Mortgage Broker FAQs
What is the difference between pre qualification and pre approval?
Pre qualification is when a prospective buyer discloses, either verbally or by providing documentation of, their income, assets and credit so that a lender can determine how much a borrower will be likely to afford in loan payments. A pre approval involves an underwriter and is a more formal review of your credit and income. A prequalification will commonly only provide you with an idea of what you can afford while a pre approval will actually guarantee you a loan of a certain amount.
Should I lock my rate?
When you lock your interest rate your lender will guarantee that rate for a determine amount of time, no matter what the market does. Usually lenders will lock a rate for 30 to 60 days. If interest rates rise within that period of your lower interest rate is safe, and that is what you will pay on your loan. Talking with your mortgage lender will give you a better idea of whether you should lock your rate. They will usually keep up with current events and know whether the interest rate is planning to rise or fall.
What will a lender look at when I apply for a mortgage?
Lenders consider many factors in evaluating your loan application. Lenders will look at your income and debt to determine how much money you can put towards a mortgage payment each month. They will look at your credit score to see if you have been financial responsible in the past. They will also look at the property you are planning to buy to see if it is worth the amount of money you are planning to pay for it.
What is an adjustable rate mortgage?
An adjustable rate mortgage is a loan in which the interest rate can move either up or down over the life of the loan. With this type of mortgage the interest rate will generally start low and increase the longer you have the loan.
What is a fixed rate mortgage?
With this type of mortgage your interest rate will remain fixed for the entire life of the loan. This type of loan will provide you with the same payment amount every month until the loan is paid off
What will my mortgage payments include?
Your mortgage payment usually consists of two parts. The principal is the amount of money you are paying towards the amount borrowed. The interest is the amount of money you are paying to borrow the money. In the beginning of your mortgage you will pay more to interest and less to principal and as your mortgage progresses you will see a shift where more of the money is going to principal and less to interest.
How much are closing costs?
Closing costs will vary based on several factors including the lender, the type of mortgage, the purchase contract, and the state you live in. Your lender will charge fees for appraisal and credit reports. If you are paying for points, those will also be charged at closing. There are also fees for title insurance and hazard insurance and deposits for an escrow account. A lender can give you the approximate closing costs of your mortgage with a quote so that you can compare lenders.
What is a home equity loan?
A home equity loan is a loan that allows you to borrow a large amount of money, using your home as collateral. Your home equity loan will be a set amount of money at a fixed interest rate. It is a great option when you need a large amount of money for home improvement, debt consolidation or other major expenses.
When is refinancing a good option?
There are a number of reasons why someone would refinance. You can refinance if the interest rate has gone down, which will lower your monthly payment. Some people refinance when they have built equity in their home and would like to take some of that money out. Many people also refinance their loan when the initial period of their adjustable rate mortgage is coming to an end and they want to switch to a fixed rate mortgage.
Will an appraisal be required for the property?
The simple answer to this question is yes. Whether you are buying a new home, selling your home, or refinancing your current mortgage lenders will almost always require an appraisal.