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Your credit report is used by banks and other lending institutions to determine
your creditworthiness. The report can
be a factor in a lending institution's
decision to approve or decline your mortgage
application.
You should review your credit report for
any errors before submitting your mortgage
application.
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You need to analyze how much house you
can afford before blindly submitting
an application with too high of a mortgage
amount.
- for a quick estimate on how much home you can afford.
applicants
living in markets where home prices are high will consider minimum-payment mortgage plans to be within their income affordability range.
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Additional monthly costs such as real
estate taxes, hazardous insurance, and
other home ownership related fees can
add to your total monthly payment and
reduce the amount of home your can afford.
Many times buyers ignore these costs when
figuring how much of a home they can afford.
These costs are considered in your capacity
ratios that lenders use to approve your
mortgage application:
- housing ratio
- and income ratio
click here for information about escrow payments
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Your capacity to
repay the mortgage loan is a
key factor that lenders use to qualify
you for a mortgage loan. These ratios determine the level of debt you can consume based on the amount of income you have.
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Most lenders require
at least 5% of the home purchase price plus Private Mortgage Insurance (unless you qualify for government sponsored
programs).
But to avoid Private Mortgage Insurance
(PMI), which
can add to your total monthly cost,
you will need at least 20% down.
Your down payment can be in the form
of cash or the resale equity value of
a prior home.
- cash for a down payment:
you need at least 20% of the home purchase price to avoid PMI or other fees
- cash for closing costs:
you should estimate about 3-7% of the home purchase price
having enough money for a down payment and closing costs prevents many first-time home buyers from entering the market. There are 100%+ LTV mortgages that allow buyers to get into homes without the necessary cash on hand. Link to our Mortgage Loan Center for information on zero-down mortgages
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This will
help figure out what
parameters you need to change to fit within your budget and income
ratios (discussed above).
the amount of available cash
/ equity is the cash you have on hand
for your down payment and closing costs.
Equity refers to the resale equity value
of your existing home if any, that will
be available to you once you sell your
home.
- Closing costs is calculated as percentage
of the estimated purchase price of the
home — this percentage can range
between 3-7% depending on your location
and number of points.
- The American
Housing Survey shows that the median
taxes paid averaged $10 per $1,000 in
home value. The property insurance paid
averaged $30 per month.
- You can lookup your property tax assessments
by community: www.statelocalgov.net
Any percentage LTV
that is greater than 80% may require
private mortgage insurance, which
can add to the total cost of your loan
— if your LTV% (calculated below)
is greater than 80%, enter 0.005 in
the PMI field and recalculate
you
can find information about PMI
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- There is no obligation on you to obtain
a loan from that lender, nor does it
obligate the lender to provide a mortgage
loan.
The lender will analyze your credit
position, current income, and outstanding
debts to give you a reasonable estimate
of your borrowing amount.
You may begin your pre-qualification
search through our national network
of lenders and brokers: click
for the mortgage application
before you begin your lender search, have on hand the mortgage comparison sheet to keep track of your loan quotes:
open and print the mortgage comparison sheet
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mortgage
101:
review how mortgage loans work and the
players in the mortgage lending business
understanding
escrow:
review the total cost of a mortgage
loan and calculate escrow payments
getting
qualified:
discusses the parameters lenders use
to qualify an applicant for a mortgage
mortgage
management:
discusses how to manage your mortgage
loan with tips on prepaying your mortgage
early
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There are fixed rate
loans, adjustable loans, special financing
loans, and a number of mortgage loan
variations. We have notes on
each one of them.
Empower yourself with knowledge to see which one will work for you:
fixed-rate
loans:
fixed 30-Yr and 15-Yr loans
adjustable
rate loans:
adjustable rate mortgages and notes
on the components
hybrids
/ combo loans:
combination of fixed rate and adjustable
rates
interest-only loans:
pay only interest on your mortgage loan to afford a higher-priced home
minimum-payment loans:
where the initial payments are low to help you build equity value
zero/low
down payment loans (100+ plans):
mortgage loans for homebuyers with limited down
payment - closing costs
balloons and other
special loans:
balloon mortgages, pledge-asset mortgages,
RIMs, others
jumbo mortgage loans:
non-conventional jumbo loans for expensive homes
home construction loans:
special financing for home construction
government
loans:
FHA, VA, and RHS loans
less
than good credit loans:
notes for
home buyers with less-than-good-credit
reversible mortgage loans:
mortgage equity loans for retired home owners
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Sample of the average national weekly rates posted every Thursday by Freddie Mac:
Your actual mortgage
rate will be determined by your
overall credit score, your credit ratios,
your location, and your negotiation
skills to shop best rate.
Search rates and view negotiating steps
for best rate and term: how best to negotiate mortgage rates
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With the confidence to negotiate best
product and terms. Three important notes:
-
to finalize your mortgage application:
see mortgage application list
use this sheet to shop and compare lenders:
open lender comparison sheet
- submit your
request to multiple lenders
use our nationwide network
of lenders to negotiate best rate
and term: start
your mortgage application
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compare the offers
and terms from multiple lenders. You should have at least 3-4 offers.
- Select 2-3 lenders of your choice
and begin negotiating best rate,
terms, points, and closing costs. Consider the various mortgage loan products to design a mortgage plan that works for you.
- Depending on your credit strength, you
can negotiate a reduction in rate or
points, closing costs, terms, penalty
clauses, etc. If you have a strong credit
rating, lenders will work hard to keep
your business.
click for information
After you select and sign the lending
agreement with your lender of choice,
your lender (or closing agent) will arrange closing where the title
ownership of the home transfers to you.
click
here for closing and settlement
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