Mortgage News

Mortgage News

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Mortgage Calculators

Prepare your financing before the house-hunt

Figuring Your Housing Budget

Types of Loans

Loan Application Checklist

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Mortgage Calculators

How much house can I afford and what will the monthly payments be? These two questions seem to be the most frequently asked questions for prospective home buyers. The calculators listed on this page can serve to give you preliminary answers.

Rent vs. Buy
How much will my payment be?
How much can I borrow?
Am I better off refinancing?
Which is better: 15 or 30 year term?
How much will adjustable rate payments be?
Which is better: fixed or adjustable?
Which loan is better?
What home can I afford?
What will my refinancing costs be?

Prepare your financing before the house-hunt

Homeowners and renters should take certain steps in securing their financing before starting their home search. This will assure that questions about financing will not jeopardize their purchase. Two critical areas to look at are credit scores and pre-approval for the mortgage.

Credit reporting is generated by three firms: Equifax, Trans Union and TRW. Lenders rely heavily on the information from these reports in determining the approval of a mortgage loan. By obtaining this report in advance, buyers will ward off last minute questions or delays in getting the loan – delays that could lose the buyers dream home later in the process.

The second area to consider is getting pre-approval from the lender. Be aware of the difference between being pre-qualified and pre-approved. Pre-qualified simply means that the lender says that the buyer qualifies for the size of the loan based on the current income and debt. This does not assume that the buyer will get the loan. Pre-approved, on the other hand, means that the lender has guaranteed in writing that the buyer will get the loan. Being aware of these differences aids buyers in streamlining their home purchase.

Call me today with any questions you may have about the loan process.

Figuring Your Housing Budget

Have you ever shopped for clothes, furniture or gifts without a budget and later found that you'd overspent? It's easy to do especially when looking at so many great houses with your agent. Obviously, staying on budget is very important when house hunting.

That's why you'd probably like to have a ballpark idea of how much house you can afford - before you start looking and even before meeting with your mortgage broker or lender.

To get a rough estimate of how much you'll qualify for, do what the lenders do – plug your budget numbers into a basic mortgage calculation formula.

Lender Formulas:

Lenders typically use one of two formula guidelines; although most will require that you meet both sets of guidelines. Even if you don't meet the guidelines, talk with your chosen home mortgage consultant. S/he can provide additional details specific to your situation, and since there are other formulas that exist, you may qualify under another standard. For example, VA loans are calculated on a single ratio that's based upon mortgage payment and all debts. If you have very little debt, this formula may allow you to qualify more easily for a more expensive home.

Of the two usual formulas, the first compares income-to-housing costs (without including long-term debts), while the second includes all debts.

28 Percent Formula	Total monthly housing costs (P.I.T.I.) = 28 percent (or less) of gross monthly income.
36 Percent Formula	P.I.T.I. + all monthly debts = 36 percent (or less) of gross monthly Income.

So, if you're a family with a monthly gross income (before taxes) of $3,500, you would multiply $3,500 by 28 and 36 percent. The result shows that you might qualify for a home mortgage with monthly payments between $980 and $1,260 a month.

Note that these percentages may be slightly less if you have long-term debts (more than eight months) or alimony/child support payments. The number and ages of your children as well as household budget items may also have an impact.

Now that you have a better idea of what your approximate housing budget may be, learn more about:

Types of Loans
Mortgage Strategies
The Loan Application

Types of Home Loans

When it comes to paying for your new home, you have a veritable smorgasbord of financing options from which to choose. Your home mortgage may come through the seller or from a financial institution such as a mortgage company, bank, credit union, or savings and loan.

Here's our run-down on the primary types of home loans available today. Interest rates are intended for illustration only. Ask Teresa or your lender for current market rates and more detailed information on loan products to suit your needs.

Type: ARM

Characteristics: Low initial interest rate with payments that may decrease or increase over time. Popular with first-time buyers and buyers who plan to move or refinance in three to five years.
Term: Varies by lender.
Interest Rate: Subject to change on a periodic basis.

Type: Balloon

Characteristics: Lower interest rates and monthly payments than fixed-rate loans. Best for borrowers who plan to move or refinance within the loan term. May allow conversion to a fixed-rate loan at term's end.
Term: 5-7 year loans, amortized over 30 years. Repaid in equal monthly payments plus a "balloon" payment for the remaining balance.
Interest Rate: Varies by lender.

Type: Buy-down

Characteristics: Home owner, builder or third-party puts additional cash up-front in exchange for a lower interest rate.
Term: Varies. Interest Rate: Varies.

Type: Conventional

Characteristics: Can be obtained with as little as 5 percent down payment. If the down payment is less than 20 percent, it may be necessary for the loan to have Private Mortgage Insurance (PMI) to protect the lender.
Term: Paid off in equal monthly payments over 15, 25 or 30 years.
Interest Rate: Stays the same for the life of the loan.

Type: FHA

Characteristics: Insures loans, making lenders willing to finance home purchases on favorable terms. Down payments as low as 3 percent. Discount points may be paid by either seller or buyer.
Term: Varies by lender; however, the FHA charges an up-front Mortgage Insurance Premium, similar to Private Mortgage Insurance that can be financed in the mortgage amount or paid in cash at settlement. The borrower must also pay an annual Mortgage Insurance Premium of 0.50 percent, which is collected monthly.
Interest Rate: Varies by lender.

Type: Nehemiah

Characteristics: Loan-to-value up to a maximum of $289,175. Requires approval by a participating lender, contribution of 1 percent toward the home purchase, and completion of a home buyer education course.
Term: Varies by lender.
Interest Rate: Varies by lender.

Type: Non-Conforming

Characteristics: Provides home buyers with products that do not conform to the normal FHA/VA and conventional lending guidelines. These unique loan products are tailored to fit specific financial situations, including:

bankruptcies less than 2 years from discharge;
no income/no asset verification loans;
late payments on previous or current mortgage;
bank statement programs for the self-employed; or
excessive credit problems, but sufficient liquid assets to work with.

Term: Varies. Interest Rate: Varies.

Type: Owner-assisted

Characteristics: Owners may finance first, second, third or fourth loans. They may loan their equity back as a first mortgage (often called a "take back"). Term: As determined by the owner. Interest Rate: As determined by the owner.

Type: Second Mortgage

Characteristics: Made by the seller or by a commercial lender.
Term: 5- to 15-year loan, sometimes interest-only payments are made until the term date, when the balance is due. Interest Rate: Based upon lender or buyer/seller agreement.

Type: VA

Characteristics: Available to qualified veterans of the Armed Services, Reserves and National Guard. Loans can exceed $200,000 with no down payment. Flexible underwriting guidelines. Closing costs may be a gift. Can be combined with second mortgages and are assumable (upon qualifying) by future buyer. Term: Payment fixed for the full term. Interest Rate: Varies by lender.

Type: Renovation Financing

Characteristics: Provides buyers money to fix up, renovate, repair, replace or remodel a home with the purchase. We loan on the "after improved value" and can do a loan on a home in ANY condition. We can combine this type of financing with FHA or Conventional financing. Available for singles, doubles, triples or quads.

When you're ready to think about buying your new home, make sure you explore these primary loan options and the dozens of others available. The best lending partners will be able to find the right one for your needs.

Loan Application Checklist