If you’re looking for personalized service, instead of a call-center home loan, you might want to check out Summit Mortgage.
The privately-owned direct lender was started by husband and wife loan originators Diana and Robert Carter way back in 1992.
The goal was to create a business from an originator’s point-of-view, focused on providing an “unparalleled homebuying experience.”
That meant identifying the traditional pain points of getting a home loan and taking steps to avoid them.
After all, buying a home is supposed to be an exciting moment, one they believe shouldn’t be overshadowed by a miserable mortgage experience.
Summit Mortgage Fast Facts
Direct-to-consumer mortgage lender
Offers home purchase loans and mortgage refinancing
Founded in 1992, headquartered in Plymouth, MN
Licensed to do business in 17 states
Funded more than $6 billion in home loans last year
About two-thirds of last year’s volume was home
Summit Mortgage Corp. is a direct-to-consumer mortgage lender that offers home purchase financing and mortgage refinances.
The Plymouth, Minnesota-based company got its start way back in 1992, making them one of the older lenders in existence.
Last year, they produced more than $6 billion in home loans, with a 67% home purchase share and 33% refinance share.
This tells me they have strong relationships with local real estate agents, and the ability to close loans on time.
Summit Mortgage is a big-time mortgage lender in their home state of Minnesota, which accounts for about 40% of total production.
In fact, they ranked 6th there in 2021 behind only the big players such as Rocket Mortgage, U.S. Bank, and Wells Fargo.
They are also very active in the states of Florida, Pennsylvania, and Colorado.
At the moment, the company is licensed in 17 states nationwide, including California, Colorado, Florida, Idaho, Minnesota, Montana, New Jersey, North Dakota, Oregon, Pennsylvania, South Dakota, Texas, Utah, Virginia, Washington, Wisconsin, and Wyoming.
For the record, they are known as “Summit Home Mortgage” in the states of Oregon, Utah, and Washington.
How to Apply with Summit Mortgage
To begin, you can visit their website to find a loan officer near you. Their online directory allows you to search by property location or loan officer name (if you’ve been referred).
You can review profiles online and obtain licensing and contact information. Once you find the individual you want to work with, you can apply for a home loan directly from their personal webpage.
When you’re ready to move forward, you’ll be prompted to create an “Ascent App” account, which will also give you the option to download a free smartphone app.
Whether you apply on a computer or smartphone, there is an easy to follow step-by-step application process.
Benefits of using the app include a document scanner to upload required paperwork, along with a built-in auto-save feature.
The Ascent App will automatically save all data entered so you won’t need to re-enter fields that have already been completed.
And you can even take a break and return to the loan application from a different device, which allows you to work at your own pace.
It’s all powered by SimpleNexus, a leader in the digital mortgage space.
Aside from a digital application, you should be able to eSign disclosures and closing documents, message your loan officer, and track loan status from start to finish.
Your Summit Mortgage loan officer can also get you a pre-approval letter if you’re currently shopping for a home.
To that end, Summit Mortgage also offers a $10,000 underwriting guarantee in which they’ll pay the seller $10k if your loan doesn’t close.
This can help your offer stand out in a competitive housing market or even compete with all-cash buyers.
Summit Mortgage Rates
But before you begin the application process, it might be wise to get a mortgage rate quote.
There is a rate quote request form on the Summit Mortgage website, but it’s probably quicker just to call a loan officer directly.
Once you give them the details of your loan scenario, they’ll be able to provide a real-time mortgage rate quote.
Be sure to take note of any lender fees associated with your rate, such as an application fee or loan origination fee.
Also pay attention to any discount points required for the quoted rate, as they will increase your closing costs.
Unfortunately, Summit Mortgage doesn’t list daily sample mortgage rates on their website, nor do they list their lender fees.
So you’ll need to get all these details from a loan officer before you proceed.
Take the time to shop around and gather quotes from other banks, lenders, and mortgage brokers to ensure they are competitively priced.
Loan Programs Offered by Summit Mortgage
Home purchase loans
Refinance loans: rate and term, cash out, streamline
Home renovation loans: FHA 203k and Fannie Mae HomeStyle
Down payment assistance: State grants and tax credits
Fixed-rate and adjustable-rate mortgages in various loan terms
Summit Mortgage Corp. offers a wide range of loan programs to suit aspiring home buyers and existing homeowners.
If you’re short on funds, they can tap into a variety of down payment assistance programs to help you across the finish line.
Those who are purchasing a fixer-upper can take advantage of programs like Fannie Mae’s HomeStyle Renovation or the FHA 203k loan program.
They got the full suite of government-backed home loans available, including FHA, VA and USDA.
And jumbo loans are a possibility if you’re purchasing an expensive home.
All major property types are acceptable, including single-family homes, condos/townhomes, vacation homes, and investment properties.
Both fixed-rate and adjustable-rate mortgages are available in various loan terms, such as 15-year mortgages and 5/1 ARMs.
In short, you should have plenty of options to choose from no matter your personal situation or preference.
Summit Mortgage Reviews
On Experience.com, Summit Mortgage has a solid 4.94-star rating out of 5 from roughly 15,000 customer reviews.
You can fine-tune those reviews by individual if you want to narrow down your list of loan officers.
They have an even better 4.98-star rating on Zillow from over 1,500 reviews, which is pretty much flawless.
But wait, there’s more! A perfect 5.0-rating from over 250 Google reviews, along with a 4.9-star rating on Trustpilot from about 500 reviews.
Additionally, they are an accredited company with the Better Business Bureau (BBB) and currently hold an ‘A+’ rating based on customer complaint history.
In closing, Summit Mortgage appears to be a good candidate for home buyers thanks to their personalized service, $10,000 underwriting guarantee, wide range of loan programs, and many 5-star reviews.
If their pricing is also on point, they could be an excellent choice for an existing homeowner in need of a refinance as well.
Summit Mortgage Pros and Cons
Can apply for a home loan online or via smartphone
Californians looking to buy a house face some of the country’s most expensive real estate prices and wildfires that threaten scores of housing tracts. Now there’s another obstacle: finding an insurer willing to cover their dream home.
State Farm General Insurance Co. said it’s no longer accepting new applications for property and casualty coverage in California last week, a year after Allstate Corp. also paused new policies, worsening what FAIR Plan, a state-mandated insurance pool, called a “looming insurance unavailability crisis.”
“We have a lot of people going naked, which means they have no insurance,” said Bill Dodd, a Democrat state senator representing fire-scarred Napa County and other parts of Northern California. “What my constituents want is insurance.”
The FAIR Plan, which offers minimal coverage and high rates is meant to be a provider of last resort, but enrollments have surged 70% since 2019 to 272,846 homes in 2022.
It’s a blow for the nation’s most populous state, which is already struggling with an exodus of residents, many of whom are escaping the high cost of living.
The Golden State is grappling with a roughly 1 million-unit housing shortfall, in part fueled by rising costs and zoning restrictions that have choked off new construction projects. On top of that, a series of catastrophic wildfires in recent years have increased calls from insurers to weaken the state’s consumer-friendly policies that have held down rates for decades.
The average homeowners’ policy is $1,300 in California compared to over $2,000 in other states with wildfire risk and $4,000 in hurricane-prone Florida, according to Insurance Information Institute.
But new home buyers could be forced to pay more, regardless of their home’s proximity to wildfire dangers. Before State Farm’s announcement, the company requested a 28% rate hike on homeowners’ insurance, while Allstate has filed for a 39.6% increase.
The insurance crunch is affecting buyers across the state already, even in areas where the wildfire risk is low. In San Francisco, realtors say they have seen deals fall through because would-be buyers couldn’t get insured.
“What we’re hearing is that now, when buyers present an offer on a property we’re not only asking them for pre-approval for a lender, we’re also asking them if they’ve spoken to their insurance agent if they’ll insure the property,” said Joske Thompson, a realtor at Compass Inc. with 40 years experience in the area.
Home insurance is an essential step of purchasing a home. Mortgage lenders generally require proof of insurance before approving the transaction to protect their investment in the property. Without insurance. buyers would be forced to make an all-cash purchase in most cases.
Finding a Compromise
As the state’s insurance woes accelerate, the industry is taking aim at California’s marquee consumer protection law, Proposition 103, a ballot measure voters approved in 1988. The law has saved consumers tens of billions of dollars in reduced insurance rate hikes, according to the state’s insurance regulator.
“In the last six years, we lost 20 years’ worth of underwriting profit, and that was due to the catastrophic wildfires that we’ve faced,” said Janet Ruiz, a spokesperson with the Insurance Information Institute.
Harvey Rosenfield, the author of Prop 103 and founder of the Consumer Watchdog advocacy group, said climate change might require insurance companies to raise rates, but he argued that companies are using wildfire impacts to gouge customers.
“Insurance companies are very opportunistic,” he said. “They have seized on climate change as an excuse to escape from the regulatory protections that voters enacted.”
State lawmakers and industry representatives must find a compromise that would keep the insurance market viable while protecting consumers from excessive rate hikes, but that may mean Californians will have to pay more for home insurance in the future, said Dodd.
“You bite the bullet and you move forward,” said Dan Dunmoyer, president of the California Building Industry Association. Without rate increases, more insurers may leave the state, affecting everything from mortgage lending to housing supply, he said.”You have a market that is teetering on collapse.”
Mortgage Rates Too High? (Blame the Fed, Wall Street and Your Neighbor.)
Lenders use several bits of data to set mortgage rates, including trading moves by investors. Without market volatility, the rate could be under 7 percent.
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Nov. 3, 2022
Mila Adams moved to Utah in May with her husband and toddler son to be closer to family, but they didn’t expect to be living with her husband’s parents nearly a half year later.
The couple’s search for a home of their own became a race to stay ahead of the rapid rise in mortgage rates. Each time rates climbed — passing 5, 6 and, recently, 7 percent — the size of the houses they could afford shrank.
