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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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Budgeting Credit Down Payment Homebuying Homebuying Tips Mortgages Purchase Refinance

5 Ways to Get the Best Mortgage

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

Improve your credit score.

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

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

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

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

Choose your loan term carefully.

Short-term loans

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

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

Long-term loans

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

 Make a larger down payment.

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

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

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

Remember rate locks.

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

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

Want to change your mortgage? Refinance!

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

Here are a few ways a refinance can benefit you:

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

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

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Budgeting First-time Homebuyer Homebuying Homebuying Tips Mortgages Purchase

How to Decide the Best Place to Live

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

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

Step One: Know Your Budget 

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

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

Seattle, Washington

Metro Population: 3,871,323

Median Home Price: $675,237

Average Annual Salary: $68,460

Huntsville, Alabama

Metro Population: 457,003

Median Home Price: $192,667

Average Annual Salary: $55,980

Boulder, Colorado

Metro Population: 322,510

Median Home Price: $528,833

Average Annual Salary: $67,160

Sarasota, Florida

Metro Population: 803,709

Median Home Price: $387,630

Average Annual Salary: $46,040

Austin, Texas

Metro Population: 2,114,441

Median Home Price: $377,693

Average Annual Salary: $55,190

 

Cost of Living

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

Memphis, Tennessee

Metro Population: 651,011

Median Home Price: $140,000

Average Annual Salary: $57,538 

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

Toledo, Ohio

Metro Population: 275,116 

Median Home Price: $109,900

Average Annual Salary: $58,930

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

Akron, Ohio

Metro Population: 197,375 

Median Home Price: $118,950

Average Annual Salary: $62,000

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

Detroit, Michigan

Metro Population: 672,351 

Median Home Price: $70,000

Average Annual Salary: $64,357

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

 

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

Step Two: Consider Every Factor

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

Transportation

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

Climate

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

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

Demographics

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

School Districts

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

Culture

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

Convenience

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

Appearance

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

Step Three: Get The Ball Rolling

List your deal-breakers

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

Scope out the area

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

In-person 

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

Virtual tour

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

Location Decided? Lender Provided!

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

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

Homeownership 101: What Are the Costs?

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

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

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

Upfront Costs

Down Payment

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

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

Closing Costs

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

Monthly Mortgage Costs

Property Taxes

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

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

Insurance

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

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

Day-To-Day Costs

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

Utilities

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

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

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

Homeowners Association (HOA) Fees

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

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

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

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

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

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

Internal Upkeep: Maintenance 

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

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

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

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

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

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

Renovation Costs

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

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

Financial Preparedness Is The RIGHT Way To Approach Homeownership

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

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

Upfront Underwriting: A Better Way to Pre-approval

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

How Does It Work?

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

Which Documents Will Be Reviewed?

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

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

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

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

What Are the Other Advantages of Underwritten Pre-approval?

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

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

Is an Underwritten Pre-approval RIGHT for You?

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

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

5 First-Time Homebuyer Mistakes and How to Avoid Them

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

Making a down payment that’s too small

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

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

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

Not checking credit reports and correcting errors

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

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

Ignoring VA, USDA, & FHA loan programs

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

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

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

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

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

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

Applying for credit too soon

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

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

Make the RIGHT choice with us!

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

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Down Payment First-time Homebuyer Homebuying Homebuying Tips Purchase

Down Payments: How Much Do You Really Need?

When preparing to buy a home, it’s important to consider one of the most significant financial components of the purchase—your down payment. A down payment is an out-of-pocket amount you pay toward your home that translates into home equity. Because guidelines and lending practices vary when it comes to down payments, it can be hard to figure out how much you need. Let’s find out which down-payment option is right for you!

Is a 20% down payment necessary?

A 20% down payment can seem daunting for a first-time homebuyer. But there are other options. Most lenders are flexible about how much money they will allow you to put down. With that said, everything in life has its pros and cons, and making a sizable down payment is no different. 

