Tag Archive for: first-time homebuyer

Buying a Condo? 5 Questions to Help You Decide.

August 24, 2022
mortgage blog, buy a condo, preferred rate

Buying a condo can be a great first step for homebuyers on their path to a bigger home. Generally, buying a condo is a smart move for first-time homebuyers and investors alike but with mortgage rates rising, the decision isn’t as clear cut right now. Condos often have smaller price tags which makes them attractive for anyone on the path to homeownership, require less maintenance, and can often be turned into a rental property when you’re ready to buy a bigger home.

For first-time homebuyers, buying a condo can put you on a faster path to homeownership, with an affordable mortgage and a low-maintenance property. For homeowners ready to invest in a second property, buying a condo in 2022 can help build wealth and financial security through rental income and home equity.

Nevertheless, rates are rising. This article can help you ask the right questions to discover if buying a condo is a smart move right now.

5 Questions to Answer Before Buying a Condo in 2022

Whether you’re a first-time homebuyer or a current homeowner thinking about investing in a second property, these five steps can help guide the process.

When you find your dream home, the last thing you want is to watch your loan fall through after you’ve made a competitive offer. Start here.

1. Will a condo meet your financial goals and fit your lifestyle?

Buying a condo in 2022 could be a smart move to build financial security, but it’s worth thinking about balance and lifestyle. If this will be your primary residence, consider the benefits. Condos offer the opportunity to live in a close community with your neighbors along with shared amenities such as a pool, tennis courts or a fitness gym. In addition, condos provide a low-maintenance property while someone else maintains the landscaping and grounds.

On the other hand, if you love backyard entertaining or gardening, buying a condo might not be the best fit. Check with the HOA to determine what types of restrictions they may have. Many HOAs have regulations for overnight guests, pets, parking and more.

As an investor, are you ready to become a landlord? You can hire a property management company or manage the property yourself. Consider how you’ll manage ongoing maintenance and any issues that arise with tenants. Look at vacancy rates in the area and factor in the competition. The last thing you want is a mortgage and no tenant.

An experienced mortgage advisor can discuss your homeownership goals, current rates, and your ideal budget. 

2. Can you partner with an experienced realtor who knows the area?

Buying a condo in 2022 is different than buying a single-family home. Be sure to work with an experienced real estate agent who specializes in condominiums and townhouses. They will often have better advice and be a strong asset when you’re ready to make an offer. They’ll know the trends in the area including vacancy rates and which complexes are renter-friendly, better for investors, or better as a primary residence.

A qualified real estate agent will know the resale values in the area and which condominium developments offer the best value in your price range. They will also know about any HOA issues, maintenance problems, or infrastructure issues that have come up in particular developments.

Check out this mortgage calculator to see how much you can afford

3. Are the HOA fees and any special assessments comparable for the area?

Whether this will be your primary residence, or if you’re buying a condo in 2022 as an investment, take the cost of HOA fees into account. These fees are ongoing and will be on top of your mortgage and property taxes.

HOA (homeowner association) dues are often paid monthly or quarterly when you buy a condo. The fees are established by the HOA and are typically used to cover ongoing maintenance for all shared grounds, parking structures, amenities, landscaping, and shared community spaces.

That said, HOA fees vary widely across condos. Compare the HOA fees with other condos in the area to evaluate if the fees are worth the cost. Does the condo have the amenities that are important to you (accessible parking, fitness center, children’s park, pool or tennis courts, etc.) Find out what the HOA fees cover and what they do not.

Find a local mortgage advisor in your area who can help with custom loans

4. What are the rental policies for the condominium development?

Knowing the rental policies is important when you buy a condo.

Even if this will be your primary residence, you may want to rent the property after a few years. On the other hand, maybe you want to live in a condo development with few renters. Will it lower your resale value if most units are rental properties with short-term tenants?

As an investor, you’ll want to ask if there are any restrictions about renting the condo for 2022. Often the HOA will place restrictions on the number of rental units allowed and other restrictions. 

5. Do you have access to custom financing and the best mortgage rate?

Financing a condo is different than applying for a single-family home mortgage. Mortgage lenders have some regulations that are unique to buying a condo. As a result, there can be obstacles along the way that make it more difficult to get approved quickly.

Ask your mortgage advisor for a quick list of documentation you’ll need to help keep things on track.

Be prepared with a 20% down payment if possible and all your documentation in order. If you’re planning on a lower down payment, ask about an FHA loan. FHA loans are easier to qualify for, but they have stricter requirements for condo developments. For example, FHA loans require that at least 80% of the condos are owner-occupied. FHA loans also require a stricter inspection process, including the overall development and grounds in addition to the specific condo unit you want to buy.

If you’re self-employed or plan to qualify using non-standard income, your advisor can talk with you about additional information that will be required.

Related: Boost your credit score in less than 60 days

Finally, get pre-approved to secure the lowest mortgage rate available.

Typically, a qualified borrower can get a mortgage pre-approval letter in just a few days. Depending on your situation, it might take a bit longer, which is why it’s wise to start early.

Connect with a local mortgage advisor so you can make sure all your documentation is in order. If you have good credit and verifiable income, getting pre-approved for a mortgage is a quick process.

If you have a financial situation that is less common, getting pre-approved for a mortgage is even more important, so you aren’t faced with holdups when you’re ready to make an offer. A qualified mortgage advisor can keep things moving quickly.

Once you’ve got your mortgage pre-approval letter, it’s time to make those offers!