“We looked at some new builds and some older homes, but it seems like with every rate hike our buying power goes down, and we have to readjust our budget,” said Ms. Adams, 29, who was looking for a three-bedroom house roomy enough for a family with plans to grow. “The high prices of homes are not going down as quickly as the rates are going up to adjust for that loss of buying power. The prices are just kind of stubborn.”
Once rates crossed 7 percent, the couple’s mortgage pre-approval was rescinded because the costlier loan, combined with her husband’s student debt from dental school, would have pushed their debt level too high.
which recently crossed the 7 percent threshold before retreating slightly on Thursday, could be as much as a full percentage point lower if investors, homeowners and prospective buyers hadn’t been shifting their behavior so sharply in reaction to the Fed’s moves.
“A whole percentage point on your mortgage rate is due to what is going on in mortgage markets,” said Scott Buchta, a mortgage analyst at Brean Capital. “The volatility in the market has been passed through to consumers as well.”
Tara Siegel Bernard covers personal finance. Before joining The Times in 2008, she was deputy managing editor at FiLife, a personal finance website, and an editor at CNBC. She also worked at Dow Jones and contributed regularly to The Wall Street Journal. @tarasbernard
A version of this article appears in print on , Section B, Page 1 of the New York edition with the headline: Taking Stock Of Climbing Home Rates. Order Reprints | Today’s Paper | Subscribe
Credit card pre-approval makes signing up for your first credit card a lot easier.
The credit card marketplace is crowded, and every issuer is advertising to get your attention. But they may not tell you (or only tell you in the fine print) which cards you’re actually likely to get approved for, or which will score you the best interest rates.
A little research into good credit cards can help you cut through the noise, and the pre-approval process helps you narrow down which cards are the best fit for your (cloth or virtual) wallet. It’s a low-risk opportunity to pick the credit card with the features you want — and to make sure you qualify.
What is pre-approval?
Credit card companies are always on the lookout for new customers. One way they find potential cardholders is by pre-screening credit reports from the major credit bureaus.
They identify consumers whose credit scores and reports are in the ballpark of what the company looks for — like no bankruptcies, no delinquencies for several months, and a score below the company’s minimum cutoff.
Then they’ll send a pre-approval card offer to these consumers.
It’s important to remember that pre-approval doesn’t mean you’re automatically qualified for the card. But it does mean you’ve made the “first cut” by fitting the credit card issuer’s most basic requirements.
What’s the difference between pre-qualification and pre-approval?
Some issuers use the term “pre-qualified” instead of “pre-approved.” Though these terms are sometimes used interchangeably, they describe different types of offers based on who initiates the process.
Pre-qualification for a card means the customer (you) makes the first request.
If you’re interested in a specific card, you can go to the company’s website and fill out some basic info. The company responds by showing you the cards and offers you might qualify for if you made a formal application. At that point, you’re “pre-qualified” and can decide whether or not to apply.
Or a lender may invite you to find out if you pre-qualify for their card (through an advertisement, for instance). This isn’t pre-approval, since the lender hasn’t screened your credit yet to see if you’ve made the first cut.
Pre-qualification may be the route to take if you’re brand new to credit — without a credit score, you’re probably not getting on pre-approval mailing lists.
Pre-approval means the credit card company reaches out to you first because you meet their basic requirements. Once they’ve scanned consumers’ credit scores, they let certain consumers know they’ve been “pre-approved.”
Lenders often tap into their existing customer base to find people to pre-approve, as well. If your current bank is rolling out a new credit card, for example, they might send you a pre-approval offer.
Which is better, pre-approval or pre-qualification?
Neither of these processes is better than the other, or more likely to get you final approval. They’re just different ways to review your credit card options.
For both pre-approval and pre-qualification, you’ll go through a soft credit check — a check that doesn’t impact your credit score. This means both processes are relatively risk-free.
The hard credit check, the one that knocks a few points off your score, doesn’t happen until you fill out the longer application for the card.
Read more: Soft pull vs. hard pull – how each affects your credit
How do I get pre-approved for a credit card?
Respond to an offer from a credit card company
If you have time to pick a card and don’t have a lender you prefer, you can wait for the credit card company to come to you.
Companies do still send offers by snail mail, though not as much as they once did. So it’s worth taking a look at any mail offers before dropping them in the recycling bin.
Pre-screened offers are different from the general mailings that companies send to everyone on their marketing list. Look for the words “pre-approved,” “pre-qualified,” or “pre-screened.” The offer may include an invitation code you’ll need to apply for the card online.
One advantage to applying for a pre-approval offer is that they’ll sometimes give you an introductory deal associated with the offer, like a sign-up bonus or a few extra months of 0% interest.
These deals aren’t always advertised to the general public, so they’re a nice pre-approval perk.
Request pre-qualification on a credit card company’s website
Inquiring about a pre-qualification offer may be the best way to get credit card pre-approval if:
You’re new to credit and opening your first credit card.
You’re rebuilding a low credit score.
You want to go through a certain bank or apply for a specific card, and you haven’t received an offer.
You want to check out a wider range of card options.
Most major card issuers that offer pre-qualification have an online link to a simple form. Usually, you won’t enter more than your:
Date of birth.
Social security number.
Why is it important to get pre-approved or pre-qualify?
If you’re shopping around and considering lots of different cards, pre-qualification is a risk-free way to compare initial offers before you fill out any applications.
The pre-approval stage allows you to:
Rule out any cards or issuers that you don’t qualify for, so you don’t waste time applying.
Figure out the interest rate range you’re likely to get.
Compare potential sign-on bonuses, loyalty rewards, and other credit card features.
Double-check the card company’s requirements for cardholders, which are more detailed than their pre-approval requirements.
When you take the next step of a formal application, you’re officially applying for new credit. This means the company is required to run a hard credit check. They’ll ask your permission first.
Hard credit checks do show up on your credit score, usually knocking it down only 10 or 20 points. That’s not a huge deal if it happens once in a while.
But if you apply for credit pretty frequently — more than two or three times in six months — your credit score takes a bigger drop.
With pre-approval, you can make sure you’re only committing to the hard credit check if you’re likely to be approved for new credit.
Picking the right credit card to apply for
As a savvy MoneyUnder30 reader, you probably know this already, but I’ll remind you just in case: pre-approval or pre-qualification doesn’t mean the card is the best fit for your needs and lifestyle.
First, spend some time figuring out what you want in a credit card. I suggest asking yourself questions like:
Are you likely to use it for big expenses like travel, or everyday costs like groceries?
Do you want a card where the rewards category matches up with the way you spend?
Is your main goal to start building credit?
Once you know what’s important to you, you can use the pre-approval process to find cards that are a good match.
This is especially helpful if your credit card pre-approval offer suggests multiple cards from the same company. These cards will all have slightly different terms, so take the time to do your research about their differences.
Read more: Best credit cards for young adults & first-timers
How do you apply for a credit card after you’re pre-approved?
The pre-approval or pre-qualification process doesn’t require much info.
You’ll usually enter your name, birth date, address, and your social security number (either the last four digits or the whole number) to confirm your identity.
The official application is a lot more thorough. At a minimum, be prepared with:
Income information. You may or may not need to submit proof of income, depending on the issuer. But you’ll at least have to estimate how much you earn every year.
Housing payment information. This should include how much you’re paying in rent or mortgage a month.
Income details for a co-signer, if someone is co-signing for the card with you.
Read more: How to apply for a credit card (and approval requirements)
What credit score do you need?
It depends. There’s no minimum score that applies to all issuers, so if you have any credit at all, it may be possible to pre-qualify for a card. Of course, the better your credit is, the more offers will be available.
If you don’t have a credit history, it’s a little trickier. Some card issuers consider alternative credit data, like income and work history, to determine financial responsibility.
Read more: What credit score do you need to get approved for a credit card?
After you get approved
If you make the final cut and get approved, not just pre-approved, it’s time to double-check your card terms.
Credit card companies are required to provide the same terms listed in the initial pre-approval offer if they accept you. This means you should get the same interest rate, fee, or bonus that was stated in the offer. Many pre-approvals show a range of interest rates, so they’re required to give you a rate somewhere within that range.
Read more: The best credit cards – MU30’s top picks
Are you guaranteed approval when pre-approved for a credit card?
Not necessarily. A pre-approval or pre-qualification is an invitation to apply, not a guarantee of acceptance. It means there’s a strong chance you’ll meet the standards for cardholders, but the lender needs to know more before actually extending you credit.
Can you get denied after pre-approval?
Remember, pre-approval is just the first step in the process. You can get denied after submitting a formal application, even if you were pre-qualified or were pre-approved.
According to a 2019 report, only around 40% of credit card applicants made the final cut and got approved for a card.
When you officially apply, you’re giving credit card issuers a lot more information about your financial status than you did in the pre-screening stages. This means they’ll judge you a little more strictly.
Here are some of the most common reasons pre-approved candidates get their applications declined:
Your monthly or annual income doesn’t meet the issuer’s minimum cutoff.
Your reported payments are too high relative to your income.
Your credit data has changed significantly since the pre-approval offer.
You’ve taken on debt or missed several payments since the pre-approval offer.
Your income has dropped since the pre-approval offer.
The lender should send you a letter telling you why they made the decision, so it won’t be a mystery.
What if I can’t get pre-approved for a credit card?
If you don’t get any card pre-approvals or pre-qualifications, don’t sweat it. Credit lenders may be looking for cardholders who fit a particular financial profile, and that doesn’t reflect on your general creditworthiness. You still have a number of options.
Try pre-qualifying with another credit card company. Their terms may be more generous or suited to what you need.
Apply anyway. This is a risk because the issuer will run a hard credit check. But if you have stable employment, good income stats, or a co-signer with strong credit, these factors may make up for a less-than-perfect credit score.
Work on improving your credit. Make rent, bill, and loan payments on time. If you’re brand new to credit, you can take out a credit builder loan (as long as you’re able to pay it back on schedule!). Or ask a trusted family member or partner if you can be an authorized user on their account.
Read more: How to build credit the right way
Apply for a secured credit card
For credit newbies, secured credit cards are a nice bridge into the world of credit, and a lot of major card issuers offer them.
