|
|
 |
|
 |
|
| 1. |
How much money will I have to come up with
to buy a home? Answer |
| 2. |
How much is a down payment on a FHA Loan? Answer |
| 3. |
How do I know how much house I can afford? Answer |
| 4. |
What documents do I need to apply for a mortgage loan? Answer |
| 5. |
I bank with a large national bank, should I get my mortgage there? Answer |
| 6. |
How do I know which type of FHA mortgage is best for me? Answer |
| 7. |
What does my mortgage payment include? Answer |
| 8. |
Why Use an FHA Mortgage? Answer |
| 9. |
How does a no cost refinance work? Answer |
| 10. |
What are points and who should pay them? Answer |
| 11. |
Why use a FHA Approved mortgage broker? Answer |
| 12. |
When I find the home I want, how much should I offer? Answer |
|
Q
:
|
How much money will I have to come up with
to buy a home? |
|
A
: |
Answer: The answer depends on a number of factors, such as the cost of the house and the type of mortgage you get. In general, there are three costs:
- earnest money - the deposit you give the seller when you make the offer.
- down payment - a percentage of the cost of the home that is paid when you settle.
- closing costs - the costs associated with processing the needed paper work to buy a house.
When you make an offer on a home, your real estate broker will put your earnest money into an escrow account. If the offer is accepted, your earnest money will be applied to the down payment or closing costs. If your offer is not accepted, your money will be returned to you. The amount of your earnest money varies. If you buy a HUD home, for example, your deposit generally will range from $500 - $2,000.
The larger the down payment, the lower your mortgage payments. Some types of loans require 10-20% of the purchase price. Many first-time homebuyers turn to the Federal Housing Administration (FHA) for help. FHA loans require only 3.5% down — and sometimes less.
Closing costs, which you will pay at settlement, average 3-4% of the price of your home. These costs cover various fees your lender charges and other processing expenses. When you apply for a loan, your lender will give you an estimate of the closing costs. If you decide to buy a HUD home, HUD may pay many of your closing costs. |
| |
|
Q
:
|
How much is a down payment on a FHA Loan? |
|
A
: |
The down payment on a FHA loan is 3.50% of the sales price.
$150,000 (Sales Price) X 3.5% (Down Payment %) = $5,250 (Down Payment)
In most cases the seller will pay your closing costs, so all you need is the down payment amount and you are ready to purchase. |
| |
|
Q
:
|
How do I know how much house I can afford? |
|
A
: |
Generally speaking, you can purchase a home with a value of two or three times your annual household income. However, the amount that you can borrow will also depend upon your employment history, credit history, current savings and debts, and the amount of down payment you are willing to make. You may also be able to take advantage of special loan programs for first time buyers to purchase a home with a higher value. Give us a call, and we can help you determine exactly how much you can afford. |
| |
|
Q
:
|
What documents do I need to apply for a mortgage loan? |
|
A
: |
Are you looking to Apply for a Home Loan in Tacoma, WA and wondering what documents you need? If so keep reading, I have outlined a brief summary of the documents required.
Being prepared ahead of time by gathering the required documentation will help your Tacoma, WA Mortgage approval process move a little smoother.
Below are the items needed in regards to your income and asset documentation:
Income:
- 2 Most consecutive paycheck stubs-covering a 30 day cycle
- W-2’s from 2009 & 2008
- Tax Returns for 2010 & 2009 * if self employeed, have rental properties, or receive commission income
- Copies of your driver's license & social security card
Assets:
- 2 Months Most Recent Bank Statements - all pages
- Quarterly 401k Statement
- 2 Months Mutual Fund/Investment Accounts
Other items that may be needed:
- 12 Month lease agreement, or 12 canceled checks made to a private party landlord
- Bankruptcy papers and explanation for any derogatory payments after the BK
- Divorce Decree
- Letters of explanation for gaps in employment
- Letters of explanation for any judgments, tax liens, or repossessions
- Final Settlement Statement on recent sale of previous property
- Mortgage payment coupons on other real estate owned, including proof of annual tax and insurance costs
- Current lease agreements on any other real estate owned
- Job transfer letters
- College Degree if work history has not been established |
| |
|
Q
:
|
I bank with a large national bank, should I get my mortgage there? |
|
A
: |
Most large national banks, have call center operations in different states making communications difficult. By dealing with a local mortgage broker, we can close faster and cheaper than the big banks like Bank of America, Wells Fargo, and USAA. Plus our experience dealing with mortgage files everyday keeps us abreast of the lastest guidelines changes. Just spoke with a customer the other day who was shopping and their bank was quoting a guideline that had changed months ago... |
| |
|
Q
:
|
How do I know which type of FHA mortgage is best for me? |
|
A
: |
FHA offers several different types of FHA mortgages from 30 year fixed rate to 3 year Adjustable rate mortgages. After a brief interview, we can determine which options best suits your financial needs.
