There are many people who set buying a home as one of their major life goals. There is a lot that comes with owning a home including a major investment opportunity, a sense of stability, and a feeling of pride; however, homes are also expensive. It can be challenging to find a home loan.
A traditional mortgage requires a thorough credit check and could take a long time to get approved. Some people might not even qualify.
On the other hand, there is also a helpful alternative called an instant pre-approved home loan. There are a few important points that everyone should keep in mind.
What Is An Instant Pre-Approved Home Loan?
A pre-approved home loan is a loan that has been offered to existing customers of a certain lender with an immediate sanction. The funds are disbursed once the property has been verified.
The point of a pre-approved home loan is to skip the lengthy procedure that is usually required for someone to obtain a home loan. The bank makes this loan offer available to customers even before they have selected the property they want to buy. A pre-approved home loan often comes with a strong offer at an affordable price. Sometimes, the pre-approved home loan is even offered at a lower interest rate when compared to the current market average.
In order to offer a pre-approved home loan, the bank will still go through the credit history, payment history, and bank statements of its customers.
There are a few major features of a pre-approved home loan that people should note. Usually, these loans are only available for a short period of time. Second, the pre-approved home loan allows borrowers to manage their funds well. They usually bank with the same lender. Finally, there is some room for negotiation when it comes to a pre-approved home loan.
Is A Pre-Approved Home Loan The Right Option?
Many people are wondering if a pre-approved home loan is the right option for them. The downside of a pre-approved home loan is that people are limited to that specific lender. Therefore, it is a solid strategy to continue to check around with other lenders to find out about their comparable rates.
When someone is applying for a mortgage, it is important to consider the other costs that go along with taking out this type of loan. While many people focus on the down payment, the size of the loan, and the interest rate, there are other costs that might go along with taking out a mortgage.
These hidden fees are sometimes referred to as "nickels and dimes" that the lender tacks on to the loan to try to make some extra money. When compared to the size of the loan, many borrowers shrug this off because the loan is so big; however, nobody should have to pay more than they should. It is important to aim for the lowest borrowing costs possible when applying for a mortgage.
The Hidden Borrowing Costs Of A Mortgage
There are several hidden borrowing costs when it comes to a mortgage. One of the most common hidden borrowing costs is called origination fees. An origination fee is a fee that is tacked onto the mortgage for printing the papers. It is important for borrowers to ask about origination fees and try to get them waived, if possible.
A second hidden cost when it comes to a mortgage is called points. Points are interest payments due at signing. In this manner, the lender is asking for more money upfront in an effort to earn interest on that money sooner. Borrowers should keep their eyes open for points and avoid them, if possible.
Finally, some borrowers might also be asked to purchase PMI. While this isn't a "hidden" cost, it is something that borrowers should know. This is mortgage insurance that the borrower purchases for the lender to protect the lender against the risk of default. Borrowers can often avoid this expense as long as they put enough money down; however, this down payment hurdle might be lowered if the borrower has a strong credit history and plenty of assets.
Reduce The Cost Of Taking Out A Mortgage
These are a few of the most common added costs that borrowers might face when they take out a loan. Everyone needs to keep their eyes open for these hidden costs so they don't pay more than they should.
When it comes to putting a down payment on a house, most lenders are going to ask for 20 percent; however, some lenders will be willing to accept a smaller down payment in exchange for something else.
That something else is usually mortgage insurance. If a lender says they are asking for mortgage insurance, which is also shortened to PMI, it is important for everyone to know what this means.
An Overview Of PMI
PMI stands for private mortgage insurance and is usually required if the borrower is putting down less than 20 percent. The lender will usually go out and find private mortgage insurance before shifting the premium for the insurance policy to the borrower.
Usually, PMI is included with the rest of the mortgage payment. The lender will take the portion of the mortgage payment that makes up the PMI and shift this into an escrow account. Then, the lender will simply move this out of the escrow account to the insurance company to cover the cost of the policy. This is the most common type of mortgage insurance.
What Is The Cost Of Mortgage Insurance?
The cost of PMI is going to depend on a number of different factors. Some of the factors include:
In general, the larger the down payment and the higher the credit score, the lower the mortgage insurance is going to cost. It is also important for people to note that mortgage insurance is not going to last for the length of the mortgage. As a whole, most PMI policies will be phased out once the amount of equity in the home reaches 20 percent of the home’s value. Then, the PMI will usually be waived.
The Purpose Of Mortgage Insurance
Some people might be wondering why they need to purchase PMI at all. This is an insurance policy that is meant to protect the lender against the risk of the borrower defaulting. If the borrower is able to convince the lender that their risk of default is low, they might be able to avoid being asked for PMI.
