Gerry Murdock - Commonwealth Financial Services, Inc -
Frequently Asked Questions

Everyone has questions about the loan process. Here are the answers to some of the ones most commonly asked.

• How much mortgage loan is right for me?
  The amount of mortgage loan you qualify for will vary depending on factors such as the particular loan program and applicable interest rate, the subject property, your credit history, income, job stability, debt-to-income ratio and assets. Consult your mortgage professional to calculate a possible loan amount for you.
   
• What is APR?
  APR is an acronym for Annual Percentage Rate. This calculation is required by law and represents the cost of credit that includes interest and a portion of your closing costs. An estimated APR appears on your initial Truth in Lending Disclosure that is provided to you once you have applied for a loan. Because the APR shows the overall cost of the loan as a percentage, you can compare the relative costs of similar loans. The APR is not used to calculate your monthly payments and should not be confused with your actual interest rate, which is used to calculate your monthly payments.
   
• What is PMI?
  Private Mortgage Insurance (PMI) may be required if the down payment is less than 20% of the purchase price. This insurance is used as a safety net for the lender in the event that a borrower defaults on the loan. The percentage of required PMI each month depends upon the loan amount, the type of loan and the down payment.
   
• What is a Good Faith Estimate?
  As the name implies, this is an estimate of settlement and/or closing costs. This written estimate of closing costs must be provided to you within three business days of submitting an application.
   
• What are closing costs?
  Closing costs are costs incurred for financing the purchase of your new home. The seller, if negotiated within the purchase agreement may pay some of these costs. These costs may include but are not limited to:
  
  
  • Loan origination fee
  • Mortgage Broker fee
  • Discount Points
  • Underwriting fee
  • Appraisal/Inspection fees
     
• What is prepaid interest?
  Prepaid interest is interest on the loan charged to the borrowers at closing to pay for the cost of borrowing for a partial month. For example, if a loan closes on the 15th of the month and the first payment is due 45 days later, the lender will charge 15 days of prepaid interest.
   
• What are escrows?
  Escrows are funds collected by your lender to pay your property taxes, hazard/flood insurance and PMI (if applicable). The funds are collected in addition to your monthly principal and interest payments. The lender pays your property taxes and insurance premiums as they come due.
   
• What are underwriting conditions?
  Underwriting conditions are outstanding requirements needed to finalize the application process. The conditions must be received,
  documented and accepted by the lender to obtain final approval for the loan.
   
• What is PITI?
  This is the term used when referring to the monthly payment when the loan principal, interest, property taxes and property insurance is combined into one single payment.