Q: Is 20% of the
price of a new home required as a down payment?
A: There is no set
amount that you must put down. You might be surprised to learn that many
first-time home buyer programs require nothing down. In the past, mortgage
lenders most often did require a 20% down payment. But in the last fifteen
years, we've seen the introduction of many loan programs designed to help more
people buy homes. As a result, mortgage loans can now be tailored to fit each
home buyer's needs and financial resources.
Q: Do mortgage
lenders lend money to young people?
A: Mortgage lenders
must treat everyone over the age of 18 equally. Age cannot be a determining
factor in the loan approval process. In fact, over half of new home mortgages
are made to people under 35. Many prospective home owners worry that they must
fit a particular profile in order to qualify for a loan. They worry that
they're not the right age, that they don't have the right education or the
right job, that they don't speak the right language. The fact is, among all the
things that mortgage lenders look at, the most important - whether you're 23 or
76 - are these: your credit history, your income compared to the debt you're
currently carrying (debt-to-income ratio), and how much do you have in savings
(down payment and reserves).
Q: Are monthly
home payments more expensive than rent?
A: In many cases,
mortgage payments can be even less than rent payments. Ask me about my diverse
range of mortgage products that can help reduce your monthly payment.
Q: Is there a
minimum income level to qualify for a mortgage?
A: No. Every
applicant qualifies for a different loan size based on their individual
situation. There is no set minimum income requirement for mortgage
qualification. Fortunately, it's not hard to take the guesswork out of knowing
whether you can qualify. Before you even start looking for a house, contact me
and I can work up a full pre-qualification so that you know exactly how much
mortgage you may quality for.
Q: Will one late
credit card payment or loan default disqualify me from getting a mortgage?
A: Not
necessarily. If you have less than perfect credit, I have programs to meet
your needs. Late payments (especially those under 30 days) should by no means
automatically disqualify you from getting a mortgage loan. Each loan is looked
at individually, and is based on your credit quality, your debt-to-income
ratio, and the amount of down payment (for a purchase) or equity you have (in a
refinance).
Almost everyone at one time or another has forgotten to pay a bill on time, or
has had trouble making a payment -- mortgage lenders know this. Many people
find themselves in difficult financial situations, often because of illness,
divorce, or temporary unemployment. If you can demonstrate that the problem is
in the past, and you have been able to re-establish a good track record for a
sufficient amount of time, you may be in a good position to get a mortgage
loan. There may be a reasonable explanation, so speak to your lender honestly
and openly about the situation. It's important to remember that lenders don't
just look at you past history, but also at your ability and willingness to pay
in the future.
Q: What is a FICO
score?
A: A FICO score is a credit
score developed by Fair Isaac & Co. and is used as a method of determining
the likelihood that credit users will pay their bills. The credit scoring
companies use complex algorithms based on millions of credit users to factor a
score that helps lenders determine the credit risk of an individual borrower.
These algorithms are closely held secrets by the three major credit bureaus
(Experian, Equifax, and Trans Union), so it is very hard for someone to know
exactly what items on their credit report are causing their credit score to
vary. Due to the variance in these computational models, most lenders pull a
three-way credit report (one report from each repository) and they use the
middle score of the three. Although we don’t know the exact algorithms, we do
know that several factors are evaluated, such as:
·
Negative
credit information such as bankruptcies, charge-offs, collections, etc.
·
Late
payments
·
The
amount of time credit has been established
·
The
amount of credit used versus the amount of credit available
·
Length
of time at present residence
·
Employment
history
Q: What is the
difference between a Home Equity Line of Credit and a Home Equity Loan?
A: A Home Equity Loan is a second
mortgage that has a fixed interest rate and fixed payment term (you pay $X per
month for Y months and your loan is paid off or a balloon payment comes due).
A Home Equity Line of Credit (HELOC) is a variable line of credit (kind of like a
credit card) that you can draw against, and then pay back, as needed. They
typically have a ‘draw’ period of about 10 years, and after the 10 years,
whatever you owe will convert to a fixed payment/fixed interest rate loan for
about 15 years. Some of the newer HELOCs are allowing you to ‘lock’ a portion
of your line at a fixed interest rate and fixed period (ex: if you have a
$100,000 HELOC, you can lock $20,000 at one fixed interest rate with fixed
payments, and the other $80,000 will continue to have the variable rate and
draw features).
