Browse through some common questions

Q-- When does it make sense to refinance?

A-- 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:

 a. Calculate the total cost of the refinance

 b. Calculate the monthly savings

 c. 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

Q-- What is a rate lock?

A-- The rate lock is a contractual agreement between the lender and buyer. There are 4 components to a rate lock: loan program, interest rate, points, and the length of the lock.

Q-- Will I save money going directly to a bank?

A-- Not necessarily. In fact, if you are a reasonably astute shopper, you will probably do better dealing with a mortgage broker. Mortgage brokers do not add any net cost to the lending process, because they perform functions that would otherwise have to be done by employees of the bank. Furthermore, because mortgage brokers deal with multiple investors on the secondary market — they can shop for the best terms available on any given day. In addition, they can find investors who specialize in various market niches that many banks avoid, such as loans to applicants with less than perfect credit, loans to borrowers who do not intend to occupy the property, loans with minimal or no down payment.

Q-- What is the difference between a conforming and jumbo loan?

A-- A conforming loan is a loan eligible for purchase by the 2 major federal agencies that buy mortgages, Fannie Mae and Freddie Mac. The loan limits are currently $510,400.00 for a single family house in Central Minnesota.

A jumbo mortgage is a loan larger than the maximum eligible for purchase by the two federal agencies, Fannie Mae and Freddie Mac, currently $510,400.00 for Central Minnesota.

Q-- What are points?

A-- Points are a loan fee that can be financed into the loan in some circumstances.

Q-- What is a pre-qualification?

A-- This is the process of determining whether a customer has the credit, cash and income to meet the qualification requirements set by the lender on a requested loan. A pre-qualification is subject to verification of the information provided by the applicant. Only after the information is verified will an appraisal be completed so that the title work is reviewed for an approval to be issued.

Q-- What do I need for my Mortgage Pre-Approval Meeting?

A--  Here is everything you will need:

• CURRENT TWO YEARS OF W2’S AND 1040’S WITH SCHEDULES

• TWO CURRENT PAYSTUBS

• TWO MONTHS OF BANK STATEMENTS (CHECKING AND SAVINGS), ALL PAGES

• MOST CURRENT 401K, IRA, 403B RETIREMENT PLAN STATEMENTS, ALL PAGES

• VA LOANS: DD214

• IF APPLICABLE; FORECLOSURE, BANKRUPTCY, DIVORCE DECREE, CHILD SUPPORT DOCUMENTS

• TWO YEARS OF EMPLOYMENT AND RESIDENCE HISTORY

Q-- What is an FHA Mortgage?

A-- The Federal Housing Administration is the largest insurer of mortgages in the world. The FHA makes home financing possible for people who might not qualify for conventional mortgage programs to purchase a home or refinance their current mortgages, including Adjustable Rate Mortgages.