Robert Bowker is a mortgage loan originator with Interlinc Mortgage, a lending company in Round Rock. Bowker recently answered several questions for Community Impact Newspaper centered on the homebuying process. Specifically, Bowker provided information and tips for people looking to buy a home as well as common practices and benefits to look out for. The following answers have been edited for length and clarity.

What sort of qualifications do prospective buyers need to be aware of to be approved for a mortgage loan?

There are many things that need to be considered. A key element is what is called a debt-to-income ratio. There is a front ratio and a back ratio. The front ratio for the homebuyer is the percentage of their gross monthly income, and the back ratio is the housing payment and all debts on a person’s credit report as a percentage of gross monthly income. Additionally, homebuyers need to be aware of the effect student loans will have on that ratio. Even though student loans may not require a payment at present, mortgage lenders will still factor in a 0.5% of a person’s total loan against their debt ratio.

A second key requirement involves a person’s credit score. The score requirement will vary depending on factors such as loan type. For example, the Federal Housing Administration can accept a credit score as low as 580 as long as the debt-to-income and loan-to-value ratios fit the program guidelines of the investor. Conventional loans can go down to a 620 credit score, but that will also require a larger down payment.

What are some tips for first-time homebuyers trying to take advantage of assistance programs?

First-time homebuyers need to get a lender who knows the elements of various loan programs such as how much must be repaid or how much could be forgiven. All of the assistance programs are different. There are also different assistance percentages available that range from 2%-5% of the loan. Homebuyers should also be aware of what is called a mortgage credit certificate, or MCC, which is designed to help first-time homebuyers get assistance with tax credits. They should also be aware that assistance programs come with income limitations, and some come with purchase price limits. That is why it is important to work with a professional.

What is the difference between an adjustable mortgage and a fixed-rate mortgage?

The adjustable rate mortgage, or ARM, is locked in for a period of time and then will adjust. For example, a homebuyer could opt for what is a called 5/1 adjustable mortgage. That is where a loan’s interest rate is locked in for five years and can adjust once a year. Or, a homebuyer could have a 5/6, which is a loan in which the interest rate is locked for five years and can adjust every six months. People need to ask these questions and also be aware of the life cap, which is the maximum number of times a loan can adjust over the life of the loan.

A fixed rate loan contains an interest rate that is locked in for the full period of the loan, whether that is 15 years, 30 years or another amount of time.

How long does the home-buying process take once the mortgage application is filed?

This is a tricky question because [the process] is not based on when the application is filled out. It is based on the time the contract is written. Homebuyers should be able to close a mortgage within 30 days from when the contract is written.

When is the best time for a homeowner to refinance their mortgage?

This is a very tricky question because everyone’s situation is different. Homeowners really need someone they trust who will calculate for them the actual return on investment for refinancing, rather than someone who is just out for a paycheck.

Homeowners must consider the following when determining whether or not to refinance:

• how long they plan to stay in the home;

• what the refinancing will save them per month; and

• what it will cost to refinance, whether that is being rolled into the loan or it is being paid up front.

How can homeowners use home equity to their advantage?

Home equity is a great thing. In Texas, homeowners are restricted to taking only 80% of the total value of their home as a cash out to help protect the equity. However, it is important to understand how to wisely utilize a cash out. As one example, I would not use a cash out on my home equity to pay off my car, because I would be stretching out the payments from a short-term debt to a long-term debt, and I would ultimately end up paying more for the vehicle.

Can paying off a mortgage early result in penalties?

On a regular conventional [loan], there are no prepayment penalties, but if you are doing a unique program like a bank statement loan [that allows homebuyers to qualify for a mortgage without income documents that most loan types require] or non[qualified mortgage loan, which has features that reduce risk for borrowers and make the loan more affordable], homebuyers need to ask if there are any penalties for paying off a home loan early.

Interlinc Mortgage

3000 Joe Dimaggio Blvd., Ste. 66,

Round Rock