You’ll “secure” the card with a deposit — this amount can vary, but think around $200 — which gives you access to a credit line up to that amount. Then you spend just as you would on any other card.
After several months of responsible use, you’ll usually be eligible to transition to an unsecured credit card from the same company.
Read more: Best secured credit cards
Credit card companies that offer pre-approval
Most of the bigger credit card names have pre-approval or pre-qualification forms that are easy and quick to fill out online.
Keep in mind you may not be able to seek pre-approval for every card in the lender’s collection, but they’ll offer a decent range of cards to choose from.
Whether you’re getting your first credit card or adding one to your collection, it’s worth going through the pre-approval process first. You’ll save time, preserve your credit, and hopefully end up with a great card that will help you achieve financial stability.
If you are looking to buy a house, I have a bunch of home buying tips that will help you sort through all of your options, understand the real cost of a home (and help you save money), and make the right choice.
Buying a house is a huge purchase.
In fact, it is usually the largest purchase a person will ever make.
The median U.S. home value is $226,800 and the median price of homes currently listed is $291,900, according to Zillow. And, there are some areas that have much higher average home prices, like four to five times more.
Purchasing a house is a huge commitment, and it’s easy to get excited and forget to think about some very important things before plunking down a huge amount of money. There are just so many factors to think about, and not everyone will have the same concerns.
To help you through the home buying process, today’s post is going to be like a mini first time home buyer guide. I’m going to cover some of my best home buying tips, like:
Whether or not you should rent instead of buy
How to set a budget (one of the most important steps to buying a house for the first time)
Deciding what you want in a home
How to research the true cost of a house
Thinking about how long you’ll live in an area (recouping your costs)
How to avoid feeling rushed
Do you really need the house you’re about to buy
Whether you are a first time home buyer or if this is your second house or more, these are all things you should be thinking about.
Actually, these are the exact same things me and Wes have thought about before buying our sailboat and RV. They might not be “normal” homes, but they are what we live in. Plus, they are still very large purchases that need to be carefully thought out.
The home buying tips that I’m about to give you are to help you analyze what’s best for your situation – whether that’s a 5000 sq. ft. house, a 500 sq. ft. tiny home, an RV, a condo, etc.
I’ve said it already, but buying a house is a large purchase! And, everyone has felt that dreadful feeling that comes after making a large purchase and realizing that you have made a mistake. Perhaps you don’t realize for months or years later, but you eventually understand that you should have thought out your purchase a little bit more.
No one wants to feel this way after buying a house!
Articles related to buying a house tips:
Here are my best home buying tips.
Should you rent instead?
Before we started RVing, we sold our house and rented one for a little while. This raised quite a few eyebrows and led to questions about renting vs. buying from nearly everyone.
I even had several people tell me that I was making a stupid mistake.
I wasn’t surprised, though. Many people believe the myth that if you are renting a home you don’t know how to manage your money and that buying is always better, no matter what.
That couldn’t be further from the truth.
Sometimes buying can be the better decision, but there are times when renting can fit a person’s situation much better.
Buying a house can have a lot of positives, but that doesn’t mean it’s the right step for everyone.
To determine if renting is better for you, you’ll want to think about things such as:
How long you think you’ll live in the area.
Whether or not you’re ready to purchase a house, financially and/or responsibility wise.
Buying a home sometimes may be cheaper than renting, and the other way around.
Nearly everyone says that a house is a good investment. Many people will even go as far to say that doing anything other than owning a house would be a complete waste of money.
However, I don’t agree with that at all.
Buying a house isn’t for everyone. You shouldn’t just jump at the opportunity to buy a house, especially any ol’ house. And, you should think about all of the factors before deciding that buying a house over renting one is the best and only decision for you.
For home more renting vs. home buying tips, please read My Opinion Of The Great Renting vs Buying Debate for more information.
Set a budget before you look at homes.
“What’s the smartest way to buy a house?”
The smartest way to buy a house is to first think about your budget.
One of the first things you will want to do is to set a budget – you can’t go very far in the home buying process without one. It’s how you will know what you want to be pre-approved for, and a realtor will need that information to really help you shop for homes.
You will want to set yourself a budget when it comes to the home as well as all of the other expenses that go along with owning a home.
You will want to look at your overall financial situation and analyze:
The income you earn.
The stability of your job.
The amount of money you have saved for the down payment, other home expenses, etc.
Your credit history and credit score.
The total monthly amount you feel comfortable paying for a home. Make sure you look at all the costs involved!
Your total amount of debt.
When buying a house, it takes realizing all of these factors to understand what you can truly afford and be comfortable with.
However, many people justify buying a house that is over their budget, but that is a bad plan.
See, banks often pre-approve people for a mortgage payment that is higher than what they can afford to pay. You pre-approval number is not a good gauge of what you can afford because it doesn’t factor in the total cost of the house.
What you can afford takes that above list into consideration, not just the number a bank gives you. Because of that, it can be a very bad idea to go over the number the bank pre-approves you for. You should always stick to an amount that you can afford.
When determining what you can afford, you will want to think about ALL of the costs that come with buying a house and living in it. This means that your research should not end with the purchase price of the house – it actually goes way past that, as discussed in a later section of my home buying tips.
Think about what you want in a home.
If you are like most people, you’ve spent years thinking about what you want in a home.
Now is the time to make a list of those things. This is an important step when it comes to home buying for beginners.
Buying a house can lead to a crazy amount of new feelings – happiness, stress, excitement, and more. This can sometimes make every house you look at seem like the perfect one, and that’s because they all seem so new and exciting. This even happens with houses that don’t have everything you need. And, it definitely happens with ones that have more than you need.
Before you put an offer on a house, you should think about the reasons for why you want a specific house. This is one of the first steps to finding a house that’s right for you, as this can make sure you are getting exactly what you want and need, rather than just being happy with any home.
I recommend creating a wish list that includes all of the things you want in a home. Your wish list could include things like:
The square footage of the home
Size of yard
If you want a fenced in yard
How many bedrooms and bathrooms you desire
The age of the home
The quality of the schools
The parking situation and whether or not there is a garage
The size of the kitchen
Pool or no pool
Style of home
Whether you want to be in the country or the city
Your budget, and this one is extremely important!
And, you’ll also want to create a list of things that you want to stay away from, such as if you don’t want a place with a pool, a home with a lot of yard maintenance, a home that is a fixer upper, and so on.
By having this wish list on hand, you’ll know exactly what you should be looking at, and what you should avoid.
Research all of the expenses.
Like you just read, the listing price of a home is not all that you should look at.
When you find a home that you think is right for you, you need to make sure that you can afford all of the costs that come with that home.
Just because you can pay the monthly mortgage payment doesn’t mean that you can afford everything else that goes with it. There are ongoing costs when buying a house, which is something that many homebuyers forget about.
In fact, U.S. homeowners, on average, spend more than $9,400 per year in hidden homeownership costs, and maintenance expenses cost homeowners an average of $6,300 per year in unavoidable hidden costs, according to MarketWatch. These include things like homeowners insurance, property taxes, and utilities. So, this is one of the best home buying tips to help you stay out of a bad financial situation.
Before making a home purchase, you should think about how much the home will cost you in the long run. There are many ways to think of this, such as:
Property taxes. These vary widely from town to town. You may find yourself looking at two similar houses with similar price tags, but the property taxes may vary by thousands of dollars annually. That is a LOT of money. While it may seem small when compared to the actual home purchase price, remember that you have to pay property taxes annually, and a difference of just $3,600 a year is $300 a month.
Gas. Many homes use gas to run the hot water heater, the stove, and so on.
Electricity. Generally, the bigger your home, the higher your electricity bill.
Sewer. This isn’t super expensive, but it is generally around $30-$50 a month.
Trash. This isn’t super expensive either, but it does cost money.
Water (and possibly irrigation). Depending on how you use water and where you live, water bills can vary widely. I know many who live in areas where the average water bill is a few hundred dollars each month.
Home insurance. Home insurance can be cheap in some areas but crazy expensive in others. Don’t forget to look into the cost of earthquake, flood, and hurricane insurance, and know that it can add up quickly depending on where you live.
Maintenance and repairs. No matter how old your home is (even brand new homes), repair and maintenance costs will eventually come into play. In fact, U.S. homeowners pay an average of $3,435 per year in annual optional costs, including house cleaning, yard care, gutter cleaning, carpet cleaning, and pressure washing. But, don’t forget about things like needing a new roof or other repairs that may come up! Those are big expenses that you will need to be able to save up for.
Homeowners association fees. This can also vary widely. You should always see if the house you are interested in is part of an HOA. Often, the fees are high and involve rules you may not like.
Home furnishings. Furnishing your home can be done cheaply, but I know some who buy huge homes and can’t afford to put anything in them, such as a table, a bed, and so on. Why own a $500,000 house if you don’t have any furniture?
Always remember to add up the total cost when deciding to buy a house!
Estimate how long you will live in the area.
This is one of the home buying tips you might not think of because you are so anxious to be moving. How could you possibly think about moving again already?!
One of the best tips before buying a house is to think about how long you will live there.
Here’s why this is important to think about – it usually takes around five years to recoup the costs you paid to purchase a house. If you only live in a house for one or two years, then you may lose money on closing costs, due to the volatility of the real estate market, and more. Plus, it usually takes some time and legwork to buy a house, so you may not want to do it again so soon.
This is why you’ll want to think about how long you’ll be living in the area before you purchase your home.
You’ll want to make sure that the house will be suitable for you for at least five years, so you’ll want to think about things such as:
Are you happy with the area?
How are the schools?
Is the house big enough if you plan on starting a family?
Do you plan on working in the area for at least 5 years?
And so on.
You really need to think about your future when deciding to buy a house.
Don’t feel rushed.
“How long should you give yourself to buy a house?”
This is one of the home buying tips that is hard during a seller’s market, which is what’s happening in many areas right now. Knowing that homes are selling very quickly, you may feel rushed to find a house and put an offer in.
