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A gift letter is when an individual gives you money for a down payment as a gift, that person must write you a gift letter so that it can be included in your loan documentation.

The Real Estate Settlement Procedures Act (RESPA) sets standards for the calculation of the amount mortgage lenders require borrowers to deposit into the escrow account. RESPA limits the initial deposit into an escrow account to an amount equal to the sum sufficient to pay taxes, insurance premiums, and other charges on the mortgaged property for the first payment period, plus a cushion. An escrow cushion is an amount of money held in the escrow account to prevent the account from being overdrawn when increases in disbursements occur. On a monthly basis, mortgage lenders may not require borrowers to pay more than one-twelfth of the total amount of the estimated annual taxes, insurance premiums, and other charges, plus an amount necessary to maintain the allowable cushion.

Generally, the process takes as long or short as the borrower wishes. Explaining and signing the documents takes approximately 30 to 45 minutes. However, the borrower may choose to sign the documents and be on his/her way or ask a number of questions and spend more time. Closings may also vary from closing agent to closing agent.

These are similar terms thrown loosely around by many loan officers. They essentially mean that a mortgage professional has reviewed your qualification ability from a credit, income, debt obligations, and assets available for the purpose of getting a home mortgage.

The easiest way to avoid PMI is by putting 20% down payment; however, PMI can also be avoided if you only have 5% or 10% for the down payment. The way to accomplish this is via a first and second mortgage combination commonly referred to as 80/10/10^s or 80/15/5^s. These two methods combine a first mortgage lien for 80% of the home price with a second mortgage lien for either 10% or 15% of the home price leaving the remaining 5% or 10% as the down payment. Because the first lien is at the magical 80% loan=to-value, there is no PMI required, even though a second mortgage is being |piggybacked| onto the financing thus allowing for the lessor down payment. While the second lien terms are not as attractive as first lien rates, the second mortgage is still home mortgage interest and thus deductible as such on your federal tax return where PMI is insurance and offers no deduction.