Category: Homebuying Tips

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Down Payment First-time Homebuyer Homebuying Homebuying Tips Purchase

Down Payments: How Much Do You Really Need?

When preparing to buy a home, it’s important to consider one of the most significant financial components of the purchase—your down payment. A down payment is an out-of-pocket amount you pay toward your home that translates into home equity. Because guidelines and lending practices vary when it comes to down payments, it can be hard to figure out how much you need. Let’s find out which down-payment option is right for you!

Is a 20% down payment necessary?

A 20% down payment can seem daunting for a first-time homebuyer. But there are other options. Most lenders are flexible about how much money they will allow you to put down. With that said, everything in life has its pros and cons, and making a sizable down payment is no different. 

Pros

If putting 20% down on your home is financially feasible, here are a few benefits you’ll reap.

You can land a better interest rate

When you put down 20% or more, you’re less of a risk to lenders. And when you’re not as risky to lend to, you gain access to lower interest rates. 

Your interest rate is simply the percentage of the principal or outstanding balance that you’re charged monthly for borrowing money. An interest rate that’s even one point lower can save you thousands of dollars throughout the life of your loan. 

Want to know more about interest rates? Find out here.

Your monthly payments will be lower

Your down payment goes toward the cost of your home. If you can put a sizable amount of money down, you can borrow less from your lender to pay for the rest of your home. With less money borrowed, you will have lower monthly mortgage payments. 

You won’t have to worry about PMI

PMI, or private mortgage insurance, is an assurance fee typically applied to a borrower’s monthly payments if they cannot put a certain amount down on the home they purchase. It acts as a buffer for lenders when the risk of default is on the table, and if you put 20% down, you won’t have to worry about it.

Even if putting 20% down isn’t in the cards, you can request that your lender remove PMI when you reach 20% equity in your home. Typically, if you don’t make the request, a lender will automatically cancel PMI when you build at least 22% equity in your home. However, this does not apply to FHA loans. 

Need to know the basics of equity? Learn more here.

You’ll pay less interest over time

The higher your down payment, the lower your borrowed amount, so you’ll pay less interest over the duration of your loan. 

Cons 

Though putting 20% down seems like it might be the best option for every buyer, there are potential disadvantages to consider. 

Saving takes time 

Most borrowers will spend months (or even years) putting money away for a down payment, but some borrowers’ savings might be better used elsewhere. If you think you might need the money to fund an important event in your future, it might be more beneficial to put down less than 20%. 

Less money for repairs and home improvements

Some borrowers have their eye on a home that will require a few repairs, and they might be able to snag it for a bargain because of it. With a larger down payment, there are fewer funds left to go toward the maintenance of the purchased home. 

This might be less of a drawback if you’re willing to hold back on the repairing process. Once you’ve built up enough equity in your home, you may be eligible for a cash-out refinance to fund your home improvement project(s).

Is it possible to buy a house with no down payment?

Of course! Not being able to put money down may not exclude you from being able to buy the home of your dreams. However, it does prevent you from being able to access certain loans. If you want to put 0% down, you’ll need to get a government-backed loan. 

Government-backed loans are those that the government insures. They are beneficial to borrowers because the government will cover any financial losses if you default on the loan. Lenders will also be more likely to give lower interest rates and less stringent down payment requirements on these loans. 

If you’re thinking about buying a home with no money down, a VA loan or USDA loan may be the right option for you. You may qualify for a VA loan if you’re a current or former service member or a surviving spouse of a former service member. To qualify for a USDA loan, the home you want to purchase must be located in an eligible rural or suburban area.

Both VA and USDA loans come with a zero-down payment guarantee as long as you meet the minimum requirements set by the Department of Veteran Affairs (VA) and the U.S. Department of Agriculture (USDA).

Down-payment requirements for non-government loans

Outside of government loans, down-payment requirements can vary:

Conventional Loan: Conventional loan requirements a determined on a lender-by-lender basis. Some lenders may require you to put higher than 5% down, but at MortgageRight, 3-5% is common. 

FHA Loan: You can land an FHA loan with as little as 3.5% down if you have a credit score of 580 or above. However, if your credit score is within the 500-579 range, you’ll be required to put down as much as 10% 

Jumbo Loan: Though they don’t have a designated down-payment requirement, Jumbo loans typically require higher down payments and credit scores to be eligible. 

