First Time Home Buyer
Learn All About The Process of Home Buying
Lowering Costs For First Time Homebuyers
Buying a home is a momentous milestone that may seem out of reach based on your financial situation. However, an FHA loan can help manage the cost. So, how can FHA loans impact the cost of a home? With lower rates and significantly lower down payment, it can make the home buying process more feasible and realistic—which is especially exciting for individuals currently in the market for a new house. If you are on the house hunt and interested in learning how to reduce the cost of your dream home, continue reading.
How does an FHA loan affect the cost of your future home?
To drive into further detail, an FHA loan stands for federal housing administration loan, and it’s a federally backed mortgage option for potential or new homeowners. Anyone with a minimum credit score of 500 may qualify. However, these loans are also fantastic for lower-income families and individuals as well. The majority of people cannot pay out of pocket on such a large ticket item, but an FHA loan can help ease the financial burden. Unlike conventional loans, an FHA loan is eligible for streamline financing and will have you paying lower interest fees.
How does it work?
It’s commonly believed that you receive your loan through the Federal Housing Administration. But that is not the case, despite its name. Though the FHA does approve the bank you go through, they do not issue the loan themselves. They only insure it. Though a little bit of extra paperwork is required when filing for the mortgage, new homeowners can benefit greatly from the loan. Lenders can expect a down payment as low as 3.5% along with other perks that cater to their financial situation. They also have the option to sign with a non-occupant co-lender to help qualify if they do not meet the minimum requirements.
What are some benefits of FHA loans?
Anyone can apply. Even if your credit score is on the lower end of the spectrum. However, 500 is required as the minimum. You can also borrow up to 96% of what your home is worth. While still paying a lower and more manageable down payment to secure the property. All in all, it makes purchasing a home more affordable in case you’ve never gone through the home buying process.
Anything is possible
Everyone deserves a roof over their heads and a nice place to call home. The housing market can be unpredictable, and this thought alone can be discouraging. Not to mention that the cost of living is on a steady rise. It has increased by 30% within the last few years. However, if it’s a helping hand you seek as a new or prospective homeowner, FHA loans may help make your dream a reality.
If you’re embarking on the home buying process for the first time, it’s important to know what you can feasibly afford. Understanding your mortgage options and the terms of your mortgage will give you the freedom and knowledge you need. For more information, contact us today.
4 First-Time Home Buyer Grants and Programs
Financing your home purchase as a first-time buyer can be intimidating, especially if you’ve been having trouble saving up for a down payment. However, there are a variety of FHA loan programs and grants available to first-time homebuyers that make purchasing your dream home possible within your budget. Here are just a few of the many options you can take advantage of when you’re buying your first home.
FHA loan programs for first-time buyers are unique in that they allow buyers to offer a lower down payment than most traditional mortgages. To get an FHA loan for a mortgage with a down payment as low as 3.5%, the borrower needs a credit score of 580 or higher. Those with credit scores between 500 and 579 must make down payments of at least 10%. Since the limits are easier to meet, more people are able to become homeowners through this program.
While these loans are not available in every part of the country, eligible homebuyers can purchase their home without a down payment. USDA loans are designed for low-income to middle-income buyers in more rural areas, but as much as 97% of areas throughout the country can qualify as “rural” by USDA loan standards.
HUD First Time Buyers Programs
While HUD programs will vary depending on location, they can be incredibly useful for first-time buyers in need of down payment assistance or help with closing costs. Certain grants are only eligible in special circumstances, so be sure to do some research before you count on these being available.
If you are a retired veteran or are currently enlisted, VA loans are one of the best programs available for you to finance your home. These loans are usually some of the most affordable, as they require no mortgage insurance and no down payment. If you qualify, this can help you get into your first home at an affordable price.
First-time buyers can gain the assistance they need for their down payment and other associated costs through a variety of programs tailored to their needs. For more information on FHA loan programs and other grants to make your home-buying more affordable, contact Megastar Financial today.
