Q-I’m trying to find a lender in my community who offers an adjustable-rate mortgage based on the “cost of funds” index, which I think comes from California. I called four lenders, but none seemed to know anything about this index. Can you help?
A-I don’t know why you should be concerned with finding an adjustable rate mortgage (ARM) with an index based on the 11th District Federal Home Loan Bank cost of funds. This index is popular in California because it’s based on a locally tracked index.
A study of ARM indices from January 1979 to January 1993 indicates an index based on a one-year Treasury bill or six-month certificate-of-deposit rate would be least costly. Regardless, borrowers of mortgage loans are limited to ARMs with indices provided by their local bank or mortgage banker.
Q-We would like to buy our first home in the next two or three years. In the past, we have made some late payments. One was a telephone bill, another was a department store charge account payment. Some of these were due to my being laid off my job. I have never been late before, never filed for bankruptcy; I even paid off a finance company loan early. But the late payments are obviously on my credit record. Will they keep us from qualifying for a mortgage loan, or do we need absolutely perfect credit?
A-Perfect credit history is not a requirement for obtaining a mortgage loan. When you apply for a loan, you should provide the lender with a written explanation regarding any late payments.
In the meantime, keep your payments current. When you are able to show over the most recent two- to three-year period that payments have been paid when due, the lender will most likely view any past late payments as only a temporary problem.
More than good credit, however, is required to qualify for a mortgage loan. A buyer must have a sufficient down payment. Even with FHA-insured loans, 5 to 7 percent of the purchase price is necessary to cover a down payment and closing costs.
Additionally, a record of stable employment also is required to obtain a mortgage.
If you keep your monthly payments current, your past credit problems should not prevent you from buying a home.
