Frequently Asked Questions

The Chase Team

Discover answers to common mortgage questions in our concise FAQ section, covering topics such as the loan process, interest rates, down payments, PMI, prepayment options, and missed payments.

What is a mortgage?

A mortgage is a type of loan used for real estate transactions, allowing individuals to buy or refinance a property. It is a legal agreement between the borrower and the lender, typically a bank or mortgage company. The property being purchased or refinanced serves as collateral for the loan, which means that if the borrower fails to make the required mortgage payments, the lender may have the right to take ownership of the property through a process known as foreclosure. Mortgages generally involve regular payments, consisting of both principal (the loan amount) and interest, spread over a specified term, usually ranging from 15 to 30 years.

How does the loan process work?

The loan process involves several steps. First, the borrower completes a loan application, providing information about their financial situation. The lender then evaluates the application, assessing factors such as creditworthiness, income, and debt-to-income ratio. If approved, the lender issues a loan estimate outlining the terms and costs. Next, the borrower submits required documentation and proceeds with the loan underwriting process. Once all conditions are met, the loan moves to closing, where the borrower signs the necessary paperwork and finalizes the loan. After closing, the borrower begins making regular mortgage payments as outlined in the loan agreement.

What factors determine interest rates?

Mortgage interest rates are influenced by various factors, including economic conditions, inflation, the borrower's credit score, loan-to-value ratio, loan term, and the overall demand for mortgages. Factors such as the Federal Reserve's monetary policy, market forces, and the health of the housing market also play a role in determining mortgage interest rates. Lenders evaluate these factors to determine the level of risk associated with lending and set interest rates accordingly.

What is the difference between a fixed and adjustable rate mortgage?

A fixed-rate mortgage has an interest rate that remains constant throughout the loan term, providing borrowers with predictable monthly payments. On the other hand, an adjustable-rate mortgage (ARM) has an interest rate that can change periodically, typically after an initial fixed-rate period. This means that the monthly payments for an ARM can fluctuate over time, depending on changes in market interest rates. The choice between a fixed-rate and adjustable-rate mortgage depends on individual preferences, risk tolerance, and expectations for future interest rate movements.

How much down payment do I need to buy a home?

The down payment required to buy a home can vary depending on various factors, including the type of mortgage, the purchase price of the property, and the lender's requirements. Generally, down payments typically range from 3% to 20% of the home's purchase price. Some loan programs, such as FHA loans, offer lower down payment options, sometimes as low as 3.5%, while conventional loans often require a down payment of at least 5% to 20%. It's advisable to check with lenders and explore available loan programs to determine the specific down payment requirement for your desired home purchase.

What is private mortgage insurance (PMI), when is it required?

Private Mortgage Insurance (PMI) is a type of insurance that protects the lender in case the borrower defaults on their mortgage payments. It is typically required when the borrower makes a down payment of less than 20% of the home's purchase price. PMI allows borrowers to obtain a mortgage with a lower down payment, but it adds an additional cost to their monthly mortgage payment. Once the borrower's equity in the home reaches 20%, either through appreciation or principal payments, they may be able to request the cancellation of PMI.

Can I prepay my mortgage or make additional payments?

Yes, in most cases, you can prepay your mortgage or make additional payments. Making extra payments towards your mortgage can help you pay off the loan sooner and potentially save on interest costs. However, it's important to review your mortgage agreement or contact your lender to understand any specific terms or restrictions related to prepayment or additional payments. Some mortgages may have prepayment penalties or limitations on the amount or frequency of additional payments, so it's crucial to clarify these details with your lender.

What happens if I miss a mortgage payment?

If you miss a mortgage payment, it can have various consequences depending on your mortgage agreement and the policies of your lender. Generally, lenders may charge a late fee and report the missed payment to credit bureaus, which can negatively impact your credit score. If you continue to miss payments, it could lead to more severe consequences such as foreclosure, where the lender may initiate legal proceedings to take ownership of the property. It's important to communicate with your lender if you anticipate difficulty in making a payment to explore potential options such as loan modification or repayment plans to avoid these consequences.

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214-841-1131

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TX Department of Savings and Mortgage Lending and Office of Consumer Credit Commissioner 2601 N. Lamar Boulevard, Suite 201, Austin, TX 78705 512-475-1350 and 2601 N. Lamar Boulevard, Austin, TX 78705, 512-936-7600

CONSUMERS WISHING TO FILE A COMPLAINT AGAINST A MORTGAGE BANKER OR A LICENSED MORTGAGE BANKER RESIDENTIAL MORTGAGE LOAN ORIGINATOR SHOULD COMPLETE AND SEND A COMPLAINT FORM TO THE TEXAS DEPARTMENT OF SAVINGS AND MORTGAGE LENDING, 2601 NORTH LAMAR, SUITE 201, AUSTIN, TEXAS 78705. COMPLAINT FORMS AND INSTRUCTIONS MAY BE OBTAINED FROM THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV.

A TOLL-FREE CONSUMER HOTLINE IS AVAILABLE AT 1-877-276-5550. THE DEPARTMENT MAINTAINS A RECOVERY FUND TO MAKE PAYMENTS OF CERTAIN ACTUAL OUT OF POCKET DAMAGES SUSTAINED BY BORROWERS CAUSED BY ACTS OF LICENSED MORTGAGE BANKER RESIDENTIAL MORTGAGE LOAN ORIGINATORS. A WRITTEN APPLICATION FOR REIMBURSEMENT FROM THE RECOVERY FUND MUST BE FILED WITH AND INVESTIGATED BY THE DEPARTMENT PRIOR TO THE PAYMENT OF A CLAIM. FOR MORE INFORMATION ABOUT THE RECOVERY FUND, PLEASE CONSULT THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV

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