Huron Valley Financial has answers to your lending questions.
We've provided these frequently asked questions for your
convenience, but we invite you to contact any of our loan officers
for a conversation or one-on-one counseling on how to finance
your dream – whatever it may be.
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- Tax deductions
- More stable housing costs
- Appreciation on your investment
- Gain home equity
- You control your property
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Only you know if you are emotionally ready to buy a home. But
in order to determine if you're financially ready, ask
yourself these questions:
- 1. Do I have a steady source of income?
- Do I pay my bills on time each month?
- Do I have few outstanding long-term debts, like car payments and student loans?
- Do I have money saved for a down payment?
- Do I have the ability to pay a mortgage every month?
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Do you have children? If so, you
may want to consider the quality and location of the local schools.
Do you depend on public transportation? Do you want to be within
walking distance of stores and shops? Would you prefer the peace
and quiet of a rural community?
The main advantage of a new home
is - it's new! It has new appliances, new plumbing, a
new roof, boiler, electrical system, etc. With a new home, you
shouldn't have to spend money on repairs anytime soon, and most
come with five or ten year warranties.
A resale home has had at least
one owner. You're likely to find repairs or alterations that
you'll want to make prior to moving in. You'll want to consider
them if you decide to make an offer on the home.
Are you handy at do-it-yourself
repairs? Buying a fixer-upper can be a good way to own a home
which would otherwise be out of your price range.
Another option in finding a better
price is a foreclosure home. Foreclosures often offer decreased
prices, closing cost assistance, quick closing incentives, low
down payments and special loan programs. If you're interested
in this type of home, find a real estate agent who specializes
in foreclosures.
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There are two commonly accepted guidelines used by lenders to
help determine your ability to make mortgage payments.
- Your monthly housing costs (including mortgage payments,
property taxes, homeowner and mortgage insurance, and homeowner's
fees) should total no more than 28% of your monthly gross (pre-tax)
income. Your income includes regular pay from your job, funds
from a part-time or second job; retirement, VA and Social Security
benefits; disability; welfare and unemployment benefits; alimony
and child support.
- Your monthly housing costs plus other long-term debts such
as payments on car loans, student loans or other installment
debts (with more than 10 months to repay) should total no more
than 36% of your monthly gross income.
Depending on your income, you may qualify for special loan
programs that can enable you to apply for a larger mortgage
than you would normally qualify for under these guidelines.
Visit our FREE LOAN CALCULATORS
for a quick snapshot of financing simulations: determine how
much home you can buy, compare rent vs own, calculate mortgage
payments, debt consolidation, tax savings, early payment, ...
and much more!
(A very handy worksheet, the "Fannie Mae Home Mortgage Qualifying
Worksheet," (as well as an online calculator version) can be
found on the Fannie Mae website: www.fanniemae.com)
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Before you begin your home search, it's a great idea to
secure pre-approval.
- Pre-approval is a lender's actual commitment to
lend to you.
- It gives you a definite idea of what you can afford.
- It shows sellers that you are serious about buying.
- You'll be able to make an offer as soon as you
find the right house, which is especially important if you aren't
the only interested buyer.
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To begin the pre-approval process, you'll need to assemble
the following financial records for your lender:
- Pay stubs for the past 2-3 months
- W-2 forms for the past 2 years
- Information on long-term debts
- Recent bank statements
- Tax returns for the past 2 years
- Proof of any other income
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We will consider your personal situation when determining the
best loan program for you. Answering these questions will help
narrow our search:
- 1. Do you expect your finances to change over the next few years?
- Are you planning to live in the home for a long period of time?
- Are you comfortable with the idea of a changing mortgage payment amount?
- 4. Do you wish to be free of mortgage debt before your children enter college or you retire?
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Some of the basic loan types we will consider include:
- Payments remain the same for the life of the loan.
- 5- or 30-year repayment terms.
- Advantages for this type of loan include predictability and
housing costs that remain unaffected by fluctuating interest
rates and inflation.
- Payments increase or decrease on a regular schedule with changes
in interest rates. The increases are subject to limits.
- BALLOON MORTGAGE: Very low rates for an initial time period
(5, 7, or 10 years). When time has elapsed, the balance is due
or refinanced.
- TWO-STEP MORTGAGE: Interest rate adjusts only once and remains
the same for the life of the loan.
- ARM linked to a specific index or margin
The advantages of an ARM include a low initial interest rate
and therefore lower monthly payments. This may allow the borrower
to qualify for a larger loan amount.
You may elect to apply for an ARM if you are confident that
your income will increase steadily over the years, if you anticipate
a move in the near future, or if you are unconcerned about potential
increases in interest rates.
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Every loan has a repayment term, usually 15 or 30 years. They
offer different advantages.
In the first 23 years of the loan,
more interest is paid off than principal, meaning larger tax
deductions. As inflation and costs of living increase, mortgage
payments become a smaller part of overall expenses.
The loan is usually made at a lower
interest rate. Equity is built faster because early payments
pay more to principal.
Additionally, there are affordable mortgage options available
only to first time homebuyers. These help those borrowers who
don't have a lot of money saved for the down payment and
closing costs, have no or a poor credit history, have extensive
long-term debt, or have experienced income irregularities.
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Closing costs are usually made up of the following:
- Attorney's or escrow fees (yours and your lender's)
- roperty taxes (to cover tax period to date)
- Interest (paid from date of closing to 30 days before first monthly payment)
- Loan origination fee
- Recording fees
- Survey fee
- First premium of mortgage insurance (if applicable)
- Title insurance (yours and your lender's)
- Loan discount points
- First payment to escrow account for future real estate taxes and insurance
- Paid receipt for homeowner's insurance policy (and fire and flood insurance if applicable)
- Any documentation preparation fees.
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- You'll present your paid homeowner's insurance
policy or a binder and receipt showing that the premium has
been paid.
- The closing agent will then list the money you owe the
seller (remainder of down payment, prepaid taxes, etc.) and
the money the seller owes you (unpaid taxes and prepaid rent,
if applicable).
- The seller will provide proofs of any inspection, warranties,
etc.
- You'll read through all documentation. Once you
are certain you understand it, you'll sign the mortgage
and a mortgage note.
- The seller will give you the title to the house in the
form of a signed deed.
- You'll pay the lender's agent all closing
costs and he or she will provide you with a settlement statement
of all the items for which you have paid.
- The deed and mortgage will then be recorded in the state
Registry of Deeds and … Congratulations! You're
now a homeowner!
