The Dangers of Rate Shopping

Buying a home will most likely be the largest purchase you ever make.  With that in mind, you might assume having the lowest interest rate is best, but this is not always the case.  The lowest advertised interest rate may not be your best option.  Some lenders and mortgage brokers advertise low rates, but don’t inform you of all the additional points and fees that come with the mortgage.  Here are a few tips to take into consideration before rate shopping.

Look at Points and Fees

Always ask about points, lender fees, broker fees and settlement costs. Points are pre-paid interest that affect the quoted interest rate.  You can ask to have your points quoted as a dollar amount instead of just a percentage.  For example, on a $200,000 loan, one point would equal $2,000.

Shop Smart

Interest rates fluctuate daily. Talk to your Loan Officer about when the best time to lock in on a rate is.  First Home Mortgage values honesty and service, so any questions you may have for your Loan Officer will be answered diligently, fairly and in regard to your best interest. If you contact different lenders, make sure you provide each lender with the same information.  Such information will include: the quality of your credit, location, type and use of your property, the size of down payment and/or the amount of home equity you have.

Finding the Best Lender

Customer service may be the most important consideration when shopping for home financing. During the loan process, you should feel comfortable disclosing your financial information and asking questions. A trustworthy lender will be responsive and will assess your situation carefully to best suit your home buying needs. Make sure to choose a lender who can offer personalized options and takes the time to understand your goals.  Just remember interest rates don’t always matter.

 

If you have any questions or would like to get started on this home-buying journey, contact First Home Mortgage Corporation today!  We provide the mortgage you need to make “home” happen by delivering customer service that not only fulfills goals but exceeds expectations.

5 Misconceptions About Home Buying

Many people have preconceived notions about how to buy a house and what it takes to do it, but they aren’t always true. There are many pervasive myths surrounding the home buying process; read on for 5 misconceptions about home buying.

The First Step is to Look for a House

When someone is interested in buying a home, often times the first thing they do is start looking at houses. Before looking at homes, you should consult with a Loan Officer about getting pre-qualified for a mortgage. There are lots of benefits to prequalification including getting a more concrete estimate of how much you can afford and signaling to sellers that you are serious about buying.

Down Payments Are the Only Up-Front Cost

As nice as it is to think the only up-front cost of buying a home is the down payment, that’s not true. It’s important to keep closing costs in mind. A buyer can generally expect to pay closing costs between 2% to 5% of the loan amount, so it can be a considerable amount. Don’t forget about the cost of a home inspection, too. There are also moving costs to consider as well. It’s important not to completely drain your savings to put towards a down payment as there are these other costs to keep in mind (plus you should keep some money saved for potential emergencies and unforeseen expenses).

You Must Make a 20% Down Payment

The rule of thumb when it comes to down payments is that you should put down 20%. This doesn’t have to be the case. There are an abundance of down payment assistance programs and specialty loan programs available that allow for smaller down payments. For example, FHA loans allow for down payments as low as 3.5%. However, bear in mind that in most cases, you’ll have to pay private mortgage insurance (PMI) or mortgage insurance premium (MIP) when putting down less than 20%.

Your Credit Score Has to Be High

When it comes to buying a home, the higher your credit score, the better. However, you don’t necessarily have to have a stellar credit score to qualify for a home loan. There are even some loan options specifically tailored towards people with lower credit scores, such as FHA loans. Additionally, there are things you can do to improve your credit score so you’re in a better position to buy.

Don’t Buy a Home in Fall or Winter

Spring is notoriously the most popular time to buy a home, but that doesn’t mean you can’t, or shouldn’t, buy during other parts of the year. While many assume home buying in the fall and winter is something to avoid, it doesn’t have to be. There can even be benefits to home buying during the colder months, such as less competition from other home buyers and particularly motivated sellers.

There is a lot of misinformation out there when it comes to home buying, so seeking the help of real estate and mortgage professionals can help you clarify what’s true and get you on the right path to home ownership. If you’re interested in learning more about the mortgage process and exploring your options, contact one of our experienced Loan Officers today!

Protecting Your Personal Information Online When Applying for a Mortgage

In this day and age, parts of the mortgage process have evolved to include virtual components. It is essential that you take steps to safeguard your personal information and data online. Here are some tips to keep in mind:

Apply with a Reputable Lender

It’s important that you choose a trusted lender to handle your mortgage needs. Be sure to do your due diligence when picking a lender and certainly before sending them any information. There are scammers out there who create fake mortgage websites with the goal of collecting your personal information. Check your lender’s NMLS number to ensure it is valid and correct and look for reviews online or referrals from people you know.

