How To Prepare For A Home Refinance

There are many potential benefits to refinancing your home. However, it’s a good idea to prepare yourself for this process, so you can have the best experience possible.

1. Know Your Why

Understand your end goal for why you want to refinance. Are you looking to lower your interest rate, reduce your mortgage payments, tap into your home equity, or shorten the term of your home loan? Knowing exactly why you’re looking to refinance is important for weighing the pros and cons of your different refinancing options.

You should also think about potential changes in your future income. For example, if you’re looking to retire in a few years, then your income may decrease. In this case, you may not want to take on a financial burden that will be difficult to handle in the future. 

2. Get Your Finances In Check

Your financial situation can affect whether you qualify for a refinance. The better your finances, the better options you may have available to you. As an example, if you have a higher credit score, you may be able to get a lower interest rate. Make sure to avoid any missteps that might harm your credit such as taking on excessive credit card debt, closing out unused credit cards, or not checking your credit score for errors that you can dispute. 

Do your best to reduce any monthly debt payments that you can, as your debt-to-income ratio may also impact your refinancing options. You also want to keep your household finances as stable as possible. Any decrease in income or large purchases may complicate the refinancing process.

3. Talk To A Mortgage Professional

While it’s important to research the different types of refinancing options, you should speak to a professional who can look at your unique situation and help you choose the best course of action for you. You may decide to work with the lender who helped you with your original home mortgage, as this person could have a better understanding of your circumstances and future goals.

When choosing a mortgage professional, it’s best to get a second opinion as rates and fees can vary from lender to lender. Once you begin working with your mortgage professional, they’ll fill you in on the next steps and let you know what all paperwork to gather.

4. Prepare Your House For An Appraisal

For most refinances, you will need an appraisal to calculate your home's market value. This appraisal will determine how much equity you have in your home. The more equity you have, the better, because this may help you get a lower rate. For a cash out refinance, your home equity will affect whether you qualify, as well as how much money you can take out.

Do your best to make general improvements to your home, keeping up with regular maintenance. Most importantly, you should address any potential health or safety issues. For example, making sure smoke/carbon monoxide alarms are in order. If the appraiser notices any safety hazards, this can delay the appraisal process and cost you more in fees.

In addition, you should prep your home as if you’re about to sell it. Making necessary repairs, reducing clutter, sprucing up the landscaping, and deep cleaning to make your home look presentable. Even minor cosmetic changes can add up. 

All in all, preparing for a home refinance may seem a bit overwhelming at times. But taking these necessary steps can make the refinancing process run a lot more smoothly.

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Top 6 Common Mistakes To Avoid When Refinancing Your Home

There are several potential benefits to a home refinance. But all too often, homeowners make these common mistakes when refinancing their home. Read up on these mistakes now so you know what to avoid in the future.

1. Harming Your Credit Score

As you prepare to refinance, you’ll want to get your finances in order. Sudden changes in your credit score, like taking on excessive debt or closing any unused credit cards, can harm your credit. The higher your credit score, the better chances you have at getting a lower rate. Make sure not to make any large purchases or other changes that might lower your score.

2. Not Getting A Second Opinion

When looking at your refinance options, it’s best to get a second opinion. Rates and fees can vary from lender to lender. You want to choose the mortgage professional who can get you the best value on your refinance, along with someone who is open and honest about helping you make the best decisions for your unique situation.

3. Focusing Too Much On The Rates

While rates do play an important role for your refinance, they don’t paint the full picture. If you focus too much on changing interest rates and try to time out your refinance according to rates, then you may miss the mark completely. Also, you want to think about the overall benefits and value of your refinance options.

4. Not Protecting Your Home’s Value

Most refinances require you to have your home appraised. So you’ll want to do your best at protecting your home’s value. Not keeping up with regular house maintenance, letting your yard get overgrown with weeds, or DIY renovations gone wrong can significantly harm your home’s value.

5. Overlooking “Junk Fees”

Read the fine print before agreeing to pay irrelevant fees. Application and title fees are reasonable. But “junk fees” include things like “document preparation” or being charged too much for something as simple as obtaining a credit score. When getting a second opinion, keep an eye out for any fees that seem suspicious.

6. Taking Out Too Much Equity

While tapping into your home’s equity can be great for renovations, paying off credit card debt, or even going on vacation, it’s not a good idea to take out too much of your home’s equity. You want to keep a cushion of equity to protect you in case housing prices fall.

It’s important to do your research and understand how to have the best experience possible when refinancing your home. However, you should always speak to a trusted professional who can assess your unique situation, your future goals, and help you make the best decisions for you.

Original post here: Top 6 Common Mistakes To Avoid When Refinancing Your Home

Different Types of Mortgage Loans

Purchasing a home is a significant life event and the first step in building wealth for most people in the United States. Before moving forward on something this monumental, it’s essential to understand the different types of mortgage loans and which one is the right one for you.

Common types of mortgages loans

There are several types of house mortgages available, and each has its benefits. Individual circumstances can determine which works best for the situation. Here is a brief overview of each type of mortgage loan.

Fixed-rate mortgages

A fixed-rate mortgage is also known as a ‘traditional mortgage.’ This is the most commonly used mortgage and offers a fixed interest rate locked in for the loan’s entire term. 15-year and 30-year fixed-rate mortgages are by far the most popular in this category and allow a homeowner to have a clear expectation of what’s owed each month.

Pros of fixed-rate mortgages

• A fixed-rate mortgage is popular with the general public as it offers stability and predictability.
• It is a good choice for people holding the property for the long term.
• The principal balance can rapidly be reduced.

Cons of fixed-rate mortgages

• If market interest rates fall, a homeowner may be paying more on their loan than other homeowners.
• It may be locked in for a set amount of time, making refinancing difficult down the road.

If you plan to stay in your new home for at least ten years, a fixed-rate mortgage is an excellent option. Its predictability will allow for easier budgeting, and the fluctuating interest rates won’t amount to much over time.

Adjustable-rate mortgages

An adjustable-rate mortgage (ARM), also known as the ‘floating rate mortgage,’ is the opposite of a fixed-rate mortgage. An ARM offers an interest rate that fluctuates with the market. Monthly payments can go up or down, depending on the current interest rate. The most popular of the adjustable-rate mortgages is the 5/1 ARM. The introductory interest rate is locked in for the first five years (this is the 5), then will change every year (this is denoted by the 1).

Pros of adjustable-rate mortgages

• An ARM can help you build equity in the home more quickly if rates become lower.
• Using an ARM can help you qualify for a larger loan, and therefore a “better” house.

Cons of adjustable-rate mortgages

• These loans are riskier than a traditional mortgage, as interest rates may go up and cause you to pay more.
• Because the payments are not predictable, it’s more difficult to fit into a long-term budget plan.

An ARM mortgage is a good choice for someone who isn’t planning on living in a home for the long term. There’s no point in paying interest on 30 years of a home loan if you plan on moving in 3 to 5 years.

Interest-only mortgages

With an interest-only mortgage loan, the borrower only pays the interest on the loan for a specified period, typically at 5, 7, or 10-year increments, and then pays off the principal in a lump sum or by subsequent payments at a specific date. This loan is better for disciplined borrowers, borrowers with substantial assets, or homebuyers who don’t expect to keep the home long-term.

