Mortgage F.A.Q.

WHY SHOULD I USE A REALTOR?

First and foremost, because you need an experienced professional working on your behalf. The realtor’s commission is not paid by the buyer, but by the seller of the home being purchased, and it is in each party’s best interest to have professional representation. As a seller, profits are generally maximized by having an experienced realtor market and sell your home, rather than deal with the headaches of trying to do it all on your own. See our page on “selecting a realtor” for more information.

WHY AND HOW DO INTEREST RATES CHANGE?

Many people are surprised to learn that rates change on a daily and sometimes hourly basis. Interest rates fluctuate in response to changes in the financial markets. The bond market is generally a good indicator of the general trend of interest rates.

WHAT HAPPENS ONCE I AM PREAPPROVED?

You are ready to buy a home! Remember that it is very important to inform us of any changes in the financial information that was provided at the time of approval, as it may make a change in the amount or type of loan that you can qualify for.

WHEN SHOULD I CONSIDER REFINANCING?

The old rule of thumb was at least 2%, but this is no longer the case. Many different individual factors need to be analyzed to determine if refinancing is right for you, such as the length of time you intend to stay in your home, or the type of loan you currently hold. We are always happy to provide a recommendation to you for your particular circumstances.

WHAT IS AN ORIGINATION FEE?

Typically, it is 1% of your loan amount, and works exactly like a discount point. You can avoid all or part of this fee by paying a higher interest rate. In Minnesota, rates are typically quoted assuming this 1% origination fee.

WHAT IS TITLE INSURANCE?

It is a policy provided by the title company guaranteeing the accuracy of the title work done on your home at the time of purchase. As a buyer, you are required to purchase a lenders policy of title insurance as part of your standard closing costs, which only protects the mortgage company. You may also choose to purchase an owners policy, which would protect you against any loss in the event of any legal issues relating to the title of your home.

WHAT IS MORTGAGE INSURANCE?

This is generally required in one form or another when the down payment is less than 20%, and protects the lender in the event of loan default. The lower the down payment, the higher the risk for the lender, and thus the higher the monthly premium. Depending on your particulars, there are ways in which mortgage insurance can sometimes be avoided at purchase, or dropped altogether at some point in the future.

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