The Top Places to Shop for a Mortgage Loan

Man pushing a shopping cart with home model put on the old wood in the public park

You want to buy a house and you know it is going to cost a large amount. That might be all that you know about buying a house for the first time. There is much more to it and you should understand more of the details. In order to get the best deal that you can, you should have some awareness of the various items that go along with purchasing a home. Even if this is not your first house, there is probably some information you could benefit from knowing. In addition to understanding the details of a mortgage, it is important to understand where to shop for a mortgage loan.

The Top Places For Your Mortgage Loan

The most common type of mortgage that you will find is a fixed mortgage. A fixed mortgage has a rate that is fixed and the agreed-upon interest rate remains the same for the entire life of the mortgage. The most common length of a mortgage is 15 or 30 year terms. Lenders prefer that you have a 20 percent down payment for your mortgage. If you cannot afford to put down 20 percent for your mortgage, the lender requires you to have private mortgage insurance (PMI). Lenders want you to have a higher credit score to qualify for a traditional mortgage.

When you shop for a mortgage loan, you should keep these lenders in mind:

Rocket Mortgage

Rocket mortgage loanRocket Mortgage has been providing quality and affordable mortgages for over 30 years. They pride themselves on their customer service. You might want to start here when you shop for a mortgage loan. This type of loan is available online only and is a self-service type of loan. They are looking for you to have a credit score of at least 620 with a minimum down payment of 3 percent. They specialize in home purchases, refinances, FHA, fixed and variable rate loans. You can find out how much money you qualify for in minutes, partially due to Rocket Mortgage’s ability to retrieve documents.

NBKC Bank

NBKC bank logoNBKC Bank allows you to completely fill out your application on the bank’s website. You are able to sign all of your documents in the application. In addition, you can track your application. They do offer an actual building for you to visit in person, but only within the Kansas City area. They have a mobile application for iOS and Androids. NBKC bank does want you to have a minimum credit score of at least 620. Also, they want you to have at least 3 percent to put down for your house purchase. They also specialize in home purchases, refinances, FHA, fixed and variable rate loans. They charge a mortgage origination fee for most borrowers.

Quicken Loans

Quicken Loans has an application that is completely online but has mortgage advisors available to you. They provide amazing customer service. They can instantly verify your employment and income for over half of the people that apply. Also, they offer mortgage terms from 8 to 30 years. They do want you to have a minimum credit score of at least 620. They want you to have at least 3 percent to put down for your house purchase. Quicken Loans also specialize in home purchases, refinances, fixed and variable rate loans. They provide FHA backed loans.

New American Funding

newamerican funding logoNew American Funding is a great way to shop for a mortgage loan when you have a low credit score because they use a manual underwriting process. They have a full range of online options available to you. You can apply online, as well as get rate quotes and upload all of your needed documents. Their services are not available in all states. They only require to have 3 percent down with a minimum credit score of 620.

Fairway Independent Mortgage

Fairway Independent mortgage logoIf you are interested in an FHA loan when you shop for a mortgage loan, Fairway Independent Mortgage may be the best lender for you. They offer a large variety of loan options. Not only can you apply for a mortgage with them online, but you can apply with their mobile app. They claim their loan application can be completed in 10 minutes. Their website is a full-service site complete with online help and FAQs. They do require you to have 3 percent down. They do not post their interest rates online, so you have to fill out the application for more details.

Citibank

CitibankCitibank is a great choice for a mortgage because they are a large scale mortgage that provides you with a wide range of products, including fixed and adjustable-rate mortgages. They are available in all states. They look at other credit data items to determine if they want to approve you for a mortgage. Citibank allows for low down payments and offers special discounts if you are already a Citibank customer. You cannot fill out your application online and they do charge application fees.

Bank of America

Bank of America logoBank of America has unique down payment and closing cost programs that can provide assistance to you. They look at alternate data elements to determine your creditworthiness. You are able to complete the entire application online. They will accept a minimum down payment of 3 percent. They do, however, charge a hefty application fee, which can fall into the $1,200 range. Bank of America is not known for their great customer service. They have a fairly high amount of complaints.

PNC

PNC bank logoPNC Mortgage is part of PNC Bank, which is a well-established bank. They do have some online capabilities, but you cannot fill out the entire application online. They offer over 2,000 branches, but they are not in every state. PNC has a large number of online tools available to you to help you estimate your payments and track the status of your application. They do look at credit data that many traditional lenders do not determine your creditworthiness. They will consider rent payments and other nontraditional data elements.

SoFi

SoFi, which stands for Social Finance, is a digital finance company that gives you an entire catalog of products, from investment accounts, cash management, and mortgages. You have the ability to fill out the entire mortgage application online. They do not require private mortgage insurance, but they want you to have at least 10 percent down. They are willing to work with borrowers that are self-employed. If you are already a customer, you can qualify for a $500 discount on the mortgage fees. They do not offer mortgages for government loans, like FHA, or even VA. They are not available in all states. Once you have a loan with SoFi, you are considered a member, which has perks such as access to special events and financial planning.

What Is A Mortgage?

You cannot begin to shop for a mortgage loan if you do not understand what a mortgage really is. I want to take a few minutes to give you some much-needed information about the basics of a mortgage. A mortgage is what you need when you want money to purchase a home. A mortgage loan and as with any loan, you pay back the money over time by making regular monthly payments.

As with all loans, the lender adds a fee to the loan, called interest, for allowing you to borrow money from them. There is a major difference between a mortgage and other loans because, with a mortgage, you are using your house or property as collateral. That means that if you stop paying on your mortgage, the lender has the right to take your house. You do not own the house completely until you pay the mortgage in full.

What Happens During The Mortgage Process?

Regardless of what type of loan you want and where you shop, the process for a mortgage loan is usually the same. One of the first steps you should take is to check your credit. This way you will know your credit score and have an idea of the type of mortgage for which you might qualify.

Once you have determined your credit score, then you can look for the right lender for your needs. This is when you should shop mortgage lenders. You may also want to consider getting pre-approved for your financing. This shows realtors that you are serious about buying a house and the amount of a mortgage for which you should qualify. This does not replace the mortgage process, this is just a letter stating that you qualify for a certain amount. Once you have taken those steps, you should begin to look for a house.

Since you have a pre-approval amount, you know what your price range is for a house. This helps you refine your search for the houses you can actually afford. This keeps you from going outside of your price range. Once you have picked out the house you want, you can make an offer. Before you make an offer or even start looking at houses, you might want to consider finding a good real estate agent. A good agent can help you determine what a good starting price might be based on the market and the area. Once your offer is accepted, the real mortgage paperwork begins. You have to fill out the application and provide all the documentation.

Income and financial information, such as pay stubs, W2s, and bank statements, are going to be needed. After all this information is collected, it goes to an underwriter who studies all the documents and the value and price of the house.

Where Can I Find A Mortgage?

When you want to shop for a mortgage loan, the key is to actually shop around for a mortgage. There are many lending options available to you when you are looking for a mortgage. You should find out as much as you can about potential mortgages. You do not have to take the first offer you find and you should wait until you have the right mortgage for you. Keep in mind this mortgage will take anywhere from 15 to 30 years to pay off, so it will be with you for a long time.

You can shop for a mortgage loan online, which would give you a large amount of money. A quick internet search will help you find all the mortgage information you need. You want to determine the amount of money you want to borrow and how much money you have to put down. Then, you want to understand the interest rate for your mortgage and what that means for your monthly payments. Also, you want to know about any fees you may have to pay. In the end, you want to understand different types of mortgages and all of the fine print.

Finding the right lender for your situation is extremely important. You can get help from Loanry. If you leave the required information in the form below, we will get you offers from reputable lenders, and from there all you need to do is compare them and apply. Start here:


What Do I Need To Know About A Down Payment?

Before you shop for a mortgage loan, you should consider how much money you have for a down payment. A down payment is the amount of money you are putting up for the house that comes from you. You are not borrowing this money from a lender. A down payment impacts how much money you have to borrow from a lender and have to pay back. I mentioned earlier that lenders want you to have 20 percent down.

If you want to purchase a $300,000 house, 20 percent of that amount is $60,000. That is how much you would have to put down from your account. The percentage goes up or down based on the total cost of your house. The larger your down payment is then the lower interest rate you might get from the lender.

If you cannot put down 20 percent, a lender wants you to have private mortgage insurance (PMI). PMI is insurance just as the name states and it gives the lender a stronger sense of security that they will not lose the money they are letting you borrow. You have to pay for the insurance so it will add to the cost of your monthly mortgage payments. It is possible for you to find lenders that will allow you to borrow money even if you do not have 20 percent to put down.

Should I Be Pre-Approved?

Before you shop for a mortgage loan, you want to consider getting pre-approved. Keep in mind, a pre-approval is different from a pre-qualification.

A pre-approval is when the bank approves you for a set amount of money for your mortgage. The lender gives you a letter stating how much you are approved. It gives real estate agents and sellers an idea of how much you can afford. When you get pre-approved for a loan, the lender does a hard hit to your credit. It also shows that you are serious about purchasing a home. This shows sellers how much you can afford to pay for a house. If they have your offer with a pre-approval and another potential buyer with an offer that is not pre-approved, the seller may pick your offer over another.

A pre-qualification is a rough idea of how much money for which you may qualify. This is not a guarantee of how much you will get from a lender, but it is an idea of how much you can get. This type of qualification is only a soft hit to your credit. It is not a deep look into your finances. It is free to be pre-qualified for a mortgage.

Conclusion

This article contains a lot of information, including the best lenders to shop for a mortgage loan. There is a lot of information available to you and you should learn as much of it as you can. When you want to purchase a house, it is your responsibility to be well informed. When all is said and done, you are going to be responsible for making the mortgage payments and maintaining your house. You want to make sure that you can afford to do both of those things by first making sure you know all your mortgage options. Second, you need to make sure that you can afford to pay the mortgage once you have agreed to do so.

A mortgage is a binding contract and you are legally responsible for making the agreed-upon payment amounts on time. You should do all that you can to ensure you are able to do so. If you do not think you can afford a mortgage than it is probably not the right one for you.

Should You Use a Traditional Bank or Mortgage Company?

Businessman holding two houses and can not decide choosing the right house

When it comes to buying a home, there are a lot of moving parts and the process can be confusing. From the moment you start the home buying process to the day you end up paying off the mortgage, there is a lot to think about and a lot to figure out. One of the biggest things is where you should get the mortgage. And there are a lot of options with that, too.

