Mar 7, 2019 | Uncategorized
Smart shoppers start their home buying journey at a lender’s office, not by browsing on a home listing service, like Zillow or Trulia. Why is that so? Buyers who consult with a lender and become pre-approved for a mortgage first benefit immensely from understanding just how much house they can afford before shopping. For those who may not be familiar with the mortgage lingo, we wrote a guide to answer everything you need to know about getting pre-approved for a mortgage, below.
Mortgage Pre-Approval: What is it and why is it important?
A mortgage pre-approval is a process that involves a mortgage lender reviewing your financial situation and credit — by pulling your reports and scores — to determine how much they are willing to lend you. If you meet the minimum criteria, you will receive a pre-approval letter that indicates how much of a loan you qualify for based on your financial status. So, why is this an important first step for all home buyers?
Firstly, a pre-approval letter will give you a better idea of how much house you can afford so you can confidently shop in your price range. When shopping for homes in your newly identified price range, we recommend looking for a home that’s less than the amount you’re pre-approved for. This is because the total cost of the home does not include extra costs such as property taxes, home insurance, and other costs associated with homeownership. Secondly, the letter shows sellers you’ve already started working with a lender, and the lender is willing to work with you. Sellers are more likely to feel confident working with you knowing you have proof that you can obtain financing. Lastly, obtaining a pre-approval letter is especially valuable in a seller’s market where competition for homes is high. Often, when it comes down to competing bidders the pre-approved buyer is more likely to win the dream home.
Pre-Approval vs. Pre-Qualification
Although a pre-approval and a pre-qualification can give you an estimate of how much you can borrow, a pre-qualification does not include an analysis of your credit report or an in-depth look at your ability to purchase a home. A pre-qualification gives you an estimate based on the information you choose to provide your mortgage lender, while a pre-approval provides you with a much more definitive estimate based on your financial situation.
What You Need to be Pre-Approved
The items needed to be pre-approved for a mortgage may vary, however, most lenders will ask for some or all of the following:
- Income Verification: Lenders will typically ask for your two most recent pay stubs, W-2 statements from the past two years, and proof of any additional income such as alimony or bonuses.
- Monthly Expenses: Your mortgage lender may ask for an itemized list of your monthly expenses. These can include rent and utility payments, alimony, child support, and other loan payments such as student or vehicle loans.
- Place of Residence: Prepare a list of the addresses for any place you’ve lived over the last two years, or over the past several years, depending on your lender.
- Proof of Assets: Your lender wants to know that you have the means to pay the mortgage back, so they will typically ask for bank account numbers and balances for any checking, savings, or money market accounts to verify cash reserves.
- Employment Verification: Prepare a list of your employers for the last two years, including name, email, and phone numbers. Your lender may call your employer, or your previous employer if you’ve recently changed jobs, to verify your salary and employment status. If you’re self-employed, you will be required to submit additional paperwork as a part of the application process to verify your income and the health of your business.
- Gift Letters: If you are receiving monetary gifts from friends and family to help with your down payment, you will need to provide a gift letter from the donor(s). In the gift letter, the donor will need to state the amount of the gift and explain their relationship to you, and that they do not expect repayment.
- Social Security Number(s) & Drivers License: Your lender will need the social security number and a copy of the driver’s license of anyone who is on the mortgage loan to verify your identity and pull your credit.
Now that you have a better understanding of the mortgage pre-approval process, reach out to us today, or apply online with our simple online application to jumpstart your home buying journey.
Oct 10, 2018 | Uncategorized
You’ve found the perfect home and the seller has accepted your offer. You’ve submitted all the necessary paperwork, your credit has been checked, and now you’re awaiting the final and most anticipated step in the mortgage and home buying process – closing. To empower you in this step, we’ve covered what to expect during closing, provided some closing tips, and shared what to avoid before closing on a home.
What is Closing?
