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?
A Mortgage Pre-Qualification is a casual process that’s really more of an information gathering and is an only an estimate/close approximations to what you’ll qualify for if you submit a formal application that undergoes a more in-depth review. The Pre-Qualification helps to understand your budget before you even begin house hunting.
What is a Pre-Qualification best for?
A Pre-Qualification can be beneficial if you are planning on buying a house in the future and want to look at how lenders view your financial history. A Pre-qualification does not require too much documentation up front.
If you are in the serious stages of buying a home then a Pre-Approval is the way to go.
Note: To be approved for a loan, the information stated in a Pre-Qualification must be fully verified and underwritten.
The Mortgage Pre-Approval process is a more in-depth review of your financial background. You'll complete an official mortgage application which includes a credit report and you will supply necessary documents. From this, you will receive a letter with the mortgage amount for which you have been Pre-Approved. You can shop with confidence with a specific purchase price and loan amount for which you are likely to be approved. The Pre-Approval is usually valid for a particular time period, such as 90 days.
A Pre-Approval can give you a competitive edge when purchasing a home and let's home sellers know that you are ready to make the purchase.
When does it make sense to refinance?
HOME MORTGAGE REFINANCING
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?
- Mortgage brokers — A broker is a ‘middleman.
- Brokers have less control over the underwriting process because they don’t work for the lender. If the wholesale underwriter puts your file on the back-burner, your broker may not be able to do anything about it
- Brokers tend to be more expensive. But that may be because they get more complex loans, and HUD says that complexity does drive up lender costs
- Brokered loans can take longer to close. This could be a concern if you have a tight deadline for home buying or refinancing
What is a full documented loan?
Full Documentation Loan refers to a loan where all income and assets are documented. It is typically referred to as a "full doc" loan in the mortgage industry and is a common type of loan used for financing a home purchase. A list of the various types of loans can be found at Mortgage Loan Documentation.
What are the 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 that 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?
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 loan eligible for purchase by the two major Federal agencies that buy mortgages, Fannie Mae and Freddie Mac.
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.
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.
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.