What’s Better- Traditional Bank or Mortgage Company?

You want to make the right decision as it can affect you for the next 30 years- or however long your mortgage term lasts. Two of your options are to get your mortgage through a traditional bank or mortgage company. Both of these have benefits and risks associated with them, so how do you know which to choose? It starts with understanding them both and weighing out the pros and cons of each.

Traditional Bank

When talking about a traditional bank, we are referring to the financial institutions through which you can open a checking account and savings account. Most people are familiar with traditional banks more so than other financial institutions because they are referred to more often than others. When it comes time to get a mortgage loan, traditional banks are usually the first lender’s people think of. Here are the pros and cons of using a traditional bank for a mortgage:

Pros

  • Traditional banks usually have one- sometimes a couple- of people dedicated to mortgages. These mortgage bankers are specialized in the home loan products that their bank offers. They can often look at your financial situation, determine if you are a good fit prior to applying for a mortgage and if you are not, let you know exactly what you need to work on to fix it.
  • Most often, the banker is employed by a bank that either you, a family member or a friend have experience with. Sometimes- though not always- this can help you out a great deal because there is a foundation there that you can build on.
  • Traditional banks often pay their mortgage bankers a salary, meaning that you are not paying extra for fees.

Cons

  • A mortgage banker is specialized in the bank’s products, but that is about it. If you are not a good fit with that particular product- or those products- you are pretty much out of luck.
  • A traditional bank tends to have a pretty stringent approval process. There is not a lot of flexibility involved.
  • Because the banker gets paid a salary, they have no real vested interest in you getting a loan. They get paid regardless. Obviously, if they never approve loans, the bank would probably not be very happy with them, but whether or not you, in particular, get a loan is not a factor in their pay.

Mortgage Company

A mortgage company is quite different from a traditional bank. They are strong in the areas traditional banks are weak, but they do have their own struggles, too.

Pros

  • A mortgage company is often associated with a much wider range of lenders and financial products. What this means for you is that they have more options when it comes to connecting you with a loan. Let’s say that one of their associate lenders only approves a 680 credit score and a DTI of 30 percent. For some people, this would mean they might as well hang up the idea of a mortgage at this time. However, as mortgage companies have many lending partners, they may also have a lender who is willing to approve a 580 credit score with a DTI of up to 50 percent. In this sense, a mortgage company can often get more people approved than traditional banks can.
  • As mortgage companies specialize in their lending partners, they can usually take a look at your financial situation and easily determine which lenders will probably approve you. This saves you from having to apply to a long line of lenders that you may not have a shot within your current state.
  • Because a mortgage company runs off of commissions, performance-based fees, and affiliate sales, they do have a vested interest in you getting a loan. This typically means that they are going to work hard to get you approved for a loan.
  • Mortgage companies are also often associated with reputable credit repair organizations or at least have names you can work with. If they see that your financial situation may not yet be where you need it to be, they will often guide you in the direction you should go to make it what you need.
  • Mortgage companies also have a much better chance of providing you with multiple interest rate options. Where a traditional bank is mostly stuck in a box when it comes to interest rates and terms, a mortgage company has a wide range of lenders that offer varying interest rates and terms.

Cons

  • One of the biggest downsides is that mortgage companies tend to charge fees for their work. You end up paying for these fees depending on the value of the loan.
  • Sometimes, a mortgage company- especially one that is not very established yet- may not find you the best rates and terms. Sometimes, they ever guide you in the direction of a higher loan amount in order to earn higher fees.

Should I Choose a Traditional Bank or Mortgage Company?

As you can see, both have their upsides and downsides, so there really is no way to say one is always better than the other. Instead, choosing between a traditional bank or mortgage company really depends on the individual and his or her situation. And, more often than not, an individual will not know for sure whether to choose a traditional bank or mortgage company until he or she try them both out. For the best results when mortgage shopping, follow these mortgage tips:

Mortgage Shopping Tips

1. Shop Mortgage Lenders

Absolutely do not take the first offer. If you speak to someone who gives you preapproval for a loan with low interest and good terms, great! Still, do not sign on the dotted line yet. It may sound good, but that does not mean it is the best.

You should take the time to shop mortgage lenders. This means that you do not have to choose between a traditional bank or mortgage company before you know what they offer. Talk to multiple lenders of various types. Figure out what each can offer you and choose the best option from there. You can start looking here on Loanry. Fill out the form below to get offers:


2. Apply Within a Time Limit

Every time you apply for credit, it puts a negative hit on your credit. While you cannot prevent every hit, you can minimize the damage. Most often, when you apply for credit within the same industry, such as for a mortgage loan, you should do all of your applications within a two week period. If you do, all of those hits will only count against you once on your credit. This means that comparison shopping to choose between a traditional bank or mortgage company will not affect you too negatively.

3. Check Your Credit

Some places can get you a preapproval without running your actual credit. They still have to do a hard check when they are finalizing the loan application, but not necessarily when they are simply preapproving you. By checking your own credit score ahead of time, you can give the traditional bank or mortgage company something to work with.

As an additional point on your credit score, it is important to know that while companies like Credit Karma can give Credit score rangeyou a good idea of your score, the score of a traditional bank or mortgage company will pull will actually be 10 – 15 points under what you see. This is simply because it is factored differently when you are applying for actual credit as opposed to just checking your score. It is nothing to worry about.

When you talk to a traditional bank or mortgage company, they are aware of this difference. Therefore, if you say, “I checked my credit score on Credit Karma and it’s a 650,” they already know to factor in a smaller score. If you get a preapproval, it should be based on the score they expect to pull, not what you see.

You should aim to get a preapproval prior to house hunting, too. With a preapproval in hand, you know how much house you can look for and it is much easier to negotiate with sellers when they know you are serious about purchasing.

It is important to note, though, that just because the bank says you can borrow a certain amount does not mean you have to borrow the full amount. Instead, you need to determine how much house payment you can afford to pay each month.

4. Optimize Your Financial Situation

It really does not matter whether you are considering a traditional bank or mortgage company. The bottom line is that the better your financial state, the better options you will have. Here are some of the areas to pay special attention to:

Credit Score

There are many types of mortgages available. Some require a near-perfect credit score and some work with scores well below others. As far as the credit score itself goes, there really is no cut-off. Because some of your other financial factors can help you be approved for different loan types. Even those with terrible credit may get approved for certain loans, like USDA loans, if you meet the other requirements.

However, your credit score does have the propensity to affect the interest rates and terms of your loan. A credit score of only a few points can mean the difference in thousands of dollars in interest. Your credit score will often play the biggest role in determining whether you should choose a traditional bank or mortgage company as it can determine what loan you can get and the terms that go along with that loan.

Payment History

What does your payment history look like? Does your credit show that you have paid your debts well? Do you have any collections? If so, there may be a little work you need to do to make things easier for yourself.

Pay Off Some Debts

Paying off even one or two debts can bring your score up 20 points or more. When choosing which ones to pay, though, consider this: The longer a debt has been on your credit, the less weight it carries. Usually, debts have the largest impact on your credit score in the first two years that they show up on your credit.

So when choosing which debts to focus on, choose the ones that have been there the least amount of time. And, before you pay the full amount, call the creditor to see if you can get a settlement. The difference in settling a debt for a lower amount and paying it in full is only about two points. If you can get a settlement, you will be saving yourself money and improving your credit.

Debt-to-Income Ratio

Whether applying with a traditional bank or mortgage company, your debt-to-income ratio can impact your chances. The desired DTI can vary according to the lender, but the lower your debt, the better off you are. Is there anything you can pay off quickly or easily?

You might seriously consider getting a personal installment loan to consolidate your debt. This can help you decrease debt, decrease the interest you pay, and decrease your credit utilization- all of which can have a large positive impact on your credit. Additionally, when you owe less each month to other things, it can make it much easier to pay your monthly mortgage payment.

Factors to Consider When Choosing Traditional Bank or Mortgage Company

There are so many mortgage loans along with different options. Pay attention to each of these factors that I will represent to you. They can all affect your overall mortgage approval and process. You might also consider speaking to a financial advisor prior to applying. As they are on the outside and not affected by whether or not you buy a home, they can take an objective look at your credit, your financial situation, and your financial goals. They can advise you on how much would be safe for you to borrow so you are not easily swayed if you are offered more by a lender.

Again, it is hard to decide between a traditional bank or mortgage company when you do not know what they are offering. Once you have your offers in hand, there are a few things to consider when choosing your lender:

Interest Rate

Sometimes, you might get offered a very similar interest rate, such as 2.5 percent from one lender, 2.7 percent from another, and 3 percent from another. These are all close to one another, but they can each add on hundreds or even thousands in interest, depending on your mortgage amount. You must actually calculate what each rate will cost you over the life of the loan.

It is important to note, though, that the lowest interest rate does not necessarily mean it is the best loan. The interest is only a part of the equation- albeit a very important part. Calculate the interest, but do not make your decision based solely on it.

Mortgage Term

Different lenders may offer you a different amount of time to pay the loan. While 30 years may seem better because the monthly payments tend to be smaller, you usually end up paying a lot more over that 30 year term thanks to interest. Sometimes, a 15-year mortgage term is better. Even if the monthly payments are a little higher, you usually end up saving a ton over the mortgage term.

Fees

As we discussed above, you are facing fees. There will always be fees with a traditional bank mortgage, and there are usually fees with a mortgage company. Compare the fees you will be charged as they may mean a difference of hundreds or thousands of dollars.

Approval Process

How stringent is each approval process? Traditional banks are usually more stringent, but you will never know until you ask. Give each a call and determine what all will be included. While it may not always be the case, sometimes extra fees are added depending on the approval process. Be sure you check it out before jumping into anything.

Credit Factors

While you are calling the traditional bank or mortgage company, ask them what credit factors they require? You might save yourself a lot of time because this can help you decide where to apply or even if you should wait a little longer until your credit is better.

Monthly Payment

The monthly payment is a big deal- if you cannot afford your monthly payment, you may end up without the home you are working so hard for. Understand the monthly payment of each option before deciding.

Conclusion

Buying your home is one of the most important financial moves you will ever make. If you want to make all the process easier than maybe a mortgage broker can help you. You need to proceed cautiously so that you can make the best decision for you and your family. No matter what type of lender you choose, the most important factor is making sure that you consider all of your options and only make a decision when you feel comfortable.

