Home Loan FAQs

California Home Loan FAQs

Question: What type of home can I afford to own?

Answer: Historically, mortgage lenders go by two guidelines when determining if a particular home is affordable to a homebuyer:
1) If the price of the home is less than 2.5 times your annual income, you can afford the home.
2) Generally, your total housing cost should not exceed 30% of your monthly income. The total housing costs includes insurance, taxes, maintenance and repairs, and homeowners association dues.

Question: What factors are taken into consideration when I apply for a mortgage loan?

Answer: Mortgage lenders take many factors into consideration when reviewing a mortgage application. Because each situation is unique, they view each application carefully and make their determination based on the information you provide. Basically, they will want to know if you have a steady, reliable source of income, and the ability (and willingness) to repay the mortgage loan.

Question: What are the advantages of owning a home?

Answer: Homeownership has many advantages. Home owners are making an investment and building equity, they are taking advantage of tax breaks, and they are enjoying freedom, stability, and the security of having their own home.

Question: Are there special mortgages for first-time home buyers?

Answer: Yes, many programs are specifically for first-time home buyers. These programs offer mortgage options for those who have no credit, or bad credit, and/or need assistance with the down payment or closing costs.

Question: Do I need a large down payment?

Answer: Making a large down payment does reduce the amount you have to borrow, thus the more equity you'll have. Loans with less than 20% generally require Private Mortgage Insurance (PMI), which adds to the cost of the loan. However, most programs do have mortgage options with a required down payment of less than 5% of the purchase price.

Question: What does the monthly mortgage payment include?

Answer: The monthly mortgage payment includes the principal and interest of the loan, as well as, local real estate taxes, and homeowner's insurance.

Question: How is the mortgage payment figured?

Answer: The amount of the down payment, the original loan amount, the repayment terms, and the interest rate is taken into consideration when computing the mortgage payment.

Question: What documentation is typically required to apply for a mortgage loan?

Answer: Proof of current income, pay stubs for the past 3 months,W-2 forms and tax returns for the past 2 years, a current credit report, and recent bank statements. Additional documents may be requested as needed.



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