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Posted by Debra & John Blanchet on 10/10/2018

If youíre hoping to buy your first home in the near future, youíre likely wondering about the different types of mortgages that you may qualify for. Since the 1930s, the Federal Housing Administration (FHA) has been insuring home loans for first-time homeowners across America.

This program helps people achieve homeownership who typically wouldnít be able to afford the down payment or pass the credit score requirements to secure a traditional mortgage.

In todayís post, weíre going to answer some frequently asked questions about FHA loans to help you decide if this is the best option for your first home.

Does the FHA issue loans?

Although theyíre called ďFHA loans,Ē mortgages are not actually issued by the FHA. Rather, theyíre issued by mortgage lenders across the country and insured by the FHA.

Will I have to make a down payment?

With an FHA loan, your down payment can be as low as 3.5%, significantly lower than traditional loans at 20% down payment. However, you will be required to pay private mortgage insurance (PMI) in addition to your monthly mortgage payments until you have paid off 20% of the home. So, the best case scenario would be to save as much as possible for a down payment to reduce the amount of mortgage insurance you have to pay.

What are the benefits of an FHA loan?

The three main reasons to secure an FHA loan are:

  • You can qualify with a low credit score

  • You can make a smaller down payment than traditional mortgages

  • Your closer costs will be less expensive

Where do I apply for an FHA loan?

You can apply for an FHA loan through a mortgage lender. You can also work with a mortgage broker to help choose a lender.

Is an FHA loan the only loan option for low down payments?

There are multiple loan programs offered at the state and federal level to help individuals secure a mortgage with a lower down payment. They can be provided by the Department of Veterans Affairs, the USDA, or state-sponsored programs. Lenders also often sponsor their own programs to attract potential borrowers. However, always make sure you compare these programs to make sure youíre making the best long-term financial decision.

Do all FHA loans offer the same interest rates and costs?

No. Since the loans are only insured by the FHA, itís up to the lender to determine your interest rate and fees. So, itís a good idea to shop around for the best lender.

How high does my credit score have to be to qualify for an FHA loan?

You can secure a mortgage with a down payment as low as 3.5% with a credit score of 580 or higher. However, if you can afford to make a larger down payment, you can secure an FHA loan with a credit score as low as 500.

If your score is in the 500-600 range, itís typically a better idea to spend a few months building credit before applying for a home loan.

What information will I need to apply?

Youíll need to gather all of the same information that you would for a typical mortgage. This includes W2s from your employer(s), two years of submitted tax forms, your current and former addresses from the past two years, and your gross monthly salary.

Iíve owned a house before, can I still qualify for FHA loans?

Even if youíre not a first-time homebuyer you can still qualify for an FHA loan. However, you cannot qualify if youíve had a foreclosure within the last three years or have filed for bankruptcy within the last two years.




Categories: mortgage   Buying a Home   FHA Loans  


Posted by Debra & John Blanchet on 9/19/2018

The U.S. Department of Agriculture (USDA) offers multiple housing assistance programs for people hoping to achieve home ownership.

In spite of being offered by the USDA, you donít need to be a farmer or rancher of any kind to qualify for a home loan. Similarly, you donít have to buy a home miles from civilization--many popular, thickly-settled suburbs across the country also qualify for USDA programs.

In this article, weíre going to explain the different programs offered by the USDA, how to check your eligibility, how to find out which locations qualify, and how to get started with a loan.

USDA Assistance Programs

The USDA offers two types of home loans for prospective buyers. The direct program, or Section 502 Direct Loan Program, is designed to help low-income persons to acquire safe, affordable housing. The assistance for this loan comes in the form of a subsidy that can be applied directly to the applicantís mortgage, reducing monthly mortgage payments for a certain period of time.

Another type of home loan offered by the USDA is the Single Family Home Guarantee. Much like an FHA or first-time homeownerís loan, this type of mortgage is insured by the government. As a result, buyers can often qualify for lower interest rates and smaller down payments from their lenders.

Guarantees may be applied towards the purchase, rebuilding, or building of a rural home as an incentive to developing rural areas. Later, weíll talk about what is considered ďrural.Ē

Outside of help with buying homes, the USDA also provides grants and loans for repairing and modernizing rural homes.

