How to Cover Closing Costs: You’ve Got Options

November 2, 2022

mortgage blog, closing costs, preferred rate

Mortgage rates are beginning to steady but higher rates could be coming down the road. If you’re thinking about buying a home or refinancing, you can save a lot of money when it comes to closing costs. Closing costs can be an unwelcome surprise, even if you aren’t a first-time homebuyer. But closing costs don’t have to break the bank. Every home loan includes closing costs as part of the transaction—new home loans, home renovation loans, investment properties, condos, and refinancing. If you’re getting approved for a new mortgage then deciding how to pay the closing costs is an important part of the bigger financial picture.

The good news is that homebuyers have several options when it comes to paying closing costs. What’s more, you can save a lot of money on your next mortgage, and understanding how to pay closing costs is a big part of the puzzle.

An experienced mortgage advisor can help explain your best options and help you meet your financial goals. Keep reading for the top highlights.

HOW TO PAY CLOSING COSTS: KNOW YOUR OPTIONS

Many homebuyers choose to pay closing costs upfront once the purchase or refinance is complete.

However, paying a large sum of money out-of-pocket sometimes isn’t the best financial strategy.

Closing costs are a one-time expense due at closing—typically 2-5% of the home loan amount. Line items covered by closing costs often include loan origination fees, appraisal fees, title insurance, property taxes, and more. You can find a more extensive list here.

5 Popular Strategies to Pay Closing Costs

If you’re looking for a way to lower your out-of-pocket expenses at closing, these are the most popular options:

Pay closing costs up front when you sign the new loan
Roll the closing costs into your loan
Agree to have the lender pay closing costs in exchange for a higher rate
Negotiate with the seller to cover some fees
Apply for HUD-approved grants to help pay for closing costs

1. Pay for closing costs upfront.

This is a common approach to paying closing costs. When you get ready to sign the final papers and close on your new mortgage, there will be a final balance due. You can pay this in full (typically with a cashier’s check) right then and there.

For homebuyers short on cash, this can be costly. Especially since you want to have enough savings to cover new home expenses or unexpected repairs that might come up.

2. Roll the closing costs directly into the mortgage.

Adding closing costs to a home loan is another option that helps homebuyers lower out-of-pocket expenses. When you decide to roll the closing costs into your mortgage, the lender simply adds the amount of the closing costs to your original loan amount.

For example, if your purchase price is $400,000 with a down payment of $40,000 (10%), your home loan would be $360,000. Let’s assume closing costs for your new mortgage are $10,800 (3%). The mortgage lender would add that amount to the loan, putting your new mortgage at $370,800.

This can be an attractive solution for new homeowners who can afford a slightly higher mortgage payment and don’t want to pay the closing costs upfront.

3. Ask your mortgage lender about a no-cost or zero-cost loan to cover closing costs.

Some mortgage lenders offer what’s called a no-cost mortgage. In this case, the mortgage lender will pay all (or most) of your closing costs upfront and increase the mortgage rate in exchange.

This is a profitable option for the lender since the lender will have a higher return over the life of the loan, and closing costs are a fixed amount.

For first-time homebuyers, lowering out-of-pocket expenses could help you become a homeowner sooner.

4. Negotiate with the seller to decide who pays for closing costs.

It’s common for a seller and buyer to negotiate who pays for some of the closing costs as part of the final contract. Often the seller will offer to cover some of the closing costs, but if the property is in a high-demand location, the buyer typically covers the closing costs in full.

5. Apply for housing grants that help pay for closing costs.

Sometimes, rolling the closing costs into the mortgage isn’t affordable since it often results in a higher mortgage payment or a bigger home loan. Sometimes, it can cause the home loan amount to jump beyond your approved loan amount, or the new mortgage payment isn’t affordable.

A good alternative might be a HUD-approved grant. Many first-time homebuyers and borrowers with low-to-moderate income can apply to HUD-approved housing agencies for help. These agencies offer grants to help with closing costs and down payments. If you think you might qualify, give us a call. We can connect you with some information that might help.

How to Apply for a No-Cost or Zero-Cost Mortgage

Connect with a local mortgage advisor to discuss your options.

Closing costs are to be expected when you apply for a mortgage, whether you pay them out-of-pocket or roll them into a home loan. And understanding your options ahead of time can help you save money and move toward financial stability.

Mortgage financing is never one-size-fits-all, and we understand it can be overwhelming to understand all the options available to you. We’re committed to helping you secure the best mortgage at a competitive rate so you can save money on your next mortgage.

Connect with a local mortgage advisor and find out which option will help you meet your financial objectives.

Taking Action

Don’t let closing costs keep you from your best mortgage.

If you’re considering buying a house or refinancing your mortgage, connect with a mortgage advisor in your area to discuss your best options. We can guide you through the process and help you decide which path meets your financial goals. We’d love to help you finance your next dream home today.

