If you owe the bank $100, that's your problem. If you owe the bank $100 million, that's the bank's problem.
Home loans provide the thrust to residential real estate market in the United States. In the absence of home loans, a major portion of the population in any state would be compelled to stay in rental accommodations. It is because of these loans that one can be a proud owner of homes without the need for ready cash. Since they sustain the real estate market, not only home buyers but also developers depend on home loans. Home Loan Lending Norms Home loan financing's are available not only for the purchase of your dream house per se, but also to buy land and to construct a house on it. There are certain lending norms for home loans. A bank usually lends between 75 percent to 80 percent of the agreed value, and the borrower has to provide the remaining 25 percent or 20 percent themselves. The lending rate attached to a home loan depends on the state of the economy and liquidity in the market. Eligibility To qualify for a home finance from a home loan and mortgage company, a borrower needs to meet certain baseline requirements. Eligibility is determined based on the borrower’s employment status, duration of current employment, personal income, and credit status. The credit history of an intending borrower is the primary focus of lender banks. It is important to know whether the borrower has any record of default with other financial institutions. Factors such as pre-existing loans and types of property owned are also taken into account while considering eligibility for a home loan. Role of Insurance Policy in Home Loans These days, most banks in Texas, like elsewhere, require home loan borrowers to take an insurance policy under their name or one of their close relative’s name. This is a mechanism to protect such loans. This guarantees that banks get their money on time even if the borrower dies or is for some other reason incapacitated in servicing the loan. More Than Willing to Give Out Loans First-time borrowers may find all this complicated at first; however, availing a home loan is not that difficult. Banks will hand out loans to borrowers as long as they are eligible for them. Usually, banks depend on interests generated by home loans for their liquidity, and so they are more than willing to extend home loans whenever permissible. Loan Repayment If there is any challenge for the borrower vis-a-vis such loans, it is choosing the best repayment method and term. Still in such cases the terms and conditions vary from bank to bank. Therefore, it is better to look for a home loan that suits you the most before settling finally. Conclusion At any given time, there is a lot of ads on home loans and lending norms on TV and newspapers. If you are unfamiliar with the entire processes, it is advisable to consult a financial expert. This is particularly so since there are many legal aspects to consider as well while taking home loans. It is better to get it right the first time than to regret later on.
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8/30/2017 0 Comments How to Pay Off Your Mortgage EarlyThe American real estate sector has picked pace, and it’s not just the inexperienced first time home buyers who are investing in real estate, but many experienced investors too are positive about it being a good time to invest in the real estate sector. Another good news is that the home loan rates are also comparatively lower. However, what about those who obtained a home loan at higher rates and are still paying off their loans at those rates. To help, in this post we list a few ways to pay off a mortgage early. Let’s take a look. 1. Make lump-sum payments If you have received a lump-sum amount, whether through a company bonus, hefty inheritance or a tax refund, it’s advisable to use it to repay your existing debts. This will help you repay a part of your outstanding principal balance, which in turn will let you save on the interest you pay, or allow you to get rid of your mortgage early. 2. Pay additional amounts each month Some lenders may allow you to pay a variable additional amount towards the repayment of your outstanding loan. No matter how small the amount, always try to pay an additional amount in addition to your existing monthly installment due. While it may seem little to you right now, this can help you reduce your loan term by a few years. To get the exact number of years by which the loan term would get reduced, use a monthly mortgage payment estimator. 3. Refinance to get a lower interest rate If you have obtained a fixed-rate mortgage, you must always keep an eye on the prevailing interest rates. In case you notice a substantial interest rate drop, refinance your existing home loan to take advantage of the situation. Some of the popular home loans options in Texas are VA loan refinance, USDA refinance and FHA refinance. 