Frequently Asked Questions

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At FirstMortgage we want to answer all your questions because by being informed helps you make better decisions when purchasing your own home. Our mortgage consultants are available to answer any additional questions about mortgage loans. Just call 787-760-8100 and we will help you right away.

 

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How is my ability to pay determined?

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Knowing how much you’re able to pay has a lot to do with your debt-to-income (DTI) ratio. This is the percentage of gross income that goes towards paying debts. For example, if your gross family income per month is $5,200 and the monthly debt payments amount to $1,200, the DTI would be calculated by dividing your monthly debt by your monthly gross income: $1,200 / $5,200 = 0.23

This means your DTI is 23%. As a rule, we recommend the percentage to be 43% or less. Nonetheless, depending on your profile, you may qualify for other products that allow for a DTI over 43%.

What debts are considered to evaluate a loan?

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To evaluate a mortgage loan, the debt included in your credit report is taken into account, including revolving accounts, personal loans, auto loans, student loans (if applicable), as well as debt outside the credit report, such as rent and maintenance payments, taxes (for other properties), and child support.

Do I qualify for a mortgage loan if I’ve only been 6 months in my job?

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You may qualify to purchase or refinance your home if you meet certain requirements, are permanent in your job, can show evidence that you were working or studying in the same field for the past 24 months and if the income is not from self-employment.

Can I purchase a home with my partner if we’re not married?

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Yes, you may purchase your home with your partner or relative. Keep in mind that, upon loan closing, both debtors will own the property and be responsible for the mortgage loan.

Can I purchase a home if I don’t have any credit history?

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Yes, even if you don’t have any credit, there are many loan options that consider alternative credit, meaning monthly payments and expenses, such as rent, water, electricity, furniture, and utilities. You must furnish a payment history certification from the last 12 months.

What is a loan-to-value ratio?

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Your loan-to-value (LTV) ratio describes how much money you owe on the house compared to the appraised value of the property. You may find your LTV by dividing your mortgage amount by the house’s appraised value or selling price, whichever is less. The LTV varies according to investor, transaction type, whether it is a sale or refinancing, and the use to be given to the property.

For example, you are buying a home whose selling price or appraised value is $100,000. If your down payment is 8% ($8,000), your bank will have to pay the remaining $92,000. Therefore, your LTV is 92%.

The main advantage of a higher down payment is that it helps you obtain a lower interest rate and avoid paying a private mortgage insurance, and your monthly payments will be lower.

Can I receive donations from a family member to help with my down payment and closing costs?

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Yes, you may receive donations to cover part of the down payment and closing costs. If you have a relative that wants to help you purchase your home, they may contribute to your closing costs or initial down payment. Documentation will be required to validate the source of the donations. Please keep in mind that these requirements may vary by loan type.

What is the difference between a conventional loan and an FHA loan?

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Contrary to a Conventional Loan, the FHA Loan is secured and guaranteed by an agency of the federal government and only applies to the primary residence, while a conventional loan can be used to purchase or refinance your primary residence, second home or investment.

What is a conforming loan?

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A conventional loan that is eligible for being sold to investors like Freddie Mac and Fannie Mae because it meets the investors’ requirements for income, credit, property and loan amount.

The bank where I applied for the loan informs me that my property is in a flood zone. Is it compulsory to have flood insurance?


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Yes, it is compulsory. If you do not insure your property against flood losses, the bank will not be able give you the requested loan, since federal regulations demand this insurance if the property is in a flood zone. You should know that if the property suffers damages due to floods and it is not insured, you will not be eligible to receive assistance from FEMA.

What is the difference between hazard insurance and mortgage insurance?

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Hazard insurance protects the owner of the property and the bank against loss caused by fire, hurricanes, or earthquakes, and it only covers the replacement cost of the structure.

Mortgage Insurance allows you to finance a larger amount, since it offers the bank an additional guarantee that covers the amount of the loan and protects it if the debtor does not meet his/her obligation by failing to make the payments. The amount varies depending on the financing program.

It is important not to confuse mortgage insurance with the optional insurance that pays off the mortgage in the event of the debtor’s death.

Sometime ago I declared bankruptcy, how much time do I have to wait to apply for credit?

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The details of your bankruptcy will appear in your credit report for seven (7) years. This does not mean that during this time you cannot apply and obtain new credit. If you provide the following information, we will evaluate your mortgage loan application preliminarily and explain the procedure:

  • Letter indicating the reasons for declaring bankruptcy, including documents that provide evidence of this information
  • Copy of the bankruptcy petition and the debts that were included
  • Copy of the release of the Bankruptcy Court
  • Letter of recommendation from the trustee
     
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