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First-time Homebuyer Homebuying Homebuying Tips Interest Rates Mortgages Purchase Refinance

Mortgage Rate Locks: Everything You Need to Know

Interest rates are often on the move, which isn’t always great news for homebuyers or current homeowners. Luckily, a mortgage rate lock might help you bypass interest rate ups and downs when you want to make important mortgage decisions!

Mortgage Rate Lock: What Is It?

A mortgage rate lock, or lock-in, is a tool that will stop your interest rate from changing as you navigate the home-buying or refinance process. Your rate lock stays in place if you close within the specified lock period and your application has no changes. 

How Long Can You Lock in a Mortgage Rate?

Rate lock duration varies between lenders, but in most cases, a 30 or 60-day lock period is available. Rate-lock extensions are also a possibility.

Locking in a rate the moment you receive your loan approval is not always a requirement. A lender could allow you to lock your rate in at any time between signing a purchase agreement and closing on your mortgage. The length of the rate lock will affect how much interest you can expect to pay on your loan. 

Keep this in mind: MortgageRight’s Lock & Shop program allows you a 60-day lock period to find the home you want to buy. If you find a home within 60 days, a free 30-day extension will be granted. To start the rate-lock period, you will be charged a $1,500 flat fee to lock the loan. Once the loan is closed, we will issue a $1,500 credit toward your loan’s closing costs.

When to Lock in a Mortgage Rate

Knowing when to lock your mortgage rate can maximize how much you’ll benefit. The best time to get a rate lock will always depend on your financial situation, but you also need to consider the state of the housing market. Locking your interest rate mitigates the risk of interest rate volatility. If interest rates are predicted to rise during your home-buying process, a rate lock could be a worthwhile financial decision. However, if interest rates are likely to lower, getting a rate lock could keep you from saving money in the long term. 

When choosing to purchase or refinance with MortgageRight, you’ll have the opportunity to lock your loan after submitting a valid loan application.

Rate Locks for Homebuyers

When buying a new home, these rate-lock conditions may or may not apply: 

  • If your lender offers a lock-while-you-shop option, you will likely be able to lock your rate as soon as you’re pre-qualified or pre-approved. MortgageRight’s Lock & Shop program offers this option.
  • Borrowers must have a full application and selection of a property if the lender doesn’t offer a lock and shop program.
 Rate Locks for Refinancers

When refinancing, the following may affect how your rate lock is applied:

  • When considering a traditional refinance, ask yourself if the money you will save on your monthly payments will outweigh what you will pay in closing costs and interest on the new loan when the rate you’re attempting to lock is applied. If so, locking the rate might be a good idea. 
Change Can Happen

Even if you’ve managed to land a rate lock, your locked-in rate can still fluctuate if you make disqualifying decisions. Here are a few common reasons your interest rate lock may not be honored:

  • A change in your requested loan type or adjustment of your down payment amount can result in a different locked-in interest rate. 
  • Appraisal matters. If the appraisal on the home you’re buying is higher or lower than expected, your interest rate can change.
  • If your credit score changes, so can your interest rate while under a rate lock. 
  • Income issues can also affect your locked interest rate. 

Keep this in mind: Rate locks are not guaranteed and are subject to underwriting protocols. To secure and maintain a rate lock, you must meet all qualifying guidelines. A rate lock does not serve as a loan approval or commitment to lend from your lender.

Ready to Lock in a New Home?

Homeownership can be tricky in today’s market, but a rate lock can get you into the home of your dreams! Contact us today to get started with our Lock & Shop program!

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First-time Homebuyer Homebuying Loans Mortgages Purchase

Should You Build an Accessory Dwelling Unit?

When the housing market is turbulent, homeowners should strive to make the most of their property. Right now, residential expansion is essential for some homeowners, and accessory dwelling units (ADUs) make branching out worthwhile in more ways than one.

What is an ADU?

An ADU, also known as an accessory dwelling unit, secondary suite, or in-law suite, is an additional living space on a single-family residential lot. Typically small-to-medium in size, ADUs must include their own sleeping, cooking, bathroom, and living space separate from the primary residence. ADUs must also be accessible without disturbing (or entering) the primary residence.

ADUs: The Basics

Can you have an ADU on your property?

ADU installation requires you to obtain the necessary permits and your residence to meet certain legal conditions, so you should ensure your property qualifies before you begin building. 

Individual areas have different regulations for ADUs, and knowing those rules is essential. Size, proximity to the primary residence, and other factors vary by location. It’s also possible that your area does not permit ADUs to be placed on residential property at all. Check with your local government to obtain proper permits. Most counties in the nation will typically allow you to install an ADU if it meets the standards set by the city.

Homeowners who are a part of an HOA (homeowners association) may also have additional regulations they must abide by when adding an ADU. Before moving ahead with the project, be sure to review your HOA guidelines. 

Any unpermitted ADU could cause complications when it comes time to sell your home. To avoid future expenses, know if your residence meets the ADU requirements in your location before you build!

How do you build an ADU?

As previously mentioned, all ADUs must be considered independent living spaces suitable for year-round occupancy. ADUs can only meet this requirement by including a separate entrance, a bedroom, a bathroom, and a kitchen (with appliances). The space must also have electrical, gas, plumbing, heating, ventilation, and air conditioning (HVAC) systems. 

