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3 Huge Mortgage Mistakes Made by First-time Home Buyers – and How to Avoid Them

3 Huge Mortgage Mistakes Made by First-time Home Buyers - and How to Avoid Them As a first-time home buyer, you may actively be seeking out information about your upcoming purchase. Buying a home is a huge financial move to make, and it can impact your financial situation and even your lifestyle for many years to come. While it is important to learn more about what to look for in a home, it is also important to learn about mistakes home buyers have made. When you learn more about mortgage mistakes that others have made, you can take steps to prevent making those same mistakes yourself.

Committing To A Large Mortgage Payment

Many first-time home buyers contact a mortgage professional to determine what the largest loan amount and monthly payment they qualify for is. However, just because you qualify for a loan amount and monthly payment from a lending perspective does not mean that it is affordable for your budget. After all, you may have a more expensive lifestyle, childcare expenses and other expenses that are not factored into the lending equation.

Not Reviewing All Home Expenses

When you own a home, you will be required to pay for expenses that are not in place when you rent a home. For example, you will have to pay for lawn care, home maintenance tools and supplies, repair bills, homeowners’ association dues and more. It is important to allow room in your budget for all of the expenses related to home ownership to ensure that your new home is affordable for you.

Failing To Inquire About Closing Costs

Your mortgage representative is required to disclose all loan charges and fees to you early on in the loan process, but some first-time home buyers do not take the time to thoroughly review or understand these fees. Many are unfortunately surprised by the amount of money they must come to the closing table with at the end of the loan process, and this can be avoided by simply asking questions and reviewing the preliminary loan statement up-front.

Each of these home mortgage mistakes can be costly to a first-time home buyer, but they also are all entirely avoidable. As you begin your loan process and proceed through it to closing, keep these mistakes in mind. Be sure to ask your loan consultant for more information if you have any questions. You can begin the loan process today by contacting a loan consultant directly.

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3 Reasons Why Your Mortgage Lender Might Ask for Your Tax Returns – And Why You Should Provide Them

3 Reasons Why Your Mortgage Lender Might Ask for Your Tax Returns - and Why You Should Provide Them After you have completed the initial loan application and have signed the preliminary loan disclosures, your mortgage loan application will generally receive a preliminary prequalification. This prequalification will be based in large part on your ability to provide documentation to support your statements on your loan application, including your stated income and assets. Typically, a lender will include a request for least the last two to three years of your income tax returns with this documentation. There are several reasons why a lender may need to review your tax returns and why you should provide requested documentation as soon it is requested.

To View All Sources Of Income

Your mortgage lender will typically request a copy of your W2 tax forms, which will show your salary and compensation from your employer. However, the W2 form will not show all sources of income that you may receive. For example, rental property income, dividend income and even alimony or child support are just some of the many types of income that you can document through your tax returns.

To Average Income From Self-Employment

Most lenders will require self-employed borrowers to document their income through their tax returns. They will receive income as well as business-related expenses on the tax return. It is common for mortgage lenders to average this type of income for the previous two to three years. Typically, this is the only way that self-employed income is verified for mortgage purposes.

To Comply With Underwriting Guidelines

There are various types of mortgage loans that you may apply for, including stated income loans and low documentation loans. While not every type of loan that you apply for will require you to submit tax returns, some loans will have this as a firm requirement. Your loan request simply will not be reviewed and approved until you provide the required documentation to the lender.

If you want to be approved for your mortgage, it is important to comply with lender requirements. Providing documentation as soon as it is requested can speed the application process up, and your personal income tax returns may only be some of several documents that you will be required to submit to the underwriter for your loan request. You can speak with your mortgage representative about questions you have regarding required documentation, and you can work diligently to comply with underwriting information requests.

