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While many borrowers are concerned with what they need to do in order to qualify for a mortgage, there are also a number of things that borrowers should not do once approved for a loan.

In addition it’s a good idea to give yourself a couple of extra days if possible to schedule movers, landscaping companies or and other repairs for the new house. This will give you extra time to get the closing completed and the transaction funded. If you schedule movers or other companies the same day as closing or even the day after you might be in for a stressful situation if for any reason the closing is delayed.

Always consult with your mortgage professional when there is a question regarding any of this because it can cost you your home loan.

After applying for a mortgage do not let anyone pull your credit or apply for any new credit at all. Try to keep everything the same as far as credit goes as when you where initially pre-approved unless told different by your loan officer.

Do not ignore to tell your mortgage broker about any material changes in the purchase agreement you and the seller come to agree upon after the mortgage process has begun. A slightly lower sale price can alter the loan-to-value ratio and requires re-submission of loan documents. Your mortgage broker and lender have to be made aware if any addendum is later attached to the purchase contract.

After applying for a mortgage be sure to advise your loan officer to any changes in your marital status or name changes. This will help you avoid problems with the final closing documents and/or title problems.

Be certain not to lease a car or allow a car dealer to “pre-qualify” you for a car lease or loan. It doesn’t matter whether or not the car is new or used, because either way this would fall under the category of taking on new debt, and is a very common reason for individuals, particularly those making purchases for the first time, run into complications with their mortgage application process after the fact. If you have any need to make any further applications for substantial credit, please give us a call.

Do not take on new debt. The temptation is strong. There are so many big purchases that people want to make in connection with a move: appliances, window treatments, furniture, etc. When you add to this the fact that, today, everyone offers easy terms and no money down—well, why not just do it? Answer: because you will change what the mortgage industry calls your “debt-to-income ratios” (the relationship of your income to your debt).

Do not change jobs. If at all possible, try not to make a career move during the time between your mortgage application and the closing on the home you are purchasing. But, you ask, “What if it’s a BETTER job, for MORE money, in a DIFFERENT field?” Still, try and wait until AFTER closing. One of the factors mortgage companies consider is length of present employment; they are partial to stability. At the very least, changing jobs initiates the need for more paperwork, and may delay your closing.

Do not pack too soon. Well, go ahead and pack your clothes and dishes. But do not pack your bank statements, tax returns, or other important paperwork. Most especially, do not pack your checkbook! More than one buyer has had closing delayed while a friend or relative hurried over with additional funds because the checkbook was in the moving van.

Do not lease a new car. This should go under the general heading of “no new debt.” It is highlighted here because, for some strange reason, many buyers do run right out and lease a new car during the time between mortgage application and closing! As with any debt, this will change your “debt-to-income ratios” and may cause you not to qualify for your mortgage.

Do not stop making your regular monthly payments after applying for a mortgage. Borrowers refinancing their home to payoff other debts sometimes stop making their regular monthly payments because they are going to payoff the debt. This can cause problems during the loan process because not making payments on time may hurt your credit rating. Lower credit scores may cause your interest rate to go up or result in you being denied credit.

Once you apply for a mortgage to refinance or for a home purchase your job is not done. Be involved, don’t just wait for the call to schedule the closing. Check with your mortgage broker, find out what is going on with your loan, talk to your realtor make sure everything you want done is getting done. Be proactive not reactive, don’t wait for a problem then rush to solve it, work to prevent any issues form happening in the first place.

Do not pay off any old collection accounts on your credit report unless you were specifically told to do so by your mortgage professional. Paying off old collection debt will often signal to the credit reporting agencies that there is new activity on an negative entry and actually lower your credit score.

