San Diego Mortgage FAQ 2

Mortgage Frequently Asked Questions (FAQ) Page 2

Q: Can I pay my own taxes and insurance?

A: When a loan is originated, the mortgage documents specify the escrow conditions. This has become a standard practice for all mortgages, including FHA, VA and conventional mortgages. Occasionally on conventional loans, FRFCU waives the collection of escrow requirement at closing if the member has a minimum 20% equity position in the property.

Q: What do I do if I receive a tax statement?

A: Many tax authorities will mail an informational copy of the real estate tax statement to the homeowner in addition to the Credit Union. However, there are some statements tax authorities do not forward to the credit union, and in special cases we will need your assistance in obtaining the bill. If you receive a statement for any of the following, please forward it to our office by mail or fax.

• delinquent real estate taxes
• supplemental or additional real estate taxes
• special assessments
• if the tax authority will not honor a bill request from another party.

Q: Why did my mortgage payment amount change?

A: There may be several reasons. Some mortgages, such as ARM loans, provide for periodic adjustments to your principal and interest payment amount. A second reason for a change may be due to an annual analysis of your escrow account. In compliance with the Real Estate Settlement Procedures Act (RESPA), you will receive an Annual Escrow Disclosure Statement, which shows the adjustment to your escrow payment based on current tax and insurance amounts.

Q: What is an ARM loan?

A: An ARM loan is an Adjustable Rate Mortgage. The interest rate on an ARM loan is adjusted periodically based on the terms of the mortgage documents. The interest rate is typically based on a common index published periodically, adjusted by a margin. The margin is an amount charged in addition to the index and typically does not change over the life of the loan.

Q: What benefits do I receive from private mortgage insurance?

A: Prior to the existence of private mortgage insurance, individuals typically could not purchase a home unless they had a down payment of at least 20% of the purchase price.

Private 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 home ownership.

Q: How is interest calculated on a mortgage loan?

A: Most mortgages originated today calculate interest in arrears, unlike consumer loans which calculate interest to the date of payment receipt. As an example, when borrowers pay their February mortgage payments, they are paying the January interest. This method of calculating interest is based on a 360 day year in which each month has 30 days.

Q: Why does the title have to be cleared before I can get a mortgage?

A: When a lender makes a mortgage loan (other than a home equity loan), the lender typically requires a first lien position. This means there can be no other outstanding liens against the property that are superior to the new mortgage. Liens can result from a variety of sources, such as home equity loans or lines of credit, child support judgments, divorce settlements, delinquent taxes, and special assessments. Most realtors, mortgage companies, title companies, and escrow companies will assist the seller and/or borrower in clearing title. The ultimate responsibility, however, lies with the sellers of the property who are warranting clear title to the buyers. It is important the buyers receive clear title from the sellers so there are no future claims against their property ownership rights.

Mortgage FAQs

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