It’s also tempting to jump on a house the minute you find something you like, but if the purchase can wait 24 hours, then you may want to delay it. This will allow you more time to think about the purchase, go over your budget again, let any butterflies you have about the home purchase go away, and so on.
You will be able to make a much more rational decision if you think about your decision for at least 24 hours.
Plus, for all you know, you may even realize that you don’t want the house at all!
Do you really need or want that home?
“How do you make sure you get the house you want?”
Finally, the last of my home buying tips is to think about whether or not you actually need the house you are about to buy. It sounds easy enough, but many people do not even think about asking this question. When in fact, it is one of the most important questions to ask when buying a house (or any large purchase for that matter).
Really dig deep and ask yourself this simple question. Sure, you might think you want the house, but have you also been able to spend time thinking about the rest of my tips?
Do you know the full cost of the house? Are you okay spending that much? Does the house have everything you need?
Purchasing a home is a huge investment, and it deserves a lot of time and thought for you to make the best decision.
Have you bought a home recently? What other home buying tips should people think about?
The home-buying process can seem daunting for first-time homebuyers. The good news is there are some mortgage lenders that offer home loan products designed to provide more ease with the process, which can be very appealing to many first-time future homeowners.
To help you get started, CNBC Select rounded up a list of the best mortgage lenders first-time homebuyers should consider. We evaluated home loan lenders based on the types of loans offered, customer support, credit score requirements and minimum down payment amount, among others (see our methodology below.)
Beyond just the lowest rates, it’s important to go with the lender that offers the best loan terms to suit your needs. There’s a learning curve when it comes to homeownership, but we’ve included an FAQs section below to help you get a better understanding of some aspects of the process.
The best mortgage lenders for first-time homebuyers
Best for loan variety
Annual Percentage Rate (APR)
Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included
Types of loans
Conventional loans, FHA loans, VA loans, USDA loans, jumbo loans, HELOCs, Community Loan and Medical Professional Loan
10 – 30 years
Minimum down payment
0% if moving forward with a USDA loan
Offers a wide variety of loans to suit an array of customer needs
Available in all 50 states
Online and in-person service available
Doesn’t offer home renovation loans
Who’s this for? PNC Bank has a wide variety of home loan options, making it easy for first-time homebuyers to find a loan that suits their circumstances. This lender offers conventional loans, FHA loans, VA loans, jumbo loans and HELOCs. On top of that, PNC Bank offers USDA loans, which can be tougher to find among some lenders. PNC Bank also has some specialized loan options, like the Community Loan, which is meant for individuals with lower cash reserves and allows for a down payment as low as 3% and no PMI (private mortgage insurance).
It also offers a Medical Professional Loan for interns, residents, fellows or doctors who have completed their residency in the last five years. Eligible borrowers for this loan can borrow up to $1 million and won’t have to pay PMI, regardless of their down payment amount.
In addition to all these offerings, PNC Bank gives eligible borrowers the chance to qualify for a $5,000 grant to be used toward closing costs. Eligible borrowers must have an income at or below 80% of the median household income for the metropolitan statistical area (MSA), or their desired property must be located in a low- or moderate-income census tract as designated by the FFIEC, according to PNC’s website.
Best for educational offerings
Bank of America Mortgage
Annual Percentage Rate (APR)
Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included
Types of loans
Conventional loans, FHA loans, VA loans, jumbo loans, doctor loans and the Affordable Loan Solution mortgage
15 – 30 years
Minimum down payment
0% if moving forward with a VA loan; 3% if moving forward with the Affordable Loan Solution mortgage
Offers a wide variety of loans to suit an array of customer needs
Offers an Edu-Series for educating first-time homebuyers as well as other learning resources and materials
Online and in-person service available
Fixed-rate and adjustable-rate mortgages offered
Reduced cost of mortgage insurance
Doesn’t offer USDA loans
Who’s this for? Bank of America stands out for its first-time homebuyer educational resources. Aside from home loan calculators, which are typical for mortgage lenders to provide on their websites, Bank of America has an online “Edu-Series” for first-time home buyers. There are also guides on its website that break down key terms and a list of FAQs geared toward first-time home buyers.
Bank of America also offers a variety of loan options, including a home loan for medical professionals. With this loan, doctors, dentists, residents and fellows can make down payment minimums that are tiered based on the size of the loan they’re applying for. They’ll put down at least 3% on mortgages up to $850,000, at least 5% on mortgages up to $1 million, at least 10% down on mortgages up to $1.5 million and at least 15% down on mortgages to $2 million. If you’re a medical professional, Bank of America will also exclude your student loan debt from your total debt when you’re applying for the loan. This could bring down your debt-to-income ratio for the purposes of applying for the loan and make it easier for you to qualify.
Even if you aren’t a qualifying medical professional, you can still potentially take advantage of tiered down payment terms through the Affordable Loan Solution mortgage option. With this loan, eligible borrowers can make a down payment as low as 3% on loan amounts up to $726,200, and as low as 5% on mortgages up to $1,089,300. Mortgage insurance would be required if making down payments lower than 20%, but according to Bank of America’s website, the mortgage insurance would come at a reduced cost compared to that of other conventional loans.
Best for lower credit scores
Annual Percentage Rate (APR)
Apply online for personalized rates
Types of loans
Conventional loans, FHA loans, VA loans and Jumbo loans
8 – 29 years, including 15-year and 30-year terms
Typically requires a 620 credit score but will consider applicants with a 580 credit score as long as other eligibility criteria are met
Minimum down payment
3.5% if moving forward with an FHA loan
Can use the loan to buy or refinance a single-family home, second home or investment property, or condo
Can get pre-qualified in minutes
Rocket Mortgage app for easy access to your account
Runs a hard inquiry in order to provide a personalized interest rate, which means your credit score may take a small hit
Doesn’t offer USDA loans, HELOCs, construction loans, or mortgages for mobile homes
Doesn’t manage accounts for jumbo loans after closing
Who’s this for? First-time homebuyers tend to be younger and may not have a long credit history, which can make it harder to qualify for a good mortgage rate. Rocket Mortgage stands here because it accepts applicants with credit scores as low as 580. The lender also has a program called the Fresh Start program that’s aimed at helping potential applicants boost their credit score before applying.
Rocket Mortgage offers conventional loans, FHA loans, VA loans and jumbo loans but not USDA loans, which means this lender may not be the most appealing for potential homebuyers who want to make a purchase with a 0% down payment. Rocket Mortgage doesn’t offer construction loans (if you want to build a brand new custom home) or HELOCs, but if you’re a homebuyer who only plans to purchase a single-family home, a second home, or a condo that’s already on the market, this shouldn’t be a drawback for you.
This lender offers flexible loan repayment terms that range from 8 – 29 years in addition to standard 15-year and 30-year terms.
Best for no lender fees
Ally Bank Mortgage
Annual Percentage Rate (APR)
Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included
Types of loans
Conventional loans, HomeReady loan and Jumbo loans
15 – 30 years
Minimum down payment
3% if moving forward with a HomeReady loan
Ally HomeReady loan allows for a slightly smaller downpayment at 3%
Pre-approval in just three minutes
Available in all 50 U.S. states
Online support available
Doesn’t charge lender fees
Doesn’t offer FHA loans, USDA loans, VA loans or HELOCs
Who’s this for? Ally Bank doesn’t charge any application fee, origination fee, processing fee or underwriting fees. These are what’s collectively known as “lender fees” and they can cost you anywhere from a few hundred to a few thousand dollars, and eat into the money you put aside for buying your home. When you’re a first-time home buyer, going through the process as affordably as possible is often top-of-mind, so saving on these fees will let you keep more of your money for other things, like renovations or moving costs.
Keep in mind, though, that Ally Bank may still charge appraisal fees and recording fees and may charge for the title search and insurance. As long as you have all the necessary documents handy and submit complete and accurate information, you can get pre-approved for a loan in as little as three minutes online and submit your application in just 15 minutes.
Best for no PMI
Annual Percentage Rate (APR)
Apply online for personalized rates
Types of loans
Conventional loans, FHA loans, VA loans and Jumbo loans
15 – 30 years
Minimum down payment
Citi’s HomeRun Mortgage program allows for a downpayment as low as 3%
Citi’s Lender Assistance program gives eligible homebuyers a credit of up to $5,000 to use toward closing costs
Ability to choose between fixed-rate and adjustable-rate mortgages
New and existing Citi bank customers can qualify for closing cost discounts based on their account balance
HomeRun mortgage program allows for a downpayment of less than 20% without PMI
Provides homeownership education and counseling
No options for a 0% downpayment
Existing customers need high account balances to receive some of the highest interest rate discounts
Who’s this for? CitiMortgage gives homebuyers a chance to save big-time by waiving the PMI (private mortgage insurance) requirement on loans with down payments below 20%. This can be done by applying for a mortgage through Citi’s HomeRun program, which also allows for down payments as low as 3%.
PMI is typically a required monthly charge with other home loans if you make a down payment of 20% or less. But PMI can cost you tens of thousands of dollars extra over the entire life of the loan. The money you save from not paying PMI could potentially go towards saving for a second property, a home renovation, or any other financial goal you have. HomeRun mortgages also allow borrowers to lock in a fixed rate on their mortgage so they won’t have to worry about their rate increasing down the line.
How do mortgages work?
A mortgage is a type of loan you can use to purchase a home. This agreement essentially says you can purchase a home without paying for it in full, upfront — you’ll just need to put some of the money down — usually between 3% and 20% of the home price — and pay smaller, fixed monthly payments over a certain number of years, plus interest and potentially other charges. Having a mortgage allows you to own the property even if you don’t have the hundreds of thousands of dollars in cash needed to purchase it outright.
What is a conventional loan?
A conventional loan is a home loan that’s funded by private lenders and sold to government enterprises such as Fannie Mae and Freddie Mac. It’s a very common loan type and some lenders may require a down payment as low as 3% or 5%.
What is an FHA loan?
A Federal Housing Administration loan, or FHA loan, is a loan program that has some slightly looser requirements. For example, this loan program may allow some borrowers to be approved for a loan with a lower credit score or be able to get away with having a higher debt-to-income ratio. You’ll typically only need to make a 3.5% down payment with this type of loan.