Certain areas of the country may have added closing costs, but these are the general types of closing costs you might see at closing: Attorneys or escrow fees Property taxes Pre-Paid Interest Loan Origination fee Recording fees First premium of mortgage Insurance Title Insurance Loan discount points First payment to escrow account for future real estate taxes and insurance Paid receipt for homeowners insurance policy Underwriting fee Tax service fee Broker fee Appraisal Fee

Always take your Good Faith Estimate with you to compare to the fee’s on the final HUD statement. You want to make sure that there were no extra added fee’s.

Recording Fees are the costs to record any documents that needed to be recorded at the county clerk’s office. The most likely documents that are recorded are the mortgage agreement, the note, and the deed. Recording is often done by the title company.

The Settlement document containing the final closing costs or HUD may also be referred to as the HUD-1 or HUD-1A

Closing costs are fees associated with any real estate loan transaction. Federal law requires the lender to disclose all reasonable fees at the origination of the loan on a ‘good faith estimate’ within 3 days of application. All actual closing costs are then again disclosed on the closing documents , commonly called the HUD .

Property taxes may be credited to you if they are paid in the back or you may have to pay the property taxes if they are prepaid in that particular state.

Prepaid interest is the interest per day that the lender charges for using the money. For example if you close on the 10th of the month you will pay interest for approximately 20 days (in a 30 day month) for using their money for 20 days then on the first of the following month your interest will start to accrue daily for the full month. The purpose is so that when you make your first mortgage payment you are only paying the 30 days worth of interest and some to the principal compared to paying for 50 days worth of interest if you were not to pay the prepaid interest.

Your home provides many tax benefits. Here are some of the benefits of being a home owner.

1. All yearly interest is tax deductible. Including any points paid for financing.
2. You can deduct the total amount of your yearly property tax bill.
3. In addition to paid interests and real estate tax being tax deductible, most of the settlement costs are also deductible. For purchase transactions, settlement charges are deductible in the year the transactions occur. For refinances, closing costs are deductible throughout the life of the loans. As always, consult a certified tax accountant before taking any such deductions.
4. Home values have sustained growth through the years. Historically there has been no better financial investment than home ownership. It is the best hedge against inflation because real estate is the world’s only commodity in absolutely limited supply. Population growth steadily increases demand, thus the increasing value of real estate over time has been constant.
5. You can also use your homes equity to your advantage by consolidating debt, purchasing big ticket items with a 2nd mortgage or HELOC at comparable interest rates, lower payments and you are able to deduct the interest from these mortgages as long as the loans do not exceed 100% of your homes value.
6. Please keep in mind though, because of the complexity of tax laws, you must always consult your individual tax advisor for the precise tax advantages of your home and it’s mortgage. Mortgage professionals can give you general guidelines but things can vary from homeowner to homeowner.
7. The tax advantages of renting - NONE! Don’t pay someone else’s mortgage payment for them every month. Contact your trusted local mortgage consultant and get pre-qualified for a home loan today.
8. In addition to tax advantages you can greatly benefit from your home’s appreciation. A general rule of thumb is about 4 - 5% per year on average. If you bought a home that is worth $100,000 then at the end of one year’s time it could be worth:1st year = $105,0002nd year = $110,2503rd year = $115,762and so on…

Capacity = Willingness and ability to pay back the loan Credit = Payment history and current balances; willingness to repay Character = Job stability and or time in property Collateral = Property or what the lending institution will be left with if the borrower fails to pay.

Another one of the C’s that is often over looked is Cash to Close. Liquid assets readily available to pay the down payment, closing costs, and prepaid items of a mortgage transaction.

Credit is one of the most important things a borrower must be aware of when buying a new home. The credit report is a representation of how you pay your bills. If you have great credit. A Bank is willing to finance up to 106% . Which would allow a person to purchase a house with no money down.

Character – from the standpoint of underwriting, lenders are usually looking for a minimum or two years work history at the same company. If you have changed companies in the past two years, but are in the same line of work, as long as your income has stayed the same or increased lenders will accept that. The longer you have been employed with the same company and in the same line of work the better off you are and the more lenient the lender may be on other factors.