Don’t let a down payment keep you from owning your dream home

Whether you’re in the financial position to put more than 20% down or a zero-down payment is more suitable, MortgageRight can help you secure the RIGHT loan option for your home-buying needs. Get a quote or pre-approval letter or contact us at belair.mortgageright.com/contact to make your dream home a reality!

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First-time Homebuyer Homebuying Homebuying Tips Loans Market Analysis Mortgages Pre-approval Purchase

Top 3 Ways Remote Work Is Changing Homebuying

Throughout history, our home spaces have evolved alongside our workplaces. And as telecommunication and global connection continue to thrive, more people than ever are dropping the commute and firing up their laptops to put in a good day’s work. But what does this change in the workplace mean for up-in-coming homebuyers entering the housing market? Let’s find out! 

How remote work is changing home-buying behavior

When searching for the perfect home, the commute to work has been an integral part of most homebuyers’ decision-making process, and that remains true in today’s home-buying landscape. A 2021 study done by Realtor.com provides insight into homebuyers’ willingness to trade in longer commute times for more affordable homes in more desirable areas.

But with the emergence of remote work across the nation, the “this-for-that” mentality has less influence on homebuyers. Homebuyers that originally struggled to find homes that fit both their price point and desired commute time now have the opportunity to be more flexible because:

  • Majority of recent homebuyers (Gen Z, Millennials, Gen X) prefer remote work
  • About four-in-ten recent homebuyers work remotely due to pre- and post-pandemic conditions
  • Younger workers are driving real estate markets
  • Close to half of recent homebuyers report companies embracing remote work

This is great news for homebuyers who want to forgo city living altogether while maintaining their current job. If you’ve had your eyes set on a suburban or rural area, the freedom that remote work provides (and the benefits of a USDA loan) can help you snag the home of your dreams.

More first-time buyers are entering the market

The influx of remote work is also helping individuals who could not otherwise purchase a home enter the housing market. According to Zillow, remote work could open the door to homeownership for nearly two million renters to buy starter homes in less expensive areas outside of the cities they work in. 

The Mortgage Bankers Association explains how this reshaping of the housing market could take place. More than 10% of renters who may have struggled to afford a home within the city limits of San Francisco could afford a home within the metro area (but beyond an acceptable 5-day-per-week commuting distance). With current interest rates at an all-time low and the ability to move out of high cost-of-living areas, current renters who work remotely have more opportunities than ever to become homeowners.

In-home requirements are more specific

The areas people choose to live in aren’t the only thing changing with the rise of remote work. There is also a noticeable shift in what homebuyers are looking for in their homes. 

Having a dedicated office space is a top priority for homebuyers working remotely. Homes with an extra bedroom, a finished attic or basement, or designated office space are beginning to overshadow previously sought-after amenities. Home theatres and gyms are losing their luster in this new era of home buying because the more time buyers spend working at home, the more willing they are to reap the benefits of an in-home experience from a public place. 

Need a New Home to Work From?

No matter where you get your work done, any time is the RIGHT time to start your home-buying journey. If remote work has become a permanent part of your life, you don’t want to miss out on buying the perfect home for your needs. Re-invent what home looks like for you by getting a quote or pre-approval letter today. 

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First-time Homebuyer Homebuying Homebuying Tips Mortgages Pre-approval

Pre-qualification vs. Pre-approval: What’s The Difference?

The mortgage process is filled with systems and terminology that the average homebuyer may not be familiar with. While preparing to apply for a mortgage, you may encounter the terms pre-approval and pre-qualification for the first time, and it is vital that you understand the individual role each of them plays in your home search. 

Pre-qualification: What does it mean?

Pre-qualification is an initial step in the mortgage-seeking process. It typically involves describing your credit, debt, income, and asset situation to a prospective lender. After reviewing the information, the lender will give you an estimated loan amount you can expect to receive. 

Most lenders (including MortgageRight) are flexible when it comes to this part of the mortgage process and will give the option to complete it over the phone, online, or in person. 

Though pre-qualification is not a requirement when applying for a mortgage, it’s an exercise in helping you understand your financial fitness regarding a mortgage. It’s also the perfect time to learn more about the different mortgage options available. 

Pre-approval: What does it mean?

Much like the pre-qualification process, you will need to provide your lender with information regarding your financial history and stability. The difference here is that financial documents are required and will serve as proof of your mortgage readiness.

Here’s a list of commonly requested documentation:

  • W-2s (a current pay stub)
  • A summary of your assets 
  • Your total monthly expenses
  • A copy of your mortgage statement and home insurance policy if you already own real estate

After assessing the documentation, verifying your financial fitness, and running your data through an automated underwriting system, your lender will send you a pre-approval letter. This letter details the amount, type, and terms of the mortgage loan your lender is willing to offer. 

