Frequently Asked Questions
How Large of a Mortgage Will I Qualify For?What is APR?
What is PMI?
What is considered a Closing Cost?
What is Prepaid Interest?
What is Good Faith Estimate?
What are Underwriting Conditions?
What is PITI?
What are the three greatest obstacles to homeownership?
What is a credit score?
How
Large of a Mortgage Will I Qualify For?
Historically
speaking, you
can typically qualify for a loan amount equaling two to two and a half
times of
your annual household income. So, if you and your spouse have a total
income of
$50,000, you’ll probably qualify for a loan of $100,000 to $125,000.
This
figure is variable depending on credit history, Debt to income, and
employment
history.
APR stands
for Annual
Percentage Rate. This is described by law and includes costs as if they
were
part of the interest on the loan amount. The APR can be found on the
Truth in
Lending Disclosure (once the loan has been applied for). Because the
APR shows
the overall cost of the loan as a percentage, this is the most useful
number to
use when comparing competing loans.
APR is not
used to calculated
monthly payments and should not be confused with the actual interest
rate (the
rate is used to determine the monthly payment).
Private
Mortgage Insurance
(PMI) could be required by the lender if the down payment constitutes
less than
20% of the purchase price. This insurance is used as a precaution for
the
lender in the event of loan default by the borrower. The monthly
premium
(figured into the monthly payment) is dependent on the loan amount,
type of
loan, and down payment.
PMI costs
usually range from
0.15 to 2.5% of the loan. Usually, two payments in advance are required
at
closing which is then put into escrow account.
What is Considered
a Closing Cost?
Closing costs
are accrued for
financing the purchase of a new home. Some of these costs may be paid
off by
the seller if it is negotiated during the purchase agreement. Costs can
include, but are not limited to:
- Underwriting Fees - Inspection Fees - Document Prep Fees
- Escrow of Insurance and Taxes - Title Insurance and Taxes - Flood Certification Fees
Prepaid
interest is interest
accrued on the loan charged to the borrower at closing to pay for the
cost of
borrowing for a partial month. For example, if a loan closes on the 15th
of the month and the first payment is due 45 days later, the lender
will charge
the borrower for 15 days prepaid interest.
This is an
estimate of
settlement costs, such as homeowners insurance, appraisal, and prepaid
interest. This written estimate is provided to the borrower within
three days
of submitting a loan application with a verified property address.
What are
Underwriting Conditions?
Underwriting
conditions are
documents necessary to verify information submitted on a loan
application.
These conditions must be obtained to receive final approval for the
loan.
This term is
used to refer to
the monthly payment when the loan principal, interest, property taxes,
and
insurance is combined into one single payment.
What are the three
greatest obstacles to homeownership?
The 3
greatest obstacles to homeownership are poor credit, a lack of down
payment money and procrastination. With a
little work all can be overcome successfully.
A credit score is a three-digit number which gives lenders and others an indication of how likely you are to repay a loan.
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