Here's a list of several questions that will help us determine which product best for you:
1. How long do you plan to stay in the home? Are you subject to job relocations or expect your family size to increase in the next few years?
2. Is your new house payment a shock to your currrent monthly budget? If so a 2/1 buydown may be an option if your income is expected to increase in the next few years.
3. If you are considering refinancing how soon would you like to pay off the loan? 15 or 30 years? |
| |
|
Q
:
|
What does my mortgage payment include? |
|
A
: |
Answer: Most mortgages consist of 4 parts:
- principal: the repayment of the amount you actually borrowed
- interest: payment to the lender for the money you’ve borrowed
- homeowner's insurance: a monthly amount, required by most lenders to insure the property owner against loss from fire, smoke, theft, and other hazards
- property taxes: the annual city/county taxes assessed on your property, divided by the number of mortgage payments you make in a year.
Most loans are for 30 years, although 15-year loans are available, too. During the life of the loan, you’ll pay far more in interest than you will in principal — sometimes two or three times more! Because of the way loans are structured, in the first years you’ll be paying mostly interest in your monthly payments. In the final years, you’ll be paying mostly principal. |
| |
|
Q
:
|
Why Use an FHA Mortgage? |
|
A
: |
Since 1934, FHA has served as an economic backstop working hand-in-hand with lenders to provide consumers with access to safe and affordable loans, even during times of tremendous market volatility as with the current subprime situation.
Developing closer ties to the lender community will allow FHA to broaden its appeal. But there are specific business reasons for lenders to work closely with FHA. Because our products offer less risk for you -- as well as fast closings, competitive rates and foreclosure protections for your clients -- you can qualify more business and improve your bottom line. FHA's positives include:
-
No minimum credit score.
-
Non-traditional credit is acceptable.
-
Low 3.5% downpayment.
-
Non-occupant, co-borrower is permitted.
-
Expanded qualifying ratios.
-
No prepayment penalties.
-
Fully assumable.
-
Default assistance.
-
Lower premiums.
-
Non-credit qualifying, streamline refinances.
-
Availability: in all areas of the country, provided a market exists for the property and the home meets HUD's minimum property standards.
-
Versatility: may be used to purchase or refinance a new or existing one- to four-family home in urban and rural areas, including manufactured homes on permanent foundations.
-
Adaptability: typically offered at terms of 15 or 30 years.
-
Negotiability: interest rates are negotiated between the borrower and lender.
-
Works well with state and local agency products.
FHA-insured loans are also compatible with industry requirements for:
-
Appraisal and repair;
-
Closing costs; and
-
Lender insurance.
Lenders can take advantage of the Automated Underwriting Systems (AUS) via FHA's TOTAL Scorecard. Plus, there is similar documentation for comparable products between us and the industry, ensuring lender savings in dollars and time. <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /><?xml:namespace prefix = o /><?xml:namespace prefix = o /><?xml:namespace prefix = o />
Innovative FHA solutions such as the streamline 203(k) "buy and repair" mortgage, 85% cash-out refinance, reverse mortgage (HECM) for seniors, and basic construction-permanent or manufactured homes insured financing options are available today to meet borrowers' needs for a better tomorrow.
