• Why should I utilize a mortgage broker?
• Why should I do a no point, no fee loan?
• Why do interest rates go up and down all the time?
• What is an IRS 4506?
• What documents will I need?
• What is a FICO Score?
• What about downpayment?
• Do I need Private Mortgage Insurance?
• What is prequalifying?
• What is preapproval?
• What is a Rate Lock?
• Is the lender you find for me going to resell my loan?
• What if the lender you find or someone they sell my loan to goes out of business?

• It costs no more to do business with a mortgage broker.
• We do the shopping for you from an approval list of qualified lenders.
• Because of the diversity, the opportunities for loan applicants to qualify are greatly improved.
• We have access to the most competitive adjustable and fixed-rate loans, including Easy Qualifiers (limited documentation) and Jumbo's (larger home loans).
• Our only business is to provide the lowest cost home financing on the market today for the consumer.
• Because we are a broker approved with many lenders we are not forced to recommend one set of loan programs but can go to any of the approved lenders to find the best loan. A savings and loan or bank does not do this.
• We do our best to make your loan closing fast and hassle free; however if your loan needs extra work we are there to make sure we arrange a loan for you. If the loan does not close we do not get paid!

Why should I do a no point, no fee loan?

Maybe you are thinking of refinancing but you think rates are going to decline some more this year. What should you do? Suppose you have an $250,000 adjustable mortgage with a lifetime cap of 10%; your monthly payment can go to $2,193. Your current adjustable rate is 7.5%, the monthly payment is $1,748 and may go to 8.5% during the next year, your payment will increase to $1,922. The No-Point No-Fee Advantage: If you can refinance your home @ 7.875% payment of $1,812 fixed for 7 years you can avoid the risk associated with an adjustable and if rates fall you can refinance once again. Why? By not paying the loan points and closing costs out of your pocket you have the financial flexibility to refinance once again if interest rates continue to go down. Your new rate of 7.875% cannot go any higher for 7 years but if rates fall to, say, 7.5% or 7% you can refinance again & again and continue to lower your monthly payments without spending anything. The No-Point, No-Fee loan program is a quirk which solely favors the borrower in a declining rate market. This is an opportunity to actually "get something for nothing".

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Why do interest rates go up and down all the time?

Because lenders pool loans into securities and then sell them in "the secondary market" they are competing with the entire pool of world-wide investment opportunities. Any inflationary news translates into smaller values for fixed-rate securities and necessitates a rise in mortgage interest rates.

Thus, people in the mortgage business are hoping for lousy economic news which translates into little or no inflation and low mortgage interest rates.

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What is an IRS 4506?

IRS 4506 and 8821 are forms which allows the lender to receive an electronic abstract of your tax returns. It this day of scanners, laser printers, and tax preparation software it is easy to prepare a set of "phony" tax returns to submit to the lender. This form's purpose is to keep everyone honest. If you give us tax returns they better be the same one's you sent IRS. You will not get a loan if you're unwilling to sign this form. This is not open for discussion. Please understand that this does not mean that any information is being provided to IRS. The information comes from IRS.

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What documents will I need?

Click here for a complete list.

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What is a FICO Score?

FICO scores are numeric representations of your credit profile. The higher the FICO score the better credit risk you are.
FICO is a product of Fair, Isaac Company. These have been around for several years but started to be used in the mortgage lending business in 1995 for the purpose of keeping down the expense associated with Home Equity loans. You needed a certain minimum score to get such a loan.
Now both FMLMC and FNMA are going to insist on a FICO score on your credit report. Presumably, you can be denied a mortgage loan if your score is too low. People will be unhappy as a result and our elected officials will find a new cause to protect us from.

At the present time we can say the following about these scores:

1. They are based on years of computer modeling aimed at predicting who might be a credit risk.
2. Their purpose is to reduce the cost of examining a credit report and speed mortgage approvals.
3. When your FICO is computed the program tells the credit bureau what the 4 most important factors were in determining the score.
4. Fair, Isaac and the credit bureaus do not want to reveal how these scores are computed. The Federal Trade Commission has ruled this to be OK.
5. The important negative factors are: bankruptcies, delinquencies, credit lates, collections, too many "tapped out" credit lines, "too much" credit, too little credit history.
6. The score is only as good as the data. The amount of credit data history is so large that there are problems with it. The most common problem that I see is with relatives with the same name.
7. Borrowers often dispute the data but it is very accurate.
8. It will become more important that ever to keep a good or perfect credit history.
9. Even the very act of getting a credit inquiry is said to lower the FICO score (very slightly) so it is important to not authorize someone to pull your credit report unless it is necessary.

