Tag Archive for: Local Pre-Approval

moving

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.

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.

Home

10 Things to Do Before You Buy a House

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Are you ready to start shopping for your first home? Before you begin, take a look at these 10 tips to make your home-buying journey successful!

Few things are as exciting as making a real estate purchase – and few things cause more stress! To help you out, we’ve compiled a list of 10 tips to help you navigate the process of buying your first (or second, or third) home. These won’t just reduce some of the anxiety, they’ll also help you avoid costly mistakes!

10 Tips for New Home-Buyers

  1. Know where and why you want to buy. The answers to these questions will help you understand what factors should be most important in your decision. For example, is your choice of neighborhood determined by your work, being close to family, or just that you fell in love with the area? Is this going to be a starter house that you’ll want to upgrade in a few years, or are you in for the long haul? Clarity here will help you make a purchase that’s in tune with the other parts of your life.
  2. Give yourself a financial health checkup. Start saving and paying off as many outstanding bills as you can. Check your credit report and get any errors removed. If you do this now, you’ll have a better understanding of what your budget really is – and a jumpstart on the mortgage preapproval process.
  3. Research neighborhoods, prices, real estate agents, and mortgage lenders. While the first two are a given, doing your homework on real estate agents and mortgage lenders is just as important.
  4. Plan your budget and down payment. Once you’ve gotten a clear idea of your financial status, figure out how much home you can afford and how much of a down payment you’ll need – and can manage. Hint: Down payment assistance is often available through state and other agencies.
  5. Understand how the mortgage and home-buying process works. We’ve covered this quite a lot in this blog. See our posts on mortgage underwriting and the path to home ownership for more details.
  6. Get pre-approved. We’ve covered mortgage pre-approval and why it’s so important elsewhere in this blog. Suffice it to say that you can make a stronger offer on a home when your mortgage is pre-approved.
  7. Prepare yourself mentally and emotionally. This is a very hot real estate market. Competition is intense, so be prepared to deal with sticker shock and maybe some disappointment if some other buyer beats you to a house. Be flexible and don’t give up. And know that it’s not just you; most home-shoppers are dealing with the same things.
  8. Review mortgage paperwork and requirements. Yes, there are mortgage professionals who will be reviewing these documents. But look them over yourself; not only will you be legally committing yourself to the terms, any mistakes you correct now will mean one fewer potential snag later.
  9. Verify all information in the listing. Make sure the house you are purchasing is all that the sellers claim. Make sure all the features and amenities, all the room sizes, are as advertised.
  10. Get a home inspection. This is different from a home appraisal, which is mostly about verifying the value of the house and any property. A home inspection looks for potentially costly building, health, and safety issues, and you don’t want to skip that.

Finally, remember that the mortgage provider you choose will have a big impact on your decision. Make sure you’re working with one like Michigan Mortgage that will help you explore all your lending options and choose the one that’s right for you!

 

Local Lender

5 Reasons to Choose a Local Mortgage Lender

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Buying a home might be the single biggest purchase you make in your life. You want it to go right. That is why the mortgage lender you choose is critical to making sure your homeownership dreams come true and the experience is hassle-free.

Whether you are a first-time buyer needing assistance through the lending process or you are an existing homeowner seeking to refinance or purchase a vacation home, it pays to go with a local lender as opposed to a big-name national bank or brand.

Local LenderHere are 5 reasons to choose a local mortgage lender like Michigan Mortgage.

1. Personalized Service
A local mortgage lender gives you the chance to to work face-to-face with an expert, if need be. The growth of digital mortgages, like our Pro SNAP app, has eliminated the need for as much face-to-face meeting in the past, but as a home buyer it can be reassuring to know that your loan officer is right around the corner as opposed to across the country or overseas.

A local lender gets to know you. Your messages won’t sit in a voicemail box unanswered for weeks on end. With Michigan Mortgage, you’ll get a cell number for your loan officer and can call or text them at a moment’s notice to get your questions answered.

2. Local Expertise
Another advantage of local lenders is their familiarity 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.

