Mortgage questions, answered
Frequently Asked Questions
Straightforward answers to the questions homebuyers, homeowners, and borrowers ask most — from someone with 34+ years in the business.
How do mortgage rates relate to the 10-year Treasury yield?
Mortgage rates closely follow the 10-year U.S. Treasury yield. Most 30-year fixed mortgages are packaged into mortgage-backed securities (MBS) and sold to investors who compare MBS returns to Treasury yields. Because mortgages carry more risk than government bonds, investors demand a premium — called the mortgage spread — typically 1.5% to 2.5% above the 10-year Treasury yield. When the 10-year yield rises, mortgage rates tend to follow. When it falls, rates usually come down, though not always at the same pace or magnitude.
Does the Federal Reserve control mortgage rates?
Not directly. The Federal Reserve sets the federal funds rate, which influences short-term borrowing costs like credit cards and home equity lines of credit (HELOCs). Mortgage rates are primarily driven by the 10-year Treasury yield and the bond market, not the Fed funds rate. The Fed's decisions can influence investor sentiment and indirectly affect mortgage rates, but a Fed rate cut does not automatically lower your 30-year fixed mortgage rate.
When should I lock my mortgage rate?
You should lock your rate when you are comfortable with the payment it produces and you have a property under contract. Rate locks typically last 30 to 60 days. If rates are rising, locking sooner protects you. If rates are falling, floating longer may save money — but it also carries risk. There is no perfect time to lock; the goal is to secure a rate that works for your budget, not to time the market perfectly.
What are mortgage points and should I pay them?
Mortgage points (also called discount points) are upfront fees paid to the lender in exchange for a lower interest rate. One point equals 1% of the loan amount. Whether paying points makes sense depends on how long you plan to keep the loan. Divide the upfront cost by the monthly savings to find your break-even point. If you plan to stay in the home or keep the loan longer than the break-even period, paying points can save money over time.
What is a reverse mortgage?
A reverse mortgage is a home loan for eligible older homeowners that allows them to access a portion of their home equity. Unlike a traditional mortgage, a reverse mortgage does not require a monthly principal-and-interest payment, though borrowers remain responsible for property taxes, homeowners insurance, maintenance, and other loan obligations. The loan becomes due when the borrower sells the home, moves out permanently, or passes away.
What is a reverse mortgage second (second-lien reverse mortgage)?
A second-lien reverse mortgage is a newer proprietary product designed to sit behind an existing first mortgage. Unlike a traditional reverse mortgage — which typically pays off the existing first mortgage at closing — certain second-lien reverse mortgage products are specifically designed to allow the existing first mortgage to remain in place. This may allow eligible older homeowners to access equity without refinancing their current first mortgage. Eligibility, product availability, age requirements, equity requirements, and loan terms vary.
Can I keep my low-rate first mortgage and still get a reverse mortgage?
Certain second-lien reverse mortgage products may allow eligible homeowners to access equity while keeping an existing first mortgage in place. A traditional FHA HECM reverse mortgage typically pays off the existing first mortgage at closing, which would eliminate a low-rate first mortgage. A second-lien reverse mortgage is designed specifically to avoid this. Not all homeowners will qualify, and product availability, eligibility criteria, and loan terms vary.
What is the difference between a reverse mortgage second and a HELOC?
A HELOC (home equity line of credit) is a traditional second mortgage that generally requires monthly interest payments and has a draw period followed by a repayment period. Certain reverse mortgage second products may not require a monthly principal-and-interest payment on the second lien, though borrowers remain responsible for property taxes, insurance, maintenance, and other obligations. A HELOC is available to borrowers of any age who qualify; a reverse mortgage second has minimum age requirements.
Do I still own my home with a reverse mortgage?
Yes. You retain title to your home with a reverse mortgage. However, you must continue to pay property taxes, maintain homeowners insurance, keep the property in good condition, pay applicable HOA dues, meet occupancy requirements, and comply with all loan terms. Failure to meet these obligations can result in the loan becoming due.
What is the difference between a mortgage broker and a bank?
A mortgage broker works with multiple wholesale lenders to find competitive rates and programs for each borrower. A bank or direct lender can only offer its own products. An independent broker can often access better pricing and a wider range of loan programs — especially for borrowers with unique situations such as self-employment, jumbo loan needs, or interest in reverse mortgage products. SMS Mortgage is an independent broker, which means Stephanie shops multiple lenders on your behalf.
