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Why should I own, instead of rent?
A home is an investment. When you rent, you write your monthly check and that money is gone forever. But when you own your home, you can deduct the cost of your mortgage loan interest from your federal income taxes, and usually from your state taxes. This will save you a lot each year, because the interest you pay will make up most of your monthly payment for most of the years of your mortgage. You can also deduct the property taxes you pay as a homeowner. In addition, the value of your home may go up over the years. Finally, you'll enjoy having something that's all yours - a home where your own personal style will tell the world who you are.
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Can I get pre-qualified for a loan before I've found my home?
Absolutely. However, you should not confuse a pre-approval with a pre-qualification. During the pre-qualification process, our Mortgage Consultant will ask you a few questions and hand you a pre-qualification letter. The pre-approval process is much more complete.
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What is the difference between pre-approval and pre-qualification?
The pre-approval process is much more complete than pre-qualification. For pre-qualification, the loan officer asks you a few questions and provides you with a pre-qual letter. Pre-approval includes all the steps of a full approval, except for the appraisal and title search. Pre-approval can put you in a better negotiating position, much like a cash buyer.
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What is the difference between a mortgage broker and a lender?
A mortgage broker counsels you on the loans available from different wholesalers, takes your application, and usually processes the loan which involves putting together the complete file of information about your transaction including the credit report, appraisal, verification of your employment and assets, and so on. When the file is complete, but sometimes sooner, the lender "underwrites" the loan, which means deciding whether or not you are an acceptable risk.
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Will I save money going directly to a mortgage lender?
Not necessarily. In fact, if you are a reasonably astute shopper, you will probably do better dealing with a mortgage broker. Mortgage brokers do not add any net cost to the lending process, because they perform functions that would otherwise have to be done by employees of the lender. Furthermore, because mortgage brokers deal with multiple lenders -- in a typical case, 25 to 30, sometimes more -- they can shop for the best terms available on any given day. In addition, they can find the lenders who specialize in various market niches that many other lenders avoid, such as loans to applicants with poor credit ratings, loans to borrowers who do not intend to occupy the property, loans with minimal or no down payment, and so on.
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What should I do to financially prepare for a home loan?
Here are a few tips to assist you when it comes to applying for a loan:
- Use cash instead of credit for your purchases.
- Avoid making any large credit purchases—the added debt could impact your ability to qualify for a loan.
- Contact creditors immediately if you have a problem or concern about your ability to make payments on time.
- Put money aside into savings so you'll have a financial cushion in case of an emergency.
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How do I increase and protect my credit rating?
Here are a few general tips to assist you in raising and maintaining your credit score:
- Maintain two to three revolving charge accounts (such as Visa or MasterCard) in good standing.
- Have a couple of other credit card accounts, such as department stores or gas cards, in good standing.
- Avoid “finance” company credit card offers.
- Avoid credit inquiries-they lower your credit score.
- Don’t max out your credit cards-the ratio of available credit to your total credit balances is very important.
- Don’t apply for multiple credit lines; this triggers an inquiry of your credit, which lowers your credit score.
- Never co-sign a loan for someone else
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How long will it take before we know if the loan is approved or not?
If your application is received online, we can give you a preliminary pre-approval within 8 business hours. In other instances between 24-48 hours from the time we receive your application. However, this is dependent on your credit scores and overall file. In some cases it could take a little longer, such as 5-10 business days.
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How long will it take to close my loan?
If everything goes smoothly, we should be able to close in as little as 10 days.
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When does it make sense to refinance?
Usually people refinance to save money, either by obtaining a lower interest rate or by reducing the term of the loan. Refinancing is also a way to convert an adjustable loan to a fixed loan or to consolidate debts. The decision to refinance can be difficult, since there are several reasons to refinance. However, if you are looking to save money, try this calculation:
Calculate the total cost of the refinance
Calculate the monthly savings
Divide the total cost of the refinance (#1) by the monthly savings (#2). This is the "break even" time. If you own the house longer than this, you will save money by refinancing.
Since refinancing is a complex topic, consult a mortgage professional.
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Do I have to finish filling out my application at one time?
No. AFC Mortgage gives you the convenience of changing or finishing your application at any time before final submission to lender. Simply call 612-724-2717 or e-mail your Mortgage Consultant to have confidential changes made to your existing application.
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What is a full documented loan?
Both income and assets are disclosed and verified, and income is used in determining the applicant's ability to repay the mortgage. Formal verification requires the borrower's employer to verify employment and the borrower's bank to verify deposits. Alternative documentation, designed to save time, accepts copies of the borrower's original bank statements, W-2s and paycheck stubs.
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What are the other types of loans?
Stated income/verified assets: Income is disclosed and the source of the income is verified, but the amount is not verified. Assets are verified, and must meet an adequacy standard such as, for example, 6 months of stated income and 2 months of expected monthly housing expense.
Stated income/stated assets: Both income and assets are disclosed but not verified. However, the source of the borrower's income is verified.
No ratio: Income is disclosed and verified but not used in qualifying the borrower. The standard rule that the borrower's housing expense cannot exceed some specified percent of income, is ignored. Assets are disclosed and verified.
No income: Income is not disclosed, but assets are disclosed and verified, and must meet an adequacy standard.
Stated Assets or No asset verification: Assets are disclosed but not verified, income is disclosed, verified and used to qualify the applicant.
No asset: Assets are not disclosed, but income is disclosed, verified and used to qualify the applicant.
No income/no assets: Neither income nor assets are disclosed.
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What are "conforming" and "non-conforming" loans?
What are "conforming" and "non-conforming" loans?
A "conforming" loan meets loan limits and established by Fannie Mae and the Federal Home Loan Mortgage Corporation (Freddie Mac). "Non-conforming" loans or "jumbo" mortgages exceed these limits.
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What is annual percentage rate (APR)?
The total finance charges for a loan that is expressed as a percentage. APR takes into account the total cost of a mortgage, including interest, closing fees, lender points, and other charges over the life of a loan.
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What is private mortgage insurance (PMI)?
Insurance written by a private company that protects the lender against loss if you default on the mortgage.
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What is an appraisal?
An appraisal is a report made by a certified appraiser who provides a professional opinion or estimate of property value. When you apply for a mortgage loan with AFC Mortgage, we will initiate the process to get an appraisal ordered.
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What is a rate lock?
A rate lock is a contractual agreement between the lender and buyer. There are four components to a rate lock: loan program, interest rate, points, and the length of the lock.
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What is a good faith estimate?
It is the list of settlement charges that the lender is obliged to provide the borrower within three business days of receiving the loan application.
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What are points?
It is an upfront cash payment required by the lender as part of the charge for the loan, expressed as a percent of the loan amount; e.g., "2 points" means a charge equal to 2% of the loan balance.
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What is a pre-qualification?
This is the process of determining whether a customer has enough cash and sufficient income to meet the qualification requirements set by the lender on a requested loan. A pre-qualification is subject to verification of the information provided by the applicant. A pre-qualification is short of approval because it does not take account of the credit history of the borrower.
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