| ELITE MORTGAGE SERVICES, INC. |
| FREQUENTLY ASKED QUESTIONS |
| CONTACT US NOW Phone: (239) 354-0058 Fax: (888) 607-4420 info@elitemortgageservicesinc. com |
Here are some answers to some commonly asked questions. We are available to help you every step of the way. Just
call us at (239) 354-0058, fax at (888) 607-4420 or e-mail us at info@elitemortgageservicesinc.com
I can't afford 20% to put down on a house? Assuming you can qualify for high monthly mortgage payments and
have an excellent credit history, you should be able to find a low (0-15%) down payment loan. However, you may have
to pay a higher interest rate and loan fees (points) than someone making a larger down payment.
What is Private Mortgage Insurance (PMI)?
Private mortgage insurance (PMI) policies are designed to reimburse a mortgage lender up to a certain amount if you
default on your loan and the foreclosure sale is less than the amount you owe the lender. That is, the amount of your
mortgage loan plus the costs of the foreclosure sale. Most lenders require PMI on loans where the borrower makes a
down payment of less than 20%. Premiums are usually paid monthly and typically cost less than one-half of one
percent of the mortgage loan. With the exception of some government and older loans, you can drop PMI once your
equity in the house reaches 22% and you've made timely mortgage payments. Ask your lender for details on the cost
of PMI and requirements for cancelling it.
Can I use some of my IRA or 401(k) plan for a down payment? Under the 1997 Taxpayer Relief Act, first-time
home buyers can withdraw up to $10,000.00 penalty free from an individual retirement account (IRA) for down payment
to purchase a principal residence. This $10,000.00 is a lifetime limit. The law defines a first-time homeowner as
someone who hasn't owned a house for the past two years. If a couple is buying a home both must be first-time
homeowners. Ask your tax accountant for more information, or check IRS rule at http://www.irs.gov. Another source of
down payment money is a loan against your 401(k) plan. Ask your employer or plan administrator if your plan allows
for loans. If it does, the maximum loan amount under the law is the one-half of your interest in the plan or $50,000.00.
Whichever is less. Other conditions, including the maximum term, the minimum loan amount, the interest rate and
applicable loan fees, are set by your employer. Any loan must be repaid in a "reasonable amount of time", although
the Tax Code doesn't define reasonable. Be sure to find out what happens if you leave your job before fully repaying a
loan from your 401(k) plan. If a loan becomes due immediately upon your departure, income tax penalties may apply to
the outstanding balance.
What's the difference between a fixed and adjustable rate mortgage? With a fixed rate mortgage, the interest
rate and the amount you pay each month remain the same over the entire mortgage term, traditionally 15, 20 or 30
years. A number of variations are available, including five and seven year fixed rate loans with balloon payments at the
end. With an adjustable rate mortgage (ARM), the interest rate fluctuates according to the interest rates in the
economy. Initial interest rates of ARMs are typically offered at a discounted ("teaser") interest rate lower than for fixed
rate mortgages. Over time, when initial discounts are filtered out, ARM rates will fluctuate as general interest rates go
up or down. Different ARMs are tied to different financial indexes, some of which fluctuate up or down more quickly
than others. To avoid constant and drastic changes, ARMs typically regulate (cap) how much and how often the
interest rate and/or payments can change in a year and over the life of the loan. A number of variations are available
for adjustable rate mortgages, including hybrids that change from a fixed to an adjustable rate after a period of years.
Is a fixed or an adjustable rate mortgage better? If depends. Because interest rates and mortgage options
change often, your choice of a fixed or adjustable rate mortgage should depend on the interest rates and mortgage
options available when you're buying a house your view of the future (generally, high inflation will mean ARM rates will
go up and lower inflation they will fall) and how willing you are to take a risk. When mortgage rates are low, a fixed rate
mortgage is the best bet for most buyers,. Over the next five, ten or thirty years, interest rates are more apt to go up
than further down. Even if rates could go a little lower in the short run, an ARMs teaser rate will adjust up soon and you
won't gain much. In the long run, ARMs are likely to go up, meaning most buyers will be best off to lock in a favorable
fixed rate now and not take the risk of much higher rates later. Keep in mind that lenders not only lend money to
purchase homes, they also lend money to refinance homes. If you take out a loan now, and several years from now
interest rates have dropped, refinancing will probably be an option.
call us at (239) 354-0058, fax at (888) 607-4420 or e-mail us at info@elitemortgageservicesinc.com
I can't afford 20% to put down on a house? Assuming you can qualify for high monthly mortgage payments and
have an excellent credit history, you should be able to find a low (0-15%) down payment loan. However, you may have
to pay a higher interest rate and loan fees (points) than someone making a larger down payment.
