What is a mortgage?
A mortgage is another word for a home loan. Mortgages are designed to help people purchase real estate where there is an existing home or for building a new home. When you take out a mortgage, you’re borrowing money from a financial institution with the promise to repay the loan over time. It’s secure home financing that can help people achieve their homeownership goals and dreams.
What will my monthly payment be?
Your monthly payment will depend on several factors. Every mortgage payment is made up of four main costs: principal, interest, taxes, and insurance (also known as PITI). Let’s break it down:
- Principal is the loan amount you borrow, then the remaining balance throughout the life of the loan.
- Interest is the fee you pay to borrow the money expressed as a percentage rate.
- Taxes are the property taxes you pay on the home. These are set by your local government.
- Insurance on your home is required. The rate will be set by your insurance provider.
Many homeowners choose to have their taxes and insurance paid using an escrow account. This can be a convenient way to pay those bills by taking your estimated tax and insurance costs and rolling them into your monthly mortgage payment. These funds are then taken out of your escrow account and the bills are paid when they’re due by your loan servicing company. All you have to do is make your monthly mortgage payment and your servicer will take care of the rest.
What is an appraisal?
An appraisal is an estimate of a property’s fair market value. Depending on the loan program, an appraisal is required by a mortgage lender before they approve the loan to ensure that the loan amount is not more than the value of the property. The appraisal is performed by an appraiser—typically a state-licensed professional and unbiased third party who is trained to give an expert opinion concerning property value, considering its location, amenities, physical conditions, and more. They walk through the home, surveying the property and looking for issues that may affect the value of the home. During this part of the property valuation, the appraiser also researches the recently sold comparable homes (or comps) in the area to help determine the value. The resulting appraisal report should help you make an educated decision as to whether you should purchase the home.
What is PMI?
On a Conventional mortgage, when your down payment is less than 20% of the purchase price of the home, your mortgage lender will require you to get private mortgage insurance (PMI) to protect them in case you default on your mortgage. Some borrowers have to pay up to one year’s worth of PMI premiums at closing, which can cost several hundred dollars. The best way to avoid this extra expense is to make a 20% down payment or ask about other loan program options.
What does it mean to lock in your interest rate?
The market can be unpredictable. From the day you apply for a mortgage to the day you close, mortgage rates could change. And if they rise, it can increase your payment dramatically. That’s why mortgage lenders offer the ability to “lock in” your interest rate. This guarantees a specific rate for a period of time, usually 30 to 60 days and sometimes for a fee. Locking in your interest rate helps you get a great rate even if the market shifts.
What is an APR?
Your annual percentage rate (APR) is the total yearly cost of your mortgage expressed as a percentage. Not to be confused with interest rate. APR gives you a bigger picture of what it costs to finance your loan by accounting for the interest rate and finance charges. This is also why your APR is likely to be higher than the rate stated on your mortgage. What’s great about APR is that, by comparing APRs from different lenders, home buyers can get an idea of the true cost to borrow. And, it prevents lenders from advertising a low rate while hiding fees.
How is paying a mortgage different from paying rent?
As a renter, you don’t own the place you live in. When you pay rent, you’re paying the owner a fee so you can live there. Essentially, what you pay in rent each month contributes to the mortgage the homeowner or property owner pays.
However, when you pay a mortgage, you’re not paying rent to the homeowner. Since you are the homeowner, your monthly payment goes to your mortgage lender. This cuts out the middleman. Your mortgage lender loans you enough money to purchase the home and, over an agreed upon period of time, you pay back the loan (plus interest, taxes, and other fees). The biggest difference is ownership, and who owns the home you live in determines who pays whom.
What are points?
A point (also called discount point) is a percentage of the loan amount. One point equals 1% of the loan. That means one point on a $100,000 loan is equal to $1,000. Points are fees a borrower can pay the lender at closing to buy down the mortgage interest rate.
Should I pay points to lower my interest rate?
Yes, if you can afford it and if you plan to stay in your home for a least a few years. Paying points to buy down your interest rate is a viable way to lower your monthly payment and possibly increase the loan amount that you can afford to borrow. However, if you only plan to stay in your home for two years or less, your monthly savings may not be enough to recoup the cost of the points you paid up front. This is a good subject to talk about with your loan officer and your financial advisor before making a decision.
