Frequently Asked Questions

To determine 'affordability' you will first need to know your income along with the amount of any debt outstanding and the monthly payments. Assuming it is your principal residence you are purchasing, calculate a percentage of your income for use toward a mortgage payment, property taxes and insurance. If applicable, the estimated monthly condominium maintenance fees or association fees will also be included in this calculation. Second, calculate 50% of your taxable income and deduct all of your monthly debt payments, including car loans, credit cards, lines of credit payments. The lesser of the first or second calculation will be used to help determine how much of your income may be used towards housing related payments, including your mortgage payment. These calculations are based on lenders' usual guidelines. Lenders normally allow up to 49.9% for conventional loans or 57% for government loans. In addition to considering what the ratios say you can afford, make sure you calculate how much you think you can afford. If the payment amount you are comfortable with is less than 50% of your income you may want to settle for the lower amount rather than stretch yourself financially. Make sure you don't leave yourself house poor. Structure your payments so that you can still afford simple luxuries.
A home inspection is a visual examination of the property to determine the overall condition of the home. In the process, the inspector should be checking all major components (roofs, ceilings, walls, floors, foundations, crawl spaces, attics, retaining walls, etc.) and systems (electrical, heating, plumbing, drainage, exterior weather proofing, etc.). The results of the inspection should be provided to the purchaser in written form, in detail, generally within 24 hours of the inspection. A pre-purchase home inspection can add peace of mind and make a difficult decision much easier. It may indicate that the home needs major structural repairs which can be factored into your buying decision. A home inspection helps remove a number of unknowns and increases the likelihood of a successful purchase.
USDA and VA loans are 0% down loans. If you can qualify, there are conventional loan programs that offer 1% down and FHA mortgages will require 3.5% down. In addition to the down payment, you must also be able to show that you can cover the applicable closing costs (i.e. legal fees and disbursements, appraisal fees and a survey certificate, where applicable). Down payment assistance is available and the down payment can be gifted from a family member. Generally, when purchasing a home, the seller may allow for the closing costs to be paid on your behalf (seller paid closing costs). Lenders will generally accept a gift from a family member as an acceptable down payment provided a letter stating it is a true gift, not a loan, is signed by the donor.
Mortgage insurance protects the lender against default. Loan to value ratios over 80% require MI (mortgage insurance). This can be paid monthly or a one time up front payment. To determine which is best, simply calculate the proposed monthly amount compared to the upfront premium. Then calculate the anticipated length of time you plan on staying in the home. Whichever is less is usually most favorable depending on availability of cash resources. Many times on a purchase, the seller can pay the upfront premium on your behalf which provides lower monthly payments. We work with credit unions as well as banks, typically credit unions have lower MI rates due to credit union status.
A conventional loan or "conforming" loan is a mortgage that is backed by either Fannie Mae or Freddie Mac. Uniform guidelines are in place depending on the agency and loan to values are allowed up to 97%.
Depending on the circumstances surrounding your bankruptcy, generally some lenders would consider providing mortgage financing.
Where child support and alimony are paid by you to another person, generally the amount paid out is deducted from your total income before determining the size of mortgage you will qualify for. Where child support and alimony are received by you from another person, generally the amount paid may be added to your total income before determining the size of mortgage you will qualify for, provided proof of regular receipt is available for a period of time determined by the lender.
Yes subject to lender guidelines. A gift from a family member is widely accepted, a gift letter will be required. This says the money is a gift and is not required to be paid back.
A pre approval letter is a document that states the loan originator has reviewed your credit, income and assets and has determined that you are qualified to purchase a home subject to certain price ranges and other factors. You will need this letter when making an offer as the sellers want to make sure you will be able to obtain financing. The letter will normally have the property address listed.
There are ways to reduce the number of years to pay down your mortgage. You'll enjoy significant savings by: Setting up a bi-weekly payment schedule. This generally equates to one extra mortgage payment per year. Rounding up the monthly payment amount with the difference going to the principal balance. Calculate an amortization schedule based on your long term goals, then use that monthly payment to reach your goal. Consider a refinance to a shorter term such as a 10, 15 or 20 year amortization.
Outside of any down payment that may be required, you may have closing costs (which can be paid by the seller if negotiated into the contract) of tax, insurance, recording charges, an appraisal and inspection. Remember, there will be all kinds of things you'll have to purchase early on - appliances, garden tools, cleaning materials etc. So factor these expenses into your initial costs.
The interest rate on a fixed-rate mortgage is set for a pre-determined term - usually ranging in terms of 10, 15, 20, 25 or 30 years. This provides security and predictability as the interest rate will not change.
A adjustable rate mortgage interest rate fluctuates over time. An initial term is offered where the rate can not change such as 1, 3, 5, 7 or 10 years. After the initial period, the rate will adjust based on a margin and index. ARM's may provide lower initial payments but do have the risk of payments and rates increasing over time. Do your research and consult with a quality mortgage professional to fully understand the risks.
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