What is Private Mortgage Insurance (PMI)?
Private mortgage insurance (PMI) policies are designed to reimburse a mortgage lender up to a certain amount if you
default on your loan and the foreclosure sale is less than the amount you owe the lender. That is, the amount of your
mortgage loan plus the costs of the foreclosure sale. Most lenders require PMI on loans where the borrower makes a
down payment of less than 20%. Premiums are usually paid monthly and typically cost less than one-half of one
percent of the mortgage loan. With the exception of some government and older loans, you can drop PMI once your
equity in the house reaches 22% and you've made timely mortgage payments. Ask your lender for details on the cost
of PMI and requirements for cancelling it.
Can I use some of my IRA or 401(k) plan for a down payment? Under the 1997 Taxpayer Relief Act, first-time
home buyers can withdraw up to $10,000.00 penalty free from an individual retirement account (IRA) for down payment
to purchase a principal residence. This $10,000.00 is a lifetime limit. The law defines a first-time homeowner as
someone who hasn't owned a house for the past two years. If a couple is buying a home both must be first-time
homeowners. Ask your tax accountant for more information, or check IRS rule at http://www.irs.gov. Another source of
down payment money is a loan against your 401(k) plan. Ask your employer or plan administrator if your plan allows
for loans. If it does, the maximum loan amount under the law is the one-half of your interest in the plan or $50,000.00.
Whichever is less. Other conditions, including the maximum term, the minimum loan amount, the interest rate and
applicable loan fees, are set by your employer. Any loan must be repaid in a "reasonable amount of time", although
the Tax Code doesn't define reasonable. Be sure to find out what happens if you leave your job before fully repaying a
loan from your 401(k) plan. If a loan becomes due immediately upon your departure, income tax penalties may apply to
the outstanding balance.
What's the difference between a fixed and adjustable rate mortgage? With a fixed rate mortgage, the interest
rate and the amount you pay each month remain the same over the entire mortgage term, traditionally 15, 20 or 30
years. A number of variations are available, including five and seven year fixed rate loans with balloon payments at the
end. With an adjustable rate mortgage (ARM), the interest rate fluctuates according to the interest rates in the
economy. Initial interest rates of ARMs are typically offered at a discounted ("teaser") interest rate lower than for fixed
rate mortgages. Over time, when initial discounts are filtered out, ARM rates will fluctuate as general interest rates go
up or down. Different ARMs are tied to different financial indexes, some of which fluctuate up or down more quickly
than others. To avoid constant and drastic changes, ARMs typically regulate (cap) how much and how often the
interest rate and/or payments can change in a year and over the life of the loan. A number of variations are available
for adjustable rate mortgages, including hybrids that change from a fixed to an adjustable rate after a period of years.
Is a fixed or an adjustable rate mortgage better? If depends. Because interest rates and mortgage options
change often, your choice of a fixed or adjustable rate mortgage should depend on the interest rates and mortgage
options available when you're buying a house your view of the future (generally, high inflation will mean ARM rates will
go up and lower inflation they will fall) and how willing you are to take a risk. When mortgage rates are low, a fixed rate
mortgage is the best bet for most buyers,. Over the next five, ten or thirty years, interest rates are more apt to go up
than further down. Even if rates could go a little lower in the short run, an ARMs teaser rate will adjust up soon and you
won't gain much. In the long run, ARMs are likely to go up, meaning most buyers will be best off to lock in a favorable
fixed rate now and not take the risk of much higher rates later. Keep in mind that lenders not only lend money to
purchase homes, they also lend money to refinance homes. If you take out a loan now, and several years from now
interest rates have dropped, refinancing will probably be an option.
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