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How do I know how much house I can afford? |
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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. You may also be able to take advantage of special loan programs for first time buyers to purchase a home with a higher value. Give us a call, and we can help you determine exactly how much you can afford. |
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What is the difference between a fixed-rate loan and an adjustable-rate loan? |
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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. |
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How is an index and margin used in an ARM? |
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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). |
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How do I know which type of mortgage is best for me? |
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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. Bay To Bay Lending LLC can help you evaluate your choices and help you make the most appropriate decision. |
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What does my mortgage payment include? |
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For most homeowners, the monthly mortgage payments include three separate parts: Principal: Repayment on the amount borrowedInterest: Payment to the lender for the amount borrowedTaxes & 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. |
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How much cash will I need to purchase a home? |
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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 houseDown Payment: A percentage of the cost of the home that is due at settlementClosing Costs: Costs associated with processing paperwork to purchase or refinance a house |
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What is my Credit Score? |
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Credit score is a very important consideration that a lender looks at when determining whether or not to lend to you. It impacts how much you may be pre-qualified/pre-approved for and what interest rate you will ultimately get.
Your credit score or FICO (FICO stands for Fair Isaacs Credit Organization) is a value that ranks your credit worthiness. The number ranges from 300 (low score) to 950 (high score) and is based on credit information gathered and stored by the three national repository companies, also known as credit bureaus. They are Equifax, Trans Union and Experian. All of your creditors (banks, credit unions, credit card companies, collection agencies, etc) provide information to these three bureaus as to whether you pay your bills on time (or not). It’s important for you to conduct an annual “quality review” on your credit report to ensure that all the information is accurate. Occasionally, creditors inadvertently make a mistake in their reporting and if it is a negative error, it will cost you points on your credit score. Generally, the lower your score the higher interest rate you are charged and, of course, strong credit score borrowers are afforded the best rates.
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What is a Credit Score and why is it important? |
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The three credit bureaus use the same statistical model for everyone (FICO being the most commonly used). The model is highly complex but basically it analyses your credit worthiness by applying scores to your credit patterns and forecasts your repayment performance. Once you are granted a loan (i.e. credit card or auto loan), your payment performance is monitored and from thereon your credit score is established.
That’s why it is so critical to pay all your bills on time and as directed because on-time payments are reported and will reward you with a favorable rating. Late payments are also reported and will not only cause a drop in your credit score but could also result in increased interest rates with your creditors. Your creditors, such as banks and credit card companies, monitor your score from time to time and if they see a late payment, even with a creditor other than their organization, they can increase the rate you are charged, without even notifying you.
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Some Additional Credit Score Tips |
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It’s also important to remember that your credit score is hit hardest by the most recent delinquencies. As you would expect, if the delinquency is repeated that also damages your score badly. If you have joint credit cards or loans, you are just as responsible as the other party, even if they are paying the bills. Furthermore, the number of large outstanding balances is a high indication of risk to the bureaus as is the proportion of these balances relative to the credit limits. Just because you have credit available to you does not translate to the fact or belief that you can manage such a balance. This can actually lower your score so stay below 50% of your credit limits. Finance companies will negatively impact your score more heavily than a credit card. A credit card indicator is relatively low, but does affect the score outcome. So avoid “Buy now, pay later” offers – they signal a postponement of credit responsibility. Finally, the number of credit cards affects your score - even if your balances are at zero they represent available risk. It is best to limit your cards to two or three.
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How to Check Your Credit Report |
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You can review the credit information gathered by each of the three bureaus. Their contact details are as follows.
Equifax Information Services LLC
1-877-SCORE-11
Experian
1-888-397-3742
Trans Union LLC
1-800-888-4213 |
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Will one late credit card payment or loan default disqualify me from getting a mortgage? |
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If you have less than perfect credit, Bay to Bay lending, LLC has programs to meet your needs. Late payments should by no means automatically disqualify you from getting a mortgage. We understand that almost everyone has forgotten to pay a bill on time, or has had trouble making a payment. Many people find themselves in difficult financial situations. These often result from illness, divorce, or temporary unemployment. If you can demonstrate that a problem is in the past, and you have been able to reestablish a good track record for a sufficient amount of time, you may be in a good position to get a mortgage. There may be a reasonable explanation, so speak to us honestly and openly about the situation. It’s important to remember that lenders don’t just look at your past history, but also at your ability and willingness to pay in the future. |
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Should I pre-qualify or get pre-approval before I begin searching for a home? |
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Real Estate agents and home sellers will generally consider you a more serious buyer if you receive a pre-approval from a reliable mortgage company like Bay to Bay Lending, LLC. Not only does it allow you to narrow your price range, it also assures the seller that you qualify when you do find the home of your dreams. |
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What constitutes a loan approval? |
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Most lenders base their decision on three factors: credit, capacity and collateral. Credit refers to the quality of your current credit rating. Capacity is your ability to repay the loan based on job stability, current income and other factors. Collateral is the amount of equity in your home, and the likelihood of appreciation. Once everything checks out, you’re approved!
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