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Frequently Asked Questions, cont...
Q. Does
the closing cost get added to my mortgage loan or do I pay cash for
it?
A.
Closing costs are paid in cash and thus added to the down payment
amount or cash amount the buyer must have to pay for the property.
In the case of a seller, the seller’s closing costs are expenses
that have to be deducted from the amount that the buyer gives the
seller for the property so the seller has to be sure that they know
how much the closing costs are going to be for them to be able to
pay off their existing loan plus the closing costs with the money
that the buyer is going to give them.
Q. How
much down payment do I need?
A. The
amount you need for down payment depends on the difference between
how much of a loan you can get to buy a particular property and the
purchase price of the property. The loan amount that you can get
depends on what percentage of the sales price or appraised value,
(whichever is less) that the lender will lend you to buy a property.
It also depends on how much you qualify for based on your income,
expenses and credit report. So let’s say the lender will require 10%
down payment because the lender will lend you 90% of the value of
the property. So your down payment must be 10% of the purchase price
and don’t forget the closing costs which you have to add on to the
down payment in order to figure out how much cash you need to buy
the property. And you must be able to qualify for the 90% loan based
on your income, expenses and credit report.
Q. What
will my monthly payments be? How is my monthly payments calculated?
A. The
amount of your monthly payment is a very important figure to you
because most people use it to determine whether they feel that they
can afford the house that they want to purchase. It is one thing to
be able to qualify for the loan but it is also important that the
buyer feel comfortable with the monthly payment that he or she will
be expected to pay once they get the loan. Monthly payments are
calculated depending on what kind of loan you get. If you get a
fixed rate mortgage amortized over 30 years, for instance, you get a
loan that has a monthly payment based on the loan amount at a set
interest rate and you pay the same amount every month and at the end
of the 30 years with the last payment your loan is completely paid
off. There are tables and financial calculators which tell you how
much your monthly payments will be over the life of the loan. There
are also other types of loans where the monthly payments are
calculated differently and there may be a large payment at the end
of the term of the loan that you would be expected to pay by either
selling the property or refinancing it.
Q. How
many lenders should I talk to about getting a loan before deciding
which lender to go with? A.
Good question. There is no specific number of lenders to talk to. If
you have a relationship with a bank where you do business, that may
be a place to start. There are other companies that specialize in
making property loans and they may be able to offer you a nice
variety of loans to fit your needs as well. Your REALTOR® will be
able to help you select lenders with whom they have worked so you
can interview them and see what they can do for you. There is a lot
more than shopping for good interest rates because some lenders will
help you get a loan that other lenders will not be able to do. This
is because the underwriting standards, or the analysis of the risk
of lending the buyer money, differs among lenders.
Go Back
Carol Ball
Inc. dba
Carol Ball and
Associates
RB 11347
Maui Mall
70 E Kaahumanu Ave Ste A6
Kahului, HI 96732-2176
(808) 871-8807 • fax (808) 871-2462 •
info@carolball.com
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