The process of obtaining a mortgage loan can be tedious and confusing. By asking the right questions, you can have a better understanding of the process and be certain that you are getting the product that best fits your needs and circumstances. Here are 20 questions that will help you get key answers about your loan, so you can make an informed decision:

1) Do you represent a mortgage banker or lender, mortgage broker, consumer finance company, or a financial institution?

It is important to know whom you are working with and their qualifications. A loan officer for a mortgage broker company assists you in finding a lender. A mortgage banker is a lender who directly makes real estate loans to consumers. A consumer finance company is a non-depository institution that may make high-risk loans with higher rates of interest than a traditional financial institution. A financial institution is a bank, credit union, savings and loan or savings bank that besides making mortgage loans also provides traditional banking services such as checking and savings accounts. 

. is a mortgage bank.  We are licensed by the various regulatory agencies in the states we originate mortgage loans in.  Our licenses and license numbers are listed in question 2 and on our home page.

2) If working with a mortgage broker, ask: Are you licensed by the state?

The Arizona Department of Financial Institutions, Arizona Corporation Commission, Arizona Department of Real Estate, Arizona Office of Real Estate Appraisers regulate most of the real estate services in Arizona. Mortgage brokers doing business in Arizona are required to be licensed by the Arizona Department of Financial Institutions.  If you are using the services of a mortgage broker, contact the Arizona Department of Financial Institutions (DFI) at www.azdfi.com to make sure the mortgage broker is properly licensed. Also look for the NMLS# for both the mortgage company and the mortgage originator on their advertising or business cards.  If you can not find it, check them out on the Arizona law requires advertising to contain a disclosure of the license under which your loan will be made or arranged. You may also wish to check with the Better Business Bureau at www.bbb.org  to see if the company is a member and if any complaints have been filed against the company.

We lend in the following states: Arizona  License # BK 0905081, California License # CA CFL 603 9961, Colorado License # CO 20061159979,   New Mexico License # NM 00329 ,  Texas,  and are expanding our lending to other states.

3) What is the interest rate you are offering to me and is it a fixed or variable rate? Is this the best possible rate based on my credit score?

The interest rate determines the amount lenders charge you to use their money and is usually quoted as a percentage. The rate can be a fixed rate meaning that it remains the same throughout the loan. There are also variable or adjustable rate loans where the interest rate can change during the term. The rate can go up or down and your payment will adjust accordingly. A lower interest rate results in lower monthly payments or the ability to buy a higher priced home. Some loans offer an extremely low interest rate or payments. Payments on some of these loans may be too low to pay the monthly interest and will increase your loan balance, known as negative amortization or deferred interest, rather than decrease it. Payments on these loans can also increase substantially after several years. Ask your broker or lender if your loan contains these features, and, if so, ask for all of the details so you can decide if this type of loan is right for you.

Your credit score is your history of repaying debt and is the main source lenders use to determine the interest rates they offer you. To obtain the best possible interest rate, you should shop around. A high credit score should result in your being offered a low interest rate. We recommend that you obtain a copy of your credit report before applying for a loan. This will allow you to fix any errors and assist you in making sure you receive the best possible loan based on your credit history. Under federal law, you can obtain one free copy of your credit report from each of the three reporting agencies once in a 12-month period. For more information or to get your report, visit www.annualcreditreport.com or call them at 1-877-322-8228.

4) Are you locking my interest rate and, if so, for how long?

A rate lock is when the lender or broker “locks in” a stated interest rate for a specific period of time, usually 30 days. This means that if interest rates raise you still will receive the quoted or “locked” rate. If interest rates drop, you will likely still receive the locked rate (unless you negotiate different arrangements with your lender or broker). You should ask for written verification of the rate lock. You might be required to pay a fee to lock in the rate. If dealing with a broker licensed by the Department of Real Estate, the broker cannot collect any fees, other than for appraisals and credit reports, in advance without prior approval. You should contact DFI to find out if a broker has an approved “advance fee agreement”. Mortgage bankers licensed by the DFI may charge you a rate-lock fee prior to loan closing only if there is a written agreement signed by both you and a representative of the lender.

5) What would be my Annual Percentage Rate (APR)?

