- Make sure a personal loan offers you the best deal. Check if there are other types of loans that could serve your needs better. For instance, you could take out a home equity loan or line of credit.
- Sources that offer personal loans include banks, credit unions, and online lenders. Each of these offers a range of interest rates, and their terms vary. That’s why you should shop around and find a lender whose loan best fits your needs.
- Look at ALL the expenses when you are budgeting for the house: When budgeting for the house, don’t stop with principal, interest, taxes, and insurance; add in utilities, cost of commuting and upgrades.
- Call the utility companies that service the house you are considering and ask for an estimate of what the cost will be, whether there are any budget plans available, etc.
- Be sure to read your contract before you sign it: a house is probably the largest purchase you will ever make in your life, so make sure you understand the terms of your contract. If you don’t understand any of the terms, ask your mortgage broker and your real estate agent.
- Learn about the neighborhood demographics: If you are buying a house in a neighborhood full of renters, it only takes a few bad renters or bad landlords to drive the neighborhood down fast. If the neighborhood is full of single people, will you be happy there if you have very young kids?
- When you are considering a house, mentally try to remove the staging. Pay more attention to the layout of the house and the structure itself. Ugly wallpaper and paint can be easily fixed later.
- Save for a down payment of 20 percent.
- Be Real About Your Budget. In order to determine your monthly housing budget, get familiar with the term “housing expense ratio” — which is an indication of a borrower’s ability to make the payments on their mortgage loan. This ratio measures housing expense as a percentage of gross income (income before deducting for Social Security, Medicare, and taxes). Mortgage lenders expect a borrower to have a housing expense ratio of 28% or less.
- Lenders will also likely consider a borrower’s total expenses — which include housing expenses and fixed monthly obligations. Industry experts say a borrower’s expenses should not exceed 36% of gross income.
If you are planning to buy your own home in 2019, now is a good time to start to consider your options for a mortgage.
Say you find a home with a monthly payment that you can afford, but your savings are limited. In this case, it will be very helpful if you can find a loan that does not require any down payment. Maybe you already know that VA loans offer this service, but you may not know that there is another type of loan which offers the same benefit, without requiring that you be a veteran or in service.
A Missouri USDA loan gives you the option of getting into a home without requiring a down payment. Not only that, but USDA loans are usually cheaper than FHA loans for the same amount.
What is a USDA Loan?
In Missouri, USDA loans are guaranteed by the U.S. Department of Agriculture. But aside from that, what is so special about a USDA loan?
Advantages of USDA Loans
There are several advantages to USDA loans that make them attractive loan options. We will touch on some of them here.
USDA loans do not require a down payment. If you only have a little bit of savings, this will help you to free up resources. The money you would have spent on a down payment can instead go towards home furnishings or a rainy day fund. There are other options for a low down payment, but they can still add up. A conventional loan for $200,000 with a 3% down would have you paying $6,000.
Reduced Loan Costs
When you get a USDA loan, there are both upfront and monthly costs associated with it, called guarantee fees. However, you will still pay less for these than you would for mortgage insurance premiums if you had gotten an FHA loan. There is actually a significant difference. With a $200,000 loan amount, the mortgage insurance premium would be 1.75% for an FHA loan. This would come out to $3,500 upfront. In addition to that, you have an annual premium based on your down payment. If you made a 3.5% down payment, the premium is 0.85%. This will work out to paying $141.67 per month.
Now, compare that to a USDA loan for the same amount – $200,000. USDA loans have upfront guarantee fees of 1% of the loan, so that would be $2,000 either paid at closing or added to the loan. The guarantee fee is just 0.35% of your unpaid balance each fiscal year. So your premium would initially be $58.33 per month, and it would go down as you paid off the loan. This is a much lower monthly payment.
Qualifying for a USDA Loan
Some things will help you qualify for any sort of loan. One of these is to keep your debt-to-income (DTI) ratio low. DTI compares your monthly debts to your monthly income. It allows lenders to see that you can make your monthly payments without straining your budget.
In order to get a USDA loan, you need a median FICO score of at least 640.
Additionally, it is wise to have some reserves set aside so that if you lose your job or have some other kind of emergency, you can still make your monthly payments.
These general tips are helpful, but there are some additional qualifications that relate to USDA loans in particular.
