Mortgage FAQ's — Eddie Gamez, Austin TX Mortgage Broker

Question 1

Should I get pre-approved now or wait?

Accepted Answer

Get pre-approved now. A pre-approval is an evaluation of your financial profile to determine how much residential real estate spending you qualify for. It represents what you qualify for at this point in time and is not final. Going through the pre-approval process now will let you address any unexpected issues with your file, improve credit, plan your taxes accordingly, and help you prepare for whenever the time is right.

Question 2

What is the difference between using my bank and a mortgage lender?

Accepted Answer

Bankers are paid a salary while mortgage lenders are generally paid 100% commission. Bankers typically originate loans for the bank's customers while mortgage lenders get their customers from referrals. Bankers are not NMLS licensed but mortgage lenders are. Because a mortgage lender needs to close a loan to get paid, they will do whatever they can to close the loan. Because they work on referrals, they are more attentive and work to close on time. Because they are NMLS licensed, their work is tracked and subject to disciplinary action — making them much more accountable.

Question 3

How much do I need to buy a house?

Accepted Answer

You can put a minimum of 0%, 3%, or 3.5% down on a house, depending on your situation. From there, you'll also have closing costs and reserves to pay. Those numbers vary based on your credit score, purchase price, and other factors. There are also down payment assistance programs available that provide anywhere from 2–4% of your loan amount.

Question 4

What sales price should I be looking at?

Accepted Answer

You will have a sales price range based on either the maximum payment you can qualify for or the monthly payment range you are comfortable with. Your monthly payment is a combination of principal, interest, real estate taxes, homeowners insurance, mortgage insurance (if applicable), and HOA dues. Taxes and HOA dues vary based on the property. Contact Eddie to determine your max offer when you are ready to buy.

Question 5

What are closing costs and how much are they?

Accepted Answer

Closing costs are various fees associated with the mortgage transaction outside of the actual property or loan amount. These include fees charged by the title company, lender's insurance, credit reports, recording fees, points, and reserves for taxes and insurance. You will receive estimates of the total costs after submitting an application.

Question 6

What is your interest rate?

Accepted Answer

Mortgage rates change daily — sometimes several times a day — based on factors including the mortgage-backed security market and the 10-year treasury. In addition to the markets, there are over 20 points in your file that will impact your rate, such as credit score, loan amount, occupancy type, and property type. At the beginning of the pre-approval process, the rate isn't nearly as important as understanding what you can afford at the worst-case scenario rate.

Question 7

Why do I see lower rates in the news and online?

Accepted Answer

Those are advertisements designed to get you to call. Once you follow them, you typically see the true rate, which is much higher than advertised. They usually come with a disclaimer in the small print. Most of the time the rates advertised are only for certain customers or come with high charges for points.

Question 8

Can I lower my rate after it's locked?

Accepted Answer

Yes and no — but mostly no. During the lock period, your rate is protected from going up. If there is a drastic change in the market, there is an opportunity to renegotiate the rate. However, overall interest rates need to make a substantial move in order to renegotiate and get it lowered.

Question 9

Should I buy discount points? What are they?

Accepted Answer

A discount point is 1% of the loan amount. You pay discount points to lower your interest rate. If you are considering paying discount points, it's important to run a break-even analysis — taking into account how much the points cost, how much you'll save monthly, and how many payments at the lower rate it will take to recoup the initial investment.

Question 10

What is an escrow account?

Accepted Answer

An escrow account is a reserve account from which your taxes and homeowners insurance are paid. The funds are held by your lender and collected as part of your monthly payment, then used to pay your taxes and homeowners insurance when due. Escrow accounts are required on all FHA, VA, and USDA loans, and conventional loans with a loan-to-value ratio higher than 80%.

Frequently Asked Questions

Still have questions?