Mortgage FAQ — Plain answers to the questions everyone asks.
No jargon. No runaround. Just the honest answer to what you're actually wondering.
Refinancing
The old rule of thumb is "refinance when rates drop 2%." That's too simple. What really matters is your break-even point — how many months of lower payments it takes to recoup your closing costs. If you plan to stay in the home past that point, a refi can pencil out even at a 0.75% rate drop. I'll run the actual math for your loan before you pay a dime.
Rates move daily. A rate lock is your lender's written commitment to hold a specific rate for a set window — typically 30 to 60 days — while your loan processes. It protects you from a rate spike between application and closing. If rates fall after you lock, most programs don't let you re-lock lower automatically, though some have float-down options. I'll walk you through the tradeoffs before we lock.
Costs & Fees
One point equals 1% of your loan amount paid upfront to buy down your interest rate. On a $600,000 loan, one point is $6,000. Whether it's worth it depends on one thing: how long you'll stay. If you're keeping the loan 7+ years, buying down the rate usually wins. If you might sell or refi in 3–4 years, skip the points and keep the cash. I'll show you the break-even on your specific numbers.
Your interest rate is what you pay on the loan balance. Your APR (Annual Percentage Rate) wraps in the rate plus certain fees — origination, points, mortgage insurance — expressed as a single yearly cost. APR is designed to make loans comparable, but it's imperfect: it includes some fees and excludes others (title, appraisal, escrow aren't in it). The cleanest comparison is to ask lenders for a loan estimate on the same program and same rate, then compare the fee columns directly.
Private Mortgage Insurance protects the lender (not you) if you default. It's required on conventional loans when your down payment is below 20% — typically $100–$200/month on a Bay Area loan. You can avoid it by putting 20% down, or by using an 80/10/10 structure: an 80% first mortgage, a 10% second mortgage, and a 10% down payment. That piggyback approach eliminates PMI without the full 20% requirement. Ask me if it makes sense for your situation.
It's a way to buy with 10% down and no PMI. You take an 80% first mortgage, a 10% second mortgage (a HELOC or fixed second), and put 10% down yourself. Because your first mortgage stays at or below 80% of the home value, no PMI is required. The second mortgage typically carries a higher rate than the first, so we compare the blended cost against PMI to see which is cheaper over your expected hold time.
Credit & Qualifying
They use FICO scores — a number between 350 and 850 based on five things: your payment history (biggest factor), total debt vs. your limits, length of credit history, recent applications for new credit, and the mix of account types you carry. Scores above 740 get the best pricing. Most programs start around 620, with FHA going down to 580 in some cases. I pull all three bureaus and use the middle score.
Three things move the needle fastest: pay everything on time going forward (even one missed payment can drop 50+ points), pay down revolving balances below 30% of the credit limit on each card, and don't open any new credit accounts. What doesn't help as much as people think: closing old cards (can actually hurt by shortening history) and disputing accurate items. If you're 60–90 days from wanting to buy, reach out and I'll tell you exactly where to focus for your specific profile.
An appraisal is an independent estimate of your home's market value, ordered by the lender and performed by a licensed appraiser. It protects the lender from lending more than the property is worth. If the appraisal comes in below your purchase price, it creates a gap — either the buyer makes up the difference in cash, the seller reduces the price, or both sides negotiate. I've navigated low appraisals many times and always have a backup plan ready.
The Loan Process
For most applications, have these ready:
Income:
- Last 30 days of pay stubs
- W-2s for the past 2 years
- If self-employed: 2 years of full tax returns + a year-to-date P&L
Assets:
- Last 2–3 months of bank statements (all pages, all accounts)
- Investment or retirement account statements if using for down payment
- Gift letter if part of your down payment is a family gift
Property:
- Signed purchase contract (once you're in escrow)
- Homeowner's insurance info
ID:
- Driver's license or passport
The faster you get these together, the faster we move. I'll tell you upfront if anything unusual applies to your situation.
Closing (sometimes called "funding" in California) is when ownership officially transfers. You'll sign the final loan documents — usually in front of a notary — review the Closing Disclosure for accuracy, and bring a cashier's check or arrange a wire for your down payment and closing costs. Personal checks aren't accepted. On a refinance of your primary residence, federal law gives you 3 business days to review before the loan funds. For purchases, funding typically happens the same day or the next business day after signing.
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