#mortgage #realestate #realtor #mortgagebroker #home #realestateagent #househunting #newhome #property #investment #firsttimehomebuyer #mortgagelender #refinance #finance #homeloans #broker #loans #homeloan #forsale #homesforsale #credit #realtorlife #creditrepair #loanofficer #mortgages #homesweethome #dreamhome #realty #loan #creditscore #money #homebuyers #housing #mortgagelife #homeownership #house #mortgagerates #lender #listing #business #mortgagetips #homebuying #entrepreneur #justlisted #homebuyer #realtors #mortgageloans #lending #realestatelife #success #homeowner #mortgagespecialist #mortgageloanofficer #financialfreedom #homesale #insurance #milliondollarlisting #firsttimebuyer #downpaymentassistance #mortgagebrokers #creditcards #creditrepair #localbanks #mortgagebroker #mortgages #mortgagelender #mortgageloans #mortgagebrokers #mortgageloanofficer #mortgagerates #mortgagetips #mortgagepro #mortgagespecialist #mortgageagent #mortgagebanker #mortgagelending #mortgagelenders #mortgageadvisor #mortgageadvice #mortgageexpert #mortgageloan #mortgagefree #mortgagehelp #prestamoshipotecarios #bancos #prestamos #prestamosparaextranjeros #itinmortgage
- What should I know about buying a home?
- How much house can I afford?
- Why should I refinance?
- What are the costs of refinancing?
- What kinds of mortgages are available?
- What is a Fixed Rate Mortgage?
- What is an Adjustable Rate Mortgage?
- What is a VA Loan?
- What is a FHA Loan?
- How can I save on a Fixed Rate Mortgage?
- What determines the cost of a mortgage?
- What is a Private Mortgage Insurance?
- What should I ask my lender?
- What documents will I need for my loan application?
- What is involved in the closing meeting?
- What costs will I pay at closing?
- How do lenders decide loan approval?
- What decisions do credit lenders make?
What should I know before buying a home?
Here are some tips that could save you a lot of time, money and trouble.
Plan ahead. Establish good credit and save as much as you can for the down payment and closing
Get pre-approved online before you start looking. Not only do real estate agents prefer working
with pre-qualified buyers; you will have more negotiating power and an edge over homebuyers who are not
Set a budget and stick to it can
help you determine a comfortable price range.
Know what you really want in a home. How long will you live there? Is your family growing? What
are the schools like? How long is your commute? Consider every angle before diving in.
Make a reasonable offer. To determine a fair value on the home, ask your real estate agent for a
comparative market analysis listing all the sales prices of other houses in the neighborhood.
Choose your loan (and your lender) carefully. For some tips, see the question in this section
about comparing loans.
Consult with your lender before paying off debts. You may qualify even with your existing debt,
especially if it frees up more cash for a down payment.
Keep your day job. If there is a career move in your future, make the move after your loan is
approved. Lenders tend to favor a stable employment history.
Do not shift money around. A lender needs to verify all sources of funds. By leaving everything
where it is, the process is a lot easier on everyone involved.
Do not add to your debt. If you increase your debt by financing a new car, boat, furniture or
other large purchase, it could prevent you from qualifying.
Timing is everything. If you already own a home, you may need to sell your current home to qualify
for a new one. If you are renting, simply time the move to the end of the lease.
back to top
How Much House Can I Afford?
How much house you can afford depends on how much cash you can put down and how much a creditor will lend
you. There are two rules of thumb:
You can afford a home that's up to 2 1/2 times your annual gross income.
Your monthly payments (principal and interest) should be 1/4 of your gross pay, or 1/3 of your
The down payment and closing costs - how much cash will you need?
Generally speaking, the more money you put down, the lower your mortgage. You can put as little as 3%
down, depending on the loan, but you'll have a higher interest rate. Furthermore, anything less than
20% down will require you to pay Private Mortgage Insurance (PMI) which protects the lender if you
can't make the payments. Also, expect to pay 3% to 6% of the loan amount in closing costs.
