Frequently Asked Questions

Common Mortgage Questions, Simple Answers

What types of mortgages are out there?

The most common types of mortgages right now are fixed rate loans.  They are typically 10, 15, 20, 30, or 40 year terms.  There is also ARM (adjustable rate mortgage) loans that offer a lower rate for an initial fixed period and then becomes adjustable.  Several loans also have an interest only option where the minimum payment is just the interest due.

Are there hidden fees?

There are no hidden fees.  All fees will be disclosed up front.  If you choose to proceed with the no-cost option, those fees will all be credited back to you.

What fees does your “no-cost” refinance include?

Any non-recurring closing costs (NRCCs) will be included.  These are any fees being charged by the lender, title and escrow.  Pre-paid items are not included.

What are pre-paid items?

These items are not to be confused with closing costs. The most common forms of pre-paid items are interest payments in-between your old loan and new loan, property tax, homeowner’s insurance, and homeowner’s association dues.

How is the appraisal fee handled?

Appraisal fees will be paid up-front by the borrower.  In order for the appraiser to schedule an appointment, they will require their fee to be paid first.  Upon closing the loan, any fees incurred by the appraiser will be refunded back to you.

Can I get a mortgage if I’m self employed?

Definitely.  Most lenders will be required to review two years tax returns to document income.  A current P&L may be used to support income.

How does refinancing affect my loan term?

Refinancing will reset your loan term to the new maturity date.  If you are refinancing to reduce your interest rate, you can either take advantage of the lower monthly payment, or keep the same payment as before to pay the loan off earlier.

What if I co-signed for a family member; how will that affect my chances of getting a loan for me?

This scenario happens fairly often.  In order to exclude the liabilities of that other property, you must document 12 months of payments from the other party.  Otherwise, you must qualify with that other housing payment.

How do I get a pre-approval letter?

A pre-approval letter can be issued relatively fast.  All that is needed is an initial loan application briefly filled out, a credit check and proof of income.  In some situations, an automated loan approval can be issue if the listing agent requests it.

What is PMI?

PMI stands for Private Mortgage Insurance.  This occurs when there is less than 20% down payment.  It is a monthly fee to insure the lender in case of default.  Once your equity has reached 20%, you may cancel the PMI.

How long does it take to get a loan?

A good relationship with the lender is vital to get good response times.  Most loans can be closed within 30 days.  For loans that need to be closed in a shorter period, rush requests can be made.

Who do I make payments to if I obtain financing through a broker?

Your payments will be made to the lender that provided the financing.  The mortgage broker is the middle man and does not get involved in servicing the loan.  Depending on the type of lender, your loan could be sold to different loan servicers.  If there are any changes, you will be notified in advance.

What is the difference between walking into a Bank branch to get a loan vs. getting a loan through a broker?

A mortgage broker goes through the wholesale channel, not retail.  I like to compare it to going to Costco as opposed to a local supermarket.  Wholesale does larger volume and can typically offer items/services at a larger discount than others.

Is there a pre-payment penalty if I refinance after getting a loan?

No.  None of these loans will have any prepayment penalty.  There will be a disclosure requiring you to keep the loan for at least 180 days (six months) before you can refinance again if you decide to go with the no cost option.  If you refinance within the 180 days, those closing costs will need to be refunded back to the broker.

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