Mortgage Loan Options When Buying a Fixer-Upper

Interior designer showing wood swatches to his customer, laptop, tools and house projects on desktop top view

A fixer-upper may need extensive renovations before you’re able to move in. A  standard mortgage doesn’t cover this type of situation. Thankfully, there are two types of mortgage loan options that combine the mortgage with a renovation loan, so you don’t have to put in multiple applications for this process. When you shop mortgage lenders, you can use the renovation loans for your ideal setup.

Mortgage Loans For a Fixer-Upper

There are two basic mortgage loan options. A standard mortgage loan covers the sale price of the home and the seller receives it in one portion. The home’s price is based on its appraised value and that of comparable properties surrounding it. The funding you receive only covers the cost of the home – it does not include any extra funding.

A renovation mortgage loan covers the cost of the home’s sale price and renovations. The loan consists of two parts. The first pays for the home’s sale price, much like a standard mortgage loan. The second portion is the amount for the renovation funding, and it sits in an escrow account. After the mortgage lender conducts a successful inspection of the renovation project by the mortgage lender, they send the money to the contractors doing the work. The total loan amount that you get depends on the type of renovation mortgage you select, the scope of your work, and the completed appraised value of your home following all planned renovations.

FHA 203(k)

The Federal Housing Administration offers a government-backed renovation loan called the FHA 203(k). The financial institution that offers the loan also issues it, but the FHA insures it in the event that a borrower defaults on the loan. This allows lenders to have a higher risk tolerance and be willing to work with people who have credit profiles or income that are not generally ideal for a conventional mortgage loan. This mortgage loan option is available as a standard and streamlined option and covers renovations that are cosmetic in scope, or structural. Luxury renovations are not supported by this loan, although the definition of luxury may be dependent on the lender that you’re working with and whether you have the same things in mind when you think about luxury products. A streamlined FHA 203(k) is for renovations that will total $35,000 or less.

These renovations must not include structural work. The advantage of the streamlined loan is that it’s great for getting a renovation mortgage loan quickly that can cover many cosmetic concerns. A standard loan requires more documentation, but it allows you to add in major structural work and is for projects that will exceed the $35,000 limit. The minimum amount of rehabilitation is $5,000 and the house has to be at least a year old. So you need to keep all this in mind when you look at mortgage loan options.

Some Requirements for The FHA 203(k) Loan

For the FHA 203(k) loan, you must be using it as a primary residence. If you have a 10 percent downpayment, some lenders may be willing to work with credit scores as low as 500. However, 580 is the necessary credit score for access to 3.5 percent downpayment options. Lenders may have higher requirements, and 620+ is a common number that they aim for. When you use the standard FHA 203(k) option, you need to work with a HUD consultant. They guide you through the contractor bidding process for the renovations, as well as acting as an overseer when it comes to the inspection process.

Once the loan closes, you can have renovation work start without any delay. A quick turnaround time allows you to get into your new home sooner. A few ways that you can use this loan product include fixing any problems that could lead to health concerns or safety issues for people living in the home or their guests, modernizing systems in the home, fixing the plumbing, improving the interior and exterior appearance of the home, replacing and repairing the roof and flooring, making significant changes to the yard, and making it easier for disabled people to access their home.

If you buy a fixer-upper that is not habitable, this mortgage loan option may also be able to cover the rental costs of another property while you wait for the home to be rehabbed. You are permitted to build a home up from a foundation, which is an option that may make sense for buildings that are in particularly bad shape. You can also rehab part of the property for non-residential uses, or convert it to a one to the four-unit building.

Fannie Mae HomeStyle

There are many mortgage loan options out there. The next we’re talking about is maybe not so familiar to you. The Fannie Mae HomeStyle loan has more flexibility on the type of homebuyers who can use it, as well as the renovations that you do to your home. Unlike the FHA 203(k) renovation mortgage, the HomeStyle mortgage allows primary residents, people buying second homes, and property investors to access this product. However, we can see the expanded access reflected through higher credit score requirements. The base requirement is 620 minimum for a credit score. Your downpayment is either 3 percent or 5 percent. You get access to a lower downpayment if the home is owner-occupied, it’s the first time you ever purchased a home, or you have a low to moderate-income level for the area.

You need to work with an inspector who will approve the renovation documentation by the contractor. And you can choose your own contractors and the renovation loan also covers associated administrative costs of these projects. If you’re unable to live in the home while it’s being worked on, you can have up to six months of payments on your mortgage covered in the loan amount so you have a place to live during the process.

Fannie Mae HomeStyle Utilization

The renovations that are allowed with this mortgage product include cosmetic, structural, and luxury. You have a lot more leeway to add high-end touches to your home, as long as they’re permanently affixed to the property. It’s designed more for people who want to upgrade the home they already live in or people who are looking for a good return on their investment or a vacation home. You can finance renovations that can cost as much as 75 percent of the appraised value of the completed home. You have to complete these renovations within a set time limit, which is typically one year from when you get the loan.

The maximum mortgage amount given from Fannie Mae is $484,350 on a single unit property. This amount may be adjusted for particularly high-cost areas, in which case it maxes out at $726,525.

Why Choose a Fixer-Upper

A fixer-upper is an excellent option for many home buyers who are not finding home inventory that meets their needs. Here are a few of the benefits of choosing a fixer-upper.

Save Money

If you have a tight home budget or you would like to live in a neighborhood that’s more expensive, a fixer-upper can be a good approach to getting the type of home in the location that you’re looking for. You’ll be able to get mortgage tips and find your way into a home that is affordable without needing to compromise on where it’s located at. This benefit is particularly useful if you’re trying to get into a certain school district or you want to move closer to your work to lower the commute time. Sometimes in areas that become incredibly popular, going fo a fixer-upper is the only way to access a lower-priced home that’s in line with how much houses used to cost there. To really save money, looking into mortgage loan options is mandatory. So start on time and make sure you pay attention to details.

Putting in Sweat Equity

If you like taking on projects, using your handy skills to handle a whole house is an excellent way to express that and decrease how much you need to pay for a house. You get to bring your own preferences to the table and leverage your willingness to put work into your own home. You get a lot of satisfaction over checking off items on the to-do list, whether you want to take a DIY approach or you are working with contractors (or both!).

Reducing The Price Tag of Renovations

When a home seller renovates their home shortly before selling it, they’re going to try to maximize the income that they’re making off of those improvements. Because of this, you’re not just paying the base cost of the renovations. You’re also paying for the improved value of the home, as well as whatever profit the seller is attempting to put on top of that work. When you choose a fixer-upper to renovate, you are paying for the base pricing of the project without any of the overhead that ends up in the listing price. This also influences which of the mortgage loan options you choose.

Customize Everything

Cookie-cutter houses are enough to make me yawn, and that’s the case for a lot of people. You’re not a cookie-cutter human, so getting a fixer-upper and doing renovations on it is the perfect way to show off your unique style. When you have full creative control, you get to make the housework for your lifestyle and family. Make the perfect room flow, divvy up the space in the way that makes the most sense, and put in the touches that make you happy to walk into your home.

Paying Less Property Tax

When you make a home purchase, the property tax that you’re responsible for calculated by looking at the home’s sale price. While it will probably be re-appraised down the road, in the meantime, you could be saving thousands of dollars per year on taxes.

Less Competition

Many home buyers want something that’s move-in ready and newer. They don’t want to mess around with renovations or trying to imagine what the house would look like with changes. They just want to make a straightforward purchase and are willing to pay extra for the convenience. These houses get a lot of competition in many areas, but the fixer-upper is not. You end up being at a better place when you’re negotiating with the seller, which can lead to many perks in the process.

Make Your Home Worth More

Want to sell your home eventually? Improving a fixer-upper means that you’re going to get back a lot more than you paid. This is especially true when you’re in a hot neighborhood and you got in there by buying the cheapest house on the best block. So keep in mind that whichever of the mortgage loan options you choose, you may, ultimately, get your investment back and earn money.

Try to find a renovation mortgage loan here on Loanry. This could make the entire process of loan shopping much less daunting for you. If you want to see whether you qualify, enter your information here:


Choose Where You Allocated Your Resources

A chef’s kitchen doesn’t make a lot of sense for a couple that primarily eats out at restaurants. You can choose exactly where your renovation resources are going. So that you get the best features in the areas that you care about the most. This creates a home that is uniquely suited to your needs in the short and long-term.

Look Into Local Loans and Grants

If these renovation mortgage loan options don’t quite cover all of the costs for your expected home renovation plans, you may have the option to look into local grant and loan programs that provide additional funding. Community redevelopment loans, incentive programs for buying vacant houses, and state-specific mortgage programs are a few ideas of organizations that could assist you with this process. When you’re looking into these options, make sure to confirm that they would stack with the renovation loan product you’re using. You don’t want to end up counting on money that you’re not actually eligible for. Trying to redo a renovation plan in the middle of the process can throw off the schedule entirely, which is a significant problem if you have Fannie Mae HomeStyle loans that have a time limit.

Considerations Before Buying a Fixer-Upper

A fixer-upper is an excellent option for many home markets. But there are a few considerations you want to keep in mind so you can avoid mistakes in the process of buying house and renovation.

Can You Deal With Months of Renovations?

Home renovation cost estimator by house size In the big picture, you deal with renovations for a short period of your life. Then you can go on to enjoy a great customized home. However, that’s little comfort in the event that the renovations get in the way of your daily life. If you are buying a home that requires top to bottom renovations and there’s no untouched part of the house, you may want to consider adding rental or mortgage funding into mortgage loan options you look into, while you wait for renovations to complete

Are You Able to Deal With Cost Overruns and Schedule Changes?

A home renovation includes a lot of moving parts, and they don’t always work together properly. There are many reasons that a renovation project can get behind schedule, or go over budget.  You need to be ready for things to not go as smoothly as you’d like. And be able to roll with the punches. If that level of uncertainty is stressful, then you may want to consider a move-in ready house instead

Do You and Your Family Members Agree on The Scope of The Renovation?

You don’t want to take out a renovation mortgage loan and then find out that people in your family are upset because you didn’t add in the renovations that they like. It might be hard to come to a consensus on each aspect of the project. But make sure that everyone is on the same page. And willing to make compromises to make the best possible house for everyone involved

Think about the short and long-term when you are putting together a renovation plan. Your kids may be fine sharing rooms today, but are they going to feel the same way when they’re teenagers? What happens to the playroom as a family gets older? Do you have hobbies that are shoved in a corner because there is no dedicated space? What type of storage solutions will be necessary for a new property? Consider all of these questions so that you’re not overlooking anything major during this process.