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Considering a Reverse Mortgage Loan? Here’s What You Need to Know

Considering a Reverse Mortgage Loan? Here's What You Need to Know Many seniors are looking for a great way to improve their financial situation. Retirement or semi-retirement can be difficult due to the need to live on a fixed income. Some may have been unable to save enough in their working years, or their accounts may have been hit hard by stock market fluctuations. Still others are feeling the effects of inflation and the rising costs of medical care and general living expenses. If you are like many other seniors, you may not have a huge cash reserve available in your bank account, but you may have a sizable nest egg in your home. The fact is that you can tap into that equity without selling your home or taking on a mortgage payment when you apply for a reverse mortgage.

What Is A Reverse Mortgage?

A reverse mortgage is a unique type of loan that utilizes the current equity in your home and allows you to make regular withdrawals from that equity. Rather than you making a payment to a lender, the lender pays the funds to you. The terms of the mortgage are structured so that you will never owe more money on the reverse mortgage than the home is worth. When you decide to sell it or when your estate is being settled, the home’s value will pay off the mortgage. This essentially gives you the opportunity to keep living in your home and to use the equity now when you need it most.

Is This The Right Option For You?

A reverse mortgage is not suitable for everyone, but it may be suitable for you. You can easily learn more about the amount of payments that you could receive on a monthly basis if you were to apply for a reverse mortgage, and you can consider how these payments would ease your financial concerns. This loan will decrease the amount of equity you have in your home over time. Therefore, if you have plans to sell your home later and use the equity for other retirement plans, you should carefully consider if the reduction in equity is feasible for your situation and goals.

One of the best steps that you can take is to learn more about this option. You will not know if a reverse mortgage is suitable for your financial needs and long-term goals unless you take the step of speaking with a loan agent.

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Variable-rate vs. Fixed-rate Mortgages – Which is Better for Your Financial Situation?

Variable-rate Vs. Fixed-rate Mortgages - Which is Better for Your Financial Situation? When applying for a new home mortgage, many loan applicants initially consider applying for a 30-year fixed rate mortgage. This is perhaps the most common and traditional type of mortgage available. It allows you to enjoy the opportunity to pay for your home over the course of 30 years with equal payments every month. While this is one option, there are actually multiple choices available. For some applications, a variable rate mortgage may be more advantageous. If you are comparing the options between a fixed rate and a variable rate mortgage, you may consider a few points.

A Lower Initial Interest Rate

When you compare the fixed rate and variable rate options, you will immediately notice that the variable rates have a lower start rate. The interest rate will influence the mortgage payment amount. Because of this, you will benefit from a lower initial mortgage payment with a variable rate. However, it is important to understand that the interest rate on a variable rate mortgage will adjust periodically over the life of the loan. This means that the mortgage payment will also adjust.

Managing A Potential Rate Adjustment

The true benefit of a fixed rate mortgage is the ability to better control your budget and manage your funds. A mortgage payment can be a large expense item in your budget, and it may be the largest single expense you have by far. An increase to your variable rate and therefore your mortgage payment can be difficult to bear if you have a tight budget with no wiggle room. In some cases, the rate may go beyond what is affordable for a homeowner to endure. If you do take on a variable rate loan, it is important that you understand what the highest possible interest rate adjustment is and what your payment may be with that rate. If you can manage that payment, then you may confidently apply for a variable rate mortgage.

If you are thinking about applying for a mortgage, it is important that you consider all of the options carefully and that you understand the key differences between them. You can speak with a mortgage loan officer or lending representative in detail to get more information about the options available to you. This can help you to make a better decision about your mortgage application and to better plan and budget for your future as a homeowner.

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Understanding the Key Factors That Affect Your Mortgage Interest Rate

Understanding the Key Factors That Affect Your Mortgage Interest Rate When you initially start shopping for a home mortgage, you may be drawn to advertisements for ultra-low interest rates. These may be rates that seem too good to be true, and you may gladly contact the lender or mortgage company to complete your loan application. However, the unfortunate truth is that all too often, mortgage applicants are unpleasantly surprised and even disheartened to learn that they do not qualify for the advertised interest rate. By learning more about the factors that influence your interest rate, you may be able to structure you loan in a more advantageous way.

