The Davidson Group Mortgagepedia
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Tue, 19 Mar 2024 09:44:36 UTC7 Mortgage Myths
https://lindadavidsonmortgageexpert.com/mortgagepedia/posts/7-mortgage-myths/
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<h2 style="color: #f09434;">Myth #1 - I need 20% for a down payment.</h2>
<h2 style="color: #7ea73f;">Truth:</h2>
<p>It is amazing how many people (current homeowners, first time home buyers, and even some Realtors) still think that a buyer needs a 20% down payment to purchase a home. <strong>20% down payment is <span style="text-decoration: underline;"><em>not</em></span> typically required!</strong> It does require paying Mortgage Insurance, but it's a small price to pay to be able to purchase a home and start building wealth for less than 20% down.</p>
<p>Each Mortgage Type has their own standard requirement for down payment:</p>
<ul style="padding-left: 20px; list-style: circle;">
<li>FHA - 3.5% down payment required</li>
<li>VA - No down payment required</li>
<li>USDA - No down payment required</li>
<li>Conventional - Minimum 3%- 5% down payment required (There are 3% down programs with restrictive guidelines)</li>
</ul>
<p><br /><br /></p>
<h2 style="color: #f09434;">Myth #2 - The down payment is the only cost needed to purchase a home.</h2>
<h2 style="color: #7ea73f;">Truth:</h2>
<p>Most potential buyers do not take into consideration the Closing Costs and Prepaids required to purchase a home (or even understand what those are). In additional to the required down payment (see below), there are Closing Costs and the Prepaids that must be taken in consideration.</p>
<p><strong>Closing Costs</strong> - Closing costs are the 10+ companies that are involved in the transaction. These include, but are not limited to, the Appraisal, Survey (we typically can use the seller's if they have an existing one that nothing structurally has changed to the outside of the home), Tax Certifications, Underwriting, Processing, Wire Fees, Title Fees, Recording Fees, RMCR credit fees, Recording Fees, Closing Attorney, Closing Docs Attorney (who draws your closing docs), etc.</p>
<p><strong>Pre-Paids</strong> - Typically consists of 1 year of insurance +3 months in reserve in insurance + 3 months of reserve in taxes. Borrowers will choose their own insurance company (Lenders do not choose it).</p>
<p>A quick calculation to use as a "rule of thumb" (not exact but will be close):</p>
<ul style="padding-left: 20px; list-style: circle;">
<li>$100,000 sales price = @$6,000 for closing costs and prepaids $6000.</li>
<li>For each $1,000 up or down add or subtract $30. So, for example, a sales price of $101,000 = $6,030 but a sales price of $99,000 = $5,970.</li>
<li>Add the down payment required/requested (see above) to the approximate closing costs to get the approximate total costs to purchase a home. For example, for a $200,000 home sales price going FHA: $7,000 down payment + $9,000 in closing costs = $16,000 in total costs.</li>
</ul>
<p><br /><br /></p>
<h2 style="color: #f09434;">Myth #3 - The seller will always help pay closing costs.</h2>
<h2 style="color: #7ea73f;">Truth:</h2>
<p>Often in our conversations with our clients we hear, <em>"Well, we want the seller to pay everything."</em> In a slow market (what we call a "buyer's market"), a buyer may get a seller to contribute generously to their closing costs. However, in a hot market (a.k.a "seller's market"), there is almost no contribution whatsoever. In fact, asking for Seller Contributions without the advice of an expert Real Estate agent can cause your offer to <em>not</em> be accepted.</p>
<p>Typically, the buyer pays (in addition to the down payment, if required) the closing cost and prepaids. In some parts of the U.S. (and depending if in the negotiations here in Texas), the buyer would pay the Owner’s Title Policy as well. Most of the time we do find the seller still covering the Owner’s Title Policy so it would not be customarily considered a buyer’s costs.</p>
<p><em>IF</em> the seller is willing to pay the customary buyer’s closing costs and/or prepaids, here are the guidelines for the maximum seller contributions allowed:</p>
<ul style="padding-left: 20px; list-style: circle;">
<li><strong>FHA</strong> - The seller is allowed to pay any or all of the closing cost and prepaids up to 6% of the sales price provided the buyer has at least 3.5% into the loan.</li>
<li><strong>VA</strong> - The seller is allowed to pay any or all of the closing costs and prepaids up to 4% of the sales price plus the lender fees.</li>
<li><strong>USDA</strong> - The seller is allowed to pay any or all of the closing costs and prepaids up to 6% of the sales price.</li>
<li><strong>Conventional</strong> - The seller is allowed to pay up to 3% of the sales price toward the closing costs and prepaids but cannot pay any of the down payment. If buyer is putting 10%+ more down, seller is allowed to pay up to 6% of the sales price toward the closing costs and prepaids but cannot pay any of the down payment. For an investment property, the seller is maxed at 2% of the sales price toward buyer's closing costs and prepaids.</li>
</ul>
<p><br /><br /></p>
<h2 style="color: #f09434;">Myth #4 - Using a First Time Home Buyer Program is always the best route when purchasing your first home.</h2>
<h2 style="color: #7ea73f;">Truth:</h2>
<p>"Back in the day" there were a lot of programs that were available to FTHBs (First Time Home Buyers). Nowadays, most of these programs no longer have funding (budget cuts) or their criteria is so strict (i.e., seller has to fix all the repairs that the FTHB program requires) that it is very difficult to 1) get the funds and 2) get a seller to accept an offer if a buyer is using the program.</p>
<p>That being said, there are still State bond programs that are available. The loan product (i.e., FHA, Conventional, etc) and the credit score usually determine how much money is available in assistance with these programs. <em>The big down side to these bond programs is the interest rate.</em> The rate is set by the bond program and is typically 0.50%-1.00% higher than market rates. The more assistance being given, the higher the rate. In addition, some of the bond programs require the buyer to pay back the funds once they sell the home, depending on how long that they keep the home as a primary dwelling.</p>
<p>When a potential home buyer is considering doing a bond program, we always want to explore:</p>
<ul style="list-style: circle; padding-left: 20px;">
<li>1) Can they come up with their needed funds to close in a different manner?</li>
<li>2) How long do they plan to live in the home? (<em>If they don’t have to pay it back and are only going to live in the home for a few years, then maybe a higher interest rate is not a really bad thing</em>)</li>
<li>3) How high is the bond program rate versus using a lender premium/rebating pricing to assist?</li>
<li>4) What does the debt to income ratios look like?</li>
<li>5) Does the borrower qualify for any of these programs based on their credit score, income limitations, and/or other specific program criteria?</li>
</ul>
<p>In short, bond programs <em>are</em> available but it is very important to talk to a knowledgeable, experienced Mortgage Expert about the pros and cons, and whether other options would be better. Using a FTHB bond program is not always the right decision.</p>
<p><br /><br /></p>
<h2 style="color: #f09434;">Myth #5 - All pre-qualifications/pre-approvals are the same.</h2>
<h2 style="color: #7ea73f;">Truth:</h2>
<p>The definition of a Pre-Qualification and a Pre-Approval can differ from lender to lender (hence why there is so much confusion in the marketplace), but in our 20+ years of experience our opinion is:</p>
<p><strong>Pre-Qualification</strong> - An experienced, licensed Mortgage Loan Officer has spoken to the buyer. They have verbally received information concerning income, assets, liabilities, employment, etc and have pulled a tri-merged (all three bureaus) credit report to come up with an approximate figure that the buyer can qualify. <strong><em>This should never be the final step before the buyer finds a home</em></strong> as there are so many factors and guidelines that could drastically change the financial picture. For example, you may not know that a single piece of information on your W-2 or tax return could completely alter your approval, but it could. Which is why it is important to always get a Pre-Approval first, before shopping for a home.</p>
<p><strong>PreApproval</strong> - An experienced, licensed Mortgage Loan Officer has spoken to the buyer. They have verbally received information concerning income, assets, liabilities, employment, etc and have pulled a tri-merged (all three bureaus) credit report to come up with an approximate figure that the buyer can qualify. <em>Then</em>, they request from the borrower all the needed supporting documentation (i.e., W2's, Tax Returns, Paystubs, Assets, etc.) upfront so that the experienced, knowledgeable Mortgage Loan Officer can review everything to make certain of the accurate financial picture. Needed verifications have been done and the loan is Pre-Approved and the buyer is ready to shop with confidence. The Loan Officer is a trusted, knowledgeable originator who knows their guidelines and rules and has made certain that there is nothing left hanging that could cause a "blow up" later in the loan process.</p>
<p>Even with a more clear picture of the differences between a Pre-Qualification and Pre-Approval, it is just as important (if not more important) to consider <em>who</em> is performing the qualification. Would you take your care to just any mechanic? Would you get your hair cut by just any stylist? If you were about to undergo major surgery, would you trust any doctor? Of course you wouldn't. Which is why it is important to properly vet the Mortgage Loan Officer you are working with, not just the company.</p>
<p>At Service First Mortgage - The Davidson Group, we feel that <strong>all approvals are <span style="text-decoration: underline;"><em>NOT</em></span> created equal</strong>, due to the expertise of our loan officers. So we have developed our "Unfair Advantage Commitment". It is our commitment to our clients and Realtor partners to help you increase the chances of getting your offers accepted, even when up against multiple other offers.</p>
