How do I know how much house I can afford?

Generally speaking, you can purchase a home with a value of two or three times your annual household income. However, the amount that you can borrow will also depend upon your employment history, credit history, current savings and debts, and the amount of down payment you are willing to make. To give you some simple calculations you can make, try this: 1. Take your gross (before tax) income and divide it by 12. This will give you your monthly income. 2. Add up all of your current monthly debt payments. For credit cards, use the minimum payments. You can exclude all utilities and other accounts that do not appear on your credit report. 3. Then add the mortgage payment you can afford in your monthly budget to the other debt payments. This will give you your total monthly debt obligations. 4. Divide the total monthly debt obligations by your monthly income, and this will give you your rough Debt To Income Ratio. If it is below 45%, you should be ok. Note: Your Mortgage Consultant will have to collect detailed information on your income, debts, and the property you are interested in purchasing, and this information will be used to qualify you. The above method is a generic way of getting an idea of what you may qualify for. If you are self employed, on commission, or earn bonus income, there are additional steps that your Mortgage Consultant will have to take to pre-qualify you. You may also be able to take advantage of special loan programs for first time buyers to purchase a home with a higher value. Contact us at info@theperpetual.com – or by contacting one of our Licensed Mortgage Loan Originators directly – and we can help you determine exactly how much you can afford!

What is the difference between a fixed-rate loan and an adjustable-rate loan?

With a fixed-rate mortgage, the interest rate stays the same during the life of the loan. With an adjustable-rate mortgage (ARM), the interest changes periodically, typically in relation to an index. While the monthly payments that you make with a fixed-rate mortgage are relatively stable, payments on an ARM loan will likely change. There are advantages and disadvantages to each type of mortgage, and the best way to select a loan product is by talking to us.

How is an index and margin used in an ARM?

An index is an economic indicator that lenders use to set the interest rate for an ARM. Generally the interest rate that you pay is a combination of the index rate and a pre-specified margin. Three commonly used indices are the One-Year Treasury Bill, the Cost of Funds of the 11th District Federal Home Loan Bank (COFI), and the London InterBank Offering Rate (LIBOR).

How do I know which type of mortgage is best for me?

There is no simple formula to determine the type of mortgage that is best for you. This choice depends on a number of factors, including your current financial picture and how long you intend to keep your house. The Perpetual can help you evaluate your choices and help you make the most appropriate decision. Contact us at info@theperpetual.com or by speaking with one of our Licensed Mortgage Consultants and we can help advise you!

What does my mortgage payment include?

For most homeowners, the monthly mortgage payments include three separate parts:

  • Principal: Repayment on the amount borrowed
  • Interest: Payment to the lender for the amount borrowed
  • Taxes & Insurance: Monthly payments are normally made into a special escrow account for items like hazard insurance and property taxes. This feature is sometimes optional, in which case the fees will be paid by you directly to the County Tax Assessor and property insurance company.
How much cash will I need to purchase a home?

The amount of cash that is necessary depends on a number of items. Generally speaking, though, you will need to supply:

  • Earnest Money: The deposit that is supplied when you make an offer on the house
  • Down Payment: A percentage of the cost of the home that is due at settlement
  • Closing Costs: Costs associated with processing paperwork to purchase or refinance a house
How do Relief & HARP Refinances Work?

HARP 2.0 is the latest version of the relief refinance initiatives. They allow upside-down borrowers to refinance their eligible loan to a lower rate, even when they owe more than the property is currently worth. Some customers are able to refinance their homes without a new appraisal. The relief refinances do require the borrower to qualify for the new loan from a credit and income standpoint. To qualify for a HARP loan, your current loan must meet the following criteria: 1. It must have been originated prior to 5/1/2009. 2. It must be currently owned by either Fannie Mae or Freddie Mac. To find out if Fannie or Freddie own your current loan, go to http://www.makinghomeaffordable.gov/get-assistance/loan-look-up/Pages/default.aspx The borrower will also have to undergo normal underwriting procedures, but the property value is not weighted very heavily in the process. For borrowers that do not qualify for HARP because they have an FHA, VA, or USDA loan, there are ‘streamline’ refinance options available for them that also have reduced or eliminated appraisal requirements that allow them to refinance even when upside-down on the property. Some borrowers are generally ineligible for ‘relief’ refinances – primarily Jumbo borrowers, or borrowers whose loans were never sold to Fannie Mae, Freddie Mac, or insured by FHA/VA/USDA. These borrowers can attempt to refinance under normal programs; if unsuccessful they may contact their current loan servicer/lender for a modification or other options.

How do FHA Streamline refinances work?

FHA Streamline refinances allow a current FHA borrower to refinance to a lower rate on their mortgage with very little qualifying. No appraisal is required, and generally the borrower must simply meet a minimum credit score requirement of 580 and prove that they are still employed. FHA guidelines actually allow for a borrower to refinance with neither of these criteria placed upon them, but most banks will not do the loan without them. Interest rates are currently VERY favorable for FHA Streamline borrowers, making this a very attractive and low-stress option. There are also some enhanced, positive program features – with very low closing costs – for borrowers whose current FHA loan was Endorsed by FHA prior to 6/1/2009. Contact The Perpetual for more information on this great program enhancement.

How do VA Streamline refinances work?

VA Streamline refinances are a great option for current VA borrowers. These loans allow you to refinance your home with no appraisal to a lower interest rate, and very simple qualification criteria. Contact The Perpetual for more information on these! Interest rates are currently VERY favorable for these, making them a very attractive and low-cost option for clients.

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