Alaska First-Time Homebuyer Programs

The Alaska Housing Finance Corporation (AHFC) offers low-interest mortgage loans, and down payment and closing cost assistance to first-time home buyers and repeat buyers. This article takes a look at the requirements and provides links to the homebuyer program page for every city in Alaska. Get Pre-Approved for a Mortgage and Check Rates If you […]

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Source: thelendersnetwork.com

Choosing the Best Mortgage Lender

The process of finding the best mortgage loan begins with finding the best mortgage lender. They can ensure this process runs smoothly, you get the best rates, and any issues are dealt with in a timely and satisfactory manner.

But with so many different lenders, how do you know which one is right for you?

How to Find the Best Lender and Get the Best Mortgage Rates

The following tips should help you to find the best mortgage rates and lenders, potentially saving you a great deal of time, stress, and money.

1. Improve Your Credit Score

Your credit score is an important part of the mortgage process and is considered for all loans and new lines of credit. It tells lenders what kind of borrower you are and is used to determine the likelihood that you will default on your debt. If the likelihood is high and your credit score is low, you may be refused a new mortgage altogether.

There are types of mortgages that don’t require high credit scores, including those backed by the FHA. However, your credit score will still be considered and will influence the interest rate you’re offered.

2. Improve Your Debt-to-Income Ratio

Can your finances bear the weight of a new loan, one that comes with a large upfront payment and a large monthly payment? By calculating your debt-to-income ratio you can find out.

Your debt-to-income ratio estimates your affordability by comparing your monthly debt payments to your gross monthly income. For example, if you have an income of $3,000 and monthly debt payments of $600, your debt-to-income ratio is 20%, as $600 is 20% of $3,000.

Anything under 43% should be accepted once your mortgage payments have been added to the total. Some mortgage lenders will go as high as 50%. However, the higher it is, the more at-risk you are by adding new debt to your total, because once you add living costs and bills to the mix, you’ll be left with very little cash and will be one unexpected bill from complete disaster.

Reduce your debt-to-income ratio as much as possible before you apply for any new credit.

3. Reduce Your Budget

The right loan amount is more important than the right mortgage lender. The majority of borrowers overestimate how much they can afford, stretch their budgets to the maximum, and suffer the consequences years down the line. 

Most homeowners have regrets and for many, the biggest regret is not buying a cheaper house and believing they can afford more than they actually can. Your monthly mortgage payment shouldn’t stretch you too thin, nor should it leave you crippled financially. There should be some room to maneuver, some room to make extra payments when you can and to use that money for other bills and expenses when you can’t.

Think twice about spending big on your dream home and look at the benefits of getting a cheaper house. For instance, you’ll require a smaller mortgage total, could secure a better interest rate, can get a shorter term, and, therefore, will pay much less over the life of the loan.

A fixed-rate mortgage over 15-years will cost less than the same rate over 40-years. With the former, as much as 60% of your initial monthly payment could go towards the principal, and that will increase every month from there. With the latter, you could be paying just 20% to 30% towards your principal, which means you’ll clear equity at a snail’s pace.

4. Think About Your Options

You have more options than you realize when it comes to mortgage lenders and loan programs. These options include:

Conventional Loans

A conventional home loan is one that’s not backed by any government agency and typically requires a 20% down payment. These loans often used a fixed rate of interest but there are also adjustable-rate versions known as Hybrid ARMs.

Conventional loans can be conforming, which means they are less than the maximum limits set by the Federal Housing Finance Agency and meet the standards required by Fannie Mae or Freddie Mac, or non-conforming. There are also low down payment versions where as little as 3% is required. However, in such cases, borrowers will be asked to pay Private Mortgage Insurance (PMI) until 20% equity is attained.

FHA Loans

​FHA loans are backed by the Federal Housing Administration and offered by traditional lenders. The down payments are smaller and there is built-in insurance protection to cover the lender in the event that the borrower fails to keep up with monthly mortgage payments.

