Frequently Asked Questions

ALL CREDIT GRADES ARE ACCEPTABLE

 What's your Rate?

A commonly misused customer question we get. Mortgage rates are not set up as "one size fits all," they are risk based - some people pay more and some people pay less. That means without having your present day tri-bureau merged credit report right in front of us (which contains your secret credit bureau ranked "credit score") AND knowing what Loan-to-Value (means the appraised value of your home vs. the dollar amount of the proposed new loan, as a percentage) you may qualify for -  it is IMPOSSIBLE to give you a Rate Quote that's truthful.  Without that credit score "number", anything  is simply a guess!   Step Number One in the mortgage lending process these days, is for the loan provider to obtain the complete tri-bureau merged credit report with your (and your spouse/ co-borrower) credit scores (see our LOAN APPLICATION page on the left) immediately after receiving your application, so you can get answers that are meaningful, PLUS answers that apply to YOU, and not your next door neighbor, a friend, co-worker, or a relative.  Since there's really no such thing as an Emergency Mortgage Loan "absolutely MUST have an answer in 20 minutes" -  take the time to do it right and get a real answer - QUICK is worthless!!



Can we get a REAL LOW Interest Rate like the ones we see in the newspaper, on television, highway billboards, and on some Internet sites?

Of course you can, those quoted rates exist!  Here's some of the CONSERVATIVE standards customers generally need to meet, to end up with those quoted "conforming" rates.  First of all, you need a pretty good credit score, the loan's got to be on a modest priced regular stick built single family owner occupied residence in a subdivision tract.  If you're buying a home, you'll need to have a down payment of, say 20% (or 20% equity if a refinance or home equity loan) with a first mortgage loan size usually between $175,000 and $417,000, sufficient and verifiable assets & financial reserves, stable and established income, a debt load showing you can easily afford the new loan payment - things like that.  Published figures reveal that 42% of Americans have qualified for those "conforming" loan programs.  Now, what about YOU?  Many real people - good people don't end up with those "quoted" low-ball rates due to: the need for a more liberal lending standards, average or lower credit scores, too much debt, they want loans for more than 80% of property value, rural properties, non-owner occupied properties, condos or townhouses, self employed, heavily commissioned or undocumented incomes, larger property values, too small or jumbo loan sizes, past bankruptcy, judgments, collection accounts, income history not stable, rural property, etc. etc.



Is it worthwhile to refinance my home if I can only save one quarter of one percent (.250%) on the interest rate on the new loan?

Of course it is!  Over the life of your new loan, you'll save yourself nearly $10,000 in interest - if your new loan is a typical $150,000 size loan. If your new loan will be larger than $150,000, than you'll save even more.  The potential savings far out weighs the costs to refinance today. Very FEW people actually refinance simply to reduce their interest rate however; in fact the latest statistics show MOST people actually end up doing the new refinanced loan because they want to take-out a great deal of cash while they're at it! Paying off non-interest-rate-deductible consumer debts, is the main reason.



What is the difference between Supreme Lending and other mortgage bankers or mortgage brokers?

Our tradition is to obtain the very best loan available for the customer regardless of the circumstances. Normal portfolio lender types are limited to a few kinds of loans which they favor, but may not be the best for you.   In addition to our own credit facilities, Supreme Lending works with many different institutional investor funding sources and strategic partners, therefore we offer a wide variety of loan programs right here on our website - so we are more likely to be able to customize a loan that is just right for you. Although some customer requests are "conforming" and fit neatly in a little box, we know many customer applications are unique, and require special handling.  Nearly every customer situation we've already seen over the last four decades being a loan provider, we have a way to handle it; are happy to make it work. We know not everybody is perfect.



FICO FICO FICO !  That's all I seem to hear about lately -- Tell me more about these FICO Credit Scores things ....

FICO is not the name of a someone's dog. Credit Scoring (FICO) is a major issue all across the Country lately.  It is your credit score that plays such a major role in whether a lender approves you or not. See our more on scores page for details.



How long does the loan process take?

The number of days from application to closing can vary from a few days to 20 or more days on a traditional residential real estate mortgage loan, depending on a number of factors. Some of the factors are loan type, whether an appraisal is needed, title clearance, etc. Time delays also occur and are often unforeseen, such as delays in appraisals, title snafus, credit problems, etc. The most important factor in ensuring a fast funding, is to avoid delays between you and our office when exchanging information. Historically at our company, it's the customer or outside supplier/vendors who slow down the process. Our How Fast? page contains a Timeline Flow Chart which may be helpful.



