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| GENERAL QUESTIONS |
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Loan Products, Rates, Fees and Rate Lock |
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How do I know what my loan rate will be? |
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Why are your rates different from those in the newspaper? |
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What are the costs that are included in my loan payment? |
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Tell me more about mortgage loan closing fees and how they are determined. |
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Do your loans have prepayment penalties? |
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Do I have to have an impound account? |
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What is the minimum down payment required? |
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What is the maximum debt-to-income ratio? |
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What is the minimum FICO score? |
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Can I set up a direct debit to make my monthly payment? |
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Can I make a bi-weekly payment? |
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Can I make extra principal payments so I can pay off the loan more quickly? |
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What about easy qualifier loans that do not require as much supporting documentation? |
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What is the maximum percentage of my home's value that I can borrow? |
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How do I calculate my Loan-to-Value ratio (LTV)? |
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Can I subordinate my current second mortgage? |
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How do I determine the points I want to pay? |
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How much money will I save by choosing a 15 year loan rather than a 30 year loan? |
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How are interest rates determined? |
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How do I know if it's best to lock in my interest rate or to let it float? |
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What determines the cost of a mortgage? |
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How can a shorter term save me money on a Fixed-Rate Mortgage? |
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How does an ADJUSTABLE RATE MORTAGE work? |
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How is "Start rate" different from "Qualifying rate"? |
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How is start rate different from APR? |
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What is an intermediate fixed rate mortgage? |
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Why offer a balloon loans? |
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Why pay points? |
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When do I select a zero point option? |
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How do I know what my loan rate will be? |
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Rates vary primarily based on the type and purpose of the loan, your credit history and income, loan amount, value of the property, and the number of points you are willing to pay.
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Why are your rates different from those in the newspaper? |
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If you compare our loan rates to those in newspapers and other print publications, please bear in mind that the rates in these publications may have been reported one or more days ago (sometimes a week ago with a Sunday paper), and may no longer be available.
- Rates on this site are updated each business day, and often several times a day. Consumers that have loan shopped extensively have told us that we offer some of the most competitive rates around - both on and off the Web.
- Note that the rates are personalized according to answers you give us. Newspaper rates are not tailored to your individual needs and circumstances.
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What are the costs that are included in my loan payment? |
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At the least, your loan payment will consist of the principal and interest for one month. In some states you may elect to have your insurance and taxes prorated and added onto the monthly cost. In other states, it may be required that you pay for insurance taxes as part of your loan monthly payment. This money should be placed in an impound or escrow account by the lender.
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Tell me more about mortgage loan closing fees and how they are determined. |
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A home loan often involves many fees, such as the appraisal fee, title charges, closing fees and state or local taxes. These fees vary from state to state and also from lender to lender. Any lender or broker should be able to give you an estimate of their fees, but it is more difficult to tell which lenders have done their homework and are providing a complete and accurate estimate. Shearson Mortgage takes fee quotes very seriously. We've completed the research necessary to make sure that our fee quotes are accurate to the city level - and that is no easy task!
To assist you in evaluating our fees, we've grouped them as follows:
Third Party Fees
Fees that we consider third party fees include the appraisal fee, the credit report fee, the settlement or closing fee, the survey fee, tax service fees, title insurance fees, flood certification fees, and courier/mailing fees.
Third party fees are fees that we'll collect and pass on to the person who actually performed the service. For example, an appraiser is paid the appraisal fee, a credit bureau is paid the credit report fee and a title company or an attorney is paid the title insurance fees.
Typically, you'll see some minor variances in third party fees from lender to lender since a lender may have negotiated a special charge from a provider they use often or chooses a provider that offers nationwide coverage at a flat rate. You may also see that some lenders absorb minor third party fees such as the flood certification fee, the tax service fee or courier/mailing fees.
