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First-time Homebuyer Homebuying Loans Mortgages Pre-approval Purchase

USDA Loans: How to Break the Big-City Blues with a Rural Relocation

With the increase in housing prices and the decrease in peace of mind, now, more than ever, rural residential living is taking precedence over living in metropolitan areas. If your sights aren’t set on settling down in the big city, the USDA loan may be the perfect mortgage option to help you purchase your dream home! 

What is a USDA loan & how do I qualify for one?

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. 

The process of getting a USDA loan is not much different from other loans on the market, but there are some requirements you need to be aware of:

  • The USDA must approve the lender 
  • With a USDA loan, an appraisal is not only required to determine the fair market value of the home, but it must adhere to additional guidelines stipulated by the USDA. 
  • You will only be allowed to purchase homes in a specified area using a USDA loan. 
  • Approval for a USDA loan may take a little longer because you have to be approved by both your lender and the USDA.

What homes can I purchase with a USDA loan?

Acceptable property types

To be approved for a USDA loan, the property you’re seeking to purchase must serve as your primary residence. This means that it cannot be a farm, a vacation home, a secondary home (or one you intend to rent out), or an investment property. 

Note: If the property you intend to purchase is a primary residence, it can have an “income-producing” building (e.g., a barn or a silo) as long as it is not used for commercial purposes. 

Appraisal requirements

When trying to secure a USDA home loan, certain criteria must be met when it’s time for an appraisal. These include but are not limited to: 

  • Home must be built on a structurally sound foundation
  • Quality roofing 
  • Must be easily accessed from a road
  • Functional electrical & plumbing systems
  • Functional heating & cooling systems

There is a multitude of home types you can purchase using a USDA loan. Townhouses, condos, newly constructed homes, preexisting homes, and manufactured homes are viable options as long as they meet the previously mentioned requirements. 

Find the home of your dreams

Pre-approval first

Now that you have a better understanding of what type of home qualifies for a USDA loan, you might think you’re ready to start home-hunting. But it’s always better to begin searching for a home after you have been preapproved. Pre-approval will give you a clearer understanding of the type of home you can afford and the budgeting choices you may need to make. 

Location matters

Once you’re preapproved, it will be easier to search for that home you just can’t live without. And when you find it, you need to be sure that it is located in a USDA-approved area. Generally, these are homes in communities with smaller population centers outside of a city or other metropolitan areas. Some suburbs may qualify as well.

Think you might have trouble determining which areas are approved? Well, the USDA property eligibility map makes the process easy. Simply type in the property address, and the map will show you whether the desired location is approved. The map also provides insight into surrounding areas that may or may not be USDA-approved. If your first choice doesn’t fit the USDA’s location criteria, a home in the surrounding area may qualify. 

Note: Even if you have taken all the necessary steps when choosing your perfect home, the USDA Rural Development department has the final say in determining the property’s eligibility upon receiving your application.

Applying for a USDA loan 

You’ll need to apply with a USDA-approved lender to purchase a home with a USDA loan, and MortgageRight is here to help make that purchase a possibility. We will work in conjunction with the Rural Development department, guiding you through the entire application process and getting you closer to having those keys in hand. 

The RIGHT USDA Lender

Ready to make a rural community your home? We can help you secure the USDA loan you need. Click here to get started. 

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First-time Homebuyer Homebuying Homebuying Tips Mortgages Pre-approval

Pre-qualification vs. Pre-approval: What’s The Difference?

The mortgage process is filled with systems and terminology that the average homebuyer may not be familiar with. While preparing to apply for a mortgage, you may encounter the terms pre-approval and pre-qualification for the first time, and it is vital that you understand the individual role each of them plays in your home search. 

Pre-qualification: What does it mean?

Pre-qualification is an initial step in the mortgage-seeking process. It typically involves describing your credit, debt, income, and asset situation to a prospective lender. After reviewing the information, the lender will give you an estimated loan amount you can expect to receive. 

Most lenders (including MortgageRight) are flexible when it comes to this part of the mortgage process and will give the option to complete it over the phone, online, or in person. 

Though pre-qualification is not a requirement when applying for a mortgage, it’s an exercise in helping you understand your financial fitness regarding a mortgage. It’s also the perfect time to learn more about the different mortgage options available. 

Pre-approval: What does it mean?

Much like the pre-qualification process, you will need to provide your lender with information regarding your financial history and stability. The difference here is that financial documents are required and will serve as proof of your mortgage readiness.