In order to qualify for a USDA loan, you must live in an area that is eligible for them. USDA loans were designed to help develop affordable housing in rural areas. You can get a USDA loan without being a farmer, but you cannot live in or near a major population area. Fortunately, most of the country qualifies for a USDA loan. You can put your address into an eligibility map. Any area not marked by the color orange is eligible for this program.
Another requirement for qualifying for a USDA loan is that you and any other adults in your household cannot make over 115% of the median income. This is household income and includes the income of any adults living with you, even if they are not included in the loan. However, in many circumstances, the cost of childcare can be excluded from this, and if any adults in the household are full-time students, then only part of their income is counted.
A first time home buyer should be like a hawk—surveying the local and regional real estate market. By knowing how the market behaves, a first time home buyer can monitor the selling prices of comparable homes in their area, which thereby allows them to be a bit more knowledgeable when going to look at homes. Web sites such as Zillow can give a first time home buyer a general idea of what’s out there. Real estate listings are also abundant on the Internet, through sites like the National Association of Realtors®. It’s a good idea to create a few Google Alerts for when new homes come on the market—and don’t be shy about picking up those real estate magazines sitting on the rack in the supermarket either.
Timing is everything, don’t hesitate. It’s not rare for a home to sell super fast—especially when cash buyers are involved. According to the National Board of Realtors, “The median time on market for all homes was 48 days in April, down from 55 days in March.” While the general rule of thumb for a first time home buyer is almost always to take your time and not rush, making haste when in the home buying process can sometimes result in getting the home of your dreams. But be aware: this only works if you have all of your ducks in a row and feel comfortable pulling the trigger.
It’s okay to make the acquaintance of local real estate agents or mortgage brokers, even if you’re not ready to pull the trigger just yet. A first-time home buyer shouldn’t be shy about calling and asking for advice about the home buying process. Making friends in the marketplace is a good way to vet the people who may end up helping you apply for a mortgage and may hold the keys to your new home. If you have in fact found a broker and a real estate agent that meets your needs in terms of understanding the process, be sure that these folks are also professional, friendly, honest and courteous people. Another good first time home buyer tip is to ensure that your real estate agent and broker are able to work together. Teamwork is vitally important for a first time home buyer.
The post Monitor the Market and Strike While the Iron’s Hot! appeared first on LL.
After locating your ideal home, your attention now switches to find the best mortgage so that you can buy that home. One way to make sure the new home becomes yours is to work with a mortgage broker throughout the entire process.
Perhaps you have already heard of mortgage brokers from family or friends that have previously taken out mortgages in order to buy their homes.
Even so you may still be wondering what a mortgage broker does, and what they can do from the mortgage advisors who work for banks.
To assist you in understanding what mortgage brokers do, and how it makes taking out a mortgage here are 5 frequently asked questions and answers to them.
1. What is a mortgage broker?
A mortgage broker acts as a go between that uses links ith several different banks in order to find you the best deal in terms of interest rates. Mortgage brokers have good links with several banks so that they can assist all of their customers.
Mortgage brokers are qualified and licensed financial experts who process and gather mortgage claims as their profession. They will check your credit history and all relevant documents in order to apply for mortgages on your behalf.
As soon as you have agreed to apply for a specific loan, your mortgage broker will coordinate with the lender, the real estate agency, and the titleholder until the process is completed by you moving into the property.
2. How is a mortgage broker paid?
Usually, mortgage brokers are paid by the borrower or the lender, but never by both. Generally, they will receive a fee worth between 0.50% and 2.75% of the total mortgage loan.
Borrowers can decide to pay the mortgage broker fee themselves, and that is known as borrower paid compensation.
In the coastal areas and the most popular cities like New York and Los Angeles the fee tends to be 0.50%. An upper limit of 2.75% was introduced by the federal government in order to promote sustainable mortgages.
The limit for fees and points that brokers can charge is 3% in order to deter the irresponsible mortgage lending, which led to the last housing crash.
3. What makes a mortgage broker different from a loan officer?
Basically a loan officer works for, and is paid for by a single bank or lender, whereas a mortgage broker tends to work with several banks. Brokers are then paid by the lender that offers the loan (unless paid by the borrower).
