If you are receiving any sort of financial assistance or even a financial gift for your down payment from someone make sure that you are depositing it into your account at least two months prior to applying for your mortgage. That way the bank will not need to source the large deposit. If this is not done then the gifter will have to write a letter stating that the money was truly a gift and not a loan. If you are needing a loan for the down payment the lender may see this as a sign of financial dependence and it may hurt your chances of obtaining a loan.
It literally takes a few minutes to pull your credit report and order your credit score. But surprisingly, some future home buyers never review their scores and credit history before submitting a home loan application, assuming that their scores are high enough to qualify. And many never consider the possibility of identity theft. However, a low credit score and credit fraud can stop a mortgage application dead in its tracks.
Research your utilities. If you're moving into a larger home than you're used to, a home that is newer or older than you're used to or located in a climate that's hotter or colder than you're used to, ask your real estate professional to find out what the home's energy bills have typically been. This can help prevent being surprised by a higher utility bill than you're expecting. If you're moving into a new community, find out about water costs, too.
As the housing market shows more upward movement, the temptation to borrow more than you can afford becomes enticing. That’s why it’s important to really look at how much you can spend. Your mortgage payment should be comfortable even if it’s a stretch, not a weight that drags you down each month. The lender will look at your income, debt and savings, and is required by federal regulation to demonstrate your ability to repay a loan. So while that determines how much you can borrow, it isn’t necessarily what you can afford.
Include PITI (principal, interest, taxes and insurance) in your budget. Mortgage calculators will show you how much you'll pay toward principal and interest every month. Remember that you'll also have to pay property taxes and homeowners insurance. Some financial institutions will require you to contribute these funds monthly along with your principal and interest payment. Be sure to talk to your lender to understand what will be included in your monthly payment.
Fannie Mae and Freddie Mac, which are now owned by the federal government, are providing mortgage help to hundreds of thousands of homeowners from a few different programs. Since they are responsible for and service the vast majority of mortgages that are issued by hundreds of banks, many people will qualify for help from them and may not even realize it. Find the various Fannie and Freddie Mac mortgage programs.
You may not receive mortgage approval the first time around. Sometimes you're just shy of meeting program qualifications. It happens. But, it doesn't mean you should be written off as a customer. Be sure to choose a lender who sees you for you, not just your credit score. At American Financing, we'll guide you through credit weaknesses and next steps, getting you one step closer to mortgage approval.
Note that the Hope for Homeowners program indicated above has been expanded. Families can now receive aid on a second mortgage, and more lenders are participating and cooperating with the FHA. Banks and lenders have been provided further incentive to participate in the program. Find how the FHA Expanded Hope for Homeowners to assist more borrowers.
A lot can be up for negotiation in the homebuying process, which can result in major savings. Are there any major repairs you can get the seller to cover, either by fully handling them or by giving you a credit adjustment at closing? Is the seller willing to pay for any of the closing costs? If you’re in a buyer's market, you may find the seller will bargain with you to get the house off the market.
It is important to find a mortgage lender who offers a wide variety of mortgage programs. If your lender only offers a limited range of programs, they may lock you into a suboptimal mortgage when there would be better options available for your situation elsewhere. Check to see if your lender offers programs like FHA loans or VA mortgages before moving forward with their services.
Mortgages will require mortgage insurance if you have less than a 20% down payment. PMI is between 0.35% – 1.0% annually depending on the type of mortgage program you choose. FHA loans PMI is 0.85% of the loan amount, and is required for the life of the loan. Conventional mortgage PMI is 0.51% and is required until the loan balances reaches 78% LTV.
You borrow money from a mortgage lender to buy a house. You close on the loan and sign a bunch of paperwork. The deed is transferred to you, giving you ownership of the property. You now have a financial agreement with the lender. You’ve agreed to repay your 30-year fixed-rate mortgage loan with regular payments each month. You’ve also agreed to pay interest, which will be included within your monthly payments.
If you have lost your job, had a reduction in work hours or income, or are unemployed, then you may qualify for assistance. Homeowners can receive mortgage help from the federal government Home Affordable Unemployment Program. This program can reduce someone’s monthly mortgage payments for up to 6 months, which will provide an individual time to find a new job. Read more on the unemployment mortgage program.
Yes, if a homeowner lists their home for sale during the Unemployment Mortgage Assistance benefit assistance period, they are required to immediately notify the Keep Your Home California program of this change of circumstance. If during the benefit period of the Unemployment Mortgage Assistance program it is determined that your home is listed for sale or you are actively negotiating a Short Sale or Deed in Lieu of foreclosure with their Servicer, Keep Your Home California reserves the right to terminate benefit assistance. Homeowners should call (888) 953-3722, Monday – Friday 8 a.m. to 5 p.m.
