Mortgage Archives – Page 86 of 109

Loan Programs For Lower Income Buyers

May 21, 2020 by Coleen TeBockhorst

Owning a home may be the American dream, but for many who are in a lower income bracket, finding a loan can become challenging. Thankfully, there are several loan programs that can work well for lower income people considering homeownership. Here’s a closer look at some of these home loans designed to help people who have a low-to-moderate income find a way to buy a home.

FHA Home Loans

FHA home loans are loans backed by the Federal Housing Administration. Lenders are more likely to lend to “higher risk” borrowers through the FHA loan program because the loans have the FHA’s backing.

With the FHA loan, a borrower can have a credit rating as low as 500, as long as there is a reasonable explanation for it, and a fairly high debt-to-income ratio. According to the U.S. Department of Housing and Urban Development, these loans require only a 3.5% down payment, which can come from gifts, and have less stringent requirements for credit rating or income.

USDA Rural Development Loans

If you are shopping for a home in a small town or suburban area, you may qualify for the USDA rural development loan program. Only those borrowers who make no more than 115% of the average median income in their area qualify for this loan program, according to the United States Department of Agriculture.

USDA loans require no down payment and the loan has no debt-to-income ratio maximum. It has a low PMI fee even for a zero-down loan, and fair interest rates. For those who live in areas that qualify, the USDA rural housing loan simply makes sense.

97% Loan-To-Value Purchase Loans

One of the biggest challenges for lower income borrowers to overcome is the down payment, but the 97% loan-to-value loan makes that less of a concern. This program, which Fannie Mae and Freddie Mac have offered to help encourage more people to get loans, allows people to buy a home with just 3% as a down payment.

The 97% loan-to-value purchase loan is specifically for first-time buyers. Borrowers must not have owned a home within the last three years to apply.

This loan program offers fair interest rates and does not have stringent credit score requirements. Borrowers can use gift funds to pay for the 3% down payment if necessary.

As you can see, there are many home loans designed for lower income borrowers. If you are looking to buy a home but worry you can’t afford it, consider one of these options.

Qualify For A Larger Mortgage With A Co-Signer

May 15, 2020 by Coleen TeBockhorst

There are numerous steps involved in the process of buying a new home. It is important to go through the mortgage qualifying process before looking at dream houses. This gives people an idea of how big a house they can afford. Sometimes, individuals looking for a house might not get a loan that is big enough to cover their dream house. There are ways to qualify for a larger loan; however, one of the fastest methods is to use a co-signer.

What Is A Co-Signer?

A co-signer is someone who signs onto a potential home loan with the homebuyer. Essentially, the co-signer is saying that he or she is willing to be on the hook for the loan in the event that the primary homeowner is unable to make his or her mortgage payments.

This is a big commitment from the co-signer because he or she is exposing himself or herself on behalf of the primary borrower. On the other hand, the co-signer is also providing a vote of confidence on behalf of the primary borrower. Parents often act as co-signers for their children when they purchase their first home.

Vetting The Co-Signer

When someone is going through the home loan process, they are asked to produce tax returns, proof of income, credit reports, bank statements, and more. The co-signer is going to go through the same process. The bank wants to make sure the co-signer is actually adding something of value to the buying process.

The income and debt of the co-signer will be added to the primary borrower. Then, the two will be combined to be approved for a larger home loan. This can help someone purchase the home of his or her dreams.

An Important Note On The Co-Signer

If the co-signer goes to apply for a home loan or car loan in the future, the loan for which they co-signed will show up. This could limit the ability of the co-signer to qualify for a loan down the road. Even though having a co-signer can increase the size of the loan for the primary borrower, this is not without risk to the co-signer. Consider this carefully!

3 Signs It Is Time For You To Refinance Your Mortgage

May 14, 2020 by Coleen TeBockhorst

3 Signs It Is Time For You To Refinance Your Mortgage If you are looking for ways to save money on your mortgage, refinancing might be a good option. For those who might not know, refinancing can help a homeowner reduce monthly mortgage payments by switching to a lower interest rate.

Basically, the homeowner takes out one loan at a lower interest rate to pay off the old loan, which is at a higher interest rate. While the homeowner may have to pay closing costs a second time, this could save someone hundreds of thousands of dollars over the life of the loan. Furthermore, those who want to pay off their loan more quickly may be able to do this as well. There are a few signs that someone should refinance their home loan immediately.