In Conclusion

Fixer-upper mortgage loan options are a perfect solution for many home buyers. There are mortgage products that support both mortgage and renovation funding. You can consult a mortgage broker who can offer you various options from different lenders.

Get yourself in the home of your dreams. If you’re making major structural changes to the property, spend some time observing how you use your current home. The flow from room to room, and areas that you would like to improve. You don’t want to go through the trouble of restructuring a house just to have the flow end up being completely opposite of the ideal for your family. Use the help of a HomeStyle or FHA 203(k) renovation mortgage loan option!

VA Loans for Those That Serve and Deserve

When you think of military benefits, you probably think of continued health care through the Veterans Administration (VA) hospital or buying cheap groceries at the PX. The VA’s loan program should top your list though. Low rates and zero down requirements make VA loans one of the top benefits available to those in or released from the military.

All About VA Loans

Qualified recipients can purchase or build a home or refinance one with a loan up to $484,350, the 2019 loan limit. In areas where real estate costs more like New York City and Los Angeles, the VA provides a higher loan limit. You also avoid paying for Private Mortgage Insurance (PMI). PMI insurance type protects your lender until you reach at least 20 percent equity for which you pay monthly premiums.

During the year 2018, the VA backed mortgages worth $161.3 billion. The average home loan amount was $264,197.

The affordability of these loans makes them attractive to every service-member and veteran who wants to own a home. Traditional mortgages simply cost more money, and they have far tougher qualifications. Read on to learn how to shop mortgage lenders, apply for a VA loan and to explore the loan process in-depth.

VA Loans: Basic Training

Your loan still comes from a private lender although it is backed by the US Department of Veterans Affairs. The program began in 1944 and since then more than 22 million individuals have purchased homes through it.

With a conventional home loan, you must put down as much as 20 percent. The VA loan programs offer the only loans you can get with no down payment.

With a conventional home loan, you must purchase PMI which can incur a monthly cost of hundreds of dollars. You avoid that with a VA loan.

With a conventional home loan, interest rates can reach sky-high limits. The government backing on a VA loan keeps its interest rates very low – in many cases, under five percent.

With a conventional home loan, you must meet stringent requirements. The VA home loan program provides a more lenient lending policy and has more lax requirements.

VA Funding Fee

You will pay a VA Funding Fee to the Department of Veterans Affairs which helps pay for future VA loans. Those with a service-related disability avoid the funding fee. Which ranges from about 2 percent for first-time homebuyers to 3.3 percent to 3.6 percent for repeat home buyers. You can bundle this cost into the loan amount.

VA Loan Limits

The zero down payment loan limit for 2019 was $484,350. In major metropolitan areas where the cost of a home rises higher than the typical US home, the home buyer can qualify for up to $726,000. New York City is one of the locations where this exception applies. A veteran can qualify for loans for larger amounts, but they must put money down.

The loan amount for which you can qualify varies. Your credit score and debt ratio still largely determine this. You can determine ahead of time the amount of house payment you can afford with the amount you can put down as an initial payment.


AIT: VA Home Loan Types

You can obtain a VA-backed loan or a direct home loan.

VA-backed loan

With a VA-backed loan, the VA guarantees the loan you obtain from a private lender. This means that if the lender must foreclose on your home because you defaulted on the loan, the lender can recover a portion of or all of its losses. This lessens lender risk, resulting in improved loan terms for you.

Another benefit to you is that the financial lenders follow VA loan standards rather than their own. They can require additional standards. But these typically fall within a reasonable request such as a specific minimum credit score or obtaining an updated home appraisal. If you apply for a direct from the VA loan, no minimum credit score requirement exists. If you apply for loans from private or traditional lenders, you will need to meet their requirements. Which typically is a credit score of 620 or higher.

VA Direct Home Loan

Conversely, with a VA direct home loan, the VA functions as your mortgage lender. You apply to the Administration and work with the VA to manage a loan you receive.

You still must prove you have sufficient income to repay the mortgage. While VA loans still look at your debt load, the guidelines for the debt ratio are a little more lenient. VA guidelines allow veterans to use their home-loan benefits a year or two after bankruptcy or foreclosure.

Within both of these loan types, you will find various programs.

  • Purchase loan: a loan to buy a home for the first time or as a repeat buyer
  • Native American Direct Loan (NADL): a home loan and home improvement loan program for Native American veterans and veterans who are married to a Native American. This direct loan from the VA lets the individual purchase or improve a home on federal trust land
  • Interest Rate Reduction Refinance Loan (IRRRL): individuals who already have a VA-backed home loan may qualify for an IRRRL which reduces or stabilizes monthly payments
  • Cash-out refinance loan: you take out a loan against the equity in your home which you can then use to fund the school, pay debts or use it in some other manner

If you want to see which lenders may want to make you an offer, start with this form:


Caveats to VA Loans

You can use VA residential mortgage loans for more than one home. But it can only be for your primary residence. VA loans cannot be used to finance vacation homes or investment properties.

You must obtain a certificate of eligibility (COE) before you can apply for a VA home loan. You can qualify for basic entitlement and/or bonus entitlement. The basic entitlement equals $36,000 or 25 percent of the total mortgage whichever is less. A bonus entitlement equals up to $85,087, still 25 percent of a larger loan amount. The 25 percent is the amount of the loan the VA covers. It is not the same as the loan limit. This is the amount that the VA guarantees to the financial lending institution.

VA Loan advantages and disadvantages

Get Your COE

You can apply for your COE in three different ways. Again, you will need this before you can apply for VA loans.

  • Lender request: Have your lender use the database at their disposal to determine your eligibility and produce your COE
  • VA.gov: Apply online at VA.Gov by logging into your account and completing the COE application page
  • Postal mail: Print a hard copy of the COE application from the VA website. Complete it and include your eligibility documentation. Mail the application to the VA

Documents Required for COE

Your necessary documents vary by branch.

You can use your full entitlement package more than once. Deplete your entitlement a little at a time. You might use $24,000 of your package on the first home you purchase. Selling it ten years later, you might return to the VA for a second home loan and use another $12,000 of entitlement.

Veterans and Current or Former National Guard or Reserve Members in Federal Active Service

Must include a DD Form 214 with a copy showing the type of service and the reason for leaving.

Active Duty Service Members, Current National Guard or Reserve Members

Who have never been Federal active service must include an up-to-date statement of service signed by the adjutant, personnel office or commander of the unit or headquarters with their name, Social Security number, date of birth, entry date of active duty, duration of lost time and the name of the command providing the data

Current National Guard or Reserve Member

Who has never been Federal active service must include an NGB Form 22, report of separation and record of service for each period of National Guard service

Current National Guard or Reserve Member

Who has never been Federal active service must include an NGB Form 23, Retirement Points Accounting and proof of the character of service

Discharged Member of the Selected Reserve

Who has never been activated for Federal active service must include a copy of your latest annual retirement points statement and evidence of honorable service

Surviving Spouse

Spouses who receiving Dependency & Indemnity Compensation benefits must submit VA Form 26-1817 and veteran’s DD214, if available. If they receiving Dependency & Indemnity Compensation benefits must submit the veteran’s and surviving spouse’s social security number on the 26-1817 form. Surviving partners must include a copy of your marriage license, and need to submit form DD214, proving discharge orders. For those who do not receive Dependency & Indemnity Compensation benefits must submit VA form 21-534. Mail a copy of VA 21-534 to the mailing address for your state of residence. Surviving spouses must include the death certificate or DD Form 1300 – Report of Casualty.

Eligibility Requirements

By now, you have seen me refer to the eligibility requirements a number of times. Ah, but what are they, you ask?
You will be happy to know that it is really easy to obtain your COE. You are eligible for a VA loan if you meet any of the following statuses:

  • regular active military
  • veterans
  • reservists
  • National Guard
  • military spouses whose spouse died during active duty or from a service-connected disability

There Are a Few Qualifications For the Above Categories of Individuals

Active-duty military personnel must serve for six months before qualifying for a COE. If an active duty military member serves 90 consecutive days during wartime, they qualify for the COE.

National Guard members and reservists must serve six years before qualifying for a COE. If they get called to active duty, they gain eligibility following 181 days of active duty.

Here’s the thing – a COE simply means you qualify to apply for a mortgage. The COE allows you to start shopping for your mortgage. That is not like shopping for a new pair of blue jeans. You start looking for a mortgage by considering traditional mortgage lending institutions. That means you will need to meet each lender’s requirements for debt-to-income ratio, credit score and income verification. Typically, these VA loans do not include any income verification mortgage option.

The fees required vary by branch, too. It also varies depending on which option you choose – zero down payment or a down payment of 10 percent or greater.

  • Armed forces first-time borrowers with no money down pay a fee of 2.15 percent of the loan amount
  • Armed forces first-time borrowers with 10 percent or greater down pay a fee of 1.25 percent
  • National Guard members and reservists pay an additional quarter of a percentage point more than active-duty military
  • Returning borrowers with no money down pay 3.3 percent of the loan amount

Home Occupancy Requirements

You typically must move into your new home within 60 days of purchase. You must use it as your primary residence. Some exceptions are made to the move-in deadline based upon a case by case basis.

Chris Birk, director of education at Veterans United, about the occupancy requirement

Final Thoughts

The VA also offers financial counseling to its borrowers. If you cannot make your mortgage payments, the VA will help you negotiate with the lender to alter the repayment plan, modify the loan and help develop other alternatives to foreclosure. The VA offers mortgage counseling to every veteran regardless of whether they obtained a VA loan. Phone (877) 827-3702 for financial counseling and help with getting a handle on your mortgage.

Mortgage Refinance – Everything You Need to Know About It

A mortgage refinance will replace your current loan with a new one. Many times, people decide to refinance to reduce their interest rate, tap into home equity, or lower monthly payments.

Mortgage refinance applications are a significant portion of all mortgage applications. The relatively low-interest rates have persuaded homeowners to reorganize their loans and finances. Whether or not a mortgage refinance is right for you will depend more on individual circumstances instead of just the rates.

Everything About Mortgage Refinance

Before everything, it is very important to know when is the right time to refinance your mortgage. And keep these things in mind before you decide if a mortgage refinance is right for you.