At a high level, closing, also known as settlement, is where the final paperwork is signed, money is transferred to the appropriate parties, property ownership is traded from the seller to the buyer, and you legally commit to your mortgage. During this step, you will typically be joined by your co-borrower, if applicable, an escrow officer, the seller’s attorney and yours, the closing agent, and the real estate agents who have been involved in the process on both sides. While each closing may be unique, you can expect the following events to occur during your closing:
- You, or your lender, will provide a check for the amount owed toward the purchase price of the home.
- The seller will sign the deed of the home over to you, and you will receive the keys.
- Your lawyer, notary, or a title company will register the new need with the appropriate government office, making you the new legal owner of the home.
- You will pay for the down payment, and any closing costs, if applicable, which can include title transfer fees, your real estate agent’s commission, inspection bills, filing costs, and attorney fees.
Once all paperwork has been signed and filed, all money has been properly distributed, and the deed to the home has been signed over to you, you will officially become a homeowner. To be sure everything runs smoothly up to this point, we’ve put together several tips to keep in mind leading up to the closing day.
What to do Before Closing Day
Review your closing disclosure –
Three days before your closing date, you will receive a closing disclosure or HUD-1 Settlement Statement. This document outlines your exact mortgage payments, loan terms, and additional fees, or closing costs, you’ll pay. We recommend reviewing this document and comparing it to your Loan Estimate. If you spot any discrepancies between the two, be sure to run these by your lender.
Complete any contingencies –
It’s likely there are several contingencies attached to your purchase agreement r tasks that buyers must complete before closing. Some common contingencies include the home inspection contingency, the appraisal contingency, and the financing contingency. Be sure to complete any contingencies either within the timeframe set or before closing.
Purchase a homeowners insurance policy –
Most mortgage lenders will require you to purchase homeowners insurance before closing on a home. Since the mortgage company provides most of the funding outright, they essentially become a majority ‘stakeholder’ of your home. Therefore, insurance is required because the home becomes a liability if it’s not properly insured. Be sure to either bring the policy itself or proof of purchase to the closing.
Do a final walk-through –
In most cases, you’re allowed a walk-through at least 24 hours before closing. During the walk-through, you’ll want to make sure the seller has moved out completely unless you’ve agreed to let them stay for a period of time after closing. You’ll also want to ensure the condition of the home is what you agreed upon in the contract. If the home inspection revealed problems that the seller agreed to fix, be sure to check that those have been completed.
In summary, as a buyer, it’ll be important to have a clear understanding of your mortgage terms and what costs you’ll need to pay and to whom. Be sure you have everything in order, from the completion of any contingencies and paperwork to the final walk-through, before you become the legal owner of your new home.
What to Avoid Before Closing Day
Avoid disrupting the status quo –
Until you receive the good word from your mortgage lender that your loan has been approved, you need to maintain your financial status quo as much as possible. You’ll want to keep your bank account as close to the way it was when you were pre-approved for a mortgage loan. This means you should avoid making any large deposits into your bank account, shifting funds, or withdrawing any large amounts. We recommend placing your down payment into one account and keeping it there until you’re approved, then withdrawing when it’s needed during closing.
Avoid credit inquiries –
Applying for a new credit card, or taking any action that requires a credit check, such a buying a new cell phone, signals to your mortgage lender that you’re taking on more debt, even if you aren’t.
Avoid changing jobs –
One of the things your lender looks at closely is your employment history. They use this as a gauge to determine your financial stability and to see if you would be capable of making your loan payments.
Avoid making large purchases on credit –
It can be tempting to use credit to start purchasing furniture and appliances for your new home before you’re approved. Or, buying a new car to go with your new home. These purchases will change the current state of your credit as you bring on more debt and will likely hurt your chances of approval.
In a nutshell, be sure to avoid making any large or significant changes in your life or your finances, such as changing jobs or taking on more debt, while you’re waiting to be approved for a home loan.
Now that you have a better understanding of the closing process, and some tips to follow and things to avoid, are you ready to take on the final step in the mortgage and home buying process? Reach out to us today, or apply online with our online application to get started on your home buying journey.
