FAQs
What is the difference
between pre qualification and pre approval?
Pre qualification is when a
prospective buyer discloses, either verbally or
by providing documentation of, their income,
assets and credit so that a lender can determine
how much a borrower will be likely to afford in
loan payments. A pre approval involves an
underwriter and is a more formal review of your
credit and income. A prequalification will
commonly only provide you with an idea of what
you can afford while a pre approval will
actually guarantee you a loan of a certain
amount.
Am I required to get
financing from the lender that my real estate
agents recommends?
A recommendation is just
that, a suggestion, you are never required to
choose the lender that anyone suggests to you.
The best way for you to find a lender is to shop
around and compare deals.
What are points?
Also called discount points,
a point is 1% of the amount of the loan. Points
are a one-time fee added to your closing costs
and generally results in a slightly lower
interest rate on your loan.
What is a good faith
estimate?
A Good Faith Estimate is an
estimate that outlines the costs you will incur
during the mortgage process. This is provided to
you when you apply for your loan.
What is an Escrow Payment?
The portion of your monthly
payment that is held by the lender to pay for
taxes, hazard insurance, mortgage insurance and
other items as they become due is known as an
escrow payment.
What will a lender look at
when I apply for a mortgage?
Lenders consider many factors
in evaluating your loan application. Lenders
will look at your income and debt to determine
how much money you can put towards a mortgage
payment each month. They will look at your
credit score to see if you have been financial
responsible in the past. They will also look at
the property you are planning to buy to see if
it is worth the amount of money you are planning
to pay for it.
What will my mortgage
payments include?
Your mortgage payment usually
consists of two parts. The principal is the
amount of money you are paying towards the
amount borrowed. The interest is the amount of
money you are paying to borrow the money. In the
beginning of your mortgage you will pay more to
interest and less to principal and as your
mortgage progresses you will see a shift where
more of the money is going to principal and less
to interest.
When is refinancing a good
option?
There are a number of reasons
why someone would refinance. You can refinance
if the interest rate has gone down, which will
lower your monthly payment. Some people
refinance when they have built equity in their
home and would like to take some of that money
out. Many people also refinance their loan when
the initial period of their adjustable rate
mortgage is coming to an end and they want to
switch to a fixed rate mortgage.
Do I need to appraise my
home if I am refinancing?
Yes, essentially refinancing
is paying off your mortgage with a new mortgage.
Especially if you are changing lenders, they
want to make sure the property they are funding
is worth the cost that is being mortgaged.
What is a home equity
loan?
A home equity loan is a loan
that allows you to borrow a large amount of
money, using your home as collateral. Your home
equity loan will be a set amount of money at a
fixed interest rate. It is a great option when
you need a large amount of money for home
improvement, debt consolidation or other major
expenses. |
