Are discount points tax deductible?
What does Prepaid Interest mean?
Why is the Annual Percentage Rate (APR) on the Truth in Lending Disclosure higher than the rate shown on my note, which is the rate I thought I chose?
Should discount points be paid to lower (buy down) an interest rate?
What does the origination fee cover?
What does Prepaid Interest mean?
Why is the Annual Percentage Rate (APR) on the Truth in Lending Disclosure higher than the rate shown on my note, which is the rate I thought I chose?
Should discount points be paid to lower (buy down) an interest rate?
What does the origination fee cover?
How long does the loan process take?
Can FIRST RESOURCE FEDERAL CREDIT UNION refinance my current mortgage loan?
What is an escrow account?
Are lenders limited in the amount of escrow funds they can collect from borrowers?
Can I pay my own taxes and insurance?
What do I do if I receive a tax statement?
Why did my mortgage payment amount change?
What is an ARM loan?
What benefits do I receive from private mortgage insurance?
How is interest calculated on a mortgage loan?
Why does the property title have to be cleared before I can get a mortgage?
How much time will it take to close my loan (sign the loan documents)?
Can FIRST RESOURCE FEDERAL CREDIT UNION refinance my current mortgage loan?
What is an escrow account?
Are lenders limited in the amount of escrow funds they can collect from borrowers?
Can I pay my own taxes and insurance?
What do I do if I receive a tax statement?
Why did my mortgage payment amount change?
What is an ARM loan?
What benefits do I receive from private mortgage insurance?
How is interest calculated on a mortgage loan?
Why does the property title have to be cleared before I can get a mortgage?
How much time will it take to close my loan (sign the loan documents)?
In many cases they are, however, Your Community Credit Union is not a tax advisor. Therefore, we recommend you contact your tax preparer or the IRS to obtain a qualified opinion on the deductibility of discount points.
Prepaid interest is typically paid at loan closing. It is the interest paid on a new loan from the day of closing through the end of the month. All future interest on a mortgage loan is then paid in arrears. For example, if your new loan closes on February 19th, prepaid interest would be paid at closing from February 19th through the end of the month of February. Interest would then be paid monthly with your first payment beginning April 1st which would pay March interest. Your payment on May 1st would pay April interest, etc.
Why is the Annual Percentage Rate (APR) on the Truth in Lending Disclosure higher than the rate shown on my note, which is the rate I thought I chose?
All lenders are required by the Real Estate Settlement Procedures Act (RESPA) to show the rate which will be charged on the note signed at closing, including the total cost to obtain the loan. This includes, but is not limited to, the total interest paid over the life of the loan, assuming the full term is carried out at the note rate, plus certain closing costs. Closing costs could include prepaid interest, Private Mortgage Insurance/FHA Mortgage Insurance Premium/ or VA Funding fee, whichever may be applicable, and various miscellaneous costs including, but not limited to, underwriting fee and tax service fee, may be charged. All of these "Finance Charges" are taken into consideration when calculating the APR to give a more accurate picture of the total cost of the loan.
This question is best answered after careful consideration of your own personal financial goals. Buying down the interest rate (paying points on the mortgage - one point is one percent of your mortgage amount) may not be in your best interest. Here are some reasons why:
- Mortgage interest paid is tax deductible in most cases (seek the advice of an accountant or the IRS).
- The funds are no longer available to invest, save or use (i.e. purchase an IRA, pay off credit card debt at a higher rate, etc.)
- Falling interest rates can be taken advantage of sooner if discount points are not paid to buy down the interest rate (the original interest rate was higher).
- In the past, if a consumer bought down the interest rate and then refinanced (buying down the rate again), it is possible not enough time will have elapsed to recover the "buy down" amount through the reduced monthly payment. This also occurs if the consumer sells the home before recovering the "buy down" amount.
- Not only does the amount paid in discount fees (buy down amount) need to be recovered, the "time value" of the money spent or its "present value" also needs to be recovered. Present value is the income you could have earned or the satisfaction you could have received through alternative use of your money. Remember to consider the tax consequences of your ultimate decision.
- Individuals should do what best fits their own personal situation and goals.
The origination fee is the fee some lenders charge to cover some of the costs of making the loan and is calculated by multiplying the total mortgage loan amount by the percentage shown. This fee is typically 1% or lower, but may also be influenced by market conditions or the type of loan being sought.
The number of days from application to closing can vary from just a few days to 45 or more days, depending on a number of factors. Some of the factors include: loan type, whether an appraisal is needed, and title clearance. Time delays also occur if outside sources or the borrowers do not promptly provide documents to the lender.