Knowing what lenders are looking for and planning to provide them what they need in order to fund your loan is the best way to make sure you can get the best loan for you.

From an underwriting perspective, if a loan package is significantly strong in one of the “C” areas, deficiencies in another “C” can be given less weight. Example, if a borrower is putting down a large down payment the Collateral would be stronger so a weaker credit score might be tolerated.

Credit - Although there are a few programs that are not credit score driven, by far you will be able to secure a better rate if your credit rating is good. Payment history plays a big part in your credit score and this shows the lender your track record of payments to your creditors. It’s more probable that you will pay your loan on time if you pay your other bills on time. If you have high balances on your other debt such as credit cards and automobiles this can affect your Debt-to-income (DTI) ratio and put you at more risk in the eyes of the lender. The reason good credit scores are important is because you have the ability with good scores vs. bad scores to qualify for no income verification or no documentation loans.

Collateral-From the standpoint of loan underwriting, the higher the stake a homeowner has in the property, the less likely he would default on the mortgage. Statistics have shown that if homeowners have 20% or more in equity in their homes, lenders are less likely to suffer a loss as a result of default. For home buyers who have less than 20% to put down as down payment, many banks are willing to grant them loans as long as these home buyers have other compensating factors, such as a better than average credit profile, or a low debt to income ratio. As a safety measure, most banks require home buyers putting down less than 20% to carry Private Mortgage Insurance, which insures the banks against loss due to homeowner default.

Capacity - Capacity goes hand and hand with credit. When a lender reviews your credit there are 2 major factors they are looking at aside from credit scores. One is your DTI or Debt-to-income ratio and the other is your credit history. Both of these will determine your capacity to repay the loan or your risk to the lender.

Capacity also refers to the amount of debts you can realistically pay given your income. Creditors look at how long you’ve been on your job, your income level and the likelihood that it will increase over time. They also look to see that you’re in a stable job or at least a stable job industry. It’s important when you fill out a credit application to make your job sound stable, high-level and even” professional.” Are you a secretary or are you an executive secretary or the office manager? Finally, creditors examine your existing credit relationships, such as credit cards, bank loans and mortgages. They want to know your credit limits (you may be denied additional credit if you already have a lot of open credit lines), your current credit balances, how long you’ve had each account and your payment history—whether you pay late or on time.

There are several factors that may play into affect when you decide to sell your home.