Who is eligible for USDA mortgage assistance?

In general, those applying for USDA assistance must meet certain criteria. Applicants must meet income eligibility, be a U.S. citizen or qualified noncitizen, and must purchase a qualifying property.

For the Direct loan program, applicants must be without safe or sanitary housing and be unable to secure housing through other means. Whereas for USDA guaranteed loans, applicants need only fall under the maximum income limit.

To find out if youíre eligible immediately, fill out an eligibility form from the USDA.

How do I know which houses qualify?

Generally speaking, homes located within large, metropolitan cities wonít qualify for USDA loans. However, suburbs just outside of some larger cities often do. For example, towns located just a half hourís drive outside of Boston have a good chance of being eligible.

To view the map of property eligibility, simply fill out the online eligibility form.

How Do I Get Started?

If youíre seeking a direct loan, youíll have to contact your local Rural Development office. Applications for a direct loan are accepted year-round and are awarded based on funding availability.

For people looking for a private loan guaranteed by the USDA, applicants should contact an approved lender in the area. The lender will then work with the USDA loan specialist in your state.




Tags: Mortgage   home loans   USDA Loans  
Categories: mortgage   home loans   USDA loans  


Posted by Debra & John Blanchet on 7/11/2018

You may have heard of private mortgage insurance, also known as PMI, but youíre probably not sure what exactly it is. If your down payment is less than 20% of the purchase price of the home, then youíll need to pay for this additional insurance in order to secure a loan for the home. This type of policy protects the lender if you end up in a foreclosure situation. This way, the lender is assured that they will not lose money. 


Private mortgage insurance is also required if you refinance your home when it has accrued to less than 20% equity. Again, this protects the lender from losing money if the loan is defaulted on. 


Fees


The fees involved with private mortgage insurance can range based on a few factors including the actual size of the down payment and your credit score. You can expect the cost of the insurance to be somewhere between 0.3% and 1.5% of the loan amount per year. The PMI premiums are tax deductible some years and other years they are not. It really all depends upon the state of the government and what they have enacted for the particular fiscal year. Private mortgage insurance premiums can be paid either monthly or with a large payment upfront, although most policies will require the borrower to pay on a monthly basis.    


This Insurance Can Be Canceled


The lender will automatically cancel your PMI once the loan drops down to 78% of the homeís value. For this reason, youíll want to keep track of your payments in order to see how far away you are from shedding this monthly fee. When your loan is paid down to 80% of the homeís original value, you have the right to ask your lender to discontinue to insurance premium payments.


What Is The Loan-To-Value Ratio?


This ratio is the amount of mortgage debt in the form a percentage based on how much the home is worth. Itís calculated by the following formula:


Amount owed on the mortgage/Appraised value


This is an important factor when it comes to matters of PMI insurance, as itís how the required loan payment percentages are calculated. If a home is worth $100,000 and $80,000 is still owed on the home, the loan-to-value ratio is 80 percent. This means the borrower can request the insurance be cancelled.      


FHA Loans Have Different Requirements


If you secure an FHA loan, they require the payment of PMI premiums for the entire life of the loan. You canít exactly cancel these insurance payments but you can refinance the loan in order get rid of the insurance. This means that you will no longer have an FHA loan.           


Private mortgage insurance can be a nuisance, however as a first-time homebuyer with little capital, the fees may be worth it when youíre able to secure your first home.




Tags: Mortgage   PMI   what is pmi  
Categories: mortgage   Insurance   First Time Buyer  


Posted by Debra & John Blanchet on 6/6/2018

Thereís numerous reasons why the name on a title to a home may not be the same as the name thatís on the mortgage loan. These reasons include:


  • Only one buyer had stable credit
  • Only one person was on the loan application
  • One person was released from the mortgage


No matter why this is the case, having your name on the mortgage but not on the title to a home can affect you and people residing in the home in different ways. 


Why Would Only One Name Be On The Mortgage?


If people are looking to get a home or refinance a home, but only one person has good credit a decision must be made. For the best possible mortgage rates, youíll want to person with the best credit to be the primary loan holder. This may mean that you need additional legal documents in the process.  


