General Home Loan Questions

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What does a lender look at to approve me?

At the heart of approving a potential borrower is what lenders call "the three C's of underwriting:"

• Credit — your credit history

• Collateral — the value of the property securing the loan (your house)

• Capacity — your financial ability to assume and repay debt

Taken together, these create a portrait of a potential borrower's risk - that is, whether or not he or she will pay back his or her loan. If the risk seems high, the lender will be reluctant to make the loan. Depending on the degree of risk, a lender may choose to charge higher rates and/or fees, or decline to make the loan altogether.

Traditionally, all three were of equal importance. However, we place the most emphasis on your credit history.

How do I know what my loan rate will be?

Rates vary primarily based on the type and purpose of the loan, your credit history and income, loan amount, value of the property, and the number of points you are willing to pay.

What are points and how many do I have to pay?

Generally speaking, points are fees added onto loans. One point is equal to 1 percent of your loan amount. Points are paid when the loan closes, not at the time you apply for the loan.

How do I determine the points I want to pay?

Points are paid when the loan closes, not at the time you apply for the loan. Generally speaking, points are fees added onto loans. One point equals 1 percent of the loan amount.

Do I get a tax advantage from having a mortgage?

You should consult a tax attorney or accountant for specific details, but interest on a mortgage is usually tax deductible. Interest on credit cards or automobile loans is not normally tax deductible.

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How do I qualify for a loan?

Lenders use specific criteria to determine if you qualify for a loan and the amount you can qualify for. You can use our calculator tools to determine whether you can qualify for a loan, the types of loan products that are best for you, and many other things.

How do I refinance my existing loan?

To refinance your loan in order to obtain a lower interest rate and start saving on your monthly payments, National Mortgage Center can offer you the following loan products with the security of fixed-rate payments:

15-Year Fixed-Rate Refinance
Choose this if:

• You want a shorter loan life and lower rates

• Low monthly payments are not a priority

• You're planning to stay in your house for more than 10 years - especially if you're planning to completely pay off your loan

CASH OUT OPTION

If your equity in your property qualifies, you can refinance with a loan amount greater than your current mortgage - and keep the difference! Use it for home improvement, debt consolidation, or whatever you want.

30-Year Fixed-Rate Refinance
Choose this when:

• You want low monthly payments that do not change

• You want a loan that's generally easier to qualify for

• You're planning to remain in your house less than 10 years

• You want the maximum tax advantage (please consult your tax adviser)

How much can I borrow and why?

Income, debt, and mortgage payments are the primary factors that affect whether you qualify for a loan. If you do qualify for a loan, you can apply and we will move to the next step of checking to see if you can be approved.

To determine your qualification, the first thing we will do is divide the monthly payment of your proposed loan by your gross monthly income. This provides your housing-to-income ratio.

If the resulting percentage falls within a certain range, the next step is to divide your total monthly debt by your gross monthly income. This provides your debt-to-income ratio. Again, if the ratio falls within prescribed limits, you are qualified for the loan.

The limits within which your housing and debt ratios must fall are determined primarily by the size of the loan, the value of the property, and the ratio between the two (known as the loan-to-value ratio, or LTV). This loan-to-value ratio is one of the most important factors in determining a home loan.

Should I roll in my fees?

The choice basically comes down to "pay now" or "pay later." If you have the funds now, it makes sense to cover the expenses out-of-pocket and save through lower loan payments and interest costs on a smaller loan. On the other hand, if your budget is currently tight, rolling in the costs with your loan amount makes sense because it allows you to get the loan without immediate expense.

Your loan-to-value ratio (LTV) shows your equity in the property. Your equity is basically the amount of the property you own, expressed as a monetary figure. Another way of thinking of your equity is that it's the amount of money you'd receive if you sold your property at its valued price, less what you'd have to return to your lender to repay the loan. Example: $100,000 value minus $50,000 to repay loan = $50,000 equity. Your LTV and equity are crucial because common wisdom among lenders is that the higher the LTV (and the lower the equity), the higher the risk of a borrower defaulting on his or her loan. Thus, low equity loans present lenders with greater risk, forcing them to increase their costs.

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