Taxes and Other Unavoidables
Fees that we consider to be taxes and other unavoidables include: State/Local Taxes and recording fees. These fees will most likely have to be paid regardless of the lender you choose. If some lenders don't quote you fees that include taxes and other unavoidable fees, don't assume that you won't have to pay it. It probably means that the lender who doesn't tell you about the fee hasn't done the research necessary to provide accurate closing costs.
Lender Fees
Fees such as discount points, document preparation fees and loan processing fees are retained by Shearson Mortgage and are used to provide you with the lowest rates possible.
This is the category of fees that you should compare very closely from lender to lender before making a decision.
Required Advances
You may be asked to prepay some items at closing that will actually be due in the future. These fees are sometimes referred to as prepaid items.
One of the more common required advances is called "per diem interest" or "interest due at closing" . All of our mortgages have payment due dates of the 1st of the month. If your loan is closed on any day other than the first of the month, you'll pay interest, from the date of closing through the end of the month, at closing. For example, if the loan is closed on June 15, we'll collect interest from June 15 through June 30th at closing. This also means that you won't make your first mortgage payment until August 1st. This type of charge should not vary from lender to lender, and does not need to be considered when comparing lenders. All lenders will charge you interest beginning on the day the loan funds are disbursed, it is simply a matter of when it will be collected.
If an escrow or impound account will be established, you will make an initial deposit into the escrow account at closing so that sufficient funds are available to pay the bills when they become due.
If your loan requires mortgage insurance, the first month or so of the mortgage insurance will be collected at closing. Whether or not you must purchase mortgage insurance depends on the size of the down payment you make.
If your loan is a purchase, you'll also need to pay for your first year's homeowner's insurance premium prior to closing. We consider this to also be a required advance.
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Do your loans have prepayment penalties? |
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Prepayment penalty is for the first 6 month only! We only charge you a prepayment penalty if you payoff our loan within the first 5 month of closing your loan. This is to discourage early payoffs and to protect our investors from churning / flipping of loans.
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Do I have to have an impound account? |
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None of our programs require you to have an impound account unless the Loan-to-Value ratio is over 80%.
Even then, impounds can be waived on some programs.
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What is the minimum down payment required? |
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The minimum down payment required for our programs is 5% of the purchase price.
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What is the maximum debt-to-income ratio? |
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On conforming loans, there is no maximum debt to income ratio. With good compensating factors, we have approved loans with ratios as high as 70%. On jumbo loans, the maximum debt to income ratio is 40% to 50% depending on the loan program.
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What is the minimum FICO score? |
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Minimum Fico requirements for Conforming and Non-Conforming loans are determined once we have DU or LP approval. On jumbo loans it depends on the program, refer to Website for most current program guidelines.
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Can I set up a direct debit to make my monthly payment? |
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Most of our services allow you to set up a direct debit to make your monthly payment. Upon receiving notification regarding the servicer for your loan, contact the toll-free number provided to set up your direct debit.
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Can I make a bi-weekly payment? |
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Many of our servicers allow you to set up bi-weekly payments.
However, you should seriously weigh the merits of this program before setting it up. A bi-weekly payment program pays off the mortgage early by making 13 payments each year (52 weeks in a year divided by 2 equals 26 half payments or 13 full payments).
By simply paying an extra 1/12 of a payment each month, you will pay your mortgage off faster and avoid any administration fees associated with the biweekly payment program. Use our Mortgage Loan Calculator to set up a prepayment schedule that is right for you.
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Can I make extra principal payments so I can pay off the loan more quickly? |
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Depending on the loan, and what your state permits, it is feasible for you to make extra payments on the loan. Extra payments will have an effect on the amortization schedule over the remaining term of your loan.
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What about easy qualifier loans that do not require as much supporting documentation? |
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It all depends on your FICO and Loan-to-Value. These loan programs are becoming increasingly popular but have slightly higher rates.
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What is the maximum percentage of my home's value that I can borrow? |
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The maximum percentage of your home's value depends on the purpose of your loan, how you use the property, and the loan type you choose. Generally you can borrow more for a property that you occupy as your primary residence than you can borrow for a vacation home or an investment property. It also makes a difference whether your looking to purchase a new home or refinance a home you already own.
