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Educational Resources

As always, Garden State Home Loans wants to be your resource for all things mortgage related. Below you will find educational resources to help you during the mortgage process.  If you have any additional questions, reach out to us at info@gardenstateloans.com.

Understanding Mortgages

Conventional

  • A conventional mortgage is a home loan that isn’t backed by a government agency, such as the FHA or VA. Conventional mortgages often meet the down payment and income requirements set by Fannie Mae and Freddie Mac, and they often conform to the loan limits set by the Federal Housing Finance Administration (FHFA).

FHA

  • An FHA loan is a mortgage issued by an FHA-approved lender and insured by the Federal Housing Administration (FHA). Designed for low-to-moderate-income borrowers, FHA loans require a lower minimum down payments and credit scores than many conventional loans.

VA

  • A VA loan is a mortgage loan available through a program established by the United States Department of Veterans Affairs (previously the Veterans Administration). The VA sets the qualifying standards, dictates the terms of the mortgages offered and guarantees a portion of the loan, but doesn’t actually offer the financing. VA home loans are provided by private lenders, such as banks and mortgage companies, instead.

Closing costs refer to the fees you pay to your mortgage company to close on your loan. Cash to close, on the other hand, is the total amount – including closing costs – that you’ll need to bring to your closing to complete your real estate purchase.

Closing Costs- The specific closing costs you pay depend on your loan type, state, down payment and how much you borrow. A few common fees you might pay are listed below.

  • Appraisal Fees
  • Attorney Fees
  • Title Insurance
  • Application Fees
  • Origination Charges
  • Private Mortgage Insurance
  • FHA, USDA Or VA Fees
  • Pest Inspection Fee

Cash To Close Cash to close includes the total closing costs minus any closing costs that are rolled into the loan amount. It also includes your down payment, and subtracts the earnest money deposit you might have made when your offer was accepted, plus any seller credits. It also includes any refunds for overpayments and other credits.

The debt-to-income (DTI) ratio is a personal finance measure that compares an individual’s monthly debt payment to his or her monthly gross income. Your gross income is your pay before taxes and other deductions are taken out. The debt-to-income ratio is the percentage of your gross monthly income that goes to paying your monthly debt payments.  A DTI of 43% is typically the highest ratio a borrower can have and still get qualified for a mortgage, but lenders generally seek ratios of no more than 36%.

The loan-to-value (LTV) ratio is an assessment of lending risk that financial institutions and other lenders examine before approving a mortgage. Typically, loan assessments with high LTV ratios are considered higher risk loans. Therefore, if the mortgage is approved, the loan has a higher interest rate.

An LTV ratio is calculated by dividing the amount borrowed by the appraised value of the property, expressed as a percentage.  Most lenders offer mortgage and home-equity applicants the lowest possible interest rate when their LTV ratio is at or below 80%.

When you close on your loan, your lender will collect enough funds to establish an escrow account. Each month, a portion of your mortgage payment will go into your escrow account, and your lender will use the escrow account to pay your taxes and home insurance bills when they are due. This spreads the amount over 12 months, making it easier on your bank account. And since your lender is making the payments, you won’t have to worry about remembering when they’re due.

3 Common Types of Mortgages

Conventional

  • A conventional mortgage is a home loan that isn’t backed by a government agency, such as the FHA or VA. Conventional mortgages often meet the down payment and income requirements set by Fannie Mae and Freddie Mac, and they often conform to the loan limits set by the Federal Housing Finance Administration (FHFA).

FHA

  • An FHA loan is a mortgage issued by an FHA-approved lender and insured by the Federal Housing Administration (FHA). Designed for low-to-moderate-income borrowers, FHA loans require a lower minimum down payments and credit scores than many conventional loans.

VA

  • A VA loan is a mortgage loan available through a program established by the United States Department of Veterans Affairs (previously the Veterans Administration). The VA sets the qualifying standards, dictates the terms of the mortgages offered and guarantees a portion of the loan, but doesn’t actually offer the financing. VA home loans are provided by private lenders, such as banks and mortgage companies, instead.
Closing Costs VS Cash To Close

Closing costs refer to the fees you pay to your mortgage company to close on your loan. Cash to close, on the other hand, is the total amount – including closing costs – that you’ll need to bring to your closing to complete your real estate purchase.

Closing Costs- The specific closing costs you pay depend on your loan type, state, down payment and how much you borrow. A few common fees you might pay are listed below.

  • Appraisal Fees
  • Attorney Fees
  • Title Insurance
  • Application Fees
  • Origination Charges
  • Private Mortgage Insurance
  • FHA, USDA Or VA Fees
  • Pest Inspection Fee

Cash To Close Cash to close includes the total closing costs minus any closing costs that are rolled into the loan amount. It also includes your down payment, and subtracts the earnest money deposit you might have made when your offer was accepted, plus any seller credits. It also includes any refunds for overpayments and other credits.

What is DTI

The debt-to-income (DTI) ratio is a personal finance measure that compares an individual’s monthly debt payment to his or her monthly gross income. Your gross income is your pay before taxes and other deductions are taken out. The debt-to-income ratio is the percentage of your gross monthly income that goes to paying your monthly debt payments.  A DTI of 43% is typically the highest ratio a borrower can have and still get qualified for a mortgage, but lenders generally seek ratios of no more than 36%.

LTV

The loan-to-value (LTV) ratio is an assessment of lending risk that financial institutions and other lenders examine before approving a mortgage. Typically, loan assessments with high LTV ratios are considered higher risk loans. Therefore, if the mortgage is approved, the loan has a higher interest rate.

An LTV ratio is calculated by dividing the amount borrowed by the appraised value of the property, expressed as a percentage.  Most lenders offer mortgage and home-equity applicants the lowest possible interest rate when their LTV ratio is at or below 80%.

Escrow Account

When you close on your loan, your lender will collect enough funds to establish an escrow account. Each month, a portion of your mortgage payment will go into your escrow account, and your lender will use the escrow account to pay your taxes and home insurance bills when they are due. This spreads the amount over 12 months, making it easier on your bank account. And since your lender is making the payments, you won’t have to worry about remembering when they’re due.

Additional Resources