When does it make sense to refinance?
Usually a refinance is takes place to save money, either by obtaining
a lower interest rate on their loan, by reducing the term of the loan, or
by consolidating higher (and generally non-tax-deductible) consumer credit
debt. Refinancing is also a way to convert an adjustable loan to a fixed
loan or to take "cash out" of the equity of a home for other purposes...
renovations, education, vacation, investments, etc. The decision as to
whether it makes sense to refinance can therefore be difficult to answer;
but if you want to see if the numbers work, visit the Calculator area of
our website and then be sure to talk with your Apex Lending loan
professional.
What is the difference between
pre-qualification and pre-approval?
The pre-approval process is generally a much more thorough assessment
of the borrowers capacity to secure a loan. For pre-qualification, the
loan officer may ask just a few questions and then can generally provide a
pre-qualification letter. Pre-approval generally 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.
What is a rate lock?
A rate lock is a contractual agreement
between the lender and buyer which defines components of the loan product.
There are four components: the loan program, interest rate, points (cost)
, and the duration of the lock. Many loan programs are quoted on a 30 day
lock period. Longer periods are generally offered for additional costs.
Will I save money going directly to a
mortgage lender?
Not likely. In fact, if you are a
reasonably astute, you will probably do better dealing with a mortgage
broker. Many Mortgage brokers have access to hundreds of lenders and
thousands of loan programs and are able to "shop" for you for the best
rate on any given day. Further a mortgage broker does not need to add
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 docs" (full
documentation) 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?
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.
No ratio: Income is disclosed and verified but not used in
qualifying the borrower. The standard rule that the borrower's housing
expense cannot exceed some specified percent of income, is ignored.
Assets are disclosed and verified.
No income: Income is not disclosed, but assets are disclosed and
verified, and must meet an adequacy standard.
Stated Assets or No asset verification: Assets are disclosed but
not verified, income is disclosed, verified and used to qualify the
applicant.
No asset: Assets are not disclosed, but income is disclosed,
verified and used to qualify the applicant.
No income/no assets: Neither income nor assets are disclosed.
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.
What is a conforming loan?
A loan eligible for purchase by the two
major Federal agencies that buy mortgages, Fannie Mae and Freddie Mac.
What is a jumbo mortgage?
A mortgage larger than the maximum
eligible for purchase by the two Federal agencies, Fannie Mae and
Freddie Mac, currently $359,650. (Higher for Alaska and Hawaii)
What are points?
It is an up front 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.
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.
