Ask a Mortgage Expert

Being in the mortgage industry for twenty years, I have heard every question there is about mortgages. Below are three common questions that I receive about mortgages, rates, and refinancing. 

My wife and I are looking to upgrade as we're running out of space with our growing family but I'm self-employed. Will I be able to get a mortgage?

Obtaining a mortgage should really not be any more difficult as a self-employed individual than a W2 wage earner. There are some caveats that come along with obtaining a mortgage as a self-employed individual. First, most lenders require that you have two years of self-employment history to qualify for a mortgage. There are some exceptions to that rule but you should check with your mortgage professional and discuss what options are available. Secondly, and maybe most importantly, lenders will use a self-employed individuals net income after all expenses to determine if you qualify for a mortgage. Be careful when talking about your self employed income and consider your total net income not your gross income. Since you currently own a home and are upgrading, depending on your total family income, you may need to close the sale on your current home before you buy the new one, or you must be able to qualify for both home mortgage payments.

Rates are great now, but will most likely go up in the future. Does this make a variable rate mortgage too risky?

Variable or adjustable rate mortgages definitely carry more risk than fixed rate mortgages the majority of the time. If you expect to be in a home for the foreseeable future, a fixed rate mortgage is probably the best avenue to take. Adjustable rate mortgages do play an important role in the mortgage industry and are great products. You should fully understand how they operate and be completely informed about the potential future interest rate increases and how that could affect your mortgage payments. A few examples of when Adjustable Rate mortgages make good sense are as follows:
• If you know that your plans are to move within a certain number of years, an adjustable rate mortgage can save you thousands of dollars over that time with the significant lower interest rates they offer.
• If you are just entering the job market and cannot afford the fixed rate payments but you very likely expect increases in your income over the next few years, an adjustable rate mortgage could be a way to enter the home owners market and then look to get into a fixed rate product once your income increase.
In summary, there are many different types of mortgage pro- grams available and an Adjustable Rate mortgage may be the perfect product for your situation. Always ask your mortgage professional if they think an adjustable Rate mortgage might be right for your specific situation and have them educate you on the reasons for and against.

I'm not sure if I should refinance. How can I tell if now is the right time?

In most cases there is not one simple answer to this question. Refinancing should be a decision made primarily by you and others in your household who are responsible for the mortgage along with the help of your mortgage professional. Your decision should be based on current and future needs. You should explain your needs or questions to the mortgage professional, as the resulting recommendations can vary greatly depending on your specific situation. Some reasons for refinancing include, your need to increase your cash flow, your desire to pay off your mortgage sooner than originally anticipated, your need to consolidate your debt, the desire to lower the term of the mortgage, cash needs for home improvements, etc, etc. So to answer your question specifically, YOU really decide if it is the right time to refinance as long as you consult with a mortgage professional who can explain the programs available to meet your needs.