Tuesday, May 26, 2015

Why getting pre-approved for a home loan is important

A common mistake people make when buying a home is beginning the process by looking at homes for sale. While looking at houses can be very exciting, it is important to get pre-approved first. Being pre-approved will save you a lot of time and energy so that you and real estate agents are not looking at houses you can not afford.   Real estate agents often prefer to work with buyers that are pre-approved because it increases the likelihood of a sale. In fact, most real estate agents require a pre-approval letter before showing properties to a buyer.

Once pre-approved, you will be provided a pre-approval letter. Along with feeling more confident when making an offer, a pre-approval letter puts you in a better position when you do find the right house because the seller knows that your offer is solid. Your negotiating power is stronger when competing with other buyers that are not pre-approved.  

Know the Difference:  Pre-qualification vs. Pre-approval
Getting pre-approved is not to be confused with getting pre-qualified.  Anybody can get pre-qualified. Pre-qualification is just a way to get preliminary information and pass it on to lenders.  Getting pre-approved means your actual financial information has been verified and it has been determined what you can afford and how much you can borrow. This means you must submit your financial documentation for verification.  If a website is claiming to offer pre-approvals without you submitting financial documents, then you are not getting pre-approved.

Get a Pre-Approval Letter Online with TrueFi

Now that you know the importance of getting pre-approved, check out the advantages of getting pre-approved with TrueFi. If you are ready to find out how much home you really can afford and print your own pre-approval letter to give to realtors and home sellers, you can do this online anytime, anywhere, without the sales calls or barrage of emails.  Submitting your pre-approval request is extremely easy as TrueFi guides you step-by-step from start to finish. Best of all, there's no cost to you.

Tuesday, September 2, 2014

10 Tips Many First-Time Homebuyers Forget

There is a lot that goes into buying your first home, you have to remember so much. It can be easy to forget things to consider when you are buying a home for the first time.

Think about the long-term. How long do you plan on staying in your home? Do you plan on starting a family? This will impact the type of purchase mortgage that you get too.

Have a checklist. Leave your emotions at the door when you are checking out potential houses. When you let your emotions get in the way, it can skew what you see. Have a list of things the house must have, would be nice to have, and miscellaneous essentials. Take pictures, too. That way, when considering the houses, you can review those. Check things off when you go throughout the house.

Remember the expenses when budgeting for the home. Remember the principal, the interest, taxes, insurance, utilities, maintenance/fixing up, any cost of commuting to work, etc. What will the cost of the utilities be, approximately? You can call the companies and find out. Remember, you don't want to be "house poor".

Look at the homeowner's association contract before you sign. If you are going to be part of a homeowner's association, look at the contract before you sign. You will hate living in a neighborhood if you can't breathe without permission from the association.

Look for grants and other funding. There are often lots of grants and other funding sources. There are options to look at based on your profession, area of the home you're buying, etc. Find out what you're qualified for. This will make it easier to afford the mortgage to buy the home, maybe you can get a smaller mortgage?

Read the contract before you sign. Understand the terms of your mortgage. If you are confused, then you can always utilize the services of a mortgage broker and find out the terms. It would be wise to consult with one before you even get started.

Learn about the neighborhood. Does the neighborhood have good schools? Lots of kids and young parents? Or is it an aged neighborhood?

Buy the house, not the view. You will possibly have an incredible view of something from your home; mountains, beaches, forest, etc. Remember, that will always change. Perhaps a new development will be built, that nature or view will change naturally, etc. Make sure the house, neighborhood, proximity to important places like work, school, etc. are all good before you buy for the view. If you do love the view, then buy it; you will likely have to pay extra more for the view by buying the land next door or at least buying the house closest to it.

Look past staging. Every house on the market, or at least most, will be staged. Things will be placed and decorated in certain ways to make you buy. This is not a bad thing. You just have to remember to think about how your life will be there in the way you like it. Remember, the paint color and furniture (and arrangement of said furniture) can change.

Remember what you're told about buying a home. People tell you good advice, remember it. Have enough saved up for 20 percent down payment, have an emergency account, have good credit, etc.

Buying a home in the future or refinancing? Then contact TrueFi

Friday, August 29, 2014

How Do Mortgage Rates Affect the Housing Market?

Mortgages are available in many forms but there are two primary ways: fixed-rate mortgage and adjustable-rate mortgage; there are varying forms of each kind that we know of.