Taking Action

If you’re ready to buy a condo, getting pre-approved can put you on the fast track to homeownership at the best mortgage rate. Whether you are a first-time homebuyer or a homeowner ready to invest in a second property, we can help you secure your best mortgage and keep your mortgage payment affordable. Connect with a local mortgage advisor to discuss your loan options and build financial security. We’d love to help.

The True Value of a Mortgage Advisor

July 20, 2022
blog mortgage advisor

When you’re getting ready to buy a new home or refinance a mortgage, an experienced mortgage advisor can make all the difference. Unfortunately, every big bank and mortgage lender seems to promise the lowest rate and fastest close. So how can you tell who to trust when seeking the best mortgage lender? Mortgages aren’t one-size-fits-all anymore. 

The truth is that every homeowner has a different story and different financial goals. A qualified mortgage advisor listens, understands, and works with you to build a mortgage that meets your long-term goals and saves you money at the same time. What’s more, a qualified mortgage advisor will work hard to secure the right financing for your current budget while also helping you build wealth through home equity.

One of the best early moves you can make is to lock in your rate today by getting pre-approved.

Financing your home is one of the biggest financial commitments most people ever make. When you partner with a mortgage advisor you can be confident that they are working on your behalf to create a mortgage that fits your goals. While big banks and online lenders treat every borrower the same, our mortgage advisors build genuine relationships and often become a trusted advisor for life.

How a Custom Home Loan Can Save You Money

This might seem obvious, but mortgages are not one-size-fits-all. Loan programs are becoming increasingly specialized to meet the growing needs of homeowners with personal goals about homeownership, financial security, and building wealth.

What’s more, securing the lowest mortgage won’t always save you money or give you the lowest mortgage payment. Consider just a few costly variables that go beyond the advertised “low mortgage rate” you might see from big banks or online lenders:

  • Fees
  • Points
  • Closing costs
  • Adjustable terms
  • Variable terms
  • APR vs. Interest Rates
  • Balloon payments
  • Private Mortgage Insurance
  • Prepayment penalties

These are just a few variables that could end up costing you a lot of money in the long term. Every mortgage has fine print and there are a lot of variables to consider. This is one of the biggest reasons why working with an experienced mortgage advisor in your area is a smart move.

Custom Loan Programs to Keep You Competitive

A great mortgage advisor will also make sure that you’re ready to compete when it’s time to make an offer. They can help expedite paperwork, fast-track your mortgage pre-approval, and execute a fast close. What’s more, a qualified local mortgage advisor knows every hurdle that might come up and will make sure the entire process moves seamlessly from start to finish. 

We can even set you up with our Keys on Time™ program, which guarantees the seller that your loan will close on time or we’ll pay a $2,000 commitment fee (restrictions apply). 

Another custom mortgage solution is the CashBuys™ program, which allows you to operate like an all-cash buyer while still financing your mortgage. With the CashBuys program, you can get pre-approved for your mortgage and finance your mortgage behind the scenes, then make a real-time all-cash offer to the seller. Find out more about the CashBuys program here.

Related: How to FAST TRACK your mortgage pre-approval

How to Unlock the True Value of Your Home

Finally, a qualified mortgage advisor can help set you up with a mortgage payment you can afford and put you on the fast track to building home equity. They can also show you the true cost of homeownership over time, including historic appreciation rates and average annual costs. As a trusted advisor, they can guide you through different strategies that will help you save money over the life of your loan, as well as opportunities to leverage your home through its equity. 

The bottom line: An experienced mortgage advisor will take the time to understand your unique situation and offer custom home loan options to meet your financial goals.

Connect with your local mortgage advisor and start your application and get pre-approved for your best home loan.

Taking Action

From buying and selling property, investing in real estate, wealth-generation strategies, and providing opportunities to improve your financial situation, our trusted mortgage advisors are here to help guide you along your homeownership journey. Connect with a local mortgage advisor today to get started. We’d love to help.

Get Approved for an FHA Mortgage with 3.5% Down

July 27, 2022
mortgage blog, fha mortgage, home loans, preferred rate

An FHA mortgage is one of the best options for new homeowners and first-time homebuyers. FHA home loans have more flexible requirements for approval and offer some of the lowest mortgage rates available. What’s more, with an FHA loan, you can get approved with a lower down payment and an imperfect credit history.

FHA loans are government-backed mortgages which means they are widely available. Still, be sure to partner with a mortgage lender who underwrites FHA mortgages and has experience in your local housing market. An experienced local mortgage advisor will talk through your big picture goals and make sure your mortgage helps you build financial security. After all, a new mortgage in 2022 is one of the biggest financial commitments many people will make this year.

One of the best early moves you can make is to get pre-approved and lock in your mortgage rate.

Finding The Right Mortgage Advisor for an FHA Mortgage

For the best FHA mortgage, partner with a mortgage advisor who does custom mortgages. FHA loans are fairly straightforward, but every mortgage has subtle differences that can end up costing you thousands of dollars over the life of your home loan. Even when a lender promises a low introductory interest rate, it can cost you more through one-time fees at closing.

Partnering with a local mortgage advisor who writes custom mortgages and FHA loans on a regular basis can get you a better home loan every time. They’ll look at your whole profile — the purchase price and appraisal, along with your credit score, income, debt-to-income ratio, assets, employment history, and your down payment.

Quick tip—not all mortgage lenders are licensed to write FHA loans. So it’s best to make sure your lender writes FHA mortgages before you start working together. Make sure to check client reviews, too. Your mortgage is one of the biggest financial commitments you’ll make.

How to Get Approved for an FHA Home Loan

FHA loans are easier to qualify for compared to most other home loans.