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How do I calculate my Loan-to-Value ratio (LTV)? |
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The Loan-to-Value ratio (or LTV) is one of the most important factors in your loan process. It is used to determine the limits within which your Housing and Debt ratios must fall for you to be approved. It can also determine which fees you will be charged for your loan, and the amount of these fees. It will also determine whether you must pay Private Mortgage Insurance (PMI) and use an Impound/Escrow Account.
Loan-to-Value ratio (LTV) is simply the amount you are borrowing divided by the value of the subject property you are purchasing or refinancing. This gives you a simple ratio. The value of your property is its appraised value OR the amount you pay for the property whichever is lower. In the initial stages of qualification and approval, your property's value is understood to be an estimate. It will be confirmed, if necessary for your particular loan, by a professional appraiser hired by Shearson Mortgage.
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Can I subordinate my current second mortgage? |
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While it is possible to subordinate your current second mortgage, the extra time your current lender requires to process the subordination request could cause your loan process to extend past your rate lock period resulting in a repricing of your loan. Because Shearson Mortgage offers low rate second mortgages, a better option may to pay off your current second mortgage with a new loan.
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How do I determine the points I want to pay? |
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Points are paid when the loan closes, not at the time you apply for the loan. Generally speaking, points are fees added on to loans. One point equals 1% of the loan amount.
When you get a loan, you'll have the opportunity to "buy down" the interest rate by paying discount points - essentially paying a fee to lower your interest rate.
By lowering your interest rate, you will be lowering your monthly payment and the amount of interest you'll be paying over the life of the loan. You pay more at the beginning of your loan but will save money in the long run. Keep this in mind as you determine whether to pay points.
Paying points requires a higher immediate expenditure, so it may not be for you. In that case, let the loan do its job - allowing you to borrow the money you need and pay it back as you can.
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How much money will I save by choosing a 15 year loan rather than a 30 year loan? |
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A 15-year fixed-rate mortgage gives you the ability to own your home free and clear in 15 years. And, while the monthly payments are somewhat higher than a 30-year loan, the interest rate on the 15-year mortgage is usually a little lower, and more importantly - you'll pay less than half the total interest cost of the traditional 30-year mortgage.
However, if you can't afford the higher monthly payment of a 15-year mortgage don't feel alone. Many borrowers find the higher payment out of reach and choose a 30 year mortgage. It still makes sense to use a 30 year mortgage for most people.
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How are interest rates determined? |
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Interest rates fluctuate based on a variety of factors, including inflation, the pace of economic growth and Federal Reserve policy. Over time, inflation has the largest influence on the level of interest rates. A modest rate of inflation will almost always lead to low interest rates, while concerns about rising inflation normally cause interest rates to increase. Our nation's central bank, the Federal Reserve, implements policies designed to keep inflation and interest rates relatively low and stable.
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How do I know if it's best to lock in my interest rate or to let it float? |
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Mortgage interest rate movements are as hard to predict as the stock market and no one can really know for certain whether they'll go up or down.
If you have a hunch that rates are on an upward trend then you'll want to consider locking the rate as soon as you are able. Before you decide to lock, make sure that your loan can close within the lock in period. It won't do any good to lock your rate if you can't close during the rate lock period. If you're purchasing a home, review your contract for the estimated closing date to help you choose the right rate lock period. If you are refinancing, in most cases, your loan could close within 30 days. However, if you have any secondary financing on the home that won't be paid off, allow some extra time since we'll need to contact that lender to get their permission.
If you think rates might drop while your loan is being processed, take a risk and let your rate "float" instead of locking. You can watch rates and lock in at any time, but at least 5 days prior to your closing.
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What determines the cost of a mortgage? |
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There are five factors that determine the ultimate cost of a mortgage.
The principal, or amount of the loan, is the total amount you borrow (the purchase price minus your downpayment).
