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First-time Homebuyer

Tips & Tricks for a Smooth Mortgage Application Process

Buying a home is one of the biggest investments you’ll make in your lifetime, and applying for a mortgage loan can be a complex and overwhelming process. However, by understanding the mortgage loan timeline, the step-by-step process, and how to get approved for a home loan, you can make the process much smoother and less stressful. In this guide, we’ll cover everything you need to know to improve your mortgage loan application process from start to finish.

Understand the Mortgage Loan Timeline

The mortgage loan timeline can vary depending on the lender, the type of loan, and your financial situation. Generally, the timeline can range from 30 to 90 days, and it’s important to understand the key milestones in the process.

First, you’ll need to gather all the necessary documentation for your lender, including proof of income, tax returns, bank statements, and other financial information. Once you submit your application, your lender will review your credit score, debt-to-income ratio, and other factors to determine your eligibility for a mortgage loan.

Once your application is approved, you’ll need to complete a home appraisal and inspection to ensure the property is in good condition and worth the loan amount. Finally, you’ll close on the loan and receive the funds to purchase your new home.

Learn the Step-by-Step Mortgage Loan Process

Understanding the step-by-step mortgage loan process can help you prepare for each stage of the application process. Here are the key steps to keep in mind:

1. Pre-approval: Before you start shopping for a home, it’s a good idea to get pre-approved for a mortgage loan. This will give you an idea of how much you can afford to spend on a home and help you make a more informed decision.

2. Application: Once you find a home you want to purchase, you’ll need to submit a mortgage loan application to your lender. This will include all the necessary documentation to verify your income, assets, and creditworthiness.

3. Underwriting: During the underwriting process, your lender will review your application and assess your risk as a borrower. This will include a review of your credit score, employment history, and other factors.

4. Appraisal and Inspection: Your lender will require an appraisal and inspection to ensure the property is worth the loan amount and in good condition.

5. Closing: Finally, you’ll close on the loan and receive the funds to purchase your new home.

Know How to Get Approved for a Home Loan as a First-Time Buyer

If you’re a first-time buyer, the mortgage loan application process can be particularly daunting. However, there are several steps you can take to improve your chances of getting approved for a home loan:

1. Improve your credit score: Your credit score is one of the most important factors in determining your eligibility for a mortgage loan. Make sure to pay your bills on time, keep your credit card balances low, and avoid opening new credit accounts.

2. Save for a down payment: Most lenders require a down payment of at least 3% to 20% of the home’s purchase price. Make sure to save up enough money to cover your down payment and closing costs.

3. Get pre-approved: Getting pre-approved for a mortgage loan can help you stand out as a serious buyer and improve your chances of getting approved for a loan.

Understand the Mortgage Application Timeline

The mortgage application timeline can vary depending on the lender and the type of loan you’re applying for. However, there are several key milestones you should be aware of:

1. Pre-approval: 1-3 days

2. Application: 2-4 weeks

3. Underwriting: 2-4 weeks

4. Appraisal and Inspection: 2-4 weeks

5. Closing: 1-2 weeks

By understanding the timeline, you can plan ahead and ensure a smooth application process.

Learn How to Apply for a Mortgage Loan with Bad Credit

If you have bad credit, getting approved for a mortgage loan can be challenging. However, there are several steps you can take to improve your chances of getting approved:

1. Improve your credit score: Work on paying down your debts and improving your credit score before applying for a mortgage loan.

2. Consider a co-signer: A co-signer with good credit can help improve your chances of getting approved for a mortgage loan.

3. Look for alternative lenders: Some lenders specialize in working with borrowers with bad credit.

Be Aware of the Mortgage Loan Processing Checklist

The mortgage loan processing checklist can vary depending on the lender and the type of loan you’re applying for. However, here are some common items you’ll need to provide:

● Proof of income

● Tax returns

● Bank statements

● Credit report

● Employment verification

● Home appraisal and inspection

By being aware of the checklist, you can ensure you have all the necessary documentation and avoid any delays in the application process.

