Q: What's the difference between a Broker, Correspondence Lender, and direct Lender? 

A:  Broker:  An intermediary who does the legwork and analysis for the borrower, and puts the lender and borrower together.  Charges fee for the service, but have access to varous wholesale lenders, which the loan will be sold to.  Advantage to the borrower, you don't have to go from lender to lender to find the right loan, and often means you'll get a better price than what's available from the retail end with the same bank. 

A:  Correspondence Lender:  Same as Broker, except they initially fund the loan in their own name. 

A:  Lender:  A direct lender or a bank that lends you its own money most of the time, although it often sells the loan to the secondary market.  But they can retain servicing rights for a few years, and eventually will sell servicing rights as well.  This is how your mortgage ends up with various lenders during the course of its term.  A lender will also be limited in products to what they have in the box.  

Q: Why should I use a Broker instead of my own bank?
A: Certainly folks, I suggest you see if your bank can help you. And if so, get the good faith estimate in writing and a firm commitment letter from the underwriter.  Not a prequalification letter, but a preapproval letter!  Speaking from experience, if your loan type is not a cookie cutter, your bank may not have the product. The banks or other mortgage company is limited to what they have in stock. To put it in simpler term, you wouldn't go to a burger joint and ask them for some sushi would you? And if you did, they'd probably look at you as if you're crazy. I started my career working for a big bank, and trust me I know what I am talking about. Now, not only do I still have access to my previous employers product box, but also the other big banks and everyone else's.
Q: Would I get a better price going through a Broker than a bank?
A: Don't believe the myth folks, brokers will beat the banks pricing any day of the week. Why? Because we work with wholesale pricing. And this means, that the banks will offer me more of an incentive to channel it through me, than through their own store front. This is called saving in overhead costs. Still don't get it, call me! But here's a simple fact for you, did you know that around 70% of all mortgages year after year are originated through the wholesale channel?
Q: I would rather deal with a reputable company, what credentials do you have as a mortgage broker?
A: To conduct mortgage transactions in the state Texas, we are required to be licensed by State of Texas Department of Savings and Loans. This means, that every single transaction that we close is reported and monitored by the state. We are required to renew our license every 2 years, by taking ongoing education class credit relevant to our everyday job. Unlike bank loan officers, where they only have to know their product box, as a mortgage broker, we have to constantly keep up with every lender's product line. This means staying abreast with the market and offering you the customer, options! We have 9+ years in the mortgage industry, 14+ years in the financial industry.  As the mortgage broker/owner of the company, I do have a BBA in Finance. 
Q:  What is a Pre-Qualification?

A:  A prequalification should be the 1st step in the home search process.  With information such as your credit, income, assets, and liability, your loan officer will determine how much loan you qualify for, what type of loan options are available, your monthly payments, etc.  Your realtor or the seller will most likely ask you for a prequalification letter prior to showing you a home. 

Q:  Why should you get prequalified before looking at homes?

A:  So you'll know how much house you can buy.  The last thing you don't want to happen is for you to fall in love with a home, write up an offer, only to find out later that your loan cannot be approved. 

Q:  What is a preapproval?

A:  A preapproval is a formal loan approval from the lender stating the specifics and conditions of your approval. 

Q:  What are my obligations if I complete a loan application?

A:  There are no obligations when you apply for a loan. 

Q:  What kind of costs can I expect before my loan closing?

A:  Although we have no application fee, if your loan is approved, and we are ready to order an appraisal, we will require you to pay for the appraisal cost upfront.  

Q:  What will my rate be? 

A:  Interest rates depend on many factors.  Credit is one of those factors.  Some other factors include the amount of equity in the property, the level of income documentation provided, and the debt level you have in relation to your income.  Until we understand the structure of your specific loan and the loan is approved, the itnerest rate can only be estimated. 

Q:  What down payment is required if I cannot document my income?

A:  You may qualify for 100% financing if you meet the credit score and reserve requirement, which will depend on the product type, and varies from time to time. 

Q:  What are Reserves and why is it required? 

A:  Reserves is your liquid asset or available cash on hand after your loan closes.  The lender would like for you to have funds available for you to live on after your closing.  But more so, the lender wants you to have available asset that you can easily tap into for a mortgage payment, in the event you loose your job and have no other source of income.  Most conventional loans will require that you have anywhere from 3 to 6 months reserve.  (1month reserve=1 month PITI).  The more reserves you show, the more favorable your loan will be to the lender. 

Q:  What is PITI?

A:  This is your total monthly payment.  Principle, Interest, Taxes, and Insurance.  If your loan type requires PMI, then it'll be included in your PITI as well. 

Q:  What is Private Mortgage Insurance (PMI) and how can I avoid it? 

A:  PMI is insurance for the lender in the event that you the borrower default on your loan.  Usually, if you put down less than 20% down payment, you'll be required to pay MI, or structure your loan into 2 liens.  We have loan programs up to 100% financing on one payment with no PMI requirement, but it usually means that your rate is a little higher.  Some loan programs, PMI is unavoidable, and sometimes it may not be to your advantage. 

Q:  What is an (IO) interest-only loan and why should I get one? 

A:  First of all, an (IO) interest-only loan is not for everyone.  But if you decide that you want an IO loan, each month when you make your mortgage payment, you have the option of paying principle plus interest or simply the interest-only.  This can help if you have significant financial obligations in addition to your home loan payment.  Or if you are looking to afford more home with a lwoer payment.

Q:  What is the lowest down payment necessary when buying an investment or rental property?

A:   Depending on your credit score and other factors, you may qualify for a 100% financing. 

Got Questions?  Call or Email me! 
Sela Finau
817-874-3533
sela@finaumortgage.com