All You Need To Know About Home Loans

Here at Destinations Credit Union, we provide a variety of products and services to meetimage of a mortgage application your specific financial needs and in the most ideal ways possible. One such example is our home loans. Let’s take a closer look at this product and how its application process works.

What is a home loan?

A home loan, or a mortgage, enables you to purchase a home without having to foot all the cash out of your pocket when purchasing. You will, however, need to make a down payment, which is typically between 3.5-20% of the home’s appraised value, along with closing costs and some other fees. The lender then finances the rest of the purchase. You’ll repay the loan, along with interest, over the course of (generally) 15 to 30 years.

Are all home loans alike?

Before you get started, you’ll need to choose a mortgage type. A conventional loan will necessitate a 5-20% down payment on the home.

There’s also an FHA loan, which only requires a down payment of 3.5%, but necessitates mortgage insurance. If you’re a military veteran, consider obtaining a VA loan, which lets you buy a home with zero down payment.

Once you’ve chosen the kind of loan which is best for your scenario, you may be given a choice of repayment arrangements for that loan.

Here are the three common types of mortgages:

  1. 30-year fixed-rate mortgage. The interest rate on this 30-year mortgage will remain fixed no matter the changes to the national rate.
  2. 15-year fixed-rate mortgage. This mortgage will also have a fixed interest rate, but the term lasts just 15 years. The monthly payments will be higher, but the overall interest paid over the course of the loan will be significantly lower.
  3. Adjustable-rate mortgage (ARM).  An ARM gives the borrower a lower interest rate in the early years of the loan, and then a gradual increase (adjustment) in rate over the rest of the life of the mortgage if rates are going up.

What do I need to know before applying for a home loan?   

A home is likely to be the largest purchase you will ever make. To qualify for one, you will need to prove that you are living a financially responsible life and that you can afford the monthly payments.

The primary way lenders gauge your financial responsibility is through your credit score. This number is like a grade that tells lenders how you’ve handled your past credit card accounts and other debts. It will include the length of time you’ve had your credit cards and loans open, the timeliness with which you’ve made your payments, the trajectory of your debt and the amount of available credit you might use. Most lenders will only grant a home loan to borrowers with a credit score of 650 or higher. You can check your score for free on Credit Karma. You might also consider ordering a free credit report from all three major credit bureaus once a year at AnnualCreditReport.com.

During the time leading to your mortgage applications, make sure to pay all your bills on time, don’t open new credit cards and work on paying down overall debt. A higher credit score will help you get approved quicker and it will net you a lower interest rate on your loan.

Another crucial factor in determining your eligibility for a mortgage is your debt-to-income ratio, or your DTI. Lenders want to know how big your collective outstanding debt will be in relation to your income if you receive the home loan. Most lenders will only allow a maximum DTI of 36%.

When should I apply for a home loan?

While you won’t need the loan until you are ready to close on a house, it’s a good idea to start the process before you begin house-hunting. Your lender will let you know whether you can expect to be approved for a loan and will provide you with an estimate of how much house you can afford so you don’t face disappointment later.

When initially applying for a home loan, ask your lender for a letter of pre-approval. This letter confirms you are pre-approved for a home loan up to a specific amount. Having this letter in hand shows real estate agents and sellers that you are serious about buying. Most pre-approvals are only good for 60-90 days, so make sure you’re ready to start house hunting before you get yours.

How do I apply for a home loan?

To apply for a home loan at Destinations Credit Union, visit our First Mortgage Center online – you can get information, speak to a Loan Officer or apply online. Make sure all of your financial paperwork is in order and hold onto all important financial documents in the months leading up to your application.

To make it easier, we’ve created a list of the information and documents you’ll need:

  • Name of current employer, phone and street address
  • Length of time at current employer
  • Official position/title
  • Salary including overtime, bonuses or commissions
  • Two years’ worth of W-2s
  • Profit & loss statement if self-employed
  • Pensions and Social Security check stubs
  • Proof of child support payments
  • Copies of alimony checks
  • Statements for all checking and savings accounts
  • Investments (stocks, bonds, retirement accounts)
  • Proof of any gifted funds from relatives
  • Car loan information

You will also need to explain any blemishes on your financial record; including bankruptcies, collections, foreclosures and delinquencies.

If you’re ready to apply for a home loan, visit our First Mortgage Center online.  We’re completely committed to your financial success.

Your Turn: How did you prepare for a home loan application? Share your tips with us in the comments.

