Mortgage Source NJ: FAQs - New Jersey Mortgages Loans

How important is it that I get pre-qualified before shopping for a new home?
Should I get pre-approved when buying a home?
Do I need to have a professional inspection of the property I'm buying?
Should I refinance with my existing lender without shopping around?
Should I choose a lender just because they have the lowest rates?
What does APR mean?
Should I pay points?
What is a FICO score?
What is PMI?
Can I get rid of PMI on my loan?
Why should I consult a Mortgage Banker (The Mortgage Source) instead of a bank?

1. How important is it that I get pre-qualified before shopping for a new home?
In addition to knowing exactly how much you can afford to spend on a home, as a potential buyer competing for a property, you'll have a better chance of getting your offer accepted since you have met with a mortgage broker or lender and discussed your income, expenses, assets and liabilities.

2. Should I get pre-approved when buying a home?
It is wise to get pre-approved because this buyer has provided a broker/lender with written evidence of income, expenses, assets, liabilities and credit. All information has been verified by a lender and as a result, much of the paperwork for this buyer's loan has been completed and will probably make this buyer able to close quicker.

3. Do I need to have a professional inspection of the property I'm buying?
Unless you're buying a new home with warranties on most equipment, it's highly recommended that you get property, roof and termite inspections. An inspection report is also a great negotiating tool when asking the seller to make needed repairs. When a professional inspector recommends that certain repairs be done, the seller is more likely to agree to do them.

4. Should I refinance with my existing lender without shopping around?
No because you're existing lender may not have the best rates and programs. There is a general misconception that it is easier to work with your current lender. In most cases, your current lender will require the same documentation as other companies. This is because most loans are sold on the secondary market and have to be approved independently. Even if you have made all your mortgage payments on time, your existing lender will still have to verify assets, liabilities, employment, etc. all over again.

5. Should I choose a lender just because they have the lowest rates?
While the rate is important, consider the total cost of your loan including the APR, loan fees, discount and origination points. When receiving a quote from a lender or broker, insist that the discount points (charged by the lender to reduce the interest rate) be distinguished from origination points (charged for services rendered in originating the loan).

The cost of the mortgage, however, should not be your only criterion. Have confidence that the company you select is reputable and will deliver the loan with the terms and costs they promised. If In the final hours of the transaction you determine that the lender has suddenly increased their profit margin at your expense, you won't have time to start again with a different lender. Ask family and friends for referrals.

6. What does APR mean?
APR is a term that expresses the cost of a mortgage, as an Annual Percentage Rate. The APR is normally higher than the advertised interest rate because it includes interest, points and other finance charges. The APR is used to compare different types of mortgages.

7. Should I pay points?
First understand that points are, by definition, "Pre-Paid Interest". If you give your lender their interest up front (points) they will lower your interest rate for the life of the loan. So the question you should consider is: How long do I plan on being in this home? If the answer is a "short time" (less than three years) then you should not pay points. If you plan on being in the house a long time (more than five years), and you could afford it, then pay some points to lower the interest rate. If you plan to stay in the house between three and five years, it does not make a significant difference whether you pay points or not.

8. What is a FICO score?
A FICO score is a credit score developed by Fair Issac & Co. Credit scoring is a method of determining the likelihood that credit users will pay their bills. Fair, Isaac began its pioneering work with credit scoring in the late 1950's and, since then, scoring has become widely accepted by lenders as a reliable means of credit evaluation. A credit score attempts to condense a borrower's credit history into a single number. Fair,Isaac & Co. and the credit bureau do not reveal how these scores are computed. The federal trade commission has ruled this to be acceptable.

9. What is PMI?
PMI or Private Mortgage Insurance is normally required when you buy a house with less than 20% down. Mortgage insurance is a type of guarantee that helps protect lenders against the costs of foreclosure. This insurance protection is provided by private mortgage insurance companies. It enables lenders to accept lower down payments than they would normally accept. In effect, mortgage insurance provides what the equity of a higher down payment would provide to cover a lender's losses in the unfortunate event of foreclosure. Therefore, without mortgage insurance, you might not be able to buy a home without a 20% down payment.

10. Can I get rid of PMI on my loan?
The decision on when to cancel the private insurance coverage does not depend solely on the degree of your equity in the home. The final say on terminating a private mortgage insurance policy is reserved jointly for the lender and any investor who may have purchased an interest in the mortgage. However, in most cases, the lender will allow cancellation of mortgage insurance when the loan is paid down to 80% of the original property value. Some lenders may require that you pay PMI for one or two years before you may apply to remove it.

11. Why should I consult a Mortgage Banker (The Mortgage Source) instead of a bank?
When we discuss with you one of the most important decisions in your life, the purchase of a home, we believe it deserves special attention. Unlike your local bank, you can reach our loan officers seven days a week if you have questions or the need to send and receive documents to expedite your loan process. We specialize in one thing ... Mortgages. From our courteous staff to the ownership of the company, our goal and yours are one and the same.

Call Us Toll Free: 877-657-6872