Attached ADUs typically share gas, electrical, plumbing, and HVAC systems with the primary residence, but this is not a requirement.

If you’re considering a detached unit or are unsure how to go about the project, it might be best to contact a trusted contractor to help you plan and build your ADU. 

How much does an ADU cost?

The cost of an ADU varies between locations. The type and size of the dwelling also factor into the price. According to HomeAdvisor estimates, the more separate space between the ADU and the primary residence, the more expensive the ADU will be. Converting existing internal spaces will typically cost $10,000 – $30,000; ADUs attached to the primary residence often cost $40,000 – $125,000, and a stand-alone structure might have a price tag of $100,000 and up. 

Luckily, if you don’t have the cash on hand to cover these costs on your own, an ADU is still a possibility.

How do you finance an ADU?

There are multiple ways to finance an ADU project:

  • Utilize your home equity – If you have equity built up in your home, you can opt for a cash-out refinance, home equity line of credit (HELOC), or home equity loan to pay for an ADU expansion or other home improvement projects. 
  • Try renovation or HomeReady loans – Our HomeStyle Renovation and HomeReady loan programs target ADU-specific renovation projects. Borrowers looking to purchase or refinance a 1-unit property and construct or install a new ADU can use our HomeStyle Renovation loan to finance it. Borrowers purchasing or refinancing a home with an existing ADU who qualify for a HomeReady Loan can include rental income to help them qualify for the loan.
  • Go your own way – Taking out personal loans or putting home-improvement expenses on a credit card are viable options—but only if you’re consistent with making payments. 
How much value does an ADU add?

ADUs are incredibly valuable for those with larger families who need more space on their property. ADUs could provide a more pleasant living experience for multigenerational families and families who have older children that want a little more independence or kids who are moving back in.

The biggest benefit of building an ADU is the potential increase in your home’s property value. Generally, a home with an ADU has 20% – 35% more value than a home that does not have one, and you can pocket that much more when you sell your home. In many cases, an ADU can be a winning investment. 

Keep this in mind: MortgageRight’s ADU lending program does not allow the unit to be used as an investment rental.

Ready to Expand?

Are you thinking of adding an ADU to your home? We can help you out! Contact us here to make the most of homeownership!

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First-time Homebuyer Homebuying Homebuying Tips Loans Mortgages Pre-approval

How to Apply for a Mortgage

Want to take on homeownership? Great! Found a home that’s RIGHT for you? Even better! Now you need to apply for financing. Don’t sweat it—here’s a helpful breakdown of everything you need to apply for a mortgage loan. 

What to do before applying

Do your research

Before you move into the mortgage application process, you must make sure you pick the lender that is RIGHT for you. A mortgage is a relatively long-term commitment, so a healthy borrower-lender relationship is crucial! Do your research and choose a lender that best suits your needs. 

Consider your credit score

Your credit score plays a vital role in mortgage approval. As you begin the mortgage application process, check the condition of your credit reports and scores. Acceptable minimum credit scores vary for prospective mortgage applicants, but having a FICO score of 620 or more is a good starting point. 

Find the right mortgage type

Every homebuyer is unique. So, to ensure borrower satisfaction, lenders offer several mortgage types to meet different needs. When researching mortgage offerings, you’ll encounter government-backed mortgagesvaried loan terms, and multiple mortgage rate options. The most important thing is to seek the best mortgage type for your homeownership goals.

Gather your documents

To make it past the mortgage application process, you’ll need to prove that your lender can trust you to repay a sizable loan amount. This is where documentation comes in. These documents will establish your income stability, assets, creditworthiness, and your financial obligations and debts:

  • Driver’s license and Social Security card
  • Paystubs for every job held (most recent 30 days)
  • W-2s and/or 1099s for the last two years
  • Your last two years of tax returns (complete and signed)
  • Most recent 2 months’ bank statements 
  • Alimony or child support documents.
  • Other situational information (e.g., bankruptcy/foreclosure documents, divorce decree, armed services documents, etc.)

Have these documents on hand before starting the application process. 

How a successful mortgage application process works
  • Get pre-approved
  • Fill out the application
  • Begin loan processing
  • Enter the underwriting phase
  • Clear-to-close

Step 1: Get pre-approved

Getting pre-approved is one of the most important steps in the mortgage process. It not only lets you know how much house you can afford but also gives you a leg-up over other potential homebuyers when bidding on a home. 

When you get pre-approved, your lender will provide you with a pre-approval letter. This official document typically includes the loan amount, down payment amount, expiration date, and more. 

Keep this in mind: You can get pre-approved even if you haven’t started searching for a home with our unique pre-approval program. Learn more about our Upfront Underwriting option.

Step 2: Fill out the application

Now that you’ve made all the necessary preparations to begin the mortgage process, it’s time to fill out your application! If you already have a home in mind that you want to buy, great! If not, you can still fill out a mortgage application to see where you stand in the eyes of your chosen lender. 

After submitting your complete mortgage application, a lender will pull your credit. By law, a lender has up to three business days after receiving your application to issue you a Loan Estimate form. This form is a detailed disclosure that shows the loan amount, type, interest rate, and all mortgage costs, including mortgage insurance, hazard insurance, closing costs, and property tax. 