When you buy a new house, the first thing you want to do is protect your investment. You already have property insurance. Should you also buy a home warranty?
What Is A Home Warranty?
A home warranty is not the same thing as insurance. Home warranties are service contracts. If a covered item breaks down and it is covered in the terms of the warranty, the home warranty company will pay to fix or replace that item.
What is Covered Under A Home Warranty?
Every home warranty contract is different but generally, a home warranty may cover items like major kitchen appliances, HVAC components, sump pump, in-home sauna or spa tub, and/or ceiling and exhaust fans.
Often, a homeowner can get an extended warranty contract that covers items like the washer and dryer, garage door opener, septic system and swimming pool components.
Understand The Costs
A basic home warranty costs between $350 and $500 annually, depending on what coverage you get. However, if something does break, you will also be on the hook for incidentals like service call fees or a deductible.
Know The Benefits
There are considerable benefits to having a home warranty contract in place, especially when something expensive breaks down, like a furnace. There is a lot of peace of mind knowing that you will be able to quickly get something fixed in your home.
You Might Already Be Covered
Your homeowner's insurance policy might cover some of the same things that are covered with a home warranty. So you could be paying for duplicate coverage on some items. However, your homeowner's insurance likely will not cover a dishwasher that needs to be replaced or a fridge that suddenly goes out.
There Are Alternatives
Finally, before you pay for a home warranty, remember that there are alternatives. For example, most HVAC companies offer financing options to buy a new furnace. Most appliance stores also offer financing on major purchases like refrigerators and dishwashers. You could save your $500 or so a year and put it in a savings account for a rainy day instead of gambling that you might have a major repair or purchase that year.
There are pros and cons to home warranty plans. Just be sure you fully understand both sides of the issue before you sign on the dotted line.
As a homebuyer, your real estate agent will do their best bring you to see homes that meet the criteria you asked for. However, there's no guarantee that a home will have a history of being properly cared for.
Your real estate agent can choose the homes you see, but they have no control over the property owner's homeownership habits.
Why Home Maintenance Matters
Home maintenance should matter to you as a homebuyer and later on as a homeowner. A home needs consistent and proper maintenance in order to run efficiently, and that doesn't only apply to moving parts like the HVAC system. If a home isn't looked after, it begins to run down and then break down.
Just as a poorly maintained vehicle will eventually strand its owner on the side of the road, a poorly maintained home will eventually fail to properly house its occupants.
How To Tell If A Home Has Been Well-Maintained
A home that hasn't been cared for will easily give up its secrets to a discerning homebuyer. Conversely, you can tell if a home has been cherished and well-maintained over the years.
These are all positive signs for a prospective homebuyer. Of course, you must still pay attention to the home inspection report. But odds are if you see all these signs, you're probably looking at a new home that will serve your needs for many years to come.
The cost of living in America varies widely in different parts of the country. In general, it is less expensive to live in the country than in the cities.
However, there are many cities where the cost of living is modest compared to others where the money needed to live there is outrageous in comparison.
These rankings came from comparing the monthly cost of renting a one-bedroom apartment, utilities, the price for gasoline, and the cost of groceries.
The Ten Lowest-Cost Cities For Renters
From Texas and Ohio to New Mexico and Arizona, there are some nice cities in this low-cost group.
The top ten lowest-cost cities are:
For the top ten lowest-cost cities, the total monthly expenses for two adults ranges from just under $1,200 per month in El Paso to just over $1,500 per month in Mesa. These cities are a great deal when compared to other cities.
In America, the median rent of $1,566 per month is more than the total amount needed to live in these low-cost cities.
The Ten Highest-Cost Cities For Renters
It is not surprising that the biggest metropolitan areas are on the high-cost list.
The top ten highest-cost cities are:
For the top ten highest-cost cities the total monthly expense for two adults ranges from just over $2,000 per month in Irvine to over $4,200 per month in San Francisco. For those wanting to live in the “City by the Bay” of San Francisco, both of the people in a couple better have an incredibly well-paying executive position to be able to afford to live there.
What About Home Buying?
The national median home price in America is $229,000. The city with the highest median home price is San Francisco at $1,352,000. New York is only $672,000 in comparison. The median home price in El Paso is $129,800; however, El Paso does not have the lowest-priced homes in the country.
The Top Ten Cities With The Lowest-Priced Homes
There are many cities where the homes sell at bargain prices for under $100,000, these include:
Conclusion
There are bargains to be found in many parts of America for those that do not have to live in the big cities.