Here’s a list of commonly requested documentation:

  • W-2s (a current pay stub)
  • A summary of your assets 
  • Your total monthly expenses
  • A copy of your mortgage statement and home insurance policy if you already own real estate

After assessing the documentation, verifying your financial fitness, and running your data through an automated underwriting system, your lender will send you a pre-approval letter. This letter details the amount, type, and terms of the mortgage loan your lender is willing to offer. 

While a pre-approval offer is not a guarantee, it does act as proof of your commitment to buying a home and can give you leverage in a competitive market. 

Choose What’s Best for You

Whether you’re unsure about your financial standing when it comes to getting a mortgage or you’re ready to move on to pre-approval, MortgageRight can help you every step of the way. Call us at (205) 776-8401 to discuss the next steps in pre-qualification or get pre-approved today!

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Budgeting Down Payment First-time Homebuyer Homebuying Homebuying Tips Mortgages Pre-approval Purchase Self-Employed

How to Get a Mortgage if You’re Self-Employed

You’ve finally put some action behind the go-getter title your friends gave you and started a successful business. Now you’re looking for the perfect place to wind down after putting in the work. But as a self-employed individual, are there extra hoops you’ll need to jump through to buy your new home? Let’s find out. 

Does Being Self-Employed Make it Harder to Get a Mortgage?

The answer depends on what you consider harder. The biggest difference between a self-employed and an otherwise employed person is the documentation a lender may request to increase your chances of approval. 

When applying for a mortgage while self-employed, you need to be realistic about your income and what you can afford, prepared to submit more paperwork, and willing to pay constant attention to detail. 

Understanding Your Unique Self-Employed Situation

When assessing a self-employed borrower, most lenders will want to have a good understanding of the nature and location of your business, your business’ financial viability when it comes to current and future income generation, and your personal income stability.  

Employment Verification

Employment verification is the first step in proving you are successfully self-employed. Documents verifying self-employment status can include written communication from the following:

  • Current (and past) clients indicating services performed
  • A letter from your licensed CPA, or tax preparer
  • A professional organization that can attest to your membership
  • Any state or business license that you hold
  • Evidence of worker compensation and insurance for your business
  • A Doing Business As (DBA) issued at least 2 years prior to your application date.
Income Documentation

You’re much more likely to be approved for a mortgage if you can provide proof of a steady income. You may think you only need a few tax documents to breeze through the income verification portion of the approval process, but there have been recent changes in requirements, and you need to be prepared.

In June 2020, mortgage organizations Fannie Mae and Freddie Mac instated specific income verification practices for self-employed borrowers. According to a bulletin posted by the organizations, “the mortgage file must include a written analysis of the self-employed income amount and justification of the determination that the income used to qualify the borrower is stable.”

Because of these new stipulations, your lender will now ask for the following to verify your income:

  • 2 years of personal tax returns (this includes W-2s if you’re paid through your corporation)
  • An unaudited year-to-date (YTD) profit and loss statement that is signed by the borrower and reports business revenue (i.e., gross receipts or sales), expenses, and net income                      Note: The statement must cover the most recent month preceding the application received date.
  • 3 months business account statements no older than the latest two months represented on the YTD profit and loss statement                                                                                                                Note: Personal asset account statements evidencing business deposits and expenses may be used when the borrower owns a small business and does not have a separate business account.

The Road to Approval

Documentation is not the only thing you should consider when it’s time to submit your mortgage application. The road to approval may be clear of speedbumps if you have these four segments of your financial portfolio in order.

Credit Score

If there’s one thing self-employed mortgage applicants share with every other applicant out there, it’s what lenders will view as an acceptable credit score. 

Lenders look to your credit score for information on your debt repayment history, and a better score may equal more favorable loan terms, so be sure to keep your credit score as high as possible at all times.

Debt-To-Income-Ratio 

When it comes to getting a mortgage while self-employed, underwriters look at your existing debts instead of your income. This is how your debt-to-income ratio (DTI) is calculated.

Your DTI is a measurement of your income against your recurring debts, and it determines how much money you have available for potential monthly mortgage payments. 

DTI may hold more weight for self-employed borrowers because lenders might view tax write-offs as lowered income. This could result in existing debts becoming a larger share of your approved budget. 

If your DTI is 50% or higher, it may be wise to pay some current debts down before you apply for a mortgage. 

Downpayment

Your lender will also require proof that you have the funds for a down payment, miscellaneous fees, and enough funds to cover the initial monthly mortgage payments. 

