A: PMI IS PRIVATE MORTGAGE INSURANCE. PMI IS USUALLY REQUIRED IF YOU ARE PUTTING LESS THAN 20% DOWN PAYMENT ON A PROPERTY. THIS INSURANCE IS PAID BY THE BORROWER AND PROTECTS THE LENDER. YOU MAY CONTACT YOUR LENDER TO DROP THE PMI WHEN THE LOAN BALANCE DROPS BELOW 80% OF THE PROPERTY'S VALUE. THE LENDER WILL REVIEW YOUR PAYMENT HISTORY AND MORE THAN LIKELY REQUIRE AN APPRAISAL OF THE PROPERTY TO VERIFY THAT YOUR LOAN BALANCE IS 80% OR LESS OF THE PROPERTY VALUE. IT IS STILL THEIR OPTION TO KEEP OR REMOVE THE PMI.
Q: WHAT IS THE APPRAISAL FOR?
A: WHEN YOU APPLY FOR A LOAN, THE LENDER WILL REQUIRE A PROFESSIONAL APPRAISAL OF THE MARKET VALUE OF THE PROPERTY. THE APPRAISED VALUE OF THE HOUSE DETERMINES HOW LARGE A MORTGAGE THE LENDER WILL BE WILLING TO GIVE YOU. THE MORTGAGE IS BASED ON THE PURCHASE PRICE OR THE APPRAISED VALUE, WHICHEVER IS THE LESSER OF THE TWO.
Q: WHAT IS AN ARM LOAN
A: "ARM" STANDS FOR ADJUSTABLE RATE MORTGAGE. WITH AN ARM LOAN , THE INTEREST RATE PAID BY THE BORROWER IS ADJUSTED FROM TIME TO TIME TO BRING IT IN LINE WITH CHANGING MARKET RATES. IF YOU HAVE A 1 YEAR ARM, IT WILL CHANGE EVERY YEAR. A 3/1 ARM IS FIXED FOR 3 YEARS AND IN YEAR 4 BECOMES A 1 YEAR ARM. A 5/1 ARM IS FIXED FOR 5 YEARS AND BECOMES A 1 YEAR ARM IN YEAR 6. ARMS ARE ATTRACTIVE TO SOME BORROWERS BECAUSE THEY OFFER A LOWER INTEREST RATE IN THE BEGINNING. THE DRAW BACK IS THAT THE RATE AND PAYMENT WILL MOST LIKELY GO UP AT ADJUSTMENT.
Q: WHAT IS AN APR?
A: APR Stands for Annual Percentage Rate. It is the cost of your credit expressed as an annual rate. The APR is comupted from the Amount Financed and based on what your proposed payments will be on the actual loan amount credited to you at settlement. The APR is usually higher than your actual Interest Rate. Your monthly payment is based solely on the Interest Rate not the APR.