Pros of interest-only mortgages

• Large payments are deferred, making this a good mortgage loan for people who expect to have more money in the future.
• There is an increased cash flow while in the interest-only payment period.

Cons of interest-only mortgages

• You are not building equity during the interest-only payment period.
• You must be certain of a large sum being available when the payment comes due or risk defaulting on the loan.

This type of mortgage is ideal for someone who wants a home now and anticipates making large payments in the future. Some examples might be a doctor or lawyer who is just starting or an investor who is sure that their return on investment will be significantly higher if they invest their money elsewhere.

Other Types of Mortgage Loans

Fixed-rate and adjustable-rate mortgages account for about 75% of home loans. However, there are other mortgage loan options that aren’t as popular or as common as the more traditional loans.

Government-insured mortgages

Government-insured loans are loans issued by lenders but are backed by the U.S. government if defaulted. Some examples of government-insured mortgages include FHA loans (for lower-income families), VA loans (for eligible military members and veterans), and USDA loans (for qualified borrowers in rural or low population areas). Benefits for these loans include small down payments as well as flexible qualification criteria.

Jumbo mortgages

Jumbo mortgages (aka jumbo loans) are a type of financing designed to finance luxury properties or houses in highly competitive housing markets. These loans exceed the Federal Housing Finance Agency’s limits and have unique tax implications and underwriting requirements. Approval for a jumbo mortgage requires an exceptionally low debt-to-income ratio, truly excellent credit, and a more rigorous screening process than conventional loans. It is best for those looking to buy more houses than they could typically afford and whose credit and income bear scrutiny. As Fannie Mae or Freddie Mac does not back these loans, they are a risk for the lender.

Reverse mortgages

A reverse mortgage is a type of mortgage available only to older homeowners (62+) who own their own homes. This type of loan allows the homeowner to access the equity they’ve already built and then defer payment until they die, sell out, or move out of the home. They are still responsible for paying property taxes and homeowners insurance. Some regulatory authorities are skeptical of these loans, insisting that they are ripe for fraud and are difficult for the average homeowner to understand.

Which is the best mortgage loan type for you?

Before investing in a home, it is beneficial to do your research. We’ve touched on several different types of mortgage loans available, but each one has its own set of risks and benefits depending on the individual situation. Most homebuyers end up taking a traditional loan, but other choices may work better for some people. Sometimes it is necessary to go with the non-traditional mortgage loan due to an inability to secure a traditional loan. It could be because of less than stellar credit or a high debt-to-income.

If you dream of owning your home but are confused about the right mortgage loan for you, we at Hero Home Programs can help. Reach out today to see how this program can help you save thousands of dollars on your path to homeownership.

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How Big Of A House Do You Need?

Choosing a home isn’t as simple as square footage or number of bedrooms. When deciding which size house is best for you, keep these important factors in mind.

Will this be your forever home?

You may feel pressured to think of your next home as the end all be all. But that’s not necessarily true! It’s possible you may want to move after a few years. Think honestly about the likelihood of you staying versus moving. Will you stick with this home for the long term, or is this house good enough for the time being?

Will your income change in the future?

Your income may change depending on what phase of life you’re in right now. For someone just starting off in a career, their income may increase the more they grow in their profession. But someone looking to retire in the next few years will probably see a decrease in their income. You don’t want to set yourself up for financial stress in the future. It’s better to choose a house that’s well under your budget than to spread your finances too thin. 

A larger home means higher maintenance and upkeep costs. The bigger the space, the more expensive renovations and updates will cost. Keep your future income in mind when choosing the right home for you.

How will you use this space?

Now’s the time to think about your priorities and values. Are you really going to use a large dining room to host dinner parties? If so, great! But if not, it’s okay to be honest about your priorities. Just because your best friend loves to host dinner parties doesn’t mean you have to! Maybe you value outdoor space more and would rather have a nice backyard where you can garden. 

This is your home. You don’t need to feel pressured to throw parties or have family stay over for the holidays if you don’t want to. If sharing your home with the ones you love is something you truly value, then having that extra space is a good idea.

How much privacy do you need?

Every family dynamic is different. Some people really value their alone time, and need their own space away from their kids or spouse. On the flip side, a house that’s too big for your family may feel emptier and less cozy. Whether you need more space to yourself, or like to feel closer to the ones you love, think about the right size and layout that strikes a nice balance for your family.

Does this home feel spacious enough?

Square footage can be deceiving. A smaller home can feel spacious depending on features like layout, lighting, and decor. Reducing clutter and maximizing your space with mirrors, lighter colors, and open concept designs can transform the perceived size of a home. 

Another thing to consider, you may be perfectly happy with a smaller master bedroom if there’s plenty of storage space in your closets. Having adequate storage can help you reduce clutter in the rooms you use the most. 

The Takeaway

You need to take an honest look at your values to truly visualize your life in a new home. Getting hung up on things like square footage and number of bedrooms may keep you from finding the home that suits YOUR dream. For example, being open to a smaller home may give you a bigger budget to choose your prime location.

On the flip side, if you value your space and privacy, then a larger home is probably more ideal. As long as you’re honest with yourself about your lifestyle, values, and priorities, then you’ll be able to strike the perfect balance and find the home that’s right for you.

Original post here: How Big Of A House Do You Need?

Top 6 Most Common Home Buying Myths

Buying a home is one of the biggest financial decisions you can make. That’s why it’s important to not let these common myths get in the way of what’s best for you and your future.

Myth #1: You Want The Largest Square Footage Possible

When searching for your new home, don’t get too hung up on the square footage. Depending on the layout, a smaller home can actually feel a lot more spacious. When going to open houses, you should ask yourself, how big does this space feel? Also keep in mind the potential for storage. A smaller bedroom can work perfectly well for your needs if there’s plenty of storage space in the closets. 

Other factors such as open concept designs, lighter colors, and reduced clutter can greatly maximize the amount of space in your new home. 

Myth #2: Your New Home Is Forever

While there’s a certain expectation out there that you have to stay in your new home forever, there’s still a possibility that you may move in a few years. When searching for homes, be honest with yourself about the likelihood of staying versus moving. If there’s a strong possibility that you’ll move in 5 to 10 years, then you may consider choosing a house that works well for you right now, instead of a home that has to be perfect for you well into the future.

Myth #3: Certain Types Of Mortgages Are Better Than Others

Everyone’s financial situation is different. The myth that one type of home loan is better than the other is simply not true. When making these financial decisions, it’s crucial to speak to a mortgage professional. An experienced and trustworthy mortgage lender can help you figure out the best course of action for you.

Myth #4: You Always Want The Lowest Possible Rate

If you focus too much on interest rates, then you might overlook other factors such as extra fees. While rates do play a role in your finances, they don’t paint a full picture of the long term value that comes with home ownership. When choosing the best mortgage professional for you, always get a second opinion and remember that overall value is more important than just low rates.

Myth #5: Buying A Home Is A Bad Investment

Buying a home is a major financial decision that should not be taken lightly. That’s why there are plenty of resources and professionals out there to help you with this decision. And yes, housing prices will go through highs and lows, but studies show that homes generally increase in value over the long term. 

