Should I talk to a Mortgage Professional before house hunting?
Absolutely! It's important to see your mortgage professional first. Why? What can we do for you if you haven't negotiated a price, and don't know how much you want to borrow?
When we approve you, we help you determine how much of a monthly mortgage payment you can afford, and how much we can loan you. We do this by considering your income and debts, your employment and residence situations, your available funds for down payment and required reserves, and some other things. It's short and to the point, and we keep the paperwork to a minimum!
Once you're approved, we'll give you what's called an Approval Letter, which says that we are working with you to find the best loan to meet your needs and that we're confident you'll qualify for a loan for a certain amount.
When you find a house that catches your eye, and you decide to make an offer, being approved for a mortgage will do a couple of things. First, it lets you know how much you can offer. Your real estate agent will help you decide on an appropriate offer, but being approved gives you the confidence to know you can follow through.
More importantly, to a home seller, your being approved is like you walked into their house with a suitcase full of cash to make the deal! They won't have to wonder if they're wasting their time because you'll never qualify for a mortgage to finance the amount you're offering for the home. You have the clout of a buyer ready to make the deal right now!
You can always use the calculators available on our site to get an idea of how much mortgage you can afford -- but it's important to meet with us. For one thing, you'll need an Approval Letter! For another thing, we may be able to find a different mortgage program that fits your needs better.
How do I get Pre-Approved?
Before you begin to shop for a new home, you should set up a time to meet with your loan officer so we can figure out how much you can afford. This will put you in a better position as a buyer.
To get pre-approved for a loan, we will collect information about your debt, income, and assets. We'll look at your credit profile and assess goals for a down payment and get an idea of different loan programs that would work for you. We will issue you an approval letter indicating the amount you are approved to borrow.
It is important to understand that an approval letter is just an estimate of what you are eligible to borrow, not a commitment to lend. Getting approved for a loan gives you competitive advantage when the time comes to bid on a home because you have been approved for a loan for a specified amount.
To get pre-approved, you will complete a mortgage application and provide me with various information verifying your employment, assets and financial status such as W-2 forms and asset statements. We'll review your mortgage options and find the program that best meets your needs. Once the application process is complete you will receive an approval letter indicating the amount we're able to lend you for your home.
An approval letter is not binding on the lender; it is subject to an appraisal of the home you wish to purchase and certain other conditions. If your financial situation changes (e.g. you lose your job), interest rates rise or a specified expiration date passes, your loan officer must review your situation and recalculate your mortgage amount accordingly.
How much House can I Afford?
Deciding how much house you can afford is a personal decision. Many factors come into play. How much can I borrow? How much can I put toward my down payment? What size monthly payment can I afford?
There are no black and white answers to these questions. Its a matter of give and take. If you plan on a 30 year mortgage, you can probably make a
lower down payment (or perhaps no down payment at all) and still manage the monthly payments. If, on the other hand, you plan on a 15 year mortgage, you'll probably want to make a larger down payment to keep your monthly payments in line with what you can afford.
What size Monthly Payment can I afford?
When determining what size monthly payment you can afford, you'll want to consider what other monthly expenses you have. Tangible expenses such as car payments, day care and utility bills, all play a role in how large a monthly payment you can afford.
There are also the intangible expenses or lifestyle expenses that you'll want to consider. Things such as dining out, travel and when you buy your next car can effect how much you can afford. Are you willing to curtail or delay some of these expenses in order to afford a larger monthly payment?
How much can I Borrow?
This is a question you'll want to get answered before you begin your home search. This is something that we're here to help you with. Our mortgage calculators will help you see how your down payment, monthly payment and the amount you borrow are all interrelated.
What is Private Mortgage Insurance (PMI)?
Private Mortgage Insurance, also known as PMI, is a supplemental insurance policy you may be required to obtain in order to get a mortgage loan. PMI is provided by private (non-government) companies and is usually required when your loan-to-value ratio - the amount of your mortgage loan divided by the value of your home - is greater than 80 percent.
PMI isn't a bad thing - it allows you to make a lower down payment and still qualify for a mortgage loan. In fact without PMI, many of us would not be able to purchase our first home.
How is PMI calculated?
Our PMI premium is fixed based on plan type (loan-to-value ratio, loan type, loan term, etc.) PMI typically amounts to about one-half of one percent of your mortgage amount annually, according to the Mortgage Bankers Association, and the premium payment is usually rolled into your monthly mortgage payment. On a $200,000 mortgage, you may be paying $1,000 per year for PMI. Please be aware this will vary according to your loan-tovalue ratio, loan type, loan terms and especially your credit profile.
For the best estimate of how PMI would be calculated for you, please call your experienced mortgage professional.
How can I get my Loan faster?
- Have everything ready and in one place.
Elsewhere on our website, you'll find a list of things you might need in support of your mortgage application. If you get them all together and keep them in a safe, portable place like a special pouch or folder, you can cut down on time spent rooting around for things we may need. Also, you'll help cut down on your own anxiety and confusion.
- Be honest and complete when you fill out your application.
"Fudging" your employment or residence history or omitting open credit accounts you'd rather not have considered doesn't increase your chances of getting the loan approved. In 100 percent of cases, it makes it harder to secure financing because of the questions that are raised.
- Respond promptly to requests for additional information.
During the loan process, a review of your documentation may require that additional information is needed. Provide it as soon as you get the request, or return the call as soon as you get the message.
- Be prepared to explain derogatory items in your credit report.
This is really part of number 3 above. If you had an illness or a divorce where you missed or made late payments, or you have other instances of late payments or delinquencies on your credit report, be prepared to explain them. Be honest, and don't be nervous! The loan processor isn't judging you, they're trying to fill in all the blanks in their paperwork.
- Let the appraiser in!
The appraisal is one of the lengthiest parts of the mortgage loan process. Studies have shown that the single biggest factor in appraisal "lag time" is the appraiser's inability to reach the homeowner to make an appointment. If you're refinancing and the appraiser calls to make an appointment, make it as soon as its convenient for both of you.
FHA loan common questions
What is the FHA?
FHA stands for the Federal Housing Administration. It was created in 1934 to help Americans get into homes.
What makes a FHA insured mortgage beneficial?
A FHA insured mortgage is easy to qualify for, can be obtained with less than perfect credit, costs less and requires a smaller down-payment.
Where can I find FHA forms and other literature?
A great source for FHA forms and information is www.hud.gov/library/
What is the FHA loan limit in my area?
The loan limit across the country is different
Can I pay an FHA loan off early?
Yes, however be sure to check the pre-payment section of your contract before signing.
Can a FHA insured loan help me lower energy costs?
Yes, through the Energy Efficient Mortgages Program you can finance 100 percent of the cost of making your home more energy efficient. Contact us to see how.
Is there a FHA program to help me refinance my loan?
Yes, FHA is one of the ways that we can help you refinance your current home loan. Contact us now to see what we can do for you.
Can I refinance a fixed rate FHA loan?
Yes. Talk with one of our professionals today to see if refinancing makes sense for you.
What is the recommended debt-to-income ratio for FHA loans?
The recommended debt-to-income ratio for a FHA loan is 43%.
Are FHA loans assumable?
Absolutely, you can assume an existing FHA loan or allow a buyer to assume yours.
Will I have to pay mortgage insurance with an FHA loan?
Yes, in fact FHA mortgages often require you to carry mortgage insurance for longer than most conventional loans. Most often for the life of the loan for terms over 15 years
Can I get a "fixer-upper" of a home with a FHA mortgage?
Yes, however you might be required to fix certain problems in the home before you can get the full loan. Speak with us today for details on this.