This is why having a thorough understanding of your financial situation is so important. If you know that you will not be able to afford these expenses or you’re not willing to make the necessary financial adjustments, you should hold off on applying for a mortgage.

Separate Personal & Business Expenses

People who own businesses tend to intermingle business and personal debts, but this can backfire on those seeking a mortgage. The increase in credit usage may hurt your mortgage application if you charge business purchases, such as office phones or other supplies, to your personal cards or accounts.  

Keeping your business and personal accounts separate will more accurately reflect your financial profile (and increase your chances of being approved for a mortgage). 

Ready to Be a Self-Employed Homeowner?

Landing a mortgage while self-employed doesn’t have to be difficult! All you need is the RIGHT information and the RIGHT preparation to become a homeowner. Think you’re ready to take the next home-buying step? Click here to get started. 

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

How to Get a Mortgage in 2021: A Step-by-Step Guide 

For many people, getting a mortgage can feel like learning to walk all over again—that is, if they go into the process uninformed. Information is what separates the runners from the crawlers, and knowing how to prepare will make it that much easier to walk into the front door of your dream home.

Ready to make strides in the home-buying process? Let’s look at how to get a mortgage, step-by-step. 

Step 1: Financial Preparedness is Key

When looking to get a mortgage, be sure you’re financially prepared to take on homeownership. Buying a home is a major investment, and you need to consider how it will affect your finances. Can you save enough for a down payment? Are you deep in debt? Can you cover closing costs? 

If you answered no to any of those questions, you may want to improve your financial situation before applying for a mortgage. 

Additionally, lenders take a close look at your credit score when determining your mortgage eligibility; so make sure your credit score is in good condition before applying for a mortgage. If your credit score needs a little work, give it a boost by paying off debts or holding off on opening new lines of credit until you can secure a mortgage. 

Step 2: Decide Which Mortgage Loan Type Suits Your Needs

There are many loan types out there with different eligibility requirements, so it’s best to learn which one will fit your unique home-buying needs before you apply. 

Here are some loan types you might be interested in:

  • FHA loans have features, such as low down payment options, flexible credit & income guidelines, and a fixed rate, that may make it easier for first-time homebuyers to achieve the dream of homeownership.
  • USDA loans are popular among today’s home buyers because the USDA program offers no-money-down financing where homebuyers can finance 100% of a home’s purchase price.
  • Conventional loans are home loans not insured by the federal government. This type is best suited for borrowers who have a strong credit score, stable employment history, and can make a down payment of at least 3% of the home’s cost. 
  • VA loans are most beneficial for the vast majority of military borrowers. These versatile, $0-down payment mortgages have made it possible for more than 24 million service members to achieve their dream of homeownership. 
  • Jumbo loans are for home prices that exceed federal loan limits. These are best suited for affluent buyers with good credit, a high income, and who can offer a substantial down payment. 
Fixed or Adjustable Rates?

Fixed-rate mortgages keep the same interest rate over the life of your loan. They also provide a consistent monthly payment on your mortgage and come in 15-year, 20-year, or 30-year loans. 

Adjustable-rate mortgages have flexible interest rates that change with market conditions. These come with a certain level of risk but are beneficial if the home is temporary. 

Step 3: What Documentation Is Needed?

You’ll need to have all of your documentation in order before you apply for a mortgage. Here’s a rundown of the paperwork your lender will request.

Proof of Income

A lender will ask for a variety of documents to verify your income. Some items you might need to provide include:

  • 2+ years of federal tax returns
  • 2 most recent W-2s and pay stubs
  • If you’re self-employed, 1099 forms or profit and loss statements, or other additional documents.
  • If applicable, legal documentation that proves you have been receiving child support, alimony, or other types of income for at least 6 months.
Credit Documentation

A lender will always ask for verbal or written permission to view your credit report. While looking at your credit report, lenders will keep an eye out for factors that might exclude you from getting a mortgage (e.g., bankruptcy or foreclosure). If bankruptcy or foreclosure are present on your credit report, you might have to wait a number of years before you’ll become eligible for a mortgage.

Proof of Assets & Liabilities 

It’s possible that a lender might request some of the following documents to verify your assets: 

  • Up to 60 days’ worth of account statements that confirm the assets in your checking and savings accounts
  • The most recent statement from your retirement or investment account
  • Documents highlighting the sale of any assets you released before you applied (e.g., a copy of title transfer for a sold car)

How To Get A Mortgage With MortgageRight

Step 4: Preapproval

Preapproval is the process of learning how much a lender is willing to lend you to purchase your home, and there are some big advantages of getting preapproved before starting the mortgage application process. 

