What Does a mortgage payment include?

Your mortgage payment is typically made up of four parts: principal, interest, taxes and insurance. If you make less than a 20% down payment, your mortgage payment will also include mortgage insurance that is paid to the agency providing the insurance. Each month your payment will include a portion of your property taxes and homeowner’s insurance that will be placed in an escrow account. Your lender will pay those third party fees from the escrow account as they come due.

What does amortization mean?

With each mortgage payment that is made, a portion of the payment is applied towards reducing the principal and the other portion is applied towards the interest on the loan. In the early stages of your mortgage term, the payment is mostly interest and a small portion pays down the principal. A smaller portion of your payment each year goes to interest and more towards principal until your loan is repaid.

What is homeowner’s insurance and Mortgage insurance?

Homeowner’s insurance protects you in the event of loss that is the result of fire, wine, natural disaster or other hazards. You are required to have insurance on your property at all times. On the other hand Mortgage insurance – also referenced to as MI is required on certain loans to protect the lender against financial losses if the borrower fails to repay the loan.
What loans have Mortgage Insurance?

FHA – insured loans have upfront mortgage insurance added to the loan amount along with a monthly MI which is paid regardless of how much your down payment is.

VA loans require a funding fee paid directly to the VA but do not require monthly MI.
Conventional loans will have mortgage insurance if your down payment is less than 20% of the home’s purchase price.

What are Closing Costs?

The cost of buying a home is more than just the purchase price. Every home buying transaction requires the services of professionals from a variety of fields. It is common for these costs to add up to several thousands of dollars and or between 3-5% of your total mortgage. You will get a better idea of the amount soon after you apply for a mortgage when you receive the Loan Estimate that details the approximate costs you will pay on or before your loan closes. In some cases, the closing costs can be added to your loan, of your agent can negotiate for the seller to pay a portion. You may also be able to qualify for a down payment assistance program.

How will I know how much I can borrower to buy a home?

You Fidelity Mortgage loan officer will work with you to calculate the maximum amount you can borrower. There are several things needed from you to determine this amount. The lender will look at all the 4 initial items: Income, Credit, Savings and property. Other items will also be factors, but those up front factors will help give them an idea of how much you qualify for. But also know it’s always better to get Pre-approved over Pre-qualified.

What will a mortgage company look at in regards to income?

Generally, lenders will need the past 2 years of tax returns for self-employed and W2 wage earners. They will average the income over the past 2 years. If income is declining they will us the lower amount. If you receive an increase in pay due to a promotion they may be able to use the new amount. Part-time or second jobs must also have a 2-year work history. Temporary disability, worker’s compensation or any income that will not continue for a minimum of three years cannot be used.

What is a credit score?

You credit score could mean the difference between being denied or approved for a home loan, and a low or a high interest rate. There are 3 major credit Bureaus: Equifax, Experian, and Transunion. Data from your credit goes into 5 major categories to make up your credit score – Payment History, Amounts owed, length of credit history, new credit and types of credit used.

Can someone give me the money for my down payment?

Some loan programs may allow you to use monetary gifts from family and friends as part of the down payment. You will be required to show written proof that the funds are truly a gift and not a personal loan along with documentation of their bank account withdrawal.
What if I have cash deposits showing on my bank accounts do they need to be verified?
Yes, generally all cash deposits need to be verified regardless of whether you are using the money towards the down payment. For example: if you sell a car on Craigslist you must provide a bill of sale and trail of the funds received.

Are there any other down payment sources I may Use?

Not-for-profit down payment assistance programs provide funds to qualified borrowers to help with down payment and closing costs. These agencies may require you to take a class first before you are eligible. Most require the mount to be paid back at the sale of the home or if you refinance, each program is different. You Fidelity Mortgage loan officer can help you find out what programs are available in your area.

What are the 10 general steps of a loan process?

Step 1: Initial Consultation
Step 2: Preapproval
Step 3: Provide all required documentation for the loan
Step 4: Find your home, make an offer and sign the purchase contract (disregard this step if you are refinancing)
Step 5: Initial processing
Step 6: Order a home inspection, appraisal and Title
Step 7: Underwriting – Conditional approval
Step 8: Final Approval
Step 9: A Closing day is set
Step 10: Finalizing the Transaction and closing!

Why do I need a home inspection if I am already getting an appraisal?

A home inspection is an objective examination of the structure and the many systems within the home. The home inspector will check the following items – plus many more: structure and foundation, electrical systems, plumbing, roofs and attics, basements and crawl spaces, gutters and drainage, walls, floors and ceilings, porches and decks, property and site structural repots and pest inspection. The inspector will not place a value on the home. An Appraisal does the opposite, they place a value on the home without a thorough inspection. It is always advised to get a home inspection when purchasing a home.

 

 

Equal Housing Lender. This is not a commitment to lend or extend credit. This page is strictly for mortgage tips, for true qualification information please contact Fidelity Mortgage Directly. Restrictions may apply. Rates may not be available at time of application. Information and/or data are subject to change without notice. All loans are subject to credit approval. Not all loans or products are available in all states. Bay Equity LLC, 28 Liberty Ship Way Suite 2800, Sausalito, CA 94965; NMLS ID#76988. Colorado Mortgage Company Registration #76988. Regulated by the Division of Real Estate. NMLS consumer access: www.nmlsconsumeraccess.org