Frequently Asked Massachusetts Mortgage Questions
From First Time Home Buyers
Mortgage and Loan Financial Questions
Title & Homeowner's Insurance Questions
(What do all these terms mean?)
and Loan Financial Questions
- Do I have to use the lender
my real estate agent (or builder) recommends?
- What is a mortgage?
- What is LTV and how does it
determine the size of my loan?
- What types of loans are available
and what are the advantages of each?
- When do ARMs make sense?
- What are the advantages of
15 and 30 year loans?
- Does it help to pay off my
loan ahead of schedule?
- Are there special mortgages
for first time home buyers in Massachusetts?
- Are there low doc or no doc
- What size of down payment
will I need?
- What is included in a monthly
- What factors affect my mortgage
- How does the interest rate
affect my Massachusetts mortgage?
- Should I lock my interest
rate or float the rate until closing?
- What happens if interest
rates go down and I have a fixed rate loan?
- What are discount points?
- What is the difference between
a zero point and a no cost loan?
- What is an escrow account
and do I need one?
- What is the difference between
a conforming and non-conforming (aka jumbo)
- Is there a difference rate
for non-owner occupied vs. owner occupied
- What is mortgage insurance
and do I need it?
- What is the APR and how is
- Do I have to use the lender my real estate
agent (or builder) recommends? No. Most
real estate agents will provide their clients
with 2-3 potential sources for financing.
However, the referred lenders may not offer
the best array of loan products or the lowest
rates. It is always a good idea to do some
loan investigating on your own, do your homework
carefully before committing to any lender
and always be careful when shopping that you
are making a valid loan comparison (i.e. same
rate, points, closing costs, rate lock duration,
etc). The loan specialists assigned to you
on this site can taylor a loan to suit your
specific needs, contact him or her today.
- What is a mortgage? A mortgage is
a loan obtained to purchase real estate. The
"mortgage" itself is a lien (a legal claim)
on the home or property that secures the promise
to pay the debt. All Massachusetts mortgages have
two features in common: principal and interest.
- What is LTV and how does it determine
the size of my loan? The Loan To Value
ratio is the amount of money you borrow compared
with the price or appraised value of the home
you are purchasing. Each loan has a specific
LTV limit. For example: With a 95% LTV loan
on a home priced at $100,000, you could borrow
up to $95,000 (95% of $100,000), and would
have to pay,$5,000 as a down payment. The
LTV ratio reflects the amount of equity borrowers
have in their homes. The higher the LTV the
less cash homebuyers are required to pay out
of their own funds. So, to protect lenders
against potential loss in case of default,
higher LTV loans (80% or more) usually require
mortgage insurance policy.
- What types of loans are available and
what are the advantages of each? Your
personal loan specialist on this site, would
be glad to go through the various types of
loans available and find the one that fits
your specific needs. Here are a few of the
most common types of loans. Fixed Rate Mortgages:
Payments remain the same for the the life
of the loan Types 15-year 30-year Advantages
Predictable Housing cost remains unaffected
by interest rate changes and inflation. Adjustable
Rate Mortgages (ARMS): Payments increase or
decrease on a regular schedule with changes
in interest rates; increases subject to limits
Types Balloon Mortgage- Offers very low rates
for an Initial period of time (usually 5,
7, or 10 years); when time has elapsed, the
balance is due or refinanced (though not automatically)
Two-Step Mortgage- Interest rate adjusts only
once and remains the same for the life of
the loan ARMS linked to a specific index or
margin Advantages Generally offer lower initial
interest rates Monthly payments can be lower
and may allow borrower to qualify for a larger
- When do ARMs make sense? An ARM may
make sense if you are confident that your
income will increase steadily over the years
or if you anticipate a move in the near future
and aren't concerned about potential increases
in interest rates.
- What are the advantages of 15 and 30
year loans? 30-Year: In the first 23
years of the loan, more interest is paid off
than principal, meaning larger tax deductions.
As inflation and costs of living increase,
mortgage payments become a smaller part of
overall expenses. 15-year: Loan is usually
made at a lower interest rate. Equity is built
faster because early payments pay more principal.
- Does it help to pay off my loan ahead
of schedule? Yes. By paying a little extra
each month or making an extra payment at the
end of the year, you can accelerate the process
of paying off the loan. When you send extra
money, be sure to indicate that the excess
payment is to be applied to the principal.
Most lenders allow loan prepayment, though
you may have to pay a prepayment penalty to
do so. Ask your lender for details.
- Are there special mortgages for first
time home buyers in Massachusetts? Yes. Lenders
offer several affordable mortgage options
which can help first time home buyers overcome
obstacles that made purchasing a home difficult
in the past. Lenders may now be able to help
borrowers who don't have a lot of money saved
for the down payment and closing costs, have
no or a poor credit history, have quite a
bit of long-term debt, or have experienced
- Are there low doc or no doc loans available?
Yes there are many. They come in a variety
of programs; some have self-employment, credit,
equity or asset requirements so it may be
advisable to have our loan specialist direct
you to the appropriate product for your needs.
There are also loans available to individuals
who cannot verify either their income or assets
(referred to as NINA loans). Keep in mind
that these products can carry higher interest
rates than that of a loan that is fully documented.
A good rule to remember, the more documentation
a borrower can provide for a lender, the lower
the rate they will typically get.