Sep 13, 2018 | Uncategorized
U.S. Home prices are soaring and affordable homes are in short supply. Dane County is no exception as real estate agents are seeing an extraordinary demand for homes in the Madison area. Bidding wars between home buyers and increased home prices might make some first-time home buyers wary of purchasing this year; however, we’ve put together the most recent housing market data for Dane County and 6 tips to navigate the current Madison WI housing market to help make purchasing easier this year.
[Related: 5 Tips to Navigate a Seller’s Market]
Key Facts: Dane County Housing Market Data for July & August 2018
Currently, we have 1.5 months of inventory — down from the 1.8 months of supply last August — available in the Madison single-family market as of August 13, 2018. As a comparison, a healthy and balanced market would have around 6 months of inventory, meaning neither buyers or sellers are favored in the market. The current inventory is a strong indicator that we’re in a seller’s market, where sellers have the upper hand and homes are selling quickly. In July 2018, there were 863 new listings on the market, approximately 80 fewer listings than that same month in 2017. In total, there were 1,314 active residential listings at the end of July 2018, 50 fewer than in July 2017.
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Average & median sale price:
The average sales price for a home in Dane County in July 2018 was $324,073, a 7.5% increase from last year. The median July 2018 sales price in Dane County was $289,000, a 7% increase from last year.
In July 2018, the median listing price for residential homes and condos in Dane County was $360,600, a 7.4% increase from last year.
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Current average mortgage rate:
The current average mortgage rate for a 30-year fixed rate mortgage is 4.38%, with actual offered rates ranging from 3.50% to 7.39%. These rates can vary depending on the loan type, your credit history, loan amount, and down payment. Though these rates may seem high, they are still historically low. Just ten years ago, the average mortgage rate was 6.48% and 6.92% 20 years ago.
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Average duration on the market:
In July 2018, the average number of days a home was on the market was 25 days, a 17% decrease from last year’s 30 days.
In a nutshell, housing prices are increasing, while the number of homes for sale in Dane County remains low. So, what does this mean for you? As a buyer in a seller’s market, you’ll need to move quickly and strategically to score your dream home. To help you through the process, we’ve put together 6 tips to navigate the current market.
First-time Homebuyer Tips to Navigate the Current Housing Market:
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Create a wishlist and a need list:
When searching for the perfect home, it’s a smart idea to first determine what you want and what you need in a home. Once these lists are complete, consolidate and prioritize the things you need while also considering what you can afford. This step will help with budgeting and will help motivate you to start saving for the things you want down the road, such as a kitchen or bathroom remodel.
Even before you start searching for homes, your first step should be to get pre-approved by a mortgage lender to learn how much they are willing to lend you. This will give you a better idea of how much house you can afford so you can confidently shop in your price range. If you meet the minimum criteria, you will receive a pre-approval letter to use during your home search to show real estate agents and sellers that you are a serious buyer.
Things move at top speeds in a seller’s market. Affordable, single-family homes often enter bidding wars and sell within days of entering the market. As a first-time home buyer, you need to be aggressive in the current market so you don’t miss out on the home of your dreams. Once you know exactly what your maximum price is from your pre-approval, be sure to offer that from the get-go to beat out as much competition as you can.
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Hire a good real estate agent:
Hiring a real estate agent that knows the ins and outs of the market and the area you’re interested in purchasing is invaluable in a seller’s market. If you’re using Zillow, Trulia, or a similar listing tool, those homes are likely already spoken for; an agent will have a better idea of what homes are available, and which ones are in your price range. Another way you can stay on top in a seller’s market is to ask your agent for listing notifications to make sure you receive an email whenever a new listing or price reduction matching your buying criteria is posted to the MLS.
When you know you’ll be competing with multiple offers on a home, it’s a smart idea to send a personal letter to the seller when sending your offer. This will help make the sale more personal and will give the seller something more to consider than just price when making the decision of who to sell to.
