Frequently Asked Questions

Once you are pre-approved for a mortgage, there are several important do's and don'ts to keep in mind. Here's a concise list to guide you:

Do's:

  1. Maintain your financial stability: Continue to pay your bills on time, avoid taking on new debts, and maintain stable employment. Any significant changes to your financial situation can affect your final loan approval.
  2. Communicate with your lender: Stay in touch with your lender throughout the homebuying process. Inform them of any changes in your circumstances or if you have any questions or concerns. They can provide guidance and support to ensure a smooth transaction.
  3. Stick to your budget: Pre-approval gives you an idea of the loan amount you are eligible for, but it's essential to determine a comfortable budget based on your financial situation. Stick to this budget and avoid stretching yourself too thin financially.
  4. Keep your credit in check: Maintain good credit practices by paying your bills on time, keeping your credit card balances low, and avoiding any major credit-related activities. Your credit score can impact your final loan terms, so it's crucial to be diligent in managing your credit during the homebuying process.
  5. Continue property search: Once pre-approved, you have a better understanding of your purchasing power. Use this information to search for properties within your budget. Work with a real estate agent to explore suitable options and make informed decisions.

Don'ts:

  1. Make major purchases: Avoid making significant purchases or taking on new debts during the homebuying process. Large expenses or new debts can impact your debt-to-income ratio and financial stability, potentially affecting your loan approval.
  2. Change jobs or employment status: Lenders prefer stability in employment. Avoid changing jobs or becoming self-employed during the homebuying process, as it can raise concerns for lenders. If you must change jobs, inform your lender immediately to discuss any potential implications.
  3. Apply for new credit: Avoid applying for new credit cards or loans, as each application can generate a hard inquiry on your credit report. Multiple inquiries can temporarily lower your credit score and raise concerns for lenders.
  4. Make large cash deposits: Avoid making large cash deposits into your bank accounts without proper documentation. Lenders prefer to see a clear paper trail for all funds involved in the home purchase to prevent potential issues with the source of funds.

Remember, being pre-approved is an important step in the homebuying process, but it's not a guarantee of final loan approval. It's crucial to maintain your financial stability, follow the lender's guidelines, and communicate openly throughout the process.

Consulting with your mortgage lender or loan officer can provide you with specific guidance tailored to your situation and ensure a smooth transition from pre-approval to final loan approval and closing.

Deciding whether to hire a Realtor is a personal choice that depends on several factors. Here's a concise explanation to help you consider the benefits of hiring a Realtor:

  1. Expertise and knowledge: Realtors are licensed professionals with in-depth knowledge and experience in the real estate industry. They understand local markets, pricing trends, and the intricacies of buying or selling a property. Their expertise can help you navigate complex processes and make informed decisions.
  2. Access to resources and networks: Realtors have access to a wide range of resources and networks that can benefit you. They can provide comprehensive listings, connect you with other professionals (e.g., mortgage lenders, home inspectors), and facilitate negotiations on your behalf.
  3. Market insights and pricing guidance: Realtors can analyze market data, comparable property sales, and other factors to help you determine a competitive and fair price for a property. This knowledge can be invaluable whether you're buying or selling a home.
  4. Negotiation skills: Realtors are skilled negotiators who can represent your interests effectively. They have experience handling negotiations with buyers, sellers, and other parties involved in a real estate transaction. Their expertise can help you secure the best possible deal.
  5. Streamlined process and paperwork: Buying or selling a property involves a substantial amount of paperwork and legal documentation. Realtors can guide you through the process, ensure all necessary paperwork is completed accurately and on time, and help you avoid potential pitfalls.
  6. Time and convenience: Hiring a Realtor can save you time and effort. They can handle various tasks on your behalf, such as scheduling property showings, coordinating inspections, and marketing your property. This allows you to focus on other priorities while having peace of mind that your real estate needs are being taken care of.
  7. Code of ethics: Realtors adhere to a strict code of ethics, which means they are committed to acting in your best interest and maintaining professional standards throughout the transaction.

While hiring a Realtor offers numerous advantages, it's important to consider your specific situation, budget, and comfort level in navigating the real estate process. In some cases, you may feel confident and experienced enough to handle certain aspects on your own. However, working with a Realtor can provide valuable guidance, expertise, and peace of mind throughout your real estate journey.

If you're unsure whether to hire a Realtor, consider consulting with a few professionals in your area. They can provide personalized insights and help you make an informed decision based on your unique circumstances.

