Mortgage Refinance Frequently Asked Questions

What are the steps involved in applying for a home mortgage?

1 - PRE-QUALIFICATION OR LOAN APPLICATION:    Initially we will take your information to determine which mortgage programs and loan amounts you qualify for. At this time we will pull your preliminary credit report to see where you stand. If everything looks good and if you desire, we will submit your loan for a credit approval.

2 - CREDIT APPROVAL: We then submit your application information and a copy of your preliminary credit, in order to get a credit based approval. Approvals are usually received in 4 to 24 hours (it depends on the loan program). At this time a conditional approval or denial will come back. A conditional approval will list documentation conditions that must be provided in order to receive a final approval. If the loan is denied we then re-evaluate your options, and determine if you would like to submit your loan with a different lender, or for a different program.

3 - REQUEST DOCUMENTATION:   At this point we request any documentation that is necessary to get a final loan approval. This will include income documentation, an appraisal, a title report, and any other supporting documentation.

4 - AWAITING DOCUMENTATION:   As we receive the supporting documentation. we check for any problems that might arise and request any additional items.

5 - COMPLETED LOAN PACKAGE SUBMISSION:   Once all the necessary documentation has been received, a loan officer will review the loan package to make sure you are getting the best rate and terms. We then put the loan package together, and submit it to the underwriter for final approval.

6 - FINAL LOAN APPROVAL:   Final approval generally takes anywhere from 24 to 72 hours. All parties are notified of the approval, and of any conditions that must be received before the loan can close. The final loan approval is the beginning of the closing process.

7 - DOCUMENTS ARE DRAWN:   Within 1 to 3 days after the final loan approval. the closing mortgage documents (including the note and deed of trust) are sent to the title company. At this time you will then go to the title company to sign the mortgage documents.

8 - FUNDING: Once all parties have signed the loan documents, they are returned to the lender who reviews the closing package. If all the documents have been properly signed and executed, a check will then be issued to fund the loan.

9 - RECORDING TITLE:   When the title company receives the funding check, they record the note and deed of trust at the county recorders office. The title company will then pay all necessary parties. And finally your escrow is officially closed!

What are the costs associated with a mortgage?

Costs associated with a mortgage can be broken down into three main categories: 1)Closing Costs, 2)Pre-Paid Costs, and 3)Down Payments.

CLOSING COSTS: Closing Costs are the actual costs required to obtain a home mortgage. They include any origination fees, points, credit reports, tax service, processing fees, appraisal, underwriting, lender inspections, document preparation, flood certification, title fees, and recording fees.

PRE-PAID COSTS: Pre-Paid costs are costs associated with owning a home, that the lender requires advance payment of before the mortgage can close. Pre-paid costs include: homeowner's insurance, property tax, mortgage insurance, and interest. The actual portion of a pre-paid costs that must be paid is dependant on when in the month (and year) the loan closes.

DOWN PAYMENTS: Down Payments are required on purchases only. The amount of the down payment will depend on the mortgage program you want to use. Some programs require ZERO down and others can require 3-30% down, see our programs page for more details.

If you want to know how much your fees will run, you can ask your lender for a Good Faith Estimate. The fees in a Good Faith Estimate should be fairly close to the actual costs at the end of the mortgage, any changes or major discrepancies should be adequately explained to you before your mortgage is finalized.

Should I pay points to get a lower interest rate?

It depends. Paying points means you are paying extra money up front to lower your interest rate, which will subsequently lower your monthly payment. What you should consider is: will paying points lower your payments enough to benefit you in the long run??.

The general rule is that if you plan on staying in the same home/mortgage for five years or more, then paying points will work to your advantage. However, if you refinance or plan to move within five years, your money may be better spent as an increased down payment or used for other purposes.

1 point = 1% of the loan amount

What is mortgage insurance and do I need it?

Mortgage Insurance (MI) or Private Mortgage Insurance (PMI) is mandatory for certain types of first mortgages. It is generally required for most good credit first mortgages such as Conventional, FHA, VA, and Jumbo programs.