These are fees required to close the loan including points, insurance, inspections and title fees. To save on closing costs you may ask the seller to pay some of them, in which case the lender simply adds that amount to the price of the house and you finance them with the mortgage.
A lender may also ask you to have two months' mortgage payments in savings when applying for a loan. The mortgage - how much can
you borrow? A lender will look at your income and your existing debt when evaluating your loan
application. They use two ratios as guidelines:
Housing expense ratio. Your monthly PITI payment (Principal, Interest, Taxes and Insurance)
should not exceed 28% of your monthly gross income.
Debt-to-income ratio. Your long-term debt (any debt that will take over 10 months to pay off
- mortgages, car loans, student loans, alimony, child support, credit cards) shouldn't exceed
36% of your monthly gross income.
Lenders aren't inflexible, however. These are just guidelines. If you can make a large downpayment or if
you've been paying rent that's close to the same amount as your proposed mortgage, the lender may bend a
little. Use our calculator to see how you fit into these guidelines and to find out how much home you
back to top
Why Should I Refinance?
If you have a low, 30-year fixed interest rate you're in good shape. But if any of these Five Reasons
applies to your situation, you may want to look into refinancing.
1. Decrease monthly payments.
If you can get a fixed rate that's lower than the one you currently have, you can lower your
2. Get cash out of your equity.
If you have enough equity you can get cash out by refinancing. Just decide how much you want to
take out and increase the new loan by that amount. It's one way to release money for major
expenditures like home improvements and college tuition.
3. Switch from an adjustable to a fixed rate.
If interest rates are increasing and you want the security of a fixed rate, or, if interest rates
have fallen below your current rate you can refinance your adjustable loan to get the fixed rate
you're looking for.
4. Consolidate debt.
You can refinance your mortgage to pay off debt, too. Simply increase the new loan amount by the
amount you need and the lender will give you that cash to pay off creditors. You'll still owe the
lender but at a much lower interest rate - and that interest is tax-deductible.
5. Pay off your mortgage sooner.
If you switch to a shorter term or a bi-weekly payment plan, you can pay off your home earlier and
save in interest. And if your current interest rate is higher than the new rate, the difference in
monthly payments may not be as big as you'd expect.
Is refinancing worth it?
Refinancing costs money. Like buying a new home, there are points and fees to consider. Usually it takes
at least three years to recoup the costs of refinancing your loan, so if you don't plan to stay that
long it isn't worth the money. But if your interest rate is high it may be smart to refinance to a lower
interest rate, even if it is for the short term. If your mortgage has a prepayment penalty, this is
another cost you will incur if you refinance.
Use the reasons above as a guideline and determine whether or not refinancing is the
right thing to do. You can also use our refinance analysis calculator to help you decide.
back to top
What Are the Costs of Refinancing?
Here's what you can expect to pay when you refinance:
The 3-6 Percent Rule
Plan to pay between 3% and 6% of the amount of the new loan amount (if want cash-out, the loan amount will
be larger). Yet some lenders offer no-cost refinancing in exchange for a higher rate.
Getting to the Points
Points play a big part in how much it'll cost to refinance - the more points you pay, the lower your
interest rate. Points are a good idea if you're planning to stay in your home for a while, but if you'll be
moving soon you should try to avoid paying points altogether.
Negotiate the Fees
Be aggressive and investigate the fees your lender is asking you to pay. You may not need an appraisal, or
your loan-to-value may be such that you no longer need Private Mortgage Insurance. Sometimes if you
refinance with your current lender they won't need a credit report. With a little research it's amazing how
much you can save.
Here, we've explained the different loan refinancing fees.
Application Fee: This covers the initial costs of processing your loan application
and checking your credit.
Appraisal Fee: An appraisal provides an estimate or opinion of your property's
Title Search and Title Insurance: A Title Search examines the public record to
discover if any other party claims ownership of the property. Title Insurance covers you if any
discrepancies arise in ownership. (A reissue of the title can save 70% over the cost of a new policy.)
