Mortgage
First, Pay Off Old Debts
January 11, 2010 by Ken McCormick · Leave a Comment
If you are looking into purchasing your first home, you might be tempted to start saving every penny you can for your down payment. But in reality, there are some other payments you should be making first…
If you have any outstanding debt, the time to pay it off is now. Not only will a reduced debt load make it easier for you to qualify for a mortgage, but you will find that the costs of homeownership will quickly eat into any money you had planned on putting aside for paying old bills. Old debts also collect interest, which means the longer you hold on to them, the more they cost you.
But as far as homeownership goes, the biggest problem with old debt is the approval for a mortgage. Less debt and smaller debt payments will mean a mortgage company will trust you with a larger amount to purchase your home with. A higher debt load may limit the size of your mortgage, forcing you to look at smaller homes than you were hoping to see, or look in neighborhoods that you had hoped to avoid.
Either way, you should adjust your savings to unload some debt, and still have some savings left for the down payment.
Are You Eligible for a VA Mortgage?
November 18, 2009 by Ken McCormick · Leave a Comment
If you or your spouse is a veteran, getting a VA mortgage is a great option to know more about, and it guarantees the lender 25% of the home loan (up to $104,250 of a maximum loan of $417,000) if you default. This guarantee makes it easier for you to find attractive financing with no down payment, longer repayment plans, and no prepayment penalty based on qualifying.
How They Got Started
The VA Mortgage started in 1944 with the GI Bill of Rights, signed into law by President Franklin D. Roosevelt, which provided veterans a federally guaranteed home with no down payment. It was designed to provide housing assistance for veterans and their families, and the dream of owning a home became a reality for millions of veterans returning from the war. Historically the GI Bill has contributed to the growth of the nation’s economy and the welfare of veterans more than any other program.
More than 25.5 million veterans and service personnel are eligible for VA financing. Eligibility changed after September 7, 1980 where a two-year service requirement was put into place for veterans enlisted, or if the veteran was an officer and began service after October 16, 1981. There is a six-year requirement for National guards and reservists with certain rules and criteria concerning eligibility of surviving spouses.
How They Work
VA Mortgages are home loans, made by private lenders to eligible veterans for the purchase of a home for their own personal occupancy. The home does have to pass certain inspections to qualify. The value of the home or the purchase price – whichever is less – plus the funding fees may be borrowed. Veterans must still qualify with debt to income ratios; it is not a guaranteed approval just because you are a Veteran.
Funding fees average 2.15%-3% depending on eligibility and veterans. Veterans receiving VA compensation for service disabilities, veterans that would be eligible to receive service connected pay if not for retirement benefits, and surviving spouses of veterans who died in service are exempt from the funding fee.
Closing costs can average 3%-5% but can be included in negotiations with the seller to pay, assuming the house appraises for the increased price. Additional costs associated with your VA mortgage would be appraisal costs, recording fees, credit report, prepaid taxes, and insurance and title examination in addition to the funding fees.
Experience Homeownership with an FHA Loan
November 13, 2009 by Ken McCormick · Leave a Comment
Purchasing a home loan is not always an easy feat, and people with lower incomes, including first-time homebuyers, often have a hard time getting approved for a home loan. So what are the options? For individuals who need a little extra help, an FHA loan might be the answer you are looking for.
Where do I start?
The first step is finding a lending institution that has an FHA program. Once you apply for an FHA loan, the Federal Housing Administration will examine your application for the following items: your income to debt ratio, how (and if) you paid previous debts, overall income, number of family members, etc.
Bad credit applications will generally be approved if it has been two years since bankruptcy and you’ve made debt payments on time for at least 12 months. If they decide that you meet the qualifications and are an acceptable candidate, they will approve the loan.
What are the Benefits?
Besides increasing loan acceptance by private lender, here are some of the more obvious benefits:
- Lower down payment
- Lower closing costs
- Lower interest rates
- Helps for those with little or no credit
- Greater leeway for those with a bad credit history
What are the disadvantages?
The loan process can be very tedious. It may take a while to figure out which type of loan to apply for and meet all the qualifications before getting approved. There are stringent guidelines for qualifying the property for an FHA loan, and the specific specs and qualifications will vary per state and area. So make sure you are working with someone who is an expert on this type of loan program.