Points, also known as discount points, are fees that can be paid upfront to the lender at the time of closing in exchange for a lower interest rate on your mortgage loan. Each point typically costs 1% of the total loan amount. Here's a breakdown of how points work:

  1. Lower interest rate: By paying points, you can potentially reduce your interest rate, which can result in lower monthly mortgage payments over the life of the loan.
  2. Cost vs. savings analysis: It's important to weigh the cost of points against the potential savings they offer. Consider how long you plan to stay in the home and calculate the breakeven point—the point at which the savings from the lower interest rate outweigh the upfront cost of the points.
  3. Tax implications: In some cases, points may be tax-deductible. It's advisable to consult with a tax professional to understand how points may affect your specific tax situation.
  4. Suitability for your situation: The decision to pay points depends on your financial circumstances, long-term goals, and how long you plan to stay in the home. If you plan to keep the property for a significant period, paying points may make sense. However, if you anticipate selling or refinancing within a few years, the upfront cost may not be worthwhile.

It's crucial to discuss the option of paying points with your mortgage lender or broker, who can provide you with personalized advice based on your financial objectives and the current market conditions.

The decision to pay points depends on your financial circumstances, long-term goals, and how long you plan to stay in the home. If you plan to keep the property for a significant period, paying points may make sense. However, if you anticipate selling or refinancing within a few years, the upfront cost may not be worthwhile. 


If you plan to stay in the property for only a short period, your monthly savings may not be enough to recoup the cost of the discount points that you paid up-front.

Discuss the option of paying points with your mortgage lender or broker, who can provide you with personalized advice based on your financial objectives and the current market conditions.

APR stands for Annual Percentage Rate. It is an important factor to consider when comparing different mortgage offers or other loan options. Here's a concise explanation of APR:

APR is a comprehensive representation of the total cost of borrowing, expressed as an annualized percentage. It takes into account not only the interest rate but also other associated fees and charges that lenders may impose, such as origination fees, points, and mortgage insurance. The inclusion of these additional costs provides a more accurate picture of the true cost of the loan.

By considering the APR, you can make more informed decisions when comparing loan offers from different lenders. Here are a few key points to keep in mind:

  1. Transparency: APR ensures transparency by providing a standardized metric that allows borrowers to compare the overall cost of loans from various lenders. It helps you see beyond the interest rate and evaluate the total expense of borrowing.
  2. Comparison tool: When comparing loan options, focusing solely on the interest rate may not give you the complete picture. Lenders with lower interest rates may have higher fees, resulting in a higher APR. Therefore, comparing APRs helps you assess the overall affordability of the loan.
  3. Borrower-specific: It's important to note that the APR is calculated based on certain assumptions about the loan, such as the term, loan amount, and repayment schedule. Keep in mind that your individual circumstances may affect the APR you receive.

Remember to review and understand the APR, along with other loan terms and conditions, before making a final decision. If you have further questions or need assistance in evaluating loan options, consulting with a mortgage professional can provide valuable guidance tailored to your specific needs.

Locking in an interest rate is an important step in the mortgage process that provides you with stability and certainty regarding your loan's interest rate. Here's a helpful explanation of what it means to lock in an interest rate:

When you lock in an interest rate, your lender guarantees that specific interest rate for a designated period, typically ranging from 30 to 60 days. This means that regardless of any subsequent fluctuations in the market, your interest rate will remain unchanged during the lock period.

Here are a few key points to understand about interest rate locks:

  1. Protection from rate increases: Locking in your interest rate shields you from potential increases in market interest rates. If rates go up after you've locked in, your rate will remain the same, offering you peace of mind and ensuring your monthly mortgage payments stay consistent.
  2. Rate lock duration: The duration of the rate lock varies, and it's essential to discuss this with your lender. It's typically recommended to choose a lock period that allows sufficient time to complete the loan process, including appraisal, underwriting, and closing.
  3. Rate lock expiration: It's crucial to be aware of the expiration date of your rate lock. If your loan doesn't close before the lock period ends, you may need to request an extension or potentially face the possibility of a different interest rate if market rates have changed.
  4. Rate lock considerations: Before locking in an interest rate, it's essential to consider factors such as your loan closing timeline, current market conditions, and any potential costs associated with extending a rate lock or switching lenders.

Remember, the terms and conditions of rate locks may vary among lenders, so it's advisable to discuss the specifics with your loan officer or mortgage professional. They can guide you through the process and help you determine the best time to lock in your interest rate based on your unique circumstances.

