Financing a Home in Gilbert
Before approving your loan application, a lender considers two basic factors: 1) your ability to repay the loan and 2) your willingness to repay the loan.
1) Ability. The bank will determine your ability to repay the loan by verifying your current employment status and analyzing your total income. Lenders prefer to see at least two years of employment at the same place, or a few years of work in the same occupation. Your proposed monthly payment will be compared to your monthly income and debt.
2) Willingness. In the bank's eyes, your willingness to repay the loan is evidenced by how well you have paid off previous loans and by examining how the property will be used. Willingness can be gauged by your credit report and previous commitments to pay rent and/or utility bills. There is also a greater tendency to stick with your payments if you plan to live in the house, as opposed to using it as a rental property or vacation home.
It is important to remember that there are no set rules and each applicant is handled on a case-by-case basis. Many applicants come up a little short in one area but make up for it with other strong points. These compensating factors may include a large down payment, solid employment history, extensive educational background, or overall financial health.
For applicants who need to make a lower down payment, the bank will require you to buy mortgage insurance. Mortgage insurance is protection for the lender in case you stop making payments. This allows low and moderate income families to become homeowners with low down payment programs.
Loan Repayment Options
Fixed-rate Mortgage Loan. The interest rate stays the same throughout the life of the loan, so your monthly payments don't change.
Adjustable-rate Mortgage Loan. Interest rates are periodically adjusted to stay in line with current interest rates.
Balloon Loans. A balloon loan, or "reset mortgage", typically acts like a fixed-rate mortgage loan, until the balloon payment comes due, when the balance of the loan must be paid in full, usually requiring refinancing.
Types of Non-conventional Loans
FHA Loans. FHA mortgage loans are insured by the government for a fee that is folded into the loan. First-time home buyers are ideal candidates for an FHA loan because the down payment requirements are minimal and FICO scores do not matter.
VA Loans. Zero down-payment home loans available to qualified veterans. The loan is guaranteed by the Veterans Administration, but funded by a conventional lender.
USDA Loans. Loans available to home buyers in certain areas that are considered rural, such as Pinal County, AZ. These loans require zero down-payment and are backed by the US Department of Agriculture.
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