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Downpayment

You can get a home with as little as 5% downpayment (there are special cases which do 3% down). If your downpayment is less than 20% of the purchase price, or 20% of the appraisal for a refinance you will need Private Insurance (PMI). The downpayment must be well-documented. That is, you must show, for example, bank statements proving that you have had the money for at least 2 months. If the source of the downpayment is a gift from a relative you will need:

• a "gift letter"
• statements from the accounts of the gift-giver showing that they have had it for at least 2 months.
• a copy of the check from them to you and a copy of the deposit slip showing it going into your account.

The purpose of all this is to make sure that the downpayment is not a loan and most especially not coming from the seller.

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Do I need Private Mortgage Insurance?

Private Mortgage Insurance (PMI) is needed on all loans where the loan-to-value (the loan amount divided by the value of the property) exceeds 80%. (There are some examples of "self-insured" loans where the rate is increased and there is no formal PMI but you pay one way or another.) The mortgage insurance premium depends on the loan-to-value ratio. It is 3-tiered: 80.01%-85.00%, 85.01% to 90.00% and 90.01% to 95.00% each step costing more. The mortgage insurance also depends on the loan amount and the type of loan. Adjustable rate loans have higher premiums than fixed rate loans. At the present time you can choose between monthly and annual premiums. The PMI is given by a different party than the lender. Your lender will send a copy of your loan application package to the MI company for their approval. Among the loan documents you will sign at closing is a PMI agreement. Your lender will "impound" the PMI payment along with your principle and interest. It is usual that when your loan-to-value equals or exceeds 90% your property tax is also impounded. PMI policies usually have "escape" clauses describing under what conditions you can stop paying PMI. It is necessary that you read the PMI policy to determine this. Make no assumptions.

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What is prequalifying?

Prequalifying is a process whereby a loan officer takes information about you, either over the telephone or face-to-face and indicates how big a loan of a particular type you will qualify for. The lender would then give you a "prequalifying letter" which is of considerable value in dealing with a Realtor or a potential seller. Realtors and sellers are interested in dealing with people whom they know to be able to get the loan necessary to close the deal. We prefer to get the income and asset information from you, get a loan application and prequalifying credit report and then write the letter. We are willing to make exceptions if time is critical.

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What is preapproval?

Preapproval is a step beyond prequalifying. In a preapproval we send the credit part of the loan package to the lender and get you approved for a certain type of loan with a particular lender before you have found or made an offer on a property.

With a preapproval you can close the loan faster and often will find your offer more acceptable to the seller. Sometimes sellers are anxious and will take somewhat less in price from someone who can close quickly.

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What is a Rate Lock?

The rates you see on this web site are always quoted (unless otherwise noted) for 30 day rate locks. The interest rate on your loan is not set until we fax a "Rate Lock" form to the lender and receive confirmation that they have received it. The loan must fund before the "lock expiration" date or you can lose your rate lock. When we are locking your rate and discussing the lock expiration date it is important that both borrowers be available to sign the documents. You must tell us of your vacation and travel plans. If one borrower will be out of town we can have a "specific power of attorney" prepared so that the other person may sign for both.

You can lock your rate before your loan is approved, you can even lock your rate before your loan is submitted. In general, we can get you a 45 day rate lock for an extra 0.125 in rate or 0.5 points in cost. It must be noted that the cost for extended locks can vary significantly with the volatility of the market. When rates are volatile long term locks are more expensive.

Long-term locks

You can lock rates in (on purchases) for a long period. Here is an example of long term lock costs for one particular lender as of now.

• 120 day extra 0.875 points cost
• 150 day extra 1.375 points cost
• 210 day extra 1.625 points cost with 0.625 points up-front fee (included in cost)
• 270 day extra 2.25 points cost with 0.875 points up-front fee (included in cost)

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Is the lender you find for me going to resell my loan?

You should assume that your loan will be sold. The good thing about this is that the marketability of pools of loans as "Mortgage Backed Securities" has led to lower rates. The annoying thing is that your loan may get sold a couple of times in the first year and you have to keep track of whom you have to pay. This is an inconvenience, particularly since they may be in another state and time zone. But it is, we feel, an inconvenience that we all put up with for the sake of lower rates.

As part of the loan documents you will be asked to sign a form granting recognition to the fact that your loan may be sold. You will also be provided with a form from the lender indication what percentage of their loans have been resold in recent years.

Keep in mind that there is a Federal regulation which gives you the ability to make payments to your old lender for a period of time after your loan is sold. This will protect you from having your payment reported as "late" if you send it to the old lender soon after it is sold. Protect your rights in this regard.

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What if the lender you find or someone they sell my loan to goes out of business?

People sometime ask: If the lender you find for me goes out of business or becomes insolvent can I be forced to pay my loan off early. The answer is No, never. If the ownership of your loan is transferred because of failure it is still governed by the original note and deed of trust. Your note cannot be accelerated and your rate cannot be modified as a result of the failure. (Interestingly enough, this is not true of the savings or CD account you might have with a failed institution. There the principle maybe guaranteed by the interest isn't.)

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