Can Supreme Lending help me get a home equity or a first mortgage?

YES!  Our long-experienced staff is available to discuss your funding needs. You may telephone us, at 214-233-0758. You may also complete our online Loan Application and submit it right on this website. Stop in, send us an e-mail, or call our office to request more info, and the best time to contact you. All of our homeowner loans are tax deductible; a real smart reason to have your house work for you for a change!


Why is it, I seem to get evasive answers when I ask specific questions, from many residential real estate lender/loan agent types? 

We hear this comment too.  It so happens there are many "moving parts"
in this industry, and in recent years a great number of new people have flooded our business due to the explosion of computers, telecommunications, refinance mania, and the Internet. Like in so many other industries, training lags technology.  So what you may be hearing is not people being evasive, they simply may need more experience dealing with the volume of customers they receive these days.



Who dictates the costs & fees on a traditional residential real estate mortgage loan?

Many fees associated with residential homeowner mortgage loans are not dictated by the mortgage company/Lender/Broker. In many cases they are mandated by local, state and federal law. For example the county recorders office will insist on assessing a percentage of the total loan that must be paid to the county to cover the cost in recording property transactions. Then there are the fees that must be paid to the title insurance company to do research to insure the title to the property is not clouded, that there is no litigation pending, etc.  Another cost the mortgage company has no control over, is when a residential real estate purchase transaction cannot be 80/20 percent down payment. Mortgage insurance is then often required, the cost can be quite substantial. These are just a few of the costs which the funding company has no control over. Costs and fees for home equity second mortgage loans are generally similar to those of a traditional first mortgage, but usually less, and of course MUCH faster!  Closing costs usually average around $2,300 per transaction at most firms, they're a lot of vendor/suppliers involved with mortgage loan transactions. Please ask us for details on the loan you have in mind. The federally mandated Good Faith Estimate you'll receive from us early on in the loan process (within 3 days of receiving your application package), spells them out clearly, and in specific detail.



What about income tax vs. costs & fees for a first mortgage or equity loan?

We encourage you to ask your personal & individual tax preparer or tax advisor for details; however, a general rule of thumb is that if you finance your loan fees, that is - allow an increase in loan amount to absorb the fees, the fees are not tax deductible. On the other hand, if you finance the fees with your own money (paid outside of escrow) much of the fees and points you pay may be tax deductible. Again, we recommend that you consult your tax professional for specific advice.



Is the interest on my loan tax deductible on a traditional residential real estate first mortgage or equity loan??

Yes, in most instances the interest you pay on home financing is tax deductible. Some restrictions apply to investment properties and high-loan-to-value transactions. We recommend that you consult with your tax professional for specific advice, since you might be the one in one-hundred million taxpayers who could not be eligible for the deduction - but, you probably are available for the deductions.



Why is the Annual Percentage Rate (APR) on the Truth in Lending Disclosure higher than the "rate" shown on my note, which is the rate I thought I chose for my first mortgage or equity loan?

All consumer residential real estate lenders are required by the 1965 Consumer Credit Protection Act (Regulation Z) to show the rate which will be charged on the note signed at closing, including the total cost to obtain the loan. This includes, but is not limited to, the total interest paid over the life of the loan, assuming the full term is carried out at the note rate, plus certain closing costs. Closing costs could include prepaid interest, Private Mortgage Insurance/FHA Mortgage Insurance Premium/ or VA Funding fee, whichever may be applicable, and various miscellaneous costs such as an underwriting fee, tax service fee, etc., as may be charged by the lender. All of these "Finance Charges" are taken into consideration when calculating the APR to give a more accurate picture of the total cost of the loan.



What is the difference between locking or floating my interest rate on a traditional residential real estate first mortgage loan?

