Mortgage FAQs

What does it mean to be Platinum Pre-Approved?

To be Platinum Pre-Approved means that George Koutsos and his team thoroughly reviewed and analyzed your credit and financial profile, looking at credit history, employment, income, assets, and liabilities to ensure that you qualify for home financing. When first-time home buyers are Platinum Pre-Approved, they can search for a new home with full confidence that they will be able to afford the home and qualify for financing.

What is a credit score and how does it affect my loan application?

A credit score is one of the many pieces of information that is used to evaluate an application for financing. A credit score is a compilation of all the information collected by credit bureaus and is reported each month by your creditors about the balances you owe and the timing of your payments. Credit scores used for mortgage loan decisions range from 300 to 850. Having a high credit score will improve your chances of getting approved for a loan and getting the best interest rate possible.

How much money do I need for a down payment?

If you wish to avoid paying Private Mortgage Insurance (PMI), a down payment of 20% of the home purchase price is required. If you have less than 20% down, you will have to pay PMI. There are, however, options to buy out the PMI under the right circumstances. FHA and MassHousing loans are two of the most popular loan products for first-time home buyers. They accept down payments as low as 3.5 and 3% respectively and also have less-stringent loan requirements. MassHousing even has a low down payment loan that does not require mortgage insurance.

What is an FHA loan?

FHA loans are government insured loans through the U.S. Department of Housing and Urban Development (HUD). FHA loans are very popular among first-time home buyers but are available to anyone who qualifies. They offer competitive rates, less-stringent credit requirements, and low down payments which can be as low as 3.5% of the purchase price.

What is a MassHousing loan?

MassHousing offers several loan options for Massachusetts residents with low and moderate incomes who wish to purchase a home. Many of these loan products accept a down payment as low as 3% and offer competitive interest rates. MassHousing loans do have income restrictions that vary by city or town and do require good credit. Completion of a home buyer counseling course is required for eligibility.

What is PMI?

PMI stands for Private Mortgage Insurance and is required by lenders when the down payment is less than 20%. PMI protects lenders against losses when a borrower defaults on a mortgage.

What is PITI?

PITI is an acronym for principal, interest, taxes, and insurance. These are the four components that comprise your complete mortgage payment.

What is an escrow account?

An escrow account is an account that is established to hold separate monetary funds for the purpose of paying real estate taxes and homeowners insurance as part of the monthly mortgage payment. Bills for taxes and insurance are sent directly to the lender who makes the required payments.

What is a Good Faith Estimate?

The Good Faith Estimate (GFE) is a disclosure form that includes an itemized list of fees and costs associated with the loan and must be provided within three business days of applying for a loan. These mortgage fees, also called settlement costs or closing costs, cover every expense associated with a home loan.

What is the difference between interest rate and APR?

The interest rate is the yearly rate a lender charges to borrow money for a specific length of time. The APR is designed to represent the total cost of credit on a yearly basis, taking into consideration not only the base interest rate but also any pre-paid finance charges such as pre-paid interest, PMI, closing costs, points, etc. Because APR is designed to show you the total cost of a loan, it can be useful when comparing loans from different lenders.

What are points and how much do they cost?

Points, also known as “discount points,” are fees which are paid directly to the lender upon closing in exchange for a reduced interest rate. This is also known as “buying down the interest rate,” which will directly lower your monthly payments. Each point is equal to 1% of the mortgage amount (e.g., 1 point on a $300,000 mortgage costs $3,000).

What is the difference between an appraisal and a home inspection?

An appraisal determines market value of a particular property by considering comparable properties that have recently sold based on similar general condition, location, age, and other features, such as size, major structural improvements, and amenities. An appraisal is concerned primarily with what the home would sell for in the marketplace. A home inspection is a detailed examination and evaluation of the mechanical and structural condition of the subject property. An inspection tries to determine potential defects and itemizes all potential repairs or problems in the home.

What is title insurance?

Title insurance protects a property owner should a prior claim arise against the property after the purchase has been completed. This also covers a lender should a question of ownership arise. Owner’s title insurance is optional, whereas lender’s title insurance is required.

What does a mortgage underwriter do?

The mortgage underwriter reviews the loan application and all of the supporting documentation that has been gathered from the borrower, as well as the appraisal and title information on the property. Based on this review, the underwriter assesses the risks and makes the final decision on whether to approve or decline a loan.

What happens at the closing?

All final documents (Note, Mortgage, Deed, etc.) are signed. Any final monies necessary are paid and ultimately, immediately after the closing, the buyer takes legal ownership when the necessary documents are filed with the appropriate Registry of Deeds.

Will I need legal representation at the closing?

In some areas of the country it is customary and sometimes required by law to have an attorney represent you at the closing. Please consult with your realtor and the closing attorney who represents the lender if you have any questions regarding representation.