Step 3: Begin loan processing

In this stage, mortgage loan processors carefully review all information submitted with your mortgage application. All employment, tax, and other claims are verified at this time. You may receive questions and document requests from your lender during the processing phase—but don’t worry! A prompt response to your lender will keep things moving forward. 

Step 4: Enter the underwriting phase

You’ve almost reached the finish line at this stage—so sit tight! You typically won’t be contacted during the underwriting phase, but if you are, it will be to answer a few more questions and provide more documents. 

Underwriters will be working diligently to assess delinquency risk and your ability to repay the mortgage loan you’re seeking. 

Step 5: Clear-to-close

It’s time to get those keys in hand! To conclude the mortgage process, you will meet with your lender to sign the final documentation. And voila! You’re officially a homeowner.

Keep this in mind: Don’t forget to use this closing session to ask any last-minute questions you may have about your loan.

How long does the entire process take?

The time it takes to reach the end of the mortgage process differs for everyone. The mortgage application-to-closing process can take anywhere from 15 days to several months, depending on the proficiency of the lender you choose, the condition of the housing market, and your personal circumstances.

Get started!

Whether you’re still in the applying phase or a little further on your home-buying journey, you can trust us to satisfy your homeownership needs! If you’re looking to purchase a new home, refinance the one you own, or have any questions, contact us here to learn more. 

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Budgeting Credit Down Payment Homebuying Homebuying Tips Mortgages Purchase Refinance

5 Ways to Get the Best Mortgage

One of the most important things to do when getting a mortgage is to ensure the mortgage you choose fits all your home-buying requirements. It’s possible to get the right interest rate, monthly payment amount, and more! You simply need to make the most of available mortgage options, and put your best foot forward where your finances are concerned. Here’s how you can get the best mortgage for your needs. 

Improve your credit score.

No matter which loan you choose, better mortgage rates tend to come to borrowers with higher credit scores. To lenders, your credit score is a risk assessment tool. Typically, the lower your credit score, the riskier it is to lend to you. Borrowers with a low credit score are more likely to default on a loan or fail to meet contractual obligations. This leads lenders to charge higher interest rates to applicants with lower credit scores.

If your credit score is preventing you from buying the perfect home, these tips will help you improve it:

  • Be consistent with payments – On-time debt payment is the number one way to raise your credit score. If you have trouble making payments on time, consider using automatic payment systems. 
  • Consider paying your debts off early – Paying down certain debt before it’s due or making more payments a month than required can also benefit your credit score. Going this route can also decrease your debt-to-income ratio.

Need more help increasing your credit score? Download our FREE Credit Repair Guide.

Choose your loan term carefully.

Short-term loans

Short-term mortgage loans are those that are shorter than the typical 30-year term. Risk is less of an issue with short-term loans, so they typically come with lower mortgage rates. Short-term loans also tend to save borrowers more money over time. However, because you’ll be paying the principal for a shorter amount of time, your monthly payments will be higher.

This loan option is less suitable for borrowers who fall into a lower income bracket, don’t have enough savings to offset higher monthly payments, or are less financially stable. If you’re adamant about a lower mortgage interest rate and can handle higher mortgage payments, a short-term loan might be your best bet.

Long-term loans

Long-term loans are the most common and are typically a 30-year term. These loans allow you to spread your payments over a longer period of time, which will lower monthly mortgage payments and leave you with more disposable income each month than a short-term loan would.

 Make a larger down payment.

The more money you put down on your home, the less you will owe on the mortgage loan. If you make a larger down payment, you can build more equity in your home from the start. Because interest is calculated from the principal, larger down payments also open the door for lower interest costs over the life of the loan.

A borrower’s inability to put down a significant amount on a home could make lenders view their loan as riskier than those who put more money down. In this case, less money down can result in a higher interest rate. 

Keep this in mind: A sizable down payment has its perks, but some loans don’t require a large (or any) down payment at all! FHA and VA loans are excellent mortgage options for those that qualify and want to put less money down.

Remember rate locks.

Rate locks are a great way to potentially avoid rate changes before you close on your home loan. Our Lock & Shop program preapproves a borrower’s budget ahead of time and applies a 60-day interest-rate lock before they start shopping for a home. Lock & Shop is available for all conforming Conventional, VA, FHA, and USDA loans.

Keep this in mind: Like most rate-lock options, borrowers do have to pay an upfront fee to access our program. To learn more, reach out to your closest branch here.

Want to change your mortgage? Refinance!

If you’ve already purchased your home but you’re unsatisfied with your current loan, refinancing is an option! Renegotiating the terms of your mortgage can save you money over the new course of the loan. There are many available refinancing options, each with its own advantages and drawbacks. 

Here are a few ways a refinance can benefit you:

  • If you have an adjustable-rate mortgage and interest rates are on an upward trend, you can benefit by refinancing to a fixed-rate mortgage
  • Sometimes expenses pop up, and you need cash to pay for them. If you have enough equity built up in your home, you can use a cash-out refinance to get a lump sum and pay for anything that needs funding.
  • Many borrowers improve their financial situation over time, so it is possible for you to renegotiate a fixed-rate mortgage to a lower rate if you have a better credit score or if rates have decreased since you initially closed on your loan.
Make sure your mortgage is RIGHT for you!

