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7 Most Frequently Asked Questions About Financing

If you're thinking about making your next big purchase, you're going to want to read this!

1. How much of a loan do I qualify for?

There are a few different ways you can find out how much of a home loan you qualify for. An affordability calculator can be a great first step and give you an estimate on where you stand. But there are some other things to consider when calculating this number. You can use the 31/43 Rule for Affordability. This rule states that your mortgage payment should not be more than 31% of your pre-tax income and your total debt should not exceed more than 43% of your pre-tax income. Getting pre-qualified is also an important step in determining how much you can afford. The broker will assist you through this process and assess your finances to determine how much they can preapprove you for, as the 31/43 rule can be exceeded depending on the circumstances.

2: How can I review my credit score?

You are entitled to one free credit report every 12 months from each of the three credit reporting companies: Experian, Equifax, and TransUnion. It is important to be cautious of websites that claim to offer free credit reports if you make a purchase or order products through them. When you receive your credit report, you’ll want to make sure everything is accurate before you move forward when buying a home. To get your free credit report online, go to www.annualcreditreport.com.

3: What’s the first step in buying a house?

The first step to buying a house is getting pre-qualified and pre-approved for a mortgage. This is where you will find out how much you can afford based on your financial history. We can help you with that!

4: What do I need to qualify for a loan?

The following information is usually required during the loan process:

• Your Social Security Number

• Current pay stubs and last two years' W2's, if self-employed, your tax returns for the past two years.

• Bank statements for the past two months

• Investment account statements for the past two months

• Retirement account statements for the past two months

5: What’s the difference between a fixed-rate and adjustable-rate mortgage?

A fixed-rate mortgage is a mortgage interest that is fixed throughout the entire term of the loan. An adjustable-rate mortgage is a mortgage with an interest rate that changes during the life of the loan according to movements in an index rate. Sometimes called AMLs (adjustable mortgage loans) or VRMs (variable-rate mortgages).

6: How much should I put down?

A down payment is important to consider early in the home buying process. A down payment is part of the purchase price of a property that is paid in cash and not financed with a mortgage. The down payment is dependent on the purchase price of your home and loan program. The percentages can vary based on the loan program and start as low as 0% down, but typically range from 3.5% to 20%.

7: What are the costs associated with getting a mortgage?

There are several different costs you will pay when receiving a mortgage and it’s important to be aware of them before starting the process. Some are related to the actual mortgage and make up the price of the loan. A mortgage can be paid in two ways: upfront and over time. Your mortgage is a monthly payment and contains four parts: principal, interest, property taxes, and homeowners’ insurance. The upfront costs that will need to be paid are the origination and lender charges, points, third-party closing costs, taxes and government fees, and prepaid expenses and deposits.