Park Avenue Mortgage Center

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Applying for a mortgage or refinancing your existing mortgage can seem overwhelming that is why we created a list of the general terms.

Mortgage Broker: a qualified and licensed person who acts on behalf of a borrower to obtain a Mortgage Loan for a fee consideration.

Application: A standard form that the borrower(s) completes either verbally or in writing. The application thoroughly provides all relevant information about the borrower(s) and subject property required to underwrite the loan. It is simply a snapshot photo of the borrower. The broker or lender may assist in completing this form based on information obtained directly from the borrower(s) or their agent/representative (only if translation is required). We do not accept third party applications on behalf of the borrower(s).

Appraisal: Collateral valuation of the subject property assuring market value used in underwriting to determine if the collateral is sufficient for the loan that has been requested. Appraisal fees vary based on type of loan. Fees must be paid by credit or debit card at time of order. Borrower is responsible for the advance payment.

Point(s): Each point is equal to 1% of the financed loan amount.

Assets: This will include both LIQUID and NON-LIQUID ASSETS.

  • Liquid Assets: Assets that are easily convertible to cash. Acceptable form of Liquid Assets are: Bank accounts (Checking, savings, Money      
    Market Accounts, Certificates of Deposits, Etc.), Stocks, Bonds, Annuities, Individual Retirement Accounts (IRA), 401K Retirement plans, and Mutual
    Funds are acceptable if can be liquidated without having to leave your employer.
  • Non Liquid Assets: Assets that may be of value but can not be convertible into cash readily. Some examples are: Stocks, Bonds, 401K plans that cannot be liquidated unless you leave your employment, Automobiles, Boats, Etc. These assets are only valuable toward required reserves and strength of the loan application.

Loan Estimate (LE): An estimate of all costs associated with the loan transaction. Although a Loan Estimate is an estimate, it should be complete, accurate, and based on actual costs or customary costs.

Closing Disclosure: It is provided by the lender institution- the document details loan information such as Loan Amount (Amount Financed), Annual Percentage Rate, Closing Costs, and Proposed Housing Payment. This form replaced the old HUD1 Settlement Statement.

Mortgage: A legal binding document that pledges property to a lender as security for the repayment of debt. The term is also used to refer to the
loan itself.

Note: A legal document or contract that obligates a borrower(s) to repay a mortgage loan at the stated interest rate during a specified period of time loan contract.

Pre-Approval: Needed to make an offer. Pre-approval involves verifying your credit, down payment, employment history, etc. Your loan application is submitted to an underwriter and a decision is made regarding your loan application. If your loan is pre-approved, you are then issued a pre-approval letter. Getting your loan pre-approved allows you to close very quickly when you do find a house. A pre-approval can help you negotiate a better price with the seller, since being pre-approved is like having cash in the bank to pay for the house!

Pre-Qualification: Simply means that based on income and assets, you can afford a certain mortgage amount. A pre-qualification is normally issued by a loan officer, who after interviewing you, determines the dollar value of a loan you can be approved for. However, loan officers do not make the final approval, so a pre-qualification is not a commitment to lend. After the loan officer determines that you pre-qualify, he/she then issues you a pre-qualification letter. This letter is simply used to determine the amount of mortgage loan you can tentatively obtain based on your income and assets available.

Generally, sellers will not accept your offer unless you have a pre-approval.

Purchase Agreement or sales contract: An Agreement between seller(s) and buyer(s) for the sale/transfer of a property that details the terms of the purchase.

Title Commitment: Title insurance is the insurance that protects the lender (Lender’s Policy) or the buyer (Owners Policy) against loss arising from
disputes over ownership of a property; i.e. liens, judgements, ETC.

Transfer of Servicing Rights: Notice to borrower that servicing of loan may be sold/transferred to another entity for servicing. Terms of the loans cannot and will not change your loan terms; only change is the name of the payee to send your payments.

