Understanding Mortgages and Your Budget: How Listing Box will help you apply for, qualify, and complete your next mortgage (6 min read)
Unfortunately, today’s school system doesn’t think it's important to teach students about mortgages and how to buy property. This article is designed to help home buyers understand, apply for, and qualify for a mortgage during their home buying process.
Down Payment: Your down payment is usually the single largest amount of money required for you to purchase a home. Traditional loan programs (FHA & Conventional) have a minimum down payment amount of 3.5%. For example, if you’re buying a home worth $400,000 your minimum payment would be $14,000. If you’re a veteran, the VA offers buying programs called “VA Loans” with down payments as low as $1. For buyers who don’t have the minimum down payment there are a multitude of down payment assistance programs that most people qualify for. Just because you don’t have your down payment saved, doesn’t mean you shouldn’t be getting prequalified for a loan. Listing Box will help you find a loan or program that makes sense for you and your situation. Please reach out to us using the “Pre-Approval” tool in the accounts tab in the Listing Box App or your preferred form of communication.
Closing Costs: Closing costs are any fees involved with buying a home that aren’t the down payment. There are some varying fees from lenders, escrow companies, home warranty companies, home inspectors, etc. Listing Box will help you navigate and understand these fees throughout your transaction. Most closing costs average between 1%-2% of the sales price depending on the specific vendors you decide to do business with. Once again, Listing Box is here to help every step of the way, do our part to reduce fees, and make recommendations based on your specific needs.
Monthly Payment (PITI): Your monthly mortgage payment is made of 4 parts called “P.I.T.I.” which stands for Principal, Interest, Taxes, & Insurance. These 4 items added together equal your monthly mortgage payment. Your mortgage lender and Listing Box will help you go through these items, including interest rates, to help you get the most favorable monthly payment for the property you are purchasing based on your financial situation. The Listing Box Staff is standing by to answer any questions you may have before, during, and after your home purchase.
Escrow Account: An escrow account is set up by your lender during the closing process to help automatically cover expenses which threaten the loan by foreclosure. This means that your property taxes, homeowners insurance, mortgage insurance, etc. are all automatically covered within your mortgage payment. This is done to protect both the homeowner and lender in the event that a minor payment is missed and the foreclosure process is started by the debtor owed. Escrow accounts are usually managed by the lender and rebalanced periodically. They benefit both the owner and the bank.
Qualifying for a mortgage: Some of the biggest factors to consider when qualifying for a mortgage are obviously your credit score, income, and job history. However, there is a lesser known factor most lenders use when qualifying you for a mortgage, it’s called “Debt-to-Income Ratio” or DTI. To summarize this let’s use the following example. If you pay $2,000 a month for your total debts (car loans, credit card minimums, insurance, etc.) and your gross monthly income is $6,000, then your debt-to-income ratio is 33 percent. ($2,000 is 33% of $6,000.) Lenders use your DTI, credit score, income, and job history to help you qualify for a home loan and get you the best interest rate. Listing Box will help you work with your lender to make sure we are able to get the loan closed smoothly before you ever start looking at homes. Minimum credit scores for FHA financing is usually 580 and conventional loans are usually a min score of 620 however every lender is different and we will do our best to get you qualified.
Houses that qualify for loans: There is a little known fact about home loans that most consumers are unaware of. Not all homes can be purchased with loans. Each house is not only appraised for the purchase price but also appraised for condition. Homes with exposed concrete foundation or unpainted fascias, for example, won’t qualify for FHA loans. Listing Box will make sure during your transaction that the houses you’re writing offers on meet or exceed the condition requirements for your specific loan type.
Time Frames: When buying your home you’ll hear there is a 30-45 day escrow period involved in your transaction. While true, there is more to the story. Escrow periods are for the lender, title company, buyer, seller, and agents to get all the paperwork together in order for the transaction to close. Listing Box’s system and partnering vendors are all here to simplify the process and reduce the overall escrow period. They are here to guide you through the process as fast or as slow as you need. When writing an offer on a house we always recommend a 30 day escrow period however Listing Box will do all we can to speed up the process if need be.
In conclusion, it doesn’t matter your financial situation, amount in your savings account, or personal history. Listing Box is here to help you navigate the confusing world of mortgage banking and get you in a home you’re proud of. Contact us today via call, text, email, or using the Listing Box App.
702-506-5905 / www.listingboxapp.com / info@listingbox.com / “ListingBox” on Apple App Store or Google Play Store
Written by: Mason Hoopes, Founder/Broker of Listing Box Dec. 13th, 2022 B.0146385.LLC