Home Equity, Credit Score, Taxes and Your Debt-to-Income Ratio

The first qualification you will need in order to refinance is your home’s equity. Many home values have been on the rise and the share of underwater homes has dropped. However, some homes haven’t regained value. You may not be able to refinance with little or no equity with a conventional lender. But there are some government programs available. The best way to find out if you qualify is to visit with a lender and then discuss your individual needs. If you have at least 20% equity, it can be much easier to qualify for a new loan.

Credit Score: Lenders have tightened standards for loan approvals. So you may be surprised to find that even if you have good credit, you don’t necessarily qualify for a low-interest rate. In order to qualify for some of the lowest interest rates, you need a score of 760 or higher. If you have a lower score, you can still qualify for a new loan but the fees or interest rate can be higher.

Debt-to-Income Ratio: If you have a loan, you may think that you can easily get another one. However, lenders have also become stricter when evaluating the debt-to-income ratio. If you have substantial savings, a stable job history, or a high income, it can be easier to qualify for a loan. Lenders want to keep the monthly housing payment under 38% of your gross income. You may want to focus on paying off some debt before your refinance in order to qualify.

Rates vs The Term

You don’t want to just focus on the interest rate but also establish some goals when refinancing to determine which product meets your needs. If the goal is to reduce monthly payments then you want to choose a loan that has the lowest interest rate for the longest term. Maybe you want to pay less over the length of the loan. Then look for the lowest interest rate at the shorter term. If you want to pay off the loan as quickly as possible then look for an option with a short term and payments that you can afford.

Liens or a Second Mortgage: If you have liens or a second mortgage then refinancing can be a challenge since the new loan is used to pay off the first mortgage. You want to resolve any liens or tax liabilities before you begin the refinancing process.

The Cost of Refinancing, Taxes, Break-Even Point and Insurance

Refinancing a home isn’t free. However, you can find different ways to cut down on the cost or wrap the cost into your loan. Some lenders have a “no-cost” refinance option. This means you pay a slightly higher interest rate in order to cover the closing cost. Don’t forget to shop around since some refinancing fees can be reduced or paid by the lender.

Taxes: Many people rely on the mortgage interest deduction to lower their federal tax bill. If you refinance and are paying less interest, your tax deduction could be lower. Very few people think of this as a reason not to refinance but it’s still something to keep in mind.

Your Break-Even Point: One calculation that plays into your decision is the break-even point. This is the point at which the costs of the refinance are covered by what you save monthly. If the refinancing costs you $2,000 and you are saving $100 every month then it takes you 20 months to recoup those costs. If you plan to sell or move within those two years then a refinance doesn’t make sense.

Private Mortgage Insurance: If you have less than 20% equity in the home, when you refinance you will have to pay private mortgage insurance. If you are already paying this, it shouldn’t make a big difference to you. If the home value has decreased since the purchase date then you may need to pay PMI for the first time. The lender you are working with can help you calculate whether you will need to pay this and how much it adds to your monthly payment.

Why You May Want to Refinance

There are a number of reasons why a mortgage refinance may make sense to you.

8 Facts behind Refinancing

Reduce the Monthly Payment and Pay Off the Loan Faster

If your goal is to pay less each month then you should refinance with a lower interest rate. You can also reduce the payments by extending your loan term but with this option, you will pay more interest in the long run.

If you refinance from a 30-year mortgage to a 15-year one then you can pay off your loan in half the time. Due to this, you would pay less interest over the life of the loan. There are pros and cons to a 15-year loan but one of the reasons why more people don’t choose this option is because your payments usually go up.

Get Rid of Private Mortgage Insurance and Avoid Balloon Payments

Get Rid of Mortgage Insurance: One of the top mortgage tips is to eliminate this when you can. Private mortgage insurance on a conventional home loan can just be canceled. But if you have an FHA loan then the mortgage insurance can’t be canceled. The only way to get rid of the insurance is to sell the home or refinance once you have enough equity.

Balloon programs like adjustable-rate mortgages seem like a good option for lowering the monthly payments and rate. However, at the end of the term, if borrowers still own the property then the mortgage balance can be due, which can be a lot. A refinance can allow you to avoid these balloon payments and instead continue on with affordable monthly payments.

Equity and Fixed-Rate Loan

Use equity, when you refinance to borrow more than you owe on the current loan. Your lender will give you a check for the difference This is called a cash-out refinance. Some people can get a cash-out refinance and a lower interest rate at the same time.

Switch from an Adjustable-Rate to a Fixed-Rate Loan. Interest rates on an adjustable loan can go up over time but the fixed rate stays the same. When you refinance into a fixed loan, you can have more financial stability and more steady payments.

Cash-Out Refinance

When you get a cash-out refinance, you can have cash in hand to spend on debt consolidation, financial needs, or home improvements. You need to have built up equity in your home. You aren’t able to pull out 100% of your home’s equity but you can pull out some. For example, if the home’s value is $200,000 and the balance is $100,000, you can refinance the $100,000 loan for $150,000 and then have $50,000 for renovations.

This type of refinancing may give you a lower interest rate if you bought the home when mortgage rates were higher. If you want to lock in the lower interest rate and don’t need cash then you can go ahead with a traditional refinance.

Good Things About Cash-out Refinance

A cash-out refinance can make sense for a few reasons:

  • Debt Consolidation: You can use the money to pay off your high-interest credit cards and save yourself money in interest
  • Higher Credit Score: When you pay off your cards, you can build your credit score since you lower your credit utilization ratio
  • Tax Deductions: The mortgage interest deduction may also still be available on this type of refinance if the money is being used to improve the home
  • In addition to the benefits, there will be some cons that you need to consider for this type of mortgage refinance
  • Foreclosure Risk: Since the home is used as collateral you are risking it if you aren’t able to make payments. If you are doing a cash-out refinance to work on paying down your credit cards then you end up paying for unsecured debt with a secured debt
  • New Terms: Your new mortgage has different terms so you want to make sure you check your fees and interest rate before you agree to the new terms
  • Private Mortgage Insurance: If you borrow more than 80% of your home’s value then you have to pay for private mortgage insurance
  • Enables Bad Habits: Using a cash-out refinance to pay off credit cards can backfire if you rack up debt again and don’t have this option to pay off the balance

When Can You Refinance the Home?

Most lenders and banks require that you maintain the original mortgage for at least a year before you are able to refinance. However, each lender and the terms are different. Don’t hurry, shop around and see which lender has the best offer for you. It’s recommended to check with your specific lender to see any details or restrictions. In many cases, it would make sense to refinance with your original lender but it’s not required. It’s easier for a lender to keep a customer than get a new one so some lenders don’t require a property appraisal or a title search if you are sticking with your current lender. Many will offer a better price to a borrower looking to refinance. You may be able to get a better rate when you stay with your original lender. But you still want to shop around just to make sure.

The Cost of Refinancing

Refinancing does come with some costs, just like with a typical house mortgage.

Application Fee: Lenders have this charge to cover their cost of checking your credit report and the initial cost to process your loan request.

Title Search and Title Insurance: This charge covers the cost of the policy and insures the policyholder for a specific amount. It covers any loss caused by discrepancies found in the property title. And covers the cost to look at the public records and verify the ownership on the property.

Attorney Review Fees: The lawyer or the company that conducts the closing charges the lender for fees and, in turn, the lender charges those to you. Borrowers may also be required to pay for other legal services and fees related to the loan.

Fees and Points Incurred in Loan Origination: Lenders will charge an origination fee for the work in evaluating and preparing the loan. Points are prepaid financial fees imposed by the lender at the time of closing.

Risks of Refinancing

A mortgage refinance can be a smart move but it’s not beneficial for everyone. Refinancing can be a risk if you aren’t able to lower the interest rate by that much or you incur a lot of fees.

Refinancing Isn’t Free: Your mortgage refinance comes with costs, such as origination fees, title insurance, taxes, and an appraisal. Just like your original mortgage. Even if the refinance comes with a lower monthly payment, you aren’t actually saving money until the monthly savings make up for the cost of refinancing. It’s helpful to do the math ahead of time and use a refinance calculator to see how many months it takes to reach this point. If you are even thinking about moving before then, this it’s not worth it.

Prepayment Penalty: Some lenders may charge you extra for paying the original loan amount off early. A high prepayment penalty may persuade you to stick with your original mortgage instead of refinancing.

Total Financing Can Increase: If you refinance to a new 30-year mortgage then you will pay more in fees and interest over the life of the loan than if you have kept the original mortgage.

Reasons Not to Refinance

One of the main reasons to not refinance is if you are going to be moving soon. You need to consider your break-even cost and know that it usually takes a year or two to break even on the cost of a refinance. If you will be considering moving then it’s not worth it.

If you are close to paying off your mortgage then it may make sense to wait instead of a refinance. This is true even if the terms of the refinance are better than the current terms. By refinancing, you might extend the term of the loan and increase the cost, which means that refinancing may not be worth it in the long run.

If you are having financial problems then you may want to reconsider. Refinancing may seem like a good way to consolidate debt but in some situations, it puts you at risk for further financial problems.

Step-by-Step Process to a Mortgage Refinance

If you are ready to tackle the mortgage refinance process, here are the steps you want to take:

  1. Set the goal. Whether it’s lower payments, a shorter loan term, or getting rid of the insurance, knowing why you want to refinance is an important step
  2. Start shopping around for the best refinance rates. In addition to looking at interest rates, you also want to look at the fees. When you shop mortgage lenders, you can be sure to get the best deal
  3. Apply with different lenders. You want to get information from about three to five lenders but apply within a two-week period so you can minimize any impact on your credit score
  4. You need to choose a lender after you have compared the loan estimate documents you receive. The loan estimate also tells you how much cash you need for any closing costs
  5. Lock in your rate. When you do this, your interest rate can’t be changed during a specific period. You and the lender then try to close your loan before this expires
  6. Close on your loan. During this time, you pay the closing costs listed in the closing disclosure. Closing on a mortgage refinance is very similar to closing on your purchase loan but no one is handing you keys at the end of it

About this second step, maybe we can help you. Try here to find the best options to refinance your mortgage loan. Put in your information below and see what suggestions you will get. Good luck!


Conclusion

A mortgage refinance can be a great option for you if you are trying to lower your monthly payments. And eliminate your mortgage insurance, tap into the home’s equity, or pay off your home early. There are plenty of things to consider before you start the refinance process. Consider your credit score, your financial situation, and if it really makes sense to go through the refinance process. You want to make sure you have goals in mind when starting the process since refinancing is not free and you will have to pay some closing costs.

