BD Mortgage Group | Frequently Asked Questions

Got Questions About Mortgages? We’ve Got Answers!

Frequently Asked Questions

Do you have questions? We can help! You will find the answers to several frequently asked mortgage questions below.

DIFFERENCE BETWEEN PRE-QUALIFICATION AND PRE APPROVAL?

Understanding Pre-Qualification vs. Pre-Approval

At BD Mortgage Group LLC, we recognize that understanding the mortgage process is essential for making informed decisions. A key step is knowing the difference between pre-qualification and pre-approval.

Pre-Qualification

is the initial phase, where a loan officer evaluates your financial situation based on basic information about your income, debts, and credit history. This results in a pre-qualification letter that estimates your borrowing potential, but it's not a comprehensive analysis.

Pre-Approval

is more thorough, requiring a formal application and documentation like pay stubs and tax returns. The lender conducts a detailed review, resulting in a pre-approval letter, which shows stronger commitment, covering all steps of a full approval process except for appraisal and title search.

Securing pre-approval enhances your position as a buyer, making you appear credible and competitive in negotiations. At BD Mortgage Group LLC, we’re here to guide you through your mortgage journey—contact us for personalized support!

WHEN SHOULD I REFINANCE?

When Should You Consider Refinancing?

At BD Mortgage Group LLC, we recognize that refinancing your mortgage is a crucial decision that can significantly impact your financial health.

Homeowners typically refinance for key reasons:

Lower Interest Rates: Refinancing can lower your monthly payments if market rates are lower than your current rate.Shorten Loan Term: This can help you pay off your mortgage faster and build equity quickly.Convert Loan Types: Switching from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage can provide payment stability.Debt Consolidation: You may consolidate higher-interest debts into your mortgage for potential savings.

To evaluate refinancing, calculate the total costs, your monthly savings, and the break-even point to determine if refinancing benefits you.

At BD Mortgage Group LLC, our experienced team is here to guide you through the refinancing process. Contact us today to explore how refinancing can work for you!

WHAT ARE POINTS?

Understanding Points in Mortgage Financing

At BD Mortgage Group LLC, we prioritize financial literacy in your mortgage decisions. One key concept is "points," which are upfront fees expressed as a percentage of the total loan amount. For example, "2 points" equals 2% of the loan balance.

Points can serve two main purposes:

Discount Points: Paid at closing to lower your mortgage interest rate, resulting in reduced monthly payments and overall interest savings, beneficial if you plan to stay in your home long-term.

Origination Points: Fees for processing the loan that do not affect your interest rate but are part of the loan costs.

When considering points, evaluate your long-term plans, cash availability, and conduct a break-even analysis to understand the potential savings.

At BD Mortgage Group LLC, we’re here to guide you through the mortgage process and help you make informed decisions. Contact us for personalized advice and explore your mortgage options with confidence!

HOW TO IMPROVE MY CREDIT FOR A MORTGAGE LOAN?

How Do I Improve My Credit Score for a Mortgage?

Improving your credit score is essential for securing a favorable mortgage rate.

Here are key steps to enhance your creditworthiness:

Check Your Credit Reports: Obtain your credit reports from all three major bureaus and review them for errors.

Dispute any inaccuracies you find. Pay Your Bills on Time: Consistently making timely payments is crucial, as payment history accounts for a significant portion of your credit score.Reduce Credit Card Balances: Aim to keep your credit utilization ratio below 30% of your available credit. Pay down existing balances to improve your score.Avoid New Debt: Limit new credit inquiries and accounts during the mortgage application process, as this can temporarily lower your score.Keep Old Accounts Open: Maintain your older credit accounts to lengthen your credit history, which positively impacts your score.

By following these strategies, you can boost your credit score and increase your chances of securing a better mortgage rate. For personalized guidance, contact BD Mortgage Group LLC!

WHAT IS A RATE LOCK?

What Is a Rate Lock?

At BD Mortgage Group LLC, we understand that navigating the mortgage process can be complex, and we’re here to help you make informed decisions. A rate lock is a crucial tool in this journey—a contractual agreement between the lender and the borrower that secures a specific interest rate for a defined period.