Landing the right mortgage can make or break your home-buying experience, so we want to help you make the best mortgage decision you can! Reach out today to get started on your home-buying journey. 

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Budgeting Government Loans Homebuying Loans Mortgages

Is a Reverse Mortgage Right for You?

Have you ever wondered if you could buy a home and pay nothing on the mortgage while you’re living there? It might sound too good to be true, but a reverse mortgage is a real home-buying option—and it might be the right one for you!

What is a reverse mortgage?

A reverse mortgage is similar to a traditional home loan because it allows homebuyers to borrow money using their home as collateral. However, a reverse mortgage doesn’t require the borrower to make monthly mortgage payments. Instead, the borrower may receive monthly payments from the lender. 

Something to consider: There are multiple ways to receive and utilize the funds from a reverse mortgage. A borrower can pay off a current mortgage or lien, receive a lump sum, a line of credit, monthly payments, or a combination of all 3. The borrower must also pay the loan in full when they no longer live in the home. 

Home Equity Conversion Mortgage (HECM)

A HECM is the most common type of reverse mortgage. It is a specialized home loan issued by Federal Housing Administration (FHA)-approved lenders. Because a HECM is a government-backed, non-recourse loan, you will never owe more than what the home is worth. You can also spend the funds on anything.

Requirements

Homeowners who opt for a reverse mortgage should be aware of the following:

  • Homeowners must be at least 62 years old.  
  • Homeowners are required to pay property taxes and homeowners insurance.
  • Homeowners must use the property as their primary residence.
  • Homeowners must keep the home in good condition. 

Something to consider: The amount a homeowner owes the lender when they no longer occupy the home will go up over time because interest accrues monthly. 

How much will you receive monthly?

If your lender is paying you, where is the money coming from? When you get a reverse mortgage, the monthly payments you receive come from the equity you have in your home.

To decide how much you’ll receive monthly, your lender will order an appraisal of your home. They will then use the appraisal value, age, and available interest rate to determine the loan and monthly payment amount.

How do you pay back a reverse mortgage?

When you decide to sell your home, that money goes toward repaying your reverse mortgage and interest. This means you won’t profit as much from the sale as you might with a traditional mortgage. Why? Because the interest accruing each month adds to your principal balance. 

Something to consider: Even though you’re not required to repay your mortgage until you sell your home, pass away, or no longer live on the property, you can still choose to make regular payments on your home.

What if the homeowner passes away? 

The property becomes the beneficiary’s responsibility if the homeowner passes away before the home is sold. If the beneficiary wants to keep the home, they can either purchase it for the amount owed on the reverse mortgage (or 95% of the appraised value) or refinance to a traditional mortgage loan. The beneficiary may also sell the home and pay off the reverse mortgage.

Who benefits most from reverse mortgages?

Reverse mortgages let homeowners of retirement age take advantage of their home’s value sooner than with a traditional loan. It also helps them lower or eliminates their monthly mortgage payments and better cover their expenses.

However, some older homeowners could benefit more than others. You’re more likely to make the most of a reverse mortgage if you fit the following criteria:

  • Your home value is on the increase – If you have a lot of equity built up in your home, you may still have money left over when you take out a reverse mortgage. 
  • You plan to live in your home long-term – Like a traditional mortgage, there are upfront costs associated with a reverse mortgage. Planning to stay in the home long-term will make taking on those costs worthwhile. 
  • You can cover home costs – Because a reverse mortgage requires you to keep property taxes, insurance, maintenance, and other payments up to date, it’s essential to have enough funds on hand to cover these expenses. 
Should you get a reverse mortgage?

A reverse mortgage isn’t for everyone, but it could be the mortgage option that helps you achieve a financially fulfilling retirement. If you want to learn more about reverse mortgages, or you’re ready to make another home-buying decision—we’re the RIGHT people to call! Click here to get started.  

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Budgeting First-time Homebuyer Homebuying Homebuying Tips Mortgages Purchase

How to Decide the Best Place to Live

What do lush green lawns, occasional cul-de-sacs, mainstream grocery stores, and annual block parties have in common? Neighborhood. And when you’ve got home buying on your mind, thoughts about your ideal future neighborhood shouldn’t be too far behind. Choosing the right location is one of the most important parts of home buying because you need to find an area that supports your lifestyle and fits your budget.

Here are a few steps that will make the decision process easier. 

Step One: Know Your Budget 

Your budget is the first thing you should consider when choosing a potential home location. Why? Because if you don’t know how much you can afford, you’ll struggle to find the right home. Consider how much you could put toward a down payment while maintaining some of your savings. Then, think about how much you can reasonably pay each month toward your mortgage. 

