Common Questions About Lending
Getting a mortgage doesn’t have to be scary. By doing your research and working with your lender, you’ll be in your new home in no time.
When you buy a home or refinance your first mortgage and have less than 20% equity in your home, mortgage insurance (also referred to as private mortgage insurance or PMI), is generally required. The mortgage insurance premium is typically included in your monthly mortgage payment. Some programs allow for the PMI to be cancelled when your LTV (loan to value) reaches 80%.
When your mortgage payment includes additional annual expenses like your homeowners insurance and property taxes, your lender can add the monthly portion of each of those accounts to your mortgage payment. That money is held in an escrow account that is managed by a third party to make sure those costs are paid on time. Pretty nice, right? One less thing to remember!
Your debt-to-income ratio compares your gross monthly income with how much you owe each month (e.g. your estimated mortgage, credit cards, student loans and car loans). To get this ratio, divide your monthly expenses by your gross monthly income. This number turns into a percentage and becomes your debt-to-income ratio. Lenders typically want the number to be below 43%, but some programs allow it to be higher. I can help you determine your debt-to-income ratio and review which loan programs you may qualify for.
Loan-to-value, sometimes referred to as LTV is a term used by mortgage lenders to show the ratio of a loan or loan balance to the value of a property that is purchased or refinanced. The term is commonly used by mortgage lenders, banks, and other financial institutions to represent the ratio of the mortgage lines as a percentage versus of the total appraised value of real property.
An appraisal is an unbiased professional evaluation of the value of a property. If you need a mortgage to buy a new home or take cash out using a refinance, a professional appraisal will usually be required.
There may be tax benefits associated with owning a home, such as deductions for mortgage interest payments, real estate taxes and mortgage points. Tax credits may also be available for low-to-moderate income homeowners. Check with your tax advisor for a full list of deductions.
An interest rate lock guarantees your rate. After you are under contract for a home purchase and your official loan program is determined, your mortgage loan originator will “lock-in” your interest rate. This means that your rate has been confirmed and will no longer be subject to market changes that could increase your rate. This prevents your rate from rising to the point where it could price you out of being able to afford or qualify for the home you have under contract. Typical rate locks are 30 days in length, but if for some reason you have a longer closing window on your purchase contract, your mortgage loan originator can choose a 45 to 60-day lock period for your loan, depending on your circumstances.
Offers are not just about the money!
– Your agent needs to be personable to be able to build rapport with the other agent. Agent to agent rapport equals closing.
– They will include their lenders into the offer conversation
– They will find out what the seller’s primary needs are, not what the buyer dictates