Common Mortgage Terms
What is an adjustable rate mortgage (ARM)?
Adjustable rate mortgages (ARMs) typically start at a lower interest rate than fixed mortgages, so your monthly principal and interest payment may be lower. However, the mortgage payment for an ARM can change over time, since it continually "adjusts" to changing interest rates.
What is a fixed rate mortgage?
A fixed rate mortgage offers the stability and consistency of predictable monthly payments for the life of the loan. It may be a good choice for people who expect to live in a home for an extended period of time, or who want to lock in current interest rates. With a fixed rate mortgage, payments remain constant, allowing you to plan and budget without factoring potential interest rate fluctuations.
What are discount points?
Discount points represent a fee, paid by the customer, used to lower the interest rate charged. Points are typically expressed as a numeral, but represent a corresponding percentage rate. 1 point is the equivalent of 1% of the loan amount. For example, a $100,000 mortgage with 1 discount point would mean you pay $1,000. Points that are expressed as a .negative., such as .1 point, are a credit that the customer will receive at closing towards their closing costs. For example, a $100,000 mortgage with a .1 discount point would mean you receive a $1,000 credit at closing.
What are closing costs?
Closing costs may include loan origination fees, up-front fees, prepaid interest, application fees, appraisal fee, home inspection fee, survey, title search and title insurance, an amount placed in escrow, recording fees and attorney's fees. Depending on your location, closing costs generally average 3 to 4 percent of your loan amount.
What is an origination fee?
An origination fee is charged by a lender to cover the administrative costs associated with processing your loan. The origination fee is often expressed in points. One point equals 1% of the loan amount. For example, a $100,000 mortgage with a loan origination fee of 1 point would mean you pay $1,000.
What are lender fees?
Lender's fees are fees that offset the cost of producing the loan. Different lenders may refer to them by different names, such as, document preparation, underwriting fees or commitment fees.
What is a jumbo loan?
Jumbo loans exceed the maximum conforming loan amount established by Fannie Mae and Freddie Mac, currently set at $359,650.
What is an APR?
The Annual Percentage Rate (APR) is the actual cost of your loan disclosed in a rate of interest, including some of the associated costs such as interest, mortgage insurance and loan origination fees.
What is an interest rate?
This is the base interest rate charged by the lender for the loan. Unlike the Annual Percentage Rate (APR), it does not include associated costs such as mortgage insurance and loan origination fees.
What is my loan-to-value ratio?
Your loan-to-value ratio compares the lesser of the original property value or purchase price to the current loan balance to determine the percentage of equity you have in your home.
Wachovia Mortgage Programs
What is a fixed rate mortgage?
A fixed rate mortgage offers the stability and consistency of predictable monthly payments for the life of the loan. It may be a good choice for people who expect to live in a home for an extended period of time, or who want to lock in current interest rates. With a fixed rate mortgage, payments remain constant, allowing you to plan and budget without factoring potential interest rate fluctuations.
What is an adjustable rate mortgage (ARM)?
Adjustable rate mortgages (ARMs) typically start at a lower interest rate than fixed mortgages, so your monthly principal and interest payment may be lower. However, the mortgage payment for an ARM can change over time, since it continually "adjusts" to changing interest rates.
What is a 3/1 ARM?
Adjustable rate mortgages (ARMs) typically start at a lower interest rate than fixed mortgages, so your monthly principal and interest payment may be lower. However, the mortgage payment for an ARM can change over time, since it continually "adjusts" to changing interest rates. With a 3/1 ARM, the initial interest rate remains fixed for the first three years of the loan, then may adjust annually for the remaining term of the loan.
What is a 5/1 ARM?
Adjustable rate mortgages (ARMs) typically start at a lower interest rate than fixed mortgages, so your monthly principal and interest payment may be lower. However, the mortgage payment for an ARM can change over time, since it continually "adjusts" to changing interest rates. With a 5/1 ARM, the initial interest rate remains fixed for the first five years of the loan, then may adjust annually for the remaining term of the loan.
What is the Teacher A+ Program?
If you are currently employed as a certified classroom teacher, school administrator, principal, vice principal, librarian, or a school healthcare professional, Wachovia's Teacher A+ Program may be for you. Benefits include a low or no down payment, greater flexibility in qualifying guidelines and closing cost assistance.
Are there special programs for police officers, EMTs or firefighters?
Wachovia Mortgage, FSB has made it easier for police officers, EMTs and firefighters to own a home in the communities they protect. Qualified applicants may receive up to 100% financing of the purchase price for loan amounts up to $359,650. All but $500 of closing costs can be financed from alternative sources, such as family gifts or other loans.
What is the My Community Mortgage program?
Wachovia offers a number of ways for homebuyers with modest incomes and limited savings to turn the dream of home ownership into a reality. The My Community Mortgage loan is available to first-time homebuyers who buy a home in a low-to moderate-income area as determined by the U.S. Census. This program may be a good choice if you have limited funds saved for a down payment, have funds saved for the first month.s mortgage payment, are interested in stable monthly payments, and need a variety of loan terms and down payment options to choose from.
What is the Flex 100 program?
Providing 100% financing of the purchase price of your home, this mortgage is specifically designed for homebuyers who have limited available cash, but excellent credit.
What is the Flex 97 program?
Providing 97% financing of the purchase price of your home, this mortgage is specifically designed for homebuyers who have limited available cash, but excellent credit.
Online Application
What types of mortgages can I apply for online?
You can apply for fixed-rate, adjustable rate, and specialty mortgages online.
What does the $95 non-refundable application fee include?
We analyze the information you provided and, in most cases, grant an online pre-approval of your loan. Full approval depends on: verification of income and assets, an appraisal of the subject property, and additional factors.
