FAQ | Mortgage Loan Process
At Envoy Mortgage we stand behind our promise to make the home financing process as efficient, stress-free, and pleasant as possible for home buyers.
Some of the questions we frequently get asked are:
What are the advantages of owning a home rather than renting?
Owning a home can be as affordable as renting, and in some part of the United States, it can be more affordable to own rather than rent. Borrowers can compare costs by researching home prices in the areas they want to live, calculate what a mortgage loan would cost them, and compare that to the cost of renting a similar type of home.
While homeownership is not the right option for everyone, the advantages are many. Some of those advantages include building equity and earning tax advantages. Borrowers can build their wealth as they gain more equity over the course of time. Additionally, per Internal Revenue Service code, loan interest is tax deductible.
Homeowners must be prepared to consider maintenance costs of keeping their home in good condition. Also, the value of a home can fluctuate in value. Buying a home requires a significant amount of cash upfront, so selling it during the initial years of ownership may be difficult and something to consider in light of job and other commitments.
What information do mortgage lenders need from me to qualify for a mortgage loan?
To help you get a mortgage loan, mortgage lenders require information related to your employment, finances and information about the home you wish to purchase. They will ask you specific, detailed information about these topics so that they can arrive at a monthly payment that you can afford and will be able to sustain.
What is a credit score?
A credit score is a primary indicator of how likely borrowers will repay future debt. Mortgage lenders review your credit history by reviewing your credit report. This report gives an indication of how well you have paid your bills and other financial obligations in the past. Additionally, the report will show how much debt you already have, for example, your credit cards, car, student and other types of loans.
The most common credit score used by lenders is the FICO®score, which can range anywhere between 300 and 850. The higher the FICO credit score a borrower has, the better. Your FICO credit score will determine the amount of money you can borrow and the terms of your loan, including the interest rate and length of loan. Credit scores do vary and change.
What taxes and insurances must I pay as a homeowner?
Homeowners are required to pay property taxes and they must also have some type of homeowners insurance to protect their home, which is now their asset. State laws and other variables affect how homeowners pay for property taxes and insurance, but today, many mortgage lenders require homeowners to pay into an escrow account. The lender or mortgage servicer maintains an account to cover your property tax and homeowners insurance expenses. Each month, a portion of your mortgage payment will be put into this account and when your taxes or property insurance are due, the lender or servicer will pay them for you.
What is an escrow account?
Your mortgage lender may require or suggest that you set up an escrow account. With an escrow account, you pay a fixed amount each month in addition to your mortgage payment to an account—the escrow account—that is maintained by the lender. The lender then draws on that account to pay property taxes and homeowners insurance as those bills become due. Escrow accounts ensure that money will be available for these types payments, which are more than paying toward the principal and interest on your loan.
What is a good amount of money to have available for a down payment?
A down payment of 20 percent or more of the home purchase price is a good indicator of your ability to sustain long-term homeownership. It will also provide immediate equity in your new home—the 20 percent you put toward the home is money invested in the home itself.
What is private mortgage insurance?
Private mortgage insurance applies to borrowers who make a down payment that is less than 20 percent of the selling price of the mortgage. Mortgage lenders often require a borrower to acquire another type of insurance, which is private mortgage insurance. This insurance covers the lender in the unfortunate even that the borrower is not able to repay the loan and the lender is not able to recover costs of the foreclosure and also selling the property.
How can a borrower save money on interest?
Most borrowers can save money by splitting their monthly mortgage payment and paying it every two weeks instead of one payment per month. Usually a 30-year fixed rate loan qualifies for this type of payment. You will be able to pay down your mortgage faster because you build more equity rather than occurring more interest over the course of the month. Because your payments are applied to the loan every 14 days, the principal amount decreases faster, saving you more in interest costs.
Borrowers can also consider paying additional principal per month. If you can afford a slightly higher monthly payment, you can achieve savings over time as well.