A mortgage pre-approval or pre-qualification is strongly recommended if you want to be taken seriously as a buyer. Mortgage pre-approvals and pre-qualifications are like your financial resume. You may find that some real estate agents and sellers require that you have a pre-approval in hand before they will show you homes. Work with your mortgage professional to obtain a pre-approval that provides you with impressive curb appeal that stands out from your competition.

A mortgage pre-qualification is a conversation between you and your lender about your financials, assets and down payment. Your mortgage loan originator may pull a soft pull credit report to determine your credit scores and debt, as well as obtain copies of your bank statements, pay stubs, tax returns and W2’s to further evaluate your financial situation. The mortgage loan originator will go one step further to obtain a pre-approval by actually obtaining a loan application, pulling a formal mortgage credit report and obtaining a formal loan approval from either the automated underwriting system or an actual underwriter. For this reason, the pre-approval holds more weight.

In the past, most lenders would agree that you should aim to save 20% or more of the total loan amount for a down payment. In some situations, this may be the case. However, there are loan programs that allow for less than 20% for a down payment. There are some loan programs that require a minimum of 3.5% as down payment and some that require a minimum of 5% down. Some require extra insurances on your mortgage known as private mortgage insurance (PMI) and some do not. It just depends on your financial situation and what loan program you will be able to qualify for. You should have at least 3.5% saved up for your down payment and an additional 2% to 5% of the loan amount for closing costs. There is no set number for closing costs.

Not necessarily. There are loan programs that require a minimum credit score of 620 and some that require a 580 minimum credit score. It just depends on the loan program that you are applying for. The interest rate and pricing may be better if your credit score is higher than the minimum, but there are rescoring options that are provided to loan professionals by their credit reporting agency that may assist in helping borrowers increase their credit scores easily. You may want to ask your loan professional if he/she has this capability. We, at Mahalo Mortgage, have the ability of assisting you with this.

The answer to this question comes down to your finances and personal preference. If you know that you will be in your home for several years, a fixed rate mortgage may be the way to go. If you are not planning on staying in your home for more than 5 or 10 years, an adjustable rate mortgage loan may be the way to go because it may provide you with a lower rate for a short period of time.

 Several factors need to be considered when determining the answer to this mortgage question. Current interest rates, your new mortgage payment, how long you will be in your current home. With the rates being higher than they were a year ago, it may be feasible to refinance if you are wanting to consolidate debt because interest rates on credit cards are higher than current mortgage rates, you may want to take the equity out of your home to make future home renovations or you may want to convert between a fixed rate and adjustable rate mortgage. Be sure to consider your current and financial situation before deciding if the time is right to refinance.