Use Secured Networks

You want to use a secured network for all your online dealings but especially when submitting personal information. Avoid using public networks. Make sure you’re on a password protected network that you trust so hackers can’t get in and steal your data.

Be Cautious Responding to Emails

Even if an email appears to be from your bank or loan officer, if it seems suspicious, don’t answer it. Beware of phishing scams that imitate legitimate email addresses with the purpose of gathering your personal information to use and exploit. If you’re unsure an email is on the up and up, reach out to your loan officer to confirm the email is actually from them before you click any links or submit any information. When possible, you should avoid sending sensitive information or documents over email, and instead opt to deliver this information in person or through a secure online portal.

Use Strong Passwords

When creating any online account, you want to make sure you have a strong password. This is especially the case when it comes to accounts associated with your mortgage. Seek to not only meet password length and complexity requirements but exceed them; the stronger the password, the better. Avoid using the same password across platforms. Enabling two-factor authentication when possible is also a good idea as it adds an additional layer of security when signing into accounts.

Trust Your Instincts

If something seems fishy to you, contact your loan officer directly to ensure everything is legitimate and you’re safe to act. It is much better to be safe than sorry when it comes to the security of your personal information and data. When in doubt, give your loan officer a call.

If you’re interested in starting the home loan process, contact one of our Loan Officers today to learn more!

Government Home Loan Basics

The United States government offers programs through various agencies which are designed to better serve borrowers who are in unique circumstances. Read on for more information about the most common government home loans available.

FHA Loans

The Federal Housing Administration, or FHA, insures FHA loans. FHA programs are available for borrowers with limited savings for a down payment. FHA loans allow you to put down as little as 3.5% so long as you have a credit score of 580 or higher. They are flexible when it comes to the use of gifts and grants for a down payment and are best for borrowers with limited assets for a purchase. The home purchased must be your primary residence and you have to pay a mortgage insurance premium. FHA loans are more accessible than other government home loans as there aren’t restrictions on military service or where you are purchasing a property.

VA Loans

The Department of Veterans Affairs, or VA, insures VA loans. VA programs allow eligible service members or veterans and their spouses to purchase a home with little to no down payment or cash to close. Additionally, there is no need for private mortgage insurance or mortgage insurance premium, but there is a one-time VA funding fee. To take advantage of the VA loan program, you must have a Certificate of Eligibility which shows a lender you are qualified based on your duty status and service history. You can apply for a Certificate of Eligibility via the VA.

USDA Loans

The United States Department of Agriculture, or USDA, insures USDA loans. USDA programs are designed for home buyers with moderate to low income who are moving to designated rural areas. A down payment is not required and they can provide up to 100% financing. They’re best for borrowers with limited assets for purchase who are interested in buying property in a rural area. Your income must be at or below the low-income limit set in the area you want to buy in. Like FHA loans, they are only for primary residences and you will have to pay a mortgage insurance premium. You can research whether the area you’re looking in is a designated rural area and learn more about the income limits via the USDA.

Unsure if you qualify for one of these special government home loan programs? Contact one of our Loan Officers today to discuss your situation and learn more.

This is not a guarantee to extend consumer credit as defined by Section 1026.2 of Regulation Z. Programs, interest rates, terms and fees are subject to change without notice. Income restrictions, minimum credit scores, and other program requirements and qualifications may apply to certain programs. All loans are subject to credit approval and property appraisal. First Home Mortgage Corporation NMLS ID #71603 (www.nmlsconsumeraccess.org)

15-Year Fixed vs. 30-Year Fixed Rate Mortgages

As far as fixed rate mortgages go, you have two main term options: 15-year or 30-year. But what’s the difference between the two aside from how long they are? How do you know which option is right for you? Read on to find out!

 

What is a Fixed Rate Mortgage?

A fixed rate mortgage has an interest rate that remains the same for the entire life of your loan. This is in contrast to adjustable-rate loans which allow for yearly adjustments to the interest rate following a period where the rate is fixed. An important benefit of fixed rate mortgages is that since your rate is locked in and your monthly payments are predetermined, it’s easier to budget for and there are no surprises.

