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.