4. Switch to a shorter loan term Did you know that you can request for a change in loan term? For example, if you had a 30 year loan term, you can ask the lender to reduce the loan term to say 15 years or 20 years. Many homebuyers who cannot afford to pay a high monthly installment initially, switch to a shorter term home loan with an increased monthly installment, as their earnings increase over the years. Hire a Home Loan Consultant Refinancing an existing home loan may seem a bit complicated. If you have an existing loan, be it a VA home loan in Texas, or a USDA home loan, and you need help to pay it off early, hire a home loan consultant who can guide you through the process of refinancing your existing home loan. The amount of down payment required for a conventional home loan may vary anywhere between 5 to 20 percent. As the amount of down payment is high, homebuyers with insufficient funds, often have to procrastinate their home-buying decision to a later date, despite their being eligible for a home loan. If you too are planning to take a home loan but do not have sufficient funds to pay for the down payment, in this post we list three Texas home loan programs, that require zero or minimal down payment. Let’s take a look. USDA Loans USDA home loans are one of the most sought after home loans in the US. They come with significant benefits allowing homebuyers to buy a property in the rural and suburban areas. Borrowers who qualify for a USDA loan need not pay any down payment. In addition to this, the borrowers may also have the closing costs rolled into their loan. VA Loans Backed by the U.S. Department of Veterans Affairs, the VA loans are one of the most popular home loans among veteran homebuyers. The VA loans not only have interest rates that are much less than what conventional loans offer, but they also allow borrowers to finance 100 percent of the property value. While there is a funding fee linked to obtaining a VA home loan, even this fee can be rolled into the original loan, thereby allowing borrowers to pay almost nothing. FHA Loans Insured by the U.S. Federal Housing Administration, the FHA loans are another low down-payment home loan option for home loan borrowers. If you don’t have a great credit score, you can still get an FHA loan, that too at a minimum down payment of 3.5 percent. In addition to the down-payment amount, FHA loan borrowers are also required to pay an upfront premium of 1.75 percent, that can be rolled into the loan. Conclusion If you are planning to buy a home and are worried about the down payment, then this post should have helped. If you still need more help, get in touch with a home loan consultant who can help you weigh the pros and cons of different home loan programs, allowing you to choose a loan that best suits your requirement. The VA loan program was introduced to help the US veterans fulfill their dreams of buying a home. As the program offers several benefits over conventional and other government backed home loan programs, it is one of the most popular home loans among borrowers. While the VA loan offers several advantages, there are various disadvantages associated with VA loans, too. It is, therefore, important for you to weigh the pros and cons of VA loans before you go apply for a VA home loan to buy a home in Texas or anywhere in the US. Come, let’s take a look at what they are. Pros of VA loans 1. Zero Down Payment Most home buyers procrastinate their home buying decision because of lack of funds required to pay the down payment. One of the key benefits of obtaining a VA home loan is that the borrower doesn’t have to pay a down payment. 2. Closing Cost Benefits Most home loan programs require homebuyers to pay the closing costs that comes as an additional burden for home buyers VA loan program allows sellers to pay a part of the closing cost on behalf of the veteran home buyers. 3. Low Interest Rates Interest rate is one of the most important factors that help home buyers determine the home loan they must obtain. VA loans offer lower interest rates as compared to what most home loan programs offer. Cons of VA loans 1. Funding Fee VA loan borrowers are required to pay an upfront funding fee of 2.15 percent if they are obtaining a VA loan for the first time, and 3.3 percent if they have taken a VA loan earlier. 2. VA Non-allowable Costs The VA loan program does not allow a buyer to pay the non-allowable costs. These costs have to be borne by the seller. Though these costs are only 1 percent of closing costs, it can be hard to convince a seller to pay these costs during a sellers’ market. 3. Terms of Usage VA loan program does not provide loans for buying a second home or for making an investment. The borrower or their dependents are expected to occupy the property within 6 months from the date of purchase. Last Few Words VA loan is undoubtedly one of the best home loan options available to veteran borrowers. However, if there are any home loan restrictions around VA loans that are discouraging you from obtaining a VA home loan, it’s advisable to consult a home loan officer who can help you decide whether you should go with a VA loan or any other home loan option. VA loans in Texas and other parts of the U.S. are provided to eligible veterans or their spouses. These loans are guaranteed by the VA and are one of the most popular loan programs due to the benefits such as no down payment requirements, and lower interest rates that come with them. That said, as is the case with other loans, there are some drawbacks of VA loans, too. Opting for VA loan is necessarily not a better alternative every time. To provide a balanced perspective when deciding whether to opt for a VA loan, the post lists some pros and cons of the loan. Read on.
