Frequently Asked Questions

Find answers here to frequently asked questions.

What is Underwriting?

Underwriting is the process of determining the facts of risk. Underwriting is done by insurance companies as well as banks to decide whether or not they want to write a policy (or mortgage).

How much home can I afford?

How much home you can afford is based on a complex calculation that takes into account how much money you make, the value of the home and your total debts and other monthly payments that you must make. Generally mortgage lenders will not allow your mortgage payment to exceed around 33% of your total take-home pay and that is only if you have no other significant monthly debts like credit card payments or a car loan. If you carry a few cards and a car loan, you can expect that a mortgage lender will be willing to offer you up to 25% of your total take-home pay as a mortgage.

What is PITI?

PITI stands for Principal, Interest, Taxes, and Insurance and it is represented by your total mortgage payment. The principal is how much actual money you borrow from the mortgage lender (the value of the home), the interest is how much you will pay for the loan on a monthly basis, the taxes are how much taxes are required for the home broken down monthly and the Insurance represents the homeowner's insurance you will be required to have in order to protect the lender's investment (the home).

What is PMI?

PMI stands for Private Mortgage Insurance and it is that amount that is owed as a surety against a government-backed mortgage falling into default. Since government-backed mortgages, such as FHA and VA loans, are easier to qualify for, the lenders are able to offer them to borrowers that represent a greater risk of loss or default. This risk is offset by a small monthly insurance that is paid monthly along with the mortgage until the home's equity value reaches 20% of the mortgage amount. One way to avoid having to pay PMI is to come up with a 20% down payment for the house when you purchase it.

What is APR?

APR stands for Annual Percentage Rate and it is an important part of a mortgage calculation that is established based on a wide variety of factors that all determine the bank's risk in offering you the mortgage loan. A part of the formula includes your income, your job stability, your credit history, and how much of a down payment you come up with for the mortgage as well as the status and condition of the property you are buying.