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Jan 24

4 New Year’s Resolutions For Homebuyers

NewYears

New Year’s resolutions are hard to keep—but if you are planning to buy a home in 2018 or later, that decision will benefit you for life. With a few smart choices, these resolutions can help you to save money, improve your credit score, and to find a mortgage and home that fits your lifestyle.

Look ahead at 2018 with these resolutions:

1. Start a savings fund

The first step in preparing to buy a home should be to start a savings fund. FHA Loans require a down payment of 3.5% of the home’s cost. Other mortgages typically see down payments of 20% of a home’s price, and it can take time and planning to accrue that amount of money.

If you are not able to provide a large down payment, learn more about FHA mortgage loan requirements.

If you have trouble saving, try using a financing app, look for places where you can cut spending, or speak with your bank about creating a savings plan. Any amount that you can set aside will be useful in buying a home.

2. Check your credit score

Be prepared to check your credit score before planning to shop for a mortgage. If you have established credit accounts and a good history of on-time payments, then your score may already be above 580, which is required for an FHA loan.

However, if you do not have good credit history, here are a few ways that you can plan to improve your score in just one year.

  • Lower your credit usage. You should use no more than ⅓ of your available credit each month.
  • Make on-time payments for your credit accounts. A single late payment can be one of the largest negative impacts on your credit score. If you have trouble remembering payment dates, use your accounts’ online interface or app to set up automatic payments on each due date.
  • Pay your full balance each month. Showing a consistent payment history and low credit usage will help improve your credit score.
  • Don’t over check. If you are applying for credit cards, mortgage loans, or other large credit accounts, a hard pull will be made on your accounts. This can negatively impact your score if too many occur within a year.
  • Similarly, a self check of your credit score will not impact it negatively. This is called a soft pull. Make sure that you use a reliable credit checking agency to view your score periodically. Many banks and financial institutions are now providing monthly credit reports as an included service with certain accounts.

With these credit tips, you can begin to see your score improve. If you make a habit of using these methods, you can expect to have a better credit score by the next new year.

3. Plan for pre-approval

When you are shopping for homes, pre-approval can help you to make a decision on a home when the time is right. Homes can sell faster than you expect, and getting a pre-approval can allow you to make an offer on a home when you are ready to act.

4. Choose a mortgage lender that understands your needs

When you are shopping for pre-approval, you can start to build a relationship with a mortgage lender that understands your interests, your home market, and what you expect in a loan.

If you are looking for a close, personal connection with a mortgage lender, try shopping locally. Local mortgage lenders are often easier to contact, can meet with you to explain costs and other variables, and are most familiar with your local market values.

Taking time to understand your finances and learn about your mortgage options can be helpful at any time of the year. If it is your goal to buy a home in 2018, RatePro Mortgage wishes to help with any information that you may need. Good luck!

Are you planning to refinance your home this year? View more information here!

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Dec 19

What Mortgage Loan is Right For You?

web mortgage loans

Knowing more about different types of mortgages can assist you in finding the right lender, choosing the best type of loan, and planning for different variables and options. Ask your mortgage lender to explain several types of plans, and work together to determine which loan would be best for your current and future needs.

Conventional Mortgages

A conventional mortgage, also known as a fixed rate mortgage, has a fixed APR for the duration of the loan term. However, loan terms are variable. 15- and 30-year conventional loans are the most common, and may affect your down payment, APR, and monthly payment. Either way, a conventional mortgage will have a fixed APR until you choose to refinance or pay off the loan.

FHA Loans

FHA loans can be the easiest type of loan to qualify for because they require a low down payment of 3.5% and allow the purchaser to have a credit score anywhere above 585. Although these are the minimum requirements for starting an FHA loan, having a higher credit score and larger down payment can affect your mortgage term, APR, and monthly payment. Each individual mortgage lender may have different specifications.

Read more about FHA Loans here.

VA Mortgage Loans

VA Loans are specifically for United States veterans, service members, and widowed spouses of deceased service members. To purchase a home with a VA loan, you do not need to provide a down payment or purchase mortgage insurance.

Although costs are generally lower with a VA Loan, they do require a one-time lending fee of 2.15%. This fee is reduced to 1.25% is the buyer provides a down-payment of 10% or more. Another benefit of a VA Loan is that Veteran’s Affairs will re-negotiate on behalf of the loan recipient should they run into financial difficulty.

You can learn more about the qualifications for VA Loans here.

Adjustable rate mortgages

Adjustable rate mortgages come in several different types and are available based on the lender you choose to work with. The variables that affect the APR could be loan term, current market rates, repayment history, cost of the home, and income. Choosing an adjustable rate mortgage is usually for a unique home buying situation, such as a large purchase.