Some areas are better suited for average-wage home seekers who have figured out their budget. These cities are among Real Estate News’ top 10: 

Seattle, Washington

Metro Population: 3,871,323

Median Home Price: $675,237

Average Annual Salary: $68,460

Huntsville, Alabama

Metro Population: 457,003

Median Home Price: $192,667

Average Annual Salary: $55,980

Boulder, Colorado

Metro Population: 322,510

Median Home Price: $528,833

Average Annual Salary: $67,160

Sarasota, Florida

Metro Population: 803,709

Median Home Price: $387,630

Average Annual Salary: $46,040

Austin, Texas

Metro Population: 2,114,441

Median Home Price: $377,693

Average Annual Salary: $55,190

 

Cost of Living

Researching the cost of living for any potential home location is a must. Coupled with your budget, understanding the cost of living in certain areas can help you decide whether you want to spend a little more to stay in the city or choose a suburb on the outskirts to save money. Forbes highlights a list of locations to consider if you’re looking for the most affordable home-buying options in the country: 

Memphis, Tennessee

Metro Population: 651,011

Median Home Price: $140,000

Average Annual Salary: $57,538 

Cost of Living Index: 17% more affordable than the nation’s average

Toledo, Ohio

Metro Population: 275,116 

Median Home Price: $109,900

Average Annual Salary: $58,930

Cost of Living Index: 8% more affordable than the nation’s average

Akron, Ohio

Metro Population: 197,375 

Median Home Price: $118,950

Average Annual Salary: $62,000

Cost of Living Index: 6% more affordable than the nation’s average

Detroit, Michigan

Metro Population: 672,351 

Median Home Price: $70,000

Average Annual Salary: $64,357

Cost of Living Index: 3% more affordable than the nation’s average

 

Even in the most affordable areas, you’ll find that some suburban neighborhoods are more expensive than others. Your ideal home location should strike a near-perfect balance between how much you can afford and how easily you see yourself making a life there. 

Step Two: Consider Every Factor

There’s more to choosing the right home location than affordability. All areas have different benefits that they bring to the table, and you need to keep those in mind when deciding where you want to live.  

Transportation

How you get from place to place is an incredibly important factor when deciding where to settle down. If you’re a fan of efficient public transportation, an area in or close to the city might be best for you. Prefer to drive your own car? Then you won’t need to limit yourself to subway-heavy living locations.

Climate

Climate can dictate whether you should move to a specific area. Are you a fan of constant sunshine and warmth? Then snowy locations are out of the question. Do you hate dreary, rainy days? Then a western state might better suit your needs. 

Also, consider the unique expenses that come with living in certain climates. For example, if you’re thinking of moving to a mid- or southwestern location, you might want to make sure you can afford insurance that covers fire damage. Similarly, if you want a house on the beach, flood insurance should be included in your budgeting plan. 

Demographics

Get some insight into demographics before you move to an area. Consider population numbers, average person’s age, number of hospitals available, and even crime rates when deciding on a location. 

School Districts

Choosing an area with good educational options is essential for home seekers with children. But those without children also benefit from having good public schools in a prospective home location. Generally, an area with better schools means it’s of better quality overall, which will help with maintaining or increasing property values. Picking a neighborhood with a good school district would also benefit those who may not have children now but will in the future. 

Culture

Think about the cultural aspects of the places you’re considering. What events are common in the area? Is it a spot with stadiums that host frequent concerts and sporting events? Are there annual festivals? You’ll want to know these things before deciding on a move. 

Convenience

Nowadays, we build our lives around convenience, so it’s necessary to consider how much of it you want when deciding on a home location. Need restaurants within walking distance? Want a gas station on every corner? Many areas have those amenities conveniently available throughout, but having easy access to certain businesses might increase home prices. 

Appearance

If you don’t like the look of a neighborhood, you won’t like your life there. Are you a fan of sprawling trees and green pastures? Well, many metropolitan areas might not sync with your aesthetic tastes. Does the thought of a deer leaping from the woods nauseate you? Then city-life is calling. Have an irrational fear of garden gnomes? Then you probably shouldn’t pick the neighborhood where every house has a miniature elf in the middle of the yard. Just be sure the view you’re seeing is one you can’t picture yourself tiring of. 

Step Three: Get The Ball Rolling

List your deal-breakers

Before you begin touring any potential home locations, you need to make a list of things that must be a part of your future living experience. Then, tack on things that you don’t want to see in a potential neighborhood to narrow down your choices. 

Scope out the area

Now that you’ve compiled a viable list of locations you want to live in, you need to scope out those areas. 

In-person 

When visiting a potential home location in person, you’ll want to head to any place you think you might frequent if you were to move to the area—like grocery stores, shopping malls, parks, and other recreational hotspots. You may also want to visit surrounding neighborhoods to compare. Because public transport isn’t an option in some locations, you might also want to test drive your potential commutes. 

Virtual tour

If you’ve got your eye on areas a little further from your current location and you’re not ready to commit to an in-person visit yet, a self-guided virtual neighborhood tour could give you enough insight to narrow down your search. Google Street View can provide a relatively up-to-date and thorough overview to help you get the overall feel of a specific neighborhood. There are also a variety of virtual home tours available online. 

Location Decided? Lender Provided!

Finding that perfect home in that perfect location takes time, but we’re here to help you make the purchase when you’re ready! Get a quote or pre-approval letter, or contact us at mortgageright.com/contact to get the RIGHT financing for your new home!

