As the housing market shows more upward movement, the temptation to borrow more than you can afford becomes enticing. That’s why it’s important to really look at how much you can spend. Your mortgage payment should be comfortable even if it’s a stretch, not a weight that drags you down each month. The lender will look at your income, debt and savings, and is required by federal regulation to demonstrate your ability to repay a loan. So while that determines how much you can borrow, it isn’t necessarily what you can afford.

“Get pre-approved early, and know your numbers. Make sure you understand the monthly payment that goes along with your price point. Your expectations and your reality need to sync up. Also, rely on your professionals like loan officers and real estate agents. Never feel like you’re bugging them with questions, they should want you to bug them with questions. They’d certainly rather you get the correct info from them than the incorrect info from Google. Also, I think it’s ok to overpay a little for a house you love. If the market isn’t giving you many options to buy and you find a house you love, don’t get hung up on a couple thousand bucks, especially if you’re going to stay in the house long-term. If you can afford it, make it happen.”–Tyler Baker, Branch Manager, Olathe, KS
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When you apply for a mortgage loan in the US, you will typically deal with an underwriter. Most underwriters work for banks, but you can also choose to work with a brokerage. Mortgage brokers don't provide loans directly, but have relationships with a number of lenders. Regardless of the type of underwriter you work with, you will typically be required to:
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Tips for First-time Homebuyers Tips for First-time Homebuyers While buying your first home is a big decision, following these essential first-time homebuyer tips can make the process much easier. Explore these tips for first-time homebuyers Bank of America While buying your first home is a big decision, there are also lots of small decisions to make along the way to homeownership. To help you navigate the process, we've gathered suggestions for avoiding some of the most common mistakes. Know your budget Set a budget. Calculate a monthly home payment that takes into account how much home you can afford, then discuss this amount with your lender. Making sure you can meet your projected future home payment is probably the most important part of successful homeownership. Include PITI (principal, interest, taxes and insurance) in your budget. Mortgage calculators will show you how much you'll pay toward principal and interest every month. Remember that you'll also have to pay property taxes and homeowners insurance. Some financial institutions will require you to contribute these funds monthly along with your principal and interest payment. Be sure to talk to your lender to understand what will be included in your monthly payment. Know how much cash you'll need at closing. When you buy your home, you'll need cash for a down payment (see how much you should put down) and closing costs (estimate your closing costs). The down payment typically varies from 5% to 20% or more. Putting less than 20% down will typically require you to pay for private mortgage insurance (keep reading for more on that). Closing costs could be about 3-7% of the total loan amount and will include charges such as loan origination fees, title insurance and appraisal fees. Budget for private mortgage insurance. For conventional financing, PMI is typically necessary if you don't make at least a 20% down payment when you buy your home. Make sure you know how much this cost will be and factor it into your monthly home payment budget. Research your utilities. If you're moving into a larger home than you're used to, a home that is newer or older than you're used to or located in a climate that's hotter or colder than you're used to, ask your real estate professional to find out what the home's energy bills have typically been. This can help prevent being surprised by a higher utility bill than you're expecting. If you're moving into a new community, find out about water costs, too. Don't forget miscellaneous expenses. Be sure to budget for moving expenses and additional maintenance costs. Newer homes tend to need less maintenance than older ones, but all homes require upkeep. If you're considering a condo or a home with a homeowners association (HOA), remember to include HOA dues in your budget. Keep in mind that you should have an emergency fund on hand to prepare for any unexpected changes in your income (like reduction in your wages) or unexpected expenses (like medical bills). Manage your debt carefully after your home purchase. Sometimes your home will need new appliances, landscaping or maybe even a new roof. Planning for these expenses carefully can help you avoid one of the most common causes of missed mortgage payments: carrying too much debt. It's important not to overextend your credit card and other debts so you stay current on your payments. A smart start Research your mortgage options. As a first-time homebuyer, you're undoubtedly anxious and excited about moving into your new home, but take the time to step back, do the research and learn the differences between the various types of mortgages so you'll know which one is best for you. Know your credit score. As soon as you decide to start looking for a home, check your credit report and credit score with any of the 3 major credit reporting agencies: Experian, TransUnion and Equifax. If you find any mistakes that need to be corrected, addressing these issues early will put you in a better position when it's time to buy a house. (Bank of American credit card customers can get a free FICO® score in Online and Mobile Banking.) Find a responsible lender. When you choose a lender, pick someone you feel good about working with. They should listen to you and put your needs first, and they should be able to explain your home loan options in plain terms. It's a good idea to interview potential lenders to find the one that's best for you. Get prequalified for a mortgage before you start shopping. Knowing how much you can borrow will let you keep your search focused on the homes that are right for you. Getting prequalified (you can prequalify for a Bank of America mortgage online) will provide you with an estimate of how much you can borrow before you start looking at homes. You can also apply for a mortgage with Bank of America's Digital Mortgage Experience Calculate your monthly mortgage payment. You can use our Affordability Calculator to help calculate a monthly mortgage payment that fits into your budget. 2018-07-09 2018-07-09
In addition to a down payment, you will also have to pay closing costs to finalize your loan. This can be a substantial amount of money, so it’s important to plan ahead and be aware of the amount you will likely have to bring to the table. Make sure you have budgeted and saved up enough for these fees in advance, so they don’t catch you by surprise.
If you are thinking about buying a home in the near future, before you start house hunting or get pre-approved for a loan, it’s a good idea to check your credit report and find out what your credit score is. You are entitled to a free credit report once a year from each of the three credit bureaus – Equifax, TransUnion, and Experian, which you can access at www.annualcreditreport.com.