As you pay off your mortgage, you build equity in your home, which is essentially like a savings account for the future. But when you pay rent, that money just goes into your landlord’s pocket. Over time, owning a home is generally a better investment than simply paying rent.

Myth #6: You Can Save Money By Foregoing A Realtor

A good real estate agent can be a total game changer when it comes to buying a home. A realtor can negotiate with the seller on your behalf, potentially saving you a lot of money on closing costs or repairs. When hiring a real estate agent, it’s important to work with someone who is knowledgeable and trustworthy. Having a friendly and professional relationship with your realtor can make the process of buying your home a thousand times easier.

The Bottom Line

There’s a lot of information out there when it comes to buying a home. While it’s important to do your research and listen to suggestions, everyone’s situation is unique. Make sure to honestly think about what makes the most sense for you and your future.

Original post here: Top 6 Most Common Home Buying Myths

The Truth About Changing Rates

In the housing industry, there’s always a lot of talk about changing interest rates. But if you focus too much on the rates, you might miss out on the long term value of home ownership.

Rates change, housing prices go through highs and lows, and the markets will fluctuate. But the value of home ownership is more consistent. Even as rates go up and down through the years, owning a home will generally appreciate in value over the long term.

What a lot of people don’t understand is the difference between paying rent versus paying a mortgage. When you pay your rent, that money goes straight into your landlord’s pocket. All your rent money does is give you a place to stay for the next month. But as you pay off your mortgage, you build equity in your home.

Building home equity is like a savings account for the future. For the long term, as you pay off your mortgage, you will likely build home equity, which gives you the option to tap into your equity in the future.

There are many different ways that you can use your home equity. A lot of people tap into their equity to pay off credit card debt. But you can also use this money for travel, home renovations, even life events such as helping to pay for your kid’s wedding.

Besides the long term financial value of homeownership, there’s also the emotional value to consider. As you reach a certain point in your life, you start to realize how exhausting it can be moving from one rental to another.

Transitioning into a stable living situation allows you to put down roots for the future. Owning a home means having a space to make long lasting memories that you and your family will share for years to come.

The Bottom Line

Rates change all the time. In the grand scheme of things, however, rates don’t really matter as much. What it really comes down to long term value, and what that value means for your future. 

When choosing the best mortgage options for you, think about the overall value. If you focus too much on rates, you might overlook other factors (such as extra fees). Also, make sure to get a second opinion when it comes to your mortgage options.

You should always talk to a professional about how to make the best financial decisions for your unique situation. And while changing rates do play a role in these decisions, they don’t paint a full picture of what it really means to own a home.

Original post here: The Truth About Changing Rates

What Is Home Equity And Why Is It Important?

You may be unsure on what it means to build equity in your home. For a better understanding on what home equity is and how to use it to your advantage, check out the article below!

What is Home Equity?

Home equity is the difference between what you owe on your mortgage and what your home is currently worth.

To calculate your home equity, take the current value of your home and subtract what you owe on your mortgage. For example, if the current value of your home is $250,000, and you owe $100,000 on your mortgage, then you have an equity of $150,000.

The more you pay off your mortgage, the higher your home equity (as long as your home value doesn’t decrease).

If your home value decreases faster than the rate at which you pay off your mortgage, then your equity will decrease as well. 

There are two main ways to build home equity: by paying off your mortgage, or if your house increases in value.

To determine the current value of your home, you will need to talk to a real estate appraiser. But you can also try doing your own research to get an estimate. If you search for real estate prices in your neighborhood, and look at properties that are similar to your home, those property prices can give you a general idea of what your home is currently worth.

Here are some ways you can build equity in your home:

•  Make a large down payment
• Focus on paying off the mortgage
• Stay in your home longer than 5 years
• Renovate and add curb appeal (landscaping, kitchen & bathroom updates)

How To Use Your Home Equity: Cash Out Refinance

In a cash-out refinance, you refinance your current home loan for more than what you owe on your mortgage. You can receive the difference (the new loan amount minus what you owe) in cash. In order to qualify for a cash-out refinance, you need to build equity in your home.

Let’s say you take out a loan for a house that costs $200,000. One year later, you’ve paid off $50,000 of that mortgage, and good news! Your house has increased in value to $250,000!

This means you now owe $150,000 on your original mortgage, and you have $100,000 in home equity. 

If you choose to refinance your current loan for $200,000, then you can receive a $50,000 check at closing. The $50,000 sum is the difference between your new loan amount and what you owe on your original mortgage.

However, you will need to repay that $200,000 in monthly payments with interest, along with the closing costs of refinancing.

The amount of extra money you can get from this cash-out depends on how much equity you have. The more equity you have in your home, the more money you can take from a cash-out refinance. 

Traditionally, a lot of homeowners use the cash-out refinance to pay off credit cards or renovate their home. You can also use this extra cash for travel, investing in your business, or even major life events such as paying for your kid’s college tuition.

Summary

Building equity in your home gives you more refinancing options for the future. It’s hard to predict what may come up later down the road, so having the freedom to tap into your home equity can help you prepare for major life events.

It’s helpful to understand your different options when it comes to refinancing. But if you’re interested in refinancing your home, you should speak to a mortgage professional who can look at your unique situation and help you make the best decisions for you.

Original post here: What Is Home Equity And Why Is It Important?

Tips For Buying A Newly Constructed Home

There are several benefits to buying a newly constructed home. For example, new builds allow you more opportunities to customize your home. Plus, most newly constructed homes have less maintenance costs over the first few years. 

To ensure the best possible experience when watching your new home come to life, keep these important tips in mind!

Research The Builder

Choosing a reputable builder is crucial to a well-constructed home. Make sure to research the builder’s reviews. And you can even drive by their previous projects to get an idea of their quality of work. Looking at the builder’s past projects can give you more insight into their experience and reputation. 

Other questions to ask when researching your builder:

• How often will a superintendent visit the construction site?
• Which features are included in the build, and which features are upgrades?
• How often can I visit the construction site?
• How many properties have you sold so far?

There are certain red flags to look for when researching your builder. Obviously, several bad reviews from past clients can raise major concerns. Also, if a builder, superintendent, or project manager seems hesitant to answer your questions, this could reflect poorly on their experience. Another thing to keep in mind, if you visit their other construction sites, and they seem disorganized, this could impact the quality of their work.

Maintain A Clear Line Of Communication

It’s also important to stay in contact with your builder. The better you communicate, the less likely you’ll have to deal with misunderstandings down the road. A great way to establish a line of communication is to start with a pre-construction meeting. In this meeting, you will go over the construction details with your project manager. And you can also set certain expectations such as, how often will the builder give you progress updates? Is it ok for you to call or text the builder and if so, how often? 

Visit The Construction Site

Stopping by the construction site is a great way to prevent any miscommunication in the building process. Not to mention, watching your dream home come to life from the ground up is a fun and rewarding experience! 

When you visit the site often, you’ll be more likely to notice small details that the builder may have overlooked. Also, make sure to take pictures! Having plenty of pictures can help you later when you need to know the exact location of a certain pipe or electrical connections. It’s best to take pictures of these features before they’re covered up with drywall.

