Frequently Asked Questions
Our knowledgeable staff is ready to answer any and all questions from both new and existing customers.
Never pay your landlords mortgage again! Owning builds your personal equity. With rates at historic lows, Interstate has programs for all. The many benefits of home ownership await you.
Equity– It’s impossible to create equity in an apartment or any rental property. The only way is to own the property yourself.
Tax Deductible- Rental payments are not tax deductible. As a homeowner, interest paid on your mortgage payment may be tax deductible.*
Same Payment Year After Year- It’s inevitable that your rent will increase when your lease is renewed. With a fixed-rate mortgage from Interstate, your principle & Interest payments will never increase. No Surprises!
Deep Sense of Pride- Apartments will forever be a temporary place to call home. Home ownership provides a true sense of accomplishment and pride.
Numerous Tax Benefits- In addition to interest tax deductions, many may also be eligible to deduct closing costs. There may be additional deductions available and/or special tax credits for home improvements and numerous other incentives only available to homeowners.
*Please consult your local tax professional or CPA
Question number one when buying a home is usually “How much money are we going to need?” The necessary down payment is dependent upon the type of loan you receive (which can vary from 0%, as with VA Loans, to 25% or more as with non-conforming loans), and how much you are comfortable paying each month. As an average, most homebuyers make down payments in the 3.5%-20% range, although your own personal situation may dictate more or less down payment. When you are factoring money for a down payment, don’t forget about closing costs.
With so many interest rates on so many different kinds of loans out there, it is hard to know which is right for you. You shouldn’t take a rate just because it’s low. In fact, a lower rate on the wrong loan can cost you thousands of dollars. That’s why we discuss your financial goals with you and help you access the best rate on the right loan to help you achieve financial freedom.
Part of the mortgage application process will be the determination of how much house you can afford based on your income. The two ratios that will be computed are the front ratio and the back ratio. Front Ratio: The total mortgage payment including principal, interest, taxes, and insurance (PITI) as well as any condominium or homeowner association fees divided by your total GROSS income. Example: With a gross income of $3,700 per month and a PITI of $973, the front ratio would be 26%. Back Ratio: The total mortgage payment PLUS any car payments, credit card, and other loan payments, divided by your total GROSS income. Example: With a gross income of $3,700 per month, a total mortgage payment of $973, a car payment of $212, one credit card payment of $59, and one credit card payment of $43, for a total of $1,287, the back ratio would be 35%. The loan program in addition to compensating factors will dictate the maximum allowances for both the Front and Back Ratio in accordance to underwriting industry standards, so contact your Interstate Loan Officer to find out exactly how much you can qualify for TODAY.
Although most programs require assets for down payment and closing costs, there are a few that don’t or may have minimal down payment requirements. Eligible Veterans can do a VA loan with no down payment. FHA only requires 3.5%. If you’re a first-time home buyer, you may qualify for State sponsored down payment and/or closing cost assistance, which may require as little as $500 in borrower contribution, based on program qualification.
Lenders put a portion of your monthly mortgage payment into an escrow account – a holding bin of funds to cover your homeowner’s insurance, flood insurance if applicable, and your property taxes. When these payments are due, the lender pays them from the escrow account on your behalf. Escrow accounts are required on conventional loans when the loan to value is greater than 80% per investor guidelines.
ARM– A mortgage in which the rate changes during the life of the loan based on movements in an index rate, such as the rate for Treasury securities or the Cost of Funds Index. Arms usually offer a lower initial interest rate than fixed-rate loans. The interest rate fluctuates over the life of the loan based on market conditions, but the loan agreement generally sets the maximum and minim rates. When interest rates increase,generally, your loan payments increase. For more information on Adjustable Rate Mortgages, download the Consumer Handbook on adjustable-rate mortgages from the Consumer Financial Protection Bureau.
FRM– A fixed rate mortgage carries the same rate for the term of the mortgage. The interest rate and term are fixed at the start of the mortgage. The monthly amount for the payment of principal and interest will not change during the term of the mortgage, regardless of market conditions.
Mortgage insurance is usually required on a conventional loan any time that the down payment is less than 20% of the sales price (or the appraised value if the appraisal is lower than the sales price) of the property. Premiums vary based on the amount of down payment and credit scores. Higher coverage is required with a lower down payment to address the greater risk. This insurance protects the lender should you default on the loan and it’s required by the investor. On an FHA loan, it’s automatically required upfront and monthly.
Points and discount points are the same thing. They are percentage points of a loan amount. They are an elective fee that you may choose to pay at the time of closing. They reduce the interest rate that you pay. Sometimes it’s worth paying points to get a lower interest rate and to make sure that you’re comfortable with your monthly payment. If you have the additional cash, are payment sensitive, and/or will be living in the home longer term, then paying points may make sense. Your Interstate Loan Officer will help you look at the options.
Required documentation varies by loan type but generally you will need the following documents for your pre-approval:
-Copy of last 2 years W-2 or 1099
-Copy of last 2 years Tax Returns
-Copy of Driver’s License/ Government issued Photo ID and Social Security Card