Key components of a rate lock include:

Loan Program: The type of mortgage you are securing, which influences the rate.Interest Rate: The percentage you will pay on the borrowed amount, fixed for the duration of the lock.Points: Upfront fees paid to lower the interest rate, expressed as a percentage of the loan.

Length of the Lock: The duration for which the rate is guaranteed, protecting you from potential rate increases.

A rate lock can provide peace of mind, ensuring you get the best possible rate for your mortgage. Contact BD Mortgage Group LLC to discuss your options!

DIFFERENCE BETWEEN A MORTGAGE BROKER AND A LENDER?

At BD Mortgage Group LLC, we understand that choosing the right financial partner is essential for your home financing needs. A mortgage broker and a lender play different roles in the mortgage process.

A Mortgage Broker acts as an intermediary between you and various lenders. They work on your behalf to find the best loan options suited to your financial situation and needs. Brokers have access to multiple lenders, allowing them to compare rates and terms to secure the most favorable deal for you.On the other hand.

A lender is a financial institution or bank that directly provides the funds for your mortgage. They underwrite your loan, making the final decision on whether to approve it based on your financial profile.

Choosing BD Mortgage Group LLC means you have a dedicated team ready to navigate both roles for you, ensuring you receive the best mortgage solution tailored to your goals. Contact us today to get started!

WILL I SAVE MONEY GOING DIRECTLY TO A MORTGAGE LENDER?

Will I Save Money Going Directly to a Mortgage Lender?

At BD Mortgage Group LLC, we believe in empowering our clients with the best mortgage solutions. While it might seem logical to approach a mortgage lender directly, working with a mortgage broker can often yield better financial outcomes.

Mortgage brokers do not increase your costs; instead, they perform essential functions that lenders would typically handle internally. With access to numerous lenders—often 25 or more—brokers can effectively compare offers to secure the most competitive terms available.

Additionally, brokers specialize in identifying lenders who cater to niche markets, including options for borrowers with lower credit scores or those seeking minimal down payment loans. By choosing BD Mortgage Group LLC, you gain the advantage of expert guidance and tailored solutions designed to meet your unique financial needs. Contact us today to explore your options!

WHAT IS A FULL DOCUMENTED LOAN?

What Is a Fully Documented Loan?

At BD Mortgage Group LLC, we are committed to helping you understand the mortgage process. A fully documented loan is a type of mortgage that requires comprehensive verification of your financial information to ensure your ability to repay the loan.

In this process, both your income and assets are disclosed and verified. This includes formal verification from your employer to confirm your employment status, as well as your bank providing evidence of your deposits.

Alternatively, we offer a streamlined documentation approach, where you can provide copies of your original bank statements, W-2 forms, and paycheck stubs to expedite the process.

Choosing a fully documented loan can enhance your credibility as a borrower, making it easier to secure favorable loan terms.

Contact BD Mortgage Group LLC today to explore your options and find the right mortgage solution for you!

WHAT ARE CLOSING COSTS?

Closing costs are fees and expenses incurred during a real estate transaction, typically ranging from 2% to 5% of the loan amount. These costs must be paid at closing and include a variety of charges, such as:

Loan-Related Fees: This includes origination fees for processing the loan, discount points to lower interest rates, application and underwriting fees.

Title and Legal Fees: These cover the title search, title insurance to protect against disputes, and attorney fees for document review.

Inspection and Appraisal Fees: Costs for an appraisal to determine property value and inspections to check the condition of the home.

Property and Mortgage Insurance: Prepaid homeowners insurance and mortgage insurance if the down payment is less than 20%.

Prepaid Costs and Escrow: Includes prepaid property taxes and deposits for future insurance and tax payments held in escrow.

Recording and Transfer Fees: Fees for recording the property transfer in public records and any applicable transfer taxes. Miscellaneous Fees: Other costs like courier fees and credit report fees.

Both buyers and sellers typically share these costs, with buyers usually covering more of the loan-related fees, while sellers may handle transfer taxes and certain title fees.

WHO APPROVES MORTGAGE LOANS?

Mortgage loans are approved through a collaborative process involving several key parties:

Loan Officer: The initial contact for borrowers, helping them navigate the application process and gather necessary documentation.

Underwriter: Responsible for evaluating the loan application in detail, assessing the borrower's creditworthiness and financial information to determine if the loan meets the lender’s guidelines.