When applying for a loan, it's important to gather and prepare certain documents to streamline the process and ensure a smooth loan application. Here's a list of commonly requested documents:

  1. Identification: A valid government-issued ID, such as a driver's license or passport, to verify your identity.
  2. Proof of income: This typically includes your recent pay stubs showing year-to-date earnings, W-2 forms for the past two years, and, if applicable, income documentation for self-employed individuals (such as tax returns, profit and loss statements, and 1099 forms).
  3. Employment verification: Contact information for your current employer, including the company name, address, and phone number. Lenders may also request verification of employment directly from your employer.
  4. Bank statements: Recent bank statements (usually the past two months) for all accounts you hold, including checking, savings, and investment accounts. These statements provide a snapshot of your financial history and help verify your assets.
  5. Tax returns: Lenders may require the past two years of federal income tax returns, including all schedules. This helps determine your income stability and assess your ability to repay the loan.
  6. Asset documentation: If you have other significant assets, such as real estate, stocks, or bonds, you may need to provide documentation to verify their value.
  7. Debt information: A list of your current debts, including credit cards, student loans, auto loans, and any other outstanding loans. This includes the account balances, minimum monthly payments, and creditor information.
  8. Additional documentation: Depending on your specific situation, additional documents may be required, such as divorce decrees, child support documentation, or bankruptcy discharge papers.

It's important to note that each lender may have specific document requirements, so it's advisable to consult with your loan officer or mortgage professional to ensure you have all the necessary paperwork. Being prepared with these documents can help expedite the loan application process and increase your chances of a successful approval

When evaluating your creditworthiness, lenders typically assess several factors to determine your creditworthiness and the terms of the loan you may qualify for. Here's a breakdown of how lenders evaluate your credit:

  1. Credit score: One of the primary factors lenders consider is your credit score, which is a numerical representation of your creditworthiness based on your credit history. Scores typically range from 300 to 850, with higher scores indicating lower credit risk. Lenders have their own criteria for what they consider a good credit score.
  2. Payment history: Lenders review your payment history to assess your ability to make timely payments. They look for any late payments, delinquencies, or accounts in collections. Consistently paying bills on time can positively impact your creditworthiness.
  3. Credit utilization: This refers to the amount of credit you're currently using compared to your total available credit. Lenders consider lower credit utilization ratios to be more favorable, as it indicates responsible credit management.
  4. Length of credit history: The length of time you've had credit accounts is another factor. Lenders typically prefer longer credit histories, as it provides more data to assess your creditworthiness.
  5. Types of credit: Lenders also evaluate the types of credit accounts you have, such as credit cards, loans, or mortgages. A diverse mix of credit types can be viewed positively, demonstrating your ability to handle different financial responsibilities.
  6. Credit inquiries: Each time you apply for credit, it generates a credit inquiry. Multiple recent inquiries may raise concerns for lenders, as it suggests an increased risk.

It's important to note that lenders may have different credit requirements and weight these factors differently. Maintaining a good credit history by paying bills on time, keeping credit card balances low, and avoiding excessive debt can help improve your creditworthiness.

If you have concerns about your credit or want to understand how lenders might perceive your credit profile, consider consulting with a mortgage professional who can provide guidance tailored to your situation and help you explore suitable loan options.

Improving your credit score is a gradual process that requires consistent effort and responsible financial habits. While there is no overnight solution, here are some effective strategies to help you improve your credit score:

  1. Pay bills on time: Your payment history has a significant impact on your credit score. Make sure to pay all your bills, including credit card payments, loans, and utilities, on time. Consider setting up automatic payments or reminders to help you stay organized.
  2. Reduce credit card balances: High credit card balances relative to your credit limits can negatively affect your credit score. Aim to keep your credit utilization ratio below 30%. Paying down debts and keeping balances low can have a positive impact on your creditworthiness.
  3. Establish a credit history: If you're new to credit or have limited credit history, consider opening a credit card or a small loan to start building a positive credit history. Make small purchases and pay them off in full each month to establish a track record of responsible credit management.
  4. Monitor your credit report: Regularly review your credit report for accuracy and report any errors or discrepancies promptly. You're entitled to a free credit report from each of the major credit bureaus once a year. Monitoring your report can help you identify areas for improvement and address any issues.
  5. Avoid opening multiple new accounts: Opening too many new credit accounts within a short period can negatively impact your credit score. It's advisable to apply for new credit sparingly and only when necessary.
  6. Maintain a diverse credit mix: Having a mix of different types of credit, such as credit cards, loans, and a mortgage, can be viewed positively by lenders. However, it's important to only take on credit that you can manage responsibly.
  7. Be patient and consistent: Building or improving your credit score takes time and consistent positive financial behavior. It's important to demonstrate responsible credit habits over an extended period to see significant improvements.