 

15-Year Fixed Rate Mortgages

15-year fixed rate mortgages have a term of 15 years. The primary benefit of a 15-year fixed mortgage is that you’ll save money on interest since you won’t be paying off the loan for as long. You also build equity in your home faster as a result. In many cases, you’re also able to secure a lower interest rate. You’re paying your home off twice as quickly compared to a 30-year fixed mortgage, so you’ll own your home and complete payments sooner. However, your monthly payments will be higher with a 15-year fixed mortgage than they would be with a 30-year one.

 

30-Year Fixed Rate Mortgages

 

30-year fixed mortgages have a term of 30 years. The primary benefit of a 30-year fixed mortgage is that your monthly payments are lower compared to that of a 15-year fixed rate mortgage. You may also qualify for a more expensive home with a 30-year fixed mortgage since you have longer to pay it off. That said, you also have to keep paying on it longer which means you pay more in interest than you would with a 15-year fixed mortgage.

 

Which Mortgage Term is Right for Me?

 

Whether a 15-year or 30-year fixed rate mortgage is going to be your best option depends on numerous factors. A key one to look at is how much you can afford to spend each month. If you’re able to afford higher payments, a 15-year fixed mortgage may be right for you. But if you’re concerned about being able to save for things like retirement, education, and emergencies, then the lower payments of a 30-year fixed mortgage may benefit you more. If you want to borrow a larger amount than you might otherwise be able to, a 30-year mortgage is probably your best option. However, if you’re more concerned with minimizing how much you pay in interest, a 15-year fixed rate mortgage is likely the way to go. It really depends on your financial situation and goals.

When it comes to determining the best loan option for your unique situation, your best bet is to talk things over with a knowledgeable professional. Contact one of our experienced Loan Officers today to discuss your options and learn more!

Questions to Ask When Applying for a Mortgage

There are a lot of factors to consider when beginning your journey towards a home loan. It can seem overwhelming at first, especially if you’re a first-time homebuyer. There are some questions you can ask your Loan Officer that can help clarify the situation and get you on the path to the best possible mortgage solution for your needs. Here are some of the questions that may prove helpful when pursuing a new mortgage.

What Types of Loans Are There?

There are many mortgage loan options available and it’s important that you understand what they are so you can ensure you choose the best one for your unique situation. Your Loan Officer should explain the difference between fixed and adjustable rates, the different terms available, and additional special programs you may qualify for. While you don’t need to be an expert on every loan option on the market, you should feel like you have enough of an understanding that you know the loan product you and your Loan Officer choose is the right one for you.

Do I Qualify for Any Special Programs?

When it comes to special programs and loan types, your Loan Officer will need to ask you some questions to learn more about you and your background in order to determine whether you qualify. For example, to qualify for a VA home loan, there are certain military requirements you must fulfill in order to be eligible. Your Loan Officer should also be able to fill you in on various other special programs such as down payment assistance programs or special programs for first-time homebuyers.

How Much Home Can I Afford?

Getting prequalified can help you determine how much you can afford to borrow. Prequalification offers an estimate of how much home you can afford based on your finances and credit. It’s beneficial to consult a Loan Officer prior to starting your home search as you’ll know what your budget is so you don’t waste time looking at homes beyond what you can afford.

What Is My Interest Rate and APR?

It’s important to understand what interest rate you’d be getting on your loan. You should be able to receive a quote from your Loan Officer. You may also want to discuss locking in your interest rate if it’s one you want to ensure doesn’t change. Additionally, you’ll want to ask about the annual percentage rate, or APR, for your loan. The APR is the annual cost of a loan expressed as a percentage and factors in fees and other charges.

How Much Do I Need to Save for a Down Payment?

How much you need to put down depends on your particular loan type and any special programs you may qualify for. The rule of thumb is generally 20 percent of the purchase price but sometimes you’re able to put down far less—or even nothing at all. However, be sure to ask about private mortgage insurance, or PMI, which you’ll likely have to pay if you put down less than 20 percent.

These are just a few of the many questions you can ask at the start of the mortgage process. When you work with an experienced Loan Officer, they will be able to answer these questions and more so you have a solid understanding of what to expect. If you’re thinking about buying or refinancing, contact one of our knowledgeable Loan Officers today to get your questions answered.

Understanding Refinancing

Before you decide to refinance your home loan, it’s important that you understand how it works. Refinancing can seem confusing or overwhelming, but it doesn’t have to be.