Your Credit Rating

One of the most important factors that influence an interest rate is your credit score. Lenders have different credit score requirements, but most have a tiered rating system. Those with excellent credit scores qualify for the best interest rate, and good credit scores may qualify for a slightly higher interest rate. Because of this, you may consider learning more about your credit score and taking time to correct any errors that may be resulting in a lower score.

The Amount Of Your Down Payment

In addition, the amount of your down payment will also play a role in your interest rate. The desired down payment may vary from lender to lender, but as a rule of thumb, the best home mortgage interest rates are given to those who have at least 20 to 30 percent of funds available to put down on the property, and this does not include subordinate or secondary financing. If you are applying for a higher loan-to-value loan, you may expect a higher interest rate.

The Total Loan Amount Requested

In addition, the total loan amount will also influence the rate. There are different loan programs available, but one of the biggest differences in residential loans is for very large loan amounts. The qualification for a jumbo loan will vary for different markets, but these loans qualify for different rates than conventional loans with a smaller loan amount.

While you may be able to use advertised interest rates to get a fair idea about the rate you may qualify for, the only real way to determine your mortgage rate will be to apply for a loan and to get pre-qualified. You can contact a mortgage lender today to request more information about today’s rates and to begin your pre-qualification process.

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The Mortgage Pre-approval Letter: Why It’s Important and How to Get One

The Mortgage Pre-approval Letter: Why It's Important and How to Get One If you are thinking about buying a new home in the near future, you may already be searching online to get a feel for the different types of homes available in the local area. You may have reviewed your budget, and you may have a fair idea about a sales price that is comfortable for you to afford.

While you may feel as though you have taken the preliminary steps necessary to prepare yourself to buy a home, it is important that you also get a mortgage pre-approval letter for your financing before you starting hunting for that perfect new house or condo.

The Importance of a Pre-Approval Letter

A mortgage pre-approval letter is issued to a loan applicant after he or she has passed through a preliminary credit review process. Most of these letters state that the individual is pre-qualified for a property with a maximum sales price, and it is contingent on the loan applicant providing supporting documentation, such as tax returns and bank statements.

This letter gives you a better idea about what it will take for you to get final loan approval and what loan amount you may qualify for. The letter is also provided to a seller, and it gives the seller the confidence that comes with knowing that you are a qualified buyer. When a seller has an offer from a buyer with a letter and another offer from one without a letter, there is a good chance that the seller will opt for a buyer who is already pre-qualified for financing.

How to Get Your Pre-Approval Letter

As you can see, there are several reasons why it is important to get pre-qualified for your mortgage financing. Getting a pre-approval is generally a straightforward process, but it can seem intimidating. You will need to complete a loan application, and this may be done in person or online with a lender or mortgage company. You will also need to sign an authorization for the lender to pull your credit report. After taking these steps, you typically will be able to receive a pre-approval letter within a day or two.

When you have plans to purchase a new home, you likely will need to apply for financing in order to complete your plans. Getting a pre-approval letter up-front can help you in a number of ways, and you can easily take the steps necessary to get pre-approved for your mortgage. Simply contact a mortgage company or lender today to get started with the process.

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Missed a Mortgage Payment? How to Ensure It Doesn’t Affect Your Credit Score

Missed a Mortgage Payment? How to Ensure It Doesn't Affect Your Credit Score If you pay attention to your credit rating, you may be well aware that a single late payment reflected on your credit report can result in a decline in your scores.

In some cases, the decline can be rather significant, and you will have to work hard to make regular payments over a period of time to show that you remain creditworthy and to rebuild your credit score.

It is far better to avoid late payments altogether than to deal with the stress and ramifications of a late payment on your credit report. If you have already missed the due date on your mortgage loan, you may be wondering what you can do to prevent this late payment from showing up on your credit report.

Contact Your Mortgage Company Immediately

Initially, contact your mortgage company to make payment arrangements and to discuss the situation. In some cases, a mortgage company may be willing to work with you on structuring a new arrangement for the payment to be made or you may even have a surplus in your escrow account that could be applied toward the payment.