<p>Our "Unfair Advantage Commitment"</p>
<ul style="padding-left: 20px; list-style: circle;">
<li>We review all documents received by our buyers <span style="text-decoration: underline;">upfront</span> prior to the contract being written.</li>
<li>As soon as the buyer has written a contract, and they notify us, we will <em>immediately</em> contact the listing agent and let them know that our buyer is "ready to go" for their mortgage, and the strengths of the loan.</li>
<li><em><strong>IF</strong></em> we have all the documentation upfront, then we just need 28 days (except for USDA or Bond) to close from the day we can order the appraisal. That's it.</li>
</ul>
<p>We want our buyers to have an unfair advantage in this market place and we are committed to you to make that happen!</p>
<p><br /><br /></p>
<h2 style="color: #f09434;">Myth #6 - You need a great credit score to purchase a home.</h2>
<h2 style="color: #7ea73f;">Truth:</h2>
<p>Below are the minimum credit scores based on loan program:</p>
<ul style="padding-left: 20px; list-style: circle;">
<ul style="padding-left: 20px; list-style: circle;">
<li><span style="text-decoration: underline;"><strong>What is Lowest Credit Score for Conventional?</strong></span> <br /> 620 if putting down a 20% or more down payment (no PMI), 640 if needing PMI. It is important to note that on Conventional financing, the loan must run through an AUS (Automated Underwriting System) and receive an "Accept" status, but a lot of times if the credit score is below 660 it will not. Private Mortgage Insurance (PMI) Companies also have their own overlays (a.k.a. restrictions) when the credit score is low. One downside of Conventional is that the government-backed guarantors (Fannie/Freddie) have required risk-based pricing adjustments which means that the lower the credit score the higher the interest rate on the loan. In addition to a higher rate, it also requires a higher PMI "rate". Both the pricing adjustments and the PMI "rate" hits are significant below 700.</li>
</ul>
</ul>
<p> </p>
<ul style="padding-left: 20px; list-style: circle;">
<ul style="padding-left: 20px; list-style: circle;">
<li><span style="text-decoration: underline;"><strong>What is Lowest Credit Score for FHA?</strong></span> <br /> Although FHA will allow down to a 580 credit score with a 3.5% down payment, the industry restrictions for scores that low make it fairly impossible to obtain financing. Most lender restrictions loosen until 640 or higher, but are still very restrictive due to a history of high potential of default.</li>
</ul>
</ul>
<p> </p>
<ul style="padding-left: 20px; list-style: circle;">
<ul style="padding-left: 20px; list-style: circle;">
<li><span style="text-decoration: underline;"><strong>What is Lowest Credit Score for VA?</strong></span> <br /> <em>Technically</em> VA does <span style="text-decoration: underline;">not</span> have a minimum credit score, but the standard in the Industry is 620+. The thing to always remember on credit scores is that not only do lenders need to have the loan insured but we also must be able to get the loan securitized in the secondary market (think bonds, stock market, etc.) and serviced, so that is why you now see lender overlays (restrictions). VA has a big issue with collections and history of non-payment of debt.</li>
</ul>
</ul>
<p> </p>
<ul style="padding-left: 20px; list-style: circle;">
<li><span style="text-decoration: underline;"><strong>What is Lowest Credit Score for USDA?</strong></span> <br /> Most lenders will not go lower than 620. Credit scores 680 or above will be reviewed more favorably in situations where a borrower has a higher DTI (Debt-to-Income Ratio).</li>
</ul>
<p><br /><br /></p>
<h2 style="color: #f09434;">Myth #7 - Once the buyer finds a house (and has a contract), the hard part is over.</h2>
<h2 style="color: #7ea73f;">Truth:</h2>
<p>Not quite. As a borrower, you still need to work with your Real Estate expert to perform an inspection on the home, shop for homeowner's insurance, schedule movers, pack boxes, fill out Change of Address forms, etc.</p>
<p>On the lender side, did you know that there are over 30 Companies/Entities involved in one single mortgage transaction? In addition to that there are over 10 Verifications/Searches that we are required to do for every single borrower. It is no wonder that 85% of all mortgage files contain between 400-2,000 pages of documentation.</p>
<p>Why, do you ask? Because there are over 45 Agencies or Acts that are part of every mortgage transaction in the U.S.</p>
<p>Luckily, as a borrower you are mostly shielded from these inconveniences (as long as you are working with a good lender). However, do not be surprised if your lender has to ask for additional documentation throughout the loan process. The mortgage process is like a beautiful symphony and the lender is like the conductor. When every plays their part as instructed (like sending in documentation when needed) the concert goes smoothly and can be enjoyable.</p>
<p>In the end, you are purchasing a new home. That is something to be excited about, and every bit worth a little extra effort for a short period of time.</p></div>
Tue, 23 Jan 2018 21:49:00 UTChttps://lindadavidsonmortgageexpert.com/mortgagepedia/posts/7-mortgage-myths/Ever Thought of Buying a Second Home? It’s High Time You Did
https://lindadavidsonmortgageexpert.com/mortgagepedia/posts/ever-thought-buying-second-home-its-high-time-you-did/
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<p>Whether or not buying a second home is a good idea has always been a subject of debate. And looking at the percentage of American families that own a second home, around 6 percent, you might deduce that owning a second home is not a great idea. We, however, have a completely different view and have more than a few reasons to encourage people to invest in a second home. Come let’s take a look at some of the biggest benefits of owning a second home that might compel you to buy one too.</p>
<h2>An Alternate Source of Income</h2>
<p>Rent from your second home is one of the obvious benefits of owning a second home. You can also use the rent to pay off your monthly installments. Initially, the rent may be a very small part of your monthly installment, however, with time as your monthly rent would increase, you will be able to pay a substantial part of your monthly installment from the rent amount.</p>
<h2>A Home Away from Home</h2>
<p>With the concept of vacation homes on the rise, an increasing number of people are buying second homes as a vacation home where they can spend their vacation. A vacation home not only allows homeowners to decorate the home the way they want, but it’s also a cost effective way of spending your vacations, considering the high hotel room rates. </p>
<h2>A Contingency Asset</h2>
<p>If you are one of those people who wouldn’t save until they are forced to save then investing in a second home is a great way to save money in an appreciating asset that would come handy in case of an emergency. You can also use your second home for future milestone’s such as your children’s education, marriage or retirement.</p>
<h2>Tax Benefits</h2>
<p>Let’s say you took a home loan to buy a second home in Texas, while you already had a home loan running on your primary home. In this scenario if your total home loan is less than $1million and your home equity is not more than $100,000 then you are eligible for tax deduction on all the interest you pay annually towards your home loans. Besides this you can also exclude a portion of your capital gains from selling your primary home, if you start using your second home as your primary home (for at least two years).</p></div>
Tue, 12 Dec 2017 11:36:00 UTChttps://lindadavidsonmortgageexpert.com/mortgagepedia/posts/ever-thought-buying-second-home-its-high-time-you-did/What to do when the appraisal value is less than the purchase price?
https://lindadavidsonmortgageexpert.com/mortgagepedia/posts/what-do-when-appraisal-value-less-purchase-price/
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<p>Being able to buy their dream home is almost every adult’s aspiration. Buying a home is, however, not easy; the prices are high and it is difficult to cover the cost directly from one’s own pocket. So, of course, it is common to reach out to a lender for a home loan. But sometimes during the home buying process the home’s appraised value falls short of the contracted purchase price, and the amount the lender has to offer is less than what you require to buy your dream home. In case you are facing a similar issue, do not worry because all’s not lost. In this post, we list ways to still go ahead with the deal.</p>
<h2>Ways You Can Still Move Forward With The Purchase</h2>
<p>Firstly, you can approach the seller to <strong>renegotiate the sale price</strong>, keeping in mind the initial appraised value. This might lead the seller to reconsider and lower the sales price to the newly appraised value.</p>
<p>Secondly, if the seller is not willing to renegotiate, you can work with your Realtor to contest the valuation by providing additional, relevant comparables of other homes that have sold in the area (referred to as “comps”). Note that there is not a formal method for contestation and there is no guarantee it will change the appraiser’s mind about the valuation. It is also important to note that according to federal regulation the lender cannot contact the appraiser and tried to persuade them to meet a certain value.</p>
<p>Lastly, if you cannot negotiate a new sales price with the seller, nor get a revised appraisal value from the appraiser, then you can still offer to <strong>pay in cash</strong> the difference between the sales price and the loan amount.</p>
<h2>Word Of Caution</h2>
<p>Home appraisers do not look into home defects or issues you may face in the future regarding maintenance. Their job is to evaluate the home on the lines of market value, safety and sanitation. So be sure to do get all the checks done personally before you finalize your dream home.</p></div>
Wed, 08 Nov 2017 12:44:00 UTChttps://lindadavidsonmortgageexpert.com/mortgagepedia/posts/what-do-when-appraisal-value-less-purchase-price/Attention First Time Home Buyers: Have You Factored in These Additional Home Buying Costs?