• You will need to decide if you want to sell it on your own (For Sale By Owner) or if you would like to use a real estate professional.
• The real estate professional often times will be able to sell your home faster than what you would be able to do on your own. The agent will have access to MLS, as well as customized marketing tools for your property. Also, the agent will do the open houses, which will free up more time for you.
• The real estate agent will take care of all the paperwork that needs to be done when you sell your home. They will write the offer to purchase, any counteroffers or amendments to the offer, and order the title. Basically, they will walk you through each step to selling your home.
• A key benefit to having a listing agent is marketing of your home. When selling your home, the only way to get people to consider your home is through the effective marketing of your homes qualities. A listing agent will provide all the marketing of your home which will drive potential buyers who are looking for houses with the qualities of the home you are selling.
• When talking to a real estate agent, you must realize that they are conduits to the Multiple Listing Service or MLS. The vast majority of homes are sold using this service.
• Real estate agents have experience and training in several areas that most individuals selling their homes “For Sale By Owner” do not. These include negotiation; understanding and reading contracts; understanding titles, appraisals, surveys and inspection reports; presenting or “staging” a home for showings; marketing; valuation and sales trends; pre-qualifying prospects; and more.
• If you are an avid investor, it is important to note that many States set limits on the number of real estate transactions a person can do without the aid of a real estate agent.
• While many home owners chose to go the route of For Sale By Owner, more than half of these seller end up signing with a Realtor after finding out the work that is involved in the process.
• Real estate agents have no incentive to show sell homes that are not listed, because they only get commissions from sellers of listed home. Since most home buyers use real estate agents to find homes, those who do not hire an agent to sell may have a difficult time finding qualified buyers in a cooled-off real estate market.
• The real estate agent that will sell your home is called a listing agent. They will “list” that your home is for sale, and do everything that they can to find you a buyer.
• If you are thinking of purchasing a home right away as well, you may want to contact a mortgage professional to get pre-approved before your home goes up for sale. Besides pre-approving you, your mortgage broker can give you a list of trusted real estate agents, that can you help you.
• Another benefit to have a listing agent sell your home for you is the legal aspect. It is the agents responsibility to protect you the seller such as in the event that a buyer backs out or defaults on the contract, who will pay for things such as title, if it is in your best interest to accept or deny an offer ampersand to let you know who should pay for repairs if there are any.
• When you sell your home with the help of an agent you gain the benefit protection. The agent is there to protect you. They protect you from wasting your time. They protect you from homeowners who don’t qualify. This of course has a cost.
• Ask your real estate agent if he or she works with one or more mortgage professionals on a regular basis. Problems with a potential buyer obtaining financing are the biggest reason for real estate purchase offers not closing. Or, if you have a mortgage professional first, have him or her recommend a highly qualified and skilled real estate agent.
• The fact remains that when you list your home with a quality real estate agent your home will be exposed to the maximum number of other realtors. Since the realtors really control the buyer pools this means your home will in turn be exposed to the maximum potential qualified buyers. This usually serves to get your home sold the quickest and for the best price.
• Nine out of ten home buyers use a real estate agent in the search process. 77% of the buyers also used the internet to search for a home. Realtors have invested a lot of time and money in building information technology, and because of these efforts, more consumers are using the internet in their home search. Realtor.com was the most popular internet resource, used by 54% of buyers, followed by MLS websites and real estate company websites. The most important factor in choosing an agent was reputation, according to 41% of home buyers. In terms of desired qualities in an agent, three categories were rated as very important by more than nine out of ten buyers: Knowledge of the purchase process, responsiveness and knowledge of the market. Satisfaction with real estate agents is very high, with 85% of buyers saying they were likely to use the agent again.
• There are a lot of discount brokers that will sell your house for less then the standard 6% commission. You should be able to find one local to your area and benefit from there cheaper services.

In the mortgage business, the word “reserves” has more than one meaning. It can refer to the monies (assets) required by the lending bank - to be on hand in the borrowers deposit accounts at the time the loan closes.

The other form of “reserves” in a mortgage transaction are those monies required by the lender to go in escrow, if one is created.

Although proceeds from the sale of your previous home are not technically “seasoned”, they may be used for the down payment of a new purchase, as well as the necessary closing reserves.

Many banks do not consider state controlled retirement funds when using borrowers deposit records to determine how much cash reserves they have. This is because many state controlled retirement funds are inaccessible to their contributors.

Reserves are assets that a home buyer has after settlement. It is one of four underwriting criteria, as with credit, income, and loan-to-value ratio. Most banks require borrowers to have 3 to 6 months worth of housing expenses in reserve after closing. Reserves do not have to be liquid. They can be in the form non-liquid investments such as stock securities, bonds, retirement funds, etc.

A Verification of Deposits (VOD) is often used to show both source and seasoning of reserves or assets. This is a form that is filled out and signed by an official of the depositing institution that verifies such things as the current balance, daily deposit average, account numbers and other information.

When a lender is asking for seasoning or reserves on assets, this usually is referring to liquid assets such as checking and savings. The lender uses the borrower’s assets as a indicator for measuring the borrower’s ability to repay a loan. The assets also show the borrowers pattern of savings and ability to support financial obligations.

