1. Am I eligible for VA financing?
   First of all, send for your Certificate of Eligibility from the Department of Veterans Affairs (VA). When you were discharged, you were given a document called a DD-214. Send a copy of this form along with your request for eligibility. You should receive an answer in 1-2 weeks. You need to have a minimum of 90-days of active duty.

2. What is a "No Doc" or "Low Doc" loan?
   No documentation or low documentation loans are offered to people who have 25% or more of the down-payment. For lenders this is a low-risk situation because you have a lot to lose as well as they, given your large financial investment into buying the property. There are certain conditions for this. The down-payment must be your own money and not a gift, you must have an excellent credit history, and your income must be enough to easily fall into the qualifying ratios.

3. What is a "self-insured" mortgage?
   Some mortgage lenders offer programs with no PMI (Private Mortgage Insurance) insurance. The interest rate is usually higher by ½% for the term of the loan. This is a "self-insured" mortgage, where the lender will accept the higher risk of a low down-payment if you will agree to pay him more for the mortgage. Also, the closing costs for these loans is less because there are no up-front PMI insurance premiums.

4. What are COFI ARMs and LIBOR ARMs?
   The COFI annual percentage rates (ARMs) use the Cost of Funds Index (COFI), while the LIBOR annual percentage rates uses the London Interbank Offered Rate (LIBOR). It is best to compare these with the more usual one-year treasury securities index, to see what is best for you.

5. What is a "flex" mortgage?
   Basically, it is a mortgage that will change types in the future. For example, a "5/1 flex" means a 5-year fixed-rate mortgage with a change to a 1-year ARM for the remainder of the term, after the initial 5-year period. Make sure you find out what the worst-case scenarios would be here, before you sign on. All the adjustment terms should be crystal clear.

6. What is 80-10-10?
   This is a financing option that you choose to avoid PMI. The "80" refers to an 80% mortgage. The "10" refers to a 10% second mortgage, and the second "10" refers to the required down-payment of 10%. This is a good mortgage, but you do have to pay for both the mortgages every month; the accumulated payment is often higher than with PMI.

7. What are biweekly mortgages?
   You make your mortgage payment every other week rather than every month. This way you end up making 26 payments in a year. This often reduces the amount of interest being charged and reduces the term of the loan as well.

8. Are new FHA and VA loans still assumable?
   Yes, they still are. Both FHA and VA require that the assumptor have the same qualifications as the original borrower and that the assumptor be liable for the loan after assumption. Also, the assumptor must actually occupy and live in the house.

9. What is a one-year ARM with equity participation?
   Equity participation is also known as "negative amortization" (see Glossary). You make monthly mortgage payments below what is needed to repay the loan. The amount unpaid in the monthly payments is actually added back into the loan, thus increasing the loan balance.

10. What is difference between PMI and MIP?
    PMI (Private Mortgage Insurance) is issued on conventional loans. An independent insurance company issues an insurance policy that guarantees the mortgage company that they will pay a percentage of the loan if you stop making your payments and the loan goes into default. Therefore, if you put down 5%, the lender will want the loan covered for 25% of the full amount insured or covered. A Mortgage Insurance Premium (MIP), on the other hand, is issued on FHA loans. Here, the FHA acts as the insurance agent on the loan and issues coverage on the entire loan amount. If you default, FHA pays the lender in full and takes the house back to sell. You cannot eliminate MIP insurance. The FHA covers the loan for the full term. However, a PMI may be eliminated if your payments are always punctual and you prove to the lender (usually through an appraisal) that the property no longer needs a policy for 25% coverage (because of increase in property value).

11. What is the 2% rule?
    This is the difference between the interest rate on your old mortgage and the new proposed interest rate. If you reduce your old mortgage by 2%, you are often told to refinance. But you should realize that it is often not a good idea to refinance, because the cost of doing so may run into 3% of your mortgage amount. Instead, you might want to reconsider moving to a better home, rather than refinancing your old one.

12. How can I make sure that I am not over-charged at closing?
    Many companies and individuals are involved in the sale and purchase of a home. The good-faith estimate is your best indicator as to your charges. Keep in mind, however, that most lenders always guess high, so when it comes time to actually paying the bills, you are paying a little less than estimated.

13. Do I have to have a tax and insurance escrow account?
    There is no law stating that you have to have these accounts in place. But lenders do expect them. If, however, you have a large down-payment (25% and over), this rule for an escrow account may be waived. But you should also remember that not having an escrow account means that you have to be disciplined enough to look after your own insurance and tax payments

14. What is a lock-in?
    Home loan interest rates change daily. They can even change more than once in a single day. When you get a quote from a lender, it becomes your rate, which you can "lock-in" with your lender. A "lock-in" is a written promise to close your loan at a certain interest rate. Always get a lock-in guarantee that is clearly defined. Get the expiration date, interest rate, and points paid by buyer and seller.

15. Why do mortgage rates go up and down all the time?
    There are a lot of investors making home mortgage loans in the market. The best way to gauge the movement of interest rates is to watch the bond market.

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