Dan Pick Real Estate
What do I need to do to get a loan?
What
are the Steps in the Loan Process?
When you apply for a mortgage, you will need to furnish
information regarding your income, expenses and obligations. It
will be very helpful and a time-saver, if you have the following
items available:
· Most recent two pay stubs
· W-2's for the last two years
· Last two months' bank statements
· Long-term debt information (credit cards, child support, auto
loans, installment debt, etc.)
How
Does a Lender Determine the Maximum Mortgage I Can Afford?
The three primary areas lenders examine in determining the size
of mortgage you can handle include your monthly income,
non-housing expenses, and cash available for down payment, moving
expenses and closing costs. The most common way lenders interpret
these variables to estimate your mortgage capacity is the
Percentage Method. Most lenders feel a family should spend no
more than 28% of its income on housing costs, including the
mortgage, insurance, and real estate taxes. Also, these housing
costs plus your long-term debts (car loans, child support,
minimum credit card payments, student loans, etc.) shouldn't
exceed 36% of your income.
Although this is not a true method, you can use the Multiplier
Method formula as a general rule of thumb to determine how much
home you can afford. Most lender's guidelines allow a family to
carry a mortgage that is two to three times its gross annual
income (income before taxes and expenses are taken out). The
amount of down payment and the type of mortgage (fixed or
variable rate) will determine the precise ratio used by the
lender.
How
Much of a Down Payment Will I Need to Buy a Home?
The amount of money that a buyer must put down at closing depends
on the loan-to-value ratio - the percentage of the property's
appraised value or sales price (whichever is less) that a lender
is willing to loan.
For example, if a property is appraised at $100,000 and the
loan-to-value ratio is 90%, the lender would be willing to loan
$90,000. The buyer's down payment is the remaining $10,000.
Because the loan-to-value is a percentage, the higher the sales
price of a house, the higher the down payment. A down payment of
20% has been the benchmark for conventional financing, but today,
many options are available, some requiring as little as 5% down.
A representative from your bank can help you determine which down
payment option is right for you and your budget.
Can
I get an FHA or VA Mortgage?
Just about anyone can apply for an FHA-insured mortgage through
banks and other lending institutions. They are particularly
well-suited for buyers of moderate income; the low down payments
requirements (as low as 5% of the purchase price) are matched by
a relatively low maximum mortgage amount.
Similarly, VA-guaranteed loans often require no down payment for
up to four times the amount guaranteed by the VA. These loans are
reserved for either active military personnel or veterans, or
spouses of veterans who died of service-related injuries.
If there is a downside to these loans, it's the qualifying
process. Though you apply for government-insured financing
through a lending institution, the Federal Housing Administration
or the Department of Veterans Affairs must insure or guarantee
the loan and may require specific documentation or procedures not
necessarily required for conventional financing. That may take
more time than is generally required for conventional mortgage
approval. Additionally, FHA-required insurance must be added to
your payment.
What
Is A Mortgage, & What Are the Benefits of Different Kinds of
Mortgages?
Simply put, a mortgage is a loan that a home buyer obtains
directly from a lender to purchase real estate. The mortgage is a
lien on the property that secures a promissory note (promise to
repay the debt) that states the terms of the loan, including the
interest rate, and the number of payments.
The most popular mortgages available to home buyers today can be
divided into two general categories: those which offer fixed
interest rates and monthly payments, and those where one or both
of those factors are adjustable. Fixed rate/fixed payment loans
are more traditional, and remain the most popular home financing
method, currently accounting for about two-thirds of all
residential mortgages. Their advantages are well-known: You
always know what your monthly principal and interest payment will
be, so your basic housing cost will remain unaffected by interest
rate changes until the mortgage is paid off.
Mortgages that entail flexible rates and/or payments have grown
in popularity in recent years, primarily during periods of high
interest rates and/or rapidly rising home prices. Many, including
the popular ARMs (Adjustable Rate Mortgages), offer
lower-than-market initial interest rates that allow buyers a
measure of affordability unavailable in fixed-rate loans. The
tradeoff may be higher interest rates and higher monthly payments
later on.
What
Is the Difference Between Pre-qualifying and Pre-approval?
A pre-qualification consists of a discussion between you and a
loan officer. The loan officer will collect information regarding
your income, monthly debts, credit history and assets, and based
on this information calculates an estimated mortgage amount for
which you qualify. The pre-qualification is not a mortgage
approval, but more an estimate on what you can afford. A
pre-approval, on the other hand, is a more comprehensive approach
giving an actual decision on a home loan. This is an actual
credit approval, and it carries with it some considerable
benefits. From this information, a loan approval is given
agreeing to finance a home and the total mortgage amount
available to you. You will have a greatly improved negotiating
position when you are pre-approved for a mortgage. Sellers are
more apt to negotiate with someone who already has a mortgage
approval in hand. The pre-approval letter lets the seller know
they are working with a serious cash buyer. A pre-approved buyer
can also close on a property more quickly-another major
consideration for a motivated seller. I strongly recommend it if
you're serious about buying.
What
Are Typical Closing Costs?
You can expect to pay the following closing costs at the time of
settlement:
· Appraisal fee - covers the cost of a professional written
estimate of the property's value.
· Attorney's or escrow fees - your own, and the lender's if they
have one.
· Credit report fee.
· Points.
· Documentation preparation - covers the cost of preparing the
deed and other paperwork.
· First-year's premium on fire and hazard insurance.
· Impounds - sufficient to cover real estate taxes on the
purchased property for the current tax period to date. The lender
then pays these bills when they come due.
· Interest - paid from the date of closing until 30 days before
your first monthly payment.
· Title insurance.
· Mortgage insurance if required.
· origination fee - covers the lender's administrative costs.
· Recording fees.
· FHA mortgage insurance (FHA loans only).
· VA guarantee fees (VA loans only).
What
Are Points, & What's the Point in Paying Them?
In real estate, the term "point" refers to 1% of the
total mortgage loan amount. Buyers often pay lenders a
supplemental fee, calculated in points, to get a better interest
rate on a particular mortgage.
For instance, a lender may offer you a choice of two 30-year
mortgages: the first at 8% with no points, and the second at
7-1/2% with an additional three points. If the loan is for
$100,000, those three points will cost you an extra $3,000 up
front - but you'll get a payback of significantly lower monthly
payments for the lifetime of the loan.
Many lenders will advise you to pay the points for the better
rate if you can afford it, especially if you plan on keeping the
home for more than a few years. Like interest, the money you pay
for points may be tax-deductible, and the investment may pay for
itself through savings generated by lower monthly payments. I
suggest you call your tax preparer to learn more about this.
Properties for Sale | Tips for Selling Your Home | Tips
for Buying a Home
Community Information | Schools
in Remsen | Home
215
Jefferson St., Remsen, Iowa 51050
(712) 786-1417 Fax: (712) 786-1456
dcpick@yahoo.com
Equal Housing Lender