When attempting to estimate monthly mortgage costs, try getting a pre-approval for the mortgage. Do some shopping to know what your eligibility looks like, so you can better estimate the price range you have. Once you know this number, you can determine possible monthly mortgage payments quite easily.
Pay down the debt that you already have and don’t get new debt when you start working with a home mortgage. A higher mortgage amount is possible when you have little other debt. Carrying a higher debt may mean being denied for the application you’ve placed for a mortgage. Carrying debt may also cost you a lot of money by increasing your mortgage rate.
Ensure that your credit history is clean, even before you contact any lenders. Credit standards are becoming even more strict, so work on your credit whenever possible.
Your application could be declined because of new changes to your finances. Avoid applying for mortgages until you know that your job is safe. You should not accept a different job until your mortgage has been approved because their decision will be made by your mortgage underwriter with regards to the info you included in your app.
Place all your paperwork together before seeing a lender. The loan officer will require that you show evidence of your earnings, statements from the bank and any other documents about your assets. Making sure this information is organized and accessible will make the procedure run much more smoothly.
Check out a the least three (five is better) mortgage lenders before you decide on your mortgage company. Ask about all fees and charges. Find reviews about each lender online and discuss to friends and family. Once armed with these details, you can make an informed decision.
Consistently pay close attention to relevant interest rates. Obtaining a loan is not dependent upon the interest rate, but it will determine how much you really spend. Learn how the interest can affect your own monthly payments and how it works in the financing your mortgage. Mortgages are liabilities; If you don’t pay attention, you can end up in foreclosure.
- First, decide what kind of a mortgage you want to take. Home loans have all different types of terms. If you understand each, you’ll know which fits your needs the best. Speak to lenders about different options when it comes to your loan.
- Before signing the dotted line, research your mortgage lender. Do not just assume your lender is totally trustworthy. Ask family and friends if they are aware of them. Look through search engine results online. Check out the BBB. Know all that’s possible so that you’re able to get the best deal possible.
- An adjustable-rate mortgage won’t expire when its term ends. Instead, the fee is fixed to match current bank rates. This might result in the mortgagee owing a high interest rate.
Knowledge is power. After going through this article, you have the knowledge required to acquire a home loan. Educate yourself in your decision to apply for a home mortgage and make sure you know all of the options available to you!
]]>Most lenders require at least 10% of the purchase price, though new programs are available for 3%-5% down. 100% financing can be found, but you credit must be excellent and PMI insurance will be required.
Loan Origination Fee
A lender’s fee for establishing a new loan. Government regulations allow only 1% origination fee on FHA or VA loans. Conventional loan fees can vary from -1 to 3+ points, plus other costs. A point is 1% of the loan.
Appraisal Fee
Fee paid to obtain an estimate of market value upon which the lender will base the loan amount. The cost is about $300-$500. Non refundable.
Credit Report
An evaluation of the buyer’s credit habits made by a credit bureau for the lender. The cost is $50-$60. Non refundable.
Tax Service Fee
A charge of approximately $75 is made by a tax service company to verify to the lender that the taxes have actually been paid when due or are due to be paid by borrower or mortgage company if impounding.
Assumption Fee
Fee of approximately $250 up to 1% of the loan balance is charged by the existing lender for the privilege of assuming the existing loan.
Pest Inspection Fee
Fees of $75 – $175 is charged by termite companies for inspecting property for damage done by wood destroying organisms and dry rot. It is customary for the seller to pay for Section 1 and the buyer for Section 2 work.
Other Inspection Fees
Other inspections the buyer may choose to have done are: property inspections that usually cover foundation, electrical, plumbing and overall construction at a cost of $300-$400. Roof inspections cost $75-$125. Geological reports cover subject’s site in relation to fault and slide zones, costing about $100. Septic $200-$400. Radon $50-$100. Asbestos $75-$125.