There are three main financial buckets that lenders evaluate for your mortgage: your income, credit score, and total assets. Combined, this provides your lender with your DTI ratio (debt-to-income ratio). Your DTI is one of the most influential factors mortgage lenders use to determine risk.

Here’s a snapshot to get approved at a preferred rate:

  • 3.5% Down Payment: The minimum down payment required for an FHA loan is 3.5% of the amount you want to borrow. If your credit score is 500-579, a minimum down payment of 10% is required.
  • Minimum Credit Score: The minimum credit score to qualify for an FHA loan is typically 580, though some lenders will approve a borrower who has a credit score between 500-579. Note that you must be free of 30-day late payments within the past year and no foreclosures within the past three years.
  • Debt-to-Income (DTI) Ratio up to 45%: Your debt-to-income ratio (DTI) measures your monthly income against any recurring debt obligations and is one of the biggest factors that affects your mortgage offer. Most mortgage lenders require a DTI of less than 45% to qualify for an FHA. In addition, your mortgage payment should be below 32% of your gross monthly income.
  • Low Closing Costs: Closing costs for an FHA mortgage are the one-time fees associated with writing the loan. Prepare to pay 2%-5% of the total loan amount at closing. This is in addition to your down payment.

Related: How to FAST TRACK your mortgage pre-approval

A Few Restrictions With FHA Loans

First, the property must be your primary residence when you decide to apply for an FHA loan. It can be a single-family home or a multi-unit property (up to four units), as long as you live in one of the units full-time.

Second, FHA loans include an additional fee referred to as a mortgage insurance premium (MIP). This is similar to PMI (private mortgage insurance) that is typically added to a conventional mortgage for homebuyers who put less than 20% down.

For the mortgage insurance premium required with FHA loans, there are two fees: a 1.75% fee due at closing and an annual installment that is typically added to your mortgage payment each month. Many homebuyers roll the up-front fee into their mortgage. Also, the MIP payment is typically added directly to your mortgage payment each month for convenience.

Quick tip: many homeowners refinance their mortgage once they’ve built some home equity. Once you own at least 80% of your home, you can qualify for a number of custom loan programs that may reduce your mortgage payment. Also, you’ll be able to get rid of your mortgage insurance premium.

Connect with your local mortgage advisor and start your application and get pre-approved for your best home loan.

Summary

FHA loans offer homebuyers an opportunity to make homeownership a reality in 2022 with a down payment of 3.5% and less than perfect credit history. Be prepared for closing costs and a mortgage insurance premium that will be added to your mortgage payment. 

Finally, partner with a local mortgage advisor who is licensed to write FHA loans and specializes in custom home loans. This will give you the best of both worlds and a mortgage that will save you money.

Taking Action

Applying for an FHA loan in 2022 is a smart move for homebuyers looking for a low mortgage rate and a low down payment. From buying and selling property, investing in real estate, wealth-generation strategies, and providing opportunities to improve your financial situation, our trusted mortgage advisors are here to help guide you along your homeownership journey. Connect with a local mortgage advisor today to get started. We’d love to help.

Good News for First-Time Homebuyers

August 17, 2022
mortgage blog, first-time homebuyers, preferred rate

As mortgage rates swing upwards along with inflation, it can be discouraging to wonder if homeownership can ever be a real possibility. What’s more, as housing costs increase, many people are choosing to relocate, even change careers to move to areas with more affordable housing and a balanced lifestyle. But there’s good news for first-time homebuyers! Keep reading to learn first-hand about the benefits and advantages that are available to you.

Even if you’ve owned a home before, many repeat homeowners can still qualify as first-time homebuyers right now, so keep reading to see if you’re eligible. Homeownership might be closer than you think.

One of the best early moves you can make is to get pre-approved and lock in your mortgage rate.

How to Qualify as a First-Time Home Buyer

According to the U.S. Department of Housing and Urban Development (HUD), a first-time homebuyer meets any of the following conditions:

  • An individual who has not owned a principal residence for at least three years.
  • An individual who has owned a home (but their spouse has not) can still purchase a new home together as first-time homebuyers.
  • A single parent who has only owned a home with a former spouse while married.
  • A displaced person who has only owned a home with a former spouse while married.
  • An individual who has only owned a principal residence not permanently affixed to a permanent foundation (following applicable regulations).
  • An individual who has only owned a property that was not in compliance with state, local, or model building codes, and cannot meet compliance for less than the cost of constructing a permanent structure.

Top Mortgage Benefits for First-Time Home Buyers

A few highlights:

  • Down payments as low as 3.0%
  • Use of gift funds to help with closing costs
  • HUD-issued grants and down payment assistance
  • Government-backed loans with lower interest rates
  • Withdraw IRA funds for use without penalty
  • Tax deductions for points and origination fees

Many first-time homebuyer programs allow you to use gifted funds from family or friends, withdraw from retirement funds without a penalty, and even access down payment assistance. Talking with a mortgage expert can help you get access to the best options based on your goals.

Related: How to FAST TRACK your mortgage pre-approval

Top Home Loans for First-Time Home Buyers

One of the biggest obstacles for a lot of first-time homebuyers is the down payment. These popular first-time homebuyer mortgages can help lower your down payment and get you into a house without massive fees or unexpected costs:

  1. FHA Loan – 3.5% down payment
  2. VA Loan – 0% down payment
  3. USDA Loan – 0% down payment
  4. Conventional 97 Home Loan – 3% down payment
  5. HomeReady Home Loan by Fannie Mae – 3% down payment
  6. Good Neighbor Next Door Program – $100 down
  7. 203(k) Section Loans – 3.5% down payment

Connect with your local mortgage advisor and start your application and get pre-approved for your best home loan.