One year ARMs

A one-year Adjustable Rate Mortgage will have a fixed APR for one year, and afterward, have a rate that changes yearly for the remaining life of the loan. This adjustable APR will be based on the loan index, repayment schedule, duration of the loan, and other factors. The benefit of a one year ARM is that the first year will generally have a very low APR. They will also have an adjustable rate cap, which prevents the APR being raised above a certain rate.

5/5 and 5/1 ARM

You may also benefit from a 5/1 ARM (adjustable rate mortgage) loan. A 5/1 ARM will have a fixed low-interest rate for the first 5 years of the loan, and afterward, the interest rate and monthly payment will be variable from year to year based on the loan index, as well as the market and payment history. The benefit of a 5/1 is the low-interest rate if you are likely to pay the loan off within that time.

USDA mortgage loan

Also known as the United States Department of Agriculture (USDA) Rural Development Loan or Rural Housing Loan, a USDA mortgage loan was created to help populated rural areas and to stimulate economic growth. These loans are for designated rural areas. Choosing a USDA loan could allow you to finance 100% of the purchase price.

Refinancing a Mortgage

A mortgage loan is different from other loans in that you are building equity as you pay off the loan. For this reason, both complete and incompletely paid off mortgage loans are available for refinancing with your lender or another. Refinancing a loan can be an excellent financial choice if you are making new investments and wish to use the equity that you already have.

Review the terms of your mortgage to understand this flexibility, and know that it may only be an option with some longer-term mortgages. Learn more about refinancing a mortgage here.

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Nov 20

7 Ways to Build Equity in Your Home

How to build equity in your home website 1

Your home’s equity is an important part of your mortgage loan. Believe it or not, the equity (or value of your home) is almost always growing. If you have plans to refinance, building your home’s equity can help you to get a larger amount or a lower interest rate. It will also play a part in the sale of your home if you plan to sell.

Follow these steps to build equity:

1. Increase your down payment

This is the single fastest way to build equity in your home right from the start. If you pay a larger down payment, then you will own more of your home when you purchase it with a mortgage. A large down payment is not necessary, but it will help you to build equity quickly.

2. Pay more than your monthly principal

Find ways to save extra out of your monthly budget and put it toward your monthly principal, or mortgage payment. Even the smallest additional amount can have huge effects on your equity compounded over time. Try setting aside a small amount to pay toward your principal each month, and increase this as possible.

3. Try new ways to save

There are smartphone applications, like Digit, that can allow you to save money over time as you use your money in regular ways. This money can be withdrawn and added to a mortgage payment at any time, and could add up in big ways! If you are not a fan of applications, try to find other small ways in which you could save small amounts on everyday purchases.

Click here for information on refinancing your mortgage

4. Start a shorter mortgage term

If you choose to sign a shorter mortgage term, you will build equity in your home at a faster rate. Although your monthly payments will be higher, your total interest paid on the life of the loan will be greatly reduced, increasing your equity.

5. Renovate, remodel, or improve

By adding value to your home, your equity will increase. Choosing to start a renovation is more than a labor project, it’s a financial one! Assess how much you will spend on a renovation and the value that it could add to your home. It is also likely that the value of your neighborhood is fluctuating over time as well which can add to your home’s value.

6. Put extra money to work

If you have extra money from a work bonus, selling stocks, or a gift, use it to pay more toward your principal. Just make sure that you specify to the lender that the additional funds are to be paid towards your principal in order reduce the future interest costs and speed up your equity improvement.

7. Practice financing

Learn about your finances and spending patterns, and find ways in which you can save the most money to put toward your mortgage loan. You can use financial planning apps, like Mint, and other similar apps, that allow you to monitor your spending, check your credit score, and create budgets.

Benefits of new equity

When you own more equity in your home you’ll be able to get more out of a refinance, renegotiate a mortgage loan, and improve your credit. If you have financial plans for the future, make sure that you are considering building your equity in your home.

 

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Sep 13

Don't Let the Equifax Breach Prevent You From Getting a Mortgage Loan

equifax

 

Here’s how the Equifax breach could impact your chances of getting a mortgage loan:

Credit scores are extremely important in getting a mortgage. Good credit can be the difference between getting a home loan when you are ready to make an offer, or having to wait to improve your credit score—even if you are prepared in other ways.

The consumer credit reporting agency Equifax reported that the unauthorized access occurred between mid-May and July, and was discovered on July 29. More than half of the US, an estimated 143 million consumers, could be affected by the breach.

Luckily, there are a few steps that you can take now to protect yourself from having your credit score compromised and your identity stolen:

1. Begin monitoring your credit and bank accounts

There are several agencies that will give you a free credit report, like www.annualcreditreport.com. This is not considered a “hard” credit pull, which could negatively affect your credit, but will allow you to see where your credit is being used. Monitor your credit report and bank accounts for any charges that seem unusual.