Both options require that the interest rate be locked, only floating allows the rate to be locked until the last possible moment. A loan rate must be locked before final loan papers may be drafted. You as a consumer, may wish to lock an interest rate prior to drafting final loan papers. Advance locks may be processed as soon as the initial application is taken guaranteeing a rate of interest that won’t change during the processing period. Although advance locks offer a level of security, the down side is if interest rates fall, the borrower is locked in at a rate above current market rates. When floating the interest rate for any amount of time, the borrower takes the risk of interest rates increasing during the period from application to the time of lock-in. The downside to this, of course, is if interest rates increase during this time, the borrower is subject to the then current higher interest rates. The benefit would then be if interest rates went down, the borrower would have the option of a lower interest rate than if locked in previously. Ultimately the decision when to lock is the consumers, but professional input may often be provided by the loan agent to assist in making an intelligent decision. However let's be practical, how lucky are YOU?  It's a roll of the dice either way!



Should discount points be paid to lower (buy down) an interest rate?

This question is best answered in the context of time. Long term interests are best served by obtaining the lowest possible rate, which often means higher points. Conversely, a short term consumer may wish to limit points at the expense of a higher rate. It is safe to summarize saying that the rate is a function of points: the lower the rate, the higher the points. Typically, the distinction of long term vs. short term is about 48 months. If you plan on keeping your mortgage for more than 4 years, a discounted loan (a loan with more points) may be a good idea. On the other hand, if you know you’ll keep the mortgage less than 4 years or there is uncertainty, a loan without points or a loan with no points and no fees may be the best option. Again, our team of loan professionals will provide various written loan options so that you can make an intelligent decision.

When borrowers make their monthly mortgage payments, they generally also pay one-twelfth of the anticipated annual amount needed to pay taxes and insurance premiums. These additional funds are deposited into an escrow (trust) account (also known as an impound account), until the lender pays the taxes and insurance premiums as they come due. The borrower benefits for budgeting reasons because costs are spread through the year rather than as a lump sum. This method allows the lender greater control in avoiding tax delinquencies or lapses of hazard insurance coverage on the property. Mortgage documents often stipulate lenders establish an escrow account.



Can I pay my own taxes and insurance on a traditional residential real estate first mortgage loan?

When a loan is originated, the mortgage documents specify the escrow conditions. Lenders are required to establish escrow accounts only for FHA insured mortgages. With conventional loans you typically have the option to establish an impound account or make property taxes on your own. We will present you with options at the time of financing  Choosing an impound account is often a convenient way to budget for property taxes and insurance. Some loan programs require that you "impound" or they charge you a "waiver fee" if you don't!



What is an ARM loan?

An ARM loan is an Adjustable Rate Mortgage (ARM); they are very popular these days - especially the ones that are two or three year fixed (then adjustable after that) types.  The interest rate on an ARM loan is adjusted periodically based on the terms of the mortgage documents. The most common periods are 6 months or 1 year; however, some ARM’s, most often with banks, may adjust your rate as often as monthly. The interest rate is typically based on a common index published in newspapers and adjusted by a margin. The margin is in percentage points and rides above the index rate. For instance a loan tied to the T-Bill Index at let’s say 6% and a margin of 2% would yield a rate of interest at 8%. ARMs, as opposed to fixed rates, reflect current market conditions. Given the condition of the economy this could be good or bad, and will always be unpredictable.



What benefits do I receive from mortgage insurance (MI) on a traditional residential real estate first mortgage loan??

Prior to the existence of mortgage insurance, individuals typically could not purchase a home unless they had a down payment of at least 20% of the purchase price. Mortgage insurance benefits the mortgage lender directly by reducing the costs associated with borrower default. It also benefits consumers by lowering down payments, thereby allowing more people to achieve homeownership.

FHA insured mortgages require mortgage insurance premiums. Mortgage Insurance is paid monthly in addition to your mortgage and the premium is calculated as a percentage of the loan amount. Various factors determine the percentage but most the most significant factor is the amount of down payment, or lack of down payment. In today’s market homes may be purchased with no money down.



On a traditional residential real estate first mortgage loan, aren't there really just two kinds of mortgages: fixed and adjustable rate?

You could say that, because all mortgages fall into one of these two categories -- that is, the interest rate you pay is either the same (fixed) for the life of the mortgage, or it can change (adjust) over the life of the mortgage. However, within these two broad categories there are variations. Such as:

Balloon Note Mortgages: This type of fixed rate has a call feature, that is, your mortgage payments may be amortized over a longer period like 30 years, yet the loan is due and payable long before the 30 years is up. The principal balance of the loan must be paid off or refinanced. This is common when lenders wish not to commit funds for a long period of time. Typically the consumer realizes improved interest rates by accepting a balloon note mortgage, and also has short term needs.

