What will my interest rate be?
Your interest rate is impacted by several different factors including property type, down payment, loan amount and credit score. JVM is happy to provide current market rate quotes for your particular scenario at any time, but rates cannot be guaranteed until locked.
NOTE: Rates cannot be locked unless a property is identified and we have an address to associate with the rate-lock.
Here are factors that influence an individual’s interest rate:
- Property Type: Condos, high-rise condos and multi-unit dwellings (2 – 4 units) usually have higher interest rates associated with them, as compared to single-family dwellings.
- Property Use: Investment properties have higher rates than owner-occupied properties.
- Credit Scores: Credit scores significantly affect rates. A borrower with a 750 mid-score might have a rate as much as 1% lower than a borrower with a 670 mid-score.
- Down Payment: The bigger the down payment, the lower the rate, in most cases.
- Loan Amount: Very small loans (under $150,000 for example) can have higher rates, as can very large jumbo loans (over $3 million for example). In addition, “Low Balance” conforming loans under $484,350 will have lower rates than “High Balance” conforming loans (from $484,350 to $726,525).
- Loan Type: FHA and VA rates are usually lower than conforming (Fannie/Freddie) rates, and our jumbo rates are currently the lowest of all for very strong borrowers.
- Rate Lock Period: Interest rates can be “locked in” or guaranteed prior to close of escrow for 15, 30, 45 or 60 days in most cases. The longer the lock period, the higher the rate.
- Fixed Period/Loan Maturity: The longer a rate stays fixed, the higher the rate. For example, a 7/1 ARM (fixed for seven years) will usually have a lower rate than a 15 year fixed-rate loan, and a 15 year fixed-rate loan will have a lower rate than a 30 year fixed-rate loan.
- 1st/2nd Combo Loans: Loans with a concurrent 2nd mortgage can have higher rates too, depending on the loan-to-value ratio.
If several of the above factors work in tandem, the rate can be significantly affected.
For example, if a buyer with a 690 credit score is buying a high-rise condo with 5% down and a high balance loan, his interest rate might be 1% to 2% higher than his rate would be if he were buying a single-family residence with 25% down, a 750 credit score, and a low balance loan.
When can I lock in my rate?
For a purchase, we can lock in your rate as soon as we receive a ratified purchase contract that identifies a property address and closing period.
For a refinance, we can lock in your rate as soon as you provide the authorization, after you and one of our Mortgage Analysts have discussed the terms and benefits.
How long does it take to get pre-approved? Is a pre-approval different than a pre-qualification?
A typical pre-approval takes 1-2 days. If you have an upcoming offer deadline, please let us know and we will happily expedite accordingly.
The pre-approval process is much more involved than most borrowers realize (especially because JVM is so thorough) but we can fully pre-approve borrowers in several hours if necessary.
Pre- Approvals VS. Pre-Qualifications
Many lenders offer only “pre-qualifications.” Pre-qualifications can be much faster because they are much less thorough, involving only a preliminary income analysis without a full review of tax returns, assets accounts and credit profiles.
JVM avoids pre-qualifications because they do not uncover potential issues and listing agents and sellers are much less likely to accept an offer accompanied only with a pre-qualification.
How long does my pre-approval remain valid?
Your pre-approval remains valid as long as the primary criteria we used to pre-approve you remains the same.
The primary criteria includes your employment, your income, your debt obligations, your assets, and your credit. If any of these criteria change, please let us know so we can evaluate their impact on your qualifications and pre-approval.
Can I put $0 down?
All of JVM’s loan products require a down payment towards the purchase price, with the exception of VA financing.
JVM does, however, offer both FHA and conventional financing with very low down payment options. FHA requires only 3.5% of the purchase price for a down payment, and our conventional options require as little as 3% down for qualified buyers. Both FHA and conventional loans also allow “gift funds” to comprise 100% of the down payment.
Veterans eligible for VA financing can take advantage of VA financing that requires no down payment, as long as the loan amount is within county loan limits.
Do I have to pay origination fees (or points) to JVM?
The short answer is “no,” but you can pay points to buy down your rate. We typically quote interest rate options with no points or origination fees.
The no points option will usually be associated with a higher rate. With the no points option, our entire commission is earned when we sell a loan to an investor for a premium on the secondary market.
