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Mortgage FAQs
What's the difference between pre-approval and
pre-qualification?
Answer: The pre-approval process is much more
complete than pre-qualification. For pre-qualification, the loan
officer asks you a few questions and provides you with a pre-qual
letter. Pre-approval includes all the steps of a full approval,
except for the appraisal and title search. Pre-approval can put
you in a better negotiating position, much like a cash buyer.
When does it make sense to refinance?
Answer: 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. Since refinancing is a complex topic,
call Tracy Cohee at 410-820-5200 or toll-free at 800-785-4075.
What is a rate lock?
Answer: A rate lock is a contractual
agreement between the lender and buyer. There are four
components to a rate lock: loan program, interest rate, points,
and the length of the lock.
Which type of mortgage is best for me?
Answer: Obviously, there isn't a simple answer to this question. The
right type of mortgage for you depends on many different factors:
- Your current financial picture
- How you expect your finances to change
- How long you intend to keep your house
- How comfortable you are with your mortgage payment
changing from time to time
For example, a 15-year fixed-rate mortgage can save you many
thousands of dollars in interest payments over the life of the
loan, but your monthly payments will be higher. And an adjustable
rate mortgage may get you started with a lower monthly payment
than a fixed-rate mortgage -- but your payments could get higher
when the interest rate changes.
The best way to find the "right" answer is to discuss your
finances, your plans and financial prospects, and your preferences
frankly with Tracy Cohee - please give her a call!
What does my mortgage payment include?
Answer: For most homeowners, the monthly
mortgage payments include three separate parts: a payment on
the principal of the loan (that is, the amount borrowed); a
payment on the interest; and payments into a special account
(called an escrow account) that your lender maintains to pay
for things like hazard insurance and property taxes. These
elements are called P.I.T.I. (Principal-Interest-Taxes-Insurance).
How Much House Can I Afford?
Answer: The best way to find out is to
talk to Tracy - because with all the innovative mortgages
available today, there is no simple, accurate formula that can
tell you how big a mortgage you can qualify for. There are simply
too many different factors involved, including your own financial
situation and variations in the qualification guidelines for
different mortgages.
However, you can use your total monthly household income to make
a very rough estimate. Generally, your monthly housing costs
(including your mortgage payment, taxes, insurance and other
fixed expenses) should be between 25 and 28 percent of your total
monthly income. Your monthly housing costs plus other long-term
debt (expenses extending more than 10 months into the future) such
as car or other installment loans should not exceed more than
36 percent of your gross (before taxes) monthly income.
Got more questions? Tracy's got the answers! Please stop by
or call her today.
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