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Budgeting Down Payment First-time Homebuyer Government Loans Homebuying Homebuying Tips Mortgages Purchase

Homeownership 101: What Are the Costs?

When faced with consistently rising rent prices and the desire to build wealth, homeownership is one of the most beneficial money moves you can make in your lifetime. But that doesn’t mean it comes without its costs. 

To avoid any surprise expenses after buying and moving into your new home, future homeowners need to understand all the costs of homeownership before signing any dotted lines.

Let’s take a look at the most common costs of owning a home so you can enter homeownership financially prepared. 

Upfront Costs

Down Payment

The most widely mentioned homeownership expenses are the out-of-pocket amounts you will need to close on your home. Typically, these upfront costs consist of your down payment and other closing costs. 

Down payments vary in amount, but they are often between 3% and 20% of a home’s price. Some government-backed loan programs, such as VA and USDA, require zero down payment; however, if you don’t qualify for a zero-down-payment loan, it will be in your best interest to save up a decent amount of money to be able to purchase your home. 

Closing Costs

Closing costs are fees that you acquire throughout the home-buying process. Closing costs consist of lender fees, taxes, insurance, title search fees, etc. They are typically between 3% and 6% of a home’s purchase price. 

Monthly Mortgage Costs

Property Taxes

When you get a mortgage, property taxes might be included in your monthly mortgage payment, which would allow your lender to hold the funds in an escrow account and pay them on your behalf. 

The U.S. Bureau of Labor Statistics’ Consumer Expenditures Survey (CES) estimates homeowners paid an average of $3,370 in property taxes in 2019. 

Insurance

Homeownership will likely also come with an insurance cost added to your monthly mortgage payment:

  • General Home Insurance – covers loss and damage to your house, as well as the assets inside your home if a damaging event occurs and would be used to restore your home to its original value. 
  • PMI – Private mortgage insurance is a cost only applicable to conventional (or non-government-backed) loans. PMI is an “assurance fee” typically applied to monthly payments if a borrower cannot put 20% or more down on the home they purchase. PMI acts as a buffer for lenders when the risk of default is on the table while making homeownership possible for borrowers who can only put a small percentage down on the home they want.
  • MIP – A mortgage insurance premium is much like PMI, but it only applies to government-backed (FHA) loans, and it is required no matter your down-payment amount. This mortgage insurance consists of an annual MIP and UFMIP (upfront mortgage insurance premium).

Day-To-Day Costs

Once you’ve closed on your home and moved in, there are other living costs to consider aside from the expected monthly mortgage expenses.

Utilities

An umbrella term familiar to any new homeowner who was first a renter, utilities consist of all electricity, fuels, and services needed to keep your home livable. 

The 2020 Consumer Expenditures Survey (CES) supports the idea that utilities can make up a sizable chunk of monthly expenditure when they state that the average homeowner spent around $4,150 on utilities, or about $350 a month.

But don’t let these numbers scare you. Utility costs can vary depending on your location, the size and features of your house, and how much you use them overall.

Homeowners Association (HOA) Fees

Nowadays, many communities have a homeowners association that you will likely have to join, which means you will need to pay a monthly fee to that association. 

HOA fees generally pay for the following services shared by neighbors or community members:  

  • repair of shared community buildings 
  • neighborhood walkways or roads
  • upkeep of common areas
  • landscaping or weather-related services (such as lawn care or snow removal). 

Monthly HOA fees are often $200 – $300, but the exact cost is dependent on the extent of shared spaces and services your community offers. The fewer community spaces and services available, the lower your HOA fee will tend to be. 

In some cases, HOAs will ask you to pay a special assessment if an unforeseen emergency expense arises and they don’t have funds set aside to cover the cost. If this occurs, your HOA will request the special assessment fee in addition to your typical monthly HOA fees.

If you’re considering moving into a neighborhood with an HOA, make sure you understand the regular dues (and special assessments) you’ll have to pay.

Internal Upkeep: Maintenance 

Homeownership comes with the responsibility to fix things that need fixin’. This is where maintenance costs come in. If some part of your home needs to be replaced, cleaned, or otherwise serviced, you will need to have the money (and time) set aside to get things working as they should. 

According to a 2021 index from Thumbtack, a home services organization, the average homeowner should “budget $4,886 for a single-family home—up about $450 from last year, in part due to labor and material shortages.” 

The above price estimate may seem daunting to new homebuyers, but be aware that this estimate is a result of the past few years of unique, global circumstances. As things continue to fall back into normalcy, so should maintenance expenses. 

Here are the most common repairs and maintenance services homeowners need:

  • water damage
  • roof issue
  • HVAC care
  • plumbing problems
  • pest removal

If you want to be as prepared as possible to cover these costs if they arise, a good rule of thumb is to save 1% of your home’s value each year. 

Renovation Costs

Renovation costs are also something new homeowners should consider. However, they are not a definite expense. If you feel the need to make aesthetic additions to your home in the form of painting, rearranging, or upgrading, be sure to set aside enough funds for your home makeover to go smoothly. 

Though renovation is not a requirement, it can be a great investment, as many of these projects can help boost your home’s value. MortgageRight also has an awesome Renovation Loan Program to help you fund any renovations you might want to undertake. 