The APR is the cost of credit and includes the interest rate and all other finance charges. If the APR is .75 to 1 percentage points higher than the interest rate you were quoted, there are significant fees being added to the loan.

6) As a mortgage broker or banker, how much money would you be paid?

A mortgage broker brings borrowers and lenders together and receives compensation for providing this service. The fees can be negotiated. Their fees are disclosed in the various line items on your HUD statement, including broker origination fee, processing fee, and application fee. Lenders also may pay the broker a yield spread premium (YSP), which is a payment to the broker from the lender for selling the borrower a loan at a higher interest rate than the borrower would otherwise be charged. This is generally acceptable if there are no other fees being charged by the broker. A mortgage banker and other lenders also will be paid for the service of providing you the loan. Their fees may include items such as a processing fee, application fee, and document preparation fee. Some of these fees are negotiable. When dealing with a broker licensed by DFI, you are entitled to receive a “Mortgage Loan Disclosure Statement” or other qualifying disclosure, within 3 days of applying for your loan. The disclosure must include how much the broker is being paid for its services, whether directly by you, by the lender, or both. Any changes in the amount of compensation the broker will receive is subject to prior disclosure to you. All lenders are required by federal law to provide a Good Faith Estimate of the costs of your loan and a Truth-In-Lending Disclosure within 3 days of receiving your loan application. If the costs increase significantly subsequent Truth-In-Lending Disclosures are required. You may also request that your closing agent provide an estimated closing statement 24 hours prior to closing your loan.

7) What other costs besides your fees will be associated with this loan?

Other costs may include points, prepaid items and title charges. Points are interest paid upfront and one point is equal to 1% of the loan amount. Generally, if you are paying points you are reducing your interest rate. You also likely will be paying for the appraisal and the credit report. Prepaid items include interest due until your first payment and initial escrow balances for taxes and insurance. Title charges are from the title agency and can include a title search, title insurance, and attorney fees. You can try to negotiate these fees with the title company. When dealing with a broker licensed by DFI, its disclosure to you must include all of the expected costs and expenses of your loan. Any significant changes to those costs must be disclosed to you. Federal law requires that the lender send you the Good Faith Estimate sent to you within 3 days of receiving your loan application.

8) What is the principal balance of my loan?

The principal balance of your loan is the amount of credit and/or money you are borrowing. When purchasing a home, the principal balance typically is the price of the home plus any fees minus your down payment. If you are refinancing, the principal balance would be the payoff of your current mortgage plus any fees. It also may include any other debt rolled into the loan or cash you receive at closing.

9) How much will the monthly payments be? Does this amount include escrow for property taxes and homeowner’s insurance or will I be responsible for paying these expenses on my own?

It is important to know exactly what your monthly payment will be to help you determine if you can afford the loan. This includes knowing what it will cost you monthly to pay the principal and interest in addition to homeowner’s insurance and property taxes. Beware: Some unscrupulous brokers or lenders try to sell borrowers on a low payment by excluding the additional monthly amounts for property taxes and insurance from the monthly payment quote.

10) When would my payments be due? What is the grace period?

Knowing when your payments are due can help you plan your monthly budget. This is especially important if you are on a fixed income or get paid once a month. Lenders may be willing to work with you during the loan process to set a mutually agreeable due date. It is much harder to get the date changed once you have received the loan.

11) What is the length of the loan? Is there a balloon payment at the end of the loan?

You should know how long you will be paying on the loan. Traditionally, most loans are paid off in 30 years. However, 15- and 20-year loans are available and can drastically reduce the amount of interest you will pay over the life of the loan. In some cases, the loan is a balloon note where the loan is not completely paid off during the term of the loan because the monthly payment only covers the interest due. In these cases, you are obligated to pay off the remaining balance or balloon payment, which can be a considerable amount, at the end of the loan term. If you do not have the funds or the ability to refinance the balloon payment, you could lose your property in a foreclosure.

12) Who would be my lender?

If you are working with a mortgage broker, it is the broker’s job to find you a lender. The mortgage broker will not be loaning you the money.

13) What are the chances that my loan would get sold?

