What is the difference between pre-approval and pre-qualification?
The pre-approval process is more thorough than pre-qualification. For pre-qualification, the loan officer will give you an opinion of your loan qualifications based on verbal information you provide. For a full pre-approval, which most sellers will want to see, you will need to provide documentation of the information provided verbally in the pre-qualification process. Additional credit and employment will also be verified.
Should I refinance my home?
People have different motivations for refinancing. You may be interested in lowering your monthly payment while others might be more interested in obtaining the lowest possible interest on a product like a 15-year fixed loan, which could greatly increase their payment.

Others may refinance to take money out for home improvements or other large expenses. While this might be a great option for one borrower, another possibility would be to open up a home equity line of credit.

The decision to refinance can be a difficult one, but if your primary goal is to save money then use this simple 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.

While this is an easy calculation to get you started, make sure you also looking into the amortization of your loan to see what the total interest costs are in the long run. This is when it’s best to give me a quick call to go over your options, and make sure we are achieving your goal.
What does “locking the rate” mean?
A rate lock is a commitment between the lender and consumer to provide financing at specific terms for a specific period of time. Once you lock a rate with the lender, they hold the rate for you even if the market goes up. Conversely, if that rate comes down, you may not be eligible to receive the lower rate.

Once a rate is locked, the clock is ticking so make sure to submit all the documents requested of you in a timely fashion.
What are points and should I pay them?
Points are an upfront payment that is used to reduce - or “buy down” - your interest rate. A point is simply a percentage of the loan amount; e.g., ‘2 points’ means a charge equal to 2% of the loan balance.

Paying points may make sense for some borrowers but there are things to consider. First, can you afford the cash you will need to pay for the points? If the answer is yes, the next question is, how long you will be in the property. If you divide the cost of the upfront points by the monthly savings you can determine your break-even point.

If you plan on keeping the loan for at least that many months then you may want to consider paying points.
What are closing costs?
There are two types of closing costs, recurring and non-recurring.

1. Recurring costs are fees you pay that will continue in the future. These include prepaid interest, insurance premiums, and property taxes.

2. Non-recurring closing costs are one-time fees that you will pay at the close of escrow. These include loan points and origination fees, underwriting, appraisal, credit report, title insurance and escrow.
What is the difference between a mortgage broker and a bank?
Mortgage brokers deal with many lenders so they can shop for the best rate among the lenders on a given day. Since they deal with many lenders, they also have considerably more products and a variety of underwriting criteria. With a bank, you only are given their programs and rates. In general, brokers are a more economical choice for the borrower than a bank.
What’s a conforming loan vs. a jumbo loan?
A conforming loan is eligible for purchase by the two major federal agencies that buy mortgages, Fannie Mae and Freddie Mac. There are two distinctions for conforming loans: Agency and Agency Jumbo. For a single family home, Agency loans have a maximum loan amount of $424,100; Agency Jumbo loans are capped at $636,150, but each county has its own agency jumbo rate with may be lower than the cap.

Any loan amount over the county’s agency jumbo amount is considered a jumbo loan. Two- to four-unit properties have larger Agency and Agency Jumbo loan amounts. Please ask me for more details.
What is an impound/escrow account?
When you open a new mortgage you can elect to pay your property taxes and insurance on a prorated monthly basis to your lender, who will in turn pay those bills when they are due. This is called an “impound” or “escrow” account. Often borrowers who want help budgeting prefer this option.

You will be required to make an initial payment to the account at time of closing so that the lender is sufficiently funded to make your first payments. An impound account is mandatory on FHA, and loans with a loan-to-value over 90%.
How much money do I need down and can I get a gift for it?
The down payment required can vary greatly depending on the type of loan program. For conforming loans: VA requires $0 down, FHA requires 3.5% and conventional financing requires 3% or more. Typically the more you put down, the better your interest rate will be.

For jumbo financing, currently you’ll need at least 10% down, but loan programs change all the time so check with me for current available programs. Depending on the program you use, it may be possible to use a gift for some or all of your down payment.
What’s an APR and how do I compare loans?
The annual percentage rate (APR) is an interest rate that is different from the note rate. It is commonly used to compare loan programs from different lenders. The APR does NOT affect your monthly payments.

The APR can be a misleading number, it’s designed to tell the borrower the true cost of the loan by preventing lenders from advertising a low rate, but hide fees. The problem with the APR is it may not be calculated the same among all lenders. A better way to compare loans is to ask lenders to provide you with a loan estimate of their costs on the same type of program (e.g. 30-year fixed) at the same interest rate. Then, subtract all fees that are independent of the loan such as homeowners insurance, title fees, escrow fees, etc.

The following fees should be included in the APR:

- Points
- Pre-paid interest. This is the interest paid from the date the loan closes to the end of the month. Most mortgage companies assume 15 days of interest in their calculations. However, companies may use any number between 1 and 30.
- Loan-processing fee
- Underwriting fee
- Document-preparation fee
- Private mortgage-insurance

The following fees might be included in the APR:

- Loan-application fee
- Credit life insurance (insurance that pays off the mortgage in the event of a borrowers death)

The following fees are normally not included in the APR:

- Title and escrow fees
- Notary fee
- Document preparation
- Home-inspection fees
- Recording fee
- Transfer taxes
- Credit report
- Appraisal fee

APR does not tell you how long your rate is locked for. A lender who offers you a 10-day rate lock may have a lower APR than a lender who offers you a 60-day rate lock. Calculating APRs on adjustable and balloon loans is even more complex because future rates are unknown.

Use the APR as a starting point to compare loans. There is no substitute to getting a loan estimate from each lender to compare costs. Remember to exclude those costs that are independent of the loan.