Category: Loans

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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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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 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 mortgages, varied loan terms, and multiple mortgage rate options. The most important thing is to seek the best mortgage type for your homeownership goals.

Gather your documents

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

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

Have these documents on hand before starting the application process. 

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

Step 1: Get pre-approved

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

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

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

Step 2: Fill out the application

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

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

Step 3: Begin loan processing

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

Step 4: Enter the underwriting phase

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

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

Step 5: Clear-to-close

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

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

How long does the entire process take?

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

Get started!

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

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Budgeting Government Loans Homebuying Loans Mortgages

Is a Reverse Mortgage Right for You?

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

What is a reverse mortgage?

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

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

Home Equity Conversion Mortgage (HECM)

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

Requirements

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

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

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

How much will you receive monthly?

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

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

How do you pay back a reverse mortgage?

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

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

What if the homeowner passes away? 

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

Who benefits most from reverse mortgages?

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

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

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

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

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First-time Homebuyer Homebuying Homebuying Tips Loans Market Analysis Mortgages Pre-approval Purchase

Top 3 Ways Remote Work Is Changing Homebuying

Throughout history, our home spaces have evolved alongside our workplaces. And as telecommunication and global connection continue to thrive, more people than ever are dropping the commute and firing up their laptops to put in a good day’s work. But what does this change in the workplace mean for up-in-coming homebuyers entering the housing market? Let’s find out! 

How remote work is changing home-buying behavior

When searching for the perfect home, the commute to work has been an integral part of most homebuyers’ decision-making process, and that remains true in today’s home-buying landscape. A 2021 study done by Realtor.com provides insight into homebuyers’ willingness to trade in longer commute times for more affordable homes in more desirable areas.

But with the emergence of remote work across the nation, the “this-for-that” mentality has less influence on homebuyers. Homebuyers that originally struggled to find homes that fit both their price point and desired commute time now have the opportunity to be more flexible because:

  • Majority of recent homebuyers (Gen Z, Millennials, Gen X) prefer remote work.
  • About four-in-ten recent homebuyers work remotely due to pre- and post-pandemic conditions.
  • Younger workers are driving real estate markets.
  • Close to half of recent homebuyers report companies embracing remote work.

This is great news for homebuyers who want to forgo city living altogether while maintaining their current job. If you’ve had your eyes set on a suburban or rural area, the freedom that remote work provides (and the benefits of a USDA loan) can help you snag the home of your dreams.

More first-time buyers are entering the market

The influx of remote work is also helping individuals who could not otherwise purchase a home enter the housing market. According to Zillow, remote work could open the door to homeownership for nearly two million renters to buy starter homes in less expensive areas outside of the cities they work in. 

The Mortgage Bankers Association explains how this reshaping of the housing market could take place. More than 10% of renters who may have struggled to afford a home within the city limits of San Francisco could afford a home within the metro area (but beyond an acceptable 5-day-per-week commuting distance). With current interest rates at an all-time low and the ability to move out of high cost-of-living areas, current renters who work remotely have more opportunities than ever to become homeowners.

In-home requirements are more specific

The areas people choose to live in aren’t the only thing changing with the rise of remote work. There is also a noticeable shift in what homebuyers are looking for in their homes. 

Having a dedicated office space is a top priority for homebuyers working remotely. Homes with an extra bedroom, a finished attic or basement, or designated office space are beginning to overshadow previously sought-after amenities. Home theatres and gyms are losing their luster in this new era of home buying because the more time buyers spend working at home, the more willing they are to reap the benefits of an in-home experience from a public place. 

Need a New Home to Work From?

No matter where you get your work done, any time is the RIGHT time to start your home-buying journey. If remote work has become a permanent part of your life, you don’t want to miss out on buying the perfect home for your needs. Re-invent what home looks like for you by getting a quote or pre-approval letter today. 

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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 the following: 

  • 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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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. Here are some items you might need to provide:

  • 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 determine—and 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, you may also need to submit the following:

  • 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. It consists of the following information:

  • 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 take steps to verify details about the property you want to purchase:

  • Order an appraisal 
  • Verify the home’s title
  • Schedule 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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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 option that is 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!

Categories
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.