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 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.

A pre-qualification usually take about 10 minutes whereas the pre-approval takes about 45 minutes to an hour.

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 at Ace Mortgage for further explanations.

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. Once a borrower requests the rate lock, they are protected from increasing rates due to market fluctuations. The borrower is also prevented from lowering the rate once the lender has comitted to providing that rate lock.

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 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.

Wholesale brokers traditionally provide lower rates than direct lenders for several reasons such as lower overhead, competitve rate providers, and the ability to compare different wholesale products to name a few.

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.

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. The lender may additionally request the 2 most recent tax returns as well.

What are the other types of loans?

With the recent changes in the mortgage industry, there are only two basic loan programs remaining.

1) Conventional - these loans are typically for those borrowers who are able to put 20% or more down on a loan or already has 20% or more equity in their home. Conventional loans are usually best suited for traditional borrowers

2) FHA - these government secured loans are generally for those seeking to purchase and have limited funds to contribute to the transaction. FHA is also more flexible for those looking to access cash from the equity in their existing home.

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. This form is generally used as an overall summary of the loan scenario.

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.
The current conforming limit is $417,000.00 but may be higher depending upon your state.

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. These "points" can also be used to acquire a lower interest rate.

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.

Ace Mortgage Company

711 River Highlands Bvld.
Covington, Louisiana 70433
Phone: 985-888-1660
Fax: 985-888-1665
Email: phil@acemortgagela.com
NMLS: 49604

 
 

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