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Mortgage Terms In Depth

General Questions

What is a “good faith” estimate?
What is a cash-out option?
What is a housing to income ratio?
What is an appraisal and who completes it?
What is an impound/escrow account?
What is an income to debt ratio?
What is an owner’s estimate of value?
What is a PITI?
What is a PMI?
What is prequalification vs preapproval?
What is roll in refinancing?
What is the difference between an equity line of credit and another type of second mortgage?
What are closing costs?
What are income, debt and mortgage payments?
What are prepaid interest and impound/escrow funds?
What are rates, terms and APR?
What is “locking in a rate”?
What is a mortgage?
What is a amortization?
What is equity?
 

What is a “good faith” estimate? It is an estimate of the fees you will pay to close your loan.

 

What is a cash-out option? If your equity in your property qualifies, you can refinance with a loan amount grater than your current mortgage – and keep the difference! Use it for home imporvement, debt consolidation, or whatever you desire.

 

What is a housing to income ratio? Your income, debt, and mortgage payments are the primary factors that affect whether you qualify for a loan. If you do qualify for a loan, you can apply, and PacAlly Mortgage will move to the next step of checking to see if you can be approved.

To determine your qualification, the first thing PacAlly will do is divide the monthly payment of your proposed loan by your gross monthly income. This provides your housing-to-income ratio. If the resulting percentage falls within a certain range, the next step is to divide your total monthly debt by your gross monthly income. This provides your debt-to-income ratio. Again, if the ratio falls within prescribed limits, you are qualified for the loan.

 

What is an appraisal and who completes it?
The appraisal determines the value of the property in question, which becomes a prime factor in determining the loan-to-value or LTV ratio (the amountof your loan divided by the value of your property) Your LTV is important because it determines your equity in the property. With the exception of leveraged equity and some second mortgages, PacAlly will arrange an appraisal of your property to verify its value. An appraiser is an authorized professional who estimates the value of the property and sends the information to PacAlly and to you.

 

What is an impound/escrow acount? An impound account or an escrow account (the terms are interchangeable; each is used in different states) is the name of the account in which a lender collects payments you make toward your property taxes and hazard/fire insurance. If you have an impound/escrow account, each of your monthly payments will contain a fraction of your annual property tax and insurance costs. Your lender keeps these funds in the impound/escrow account and then pays your taxes and insurance directly when they become due.
 
An impound/escrow account can be a convenient and trouble-free manner of ensuring that your insurance and tax payments are made on time. Additionally, choosing the convenience of an impound/escrow account allows PacAlly to offer you a better rate or lower fee. Please note that impound/escrow accounts are mandatory for purchase or refinance loans where the loan amount is 80.01 percent or more of the property value (loan-to-value of 80.01 or more), unless otherwise restricted by laws in your property’s state (in California, impound accounts are required for refinance loans, purchase loans with LTV of 90 percent or greater, and for second mortgages with LTVs of 80.01 percent or greater).

 

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