General Loan
Questions
■ What are the loan products that San Francisco Mortgage Company offers to
purchase a house?
■ What does a lender look at to approve me?
■ How do I know what my loan rate will be?
■ What are points and how many do I have to pay?
■ How do I determine the points I want to pay?
■ Can I or my co-borrower be self-employed and still qualify
for a loan?
■ How can I draw credit when I need it?
■ How do I calculate my loan-to-value ratio (LTV)?
■ Can I make extra principal payments so I can pay off the
loan more quickly?
■ Do I get a tax advantage from having a mortgage?
■ How do I qualify for a loan?
■ How do I receive my loan documents?
■ How do I refinance my existing loan?
■ How much can I borrow and why?
■ Should I roll in my fees?
■ Why is the loan-to-value ratio important?
■ Will a second mortgage allow me to borrow funds against my
existing property?
■ How do I know how much equity I have in my property?
■ How do I calculate the value of my property?
What are the
loan products that San Francisco Mortgage Company offers to purchase a house?
San Francisco Mortgage Company offers both 30-Year Fixed-Rate Loans and 15-Year
Fixed-Rate Loans.
Choose a 30-Year Fixed-Rate if:
▪
You want low monthly payments that do not change
▪
You want a loan that's generally easier to qualify for
▪
You're planning to stay in your new house less than 10 years
If you have a fixed loan, your house payment remains the
same regardless of the interest rate. This means if the
interest rate increases, your house payment will not.
However, if rates go lower than your loan rate, San Francisco Mortgage Company
will help you refinance quickly and possibly with no
out-of-pocket costs (depending on the program you choose).
The interest you pay on your loan can be tax deductible.
Please consult your tax preparer for specifics of how your
taxes will be affected.
30-Year Fixed-Rate Loans are by far the most common and
popular loans available. They are ideal for first-time
buyers, and buyers with smaller reserves of cash.
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What does a lender look at to approve me?
At the heart of approving a potential borrower is what
lenders call "the three C's of underwriting:"
▪
Credit - your credit history
▪
Collateral - the value of the property securing the loan
(your house)
▪
Capacity - your financial ability to assume and repay debt
Taken together, these create a portrait of a potential
borrower's risk - that is, whether or not he or she will pay
back his or her loan. If the risk seems high, the lender
will be reluctant to make the loan. Depending on the degree
of risk, a lender may choose to charge higher rates and/or
fees, or decline to make the loan altogether.
Traditionally, all three were of equal importance.
San Francisco Mortgage Company, however, places the most emphasis on your credit
history.
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How do I know what my loan rate will be?
Rates vary primarily based on the type and purpose of the
loan, your credit history and income, loan amount, value of
the property, and the number of points you are willing to
pay.
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What are points and how many do I have to pay?
Generally speaking, points are fees added onto loans. One
point is equal to 1 percent of your loan amount. Points are
paid when the loan closes, not at the time you apply for the
loan.
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How do I determine the points I want to pay?
Points are paid when the loan closes, not at the time you
apply for the loan. Generally speaking, points are fees
added onto loans. One point equals 1 percent of the loan
amount.
When you get a loan, you'll have the opportunity to "buy
down" the interest rate by paying discount points -
essentially paying a fee to lower your interest rate.
By lowering your interest rate, you will be lowering your
monthly payment and the amount of interest you'll be paying
over the life of the loan. You pay more at the beginning of
your loan but will save money in the long run. Keep this in
mind as you determine whether to pay points.
Paying points requires a higher immediate expenditure, so it
may not be for you. In that case, let the loan do its job -
allowing you to borrow the money you need and pay it back as
fast as you can.
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Can I or my co-borrower be self-employed and still qualify
for a loan?
San Francisco Mortgage Company provides loans to individuals who are
self-employed. Income documentation may be requested with
certain loan products.
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How can I draw credit when I need it?
If you want a reserve of funds you can draw on in the
future, choose our Home Equity Line of Credit. You'll have
the credit you need when the need arises - and you make no
monthly payments until you draw on it. Be ready for future
expenses like medical bills, emergency home repairs,
tuition, and more.
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How do I calculate my loan-to-value ratio (LTV)?
The loan-to-value ratio (or LTV) is one of the most
important factors in your loan process. It is used to
determine the limits within which your housing and debt
ratios must fall for you to be approved. It can also
determine which fees you will be charged for your loan and
the amount of these fees. It will also determine whether you
must pay Private Mortgage Insurance (PMI) and use an
impound/escrow account.
Your loan-to-value ratio (LTV) is simply the amount you are
borrowing divided by the value of the subject property you
are purchasing or refinancing. This gives you a simple
ratio. For example, a house valued at $100,000 which you
intend to purchase with an $80,000 loan (and a $20,000 down
payment of your own cash) is said to have an LTV of 80
percent - that is, the loan represents 80 percent of the
value of the house.
The value of your property is its appraised value OR the
amount you pay for the property (the market value),
whichever is lower. In the initial stages of qualification
and approval, your property's value is understood to be an
estimate. It will be confirmed, if necessary for your
particular loan, by a professional appraiser hired by
San Francisco Mortgage Company.
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Can I make extra principal payments so I can pay off the
loan more quickly?
Depending on the loan, and what your state permits, it is
feasible for you to make extra payments on the loan. Extra
payments will have an effect on the amortization schedule
over the remaining term of your loan.
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Do I get a tax advantage from having a mortgage?
