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First Time Home Buyers

Buying a home is a significant financial step. For first time home buyers, the encounter can be thrilling and daunting at the same time. Before you finally open the door to home-ownership, you have to take into consideration some crucial first steps. The learning curve can be stiff, but with a little homework, you can resolve most issues. When buying a home, it’s hard to determine if it’s the right one for you on the first go. Make use of first home buyer programs that will enlighten you on important things such as mortgage rates. The tips below will help your process go more smoothly.

Check your credit      first time home buyers

Most homeowners will tell you that loans are life-saving especially if you do not have enough money to pay in cash. Home owning starts with a mortgage pre-qualification. Often, most first-time home buyers make the mistake of picking a price range out of the sky and looking for a home before determining whether they qualify for a loan. If your credit is damaged and needs repair, start the repair process six months before shopping for a house. Today, new homeowners have real possibilities for possessing homes because of low mortgage rates.

Get professional help

Being a first timer in the home buying game, you will want to make use of a good Loan Originator or Loan Officer and a reliable Real Estate agent. It’s not advisable to venture in this process alone without any professional guidance. Do not deal with a listing agent directly if you have no experience. Instead, find a buyer’s agent to help you. If the agent you are working with has no referral from friends or relatives, then ask the agent to give you references from previous buyers. Find a person who will give you an independent advice.

Find the perfect home

After considering your price range, find a home that you will not regret immediately after moving in. Size should be a top priority. Before looking for a home, have an idea of how big you want your new house to be, how many rooms and square footage you will want in the next five to ten years’ time. If you are a new couple and do not have kids yet, think about the future, considering if you will want to have children in the future. Remodeling or building an addition to your house is expensive.

Get a second opinion

Whether it’s from your friends, relatives or your spouse, get a view from someone else. When shopping alone, you may look through rose-colored glasses making it easier to overlook some flaws. A friend or a relative may be able to see the house as it is since they are not as emotionally invested. Bringing along a friend with construction experience is a bonus since they can pinpoint fixes and estimate repair costs. With that in mind, you will know whether to find another house or if the price is low enough to compensate for the shortfalls.

Determine a budget

Know how much you are willing to pay for your dream house and stick to the budget. It’s easy to see a house and fall in love with it leading you to make irrational decisions. Before hitting the road to shop for a new home, determine what will fit your budget and stay in control. Consider the costs of your homeowner’s insurance and property taxes, not just the mortgage payments.

Figure out your down payment

The huge mistake most first time home buyers make using up all their savings for the down payment. Start saving for the down payment way ahead of time. If you have been thinking of buying a house for quite a while, you should have saved up some money just for the down payment instead of using all your emergency cash. Also, inform your mortgage lender when you begin the process. You may ask your friends and co-workers questions about the process and how to go about it, but touch base with your Loan Officer regularly and ask questions, if you have any.

For most people, procuring a home is a dream come true. But the hassle that comes with it can be discouraging. Having a professional adviser to take you through this process will save you a lot of frustration and expenses. With the above steps, you will find that the journey is quite easy, and you will enjoy each step. Nowadays it is easy to own a home, if you plan everything right from the start.


by nico2me


Renting Versus Buying: Pros and Cons

There are many people who are unable to decide whether they should buy or rent a home. Both renting and buying a home has their benefits, therefore it is important that you compare the benefits and drawback of buying and renting a home.renting vs buying a house

Renting a home is usually cheaper than buying one. When you rent a property, you don’t have to pay your monthly mortgage dues and you don’t incur expenses of repairing the appliances and home. However, the rent that you pay could increase from time to time. When you have taken a mortgage at a fixed rate of interest, your mortgage payment is fixed and will not increase.

When you apply to get home loans, you are required to complete a lot of paperwork. When signing a mortgage contract, it is important that you understand the terms of the contract. Most contracts are for a period of 30 years and if the terms are not in your favor, repaying the mortgage could be a big headache. One of the most important reasons why people default on their mortgage loans is because borrowers don’t understand the terms of the mortgage. On the other hand, terms the of the rental agreement are easy to understand.

It would be nice if you need not write a rent check each month. Nothing can make you feel safer than owning a house, provided that buying a home will not result in financial problems of its own. Every year, a new wave of first time home buyers hits the trail in search of their humble abode. There are pros and cons to home buying. Certainly, there is the matter of timing and related financing programs.

Let us discuss the key monetary costs associated with home buying to stack up against your monthly rent check. Here are points to consider when deciding on buying versus renting.

Owning a home means gaining equity. If the owner keeps the house long enough for it to rise above the initial cost of its purchase, then that is profit. This is one of the most essential and superb matters associated with home ownership.

When you buy a home, it brings a sense of accomplishment and pride. It is also a chance to express your style and personal taste. You can enjoy the freedom with home ownership. Buying a home also lets you have insight as a part of a permanent community. On the other hand, in a rented apartment or home, one might feel temporary and less involved.

Now, let us discuss the financial considerations of buying versus renting.

