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Mortgage News Matters

What’s the Difference Between Refinancing & Home Equity Loan?

One of the major benefits of owning a home is that it is, in fact, a major financial investment. By obtaining a mortgage loan refinance or home equity loan, homeowners can access cash to cover events like unplanned emergencies, necessary repairs, and important updates.

So, what is the difference between the two and when should a borrower consider each?

What is a Mortgage Loan Refinance?

Refinancing is the act of paying off a borrower’s current mortgage with a new one, typically at a lower interest rate, saving them money in the long run.

What is a Home Equity Loan?

A Home Equity Loan gives homeowner’s cash in exchange for the equity they’ve built up in their property as a separate loan.

Both methods can be beneficial to homeowners who need to access a home’s equity. However, a borrower’s circumstances can determine which method is best for them.

When should a borrower Refinance?

Refinancing is ideal for homeowners who intend on staying in their current home for at least the amount of time that the benefits of reduced monthly payments or another tangible benefit will recoup the closing costs associated with a full new mortgage. Refinances can either be “rate and term” or “cash-out”, meaning the equity in the home can be leveraged to pay off just the current loan or both the current loan and receive additional equity as cashback at closing.

When should a borrower take out a Home Equity Loan?

A home equity loan is ideal for borrowers who are looking for a significant sum of money right away for a specific purpose, like paying for a major home improvement. A home equity loan may be the best option for borrowers who currently have a low-interest rate on their first mortgage and the “blended rate” and payment of their current 1st mortgage and new 2nd mortgage is less costly than replacing it with a whole new loan.

Another consideration to keep in mind is that Home Equity Loans are often structured as lines of credit with variable interest rates and payments which make them less predictable. Any borrower on a tight budget with limited disposable income would need to take this into account.

It is important to note that for borrowers to refinance or obtain a home equity loan, they must take into consideration their credit score. If their score is lower than when they originally purchased their home, refinancing may end up increasing their interest rate. Borrowers should obtain their credit report before going through the process of applying for either loan, to be sure it is the right decision for them.

To learn more about the differences between refinancing and home equity loans and to determine which method is right for you, contact a VanDyk Mortgage Loan Originator today!

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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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What Does a Lender Look for When Approving My Loan?

When beginning the pre-approval process, most lenders are looking for a few major things: Credit History, Capital, Employment, and Collateral.

  1. Credit & Credit History. Lenders will use your current credit and past credit history as an indicator of your ability to repay your debt. They will look at how much you currently owe, how often you borrow, how often you pay your bills – and if you often pay them on time, as well as how well you live within your means. To check your credit score, visit annualcreditreport.com.


  2. Capital. Capital tells the lender how much money you have, to put towards your down payment, as well as funds that will remain in your accounts after closing to be used for reserves. This includes such things as moving expenses, money required to turn on utilities, emergency repairs, or cost of ongoing maintenance. This is crucial information as you begin your home buying journey and apply for a loan.


  3. Employment. Employment tells the lender approximately how long it will take you to pay back your debt. They will check things like your previous employment history, as well as your current employment situation. Lenders are looking for stability in your income earnings trend to help determine its likelihood of continuance.


  4. Collateral. Collateral protects the lenders in the case that borrowers are unable to repay their loan. This is equally important to lenders as credit, income, and employment, as it acts as a safety net in the unfortunate circumstance that the loan is unable to be paid.

For more information on the Loan Application and Loan Process, contact your local VanDyk Loan Originator today!

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Mortgage News Matters

What is the Difference Between Pre-Qualification and Pre-Approval?

Many home buyers know that pre-qualification and pre-approval are necessary steps in the home buying process, but not many understand how they differ, or when each action is required.

To help, we’ve broken down the process of each, and what – you as a home buyer – will need to provide.


What is pre-qualification?

Pre-qualification is an essential first step in the homebuying process. It tells you how much money you can borrow, based on your current finances and credit score, and gives you insight into your mortgage options, allowing your lender to better identify your unique needs and goals.

What do you need to provide for pre-qualification?

  • Income information
  • Credit check
  • Information about bank accounts
  • Down payment amount and desired mortgage amount

What is pre-approval?

Pre-approval is a much more in-depth process that requires more information and likewise carries more weight. This process requires you to complete a mortgage application and requires your lender to perform a credit check. Keep in mind that this process requires a detailed examination of your finances, so be prepared to answer unexpected questions.

The benefit of getting pre-approved is that it shows your seriousness as a homebuyer and your ability to secure a mortgage. Once you receive your pre-approval letter, it is valid for 90 days.

What do you need to provide for pre-approval?

  • Copy of pay stubs showing your income for the previous 30 days
  • Credit check
  • Bank account information or two of your most recent bank statements
  • Down payment amount and desired mortgage amount
  • W-2 statements
  • Personal and business tax returns from the past 2 years



Are you looking to get pre-qualified or pre-approved for a mortgage loan? Contact a VanDyk Loan Originator by calling 888-482-6395 today!