SOURCES:
https://www.thebalance.com/before-you-get-a-mortgage-315700

https://www.rubyhome.com/blog/mortgage-loan-process/
https://thelendersnetwork.com/what-is-mortgage/

Buying A Home In The Winter

Q:  I’m ready to buy a new home and I’d rather not wait until spring. What do I need to house for sale with snow on the groundknow about buying a house during the winter?

A:  Spring and summer are, by far, the most popular seasons for house-hunting. But, that shouldn’t stop you from looking for your dream home in middle of winter. Though icy driveways and snowed-out open houses can be less than thrilling, there are surprising benefits to purchasing a home during the coldest time of year.

Let’s explore the various aspects of buying a home in the winter.

The challenges

House-hunting during the winter months has lots of obvious disadvantages, and some less obvious ones as well.

First, it can be difficult to check out a property that is covered in snow or ice. A lush yard of trees, bushes and blossoming flowers can look stark and bare during cold winter months. There will also be some structural elements, like the septic tank, roof and AC system, that can be difficult or impossible to inspect during the season. With fewer hours of daylight, it can also be harder to get a good look at the home, especially if your schedule isn’t flexible.

Home-shopping during the winter also means working with fewer options on the market. Sellers know that spring is peak season for house-hunting, so most will wait until the weather warms up to list their house for sale.

Finally, if you decide to go through with a sale during the winter, you can expect delays throughout the home-buying process. Inclement weather can push off the scheduling of important events, like the inspection, appraisal and even the final walk-through or closing.

The advantages

You might be working with slimmer pickings in winter, but you’ll also be dealing with more motivated sellers. Homeowners who choose to list their properties for sale during the winter are likely quite eager to sell. You’ll also find some homes that have been on the market since the previous spring with an equally motivated seller. Plus, the smaller pool of buyers during the winter puts you at an immediate advantage. These factors will make it easier for you to negotiate for a lower price. In fact, according to research by Zillow, homes that are listed for sale in December generally sell for $3,100 less than average.

You can also use your favorable position to ask the seller to throw in extras, like window treatments, light fixtures, appliances and furniture.

Buying a home in the winter can also mean enjoying better service from all the professionals you work with during the process. Your Realtor, inspector, lender and mover will have fewer clients during the winter and will be able to provide you with optimal service, as well as be more available to promptly answer your questions.

Finally, inspecting a home during harsh weather will enable you to see how the house handles the cold, snow and ice. You’ll also be able to check out the heating system so there are no surprises after moving in.

Tips and tricks

If you’ve decided to go house-hunting during the winter, keep these tips in mind:

  • Ask to see photos of the home during warmer seasons. To get a picture of the property in its prime, ask the seller to provide pictures showcasing the yard, pool, patio, flowerbeds and more during the spring or summer months.
  • Take full advantage of the buyer’s market and offer a starting bid that is well below the listed price.
  • Ask for documentation for home features that are difficult or impossible to check out because of weather. Have the seller provide proof of the last roof inspection or replacement, the most recent day of service for the septic tank and the age of the A/C units. If something needs fixing, ask for a credit toward its repair or renegotiate the home’s selling price.
  • Don’t rush your decision. A narrow selection of houses doesn’t mean you need to compromise on the home of your dreams. If you can’t find a house that checks off all or most of the features on your list, wait it out a bit. Next season’s sellers will start listing their homes right after the Super Bowl, so be patient and hang tight until you find what you’re seeking.

The real estate market may cool down during winter, but if you know how to overcome the challenges and optimize the advantages, you can walk away with a hot deal on a home during the coldest time of year.

Are you in the market for a new home? Stop by Destinations Credit Union to ask about our home mortgage options! We’ll help you move into your dream home with the most favorable terms.

Your Turn: Did you close on a home during the winter? Share your best tips with us in the comments.

SOURCES:
http://www.freddiemac.com/blog/homeownership/20170129_pros_cons_buying_home_in_winter.page

https://realestate.usnews.com/real-estate/articles/should-you-consider-buying-a-home-during-the-winter
https://easymortgagecompany.com/5-advantages-buying-home-winter/
https://www.trulia.com/blog/what-you-need-to-know-about-buying-a-home-this-winter/
https://www.fortunebuilders.com/buying-a-home-in-winter/

 

Should I Be Concerned About Rising Mortgage Rates?

On June 13th, the Federal Funds Target rate was officially raised by .25%. This increase Two women reviewing loan documentsmarks the second time interest rates were raised in 2018 and experts expect another two increases this year.

