Miscellaneous

Why Are Appraisals Important?

                When you get qualified for a mortgage, you get approved for your unique situation: your income, your debt, and your credit. Also, lenders check that the property is a good fit for you, which is done through an appraisal. Who Does the Appraisal? When an appraisal is done, an unknown, third-party, qualified professional is brought in to examine the property. The buyer and lender do not have the ability to choose the appraiser. This person will go to the property and look at the amenities of the property, and then compare that to all the properties that have sold in the area to determine a fair market value for your home. Is the Appraised Value Acceptable? A lender will look at the appraised value of the home, and compare that value to your contract price, whether you have bought the home or…

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Who Can Qualify for a VA Loan?

                        VA loans, or loans through the Veteran’s Administration, are special loan programs for veterans that require qualification. If you are looking at VA loans, you have probably heard of some of the great benefits: you can buy a home with no money down, you do not need monthly mortgage insurance (rather, there is just need a one-time funding fee built into the loan), and you get a competitive interest rate with low closing costs. It is probably one of the best loans out there and was designed for those who have served our country. Do You Qualify? If you have been in the Armed Forces, such as the Army, Navy, Air Force, Coast Guard, Marines, National Guard, or their reserves, you could be eligible. The VA loan program is inclusive of both active duty and qualified veterans. If…

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Making Income Changes While in the Process of Obtaining a Mortgage

                  What happens if you have to change jobs while you are in the middle of getting a mortgage? Lenders typically recommend that you do not make major changes if you are in the middle of trying to get a mortgage, because lenders look for continuity, and will have to re-verify information if major changes are made. However, many folks do not have a choice: sometimes a new opportunity comes up, or are forced to change jobs. The good news is that lenders can work with you, and use the new information (income, salary, etc.) from your new position for your qualifying. This process can be started with just an offer letter, so the terms (salary, start date, etc.) are known to get the process started. Typically, at least one pay stub will be required before closing to show that you have…

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What Can You Do with a Renovation Loan?

What specifically are you allowed to do with a renovation loan? The real question is, “What can’t you do?” because there is a lot of flexibility with this type of loan. There are many different ways to use this program. There are three basic types to look at: FHA 203k renovation loan: a great way to get a government-insured property with as little as 3.5% down, including costs of repairs Homestyle renovation loan: better if you have a bit more of a down payment VA renovation loan: includes special benefits for veterans and disabled veterans The good thing about renovation loans is their flexibility: you can use it for something that just needs a little bit of work or a home that needs a tremendous amount of work. It doesn’t matter what the condition of the property is currently in, but what the condition will be once you finish making…

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What Mortgage Programs Are Available to Veterans?

If you’re a veteran or a disabled veteran, what special programs for buying a home are available to you? If you served your country, you can take advantage of the Veterans Administration Loan Program that allows you to get 0% down on a home loan. In addition, there are other benefits with a VA loan, which will be described below. Funding Fee When setting up a Veterans Administration loan, a funding fee is attached to the mortgage. VA loans do not require mortgage insurance, as with typical mortgages when you put less than 20% down. However, there is a one-time funding fee that is added back into the mortgage. The amount of the funding fee depends on whether you were active duty, or served in the National Guard. However, if you are a considered a disabled veteran, this funding fee is waived and can save you money up front. Real…

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Down Payments and Gifts: Part 2

In my last post, Down Payments and Gifts: Part 1, we discussed what a down payment is, how much you might need for a down payment, and how the type of loan determines how you can use a gift. In this post, we will explore the definition of a gift in the world of mortgages, what paperwork you’ll need to verify a gift, and the overall rules for gifts for all loan types. What is considered a “gift”? Let’s say Aunt Judy gives you $50, and Grandma and Grandpa Smith give you $1,000 for your college graduation. Can you use both as gifts towards a down payment on a house? Absolutely! It’s just that the $1,000 probably requires a little documentation. Look at it from a lender’s point of view. When they examine your accounts, they want to be sure that all of the money in there is yours. If…

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Down Payments and Gifts: Part 1

Whether it’s in a jar labeled “Future Home” or in a special account at the bank, you’ve been saving your pennies for a down payment. Go you! But how much do you have versus how much do you need? Are grandma and grandpa giving you a chunk of change for your graduation towards the down payment too? Before answering these questions, let’s take one small step back in order to define some terms. What is a down payment? The definition of a down payment is the initial payment made when something is bought on credit. For our purposes, that something is a house. The money you use for a down payment is the foundation for the equity you’ll build in your home over time as you make mortgage payments. Equity is the total amount of money you’ve paid towards owning your home. For example, if you made a $15,000 down…

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Credit 201: FICO Credit Scores and Improving Credit

In our last post, Credit 101: Understanding Credit for Home Buyers, we discussed some basics about your credit and where to find your credit reports for the purpose of understanding why having good credit is so important when applying for a home loan. This next mini educational course will go over what a FICO score is, what impacts it, and start exploring how to improve your credit score. Welcome to Credit 201! What is a FICO credit score? FICO stands for Fair Isaac Corporation, who developed the first credit scoring system back in the 1950s. FICO is now the official name of the company, but they still generate THE credit score lenders refer to when deciding on your eligibility for a loan. Conversationally, “FICO score” is synonymous with “credit score.” However while all FICO scores are credit scores, not all credit scores are FICO scores. It is important to make…

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The Benefits of Having a Larger Down Payment

Consumers face many decisions when looking to purchase a home. One of these many decisions include how large of a down payment to put down. Their down payment is the sale price less the loan amount. In the vast majority of cases, the potential home buyers must have their financial assets, at a bare minimum, be as large as the down payment they will make. Many consumers, despite having the capacity to put down more, put down as little as they can because they view a down payment as a loss instead of looking at it as the investment that it is. The nice thing about down payments is that the return on investment is 100 percent risk free. It is an investment that yields a return far surpassing anything else available to consumers. For Example: If Bob is planning on purchasing a home for $200,000 financed, a mortgage of…

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Should you Include your Spouse on an Application?

When deciding whether or not to include a spouse on an application for a mortgage there are a few things you need to take into consideration. Let’s say that you are looking to purchase a $450,000 home and you make $84,000 a year and have a credit score around 800. Your spouse, on the other hand, has a credit score around 680. You also have about $25,000 of financial assets in your name and no debts. Your spouse has $32,000 and zero debt and both of you plan on residing in the home for about 7 years. When applying for a mortgage jointly, both of your incomes are combined as well as any financial assets you may have as individuals. When combining both assets and incomes, it strengthens your application thus making it more probable that you’ll qualify for the mortgage you’re wanting. On the flip side, filing jointly will…

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