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Frequently Asked Mortgage Questions

What is a mortgage?
A mortgage (also called a home loan) is a legal contract made between a lender and a borrower that uses property as collateral to secure the loan. The lender can take possession of the property if the borrower fails to pay the prearranged home loan payments.

What type of mortgage is best for me?
The mortgage world can be a confusing place. Every mortgage has variables that determine how much a borrower ends up paying, and technical jargon can make it tough to understand what you're getting into. Most shoppers simply want a good deal on a loan. Making apples-to-apples comparisons can be difficult, but a little education can go a long way toward landing the right mortgage at a great price.

To learn more about the types of mortgages offered by Sunshine Home Loans click here >> .

What is a mortgage refinance?
A mortgage refinance occurs when borrower uses the money from a refinanced loan to pay off an existing home loan. Borrowers typically do this to extend their home loan period, apply for a lower interest rate, or to use some money out of their equity.

What is a mortgage lender?
A mortgage lender is a financial institution that provides prospective homeowners with the funds over a long-term period to pay off their home loan mortgage. Borrowers are required to pay monthly installments to their lender which includes principle, interest, and additional lender fees. Examples, mortgage bankers and mortgage brokers.

What is the difference between a mortgage broker and a mortgage banker?
A mortgage broker is the middleman who helps match borrowers with lenders based on corresponding needs and standards. Mortgage brokers arrange more the 80% of all transactions between borrowers and lenders, yet mortgage bankers actually finance and distribute the largest portion of home loans compared to all other lenders.

What is a mortgage principle?
The mortgage principle is the amount of loan money that a homeowner borrows excluding the interest.

What does APR mean?
Annual Percentage Rate ( APR ) is the percentage used to figure out the total cost of your cash advance loan by taking into account all fees charged by your lender in addition to your loan principle and interest.

What is a fixed-rate mortgage?
A fixed-rate mortgage is a home loan with steady interest rates and monthly payments that do not change throughout the life of the loan.

What is an adjustable rate mortgage?
An adjustable rate mortgage (ARM) has monthly payments that change periodically due to fluctuations in market interest rates.

What is a USDA loan?
A USDA loan (also called a Rural Development Loan) is a government insured home loan that allows you purchase a home with NO Money Down. USDA Loans offer 100% financing to qualified buyers, and allow for all closing costs to be either paid for by the seller or financed into the loan. USDA offers some the lowest rates of any loan, and the borrower will always have a fixed interest rate.

What is a VA loan?
A VA loan is a mortgage loan in the United States guaranteed by the U.S. Department of Veterans Affairs (VA). The loan may be issued by qualified lenders. The VA loan was designed to offer long-term financing to eligible American veterans or their surviving spouses (provided they do not remarry). The basic intention of the VA direct home loan program is to supply home financing to eligible veterans in areas where private financing is not generally available and to help veterans purchase properties with no down payment. Eligible areas are designated by the VA as housing credit shortage areas and are generally rural areas and small cities and towns not near metropolitan or commuting areas of large cities.

What is an FHA-insured loan?
An FHA insured loan is a Federal Housing Administration mortgage insurance backed mortgage loan which is provided by a FHA-approved lender. FHA insured loans are a type of federal assistance and have historically allowed lower income Americans to borrow money for the purchase of a home that they would not otherwise be able to afford. To obtain mortgage insurance from the Federal Housing Administration, a mortgage insurance premium (MIP) equal to 1 percent of the loan amount at closing is required, and is normally financed by the lender and paid to FHA on the borrower's behalf. Depending on the loan-to-value ratio, there may be a monthly premium as well.

What is HARP?
The Home Affordable Refinance Program, also known as HARP, is a federal program of the United States, set up by the Federal Housing Finance Agency in March 2009 to help underwater and near-underwater homeowners refinance their mortgages. This program targets homeowners who are current on their monthly mortgage payments but are unable to refinance due to dropping home prices in the wake of the U.S. housing market correction.

What is HAMP?
The Home Affordable Modification Program (HAMP) is designed to help financially struggling homeowners avoid foreclosure by modifying loans to a level that is affordable for borrowers now and sustainable over the long term. The program provides clear and consistent loan modification guidelines that the entire mortgage industry can use. The Home Affordable Modification Program includes incentives for borrowers, servicers and investors.

What is an FHA 203k loan?
The FHA 203k loan program provides home buyers the opportunity to buy and fix up a property, without exhausting their personal savings. Home buyers can purchase a property and include whatever costs to make required repairs or desired updates, or to fully renovate the property, all into one simple thirty-year fixed loan. ALL work starts AFTER purchasing the property, using the money set aside by the bank.

There are two types of FHA 203k loans the Full FHA 203k loan and the Streamline FHA 203k Loan. The full 203k is for larger projects requiring more than $35,000 in costs or for projects that require structural repairs. A HUD consultant is required on the full FHA 203k loan programs.

The Streamline 203k is the new kid on the block brought about in December of 2005 for less extensive repairs and improvements, therefore eliminating the required HUD consultant. The maximum costs that can be included in the loan are $35,000, none of which can be structural costs.

What is a reverse mortgage?
Reverse mortgages are loans that allow homeowners to transfer some of their home equity into cash. In contrast to traditional home loan mortgages, reverse mortgages do not require borrowers to repay their home loan until the homeowner no longer lives primarily at that residence, although he or she stills owns the residence.

What is a jumbo mortgage?
A jumbo mortgage is a mortgage loan in an amount above conventional conforming loan limits. This standard is set by the two government-sponsored enterprises Fannie Mae and Freddie Mac, and sets the limit on the maximum value of any individual mortgage they will purchase from a lender. Fannie Mae (FNMA) and Freddie Mac (FHLMC) are large agencies that purchase the bulk of U.S. residential mortgages from banks and other lenders, allowing them to free up liquidity to lend more mortgages. When FNMA and FHLMC limits don't cover the full loan amount, the loan is referred to as a "jumbo mortgage". The average interest rates on jumbo mortgages are typically higher than for conforming mortgages.

What is an amortized mortgage?
Amortized mortgages refers to loans that are paid in installments comprised of both principle and interest, and which is paid off (or amortized) over a fixed period of time.

How do you calculate LTV or loan-to-value ratio?
The loan-to-value (LTV) ratio of your home is calculated by dividing the fair market value of your home by the amount of your home loan.

What are lender fees?
These fees usually range anywhere from 2 to 5 percent and may include, but are not limited to, things such as appraisal costs, document preparation, and application costs.

What is the Truth in Lending Act?
The Truth in Lending Act is a federal law that was enacted as part of the Consumer Protection Act. This law requires lenders to reveal all information to the borrower and detail all costs associated with the transaction.