Lender's Attorney's Review Fees: In any financial transaction of this scope, a
lawyer's participation ensures that the lender isn't legally vulnerable. This fee is passed on to you.
Loan Origination Fees: This is the cost of evaluating and preparing a mortgage loan.
Points: These are basically finance charges you pay the lender. One point equals 1%
of the loan amount (for example, one point on a $75,000 loan is $750). The total number of points a lender
charges depends on market conditions and the loan's interest rate.
Prepayment Penalty: Some mortgages require the borrower to pay a penalty if the
mortgage is paid off before a certain time. FHA and VA loans, issued by the government, are forbidden to
charge prepayment penalties.
Miscellaneous:Other fees may include costs for a VA loan guarantee, FHA mortgage
insurance, private mortgage insurance, credit checks, inspections and other fees and taxes.
How to Save Money Refinancing:
Research all costs and fees.
Don't be afraid to negotiate with your lender.
Shop around for the lowest rates.
Check with your current lender for lower rates with costs that are reduced or waived.
back to top
What Kinds of Mortgages Are Available?
Fixed-Rate Mortgage - interest rates and monthly payments remain unchanged for the life of
Adjustable-Rate Mortgage - interest rates and monthly payments can go up or down,
depending on the market
Hybrid Loans - a combination of fixed and adjustable mortgages
How do you decide which loan is best? These questions may help.
How much cash do you have for a downpayment?
What can you afford in monthly payments?
How might your financial situation change in the near future and beyond?
How long do you intend to keep this house?
How comfortable would you be with the possibility of your monthly payments increasing?
Discuss these with your lender so they can help you decide which loan would best suit you.
back to top
What is a Fixed Rate Mortgage?
This is the most common loan arrangement in the U.S. With a fixed-rate mortgage the loan's principal
and interest are amortized, or spread out evenly, over the life of the loan, giving you a
predictable monthly payment.
The upside is, if rates are low, you can lock in for as long as 30 years and protect
yourself against rising rates. However, if rates fall you can't change your rate without refinancing the
loan, and that could cost money.
The 30-year Fixed-Rate Mortgage, the most popular and easiest to qualify for, will give
you the lowest payment. But you can also get a 20-, 15- and even a 10-year fixed-rate mortgage if you wish
to save interest and pay your home off sooner.
back to top
What is an Adjustable Rate Mortgage?
With Adjustable-Rate Mortgages (ARMs) interest rates are tied directly to the economy so your monthly
payment could rise or fall. Because you're essentially sharing the market risks with the lender, you are
compensated with an introductory rate that is lower than the going fixed rate.
How often does the interest rate change?
That depends on the loan. Changes can occur every six months, annually, once every three years or whenever
the mortgage dictates.
How much can my rate change?
Your ARM will stipulate a percentage cap for each adjustment period, which means your interest may not
increase beyond that percentage point. If the market holds steady, there may be no increase at all. You may
even see your payment decrease if interest rates fall.
How are the changes determined?
Every ARM loan is tied to a financial market index, such as CDs, T-Bills or LIBOR
rates. Your rate is determined by adding an additional percentage (known as a margin) to that index's rate.
When the index rises or falls, your rate rises or falls with it.
Is there a limit to how much interest I'll be charged?
Yes. It's called a ceiling, or lifetime cap. This is a guarantee that your interest rate will never
exceed a designated percentage. For instance, if your introductory rate was 5% and you have a lifetime rate
cap of 6% (meaning that your interest rate can never increase more than 6% during the life of the loan)
then your ceiling would be 11%.
What are the benefits of an ARM?
With a lower initial interest rate (usually 2% to 3% lower than fixed-rate mortgages),
qualifying is easier and the payments are more manageable at first.
You may qualify for a larger loan than you would with a fixed-rate mortgage.
If you're only planning to stay a short time the interest rate is likely to stay lower than that
of a fixed-rate mortgage.
