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What’s 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; In the state of Connecticut only a mortgage lender may issue a pre-approval. A mortgage broker may issue pre-qualification letters only.

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:

1. Calculate the total cost of the refinance.

2. Calculate the monthly savings.

3. 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 may save money by refinancing.

Refinancing can be a complex topic, consult a mortgage professional.

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.

What is the difference between a mortgage broker and a lender?

A mortgage broker arranges loans through different lenders, 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 that they conduct reviews and analyses to determine whether you qualify for a mortgage loan.

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 work with multiple lenders -- in a typical case, 25 to 30, sometimes more -- they can shop for the best terms available to you in their network of lenders 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.

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.

What is a Loan Estimate?

Loan Estimate (LE) is a three-page form that you receive after applying for a mortgage. The Loan Estimate tells you important details about the loan you have requested. The law requires us to provide you with a Loan Estimate within three business days after we receive your application. The form provides you with important information, including the estimated interest rate, monthly payment, and total closing costs for the loan. The Loan Estimate also gives you information about the estimated costs of taxes and insurance, and how the interest rate and payments may change in the future. When you receive a Loan Estimate, a lender has not yet approved or denied your loan application. The Loan Estimate shows you what loan terms the lender expects to offer if you decide to move forward. If you decide to move forward, we will ask for additional financial information in order to proceed with the application process. If you are applying for a reverse mortgage or a Home Equity Line of Credit (HELOC) you will receive a Good Faith Estimate (GFE) and an initial Truth-in-Lending disclosure – instead of a Loan Estimate.

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.

What is 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. A mortgage broker may issue a pre-qualification.