How Much House Can You Afford?
Home prices in Marin are among the highest in the nation, and it's essential to determine how much you can afford before you start house hunting. Most of what you can afford depends on how much a lender will let you borrow. Fortunately, there are currently historic low interest rates and ground-breaking loan programs that make your affordability higher than ever. Once you have a general idea about the size of your down payment, your type of loan and its interest rate then you can quickly calculate how much house you can afford by using Yahoo's Mortgage Calculators.
There are a variety of mortgages, so we have developed
a quick overview for you of the most common types:
- Fixed rate mortgage
- The interest rate and monthly payments
the same over the entire term, which is traditionally
30 years. A number of variations are available
including short-term fixed rate mortgages, fixed
rate loans with balloon payments at the end, and
two-step mortgages with a lower rate for the first
few years. The 30 year fixed mortgage is the most
common loan program.
- Interest only mortgage
- These mortgages allow interest only
the first 3, 5 or 7 years. The interest rate remains
same over a set period of time, and then the
loan reverts to fully
amortized over the remaining
years. Interest only loans allow buyers to afford
more by lowering the monthly payment. Although principle
is not paid down, equity still accrues and cash
flow is maximized. Interest only loans are very
popular in Marin today.
- Adjustable rate mortgage
(ARM) - The interest rates on these
fluctuate according to interest rates in the economy.
Initial interest rates are typically offered at
a discounted interest rate, which are lower than
they are for fixed rate mortgages. Over time, once
initial discounts are filtered out, ARM rates fluctuate
as general interest rates go up and down. Several
types of ARMs are available.
Many entities including banks, credit unions, savings
and loans, insurance companies and mortgage bankers
furnish home loans. Most Marin homebuyers hire a mortgage
broker to find the appropriate loan. A savvy loan
broker can find you a competitively priced mortgage
that meets your needs, and it's often easier and more
effective than looking for the cheapest rates yourself.
The Importance of Having a Good Credit Score
When reviewing loan applications and making financing
decisions, lenders check a homebuyer's credit report
and score. Credit scores, commonly known as FICO scores,
are based on your history of paying bills on time,
the level of your outstanding debts, how long you've
had credit, your credit limit, the number of credit
cards and the types of credit you have. Credit scores
range from 400 to 900, and you'll need a score of
at least 620 to qualify for a standard loan. Because
your credit history is so vital in getting a good
rate, you should check your credit report before applying
for a loan. If necessary, your loan broker can help
you clean up your file. For more information on credit
scores check out myFICO
or the three credit bureaus Equifax,
Getting pre-approved for a home loan immediately enables
you to start your house searching as a prepared buyer.
So, do yourself a favor and start a relationship with
a lender. Once a lender has evaluated your financial
situation and credit report you will be able to decide
on the loans available to you and become pre-approved.
Your lender will then issue you a 'pre-approval letter'
verifying that they will fund you the loan. Most sellers
in Marin County require a pre-approval letter with
your offer, so you'll need to get pre-approved in
How to Find a Good Local Lender
When it comes down to financing, you need a savvy
loan broker who is looking out for your best interest.
It's not only the rate that counts; a good lender
will analyze your personal financial situation and
outline the best loan program for you. Our network of top Marin lenders is the very best in the county. Click here for a Top