F&Q's

Application We want to lock our rate, but how do we know which rate is the best option for us?

We will always quote what we term as a par rate - with no origination, no discount. This means there is no fee paid at closing to buy the rate. We will also quote different rates with different costs and provide the comparison for cost vs. payment savings. We then calculate your break even point, so you can see when you would begin enjoying the savings.

I have a judgment on my credit report. It is old, I will pay it. How do we best handle this?

Taking something old that is derogatory and making it new again does affect credit score. We should first pull your credit report to see where we are with score. Provided we are good to move forward, we would strongly suggest that you not pay the judgment now - but instead pay it at closing.      

I am interested in an interest only program. People keep telling me they do not exist anymore. Do you have one?

As a matter of fact, we do! It is a 5/1 interest only ARM. The program can be used for primary and second homes.

What is the difference between pre-approval and pre-qualification?

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.

When does it make sense to refinance?

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:
  1. Calculate the total cost of the refinance
  2. Calculate the monthly savings
  3. Divide the total cost of the refinance (#1) by the monthly savings (#2). This is the "break even" time. If you own the house longer than this, you will save money by refinancing.
  4. Since refinancing is a complex topic, consult a mortgage professional.

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?

A mortgage broker counsels you on the loans available from different wholesalers, takes your application, and usually processes the loan which involves putting together the complete file of information about your transaction including the credit report, appraisal, verification of your employment and assets, and so on. When the file is complete, but sometimes sooner, the lender "underwrites" the loan, which means deciding whether or not you are an acceptable risk.

Will I save money going directly to a mortgage lender?

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.

What is a full documented loan?

Both income and assets are disclosed and verified, and income is used in determining the applicant's ability to repay the mortgage. Formal verification requires the borrower's employer to verify employment and the borrower's bank to verify deposits. Alternative documentation, designed to save time, accepts copies of the borrower's original bank statements, W-2s and paycheck stubs.

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.
Applying for a Mortgage: 10 Questions to Ask

Did You Know 1

1. What is the interest rate on this mortgage?
Ask for the lender's loan estimate, which breaks down the interest rate and fees. It will include the annual percentage rate, or APR, which accounts for the interest rate, points, fees and other charges you will pay for a mortgage.

2. How many discount and origination points will I pay?
Lenders may charge discount points, origination points or both. One point is equal to 1% of the loan amount. For example, if you get a $162,000 mortgage and pay 1 discount point, you'll pay a fee of $1,620, because that's 1% of $162,000. (Divide the loan amount by 100 to calculate 1%.)

3. What are the closing costs?
Borrowers pay fees at closing for services provided by the lender and other parties, such as title companies. Lenders are required to provide a written estimate of these costs within 3 days of receiving a loan application.

4. When can I lock the interest rate, and what will it cost me to do so?
Interest rates might fluctuate between the time you apply for a mortgage and closing. To prevent getting a higher rate, you can lock the rate, and even the points, for a specified period. Fees may apply, but not always. To keep tabs on rate movements, read Bankrate's Rate Trend Index.

5. Is there a prepayment penalty on this loan?
Some lenders charge a penalty if you prepay on the mortgage. Some apply only when you refinance or reduce the principal balance by more than a certain percentage. Find out the penalty specifics and see if your lender will lower the rate if you choose a loan with a penalty.

6. What is the minimum down payment required for this loan?
A bigger down payment might mean a lower interest rate and better loan terms. With a down payment of less than 20%, you will probably have to get mortgage insurance, increasing your monthly payment.

7. What are the qualifying guidelines for this loan?
Ask about requirements relating to your income, employment, assets, liabilities and credit history. Qualifications for first-time homebuyer programs, Veterans Affairs loans and other government-sponsored mortgages are typically less stringent.

8. What documents will I have to provide?
Lenders require proof of income and assets, including bank statements, tax returns, W-2 statements and recent pay stubs. More may be needed to show your down payment and ability to pay closing costs.

9. How long will it take to process my loan application?
Depending on how busy the lender is, it can take as little as 2 weeks or as long as 60 days. Be patient and forward any requested documents quickly to speed up the process.

10. What might delay approval of my loan?
A job change, an increase or decrease in salary, a new debt, a change in your credit history or change in marital status could delay your loan approval. The best way to avoid that is to put your financial life in a holding pattern until you reach the closing table.

 

Did You Know?

Tidewater Home Funding

Tidewater Home Funding, LLC NMLS# 41552
(www.nmlsconsumeraccess.org).
Equal Housing Lender.

Licensed in Virginia, North Carolina & Florida.

VSCC Bureau of Financial Institutions, P.O. Box 640, Richmond VA 23218-0640, (1-800-552-7945) www.scc.virginia.gov/bfi

00facebook 00twitter 00lin 00yelp

Search Our Site