Tag Archive for: Educational Information

Documents

What documents are needed to apply for a mortgage?

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Are you ready to turn your homeownership dreams into reality? Whether you’re a first-time buyer, looking to upgrade, or seeking to refinance, our tailored mortgage solutions will make your journey to homeownership a breeze.

We know that gathering the necessary documentation can be overwhelming but worry not! Although documentation required may vary depending on the type of loan, generally, the following documents are needed.

Proof of Income

This includes pay stubs, W-2 forms, tax returns, and bank statements to verify your income and employment history. Generally, we are looking for at least two years of employment history.

Identity Check

You will need to provide a government-issued ID, such as a driver’s license or passport, to verify your identity. Be sure your documents are up to date and not expired.

Verify Assets

We will ask you to provide documentation of your assets. These can include bank statements or investment account statements. We want to ensure that you have the funds for a down payment and closing costs.

Self-Employed?

We understand that being self-employed comes with unique financial complexities. Our team will assist you in providing the essential self-employed documentation, including profit and loss statements and business tax returns, so you can secure a mortgage that suits your individual circumstances.

Personalized Solutions for Every Loan Type

We know that one size doesn’t fit all. That’s why we offer a wide range of mortgage options to suit your preferences. Whether you’re looking for a conventional loan, VA loan, FHA loan, or any other specialized loan, our experts will craft the perfect solution tailored to your unique needs.

By ensuring you have all the necessary documentation ready, you can expedite the mortgage application process and increase your chances of approval.

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Seven Steps to Get a Mortgage

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The day has come that you are ready to start house hunting. Before you dive into the process, there are a few things you need to do before finding the perfect home.

Choose Your Lender
The first step in the mortgage process is choosing a lender. Be sure to choose a lender you can trust, and a local lender is a huge advantage because they have local experience and can provide a more one-on-one approach. Your lender looks out for your interests and provides a variety of loan options to fit your needs.

Get Pre-Approved
Most realtors do not allow you to schedule a home tour without a pre-approval letter. This is why it is a crucial part in the process before you start your search. You will fill out a mortgage application and provide the lender with your financial information, such as your income, assets, and credit score. The lender will then pre-approve you for a loan, which means they will tell you how much you can borrow and at what interest rate.

Find a Property
Once you are pre-approved, you can start looking for your dream home. Your Realtor can help you narrow down current listings in your preferred area. Once you have a list of possible homes, you can start peeking inside. Planning to set up a private tour with your Realtor can be a good option as you are able to ask more in-depth questions and have your realtor share their own options.

Apply for the Loan
You found the perfect home! Now you will formally apply for the loan. This involves providing the lender with additional documentation, such as a purchase agreement and proof of insurance. The process is quite straightforward and if your finances are in order, it should be a simple process since you have already been pre-approved.

Underwriting
One of the last steps in finalizing your loan is having your lender review your application and documentation to make sure you meet the lending criteria. This process is where an underwriter will look over every detail of your application and ensure that there are no missing pieces.

Appraisal
The lender will order an appraisal of the property to ensure that it is worth the amount you are borrowing. If the appraisal comes in over your offer price, you’re all set. However, if the appraisal comes in less than your offer price, you will need to pay for the difference upfront before the purchase finalizes or renegotiate with the seller.

Closing
One last step and the home is yours! Once the lender has approved your loan, you will need to attend a closing. You will sign the loan documents and pay any closing costs. The most important thing is to ensure you have your final costs set aside for closing day.

Tips to improve your credit score

Five Ways to Improve Your Credit Score Before Buying a House

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House hunting is an exciting time, but before you leap into finding the perfect home it’s important to do the prep work. One of the best ways you can set yourself up for success is by taking a close look at your credit score. Your credit score is key to determining the interest rate you will pay on your mortgage.

Here are five ways you can improve your credit score to get the best rate possible.

Know Your Score

It is a good idea to know your credit score before you take on any big investment. After paying off debt, it can take some time to see the change reflected on your score. This is why we recommend checking your score annually.  Visit www.usa.gov/credit-reports for information on how to check your credit report.