While a pre-approval offer is not a guarantee, it does act as proof of your commitment to buying a home and can give you leverage in a competitive market. 

Choose What’s Best for You

Whether you’re unsure about your financial standing when it comes to getting a mortgage or you’re ready to move on to pre-approval, MortgageRight can help you every step of the way. Call us at (205) 776-8401 to discuss the next steps in pre-qualification or get pre-approved today!

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Budgeting Down Payment First-time Homebuyer Homebuying Homebuying Tips Mortgages Pre-approval Purchase Self-Employed

How to Get a Mortgage if You’re Self-Employed

You’ve finally put some action behind the go-getter title your friends gave you and started a successful business. Now you’re looking for the perfect place to wind down after putting in the work. But as a self-employed individual, are there extra hoops you’ll need to jump through to buy your new home? Let’s find out. 

Does Being Self-Employed Make it Harder to Get a Mortgage?

The answer depends on what you consider harder. The biggest difference between a self-employed and an otherwise employed person is the documentation a lender may request to increase your chances of approval. 

When applying for a mortgage while self-employed, you need to be realistic about your income and what you can afford, prepared to submit more paperwork, and willing to pay constant attention to detail. 

Understanding Your Unique Self-Employed Situation

When assessing a self-employed borrower, most lenders will want to have a good understanding of the nature and location of your business, your business’ financial viability when it comes to current and future income generation, and your personal income stability.  

Employment Verification

Employment verification is the first step in proving you are successfully self-employed. Documents verifying self-employment status can include written communication from the following:

  • Current (and past) clients indicating services performed
  • A letter from your licensed CPA, or tax preparer
  • A professional organization that can attest to your membership
  • Any state or business license that you hold
  • Evidence of worker compensation and insurance for your business
  • A Doing Business As (DBA) issued at least 2 years prior to your application date.
Income Documentation

You’re much more likely to be approved for a mortgage if you can provide proof of a steady income. You may think you only need a few tax documents to breeze through the income verification portion of the approval process, but there have been recent changes in requirements, and you need to be prepared.

In June 2020, mortgage organizations Fannie Mae and Freddie Mac instated specific income verification practices for self-employed borrowers. According to a bulletin posted by the organizations, “the mortgage file must include a written analysis of the self-employed income amount and justification of the determination that the income used to qualify the borrower is stable.”

Because of these new stipulations, your lender will now ask for the following to verify your income:

  • 2 years of personal tax returns (this includes W-2s if you’re paid through your corporation)
  • An unaudited year-to-date (YTD) profit and loss statement that is signed by the borrower and reports business revenue (i.e., gross receipts or sales), expenses, and net income                      Note: The statement must cover the most recent month preceding the application received date.
  • 3 months business account statements no older than the latest two months represented on the YTD profit and loss statement                                                                                                                Note: Personal asset account statements evidencing business deposits and expenses may be used when the borrower owns a small business and does not have a separate business account.

The Road to Approval

Documentation is not the only thing you should consider when it’s time to submit your mortgage application. The road to approval may be clear of speedbumps if you have these four segments of your financial portfolio in order.

Credit Score

If there’s one thing self-employed mortgage applicants share with every other applicant out there, it’s what lenders will view as an acceptable credit score. 

Lenders look to your credit score for information on your debt repayment history, and a better score may equal more favorable loan terms, so be sure to keep your credit score as high as possible at all times.

Debt-To-Income-Ratio 

When it comes to getting a mortgage while self-employed, underwriters look at your existing debts instead of your income. This is how your debt-to-income ratio (DTI) is calculated.

Your DTI is a measurement of your income against your recurring debts, and it determines how much money you have available for potential monthly mortgage payments. 

DTI may hold more weight for self-employed borrowers because lenders might view tax write-offs as lowered income. This could result in existing debts becoming a larger share of your approved budget. 

If your DTI is 50% or higher, it may be wise to pay some current debts down before you apply for a mortgage. 

Downpayment

Your lender will also require proof that you have the funds for a down payment, miscellaneous fees, and enough funds to cover the initial monthly mortgage payments. 

This is why having a thorough understanding of your financial situation is so important. If you know that you will not be able to afford these expenses or you’re not willing to make the necessary financial adjustments, you should hold off on applying for a mortgage.