Remember, improving your credit score is a gradual process, and results may not be immediate. If you need additional guidance or personalized advice, consider consulting with a financial advisor or credit counselor who can provide tailored recommendations based on your specific situation.

An appraisal is an integral part of the home buying and mortgage lending process. It is an assessment conducted by a professional appraiser to determine the fair market value of a property. Here's a concise explanation of what an appraisal entails:

  1. Objective evaluation: An appraiser is an unbiased professional who evaluates various factors to determine the value of a property. They consider factors such as the property's location, size, condition, amenities, recent comparable sales, and market trends.
  2. Mortgage lender requirement: Lenders typically require an appraisal to ensure that the property's value is sufficient to support the loan amount. This protects the lender's interests and helps mitigate the risk associated with the loan.
  3. Independent appraisal process: The appraiser conducts a physical inspection of the property, taking into account both its exterior and interior condition. They also research comparable properties in the area to assess how the property compares in terms of size, features, and recent sale prices.
  4. Appraisal report: Following the evaluation, the appraiser prepares a detailed appraisal report that includes their findings, comparable property data, and the final determined value of the property.
  5. Impact on the mortgage process: The appraised value of the property can affect various aspects of the mortgage process. It helps determine the loan-to-value ratio, which impacts the down payment requirement, mortgage insurance, and the terms and conditions of the loan.

It's important to note that the appraised value is an independent assessment and may not always align with the seller's or buyer's expectations. If the appraised value comes in lower than the agreed-upon purchase price, it may require renegotiation between the buyer and seller or adjustments to the financing terms.

Appraisals provide an objective evaluation of a property's value, helping lenders make informed decisions and protecting both buyers and sellers. If you have further questions or need more information about the appraisal process, consulting with your real estate agent or mortgage professional can provide valuable insights specific to your situation.

PMI stands for Private Mortgage Insurance. It is a type of insurance that protects the lender in case a borrower defaults on their mortgage loan. Here's a concise explanation of PMI:

  1. Loan-to-value ratio: PMI is typically required by lenders when the borrower makes a down payment of less than 20% of the home's purchase price or appraised value, resulting in a higher loan-to-value ratio (LTV). It serves as a safeguard for the lender against potential losses in the event of default.
  2. Cost and payment: The cost of PMI can vary based on factors such as the loan amount, credit score, and down payment amount. It is typically added to the borrower's monthly mortgage payment or may be paid upfront at closing.
  3. Cancellation or termination: Once the borrower's equity in the home reaches 20% (based on the original purchase price or appraised value), they may be eligible to request the cancellation of PMI. Alternatively, PMI may be automatically terminated when the borrower's equity reaches 22%. It's important to review the specific requirements with your lender.
  4. Different types of PMI: There are various types of PMI available, such as borrower-paid PMI, lender-paid PMI, or single premium PMI. Each has its own cost structure and implications, and it's advisable to discuss the options with your lender to determine the most suitable choice for your situation.
  5. Alternatives to PMI: In some cases, borrowers may explore alternatives to PMI, such as taking out a second mortgage (known as a piggyback loan) to cover a portion of the home's purchase price and avoid PMI requirements. However, it's important to carefully evaluate the costs and implications of these alternatives.

It's worth noting that PMI protects the lender, not the borrower. However, PMI can provide an opportunity for borrowers who are unable to make a 20% down payment to still obtain a mortgage and purchase a home.

If you have further questions or want to explore PMI options in more detail, it's recommended to consult with your mortgage lender or a qualified mortgage professional who can provide personalized guidance based on your specific circumstances.

