Frequently Asked Questions – Mortgage Approval Process:
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Solid relationships are the basis of a smooth mortgage transaction. Guild Mortgage consistently works with the same agents and everyone works as a team. With strategic financing that’s tailored to your needs, along with winning strategies for strong offers and cohesive communication, your agent is confident in a quick, smooth transaction.
Q. I was pre-approved, but after I found a home and signed a contract, my lender denied my loan. Why is this a common trend that I hear about?
There are literally hundreds of moving parts with a real estate purchase transaction that can impact a final approval.
With the borrower – credit scores, income, assets, and employment can change.
With the property – appraised value, poor inspection report, title transfer / property lien issues, seller cooperation, HOA disclosures.
With the mortgage program – Interest rates can change up until your interest rate is locked, affecting the DTI ratio, mortgage insurance companies change guidelines…. the list can go on.
It’s important to make sure your initial paperwork is fully reviewed and approved. Stay in close contact with your mortgage approval team throughout the entire process so that they’re aware of any delays or changes that could impact the final approval.
Q. What happens if I can’t find a home before my pre-approval letter expires?
A complete pre-approval letter is an acknowledgment that the Lender has verified credit, income, and assets (source of funds). These items are generally valid for 60-90 days and can be updated by re-verification of documentation. It is important to keep the lender in-the-loop regarding any changes to credit, income, and assets, as these can effect final approval.
Q: Do I have to sell my current home before I can qualify for a new mortgage payment?
Yes, No and Maybe…
If you are in a financial position where you are qualified to afford both your current residence and the proposed payment on your new house, then the simple answer is No!
Qualifying based on your Debt-to-Income ratio is one thing, but remember to budget for the additional expenses of maintaining multiple properties. Everything from mortgages payments, increased property taxes and hazard insurance to unexpected repairs should be factored into your final decision.
FAQ: Refinance Mortgage Process
Q: Is there such a thing as a “No Cost” mortgage?
Technically speaking, there are always costs involved with any mortgage transactions. Appraisal, underwriting, prepaid taxes, insurance, interest, title, closing…the list can go on.
However, there is a way to structure a closing cost and interest rate scenario that will decrease the amount of fees, or how a borrower pays them.
Basically, the costs to produce the new mortgage are either financed into the loan amount, or covered by the lender in exchange for a slightly higher than market interest rate.
Deciding on the best option involves weighing the difference in cost up-front vs the increased monthly payment over a set period of time.
Q: How long do I have to wait to refinance after a purchase transaction?
The rule-of-thumb is 8-12 months, but there may be exceptions. It’s important to check with your lender at the time of initial application to make sure there aren’t any short-term penalties for refinancing within the first year.
Another thing to consider is the cost of refinancing. If you’re watching the market and may want to lock in a lower rate in the near future, it may be more cost effective to pay a discount point for a lower rate vs paying for a full refinance a few months later.
Q: I heard that I should only refinance if I drop 1% on my mortgage, is that true?
Some people say ½%, 1% to never. Every mortgage is different, so your individual situation would need to be evaluated.
Q: Why can’t I just compare my current payment to the proposed payment and figure out my net benefit?
You could just compare just the two payments if you wanted to find out your cash flow savings, but the current and proposed loans may have two different amortizations. Let’s say you have a 15 year mortgage currently and you are comparing to a 30 year mortgage.
If everything else is the same (interest rate, loan amount, etc) except for the amortization your interest savings per month would be $0 but, you are going to show a cash flow savings because of the longer amortization. We will provide you with a break-out of the details to have a true comparison of your net benefit.
Q: Do I have to refinance with my current mortgage company?
No, you may choose any company you wish to refinance your mortgage since the new loan will replace the old mortgage.
Q: Is it easier to refinance with my current mortgage company?
Not necessarily. They may have a “promo,” but it may cost you in other areas. Make sure that you check to make sure you’re getting the best deal.
Q: Will I automatically qualify?
No, you will have to qualify for your new refinance. However, certain programs will allow for reduced documentation like the FHA to FHA Streamline, or VA to VA IRRL.