What is the difference between the interest rate and the A.P.R.?

You'll see an interest rate and an Annual Percentage Rate (A.P.R.) for each residential loan you see advertised. The easy answer to "why" is that federal law requires the lender to tell you both. The APR only applies to residential loans on owner occupied property and does not apply to commercial loans.

The A.P.R. is a tool for comparing different loans, which will include different interest rates but also different points and other terms. The A.P.R. is designed to represent the "true cost of a loan" to the borrower, expressed in the form of a yearly rate. This way, lenders can't "hide" fees and upfront costs behind low advertised rates.

While it's designed to make it easier to compare loans, it's sometimes confusing because the A.P.R. includes some, but not all, of the various fees and insurance premiums that accompany a mortgage. Federal law requires lenders to disclose the A.P.R. but unfortunately the APR can be misleading as it does not clearly define what goes into the calculation and it can vary dramatically based on per dime interest or other minor variables.

APR is also misleading because it does not disclose balloon payments, prepayment penalties or the duration of the fixed rate. So, A.P.R. is at best inexact. The lesson here is that A.P.R. can be a guide, but you need an Empyrean Funding mortgage professional to help you find the best residential loan for your specific needs!

What are the advantages of fixed rate versus adjustable rate loans?

With a fixed-rate loan, your monthly payment of principal and interest never change for the life of your loan. Your property taxes may go up or down, and so might your homeowner's insurance premium part of your monthly payment, but generally with a fixed-rate loan your payment will be very stable on both Residential loans and Commercial Loans.

Fixed-rate loans are available in all sorts of shapes and sizes: 30-year, 20-year, 15-year, even 10-year. Some fixed-rate mortgages are called "biweekly" mortgages and shorten the life of your loan. You pay every two weeks, a total of 26 payments a year — which adds up to an "extra" monthly payment every year.
During the early amortization period of a fixed-rate loan, a large percentage of your monthly payment goes toward interest, and a much smaller part toward principal. That gradually reverses itself as the loan ages.

You might choose afixed-rate loan if you want to lock in an interest rate for the duration of your loan to avoid interest rate risk. If you have an

Adjustable Rate Mortgage (ARM) now, refinancing with a fixed-rate loan can give you more monthly payment stability on your Residential loan or Commercial loan.

Adjustable Rate Mortgages— ARMs, as we called them above — come in even more varieties. Generally, ARMs determine what you must pay based on an outside index, perhaps the 6-month Certificate of Deposit (CD) rate, the one-year Treasury Security rate, the Federal Home Loan Bank's 11th District Cost of Funds Index (COFI), London Interbank Offering Rate (Libor) or others. They may adjust every six months or once a year.

Most programs have a "cap" that protects you from your monthly payment going up too much at once. There may be a cap on how much your interest rate can go up in one period — say, no more than two percent per year, even if the underlying index goes up by more than two percent. You may have a "payment cap," that instead of capping the interest rate directly caps the amount your monthly payment can go up in one period. In addition, almost all ARM programs have a "lifetime cap" — your interest rate can never exceed that cap amount, no matter what.

ARMs often have their lowest, most attractive rates at the beginning of the loan, and can guarantee that rate for anywhere from a month to ten years. You may hear people talking about or read about what are called "3/1 ARMs" or "5/1 ARMs"or the like. That means that the introductory rate is set for three or five years, and then adjusts according to an index every year thereafter for the life of the loan. Loans like this are often best for people who want the short term safety of a fixed rate which will then convert to a variable rate after the initial fixed rate period is over.

You might choose an ARM to take advantage of a lower introductory rate and refinance again or simply absorbing the change in rate after the introductory fixed rate is over. With ARMs, you do risk your rate going up, but you also take advantage when rates go down by pocketing more money each month that would otherwise have gone toward your mortgage payment on either your Residential Loan or Commercial Loan.

What are homeowner's insurance, private mortgage insurance and title insurance?

A homeowners insurance policy is a package policy that combines more than one type of insurance coverage in a single policy. There are four types of coverages that are contained in the homeowners policy: dwelling and personal property, personal liability, medical payments, and additional living expenses. Homeowner's insurance, as the name suggests, protects you from damage or loss to your home or the property in it.