When is it Smart to Buy Mortgage Points?

May 18, 2022

mortgage blog, mortgage points, preferred rate

As mortgage rates rise and housing inventory is beginning to stall, many homebuyers ask whether they should buy mortgage points to secure a lower interest rate. Buying mortgage points is one way to lower your mortgage rate, but the decision can be difficult for many homebuyers. For new borrowers getting ready to buy a home and for homeowners who want to refinance, buying mortgage points is one option to reduce your rate and bring down a mortgage payment. But it’s not always the best option.

Keep reading to learn the pros and cons of buying mortgage points.

If getting the lowest interest rate is your primary goal, then choosing to buy mortgage points or “discount” points can make a lot of sense. But paying mortgage points at closing isn’t always the best financial decision when it comes to saving money on your mortgage. It all depends on your financial goals.

The truth is there are a lot of factors: the terms of the loan, closing costs, how much money you want to use for a down payment, and how long you plan to stay in your home. An experienced mortgage advisor can help explain your best loan options to help you meet your financial goals.

Are mortgage points and discount points the same thing?

There are two types of mortgage points: Discount points and rebate points. When people talk about paying mortgage points or buying mortgage points, they are typically referring to discount points. Mortgage points, or discount points, allow you to reduce your interest rate by paying your mortgage interest upfront.

Mortgage points typically cost 1% of your total loan amount. For example, for a $400,000 mortgage, 1 point would cost $4,000 (2 points would cost $8,000, etc.) In exchange, you’ll typically receive a reduced interest rate of 0.25% for each point.

Buying mortgage points can reduce your interest rate and monthly payment (how it works).

Sample loan for a fixed-rate 30-year home loan for $450,000:

Loan amount: $450,000
Loan term: 30-year fixed rate
Interest rate: 6.00%
Monthly payment: $2,698

Sample scenario if you decide to pay 2 mortgage points:

Loan amount: $450,000
Loan term: 30-year fixed rate
Mortgage points: 2
Reduced interest rate: 5.50%
Lower monthly payment: $2,555
Monthly savings: $143/mo
Break-even period: 63 months
Cost at closing: $9,000

In short, this means that paying 2 mortgage points (0.25% discount per point) would cost $9,000 (2% of the loan amount). Paying 2 mortgage points would reduce your mortgage payment by $143/mo and take 63 months to “break-even” or recover that cost. On month 64, you’d start the real benefits of a lower monthly payment.

The example above offers a framework to evaluate if paying points might be a smart decision.

Is it always worth it to pay points on a mortgage?

Yes and no. In the example above, you can see how paying mortgage points upfront can save you money on your mortgage over the long term. But if you end up selling your house or refinancing in the short-term, paying mortgage points could end up costing money upfront at closing that you won’t recover.

Similarly, if you need the additional cash for emergency funds, home repairs, or other needs, it’s probably not wise to become cash-poor just to save 0.25% on your mortgage interest rate.

Today, with mortgage rates inching up and inflation rising, it can be a smart move to buy mortgage points and get a lower mortgage rate. Especially if you plan on staying in your home for more than 6 years, you could save thousands on interest over the life of the loan.

Is it smarter to make a bigger down payment instead of buying mortgage points?

Let’s say you have $9,000 in additional funds that you want to put toward your new home loan, and you’re not sure if you should buy mortgage points or put it toward your down payment.

Going back to the example above, you could put the $9,000 toward your down payment, reducing your home loan to $441,000. While this might not seem like a substantial difference, it would lower your monthly payment since your loan amount is lower.

What’s more, by increasing your down payment, you can improve your loan-to-value (LTV) ratio. A better LTV can translate into a lower interest rate or better terms. If your down payment crosses the 20% threshold, you’ll save even more.

The truth is, talking with a local mortgage advisor can help. Several factors affect every mortgage application, such as your credit score, debt-to-income ratio, and income verification. Custom loan options can create the best terms for your financial situation. Together, these factors impact the overall terms of your loan offer. Paying mortgage points is one element in a much bigger picture.

Are mortgage points tax deductible?

Mortgage points are tax-deductible in most circumstances. Mortgage discount points are prepaid interest on your mortgage and are treated the same as mortgage interest on your tax return. Note that the Tax Cuts and Jobs Act of 2017 puts a limit on the amount of mortgage interest you can deduct, so it’s best to check with your tax accountant for current limits and tax laws.

Finally, a few questions to consider:

Do you plan on staying in your home for at least 5 years (or longer than the break-even period)?

If you plan to move or refinance in less than 5 years, paying points might not be beneficial. But if this is going to be your forever home, it might benefit you to pay points for a reduced interest rate.

Do you have enough cash to make a substantial down payment and also pay points?