We typically do not recommend that borrowers pay points to buy down their interest rate because the return on investment is too small. If buyers do opt to pay points, a 1% discount fee will usually buy down an interest rate by approximately a 1/4%, depending on loan type and market conditions.
Can I roll closing costs into the loan?
Closing costs cannot be rolled into a purchase loan per se. Borrowers can, however, put less money down and obtain financing with a higher loan-to-value ratio if guidelines allow.
This may result in a higher interest rate or mortgage insurance though. Lenders can also assist with closing costs with “lender credits” but these often result in a slightly higher interest rate.
Should I be prepared to pay anything other than the down payment?
The short answer is “yes.” You will be responsible for your down payment and all of your closing costs. As discussed in our JVM Buyer’s Guide, there are both recurring and non-recurring closing costs that can range from $4,000 to $20,000 or more, depending on the purchase price, the loan amount, and the type of loan. Please see Closing Costs – Non-recurring and Recurring.
You can get assistance with your down payment and closing costs with gift funds, seller credits and lender credits. These too are discussed in the JVM Buyer’s Guide.
Along with your income, employment, and assets, your credit profile is crucial during the evaluation process for any lender’s pre-approval or pre-qualification.
JVM’s full pre-approval process requires that we run our own credit report for several reasons. First and foremost, we use Fannie Mae’s and Freddie Mac’s specialized software as part of our pre-approval process. The specialized software requires that we have our own internal credit report in a specific format that integrates automatically with the software. We need to integrate the entire report too; we cannot just use a score or information that is conveyed to us. In addition, we need to make sure we have a valid and up to date report to ensure we have an accurate pre-approval.
Credit reports and information provided by third parties cannot be verified as 100% accurate and therefore should not be relied on when the stakes are so high with respect to mortgage pre-approvals.
We of course understand the concern many borrowers have in regard to “inquiries” on their credit reports. Because of this we like to remind borrowers that the major credit bureaus consider all credit inquiries from mortgage lenders within a 30-day period to be a single inquiry from a credit score perspective. This allows borrowers to “shop” among different lenders, if necessary, and avoid an adverse impact on their credit.
Why is my credit score online so much higher than the one you are reporting?
Online credit reporting tools often yield higher credit scores than those that mortgage lenders pull with their reports. This is because the scoring criteria that mortgage lenders use is more stringent than the scoring criteria that is used by the online tools.
As discussed above, we are required to use our own internally generated report that adheres to the specialized scoring criteria for mortgage lenders.
What are impounds? Should I get impounds?
Impound or escrow accounts are maintained by lenders or servicers and are set up to allow buyers to pay their property taxes and hazard insurance on a pro-rata monthly basis instead of on a semi-annual or annual basis.
For example, if property taxes are $6,000 per year, and hazard insurance is $1,000 per year, a buyer would have a total of $7,000 to divide into twelve monthly payments of $583 per month. Buyers would simply add the $583 to their principal and interest payment and make the larger payment to their lender or servicer each month. The lender/servicer will then make property tax and hazard insurance payments on behalf of the buyers.
Impound accounts are usually required when a buyer’s down payment less than 10% of the purchase price in California or less than 20% in Texas. Impound accounts are always required for FHA and VA loans.
Many of our conservative borrowers like the security, safety and forced savings that an impound account imparts. They also like not having to worry about coming up with the necessary funds to make the large property tax and insurance payments when they come due.
Despite this, we often recommend that borrowers do not set up an impound account, when allowed. This is because impound accounts often require substantially more cash at close of escrow (that borrowers sometimes do not have or that borrowers might need for required “reserves” after close of escrow). In addition, we like to remind buyers that lenders and servicers usually do not pay interest against impound account balances.
What is the difference between my APR and the interest rate quoted to me for my mortgage?
The interest rate we quote you is the actual rate that will be on your mortgage promissory note. The APR (Annual Percentage Rate) is a recalculation of your effective mortgage interest rate to include your closing costs as well as the interest you will pay on the loan. These closing costs can include origination fees, points, escrow fees and mortgage insurance.
The APR may be somewhat misleading on loans that require large mortgage insurance premiums, like FHA loans. APR quotes are required, however, to prevent lenders from quoting artificially low interest rates to attract business and then charging substantial fees to cover the cost of the low rates.
Will my loan have a pre-payment penalty or a balloon payment?
None of the mortgage loans JVM currently offers have either pre-payment penalties or balloon payments.