Borrowers need a credit score of 500 and a down payment of 10% or a credit score of 580 and a down payment of 3.5% to get an FHA loan. As a result of these reduced requirements, FHA loans may be better suited for most first-time home buyers, but that doesn’t necessarily make an FHA loan the best choice. What’s more, as they are offered by multiple mortgage companies, you still need to find the right lender and lock-in the best rate.

VA Loans

Offered by the Department of Veteran Affairs, these loans make it easier for military veterans and active personnel to get home loans. You can get a VA loan with no down payment and 90% of borrowers do just that. However, as with all other types of loans, by increasing your down payment you can reduce your rate.

USDA Loans

Offered by the United States Department of Agriculture, these loans don’t require a down payment and can be used for homes in rural areas.

Down Payments

One of the most important aspects of the home buying process is the down payment, which is the amount that you pay upfront. The higher this amount is, the lower your mortgage loan needs to be and the less interest you will pay as a result. What’s more, a down payment can also take you above the magical 20% mark with a conventional loan. 

Not only will this massively reduce your total interest, but it will negate the need for Private Mortgage Insurance (PMI) which could cost you as much as $100 a month on the average house purchase.

Many borrowers overlook these benefits because they focus on the short term. They don’t care if they are paying 50% more over the life of the loan, as the house is still technically theirs and the end result will be exactly the same. If they’re not paying much more per month and don’t notice the impact on a month to month basis, what’s the point?

The point it, you could save huge sums of money over the life of the loan and own 100% of your house much sooner. This gives you more options in the future with regards to equity loans, cash-out refinancing, and more. 

It also prevents any issues for your heirs when if you die before the mortgage clears in full. This way, you’re leaving them a house that is fully paid off and can be passed on directly, as opposed to one that has debt attached and needs to be handed down with that debt and that responsibility.

5. Compare and Get Pre-Approval

The next step is to work with mortgage lenders and mortgage brokers, see which ones work best for you and can provide you with what you need. You can look into online lenders, banks, and credit unions, check online reviews, speak with friends and family, ask experts, and generally do everything you can to find the best one. Ultimately, however, it all comes down to what they can offer you.

Once you find the one that is right for you, the one that offers the lowest rate and gives you what you need, you can get a pre-approval. The lender will check your credit report and give you a loan estimate, which will give you an idea of how much you can borrow and what you can expect to pay.

It’s worth noting, however, that this pre-approval isn’t set in stone. It is subject to additional checks performed prior to the loan. If you apply for a lot of credit cards and lose your job between pre-approval and mortgage, you’ll likely be rejected and that contract will be ripped up.

6. Check the Small Print

Don’t let your excitement get the better of you, don’t be too eager. Read the small print, make sure you understand the loan terms and know what sort of origination fees and other closing costs you’ll be expected to pay. These differ from lender to lender and some of them can be negotiated, so don’t assume that they are standard across the board and can’t be changed.

If you’re not sure about any step of the process, ask questions. If you feel a little out of your depth, do some more research. We have countless articles on mortgages here and can help with everything from mortgage terms to the actual mortgage application, after which we can guide you towards the best strategies for paying off your balance.

Choosing the Best Mortgage Lender is a post from Pocket Your Dollars.

Source: pocketyourdollars.com

First Time Home Buyer Programs for Veterans

Numerous programs exist to help veterans and service members who are first-time buyers with their closing costs and other expenses.

Indeed, it’s perfectly possible for those who are eligible for VA home loans to become homeowners with very little — or even nothing — in the way of savings.

Check today's VA rates by completing this quick online form.

Advantages of VA home loans for first-time buyers

The most famous housing benefit associated with the VA loan program is the zero down payment requirement. That can be hugely valuable for first time home buyers.

But it’s just one of a whole range of advantages that come with a VA home loan. Here are some more.