Int this post, we will talk about the influence of the interest rates on the mortgage business. Basically, interest rates and the forces that exist that influence the mortgage interest rates will help consumers make financially smart decisions about their mortgages.

The mortgage business comprises of three main parts: originator, aggregator, and the investor. The mortgage originator is the lender, they also come in forms like credit unions and mortgage brokers, they create the mortgage. They intro mortgages to consumers and then they sell them. One of the ways that lenders compete with each other is via mortgage rates. The rates, as well as the fees, that are charged to consumers determine what their profit margins are. They can also sell these to the secondary mortgage market.

The aggregator will buy freshly originated mortgages from other mortgage institutions. The aggregator is part of the secondary market. Many aggregators are also ori
ginators. What aggregators do is they pool many mortgages together and compile mortgage-backed securities, this process is called securitization. These securities are then sold to investors. The prices will determine what aggregators will pay for fresh mortgages with other lenders and then the rates that are offered to consumers are determined.

So do investors determine the mortgage rates? For the most part, yeah. As we explained, the line of production for mortgages comes to an end where the MBS is purchased by an investor.

Fixed rate mortgages. With this kind of mortgage, the rate will last throughout the lifetime of the mortgage. However, on average, the lifespan of a fixed rate mortgage is about seven years; mostly because people move or they refinance a mortgage. The interest rate on a 30-year fixed is heavily tied to the yield of the 10-year bond. If you want to figure out the 30-year fixed interest rate will be in the future, you have to keep an eye on the U.S. 10-year treasury bond.

Adjustable-rate mortgage. The rates here will move up and down each month, maybe six months, or even every year. The rate here will depend on the terms of the mortgage and consist of the index and the margin. There are many different kinds of indexes that are used for ARMs; each of the indexes are constructed using the rates on either an actively traded financial security, a specific type of loan from a bank, or a certain kind of bank deposit.

It is important to understand what influences current mortgage rates since that can help you make a sound decision about your next mortgage.

Tuesday, August 26, 2014

What to Do With Your Mortgage and Retirement

There is the big question about what to do with your purchase mortgage upon retiring. Many people ask themselves, "I'm about to retire. If I pay off my mortgage with money I saved (after tax), I can save quite a bit. Is this a wise idea?"

The answer to this question is only able to happen between you, your financial advisor/accountant, and your family. It would be an easy move to pay off your mortgage it was just another investment, like a student loan or car loan. However, your house has a lot of components to it, such as being one of the biggest factors in your retirement since it gives you a place to live.

If the housing market is healthy, then you will have saved all that cost on mortgage interest. You can also get to the money in the event of a surprise with a new mortgage, as long as the market is still strong and the lender doesn't count your retirement against you. In the mean time, you can live in your home, mortgage free.

Now, let's look at this from the perspective of three people. It's 23 years into the future, too.

  • Person A did what you're thinking about doing. The house is healthy and worth the same as yours; they have one less thing to worry about now!
  • Person B moved the money in the market and they lost almost 3/4s of it, they still have that mortgage and no money. 
  • Person C bought a home, (a 2nd home), and did some renovations and then sold it for a big profit (50 percent profit). They paid off the mortgage and have some cash in the bank for retirement. 
If you don't like the plans from people B & C, then pay off your mortgage. Interest and inflation can really put a damper on your retirement if you don't watch out for them. Look at all the factors and think ahead. Listen to your gut if the evidence behind it supports what it is saying. 

Wednesday, August 20, 2014

Can Multiple Credit Cards Harm My Credit Score? Mortgage Eligibility?

Many people have multiple credit cards in their wallets. There is a worry for some people that this will harm their credit scores. Having multiple credit cards will not harm your credit score; however, it is how you use the cards that might do you in.

Why does this matter for your decision to buy a home and get a purchase mortgage? Maybe you already own a home and you want to refinance? Well, if your credit score is harmed by your credit card usage, then that could impact your mortgage eligibility and what sort of mortgage rate you will get approved for… if you get approved.

What are the components of your credit score?

  • Types of credit in use: 10 percent
  • New credit: 10 percent
  • Age of credit history: 15 percent
  • Amounts owed: 30 percent
  • Payment history: 35 percent
If the only form of credit that you use is a credit card, then you could do more damage to your credit score since that will have more weight due to the lack of weight elsewhere. Ho
wever, unless you are already sure about going and getting a mortgage, then don't rush out and get one because that could complicate matters. 

