Q: What happens if I have an adjustable rate mortgage (ARM) and my interest rate is higher than what the Fed rate is now? Will my payment go up or down?
A: Well, there really is not information to know exactly what will happen with the rate. You need to dig out your paperwork and find the details on how your ARM was structured to get a better idea of what is going to happen and what you need to do.
Q: I was pre-approved for a home loan earlier this year but wasn’t ready to buy anything. I’d now like to get a loan. How do the current market conditions affect my earlier approval?
A: The market has certainly been making a tremendous amount of adjustments in the last few months. It is a different world right now compared to where we were in the beginning of the year.
There are a few factors that need to be considered. First, the credit report that was pulled originally has expired. A new report would need to be pulled to ensure your good credit has not changed or you have not taken on any further debt, whether it be credit cards or car loans. Then there would need to be a new pre-approval.
One of the conditions that has changed in the conforming market is that the debt-to-income ratio will be lower. What that means is that before you may have been able to qualify with a higher debt-to-income ratio but because of the adjustments the mortgage insurance companies have made you will need a lower debt-to-income level to qualify. If you were above the current threshold before, then you would have to look for a house that is lower in price so that your ratio would be lower and you would be in line with current requirements.
In another scenario, if you were getting an FHA loan and you were going to use one of the down-payment assistance programs, you would no longer qualify because the down-payment assistance programs are no longer allowed. The only way you would be able to do this — if you did not have your own funds — would be to get a gift from a family member, and that would require some necessary documentation.
These are just a few things that could affect your loan application now. There may be other items that would need to be considered because everyone has a completely different situation. There are not too many borrowers that are exactly alike, so we look at every profile on an individual basis.
House Helper answers are provided by area industry professionals and are the opinions of our experts. Triad Homes does not make any representations as to opinions and facts.
If you have a question that can be answered by a Realtor, remodeler, builder or mortgage loan adviser, please send it to Heather L. Modlin at hmodlin@news-record.com or by fax to 373-5956.
About our contributor: George Morales is a mortgage adviser with Coldwell Banker Mortgage covering the Triad. He can be reached at 254-8054 or at george.morales@mortgagefamily.com.