If you expect regular pay increases that would cover the increase in your interest, or if you
believe interest rates will fall, an ARM might be the wiser choice.
A few words of caution:
Negative Amortization This happens when a lender allows you to make a payment that
doesn't cover the cost of principal and interest. Watch for this. It may be used as a lure to get you into
a home with the promise of low initial payments. Or, a lender may give you a payment cap instead of a rate
cap. In this mortgage arrangement, if interest rates increase, your monthly payments could stay the same
- but the higher interest will still be charged to your loan, adding to it instead of reducing it. Either
way, if you find yourself with a negative amortization ARM, you'll be adding to your debt.
Discounted interest rates Sometimes a lender will advertise an unusually low
initial rate. This is a discounted rate, and it's essentially a marketing tool. If your ARM offers a
discounted interest rate you are certain to see an increase at your next adjustment period, even if
interest rates don't change.
back to top
What is a VA Loan?
Administered by the Department of Veterans Affairs, these special loans make housing affordable for U.S.
veterans. To qualify you must be a veteran, reservist, on active duty, or a surviving spouse of a veteran
with 100% entitlement.
A VA loan is simply a fixed-rate mortgage with a very competitive interest rate.
Qualified buyers can also use a VA loan to purchase a home with no money down, no cash reserves, no
application fee and reduced closing costs. Some states allow a VA loan for refinancing as well.
Many lenders are approved to handle VA loans. Your VA regional office can tell you if
back to top
What is a FHA Loan?
FHA loans are designed to make housing more affordable for first-time home buyers and those with low to
Both fixed- and adjustable-rate FHA loans are available, and in most states, an FHA loan
can be used for refinancing. The difference is, they're insured by the U.S. Department of Housing and
Urban Development (HUD). With FHA Insurance, eligible buyers can put down as little as 3% of the
FHA appraisal value or the purchase price, whichever is lower. Qualifying standards are not as strict and
the rates are slightly better than with conventional loans.
back to top
Some adjustable-rate mortgages allow you to convert to a fixed rate at certain specified times. This
mitigates some of the risk of fluctuating interest rates, but there will be a substantial fee to do it. And
your new fixed rate may be higher than the going fixed rate.
This is an ARM that only adjusts once at five or seven years, then remains fixed for the duration of the
loan. Not only will you benefit from a lower rate for the first few years, but the new fixed rate cannot
increase by more than 6%. It may even be lower, depending on market conditions. Then again, you also run
the risk of adjusting to a much higher rate.
Another ARM choice, the convertible loan offers a fixed rate for the first three, five or seven years, then
switches to a traditional ARM that fluctuates with the market. If you strongly believe that interest rates
will fall a convertible loan might be a smart move.
These short-term loans begin with low, fixed payments. Then, in five, seven or ten years a single large
payment (balloon) for all remaining principal is due. While this saves money up front, coming up with a
large payment at the end of the loan may be difficult. Some lenders will allow you to refinance that
payment, but some won't, so be sure you know what you're getting into.
Graduated Payment Mortgage (GPM)
With a GPM you pay smaller payments that gradually increase and level off after about five years. Lower
payments can make it possible for you to afford a bigger home, but they'll be interest-only payments,
adding nothing to the principal. This could put you in a negative amortization situation.
back to top
How Can I save on a Fixed Rate Mortgage?
Short Term Mortgages
You don't have to finance your home for 30 years. Granted, the payments will be lower, but you'll be paying
them longer. You could, instead, opt for a period of 20, 15 or even 10 years, pay your home off sooner and
save in interest.
Furthermore, lenders offer much more attractive interest rates with short-term loans, so
your payments may not be as much as you'd think.
The table below shows you the interest savings on a $100,000 loan at 8.5% interest:
Total Interest Accrued
By paying $215.83 more a month on a 15-year mortgage, you'd save $99,555.83 in interest
over a 30-year loan - and own the house in half the time.
