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Have you decided to finance your real estate purchase, but do not know where to start? Our article outlines all the steps and resources you will need. Start with the section on the benefits of pre-approval for a mortgage below or learn about bad credit mortgages and you will get all the information necessary to help you better understand your financing options.
Mortgage questions and guide
Mortgage Financing Requirements
Prior to beginning your search for a New York City home or investment property it is essential in being aware of the financing requirements for non-cash buyers. Whether choosing to work with a mortgage bank or broker the information below will prepare you in advance. Be prepared with the following documentation:
US Residents & Resident Aliens
Personal data – Full name, address, and Social Security number.
Income – The amount and source(s) of income for all borrowers.
- Most recent checking and savings bank statements
- Two years of tax returns
- Employment letter verifying your start date, annual salary including bonus
- If self-employed – letter from your CPA or attorney verifying your salary and net worth
Assets – Information on all assets such as checking and savings accounts, stocks and bonds, retirement plans, and other real estate owned.
- List of other liquid or non-liquid assets
- Most recent asset portfolio statements (if applicable)
- Most recent 401K or retirement fund statements (if applicable)
Debts and obligations – Information on all outstanding debts and any other financial obligations.
Credit references – Information concerning loans or debts that have been paid, plus any other references to good credit use.
Reserves – 6 months of the mortgage payment for loans <$650k
Mortgage Loan Programs
- 30 Years Fixed
- 3/1, 5/1, 7/1, 10/1 ARM
- 20% – 35% down payment required
Financing for: Tourists, Visitors, Residents of other Countries, No U.S address, No job in U.S.
- Valid (unexpired) Foreign Passport
- I-94 (Required only when the Foreign National is in the U.S. at time of application or closing)
- International Credit Report
Income and Asset Documentation Requirements
- Proof of Income – Tax returns, pay stubs, etc.
- Stated Income available
- Verification of Deposit
- Down payment and closing costs must be verified by U.S. institution
- Reserves can be verified in a foreign institution with 6 months history
- Statement accounts required
- 6 Months of a mortgage payment for loans <$650k
- 12 Months of mortgage payments for loans >$650k
Mortgage Loan Programs
- 30 Years Fixed
- 3/1, 5/1, 7/1, 10/1 ARM
- 30% – 70% down payment required
Note: Information above is a general overview for foreigners seeking to obtain financing for the purchase. Requirements for financing can vary from bank to bank depending on individual buyer qualifications.
What are the benefits of mortgage pre-qualification?
Except for when you intend to pay for your purchase in cash, it is essential that you are pre-qualified with a New York City mortgage company. Not many of the major mortgage lenders that exist nationally are available in New York because co-operatives tend to be popular in the city, but as long as there’s a need to be served, you’ll always find a mortgage lender for pre-qualification purposes.
Reasons why it is important to be pre-qualified
- A pre-qualified buyer is usually a better option for sellers as they understand that you are serious and prepared to make a purchase. In addition to this, when you are pre-qualified, you also receive preferential access.
- Pre-qualification provides a better understanding of the actual price range you can afford, and this helps you focus better regarding what you may want to buy. A lot of buyers can usually afford more than they believe they can.
- Buying NYC apartments is a big step, so when you are competing against other buyers and you are armed with a pre-qualification from a recognized mortgage lender, your offer will be treated with preference.
- If you are pre-qualified and your offer is accepted, the fact that you are pre-qualified will speed up the rest of the purchasing process; if you are not pre-qualified, your offer will need to undergo much more scrutiny before finally sealing the deal.
Applying for a Mortgage
A mortgage quote will help you get an understanding of the terms of your mortgage, the amount and the interest rate. You can get a quote on any form of variable rate mortgages. The quote can be for any term of six months to thirty years. The decision is yours. However, most lenders try to direct you towards a mortgage that benefits them, so you need to decide in advance which mortgage option works best for you.
So how do you determine which type of mortgage is right for you?
Consider the following to help you select the right mortgage:
- You should think about a short-term mortgage when interest rates are dropping. If your credit rating and financial situation allow, try to get a mortgage that has one year or less on the term. Check out financial websites to see if interest rates are expected to go down, stay the same or increase and in what period the change is expected to occur. You want to choose to lock in your interest rate or not, for how long and whether you will be better offer with an adjustable or variable rate mortgage.
- You should think about a long-term mortgage. Although you shouldn’t lock in your interest rate if it takes you more than five years to pay back the loan. Any more than five years and you will likely pay more on interest rates than when you get a shorter-term mortgage or a variable interest mortgage. You may also miss the chance to lower your interest rate. Again, it is essential to consider your credit rating and financial situation first.
