Frequently Asked Questions

Refinancing is generally a good option when mortgage rates are at least 2% lower than your current rate. Even a 1% difference can help lower your monthly payment. For example, a $100,000 loan at 8.5% might have a payment of $770, but with a 7.5% rate, your payment could drop to $700, saving you $70 per month.

A point equals 1% of your loan amount. For a $100,000 loan, 1 point costs $1,000. Discount points are paid up-front to reduce your interest rate.

Paying points is beneficial if you plan to stay in your home for several years, as it lowers your monthly payments. If you're staying for a short time, the upfront cost may not be worth it.

APR reflects the total yearly cost of a loan, including interest and fees. It's typically higher than the interest rate, as it accounts for points, mortgage insurance, and other costs. APR allows you to compare the true cost of different loan offers.

Locking the interest rate ensures that your rate stays fixed for a specified
period (usually 30-60 days), protecting you from rising rates during the
application process.

You’ll need the following:

• Property Documents: Signed sales contract, proof of deposit, contact
  details of agents, legal descriptions.
• Income Documents: Pay stubs, W-2s, tax returns (if self-employed), etc.
• Source of Funds: Bank statements, stock/bond statements, gift
  affidavits (if applicable).
• Debts and Obligations: List of all current debts, including mortgage
  payments.
• Other Documents: Credit report, application fee check.

Lenders use credit scores (typically FICO scores) to assess risk. Your credit
score is influenced by factors like bill payment history, outstanding debt, and
credit history length. A higher score indicates lower risk to the lender.

To improve your credit score:

• Pay bills on time
• Reduce outstanding debt
• Avoid opening new accounts
• Maintain a long credit history with low balances.

An appraisal is a professional estimate of your home’s value, conducted to ensure the loan amount doesn’t exceed the home’s worth.

PMI is required when your down payment is less than 20%. It protects the lender in case of default. You can avoid PMI by making a larger down payment or exploring loan options without PMI.

This option allows you to avoid PMI by taking out two loans: an 80% first mortgage, a 10% second mortgage, and a 10% down payment. A similar option is 80-15-5 if you can only afford a 5% down payment.

At closing, ownership of the property is officially transferred from the seller to you. This process may involve various parties like real estate agents, attorneys, and title/escrow firms. It can take from 1 hour to several, depending on factors like contingencies or escrow accounts.