For one, it shows sellers that you can make a solid offer up to a specific price. Preapproval also gives you a better understanding of your mortgage costs because lenders will determineand provide details on your interest rate, APR, fees, and other closing costs.

During the preapproval process, MortgageRight will seek to provide the mortgage option(s) we think best fit your needs. We will show you different mortgage solutions and how much you can qualify for.

Step 5: Submit your Application

Even if you have already been preapproved, you still need to formally submit your most recent financial documents when you apply for a mortgage. Outside of the previously mentioned Proof of Income documents, these can include:

  • Proof of other sources of income
  • Recent bank statements
  • Details on long-term debts (e.g., car or student loans)
  • ID and Social Security number
  • Documentation of recent deposits in your bank accounts
  • Documentation of any funds or gifts used for a down payment

*Depending on the type of mortgage you’re getting, other documentation may be required. 

Within three business days, MortgageRight will give you an initial loan estimate, which consists of:

  • The cost of the loan
  • Associated fees and closing costs
  • Interest rate and APR.
Step 6: Enter the Underwriting Process

During this process, an underwriter will verify your assets and finances with the documentation you have provided during your application submittal.

MortgageRight will also verify details about the property you want to purchase. This usually encompasses:

  • Ordering an appraisal 
  • Verification of the home’s title
  • Scheduling any state-required inspections. 

When underwriting is finalized, you’ll receive a Closing Disclosure document.

A Closing Disclosure will tell you important information about your mortgage, including your monthly payment, down payment, interest rate, and closing costs. If you have any questions regarding the Closing Disclosure, you may discuss them with your Loan Originator prior to the scheduled closing date. 

Step 7: Close on Your Home

When your loan gets approved, you will be scheduled to attend closing at the closing agent’s office. This closing session is the perfect time to ask any last-minute questions you may have about your loan. Remember to bring your Closing Disclosure, a valid photo ID, and your down payment. Once you sign on that dotted line, you will officially become a homeowner!

Are You Ready To Secure A Mortgage?

A lot of organization, documentation, and time goes into getting a mortgage, but if you prepare as much as you can beforehand, things should go smoothly for you. Think you’re ready to take that first step toward getting a mortgage? We’ll walk beside you! Click here to get started!

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

Cease Your Lease: Advantages of Buying a Home

Owning a home has been a rite of passage for generations, but in recent years, one obstacle has kept people from their home-buying goals—rent. While many have broken free from the leash of a lease, one group still clings to the world of renting.

Millennials: Stuck in The Rent Ring

For the millennial generation (those born between 1981 – 1996), rent is an ever-present—and often welcome—expense. According to data from the Pew Research Center, more millennials choose to rent over buying a home compared to generations prior. Several factors play into many millennials’ decision to continue renting. Past economic decline, postponement of marriage, the housing bubble, and freedom to apartment hop have all lead millennials to stick with their landlords. But as the housing market continues to improve, millennials need to know that the American Dream of owning their own home is still within reach. 

Top 3 Reasons to Buy vs. Rent 

1). Owning a home will benefit you in the long run

Renting your home (or apartment) means shelling out income to a landlord and putting nothing toward an investment you own. Buying a home trumps renting because it can result in financial gain in the future. When you buy a home with a 30-year mortgage and make the required payments, you will come out owning your home, and money will stop coming out of your pockets. However, if you rent a property, you will have nothing to show for all the time and money you put toward paying your rent. 

2). Boosted equity as property values rise

Rising home values are the name of the game (and are expected to be on the ups for the foreseeable future), which makes homeownership a profitable long-term investment. According to Zillow, the average U.S. home price has increased 13.2% from May 2020 to 2021—a record rise since the company began aggregating housing data in 1996. 

This increase in property values is critical when deciding to buy versus rent because owning a home can result in a significant return if your home is sold at a higher value than it is purchased. And, with each monthly mortgage payment, you boost the amount of equity—a tangible growth in your home value that you can borrow against—you have in your home. 

3). Avoid constant rent increases

Though the amount may be unpredictable, one thing is for sure, your rent is going to rise (likely every year). With steadily rising rent comes constant budget changes and potential overpayment for a property that does not live up to its price tag in living conditions. Sound like a nightmare? Well, with a fixed-rate mortgage, you will always pay the same amount each month on a home you own, and you can’t be kicked out by a landlord!