If not, it might be better to focus on your down payment. By making a larger down payment, you’ll have a smaller loan amount and a lower mortgage payment.

Is there a better way to invest your money instead of buying mortgage points?

In the example above, you’d pay $9,000 in points when your loan closes. Consider whether or not there may be an alternative way to invest that $9,000 which could yield better returns.

Check out a mortgage calculator to see what you can afford and if paying points will help meet your homeownership goals.

Takeaway

Paying mortgage points is a clear path to getting a lower interest rate and saving money if you plan to stay in your home long-term. That said, paying discount points in addition to a down payment and other closing costs can be financially demanding.

Before you deplete your savings, talk with a local mortgage advisor to find out how much you’ll save each month and how long it will take before you break even. Finally, if you have the extra cash, consider making a larger down payment which might generate better loan terms and save you more money than buying mortgage points.

Connect with a local mortgage advisor and discover which options will help you meet your financial goals.

Next Steps

Working with a local mortgage advisor can help you compare your best mortgage options, lock in the lowest mortgage rate, and secure the best home loan that fits your life goals. Once you know your home loan options, you can decide whether or not buying mortgage points is a smart path. Connect with a local mortgage advisor to discuss your options and save money on your mortgage. We’d love to help.

Buying a Home? Ask Yourself These 5 Questions First

April 5, 2022

mortgage blog, buying a home, preferred rate

Mortgage interest rates are starting to rise, though it’s difficult to know how high they’ll go before they take a dip or level out. So if you’re thinking about buying a new home, now is a good time to take action. Spring is the season which means more houses are coming onto the market and will continue into early summer. At the same time, it can be a competitive season for new homebuyers. Often, sellers are able to secure multiple offers and homebuyers are forced to negotiate.

Before you walk into your next open house, get prepared with a bit of homework by asking yourself these top 5 questions.

5 Questions to Ask Yourself Before You Buy a Home

1. How long do I want to live here?

Planning for the future can be difficult and things can change quickly. Still, having a general plan can help. For example, knowing how long you plan to live in a new home can help you decide between a fixed-rate vs. an adjustable-rate mortgage. Also, it can help you decide how much money you want to use for a down payment.

Quick tip: If you’re planning to stay in the area for less than 3-4 years, it might be better to wait before buying a new home. Why? Closing costs and real estate commissions will cost you upfront, and three years might not make the cost worth it.

2. How much do I want to use for a down payment?

For the lowest mortgage rate and the most competitive home loan, plan on putting down 20%. You’ll avoid PMI (private mortgage insurance) and secure better terms on your overall mortgage.

That said, there are several home loan options, especially for first-time homebuyers. For example, FHA loans require 3.5% down, and a conventional 97 only requires a 3% down payment. VA loans and USDA loans offer mortgages with zero down. However, many government-backed home loans require mortgage insurance premiums for the life of the loan, which increases your monthly payment.

If you know how much you’re prepared to use for a down payment, you’ll be better prepared when it’s time to make an offer.

Connecting with a local mortgage advisor can help, too. You’ll be able to talk through your options in advance and know what to expect.

3. What’s my credit score?

Your credit score is one of the biggest factors that affect your mortgage rate. So, if you’re deciding whether to save more money for a down payment or pay down your credit cards–it can help your credit report to pay down your credit cards.

Mortgage lenders typically offer the lowest mortgage rate to borrowers with a credit score above 740. However, there are a number of great home loans available for homebuyers with credit scores of 680-740, and other loans that only require a credit score of 580.

Download a free copy of your credit report here to find out your credit score.

Look for any errors or misinformation, as most can be fixed within 30 days. Next, pay down your credit cards to improve your debt-to-income ratio. Even better, check out this blog we posted recently on how to boost your credit score in 60 days.

4. Am I prepared for home maintenance and property taxes?

Buying a new home is often exciting. Until the furnace quits or the water heater breaks. Home maintenance, necessary improvements and unexpected repairs are more common than we like to think.

Furthermore, homeowner’s insurance and property taxes will be required on top of your home loan. Many mortgages have the option to include your property taxes and HO insurance into your monthly payment. This option might help you set a clear budget while making sure you don’t fall short on property taxes or insurance.

5. Am I willing to wait to buy a house?

Buying a home can be stressful and overwhelming. It’s a good idea to take some time and shop around. Go to several open houses and be honest with your realtor about what you’re looking for in a home. Spend time researching recent homes sold in your area and current home prices. The more homework you do, the better prepared you’ll be when you find the right home. You’ll be able to make an offer with confidence.

Finally, ask yourself if you’re ready to wait. House hunting can be discouraging at times, especially if there aren’t a lot of homes on the market or the “perfect home” just sold to someone else. Almost every homeowner has gone through a similar adventure at some point, and it’s worth taking your time.

Buying a new home could be one of the biggest financial decisions you’ll ever make.

