In the introduction to our finance expert, Benjamin Morrow, I realized that we never covered any lending basics. Many people that are buying downtown are young, first-time home buyers, and might not know some of the ‘basics’ when it comes to financing your home.

Here’s a few questions that I asked Ben to help anyone out that might have questions about what they can afford, and how lending works.

(for those that really want to know, I’ve also included a little bit more about Ben’s experience in the industry as well–where his expert status comes from!)

For the previous article and questions that were answered about changes in the lending industry head over here.

What kind of credit do you need to have in order to purchase a home?

“What kind of credit” is kind of a broad term. There are several factors involved in credit, such as: credit score, credit history and credit depth. Each item is important in evaluating someone’s credit. We will perform a FREE credit analysis for prospective buyers and put them on the right course if more work is needed. As a rule of thumb, a lender likes to see a minimum of 3 trade lines open for 24 months. This is not always the case, but is great if you have it. As far as score goes to purchase a home, it is directly correlated with what your down payment is. If someone is able to put down a good portion of the purchase price, they do not have to have as high of a credit score.

How do I calculate what I can afford?

There are several ways to calculate how much you can afford. First and foremost, you have to be comfortable with the payment that you are about to take on. The first question I always ask is: How much do you think you can afford? If it is much below what a lender’s maximum is, then it is usually a good fit. Generally a lender wants to see a debt to income ratio at or below 45%. Other programs may max that at 43 or 41%. We have calculators that will break down a rent vs. buy scenario. We can help you decide if buying is the correct thing to do, or if renting may be better for a while. The last thing a buyer wants to do is get in over their head and not be able to make payments in the future. Make sure you are talking with a trusted Mortgage Consultant because the biggest mistake I see in the buying process is at this point. I advise people who are looking to buy a home to sit down and prepare a budget. Not only your big expenses such as car, student loans etc, but also what you spend on a monthly basis for food, clothing etc. Even though a lender won’t count these smaller things, you should.

Are there special programs for first-time home buyers downtown?

At Revolution Mortgage we are approved to originate the Iowa Finance Authority loans. There are several loans first-time home buyers may qualify for and I would suggest calling to see which one may be the best. It is very difficult to paint everyone with one brush, but there are some great programs for those who qualify. Whether it is a discounted rate, or possibly even a grant, we will ensure that everyone is fully educated on their options and what the long and short term consequences and benefits are for each of them.

What advantages does a person have to buy a home rather than rent one?

There are several advantages that a home owner has that a renter does not. First of all, you can begin building equity instead of that money going out the door with no return. That equity may take some time to build, but it will be well worth it down the road. Also, (I am not a tax advisor so please consult your tax advisor for tax advice) the interest you pay to the lender, and the real estate taxes you pay, may be tax deductible. This is a fact that many people do not factor in when looking at rent vs. buy, but often times the biggest deduction they have once they do buy. Again, it has to be right for your situation, but definitely something to factor in. I believe the biggest advantage is simply the peace of mind and pride of ownership. Owning a home can be one of the most rewarding experiences you can have. It is definitely a big step in your life and should be something to be proud of.

How long does pre-approval take?

A pre-approval can be completed in as little as 20 minutes, or up to a day. The key to an accurate pre-approval is two things. 1. Provide very accurate information to the person you are speaking with. 2. Speak with a trusted Mortgage Consultant who knows what they are talking about. The better your situation the easier it is to pre-approve you. If it is something that may require a different type of a program, we may have to call several of the lenders that we work with to ensure accuracy. When we issue a pre-approval, we already have a lender that is willing to take your loan with the information given to us. Also, a pre-approval is FREE and has no-obligation. I recommend whenever you have a question, or just want to see what you qualify for, give me a call. It costs nothing to look over your options

What is a ‘jumbo’ mortgage?

A jumbo mortgage is a loan amount over $417,000 which is called a conforming loan amount. This number changes from time to time and was in the low $300 thousands only a few years ago.

How long have you been in the mortgage industry?

I am on my fourth year in the industry and have been in several facets of the business along the way. I began in on the wholesale side of the business and basically, this is the business to business side. I went to mortgage brokers to offer them the products that my company had. My company would sell these loans on the secondary market to investors and be in between the broker and the investor. That was a great way to learn the business and see how the back side of it worked. I then realized that I would much rather deal with the borrower because of the excitement and emotion that is involved in buying a home. In , I financed condo’s, single families, and even sat in a high rise project to help the developer finance his buyers. I have worked on projects as big as 650 units and as small as a small single family home. After being in the Chicago-land area for 4 years, I decided I wanted to move back to Iowa and start my own business. I started Revolution Mortgage Company and things have been great ever since.

How can I contact you?

You can contact me by calling the office at 515-309-1221 or by emailing me at your convenience.