For example, a national lender with no roots in the local community may be reluctant to approve a mortgage for an atypical property, such as an original farmhouse on acreage that’s now covered by a subdivision. A local lender like Michigan Mortgage will know the history of the area and the changing demographics and economic trends and may be more comfortable underwriting such a loan.

Local lenders also have their finger on the pulse of the local or regional economy, and have a better sense of the lending risks in the area. What looks to a big lender like a dilapidated section of town might actually be an up-and-coming area where properties re increasing in value. Local lenders will know this.

Local lenders may also be more attractive to some home sellers and real estate agents who want an efficient and timely closing. Reputation matters. In situations where several offers are on the table, having a local, trusted lender could be the difference between closing or not closing.

3. Realtor Relationships
Local lenders invest a lot of time and effort building relationships with local Realtors. Realtors and lenders are the yin and yang of real estate. Michigan Mortgage loan officers are on a first-name basis with most of the real estate agents in their local areas.

Also, with everyone on your team – the Realtor, the lender, you– working in proximity, a closing can happen quickly and without hassle. The final stage of home buying is sometimes the most stressful. Having a unified team that is familiar and comfortable with each other can make the process quick and painless.

4. Varied and Specialized Products
Local lenders have a better understanding of property values and the local economy. When you work with Michigan Mortgage, you’re paired with a licensed loan officer and team of professionals who are experts in your region. Our loan officers help you choose the right type of loan for your circumstance and we keep you updated along the way. We have in-house tools and resources to expedite a loan, ensuring everything is taken care of in a timely manner.

Local lenders are where you’ll find the specialized loans the big lenders won’t bother with. Maybe you want an adjustable-rate mortgage with a 15-year lock? Or you want to buy a vacation property that lacks a furnace? Or you want to buy or refinance a home for less than $100,000, an amount too small to be of interest most lenders? Or you want a jumbo loan?

Local lenders are have more flexibility. Big banks need process large numbers of loan applications. To do that, they have rigid guidelines about who they will and won’t lend to. Big banks are more about volume than customer service.

At Michigan Mortgage, we have been Michigan’s leading MSHDA first-time buyer lender for 6 straight years. We are also a recognized USDA rural development leader.

5. Reliable, Responsive & Flexible
Local lenders are better at closing loans on a timely basis. If the closing of a loan has to be extended by a week, local lenders are more flexible than big banks who have corporate mandates to crank out the volume.

Local lenders, along with local real estate agents, have an incentive to provide you with excellent service because they want you to be a referral source for future business. They stake their reputation on each and every customer.

With a local lenders, you are much closer to the decision makers with the authority to approve your mortgage. You aren’t dealing with a corporate bureaucracy.

Michigan Mortgage loan officers are more likely to get personally involved in qualifying you for a mortgage, as opposed to big banks. Often, it’s a matter of the getting to know you. Perhaps you are self-employed with irregular income. Or you have poor credit due to a financial crisis, but have good income and low debt.

Michigan Mortgage loan officers are better suited to be responsible and flexible for borrowers like these.

At Michigan Mortgage, you will never be just a name or number on a loan application. We manage every step of the mortgage process, from application to underwriting to closing, to make the process easy. We have been financing the American homeownership dream for nearly three decades. We can do the same for you.

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MSHDA First-Time Home Buyer Assistance Programs

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If you’re a first-time home buyer, getting enough money for a down payment can seem like a major hurdle. But there’s good news! The Michigan State Housing Development Authority (MSHDA) has a program that helps home buyers afford their down payment by loaning them up to $10,000 towards it.

This is what you need to know.

kitchenWhat Is MSHDA?

The Michigan State Housing Development Authority “provides financial and technical assistance through public and private partnerships to create and preserve safe and decent affordable housing, engage in community economic development activities, develop vibrant cities, towns, and villages, and address homeless issues.” Part of its mission is to make owning a home in Michigan an affordable and realistic goal for as many people as possible. In addition to buying a home, it also offers programs for improving existing properties and dealing with foreclosure.

