Archives for May 2008

How to Apply On-Line for a Mortgage Preapproval

I recently had this excellent question from one my readers who is interested in getting preapproved:

I began filling out the loan application on the web, but stopped once I reached the part about the specific property, as I don’t currently have a property in mind.  I believe what I am seeking to do [is] a true preapproval letter.  I did read your post which clarified the difference between prequalification and preapproval.  Is there a way to submit the full-doc information to you electronically to start the process for preapproval?

Mortgage Porter’s On-line Application (under Favorite Links) allows you to apply for mortgage preapproval before you have a property address.   This is question is very valid because there is not a formal way to select that the property has not yet been found.  Ideally, home buyers should get preapproved before they make an offer on a home.  Anyhow, where the application asks for a property address, simply enter:

123 TBD St., Your City, WA, Your Zip  (NOTE:  I’m only licensed to help those who need a mortgage in Washington State).

During these historic times in our mortgage industry (and actually, in any time) it’s crucial to get preapproved BEFORE you begin to shop for your next home.

I’m really glad that I was emailed this question so I could address it…otherwise, I might not have caught this.   Thanks!

My 22nd Anniversary in the RE Biz

I should stop saying how long I’ve been around the real estate industry!  On May 1, 1986, a very bright-eyed and naive young Rhonda Christopherson, began my first “real job” at Safeco Title Insurance Company as a doc-puller (we were bought a year later by Chicago Title, where I worked in Unit 5).   

After 14 years in the title industry, I made the move to mortgage and I’ve been helping Washington families with their Mortgage Planning needs for the past 8 years…the rest is history!Seahawks_3

Yes…that is Chuck Knox, that was my hair style in the 80s and yes, I’m wearing yellow Reeboks with actual jersey. 

What’s a Lock Confirmation?

A lock confirmation is a written document that your Mortgage Professional should provide you once your interest rate is locked.   In fact, if you don’t receive a Lock Confirmation once you have instructed your loan originator to lock, demand one.  No skirting from the Loan Originator allowed!

Your Lock-In Agreement/Confirmation should include the following information:

  • Date the loan was locked
  • Borrowers Names
  • Property Address
  • Loan Amount
  • Lock Expiration Date
  • Interest Rate
  • Origination Fee
  • Discount Point
  • Whether or not there’s a Prepayment Penalty
  • ARM information (Margin, Index, Adjustment Caps, Life Cap and if it features a Conversion Option)
  • Any lock in fees (including non-refundable) if any.  This generally applies towards locks with longer lock periods.
  • Terms of the lock (see below)
  • Signature place for borrowers
  • Signature of Loan Originator
  • Name and Address of Mortgage Company

Why is this so important?  For starters, once you agree to lock in a certain interest rate, a clock begins ticking and counting down towards the lock expiration date.  If you get too close to that date, you may need a lock extension which could have a fee depending on what the pricing is at that time.   

Equally, and possibly more important, you want to make sure that your Loan Originator has in fact locked your mortgage rate.   There are some Loan Originators out there who will say they have locked in your rate when in fact, they have not.  They’re gambling the market with hopes of still locking in your rate at what they have told you, but they’ll make a little extra on the back end OR the rate you want isn’t quite available so they’re gambling the market will improve and they’ll lock you once that rate appears.   But what if it doesn’t?   Having a document that shows that the Loan Originator committed that rate to you may help you should you need to make them honor the rate (you may have to seek their manager or higher).

It’s quite possible, especially in this volatile of a market where we are averaging two rate changes per day, that you may give the LO permission to lock in your rate and when they go to do so (even if it’s the moment you hang up the phone), the rates may be changing.  A Mortgage Professional will be upfront with you and let you know if this has happened (for better or worse).   An actual Lock-In Agreement/Confirmation should not be provided until the rate is actually locked in. 

Changes to the loan application may also impact the mortgage rate which would then change the lock.  For example:

  • Credit score changes during the transaction discovered from a new report may impact the rate for better or worse.
  • Changes in loan to value (after the appraisal is received).
  • Change in level of documentation for the loan.
  • Loan programs being terminated or guidelines tightened.
  • Investor pricing changes with less time permitted than what the lock will allow.
  • Information on loan application not accurate, misrepresented or changes (such as employment or the Underwriter determines occupancy to be different than stated on application).

Again, a Mortgage Professional will notify you of these changes and how they impact you as soon as they become aware.

Some lenders also offer a Forward Lock Agreement which is different than a confirmation…I’ll give you the scoop on a Forward Lock in another post soon.  Stay tuned!