Cheryl Deschenes' Blog
If you’re in the market for a new home, chances are you’ve been evaluating your finances. As a first-time homebuyer, there are programs in place to help with the down payment. According to the December 2019 Realtor Index Confidence Survey, first-time homebuyers accounted for 31% of all sales, and 77% put down less than 20%.
Once you’ve worked with a mortgage lender to get a competitive rate, these programs may help with getting into your dream home:
Are you a veteran or active duty? If so, you won’t need to look far. This program helps individuals get a home with no down payment. It’s backed by the government and has a series of requirements to meet. There are also Adapted Housing Grants, which help purchase a home adapted for a service-related disability, or if upgrades need to be done to the home to make if accessible.
If you’re looking in a rural area, this loan by the Department of Agriculture may be the one for you. There is no down payment to participate, but there are income requirements. When hearing the word rural, you may think it’s totally country but there are tons of “rural” areas that are well populated.
This program from the Department of Housing and Urban Development (HUD) lists eligible properties by state and is not limited to first-time homebuyers. The property must be in an area marked for revitalization and is only open to certain professions like law enforcement officers, firefighters, emergency medical technicians and teachers. If approved, you must live in the property for at least 36 months and receive up to 50% off the list price of the home.Local First-Time Homebuyers Grants
Many municipalities offer funds from their own first-time homebuyer programs. There are certain requirements to meet, such as requiring the owner live in the home for a short period of time. In many cases, the grant is forgivable over a period of time. There are also block grants through Congressional districts, which are distributed through local programs.
A mortgage broker will be able to recommend additional programs you may qualify for based on the area you are attempting to purchase in. Homeownership doesn’t have to be complicated – it may just take a little work to get what you want and the assistance you need. Call a realtor and mortgage broker to get started on the process today.
If you are thinking of buying a home in the near future, there’s one three-digit number that could be oh so important to you. That number is your credit score. Read on to find out how a credit score can affect you and the steps you can take to be sure that your credit is in good standing when you head to apply for a mortgage.
What Is A Credit Score?
Your credit score is checked by lenders of all kinds. Every time you apply for a loan or a credit card, there’s a good chance that your credit score is being pulled to see if you qualify for the loan. Your credit score is calculated based on the information on your credit report. This information includes:
Length of credit history
New credit accounts opened
The areas with the most impact on your score is your payment history and your debt-to-credit ratio. This means that on-time payments are super important. You also don’t want to get anywhere close to maxing out your credit cards or loan amounts to keep your score up.
What’s A Good Score?
If you’re aiming for the perfect credit score, it’s 850. Most consumers won’t reach that state of perfection. That’s, OK because you don’t have to be perfect to buy a house. If your score is 740 and above, know that you’re in great shape to get a mortgage. Even if your score is below 740 but around 700 or above, you’ll be able to get a good interest rate on your mortgage. Most lenders typically look for a score of 620 and above. Keep in mind that the higher your credit score the better your interest rate will be.
What If You Lack Credit History?
Most people should get a credit card around age 20 in order to begin building credit. You can still qualify for a mortgage without a credit history, but it will be considerably harder. Lenders may look at things like your rent payments or car payments. Lenders want to know that you’re a responsible person to lend to.
What If Your Score Needs Help?
It doesn’t mean you’re a hopeless case if you lack good credit. Everything from errors on your credit report to missed payments can be fixed. The most important thing that you can do if you’re buying a home in the near future is to be mindful of your credit. Keep an eye on your credit report and continue to make timely payments. With a bit of focus, you’ll be well on your way to securing a mortgage for the home of your dreams.
It's easy to think that investing in real estate is an incredibly expensive venture. You may think you need thousands if not tens of thousands saved before you can even think about it. But there are ways to jumpstart your portfolio even if you're renting one of the cheapest apartments in your neighborhood. Learn more about assumable mortgages and how you can use them to get ahead.
An assumable mortgage is one that's allowed to be transferred to another person. So if a property owner no longer wants to pay their mortgage, they have the option to put the property in someone else's name. You'll still need to qualify for the loan, and you'll need to go through the lender to work it out properly. Informal assumptions are liable to be canceled immediately (with the lender demanding full repayment on the loan).
You cannot assume all types of mortgages. As a general rule, insured loans, such as USDA, FHA, and VA loans, are assumable while conventional loans are not. In an assumable mortgage, the terms of the loan stay the same. A buyer won't have to worry about the interest rate or deadline changing. So a 15-year mortgage taken out three years ago gives you 12 years to pay it off.
Why Choose an Assumable Mortgage?
There are a few ways to get started in investing without saving for a large down payment, so it helps to understand the perks of each option before choosing one. The biggest advantage of an assumable mortgage is that you have the chance to lock in a property at a relatively low-interest rate. The closing costs are also more reasonable, given the strict limits on FHA, VA, and USDA fees for buyers.
Why Skip an Assumable Mortgage?
