Monthly Archives: April 2018

//April
23 04, 2018

Mortgage Pre-Qualification vs. Pre-Approval: What’s the Difference?

April 23rd, 2018|Buying a home, Mortgage 101|

When buying a home, cash is king, but most folks don’t have hundreds of thousands of dollars lying in the bank. Of course, that’s why obtaining a mortgage is such an important part of the process. And securing mortgage pre-qualification and pre-approval are important steps, assuring lenders that you’ll be able to afford payments.

However, pre-qualification and pre-approval are vastly different. How different? Read on to find out why one is better than the other in the long run.

What is mortgage pre-qualification?

Pre-qualification means that a lender has evaluated your credit and has decided that you probably will be eligible for a loan up to a certain amount.

However, the pre-qualification letter is an approximation, not a promise, based solely on the information you give the lender and its evaluation of your financial prospects.

A pre-qualification is merely a financial snapshot that gives you an idea of the mortgage you might qualify for.

It can be helpful if you are completely unaware what your current financial position will support regarding a mortgage amount. It certainly helps if you are just beginning the process of looking to buy a house.

Why is mortgage pre-approval better?

A pre-approval letter is the real deal, a statement from a lender that you qualify for a specific mortgage amount based on an underwriter’s review of all of your financial information such as credit report, pay stubs, bank statement, salary, assets, and obligations.

Pre-approval should mean your loan is contingent only on the appraisal of the home you choose, providing that nothing changes in your financial picture before closing.

The reliability and simplicity of your offer stand out from other offers. And pre-approval can give […]

23 04, 2018

How To Consolidate Debt To Qualify For A Mortgage

April 23rd, 2018|Home Finances, Tips & Advice|

Use debt consolidation to qualify for a mortgage carefully

Consider the use of debt consolidation to qualify for a mortgage very, very carefully. Follow these tips to avoid being one of the 85 percent who fails debt consolidation.

Debt consolidation can lower your debt payments, allowing you to qualify for a larger mortgage

  1. Debt consolidation can be a home equity loan, debt management plan, or unsecured financings like personal loans or balance transfer credit cards
  2. Consolidating your debts can extend your repayment and increase your costs
  3. Debt consolidation works for a small percentage (about 15%) of those who try it. Be careful out there.

Debt-to-income ratios

Lenders are very concerned about debt. Typical guidelines say that as much as 43% of your gross income can be used to repay monthly debts like your housing, credit card, and auto payments.

Dividing these bills by your monthly income determines your debt-to-income ratio or DTI. If you have a household income of $7,000 a month, 43% equals $3,010. That’s your limit for housing plus other account payments. But not living expenses like food and utilities.

If you have two car loans at $500 each, $400 a month in student debt, and $200 for credit cards, that’s $1,600 a month, leaving just $1,410 a month for mortgage principal, mortgage interest, property taxes, and property insurance.

In a lot of markets, that leaves less than $1,000 a month for the mortgage itself. At 4.5% over 30 years, a borrower qualifies for about $200,000 in financing.

How debt consolidation works

If you already own a home, a home equity loan for debt consolidation is probably […]

10 04, 2018

Programs for Ohio First Time Homebuyers

April 10th, 2018|Buying a home, Tips & Advice|

The state of Ohio works with mortgage companies, lenders and credit unions to offer home loans to people with low and moderate incomes, including first time home buyers.

The Ohio Housing Finance Agency (OHFA) helps low- and moderate-income borrowers get 30-year, fixed-rate conventional, Federal Housing Administration, Veterans Affairs and U.S. Department of Agriculture Rural Development mortgages with relaxed income and purchase price limits. OHFA also has a number of programs that assist first time buyers and others buying a home. Benefits include lower mortgage rates, down payment assistance, tax credits and combined financing for buying and renovating a home. Besides basic eligibility rules, each program may have additional requirements.

About OHFA and eligibility requirements

  • A free homebuyer education course is required after borrowers submit a mortgage application
  • Down payment assistance is available for first time home buyers and is forgiven after seven years unless the home is sold or refinanced during that time
  • There are limits on purchase price and borrowers’ incomes, which vary by county and the number of people in a family
  • A minimum credit score is 640 for conventional mortgages and USDA, VA, and FHA 203(k) home loans
  • A minimum credit score is 660 for other FHA loans
  • Each type of loan has its own debt-to-income requirements
  • Veterans who’ve been honorably discharged are eligible for VA loans. They do not have to be first time home buyers.
  • Eligible property types for these programs include existing single-family homes, duplexes, triplexes, fourplexes and condominiums; one-unit existing modular homes; and newly […]
4 04, 2018

Home Buying Help: Should I Lock in a Rate on My Mortgage?

April 4th, 2018|Buying a home, Mortgage 101, Tips & Advice|

Mortgage rates change daily, making it difficult to spot the perfect moment to lock in a mortgage rate. To simplify the decision, keep these things in mind:

  1. Timing is everything.
  2. Have a few options to compare.

What is a Mortgage Rate Lock?

It’s an agreement the lender will deliver a specific combination of interest rate and points if the mortgage closes by a certain date. A point is a fee or rebate equal to 1 percent of the loan amount. Often times, rate locks last for 30, 45 or 60 days, but they can be shorter or longer. A rate lock protects the borrower from rate fluctuations during the lock period.

To begin, find out when your loan is expected to close and work backward to determine when to lock the rate. If you think you need 45 days to close your loan, find out what the interest rate would be if you locked it for a 60-day period.

Find the Best Combination For You

Look for the sweet spot when pricing out a rate lock. The sweet spot is the combination of interest rate, term, and cost you need to acquire the best deal. Most lenders won’t lock-in your rate for less than 30 days. An exception would be if you’re ready to close and offer the same rate for a 15- and 45-day period. There are different lock periods between 15 and 60 days. Anything longer than 60 days gets pricey, so it might be smarter to wait until you get closer to the closing date and check rates again.

When is the best time to lock in your rate?

For most homebuyers, it makes sense to sign a purchase […]

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