When buying a home, with your every monthly payment, you are putting money into savings. On the contrary, when you rent a home, you have to give money to the landlord and it is an expense. Every time you pay a mortgage, a percentage goes toward your equity. Indeed, this is similar to having money in your bank account, which you can draw upon later when needed. Every year, rental rates increase and the principal on your mortgage decreases with every monthly payment. Further, the housing market continues to grow and hence the property value of homes.

Owning a home also comes with some interesting tax benefits. Each interest payment made is accounted in your tax deduction later on. The same is not true with your rental payment. With all the above points, buying a home certainly sounds great! However, it is not for everyone. Every coin has 2 sides and we have to think about every aspect before getting into home ownership. Of course, we don’t want it to be our worst nightmare. When it comes to buying a home, it is a complicated, time-consuming and of course, costly endeavor. Let us think about the responsibilities involved in buying vs. renting.

Buying a home requires an investment of time. As a tenant, you can enjoy more freedom to move around the country. As a homeowner, you have to think about and manage the leaking pipes, pruning hedges, mowing lawns, and lots more to keep all things running smoothly.

When it comes to buying a home, many small home improvements can keep adding up as expenses. Sometimes, you might need to pay for utilities that would be covered in a rental agreement. When you rent a home and find that you are not happy with the locality or your new neighborhood, then you can find a place and move somewhere else. You can make a decision to shift somewhere else instantly depending upon your rental agreement. Imagine a similar case with home buying. You cannot sell out your home instantly. You have to wait till you get a good deal for your home, along with the expenses invested in it, at least be in an equitable position when you sell the house.

Weighing the advantages and disadvantages of buying and renting a home can be challenging. Definitely, the above considerations may vary from person to person. You have to think about your financial condition and think about the effects of the decision you make in the future. Do not forget to take responsibilities into account while counting benefits of any aspect. This will definitely help you make a smart decision that will give you the best return on your investment.

by nico2me


Jumbo Loans

A home loan that exceeds the conforming limits is known as a Jumbo mortgage. In most parts of the United States, the Jumbo loan limit is $417,000 while in other high-cost areas like Alaska and Hawaii it is usually $625,000. Jumbo loans are different from conforming loans in that they require higher interest rates due to the large amount of financing they offer.

Eligibility for a Jumbo loan

Jumbo loans generally require higher down payments. The down payments, however, vary with the lender. It could be 15%, 20% or 30%. Applicants for a jumbo mortgage should have an income-to-debt ratio of 45% or less. The reserve amount required for the borrowers of the loan can go up to 20%. A Property appraisal is also required to support the mortgage and the purchase price of the home. The minimum credit score for any applicant to qualify is usually 700+.
Jumbo mortgages were designed to benefit people who could afford luxury homes with higher monthly installments. This was beneficial in the sense that they could still acquire the loans with little savings.

luxury home financed using a jumbo mortgage loan

Advantages of Jumbo loans

Most mortgages do not exceed the conforming limits set by the government. This is the main advantage of Jumbo loans. The fact that they exceed the conforming loan limits means the interest rates are higher. Jumbo Mortgage allows the borrowers to acquire luxury homes, something that would be impossible with regular or fixed-rate mortgage. People who have always wished to purchase luxury homes can get them with this type of loan.

Multiple loans are not required if you take a jumbo loan. When borrowers look for this kind of loan they usually do it to avoid having to go to more than one lender. This means each month the borrower has just one installment. The various Jumbo loan options also make it attractive to borrowers. The different types of interest rates offered by the lenders are meant to suit the needs of the borrower. You can choose either an adjustable rate jumbo or a fixed rate jumbo, depending on your ability to pay monthly.
Interest rates for Jumbo Loans dropped following the federal stimulus package (2009) making it more attractive to borrowers. The decision to reduce the interest rates on the loans was done with the aim of boosting the economy and growing the real estate industry. With these attractive interest rates borrowers can refinance their jumbo loans for low-interest loans. Loan application has also been made easier for borrowers. A few years back, acquiring a Jumbo Loan was an uphill task. Prospective home-buyers can easily meet the qualifications for these loans. The offers from lenders are also getting more attractive each day. Some of the things lenders are doing to make it borrower-friendly is quick processing of the loan and reduced lender fees.


One of the demerits of these loans is that you have to prove to the lender that you own lots of assets supported by a relatively high income. This kind of loan is big, so it is understandable when the lender demands that you meet these requirements. Apart from having a high credit score, you should be able to show that you have the financial ability to handle the loan. The high interest rate is also a factor that should worry the borrowers. When compared to the conventional loans, Jumbo loans have a higher interest rate (about half a percentage higher). These interest rates are usually more than the traditional mortgages so borrowers may find it difficult to pay the monthly installments after they qualify for the loan.
Borrowers and lenders sometimes decide to extend the term of the loan considering its sheer size. The usual mortgage is to be repaid in a period of 30 years, but they may extend it to 40 years. This is an advantage to both the lender and the borrower. The lender gets extra interest charges while the borrower is able to acquire a larger residence.
A Jumbo Loan which is paced at $650,000 and above is usually referred to as a super jumbo loan. Jumbo loans are available and flexible for borrowers who meet the qualifications above. With the low interest rates and the attractive packages offered by lenders, it is worth applying for one.