https://lindadavidsonmortgageexpert.com/mortgagepedia/posts/attention-first-time-home-buyers-have-you-factored-these-additional-home-buying-costs/
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<p>Many home buyers believe that having saved enough for a down payment is all that they need for buying a new home. The notion, however, is far from truth as there are several additional costs associated with home buying, other than down payment. While some loans such as VA loans for veterans or USDA home loans may allow some closing costs to be rolled into the original loan, a homebuyer will likely still have other out of pocket expenses. Having said that, in this post we list five additional home buying costs that homebuyers must factor in at the time of buying a new home.</p>
<h2>1. Appraisal Fee</h2>
<p>Before a lender lends money to you, they would require an appraiser to determine the current market value of the property. In most areas of Texas, be prepared to spend around $300 to $600 for an appraisal, depending on the area and size of the home. This fee is one of the few fees collected up front, but goes directly to the appraiser, not the lender.</p>
<h2>2. Home Inspection Fee</h2>
<p>Do not confuse a home inspection with a home appraisal. While a home appraisal helps find the actual value of a property, the purpose of home inspection is to find out if there are any potential problems with the property, for example - structural problems, roofing issues, drainage problems and more. The home inspection cost typically varies from $300 to $500. Though this cost is optional, it is absolutely invaluable and a prudent home buyer should not forego this chance to be sure they are purchasing a home in good condition.</p>
<h2>3. Homeowner’s Insurance</h2>
<p>When buying a property, it’s a must to buy homeowners insurance in some states in the US. Buying an insurance is important because it helps cover the costs associated with damages to your property. It also provides liability coverage in case of any accidents or injuries caused due to a homeowner or their family member’s negligence. For example, some policies even cover the damages caused by household pets. <strong><em>Important Note: It is very common to include the cost of homeowner’s insurance as part of your monthly mortgage payment, but the premium may be paid out of pocket if you wish.</em></strong></p>
<h2>4. Moving Expenses</h2>
<p>An often overlooked cost of purchasing a new home is moving expenses. Whether you are renting a truck and paying your friends in pizza and drinks, or hiring a professional moving company to pack and/or move your belongings, this cost should not be overlooked. In addition to movers, there are also setup and connections fees for various service providers such as electric, gas, tv, internet, water, etc.</p>
<h2>5. Repair and Renovation Cost</h2>
<p>If you buy a home that was already occupied previously, then there are chances that you may need to spend some money on the repairs and maintenance. In addition to repair costs, renovation costs also form a significant part of the additional costs borne by home buyers. In fact one of the reasons people buy their own property is, that unlike a rented house where there are a lot of restrictions in terms of the modifications one can do, one can modify their own house according to their whims and fancies.</p></div>
Wed, 08 Nov 2017 12:21:00 UTChttps://lindadavidsonmortgageexpert.com/mortgagepedia/posts/attention-first-time-home-buyers-have-you-factored-these-additional-home-buying-costs/A Guide to Loan-to-Value Ratio
https://lindadavidsonmortgageexpert.com/mortgagepedia/posts/guide-loan-value-ratio/
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<p>Whether you are a first-time homebuyer in Texas or are looking for a loan to finance an additional property; to qualify your loan request, the lender will consider various factors such as your employment history, income, credit history and down payment percentage. The lender will also calculate the loan-to-value ratio, a ratio between the loan amount and the home’s appraised value. Your loan-to-value ratio can have a significant impact on the mortgage rate, which is why it is important to know how the ratio is computed and what a high or low LTV means for you.</p>
<h2>What is Loan To Value (LTV)?</h2>
<p>Loan to value is exactly what it sounds like. It is the loan amount in relation to the value of the home, expressed as a percentage. So for example, if you have a home that is worth $100,000 but you owe $80,000 on your home the LTV is 80%. As it applies to purchasing a home, if you are purchasing a $250,000 home and putting down $25,000 as a down payment then your resulting LTV the lender will use in their calculation and analysis will be 90% ([$250,000 - $25,000] &#247 $250,000).</p>
<h2>Importance</h2>
<p>Borrowers with a low LTV have more equity in their home and represent less risk as compared to those with a higher LTV. Even if the borrower defaults, the lender stands a good chance of recovering a substantial percentage of the loan amount after foreclosing, and later selling the property. LTV is certainly not the only factor a lender considers when deciding whether to lend to a particular borrower. That said, in most cases applicants with a low LTV qualify for a lower mortgage rate.</p>
<h2>Impact on Mortgage Insurance</h2>
<p>If you have a conventional loan, you can avoid paying the PMI by making a downpayment of 20 percent, or more, of the homes value. Lenders offering FHA purchase loans accept an LTV of up to 96.5 percent, but the mortgage insurance varies based on LTV. If the LTV is greater than 90% the FHA mortgage insurance is never eliminated and lasts for the full mortgage term. If the LTV is less than 90% then the mortgage insurance will drop off after 11 years into the mortgage term. USDAloans allow up to 100% LTV (and even allow costs to be rolled into the mortgage to go above 100%), but does have an annual fee that is similar to mortgage insurance which lasts for the term of the loan, regardless of LTV. Lastly, VA loans also allow an LTV of 100 percent but does not have any mortgage insurance tied to the loan regardless of LTV.</p></div>
Fri, 27 Oct 2017 13:03:00 UTChttps://lindadavidsonmortgageexpert.com/mortgagepedia/posts/guide-loan-value-ratio/Common Mortgage Refinance Scams and How to Avoid Them
https://lindadavidsonmortgageexpert.com/mortgagepedia/posts/common-mortgage-refinance-scams-and-how-avoid-them/
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<p>Refinancing an existing mortgage offers an array of benefits to many U.S. homeowners, from lowering the existing interest rate, to paying off debt, or even funding a special want/need like a renovation or child’s college. While refinancing a prudent and beneficial decision, it is important to be extremely careful and diligent. Over the years, scammers have tried every trick in the book to dupe homeowners into “refinancing” their mortgage, but instead stealing the equity right out of their home. From posing as government officials eager to help, to flipping the documents at the last moment, these con artists stop at nothing. When it comes to steering clear of refinancing scams, keeping your guard up is the best defence. To help, we discuss some common refinance scams and preventive measures. Take a look.</p>
<h2>Common Mortgage Refinance Scams</h2>
<h3>Equity Stripping</h3>
<p>Equity stripping, as the name suggests involves draining the property’s equity. Scamsters mainly target homeowners facing foreclosure, talk them into selling their property at discounted rates and agree to let them live as tenants until the refinance is finalized. Once the unscrupulous buyer gets possession of the agreement, they borrow against the property, draining its value. Alternatively, some con artists pose as lenders and offer to lend more money to the borrower than they can afford, and later foreclosing on the property when the borrower cannot pay.</p>
<h3>Phantom Help</h3>
<p>Ever received a piece of mail from a government representative about a special program with unrealistic low rates? Remember the old adage, if it seems too good to be true, it probably is? Scammers, often pose as government authorities and ask homeowners to share their personal info such as their date of birth, name, address and social security number over mail or phone, which can give rise to identity theft concerns. Some may even ask the borrower to wire a fee to share some info, or begin processing their file. In some cases, the scammer may even ask the borrower to transfer the home’s title to an organization or an individual in return for help.</p>
<h3>Loan Flipping</h3>
<p>If you think you need to watch out just for bogus offers and scammers when refinancing a mortgage, think again. Over the years, some nefarious lenders, too, have jumped on the bandwagon and have come out with ways to dupe borrowers. These unscrupulous lenders often target homeowners who look to get more money on their refinance. The lender, after receiving a few payments approaches the borrower with a promise to help them earn more money back. The interest rate, however, is substantially higher and these lenders often slyly roll the settlement costs into the loan, which makes the monthly mortgage payments go through the roof. Additionally, they may forego the traditional 15 year or 30 year mortgage and sneak in a 2-5 year balloon payment. When the balloon payment comes due to the unsuspecting borrower, and they cannot afford to pay it, the lender is more than happy to refinance the borrower another time, once again pocketing thousands of dollars in fees.</p>
<h3>Bait and Switch</h3>
<p>Unscrupulous lenders often attract homeowners with unrealistically good refinancing offers. Once the borrower takes the bait, the lender flips the loan papers and changes the conditions, often on the closing day. In many cases, the borrower is too invested to walk away from the deal and reluctantly agrees to bear the extra cost.</p>
<h2>How to Stay Out of Troubled Waters</h2>
<h3>Never pay Upfront Fees</h3>
<p>Stay clear of schemes that ask you to deposit any upfront fees. The only upfront fee a reputable lender would ask for is the cost to get a copy of your credit report, and/or payment for the appraisal (which goes to the appraiser, not the mortgage company).</p>
<h3>Stay Clear of Suspicious Email </h3>
<p>Never click on a link from an unknown source. Look for spelling mistakes in the URL and take a note of grammatical mistakes. Review the signature and do not open the mail if you cannot find the company’s contact details. Most importantly never share personal info over email.</p></div>
Tue, 19 Sep 2017 16:19:00 UTChttps://lindadavidsonmortgageexpert.com/mortgagepedia/posts/common-mortgage-refinance-scams-and-how-avoid-them/3 Ways to Increase Your Home Loan Eligibility
https://lindadavidsonmortgageexpert.com/mortgagepedia/posts/3-ways-increase-your-home-loan-eligibility/
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<p>Your home loan eligibility depends on various factors such as your income, credit score, debt obligations, and more. These factors don’t change overnight. So, what if you want a home loan but the amount your lender has offered to lend is way too low for the price range you are looking in? While the factors we just discussed would not change overnight, you still have ways to increase your mortgage loan eligibility. Want to know what those ways are? Let’s take a closer look.</p>
<h2>1. Opt for a longer amortization</h2>
<p>Your maximum loan amount depends on the maximum amount of monthly payment you can afford to pay every month and how long the mortgage takes to amortize. Because you are spreading the payments over a longer period of time, the monthly payment will be lower. Fair warning that the longer the amortization, the more interest costs you will likely pay over time.</p>
<h2>2. Get a co-borrower, or co-signer.</h2>
<p>If you are having trouble qualifying for a mortgage loan at the amount you are wanting, you might want to considering adding a coborrower, or a cosigner. By doing this, the lender would add their income and yours together to increase your mortgage eligibility amount. When applying for a home loan, many people confuse a co-borrower and co-signer. What you need to know is that a co-borrower is someone who jointly applies with you for a home loan and holds an ownership interest in the property. A co-signer, however, is simply an individual who agrees to be a backup in case the borrower defaults.</p>
<h2>3. Factor in Your Additional Income</h2>
<p>If you have any source of additional income such as income from investments, rental income, business income or interest from savings, then do mention it to your lender. You can also mention the perks or additional bonus that you receive from your employer. The additional income, however, should be an amount that you expect to receive at least once in a year. In case there is any uncertainty as to whether or not you would receive the amount, the lender will not consider it while calculating the eligibility amount.</p></div>
Tue, 19 Sep 2017 16:16:00 UTChttps://lindadavidsonmortgageexpert.com/mortgagepedia/posts/3-ways-increase-your-home-loan-eligibility/Confused between a 15 Year and a 30 Year Mortgage?