Can I get a mortgage if I am self-employed?
Yes. Self-employed borrowers can qualify for conventional, FHA, VA, and jumbo mortgages. Lenders typically require two years of self-employment history documented through tax returns and profit-and-loss statements. Some programs allow bank statement loans for borrowers who cannot document income through traditional tax returns. An experienced mortgage broker can identify the best program for your income documentation and financial profile.
What credit score do I need to get a mortgage?
Minimum credit score requirements vary by loan type. Conventional loans typically require a 620 or higher. FHA loans may allow scores as low as 580 with a 3.5% down payment, or as low as 500 with a 10% down payment. VA loans do not have a government-mandated minimum, but most lenders require 580–620. Jumbo loans typically require 700 or higher. A higher credit score generally qualifies you for better rates. SMS Mortgage offers a complimentary credit review to help you understand your options.
What is a jumbo loan in California?
A jumbo loan is a mortgage that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac. In most of Orange County, CA, the 2024 conforming loan limit for a single-family home is $1,149,825. Loans above this amount are considered jumbo loans and typically require stronger credit, larger down payments, and more documentation. SMS Mortgage works with multiple jumbo lenders to find competitive rates for high-value California properties.
What is the difference between an FHA loan and a VA loan?
An FHA loan is a government-backed mortgage available to most borrowers with a minimum 3.5% down payment and a credit score of 580 or higher. It requires mortgage insurance premiums (MIP). A VA loan is a mortgage benefit available only to eligible veterans, active-duty service members, and surviving spouses. VA loans offer zero down payment, no private mortgage insurance (PMI), and competitive rates. If you are eligible for a VA loan, it is often the better option.
When is the right time to refinance my mortgage?
The right time to refinance depends on your current rate, remaining loan balance, how long you plan to stay in the home, and current market rates. A common rule of thumb is to consider refinancing when you can lower your rate by at least 0.5% to 1%, but the break-even point — how long it takes for monthly savings to offset closing costs — matters most. If you plan to stay in the home longer than the break-even period, refinancing typically makes financial sense.
What is a cash-out refinance?
A cash-out refinance replaces your existing mortgage with a new, larger loan and gives you the difference in cash. For example, if your home is worth $600,000 and you owe $300,000, you might refinance into a $400,000 loan and receive $100,000 in cash (minus closing costs). The cash can be used for home improvements, debt consolidation, or other purposes. A cash-out refinance replaces your existing first mortgage, so it is not ideal if you have a low-rate first mortgage you want to keep.
Should I do a cash-out refinance or a HELOC to access equity?
It depends on your existing mortgage rate and how much equity you need. If your current mortgage rate is low, a HELOC lets you access equity without replacing your first mortgage — preserving your low rate. A cash-out refinance replaces your entire first mortgage at the current market rate, which may be higher than your existing rate. If you have a low-rate first mortgage, a HELOC or second-lien product is often the better choice. If your current rate is already at or near market rates, a cash-out refinance may simplify your debt into one payment.
Who is Stephanie Pedley and what is SMS Mortgage?
Stephanie Pedley is a licensed mortgage professional and real estate broker with 34+ years of experience in mortgage lending, underwriting, management, and loan strategy. SMS Mortgage is an independent mortgage brokerage based in Laguna Hills, CA (Orange County). As an independent broker, Stephanie shops multiple wholesale lenders to find the best rates and programs for each client. She works directly with every client — not a call center.
What states is SMS Mortgage licensed in?
SMS Mortgage is licensed to originate mortgage loans in California (CA DRE #01265685, NMLS #1087365), Colorado (CO MLO License #MLO.100506725), Texas (sponsored through B Walters CO., LLC NMLS #262157), and Ohio (sponsored through Beacon of Hope Residential LLC NMLS #2543671). NMLS Company #1147207.
How do I get started with SMS Mortgage?
The easiest way to get started is to schedule a free consultation. You can book an appointment online, call (949) 888-6000, or send an email to [email protected]. Stephanie will review your situation, answer your questions, and outline your options — with no obligation.
Still have questions?
Schedule a free consultation and get answers specific to your situation.
SMS Mortgage — NMLS #1087365 | CA DRE #01265685 | NMLS Company #1147207. Licensed in CA, CO, TX, OH. This page is for informational purposes only and does not constitute a loan commitment or guarantee of loan terms.