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Frequently Asked Questions
About Mortgages, Financing and More!
A few of the more popular questions we receive with their basic answers. Please contact us if your question about our loan process or real estate services is not answered.
- What is the difference between a pre-approval and pre-qualification?
- What is a pre-qualification?
- When does it make sense to refinance?
- What is a rate lock?
- What's the difference between a mortgage broker and a lender?
- Will I save money going directly to a mortgage lender?
- What is a full documentation loan?
- What is a good faith estimate?
- What is a conforming loan?
- What is a jumbo mortgage?
- What are points?
What is the difference between pre-approval and pre-qualification?
The pre-approval process is much more complete than pre-qualification. For pre-qualification, the loan officer asks you a few questions and provides you with a pre-qualification letter based upon acceptable credit and other criteria. Pre-approval includes all the steps of a full approval, except for the appraisal and title search.
What is a pre-qualification?
This is the process of determining whether a customer has enough cash and sufficient income to meet the qualification requirements set by the lender on a requested loan. A pre-qualification is subject to verification of the information provided by the applicant. A pre-qualification is short of approval because it does not take account of the credit history of the borrower.
When does it make sense to refinance?
Usually people refinance for one of a number of reasons:
To lower their monthly mortgage payment and free up some much needed extra cash from month to month.
To obtain a lower interest rate, which will save hundreds and thousands of dollars in interest over the life of the loan.
To reduce the term of the loan by moving from a 30-year mortgage to a 20-year or 15-year mortgage, for instance.
To convert an adjustable rate loan to a fixed rate loan.
To consolidate other high-interest debt under a "mortgage umbrella," which makes the interest tax-deductible.
The decision to refinance can be difficult, since there are several reasons to refinance. Because refinancing is a complex topic, please consult a Signature Mortgage Funding Loan Officer for further assistance.
What is a rate lock?
A rate lock is a contractual agreement between the lender and buyer that guarantees your interest rate for a pre-determined period of time.
What's the difference between a mortgage broker and a lender?
A mortgage broker counsels you on the loans available from different wholesalers, takes your application, and processes the loan which involves putting together the complete file of information about your transaction including the credit report, appraisal, verification of your employment and assets, and so on. When the file is complete, the lender "underwrites" the loan, which means deciding whether or not you are an acceptable risk.
Will I save money going directly to a mortgage lender?
Not necessarily. In fact, you will probably do better dealing with a mortgage broker. Mortgage brokers do not add any net cost to the lending process, because they perform functions that would otherwise have to be done by employees of the lender. Furthermore, because mortgage brokers deal with multiple lenders, they can shop for the best terms available on any given day. In addition, they can find the lenders who specialize in various market niches that many other lenders avoid, such as loans to applicants with poor credit ratings, loans for investment properties, loans with minimal or no down payment, etc.
What is a full documentation loan?
Both income and assets are disclosed and verified, and income is used in determining the applicant's ability to repay the mortgage. Formal verification requires the borrower's employer to verify employment and sometimes it is necessary for the borrower's bank to verify deposits. Alternative documentation, designed to save time, accepts copies of the borrower's original bank statements, W-2s and paycheck stubs.
What is a good faith estimate?
It is the document that summarizes your loan amount, interest rate, term of loan, monthly payment, closing costs, and cash back to you or cash needed to close. It is provided to you within three business days of receiving the loan application.
What is a conforming loan?
A loan eligible for purchase by the two major Federal agencies that buy mortgages, Fannie Mae and Freddie Mac. The loan limits are currently $322,700 for a single family house.
What is a jumbo mortgage?
A mortgage larger than the maximum eligible for purchase by the two Federal agencies, Fannie Mae and Freddie Mac, currently $417,000.
What are points?
Points are a percentage of your loan amount that you are required to pay the lender at closing to reduce your interest rate. For example, 1 point equals 1% of your loan amount, 2 points equals 2%, etc. If you are quoted a rate of 7% but would prefer 6.5%, it may cost you a point to "buy down" the rate, or 1% of your loan amount.
For more information about how Signature Mortgage Funding, Inc. can tailor a loan that's right for you, please contact us. 