https://lindadavidsonmortgageexpert.com/mortgagepedia/posts/confused-between-15-year-and-30-year-mortgage/
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<p>Confused between a 15 Year and a 30 Year Mortgage?</p>
<p>According to a report by the Mortgage Banker’s Association, most Americans opt for a 30 year fixed mortgage when choosing between home loans with different term lengths. While the 30 year mortgage has been the American archetype for several years, the 15 year mortgage option should not be overlooked. Depending on the individual’s financial situation and long term goals, the 15 year mortgage may have benefits that far outweigh its 30 year counterpart. To help homebuyers choose between a 30 year and a 15 year mortgage, we list the benefits of both.</p>
<h2>Advantages of a 15 Year Mortgage</h2>
<p>While a shorter-term requires home loan borrowers to pay a higher monthly mortgage payment, it makes the loan cheaper and has several other benefits such as:</p>
<h2>1. Quick Repayment</h2>
<p>Paying mortgage payments for a long period of time can not only be frustrating for some, but it can also affect their eligibility for a second loan. Lenders offer lower loan amounts to borrowers who already have an existing mortgage, as their existing loan lowers their repayment capacity. So, if you are young, can easily afford to pay higher installments and are planning to take a second loan after a few years, opting for a 15 year mortgage would be a good idea. Not to mention the euphoria of being debt free - well at least mortgage debt.</p>
<h2>2. Interest Savings</h2>
<p>Home loan borrowers can make substantial savings by choosing a 15 year mortgage over a 30 year mortgage. In fact, a lot of lenders offer significantly lower interest rates on loans with shorter loan periods as they are considered less risky. In addition to the lower interest rates, a 15 year mortgage has significantly less interest costs over the life of the loan than a 30 year mortgage. The savings can be substantial.</p>
<h2>3. Faster Equity Build-up</h2>
<p>The difference between the current market price of the property for which the loan was borrowed and the amount the borrower owes to the lender is known as equity. As one pays off their mortgage loan faster in a 15 year mortgage, it helps them build equity faster.</p>
<h2>Advantages of a 30 Year Mortgage</h2>
<p>Though a 30-year mortgage is more expensive in the long run than a 15-year mortgage, it’s a blessing for those who cannot afford a high monthly payment. Here are some of the other advantages it offers:</p>
<h2>1. Lower Monthly Installments</h2>
<p>The biggest advantages of a 30 year mortgage is its relatively low monthly installment. The installment for a 30 year mortgage is around one third less than a 15 year mortgage installment. The savings may help borrowers save for other goals such as their children’s education, saving for their retirement, and other opportunities. A savvy investor may even go on to invest the difference in high-yielding bonds, or additional real estate.</p>
<h2>2. Flexibility</h2>
<p>A borrower with a 30 year mortgage has the flexibility to pay off their loan earlier than the committed period, if they so desire. If their lender allows (which they usually do), borrowers can increase their monthly installments or pay lump-sum amounts during the tenure of the loan. In case the situation gets tight, borrowers can fall back to the more comfortable payment established earlier.</p>
<p> </p>
<h2>Need Help?</h2>
<p>If you need help or have any questions about what loan term you should choose, <a href="https://lindadavidsonmortgageexpert.com/about-us/contact-us">get in touch with</a> one of our mortgage experts today. You can also do you own comparison of the 15 year mortgage versus 30 year mortgage by using our <a href="/loan-center/calculators/mortgage-comparison-15-years-vs-30-years">comparison calculator</a>.</p></div>
Fri, 21 Jul 2017 15:32:00 UTChttps://lindadavidsonmortgageexpert.com/mortgagepedia/posts/confused-between-15-year-and-30-year-mortgage/4 Simple Ways to Pay Off Your Mortgage Early
https://lindadavidsonmortgageexpert.com/mortgagepedia/posts/4-simple-ways-pay-your-mortgage-early/
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<p>Two-thirds of American home buyers take out a mortgage loan to purchase their dream home. As buying a home is a huge investment, it may be unavoidable for homebuyers to buy a home without taking a home loan. However, it is advisable for home loan borrowers to try paying off their mortgage as quickly as their financial condition allows them to do so. If you too have a home loan, or are planning to take one, here are a few tips to help you pay off your loan early.</p>
<h2>1. Refinance to a lower interest rate</h2>
<p>Borrowers with fixed-rate mortgage should always keep an eye on the prevailing interest rates. In case there is an interest rate drop, take advantage of the situation and refinance your existing loan to reduce your monthly mortgage payments. If you can, you should use some, if not all, of the savings and put it toward extra principal payments each month. This will speed up your repayment.</p>
<h2>2. Refinance to a shorter loan term</h2>
<p>Alternatively, if there is an interest rate drop and you can keep your monthly payment close to the same amount, refinancing your existing loan to shorten the term of your home loan is a great idea. For example, going from a 30 year mortgage to a 20 or 15 year mortgage. Many times borrowers who could not afford a higher monthly payment during the initial days of borrowing find it advantageous to switch to a loan with a shorter term and higher monthly commitment, later in order to pay off their home sooner.</p>
<h2>3. Pay lump-sum amounts</h2>
<p>Whenever you receive any lump-sum amount, such as through a tax refund or inheritance, use that amount to pay a part to chip away at your outstanding mortgage principal balance. That is, if you don’t have any other important commitments to tend to first. One important thing to note here, however, is that even though almost all of the newer mortgages were rid of prepayment penalties, if you have an older mortgage loan you may want to check the terms of your mortgage note before paying off too early .</p>
<h2>4. Make additional payments each month</h2>
<p>There are companies out there that offer to “pay” your mortgage payment bi-monthly, for a fee of course, in order to help pay off your mortgage sooner. Do not fall for this trick! You can do it on your own. You can achieve the same goal by taking the cost of one extra mortgage payment, dividing in by 12 (for 12 months in a year), and apply that amount towards principal each month. For example, if your mortgage payment is $1,200 a month that would be an additional $100 each month to principal. It may seem little, but over time it could shave off 5-10 years of your mortgage. </p>
<p>Can’t afford the additional principal payments right now? What about just rounding up your monthly payment? So instead of $950 a month pay the additional $50 in principal. If you think rounding up your monthly payment and increasing them by $20 to $50 will not make much of a difference, you would be surprised to know that rounding up your monthly payment of $954.83 To $1000, can help you pay off your debt two years and five months early. The earlier you pay off, the more money you can save on interest.</p>
<h2>Use our Monthly Payment Payoff Calculator</h2>
<p>To find you how much can you save by making higher mortgage payments, use our <a href="https://lindadavidsonmortgageexpert.com/loan-center/calculators/mortgage-payoff">monthly payment payoff calculator</a>. In case you have an existing loan and want to pay it off early, or need help choosing the right term for a home loan, <a href="/about-us/contact-us">get in touch</a> with one of our home loan experts today.</p></div>
Fri, 21 Jul 2017 15:06:00 UTChttps://lindadavidsonmortgageexpert.com/mortgagepedia/posts/4-simple-ways-pay-your-mortgage-early/The 3 C's of Underwriting Home Loan Borrowers Must Know
https://lindadavidsonmortgageexpert.com/mortgagepedia/posts/3-cs-underwriting-home-loan-borrowers-must-know/
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<p>There is a common expression in the mortgage industry that consolidates all the things that underwriters are looking at before they approve a home loan into 3 categories, known as the “3 C’s of Underwriting”. When applying for a home loan in Texas, or any other part of the US, it is important for applicants to put their best foot forward because in case their application is rejected, they would not only have to reapply through some other lender, but it may also decrease their chances of getting their home loan application approved. Now, if you are wondering what is that you need to do to ensure that an underwriter does not reject your home loan application, we will explain the three C’s of underwriting that underwriters consider approving or rejecting an application.</p>
<p> </p>
<h2>Credit</h2>
<p>One of the most important factors that help determine whether an underwriter would approve your loan application or not is the credit reputation of the applicant. To check the credit reputation, an underwriter checks your credit report that includes an applicant’s credit history such as bankruptcies, past foreclosures, delinquencies if any and other important information. To ensure your application is not rejected on the basis of credit, pay your credit card bills, monthly installments on time and review your credit report on a periodic basis to check for errors.</p>
<h2>Capacity</h2>
<p>Another important factor that underwriters consider at the time of processing a loan application is the borrower’s capacity to repay a loan. To determine the payback capability of an applicant, underwriters take into account factors such as income, cash reserves, debt-to-income ratio, assets, loan program requirements, and more. What underwriters mainly look for here is a stable source of income. The stability of different borrowers vary depending upon their source of income. For example, income requirements that indicate a stable income may vary for W2 hourly wage earners, salary with commission income earners, and W2 salary income earners. </p>
<h2>Collateral</h2>
<p>Before approving a loan, lenders need to determine the actual value of the property for which a borrower is wanting to take out a mortgage loan to purchase. It is important for a lender to ensure that the approved loan amount is less than, or equal to, the value of the property. This helps lenders recover the loan amount in case a borrower defaults. One main benefit of a home appraisal is that it verifies the condition and value of the property. This information is not only beneficial for lenders, but for home buyers too.</p></div>
Fri, 21 Jul 2017 14:30:00 UTChttps://lindadavidsonmortgageexpert.com/mortgagepedia/posts/3-cs-underwriting-home-loan-borrowers-must-know/How Credit Scores Are Calculated
https://lindadavidsonmortgageexpert.com/mortgagepedia/posts/how-credit-scores-are-calculated/
