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• What is the
difference between pre-approval and pre-
qualification?
• When does it make sense to refinance?
• What is a rate lock?
• What's the difference between a mortgage broker
and
a lender?
• Will I save money going directly to a mortgage
lender?
• What is a full documented loan?
• What are the other types of loans?
• What is a good faith estimate?
• What is a conforming loan?
• What is a jumbo mortgage?
• What are points?
• What is a pre-qualification?
What
is the difference between pre-approval and pre-qualification?
Pre-approval 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 being 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. To help with the decision to refinance:
1. Calculate the total cost of the refinance
2. Calculate the monthly savings
3. 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.
Since refinancing is a complex topic, consult one of our experienced mortgage professional for advice.
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's 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. This 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, or sometimes sooner, the lender "underwrites" the loan. This means deciding whether or not you are an acceptable risk.
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 like Regal Home Loans do not add any net cost to the lending process, because they perform functions otherwise done by employees of the lender. Furthermore, because mortgage brokers deal with multiple lenders –often 25 to 30 or more – they can shop for the best terms available on any given day. Also, they can find lenders who specialize in certain market niches 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.
What is a full documented loan?
Both income and assets are disclosed and verified. 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 is designed to save time and accepts copies of the borrower's original bank statements, W-2s and paycheck stubs.
What are some other types of loans?
Stated income/verified assets: Income is disclosed and the source of the income is verified, but the amount is not verified. Assets are verified, and must meet an adequacy standard such as, for example, 6 months of stated income and 2 months of expected monthly housing expense.
Stated income/stated assets: Both income and assets are disclosed but not verified. However, the source of the borrower's income is verified.
No ratio: Income is disclosed and verified but not used in qualifying the borrower. The standard rule whereby the borrower's housing expense cannot exceed some specified percent of income, is ignored. Assets are disclosed and verified.
No income: Income is not disclosed, but assets are disclosed and verified, and must meet an adequacy standard.
Stated Assets or No asset verification: Assets are disclosed but not verified. Income is disclosed, verified and used to qualify the applicant.
No asset: Assets are not disclosed, but income is disclosed, verified and used to qualify the applicant.
No income/no assets: Neither income nor assets are disclosed.
What is a good faith estimate?
The Good Faith Estimate (GFE) is the list of settlement charges 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 is eligible for purchase by two major Federal agencies that buy mortgages, Fannie Mae and Freddie Mac. The loan limits are currently $333,700 for a single-family house.
What is a jumbo mortgage?
A mortgage larger than the maximum eligible for purchase by the two Federal agencies, Fannie Mae and Freddie Mac, currently $333,700.
What are points?
Points involve an upfront cash payment required by the lender as part of the charge for the loan. Points are expressed as a percent of the loan amount; e.g., "2 points" means a charge equal to 2% of the loan balance.
What is a pre-qualification?
This is the process of determining whether a potential borrower 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 into account the borrower’s credit history.
Pre-approval 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 being 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. To help with the decision to refinance:
1. Calculate the total cost of the refinance
2. Calculate the monthly savings
3. 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.
Since refinancing is a complex topic, consult one of our experienced mortgage professional for advice.
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's 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. This 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, or sometimes sooner, the lender "underwrites" the loan. This means deciding whether or not you are an acceptable risk.
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 like Regal Home Loans do not add any net cost to the lending process, because they perform functions otherwise done by employees of the lender. Furthermore, because mortgage brokers deal with multiple lenders –often 25 to 30 or more – they can shop for the best terms available on any given day. Also, they can find lenders who specialize in certain market niches 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.
What is a full documented loan?
Both income and assets are disclosed and verified. 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 is designed to save time and accepts copies of the borrower's original bank statements, W-2s and paycheck stubs.
What are some other types of loans?
Stated income/verified assets: Income is disclosed and the source of the income is verified, but the amount is not verified. Assets are verified, and must meet an adequacy standard such as, for example, 6 months of stated income and 2 months of expected monthly housing expense.
Stated income/stated assets: Both income and assets are disclosed but not verified. However, the source of the borrower's income is verified.
No ratio: Income is disclosed and verified but not used in qualifying the borrower. The standard rule whereby the borrower's housing expense cannot exceed some specified percent of income, is ignored. Assets are disclosed and verified.
No income: Income is not disclosed, but assets are disclosed and verified, and must meet an adequacy standard.
Stated Assets or No asset verification: Assets are disclosed but not verified. Income is disclosed, verified and used to qualify the applicant.
No asset: Assets are not disclosed, but income is disclosed, verified and used to qualify the applicant.
No income/no assets: Neither income nor assets are disclosed.
What is a good faith estimate?
The Good Faith Estimate (GFE) is the list of settlement charges 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 is eligible for purchase by two major Federal agencies that buy mortgages, Fannie Mae and Freddie Mac. The loan limits are currently $333,700 for a single-family house.
What is a jumbo mortgage?
A mortgage larger than the maximum eligible for purchase by the two Federal agencies, Fannie Mae and Freddie Mac, currently $333,700.
What are points?
Points involve an upfront cash payment required by the lender as part of the charge for the loan. Points are expressed as a percent of the loan amount; e.g., "2 points" means a charge equal to 2% of the loan balance.
What is a pre-qualification?
This is the process of determining whether a potential borrower 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 into account the borrower’s credit history.