Learn All About Mortgages
How to Choose the Best Mortgage For Your Home
Whether you’re a first-time home buyer or you’ve purchased other homes in the past, chances are pretty high that you’ll need to negotiate a mortgage when it comes time to move. Mortgages can make it far more feasible for the average American to buy a home, but that doesn’t mean that the process of deciding on a mortgage is easy. In fact, 59% of American homeowners surveyed in 2016 said they wished they understood the terms and details of their mortgages better.
It’s far better to take your time when exploring your mortgage loan options, rather than rushing to sign on the dotted line. Otherwise, you could end up being stuck with the type of home mortgage Redding CA homeowners can’t really afford. If you’re a first-time home buyer or you simply want to make smarter decisions next time you purchase property, you might want to keep reading. We’ll discuss some tips to keep in mind when determining the best mortgage for your future (or even your current) home.
Research Various Types of Mortgages
While there isn’t just one home mortgage Redding CA homebuyers tend to pick, there are a handful of basic mortgage types you should know about. You’ll want to do some research on each type and eliminate the ones that aren’t applicable to you. From there, you can narrow down your choice of loan and talk to lenders about those options. Conventional mortgages, for example, are not backed by the federal government, but USDA loans, VA loans, and FHA loans are. You may qualify for government-backed loans if you have ties to the military, want to live in a rural area, or have a lower credit score. Otherwise, a conventional mortgage may be the way to go.
Consider Loan Length and Structure
The type of loan matters, of course, but there are other factors to consider when choosing the kind of home mortgage Redding CA buyers are able to take on. For example, you’ll also need to think about the length of your mortgage loan. Typically, you might find 10-, 15-, or 30-year loans (though some lenders offer different variations). While a 30-year loan will come with lower payments, it’ll also come with higher interest rates. The opposite is true for a 10-year loan. That said, you might not be in a position where you can make higher monthly payments and be able to pay off your mortgage in record time. There are also adjustable rate and fixed rate mortgages to consider, each of which has its pros and cons.
First-time home buyers, in particular, may have trouble figuring out which loan structure is actually best for them. You’ll need to create a detailed budget to determine just how much you can pay each month and which option will allow you to live comfortably.
Find a Great Lender
Regardless of whether you’re a first-time home buyer or you’re seasoned in all things real estate, you’ll want to find an excellent lender to obtain a mortgage. You’ll want to focus on lenders that won’t charge prepayment penalties and that will be transparent about their pricing. Ideally, you’ll want to choose a lender that will end up saving you money and that you can trust. Keep in mind that it’s best to shop for lenders early, as having a pre-approval letter from your lender can go a long way in helping you make a home purchase. Make sure to give yourself enough time so that you don’t have to rush this process.
If you’re a new buyer seeking the best option for a home mortgage Redding CA has to offer, we’d be happy to guide you through this unfamiliar territory. For more information on your mortgage options, contact us today.
Mortgage Rates Are Falling — Should You Refinance?
June has been an exciting month for home buyers and homeowners. The average rate on a 30-year mortgage has dropped from 4.23% on May 21 to 3.94% as of June 17; that comes out to a savings of around $270 per year for those homeowners interested in refinancing their current mortgage loans. However, conventional mortgage refinancing isn’t inherently a smart choice. In some cases, it could take a decade or more to recoup the upfront costs. Here are some questions you should ask yourself to figure out if you should refinance.
How long are you planning to stay in your home?
If you’re planning on moving in the very near future, the answer is simple: don’t refinance. Because of the many costs associated with refinancing, you could end up wasting time and money before you recoup them with a lower payment. In layman’s terms: the longer you plan to spend in a house, the more worthwhile a refinance could be.
How much will it cost to refinance your mortgage?
Approximately 63% of homeowners are delinquent in their mortgage payments, which pushes many to refinance without fully understanding the process. For starters, refinancing isn’t free: you’ll need to pay closing costs again (which can include bank fees, appraisal fees, and attorney fees, among other things) in order to secure a lower interest rate. These costs typically turn out to be around 2% of your total mortgage balance. If your new interest rate doesn’t allow you to recoup those fees within five years, it isn’t worth it.
