Question - What is a good faith estimate and why do I need one?

Answer - By Federal Law, every lender must provide a borrower with a written estimate of all the costs associated with a transaction. At IFC, we do our best to provide an accurate estimate. However, since we don’t always know what specific companies may charge, we can only estimate based on typical charges for that industry. Later on in the transaction, escrow will provide an estimated closing statement. This will let you know how much money escrow needs you to pay at the closing.

Question - Why do I get the same documents from different lenders?

Answer - You will receive a package from each lender we submit your loan to. This package has mandatory disclosures in it. Call your IFC loan agent if you have questions.

Question - Why do you ask me for additional items after my loan has been approved?

Answer - Most loans are approved with some lender "conditions". These are such things as an updated pay stub, an appraisal, or a more recent bank statement. Lenders have certain requirements to make their files complete. These will vary from lender to lender.

Question - Why does the interest rate on the lender’s disclosure statement differ from the interest rate I discussed with my loan agent?

Answer - Three days after the loan has been submitted to a lender, they are required by law to send you, the borrower, a disclosure statement. The interest rate they report in the upper left hand corner of this statement is the APR (annual percentage rate). APRs include not only the interest rate your loan agent quoted you, but also the points, mortgage broker fees, and any other fees that you might have to pay. For example, an 8% interest rate has an 8.319% APR. An 8.875% interest rate has a 9.212% APR.

Question - Why do I need an appraisal and how much is it?

Answer - An appraiser is an independent contractor. His assessment of the property you are going to buy will determine if the asking sales price is reasonable based on recent, comparable sales in that neighborhood. An appraisal costs between $300 and $400. In some cases, it may be higher. His fee will be billed to you. You have a right to get a copy of the appraisal report.

Question - What is title insurance?

Answer - Title insurance insures the title is free of defects and can be transferred to you unencumbered. It protects the lender against loss from claims of others against your new home. A lender’s title insurance does not protect you. You will need to purchase an owner’s policy to do that. It is usually less expensive to buy an owner’s policy of title insurance at the same time and from the same insurer as the lender’s policy.

Typically, the seller pays the owner’s policy and the buyer pays the lender’s policy.

Question - Is homeowner’s insurance required?

Answer - Absolutely. Lenders must be protected for any loss to their investment. Hazard insurance premiums are based on the replacement value of the home as determined by the selling price. You must have this insurance in place by the close of escrow. Rates vary tremendously. Shop around for the best price. If you a buying a condominium, the condo association will already have insurance in place to protect the building. When buying a condo, consider getting an optional contents and liability policy to cover personal belongings.

Question - Do all mortgage brokers charge the same fees for a loan?

Answer - Absolutely not. One of the distinguishing benefits of doing business with IFC Mortgage is we save you money. We have a very competitive processing fee. Depending on the market rates at the time of your loan, we may or may not charge you points for the loan. A point is a fee equal to one percent of the loan amount. We never charge you for a credit report. Always ask what the APR (annual percentage rate) is for a loan before your apply. The APR will tell you not only the interest rate, but also the points, mortgage broker fees, and certain other fees that you might have to pay. Compare APR’s to get a true picture of the cost of your loan.

Question - Is locking in a loan a good idea?

Answer - Your loan’s interest rate may fluctuate until it is locked. Locking it in at the time of application or during the processing of your loan will keep the rate and/or the points from changing until the closing of the escrow process. Once a loan is locked, this will be for a specified number of days. Time is of the essence when locking a loan.

Question - What is PMI and do I need it?

Answer - PMI stands for Private Mortgage Insurance. It protects the lender against default and enables the lender to make a loan that is considered high risk. PMI is generally required for loans where the downpayment is less than 20% of the sales price. Thus, on a $100,000 loan, PMI will be required if the downpayment is less than $20,000. The cost for PMI varies between .35% to 1% of the loan amount and depends on the amount of the downpayment. It continues until at least 20% of the loan amount has been repaid.

Question - What is escrow?

Answer - The escrow company is a neutral party that coordinates the distribution of funds mutually agreed to by the buyer and seller.

Question - What is the close of escrow?

Answer - After all lender conditions have been satisfied, your IFC loan agent will order your loan documents. Once the documents are drawn by the lender (usually within 24 hours of ordering) they will be sent to escrow. Escrow will contact you to make an appointment to sign your documents. You will receive a copy of all documents. Your loan will fund within a day or two after signing, depending on the terms in the purchase agreement. For refinancing, there is a three-business day waiting period before your loan can fund. Escrow sends some of your signed documents to the County Recorder’s Office to be filed or recorded. When your loan is recorded at the County Recorder’s Office, the loan is done. This is called the close of escrow. In a purchase, the home is officially yours!