*The Principal and Interest payment remains the same on a fixed-rate mortgage. Typically, only the escrow portion of the payment (insurance and property tax amount) increases. 

Breaking the Cycle: Letting Go of Beliefs That Keep You with a Lease

Bright lights can bog you down

We get it—the lure of living in the big city is strong for millennials, but a large metropolitan area could only offer you sky-high rent prices (as opposed to a fixed-rate home with a backyard). If those city lights are beginning to blind you, consider moving to a more rural area just outside and landing a home that suits you with a USDA loan

Don’t let debt stop you from getting a house with a deck

Student loan debt is a massive concern for many who want to leave renter life behind, but being debt-free isn’t a requirement when buying a home or qualifying for a mortgage. Lenders do consider your current debt, including any associated with student loans, but only to determine your DTI (Debt-to-Income Ratio). Your DTI is simply a measurement of your income against recurring debts, and lenders look to it to decide whether you will be in a financial position to make payments on a possible mortgage. The more debt you have, the more likely you are to fall behind on your payments. But don’t lose hope—lenders have varying options when it comes to DTI ratios. 

*Most lenders prefer a potential borrower’s DTI to be about 35% or lower during the approval process. 

Tie the knot after finding your way home

In a report about millennial home-buying trends, Bank of America states, “Life events such as getting married or having children are typical triggers to buying a home. The longer this age group lives with parents or independently, the more homeownership will be delayed,” However, this does not have to be the route you take. Even if your social media status says single, you should still be seeking to own a home to build wealth for your future—and an FHA loan (or a VA loan if you are military-affiliated and eligible) can help a new home be your plus one.

Ready To Leave Your Lease Behind? 

Buying a home is a huge step for up-and-coming generations, but it doesn’t have to be stressful. If you’re ready to let go of the leasing life and start living life, we can help! Getting a quote or pre-approval letter is easy. To get started, click here

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Budgeting Credit Down Payment First-time Homebuyer Mortgages Purchase

‘C’ Your Way to a New Home

Worthiness. For some, it is innate. For others, it is forged by a lifetime of trial and error. And when it comes to buying a home, creditworthiness is a determining factor in whether you will be handed the keys to your new haven. 

 

The Five Cs of Credit

 

The Five Cs of Credit is a classification of characteristics—character, capacity, capital, collateral, and conditions—that lenders use to ascertain the creditworthiness of a potential borrower. 

 

Character – Not to be confused with Luke Skywalker or James Bond, the first C refers to a borrower’s general trustworthiness, credibility, and personality. The function of this C is to determine whether the borrower is responsible and can be relied upon to make on-time payments on their mortgage (or other debts). Lenders typically look to a borrower’s credit history and interactions with previous lenders to evaluate their character; work experience, references, credentials, and overall reputation may come under the microscope as well. 

 

Capacity – The second C refers to a borrower’s ability to repay a mortgage loan by measuring income against recurring debts. This process is known as the debt-to-income ratio (DTI), which is calculated by adding up a borrower’s total monthly debt payments and dividing that summation by the borrower’s gross monthly income. Though acceptable DTI ratios vary between lenders, most prefer a potential borrower’s ratio to be about 35% or lower during the approval process. 

 

Capital – If you’re a borrower, putting money down is one of the best ways to up your chances of securing the mortgage you’re seeking. Lenders want to see a borrower that is committed to their investment, and what better proof is there than putting your own capital on the line? Typically, when it comes to the third C, the higher the down payment, the more vested the borrower is in the property. 

 

Collateral – A borrower’s assets are the key to this C. When it comes to landing a mortgage, the home is the collateral the borrower pledges to obtain the loan. It is important to maintain your account to avoid compromising your new home.

 

Conditions – The final C consists of lenders focusing on financial factors outside of the borrower’s control. The overall health of the economy and other loan specifics—such as interest rates and the amount of the principal—come into play here. If the lender determines that any of these external factors will inhibit a potential borrower’s ability to repay the loan, the loan my not be approved. 

 

Improving your worth

 

It’s one thing to understand the five Cs, but you may need to take steps to improve one or more components when considering purchasing a new home. Here are a few ways you can better your overall financial situation and bolster your creditworthiness using the five Cs:

 

Be consistent with payments – Credit score is one of the largest determining factors of your FICO score, and it typically increases when making monthly payments on time. If you find yourself lost in the onslaught of monthly bill payments, consider adding an automatic payment system into the mix to keep payments consistent and demonstrate your good character to future lenders. 

