BLJuly17.ToWeb

ON LOCATION
... LOCATION...LOCATION
by Spence Servoss
Coldwell Banker
Residential Real Estate
Call (321) 960-1298
spenceservoss@gmail.com
All About Mortgages
This month we take a look at residential mortgages, something
many buyers should find interesting and hopefully
informative. Whether purchasing a house, condo, townhome,
or a multifamily property, many buyers rely on obtaining
a loan from a licensed financial institution to pay for
the purchase. In today’s market, some buyers pay cash for
properties, but the majority of purchases of residential properties
are completed by means of a mortgage provided by a
residential lender.
There are loads of different mortgages, tailored to the
financial capabilities of each buyer. One popular type of
mortgage is an 80% conventional fixed rate loan, whereby a
buyer makes a down payment of 20% of the purchase price
of a property, borrows the remaining 80% to complete the
purchase, and the interest rate on the loan remains the same
for the term of the loan. The life of the loan is often 30 years,
but can be a 15 yr. term if buyer qualifies for the payment
amount as it is higher than a 30 year loan due to the shorter
payback period. The qualifications to obtain a conventional
loan, regardless of a 5%, 10%, or 20% down payment are
standard throughout the industry. If a buyer does not have a
20% down payment, then he will pay an extra amount in his
monthly payment for insurance for the loan until the equity
in the property reaches more than 20%, at which time the
insurance may be terminated by the lender if a residential
appraisal shows 20% equity. Income to debt ratios permitted
are 28% of gross income on a house payment, and up to 36%
of income plus long term debt (car payment, student loan,
alimony, etc) on a house payment. Both of those ratios must
be met for a lender to approve a loan. Length of time on the
job is another qualification. A buyer’s credit score is also a
huge item in qualifying for a loan. A credit score above 700
is considered a positive feature of any buyer, although today
lenders may approve a loan for a buyer with a credit score of
620-640. Lenders charge fees to provide a loan to purchase
a home. These closing costs and prepaid items can often
equal 5% of the amount of money borrowed, and must be
paid at closing on the purchase, so a lender will check on all
available funds of borrower to make sure they have “CASH
TO CLOSE”. A seller is permitted by law to pay up to 3%
of a buyer’s mortgage amount in closing costs and prepaids
(taxes and homeowners insurance) for the buyer if negotiated
38 - Brevard Live July 2017