What Assistance Does MSHDA Offer First-Time Home Buyers?

The MI Home Loan and MI Home Loan Flex programs help first-time buyers with their downpayment. In addition to homebuyer education classes, these MSHDA products provide loans of up to $7,500 statewide. In many areas throughout the state, this amount can be increased to $10,000. (See this ZIP code list or state map to see which areas qualify for larger MI Home Loan amounts.)

Who Qualifies for First-Time MSHDA Home Buyer Assistance?

If this is your first time buying a home, you should look into the MI Home Loan and MI Home Loan Flex programs. To qualify, you must meet the following requirements:

Additionally, only homes that are priced $224,500 or less are eligible for assistance with downpayment.

Is MI Home Loan Only for First-Time Home Buyers?

No – MI Home Flex is available to all home buyers that meet its criteria. And in certain targeted areas, MI Home Loan is available to both new and repeat home buyers.

Should First-Time Home Buyers Choose MSHDA’s MI Home or MI Home Flex?

That depends on your financial and personal circumstances. MI Home Flex is a little more flexible and only requires one adult to apply (i.e. one partner out of a couple). Consult with a loan professional for more details – they will help you determine which best meets your needs.

As Michigan’s top MSHDA lender, Michigan Mortgage is ready to help you understand what Michigan loan programs are right for you. We’ve helped many first-time home buyers navigate MSHDA’s Mi Home and MI Home Flex programs, and we can help you find answers to all your home-buying questions.

This blog post was written by experts at Mortgage 1 and originally appeared on www.mortgageone.com. Michigan Mortgage is a DBA of Mortgage 1. 

The Klyn Family

Success Story: The Klyn Family

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At Michigan Mortgage, we strive to make life-long connections with our clients.

We commit to educating and advising long after the loan is closed and hope to reconnect with each family we serve at our annual customer appreciation events.

The Klyn FamilyThe Klyn family is no different. Loan Officer Amy Hendrickson and her team look forward to working with them every time they call.

“Amy treats you in such a way that you feel valued and want to be one of her clients for life,” David Klyn said. “We know that we are in good hands with Amy, and she is going to help us navigate through what can be a stressful time. Her thoroughness and attention to detail helps to calm our nerves and reduce stress.”

The Klyn family called Amy for the first time in 2019. Earlier this year, they purchased a new home via Michigan Mortgage and the Pro Snap app. They asked questions about another possible purchase and Amy answered all of them even though they opted against the transaction.

“Amy and her team are on top of responding to emails/phone calls and answering all of our questions,” David said. “I typically have a number of questions and Amy is always more than willing to answer these questions no matter how simple or dumb they are.  She is also willing to go over multiple scenarios based on different buying and selling options.”

This is one of the many reasons the Klyn family put their trust in Michigan Mortgage.

What do they like most about working with Amy and her team?

“Two reasons come to mind,” David said. “She is upfront and honest in everything she does.”

“Number two. Amy and her team have great service, treat you like family, and cover all the details.”

Our team is here to guide you every step of the way! And we appreciate the Klyn family for putting their trust in us each and every time they’re interested in making a real estate transaction.

Image of a family hanging up an American flag

Military Vets: Get a VA Home Loan

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In addition to being one of the country’s leading lenders to first-time home buyers, Michigan Mortgage specializes in helping veterans of the United States military and their families get into their dream homes.

Veterans Affairs (VA) mortgages make it easier for veterans to obtain financing for home ownership. VA loans are available to veterans and active military members. VA loans are guaranteed by the Department of Veterans Affairs and are somewhat easier to qualify for than conventional mortgages.

Image of a family hanging up an American flagVA Home Loan Benefits

VA loans are great because:

  • They can be obtained without any down payment.
  • Mortgage insurance is not required even if you put less than 20% down.
  • The VA does not require a specific credit score for a VA loan.

Although the costs of getting a VA loan are generally lower than they are for other types of low-down-payment mortgages, VA loans do carry a one-time funding fee that varies depending on the down payment and the type of veteran.