 

Consider paying your debts off early – In both nature and lending situations, the old adage “the early bird gets the worm” rings true. Making extra payments or paying off debts early can improve your credit score and decrease your debt-to-income ratio. These factors tie into your capacity to repay your mortgage and lower the risk you pose to a lender. 

 

Boost your savings – Extra funds can mean easier approval when it comes to landing a mortgage. Having the capital on hand to use as a down payment on your home will make you more desirable in the eyes of the lender. To increase your savings, try implementing an easy-to-follow budgeting strategy

 

 

You’re Worthy? We’re Ready.

 

If you think you’ve mastered the five Cs of credit, it’s time to get a quote! Do you have more questions about increasing your creditworthiness? Download our FREE Credit Repair Guide.

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Bring Home the Bacon: The Ins & Outs of a Cash-Out Refinance

Picture This: You come home from a hard day’s work only to find the paint chipping from your walls and high-interest debt chipping away at your bank account. With a sigh, you throw yourself down in your favorite recliner and stare up at the ceiling in defeat—until it hits you. There is a reason a home is considered one of the best investments you can make in your lifetime, and using the roof over your head to put cash in your pocket might be just what you need to get your life back on track.

What Is a Cash-Out Refinance?

When refinancing a mortgage, you replace your existing loan with a new one for the same amount—usually at a lower interest rate to reduce mortgage payments. But with a cash-out refinance, you substitute your current home loan with a new mortgage that is higher than your outstanding loan balance. 

A cash-out refinance makes the most of the equity you have built over time by letting you pocket the difference between the two mortgages in cash. This lump sum opens the door for consolidating high-interest debt, making important purchases, or tackling large-scale home renovation projects.

The Equity of It All

Home equity is the backbone of a cash-out refinance, so let’s look at the numbers. 

Say you purchased a home at $250,000, and its value has risen to $300,000. Having lived in the home for five years, you have managed to pay your mortgage down to $215,000. 

The equity built in your home is simply the difference between your mortgage balance and your home’s value. Which, in this example, is $85,000.

*Though you might be itching to utilize the entire amount, lenders generally only allow you to withdraw a portion of it. Assuming you can only refinance 80% of the home’s value, you take out $17,000 in cash, while $68,000 remains in the home. 

Yays & Nays of a Cash-Out Refinance

Yays:

The advantages of a cash-out refinance often outweigh those of other loan options. Here’s how a cash-out refinance can help your finances thrive:

  • Land a lower interest rate – Generally, a mortgage refinance is an opportunity to get a lower interest rate than you would if you opted for a HELOC (Home Equity Line of Credit) or a home equity loan. This benefit also applies to a cash-out refinance with the added perk of pocketing some cash you might need. 
  • Fund home improvement projects – One of the easiest ways to add value to your home and boost your overall homeowning experience is to start home improvement projects. Renovating your bathroom or giving your kitchen a facelift can increase your home’s appeal and future selling potential. 
  • Consolidate high-interest debts and pay them off – Are you drowning in debt? Using a cash-out refinance to pay off high-interest credit cards (and other debt) can bring you back above water and save you thousands in future interest payments.  
  •  Pay for other expenses – Have a child going off to college soon? You can use your home’s equity to pay for your child’s tuition in the event of student loan interest rates being higher than the rate of your refinanced mortgage. Just want the money to splurge? Have at it! You can use the lump sum you receive from a cash-out refinance to purchase virtually anything.
Nays:

Though beneficial for many homeowners, a cash-out refinance isn’t always the best choice for every situation. Here’s why you might want to consider alternatives:

  • Higher interest rate than expected – Getting a cash-out refinance might seem like a no-brainer, but be sure it is working in your favor. Generally, you want to refinance if the outcome will be a lower interest rate. If a cash-out refinance ends in an interest-rate spike, it might not be the route you want to take. 
  • You can’t avoid closing costs  – Because a cash-out refinance is still a refinance, you have to pay closing costs. Typically, the closing costs are deducted from the cash you are receiving and not out of pocket. It is always a good idea to consider the overall financial benefit of a cash-out refinance. If your potential savings are less than the costs, a cash-out refinance might not make sense for your situation. 
  • Taking a chance with your home – Though a cash-out refinance is yours to use however you choose, always be aware of the risk that comes with using your home as collateral. Be sure to take out no more than the amount you need, and put it toward a project that is guaranteed to benefit you financially.
  • Enabling unhealthy financial habits – As tempting as it may be to use your home as a cash cow, tapping your home’s equity to finance every expense could cause a sense of false security and, ultimately, lead to a resurfacing of the debts you initially paid off.  

