Mortgage FAQ

Mortgage FAQ

  • What is the VA?

    The Department of Veterans Affairs is a U.S. Federal Government Department responsible for administering programs for Veterans which include loan insurance guarantee programs.

  • What is Freddie Mac?

    Freddie Mac, the Federal Home Loan Mortgage Corporation, is a congressionally chartered corporation that purchases conventional mortgages in the secondary market.

  • What is FHA?

    The Federal Housing Administration, part of HUD, insures mortgages made by private lenders.

  • What is HUD?

    The Department of Housing and Urban Development (HUD) is responsible for the implementation and administration of government housing and urban development programs. The broad range of programs includes community planning and development, housing production and mortgage credit (FHA), and equal opportunity housing.

  • What is Fannie Mae?

    Fannie Mae, also known as the Federal National Mortgage Association, is a congressionally chartered corporation that purchases conventional mortgages in the secondary market.

  • What is an escrow payment?

    The portion of the mortgagor's monthly payment held by the lender to pay for taxes, hazard insurance, mortgage insurance and other items as they become due. Also known as impounds or reserves in some states.

  • What is my principal balance?

    The outstanding balance of the mortgage, exclusive of interest and any other charges.

  • When will my first payment be due?

    At closing, you will receive temporary payment coupons that will indicate when your first payment is due.

  • What will my monthly payment include?

    Principal, insurance, taxes, interest, condo fees, and mortgage insurance, if applicable.

  • Why do I need to pay for a flood certificate?

    A flood certificate is required to determine if a property is in a flood zone.

  • What is a Subordination Agreement?

    If you have other mortgages against your property, this agreement is required to obtain another mortgage. This agreement assures that Pinnacle will be the first lien holder of notes against your home.

  • What is private mortgage insurance (PMI)?

    Insurance written by a private company protecting the mortgage lender against loss as a result of a mortgage default.

  • What is Mortgage Insurance?

    The function of Mortgage Insurance is to insure a mortgage lender against loss created by mortgagor's default. In the event that the borrower dies while the policy is in force, a portion of the debt is automatically satisfied by the insurance proceeds.

  • What is Title Insurance?

    Title Insurance is a policy issued to lenders or buyers to protect any losses because of a dispute over the ownership of a piece of property.

  • What is an appraisal?

    A report by a qualified person setting forth an opinion or estimate of value.

  • What is an Origination Fee?

    A fee or charge for the work involved in the evaluation, preparation, and submission of a proposed mortgage loan.

  • Do I have a choice of points or no points and how do I determine whether or not to pay points?

    Yes. The basic concept of points is to pay a little up-front in order to save a big amount over the life of the loan. Each discount point will typically lower your loan's rate. Points are a good idea if you plan to be in your home for a long period of time.

  • What are points?

    Also called discount points, a point is 1% of the amount of the loan. Points are a one-time fee added to your closing costs and generally results in a slightly lower interest rate on your loan.

  • What happens if my rate expires before I close my loan?

    You may be required to pay an extension fee or other charges.

  • Can my rate change during my lock-in period?

    No. As long as you stay in the same program, your rate is guaranteed throughout your lock period.

  • When should I lock or float my rate?

    You can lock a rate anytime after we receive and review your signed loan application, you pay your application fee and you have identified a property. The typical lock-in period is 45 days. This means that once you lock in the rate, you must close your loan within 45 days. Once you lock, you cannot un-lock. If you think rates may fall, don't lock and instead float your rate. If you are unsure or adverse to risk, it might be better to lock your rate.

  • What is the difference between my interest rate and APR?

    An APR lets you see the total cost of a mortgage, including closing fees and points over the life of the loan, not just the interest due.

  • What is an APR?

    APR stands for the Annual Percentage Rate and is a measurement tool used to provide a standard basis of comparison of loans offered by competing lenders, which takes into account the loan's interest rate, closing costs, and other fees such as points. An APR lets you see the total cost of a loan, including fees and points over the life of the loan, not just the interest due.

  • What is a Good Faith Estimate (GFE)?

    A Good Faith Estimate (GFE) is an estimate from Pinnacle that outlines the costs you will incur during the mortgage process. This is provided to you when you apply for your loan.

  • How much money do I have to have left after closing?

    This varies with the loan program, but most programs require 2 months of principal and interest payments in reserve after closing your loan.

  • What are closing costs?

    Money paid by the borrower (or seller) to affect the closing of a mortgage loan. This normally includes an origination fee, title insurance, survey attorney's fees and such prepaid items as taxes and insurance escrow payments.

  • What sources can I draw from for my down payment?

    Examples of acceptable sources for your down payment are savings accounts, money market accounts, the sale of real estate, stock liquidation, IRAs, 401(k), cash value of a life insurance policy, brokerage accounts, retirement accounts and gifts.

  • What is my down payment?

    This is the amount of money you have available to put down toward the purchase of a home. The down payment and the loan amount make up the purchase price of the home.

  • What is a Balloon Mortgage?

    A mortgage that has level monthly payments that will fully amortize over the stated term, but which provides for a lump-sum payment to be due at the end of an earlier specified term.

  • What is a Fixed-rate mortgage?

    A Fixed-rate mortgage is a loan that has the interest rate and payment set for the life of the loan. The benefit is that you always know what your principal and interest costs are, which takes out the guesswork when planning.

  • What is a Convertible ARM?

    A type of ARM that includes an option for the mortgagor to change the mortgage to a fixed-rate mortgage in the early years of the mortgage term.

  • What is an adjustable rate mortgage (ARM)?

    A type of mortgage instrument in which the interest rate adjusts periodically according to a predetermined index and margin. The adjustment results in the mortgage payment either increasing or decreasing. A 1-year ARM, for example, will have an initial interest rate for 1 year and then adjust on the second year, and continue to adjust annually over the life of the loan. With an ARM loan, you typically get a lower starting rate in exchange for taking a risk that rates may rise in the future. There is also a cap on how much the interest rate can go up or down.