4. Is a mortgage broker right for me?
A mortgage broker is the right option for many home buyers. Mortgage brokers will save you both time and money because of their links with several lenders.
As mortgage brokers apply for loans for you, they will work out the best rates, costs and over all deal for you.
Aside from money, a mortgage broker will also save you time by smoothing out the process and making sure that the lenders, solicitors, and the real estate agents do everything right and on time. They will shorten the time it take you to move into your new home.
Mortgage brokers just like lenders charge different fees, so compare fees before picking a broker. All brokers will save you time, and some will cost less than others.
Compare the interest rates and fees charged by different lenders, estate agents and mortgage brokers. Such comparisons could save you substantial amounts of money on possibly the most expensive item you will ever buy.
5. How do I chorse a mortgage broker?
A good method for chosing a mortgage broker is to seek advise from family and friends if they have used any brokers recently. Make sure that whoever is offering advise has used the service themselves fairly recently.
Ask for advise from your real estate agent, chances are high that they have mortgage brokers who they prefer to deal with. Your agent will trust some brokers more than others and recommend their favorite ones to you. Remember you can still pick another broker, you do not have to go with their recommendation.
Do not go with the first broker you see details for, or the cheapest one. Instead interview at least three mortgage brokers to find the one you think will deliver you the best service.
You can also check their license to see if they are in good standing with the state licensing authority. Online review and also the Better Business Bureau can provide useful reviews and information about the good or bad reputations of local brokers.
The post 5 Facts About Working With a St. Louis Mortgage Broker appeared first on LL.
It doesn’t take much to feel out of your depth when it comes to buying a home. Slick realtors and TV show tycoons are just itching to trick you and stick you with the bill—preferably with a hefty fee tacked on for them! But all of this can be avoided if you know your homebuyer’s rights!
- You have the RIGHT to shop for the best loan for you and compare the charges of different mortgage brokers and lenders. Look all around town, do your research: Liberty Lending has the best deals in town!
- You have the RIGHT to be informed about the total cost of your loan including the interest rate, points, and other fees. Liberty Lending is 100% up-front with any charges you owe and you’ll never get hit with a surprise bill.
- You have the RIGHT to ask for a Good Faith Estimate of all loan and settlement charges before you agree to the loan and pay any fees.
- You have the RIGHT to know what fees are not refundable if you decide to cancel the loan agreement. We hope you never have to, but sometimes these things happen.
- You have the RIGHT to ask your mortgage broker to explain exactly what the mortgage broker will do for you.
- You have the RIGHT to ask questions about charges and loan terms that you do not understand. Not everyone is an expert in real estate, so don’t worry about having to ask!
- You have the RIGHT to a credit decision that is not based on your race, color, religion, national origin, sex, marital status, age, or whether any income is from public assistance. We don’t hate, and we don’t discriminate!
- You have the RIGHT to know the reason if your loan was turned down. We won’t keep you in the dark!
- You have the RIGHT to ask for the HUD settlement cost booklet “Shopping for Your Home Loan”. This informative booklet will tell you everything you need to know about shopping for your next home loan, and then some!
- You have the RIGHT to be happy with your home loan! Stick with Liberty Lending and we promise you always will be!
The post Know Your Homebuyer’s Rights and Don’t Get Left Out! appeared first on LL.
You would be hard-pressed to underestimate the importance of an FHA loan. First of all, an FHA loan is a government-backed mortgage that is insured by the Federal Housing Administration, which is where the initials “FHA” comes from. Needless to say, FHA loans are quite popular with first-time home buyers. This is because an FHA loan is often easier to get, requiring a lower minimum credit score and less of a down payment than traditional mortgages. The government will ensure the loans, but the lender will usually be an institution that has been approved by the Federal Housing Administration.
With an FHA home mortgage, you usually can expect a fixed rated of either 15 or 30 years.
Understanding FHA Home Loans
An FHA mortgage works by allowing borrowers who may not have a high income or the best income still be able to qualify for a mortgage. It is a great way to become a homeowner at a reduced rate. However, there’s a catch. All FHA mortgage holders must pay into the FHA mortgage insurance plan so that the lender is protected in case the borrower defaults on their loan.
Because an individual applying for an FHA loan will often put down less than 20 percent of the home mortgage, this insurance will be required.