Defining Your Mortgage Loan: A Glossary Of Common Terms
With all of the various rules and stipulations, the mortgage industry can be very confusing for many homeowners, especially first-time homeowners. According to data from Sept. 2016, 59% of homeowners wish that they had a better understanding of their mortgage loans’ terms and details. By knowing the definitions of these common terms, you’ll start your journey to more easily understanding your mortgage.
Adjustable Rate Mortgage: Known as an ARM, this type of mortgage has a fixed rate of interest for a set period of time. This period is typically one, three or five years. The interest rate is lower during that period, but after the period ends it will adjust based on an index.
Amortization: The amortization is simply the schedule of how the loan is intended to be repaid. For mortgage loans, it typically includes a monthly breakdown of the amount of interest you pay and how much is paid on the amount borrowed.
Closing Costs: Any homebuyer must pay costs and fees during the mortgage process. These costs typically include attorney fees, recording fees, and more.
Escrow: The mortgage lender maintains an escrow account for a borrower that collects money that is used to pay the taxes on the home. Upon the initial closing of the mortgage, the borrowers typically need to set aside a percentage of the yearly taxes and this is held in the escrow account.
Good Faith Estimate: This is an estimate made by the mortgage lender of the closing costs from the mortgage. As the name implies, a good faith estimate is not an exact amount, but rather a way for lenders to inform buyers what they will likely need to pay at the closing of the loan.
Loan-to-value Ratio: A financial calculation common for mortgage loans, the loan-to-value ratio is determined by dividing the amount of the mortgage by the value of the home. In order to qualify for a mortgage, lenders typically require this rato to be at least 80%.
Origination Fee: Borrowers often need to pay an origination fee to the lender when they apply for a mortgage fee. The origination fee can encapsulate an application fee, appraisal fees, and fees for follow-up work.
Points: The points are the percentage points of the loan amount. Lenders often allow borrowers to buy down their interest rate by paying points. If borrowers stay in the home for the duration of the loan, paying a percentage point up front is usually a good way to save.
A mortgage loan is a complicated, but necessary part of homeownership. By knowing these basic terms, you can have a more active role in determining your financial wellbeing.
The Relationship Between Mortgage Loans And Credit Scores
Mortgage lenders want to be sure that the loans they give out will be paid back in a timely fashion, and one of the surest ways for them to measure that is by checking credit scores. One of the most important things you can do to expedite and simplify the home buying process is to make sure that your credit score is in good shape before you make moves to purchase a home.
What Credit Score Do I Need For The Best Mortgage Loan?
The lowest mortgage rates and down payments come with impressive credit scores. With a credit score of 720 or above, you are in the “excellent” territory. A credit score this high will get you a low-interest rate, as the lender can see that you are trustworthy when it comes to repaying other lenders and credit card companies. With a 30-year, $200,000 mortgage, a borrower with a credit score above 760 can save as much as $193 in monthly payments as compared to a borrower with a score around 620. Around 700, your score is still considered good and around 680 it is veering on average. If you have a credit score around 640 or lower than that, you may have some trouble in getting a conventional mortgage from a bank or online lender. Try to keep your credit score around 680 or above for the best rates.
Can I Get A Mortgage Loan With A Lower Credit Score?
A low credit score does not indefinitely bar you from getting a mortgage loan. While you may not be able to get a conventional loan with a score in the lower 600s, there are government-funded loans to help borrowers. You can get an FHA loan from the Federal Housing Administration with a down payment as low as 3.5% with a credit score of 580 or higher. If your credit score is lower, you may face higher down payment rates and interest rates, but you can often still get the loan. The U.S. Department of Veteran Loans offers VA loans to active and veteran military personnel and do not require a minimum credit score. The USDA loan program helps borrowers with a low to moderate income purchase a home in a rural area and will consider those with lower credit scores.
If you have a dream of owning a home, don’t let a low credit score stop you from getting there. Look into alternative loan options that offer reasonable rates, or take some time to improve your credit score by paying down bills and credit cards. Buying a home is something all people can achieve with a little research and financial work.
