What is a pre-qualification?
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:
- 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.
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
What's 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
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
What are the other types of loans?
High Balance Conforming:
The Housing and Economic Recovery Act
of 2008 (ARRA) changed Fannie Mae’s charter to
expand the definition of the
“conforming” loan. Effective with the November
2008 release of the conforming
loan limits, two sets of limits are provided for
first mortgages: 1) general conforming
loan limits, and 2) high-cost area conforming
loan limits. To implement the expansion
to serve high-cost areas, Fannie Mae offers the
high-balance loan feature, which
is broadly applied across their standard
conforming business. Pursuant to the American
Recovery and Reinvestment Act, loans originated
in 2009 may be delivered to Fannie
Mae using the higher of 10 the permanent
high-cost area loan limits, or 2) the temporary
high-cost area loan limits in place for loans
originated in 2008.
USDA Rural Development: This
program is administered by USDA Rural
Development, which serves the public through
more than 800 field offices nationwide.
Sometimes good credit and steady income are not
enough to qualify for a home loan
at a commercial lending institution, such as a
bank or savings and loan. More rural
families and individuals may be eligible to
become homeowners with the help of a
USDA guaranteed home loan. When the federal
government agrees to guarantee a loan,
lending institutions can help buyers while
incurring less risk. Through USDA’s
Guaranteed Rural Housing Loan Program, low and
moderate-income people can qualify
for mortgages even without a down-payment.
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
What is a conforming loan?
A loan eligible for purchase by the two major
Federal agencies that buy mortgages,
Fannie Mae and Freddie Mac. The loan limits are
currently $417,000 for a single
What is a jumbo mortgage?
A mortgage larger than the maximum eligible for
purchase by the two Federal agencies,
Fannie Mae and Freddie Mac, currently $417,000.
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.