Separate Personal & Business Expenses

People who own businesses tend to intermingle business and personal debts, but this can backfire on those seeking a mortgage. The increase in credit usage may hurt your mortgage application if you charge business purchases, such as office phones or other supplies, to your personal cards or accounts.  

Keeping your business and personal accounts separate will more accurately reflect your financial profile (and increase your chances of being approved for a mortgage). 

Ready to Be a Self-Employed Homeowner?

Landing a mortgage while self-employed doesn’t have to be difficult! All you need is the RIGHT information and the RIGHT preparation to become a homeowner. Think you’re ready to take the next home-buying step? Click here to get started. 

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Budgeting Credit Down Payment First-time Homebuyer Homebuying Tips Loans Mortgages Purchase

How to Get a Mortgage in 2021: A Step-by-Step Guide 

For many people, getting a mortgage can feel like learning to walk all over again—that is, if they go into the process uninformed. Information is what separates the runners from the crawlers, and knowing how to prepare will make it that much easier to walk into the front door of your dream home.

Ready to make strides in the home-buying process? Let’s look at how to get a mortgage, step-by-step. 

Step 1: Financial Preparedness is Key

When looking to get a mortgage, be sure you’re financially prepared to take on homeownership. Buying a home is a major investment, and you need to consider how it will affect your finances. Can you save enough for a down payment? Are you deep in debt? Can you cover closing costs? 

If you answered no to any of those questions, you may want to improve your financial situation before applying for a mortgage. 

Additionally, lenders take a close look at your credit score when determining your mortgage eligibility; so make sure your credit score is in good condition before applying for a mortgage. If your credit score needs a little work, give it a boost by paying off debts or holding off on opening new lines of credit until you can secure a mortgage. 

Step 2: Decide Which Mortgage Loan Type Suits Your Needs

There are many loan types out there with different eligibility requirements, so it’s best to learn which one will fit your unique home-buying needs before you apply. 

Here are some loan types you might be interested in:

  • FHA loans have features, such as low down payment options, flexible credit & income guidelines, and a fixed rate, that may make it easier for first-time homebuyers to achieve the dream of homeownership.
  • USDA loans are popular among today’s home buyers because the USDA program offers no-money-down financing where homebuyers can finance 100% of a home’s purchase price.
  • Conventional loans are home loans not insured by the federal government. This type is best suited for borrowers who have a strong credit score, stable employment history, and can make a down payment of at least 3% of the home’s cost. 
  • VA loans are most beneficial for the vast majority of military borrowers. These versatile, $0-down payment mortgages have made it possible for more than 24 million service members to achieve their dream of homeownership. 
  • Jumbo loans are for home prices that exceed federal loan limits. These are best suited for affluent buyers with good credit, a high income, and who can offer a substantial down payment. 
Fixed or Adjustable Rates?

Fixed-rate mortgages keep the same interest rate over the life of your loan. They also provide a consistent monthly payment on your mortgage and come in 15-year, 20-year, or 30-year loans. 

Adjustable-rate mortgages have flexible interest rates that change with market conditions. These come with a certain level of risk but are beneficial if the home is temporary. 

Step 3: What Documentation Is Needed?

You’ll need to have all of your documentation in order before you apply for a mortgage. Here’s a rundown of the paperwork your lender will request.

Proof of Income

A lender will ask for a variety of documents to verify your income. Some items you might need to provide include:

  • 2+ years of federal tax returns
  • 2 most recent W-2s and pay stubs
  • If you’re self-employed, 1099 forms or profit and loss statements, or other additional documents.
  • If applicable, legal documentation that proves you have been receiving child support, alimony, or other types of income for at least 6 months.
Credit Documentation

A lender will always ask for verbal or written permission to view your credit report. While looking at your credit report, lenders will keep an eye out for factors that might exclude you from getting a mortgage (e.g., bankruptcy or foreclosure). If bankruptcy or foreclosure are present on your credit report, you might have to wait a number of years before you’ll become eligible for a mortgage.

Proof of Assets & Liabilities 

It’s possible that a lender might request some of the following documents to verify your assets: 

  • Up to 60 days’ worth of account statements that confirm the assets in your checking and savings accounts
  • The most recent statement from your retirement or investment account
  • Documents highlighting the sale of any assets you released before you applied (e.g., a copy of title transfer for a sold car)

How To Get A Mortgage With MortgageRight

Step 4: Preapproval

Preapproval is the process of learning how much a lender is willing to lend you to purchase your home, and there are some big advantages of getting preapproved before starting the mortgage application process. 