Many younger people are now part of the “gig” economy. They do all of their work online and can work from anywhere that has a decent Internet connection. For these young people, finding a lost-cost city in America to live in and finding a modestly-priced home to buy is not limited to any particular area.
When someone is thinking about buying a home, one of the key parts is the home appraisal. The appraisal ensures that the buyer is paying a fair price for the home while also protecting the mortgage lender against taking a loss.
On the other hand, an appraisal is also an added cost of the buyer can be a serious source of stress for both sellers and brokers.
Recently, government agencies have passed a rule saying that home appraisals are no longer going to be required on homes that are less than $400,000; however, many lenders will still require them.
Therefore, when should someone consider skipping a home appraisal to save some money?
Appraisals And Mortgages
One of the first ways to take a look at the value of a home appraisal is by comparing it to the mortgage. The two go hand in hand. Appraisals are important because they protect not only the seller and buyer but also the lender. The lender wants to make sure they know what the property is worth.
Therefore, an appraisal is more about valuing the property and not about the price of the home.
In addition, lenders make loans based on either the sale price or the appraised value, whichever is lower. Lenders do this to make sure that buyers have invested enough in their own property.
Borrowers And Appraisals
In addition to considering the lender, it is also important to consider the borrower. An appraisal is helpful for the borrower because this prevents someone from overpaying for a property.
Therefore, they act as a form of consumer protection. On the other hand, they also cost the borrower a few hundred dollars. If money is tight, this can be a serious problem and could dull the appeal of a home.
Choosing Between The Two Options
In the end, people should consider skipping the appraisal if it saves them money. Lenders might still require someone to obtain an evaluation as a form of protection. If the buyer is not confident in this evaluation method, then a traditional evaluation might be a better approach.
It is important for people to feel confident in the sale price, regardless of how this happens.
If you've been putting off your house hunting, it's time to head out. Summer is the best season to go shopping for a new home, for a variety of reasons.
1. More Inventory
Homeowners list their homes for sale in the summer more often than any other season. When you shop for a new home during this time, you'll have a much wider selection of homes to choose from.
2. Better Prices
More inventory in summer often turns the local real estate scene into a buyer's market. Home sellers may have to compete with other sellers on the same block or even down the street. This gives buyers a nice position of leverage to possible get a better price on a new home.
3. More Neighborhood Activity
There's no better time to get a true sense of the neighborhood than summer. In summer, kids are out playing, homeowners are out tending lawns and friends are gathering for backyard BBQs. These are all activities that can give you an accurate portrayal of the neighborhood culture. Take advantage of summer weekends, too; you'll find even more neighborhood activity then.
4. More Visibility
By summer, all the snow, ice and autumn debris has either melted or been cleaned up by homeowners. You'll have more visibility to view the condition of the roof, siding, deck, lawn, driveway and walkways. Under the cover of snow and ice, you might miss important issues.
5. Evidence Of Any Flooding Problems
Spring rains produce evidence of any flooding issues with water lines along foundation walls. Summer is the best time to go home shopping because this kind of evidence will be fresh and easily identifiable. Flooding isn't always a reason not to buy a home, but it helps to know what potential issues you could be facing.
6. More Free Time
Most people have more free time in summer than any other time of year.
It is more relaxing to go home shopping when you know you aren't taking valuable time away from work. On your summer vacation, you also don't have to take unpaid days off to view homes with your real estate agent.
7. Easier School Transition
When you do go ahead and buy in summer, your kids will have an easier time of transitioning to a new school. Instead of breaking up the school year, your kids can end one grade in one school and start the new year at the new school.
Buying a home in summer just makes good sense. Contact your local real estate agent today so you can hurry and take advantage of the summer real estate market in your area.
Did you just move into a new city? Transitioning to a new city is hard enough, but when you also need to find a job, it can be even tougher. Since everything is a bit new to you, there are definitely some strategies to implement that will make your job hunting easier. Here are some tips to keep in mind.
1. Let People Know You are Looking For A Job
Everywhere you go, spread the word that you are in the market for a new job. In general, people love to help out other people. Someone you speak with will surely know of a job opening; either where they work or someplace else.
2. Be Ready With Your Business Card
Once you start having conversations with people about needing a job, they will want to know what you do and how to contact you. Have some attractive business cards printed up with your contact information and area of expertise.
The more of these you can get into circulation, the higher your chances of finding a job sooner rather than later.
3. Use Your Existing Network
Check back in with your network where you used to live and see if anyone knows someone in your new city. You might be surprised to find out how vast a network of connections can be. If you can make a new connection in your new city through your old network, they may be able to introduce you to potential employers in the area where you now live.
