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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 takes an application and provides you with a "pre-qual" letter which lists many of the conditions required for a pre-approval. A pre-approval includes all the steps of a full approval, except for the appraisal and title search on subject property. Pre-approval can put you in a much better negotiating position, much like a cash buyer. During the pre-approval process, an application is taken and credit is run by the loan officer. The buyer provides the loan officer with all of their financial info. The loan officer will then get the loan package submitted to the lender's underwriting department for the final conditions needed to close.
Most respectable real estate agents will require their buyer to have a pre-qualification or pre-approval letter before showing them property.
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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:
Calculate the total cost of the refinance
Calculate the monthly savings
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.
Since refinancing is a complex topic, consult a mortgage professional.
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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.
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What is the difference between a mortgage broker and a lender?
A mortgage broker counsels you on the loans available from different wholesalers (banks), 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.
A mortgage lender will do the same as a mortgage broker, except a bank will typically fund the loan with its own money while employing the support staff required to underwrite, fund and close your mortgage.
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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. The good faith estimate breaks down all of the charges associated with closing on a home.
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What is a conforming loan?
A loan eligible for purchase by the two major federal agencies that buy the majority of mortgages in the United States, Fannie Mae and Freddie Mac. The conforming loan limit varies from county to county.
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What is a jumbo mortgage?
A loan larger than the maximum eligible for conforming purchase by one of the two federal agencies, Fannie Mae and Freddie Mac. Jumbo mortgages typically have higher interest rates and are not as easy to obtain as conforming mortgages.
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What are points?
Points are a cost required by the lender as part of the total charges 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. Paying points enables the borrower to lower the interest rate of the loan.
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