80-10-10 financing is a type of mortgage arrangement that involves taking out two separate loans to purchase a home when the buyer has a down payment of less than 20%. Here's a concise explanation of how 80-10-10 financing works:

  1. The first mortgage: The '80' in 80-10-10 refers to the first mortgage, which covers 80% of the home's purchase price. This loan is typically a traditional mortgage loan obtained from a lender. The borrower provides a down payment of at least 10% of the purchase price.
  2. The second mortgage: The '10' in 80-10-10 represents the second mortgage, which covers 10% of the purchase price. This loan is often referred to as a piggyback loan or a home equity line of credit (HELOC). The borrower obtains this loan from a different lender or the same lender as the first mortgage.
  3. The down payment: The borrower contributes a down payment of at least 10% of the purchase price, which is usually paid upfront. This amount, combined with the first mortgage (80%) and the second mortgage (10%), adds up to a total of 90% of the home's purchase price.
  4. Mortgage insurance: Since the borrower's down payment is less than 20%, mortgage insurance may still be required on the first mortgage. The need for mortgage insurance depends on the lender's guidelines and the borrower's specific situation.
  5. Benefits and considerations: 80-10-10 financing can offer several advantages, such as avoiding the cost of private mortgage insurance (PMI) and potentially securing a lower interest rate on the first mortgage. However, it's important to carefully evaluate the terms, interest rates, and costs associated with both the first and second mortgages.

It's crucial to note that 80-10-10 financing may not be available in all situations or markets, and eligibility requirements may vary. Consulting with a mortgage professional or a loan officer can help you determine if this financing option is suitable for your specific needs and circumstances.

Remember to carefully consider your financial situation and discuss the various loan options with your lender or mortgage professional to make an informed decision about the best financing approach for your home purchase.

When to refinance depends on various factors and your specific financial goals. Here are some common scenarios where refinancing may be beneficial:

  1. Lower interest rates: If current interest rates are lower than when you initially obtained your mortgage, refinancing can help you secure a lower rate, potentially reducing your monthly payments and saving you money over time.
  2. Shortening the loan term: Refinancing to a shorter-term loan, such as switching from a 30-year mortgage to a 15-year mortgage, can help you build equity faster and save on interest payments in the long run, although your monthly payments may increase.
  3. Consolidating debt: If you have high-interest debts, such as credit cards or personal loans, refinancing your mortgage to consolidate these debts into one lower-interest loan can simplify your finances and potentially lower your overall interest expenses.
  4. Tapping into home equity: Refinancing allows you to access your home's equity by taking out a cash-out refinance loan. This can be useful for home improvements, education expenses, or other major expenses, but it's important to consider the long-term financial implications.

Before refinancing, it's essential to evaluate the associated costs, such as closing costs and potential prepayment penalties, and assess how long it will take to recoup those costs. Consulting with a mortgage professional can help you determine if refinancing is a suitable option for your current financial situation.

At closing, also known as the settlement, several important steps take place to finalize the home purchase process. Here's a concise explanation of what typically happens at closing:

  1. Signing loan documents: You will be provided with the loan documents, including the mortgage note, deed of trust or mortgage agreement, and other relevant paperwork. You'll carefully review and sign these documents, acknowledging your agreement to the terms and conditions of the loan.
  2. Payment of closing costs: Closing costs, which include various fees associated with the home purchase, are typically paid at this stage. These costs may include loan origination fees, appraisal fees, title search and insurance fees, attorney fees, and prepaid expenses such as property taxes and homeowner's insurance.
  3. Down payment: If you haven't already provided the down payment, it will be collected at closing. This is usually in the form of a certified check or wire transfer. The down payment is the portion of the purchase price that you are paying upfront, reducing the amount you need to finance through a mortgage.
  4. Title transfer: The seller will provide the necessary documents to transfer the title of the property to you. These documents may include the deed and any additional paperwork required by the local jurisdiction. The title transfer ensures that you become the legal owner of the property.
  5. Escrow and prorated expenses: If you're escrowing for property taxes and homeowner's insurance, funds will be collected at closing to establish these accounts. Additionally, any prorated expenses, such as prepaid property taxes or HOA fees, will be settled based on the closing date.
  6. Recordation: After all necessary documents are signed and funds are exchanged, the deed and mortgage documents will be submitted for recordation at the county recorder's office. This officially documents your ownership of the property and the lender's lien against it.
  7. Receiving keys: Once the closing process is complete, you'll typically receive the keys to your new home. Congratulations, you're now a homeowner!

It's important to note that the closing process may vary depending on the location, type of property, and the parties involved. Your real estate agent or settlement agent will guide you through the specific steps and documents required for your closing.

If you have any questions or concerns about the closing process, it's recommended to consult with your real estate agent or an attorney who can provide personalized guidance based on your specific circumstances.