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4 Considerations to Make Before Applying for a Home Loan
Making the decision to purchase a home is a significant step in anyone’s life. So before you begin shopping around for mortgages, it’s important to do some research and figure out exactly what type of home loan will be best for you. So if you’re looking to apply for a home loan in Redding, make sure you consider the financial factors discussed in this article.
1. How much you can afford – One of the most important things to consider is how much you can afford, at your current income, to pay towards your monthly mortgage payment. It’s also important to remember that the monthly cost you’ll be paying needs to include property taxes, homeowners insurance, and utilities. So your estimate of what you can afford should go beyond just the mortgage payment. This is important to understand before applying for loans because you don’t want to accept a loan you cannot afford to pay every month.
Your credit score – Before you even begin shopping around for a home loan in Redding, you should know your credit score. Your credit score will be one of the biggest determining factors in your approval of a loan and which type loan you’re eligible for. For example, people with credit scores below 600 may be eligible for FHA loans, but the FHA will sometimes make exceptions for applicants who have insufficient credit or nontraditional credit history. For more traditional mortgages, a credit score of 600 will put you at the back of the line. Your credit score is considered when calculating what mortgage rate you’ll end up with, which means it will have a direct impact on your monthly payments. Higher credit scores are awarded lower interest rates. If you give yourself enough time, you should try to get your credit score as high as possible to ensure you don’t suffer extreme interest rates.
Types of mortgages – You should do some thorough research before applying for loans. There are multiple types of loans, including a fixed-rate mortgage, an interest-only home loan, and a hybrid mortgage. When choosing the type of home loan, you should be realistic about your financial future. With that in mind, it’s important to choose a mortgage type that won’t leave you scrambling to pay your bills every month.
Potential lenders – You should meet with multiple lenders before signing an official mortgage application. By meeting with potential lenders, you’ll be able to ask any questions, find out about closing costs and other fees, and see what kind of loan you may qualify for. In doing this, you’ll then be able to compare information from different lenders and make an informed decision.
These factors are just a few of the many considerations you should make before applying for a home loan in Redding. By choosing a reputable lender, you’ll be able to ensure you gather all of the information you need to make an informed decision about what loan is best for you.
Think You Can’t Get a Home Loan? Think Again.
Home loans are easier to secure than ever, and in Shasta County, there’s plenty of help for anyone who wants one. Mainly this is because of government-subsidized home loans like FHA loans, and USDA loans. In this article, we will cover some of the options for first-time home buyers wanting to find a home loan.
Federal Housing Administration Home Loan
Also known as an FHA loan. These loans are guaranteed by the Federal Housing Administration, and are perfect for first time buyers for several reasons:
First, FHA loans require a down payment of only 3.5%. Compared to conventional loans, these are very small down payments that are easier for people with less cash in the bank to pay.
Second, lending standards are more relaxed for FHA loans. Even if your credit score is somewhat low – you can still secure an FHA home loan.
The only downsides are that a) interest rates are often higher than with conventional loans (though still very attractive) and b) mortgage insurance payments are required.
Mortgage insurance payments are two part – an upfront payment and an annual payment The upfront payment is equal to 1.75% of the loan amount. The annual payments are variable, depending on how much the home owner put’s down.
Monthly mortgage insurance payments for FHA loans
30-year loan with a down payment of less than 5 percent: 0.85 percent
30-year loan with a down payment of 5 percent or more: 0.80 percent
15-year loan with a down payment of less than 10 percent: 0.70 percent
15-year loan with a down payment of 10 percent or more: 0.45 percent
US Department of Agriculture Home loan
Commonly abbreviated as USDA loans. These loans were originally designed to help farmers pay for their houses, but nowadays they are a helpful option for anyone in a rural area – like Shasta County. If you’re looking at a home in the unincorporated portions of the county, you may very well be eligible for a USDA loan.
USDA loans do not require down payments, and have very low interest rates. What’s more, rates for USDA loans remain fixed for 30 years.
The only real drawbacks are that mortgage insurance is required, and the strict income requirements on those holding USDA loans. Those requirements can be found here.
Both USDA loans and FHA loans can only be sold by an approved loan originator, such as Megastar Financial.
You may also be available for other help in securing a home loan. For instance, if you need cash to make repairs to your home, the Federal Housing Administration may sell you a special product called a 203(k). With this loan, the total loan amount is based on the value of the home after repairs – not before.
Also, mortgage banks are allowed to provide hardship relief when administrating FHA loans. For instance, they might temporarily lower interest rates for those who are struggling to make their payments. The nature of this sort of assistance is up to the mortgage lender and provided on a case-by-case basis.
Don’t want to rent forever but you’re not sure if you can get a home loan? Assistance is out there, and if you want to live in a house, you shouldn’t let anything stop you. Contact Megastar Redding today for more information.
Tips for finding home loans in Redding, CA
Securing a home loan can be daunting, especially in the initial phases of your search – before you have even decided on what loan you want. We’ll teach you how to fix your credit, decide on a price, and shop around for a loan. Sometimes, this can be the hardest part of the process.
Before you look for home loans in Redding, CA
The first step is to be prepared: When you first talk to a mortgage lender, you may expect to be grilled a bit. They’ll want to see recent pay stubs, tax filings, and bank account statements. In general, the more documents you have with you, and the more you know, the easier the process will be. That said, you don’t have to be afraid of contacting a lender until you have everything perfect. They’ll tell you what they need.
Know your budget: Before looking for a loan, you will want to crunch some numbers and figure out what you can afford. One good rule of thumb: Your monthly loan payments should not account for more than 28% of your income, and your payments on all different forms of debt should not rise above 36% of your income.
Understand the market: The area in which you’re hunting for a home makes a lot of difference when finding a loan. If you’re looking for a home in an area where many people have foreclosed, for example, you may be forced to pay more for mortgage insurance or pay a higher down payment. You don’t have to be an expert (that’s what the mortgage lender is for) but having some understanding of the market going in will help you avoid unpleasant surprises.
Raise your credit score: A poor credit score will limit your ability to qualify for good deals on many loans, especially conventional loans. Before you can work to raise your credit score, you have to know what it is. Many credit card companies will let you know your score for free, and there are also services available that will offer a report on your credit. Raising your credit score is a long-term process, and can be somewhat difficult. In the short term, the best thing to do is look for any errors on your credit card company’s part and pay off any balances you can.
Pay off your debts: This step is straightforward enough – too much debt can make it more difficult to qualify for a loan. The solutions is simple enough (though not necessarily easy): Pay off the debt!
Shop around: Once you have done everything else, it’s time to find a mortgage lender! In a way, finding the right mortgage lender for you is like finding the right person to perform any other service: Talk to other people who have chosen lenders and find out what type of experience they have had. Check reviews online. It’s worth it to be scrupulous during this step, as a good mortgage lender can make the entire complicated process much easier and cheaper.
Completing these six steps before shopping for home loans will potentially mean a better deal, and certainly mean fewer headaches as the process goes on. If you’re a first-time home buyer you might be apprehensive about starting to look for a loan, but if you develop a solid foundation you will have nothing to fear. Happy hunting!
Want to know what options are available for a loan? Check out our page for first-time home buyers.
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.