There are certain situations where refinancing doesn’t make sense and you want to consider all your options. When you are ready to start the mortgage refinance process, know that the process is similar to getting an original mortgage and you want to shop around for the best rates.

Everything You Want to Know About Reverse Mortgages

There has been a lot of talk lately about a different kind of mortgage called a reverse mortgage. There are a lot of opinions about the pros and cons associated with a reverse mortgage. It has caused quite a bit of confusion for many people. Reverse mortgages are marketed towards senior citizens or those who have paid of their mortgages. That group of people are both susceptible to scams and also unwilling to make changes. Continue reading to find out more information about a reverse mortgage. I will also give you some general information about all types of mortgages, so you can have a full wealth of knowledge.

What Is A Reverse Mortgage?

A reverse mortgage is basically a loan against the value of your house. You must be 62 years of age or older to qualify for a reverse mortgage. You must also have a large amount of equity in your house, or your house must be paid in full. When you take out a reverse mortgage, you can get one lump sum, a regular payment each month, or a line of credit. With this loan, you do not have to make any loan payments. You pay back the loan upon selling the house, moving out of it, or death.

Reverse mortgages are federally regulated and the lender cannot loan more money than the value of the house. If the loan amount exceeds the value of the house, you or your estate is not responsible for the difference. This can happen when the value of the house drops or if you, as the borrower, live longer than expected. This type of loan gives senior citizens access to money that is tied up in the value of their home when they need it instead of it going to their estate upon death.

Are Reverse Mortgages Scams?

In general, a reverse mortgage is not a scam. However, they are geared toward a population of people that tend to be vulnerable. Senior citizens often suffer from the inability to make sound decisions and often look for ways to solve their financial burdens. They do not want to be a burden to their families and feel like they should have something to leave behind besides debt. A reverse mortgage can be a fast and easy way to make a large sum of money so it is an area that is subject to criminals.

Contractors and vendors have been known to prey on seniors to persuade them to obtain a reverse mortgage to pay for improvements to their homes, which may need be needed. The contractor may not perform the work, or do a shoddy job and just take the money from the senior. Unfortunately, many people have taken advantage of senior citizens for a long time. Even family members have been known to take advantage of the older family members. They make claims that they are not able to handle their money and force them to get reverse mortgage just to steal the money. The reverse mortgage itself is not a scam, however, people use reverse mortgages to scam people.

What Are The Advantages To A Reverse Mortgage?

There are many reasons why a reverse mortgage might be a good idea for you. A reverse mortgage is similar to a line of credit or a home equity loan. A reverse mortgage gives you a lump sum that you can access when you need it, not later when you decide to sell your home. One of the major advantages of a reverse mortgage is you do not need any form of income. Your credit score does not matter when you want to obtain this type of mortgage. Another huge advantage is you do not have to make any loan payments as long as you live in the home. Any other mortgage or loan has monthly payments associated with it.

For most people over the age of 62, their home is their largest asset, but they cannot access the cash in it. You can tap into the equity in your home without having to sell it or make any payments. This type of mortgage is the only way you can do essentially take out a loan but not make any type of payment. Seniors often find it hard to pay basic expenses. Some of the many reasons for this is the increased cost of health care and people living longer. Often seniors have basic medical coverage and the cost of prescriptions is through the roof. This gives them a way to make those payments easier. When someone takes out a reverse mortgage, that person is still responsible for paying the property taxes, insurance and continuing to maintain the house.

What Are The Disadvantages To A Reverse Mortgage?

When considering a reverse mortgage, you should know that there are some disadvantages, too. You should be aware of them so you can make an educated decision when determining if a reverse mortgage is right for you. One of the key pieces of which you should be aware is for you to qualify for a reverse mortgage you must be able to state that you will not have to move into assisted living within one year of the loan.

The reality of a reverse mortgage is that you tap into the equity in your home and take a large chunk of it. This means that when you are ready to sell your home, you will not make as much, or any money on the house. Another possibility is that you pass away while living in the home and your heirs do not get the full value of the house. However, that may not matter to you for many reasons. This is a determination that you need to make and determine if this is the best thing for you right now.

Typically, when you elect for a reverse mortgage, there are several plans from which you can pick. You can pick a lump sum or line of credit and those amounts of money may not last you for the rest of your life, especially if you live longer than you expect. Another option is you can receive monthly payments but the key is to make sure the payments would give you enough money per month for the rest of your life.

What Are Other Types Of Mortgages?

There are many different types of mortgages on the market. A reverse mortgage is completely different from most typical mortgages. In this case, you are a certain age and you already own your home, or have a large amount of equity in it. I want to touch on all the other mortgages that are for buying or refinancing a home. It is important to understand these distinctions when you shop mortgage lenders. This helps guide you to making the right decisions when you are looking for a mortgage.

Fixed Rate Mortgage

The most common and safest mortgage is a fixed rate one. The largest benefit of this type of mortgage is that the payment amount remains the same each month. These types of loans are offered in ranges from 10 to 40 years, with the most common being 15 and 30 year repayment lengths. Lenders want you to have a down payment that is 20 percent of the price of the house. If you cannot have a down payment of 20 percent, the lender most likely requires you to have private mortgage insurance (PMI). This insurance protects the lender if you do not pay your mortgage. You usually need a higher credit score to be able to obtain a traditional mortgage and you need a fair amount of documentation.

Adjustable Rate Mortgage

Another type of mortgage is an Adjustable Rate Mortgage (ARM). This type of mortgage has a level of risk that you have to accept before you obtain one. Just as the name states, the interest rate is adjustable, so it does not remain the same. One of the most common types of an ARM is a 5/1 type of loan. This means that the rate stays the same for 5 years and then changes every year for the life of the mortgage.

The interest rate for the first 5 years tends to be lower, which can translate to a huge cost savings for you. However, once the rate increases, it may get so high, you cannot pay the mortgage. Often homeowners sell their homes or refinance before the end of the 5 year period to a more traditional loan. This type of loan can get you in your house and you can work to improve your credit or build equity in the house so you can qualify for better rates before the end of 5 years.

Interest Only Mortgage

Another type of mortgage is an interest only mortgage. This type of mortgage allows you to pay only the interest of the loan for the first 5 to 10 years. After that time period, you begin to pay off the mortgage as if it was a conventional mortgage. This type of mortgage can decrease your monthly payments, however, it can increase the time it takes you to pay off your mortgage. It also decreases how much equity you earn in the house.

Your Guide to Understanding the Different Types of Mortgages

How Do I Go About Getting A Mortgage?

No matter if you are interested in a reverse mortgage, or some other type of mortgage, you should do some research. It is important that you know how to shop for a mortgage. It is also important that you understand the differences between the mortgage types, so you can ensure that you are choosing the best option for you. You should have an understanding of how happens when you apply for a mortgage, so you know what to expect and be prepared.

  • Check your credit and if you need to improve it, start working on it.
  • Get prequalified. This way you’ll show to any seller that you are a serious buyer. And you can check how much money you’re able to get. With this information, you basically know what your budget is and which price range can you look at.
  • Choose a mortgage from all the options that you found. Make sure you choose the best mortgage for your situation. The best mortgage is that which you can actually afford.
  • Find the right lender for you. Not only is the mortgage important, but so is a lender that is willing to work with your credit and down payment.
  • Gather all documents. Some of the documents you’ll need are where you worked for the last two years, pay stubs, tax returns in the past two years, two years worth of W2s, any proof of pension. You should also get documents which prove dividend earnings, bank statements, and any other debts that you have.
  • Another step is to check out a mortgage calculator and determine the amount you can afford to repay.
  • Apply.

If you want to check right now whether you can get offers for a loan, put in your information below and see if you can get a loan:

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What Is A Mortgage Broker?

Whether you are interested in a reverse mortgage or a traditional mortgage, there are mortgage brokers available to help you. You do not need to have a mortgage broker to get a mortgage, but you may find one helpful.  A mortgage broker finds the right mortgage for you and your needs, but there are fees. A mortgage broker does not work for a bank. They get paid by the fees that they charge you. They must have a license to operate.

A mortgage broker usually has various loans from different lenders to offer you a wide variety of options. A mortgage broker can work with lenders to secure a loan for you. For example, if you only have 8 percent to put down for a house, the broker can find lenders that accept those terms. A broker can do all the negotiating for you. This may be especially helpful if you do not have the best credit. A broker may be able to find some of the best homebuyer grants and programs for you so that you do not have to do any of that work.

Mortgage Broker Fees

If you are considering a broker, you should be aware of the fees that you may have to pay. The broker may use lender based compensation fees which means that the lender pays the fees of the broker and then adds those fees on to your mortgage. If the mortgage broker chooses borrower based compensation, that means you pay the broker fees at closing. Every broker charges a different fee amount and they may call them by different names.

Here are some of the common fee names and types that you hear:

  • Loan origination fees – the lender charges origination fees which are a percentage of your mortgage, and sometimes the broker can add their fees to this. If this happen, make sure you ask for a breakdown of these fees so you can see how much exactly has the broker charged.
  • Yield spread premium – this is the amount the broker gets from the lender because they got you to get a mortgage with higher interest. Make sure you have a competitive interest rate if this is the case.
  • Upfront fees – when you get a jumbo loan, you also have these fees to pay and they are usually flat rate fees.
  • Administrative fees – this is the fee that the broker adds tot he standard lender fee. You should ask the broker to waive it if you see this fee in the breakdown.

Important Mortgage Terminology

When you are determining where to shop for a mortgage, it is important that you understand some key terms. When you fully understand these terms, it makes it easier for you to make a sound decision about the right mortgage for you. Even if you are interested in a reverse mortgage, understanding the terms are a key part to obtaining the proper mortgage.

Some terms of which you should be aware are:

Amortization – this is when your mortgage is broken down into scheduled payments of principal plus interest. Those payments need to be higher than the interest or the loan balance increases.

Amortized Loan – this is any type of loan that has been paid of in equal payments.

Closing – this is when you meet an attorney to sign the final documents for the mortgage and buying a house. This is when the attorney takes your funds from your lender, which includes any fees or commissions. The attorney pays the seller for the house. All of this paperwork is recorded at the local courthouse.

Closing costs – this covers all the costs including any administrative costs. It may also include appraisal and credit report fees, attorney fees, recording fees, survey fees, termite inspections and title insurance.

What Factors Impact My Mortgage Payment?

