What is the difference between a mortgage broker and a direct lender?
A mortgage broker is a middleman that brings in a wide range of lenders who specialize in niche products. Each loan scenario is unique so the mortgage broker is able to choose the best lender to suit specific needs and get the best loan. When working with a direct lender they only allow access into their portfolio loans limiting options for the client.
What is the difference between interest rate & APR?
Interest rate is the monthly cost paid on the balance of a home loan. An Annual Percentage Rate (APR) includes both interest rate and any additional cost or prepaid finance charges such as the origination fee, points, private mortgage insurance, underwriting and processing fees. While interest rate is the rate of monthly mortgage payments, the APR is a universal measurement that can assist in comparing the cost of mortgage loans offered by different mortgage lenders.
What information is used to come up with loan options?
When using the mortgage rates page or our mortgage calculator we try to customize the loan to what the client is looking for – a new home, a lower rate, cash from the home etc.
Since we want to deal with all your needs it is important to CONTACT US about particular decisions so we can figure out the best situation for you.
How important is the loan to value ratio?
The loan-to-value ratio or “LTV” shows how much equity is in the home. Equity is the difference between how much the home is worth and how much is owed on it. An example is if the home is worth $500,000 and $400,000 is owed on the mortgage then the equity in the home is $100,000.
To calculate LTV- divide current loan amount by the house value. In the example above the LTV would be 80%. In the world of lending, higher loan-to-value (or lower equity) means there is a greater risk the borrower may default on the loan. Therefore LTV is important in determining qualification for home loans and rates but in general the lower your LTV the lower your rate.
What are “pre-payment penalties” and why pay them?
A pre-payment penalty is a fee charged to the borrower for paying off the mortgage early. A pre-payment penalty is usually attached to a loan in exchange for a slightly lower rate. Pre-payment penalties benefit lenders by discouraging refinancing if rates fall. In theory this guarantees a higher rate of return on the money lent. Pre-payment penalties are typically a percentage of the outstanding balance at the time of the pre-payment or a specified number of months of interest.
Keep in mind loans differ on how they structure the pre-payment penalties. We recommend thinking twice before agreeing to a pre-payment penalty. No matter how enticing the lower rate sounds in the long run it will be better off paying the higher rate. Why? Because statistics show refinancing or moving occurs long before paying off your mortgage.
It is our policy not to have pre-payment penalties as we continue to look out for our clients.
Are the pre-qualification and pre-approval services free?
There is no charge for getting pre-qualified or pre-approved.
Can I get pre-approved?
Yes, after a review a decision will be made over qualification. This is why we recommend CONTACTING US so we can help with providing the right information. We show our clients how to get pre-approved so they can look for a new home with confidence and allow sellers to feel comfortable.
Can I finance rental property?
Yes, but the interest rate may be higher since there is more risk for banks when lending on a property that is not the primary residence.
Can I get a loan if I live outside the United States?
Yes. With certain criteria being met like being a U.S. citizen with established credit and income history. Occasionally we assist borrowers who are not U.S. citizens if the home being financed is a primary residence. Every situation is unique so CONTACTING US can help make sure qualifications are met.
Do I need a fixed rate or an adjustable rate?
Fixed-rate loans have interest rates that do not change during the life of the loan. Adjustable-rate loans have rates that are linked to an index (LIBOR) and therefore can change over time. Consider factors that could affect decision making such as how a higher monthly payment would impact the budget if the rate was to increase and the length of time planning to stay in the home.
How fast will I get my money?
On a purchase funds are available on the day the loan is closed. On a refinance funds are normally disbursed on the fourth business day after signing the loan documents. This is because federal regulations require a 3-day rescission period during which time there is the right to cancel the loan outright.
What are points?
A “point” is equal to one percent of the loan amount. Points can be either positive (discount points) or negative (rebate points). The more discount points chosen to pay up-front, the lower the interest rate will be. Also opting for a loan with a higher interest rate in exchange for a rebate is an option which will give credit towards paying some of the non-recurring closing costs such as title insurance, appraisal and origination fee. It is not possible to get cash back from rebate points.
Why do I pay pre-paid interest?
When closing a loan interest accrues in between the closing date and the last day of the calendar month. This amount is added to the closing costs for the loan rather than making the first monthly payment larger in order to absorb any excess that is due.
Should I pay my fees out of pocket?
If refinancing the option is to pay the fees in advance or roll them into the closing costs. For refinance loans only with extra funds (like a down payment for a car) then it makes sense to consider paying them out of pocket as it will have a lower monthly payment. Without extra funds it makes sense to roll the fees in. The difference in payment and total cost of the loan is usually nominal.
What are the closing costs?
Closing costs include items like appraisal fees, title insurance fees, attorney fees, pre-paid interest and documentation fees – to name a few. These items are usually different for each customer due to differences in the type of mortgage, the property location and other factors. A good faith estimate of your closing costs is given within three days for review.
What is the difference between non-recurring and recurring costs?
Non-recurring costs are one-time fees associated with closing a loan and include loan fees, appraisal and title fees, taxes and points. Recurring costs are ongoing fees that can include mortgage insurance, property taxes and insurance.
What is PMI?
Private Mortgage Insurance (PMI) protects lenders against losses that can occur when a borrower defaults on a mortgage. PMI is required on first mortgage purchase transactions when the borrower has less than a 20% down payment. It is required on first mortgage refinance transactions when the borrower has less than 20% equity in the property being refinanced. The cost of the mortgage insurance is typically added to the monthly mortgage payment.