Mortgage Calculator

The procedure of applying for a mortgage requires lots of details which results will necessitate significant amounts of paperwork.  The first requirement is filling out the application form, including comprehensive information about you, your employment record, the house you want to purchase, etc.

At this point you will need to supply the lender with personal financial records such as earnings statements, your debts, and any monthly expenses. This helps the lender to determine your willingness and ability to repay the mortgage.

Credit bureaus inform lenders if you pay your bills on time. You can expect your lender to consult with at least one of them. Because a lender could reject the application for poor credit history, it is very important to make sure your credit history is accurate prior to applying for your mortgage. As your credit is an integral part to the mortgage process, you need to know what information is contained in your credit profile and the credit bureaus should have someone to help you understand each item. All of the names of the credit bureaus can be found in the phone book.

The first step in calculating your mortgage payment involves how much you want to borrow.  The property value and your personal financial condition decide what your maximum loan amount will be. After ratification, a real estate appraiser will be asked by the lender to give an opinion about the property’s value to get the initial estimate. Payment may sometimes be due at the time of completion or on the HUD-1. Whether or not you qualify for the size of mortgage you want may largely depend of the appraiser’s results.

Your lender will usually expect you to contribute a down payment to the sales price that will make up the difference of between the appraised value and the amount the lender supplies, which are usually 80 or 90 percent. In some cases the appraisal value might be below the asking price of the home, which could make your down payment and lender amount insufficient to cover the purchase price. When this happens, a lender may suggest that you increase the size of the down payment to make up the difference between the purchase price and the appraised value. Your Buyer Specialist and loan officer can offer advice on your unique situation.

You will also be asked to provide specific documentation with regards to your income such as pay stubs, W-2’s, bank statements, account numbers, and current debts with creditor’s addresses. You will also need to have the purchase contract available. To get an approximate completion date, it is important to ask the lender how long the process will take when you file your application.  Timing may vary according to loan type, complexity of your mortgage, further information that may be required and recently updated lender guidelines. Your lender may take up to between 30 to 40 days after they receive all the necessary information and applications for FHA or VA loans may take longer. Being organized at the beginning will help streamline as much as possible and keep the timeline on track.

If for some reason your application is turned down, the Federal Law entitles you to receive in writing from the lender the specific reasons for the denial. It is very important that you understand the reasons given as you may be able to find answers or alternatives that will satisfy the institution’s lending standards. While you might not be able to continue the application with that lender, the reasons the loan was denied may improve your chances with the next lender you visit. Typically these three factors, down payment, appraisal, and credit history are the ones that will largely affect the loan decision.

• Down payment
  Do you have a sufficient amount available for your down payment? If not, there is a chance that the lender has other types of mortgages with lower down-payment requirements available.
• Appraisal
  Does the appraisal value greatly differ from the purchase price or loan amount? The appraiser might have undervalued the property if you can find similar houses in the neighborhood that have sold at prices comparable to yours. This would be a good time to suggest that the lender reexamine the appraisal.  If you have paid for the appraisal, you also have the right to receive a copy of it.
• Credit history
  If your credit history or debt to income ratio is giving your lender some doubts, ask how your debt ratios compare to their standards. Hopefully, you have checked your credit history and are aware of any potential problems. If this is so and there were special circumstances surrounding old credit problems, ask for a chance to explain.

* Different lenders have different levels of strictness when it comes to lending standards.  Shopping for the best mortgage package that meets your financial needs could result in major savings and less headaches down the road. Don’t let one unsatisfactory experience stop you, try someone else.

Your loan can come from varied sources such as a loan from a bank, a savings and loan, credit union, private mortgage company, or various state and national government lenders. There are many different types of loans available to purchasers these days. A few of the more common ones include programs with conventional fixed rate loans, adjustable rate mortgages, buy downs, VA, FHA, graduated payment mortgages and all the varieties of each. Consult with your Loan Officer and Real Estate Agent to decide what is the best choice for you. DDA preferred lending partners offer an array of options to meet your needs.