3 Questions You Need to Ask Your Mortgage Lender
Not surprisingly, 59% of homeowners wish they had a better grasp on the terms and details of their mortgage, according to data collected in September of 2016. While it’s important to ask questions about mortgage loans during the meeting with your lender, it’s more important to ask the right questions.
Most people are asking questions that don’t provide them with any more insight into their mortgage loan. With a little tweaking, you can change those questions to ones with answers that give you a better understanding of your loan.
Ask “What are my loan options with a low down payment?”
Most people make the mistake of asking their lender how much of a down payment they should make, but because of the differences from borrower to borrower, your lender won’t be able to provide you with an accurate answer. In order to tell you exactly how much you should put down, they would need to know your current financial status and expenses as well as your long-term financial goal. Since they’re a lender and not a financial planner, they can’t answer that question. Asking what types of loans and options are available to you if you were to put down a small payment would be more beneficial.
Ask “How much is the origination fee?”
When you’re shopping around for mortgage lenders, you typically chose the one with the lowest closing costs. Except, the problem with that is closing costs aren’t dictated by the lender and vary by property, not the financial institution. Therefore, instead of asking “How much are your closing costs?” ask “What is your lender/origination fee?” That way, you’re choosing a lender based on their fee and not the fees associated with the property.
Ask “When can I lock in my rate?”
Asking a lender if they offer rate locks is like asking if the Pope is Catholic; the answer is always yes. Instead, you might find it more beneficial to ask when you can lock in your rate. The answer will be when you have a property, and that’s true for all lenders. Yet, the actual time that you decide to lock in your interest rate is entirely up to you. Of course, you want to get the best rate, but that can be hard to do since rates fluctuate and you don’t know if they’re going to go up or down. Your lender could help guide you through this process, should you ask.
Hopefully, reading this short post gave you a bit more insight into the terms and details of your current mortgage loan. If you’re still hunting for one, then use this quick guide to get the most out of the meeting with your lender.
The Top 6 Benefits of Owning Your Own Home
The American Dream is inseparable from home ownership. Putting down roots and owning your own piece of America is the ultimate goal of many Americans. But as a first-time home buyer, buying a house can be intimidating. How do you know if you’re making the right choice?
You Can Choose to Rent or Own a Home
Despite the benefits of owning your own property and (finally) having a yard, more and more people are choosing to become lifelong renters. Yet there are many personal and financial advantages to owning a home. Here are some of the top reasons to consider a home mortgage in Redding, CA.
Great Reasons to Own a Home
Equity is the difference between how much you owe to the mortgage lender and how much your home is worth. Every month you pay your mortgage, the greater your equity.
2. Tax Benefits
You’re able to deduct your mortgage interest from your taxes if your loan is less than $1 million. You can also deduct some of your state property taxes from your federal return.
Unlike apartment living, you can do whatever you want with your home. Paint the walls whatever color you like, upgrade the amenities, or get a dog.
With a fixed-rate mortgage, you’ll be able to predict exactly how much you’ll owe to your mortgage lender each year. Compare this to apartment living, where rent can go up every year. With a fixed rate mortgage in Redding, CA, you can plan for the future.
Renting can be great when you’re not sure where you want to settle. But once you’ve planted roots in a city, owning a home can give you a great sense of stability.
Houses usually go up in value over time. That means, over a 30-year period, your house’s value will increase substantially in most cases. If your city grows and your neighborhood becomes more desirable, even the ground beneath your feet can increase in value. That gives you more bang for your buck once you start to think about retirement.
There are many benefits to owning a home compared to renting an apartment. And now is the best time to invest in your own property. For more information on home mortgages in Redding CA, contact Megastar Financial today.
Millennials are flocking to VA Loans
Millennials are using VA loans much more than previous generations – creating a renaissance for the long running program. Last year, one third of all VA loans were used by millennials.
A notoriously cash-strapped generation – coming of age in a time of tight credit, flat wages, and ballooning housing prices – they find their savings where they can. If you’re an eligible millennial wanting to escape the endless cycle of rent payments, a VA loan is an amazing option.