What other charges apply for the application process?
The application fee allows you to submit your application up to three times within 24 hours. Once your application is approved, your home will need an appraisal, which has varying levels of complexity and costs. Appraisals commonly cost around $300 to $400, but could be more or less depending on your situation. We collect the appraisal fee prior to ordering the report. Additional costs associated with closing your loan will be detailed in your Good Faith Estimate, which is sent to you within three days of applying.
What are the next steps after I submit my application?
Your Wachovia Mortgage, FSB representative will mail state and federal regulatory disclosures for your review, contact you to discuss interest rate .lock-in. options, order an appraisal from a licensed appraiser, and request any additional information necessary to process your application. If you have any questions while your mortgage is being processed, please contact your processing team or your Wachovia Mortgage, FSB specialist.
If my application is pre-approved, does this mean I have the mortgage loan?
No. Full approval depends upon verification of your income and assets, an appraisal of the subject property, and additional factors. Once we receive documentation to support your income, assets, and appraised value, you will receive a full approval. We.ll also send a follow-up letter.
What is the application underwriting process?
When you submit an application for underwriting, analysis is done on your loan request. In the traditional loan process, your application goes through many hands: the loan officer who helps you find the loan; the processor who orders credit reports, pay stubs, and bank statements; the appraiser; and the underwriter. The information that you supply via the Wachovia web site circumvents that traditional process so that your loan can receive pre-approval in minutes.
How many times can I change my application and resubmit it for one fee?
You may change your application figures and submit the application three times within 24 hours for the same application fee.
Appraisals
Why do I need an appraisal?
You need an appraisal to verify the current value of the property at the time of a request for deletion of PMI. It is also needed to confirm a property has not declined in value since origination.
Why do I have to have an appraisal rather than using the tax value of my home?
Appraisals determine the current fair market value of your home. Tax values obtained from your taxing authority can sometimes be lower and may not reflect the appraised value of the home. An appraisal justifies the loan amount being requested.
PMI (Private Mortgage Insurance)
What is PMI and why is it required?
Private mortgage insurance (PMI) is insurance written by a private company that protects the lender from losses in the event the borrower defaults on the mortgage. Borrowers are required to pay the premium for private mortgage insurance. Private mortgage insurance limits a lender's exposure to financial loss resulting from loan default. If you make a down payment of less than 20%, lenders generally require private mortgage insurance.
What is my loan-to-value ratio?
Your loan-to-value ratio compares the lesser of the original property value or purchase price to the current loan balance to determine the percentage of equity you have in your home.
What is the Homeowner's Insurance Protection Act of 1998 (S.318) and how will it affect my mortgage?
President Clinton signed the Homeowner's Protection Act of 1998 on July 29, 1998. The Act become effective July 29, 1999 and requires that mortgage lenders and services cancel Private Mortgage Insurance (PMI) when certain criteria are met. PMI is required on conventional first lien mortgages when the mortgagor has less than a 20 percent down payment. This insurance protects the lender and/or investor in the case of default on the mortgage loan. Under the new bill, servicers must provide annual notices regarding cancellation of the PMI. Also, on loans closed on or after July 28, 1999, the lender/servicer is required to provide, at closing, an amortization schedule (for fixed rate mortgages only), and disclosure regarding the criteria and exceptions regarding the cancellation of PMI.
Title Insurance
What is title insurance?
Title insurance provides the lender and the buyer (if you purchase owner's coverage) with coverage for losses resulting from specific title defects listed in the policy. In cases where land and property have changed hands over time, there is always the possibility an error has occurred. If an error has occurred, it may be possible that someone else may be in title to or have an interest in the property, that improvements encroach on property lines or that other similar problems may exist. In these cases, if you do not have title insurance you could lose your investment in your home. Lenders require "lender's coverage" to protect their investment. Owner's coverage is optional and provides separate coverage for the borrower.
Does the lender require title insurance?
Yes, a Title Insurance Policy will be required at closing.
Hazard and Flood Insurance
What homeowner's insurance requirements will I need to meet at closing?
Wachovia requires a hazard insurance policy and a one-year paid receipt at closing for least the amount of the mortgage.
What is your mortgage clause?
Our mortgage clause is "Wachovia Mortgage, FSB, its successors and/or assigns."
Will you escrow my flood insurance?
If a flood certification indicates that your house is located in a special flood hazard area and your mortgage loan has an escrow account for your taxes and/or insurance, Wachovia Mortgage, FSB is required to escrow for and pay your flood insurance.
Escrow
What is an escrow account?
An escrow account is established at the time you close your mortgage loan. This account is held by the lender for the future payments of real estate taxes and insurance premiums. At closing you will be required to pay an initial amount for each of these items to establish your escrow account.
Are there any limitations on how much lenders can collect from a borrower for the borrower's escrow account?
Lenders are required to follow the standards set forth in the Real Estate Settlement Procedures Act (RESPA) and applicable state law. RESPA and some states set limits on the amount, which can be collected by the lender to pay for escrow items, such as property taxes and insurance.
What is RESPA (Real Estate Settlement Procedures Act)?
The Real Estate Settlement Procedures Act is a federal statute and regulation governing real estate lending practices, including but not limited to originating and servicing mortgage loans.
How will the appropriate escrow balance be determined?
After your taxes and insurance are paid each year, we analyze the current escrow balance and compare it to the required escrow balance. If there is a difference between your required balance and your current balance, an overage or shortage may occur.
Do I have to carry an escrow account on my mortgage loan?
If your loan is approved and closed with an escrow account, you may be required to maintain the escrow account for the life of the loan.
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