Our team of experts is here to help you navigate the murky waters of the home loan process. Find answers below to some of our most frequently asked questions.
Got questions? Ask them here!
What is mortgage insurance? What is a fixed-rate mortgage? What is Pre-Approval? What is refinancing? What is equity? What is a loan estimate? What is a loan officer? What is a loan processor? What is an adjustable-rate mortgage (ARM)? What is loan-to-value (LTV) ratio? What is debt-to-income ratio (DTI)? What is principal? What are closing costs? What is private mortgage insurance (PMI)? What is amortization? What is underwriting?Mortgage insurance is a requirement for a traditional loan when less than a 20% downpayment is given at the time of purchasing a home. Mortgage insurance comes in various types depending on the specific loan program.
Mortgage insurance is used as a safeguard to reduce the risk lenders take on by providing loans to borrowers.
You may not need mortgage insurance for the full duration of your loan! Once you’ve paid off a substantial portion of your loan, you may be eligible to cancel your insurance.
Not sure whether you’ll need mortgage insurance? Wondering if and when you can cancel it? For these questions and any others you may have, contact us at (818) 630-7801 and let’s talk!
A fixed-rate mortgage option is a type of loan where the interest rate stays the same throughout the term of the loan, which means your payments also stay consistent.
A fixed-rate mortgage provides predictability and consistency, making it an attractive loan option for borrowers planning on holding their property for a long duration.
Fixed-rate mortgages lock in a consistent interest rate that will run the duration of the loan’s lifespan. This means that should interest rates rise, a fixed-rate mortgage’s interest rate will remain the same. However, this also means that should interest rates drop, the fixed-rate mortgage’s interest rate will also remain the same.
The distinct benefit of a fixed-rate mortgage is its consistency. By providing a locked-in interest rate that lasts the duration of a loan, borrowers enjoy predictability which helps them to budget accordingly and stay on top of their loan. However, this comes at the price of flexibility. In addition, if rates should drop, borrowers won’t be able to enjoy lower payments.
Wondering if a fixed-rate mortgage is the right choice for you? Give us a call at (818) 630-7801 and we’ll be happy to discuss your options!
Pre-approval is an initial evaluation by a lender (in our case, Golden Coast Finance) in which we determine if a borrower qualifies for a loan, how much money they can borrow, and at what interest rate.
Lender = Golden Coast Finance
Borrower = You, the applicant
To give us, the lender, a financial understanding of your borrowing capacity so we can pair you with the right loan and set you up with a realistic budget for success.
To give you, the borrower, a budget, as well as a pre-approval letter, before you begin your home search.
An Application: Fill out a basic form here to get started.
Credit Check: A member of our team will assist in conducting a hard credit check to assess your creditworthiness and pair you with the right loan program since our diverse options all have varying minimum credit score requirements.
Documentation Gathering: Our team will identify and communicate which documents we need for you in order to verify your current financial standing.
Evaluation: We will internally evaluate all relevant documentation to determine your financial stability and debt-to-income ratio, among other key metrics.
Decision: Our team of experts will communicate our findings with an official pre-approval letter which will state the maximum loan amount for which you qualify, as well as an outline of loan terms.
Borrowers need pre-approval for the following reasons:
Clear budgeting: Knowing your maximum home/condo price before you begin your search.
Access to view homes in person: In many cases, real estate agents require interested buyers to have a pre-approval letter before they schedule a showing. Likewise, they will likely also require you to already have a pre-approval letter before they pair you up with a real estate agent to represent you.
Competitive advantage: Sellers and seller’s agents will take you more seriously when submitting an offer.
Faster processing: Since much of the financial evaluation is complete, the final loan approval process is, in most cases, much quicker.
Still have questions about pre-approval? Fill out the contact form below and a member of our team will reach out shortly.
Refinancing refers to the process of replacing an existing loan with a new loan.