Will refinancing help you with other lifestyle factors?
Sometimes, refinancing might not save you much money but is beneficial in other ways. For example, refinancing can allow you to stop paying private mortgage insurance (PMI), a policy the lender takes out if your loan exceeds 80% of the value of the home; because these are traditionally expensive, eliminating that extra cost could make a big difference. Refinancing also offers a way for you to remove someone from the mortgage, such as an ex-spouse following a divorce.
Don’t race to the bank or your mortgage lender simply because you’ve heard that interest rates dropped significantly. Before you make any major decisions regarding a mortgage refinance, truly take a look at the numbers and your needs.
Millennials and Mortgages
What This Leading Generation Should Know About Homeownership
According to a 2016 report, approximately 35% of home buyers were also first-time buyers that year. And since people tend to be waiting a little longer to purchase homes, it should come as no surprise that there’s a certain demographic that’s finally entered the marketplace. Although millennials have often been blamed for killing various industries and even for the downturn of the real estate market, it turns out that this generation is actually leading the charge when it comes to home ownership. What’s more, millennials are actually purchasing a larger share of mortgages than homeowners from other generations.
In other words, real estate agents and providers of home loans would be wrong to ignore the millennial generation. A recent analysis of home loan data analyzed by Realtor.com found that adults aged 19 to 37 (aka millennials) have bought a larger share of mortgages since early 2017 as compared to Gen Xers or baby boomers. In fact, millennials comprise the largest share of new mortgage loans by dollar volume, representing 42% in total. That means they now have more mortgages than Generation X homeowners.
There are reportedly a couple of different reasons for this. One is that millennials are simply buying more homes. Instead of resigning themselves to renting, they’re realizing that homeownership is a real possibility. Contrary to popular belief, millennials actually do want to experience this rite of passage; it’s simply that they were not able to realize it until recently. That said, there are financial barriers for millennials looking to buy homes. Home prices are rising and many millennials are forced to contend with lower wages, higher costs of living, and steep student loan payments. If they want to own a home, most have to make do with making smaller down payments on these properties. The report found that the average millennial down payment on a home hovers around 8.8%, which pales in comparison to the 11.9% Gen Xers put down or the 17.7% many baby boomers will contribute.
Ultimately, that means mortgages for millennials are more substantial. While Gen X homeowners are still taking on higher loan amounts (likely due to more expensive properties, as they’re more likely to buy a “forever home” than a starter home), mortgage payments can still be a major concern for millennials. It’s just not a concern that’s necessarily going to dissuade them from making the purchase.
As Javier Vivas, the director of economic research at Realtor.com, explained in a statement: “Millennials are getting older, with better jobs and deeper pockets, allowing them to expand their collective purchase power, and hence, their footprint in the market. The stereotype that millennials primarily choose to buy homes and live in large metro areas isn’t the reality. Results show millennials’ expansion is more heavily conditioned by affordability than in prior years, so their eyes are set on less traditional secondary markets where homes and jobs are now available and plentiful.”
For millennials who have their sights set on homeownership, research is key. Knowing that not all mortgages actually require that 20% down payment can empower buyers of this generation and allow them to realize their dreams of owning property, even with a stricter budget. Even those with significant student loan debt may very well be able to obtain a mortgage and purchase a home. Most millennials will also find that managing those loan payments, improving their credit, and obtaining pre-approval for a mortgage will make the process much smoother.
Of course, finding a lender you can trust will be key. Understanding your different mortgage options and discerning which one will work best for your situation is essential for millennials, who simply have different financial concerns than their parents and grandparents did when they purchased their first homes. A lender who knows about the unique challenges millennials face when buying homes, who can clearly explain your available choices, and who can guide you throughout this process will be a priceless asset.
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.
Applying for a Mortgage? Make Sure You Ask These 5 Questions
If you’re getting ready to buy a home, choosing a home loan is a crucial step. It can be time-consuming and confusing, so allow yourself plenty of time to go through this process. Data collected in September of 2016 shows that 59% of homeowners wish they had a clearer understanding of the conditions and details of their mortgage. To make sure you fully understand all aspects of the home loan you’re looking into, make sure to ask the following questions.
