Adjustable Rate Mortgage (ARM) Rates

An Adjustable Rate Mortgage (ARM) is a loan with an interest rate that periodically adjusts to reflect current market rates. The amounts and times of adjustment are agreed upon in a document called an Adjustable Rate Note, which is signed by the borrower.

Fixed rate mortgages have a locked interest rate that will remain the same for the life of the loan. The interest rate on an adjustable rate mortgage will change on an annual basis after the predetermined initial interest rate period expires.

Your rate is calculated based on a variety of factors, including credit qualifications, loan-to-value, loan amount and other criteria.

Yes, adjustable rate mortgages have three rate caps that restrict how much your interest rate can change.  —One cap restricts the amount the interest rate can change at the first adjustment, the second restricts the amount the interest rate can change every adjustment period after the first adjustment period, and the third cap restricts the maximum interest rate you can pay for as long as you have the mortgage.

There are few factors that determine how much you will be qualified to borrow: credit history, debt-to-income ratio, loan-to-value ration, and your down payment.

Your rate is calculated based on a variety of factors, including credit qualifications, loan-to-value, loan amount and other criteria.

Credit Score Basics

When you buy or refinance, your credit score is one of the first things a lender looks at. It helps them determine if you qualify for a loan, and what interest rate they can offer you.

Factors that affect your Credit Score:

• Length of Credit History
• Amounts Owed 
• Payment History 
• New Credit 
• Types of Credit Used
• Derogatory Credit

Your credit score reflects how reliable you are as a borrower and is determined by your track record of borrowing and repaying banks, credit card companies and other lenders.

Factors that Determine Your Rate

Lenders start with the par rate, then look at your risk profile to determine what rate they will offer you.

Rates are usually based on a combination of the following factors:

• Down Payment
• Loan terms
• Loan to Value Ratio (The percentage of the lesser of the sales price/appraised property value that is borrowed from a bank or lender. A down payment of 20% would create a loan-to-value of 80%).
• Points 
• Loan Product

Escrow Basics

Escrow Payment– That portion of a mortgagor's monthly payments held by a lender or servicer in an account to pay taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also called impounds or reserves in some states.

An Escrow Account on your loan allows PNC to make payments for certain bills related to your property, such as real estate property taxes, homeowners insurance, flood and other property related insurance, and mortgage insurance. Home buyers are generally required to have an escrow account until a certain loan to value ratio is met.

Escrow Analysis– The periodic examination of escrow accounts to determine if current monthly deposits will provide sufficient funds to pay taxes, insurance, and other bills when due.

Your annual Escrow Analysis Statement contains all the information you need to understand your previous and projected mortgage payments. 

Getting Pre-Approved^[1]

Learn how this simple step could help you get the home you want.

House hunting? Getting pre-approved^[1] by a mortgage lender can be a smart move, because you'll:

• Know in advance exactly how much you can borrow, so you won’t waste time looking at out-of-reach properties
• Be able to better estimate monthly mortgage payment and budget around it
• Show real estate agents and sellers that you're serious – giving yourself an advantage over other buyers

You can often get a commitment letter from your lender in as little as 48 hours, once your paperwork is complete.

Mortgage Application Checklist

Use this list to gather what you need to apply for a home loan

To apply for a home loan, you’ll need to provide information about your income, assets and debts, plus any circumstances that may impact your ability to repay. 

Be prepared to provide some or all of the items below:

INCOME VERIFICATION

• Pay stubs for the last 30 days
• W-2 forms for the last two years
• Child support/alimony - Child support agreement and/or divorce decree and/or 12 months 
• Award letter/1099 for social security, pension and disability

IF YOU ARE SELF-EMPLOYED

• Signed, completed tax returns for the past two years, including personal, partnership, and corporate, if applicable, including all schedules.
• Year-to-date business profit and loss statement for current year, if more than three months have passed since the end of the tax year
• Current balance sheet

ASSETS: SOURCES OF FUNDS/DOWN PAYMENT

• Original bank statements for the last three months, including savings, checking, and investment accounts
• Stocks and securities account statements for the last three months
• Closing Disclosure or Listing Agreement if using funds from the sale of property
• Sale of asset – proof of ownership, proof of sale, and proof of funds transfer
• For gift funds – a gift letter, evidence of transfer, and sometimes evidence of withdrawal

PAYMENT HISTORY

• Cancelled rent or mortgage payment checks for the past 12 months, if not available on credit report
• Copy of land contract, if applicable
• Child support/alimony
• Bankruptcy/Consumer Credit, if applicable

ADDITIONAL INFORMATION, IF APPLICABLE

• Purchase agreement, including legal property descriptions and any addendum
• Explanation of discrepancies on credit

I've Submitted My Application- Now What?

Once you’ve submitted your home loan application, it’s important to understand what to expect along the way. Your PNC Mortgage Loan Officer and home lending team will assist you from application through the closing process.

For a more detailed version of these steps, please check out the Application Through Closing article.