Title Insurance
This is an extended policy with more specific coverage than the standard policy. It covers unrecorded liens, is based on loan amount only and is required by almost all lenders. The cost is obtained from a rate chart and is based on the loan amount.
Miscellaneous Costs & Fees
An estimate of $150 should be adequate to cover minor items as notary, recording documents, endorsements, etc. as well as allowing for variations from these other estimates.
Hazard Insurance Reserve
Two month’s premium is collected for the impound account if required. The buyer will need to either provide or pay for coverage for the 1st year.
Prepaid Interest
Interest must be paid from COE (close of escrow) to 30 days prior to the first regular mortgage payment. An estimate of one months interest should suffice.
Mortgage Insurance
Mortgage Insurance is required on all conventional loans greater than 80%. The cost may range from 1/2% to 1% per year and 14 months premium is collected in advance. This is coverage for the lender in case of default.
Tax Impounds
If the new loan is going to have an impound account, the lender will require from 2-10 months taxes to be deposited, depending on the time of year. Note: if taxes are prorated, buyer’s total charge for taxes should equal about six month’s taxes.
Escrow Fee
These fees range from $750-$2500, depending on the sales price. In some counties its customarily paid by the seller, in other counties the buyer pays, while in others it may be customarily split. Remember though, everything is negotiable.
Negotiating Fees
The above fees are typical costs when buying real estate in Florida counties. Most of the fees are considered buyer’s non-recurring closing costs. Some of the fees are fixed while others are negotiable. Your real estate agent can negotiate with the sellers to pay some or most of these costs, saving you thousands of dollars in closing costs. Ask your real estate agent and loan agent to provide estimated closing costs of buying a home before looking at homes.
FICO scores (credit score) are what the vast majority of American mortgage lenders use to evaluate home loan applicants’ creditworthiness. The scores are based on a number of factors that analyze the electronic credit files maintained on virtually all adults in the U.S.
The scores range from the 300s to around 850, with higher scores indicating lower risk. Many lenders reserve their most favorable quotes of rates and fees for applicants in the upper FICO score ranges, 700 and above. Mortgage applicants in the low 600s and below get progressively higher rate quotes and are charged higher loan fees.
Your FICO score only looks at information in your credit report. However, lenders look at many things when making a credit decision including your income, how long you have worked at your present job and the kind of credit you are requesting. Your score considers both positive and negative information in your credit report. Late payments will lower your score, but establishing or re-establishing a good track record of making payments on time will raise your score.
Your Score Takes into Account:
- Payment information on many types of accounts, including credit cards, retail accounts, car and mortgage loans.
- Public record and collection items such as bankruptcies, foreclosures, suits, wage attachments, liens and judgments.
- Details on late or missed payments (“delinquencies”) specifically, how late they were, how much was owed, how recently they occurred and how many there are.
- How many accounts show no late payments.
- Length of Credit History
How Scores are Established:
Approximately 15% of your score is based on your credit history. Generally a longer credit history will increase your score. The score considers both the age of your oldest account and an average age of all your accounts.
10% of your score is based on new credit or if you are taking on new debt. Opening a couple of new credit lines in a short period will hurt this score. If you are planning on buying real estate in the near future, put off buying a car until after it closes. A new car loan can have a big impact on what price of house you can qualify for.
10% of your score is based on types of credit in use. The score will consider your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans.
30% of your score is based on amounts owned on all accounts.
Even if you pay off your credit cards in full every month, your credit report may show a balance on those cards. The total balance on your last statement is generally the amount that will show in your credit report. The score considers the amount you owe on specific types of accounts, such as credit cards and installment loans. Small balances without missing a payment shows that you have managed credit responsibly, and may be slightly better than no balance at all. Closing unused credit accounts that show zero balances and that are in good standing will not generally raise your score. A large number of accounts can indicate higher risk of over-extension.