Taking Action

If you’re thinking of buying a new home, getting pre-approved for your mortgage is a great first step. A mortgage pre-approval guarantees your loan will fund up to a certain amount. With a mortgage pre-approval you can shop with confidence. Connect with a local mortgage advisor to get started. We can guide you through the process and help you decide which path meets your financial goals. We’d love to help.

VA Loans: Benefits and Guidelines for 2022

March 22, 2022

mortgage blog, VA loans, 2022, preferred rate

VA Loans are still one of the smartest mortgage options for members of the military and their spouses. If you’re moving into 2022 with new financial goals, getting a great mortgage is going to be a big part of your success. And if you’re thinking of refinancing or buying a new home, VA Loans offers some smart benefits: Dream homes, fixer-uppers, and first-time homebuyers included.

So who qualifies? What are the benefits? How much will I need to save for a down payment? Has anything changed for VA Loans in 2022?

This quick read will help.

VA Loans Explained

VA Loans are government-backed mortgages available through banks and qualified mortgage lenders. Since VA loans are partially guaranteed by the U.S. Department of Veteran’s Affairs, lenders can pass along savings in the form of lower interest rates, lower down payment requirements, and flexible credit score qualifications.

Top Advantages of VA Home Loans

No down payment requirements – 0% down
No private mortgage insurance (PMI) requirements
Lower interest rates than FHA loans and conventional mortgages
Lower closing costs
Maximum 1% origination fee

Popular VA Loans

Purchase Mortgage — Secure a VA home loan based on the purchase price of your new home.
Cash-out Refinance — Refinance an existing VA loan or conventional loan with the option to cash-out on some of the equity in your home.
Streamline Refinance — Refinance an existing VA loan to a lower interest rate and better terms without getting cash out.
Renovation Loans — Finance the cost of repairs and home improvements and roll it all into a new VA Loan.

VA Home Loan Guidelines for 2022

Since December 2020, the VA loan no longer limits the purchase price for qualified borrowers. This means that there is no cap on the size of your loan and you can still qualify for a zero down payment. Qualified borrowers will still need to meet income requirements and debt-to-income ratios set by their lender for final loan approval on the amount they’ll be able to borrow.

The VA home loan requires a funding fee (0.5 – 3.6%) for home purchases and refinances. Veterans Affairs sets this fee which helps make the loans available to all qualified service members and eligible spouses. The funding fee is a one-time fee and can often be rolled into the loan.

How to Determine Eligibility for a VA Loan

Qualifying for a VA Loan is a fairly straightforward process. You’ll need a VA certificate of eligibility (COE) before the loan closes, which you can request from the U.S. Department of Veteran’s Affairs.

VA Loan Requirements

Active-duty service members and veterans who meet minimum service requirements
Surviving spouses of qualifying service members and veterans
Eligible members of the National Guard and Reserves

Finally, make sure you work with a VA-approved mortgage lender. Working with an experienced mortgage lender can help you save time and money. A VA mortgage expert can help gather required certificates if needed and put together a custom loan package to make sure you get every advantage available to you.

Mortgage financing is never one-size-fits-all. Connect with a local mortgage advisor and find the answers to your questions.

Summary

VA Loans are still one of the smartest mortgage options for members of the military.

Qualifying for a VA home loan is a fairly straightforward process, but there are some documentation requirements that you’ll need to prepare to confirm eligibility. Connect with a local mortgage advisor to find out the details and make 2022 the year you reach your financial goals.

Connect with a local mortgage advisor to discuss your options.

Taking Action

Getting pre-approved for a VA home loan is the best action you can take. Whether you’re refinancing, buying your first home, or renovating your dream house, applying early will help you secure your best mortgage. We can guide you through the VA loan process and help you get approved fast at the rate you deserve. Connect with a local mortgage advisor to get started. We’d love to help.

Smart Tips to Get Preapproved for a Mortgage (Before That Offer)

June 4, 2021

As soon as you start shopping for a new home, one of the most important steps you can take is to get pre-approved for your home loan. Getting pre-approved for a mortgage can boost your buying power and give you peace of mind while you shop.

Why? When you get pre-approved for a mortgage, the lender has already approved a maximum amount for your home loan. You won’t have to worry about whether or not you’ll get approved for a different amount, and you’ll have real buying power when you make an offer.

Follow these tips and learn how to get pre-approved for a mortgage fast. Once the mortgage pre-approval process is underway, you can hit those open houses with confidence.

Getting Pre-qualified vs. Pre-approved for a Mortgage

First things first, getting pre-qualified and getting pre-approved for a mortgage aren’t the same thing, and knowing the difference can give you an edge.

Pre-qualification seems like a simple process because it requires less documentation.