There are two major factors that impact your mortgage payment, except when it comes to a reverse mortgage. Interest and down payment are two of the major contributors to your mortgage payment. A down payment is the money you put down upfront to buy a house. This is the amount of the purchase price that you pay out of your own pocket. This money is not factored into the loan amount that you ask to borrow. The higher your down payment amount, the less money you need to borrow which means the less money you owe. This also means the lower your monthly mortgage payments is going to be.

Obviously, the higher your down payment, the lower the amount you must borrow. You may qualify for lower interest rates if you put down a larger amount of money. When you put down a larger amount of money, you are reducing the amount of risk a lender has because you own more of the house. When the lender has a lower risk, you see that reflected in a lower interest rate.

Interest is what the lender charges you for allowing you to borrow money. The amount of interest you pay is directly related to your credit score and the amount of your down payment. If you have a bad credit score of less than 579, it adds about 2 percent on to the lowest interest rate. And if you have poor credit, you see an interest rate that is about 1 percent higher than the lowest rate. But if you have average credit, you should not see much increase in the interest rate. If you have excellent credit, the lender offers you the best interest rate they can.

Does My Credit Make A Difference?

The good news about a reverse mortgage is your credit does not make one bit of difference. However, if you would like another type of mortgage, your credit absolutely matters. A lender looks at your FICO score and the credit score. The difference with a mortgage is the lender pulls a credit report from each of the three credit bureaus. Typically all three scores are a little different. The lender uses the middle range score. If your credit scores are 600, 620, and 650, the lender uses 620.

What If I Have Bad Credit?

If you have bad credit, it will not impact a reverse mortgage. However, if you think you have bad credit, you should find out for sure before you attempt to get any other type of mortgage. A good rule of thumb is to look at your credit score about 4 or 5 months before you apply so you have a good idea of your credit score. You can use one of the many sites that gives you access to your credit report. A 740 or above is a great credit score. Anything between 680 to 739 is average. A score between 620 to 679 is fair. Anything between 580 to 619 is poor and a score below 579 is bad.

If there is an error on your credit report, fix it immediately. This can improve your credit score. You should work to decrease the amount of debt you have. You should also improve your payment history. One of the top reasons for a low credit score is late or missed payments. You should begin making all of your payments on time and in their full amount. It takes consistent work, but you can begin to improve your credit score.

Credit Terminology

It can be difficult for you to improve your credit score without a decent understanding of credit and credit terms.

FICO score – this is the three digit number that informs lenders of your level of risk and credit worthiness. The higher your number then the less risk you are to a lender.

Credit report – this is the report that contains your credit score. It also contains your entire credit history. And it shows your payment history, along with all your debts and income. It shows if you have filed for bankruptcy and any other credit problems you have had.

Debt to income ratio – this is the amount of debt you have compared to your income. This number is a percentage and lenders prefer your debt to income ratio is less than 30 percent.

Affordability – this is a term used with mortgages. This is the amount that a lender feels you are capable of repaying when it comes to purchasing a home. This is typically the amount for which you can obtain a mortgage. Be careful with this number. Do not let the bank tell you what you can afford. Use a mortgage calculator and determine for yourself just how much you can afford to pay for a house.

Conclusion

This article contains a lot of information about a reverse mortgage and other general mortgages. As with any type of loan, considering a reverse mortgage is a big deal and not something you should take lightly. You should weigh all of your options to make sure a reverse mortgage is the best answer for you. Keep in mind, it means that when you sell your house or pass away, you have cut into the equity in the home and there will not be any money for your or your survivors. That might be great for you, and if that is the case, a reverse mortgage might be right for you. You should decide this after you have educated yourself to understand all of your options.

Common Home Mortgage Terms and Definitions


You want buying a house to be simple. It is not. You might end up lucky and only need to view a handful of homes. More likely though, you’ll look at least ten houses. Some will have the right price. More than likely, you’ll settle on a home that comes close to the price and size you want while requiring little work. When the process of buying starts, knowing mortgage terms and definitions comes in handy.

Then begins your miasma of time with the bank or credit union. You’ll wallow in paperwork, beginning with your application and traipsing right on through to the closing documents. Within this pile of paperwork, you’ll read a plethora of business and financial terms. While your bank will not take the time to explain each mortgage term, we here at Loanry will. We’re here to help you with the mortgage terms and definitions you need to understand before you ever apply for your residential mortgage.

Common Home Mortgage Terms and Definitions To Know

To help you understand all these mortgage terms and definitions more easily, we divided them intro to several categories. We also recommend that you pay attention to each individual category since all these terms will be important during the process.

Mortgage Terms and Definitions: General Terminology

The mortgage terms and definitions that the real estate and financial industries consider general terms, you probably don’t.

Acceleration Clause

This is a contractual clause in a mortgage that allows the lender to demand repayment of the entire loan balance if the borrower violates any clause in the note.

Accrued Interest

Earned interest that is not paid and adds to the owed amount. It is also called negative amortization.

Adjustment Interval

The interval of time between interest rate or monthly payment changes in an adjustable-rate mortgage. This is typically displayed in x/y format with “x” representing the period of time before the first adjustment and “y” representing the following adjustment period.

Agency

A legal term referring to the fiduciary obligation one party has to the to the other.

Agreement of Sale

A  legal and binding contract signed by both the buyer and seller describing the conditions and terms under which the described property will be sold.

Alt-A

A mortgage risk category also known as “A minus.” It describes the grey areas between prime and sub-prime credit risk.

Alternative Documentation

A banking term that refers to an expedited method of verifying the applicant’s financial situation. Rather than verifying employment with the applicant’s employer, the bank accepts paycheck stubs and W-2s. Instead of verifying bank deposits with the applicant’s bank, the financial institution verifies using the borrower’s original bank statements. Although it provides an alternative, it still qualifies as “full documentation.”

Amortized Loan

An amortized loan need not be a mortgage. The term refers to any loan paid off in equal installments within the loan term.

Amortization

Amortization is the process of scheduled payments of principal plus interest. The payments must exceed the interest due otherwise the balance rises, creating negative amortization.

Amortization schedule

The monthly schedule of interest and loan principal. It may also include tax and insurance payments if the lending institution made them.

Amount financed

This term refers to the loan amount once the prepaid finance charges, a closing fee, have been paid.

Annual percentage rate (APR)

The total effective cost of the extension of credit. This gross cost disclosure calculation includes the loan interest rate and the upfront costs.

Application

A loan request form completed with potential borrower information as well as property information and requested loan amount. This is a standardized application form known as the “1003.”

Application fee

The fee to submit the loan application. It may cover the property appraisal, credit report or other costs. Some lenders refund it if they decline the loan.

Appraisal

The written estimated current market value of a property as prepared by a professional appraiser.

Closing

A business meeting at which the involved parties sign the final loan documents including the deed, mortgage, note, statements, etc. The settlement agent – typically an attorney or title insurance company – collects the buyer’s funds from them or the lending institution, pays the transaction fees such as appraisal fees, realtor’s commission and document recording fees. They also pay the seller for the net proceeds of the sale. At the close of the closing meeting, the purchase paperwork is recorded at the county courthouse. This meeting is also referred to as the settlement or close of escrow.

Closing Costs

A catchall term referring to the costs of servicing a loan. It includes the costs of processing, approving and closing a loan which may include appraisal and credit report fees, attorney fees, recording fees, survey fees, termite inspections and title insurance. Closing costs apply whether the home was financed or not.

Cost of funds index (COFI)

An interest rate index used to determine interest rate adjustments on an ARM.

Down Payment

This term refers to the cash amount paid at closing by the buyer which reflects the difference between the sales price of the home and the loan amount.

Good Faith Estimate

This estimate of closing costs, typically given to the borrower when they apply for the loan.

Interest Rate

The fee, expressed as a percentage, charged by the lending institution on a loan amount. It is typically calculated on an annual basis and may be tax-deductible.

Loan-to-Value Ratio (LTV)

A ratio expressing the loan amount to the value/sales price of a property. If the LTV ratios exceeds 80 percent, the lender typically requires loan insurance and may charge a higher interest rate.

Mortgage Insurance Premiums (MIP)

The insurance premiums paid on an Federal Housing Administration (FHA) mortgage loan.

Origination Fee

A lending institution charged one-time fee covering overhead costs of making a loan. It represents a fee of the closing costs. The lender may waive it for certain loan types.

Points

An optional prepaid finance charge the borrower can pay to lower the loan’s interest rate. These affect the total cost of the loan. A single point equals one percent of the loan’s interest rate. A point is deductible interest for income tax calculation. The financial community also refers to these as discount points.

Private Mortgage Insurance (PMI)

Lending institutions require this insurance on conventional loans that represent 80 percent or greater of the property value. This insurance insures the lending institution against financial loss if the borrower defaults.

Underwriting

In mortgage lending, the process of approving or denying a loan based on an evaluation of the property as collateral and the ability and willingness of the borrower to repay the loan.

Mortgage Loan Basics Spelled Out: Lending 101

Mortgage Terms and Definitions: Mortgage Types

If this is your first time buying a home, you might go into it thinking “A mortgage is a mortgage.” That’s not so. Numerous types of loans exist within mortgages. Not all of them are offered by a bank or credit union either.
Beyond conventional loans offered through standard financial institutions, some federal agencies also offer mortgage loans.

The Federal Housing Administration (FHA) and Veteran’s Affairs (VA) Administration offer mortgages to special groups. The FHA specializes in those who are first-time homebuyers while the VA offers loans only to veterans of the US armed forces. You can find a lot of information about mortgages if you know where to look.

Within the range of conventional mortgage loans, you also will not likely qualify for each type. Adjustable rate and assumable mortgage loans are probably the toughest for which to qualify.

Adjustable Rate Mortgage (ARM)

A type of loan that varies the interest rate and payments according to a specific schedule and pre-set limits. An ARM typically begins with a below-market interest rate. In the US, these are indexed, but abroad they’re flexible with the interest rate set at the discretion of bank.

Assumable mortgage

A loan contract that lets the seller transfer the loan to a creditworthy buyer thus potentially saving money on the interest rate and avoiding closing costs.

Balloon mortgage

A type of mortgage with smaller principal and interest installments during the loan term that does not fully repay the loan, but requires a lump-sum payment, also known as a balloon payment, at the end of the loan term.

Conventional Loan

A mortgage loan offered by the private financial sector, typically using the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac) guidelines.