1. Current Mortgage Rates Are Significantly Lower

One of the biggest signs that someone should refinance is that current home loan interest rates are way lower than what they have. While everyone’s financial situations are different, if the current average interest rate is more than a point lower than your current interest rate, you should consider refinancing

While not everyone is going to qualify for the current average interest rate, some people might. This means that this is a possibility worth examining. If you can qualify for a much lower interest rate, it is time to refinance.

2. Your Credit Is Good

In order for you to qualify for home loans with lower interest rates, your credit has to be in good shape. There are ways for you to improve your credit score. Paying off credit card debt, paying your bills on time, and fixing errors on your credit report are all great ways to raise your credit score. If your credit score is good, it might be time to refinance.

3. You Are Not Moving Any Time Soon

As mentioned above, you may have to pay closing costs when you refinance. Therefore, if you plan on staying in that house for a while, this could be a good time to refinance. On the other hand, you don’t want to pay closing costs just to move again next year.

These are a few of the biggest signs that indicate it is time for you to refinance. Don’t pass up this chance to save money!

How To Pay Off Your Mortgage Early: 4 Methods That Work

May 13, 2020 by Coleen TeBockhorst

How To Pay Off Your Mortgage Early 4 Methods That Work While a mortgage is a necessity for many people who have the dream of owning a home, it is also a form of debt. Most people do not like owing money to someone else. Therefore, homeowners might be looking for ways to pay off their mortgage early. The reality is that people are charged interest for having a mortgage. If a mortgage is paid off early, this is less money than the bank will take and more money in the pockets of homeowners.

There are a few methods people can use to pay off their mortgage early.

Make Extra Payments

At the beginning of a mortgage, the vast majority of the money that people send the bank goes toward interest. In the end, most of the payment covers the principle of the loan. If someone is willing to make extra payments, these added payments are going to directly attack the principle. When the principle shrinks, there is less interest that accrues. Making extra payments is the most direct way to attack a home loan and pay it off more quickly.

Refinance The Mortgage

Another option people should consider is refinancing the mortgage. Essentially, a homeowner takes out a second home loan that pays off the first home loan; however, the new home loan has a lower interest rate. This may allow people to pay off the loan more quickly. Furthermore, people can refinance to a shorter-term, allowing them to pay off the loan more quickly.

Recast The Mortgage

Recasting the mortgage is a little bit different than refinancing. In recasting the loan, people throw a lump sum at the principle in exchange for a new amortization schedule based on that lump sum. This means that people will have a new schedule that reflects the principle that is left, often resulting in a shorter payment schedule.

Split The Monthly Payment In Two

Finally, many people are paid biweekly. Therefore, it might be easier for people to pay their mortgage biweekly. If someone pays their mortgage biweekly, they are making 26 half-payments per year or 13 monthly payments per year. The effect is that someone makes one extra monthly payment per year. This payment attacks the principal directly, helping people pay off their mortgage faster.

4 Things Not To Do When Buying A Home

May 6, 2020 by Coleen TeBockhorst

4 Things Not To Do When Buying A Home There is a long list of things that people need to do when they are looking to buy a home; however, it is also important for people to know what to avoid as this process unfolds. There is a lot for people to remember and it is easy for people to get carried away when they start looking at their dream homes. Even though it is great to look at a bunch of houses and imagine living there, it is critical for people to stay grounded and know what to avoid.

Do Not Make Any Large Purchases During The Home Buying Process

One of the biggest mistakes people make when they are looking at buying a home is they open their wallets too big. If people end up taking on other big purchases, they end up accruing more debt. This is going to mess up their debt to income ratio and will make it harder for people to qualify for a home loan. Therefore, try to avoid making any other large purchases during the home buying process.

Do Not Take Out Multiple Credit Inquiries

While this might not sound real, the truth sometimes hurts. The more times people pull their credit report, the worse it looks. Therefore, by making multiple credit inquiries, people could actually hurt their credit score. It is important for people to pull their credit score at least once to fix any inaccuracies that might be present; however, people should not get carried away.

Do Not Skip The Pre-Qualification Process

Many people want to avoid filling out excess paperwork; however, the pre-qualification process is a good idea. When someone pre-qualifies for a mortgage, they get a budget ahead of time and immediately look like a serious buyer. This means that their offer looks more competitive to a potential seller. Finally, the pre-qualification process could also help someone qualify for a lower interest rate.

Do Not Be Anxious

The process of buying a home can be stressful even for those who have been through it before. Just remember to ask questions along the way and individuals will be set up for success. There are trained professionals who are willing to lend a helping hand to those in need.