Debbie Chase's Blog
Myths are lies that are perceived to be true. Like every other industry in the world that has myths surrounding them, the real estate industry has its tales. People have ideas in their head about the mortgage industry that are not true. If you are buying a house and all you feel is happiness, then you might be working with a myth you heard and perceive as being real; same also applies if you are buying a home and all you feel is dread.
Below are few mortgage misconceptions that many buyers and sellers mistake for truth:
You Need A Near-Perfect Credit Score
It's essential to have a high credit score, but lack of it doesn't mean you are out of the game. Even if you have some credit blemishes but always ensured you paid bills, you probably won't have a lot to worry. If you are bothered about your credit score, other factors could offset adverse credit. Depending on your loan type, each situation is analyzed differently.
A Down Payment of Twenty Percent Is Needed
Compulsorily providing 20% of the purchase value of the home as a down payment is also a myth. Making a down payment of 20% is helpful in the long run, especially to avoid paying monthly insurance to a private mortgage. Presently, mortgage companies and banks provide loans to individuals without requesting for a down payment close to 20%. It all depends on your financial situation.
A House Is an Excellent Investment
A home could be considered as a long-term investment if you do not intend living in it – but then, nothing in the real estate business is guaranteed. If you purchase a house to live in for several years, it's better you don't think about it as a financial tool for padding your investment or retirement plan. Buying a house is part of your net worth, but you shouldn't count on getting a return after investing much money into the home. Something most home buyers fail to understand is that the value of houses appreciates at a shallow rate and can have negative growth for long periods.
The House Belongs to You After You Get the Keys
It's one of the myths that homebuyers assume is true. When you purchase a house via mortgage; if you do not have equity or a significant amount as down payment, your bank owns your home. For as long as it's required to finalize payment for your home - including interest, the house doesn't belong to you.
The American Dream
In as much as owning a home is supposed to be the American dream; it can also be the American nightmare. Acquiring a home via a mortgage and not being able to meet up with payment can turn out to be your worst nightmare. Owning a home is a decision that requires thorough thinking without jumping into any decision
Buy a house if you can afford it but be sure you have your facts right.
There are a number of programs, government-sponsored and otherwise, that are designed to help aspiring homeowners find and get approved for a mortgage that works for them.
Among these are first-time homeowner loans insured by the Housing and Urban Development Department, mortgages and loans insured by the USDA designed to help people living in urban and rural areas, and VA loans, sponsored by the U.S. Department of Veterans Affairs.
In today’s post, I’m going to give you a basic rundown of VA loans, who is eligible for them, and how to apply for one. That way you’ll feel confident knowing you’re getting the best possible deal on your home mortgage.
What is a VA Loan?
VA loans can provide soon-to-be homeowners who have served their country with low-interest rates and no private mortgage insurance (PMI).
If you’re hoping to buy a home soon and don’t have at least a 20% down payment, you typically have to take out private mortgage insurance. This means paying an extra insurance bill on top of your monthly mortgage payments. The downside of PMI is that it never turns into equity that you can then use when you decide to move again or sell your home.
Loans that are guaranteed by the VA don’t require PMI because the bank knows your loan is a safer investment than if it wasn’t guaranteed
VA loans may also help you secure a lower interest rate, or give you some negotiating power when it comes to discussing your interest rate.
Finally, VA loans set limits on the number of closing costs you can pay in your mortgage. And, if you’ve ever bought a home before, you’ll know how quickly closing costs can add up.
Who is eligible?
There are some common misconceptions about who can apply for a VA loan? So, we’ll cover all the bases of eligibility.
If you meet one of the following criteria, you may be eligible for a VA loan:
You’ve served 90 consecutive days during wartime
You’ve served 181 days during peacetime
You’ve served six or more years in the Reserves or National Guard
Your spouse died due to their work in the military
There are some restrictions to these eligibilities. For example, your chosen lender may still have credit score minimums.
Applying for a VA Loan
There are two main steps for applying for a VA Loan. First, you’ll have to ensure your eligibility. You can do this by checking the VA’s official website. Be sure to call them with any questions you may have.
Next, you’ll need a certificate of eligibility. The easiest way to acquire one is through your chosen lender. If you haven’t chosen a lender, you can also apply online through the eBenefits portal, or by mailing in a paper application.
Once you have a certificate, you can apply for your mortgage and you’ll be on your way to buying a home.
The cost to attend university continues to rise, putting pressure on students to afford an education. While some universities assist their students, many raise their prices to contend with operating costs. As a result, students leave school with mounds of debt that impede their quality of life. Paying off student loans starts by laying the appropriate groundwork, which gives you the best chance at success.
Where to Start
Begin by identifying the type of student loans you have. Most often, you have either private or government student loans. The difference between them dictates the various options available to eliminate your debt. Now that you've identified your student loan type start with the government student loan.
Government loans offer a variety of payment options based on factors such as your income and ability to pay. To more effectively make your student loan payments, request the payment plan that fits your financial situation. When you do receive extra money—like that birthday gift from Great-Aunt Daisy—apply it to your principal balance. You'll speed up the loan elimination process. By using the right payment plan, you balance your debt elimination with financial well being.
The payment plans for private student loans are difficult to adjust. One method to consider is refinancing to a lower interest rate. By refinancing your loan, you may lower your monthly payments. If you continue making more substantial payments on your refinanced note, you'll eliminate the principal balance at a faster rate.