What is a USDA loan?
A USDA loan is offered through the United States Department of Agriculture and is aimed at borrowers who want to purchase a home in a qualifying rural area. USDA loans don’t require a minimum down payment, so borrowers can use this loan to purchase a home for almost no money upfront (you’ll still likely pay fees, though).
What is a VA loan?
VA mortgage loans are provided through the U.S. Department of Veterans Affairs and are meant for service members, veterans and their spouses. They typically require a 0% down payment and borrowers don’t have to pay private mortgage insurance.
What is a jumbo loan?
A jumbo loan is meant for home buyers who need to borrow more than $647,200 to purchase a home. Jumbo loans usually have stricter credit score and debt-to-income ratio requirements, and they also typically require a larger minimum down payment.
How is my mortgage rate decided?
Mortgage rates change almost daily and can depend on market forces such as inflation and the overall economy. However, your specific mortgage rate will depend on your location, credit report and credit score. The higher your credit score, the more likely you are to be qualified for a lower mortgage interest rate.
Be sure to submit the necessary information for more personalized rate estimates from your desired lender.
What is the difference between a 15- and 30-year term?
A 15-year mortgage gives homeowners 15 years to pay it off in fixed, equal amounts plus interest, while a 30-year mortgage gives homeowners 30 years to pay it off. Monthly payments are generally lower with a 30-year mortgage since you’ll have a longer period of time to pay off the loan. However, you’ll wind up paying more in interest over the life of the loan since it is charged on a monthly basis. A 15-year mortgage, on the other hand, lets you save on interest but you’ll likely have to make a higher monthly payment.
How does private mortgage insurance (PMI) work?
Lenders charge private mortgage insurance (PMI) to protect themselves in the event that a borrower defaults on their loan. PMI is assessed to your account if you choose to make a down payment of less than 20%. You’ll be responsible for paying this in addition to your monthly mortgage payments.
However, you can usually have the PMI waived after you’ve made enough payments to build 20% equity in your home.
If you need to take out a mortgage to purchase your first home, you have options. Certain mortgage lenders stand out for first-time homebuyers by considering applicants with lower credit scores, offering lower down payments and providing useful educational resources.
Keep in mind that mortgage interest rates fluctuate often and the rate you receive will vary depending on your location, credit score and credit report. While lenders may post general interest rate ranges on their websites, the best way to get a more accurate estimate of your rate is to provide the necessary information to check your rate.
To determine which mortgage lenders are the best for first-time homebuyers, CNBC Select analyzed dozens of U.S. mortgages offered by both online and brick-and-mortar banks, including large credit unions, that come with fixed-rate APRs and flexible loan amounts and terms to suit an array of financing needs.
When narrowing down and ranking the best mortgages, we focused on the following features:
Fixed-rate APR: Variable rates can go up and down over the lifetime of your loan. With a fixed rate APR, you lock in an interest rate for the duration of the loan’s term, which means your monthly payment won’t vary, making your budget easier to plan.
Types of loans offered: The most common kinds of mortgage loans include conventional loans, FHA loans and VA loans. In addition to these loans, lenders may also offer USDA loans and jumbo loans. Having more options available means the lender is able to cater to a wider range of applicant needs. We have also considered loans that would suit the needs of borrowers who plan to purchase their second home or a rental property.
Closing timeline: The lenders on our list are able to offer closing timelines that vary from as promptly as two weeks after the home purchase agreement has been signed to as many as 45 days after the agreement has been signed. Specific closing timelines have been noted for each lender.
Fees: Common fees associated with mortgage applications include origination fees, application fees, underwriting fees, processing fees and administrative fees. We evaluate these fees in addition to other features when determining the overall offer from each lender. Though some lenders on this list do not charge these fees, we have noted any instances in which a particular lender does.
Flexible minimum and maximum loan amounts/terms: Each mortgage lender provides a variety of financing options that you can customize based on your monthly budget and how long you need to pay back your loan.
No early payoff penalties: The mortgage lenders on our list do not charge borrowers for paying off the loan early.
Streamlined application process: We considered whether lenders offered a convenient, fast online application process and/or an in-person procedure at local branches.
Customer support: Every mortgage lender on our list provides customer service via telephone, email or secure online messaging. We also opted for lenders with an online resource hub or advice center to help you educate yourself about the personal loan process and your finances.
Minimum down payment: Although minimum down payment amounts depend on the type of loan a borrower applies for, we noted lenders that offer additional specialty loans that come with a lower minimum down payment amount.
After reviewing the above features, we sorted our recommendations by best for loan variety, educational offerings, lower redit scores, no lender fees and no PMI.
Note that the rates and fee structures advertised for mortgages are subject to fluctuate in accordance with the Fed rate. However, once you accept your mortgage agreement, a fixed-rate APR will guarantee the interest rate and monthly payment remain consistent throughout the entire term of the loan, unless you choose to refinance your mortgage at a later date for a potentially lower APR. Your APR, monthly payment and loan amount depend on your credit history, creditworthiness, debt-to-income ratio and the desired loan term. To take out a mortgage, lenders will conduct a hard credit inquiry and request a full application, which could require proof of income, identity verification, proof of address and more.
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Inside: This guide will teach you about the different factors you need to consider when purchasing a home with a 70k salary.
There are a lot of factors to consider when you’re trying to figure out how much house you can afford. Your income, your debts, your down payment, and the interest rate on your mortgage all play a role in determining how much house you can afford.
Your situation will be different than the person next-door or your co-coworker.
Making 70000 a year is a great salary. You are making the median salary in the United States.
It’s enough to comfortably afford most homes and gives you plenty of room to save money each month.
But how much house can you actually afford?
It depends on several factors, including your down payment, interest rate, income, and credit score.
In this ultimate guide, we’ll walk you through everything you need to know about how much house you can afford making 70000 a year.
how much house can i afford on 70k
In general, you can expect to spend 28-36% of your income on housing.
Generally speaking, if you make $70,000 a year, you can afford a house between $226,000 and $380,000.
How much mortgage on 70k salary?
In general, you should expect to spend no more than 28% of your monthly income on a mortgage payment.
Thus, you can spend approximately$1633-2100 a month on a mortgage.
Just remember this is relative to the interest rate, term length of the loan, down payment, and other factors.
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But there’s one factor that trumps all the others: The 28/36 rule.
Also known as the debt-to-income (DTI) ratio.
The 28/36 rule is a guideline that says that your housing costs (mortgage payments, property taxes, homeowners insurance, and HOA fees) should not exceed 28% of your gross monthly income.
And your total debt (housing costs plus any other debts you have, like car payments or credit card bills) should not exceed 36% of your gross monthly income.
You must follow the 28/36 rule.
How to calculate how much mortgage you can afford?
If you’re like most people, you probably don’t know how to calculate how much mortgage you can afford.
This is actually a really important question that you need to ask yourself before beginning the home-buying process.
The answer will help determine the price range of homes you should be looking at. Plus know how much money you’ll need to save for a down payment.
Step #1: Check Interest Rates
Research current mortgage rates to get an accurate estimate. You can also check your credit score and search for average mortgage rates based on your credit score.
Right now, with sky-high inflation, you are unable to afford a bigger house when interest rates are hovering around 6% compared to ultra-low interest rates of 2.5%.
With a 70k salary, this can be the difference between $50-100k on the total mortgage amount you can afford.
Step #2: Use a Mortgage Calculator
Use a mortgage calculator to get an estimate of the home price you can afford based on your income, debt profile, and down payment.
Generally, lenders cap the maximum amount of monthly gross income you can use toward the loan’s principal and interest payment to not more than 28% of your gross monthly income (called the “Front-End” or “Housing Expense” ratio). Then, limit your total allowable debt-to-income ratio (called the “Back-End” ratio) to not more than 36%.
You can use a mortgage calculator to a ballpark range of what house you can afford.
Step #3: Taxes, Insurance, and PMI
When planning for a home purchase, it’s important to factor in all of your monthly expenses, including taxes, insurance, and PMI.
This will ensure that you get an accurate estimate of your home-buying budget based on your household annual income.
Don’t forget to include these payments to get a realistic understanding of your monthly budget.
Step #4: Remember your Living Expenses
When considering how much house you can afford based on your $70,000 salary, you must consider your lifestyle and current expenses.
It is important to factor in other monthly expenses such as cell phone and internet bills, utilities, insurance costs, and other bills.
More than likely, you will be approved for a higher mortgage amount than you would feel comfortable with. This is 100% what lenders will do.
They want to provide you with the most you can afford – not what you should afford.
Step #5: Get prequalified
Prequalifying for a mortgage is an important first step to take when estimating how much house you can afford.
It gives you a more precise figure to work with and helps you make a more informed decision based on your personal situation.
Remember that your final amount will vary depending on a number of factors, especially your interest rate, which will be based on your credit score.
Taking the time to research current mortgage rates helps you secure a better mortgage rate, giving you more buying power.
Home Buying by Down Payment
How much house can you afford?
It’s a common question among home buyers — especially first-time home buyers. Use this table to figure out how much house you can reasonably afford given your salary and other monthly obligations.
The assumption is 30 year fixed mortgage, good credit (690-719), no monthly debt, and a 4% interest rate.
How Much House Can I Afford?
**Your own interest rate, monthly payment, and how much house you can afford will vary on your personal circumstances.
Mortgage on 70k Salary Based on Monthly Payment and Interest Rate
How much house can you afford on a $70,000 salary?
This largely depends on the current interest rate of the mortgage loan you’re considering. When interest rates are high, people aren’t actively buying as when interest rates are low.
By understanding these factors, you can better gauge how much house you can afford on a $70,000 salary.
The assumption is 30 year fixed mortgage, good credit (690-719), no monthly debt, and a 20% downpayment.
How Much House Can I Afford?
**Your own interest rate, monthly payment, and how much house you can afford will vary on your personal circumstances.
Home Affordability Calculator by Debt-to-Income Ratio
Around here at Money Bliss, we always stress that debt will hold you back.