To get pre-qualified, a lender will ask you for some basic information, including your credit score, current income, and employment status. A pre-qualification is helpful as an estimate for what you can afford, but it doesn’t guarantee that you’ll qualify for a home loan for that amount.

Pre-approval is a more thorough process, but the payoff for potential buyers is significant.

When you get pre-approved for a mortgage, the lender does the extra work to verify your credit and income, along with the required documentation for a home loan. Your mortgage advisor will discuss different loan options, current mortgage rates, and your budget.

Once your mortgage is pre-approved, you’ll have a mortgage pre-approval letter that you can present with every offer. You’ll know the maximum amount you can borrow, and the sellers will know that you’re a serious buyer who can close fast.

A mortgage lender won’t finalize the loan terms until you’ve made an offer that the seller accepts. Once the new property is in escrow, the lender will complete the terms of your home loan and get paperwork ready for closing.

How to Get a Fast Mortgage Pre-approval

Step 1: Estimate how much you can afford

Use a mortgage calculator to find out how much you can afford. The results will only be a ballpark figure, but it can help set expectations. Decide on your price range, then connect with a mortgage advisor to discuss your homeownership goals.

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

Step 2: Connect with a Mortgage Advisor

First, talk to a mortgage advisor as soon as you’re thinking about getting a home loan. A qualified mortgage expert can start the mortgage pre-approval process right away while you start shopping for your next home.

Find a qualified mortgage expert in your local area

Step 3: Download your free credit report

You can download a free credit report once every 12 months. It’s a good idea to find out your credit score and check the report to see if any errors need attention. Your credit score will have a direct impact on the terms of your loan and your mortgage rate. By getting a free copy of your credit report early, you can resolve any errors ahead of time.

Click here to download your free credit report

Step 4: Gather required documentation

Most mortgage lenders require similar documentation, with a few exceptions. Start gathering paperwork you’ll need to verify income and assets, employment information, bank statements, and tax returns. If you’re self-employed or plan to use non-standard income to qualify, your mortgage advisor can talk with you about additional information that might be required.

Ask your mortgage advisor for a quick list to help keep things on track. An experienced mortgage advisor will provide a checklist to follow and will make sure the process runs smoothly.

Final Takeaway

Getting pre-approved for a mortgage means that your mortgage lender has already approved the total loan amount for your home loan. Getting pre-approved will help you stand out among other potential buyers and also lets sellers know you’re serious and you’ll be able to close fast.

Shopping with a mortgage pre-approval letter will give you peace of mind and a competitive edge when you decide to make an offer. Start the process early so your lender has all the required documentation and your mortgage advisor can keep things running on time.

Next Steps

If you’re thinking about buying a home, getting pre-approved for a mortgage will give you several advantages in today’s housing market. Start gathering your documentation and connect with a mortgage advisor to discuss your homeownership goals. Getting pre-approved is a straightforward process with big payoffs. We’d love to help.

Get Preapproved for a Mortgage Before You Make an Offer

July 13, 2022

When you’re shopping for a new home, one of the most important steps you can take is to get pre-approved for your home loan. Getting pre-approved for a mortgage can boost your buying power and give you greater confidence when you make an offer.

Why? When you get pre-approved for a mortgage, the lender has already approved a maximum amount for your home loan. You won’t have to worry about whether or not your financing could fall through and you’ll have real buying power when you make an offer.

Follow these tips and learn how to get pre-approved for a mortgage fast. Once the mortgage pre-approval process is underway, you can hit those open houses with confidence.

Getting Pre-qualified vs. Pre-approved for a Mortgage

First things first, getting pre-qualified and getting pre-approved for a mortgage aren’t the same thing, and knowing the difference can give you an edge.

Pre-qualification seems like a simple process because it requires less documentation.

To get pre-qualified, a lender will ask you for some basic information, including your credit score, current income, and employment status. A pre-qualification is helpful as an estimate of what you can afford, but it doesn’t guarantee that you’ll qualify for a home loan for that amount.

Pre-approval is a more thorough process, but the payoff for potential buyers is significant.

When you get pre-approved for a mortgage, the lender does the extra work to verify your credit and income, along with the required documentation for a home loan. Your mortgage advisor will discuss different loan options, current mortgage rates, and your budget.

Once your mortgage is pre-approved, you’ll have a mortgage pre-approval letter that you can present with every offer. You’ll know the maximum amount you can borrow, and the sellers will know that you’re a serious buyer who can close fast.

A mortgage lender won’t finalize the loan terms until you’ve made an offer that the seller accepts. Once the new property is in escrow, the lender will complete the terms of your home loan and get the paperwork ready for closing.

How to Get a Fast Mortgage Pre-approval

Step 1: Estimate how much you can afford

Use a mortgage calculator to find out how much you can afford. The results will only be a ballpark figure, but it can help set expectations. Decide on your price range, then connect with a mortgage advisor to discuss your homeownership goals.