Conventional Loans :  With Conventional loans your lender can get more creative with the type of programs available. Options that affect these programs are down payment percentages, private mortgage insurance(PMI), and closing cost contributions which is explained in detailed a little bit further down

Adjustable Rate Mortgage (ARM) :  An adjustable rate mortgage usually starts out with lower interest rates and monthly payments than with a fixed rate. However, your rate and payment can fluctuate up or down as often as once or twice a year. The fluctuations are generally tied to a financial index such as the one-year U.S. Treasury Bill, the Cost of Funds Index.  While you must be continually aware of the changing rates and its effects on your financial situation, the trade off is that you may be able to buy more house for your money. There are also different types of ARMs with set periods of fixed year payments available. However, not all lenders offer this option. It is important to note the references for this type of mortgage including the caps, the index, the margin, and any possible negative amortization.

Buy Downs or Two Step Mortgage :  Both of these types of mortgage start you off at one rate and increase it over time. While it’s true you likely end up paying more in throughout the years, if it's your first home, the assumption is your salary will move up within a few years due to financial growth.   In addition the difference between the buy down rate and actual rate can be paid by the seller, the buyer, the homebuilder, or in some cases, the lender (usually offset with increased rates or in points).

Fixed Rate Mortgage :  This type of mortgage secures your interest rate for the term of the mortgage, no matter the length typically ranging from 15, 20, or 30 years. Fixed-rate mortgages are generally popular with first-time home buyers as they are more straightforward and easier to understand. They generally have higher interest rates than some other mortgages due to the increased risk to the lender. Nevertheless, an extra payment a year can effectively reduce the principle thereby eventually reducing the amount of interest owed over the life of the loan. Talk to your lender for more details.

Veterans Administration (VA) :  VA loans have several benefits however to be eligible for a VA Loan you must be a Veteran and have your Certificate of Eligibility from the VA. VA has fixed rates and buy-downs and sometimes very attractive down payment, and mortgage insurance options. Ask your lender about their required funding fee and how it should be applied to your loan.

Federal Housing Administration (FHA) Insured :  FHA’s have the Federal Government insure the lender against loss should the home buyer defaults on the loan. Initially, this loan was to enable buyers to purchase a home who could not meet the expense of the larger down payments required conventional lenders.  Today however, FHA’s are increasingly becoming more popular with purchasers even with the required mortgage insurance premium (MIP) on ALL their loans.

Graduated Payment Mortgage (GPM) :  GPM payments increase gradually for an established time period, typically five years and is a negatively amortizing loan. Negative amortization means that the difference between the interest paid and the interest due is deferred and added to the loan balances. This loan becomes more attractive when interest rates are higher which provides incentive for the buyers who expect their incomes to increase over the life of loan. This is because your loan amount will increase once you start paying off the loan and then amortize normally at the end of the loan period.

Loans have a wide degree of payment terms but the most common are the 15 yr and 30 yr loan. The shorter the loan means a higher the payment with lower interest paid and vice versa. Purchasers should consider which option is the most financially viable for their situation.

Loan originated fees are also sometimes known as mortgage points are the fees incurred when originating a new loan. This is paid to the lender who initiated and completed the loan transaction with the homeowner, and is paid out only if and when the loan funds. Most, but not all, brokers and banks charge origination fees and if you shop around you may be able to avoid them. Discount points, another form of prepaid interest, depend on your interest rate. Typically one point equals one percent of the loan amount . Settlement attorney's fees mainly cover expenses accrued for document preparation such as the title search, title insurance binder, and courier fee to/from lender.

Title searches research any potential liens and easements on the property as well as the legal identity of the seller and owner of the property.  While some title searches may reveal problems, the most common kinds can be cleared before a delay in settlement occurs. Lenders have fees that include underwriting, a tax service fee, and their document preparation fee. If the lender requires title insurance, it usually only covers your loan amount, however full sales price coverage is also available. This insurance is highly advised due the fact that a title search can be flawed by human error. Some title companies offer incentives that include title insurance if you use their services.