In the case of buying a house, debt increases your DTI ratio.
Here is a glimpse at what monthly debt can cause your debt-to-income (DTI) ratio to increase. Thus, making the house you want to buy to be more difficult.
How Much House Can I Afford?
**Your own interest rate, monthly payment, and how much house you can afford will vary on your personal circumstances.
Increase your Home Buying Budget
Here are a few ways you can increase your home buying budget when buying a house on a $70k annual income.
By following these steps, you can increase your home buying budget and find a more suitable house for your income.
1. Pick a Cheaper Home
Home prices vary significantly in different parts of the country.
Moving out of a major metropolitan area with notoriously high housing costs can help you find more affordable homes.
There are plenty of ways to find a home that is cheaper than you would normally expect.
Look for homes that are for sale in less desirable neighborhoods.
Find homes that are for sale by owner or have not been listed yet.
Check for homes that are for sale outside of your usual price range and haven’t sold as they may drop their price.
Move to a lower cost of living area.
2. Increase Your Down Payment Savings
A larger down payment can reduce the amount you have to finance, which lowers your monthly payment.
Plus help you get a lower interest rate and avoid paying PMI.
Putting down at least 10-20 percent of the home sale price can help boost your home buying power. You can also take advantage of down payment assistance programs in your area.
3. Pay Down Your Existing Debt
Paying down your debts such as credit card debts or auto loans can help raise your maximum home loan.
Paying down your debts can help you qualify for a higher loan amount.
This is because when you have lower amounts of debt, your credit score is higher and your debt-to-income ratio is less. This means you are less likely to be rejected for a home loan.
4. Improve Your Credit Score
A higher credit score can lead to lower rates and more affordable payments.
You can improve your credit score by:
Paying your bills on time
Paying down your credit card balances
Avoiding opening new credit before applying for a mortgage
Disputing any errors on your credit report
This is very true! We had an unfortunate debt that wasn’t ours added to our credit report right before closing. While the debt was an error, it still cost us a higher interest rate and forced us to refinance once the credit report was fixed.
5. Increase Your Income
Asking for a raise, seeking a higher-paid position, or starting a side gig can help you increase the amount of home you can afford.
While you need two years of income from a side gig or your own online business to count as income, the extra cash earned helps you to increase the size of your downpayment. Plus it lowers your debt-to-income ratio with the savings you are setting aside.
What factors should you consider when deciding how much you can afford for a mortgage?
How much house can you afford on your current salary and with your current monthly debts?
This is a question that we are often asked, and it’s one that we love to answer.
We’ll walk you through all the different factors that go into this decision so that you can make an informed choice.
1. Loan amount
The loan amount is a key factor that affects the total cost of a mortgage.
If you have no outstanding debt, a 20% down payment, a high credit score, and a 3.5% interest rate from an FHA loan, you could be able to afford up to $508,000.
However, if you have debt, a smaller down payment, or a lower credit score, the loan amount you can qualify for will be lower.
Similarly, if you choose a 15-year fixed-rate loan, your monthly payments will be higher, but you will end up paying less in interest over the life of the loan than with a 30-year fixed-rate loan.
Ultimately, your loan amount will affect the total cost of your mortgage, so it’s important to consider all the factors when making your decision.
2. Mortgage Interest rate
Mortgage interest rates can have a significant impact on the cost of a mortgage. The higher the interest rate, the more expensive the loan will be.
For example, a difference between a 3% and 4% interest rate on a $300,000 mortgage is more than $150 on the monthly payment.
Remember, in the first few years of a mortgage, the majority of the payment goes toward interest rather than trying to reduce the principal amount.
3. Type of Mortgage
The primary difference between a fixed and variable mortgage is the interest rate and the amount of your payment
Fixed-rate mortgages offer the stability of having the same interest rate for the life of the loan.
Adjustable-rate mortgages (ARMs) come with lower interest rates to start, but those rates can change over the life of the loan. ARMs are often a riskier choice, as if the economy falters, the interest rate can go up.
Fixed-rate loans are typically the most popular choice, as the monthly payment amount is more predictable and easier to budget for. The terms of a fixed-rate loan can range from 10 to 30 years, depending on the lender.
Adjustable-rate mortgages (ARMs) have interest rates that can increase or decrease annually based on an index plus a margin. ARMs are typically more attractive to borrowers who plan on staying in the home for a shorter period of time, as the lower initial interest rate can make the payments more manageable.
The Money Bliss recommendation is to choose a 15-year fixed-rate mortgage.
4. Property value
Property value can have a direct effect on how much you can afford for a mortgage.
As the value of the property increases, so does the amount of money you will need to borrow to purchase it. This, in turn, affects the monthly payments and the amount of interest you will pay over the life of the loan.
This is especially important as many people have been priced out of the market with the rising home prices.
Additionally, higher property values can mean higher taxes, which will add to the amount you need to budget for your mortgage payments.
5. Homeowner insurance
Homeowner’s insurance is a requirement when securing a loan and it can vary depending on the value and location of the home.
Additionally, certain areas that are prone to natural disasters or are located in densely populated areas may have higher premiums than other locations and may require additional insurance like flood insurance.
As a result, lenders typically require that you purchase homeowners insurance in order to secure a loan, and may have specific requirements for the type or amount of coverage that you need to purchase.
Before committing to a mortgage, it is important to consider the cost of homeowner’s insurance and make sure it fits into your budget.
This is something you do not want to skimp on as the cost to replace a home is very expensive.
6. Property taxes
Property taxes are calculated based on the value of a home and the tax rate of the city or county where the property resides.
The higher the property taxes, the more you will have to pay in your monthly mortgage payment.
In states with high property taxes, the property tax bill can be a large sum of the mortgage payment.
It is important to consider these costs when comparing different homes and locations to ensure you can afford the home without stretching your budget too thin.
7. Home repairs and maintenance
It’s important to also consider other factors such as the age of the house, since some properties may require renovation and repairs that can cost more than the house price itself.
Beyond the cost of purchasing a home, homeowners will likely have other expenses related to owning and maintaining the property.
Also, many homeowners prefer to do significant upgrades to the home before moving in, which comes at an additional expense.
These can include ordinary expenses such as painting, taking care of a lawn, fixing appliances, and cleaning living spaces, which can add up.
Additionally, it’s advisable to buy a home that falls in the middle of your price range to ensure you have some extra money for unexpected costs, such as repairs and maintenance.
8. HOA or Homeowners Association Maintenance
This is often an overlooked factor by many new homebuyers, but extremely important as some HOAs add $500-800 per month to the total housing budget.
The purpose of a homeowners association (HOA) is to establish a set of rules and regulations for residents to follow as well as maintain the community or building.
These fees are typically used to pay for maintenance, amenities, landscaping, and concierge services.
HOA fees are used to finance community upkeep, including landscaping and joint space development, and can range from $100 to over $1,000 per month, depending on the amenities in the association.
9. Utility bills
When switching from renting to buying a home, you will have to factor in the costs of your monthly utility bills such as electricity, natural gas, water, garbage and recycling, cable TV, internet, and cell phone when calculating how much mortgage you can afford.
In addition, the larger the home, the higher the costs to heat and cool your new home.
Make sure to ask your realtor for previous utility bills on the property you are interested in.
10. Private Mortgage Insurance
The purpose of private mortgage insurance (PMI) is to protect the lender in the event of foreclosure. It is typically required when a borrower is unable to make a 20% down payment on a home purchase.
PMI allows borrowers to purchase a home with less upfront capital, but also comes with additional monthly costs that are added to the mortgage payment. These fees range from 0.5% to 2.5% of the loan’s value annually and are based on the amount of money put down.
PMI can also be canceled or refinanced once the borrower has achieved 20% equity in the home or when the outstanding loan amount reaches 80% of the home’s purchase price.
11. Moving costs
Moving is expensive, but also a pain to do. So, consider the moving costs associated with relocating from one location to another.
Typically fees for packing, transportation, and possibly storage, and can vary depending on the size of the move and the distance the move needs to cover.
Also, consider if by buying a home, you will stop having moving costs associated with moving from rental to rental.
When determining how much house you can afford, it’s important to consider several factors.
These include your income, existing debts, interest rates, credit history, credit score, monthly debt, monthly expenses, utilities, groceries, down payment, loan options (such as FHA or VA loans), and location (which affects the interest rate and property tax). Also, think about the costs of maintaining or renovating a home.
Additionally, you should also evaluate your own budget and assess whether now is the right time to purchase a home. Taking all of these factors into account can help you set the maximum limit on what you can realistically afford.
A mortgage calculator can help you determine your home affordability by providing an estimate of the home price you can afford based on your income, debt profile, and down payment.
It works by inputting your annual income and estimated mortgage rate, which then calculates the maximum amount of money you’re able to spend on a house and the expected monthly payment.
Additionally, different methods are available to factor in your debt-to-income ratio or your proposed housing budget, allowing you to get a more accurate estimate of your home buying budget.
The debt-to-income ratio or DTI is used by lenders to assess a borrower’s ability to make mortgage payments.
This ratio is calculated by taking the total of all of a borrower’s monthly recurring debts (including mortgage payments) and dividing it by the borrower’s monthly pre-tax household income.
A high DTI ratio indicates that the borrower’s debt is high relative to income, and could reduce the amount of loan they are qualified to receive.
Generally, lenders prefer a DTI of 36% or less, which allows borrowers to qualify for better interest rates on their mortgages.
To calculate their DTI, borrowers should include debt such as credit card payments, car loans, student and other loans, along with housing expenses. It is important to note that the DTI does not include other monthly expenses such as groceries, gas, or current rent payments.
Closing costs can have an enormous impact on how much home you’re able to afford.
From application fees and down payments to attorney costs and credit report fees, these costs can add up quickly and affect your overall budget. Unfortunately, most of these closing costs are non-negotiable, but you can ask the seller to pay them.
When buying a house, it is important to research the different mortgage options available to you.
