What You Need To Know When Applying For A Mortgage

If you are contemplating applying for a mortgage, then there are some important financial issues that you need to be aware of. Mortgage lenders have rather precise criteria for judging the credit-worthiness of applicants, and this article includes what you need to know when applying for a mortgage.

Know Your Credit Scores

Your credit scores compiled by each of the three major credit bureaus will fall between 300 and 850. You can find your credit scores by visiting www.annualcreditreport.com. Another score is compiled by Fair Isaac and you can obtain this score online also. The best interest rate and terms require credit scores of about 720. Some lenders will consider applicants with lower scores, but the interest rates will be higher. If you are working with a mortgage broker, then they will find the best available rates and terms.

Know Your Income-to-Debt Ratio

Lenders use this ratio to determine whether you can make a house payment which includes the principal, interest, property insurance, taxes, and a private mortgage insurance premium if any is required. Let's look at how this works. To qualify for an FHA mortgage, your total house payment cannot be more than 29% of your gross monthly income. Your total income-to-debt ratio cannot be more than 41% including your house payment, and this ratio is determined by adding your monthly debt service to your house payment. This means that debt service includes credit card debt, car payments, student loans, child support, alimony and any other obligation which requires an ongoing monthly payment. This is another situation where a mortgage broker can assist your efforts to find the best mortgage available if your ratio is higher than the highest stated ratio.

Know The Amount Of Your Down Payment

This is a little more complicated than it appears to be. Your down payment should come from money you have saved or from a recent property sale. There may be an exception for gifts from parents, but you should still be able to demonstrate that you have saved money every month to use for a down payment. If you have not been able to save money from your income, then you will have to demonstrate how you can make the mortgage payment if it is higher than your current housing expense.

Your credit scores will be a major factor in determining the amount of the down payment. For example, if you have high credit scores, you can get an FHA loan with 3.5% down, but you could be required to put as much as 10% down if your scores are low. The best interest rates are only available to applicants who can put 20% down and who have good credit scores.

Know that you can Get Help In Finding The Best Mortgage

Mortgage brokers work with many lenders and they know the lenders that will work with applicants who have a financial status that does not comply with the customary criteria. Discuss your situation candidly with a broker, and you will have at least explored every option available.

5 Questions Realtors Should Be Prepared To Answer

Home buyers want as much information as possible about a home they would like to buy and the neighborhood the home is in. Most home buyers have used the internet to learn about home buying procedures and the facts about a home that they should want to know before they make an offer to buy it. We have studied the issues that home buyers believe are important, and as a result, we believe that these are 5 questions realtors should be prepared to answer.

1: Why Is The Home For Sale?

Perhaps the owners just want a change of scenery or a different size home, but it is possible that another less acceptable reason is motivating the seller. A real estate agent should be able to answer this question directly and without hesitation while keeping in mind that any serious problems must be disclosed. One concern could be the area crime rate.

2. Does The Property Have Any Serious Issues?

The real estate agent has an ethical and legal obligation to disclose any issues that make the home unsafe, structurally unsound, or that would cause it to be in violation of any code. The buyer should examine the home's foundation, and if any cracks are discovered, then an explanation of the cause should be provided.

3. Have Any Renovations Been Made or Any Remodeling Been Done?

This information may be important to a buyer when they assess the overall condition of the home. Buyers should want to know if any work required a permit and if it did, was the work inspected upon completion. It would be important for the buyer to know if a permit was not obtained.

4. Has The Home Experienced Any Water Damage?

This is an important question since any water damage is cause for concern. A leak in the roof may have caused toxic mold to grow or roof support members to weaken. A roof leak can also cause water to run down behind the interior walls and cause mold to grow. Of course, any problem that caused the home to flood with any amount of water is cause for concern. If this happened, then efforts to remove the water and to remediate any water damage should be documented. Buyers will be concerned about the extent of the damage and any latent problems arising from the damage.

5. Are Any Other Offers Pending?

Astute buyers will ask this question because the answer will determine if they have any real interest in making an offer. Buyers will likely know that one offer does not make a sale, but multiple offers may compel them to keep looking.

Critical Ways That VA Home Loans Differ from Standard Mortgages

Veterans who are looking to purchase a new home or refinance their current home should always consider a VA home loan as an alternative to a standard mortgage. These loans come with a wide variety of benefits that could protect a homeowner’s finances for years on end. Here is a closer look at five of the primary differences between a VA home loan and a traditional mortgage.

Down Payments

The minimum down payment for most homes is around 5 percent, but those wanting a larger home or lower payments may have to provide a down payment as high as 20 percent. With a VA loan, however, veterans could purchase their home with an incredibly low down payment or even no down payment in some situations.

Government Guarantee

The VA does not provide home loans directly to veterans, but instead helps guarantee loans offered by approved lenders. If the loan is defaulted on, then the VA will help to pay back some or all of the money. This government guarantee means that lenders are much more willing to make quick sales with little in the way of a down payment.

Credit Score

Maintaining good credit is absolutely vital when it comes to an affordable mortgage, and even a minor drop in one’s credit rating could affect their chances of receiving a loan. VA home loans are approved at a much higher rate as long as the veteran is not deemed a major financial risk. In some instances, the approved credit rating can be as low as 620 depending on a number of factors such as the overall value of the home. If you aren’t sure if you qualify for a VA home loan, contact Low VA Rates or a similar institution for a professional analysis.

Mortgage Insurance

Along with the down payment, one of the largest initial costs of purchasing a home is mortgage insurance. Unless the buyer can provide a down payment of at least 20 percent, most lenders will require mortgage insurance until sufficient equity has been built. VA home loans, on the other hand, often require little or no mortgage insurance.

Foreclosure

Around one out of every 200 homes that are sold will be foreclosed upon, but VA home loans are rigorously guarded by lenders. Instead of allowing the home to be foreclosed, these lenders will often do everything in their power to make alterations to the loan in order for it to be financially manageable.

Those who are looking to save themselves time, money, and stress should consider their options for VA home loans if they are a past or current member of the military.

Courtesy of: Home Advisor