Q & A with Dottie Herman

Q & A with Dottie Herman

» Featured Columnists | By Dottie Herman | June 29, 2012 8:00 AM ET

Q1 - It is better to get a pre-qualification or a pre-approval.  What is the difference between pre-approval and pre-qualification?

A - The pre-approval process is much more complete than pre-qualification. For pre-qualification, the loan officer asks you a few questions and provides you with a pre-qual letter. Pre-approval includes all the steps of a full approval, except for the appraisal and title search. Pre-approval can put you in a better negotiating position, much like a cash buyer

Q2 - I am just starting to look at houses that are bank-owned because I was told I could get a good price.  What should be my 1st step?

A - Your first step should always be to get your own financing in order. Often times, bank-owned properties attract investment buyers and can have multiple offers. Make sure you have been pre-qualified all the way to underwriting (your lender will help with that) and have that approval letter with you so that you can make an offer immediately on the home you like.

Q3 - I would like to refinance to lower my rate, but don't know if it is worth it.  At what percentage rate does it make sense to get a new mortgage?

A - The general rule of thumb is that once interest rates drop to at least 1% or more from your current rate, then it's probably a good idea to start investigating a refinance.  There are other factors to consider, such as how many years have you already paid off, do you want to shorten your term, do you want cash out, and how long you plan on keeping the property, so you can figure out the breakeven point (the closing costs divided by the monthly savings). 

Q4 - I do not owe anything on my mortgage and only pay my taxes and insurance.  Can I get a loan?

A - Yes!  If you qualify, you can get a mortgage on your home.  It would be considered a cash-out refinance, and may carry a slightly higher interest rate than a rate and term refinance.  Lenders generally lend less money against the value of the home (Loan to Value) on a cash-out refinance than a rate and term.

If you have a real estate question for Dottie, please send it to;

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