Mortgage questions, answered

Yes, loans are often sold, and the company that collects your payments, the servicer, can change. The terms of your loan do not change when it is sold: the rate, the balance and the payment stay as they are. You are told in writing who the new servicer is and where to send payments, and the old servicer tells you too.

If a lender goes out of business, your loan is still owed and is normally transferred to another company on the same terms. Keep paying as you have been until you receive a written notice telling you where to pay instead. If you are unsure whether a notice is genuine, call the servicer at the number on your statement, not a number in the letter.

Yes, but nothing is free. A lender can give you a lender credit that pays some or all of your closing costs in exchange for a higher interest rate. You pay less at closing and more each month, for as long as you keep the loan.

It can make sense if you expect to sell or refinance within a few years, or if you are short of cash for closing. If you plan to keep the loan for a long time, paying the costs, or even paying points for a lower rate, usually costs less overall. Your Loan Estimate shows the lender credit and the rate, so you can compare both options.

One thing to check: the costs should be covered by the credit, not quietly added to your loan amount.

No one can predict rates. Locking protects you if rates rise while your loan is being completed; floating leaves room to benefit if they fall, with the risk that they rise.

Before you lock, make sure the lock lasts long enough for your loan to close. On a purchase, start from the closing date in your contract. On a refinance with a second mortgage or home equity line that will stay in place, allow extra time, because that lender must agree to stay in second place.

How and when you can lock with us is set out in our rate lock policy.

Points are a fee paid at closing to lower your interest rate. One point is one percent of the loan amount. Paying points costs more now and less each month.

The way to decide is a break-even check: divide the cost of the points by the amount they save you each month. The answer is the number of months it takes to earn the cost back. If you expect to keep the loan longer than that, points can pay off; if you may sell or refinance sooner, they usually do not.

A seller may agree to pay points or other costs as part of the deal, within limits each program sets. Whether points are tax-deductible depends on your situation; ask a tax adviser.

People refinance to lower the rate or payment, to shorten the loan and pay less interest overall, to move from an adjustable to a fixed rate, to remove mortgage insurance, or to take cash out of their equity.

To check whether a lower rate is worth it, divide the total cost of the refinance by the monthly saving. That gives the number of months to break even. If you plan to keep the home and the loan longer than that, the refinance can make sense. A shorter loan can raise the payment while lowering the total interest, so look at both.

Try our Should I refinance? calculator, read about refinancing, or talk it through with a loan officer.

A past credit setback does not always rule out a mortgage. FHA loans accept lower credit scores than most conventional loans, and FHA sets waiting periods after events such as a bankruptcy or foreclosure. Some other programs, outside the standard rules, look at borrowers with a recent credit event; they usually ask for a larger down payment and cost more.

Lenders look most closely at how you have paid your bills since the setback, along with your income, debts, savings and the home. Our ideas to improve your credit can help before you apply, and a loan officer can tell you which programs may fit.

Yes, through several national programs where we are approved; our estimator shows which may fit. Call 732-686-9999.

Yes. Bank statement, 1099 and asset-based programs document income without tax returns.

A rental property loan qualified on the property's rent instead of your personal income; a business-purpose loan.

An adjustable-rate mortgage (ARM) has a rate that is fixed for a set number of years and then can change at set times. The new rate is a published index plus a set amount called the margin, and caps limit how much it can change at each adjustment and over the life of the loan. When the rate changes, the payment can rise or fall.

An ARM can make sense if you expect to sell or refinance before the fixed period ends, but plan for the payment you could face after it. Compare the margin and the caps as well as the starting rate. Read more about adjustable rate loans.

Some loans, including many investor loans, have a prepayment penalty; your Loan Estimate and loan documents say whether yours does.

The APR is the yearly cost of a loan, including the interest rate and certain fees, shown as one rate. It is usually higher than the interest rate in your note. It does not change your monthly payment, which comes from the interest rate, the loan amount and the term.

APR helps you compare loans of the same type and length from different lenders. It is less useful for comparing a shorter loan with a longer one, or for adjustable-rate loans, where future rates are unknown. It also does not tell you how long a rate is locked.

The most useful comparison is your Loan Estimates side by side: the rate, the lender's charges, the lender credit or points, and the APR, for the same loan program and lock period.

A rate lock is a lender's commitment to hold a rate and price for a set number of days while your loan is completed. A lock covers the loan program, the interest rate, any points or credit, and the length of the lock. A longer lock usually costs a little more, in the rate or in points.

If the lock runs out before the loan closes, the loan may have to be relocked, and the price can change. Get your lock confirmed in writing. Our rate lock policy explains how locking works with us.

Mortgage insurance protects the lender, not you, if a borrower stops paying. It lets lenders accept a smaller down payment. It is different from mortgage life insurance, which pays off a loan when a borrower dies.

Conventional loans usually carry private mortgage insurance (PMI) when the down payment is small. FHA loans carry an FHA mortgage insurance premium: an upfront premium, usually added to the loan, and an annual premium paid monthly. VA loans have no monthly mortgage insurance; most borrowers pay a one-time funding fee. USDA loans have an upfront and an annual guarantee fee.

Private mortgage insurance (PMI) is the mortgage insurance on a conventional loan with a smaller down payment. The premium is usually part of the monthly payment.

PMI does not last forever. Once your balance falls to a set share of the home's original value, you can ask your servicer to remove it, if your payments are up to date; federal law also ends it automatically a little later. Some servicers will consider the home's current value, often with a new appraisal that you pay for. Your servicer has to tell you how removal works for your loan.

FHA mortgage insurance follows FHA's rules: with a larger down payment it ends after a set number of years; with a smaller one it lasts for the life of the loan. Refinancing into a different loan later is one way some owners remove it.

A pre-qualification is a first estimate of what you may be able to borrow, based on what you tell a loan officer. It is quick, and nothing is checked yet.

A pre-approval goes further: the lender reviews your credit, income, assets and debts before you choose a home and gives you a letter for a loan amount. It shows sellers you are a serious buyer. Neither one is a final loan approval or a commitment to lend: the home still needs an appraisal, and the full file still goes to underwriting.

We are licensed in 40 states and the District of Columbia; NMLS #103098 (nmlsconsumeraccess.org).

Get a quote or apply online, or call a licensed loan officer at 732-686-9999.

Mortgage rates move with the bond market. Most mortgages are pooled into mortgage-backed securities, so when investors demand a higher return on those bonds, mortgage rates rise, and when they accept a lower one, rates fall. Bond prices and rates move in opposite directions.

What moves the bond market: inflation, which erodes the value of fixed payments; the strength of the economy and jobs; the Federal Reserve's decisions and outlook; and demand for safe investments such as Treasury bonds. A strong economy and rising inflation tend to push rates up; a slowing economy tends to bring them down.

Your own rate also depends on your loan: the program, your credit, your down payment or equity, the property, the lock period and any points or credit. Our market update follows the bond market day to day.