Financial Preparedness Is The RIGHT Way To Approach Homeownership

Homeownership is rewarding, but it’s not something you should jump into unprepared. If you need more help navigating the ins and outs of homeownership expenses, or you’re ready to put your money where your mouth is, contact us here, and we’ll get you started!

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Down Payment First-time Homebuyer Homebuying Mortgages Pre-approval Purchase

Upfront Underwriting: A Better Way to Pre-approval

Getting approved for a mortgage without knowing which home you want to purchase might seem like a pipe dream. But MortgageRight is in the business of making the impossible a reality! Let’s look at how an underwritten pre-approval will allow you to get conditionally approved for a mortgage even if a home hasn’t caught your eye yet. 

How Does It Work?

Upfront underwritingalso known as To-Be-Determined (TBD) Pre-approval, is a method that sends the necessary information to an underwriter at the beginning of the mortgage process instead of at the end. This way, a lender can give you conditional approval of a dollar amount before you have a house picked out.  

Which Documents Will Be Reviewed?

Much like traditional loan underwriting, the upfront underwriting process requires documentation that supports your financial stability to ensure a successful pre-approval. To verify your eligibility, an underwriter will review the following:

  • Past two years of W-2s
  • Most recent pay stubs
  • Past two years of tax returns
  • Credit report
  • Other asset documentation
Underwritten Pre-approval vs. Pre-qualification 

The most notable difference between a true pre-approval and pre-qualification is underwriting review. If you opt for pre-qualification, you must submit income, asset, and credit-related information that will initially land in the hands of your mortgage loan originator. At that point, your mortgage loan originator will review the information and determine which loan programs and amounts you could be qualified for on your home purchase. Because pre-qualification does not involve an underwriter reviewing your information at the onset, loan circumstances are subject to change as you move through the home-buying process.

On the other hand, our Underwritten Pre-approval Program allows for upfront underwriting and faster issuance of a conditional approval of a loan amount. That is why an underwritten pre-approval is so valuable. Instead of having an underwriter review your information later in the process, it is sent directly to them. This way, you can get a well-founded assurance about which loan program and maximum loan amount you can use to purchase the home of your dreams. 

What Are the Other Advantages of Underwritten Pre-approval?

One of the greatest advantages of underwritten pre-approval is securing an upfront review and verification of your credit, income, assets, and loan application by an underwriter before you decide on your perfect home. It’s a great way to get ahead of the game, understand your budget, and start shopping with certainty.

An underwritten pre-approval is the ticket to peace of mind because it drastically reduces surprises on your way to the closing table. Plus, an underwriter’s stamp of approval gives realtors and sellers confidence that issues with your mortgage loan are unlikely, which earns you more negotiating power over other potential buyers when you finally find the house you want. 

Is an Underwritten Pre-approval RIGHT for You?

Many homebuyers can benefit from getting pre-approved at the beginning of the home-buying process. Think the underwritten pre-approval route is RIGHT for you? Contact us here, and we’ll get you into a new home in no time!

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Budgeting Credit Down Payment First-time Homebuyer Homebuying Tips Mortgages Purchase

5 First-Time Homebuyer Mistakes and How to Avoid Them

We get it. Today’s home-buying landscape can leave many first-time homebuyers wondering if they’re making the right choices when it comes to securing a mortgage. The good news is, you don’t have to go into this blind. Let’s look at five common mistakes homebuyers make and how to avoid them.

Making a down payment that’s too small

Contrary to popular belief, you don’t always have to make a 20% down payment to purchase a home. Some loan programs will allow you to put as little as 3.5% on the table, or no down payment at all. Now, you might be thinking, of course I’m going to go with the option that takes the least out of my pocket upfront. But paying a smaller down payment does not suit everyone’s needs. 

Smaller down payments might lessen the hit to your savings in the short term, but you will be left with larger monthly mortgage payments as a result. On the flip side, going into a home purchase with a larger down payment might deplete funds you had saved up for other situations.

Use this advice to avoid a setback:  The answer to the question “which down payment amount is best?” comes down to one thing—your judgment. You’ll want to decide on a down payment (and supporting loan program) that will guarantee a monthly mortgage payment you’re satisfied with. If you’re aiming for a higher down payment, save more beforehand. If a lower down payment is more your style, make sure your finances can withstand a higher monthly payment.  

Not checking credit reports and correcting errors

Your credit report is one of the holy grail documents lenders use when deciding whether to approve your loan and at what interest rate. If there are any errors, unknown or otherwise, in your credit report, it could lead to a lender landing you with a higher interest rate than you anticipate. That’s why it’s so important to make sure your credit report is accurate. 

Use this advice to avoid a setback: Now more than ever, it’s easier to get access to your credit report. Request a free credit report from the three main credit bureaus to check for discrepancies. From there, you can dispute any errors you notice. 

Ignoring VA, USDA, & FHA loan programs

Making a small down payment is at the top of the list for many first-time homebuyers. But they aren’t always aware of the benefits that come with government-backed loan programs. VA, USDA, and FHA loans often make it easier to buy a home by requiring as little as zero down. 