#1 What would be my monthly payment?
Make sure you’re not offered a loan you cannot afford. It’s important to buy a house within your budget — remember to include taxes, insurance, utility bills, and any other costs into your budget so you know what kind of mortgage you will be able to afford.
The interest rate on a mortgage is often based on the loan and your credit score. The monthly payment will be based on the loan amount, term, and interest rate. Ask the lender to provide the loan estimate, which will include the annual percentage rate, to give you a better idea of how much your monthly payments will actually be.
#2 What are the criteria to qualify for this loan?
Loans require a certain amount of funds for closing costs and a down payment as well as proof of income and enough money to pay the first few months of mortgage payments. Make sure to factor all of these costs into your budget as well.
#3 Does this loan have a prepayment penalty?
Certain lenders may charge a penalty if you prepay on your mortgage. It may only happen if you reduce the balance by a certain amount or refinance.
#4 How long will I have to wait for my application to be processed?
It can take anywhere from one or two weeks to over two months for an application to be processed. Make sure the lender has all of the required documents to ensure the process goes as quickly as possible. Additionally, make sure you’re aware of anything that could delay your approval. It’s best not to make any job changes or large purchases while you’re waiting for your application to be approved.
Deciding on a mortgage isn’t something you want to rush into. Make sure you do your research and find multiple, credible lenders to meet with. At these meetings, it’s important to fully explain your financial situation and receive a fully-detailed explanation of the home loan terms.
The worst home mortgage advice you hear and what to do instead.
The title really says it all! In this post I’ll be describing some of the worst pieces of home mortgage advice that people hear, and explain why it’s wrong and what advice would be more helpful. Call it the professional take.
We are bombarded everyday by bad advice from non-experts. Bad medical advice, bad business advice, bad fashion advice, etc.
As a home loan originator, I’m not qualified to touch any of those three, but I can refute some of the worst mortgage advice I’ve heard people give, and sincerely believe.
Worst home mortgage advice #1: Don’t bother with pre-approval
Technically it’s not necessary to get pre-approval for a loan, but it’s still a very good idea. You may hear that because a pre-approval isn’t reviewed by an underwriter, it’s not official.
It’s true that pre-approval doesn’t directly help you to buy a home, but what it does do is prevent you from becoming dead set on a house you can’t afford. More important, if there are multiple offers for a property, a pre-approval allows you to separate yourself from the pack.
Worst home mortgage advice #2: Get your home mortgage from a bank where you have an account.
You won’t necessarily get the best deal on a home mortgage from the bank where you have a savings account, even if you have a lot of trust in them. To get the best home mortgage you’ll need to shop around and explore your options. You may need to enlist the help of an expert.
This is a myth that banks are quite happy to promote. Often they will promise that their customers will get better service and an easier application process than if they went elsewhere. But this isn’t necessarily true.
Worst home mortgage advice #3: Skip through the fine print
It’s quite common for people to treat mortgage paperwork just like the Itunes terms of service. But skimming, or not reading, your mortgage agreements is a very bad idea.
Read through your contract very slowly, and very carefully. If something seems off, ask! Better to spend a few hours reading the contract than to potentially lose tens or hundreds of thousands of dollars on a deal that wasn’t what you thought.
Worst home mortgage advice #4: Take the deal with the lowest interest rate
Don’t get us wrong, a low interest rate is a good thing. A low interest rate means low monthly payments. But don’t prioritize interest rate over all other considerations, because a low interest rate may come with any number of unfavorable caveats.
For instance, adjustable rate mortgages (ARMs) can have very low interest rates, but, as the name implies, these rates are adjustable. If interest rates suddenly increase you could find yourself paying much more than you bargained for.
This may or may not be acceptable. ARMs are perfectly valid options for home mortgages. However, the key point is to be aware of what you’re getting.
Worst home mortgage advice #5: Borrow as much as you can!
If you can borrow enough to live in a really nice home, why not, right?
Technically you can qualify for monthly payments up to 50% of your income, but living within your means is always wise. If you were to go without work for a while, or have a medical emergency, would you also risk your home?
Living frugally is one of the best pieces of home mortgage advice you’ll hear.
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.