Understand Your Construction Timeline

Generally, a new construction can take about 7 to 12 months to complete. However, many factors can cause delays such as weather conditions, or waiting on materials to be delivered. Many unexpected changes can push back the construction timeline. For this reason, most builders add a one to two week buffer into their timelines. If you’re in the process of selling your current home, or ending a leasing agreement, keep these possible delays in mind, so you’re not in between homes for a few weeks. 

Have Your New Home Inspected

Even newly constructed homes may have structural issues. Hiring a professional and licensed inspector can put your mind at ease when it comes to the quality of the build. Depending on your preference, there should be 1-3 inspections of your new home: the foundation inspection, the pre-drywall inspection, and the final inspection.

If there are any problems in the quality of construction, the inspector will take note of these issues in the report, while also suggesting a solution. Once you have this information, you’ll be able to address your concerns with the builder and negotiate a solution.

Original post here: Tips For Buying A Newly Constructed Home

What Happens If My Credit Changes Before Closing?

Mortgage lenders check your credit at the beginning of the approval process, and they also pull your credit again right before closing. If the second credit check comes back the same as the first, the closing should stay on schedule.

However, if the second credit check comes back lower than the first, or raises some concerns to the lender, this could delay closing. The mortgage lender may need to send your application back to an underwriter for a second review.

If there are major concerns raised by a change in your credit score, this can cause you to lose the loan. It’s crucial not to mess with your credit during the application process.

There are many changes that can harm your credit before closing. 

Here are some things to avoid:

• Being late on a payment and sent to collections
• Acquiring a new loan or line of credit
• Closing an existing loan or line of credit
• Making a large purchase, especially on your credit card
• Opening a new credit card account, or closing an existing credit card account
• Taking out a personal loan

If at the first credit check, your score was already on the lower end, then it’s especially important not to mess with your credit before closing.

Mortgage lenders look at your credit to determine any risks or uncertainties that may prevent you from paying your bills. Sudden changes can mean major red flags that harm your eligibility for a home loan.

All in all, you need to do everything in your power to keep your household finances stable throughout the closing process. Any changes in income, debt or spending habits can negatively affect the closing process and become a roadblock between you and your dream home.

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The Emotional Highs and Lows of Buying Your Dream Home

Buying a house is one of the biggest financial decisions you can make. Here’s how you can set the right expectations about the road ahead, along with some tips to help you along the way.

Buying a Home: The Emotional Lows

Let’s get the bad news out of the way: nothing worth having ever comes easy. Here are some of the emotional lows you may experience when buying your home.

Online photos may not tell you the full story

We’ve all been deceived in the past. Maybe you bought a cool T-shirt online, but when it arrived at your door, the material was flimsy and the colors faded. Similar to looking at houses online, most of the listing photos will probably be more flattering than in real life. While searching online is a great starting point, don’t get your hopes up until you visit the house in person.

Open houses can get exhausting

Visiting open houses can be really fun at first, but after the 5th or 10th open house, you’ll probably get exhausted. Plus, you’re probably incredibly busy! With work, day-to-day chores and errands, penciling in all these open houses can be a major strain on your schedule. Unfortunately, you have to be patient and keep searching until you find the right one.

You have to be on the lookout for red flags

When searching for homes, you need to ask about any issues such as water damage, electrical problems, or old HVAC systems. You have to do your homework to avoid dealing with some major repairs down the line. Keep in mind that minor cosmetic details like paint or landscaping can be easily fixed, but replacing something as costly as a damaged roof is far from easy.

You’ll have to make compromises

When narrowing down your home search, you’ll have to strike a balance between your needs and your wants. You may really want to live close to downtown, but you need to stay within your budget. We’d all like to have our cake and eat it too, so separating our needs from our wants isn’t very fun. 

The closing process can be nerve-wracking

From the mortgage application, to getting approved, submitting an offer, and then waiting to hear back, it can all be both tedious and terrifying! 

To minimize this stress, do your best to choose the right mortgage professional for you. Always get a second opinion from a different mortgage lender and work with the mortgage pro who can get you the best value (not just the best rate). Not only should your mortgage lender genuinely care about helping you, but they should also be an open book when it comes to your different options.

The same goes for your real estate agent. A great realtor can change the game when it comes to searching for your home and negotiating with the seller. Having a professional, friendly, and trusting relationship with your realtor will make the whole process run a lot more smoothly.

Buying A Home: The Emotional Highs

Throughout all the uncertainty and frustration, it’s crucial to remember why you’re working toward owning your dream home. Keep these major perks in mind to help you through the hard times.

Not blowing your money on rent

The rent is too dang high. It’s annoying putting a third of your monthly income into paying for an apartment, especially when your upstairs neighbors are clomping around like Irish river dancers all night. The thing about owning a home, your housing costs are going into a solid real estate investment, not just your landlord’s pocket.

Having more space to suit your lifestyle

As rental prices increase, the size of apartments seem to shrink. In a lot of apartments, there’s hardly any space for storage, cooking, exercising or your favorite hobbies. When you find your dream home, you get to pick a place that suits your lifestyle. You may really want to get into gardening or woodworking, but it’s hard to treat yourself to these fun activities when you’re stuck in a cramped space.

The freedom to personalize however you want

When you own your home, you get to define that space however you want! Whether it’s painting an accent wall, updating the appliances, or sprucing up the landscaping, you get to make this space your own. Having the freedom to put your own signature on your surroundings can fill you with a sense of pride, as if to say, “I made this!”

Not having to answer to a landlord

When you’re renting, you have to follow someone else’s rules. You may really want a puppy, but your landlord says “nah.” Constantly trying not to upset your landlord can add a lot of extra stress to your daily life. After you buy a house, you’ll never have to worry about those ominous emails from Brenda down at the leasing office ever again!

Having your friends and family over for dinner

With a lot of rental situations, it’s hard to have guests over. In most apartments, there’s no space for a dining room, so dinner parties are out of the picture. Not to mention, most rental situations come with zero extra parking for your guests. Plus, you can’t throw a noisy party or you might tick off the neighbors. 

When you own a home, you have more freedom to share your space with the ones you love. You can have family over for the holidays, invite friends to come watch the game, or even host parties every now and then! All while not having to worry about your neighbors ratting you out to the leasing office.

Putting down roots for your family’s future

As you reach a certain point in your life, you start to realize how exhausting it can be moving from one place to another. Moving from a temporary into a stable living situation allows you to put down roots for the future. Owning a home means having a space to make long lasting memories that you and your family can share for years to come.

Whether it’s planting rose bushes in the backyard that bloom every spring, hanging framed family portraits in the hallway, or tracking how tall your kids are with pencil marks on the wall, putting down roots gives you a sense of belonging. Throughout all the highs and lows, you’ve finally made it. Your home sweet home.

Original post here: The Emotional Highs and Lows of Buying Your Dream Home

Refinancing Your Home Mortgage: The Basics

You may be wondering what it means to refinance, the benefits of refinancing, and what different refinancing options are out there. Check out this quick article to learn more!

Refinancing: Introduction 

Refinancing your home mortgage means converting your current home loan into a new one.

There are several reasons why someone may choose to refinance. Benefits can include reducing your monthly mortgage payments, getting a lower interest rate, shortening the term of your loan, or tapping into your home’s equity.

