Mortgage Frequently Asked Questions

For many people, a home mortgage will be the single biggest investment they make in their lifetimes. At Delta Mortgage Services, we understand that you’ll have many questions regarding your mortgage investment. If your mortgage questions aren’t answered here, please get in touch with us through our Contact page. We’re here to ease you through the process every step of the way.

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What will Delta Mortgage Services look at when I apply?

Lenders consider many factors in evaluating your loan application, but they usually focus on four areas:

• Income and debt. How much money you make and what other bills you have to pay helps the lender determine whether you can afford to make mortgage payments.

• Assets. The lender needs to make sure you have enough money to cover the costs of buying a home.

• Credit. Whether you've met other financial obligations helps the lender predict whether you will repay your mortgage.

• Property. The home you want to buy has to be worth enough to act as collateral for the mortgage.

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What does it mean to get pre-approved?

Getting pre-approved means you receive a loan commitment from your mortgage company before you have found a home, based on a review of your credit and finances. Having your credit pre-approved shows sellers that you're a qualified buyer and helps you establish a clear price range. The process may be the same as a typical mortgage application, except that your application doesn't include property information, or it may be as simple as providing preliminary information to your lender.  Read more about prequalification here.

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What if I've had credit problems?

Your credit history is only one factor in qualifying for a loan, and having made some late payments doesn't have to keep you from buying a home. Someone who has consistently made payments on time in the past may have more financing options than someone who has not, but that doesn't mean a mortgage is off-limits if you've had credit problems.

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What closing costs will I have to pay?

Closing costs vary based on a number of factors — including the lender, mortgage type, purchase contract, and location — but they typically include the following:

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• Lender fees. Your mortgage company may charge for expenses related to making the loan, including an appraisal fee, a credit report fee, origination points, and discount points.

• Third-party fees. Charges for services not provided by your lender often include the settlement fee, title insurance, and attorney's fees.

• Prepaid items. Certain mortgage costs must be paid to your lender in advance. The most common of these are pre-paid interest, hazard insurance, and deposits to set up an escrow account.

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How much do I need for a down payment on a home purchase?

There is generally no maximum down payment limit for buying a home. Many first-time buyers believe they must be able to put down as much as 20 percent of a home's purchase price in cash. That may have been true in the past, but many of the mortgage options available to today's home-buyers require as little as 3-percent down payment.  With housing prices as high as they are, homeownership would be impossible for many people if not for these low-down-payment options.

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What is mortgage insurance?  Will I have to pay it?

Private Mortgage Insurance (PMI) provides your lender with a way to recoup its investment if you are unable to repay your loan. PMI is usually required when the mortgage amount is higher than 80 percent of the home's value. That means that if you buy a home with a down payment of less than 20 percent, you will probably have to pay for PMI.  On an FHA-insured mortgage, this is called a Mortgage Insurance Premium (MIP) and ranges between 1.25 and 1.75 percent of the loan amount plus a small monthly payment of around a half a percent of the loan amount.

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Should I pay discount points?

Discount points are prepaid interest, which you can pay to your lender at closing in exchange for a lower interest rate on your mortgage. Paying discount points, each of which is equal to 1 percent of the loan amount, is often called “buying down” your rate.

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So does paying points make sense for you? The answer depends primarily on how long you plan to stay in your home. First, find out how much lower your monthly payments will be if you pay points. Then, calculate how long it will take for those monthly savings to add up to the cost of the points. If it would take five

years to break even and you're planning to live in your home for 10, paying discount points may be a smart move.

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Should I choose a fixed- or adjustable-rate loan?
With a fixed-rate mortgage, the interest rate never changes and your payments remain stable throughout the life of your loan. With an adjustable-rate mortgage (ARM), the interest rate changes at regular intervals — usually once every year — based on a formula that uses a market index. For most ARM options, rate adjustments begin after an initial period — usually between three months and ten years — during which the rate is fixed.

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A fixed rate is usually best if you plan to stay in your home for the long term and are buying at a time when rates are relatively low — like now. An ARM is usually best if you plan to move before the rate adjustments begin, or if you are buying when rates are relatively high.

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What will my mortgage payments include?  What is PITI?
For most borrowers, each monthly mortgage payment goes toward the following:

• Principal, which is the total outstanding balance of the loan

• Interest, which is the cost of borrowing money

• Taxes, which are levied on the property by the local government

• Insurance, which protects the owner and the lender from losses caused by fire and natural hazards

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What credit and collections laws should I be familiar with?

• The Federal Trade Commission (FTC) enforces a number of credit laws and has free information about them:

• The Equal Credit Opportunity Act prohibits the denial of credit because of your sex, race, marital status, religion, national origin, age, or because you receive public assistance.

• The Fair Credit Reporting Act gives you the right to learn what information is being distributed about you by credit reporting companies.

• The Truth in Lending Act requires lenders to give you written disclosures of the cost of credit and terms of repayment before you enter into a credit transaction.

• The Fair Credit Billing Act establishes procedures for resolving billing errors on your credit card accounts.

• The Fair Debt Collection Practices Act prohibits debt collectors from using unfair or deceptive practices to collect overdue bills that your creditor has forwarded for collection.

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The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

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Still Have Questions?

Call Delta Mortgage Services at 443-371-6115