Mortgage Insurance (MI): Whether Private (PMI)Mortgage insurance is required on all loans when the amount of mortgage is over 80% of the Purchase price or Fair Market Value (which ever is less). An MI Certificate is issued by the insurance provider to detail the interest rate and percentage of coverage. Government (GMI), or MIP insures the lender and is for the life of the loan and cannot be cancelled until payoff or refinance of the existing mortgage. Mortgage Insurance comes in Several Forms:

  • Borrower Paid Mortgage Insurance (BPMI): presents an increase in payment and can be cancelled when the loan balance reaches 80% of the original appraised value of the property. Automatically cancelled when the balance reaches 78%.
  • Lender Paid Mortgage Insurance (LPMI): Can not be cancelled and presents an increase in the interest rate to the Borrower.
  • Single Financed Mortgage Insurance (SFMI): Can be Cancelled & Does not Present an increase in the Rate of Payments. However, the entire premium must be paid at the time of Closing. If the Coverage is cancelled, a prorated refunded will be issued.

MI premiums maybe be 100% tax deductible for households earning $100,000.00 or less in Adjusted Gross Income. You can request the MI cancellation if you believe that your property value appreciated and your current loan balance is at or below 80% of the value. However, you must bring a new appraisal to your lender and they must agree with the value.
Please note that on most FHA and USDA LOANS, The first full year premium is collected at closing or financed with your loan. Additionally, a monthly premium is added to the monthly mortgage payment.

Right to Cancel: Disclosure informs the borrower(s) of their right to rescind (Cancel) on a refinance transaction of their primary residence. By law, any homeowner refinancing their home (whether or not a current mortgage is being paid off) is subject to the 3 days rescission period. The RESCISSION PERIOD cannot be WAIVED.

Jumbo Loan Limits:   

  • If you are borrowing more than the Conforming Loan Limit, your loan is a Jumbo Loan.
  • Jumbo Loans do not fit the Conforming Loan Criteria regardless of credit history and other qualifying criteria. Therefore, you will be subject to
    a higher interest rate and additional qualification conditions.

What is a Credit or FICO Score?

A FICO score is a credit score developed by Fair Isaac & Co. Credit scoring is a method of determining the likelihood that credit users will pay their bills timely. How to earn an 800 Credit Score. It might surprise you that some folks are reaching for an 850 credit score. It can be done. Try some of these five elements to improve your score:

  • Payment history: pay on time as this accounts for 35% of the FICO Score
  • Amount owed; keep balances low
  • New credit: avoid new credit cards for small gifts especially during holiday promotions
  • Amount of available credit: avoid maxing out your available credit limits
  • Types of credit used; avoid too many revolving credit cards

Check your credit report and your credit score on a regular basis to see how you stack up in each of these categories. Everyone is entitled to a free annual credit report from each of the three main credit bureaus. Request them online from: www.annualcreditreport.com. If you find any discrepancies or errors, report any dispute or error to the report provider.

YOu may not achieve an 850, but following these guidelines can certainly give your current score a nice boost.

Credit scores analyze a borrower’s credit history considering numerous factors such as:

  • Late payments
  • The amount of time credit has been established
  • The amount of credit used versus the amount of credit limits available
  • Length of time at present residence
  • Employment history
  • Negative credit information such as bankruptcies, charge-offs, collections, etc.
  • Number of times credit history has been accessed; these are called, “Hard credit inquiries”

These are really three Credit scores computed by each of the three bureaus – Experian, Trans Union and Equifax. Most lenders use the middle score.

Who do I contact if there is an error on my credit report?

If you see an error on your report, report it to the credit bureau. The three major bureaus in the United States are:

EQUIFAX (1-800-685-1111),

TRANS UNION (1-800-916-8800)

EXPERIAN (1-888-397-3742)

These all have procedures for correcting information promptly. Want to see a credit report for free. Link this link, www.annualcreditreport.com. You will not get credit scores, but you can obtain one free credit report every year. You can review your credit profile and make any necessary changes or disputes. This should be the first step you take to correct any problems you might have with your credit profile. There are paid services as well. Be very careful. Some will want you to sign up for other products to get free credit report or free credit scores. www.annualcreditreport.com is the only true free report available.

Anti Steering: It is illegal for any person or entity to stipulate or steers a borrower to use any of the following:

  • A Mortgage Broker,
  • a certain Law Firm or Title company for settlement,
  • an insurance company for Homeowners insurance,
  • Home Inspector, etc.

Borrowers have options. The option to choose any or all of the above service providers.

If you have any questions, please contact us at 610-767-2928

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Park Avenue Mortgage Center NMLS#101916

George Makhoul NMLS#135328