You can also determine when they will report your late payment to the credit bureaus and how much time you have before you absolutely need to make the payment to avoid credit ramifications.

Make Your Payment Before The Next One Is Due

Generally, lenders will report late payments when they are more than 30 days late. While you may be assessed a late fee after the initial grace period has expired, you may not have technical late payment in terms of what credit reporting bureaus consider to be late. Generally, if you make your payment before the next mortgage payment is due, your late payment will not show up as a late payment with the bureaus. However, you do want to verify this with your mortgage company and work with them to bring your account current.

A late payment on a mortgage can have a substantial and negative impact on your credit rating, and it can take months or even years to restore your scores to their previous level. Rather than go through the effort to try to improve your score after the fact, it is best to avoid the late payment altogether. While you may have already missed a payment and may be required to pay a late fee, it may not be too late to avoid having this event reflected on your credit report.

Contact your lender today to learn more about your options and to make your payment.

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Buying for the First Time? The Ultimate Guide to Surviving the Mortgage Process

Buying for the First Time? The Ultimate Guide to Surviving the Mortgage Process If you have heard nightmarish stories from friends and family members about the home mortgage application process, you are not alone. In fact, some of these stories may have even been a reason why you have held out on moving forward with your plans to purchase your first-home. While some have indeed had unpleasant experiences, the fact is that there is nothing to be intimidated about. When you follow a few easy tips, you can streamline the process and navigate through it with minimal effort or stress.

Find The Right Mortgage Professional To Work With

One of the best steps that you can take when applying for a mortgage is to choose a friendly, knowledgeable and experienced mortgage professional. Do not be afraid to ask the loan officer how long he or she has been working in the field and with the current company. They want your business, and they should be more than willing to answer your questions. More than that, pay attention to how easy it is to get ahold of them and how quickly they respond to your questions and concerns. If you cannot get a fast response up-front, you likely will not get one when you are in the middle of the loan process.

Ask Questions As Needed

As a first-time mortgage applicant, it is important that you understand as much as possible about your application and your mortgage. If you have any questions about closing costs, payment adjustments, the general loan process, how to verify your earnest money deposit or anything else, you should ask. A friendly mortgage professional will be more than willing to answer all of your questions as needed to ensure that you are a confident and informed borrower. You never should worry about a matter, and you simply have to ask the questions to get the answers you need.

Respond To Inquiries For Information Promptly

During the loan process, your lender will ask you for specific items. This may be your signature on their loan documents, a loan application, tax returns, pay stubs and other related financial documentation. The loan process may be on hold until you respond to those requests for information. Keep in mind that the loan process and underwriter will need to review the items, and some items may trigger the need for more documentation. For example, if you have a large deposit on a bank statement, the lender may request more information about this.

You may be stressed and even fearful about the mere thought of applying for a mortgage, but rest assured that many people successfully navigate through the process with minimal stress or fanfare. Your mortgage broker or lender is committed to helping you get the loan you need, and you can easily reach out to a friendly, experienced lending professional today to begin learning more about the loan programs that may be right for you.

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Buying a Second Home? Assessing Your Finances to Ensure You Can Afford a Second Mortgage

Buying a Second Home? Assessing Your Finances to Ensure You Can Afford a Second Mortgage The decision to buy a second home may be made for a number of reasons. For example, you may have a destination where you and your family love to spend free time in, and you may be ready to settle into your own space in this location. You may considering the tax benefits associated with a second home, and you may even have plans to live in the home as your primary residence after you retire.

While there may be numerous benefits associated with the purchase of your second home, you may be concerned about how affordable it will be for you to manage the additional expense of a second mortgage payment.

Consider All Of The New Expenses Related To The Purchase

A second mortgage payment may be a rather major expense to take on, but it is not the only expense related to buying the new property. In order to ensure that the mortgage payment is affordable, you need to ensure that all aspects of secondary home ownership are affordable for you.