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

Step 2: Connect with a Mortgage Advisor

First, talk to a mortgage advisor as soon as you’re thinking about getting a home loan. A qualified mortgage expert can start the mortgage pre-approval process right away while you start shopping for your next home.

Find a qualified mortgage expert in your area

Step 3: Download your free credit report

You can download a free credit report once every 12 months. It’s a good idea to find out your credit score and check the report to see if any errors need attention. Your credit score will have a direct impact on the terms of your loan and your mortgage rate. By getting a free copy of your credit report early, you can resolve any errors ahead of time.

Click here to download your free credit report

Step 4: Gather required documentation

Most mortgage lenders require similar documentation, with a few exceptions. Start gathering paperwork you’ll need to verify income and assets, employment information, bank statements, and tax returns. If you’re self-employed or plan to use non-standard income to qualify, your mortgage advisor can talk with you about additional information that might be required.

Ask your mortgage advisor for a quick list to help keep things on track. An experienced mortgage advisor will provide a checklist to follow and will make sure the process runs smoothly.

Summary

Getting pre-approved for a mortgage means that your mortgage lender has already approved the total loan amount for your home loan. Getting pre-approved will help you stand out among other potential buyers and also lets sellers know you’re serious and you’ll be able to close fast.

Shopping with a mortgage pre-approval letter will give you peace of mind and a competitive edge when you decide to make an offer. Start the process early so your lender has all the required documentation and your mortgage advisor can keep things running on time.

Taking Action

If you’re thinking about buying a home, getting pre-approved for a mortgage will give you several advantages in today’s housing market. Start gathering your documentation and connect with a mortgage advisor to discuss your homeownership goals. Getting pre-approved is a straightforward process with big payoffs. We’d love to help.

Relocating? Get Pre-approved for a Mortgage First

October 12, 2022

mortgage blog, pre-approved mortgage, preferred rate

When you’re relocating, shopping for a new home can be exciting but it can also feel overwhelming. One of the most important steps you can take is to get pre-approved for your home loan–even if you’re moving out of state. An experienced mortgage advisor can help you get pre-approved for a mortgage before you move in the zip code you need.

The best part is you’ll know exactly how much you can afford before you shop and you can lock in the lowest mortgage rate available. Getting pre-approved for a mortgage can boost your buying power and give you greater confidence when you’re ready to make an offer.

When you get pre-approved for a mortgage, the lender has already approved a maximum amount for your home loan. You won’t have to worry about whether or not your financing could fall through and you’ll have real buying power when you make an offer.

First, find a local mortgage advisor ahead of time who can help guide you through the process. No matter what state you’re about to call home, a qualified advisor can lock in your rate and partner with you through every step.

These tips and learn how to get pre-approved for a mortgage fast. Once the mortgage pre-approval process is underway, you can hit those open houses with confidence.

Getting Pre-qualified vs. Pre-approved for a Mortgage

First things first, getting pre-qualified and getting pre-approved for a mortgage aren’t the same thing, and knowing the difference can give you an edge.

Pre-qualification seems like a simple process because it requires less documentation.

To get pre-qualified, a lender will ask you for some basic information, including your credit score, current income, and employment status. A pre-qualification is helpful as an estimate of what you can afford, but it doesn’t guarantee that you’ll qualify for a home loan for that amount.

Pre-approval is a more thorough process, but the payoff for potential buyers is significant.

When you get pre-approved for a mortgage, the lender does the extra work to verify your credit and income, along with the required documentation for a home loan. Your mortgage advisor will discuss different loan options, current mortgage rates, and your budget.

Once your mortgage is pre-approved, you’ll have a mortgage pre-approval letter that you can present with every offer. You’ll know the maximum amount you can borrow, and the sellers will know that you’re a serious buyer who can close fast.

A mortgage lender won’t finalize the loan terms until you’ve made an offer that the seller accepts. Once the new property is in escrow, the lender will complete the terms of your home loan and get the paperwork ready for closing.

How to Get a Fast Mortgage Pre-approval

Step 1: Estimate how much you can afford

Use a mortgage calculator to find out how much you can afford. The results will only be a ballpark figure, but it can help set expectations. Decide on your price range, then connect with a mortgage advisor to discuss your homeownership goals.

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

Step 2: Connect with a Mortgage Advisor

First, talk to a mortgage advisor as soon as you’re thinking about getting a home loan. A qualified mortgage expert can start the mortgage pre-approval process right away while you start shopping for your next home.

Find a qualified mortgage expert in your area

Step 3: Download your free credit report

You can download a free credit report once every 12 months. It’s a good idea to find out your credit score and check the report to see if any errors need attention. Your credit score will have a direct impact on the terms of your loan and your mortgage rate. By getting a free copy of your credit report early, you can resolve any errors ahead of time.