Fixed-rate mortgages offer stability in your mortgage payments. However, many ARMs start with a lower interest rate than fixed mortgages and lock the rate in for a few years. That can mean significantly lower payments in the early years of your loan, so some borrowers opt for an ARM with the intention of selling or refinancing their home before the rate can adjust.
In simple terms, a mortgage is a loan in which your house functions as the collateral. The bank or mortgage lender loans you a large chunk of money (typically 80 percent of the price of the home), which you must pay back -- with interest -- over a set period of time. If you fail to pay back the loan, the lender can take your home through a legal process known as foreclosure.
One of the easiest ways to obtain a mortgage loan is to work with your existing bank. If you already have a relationship with a bank in the US, the process of applying for a mortgage is relatively painless. However, you may find that your bank can't provide you with the best possible deal. It can pay off to speak with underwriters at different financial institutions. In addition to mortgage rates, you should also ask them about their origination fees and various closing costs and fees.
DO THIS: SET UP A QUICK MEETING WITH YOUR LOAN OFFICER TO SEE IF YOU COULD BENEFIT FROM A REFINANCE TO REDUCE YOUR MONTHLY MORTGAGE PAYMENTS. YOU COULD ALSO REFINANCE TO CONSOLIDATE YOUR CREDIT CARD, LOAN, AND OTHER DEBT TO LOWER YOUR INTEREST RATES; TO FINANCE HOME RENOVATIONS OR EXTENSIONS BY USING THE EQUITY ON YOUR EXISTING HOME; OR TO GET A NEW HOME LOAN WITH BETTER FEATURES, LIKE AN OFFSET ACCOUNT OR REDRAW FACILITY.
If you are thinking about buying a home in the near future, it’s a good idea to check your credit report and find out what your credit score is early on. You are entitled to a free credit report once a year from each of the three credit bureaus – Equifax, TransUnion, and Experian, which you can access at www.annualcreditreport.com. Check for mistakes on your credit report. A mistake on your credit report can cost you when trying to secure a home loan. Mistakes do happen, so review your credit report closely to ensure everything is correct and dispute any errors you might find with the appropriate credit bureau.
Don't forget miscellaneous expenses. Be sure to budget for moving expenses and additional maintenance costs. Newer homes tend to need less maintenance than older ones, but all homes require upkeep. If you're considering a condo or a home with a homeowners association (HOA), remember to include HOA dues in your budget. Keep in mind that you should have an emergency fund on hand to prepare for any unexpected changes in your income (like reduction in your wages) or unexpected expenses (like medical bills).
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Buying a home is the embodiment of the American dream. However, that wasn’t always the case: In fact, before the 1930s, only four in 10 American families owned their own home. That’s because very few people had enough cash to buy a home in one lump sum. And until the 1930s, there was no such thing as a bank loan specifically designed to purchase a home, something we now know as a mortgage.
To qualify you for a conventional loan, your lender will consider whether you have stable and reliable income. It may require copies of paystubs, W-2s, income tax returns and other documentation to make an assessment. Frequently changing jobs will not necessarily disqualify you for a conventional mortgage, if you can show that you’ve earned a consistent and predictable income.
Ellie Kay is a regular expert on national television with ABC NEWS NOW’s Money Matters and Good Money shows. She is also a national radio commentator, a frequent media guest on Fox News, and CNBC, a popular international speaker, and the best-selling author of fourteen books including her newest release, The Sixty Minute Money Workout (Waterbrook, 2010). For money savings links visit Ellie's blog.
If you choose a variable rate mortgage deal, then the amount of interest you pay can fluctuate over time. Mortgage rates often rise when the Bank of England raises the base rate, as borrowing costs become steeper for lenders, and these higher costs are passed on to homeowners. That’s why many homebuyers opt for fixed rates to provide peace of mind that their interest payments won’t change.
A reverse mortgage loan typically does not require repayment for as long as the borrower(s) continues to live in the home as the primary residence, pays property taxes and insurance, and maintains the home according to the Federal Housing Administration (FHA) requirements, or until the last homeowner has passed away or has moved out of the property. The amount of equity you can access with a reverse mortgage is determined by the age of the youngest borrower, current interest rates, and the value of the home. Please note that you may need to set aside additional funds from loan proceeds to pay for taxes and insurance.
Prepare to spend some time sitting back and waiting. Each application is thoroughly reviewed by the grant-making agency, sometimes causing a long lag time between when you submit your application and when you are notified about the decision. In the meantime, don't stop making your mortgage payments, or at least pay as much of them as you are able to, or it may look like you aren't taking your mortgage obligation seriously.