4. Go Through The Employment Agency
Employment agency work can sometimes transition into permanent positions. Working through an employment agency will not make you wealthy, but it can help to pay the bills until the time you can find a job that fits with your career goals.
Plus, employment agencies can often put you to work the very next day or the next Monday. It is a temporary solution, but a worthwhile use of your time.
5. Spend Time Getting To Know The Locals
Some cities are known for being harder to find a job as an outsider. A local reference can help you to pass the test and get an interview. Get to know some locals who might be willing to vouch for you as a local reference.
These five tips will help you get a job in no time in your new city. Remember, your first job in your new city might not be your dream job, but at least it will get you in the door.
There are many people who are considering buying a home because the current market is so attractive. With the ability to carry out virtual tours, this makes it even easier for people to find the home of their dreams.
While the fun part is looking at houses, it is important to get pre-approved for a home loan first. There are a few reasons why everyone must get pre-approved before they start the process of shopping for a home.
This Provides A Chance For People To Get Their Finances In Order
Buying a home is a major decision. For many people, this is going to be their biggest investment. For this reason, it is critical for everyone to have their finances in order.
Of course, some people might think that their finances are fine when, in reality, this might not be the case.
For example, someone might be self-employed and think they are doing well; however, many lenders will not accept self-employment income as “reliable” unless they see at least two years of tax records. Furthermore, because those who are self-employed often take large tax deductions (due to business expenses being deductible), their gross taxable income is also lower.
This can be a problem for lenders who want to make sure their borrowers have a high gross taxable income to pay back the loan.
Increases The Attractiveness Of An Offer
If someone finds a house they love, there is a strong chance that someone else has fallen in love with the home as well. The seller wants to make sure that whoever is providing an offer on a home is a serious candidate. With a pre-approval letter, this makes the offer far more attractive.
This is because the seller knows that nothing is going to hold up the sale. If someone isn’t pre-approved, there is a chance that they might make an offer on the home only to have it stonewalled by the lender. This can be frustrating for someone who is trying to sell a home.
Avoid These Problems By Getting Pre-Approved
In order to avoid these problems, everyone must get pre-approved before they start the process of searching for a home. By getting pre-approved, people can expedite the home buying process.
The vast majority of people who are interested in buying a home are not going to be able to pay cash for the home. Even for those who can buy a home in cash, they often would rather take out a loan to avoid pulling money out of their investments where they would have to pay capital gains taxes.
Those who take out a loan to buy a home will apply for something called a mortgage.
Simply put, a mortgage is a loan that someone uses to buy a home. Mortgages are very specific to the real estate industry; however, they are similar to other loans. People borrow money to cover the difference between the down payment and the cost of the house.
Then, they pay back the loan over a specified period of time with interest. For those who are buying a home, it is important to understand the basics of a mortgage.
Qualifying For A Mortgage
First, anyone buying a home has to qualify for a mortgage. Most lenders will have a set of criteria they use to approve someone for a loan. Some of the factors include:
The lender is taking on risk by providing a mortgage to someone. They want to make sure the borrower is going to reliably pay the loan back.
The Terms Of The Mortgage
Once someone has been approved for a loan, they need to figure out what the terms of the mortgage will be. Some of the variables include:
It is critical for everyone to talk with an experienced professional to make sure they understand the terms of the mortgage.
Nearly everyone has been impacted by the COVID-19 pandemic in some way. While many people are getting tired of being cooped up in their homes, the home improvement industry has actually been able to stay afloat. Furthermore, it is actually thriving. Because many people are trapped in their homes during the COVID-19 pandemic, many people are thinking about carrying out a home remodeling project. For those who are wondering about the prospects of such an undertaking, it is important to weigh the pros and cons.
The Pros Of Home Remodeling During The COVID-19 Pandemic
There are a few benefits that people should note about remodeling during this time. They include:
These are some of the biggest benefits for people to note; however, there are also a few drawbacks as well.
The Cons Of Home Remodeling During The COVID-19 Pandemic
Some of the disadvantages of trying to start a home remodeling project during this time include:
For these reasons, it is important for everyone to carefully weigh the pros and cons of starting a home remodeling project during this time. While there are some attractive offers, everyone’s individual situation is different. People need to think about what is right for them.
Many millennials are reaching the age where they are thinking about buying homes for the first time. It turns out that many members of this generation are finding this process challenging. Even though the housing market is great for those looking to buy, surveys indicate that this generation also finds the process overwhelming.
Reports have been published showing that many millennials are planning to buy their first home in the next year, showing that owning property is still a strong part of the American dream. Furthermore, many millennials also know that this is a great time to buy. Why are millennials finding this process so challenging?