Depending on your unique situation (including your employment status and credit rating), there are custom solutions that can take advantage of government-backed loans, get you super low rates and save you money.

You can finally stop renting and start building equity in your first home. Homeownership is possible.

Down Payment Assistance for First-Time Home Buyers

FHA grant and loan programs and down payment assistance programs are available across the country, and many are state-specific.

Find out more about FHA Home Loans and Down Payment Assistance programs that are offered to first-time homebuyers available in 2021 in your state: find your state.

You can even learn about government programs that make it easier to purchase a home. Go here to check information on vouchers, state programs, and even foreclosures in your state.

Taking Action

If you’re dreaming about buying a home and you’re curious to see if you qualify for first-time homebuyer advantages, start the process today by connecting with your local mortgage advisor. Talk with your advisor and ask them to show you which home loan programs will give you the best advantages. Getting pre-approved early on can help you move fast when you find your dream home. We’d love to help.

Mortgage Rates are Rising: How Much Can I Afford?

April 27, 2022
mortgage blog, mortgage rates, how much can I afford, preferred rate

Mortgage rates are ticking up right alongside inflation, and home prices continue to rise in many areas across the country. So if you’re looking to buy a home in 2022, it can be difficult to figure out how much you can afford.

One of the top questions we’re hearing from homebuyers across the US is, how much can I afford right now?

It makes sense. The minute you start shopping for a new home, you want to know how much you can afford and what your mortgage payment will be. With rates increasing it’s hard to plan ahead. After all, the last thing you want is to make an offer on your dream home only to watch your loan fall through.

One of the best moves you can make is to lock in your rate today by getting pre-approved, which we blogged about here.

5 SMART TIPS TO DECIDE HOW MUCH YOU CAN AFFORD

If you’re looking for a ballpark figure, be sure to check out this mortgage calculator. Just a reminder that daily mortgage rates can change and mortgage calculators only offer you a general idea of what you can afford.

The truth is, when you apply for a mortgage, your borrower profile determines your mortgage rate: income, employment, credit history, assets, and debt-to-income ratio. For this reason, mortgage calculators are useful, but they are only a starting point.

The best action you can take is to connect with a local mortgage advisor. Start here to find an experienced advisor in your neighborhood.

Tip #1 – Evaluate your spending habits.

When you start shopping for a new home, look at your current spending patterns. This might seem like a simple approach, but it’s common for some borrowers to qualify for a mortgage they can’t really afford.

This is because home loans are largely based on algorithms defined by mortgage lenders to calculate risk. If your spending habits aren’t in line with your new mortgage payment, it’s better to know your limits before you apply.

Also, think about creating a new budget based on being a homeowner. For example, do you plan on hosting backyard BBQs, putting in new landscaping, or maintaining a pool? Remember, you’ll have new monthly costs such as homeowner’s insurance, property taxes, home maintenance, and unexpected repairs.

Related: How to FAST TRACK your mortgage pre-approval

Tip #2 – Follow the standard 28/36% rule.

Most financial advisors recommend putting 28% or less in monthly income toward housing. As a homeowner, this amount (before income taxes) should be able to cover all housing costs, including your mortgage payment, utilities, property taxes, and homeowner’s insurance. 

The 36% rule extends the recommended monthly allotment to include debt repayments. For this model, all housing costs plus all debt repayments (such as credit cards, auto loans, student loans) should fall at or below 36% or your monthly gross income.

Some borrowers decide to set up a mortgage escrow account, which can help create a monthly budget. With an escrow account, your mortgage payment will include your property taxes and homeowner’s insurance. For homeowners, this is a convenient option that can help to establish financial stability.

Related: Does every mortgage need an escrow account?

Tip #3 – Evaluate your debt-to-income ratio (DTI).

Your debt-to-income ratio is one of the main factors mortgage lenders use to determine risk. To determine your debt-to-income (DTI) ratio, simply measure your gross monthly income against your monthly debt obligations.

Monthly expenses such as groceries or utilities are not taken into account here. Instead, only debt obligations count toward your DTI. For example–car payments, student loans, and credit cards would be included to determine your DTI when you apply for a home loan.

If you have a debt-to-income ratio above 43%, it will be more difficult to qualify for a mortgage at a low rate. Ideally, the lower your DTI, the better home loan you’ll secure.

That said, there are a number of custom loan programs to help homebuyers qualify even with a high DTI. So talk to your mortgage advisor and start your application to lock your rate and get pre-approved for your best home loan.

Mortgage rates rising, but this doesn’t mean you have to max out on your mortgage. It’s wise to keep a buffer in your finances when it comes to how much house you can afford. An affordable mortgage payment can help you breathe easier. Connect with a local mortgage advisor to get started.

Tip #4 – Boost your credit score.

It’s always a good idea to download a free copy of your credit report. This will give you a chance to fix any errors, dispute incorrect information, and know your credit score.

One of the best ways to boost your credit score fast is to pay down credit cards (start with the highest balances), keep your credit accounts open, and don’t apply for any new credit. Be prepared to offer an explanation for anything on your credit report that is out of the ordinary. This can help you get a better mortgage.

Related: Boost your credit score in less than 60 days

Tip #5 – Plan your down payment.