Benefits No Down payment Requirement Unlike some other government and conventional loans, VA loans do not require any down payment. That said, lenders usually offer better terms to borrowers who pay a downpayment (of 20 percent or more). No Private Mortgage Insurance Required An added cost for FHA borrowers who cannot pay at least 20 percent down payment is the yearly private mortgage insurance premium. This cost is spread throughout the life of the loan and can run into thousands of dollars. VA does not have any PMI requirements which helps save precious dollars, thereby, reducing the total cost of the loan. Relaxed Debt-to-income Ratio Requirements DTI ratio is the ratio between the debt you owe and your income for a given period. VA has relaxed DTI norms a compared to FHA and conventional loans. It is not rare for the body to approve borrowers with a high DTI ratio (41 percent or more), thereby, making these loans more accessible. No Prepayment Penalties Unlike some other loans that require a prepayment penalty in case the borrower wants to pay their loan at an earlier period, VA does not have a prepayment charge for borrowers who want to pay off a part or all of their loan before the stipulated period expires. Limits on the Closing Costs Paid by the Buyer Closing costs, on an average range between 2-5 percent of the home’s purchase price. The VA does not allow the veteran to pay certain closing costs such as attorney fee, escrow fee, document preparation fee, and underwriting fee, which helps in reducing the loan cost for the borrower. Drawbacks Funding fee VA loans carry a funding fee that helps the VA to run the program and keep on providing the benefits. This fee varies in the range of 1.25 percent to 3.3 percent depending on the down payment amount. Veterans with a service connected disability are exempt from this fee. Other borrowers can get this charge rolled into their loan. Property Restrictions One of the eligibility requirements for a VA loan is that the borrower must intend to use the property as their primary residence. These loans are not provided to finance a second home or an investment property. Stringent Appraisal Process VA has a stringent appraisal process and can reject a loan application if the seller does not agrees to certain repairs, thereby, making it difficult for the buyer to buy the house “as is”. Hesitant Buyers VA restricts the amount of closing costs the borrower can pay, which can result in additional expenses for the seller. Many sellers are, therefore, hesitant to sell their house to a VA loan borrower. Conclusion There is no set answer to the question whether a VA loan is good for you. To reach at an informed and judicious decision you need to consider these factors. You must also consult your lender or an experienced mortgage consultant who will study your personal info to help you choose a program that best suits your needs. Refinancing a conventional mortgage into a VA loan gives borrowers an opportunity to get a low-interest rate. Qualified borrowers can easily refinance their existing loans into a new VA mortgages, by submitting new applications, title reports, and fulfilling other required paperwork. Borrowers defaulting on refinancing options with other conventional loans can refinance with VA loans, irrespective of the market value of their property or their credit score. This post discusses three ways in which a borrower can refinance into a VA loan through a VA approved lender. 1. Cash-out Refinance Qualified veterans who don’t have enough equity to refinance with FHA or conventional loans can refinance with a VA cash-out loan at lower interest rates. The proceeds from the loan are received in form of cash, which allows borrowers to take care of other expenses, such as credit card payments and home upgrades. The maximum amount of cash available to the borrower during refinancing is determined by calculating the current appraisal value of the subjected property. Most VA approved lenders in Texas allow a cash-out amount of up to 80 percent. Unlike the IRRRL, a cash-out VA loan is thoroughly documented, and the borrower is required to submit their most recent paycheck stubs, W2 forms, and their federal tax returns for the last two years. 2. IRRRL or Streamline Refinance IRRRL (Interest Rate Reduction Refinance Loan) - often regarded as a VA streamline loan - is a refinance option that requires minimal paperwork compared to other available VA loans. It doesn’t require old W2 forms, copies of paycheck stubs or any minimum credit score. Though some lenders may require a minimum credit score, VA guidelines only mention examining the previous year’s mortgage history. The VA doesn’t have any specified maximum loan amount but has a specified maximum amount that it guarantees to the lender, which is 25 percent of the loan amount. 3. Standard VA Loan Unlike VA streamline, which only allows VA to VA loan transactions, the standard VA refinancing option also allows refinancing of other loans, such as FHA loan and conventional loans. Refinancing a conventional loan with a VA loan is a viable option when property value is a concern, as refinancing with a conventional loan goes up to 90 percent of the property’s current value. If, for example, the home mortgage balance is $200,000, refinancing with a conventional loan requires an appraisal value of at least $222,222. If the appraised value is less than $222,222, the borrower cannot refinance their loan with another conventional loan. This is where refinancing with a VA loan is a possible way out. The Bottom Line If the interest rate is low enough for VA loans as opposed to conventional or FHA loan programs, it makes sense to refinance an existing mortgage. The amount of money you receive as refinance, however, depends on the current home value and the policies of the lender. It is therefore important to choose a qualified lender that can not only help you decide whether refinancing will be a wise decision, but is also able to answer all your questions related to eligibility and application procedure. 