FAQ's - Frequently Asked Questions

1. Where should I send my payment?
2. How do adjustable rate mortgages work?
3. What are excrow accounts and how much do I need in my excrow account?
4. What information will I need to provide to my loan officer?
5. Where will I go to close on my loan?
6. Why do I have to pay for a flood zone certification when my house is clearly not in a flood plain?
7. How long will it take before my loan is approved?
8. Once I make application, should I still continue to make my loan payments on my existing mortgage?
9. What is the difference between closing costs and prepaid items?
10. Can my closing costs be included in my percent required for down payment?
11. If my loan requires Private Mortgage Insurance (PMI), when and how can I drop it?
12. What is the difference between a pre-qualification and a pre-approval?

1. Where should I send my payment?

For mortgages serviced by ChoiceOne Mortgage Company of MI, you can send your payment to:

2. How do adjustable rate mortgages work?

There are many types of adjustable rate mortgages, but all have some common features. One common feature of adjustable rate mortgages is an interest rate change that occurs after a stipulated number of payments have been made. The interest rate can increase or decrease depending on how the new interest rate is calculated. Typically, the interest rate change is based upon a predetermined index value and a margin. If a mortgagor currently has an interest rate that is pending adjustment, the new rate would be calculated by adding the current index rate and a margin. For example, if the mortgagor’s current rate was 6.000% with a 2.000% margin, the new rate would be determined by adding the current index rate (5.000% as an example) to the margin. In this example the new interest rate would be 7.000%.

The maximum amount the interest rate can change during any adjustment period is usually fixed. This maximum adjustment is called the cap. Adjustable rate mortgages also have a lifetime cap, preventing the interest rate from exceeding a predetermined rate.

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3. What are escrow accounts and how much do I need in my escrow account?

Escrow payments are additional amounts paid each month for the purpose of paying the taxes, insurance, and other payments associated with home ownership. Your lender is responsible for the timely disbursement of escrow funds to pay these bills as they come due. Usually, a mortgage company collects funds for placement into the mortgagor’s escrow account with the mortgagor’s periodic payment of principal and interest. The escrow account maintains sufficient funds so there is enough to pay all bills when they come due. It is a common practice for mortgage companies to hold a reserve (cushion) amount for a mortgagor. The reserve or cushion can provide the funds necessary to pay any increases in taxes, insurance, etc.

4. What information will I need to provide to my loan officer?

Your loan officer will submit your loan application through an atuomated underwirting system. This system will tell your loan officer what information is needed for your loan file. This information may include any of the following:

• W-2 and/or 1099 tax forms for the past two years
• 30 days of pay stubs showing current year-to-date earnings
• Your job history and any wxplanation of a job change within the past two years
• If self employed (defined as owning 25% or more of a business), last two years of business and personal federal tax returns (including schedules), a current year-to-date profit and loss statement, and a K-1 on all partnerships.
• Last two months bank statements
• Investment account statements
• Retirement account statements
• Signed gift letter and transfer of funds verification
• Explanation letter of any derogatory credit (bankruptcy, collection, foreclosure or default) in the past seven years
• Landlord address(s) for the past two years and rental amounts
• Name and contact information of your realtor, if applicable
• Homeowner's insurance information
• Rental and/or lease agreements

5. Where will I go to close on my loan?

Generally, all purchase transactions are closed at a title company. Your realtor will let you know where your closing will take place. ChoiceOne Mortgage Company of MI will send all documents to be signed to the title company.
Most refinances will close at ChoiceOne Mortgage Company of MI. We will schedule your appointment and prepare all documents to be signed.

6. Why do I have to pay for a flood zone certification when my house is clearly not in a flood plain?

A flood zone certification is done to determine if flood insurance is required on your loan or not. ChoiceOne Mortgage Company of MI is required by law to have this certification in each loan file. The certification is life of loan coverage and we are notified of any flood plain changes that affect your property.

7. How long will it take before my loan is approved?

Once we receive your loan application, we can generally give you an answer or approval within 24 hours. However, this approval is subject to the verification of the information provided by you on your application. If any of the information should adversely change, your approval status could change.

8. Once I make application, should I still continue to make my loan payments on my existing mortgage?

Yes. Although your loan may be in process, ChoiceOne recommends that you make all mortgage payments that come due unless a closing has been scheduled. In the event there is a delay in the processing of your loan, this would eliminate any problems of late payments and fees.

9. What is the difference between closing costs and prepaid items?

Prepaid items include interest on the loan from the day of closing to the first of the following month, taxes and insurance collected to set-up an escrow account, and any private mortgage insurance that is financed into the loan amount. Closing costs are anything other than the prepaid items. Closing costs are what it "cost" to obtain the loan.

10. Can my closing costs be included in my percent required for down payment?

No, all closing costs are separate from the down payment required on a loan. For example, if you must put 5% down on a $100,000.00 loan, your down payment would be $5,000.00. If the closing costs for that loan are $1,500.00, you would have to have $6,500.00 to complete the loan transaction. 

11. If my loan requires Private Mortgage Insurance (PMI), when and how can I drop it?

If your loan-to-value (LTV) is over 80%, you will be required to have private mortgage insurance (PMI) on your loan. This is insurance for the bank should you default on your loan. Current law states that as long as a borrower has not been delinquent in their mortgage payments, PMI must be dropped off the loan when the LTV hits 78%. The borrower may request that the PMI be dropped at 80%. However, a new appraisal at the borrower’s expense may be required at that time.

12. What is the difference between a pre-qualification and a pre-approval?

A pre-qualification can be performed over the phone or submitted online with the borrower giving the loan officer limited information such as gross monthly income and total monthly debt payments which is used to generated a debt ratio. Based on this ratio, and data obtained from a credit bureau report, the loan officer can generally tell whether there would be any problems in making a loan. No formal credit approval is given until all information is verified.

A pre-approval is done by bringing in proof of income to the loan officer and having a credit report run. With these verified figures, the loan officer will be able to tell if you would qualify for a loan. A pre-approval letter can be issued at that time and is subject to a valid appraisal report along with a clear title report of the subject property. A pre-approval is a credit approval only.

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