Carol George's Blog
If you are thinking of buying a home, you probably have been getting your finances for some time. First-time homebuyers need the right information to avoid making big mistakes when they purchase their homes. The leap into home ownership is a big one, and you’ll want as much information with you along for the ride. Below, you’ll find a crash course on mortgages for first-time homebuyers.
Every homebuyer needs to prepare ahead of time for the process to be smooth. Research different lenders in your area and see what their rates are. If you talk to your lender about your goals and what type of loans you’re looking for, you’ll understand all of the costs that you’ll face ahead of time. You don’t want any surprises when it comes to signing a contract for a home.
Every Mortgage Is Different
It’s easy to think that all home loans are created equal, but they aren’t. The diversity in types of home loans is why you need to research and meet with a lender ahead of time. Talk to your real estate agent and see who they suggest. Your agent is a useful resource because they want your entire transaction to go smoothly for everyone involved. There are many different kinds of mortgages, and you need to make sure you’re getting the loan that’s right for you. Be sure you understand the specifics of each loan before you sign on.
What You Need In Order
Before you even head into the home buying process, there are a few things that you’ll need including:
- Cash for a downpayment
- A budget
- Knowledge of all of your finances
- Where you’d like to look for a home
- An idea of how much you can spend on a home
- Information to get pre-approved including tax returns, proof of income, and bank statements
Once you have saved up cash for a downpayment, it’s time to take a look at your budget. Can you afford a monthly mortgage payment in the price range that you hope to buy? How much money will you have left over each month? Should you adjust your expectations?
You’ll need to save up a bit of cash before you know that you’re ready to buy a home. It’s recommended that you have at least 20 percent of the purchase price of a home to put down towards your loan. The more you put down, the lower your monthly payments will be on the mortgage. So saving is the next big step in securing a mortgage in the smoothest possible way.
Securing a mortgage can take years of planning and saving. Depending on credit score and financial history, it can be difficult for some people to secure a mortgage with a reasonable interest rate and down payment.
As a result, the U.S. government--at both the federal and state level--has created several programs to make the goal of homeownership more achievable for more Americans.
These programs are designed to help a number of people, including first-time homebuyers, low-income families, people living in rural areas, Native Americans, and veterans and servicemembers of the United States military.
In today’s article, we’re going to be talking about “VA loans,” or loans guaranteed by the United States Department f Veterans Affairs.
What is a VA Loan?
When a bank chooses to approve someone for a mortgage, they have weighed the risks of that person’s ability to pay back the loan. The less certain a bank is that they will see a return on their investment with a borrower, the higher the down payment and interest rate they will require.
One incentive that the U.S. Department of Veteran Affairs offers its service members and veterans is the ability to receive a loan that is, in part, guaranteed by U.S. Government. That means that lenders can safely approve you for lower interest rates and down payments knowing that the money they are lending you is insured.
Who is eligible for a loan?
Loans guaranteed by Veterans Affairs aren’t strictly for veterans. Active duty service members, including National Guard and Reserve Members may also be eligible. In addition to service members, people who are or were spouses of veterans or service members might also be eligible for a VA loan.
Specific eligibility requirements can be somewhat complicated, so it’s a good idea to visit the eligibility page or contact your local Veterans Affairs office.
What are the perks of a VA Loan?
If you’ve spent a significant portion of your time serving in the military, there’s a good chance that saving for a home has been placed on the back burner. Shopping around for a loan with an affordable down payment can be daunting or impossible for many.
Fortunately, with a VA loan eligible recipients are able to receive a loan with a low down payment or even no down payment.
In a time when down payments can average 20% of the mortgage, that can mean a lot of money you won’t have to spend up from. For example, a home that costs $275,000 would have a 20% down payment of $55,000.
What are the fees?
This great deal does come with one catch. As with many loan assistance programs, there is a fee charged for the services. On top of the funding fee charged by the VA, there are other costs associated with buying a home.
These may include appraisals, inspections, credit reports, and more. Additionally, lenders may charge a 1% flat fee for those using a VA loan.
For those who want to acquire a house, it helps to get your finances in order. That way, you can quickly and effortlessly navigate the homebuying journey without having to worry about how you'll afford your dream house.
There are many quick, easy ways to straighten out your finances before you embark on the homebuying journey, such as:
1. Assess Your Credit Score
Your credit score ultimately can play a major role in your ability to secure a great mortgage. If you understand your credit score, you may be able to find ways to improve it prior to conducting a home search.
It is important to remember that you are entitled to a free copy of your credit report annually from each of the credit reporting agencies (Equifax, Experian and TransUnion). Request a free copy of your credit report today, and you can take the first step to evaluate your credit score.
If you find that your credit score is low, there is no need to worry. You can always pay off outstanding debt to improve your credit score over time.
Also, if you identify any errors on your credit report, you'll want to address these mistakes immediately. In this scenario, you should contact the agency that provided the report to ensure any necessary corrections can be made.
2. Look Closely at Your Monthly Expenses
When it comes to buying a house, it generally helps to have sufficient funds for a down payment. The down payment on a house may fall between 5 and 20 percent of a home's sale price, so you'll want to have enough money available to cover this total for your dream residence.
If you evaluate your monthly expenses, you may be able to find ways to save money for a down payment on a house.
For example, it may be beneficial to cut out cable TV for the time being and use the money that you save toward a home down payment. Or, if your dine out frequently, cooking at home may prove to be a substantial money-saver that could help you speed up the process of saving for a down payment.
