Mortgage Basics

Jul 5


Know the difference between “pre-qualified” and “pre-approved.” Getting pre-qualified is a process where we calculate how much house you can afford based on your credit report and non-verified financial figures you provide verbally.

Pre-approval, on the other hand, is a more in-depth look at your finances which renders a more accurate picture of your financial situation. By looking at tax returns, pay stubs and bank statements we can pinpoint your price range. A pre-approved buyer is more attractive to sellers and their agents.

You don’t want to borrow more than you can afford. We will work with you to determine what you can afford.

Don’t get distracted by bells and whistles. Choose the type of loan that makes the most sense for you. Use financial calculators to determine if you should go with a fixed rate mortgage or an adjustable rate mortgage.

  • Fixed Rate Mortgage: interest rate never changes
  • Adjustable-Rate Mortgage (ARM): lower starting rate that may increase or decrease over time depending on the current market.

Greenway will run a credit check for you, analyze your FICO scores for any blemishes, and help fix any errors or recommend actions to raise their score.

Greenway will review the costs involved with purchasing a home. It’s important to talk with your Loan Officer about additional costs. While these costs vary from home to home, you’ll want to know what they are before making a final offer. These include:

  • Title and other third-party fees
  • Homeowners insurance
  • Taxes and escrows
  • Your Down Payment - generally 3% or more of the sale price
  • Closing costs - includes a variety of fees and other expenses

But once the house is yours, maintenance and repairs are your responsibility. As a homeowner, you are responsible for those additional costs – there won’t be a landlord to call.

We will review your eligibility for various federal, state, county and municipal programs. These may include grants and other forms of aid as well as reduced fees or rates.

Did you miss last week's blog? Catch up here. Learn how much house you can really afford!


How much home can you afford? There is a general rule of thumb that says your total monthly debt – mortgage payments, car payments, credit cards, gas, utilities, etc. – should not exceed 36 percent of your gross monthly income. Lenders typically follow a similar guideline when a qualifying a borrower for a mortgage, although the exact criteria depends on the lender, the borrower and the mortgage program.
First, let’s clarify what the lender actually does when qualifying a borrower for a mortgage. The lender qualifies a borrower for a maximum monthly payment that they can afford based on the borrower’s current financial situation, as well as the down payment amount. Remember, your monthly mortgage payment includes PITI – principle, interest, taxes and insurance. Many online mortgage calculators don’t include all four components.
Second, just because you qualify for a certain monthly payment, that doesn’t mean you should purchase a home that puts you right at that limit or anything close to it. “But wait,” you say. “I’ve crunched the numbers in my monthly budget and I have no doubt that I can swing that payment with plenty left to spare!”
Are you sure about that?
Do you plan to have kids? Will they go in daycare? If you plan to stay home with your kids, how much income will you lose? Will you start saving for their education? Do you plan to buy a car within the next five years? Would you like to go on vacation? Will this home you’ve fallen in love with require any improvements?

In other words, if these or other life events add significantly to your monthly expenses, will you still be able to swing that mortgage payment? Many first-time home buyers become house poor because they buy based on today and fail to consider where they’ll stand tomorrow. Their lifestyle tends to suffer, and they often struggle to meet their financial obligations. If an unexpected life change occurs, they could be in real trouble. On the other hand, if significant money will be coming off the books within a few years, you may determine that it’s worth it to make sacrifices in the short-term to own the kind of house you really want.
The Better Question to Ask
First-time buyers constantly come to us and say, “How much house can I afford?” Unfortunately, we can’t answer that question with any certainty. We can only tell you how much of a monthly payment you qualify for. The better question to ask is, “How much should I buy?” Again, the lender can’t answer that question. That’s a personal decision you have to make based on your income, lifestyle, family situation, and priorities, both now and in the future.
For a lot of first-time home buyers, mortgage qualification is a reality check. They experience payment shock when they come from paying low rent for a small apartment, or no rent from living with parents. Common sense tells us that upgrading to a home with more rooms, more square footage, and outside property will result in higher living expenses.
Resetting Expectations
You may find that you can’t afford the kind of home you want in the exact town you want. But you still have options. Would you be satisfied with a smaller house in the same town? Would you be satisfied with the same house in a different neighborhood or town where prices are lower?

Location is important. Location affects property taxes, home and auto insurance, commute times and expenses, traffic, social life, quality of schools, public services and more. Choosing how much home you can afford requires you to determine the importance of these and other factors.

In any of these scenarios, you have to look at how your decisions will affect your lifestyle. Would you be willing to compromise now and then move to a new home in the future? Is it best to live at home or rent for another year, save money, and look for ways to increase your income? Do you feel confident enough to pull the trigger right now on the home you really want, even if it’s a little more than you want to pay?

There is no mathematical formula that tells you exactly how much home you could afford. Greenway Mortgage will take the time to discuss these issues with you instead of simply approving you for a mortgage and wishing you luck.