Assumable mortgages are not always recommended for buyers in rapidly exploding neighborhoods. This is because you're still paying the total value of the home at the time of sale. So let's say the property was originally sold for $100,000 two years ago and $20,000 has already been paid off, but the home is now worth $150,000. You'll still need to make up the difference in the home's value to complete the sale — which usually means taking out a second loan.
Assumable mortgages can be a great way to get started in real estate, but they're not for everyone. If you're shopping around for one, consult a real estate agent or financial advisor who can answer the nitty-gritty questions about how the loan works and what you can expect.
A mortgage pre-approval can be a valuable tool for understanding how much you can afford to spend on purchasing a home. It can also make you seem much more attractive to sellers and help to identify any potential problems that may make it difficult to get a loan. In fact, many lenders claim that if a buyer isn’t pre-approved for a mortgage, they will have a difficult time navigating the real estate market. But what does pre-approval really mean?
What is a Mortgage Pre-Approval?
While it can sound like you’ve got a sure thing locked in when you’re pre-approved for a mortgage, being pre-approved doesn’t promise that you’ll be able to secure a loan for the home that you want to purchase. A mortgage pre-approval simply means that a loan officer has reviewed your finances and decided how much money you're allocated to borrow, what you should be able to pay each month towards your mortgage and what your interest rate will be.
Once, you’ve been pre-approved by a lender, you will get a letter that can be shown to sellers. This letter indicates that you’ve already established a working relationship with a lender. This helps to give sellers peace of mind in knowing that you’re serious about putting in an offer on their home, and they don’t have to risk wasting time with a buyer who isn’t serious.
What Are the Benefits of Getting a Pre-Approval?
A pre-approval doesn’t guarantee you’ll get a mortgage but it does offer a few key advantages during your search for the ideal home. It helps to give you confidence while looking at potential properties, as you look at homes that are within your budget. There’s no need to fall in love with a home that you can’t afford. Additionally, it establishes credibility as a buyer, showing that you have your finances under control and can help to put you on the fast-track to closing once you’ve found the perfect home.
Are Pre-Approval & Pre-Qualified the Same Thing?
Unfortunately, no. These two similar real estate terms are not interchangeable. When you are pre-qualified for a mortgage, this indicates that you have given your lender information regarding your income, debts and assets. Without doing further research, the lender then tells you that you should qualify for a certain mortgage. Pre-approval is a much more in-depth process, requiring your lender to verify the financial information provided by pulling your credit history, as well as verifying your income and assets.
If you’re a first time homebuyer and want to start weighing your mortgage options, you’ll have much to learn. With so much at stake, you’ll want to make sure you choose the best mortgage for you now, and one that will still suit your needs years into the future.
Sometimes, first time buyers are hesitant to ask questions they may consider too basic because they don’t want to seem inexperienced to lenders, agents, or anyone else they’ll be in contact with throughout the home buying process.
So, in this article, we’ve compiled a list of commonly asked mortgage questions that first time buyers might want to ask before heading into the process of acquiring a home loan.
What is the first step to getting a mortgage?
This question may seem straightforward, however the first step can vary depending on your financial situation. For those who already have saved up for a down payment and built a solid credit score, the first step is probably contacting lenders and getting preapproved or prequalified.
However, if you aren’t sure about your credit score and haven’t saved up for a down payment (ideally, 20% of what you hope to spend on the house), then you should address those matters first.
To find a lender, you can do a simple Google search for the mortgage lenders in your area, or you can ask around to friends and family to find out their experience with their own mortgage lenders.
What does it mean to be pre-qualified and pre-approved?
If you think of the mortgage process in three steps, the first step would be getting pre-qualified. This means you’ve given the lender enough basic information for them to decide which type of mortgage you’re eligible to receive.
Pre-approval includes collecting and verifying further details. At this step, you’ll complete a mortgage application and the lender will run a credit check. Once you’re pre-approved, your file can be moved to the underwriting phase.
What are closing costs?
“Closing costs” is an umbrella term that covers all of the various fees and expenses related to buying or selling a home. As a buyer, you are responsible for paying numerous closing costs. These can include, but are not limited to, underwriting fees, title searches, title insurance, origination fees, taxes, appraisal fees, surveys, and more.
That sounds like a lot to keep track of, however your lender will be able to give you an accurate estimate of the total closing costs when you apply for your loan. In fact, lenders are required to give you a list of these costs within three days of your loan application in the form of a “good faith estimate” of the closing costs.
What will my interest rate be?
The answer to this question is dependent upon numerous factors. The value of the home, your credit score, the amount you put down (down payment), the type of mortgage you have, and whether or not you’re paying private mortgage insurance all factor into the interest rate you’ll receive. Interest rates also will vary slightly between lenders.
You can receive a fixed-rate mortgage that does not fluctuate throughout the repayment term. However, you also typically have the option to refinance to acquire a lower interest rate, however refinancing comes with its own costs.