Discover How to Apply for a Mortgage Loan Online

Many lenders now offer online mortgage loan applications, which can be a convenient and efficient way to apply for a loan. To apply for a mortgage loan online, you’ll need to follow these steps:

1. Research and compare lenders: Use online tools to compare rates and fees from different lenders.

2. Pre-approval: Get pre-approved for a mortgage loan online.

3. Application: Fill out the online application and upload all necessary documentation.

4. Underwriting: The lender will review your application and assess your eligibility for a mortgage loan.

5. Closing: Once your loan is approved, you’ll close on the loan and receive the funds to purchase your new home.

In conclusion, by understanding the mortgage loan timeline, the step-by-step process, and how to get approved for a home loan, you can improve your chances of a successful mortgage loan.

Categories
First-time Homebuyer Homebuying Loans Purchase

Buying vs. Renting: How to Decide

Home is where happiness resides, but choosing a place to call home can be hard to decide when you don’t know the ins and outs of buying vs. renting. Whether you’re considering buying or renting your home, you need to weigh the pros and cons of each option. Let’s find out how these two living situations measure up.

Buying vs. Renting: Pros and Cons

Pros of Buying
  • It’s a worthwhile investment: Buying a home is an opportunity to invest in your future. Why? Because equity comes into play. After you purchase a home, you build equity by making monthly mortgage payments. More equity means more chances to make a profit on your investment. If you have the equity, you can take advantage of programs like a cash-out refinance. You can also pocket a significant sum if you sell your home when its value has appreciated. Unlike renting, homeownership can benefit you in more ways than one. 
  • Freedom to live: Among the greatest benefits of buying your home is the ability to do whatever you want with your space. Are you looking to decorate your walls with green and orange polka dots? Want to install stained glass windows? Can’t fathom leaving your six dogs, two cats, and pet python behind? Then homeownership is the right option for you. Enjoy the freedom to live however you wish by purchasing a home of your own instead of renting one that belongs to someone else. 
  • Enjoy stability: When you own your home, you have more privacy—which is huge when you want to build a stable home. Freedom, privacy, and choice are the hallmarks of a steady living situation, and homeownership offers all three without fear of landlord restrictions. 
Cons of Buying 
  • Added responsibility: If you buy a home, you become fully responsible for property upkeep. You’ll have to do your maintenance, lawn care, etc., or hire a professional when you become a homeowner. 
  • Generally, more expensive:  All good things come at a price, and homeownership is no different. If you want to buy a home, you need to consider costs like down payment, closing costs, insurance, etc.  

Keep this in mind: Even though homeownership is typically more expensive than renting, it’s still very achievable for the average home seeker.

Pros of Renting 
  • Flexibility: If you don’t like to live in one place for too long, then renting can offer you more flexibility. Leases typically run between a few months to a year—which is less of a long-term commitment than buying a home.  
  • Maintenance is covered: Landlords or property management companies take care of most maintenance issues for renters, so if you want a little less responsibility, renting may be for you. 
Cons of Renting 
  • Rent can increase at any time: Rent prices are always rising, and in many states, there is no cap on the amount a landlord can charge. When you own your home, you’ll typically have a stable monthly payment for a fixed amount of time. 
  • No chance at equity: When you rent, the only investment you will be making is in your landlord’s financial future. Renters don’t have the option to build any equity—which means your payments won’t benefit you in the long term. When you rent, you secure a place to stay but not much else.
  • Limits and policies: Many renters take a hit to their freedom because of the rules and regulations landlords have in place. Many rental properties don’t allow pets and will never let you personalize your space the way you would be able to if you owned it yourself. 
  • Less privacy: Because renters typically live in properties that house more than one family, privacy is sometimes scarce. If the property is poorly built, you may have to put up with noise from other tenants, mail theft, and even maintenance crews using a master key to barge into your space unannounced. 

Still Deciding Whether to Rent or Buy?

Ultimately, the choice to buy or rent a home is up to you. But if you think homeownership is in your future, we can help you move into the home of your dreams! Contact us today if you have any questions or to start your home-buying journey!

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

FHA vs. Conventional Loans: How Do They Differ?

What Is an FHA Loan?

An FHA loan is one of multiple government-backed home loan options. This loan type is insured by the Federal Housing Administration, which makes the requirements to qualify less restrictive for homebuyers. FHA loans are a good option for homebuyers with lower credit scores or lower down payment potential. 

What Is a Conventional Loan?

