FREQUENTLY ASKED QUESTIONS
You will find several of our most common and frequently asked questions below. If you have an additional question not contained in this list, do not hesitate to contact us.
Do I have to wait until I’ve found a property to apply for a loan?
No, in today’s tough real estate market many agents often will only work with pre-approved and pre-qualified buyers. By getting pre-qualified and pre-approved now, you and your Realtor will know exactly what you qualify for before you begin shopping. Most sellers will only accept offers and negotiate with pre-approved and pre-qualified buyers. Call Franklin Advantage today and get pre-approved and pre-qualified now. It’s the first step in buying a home.
What first-time buyer programs are available?
Many first-time buyer programs are locally developed and administered. Your county, city or local community is much more likely to have a program available than on a national level. Your Franklin Advantage professional can help you determine if there are programs available in the neighborhood you’re looking to buy in.
What are the differences between pre-qualification, pre-approval and final loan approval?
Pre-qualification is the process where we will look at your credit report and use the information you supply to determine how much mortgage you can afford based on your income. No accounts or employment information is verified. Pre-approval occurs when all credit and employment is verified and the mortgage is approved, subject to the appraisal of the property you have chosen to buy. Final loan approval occurs when the property has been appraised, all documentation is in the hands of the investor and all contingencies have been met.
There seem to be so many mortgage programs available. How can I compare them?
Choosing the right mortgage can be very confusing. There are a lot of options. Do you want the security of a 30 year fixed rate loan or the lower payments of a loan that is only fixed for the initial 5, 7, or 10 years? Do you have money for a down payment or do you need to explore other options? Look at program descriptions on this web site for some of the many options available.
The best way to find the right mortgage is to talk to a Franklin Advantage professional. We take the time to explain the benefits and draw backs of every mortgage loan option available, making sure you make the right choice for you.
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Which Type of Loan is Best?
There is no “best” loan. There is only the best loan for you. But the best loan for you today may not be the best loan for you in a few years. The best loan for you when you’re buying your first home may not be the best loan for you when you retire. Talk to a Franklin Advantage professional. We take the time to explain the benefits and draw backs of every mortgage loan option available, making sure you make the right choice for you.
Should I choose a fixed-rate or adjustable-rate loan?
Most mortgage loans have either a fixed interest rate or an adjustable interest rate. With a fixed-rate mortgage, the interest rate never changes and your payments remain stable throughout the life of your loan. With an adjustable-rate mortgage (ARM), the interest rate changes at regular intervals (usually once or twice a year) based on terms in the note. Fixed rate ARMs offer fixed terms during the initial period (usually between three and ten years) after which the rate and payment adjustments begin.
A fixed rate is usually best if you plan to keep you loan for the long term and rates are relatively low. An ARM is usually best if you plan to sell your home or refinance before the rate adjustments begin, or if you are buying when rates are relatively high. Talk to a Franklin Advantage professional. We take the time to explain the benefits and draw backs of every mortgage loan option available, making sure you make the right choice for you.
What factors are looked at when I apply for a mortgage?
Many factors in evaluating your loan application are looked at, but they usually focus on four areas:
Income and debt. How much money you make and what other bills you have to pay helps determine how much payment you can afford.
- Assets: We need to verify you have enough money to cover the costs of buying a home. With some mortgage options we may need to verify you have enough money to cover unforeseen financial setbacks than occur.
- Credit: Whether you’ve met other financial obligations helps predict whether you will repay your mortgage.
- Property: The home you want to buy has to be worth enough to act as collateral for the mortgage.
Talk to a Franklin Advantage professional. We take the time to explain all the factors that apply in your situation and help you get pre-qualified and pre-approved today.
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I hear about these different "ratios" when qualifying for a mortgage. What are front and back ratios?
Part of the mortgage application process will be the determination of how much payment you can afford based on your income. The two ratios that will be computed are the front ratio and the back ratio.
- Front Ratio: The total mortgage payment including principal, interest, taxes and insurance (PITI) as well as any condominium or homeowner association fees divided by your total GROSS income.
- Back Ratio: The total mortgage payment PLUS any car payments, credit card and any other loan payments divided by your total GROSS income. These payments do not include utility payments or child care though it can include child support and alimony.
Call Franklin Advantage today and get pre-qualified and pre-approved now.
What options are there for buyers with no money down and no cash for closing costs?
VA and RHS programs allow buyers to purchase a home with no down-payment. VA loans are restricted to veterans. RHS loans are limited to specific geographic areas. If you do not fit into either of these programs, you will generally need some funds for down-payment, closing costs or both. FHA programs allow for as little as 3.5% down-payments.
You can negotiate with the seller to pay all or some of the closing costs. When this is done with a a VA or a RHS mortgage, it is possible to buy a home with no out-of pocket expense. Call Franklin Advantage today and get pre-qualified and pre-approved now.
Do I need to sell my existing home before I apply for a new mortgage loan?
Absolutely not! You can apply for a new mortgage loan before you sell your current home. However, depending on your income and debt levels, you may need to sell your current home before you can close on your new home.
Talk to a Franklin Advantage professional. We take the time to explain all the factors that apply in your situation and help you get pre-qualified and pre-approved today.
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When does it make sense to refinance?