Refinancing allows borrowers to renew their mortgage loan terms under more favorable conditions, whether that means lower interest rates, a change to the loan’s duration, or changing the type of loan (fixed-rate or adjustable-rate).
To lock in better interest rates
To shorten their mortgage loan duration
To free up cash to handle an urgent issue
Switching from a fixed-rate to an adjustable-rate mortgage (or vice versa)
Their credit has improved
The process of refinancing involves replacing your old loan with a new loan, albeit with different terms such as lower interest rates, an accelerated payment schedule, etc. Your old loan is paid off with the new loan.
Curious if refinancing could help you? Contact us at (818) 630-7801 and we’ll be happy to take a closer look!
Equity in real estate is the difference between a property’s current market value and any liens, like a mortgage, that are tied to it. It is primarily what you own in a home and is a key part of homeownership.
Home equity gives you a realistic idea of how much of your property you actually own.
Equity in a property often changes with time. For example, it can grow through mortgage payments or an increase in market value. Likewise, it can decrease through a drop in market value or if you take out a second mortgage in which your equity serves as collateral.
To determine your home equity, you can use this simple formula:
Property Equity = Property Value - Balance of Mortgage Loan
Besides the peace of mind of true homeownership, there are a few other perks of building your property equity. These include:
Canceling PMI - You can often cancel your mortgage insurance after achieving property equity of 20% or more.
Debt Consolidation - High-interest credit cards can be paid off using a home equity loan or a lower-interest rate line of credit supported by your equity.
Cover Emergency Expenses - If you need a lot of money fast, you can tap into your equity to secure a home equity loan as opposed to relying on high-interest credit cards.
There are several methods by which you can take out a loan supported by the equity you have in your property. It can be an attractive option because home equity loans typically have interest that is tax deductible, lower interest rates, and less stringent requirements. However, taking out a home equity loan may come with fees and restrictions, and will obviously add to your debt.
Still not fully understanding equity? Wondering how you can use your equity for a home equity loan? We’ve got answers to these questions plus any others you may have. Contact us at (818) 630-7801 and let’s talk equity!
A loan estimate is a document provided by lenders that outlines the estimated costs and terms of your mortgage loan including interest rate, monthly payment, closing costs, and more.
A loan estimate provides you with a three-page document offering the knowledge and information you need to make an educated decision on whether a loan is right for your situation.
You can count on a loan estimate to give you an accurate assessment of a variety of aspects of your preferred loan type including:
Interest rate
Closing costs
Monthly payments
Annual percentage rate
These figures can be adjusted through several factors including:
Loan type
Amount of loan
Duration of the loan
Golden Coast Finance will provide you with a loan estimate within three business days of your mortgage application. If you don’t meet the qualifications of the loan, resulting in a rejection, Golden Coast Finance will notify you in writing within 30 days along with a clear explanation for the rejection. Note that loan estimates expire after 10 business days.
Still have questions about loan estimates? Give us a call at (818) 630-7801 and we’ll answer them!
A loan officer serves as the liaison between you and the financial institution issuing your loan.
This professional is here to guide you throughout the loan process.
This role is essential in the loan process and includes the following responsibilities:
Still have questions about the role of a loan officer? Fill out the contact form below and a member of our team will reach out shortly.
A loan processor is a professional who handles the paperwork and documentation during the mortgage application process. They ensure all necessary documents are collected and organized for the lender.
A loan processor oversees the completion of required documents before a loan application is submitted for underwriter review.
This role is essential in the loan process and includes the following responsibilities:
A loan processor may require documents related to:
Still not sure how a loan processor fits into your mortgage application? Call us at (818) 630-7801 and we’ll be happy to answer all of your questions!
ARM, an adjustable-rate mortgage, is a mortgage that offers lower and fixed interest rates for a specific period, typically between one to seven years. The adjustable interest rate term may fluctuate based on the initial agreement determined between the borrower and the lender. ARMs are also referred to as variable-rate mortgages or floating mortgages.