If you’re a renter and decide to purchase a home midway through your lease, it’s important to be mindful of the timing in finding a home, obtaining financing, and closing so you’re not paying for your mortgage on top of your rent payments. Be sure you understand the home buying and mortgage approval process before you begin the search for your dream home.
Now that you have a better understanding of the current housing market in Dane County and have some tips under your belt, are you ready to start your path to home ownership? Reach out to us today to get pre-approved, or start by applying online with our 2-step online application!
Aug 9, 2018 | Uncategorized
Your credit score plays a large role in your financial future, especially when it comes to purchasing a home. A higher credit score can help you qualify for home loans with lower interest rates and save you money in the long run. It’s important to understand there is no quick way to fix a credit score. It’s best to avoid advice that claims to improve your credit score fast, as these strategies are the most likely to backfire. Instead, try these five tips to improve your credit health over time.
[Related: Getting a Home Loan with Bad Credit]
1. Pay Your Bills on Time
Payment history accounts for a third of your credit score, so paying your bills on time should be one of your top priorities. If you’re finding it difficult to make payments, consider spending only what you can afford to pay in full each month. Another option to avoid missed payments is to set up auto payments to pay your bills a few days after you receive your paycheck. Missed payments can drop your credit score and remain on your report for up to seven years; however, your score will begin to rise over time, especially as you establish a good payment pattern by paying your debts in full and consistently on time.
2. Keep old Debts and Accounts
Despite what many people believe, old debts, such as home or car debts, are good for your credit score if you’ve paid them off in full and on time. Keeping these paid debts on your report will help your credit score by positively contributing to your payment history. The same goes for old accounts where you’ve built up a good credit and payment history over time. Closing old accounts will likely shorten your credit history and reduce your available credit, which could lower your credit score.
3. Reduce the Amount of Debt You Owe
This task is easier said than done, but there are steps you can take to lower your debts owed, thereby improving your credit score over time. First and foremost, make a list of the fixed and variable expenses you incur each month. Fixed expenses cost the same amount each month and can include rent, phone and utility bills, car payments, and insurance payments. Variable expenses, or discretionary spending, can differ from month-to-month and can include eating out, shopping, and going to the movies. The next step is to create a budget, placing priority on your fixed expenses and scaling back your variable expenses if necessary. Managing a budget this way goes back to spending only what you can afford; if you find that you’re having a hard time paying off your fixed expenses, such as car payments or rent, it may be time to reassess your spending habits.
4. Optimize Your Credit Utilization Ratio
Your credit utilization ratio measures the balances you owe on your credit cards relative to the cards’ credit limits. For example, if your credit limit is $7,000 and you spend $1,000, your credit utilization ratio is 14%. It’s best practice to stay below 30%, as anything higher can lower your credit score. A low utilization ratio suggests that you use credit responsibly by spending only what you can afford. If you have trouble staying below 30%, try paying more than the monthly minimum on your credit card, or request a credit limit increase. But be aware, asking for a higher limit may temporarily lower your credit score.
5. Check Your Credit Report
Checking your credit report regularly helps you evaluate your current credit health. You can see if you’re making progress and your score is increasing, or if something is keeping you from reaching your credit score goals, such as late payments or inaccuracies in your report. You’re entitled to a free credit report every 12 months at each of the three credit bureaus, Equifax, Experian and TransUnion. We suggest requesting a credit report every four months so you can monitor your credit and ensure you’re making progress towards improving your credit health.
Now that you have these tips in your toolbox, it’s time to start utilizing them. By following what we outlined above, you’ll be well on your way to improved credit health and greater financial possibilities. If you’re ready to start your journey to home ownership, give us a call or send us a message. We would be happy to help you through the process and get you into your dream home this year.
Jun 12, 2018 | Uncategorized
The prime home buying season has arrived and because we’re currently in a seller’s market, it’s important to understand what’s ahead as you enter the home buying process. Although a mortgage professional will be available to walk you through your financing options, it’s a good idea to understand which loan programs could be the best fit for you. We’ve developed a comprehensive guide to help you understand the top 7 home loan programs we offer at Easy Mortgage to get you into a new home this year.