If you’re able to put down at least 20% toward your new home, you’ll have more loan options at the best rate. Staying below 80% LTV (loan-to-value) typically means the mortgage lender won’t require PMI (private mortgage insurance). As a result, you’ll secure a lower mortgage payment and a better mortgage rate.

That said, there are several loan options and custom mortgages available. Many home loans for first-time homebuyers offer home loans with 0-5% down. FHA loans only require a 3.5% down payment. Conventional 97 requires only a 3% down payment.

Take the best next step and connect with a mortgage advisor to lock your rate and get pre-approved. An advisor can look at the big picture, offer the best loan options, and help you decide which home loan is best based on your homeownership goals.

Taking Action

Get pre-approved and lock in your mortgage rate now. Deciding how much you can afford can help you fast-track your mortgage pre-approval, especially in today’s housing market. When you’re ready, an experienced mortgage advisor can help you get approved, lock in the lowest mortgage rate, and secure the right home loan. Connect with a local mortgage advisor to discuss your options and save money on your mortgage. We’d love to help.

Find Out How Much You Can Afford for Your Best Mortgage

November 23, 2021
blog house with pool, mortgage, preferred rate

Mortgage rates are ticking up, inflation is rising, and home prices are steadily increasing in many areas across the country. So if you’re wondering how much you can afford on your next mortgage, you’re not alone.

One of the main questions we hear from homebuyers across the US is, how much can I afford right now based on my current salary?

It makes sense. The minute you start shopping for a new home, you want to know how much you can afford and what type of mortgage you’ll qualify for. After all, the last thing you want is to make an offer on your dream home, compete against multiple bids, only to watch your loan fall through.

One of the best moves you can make is to get pre-approved to qualify for the lowest mortgage rate, which we blogged about here.

TAKE 5 STEPS TO FIND OUT HOW MUCH YOU CAN AFFORD

If you’re looking for a ballpark figure, be sure to check out this mortgage calculator. Just a reminder that daily mortgage rates on websites rarely pan out. Once you apply for a mortgage, everything else comes into play: income, employment, credit rating, debt-to-income ratio, the home appraisal, just to name a few. For the same reason, mortgage calculators are useful, but they are only a starting point. Connecting with a mortgage advisor is the best action you can take.

Step 1: Evaluate your spending habits.

This might seem like a simple approach, but it’s not uncommon to qualify for a mortgage you can’t really afford. Loans are largely based on algorithms defined by mortgage lenders to calculate risk. If your spending habits aren’t in line with a new mortgage payment, it’s better to know your limits.

When you decide to start shopping, look at your current spending patterns. Also, think about new spending that will change once you become a homeowner. For example, do you plan on hosting backyard BBQs, new landscaping, maintaining a pool? Remember, you’ll also have new costs such as home maintenance and repairs, homeowner’s insurance, and property taxes.

Related: How to FAST TRACK your mortgage pre-approval

Step 2: Follow the standard 28/36% rule.

Most financial advisors recommend that homeowners spend 28% or less of their monthly income on housing. As a homeowner, this amount (before taxes) should cover all housing costs, including your mortgage payment, utilities, property taxes, and homeowner’s insurance. 

If you set up a mortgage escrow account, your mortgage payment will include your property taxes and homeowner’s insurance. For homeowners, this is a convenient option that helps with budgeting and financial stability each month.

Related: Does every mortgage need an escrow account?

Step 3: Evaluate your debt-to-income ratio (DTI).

Your debt-to-income ratio is one of the main levers used by mortgage lenders to determine your loan amount. To determine your debt-to-income (DTI) ratio, simply compare your monthly income (before taxes) against your monthly debt obligations.

Monthly expenses such as groceries or utilities are not taken into account here. Instead, total debt payments are the main factor. For example, be sure to include car payments, credit card payments, and any student loan debt. 

If you have a DTI above 43%, it will be more difficult to qualify for a mortgage at a low rate. Ideally, the lower your DTI, the better mortgage you’ll qualify for. There are loan programs to help homebuyers qualify even with a high DTI, so talk to your mortgage advisor to start your application and get approved for the best loan.

One caveat: You don’t have to max out on your mortgage. Just because you might qualify for a high loan amount, it’s your choice how much you decide to borrow (up to qualified limits). It’s a smart move to keep a buffer in your finances when it comes to how much house you can afford.

Step 4: Bump up your credit score.

It’s always a smart decision to download a free copy of your credit report. This will give you a chance to fix any errors, dispute incorrect information, and know your credit score.

One of the best ways to boost your credit score fast is to pay down credit cards (start with the highest balances), keep your credit accounts open, and don’t apply for any new credit. If you have anything out of the ordinary, be prepared to offer an explanation that can help you get a better mortgage.

Related: Boost your credit score in less than 60 days

Step 5: Plan your down payment.

If you’re able to put down at least 20% toward your new home, you’ll have more loan options at the best rate. This is because you’ll be below the 80% threshold that many mortgage lenders prefer since it reduces their risk. Staying below 80% LTV (loan-to-value) typically means the mortgage lender won’t require PMI (private mortgage insurance), so you’ll enjoy a lower mortgage payment and a better mortgage rate.

That said, there are several loan options and the choice is yours. Many home loans for first-time homebuyers offer home loans with 0-5% down. FHA loans only require a 3.5% down payment. Conventional 97 requires only a 3% down payment.

The best action step is to connect with a mortgage advisor and get pre-approved. An advisor can look at the big picture, offer the best loan options, and help you decide which home loan is best based on your homeownership goals.

