FAQs

faq

Do you have questions? We can help! You will find the answers to several frequently asked mortgage questions below:

What makes pre-approval and pre-qualification different?

The pre-approval process is more complete than pre-qualification. For a pre-qualification, a loan officer or broker asks you a series of questions and based on those answers and a review of your credit report, you receive a pre-qual letter. A pre-approval involves all the necessary steps for a loan to be approved, except for the title search and appraisal. A thorough review of your documentation during the process puts you in a better position to negotiate with a seller, because you are closer to a full loan approval

When is the best time to refinance?

There are several reasons why people want to refinance. You may want to save money by reducing the term of your loan, getting a lower interest rate, or eliminating your private mortgage insurance (PMI). Or, if you have an adjustable-rate loan, you may want to switch to a fixed-rate one. Finally, you may choose to refinance to obtain cash, consolidate debts or make home improvements.

A mortgage professional can help you determine if it makes financial sense. You need to calculate the total cost of the refinance and your monthly savings. Then, you divide the refinancing cost by the monthly savings. What you will see is your time to break even. This number can help you make a decision as to whether refinancing makes sense for you.

What is a rate lock?

This is a contractual agreement that binds the borrower and the lender. It has four components namely: interest rate, length of the lock, loan program and points or credits.

What makes a mortgage broker and a lender different?

A mortgage broker educates you on the different loans that are available. He also takes your application and processes the loan. He puts together the necessary information such as your credit report, employment and assets verification, appraisal and more. Once done, the lender then “underwrites” and funds the loan. Underwriting means that the lender decides if the borrower is qualified or not.

When I go directly to a mortgage lender, is it possible for me to save money?

Not really. In most cases, you can get as good of a deal or a better one when you deal with a mortgage broker. This is because typically there is no net cost that is added by the mortgage brokers to the lending process. Mortgage brokers can quickly sift the thousands of different products and programs lenders offer to find you the best deal for your situation. They can also find lenders who specialize in different market niches, which are often avoided by many lenders, so that you are more likely to get your loan approved. If you’ve been declined by a bank or credit union, a mortgage broker is probably your best option.

What is a full documentation loan?

A full documentation loan is where your assets and income are verified and disclosed. Your income is used to determine your ability to repay the mortgage. For formal verification, employment is verified by your employer. Your deposits are verified by the bank as well. This is the most common kind of loan for a mortgage. We also offer programs that use a borrower’s bank statements to verify income, however these programs have more restrictive guidelines for down-payment/equity, credit score and asset reserves.

What are the other kinds of loans?

Stated income/verified assets: In this type of loan, the income is disclosed. The income source is verified as well. However, there is no verification of amount. Aside from verifying the assets, it is also important for them to meet adequacy standard.
Stated income/stated assets: Assets and income are disclosed but they are not verified. The borrower’s source of income is verified though.
No ratio: The income is verified and disclosed. However, it is not used to qualify the borrower.
No income: The assets should meet adequacy standard. In addition, they should be verified and disclosed. Income remains undisclosed though.
No asset verification or Stated Assets: The income is verified and disclosed. It is also used as a qualification of the applicant. The assets are not verified but they are disclosed.
No asset: Income is verified and disclosed. It is also used as the applicant’s qualification. The assets, on the other hand, are left undisclosed.
No assets/no income: No income or asset is disclosed.

What is the Loan Estimate?

This is the list of settlement costs that the lender provides to the borrower within 3 days after he or she receives the complete loan application.

What is a conforming loan?

This is a loan that conforms to the requirements of Fannie Mae and Freddie Mac – the 2 major Federal agencies that buy mortgages. Loans must conform in order for them to be purchased by either agency.

What is a jumbo mortgage?

This is a mortgage that has a loan value larger than the maximum loan amount that can be purchased by Freddie Mac and Fannie Mae, $580,750 for San Diego County for 2016.

What are points?

Points are the upfront cash payment (each point equals 1% of the loan) paid by the borrower to secure a lower interest rate. Points are typically used when the borrower intends to maintain the loan for at least 5 years.

What is pre-qualification?

Pre-qualification is the stage where you are checked to see if you really qualify for the requested loan. Do you have enough cash and income? Any information you provide is checked and verified.