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During pre-qualification, a mortgage lender will collect and review self-reported information regarding your financial history in order to provide you with a general estimate about what you are likely to qualify for.
The pre-approval process is more thorough and will require the lender to verify your financial information and credit history. It provides you with a better sense of what you can afford and adds credibility to your offer by demonstrating to sellers that your financial information has been verified.
Regardless of the approval you get, it is not a guarantee that you will close the loan.
By refinancing your mortgage loan, you acquire a new loan with revised terms. Some reasons to refinance include the ability for a homeowner to obtain a lower interest rate, shorten the term of their loan, convert an adjustable-rate mortgage to a fixed rate mortgage (and vice versa), to convert equity in the home into cash, or to consolidate debt. It is important to carefully assess your current financial position and weigh the cost of refinancing with the potential savings before making the decision to refinance.
A mortgage rate lock is a promise to you from the lender to hold a specific combination of an interest rate and points for an agreed upon time (typically 15, 30 or 45 days) until you close your loan. Locking in a rate protects you from unforeseen interest rate increases that can occur in the days or weeks leading up to closing.
A Jumbo Mortgage is a loan that exceeds the maximum threshold created by government agencies and FHA.
Points are a one-time fee paid directly to the lender at closing in exchange for a reduced interest rate on monthly payments. Points are calculated relative to the loan amount: one point is equivalent to 1% of the loan amount. The exact amount that your interest rate will be reduced will vary, as it is dependent upon the lender, loan type, and market conditions.
A mortgage payment is typically comprised of four components: principal, interest, taxes, and insurance.
The principal portion of your payment is the amount that pays down your outstanding loan balance. The interest on your loan is the fee you pay to the mortgage company as the cost for borrowing money. It is calculated as a percentage of the principal payment you make over the life of the loan. The property taxes you pay will vary, depending upon property value and local tax rates. The insurance portion of your payment goes towards homeowner’s insurance and, if applicable, mortgage insurance.
Fixed-rate mortgages will have a set interest rate throughout the life of the loan. Adjustable-rate mortgages will typically have an introductory period in which the interest rate remains fixed for a set time frame, with the interest rate subject to adjust in the subsequent years.