6/22/2017 0 Comments Types of USDA Loans: A Brief GuideIf the thought of spending life in a city doesn’t appeal at all, and you always want the place you call home to be surrounded by pastures, you might be eligible for a USDA loan. The Department of Agriculture offers mortgage assistance programs through Texas home loan and mortgage company to improve the economy and quality of life. Launched with an initial investment of almost $20 billion 2014, USDA loans have helped more than 140,000 families to buy their own house. In this blog post, we discuss three types of USDA loans offered under the Rural Development program. Read on. 1. Single Family Guaranteed Loans The loan applicant doesn’t need to make any down payment, and can use this loan to rehabilitate, refinance, buy or improve the existing property. The interest rate is lower than FHA and conventional loan, but to qualify, it is required to apply for loan in a rural area that has a population less than 35,000. The applicant also need to take mortgage insurance. Other expenses include, 2 percent upfront MI fee to be paid at closing and 0.40 percent fee, which is based on the remaining principal balance to be paid annually. 2. Single Family Direct Loans These loans are basically subsidized grants to reduce the mortgage payment to 1 percent for some time. When the title of the property is transferred, or the borrower no longer lives in the house, it is necessary that borrower repays all or certain portion of the subsidy received over loan tenure. No down payment is required, and to qualify for a direct loan, the borrower needs to show inability to secure a loan from other lenders on reasonable terms and conditions. 3. Single Family Housing Repair Loans and Grants The loan is offered to very-low-income homeowners who want to improve or repair their house. The elderly very-low-income homeowners also get grants to remove any health or safety hazard from the house. The maximum limit for loan is $20,000 and grant is $7,500. The applicant may ask for a combined assistance of loan and grant with maximum limit of $27,500. The rate of interest for loan is 1 percent and payback time is over 20 years. The applicant needs to own and occupy the house. The family income should be less than 50 percent of the median income of the area. Way Forward Talk to a participating lender to apply for USDA home loan. If you want USDA direct mortgage or home improvement grant or loan, get in touch with the USDA office in your state. The loan applicants who have credit score of 620 or more get faster approval, and those with credit score below 580 need to meet stringent underwriting standards to get the approval. USDA loans are offered to rural and suburban property buyers at low interest rates. Homeowners can also get a USDA loan for home improvements. These loans are backed by the U.S. Department of Agriculture and disbursed by recognized private lenders. Despite the many advantages of USDA loans such as attractive interest rates and low monthly mortgage insurance, many homeowners have skewed or limited knowledge about them. To help spread awareness about USDA home loans, the post discusses some useful info about them. Take a look.
Types of USDA Loans Guaranteed Loan Guaranteed loans can be raised by households whose income is up to 115 percent of the median income for the area. The loan is provided to borrowers who don’t have a residence but can afford the mortgage payments. Before applying for a Guaranteed Loan, borrowers must check the Maximum Household Income limits set by their county to determine eligibility. As is the case with other USDA loans, borrowers would be required to pay an upfront funding fee of 2.75 percent of the purchase price. Direct Loan Direct Loans are provided to applicants who fall in the very low or low income category (low: between 50-80 percent of the median income for the area, very low: below 50 percent of the median income for the area). A Direct Loan can be used to build, repair, renovate, and relocate a home. Though, borrowers must have a reasonable financial standing to afford mortgage payments, they can be eligible for payment subsidies. Rural Repair and Rehabilitation Loan Rural Repair and Rehabilitation Loans are provided to senior homeowners (age: 62 years or more) who fall in the very low income category. Borrowers can use the loan amount to finance necessary repairs, and renovations that can help address safety and hygiene issues. These loans are provided to homeowners who are unable to secure credit elsewhere. Pros and Cons of USDA Loans Benefits
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Conclusion Easy payment plans, zero down payment, and flexible qualifying criteria make USDA loans one of the most accessible government loan programs. Though borrowers are required to get mortgage insurance, they can finance the cost into the loan which helps in lightening the payment obligation. Individuals looking to raise a USDA loan must visit USDA’s official site before applying for a loan as the eligibility criteria keeps on changing every year. All mortgages come with closing costs, and VA loan is no exception. Unlike conventional loans, VA loan has a limited closing cost, which could be anything between 3 to 5 percent of the loan amount. Though some of the closing costs may be paid by the seller, a veteran buyer must still be aware of the major closing costs that are involved in the home loan process. In this blog post, we discuss four main home loan closing costs a veteran needs to pay before they get the key to their dream home.