Different Refinancing Options

To better understand refinancing, it’s helpful to look at different examples of refinancing options. For instance:

• Current FHA mortgage holders may choose to refinance into a different type of mortgage so they can get rid of mortgage insurance fees.
• If you have a 7-year adjustable rate mortgage (ARM), you may refinance your ARM loan into a fixed loan, so that your interest rate doesn’t go up at the adjustment period.
• You may currently have a 30-year fixed rate loan, then choose to refinance into a 15-year fixed rate mortgage so you can shorten the term of your loan.
• If you’re currently on a 15-year mortgage, you can refinance to a 30-year mortgage. This lengthens the term of your loan but reduces the monthly payments. 
• Tapping into your home’s equity: You may choose to refinance for more than what you owe on your current loan. In this case, you’ll receive a check for your home’s equity. This is called a cash-out refinance. Oftentimes, people can get the cash-out in addition to lower interest rates on their loan.

How To Get Approved For A Refinance

You still need to qualify for the refinance the same way you had to get approved for the original loan. This means submitting an application with a mortgage lender, going through the underwriting process, and closing on the refinance similar to how you closed on the home loan.

In certain cases, you may be able to opt for a “Streamline” refinance. This “streamlined” option has a faster approval process and doesn’t require you to provide as many documents. 

When choosing a mortgage lender to help you refinance, it’s best to get a second opinion. Rates and fees can vary from lender to lender. 

Also, consider reaching out to the mortgage lender who helped with your original loan. Working with a mortgage professional who already has a good understanding of your situation can make the process run more smoothly. 

While there are many benefits to refinancing, you should speak to a mortgage professional to help you choose the best course of action.

Original post here: Refinancing Your Home Mortgage: The Basics

An Essential Guide For Home Buyers

Finding your dream home can feel like looking for a needle in a haystack. Keep in mind these essential tips when searching for the perfect fit. 

Set Your Budget Before Starting Your Home Search

Setting a price range is crucial because your budget can help narrow down your search. A great way to figure out your budget is to get pre-qualified by a mortgage lender. Pre-qualification is a quick and easy way to have a mortgage professional assess your financial situation and give you a rough estimate of what you can afford. 

Pre-qualification is a great first step, but you will also need to get pre-approved for a home mortgage. Pre-approval is more in-depth. You will need to provide documents and records having to do with your debt, income, and credit history. A mortgage professional and underwriter will use these documents to verify your eligibility for a home loan. 

Once you get pre-approved, the lender will give you a pre-approved loan amount, which tells you how much you can afford. In short, pre-qualification is an easy way to get an estimated budget, while pre-approval gives you a more exact maximum loan amount. Remember, your pre-approved loan amount is the ceiling, so you should focus your search on homes that cost less than your maximum loan amount.

Consider The Location

Location! Location! Lo-... you know the rest. Cliche as it sounds, this age-old saying is around for a reason! You should think long and hard about the location of your new home. 

Some questions to consider:

• Do you want to live in a place where you can easily walk to nearby shops and restaurants? 
• Do you want to belong to a more close-knit community?
• Or, are you looking for a more private space located off the beaten path?
• How safe is the neighborhood? What are the local crime statistics?
• How easily can you commute to work or school?
• Is this in your preferred school district?
• Do you want to live close to family and friends?

A great way to figure out what location you’re looking for is to think about where you currently live. What do you wish was different about the location you’re in now?

Think About What Features Are Important To You

When deciding on the features that matter most to you, make sure to plan for the future. For example, if you want to expand your family, you’ll eventually need more space. 

Also consider what lifestyle amenities are crucial to you. Maybe you love to garden, so you’ll want a big enough yard that allows room for your favorite hobby. 

Similar to how you should think about your current location, you should also ask yourself about your current living situation. What do you wish was different? What features are you missing out on now that you’d like to have in your new home? For instance, do you love to bake and want a larger kitchen? 

Some house features to think about:

• Size and square footage
• Air conditioning
• Number of bathrooms/bedrooms
• Outdoor space
• Floor plan and layout that meets your needs
• Natural light
• Storage space

Assess The Property Conditions

As you narrow down your search and start going to open houses, you’ll need to look out for red flags. Most importantly, checking for any problems that will be difficult or expensive to fix:

• Water damage or mold
• Old insulation
• Electrical wiring issues
• Damaged roof
• Older HVAC, heating, A/C systems
• Issues in plumbing
• Uneven floors
• Cracks in the exterior 

As you start going to open houses, come prepared with a list of questions. For example, why do the sellers want to move? When was this house built? Are there any issues or problems with the home? How long has the house been on the market?

Think About Features You Can Personalize

Don’t get too hung up on minor cosmetic details like paint color, landscaping or lighting fixtures. While a beautiful coat of fresh paint can be enticing to home buyers, it’s easier to paint the walls than to replace a damaged roof. 

For more complicated renovations, like updates to the kitchen or bathroom, carefully consider your budget. It can make sense to choose a home that’s more of a fixer upper if it’s in your perfect location and has the other major features you need.

If you plan on renovating your home, keep track of your closing costs and move-in expenses. You may feel eager to start renovations as soon as you move in, but some updates may have to wait until after you’ve paid the more urgent expenses. 

Separate Your Needs From Your Wants

You may really want to live near downtown, but you need to stay within your budget. While it’d be nice to have your cake and eat it too, you’ll probably have to make some compromises as you search for your dream home. 

Separating your needs from your wants can feel a bit like a balancing act at first. However, eventually things will fall into place as you reach your dream of homeownership.

Original post here: An Essential Guide For Home Buyers

Are You Spending Too Much On Rent?

The rule of thumb is that you should not spend more than 30% of your household income on rent. This means that if your combined household income is $10,000 per month, then your rent should be no more than $10,000 x 0.3, which comes out to be $3,000. 

This 30% rule of thumb exists so that a household can cover their current expenses while also saving money. If your household is spending more than 30% of your income on rent, this can make it difficult to manage your current expenses while also securing savings for the future. 

While the 30% rule is helpful to keep in mind, it can be difficult to stick to this rule for people who are cost-burdened by debt. For this reason, people with high student loans or costly debt payments should consider using the 43% rule. 

The 43% rule states that your monthly housing cost plus your monthly debt payments should be no higher than 43% of your monthly income. Meaning, if your household monthly income is $10,000, then your total rent and monthly debt payments should not exceed $10,000 x .43, which is about $4,300.

Depending on your financial situation, it may be difficult for you to stick to either the 30% or 43% rule. If you’re a current renter hoping to own a home one day, saving for a down payment may prove difficult if you’re cost burdened by debt or high rent expenses. If this is the case, consider cutting down on expenses so you can save for a down payment on a home. 

There are many ways that cost-burdened renters can save money and reduce monthly debt payments. For example, refinancing student loans for a longer term or lower interest rate can lower your debt payments. You can also consider getting a roommate to help cover rent.

Most importantly, you should take a critical look at your expenses. This will help you create a budget and cut down on spending. Some of the most common expenses that hold renters back from saving money are eating out, online shopping, excessive utility usage, and subscription services.

By reducing your spending wherever possible, you can more easily save for a down payment on a house, rather than blowing all your money on high rental prices. By buckling down on your monthly expenses, you can create a better financial situation for yourself in the long run.

Original post here: Are You Spending Too Much On Rent?

Can You Get a Home Loan Without Tax Returns?