According to the VA, veterans who have taken advantage of the program have some of the lowest home ownership default rates, and that the agency also helped 80,000 VA borrowers avoid foreclosure in 2014, saving taxpayers $2.8 billion.

VA Loan Requirements

VA loans are offered to most active duty, reserve or National Guard and veteran service members and even some surviving spouses.

Veterans are able to borrow over $400,000 without any down payment on a principal residence home. According to the VA, almost 90% of VA loans have no down payment.

There’s also no minimum credit score requirement for a VA loan, while most home mortgage loans require a credit score of at least 620 for conventional loans or 580 for most FHA loans. A VA loan can also be used to refinance an existing loan.

VA loans do have specific requirements that most other loans don’t. For instance, all work on the home must be completed before the inspection. Also, there can’t be chipped or peeling paint inside or out, or termites or mold or loose handrails. In other areas, a VA inspection can be a bit more stringent. For example, while most home inspectors merely turn on the home’s furnace to see if it works, the VA requires inspectors to verify that the heat source can keep pipes from freezing.

Are you a vet? Reach out to one of our experienced Loan Officers to learn more. 

This blog post was written by experts at Mortgage 1 and originally appeared on www.mortgageone.com. Michigan Mortgage is a DBA of Mortgage 1. 

Thomas Siuda

Success Story: Thomas Siuda

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Change is hard – change following a national pandemic is even harder.

Thomas and his children set out to purchase a new home earlier this year following his divorce. COVID-19 and low interest rates made it more difficult than expected.

Inventory was extremely low and offers faced unprecedented competition, but Dave Lehner and his team at Michigan Mortgage were ready to help guide Thomas as soon as he found the right home.

“I made offers on four homes during my search,” Thomas said. “I missed out on each one, but that was in no way a reflection of Dave and his team. In each of these offers I made, I had estimates of what my closing costs and monthly payments would be.”

Thomas SiudaAfter four rejected offers, an offer was accepted, and Dave and his team went to work.

“The purchase itself was very simple due to the expert advice and team that I was working with,” Thomas said. “I had no hiccups along the way.”

“Right from the start, Jill was great to work with and set the tone for the entire process,” he said. “Everyone that I came in contact with from Dave’s team was friendly, easy to work with and was truly happy that my three kids and I found a home that we love.”

“Everyone from Dave to Jill to the entire team was welcoming, helpful and made my experience truly seamless.  It was simple and easy to follow what I needed to do and when.”

With the help of Pro Snap, most of the work was done via cell phone. Thomas applied via the app, securely scanned and uploaded the necessary documents and communicated with Team Lehner whenever needed.

“I enjoyed the whole experience from beginning to end,” Thomas said. “I was actually a little sad when I closed. I knew I would miss the communication with the team at Michigan Mortgage, but I did receive congratulations from everyone on our home.”

Thank you for trusting us to guide you home, Thomas! We enjoyed working with you.

Spring Welcome Mat

Tips for Buying a Home This Spring

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The spring homebuying season is upon us! It’s the most popular time to buy a home, but also the most competitive. What do you need to do to be ready for it?

Given the financial commitment that buying a home represents, it’s amazing how many people wade into the process with minimal preparation. Here are six steps to get you ready to tackle the busy spring market and put you in position to get a good deal on a great home.

#1: Check your credit

Yes, you may be tired of hearing it, but checking your credit is the first step you want to take in buying a home. Even if you’re confident that you’ve got excellent credit, undiscovered errors in your report could drag down your score – and result in a higher interest rate on a mortgage. Your credit score will also affect the mortgage rate you can obtain and the cost of the loan as a result.

You’re entitled to a free copy of your credit report once a year from each of the three major credit reporting companies – Equifax, Experian and Transunion. You can order them through the official site at www.annualcreditreport.com. Once you have them, check for any errors in the payment history or status of your credit accounts and follow the instructions for correcting any that you find.