Related article: The 6 Steps to the Mortgage Approval Process
Fixed Rate Home Loans
A fixed rate home loan is a loan that has a fixed interest rate for the entire term of the loan. Fixed rate home loans offer borrowers the flexibility to choose a 10, 15, 20, 25, or 30-year term, depending on the loan type. This way, borrowers can choose to extend the life of their loan for smaller monthly payments, or they can opt for a shorter term and pay off their fixed rate mortgage faster if they can afford a higher monthly payment.
Who are they good for?
Fixed rate home loans are a great option for people planning to stay in their homes for more than seven or eight years, as the interest rate remains the same for the entire term of the loan. First-time home buyers may find the 30-year fixed rate home loan appealing, as it offers lower and more affordable monthly home mortgage payments.
What are the benefits?
There are several benefits to fixed rate home loans, such as flexibility in term length, consistent monthly payments and interest rates, protection from rising interest rates, and no closing cost options.
Adjustable Rate Mortgages (ARMS)
An adjustable rate mortgage is a loan term with interest rates that can change periodically after the initial fixed rate period. This means most ARMs have an initial fixed rate period where the interest rate doesn’t change followed by a longer period during which the rate changes at preset intervals, moving up and down as interest rates fluctuate.
Who are they good for?
Adjustable-rate mortgages are great for those who plan to stay in their homes for only a few years, often less than 5 years. This is because those who are planning to sell within a few years can take advantage of the lowest interest rate available at the time of borrowing.
What are the benefits?
Benefits of adjustable rate mortgages include lower interest rates, lower initial monthly payments, and the possibility to qualify for a higher loan amount.
Veterans Administration Home Loans (VA home loans)
VA home loans are available through a program established by the United States Department of Veterans Affairs and assist service members, veterans, and eligible surviving spouses to become homeowners.
Who are they good for?
VA home loans are available to eligible veterans, service members, and surviving spouses. Our team at Easy Mortgage offers VA home loans through the Homes for Heroes program which provides significant savings to veterans, service members, police officers, firemen, teachers, nurses, and doctors.
What are the benefits?
There are several benefits available for those eligible for VA home loans, including no money down options, 100% financing, no closing costs, and no prepayment penalties or private mortgage insurance.
Wisconsin Housing and Economic Development Authority (WHEDA)
WHEDA offers special loan programs to home buyers looking to purchase an owner-occupied home in Wisconsin, meaning the home will be your primary residence.
Who are they good for?
WHEDA home loans are great for those who meet requirements such as falling within specific income limits and residing in the home as a primary residence. They are also helpful for lower-income families as it offers the lowest monthly mortgage payments, down payment, and closing cost assistance.
What are the benefits?
Those eligible for WHEDA home loans can take advantage of several benefits including 100% financing, lowest allowable monthly mortgage payments, low-interest rates, and low closing costs.
Federal Housing Administration Home Loans (FHA home loans)
FHA home loans are insured by the Federal Housing Administration and are designed for borrowers with low to moderate income.
Who are they good for?
These loans offer less rigorous lending standards and can help accommodate borrowers with low credits scores, typically as low as 500. This is also a great loan option for those who don’t have a credit history as lenders will typically ask for other forms of records such as utility and rent payments.
What are the benefits?
FHA home loans provide borrowers with several benefits including only 3.5% down payments, low interest rates, low FICO score requirements, and you’re allowed to use gift money toward the down-payment.
US Department of Agriculture Home Loans (USDA home loans)
USDA home loans are 100% no-money-down home mortgage loans that are backed by the US Department of Agriculture.
Who are they good for?
USDA home loans are great for families with low and moderate income living primarily in rural areas. There are three primary USDA home loans, including USDA loans issued by qualified lenders such as Easy Mortgage, direct loans issued by the USDA, and home improvement loans.