Taking Action

Getting pre-approved for a mortgage is the best first step you can take when you’re shopping for your next home. We can help get you qualified so you know exactly how much you can afford and how to secure the lowest mortgage rate. There are several advantages depending on your homeownership goals. Connect with a local mortgage advisor to get started. We’d love to help.

Will Mortgage Rates Rise With Inflation?

January 25, 2022
buy a home, mortgage, inflation, mortgage blog

Buying a new home in 2022 can bring a sense of stability and financial security. Especially in the middle of an era where very few things feel certain. Despite unpredictability in almost every area of our lives, mortgage rates have remained historically low these past two years.

Last summer, with signs of economic recovery and a drop in covid, mortgage rates began to shift upward just a bit. Then Omicron arrived along with a new cycle of pandemic exhaustion. Nevertheless, mortgage rates remained low and ended the year hovering near 3.0%. But the economic recovery that seemed hopeful has shifted downward, and inflation is starting to gain ground.

It’s fair to say that the current market is extraordinary and uncommon: the combination of high inflation and low mortgage rates is rare.

Many homebuyers are asking if now is the right time to buy a home. It’s a difficult decision for sure. Will mortgage rates rise? Will the housing market be stable? Will home equity continue to grow? How will the markets react as we move deeper into 2022?

Trends that used to signal predictable movements are now in question. This article can help.

RELATED: Top home loans for first-time homebuyers

It’s difficult to imagine rates remaining low for much longer. The link below provides a snapshot of mortgage rates over the past 50 years.

Click here to view the analysis

Follow the inflation rates in the link below, and you’ll find that inflation rates are almost always in sync with mortgage rates. When one rate rises, the other increases. When one drops, the other follows.

U.S. inflation rate from 1960-2022 mapped with mortgage rates:

Click here to view the chart

Based on these historical trends, most mortgage lenders predict rates to rise along with inflation as we move into 2022. But nothing is certain.

If you’re considering buying a home in 2022, now is the time to take action. Rates are still low and home loan terms are favorable for qualified buyers.

Connect with a mortgage advisor to discuss your goals. The right mortgage can help you build financial security through homeownership.

How a Rise in Inflation Affects Mortgage Rates

When many of us consider inflation, we often think of the weekly grocery bill or gas prices going up. We might notice that clothing costs more or eating out has a higher price tag.

In broad terms, inflation happens when prices for goods increase and purchasing power decreases. For example, if the rate of inflation jumps to 10%, then it would take $110 to buy items that would have cost $100. When the rate of inflation starts to rise consistently, everyone feels it in day-to-day expenses like groceries, gas, transportation, and retail goods.

On the flip side, when earnings rise faster than the rate of inflation, buying power increases. As a result, the household dollar can stretch a little further. As a result, people tend to spend more, save more and invest more.

Related: Get started now with a qualified mortgage advisor in your local area

What This Means for Mortgage Rates in 2022

Today, the rate of inflation is rising and if it continues to move upward, it will have far-reaching economic implications–from goods and services to investment returns and yes, mortgage rates.

This is because mortgage rates operate similarly to bonds. When the inflation rate rises, purchasing power is lower, which directly impacts the market that buys and sells mortgages. When buying power decreases, interest rates go up to keep investors fully engaged.

As the rate of inflation increases, the Fed raises interest rates. As interest rates go up, mortgage rates increase, and the rate of return on mortgages continues to keep investors, well, invested.

Meanwhile, new homebuyers applying for a mortgage face a higher mortgage rate.

RELATED: Find out how much you can afford with this mortgage calculator

How to Decide if Now is the Right Time to Buy a Home

Nothing is certain in economic forecasting, and mortgage predictions are no different. However, the one clear thing is that mortgage rates remain at historic lows. With mortgage rates still below 4%, a mortgage continues to be one of the least expensive ways to borrow money and invest. 

What’s more, with a mortgage, you’re potentially building financial security. With a 30-year fixed-rate loan, your monthly mortgage will be the same for the entire life of the loan. No changes. No surprises. You can build home equity and financial security in the same move.

Talk with a mortgage advisor to discuss your goals and find out if homeownership is your next best move. 2022 could be your year.

RELATED: Learn the Truth About No-Closing Cost Loans

Next Steps

Connect with a mortgage advisor. There are several custom loan options, along with FHA loans, VA loans, conventional mortgages and jumbo loans with great mortgage rates right now. So whether you’re a first-time homebuyer or on your third renovation, the right mortgage can help you toward financial security. We’d love to help.

Renting vs. Buying a Home in 2022

February 1, 2022
mortgage blog, rent vs buy a home, 2022

If you’re deciding whether to rent or buy a home in 2022, this quick list of pros and cons can help. Whether you’re a current homeowner, a long-term renter, or somewhere in between, you’re not alone. People from every corner of the country are weighing the pros and cons of renting vs. buying a home in 2022.

Mortgage rates are ticking upwards, but experts remain cautious on setting predictions in the face of so many economic uncertainties. To find out just how inflation affects mortgage rates, check out last week’s perspective on inflation which we blogged about here.

What’s more, pandemic exhaustion makes the decision a bit more difficult. Two years ago, renting somewhere new and working remote seemed like an adventure. Today, many families are seeking stability and balance. In an era where everything is changing, many are choosing options that promise a sense of stability.

If you’re deciding whether to rent or buy a home in 2022, these pros and cons are written with you in mind.

RELATED: See the Top 5 home loans most popular for first-time homebuyers

Renting vs. Buying in 2022

Pros of Buying a Home

1. Buying a home can help build stability with a steady mortgage.

With a 30-year fixed-rate mortgage, you can lock in your rate for the life of the loan and count on a fixed payment. No matter what happens in the economy, you can be certain that your mortgage payment will be steady and consistent. No surprises. No extra fees. No hidden increases.