Short Sale: Your servicers may allow you to sell the home yourself before it forecloses on the property, agreeing to forgive any shortfall between the sale price and the mortgage balance. This approach avoids a damaging foreclosure entry on your credit report. Under the Mortgage Forgiveness Debt Relief Act of 2007, the forgiven debt on your primary residence may be excluded from income when calculating the federal taxes you owe, but it still must be reported on your federal tax return. For more information, contact the IRS, and consider consulting a financial advisor, accountant, or attorney.
Look at properties that cost less than the amount you were approved for. Although you can technically afford your preapproval amount, it’s the ceiling — and it doesn’t account for other monthly expenses or problems like a broken dishwasher that arise during homeownership, especially right after you buy. Shopping with a firm budget in mind will also help when it comes time to make an offer.
A lot of borrowers choose to pick up the phone and call a handful of lenders to request interest rates. Those who do that may be surprised when the lender is asking questions before listing off rates. Again, interest rates vary and are dependent on many factors such as the loan program, your financial situation (including credit score), the cost of the home you’re looking to fund, etc. So, both the borrower and the lender should be interviewing one another to narrow down best options. Don't be alarmed if this happens to you! It's all part of the process of getting you into the best loan for your financial situation.

If you are receiving any sort of financial assistance or even a financial gift for your down payment from someone make sure that you are depositing it into your account at least two months prior to applying for your mortgage. That way the bank will not need to source the large deposit. If this is not done then the gifter will have to write a letter stating that the money was truly a gift and not a loan. If you are needing a loan for the down payment the lender may see this as a sign of financial dependence and it may hurt your chances of obtaining a loan.


When your application is received and your eligibility is confirmed, the NC Housing Finance Agency may place a temporary stay-of-foreclosure for up to 120 days so that the company that owns your mortgage cannot foreclose on your home or take other legal action while your Mortgage Payment Program loan application is under review. If you qualify for the loan, the NC Housing Finance Agency will make your mortgage payment directly to your loan provider or bank. At the end of the assistance period, you will resume making your mortgage payment.
Oftentimes, rates you see in advertisements online aren’t necessarily for the loans you qualify for. So you’ll need to investigate. Interest rates vary by location and can change daily. And they vary depending on your specific financial picture, such as income, credit score, and debts.  A good place to get an idea of what rates are available to you right now is to search for interest rates on Zillow. You can get free quotes anonymously, based on your specific financial picture, so you don’t have to worry about being hassled. You’ll also be able to see mortgage rates from multiple lenders so you can easily compare rates.

