Frequently Asked Questions
I want to begin looking for homes. How do I start?
GVC Mortgage specializes in acquiring loans for people interested in purchasing a house in Indianapolis, Carmel, Fishers, Plainfield, and Westfield. Contact us today at (317) 564-4906 (Carmel) or (317) 754-4008 (Plainfield) to make an appointment with one of our professionals. We can pre-qualify you for a loan in just days.
What is the difference between pre-qualification and preapproval?
Pre-qualification estimates how much of a mortgage you will get when you do apply. If you’re considering purchasing a home soon, this should be one of your first steps. It will give you an idea of what price range you can afford.
When you’re ready for the next step, you should apply for preapproval. Once you’re preapproved, you will have a written commitment from a mortgage lender saying that they will lend you money. People selling a home like to see that you’ve been preapproved because it shows that you can receive financing. It also helps expedite the buying process.
How much of a mortgage can I get?
The amount of mortgage you qualify for directly affects how much house you can afford. To figure out how much money you can borrow, lenders will examine your annual income, as well as any large debts you may have. Most lenders want you to have a 28/36 ratio, which means that only 28% of your gross monthly income goes to mortgage payments. Also, when you add other regular debt payments onto your loan payment, lenders don’t want this number to exceed 36% of your gross monthly income.
Remember that when a lender calculates these numbers, any additional fees that have to be paid with your mortgage are included in the price. Below are some of the charges that would be added into your rate:
- Homeowner’s insurance
- Interest rates
- Property taxes
- Any applicable homeowner’s association fees
For a practical way to estimate how much of a house you can afford, try our free mortgage calculator.
Should I check my credit before I begin looking for homes?
When it comes to getting a mortgage, your credit score plays an extremely important role. A good credit score shows lenders that you’re responsible and timely with your payments and are a good candidate.
Since your credit is so critical to the mortgage process, you should ensure that everything is correct before you apply. If you do find any credit mistakes, you’ll want to get those corrected as soon as possible. When you’re trying to buy the house of your dreams, time is of the essence. Don’t let a credit mistake slow you down.
What’s the average down payment?
The amount of money you’ll need for a down payment depends greatly on the type of loan you get. If you get a conventional loan, you’ll probably need to pay 10%–20% of the home’s price upfront. However, some FHA loans only require a 3.5% down payment, and other options allow you to finance everything. If you qualify for the FHA/HUD 100, you only pay $100.
Do keep in mind that if you don’t pay a certain percentage for the down payment, you will need to pay a monthly fee for PMI (Private Mortgage Insurance).
I need Private Mortgage Insurance?
This special insurance protects the lender if you default on your loan by covering the remaining payments. Most people who pay a down payment of less than 20% of the home’s selling price are asked to acquire Private Mortgage Insurance (PMI). Additionally, many programs, including the FHA, require PMI. It normally costs half of one percent, (0.5%) of your total loan.
What’s the difference between fixed and adjustable interest rates?
Many loans give you the option of choosing whether you want a fixed or an adjustable interest rate, like a conventional loan or the FHA 203(k). A fixed interest rate means that the interest rate will stay the same during your entire loan. However, an adjustable interest rate means that it can fluctuate, either going up or down—normally related to the economy. Adjustable-rate mortgages (ARM) have more inherent risk.
Are closing costs included in my down payment?
No. The price that you are paying for your home doesn’t include all of the finalization costs, referred to as “closing costs.” When you officially purchase your home, you’ll pay the down payment, property tax, and homeowner’s insurance. However, you may need to bring extra cash for a variety of other charges, including attorney fees, title insurance fees, survey fees, and any other charges or taxes. Before closing day, your real estate agent will inform you of any applicable, extra costs so you can be prepared.
Is it wise to refinance?
Refinancing a mortgage is simply replacing one loan with another under different terms. Some people can save a lot of money by borrowing money with a lower interest rate or by reducing the loan’s length and paying the debt off faster. However, refinancing isn’t beneficial for everyone. Some people would actually lose money if they tried. The professionals at GVC Mortgage are experienced in the art of refinancing. If you’re considering it, contact us today. We’ll advise you on what would be best for your financial situation.