Most lenders want a borrower’s reserves to be seasoned for a minimum of 60 days. Seasoned means that they must show proof that they have had this money for at least 60 days. A lender doesn’t want to see that a borrower just had a large amount of money deposited into their account just recently, or they will require proof of where the money came from along with a letter of explanation. This safeguards the lender that the borrower has not incurred a new debt or loan that needs to be calculated into their debt to income ratio.

Many wonder why reserves are sometimes required. This gives the lender more sense of security when lending you the money for your home. If any life changing situations should occur, and you have 6-12 months of “reserves” available, you are likely to use these funds to make your payments in order to keep your house. This makes you less of a risk in the lenders eyes.

With retirement accounts you may be required to contact your human resource department to get a statement explaining how readily available these accounts would be and what the process for taking any money out would be.

Though a borrowers 401k accounts are used to show these reserves, the money in the 401k account is not actually drawn out it is simply shown to be available.

Fannie Mae continues to tighten up approval guidelines. By putting accurate reserves on your 1003, you actually will receive LESS DOCUMENTATION requirements! Most often, Fannie will only require verification of some of the funds listed, not all (for example, borrowers may have checking, savings, and retirement totaling $12,500, but D.U. findings may need NONE verified, or perhaps only $500 verified…then you do not need to send in all asset verifications, just the $500)Remember - every little bit helps! Checking Accounts count at 100% of balance (recent large deposits may need to be explained)Savings Accounts count at 100% of balance (recent large deposits may need to be explained)Stocks / Mutual Funds count at 100% of balance401k / IRA count at 70% of vested balance Cash balance for life insurance policies count at 100% of cash balance Most other retirement accounts may not count, including pensions, PERA accounts, etc.

You can usually count the cash value of a life insurance policy as well.

Other sites: Mortgage Broker | Negative Amortization | Fixed-rate mortgage | Delinquency | Increasing your homes value | MIP | Stated Income Loan | What not to do after you apply for a Mortgage | Quick Closing | Tips for lowering your homeowners insurance| Pay Option Arm Calculator

Completing a loan application is the first thing you’ll do when refinancing your mortgage. You may also need to provide a variety of documentation to help your mortgage lender approve you for a home loan. The documentation will vary depending on the lender you choose, your loan program, and your personal financial situation.

It’s also handy to have available your latest mortgage payment coupon, your mortgage note, and any payment coupons for credit cards you are paying off.

The extent of the documentation you will need to provide to your mortgage broker to get approved for a loan will depend on the type of loan you and your mortgage broker decide to use. Your mortgage broker will help you decide what amount of documentation will best fit your financial situation. Common types of documentation are Full Doc, Alt or Light Doc, Stated Doc, and No Doc. Full Doc is exactly what it sounds like you will need to provide full documentation of your income assets, etc. Alt Doc or light doc is an alternative to Full doc where rather than providing pay stubs and/or W-2s bank statements can be used to show income. Stated Doc is when as the borrower you tell the broker what your income is and do not provide additional documentation. The income must be with in reason for your type of employment and job title. For example you can not be a part time dish washer making 100K per year. No Doc is when no documentation is provided for your employment assets, etc. As the amount of documentation decreases the Lenders take on additional risk. With the additional risk the lenders become more stringent on other qualifying factors such as credit. Rates also increase with the increased risk to the Lender.

The following is a list of documents generally required when applying to refinance. You may or may not need them all, but for a fast and easy loan process, have these items available when you’re ready to complete your mortgage application. * Proof of income Typically, you’ll need to show original pay stubs for the last 30 days. * Copy of homeowners insurance Verifies that you have current and sufficient coverage on your home. * Copies of your W2 forms Required for each loan applicant and helps your lender verify past employment and income history. * Copies of asset information Including accounts holding money for closing costs, statements for savings, checking and 401K accounts and investment records for mutual funds or stocks. * Copy of title insurance Helps your mortgage lender verify the taxes, names on the title and legal description of the property.