Conventional loans are a mortgage type insured by private lenders. Conventional loans are not government-backed, which means the qualifications are more stringent than those of an FHA loan. Homebuyers typically need a higher credit score and down payment to secure this loan type. 

Fannie Mae & Freddie Mac

Because conventional loans conform to Fannie Mae and Freddie Mac’s standards, they are also known as conforming loans. Fannie Mae & Freddie Mac are the two government-affiliated organizations associated with conventional loans. They purchase mortgages from private lenders and hold the mortgages or convert them into mortgage-backed securities. 

Credit Scores

FHA Loan

Many factors decide the credit score requirements for each loan option. With an FHA loan, a credit score of 580 is typical for you to qualify. A credit score as low as 500 is a possibility for some homebuyers through certain lenders, however, lenders establish their minimum credit score requirement based on risk. When trying to qualify for an FHA loan with a lower credit score, a homebuyer typically needs a higher down payment. The more you’re willing to put down on your home, the lower the credit score required to secure the loan. 

Keep this in mind: If you have a co-borrower, the credit score used to determine eligibility will be the lowest median score. Your middle credit score will be used if you’re borrowing as an individual. 

Conventional Loan 

With conventional loans, qualifying credit scores vary from lender to lender. However, a minimum credit score of 620 or higher is the standard. Like the FHA loan, your median credit score will be used to determine eligibility if you’re borrowing as an individual. If co-borrowers are present, Fannie Mae can make qualification easier by using the average median score of each borrower instead of the lowest median score. 

Keep this in mind: Conventional loan credit score requirements are higher than FHA loans because of the risk associated with loans that don’t have the backing of a government agency.

Down Payments

Conventional Loan 

It might come as a surprise to new homebuyers, but putting 20% down is not always necessary to secure a conventional loan. Down payment expectations are often flexible. However, if you can’t put 20% or more down on your home, you’ll have to pay private mortgage insurance (PMI).

Smaller down payments create a higher risk scenario for lenders, and PMI keeps that risk in check in case you default on your loan. 

FHA Loan

If you opt for an FHA loan, you can put down as little as 3.5% if you have a 580 or higher credit score. If your credit score falls within the 500-579 range, a 10% down payment is required. 

Mortgage Insurance

Conventional Loan 

Conventional loans often come with private mortgage insurance. Private mortgage insurance (PMI) is an assurance fee typically applied to monthly payments if a homebuyer can’t put 20% or more down on the home. 

Though putting down less than 20% on a conventional loan makes paying mortgage insurance more likely, mortgage insurance payments change when you reach 20% equity in your home. When you achieve this equity milestone, you can ask that your lender remove PMI from your mortgage. 

Your PMI payments automatically end 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 proves the equity is 20% or more of the appraised value. 

With a rate between 0.58% and 1.86% of the conventional loan amount, a portion of your PMI is included in each monthly mortgage payment to prevent you from paying any upfront costs.

FHA Loan 

If you opt for an FHA loan, you’ll receive a mortgage insurance premium (MIP). Unlike private mortgage insurance, MIP is applied no matter your down payment amount.

Alongside an annual MIP payment (which falls between 0.45% and 1.05% of the loan amount), you will need to pay an upfront mortgage insurance premium (UFMIP). UFMIP is 1.75% of the amount you borrow and can either be paid in full at closing or added to your loan amount. 

Generally, MIP can’t be canceled and is a payment that remains for the duration of the loan regardless of equity. However, if you want to get rid of MIP payments, there are other options. When your equity reaches 20% or more, you can refinance your home with a conventional loan and no PMI. 

Which Loan Offers the Best Benefits?

Conventional Loans Benefit Borrowers Who…

  • Have a credit score of at least 620.
  • Have a down payment of 3% or higher; have a down payment of 20% if they want to avoid PMI payments. 
  • Have a low debt-to-income ratio (DTI).

FHA Loans Benefit Borrowers Who…

  • Have a credit score on the lower end. 
  • Don’t have much saved for a down payment. 
  • Have a higher debt-to-income ratio (DTI).
Make Homeownership Happen!

Whether you’re leaning toward a conventional loan, an FHA loan, or are still unsure where you stand—we can help you! Contact us today to have all your mortgage questions answered or to start your home-buying journey!

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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. 

Categories
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!

Categories
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!

Categories
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.