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What is the first step when looking for a home loan? |
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Most experts recommend that you should get prequalified for a loan first. By being prequalified, you will know exactly how much house you can afford. Almost all mortgage lenders now prequalify people, and many of them can even do it on the Internet. You also can do your own affordability calculations; most recent consumer books on home buying include steps to doing so, as do various real estate Internet sites. |
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How do I know how much house I can afford? |
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Generally speaking, you can purchase a home with a value of two or three times your annual household income. However, the amount that you can borrow will also depend upon your employment history, credit history, current savings and debts, and the amount of down payment you are willing to make. You may also be able to take advantage of special loan programs for first time buyers to purchase a home with a higher value. Give us a call, and we can help you determine exactly how much you can afford. Back to Top^ |
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How is a home's value determined? |
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You have several ways to determine the value of a home. An appraisal is a professional estimate of a property's market value, based on recent sales of comparable properties, location, square footage and construction quality. This service varies in cost depending on the price of the home. On average, an appraisal costs about $300 for a $250,000 house.
A comparative market analysis is an informal estimate of market value performed by a real estate agent based on similar sales and property attributes. Most agents offer free analyses in the hopes of winning your business.
You also can get a comparable sales report for a fee from private companies that specialize in real estate data. You also can find comparable sales information available on various real estate Internet sites. Back to Top^ |
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What is the difference between a fixed-rate loan and an adjustable-rate loan? |
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With a fixed-rate mortgage, the interest rate stays the same during the life of the loan. With an adjustable-rate mortgage (ARM), the interest changes periodically, typically in relation to an index. While the monthly payments that you make with a fixed-rate mortgage are relatively stable, payments on an ARM loan will likely change. There are advantages and disadvantages to each type of mortgage, and the best way to select a loan product is by talking to us. Back to Top^ |
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How is an index and margin used in an ARM? |
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An index is an economic indicator that lenders use to set the interest rate for an ARM. Generally the interest rate that you pay is a combination of the index rate and a pre-specified margin. Three commonly used indices are the One-Year Treasury Bill, the Cost of Funds of the 11th District Federal Home Loan Bank (COFI), and the London InterBank Offering Rate (LIBOR). Back to Top^ |
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How do I know which type of mortgage is best for me? |
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There is no simple formula to determine the type of mortgage that is best for you. This choice depends on a number of factors, including your current financial picture and how long you intend to keep your house. Newport Bay Mortgage, Inc. can help you evaluate your choices and help you make the most appropriate decision. Back to Top^ |
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What does my mortgage payment include? |
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For most homeowners, the monthly mortgage payments include three separate parts: Principal: Repayment on the amount borrowedInterest: Payment to the lender for the amount borrowedTaxes & Insurance: Monthly payments are normally made into a special escrow account for items like hazard insurance and property taxes. This feature is sometimes optional, in which case the fees will be paid by you directly to the County Tax Assessor and property insurance company. Back to Top^ |
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How much cash will I need to purchase a home? |
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The amount of cash that is necessary depends on a number of items. Generally speaking, though, you will need to supply:Earnest Money: The deposit that is supplied when you make an offer on the houseDown Payment: A percentage of the cost of the home that is due at settlementClosing Costs: Costs associated with processing paperwork to purchase or refinance a house Back to Top^ |
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What do I do if I get turned down for a loan? |
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Increasing numbers of loan applicants are finding ways to buy their own home despite past credit problems, a lack of a credit history or debt-to-income ratios that fall outside of traditionally acceptable ranges. Ask the lender for a full explanation, then appeal the decision in writing. Back to Top^
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What exactly is bad credit? |
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There are numerous types of credit report problems that would cause a lender to reject your application for a loan. Such problems include: missing a credit card payment, defaulting on a prior loan, filing for bankruptcy in the past seven years or not paying your taxes. Other black marks on a credit report include a judgment filed against you (perhaps for non-payment of spousal or child support) or any collection activity.
If you feel that your credit report is wrong, experts say it's best to take it up with the organization or company claiming you owe them money. But if you've been late paying your bills, regroup by paying in full and on time for six months to a year to prove to the lender that the late payments were an aberration. You can order a copy of your own credit report by calling the three major credit reporting agencies: Experian at (800) 392-1122, Equifax at (800) 685-1111 and Trans Union at (312) 408-1050. Back to Top^ |
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What if there is a credit reporting mistake on my report? |
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There is no fast and easy way to repair damaged credit that took months or years to occur. The law allows negative information to appear on an individual's credit record from seven to 10 years. Credit problems are the main reason would-be home buyers are denied a loan.
The first step to clearing up your credit is to get a copy of your credit report to make sure that the negative credit information is indeed accurate. For a copy of your report, contact one of the three major credit reporting agencies: Experian at (800) 392-1122, Equifax at (800) 685-1111 and Trans Union at (312) 408-1050.
The bureaus should provide instructions on how to read the report and how to dispute any inaccuracies it contains. If your credit report is correct, take care of any outstanding delinquent obligations first. Lenders usually won't consider any borrower who has had a delinquent payment in the past year. Back to Top^ |
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What do I do if I get turned down for a loan? |
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Increasing numbers of loan applicants are finding ways to buy their own home despite past credit problems, a lack of a credit history or debt-to-income ratios that fall outside of traditionally acceptable ranges. Ask the lender for a full explanation, then appeal the decision in writing. Back to Top^
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How does FHA work? |
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The U.S. Department of Housing and Urban Development offers a variety of loan insurance programs through the Federal Housing Administration which require approximately 3 to 5 percent cash down. FHA loan limits vary depending on the county where the property is located. FHA loans administered by HUD are originated by private lenders. For more information, contact lenders who offer FHA loans or a regional HUD office. Back to Top^
Resources:
* "FHA Forms, Booklets and Publications," U.S. Department of Housing and Urban Development Printing Branch, Room B-100, 451 7th St., Washington, DC 20410; call (800)767-7468. |
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Which lenders offer FHA loans? |
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Lenders who handle Federal Housing Administration loans typically advertise in the Yellow Pages under "real estate loans" and in the real estate sections of newspapers. FHA also supplies limited lists of approved lenders. For general qualifications and program details, see the FHA brochure, "How to Qualify for an FHA Loan." To order, write the U.S. Department of Housing and Urban Development, Printing Branch, Room B-100, 451 7th St., Washington, DC 20410; (800) 767-7468. Back to Top^ |
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