When it comes to re-finance, it is often a good idea to consult a mortgage professional to identify a loan program that would achieve what is intended to accomplish. In addition, whether a refinance makes good economic sense also depends on the anticipated costs of the refinance transaction, which only a mortgage loan officer can provide.

Contact a mortgage professional for a complete listing of documents which you may be required to produce specifically for your state, county and loan program.

Documentation that may be needed for a refinance may include: Last 2 Years W-2’sLast 2 pay stubs Last 3 months statements for all asset accounts to include but not limited to: checking, savings, money market, 401K, stocks, etc. (must provide all pages for each account)Bankruptcy paperwork (all pages of filing and discharge)Divorce Decree (all pages of the Decree/Judgment and any attachments.)Social Security/Pension award letters Proof of 3 months receipt of child support/alimony Satisfaction of any liens, judgments and/or collections that have been paid Property tax bill Warranty Deed Mortgage Note Owner’s Title Insurance Policy Prior survey Clear copy of your Driver’s License or State issued ID and Resident Alien/Green Card

Cash-out refinancing is often used for home improvements or to consolidate high interest debt.

In addition you may need your HUD (closing statement) from the closing when you last purchased or refinanced the house. This depends on what type of loan program you are choosing, usually in cash out refinance situations.

There are two types of refinances:- Rate/Term, where you reduce your rate, payment or term (ex: 30 year fixed to a 15 year fixed)- Cash-Out, take out more equity on your property

Everywhere you look, economists believe rising interest rates are imminent. According to popular believes, when Adjustable Rate Mortgages (ARM) start to adjust, the new interest rates will be significantly higher, thereby putting unprepared homeowners, who have been accustomed to the low payments of ARMs, at risk of default and eventually foreclosure. If a homeowner with an Adjustable subscribes to this outlook, it is time to refinance out of the ARM and get into a Fixed Rate Mortgage (FRM), while long term rates are still historically low.

Typically, adjustable rate mortgage can adjust from 2-5% on their first adjustment. Check with your mortgage servicer to see how your mortgage will adjust, and when it will adjust.

Here in early 2006 financial markets are experiencing a phenomenon known as the inverted yield curve. In a nutshell, that means that interest yields on long term investments like bonds are actually lower than those paid for shorter term ones. What this means for the mortgage market is that long term fixed rate loans are actually priced lower than the ones that have only a short fixed rate period and then convert to an ARM. During periods of inverted yield curves it is a great time for many borrowers to refinance out of their ARM mortgages into long term fixed rate ones.

If you have an adjustable rate mortgage and you are considering refinancing into a fixed rate to get out of the adjustable you need to consider your short term and long term goals. If you plan on moving from the home within the next few years refinancing into another Adjustable Rate Mortgage (ARM), might be the best option. However, if you have no intention of ever moving then a fixed rate mortgage may be the best option for you. Therefore consider all options before jumping into a new mortgage.

If you want to know the details of how and when your ARM will adjust read through your mortgage Note. The Note is one of the many documents you signed at closing and you should have a copy of. The Note will describe when your rate can adjust, and how the adjustment is calculated, and what the adjustment caps are.

Along with the security of a fixed interest rate you may also be able to take cash out of your home’s equity in the same transaction. Its best to do this at the same time you refinance your adjustable rate mortgage to keep from having to pay closing costs again later. Ask your preferred mortgage professional if your home has grown in value and if a cash-out refinance is right for you.

When you have an adjustable rate mortgage at some point it will adjust. When your loan is a few months away from adjusting it a good idea to look into refinancing your loan to a fixed rate. When refinancing to a new loan look into all the options. Going with a 25, 20, or 15 year term might be better option rather than a 30 year if you are able to afford the monthly payment.

To really understand you adjustable rate mortgage, you need to know two things, the index and the margin. The index is the adjustable component can be one of several indices. The most common index used is the 6 month LIBOR. Indices move up or down based on numerous economic factors. The margin is the fixed component of the adjustable and does not move. When you adjustable rate mortgage adjusts it’s when the index and the libor added together are greater than your current rate.