Identify and Fix Errors

Once you have your credit report in hand, it is important to take a close look and ensure there are no errors. You want to look at your accounts and balances to verify they are at accurate amounts. Keep in mind it may take a while for balances to be updated on your credit score after a recent payment. If you notice any errors or suspicious activity on any of your credit reports, contact the credit bureau issuing that report and have them correct the information.

Pay Down Debt

Not all debt is inherently bad, but having a lot of revolving debt makes you less appealing to lenders. It is a good practice to pay off as much as you can. At the least ensure you make the minimum payment each month, and if possible, aim for a larger amount. It may be beneficial to consider asking for higher credit limits. Higher limits will improve your credit utilization — if you don’t increase your balance to match.

Don’t Miss Payments

Keeping your accounts in good standing is more important than you think. Even missing a few payments can bring down an otherwise excellent record. Setting up automatic payments using a bank account routing number is the best way to ensure no errors are made.

Limit your Credit Inquiries

It may be tempting to apply for loans and cards due to intriguing bonuses and benefits, but all these applications generate hard credit inquiries. Be mindful of inquiries you decide to opt-in for and be confident that you will be approved. It is important to remember that no matter how tempting, every single inquiry shows up on your credit report and can easily hurt your score.

The more you know about your credit, the easier it will be to work on improving your score. Most credit scores range from 300 to 850 and rank from bad to excellent. Having a higher score shows the lender you are at a lower risk of deficiency and therefore receiving an offer for a lower interest rate. You want to aim for a credit score between 720 and 850.

Each positive action is one step closer to receiving the best interest rate possible and landing your dream home!

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What are closing costs and how much will I pay?

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Closing costs refer to the fees and expenses associated with the purchase or sale of a property.

These costs are typically paid at the closing of the transaction and may include a variety of different charges depending on the specific circumstances of the transaction.

Some common closing costs include the following.

Title Insurance: This protects both the buyer and lender from any legal disputes over the ownership of the property. The cost of title insurance can vary depending on the value of the property.

Appraisal Fee: This covers the cost of having the property appraised by a professional to determine its value.

Home Inspection Fee: This covers the cost of having the property inspected by a professional to identify any potential issues or repairs that may be needed. You may be asked to pay at the time of inspection, so don’t forget to budget this cost into your purchase plan.

Loan Origination Fee: This is a fee charged by the lender to process and underwrite your loan application. Origination fees may vary depending on the lender you trust with your purchase.

Prepaid Interest: This is interest that is paid upfront to the lender to cover the interest that will accrue on the loan before the first payment is due.

Recording Fees: This covers the cost of recording the deed and mortgage with the local government.

The total amount of closing costs can vary depending on the location of the property, the price of the property, and other factors.

In general, closing costs can range from 2 – 5% of the purchase price of the property. If you are purchasing a property for $300,000, you could expect to pay between $6,000 and $15,000 in closing costs.

If you have additional questions about closing costs, don’t hesitate to reach out! Our team can help guide you in the right direction.

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How to Get Pre-Approved for a Mortgage

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In a competitive market, it pays to be pre-approved.

We strongly encourage our customers (as well as our friends and family!) to get pre-approved before they start house hunting.

To get pre-approved for a mortgage, you will need to provide some personal and financial information to your Loan Officer.

Here are some of the things you will need to have.

  • Proof of income: You will need to provide proof of your income, which can include recent pay stubs, W2s & tax returns.
  • Employment verification: The lender may need to verify your employment, so you will need to provide contact information for your employer.
  • Credit score: Your credit score is an important factor in the mortgage pre-approval process. You can get a free credit report from one of the major credit bureaus, Equifax, TransUnion or Experian, to check your credit score before you apply.
  • Debt-to-income ratio: Lenders will want to know your debt-to-income ratio, which is the amount of debt you have compared to your income. You will need to provide information on any outstanding debts, such as credit card balances or car loans.
  • Down payment and closing costs: You may need to have some money saved for a down payment on the house you want to buy. The amount of the down payment will depend on the price of the house and the loan program that’s best for your unique situation. Some programs do not require a down payment, but you may still be responsible for covering closing costs.
  • Identification: You will need to provide a government-issued ID, such as a driver’s license or passport.

Once you have provided all the necessary information, your Loan Officer will review your application and let you know if you are pre-approved for a mortgage.