Low mortgage rates for VA loans

According to the Ellie Mae Origination Report, in October 2020, the average rate for a 30-year, fixed-rate mortgage backed by the VA was just 2.75%. That compares with 3.01% for conventional loans (ones not backed by the government) and 3.01% for FHA loans.

So VA home loans have lower rates. And that wasn’t just a one-time fluke. VA mortgage rates are lower on average than those for other loans — month after month, year after year.

Lower funding fees for first-time buyers

When you buy a home with a VA loan, you need to pay a funding fee. However, you can choose to pay it on closing or add it to your loan so you pay it down with the rest of your mortgage.

But, as a first-time buyer, you get a lower rate. For you, it’s 2.3% of the loan amount (instead of 3.6% for repeat purchasers) if you make a down payment between zero and 5%.

That’s $2,300 for every $100,000 borrowed, which can be wrapped into the loan amount. It’s a savings of $1,300 per $100,000 versus repeat buyers.

Put down more and your funding fee drops whether or not you’re a first-time buyer. So it’s 1.65% if you put down 5% or more, and 1.4% if you put down 10% or more.

Although it might seem like just another fee, the VA funding fee is well worth the cost since it buys you the significant financial benefits of a VA home loan.

No mortgage insurance for VA loans

Mortgage insurance is what non-VA borrowers usually have to pay if they don’t have a 20 percent down payment. Private mortgage insurance typically takes the form of a payment on closing, along with monthly payments going forward.

That’s no small benefit since mortgage insurance can represent a significant amount of money. For example, FHA home buyers pay over $130 per month on a $200,000 loan — for years.

Mortgage insurance vs funding fee

Let’s do a side-by-side comparison of the mortgage insurance vs. funding fee costs of a $200,000 loan:

  VA Loan FHA Loan
Payable on closing $4,600* $3,500
Payable monthly $0 $133 per month**
Paid after five years (60 months) $4,600 $11,500

*First-time buyer rate with zero down payment: 2.3%. $200,000 x 2.3% = $4,600
** $200,000 loan x 0.8% annual mortgage insurance = $1,600 per year. That’s $8,000 over five years. $1,600 divided by 12 months = $133.33 every month

It’s clear that mortgage insurance can be a real financial burden — and that the funding fee is a great deal for eligible borrowers.

Better yet, that makes a difference to your buying power. Because, absent mortgage insurance, you’re $133 a month better off. And that means you can afford a higher home purchase price with the same housing expenses.

Ready to buy a home? Start here.

Types of first-time homebuyer programs for VA loans

You may find two main types of assistance as a first-time buyer:

  1. Down payment or closing cost assistance
  2. Mortgage credit certificates

Down payment and closing cost assistance

There are thousands of down payment assistance programs (DAPs) across the United States and that includes at least one in each state. Many states have several.

Each DAP is independent and sets its own rules and offerings. So, unfortunately, we can’t say, “You’re in line to get this …” because “this” varies so much from program to program.

Some help with closing costs as well and down payments. Some give you a low-interest loan that you pay down in parallel with your main mortgage. Others give “forgivable” loans that you don’t pay back — providing you stay in the home for a set period. And some give outright grants: effectively gifts.

Mortgage credit certificates (MCCs)

The name pretty much says it all. In some states, the housing finance agency or its equivalent issues mortgage credit certificates (MCCs) to homebuyers — especially first-time ones — that let them pay less in federal taxes.

The Federal Deposit Insurance Corporation explains on its website (PDF):

“MCCs are issued directly to qualifying homebuyers who are then entitled to take a nonrefundable federal tax credit equal to a specified percentage of the interest paid on their mortgage loan each year. These tax credits can be taken at the time the borrowers file their tax returns. Alternatively, borrowers can amend their W-4 tax withholding forms from their employer to reduce the amount of federal income tax withheld from their paychecks in order to receive the benefit on a monthly basis.”

In other words, MCCs allow you to pay less federal tax. And that means you can afford a better, more expensive home than the one you could get without them.

