Below we have listed the most frequently asked questions we receive. Please feel free to contact us if your questions are not answered below and we will be more than happy to provide you with answers.
What is a Mortgage Broker vs. a Mortgage Lender or Banker?
Will I save money with a mortgage lender?
What is a Loan Estimate?
What are Points?
What is a rate lock and how does it work?
What is a pre-qualification vs. pre-approval?
What is the difference between a conforming and jumbo loan?
What is APR and why is it not the same as loan rate?
Should I consolidate my debt?
When is it right to refinance?
What is the worst thing we can do regarding home financing?
A MORTGAGE BROKER counsels you on loans available from a number of lenders, works through the application process with you and follows you through to closing. A mortgage lender generally has just their own products to offer.
Generally the MORTGAGE BROKER will save you money. They specialize in only one function – Finding you the best loan for the best price. By dealing with multiple lenders the broker can shop for the very best terms at any given moment.
LOAN ESTIMATE is the list of settlement charges that the lender charges at closing (based upon information known at application) Lenders must provide the “Loan Estimate” within 3 days of application.
POINTS are upfront payment of finance charge – paid at closing generally expressed as a percentage of the loan amount. 1 point is 1% of the loan amount.
A RATE LOCK is an agreement between the borrower and the lender guarantying a specific rate at closing. There are four components to a rate lock – Loan program, rate, points and length of lock. Generally the lock should be in writing between parties.
A PRE-QUALIFICATION results after a discussion between your loan originator and you. During the discussion, you determine if you have enough cash, income and meet the general loan guidelines. A PRE-APPROVAL involves the same information plus the analysis of credit through your credit report
CONFORMING and JUMBO refer to the dollar size of the loan. These limits are set annually and are different by property living units. 2003 conforming loan limits are: 1 unit, $333,700 – 2 unit, $427,150 - 3 unit, $516,300 – 4 unit, $641,650
A.P.R. stands for annual percentage rate. It is generally a rate higher than the loan or note rate. The A.P.R. takes into account fees that are considered finance charges (such as points and others) as well as the note rate of interest. The larger the difference between the note rate and A.P.R. the more fees being charged. Comparing A.P.R. rates is a good way to shop for a mortgage providing the same information is used by all for the calculation.
Think long and hard about CONSOLIDATING long and short-term debt into a home mortgage. The thought of financing a car for thirty years is not necessarily a pleasant one. Possibly a Home Equity Loan / Line is more appropriate? We can arrange one for you if you like.
You need to do a COST / BENEFIT and pay-back analysis. Determine the total cost of refinancing. Next, calculate the savings per month you will receive from refinancing and then divide the total costs by the savings to determine the number of months to break even. If you plan on living in the home more months than the break-even, it may be a good idea to refinance.
I teach home financing to new homeowners each month. The single most important message I hope they leave class with is to COMPARE before making a commitment. Shop a number of lenders and brokers before making a decision. Failure to do so could cost you thousands of dollars.