Odyssey Lending FAQ

1. How much can I afford to borrow?
This may be the most basic and yet important question to ask prior to the start of the loan process. The answer, qualification ratios are utilized to determine a secure loan amount on behalf of the consumer and the lender. These ratios assist lenders in evaluating your income and long-term debts to obtain a comfortable monthly payment for your mortgage.

2. What is the difference between pre-qualification and pre-approval?
Pre-qualification will be provided by the Mortgage Banker prior to your search for a home. The pre-qualification process includes analyzing total income, assets, and current debt to estimate a comfortable purchase price for your new home. Pre-approval means that you have a lender's written commitment to put together a loan for you with the stipulation that it is subject to verification of income and employment. Most real estate brokers will either require or recommend that you have the pre-approval prior to shopping for a new home.

3. Why do I need to check my credit prior to purchasing a house?
Any proactive work that may be accomplished upfront would be worth the effort since it may save you additional work and time later on in the process. The credit score that you may think you have doesn't matter at this time. The concern would be if you have errors that may appear on your credit score that will need to be addressed prior to moving forward with the process.

4. How much do I need for a down payment?
The total down payment that may be required varies depending upon many factors such as available financing, loan amount and your personal circumstances. At Odyssey Lending, we specialize in assisting you in the selection of the loan program that best fits your current needs.

5. What is the difference between conforming and nonconforming (Jumbo) loans?
A "conforming loan" basically means that it meets the specific guidelines as specified by Fannie Mae/Freddie Mac which are the two congressionally chartered private companies that purchase mortgage loans from lenders. The established loan limit is set at $417,000 but was recently changed for those specific areas in the US where home pricing is well above that loan limit. If your loan amount is above the Fannie Mae/Freddie Mac specified loan guidelines, then it is considered "non-conforming" and may result in a higher interest rate as well as different underwriting requirements.

6. Should I choose fixed or adjustable interest rate mortgage?
This is a personal decision based upon your comfort level and your particular circumstance. However, if you are not planning to stay in your new home for more than 5 years, you may want to consider an ARM (Adjustable Rate Mortgage). The interest rate associated with your loan may vary, either up or down, depending on the market conditions. In contrast, the fixed rate loan may be a better solution for those individuals that are planning to stay in their new home for the long term. In this scenario, the interest rate remains consistent throughout the term of the loan enabling you to efficiently manage your financial situation.

7. What are discount points?
A "point" basically means 1% of the total amount of the loan that you may be charged in order to reduce the interest rate on your loan. The discount points may make sense for those individuals that plan to stay in their homes for a few years; it may not make sense for short term loans.

8. What is APR (Annual Percentage Rate)?
The Annual Percentage Rate (APR) factors interest, any closing costs, any points and other finance charges over the term of a loan. The federal Truth-in-Lending laws require disclosure of the APR within three business days of when you apply for a loan or prior to or at closing for a refinance.

9. What are closing costs?
The "closing costs" are fees that must be paid in addition to your down payment. They include but are not limited to such costs as a credit check, appraisal fees, prepaid property tax, homeowners insurance and various fees that are associated with the purchase. These fees are paid by both buyers and sellers. The appraisal and credit check fees may not be refunded to you if you decide not to move forward with the loan.

10. What is PMI (Private Mortgage Insurance)?
The "PMI" basically insures the lender against default from the borrower and is normally instituted against loans with down payments of less than 20%. The debt is repaid by the PMI to the lender if you should default on the loan. The PMI usually adds about ½ a percent onto the interest rate. In the case of an FHA loan, they have what is called an MIP (mortgage insurance premium) which is paid by all borrowers.

If you have additional questions please call us toll free at 1-877-281-7039.