Pros

If putting 20% down on your home is financially feasible, here are a few benefits you’ll reap.

You can land a better interest rate

When you put down 20% or more, you’re less of a risk to lenders. And when you’re not as risky to lend to, you gain access to lower interest rates. 

Your interest rate is simply the percentage of the principal or outstanding balance that you’re charged monthly for borrowing money. An interest rate that’s even one point lower can save you thousands of dollars throughout the life of your loan. 

Want to know more about interest rates? Find out here.

Your monthly payments will be lower

Your down payment goes toward the cost of your home. If you can put a sizable amount of money down, you can borrow less from your lender to pay for the rest of your home. With less money borrowed, you will have lower monthly mortgage payments. 

You won’t have to worry about PMI

PMI, or private mortgage insurance, is an assurance fee typically applied to a borrower’s monthly payments if they cannot put a certain amount down on the home they purchase. It acts as a buffer for lenders when the risk of default is on the table, and if you put 20% down, you won’t have to worry about it.

Even if putting 20% down isn’t in the cards, you can request that your lender remove PMI when you reach 20% equity in your home. Typically, if you don’t make the request, a lender will automatically cancel PMI when you build at least 22% equity in your home. However, this does not apply to FHA loans. 

Need to know the basics of equity? Learn more here.

You’ll pay less interest over time

The higher your down payment, the lower your borrowed amount, so you’ll pay less interest over the duration of your loan. 

Cons 

Though putting 20% down seems like it might be the best option for every buyer, there are potential disadvantages to consider. 

Saving takes time 

Most borrowers will spend months (or even years) putting money away for a down payment, but some borrowers’ savings might be better used elsewhere. If you think you might need the money to fund an important event in your future, it might be more beneficial to put down less than 20%. 

Less money for repairs and home improvements

Some borrowers have their eye on a home that will require a few repairs, and they might be able to snag it for a bargain because of it. With a larger down payment, there are fewer funds left to go toward the maintenance of the purchased home. 

This might be less of a drawback if you’re willing to hold back on the repairing process. Once you’ve built up enough equity in your home, you may be eligible for a cash-out refinance to fund your home improvement project(s).

Is it possible to buy a house with a low or no down payment?

Of course! Not being able to put money down may not exclude you from being able to buy the home of your dreams. However, it does prevent you from being able to access certain loans. If you want to put 0% down, you’ll need to get a government-backed loan. 

Government-backed loans are those that the government insures. They are beneficial to borrowers because the government will cover any financial losses if you default on the loan. Lenders will also be more likely to give lower interest rates and less stringent down payment requirements on these loans. 

An FHA loan is a government-backed loan insured by the Federal Housing Administration. With this mortgage option, you can typically purchase a home with as little as 3.5% down if you have a credit score of 580 or above. However, if your credit score is within the 500-579 range, you’ll be required to put down as much as 10% 

If you’re thinking about buying a home with no money down, a VA loan or USDA loan may be the right option for you. You may qualify for a VA loan if you’re a current or former service member or a surviving spouse of a former service member. To qualify for a USDA loan, the home you want to purchase must be located in an eligible rural or suburban area.

Both VA and USDA loans come with a zero-down payment guarantee as long as you meet the minimum requirements set by the Department of Veteran Affairs (VA) and the U.S. Department of Agriculture (USDA).

Down-payment requirements for non-government loans

Outside of government loans, down-payment requirements can vary:

Conventional Loan: Conventional loan requirements a determined on a lender-by-lender basis. Some lenders may require you to put higher than 5% down, but at MortgageRight, 3-5% is common. 

Jumbo Loan: Though they don’t have a designated down-payment requirement, Jumbo loans typically require higher down payments and credit scores to be eligible. 

Don’t let a down payment keep you from owning your dream home

Whether you’re in the financial position to put more than 20% down or a zero-down payment is more suitable, MortgageRight can help you secure the RIGHT loan option for your home-buying needs. Get a quote or pre-approval letter or contact us at mortgageright.com/contact to make your dream home a reality!

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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.