Mortgage FAQs

This question is probably the most frequently raised question. Interest rates can change daily, so until you are ready to lock in a rate, only an estimate can be provided. Additionally, your rate is influenced by a number of factors such as your credit scores, the type of loan that you choose, and the amount of your down payment, to name a few. Your loan officer will be able to estimate a range that you can expect given a recent history of interest rate levels. But the answer to your question can be answered definitely once you are able and have decided that you are ready to lock in an interest rate.

In general, you will need documentation to confirm your income, your assets, and your employment history. Conceptually, the information that you outlined on your loan application is typically confirmed and verified by the documentation requested. You can refer to our loan checklist as a guide.

To lower your interest rate or monthly payment typically requires an increase in down payment, selection of a different loan option, or the payment of discount points to buy down your interest rate. Often, improving credit scores may also help achieve your goal.

Pre-qualification means your mortgage lender determines that after obtaining your preliminary credit report and the information listed on your loan application, you are qualified to purchase a home in the range and with the terms that you have discussed. Pre-qualification is not the same as pre-approval. Pre-approval is provided once the lender verifies or confirms the information listed on your loan application. Verification is completed based on industry-specified underwriting guidelines.

Closing costs are costs associated with your loan application and third-party fees related to the closing on your home. They include fees such as the appraisal fee, title insurance, document preparation fees, as well as property taxes, homeowner’s insurance, and setting up your escrow account, if applicable. Your loan officer can provide you an estimate based on the assumptions that you provide related to your purchase plans.

Closing time varies across mortgage companies. Generally, it takes approximately 3-4 weeks to complete the loan process. The loan process includes verifying the information listed on your loan application, receipt of your property appraisal, and title information. Additionally, a lender is required to provide you a Closing Disclosure at least three days prior to closing. The combination of these various aspects is the reason for the estimate of 3-4 weeks needed to close.

It is a common assumption that a 20 percent down payment is required, especially following the real estate market collapse in 2007. That is a faulty assumption. Minimum down payment requirements vary by mortgage option. For example, under FHA, it is 3.5 percent. Under some conventional options, 3 percent is permitted. The most liberal are VA and USDA, which can be as low as 0 percent. There are some restrictions such as credit scores that influence access to these options, so the guidance of an experienced loan officer is highly recommended.

It is commonly expected that each person whose name will appear on the title be personally present to sign the closing documents. In situations where it is impossible for this to happen, a power of attorney can be provided to a party to sign on your behalf. In this situation, it is necessary to contact your lender and the title company to discuss the matter and to confirm the options that are available. A mobile notary service arranged by your title company may be another solution. Again, if you anticipate that you will not be able to be present at closing, inform your loan officer and the title company as soon as possible.

PMI, or private mortgage insurance, is required whenever the down payment is less than 20 percent. The insurance is required as a protection for the lender because of the lower down payment amount. The most common question regarding PMI is related to the monthly PMI option. There are options other than monthly PMI. Your loan officer can discuss the different options available and help you determine the best option for you.

For monthly PMI, once you can demonstrate that you have 20 percent equity in your home, you can request your PMI be canceled and be removed from your monthly payment. This is typically accomplished by providing a current appraisal or broker price opinion on your home demonstrating that the value of your home has increased and that you now meet the 20 percent requirement. The first step in the process is to contact your lender to determine what and how you are required to provide the necessary documentation needed to obtain the cancellation.

There are other important criteria you must meet if you want to cancel PMI on your loan:

• Your request must be in writing.
• You must have a good payment history and be current on your payments.
• Your lender may require you to certify that there are no junior liens (such as a second mortgage) on your home.
• Your lender can also require you to provide evidence (for example, an appraisal) that the value of your property hasn’t declined below the original value of the home. If the value of your home has decreased below the original value, you may not be able to cancel PMI at this time.

Refinancing can be a smart option if today’s interest rate is below your current rate. But interest rate differentials are not the only reason to consider refinancing. Often the decision is based on the goal of reducing the time to pay off your loan or the need to convert equity to cash. See our refinance page for more insights.