Q & A with Dottie Herman

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Q1 - What are the current rates? I am looking to purchase a home and I am trying to figure out what I can afford as a monthly payment. I think a 30 year fixed is the best mortgage for me, but are the rates lower on a 7 year ARM?

A - Mortgage rates are based on financial market conditions and can change daily, or even more often. They also depend on many other factors just some of which include loan amount, mortgage product type (fixed, adjustable), occupancy (primary home, second home, investment), property type (single family, multi family...),  loan to value, and FICO credit score.  Your choice of loan product will also depend on many factors, and in general, rates on fixed rate loans will often be higher than the initial rate on adjustable rate loans.

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Q2 - What are some of the factors that would prohibit me from qualifying for a mortgage. I have only had a job for a short period of time, and I am not sure if that will impact a bank's decision. What are some of the key factors they look at in order to lend someone money?

A - Being in your job for a short time in itself is not necessarily a reason that a bank would decline you for mortgage financing. The lender will want at least a 2 year history of your employment.  As an example, you might have just received your first paycheck at your first job out of college, or your employment history might be 1 month in your new job and 2 years before, somewhere else.
 
Banks tend to look at 4 major factors which include:
 
1. Debt To Income Ratio: Analysis of the ratio of all the debt payments you will be making if they lend, against your recurring income.  In some cases the time at the job could impact the decision.

2. Loan To Value: The total amount of debt that you intend to take out that is to be secured by the property against the appraised value.

3.       Credit Score: Lenders generally use the middle score of the FICO scores that they obtain from the three major credit reporting agencies. The higher the score the better.