The rate increase was prompted by optimistic feelings about the general state of the economy. The Fed pronounced the economy to be rising at a “solid rate” and claimed that inflation rates are close to their target goal of 2%. Most notably, unemployment rates have dropped to just 3.8% in May, 2018, tying with April 2000 for the lowest rate since 1969.

While this might be good news for the economy, all these indicators point to rising interest rates-and that might not be the best news for current and hopeful homeowners.

Is it a good time to buy a house? Should you choose an ARM or a fixed-rate mortgage? If you’re a homeowner, should you be taking any action now?

So many questions-and we’ve got answers! Read on for what you need to know about the rising interest rates and what it all means for you.

What you can expect for the rest of the year

Here’s what experts anticipate for the remainder of 2018:

  • More market increases. The fed is expected to raise interest rates again at their meetings in September and December.
  • A healthy economy that keeps growing. With unemployment rates at record lows and the recent tax cuts keeping the economy strong, business is booming across the country. Hiring is up and firing is down. If you’re an employee, you can anticipate a raise in 2018 and the security of a job you can hold onto for years.
  • More homeowners choosing to stay put. In 2017, U.S. homeowners gained $1 trillion in equity. This means most homeowners are now sitting on newfound wealth. It now makes more sense for them to tap into their home’s equity to fund renovations on their homes instead of going through the hassle and paying the costs of a move. Cash-out refinances, in which the homeowner takes out a bigger mortgage and pockets the difference in cash, will be especially popular. When homeowners stay put, it can create a tighter housing market which can make prices rise.

Why a healthy economy means higher mortgage rates

When the economy is thriving, inflation increases. This causes investors to seek higher returns for their investments. The only way to keep investors interested in mortgage bonds when the economy is booming is to raise interest rates on mortgages.

It’s more that, though. The Feds want to keep inflation stable so that it doesn’t spikesuddenly and trigger a market panic which can lead to a crash or a recession. By gradually increasing interest rates, they can keep the economy growing at a steady, stable pace.

What do mortgage rates look like now?

Mortgage rates have already surpassed predictions set by major housing agencies at the end of 2017. As of August 1st, 2018, mortgage rates are hovering between 4.5% and 5% and are not expected to drop anytime soon. If anything, they’ll only continue rising throughout the rest of the year.

If you’re a homeowner

If you own a home and haven’t yet locked in your interest rate, now is the time to do so. Rates are only going to continue climbing and you want to get the best interest rate for your mortgage before it gets too expensive to handle.

If you haven’t already, consider refinancing your existing mortgage to one with a lower interest rate.

If you’re in the market for a home

House prices have soared over the last seven years. According to the National Association of Realtors, the average price tag for a home is now $264,800, up by almost 100K from 2011. When you adjust these numbers for inflation, house prices have seen a 33% increase in seven years.

If you’re house-hunting now, don’t pay more for your mortgage than you absolutely have to.

Housing agency Freddie Mac urges new-homeowners to shop around before choosing a mortgage. Get as many quotes as you can, do your research, and make some more phone calls. You do it before every other major purchase; why not shop around when it comes to a decision that will affect your monthly mortgage payments for years?

“One additional mortgage quote could save you $1,500 over the life of your loan,” Freddie Mac shares. “Five quotes could save $3,000.”

It’s also a good idea to consider an adjustable-rate mortgage (ARM). ARMS are 30-year loans that have fixed rates for a specified amount of time, usually 3-7 years. Rates will then change according to national rates. When mortgage rates are rising, ARMs are usually priced more reasonably than fixed-rate loans. 30-year fixed rates, now priced up to 5%, hovered in the high 3s throughout 2017. ARMs are now in the same range.

ARMs can give you a fixed, stable payment for up to 7 years. After the initial period, they can be adjusted just once a year-and there are limits to how much the rate can be increased.

Considering a refinance? Shopping for a mortgage? Don’t forget to call, click, or stop by Destinations Credit Union today to learn about the mortgage products we have available for you.

Your Turn: Have you taken any action in response to the Fed’s interest rate increase? Share it with us in the comments!

SOURCES:
https://themortgagereports.com/32667/mortgage-rates-forecast-fha-va-usda-conventional

https://www.bloomberg.com/news/articles/2018-06-20/fed-s-powell-says-case-for-gradual-rate-hikes-remains-strong
https://www.nar.realtor/research-and-statistics/housing-statistics
https://www.forbes.com/sites/advisor/2018/06/19/fed-now-hinting-at-four-potential-rate-hikes-in-2018/#20c2283f2d6a
https://www.nerdwallet.com/blog/mortgages/adjustable-rate-mortgage-good-bad-idea-rates-rise/