2. Use Equifax’s free credit monitoring service

To make amends for the largest private information breach in the history of the U. S., Equifax is offering a free credit monitoring service for 1-year. Although this does not have a long-term solution, credit information that is stolen is usually used very quickly, so it can help you to keep your identity safe.

You can visit www.equifaxsecurity2017.com to sign up for this service.

 

 

3. Freeze your credit

When you freeze your credit, no business can open a new account under your name or Social Security number. It can be tedious to unfreeze, but it will not affect your credit score. After receiving criticism from customers, Equifax is now allowing consumers to freeze their credit without paying any fees. However, it’s still important to freeze your credit with the two additional credit reporting agencies, Experian and TransUnion.

To freeze your credit at Equifax, you'll want to go to freeze.equifax.com.

4. Set up monthly reminders to check your credit score

You and your family can better protect your financial security by using a monthly reminder to check credit reports and bank accounts. Checking your credit report on a monthly basis will not affect your score adversely.

5. Use a financial monitoring application

Mint is a financial planning application owned by Intuit, the creators of Turbo Tax. Mint, and other similar apps, allow you to monitor your spending, check your credit score, and create budgets. Mint will also notify you if an unusual charge is made to one of your accounts.

Although there is no way to guarantee that monitoring your credit will prevent a thief from stealing your identity or opening a credit account, following these steps may help you to prevent it from impacting your credit score. This can give you more peace of mind if you're preparing to purchase a new home.

 

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Aug 24

Getting Started with VA Loans


VA Loan

A VA loan is a mortgage loan that is offered specifically for active military and veterans and is guaranteed by the United States Department of Veterans Affairs (VA). A VA loan is issued by a mortgage lender, similar to other loan types, but is backed by the Department of Veterans Affairs. VA loans have additional benefits, making them an attractive option for buying a home if you are eligible. To purchase a home with a VA loan, you do not need to provide a down payment or purchase mortgage insurance.

Although costs are generally lower with a VA Loan, they do require a one-time funding fee of 2.15%. This fee is reduced to 1.25% if the buyer provides a down-payment of 10% or more, and is zero if the veteran receives disability. Another benefit of a VA Loan is that Veteran’s Affairs will renegotiate on behalf of the loan recipient should they run into financial difficulty.

Who is Eligible for a VA Loan?

VA Loans are specifically for United States veterans, service members, and widowed spouses of deceased service members. You are able to apply for a VA mortgage if:

  • You are on active-duty military
  • You were separated from military service in a situation other than “dishonorable discharge”
  • As a veteran or active military, if you meet specific length-of-service requirements
  • As a reservist or a member of the National Guard, if you meet specific length-of-service requirements
  • You are a qualified surviving spouse of a deceased veteran

In addition, the home must be intended as your primary residence. Also, you must have a valid certificate of eligibility from the VA.

Benefits of a VA Loan

There are many benefits that make VA loans an attractive option for those that are eligible, including:

1. You do not need to provide a down payment. Because the loan is backed by the VA, you are not required to provide a down payment. However, if you choose to provide one, your monthly payment will be reduced.

2. You do not have to purchase mortgage insurance. Again, because the loan is backed by the VA, there is less liability for the lender and you do not need to purchase mortgage insurance.

3. There is no minimum credit score. However, a lender can impose a credit score range for approving a VA loan from their firm, which is typically 620. The VA will not require a minimum mortgage score when granting approval.

4. Lower annual percentage rate. VA loans generally have a lower APR than other loan types, however, this is variable based on the lender and the type of loan.

5. You can reuse your VA loan benefit. Unlike an FHA loan, you can reuse a VA loan benefit, meaning that you may be eligible to receive a VA loan to purchase an additional home or to refinance.

6. VA loans have a lower closing cost. The VA requires loan recipients to pay a one-time lending fee, and the lender may receive a 1% origination fee that is similar to closing costs on other loans. Because of the reduced closing cost, VA loans are easier to qualify for if you do not have large savings.

Types of VA Loans

There are several types of VA loans, and each has separate qualifications.

1. Home purchase
Also called a VA purchase loan, this loan allows veterans and active military, who meet the requirements of the VA, to purchase a home.

2. VA refinance
Similar to other refinance loans, a VA refinance loan allows the homeowner to cash-out their equity in their home.

3. Interest rate reduction refinance loan
A VA interest rate reduction refinance loan, or IRRRL, lowers your interest rate by refinancing your current VA loan. This is similar to other refinance loans, and allows the homeowner to find a lower APR or monthly payment.

4. Adapted housing grants
The VA provides grants to active military or veterans that require modifications in their home in order to live with a permanent disability. These grants are not found through a mortgage lender but come from the VA directly. However, if you are seeking an adapted housing grant, it may be important to begin the process before your loan is finalized.

Shop Around

When applying for a VA loan, homeowners should still shop for the best lender that will meet their specific needs. Interest rates may vary from one lender to another.

 

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