YES! Friendly, knowledgeable staff is available to discuss your refinance needs during regular business hours. Contact the credit union by email at www.FRFCU.org or by telephone at 888-982-1400 for information about Your Community Credit Union loan products and competitive interest rates. You may also analyze various financing possibilities or make an application at this time.
When borrowers make their monthly mortgage payments, they generally also pay one-twelfth of the anticipated annual amount needed to pay taxes and insurance premiums. These additional funds are deposited into an escrow account until the lender pays the taxes and insurance premiums as they come due. The borrower benefits for budgeting reasons because costs are spread through the year rather than as a lump sum. This method allows the lender greater control in avoiding tax delinquencies or lapses of hazard insurance coverage on the property. Mortgage documents often stipulate lenders to establish an escrow account.
The Real Estate Settlement Procedures Act (RESPA) sets standards for the calculation of the amount mortgage lenders require borrowers to deposit into the escrow account. RESPA limits the initial deposit into an escrow account to an amount equal to the sum sufficient to pay taxes, insurance premiums, and other charges on the mortgaged property for the first payment period, plus a cushion.
An escrow cushion is an amount of money held in the escrow account to prevent the account from being overdrawn when increases in disbursements occur.
On a monthly basis, mortgage lenders may not require borrowers to pay more than one-twelfth of the total amount of the estimated annual taxes, insurance premiums, and other charges, plus an amount necessary to maintain the allowable cushion.
When a loan is originated, the mortgage documents specify the escrow conditions. This has become a standard practice for all mortgages, including FHA, VA and conventional mortgages. Your Community Credit Union may waive the collection of escrow requirement if the member has a minimum 20% equity position in the property.
Many tax authorities will mail an informational copy of the real estate tax statement to the homeowner in addition to the credit union. However, there are some statements tax authorities do not forward to the credit union, and in special cases we will need your assistance in obtaining the bill. If you receive a statement for any of the following, please forward it to our office by mail or fax:
- delinquent real estate taxes
- supplemental or additional real estate taxes
- special assessments
- if the tax authority will not honor a bill request from another party.
There may be several reasons. Some mortgages, such as ARM loans, provide for periodic adjustments to your principal and interest payment amount. A second reason for a change may be due to an annual analysis of your escrow account. In compliance with the Real Estate Settlement Procedures Act (RESPA), you will receive an Annual Escrow Disclosure Statement, which shows the adjustment to your escrow payment based on current tax and insurance amounts.
An ARM loan is an Adjustable Rate Mortgage. The interest rate on an ARM loan is adjusted periodically based on the terms of the mortgage documents. The interest rate is typically based on a common index published periodically, adjusted by a margin. The margin is an amount charged in addition to the index and typically does not change over the life of the loan.
Prior to the existence of private mortgage insurance, individuals typically could not purchase a home unless they had a down-payment of at least 20% of the purchase price. Private mortgage insurance benefits the mortgage lender directly by reducing the costs associated with borrower default. It also benefits consumers by lowering down-payments, thereby allowing more people to achieve home ownership.
Most mortgages originated today calculate interest in arrears, unlike consumer loans which calculate interest to the date of payment receipt. As an example, when borrowers pay their February mortgage payments, they are paying the January interest. This method of calculating interest is based on a 360 day year in which each month has 30 days.
When a lender makes a mortgage loan (other than a home equity loan), the lender typically requires a first lien position. This means there can be no other outstanding liens against the property that are superior to the new mortgage. Liens can result from a variety of sources, such as home equity loans or lines of credit, child support judgments, divorce settlements, delinquent taxes, and special assessments. Most realtors, mortgage companies, title companies, and escrow companies will assist the seller and/or borrower in clearing title. The ultimate responsibility, however, lies with the sellers of the property who are warranting clear title to the buyers. It is important the buyers receive clear title from the sellers so there are no future claims against their property ownership rights.
How much time will it take to close my loan (sign the loan documents)?
Generally, the process takes as long or short as the borrower wishes. Explaining and signing the documents takes approximately 30 to 45 minutes. However, the borrower may choose to sign the documents and be on his/her way or ask a number of questions and spend more time. Closings may also vary from closing agent to closing agent.
Generally, the process takes as long or short as the borrower wishes. Explaining and signing the documents takes approximately 30 to 45 minutes. However, the borrower may choose to sign the documents and be on his/her way or ask a number of questions and spend more time. Closings may also vary from closing agent to closing agent.
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