Click here to download your free credit report

Step 4: Gather required documentation

Most mortgage lenders require similar documentation, with a few exceptions. Start gathering paperwork you’ll need to verify income and assets, employment information, bank statements, and tax returns. If you’re self-employed or plan to use non-standard income to qualify, your mortgage advisor can talk with you about additional information that might be required.

Ask your mortgage advisor for a quick list to help keep things on track. An experienced mortgage advisor will provide a checklist to follow and will make sure the process runs smoothly.

Summary

Getting pre-approved for a mortgage means that your mortgage lender has already approved the total loan amount for your home loan. Getting pre-approved will help you stand out among other potential buyers and also lets sellers know you’re serious and you’ll be able to close fast.

Shopping with a mortgage pre-approval letter will give you peace of mind and a competitive edge when you decide to make an offer. Start the process early so your lender has all the required documentation and your mortgage advisor can keep things running on time.

Taking Action

If you’re thinking about buying a home, getting pre-approved for a mortgage will give you several advantages in today’s housing market. Start gathering your documentation and connect with a mortgage advisor to discuss your homeownership goals. Getting pre-approved is a straightforward process with big payoffs. We’d love to help.

The Fannie Mae HomeStyle Renovation Loan: Worth It?

April 26, 2021

The Fannie Mae HomeStyle Renovation Home Loan is a solid opportunity for homeowners excited about buying a fixer-upper. Even if you haven’t thought about buying a home in need of repairs, the HomeStyle loan has a full suite of advantages worth considering.

Why? Housing inventory remains low, rates dropped again this week, and the Fannie Mae HomeStyle renovation loan folds the cost of renovation and repairs into one mortgage. You won’t fall into a money pit with unlimited surprises, since the entire renovation is planned and approved before the loan closes.

The HomeStyle renovation loan reduces risk (for you and your lender) by approving a final loan amount covering all updates and repairs before the loan closes. Once your approved mortgage closes, you’ll be able to start improvements right away and enjoy the peace of mind that comes with one mortgage payment.

Fixer-Uppers are a Smart Move in Today’s Housing Market

Buying a fixer-upper isn’t always a popular decision. New homeowners often want a property with great curb appeal and everything ready to roll. Some think that fix-and-flip buyers are the only ones purchasing homes that need a lot of repairs. But in reality, this isn’t the case.

Mortgage interest rates dropped again this week despite signs of inflation, and the majority of homeowners are refinancing instead of moving which means housing inventory is still low.

A decade ago, homeowners might have traded up, moved to a bigger house, or even a better location. But with so much uncertainty in the economy, more people are staying put, which means housing inventory might remain low for a while.

The HomeStyle loan requires a bit of work upfront to estimate the cost of repairs and get approved. Keep reading to see the benefits.

Fannie Mae Homestyle Renovation Loan: How it Works

Fannie Mae HomeStyle Loan is a government-backed loan designed to help homeowners purchase a home in need of repair. The cost of repairs and renovation is estimated ahead of time, so you have one mortgage that includes the entire amount (renovation costs + purchase price) in one monthly payment.

A designated custodial account holds the funds for renovation and repairs. As soon as the loan closes, you’ll begin paying your monthly mortgage. The contractor can start work immediately and submit requests for funds at each milestone. Inspection will take place each time there is a “draw” on the account.

When the work is complete, there is a final inspection and appraisal. A bit of business to change to the title, and you’re ready to enjoy your new home!

The HomeStyle Loan is Incredibly Flexible

You could put in permanent landscaping features such as a pool or an outdoor kitchen, build an accessory dwelling unit (ADU), upgrade the interior with brand new bathrooms, or build an extensive remodel.

One caveat: The HomeStyle home loan does not allow homeowners to tear down the existing structure to build a new one. Also, all renovations must be affixed to the property (permanent).

How to Apply for the HomeStyle Loan

Step 1: Find an approved lender and start the process to get pre-approved.

Step 2: Select a licensed contractor and work together to create detailed plans and a clear schedule. Create a timeline with milestones to show how long it will take.

Step 3: Share the final plans with your lender.

Step 4: Schedule an appraiser to inspect the home and review the plans. The appraiser will provide a valuation based on the “finished property.”

Step 5: Discuss the results with your lender to confirm how much you’re approved to borrow.

Once the final amount for the HomeStyle renovation loan is approved, you’re on your way to one simplified mortgage & a renovated home!