Adjustable Rate Mortgage (ARM): Unlike a fixed-rate mortgage, an adjustable-rate mortgage has an interest rate that changes throughout the length of the loan. The interest rate either increases or decreases, depending on market indexes.
Assessment: The total value of your property. This number is usually used for taxes.
Closing: The official act of transferring homeownership (and all associated titles, deeds, and paperwork) from the seller to the buyer. Both buyer and seller normally have to pay closing costs at this time.
Closing Costs: Any costs related to the buying and selling of the house that must be paid in addition to the down payment. Some homes have closing costs that include the attorney’s fee, documentation fees, a survey charge, and more.
Collateral: Assets that are pledged as security for the loan’s repayment—normally the house and the property that are listed on the mortgage.
Conventional Loan: A mortgage that isn’t insured by the FHA or guaranteed by the VA. These loans are harder to get because qualification is based on the buyer’s credit history.
Default: A term used to describe a borrower who doesn’t uphold the agreement with the lender, normally by failing to keep up with punctual payments. After 90 days of breaking the contract, the borrower is considered to be in default.
Delinquency: When a borrower is more than 30 days late making a payment.
Equity: The portion that the borrower owns of the home. Calculate this by subtracting the unpaid loan balance from the value of the home.
FHA: The Federal Housing Administration (FHA) doesn’t actually lend money, but it does insure loans that are made by private lenders. This insurance gives the lenders the opportunity to offer mortgages with more favorable terms and interest rates. Many people who can’t obtain conventional loans can get one through one of the FHA’s programs. The FHA is part of HUD.
Foreclosure: If the borrower defaults, the lender can repossess the home. Foreclosing is a legal procedure where the borrower forfeits all rights to the home and property.
Grantee: The grantee is the person buying the real estate.
Grantor: The grantor is the person selling the real estate.
Gross Income: An individual’s total earnings before any taxes or deductions are paid.
Homeowner’s Insurance Policy: Also known as “hazard insurance,” homeowner’s insurance compensates the homeowner if their real estate is damaged due to theft, fire, or other dangers. It often covers the entire value of the home.
HUD: Housing & Urban Development (HUD) is a government agency that manages federal housing and several different programs dedicated to urban development. The FHA is a part of HUD.
Interest Rate Cap: To protect both the lender and the borrower, many mortgages have an interest rate cap. The cap is a safeguard built into ARMs; it lists the highest and the lowest percentage of interest that can be charged.
Late Charge: To encourage punctual payments, many lenders charge a late penalty if the borrower makes a tardy payment.
Loan Submission: When a borrower applies for a loan, it is submitted to the underwriters. The underwriters consider the potential borrower’s credit and financial history, and then they decide if lending to that borrower is a wise choice.
Market Value: Not to be confused with the assessment (the total value of the property), the property’s market value is the highest price a buyer would pay and the lowest price the seller would sell for.
Mortgagee: The person lending the money for the mortgage.
Mortgagor: The person borrowing the money for the mortgage.
Net Income: Also called “take-home pay.” This part of income already has taxes, insurance, social security, and any other necessary payments subtracted. This is most commonly used when lenders are making an FHA or a VA loan.
PITI: Most monthly housing payments cover the costs for PITI (Principle, Interest, Taxes, and Insurance).
Prepayment Penalty: When paying for a mortgage, it’s important to stay on schedule. Just as you’re penalized for paying too late, you are also fined for paying more than you’re supposed to or finishing the loan earlier than scheduled.
Principal: The amount of money borrowed for the mortgage.
Private Mortgage Insurance (PMI): Many borrowers are required to pay for PMI, especially if they didn’t pay much for the down payment. PMI protects the lender in case the borrower defaults.
Titles: Legal documents that state who has ownership of a property.
Underwriting: Underwriters review a borrower’s credit and financial situation and any property appraisals, and then they assess the amount of risk. If they deem the borrower trustworthy and assess it as a good fit, they give the final approval.
VA: The Veteran’s Administration (VA) supports service members, veterans, and eligible spouses in purchasing, renovating, and building homes. While the VA does not lend money, they do guarantee loans so that the private lender can offer more favorable terms.
If you’re ready to get a mortgage or refinance, apply now. If you have any questions, contact GVC Mortgage at (317) 564-4906 (Carmel) or (317) 754-4008 (Plainfield). We also have other resources to help you.