Mortgage Amount

Specify the Mortgage amount for the first and second mortgage if the Buyer will have two mortgages. The preapproval from the Buyer’s mortgage company has all the information. The Buyer may change the Mortgage company from the one stated in the Agreement by sending an addendum to the Seller for approval. Remember, application must be made within the specified time per Mortgage Application.

Note: when the Buyer makes the decision to purchase, the mortgage lender will send a revised preapproval to reflect the purchase price. The terms of the original preapproval will apply with the same load-to-value (LTV), term, type of mortgage, interest rate and points. After negotiations are complete, and if the purchase price changes, the lender will have to issue another revised preapproval to accompany the Agreement to the Seller.

Maximum Interest Rate?

You might think this would open the possibility for the lender to charge whatever interest rate they want. This is not the case here! ”Regulations of the State Real Estate Commission state that you must include a maximum interest rate that the Buyer will accept if offered by the lender.

You and the lender must agree on the amount of principal and interest you want to afford and the amount the lender approves for you to afford. Your total mortgage payment is what the lender approves without knowing the exact amount of taxes and insurance you will include in your monthly mortgage payment for the escrow account. The entire mortgage payment is the sum of principal, interest, taxes and insurance - PITI.

PITI vs Interest Rate

PITI becomes important when you focus on the purchase price and not recalculate with the actual taxes. When the taxes exceed the amount estimated by the lender, then the higher interest rate could push the PITI over the approved amount. The interest rates change constantly, which is why the maximum interest rate protects the Buyer from financial harm.

Return From Mortgage Amount To Part 2 – Mortgage Contingency