What are the benefits?
USDA home loan benefits include 100% financing (no money down), low interest rates, low FICO score requirements, low closing costs, and you’re allowed to use gift money toward the closing costs.
Jumbo Loans
Jumbo loans, or non-conforming mortgages, typically have lower rates than many other mortgage options and allow buyers to purchase a more expensive home with a loan amount above the conforming limit set by the Federal Housing Finance Agency. The conforming loan limit is $453,100 in most areas of the U.S. as of 2018.
Who are they good for?
Jumbo loans are great for borrowers with a low debt-to-income ratio and higher credit score, but without enough funds to bring the loan amount under the conforming limit.
What are the benefits?
Those eligible for jumbo loans are able to use the loan for their primary home, secondary home, or investment property; they’re able to use one loan for the entire amount borrowed, and are able to finance a home over the maximum loan amount established by the Federal Housing Finance Agency.
Now that you have a better understanding of the top 7 loan programs we offer, reach out to us to get the ball rolling. We’d love to help you find the home loan program that best fits your needs so you can get into your dream home this season!
May 7, 2018 | Uncategorized
You’ve already determined your eligibility for a VA home loan and have reviewed the steps to take to apply. You know a VA home loan is the right option for you, but did you know there are several benefits provided by the Veterans Administration for those obtaining a VA home loan? The following is a breakdown of the top five benefits of VA home loans.
1. No Down Payment
Most VA home loans do not require a down payment. Since traditional home loans, on average, require a down payment of 20% of the loan amount, you are able to save approximately $40,000 on a $200,000 home. Not having to make a down payment will help you maintain your emergency fund, help pay for repairs and renovations, or your new home’s extra expenses such as appliances and furnishings.
2. No Private Mortgage Insurance
Private mortgage insurance (PMI) is a special type of insurance policy put in place to protect lenders against loss if a borrower defaults on the loan, and is typically required when a borrower makes a down payment of less than 20% on a loan. PMI costs range from 0.5% to 1% of the entire loan amount on an annual basis; however, the greater your risk factors, the higher the rate you pay. VA home loans do not require PMI because the government assumes the risk on behalf of the borrower. With the absence of PMI, you’ll be saving thousands over the life of your loan.
3. No Prepayment Penalties
A prepayment penalty is a clause in a mortgage contract stating that a penalty will be assessed if you pay down or pay off your mortgage within a certain time period. They are included to protect the lender against financial loss of paid interest over time. Not having to pay for these penalties allows you to pay off your mortgage early, save money, and allows you to consider future purchases and refinancing options.
4. Competitive Interest Rates
Since the VA backs each VA home loan with a guarantee, lenders can offer interest rates that are typically 0.25% lower than those of conventional loans. This is true for lenders such as Easy Mortgage, as we’re able to offer special VA home loan mortgage rates for veterans and service members through the Homes for Heroes program. Lower interest rates could mean significant savings for you. For instance, the difference between paying 4% and 4.75% interest on a 30-year $250,000 loan is a savings of approximately $40,000 over the life of the loan. Our mortgage calculator can help you easily determine how much you can save by comparing varying interest rates against a set loan amount and term of loan.
5. Lifetime Benefit
Something of which not many home buyers are aware is that the VA mortgage program is a lifetime benefit, meaning veterans and service members can take advantage of the program’s benefits over and over throughout their lives. This is helpful for those who need to relocate, as it’s possible to have more than one VA home loan at a time. What provides this benefit is what’s known as VA loan entitlement. This is a specific dollar amount that the VA promises to repay the lender if the veteran or service member defaults on the loan. When you purchase your home, some or all of your entitlement is applied to your loan. If you find yourself needing to move, you can rent out your first home and use your remaining entitlement to purchase a second home. Your entitlement is restored once your original loan is paid in full.
Are you ready to get on the road to homeownership and take advantage of these five benefits? Give us a call, or apply online to get started today!