An ARM gives borrowers an opportunity to enter into a loan with interest rates lower than what they could expect from a fixed-rate mortgage loan of a similar type. However, that lower introductory rate will only last for a portion of the loan’s duration.
Since an ARM typically starts with an introductory “teaser rate”, it’s easy to start out and get accustomed to the loan
How an adjustable-rate mortgage works
Still not sure how a loan processor fits into your mortgage application? Call us at (818) 630-7801 and we’ll be happy to answer all of your questions!
The initial interest rate set on an ARM will be lower than what a lender would offer you for a similar loan type at a fixed rate. However, after the fixed-rate period expires, your new interest rate will be dictated by two factors:
However, most ARMs also offer rape/payment caps that limit how much the terms can increase over a mortgage loan’s duration. This acts as a safeguard, giving the borrower some stability despite the impending rate fluctuations.
We get it - ARMs can get complicated. If you think an ARM could be right for you, but you still have questions, let us help you! Give us a call at (818) 630-7801 and we’ll give you the full details of ARMs including whether one is right for your situation.
A loan-to-value ratio, often referred to as LTV, is the proportion of a loan amount relative to the value of an asset that is purchased, such as a house.
The LTV ratio helps lenders determine an appropriate loan for a borrower by balancing out risk with the terms of the loan, such as interest rates, whether private mortgage insurance (PMI) is required, and the amount needed for a suitable down payment.
To calculate amortization, you need only use this simple formula:
(LTV Ratio) = (Mortgage Amount)/(Property’s Appraised Value)
However, Golden Coast Finance will provide you with your total monthly payment when you take out your loan.
The lower your LTV ratio, the better. But the majority of lenders are looking for an LTV ratio of 80% or lower. Loan conditions tend to get better the lower your LTV ratio drops.
The LTV ratio is not a catch-all statistic. It doesn’t take into account second mortgages, home equity loans, and the like. While LTV can be a good indicator of whether a borrower will successfully pay off a loan long-term, a combined loan-to-value ratio (or CLTV) is a more comprehensive statistic that accounts for all secured loans on a given property divided by the property’s value.
Still not 100% clear on the LTV ratio? Then give us a call at (818) 630-7801 and we’ll break it down for you!
A debt-to-income ratio (or DTI) is a percentage that compares your total monthly expenses to your gross monthly income. This is one of the first and main factors necessary for your loan qualification.
DTI is a factor that lenders use to assess the risk posed by borrowers applying for mortgage loans. However, it is not the sole factor considered.
To figure out your DTI, you simply need to add your monthly debt payments, then divide the sum by your gross monthly income. Gross monthly income will be the amount of pay you actually take home after taxes and other deductions are removed.
In most cases, a lender won’t accept a DTI in excess of 43%. Most lenders would prefer a DTI of 36% or less.
Curious about how your DTI affects your chances of qualifying for a loan? Give us a call at (818) 630-7801 and we’ll look at your specific situation!
Principal refers to the original amount of money borrowed on a loan, excluding interest and other charges. It is the amount on which interest is calculated.
You could consider the principal to be the basis of a mortgage loan since it is the initial amount of the loan before other factors such as interest are applied. Therefore, the principal serves as the baseline from which interest and fees are calculated.
The initial principal on a mortgage loan is the original amount borrowed from a lender. As you begin to pay off your loan, the principal will decrease. This remaining amount is referred to as the outstanding principal.
Your interest on a mortgage loan directly relates to your principal. Basically, the larger your principal, the more interest you can expect to pay. Typically, when you begin to pay off your mortgage loan, the majority of your payments will go toward covering your interest with only a fraction chipping away at your principal. But as you continue making payments, your principal will be whittled away, reducing your accrued interest.
Still struggling to understand the basics of principal? We’re happy to break it down further for you! Give us a call at (818) 630-7801 and let’s talk!
Closing costs are fees and expenses that you must pay when you are finalizing the purchase of your home.
