So you’ve went through the entire loan origination process, you’ve sent in all the documents you were required to and you’ve gotten to the closing table only to find that on the Truth In Lending Document, your APR is higher than your interest rate. Wait a minute, why are these different? This is only one of the many questions members of the Quicken Loans closing team encounter on a daily basis and one of the top questions you may have during the closing of your refinance. Don’t fret, through! We’re here to help and are capable of answering any questions you may have about what goes in to loan closings. So let’s start with the five most common questions that come up at closing and see if we can take a little bit of worry off of your plate.
Why Is My Payoff Higher than My Principle Balance?
When you go online to make your monthly payment or when you receive a paper statement in the mail, lenders will usually make a reference to the principal balance on the loan, which is the outstanding balance on the mortgage. What they don’t usually mention is that this principal balance does not include the interest that is being calculated on the loan or any other charges such as a fax fee or a recording fee if applicable. Before closing on your home loan you should ask your current lender what the true payoff on your loan is and not what the principal balance is so that once you’re at the signing table the higher figure doesn’t catch you off guard.
Why Is My APR Higher than My Interest Rate?
The annual percentage rate (APR) reflects the cost of your loan with closing costs and the loan discount fee included. Lenders add those fees and display the cost to you in a form of the rate to give you a clear idea in one easy number that will show how much the loan will cost you in the form of a percentage rate. The APR is used for comparison purposes when shopping around for a loan. We always direct our clients to the “Note” which is the promissory document stating that you will repay the loan. On these documents, it will clearly state what your interest rate is and there you will find the figure that you have been quoted during the entire process.
Why Is the Amount Financed on The Truth in Lending Lower than What I’m Borrowing?
This is the amount borrowed minus prepaid finance charges. These include loan origination, commitment or loan discount fees. The amount financed is lower because it represents the net figures. For example, if you have a $100,000 loan and the prepaid finance charges total $5,000, the amount financed would be $95,000.
What Are Transfer Taxes and Why Must I Pay Them?
Transfer taxes are the state or local taxes payable upon the transfer of a title from one client to another or one lender to another. Essentially, whenever you’re refinancing from one lender to another you’re transferring the title in the process and must pay a tax for this transaction.
Why Does My Non-Borrowing Spouse Have to Sign Documents, Especially the Mortgage?
The mortgage shows who has a connection to the property, although the party may not be a borrower, if they‘re on title to the property, have dower or homestead rights, they must sign the mortgage to acknowledge that the other party is refinancing. Paragraph 13 of the mortgage on a primary loan and paragraph 10 on a HELOC explains that a non-borrowing party signing this document does not make them liable to repay the loan. Although the non-borrowing party is not liable to repay the loan, by singing the mortgage, they’re essentially giving permission to the borrowing party to do so.
Going through a refinance process may seem pretty scary at first but that’s why we’re here. Were here to help guide you through the entire process and help you make the best decision that suits your unique situation.
There are a ton of questions that arise during closing but why wait until you get to closing to ask them? Leave any question, or any comments in the section below.