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What are loan points?
Loan points are the fees a lender charges for making the loan. Loan points correspond to a percentage of the actual loan made to a client. As an example, 1 point on a $100,000.00 loan would be $1,000.00, or one percent. Loan points are often used to buy down rates, making the long-term cost of the loan less. For example, if you were to pay 2 points on a $100,000.00 loan in order to get a 6% rate, your payment for 15 years would be $843.86. If the same loan without points cost 6.750%, that payment would be $884.91. In this case, paying 2 points saved you $ 5,388.90 over the life of your loan. While often viewed as an "evil" item, points if used properly could save you thousands of dollars. Our loan consultants can review your situation and help you decide if points are right for your loan.
The loan process — how long does it take?
This depends on a wide variety of things — the type of loan, the gathering of documents, verification of information, the ordering of title documents, the scheduling of appraisals and other factors. The entire process usually takes anywhere from 14 to 30 days.
How is debt ratio calculated?
Assume your total monthly expenses for mortgages, car payments, other personal loans, and minimum payments to your credit cards equals $1500/month and that your gross pay equals $3000/month. $1500 divided by $3000 equals 50%. Your debts are 50 % of your income; therefore you have a 50% debt ratio.
How is loan to value calculated?
Assume you are borrowing $75,000 against your house that has an appraised value of $100,000. $75,000 divided by $100,000 equals 75% LTV. You are borrowing 75% of your home's value; therefore you have a 75% LTV.
How is credit graded?
Generally, lenders look at your last 18-24 months of credit history to determine your credit rating. As a rule, derogatory credit in order of highest to lowest as damaging to your credit grade is as follows:
- Judgements/liens
- Late payments on mortgage
- Collection accounts/charge offs
- Late payments on auto loans
- Late payments on credit cards
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