When you finance your FHA mortgage, you will have to pay an upfront mortgage insurance premium of 1.75 percent of the total amount of the mortgage. If you are having difficulty coming up with this initial premium, don’t fret; the fee can often be rolled into the amount financed by the loan.
After this step is completed, you will have to pay an annual mortgage insurance premium of either 0.45 percent or 1.05 percent. Your rate depends on whether you have a fifteen-year note or a thirty-year note, and it also depends on your loan-to-value ratio. Generally, you would multiply the mortgage amount by your rate and then divide by twelve to get your monthly payment.
For example, let’s say you borrow for an FHA loan of $200,000. Your initial mortgage insurance payment is going to be $3,500 and your annual mortgage insurance premium is going to consist of an annual payment of $900 and a monthly payment of $75 if you have a 15-year mortgage. On a thirty-year mortgage, you would have an annual payment of $2,100 and a monthly payment of $175.
Can FHA mortgage insurance be canceled? No, not in most cases. Usually, about the only way you can get out of paying FHA mortgage insurance would be to either refinance your home to a non-FHA loan or to sell the house outright. Regardless of these factors, FHA loans tend to be popular with first-time buyers and those with lower incomes or poor credit scores. The beauty of the FHA loan is that you can even be a repeat buyer as long as the loan is going to go towards the purchase of a primary residence!
Another set of good news would be that in order to become an FHA-approved lender, a banking institution must commit to only charging between 3 and 5 percent on closing costs. The FHA will allow builders, lenders and home sellers to only have to pay up to six percent on such closing costs as credit reports, title searches and home appraisals.
How do I qualify for an FHA loan?
Borrowers must meet a number of lending guidelines in order to qualify for an FHA loan, including the following:
A FICO score between 500 and 579 if they want to be approved for the 10 percent down FHA option or a FICO of 580 or higher if they want to qualify for an FHA loan with only 3.5 percent down.
A verification of their employment history for at least the past two years.
Verifiable income; this can be accomplished through bank statements, pay stubs and federal tax returns.
The loan must be used for a primary residence.
The property is to be appraised by an FHA-affiliated appraiser and the home should meet all HUD guidelines.
The front end debt ratio (monthly mortgage payment) must not exceed 31 percent of your income. Some lenders might allow 40 percent of your gross monthly income in some cases.
If you have gone through bankruptcy before, you must allow for at least 12 to 24 months to apply for an FHA loan. If the home is being foreclosed upon, you must be bankruptcy-free for at least 36 months.
FHA vs. Conventional Loans
One of the main differences between FHA loans and conventional loans is that traditional loans are not insured by the federal government. Moreover, if you at some point want to qualify for a conventional loan, you will normally need a solid income, higher credit score, and higher down payment.
Types of FHA Loans
The Federal Housing Administration offers a lot more than just the prototypical FHA loans. They also have the ability to insure other types of FHA loans as well. Consider some of these examples:
FHA 203 (k) Loans: This FHA loan type exists to help buyers who want to purchase a home that is deemed a “fixer-upper.” Borrowers have the added benefit of being able to roll the cost of repairs and the cost of the home into one mortgage. An FHA k loans come in two different types:
Streamlined or Limited 203 (k): This loan type is available for those who are buying a home with improvements that will only total $35,000 or less. The paperwork is easier with this type.
Standard 203 (k): This is the full-fledged type of FHA improvement loan, and it will require much more paperwork than the limited version. The home will need to have improvements that cost more than $35,000 to qualify for this type. Both of these types have a $5,000 minimum for rehabilitating the home.
Home Equity Conversion Mortgage (HECM): The FHA also helps people with their retirement plans too. The HECM is one example, and it is for senior citizens aged 62 and older who either have significant equity or have their home paid off outright and want to have a reverse mortgage.
FHA Energy Efficient Mortgage (EEM): The FHA encourages individuals to purchase homes that are energy-efficient. They also have programs that can help the new homeowner make their home more energy-efficient.
FHA Section 245(a) Mortgage: This is also known as the Graduated Payment Mortgage, and it allows borrowers to raise their mortgage payment over time. This program works best for those who will incomes that increase over time. There are five different plans, and they are categorized by how much the rates will increase over a specific time period.