35% is based on payment history. The first thing any lender would want to know is whether you have paid past credit accounts on time. This is also one of the most important factors though late payments are not an automatic “score-killer.” An overall good credit picture can outweigh one or two instances of, say, late credit card payments.
]]>Obtain a copy of your credit report and check for errors. Do this prior to your lender ordering one and before mistakes are found.
FICO Scores: What They are and Why They are Important
Next gather all your financial data. Lenders will want to see bank account statements, paycheck stubs, W-2 forms and tax returns for the last two years, investments and proof of any other sources of income.
Down Payment Sources
- Savings
- Sell a car, boat or other property
- Receive a tax-free gift from parents or relatives
- Borrow against a pension plan or a life insurance policy
- Equity share with parents or friends
- Use your business as collateral
If you can make only a small down payment or have credit problems, consider asking the seller to help you with the financing. Example: Sellers can “carry back” a second mortgage to reduce the amount of the first mortgage you need. By reducing the loan-to-value ratio of the first mortgage to 80% or less, buyers often avoid paying for private mortgage insurance when they use a seller-provided second mortgage.
Other Financing Options
If you can’t qualify for a conventional loan because of income, don’t give up. There are a number of special programs to get you into a home. Some cities have BMR (below market rate) housing programs that allow qualified buyers to purchase new homes substantially below market value.
Programs to Help Lower Income Families:
- VA (Veteran)
- Community Homebuyer loan program
- FHA’s 203(k) program (for fixer-upper)
- Mortgage Credit Certificate program (MCC)
- Enhance Fannie Neighbors mortgage program
- Fannie Home Style loan program (for fixer-upper)
… Ask your mortgage loan officer for more information about these programs.
Comparing Programs (ask yourself):
- How long will I live there?
- What are the tax implications?
- Can I expect earnings to increase or decrease?
- Are interest rates likely to go up or down in the near future?
- Questions a Borrower Should Ask
- Are there any “up front” fees?
- What is the annual percentage rate?
- What and how much are the points?
- Is there a prepayment penalty?
- Is there a balloon payment?
- Is the loan assumable by someone later?
- How much money must I have at closing?
- What is the interest rate and term of the loan?
- What is the monthly payment for principal and interest?
- What happens if interest rates change during the loan process?
- Do not hesitate to ask questions.
- Take the time to carefully examine the programs being offered.
- Get a written cost estimate up front.
Financing Facts
- Interest rates are negotiable. Costs for fees may be negotiable.
- Save money by shopping around for your mortgage.
- A larger down payment isn’t necessarily the best way to go.
- It may not be to your advantage to pay off your mortgage early.
- Larger monthly mortgage payments means a larger tax deduction.
- Interest rates on mortgages may be high, but the interest is tax deductible.
- A short-term mortgage will build more equity for you in a shorter period of time.
- Mortgage insurance may be required if the down payment is less than 20%.
- A second mortgage or equity line on top of a low rate first mortgage may be cheaper than refinancing a new first mortgage.
What is the Best Loan?
You can save thousands of dollars or increase your home purchasing power by selecting the right loan. New mortgage programs are constantly entering the market place in response to consumer needs. Take the time to understand and compare programs available to you.
Tax Advantages
With many tax deductions being eliminated, it’s comforting to know that mortgage interest is still deductible. Besides the interest, you also can deduct any points paid to secure a loan on your first or second home. Property taxes on your home are fully deductible. These can add up to a sizable savings on your income tax bill.
Other Savings
You may deduct a portion of your house expenses if you have a qualifying home office.
Tips to Expedite the Loan Process:
- Pay off credit cards before lender orders a credit report.
- Don’t buy a car or take out a loan prior to applying for a loan.
- Don’t charge expensive items on charge cards before getting a credit report.
- Have verification of the down payment and an explanation of the source of money.
- Getting money from relatives? A Gift letter from them will be needed.
- Completely fill out the loan application, providing addresses with zip codes and all account numbers.