- What size of down payment will I need?
There are now mortgages that only require
a down payment of 5% or less of the purchase
price. But the larger the down payment, the
less you have to borrow, and the more equity
you'll have. Mortgages with less than a 20%
down payment generally require a mortgage
insurance policy to secure the loan. When
considering the size of your down payment,
consider that you may also need money for
- What is included in a monthly mortgage
payment? The monthly payment mainly includes
principal and interest fees. But most lenders
also include local real estate taxes, homeowner's
insurance, and mortgage insurance (if applicable).
- What factors affect my mortgage payments?
The amount of the down payment, the size of
the mortgage loan, the interest rate, the
length of the repayment term and payment schedule
will all affect the size of your mortgage
- How does the interest rate affect my
Massachusetts mortgage? A lower interest rate
allows you to borrow more money than a high
rate with the some monthly payment. Interest
rates can fluctuate as you shop for a loan,
so ask your loan specialist if he or she can
offer a "rate lock" which guarantees
a specific interest rate for a specified period
of time. Remember that a lender must disclose
the Annual Percentage Rate (APR) of a loan
to you. The APR shows the cost of a mortgage
loan by expressing it in terms of a yearly
interest rate. It is generally higher than
the interest rate because it also includes
the cost of points, mortgage insurance, and
other fees included in the loan.
- Should I lock my interest rate or float
the rate until closing? The answer depends
on one's outlook for interest rates, whether
you are satisfied with the current rate being
offered, how far out the closing date is and
whether or not a rate increase could effect
your ability to qualify for the loan. With
a purchase, there is a contractual obligation
to close on a specified date. Some lenders
try to take the guess work out of the process
by allowing borrowers to lock and then float
the rate down one time during the loan process.
Some Massachusetts lenders require a lock fee to
insure the transaction will in fact close.
- What happens if interest rates go down
and I have a fixed rate loan? If interest
rates drop significantly, you may want to
look into refinancing. Most experts agree
that if you plan to be in your house for at
least 18 months and you can get a rate 2%
less than your current one, refinancing is
smart. Refinancing may, however, involve paying
many of the same fees paid at the original
closing, plus origination and application
- What are discount points? Discount
points allow you to lower your interest rate.
They are essentially prepaid interest, With
each point equaling 1% of the total loan amount.
Generally, for each point paid on a 30-year
mortgage, the interest rate is reduced by
1/8 (or .125) of a percentage point. When
shopping for loans, ask lenders for an interest
rate with 0 points and then see how much the
rate decreases With each point paid. Discount
points are smart if you plan to stay in a
home for some time since they can lower the
monthly loan payment. Points are tax deductible
when you purchase a home and you may be able
to negotiate for the seller to pay for some
- What is the difference between a zero
point and a no cost loan? With a zero
point loan, a borrower has opted not to pay
points to buy their interest rate down but
will still be paying for their base closing
costs (i.e. appraisal, credit report, lender
doc fees, title and escrow, etc.). With a
no cost loan, a borrower has accepted a higher
interest rate, (typically .25%-.375% higher
than on a zero point loan) with the trade
off that the lender or broker will pay for
all their non-recurring closing costs (all
base closing fees except for interest, taxes
and insurance due).
- What is an escrow account and do I need
one? An escrow account is a place to set
aside by your lender to hold the portion of
your monthly mortgage that covers; annual
charges for homeowner's insurance, mortgage
insurance (if applicable), and property taxes.
Escrow accounts are a good idea because they
assure money will always be available for
these payments. If you use an escrow account
to pay property tax or homeowner's insurance,
make sure you are not penalized for late payments
since it is the lender's responsibility to
make those payments.
- What is the difference between a conforming
and non-conforming (aka jumbo) loan? A
conforming mortgage is one that does not exceed
the maximum mortgage limit of the two primary
GSE's (Government Sponsored Enterprises),
Fannie Mae and Freddie Mac. Therefore a jumbo
mortgage is one that has a mortgage amount
exceeding the GSE's limits. The interest rates
on jumbo mortgages are typically between 1/4-5/8%
higher than on conforming mortgages.
- Is there a difference rate for non-owner
occupied vs. owner occupied financing?
Conforming non-owner occupied rates are typically
3/8% higher than owner occupied interest rates.
The down payment or equity requirement is
usually higher for non-owner occupied loans
as well, typically 20-30%+.
- What is mortgage insurance and do I need
it? Please see the insurance
section on our website.
- What is the APR and how is it calculated?
APR stands for annual percentage rate and
its purpose is to give borrowers a truer representation
of the effective interest rate on their loan.
APR factors in certain closing costs and fees
and spreads these costs over the life of the
loan, along with the note rate, to arrive
at a more accurate annualized percentage rate
than the note rate alone represents.
- More Questions? Please contact your
personal mortgage loan specialist, assigned
to you here on this site, don't hesitate to
ask any questions you may have. Top
Hours: 10am-6pm Mon.-Fri. MST
Phone: (877) 511-8811
Fax: (866) 897-2452
My name is Elizabeth Stevenson. I am a licensed and bonded loan officer with Accurate Lending. I have been chosen to be your personal representative for any loan needs or questions that you might have.
Look for my picture throughout the site for helpfult tips and information and feel free to contact me anytime.
I look forward to working with you.