Frequently Asked Mortgage Questions

Do you have questions? We can help! You will find the answers to several frequently asked mortgage questions below.

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.

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 an opinion of your loan qualifications based on verbal information you provide. Pre-approval includes documentation of all information provided verbally in the pre-qualification process, including verification of credit history. A property appraisal and title search are generally not done at this stage. Formal, or final, approval includes the appraisal and title search of the property and written underwriting approval by a specific fincancial institution.

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 commitment between the lender and consumer to provide financing at specific terms for a specific period of time. There are four components to a rate lock: loan program, interest rate, points, and the length of the lock.

What are points?

Points are an optionial upfront cash payment that is used to permanently reduce your interest rate. 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 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.

Will I save money going directly to a mortgage lender?

Generally not. 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 not offered by all lenders.

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 documentationn and submits your loan request to the lender providing the most advantageous combination of loan terms. The lender "underwrites" the loan, which means deciding whether or not you meet its lending requirements and funds the loan.

What is a "full document" 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?

Due to changes in the lending industry, many previously available programs are no longer available for borrowers. Full documentation is required for most of our programs. Please ask one of our mortgage professionals for more information.

What is an FHA loan?

An FHA loan is a loan that is insured by the Federal Housing Administration, allowing buyers to purchase homes with as little as 3.5% down. There are programs within FHA for rehabilitating homes and for downpayment programs. Ask your loan professional for more details.

What is a Conforming loan?

A loan eligible for purchase by the two major Federal agencies that buy mortgages, Fannie Mae and Freddie Mac. There are two loan levels for Conforming loans: Agency and Agency Jumbo. Agency loans have a maximum loan amount of $417,000; Agency Jumbo loans are capped at $729,750, subject to geographic restrictions. Ask your loan professional for more information.

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. It generally refers to a first or second mortgage in excess of $729,750, subject to certain geographic restrictions.

Holmgren and Associates

DBA of Finance of America
1900 Mountain Boulevard
Oakland, California 94611
Phone: 510-339-2121
NMLS 0910184/1071
 

Holmgren & Associates is a branch of Finance of America. We are a full service mortgage banker with an experienced staff offering expertise in residential mortgage lending, with primary focus on loans for home purchase, refinance, and reverse mortgages.

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