FAQ's

What is a Short Sale? [top]
A sale of a house in which the proceeds fall short of what the owner still owes on the mortgage. Many lenders will agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the owner cannot make the mortgage payments.

How large of a down payment will I need? [top]
Depending on the loan amount, you may be able to put down as little as 3% of the loan. 100% financing deals are now very popular. Down payments vary according to loan programs, so please consult your mortgage professional for specific requirements.

Does my credit have to be perfect? [top]
Your ability to purchase a home will depend, in part, on your credit history as profiled in a “credit report”. The information on the report is used to help us determine how responsible you are in meeting your obligations. You do not need perfect credit to be approved for a mortgage though. Our Lending Partners offers loans to meet most borrowers' needs, and one of our mortgage professionals can answer your questions, help you compare programs and select a mortgage. Contact Us and allows us to analyze your credit. Click here for a free credit report.

How do I make an offer? [top]
Once you have determined you are ready to make an offer, you will need to determine the true value of your future home by comparing its price to that of other houses in the area. Your Realtor® can assist you. Once you have an appraisal, you will need to reach an agreement with the current owner. You may be asked for a binder (deposit) to hold the house while the contract is prepared.

Which kind of mortgage should I apply for? [top]
Once you’re ready to buy a home, you need a mortgage that fits your budget and your financial objectives. We offer a wide range of mortgage options. Our mortgage professionals can help you compare your options and select a mortgage. Contact us to discuss your financial goals, income and expenses, and help you determine an appropriate home financing option prior to selecting a loan program.

What is PITI? [top]
"PITI" is the total monthly payment you will make each month to your lender and includes principal and interest on the mortgage, real estate taxes, and homeowners insurance. If you will be paying private mortgage insurance or condo/co-op association fees, these monthly payments will also be included in the "PITI" amount.

What is the difference between the interest rate and the A.P.R.? [top]

You'll see an interest rate and an Annual Percentage Rate (A.P.R.) for each mortgage loan you see advertised. The easy answer to "why" is that federal law requires the lender to tell you both.

The A.P.R. is a tool for comparing different loans, which will include different interest rates but also different points and other terms. The A.P.R. is designed to represent the "true cost of a loan" to the borrower, expressed in the form of a yearly rate. This way, lenders can't "hide" fees and upfront costs behind low advertised rates.

While it's designed to make it easier to compare loans, it's sometimes confusing because the A.P.R. includes some, but not all, of the various fees and insurance premiums that accompany a mortgage. And since the federal law that requires lenders to disclose the A.P.R. does not clearly define what goes into the calculation, A.P.R.s can vary from lender to lender and loan to loan.

The A.P.R. on a loan tied to a market index, like a 5/1 ARM, assumes the market index will never change. But ARMs were invented because the market index changes and makes fixed rate loans cheaper or more expensive to make -- that's why they're variable rate in the first placed!

So, A.P.R.s are at best inexact. The lesson is, that A.P.R. can be a guide, but you need a mortgage professional to help you find the truly best loan for you.

Note when you're browsing for loan terms that the A.P.R. will not tell you about balloon payments or prepayment penalties, or how long your rate is locked. Also, you'll see that A.P.R.s on 15-year loans will carry a higher relative rate due to the fact that points are amortized over a shorter period of time.

When does it make sense to refinance?[top]

Usually people refinance to save money, either in the short-run by obtaining a lower interest rate and payment, or in the long-run by reducing the overall number of payments (term) of the loan.

However, refinancing is also frequently considering by those who wish to convert a variable rate loan to a fixed, or by those who may need to pull some cash-out to make home improvements, consolidate debts, etc.

Obviously, there are several reasons to refinance. However, if you are looking to save money here's a quick calculation you can perform:

1. Calculate the total cost of the refinance
2. Calculate the monthly savings
3. Divide the total cost of the refinance by the monthly savings to determine the "break-even" point. If you end up owning the home longer than this, you will have saved money by refinancing.

Since refinancing can be a complex topic, it is always recommended that you consult a mortgage professional. Contact me today!

What is the difference between preapproval and prequalification? [top]

Prequalification simply means that a loan officer confirms your income/assets and obtains a tri-merge credit report to determine how much of a loan you are eligible for. The LO is then in a position to provide a pre-qual letter.

Pre-approval involves completing the applicaiton process, documenting your income/assets and obtaining formal loan approval for a specific loan program, subject to the appraisal and title work. Getting pre-approved can put you in a better negotiating position, much like that of a cash buyer.

