Frequently Asked Questions
If you have any questions that aren’t on here, give me a call.
Click here for a glossary of mortgage terms.
Should I get pre-approved now or wait?
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. In addition to seeing what you qualify for now, 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.
What is the difference between using my bank and a
mortgage lender (Eddie)?
There are a lot of differences between using your bank vs. a mortgage lender. The most basic that impact home buyers are that bankers are paid a salary and mortgage lenders are generally paid 100% commission, bankers typically originate loans for the banks customers while mortgage lenders get their customers from referrals, bankers are not NMLS licensed and mortgage lenders are. These differences impact the customer service provided. Because a mortgage lender needs to close a loan to get paid, they are going to do whatever they can to close the loan for a customer. Because a mortgage lender works on referrals from customers and realtors, they are going to be more attentive and work to close the loan on time. Because the mortgage lender is required to be NMLS licensed, their work is tracked and subject to disciplinary action, which makes them much more accountable for their service.
How much do I need to buy a house?
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 are different based on your credit score, purchase price, and a few other factors. You can see some of them on this page.
There are also down payment programs available that provide you with anywhere from 2 – 4% of your loan amount.
What sales price should I be looking at?
You will have a sales price range based on either the maximum payment you can qualify for or the monthly payment range that you are comfortable with. Your monthly payment is a combination of principal, interest, real estate taxes, homeowners insurance (and flood insurance if applicable), mortgage insurance (if applicable) and homeowners association dues.
Taxes and HOA dues vary based on what property you are considering. Make sure to contact me to determine your max offer when you are ready to buy.
What are closing costs and how much are they?
Closing costs are various fee’s associated with the mortgage transaction outside of the actual property or loan amount. These include fee’s charged by the title company, lenders insurance, credit reports, recording fees, points, and reserves (money held back) for taxes and insurance.
You will receive estimates of how much the total costs will be after submitting an application. You can learn more about closing costs here.
What is your interest rate?
Mortgage rates change daily, sometimes several times a day based on a variety of factors, including the mortgage back security market and the 10 year treasury. In addition to the markets, there are over 20 points in your file that will impact your interest rate such as credit score, loan amount, occupancy type, property type, and more. You can learn more about interest rates here.
At the beginning of the pre-approval process, the interest rate isn’t nearly as important as understanding what you can afford at the “worst-case scenario” rate. Once under contract, you can shop for a better, if you think its necessary.
Why do I see lower rates in the news and online?
Because these are advertisements meant to draw your interest and designed to make you call. Once you follow them, you typically see the true rate which is much higher than what is 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.
Can I lower my rate after its locked?
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, the overall interest rates need to make a substantial move in order to renegotiate and get it lowered.
Should I buy discount points? What are they?
A discount point is the term used for 1% of the loan amount. You pay discount points to lower your interest rate and in some cases just to get the loan, depending on what is available.
If you are considering paying discount points to lower your rate, its important to run a break-even analysis. A break-even analysis takes into consideration, how much the points cost, how much you will be saving monthly, and how many monthly payments at the lower rate it will take to recoup the initial investment.
What is an escrow account?
Its a reserve account from which your taxes and homeowners insurance are paid. The funds are held by your lender (or servicer) and collected as part of your monthly payment, then used to pay your taxes and homeowners insurance when the time comes.
Escrow accounts are required on all FHA, VA, and USDA loans, and conventional loans with a loan-to-value ratio higher than 80%.