What is Refinancing?

Refinancing is the process of replacing your existing mortgage with a brand-new loan. In short, refinancing presents an opportunity to improve your current mortgage. It involves getting a new loan with new terms and using that money to pay off your old loan.

Reasons to Refinance

There are numerous reasons you may choose to refinance. Refinancing with a lower interest rate could result in lower mortgage payments, leaving you with extra money each month to save or spend on other things. If you refinance to a shorter loan term, you may see slightly higher monthly payments, but you’ll build equity faster and pay off your mortgage in less time. When it comes to cash-out refinances, you can turn your equity into cash that you are free to access and spend without tax penalty.

Is Refinancing Right for You?

Whether refinancing is right for you depends on lots of different factors. It’s important to consider your financial goals. Do your goals include lowering your monthly bills or shortening your loan term? Goals like these may be accomplished through refinancing. You should also look at your credit score. If your credit score falls within the exceptional or very good range (800+ or 740-700, respectively), you’re in a better position to refinance with a lower interest rate. How long you plan to stay in your home matters, too. Because of closing costs, it can take months or even years to break even and truly see savings. If you are planning to move or sell soon, refinancing may not be the best option. However, if you plan to stay in your home, it could save you money in the long run. If you’re thinking about making home improvements such as finishing a basement, remodeling a kitchen, or installing a new roof, cash-out refinancing may be the right move for you so you can put that money towards increasing the value of your home.

If you think it may be time to refinance your mortgage, contact one of our experienced and knowledgeable Loan Officers today to learn more and explore your options!

5 Things to Avoid During the Home Loan Process

When you’re pre-qualified for a home loan or beginning the mortgage application process, there are some actions you should avoid taking. These things could potentially delay your mortgage closing or even put you at risk of not being approved at all. Here are some things to avoid before your loan closes.

Avoid Making a Large Purchase

You’ll want to avoid making any large purchases regardless of whether it’s in cash or on credit. A large cash purchase will take away from your savings which you’ll need for a down payment and closing costs and a large credit purchase will increase your debt-to-income ratio and credit utilization which are used to qualify—or disqualify—you for a loan. It’s in your best interests to save large purchases for after your mortgage has closed.

Avoid Opening or Closing Lines of Credit

Your credit can be pulled at any point during the mortgage process up through the date of closing. Opening a new line of credit or closing an existing one can negatively impact your score which, in turn, negatively impacts your chances of getting approved. You want your credit to remain as stable as possible when applying for a mortgage, especially if you’ve already been pre-qualified. Pre-qualification doesn’t guarantee approval, and if your credit score changes, there’s a chance you may not be approved. You can continue to use your existing credit cards as normal but be sure to pay these bills on time and not rack up your spending.

Avoid Missing Credit Card, Bill, or Loan Payments

Payment history plays a huge role in determining your credit score which is an important part of determining your eligibility for a loan. It is essential that you pay your bills and other financial obligations on time. Just one late payment can negatively impact your credit score. You should pay especially close attention to your spending during the loan process to ensure you aren’t spending more than you’re able to pay off in a timely manner.

Avoid Starting a New Job

Situations where you are suddenly out of work can be unexpected and out of your control. However, if you’re employed but considering changing fields, seeking employment elsewhere, or becoming self-employed, it’s best that you wait until your mortgage has closed before doing so. Lenders examine your employment history to ensure you’ve had steady employment and income. Unemployment may result in disapproval, particularly when you’re applying on your own rather than jointly, and a change in jobs can require additional documentation which can slow the process down.

Avoid Making Large Deposits

When you’re waiting for mortgage loan approval, you should avoid making any sizable deposits. Payroll deposits and transfers between accounts are generally fine, but other larger deposits (generally over $1,000) must have an explanation. If you do deposit a notable amount of money, your lender will likely ask for an explanation and proof of its origin which can slow down the loan process or even lead to a denial if you aren’t able to properly disclose information about the deposit. In any case, it’s best to hold off on depositing larger amounts until after your loan has closed. If you’ve received or are anticipating receiving a gift to go towards your down payment, it’s best to discuss this with your loan officer at the start of your mortgage application so you can properly document it and avoid any issues in processing your application.

When you work with a knowledgeable mortgage professional, they are able to walk you through the process and make sure you avoid any missteps that could slow down or jeopardize your loan approval. Contact one of our experienced loan officers today to learn more and start your home loan journey!