The person with lower credit may still be able to have their name placed on the title to the home. Anyone who plans to contribute financially to a home, even if not on the mortgage, should place their name on the title. This would be one instance when a name would be on the title to a home and not on the mortgage loan. In this case, a person has property rights, but no legal-financial responsibility to the home. Itís important to agree on the home arrangement that youíre considering. This would be done through a will or a legal contract. This way, all parties are protected in regards to the ownership of the home should something happen to the individual whose name is on the mortgage.


Legal Things To Consider


Those who are listed on the mortgage are the people who are responsible for house payments. If a personís name isnít on the mortgage, it doesnít release them from complete responsibility from the home. If your name is on the title to the home but not on the mortgage, the bank generally has first dibs on the home if thereís a lapse in payments. If you want to keep living in the house, youíll have to keep making payments on the home. If you canít make the mortgage payments, youíll risk going into foreclosure. 


Taxes


An issue that can come up if your name is not on the mortgage is that you cannot use the home youíre living in as a tax deduction. Even if you make payments on the home, in order for you to get tax benefits, your name must be on the mortgage stating that youíre legally responsible for the home. If you are paying for the mortgage because your name appears on the title to the home, you arenít legally entitled to pay, giving away your rights to tax benefits. If youíre married, filing jointly, and only one name appears on the mortgage, however, you can use this as a tax deduction. This becomes an issue if two unmarried people buy a home together.  


Ask For Legal Assistance


Whenever you have an issue with the title of your home or with names on the mortgage, itís good to consult legal counsel. The attorney can assist you in determining who is legally responsible for the home and if the people listed on the title of the home are correct. This can help save you from trouble at a future date.


Since credit scores and loans can get messy at times during the home buying process, itís good to understand all the implications of home mortgages and titles.




Tags: Mortgage   Buying a home  
Categories: mortgage   Buying a Home   Title  


Posted by Debra & John Blanchet on 5/16/2018

For those who want to acquire a house, it helps to get your finances in order. That way, you can quickly and effortlessly navigate the homebuying journey without having to worry about how you'll afford your dream house.

There are many quick, easy ways to straighten out your finances before you embark on the homebuying journey, such as:

1. Assess Your Credit Score

Your credit score ultimately can play a major role in your ability to secure a great mortgage. If you understand your credit score, you may be able to find ways to improve it prior to conducting a home search.

It is important to remember that you are entitled to a free copy of your credit report annually from each of the credit reporting agencies (Equifax, Experian and TransUnion). Request a free copy of your credit report today, and you can take the first step to evaluate your credit score.

If you find that your credit score is low, there is no need to worry. You can always pay off outstanding debt to improve your credit score over time.

Also, if you identify any errors on your credit report, you'll want to address these mistakes immediately. In this scenario, you should contact the agency that provided the report to ensure any necessary corrections can be made.

2. Look Closely at Your Monthly Expenses

When it comes to buying a house, it generally helps to have sufficient funds for a down payment. The down payment on a house may fall between 5 and 20 percent of a home's sale price, so you'll want to have enough money available to cover this total for your dream residence.

If you evaluate your monthly expenses, you may be able to find ways to save money for a down payment on a house.

For example, it may be beneficial to cut out cable TV for the time being and use the money that you save toward a home down payment. Or, if your dine out frequently, cooking at home may prove to be a substantial money-saver that could help you speed up the process of saving for a down payment.

3. Get Pre-Approved for a Mortgage

With pre-approval for a mortgage, you can enter the housing market with a budget in hand. Then, you'll be better equipped than ever before to narrow your search to houses that fall within your price range.

To get pre-approved for a mortgage, you'll want to meet with banks and credit unions. These financial institutions can teach you about different mortgage options and help you assess all of the options at your disposal.

Furthermore, don't hesitate to ask banks and credit unions about how different types of mortgages work. This will enable you to gain the insights that you need to make an informed decision about a mortgage based on your financial situation.

If you need extra help as you prepare to pursue a house, you may want to hire a real estate agent as well. In fact, a real estate agent can help you find a high-quality house at a budget-friendly price in no time at all.




Categories: mortgage   Buying a Home   Financing  




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