For one, it shows sellers that you can make a solid offer up to a specific price. Preapproval also gives you a better understanding of your mortgage costs because lenders will determine—and provide details on— your interest rate, APR, fees, and other closing costs.

During the preapproval process, MortgageRight will seek to provide the mortgage option(s) we think best fit your needs. We will show you different mortgage solutions and how much you can qualify for.

Step 5: Submit your Application

Even if you have already been preapproved, you still need to formally submit your most recent financial documents when you apply for a mortgage. Outside of the previously mentioned Proof of Income documents, these can include:

  • Proof of other sources of income
  • Recent bank statements
  • Details on long-term debts (e.g., car or student loans)
  • ID and Social Security number
  • Documentation of recent deposits in your bank accounts
  • Documentation of any funds or gifts used for a down payment

*Depending on the type of mortgage you’re getting, other documentation may be required. 

Within three business days, MortgageRight will give you an initial loan estimate, which consists of:

  • The cost of the loan
  • Associated fees and closing costs
  • Interest rate and APR.
Step 6: Enter the Underwriting Process

During this process, an underwriter will verify your assets and finances with the documentation you have provided during your application submittal.

MortgageRight will also verify details about the property you want to purchase. This usually encompasses:

  • Ordering an appraisal 
  • Verification of the home’s title
  • Scheduling any state-required inspections. 

When underwriting is finalized, you’ll receive a Closing Disclosure document.

A Closing Disclosure will tell you important information about your mortgage, including your monthly payment, down payment, interest rate, and closing costs. If you have any questions regarding the Closing Disclosure, you may discuss them with your Loan Originator prior to the scheduled closing date. 

Step 7: Close on Your Home

When your loan gets approved, you will be scheduled to attend closing at the closing agent’s office. This closing session is the perfect time to ask any last-minute questions you may have about your loan. Remember to bring your Closing Disclosure, a valid photo ID, and your down payment. Once you sign on that dotted line, you will officially become a homeowner!

Are You Ready To Secure A Mortgage?

A lot of organization, documentation, and time goes into getting a mortgage, but if you prepare as much as you can beforehand, things should go smoothly for you. Think you’re ready to take that first step toward getting a mortgage? We’ll walk beside you! Click here to get started!

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Budgeting Down Payment First-time Homebuyer Homebuying Homebuying Tips Mortgages Pre-approval Purchase

Cease Your Lease: Advantages of Buying a Home

Owning a home has been a rite of passage for generations, but in recent years, one obstacle has kept people from their home-buying goals—rent. While many have broken free from the leash of a lease, one group still clings to the world of renting.

Millennials: Stuck in The Rent Ring

For the millennial generation (those born between 1981 – 1996), rent is an ever-present—and often welcome—expense. According to data from the Pew Research Center, more millennials choose to rent over buying a home compared to generations prior. Several factors play into many millennials’ decision to continue renting. Past economic decline, postponement of marriage, the housing bubble, and freedom to apartment hop have all lead millennials to stick with their landlords. But as the housing market continues to improve, millennials need to know that the American Dream of owning their own home is still within reach. 

Top 3 Reasons to Buy vs. Rent 

1). Owning a home will benefit you in the long run

Renting your home (or apartment) means shelling out income to a landlord and putting nothing toward an investment you own. Buying a home trumps renting because it can result in financial gain in the future. When you buy a home with a 30-year mortgage and make the required payments, you will come out owning your home, and money will stop coming out of your pockets. However, if you rent a property, you will have nothing to show for all the time and money you put toward paying your rent. 

2). Boosted equity as property values rise

Rising home values are the name of the game (and are expected to be on the ups for the foreseeable future), which makes homeownership a profitable long-term investment. According to Zillow, the average U.S. home price has increased 13.2% from May 2020 to 2021—a record rise since the company began aggregating housing data in 1996. 

This increase in property values is critical when deciding to buy versus rent because owning a home can result in a significant return if your home is sold at a higher value than it is purchased. And, with each monthly mortgage payment, you boost the amount of equity—a tangible growth in your home value that you can borrow against—you have in your home. 

3). Avoid constant rent increases

Though the amount may be unpredictable, one thing is for sure, your rent is going to rise (likely every year). With steadily rising rent comes constant budget changes and potential overpayment for a property that does not live up to its price tag in living conditions. Sound like a nightmare? Well, with a fixed-rate mortgage, you will always pay the same amount each month on a home you own, and you can’t be kicked out by a landlord!

