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Gershman Mortgage FAQ

General

Q: What does it mean to “lock in” or “float” a rate?
A: “Locking in” a rate is a process in which a lender guarantees a borrower a specific rate for a certain period of time, even if rates fluctuate during that period. At Gershman Mortgage, you can “lock in” a rate for up to 270 days.When “floating” a rate, the borrower chooses to allow their rate to fluctuate with the market from the time of the application until the closing.
Q: What will my closing costs be?
A: Your closing costs will vary based on the type of loan you have applied for. There are program options that offer low or even no down payment options to qualifying borrowers.   In general, plan for 2-3% of the purchase price. Remember that you’ll also have to pay the down payment at the closing as well as any prepaid items such as real estate taxes and homeowners insurance. Gershman Mortgage will provide you with a Loan Estimate of the closing costs within three days of your application.
Q: What are points?
A: Points, often called discount points, can be paid to reduce the interest rate or your loan. Each point is equivalent to 1% of the loan amount.
Q: How much will I need for a down payment?
A:  Based on the loan program, down payment options vary.  Conventional loans require a 5% down payment. If a borrower wants to avoid paying PMI on the conventional loan, then a 20% down payment is required.  FHA loan require a 3.5% down payment and VA loans may require no down payment to eligibal borrowers.
Q: What is an APR?
A: APR stands for Annual Percentage Rate. The APR takes into account points, fees, and the interest rate, making it a good tool for comparing loans.

 

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Prequalification and Preapproval

Q: What is the difference between prequalification and preapproval?
A: Prequalification generally involves a less thorough review of an applicant’s credit history and gives a general idea of how much they can borrow.  Being prequalified for a loan does not mean that a borrower is approved for a loan.   The prequalification process can often be completed online or by phone.

Preapproval  is a complete review of income, assets, liabilities credit and other factors.  Being preapproved for a loan means that the borrower(s) have qualified for the amount of the loan and been approved by underwriting.  A preapproval letter in hand makes a prospective buyer much more attractive to sellers.

Q: Once I’m prequalified or preapproved, what do I need to do to finalize my loan?
A: If you are prequalified, you will have to apply for the loan and provide all documentation that will be required for underwriting approval.  In the case of a preapproval, you are already approved for the loan and we will then review the property information based on an appraisal that we will request.
Q: Can I apply for a loan before I’ve decided which home to purchase?
A: Yes, to apply for a loan before you have chosen a house, ask to be preapproved.

 

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Applying

Q: How long does the mortgage process take?
A: The time required for the application process will vary based on the type of loan and whether you are preapproved. Typically, it will take 30 to 45 days from from application to closing.
Q: What information do I need to apply?
A: You will need to provide Gershman Mortgage with information on your assets and debts, employment history, and residential history. View our Helpful Links section for a printable Home Application Checklist of items you’ll need to fill out your application.
Q: Can I start my application on-line at Gershman.com and finish it later?
A: Yes! Once you have registered, you can easily save your application at any time by clicking on the “Save Progress” button at the bottom of the screen. In addition, each time you move to the next page, your work will be saved, protecting you from unexpected power outages or Internet connection failures. To access your application, login on the Apply Online page. Gershman Mortgage also gives you the option of starting your application online and then finishing it over the phone or in person. Call 1-800-437-7462.
Q: What factors are used to determine if I’ll be approved for a mortgage?
A: Lenders look at a number of factors when considering a mortgage application. The main areas are your credit, income, assets, liabilities and any other factors that will affect your ability to repay your mortgage.

 

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Refinancing

Q: What is a cash-out refinance?
A: In a cash-out refinance, the borrower refinances their home for an amount larger than is necessary to pay off the first mortgage. The borrower can use the remaining funds at their discretion. Some popular uses are remodeling, funding a child’s education, higher-yield investments, or a vacation.
Q: What options do I have regarding closing costs?
A: All of our loans have closing costs.  However, closing costs do vary based on the loan program.

 

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Insurance

Q: What is Private Mortgage Insurance (PMI)? 
A: Mortgage insurance protects the lender if the borrower defaults on the loan. On a conventional loan, private mortgage insurance (PMI) is always offered through private mortgage insurance companies. PMI is typically required on loans with less than 20% down payment. Government-insured loan programs also have similar forms of mortgage insurance as well.
Q: Can I cancel my PMI?
A: You may be able to cancel your PMI before your loan is fully amortized.  In order to determine that your loan to value (LTV) is below 80%, your lender will need to have the property reappraised.  You will need to contact the company who services your loan to find out what they require to have your PMI removed.
Q: What is title insurance?
A: Title insurance protects the lender from liens, defects, and inconsistencies in the title that did not show up in the title search.

 

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Loan Programs

Q: Are there benefits to choosing a shorter term over a longer term?
A: A shorter term loan accumulates less interest, costing you less over the course of a loan. The trade-off is that the monthly payments are higher than for a longer term loan.
Q: Does Gershman Mortgage offer any special programs for first-time buyers?
A: Yes.  There are programs that require little or, in some cases, no down payment options to qualified borrowers.  FHA loans, insured by the Federal Housing Administration, are popular among first-time buyers and require a 3.5% down payment.   VA loans, guaranteed by the Veterans Administration, are available only to qualified veterans. The VA loan program requires no down payment.
Q: What are “conforming” and “non-conforming” loans?
A: A conforming loan meets the requirements for purchase by FNMA (Fannie Mae) or FHLMC (Freddie Mac).  The present loan amount limit for conforming loans is $ 424,100.  A non-conforming loan is any loan that exceeds the standard loan limit.   Loan limits can (but don’t always) change annually, based on average sale prices of homes across the country.
Q: What is a jumbo loan?
A: A jumbo loan is another name for a “non-conforming” loan and applies to loan amounts over $ 424,100.

 

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More

Q: Who will service my loan?
A: Your loan will be sold to a third party. If this is the case, the loan amount, payments, and interest rate will remain the same. You will receive a notice regarding the change as well as a new coupon book. If your loan is sold, you will not be required to pay any additional fees.
Q: What is included in my monthly mortgage payment?
A: Mortgage payments generally include four basic components- principal, interest, taxes, and insurance (referred to as PITI). While principal and interest are paid directly to the lender, taxes and insurance are directed into an escrow account, which the lender uses to pay the annual insurance premium and taxes.

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