Tag: downpayment

Mortgage News Matters

Unmasking Mortgage Myths: Debunking Common Misconceptions for Homebuyers

Applying for a mortgage can seem like a labyrinth of uncertainty, especially for first-time homebuyers navigating unfamiliar terrain. The realm of mortgage information often brims with confusing and conflicting notions, leaving potential borrowers hesitant to embark on this journey.

To provide much-needed clarity, we’re here to dispel six prevalent mortgage loan myths, unraveling the truths beneath the misconceptions.

1. The 20% Down Payment Dilemma Debunked

A pervasive myth suggests that every loan type mandates a hefty 20% down payment. This misleading belief deters many from even considering homeownership due to perceived financial limitations. The reality is different—borrowers lacking a 20% down payment can still secure a loan by opting for Private Mortgage Insurance (PMI). Though PMI entails an additional monthly expense, it safeguards lenders in case of borrower default. Certain Conventional or FHA loans allow down payments as low as 3-5%, presenting viable alternatives. Once you amass 20% home equity, you can bid adieu to PMI and continue making mortgage payments sans the extra burden.

2. Distinguishing Pre-Qualification from Pre-Approval

Clarity is imperative when understanding the distinction between pre-qualification and pre-approval. Pre-qualification provides an approximate borrowing estimate based on current finances and credit score, aiding in identifying suitable loan options. On the other hand, pre-approval delves deeper, encompassing a comprehensive financial evaluation, including credit checks. It culminates in a written commitment from the lender, specifying the maximum loan amount they can extend.

3. Demystifying Down Payments and Closing Costs

The notion that your down payment also covers closing costs is a common fallacy. While the down payment is a significant upfront expense, it exclusively caters to the home’s principal value. Closing costs, encompassing fees like appraisals and title insurance, remain a distinct financial aspect. Typically ranging between 3% to 6% of the loan balance, closing costs warrant separate consideration.

4. Imperfect Credit and Homeownership

Contrary to the myth of requiring flawless credit, aspiring homeowners with less-than-perfect credit have options. FHA loans, backed by the government, provide a viable avenue for those who don’t meet conventional loan requirements. Furthermore, proactive credit-building steps can pave the way for eligibility and improved loan terms.

5. The Temporal Impact of Mortgage Applications on Credit

Concerns about mortgage applications negatively affecting credit are valid, albeit temporary. Similar to applying for other lines of credit, a mortgage application may lead to a short-lived dip in your credit score. However, this effect typically surfaces after the pre-approval stage. For credit-conscious individuals, refraining from opening unnecessary lines of credit during this period is advisable.

6. Debt and Homeownership: Debunking Misconceptions

The belief that homeownership hinges on a debt-free existence is a misconception. Many Americans shoulder various forms of debt, be it student loans or car payments, without precluding homeownership. What matters is your debt-to-income ratio, revealing the proportion of your income allotted to debt payments. A lower ratio signifies a less risky borrower. Addressing debt through repayment strategies or increased income generation can enhance your eligibility and broaden homeownership prospects.

In conclusion, navigating the realm of mortgages demands a clear understanding untainted by myths. Armed with accurate information, potential homebuyers can make informed decisions, secure suitable loans, and realize their homeownership dreams.

Have questions about mortgage myths or seeking expert guidance? Contact us today for accurate insights tailored to your needs.

Mortgage News Matters

7 Questions to ask your Lender when Obtaining a Pre-Qualification Letter

Pre-qualification is an essential first step in the home buying process. It determines how much money you can borrow and gives you insight into what your mortgage options are – allowing your lender to better identify your unique needs and goals.

To help you best get prepared, we’ve listed 7 important questions to ask your lender when starting the pre-qualification process.

  1. What is your pre-qualification process? Every lender has a different process. To help you best prepare and save yourself the most time and energy, ask your lender what documentation is required before starting the process.

  2. How long can I expect the process to take? There are many factors that go into the overall timeline, such as processing, underwriting, title search, appraisal, and other verification procedures.

    By asking how long the process will take up front, you can set realistic expectations for yourself. It can also be helpful to ask what factors could delay the home closing, so you can best prepare for any likely hurdles.