For example, consider HOA dues, repairs and maintenance expenses, property taxes, insurance and cleaning or lawn care service since you will not be available to handle these chores on a regular basis. If you can comfortably take on all of these expenses, you may make your purchase with confidence.

Increase Your Emergency Savings Account Balance

While your current budget may easily accommodate the new mortgage payment and the related expenses, the unfortunate truth is that your income or expenses may not remain static in the future. You may suffer from unemployment or a serious illness that reduces your income. You may have extra expenses due to a car accident or severe damage to a home.

These are just a few of the many things that can happen, and it is important that you have an adequate cash reserve in your emergency savings account that allows you to pay for all of your expenses for at least several months. Because your expenses will increase substantially with your new mortgage payment, you may need to increase your emergency savings account balance.

While it can seem intimidating to take on a new mortgage payment and other related household expenses for a second home, you may be able to more comfortably take on this additional expense when you follow these tips. You may also speak with a mortgage professional to get a quote for your new mortgage payment and interest rate.

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3 Easy Ways to Put Aside a Bit of Extra Cash So You Can Pay off Your Mortgage Faster

3 Easy Ways to Put Aside a Bit of Extra Cash So You Can Pay off Your Mortgage Faster If your personal budget is similar to many other people’s budgets, your home mortgage payment is by far the largest expense that you pay for each month. In fact, this payment may easily account for 20 or 25 percent or more of your take-home income. Understandably, you may be focused on trying to pay this expense off early. By focusing on this payment, you can build equity and may be able to achieve financial security more quickly. You simply have to find a way to put aside a bit of extra cash regularly so that you can make extra payments, and there are few easy ways that you can consider.

Use Your Tax Refund

First, if you are one of the many taxpayers who receives a refund each year, consider setting aside some or all of this refund to reduce your outstanding mortgage balance. Some taxpayers may have such a sizable refund that it can account for two or more mortgage payments each year. However, even a few hundred dollars extra put toward your principal balance will save you a considerable amount of money in interest charges over time and will have a wonderful effect on your balance.

Earmark Your Annual Bonus

If you are lucky enough to receive an annual bonus each year, you may consider using this to pay down your principal balance. While you may usually spend this money on extra holiday gifts or just add it to your spending cash, you can benefit more substantially when you contribute it to your effort to pay down your mortgage.

Use An Automated Draft To Create a Fund

Another great idea that will work well for all individuals is to create an automated draft from your checking account each month. You may set aside the funds in a special account, and you can make an extra mortgage payment from this account periodically. Another idea is to set up auto payments for your mortgage that are higher than the amount due. For example, you may establish auto payments that are $50 or $100 more than your scheduled payments.

Paying off your mortgage earlier can be a life changing event for you. Simply imagine how different your life would be if you were not responsible for this payment each month. The fact is that this could be your reality sooner than you think if you follow these tips. For the best results, apply two or even all three tips to your efforts.

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Posts Tagged ‘Home Mortgage Tips’

3 Huge Mortgage Mistakes Made by First-time Home Buyers – and How to Avoid Them

Related Articles:

3 Reasons Why Your Mortgage Lender Might Ask for Your Tax Returns – And Why You Should Provide Them

Related Articles:

Considering a Reverse Mortgage Loan? Here’s What You Need to Know

Related Articles:

Variable-rate vs. Fixed-rate Mortgages – Which is Better for Your Financial Situation?

Related Articles:

Understanding the Key Factors That Affect Your Mortgage Interest Rate

Related Articles:

The Mortgage Pre-approval Letter: Why It’s Important and How to Get One

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Missed a Mortgage Payment? How to Ensure It Doesn’t Affect Your Credit Score

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Buying for the First Time? The Ultimate Guide to Surviving the Mortgage Process

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Buying a Second Home? Assessing Your Finances to Ensure You Can Afford a Second Mortgage

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3 Easy Ways to Put Aside a Bit of Extra Cash So You Can Pay off Your Mortgage Faster

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