Does my co-borrower’s credit score matter?
Yes, it does. We will look at both of your scores and use the lowest. You can avoid this by only putting the person with the highest credit score on the mortgage, if the co-borrower’s income isn’t required to qualify. Having a co-borrower isn’t always financially beneficial.
Can I buy a house even if I have student debt?
It’s possible! We’ll look at your debt-to-income (DTI) ratio and if it’s not too high, we may be able to approve you for a mortgage, depending on the loan product. Different loan products have different DTI ratio requirements. There are also loan products that can help refinance your student debt and down payment into a mortgage.
Can I buy a house if I’m self-employed?
Yes! We accept business tax returns for the two most recent tax years, regulatory information, your business license, and a letter of certification from a CPA. For a complete list of requirements for self-employed borrowers,
Self-Employed Borrowers
This checklist shows the documents we will need for processing your mortgage loan application. While additional information may be required after our preliminary review of your financial records, compiling these documents will help the initial processing of your application go as quickly as possible.
Self-Employed (Individual Filing) |
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Current business license (If applicable). |
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Last 2 years filed personal federal tax returns, including all schedules. All pages, including blank pages. No missing pages; screen shots not permitted. |
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Schedule K-1 if ownership is 25% or more, provide most recent 2-years. All pages, including blank pages. No missing pages; screen shots not permitted. |
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Most recent 2 months bank and asset statements. All pages, including blank pages. No missing pages. Online transaction history allowed; screen shots not permitted. |
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Most recent Profit and Loss Statement showing year-to-date revenues and expenses (if applicable). All pages, including blank pages. No missing pages; screen shots not permitted. |
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Property’s Current Homeowners’ Insurance declaration page, showing premium, coverage amounts and agent’s name and phone number. |
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Self-Employed (With Partnership Filing) |
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Current business license. |
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Last 2 years filed personal federal tax returns, including all schedules. All pages, including blank pages. No missing pages; screen shots not permitted. |
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If percentage of ownership on Schedule K-1 is 25% or more, provide copy of most recent 2-years. All pages, including blank pages. No missing pages; screen shots not permitted. |
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Last 2 years completed Partnership tax returns (1065). All pages, including blank pages. No missing pages; screen shots not permitted. |
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Last 2 months bank or asset statement. All pages, including blank pages. No missing pages. Transaction history allowed; screen shots not permitted. |
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Most recent Profit and Loss Statement showing year-to-date revenues and expenses (If applicable). All pages including blank pages. No missing pages; screen shots not permitted. |
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Property’s Current Homeowners’ Insurance declaration page, showing premium, coverage amounts and agent’s name and phone number. |
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Self-Employed (With Corporation Filing) |
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Current business license. |
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Last 2 paystubs with year to date earnings. |
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Last 2 years’ completed personal federal tax return including all schedules. All pages, including blank pages. No missing pages; screen shots not permitted. |
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Last 2 years’ completed Corporation tax return (1120(S)). All pages, including blank pages. No missing pages; screen shots not permitted. |
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Last 2 months bank or asset statement. All pages, including blank pages. No missing pages. Transaction history allowed; screen shots not permitted. |
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Most recent Profit and Loss Statement showing year-to-date revenues and expenses (If applicable). All pages including blank pages. No missing pages; screen shots not permitted. |
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Property’s Current Homeowners’ Insurance declaration page, showing premium, coverage amounts, agent’s name, and phone number. |
Alimony, child support or separate maintenance income: include only if you are required to pay or using to qualify.
Can I get a mortgage without a credit score?
It’s possible to get a mortgage without a credit score, but you’ll have to go through manual underwriting. Manual underwriting simply means you’ll be asked to provide additional paperwork for the underwriter to personally review. Your loan process may take a little longer, but buying a home without the strain of extra debt is worth it!
What’s the difference between being pre-qualified and pre-approved?
Getting pre-qualified is a quick and informal conversation with your lender about your income, assets, credit score, debt, and down payment. Then, they’ll give you an estimated amount you may be approved to borrow. It’s purely informative. Getting pre-approved, however, is a more formal process. Your lender will consider all of the same financial information, but they will submit your loan for preliminary underwriting, which can potentially result in loan approval. A pre-approval takes a little more time and effort, but it also carries a lot more weight.