Loan Processor: Manages the paperwork and ensures that all necessary documents are organized for the underwriter’s review.

Mortgage Lender: The financial institution that provides the loan, setting guidelines for approval based on regulatory requirements.

Secondary Market Investors: Sometimes involved after a loan is approved; they may purchase loans from lenders, influencing approval criteria.

In summary, loan officers, underwriters, processors, and lenders work together to assess and approve mortgage loans, ensuring a thorough evaluation of borrower eligibility and risk.

CAN MORTGAGE LOANS BE TRANSFERRED?

Yes, mortgage loans can be transferred. This process is commonly referred to as the transfer or assignment

of a mortgage. Here are the primary ways this can happen:

Servicing Transfers: Mortgage lenders often transfer the servicing rights of a loan to another company. This means that while the terms of the loan (such as the interest rate and monthly payments) remain the same, a new company will handle payments, escrow accounts, and customer service. The borrower will receive a notice in advance if their loan servicer changes.

Loan Sales in Secondary Market: Lenders frequently sell mortgage loans to other financial institutions or investors in the secondary market. This doesn’t change the loan terms for the borrower but shifts ownership of the loan.

Assumable Mortgages: Certain types of mortgages (typically FHA, VA, and USDA loans) allow for assumption, where a new borrower can take over the existing loan and its terms.

This requires the lender’s approval and is generally used in real estate sales when the interest rate on the existing mortgage is favorable compared to current rates.

Mortgage Transfers Due to Mergers or Acquisitions: If a lender is acquired by or merges with another institution, the loans they hold may be transferred to the new entity.

Mortgage transfers do not impact the borrower’s original loan terms but do require the new servicer or owner to notify the borrower in advance of the change.

HOW DO MORTGAGE LOANS WORK?

A mortgage loan is a loan specifically for purchasing real estate, where the property itself secures the loan. Borrowers apply through lenders or brokers, who assess factors like income, credit, and employment history to approve the loan and determine terms, including interest rate and monthly payment amounts. Typically, borrowers make a down payment, with the lender covering the rest of the property price. The loan is repaid through monthly payments over 15-30 years, which cover both the principal (loan amount) and interest.

Mortgage payments may also include an escrow account, which handles property taxes and insurance to ensure timely payments.

There are two main types of interest rates: fixed-rate (same rate throughout the loan term) and adjustable-rate (changes periodically). If a borrower fails to make payments, the lender can foreclose and sell the property to recover the loan balance.

Borrowers can refinance a mortgage to adjust loan terms, such as lowering interest rates or accessing equity in the home.

Additionally, closing costs—covering loan fees, title fees, and appraisal fees—are typically paid upfront. The entire process allows borrowers to own real estate while making manageable payments, with lenders protected by the property as collateral.

WHAT IS A JUMBO LOAN?

What Is a Jumbo Loan?

At BD Mortgage Group LLC, we aim to clarify mortgage options to help you make informed decisions. A jumbo loan is a type of mortgage that exceeds the maximum loan limits set by the federal agencies, Fannie Mae and Freddie Mac.

Because jumbo loans are not eligible for backing by these agencies, they typically come with stricter credit requirements and a higher interest rate. This type of financing is ideal for buyers looking to purchase luxury homes or properties in high-cost areas where home prices surpass conforming limits.

If you're considering a jumbo loan, our expert team is here to guide you through the process, ensuring you understand your options and secure the best terms available.

Contact BD Mortgage Group LLC today to discuss how a jumbo loan can fit into your home financing strategy!

WHAT IS A CONFORMING LOAN?

What Is a Conforming Loan?

At BD Mortgage Group LLC, we strive to provide clarity on your mortgage options. A conforming loan is a type of mortgage that meets the guidelines set by Fannie Mae and Freddie Mac, the two primary government-sponsored enterprises that purchase mortgages.

These loans adhere to specific limits on loan amounts, ensuring they are eligible for sale in the secondary market. Because of their standardization, conforming loans typically offer competitive interest rates and favorable terms, making them an attractive option for many homebuyers.

If you're looking for a reliable financing solution, our experienced team can help you navigate the conforming loan process to secure the best rates tailored to your needs. Contact BD Mortgage Group LLC today to learn how we can assist you in achieving your homeownership goals!