Federal law requires that at the closing table you receive and sign a document stating the likelihood that your loan will be sold. Some loans are never sold, some are sold immediately and others are sold many times. It is also possible that only the servicing rights are sold. This means that while you make your payment to a new company, your old company is still the note holder or lender. Federal and state laws require both the old and new servicing company to notify you in writing of the change.

14) If I pay off the loan early, would I be charged a prepayment penalty? If yes, what is the amount of the prepayment penalty? How many years into the loan would the prepayment penalty expire?

A prepayment penalty is a fee you may be required to pay if you pay off your loan early. While California law permits a prepayment penalty under certain circumstances, the terms of the penalty vary depending on a number of factors such as the type of license held by the mortgage broker who negotiated your loan and the type of residential real property. The disclosures you receive from your mortgage broker or lender should state if there may be a prepayment penalty in your loan. If you have questions concerning your prepayment penalty, you should consult your attorney. If your loan has prepayment penalty provisions they will be included in your loan documents. Typically prepayment penalties do not extend beyond 5 years.

15) What is the appraised value of the property?

The appraisal is an impartial opinion of property value, performed by an appraiser who compares like properties within a close distance to the subject property. It is completed for the lender’s benefit, even if you pay for it, to ensure that the lender is not lending more than the property is worth. It also does not take the place of a home inspection. An appraiser who signs an appraisal in a federally related transaction (e.g., certain real estate-related financial transactions involving a federal financial institution) must be licensed by the California Office of Real Estate Appraisers. To see if your appraiser is licensed, check with the Office of Real Estate Appraisers at www.orea.ca.gov or contact them at (916) 552-9000. If the real estate transaction does not involve a federally related transaction, the appraiser is not required to be licensed in California and therefore is not licensed and regulated by any California state agency.

16) If I pay for the appraisal, how do I obtain a copy of it?

Sometimes a mortgage broker or lender will require you to pay for the appraisal. If you have paid for it, you are entitled to a copy and your lender or mortgage broker can tell you what you need to do. You may be required to request the copy in writing.

17) If I pay for the credit report, how do I obtain a copy of it?

A lender or mortgage broker may ask you to pay for the credit report upfront. You should consult the federal Fair Credit Reporting Act to determine your right to obtain a copy of the credit report. (See Question 3 above for the information on how to obtain a free copy of your credit report.) You are entitled to a disclosure advising you of your right to receive information about your credit score.

18) Am I required to have Private Mortgage Insurance (PMI)? If so, when will it be removed and what do I need to do to have it removed?

PMI is insurance that protects the lender against a loss if the borrower defaults on the loan. It is usually required for loans where the down payment is less than 20% or when the amount financed is greater than 80% of the appraised value of the home. For current loans other than FHA or VA loans, PMI may be automatically eliminated when equity becomes 22% of your original appraised value. You are also entitled to a disclosure from your broker or lender telling you if you have a right to cancel the PMI and the conditions for cancellation. For more specific information, you should contact your lender.

19) Who are you planning on using as the title agency? Are you or your company affiliated with the title company? Should I purchase owner’s title insurance?

Many borrowers will let the lender or mortgage broker choose the title company. You should know, however, that you have the right to use the title company of your choice even if it is a different company than selected by the mortgage broker or lender. In some cases when you are buying a property, the sales contract may stipulate a title company. Also, using the same title company as you have previously used may allow you to save some money. You just need to ask. It is not illegal for a mortgage broker or lender to have a financial interest in a title company. They just need to disclose this to you during the loan process. It is best to ask upfront so you can make an informed decision about which title company to use. The title insurance purchased in a loan transaction is typically for the lender’s protection should the title exam miss an outstanding lien. You may want to consider purchasing borrower’s title insurance to protect yourself should a lien be discovered after the close of the loan.

20) Who do I contact to obtain the closing documents for the loan 24 hours in advance of the closing?

You are entitled to obtain a copy of the estimated HUD settlement statement 24 hours in advance of the closing as long as you request it in writing before the 24-hour period begins. Your lender or mortgage broker can tell you who you need to contact to make this request. Having the statement ahead of time will give you and your attorney time to thoroughly review the costs of obtaining the loan and make sure that it is paying off all debt you want to be consolidated into the new loan. It also allows time for you to initiate any changes that need to be made prior to the loan closing.

