Frequently Asked Questions
Q: What is the difference between a mortgage broker and a mortgage bank?
A: Mortgage Broker brokers submits the loan to other lenders who fund the loan. A Mortgage Banker funds and closes the loan in their own name. American Mortgage Partners is both a Mortgage Banker and a Mortgage Broker, thus we have access to every conceivable loan program available.
Q: Can you find better rates than what the “Big Banks” offer?
A: YES, and we consistently do! We generally use a handful of banks that are very competitive – and more importantly, provide a quality and consistency of service we can count on.
It is EQUALLY important for us to be able to close the loan within the contract period and provide the most competitive loan program – we know missing the mark on either of these two key issues could cost us a client!
Q: What is the difference between a “jumbo” and a “conforming” loan?
A: Fannie Mae and Freddie Mac are companies that purchase loans from lenders. They have established maximum loan limits for loans they will purchase. These loans are considered “conforming loans” Loans above these limits are referred to as “jumbo.” Loans that federal loan agencies will participate in are considered “safer” for private lenders, and are therefore preferred. As a result, conforming mortgages generally better pricing than jumbo mortgages.
Q: What is an FHA loan?
A: An FHA (Federal Housing Administration) loan is a government backed mortgage insured by a HUD (Housing and Urban Development) that has historically been for borrowers seeking minimal down payment, or who fall below standard lending guidelines. FHA Loan guidelines have recently changed to reflect higher home values in areas of the country where FHA loan limits were previously too low to help the average household. Given the tightening in the conventional guidelines due to the mortgage credit crisis, FHA financing has emerged as the main source of financing for low down payments and / or lower credit score purchases and refinances.
Q: What are Points?
A: Loan Origination Fees are also referred to as “Points”. One ‘point’ refers to 1 percent of the loan amount. For example, if you are borrowing $250,000, 1 point would cost $2,500.
Points were designed as an incentive system to encourage you the borrower to get a lower interest rate in exchange for paying fees up front. If you don’t have the available cash, you can get a loan that has less points,but loans with low points generally have higher interest rates. If you have cash available and plan on keeping your loan for many years, then it may make sense to “buy down” the rate with discount points.
Q: What is a FICO/Credit Score?
A: The actual definition of credit scoring is a formula for credit risk assessment that is believed to be highly predictive of future payment risk.
Each credit bureau has different items reported to them and these items provide a credit score that will vary between each bureau. Based on these scores, the lender will determine loan eligibility and pricing. Major criteria for determining your score are:
• Number of accounts
• Length of time since account was opened
• Number of late payments
• Amount owed vs. high balances
Q. How does the Borrower’s credit score affect their qualification for the loan?
A: Lenders use credit scores to profile Borrowers based on their level of risk for potential default. The better the Borrower’s credit score, the more competitive the interest rate and loan program pricing. Here are some interesting statistics about how a Lender evaluates the level of risk for each Borrower based on their FICO score:
Score Range Risk of DefaultBelow 600 8 to 1
620-659 26 to 1
660-679 38 to 1
700-719 123 to 1
720-759 323 to 1
760-799 597 to 1
800-900 1292 to 1