The possibility of losing your home because you can’t make the mortgage payments can be terrifying. Perhaps you’re having trouble making ends meet because you or a family member lost a job, or you’re having other financial problems. Or maybe you’re one of the many consumers who took out a mortgage that had a fixed rate for the first two or three years and then had an adjustable rate – and you want to know what your payments will be and whether you’ll be able to make them.
When you apply for a mortgage, you will need to provide your lender with a number of financial documents. Having these documents already assembled will help accelerate the processing of your loan application. At a minimum, you should be prepared to provide your last two pay stubs, your most recent W-2, your last two years of tax returns, and current bank and brokerage statements.

Requirements for getting a mortgage loan often change, and if you are considering applying for a home loan in the near future, be ready to cough up the cash. Walking into a lender’s office with zero cash is a quick way to get your home loan application rejected. Mortgage lenders are cautious: Whereas they once approved zero-down mortgage loans, they now require a down payment.

Home equity loans are also referred to as second mortgages because you use your equity as collateral. If you obtain a home equity term loan, you will receive a lump sum and will have to make a monthly payment. You can also apply for a home equity line of credit, which provides you with access to a revolving account. That allows you to withdraw and repay money over the course of a specific period of time.
The amortization chart below (courtesy of the Federal Reserve) shows how the proportion of your payment that is credited to the principal of your loan increases each year, while the proportion credited to the interest decreases each year. In the later years of your mortgage, more of your payment will be applied to principal, helping you build equity faster.

Look at properties that cost less than the amount you were approved for. Although you can technically afford your preapproval amount, it’s the ceiling — and it doesn’t account for other monthly expenses or problems like a broken dishwasher that arise during homeownership, especially right after you buy. Shopping with a firm budget in mind will also help when it comes time to make an offer.
Investopedia’s Mortgage Calculator is based on a complex formula that factors in your mortgage principal (how much you are borrowing), the interest rate you’re paying and the duration of the loan to determine how much that monthly mortgage payment will be. It lets you try out different scenarios of how much you might borrow and what varying interest rates will do to the amount you’ll be asked to pay. Read below to understand what each of these terms mean.
Apartment renting is great when you are a twenty-something college student and all of the best trendy restaurants are within walking distance of your home. It doesn’t take long, however, until those things slowly fade away and the desire to own a home becomes more than a thought. This is usually the point where you realize you need to evaluate your finances if you are going to apply for a home loan. Fast forward to the point where you have made the decision to buy a home and you are getting an approval. The bank comes back to you saying that you did not get approved for the loan. It can be devastating but if you know the reasons why you can’t qualify for a loan, the easier it will be to work on fixing them so that your dream of owning a home can become a reality.

DO THIS: SET UP A QUICK MEETING WITH YOUR LOAN OFFICER TO SEE IF YOU COULD BENEFIT FROM A REFINANCE TO REDUCE YOUR MONTHLY MORTGAGE PAYMENTS. YOU COULD ALSO REFINANCE TO CONSOLIDATE YOUR CREDIT CARD, LOAN, AND OTHER DEBT TO LOWER YOUR INTEREST RATES; TO FINANCE HOME RENOVATIONS OR EXTENSIONS BY USING THE EQUITY ON YOUR EXISTING HOME; OR TO GET A NEW HOME LOAN WITH BETTER FEATURES, LIKE AN OFFSET ACCOUNT OR REDRAW FACILITY.
The internet is filled with “discount” mortgage financing options with great rates, but often they are not able to quickly close your mortgage or offer you the level of service you need. On the other end of the spectrum you have the large, national mortgage companies that purport to offer both great service and value but in reality are not able to give you a competitive rate, and the service is not on the level you might receive from a local company.