Your free credit reports don’t include your credit scores, which are what lenders use when evaluating you for a mortgage. For those you typically need to pay, either by purchasing them directly from the three companies or by enrolling in a credit monitoring service that includes your credit scores as a free perk.

Spring Welcome Mat#2: Know what you can afford

This can be a deceptively complex problem – it’s not simply a matter of figuring out how much of a mortgage payment you can handle. You also need to take into account property taxes, homeowner’s insurance and – you’re making less than a 20 percent down payment – mortgage insurance as well. All these are typically billed with your mortgage statement.

Then you also have to consider what kind of down payment you can make, the ongoing costs of home maintenance, monthly utility bills and a reserve for unexpected repairs. You’ll probably also want to have something set aside for buying new furniture or appliances, and other purchases/expenses to make the home your own.

The standard rule of thumb is that lenders don’t want to see you spending more than 28 percent of your gross monthly income on your mortgage payment, and no more than 36 percent on loans of all types (auto, credit cards, etc.) though these are flexible. Just as important though, is how much of your earnings you want to spend on housing – 28 percent may be higher than you want to go.

#3: Consider the down payment

Your down payment isn’t just a matter of what you can put together or trying to hit a certain number. To a certain extent, the size of a down payment is a choice you make depending on how much you’re looking to borrow and the mortgage terms you’re willing to accept.

While a 20 percent down payment is considered the gold standard, it isn’t mandatory. Most lenders view 10 percent down nearly as favorably and many will let you go as low as 5. That allows you to buy a higher-priced home, but you will need to buy private mortgage insurance, which is like paying an extra half a percent or more on your mortgage rate.

If you go the FHA route, you can put as little as 3.5 percent down, which maximizes your homebuying ability but means higher fees both up front and for annual mortgage insurance.

If you’re seeking a jumbo loan or have damaged credit, lenders may require that you put at least 30 percent down in order to be approved.

#4: Do Your Research

Browse the real estate listings to see what sort of homes are being offered in your price range and where. Drive by a few of them to get a sense of the home and neighborhood in real life. Go to a few open houses to get a sense of the market and a feeling for prices. Pay particular note to homes that sell almost immediately after being listed – that’s a sign it was attractively priced, while ones that linger are likely overpriced.

You can also check local assessor’s office records online to see what other homes in the area have sold for recently, or use commercial online listings to do the same thing.

#5: Use a Realtor

A Realtor representing your interests as a buyer can be a big help when house hunting. First, they’ll be tuned into the local housing market and can help you cut through the clutter to find the properties that best match your criteria. They can also alert you when new ones are coming on the market.

#6: Be Ready to Buy

Because the spring housing market can be very competitive, you want to be ready to make an offer as soon as you find the right house. If you wait a day or two to think it over, you may find someone else has beat you to it, particularly if it’s an attractive property.

For this reason, you want to be sure to get preapproved for a mortgage before you being home shopping in earnest. Getting preapproved means choosing a lender and submitting all the financial information you need to be approved for a loan. It’s different from being prequalified, which simply means a lender gives you an estimate of what you can borrow based on unverified information you provide.

When you’re preapproved, you can show that to a seller as evidence you’re ready to buy and have the means to do so. That’s an important thing to be able to do when you may be competing with several other offers.

This blog post was written by experts at Mortgage 1 and originally appeared on www.mortgageone.com. Michigan Mortgage is a DBA of Mortgage 1. 

First Time Buyer FAQ

First-Time Buyer FAQ

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For first-time buyers, the mortgage process raises a lot of questions. In this article, we tackle some of the most common questions we receive from customers.

“How Does a Mortgage Work?”

First Time Buyer FAQTechnically speaking, “A mortgage is a debt instrument secured by the collateral of specified real estate property, that the borrower is obliged to pay back with a predetermined set of payments.” (Investopedia.com)

What does that mean in plain English? It means, when you get a mortgage, you are (1) borrowing money from a lender and (2) committing yourself to paying back the money you borrowed in equal monthly payments for the length of the loan.