  3. Are my taxes and insurance included in the payment? This will determine how much your monthly payments will be, as well as how much money you will need to bring to the closing.

  4. Is there anything that could increase my interest rate or loan payment? If a borrower chooses a fixed interest rate loan, their payment will never increase throughout the life of the loan. However, if taxes and insurance are included, your payment could change over time due to increases in HOI premiums and property taxes.

  5. Can I lock in my interest rate? And if so, how long will my interest rate be locked? Typically, mortgage rates are priced with a 30-day lock, but you can choose to delay this if you are purchasing a foreclosure or short sale. A shorter lock period means a lower interest rate, while a longer lock period results in a higher interest rate.

  6. How will my credit score affect my interest rate? This is an important question to ask, especially if you have had any changes in your recent credit scenario.

  7. How much should I expect to pay at closing? There are many factors that go in to determining your closing costs, such as your earnest money deposit, appraisal fees and seller contributions. By getting this number up front, so you can properly budget for closing day.

To learn more about the pre-qualification process and get the answers to your questions, contact a VanDyk Loan Originator today!

Mortgage News Matters

Is Delayed Financing Right for You?

What is Delayed Financing?

Delayed financing is when a buyer pays for their home upfront with cash, and then immediately obtains a mortgage after the home is purchased.

What are its advantages?

The biggest advantage of delayed financing is the power of paying cash. A cash offer provides buyers with a competitive edge and allows them to stand out in a seller’s market, much like the one we find ourselves in today.

This method allows the buyer to make an enticing all-cash offer, then immediately puts the money right back into their pockets with a cash-out refinance.

What are the restrictions?

  • The amount of the mortgage loan obtained cannot be greater than the amount of the purchase price, closing costs, prepaid fees, and points, combined.
  • Applicants must have proof of cash purchase.
  • Applicants must provide proof of the initial source of cash used for the purchase of the home.
  • Applicants cannot apply for delayed financing with a home they purchased from someone they have a personal relationship with.
  • If funds are provided from a third party, applicants must provide a gift letter.
  • If applicants were provided a gift fund for the purchase of the home, they cannot give the cash from the cash-out refinance back to the donor.
  • The property must be free from any liens.

To learn more about delayed financing and if it is right for you – contact a VanDyk Loan Originator today!

Mortgage News Matters

Zero Down and Low Down Payment Mortgage Options

For buyers currently looking to purchase a home – affordability is the name of the game. And finding a mortgage loan that requires zero – or low down payments, is essential to their home buying process. Fortunately, VanDyk Mortgage provides a variety of mortgage loan options with low or no down payments required for our cost-conscious buyers.

Low-Down Payment Mortgage Loan Options:

30-Year Conventional: With consistent interest rates and monthly mortgage payments, the traditional 30-Year Conventional Loan is one of the most popular mortgage loan options. Programs with down payments as low as 3%, the 30-Year Conventional Loan is a great option for those seeking to purchase a home, before they have the funds necessary to do so. Keep in mind, whenever you put a less than 20% down payment on a home, you may be required to pay Private Mortgage Insurance (PMI) until you own enough equity in your home.

FHA: The Federal Housing Association, or FHA loan, is an ideal option for first-time homebuyers with less than perfect credit. With a down payment as low as 3.5% and lower than average interest rates, the FHA loan is a great option for buyers who do not meet the requirements for a traditional 30-Year Conventional Loan.

Zero or No Down Payment Mortgage Loan Options:

VA: A VA, or Veteran Loan, is the best option for Veterans or active duty military members looking to purchase a home of their own. There is no down payment required and low-interest rates. VA loans require no monthly mortgage insurance, making it possible for a buyer to purchase a home without paying out of pocket.

USDA: Backed by the US Department of Agriculture, a USDA, or Rural Housing Loan, is for buyers who are looking to purchase a home in a rural or suburban area with minimal investment. These loans require no down payment and provide flexible credit guidelines, as well as low monthly mortgage insurance costs.

To learn more about low and zero down payment loan options offered at VanDyk Mortgage, visit our website Loan Options.