It’s short for private mortgage insurance. It’s usually required if you put less than 20 percent down on your house, and it protects the lender in case you default. The cost varies, as do the methods to get rid of the PMI once you have 20 percent equity in your home. Government loan programs, such as FHA or VA loans, are backed by the government rather than PMI. There is no monthly mortgage insurance on VA loans, however you will have monthly mortgage insurance on a new FHA loan.
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Modify your mortgage loan. In many cases your payment is no longer affordable due to changing personal or financial circumstances. A loan modification can reduce your payments, waive fees, lower your interest rates, and more. Banks and lenders are also offering loan modifications with interest rates as low as 2%. They have determined this is in their best financial interest as well. Learn more on low interest rate loan modifications. Find all of the pros and cons as well as details on modifying mortgages.
Once you find a home you want to put an offer on, you have to obtain the actual mortgage loan. Apply for a loan with your chosen mortgage lender. Within three days of your application you should receive a loan estimate that includes closing costs, the interest rate, and the monthly amount you’ll pay for the principal, interest, insurance, and taxes. After that, it’s off to the underwriter, who will review all of your financial information and make the final call to approve or deny your loan.
As interest rates rise, so does your monthly payment, with each payment applied to interest and principal in the same manner as a fixed-rate mortgage, over a set number of years. Lenders often offer lower interest rates for the first few years of an ARM, but then rates change frequently after that – as often as once a year. The initial interest rate on an ARM is significantly lower than a fixed-rate mortgage.
In the beginning, you owe more interest, because your loan balance is still high. So most of your monthly payment goes to pay the interest, and a little bit goes to paying off the principal. Over time, as you pay down the principal, you owe less interest each month, because your loan balance is lower. So, more of your monthly payment goes to paying down the principal. Near the end of the loan, you owe much less interest, and most of your payment goes to pay off the last of the principal. This process is known as amortization.
Mortgage forbearance agreements are a type of emergency mortgage assistance given by lenders in order to help homeowners avoid foreclosure. Effectively, what they come down to are extensions, given in times of great need. If your family just incurred unexpected medical expenses, if your family's primary income producer just lost his/her job, or in the event of an unforeseeable disaster, you may qualify for a forbearance agreement. This allows you to put your mortgage on hold while you deal with your difficult situations.

Everyday Mortgage is meant to help you get real-life, homebuying advice that’s useful. That’s what we’re here for. The people answering these questions are real loan officers, in your hometowns, ready to serve you and get you into the home of your dreams. Click on their names to get in touch with them directly, or find a Movement Mortgage loan officer near you.


