Loan Applications


 

 

 

 

 

FAQ's - Frequently Asked Questions

What is the difference between fixed rate and variable rate mortgages?

What are escrow accounts and how much do I need in my escrow account?


What is the difference between fixed rate and variable rate mortgages?
A fixed rate mortgage is a loan where the principal and interest payment never change during the life of the loan.

A variable rate mortgage is a loan where the interest rate can change periodically. The changes in the interest rate are tied into the market rates that exist at the time the rate is subject to change.

Initial ARM rates are generally lower than fixed rates, but can adjust upward if interest rates go up. There is a predefined cap which defines how high the interest rate can adjust.

Fixed rate mortgages are beneficial to those who are on a fixed income, (adverse to interest rate change) and those who prefer fixed payment schedules.

Adjustable rate mortgages are advantageous for those who do not plan to stay in their home for a long time, for those borrowers who do not qualify at higher fixed interest rates, and those who can financially handle fluctuating payments.


What are escrow accounts and how much do I need in my escrow account?
Escrows are payments made by a mortgagor to a mortgagee for the purpose of paying the mortgagor's taxes, insurance, and other payments associated with home ownership. The mortgagee is responsible for the timely disbursement of escrow funds to pay the mortgagor's bills as they come due.

Usually, a mortgage company collects funds for placement into the mortgagor's escrow account with the mortgagor's periodic payment for principal and interest. An escrow account has sufficient funds if there is enough to pay all bills when they come due.

It is common practice for mortgage companies to hold an escrow cushion for a mortgagor. The cushion is kept by the mortgage company to assure that if the cost of any escrowed item were to increase in the future, there would be sufficient funds to pay all bills as they come due.