You can typically choose between a conventional loan that is guaranteed by a private lender or banking institution, or a government-backed loan. Depending on your monthly payment and down payment availability, you may be able to select between a 15-year or a 30-year loan.
A conventional loan typically offers better interest rates and payment flexibility.
While a government-backed loan may be more lenient with its credit and down payment requirements.
For veterans or first-time home buyers, there may be special mortgage options available to them.
Ultimately, it is important to talk to a lender to see which loan type is best for your personal circumstances.
When it comes to saving for a down payment, it’s important to understand how much you’ll need and how much it will affect your budget.
Generally, you’ll need 20% of the cost of the home for a conventional mortgage and 25% for an investment property. When you put down more money, it gives you more buying power and may help you negotiate a lower interest rate.
For example, if you’re buying a $300,000 house, you’ll need a down payment of $60,000 for a conventional mortgage. On the other hand, if you put down 10%, you can still afford a $395,557 house. But, you will have to pay for private mortgage insurance.
In addition, there are other ways to help you cover these upfront costs. You can look into down payment assistance programs.
Ultimately, the size of your down payment will depend on your budget and financial goals. You should never deplete your savings account just to make a larger down payment. It’s important to factor in emergency funds and other expenses when deciding on the best option.
Eligibility requirements for loan lenders can vary, but in general, lenders are looking for borrowers with a good credit score, a reliable income, and a history of employment or income stability.
For most loan types, borrowers will need to show a history of two consecutive years of employment in order to qualify. However, lenders may be more flexible if the borrower is just beginning their career or if they are self-employed and do not have W2 forms and official pay stubs.
Income verification also needs to be done “on paper”, meaning that cash tips that do not appear on pay stubs or W2s can not be used as income. The lender will look at the household’s average pre-tax income over a two-year period before determining the amount that can be borrowed.
In order to make sure that the borrower is financially secure, lenders will also pull the borrower’s credit report and base their pre-approval on the credit score and debt-to-income ratio. Employment verification may also be done.
For certain government-backed loan types, such as FHA, VA, and USDA loans, there may be additional or different requirements for eligibility. For instance, for FHA loans, the borrower must intend to use the home as a primary residence and live in it within two months after closing. VA loans are more lenient, and may not require a down payment.
The qualifications for VA loans vary based on the period and amount of time the borrower has served. There are many ways to qualify, whether the borrower is a veteran, active duty service member, reservist, or member of the National Guard. For more information on eligibility requirements for VA loans, borrowers can visit the U.S. Department of Veteran Affairs.
A good credit score will mean you have access to more lending options, better interest rates, and more purchasing power.
On the other hand, a poor credit score could mean you are approved for a loan, but at a higher interest rate and with a smaller house.
This means your budget will be more limited and you may not be able to buy as much home as you had hoped for. Additionally, lenders will also look at other factors, such as your debt-to-income ratio, employment history, and loan term, in order to determine your overall affordability.
What House Can I Afford on 70k a year?
As a borrower, you need to consider the interest rate, down payment, credit score, debt-to-income ratio, employment history, and loan term when determining how much house you can afford.
A higher credit score can often mean a lower interest rate, and a larger down payment can bring down the monthly payments.
All of these factors can have an effect on the amount of money you can borrow and the home you can afford.
Ultimately, understanding the impact of different factors can help borrowers make the best decisions when it comes to getting a mortgage.
Now that you know how much house you can afford, it’s time to start saving for a down payment.
The sooner you start saving, the sooner you’ll be able to move into your dream home. But you may have to wait if you are considering a mansion.
By taking into consideration this guide into account, you can make a more informed decision about the cost of a mortgage for your new home.
Know someone else that needs this, too? Then, please share!!
In early March, Brown Harris Stevens broker Mindy Diane Feldman had reservations about a First Republic Bank loan.
A buyer had offered to purchase a New York City co-op from Feldman’s client and had pre-approval from First Republic for a below-market-rate mortgage — the bank’s specialty. Feldman wanted to ensure that if interest rates rose, it wouldn’t affect the closing or the buyer’s ability to meet the co-op board’s financial requirements.
“If they were the lowest rates that the bank was offering, then we had volatility risk,” she said.
Two days after the broker asked for details about the mortgage, Silicon Valley Bank collapsed. Fearing that First Republic could get caught in the maelstrom, Feldman urged her client to take another bidder’s all-cash offer.
First Republic’s rock-bottom rates did more than make agents nervous — they led to the bank’s downfall.
Its seizure Monday by the Federal Deposit Insurance Corporation and sale to JPMorgan Chase ended weeks of turmoil for the bank, which saw its stock plummet 89 percent in March as customers pulled out over $100 billion in deposits.
But the drama now shifts to First Republic’s residential and multifamily borrowers — its largest lending pools — and to lending in those markets.
Early Monday morning, the FDIC took control of First Republic and sold the “substantial majority” of its loans and assets to JPMorgan Chase, the country’s largest bank with more than $3.7 trillion in assets.
JPMorgan acquired $203 billion in loans and other securities, but passed on assuming First Republic’s corporate debt or preferred stock.
Some insiders believe the sale includes $103 billion in residential mortgages, about $23 billion in multifamily loans and nearly $11 billion in other commercial real estate debt.
That contrasts with New York Community Bank’s purchase of Signature Bank’s assets in March, which excluded Signature’s commercial real estate loan book — inviting speculation that the debt was toxic.
Experts say the First Republic sale gives little insight into the health of its assets. But the FDIC committed to covering 80 percent of losses incurred on that debt over the next five to seven years, implying a degree of distress and a “downside risk of significant losses in the portfolio,” said Sam Chandan, director of NYU’s Institute of Global Real Estate Finance.
The FDIC pegged its own loss on the deal at about $13 billion.
First Republic reported $549 million in loans with “high volatility commercial real estate exposure” in the first quarter, more than twice the $252 million it reported a year earlier, according to the FDIC. The first-quarter figure represents a fraction of its $139 billion real estate loan book.
But the bank did not report any non-performing commercial or multifamily loans on its books as of March 31.
Rather, the problem was rising interest rates, which meant First Republic had to pay more on its customers’ deposits while the vast majority of its long-term residential mortgages were issued in a low-rate environment.
For now, brokers don’t expect First Republic’s residential borrowers to experience much disruption. JPMorgan plans to keep all of its branches open, allowing existing loan customers to “bank as usual,” it said Monday in an investor presentation.
Brad Lagomarsino, a Colliers multifamily broker in San Francisco, said he touched base with his personal banker at First Republic on Monday morning, hours after the sale, and said nothing had changed.
“Every loan I have is with them,” Lagomarsino said.
Still, residential brokers including Feldman say they have spent the past month advising clients considering a First Republic loan to line up alternatives.
“Just so there’s a plan A, a plan B and maybe even a plan C,” Feldman said.
David Cohen, a broker at City Real Estate in San Francisco, said some clients have opted to “double-dip” with pre-approval letters, one with a low rate from First Republic and a second from another lender to avoid delaying a closing if First Republic fell.
“We joked that a pre-approval letter from First Republic was the Rolls Royce of pre-approval letters,” Cohen said.
“A gaping hole”
Though it was known for catering to the rich and famous — providing mortgages to Ben Affleck, Mark Zuckerberg and, as recently as last month, actress and socialite Julia Fox — First Republic was also a prominent lender to landlords.
The bank was San Francisco’s top multifamily lender in the first quarter, financing eight out of the quarter’s 20 deals, according to Colliers.
If rival banks were offering a senior loan with an interest rate of 5.5 percent, First Republic was offering one in the lower 5 percent range, Lagomarsino said. Account holders especially often scored preferential terms.
“If you had a ton of money there, you were able to get very good debt,” he said.
“They are going to leave a gaping hole in this market in the short-term,” Lagomarsino added, noting that multifamily buyers are already stepping away from regional banks. “You’re seeing people gravitate towards the Chases of the world.”
First Republic was generally conservative in its underwriting, offering lower loan-to-value ratios — generally between 50 and 60 percent — but low rates.
As high interest rates eat into banks’ profits, regional lenders figure to offer less competitive loan terms, leaving a void in the market.
“It’ll be interesting to see if JPMorgan wants to fill that gap,” said Mark Weinstein, the founder of Santa Monica-based multifamily firm MJW Investments.
What is certain is that JPMorgan’s purchase of First Republic consolidates the residential and multifamily lending markets, narrowing options for borrowers.
First Republic was New York’s ninth-largest provider of home mortgages in 2021 with nearly $5 billion in loan volume, according to Home Mortgage Disclosure Act data. It was eighth in California and 23rd nationally.
JPMorgan, by comparison, took the top spot in New York, with $21 billion in volume, and ranked fourth in California and nationally.
First Republic’s sale eliminates one national home-loan heavyweight while inflating another, JPMorgan.
That could be bad news for residential borrowers, Feldman said. With less competition, lenders can set higher rates and stricter requirements while offering fewer loan products.
Other banks “don’t have to compete” with First Republic’s low rates anymore, said Michael Nourmand, head of the Los Angeles residential brokerage Nourmand & Associates.
Rivals including Wells Fargo, PNC Bank, City National Bank and Citibank have spent the past two months snapping up First Republic’s market share after the bank began offering less generous mortgage rates.
Some First Republic borrowers are also concerned about JPMorgan’s size.
“[It] is like Bank of America — too big for personalized service,” Artem Tepler, who runs multifamily developer Schon Tepler Partners in L.A. and held personal loans with First Republic, wrote in a text.
First Republic often sweetened deals by offering potential borrowers interest-only loans. It’s unclear whether JPMorgan will continue that, but insiders say it’s unlikely.
“I don’t think JPMorgan is going to continue the kind of business that First Republic was doing that they weren’t doing themselves,” said Morris Pearl, a former managing director at BlackRock who now chairs the lobbying group Patriotic Millionaires.
JPMorgan plans to spend $2 billion restructuring the bank, according to its investor presentation. It plans to convert certain branches into new wealth centers and said the loans will be placed into its banking divisions.
Beyond that, details are vague. Restructurings typically involve layoffs, selling loans, closing offices and refinancing debt.
