How do I know which program is right for me?  Start with your budget. Figure out your optimal house payment and how much you are prepared to pay for a down payment. Then let’s talk. My job is to scour the diverse mortgage marketplace and find people the right match.

Are there options available for little or no down payment? Yes. There are several. Veterans Affairs (VA) loans and USDA Rural Development (RD) loans jump to mind immediately. There are configurations of the first-time homebuyer loan that require very little down payment, and there are repeat homebuyer loans that have similar reduced-down-payment options. Each of these has its own set of criteria to qualify, so reach out to me to get the full skinny.

How much of a mortgage can I qualify for?  Good question, but I’d start with ‘what kind of a payment fits within my budget?’ We will take your gross income times a percentage and subtract your other debt payments to calculate how much house you can afford, but you are the one who must ultimately tell us what is affordable to you.

I don’t have 20% down. Is there any way I can buy a house?

There are tons of mortgage options out there with low down payments. Rural Development (RD) and Veterans Affairs (VA) loans, for instance, require zero down payment. Conventional loans for first-time homebuyers only require 3% down and Federal Housing Administration (FHA) loans require 3.5% down. Tons. Of. Options. Plus, there are often grants and down payment assistance loans available that can further chisel out-of-pocket expenses down. We frequently close on homes where the buyer has next to nothing due at closing.

Can you lend in different states?

Yep. Most of them.

Please contact me for a full list of which states Plains Commerce Bank lends in.

What is Private Mortgage Insurance or PMI and how can I avoid it?  Watch an explanation HERE. For many people, paying mortgage insurance is a necessary evil.  It goes by a couple different names:  PMI (private mortgage insurance) is required on conventional loans, and MIP (mortgage insurance premium) is the FHA version. No matter what you call it, people really seem to hate paying for it.

Why the hate? Frankly, it seems like a bit of a racket from the homeowner’s perspective. Unlike most other insurance products people buy, mortgage insurance does not protect the person paying for it.  Crash your car? Your car insurance company pays on your claim to get it fixed. House hit by hail? Homeowners insurance to the rescue. But the monthly payment you make on your mortgage insurance premium protects your lender, not you.

Basically, mortgage insurance covers your lender’s risk so they won’t lose money in the case of loan default.

Mortgage insurance is required on all conventional mortgages where the homeowner owes more than 80% of the house’s value. It is required on all new Federal Housing Administration (FHA) loans, regardless of how much is owed. The amount you pay for mortgage insurance varies, depending on your loan-to-value percentage – the amount you owe versus your home’s value. The higher that percentage, the more you pay for your mortgage insurance.

So is mortgage insurance evil? Not really. The alternative is that would-be homeowners not sporting a hefty down payment would be unable to buy a house. I think it’s good that we at least have the choice.

That being said, there are strategies to reduce the bill on your mortgage insurance or eliminate it altogether. There are a million configurations for implementing these strategies, so feel free to call or e-mail me if you’d like some specific advice.

How big of a mortgage can I qualify for?

The size of the mortgage is tied to how much payment you can afford. Start by assessing your budget and figuring out where you want your house payment to be. The old-school conservative banker rule of thumb is to keep your house payment under 25% of your gross (before taxes – the bigger number) income and all of your long-term debt should be less than 33% of your gross income. The actual benchmark qualification ratios are higher, but these are a good place to start. There are other factors to consider, like the property taxes, insurance, mortgage insurance, homeowners association fees, etc., so the easiest way to translate a monthly payment into an actual mortgage amount is to give me a call. I use some high-powered analytical software that pits different price points against each other so you can identify your price range before you begin looking at houses.

t ready to buy yet. Should I really look at getting prequalified now?

Applying and getting prequalified doesn’t cost anything, nor does it handcuff you to a loan. Getting prequalified early allows us to take a good look at your setup & make sure you are on track. If a person’s credit score needs work or if they need to save extra money for a down payment, it’s good to know these things early so we can offer advice for you to make course corrections. In short, yes. Apply early and get prequalified. What do you have to lose?

I might want to build. How does that work?

It really depends on whether you or the builder will be bankrolling the construction. If your builder is financing construction, building works just like any other purchase. You enter into a purchase agreement with a builder where they agree to build the home on the location you specify and in accordance with the plans and specs you agree upon, and you agree to purchase the home from the builder when the build is complete. If you will be financing the construction, it’s a two-part process: construction loan and permanent financing. A construction loan is essentially a giant line of credit that is drawn upon to pay contractors as you build your home. Construction loans have their rules and quirks, but the one thing to remember is they are not meant to be long-term loans. They are put in place to build a home and that’s about it. You’ll need to convert a construction loan into permanent mortgage financing when the construction is complete. So, is it better to take out a construction loan or have the builder fund the build? It really comes down to the specifics of the deal. Some builders don’t have a line of credit and are unable to fund a construction project. Construction loans typically require a 20% down payment or some sort of extra security, so they are not an option for every buyer.

What is an escrow account? Why do I need one?

Great question – nobody ever knows what this is. An escrow account is like a side savings account that is hooked on to your mortgage. It’s the holding tank for the money that is earmarked for your property taxes, homeowners insurance, and mortgage insurance. Every month when you make a mortgage payment, the portion that goes to pay the loan back is sent one direction and the rest is lopped off and put in your escrow account. That account balance keeps building higher every month until your property taxes or homeowners insurance comes due. When that happens, you will receive a statement from the county or your insurance agent, but they will actually bill the mortgage company and those bills will be paid from the escrow account. Federal Housing Administration (FHA), Veterans Affairs (VA), and Rural Development (RD) loans all require you to have an escrow account. Conventional loans also require it unless you owe less than 80% of your home’s value.

How do I start? 

Call me up! I’ve been helping people begin their journey to home ownership since 1997 & have helped thousands of people into homes. I’d love to help you too. A 15 to 20 minute phone call will get us started.

Note: Please do not email personal financial information.