- If you can save money, then you should try to get the best pre-payment and payment frequencies available. To get these, you should sacrifice as much interest as possible, or if you are expecting a ‘windfall’ sometime soon. However, be sure not to sacrifice more than you can spare.
When it comes to getting the best mortgage rate quotes your best tool is the internet. Several websites give free mortgage quotes from one or more of the top mortgage lenders. This reduces the hassle and footwork that you have to do.
How to find the Best Mortgage Rate?
The interest rate is the most critical part of a mortgage to consider. Your interest rate is negotiated for a particular period of six months to thirty years. During this time, you will have to pay the agreed interest rate.
If you can get a low-interest rate, you will pay less in interest costs for the term of the mortgage. When you first negotiate your mortgage for a New York City apartment, you will be able to save thousands of dollars by lowering your interest rate.
Your mortgage will be at its highest amount when you first buy your property. Your payments at this time will primarily be interest charges while a smaller amount is applied to your ‘principal’ or the actual amount you borrowed. This means you are paying less on the large sum of money due to a lower interest rate and in the end, you will be able to save more money.
So how can you lower your interest rate? Look around and consider various mortgage options. Make sure you negotiate with your lender as the lender relies on your business for success, and they cannot make money without you. The lender may make you think that they are doing you a favor by approving your mortgage, but you are doing them a favor as long as you pay off your debt on time.
Lastly, when it comes to interest rates you need to remember that many mortgage lenders will stack the deck to favor themselves. The interest rate they want to charge will make them money. Lending is by no means a charity business. If you get an interest rate lock for five years, then you will end up paying more for your mortgage. This is because the lender wants to make sure they make money off you even when interest rates go up. Therefore, if you try to reduce your interest rates by locking in your payments at a low rate now, you may end up paying more because you are increasing the lender’s risk.
If you are willing to accept some risk, especially if you have an excellent job with proper credit, then you can benefit by getting a variable rate mortgage. This means your interest rate will change along with the market, which is somewhat risky but it also means that you will be able to save money:
A variable interest rate mortgage will be lower than a locked in interest rate mortgage
If it seems like interest rates are going to go up, then you can often switch to a locked in a rate with no additional penalties.
Ultimately, if you can switch without penalties, then you will often be able to get better deals with a variable interest rate mortgage.
I have no credit history, and I’m told I can only get a mortgage loan with high-interest rates
Consider whether you need to buy right away. If you can wait to buy then don’t rush into your purchase. Instead, take the time to get a department store credit card. The other option is to consider a small, short-term loan from a bank or credit union of about six months to a year. Make sure you make regular payments on time; this will enable you to establish good credit in just a few years. While building up your credit history, you can also work on saving money for a down payment, ultimately giving you a better chance when re-entering the property market.
You can expect to pay a higher interest premium if you need to buy right away. This is because your lender doesn’t know how you will handle the loan. Nevertheless, don’t get discouraged, no matter what your credit still try and get the best deal possible. It can be a good idea to try a mortgage broker who you can show your stability like a good job and regular pay to, and there is the possibility of advancement due to their contacts. Be aware that your interest rate may still be higher than those with good credit history.
What are Bad Credit Mortgages?
Even if you have financial problems or bad credit, you can still obtain a mortgage, a bad credit mortgage.
You are considered to have “bad credit” if you haven’t been able to build up your credit history yet, and you will have a low credit score if you don’t yet own a credit card or have a loan. If this is the case, a bad credit mortgage may be a good idea.
What exactly is a mortgage for bad credit? These mortgages give you a chance to establish your credit history if you cannot wait. It can also be a refinancing option for those who already own a home.
No matter how you got into your current financial situation, you need to find a lender who will work with those who have bad credit. These lenders often realize that bad credit happens and you likely have a good reason for it. Before talking with a lender, it can be a good idea to see what your credit score is by going online.
When you get a bad credit mortgage, you will enjoy the following benefits:
- Clean up your credit history or establish proper credit
- Gain relief from a mortgage with a high interest
- Consolidate previous bills into one convenient payment each month
- Pay off existing creditors to get debt relief
- Get the extra money needed to pay for home repairs or emergencies
- Help you to avoid bankruptcy
How do I know I’m getting the best deal?
Doing your homework is the only way to know you are getting the best mortgage deal. Have you checked free quotes online? Have you talked to other lenders? Have you spoken with a mortgage broker? After reviewing just a few sites, you will acquire a wealth of information about your proposed mortgage deal.
I’m buying my first home, and I need help.
When buying a New York City apartment, you will have the free services of a real estate agent since the seller is paying for the agent’s commission. Take the time to interview several real estate agents. Each agent will be able to give you some useful information on the real estate market.