If you find yourself looking to refinance, shop around. Several companies specialize in student loan refinancing. By lowering your interest rate, you save money and can use that extra money toward principal payments, ultimately eliminating your student loans faster.
Finally, once you set a repayment plan, increase your principal payments through a second job or side-gig. Lyft, eBay, Instacart, and other flexible part-time options make increasing your outside income possible. Eliminating student loan debt is difficult, but certainly possible. With minor tweaks and adjustments, you will find the right path for you.
Once you clear your student debt, you will have extra income for items such as saving for a down payment on a home. Purchasing a home is arguably the most significant asset for most people. By eliminating student debt, you can focus on home buying. To see if you qualify for a mortgage despite your school debt, reach out to a mortgage broker or loan officer.
If you’re a first time homebuyer and want to start weighing your mortgage options, you’ll have much to learn. With so much at stake, you’ll want to make sure you choose the best mortgage for you now, and one that will still suit your needs years into the future.
Sometimes, first time buyers are hesitant to ask questions they may consider too basic because they don’t want to seem inexperienced to lenders, agents, or anyone else they’ll be in contact with throughout the home buying process.
So, in this article, we’ve compiled a list of commonly asked mortgage questions that first time buyers might want to ask before heading into the process of acquiring a home loan.
What is the first step to getting a mortgage?
This question may seem straightforward, however the first step can vary depending on your financial situation. For those who already have saved up for a down payment and built a solid credit score, the first step is probably contacting lenders and getting preapproved or prequalified.
However, if you aren’t sure about your credit score and haven’t saved up for a down payment (ideally, 20% of what you hope to spend on the house), then you should address those matters first.
To find a lender, you can do a simple Google search for the mortgage lenders in your area, or you can ask around to friends and family to find out their experience with their own mortgage lenders.
What does it mean to be pre-qualified and pre-approved?
If you think of the mortgage process in three steps, the first step would be getting pre-qualified. This means you’ve given the lender enough basic information for them to decide which type of mortgage you’re eligible to receive.
Pre-approval includes collecting and verifying further details. At this step, you’ll complete a mortgage application and the lender will run a credit check. Once you’re pre-approved, your file can be moved to the underwriting phase.
What are closing costs?
“Closing costs” is an umbrella term that covers all of the various fees and expenses related to buying or selling a home. As a buyer, you are responsible for paying numerous closing costs. These can include, but are not limited to, underwriting fees, title searches, title insurance, origination fees, taxes, appraisal fees, surveys, and more.
That sounds like a lot to keep track of, however your lender will be able to give you an accurate estimate of the total closing costs when you apply for your loan. In fact, lenders are required to give you a list of these costs within three days of your loan application in the form of a “good faith estimate” of the closing costs.
What will my interest rate be?
The answer to this question is dependent upon numerous factors. The value of the home, your credit score, the amount you put down (down payment), the type of mortgage you have, and whether or not you’re paying private mortgage insurance all factor into the interest rate you’ll receive. Interest rates also will vary slightly between lenders.
You can receive a fixed-rate mortgage that does not fluctuate throughout the repayment term. However, you also typically have the option to refinance to acquire a lower interest rate, however refinancing comes with its own costs.
Applying for a mortgage is a big step towards homeownership and financial independence. If it’s your first time buying a home, you might be curious (and a little intimidated) about all of the things that go into your mortgage application.
When reviewing your application, mortgage lenders are trying to determine how risky it is to lend you money. If all goes well, and they determine that lending to you would be a worthy investment, you’ll get approved for a mortgage.
There are three main things that lenders will use when weighing your application (however, there are other factors as well).
First, they’ll run a detailed credit report. This will tell them how much other debt you have, what kind of accounts you have open, how long you’ve had this debt, and how responsible you are when it comes to making your monthly payments in time.
Second, they’ll consider how much money you’ll be using toward a down payment. A larger down payment alleviates some of the risk associated with lending to you. Therefore, people with little or no down payment saved can have a difficult time getting approved for a mortgage. And, if they do get approved, they’ll have to pay monthly private mortgage insurance on top of their regular mortgage payments.
Finally, the third main consideration will be your current income. Lenders will look at your previous two years of income (including tax returns) and will seek out current income verification from your employer.
The latter is a key part of getting approved, as lenders will want to ensure that you are in a stable financial situation and will be able to immediately start making mortgage payments.
Today’s post will center around income verification and how mortgage lenders will use your income to determine your borrowing eligibility.
How Do I Verify My Employment?
If you’re employed with a company, most lenders will reach out to your employer directly to verify your employment. You’ll be asked to sign a form that authorizes your employer to share these details with the lender, and then your part of the job is done and you can move on to the next step of your application.
Things get trickier when you’re a freelancer, are self-employed, or work with several clients as a contract worker. In these situations, lenders will typically require you to file a Form 4506-T with the IRS. This form allows your lender to obtain your tax returns directly from the IRS.
Can I submit additional information to verify my income?
There are some situations where providing additional income information can bolster your case in terms of getting approved for a mortgage.
If you own a business, your lender of choice may ask for a profit and loss statement. If you’re an independent contractor or freelancer, your clients who have paid you at least $600 or services or $10 in royalties will be required to send you a Form 1099-MISC.
If you have mixed income, such as a full-time job with freelance work on the side, showing these 1099-MISC forms can help increase your income on paper so that lenders will approve you or a higher mortgage amount or lower interest rate.