Frequently Asked Mortgage Questions

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 based on your responses which are not verified. 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.

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 the refinance could also consolidate debts other than just the mortgage. 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" point to consider. If you own the house longer than this, you will save money by refinancing. Since refinancing can be a complex topic, contact a mortgage professional with FiT Mortgage!

A Loan Estimate (LE) is a standardized form provided to borrowers by mortgage lenders within three business days of receiving a loan application. It is a key document in the home mortgage application process and is designed to help borrowers understand the terms and costs associated with the loan they are applying for. The Loan Estimate includes important information such as the estimated interest rate, monthly payment, closing costs, and other details about the loan. It allows borrowers to compare offers from different lenders and make informed decisions about their mortgage financing. The Loan Estimate is part of the consumer protection measures implemented by the Consumer Financial Protection Bu

A Closing Disclosure (CD) is a document provided to borrowers by mortgage lenders at least three business days before the scheduled closing of a home purchase. It is a detailed statement that outlines the final terms and costs of the mortgage loan. The Closing Disclosure includes important information such as the loan terms, interest rate, monthly payments, closing costs, and other fees associated with the loan and the home purchase. The CD is designed to provide borrowers with a clear and accurate summary of the financial aspects of the transaction, allowing them to review and compare the final terms with the previously provided Loan Estimate. The introduction of the Closing Disclosure is part of the regulatory measures aimed at enhancing transparency and ensuring that borrowers have adequate time to understand the terms before finalizing the home purchase.

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 (if any), and the length of the lock.

A mortgage broker counsels you on the loans available from different wholesale lenders, takes your application, and usually processes the loan. This 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 so they can issue an approval for the loan.

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 -- as many as 10-15 or 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.

Both income and assets are disclosed and verified, and the 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 can be copies of the borrower's most recent bank statements, W-2s, paycheck stubs, and possibly tax returns.

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.

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

A mortgage larger than the maximum eligible for conforming purchase by the two Federal agencies, Fannie Mae and Freddie Mac. The conforming loan limit typically updates annually based on the median home prices in each area (county).  

The 2024 conforming loan limit for single-family homes is $766,550 in most areas, but it can be higher in some expensive housing markets. For example, in the Nashville, TN and the surrounding counties (MSA), the conforming loan limit is $943,000. 

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., "1 point" means an amount paid that is equal to 1% of the loan balance.