Mortgage FAQs

The idea of qualifying for a mortgage can be intimidating, especially if you’re buying your first home. After all, this is probably the biggest purchase you’ll ever make!

Take a deep breath and relax—you don’t have to be stressed. Think of your first conversation with a lender as a get-to-know-you session. We simply want to learn a few basics about you and your financial situation.

Then comes the paperwork! Once your loan process gets started, be prepared to provide proof of items below as an example:

• Where you work
• Your income
• Any debt you have
• Your assets
• How much you plan to put down on your home

A good lender, like The Medrano Team at FUB, will clearly explain your mortgage options and answer all your questions so you feel confident in your decision. If we don’t, find a new lender. A mortgage is a huge financial commitment, and you should never sign up for something you don’t understand!

This is one of the most commonly asked mortgage questions, and the answer may surprise you.

Typically, you can qualify for most mortgage loans with a credit score of at least 620 however your score will affect your interest rate and the lower the score the higher the rate could be.  The Medrano Team can review your credit report and score with you and if needed recommend certain tasks that can improve your score to help you qualify and/or get a lower rate.  **Some specialized loans i.e. Jumbo loans do require higher credit score minimums**

A quick application with your lender about your income, assets and down payment is all it takes to get prequalified.  However, if you want to get preapproved, your lender will need to verify your financial information and submit your loan for preliminary underwriting. A preapproval takes a little more time and documentation, but it also carries a lot more weight.

Buying “too much house” can quickly turn your home into a liability instead of an asset. That’s why it’s important to know what you can afford before you ever start looking at homes with your real estate agent.

Be prepared to have room in your budget to cover additional costs of homeownership, like repairs and maintenance, while saving for other financial goals, including retirement.

The common misconception is that you need 20% down to buy a home.  There are actually many options for a down payment depending on your financial situation. 20% is ideal because you won’t have to pay private mortgage insurance (PMI). PMI is an extra cost added to your monthly payment that doesn’t go toward paying off your mortgage.

Saving for a down payment takes hard work and patience, but it’s worth it. Here’s why:

• You’ll have built-in equity when you move into your home.
• You can finance less, which means you’ll have a lower monthly payment.

With that said, there are also many reasons why buying a home sooner than later can also make sense.  Even if that means putting less than 20% down.  There are many options that allow for as low as 3% – 5% down so just know that everyone’s financial scenario is different and The Medrano Team can help find the right fit for you.

With so many mortgage loan options out there, it can be hard to know how each would impact you in the long run. The Medrano Team at FUB can recommend loan options based on your financial needs.  Here are the most common mortgage loan types:

• Fixed-Rate Conventional Loan
• Adjustable-Rate Mortgage (ARM)
• Federal Housing Administration (FHA) Loan
• Department of Veterans Affairs (VA) Loan
• Jumbo Loan
• Construction Loan

Mortgage interest rates can change day to day, so locking your rate is an important part of the mortgage process. Locking your interest rate guarantees a certain interest rate for a specific period of time, usually between 30 and 60 days.
You can lock your interest rate as soon as you have found a specific home to purchase and are officially under contract.

Mortgage interest rates go up and down and there’s no way to time it perfectly. We don’t know what the future holds, but we can guide you through the process and give you the tools necessary to make a good decision on whether to lock or float.

Mortgage points, or discount points, are a way to prepay in the form of an upfront fee in order to buy a rate even lower than what the market is currently dictating.

Each mortgage point equals a percentage of your loan amount. For example, if you’re receiving a $250,000 loan and opt to pay 1% origination point, you’ll pay $2,500 to receive an even lower rate.

You mortgage payment doesn’t just reduce your principal balance, but your monthly payment actually goes toward a lot more.

Here’s what the typical monthly mortgage payment includes:

• Principal
• Interest
• Homeowners insurance
• Property taxes
• Private mortgage insurance (PMI), if you put down less than 20% on your home

You can pay more than the minimum amount and it will go towards reducing the principal faster and reduce your interest paid over time.

Your mortgage payment may include additional costs like your homeowner’s insurance and property taxes. These are annual expenses that are part of homeownership, and as a lender we can be at risk if you don’t make those payments.

As your lender we can add the monthly portion of each of those accounts to your mortgage payment. That money is held in an escrow account that is managed by a third party to make sure those costs are paid on time annually as the bills come due for property taxes and homeowner’s insurance policies.  Note:  if you put less than 20% down escrowing of taxes and insurance is required, however if you put 20%+ down you have the option to include or pay on your own.

Anytime you can lower your interest rate or go from an adjustable rate to a fixed rate it could make sense refinancing.  As a lender we can run specific numbers for you to determine the cost benefit of lowering your interest rate to make sure refinancing is the best option for you.

Typically lenders need 30 days to close on a purchase loan.  However, if you have a full application with all your required documents we can close in 25 days.

Refinances loans can take up from 45-60 days to close typically.

When you close, that new house and mortgage are officially yours. At the closing, you’ll sit down with the professionals involved in your real estate transaction (your realtor, your loan officer and title escrow officer) and sign all the legal documents needed to give you ownership of your new place. Hooray!!

You’ll also be responsible for paying down payment and any closing costs as part of the closing process. You’ll receive a Closing Disclosure a minimum of three days prior to closing so you know exactly what to expect and how much you owe at closing.

Mortgage lending can be pretty daunting.  The questions above don’t answer half of the questions you may have.  Our team is committed to providing you with all the answers you need to make one of the biggest financial decisions you may have.  We have a combined 30+ years of experience in the mortgage industry and with that comes extensive financial knowledge where we can truly be considered your trusted advisor through this process.