If you are receiving any sort of financial assistance or even a financial gift for your down payment from someone make sure that you are depositing it into your account at least two months prior to applying for your mortgage. That way the bank will not need to source the large deposit. If this is not done then the gifter will have to write a letter stating that the money was truly a gift and not a loan. If you are needing a loan for the down payment the lender may see this as a sign of financial dependence and it may hurt your chances of obtaining a loan.
A lot of borrowers choose to pick up the phone and call a handful of lenders to request interest rates. Those who do that may be surprised when the lender is asking questions before listing off rates. Again, interest rates vary and are dependent on many factors such as the loan program, your financial situation (including credit score), the cost of the home you’re looking to fund, etc. So, both the borrower and the lender should be interviewing one another to narrow down best options. Don't be alarmed if this happens to you! It's all part of the process of getting you into the best loan for your financial situation.
FHA loans. FHA loans are a program from the Department of Housing and Urban Development (HUD). They’re designed to help first-time homebuyers and people with low incomes or little savings afford a home. They typically offer lower down payments, lower closing costs and less-stringent financial requirements than conventional mortgages. The drawback of FHA loans is that they require an upfront mortgage insurance fee and monthly mortgage insurance payments for all buyers, regardless of your down payment. And, unlike conventional loans, the mortgage insurance cannot be canceled, even if you have more than 20 percent equity in your home.
On the other hand, if you know you will be selling in the not-too-distant future, the lower interest rate that comes with an ARM might make sense. Even if rates jump in a few years, you’ll be selling anyway so it won’t impact you. You can also select a hybrid ARM that is fixed for a certain number of years (3, 5, 7 or 10) then adjusts annually for the remainder of the loan. The risk with an ARM is that if you don’t sell, your payments may go up and you may not be able to refinance.
Interest – This is what you are paying to borrow the money for your home. It is calculated based on the interest rate, how much principal is outstanding and the time period during which you are paying it back. At the beginning of the loan repayment period, most of your payment actually is going toward interest, with a small portion going against paying down the principal. Over time this will reverse and more of your payment will go toward reducing the loan balance.
However, it's perfectly acceptable to work seller-paid closing costs into your offer in order to reduce your out-of-pocket expense. In other words, if you want to offer $195,000 on a home, you can offer $200,000 and ask the seller to pay up to $5,000 in closing costs for you. This can be an excellent strategy for first-time buyers with limited savings to improve their ability to get a mortgage.
We're here to offer our customers excellent fee free mortgage advice. Our expert advisers will help you secure the best mortgage deal whether you're a first time buyer, remortgaging your home, buying to let or moving up the property ladder. We'll help you throughout the mortgage process – no hidden costs or surprises, just straightforward, honest, mortgage advice.
Typically offered by lenders, loan modification programs are designed to make your mortgage fit within your budget. If your income has decreased due to layoff, reduction in hours, reduction in hourly pay, or emergency expenses, you can go to your lender and explain why you can't pay the mortgage. If they offer loan modification programs, they can reduce their interest rates, keep your payment within a certain percentage of your income, increase or decrease the length of the loan, or negate certain penalty fees. Loan modifications are rarely sweeping, one-size-fits-all type deals. They take time to set up, and only provide indirect assistance by modifying your debt. They don't put cash directly into your pocket. For this reason, they're not useful as emergency mortgage assistance, but they can help if you're struggling just a little bit.
Deed in Lieu of Foreclosure: You voluntarily transfer your property title to the servicers (with the servicer’s agreement) in exchange for cancellation of the remainder of your debt. Though you lose the home, a deed in lieu of foreclosure can be less damaging to your credit than a foreclosure. You will lose any equity in the property, although under the Mortgage Forgiveness Debt Relief Act of 2007, the forgiven debt on your primary residence may be excluded from income when calculating the federal taxes you owe. However, it still must be reported on your federal tax return. For more information, contact the IRS. A deed in lieu of foreclosure may not be an option for you if other loans or obligations are secured by your home.
This seemed to be the thinking a few years ago, and things didn’t turn out very well. When you borrow more than you can realistically pay, that’s a sub-prime mortgage. Banks sold a lot of those to people who assumed the housing market would keep rising like gangbusters. Their home values would go up, giving them nearly instant equity and they could refinance quickly at a lower rate or sell the home for a quick profit. Lenders sold these loan products because they were making the same bet, and interest rates are always higher on sub-prime loans. Even if some ended up in foreclosure, the lenders would still make a tidy profit. Unfortunately, it was a bad bet for almost everyone.
If you and your loan servicer cannot agree on a repayment plan or other remedy, you may want to investigate filing Chapter 13 bankruptcy. If you have a regular income, Chapter 13 may allow you to keep property, like a mortgaged house or car, that you might otherwise lose. In Chapter 13, the court approves a repayment plan that allows you to use your future income toward payment of your debts during a three-to-five-year period, rather than surrender the property. After you have made all the payments under the plan, you receive a discharge of certain debts.
This makes the 30-year fixed-rate home loan very different from an adjustable-rate mortgage (ARM). An adjustable loan, as its name suggests, has an interest rate that can change over time. But the 30-year fixed-rate mortgage remains true to its name, keeping the same interest rate (and the same monthly payment amount) through the entire repayment term.
Due to limited availability of funds, the New York State Mortgage Assistance Program (NYS-MAP) will no longer be accepting loan applications after February 15, 2019. In addition, we cannot guarantee that we will be able to fund loans for clients who have received conditional approval letters. Please keep this in mind as you work on your application with your housing counseling or legal services provider.
Also, JP Morgan Chase has opened dozens of Homeownership Centers across the country to provide face to face contact for troubled borrowers. Anyone can stop by a center in their region for free consultations and information. The face to face contact from a homeownership center will ensure the borrower receives the attention and service they deserve.
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