1. How do I get prequalified?
Your mortgage specialist will need for you to fill out an application and check your three credit scores. Once you have qualified by your scores, your income will need to be determined to verify how much of a loan you can qualify for. Credit score requirements constantly change but for the most part you will need a 640 middle score to qualify.
2. How much can I afford?
All underwriters have debt to income ratio guidelines they must go by. Debt includes mortgage note and all other payments that appear on your credit report. As a general rule you are allowed 45 to 50% of your gross income to qualify with. While you may go up to that percentage this doesn’t mean you will want that note that comes with it.
Set a comfortable monthly note and stick with it. Don’t become house poor.
3. How much down payment must I have?
There are certain loan types that will not require a down payment or you may qualify for down payment assistance
through grants. These are usually reserved for lower income families. FHA requires as little as 3.5% and conventional
loans can require as little as 5% if you credit score qualify.
4. How do I calculate my monthly payment?
There are several online mortgage calculators available. They are easy to use and will help you get the principal and interest payment (P & I). Don’t forget that there is more to the payment than P & I. You must calculate property
taxes and home owner’s insurance and in some cases you may also have Mortgage Insurance (MI or PMI).
5. What is mortgage insurance?
If you borrow more than 80% of loan to value (contract price on purchases and appraised value on refinances), most lenders will require this insurance. Mortgage insurance is a policy that insures the lender against any losses on the property due to foreclosure. If you are below 80%, the lender views this as a lower risk so that if they foreclose, there is enough room to resale without taking a loss.
6. Are there penalties if I sell or refinance my home?
Consult your mortgage professional about the type of loan you are getting. Almost all fixed rate and Adjustable Rate Mortgages (ARM’s) no longer have a prepayment penalty. That is not always the case so be sure to see it in writing.
7. Should I get a fixed rate or an adjustable rate?
In spite of all that has been said about adjustable rate mortgages, they are not necessarily bad as long as you
understand how they work. ARM’s usually have a lower interest rate and are actually fixed for a period of time. After
the fixed period is over, they then adjust based on the type of ARM, but usually once a year. They also have “caps”
on them so that they cannot go over a certain interest rate during the life of the loan. Consult your mortgage
professional about the terms but if you are not comfortable, get a fixed rate. Fixed rates will not adjust any during
the life of the loan.
8. How long will it take to close my loan?
By law you cannot close until 7 days after making application in person and 10 days after making application by phone or internet. You should still allow 3 to 4 weeks at a minimum.
9. Should I shop around?
Absolutely. Just remember, someone quoting you a lower rate doesn’t necessarily mean better service. If you find a mortgage professional you are comfortable with, stay with them. Current rates are available online so you can always check to see if they are at market rate.
10. Where do I start?
Ask around and then check online. Friends that have purchased or refinanced before can give you great insight.
There are also lots of resources online that show feedback. If you are working with a Real Estate professional, seek
their counsel also.
The Ashton Real Estate Group of RE/MAX Advantage
The #1 Real Estate Team in Tennessee and #4 RE/MAX team in the world!