Eligibility Requirements

If you’re wondering who is eligible for the Fannie Mae HomeStyle Renovation Loan, it’s similar to conforming loan standards. While there is a fair amount of work upfront to apply, the eligibility requirements are fairly standard:

Homeowner Requirements:

Evidence of reliable income via tax returns
Verifiable employment & regular income
Loan-to-value (LTV) < 97%
Debt-to-income ratio (DTI) < 45%
Credit score 620+

Property Requirements:

Detached single-family home
Townhome, condo, manufactured home
Readily accessible roads that meet local standards
Served by utilities that meet community standards
Construction costs up to 75% of the home’s value

Second homes, investment properties, and 1-4 unit properties are possible, but the requirements for the borrower might be more strict. You can also use the additional funds to help bring your property up to standard, but the scope of work will need to be in the plans.

Additional Resources

The Fannie Mae HomeStyle Renovation Loan isn’t the only home renovation loan available right now. Another option is the FHA 203(k), and the VA Renovation Loan has exclusive benefits for members of the military. All of these options keep things manageable with one monthly mortgage payment that includes renovation costs.

Final Takeaway

If you’re ready to meet the challenge, the HomeStyle renovation loan will give you everything you need to build the house of your dreams AND take advantage of low rates. Properties that might be less desirable to some could be a great opportunity with the HomeStyle renovation loan.

Next Steps

Working with an experienced mortgage advisor can help you reach your financial goals. If you’d like to understand more about the Fannie Mae HomeStyle Renovation Loan, give us a call to discover what’s possible. We’d love to help.

Tag Archive for: pre-approval

Helpful advice from friendly mortgage experts.

HOW TO PAY CLOSING COSTS: KNOW YOUR OPTIONS

5 Popular Strategies to Pay Closing Costs

Find out how much you can afford (it’s free).

1. Pay for closing costs upfront.

2. Roll the closing costs directly into the mortgage.

3. Ask your mortgage lender about a no-cost or zero-cost loan to cover closing costs.

Thinking about refinancing?

4. Negotiate with the seller to decide who pays for closing costs.

5. Apply for housing grants that help pay for closing costs.

Start your application in less than 5 minutes.

How to Apply for a No-Cost or Zero-Cost Mortgage

Taking Action

Take the first step toward your best mortgage.

Are mortgage points and discount points the same thing?

Buying mortgage points can reduce your interest rate and monthly payment (how it works).

Find out how much you can afford (it’s free).

Is it always worth it to pay points on a mortgage?

Is it smarter to make a bigger down payment instead of buying mortgage points?

Are mortgage points tax deductible?

Thinking about refinancing?

Finally, a few questions to consider:

Do you plan on staying in your home for at least 5 years (or longer than the break-even period)?

Do you have enough cash to make a substantial down payment and also pay points?

Is there a better way to invest your money instead of buying mortgage points?

Takeaway

Start your application in less than 5 minutes.

Next Steps

Helpful advice from friendly mortgage experts.

5 Questions to Ask Yourself Before You Buy a Home

1. How long do I want to live here?

2. How much do I want to use for a down payment?

Find out how much you can afford (it’s free).

3. What’s my credit score?

4. Am I prepared for home maintenance and property taxes?

5. Am I willing to wait to buy a house?

Start your application in less than 5 minutes.

Taking Action

Take the first step toward your best mortgage.

VA Loans Explained

Top Advantages of VA Home Loans

Popular VA Loans

Find out how much you can afford (it’s free).

VA Home Loan Guidelines for 2022

How to Determine Eligibility for a VA Loan

VA Loan Requirements

Mortgage financing is never one-size-fits-all. Connect with a local mortgage advisor and find the answers to your questions.

Helpful advice from friendly mortgage experts.

Summary

Connect with a local mortgage advisor to discuss your options.

Start your application in less than 5 minutes.

Taking Action

Getting Pre-qualified vs. Pre-approved for a Mortgage

Top 5 Questions on Getting Pre-approved for a Mortgage (Answered)

1. Do I need to get pre-approved for a mortgage before I make an offer?

2. What documents will I need to get pre-approved?

3. Does getting pre-approved for a mortgage affect my credit score?

4. How long will it take to get a mortgage pre-approval letter?

5. What happens if my home loan doesn’t get approved?

How to Get a Fast Mortgage Pre-approval

Final Takeaway

Next Steps

Take the first step toward your best mortgage.

Getting Pre-qualified vs. Pre-approved for a Mortgage

Top 5 Questions on Getting Pre-approved for a Mortgage

1. Do I need to get pre-approved for a mortgage before I make an offer?

2. What documents will I need to get pre-approved?

Start your application in less than 5 minutes.

3. Does getting pre-approved for a mortgage affect my credit score?

4. How long will it take to get a mortgage pre-approval letter?

5. What happens if my home loan doesn’t get approved?

Find out how much you can afford.

How to Get a Fast Mortgage Pre-approval

Helpful advice from friendly mortgage experts.

Summary

Taking Action

Take the first step toward your best mortgage.

Getting Pre-qualified vs. Pre-approved for a Mortgage

Top 5 Questions on Getting Pre-approved for a Mortgage