Remember that flood insurance and earthquake damage are not covered by a standard homeowners policy. If you buy a house in a flood-prone area, you'll have to pay for a flood insurance policy that costs an average of $400 a year. The Federal Emergency Management Agency provides useful information on flood insurance on its Web site at www.fema.gov. A separate earthquake policy is available from most insurance companies. The cost of the coverage will depend on the likelihood of earthquakes in your area.

Private mortgage insurance and government mortgage insurance protect the lender against default and enable the lender to make a loan which the lender considers a higher risk. Lenders often require mortgage insurance for loans where the down payment is less than 20 percent of the sales price. You may be billed monthly, annually, by an initial lump sum, or some combination of these practices for your mortgage insurance premium. Mortgage insurance should not be confused with mortgage life, credit life or disability insurance, which protect you and are designed to pay off a mortgage in the event of your death or disability.

You may also encounter "lender paid" mortgage insurance ("LPMI"). Under LPMI plans, the lender purchases the mortgage insurance and pays the premiums to the insurer. The lender will increase your interest rate to pay for the premiums — but LPMI may reduce your settlement costs. You cannot cancel LPMI or government mortgage insurance during the life of your loan. However, it may be possible to cancel private mortgage insurance at some point, such as when your loan balance is reduced to a certain amount. Before you commit to paying for mortgage insurance, ask us about the specific requirements for cancellation in your case.

Title insurance is usually required by the lender to protect the lender against loss resulting from claims by others against your new home. In some states, attorneys offer title insurance as part of their services in examining title and providing a title opinion. The attorney's fee may include the title insurance premium. In other states, a title insurance company or title agent directly provides the title insurance.

A lenders title insurance policy does not protect you. Neither does the prior owners policy. If you want to protect yourself from claims by others against your new home, you will need an owner's title policy. When a claim does occur, it can be financially devastating to an owner who is uninsured. If you buy an owner's policy, it is usually much less expensive if you buy it at the same time and with the same insurer as the lender's policy.

To save money on title insurance, compare rates among various title insurance companies. Ask what services and limitations on coverage are provided under each policy so that you can decide whether coverage purchased at a higher rate may be better for your needs. However, in many states, title insurance premium rates are established by the state and may not be negotiable. If you are buying a home which has changed hands within the last several years, ask your title company about a "reissue rate," which would be cheaper. If you are buying a newly constructed home, make certain your title insurance covers claims by contractors. These claims are known as "mechanics liens" in some parts of the country. The American Land Title Association has consumer title insurance information available at its website, www.alta.org.

How can I make my loan process faster?

We should say that "working with us" is the first way! When you let us help you find the loan that's right for you, you truly are taking advantage of some of the area's best technology and expertise to get you a loan decision and funding on your loan quickly.

But here are five "other" ways you can speed up the process of getting a mortgage loan:

1. Have everything ready and in one place. Once you have obtained a list of the items required for your Residential mortgage or Commercial Mortgage, get all of your documents together and keep them in a safe, portable place like a special pouch or folder, you can cut down on time spent rooting around for things we may need. Also, you'll help cut down on your own anxiety and confusion.

2. Be honest and complete when you fill out your application. "Fudging" your employment or residence history or omitting open credit accounts you'd rather not have considered doesn't increase your chances of getting a favorable Residential or Commercial loan. In 100 percent of cases, it makes it harder, and takes longer.
3. Respond promptly to requests for additional information. *During processing, we may need additional information. Provide it as soon as you get the request, or return the call as soon as you get the message as it will help expedite your Residential Mortgage or commercial mortgage request.

4. Be prepared to explain derogatory items in your credit report. This is really part of number 2 above. If you had an illness or a divorce where you missed or made late payments, or you have other instances of late payments or delinquencies on your credit report, be prepared to explain them. Be honest, and don't be nervous! The loan processor isn't judging you, they're trying to fill in all the blanks in their paperwork.
5. Let the appraiser in! *The appraisal is one of the lengthiest parts of the mortgage loan process. Studies have shown that the single biggest factor in appraisal "lag time" is the appraiser's inability to reach the property owner to make an appointment. If you're refinancing and the appraiser calls to make an appointment, make it as soon as convenient for both of you.

And remember that *the appraiser doesn't want to buy your property. He or she will say what the property is worth clean and tidy and in reasonable repair. Remember, letting the appraiser in as soon as possible gets you a loan faster!