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<p>When apply for a home loan the lender will undoubtedly check your credit report, which summarizes your credit history. A healthy credit score is the single most important criterion lenders consider when evaluating a borrower’s creditworthiness. A good credit score equips you with negotiating power that you can use effectively to get better interest rates and other benefits. Knowing the factors that go into making your credit score will help you dispute any errors and maintain a healthy score. There is limited, or inaccurate, public knowledge about how credit scores are calculated. To help, we list some important criteria that credit reporting agencies use to calculate credit score.</p>
<h2>1. Your Payment History (35%)</h2>
<p>Many experts argue that payment history is the most important criterion used when calculating credit scores. The credit reporting company will gather important info such as the number of credit accounts you have, details on the number of credit accounts you have paid, and those that are outstanding, and missed payments. The agency will also take into account the frequency of late payments and your details on public records such as bankruptcy, liens, wage attachment, and foreclosure.</p>
<h2>2. Used vs. Available Credit (30%)</h2>
<p>When calculating your credit score, the credit reporting agency would want to know how good you are at managing your monthly payments. The company will gather info about the amount of credit you have used out of the available credit on your credit cards. The agency will study other revolving line of credits (a loan that allows you to borrow, repay, and reuse the available line of credit) you use. Further, the credit reporting agency will also collect data about the total amount you owe (as debt). </p>
<div style="float: right; padding: 15px;"><span><img src="https://lindadavidsonmortgageexpert.com/files/7615/0066/4860/How-Credit-Scores-Are-Calculated-Credit-Background.png" alt="Credit Score Breakdown Pie Chart" /></span></div>
<h2>3. Type of Credit Used (10%)</h2>
<p>To evaluate how effective the person is at managing different lines of credit, credit rating agencies collect info about the different types of credit the individual uses. The key to maintaining a healthy credit score is meeting payment obligations that arise due to these lines of credit in-time.</p>
<h2>4. Your Credit History Length (15%)</h2>
<p>To evaluate how good you are at managing your credit accounts over time, credit agencies gather details about your oldest and the latest credit account. Some important info the credit rating company will look for are the date when these accounts were opened, the period of their operation, how frequently you use them, and whether there are any judgement or public record items listed against these accounts. </p>
<h2>5. Credit Report Inquiries (10%)</h2>
<p>Whenever you apply for a new loan, you would be required to sign a document that authorizes the lender to request a copy of your credit report from credit reporting agencies. There are two types of credit inquiries - soft inquiries and hard inquiries. Soft inquiries are done by you to check your credit score, by a company offering a promotional offer to you, or by a company that is already offering services to you. Hard inquiries are requested by lenders with whom you have applied for credit. Soft inquiries, in general, do not impact the person’s credit score, it is hard inquiries that pose a problem and can impact the credit score for people with a short credit history or fewer accounts.</p></div>
Fri, 21 Jul 2017 13:32:00 UTChttps://lindadavidsonmortgageexpert.com/mortgagepedia/posts/how-credit-scores-are-calculated/A Look at the Eligibility Criteria, and Pros and Cons of USDA Loans
https://lindadavidsonmortgageexpert.com/mortgagepedia/posts/look-eligibility-criteria-and-pros-and-cons-usda-loans/
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<p>The <a href="https://lindadavidsonmortgageexpert.com/loan-types/usda-loans">USDA Rural Development Guaranteed Housing Loan Program</a> is one of the most popular federally backed home loan programs in the United States. USDA home loans are guaranteed by the United States Department of Agriculture, have zero down payment requirement, and almost $0 move in costs capability . The loans are available to those looking for a property in rural areas, or homeowners who already own a house in “rural” U.S.A. For all the wonderful benefits this mortgage program provides, USDA home loans also have their share of disadvantages, which can make them unsuitable in some cases. To help clear up any confusion and assist you in taking informed decisions, here are some eligibility criteria and some pros and cons of USDA loans.</p>
<h2>Eligibility Criteria</h2>
<h3>Property Location</h3>
<p>First and foremost, the property of choice must be located in USDA loan-eligible territory. To check whether your property lies in this territory, visit the US Department of Agriculture’s website: <a href="https://eligibility.sc.egov.usda.gov/">https://eligibility.sc.egov.usda.gov/</a></p>
<h3>Property Condition</h3>
<p>The USDA will require that your property be in good condition and meets its property eligibility guidelines. To determine the home’s condition, state certified inspectors will visit the property and survey it to ensure:</p>
<p> </p>
<ul style="padding-left: 20px; list-style-type: disc;">
<li>There are no signs of termite and pest damage or infestation.</li>
<li>The property is structurally sound.</li>
<li>The plumbing, water, sewage disposal units, and electrical systems are functional and calibrated.</li>
</ul>
<h2>Employment Status</h2>
<p>Though the USDA does not require borrowers to have a minimum employment history in any one position or company, you do still need to provide proof of steady income over the past 2 years. The lender’s underwriters will request verification of this through documents such as W2’s and tax returns. If you are self employed, you would also be asked to submit tax returns. If you have a gap of more than 30 days in your employment history, draft an explanation letter giving reasons for the gap. Even if you do not have steady employment for the past two years, you can be eligible subject to the condition that you have a new job, or are returning to work after a long leave. Ask your mortgage expert for further details on this one, as there may be some nuisances that an expert could guide you through.</p>
<h2>Income Guidelines</h2>
<p>USDA home loans are provided to low to moderate income individuals or families. As such, the program places an income limit for eligible borrowers. To qualify, your family income (family size 1-4 members) must not exceed $75,650 (in most counties) and $153,400 (for high cost areas). This limit is $99,850 and $202,500, respectively, (for a family with 5-8 members). The income limits, however, change with time so check with your mortgage expert to help you determine eligibility. In general, the baseline rule is that it cannot exceed 115 percent of the area’s median income (AMI).</p>
<h2>Credit Score</h2>
<p>The minimum credit score to get a USDA loan is 640. That said, borrowers with a lower credit score may still qualify after further review from an underwriter, called a “manual underwrite”. Under no circumstances, however, can the minimum credit score go below 580.</p>
<h2>Pros and Cons of USDA Loans</h2>
<h2>Advantages</h2>
<ul style="padding-left: 20px; list-style-type: disc;">
<li>Zero down payment</li>
<li>Lower interest rates</li>
<li>100 percent financing available. You also have the option to finance mortgage insurance.</li>
<li>Zero pre-payment penalty</li>
<li>You can use gift funds to cover closing costs</li>
</ul>
<h2>Shortcomings</h2>
<ul style="padding-left: 20px; list-style-type: disc;">
<li>Geographical limitations (the property must be located within USDA loan-eligible territory).</li>
<li>Only single family units can be financed.</li>
<li>Borrowers need to pay mortgage insurance.</li>
<li>Income restrictions</li>
</ul></div>
Fri, 21 Jul 2017 13:00:00 UTChttps://lindadavidsonmortgageexpert.com/mortgagepedia/posts/look-eligibility-criteria-and-pros-and-cons-usda-loans/Mortgage Insurance: Conventional vs FHA vs VA vs USDA Loans
https://lindadavidsonmortgageexpert.com/mortgagepedia/posts/mortgage-insurance-conventional-vs-fha-vs-va-vs-usda-loans/
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<p id="docs-internal-guid-47922a3d-660f-5139-554c-5af21fd08cca">Depending on how much you are able to put down as a down payment, mortgage insurance is one of the major costs associated with taking out a loan. The fee is required for most borrowers with less than 20 percent sales price as a down payment. Mortgage insurance helps hedge against the losses that arise when a borrower defaults. Different home loans in Texas, including first time home buyer programs, conventional loans, FHA, and USDA loans, carry this cost. If you are looking for a home loan in Texas, knowing the mortgage insurance requirements in advance will help you better plan your monthly payment obligations. We’ve outlined the fee for the main different loan programs below.</p>
<h2>Conventional Loans</h2>
<p>Private Mortgage Insurance (PMI) rates on <a href="https://lindadavidsonmortgageexpert.com/loan-types/conventional-loans">conventional loans</a> usually varies in the range of $30-$70 per month per each 100,000 of the loan amount borrowed, as a rough estimate. The actual amount would depend on multiple factors such as your credit score, insurer guidelines, and your down payment amount.</p>
<h2>FHA Loans</h2>
<p>Borrowers opting for an <a href="https://lindadavidsonmortgageexpert.com/loan-types/fha-loans">FHA loan</a> cannot buy private mortgage insurance (provided by private insurers) and will have to opt for government mortgage insurance specially designed for those with FHA loans, called Mortgage Insurance Premium (MIP). There is an upfront mortgage insurance premium rate for FHA loans which is 1.75 percent of the base loan amount. Luckily, however, this one time fee can be rolled into the loan amount if you wish. In addition to the one-time fee, there is an annual insurance premium as well. Though this fee can vary significantly based on down payment, length of loan term, and purchase vs. refi transaction, the typical fee is 0.85% of the loan amount. It is a part of your monthly payment and, if your down payment is less than 10%, it never goes away until you sell your home or refinance. See below for a better breakdown on annual MIP rates (as of January 2017):</p>
<ul style="padding-left: 20px; list-style-type: disc;">
<li>30-year loan, down payment (or equity) of less than 5 percent: 0.85 percent</li>
<li>30-year loan, down payment (or equity) of 5 percent or more: 0.80 percent</li>
<li>15-year loan, down payment (or equity) of less than 10 percent: 0.70 percent</li>
<li>15-year loan, down payment (or equity) of 10 percent or more: 0.45 percent</li>
<li>Streamline refinance (all terms and down payment): 0.55 percent</li>
</ul>
<h2>VA Loans </h2>
<p>One of the benefits of opting for a <a href="https://lindadavidsonmortgageexpert.com/loan-types/va-loans">VA loan</a> is that you are not required to opt for mortgage insurance. Rather, you will have to pay an upfront funding fee that can be financed into your loan. The funding fee usually varies in the range of 1.25 percent-3.3 percent of the total loan amount depending on your type of service and the down payment amount.</p>