Now more than ever we need a sustained, coordinated industry-wide effort to strengthen the housing market for future generations. We look forward to forging a closer partnership with you and the greater lender community to achieve our goals together. www.fhamortgagetacoma.com
|
| |
|
Q
:
|
How does a no cost refinance work? |
|
A
: |
With interest rates at historic lows, many homeowners are considering refinancing. One question that seems to come up often is, should I pay closing costs or not? Here is a list of options to consider when looking at refinancing. Each option has it's benefits, so there's no one size fits all answer.
Interest Rate Points/Origination Fee
4.25% .875%
4.50% -.875% *
4.875% (-1.50%)*
* indicates a payment to your lender or broker - known as a "premium"
1. No Closing Cost Refinance - 4.875% with a 1.50% Premium Paid To Your Lender or Broker: Like the title says, it means you do not pay closing costs. The next question is who is paying them? Indirectly you are. By taking an interest rate higher than the market rate, the lender or broker can use the "Premium" in the interest rate to pay all your costs. For the purposes of this example, let's take a look at how this no cost refinance works.
Your lender or broker will be paid 1.50% of $400,000 * 1.5% = $6,000. They will then use this money and pay all your closing costs of approximately $2,500. Leaving them $3,500 in gross revenue, before their office expenses and overhead.
2. Low Closing Cost - 4.50% with a .875% Premium Paid To Your Lender or Broker: This is a combination of the No Closing Cost & Full Closing Cost Option. The lender or broker is paid their origination fees, and you are paying 3rd party costs, like title, escrow fee, credit reports, appraisal etc. In the above example your lender is being paid 400,000 * .875% = $3,500 gross revenue before their office expenses and overhead. You are responsible for the third party costs of $2,500.
3. Full Closing Costs - 4.25% with a .875% Loan Fee: In this example, you will pay the origination fee plus the 3rd party closing costs. That means you pay $3,500 loan fee + $2,500 in 3rd party fees or $6,000 total closing costs.
Now look at the monthly payments:
$400,000 Loan Amount * payments exclude taxes and insurance
4.25% = 1,967 Cost: $6,000
4.50% = 2,026 Cost: $2,500
4.875% = 2,116 Cost: $ 0.00
Compare: 4.25% v 4.875%
monthly savings: 2,116 - 1967 = 149 lower payment by selecting the 4.25% rate. Now look at the total costs divided by the savings: $6,000/149 = 40.26 months or 3.35 years to break even. That means after 3.35 years, the lower rate and paying the closing cost would have paid off.
Compare 4.875% v 4.50%
monthly savings: 2116 - 2026 = 90 lower payment by selecting the 4.50% rate. Now look at the total costs divided by the savings: $2,500/90 = 27.78 months or or 2.3 years to break even. That means after 2.3 years, the lower rate and paying the closing cost would have paid off.
Compare 4.50% v 4.25%
monthly savings: 2026 - 1967 = 59 lower payment by selecting the 4.25% rate. Now look at the total costs divided by the savings: $3,500/59 = 59.32 months or or 4.9 years to break even. That means after 4.90 years, the lower rate and paying the closing cost would have paid off.
A few other factors to consider is the loan to value ratio of the new loan to your home's value. If for example, adding closing costs to your loan puts you into a higher loan to value bracket, you may opt to go with the lower closing cost or no cost option. Or if you have to pay private mortgage insurance by adding in closings cost, you may opt to go with the low or no closing cost option.
For additional refinancing question, feel free to contact me directly at (253) 472-1500. Ask for Kevin or visit us online at www.mortgageratesgigharbor.com |
| |
|
Q
:
|
What are points and who should pay them? |
|
A
: |
Points are up-front fees paid by the borrower to obtain a better interest rate on a loan. One point equals one percent of the loan amount. And while a lower interest rate may result in a lower monthly payment, it is important to consider how long you intend to be in the loan and to compare current interest rates to historical market trends. This will help you to determine whether paying points is a worthwhile investment.
