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Mortgage News Matters

7 Questions to ask your Lender when Obtaining a Pre-Qualification Letter

Pre-qualification is an essential first step in the home buying process. It determines how much money you can borrow and gives you insight into what your mortgage options are – allowing your lender to better identify your unique needs and goals.

To help you best get prepared, we’ve listed 7 important questions to ask your lender when starting the pre-qualification process.

  1. What is your pre-qualification process? Every lender has a different process. To help you best prepare and save yourself the most time and energy, ask your lender what documentation is required before starting the process.

  2. How long can I expect the process to take? There are many factors that go into the overall timeline, such as processing, underwriting, title search, appraisal, and other verification procedures.

    By asking how long the process will take up front, you can set realistic expectations for yourself. It can also be helpful to ask what factors could delay the home closing, so you can best prepare for any likely hurdles.

  3. Are my taxes and insurance included in the payment? This will determine how much your monthly payments will be, as well as how much money you will need to bring to the closing.

  4. Is there anything that could increase my interest rate or loan payment? If a borrower chooses a fixed interest rate loan, their payment will never increase throughout the life of the loan. However, if taxes and insurance are included, your payment could change over time due to increases in HOI premiums and property taxes.

  5. Can I lock in my interest rate? And if so, how long will my interest rate be locked? Typically, mortgage rates are priced with a 30-day lock, but you can choose to delay this if you are purchasing a foreclosure or short sale. A shorter lock period means a lower interest rate, while a longer lock period results in a higher interest rate.

  6. How will my credit score affect my interest rate? This is an important question to ask, especially if you have had any changes in your recent credit scenario.

  7. How much should I expect to pay at closing? There are many factors that go in to determining your closing costs, such as your earnest money deposit, appraisal fees and seller contributions. By getting this number up front, so you can properly budget for closing day.

To learn more about the pre-qualification process and get the answers to your questions, contact a VanDyk Loan Originator today!

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Mortgage News Matters

Is the Lowest Rate the Best Rate?

Homebuyers who are new to the market may find themselves asking the common question, ‘Is the lowest rate the best rate?’ It’s a good question to ask because the answer can be somewhat complicated.

The short answer is no.

In some cases, even, a borrower might end up paying more for a lower rate. This is why understanding the difference between the lowest rate and the best rate is important. 

When determining the best rate, you will want to look at two major things: (1) the interest rate and (2) the APR.

What is the difference between Interest Rate and APR?

Interest rate is the rate a borrower pays on their home loan. This rate varies due to many factors, such as home price and loan amount, down payment, loan term, interest rate type – adjustable vs. fixed – loan type, and credit score, to name a few.

APR is the interest rate plus other fees and costs that go into buying a home. Which is, what a borrower will end up paying on top of the principal. These fees include the interest rate, origination fees, discount points, and closing costs – which include application and attorney fees, administrative or processing fees, insurance fees, property taxes, and expenses from the title company.

To determine the best rate, you will want to find the one that saves you the most money once you factor in fees, closing costs, and loan terms. You will want to look at the APR.

When looking at the APR you should pay attention to these major factors:

  1. Which fees are included? Sometimes fees, like appraisal fees, property taxes, and insurance costs are not included in the original APR quote. It can be helpful for borrowers to ask these questions upon receiving a quote from their lender, so they are not hit with unexpected costs later.
  2. Upfront costs? In some cases, lower APRs may have higher upfront costs, this is important for borrowers to acknowledge as well so they are not stuck paying unexpected upfront costs at closing.
  3. Take into consideration PMI, credit score, and down payment. Borrowers with less-than-perfect credit may qualify for a loan but will have a higher APR because of it. Likewise, those who put a smaller amount towards their down payment or who haven’t accounted for mortgage insurance may see an increase in their APR.
  4. Consider the length of the loan. The APR is calculated in relation to the length of the loan. This means, for a 30-year loan, the APR is determined assuming it will take 30 years for the loan to be paid off.

    However, many borrowers choose to pay their loans off earlier than the original term, which ultimately affects the APR. The best way to get the most accurate APR would be to keep the loan for the entire term. Or, if a borrower is anticipating paying it off early, they should be prepared for an increase in APR.

Understanding the difference between interest rate and APR is crucial when it comes to finding the best mortgage loan rate.

Moreover, understanding the costs that will affect your APR in the long run, is the only way to make sure you are getting the best rate possible.

Your best option is to sit down and talk with a Loan Originator who can help you break down the real, and sometimes hidden costs, that affect your APR to help you find the best deal for you! 

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Mortgage News Matters

5 Reasons to Refinance

Refinancing can be beneficial to homeowners who are hoping to get cash out for a home project, or those who are simply looking to lower their interest rate. Though a borrower’s reason to refinance is unique to them, it may be helpful to look at a few common reasons one might want to consider refinancing their current home loan.

  1. Finance home improvements and upgrades. Whether you’re looking to increase the value of your property through a home addition or you’re finally ready to make that much-needed upgrade, cash-out refinancing can help you fund these goals.
  2. Lower your interest rate. If refinancing can reduce your interest rate by even 1%, it can ultimately save you money in the long run, while also allowing you to build equity at a faster rate.
  3. Consolidate high-interest debt, such as credit cards or other personal loans. When consolidating, it is important to be mindful of how much equity you currently have in your home. This way, you can avoid paying private mortgage insurance, if your equity dips lower than 20%.
  4. Reduce or eliminate mortgage insurance. If your property value has increased, you may find yourself currently with 20% equity in your home. In this case, you could reduce or eliminate your PMI.
  5. Purchase an investment property. Like financing improvements and upgrades, a cash-out refi will give you the capital to invest in other projects, such as the purchase of an investment property.

If you’re considering refinancing your home and want to find out more about the benefits that come along with it, email us at servicemyloan@vandykmortgage.com or give us a call today!