Frequently Asked Questions
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.
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 for refinancing, then calculate
the monthly savings with the new loan program. Now Divide the total cost of
refinance by the monthly savings. This is the “break even” time. If you own
the home longer than this number, you will save money by refinancing. Since
refinancing is a complex topic, consult a mortgage professional.
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.
A mortgage broker counsels you on the loan programs available from different
lendersand can shop for the best rate available. They process the loan for
you by collecting documents such as, assets, verification of employment,
credit reports, and so on.
A lender is a financial institution that makes loans directly to you. They have one set of programs and that’s it. They are also incentivized by charging higher rates and fees.
A lender is a financial institution that makes loans directly to you. They have one set of programs and that’s it. They are also incentivized by charging higher rates and fees.
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, 25
to 30, 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.
For this loan both income and assets are disclosed and verified. The income
is used to determine the applicant’s ability to repay the mortgage. A
written and verbal verification is then conducted by the lender. The assets
are verified by bank statements. Alternative documents to save time include
W2’s and paystubs.
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.
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.
A loan eligible for purchase by the two major Federal agencies that buy
mortgages, Fannie Mae and Freddie Mac.
A mortgage larger than the maximum eligible for conforming purchase by the
two Federal agencies, Fannie Mae and Freddie Mac.
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.
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.