Frequently Asked Questions

It's generally a good time to refinance when mortgage rates are 2% lower than the current rate on your loan. However, even a difference of 1% or less can be worthwhile — any reduction can trim your monthly mortgage payments.

Your savings depend on your income, budget, loan amount, and the size of the interest rate change. Your trusted lender can help you calculate the right options for your situation.

Mortgage rates can change from the day you apply for a loan to the day you close. If rates rise sharply during that period, your payment could increase unexpectedly.

A rate lock allows a lender to guarantee your interest rate for a specified time — often 30 to 60 days — sometimes for a fee. This protects you from market fluctuations while your loan is being processed.

A point equals 1% of the loan amount — so one point on a $100,000 loan is $1,000. Points are fees paid to a lender to obtain mortgage financing under specified terms.

Discount points are fees paid up-front to lower the interest rate on your mortgage. Lenders may also refer to costs in basis points: 100 basis points = 1 point = 1% of the loan amount.

Yes — if you plan to stay in the property for at least a few years. Paying discount points lowers your required monthly payment and may increase the loan amount you can qualify for.

However, if you plan to stay only one or two years, your monthly savings may not be enough to recoup the up-front cost of the discount points you paid.

The Annual Percentage Rate (APR) reflects the true yearly cost of a mortgage, including points and other credit costs. It's typically higher than the stated rate because it factors in those additional fees — creating a level playing field so you can compare loan offers fairly.

Note: APR does not affect your monthly payment, which is determined solely by the interest rate and loan term.

Fees generally included in APR:

• Discount and origination points
• Pre-paid interest (from closing date to end of month)
• Loan-processing, underwriting & document-prep fees
• Private mortgage insurance (PMI)
• Escrow fee

Fees generally NOT included in APR:

• Title or abstract fee
• Borrower attorney & home-inspection fees
• Recording fee & transfer taxes
• Credit report & appraisal fee

The best way to compare loans is to ask lenders for a good-faith estimate on the same program and rate, then compare total loan fees directly.

On a conventional mortgage, when your down payment is less than 20% of the purchase price, lenders typically require Private Mortgage Insurance (PMI) to protect them in case of default. You may need to pay up to one year's worth of PMI premiums at closing.

The best ways to avoid this extra expense are to make a 20% down payment, or ask your lender about alternative loan program options such as 80-10-10 financing.

80-10-10 is a financing structure that lets buyers avoid PMI even without a 20% down payment. It works like this:

• 80% — traditional first mortgage from a lender
• 10% — second mortgage
• 10% — your cash down payment

By structuring the loan this way, no PMI is required. A similar option — 80-15-5 — is available if you can only afford a 5% down payment, though expect slightly higher fees and interest rates due to the increased lender risk.

Lenders use credit scoring to predict how likely you are to repay a loan. The most widely used scores are FICO scores, which range from 350 (high risk) to 850 (low risk). They're based on factors like:

• Payment history (on-time vs. late payments)
• Outstanding debt relative to credit limits
• Length of credit history
• Recent applications for new credit
• Types and number of credit accounts

To get a copy of your credit report, contact the three major credit bureaus:

• Equifax: (800) 685-1111
• Experian: (888) 397-3742
• TransUnion: (800) 916-8800

You're entitled to one free report per year from each bureau at annualcreditreport.com.

Under most models, the most effective steps are straightforward:

• Pay your bills on time — payment history carries the most weight
• Pay down outstanding balances — especially if near your credit limit
• Avoid taking on new debt — too many new accounts can hurt your score

Significant improvement takes time. Only the creditor evaluating your application can tell you exactly how their scoring model weighs each factor.

Every situation is unique, but here's what's typically required. Be prepared to provide additional documents if requested — prompt responses help speed up the process.

Your Property

• Signed sales contract (including all riders)
• Verification of deposit placed on the home
• Contact info for all realtors, builders, insurance agents, and attorneys
• Copy of listing sheet and legal description (if available)

Your Income

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

If Self-Employed or Receiving Commission / Bonus / Rental Income

• Full tax returns for the last two years + year-to-date P&L statement
• K-1s for all partnerships and S-Corporations for the past two years
• Signed Federal Partnership (1065) or Corporate Income Tax Returns (1120) if ownership ≥ 25%

Source of Funds & Down Payment

• Signed sales contract on your current home (if selling)
• Bank statements for the last 3 months
• Stock/bond statements or certificates
• Gift Affidavit and proof of receipt (if using a gift toward closing costs)

Debt & Obligations

• List of all current debts: names, account numbers, balances, and monthly payments
• Last three monthly statements for all accounts
• Mortgage/landlord info for the last two years
• Court order if paying alimony or child support

An appraisal is a professional estimate of a property's fair market value. Most lenders require one before approving a loan to ensure the mortgage amount doesn't exceed the property's value.

It's performed by a state-licensed appraiser who evaluates the property based on its location, amenities, and physical condition.

Closing (also called "Funding") is when ownership of the property is officially transferred from the seller to you. It may involve you, the seller, agents, attorneys, and title or escrow representatives. Closing can take anywhere from one hour to several, depending on contingencies.

Prior to closing, you should do a final walk-through to confirm that agreed-upon repairs were completed and all included items (drapes, fixtures, etc.) are still in the home.

In most states, a title or escrow firm handles the settlement — you'll forward all materials and cashier's checks to them, and they'll disburse funds, deliver the check to the seller, and hand you the keys.

If you cannot attend in person (e.g., you're out of state), an attorney can represent you.