What Determines the Cost of a Mortgage?
There are five factors that determine the ultimate cost of a mortgage.
The principal, or amount of the loan, is the total amount you borrow (the
purchase price minus your down payment).
The interest rate adds significantly to the cost of your mortgage. Fixed or
adjustable, the interest paid at the end of the loan can exceed the original cost of the home itself. For
instance, a $100,000 loan balance at 8.5% for 30 years will cost you $277,000 by the time the loan is
The term of the loan is the length of time until the loan is paid off. A longer
term means more interest and higher cost.
Points are interest paid on the loan and they're purely optional. You pay points at
closing if you want to reduce the interest rate and make your monthly payments smaller. One point equals
one percent of the loan amount.
Fees are paid to the lender at closing to cover the costs of preparing the mortgage.
They can vary according to where you live and what type of loan you're securing.
While points and fees are not financed, they still contribute to the cost of the mortgage.
back to top
What is Private Mortgage Insurance?
Private Mortgage Insurance, or PMI, is insurance purchased by the buyer to protect the lender in
case the buyer defaults on the loan. PMI is generally applied when you put down less than 20% of the home's
purchase price. The reason is this:
With 20% down, you are considered a low risk. Even if you default the lender will probably
come out ahead because they've only loaned 80% of the home's value and they can probably recoup at least
that amount when they sell the foreclosed property.
But with 5% or 10% down, the lender has a lot more invested in the loan and if you default,
they will almost surely lose money. This is why lenders require buyers to purchase PMI if they put down
less than 20%. It's insurance that, no matter what happens, the lender will recoup its investment.
How does PMI increase your buying power?
In simplest terms, PMI allows you to put less money down, and the benefits are as follows:
If you have good credit but are short on cash for a down payment you can put as little as 5% down.
It doesn't take as long to accumulate a 5% or 10% down payment so you could buy a home much sooner
than you anticipated.
A smaller down payment allows you to purchase a larger or nicer home.
For repeat buyers, a smaller down payment on the new home can free up cash from the sale of their
previous home to use for other debts or expenses.
Your interest will be higher if you put down less than 20%, but that interest is tax-deductible.
What does PMI cost?
A Good Faith Estimate will be provided to you within a few days after we received your loan application.
This disclosure will provide you with an estimate of your monthly PMI premium as well as the initial
premium you'll need to pay at closing. Additionally, we will be providing you a disclosure on your rights
(if applicable) to cancel the PMI.
back to top
What Should I Ask My Lender?
What type of loan is best for me?
If you've done some groundwork you should have a pretty good idea of what type of loan you need. But your
lender may offer options you hadn't considered or even something you haven't yet heard about.
What will my closing costs be?
At closing, you'll be required to pay a number of fees such as transfer of title, origination and appraisal,
attorney services, credit report, title insurance and inspections. Your lender is required to provide an
estimate of these costs within a few days after your application is received, but you can always ask for an
Will I be charged points?
Sometimes you'll have to pay points (one point = 1% of the loan amount) in order to get the interest rate
the lender has quoted you. Before proceeding with your loan application find out if there are any points
attached to your loan.
What items must be prepaid?
Some expenses, such as first year's property taxes and insurance, must be paid at closing. Your lender will
let you know what's required.
How long will I be guaranteed the quoted interest rate?
This is called "locking in" a rate and most lenders provide this service. When you apply for your
loan, the lender will lock in the agreed interest rate for an agreed period of time. But there may be a fee
for this, so ask.
How long will it take to get approval?
It varies, so make sure you get an estimate of how long approval will take, especially if you have a
deadline for closing on a new home.
Does the loan have a pre-payment penalty?
If you even think there's a possibility you may pay off your loan early (this includes refinancing) find
out if there's a penalty for doing so.
Is there a call option attached?
A call option allows the lender to require you to pay off your loan balance before it's due. You don't want
this, so make sure it's not in the contract.
back to top
What Documents Will I Need for My Loan Application?
