Caroline Gau:The shift is a gift.Caroline Gau:Hi, I'm Caroline Gau in the Baird & Warner Glenbrook office. And today, I'm delighted to invite Ian into his own office. He's the designated
What's PITI with Lauren Marks, Key Mortgage & Caroline Gau, Baird & Warner
Caroline Gau: Down payment. PITI, oh my.
Caroline Gau: Hi, I'm Caroline Gau in the Baird & Warner Glenbrook office. Today I'm delighted to have Lauren Marks here from Key Mortgage. She's a loan officer. She is going to demystify the loan process and the different terms that we run across when purchasing a new home. So Lauren, thanks so much for joining me.
Lauren Marks: Thank you for inviting the me.
Caroline Gau: So Lauren, can you tell us what is the most frequently asked question that you get when somebody comes to you to do their loan application?
Lauren Marks: Sure. I would say the number one question somebody will ask me is, "What can I get pre-approved for? How much?" There's not any one number. It really depends upon the property taxes, If it's a condo or a town home, is there an association fee? Because all those things matter. We count everything, the entire debt of the purchase. So principal interest, taxes, insurance, and if there's an association fee as far as how much somebody can qualify for.
Lauren Marks: The one thing that I do know more than anything else is that people have in their mind when they are getting pre approved that they want to spend X amount of dollars per month on their housing payment. So if I know what that amount is, we can back into the equation and figure out, "Okay, based on what you want to spend per month, here would be an approximate purchase price that you should be looking at based on taxes of a certain amount and if there's an HOA a certain amount."
Caroline Gau: Great. And you had mentioned PITI. Can you explain that a little bit more in depth? What does PITI stand for again?
Lauren Marks: It stands for principal, interest, taxes and insurance. That's what typically goes into your mortgage payment. The only additions would be if there's private mortgage insurance and if there's an association fee.
Caroline Gau: Okay, got it. Then it's a myth that buyers need to have 20% down to buy their first home. There are a lot of buyers out there that think that, "I can't buy a house because I don't have 20% down." Can you talk to us about the program that you told us about in our office meeting that requires only 3% down?
Lauren Marks: Absolutely. There is a program out there. It is called Home Ready. It's a Fannie Mae program. You could put down as little as 3% on a conventional loan. So you're right, most people do think that you need to put 20% down for a conventional loan. Not true! Even if you're not able to do the Home Ready program, there's still 5% down programs for conventional loans. The other thing that I think people under utilize is if you are a veteran. You can put down 0%, and there's no PMI.
Caroline Gau: So with the 3% and 5% conventional loan programs, do they have a PMI?
Lauren Marks: They do. But again, there are different kinds of PMI. Most people think of PMI as something that they pay monthly. It actually will fall off automatically when the loan of value hits 78%. but there are other ways to accomplish that. We can do something called lender paid PMI, where us the lender buys it up front at the closing. You pay a slightly higher interest rate but then you don't have the PMI. PMI is not tax deductible anymore, so it's out of the equation. It used to be some benefit, but not anymore due to the tax code.
Caroline Gau: So it sounds like people have a lot of different options that have come new into the market that we didn't have before.
Lauren Marks: Absolutely.
Caroline Gau: Give us an example of a pitfall that we can avoid before we start shopping for homes.
Lauren Marks: Couple things. Number one, while you're in the process and you've had your credit pulled, do not open up any new credit. Even if you go to the appliance store and they say, "Oh, we're going to give you a 0% interest for three years." It may make a difference between you qualifying for the property or not, because we still have to count payment against you. So that's number one. Do not open up credit while you're in the process.
Lauren Marks: The other thing that I see a lot of is large deposits into people's bank accounts.
Caroline Gau: That should be a good thing, right?
Lauren Marks: It could be, but other than their paychecks. We have to account for where did those large deposits come from? It's a paper trail. It can be annoying, but it's something that underwriters require. So we have to do that. If at all possible, just keep the money steady. Don't change from bank to bank account to bank account. It just makes it a much more difficult to track.
Caroline Gau: So they want to see a paper trail of everything.
Lauren Marks: Yes.
Caroline Gau: Right. If you provide all that information up front, it's a little bit more time consuming upfront, but then it's going to make your shopping much easier because it will all be there and ready to go.
Lauren Marks: Absolutely.
Caroline Gau: And you have an online application that they can use too.
Lauren Marks: Online, they can even do it on their phones, their tablets, a laptop, desktop, whatever. It is really super easy. The people that's process goes the smoothest and the quickest are those that have the ability to upload documents, bank statements, W2's, tax returns, et cetera, pay stubs, right to our secure site. It is secure.
Caroline Gau: Great. So I know the interest rates were super low this week. I saw yesterday 3.48 %, so if you've considered refinancing or you do want to shop for a home in the fall, please contact Lauren and she can be reached at.
Lauren Marks: (847) 910-5988.
Caroline Gau: So this has been a nice chat with Lauren Marks about loan process, and we hope to see you next time. Thank you.
Lauren Marks: Thank you.
Caroline Gau: These are the kinds of invaluable insights I share with my clients when they choose to work with me. Hire me today.
Caroline Gau is a residential real estate expert with 17 years of experience in the Chicagosuburbs. She is an Accredited Staging Professional (ASP®) and a Certifi....
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