[heading text=”Convention Purchase Calculator” tag=”h1″]
[heading text=”FAQ & Definitions” tag=”h1″ align=”center”]
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Loan to Value
Loan-to-Value (LTV) ratio is a financial metric that quantifies the proportion of a property’s value that is financed through a loan. It provides lenders with insights into the extent of financial exposure they are assuming when lending to a borrower. LTV is typically expressed as a percentage and is calculated by dividing the loan amount by the appraised value of the property securing the loan.
APR - Annual Percentage Rate
The Annual Percentage Rate is not the interest rate on the Note for which the borrower has been approved for. The ARR is the cost of the loan in percentages, taking into consideration various loan charges of which interest is only one charge. The yearly cost of a mortgage, including interest, mortgage insurance, and the origination fee, points, expressed as a percentage. The APR is calculated by spreading the specified charges over the lifetime of the loan which results in a much higher rate than the approved rate by the lender.
The annual percentage rate can be looked at in two primary ways: the nominal rate, which is a non-adjusted simple rate, or the effective rate, which takes compound interest into account. While the nominal rate is relatively straightforward, there can be many different ways of calculating the effective rate, depending upon how fees are factored into the equation.
The APR is the simplified counterpart to the effective interest rate that the borrower will pay on a loan. When not using the term “effective APR”, the use of “APR” is an early term for normal APR. In many jurisdictions, lenders are required to disclose the “cost” of borrowing in some standardized way as a form of consumer protection.
APR is intended to make it easier to compare lenders and loan options. The APR is likely to differ from the “note rate” or “headline rate” advertised by the lender, due to the addition of other fees that may need to be included in the APR. APRs can be found by asking the lender or by reading the appropriate section in the disclosures.
Lender Paid Broker Compensation
This is the retail cost added to the wholerate as explained in our Nevada State Broker link. Our Broker paid compensation is 2% over the wholesale rate for most of our loan products so our rates stay very competitive. This retail cost is typically 2% between 4% over the wholesale rate for most retail lenders. This Broker paid compensation is typically paid by the wholesale lender, it’s paid to the Broker/Banker by increasing the rate. This office does not charge any origination Broker fees.
Mortgage Electronic Registration Systems, Inc. (MERS)
Mortgage Electronic Registration Systems, Inc. (MERS) is an American privately held corporation.[1] MERS is a separate and distinct corporation that serves as a nominee on mortgages after the turn of the century and is owned by holding company MERSCORP Holdings, Inc., which owns and operates an electronic registry known as the MERS system, which is designed to track servicing rights and ownership of mortgages in the United States. According to the Department of the Treasury, the Board of Governors of the Federal Reserve, The Federal Deposit Insurance Corporation and the Federal Housing Finance Agency, MERS is an agent for lenders without any reference to MERS as a principal.[2] On October 5, 2018, Intercontinental Exchange (NYSE: ICE) and MERS announced that ICE had acquired all of MERS
Seller Concession
A seller concession is a portion of the buyer’s closing costs and prepaid expenses that the seller agrees to pay for, lowering the overall upfront costs for the buyer. Sometimes, buyers ask for concessions when the home inspection turns up an issue that needs to be remedied
BASE LOAN AMOUNT
The base loan amount equals the purchase price minus the down payment. The final loan amount adds the upfront MIP to the base loan amount.
Reconveyance
When you refinance your mortgage, expect to pay a number of fees. A loan reconveyance fee is a typical charge when you refinance a mortgage, collected when you have a full reconveyance document prepared. A loan reconveyance fee covers the preparation of the reconveyance document that reassigns ownership back to you. The fee covers the cost of removing your current lender’s lien from your property title.
Hazard Insurance
Hazard Insurance protects a homeowner against the costs of damage from fire, vandalism, smoke, and other causes. When you take out a mortgage, the lender will require you to take out hazard insurance to protect their investment; many lenders will incorporate the insurance payment into your monthly mortgage payment.
Real Estate Taxes
Real Estate property tax is a levy on property that the owner is required to pay. The tax is levied by the governing authority of the jurisdiction in which the property is located; it may be paid to a national government, a federated state, a county/region, or a municipality. Multiple jurisdictions may tax the same property. Real property (also called real estate or realty) means the combination of land and improvements. Under a property tax system, the government requires and/or performs an appraisal of the monetary value of each property, and tax is assessed in proportion to that value. Forms of property tax used vary among countries and jurisdictions.
ITEMS REQUIRED BY LENDER TO BE PAID IN ADVANCE
There are certain items the lender may require you to pay at the time of closing or in advance of the actual closing date. These may include: Interest – Lenders require payment of loan interest from the day of closing through the end of the month. Interest is accrued and paid as part of the monthly loan installments. Mortgage Insurance Premium – At closing, you may be required to pay your first year’s mortgage insurance premium, this fee is paid to a Private Mortgage Insurance Company. If the loan is being federally insured (FHA) or guaranteed (VA), the mortgage insurance or funding fees for those government loan programs would be charged at closing. Hazard Insurance Premium, “homeowner’s hazard insurance” lenders normally will require one year’s payment in advance, this policy protect the property from major damage.
