Frequently Asked Mortgage Questions

Do you have questions? We can help! You will find the answers to several frequently asked mortgage questions below.

What is the difference between pre-approval and pre-qualification?

The pre-approval process is much more complete than pre-qualification. For pre-qualification, the loan officer asks you a few questions and provides you with a pre-qual letter. Pre-approval includes all the steps of a full approval, except for the appraisal and title search. Pre-approval can put you in a better negotiating position, much like a cash buyer.

When does it make sense to refinance?

Usually people refinance to save money, either by obtaining a lower interest rate or by reducing the term of the loan. Refinancing is also a way to convert an adjustable loan to a fixed loan or to consolidate debts. The decision to refinance can be difficult, since there are several reasons to refinance. However, if you are looking to save money, try this calculation:

Calculate the total cost of the refinance
Calculate the monthly savings
Divide the total cost of the refinance (#1) by the monthly savings (#2). This is the "break even" time. If you own the house longer than this, you will save money by refinancing.

On average, you should recoup the closing costs in approximatelyt 4 years.

Since refinancing is a complex topic, consult a mortgage professional.

What is a rate lock?

A rate lock is a contractual agreement between the lender and buyer. There are four components to a rate lock: loan program, interest rate, points, and the length of the lock.

What is the difference between a mortgage broker and a lender?

A mortgage broker counsels you on the loans available from different wholesalers, takes your application, and usually processes the loan which involves putting together the complete file of information about your transaction including the credit report, appraisal, verification of your employment and assets, and so on.

When the file is complete, but sometimes sooner, the lender "underwrites" the loan, which means deciding whether or not you are an acceptable risk.

A mortgage broker acts as a "middleman" between you and the lender. A mortgager banker, or lender, works with the borrower directly, eliminating the "middleman".

Will I save money going directly to a mortgage lender?

YES. When you use a mortgage lender, there are no broker fees involved.

You have a one stop source for your mortgage needs, and you get to deal directly with the lender. This usually saves the borrower both time and money.

What is a full documented loan?

Both income and assets are disclosed and verified, and income is used in determining the applicant's ability to repay the mortgage. Formal verification requires the borrower's employer to verify employment and the borrower's bank to verify deposits. Alternative documentation, designed to save time, accepts copies of the borrower's original bank statements, W-2s and paycheck stubs.

What is a good faith estimate?

It is the list of settlement charges that the lender is obliged to provide the borrower within three business days of receiving the loan application.

What is a conforming loan?

A conforming loan, also referred to as a conventional loan which has a loan amount less than $417,000 and conforms to the guidelines of
Fannie Mae and/or Freddie Mac.

What is a jumbo mortgage?

A conforming loan, also referred to as a conventional loan which has a loan amount greater than $417,000 and conforms to the guidelines of Fannie Mae and/or Freddie Mac.

What are points?

A "point" is equal to 1% of the loan amount.

On a $100,000 loan, one point would equal $1,000.

Points are paid when the borrower wants to "buy down" the interest rate. The more points paid - up front - the lower the interest rate will be for the life of the loan.

What is a pre-qualification?

This is the process of determining whether a customer has enough cash and sufficient income to meet the qualification requirements set by the lender on a requested loan. A pre-qualification is subject to verification of the information provided by the applicant. A pre-qualification is short of approval because it does not take account of the credit history of the borrower.