After you have your pre-approval letter in hand, and you know how much you can afford to spend on a home, let the house hunting begin!

What are LLPAs?

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Loan level price adjustments (LLPAs) are a form of risk-based pricing that mortgage lenders use to determine the interest rate and terms of a loan. The adjustments are based on factors such as the borrower’s credit score & down payment amount.

These adjustments can result in higher or lower interest rates, depending on the borrower’s risk profile.

For potential homebuyers, LLPAs can have a significant impact on the affordability of a mortgage. If a borrower has a lower credit score or a smaller down payment, they may be subject to higher LLPAs, which can increase their interest rate and therefore their monthly mortgage payment. Conversely, borrowers with higher credit scores & larger down payments may be able to qualify for lower LLPAs, which can result in a lower interest rate and monthly mortgage payment.

In addition to affecting the monthly mortgage payment, LLPAs can also impact the overall cost of the loan. A borrower who is subject to higher LLPAs may end up paying more in interest over the life of the loan, while a borrower with lower LLPAs may be able to save money in interest payments.

LLPAs were introduced in 2008 and have changed periodically since.

If you’ve been following industry news, you’ll know that new LLPAs were recently introduced. There’s a lot of misconceptions in our industry about what the changes actually mean, so we encourage you to take a few minutes and watch a short video. Loan Officer and Branch Manager Rob Garrison breaks down the confusion and explains the changes here.

Overall, LLPAs are an important factor for potential homebuyers to consider when applying for a mortgage. Borrowers should be aware of the factors that can impact their LLPAs and work to improve their credit score & save for a larger down payment to potentially qualify for lower LLPAs.

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How much can I afford to spend on a home?

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Determining how much you can afford to spend on a home depends on various factors, such as your income, debt-to-income ratio, credit score, down payment, and other financial obligations.

Here are some general guidelines to help you estimate a reasonable home price range.

Couple PaintingDetermine your monthly income.

Start by calculating your monthly income, including all sources of income such as salary, bonuses, and investments.

Calculate your monthly expenses.

Next, calculate your monthly expenses such as car loans, student loans and credit card payments.

Determine your debt-to-income ratio.

Your debt-to-income ratio (DTI) compares your monthly debt payments to your monthly income. A lower DTI generally means you can afford a higher home price. To calculate your DTI, add up all of your monthly debt payments (such as car loans, student loans, and credit card payments) and divide that number by your monthly income. The resulting percentage is your DTI.

Your DTI should not exceed 50% after your mortgage payment is included in your calculations.

Consider your down payment.

A larger down payment will lower your monthly mortgage payments and allow you to afford a more expensive home. Most lenders require a down payment of at least 3% of the home’s purchase price, but there are programs available with 0% down. Ask your Loan Officer which program if best for your unique needs!

Use an affordability calculator.

You can use an online affordability calculator to estimate how much home you can afford based on your income, expenses, and down payment. Our mobile app, Pro Snap, allows you to calculate your potential mortgage payment in the palm of your hand.

Remember that buying a home involves additional costs beyond the purchase price, such as closing costs, property taxes, and homeowner’s insurance. It’s important to consider all of these expenses when determining how much you can afford to spend on a home.

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Five Benefits of a VA Loan

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VA Loans are mortgage loans guarantee by the United States Department of Veterans Affairs (VA) and are available to eligible Veterans, Active-Duty Service Members and surviving spouses.

For more than 70 years, VA Loans have made homeownership possible for millions of Americans.

Here are some of the benefits of a VA Loan.

Image of a family hanging up an American flagNo down payment required. Qualified borrowers in Michigan can purchase a home up to $417,000 without needing a down payment. This is a significant benefit for those who may not have the funds to make a substantial down payment. In comparison, FHA Loans required 3.5% down and Conventional Loans required 5% down.

No private mortgage insurance (PMI). PMI is required on most loan programs if the borrower is unable to put down 20% of the purchase price. VA Loans are the exception! Since the VA guarantees a portion of the loan, lenders do not require borrowers to purchase private mortgage insurance. This can result in significant savings over the life of the loan.

Competitive interest rates. VA Loans typically offer competitive interest rates which can help the borrower save money over the life of the loan.