Flood Insurance, depending on the location of your home, flood insurance may be required and payment of the first year’s premium must be made in advance of closing. Real Estate property taxes, the lender will normally require two to three quarters paid upfront at closing, these Real Estate taxes are levy’s placed on the property that the owner is required to pay
RESERVES DEPOSITED WITH LENDER:
These are deposits paid by the borrower to the lender for homeowners insurance, taxes, and sometimes mortgage insurance and assessments, these deposits are placed into an account called an escrow impound account.
Estimated Prepaid Items/Reserves
- Estimated Prepaid Items/Reserves
These estimated prepaid items and reserves include taxes, insurance, and mortgage insurance, The number of months in reserves that is collected at closing will depend on what month it is, and where you fall in relation to the billing cycle associated with taxes, and insurance. An established impound account must have enough reserves in it to pay the bills when they come due. In addition borrowers should expect to pay home owners insurance and property taxes due inside of escrow if they are financing close to the end of the billing cycle. If you tax or insurance bill is due within three months expect to pay your taxes and insurance due inside of escrow when closing. The escrow and prepaid’s are considered items you would have to pay regardless of your refinance loan or whether you where purchasing.
Estimated Closing Cost:
- Closing costs are fees associated with the finalization of a real estate contract and the origination of a loan, and they can vary considerably, depending on the situation. In order for the deal to go through, the buyer must have these funds on hand at closing, when the change of ownership takes place. Estimated closing costs are provided by real estate professionals and lenders at the start of the escrow period to give buyers and sellers an idea of the closing costs they can expect with their particular real estate deal.
Pest Inspection
Pest Inspections are most typically performed as part of a real estate transaction when a home is changing hands. Many banks and lending agencies now require a pest inspection to be done before a real estate transaction is completed.
PMI,” Private Mortgage insurance”
Private mortgage insurance (PMI) protects the lender in case the borrower defaults on his or her mortgage loan. Lenders generally require PMI when your down payment on a home is less than 20 percent of the home’s total value.
ITEMS PAYABLE IN CONNECTION WITH LOAN
Items Payable in Connection with Loan: These are the fees that lenders charge to process, approve and make the mortgage loan.
Document Preparation Fee
A document preparation fee is charged by a lender or escrow company for preparing loan documents such as the mortgage, note and other legal disclosures.
GOVERNMENT RECORDING & TRANSFER CHARGES
Recording fee are paid to a government body which enters an official record of the change of ownership. Transfer Taxes, these are government charges based on the amount of the mortgage on the purchase of a home. Depending on your location, there could be a city, county or state tax involved, or some combination.
State Tax/Stamps
A real estate stamp tax fee, more commonly known as a real estate transfer tax, is a fee assessed during the transfer of real estate between two parties
ADDITIONAL SETTLEMENT CHARGES
Additional Settlement charges may cover a survey; a lender may require that a surveyor conduct a property survey. This is a protection to the buyer as well. Usually the buyer pays the surveyor’s fee, but sometimes this may be paid by the seller. A Pest Inspection, this fee is to cover inspections for termites or other pest infestation of your home. A Lead-Based Paint Inspections, this fee is to cover inspections or evaluations for lead-based paint hazard risk assessment.
Interest for 15 days @ $per day
This is prepaid interest and it’s normally collected by the lender to pay for the interest charges for the remainder of the month during the period which the loan closes escrow.
VA Funding Fee
The VA Funding Fee is a set fee charged to each veteran who is closing a mortgage with the Veteran’s Administration. The fee varies based on the situation and the down payment on the loan itself.
Base Loan Amount
Base Loan Amount is 96.5% Loan to Value on the purchase price of a home on an Federally Insured Mortgage ( FHA Financing) When multiplied by the lesser of sales price or appraised
Value, this determines the maximum Base Loan Amount (BLA), prior to including
the UFMIP – not to exceed FHA’s maximum county loan limit.
Sub Financing (Subordinate Financing)
A loan that places a secondary or “junior” lien on property.
TITLE AND ESCROW CHARGES
Escrow
The purpose of an escrow company is to safeguard the escrow transaction; they’re a neutral disinterested third party to the escrow. Their objectives are to safeguard all funds, and any legal documents in their possession, disburse funds accordingly, convey title after a complete examination of the Preliminary Title Policy, proration’s, and provide Settlement Statements, Deed Recording, reviewing legal documents, and much more. An escrow company must remain completely impartial throughout the entire escrow process and they don’t have the authority to alter and change any binding agreement unless agreed by all principals.
Title Insurance
The purpose to have title insurance is to secure and protect one’s ownership of Real Estate. Through escrow, you will be able to request a Preliminary Homeowners Title Policy or an Alta Title Policy. These policies will search the chain of title and discover ownership rights, and any claims that may be secured to the property, such as liens, encumbrances, cloud’s on title, easements, and judgments, Contractor liens, Federal IRS liens, Federal Estate Tax Lien’s, Levy’s, Heir’s right’s to the property, Forgery, Fraud, Duress, Defects, Restrictive covenants and many other claims that may affect the chain of title. Title insurance is a unique type of insurance, it prevents and protects future claims and losses due to defects on the title, and it ensures a clear title. In many cases, Title Insurance covers Attorney and court costs and title insurance reimburses you for any covered losses. In a sense, title insurance insures a clear title.
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