Wednesday, September 18, 2013

What does it take to get a mortgage today? - Half Moon Bay Review : Community

What does it take to get a mortgage today? - Half Moon Bay Review : Community



Your debt to income ratio cannot exceed 45 percent. The higher your credit score, the lower the mortgage rate. A score of 740 or above will give the best rate; a 690 will work, but you will pay between one-eighth to one-quarter of a percentage point more. Rates have certainly moved up this year after the announcement from the Federal Reserve saying it planned to gradually stop buying bonds sometime in the near future. The rate changes daily, but now it’s hovering around 4.375 percent for 30-year fixed mortgages.
The amount of the down payment will also affect both the rate and monthly payment. A 20 percent down payment is the magic number, but other programs are available. The banks are once again offering second mortgages with purchases reducing cash needed. Wells Fargo is doing 80 percent first mortgages with a 5 to 10 percent second mortgage and a 10 to 15 percent down payment. This avoids the costly Private Mortgage Insurance premium, which can add a few hundred dollars a month to your payment and isn’t tax-deductible.
For those with less cash, there are the FHA loans that only require a 3.5 percent down payment and 3.5 percent for closing costs. Here you will have to pay PMI — at the time of closing and every month thereafter until you have 20 percent equity in the property.
So what does it take to get a loan today? According to Griffis, banks are going to want to see two years of tax returns, pay stubs, bank statements and a letter explaining any gaps in employment. If part of your down payment is a gift, you will have to season it in your account for two to three months or obtain a letter.

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