Answers to Common Questions

This is one of the most common questions first time home buyers ask me. The answer: everyone is unique, and it will never be a one-size-fits-all solution. 

An easy calculation the industry uses is called debit-to-income, or DTI. To calculate this, simply add up monthly expenses and divide by monthly income. For example, if your expenses such as car payment, student loans and credit card payment equal $2,500/month and you earn $6,200/month, that means your DTI is 40%. Generally, experts in the industry will say a good DTI target is 40% or lower. DTI limits do range depending on the lender, type of loan and overlays. In many programs, DTI range from 42% up to 56.99%.

But, in my opinion, DTI isn’t a perfect metric. Here is why, if you made $2,000/month and your DTI is 40% that means you have $1,200 each month for other expenses such as insurance, taxes, gas, groceries, medical, cell phone, etc. That may not be enough, especially for a larger family. However, if you made $10,000/month with a 40% DTI, you would have $6,000 remaining to cover all other expenses. That is the same DTI percentage, but a significantly different amount of left-over income each month to cover your financial needs. 

I recommend you approach it the old-fashioned way and look at your expenses over the last year to determine what you spend each month on average. You can back into what a monthly mortgage payment would comfortably look like for you. Don’t forget to add in what you save for retirement and savings. 

Some loan programs require copies of bank statements and lenders review those bank statements for large deposits. A transfer could be considered a large deposit, and this is problematic because the transfer of funds would now require bank statements from where the money came from. The more statements an underwriter reviews, the more chances there are for issues that could come up and more work for you providing additional documentation. 

I'm sure you've heard the term "Closing Costs” but what does that actually mean?

Closing costs, or more correctly "Loan Costs,” are the fees for services to set up your loan. Some of these costs are paid directly to the lender (example could be an underwriting fee and/or a processing fee) while others are paid to 3rd parties (examples of these are the appraisal, recording cost, lenders & buyers title insurance and the title closing fee). Sometimes people confuse the title closing fee as total closing cost, but this is only the fee for the title company to close the loan, not the full loan cost. We see this a lot when the buyer and seller agree to split the closing fee. In this case the seller is not agreeing to split total loan cost, just the title fee to close the loan. 

With a purchase it's always good to make sure you are 100% clear on what you are paying for and what the sellers are paying to avoid surprises. Finally, loan cost & fees vary from state to state as well as between loan types and mortgage lenders.

If you have other questions about the mortgage/home buying process, I have so much information to give you. Call or text me at 316-262-7766 to discuss.

We have programs that are anywhere from zero down to 3% – 3.5% down. 

Down Payment Assistance

Starting with zero down programs, we have a Down Payment Assistance Program (DPA) that works in connection with conventional and FHA financing to either gift or lend the money for the down payment. You do not have to be a first-time home buyer to qualify, and 100% financing is available to eligible borrowers. 

USDA Loans

The other zero down program is USDA financing. Sometimes referred to as a rural development loan, USDA loans are designed to stimulate growth in smaller communities and less populated areas. Cities near the Wichita, Kansas metro area that may qualify include Maize, Park City, Valley Center, Clearwater, Garden Plain, Mulvane, Benton, and homes in Andover.*

Additionally, borrowers do not have to be a first-time homeowner to qualify. New construction properties and FHA approved condos may be eligible under the USDA loan program. 

VA Loans

VA loans are also zero down. VA loans help Armed Forces members, veterans, and eligible surviving spouses become homeowners with special financing options. There are no down payments or mortgage insurance required and VA loans can be used for up to 100% loan-to-value (LTV)… aka zero down. Purchase and refinancing options are available with VA loans and seller paid closing costs are allowed. 

Conventional Loans

Another loan solution we offer is known as a 3% Down Payment Conventional Mortgage. Benefits of this loan include a 3% minimum down payment, no income limits, and reserves (if required by DU) may be gifted.

FHA Loans

Insured by the Federal Housing Administration, FHA loans help buyers save up-front costs through lower down payments and secured interest rates. FHA allows for 3.5% down on loans for single family and multi-family homes. 

Indian Home Loan Guarantee Program (Section 184)

This program provides opportunities for home ownership for Native Americans, Tribes, Tribally Designated Housing Entities (TDHEs), and Indian Housing Authorities on Indian land. Section 184 requires 2.25% down. To qualify for this benefit program, borrowers must be a Native American/ American Indian in the process of buying a home that will be their primary residence. Borrowers or their family member(s) must also be enrolled in a federally recognized American Indian tribe or Alaska Native village.

The best way to determine which loan may be a good fit for you is to call us so we can discuss your specific situation.  Our team reviews all options available to you and will work with you to discuss the loans you qualify for, the advantages and disadvantages of each.