Why are millennials attracted to VA Loans?
The simple answer is: Money. VA Loans are a great deal. But, to be more specific, there are three reasons millennials are making use of these loans.
Zero down payment
The biggest and most obvious advantage of a VA loan is that a down payment is not required, making it easy for someone without much in the way of savings to afford a home. You can afford up to a 424,000 dollar loan (or even more in some markets) without having to worry about a costly down payment.
FHA loans, which are designed to be attractive to first-time buyers, do require down payments of 3.5% or more. In the case of the average first time home loan, that’s about 12,000 dollars.
Given this, a VA loan provides a significant hand up to those who have served their country.
No Mortgage Insurance Required
Another significant boon to the young homebuyer is the lack of a mortgage insurance requirement. Most loan types require either a large down payment, or mortgage insurance to protect the lender from risk. VA loans, backed by the US government, require neither.
For a typical FHA loan, annual mortgage insurance is just under 1% of the value of the loan. Even divided over twelve months, this monthly payment will put a dent in a typical household’s budget. A VA loan circumvents these payments entirely.
Those who qualify for VA loans are responsible for a small payment to the VA, but compared to the cost of Mortgage Insurance, this is barely worth mentioning.
Easier to qualify for
Besides the obvious stipulation that only veterans and the spouses of veterans can qualify for VA loans, this program is much more forgiving and flexible with most requirements.
For instance, lower credit scores are required to qualify for a VA loan. What’s more, the VA is there to help veterans who have trouble making payments. For these reasons, VA loans have the lowest rates of foreclosure on the market of any loan type.
If you are a millennial who has served your country, it’s time for the count to give back. A VA loan can help you get ahead. If you’d like to find out more, check out our page on VA loans. Or contact Redding Megastar if you have questions.
MEGASTAR FINANCIAL CORP. is an Equal Housing Lender. DBO Lic # 603 G365 NMLS Lic # 235828(3043)*
Licensed by the Department of Business Oversight (DBO) under the California Finance Lenders Act * NMLS # 1162668.
As prohibited by federal law, we do not engage in business practices that discriminate on the basis of race, color, religion, national origin, sex, sexual preference, marital status, age (provided you have the capacity to enter into a binding contract), because all or part of your income may be derived from any public assistance program, or because you have, in good faith, exercised any right under the Consumer Credit Protection Act. We are regulated by the Fair Housing Act (overseen by HUD) and the Equal Credit Opportunity Act (overseen by CFPB), Washington, DC, 20580.
Example of 30 year mortgage:
$300,000 sales price, $60,000 down payment, $240,000 loan amount, 360 months, 3% interest rate, 3.132% APR, $1,029 Principle and Interest monthly payments, Payment does not include taxes, insurance premiums or HOA dues. The actual payment amount will be greater. Rates shown valid on publication date of June 29th, 2020. This example is for a conventional, not jumbo, mortgage product; there are restrictive upper loan amounts for conventional loans based on the property’s location. Example given requires a minimum 740 credit score with a debt to income ratio of under 45%. Applicant must be employed. This is not a promise to lend. All terms and conditions are based on the subject property, the applicant’s credit worthiness and the applicant’s ability to repay the loan.
15-Year Fixed-Rate Mortgage:
The payment on a $300,000 15-year fixed-rate loan at 2.723% and 80% loan-to-value ratio (LTV) is $1,626. The annual percentage rate (APR) is 3.178%. Payment does not include taxes and insurance premiums. The actual payment amount will be greater. Rates shown valid on publication date of June 29th, 2020. This example is for a conventional, not jumbo, mortgage product; there are restrictive upper loan amounts for conventional loans based on the property’s location. Example given requires a minimum 740 credit score with a debt to income ratio of under 45%. Applicant must be employed. This is not a promise to lend. All terms and conditions are based on the subject property, the applicant’s credit worthiness and the applicant’s ability to repay the loan.