FAQ's
Q: How much cash will I need to purchase a new home?
Typically, there are four cost categories when financing with a mortgage.
- Down Payment: This can range from as little as zero for qualified borrowers, to whatever you can afford to put down.
- Closing Costs: The lender will likely impose fees for performing certain services, as will third-party service providers such as appraisers, title examiners, and closers. Depending upon your loan size, closing costs could range from 1 to 2 percent of the loan amount.
- Points: Points are usually considered optional fees that are used to buy down the rate of interest. Not every loan requires you to pay points.
- Pre-Paid Items: Pre-paid items include recurring costs such as interest, Real Estate Taxes, and Hazard Insurance. These fees, which are collected at the time of closing, can differ depending upon several variables such as the interest rate and the time of month you close.
Q: How much home can I afford?
- Down Payment: The greater the down payment, the more home you will be able to afford.
- Income: Lenders typically take a percentage of your qualifying, gross monthly income to arrive at a maximum housing payment that includes principal, interest, taxes, and insurance (PITI). This percentage can vary from program to program, but usually ranges from 28 percent to 33 percent of gross monthly income.
- Debt: The greater your debt load, the less monthly income will be available to service the debt on your new home, the less home you can afford.
- Credit: Your credit history will also help determine how much home you can afford. A low credit score tells a lender you are a higher risk. To compensate for that risk, the lender will usually charge a higher rate of interest. The reverse is also true: a higher credit score will usually afford you a market rate of interest.
Q: There are so many banks. Shopping for a mortgage seems confusing. How do I know which direction to head?
That’s an easy one . . . just ask us! We stick with our clients from the start to the finish. That means we want the sale to go as smoothly as you do. We know which banks to use and which ones not to. And we can save you time & money since we receive a wide range of mortgage program info weekly.
Q: Should I get pre-approved for a mortgage before I shop for a new home?
Absolutely! Getting pre-approved for your mortgage will allow you to focus on homes you know you can afford, and lets seller know you are a serious buyer who can afford the house being offered. Pre-approval helps you stand out in the event of multiple offers and gives you negotiating strength.
Q: What is the difference between pre-qualified and pre-approved?
Pre-qualification represents a mortgage professional’s opinion, in which little information, if any, has been verified. A pre-approval is the result of verifying credit, income, and assets, and represents a decision as opposed to an opinion.
Q: What types of mortgages are available?
Most mortgage lenders can offer its customers a wide array of mortgage products, including the following:
- Fixed Rate Mortgage: This loan offers a fixed rate of interest over the term of the loan—usually 15 or 30 years. A fixed rate means a fixed payment of principal and interest, which is desirable for long-term budgeting. This program is best when rates are low and the borrower plans to own the property for the long-term.
- Adjustable Rate Mortgage (ARM): This loan usually offers a below-market interest for a fixed time period—usually one, three, five, seven, or ten years. After then, the interest rate, along with the principal and interest payment, will adjust with the movement of the economy. This loan is best for those borrowing in a high fixed-rate environment, or for those who plan to live in their new home only a short time.
- New Construction Mortgage: This loan allows the borrower to lock in an interest for an extended period of time, usually the construction period; as completion draws near, the borrower can elect to relock if rates have improved.
- Home Equity Lines/Loans: A home equity line, or loan, can be used in combination with a suitable first mortgage to purchase a home; if you are putting down less than 20 percent of the purchase price, the home equity loan can help you avoid having to pay mortgage insurance. These loans can also be used to help manage the equity in one of the largest assets you will ever own. A home equity line can be put into place when the home is purchased, or later, and the equity drawn from the line can be used to make major purchases, such as a vacation home, car, or college education.
Q: What is an impound or escrow account?
An impound or escrow account allows you to include, with your monthly principal and interest payment, a small portion of the cost toward your Real Estate Taxes and Hazard Insurance. The lender sets these additional funds aside until the Tax or Insurance bills come due, then pays the amount due from the account. Under some programs, an impound/escrow account may be mandatory; under others, it may be optional—although you may have to pay a fee to exercise that option.
Q: What is a lock period?
Borrowers may have the option of “locking” in an interest before the loan closes. This action protects you against rising interest rates and guarantee your rate for a certain period of time, usually ranging from 15 to 90 days. You must close during your lock period to ensure closing with that rate.
Q: I get the financing part . . . but what about finding a house?
That’s where a good REALTOR comes into the picture. It’s our job to know who’s selling what. We’ll do a full market search using California’s Multiple Listing Service and let you know of any deals through the “REALTOR grapevine”. We specialize in knowing what’s available for houses and where to find the good ones.
Q: Now what?
Just call us. We’ll help you from here! First we’ll sit and listen to what you want in your new home. Then we’ll help you put together some financing choices and the paperwork you’ll need. And, finally we’ll start looking. It’s simple. It’s free. And yes, it’s fun!
If you'd like to go to our easy to use contact page - that's also a great way to start, if you're browsing our site after hours. You can send us your information and we'll contact you right away!
It's that easy!