Top Ten Mistakes

If you are like most people, buying a home is the second biggest investment you will ever make. The biggest investment is generally is your mortgage.   Annual mortgage, taxes and insurance costs can range from 25% to 40% of your gross annual income.
By visiting this reference page, you are on your way to protecting yourself, and making the home-buying process easier by becoming an informed consumer.
Read, talk to family, friends and real estate professionals. You will be glad you took the time to understand the process.

Buying a home

1. Looking for a home without being pre-approved.
   Pre-approval and pre-qualification are two different things. During the pre-qualification process, a loan originator asks you a few questions, then hands you a "pre-qual" letter. The pre-approval process is much more thorough.
   During the pre-approval process, the mortgage company does virtually all the work associated with obtaining full-approval. Since there is no property yet identified to purchase, however, an appraisal and title search aren't conducted.
   When you're pre-approved, you have much more negotiating clout with the seller. The seller knows you can close the transaction because a lender has carefully reviewed your income, assets, credit and other relevant information. In some cases (multiple offers, for example), being pre-approved can make the difference between buying and not buying a home. Also, you can save thousands of dollars as a result of being in a better negotiating situation.
   Most good Realtors® will not show you homes until you are pre-approved. They do not want to waste your, their, or the seller's time.
   Many mortgage companies will help you become pre-approved at little or no cost. They will usually need to check your credit and verify your income and assets.
2. Making verbal (oral) agreements!
   If an agent tries to make you sign a written document that is contrary to their verbal commitments, DO NOT do it! For example, if the agent says the washer will come with the home, but the contract says it will not--the written contract will override the verbal contract. In fact, written contracts almost always override verbal contracts. When buying or selling real estate, abide by this maxim: Get it in writing!
3. Choosing a lender because they have the lowest rate. Not getting a written good-faith estimate.
   While rate is important, you have to consider the overall cost of your loan. Pay close attention to the APR, loan fees, discount and origination points. Some lenders include discount and origination points in their quoted points. Other lenders may only quote discount points, when in fact there is an additional origination point (or fraction of a point).
   This difference in the way points are sometime quoted is important to you. One lender will quote all points, while another lender may disclose an extra point, or fraction thereof, at a later time--an unwelcome surprise.
   Within 3 working days after receipt of your completed loan application, your mortgage company is required to provide you with a written good-faith estimate (GFE) of closing costs. You may want to consider requesting a GFE from a few lenders before submitting your application. With a few GFEs to compare, you can get a feel for which lenders are more thorough, and you can educate yourself regarding the costs associated with your transaction. The GFE with the highest costs may not indicate that a particular lender is more expensive than another--in fact, they may be more diligent in itemizing all fees.
   The cost of the mortgage, however, shouldn't be your only criteria. There is no substitute for asking family and friends for referrals and for interviewing prospective mortgage companies. You must also feel comfortable that the loan officer you are dealing with is committed to your best interests and will deliver what they promise.
4. Choosing a lender because they are recommended by your Realtor®.
   Your Realtor is not a financial expert. He or she may not know which loan is best for you. Your Realtor® gets a commission only when your transaction closes. As a result, the Realtor® may refer you to a lender who will close your loan, but who may not have the best rates or fees. Also, many Realtors® refer you to one of their friends in the loan business--who also may not have the best rates or fees. Although most Realtors® are professional and concerned about your best interests, you should do your own homework.
   We recommend shopping for a loan with at least three mortgage companies before you make a decision. There are countless stories of consumers who ended up paying higher rates, or got a loan that wasn't right for them, because they blindly followed their Realtor's® advice.
5. Not getting a rate lock in writing.
   When a mortgage company tells you they have locked your rate, get a written statement detailing the interest rate, the length of the rate lock, and other particulars about the program.
6. Using a dual agent (an agent who represents the buyer and seller in the same transaction).
   Buyers and sellers have opposing interests. Sellers want to receive the highest price, buyers want to pay the lowest price. In most situations, dual agents cannot be fair to both buyer and seller. Since the seller usually pays the commission, the dual agent may negotiate harder for the seller than for the buyer. If you are a buyer, it is usually better to have your own agent represent you.
   The only time you should consider using a dual agent, is when you can get a price break (usually resulting from the dual agent lowering their commission). In that case, proceed cautiously and do your homework!
7. Buying a home without professional inspections. Taking the seller's word that repairs have been made.
   Unless you're buying a new home with warranties on most equipment, it is highly recommended that you get property, roof and termite inspections. These reports will give you a better picture of what you're buying. Inspection reports are great negotiating tools when it comes to asking the seller to make repairs. If a professional home inspector states that certain repairs need to be made, the seller is more likely to agree to making them.
   If the seller agrees to make repairs, have your inspector verify the completed work prior to close of escrow. Do not assume that everything will be done as promised.
8. Not shopping for home insurance until you are ready to close.
   Start shopping for insurance as soon as you have an accepted offer. Many buyers wait until the last minute to get insurance and find they have no time left to shop around.
9. Signing documents without reading them.
   Do not sign documents in a hurry. As soon as possible, review the documents you'll be signing at close of escrow--including a copy of all loan documents. This way, you can review them and get your questions answered in a timely manner. Do not expect to read all the documents during the closing. There is rarely enough time to do that.
10. Making moving plans that don't work.
    You expect to move out of your current residence on Friday and into your new residence over the weekend. Also on Friday, your lease terminates and the movers are scheduled to appear.
    Friday morning arrives: bags packed, boxes stacked, children under arm and the dog on a leash; you're sitting on your front door stoop awaiting the arrival of the movers.
    Your phone rings. Your loan closing is delayed until the following Tuesday. The new tenants turn into your driveway with a weighted-down U-Haul and the movers pull up across the street.
    You ask yourself, "Where's the nearest Motel 6 and storage facility? How much will the movers charge for an extra trip? Can we afford it?"
    How can you avoid such a disaster? Cancel your lease and ask the movers to show up five to seven days after you anticipate closing your transaction. Consider the extra expense an insurance policy. You're buying peace of mind--and protecting yourself from expensive delays.

