Frequently Asked Mortgage Questions

Do you have questions? We can help! When you begin the loan process, you have hundreds of questions.  Miller Financial can answer each and every question you may have. We would be delighted to advise you about questions concerning your personal financial situation so you can buy the home of your dreams.  Contact Miller Financial today or apply online -- we'll respond quickly and professionally to help you protect your best interests right through closing!

Why should I bother with a pre-approval?

It can be easier to negotiate a real estate when the seller knows you are pre-approved for the sales price. Thereís also the aspect of your own peace of mind, knowing you have been pre-approved for a loan amount before you fall in love with a house!

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What is APR?

Annual Percentage Rate is the rate of interest you pay after you factor all finance charges and interest over the life of the loan.

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What is mortgage insurance?

Private Mortgage Insurance protects the lender against loan default, and is usually required when a borrower has less than 20% for the down payment.

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How do you compare APRs of different mortgages?

Calculating the APR can vary. Usually it is best to evaluate the same interest rate for the same loan type and term, and then compare points and total closing costs. Our mortgage experts offer you invaluable advice based on years of experience in the industry.

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What is the difference between fixed rate and adjustable rate mortgages?

Fixed rates remains constant throughout the entire term of the mortgage. Adjustable rates start off at one rate but then are subject to adjustment at fixed periods. Your monthly payments will be recalculated based on the prevailing market conditions at the time - and yes, your payments can go up or down.

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Which is better, an adjustable rate mortgage or fixed rate mortgage?

In most cases, a fixed rate mortgage is better when rates are low. Adjustable rates may be more attractive if you donít plan to stay in the house for several years. One caution to consider about adjustable rate mortgages is negative amortization, where the total amount you owe on your mortgage actually increases during the mortgage period.

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What are the advantages of purchasing a home vs. renting?

* Increased standard of living.
* Tax deductions for interest and property taxes
* Building home equity
* Appreciation of your property

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What are the benefits if I refinance my home?

* Converting an adjustable rate mortgage to fixed rate mortgage to stabilize your payments
* Converting a higher-rate mortgage to a lower-rate mortgage when rates are low
* Tax considerations for the amount refinanced
* Tapping into additional cash to improve your home and increase its value

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Which mortgage program is best for me?

Now that's highly personal! There is no one answer. We can help you evaluate countless loan offers sponsored by large numbers of lenders, then you decide what's right for you. We will then assist you through the loan process, step-by-step, right through closing.

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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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When does it make sense to refinance?

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 to consolidate debts. 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" time. If you own the house longer than this, you will save money by refinancing.
Since refinancing is a complex topic, consult a mortgage professional.

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What is a rate lock?

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, and the length of the lock.

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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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What is a full documented loan?

Both income and assets are disclosed and verified, and 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, designed to save time, accepts copies of the borrower's original bank statements, W-2s and paycheck stubs.

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What are the other types of loans?

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.

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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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What is a conforming loan?

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

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What is a jumbo mortgage?

A mortgage larger than the maximum eligible for conforming purchase by the two Federal agencies, Fannie Mae and Freddie Mac.

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What are points?

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., "2 points" means a charge equal to 2% of the loan balance.

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What is a pre-qualification?

This is the process of determining whether a customer has enough cash and sufficient income to meet the qualification requirements set by the lender on a requested loan. A pre-qualification is subject to verification of the information provided by the applicant. A pre-qualification is short of approval because it does not take account of the credit history of the borrower.

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Be sure to visit our Mortgage Glossary

Miller Financial, Inc. | Phone: 951-691-1373 | NMLS#: 290131
Email: info@millerfinancial.com