Finding Ways in Funding Your Dream Home
"I strive to help my clients make an educated decision about taking the right loan product available for them.
We will achieve this goal with professional coaching, transparency and integrity."
Joey I. Narciso
Mortgage Loan Originator
NMLS # 2311575
Which Type of Mortgage Loan Fits Your Need?
The first step in purchasing your dream home is making sure that you have funds to pay for it. While most people are not cash buyers, they need to secure a mortgage loan to purchase a house. However, not every loan is the same. There is this one type of loan that fits exactly with your unique situation and your current financial status.
Check below which one is best for you! If you do not know the best option to pick, I am here to assist you.
Mortgage Calculator
Use this calculator to determine how much your monthly mortgage payment will be given your unique situation.
What Do You Need to Know?
I strongly believe that one’s strength is wrapped with what he knows!
That is why I see to it that my clients get the proper coaching going through the process. My objective is to lay down everything that you need to know about mortgage loans so you can make an educated decision when you get yours.
Required Documentation
In most cases, you will be required to submit the following:
- Paystubs for the past 30 days showing both your current and the year-to-date (YTD) income.
- W-2 (or 1099) Statements for the past two years.
- Tax Returns (1040) for the past two years.
To prove that you have funds for the down payment and the closing costs on the loan, you will be asked of the following:
- Bank Account Statements covering two months or 60 days.
- Investment Account Statements for the last quarter.
- Gift Letters if you receive money from a relative or a friend to assist with the down payment.
You will be required to submit copies of the following:
- Driver License.
- Social Security Card.
- Green Card (For permanent resident applicants.)
As the loan application progresses, the Lender might ask additional documentations on a case to case basis that include, but not limited to, the following:
- Letter of Explanations (LOX).
- Employment Verification.
- Transcript of Records or Diploma.
- Etc.
Loan Qualification
Your Credit Score plays a major role in your ability to secure a mortgage loan and the interest rate that you can get.
Generally, the lower your credit score is, the higher the interest rate lenders will lend you money than that paid by someone with a better credit score.
Some loan programs also have minimum credit score requirement so be sure to consult with your Loan Officer about loan programs that are available for you.
The Debt-to-Income (DTI) Ratio is the numerical representation of how much you owe each month to how much you earn and is used by lenders to determine your borrowing risk.
It is the percentage of your gross monthly income that goes towards the payments for mortgage, rent, auto loan, credit card debt, student loan or other debt.
Different loan programs have different DTI requirements, therefore, your Loan Officer calculates your DTI to determine the best loan program available for you.
The Loan-to-Value (LTV) is the ratio of the amount of money being borrowed to the market price of the property subject to a mortgage.
Lenders use the LTV to assess the lending risk before approving a mortgage loan. High LTV loans, like a conventional loan with more than 80% LTV, would require the Borrowers to purchase a mortgage insurance and would have higher interest rates.
When you get a mortgage, there is a limit to how much you can borrow and this limit is different for every county.
So, even if you are approved individually to apply for a loan with a particular amount, you still need to know how much does the Federal Housing Finance Agency (FHFA) set forth to conform with their standards.
If your purchase price goes beyond the conforming limits, you can still get the loan but you will no longer qualify to a more affordable mortgage loan specifically with conventional and FHA loans.
Click on this link to determine the current loan limits in your county.
Loan Costs
This section will guide you to the costs that you need to pay
If you hear somebody telling you that you need to put up 20% of the purchase price as down payment, that is fake news! The truth is, you do not have to put up 20% DP in most cases.
Different loan programs offer different percentages for the downpayment and here are the most common:
- FHA – 3.5% (Minimum)
- Conventional – 5% (Minimum). However, some lenders offer as low as 3% DP for first time home buyers so please check with your Loan Officer about this program.
- VA – 0% (Minimum). For veterans who will apply for a VA Loan with non-spouse Co-borrower, VA will require a 12.5% DP.
Further, if you do not have enough savings for the down payment, consult with your Realtor® or your Loan Officer for down payment assistance (DPA) programs that may be available for you.
Mortgage insurance is an insurance policy that protects the mortgage lender or the title holder if the borrower defaults on payments, dies, or otherwise unable to meet their obligations of the mortgage.
With an FHA loan, it is called the Mortgage Insurance Premium (MIP) and the borrower needs to get it for the life of the loan.
With a conventional loan, it is called Private Mortgage Insurance(PMI) and it protects the lender. However, upon reaching an LTV of 80%, the PMI will be removed saving few hundred of dollars in monthly mortgage.
On the other hand, VA loans do not require mortgage insurance.
The Upfront Mortgage Insurance Premium (UFMIP) is a unique feature of FHA loans.
It is an insurance premium that is collected, either paid at closing or rolled over to the loan, at the time the loan is made.
UFMIP is added to a pool of money that is used to help FHA insure FHA Loans.
Currently, the UFMIP is 1.75% of the purchase price or the base loan amount (for refinance). So if your purchase price is $350,000, you will be required to pay, upfront, the amount of $6,125 and this will be added to the closing cost (or financed by the loan).
Talk to your Loan Officer about your options.
Borrowers are expected to pay for the cost associated with pulling their credit report. Some Borrowers pay it in advance or pay it at closing as part of the closing costs.
Another expense that the Borrowers are expected to pay is the cost of doing the appraisal of the property. In most cases, it is usually paid in advance using the Borrowers’ credit card.
Talk to your loan Officer about your options.
Closing costs are expenses you pay to your lender in exchange of loan services (processing fees) and can make up about 3-6% of the loan amount.
Some costs are lender requirements, some are government requirements and others may be optional and is a case to case basis.
These costs include application fee, loan origination fee, appraisal, closing fee, courier fee, credit report fee, discount points, escrow funds, etc.
Just remember that you can actually negotiate with a seller to help cover the closing costs, which are called seller concessions.
Talk to your Loan Officer about your options.
Cash to Close refers to the total amount of money that you will need to pay on closing day to finalize the home purchase transaction.
The Cash to Close includes the closing costs and the remaining unpaid down payment.
Some people confuse cash to close with the closing costs. Though they are closely related, they are still different.
Are You Ready to Apply for a Loan Now?
Learning Hub
MIP Reduction for FHA Loans
VA Funding Fee Charge Update
Who Are First-Time Homebuyers?
How Much Down Payment Do You Need?
What My Clients Have to Say?
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