Refinancing your home

1. Refinancing with your current lender without shopping around.
   Your current lender may not have the best rates and programs.
   Believing it's easier to work with your current lender is a common misconception. In most cases, they'll require the same documentation as other lenders and mortgage brokers. This is because most loans are sold on the secondary market and have to be approved independently. Even if you've been good at making payments to your existing lender, they'll still have to process the verifications all over again.
2. Not doing a break-even analysis.
   Determine the total transaction costs and how much you'll save each month by lowering your monthly mortgage payment. Divide the transaction costs by the monthly savings to determine the number of months you'll have to stay in the property to recoup your refinancing costs.
   For example, if the costs of refinancing total $2000, and you save $50 per month, you break-even in 2000/50 = 40 months. In this case, you should only refinance if you plan to stay in the home for at least 40 months.
   
   Note: The above example is suited to comparing two similar loans when the intent is to lower your monthly payment and recoup transaction costs relatively quickly. Other refinancing transactions require different kinds of analyses which are beyond the scope of this document. Other types of refinancing transactions include exchanging a fixed rate for an ARM, or a 30 year mortgage for a 15 year mortgage.
3. Not getting a written good-faith estimate of closing costs.
   Within 3 working days after receipt of your completed loan application, your mortgage company is required to provide you with a written good-faith estimate of closing costs.
4. Paying for a home appraisal when you think the appraised value may be too low.
   Have the appraisal company conduct a Desktop/drive-by appraisal and provide you with a range of possible values. Your mortgage company can ask an appraiser to do this for you.
   Do not waste your money on a complete appraisal if you believe the home is unreasonably priced.
5. Using the county tax assessor's value as the market value of your home.
   Mortgage companies do not use the county tax assessor's value to help determine if they'll originate your loan. They, like real estate agents, usually use the sales comparison approach (formerly known as the market data comparison approach).
6. Signing documents without reading them.
   Do not sign documents in a hurry. As soon as possible, review the documents you'll be signing at close of escrow--including a copy of all loan documents. This way, you can review them and get your questions answered in a timely manner. Do not expect to read all the documents during the closing. There is rarely enough time to do that.
7. Not providing your mortgage company with documents in a timely manner.
   When your mortgage company asks you for additional paperwork--get cracking! They're trying to get you approved! If you don't quickly respond to your broker's requests, you could end up paying higher rates should your rate lock expire.
8. Not getting a rate lock in writing.
   When a mortgage company tells you they've locked your rate, get a written statement detailing the interest rate, the length of the rate lock, and other particulars about the program.
9. Drawing against your home equity credit line before you refinance your first mortgage.
   Many lenders have "cash-out" seasoning requirements. If you draw against your credit line for anything other than home improvements, they'll consider your first mortgage refinance transaction a "cash-out" refinance. This creates stricter lending requirements and can, in some cases, break your deal!
10. Getting a second mortgage before you refinance your first mortgage.
    Many mortgage companies look at the combined loan amounts (i.e., the sum of the first and second loans) when you are refinancing only your first loan. If you plan on refinancing your first loan, check with your mortgage company to see if having a second loan will cause your refinance to be turned down.

