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How much can I borrow for my home? |
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The
amount you may be able to borrow will depend on your income
and current debts as well as the value of the home you're purchasing,
the amount of your down payment and the current mortgage rates.
Generally, your monthly mortgage payment for principal, interest,
taxes and insurance should not exceed 28 percent of your monthly
pre-tax income. Monthly payments on other debts, such as car
loans, school loans or credit card payments should not exceed
an additional 5 to 8 percent of your monthly income. These percentages
can be higher or lower depending on the type of loan you apply
for, but they're a good place to start estimating.
Loans obtained during times of high interest rates will have
higher monthly payments. Consequently, the lower the interest
rate at the time you get your mortgage, the lower your monthly
payments and the more you may be eligible to borrow.
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Can
I get a credit pre-approval decision before I select my home? |
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Yes!
A credit pre-approval decision will help you and your real estate
professional a great deal during your search. Not only will
it put your mind at ease that your credit has already been reviewed,
but a pre-approval decision also lets sellers know that you
are a serious buyer and that a sale shouldn't be held up by
mortgage problems down the line.
GMAC Mortgage offers credit pre-approval decisions through our
Expressway Credit Pre-approval program. At the time you apply
for credit pre-approval, a loan officer will collect any necessary
documents to verify your income and assets up front. If your
credit is approved, you'll receive a pre-approval certificate
that you can present with your offers to purchase a home.
Final loan approval will be subject to a completed sales contract,
a satisfactory appraisal of the property, updating the information
you have provided and any other commitment conditions of GMAC
Mortgage related to your situation.
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How much down payment will be required? |
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Borrowers
may qualify for several mortgage programs that require a low or
even no down payment. Qualified veterans may be able to obtain
a loan with no down payment at all through the VA home loan program.
There are also several other programs that require no down payment.
However, you will find that the greater the down payment, the
more types of loans and options may be available to you.
To cover the risk on lower down payment loans, you may be required
to purchase private mortgage insurance (PMI) which protects lenders
against losses. PMI is usually required for loans with less than
20 percent down. The cost of PMI will be reflected in slightly
higher monthly payments and, possibly, an additional fee at settlement.
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How can I compare interest rates? |
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To
determine your best finance options, compare not only interest
rates, but also other related charges. Lenders are required by
the federal government to provide you with the annual percentage
rate (APR) in order to help you make comparisons.
The APR is the cost of your credit expressed as a yearly rate,
and is generally higher than the note rate. This is because the
APR includes the interest rate on which your monthly payments
will be based plus related costs such as points, fees for processing
the loan and other pre-paid charges.
Points are also an important part of your comparison. One point
is usually equal to one percent of the mortgage amount. Points
are a one-time cash payment made up front or made at settlement.
Lenders charge points so they're able to offer lower rates while
still receiving a fair return on their investment. With most loan
types, borrowers can choose to pay fewer points if they are willing
to accept a higher rate.
Remember that there are factors to consider when selecting your
lender other than interest rate. It is true that a lower rate
will give you a lower payment, but the stability of the lender,
mortgage types and service are also important.
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What programs can help first-time buyers? |
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There
are so many programs available for first-time buyers today, that
buying a home may be easier than you think. Generally, these loan
programs reduce down payment or closing cost requirements because
savings is often the biggest challenge when buying a first home.
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What application fees are charged and what do they cover? |
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Typically,
lenders charge an application fee which covers the cost of a credit
report, an appraisal to determine the value of the property, and
a determination as to whether your property is located within
an area prone to flooding. This may vary due to state laws and
requirements.
Some lenders may not charge an application fee, but may increase
the loan rate or other costs to cover these charges. It's important
to have a clear understanding of the services covered by the fee
and how they may be paid.
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How long will it take to know if I'm approved? |
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The
days of the 45-day loan decision are going by the wayside as lenders
work to speed up the process. GMAC Mortgage's process has been
reduced significantly as a result of streamlining the process
and new technology.
A quick loan process still depends on several factors, including
how fast the lender receives answers from your credit references
and other third parties, such as appraisers and title companies.
An active real estate or finance market may also delay the process.
Once you apply for a GMAC Mortgage loan and have provided your
loan officer with necessary documentation, your application is
submitted to a customer loan specialist. The information will
be joined electronically with a credit report and submitted through
our automated underwriting system. The system tells automatically
whether your loan appears to meet the requirements for approval.
After the initial approval, the customer loan specialist will
order an appraisal of the property, a title search to identify
potential ownership questions, and any verification needed from
your bank, landlord or employer. When this documentation is complete,
you'll receive notification of a loan decision, and, if approved,
a date will be set for settlement.
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What if rates change after I apply but before my loan closes? |
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Sudden
changes in interest rates are common. To prevent surprising increases,
some lenders offer a rate guarantee for a specific period, typically
45, 60 or 90 days. An up-front fee may be required for this protection.
GMAC Mortgage also offers a rate cap program on many loan types
that enables you to cap the rate at a maximum. The cap will be
slightly higher than rates available at the time of application.
If rates rise before closing, your rate cannot go above the cap.
On the other hand, if the rate being quoted under the cap program
is lower than your cap when you're ready to lock-in, you can receive
the lower interest rate. As with the lock-in, an up-front fee
may be required. Without rate protection, your interest rate floats
up and down with the rates in the mortgage market. Many borrowers
prefer to float the rate with the hope that rates will fall before
closing.
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What will be included in my monthly payment? |
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Your
monthly payment will include regular installments of principal
and interest, and if an escrow account is maintained, one-twelfth
of your annual property tax bill and one-twelfth of your annual
hazard insurance premium. Premiums for mortgage insurance (for
loans with low down payments), flood insurance, if your property
is located in a flood hazard zone, or mortgage life insurance
if you select it, as well as other charges, may also be included.
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