Frequently Asked Questions

What can I Afford?

A good rule of thumb is to take your yearly gross income and multiply it by 2.5. The answer you get is the price range you are going to be in. Find the monthly payment for that loan amount on the mortgage calculator. The monthly payments on the loan should be about one third your gross monthly income. This is not a perfect system, but it is often in the ball park. The mortgage calculator allows you to input different numbers for the amount and length of the loan, as well as the interest rate. It does not calculate the taxes and insurance, so don't forget to add those.

Who does Bill Young or Lepic-Kroeger represent in a transaction?

Many of you are under the impression that REALTORS® always represent the sellers and imply that they are representing you. That may be true in some states but in Iowa you do have buyer representation by a REALTOR®. There have been numerous national news reports that tell you otherwise, and these reports are true for most states in the US, but thankfully not in Iowa. You can see more about how we can represent only buyers/sellers or in some cases both parties by reading our Agency Disclosure Statement that all clients will eventually need to sign.

What is PITI?

This is the total amount of the payment you make to your lender every month.
P= Principal
I= Interest
T= Taxes
I= Insurance
Some lenders will allow you to pay the taxes or insurance on your own. If this is something that is important to you, speak with your lender.

How much down payment do I need?

Iowa City has a competitive market. Many local lenders need as little as 5% down, and some have programs that require only 3% down for first time buyers. There are even some programs with 100% financing for qualified applicants. They actually give you two loans. One for 80% of the sale price, and a second loan for the final 20%. It may sound complicated, but it is better than PMI.

If you qualify for a VA loan, you may be able to get a loan for 103% of the purchase price of your home. If you are buying your first home and plan to live there for several years, this may be a great option for you.

What is PMI?

PMI stands for Private Mortgage Insurance. This is something to avoid if possible. Lenders are only insured by the government up to 80% of the value of a home. If the loan is for more than 80% and goes into default, the lender may loose up to 20%. That is why they want anything you owe above 80% of the value to be insured by a private mortgage insurance company. The cost of this insurance will depend on the size of your down payment. Often the PMI will cost more than your homeowners insurance! That is why a 20% down payment is best if you are able to afford it. If you can come close to 20%, the lender may be able to waive the fee for you.

What is title insurance?

Title insurance is not commonly used in Iowa. It is a quick fix system used in each of the other 49 states to guarantee clear title. The cost to the buyer can be as high as $1400. The lender requires that there are no liens or debts attached to the property before they will write the loan. They want to be sure that no one else has any claim to the title. This is why they make buyers purchase a policy from a title insurance company.

In Iowa, the normal procedure is to review and update the abstract, which traces the history of ownership. The buyer's attorney renders what is known as a title opinion, and informs the lender about items that will be required from the seller at closing. Common requirements are mortgage releases, a sidewalk release from the city, satisfaction of alimony, etc. The lender will usually accept this method of clearing the title. A title opinion will cost around $150 depending on the attorney you choose.

The system used in Iowa is less expensive and usually offers the buyer and the lender as much protection as title insurance. This is the main reason Realtors in Iowa recommend using a local lender. Lenders outside of Iowa always want title insurance.  It is their standard operating procedure. Some out of state lenders may see the logic in the system and accept a title opinion and the required releases rather than title insurance. Most will not.

Is there a question that you have? Drop me an email and I will respond to your question and post the answer here for others.