Easier qualification. VA Loans have less stringent qualification requirements compared to other loan types, making them easier to qualify for.

Assumable. VA Loans are assumable, which means that if the borrower sells the home, the buyer can take over the loan without having to refinance.

If you have questions about VA Loans and their benefits, please give us a call. We take great pride in guiding our Military Veterans and their families home.

PMI

How to Remove Private Mortgage Insurance (PMI)

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If you’re in the market for a new home, you’ve likely heard the term Private Mortgage Insurance or PMI. Do you know what it is? And more importantly, how to remove PMI from your mortgage?

We’re here to help.

What is PMI?

From Freddie Mac: For homeowners who put less than 20% down, Private Mortgage Insurance or PMI is an added insurance policy for homeowners that protects the lender if you are unable to pay your mortgage.

It is not the same thing as homeowner’s insurance. It’s a monthly fee, rolled into your mortgage payment, that’s required if you make a down payment less than 20%. While PMI is an initial added cost, it enables you to buy now and begin building equity versus waiting five to 10 years to build enough savings for a 20% down payment.

While the amount you pay for PMI can vary, you can expect to pay approximately between $30 and $70 per month for every $100,000 borrowed.

How can you remove PMI?

Private Mortgage Insurance can be removed from your mortgage under the following circumstances.

  1. You put down 20% (or more) when you purchase your home.
  2. If you plan to stay in the home for many years, ask your Loan Officer about paying for PMI upfront instead of monthly.
  3. PMI is automatically removed by your mortgage loan servicer when your balance reaches 78% of the original purchase price.
  4. Refinance your mortgage when you have 20% equity in the home and PMI will be removed.

Veterans and Active-Duty Service Members who purchase a home with a VA Loan will not be charged PMI (no matter how much money they put down).

When meeting with your Loan Officer, ask which option is best for you. They will help guide you in the right direction.

If you have additional questions about PMI, or the mortgage process in general, give us a call.

Buying a House

Five Things You Should Know Before Buying a House

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Buying a house is one of the most significant financial decisions people make in their lifetime. Whether it’s your first home or a new property to add to your investment portfolio, purchasing a house requires careful consideration of several factors.

Here are the five things people should know before buying a house.

Know Your Budget

Buying a HouseBefore you start house hunting, it’s crucial to determine how much you can afford to spend on a house. Make sure you factor in all the costs associated with homeownership, such as property taxes, insurance, utilities, and maintenance expenses. You’ll also need to consider your down payment and closing costs. Knowing your budget helps you narrow down your search and ensures you don’t get in over your head with a home you can’t afford.

Location is Key

The location of a property is one of the most important factors to consider when buying a house. The location affects the home’s value, your commute to work, access to amenities, and the quality of the schools. Before you make an offer, research the neighborhood’s crime rates, property values, and proximity to public transportation, shopping centers, and other essential amenities. You’ll also want to consider the property’s proximity to major highways or airports if you travel frequently.

Work with a Local Lender

Local mortgage lenders offer personalized service that can help homebuyers navigate the complex process of obtaining a mortgage. Local lenders are familiar with local market conditions. We know our local neighborhoods, so we know what’s going, what the trends are, and we use that knowledge when helping buyers obtain mortgages. In a competitive market, a pre-approval from a local lender can help your offer stand out among the rest.

Hire a Real Estate Agent

A Real Estate Agent can help guide you through the home buying process, negotiate on your behalf, and offer valuable insights into the local real estate market. A knowledgeable and experienced Real Estate Agent can help you find properties that meet your needs and budget, navigate the home inspection process, and ensure that all the necessary paperwork is completed correctly.

Don’t Skip the Home Inspection

A home inspection is a crucial step in the home buying process. It helps you identify potential issues with the property before you finalize the purchase. A professional home inspector will thoroughly examine the property’s structure, electrical systems, plumbing, and other essential components to ensure everything is in good working condition. If the inspection reveals any problems, you may be able to negotiate with the seller to make repairs or adjust the sale price to account for the necessary fixes.

By knowing your budget, considering the location, hiring a real estate agent, conducting a home inspection, and working with a local lender, you’ll be better equipped to make an informed decision and find the perfect property for your needs.