Does Your Credit Score Spook You?

Your credit score affects more than just your mortgage rate. It also plays a role in how much you will get approved for, what you need to put down, and what you will pay for your private mortgage insurance. While it is not impossible to buy a home with a lower score, you will need to keep in mind how it will affect your qualification. Those with higher scores are more likely to receive a lower rate. Most lenders view a potential home buyer with a high credit score as more dependable and less likely to default on mortgage payments.

It’s best to know and understand your credit score in the months leading up to applying for a mortgage, even if you know your score is in good shape. This will give you time to either improve your credit or ensure that you keep it as high as possible before you apply. Here is an estimated breakdown of how credit scores are judged:

  • Excellent = 720 and above
  • Good = 690 – 719
  • Fair = 630 – 689
  • Poor = 629 and below

Taking steps to build you credit can help put you in the best possible position when you apply for a mortgage. Some of the best ways to build your credit are:

  • Make your rent, credit card, and any loan payments on time
  • Check for errors on your credit report and try to resolve them
  • Keep your credit utilization below 30%
  • Work with a credit counselor or loan officer

If you are not able to improve your credit score in time to apply for a mortgage, there are loan options you may still qualify for. For example, FHA loans are popular among first time home buyers with less than excellent credit scores. When you begin the mortgage process, your Loan Officer will order a credit report and will help you explore all your options to find the best fit for you! Contact one of our highly trained Loan Officers to learn more!

Types of Mortgage Loans

There are many mortgage types. The one that is best for you is dependent on your particular situation and needs. It’s important to understand what options are available and what makes each one unique. Here are some of the primary home loan types.

Conventional Home Loans

Conventional home loans are what most often come to mind when we think of mortgages. They are loans that either need no mortgage insurance or are be insured by a private company. Conventional loans can either be conforming or non-conforming. Conforming loans meet the guidelines set by Fannie Mae or Freddie Mac, the government-sponsored entities that back most mortgage loans. The most common type of non-conforming conventional home loan is a jumbo loan which is used when the loan amount is higher than the loan limit set by Fannie Mae and Freddie Mac. Jumbo loans allow a borrower to purchase a higher priced home.

Conventional loans can either have a fixed or adjustable rate. As the names suggest, fixed-rate loans have interest rates that stay the same for the whole life of your loan while adjustable rate mortgages may allow you to get a low introductory interest rate that may increase over time. Fixed-rate loans are generally best for buyers planning to stay in their homes long-term.  An adjustable rate may be a good option if you’re looking to keep your loan for a shorter period.

Government Loans

The U.S. government is not a mortgage lender but does offer certain programs through various agencies in order to better serve borrowers in unique circumstances. These programs are available only though approved lenders such as First Home Mortgage.

Some of the most common government loans include FHA, VA, and USDA loans. The Federal Housing Administration insures FHA loans which are geared toward borrowers with limited savings and lower incomes. The Department of Veterans Affairs insures VA loans which allow service members and their spouses to purchase a home with little to no down payment. The U.S. Department of Agriculture insures USDA loans to home buyers with low to moderate income who are buying in certain designated rural areas.

Renovation Loans

Renovation loans are just that, loans to fund the cost of renovating your home. These loans are available to existing homeowners as well as to homebuyers who have found a home to purchase that needs fixing up. Common repairs and remodels covered by renovation loans include garages, driveways, roofs and gutters, room additions, plumbing and electrical, basement finishing, landscaping and fencing, doors, windows, and decks, patios, and porches.

Two of the most common renovation loans are FHA 203(k) and FNMA HomeStyle loans. The Federal Housing Administration offers FHA 203(k) loans which cover the purchase of a primary residence and the repairs in one mortgage. There are two types of FHA 203(k) loans: Standard and Streamline. Standard FHA 203(k) loans give borrowers the flexibility to finance major rehabilitations that cost a minimum of $5,000, while the Streamline FHA 203(k) provides financing for minor repairs and renovations up to $35,000. A FNMA HomeStyle loan allows the purchase and renovation of either a primary residence, second home, or investment property in a single mortgage up to the lending limit with a minimum down payment of 5%.

The best way to determine the mortgage type that’s best for you is by talking to a knowledgeable professional. Contact one of our experienced loan officers today to learn more about loan types and find the option that’s right for you!

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