Question 1

What factors impact what I can afford?

Accepted Answer

To determine how much home you can afford, lenders assess your financial track record and your financial obligations to determine how much you can afford to borrow and pay on a monthly basis. This helps them ensure you will be able to reliably make your mortgage payment every month.

Income and debt:  Lenders assess your monthly documented earnings, which can come from sources like salary, retirement, self-employment, or investments. They then deduct your monthly obligations, such as credit card payments, car loans, and student loans. This helps them determine the amount you can comfortably afford to pay each month.

Cash reserves: The availability of funds for your down payment and closing costs is essential. Whether it's from your savings, investments, or other sources, having adequate cash empowers you to navigate the homebuying process smoothly.

Credit profile: Lenders scrutinize your credit score and credit history (e.g. bankruptcies and late payments) to evaluate your creditworthiness. This assessment impacts the mortgage interest rate you can secure.

Property tax: As a homeowner, one factor in how much home you can afford is your annual property taxes. These are determined by the assessed value of the property or the purchase price of the home. Tax rates vary depending on the state, county, and municipality. They also vary based on exemptions that might be available - e.g. for primary residences.

Homeowner’s insurance: Homeowner’s insurance is a vital form of property insurance specifically designed to protect private residences. It is a requirement when obtaining a home loan. The cost can vary, but it tends to average around $35/mo per $100,000 of home value. Of course, for the most accurate cost, it’s best to consult your insurance carrier.

Private mortgage insurance (PMI): If you contribute less than a 20% down payment for a home purchase, lenders will require private mortgage insurance, or PMI. Our affordability calculator uses home price and down payment amount to estimate whether you’ll need to pay PMI and, if so, how much.

Homeowner’s Association (HOA) dues: Certain condo, townhome, or housing communities operate under the governance of a homeowner’s association, otherwise known as an HOA. These associations are responsible for maintaining shared areas and upholding specific rules and regulations with the intention of preserving home values. This typically requires a monthly fee from residents. You can typically see HOA fees directly on the real estate listings.

Delving into these key factors can help you make more informed decisions on your homeownership journey. You’ll also get a better idea of what you need to adjust to increase your eligibility for a more expensive home.

Question 2

What are my options if I want to put a small down payment?

Accepted Answer

The down payment is a common sticking point for first-time homebuyers. But we’ve got good news: You don’t have to put 20% down. With an FHA loan, you can put as little as 3.5% down. There are even some programs that let you put down as little as 3%.

If you’re a veteran or active service member, you may qualify for a VA loan, which doesn’t require putting any money down.

Question 3

I have poor credit. What are my chances at home ownership?

Accepted Answer

There is no standard credit score threshold that will disqualify you from getting a mortgage across the board. That being said, conventional loans typically require a credit score of 620 or more, while government-backed loans like an FHA or VA require a credit score of 580 or more. At Tomo Mortgage, we have products to help those with less-than-ideal credit get into their first home.

Question 4

Can I get a loan with a non-traditional income?

Accepted Answer

Absolutely. Tomo Mortgage offers a product called a Non-QM loan, which is perfect for people with non-traditional income, such as small business owners, foreign nationals, real estate investors, and freelancers. With no credit score requirements, wider loan amounts, and fewer intended use restrictions, a non-QM can be a great fit for those with non-traditional circumstances.

Question 5

I want a manufactured home, condo, or condotel. Can Tomo Mortgage help me?

Accepted Answer

Yes, Tomo Mortgage can now lend on manufactured homes, condos, and condotels.

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