*The Principal and Interest payment remains the same on a fixed-rate mortgage. Typically, only the escrow portion of the payment (insurance and property tax amount) increases. 

Breaking the Cycle: Letting Go of Beliefs That Keep You with a Lease

Bright lights can bog you down

We get it—the lure of living in the big city is strong for millennials, but a large metropolitan area could only offer you sky-high rent prices (as opposed to a fixed-rate home with a backyard). If those city lights are beginning to blind you, consider moving to a more rural area just outside and landing a home that suits you with a USDA loan. 

Don’t let debt stop you from getting a house with a deck

Student loan debt is a massive concern for many who want to leave renter life behind, but being debt-free isn’t a requirement when buying a home or qualifying for a mortgage. Lenders do consider your current debt, including any associated with student loans, but only to determine your DTI (Debt-to-Income Ratio). Your DTI is simply a measurement of your income against recurring debts, and lenders look to it to decide whether you will be in a financial position to make payments on a possible mortgage. The more debt you have, the more likely you are to fall behind on your payments. But don’t lose hope—lenders have varying options when it comes to DTI ratios. 

*Most lenders prefer a potential borrower’s DTI to be about 35% or lower during the approval process. 

Tie the knot after finding your way home

In a report about millennial home-buying trends, Bank of America states, “Life events such as getting married or having children are typical triggers to buying a home. The longer this age group lives with parents or independently, the more homeownership will be delayed,” However, this does not have to be the route you take. Even if your social media status says single, you should still be seeking to own a home to build wealth for your future—and an FHA loan (or a VA loan if you are military-affiliated and eligible) can help a new home be your plus one.

Ready To Leave Your Lease Behind? 

Buying a home is a huge step for up-and-coming generations, but it doesn’t have to be stressful. If you’re ready to let go of the leasing life and start living life, we can help! Getting a quote or pre-approval letter is easy. To get started, click here. 

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Credit Down Payment Government Loans Homebuying Homebuying Tips Interest Rates Loans Mortgages Purchase Refinance

Appreciating Our Veterans One VA Loan at a Time

What does it mean to be a Veteran? Being a veteran means fighting for the freedoms of those you have never met. It means having a willingness to give up everything while expecting nothing in return. Being a veteran means volunteering to leave the home you’ve always known, so others won’t have to. It means that you not only understand the concept of courage, but you embody it.

Most of all, being a veteran means taking off the uniform and rebuilding a civilian life when your service is complete. Here at MortgageRight, we understand how difficult it can be to make the transition from protector to private citizen. To show our appreciation for your sacrifice, we provide easy access to a mortgage made just for you—the VA home loan.  

What Is a VA Loan?

Homeownership can become a hassle if you’re not equipped with the financing options that are right for you. For the vast majority of military borrowers, the VA loan program is the most beneficial. These versatile, $0-down payment mortgages have made it possible for more than 24 million service members to achieve their dream of homeownership. 

Despite the program being designed to create a seamless homebuying experience for service members, much of our military population is left in the dark about the program’s unique benefits, and this leads them to choose less favorable loan options.

Who Qualifies? 

To be eligible for a VA loan, you must be a veteran or active service member who has satisfied at least one of these service requirements:

  • Served for 90 consecutive days during wartime 
  • Served for 181 days during peacetime 
  • Served in the National Guard or the Reserves for 6 years

Surviving spouses of service members may also qualify if the service member’s life was lost in the line of duty or if they sustained a service-related disability.

Before you can obtain a VA loan, you will need to present your lender with a copy of your Certificate of Eligibility, which is a document provided by The Department of Veteran’s Affairs as proof of your qualification. To prove previous military service, you must provide a Report of Separation (DD Form 214). If you are on active duty, you will need to provide a Statement of Service instead.

Though The Department of Veteran Affairs does not require a minimum credit score to qualify, it is best to maintain a credit score of 620 or higher to ensure third-party lender requirements are met. 

Backed by Benefits

  • Zero Down Payment

Other loan programs usually require at least a 3% down payment when purchasing a home. However, if you’re looking to buy a home with a VA loan, one of its most advantageous aspects is that the down payment requirement is no longer a burden. 

  • 90% Equity Cash Out

For homeowning service members and veterans, refinancing with a VA loan opens the door for a 90% equity cash out. This option replaces your existing mortgage with a new loan for more than you owe on your current mortgage and allows you to pocket the difference if your home has risen in value. This is especially beneficial if you are looking to save for higher education or retirement, pay off higher-interest debt, or make needed home improvements.