Before you hire a realtor to either help you sell your home or help you find a new one there are some questions you will want to ask to make sure the fit is right. You will first want to ask the realtor is they work in and have knowledge of the area that you are selling or buying in. A realtor who understand the area you are interested in will make the process more enjoyable.

You will want to find out from the realtor if there are any other fees that you will need to pay besides the standard commission. The standard commission is 6% total, 3% goes to the listing agent and 3% goes to the buyers agent. You may be able to negotiate this fee with your agent, while these are the customary fees, there are many new companies that charge a flat rate or smaller fees, so some real estate agents will negotiate with you.

If you’re buying, ask about tax rates and trends in various area towns. They can vary considerably and will affect your total cost of ownership. Also, ask the realtor whether they work primarily with buyers or with listing. If you’re a buyer, a buyer-only realtor may be a good bet.

If you have children, feel free to ask the realtor about the local school system, daycare, etc. You shouldn’t hesitate to ask your realtor about the basics either. Things such as where the grocery store is or the nearest dry cleaners, are all questions that your realtor can answer or find the answers for you.

Also, ask your realtor if there are any administration fees associated with the transaction. These are paid to the realty company at closing.

Ask your realtor about Home Owners Associations and covenants for the neighborhoods you are considering. Ask if the neighborhood is part of any special taxing district.

When working with a Realtor one of the questions you should ask them is how long has he/she been a Realtor. An experienced Realtor who has been doing it for a long time has been there and done that, while a new Realtor will obviously be less experienced and may not be familiar with everything still. I would definitely be more apt to second guess something a new Realtor was doing versus an experienced veteran Realtor. This is not to say a new Realtor can not do his/her job as well or better than the veteran, but I would make a mental note of their experience in my head. An example where the seasoning of a Realtor may come into play: If you have a “unique” property that you are trying to sell, the veteran might have more experience or knowledge about selling this type of property than the newbie Realtor.

One of the most important questions to ask your real estate agent is which neighborhoods appreciate higher than others. You don’t want to buy a property in a neighborhood that has seen little to no appreciation.

Prepaid interest is collected by the lender, to pay for the interest charges for the remainder of the month during which the loan closes escrow.

Although you will pay prepaid interest at the time of the closing of a new loan, you will almost always skip one months mortgage payment as well.

During a refinance interest will also be charged by the preceding bank. Usually 30 days of interest is charged, above the actual principal balance, at the time the bank issues a payoff amount. This will need to be paid forward, and a reimbursement will be issued for the balance within 30 days.

If you close early in the month you can get an interest credit and pay no pre paid interest for that month. However your payments will not skip a month and your first payment will be due on the first day of the following month.

Prepaid interest must be disclosed on the Good Faith Estimate along with other closing costs. The amount expressed on the Good Faith Estimate will correspond with the estimated closing date indicated. The amount of prepaid interest that you will actually pay at closing will correspond to the actual closing date.

Closing later in the month will decrease the prepaid interest collected at closing. If you are seeking to minimize closing costs, this is something to consider.

Mortgage interests are paid in arrears, after they are earned by the banks. For instance, the interest portion of the June mortgage payment pays for interest accrued from May 1 to May 31. Prepaid Interest, on the other hand, is interest paid on the day of settlement, prior to being earned by the bank, hence the term “pre-paid”.

Prepaid interest is calculated by multiplying the per diem (per day) interest on the loan by all of the remaining days in the month (remaining days start on the day the loan funds). A refinance transaction generally funds 3 days after the closing date (Sundays and holidays excluded) and a purchase transaction generally funds on the closing date. Example: purchase transaction closes on 01/25/06 (funds same day) $25.50 is per diem interest on loan (interest per day) x 7 days left in the month = $178.50 prepaid interest on this mortgage transaction

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