• Charlotte, NC

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Choosing the right mortgage…..??!!


    Pinpoint the Best Loan
    for Your Circumstances  

Start the loan process by looking at your financial situation. To help find the optimum loan program, answer these questions:

How Much Payment Can You Afford?

    When considering what type of loan to get, figure out how much you can afford. Generally, lenders want to see that your payment (which is considered to include principal, interest, taxes and insurance) does not consume more than 28 percent of your income. Your monthly payment divided by your monthly gross income is called your housing ratio.
    In addition, lenders usually want to see that your debt ratio (house payment, plus other loans or credit card payments, divided by your monthly gross income) does not exceed 36 percent. 
    These ratios are typical, but they do change over time as the economy changes. 

  • How long will you remain in the home?
  • What is your current financial situation?
  • What are your longer-term income expectations?
  • How much interest rate fluctuation and risk are you willing to accept?
  • How much money do you have available for a down payment and other upfront costs?

Armed with an understanding of your financial situation, you can best evaluate these common types of loans:

A fixed-rate mortgage carries the same interest rate for the life of the loan, which is most commonly 15 or 30 years. Many lenders are now offering other terms including 20-year and 40-year fixed-rate loans. Fixed-rate loans are the most popular choice because they provide a predictable monthly payment.

With an adjustable-rate mortgage (ARM), the interest rate is tied to an index that rises and falls over time causing the monthly payment to change over the life of the loan. ARM loans typically have a cap to keep the rate from rising above a certain amount. These loans are attractive for those who do not plan on staying long in their homes because they often start with an interest rate two to three percent below a fixed rate mortgage. Plus, you may be able to afford a more expensive home with an ARM because your initial interest rate will be lower.

With an interest only mortgage, for a set term the mortgage payment is applied only to the interest on the loan and not the principal. The amount that would be applied to the principal can be used for investment purposes or some other purpose. At the end of the term the loan reverts back to its original terms with the monthly payments raised to reflect the full amortization over the remaining years of the loan (for instance, following a five-year interest-only loan, a 30-year mortgage would now fully amortize over 25 years).

FHA and VA loans assist first-time homebuyers and others who might not be able to meet down payment requirements for conventional loans. The Federal Housing Authority provides mortgage insurance to private lenders making these loans. Down payments can be as low as three percent and closing costs can be rolled into the mortgage. There is a statutory limit on FHA loan amounts. The government also steps in to help veterans secure a home. VA loans can offer up to 100 percent financing with no mortgage insurance. Even those with less than perfect credit can secure good rates. 

A balloon mortgage has a short term, generally five, seven or ten years. However, the payment is based on a term of 30 years. This type of mortgage can be attractive because it is easier to qualify for and often has a lower interest rate. But at the end of the loan term, you need to pay off the loan, refinance, or convert the balloon mortgage to a traditional mortgage at current interest rates.


Community Living Q&A

Community living expert, Richard Thompson, tackles some questions:

Question: We had a water pipe break in a common wall which flooded two units. The HOA has no policy about common wall water problems and both owners are looking to the HOA to repair both the plumbing and the unit damage. What do you advise?

Answer: If the leak came from a common water supply line, the HOA should fix the plumbing. If the leak came from a supply line serving only a particular unit, that unit owner is responsible for fixing the leak.

The plumber should be instructed to determine which it is when performing the repair. 

However, even if the leak came from a common water line, it doesn’t mean the HOA should fix the resulting damage to units unless the HOA was negligent in responding to the plumbing repair in a timely manner. 

If there was no negligence, the resulting unit damage should be paid for by the affected unit owners or their insurance. The same principle would apply to a leaking roof or errant sprinkler head that did unit damage. 

The HOA is under no obligation to reimburse unit owner insurance deductibles. Some repairs and costs should be shouldered by the HOA and some should be borne by the owners, including the deductible. Most governing documents require owners to insure their unit and personal property for this very reason. 

To protect the HOA’s insurability, the board should enact an Areas of Insurance & Maintenance Policy which clearly defines by building and grounds component who is responsible, owner or HOA. Since HOA insurance is very broad and will pay almost any claim submitted, this policy will determine which claims qualify.

An Areas of Responsibility Policy will put both unit owners and their insurance companies on notice as to how it works at your HOA so most disputes can be settled before they start. The Areas of Responsibility Policy cannot shuffle responsibility for maintenance or insurance where the HOA clearly is obligated. It simply should describe the dividing line.

Question: Is the insulation under the roof considered a common element or an individual homeowner expense? We have a contractor that advises adding insulation under the roof to help prevent ice dams. Would this be an HOA or unit owner expense? 

Answer: Roof maintenance is typically an HOA expense in common wall communities and mitigating ice dams would typically be an HOA responsibility. If ice dam maintenance is common and expensive, finding a way to reduce the cost and potential interior damage makes sense and the HOA should pay for it. 

Question: We live in a condominium. Several of our members have requested approval to paint their front doors a different color then the other units. Should the board grant their requests?

Answer: Common wall communities derive value from consistent design and look. Glaring variations detract from market appeal and value. 

But, as time passes, so do consumer tastes. That all-the-rage chocolate brown paint color of the 70s is now a sales detriment.

Rather than have the board or Architectural Design Committee play political football with exterior colors, why not hire a color consultant to update the HOA color schemes and offer some compatible choices? 

Most paint supply companies offer this service free of charge in anticipation of selling their product. The consultant will provide options while maintaining a unified curb appeal. 

Have the consultant put together color boards with a number of trim and body color options which the members can vote on. That makes them part of a democratic process on what could be a highly volatile subject. 

Punt this issue to the professionals and members.