Getting a home equity credit line.

1. Not checking to see if your credit line has a pre-payment penalty clause.
   If you are getting a "NO FEE" credit line, chances are it has a pre-payment penalty clause. This can be very important (and expensive) if you are planning to sell or refinance your home in the next three to five years.
2. Getting too large a credit line.
   When you get too large a credit line, you can be turned down for other loans. Some lenders calculate your credit line payments based upon the available credit, even when your credit line has a zero balance. Having a large credit line indicates a large potential payment, which makes it difficult to qualify for loans.
3. Not understanding the difference between an equity loan and a credit line.
   An equity loan is closed--i.e., you get all your money up front, then make payments on that fixed loan amount until the loan is paid. An equity credit line is open--i.e., you can get an initial advance against the line, then reuse the line as often as you want during the period the line is open. Most credit lines are accessed through a checkbook or a credit card. Credit line payments are based upon the outstanding balance.
   Use an equity loan when you need all the money up front--e.g. home improvements or debt consolidation.
   Use a credit line if you have an ongoing need for money or need the money for a future event--e.g., you need to pay for your child's college tuition in three years.
4. Not checking the lifecap on your equity line.
   Many credit lines have lifecaps of 18%. Be prepared to make high interest payments if rates move upwards.
5. Getting a credit line from your local bank without shopping around.
   Many consumers get their credit line from the bank with which they have their checking account. Shop around before deciding to use your bank.
6. Not getting a good-faith estimate of closing costs.
   Within three working days after receipt of your completed loan application, your mortgage company is required to provide you with a written good-faith estimate of closing costs.
7. Assuming that the interest on your home credit line/loan is tax deductible.
   In some instances, the interest on your home credit line is NOT tax deductible.
   It is beyond the scope of this document to provide tax advice or quote from the IRS code. Contact an accountant or CPA to determine your particular situation.
8. Assuming a home equity line is always cheaper than a car loan or a credit card.
   A credit card at 6.9% can be cheaper than a credit line at 12%, even after the tax deduction. To compare rates, compare the effective rate of your credit line with the rate on a credit card or auto loan.
   Effective rate = rate * (1 - tax bracket)
   Example: If the rate of the home equity credit line is 12% and your tax bracket is 30%, your effective rate is12% * (1 - 0.3) = 12% * 0.7 = 8.4%
   If your credit card is higher than 8.4%, the credit line is cheaper.
   Besides the interest rate, you may also want to compare monthly payments and other terms of the loan.
9. Getting a home equity credit line if you plan to refinance your first mortgage in the near future.
   Many mortgage companies look at the combined loan amounts (i.e., the first loan plus the equity line/loan) even though they are refinancing only the first mortgage. If you plan on refinancing your first loan, check with your mortgage company to determine if getting a second line/loan will cause your refinance to be turned down.
10. Getting a home equity credit line to pay off your credit cards if your spending is out of control!
    When you pay off your credit cards with your credit line, don't put your home on the line by charging large amounts on your credit cards again! If you can't manage the plastic, get rid of it!

There are several factors to consider when making your decision and I will present the benefits and drawbacks to each program, plan, alternative and goal.  I can only do this when you choose me to be your Mortgage Banker.  Call me at the office at ,  call my cell at 623-340-0934 , email me, or contact me via the website.