You should consult a tax attorney or accountant for specific
details, but interest on a mortgage is usually tax
deductible. Interest on credit cards or automobile loans is
not normally tax deductible.
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How do I qualify for a loan?
Lenders use specific criteria to determine if you qualify
for a loan and the amount you can qualify for. You can use
our calculator tools to determine whether you can qualify
for a loan, the types of loan products that are best for
you, and many other things. San Francisco Mortgage Company allows you to apply
and get pre-approved right here online - it's fast, easy,
and free (San Francisco Mortgage Company charges no application fee).
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How do I receive my loan documents?
After you complete your application with a loan agent,
San Francisco Mortgage Company will provide you with a package in one of two
ways: via e-mail with a link to your Loan Status page or via
express mail. This package will contain your loan
application and disclosure documents.
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How do I refinance my existing loan?
To refinance your loan in order to obtain a lower interest
rate and start saving on your monthly payments, San Francisco Mortgage Company
can offer you the following loan products with the security
of fixed-rate payments:
15-Year Fixed-Rate Refinance
Choose this if:
▪
You want a shorter loan life and lower rates
▪
Low monthly payments are not a priority
▪
You're planning to stay in your house for more than 10 years
- especially if you're planning to completely pay
off your
loan
ROLLDOWN OPTION
Our rolldown option allows you to refinance with few upfront
fees! While the rate is slightly higher, you will pay few
upfront fees to get your new loan. In effect, as long as our
rolldown rate is lower than your existing rate, it makes
financial sense to refinance because there is little or no
cost in doing so.
CASH OUT OPTION
If your equity in your property qualifies, you can refinance
with a loan amount greater than your current mortgage - and
keep the difference! Use it for home improvement, debt
consolidation, or whatever you want.
30-Year Fixed-Rate Refinance
Choose this when:
▪
You want low monthly payments that do not change
▪
You want a loan that's generally easier to qualify for
▪
You're planning to remain in your house less than 10 years
▪
You want the maximum tax advantage (please consult your tax
adviser)
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How much can I borrow and why?
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 San Francisco Mortgage Company will move
to the next step of checking to see if you can be approved.
To determine your qualification, the first thing San Francisco Mortgage Company
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.
The limits within which your housing and debt ratios must
fall are determined primarily by the size of the loan, the
value of the property, and the ratio between the two (known
as the loan-to-value ratio, or LTV). This loan-to-value
ratio is one of the most important factors in determining a
home loan.
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Should I roll in my fees?
The choice basically comes down to "pay now" or "pay later."
If you have the funds now, it makes sense to cover the
expenses out-of-pocket and save through lower loan payments
and interest costs on a smaller loan. On the other hand, if
your budget is currently tight, rolling in the costs with
your loan amount makes sense because it allows you to get
the loan without immediate expense.
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Why is the loan-to-value ratio important?
Your loan-to-value ratio (LTV) shows your equity in the
property. Your equity is basically the amount of the
property you own, expressed as a monetary figure. Another
way of thinking of your equity is that it's the amount of
money you'd receive if you sold your property at its valued
price, less what you'd have to return to your lender to
repay the loan. Example: $100,000 value minus $50,000 to
repay loan = $50,000 equity. Your LTV and equity are crucial
because common wisdom among lenders is that the higher the
LTV (and the lower the equity), the higher the risk of a
borrower defaulting on his or her loan. Thus, low equity
loans present lenders with greater risk, forcing them to
increase their costs.
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Will a second mortgage allow me to borrow funds against my
existing property?
San Francisco Mortgage Company offers several solutions to borrow funds against
your existing property value.
▪ Home Equity Line of Credit
If you want a reserve of funds you can draw on in the
future, choose our Home Equity Line of Credit. You'll have
the credit you need when the need arises - and you make no
monthly payments until you draw on it. Be ready for expenses
like medical bills, emergency home repairs, tuition, and
more.
▪ Home Equity Loan
If you want to borrow up to 100 percent of your home's value
at a fixed rate of interest, choose our Home Equity Loan.
Use those funds for a purchase opportunity, home
maintenance, debt consolidation, or major expenses.
▪ High loan-to-value
If you want a large sum of cash, choose one of our High
Loan-To-Value products - 125 percent Freedom Loan. With low
equity - even no equity - San Francisco Mortgage Company can still loan you the
funds you need to make home improvements, consolidate debt,
buy a car, or make an investment.
To learn more about these and other products, call us any
time at
1-XXX-XXX-XXXX.
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How do I know how much equity I have in my property?
Equity is the value of a homeowner's interest in real
estate. Equity is computed by subtracting the total of the
unpaid mortgage balance and any outstanding liens or other
debts against the property from the property's fair market
value. A homeowner's equity increases as he or she pays off
his or her mortgage or as the property appreciates in value.
When a mortgage and all other debts against the property are
paid in full, the homeowner has 100 percent equity in his or
her property.
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How do I calculate the value of my property?
Since a mortgage is a loan secured by a piece of real
property, a crucial factor is in the correct value of the
property in question.
Property value can be determined in a number of ways:
▪
The market value of the property - that is, what a buyer
will pay for it and what other comparable properties (comps)
in the neighborhood have recently sold for.
▪
The appraised value of the property - that is, what a
trained and licensed professional deems the property to be
worth based on an inspection, comps, and a thorough analysis
of the property and its neighborhood.
Additionally, the appraiser estimates the replacement value
of the property - that is, the cost to build a house of
similar size and construction on a vacant lot. The appraiser
reduces this cost by an age factor to take into account
deterioration and depreciation.
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