Reset Mortgages: This type of fixed rate allows for a reset of the interest rate at a specified date. Consumers will realize lower than market interest rates when accepting this type of loan. Reset terms typically are set at 5 or 7 years. Lenders classify these as the 5/25 or 7/23 loan. That is, the payments are amortized over 30 years yet they reset to prevailing market rates upon the 61th or the 85th payment. Again, consumers geared for short term and seeking the best rates may consider this financing option.

Fixed then ARMS: This type of fixed rate allows a consumer to secure a fixed rate for a specified term before it roles into an adjustable rate mortgage. This type of 30 year loan may offer a fixed rate, below current market rates, for 3, 5, 7 or 10 years, but then becomes an adjustable rate, at pre-determined terms, for the remaining life of the loan. Lenders commonly refer to these as "3/1 ARMs, 7/1 ARMS" etc. A consumer may prefer this type of mortgage when they are short-term oriented and want better rates, yet prefer the reassurance that if they keep the loan longer than they expect they will not be burdened with the down-side of a balloon note mortgage, also preferred by short-term mortgage shoppers.

Pre-Payment Mortgages: The most traditional, this type of fixed rate has a penalty if you pay it off early. Typically, they come into play, to keep you from paying your loan off early, from anywhere from 1 to 5 years. The terms of pre-payment will be in defined in your note. The amount of penalty may be calculated using the formula defined in the Note. The most common formula is 6 months interest of 80% of the original principal balance. For instance if you were to pay off a $100,000 mortgage @ 10% interest within the pre-payment time frame you’re penalty would be calculated as follows: $100,000 x 80% x 10% x 0.5 = $4,000 penalty. It is recommended that pre-payment penalties should be avoided if possible unless you are certain that the loan will not be refinanced or paid-off within the pre-payment period. Again, a consumer can expect preferred loan terms by accepting a loan with a prepay penalty vs. a loan without one.

Potentially Negatively Amortized Mortgages: This type of Adjustable Rate Mortgage has built-in features allowing optional payments. Typically this loan will offer 1-4 payment options. Options are usually classified as 1). a minimum payment option or 2). interest only option or 3). fully amortizing option for 30 year payoff or 4). fully amortizing option for 15 year payoff. The term "negative amortization" refers to loans that defer interest and thus can increase in principal balance rather than decrease.

Option 1 allowing a minimum payment is calculated per the predetermined terms of the note and may allow for deferred interest. The minimum payment option is a function of your initial payment, increasing slightly every year, and it does this independently of the adjustable interest rate associated with the loan. The market may dictate an interest rate, based on your index plus margin, that yields interest at a dollar figure well above your scheduled monthly payment. For instance, a $100,000 loan with an interest rate of 8% will accrue interest of $666 a month, yet if you have a minimum payment option allowing only a $500 payment then the difference of $166 will be the deferred interest and is added to your principal balance. The following month your balance is not $100,000 but $100,166. Negatively amortized loans have pros and cons, so be sure you consult with your loan professional before selecting this type of mortgage option.

Fixed-Rate Mortgages

With this type of mortgage your monthly payments for interest and principal never change. Property taxes and homeowners insurance may increase, but generally your monthly payments will be very stable.

Fixed-rate mortgages are available for 30 years, 20 years, 15 years and even 10 years. There are also "bi-weekly" mortgages, which shorten the loan by calling for half the monthly payment every two weeks. (Since there are 52 weeks in a year, you make 26 payments, or 13 "months" worth, every year.)

Adjustable-Rate Mortgages (ARMS)

These loans generally begin with an interest rate that is 1-2 percent below a comparable fixed rate mortgage. This is called a "start" rate or "teaser" rate. The flip side is that the interest rate changes at specified intervals (for example, every year) depending on changing market conditions; if interest rates go up, your monthly mortgage payment will go up, too. However, if rates go down, your mortgage payment will drop also. Lenders and consumers alike prefer these types of loans since they safely reflect the prevailing market rates. A Lender hedges an increasing interest rate market with adjustables while a consumer hedges against a decreasing interest rate market. In a sense they are both betting on the loan to go in different directions.

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