Home Mortgages with North American Lending

November 21, 2008

Frequently Asked Mortgage Questions

If you have questions, we have answers!! Several of the most asked questions are below, including:

Understanding the difference between pre-approval and pre-qualification
Understanding a rate lock
Understanding how going directly to a mortgage banker saves money
Understanding if it makes sense to refinance
Understanding points
Understanding what a good faith estimate represents
Understanding conforming loans
Understanding jumbo loans
Understanding full documentation loans
Understanding other types of loans available

Understanding the difference between pre-approval and pre-qualification: A pre-approval requires more complete borrower information than a prequalification. Prequalification is simply running ratios and can be accomplished on the phone. These ratios are based on the information provided, but without verifications. Pre-approval is recommended since it puts borrowers in a better negotiating position with a seller.

Understanding a rate lock: A rate lock is an agreement between a lender and a buyer. Some of the most important components of a rate lock are: length of time of the lock, loan program, interest rate, and origination or discount fees.

Understanding how a mortgage banker can save you money: Since mortgage bankers underwrite and close your loan, there is more control over the process allowing us to provide better service. Additionally, we have negotiated rates based on large volume to insure you get the best rate.

Understanding if it makes sense to refinance: Usually people refinance to obtain a lower rate or to reduce the term on the loan. Also, if borrowers currently have an adjustable rate mortgage or need cash out of their home, they may want to refinance. The choice to refinance should be in part based on how long you plan to stay in the home. Consult your Home Lending Counselor to discuss your situation.

Understanding points: Points are usually paid to buy down the interest rate. The cost for this rate reduction is expressed as a percent of the loan amount. One point means a charge of 1% of the loan balance.

Understanding what a good faith estimate represents: This estimate is a list of normal settlement charges that the lender is obligated to provide the borrower within three business days of receiving the loan application.

Understanding conforming loans: A conforming loan qualifies as salable to the two main Federal agencies that purchase mortgage loans, Fannie Mae and Freddie Mac.

Understanding jumbo loans: A jumbo loan exceeds the maximum conforming purchase limit set by Fannie Mae and Freddie Mac.

Understanding full documentation loans: Fully documented loans require both income and assets be disclosed and verified. The income is used in determining the borrower's ability to repay the mortgage. Additionally, W-2's and paycheck stubs will be needed.

Understanding other types of loans: Stated income/verified assets requires income to be disclosed and the source of the income 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. No ratio loans require income to be disclosed and verified, but does not use the income in qualifying calculations. FHA mortgages are backed by the Department of Housing and Urban Development. FHA loans offer as little as 3% down and borrowers can finance "allowable" closing costs. Seller can also contribute up to 6% of the purchase price toward closing costs.

North American Lending

5100 Westheimer Road
Suite 415
Houston, Texas 77056
713-963-0049

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A Member of the NTFN Group