Q & A with Dottie Herman

Q & A with Dottie Herman

» Featured Columnists | By Dottie Herman | December 24, 2012 8:00 AM ET

Q1 - What are the current rates? I am looking to purchase a home and I am trying to figure out what I can afford as a monthly payment. I think a 30 year fixed is the best mortgage for me, but are the rates lower on a 7 year ARM?

A - Mortgage rates are based on financial market conditions and can change daily, or even more often. They also depend on many other factors just some of which include loan amount, mortgage product type (fixed, adjustable), occupancy (primary home, second home, investment), property type (single family, multi family...),  loan to value, and FICO credit score.  Your choice of loan product will also depend on many factors, and in general, rates on fixed rate loans will often be higher than the initial rate on adjustable rate loans.

Q2 - What are some of the factors that would prohibit me from qualifying for a mortgage. I have only had a job for a short period of time, and I am not sure if that will impact a bank's decision. What are some of the key factors they look at in order to lend someone money?

A - Being in your job for a short time in itself is not necessarily a reason that a bank would decline you for mortgage financing. The lender will want at least a 2 year history of your employment.  As an example, you might have just received your first paycheck at your first job out of college, or your employment history might be 1 month in your new job and 2 years before, somewhere else.
Banks tend to look at 4 major factors which include:
1. Debt To Income Ratio: Analysis of the ratio of all the debt payments you will be making if they lend, against your recurring income.  In some cases the time at the job could impact the decision.

2. Loan To Value: The total amount of debt that you intend to take out that is to be secured by the property against the appraised value.

3.       Credit Score: Lenders generally use the middle score of the FICO scores that they obtain from the three major credit reporting agencies. The higher the score the better.

4.       Post Closing Liquidity: The lender will look at the borrower's available sources of liquidity and factor in the necessary funds needed to close, plus a reserve. Each lender will likely have different requirements for how much you will need to have left over after the closing.

5.       Other Factors: Each lender has their own credit policies.

Q3 - If I showed myself an apartment for rent, do I pay a broker fee? How do rental fees work in NYC?

A - If you found an apartment on your own and did not enlist the services of a licensed real estate agent to bring about a meeting of  the minds between you and the Landlord, then no commission is due and owing. However, some landlords (who are licensed brokers) impose a "fee", so always ask if there is a "fee" to rent the apartment.

Q4 - I am going to be relocating for work for a minimum of 2 years, but there is an excellent chance I will return to NYC and I do not want to sell my apartment. Is there a way to rent it for 2 years? I am in a rental building, so there is no board approval needed.

A - You will need to check your lease and consult with your Landlord about whether or not you are permitted to lease the apartment. While you say you reside in a rental building, you say you don't want to "sell" the apartment. If you live in a condo or coop, you need to familiarize yourself with the leasing policies.

If you have a real estate question for Dottie, please send it to;

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