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What is a downpayment and how much do I need?A down payment, or “down,” is the cash you pay upfront to get a mortgage. The down is deducted from the total amount of your home loan. To determine out how much down you need, first start with the type of loan you are applying for. Such as, a conventional loan can require as little as 3% down, an FHA loan is 3.5% down, and a VA or USDA may be no money down. The more money you put down, the less your loan amount will be, therefore, the less your monthly mortgage payment will be.
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What are closing costs and how much do I have to pay?Closing costs are the charges you are required to pay before your mortgage is completed and fully funded. The average home buyer will pay anywhere between 2% and 5% of the loan amount in closing fees. Such as, if your home loan is $250,000, you could pay anywhere between $5,000 and $12,500 in closing costs. You will receive your closing costs in a Loan Estimate provided by your Mortgage Advisor, after you apply for your home loan and in the Closing Disclosure document that will be provided before the official closing day.
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Do I need good credit to get a mortgage?It is possible to get a conventional mortgage with a credit score as low as 620 and an FHA loan with a credit score of at least 580. Remember, the lower your score, the higher your interest rate will be.
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How is my mortgage payment determined?Depending on the loan type, the length of the loan, and how much down you pay, there are typically three or four parts that roll into your monthly mortgage payment: Principal: Amount borrowed for your home loan. Interest: Interest rate charged on the original amount you borrowed for your home loan. Taxes: Annual property taxes. Insurance: This includes homeowner's insurance and any other hazard insurances you are required to have, such as flood or hurricane insurance. If you put less than 20% down on a conventional loan, this can also include private mortgage insurance (PMI), and if you have an FHA loan this could also include a mortgage insurance premium.
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Can I get a mortgage if I am self-employed?Yes! You will need to provide documented evidence of an active income. You may also be asked to provide documentation proving the stability of your business.
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Should I get a fixed-rate or an adjustable-rate mortgage?About 90%+ of home loans in today’s market are fixed rate loans. The number of home buyers choosing to go with an adjustable-rate mortgage (ARM) varies depending on what the market is forecasted to do. An adjustable-rate mortgage can be risky because your interest rate will fluctuate over time, after an initial fixed period, which means your monthly payment will also go up and down. Most ARMS start at a lower interest rate when compared to a fixed-rate mortgage, but will then go up to a much higher interest rate.
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What does it mean to lock or cap your interest rate?When your mortgage advisor suggests you lock your interest rate it means you are guaranteed today’s mortgage interest rate for up to 90 days. If the interest rate drops, you are still loced into the rate at the time you locked.This provides you with the opportunity to protect yourself from fluctuating interest rates over a 90 day period. In order to keep that interest rate, you must close the loan before the end of the 90 day period. If you are ready to purchase a home in the next three months it may be strategic to secure a low interest rate if you believe it can save you money. If you don’t close on a home in that first 90-day period, you can reset your rate for another three months.
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What documents do I need to get a home loan?You will be asked to provide many personal financial documents including income verification (such as the last two years’ tax returns, W-2s, 1099s, pay stubs, etc.), driver’s license and social security card, bank statements, proof of funds to close, and more, per the request of your Mortgage Advisor and the Underwriter. If the time to find a home takes longer than expected, you may be asked to provide more recent documentation again.
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What is pre-qualification?A lender can say you are “pre-qualified” based on information you provide initially. It is not considered verification of your income and assets. This may be the quickest and easiest option, but you are not actually approved for to finance a home loan.
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What is pre-approval?A pre-approval takes more time than a pre-qualification, as you will be required to submit your financial documents to your lender for review. A standard pre-approval can help you determine how much you can afford before you start looking for a house, although it does not mean a mortgage underwriter has reviewed your file, resulting in a less reliable approval.
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