Usually, people refinance to save money, either by obtaining a lower mortgage rate or by reducing the term of the loan. Refinancing is also a way to convert an adjustable rate mortgage to a fixed rate 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 calculation:
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.
Both income and assets are disclosed and verified, and income is used in determining the applicant's ability to repay the mortgage. Formal verification requires the borrower's employer to verify employment and the borrower's bank to verify deposits. Alternative documentation, designed to save time, accepts copies of the borrower's original bank statements, W-2s, and paycheck stubs.
Points (or discount points) are a way of lowering your interest rate. Also, be mindful of an origination fee. More information regarding discount points can be found here.
The rate refers to what percentage of your loan you will pay in interest per month, whereas the annual percentage rate (APR) is an adjusted percentage that expresses the yearly cost and also includes certain charges and fees.
A rate lock is a contractual agreement between the mortgage broker, mortgage lender, and mortgagee. There are several components to a rate lock: loan program, interest rate, closing costs, fixed rate mortgage or an adjustable rate mortgage, loan term, points, and the length of the lock.
A mortgage broker counsels you on the loans available from different mortgage wholesalers, 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. When the file is complete, but sometimes sooner, the mortgage lender "underwrites" the loan, which means deciding whether or not you are an acceptable risk and qualify for the loan.
The pre-approval process is much more complete than a pre-qualification. For a pre-qualification, the loan officer asks you a few questions and provides you with a pre-qualification letter based upon information discussed, but not verified. A pre-approval includes all the steps of a full approval, except for the appraisal and title search. Pre-approvals put you in a much better negotiating position when making an offer on a new home, much like a cash buyer. Additional information can be found here.
There are typically three main ways to hold the title, or show ownership, to real estate:
Sole and separate – no one else holds any interest in the property.
Joint tenants – Each person owns an equal share and if one party dies, title transfers to the survivor, regardless of what a will may specify.
Tenant in common – Tenants in common may own equal or unequal shares of the home. For example, Owner A could hold 50% ownership, owner B 25%, and owner C 25%. If the percentage of ownership is not reflected, it is assumed that each tenant owns an equal percentage. If one party dies, unless the surviving party is named in the will, the decedent’s percentage of interest passes to heirs. Tenants in common share one unity: the right of possession. All tenants in common have the right to occupy the property, and neither can exclude the other.
Word of caution: please do NOT assume that married applicants should hold title as joint tenants and unmarried applicants as tenants in common. Such an assumption could eliminate any intended heirs of the equity. For example, a previously married co-applicant may want his/her percentage of ownership to go to his/her children from a prior marriage rather than to the other co-applicant, as it would if the title were held as joint tenancy. Your loan officer should be able to explain the differences, but NOT give legal advice. It is up to the applicants as to how they should hold title as such could affect each of their estates if one or both were to die.
No, a mortgage broker often offers lower mortgage rates and/or fees since they are able to compare several lenders for you. When considering a refinance loan it's important to remember that the better your credit score the better interest rate you can get. So if you don't have perfect credit you can still qualify for a refinance loan but you'll want to make sure that you're lowering the interest rate on your loan enough to make a refinance worth it.
A conforming loan is eligible for purchase by the two major government-sponsored entities, known as, Fannie Mae and Freddie Mac. A conforming loan is more commonly known as a conventional loan.
A mortgage larger than the maximum eligible loan amount for a conforming or conventional loan.