When preparing a loan, the lender will ask for substantial documentation. Here's a list of what is usually
Address and telephone numbers of each borrower
Previous address(es) over the last seven years
Social Security number(s) of applicants
Age of applicant(s) and dependent(s)
Name and address of landlord(s) or lender(s) for the past two years and proof of payment
Current housing expense details (rent, mortgage payments, taxes, insurance)
Name and address of employer(s) for the past two years
Pay stubs for the past 30 days · W-2 forms for the past two years
A written explanation of any employment gaps
If you're self-employed you'll need:
Complete, signed Federal Income Tax Returns for the past two years (personal and corporate) ·
Year-to-date Profit and Loss Statement and Balance Sheet
If you receive Social Security, a pension, disability or VA benefits you'll need:
A copy of your awards letter (or tax returns for the past two years)
A copy of your most recent check
If you pay child support you'll need:
A copy of the divorce or separation agreement
Evidence of payment for the last 6-12 months (cancelled checks of pay history from the courts)
If you receive rental income you'll need:
A copy of the lease
Debt Disclosure - Credit Cards, Loans and/or Current Mortgages
Name and address of each creditor
Account number, monthly payment and outstanding balance for each
Proof of recent payment or current statement for each
Documentation of alimony or child support you are required to pay
Written explanation of any past credit problems
Loan Application for Home Purchase
A complete, signed copy of sales contract · Mailing address and property description (if it's not in the contract)
A copy of your cancelled earnest money check Loan Application for Refinance
A copy of the deed
A copy of your hazard insurance policy
A copy of the property survey
Proof that your home has passed a termite inspection
Evidence of Funds for Downpayment
If the downpayment is a gift you'll need a signed gift letter, the giver's bank statement showing
sufficient funds, a copy of the check and a deposit slip
If you have any recent large deposits or new accounts you'll need to show documentation
If your loan is for new construction the lender will need to see plans and specifications
If there's a bankruptcy in your financial history you'll need complete documentation
Appraisal fee (approximately $350)
Credit report fee (approximately $50)
In some areas, a flood determination fee (approximately $20)
back to top
What's Involved in the Closing Meeting?
Preparing for ClosingMany things must be taken care of before you come to the closing meeting.
Ask your lender for a list of your responsibilities so you can arrive fully prepared.
Set a Closing Date
When choosing a closing date give yourself time to gather all your information and free up any necessary
funds. The lender will need time to prepare and deliver loan documents (usually 3-5 days), home inspections
must be scheduled and if any repairs are needed allow enough time for them to be completed. Also, if your
rate is locked in, make sure you close before the deadline so you'll be guaranteed the quoted interest rate.
Other Required Items
Your lender will provide you with a commitment letter that lists all the other documentation that's
required at closing. The following are common examples.
Survey - This shows the property's boundaries and any improvements made to it. It also details
any encroachments on the property like fences or buildings. Major encroachments must be corrected before
Termite Inspection - Many areas legally require homes to pass a termite inspection, and all
FHA and VA loans require one. If a termite inspection is required you must bring the certification to
Homeowner's Insurance - Lenders require you to carry insurance for the replacement cost of the
property. Bring the policy with you to closing.
Title Insurance Policy - All lenders require title insurance to protect them against claims of
property ownership by anyone other than the borrower. The title insurance issues the policy company after
conducting a title search.
Flood Insurance - A flood insurance policy is necessary for any property located in a flood
Water and Sewer Certification - If the property isn't served by public water and sewer
facilities you'll need certification from the local government that you have a private water source and
sanitary sewer facility.
Certificate of Occupancy - For a new home you'll need one of these before you move in. The
builder should get it for you from the city or county.
Building Code Compliance - An inspection is often required to make sure the property
conforms to current building codes. There will be an inspection fee, and the contract should specify who
pays for any repairs needed to bring the home up to code.
