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Feb 11

8 Factors That Can Influence Your Mortgage Rate

How Mortgage Rates are Determined

When looking for a mortgage, one of the most important factors to consider when agreeing to a mortgage is the interest rate. The interest rate you get makes a big difference in how much you’re paying both monthly, and the total cost of the home.

For most, this is the biggest purchase of your life, and you’ll want to plan as much of it as you can. Making sure you get the best interest rate you can is a big part of that, but to plan for that you need to know how the mortgage interest rate is determined. There are multiple factors that go into it, and in this blog, we’ll list 8 factors and explain how they affect the interest rate.

-Credit Score

Your credit score is a key component of any type of loan, as it provides a record of your lending history. The better your score, the more trust lenders will put in you as you’ve shown the ability to pay back your loans and stay on top of them. The lower your score, the less trust they’ll have and the more contingencies may arise, such as a higher interest rate (or mortgage insurance in some cases).

-Home Location

The location of your home can have a big effect on your mortgage rates, as you’ll find different states, and even different cities and counties will have different laws and regulations. You’ll find some states or more expensive counties may have higher mortgage rates, due to bigger loans (including jumbo loans) being tougher to provide. Which leads into the next factor.

-Home Price and Loan Amount

The overall price of your home and the amount of your loan will affect your mortgage rates as well. The more expensive your home, and thus the greater the loan, the tougher it becomes to grant a loan as jumbo or even super jumbo mortgages may be needed. These loans are also riskier to offer, and an increased mortgage rate helps them cover costs, and provides themselves with some peace of mind in the case it goes bad.

-Down Payment

Your down payment will affect the mortgage rate is either positively or negatively, depending on how much you put down. The lower your down payment, the greater the loan amount and thus the higher the risk, so your mortgage rate will be higher. But, with a greater down payment, the less you have to loan, the more trust lenders will have in you and thus the lower your mortgage rate will be.

-Loan Purpose (Purchase, Refinance, Cashing Out) and Purpose for Residence

The purpose of your loan and for the home itself, both have the ability to influence your mortgage rate. Purchasing a new home versus refinancing a current loan are very different prospects and have different risks and variables associated with them. Similarly, someone buying their first home will look different than someone buying a second home and histories with such will be influencing factors.

-Loan Term

The term of the loan can heavily influence your mortgage, as generally a shorter loan means a lower interest rate. However, shorter terms typically mean higher monthly costs, which is the balance that one needs to consider when choosing their loan. While a longer loan may have you pay more over the life of it, that may be worth it if you can’t pay more each month in the short term.

-Economy

The current state of the economy will always be a factor for your mortgage rate, as economic growth, market trends, inflation, and current policies and laws will all play a role in what your mortgage rate is. Keeping an eye on trends and the current economic state can help you choose when the best time to go after a mortgage is.

Feb 7

Mortgage Approval Tips to Secure the Loan You Need!

Buying a home can be expensive. That’s why you want a mortgage to help you reduce your direct cash investment! Follow these easy-to-remember tips to help you get your mortgage approved and secure the funding you need!

A piece of property is a home—your castle! It is also an incredibly valuable long-term investment that very often increases in value over time so you’ll likely turn a handsome profit when you eventually sell it.

All these factors mean getting your own property is a very attractive investment option. But properties are often expensive and it is not easy to pool together enough capital for the initial investment.

This is why you’ll want to look into getting a home loan—mortgage. Below are three simple tips that will help you toward securing the capital you need for a home purchase!

Mortgage Approval Tip 1: Save Up for the Down Payment

Mortages are a must to help you fund the purchase of the American Dream—your own home! It helps you greatly reduce your own direct capital investment and frees up cash that you can use elsewhere.

The easiest way to boost your chances of successfully qualifying for a home loan is, by far, to save up enough to cover the down payment.

While there is no hard-and-fast rule for how much down payments need to be, payments of less than 20 percent typically mean that you’ll also need to take out a private mortgage insurance. So a down payment of 20 percent makes sense and is what you should aim for.

Yes, saving up for that down payment means tying up some of your own cash, but it’s still better than committing 100 percent to the purchase. In comparison, a commitment of 20 percent is definitely worth it!

Mortgage Approval Tip 2: Check Your Credit Score/Report

Staying on top of your credit score is crucial. Look over your report to make sure everything checks out and that there aren’t any errors. Lenders will pull your credit score to help them decide whether to approve your loan.

