Todd Abelson: (520) 991-VA VA
Sunny Tucson, AZ










 
 

Top 10 Frequently Asked Questions

  1. What is the difference between pre-qualification and pre-approval?
  2. Is it okay to use Internet statements instead of actual hard copy statements to verify my bank and investment accounts?
  3. Who orders the appraisal and when is it ordered?
  4. What is meant by the phrase ‘locking my interest rate’ and when and how do I lock my interest rate?
  5. Do you sell your loans?
  6. What are origination and discount points?
  7. Once I sign my loan application, am I committed to borrowing the money?
  8. What is APR?
  9. How will I be kept updated on the status of my loan?
  10. Where will I be closing, how much do I have to bring to closing, and can I bring a personal check?

 

Question 1: What is the difference between pre-qualification and pre-approval?

Pre-qualification is a Loan Officer’s opinion of your ability to purchase a home; pre-approval is an Underwriter's decision that you are qualified. When it comes to writing an offer for a home, a pre-approval letter contains much stronger language to the seller and the listing agent, and often is the determining factor in winning the contract in a competitive bid situation. You receive a conditional pre-approval shortly after returning your pre-qualification worksheet to me, and it is made unconditional by returning the few pieces of financial documentation that we request as a result of that.
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Question 2: Is it okay to use Internet statements instead of actual hard copy statements to verify my bank and investment accounts?

Internet statements are not allowed because they’ve not yet been proven as a reliable source of unalterable financial documentation by Fannie-Mae and Freddie-Mac. Underwriters will usually accept a previous month's Internet statement as long as you can support it with a more recent consecutive month hard copy statement. Also, an important side note - bank and investment statements always designate the number of total pages. For instance, your statement may say pages "1 of 3" or "1 of 5". Please make sure to include all pages of your statements, even if there's nothing on the last page and even if the first page is an advertisement. Fannie-Mae and Freddie-Mac, by their guidelines, still require all pages of a statement to verify an account. Getting partial statements is probably still the greatest reason we have to come back to our customer and ask for additional documentation after the initial meeting.
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Question 3: Who orders the appraisal and when is it ordered?

We order the appraisal. If your home is newly constructed we typically order the appraisal after all of your options have been selected so we have the final purchase price of your home. If your home is existing, protocol is to wait until after your inspection is completed. In the case of new construction with VA or FHA financing, we typically need to order a “final inspection” to make sure the home is actually complete and/or all required repairs have been completed.
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Question 4: What is meant by the phrase ‘locking my interest rate’ and when and how do I lock my interest rate?

“Locking in your interest rate” refers to guaranteeing a set interest rate for a specific period of time. That period of time is called the lock period. The lock period guarantees your rate as long as we fund your loan on or before the “lock expiration date”. If your loan funding is delayed beyond your lock expiration date, you could be exposed to higher market rates so it's always good advice to lock for a longer period than you may need. Typically, lock periods run in 15 day increments, for example: 15, 30, 45 and 60 days. However shorter lock periods provide you with a better interest rate. Remember, though, things are rarely equal - the market can be volatile and rates move with market activity, up and down. Until you lock in your rate, you are considered “floating”. Think of this like a ship on the ocean - your rate will go up and down with the market as daily events change interest rates.

To help you determine whether you should “lock”, let’s consider four scenarios for rates. Rates can go up slightly, rates can go down, rates can stay the same, or rates can go way up. If rates go up slightly you might benefit by floating because a shorter lock period can yield a lower rate. If rates go down, you definitely benefit by floating. If rates remain the same you also benefit by floating due to lower rates for shorter lock periods. Of the four scenarios, you benefit from longer lock periods only when rates rise significantly after you lock. For that reason, and generally speaking, many people decide to float and lock for shorter periods. If you have a feeling, though, that rates are going to go up significantly, by all means call our office and we will lock your rate. The bottom line is this – we work for you, and we'll do exactly what you wish concerning your rate lock. We are available to provide you with advice if you ask, but the final decision is yours.

If you've not locked in a rate by the time you receive your application, you're going to notice that the rate on the application is somewhat higher than the market interest rate. However, since your rate is floating it is subject to change, up or down, with market conditions. We intentionally use a higher rate for loan qualification purposes in the event that rates rise prior to your decision to lock. In such a case, your loan will still be approved so you're not required to provide any additional paperwork.

Once you have a property under contract with a firm closing date, you can lock your rate by calling our office and simply requesting a lock-in. We will fax, e-mail or US Postal mail a confirmation to you at that time to confirm the rate lock.
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Question 5: Do you sell your loans?

A better way of asking this question is, who services my loan after the closing? After your loan has closed, we sell the servicing rights of your loan to a permanent servicing company. This means they're going to be sending you your payments statements and handling your payments. This is very important: We service our customers for life, so if you ever have a concern, problem or question about your loan we want you to call us. We can represent you to the company that is currently servicing your mortgage loan.
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Question 6: What are origination and discount points?

Origination and discount points are both a percentage of your loan amount. If we're talking about 1 point, it would be 1 percent of the loan amount. For example if your loan amount is $200,000, then an origination or discount point would be $2,000. One origination or discount point will typically affect the rate of a 30-year fixed loan by a 1/4 %. Check with your CPA, Accountant or Financial Planner for tax deductibility; but generally speaking, origination and discount points are tax deductible when you are buying a primary residence.
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Question 7: Once I sign my loan application, am I committed to borrowing the money?

Many people feel like once they've signed their application, they're obligated to complete the transaction. That is absolutely not the case; in fact, none of the documents that you receive from us, until you're actually at closing and sign your promissory note, are contractual. So all we're dealing with is an application that puts you in the position to buy and close on the mortgage loan.
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Question 8: What is APR?

Quite often mistaken as your Note (or nominal) interest rate, this figure is presented on your Federal Truth-in-Lending disclosure. Typically the APR, or Annual Percentage Rate is higher than the actual note rate, or the quoted interest rate. There are two rates on the Truth-in-Lending disclosure, also known as the "T-I-L", pronounced "till". The first is the “Note Rate” that is the rate used to calculate your payments. You may or may not be locked in at this rate. The second rate is the "APR" - this is different than your note rate, or the rate that you were quoted, because the APR includes the costs of obtaining your financing. Simply stated, if there were no costs in obtaining your financing, your Note Rate and the APR would be the same.
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Question 9: How will I be kept updated on the status of my loan?

We utilize a web based application called "EYE ON MY LOAN". Every time there is a change in status on your loan, or a key document is received (such as the appraisal), our Transaction Coordinator will update the system. You're always welcome to call us directly, but our staff is available for you at any time. That's their specific responsibility - to help keep you updated on the status of your appraisal, loan approval, homeowners insurance, and loan documents. Feel free to call them with any questions.
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Question 10: Where will I be closing, how much do I have to bring to closing, and can I bring a personal check?

Within 5 days of your signing date we will call you to confirm the terms of your loan and make sure you know exactly where the closing (also called the signing) will be held. Within 3 days of the signing date, you will be contacted by the Escrow Officer (the person who will handle your final loan documents) who will give you the final amount of funds required. Personal checks are typically not an acceptable source of funds for closing so you'll need to either have funds wired directly between your bank and the Title company’s bank -or- you can have a cashier's check made out to the Title company.Under Arizona state law, cashier’s checks must be held for at least 24 hours to be confirmed as “good funds”. Kindly plan accordingly.
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