Build Your Budget
Having a clear budget is key. Answering a few questions before you begin looking will help you find the best loan option to fit your budget. Do you have a down payment? What is your income-to-debt ratio? What is your credit score? These basic answers will go a long way to making informed decisions.
+ Can You Qualify for a Mortgage?
The first question we can help you answer is if you qualify for a mortgage. One of the key factors in determining this is your debt-to-income ratio. For example, if a loan program uses a 28/36 qualifying ratio, this means you are allowed to spend no more than 28% of your gross (pre-tax) income on monthly mortgage payments and no more than 36% on total debt. Total debt includes car and school loans, credit cards, child support and alimony. So, if you earn $60,000 per year, your monthly gross income is $5,000. Under the 28/36 guidelines, your maximum monthly mortgage payment should not exceed $1,400 while your total monthly debt should not exceed $1,800.
+ How Much Home Can You Afford?
Next, you’ll need to calculate how much you can afford. For example, how much of a down payment are you prepared to make? Commonly paid in cash, the down payment is based on a percentage of the home’s selling price and is due at closing. Making a down payment of 20% or more can save you money and enable you to avoid the cost of mortgage insurance. If you are unable to make a 20% down payment, many other affordable mortgage programs exist. - See more at: http://www.primelending.com/budgeting-for-a-home#sthash.jnP8UU7a.dpuf
Plan Your Payments
Determining how much you can comfortably afford is important. Typically referred to as PITI, your monthly mortgage payment consists of Principal, Interest, Taxes and Insurance.
- The initial amount you borrow to purchase the home and the remaining outstanding balance throughout the life of the loan is the PRINCIPAL.
- The charge for borrowing the money is the INTEREST.
- TAXES are assessed by your local government and typically paid to your lender as a portion of your payment and collected in an escrow account. The lender will then pay them to the government upon their due date.
- Established in a similar fashion as your taxes, INSURANCE is collected by the lender and also put into an escrow account. Your insurance comprises two prominent types of coverage. Homeowner’s insurance provides you with coverage for damages inflicted by hazards such as (but not limited to) wind and fire. Mortgage insurance typically is required for those making a smaller down payment on their loan; it provides protection for your lender in the instance that you are not able to fulfill the mortgage requirements and repay your loan.
Your Interest Rate
One of the biggest concerns for homeowners is their mortgage interest rate. That’s because it directly affects the monthly payments for the life of the loan. Because of this, homebuyers search for steps they can take to obtain the lowest rate available. We can help you find the best interest rates for you.
+ Float Down Interest Rate
The float down option gives you the ability to reduce your interest rate if the market improves after you lock in your rate. The float down option is applied to the interest rate only and is based on the initial lock period; it may be utilized with all conforming loans – both government and conventional.