Home Loan F.A.Q.


Q) What is a pre-qualification?

A) A process by which you, a potential homebuyer, qualifies for a home mortgage before making an offer on a home. We, as a bank, agree to make a loan for the specified amount to you.


Q) My real estate agent recommended that I get a pre-qualification letter. What is a pre-qualification letter, and why should I get one?

A) I give a commitment letter that states that we agree to provide a mortgage to you, the homebuyer. Commitment letters help you set realistic goals while you’re house-hunting, provide the same negotiating ability as a cash buyer and enable you to move quickly once the perfect home is found.


Q) What is “PITI” and what is it referring to?

A) PITI is principal, interest, taxes and insurance- the components of a monthly mortgage payment.


Q) What does waving escrows mean?

A) When you waive escrows, you take the responsibility of paying your taxes and insurance rather than having them included in your monthly payment. Waiving escrows may add a small fee to your closing costs. You can only waive escrows on a conventional loan.


Q) What is meant by points or origination fees?

A) One point is equal to one percent of the loan amount. Points and origination fees are used to buy down the interest rate and are tax deductible on purchase transactions.


Q) How does the annual percentage rate differ from the interest rate?

A) The annual percentage rate (APR) is the effective rate of interest for a loan if the calculation is based on the original loan amount less the closing costs. This is the rate that will appear on your preliminary Truth-In-Lending.


Q) How do I know what my interest rate will be?

A) Upon your request, I will search for the best rate and “lock” your rate. The “locked-in” rate guarantees you the interest rate provided the loan closes with you and the specified property within a set period of time.


Q) What is the Debt-To-Income Ratio?

A) Debt-To-Income Ratio is a ratio used by us to determine whether you is qualified for a mortgage. Debt-to-income is the total amount of debt, including credit cards and other loans, divided by total gross monthly income.


Q) What is the difference between a FHA and a VA loan?

  • A1) A FHA loan is a guaranteed by the Federal Housing Administration. FHA issues specific guidelines for mortgages.
  • A2) A VA loan is guaranteed by the Veterans Administration. To obtain a VA loan, the borrower must have served in the Armed Forces.