Usually people refinance to save money, either by obtaining a lower interest rate or by reducing the term of the loan. Refinancing is also a way to convert an adjustable loan to a fixed loan or to consolidate debts. The decision to refinance can be difficult, since there are several reasons to refinance. However, if you are looking to save money, try this calculation:
Divide the total cost of the refinance by the monthly savings. This is the "break even" time. If you own the house longer than this, you will save money by refinancing.
Talk to a Franklin Advantage professional. We take the time to explain the benefits and draw backs of every mortgage loan option available, making sure you make the right choice for you.
Can I refinance to take cash out of my house?
Franklin Advantage offers a variety of options that allow you to tap into your home's equity and take cash out. Talk to a Franklin Advantage professional. We take the time to explain the benefits and draw backs of every mortgage loan option available, making sure you choose the best cash-out refinancing option for you.
Why is an appraisal necessary? Can I use the tax value of the home?
Appraisals compare the current market value of your home to other homes in your area that have recently been sold. Tax values can sometimes be higher or lower and may not reflect the actual appraised value of the home. A current appraisal is necessary for the lender to justify the loan amount you've requested and is required by our secondary investors.
Will I have to pay for Private Mortgage Insurance?
Private Mortgage Insurance (PMI) provides your lender with a way to recoup its investment if you are unable to repay your loan. PMI is usually required when the mortgage amount is higher than 80% of the home’s value. That means that if you buy a home with a down payment of less than 20%, you will probably have to pay for PMI.
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Do VA or FHA loans require PMI?
VA and FHA loans do not require PMI but both loans do have ways of insuring against investor loss. VA loans finance concurrently with the mortgage a “VA Funding Fee”. This fee runs from 1.25% to 3.35% depending upon down-payment, years of service and first or subsequent use. FHA loans require MIP. MIP is similar to PMI and the “VA Funding Fee” in that it is charged monthly like PMI and also financed concurrently with the mortgage like the “VA Funding Fee”. MIP is less expensive than PMI and “VA Funding Fee” in most cases.
Talk to a Franklin Advantage professional. We take the time to explain the benefits and draw backs of every mortgage loan option available, making sure you make the right choice for you.
Is There a Prepayment Penalty?
All VA, RHS, FHA, Fannie Mae and Freddie Mac loans do not have prepayment penalties.
What closing costs will I have to pay?
Closing costs vary based on a number of factors including the investor, mortgage type, loan amount, purchase contract, and location. They usually include the following:
- Lender fees: Franklin Advantage may charge for expenses related to making the loan, including an appraisal fee, a credit report fee, service fees and discount points.
- Third party fees: Charges for services not provided by your lender often include the escrow or settlement fee, title insurance, and recording fees.
- Prepaid items: Certain mortgage costs may be paid to your lender in advance. The most common of these are pre-paid interest (since most loans do not close on the first day of the month, daily interest is charge), hazard insurance, and deposits to set up an impound account to pay your property taxes and hazard insurance as they become due.
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When should you pay discount points?
When you pay a discount point, you are essentially paying part of your interest to the investor up front. This will lower your interest rate, as well as your monthly payment over the life of the loan. One discount point is 1% of the loan amount. For example, one point on a $100,000 loan would require payment of $1,000 at closing.
So does paying points make sense for you? The answer depends primarily on how long you plan to stay in your home. First, find out how much lower your monthly payments will be if you pay points. Then, calculate how long it will take for those monthly savings to add up to the cost of the points. If it would take five years to break even and you’re planning to live in your home for 10, paying discount points may be a smart move.
Talk to a Franklin Advantage professional. We take the time to explain the benefits and draw backs of every mortgage loan option available, making sure you make the right choice for you.
What is “Risk Based Pricing”?
In 2008 Fannie Mae and Freddie Mac instituted “Risk Based Pricing”. “Risk Based Pricing” adjustments are to rates, fees or both on loans that are considered of higher risk than another. Loans where the borrowers credit scores are below 740, Loan amounts exceed 60% of the appraised value, the use of the property will be for investment and/or the property is a duplex, condo or 3 to 4 unit property is subject to additional discount points and or higher rates.
Should I lock my rate?
Locking your interest rate means your lender guarantees the rate on your loan even if market rates change before closing. Franklin Advantage will allow you to lock your rate for 30 to 60 days, with the option to extend the rate-lock period for a fee. So how do you know whether to lock your interest rate? It depends on whether you expect rates to rise or fall before you close on your home. No one knows for sure which direction rates will go at a given time, so it’s difficult to make a reliable prediction.
See Franklin Advantage’s Rate Watch to get current information on today's interest rates including news and analysis on the economy. Rate Watch covers the topics daily that are vital to mortgage rates including the latest economic data, Federal Reserve actions, US Treasury policy changes and investor sentiments.
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What is a Good Faith Estimate?
Required by federal law, the Good Faith Estimate (GFE) is a written list of the estimated closing costs associated with your mortgage transaction, including the lender fees, third party fees and prepaid items.
How do I check to see if Franklin Advantage is licensed?
Franklin Advantage is a HUD approved lender. You can check us out on HUD’s website . We are also approved through the State of California Department of Real Estate. You can visit the California DRE Website. Call us for a complete list of states we do business in.
If you have any additional questions, you can LIVE CHAT with one of our Franklin Advantage professionals. If you want to Apply Now, just follow the link to our Easy Application Page
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