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Mortgage Blog

Sep 9

What to Expect With Closing Costs

What to Expect With Closing Costs web

When preparing to buy a home, there are a few things that most people are prepared for. And when you close on a home, it means that the end of your negotiations are over, your mortgage is approved, and you and the seller are prepared for sign and have the property turned over. However, you will also need to prepare for closing costs as an expense before you finalize the purchase of your home. Here’s what you need to know about closing costs:

What are closing costs?
Closing costs are fees associated with your home purchase that are paid at the closing of a real estate transaction. These costs are typically between 2-5% of the purchase price of their home. What makes up closing costs is unique to the type of mortgage lender that you work with, as well as your location and the type of mortgage that you choose. There are multiple factors that make up closing costs, but they will usually be itemized and explained to you by your mortgage lender. Some of these fees may also be negotiable, but remember, this must be done prior to closing.

Where can I find my closing cost?
You will receive a closing disclosure by your mortgage lender 3 days before your loan closes. This document has a lot of useful information, including the amount of your loan, interest rate, monthly payment, and the closing costs.

Before you get here, you should have been given a loan estimate from your mortgage lender which would have included a summary of these costs. There are restrictions that prevent a mortgage lender from increasing these costs substantially, so this should be used as a first indicator of how much money you will need to have set aside.

How much should closing costs be?
Closing costs are typically between 2-5% of the purchase price of your home. If you purchase a home that is $150,000, your closing costs will be between $3,000 and $7,500. Because there are other costs that come with owning a home, such as mortgage insurance, it is important to be prepared to pay these costs at closing.

What factors determine the cost of closing costs?
The items that make up your closing costs can vary, but they will most likely include appraisal and attorney fees, title insurance and services, as well as local and state taxes and recording fees. These fees are all a normal part of purchasing a home, and should be easily explained by your mortgage lender.

Other costs include the set up of your escrow account for the payment of future real estate taxes and homeowner’s insurance.

Is there a way to not pay closing costs?
You can avoid pay closing costs by getting a no-closing cost mortgage. This type of mortgage does not require you to pay costs at closing. However, the buyer will usually have to pay an increased monthly interest rate to make up for these costs.

In some instances, closing costs may be paid by the seller of the home if you agree upon this in the purchase and sale agreement. Also, if you are required to move for your career, your company may be able to pay or subsidize your closing costs. It’s always worth asking.

When can I ask my mortgage lender or realtor about closing costs?
You can, and should, speak with your mortgage lender about closing costs immediately. When you apply for pre-approval, a mortgage lender or bank will typically evaluate your finances with fees like closing costs in mind. Because they are paid at closing, it is another important item to save for when planning to purchase a home.

When you are looking to purchase a home, there are a lot of things that you may have questions about. Finding a local mortgage lender that you can rely on will help you to understand everything that you need to know about this important process. Visit RatePro Mortgage to answer all of your questions.

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Jul 18

Tips for Buying a Home When Mortgage Rates are Rising

Tips for Buying a Home When Mortgage Rates are Rising

Mortgage rates have risen about .5% since the end of 2017 to 4.625% for a 30-year conventional loan. If you are planning to buy a home this year, it’s important to learn what this could mean for you.

The mortgage rate increase will have an affect on your monthly payment. It may not be a large amount each month, but the cost increase will add up over time. However, this has happened steadily over the past decade, and it doesn’t mean that this is a bad time to buy a home.

Here are a few things that you can do when mortgage rates rise:

Lock your mortgage rate
Speak with your lender about locking your mortgage rate. This means that your interest rate will be frozen until your closing, ensuring that you will not pay more in interest than the rate you were quoted at the time you sought pre-approval. This can be helpful if month-to-month interest rates seem variable.

Consider increasing your down payment
Even if interest rates are rising, the lowest rate available is always going to go to an ideal homebuyer. If you can increase your down payment, you will have a better chance of getting a lower interest rate.

Consider your price range closely
When interest rates increase, the housing market can slow. This often means that houses on the market may be open to selling at a lower price range. If this is not the case, consider reevaluating your price range now that interest rates have changed.

Pay down your ARM mortgage
If you have an ARM (adjustable rate mortgage) and the rate is going to change soon, you will likely pay more per month due to the increase. If you can pay more at this time, you can decrease your total amount owed prior to the increase in interest.

Buy discount points
Most lenders will allow you to pay more money in loan costs with the specific goal of reaching a lower interest rate, called buying discount points. The amount paid is determined by the loan amount, and will lower your rate by .125% increments. The larger the rate decrease, the larger the amount of discount points.

Don’t panic. Mortgage rates have fluctuated up and down for many years. Monitoring interest rates has always been a part of buying a home, but it should not dissuade you from making a purchase when you are ready for it.

Contact RatePro Mortgage for the current rate trends and to learn the best time to lock in your interest rate on a mortgage.

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Apr 19

Everything You Need to Know About FHA Loans in 2018

Everything about FHA Loans 2018

FHA (Federal Housing Authority) Loans are designed for first-time homebuyers and can help buyers with low or building credit to make homeownership a reality. FHA Loan limits are set by the U. S. Department of Housing and Urban Development, or HUD.

It is important to stay up-to-date on what these changes are if you are interested in signing an FHA Loan in 2018. And remember, these limits can vary by state and housing market, so be sure to check with your local mortgage lender to discuss the current rate.

The national FHA loan limit for high cost markets will increase to 679650.The national limit for FHA insured Home Equity C 1

What is a high-cost or low-cost market?

Locations within Virginia range from low-cost to high-cost. The central Virginia market, including Richmond, is currently set at $535,900.

FHA loan limits increase when the average price of homes rises. This means that the limit is considering the average home price over the past two years in Virginia. It is also expected that home prices will continue to rise and FHA loan limits may change again to correspond. This could mean that FHA Loans can work with your home buying budget and correspond with the market that you wish to buy in.

Copy of FHA3

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Lender requirements

Although an FHA Loan is insured through the Federal Housing Agency, the mortgage lender may have specific requirements that they set to qualify for an FHA Loan. It is important to discuss these requirements before deciding what type of loan that you would like, and it may be helpful to learn about other loan options as well. Remember, when looking for a mortgage, a priority should be the face-to-face contact only available from a local mortgage lender.

Want to learn more about other loan types? Check out What Mortgage Loan is Right For You?

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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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