If there’s a question that you don’t see below, or you need more information than is provided, please contact us.
Why do interest rates change?
Interest rate movements are based on the simple concept of supply and demand.
If the demand for credit (loans) increases, so do interest rates. This is because there are more buyers, so sellers can command a better price, i.e. higher rates.
If the demand for credit reduces, then so do interest rates. This is because there are more sellers than buyers, so buyers can command a lower better price, i.e. lower rates.
When the economy is expanding there is a higher demand for credit, so rates move higher; whereas when the economy is slowing, the demand for credit decreases and so do interest rates.
Inflation Drives Interest Rates
Higher inflation is associated with a growing economy. When the economy grows too quickly, the Federal Reserve increases interest rates to slow the economy down and reduce inflation. Inflation results from price of goods and servies increasing.
When the economy is strong, there is more demand for goods and services, so the producers of those goods and services can increase prices. A strong economy therefore results in higher real-estate prices, higher rents on apartments and higher mortgage rates.
What's the difference between a conventional and FHA loan?
Loans where the borrower’s down payment is less than 20% often require mortgage insurance, which can be provided privately or publicly.
Conventional loans requiring MI are insured by private mortgage insurance. FHA loans are those whose MI is provided by the Federal Housing Administration, a public, government program backed by taxpayers.
Both mortgage insurance options have premiums, often paid by the borrower. Each program has advantages and disadvantages depending on your unique situation.
What is the difference between being pre-qualified and pre-approved?
Pre-qualification is normally determined by a loan officer. After interviewing you , the loan officer determines the potential loan amount for which you may be approved. The loan officer does not issue loan approval; therefore, pre-qualification is not a commitment to lend.
After the loan officer determines that you pre-qualify, he/she then issues a pre-qualification letter. The pre-qualification letter is used when you make an offer on a property. The pre-qualification letter informs the seller that your financial situation has been reviewed by a professional, and you will likely be approved for a loan to purchase the home.
Pre-approval is a step above pre-qualification. Pre-approval involves verifying your credit, down payment, employment history, etc. Your loan application is submitted to a lender’s underwriter, and a decision is made regarding your loan application.
When your loan is pre-approved, you receive a pre-approval certificate. Getting your loan pre-approved allows you to close very quickly when you do find a home. Pre-approval can also help you negotiate a better price with the seller.
What is an annual percentage rate (APR)?
The Annual Percentage Rate is the actual cost of the mortgage, based on the mortgage interest rate and factoring in other costs, including points paid and underwriting and processing fees.
The Federal Truth-in-Lending law requires mortgage companies to disclose the APR when they advertise a rate. Typically the APR is found next to the rate.
30-year fixed 8% 1 point 8.107% APR
The APR does NOT affect your monthly payments. Your monthly payments are a function of the interest rate and the length of the loan.
What is a rate lock?
A rate lock is a lender’s promise to “lock” a specified interest rate and a specified number of points for you for a specified period of time while your loan application is processed.
During that time, interest rates may change. But if your interest rate and points are locked in, you should be protected against increases. Conversely, a locked-in rate could also keep you from taking advantage of price decreases.
There are four components to a rate lock:
- Loan program
- Interest rate
- Length of the lock period
The longer the length of the lock period, the higher the points or the interest rate will be. This is because the longer the lock, the greater the risk for the lender offering that lock.
What is a FICO score?
A FICO score is a credit score developed by Fair Issac & Co. Credit scoring is a method of determining the likelihood that credit users will pay their bills. Credit scoring is widely accepted by lenders as a reliable means of credit evaluation.
Credit scores analyze a borrower’s credit history considering numerous factors such as:
- Late payments
- The amount of time credit has been established
- The amount of time credit used versus the amount of credit available
- Length of time at present residence
- Negative credit information such as bankruptcies, charge-offs, collections, etc.
To obtain a copy of your credit report, contact any of these credit-reporting agencies:
What if there is an error on my credit report?
To correct any errors on your credit report, you must dispute the accuracy of the item listed incorrectly, and show documentation as to your claim.
This can be done by you if you are diligent and persistent. You will need to contact each credit reporting bureau and complete their dispute process. The web sites are helpful. If the dispute is resolved in your favor, the credit reporting bureau must report and correct the error to the credit-reporting agency.
We also work with a credit repair company that does an outstanding job because they know all the ins and outs of the process.
Realistically, borrowers should allow 3 months for credit repair efforts to register at the Credit Bureaus. However, if it is only one item being disputed, we can help you get a rapid rescore immediately after you obtain a notice of successful dispute.
To obtain a copy of your credit report, contact any of these credit-reporting agencies:
For help with credit repair, Call For Details!
What documents will I need to have to secure a loan?
This checklist outlines the principal documents and information that are generally required to complete the application. additional documentation may be required, depending on the circumstances of your loan. By having the information available, you will save time and avoid delays.
- Copy of Purchase Sales contract or Offer to Purchase and all addenda (signed by buyer and seller)
- Past 2 years’ tax returns and W-2s
- Past 2 years’ employment history
- Last 3 consecutive paycheck stubs (5 if paid weekly)
- Name, address, and phone for past 2 years residence(s) and landlord(s) (if renting, evidence of 12 months rent payments)
- Last 2 months statements for savings, checking, CD, money market accounts, etc.
- Recent statement on retirement accounts (IRA, 401k, 403-B, Annuity, etc.)
- Proof of all additional income
- Military Discharge Papers (DD214) (if applicable)
- Divorce Decree (if applicable)
- Child Support or Alimony Award (if applicable)
- Bankruptcy schedules/Discharge papers (if applicable)
- Last 2 Years Business Tax Returns and year to date income statement (if own more than 25% of a business, S Corp, Inc, etc.)
Additional information that may be required:
- Estimated market value of appraised assets, such as autos, art, antiques, collections, etc.
Be prepared to discuss where the money for closing will come from, including down payment and closing costs. This money needs to be ‘seasoned’ to prove it is yours and not borrowed. Seasoning means that the money has been yours for at least 2 months.
Should I rent or buy?
Which is better for you: renting or buying? Everyone is different.
If you might need to relocate for work, or if you like somebody else taking care of real estate taxes, plumbing and repairs, etc., then renting may be for you.
Monthly payments for homeowners are generally lower than rental payments at this time in the housing market. This has not always been true. It’s a great time to buy!
If you want to have your own space inside the house, where you are free to paint and decorate according to your tastes, or if you want your own private yard outside, then buying is better than renting in most cases.
Should I refinance?
Save $100, $300, even $1000 a month on your house payment.
Find out if you can save money by refinancing your existing loan at current interest rate levels. Generally, when you can save 1% or more on interest on average value homes, it makes sense to refinance. Higher balance mortgages can make sense to refinance if saving 1/2%. Do the math, compare payments and monthly savings, divide by the amount of closing costs.
While a lower interest rate will mean lower monthly payments and less total interest, a refinance wil also mean paying closing costs. If the monthly mortgage savings exceeds these closing costs within 1-2 years, then refinancing is a good option.
Example: If a 1% change in rate could save you $400 a month, and closing costs are $3000 then your budget improves immediately, and you recoup closing costs in less than a year.