Student Loan Debt
One of the biggest reasons why millennials are having issues purchasing a home is student loan debt. When someone is looking for a home, any potential lender is going to take their existing debt into account. It is no secret that student loans are a major issue right now.
With numerous millennials saddled with student loan debt, this makes it hard to qualify for a mortgage. While other forms of debt are easier to pay back, student loan debt is not. Some millennials have student loan debt that looks like a mortgage.
A Poor Understanding Of Costs
Even though millennials may look at their rent payments as a solid barometer for their mortgage payment, there are other costs that millennials need to consider. These include real estate taxes, HOA fees, homeowners’ insurance, and potential repairs. Therefore, they might need to reset their expectations.
Comparison Is A Dangerous Temptation
Finally, too many millennials are tempted by what they know. Many millennials end up moving back into their parents' house after they finish school. The job market can be tough and they think this is a great way to save money. On the other hand, this also means they might end up looking for a house that is similar to their parents'.
Many millennials have set the bar high for their first home. A property like their parents' simply isn't within the budget. An unwillingness to accept this makes it harder to find a home. On the other hand, there are affordable homes out there. Millennials simply need assistance to find them.
Owning a home may be the American dream, but for many who are in a lower income bracket, finding a loan can become challenging. Thankfully, there are several loan programs that can work well for lower income people considering homeownership. Here's a closer look at some of these home loans designed to help people who have a low-to-moderate income find a way to buy a home.
FHA Home Loans
FHA home loans are loans backed by the Federal Housing Administration. Lenders are more likely to lend to "higher risk" borrowers through the FHA loan program because the loans have the FHA's backing.
With the FHA loan, a borrower can have a credit rating as low as 500, as long as there is a reasonable explanation for it, and a fairly high debt-to-income ratio. According to the U.S. Department of Housing and Urban Development, these loans require only a 3.5% down payment, which can come from gifts, and have less stringent requirements for credit rating or income.
USDA Rural Development Loans
If you are shopping for a home in a small town or suburban area, you may qualify for the USDA rural development loan program. Only those borrowers who make no more than 115% of the average median income in their area qualify for this loan program, according to the United States Department of Agriculture.
USDA loans require no down payment and the loan has no debt-to-income ratio maximum. It has a low PMI fee even for a zero-down loan, and fair interest rates. For those who live in areas that qualify, the USDA rural housing loan simply makes sense.
97% Loan-To-Value Purchase Loans
One of the biggest challenges for lower income borrowers to overcome is the down payment, but the 97% loan-to-value loan makes that less of a concern. This program, which Fannie Mae and Freddie Mac have offered to help encourage more people to get loans, allows people to buy a home with just 3% as a down payment.
The 97% loan-to-value purchase loan is specifically for first-time buyers. Borrowers must not have owned a home within the last three years to apply.
This loan program offers fair interest rates and does not have stringent credit score requirements. Borrowers can use gift funds to pay for the 3% down payment if necessary.
As you can see, there are many home loans designed for lower income borrowers. If you are looking to buy a home but worry you can't afford it, consider one of these options.
There are numerous steps involved in the process of buying a new home. It is important to go through the mortgage qualifying process before looking at dream houses. This gives people an idea of how big a house they can afford. Sometimes, individuals looking for a house might not get a loan that is big enough to cover their dream house. There are ways to qualify for a larger loan; however, one of the fastest methods is to use a co-signer.
What Is A Co-Signer?
A co-signer is someone who signs onto a potential home loan with the homebuyer. Essentially, the co-signer is saying that he or she is willing to be on the hook for the loan in the event that the primary homeowner is unable to make his or her mortgage payments.
This is a big commitment from the co-signer because he or she is exposing himself or herself on behalf of the primary borrower. On the other hand, the co-signer is also providing a vote of confidence on behalf of the primary borrower. Parents often act as co-signers for their children when they purchase their first home.
Vetting The Co-Signer
When someone is going through the home loan process, they are asked to produce tax returns, proof of income, credit reports, bank statements, and more. The co-signer is going to go through the same process. The bank wants to make sure the co-signer is actually adding something of value to the buying process.
The income and debt of the co-signer will be added to the primary borrower. Then, the two will be combined to be approved for a larger home loan. This can help someone purchase the home of his or her dreams.
An Important Note On The Co-Signer
If the co-signer goes to apply for a home loan or car loan in the future, the loan for which they co-signed will show up. This could limit the ability of the co-signer to qualify for a loan down the road. Even though having a co-signer can increase the size of the loan for the primary borrower, this is not without risk to the co-signer. Consider this carefully!