  • Say No to Mortgage Insurance Costs

Unlike other home loans on the market that require mortgage insurance premiums when the borrower has less than 20% equity in their home, VA loans do not come with any mortgage insurance premiums or private mortgage insurance costs—which helps borrowers save even more each month. 

 

Though a VA loan offers savings opportunities at every corner, it does require a VA Funding Fee (that is 2.3% of the amount borrowed with a VA loan, which increases to 3.6% if you are a previous VA loan borrower).

  • The IRRRL Deal

If you have an existing VA-backed home loan, the IRRRL (Interest rate reduction refinance loan) is another added perk. This program is perfect if you want to reduce your current monthly mortgage payments or increase payment stability. 

Let Us Appreciate You

As a Veteran owned and operated lender, MortgageRight always rises to the challenge of helping active and veteran service members navigate the VA-loan landscape and secure the mortgage that meets their unique homebuying needs.

Unsure if the VA loan is right for you? We can help! Get a quote or pre-approval letter or email us at contact@belair.mortgageright.com for any questions.

Happy Military Appreciation Month & Thank You for Your Service!

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Homebuying Homebuying Tips Loans Mortgages Pre-approval Purchase

How Pre-Approvals Can Help You Get Your Offer on a Home Accepted

Pre-approvals for a mortgage loan are like getting verified on Twitter. It’s a sign that you’re the real deal. 

Getting pre-approved before you start shopping for a new home isn’t a requirement, but it definitely gives you a leg up. We want to help you get your dream home, and a pre-approval letter gets you one step closer. 

So, what is a pre-approval? How do you get one? Is it worth it? Let’s take a look. 

What Is Pre-Approval?

A pre-approval determines how much money you can borrow to purchase your home. Lenders analyze your income, assets, and credit score to determine three homebuying factors:

  • The type of loan you can get approved for
  • How much you can borrow
  • What the interest rate will be

The lender will then provide you with an official pre-approval letter that details this information.  

It’s important to note that pre-approval and pre-qualification are NOT the same. Pre-qualifications can be beneficial in providing insight into your loan opportunities, but are less in-depth and therefore less accurate.  

How Do You Get Pre-Approved?

The pre-approval process is essentially a mortgage application. Your lender will want to evaluate your finances, which includes reviewing documentation in the following areas:

  • Proof of income
  • Employment verification (bank statements) 
  • Proof of assets (retirement or investment account statements)
  • List of any liabilities
  • Credit history (rent history, credit report)
  • Identification
  • Debt-to-income ratio (DTI)

How Does a Pre-Approval Help You Buy Your Dream Home?

Your pre-approval letter essentially says, “you can buy a house worth X amount of money,” because you are highly likely to get a loan for the amount stated by your lender. 

Your real estate agent will typically want to see your pre-approval letter before showing you houses to ensure you both aren’t wasting time looking at homes outside your budget.

It will also be valuable when making an offer on “the one,” because it shows the seller you won’t have problems getting financed for the amount you’re offering. That’s all the more important if it’s a hot property and others are making offers. With pre-approval, you may already be one step ahead of those other potential buyers. 

And because a pre-approval is “essentially a mortgage application,” the rest of your home buying process will go a lot smoother. By doing some of the work upfront, you can shift your focus on the fun stuff, like your living room color scheme or building a backyard entertainment space. 

Start Now!

If you’re considering a move or looking into buying your first home, it’s a great time to start the pre-approval process! And we can help! Click the blue button in the top right corner of our home page to get started. If you have questions, reach out to us! We’d love to help you take the next step on your homebuying journey.

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Budgeting Homebuying Homebuying Tips Interest Rates Loans Mortgages Purchase Refinance

Take Advantage of Unheard-Of Interest Rates

2020 is shaping up to be an interesting year for the US housing markets. The combination of a global pandemic and an election year has led to historically low-interest rates. Now is a great time to assess your financial situation and develop a plan to take advantage of this unprecedented time in the housing market. And these low-interest rates are no secret; applications to refinance have gone up by 80% to the highest level since the financial crisis of 2009. Even though this may be a stressful time in the stock market with uncertainty about the future, taking advantage of these low-interest rates is a concrete step you can take towards financial security in insecure times. Don’t get anxious, get proactive! We don’t know how long rates will stay this low, so now is the time to act!