How does the interest rate affect your mortgage?
High interest rates bring higher monthly payments and increase the overall interest you’ll pay over the life of your loan. A low interest rate saves you money in the short and long run. When it comes to interest rates, the lower the better!
How long does it take to close on a house?
It depends! On average, it takes about 30 days, but factors such as your loan type, financial situation, and the length of your contract can either lengthen or shorten that time frame. We’ve seen highly proactive borrowers get closed in seven days!
When do you lock your interest rate?
Locking your rate is an important part of the mortgage process. It guarantees a certain interest rate for a period of time, usually between 30 and 60 days. In most cases, you can lock your interest rate as soon as your initial loan is approved, but most buyers wait until they’ve found the home they want to buy.
Related
Author: Louisville Kentucky Mortgage Broker Offering FHA, VA, USDA, Conventional, and KHC Zero Down Payment Home Loans
I have helped over 589 Kentucky families buy or refinance their home over the last 18 years. Realizing that this is one of the biggest, most important financial transactions a family makes during their lifetime, I always feel honored and respected when I am chosen to originate their personal home loan. You can count on me to deliver on what I say, and I will always give you honest, up-front personal attention you deserve during the loan process. I have several advantages over the large banks in town. First, I can search and negotiate for your loan options through several different mortgage companies across the country to get you the best deal locally. Where most banks will offer offer you their one set of loan products. I have access to over 10 different mortgage companies to broker your loan through to get you the best pricing and loan products that may not fit into the bank's program due to credit, income, or other underwriting issues. You will not get lost in the shuffle like most borrowers do at the mega banks; you're just not a number at our company, you are a person and we will treat you like one throughout the entire process. Give us a try or let us compare your options on your next mortgage transaction. Call me locally at 502-905-3708. Free Mortgage Pre-Qualifications same day on most applications. Email me at kentuckyloan@gmail.com with your questions I specialize in Kentucky FHA, VA ,USDA, KHC, Conventional and Jumbo mortgage loans. I am based out of Louisville Kentucky. For the first time buyer with little money down, we offer Kentucky Housing or KHC loans with down payment assistance. Customer Testimonials 😍😍😍 We just moved here the first of January in 2017 from Ohio to the Louisville, KY area and we found Joel's website online. He was quick to respond to us and got back the same day on our loan approval. He was very knowledgeable about the local market and kept us up-to date throughout the loan process and was a pleasure to meet at closing. Would recommend his services. Angela Forsythe "We were searching online for mortgage companies in Louisville, Ky locally to deal with and found Joel's website, and it was a godsend. He was great to work with, and delivered on everything he said he would do. I ended up referring my co-worker at UPS, and she was very pleased with his service and rates too. Would definitely vouch for him." September 2016 Monica Leinhardt "We contacted Joel back in July 2011 to refinance our Mortgage and he was great to work with. We contacted several lenders locally and online, and most where taking almost 60 days to close a refinance, Joel got it done in 23 days start to finish,I would definetly recommmend him. He got us 3.75% with just $900 in closing costs on our FHA Streamline loan. Kayle Griffin “Joel is one of the best Mortgage Brokers I have ever worked with in my sixteen years in the real estate and mortgage business.” May 25, 2010 Tim Beck “Joel has always worked very hard to keep his word and to work out seasonable solutions to difficult problems. He is truly an expert in FHA and other type loans.” September 1, 2010 Nancy Nalley “I have worked with Joel since 1998. He is a great loan professional.” I refer most of my Louisville, Kentucky area home buyers to him and he always take special care of them. August 23, 2012 Jon ClarK “Joel Lobb is a real professional in the lending industry, with many years of experience, he is the one to go to for any mortgage lending needs.” August 22, 2011 RICHARD VOLZ , Residential Sales , Remax Foursquare Realty “When looking to purchase our new home in 2006, I had the pleasure of meeting Joel Lobb. Not only was he personable and easy to reach, he was extremely knowledgable in his field and made sure to find us the best rate and a top notch mortgage company. We were able to complete the process in less than 3 weeks with his expertise. I find Joel to have the utmost high integrity and I recommend him to anyone who say's they are need of mortgage assistance. He is also fantastic and keeping everyone up to date on the latest in the housing industry through his twitter posts. He provided great