3. Get Pre-Approved for a Mortgage
With pre-approval for a mortgage, you can enter the housing market with a budget in hand. Then, you'll be better equipped than ever before to narrow your search to houses that fall within your price range.
To get pre-approved for a mortgage, you'll want to meet with banks and credit unions. These financial institutions can teach you about different mortgage options and help you assess all of the options at your disposal.
Furthermore, don't hesitate to ask banks and credit unions about how different types of mortgages work. This will enable you to gain the insights that you need to make an informed decision about a mortgage based on your financial situation.
If you need extra help as you prepare to pursue a house, you may want to hire a real estate agent as well. In fact, a real estate agent can help you find a high-quality house at a budget-friendly price in no time at all.
Obtaining a mortgage can be overwhelming, particularly for a first-time homebuyer. Lucky for you, we're here to help you streamline the process of analyzing various mortgage options and choosing one that matches or exceeds your expectations.
Now, let's take a look at three tips to help first-time homebuyers secure the ideal mortgage.
1. Assess All of the Mortgage Options at Your Disposal
Both fixed- and adjustable-rate mortgages are available, and homebuyers who understand the pros and cons of these mortgage options may be better equipped than others to make the right mortgage decision.
A fixed-rate mortgage ensures a homebuyer will pay the same amount each month. For example, a 30-year fixed-rate mortgage enables a homebuyer to budget for monthly home payments over the course of three decades. And in many instances, a homebuyer may be able to pay off a fixed-rate mortgage early without penalty.
On the other hand, an adjustable-rate mortgage may start out with a lower monthly payment that escalates over the course of a few years. An adjustable-rate mortgage, for instance, may allow a homebuyer to acquire a home that surpasses his or her initial budget thanks to a lower initial monthly payment. However, after the first few years, the monthly mortgage payment may increase, and a homebuyer will need to plan accordingly.
Assess your mortgage options closely – you'll be glad you did. By doing so, you can boost your chances of selecting a mortgage that works well based on your current and future financial needs.
2. Evaluate Your Credit Score
Believe it or not, a first-time homebuyer's credit score may impact his or her ability to get the right mortgage. Fortunately, a first-time homebuyer can analyze his or her credit score without delay.
You can request a free copy of your credit report annually from each of the three credit reporting agencies (Equifax, Experian and TransUnion). Then, with your credit report in hand, you can better understand how potential lenders may view your mortgage application.
Of course, if you receive a copy of your credit report and find glaring errors, be sure to let the credit bureau know immediately. This will enable you to get any mistakes corrected and ensure these problems won't slow you down as you pursue your dream residence.
3. Consult with Potential Lenders
Although getting a mortgage may seem like an uphill climb at first, consulting with potential lenders may prove to be exceedingly valuable, especially for a first-time homebuyer.
Banks and credit unions employ friendly, knowledgeable staff who are happy to educate you about assorted mortgage options. These lenders can teach you about the ins and outs of various mortgage options at your convenience.
Lastly, if you need extra help in your search for the perfect mortgage, real estate agents may be able to offer assistance. These housing market professionals can provide honest, unbiased recommendations about lenders in your area so you can move one step closer to securing your ideal mortgage.
Ready to get a mortgage for the first time? Use these tips, and you can accelerate the process of obtaining a mortgage that suits you perfectly.
Finding a mortgage lender should be easy, particularly for homebuyers who want to purchase a high-quality residence without having to worry about spending too much. However, many mortgage lenders are available nationwide, and the sheer volume of lenders can make it difficult to choose the right one.
Lucky for you, we're here to help you streamline the process of selecting the ideal lender.
Now, let's take a look at three tips that homebuyers can use to accelerate the process of choosing the perfect lender.
1. Know Your Credit Score
Your mortgage interest rate may vary based on your credit score. As such, you should learn your credit score before you begin your search for the right lender. This will enable you to boost your credit score if necessary – something that may help you get a preferred mortgage interest rate.
You are eligible for one free copy of your credit report annually from each of the three major credit reporting agencies (Equifax, Experian and TransUnion). Request a copy of your credit report, and you can find out your credit score and map out your search for the ideal mortgage lender accordingly.
2. Meet with Several Mortgage Lenders
There is no shortage of mortgage lenders in cities and towns around the country. Therefore, you should allocate the necessary time and resources to meet with several credit unions and banks to explore all of your mortgage options.
Each lender can provide details about fixed- and adjustable-rate mortgages, how these mortgages work and other pertinent mortgage information. This information can help you make an informed decision about a mortgage.
In addition, don't hesitate to ask questions when you meet with a mortgage lender. If you obtain plenty of information from a mortgage lender, you'll be able to understand the pros and cons of various mortgage options and make the best choice possible.
3. Review a Mortgage Closely
A mortgage may enable you to secure your dream residence, but it is important to understand all of the terms and conditions associated with a mortgage before you select a lender.
For example, if you decide to purchase a condo, your mortgage might only cover the costs of your property. Meanwhile, you still may be responsible for condo homeowners' association fees that total hundreds of dollars each month, so you'll need to budget properly.
Of course, you should feel comfortable working with a mortgage lender as well. The ideal mortgage lender should be available to answer your concerns and questions at any time and help you stay on track with your monthly mortgage payments.
If you need extra assistance as you consider the mortgage lenders in your area, you can reach out to a real estate agent for additional support. This housing market professional can provide insights into mortgage interest rates and may even be able to connect you with the top local lenders.
Take the guesswork out of finding the right mortgage lender – use these tips, and you can move one step closer to getting the financing you need to buy your dream residence.