Debbie Caniff's Blog
If you are thinking of refinancing your mortgage, there are so many options available to you that address your needs. Whether you want to do some home improvement projects or provide a down payment for another property refinancing can be a good option for you. There are many different options when it comes to home loans and refinancing. Below, you’ll find some of the most popular choices and what they mean for your mortgage and your finances.
A standard refinances requires that you have a certain amount of equity in your home. If you want to avoid Private Mortgage Insurance (PMI on the refinance, you need 20% equity in the home. Different lenders have different requirements for the amount of equity that you need in order to do this primary refinancing of your home loan. Keep in mind that a good credit score is also a requirement to do this type of loan.
Refinancing With Cash Out
This option is great when you need to take some of the equity out of your home. This way, you can get some of the equity out of your home without selling the house. This way, you’re able to refinance the mortgage, get a good loan term that’s affordable, and borrow a part of the equity you have built up in your home.
You can use the cash that you take out for just about anything you need including college, home renovations, business start-up costs, or to consolidate other debt you have. The only drawback is that you’re not able to borrow 100% of your equity. Usually, the highest percentage you’re eligible to borrow is 80%. The amount is based on both the equity you have built up in your home along with your income. Also, keep in mind that after you take out one of these loans, the amount of equity you have in your home decreases.
Short refinances may not be offered by all lenders. If you don’t qualify for a HARP loan or standard, refinance this could be a good option for you. If you hope to avoid foreclosure and are struggling to pay your mortgage each month, your lender may agree to the terms of this type of loan. The loan is in effect is a combination of a short sale and a refinance. The lender agrees to pay the existing mortgage off. The loan s replaced with a new mortgage. Beware that if you choose this option, your credit score may go down significantly. If you’re able to keep up with the new mortgage payments, you’ll be able to repair your credit score over time.
Perhaps one of the most challenging things about buying a home is saving for the downpayment. Collecting such a large sum of money can be difficult. The truth is that most buyers actually think that they need more than they actually do to buy a home. The downpayment doesn’t need to be a barrier to your path to homeownership. There are so many programs that offer low and even no down payment home loans. Read on to learn more about down payments and programs that can help you.
First, let’s look at what a down payment is and how it can help you. If you put 10% down on a $200,000 home that’s $20,000. The downpayment minus the purchase price of the home is $180,000, and that's how much your home loan will be. The more money you can put down on the house, the lower your home loan will be and the lower your monthly mortgage payments will be. A large down payment can indeed save you in the long term. If you’re looking to move into a home sooner rather than later, saving a considerable sum isn’t always possible.
Low Downpayment Mortgages
You need to decide what type of home loan you need by the amount of downpayment you’re willing and able to put down. Some benefits go along with making a down payment, but there are some negatives.
By making a substantial down payment you may despite your savings, leaving little money for emergencies. Your mortgage rate may not be affected by a large downpayment either. It can be hard to decide what type of loan to get and just how much you really can afford.
FHA loans are among the most popular type of home loans. The downpayment that’s required is just 3.5%. The requirements are simple, and you don’t have to be a first-time homebuyer to qualify.
The drawback to an FHA loan is that you cannot cancel the monthly mortgage insurance that comes along with it unless you refinance the home. Traditional mortgage insurance is canceled when you have built up 20% equity in the house, but this isn’t the case with FHA loans.
Another positive about FHA loans is that your credit score doesn’t have to be stellar in order for you to qualify. Some lenders approve FHA loans with credit scores as low as 580.
VA Home Loans
Buyers who have current or former military service status can qualify for this zero down mortgage. These loans are benefits to veterans and current members of the Armed Forces. While no downpayment is required, buyers may put down any amount they wish. The only requirements are that buyers be members of the military either currently serving for 90 days or two years of active duty service if not an active member.
The above options are great for those who can’t afford or don’t wish to put down large down payments but still hope to be homeowners.
If you’re a first-time homebuyer, odds are you’ve thrown the words “prequalified” and “preapproved” interchangeably. However, when it comes to home loans, there are some very important differences between the two.
For buyers hoping to purchase a home with a few missteps and misunderstandings as possible, it’s vital to understand the procedures involved in acquiring financing for a home.
Today, we’ll break down these two real estate jargon terms so that you can go into the mortgage approval process armed with the knowledge to help you succeed in securing a home loan.
Let’s start with the easy part--mortgage prequalification. Getting prequalified helps borrowers find out what kind and what size mortgage they can likely secure financing for. It also helps lenders establish a relationship with potential customers, which is why you will often see so many ads for mortgage prequalification around the web.
Prequalification is a relatively simple process. You’ll be asked to provide an overview of your finances, which your lender will plug into a formula and then report back to you whether or not you’re likely to get approved based on your current circumstances.
The lender will ask you for general information about your income, assets, debt, and credit. You won’t need to provide exact documents for these things at this phase in the process, since you have not yet technically applied for a mortgage.
Prequalification exists to give you a broad picture of what you can expect. You can use this information to plan for the future, or you can seek out other lenders for a second opinion. But, before you start shopping for homes, you’ll want to make sure you’re preapproved, not prequalified.
After you’ve prequalified, you can start thinking about preapproval. If you’re serious about buying a home in the near future, getting preapproved will simplify your buying process. It will also make sellers more likely to take you seriously, since you already have your financing partially secured.