Renting provides stability only for as long as your lease agreement, often 1-3 years. Unless you live in a rent-controlled area, rent can increase with little notice and you’ll be subject to market rates.

RELATED: How to FAST TRACK your application with a mortgage pre-approval

2. Buying a home creates the opportunity to build equity.

Home equity is the difference between your mortgage balance and the current market value of your home. For example, if you put 20% down on your home, you’ve already got 20% equity. Every time you make a mortgage payment, a portion goes to pay down your mortgage balance. 

In many areas, home values increase faster than inflation. This means your home value (and your equity) will increase simply by paying your monthly mortgage payment on time.

As your equity builds, you’ll have opportunities to borrow against that equity and invest elsewhere or refinance your mortgage to secure a lower monthly payment.

On the other hand, renting offers no return on your monthly payment. When you pay rent, your landlord benefits from the property value and home equity. Your rent payment simply exits your account with nothing in return (except a solid roof over your head).

Use this MORTGAGE CALCULATOR to find out how much you can afford right now

3. Buying a home in 2022 brings tax advantages.

When you buy a home, mortgage interest and property taxes are tax-deductible in most states across the country. Homeowners also benefit from tax advantages on any profits when you sell your home in most circumstances. Check with your tax accountant to verify the tax laws in your state and confirm your savings.

Find a qualified mortgage expert in your local area

Renting vs. Buying: Pros of Renting in 2022

1. Renting offers flexibility to move whenever your want.

If planting roots and establishing yourself sounds limiting or restricting, renting in 2022 might be a good option. Most properties offer month-to-month leases as well as 1-3 year leases for a new tenant. 

If you’re job hunting or want to try out different parts of the country before you settle down, renting is a good way to put down temporary roots and see what life in that city feels like. If you decide at any point to move closer to family or even change jobs, renting gives the freedom to pack up and go.

2. Renting has fewer maintenance costs.

Maintenance for most properties is the responsibility of the landlord. For example, if the water heater goes out, you can call and have them take care of it. Rentals are typically maintained through a property management company, an onsite property manager, or directly by the landlord.

3. Renters don’t pay property taxes or HOA fees.

Your rent payment is typically the full monthly cost with no additional fees or taxes. (Utilities, water, and garbage are typically separate but may be included depending on your lease.)

When you rent, the property owner is responsible for paying the property taxes, mortgage interest, HOA fees and homeowner’s insurance. Some people carry renter’s insurance, but it is substantially less expensive than homeowner’s insurance.

Related: Check out the best custom loan options for 2022

Cons of Renting in 2022

One of the difficult things about renting is the instability of the market. For example, you may sign a 1-2 year lease when you become a new tenant. But when that lease gets renewed, your rent can increase substantially.

If for some reason you can’t afford the increase, you’ll be forced to find a new place at current market rates. The property owner can also decide to sell the property or simply stop renting the property altogether.

Finally, as a renter, your monthly payment goes directly to your landlord instead of paying down your mortgage and building equity in your home. There are also few or no tax benefits for renters in most states.

RELATED: Talk with a local mortgage expert to find out if you qualify for first-time homebuyers advantages

Summary

2022 has all of us looking at the housing market a little differently. Inflation is rising while economic recovery is anything but steady. Trends that used to set predictions in motion have been put on pause. Renting might provide the freedom you need right now, while homeownership could bring stability and a path toward financial freedom.

If you’re considering buying a home in 2022, now is the time to take action. Rates are affordable, and home loan terms are favorable for qualified buyers. Connect with a local mortgage advisor to discuss your goals. The right mortgage can help you build financial security through homeownership.

Taking Action

Connect with a mortgage advisor. There are several custom loan options, along with FHA loans, VA loans, conventional mortgages and jumbo loans with great mortgage rates right now. So whether you’re a first-time homebuyer or becoming a homeowner for the third time, the right mortgage can help you build financial freedom. We’d love to help.

When to Stop Renting and Become a Homeowner

September 7, 2022
mortgage blog, become a homeowner, preferred rate

Mortgage rates are ticking upwards steadily this year which has caused the housing market to cool down slightly, and the buying frenzy has slowed down in many areas. This raises the question, is it better to rent right now or become a homeowner? For many, renting might feel like an obvious choice, especially if you work remote and you’re not sure where you want to live long-term.

Here’s the thing, homeownership is one of the fastest ways to build wealth and stability, even when a mortgage payment might be higher than a rental payment. What’s more, with a fixed-rate mortgage, your mortgage payment won’t increase or change for the life of the home loan. So even if the rental market seems cheaper right now, there’s no guarantee when the rental market will push costs higher. When you become a homeowner, you can rest easy knowing your mortgage payment is predictable and stable.

If you’re trying to decide whether to keep renting or become a homeowner right now, you’re not the only one. A lot of homebuyers have been asking us this question and wondering if it’s better to wait and see if the rates come back down. Whether you’re a long-term renter, or used to be a homeowner, deciding when to become a homeowner is a big decision.

If you’re thinking about becoming a homeowner right now, this article is written with you in mind.

RELATED: See the Top 5 home loans most popular for first-time homebuyers

Benefits of Becoming a Homeowner

1. Buying a home can help build financial stability with a steady mortgage.

With a 30-year fixed-rate mortgage, you can lock in your rate for the life of the loan and count on a fixed payment. No matter what happens in the economy, you can be certain that your mortgage payment will be steady and consistent. No surprises. No extra fees. No hidden increases.