Once you know the health of your credit, you’ll have a good idea of whether you are likely to qualify for a loan. If you’re not quite there yet, don’t worry. By checking your credit score, it gives you a start place from where you can plan a strategy for improving it.

For easy tips to steadily increase your credit score and chances for a mortgage approval, click here!

Mortgage Approval Tip 3: Check Your DTI Ratio

Perhaps even more important than the amount you’ve saved up for your down payment and your credit score is your debt-to-income (DTI) ratio.

Lenders will look into your income and compare that to the amount of outstanding debt you’ve accumulated. If you have a lot of obligations, lenders may not be confident that you’ll have the ability to pay them back.

Again, looking over your DTI ratio gives you the knowledge and starting point you need to put a strategy in play to reduce the amount of debt you have outstanding.

This helps you get your finances back on track and make you a more attractive candidate to lenders for mortgage approval.

All in all, success in mortgage approval means being on top of your personal finances. The tips above outlines some of the easiest places for you to start your journey back to financial responsibility. This helps you become someone lenders will be happy to approve!

Jan 31

Florida Mortgage Guide

Rural Housing Financing (USDA):

Guaranteed Rural Housing Financing is a program offered by the United States government that offers low-income borrows the opportunity to buy a home with lenient and affordable terms and no down payment. The main caveat is that the loan must be for a home in a rural area, and you’ll only be eligible if you’re under a particular income limit. But, if you have a low income and want to live a rural area, this may be the perfect option for you.

Conventional Loans

Conventional loans are the most traditional and come in fixed rate, adjustable rate, and hybrid options.

Fixed Rate:

Fixed rate mortgages don’t change their interest rate over the course of the loan, and are great for homeowners planning on staying in the same home for 20 – 40 years and don’t want to worry about their rate ever changing.

Adjustable Rate:

An adjustable rate mortgage is one that can change over time, as it is dependent on an index and will change depending on how that changes. You’ll usually have a clause that prevents your rate from rising more than 2 percent per year, but can be great when interest rates go down.

Hybrid Loans:

Hybrid loans combine elements of the two, providing a loan that will usually have a fixed rate for a period of years before changing to an adjustable rate for the remainder of the loan. Other hybrid loans will offer a fixed rate for a certain amount of years, before changing to a new fixed rate for another period of years.

If you’re looking for an Adjustable rate or a hybrid loan, be sure to understand exactly how your interest rate will change over time so you’re prepared.

FHA Loans

FHA Loans are loans that offer low down payment options and lenient criteria to be accepted, offering those with lower incomes or lower credit scores with options to get the loan they need to buy a new home.

First Time Homebuyer

The First Time Homebuyer program offers favorable loan terms for first time buyers but requires them to be eligible for specific criteria and to take the first time homebuyer education program. If you do, it can provide ideal terms when buying your home.

FHA Streamline Refinance

FHA Streamline Refinance is for those who want to refinance their FHA mortgage. It’s fast, easy and doesn’t require a home appraisal. If you have higher debt, even twice as much as the value of your mortgage, you can still get an FHA loan.

Jumbo Fixed

Conventional loans have a cap on how much you can get for your loan, depending on the area the home is located in. But that’s where a Jumbo fixed loan comes in, offering eligible lenders the opportunity to get loans up to $3 million on certain types of homes. It’s the option you’ll need when you want that very expensive home.

Refinancing

Refinancing is an option that lets you change the existing terms of your mortgage, and can be a great option if you need money fast, or if you’ve found yourself in a better financial situation and want to better your mortgage terms.

Reverse Mortgage

Reverse mortgages are options for seniors that allows them to take a loan out on the equity of their home, while still living in it. It is great when you need a lot of money fast, and the balance doesn’t come due often until the homeowner either moves out or passes away.

VA Loans

VA loans are set up by U.S. Department of Veterans Affairs, and is an option for active duty personnel or honorably discharged veterans to purchase a home with no down payment, low credit score, and lenient mortgage terms. It’s great for veterans looking for a home, though is limited to specific kinds of homes.

No matter which mortgage option you choose, you should always be sure to read over all the terms to ensure you know exactly what you’re getting into before signing anything. But, buying a home is exciting, enjoy your newly earned home!

