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Tips on buying your first home

Should I buy or rent?

Owning a home is a financial decision which depends on your lifestyle. People who get married, start a family, expand their family,or increase their income, often prefer to buy a home since it gives a true sense of belonging and security.

Here you can find:

  • Evaluate your need
  • Benefits of buying
  • Ready to buy?
  • Tools to help you decide

Evaluate your current situation

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  • What savings do I have?

Evaluate your savings and determine if the amount is enough to purchase the property you are looking for. Even though there are products that offer up to 100% of financing, consider that you will need around 10% to 15% of the properties sales price as savings to cover closing cost, down payment or other cost associated with the transaction. 

  • What is my monthly income?

Some examples of income you may use to qualify are salary, overtime and pensions among others. Income should be verified as received during the last two years and should be identified as to likely continue. 

  • What are my benefits as an owner vs. tenant?

Buying has many advantages. It is an excellent long-term investment. Monthly mortgage payments can be seen as a savings which will allow you in 20 or 30 years own an asset that is worth a lot of money. This will also allow if necessary, for you to use your home to finance retirement or other important expenses.

Renting also has its benefits. When you rent, landlords cover expenses such as home insurance, taxes, maintenance and community expenses. Although they typically reflect a higher monthly and maintenance payment, these are not obligations of the leaseholder.

  • How important is it for me to have my own home?

While the view, decoration, location and not feeling tied-down may be important for some people, others feel it is much more important to have a home of their own. Determine what is important for you, and if it is having your own home, here we are!
 

Benefits of paying a mortgage vs. renting

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  1. When you rent, you pay your landlord's mortgage. As a homeowner, you pay your own mortgage and invest your money in your future capital asset.
  2. With good interest and financing offers, your mortgage payment may be less than your rental payment.
  3. You can modify the house, making improvements or extensions as you wish.
  4. Benefit from federal, state and municipal government incentive programs to subsidize the financing of your primary residence.
  5. When buying a property, you are creating home equity.
  6. It is an investment for your and your family's future.
  7. Interests you pay on your mortgage are tax-deductible.
  8. You avoid uncertainties related to contract duration, monthly payment increase, or contract renowal.
     

Is it time for a home purchase?

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Before making the decision, you should consider if it is the right time to buy a house. A good initial interview with your Loan Officer will help you determine your ability to buy and pay a mortgage, as well as inform you about the different financing alternatives to make the purchase feasible.

These steps will help you make a purchase decision:

  1. Check your credit score and history
    • Your credit score is one of the criteria considered during your mortgage application evaluation. Check and access your credit report before signing a purchase agreement. By doing so, you will obtain a more accurate product and interest offer, and you will be able to identify the factors that negatively impact your credit. 
  2. Determine the area where you want to live
    • Visit the area to identify and become familiar with its pros and cons.
  3. Make a list of preferences and organize them by priority
    • Along with your family, list the most important things in terms of location, property condition, price, and amenities.
  4. Know your budget
    • Determine your capacity to meet monthly payments, closing expenses, and to make a down payment before exploring the market. You may contact one of our Mortgage Consultants to be pre-qualified.
  5. Search for information
    • Once you select the area where you want to live, look for information about that market in order to negotiate a good offer with the seller.
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Which home can I buy?

Obtaining the mortgage loan and interest rates that better fit your budget is one of the most important steps when buying a home. Your mortgage payment is the largest financial commitment of your home expenses. Selecting a home you can easily afford is crucial to keeping it.

Here you will learn:

  • How much can you pay
  • Your monthly budget
  • Your current financial situation

Spend less than 43% of your income

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Experts recommend that as the buyer you should analyze your income and expenses in order to determine how much you can pay for your home. The rule of not spending more than 43% of your income on monthly payments guarantees a healthy financial status, as well as sufficient funds for emergencies, unforeseen expenses, and retirement savings.

Using our Mortgage Calculator, enter your numbers and analyze if you are able to make the principal and interest payment for the mortgage to purchase the property you are looking for. The following basic tips will also be helpful when buying your home:

  • Choose a home you can afford

You need to know how much money you have to buy a property, including the amount you could get from your financial institution. Start with our Mortgage Calculator, or make an appointment with our Mortgage Consultants today.

  • Analyze your monthly expenses

Make a list of your fixed expenditures and add the monthly amount you would have to pay for the home. If necessary, consider reorganizing your priorities to make sure you can meet your monthly mortgage payment.

  • Evaluate the home you want

Make a list of your needs and expectations for your own home. Analyze the location, number of rooms and bathrooms, type of structure, if it has a yard, parking area, among other features.