<h2>USDA Loans </h2>
<p>When opting for a <a href="https://lindadavidsonmortgageexpert.com/loan-types/usda-loans">USDA loan</a>, you will have to take two types of insurance- an upfront guarantee fee and a monthly fee. If you are looking for a USDA loan, we have some good news for you, both the upfront guarantee and monthly fee rates were slashed from 2.75 percent to- 1 percent and 0.50 percent to 0.35 percent, respectively, in 2016. USDA revises these rates at regular intervals, though, so make sure and talk with a mortgage expert to be sure the accurate costs.</p></div>
Fri, 21 Jul 2017 10:58:00 UTChttps://lindadavidsonmortgageexpert.com/mortgagepedia/posts/mortgage-insurance-conventional-vs-fha-vs-va-vs-usda-loans/Distinguishing Between VA, USDA, FHA, and Conventional Loans
https://lindadavidsonmortgageexpert.com/mortgagepedia/posts/distinguishing-between-va-usda-fha-and-conventional-loans/
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<p>Buying a home is a major investment for most people. Apart from finding a property that best meets your needs, you also have to determine the best loan program that matches your financial situation, and future financial goals. There are various loan programs in the U.S. all of which have their fair share of <a href="https://lindadavidsonmortgageexpert.com/loan-types/mortgageprosandcons">pros and cons</a>. If you want to buy a home but do not know which loan program is best for you, our experienced mortgage experts can help. We analyze your case and suggest the best loan option according to your needs. To help you arrive at an informed decision, here a some key differences between VA, USDA, FHA, and Conventional loans.</p>
<h2>1. Loan Type</h2>
<p>VA loans are provided to veterans or their surviving spouses. These loans are guaranteed by the Department of Veteran Affairs (VA) and issued by qualified lenders. VA loans were introduced to help veterans living in areas with no or limited private financing options secure a loan. USDA loans are provided to rural property owners or those who intend to invest in a property located in rural areas. The primary eligibility criteria for this loan is that the applicant’s income must not exceed 115 percent of the median income for the area. FHA insured loans are provided to low income households by FHA-recognized lenders. Conventional loans are provided by private lenders. These loans are not backed by any government agency and the payment terms, interest rates, and down payment amount can vary for different lenders.</p>
<h2>2. Credit Score Requirements</h2>
<p>Credit score requirements can vary for different lenders, but likely not by much because they are all playing by similar rules imposed by the Department of Housing and Urban Development (HUD), the VA, USDA, and/or investors. That said, in most cases, VA lenders look for borrowers with a minimum credit score of 620, though a VA home loan with a bad credit can be obtained, if the borrower takes steps towards clearing all their debts. Typical credit score requirement to get an FHA loan is a minimum of 580, but most lenders will not go below 600 without significant overlays. Lenders offering USDA loans usually look for borrowers with a credit score of 620 or more. Credit score requirements to get a conventional loan are the most stringent and lenders usually look for borrowers with a credit score of 660 or more. Conventional programs pricing comes with Loan Level Pricing Adjustments (LLPA’s), which is just a fancy way of saying that pricing gets worse as the score gets lower, and better as the credit score gets better. Credit score can also make a significant difference in mortgage insurance premiums on Conventional loans.</p>
<h2>3. Down Payment</h2>
<p>When opting for an FHA loan, you will have to pay a down payment amount of at least 3.50 percent of the loan amount. There are no down payment obligations for VA and USDA loan borrowers, which is one of the biggest advantages of these loans. Down payment requirements for a conventional loan may vary anywhere between 3-5 percent of the loan amount. Though there are no downpayment obligations for VA and USDA loan borrowers, paying a down payment amount can help improve loan terms, such as lower interest rates.</p>
<h2>4. Funding fee</h2>
<p>Funding fee is charged by government bodies guaranteeing different loans. The money that these bodies collect helps sustain their operations and continue providing benefits to borrowers. The VA funding fee varies in the range of 1.25 percent-3.3 percent of the loan amount. The actual amount, however, will depend on many factors such as the down payment amount, and your service status. VA exempts veterans receiving disability benefits, and the spouses of service members who died in the line of duty or from a service related disability from paying this fee. FHA charges an upfront funding fee of 2.25 percent of the loan amount. When opting for USDA loan, you would have to pay a funding fee of 1 percent of the loan amount. Conventional loan borrowers do not have to pay any funding fees.</p>
<h2>5. Allowed Seller Contribution</h2>
<p>Sellers can offer to pay some common closing costs such as funding fee, property taxes, and credit balances on the buyer’s behalf. The maximum seller contribution for VA loans is 4 percent of the selling price. This rate is 6 percent for FHA loans and 3 percent for conventional loans respectively. The limit is 9 percent for conventional loan borrowers, but varies significantly based on loan-to-value (LTV) - in other words down payment amount - and whether it is a primary residence, second home, or investment property. Ask your mortgage expert and/or real estate professional for more details.</p>
<h2>6. Maximum Loan Amount</h2>
<p>Though VA does not impose any restrictions on the loan amount that an eligible veteran can borrow, the maximum guaranteed amount cannot exceed $424,100. We can still provide VA financing up to $1 million, however the borrower would need to pay 25% of the difference between the sales price and $424,100 as a down payment. So for example, to purchase an $800,000 home using a VA home loan, the buyer would need to provide a $93,975 down payment ($800,000 - $424,100 = $375,900 x 25% = $93,975). The maximum loan amount for FHA loans can vary according to the county but cannot exceed $636,150 (in high cost areas). The limit can be as low as $275,665 for counties with low housing costs. The USDA does not set a cap on the maximum loan amount, but instead qualification will primarily depend on the borrower’s income. The maximum loan amount for conventional loans varies anywhere in the range of $424,100- $1835,200 depending on the county.</p>
<p>Before applying for a home loan, it is important to know the differences between the available loan programs. Conducting an in-depth research about the pros and cons of each program helps you make informed decisions. However, this is where a true mortgage expert can provide significant value to you through guiding you to the right options for you. <a href="https://lindadavidsonmortgageexpert.com/about-us/contact-us">Contact us</a> today for a free, no obligation consultation.</p></div>
Fri, 21 Jul 2017 09:44:00 UTChttps://lindadavidsonmortgageexpert.com/mortgagepedia/posts/distinguishing-between-va-usda-fha-and-conventional-loans/Answers to Common Questions About Home Loan Property Appraisals
https://lindadavidsonmortgageexpert.com/mortgagepedia/posts/answers-common-questions-about-home-loan-property-appraisals/
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<p>When applying for a home loan in Texas, or any state for that matter, an appraisal of the property by an approved appraiser will be required. These professionals will come and evaluate your home and compare it with other similar properties in the area. They will take pictures, measure area square footage, and survey different areas to arrive at a valuation. The exercise is conducted to ensure the property you are considering purchasing is worth the loan amount (or more) you are wanting to obtain from the lender. Appraisal reports are always required by a lender before approving your application, and you must know about this process when applying for a Texas home loan. Here are some frequently asked questions regarding appraisals:</p>
<h2>1. What happens if my home doesn’t appraise for the selling price?</h2>
<p>If the appraised value is lower than the sales price, you have the following options to ensure the approval process does not gets derailed:</p>
<ul style="padding-left: 20px; list-style: disc;">
<li>Work with your Realtor and mortgage expert to dispute the value. Your Realtor can provide compensating factors (known as “comps”) to the appraiser such as receipts for work done to improve the value, recent sales of comparable homes, and other factors that may influence the increased valuation.</li>
<li>Request the seller to lower the property’s selling price to match the appraised value. However, be forewarned that this may not be received too well by the sellers, and in a “Seller’s Market” where there are more buyers than homes to buy the seller will likely move on to another buyer before considering a lower purchase price.</li>
<li>Offer to pay the difference between the sales price on the contract and the lower appraised value. Note that the lender will only lend you the lower of the sales price or appraised value. So if the home does not appraise for the price that you agreed to sell it then additional monies may be required to purchase the home. This will affect your loan structure, your bank account, or both. Make sure to talk with your mortgage expert prior to agreeing to take this route.</li>
</ul>
<h2>2. What is the appraisal process?</h2>
<p>Once you submit the purchase agreement (a.k.a. contract), the lender will order an appraisal. Upon receiving the request, the appraiser will visit the home and perform various tasks such as measuring the square footage, inspecting any additions to the property, and ascertaining health and safety issues. The professional will also visit similar properties recently sold locally and compare their selling price and features with your home’s characteristics to arrive at an appraisal value. Based on their observations, the appraiser prepares a detailed report and hands it over to the lender. </p>
<h2>3. When do I need to pay the appraiser?</h2>
<p>In most cases, you would be required to pay the lender the appraisal cost upfront, and it is not refundable even if you decide against buying the property after the appraisal. Before paying the appraisal fee, make sure it is a home you want to move forward with while you are still in your option period, or at the very least still in your financing period. Ask your Realtor or home loan expert for more details and guidance on this.</p>
<h2>4. What is an appraisal contingency?</h2>