JPMorgan CEO Jamie Dimon touted the First Republic acquisition as a salve for lingering fears of a banking crisis.
The executive told CNN Monday that the deal “helps stabilize the system” and the threat of bank failures is “getting near the end.”
“Down the road — rates are going way up, real estate recession, that’s a whole different issue,” he said on a call with analysts Monday. “But for now we should just take a deep breath.”
Investors are not convinced. The KBW Regional Banking Index slid 2 percent on Monday, then 6 percent Tuesday morning to hit $81.59 per share, the lowest in more than two years.
Trading of Pacific Western Bank, a regional L.A.-based lender, was halted for volatility multiple times Tuesday after the stock plummeted more than 39 percent, CNBC reported. Valley Bank has dropped 25 percent since the markets closed on Friday.
Chandan, speaking as regional bank shares tumbled Monday, said First Republic’s seizure could reignite fears about withdrawals at smaller institutions.
As the FDIC can only insure up to $250,000 in a customer’s deposits at any one bank, Chandan said a risk remains that smaller lenders could see clients rush to the perceived safety of larger banks. First Republic suffered nearly $102 billion in outflows in the first quarter as clients, anxious about market turmoil, yanked funds.
“This leaves the door open for further runs on deposits from institutions that are perceived to be a significant risk,” the professor said.
David Hunt, CEO of global asset manager PGIM, alluded to that in remarks at the Milken Institute Global Conference in L.A. on Monday.
“There’s a tendency to breathe a sigh of relief on mornings like this,” he said. “Actually, we are just getting started.”
Taking out a mortgage is the biggest financial obligation most of us will ever assume. So it’s essential to understand what you’re signing on for when you borrow money to buy a house.
What is a mortgage?
A mortgage is a loan from a bank or other financial institution that helps a borrower purchase a home. The collateral for the mortgage is the home itself. That means if the borrower doesn’t make monthly payments to the lender and defaults on the loan, the lender can sell the home and recoup its money.
A mortgage loan is typically a long-term debt taken out for 30, 20 or 15 years. Over this time (known as the loan’s “term”), you’ll repay both the amount you borrowed as well as the interest charged for the loan.
You’ll repay the mortgage at regular intervals, usually in the form of a monthly payment, which typically consists of both principal and interest charges.
“Each month, part of your monthly mortgage payment will go toward paying off that principal, or mortgage balance, and part will go toward interest on the loan,” explains Robert Kirkland, vice president, Divisional Community and affordable lending manager with JPMorgan Chase. Over time, more of your payment will go toward the principal.
If you default on your mortgage loan, the lender can reclaim your property through the process of foreclosure.
“You don’t technically own the property until your mortgage loan is fully paid,” says Bill Packer, executive vice president and COO of American Financial Resources in Parsippany, New Jersey. “Typically, you will also sign a promissory note at closing, which is your personal pledge to repay the loan.”
A mortgage is a loan that helps borrowers purchase a home. The home itself serves as collateral for the debt.
To qualify for a mortgage, you will need to supply proof of income, a list of your assets and debts, info for credit inquiries, and explanations of any financial gifts to purchase the home.
There are a variety of mortgage products available on the market.
Your monthly mortgage payment will include your loan principal and interest, plus your property taxes, homeowner’s insurance, and, if applicable, private mortgage insurance (PMI).
Learning mortgage lingo upfront can help you to be an informed borrower and ask the right questions throughout the application and payment process.
How does a mortgage work?
A mortgage is a loan that people use to buy a home. To get a mortgage, you’ll work with a bank or other lender. Typically, to start the process, you’ll go through preapproval to get an idea of the maximum the lender is willing to lend and the interest rate you’ll pay. This helps you estimate the cost of your loan and start your search for a home.
Starting the mortgage process
Applying for a mortgage is a thorough process, involving many steps on your end. To start, you’ll need proof of income (through paystubs and previous year’s tax returns), a list of assets (including brokerage statements, if applicable), a list of debts, personal data for credit inquiries, and letters explaining any financial gifts you receive for the home purchase such as help with a down payment from family members.
Once you gather your documents, you’ll apply for the mortgage through the lender’s website. Having all the documents ready to go can expedite the process of earning a pre-approval, since they can show their underwriters you indeed have the qualifications to pay for the mortgage.
Types of mortgages
There are several types of mortgages available to borrowers, including conventional fixed-rate mortgages, which are among the most common; adjustable-rate mortgages (ARMs); FHA, VA and USDA loans; jumbo loans; and reverse mortgages.
Conventional loans – A conventional mortgage is not backed by the government or government agency; instead, it is made and guaranteed through a private-sector lender (bank, credit union, mortgage company).
Jumbo loans – A jumbo loan exceeds the size limits set by U.S. government agencies and has stricter underwriting guidelines. These loans are sometimes needed for high-priced properties — those well above half a million dollars.
Government-insured loans – These include VA loans, USDA loans, and FHA loans, and have more relaxed borrower qualifications than many privately-backed mortgages.
Fixed-rate mortgages – Fixed-rate mortgages have a set interest rate that remains the same for the life of the loan (terms are commonly 30, 20, or 15 years).
Adjustable-rate mortgages – An adjustable-rate mortgage (ARM) has interest rates that fluctuate, following general interest-rate movements and financial market conditions. Often there’s an initial fixed-rate period for the loan’s first few years, and then the variable rate kicks in for the remainder of the loan term. For example, “in a 5/1 ARM, the ‘5’ stands for an initial five-year period during which the interest rate remains fixed while the ‘1’ indicates that the interest rate is subject to adjustment once per year” thereafter, Kirkland notes.
What is included in a mortgage payment?
There are four core components of a mortgage payment: the principal, interest, taxes, and insurance, collectively referred to as “PITI.” There can be other costs included in the payment, as well.
Principal – the specific amount of money you borrow from a mortgage lender to purchase a home. If you were to buy a $100,000 home, for instance, and take out a loan in the amount of $90,000, then your principal is $90,000.
Interest – interest, expressed as a percentage rate, is what the lender charges you to borrow that money. In other words, the interest is the annual cost you pay on the loan principal.
Property taxes – your lender typically collects the property taxes associated with the home as part of your monthly mortgage payment. The money is usually held in an escrow account, which the lender will use to pay your property tax bill when the taxes are due.
Homeowners insurance – homeowner’s insurance provides you and your lender a level of protection in the event of a disaster, fire or other accident that impacts your property. Often, your lender collects the insurance premiums as part of your monthly mortgage bill, places the money in escrow, and makes the payments to the insurance provider for you when the premiums are due.
Mortgage insurance – your monthly payment might also include a fee for private mortgage insurance (PMI). For a conventional loan, this type of insurance is required when a buyer makes a down payment of less than 20 percent of the home’s purchase price.
How to find the best mortgage rate
To identify the mortgage that’s best for your situation, assess your financial health, including your income, credit history and score, and assets and savings. Spend some time shopping around with different mortgage lenders, as well.
“Some have more stringent guidelines than others,” Kirkland says. “Some lenders might require a 20 percent down payment, while others require as little as 3 percent of the home’s purchase price.”
“Even if you have a preferred lender in mind, go to two or three lenders — or even more — and make sure you’re fully surveying your options,” Pataky says. “A tenth of a percent on interest rates may not seem like a lot, but it can translate to thousands of dollars over the life of the loan.”
Sign up for a Bankrate account to determine the right time to strike on your mortgage with our daily rate trends. Bankrate makes mortgage loan comparison simple, so that you can weigh the various options and decide what loan product best fits your situation.
Important mortgage terminology to know
Amortization describes the process of paying off a loan, such as a mortgage, in installment payments over a period of time. Part of each payment goes toward the principal, or the amount borrowed, while the other portion goes toward interest.
An APR or annual percentage rate reflects the yearly cost of borrowing the money for a mortgage. A broader measure than the interest rate alone, the APR includes the interest rate, discount points and other fees that come with the loan.
“Conforming” refers to a conforming loan, a mortgage eligible to be purchased by Fannie Mae or Freddie Mac, the government-sponsored enterprises (GSEs) integral to the mortgage market in the U.S. These standards include a minimum credit score and maximum debt-to-income (DTI) ratio, loan limit and other requirements. Fannie Mae and Freddie Mac buy loans from mortgage lenders to create mortgage-backed securities (MBS) for the secondary mortgage market.
A “non-conforming” loan or mortgage doesn’t meet (or “conform to”) the requirements that allow it to be purchased by Fannie Mae or Freddie Mac. One example of a non-conforming loan is a jumbo loan.
The down payment is the amount of a home’s purchase price a homebuyer pays upfront. Buyers typically put down a percentage of the home’s value as the down payment, then borrow the rest in the form of a mortgage. A larger down payment can help improve a borrower’s chances of getting a lower interest rate. Different kinds of mortgages have varying minimum down payments.
An escrow account holds the portion of a borrower’s monthly mortgage payment that covers homeowners insurance premiums and property taxes. Escrow accounts also hold the earnest money the buyer deposits between the time their offer has been accepted and the closing.
A mortgage servicer is the company that handles your mortgage statements and all day-to-day tasks related to managing your loan after it closes. For example, the servicer collects your payments and, if you have an escrow account, ensures that your taxes and insurance are paid on time.
Private mortgage insurance (PMI) is a form of insurance taken out by the lender but typically paid for by you, the borrower, when your loan-to-value (LTV) ratio is greater than 80 percent (meaning you put down less than 20 percent as a down payment). If you default and the lender has to foreclose, PMI covers some of the shortfall between what they can sell your property for and what you still owe on the mortgage.
The promissory note is a legal document that obligates a borrower to repay a specified sum of money over a specified period under particular terms. These details are outlined in the note.
Mortgage underwriting is the process by which a bank or mortgage lender assesses the risk of lending to a particular individual. The underwriting process requires an application and takes into account factors like the prospective borrower’s credit report and score, income, debt and the value of the property they intend to buy. Many lenders follow standard underwriting guidelines from Fannie Mae and Freddie Mac when determining whether to approve a loan.