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MORTGAGE LOANS
What are discount points?
Discount points are charged by a lender to compensate the lender for a lower interest rate. Generally, the lower the offered interest rate, the higher the points. One point is equal to one percent of the loan amount.

What is loan-to-value?
Loan-to-value, commonly referred to as LTV, is the mathematical relationship between the value of the property and the amount of the loan, expressed as a percentage. The loan-to-value is derived by dividing the loan amount by the value of the property. For example, if a property is valued at $100,000 and the loan balance is $80,000, the loan-to-value is 80%.

What is private mortgage insurance?
Private mortgage insurance, also referred to as PMI, is a type of insurance that protects the lender from loss in the event the borrower fails to make loan payments as agreed.

What is title insurance?
A type of insurance that protects a homeowner and/or lender against claims made relative to legal ownership of the property.

What is APR?
APR, or annual percentage rate, is the total cost of the loan, including interest and other finance charges, expressed as a yearly interest rate.

What is an appraisal?
The examination of a property, by a qualified, professional appraiser, providing an estimate of its fair market value and a written report.

What is a loan origination fee?
A loan origination fee is an amount that a lender charges to cover the administrative costs to process a loan. The loan origination fee is often expressed in terms of points, or as a percentage of the loan amount.

REFINANCING
What are the advantages of refinancing your mortgage?
Refinancing your home loan has four major advantages over unsecured financing, like credit cards and personal note loans:
Lowers your monthly payments
Provides a tax deduction*
Lowers your total interest payments
Provides an alternative plan for becoming debt free!

I've heard it's a bad idea to incur more debt to pay off bills. Is it really smart to refinance my mortgage to get cash out to pay off bills?
You bet it's smart! If you've got credit card or other unsecured debt, you can really save big! Many people cut their monthly payments significantly, giving them hundreds of dollars more every month, plus a tax deduction* at the end of the year! By refinancing to consolidate your debt, you can get away from the high interest rates that credit cards charge anywhere from 14% to 21%, and lower your monthly payments!

Mortgages take a long time to pay off . . . I don't want to be in debt that long. No one wants to be in debt. But for many people, consolidating all of their current debt with a mortgage refinance allows them to lower their interest rate and take advantage of tax deductions*.

What does fully amortized fixed rate mean, and why is it good?
You can get a mortgage loan with a fixed rate of interest for the life of the loan. It's great because your payment can never go up, and you can budget your finances better. It also means that your loan is completely retired on your last payment. With credit cards, your rate and payments usually change every month, and you may never pay them off!

At what point will I start saving money?
Monthly payment reductions begin immediately.

Should I pay off my car with cash from my refinance?
Maybe, maybe not. If you have good financing already, leave it alone. If your interest rate is not that great, or you simply aren't comfortable with the payments, you might do better to pay it off! Remember, interest on an auto loan is not tax deductible, but interest may be deductible on mortgage loans!*

Why do some home loans have fees while others do not?
You may see ads for no points or no fees loans. However, there is no such thing as a free lunch, and somebody has to pay for the service. That somebody is you! Lenders that offer no fees usually "pack" their profit into higher interest rates, meaning that you pay more every month for the life of the loan. This is not necessarily bad, but it may end up costing more than just paying the fees up front, depending on how long you keep the loan.

I'd like to get a loan, but can't afford the fees!
No problem! You can finance the fees and still get the best possible interest rate without paying any out of pocket expenses (except a nominal home appraisal charge)
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How is my interest rate determined?
Your rate is based on a number of factors, including the type of loan you want (first mortgage, second mortgage, fixed rate, or adjustable rate mortgage), the amount of equity in your home, your past credit history, and your current ability to repay the loan (income to debt ratio).

How can I be sure that I'm getting the very best rate?
Rest assured that Community Pacific Mortgage will work hard to get you the best available loan based on your unique situation!

What is does "FICO" score mean and how does it affect my loan qualifying?
With many loan programs it's a part of how lender's process mortgages. Many lenders today use a credit score to establish a borrower's credit worthiness. The lender doesn't calculate the score, but gets it from a third party such as the Fair Isaac Company, also known as FICO. Fair Isaac Company is the most highly recognized in the credit-scoring business. It's headquartered in San Rafael, California, but has regional offices around the world (on the Internet: www.fairisaac.com). Credit scoring actually started in 1956. Since then it has grown in favor and is widely used for issuing all types of consumer and commercial credit, mortgages, leasing and rentals, insurance, employment, telecommunications, retail and catalog sales, and for strategic business decisions. FICO's scoring models are actually mathematical tables that assign points to different aspects of a consumer's profile and credit record. Examples of items scored include derogatory payment history, current level of indebtedness, types of credit, length of credit history, frequency of credit applications and number of credit inquiries.

There are three categories that lenders use:
700+, you are considered the cream of the crop by lenders. Of course that makes you eligible for the best rates.

660 TO 699, you are considered a good risk and will get the good interest rates.

620 to 650 will put you in a "questionable" category where lenders usually ask for more documentation. This doesn't mean you won't be approved, but you will have to work harder to get a loan and most likely not at the best rate available.

620 and below, you may be out of luck ----- at least for obtaining the best rates and terms.

HOWEVER, LOAN PROGRAMS ARE AVAILABLE THAT WILL PROBABLY SERVE YOUR NEEDS. REMEMBER: CREDIT PROBLEMS ARE NO PROBLEM.

It's good to have at least three or four credit card accounts and a couple of department store charge cards. If you have loans with finance companies such as Beneficial Finance and Household Finance Corporation this will probably not help your score. Also remember that the ratio of available credit to your current credit balances is a major factor in determining your score. In other words, if you have charged your cards to their limits, your score will suffer.

And finally, if at any time you have trouble making all monthly payments, use the following priorities:
·First, pay as many as you can in full.
·Don't make partial payments.
·Pay your mortgage first, then other loans such as your car payment
·And next, pay your credit cards and other revolving accounts.
·Finally, avoid credit inquiries by limiting the number of credit applications you make.

We, at Community Pacific Mortgage, assist clients who may have had credit problems in the past, and even presently. So give Tim a call at your earliest convenience, or e-mail me. We offer the perfect loan for you!

Member of the Golden Gate Better Business Bureau