You should also talk with your financial institution or bank; they can provide valuable information from these sources. While talking with them, you can even get mortgage pre-approval. This way you can determine what budget you are working with and whether or not you are ready for the big step of buying a home; including whether or not you are in a realistic financial situation to buy a house.
So what if you found the perfect property and you’re in a hurry to make a purchase? Take a moment to read our section on buying a home. Here you will find valuable information and tips.
If you can take your time when buying a home and inform yourself as much as possible so that you know exactly what you are getting into. Buying a home is probably the biggest purchase you will ever make, so it pays to take the time to look for the best deal.
What if I’ve heard bad things about my lender?
It is a good idea that you don’t sign your mortgage papers yet.
Rather take the time to review the consumer feedback from other mortgage lenders. You should also make sure your mortgage lender has the financial stability necessary to offer you a loan by checking with financial rating companies. Sometimes bad customer service can come from financial pressures within an organization.
If you’ve already signed your loan papers and are making payments to the lender, then you still have choices. First, you need to make sure you continue to make on-time payments. Make sure you keep thorough payment records whether you have a reputable lender or not. This way you will have the data you need to back you up in the event of a dispute.
If you are concerned about your lender’s procedures, then you need to get legal advice. For help, you can try a consumer watchdog group. Often when a company is put on the spot or placed in the media, then many lending companies will choose to do the right thing.
What is a non-conforming mortgage?
Nonconforming means a mortgage that doesn’t follow the standard underwriting practices of other mortgages. This is often because an individual has either bad credit or no credit history.
If someone mentions this to you, then don’t be concerned. This means you may have to pay greater interest, but you will still be able to get a mortgage.
However, if you are offered a non-conforming mortgage loan, it is important to get several quotes first whether they are from an online source or several mortgage brokers. Be sure to consider all your available options. Remember lenders are competing for your business, and this allows you to get the best possible deal.
What are my payment options and what are the differences?
There are various payment options, and they typically allow you to make extra payments or choose to increase the number of your payments. This helps as when you make an additional payment or increase your amount; you will be able to pay off the total amount of your loan sooner.
The difference in payments can be significant. You will have a better chance of making payments if your lender makes your payment plans flexible and achievable.
To understand this let us consider an example. Often banks give you just one day on the anniversary date of your mortgage to make a lump sum payment. Therefore, even if you have extra money you may not be able to make your additional payment. As a result, you spend the money, and they don’t have it when you need to make your lump sum payment. By making lump sum payments at any time, you can significantly reduce how much you pay on your mortgage loan.
Then some lenders allow individuals to increase their payments. Some lenders will only let you make double payments. So what happens if you can afford to pay extra money, but not enough to make a double payment? While just a little bit may not seem like a lot, it can quickly reduce the principal of your mortgage by hundreds of dollars in a year. Over thirty years this will save you thousands of dollars in interest. You may also be able to pay off your mortgage years earlier.
When it comes to a mortgage loan, you need to get the best payment options while not giving up the chance to get the best interest rates.
Why should I check the stability of my lender through a rating company?
Should your lender become insolvent, there is the chance that your loan will be due and payable immediately to pay off the creditors of your lender? While you could get a mortgage with another lender to get rid of this problem, you will face a lot of financial strain and stress.
Also, if a lender starts to have financial issues, then they may not keep good records. If good records aren’t kept, then it may appear as if you owe more money than you do and as a result, you may end up paying for the same debt twice.
These problems are a lot less likely to occur if you choose a financially stable lender.
Even if your lender appears financially stable, it is a good idea to keep close records on your mortgage payments. Even the best lenders can lose the occasional record, and you don’t want to be billed for more money than you owe.
Is it better to go with my bank even if they have a higher percent?
No, it’s not, while you may prefer your bank you can pay considerably more during the life of your mortgage with as much as one percent difference.
However, it pays to check a few numbers before going somewhere else for a mortgage. If moving your mortgage loan to a new bank cause fees that exceed your savings from a lower interest rate then you may want to stick with your bank. It is also important to consider the payment options available, does one lender offer better payment options? Make sure your payment options are comparable.
You also need to consider the ‘hassle’ factor to an extent. If you go to a new bank, you may have to set up new pre-authorized payment plans or additional paperwork issues.
Therefore, if the options and numbers for a mortgage are in your favor, then you should stay with your same bank. Be sure to tell your bank if you can get better rates somewhere else, tell them why you would prefer to stick with them, and then ask if they can offer a lower rate. You should also make sure you have quotes available from other lenders; if you are a good customer, most banks will want to keep you.
If the bank doesn’t want to keep you then, you will need to be prepared to take the next step.
What is PMI Mortgage Insurance?
The market today is full of products related to mortgage insurance. Some of these work to help you save money to purchase a home, others serve to make your mortgage payments in the event of ill health, death or loss of work due to disability.
