Frequently Asked Mortgage Questions

Do you have questions? We at OCEANSIDE MORTGAGE GROUP can help! You will find the answers to several frequently asked mortgage questions below.

What are my obligations if I fill out a loan application?
There are no obligations when you apply for a loan. With Oceanside Mortgage Group you incur no up-front cost, except $13.00 for each credit report.

What is the difference between pre-approval and pre-qualification?
Pre-qualification is the first step in obtaining mortgage financing. A potential borrower answers a few questions to provide the loan consultant with a quick snapshot of the borrower’s income, existing debt, accumulated savings and whether or not there is a co-borrower. Signature(s) allow the loan consultant to run a credit report and begin to determine what loans are good candidates for this particular client. However, there are literally thousands of loan programs available. It is important for the loan professional to know the long-term financial objectives of the prospective homeowner.
Pre-approval is a written documentation that proves the borrower has full support of a lender. It means the form1003 Uniform Residential Loan Application has been completed and reviewed by an underwriter. Based on the borrower’s income, debt ratio and savings, the underwriter will provide a dollar amount this borrower is eligible for.  Now the borrower has the convenience of shopping for a home in the price range agreed upon by the lender.

Pre-approval allows potential homeowners to shop as cash buyers, and that means negotiating power.  Sellers will take an offer from a pre-approved shopper much more seriously and may even accept a lower bid because they know the financing is in place and the deal is secure.

When does it make sense to refinance?
Usually people refinance to save money, either by obtaining a lower interest rate or by reducing the term of the loan.  Refinancing is also a way to convert an adjustable loan to a fixed 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.Since refinancing is a complex topic, consult a mortgage professional.

What is a rate lock?
A lock-in, also called a rate-lock or rate commitment, is a lender’s promise to hold a certain interest rate and a certain number of points for you, usually for a specified period of time, while your loan application is processed.  (Points are additional charges imposed by the lender that are usually prepaid by the consumer at settlement but can sometimes be financed by adding them to the mortgage amount. One point equals one percent of the loan amount.) Depending upon the lender, you may be able to lock in the interest rate and number of points that you will be charged when you file your application, during processing of the loan, when the loan is approved, or later.

How do I "lock-in" my interest rate?
A Loan Officer can "lock-in" the interest rate quoted, over the telephone during their pre-qualification interview with you. We will provide you a written Interest Rate and Price Determination Agreement which details the interest rate and terms of the loan you have requested, as well as the period of time the rate is locked. This may vary between 10 days and 60 days depending upon your projected closing date.

What is the difference between a mortgage broker and a lender?
Mortgage brokers do not lend, they are independent consultants who offer the loan products of multiple lenders, called wholesalers. A broker finds potential customers and counsels them on the loans available from different lenders. They also counsel on any problems involved in qualifying for a loan, including credit problems, take the borrower's application, and usually process the loan. Processing includes compiling the file of information about the transaction, including the credit report, appraisal, verification of employment and assets, and so on. When the file is complete, it is handed off to the lender, who funds the loan.

Why use a Mortgage Broker?
Using a Mortgage Broker, particularly for first-time buyers, is a very good idea. There are lots of details - many of them financial - involved in home buying. A Mortgage Broker represents YOU by purchasing loans and highlighting strengths and minimizing weaknesses. A Bank or Savings and Loan represents the LENDER.  Mortgage Brokers have a vast variety of programs to choose from. A bank only has one…their own.

What are income and debt ratios?
The Income Ratio is your total monthly housing expense divided by your gross monthly income (before taxes). The Debt Ratio is your total monthly housing expense PLUS any recurring debts (i.e. monthly credit card minimum payment, car payments, or other loan payments) divided by your income. Standard underwriting suggest a maximum guideline of 28% on the Income Ratio and 36% on the Debt Ratio, but these ratios can vary based on the loan program, the financial strength of the borrower and the down payment.

What if I am new on my job?
A new job can work in your favor when you apply for your loan. Loan program guidelines look for a 2 year job history in the same field, but a job change for a better position is looked on favorably. If you are a recent college graduate, you may be able to obtain a loan even though you don't have a 2 year work history.

What is a fixed rate loan?
A loan which has an interest rate that remains constant throughout the life of the loan, usually available for 30 or 15 years, even for 20 or 40 years, depending on the lender.

How quickly can a lender close on my home loan?
Many lenders can facilitate closing 2 to 3 weeks after you have agreed on a purchase/sales agreement for a home. If you need more time, you can take as long as you need while still closing prior to any rate lock expiration dates.  Many lenders require 30-60 days from purchase contract and application to closing.

Why should I buy instead of rent?
Home ownership is about feeling good. It's a source of pride and personal satisfaction. But there are practical reasons why ownership is a good idea. The cost of the mortgage loan can be deducted from federal income and state taxes (in states with an income tax). Interest will comprise most of the monthly payment for more than half the years a home buyer pays on it, and the interest is deductible. Furthermore, property taxes paid by homeowners are deductible. Homeowners also may see the value of their homes increase as years go by.

Should I use a real estate agent?
A good real estate agent guides you through the process and makes the experience easier. An agent will find out what's important to you in terms of house, neighborhood and price and look for a home that best fits the criteria. We can recommend some worthy real estate agents.

What is APR (Annual Percentage Rate)?
Annual Percentage Rate (APR) factors interest plus certain closing costs, any points and other finance charges over the term of a loan. The APR must be disclosed to you according to federal Truth-in-Lending laws within three business days of when you apply for a loan, or prior to or at closing for a refinance.

How much cash will I need to purchase a home?
The amount of cash that is necessary depends on a number of items. Generally speaking you will need:

• Earnest Money: The deposit that is supplied when you make an offer on the home.
• Down Payment: A percentage of the cost of the home that is due at settlement. FHA Loans require a 3.5% down payment ; Conventional Loans typically require 20% down payment.
• Closing Costs: Costs associated with processing paperwork to purchase or refinance a house.

Give us a call today at (909) 384-2866 for a free, personalized consultation.