Mortgage preapproval requires you to provide the lender with income documentation. They will also perform a credit inquiry to receive your FICO score.
Mortgage applications and credit scores
Before we talk about the rest of the preapproval process, we need to address one common issue that buyers face when applying for a mortgage. There are two types of credit inquiries that lenders can perform to view your credit history--hard inquiries and soft inquiries.
A soft inquiry won’t affect your credit score. But a hard inquiry can lower your score by a few points for a period of 1 to 2 months. So, when getting preapproved, you should expect your credit score to drop temporarily.
Once you’re preapproved for a mortgage, you can safely begin looking at homes. If you decide to make an offer on a home and your offer is accepted, your preapproval will make it easier to move forward in closing on the home.
Once the lender checks off on the house you’re making an offer on, they will send you a loan commitment letter, enabling you to move forward with closing on the home.
Finding a mortgage lender should be easy, particularly for homebuyers who want to purchase a high-quality residence without having to worry about spending too much. However, many mortgage lenders are available nationwide, and the sheer volume of lenders can make it difficult to choose the right one.
Lucky for you, we're here to help you streamline the process of selecting the ideal lender.
Now, let's take a look at three tips that homebuyers can use to accelerate the process of choosing the perfect lender.
1. Know Your Credit Score
Your mortgage interest rate may vary based on your credit score. As such, you should learn your credit score before you begin your search for the right lender. This will enable you to boost your credit score if necessary – something that may help you get a preferred mortgage interest rate.
You are eligible for one free copy of your credit report annually from each of the three major credit reporting agencies (Equifax, Experian and TransUnion). Request a copy of your credit report, and you can find out your credit score and map out your search for the ideal mortgage lender accordingly.
2. Meet with Several Mortgage Lenders
There is no shortage of mortgage lenders in cities and towns around the country. Therefore, you should allocate the necessary time and resources to meet with several credit unions and banks to explore all of your mortgage options.
Each lender can provide details about fixed- and adjustable-rate mortgages, how these mortgages work and other pertinent mortgage information. This information can help you make an informed decision about a mortgage.
In addition, don't hesitate to ask questions when you meet with a mortgage lender. If you obtain plenty of information from a mortgage lender, you'll be able to understand the pros and cons of various mortgage options and make the best choice possible.
3. Review a Mortgage Closely
A mortgage may enable you to secure your dream residence, but it is important to understand all of the terms and conditions associated with a mortgage before you select a lender.
For example, if you decide to purchase a condo, your mortgage might only cover the costs of your property. Meanwhile, you still may be responsible for condo homeowners' association fees that total hundreds of dollars each month, so you'll need to budget properly.
Of course, you should feel comfortable working with a mortgage lender as well. The ideal mortgage lender should be available to answer your concerns and questions at any time and help you stay on track with your monthly mortgage payments.
If you need extra assistance as you consider the mortgage lenders in your area, you can reach out to a real estate agent for additional support. This housing market professional can provide insights into mortgage interest rates and may even be able to connect you with the top local lenders.
Take the guesswork out of finding the right mortgage lender – use these tips, and you can move one step closer to getting the financing you need to buy your dream residence.
No income verification mortgage loans sound like a great idea. Also known as stated loans, these are easier to obtain than traditional mortgages. You won’t have to go through endless amounts of paperwork that traditional mortgages require. Think again. These types of loans are high risk and borrowers may have a hard time paying these loans back. Many lenders have removed these kinds of loans from their list of options. In certain circumstances, these loans can work for you, but you have to do your homework.
Where Can You Get A Stated Loan?
Some lenders still provide these stated loans with no verification process required. Unlike earlier times, these loans are now pretty difficult to obtain. Typically, this type of mortgage is geared towards the self-employed and requires a large down payment. Also, the borrower must have a very good credit score to be considered for the loan.
Are Stated Loans Unaffordable?
Since these loans come at very high interest rates, they are often seen as unaffordable due to the high monthly payment. Stated loans can have double the interest rate of what the current available mortgage rates are. However, if you don’t have many options, or are in a hurry to get a home and have money in the bank, it could work well for you.
Could A No Income Verification Loan Be Right For You?
If you really want a home loan, the first step is to be truly honest about your income. If you find a beautiful home and know that it’s out of your price range, you could risk defaulting on the loan.
To truly understand what you can afford, you’ll need to figure out all of your monthly expenses including taxes, mortgage insurance, phone bills and grocery bills. This will give you a full picture of your finances. Once you look at all of these factors, you may find that it does make the most sense for you to get a no income verification loan.
Deciding On The Type Of Loan You’ll Get
If you find that you need a lower monthly payment, it may make more sense for you to go after a traditional home loan. If you’re self-employed and know that your options are limited, a stated loan certainly is an option for you, you’ll just need to understand the risks of the entire process. You’ll also need to have a bunch of documents ready for the lender once you decide to go for the home loan. You can compare the costs of a no income verification loan to a traditional mortgage. Then, you can ask your lender what they’ll need from you in order to verify everything for the traditional mortgage. Any good broker can help you through your decision-making process. You’ll want to be well informed and compare all of the programs along with their fees. You should get recommendations on a lender who has the knowledge and experience to help you find the home loan that’s right for you.