Let's look at a sample scenario. If you take out a $300,000 mortgage and decide to pay one point in order to lower your interest rate, this would translate into an up-front cost of $3,000. To keep things simple, we'll assume that paying this one point will save you $50 a month. This means it will take you 60 months to recoup the cost of that point. If you decide to refinance or sell the home before the 60-month mark, your money is lost . not to mention the opportunity cost of not having this money invested elsewhere. In this scenario, you would only benefit financially from paying points if you were to remain in the home for no less than 60 months.
It's also important to remember that interest rates run in cycles. When rates are at historical lows, it makes more sense to pay points if you plan to live in the home for an extended period of time. If it's unlikely that rates will go down in the near future, then there will be no need to refinance.
When interest rates are high, however, there is a strong likelihood that they will come down again before too long. Therefore, this is not a good time to pay points. The chances of refinancing in the near future are extremely high, and you will likely not be in the loan long enough to recoup the up-front cost of the points.
Tax deductibility is another thing to consider when choosing whether or not to pay points. For new purchases, interest from both points paid and your mortgage are tax deductible up front. For refinances, however, points are not deductible up front. Instead the deductions are spread out over the term of the loan (unless the entire loan is paid off early), making points more costly in comparison. Ultimately, there's a lot to consider when it comes to points and whether or not they are a worthwhile investment. An experienced mortgage professional will work with you to determine the best course of action based upon your specific situation. Request a comprehensive cost comparison to see whether paying points could be financially beneficial to you.
If you or someone you know would like to learn more about points and whether they should be a part of your mortgage plan, give me a call. I would be happy to assist you! |
| |
|
Q
:
|
Why use a FHA Approved mortgage broker? |
|
A
: |
|
In the past 20 years, independent mortgage brokers have had a significant positive impact on the lending industry. Today the use of a professional mortgage broker is one of the key strategies used by sophisticated Borrowers. |
|
What is a FHA Approved Mortgage Broker? A mortgage broker is an independent real estate financing professional who specializes in the origination of residential mortgage loans. Mortgage brokers normally pass the actual funding and servicing of loans on to "Wholesale Lending Sources." A mortgage broker is also an independent contractor working with (on average) as many as 40 lenders at any one time. By combining professional expertise with direct access to hundreds of loan products, your broker provides the most efficient way to obtain financing tailored to your specific financial goals. |
|
What Do Mortgage Brokers do? In the volatile home-lending market, Mortgage Brokers can serve as "police," offering their clients security, safety, and peace of mind. One of the Broker's most important functions is escorting your loan application through the entire process, constantly patrolling the component transactions for possible breakdowns. A professional mortgage broker can wade through the mountains of rate data and program options, researching current market conditions to find the most accurate and up-to-date information about cost-effective loan options. |
|
Brokers handle the Details! There are literally thousands of variables that can affect the outcome of your mortgage transaction. That's why you need a mortgage broker to act as liaison between the title and escrow company, real estate agent, lender, appraiser, credit agency, the underwriters, the processors, attorneys, and any other services which may effect your transaction. A mortgage broker also:
• Discusses and explains financing program options
• Informs you, in writing, of lock-in options
• Explains all documents of the loan application
• Explains all associated costs of the loan application
• Explains the disbursement of all loan applications
• Explains the loan process, from application to closing
• Provides you with a good faith estimate of cost and fees
• Communicates with you throughout the loan process in a timely manner
• Coordinates the final closing of your transaction
Brokers and loan officers are your resource for questions or concerns after your transaction closes. | |
| |
|
Q
:
|
When I find the home I want, how much should I offer? |
|
A
: |
Answer: Again, your real estate broker can help you here. But there are several things you should consider:
- Is the asking price in line with prices of similar homes in the area?
- Is the home in good condition or will you have to spend a substantial amount of money making it the way you want it? You probably want to get a professional home inspection before you make your offer. Your real estate broker can help you arrange one.
- How long has the home been on the market? If it’s been for sale for a while, the seller may be more eager to accept a lower offer.
- How much mortgage will be required? Make sure you really can afford whatever offer you make.
- How much do you really want the home? The closer you are to the asking price, the more likely your offer will be accepted. In some cases, you may even want to offer more than the asking price, if you know you are competing with others for the house.
|
| |
|
|
|
|
|
|