Q & A with Dottie Herman

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Q1 - What Is APR for Mortgage Loans?

A - "APR" stands for annual percentage rate. The APR is a much better indicator (than just the interest rate) of the actual cost of a mortgage loan, as it estimates what you'll pay over the course of an entire year. The Federal Truth in Lending law requires mortgage companies to list the APR of their loans when they advertise an interest rate. This prevents them from advertising unduly low interest rates and tacking on fees and other costs that drive up the real cost of the loan.

The APR therefore takes into consideration other fees and costs including:

Discount points. Commonly referred to simply as "points," these are increments of 1 percent of the mortgage that you pay  at the closing. If points are not required, and you elect to pay off points to lower your interest rate, it will not be included in the APR. However, if you're required to pay off points, this cost will be factored in when your APR is calculated.
Origination fees. Often confused with points, this is a fee the lender charges for work they perform on the borrower's behalf.

Mortgage insurance premiums. This is insurance against defaulting on payment of the loan. Your lender may require you to pay mortgage insurance if your down payment is less than 20 percent of the selling price of the home.

Prepaid mortgage interest. Since interest is generally paid on a monthly basis, prepaid mortgage interest is paid at closing to cover the gap between the time you close and the first of the next month.

The APR your lender quotes you will include other fees too, but APR doesn't tell the whole story. There are other fees and costs, such as title insurance, which are still not included in the calculation. And in the end, APR is nothing more than an estimate of the various costs of your loan, including the interest rate. It is not an exact science, since some of the numbers will vary between the time of calculation and the time of closing. Nonetheless, it's a step in the right direction, and one place to start when comparing lenders and the loans they offer.

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Q2 - I am concerned that my bank may be preparing to foreclose on my mortgage. Where can I get help?

A - You should contact your lender first. Your lender is typically in the best position to know the facts of your situation and would be best able to assist you in correcting mistakes or working out a payment plan. You may also benefit from credit counseling from a qualified nonprofit credit counseling agency. For a list of such organizations that have been approved by the Department of Housing and Urban Development, you may call (800) 569-4287 or visit the following website: https://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm.
The Center for Foreclosure Solutions is another source for consumers who are concerned about foreclosure. The Center provides counselors 24 hours a day, seven days a week. They can be reached at 1-888-995-HOPE (4673).
 

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Q3 - I was thinking of buying an apartment with a friend of mine. Would that be possible in a coop or a condo? Or is this not a good idea?

A - Most coops will not look favorably upon the purchase of an apartment with a friend.  Married couples or those in a committed relationship where assets are shared and are legally binding are preferred. A condominium apartment would be a more viable option.

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Q4 - I am going to sell my house- I am working with a broker and I know they are going to bring be buyers. What do I want to make sure the buyers have as far as financing, terms, etc?

A - With the current favorable lending environment, prospective purchasers should be pre-approved for a mortgage and prepared to produce documentation to that effect.  You should let your Broker know the Terms and Conditions of your sale including the approximate time you would like to  close, and what you are including in the sale.

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If you have a real estate question for Dottie, please send it to; Reporters@WorldPropertyChannel.com