What is a Mortgage Rate?
A mortgage rate is the interest rate on your home loan. There are many factors that go into deciding what your interest rate will be when securing a mortgage including inflation, the Federal Reserve, the yield on the 10 year treasury note, your credit score and the mortgage company’s specific fees.
How is the Interest Rate Different from the Annual Percentage Rate (APR)?
The interest rate is the rate on the loan itself and does not take into account closing costs. The APR is the interest rate with the closing costs or closing credits accounted in it. The APR provides a more “apple-to-apples” comparison across loans, as long as the same types of costs are included in each home loan.
What documentation is needed to start the loan process?
Items to gather
To expedite the paperwork process, start gathering the following items:
- Pay Stubs. Current pay stubs for the most recent 30-day period.
- W-2 Forms. IRS W-2 forms for the most recent two years.
- Tax Returns. Personal tax returns for the two most recent years.
P&L Statement and Balance Sheet. If you are self-employed and own more than 25% of your business, business tax returns for the most current two years, a year-to-date profit and loss statement and balance sheet.
Bank Statements. Current bank statements for the most recent two-month period or quarter.
Landlord Information. If you are currently renting a home, please provide the name, address and telephone number for your landlord(s) for the last 12 months.
Rental Agreements. If you own rental properties, provide current rental agreements on all rental properties and expense-related information.
Closing Statement. If you have sold a home within the last six months, please provide your closing statement for the property sold.
Sales Contract. If purchasing a home, please provide a copy of your executed sales contract and all addendums.
Why use a Mortgage Broker versus a bank?
A professional mortgage broker originates, negotiates, and processes residential and commercial mortgage loans on behalf of the client. Below is a six point guide to the services you should be offered and the expectations you should have of a qualified mortgage broker:
1. OFFERS ACCESS TO HUNDREDS OF LOAN PRODUCTS
A mortgage broker offers a wide range of mortgage loans from a number of different lenders. The greater the broker’s experience and network, the better your opportunity to obtain the loan product and the interest rate that best suits your needs.
A mortgage broker represents your interests rather than the interests of a lending institution. They should act not only as your agent, but as a knowledgeable consultant and problem solver. With access to a wide range of mortgage products, a broker is able to offer you the greatest value in terms of interest rate, repayment amounts, and loan products. Mortgage brokers will interview you to identify your needs and your short and long term goals. Many situations demand more than the simple use of a 30 year, 15 year, or adjustable rate mortgage (ARM), so innovative mortgage strategies and sophisticated solutions are the advantage of working with an experienced mortgage broker.
A mortgage broker navigates the client through any situation, handling the process and smoothing any bumps in the road along the way. For example, if borrowers have credit issues, the broker will know which lenders offer the best products to meet their needs. Borrowers who find they need larger loans than their bank will approve also benefit from a broker’s knowledge and ability to successfully obtain financing.
With a mortgage broker, you only need one application, rather than completing forms for each individual lender. Your mortgage broker can provide a formal comparison of any loans recommended, guiding you to the information that accurately portrays cost differences, with current rates, points, and closing costs for each loan reflected.
A mortgage broker is offered loans on a wholesale basis from lenders, and therefore can offer the best rates available in the market, typically making the total loan cost lower for the client. A reputable mortgage broker will disclose how they are paid for their services, as well as detail the total costs for the loan.
Personalized service is the differentiating factor when selecting a mortgage broker. You should expect your mortgage broker to help smooth the way, be available to you, and advise you throughout the closing process. Check the qualifications and experience of the mortgage broker, ask for references, and rely on referrals from your attorney, accountant, real estate agent, or financial planner.