Home Financing Tips

Three Factors Determining How Much Can You Afford

1) Qualification for the Mortgage

Lenders may require that your monthly payments range between 28 – 44% of your monthly income. The percentage will depend on the borrower’s credit rating. Your monthly mortgage payment to the lender will consist of:

§  Principal on the loan

§  Interest on the loan

§  Property taxes

§  Homeowner’s insurance

2) Down Payment

Most home loans today require an upfront, or down payment, between 3.5 – 10%. If you are able to pay more upfront, you may be eligible for lower interest rate loans, and shorter loan periods.

3) Closing Costs

Additional fees and costs associated with loan processing and closing are required to be paid at the final closing, unless you are able to include them in your financing. Typically, closing costs amount to between 2 – 5% of the purchase price (not the loan amount.)

Process of Funding

1) Financial Pre-Approval

§  Application and interview with a bank or other mortgage loan company

§  Buyer provides pertinent documentation including verification of employment

§  Credit report is requested

§  Appraisal scheduled for the current home owned, if any

2) Underwriting

§  Loan package is submitted to an underwriter for approval

3) Loan Approval

§  Parties are notified of approval

§  Loan documents are completed and sent to the title

4) Title Company

§  Title exam, insurance and title survey conducted

§  Borrowers come in for final signatures

5) Funding

§  Lender reviews the loan package

§  Funds are transferred by wire