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You can call us or e-mail us to get answers.
Listed below are some of the commonly asked questions from the borrowers
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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.
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What is APR?
Evaluating competing mortgage loan deals can be confusing. One tool that can help is the Annual Percentage Rate, or APR, which represents the total cost of credit, including fees, expressed as an annual rate. A mortgage loan with an interest rate that is percentage points below another mortgage loan may seem more attractive, but if it has high fees attached to it, the APR may show that the second mortgage loan may actually be more attractive over the term of the mortgage loan . So be sure to find out what the APR is on any potential mortgage loan -- by law, it’s part of the Truth in Lending disclosure—but remember to compare apples to apples.
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What are the typical closing costs?
Closing costs are the expenses that the lender accumulates from the origination of your new mortgage loan . Some of these closing costs may be related to your mortgage loan application, while other fees are related to the house itself.
Typical closing costs include mortgage loan application fees, credit report, title search and insurance fees, property appraisal, lender’s attorney fees, inspections, survey, recording fees, transfer taxes, buyer’s attorney, document stamps, points and origination fees, and more. Escrow accounts are often required for many mortgage loans for homeowners insurance, real estate taxes, and homeowners associations and require cash deposits at closing.
These expenses are charged to the buyer and often cost between 2 and 6 percent of the amount being borrowed. Because different states require different taxes and fees to be included, it is impossible to come up with a generalization that applies to mortgage loans nationwide.
After your initial meeting with a mortgage loan professional, you should receive a Good Faith Estimate (GFE) that shows all of the closing costs associated with your mortgage loan application. This estimate is required by The Real Estate Settlement Procedures Act and must be given to you within 3 days of applying for the mortgage loan.
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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:
1. Calculate the total cost of the refinance
2. 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.
For example, if the costs of refinancing total $2000, and you save $50 per month, your break-even point is 2000/50 = 40 months. In this case, you should only refinance if you plan to stay with the new financing for at least 40 months.
Since refinancing is a complex topic, consult a mortgage professional and we will be able to guide you.
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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.
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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.
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Will I save money going directly to a mortgage lender?
Not necessarily. In fact, if you are a reasonably astute shopper, you will probably do better dealing with a mortgage broker. Mortgage brokers do not add any net cost to the lending process, because they perform functions that would otherwise have to be done by employees of the lender. Furthermore, because mortgage brokers deal with multiple lenders -- in a typical case, 5 to 10, sometimes more -- they can shop for the best terms available on any given day. In addition, they can find the lenders who specialize in various market niches that many other lenders avoid, such as loans to applicants with poor credit ratings, loans to borrowers who do not intend to occupy the property, loans with minimal or no down payment, and so on. At Beacon Lending And Realty, we show the rate sheet published by the lender and you can look at the rate and rebates offered by the lenders and decide on your own.
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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.
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What is a conforming loan?
A loan eligible for purchase by the two major Federal agencies that buy mortgages, Fannie Mae and Freddie Mac.
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What is a jumbo mortgage?
A mortgage larger than the maximum eligible for conforming purchase by the two Federal agencies, Fannie Mae and Freddie Mac.
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What are points?
It is an upfront cash payment required by the lender as part of the charge for the loan, expressed as a percent of the loan amount; e.g., "2 points" means a charge equal to 2% of the loan balance.
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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.
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