Homebuying is a massive financial enterprise. Generally, one of the first steps in the home loan process finds the lender presenting the borrower with a 4506 t form—a form that, when signed allows for the lender to request the borrower’s tax summary from the last couple of years.

A common belief is that there’s no way to procure a loan if you are missing a large piece of documentation like a tax return. But is this true? Can you get a home loan without tax returns? And if so, how do you go about getting a home loan if you don’t have a tax return?

Getting house loans without tax returns

There are actually several situations that merit a home loan under these circumstances, though keep in mind that not all lenders will offer loans without tax returns. Read on for information on how you can get a home loan without tax returns and why one might need to try.

Self-employed/business owners

A self-employed business owner often takes advantage of a number of available tax write-offs. This is well and good. However, it can also make the DTI look far too high when trying to acquire a traditional mortgage.

Enter the bank statement loan. This type of loan allows for a mortgage approval to be calculated using bank deposits while excluding tax returns. To qualify, you will need a credit score of at least 600 and documents that verify the business’s existence. These documents could include a business license, a letter from an accountant, an official business listing, or even a business website. In addition, you will need at least one of the following (keep in mind that some lenders may require both):

Personal bank statements

When using personal bank statements, you must have been in business for more than two years, but you do not have to be the sole owner. Lenders will calculate income based on 12 months of deposits, less any business expenses. They will also require three months of personal bank statements showing that revenue is coming from a business account

Business bank statements

When using business bank statements, you must own 100% of the business and have been in business for more than two years. Lenders will calculate income using 12 months of deposits, less a 50% expense factor, or whatever a CPA might deem acceptable.

Profit & Loss Only mortgage

A Profit and Loss Only (or P&L) mortgage is available for well-qualified borrowers. A lender will conduct income approval based on a Profit and Loss statement presented by a CPA. Along with this information, the CPA must provide a letter with the borrower’s business name, how tax returns are filed, the percentage of ownership in the business, and how long the CPA has been filing returns for the company.

Salaried or hourly earnings

For a salaried or hourly employee, tax returns are not required for mortgage approval in most cases. Wage-earners will typically only be required to provide a W-2 form and most recent 30-day stubs as proof of earnings. However, some circumstances require different loans. Let’s take a look at some of these scenarios.

You have irregular income.

With irregular income, mortgage underwriters have a lot of discretion and a lender will examine other assets and credit history to determine eligibility. If you have an irregular income and plan to purchase a home in the near future, keep careful records of all assets and income streams.

You’re a real estate investor.

A real estate investor can have an extremely low adjusted gross income on paper due to the write-offs they use. A cash flow loan is an optimal choice for these professionals, as it considers the cash flow of the property and not personal income.

You had business expense write-offs the previous year.

For those with a lot of expense write-offs, a bank statement loan is a good option (if you own the company), but you may also choose to apply for a P&L Only loan or a no-doc loan (see explanation below).

You have a high net worth but no job.

Lenders will decide eligibility for a loan based on assets. Those who do not have an income from a job but have a high net worth may qualify for what is known as a no income verification mortgage or a “no-doc loan.” These loans come with extra consumer protections in recent years, making them a workable alternative for the traditional home loan.

You file multiple tax returns.

A no-doc loan is also a good option for those who file multiple tax returns. This can complicate the process of checking past returns, and a no-doc loan would allow for avoiding this part of the process. Like the previous case, other factors must be in good order to qualify.

What are the requirements to get a home loan without tax returns?

Aside from employment history, there are some other standard requirements for getting a home loan without tax returns. Here is a list of the basics, but be sure to ask your lender about any additional paperwork or information that might be required.

Credit score

While lenders may vary on their credit score requirements, the down payment required and interest rates may increase if the credit score is in the lower range of acceptable.

Credit history

Your credit history determines your credit score. Pay all bills on time: rent, utilities, credit card payments, and any loans. If possible, pay off credit cards and refrain from acquiring any new debt within a few months of trying to obtain a home loan.

Current debts

Regardless of how you plan to acquire a home loan, a lender will always look at your DTI (debt-to-income ratio). The smaller your debt, the better your chances of a home loan in the amount you’re looking for.

Liquid assets and savings

Your assets and savings will be balanced against your debt for DTI. If you have a cache of savings in addition to your income, you are a better loan risk for lenders, so be sure to list everything.

When it comes to qualifying for a home loan, some situations call for a break from the usual routine. As with any loan process, it’s a numbers game, and otherwise, well-qualified borrowers can forgo the need of a 4406t form. Be sure that you have all other information available, whether working on your own or with a CPA. Also, shop around to make sure that you’re getting the best loan for your situation.

If you’re ready to start your home loan process, call the home buying experts at Hero Home Programs™ today. They work with local vendors to get you the best rate on a home loan and help save thousands of dollars on the home buying journey.

Original post here: Can You Get a Home Loan Without Tax Returns?

What Is an Escrow or Impound Account?

The home buying process can be a complicated journey as there are numerous steps to go through. You need to obtain a pre-approval through a lender, hire a realtor, find a home, make an offer to buy, go through the underwriting process, have the home inspected, close on the home, etc. The list seems endless with many steps in between the simple ones mentioned. And sometimes, the jargon sounds foreign. One of these foreign-sounding things on the home buying to-do list is the escrow or impound account. If you’re wondering what that is and why you might want one, continue on. We’re breaking down the question of what is an escrow account and will help you decide if you need one or not.

Escrow Account in Mortgage

During the closing of a home sale, a standard part of the closing paperwork includes creating an escrow account. But what is it in a mortgage setting? The lender often sets up this account wherein the money comes from a portion of your monthly mortgage payment. The purpose of this account is to create regular monthly payments alongside your mortgage to pay related expenses such as your property taxes or home insurance.

How Does This Account Work?

An impound account doesn’t cost anything and the setup is done during the closing of a house sale. How it works is that the fees associated with property taxes and insurance are broken up into monthly payments and paid alongside your mortgage payment out of this account. It is essentially a savings account held in interest by your lender to pay insurance fees and property taxes as they come due. You make one payment to your lender each month and they take the mortgage portion out while depositing the difference into a specially designated account.

Do I Need an Escrow or Impound Account?

Setting up an escrow or an impound account is not always mandatory, but most homeowners and lenders prefer it. Some lenders do require the use of an escrow account, but not all. It is a good safeguard to ensure that all taxes and insurance fees are paid in a timely manner. If you decide against using such an account and your lender doesn’t mandate that one be used, you may have to pay a small fee not to use escrow. Keep in mind that this also means you are responsible for paying property taxes and insurance on your own, which can mean larger payments when they’re due, as opposed to paying a smaller amount over 12 months.

What if My Loan Doesn’t Include an Escrow Account?

If your lender does not have an escrow impound account in place or doesn’t require it, you may request one. This is a good idea for both budgeting convenience and assurance that appropriate fees are paid. If forgoing an escrow impound account, be sure to account for these expenses in your budget. If you neglect to pay property taxes, you may be subject to fines and penalties, have a lien put on your home, or even face foreclosure.

