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 based on the verbal information you have provided.
Pre-approval includes all the steps of a full loan approval, including documentation and evaluation of income, assets, and credit. The approval is subject to an acceptable appraisal and title commitment for the property to be purchased.
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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 many different wholesale lenders, takes your application, and processes the loan. This involves putting together the complete file of information about your transaction, including the credit report, verification of your employment and assets, appraisal, survey, and title commitment. In most cases, the mortgage broker completes automated underwriting prior to delivery of the loan package to the wholesale lender, who then clears any underwriting conditions and funds the loan at closing.
A lender performs all of the same functions and funds the loans for their own account.
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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 fully 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?
No ratio: Income is not disclosed, verified, or used in qualifying the borrower. Assets are disclosed and verified and must provide a reasonable reserve balance after closing.
No income/No assets: Neither income nor assets are stated or verified.
True No Doc: Employment, income, and assets are not disclosed or documented.
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.
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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 FNMA and FHLMC, the two major quasi-governmental agencies which buy loans in the secondary mortgage market. A conforming loan must “conform” to specific underwriting guidelines and must not exceed $359,650.
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What is a jumbo loan?
A mortgage larger than $359,650, the maximum loan eligible for purchase by FNMA and FHLMC.
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What are points?
Points are fees charged by the lender that are expressed as a percentage of the loan amount; i.e., 1 point equals 1% of the loan amount. Points include origination fees and discount points.
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What is a pre-qualification?
This is the preliminary process of determining whether an applicant has enough cash and sufficient income to meet the qualification requirements for a requested loan. A pre-qualification is based on unverified verbal information provided by the applicant, and may not take into account the applicant’s credit history.
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2701 Nicholson St.
Houston, TX 77008
Toll Free: 800-428-9437
Phone: 713-869-5550
Fax: 713-869-0177
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800.428.9437
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