Appraisal Fee The appraisal fee is a non-refundable closing cost that buyer needs to pay upfront. The amount to be paid varies by the type of home (single-family, condo, manufactured home) and the state where it is purchased. The appraisal fee in Texas, for instance, is $459, which is $10 more than what you pay for in Oklahoma. The average appraisal fee for a single family home could be between $400-$450 and is paid once the VA-certified appraiser evaluates the home and submits the appraisal. Credit Report Fee The credit report fee could be between $50-$65, and most of the lenders demand for the payment as soon as the buyer applies for the loan. Lenders refer to the report to check the middle score of the borrower before qualifying the loan. The report usually includes credit scores from Experian, Transunion and Equifax. Similar to appraisal fee, credit report fee is non-refundable, even if the veteran never closes the loan. Title Insurance A title insurance protects the homeowner and lender from a situation where someone else could claim the right to the house and win the legal battle after closing. The insurance is issued by a title company after verifying that there are no unsettled liens against the property. The average fee of title insurance could be between $600 to $800, and might vary depending on the loan amount and regional insurance rates. Origination Fee Origination fee is usually 1 percent of the loan amount and is charged by the lender to cover the administrative expenses incurred during the processing of the loan. The lender has the to option to charge this as a flat fee or itemize the expense while ensuring that it doesn’t exceed 1 percent. The itemization would include:
Final Words Survey fee, recording fee and flood certification, are a few more fees the veteran might need to pay at the time of closing. Depending on the terms of purchase contract, the seller has the right to pitch in to pay for all or a part of the closing costs in behalf of the buyer. The amount of closing fees varies depending on the lender and the price of the property, and the lender provides a Good Faith Estimate to explain the cost of the loan in detail. VA loans enable military service professionals, surviving spouses, and veterans to become homeowners. The government-backed loans have significant benefits and allow eligible borrowers to purchase a home without shelling out a lot of money from their pockets. Both first-time and experienced military homebuyers who apply for VA loans require some preparation for the hassle-free experience. The blog post discusses five important tips that can prepare you to apply a Texas veteran home loan and also prevent mistakes. Let’s take a closer look. Start Without a Certificate of Eligibility The VA loan process doesn’t require you to have the Certificate of Eligibility. In fact, you can choose to start the procedure without this certificate and provide the COE a little later. A Certificate of Eligibility, undoubtedly, provides you a proof of your benefit, but the absence of a COE should not prevent you from getting in touch with a VA approved lender. Look for a VA Savvy Agent VA home loans are government backed loans for those who risked and sacrificed their lives to serve our country. Take the help of experienced lenders and real estate agents who are familiar with the specialized home loan scheme. Taking the help of an expert ensures that you stay away from properties that could lead to problems in the long run. Check Your Credit Report Thoroughly Your credit report plays a significant role in helping you to get a VA home loan. As a result, it is necessary to thoroughly examine the report for any errors and late payments. The reason is, credit reports may contain some serious errors that may prevent eligible candidates from getting a home loan. Go for Home Inspection Buying a home is, undoubtedly, one of the biggest investments and require careful consideration. Inspect the home thoroughly to ensure that there are no problems lurking in the property. Apart from clarification, home inspection also allow you to negotiate with the seller, if there are issues in the house. Though home inspection is not mandatory, but it is a helpful tip for a smart purchase. Pre-approval is Beneficial Getting a clarity of the type of property you can afford and how much the lender can provide brings in more transparency when applying for home loans. Pre approval is important if you want to show the sellers that you are a serious candidate. A prospective VA home loan candidate with a preapproval letter is always welcome by real estate agents. Bottom Line Buying a home with VA loan provides a range of benefits. VA loans are easy to get and have a lot of benefits, provided you take the help of an expert and have all the necessary information related to the loan. The process, however, can bring in moments of uncertainty. The five tips mentioned in the blog can help you prepare yourself before applying for a VA loan. |
AuthorDarrick encourages readers to post issues that need immediate attention in terms of home buying; such interactions will enhance reader engagement and provide a road-map for others Archives
November 2017
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