Do I have to put down a 10% deposit to get approved for a mortgage?

The old industry standard was that you needed spotless credit and at least 10% down in order to be considered for a mortgage.  That’s not entirely accurate now, but a larger down payment can be beneficial.  There are programs to help you get into a mortgage for 5% down or less, but the more you put down as a deposit, the smaller your mortgage and the lower your interest rate will likely be.

Putting down a smaller deposit means a smaller up-front obligation but a more expensive mortgage.  Loans with less than 20% down typically require mortgage insurance in order to secure the loan with a Michigan mortgage lender.


Should I get an adjusted rate mortgage or a fixed rate mortgage?

Fixed rate interest in a market with lower interest rates is the best way to guarantee long-term savings.  If you’re confident that your income is likely to increase over the years or if you believe you may move in the near future, and you’re not concerned with rising interest rates, then an ARM might make sense.  A 30 year fixed rate mortgage is the best way to save money from month to month, though you pay more over the long term of your loan.

A 15 year mortgage will cost you more on your monthly payment, but you pay less in interest so your loan costs you less.


Is it better to buy a home now or rent a home and wait?

This really depends on the current state of the market.  When housing values drop and it switches to a buyer’s market then it’s often better to purchase of renting in terms of monthly savings.  Likewise, if you can afford to do, purchasing a home will always be better than renting.  When you rent, you throw money away on a monthly basis.  Owning a home means every house payment gets you closer to owning 100% of the equity in your property.


What do I need when I apply for a mortgage with Ross Mortgage?

To speed up the process of pre-approval you should bring a number of documents and information with you.  Not only does the following information help us verify identity and income but it will help paint an accurate picture of your credit worthiness when applying for a mortgage.

  • Social security numbers for you and your significant other if you will both be applying for the mortgage
  • Documents disclosing evidence of stocks, bonds and other assets
  • Recent pay information detailing your earnings
  • A list of your current credit accounts with the approximate monthly obligation
  • A complete list of accounts and balances due on any outstanding loan, such as car payments
  • Tax returns for the last two years
  • References to verify employment

If we need additional information to process your request we will let you know as needed.


How do I know if I’m ready to buy?

Buying a home is a big step, and the timing is different for everyone.  There are a few key items you can watch for to see if the math adds up, and if you’re ready to move forward with buying a home in Michigan

  • Holding a steady income
  • Can afford a monthly mortgage plus extra costs (taxes and insurance)
  • Have savings set aside for a down payment
  • A good to excellent credit score showing a great record of paying bills in a timely manner
  • Are your outstanding debts under control? (car payments)


Are there first-time buyer programs for mortgages in Michigan?

Michigan has a number of statewide programs including Michigan Down Payment Assistance and programs offered by Habitat for Humanity.  Individual cities may even have localized programs, such as Grand Rapids and their home buyer assistance fund.  There are a number of metro-Detroit cities participating in home buyer assistance programs.  When you apply, we can pair you to programs that could potentially lower your down payment to as low as 1.5%


How do you decide how much I’m qualified for?

Generally speaking, your monthly mortgage obligation should not exceed 29% of your income, with the combination of mortgage and other housing costs not to exceed 40% of your monthly income.  To calculate the maximum approval amount on a mortgage, lenders look at your debt-to-income ratio.

Your debt-to-income ratio compares your gross income (before taxes) to all other expenses including housing, long-term debts, child support, alimony, credit cards, student loans, etc.  As a mortgage lender, we also look at the amount of cash available to cover the down payment on your mortgage as well as closing costs.

Use the mortgage calculator on the right to help you determine the amount you can afford to borrow to buy your home.


How much money should I have to buy a house?

You’ll need more than your deposit.  Your costs include the earnest money, which is the deposit you put down when you make an offer.  Also, there’s the actual down payment on the home and closing costs.  Your closing costs include a number of fees such as title fees, insurance, tax, professional fees and more.  There’s no set amount, and it will vary based on a variety of factors.  You’ll receive a good faith estimate that gives you a fairly accurate idea of how much you’ll need at close if you move forward with your mortgage.


What does “loan to value” mean?

Loan to Value or LTV simply means the amount of money borrowed in the mortgage against the appraised value of the property/home.  Every loan amount has an LTV assigned to it, so if you have a 95% LTV loan on a home priced at $175,000 then you can borrow up to 95% of the appraised value ($166,250).  You would need to come up with the remaining amount as a down payment on the home.  In this example, the down payment would be a minimum of $8,750.00


Do I need to have an escrow account – what are they for?

Lenders establish escrow accounts with a borrower to help cover the costs of homeowners insurance and property taxes.  Part of the monthly mortgage payment is placed into this escrow account and used to pay the item when it is due.  Escrow is a great idea because it ensures that money is always available to cover taxes.


What is a good faith estimate?

When you engage Ross Mortgage for a loan to buy a home, you’ll receive a good faith estimate within 3 days of applying.  This allows you to make an informed decision about what you can afford when you’re shopping for the best loan.  The estimate lists fees paid before closing, closing costs and additional escrow costs you would encounter.


Do I have to have mortgage insurance?

Most homeowners would love to avoid mortgage insurance because it can add thousands a year in costs on top of your mortgage.  If you cannot put down at least 20% your lender gets the loan backed by insurance.  The insurance is obtained for you, and the cost of that insurance is rolled into your monthly payment.


Still Have Questions? Contact Marc Edelstein -South East Michigan’s Preferred Mortgage Banker

Cell: 248-379-6749 / Direct: 248-658-2643