Do You Qualify?

To reap the benefits of a cash-out refinance, you need to qualify. Much like getting a mortgage for a new home, if you are considering a cash-out refinance, your qualification for the loan will be based on your credit score, finances, and property. 

While requirements for a cash-out refinance differ between lenders and the type of loan, these are the general criteria: 

  • More than 20% equity in your home 
  • Verification of the home’s value with a new appraisal
  • A minimum credit score of 620
  • Debt-to-income ratio (including the new loan) of 43% or less
  • Employment and income verification

The Big Picture: Is a Cash-Out Refinance Your Best Option?

Whether you want to revamp your basement or knockdown debt, a cash-out refinance can be an attractive option when it comes to meeting your financial goals. Are you still on the fence about a refinance? Reach out to MortgageRight, and we’ll help you down. 

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Credit Down Payment Government Loans Homebuying Homebuying Tips Interest Rates Loans Mortgages Purchase Refinance

Appreciating Our Veterans One VA Loan at a Time

What does it mean to be a Veteran? Being a veteran means fighting for the freedoms of those you have never met. It means having a willingness to give up everything while expecting nothing in return. Being a veteran means volunteering to leave the home you’ve always known, so others won’t have to. It means that you not only understand the concept of courage, but you embody it.

Most of all, being a veteran means taking off the uniform and rebuilding a civilian life when your service is complete. Here at MortgageRight, we understand how difficult it can be to make the transition from protector to private citizen. To show our appreciation for your sacrifice, we provide easy access to a mortgage made just for you—the VA home loan.  

What Is a VA Loan?

Homeownership can become a hassle if you’re not equipped with the financing options that are right for you. For the vast 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. 

Despite the program being designed to create a seamless homebuying experience for service members, much of our military population is left in the dark about the program’s unique benefits, and this leads them to choose less favorable loan options.

Who Qualifies? 

To be eligible for a VA loan, you must be a veteran or active service member who has satisfied at least one of these service requirements:

  • Served for 90 consecutive days during wartime 
  • Served for 181 days during peacetime 
  • Served in the National Guard or the Reserves for 6 years

Surviving spouses of service members may also qualify if the service member’s life was lost in the line of duty or if they sustained a service-related disability.

Before you can obtain a VA loan, you will need to present your lender with a copy of your Certificate of Eligibility, which is a document provided by The Department of Veteran’s Affairs as proof of your qualification. To prove previous military service, you must provide a Report of Separation (DD Form 214). If you are on active duty, you will need to provide a Statement of Service instead.

Though The Department of Veteran Affairs does not require a minimum credit score to qualify, it is best to maintain a credit score of 620 or higher to ensure third-party lender requirements are met. 

Backed by Benefits

  • Zero Down Payment

Other loan programs usually require at least a 3% down payment when purchasing a home. However, if you’re looking to buy a home with a VA loan, one of its most advantageous aspects is that the down payment requirement is no longer a burden. 

  • 90% Equity Cash Out

For homeowning service members and veterans, refinancing with a VA loan opens the door for a 90% equity cash out. This option replaces your existing mortgage with a new loan for more than you owe on your current mortgage and allows you to pocket the difference if your home has risen in value. This is especially beneficial if you are looking to save for higher education or retirement, pay off higher-interest debt, or make needed home improvements.

  • Say No to Mortgage Insurance Costs

Unlike other home loans on the market that require mortgage insurance premiums when the borrower has less than 20% equity in their home, VA loans do not come with any mortgage insurance premiums or private mortgage insurance costs—which helps borrowers save even more each month. 

 

Though a VA loan offers savings opportunities at every corner, it does require a VA Funding Fee (that is 2.3% of the amount borrowed with a VA loan, which increases to 3.6% if you are a previous VA loan borrower).

  • The IRRRL Deal

If you have an existing VA-backed home loan, the IRRRL (Interest rate reduction refinance loan) is another added perk. This program is perfect if you want to reduce your current monthly mortgage payments or increase payment stability. 

Let Us Appreciate You

As a Veteran owned and operated lender, MortgageRight always rises to the challenge of helping active and veteran service members navigate the VA-loan landscape and secure the mortgage that meets their unique homebuying needs.

