Frequently Asked Questions

Providing the answers to our clients.

These are the most common questions we received. If you have any more, let us know via email: info@prudentialb.com

When should I refinance?

It is often said that you should refinance when mortgage rates are 2% lower than the rate you currently have on your loan. Refinancing may be a viable option even if the interest rate difference is less than 2%. A modest reduction in the loan rate can still trim your monthly payment. For example, the monthly payment (excluding taxes & insurance) would be about $770 on a $100,000 loan at 8.5%. If the rate were lowered to 7.5%, the monthly payment would be about $700, a savings of $70. The significance of such savings in any scenario will depend on your income, budget, loan amount and the change in interest rate. Your trusted lender can help calculate the different scenarios.

What is APR?

The annual percentage rate (APR) is an interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account points and other credit costs. The APR allows homebuyers to compare different types of mortgages based on the annual cost for each loan. The APR is designed to measure the “true cost of a loan.” It creates a level playing field for lenders. It prevents lenders from advertising a low rate and hiding fees.The APR does not affect your monthly payments. Your monthly payments are strictly a function of the interest rate and the length of the loan.

What does it mean to lock the interest rate?

Due to the nature of interest rate movements, mortgage rates can change dramatically from the day you apply for a mortgage loan to the day you close the transaction. If interest rates rise sharply during the application process, it could make a borrower’s mortgage payment larger than he/she previously thought. To protect against this uncertainty, a lender can allow the borrower to ‘lock-in’ the loan’s interest rate, guaranteeing the borrower the prevailing loan rate for a specified period of time (often 30-60 days). A lender may or may not charge a fee for this service.

What is an appraisal?

An appraisal is a document that gives an estimate of a property’s fair market value. An appraisal is generally required by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property. The appraisal is performed by an “appraiser” who is typically a state-licensed individual trained to render expert opinions concerning property values. In an appraisal, consideration is given to the property, its location, amenities as well as its physical conditions.

What is PMI?

If you make a down payment of less than 20% of the purchase price of the home, mortgage lenders generally require that you take out Private Mortgage Insurance (PMI) that protects the lender in case you default on your mortgage. You may need to pay up to a year’s worth of premium for this coverage at closing, which can amount to as much as several hundred dollars. One obvious way to avoid this extra cost is to make a 20% down payment. There are also other ways to eliminate PMI such as 80-10-10 financing which is further described in this section.

Need more answers?

Contact us today and have a dedicated loan officer guide you through the entire home buying process leaving you confident in your decision.

If you're ready to take the next step, let us assist you with a dedicated loan officer for every step of the way. We're here to help you achieve your dreams and goals by providing low rates.

Prudential Borrowing:

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Prudential Borrowing, LLC 450 Sunrise Highway, Rockville Centre, NY, 11570 | (516) 280-7460
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Licensed by Connecticut Department of Banking

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