- What is the difference between a direct lender and a mortgage broker?
A direct lender originates mortgage loans and funds the loans. Many times direct lenders have more flexibility with guidelines and approvals. Mortgage brokers on the other hand originate mortgage loans, but do not fund the loans directly. Wholesale banks fund the loans that mortgage brokers originate. Mortgage brokers are often more familiar with the local market and can provide a wider range of mortgage products since they work with multiple wholesale lenders.
- Is a local mortgage specialist better than a national mortgage specialist?
A local mortgage specialist is most familiar with the local real estate market. Since real estate is local, not national, there are benefits to working directly with a local specialist.
- Do I need equity to refinance?
Each loan program has different requirements when it comes to equity. Traditional or conventional mortgages require a maximum of 80% LTV (Loan to Value). There are programs that do not require equity and allow for a refinance with negative equity. Negative equity means the value of the property is less than the loan on the property. Programs such as HARP, FHA Streamline, VA Streamline refinances allow for upside down homeowners to refinance and take advantage of lower interest rates without equity.
- Is a fixed loan better than an adjustable rate mortgage?
It depends on how long you anticipate staying in the loan. If you plan to keep the loan for a few years only, and adjustable rate mortgage allows you to have a lower payment and interest rate than you would otherwise qualify for with a fixed loan. If you plan to maintain the new loan for longer than the fixed period of an adjustable loan, then a fixed loan may make more sense. If you are looking for the peace of mind to not worry about rate changes, then a fixed loan is a much better choice.
- What documents do I need to have available to refinance?
Depending on the program you are applying for, each program has different document requirements. For all programs it is best to have your most current mortgage statement, credit status, income documentation available. Not all programs require income documentation, but it’s a good idea to have these available if necessary.
- Are there fees associated with the new loan?
There are fees associated with a refinance; however, these fees may be included in the loan. If there is equity available, the fees may be included in the loan for no out of pocket money. There may be an option to include fees in the interest rate offered above par to offset cost without increasing your loan amount. The last option is to pay for origination fees at the time of closing.
- Do I need a new appraisal in order to refinance?
Appraisals are necessary for certain programs including conventional loans. Certain programs do not require an appraisal and no equity is needed to refinance. These programs include HARP, FHA Streamline, and VA Streamline refinances.
- What is the difference between the note rate (interest rate) and APR?
The interest rate is the actual rate or note rate on the mortgage loan. This is the only interest rate on the loan. The annual percentage rate is not actually an interest rate, rather it calculates fees associated with the loan and puts them in terms of a interest rate. Assuming all other factors of the loan are equal, an APR allows the borrower to compare fees associated with the loan. The note rate (interest rate) is the only rate on the loan.
- When looking to purchase a home should I apply for a mortgage before or after selecting a property?
Many times it is best to get a pre-approval from your mortgage lender to provide to your Realtor prior to selecting a property. This way your Realtor knows exactly what she is working with as far as purchase price and you know the payments will be comfortable. Once you find the property that meets your needs, you can then apply for a mortgage approval to finance the selected property.