Monthly mortgage insurance can be avoided when less than 75-80% of the home is financed with a first mortgage. This can be accomplished by: 1) a large down payment; 2) a second mortgage that covers any of the loan amount above 80% of the value of the home, or 3) by the increased equity in your home at the time you refinance it.

If you would like to determine the exact monthly mortgage insurance payment required or if you would like to see if you can avoid mortgage insurance, then contact one of our qualified loan officers at Velocityloan.com.

How much of a down payment will I need?

It depends. The amount of the down payment will depend on the mortgage program. Some programs require ZERO down and others can require 3-30% down, but as a general rule most purchases require at least 5% down. See our programs page for down payment requirements on the individual programs.

Should I refinance?

This is a complex question that depends on your individual circumstances, and what you want to accomplish. Below are some resources that should help determine whether refinancing your home is the right decision for you.

If you are considering a rate-term refinance (lowering the interest rate) a good starting point is our Refinance Calculator. This calculator will analyze your current situation and determine if refinancing is a sound financial decision.

If you are considering a cash-out refinance to consolidate debt then you should compare your total current payments to what your new mortgage payment would be using our Monthly Payment Calculator. (Please note that some loan programs have restrictions on how much cash may be take out to pay off debt).

If you are uncertain whether you should refinance then contact one of our qualified loan officers at Velocityloan.com, and they can run all the scenarios for you and give you a list of mortgage options that apply to your circumstances.

What is a "No Cost" refinance?

A "No Cost" refinance- means you do not have to the pay closing costs associated with a mortgage. This is accomplished by the lender charging a higher interest rate on the mortgage. This can be very beneficial in that you can lower your monthly payments, without adding any additional expenses to the principal loan balance, and you shouldn't have to come up with money to pay expenses. Please note most "No Cost" refinances will not cover required pre-paid costs.

How is my credit rating determined?

Credit rating is synonymous with your credit score, a.k.a. a "FICO" score. There are three main credit reporting agencies: Equifax, TransUnion, and Experian, and each has a different mathematical way to compute your score. FICO scores above 620 are generally viewed as good credit. Some programs require excellent credit which is usually a score of 660 or higher. Anything below 620 score is taken on a case by case basis, but will normally fall into the non-conventional mortgage market or have to qualify for an FHA or VA program.

Here are some general methods to improve your FICO score: 1) make all your payments on time, 2) establish a home mortgage and pay it on time, will improve your score, 3) close excess accounts, too many open credit lines reduce your score, 4) pay down maxed out credit lines, maxed out lines tend to lower your score, and 5) keep longer established accounts, they show financial stability and can increase your score.

How do I determine my monthly payments?

Your monthly payment will consist of at least two components: principal & interest. If you want to have escrow accounts (property taxes and homeowners insurance) included in your payments, then the yearly amounts need to be divided by 12 and added to your mortgage payment. To calculate your monthly mortgage payment use our Monthly Payment Calculator.

Please note some loans require monthly mortgage insurance premiums to be added to the payment. If you would like to determine the exact monthly mortgage insurance payment required in your circumstances, then contact one of our qualified loan officers at Velocityloan.com

How do I know what my house is worth?

It is difficult to determine an exact home value without having the property appraised by a qualified professional (Registered or Certified State Real Estate Appraiser). You can determine a good ballpark figure, by finding out what similar properties (same size and quality) in your neighborhood have sold for recently.

Your tax assessed value can be a good base figure, or a past appraisal on your house can give you a good idea. But remember, the true value of the property can only be determined by an appraisal, and all other methods are good for estimation purposes only.

*Velocityloan.com's information and interactive calculators are made available to you as self-help tools for your independent use. We cannot and do not guarantee their accuracy or applicability to your circumstances. We encourage you to seek personal advice from one of our qualified mortgage professionals regarding your financing issues.