Setting up an Escrow or Impound Account

The account is set up and managed by your mortgage company. While shopping for your loan, be sure to tell your lender that you prefer an impound account for taxes and insurance. Some lenders may require this. After receiving your loan documents, the lender will include instructions to the settlement company on what the escrow company will put into the account. The necessary amount is calculated by taking the amount due for both property taxes and homeowners insurance over the year and dividing it by twelve.

Monitoring the Account

Your lender will complete an analysis each year to target any changes in insurance premiums and tax amounts as these can change yearly. Your monthly payment could go up or down to reflect these fluctuations. If the amount owed goes over what the analyst figured, you will have to pay the extra amount owed. If it doesn’t reach the amount given, you will receive a refund.

Key Takeaways

• Depending on key factors such as income, debt, and credit score, you may be required by a mortgage lender to set up an escrow impound account.
• Even if you are not required to have an escrow impound, it is a good idea to request one.
• An escrow impound account ensures that taxes and insurance on your property are paid in a timely manner.
• If you overpay into the escrow account, you will receive a refund. If you underpay, you will be required to pay the difference.

As a homeowner, you will notice that extra expenses that arise throughout the year are associated with home upkeep and emergency repairs. Unless you’re prepared to anticipate thoroughly, budget, and forecast payments for both property taxes and insurance every year, an escrow impound is extremely beneficial. If you are not required to have one, it is recommended to ask one from your lender.

If you are just starting your home buying journey, contact the experts at Hero Home Programs™. They will get you started with the right lender and other home-buying experts. They have spent countless hours cultivating relationships with key service providers to offer their clients discounted options. They work hard to find grants, rebates, and assistance in your local area to potentially save you thousands of dollars on your home purchase. Get started today with a free consultation.

Original post here: What Is an Escrow or Impound Account?

Do Teachers Get Special Mortgage Loans? 6 Mortgage Options for Educators

Homeownership is one of the most important steps you can take to build wealth in this country, yet it can seem out of reach for many people. Fortunately for certain professions, there is assistance available to make the dream of homeownership come true. Teachers can take advantage of special loans and deals that are offered to help those who work so hard to help others.

Different Mortgage Types for Teachers

Mortgage rates are not all the same. Before shopping around for a lender, become familiar with the different available rates so that you can make the best choice when searching for mortgage help for teachers.

Fixed-rate Mortgages

A fixed-rate mortgage, sometimes called an FRM, is a mortgage loan where the interest rate does not change throughout the term of the loan. This can greatly benefit a homeowner by allowing them a constant and reliable monthly payment that can be worked into their budget.

Adjustable-Rate Mortgage

An adjustable-rate mortgage, sometimes called a variable rate mortgage, is a mortgage loan in which the interest rate will periodically adjust to reflect the credit market trends. This kind of loan can be easier to get than a fixed-rate mortgage but can be unpredictable. If interest rates fall, the borrower will benefit from decreased payments. However, the opposite is true if the interest rates increase.

Shared Ownership Schemes

Shared ownership schemes, also known as equity sharing, make stepping up to homeownership a bit more reasonable for those who might otherwise have trouble getting a loan. With shared ownership, a person purchases a share of the property (usually anywhere between 25 and 75%) and has an option to buy more or all of it at a later time. You may buy in increments.

Buy-to-Let Mortgages

Popular in the United Kingdom for some time, and becoming increasingly popular in the United States as a way to buy rental properties, buy-to-let mortgages help investors purchase a home which is subsequently rented out for profit. For these kinds of loans, the down payment and interest rates can be higher than other types of loans.

Now that you know about the available types, let’s take a look at the mortgage deals for teachers.

Special Mortgages Loan and Deals for Teachers

Not only are teachers eligible for special loans and deals, but it is greatly to their benefit that they take advantage of them. Investing in a home purchase is a huge step, and special rates are hard to come by for most people.

Fortunately, as members of a helper profession, teachers can procure rates that are not available to most of the buying public. Here is a comprehensive list of the mortgage programs available to teachers.

6 Mortgage Programs for Teachers

Hero Home Programs™

Hero Home Programs™ helps teachers save thousands of dollars when buying a home. Available to first responders, healthcare workers, teachers, and other heroes, they will provide access to affiliates with competitive rates, as well as help you save money on related services such as real estate agents, title companies, home inspectors, and more.

Teacher Next Door

Teacher Next Door is a HUD program that finds federal, state, and local home loan programs for educators. Depending on the area, a teacher who qualifies can save several thousand dollars and may also qualify for additional down payment assistance.

Educator Mortgage Program

The Educator Mortgage Program offers various benefits like a faster turnaround time for loans, discounted closing costs, and discounted real estate agent fees.

Landed Down Payment Support

It can be difficult to impossible for some professionals to gather enough money for a down payment on a house. Landed Down Payment is a shared equity down payment program that supports essential professionals like teachers, helping them reach a 20% down payment so they can avoid paying private mortgage insurance.

Local Home Loan Programs For Teachers

You may check with your state to discover whether statewide loan programs are available to educators that aren’t offered on a national level. Most states have loan programs available for teachers to get a special mortgage rate.

Government-Backed Mortgages

The above options are just some of the programs available for teachers to get a mortgage deal. There are also government-backed mortgage programs that may assist.

VA Loans

VA loans are available to all active-duty military, veterans, and qualified survival spouses and offer the benefits of no down payment and no mortgage insurance for qualified buyers. If a teacher has served in the past, or their spouse has served in the military, a VA loan may be an option to consider.

FHA Loans

With two years of steady employment and qualifying factors such as DTI, you may be eligible for an FHA loan. This loan offers a low monthly rate and a minimum 3.5% down payment.

USDA Loans

USDA loans may be available to educators, depending on the income and location of the property to be bought. Check to see if they are available to you because you don’t have to come up with a down payment or pay for private mortgage insurance with a USDA loan.

Our teachers are so important. It’s their hard work that shapes the next generation, and as essential workers, they deserve a hand up in the homebuying process. Educators are a good financial risk, with steady jobs and incomes. Even if a teacher’s income isn’t enough to cover a down payment, there are many programs available for assistance. Explore your options and invest in a home that can make your money work for you.

Contact Hero Home Programs™ today. Their dedicated team will work tirelessly to save you money on your mortgage and the additional fees that come with purchasing a home.

Original post here: Do Teachers Get Special Mortgage Loans? 6 Mortgage Options for Educators

The Home Loan Process Explained

There are few things in life as important as purchasing a new home. Owning property is a crucial step to building wealth and establishing a long-term place in a community. It is imperative to understand the home loan underwriting process to create the stability that makes you an acceptable risk for lenders. Few people have the money to purchase a home outright, and so securing a home loan is a necessary step for the vast majority of the population.

Home Loan Process Approval in Ten Steps

You can follow these ten simple steps when beginning the home loan approval process. Keep in mind that home loans most often refer to initial loans secured to purchase a new home, but these steps (minus a few obvious steps, such as home shopping) may also be applied to the home equity loan process. Home equity loans are given to a homeowner, using the equity built in their home as credit. These are most often used for major expenses like education, medical bills, or home repair.

Determine How Much You Can Afford

First and foremost, decide what you can afford to buy. This requires a deep dive into your yearly and monthly budget, understanding what amount is feasible to pay for a mortgage. Remember that when you own a home, emergency repairs and unexpected expenses will arise. Be sure that you also have a budget for these eventualities when calculating costs.

