- What's the difference between pre-qualified and pre-approved?
- What is Private Mortgage Insurance(PMI) ? Can it be avoided?
- What is APR?
- Should I Re-finance?
- What is a Credit Score?
- I've got poor credit and/or no cash for a down payment. Can I still get a mortgage?
- How much mortgage do I qualify for?
- Zero down and no closing costs. Does it really exist?
- Can't I just shop on line and find the cheapest mortgage?
A pre-qualification is an estimate of how much mortgage you may qualify for based on preliminary information that you have provided to a loan officer. This preliminary information would include such things as income, debts, assets and liabilities. It is important to understand that a pre-qualification is not a commitment by the lender but rather a preliminary "looks good" test by the loan officer.
In contrast, a pre-approval is a formal commitment by the lender to grant you a mortgage based on a set of conditions. In order to issue a pre-approval, a lender must review your application and verify your income, employment, assets, liabilities , credit history and cash available to close the transaction. Upon completion of the verification process the lender will issue a pre-approval letter that can be used with your offer on your next home. You may find that being pre-approved prior to making your offer will strengthen your offer and put you in a better negotiating position. In the Twin Cities and Greater Minnesota housing markets, it really is a must. With today's emerging technology we are able to pre-approve borrowers in as little as an hour or
two, 24 hours with one phone call.
PMI or Private mortgage insurance is normally required when you buy a house with less than 20% down. Mortgage insurance helps protect the lenders against foreclosure and is provided by a private mortgage insurance companies. It enables lenders to accept lower down payments than they would normally accept. In effect, mortgage insurance provides what the equity of a higher down payment would provide to cover a lenders losses in the event of a foreclosure.
The cost of PMI increases as your down payment decreases. For example, the cost of PMI for a 10% down payment is less than the cost of PMI for a 5% down payment. Your PMI payment is normally added on to your monthly payment.
The decision to cancel your private mortgage insurance rests with the lender. However, in most cases, the lender will allow cancellation of mortgage insurance when the loan is paid down to 80% of the original property value.
To cancel the PMI on your loan, contact your lender to determine what requirements must be met.
APR or Annual Percentage Rate is the interest rate that you are paying after adding in some of the costs associated with closing the loan. It is always different from the note rate that is stated on your loan. Because different lenders charge different fees for their loans, the Federal Truth in Lending Law requires mortgage companies to disclose APR when they advertise a rate as a way to compare lenders. For example, two lenders may advertise an 8% rate but if their closing costs are different, this will show up in the APR rate with the higher closing cost lender having a higher APR. The APR does not affect your monthly payment. Your monthly payment is based on your note rate and the life of the loan.
This is a complex question and varies based upon an individuals situation. In addition to lowering your monthly payment and saving money, some of the more common reasons to re-finance include; conversion of an adjustable rate loan to a fixed rate loan, reducing the term of your loan(30 year to 15 year), convert your equity to cash which can then be used to pay other debts, invest or spend at will. The general rule of thumb if you're re-financing to reduce your monthly payments has always been the 2% rule. If you can reduce your interest rate by 2% then it makes sense to re-finance. However, we feel that a better way to approach this is to calculate your costs recovery period. This is how it would work:
Example:
a. Determine the costs of your re-finance. $2,000
b. Determine your monthly savings (old payment minus new payment) $100
c. Divide the results in (a.) by the results in (b.) ($2,000/$100 = 20 months)
The number of months needed to recover your costs in this example is 20 months. If you were planning to live in the house for longer that 20 months then you would be money ahead and it would make sense to re-finance your loan. ( This calculation does not include the impact of tax savings or investment opportunity loss)
A credit score is a method of determining the likelihood that credit users will pay their bills. Scores are calculated using scoring models and mathematical tables that add or subtract points for different pieces of credit information that best predict future credit performance. These mathematical models were developed after studying the credit histories of millions of consumers. The specifics of how these scores are computed is a closely guarded secret, however, we do know that the following items will impact your score.
If you feel that your credit score is low please feel to contact us for a thorough review. The good news is that poor credit is repairable with a little time and effort on your part. There is no magic to improve your credit scores overnight however, once you start to demonstrate a good payment history and resolve any negative information your credit score will begin to grow. Here are some of things that you can do to maintain good credit or begin the process of clearing up poor credit.
- Pay your bills on time. Late payments and collection accounts can have a very negative impact on your score.
- Do not apply for credit frequently. If you have frequent inquiries on your report it could mean your shopping for credit and can reduce your score.
- Reduce your balances. Max out your credit card and making minimum payments even if they're on time can have a negative effect.
- If you have little or no credit history obtain addition credit sources and pay your bills on time. This will begin to develop your history.
YES!!!!! It is possible for people with poor credit or no cash to obtain a mortgage but we would need to evaluate your individual situation. If you have both poor credit and no cash it may make it a little challenging but with a little guidance most people can repair their poor credit and get over the cash to close hurdle. In any event we would need to evaluate the individuals circumstances.
The process of getting approved for a mortgage we like to compare to going on a job interview. Like an interview, it's a matter of packaging yourself neatly and presenting it with your best foot forward. Our job as mortgage professionals is to package your information and present it to an underwriter in a way that accurately represents your ability to re-pay the loan. If there are credit issues we need to resolve those issues or determine the cause of those issues. In some cases, poor credit is not an individuals fault but a result of a situation(i.e. divorce, sickness etc.)
If the issue is cash availability, there are low down payment programs or a variety of alternatives to explore. The most important thing for someone to understand that may feel they are prevented from securing a mortgage because of credit or cash problem is, with time and effort it is achievable. Our promise is that if we can't get you a mortgage today, the worst case is we'll leave you with a plan to get you on the path to obtaining a mortgage in the near future.
Traditionally, the way to determine how much mortgage someone qualifies for was to review their income and debts and then apply a mathematical formula that will give us the answer. However, the rules are changing in this business daily and the traditional formulas may not exist in your situation. Please
contact us to discuss your individual situation. Once we know the facts we can quickly do a calculation for you.
We've all received those looks great teaser ads. Always remember that if it looks too good, it probably is. Keep in mind that the lender is going to get paid one way or another. Usually if they are advertising no closing costs they're simply rolling those costs into the loan via a higher rate. So now instead of paying those costs up front you've just financed them over the life of the loan and it now costs you more than double the original costs. It doesn't sound like such a great deal after all.
With our over 20 years combined experience we've seen them all. If you have one that just seems like a great deal, give us a call and we'll help you evaluate it.
Absolutely. We all have money to lend, however as they say, the proof is in the pudding. You are in the process of making the single largest purchase in your life and now your shopping on-line for the cheapest service. In order to offer discounts the on-line service needs to cut their costs and they do that by cutting their customer service. So now your sitting at the closing table across from the sellers, this is the largest purchase your ever going to make and your discount mortgage company isn't prepared and forgot to tell you. You have probably never talked to a live person there and don't know how to contact them. Even if you did they have probably gone home for the day or they are most likely are an out of state company that due to the time change has already closed their office. You begin to notice that Mr. Seller is getting very agitated because the loan can't close which means the sellers can't get the money out of their house from you to take to the closing on the house that they purchased. The domino effect begins to take over. At
Burnet Home Loans/PHH Mortgage the
St. Paul Mortgage Team is staffed by a group of professionals that are always available. Whether it be evening or weekend, there will always be a way to get in touch with us to deal with any issues or concerns you may have. While we can't always guarantee a smooth closing we've done hundreds of them and
know how to anticipate the issues before they become a problem.
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