Speak with a mortgage specialist today.

Dream Makers program

Unlike most DAPs, the Dream Makers Home Buying Assistance program from the PenFed Foundation is open only to those who’ve provided active duty, reserve, national guard, or veteran service.

You must also be a first-time buyer, although that’s defined as those who haven’t owned their own home within the previous three years. And you may qualify if you’ve lost your home to a disaster or a divorce.

But this help isn’t intended for the rich. Your income must be equal to or less than 80% of the median for the area in which you’re buying. However, that’s adjustable according to the size of your household. So if you have a spouse or dependents, you can earn more.

It’s all a bit complicated. So it’s just as well that PenFed has a lookup tool (on the US Dept. of Housing and Urban Development (HUD’s) website) that lets you discover the income limits and median family income where you want to buy.

What help does the Dream Makers program offer?

You’ll need a mortgage pre-approval or pre-qualification letter from an established lender to proceed. But then you stand to receive funds from the foundation as follows:

“The amount of the grant is determined by a 2-to-1 match of the borrower’s contribution to their mortgage in earnest deposit and cash brought at closing with a maximum grant of $5,000. The borrower must contribute a minimum of $500. No cash back can be received by the borrower at closing.”

So supposing you have $2,000 saved. The foundation could add $4,000 (2-to-1 match), giving you $6,000. In many places, that might easily be enough to see you become a homeowner.

You don’t have to use that money for a VA loan. You could opt for an FHA or conventional mortgage. But, given the advantages that come with VA loans, why would you?

The Dream Makers program is probably the most famous of those offering assistance to vets and service members. But there are plenty of others, many of which are locally based.

For example, residents of New York should check out that state’s Homes for Veterans program. That can provide up to $15,000 for those who qualify, whether or not they’re first-time buyers.

Start your home buying journey here.

State-By-State Home Buyer Assistance Programs

We promised to tell you how to find those thousands of DAPs — and the MCC programs that are available in many states.

It takes a little work to find all the ones that might be able to help you. But you should be able to track them down from the comfort of your own home, online and over the phone.

A good place to start is the HUD local homebuying programs lookup tool. Select the state where you want to buy then select a link and look for “assistance programs.”

Your best starting point is probably the state’s housing finance office though it might be called something slightly different. You should find details of programs or just a list of counties with phone numbers. Call the number where you want to buy, explain your situation and ask for advice. It’s their agents’ jobs to point you to local, state, or national programs that can help you.

If you look in the right place, you could secure some very worthwhile financial help to assist you in buying your first home.

Check today's VA rates by completing this quick online form.

Source: militaryvaloan.com

Moving to the Country? This Overlooked Loan Makes It So Easy

country homexavierarnau / Getty Images

With the COVID-19 pandemic still going strong, many city dwellers may be considering a move to the country—and there’s a specific type of mortgage that can help make this a reality, called a USDA loan.

Offered by the U.S. Department of Agriculture and backed by the agency’s Rural Development Guaranteed Housing Loan Program, these mortgages are designed to help buyers with moderate or low income purchase property outside cities.

They accomplish this by offering several key benefits—such as low or no down payments and looser qualifications for income and credit history.

“More people should absolutely consider using USDA loans to finance their homes,” says Jan Hadder, regional vice president of the builder division at Silverton Mortgage in Columbia, SC. “If you’re not living in the city, this can be a great option to finance your home.”

USDA loans could be a boon to the wave of buyers who are currently contemplating fleeing cities right now.

As it happens, searches for homes in rural ZIP codes jumped more than 15% this May, compared with a year ago, according to realtor.com® data.

Yet many Americans aren’t aware of USDA loans, or assume that they don’t qualify. They may also have other assumptions about these mortgages that aren’t true or in step with recent changes in the terms.

If you want to avoid overlooking this hidden financing gem, here are a few things to know about USDA loans today.

