Frequently Asked
Questions
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.
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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'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 acceptable risk.
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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.
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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.
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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.
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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.
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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 $333,700 for a single family
house.
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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 $333,700.
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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.
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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.
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10655 NE 4th Street, Suite #800
Bellevue, WA 98004
Phone: (425) 451-7797 or (888) 414-7797
Fax: (425) 451-7791 or (888) 649-7791
Hours: Mon. - Fri. 8am - 5pm
Weekends & Evenings by Appointment
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