Q : Why should I use Payless Mortgage if I can apply for a loan directly with a lender?
A : First, you should know these truths: No two prospective borrowers apply for a loan under the same exact circumstances, which makes every loan application unique. There are hundreds of lenders in the mortgage industry, each of which is only good at funding loans that fall within a narrow range of lending criteria--criteria that differs from each and every other lender. As a result, there is no single lender that can give you the best loan terms without regard to the unique circumstances of your loan application. Now that you know that there is no “magic potion” lender, do you know which lenders are good at funding loan applications that are similar to your own? We do. Our expertise is knowing the “sweetspot” of the dozens of lenders with whom we work. Our substantial familiarity with and experience in the industry enables us to market your unique loan application precisely to those lenders who can provide you with the best loan terms and are able to quickly close your loan without delay. Do you want to spend many dollars and countless hours applying for a loan directly with a dozen or so lenders with the hope that at least one of those applications suits a lender’s “sweet spot”? Put your faith in us and let us put our minds, our resources, our time and our energy to work for you.

Q : How is it possible that I can get better loan terms (e.g. a lower interest rate) by getting a loan through Payless Mortgage as opposed to applying for a loan directly with a national lender?
A : Payless Mortgage may be a broker, but it is not a “middleman". To illustrate, when Payless arranges for a loan with a lender, say, for instance, "Larry Lender", it arranges for the loan with the wholesale division of Larry Lender's mortgage lending operation. On the contrary, when you apply for a loan directly with Larry Lender, you are applying to the retail division of Larry Lender's mortgage business. In order to make the loan, Larry Lender's retail division must obtain the loan from Larry Lender's wholesale division. Larry Lender's retail division cannot make the loan itself, nor can it obtain the loan from anywhere else but Larry Lender's wholesale division. So, regardless of whether you apply to Payless Mortgage or to Larry Lender for a loan, your loan will pass through the same number of intermediaries. The similarities, however, end there. That is because unlike Larry Lender, Payless Mortgage can simultaneously act as the retail arm for dozens of other lenders, and shop your loan application to the lenders that we know can give you the best loan terms available in the marketplace which may or may not include Larry Lender. And even if it turns out that Larry Lender is the optimal lender for your loan, you would still more than likely obtain better loan terms by applying with Payless Mortgage. How, you ask? Because Payless has one of the most efficient mortgage operations in the industry. Recall, as we've illustrated above, that Payless competes directly with Larry Lender's retail division for the opportunity to arrange a loan for you from Larry Lender's wholesale division. The retail arm which most efficiently operates its business will be in a position to pass on greater savings to its customers in the form of better loan terms, which is why Payless Mortgage is consistently able to give its customers a better deal than they could get anywhere else. Here's an example of how this might work: A borrower will find a loan directly with a lender at a rate of 7.5 percent with 2 points. A broker can obtain the same loan for 7.5 percent, but pays the lender only 1 point. The broker may then add 0.75 points to cover his fee, but the cost to the borrower is less (i.e., 7.5 percent with only 1.75 points). The borrower pays no additional cost and benefits from the broker's service.  By state law, the broker's fee and the discount the lender offers the broker must be disclosed to the borrower.  And what accounts for the difference of 0.25 points?  It's how much more it costs the lender to operate its retail arm than it costs the broker to operate its business.

Q : Should I focus on the lenders advertising the lowest rates rather than the type of institution I borrow from?
A : You can, but remember, there is no guarantee you will lock in at the advertised rate. Those rates may only be available for a 30 or 60-day period and it typically takes longer to close on a loan. Interest rates can also change daily. The best way to compare rates is to ask each lender what the rate would be if you closed in a certain time period, for example, 90 days. And be sure to get everything in writing. It is also possible to get a loan with a longer lock-in period but, in that case, you usually pay a higher rate.

Q : What documents will I need to provide when I apply for a loan?
A : Be prepared to provide verification of income, including your pay stub and tax returns for the previous two years. You will also need to provide bank account numbers and details about your long-term debt, including credit cards, auto loans, child support, etc. If you are self-employed, you may need to provide financial statements for your business. Lenders want detailed information. For example, the origin of your down payment will be queried. Be sure to inform your lender of any changes in your employment, salary, debt or marital status between the time you submit your application and the time you close.

Q : How do I know how much house I can afford?
A : Generally speaking, you can purchase a home with a value of two or three times your annual household income. However, the amount that you can borrow will also depend upon your employment history, credit history, current savings and debts, and the amount of down payment you are willing to make. You may also be able to take advantage of special loan programs for first time buyers to purchase a home with a higher value. Try our prequalification calculator to get a sense of how much you may be able to borrow or give us a call, and we can help you determine exactly how much you can afford.

Q : What is the difference between a fixed-rate loan and an adjustable-rate loan?
A : With a fixed-rate mortgage, the interest rate stays the same during the life of the loan. With an adjustable-rate mortgage (ARM), the interest changes periodically, typically in relation to an index. While the monthly payments that you make with a fixed-rate mortgage are relatively stable, payments on an ARM loan will likely change. There are advantages and disadvantages to each type of mortgage, and the best way to select a loan product is by talking to us.

Q : How is an index and margin used in an ARM?
A : An index is an economic indicator that lenders use to set the interest rate for an ARM. Generally the interest rate that you pay is a combination of the index rate and a pre-specified margin. Three commonly used indices are the One-Year Treasury Bill, the Cost of Funds of the 11th District Federal Home Loan Bank (COFI), and the London InterBank Offering Rate (LIBOR).

Q : How do I know which type of mortgage is best for me?
A : There is no simple formula to determine the type of mortgage that is best for you. This choice depends on a number of factors, including your current financial picture and how long you intend to keep your house. Payless Mortgage Corporation can help you evaluate your choices and help you make the most appropriate decision.

Q : What does my mortgage payment include?
A : For most homeowners, the monthly mortgage payments include three separate parts: Principal: Repayment on the amount borrowed Interest: Payment to the lender for the amount borrowed Taxes & Insurance: Monthly payments are normally made into a special escrow account for items like hazard insurance and property taxes. This feature is sometimes optional, in which case the fees will be paid by you directly to the County Tax Assessor and property insurance company.

Q : How much cash will I need to purchase a home?
A : The amount of cash that is necessary depends on a number of items. Generally speaking, though, you will need to supply: Earnest Money: The deposit that is supplied when you make an offer on the house Down Payment: A percentage of the cost of the home that is due at settlement Closing Costs: Costs associated with processing paperwork to purchase or refinance a house