A day or two before closing it's a good idea to take one last look at the home to make sure repairs have
been made, there's no new damage, and anything meant to be sold with the property is still there. You can
do this on your own or with your real estate agent.
One business day before closing your lender must allow you to review your
This is the final exact amount you'll owe at closing and it must be brought in the form of a certified or
cashier's check. (Our Closing Costs Checklist can help you keep track of these expenses.)
The Closing Meeting
The legal sale and purchase of your home happens at the closing meeting which is attended by the buyer
(you), the loan officer, the seller and any real estate agents or attorneys involved. (In some areas,
closing is done by an agent without a meeting.)
Examination and Signing of Documents
At the closing meeting, the closing agent will review the settlement sheet with you and the seller and ask
you both to sign it. This is also when you'll present evidence of insurance and inspections and sign all
other loan documents.
Payment of Closing Costs
Once all papers are signed and in order you'll hand over the check for closing costs (the down payment is
included in check) and the lender provides the remaining funds to purchase the house.
Transfer of Property
Congratulations! You now own your new home. After the meeting, the closing agent will record the mortgage
and deed in your name with local government records and all funds will be disbursed.
During closing you'll sign stacks of important paperwork, including the following:
HUD-1 Settlement Sheet - This is the itemized list of closing costs your lender gave you the
day before closing. After the closing agent completes it you and the seller both sign it.
Truth-in-Lending Statement - Given to you soon after you applied for your loan, it
outlines the cost of the loan, gives you the APR (annual percentage rate) and defines the loan terms and
number of payments.
The Mortgage Note - The mortgage (or promissory) note is legal evidence of your promise to
repay the loan according to the agreed terms which this document outlines.
The Mortgage - This is the legal document that gives the lender a claim against your house
if you fail to uphold the terms of the mortgage note. Although you have possession of the house the
lender shares ownership until you pay off the loan, and can demand full payment or foreclosure if you
default. Some states use a deed of trust instead that conveys title to a trustee until the loan is repaid.
Affidavits - These are documents required either by the lender or the law. Your lender can
explain any affidavits you're asked to sign.
The Deed - This document transfers ownership to your name and is signed by the seller at
closing. You'll get a copy at closing and the original will be sent to you after it's recorded.
back to top
What Costs Will I Pay at Closing?
Closing costs vary according to lender, location and even from sale to sale. Some costs can be negotiated,
reduced or even waived and some may be paid by the seller.
When you're doing your research, use this checklist to get a rough idea of what you'll pay
at closing. The lender or closing agent will provide you with an exact total a day or two before closing.
How Do Lenders Decide Loan Approval?
The Four "Cs" of Loan Approval
A lender will weigh your housing expenses and total debt against your monthly income to determine your
ability to repay a loan.
Monthly Income - Your net monthly income. If you're self-employed or receive commissions or
bonuses, the lender averages your monthly income over the last two years.
Housing Expenses - This is the monthly payment you'll have with the new loan, along with the
monthly cost of insurance, property taxes and any homeowner's fees or other costs.
Total debt - Add up any current mortgages, credit card balances, child support or alimony
payments, tuition, car loans or other installment loans that will take longer than 10 months to pay off
and this is your total debt. If your monthly mortgage payment is less than 28% of your net monthly
income, a lender will typically consider you qualified to repay the loan. That figure can even go as high
as 36% depending on the buyer. For instance, many lenders will allow a first-time buyer's housing
expenses to take up more of their income.
CreditTo find out what kind of credit risk you represent, your lender will
Previous mortgage payment history
Rent payment history
Credit card use
Installment debt payment history
A few late payments on a credit card may not hurt you all that much. But collections,
repossessions, foreclosures and bankruptcies can be serious problems. If you have a good explanation you
may still be able to repair your credit rating and get approval.
When you ask for a home loan, you're putting the home itself up as collateral. Naturally, the lender will
want to know that the home is worth at least as much as the loan amount, which is why an inspection is
But they'll also want proof that you have the cash necessary for the downpayment and
closing costs. They'll seek verification of funds from sources including bank accounts, stocks, bonds,
mutual funds, the sale of an existing property or any gifts from family members that will not have to be
The way you conduct your financial transactions tells a lender a great deal about your fiscal character.
