Q. How do I know how much I can afford
when purchasing a new home?
A. Typically, an Underwriter would approve your loan request
if your new housing payment did not exceed 32% - 35% of your
gross monthly income and your total debts (including car
loans, minimum credit card payments etc.) did not exceed 42% -
45% of your gross monthly income.
Q. What is the minimum down payment required on the
purchase of a home?
A. There are lenders who will accept as little as zero down
payment . FNMA and FHLMC accept loans with as little as 3%
down. The typical first time buyer will put down either 5% or
10%.
Q. Why are your rates better than what a bank might offer?
A. We sell to as many as twenty different institutions who
offer us loans at wholesale rates. In most situations, we can
offer those same loans at a discount to you.
Q. What is the difference between an ARM (Adjustable Rate
Mortgage) and a Balloon Mortgage?
A. An ARM loan has an initial fixed rate period after which it
adjusts (usually annually) according to an index plus a
margin. The ARM loan has year to year and lifetime caps which
provide the borrower with a predetermined maximum interest
rate. The Balloon Mortgage is fixed for a preset time period
(usually 5 or 7 years) and then either becomes due in full or
may have a refinance provision. There is no rate cap guarantee
associated with a Balloon Mortgage.
Q. What is Private Mortgage Insurance, (PMI) and under what
circumstances do I need it?
A. PMI is an additional insurance required by most lenders if
your first mortgage loan exceeds 80% of the lower of the
purchase price or appraised value of your home. This borrower
paid fee is way to make the risk of your loan similar to one
with a 20% down payment.
Q. What items are considered closing costs?
A. Closing costs include but are not limited to fees for
appraisal, credit report, tax service, processing,
underwriting, document preparation, flood certificate,
funding, title insurance, title closing, recording, transfer
tax, attorney.
Q. What are lender escrows?
A. In Illinois, lender escrows are monies collected by the
title company at closing to pay for current interest and
future real estate taxes, home owners insurance and PMI (if
necessary).
Q. What documents are usually asked for when applying for a
mortgage?
A. Usually the underwriter needs a copy of your most recent
W2, most recent 30 days of pay stubs and a recent month’s bank
or brokerage statement verifying your ownership of enough
funds to cover the down payment and/or closing costs and
escrows. In addition, If you are self employed, the most
recent two years of federal tax returns are required.
Q. What is a No Doc or No Income loan?
A. The NIV (no income verification) loan refers to a limited
documentation process where neither pay stubs, W2’s nor tax
returns are submitted to the underwriter for their
consideration when approving your loan. The underwriter relies
more on a review of your credit history, credit scores, home
appraisal and savings pattern to reach a conclusion.
Q. How long does the process take, from start to finish?
A. Some loans can take only a few days to complete, but the
usual time frame is three to four weeks. |