  • Protect your credit

Your income and your credit history are the most important elements taken into account when buying a home. Get informed about your credit score and make a payment plan to improve it if necessary.

  • Pre-qualify

Learn about pre-qualification process, and get information regarding your current chances of obtaining a mortgage loan.
 

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My credit and financial status

It is very important that you know every detail of your credit report and how it influences the granting of any credit, including a mortgage loan. Once you do so, schedule an appointment with one of our Mortgage Consultants for guidance and pre-qualification.

Here you will learn:

  • What your credit report is
  • What information it provides
  • How the score works

Your presentation letter to the bank

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Your credit report summarizes all debts you have with the companies reporting to the credit bureaus. It represents your payment history and your means of fulfilling your debts. It is important that you make sure all the information it contains is correct. It is also important to have a good credit score when applying for your mortgage loan, since it greatly influences the granting and terms of your loan.

Basic data in your report

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All credit reporting companies, Equifax, Experian and TransUnion, include the following data in your report:   

  • Your information

Name, address, social security number, birthdate, and your employment information.

  • Credit history

Your credit accounts which include account opening date, your credit limit or loan amount, account balance due, and your payment history. Among types of accounts considered in the credit history are: 

  1. Credit Cards (Visa, MasterCard, American Express, Discover, etc.)
  2. Store credit accounts
  3. Term loans, in which you make regular payments (ie: cars, student)
  4. Financial Company accounts
  5. Mortgage loans
  • Inquiry for new credit sources

A list of all those who have accessed your credit report in the last 2 years. It contains two lists of inquiries: 

  1. Volunteers: when you apply for credit and authorize the financial institution to request a copy of your credit report
  2. Involuntary: when an institution requests your report in order to send you a pre-approved credit offer by mail 
  • Public Registry Information 

Collects your court case data. Among actions that may appear here are: 

  1. Bankruptcy - will remain on your credit report from 7 to 10 years (depending on the type of bankruptcy: Chapter 13 or Chapter 7, respectively)
  2. Foreclosures
  3. Legal actions
  4. Salary withholdings
  5. Bank account seizures
  • Late fees

Includes details of overdue or unsettled payments, how many exist, how late the payments were made, past due amount, and how recently they occurred, among others.

  • Your Credit Score

Your credit score is one of the most influential factors when determining the type of financing, interest rate, and guarantees required by a financial institution in order to grant a mortgage loan. Credit scores fluctuate between 300 and 850 points. The higher your score, the better your credit is considered and the better the financing conditions. 

You can request your free credit report once a year through www.annualcreditreport.com. If you find any incorrect information within your report, quickly contact the provider company for correction.

Actions that affect your credit score

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Your credit score is one of the most important factors taken into account when qualifying for a mortgage loan. It will determine the type of financing, interest rate, and the guarantees that will be required. Protect your credit by avoiding:

  • Payment delays (this is the main factor that affects your credit)
  • Numerous accounts with debts
  • Frequent credit information requests from different institutions in short periods of time
  • Keeping the balance due of cards or credit lines at or near the maximum approved
  • Excessive use of cards for regular purchases or expenses, without paying off spent balance at the end of the month

Actions that help you keep a good credit score

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  •  Always paying bills on time
  • Keeping a low balance due in your cards and credit lines
  • Paying credit cards and credit lines regularly without cancelling, proves that they are being used responsibly

Check your credit every year

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Your personal credit is important. We recommend you review your credit report every year. Before applying for a mortgage loan, ask for your free credit report at www.annualcreditreport.com. If you find errors in your report, contact the provider company and request any corrections. There are also credit cards with credit reporting services and online companies that keep you informed of changes in your credit report.

Do I qualify?

Knowing if the bank will give you a mortgage loan or not prepares you for your application process. Pre-qualification is an initial evaluation that we make in order to determine the amount you can borrow. Here we tell you what information we take into account when making a decision.

Here you can find:

  • What information you get through a pre-qualification
  • Pre-qualification vs Preapproval
  • What information we use to qualify you

Get Informed

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As soon as you fall in love with your house, the first thing you should do is visit us! Call us at 787-760-8100 and schedule your appointment for an initial interview with one of our Mortgage Consultants. We will be happy to guide you through the process and inform you about the different financing options.

Pre-qualification is a simple and quick process through which we evaluate your income and expenses to get a better idea of how much you can pay. This process simplifies and speeds up the purchase procedure, and also lets you know if you need anything else to qualify. Currently, many real estate brokers request a pre-qualification letter in order to sign a Call Option. Paycheck slips and details about your debts are included among the documents we require.