To cover any potential expenses beyond the purchase price of a property
Buyers and sellers alike may be required to cover certain closing costs. But if you need to pay any closing costs, they won’t come as a last-minute surprise. That’s because all closing costs must be discussed and agreed upon by all parties prior to closing the deal.
While closing costs can vary, they most often fall within the range of 3% to 6% of your loan amount.
Closing costs may feel like overkill after all of the money you’ve already put into the purchase such as down payments, deposits, etc. But here’s why they’re necessary:
Still have questions about closing costs? Contact us at (818) 630-7801 and a member of our team will be happy to help.
Private mortgage insurance (or PMI) is an insurance policy that protects the lender in the event that the borrower is unable to make payments. Borrowers are required to pay this insurance if they make a downpayment of less than 20% at the time of purchase.
PMI protects lenders in the event that a borrower stops making payments on their loans.
It’s important to recognize that PMI is not synonymous with mortgage insurance but rather a specific type of mortgage insurance provided by a private carrier.
Borrowers are required to pay mortgage insurance:
Again, PMI is a specific type of mortgage insurance, so while you may be required to get some type of mortgage insurance, it won’t necessarily be PMI.
If you’re not thrilled about paying PMI on top of your mortgage loan, rest assured that you’re likely not stuck with it for the duration of your loan. If you are permitted to eventually drop your PMI coverage, the cost of the remaining insurance will drop from your monthly payments.
Not sure if you need PMI? Already have it and wondering if you can cancel it? Give us a call at (818) 630-7801 and we’ll be happy to answer any and all of your PMI (and other mortgage insurance) questions!
Amortization is when you gradually pay off your debt through regularly scheduled payments. These fixed payments include both principal and interest with the goal of fully repaying the loan by the end of the amortization period.
To create a clear, actionable path forward to repaying debt while allowing for easy budgeting.
To calculate amortization, you need only use this simple formula:
(Principal Payment) = (Total Monthly Payment) - [(Outstanding Loan Balance) x (Interest Rate/12 Months)]
However, Golden Coast Finance will provide you with your total monthly payment when you take out your loan.
When you receive your amortization schedule, it will have six columns:
Still have questions about amortization? Contact us at 818) 630-7801 and we’ll be happy to answer them!
Underwriting in the mortgage process is a critical step in which an expert evaluates a borrower’s ability to repay the loan. The individual responsible for executing this evaluation is known as an underwriter.
Application Submission: The borrower submits a loan application, which includes personal information, financial details, and information about the property (for mortgages).
Document Collection: The lender gathers necessary documents, such as:
Proof of income (pay stubs, tax returns)
Credit report
Employment verification
Details of debts and assets
Risk Assessment: The underwriter evaluates the information using various criteria:
Creditworthiness: Analyzing the borrower’s credit score and history.
Debt-to-Income Ratio (DTI): Comparing monthly debt payments to gross monthly income to assess affordability.
Property Valuation: Ensuring the property’s value supports the loan amount through appraisals.
Decision Making: Based on the assessment, the underwriter will:
Approve the loan with or without conditions.
Deny the application if risks are deemed too high.
Request additional information or documentation.
Final Approval: If approved, the loan terms are finalized, and closing procedures begin.
Risk Management: Underwriting helps lenders identify the risk of lending to a particular borrower, minimizing the chance of defaults and financial losses.
Creditworthiness Assessment: It ensures that only borrowers who can afford to repay loans are approved, promoting responsible lending practices.
Compliance: Underwriters ensure that loans comply with federal, state, and institutional guidelines, protecting both the lender and the borrower.
Market Stability: Effective underwriting practices contribute to overall financial stability by reducing the likelihood of widespread defaults, which can lead to economic downturns.
Fairness: The process provides a standardized method for evaluating applicants, ensuring that decisions are based on objective criteria rather than subjective judgment.
In summary, underwriting is a vital step in the mortgage and loan process that protects both lenders and borrowers by assessing financial risk and ensuring responsible lending practices.
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