Because a house can be expensive, mortgage payments are usually spread over 15 or 30 years, making the cost affordable.

Your mortgage payment will consist of principal and interest portions. The principal portion goes toward reducing the amount of money you originally borrowed. The interest portion goes toward paying off the interest, which you can think of as the fee the lender charges to loan you money.

You can make additional payments, if you want, but at the least you need to make your minimum monthly payment each month.

“What Types of Loans Are There?”

Mortgage lenders offer a wide variety of loans designed to meet the needs of buyers. The most common types of loans obtained by first-time buyers are:

  • Conventional loans. This is the most common type of mortgage loan. Conventional loans can be for as long as 30 years or as short as five years, with options in between. They can be fixed-rate or adjustable rate. Conventional loans are provided by banks as well as private mortgage lenders like Mortgage 1. When most people think about home loans, the conventional loan is the one they are thinking of.
  • FHA loans. A Federal Housing Administration (FHA) loan is a mortgage that is insured by the Federal Housing Administration (FHA) and issued by an FHA-approved lender such as Mortgage 1. FHA loans are designed for low-to-moderate-income borrowers; they require a lower minimum down payment and lower credit scores than many conventional loans.
  • VA loans. VA loans are offered through the Department of Veterans Affairs. They are available to active and veteran service personnel and their families. VA loans are backed by the federal government and issued through private lenders like Mortgage 1. VA loans have favorable terms, such as no down payment, no mortgage insurance, no prepayment penalties and limited closing costs.
  • USDA loans. Rural Development home loans are low-interest, fixed-rate loans provided by the United State Department of Agriculture. The loans do not require a down payment. The loans are financed by the USDA and obtained through private lenders, such as Mortgage 1, and are meant to promote and support home ownership in underserved areas.
  • MSHDA loans. The Michigan State Housing Development Authority (MSHDA) offers down payment assistance to people with no monthly payments. The down payment program offers assistance up to $7,500 (or 4% of the purchase price, whichever is less).

“How Do I Qualify for a Mortgage?”

Different mortgage types have different specific qualification requirements, but the general process of qualifying for a mortgage is the same.

  1. You submit an application with a lender.
  2. You provide the necessary documentation, which includes paycheck stubs, tax statements, bank and asset statements, and identification.
  3. The lender reviews your information. They look at your income, how much debt you have, and they also pull a credit report.
  4. Based upon your status, the lender determines how much money you can afford for a mortgage as well as what interest rate you should receive.

“What Is the Required Minimum Credit Score?”

An important element of qualifying for a mortgage is your credit score. Your lender pulls a credit report to look at your credit score. Different loan types have different qualifying scores:

  • The minimum qualification score for most conventional loans is 620.
  • For FHA loans, the minimum score is 580.
  • For VA loans, the minimum score is 620.
  • For USDA loans, the minimum score is 640.

In addition to credit score, a lender looks at your debt-to-income ratio to make sure you are not overextended.

“How Much House Can I Afford?”

To determine how much house you can afford, follow the 28/36 rule.

Many financial advisers agree that households should spend no more than 28 percent of their gross combined monthly income on housing expenses and no more than 36 percent on total debt. Total debt includes housing as well as things like student loans, car expenses, and credit card payments.

The 28/36 percent rule is the tried-and-true home affordability rule that establishes a baseline for what you can afford to pay each month.

To calculate how much 28 percent of your income is:

  • Multiply 28 by your monthly income. If your monthly income is $7,000, then multiply that by 28. 7,000 x 28 = 196,000.
  • Divide that total by 100. For example, 196,000 ÷ 100 = 1,960.

Do the same for the 36 percent rule, using 36 in place of 28 in the example above.

Got Questions? We’ve Got Answers

Come back next week for part two of this article. In the meantime, if you have questions, let us know. At Michigan Mortgage, we specialize in helping first-time buyers understand the mortgage process.

This blog post was written by experts at Mortgage 1 and originally appeared on www.mortgageone.com. Michigan Mortgage is a DBA of Mortgage 1.