by nico2me


Conventional Loans

The Requirements, Dos and Don’ts of Conventional Loans

It’s a dream of every individual to own a home. When out shopping for a new home, dreams of gorgeous kitchens, closet space galore and elegant baths may linger in your head, but the most important leap called financing must not escape your mind. In numerous respects, financing a home is as simple as acquiring a mortgage. But mortgage acquisition comes with stringent requirements like providing collateral which you may not have at the moment. Luckily for you, there are conventional loans that you can leverage to finance your home acquisition.

What is a conventional loan? A conventional loan is basically a mortgage that is not backed or insured by the central government or government agency for that matter, for instance, the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA) or the United States Department of Agriculture (USDA). However, conventional loans have to follow the guidelines of Government Sponsored Enterprises (GSEs). Examples of Government Sponsored Enterprises include Freddie Mac and Fannie Mae. Conventional Loans can further be broken down to conforming and non-conforming loans. Conforming loans abide by the terms and conditions laid down by Freddie Mac and Fannie Mae. On the other hand, non-conforming loans don’t conform to Freddie Mac and Fannie Mae guidelines but are equally considered conventional. Like any other loan, there are conventional loan requirements to qualify for:

1. Credit History

Most creditors or lenders subscribe to Freddie Mac and Fannie Mae guidelines when offering credit. A minimum credit score of at least 620 is needed for a borrower to be eligible for a fixed interest rate. A non-adjustable rate requires a score of at least 640.

2. Documentation

To qualify for a conforming loan, the borrower must present authentic and accurate documents pertaining to work history, assets, and income.

3. Loan-to-Value Ratio (LTV)

A minimum of 5% down payment deposit is required for a borrower to qualify for conventional loans. The source of the down payment can be borrower’s own savings, down payment assistance programs or family contribution.

4. Debt portfolio

A debt portfolio must be presented to the lender duly. If a borrower’s debt portfolio is huge, he may find difficulties acquiring conventional loans.

5. Debt-to-Income Ratio (DTI)

A debt-to-income ratio of at least 455 is required for most borrowers to quality for conventional loans. However, a 50% ratio can be considered but with powerful compensation factors like remarkable credit history, anticipated salary increment with physical proof and huge amounts of liquid savings.

conventional loan requirements

Things to avoid before applying for conventional loans

  • Avoid Taking out Other Loans or Credit Lines

Student, personal and auto loans can harm your chances of qualifying for conventional loans because they drastically increase your debt-to-income ratio. When you are considering applying for conventional loans in the future, avoid taking up other loans or credit lines.

  • Avoid Blowing Your Savings

You are bound to experience out-of –pocket costs when using conventional loans to buy your house. The first consideration is always the down payment which is normally in the region of 3.5 to 5%. You will also consider the closing costs. Conventional lenders will demand to see extra cash reserves in your bank account particularly if they view you as a high-risk recipient. To elevate your chances of securing conventional loans, you must save as much as possible by avoiding large expenditures that deplete your cash reserves.

  • Avoid Taking Leaves of Absence or Shifting Jobs

Conventional loan lenders want to see a steady work history and income and on numerous occasions, they need at least 2 years of steady employment. Making major career changes or taking many leaves of absence may torpedo your chances of securing conventional loans, so stop it. As far as employment is concern, the best course of action before applying for the loan is to maintain the status quo.

  • Avoid Missing Credit Card Payments

Conventional loan lenders keep tabs on your credit score when considering giving out loans. A lower credit score is indicative of a higher risk for the lender, and it’s frowned upon. So you want to avoid defaulting on your credit card payments if you are contemplating applying for conventional loans in the future.

Before applying for conventional loans, make sure you do the following:

  • Halt all Forms of Financing

Other forms of financing like personal and automobile loans must be halted until you’ve closed on the home. Over-extending on these financing may endanger your chances of winning a conventional loan

  • Try to Limit Credit Card Use

Only use your credit card as a last resort to avoid the risk of affecting your credit score.

  • Ensure Prompt Payment of Bills

Make sure all your bills are paid on time especially those reflecting on your credit report. Just one default in the payment of bills can torpedo your chances of getting a conventional loan if it finds its way into your credit report.

  • Keep Aspect of Your Employment Steady

Avoid switching jobs until your conventional loan comes through. The only exception should be when the next job has a higher remuneration that could considerably increase your chances of getting the loan

Bottom-line: Although conventional loans are losing a significant share in today’s volatile market, they still dominate the mortgage lending domain. This means that it is easier to acquire conventional loans these days than in the past. The best financial management practices will significantly improve your chances of acquiring conventional loans. After acquiring the loan, a higher level of financial discipline is required to ensure you repay the loan without glitches. By adhering to these guidelines, your journey to owning a home will come sooner rather than later.