Use this advice to avoid a setback:  Learn how these loan programs can benefit you: 

  • VA – For the majority of military borrowers, the VA loan program is the most beneficial. These versatile, $0-down payment mortgages have made it possible for more than 24 million service members to achieve their dream of homeownership. 
  • USDA – A USDA (United States Department of Agriculture) loan is a government-backed loan that allows lenders to offer borrowers lower rates and no down payment. This loan aims to boost rural economies and build a better quality of life for rural communities across the nation. The USDA makes this possible by creating a more affordable option for families looking to buy a new home. 
  • FHA – An FHA loan is a mortgage insured by the Federal Housing Administration. With a minimum 3.5% down payment for borrowers and a wider range of acceptable credit scores, FHA loans are popular among first-time homebuyers who have little savings or have credit challenges.
Emptying your savings

For most homebuyers, savings are an integral part of the home-buying process. That’s why you should make sure you have enough funds stashed away to pay for the cost that comes with a home purchase. 

Having ample savings is especially important for borrowers who buy older or previously owned homes. Why? Because more often than not, home repairs or renovations will be on your to-do list, and if you blow through your savings, you might find yourself dealing with a leaky roof longer than you want to. 

Use this advice to avoid a setback: Be sure to save enough money to make your down payment, pay for closing costs and moving expenses, and tackle any repairs that may crop up. Your lender will provide estimates of closing costs. MortgageRight also has a great Renovation Loan option that you can make the most of!

Applying for credit too soon

Once you apply for a mortgage, the financial choices you make between that moment and the date you close on your home are crucial. During this period, you shouldn’t make any financial decision involving opening new lines of credit.  

 Use this advice to avoid a setback:  If you need to get a new credit card, finance a new car, or make any other large purchase using credit, be sure to do it after your mortgage loan closes to avoid any unwanted surprises.

Make the RIGHT choice with us!

Mistakes are a part of life, but they don’t have to be a part of your home-buying experience. If you have any questions about the do’s and don’ts of getting a mortgage, or you’re ready to take that first step, contact us today, and we’ll guide you home.

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Down Payment First-time Homebuyer Homebuying Homebuying Tips Mortgages

PMI vs. MIP: A Guide to Mortgage Insurance

Mortgage insurance is a gateway to homeownership. It adds an extra layer of accessibility for those who can’t put forward a sizable down payment. By paying mortgage insurance in addition to the monthly mortgage payment, a borrower can buy the home of their dreams with less than 20% down. 

Private mortgage insurance (PMI) and a mortgage insurance premium (MIP) are the two most common types of mortgage insurance. Though these types of mortgage insurance are prevalent, which one you get depends on a variety of factors. 

PMI vs. MIP: What Are They?

PMI

Private mortgage insurance is a cost only applicable to conventional (or non-government-backed) loans. PMI is an “assurance fee” typically applied to monthly payments if a borrower cannot put 20% or more down on the home they purchase. PMI acts as a buffer for lenders when the risk of default is on the table while making homeownership possible for borrowers who can only put a small percentage down on the home they want. 

MIP

A mortgage insurance premium is much like PMI, but it only applies to government-backed (FHA) loans, and it is required no matter your down-payment amount. This mortgage insurance consists of an annual MIP and UFMIP (upfront mortgage insurance premium). 

Notable Differences Between PMI And MIP

Beyond the type of loan each mortgage insurance policy applies to, there are other notable differences to keep in mind. 

Can You Cancel?

If you put down less than 20% on a conventional loan, mortgage insurance is something you will more than likely have to pay. However, mortgage insurance payments change when you acquire 20% equity in your home. When you reach this equity benchmark, you can request that your lender remove PMI from your mortgage. Even borrowers who get caught up in the motions of paying PMI alongside their mortgage and forget to request a stop on PMI have the chance to see it go. 

PMI is automatically canceled once you reach 22% equity based on your original appraised value. As your home value increases, you can request the lender remove PMI if a new appraisal demonstrates the equity is 20% or more of the appraised value. 

This is great news for most borrowers who pay PMI, but things work a little differently for those who have FHA loans. Typically, the MIP can’t be canceled on this government-backed loan and is a payment that remains for the duration of the loan regardless of equity. 

If the MIP payments tacked onto FHA loans aren’t for you, there are still other options. When your equity reaches 20% or more, you can refinance your home with a conventional loan and no PMI. 

Upfront Costs

An FHA loan is a mortgage option that requires both an upfront mortgage insurance premium (UFMIP) and MIP.

With this loan, UFMIP is 1.75% of the amount borrowed. It can either be paid in full at closing or added to the loan amount. 

PMI, however, is typically paid annually, with a portion included in each monthly mortgage payment. This prevents you from paying any upfront costs.

Annual Costs

Those who finance their home with an FHA loan will pay an annual MIP. This falls between 0.45% and 1.05% of the loan amount. 

Alternatively, the PMI rate is determined by your down payment amount and creditworthiness. PMI rates are typically between 0.58% and 1.86% of the loan amount.

PMI vs. MIP: Which One Is RIGHT For You?

Whether PMI or MIP, mortgage insurance is a payment that many borrowers will come across on their home-buying journey. But it doesn’t have to hold you back from getting your perfect home! Contact us here, and we’ll help you navigate the ins and outs of mortgage insurance with ease!