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payment, and the rate itself, changes on the loan anniversary date each year. However, Alfarano said, an ARM
program can be a good choice for consumers who are
looking for shorter terms with lower interest rates. Many
customers, such as those who are upsizing, downsizing,
relocating or retiring, look for these types of mortgages
and find that the adjusted rate works for their lifestyles.
A community bank can offer customers a wide range of
mortgage terms, advised Stephen Gieringer, assistant vice
president and mortgage sales manager at Fleetwood Bank.
Prospective homeowners who qualify may be eligible for
mortgages that offer significant benefits.
"We have specific products for 5-year and 10-year terms
with low closing costs and no appraisal or title insurance
requirements," Gieringer said.
Mortgage applicants who are planning to have a home built
should ask prospective lenders if they offer one settlement
for both the land purchase and house construction, according to Shenk. A community bank often has relationships
with area builders.
"Having one settlement with one set of fees is a big cost
savings," Shenk said. "A few banks also offer 95 percent
financing for such transactions."

Understanding how much Mortgage
You can Afford

Before you begin house hunting, it's important to have a
handle on your price range. If the most you'll be able to afford is a property that sells for $225,000, there's no point in
wasting your Sunday afternoons chasing down open houses
for properties priced at $600,000.

A good strategy, advised Shenk, is to meet with a mortgage
representative of a local bank early on in your house search
as a means of getting the mortgage process started. If the
prospective lender thinks you will qualify for a loan, he or
she will gather and verify information to determine how
much mortgage you'd qualify for.
When you provide those documents to the prospective
lender, you're considered pre-approved for a mortgage.
That doesn't guarantee that you'll get the loan, but it helps
speed up the underwriting and loan approval process and
lets you know what type of house is realistic for you.
"Pre-approval provides the bank and the customer a snapshot of their credit score and income, which determine
what size mortgage they qualify for," Shenk said. "Building
a relationship with a banker will be very helpful as the
homebuyer moves through the home-buying process."

Lenders use several different ratios to determine the size
of mortgage for which an applicant will qualify. Gieringer
said there are two important debt-to-income ratios a lender
uses to determine whether or not a prospective homebuyer
qualifies for a specific mortgage.
"A lender will look carefully at the front-end and back-end
ratios to figure if the applicant will qualify for a specific
loan product," he explained.
Lenders also consider how much a prospective buyer has available for a down payment when figuring out
how much to loan.
*	 Front-End Ratio. The monthly percentage of your yearly
gross income dedicated to mortgage payments is called
the front-end ratio. Mortgage payments consist of four
basic components: taxes, interest, insurance, and principal. Often, they are collectively known as PITI, and
should not exceed 28 percent of your gross income. This
is a general rule of thumb, although some lenders have
been known to lend to borrowers with PITI exceeding
as high as 30 to 40 percent.
*	 Back-End Ratio.  The percentage of a borrower's gross
income required to cover their debts is called the backend ratio. It is also known as the debt-to-income ratio.
Debts include car payments, child support, credit card
payments, mortgages and other loan payments. Most
lending institutions will recommend that the borrower's debt-to-income ratio should not exceed 36% of
their gross income. Based on this ratio, the maximum
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