Like we said, it is how you use your credit cards that will harm your credit score, if they are used in a way not liked by credit bureaus. For example, if your credit cards are all new, then that will make you appear as a risky lending option for a mortgage lender. Or, if you spend near your credit limit on a card or cards, that will harm your score; even if you pay off your balance in total each month, spending near or to your limit is not a good idea. However, if you have multiple cards, you can spread that cost out among the cards. If you keep credit usage below 20 percent of available credit, then that is something the bureaus like. 

If you are going to apply for a mortgage, then do not apply for new credit cards. However, if you can pay some of the credit debt down, that will help your score. 

Monday, August 11, 2014

The Mortgage Basics: Your Loan Eligibility

The mortgage world has a lot of information involved with it. One thing for first time mortgage borrowers to remember is the concept of loan eligibility. A very critical question to ask oneself is, "How much can I afford to borrow?" One thing some people do to easily answer this question is to take out the largest mortgage they are offered.

According to the lender, the eligibility comes from a specific formula. They compare your monthly
debts to your gross income; many lenders do not like to see your debts consume more than 28 percent of your income, while others go for 36 percent, and at most 43 percent. The lender will allow that amount to go up depending on how well your credit history and credit score are. That percentage is called the Debt-to-Income Ratio, or DTI. With the mortgage rules imposed in January 2014, lenders hold to this pretty well. Things like your car payment, student loans, and credit cards are factored into your debts.

Your gross income vs. your net income
Remember, the formula determines your DTI based on your gross income but you pay the bills with your net income. This means you have to consider how much money you will actually be able to put towards it each month. To help you figure this out, you can use a mortgage calculator.

Determining your loan eligibility
Using a calculator and looking at your finances is a great way to figure out how much money you can use here. It is very exciting to buy a new home; do not forget that mortgage lenders are there to make money; they will offer you the largest loan that you qualify for. Due to this, remember what your numbers are and be realistic about what you can afford. The more money you borrow from a lender, the more they earn due to the interest that is generated by the mortgage rate

Don't be "house poor"
This is when you can afford the house and your bills but once those are all paid for, you have no money left over. This means that if your fridge died and you were forced to buy a new one, you could not do so without serious financial issues. Or say you had to replace a bed, if you can't do that, you're also labeled as "house poor".

Be reasonable and do your research to accurately find out how much you can afford. Shop around for the best rate and see which offer suits your needs the best and not just because it's the biggest one.

Wednesday, August 6, 2014

The Basics of a Mortgage: The Costs

The costs of getting a mortgage can vary. Many people do not remember that there are costs that go along with getting a mortgage and just think about the monthly payment they will have to make. Now, the monthly payment does indeed represent a majority of the money you will put towards a mortgage, it is not the place you will put money towards your mortgage; you have to remember things like the down payment and the closing costs!

What are the major costs? 
No matter if you have a fixed-rate mortgage or an adjustable-rate mortgage, the various components of the monthly payments will always feature the principal as well as the interest. What is the principal? This is the actual money that you have borrowed from the mortgage lender. What is the interest? This is the fee that the lender charges for lending the money; this is how they earn their money.

When you have a fixed-rate mortgage, the monthly mortgage payment will remain the same; what will change is the way the payment comes together. In the first few years of the repayment process, the payments will be mostly interest, generated by your mortgage interest rate; later on, your payments will gradually switch to being mostly principal.

What are additional costs? 
The smaller components of the mortgage include things like the real estate taxes as well as the insurance, such as private mortgage insurance (PMI). The property tax part is figured out by using the number of taxes that are put on a property and then dividing the number by the amount of monthly payments. For many people, that dividing number will be 12 but some mortgages utilize biweekly payment schedules.

The insurance part of this will feature the property insurance, this part protects your home from theft, fire, acts of God, etc. Before, we mentioned PMI, this is taken out if more than 80 percent of the home's value is financed through a mortgage.

Of course, we cannot the money you will need to cover the home's down payment as well as the closing costs. The ideal solution for the down payment is to have 20 percent of the home's value put down so you do not have to take the PMI and you have smaller principal.

If you have to do mortgage points, then remember there are two kinds: discount points and origination points. The origination points are equal to 1 percent of the cost of the mortgage and are paid to the lender. Discount points are prepaid interest and will reduce the interest rate, each point is worth 1 percent of the amount of the mortgage.