What exactly are points? [top]
Points are prepaid interest on your mortgage, charged by the lender at the time of closing. Each point is one percent of License & Disclosuresthe loan amount. For example, two points on a $100,000 mortgage is $2,000. The more points you pay, the lower your interest rate will be, thus lowering your monthly payment. The points you pay are tax deductible. *

What are closing costs? [top]
Closing costs cover all the charges associated with the transaction, including points, origination fee, appraisal fee, title search fee, title insurance, survey, taxes, deed recording fee, charges for credit reports, etc.

What is a Rate Lock?[top]

A rate lock is a contractual agreement between the lender and the borrower. There are four key components to a rate lock: loan program, interest rate, points/origination fee and expiration date.

Will I save money going directly to a mortgage lender? [top]

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 wholesale lenders -typically 25 or more - they can shop for the best terms available on any given day. In addition, mortgage brokers make it their business to know certain lenders that specialize in various market niches, (ie: loans to applicants with poor credit scores, limited or no doc loans, non-owner occupied transactions, and loans with a minimal or no down payment).

What's the difference between a mortgage broker and a lender? [top]

A mortgage broker counsels you on the loans available from different wholesalers, originates/processes your application and puts together a complete file of information about your transaction (including the credit report, appraisal, verification of income/assets, etc).

When the file is complete, the file is submitted to a wholesale lender who "underwrites" the loan (decides whether or not the transaction meets their approval guidelines). The broker then works with you and the parties to obtain the final documents and close the transaction in a timely manner.

What is a fully documented loan? [top]

On full doc loans, all disclosed income sources/cash assets are verified and used to determining the applicant's ability to repay the mortgage. Formal verification requires your employers to verify present and past employment, and your bank to verify your deposits.

Alternative documentation (also considered to be full doc) was designed to save time, usually allows the lender to accept copies of your most recent paystubs, W-2s (or tax returns), bank/brokerage statements, etc. This has become the most popular way to get the best rate and terms.

What are the alternatives to going full doc? [top]

Stated Income: Income sources are disclosed on the application, but the amount received is not verified. Cash asset accounts are disclosed and verified. However, certain qualifying ratios using the stated income must meet the underlying investor's requirements.

Stated Income/Stated Assets: Both income sources and cash assets are disclosed on the application, but not verified. However, certain qualifying ratios using the stated income must meet the investor's requirements.

No Ratio: Income is disclosed and verified, but no qualifying ratios will be calculated. Assets are disclosed and verified.

No income/No Assets : Income and employment is not disclosed on the application. Assets are also not disclosed. Therefore, neither is verified.

What is a Good Faith Estimate? [top]

The GFE is the list of the total anticiapated settlement charges that the broker or lender is required to send to the borrower within the first 3 business days of receiving a complete, signed loan application.

What is a Conforming loan? [top]

A mortgage that is eligible for purchase by one of the two major investors in the Secondary Mortgage Market, (ie: Fannie Mae or Freddie Mac). The present Conforming Loan Limit is $333,700 for a single family residence.

What is a Jumbo mortgage? [top]

A mortgage loan amount that is larger than the maximum amount eligible for purchase by either Fannie Mae or Freddie Mac (currently $333,700) or a loan that doesn't meet the rquirements set forth by same.

How are Mortgages Approved? [top]

There are several factors involved in the approval process of your mortgage application.

Income. When you're qualifying for a loan, lenders usually use your gross income (all the money you earn before taxes) to determine the monthly mortgage payment you can afford. Gross income may also include the average of overtime pay and commissions, and child support or alimony, if you wish to have them considered.
Monthly mortgage payment as a percentage of your income. In general, lenders require that your total monthly mortgage payment — principal, interest, property taxes, mortgage insurance, hazard insurance and any homeowner association dues — be no more than 28% to 33% of your monthly gross income.
Your total debt situation. You may have car loans, student loans, credit cards, child support, alimony or other monthly expenses. In general, lenders require that the total of all your monthly expenses (excluding basics like utilities and groceries) not exceed 38% of your gross monthly income.
Credit history. A satisfactory record of paying your bills on time is an important part of getting a home loan. If you've had credit difficulties within the past two years, a good explanation of any late or missing payments on your credit report will be taken into consideration.
Employment history. Lenders usually prefer to lend money to people whose incomes have grown steadily over the past several years and who have worked consistently in the same or related occupations. You will need to verify employment. If you're self-employed, work on commission or have been at your job less than two years, you may need to provide additional information about your work history.
Property appraisal. A professional appraisal is done to determine the value of the home. An appraisal is based on the home's condition and selling prices of comparable properties in the area and confirms that the property is worth the purchase price you're offering for the home.

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