1. What’s involved with getting approved for a mortgage loan?
  2. What costs are associated with getting a mortgage?
  3. What’s a reasonable amount of closing costs to pay for a mortgage?
  4. How do I determine if it makes sense to refinance?
  5. Should I choose a Fixed or Adjustable Rate mortgage?
  6. Can I lock in my interest rate?
  7. What is the minimum down payment required?
  8. Is comparing Annual Percentage Rates (“APR”) an effective way to choose between two different mortgages?
  9. What is a Loan Estimates (“LE”) and a Closing Disclosure (“CD”)?
  10. Why do some Lenders require a security deposit or an application fee?
  11. Can I get a better interest rate if I go directly to my bank?
  12. Should I get pre-qualified for a loan before I look for a house?
  13. What if interest rates go lower after I close?
  14. Why is my loan payoff amount higher than my principal balance?
  15. Are bi-weekly payment plans worth the expense?
  16. I’ve been making regular mortgage payments for several years, does it make sense to refinance and start the term over again?
  17. What’s the best way to shop for a mortgage?
  18. How do Mortgage Brokers get paid?

 

1. What’s involved with getting approved for a mortgage loan?

The first step is to complete a loan application. We have found that the most efficient way to do this is over the phone. Next, we will evaluate your debt-to-income ratio, credit history, appraisal of the property and financial assets.  At this point, your application will be declined or approved subject to any clarification needed to ensure all lending guidelines are met.  Upon final approval, we’ll bring the loan documents right to your door for signing.  The loan will fund shortly after all the loan documents have been signed. It’s really quite simple. The entire process will take approximately 21 – 30 days.

2. What Closing Costs are associated with getting a mortgage?

Closing Costs can be broken down into three categories; Loan Costs, Other Costs and Lender Credits.  

Loan Costs include Origination Fees, Discount Points and third party costs such as appraisal, credit report, title and escrow fees, etc.

Other Costs include pre-paid interest and the initial escrow reserve deposit.  They can also include items such as County Property Tax payments, HOA Transfer fees and the initial cost of Home Owner’s Insurance.

Lender Credits include a credit from the lender that can be used to offset Loan Costs and/or Other Costs.  A lender will generally issue a credit in exchange for the borrower taking a higher interest rate.

3. What’s a reasonable cost to pay for a mortgage?

Loan costs and interest rates are inversely related.  The lower the interest rate, the higher the loan costs.  Conversely, the higher the interest rate, the lower the loan costs.  There many factors that determine the right combination of interest rate and loan costs.  We recommend that you discuss your goals and objectives with one of our Loan Originators and they will help you determine the best combination of rate and loan costs for your needs.

4. How do I determine if it makes sense to refinance?

There are many variables that determine whether or not a mortgage refinance makes sense. The primary considerations are “how much will I save each month?” and “how long will it take me to recover the loan cost associated with the refinance?”  The longer it takes to recover the loan costs, the less likely that refinancing makes sense.  One way to ensure that you start saving immediately is to refinance without paying loan costs.  Anytime you can drop your rate for free, it just makes sense.

5. Should I choose a Fixed or Adjustable Rate mortgage?

You should consider the following:

1) How long do you think you have this particular mortgage and what is the probability of this prediction holding true?

2) What is the difference in rate between a Fixed Rate Loan Product and Adjustable Rate Loan Product.

6. Can I lock in my interest rate?

Yes, typically we lock your rate in at the time of application for 30 days.

7. What is the minimum down payment required?

Minimum down payments range from zero down on VA loans, 3.5% down for FHA Loans and anywhere from 1% to 5% down for a conventional mortgage.  Lending guidelines frequently change, please talk to one of our Loan Originators for the latest information on down payment requirements.

8. Is comparing Annual Percentage Rates (“APR”) an effective way to choose between two different offers?

No.  There are two problems with comparing APRs.  First, in reality every mortgage company calculates APR slightly different from the next.  You could give a set of numbers to twenty different mortgage lenders and you would get twenty different APRs.  Second, the APR is based on a poor assumption that you will hold the mortgage note for its entire term, typically 30 years.  If you hold the note for less time than its entire term, your actual APR will be higher.  The shorter time you hold the note, the higher the actual APR will be.  In the US, the average duration of a mortgage loan is about seven years.  You would be better served to compare APR’s  in 5 year increments.  For example, what is the APR after 5, 10, 15 years, etc.

9. What is a Loan Estimate (“LE”) and a Closing Disclosure (“CD”)?

When you apply for a mortgage, you will be provided with an initial Loan Estimate (“LE”).  The LE is an initial estimate of what numbers will look like when your loan closes.  At least three days prior to the closing of your loan, you will be issued a Closing Disclosure statement (“CD”).  The CD is a comparison of the final numbers to the numbers on the initial LE.  The numbers between the two documents should match up.  If there are numbers that have changed outside of allowed variances, Scout Mortgage or the Lender will be required to pay the difference.  This can be confusing as some numbers cannot change, some can change only within a tolerable range, and other numbers can change without limitation.  If for some reason, you do not understand the numbers on either document, please contact Scout Mortgage.

10. Why do some Lenders require a security deposit or an application fee?

Scout Mortgage is unique in that we never require an upfront security deposit or an application fee. Therefore, the financial risk is on our company to perform and deliver the loan we promised upfront.

 11. Can I get a better interest rate if I go directly to my bank?

No.  The advantage of working with a mortgage broker is that brokers have relationships with many banks.  Mortgage brokers know which banks have the lowest rate and best loan programs, and the bank with the lowest rate may not be your bank. Additionally, a mortgage broker will continue to work for you after the loan closes by monitoring interest rates. If interest rates drop, your mortgage broker will contact you to lower your rate. This is what we at Scout call our complimentary mortgage management service. On the other hand, your banker would prefer to keep your loan at the higher rate.

12. Should I get prequalified for a loan before I look for a house?

Yes, It’s a good idea to get to know how much house you can afford without getting in over your head.  A pre-approval will also strengthen qualifications as a buyer. At Scout Mortgage, we offer complimentary prequalifications.

13. What if interest rates go lower after I close?

It’s not a problem. At Scout Mortgage we continually monitor our customer’s loans. Whenever we can lower your rate for FREE we’ll let you know.

14. Why is my loan payoff amount higher than my principal balance?

Mortgage interest is paid in arrears.  In other words, you pay the accrued interest at the end of the month.  Therefore, when you pay off a mortgage, you need enough funds to cover the principal balance plus the interest that has accrued since your last payment.

15. Are bi-weekly payment plans worth the expense?

No.  The same results can be obtained for free by dividing your principal and interest payment by 12 and adding this to your monthly payment.  This will save you the initial setup fee and the monthly charges typically associated with bi-weekly payment plans. The theory behind the bi-weekly payment plan is to make 26 half payments or 13 full payments during a 12 month period.

16. I’ve been making regular mortgage payments for several years, does it make sense to refinance and start the term over again?

The most important item on your mortgage note is the interest rate. You can control the term or how quickly you pay off your note.  Many of our clients refinance to lower their interest rate, but then continue to keep making the original payment calculated at the higher interest rate.  By doing so, our clients accelerate the payoff of their mortgage and save thousands of dollars in interest expense.

17. What’s the best way to shop for a mortgage?

The best way to shop is to compare itemized loan closing costs from different lenders.  Sometimes this can be tricky because different lenders call costs by different names.

18. How do Mortgage Brokers get paid?

As a mortgage broker, Scout Mortgage, typically gets paid by the lender we place your loan with.  Scout Mortgage works with many of the nations largest and most competitive wholesale mortgage lenders.