Jan 31

3 Tips for Improving Your Credit Score

Getting a mortgage can greatly help finance piece of the American Dream. In order to successfully qualify for a mortgage, having a good credit score is definitely a plus. It really helps smooth the mortgage appliction process.

Your credit score is a number ranging from 300 to 850. The higher the score, the more likely you are to be approved for loans. Managing your credit score doesn’t have to be challenging. Just keep in mind a few easy-to-remember tips and you’re all good!

Tip 1: Pay Your Bills On Time

The credit score helps lenders determine whether you are good for their money. If you have a history of paying your bills on time, lenders are more likely to trust you and provide you with the home loan you need to purchase your home!

Every journey begins with the first step! Start paying all credit card bills on time and you’ll notice your credit score steadily tick upward over time.

It is important to note that it matters little whether you only make your minimum payments (though this is certainly the prudent choice if possible) or pay your balance in full. When it comes to improving credit scores, the important things is that all payments are made on time.

Tip 2: Credit Utilization

Credit utilization is the amount of credit you use on a month-to-month basis. Utilizing too much or too little can both negatively impact your credit score. The typical sweet-spot is around 30 percent utilization.

If you have a credit limit of $1000. A credit utilization of 30 percent means carrying a balance of around $300. Being able to maintain this level of credit utilization tells your prospective lender that you are not strapped for cash and that paying back loans shouldn’t be a problem. They will, therefore, be more willing to give you the loan to help you finance your home purchase.

Tip 3: Have Multiple Credit Accounts

Having more than one credit card or line of credit can be helpful when it comes to improving your credit score. Do keep in mind, however, that this is only true if you can fulfill the first two tips above.

Assuming that you pay all your bills on time and have a healthy degree of credit utilization, having more than one credit accounts means that multiple lending instutions trust you to pay back your loans.

A new mortgage lender will take into account the fact that other insitutions have already determined you to be creditworthy. This will increase the likelihood of your approval by them for a mortgage.

Final Word on Credit Scores

To get that help in financing your piece of the American dream, a mortgage will greatly reduce your direct capital investment. And in order to secure a home loan, upping your credit score will be of great help.

Though it may appear daunting at first, keeping the three tips above in mind can go a long way in helping you steadily improve and maintain your credit score!

Jan 23

California Mortgage Guide

California Mortgage Terms:

30-Year Fixed Rate Mortgage

A 30 year fixed rate mortgage means that the principal and interest of your loan will never change over the life of it; however, taxes and insurance costs may vary.

15-Year Fixed Rate Mortgage

A 15-year fixed rate mortgage follows the same rules as the 30-year fixed rate mortgage, but in a condensed timeframe as the life of your mortgage is now cut in half. Because the term is shorter, it’ll cost you less over the life of it with a lower interest rate, but that means your monthly cost will be more as you have to pay a significant amount over a shorter amount of time.

Adjustable Rate Mortgage

With an adjustable rate mortgage, you’ll start with lower rates than a fixed mortgage, but risk your rate climbing higher than a fixed rate would be as the interest rate will adjust to match the current climate of the market. ARMs come at a higher risk but can provide a greater reward. They’re especially useful if you plan on spending only a few years in a home, rather than 10, 15 or 30 years.

Government-Insured Home Loans:

California FHA Loans

An FHA Loan has less restrictive terms, and down payments as low as 3.5%. However, FHA loans include a one-time mortgage insurance cost and are more stringent on what type of house you can buy. However, for those who may have a lower credit score, or want to pay less upfront, an FHA Loan can be a great option.

California VA Loans

VA loans are an excellent deal, as they require no down payment, but they do have an upfront fee. Additionally, there’s a limit on how much the property can cost, but with zero down payment, it’s an excellent option for active duty or honorably discharged veterans looking to buy a home.

California USDA Loans

If you live in a rural area and have a lower income, the United States Department of Agriculture offers zero down mortgage options. Similar to a VA loan there is an upfront fee, and if you have a greater than 80% loan-to-value, there’s an annual insurance fee in your monthly payments, but can be an excellent option for you.

State of California Homebuyer Programs

Through the California Housing Finance Agency, there are two options for First-time home buyers to help with your down payment. The MyHome Assistance Program provides 5% of your loan amount to help with any upfront costs, while the Zero Interest Program offers 3% of the loan amount with a 0% interest rate.