<p>An appraisal contingency gives you the choice to opt out of the contract without paying any penalties, if the home does not appraise. The clause also gives you the right to recover earnest money. You can waive this contingency if the property appraises. You must consider your situation before deciding in favor of or against including the appraisal contingency in the contract. You can, for instance, forego the option if there are too many buyers trying to woo sellers in your local market or don’t mind parting with a bit of extra cash, especially if you are planning to stay in the home for a long period. If, however, you are working on a tight budget, negotiate with your Realtor to include the provision in the agreement.</p>
<h2>5. How long will the process take?</h2>
<p>Appraisers, on an average, take anywhere between 5-7 working days to complete the process. The upper limit for VA appraisals can be 10 days. The actual time, however, can depend on various factors, of which the market conditions is one of the most important criterion. Home appraisals, for instance, can take more time if the real estate market is abuzz with buyer and seller activity. </p>
<h2>6. Who performs home appraisals?</h2>
<p>Appraisals are performed by certified and licensed professionals who have experience with working in the local real estate market and are well aware of market conditions. Appraisers, due to their exposure and experience in the real estate market, possess knowledge about the conditions and factors that can impact a property’s value.</p>
<h2>7. How much does an appraisal costs?</h2>
<p>A typical appraisal cost in Texas can be anywhere between $450-$650. The actual amount, however, will depend on many factors such as the type of loan, the complexity, type and location of the property, and size of the home.</p></div>
Thu, 20 Jul 2017 14:58:00 UTChttps://lindadavidsonmortgageexpert.com/mortgagepedia/posts/answers-common-questions-about-home-loan-property-appraisals/The Costs to Consider When Applying for a VA Loan
https://lindadavidsonmortgageexpert.com/mortgagepedia/posts/costs-consider-when-applying-va-loan/
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<p>Guaranteed by the U.S. Department of Veteran Affairs, <a href="https://lindadavidsonmortgageexpert.com/loan-types/va-loans">VA loans</a> are offered to honor the selfless service of our armed forces veterans. The loan is designed to help eligible veterans or their surviving spouses realize their dream of homeownership. VA loans are provided at lower interest rates compared to other loans, and the borrower typically does not have to pay a down payment, or minimal at worst. Borrowers also do not have to get mortgage insurance, which further lowers the total cost of the loan. Whether you are a veteran or a surviving spouse, opting for a VA loan can help you buy your dream home. It is, however, important to learn about the pros and cons of VA loans and the associated costs.</p>
<h2>1. Funding Fee</h2>
<p>When applying for a VA loan, although you won’t be required to pay a down payment, you will be required to pay a funding fee. The VA considers various factors, such as the service type, down payment amount (if you decide to put down a sum as down payment), and whether it is your first loan, second loan, etc. The VA, however, waives this fee for veterans with a VA rated disability and receiving respective compensation. The VA program does allow buyers to finance this amount into their loan, though.</p>
<h2>2. Interest Rate</h2>
<p>Interest rates for VA loans are considerably lower as compared to that for conventional options. If you are confused about your total interest costs, our experts can help. We may even be able to suggest tips for improving your interest rate opportunities such as improving your credit score, paying off judgments or liens, improving your debt-to-income ratio, or anything else that would reduce the appearance of “risk” to pricing engines.</p>
<h2>3. Closing Costs</h2>
<p>VA loan closing costs typically range anywhere between 1-3 percent of the total loan amount on expensive homes and 3-5 percent for less expensive ones. Some common closing costs are:</p>
<h2>4. Origination Fee</h2>
<p>The VA allows lenders to charge a 1 percent origination fee that helps cover wages and commissions paid to the loan officer and processors working on your mortgage.</p>
<h2>5. Appraisal Costs</h2>
<p>The lender contacts the VA to appraise the value of the property. VA, in turn designates a certified appraiser who charges a fee of $500 to ascertain the home’s value and to ensure it meets requirements laid out by the VA.</p>
<h2>6. Recording Fee</h2>
<p>You will have to register the refinance or purchase of your home with your local county that will charge anywhere between $20-$250 for its services.</p>
<h2>7. Credit Report Fee</h2>
<p>Before approving your application, the lender will want to have a look at your credit score. To get your credit report, the lender will contact a credit reporting agency that will charge $35 for its services, or more if additional “fact-finding” is required. At Service First Mortgage, we typically do not charge a credit report fee.</p>
<h2>8. Flood Certification</h2>
<p>Buyers whose property lie in a flood zone will have to get a flood certification that typically costs $20. The borrower will also have to get flood insurance, where the premiums can range anywhere between $300-$1,000 per year.</p>
<h2>9. Title Examination Fee</h2>
<p>A title insurance company will conduct research to ensure the property does not have any existing liens. The cost of this service usually varies between $600 to $800 depending on the amount of the loan.</p>
<h2>Fees the Lender is <strong><span style="text-decoration: underline;">not</span></strong> Allowed to Charge</h2>
<ul style="list-style-type: disc; padding-left: 20px;">
<li>
<p>Attorney fees to cover services other than helping with the title work.</p>
</li>
<li>
<p>Lock-in fees (to lock interest rate)</p>
</li>
<li>
<p>Notary fee</p>
</li>
<li>
<p>Mortgage broker fee</p>
</li>
<li>
<p>Tax service fee</p>
</li>
</ul>
<p>Of course, this is not an all-inclusive list of the costs charged by lenders and you should always request a detailed cost breakdown called a Loan Estimate before signing on the dotted line. If you are confused about a loan program and want to discuss further, please <a href="https://lindadavidsonmortgageexpert.com/about-us/contact-us">contact us</a> today.</p></div>
Thu, 20 Jul 2017 13:19:00 UTChttps://lindadavidsonmortgageexpert.com/mortgagepedia/posts/costs-consider-when-applying-va-loan/VA Funding Fee Facts
https://lindadavidsonmortgageexpert.com/mortgagepedia/posts/va-funding-fee-facts/
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<p>The <a href="https://lindadavidsonmortgageexpert.com/loan-types/va-loans/">VA loan program</a>, one of the two zero-down payment mortgage programs available on the market, was introduced to help the U.S veterans fulfil their dream of homeownership. Though VA home loans have numerous benefits compared to conventional loan programs, they also have a unique additional cost - the VA funding fee. If you are planning to apply for a VA home loan, it is likely that you’ll be charged a VA funding fee, regardless of your credit score. Here will take a closer look at the requirement and the exemptions related to VA loan funding fees.</p>
<h2>Introduction</h2>
<p>The VA funding fee is a one-time fee associated with obtaining a VA loan, no matter whether it is a VA purchase or refinance. The lender sends the funding fee directly to the VA, which is used to offset the cost of administering the loans and covering up defaulted loans, thereby keeping the loan program self-funded.</p>
<h2>Calculation</h2>
<p>Borrowers can either pay the fee upfront or include it in their monthly mortgage payment. The funding fee amounts to a certain percentage of the loan, which is calculated based on several factors, such as the nature of borrower’s service, whether the borrower has already received a VA loan, and more.</p>
<h2>Exception</h2>
<p>All veterans obtaining a VA loan are entitled to pay a funding fee at the time of closing, barring some exceptions who are required to present the Certification of Eligibility (COE) denoting their eligibility. These include:</p>
<ul style="list-style: circle; padding-left: 30px;">
<li>
<p>A veteran who is entitled to receive or is already receiving a VA compensation for a service-connected disability</p>
</li>
<li>
<p>The surviving spouse of a veteran who dies in service or from a service-connected disability, are exempted from paying a funding fee.</p>
</li>
</ul>
<p>In addition, regular military members pay lower funding fees than Reservists and National Guards.</p>
<h2>Funding Fee Percentage Breakdown</h2>
<h3><em><span style="text-decoration: underline;">For Regular Military Personnel</span></em></h3>
<h4><strong>At zero down payment</strong></h4>
<ul style="list-style: circle; padding-left: 30px;">
<li>
<p>First time loan borrowers - 2.15 percent</p>
</li>
<li>
<p>Subsequent use - 3.3 percent</p>
</li>
</ul>
<h4><strong>At 5-10 percent down payment</strong></h4>
<ul style="list-style: circle; padding-left: 30px;">
<li>
<p>First time loan borrowers - 1.5 percent</p>
</li>
<li>
<p>Subsequent use - 1.5 percent</p>
</li>
</ul>
<h4><strong>At 10 percent and above down payment</strong></h4>
<ul style="list-style: circle; padding-left: 30px;">
<li>
<p>First time loan borrowers - 1.25 percent</p>
</li>
<li>
<p>Subsequent use - 1.25 percent</p>
</li>
</ul>
<h3><em><span style="text-decoration: underline;">For Reserves and National Guards</span></em></h3>
<h4><strong>At zero-down payment</strong></h4>
<ul style="list-style: circle; padding-left: 30px;">
<li>
<p>First time loan borrowers - 2.4 percent</p>
</li>
<li>
<p>Subsequent use - 3.3 percent</p>
</li>
</ul>
<h4><strong>At 5-10 percent down payment</strong></h4>
<ul style="list-style: circle; padding-left: 30px;">
<li>
<p>First time loan borrowers - 1.75 percent</p>
</li>
<li>
<p>Subsequent use - 1.75 percent</p>
</li>
</ul>
<h4><strong>At 10 percent and above down payment</strong></h4>
<ul style="list-style: circle; padding-left: 30px;">
<li>
<p>First time loan borrowers - 1.5 percent</p>
</li>
<li>
<p>Subsequent use - 1.5 percent</p>
</li>
</ul>
<p>For veterans who refinance their existing VA loan, funding fee is 0.5 percent of the loan amount.</p>
<h2>Refund</h2>
<p>Time is of the essence when it comes to disability rating and funding fee exemption. If an applicant has already paid the fee but later qualifies for the disability exemption, they may be eligible for a refund. In such cases, the veteran must contact us. A VA Regional Loan Center can also provide them with more information on the way to proceed. If the fee was paid in cash, the applicant will get the refund in cash. However, if the fee was paid from the loan proceeds the lender receives the refund as an overpayment on the loan balance.</p>
<h2>Conclusion</h2>
<p>As they say, “knowledge is the key to success”; educating yourself about different aspects of a VA loan, including funding fee and refund policies, is essential to making the most out of this initiative by the <a href="http://www.benefits.va.gov/homeloans/">U.S. Department of Veterans Affairs</a>.</p></div>
Fri, 03 Feb 2017 15:47:00 UTChttps://lindadavidsonmortgageexpert.com/mortgagepedia/posts/va-funding-fee-facts/USDA Loan Processing Priority Criteria
https://lindadavidsonmortgageexpert.com/mortgagepedia/posts/usda-loan-processing-priority-criteria/