Unsure if the VA loan is right for you? We can help! Get a quote or pre-approval letter or email us at contact@mortgageright.com for any questions.

Happy Military Appreciation Month & Thank You for Your Service!

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Homebuying Homebuying Tips Loans Mortgages Pre-approval Purchase

How Pre-Approvals Can Help You Get Your Offer on a Home Accepted

Pre-approvals for a mortgage loan are like getting verified on Twitter. It’s a sign that you’re the real deal. 

Getting pre-approved before you start shopping for a new home isn’t a requirement, but it definitely gives you a leg up. We want to help you get your dream home, and a pre-approval letter gets you one step closer. 

So, what is a pre-approval? How do you get one? Is it worth it? Let’s take a look. 

What Is Pre-Approval?

A pre-approval determines how much money you can borrow to purchase your home. Lenders analyze your income, assets, and credit score to determine three homebuying factors:

  • The type of loan you can get approved for
  • How much you can borrow
  • What the interest rate will be

The lender will then provide you with an official pre-approval letter that details this information.  

It’s important to note that pre-approval and pre-qualification are NOT the same. Pre-qualifications can be beneficial in providing insight into your loan opportunities, but are less in-depth and therefore less accurate.  

How Do You Get Pre-Approved?

The pre-approval process is essentially a mortgage application. Your lender will want to evaluate your finances, which includes reviewing documentation in the following areas:

  • Proof of income
  • Employment verification (bank statements) 
  • Proof of assets (retirement or investment account statements)
  • List of any liabilities
  • Credit history (rent history, credit report)
  • Identification
  • Debt-to-income ratio (DTI)

How Does a Pre-Approval Help You Buy Your Dream Home?

Your pre-approval letter essentially says, “you can buy a house worth X amount of money,” because you are highly likely to get a loan for the amount stated by your lender. 

Your real estate agent will typically want to see your pre-approval letter before showing you houses to ensure you both aren’t wasting time looking at homes outside your budget.

It will also be valuable when making an offer on “the one,” because it shows the seller you won’t have problems getting financed for the amount you’re offering. That’s all the more important if it’s a hot property and others are making offers. With pre-approval, you may already be one step ahead of those other potential buyers. 

And because a pre-approval is “essentially a mortgage application,” the rest of your home buying process will go a lot smoother. By doing some of the work upfront, you can shift your focus on the fun stuff, like your living room color scheme or building a backyard entertainment space. 

Start Now!

If you’re considering a move or looking into buying your first home, it’s a great time to start the pre-approval process! And we can help! Click the blue button in the top right corner of our home page to get started. If you have questions, reach out to us! We’d love to help you take the next step on your homebuying journey.

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Budgeting Homebuying Homebuying Tips Interest Rates Loans Mortgages Purchase Refinance

Take Advantage of Unheard-Of Interest Rates

2020 is shaping up to be an interesting year for the US housing markets. The combination of a global pandemic and an election year has led to historically low-interest rates. Now is a great time to assess your financial situation and develop a plan to take advantage of this unprecedented time in the housing market. And these low-interest rates are no secret; applications to refinance have gone up by 80% to the highest level since the financial crisis of 2009. Even though this may be a stressful time in the stock market with uncertainty about the future, taking advantage of these low-interest rates is a concrete step you can take towards financial security in insecure times. Don’t get anxious, get proactive! We don’t know how long rates will stay this low, so now is the time to act!

 According to the Federal Reserve, the rate for a 30-year fixed mortgage has been about 3.75% in early 2020, and recent events have taken it even lower. That means if your rate is above 4%, you could benefit from refinancing! If you currently have a VA, FHA, or USDA loan, we have even more good news. You don’t have to have an appraisal to refinance to a lower rate.  

Here are some ideas for ways to take advantage of low-interest rates:

  • Refinance your mortgage – lower your payments by thousands of dollars or cut your term in half!
  • Refinance other loans such as student loans 
  • Make large, one-time payments on other debt.
  • Consolidate and pay off your debt – pay off high-interest credit cards to save money.
  • Purchase a new or second home – whether you’ve been looking for a vacation house, an investment property, or an upgrade for your family, now is the time! 
  • Start a business – use your savings as a nest egg to finance your dream company.

Call (205) 776-8401 to speak to any of our Mortgage Loan Experts to discuss your financial goals and find out how we can help you save thousands with a refinance. Or, head on over to our website and click the Apply Now button for an online application.