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What is the difference between pre-approval and pre-qualification?
The pre-approval process is much more complete than pre-qualification. For pre-qualification, the loan officer asks you a few questions and provides you with a pre-qual letter. Pre-approval 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.
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When does it make sense to refinance?
Usually people refinance to save money, either by obtaining a lower interest rate or by reducing the term of the loan. Refinancing is also a way to convert an adjustable loan to a fixed loan or to consolidate debts. The decision to refinance can be difficult, since there are several reasons to refinance. However, if you are looking to save money, try this:
- 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. If you own the house longer than this, you will save money by refinancing.
(Since refinancing is a complex topic, consult a mortgage professional.)
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What's the difference between a mortgage broker and a mortgage banker?
A mortgage broker is able to compare loans and rates from multiple sources in order to find the best financial fit for you, counsels you on all your best loan options, takes your application, and usually processes the loan which involves putting together the complete file of information about your transaction including the credit report, appraisal, verification of your employment and assets, and so on. There is not an additional fee for their services so today's brokers can often be quite a savings to the home buyer because of their ability to compare multiple sources and programs for the best rate. A mortgage banker, on the other hand, is hired by one banking institutions to sell the loan products available only through his or her company and at only their rate. In both cases, your loan is likely to also be sold at some point to other lenders. (At Buffington Mortgage however, you can always utilize us as a one-stop source to call for questions, etc. throughout the life of your loan.)
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Is there any financial benefit to go directly to a mortgage banker?
Not necessarily. In fact, if you are a reasonably astute shopper, because of the above reasons, it's highly likely you'll do better dealing with a mortgage broker. Mortgage brokers are able to add no net cost to the lending process because they perform functions that would otherwise have to be done by the employees of the lender. Furthermore because brokers have, as mentioned, multiple lenders--sometimes thirty or more--they can shop for the best terms on any given day from all their lenders. In addition, they can find the wholesale investors who specialize in various market niches that many other lenders avoid, such as loans to applicants with lower credit ratings, loans to borrowers who do not intend to occupy the property, investors, loans with minimal or no down payment, low-paperwork loans, and so on.
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What are the other types of loans than full documentation 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, six months of stated income and two months of expected monthly housing expense.
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Stated income/stated assets:
Both income and assets are disclosed but not verified. However, the source of the borrower's income is verified.
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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.
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No income: Income is not disclosed, but assets are disclosed and verified, and must meet an adequacy standard.
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Stated Assets or No asset verification: Assets are disclosed but not verified, income is disclosed, verified and used to qualify the applicant.
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No asset: Assets are not disclosed, but income is disclosed, verified and used to qualify the applicant.
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No income/no assets:Neither income nor assets are disclosed.
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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.
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What is a conforming loan?
A loan eligible for purchase by the two major Federal agencies that buy mortgages, Fannie Mae and Freddie Mac.
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What is a jumbo mortgage?
A mortgage larger than the maximum eligible for purchase by the two Federal agencies, Fannie Mae and Freddie Mac.
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What are points?
It is an upfront 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.
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What is a prequalification?
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.
More Questions? We're here to help! Contact Buffington Mortgage at 512-672-4729 ext. 303 or email us at: gray@buffingtonmortgage.com
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