You don’t have to buy a house in the boonies

The biggest misconception about USDA loans is that you have to live in the middle of nowhere.

In reality, homes qualify as long as they’re located outside a metropolitan area. In fact, communities with populations of up to 35,000 may be fine. The USDA offers an online map where you can search for properties that are eligible for the loans.

Matt Ronne, a loan originator at Motto Mortgage Preferred Brokers in Athens, TN, says USDA loans are a “vital asset” to home buyers in his area of southeastern Tennessee.

“It has been a high-demand product,” he says. “My county, McMinn, and most of the surrounding counties are 100% eligible for this type of financing, as long as those clients meet the credit, income, and property requirements.”

You don’t have to be destitute—and income limits recently increased

“Many people think that the USDA loans are meant to be subsidized housing, or that they are only intended for use by those with very low income,” says Gwen Chambers, a mortgage loan originator at Motto Mortgage Superior in Germantown, TN.

But that’s not the case. There are actually two types of USDA loans. Direct housing loans are for low-income individuals; guaranteed loans are designed for moderate-income buyers.

The USDA recently increased its income limits for loans, allowing more home buyers to be eligible. In most locations, the income limit for households with one to four people is $90,300, and $119,200 for households of five to eight people.

USDA loans are easier to get than ever

The income limits have been raised, Hadder says, and some elements of the application process for certain USDA loans have been relaxed.

For example, in response to COVID-19, the period for which certificates of eligibility are valid has been extended for some borrowers, and some parts of the application process will be streamlined, including credit reviews and loan processing.

Although the specifications vary by lender, borrowers typically need a minimum credit score of 640, whereas conventional home loans often require a credit score of 700 or higher.

“These new loan changes are designed to make it easier for a borrower to qualify for a USDA loan,” Hadder says.

Because certain parts of the application process will be waived or relaxed, she says, “borrowers will hopefully have a better chance of getting approved.”

USDA loans aren’t just for first-time buyers

Another misconception about USDA loans, Ronne says, is that they’re just for first-time home buyers.

“USDA only allows a borrower to own one property at a time, so using the USDA loan program allows for additional purchases in the future, as long as the current home is sold, or will be sold prior to closing on the new one,” he says.

As long as buyers continue to qualify, they can use the USDA program as many times as they want, Chambers says.

USDA loans have great interest rates

Mortgage interest rates for traditional loans have dropped to record lows in recent months, and now hover around 3%. The rates for USDA loans, however, are even lower.

As of Sept. 1, interest rates for Single Family Housing Direct Home Loans are 2.5% for low- and very low-income borrowers.

“The rates on USDA loans are often very competitive, and the fees are relatively low,” Chambers says. “In my community, consumers often find USDA loans to be their go-to loan of choice.”

USDA loans carry few added costs

In addition to low interest rates, USDA loans offer families the opportunity to own a home with few out-of-pocket expenses, like closing costs.

In addition, certain USDA loans offer 100% financing with no down payment, welcome news in today’s uncertain economy.

“Now, more than ever, because of the potential instability in the workforce over COVID-19 and possible future furloughs, layoffs, and cutbacks, having money in the bank to fall back on in case of emergencies has never been more important,” Ronne says.

“Personally, as a mortgage broker, I never want to see a buyer exhaust their savings for a down payment when they may not have to, especially a first-time home buyer,” he says.

More investment in rural communities benefits homeowners

The USDA loan programs can also give rural homeowners a boost indirectly. The agency recently announced new initiatives to increase private investment in rural communities across the country, Hadder says.

This includes changes to four of its business loan programs to standardize the requirements for loan processing, credit review, loan service, and loss claims.

These measures could help rural homeowners. New investment could add new jobs to an area, create better schools, and boost local economies.

This could increase property values and attract new residents to the area—all good news for local homeowners.

The post Moving to the Country? This Overlooked Loan Makes It So Easy appeared first on Real Estate News & Insights | realtor.com®.

Source: realtor.com