Conventional Home Loans in California:

Conforming Loans in California

A conforming loan is a conventional loan that meets the standards of Fannie Mae/Freddie Mac, two government-sponsored entities. Your down payment is usually a minimum of 20% and usually looks best to sellers. With conventional loans, the eligibility requirements are more difficult, requiring a higher credit score, but offering lower interest rates.

Non-Conforming Loans in California (Jumbo)

Jumbo loans are the same as conventional loans, but are used in situations where the loan amount required is more than the county limits. Generally, the limits are $453,100 in less expensive counties and $679,650 in more expensive counties. When you need more, perhaps in cities like Los Angeles, a jumbo loan can provide up to $3 million.

Other California Mortgage Options:

California Renovation Loans

Renovation loans are FHA type loans for renovations or remodelling. There’s on loan for repairs more significant than $35,000 and one for a renovation less than $35,000.

Reverse Mortgages

For a homeowner above the age of 62, a reverse mortgage lets you live in your home (without fear of eviction) while getting cash upfront or paid in monthly installments. The loan is only due after moving out (or death) and is helpful if you need large sums of cash quickly.

Refinance

Refinancing a loan pays off the current mortgage, and is replaced with a new one. It is common for situations where you want to change the type or terms of your existing loan (particularly if your financial situation has changed), when consolidating debt,

Jan 23

Simple Guide to New York Home Loans

Buying a home in the great state of New York can be a daunting undertaking. From choosing the right property to securing the funding, it is easy to become overwhelmed in a labyrinth of important decisions to be made in this world-class market.

At mortgages.us, we’ve put together a concise breakdown of the various kinds of home loans available to New Yorkers to help you minimalize and simplify the process.

Fixed-Rate Loans

In New York, there are two main kinds of fixed-rate home loans available to homebuyers. These come with two different terms: 30-year fixed and 15-year fixed.

30-Year Fixed

The 30-year fixed-rate loan is good for those who are looking for a fixed rate and a monthly payment lower than the 15-year loan. It offers a steady and predictable rate of payment so you won’t be surprised. Private mortgage insurance (PMI) is typically required if your down payment is less than 20 percent.

15-Year Fixed

The 15-year fixed rate home loan, like the 30-year option, offers a fixed rate for the life of the loan. Unlike the 30-year option, however, it offers a comparatively lower interest rate and is preferred for those who wish to pay off their loans faster. This also means that the borrower pays less overall interest.

Like the 30-year fixed-rate loan, PMI is typically required should the down payment be less than 20 percent.

These fixed-rate loans offer predictability in the long run so borrowers don’t get surprised by floating or adjustable interest rates. It does, however, require that the borrower be committed to these options over the life of the loan.

Adjustable-Rate Mortgage

For borrowers and homebuyers who aren’t quite ready to commit to the long term, other options are available. These are the adjustable-rate mortgages (ARM). In New York, these are the 5/1 ARM and the 7/1 ARM.

5/1 Adjustable-Rate Mortgage

The 5/1 adjustable-rate mortgage (ARM) offers fixed rates for five years. After the initial phase, the rate may change from year to year. It offers lower interest rates for a predetermined period of time and, like the fixed-rate loans, typically requires PMI if the down payment is south of 20 percent.

The 5/1 ARM is ideal for buyers and borrowers who expect to sell their properties before 5 years. This allows the borrower to take advantage of predictable rates in the short term.

7/1 Adjustable-Rate Mortgage

Similar to the 5/1 ARM, the 7/1 ARM offers fixed rates for seven years, the the rates may be subject to changes thereafter.

It is best for those who are likely to sell their properties in 7 years. It offers lower interest rates for a set period of time and typically requires PMI should the down payment be less than 20 percent.

Fixed or Adjustable Loans

VA Loan

Qualifying veterans or active servicemen can take advantage of VA loans designed to be either fixed or adjustable loans.

VA Loans are engineered to offer competitive interest rates and require no PMI. A small funding fee is required but no down payment is required!

FHA Loan

FHA loans, like VA loans, can offer fixed or adjustable rates. It is designed to be best for borrowers with a lower credit score or down payment. Upfront mortgage premium is required, but the down payment can be as little as 3.5 percent!

Jumbo Loan

Homebuyers seeking to make a purchase that exceeds $453,100 can look into the jumbo loan option.

The Jumbo loan is designed to address loan amounts that exceed the conforming loan limits and can be a fixed or adjustable-rate loan. Depending on the lender, PMI requirements may vary.