Secure Pre-approved Loan

Once you have your financial house in order, you can find out from your bank whether you qualify for a pre-approved loan. You may receive, fill out, and submit a loan application from the lender’s branch office, website, or mobile app. VA loans are an option available to veterans, active military, and surviving military spouses. While the VA home loan process is similar to that of the conventional home loan process, there are many benefits for those who qualify, such as lower interest rates and a lower income-to-debt ratio.

Go House Shopping

There are a couple of ways you can look for your ideal house. You can look on your own, shop around on local websites, attend open houses, or drive through neighborhoods you like hoping to see ‘For Sale’ signs. Far more common and more straightforward is hiring a licensed real estate agent to do the legwork. Using a real estate agent makes a lot of sense, as they are professionals who understand all the ins and outs of homebuying. You tell them your price range and your requirements, and they can pinpoint options for your perusal. They have access to “comps” (comparable pricing in neighborhoods) and will have a far better idea of what a property might appraise for—saving headaches later on in the process.

Make an Offer

Be thoughtful when making an offer on a home. It can be tempting to overreach when you find the home of your dreams, especially if caught in a bidding war with another buyer or two. However, refrain from offering the full amount of your pre-approved loan. This may damage your credibility. Experienced sellers and agents look askance at this practice. It can eliminate wiggle room in negotiations, not to mention that you may no longer qualify if interest rates rise and you have to back out of the deal. Likewise, do not offer a lowball offer. It’s not an auction, and you’ll get easily priced out. Working with a real estate agent can help you avoid pitfalls in offer negotiation.

Home Loan Underwriting Process

Underwriting is simply defined as a lender verifying your financial details and the property details to give final approval for your loan. These include your debts, assets, income, and financials on the property. While underwriting happens behind the scenes, they may require input from you, such as proof of additional assets or further documentation on the previously submitted information.

Get Homeowners Insurance

Before your loan receives final approval, your lender will require proof of insurance. You should shop around early in the process for home insurance rates as they can vary significantly from one company to another. Make sure that you know if the home you’re purchasing is in a flood zone and that you acquire this additional insurance if it is.

Schedule Home Inspection

A home inspection must be conducted by a third-party professional who follows a strict checklist to check for the house’s structural and cosmetic integrity for sale. If they find a hidden issue, you may want to negotiate for repairs or for a price cut to accommodate.

Agree on the Rate

At this point, you will lock in the rate of your mortgage loan agreement. This rate determines the amount of interest that you will pay on the money you borrow. You may choose either a fixed rate or a variable rate. A variable-rate may pay off if interest rates remain low, though this is not going to be a likely scenario, especially throughout a 30-year mortgage. Generally, a fixed rate is safer as it is not subject to fluctuations in the market. This allows you to know exactly how much you will pay for your house each month.

Documents and Down Payment

There are loans available for zero down payment, but this is comparatively rare and requires excellent credit and DTI ratio. More typical is a 3 to 3.5% of the house sale. Most sellers and lenders will require you to have a down payment, and having one also provides instant equity. In anticipation of the final sale, all documents will be prepared for the final closing at this point.

Closing

Closing is the final step in the home buying process. This is when all documents are reviewed and signed by the parties. Be sure to ask any questions you may have about anything written in the contract or other paperwork. Once signed, the deal is done, and you are the new homeowner.

Purchasing a home is an enormous life decision and investment. While the home buying process can be overwhelming, it can be broken down into manageable parts. By referencing this list and working with local home buying experts and professionals, the process can be less a mystery and more a set of actionable steps.

Original post here: The Home Loan Process Explained

What Is a Good Faith Deposit?

A good faith deposit in a real estate transaction is an amount of money that is offered to the home seller as an act of intent to buy. This amount is offered to the seller and set aside in escrow as a signal that the buyer is serious about purchasing the home. It is typically used as a part of the down payment when the sale goes through, though it is not the same thing as a down payment.

What Is Good Faith Deposit Money?

Good faith deposit money is also known as “earnest money.” It is money laid down specifically to show the home seller that you’ve got skin in the game. It is a separate amount from the down payment, which is the amount of money the lender requires for a loan. By offering a good faith deposit, you are demonstrating to the seller that you won’t walk away from the deal.

Do You Need a Good Faith Deposit Money?

It depends. A good faith deposit is not strictly necessary for buying a home. But earnest money can make you stand out among other buyers if you are vying for your dream home amidst competition. This is especially true in a seller’s market.

How Much Earnest Money Is Needed?

A good rule of thumb is offering 5% of the home price as a good faith deposit. This should be enough to cover costs for the seller if you should walk away from the deal. For example, if you are buying a house for $300,000, then an appropriate amount of earnest money would be $15,000. Generally, the higher you can go, the better, especially in a competitive market where there are more buyers than sellers.

Is a Good Faith Deposit Refundable?

Say that the close doesn’t go through for one reason or another. Do you lose your good faith deposit? Fortunately, there are contingencies in place to protect both buyer and seller from losing out if a home sale transaction can’t be completed. Let’s takes a look at a few of these.

Appraisal Contingency

An appraisal contingency allows the buyer to back out of the purchase if the property is not appraised at the amount of the purchase price stated in the contract. A seller may try to renegotiate and bring their price down to bring it more in line with the amount named by the appraiser. However, if an agreement cannot be reached, a buyer may back out of the deal without consequence.

Financing Contingency

A financing contingency (also known as a mortgage contingency) gives the opportunity for buyers to back out of closing and reclaim their earnest money if they can’t secure financing at acceptable terms.

Home Inspection Contingency

A home inspection contingency states that a buyer has a specified amount of time to conduct inspections on a home. If the results of the home inspection are deemed unacceptable to the buyer, then the contract is null and void and all deposits are returned.

Contingency for Selling an Existing House

It can feel a bit like juggling trying to sell a house while trying to buy a new home. It’s a good idea to sell your existing home before buying a new one, but in some cases, it can’t be helped. When this happens, a home sale contingency exists to give the buyer a certain amount of time to sell their existing home to finance the new one. This contingency protects the buyer because if they cannot sell their home at their asking price, they may back out of the home sale.

Taking Care of Your Good Faith Deposit Money

Good faith deposits can be a significant amount of money, dependent on the price of the house. It is imperative to protect your investment by using a real estate agent or real estate lawyer for your transaction. Ask questions if there’s anything in your contract that you don’t understand. Review property disclosures (these are a requirement in most real estate markets) carefully. Make sure all contingencies are in place. Do not cave in to pressure from the seller to remove them until your loan has been approved, the house has been appraised, and an inspection has been done.

While not necessary for lenders and not always required by home sellers, a good faith deposit is an excellent way to be a competitive buyer. A seller’s market makes earnest money even more desirable and could make the difference when multiple contract options are placed in front of a seller. When planning to purchase a home, it is best practice to save a sum aside as earnest money on top of any required down payment. This will ensure you won’t get left behind when you finally find your dream home.

When you are ready to house search, reach out to the experts at Hero Home Programs™. They will work hard to save you money during the home buying process by setting you up with local appraisers, inspectors, and more. They will also do their best to find local grants that may be available to you. Let your Hero Home Program experts help you today.

Original post here: What Is a Good Faith Deposit?