*Per USDA eligibility map, April 2021, Eligibility (usda.gov)

I am often asked the question, “When should I buy a home?” My answer is, “at the age you are financially mature enough to do so.”

There are three ways home ownership creates wealth.

1. Cash flow difference. Buying a home is actually cheaper than renting in terms of monthly cash flow because, in this example, over nine years, monthly rent is higher than monthly housing expenses (insurance, taxes, and monthly principal and interest payment). That may not always be the case, but with rates where they’re at right now, it is true.

2. Amortization gain. Like a forced savings, with every payment you make some goes to equity. Using this example, in nine years you paid $43,698 towards your principal. That is your equity in the property. When you sell, you get this back.

3. Compounding amortization. Everyone knows your home can increase in value, but amortization compounds just like any other investment. For example, if you have 100k home that appreciates 3% in year one, the next year (year 2) your home is worth $103,000. Let’s say on year 3, appreciation increases another 3%, your home’s new value is now $106,000 (103k x 1.03). This is the reason why the younger you are when you buy, the greater chance you have at wealth with home ownership because of compounding appreciation. This is the reason I recommend buying as young as you can.

In the example we’ve been looking at, with compounding appreciation you gained $63,691. If you owned the home nine years vs renting over that same time period, with home ownership you would have gained $95,367 in net worth from this example.

Are you still renting? Let Michael Gonzales at MTG Family Mortgage run a customized analysis for you based on buying vs. renting.

Buying a home, especially for the first time can be overwhelming.  It’s a big financial and life decision.  You want somebody in your corner.  The person(s) selling the home pay the realtor fee, typically a 6% commission, which is the standard fee.  If you don’t have a realtor, that 6% all goes to the seller’s real estate agent, and you don’t have someone representing you in the transaction.  If you obtain your own realtor, that 6% commission is typically split 50/50 so the seller’s real estate agent receives 3% and your realtor receives 3%.  Again, the seller typically pays the full 6% so why not have someone working for you and negotiating on your behalf, with your interests in mind?

I advise you to get pre-qualified before beginning your home search.  First, many realtors won’t show you a home until you are pre-qualified.  They don’t want to show you a home you might fall in love with only to learn you can’t qualify for that particular home because it isn’t in your budget or price range. 

Also, in today’s environment, sellers receive multiple offers.  When making an offer, sellers sit down with their real estate agent to review each offer and if one comes without a pre-qualification, chances are that offer will be set aside and other offers given more serious consideration. Sellers want to make sure the offer they select has the best chance of closing and closing on-time.  

The pre-qualification process helps you discover more about you and your budget as well.  Perhaps, you have been looking at homes in one price range, but then realize after you are pre-qualified the monthly mortgage payment is too high.  This ensures a good use of your time when you are looking at properties and the properties are in the price range you are comfortable with in terms of monthly payment and terms.

Getting pre-qualified starts with either using our online link or calling the MTG Family Mortgage offices and sharing information such as your employment, savings, etc.  Then, our head loan officer and certified mortgage advisor, Michael Gonzales, reviews the information to see what loan programs are available for you and/or which you qualify for.  Based on that information, Michael puts together custom loan program options then reviews this information with you in detail so you can choose the loan that best fits your needs.  After a conversation with Michael on these findings, he will issue you and your real estate agent a pre-qualification letter.  This letter includes the loan program you have been pre-qualified for and is your ticket to making an offer on a home you would like to purchase.  

Additional personal information such as where you currently live (or addresses where you have lived the last two years), social security number(s) to pull credit, a full two years of employment, and income history are needed to be pre-qualified.  We also need liquid asset information (approximate amounts of what you have in your savings, checking, 401k’s, retirement accounts).  

For commission employees or self-employed borrowers, there are a few extra steps that you will need to take to get pre-qualified.  For self-employed borrowers, you will need to submit your last two years tax returns.  For commissioned or variable income employees, we will also need to calculate a two-year average of your income.  This can be done by signing an authorization that allows us to obtain verification of employment from your employer or by providing your most current paystub as well as the last two, year-end paystubs for the previous two years.

Developed and guaranteed by the United States Department of Veteran Affairs, approved lenders, like myself, can issue home loans to veterans without the stipulations of a traditional loan.     During the loan approval process, the Department of Veterans Affairs vouches for veterans and active duty service members – and even surviving spouses – by helping lock in a lower-than-typical interest rate. Additionally, eligible borrowers can have the benefits of a 100% financing, which means there may be no down payment necessary.     To begin the VA loan application process, service members can apply for a Certificate of Eligibility (COE) through eBenefits or their lender.     VA loan holders are allowed to omit mortgage insurance premiums from their monthly payments.     Finally, the loans are limited to purchasing a primary home. However, VA programs are available to refinance an existing loan or cash-out equity.