Refinance One

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Northern Virginia Home Mortgage Specialist - Loan Officer Kris Sarro
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Frequently Asked Mortgage Questions
by Refinance One

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

What is the difference between pre-approval and pre-qualification?

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.

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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.

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What is a rate lock?

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.

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What is the difference between a mortgage broker and a lender?

A mortgage broker counsels you on the loans available from different wholesalers, takes your application, and usually processes the loan which involves putting together the complete file of information about your transaction including the credit report, appraisal, verification of your employment and assets, and so on. When the file is complete, but sometimes sooner, the lender "underwrites" the loan, which means deciding whether or not you are an acceptable risk.

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Will I save money going directly to a mortgage lender?

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 lender. Furthermore, because mortgage brokers deal with multiple lenders -- in a typical case, 25 to 30, sometimes more -- they can shop for the best terms available on any given day. In addition, they can find the lenders who specialize in various market niches that many other lenders avoid, such as loans to applicants with poor credit ratings, loans to borrowers who do not intend to occupy the property, loans with minimal or no down payment, and so on.

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What is a full documented loan?

Both income and assets are disclosed and verified, and income is used in determining the applicant's ability to repay the mortgage. Formal verification requires the borrower's employer to verify employment and the borrower's bank to verify deposits. Alternative documentation, designed to save time, accepts copies of the borrower's original bank statements, W-2s and paycheck stubs.

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What are the other types of loans?

Stated income/verified assets: Income is disclosed and the source of the income is verified, but the amount is not verified. Assets are verified, and must meet an adequacy standard such as, for example, 6 months of stated income and 2 months of expected monthly housing expense.

Stated income/stated assets: Both income and assets are disclosed but not verified. However, the source of the borrower's income is verified.

No ratio: Income is disclosed and verified but not used in qualifying the borrower. The standard rule that the borrower's housing expense cannot exceed some specified percent of income, is ignored. Assets are disclosed and verified.

No income: Income is not disclosed, but assets are disclosed and verified, and must meet an adequacy standard.

Stated Assets or No asset verification: Assets are disclosed but not verified, income is disclosed, verified and used to qualify the applicant.

No asset: Assets are not disclosed, but income is disclosed, verified and used to qualify the applicant.
No income/no assets: Neither income nor assets are disclosed.

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What is a good faith estimate?

It is the list of settlement charges that the lender is obliged to provide the borrower within three business days of receiving the loan application.

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What is a conforming loan?

A loan eligible for purchase by the two major Federal agencies that buy mortgages, Fannie Mae and Freddie Mac.

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What is a jumbo mortgage?

A mortgage larger than the maximum eligible for conforming purchase by the two Federal agencies, Fannie Mae and Freddie Mac.

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What are points?

It is an upfront cash payment required by the lender as part of the charge for the loan, expressed as a percent of the loan amount; e.g., "2 points" means a charge equal to 2% of the loan balance.

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What is a pre-qualification?

This is the process of determining whether a customer has enough cash and sufficient 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. A pre-qualification is short of approval because it does not take account of the credit history of the borrower.

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Loan Programs

The following is a partial list of programs offered with a brief description of the key elements of each. For a complete list of the programs that we offer, please contact us at 571-238-6443

 

Conventional

Traditional loan programs that usually require 5% down and offer competitive interest rates. Documentation and fair-to-good credit are necessary.

No Income Verification

Loans where your income is not requested or verified with as little as 10% down are stated income loans. There are several varieties of the "no-doc" loan today. The type of loan that is best suited for a particular borrower depends on that borrower's situation. Some borrowers choose not to disclose employment, income, or asset information, while others may be willing to disclose employment and asset information but not income. Still others might be willing to disclose income but select a program that does not calculate debt-to-income ratios, allowing those borrowers to exceed the traditional guidelines in order to qualify for a larger mortgage amount. With all the different variations of the no-doc loan, there is definitely a mortgage program for today's non-conventional borrowers.

No Down Payment

0% down payment required and closing costs paid by the borrower (seller can contribute up to 6% towards closing costs).

Credit Problems

Troubled credit? Bankruptcy? Been turned down somewhere else? We offer loan programs for customers with credit problems.

103% Purchase

0% down payment required and closing costs can be financed up to 103% of the purchase price. Only single-family homes that will be owner-occupied are eligible. First time homebuyer status not required and there are no income limits.

80/15/5

This is a loan which carries a second mortgage for up to 15% of the purchase price of the property. It is usually used when wishing to avoid PMI insurance or to keep your first mortgage under the FNMA/FHLMC limit to avoid Jumbo rates. The borrower puts down a 5% down payment and then finances a first mortgage up to the FNMA/FHLMC limit and a second mortgage of up to 15% of the purchase price. Other variations are 80/10/10 or 75/15/5.

Jumbo Loans

Offers 30 and 15 year fixed rate mortgage and competitive ARM products with full document, alternate documentation and limited documentation.

Cash out and No cash out refinance are allowable. Single family detached, Condo's, PUD's and single-family second homes can be financed with no prepayment penalty.

Challenged Credit Loans

These mortgages are for borrowers with less-than-perfect credit. They can vary from slightly damaged credit to severely damaged. Regardless of your situation, we have a mortgage that will get you back on track.

High Debt Ratio Loans

A ratio of monthly bills to monthly income higher than 50% is considered a high debt ratio. Loan programs are available for borrowers in this situation, allowing them to finance the purchase of a home or property.

Second Mortgage Loans

Subordinate to the first mortgage, these loans offer the borrower the ability to get money for home improvement, debt consolidation, or many other reasons without disturbing their first mortgage. Convenient when you have a low interest first mortgage.

Construction Loans

Building a new home can be an exciting prospect - unless you get caught up in a construction loan approval process that is overly complicated and time consuming. With this loan, we will finance up to 90% of the cost of land plus the costs of construction. We offer a one-time fixed rate closing or traditional ARM products.

Investor Loans

Used to finance 1-4 family properties that will be for investment with as little as a 10% down payment. Aggressively priced, these programs have many variations, including: No Doc, Limited Doc, and Full Doc. Program may not be available in some states.

Flex 97%

Similar to FHA, but without maximum mortgage amount limitations. Must be a single family, owner occupied home and borrower must have a credit score of over 680.

VA Mortgages

Backed by the Veterans Administration and the federal government, it is similar to FHA except that you have to be a qualified Veteran or military person.

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