Federal Housing Administration (FHA) Loan

A loan insured by the Federal Housing Administration with simple qualifying terms which provide first-time buyers a small down-payment requirement. It does require MIP.

Fixed-rate Mortgage

A type of loan in which the interest rate remains unchanged for the loan term.

Home Equity Loan

A type of loan that leverages the borrower’s residence as collateral. The loan functions as line of credit against which funds can be drawn, up to a pre-arranged amount.

Peer-to-Peer Loan

A type of loan that crowdfunds the loan amount from individuals.

Subprime Loan

A type of loan extended to a borrower whose credit score and history does not qualify them for the lowest interest rates. A subprime loan comes with a higher interest rate and may include greater fees.

Veteran’s Affairs (VA) Loan

A type of loan guaranteed by the Department of Veteran’s Affairs which only veterans may take out that requires no down payment.

Mortgage Terms and Definitions: Parties Involved

Going into the house-hunting process you might think that you and the home seller and bank are the only parties involved in the sale. In actual fact, a plethora of individuals and institutions take part in the process of a home loan.
The mortgage process begins when you look at the first home and meet the realtor. If you phone the real estate agency with questions, you’ll find a large staff provides administrative support. The following list of mortgage participants, while not comprehensive, does cover the most common individuals and institutions.

Appraiser

A professional individual selected by the lending institution who has extensive real estate market knowledge and skills in property appraisal.

Borrower

The individual or group who takes out the loan. This can include a signer and a co-signer which refers to the main individual requesting the loan and the person who agrees to partner with them in applying for it, thereby offering their credit worthiness to bolster the signer’s credit worthiness.

Buyer

The individual or group of individuals who purchase the home. Their names will appear on the deed.

Mortgage Broker

An individual licensed as a lending professional and who works with several different lenders to offer more loan options than a credit union or bank.

Seller

The individual offering the home for sale. The current owner of the home.

Underwriter

An Underwriter is a position in both financial institutions and insurance companies. The underwriter analyzes risk, may modify the loan terms the borrower requested and can add conditions to meet before or at the loan closing.

Title Insurance Company

A representative of the title insurance company often acts as the settlement agent who collects the buyer’s funds from them or the lending institution, pays the transaction fees such as appraisal fees, realtor’s commission and document recording fees at the closing.

Mortgage Terms and Definitions: Credit Terms

One of the first steps to purchasing a home is the credit check that precedes your loan application approval. During the process of checking your credit, improving it, and then applying for your mortgage loan will expose you to numerous new mortgage terms and definitions. These definitions present the most commonly used terminology.

A-Credit

Consumers with the highest credit rating are referred to as A-credit or prime borrowers. Typically they have a FICO score above 720 on a scale of 300 to 900.

Affordability

A consumer’s capacity to afford to purchase a house. A lending institution typically expresses this in terms of the maximum home cost a consumer could pay. This amount is also the amount for which the consumer could obtain a mortgage.

FICO score

A three-digit number that expresses a consumer’s credit worthiness and risk level. These scores range from 300 to 900.

Mortgage Loan Shopping: Use Loanry

If you think learning the terminology of mortgage terms and definitions seems exhausting, wait until you begin looking for a lending institution. Mortgage loan shopping can be a tiring process. Your best course of action is to start with Loanry.com to shop mortgage lenders.

Loanry does not offer loans nor does it represent any lending institutions. It offers no lending whatsoever.

Instead, Loanry runs a loan mall. It is like a shopping mall for loans. Rather than searching Charlotte Russe or Dillard’s for jeans, you shop for a loan among many lenders.

Loanry provides you with a way that may help you find a financial lender. The participating institutions offer a cornucopia of loan types. You may even find mortgage loans designed for those with bad credit or no credit. To use the services that Loanry provides, here’s what you need to do.

    1. Visit Loanry.com.
    2. Choose the kind of loan you need at the top of the screen.
    3. Complete the short form with your basic information.
    4. Loanry sorts through its database of financial institutions.
    5. Loanry may find a lender.
    6. You complete each lender’s long application.
    7. Each lender responds to you directly.
Keep in Mind: Loanry Does Not Make Loans

It just rents space to financial institutions just as a shopping mall rents retail space. Your loan, therefore, does not come from Loanry, but from a financial lender.

Loanry cannot promise you that a lender will give you a loan. We have no control over whether the financial institutions agree to loan you money. Our service simply might help you determine which lenders best suit you by organizing them all in one place. By putting your information below, you can see whether you qualify for any of the loans with selected lenders:

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Why Use Loanry

Using the loan mall pre-application causes only a soft hit on your credit report and reduces the number of hard hits on your credit report. These hard hits happen every time you apply for credit, no matter what type. Each request lowers your credit score just a little, so rather than reduce your credit score, you can simplify your application process and salvage your credit score.

While Loanry is not a financial lending institution, it does offer free financial educational articles like this one on mortgage terms and definitions. We want to help you make better decisions about money.

Mortgage Terms and Definitions: Bolstering Credit Worthiness

Now that you know the difference between A+ and A- and what a FICO score describes, you are ready to get started improving your credit score before you apply for a loan. Put those mortgage terms and definitions to work. You need to strengthen your credit score as much as possible before applying for any type of loan so you can get the best interest rate and fees.

To you, bad credit probably means an individual with a score of 300. That’s the lowest score you can get and that exceeds the financial institution’s definition of bad credit.

What’s Considered Bad Credit

You also might consider your score of 540 pretty good, but banks still see that as poor credit. Financial institutions recognize that it means probably do not manage money really well. Many people of normal means have high credit scores, but they do not take out much credit or loans and they always make their payments on time. So, when a financial lending institution sees lower credit scores, they see a person who doesn’t manage money well. Change their perception by learning to manage money better using Creditry.

You simply need to implement common sense advice to raise your credit score. You’ve probably heard it all before, but you may not have put it into action yet. You can improve your credit by learning what lenders look for and doing that.

1. Obtain a Copy of Your Credit Report

Read your credit report once as yourself and once as a lender would. You can get a free copy of the report once each year from each of the three major credit reporting agencies.

Reading as yourself, check each credit report for errors and inconsistencies. Each agency has different data. Some of them collect more data. For instance, Experian lets individuals opt to allow the collection of data from their cell phone and utility payments. The credit reporting agency includes this additional data in the calculation of its score, but the other two credit agencies do not get the same data. That means your score will typically be higher with Experian, but there’s no guarantee that the lender you apply to will use Experian as the agency of request.

As soon as you spot errors or inconsistency, report this to the credit reporting agency and provide documentation that proves the correct information. This may include bank statements, credit card statements and payment receipts that show the payment dates and accounts. It will take a few weeks for the agency to correct the data, but once they do, your score gets recalculated.

2. Make Timely Payments

We realize how basic that sounds, but the key to having awesome credit is to pay your bills on time. Heck, make your payments early. Just six months of making your payments on time can increase your credit score. It works that quickly.

Consolidate your loans using a non-profit agency such as CareOne, or by taking out a consolidation loan. A consolidation agency will contact each creditor for you and negotiate a restructured debt. After the negotiations, the agency combines the many creditors’ payments into a single payment you’ll make to the non-profit each month.

The non-profit organization then distributes the newly negotiated payment to each creditor. This lets you quickly reduce your overall debt, plus unless you miss a payment to the non-profit, your payments are never late. That factor, plus the reduced debt, quickly raise your credit score.

A consolidation loan will ding your credit with a hard hit when the lending institution runs your credit, but otherwise, this option will help improve your credit quickly. It will enable you to pay off all of your credit cards and loans at once. At the point of taking out the consolidation loan, you’ll reduce your score slightly. It will quickly rebound as long as you do not close any of your credit cards.

What do you get

By paying off all of your loans, you make the ultimate timely payment. You have eradicated all outstanding debt. By leaving the credit cards open, you improve your debt to credit ratio. One of the items credit agencies look at is how much of your credit you’re using. If you have five lines of credit, but only use one and have the others open and available, you actually increase your credit score.

Like the consolidation agency, this lets you make only one payment per month. You’ll pay the lending institution who provided the consolidation loan.

3. Start a Side Hustle for More Income

Save money by hustling harder. No, that’s not one of the industry’s mortgage terms and definitions. But, hustling harder can help you get a better loan deal. Raising your income lets you sock away money for a down payment or to buy discount points. It can also help you qualify for a lower interest rate. You have a few options for how to add another stream of income.

Ask for a raise

Increase your existing income by asking for a raise if you have been with your current employer for a while. Do not try this if they just gave you a regularly scheduled performance raise after your annual performance reviews. This is if you have not had a raise for some time and you have performed your job well.

Find another job

Get a second job. It does not have to be a fancy or career-oriented job. You just need to quickly bump up your income and save the money. You can get a  job in retail, grocery, fast food or waiting tables or bartending, typically in less than one week of job hunting. Forget glamourous gigs. You need money for a mortgage down payment. Most employers start you at $10 to $12 per hour. Work at the job at least six months before applying for a loan.

Try freelancing

Start freelancing. You can drive for Uber or Lyft. Rent out a room in your apartment on Airbnb. If you write well or photography is a hobby, try blogging or freelancing as a photographer.

You can quickly add this money together in a savings account that lets you put down a larger down payment and/or buy discount points. Either way, you reduce the amount you’ll ultimately pay back to the bank. Saving it all gives you a larger down payment which means you’ll need to apply for a smaller loan. The less money you are asking for, the easier it is to get approved, generally.

4. Plan It Out With a Budget and Loan Calculator

There’s nothing simple about getting a loan or improving your credit. Buying a house requires serious budgeting along with knowing your mortgage terms and definitions. You have to make the budget and stick to it.

Make a budget if you do not already have one or study your current one. You should have at least 30 percent of your income available before taking out a loan. That is because your total loan repayments including the loan you are applying to financial lending institutions for should not exceed 30 percent of your monthly income.

Use a loan calculator to calculate what you can comfortably afford. Do not try to take out a loan for the absolute maximum for which you qualify. This is just a bad idea that can land you in a lot of trouble if anything happens that makes you late for a payment or two. Use the calculator to figure out your potential monthly payments using various options for loan term and interest rate, plus down payment, if that applies.

Conclusion

Now that you have a handle on the basic mortgage terms and definitions, you’re ready for part two. We’re just kidding. You now know the essential mortgage terms and definitions you need to apply for a mortgage loan. We won’t even pull a pop quiz on you. Do stop by Loanry though and use the request form to jump-start where to apply.