results for our family and we still communicate to this day!” August 21, 2010 Stacie Drake "We first use Joel on our new home purchase in 2007 in St Matthews, Kentucky area and he was great to work with. We have since refinanced our home with him in 2010 when rates got really low and he has always delivered on what he says. I could not imagine using anyone else." Melody Glasscock March 2014 Absolutely Amazing!! I emailed Joel after I had just got a denial from a bank and just thought i would try to get some advice on what my next steps would be to get a house. I honestly didn't expect to even get a reply because my credit is not great. That was about a week and a half ago. I just signed a contract on a house last night. ONLY because of Joel Lobb. He even worked with us throughout the weekend, which shocked me. Best decision I have ever made. THANK YOU SO MUCH FOR WORKING WITH US THROUGHOUT THE ENTIRE PROCESS. Cee Bellisle August 2017 Contacted him about buying a home and he was great to work with. I was moving to Louisville Ky to take a new job and he walked me through the entire process. He explained to me all the different options for FHA, VA, USDA mortgage loans and credit score requirements versus Fannie Mae. Since I was a first time home buyer I needed alot of help and guidance. I would definitely recommend him. Fast to respond and available to answer questions that I or my realtor had after hours. Anderson Johnson April 2018 Wow, what a great loan officer. I was referred to him by our agent and he was great to work with. We used him for a USDA no money down loan in Shelby County and we were really impressed. We were afraid we could not buy a home since we did not have money saved for a down payment, but Joe l was able to get us a zero down loan and we even got our appraisal fee and good faith deposit back at closing. We actually got money back at closing!!! I Can't think him enough. Our family moved from our apartment in the south end of town to get our own home with 5 acres for our kids and 2 dogs, at a payment that is equal to our rent payment also. .Thanks Again Joel. May god bless you Patty Locker We contacted Joel about buying a house on our move from Ohio for my husband's job transfer with Ford. We put a lot of trust in him since we were new to the area and first time home buyers in the Louisville KY market, and he always delivered on what he said. It took us a while to find a home due to the lack of homes, but once we got one, he was always quick to respond our questions via text or email ,and kept us informed through the process. We got to meet him at the closing and he was super nice and even got us a closing gift for our home which we didn't expect at all. Super nice guy 😀!!! I would definitely recommend him for a local Home loan in the Louisville area. pam dolby I got a VA loan with Joel and he was great. He is an ex-army guy so he could relate to my past experiences of being a veteran and moving around the country a lot. I had some credit issues that required a little extra work but Joel was able to find A VA lender to approve my situation as far as having past bad credit problems and a lower credit score. We closed yesterday on our home here in Louisville and we could not be happier. We finally have a home of our own thanks to Joel . I would definitely recommend him for a mortgage loan. Great experience and closed 8 days before expected close date so we were able to move in early. larry summit I contacted Joel about the $10,000 KY Housing Grant last month and we were able to get it and I just closed on my home. He was great to work with and if you are a first time home buyer here in Louisville, I would definitely contact him. I met him at his office and he was very nice and knowledgeable and kept me informed through the process. No surprises either so I was very happy. I am new homeowner thanks to Joel . Joel Lobb Senior Loan Officer American Mortgage Solutions, Inc. 10602 Timberwood Circle Suite 3 Louisville, KY 40223 phone: (502) 905-3708 Fax: (502) 327-9119 kentuckyloan@gmail.com http://www.mylouisvillekentuckymortgage.com/ Company ID #1364 | MB73346E This website is not an government agency, and does not officially represent the HUD, VA, USDA or FHA or any other government agency. http://www.nmlsconsumeraccess.org/ Disclaimer: No statement on this site is a commitment to make a loan. Loans are subject to borrower qualifications, including income, property evaluation, sufficient equity in the home to meet Loan-to-Value requirements, and final credit approval. Approvals are subject to underwriting guidelines, interest rates, and program guidelines and are subject to change without notice based on applicant's eligibility and market conditions. NMLS#57916 http://www.nmlsconsumeraccess.org/ . The content in this marketing advertisement has not been approved, reviewed, sponsored or endorsed by any department or government agency. Rates are subject to change and are subject to borrower(s) qualification. View all posts by Louisville Kentucky Mortgage Broker Offering FHA, VA, USDA, Conventional, and KHC Zero Down Payment Home Loans
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