Are you thinking about buying a home or refinancing your mortgage this year? If so, you’ll want to review these noteworthy nuggets before you make that call.
1. You can buy a home without a down payment.
If you don’t have enough cash to make a 20% down payment for a conventional mortgage, there are loan programs that allow buyers to put down a small amount or skip the down payment altogether.
2. VA loans aren’t just for veterans.
The Veterans Administration (VA) also offers mortgages to qualifying active duty military and family members.* Low interest rates and zero money down make this financing very attractive.
3. You don’t need perfect credit to qualify for a mortgage.
Borrowers with a credit score of 580 or above – and a down payment of at least 3.5% of the home’s purchase price – may be eligible for a mortgage backed by the Federal Housing Administration (FHA). If your credit score is 500-579 and you have a 10% down payment, you may also qualify for an FHA loan.**
4. You may be able to forgo closing costs or roll them into your mortgage.
Another up-front expense is your closing costs, which may include title insurance, inspection, origination fees, appraisal and escrow fees. Some loan options allow you to roll your closing costs into the total amount of money you borrow. In exchange for this benefit, the lender typically charges a slightly higher interest rate.
5. Don’t buy more house than you can afford.
Depending on who you talk to, most experts agree that you should only spend 25-30% of your income on a mortgage. If you’re in the process of starting a family – and anticipate having one parent stay home with the children – then your housing percentage should be based on one income.
6. Stash some cash.
Buying or renovating a home is exciting, so it’s easy to spend more money than you intend. This can be avoided by creating a realistic housing budget that includes money set aside for unexpected costs or a change in household income. Also, in some cases, reserves are required for mortgage approval.
7. Be honest with your mortgage professional.
Choose a mortgage loan originator (MLO) who will work with you to candidly assess your goals and purchase power. This will ensure that you choose the right mortgage type and term for your individual needs.
8. You may be able to save money by refinancing to a lower-term loan.
Even if a 30-year mortgage was the right decision when you purchased your home, now might be a good time to evaluate refinancing to a 15-year mortgage. Of course, there are many variables – including interest rate, closing costs, how long you plan to remain in your home, etc. – but you may be able to pay less interest overall when you refinance.
9. You can tap into your home’s equity with a cash-out finance.
Equity is the amount already repaid on a mortgage, adjusted for any rise or fall in the home’s value (with any existing loans subtracted). Although some refinance programs have specific parameters about how you can use the money, a cash-out refinance can be used for nearly anything.
Buying or refinancing a home involves a wide range of details, so it’s easy to overlook some of these features and options. At Stearns, we believe that an educated borrower is a satisfied borrower. That’s why we take the time to share tips and tidbits that you may not come across elsewhere.
* Most members of the military, veterans, reservists and National Guard members are eligible to apply for a VA loan. Spouses of military members who died while on active duty or as a result of a service-connected disability may also apply. Stearns Lending, LLC is a VA-Approved Lending Institution, and is not acting on behalf of or at the direction of Veterans Affairs or the Federal government.
** Stearns Lending, LLC is an FHA Approved Lending Institution, and is not acting on behalf of or at the direction of HUD/FHA or the Federal government.
- By Janelle Sabin,
Feb 16, 2017