The interest rate adds significantly to the cost of your mortgage. Fixed or adjustable, the interest paid at the end of the loan can exceed the original cost of the home itself. For instance, a $100,000 loan balance at 8.5% for 30 years will cost you $277,000 by the time the loan is retired.
The term of the loan is the length of time until the loan is paid off. A longer term means more interest and higher cost.
Points are interest paid on the loan and they're purely optional. You pay points at closing if you want to reduce the interest rate and make your monthly payments smaller. One point equals one percent of the loan amount.
Fees are paid to the lender at closing to cover the costs of preparing the mortgage. They can vary according to where you live and what type of loan you're securing.
While points and fees are not financed, they still contribute to the cost of the mortgage.
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How can a shorter term save me money on a Fixed-Rate Mortgage? |
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By opting for a shorter term, you can save thousands of dollars in interest - not only because you'll be paying off the loan sooner, but lenders generally offer better interest rates on shorter-term loans. And though your payment will be more each month, it may not be as much as you may think. The grid below illustrates the savings on a $100,000 loan at 8.5% interest.
| Term |
Monthly Payment |
Total Interest Accrued |
| 30 yr. |
$768.91 |
$176,808.95 |
| 15 yr. |
$984.74 |
$77,253.12 |
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How does an ADJUSTABLE RATE MORTAGE work? |
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Adjustable rate mortgages allow the borrower to make lower initial payments in comparison to fixed rate mortgages. These payments increase over time to meet the market rate. An adjustable rate mortgage works well for younger buyers whose income will grow or self employed borrowers whose income can fluctuate. There is a large selection of adjustable loans tailored for specific needs. You will need to know the start rate, fully adjusted rate (which is the Index + Margin), and whether the loan has Negative or No-Negative amortization options. You will also need to know the Life cap of the loan. Consult your loan advisor or view the enclosed guide to adjustable rate mortgages.
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How is "Start rate" different from "Qualifying rate"? |
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Start rate determines the initial payment; the qualifying rate is determined by the programs guidelines and is used to calculate the borrower's ability to re-pay the loan.
Qualification rate is often the payment for the second year of the loan or the rate plus 2%. (An adjustable rate loan with a start rate of 5% will often have a qualification rate of 7%).
A common misconception is that by choosing an adjustable rate mortgage with a lower initial payment, the borrower can qualify easier.
In reality, the borrower has to qualify for a higher payment.
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How is start rate different from APR? |
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The APR is the rate after taking financial costs of the loan into consideration. Please see the following for information regarding APR. APR is a calculation that expresses the total cost of a mortgage loan as a yearly rate (according to a federally mandated procedure). The APR calculation takes into account monthly interest payments, mortgage insurance, points, and certain fees paid at origination. It generally results in a rate slightly higher than the stated interest rate on the loan.
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What is an intermediate fixed rate mortgage? |
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An intermediate fixed is a mortgage with a fixed rate for the first few years, which then becomes either an adjustable or has a balloon payment. The fixed period is typically 3,5,7,10 years.
These loans are recommended for borrowers who plan to move within the fixed period or when interest rates are high and you expect them to come down. Always consult with your loan advisor before recommending one of these loans and be sure to emphasize what happens to the loan after the initial fixed period.
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Why offer a balloon loans? |
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Balloon loans generally offer a lower payment for a shorter period of time. If the borrower is purchasing a property that he knows he will refinance in 3,5,or 7 years, a balloon loan may be right for him.
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Why pay points? |
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Points are used to reduce the rate and thereby the payment. When a borrower pays points on a purchase loan, the borrower receives tax benefits as well as lower payments over the life of the loan.
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When do I select a zero point option? |
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When the borrower intends to keep the loan for a very short time a zero point option may benefit the borrower.
A zero point loan usually has an interest rate of .5% to 1% higher depending on the borrower's credit and income and the loan he selects.
It is seldom advantageous for a borrower to select a Zero Point loan on a loan of $150,000 or less.
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