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APR Explained
APR stands for Annual Percentage Rate. The APR is the interest rate plus the finance charges computed and expressed as a percent, not as a dollar amount. APR takes into account all of the normal coast associated with the loan, to provide a clear, overall figure for the total cost of the loan. APR gives you as the Borrower a clear and simple way to compare the cost of the loans like for like. All other things being equal, the loan with the lower APR is the cheaper option.
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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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WHAT IS TITLE INSURANCE?
It is a policy provided by the title company guaranteeing the accuracy of the title work done on your home at the time of purchase. As a buyer, you are required to purchase a lenders policy of title insurance as part of your standard closing costs, which only protects the mortgage company. You may also choose to purchase an owners policy, which would protect you against any loss in the event of any legal issues relating to the title of your home.
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WHAT IS AN ORIGINATION FEE?
Typically, it is 1% of your loan amount, and works exactly like a discount point. You can avoid all or part of this fee by paying a higher interest rate. In Most cases, rates are typically quoted assuming this 1% origination fee.
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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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WHY AND HOW DO INTEREST RATES CHANGE?
Many people are surprised to learn that rates change on a daily and sometimes hourly basis. Interest rates fluctuate in response to changes in the financial markets. The bond market is generally a good indicator of the general trend of interest rates.
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WHY DID MY REALTOR ®/ BUILDER REFER ME TO YOU
A high quality realtor®/builder knows that the key to a successful transaction means TEAMWORK with a professional mortgage banker. Any experienced realtor®/builder could tell you horror stories about times when a client made a poor choice of mortgage company, and ended up with big surprises at the closing table, or worse, no closing taking place at all! A good realtor®/builder will form relationships with trusted individuals who have proven themselves time and time again, so that they know you will be given the excellent service that you deserve. It is important to know that your realtor®/builder is NOT given any compensation or "kickbacks" for referring you to us. As mortgage professionals, we desire more referrals, both from you and your realtor®/builder, so consider the extra motivation this provides for us to take great care with your satisfaction!
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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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WHY SHOULD I USE A REALTOR?
First and foremost, because you need an experienced professional working on your behalf. The realtor's commission is not paid by the buyer, but by the seller of the home being purchased, and it is in each party's best interest to have professional representation. As a seller, profits are generally maximized by having an experienced realtor market and sell your home, rather than deal with the headaches of trying to do it all on your own. See our page on "selecting a realtor" for more information.
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WHAT HAPPENS ONCE I AM PREAPPROVED?
You are ready to buy a home! Remember that it is very important to inform us of any changes in the financial information that was provided at the time of approval, as it may make a change in the amount or type of loan that you can qualify for
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WHAT IS MORTGAGE INSURANCE?
This is generally required in one form or another when the down payment is less than 20%, and protects the lender in the event of loan default. The lower the down payment, the higher the risk for the lender, and thus the higher the monthly premium. Depending on your particulars, there are ways in which mortgage insurance can sometimes be avoided at purchase, or dropped altogether at some point in the future.
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WHAT IS A PRE-APPROVEL?
What does it take to get pre-approved? Not as much as you might think! With a short phone conversation, I can provide you with your credit rating, approximate amount you qualify for, and list of items needed to finish the approval. Generally, if you have a few basic items available to fax, such as a recent pay stub, last two years W2 statements, and a recent bank statement, I can provide most clients with a pre-approval letter within 15 minutes.
You can also complete the items below to have more information sent to you. I want to work toward your specific goals and needs - just as every person is unique, so are their home financing desires. I will always present you with options, so that you can make an informed decision on what is best for you.
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