Frequently Asked Questions

When is it a smart move to refinance?

Hi savvy, homeowner! We're glad you're thinking about the potential pros and cons of refinancing. Of course, every mortgage loan is different, but here's a very general rule of thumb: it might be a good time to refinance when prevailing mortgage interest rates are 2% lower than the current rate on your loan. Of course, if you're thinking of a cash-out refinance or shortening the length of your loan, that 2% rule could be as useless as a fabric front door. We're always happy to crunch some numbers for you so you can see for yourself.

What are discount points?

In short, mortgage discount points are upfront payments that a borrower may choose to make at closing in exchange for a reduced interest rate. Each Point typically costs 1% of the total loan amount and typically lowers the interest rate by one-quarter of a percent. The best part? The new, lower rate applies for the entire life of the loan.

What does it mean to “lock in” an interest rate?

We all know how quickly mortgage interest rates can change. And we also know that applying for a mortgage loan isn't an instant process. That means your mortgage rate will likely change from the day you apply to the day you close the loan. Unless... you pay a fee that “locks in” the loan's interest rate for a specified time period (usually 30-60 days).

What is an appraisal?

What's a home really worth? It's hard to put a price on the future memories and that original wood detailing in the entryway. But, an appraisal can give a professional opinion of the value! An appraisal establishes the fair market value for a home before it's sold or before a refinance loan closes. This gives the mortgage lender and the borrower confidence in their investment.

What's private mortgage insurance (PMI)?

On a conventional mortgage, when your down payment is less than 20% of the purchase price, your mortgage lender might require you to pay for private mortgage insurance (PMI). It's just because a lower down payment equals more risk to the lender and if you pay them a bit more each month, that financial risk is reduced. If your loan has PMI, you might be able to get rid of it later. Hang in there!

What documents do I need to prepare for my loan application?

Below is a list of documents that are required when you apply for a mortgage. However, every situation is unique and you may be required to provide additional documentation. So, if you are asked for more information, be cooperative and provide the information requested as soon as possible. It will help speed up the application process.

Your Property

• Copy of signed sales contract including all riders
• Verification of the deposit you placed on the home
• Names, addresses and telephone numbers of all realtors, builders, insurance agents and attorneys involved
• Copy of Listing Sheet and legal description if available (if the property is a condominium please provide condominium declaration, by-laws and most recent budget)

Your Income

• Copies of your pay-stubs for the most recent 30-day period and year-to-date
• Copies of your W-2 forms for the past two years
• Names and addresses of all employers for the last two years
• Letter explaining any gaps in employment in the past 2 years
• Work visa or green card (copy front & back)

If self-employed or receive commission or bonus, interest/dividends, or rental income:

• Provide full tax returns for the last two years PLUS year-to-date Profit and Loss statement (please provide complete tax return including attached schedules and statements. If you have filed an extension, please supply a copy of the extension.)
• K-1's for all partnerships and S-Corporations for the last two years (please double-check your return. Most K-1's are not attached to the 1040.)
• Completed and signed Federal Partnership (1065) and/or Corporate Income Tax Returns (1120) including all schedules, statements and addenda for the last two years. (Required only if your ownership position is 25% or greater.)

If you will use Alimony or Child Support to qualify:

• Provide divorce decree/court order stating amount, as well as, proof of receipt of funds for last year

If you receive Social Security income, Disability or VA benefits:

• Provide award letter from agency or organization

Source of Funds and Down Payment

• Sale of your existing home - provide a copy of the signed sales contract on your current residence and statement or listing agreement if unsold (at closing, you must also provide a settlement/Closing Statement)
• Savings, checking or money market funds - provide copies of bank statements for the last 3 months
• Stocks and bonds - provide copies of your statement from your broker or copies of certificates
• Gifts - If part of your cash to close, provide Gift Affidavit and proof of receipt of funds
• Based on information appearing on your application and/or your credit report, you may be required to submit additional documentation

Debt or Obligations

• Prepare a list of all names, addresses, account numbers, balances, and monthly payments for all current debts with copies of the last three monthly statements
• Include all names, addresses, account numbers, balances, and monthly payments for mortgage holders and/or landlords for the last two years
• If you are paying alimony or child support, include marital settlement/court order stating the terms of the obligation
• Check to cover Application Fee(s)

What happens at closing?

Woohoo! Closing day is the big one — the day you sign the papers that say you own your new home (or you have received the benefits of your new refinance loan).

Closing might take anywhere from one hour to several hours, depending on the details of your loan and the overall transaction. So, come hydrated (and maybe caffeinated).

Most paperwork in closing or settlement is done by attorneys, escrow officers and real estate professionals. You may or may not be involved in some of those closing activities; it depends on who you're working with. But you'll definitely sign on a dotted line or two.

PRO TIP: Every section you sign should be explained to you before you sign it. If not, don't be shy about speaking up to ask. And never feel bad about taking the time to read it all.