Often a lender offers mortgage life insurance. This type of mortgage insurance ensures that your mortgage will be completely paid off in the event of your death or the loss of your spouse if you are both named on the actual mortgage.
The best deals on this type of insurance are directly from the insurance companies. Lenders commonly offer package deals that cost you more and don’t offer many benefits. While your bank may try to get you to purchase mortgage life insurance, it is usually more cost effective to buy it from someone else.
Buying mortgage life insurance through your lender can be up to three times the expense of a term life insurance policy in the same amount, yet the effects are the same, In the event of a death, you will be able to pay off your mortgage. If you are going to buy an additional insurance policy to pay off your mortgage in the event of a death, then you want to compare the cost of getting two policies versus a single package policy through your lender.
However, if you have a history of bad credit, your lender may require you to have insurance. If this is the case, then you will need to get additional insurance. This, however, is a different type of insurance. Typically, this type of policy will be for private mortgage insurance. If you don’t have the complete 20% down payment for a New York City apartment, there is another type of insurance you may be required to get. While this insurance policy means you can buy a home, it is an additional cost that will not benefit you.
Can I take a larger Mortgage than I need?
Have you qualified for more than you need when it comes to a mortgage? Is your New York City apartment going to need renovation or repair or do you have other financial debts that aren’t getting any smaller?
If any of the above situations apply to you, then you may be able to benefit by taking out a larger mortgage than you need.
If you have a fair amount of money for a down payment, then you may want to take more out of the mortgage and put less money down. This means you will have more cash on hand for use, as you need it. However, why take more out of your mortgage and increase what you owe? Often a mortgage loan is cheaper than all other types of a loan. A mortgage interest rate is 5 to 10% less than other loans depending on who you get your loan through and how high your credit rating is. As of 2009, many mortgages are 5% or less if you are buying from a reputable bank and have good credit. Most consumer loans come with an interest rate of 10% or higher, the interest rate on credit cards is often between 15 to 18% and can be as high as 29% if you don’t have a good payment history. This means you can save a lot of money and get further ahead if you replace your credit card debt with a mortgage payment.
So what if you want to fix up your new home? If you bought a property that needs repairs, then there are two advantages to taking out more mortgage than you need. First, you will be able to add value to your home through renovations. Second, you will be able to get the money needed for repairs at a lower cost. You will also benefit having saved money on the repairs, enabling you to get more value and enjoyment from your new home.
Be aware that you aren’t reducing your down payment about the home purchase price when increasing the amount of your mortgage. Sometimes lenders will require that your mortgage and down payment equal the market value of a home and won’t give you money more than the home value; in this case, you could apply for a home equity loan.
If you are taking out more mortgage money, ensure that that decision is your own. Don’t let your lender or real estate agent push you into making this decision. This can be a hallmark practice of predatory lending, and if you aren’t careful, you can end up with a higher mortgage payment than you can handle. Make sure you consider your specific financial situation before choosing to increase the amount of your mortgage. This option is only right for you if it places you in a financial position that is manageable and benefits you in the end.
How can I save money on my Mortgage?
The best option is to get the lowest interest rate available; this allows you to save money over the long term.
However, you should be careful because if you have a shorter amortization, then you will likely have higher payments. While you will be saving money in the end with this option due to lower interest rates, you will also need to make sure you can afford the short-term payments.
One way to lower your risk and still save money is by getting a 25 to 30-year amortization on your mortgage while increasing your payments. Most lenders allow you to do this without charging any penalties. Even if you can only improve your payments by a small amount, you will be able to pay off your mortgage years earlier while also enabling you to reduce your payments back to the original low amount if you need the extra money.
Provided you have the right mortgage; you can quickly increase your payment by as little as five percent. Even though this is a small change in your payment amount, it can make quite a difference in the long term. That extra five percent works to pay off the balance or principal of your loan faster.
If a new baby comes along for example or you have a medical emergency, and you need that five percent; merely reduce your payments back down to the original amount, and you can have the five percent for those other expenses.
Keep in mind that many lenders will have some restrictions on how much you can increase your mortgage payment and the number of times you will be allowed to adjust it.
Another way to reduce the time that you will be paying off your mortgage is making payments in lump sums. If you cannot afford higher fees, then this is a good option. Take your annual bonus from work or your tax return and put it towards your mortgage. Again, this will help reduce the principal of your mortgage and will lower your interest rate in the end. Even if you can only make small payments, every year you will be able to reduce the total time it takes to pay off your mortgage.
With over a decade assisting buyers only Elika has established strong relationships with leading lenders such as Wells Fargo, CitiBank, Chase, Bank of America and more. If you would like us to connect you with a qualified mortgage professional, contact us.