If you take responsibility for your debts by paying your bills regularly and on-time, you will appear to
have the integrity they're looking for in a borrower.
Other Compensating Factors
Many factors can sway a lender in your favor. The bottom line is that the lender wants to feel secure in
loaning you money. Even if there are a few dings in your credit, if you appear to be a safe credit risk
overall you should be confident your loan will be approved.
back to top
What Decisions Do Credit Lenders Make?
There are three major decisions that a credit lender is empowered to make.
1. Loan Approval
Approval is often given with conditions, such as the sale of current property, that require
documentation for final approval.
A loan is suspended when information is incomplete or questions remain unanswered in the loan
application. The buyer must supply the needed information before a final decision can be made.
There are a number of reasons why your loan may be denied, and you're entitled to know those
reasons. If denial is based on your credit you're entitled to a free copy of that report.
brickell Key Biscayne Miami Beach Miami Springs Pinecrets Fort Lauderdale Beach Coral Gables Doral Aventura Homestead Brickell Key Biscayne Miami Beach Miami Springs Pinecrets Fort Lauderdale Florida Aventura Homestead Brickell Key Biscayne Miami Beach Miami Springs Pinecrets Fort Lauderdale Beach Coral Gables Doral Aventura Homestead Brickell Key Biscayne Miami Beach Miami Springs Pinecrets Fort Lauderdale Beach Coral Gables Doral Aventura Homestead Brickell Key Biscayne Miami Beach Miami Springs Pinecrets Fort Lauderdale Beach Coral Gables Doral Aventura Homestead Brickell Key Biscayne Miami Beach Miami Springs Pinecrets Fort Lauderdale Beach Coral Gables Doral Aventura Homestead Brickell Key Biscayne Miami Beach Miami Springs Pinecrets Fort Lauderdale Beach Coral Gables Doralos Bay Harbor Islands Biscayne Park Coral Gables Doral El Portal.Florida City Golden Beach Hialeah Hialeah Gardens tead Indian Creek Village Aventura Homestead Brickell Key Biscayne Miami Beach Miami Springs Pinecrets Fort Lauderdale Aventura Homestead Brickell Key Biscayne Miami Beach Miami Springs Pinecrets Fort Lauderdale Kendall Doral Brickell Aventura Homestead Brickell Key Biscayne Miami Beach Miami Springs Pinecrets Fort Lauderdale New Aventura Homestead Brickell Key Biscayne Miami Beach Miami Springs Pinecrets Fort Lauderdale Kendall Doral Brickell Aventura Homestead Brickell Key Biscayne Miami Beach Miami Springs Pinecrets Fort Lauderdale Aventura Homestead Brickell Key Biscayne Miami Beach Miami Springs Pinecrets Fort Lauderdale Kendall Doral Brickell Aventura Homestead Brickell Key Biscayne Miami Beach Miami Springs Pinecrets Fort Lauderdale Aventura Homestead Brickell Key Biscayne Miami Beach Miami Springs Pinecrets Fort Lauderdale Kendall Doral Brickell Aventura Homestead Brickell Key Biscayne Miami Beach Miami Springs Pinecrets Fort Lauderdale Aventura Homestead Brickell Key Biscayne Miami Beach Miami Springs Pinecrets Fort Lauderdale Kendall Doral Brickell Aventura Homestead Brickell Key Biscayne Miami Beach Miami Springs Pinecrets Fort Lauderdale Aventura Homestead Brickell Key Biscayne Miami Beach Miami Springs Pinecrets Fort Lauderdale Kendall Doral Brickell Aventura Homestead Brickell Key Biscayne Miami Beach Miami Springs Pinecrets Fort Lauderdale Aventura Homestead Brickell Key Biscayne Miami Beach Miami