With a pre-qualification you will know:

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  • your ability to pay
  • what houses you can buy
  • the amount of credit you could get from your bank
  • the deposit you need for starting the process
  • details about closing expenses
     

Pre-qualification vs Pre-approval

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Pre-qualification is a document where you request to be qualified for a particular loan, in order to know how much you could pay for the property you wish to buy. It is conditioned to completing the credit file with the information and/or documents required to complete the loan process.

Pre-approval is a credit application prior to choosing a property to buy. 

Decision-making factors for granting a mortgage loan

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Attaining a mortgage loan can be simple if you prove to be a responsible person with the ability and intention to fulfill your payments. These factors are taken into account when calculating the mortgage we can offer you:

  • Job stability: We value your employment stability. The longer you have been working in a company and the more stable your employment is, the better the chance to get your mortgage approved.
  • Monthly income: By submitting your pay stubs or account statements, we can validate how much of your income may be applied to pay the loan you are requesting. That is why we also inquire if you pay rent, or if you have people who depend upon your salary, such as children or parents, and about any other monthly expenses you may have. At FirstMortgage, we make sure not to overload your debts in order to guarantee your financial health.
  • Payment history: If you pay all your debts as agreed and pay off your credit cards, your history will remain clean, which will result in a higher rating at the time of calculating your mortgage credit.
  • Credit history: Your credit history might not only be affected by how often you use your credit, but also by frequent refinancing requests. Constantly requesting new credit or frequently refinancing your debts might lower your score when applying for a loan.
  • Experience with other types of loans: Previous experience with other loans, such as car loans or student loans, also reflects whether you are a responsible and trustworthy person who has managed their finances well.
  • Current debts: Being too close to your credit limits could show a higher risk of default and affect your credit score. Therefore it is important to keep debts at their lowest level and pay due balances monthly.

Pre- Approval

Before you start searching for your dream house, your first step should be a good initial interview with your Loan Officer. There you will learn about all your financing options.

Here you will learn:

  • What is pre-approval for?
  • Required documents

Pre-approval helps us determine the appropriate financing for you.

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We recommend that before selecting a home, check your purchasing capacity to accomplish a mortgage payment. This will help you identify the ideal financing for you and will also help you make an appropriate purchase decision.

Pre-approval is an evaluation of your credit, your income, and your debts to determine the maximum amount the bank is willing to lend you. It saves you time in the house-searching and loan-closing process, while identifying:

  • the amount of the mortgage loan you are eligible for
  • properties that are within your purchase capacity

Documents required to request a pre-approval letter

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  1. Proof of income: Last month paycheck slips,  W-2 Form from the last two years, and bank statements for the last two months, for example
  2. Employment certification
  3. Pension Certificate and Form 1099, if you are a retiree
  4. Investment account statement, if applicable
  5. Evidence of down payment funds availability

Pre-approval is not a guarantee

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It is an indicator that the bank is able and willing to grant you a mortgage according to your financial situation when you buy your home.

This tool is for clients who have not yet chosen or optioned a property. If you have already chosen your property, you must go through the origination process. Origination is the process of receiving and processing your loan application, insuring, and financing it. Origination costs are what the bank charges for processing your mortgage loan.

Pre-approval only applies to purchase transactions and, like any mortgage process, it is subject to credit approval.

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Apply now

Ready to apply for your mortgage online? Start now from the comfort of your home, with all the information readily available and without having to go to a branch! All you need is a computer, tablet, or mobile phone with an internet connection.

Apply for your mortgage loan in the most convenient and secure way!

Get to know the benefits of applying for your loan through Mortgage Online

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  • Enjoy 24/7 online access:  Access your information online at any time, every day of the week
  • Complete your online application in only minutes providing the information without having to go to the Bank
  • Upload and review documents from your personal computer, smartphone or tablet in a secure platform, by conveniently uploading a picture or scanning
  • Choose the eConsent option for a total digital experience throughout the process
  • Electronically sign (eSign) to receive and upload disclosures and documents
  • Get real-time notifications on the status of your loan throughout the process
  • Easily locate your Loan Officer’s contact information so that you can have the help and personal contact you want 
  • Feel confident that your personal information is in a certified Secure Sockets Layer (SSL) site
  • Get to know the mortgage loan product alternatives that we have for you so you can analyze and compare them
  • Find your application summary along with your Loan Officer’s contact information
  • Review all your loan application details to make sure you completed all required information
  • Receive notifications from your Loan Officer regarding your application
  • Easily identify all application tasks so that you can complete them and expedite the process
  • Access a list to view all documents that have been uploaded to the system
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Frequently Asked Questions

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.

 

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
     

Tips on buying your first home

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Each case is unique

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