Frequently Asked Questions

How is a credit score determined?

Credit scores are based upon a number of factors, including but not limited to: your payment history (positive and negative), the amount of past due and length of delinquency on accounts, whether you have any adverse public records (bankruptcy, judgments, liens, etc.), the types of credit you have used, the length of time you have had your various accounts, new accounts and credit inquiries, the reestablishment of positive credit history after past problems, the number of accounts you have with balances, and the amounts you owe on each account.

Keep in mind, the level of importance of each factor varies from person to person depending on their overall credit report. It is virtually impossible to say what weight will be given to each factor in any given FICO score.

What’s your interest rate?

What your internet and television news sources tell you about interest rates is generally not accurate. Interest rates cannot be guaranteed, as they are determined based upon a number of factors, including the type of property involved, the county the property is located in, your income and your credit score.

Should I lock my mortgage rate?

You can lock in a rate at any time; whether you should depends on market trends and what is reasonable for your particular situation. Rates change every day and therefore you can never know with certainty what will happen. The key here is having a mortgage broker you can trust. Your mortgage broker needs to have an intimate knowledge of current rate trends in the market and needs to educate you fully and candidly. Talk to your trusted mortgage professional and make a decision together.

What’s the difference between APR and interest rate?

The APR (Annual Percentage Rate) is the actual cost of the mortgage based upon the mortgage interest rate and certain applicable closing costs in conjunction with your loan terms. If you were to pay all of the fees and expenses of the loan out of pocket, the APR would match your note rate. APR can be a confusing subject with regard to loan disclosures, but it is an effective way to compare two different loans with the same note rate.

The interest rate is used to calculate your monthly payment using the loan amount and the loan term.

What causes mortgage interest rates to drop?

There is no definitive answer to this question; however, several factors can affect mortgage interest rates. Included among these are the 10 Year Treasury, Mortgage Backed Security bonds, and inflation.

What’s the difference between being pre-qualified and pre-approved for a loan? 

You can pre-qualify simply by talking with your mortgage broker or loan officer. They will interview you and based upon your income, credit score, the type of loan you need, whether you are self-employed or a simple wage earner, and other factors they can determine the potential loan amount you may be approved for. Pre-qualification is not a commitment to lend; it is only an initial screening.

Pre-approval is a step above pre-qualification and involves completing an application, providing all the necessary documentation (tax returns, W2s, pay stubs, etc.) and submitting it to a lender who will then determine how much you qualify for.

For more Q&A, visit The Right Mortgage for You and Mortgage Rates FAQs.

For articles about current mortgage trends, visit our Articles page.

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