Del Financial Inc - saving you time and money since 1981

The FAQs Frequently Asked Questions

Below is a list of the questions that our licesned mortgage professionals are frequently asked. If you are searching for more information about the real estate and mortgage industry, please visit our Blog and News sections on our corporate website for more in-depth industry information, tips, events, and more. Don’t forget, you can call us toll-free at (800) 469-5861 to schedule a free consultation.

Answers:

1. What documents will you need to approve and process my loan?

   This is a great question and shows that you like to plan ahead. Your mortgage consultant will thank you! The list of documents is rather long, so we created a PDF document that you can print: Checklist of Items Needed

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2. What is a FICO score?

   FICO stands for Fair Isaac and Company – the designer of the most widely used algorithm for determining and quantifying the creditworthiness of a person. This acronym has become synonymous with the term ‘credit score.’ A credit score is a number representing the likelihood that a borrower will be able to pay his or her debts. A higher credit score is an indication that a person is more likely to pay his or her debts; a lower credit score is an indication of default risk. Higher Interest rates are charged to borrowers who have a higher chance of defaulting. Furthermore, if your credit score is too low, you may not be able to obtain a new loan at all.

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3. Is it still possible for me to buy a home (or refinance) if my credit is not perfect?

   Yes, it is possible to obtain financing with less-than-perfect credit. Each scenario is different, so it is important to receive a consultation to ascertain the type and amount of financing that may be available to you. Even if you would categorize your credit as ‘bad’ or ‘poor’, there are loan programs available. We offer federally backed mortgages that are designed for borrowers with less-than-perfect credit.

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4. How do I improve my credit score?

   By using our NextStep Mortgage Qualification Tool; because of its proven track record, we always recommend our clients use NextStep when needing to improve their credit score. (Our employees use this software to improve their own credit scores!) This software program will provide you with the credit analysis, tools, strategies, and coaching needed to improve your credit score. You also get access to your actual mortgage credit scores. No other program offers this. Check it out!

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5. What is an Annual Percentage Rate (APR) and why is it different from my interest rate?

   First, the APR is not your note rate (the rate of interest being charged to you.) Due to the way that the APR is calculated, the APR – as seen on the federal Truth-In-Lending forms provided to you in your disclosure package – is normally higher than your note rate. The APR is the cost of credit as a percentage distributed over the term of the loan. It includes any charges paid directly or indirectly by you and imposed by the creditor as an incident to or a condition of providing you with the loan.

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6. Why do I have to pay for Mortgage Insurance?

   Only certain loans require mortgage insurance. In most instances in which your loan-to-value is higher than 80%, the lender will require that you obtain mortgage insurance. Historically, a borrower is more likely to walk away from a loan when they don’t have as much to lose. When a borrower walks away from a loan (i.e. defaults,) the lender relies on the equity in the property to cover any losses it incurs. So when there is less equity, the risk is two-fold to the investor: Less equity to cover losses in the event of default and a higher chance of default due to the fact that the borrower has less to lose. The good news is that as you build equity in your property, the mortgage insurance requirement will go away.

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7. What is an Adjustable Rate Mortgage?

   A fixed rate mortgage is a mortgage on which the interest rate being charged stays the same throughout the entire term (i.e. life) of the loan. Unlike a fixed rate mortgage, an adjustable rate mortgage is a loan on which your interest rate (the start rate) is only fixed for a short period of time (e.g., 3, 5, or 7 years) and then can adjust thereafter. (Note: The start rate on adjustable rate mortgages is usually substantially lower than the rate of a fixed rate mortgage.) When an Adjustable Rate Mortgage goes adjustable, the interest rate charged is determined by adding together two separate numbers. The first number is the “margin.” The margin is usually 2.25%. The margin is fixed for the life of the loan. The second number is the “index.” The index is the number that creates the adjustments because it is variable. The Prime Rate (as published in the Wall Street Journal) is an example of an Index used. However, the most commonly used Index for adjustable rate mortgages is the LIBOR (London Interbank Offered Rate.) At each adjustment period – usually once a year – the interest rate adjusts to the margin + the index. There are caps on how high, how low, and how often the interest rate can adjust. Please talk to your mortgage consultant for more information.

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8. Is a Fixed Rate Mortgage better than an Adjustable Rate Mortgage?

   Yes, and at the same time no. The reason it can go both ways is that the question has to be asked in the context of a specific situation. If the start rate on an adjustable rate mortgage is the same as the rate offered on fixed rate mortgage, then yes, the fixed rate mortgage is the obvious winner. However, that is usually not the case. Please contact your mortgage consultant to help you determine which loan might be a better choice in your situation.

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9. What are points?

   A “point” is an industry term that is normally used when discussing the amount of the origination or discount fees charged by a lender. It is also used when referring to the amount of money paid to you at the close of the loan. A “point” is 1% of the loan amount. 1 point on a $100,000.00 loan is $1,000.00. So if you get a loan for $100,000.00 that pays a rebate of 2 points, then you would get $2,000.00 at closing that you can apply towards your closing costs.

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10. How much do I need for a down payment?

    There is no short answer for this question. In fact, it requires years of mortgage industry experience, current product knowledge, and an understanding of your situation to be able to answer that question for you. Please call us and we will review your situation with you for free. (Note: There are loan programs for 100% financing available, although we recommend you have at least 3.5% of the purchase price available for a down payment.)

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11. Can I still take cash out of the equity in my house?

    Yes. We are still offering cash-out refinances. We usually can’t offer cash-out above 85% loan-to-value. Each situation is reviewed on its own merits. Please contact us today for a free consultation.

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12. Does it make sense for me to refinance?

    There are two main reasons to refinance an existing mortgage. The main reason to refinance is to lower your interest rate and/or modify the terms of the loan (e.g., Fixed to Adjustable, 15 Year to a 30 Year). This is called a rate and term refinance. The second reason to refinance is to pull cash out of the existing equity in the property. This is called a cash-out refinance. Sometimes it is possible to reduce your interest rate and monthly payment at the same time you are pulling cash-out. We know this does not answer fully your question as it applies in your case; we just wanted to let you know that you can call us today (or apply online), and we will review your situation to see if refinancing makes sense for you. All consultations are free of charge.

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