 According to the Federal Reserve, the rate for a 30-year fixed mortgage has been about 3.75% in early 2020, and recent events have taken it even lower. That means if your rate is above 4%, you could benefit from refinancing! If you currently have a VA, FHA, or USDA loan, we have even more good news. You don’t have to have an appraisal to refinance to a lower rate.  

Here are some ideas for ways to take advantage of low-interest rates:

  • Refinance your mortgage – lower your payments by thousands of dollars or cut your term in half!
  • Refinance other loans such as student loans 
  • Make large, one-time payments on other debt.
  • Consolidate and pay off your debt – pay off high-interest credit cards to save money.
  • Purchase a new or second home – whether you’ve been looking for a vacation house, an investment property, or an upgrade for your family, now is the time! 
  • Start a business – use your savings as a nest egg to finance your dream company.

Call (205) 776-8401 to speak to any of our Mortgage Loan Experts to discuss your financial goals and find out how we can help you save thousands with a refinance. Or, head on over to our website and click the Apply Now button for an online application. 

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Homebuying Tips Loans Mortgages Refinance

How to Utilize Home Equity to Your Benefit

Building equity is one of the primary benefits of buying a home. Home equity can enable you to finance a renovation, pay off debt, or even launch a small business. When you factor in today’s low interest rates, the possibilities are even more interesting. 

While home equity is a readily available resource for many families, some are afraid to use it because they don’t understand the benefits and consequences.  If you’re unfamiliar with the ins and outs of home equity, don’t worry! In this article, we’ll explain everything you need to know to make an informed decision. 

What Is Home Equity?

Equity is the difference between the remaining balance on your mortgage and your home’s current value. If you purchase a home for $300,000 with a 20% downpayment, you start with $60,000 in home equity. 

How Do You Get Home Equity?

You build home equity over time in two ways. First, your equity increases as you pay down your mortgage principal. For example, if you purchased that $300,000 home five years ago with a 20% down payment and a 5% interest rate, over your first 60 months, you paid about $20,000 toward the principal and $57,000 in interest, leaving a balance of $220,000 on your mortgage. If your home’s value had not changed, you would now have $80,000 in equity. 

But home values do change. This is the second way you build home equity over time. Home values tend to rise based on market demand and other economic factors. Home values may not change a lot each year, but even small changes are significant over time. For example, if your $300,000 home increased in value by just 3% each year, it would be worth more than $347,000 after five years! If you paid your mortgage as described in our first example, you would now have $127,000 in equity!

What Else Can I Do To Increase Home Equity?

The most obvious way to establish more equity in your home is with a large down payment when you purchase, but this isn’t always an option. 

Another strategy for building equity is paying a little more than your minimum mortgage payment each month. By paying just $100 extra per month on the $240,000 example in this post, you would pay off the 30-year mortgage in just 25 years and 7 months. After only 60 months, you would have paid an additional $6,000 on your mortgage, but you would have increased your home equity by $6,800. Why is this number higher than the amount of your additional payments? You are paying down the balance owed, and this means a larger portion of every payment goes to principal rather than interest. 

You can also build equity by renovating. Adding extra space and other improvements can increase your home’s value and curb appeal. This can be complicated if you refinance or take out a second mortgage to pay for the renovations, so let’s take a closer look at options for tapping into your home’s equity. 

How Do You Tap Into Home Equity?

Borrowing money against your home equity can be beneficial, because the interest rates are lower than typical rates on personal loans or credit cards. You earn this lower rate by using your house to secure the loan. 

There are three common options for borrowing against your home’s equity:

  • A home equity loan
  • A home equity line of credit
  • Cash-out refinance 

Home Equity Loans are also known as second mortgages. You can secure a loan for about 85% of the value of your equity in your home. Just like a primary mortgage loan, it is paid back in monthly installments. 

Home Equity Lines of Credit (also known as a HELOCs) are similar to credit cards, but your credit limit is determined by your equity in your home. You make regular payments on the amount you borrow, even if it’s less than the amount you qualify for. 

Cash-Out Refinances involve a new loan with an updated interest rate and loan term. If you take out a new mortgage for more than you owe on your current loan, taxes, and insurance, you can receive a lump sum payment for the difference, and you are free to do anything you like with these funds. This can be especially beneficial during times when interest rates are very low.

Learn more about how and when you should refinance your home on our blog! 

Get the Support You Need

At MortgageRight, we help home buyers and current homeowners like you find the mortgage loan that’s both a perfect fit for your individual needs AND at terrifically low interest rates! You can get the best deal to start building your home equity today, getting you steps closer to the big purchase you’ve been saving for!