FAQs

I really want to own my own home, but I’m not sure I can afford it. Where do I start?

Lots of people don’t even consider buying a home because they’re afraid they can’t afford it.
But for most people, home ownership is within reach – especially with so many different loan
programs available. In fact, for many, home ownership is as affordable as renting – in some
cases, even more affordable. The best place to start is with a Custom Home Loans loan officer
who will help you understand the entire process.

How do I know how much house I can afford?

Before you start looking at homes, you need to have some idea of what you can afford. As a
general guide, you can purchase a home with a value of two to three times your annual
household income, depending upon your savings and debts.

If you’d like to know exactly how much you are eligible to borrow, ask one of our mortgage
loan officers today.

What is the difference between pre-qualifying and pre-approval?

A pre-qualification is normally issued by a loan officer who will talk with you to determine the
dollar amount of a loan you may be eligible to receive. However, a pre-qualification is not an
approval nor is it a commitment to make you a loan.

Pre-Approval involves actually verifying your credit, income, down payment, etc. so that your
loan request may be presented to an underwriter for a credit decision. Having a pre-approval
letter allows you to close more quickly when you do find a house since all of the time
consuming verifications have already been completed.

How much will my credit history affect my ability to get a mortgage?

Many home buyers are very worried about this issue. If you have had credit problems, be
prepared to discuss them honestly with your loan officer. We know that there can be
legitimate reasons for credit problems. If you had a problem that’s been corrected and have
made on time payments for a satisfactory period of time, your loan officer can work with you
to find a loan program with some flexibility.

How much will I need for a down payment?

It’s probably less than you think. Many first time home buyers are surprised to learn that
there is no set answer to this question. In general, a standard minimum down payment is
usually about 3% to 5% of the home’s value. However, there are several options available
that actually allow for 100% financing.

What does my mortgage payment include?

For most homeowners, the monthly mortgage payment includes four separate parts:

            Principal           Payback on the amount borrowed
            Interest             Interest on the amount borrowed
            Taxes               An escrow account to pay your annual property taxes
            Insurance          An escrow account to pay your annual homeowners insurance

Another part of your payment may include PMI (Private Mortgage Insurance) if required.

What is PMI?

PMI or Private Mortgage Insurance is normally required when you buy a house with less than
20% down. It is a type of guarantee for lenders that helps protect against the costs of
foreclosures. It enables lenders to accept lower down payments than they would normally
accept. The cost of PMI decreases as your down payment increases.