If mortgage rates continue to increase, you can rest easy with a fixed mortgage payment for the life of your home loan. If mortgage rates go down, you’ll always have the opportunity to refinance your mortgage and lock in an even better rate.

Renting provides stability only for as long as your lease agreement, often 1-3 years. This means that unless you live in a rent-controlled area, rent can increase with little notice and you’ll be subject to market rates. Sometimes the landlord moves or sells the building, other times a new property management company revises the rental structure.

RELATED: How to FAST TRACK your application with a mortgage pre-approval

2. Buying a home creates the opportunity to build equity.

Home equity is the difference between your mortgage balance and the current market value of your home. For example, if you put 20% down on your home, you’ve already got 20% equity. Every time you make a mortgage payment, a portion goes to pay down your mortgage balance. This means the equity increases each month.

In many areas, home values increase even faster than inflation. This means your home value (and your equity) will increase simply by paying your monthly mortgage payment on time. As your equity builds, you’ll have opportunities to borrow against that equity and invest elsewhere or refinance your mortgage to secure a lower monthly payment.

In short, when you become a homeowner, you’re paying yourself every month instead of paying a landlord. As your mortgage balance goes down and your home value goes up, you’re building wealth through home equity.

On the other hand, renting offers no return on your monthly payment. When you pay rent, your landlord benefits from the property value and home equity.

Use this MORTGAGE CALCULATOR to find out how much you can afford right now

3. Becoming a homeowner has tax advantages.

When you buy a home, mortgage interest and property taxes are tax-deductible in most states across the country. This can bring a huge tax break on your income taxes, even while you’re building wealth through home equity. Homeowners also benefit from tax advantages on any profits when they sell their home in most circumstances. Check with your tax accountant to verify the tax laws in your state and confirm your savings.

Renting, on the other hand, offers no tax benefits or breaks on your income tax in most states. Often this translates to higher income taxes for renters compared to homeowners in the same income bracket.

Find a qualified mortgage expert in your local area

4. Becoming a homeowner gives you freedom to build or remodel.

When you become a homeowner, you’ll have complete freedom to update the kitchen, remodel the bathroom, build a deck in the backyard or even put in a swimming pool. As a homeowner, you can decide when and if you want to change your home or build an addition. You can also take out a home equity loan to finance a remodel which can be financially strategic and an inexpensive way to borrow money.

Renters often have limited options if they want to update their home, based on the landlord’s rules. Also, if you decide to update your property or do minor remodeling, as a renter, you usually have to pay the costs yourself even though you don’t own the property. When it’s time to move, all those upgrades will stay with the property.

5. Homeowners enjoy financial flexibility.

When you become a homeowner, you enjoy the benefits of financial stability. Your home is an asset and as it increases in value, you can leverage that value to build wealth. For example, you can refinance with cash-out and invest that money elsewhere. Or you could borrow against your equity and buy a second property as an investment.

As a renter, even if your rent is stable, inflation is affecting your bottom line. As the cost of living increases, your rent payment is going to your landlord instead of helping you build equity.

Benefits of Renting

1. Renting offers flexibility to move whenever your want.

If planting roots and establishing yourself sounds limiting or restricting, renting might be a good option. Most properties offer month-to-month leases as well as 1-3 year leases for a new tenant. 

If you’re job hunting or want to try out different parts of the country before you settle down, renting is a good way to put down temporary roots and see what life in that city feels like. If you decide at any point to move closer to family or even change jobs, renting gives you the freedom to pack up and go.

2. Renting often has fewer maintenance costs.

Maintenance for most properties is the responsibility of the landlord. For example, if the water heater goes out, you can call and have them take care of it. Rentals are typically maintained through a property management company, an onsite property manager, or directly by the landlord.

3. Renters don’t pay property taxes or mortgage interest.

Your rent payment is typically the full monthly cost with no additional fees or taxes. (Utilities, water, and garbage are typically separate but may be included depending on your lease.)

When you rent, the property owner is responsible for paying the property taxes, mortgage interest, HOA fees and homeowner’s insurance. Some people carry renter’s insurance, but it is substantially less expensive than homeowner’s insurance.

Related: Check out the best custom loan options for 2022

Drawbacks of Renting in 2022

One of the difficult things about renting is the instability of the market. For example, you may sign a 1-2 year lease when you become a new tenant. But when that lease gets renewed, your rent can increase substantially.

If for some reason you can’t afford the increase, you’ll be forced to find a new place at current market rates. The property owner can also decide to sell the property or simply stop renting the property altogether.

Finally, as a renter, your monthly payment goes directly to your landlord instead of paying down your mortgage and building equity in your home. There are also few or no tax benefits for renters in most states.

RELATED: Talk with a local mortgage expert to find out if you qualify for first-time homebuyer advantages

Summary

Renting might provide the flexibility you need right now, while becoming a homeowner could bring stability and create a path toward financial freedom.

If you’re considering becoming a homeowner right now, it’s time to take action and lock in your rate. Rates are still affordable, and home loan terms are favorable for qualified buyers. Connect with a local mortgage advisor to discuss your goals. The right mortgage can help you build financial security and put you on the fast track toward building wealth through homeownership.

Taking Action

Connect with a mortgage advisor. There are several custom loan options, along with FHA loans, VA loans, conventional mortgages and jumbo loans with great mortgage rates right now. So whether you’re a first-time homebuyer or becoming a homeowner for the third time, the right mortgage can help you build financial freedom. We’d love to help.