Frequently Asked Questions

A mortgage is a loan used to purchase real estate. The property itself serves as collateral for the loan. When you take out a mortgage, you agree to pay back the loan amount plus interest over a specified period, typically 15 or 30 years.

Pre-qualification is an informal assessment based on information you provide to a lender. It gives you a general idea of how much you might be able to borrow.

Pre-approval is a more formal process where the lender verifies your financial information and credit history. A pre-approval letter shows sellers that you're a serious buyer and can typically borrow up to a specific amount.

Down payment requirements vary by loan type:

• Conventional loans: Typically 5-20%
• FHA loans: 3.5% minimum
• VA loans: 0% (for eligible veterans)
• USDA loans: 0% (for rural properties)

A larger down payment can help you avoid private mortgage insurance (PMI) and secure better interest rates.

Closing costs are fees and expenses you pay when finalizing your mortgage loan. They typically range from 2-5% of the loan amount and may include:

• Loan origination fees
• Appraisal fees
• Title insurance
• Escrow fees
• Recording fees
• Prepaid property taxes and insurance

The home buying process typically takes 30-45 days from contract to closing, but can vary based on:

• Loan type and complexity
• Property condition and appraisal
• Market conditions
• Buyer and seller responsiveness

Getting pre-approved before house hunting can help speed up the process.

You'll typically need to provide:

• Recent pay stubs (last 30 days)
• W-2 forms (last 2 years)
• Tax returns (last 2 years)
• Bank statements (last 2-3 months)
• Investment account statements
• Photo ID
• Social Security card
• Employment verification

Consider refinancing when:

• Current interest rates are lower than your existing rate
• You want to shorten your loan term
• You need to lower your monthly payment
• You want to tap into home equity
• You want to switch from an adjustable-rate to a fixed-rate mortgage

Calculate your break-even point to ensure refinancing makes financial sense.

A cash-out refinance allows you to refinance your existing mortgage for more than you currently owe and receive the difference in cash. This can be used for:

• Home improvements
• Debt consolidation
• Major expenses
• Investment opportunities

You'll need sufficient equity in your home to qualify.

Fixed-rate mortgages have an interest rate that remains the same throughout the entire loan term. Your monthly payment stays consistent, making budgeting easier.

Adjustable-rate mortgages (ARMs) have an interest rate that can change periodically based on market conditions. They typically start with a lower rate but can increase over time.

Several factors influence your mortgage interest rate:

• Credit score: Higher scores typically qualify for lower rates
• Down payment: Larger down payments often result in better rates
• Loan type: Conventional, FHA, VA, and USDA loans have different rate structures
• Loan term: Shorter terms usually have lower rates
• Market conditions: Overall economic factors affect rates
• Property type: Primary residences typically get better rates than investment properties

Interest rate is the cost of borrowing the principal loan amount, expressed as a percentage.

APR (Annual Percentage Rate) includes the interest rate plus other loan costs such as broker fees, discount points, and some closing costs. APR gives you a more complete picture of the total cost of the loan.

Always compare APRs when shopping for mortgages, as they provide a more accurate comparison of loan costs.