Did you miss last week's blog? Check it out here: Buying Your First Home



Today, there are a number of obstacles for homebuyers, including credit score and down payment requirements, among other things. Consumers should have a thorough understanding of the mortgage market when seeking home financing.

Greenway Mortgage has created an outline to help first time home buyers prepare for one of the most significant financial transactions they will enter into. We will outline the steps involved in a series of weekly blogs, provide guidance on finding the right professionals to work with, and choosing the right mortgage product. We will also touch on making sure the home you buy is within your means.

Stay tuned weekly for new blogs! This week, we talk about the benefits of homeownership.

Be sure to download our FREE First-Time Home Buyer Guide, too! Click here to download your copy today.

What are the Benefits of Homeownership?

We talk a lot about the benefits of homeownership because it is the American dream for many. Homeownership brings a lot of added responsibilities. It may also bring a lot of advantages for you, from financial gain to a secure place to raise your family. For example:

  • Your home may appreciate in value
  • You can build equity to use for home improvement loans, education and other expenses
  • Your home is your own – you can do what you like with it to reflect your lifestyle
  • Home ownership can give your children roots in a community
  • You may save money at tax time by deducting mortgage interest and property taxes (Consult a tax advisor regarding the deductibility of interest)

A home offers stability, especially as your children grow up. It’s a place where you can live the life you want, and where you can create the memories of a lifetime.

Purchasing a house is a very exciting time. Being able to be prepared will help you make an informed decision. So, take this opportunity to learn more about homebuying and the mortgage process.
Ask yourself this question, “Am I Ready to Buy?” Buying a home offers many advantages, one of the most significant being that it allows you to build equity (ownership) when you pay your mortgage each and every month. A common myth is that monthly mortgage payments are more expensive than rent payments. However, in most cases, mortgage payments can be MUCH less than rent.
So, when considering homeownership for the first time, you will need to decide whether buying makes financial and practical sense for you right now or if renting is better. You should however consider both the advantages and disadvantages to renting as well as buying. Let’s take a look at a few advantages and disadvantages of both.
How much house can you afford?
The first step toward finding the right home is to figure out your purchasing power and determine how much you can really afford to pay each month. This saves time by allowing you to focus on homes in your price range. Keep in mind, during the planning stage you should consider both up-front costs and ongoing costs associated with purchasing a home. Take a peek at our affordability calculator which will tell you how much you are able to borrow from a lender.
Getting pre-qualified is also a good idea. It will help to narrow down your options so you can focus only on home you can afford. Click here to get pre-qualified today.
Upfront Costs Include:
Down payment: Typically ranges from 3-30% of the cost of the house. The more you can put down, the greater equity you will have in your home and the lower your monthly payment will be. For down payments less than 20% you may also need to pay mortgage insurance. 

Closing Costs: Typically range from 2-6% of the loan. However, this amount depends on your area. 

On-going Costs: Your housing costs can include the following:
  • Monthly mortgage payment
  • Homeowners insurance
  • Mortgage Insurance
  • If applicable - Flood Insurance
  • If applicable - Property taxes
  • Utilities
  • Maintenance
Are you a first-time home buyer? Download our FREE First-time Homebuyer Guide for everything you need to know about the mortgage process.
Questions about the Mortgage Process or which type of Loan best fits your financial situation? Check out our library of loan programs or contact us directly and one of our expert loan officers will help.


The Monmouth County, NJ First Time Homebuyer Assistance Program is designed to provide financial assistance to low income families to purchase an affordable home in the form of a deferred payment second mortgage loan in an amount not to exceed $10,000 for down payment and closing costs (only).


  • MUST BE a resident of Monmouth County for 1 YEAR before applying for a grant.

  • ALL applicants must complete a pre-purchase housing counseling course and provide a certificate of completion with the First-Time Homebuyer application.

  • MUST BE an individual(s) that never owned a home (except if an applicant has previously owned a home he/she still may qualify if they meet 1 or more of the following criteria:

    • An individual that has not owned a home in 3 years prior to receiving home assistance. 

    • An individual who is a single parent even if the individual owned a home with his or her spouse or resided in a home owned by the spouse

    • An individual who is a displaced homemaker even if as a homemaker the individual owned a home with his or her spouse or resided in a home owned by the spouse. 

    • Must be low income. Gross annual income does not exceed 80% of the county median income:



  • Property MUST be the principal residence

  • Applicant must purchase a house located in the participating municipalities ONLY.

  • Fist-time homebuyer can only purchase a 1-4 family property or condominium unit.

  • Housing unit cannot exceed the max purchase price of $337,000 for 1-family & condominium, $432,000 for 2-family unit, $532,000 for a 3-family unit and $648,000 for a 4-family unit. 

  • Mobile homes are not eligible for purchase using First-time Homebuyer program funds

  • Co-signor not allowed

Still have questions about the FIRST-TIME HOMEBUYER ASSISTANCE PROGRAM? Contact us today! 


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