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<p>USDA loans are mortgages backed by the United States Department of Agriculture to help individuals with low to moderate incomes, buy, repair or renovate homes in rural areas. People who are eligible for <a href="https://lindadavidsonmortgageexpert.com/loan-types/usda-loans/">USDA loans</a> get several benefits, such as 100 percent financing with no down payment, and below-market interest rates. Though an applicant may be eligible for the loan, due to insufficient funding, they may still not get approval. In such cases, a priority system is used to determine the order in which the applications are processed. Here we take a closer look at the order in which applications are prioritized in case of insufficient loans.</p>
<h2>Processing Priorities</h2>
<p>If enough funds are not available to fund all the applications, the loans are processed on the basis of a priority system. The system ensures that applicants meeting the priorities for the program get the first preference. The time that will be required to get the funding depends on the duration of conducting the required verifications and the time taken to find a property. There are four different types of priorities considered when processing the loan. These are:</p>
<ul style="padding-left: 30px; list-style: circle;">
<li>
<h3>Subsequent loans to Improve health and safety hazards:</h3>
<p>Borrowers who request subsequent loans to improve health or safety hazards are given first priority.</p>
</li>
<li>
<h3>Transfer of Agency Financed Property:</h3>
<p>The second priority is given to applicants who need the loan for purposes that are of the interest of the agency. These loans are for sale of Real Estate Owned property and transfer or assumption of property owned by a program borrower.</p>
</li>
<li>
<h3>Hardships:</h3>
<p>The third priority is given to candidates who face housing related hardships. Living in deficient housing that lacks complete plumbing, heating, overcrowded or is structurally unsound get the third priority.</p>
</li>
<li>
<h3>Loans that provide additional resources:</h3>
<p>Applicants who contribute sweat equity through agency-approved Mutual Self-Help project receive fourth priority.</p>
</li>
</ul>
<h2>Veteran’s Preference</h2>
<p>In case veterans with equal priority status apply for the loan on the same day, applications that qualify for a veteran’s preference receive priority processing. Veterans discharged from active forces of the United States Army, Navy, Coast Guard, Marine Corps, Navy or Air Force are eligible for veteran’s preference. In addition, veterans who served in active duty any of the time periods mentioned below are eligible for veteran’s preference. The time periods consist of:</p>
<ul style="padding-left: 30px; list-style: circle;">
<li>
<p>April 6, 1917 through March 31, 1921</p>
</li>
<li>
<p>December 7, 1941 through December 31, 1946</p>
</li>
<li>
<p>June 27, 1950 through January 31, 1955</p>
</li>
<li>
<p>A period of more than 180 days, any part of which occurred after January 31, 1955, but no later than May 7, 1975</p>
</li>
<li>
<p>August 2, 1990 through January 2, 1992</p>
</li>
<li>Any other prescribed by Presidential proclamation or law</li>
</ul></div>
Fri, 03 Feb 2017 10:48:00 UTChttps://lindadavidsonmortgageexpert.com/mortgagepedia/posts/usda-loan-processing-priority-criteria/A Brief Guide to Mortgage Pre-Qualification
https://lindadavidsonmortgageexpert.com/mortgagepedia/posts/brief-guide-mortgage-pre-qualification/
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<p>Buying a home is one of the important investment decisions that many people make in their lives. Being an important financial decision, buyers need to plan carefully to avoid any problems in the future. Many prospective home buyers, however, make the common mistake of finding a home first before approaching a lender. The truth is it is beneficial to get in touch with a lender at an early stage. This is where mortgage pre-qualification plays a crucial role. If you are a first time home buyer, and don’t know much the pre-qualification process, we are here to help you.</p>
<h2>What is a Mortgage Pre-Qualification?</h2>
<p>Mortgage pre-qualification is a written statement given by the lender that states the amount of loan you will be qualified for according to the guidelines of the lender. The lender determines the loan amount on the basis of credit and income information you provide to them and/or they are able to pull from other sources. An important point that you need to remember is mortgage pre-qualification doesn’t guarantee that you will be eligible to get a mortgage. You need to meet the specific guidelines for the loan you are applying and provide documentation about your income and assets, job history, and much more.</p>
<h2>Is Pre-Qualification Necessary?</h2>
<p>Getting a pre-qualification before you apply for a home loan enables you decide a budget. It helps you figure out how much loan you can afford, so that you can find a suitable home that doesn’t disrupt your finances. The process also assures property sellers that you are a serious buyer who is ready to meet the financial obligations associated with buying a property. Pre-qualification doesn’t always involve a credit check, which implies you don’t get a hard inquiry on your credit report, however without it a lender is making an educated guess, at best, about your ability to obtain a mortgage. It is advised to allow the lender to fully ascertain your financial situation prior to spending the time and effort on shopping for a home.</p>
<h2>What if a Borrower Doesn’t Prequalify?</h2>
<p>To qualify for a mortgage, a borrower needs to meet specific criteria related to credit score, income, down payment and debt-to-income ratio. Every borrower may not pre-qualify for a mortgage or the amount of loan they expect/want. If you find it difficult to pre-qualify, try the following steps:</p>
<ul>
<li>
<p>Increase the down payment: If you fail to pre-qualify, an effective step is to increase the amount of down payment. This increases the loan amount you can qualify for and lower the monthly payments. If you do not have the funds readily available in your bank account, there are <a href="https://lindadavidsonmortgageexpert.com/mortgagepedia/posts/5-ways-get-help-down-payment-closing-costs/">other ways to get help with your down payment</a>.</p>
</li>
<li>
<p>Improve your debt-income ratio (by decreasing the overall debt ratio): The preferable debt-to-income (DTI) ratio needs to be 36 percent or less. To help you understand more how your DTI affects how much of a loan you can afford you can use our <a href="https://lindadavidsonmortgageexpert.com/loan-center/how-much-can-i-afford">mortgage affordability calculator</a>.</p>
</li>
<li>
<p>Take steps to improve your credit score: Correcting errors (if any) in your credit report, avoiding late or missed payments, and starting a new line of credit with a secured credit card are some of the measures that may improve your credit score. Our mortgage experts can review your credit score with you and help guide down a path to become “mortgage ready” in the future.</p>
</li>
</ul>
<h2>Final Words</h2>
<p>Getting pre-qualified is one of the most important steps to purchasing your dream home. Receiving a pre-qualification before you start looking for a property is a smart move as it saves you from a number of unforeseen problems. Additionally, a pre-qualification letter from a highly respected lender in the industry like our mortgage experts at Service First Mortgage - The Davidson Group will give you a competitive edge when up against other buyers.</p></div>
Thu, 02 Feb 2017 16:48:00 UTChttps://lindadavidsonmortgageexpert.com/mortgagepedia/posts/brief-guide-mortgage-pre-qualification/The Forgotten Benefits of a 15-Year Mortgage
https://lindadavidsonmortgageexpert.com/mortgagepedia/posts/forgotten-benefits-15-year-mortgage/
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<p>When buying a home, only a few buyers seek a 15-year old mortgage and the number is decreasing by the day. The reason is simple -- it’s a relatively higher monthly payment compared to its 20 and 30 year brethren. According to the Mortgage Bankers Association, during 2015, only 5 percent of home buyers and 20 percent of refinancers opted for a 15-year mortgage. Though many buyers may not prefer a 15-year mortgage, the reality is they can save a lot of money in the long run. Below are three (3) solid reasons why it makes more sense to opt for a 15-year mortgage.</p>
<h2>1. Lower Interest Rates</h2>
<p>As a 15-year mortgage is a shorter-term loan, it is less risky for the lenders and the chances of a borrower defaulting on a loan is correlated to the duration of the payback period. Therefore, most lenders offer comparatively lower interest rates on 15-year mortgage programs. The interest rate of a 15-year mortgage can be anywhere between quarter to a whole point less than a 30-year mortgage.</p>
<h2>2. Saves Money on Interest</h2>
<p>When you choose a 15-year mortgage program to finance your home, not only are you paying a lower interest rate, but more of your payment is going towards principal (which goes to actually paying off the loan) versus more going to paying interest (which goes to paying the lender). As you get closer and closer to paying off the mortgage the amount of interest that you pay becomes less and less, as the loan is amortized. This saving in interest, alone, can be upwards of 10’s of thousands of dollars, in most cases. Take a look at the comparison by using our <a href="https://lindadavidsonmortgageexpert.com/loan-center/calculators/mortgage-comparison-15-years-vs-30-years">15 vs 30 Year Mortgage Calculator</a>.</p>
<h2>3. Less Fees</h2>
<p>Another advantage of opting for a 15-year mortgage loan is that you need to pay less fees. The government sponsored enterprises (GSE’s) charge lower fees for loan level price adjustments on 15-year mortgages than they do for 30-year mortgages. These fees apply to all borrowers who have a lower credit score or make a small down payment, or both. Additionally, the <a href="https://portal.hud.gov/hudportal/HUD">Federal Housing Administration</a> (FHA) also charges lower mortgage insurance premiums to borrowers who opt for a 15-year mortgage program. The borrower pays these costs as either a part of the interest rates or as upfront fees.</p>
<h2>Summing It Up</h2>
<p>Based on the above, borrowers who can afford a higher monthly payment may want to consider opting for a 15 year mortgage over a 30 year mortgage. If you need more information about mortgage options, get in touch with one of our mortgage experts who possess an in-depth understanding of mortgage financing and can help you with more than a few borrower-friendly mortgage options, including VA, FHA, USDA rural development loan, and other home buyer programs.</p></div>
Thu, 02 Feb 2017 15:19:00 UTChttps://lindadavidsonmortgageexpert.com/mortgagepedia/posts/forgotten-benefits-15-year-mortgage/ Warning: Unknown: open(/home/davidss3/public_html/files/tmp/sess_rqmsnb93c6ilniiokmnes0abo6, O_RDWR) failed: No space left on device (28) in Unknown on line 0
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