5 Essential Facts About USDA Home Loans

usda home loans

Buying a home or getting a mortgage loan may feel like it’s becoming increasingly harder as the years pass. Because of this, if you’re branching out, you may want to consider USDA home loans.

USDA loans come with their own sets of qualifications and are usually geared for rural or low-income buyers. However, there are a number of benefits to taking out this type of loan. Let’s take a deeper dive and explore 5 of those benefits!

Purpose

The purpose of USDA home loans is literally to assist low-to-moderate income buyers in rural areas in purchasing a home.

When you don’t have a lot of money, sometimes it can seem like actually owning a home is a pipe dream. USDA home loans help give people who aren’t wealthy a chance at affording a home.

This can help promote prosperity, according to the US Department of Agriculture. USDA loans exist to promote happiness, harmony, and improve the quality of life.

Types

There are two types of USDA loans: direct and guaranteed. Direct loans have more requirements to use. Your property has to qualify as “modest in size” for your area, and it cannot have a market value that exceeds your loan limit. There are also limitations put on your home itself.

Direct loans are aimed at low-income families, so the requirements can be strict.

Guaranteed loans are similar, but they open a few more doors and aren’t quite as strict.

Qualifications

Direct and guaranteed loans have different sets of qualifications. To qualify for a direct loan, you must not own a home. You also must not be able to obtain a loan elsewhere, and you have to legally be able to handle a loan.

If you’ve been suspended from participating in federal programs, you will not be able to apply.

Guaranteed home loans have income-eligibility requirements. To get a guaranteed loan, you must also be a US citizen or otherwise qualified, and you need to be able to pay your credit obligations in a decent amount of time.

Down-payments

The great thing about USDA home loans is that they don’t require a down payment.

If you’re a qualified borrower and have been approved for the loan, there’s no down-payment required. This can wind up saving you thousands in home-buying costs and upfront expenses.

Insurance

USDA loans do not have private mortgage insurance, also known as PMI. Instead, your USDA loan will have a premium for your mortgage insurance wrapped up in the cost.

Typically, this is about 2% of your entire loan cost. However, it’s also not a separate payment, and it’s included in the cost of your loan.

USDA home loans: the right choice

USDA loans are a great choice for people looking to purchase in rural areas. Additionally, if you’re a low-to-moderate income homebuyer, it’s very likely that you qualify for one of these loans.

A USDA loan can help you save thousands of dollars in homebuying expenses because they don’t require down payments. However, you do need to make sure that you qualify.

If you have questions regarding home loans and the home buying process, please don’t hesitate to contact us!

How to Determine Your Home Loan Eligibility

home loan eligibility

Are you looking to take that next step in your life? Have you finished browsing the net looking for that perfect place to call home?

Are you ready to become a homeowner?

Before you can actively start looking to purchase a property, the first sensible thing to do would be to check out your home loan eligibility.

Why?

Because knowing how much you can borrow not only helps you understand your own financial situation but also it stops you from getting your heart set on a place, only to find it out of your budget.

Let’s take a look at the best ways to check on your maximum home loan potential.

Calculate your Home Loan Eligibility Early To Set Your Search In the Right Area

When it comes to a home loan, the math is actually quite simple. You look at what you have coming in – your income – and you deduct your outgoings each month – your expenditure. The rest is just a matter of seeing how much you can realistically afford to pay back each month.

There are plenty of home loan calculators out there that can help you get a ballpark figure.

The main criteria that get looked at when applying for a home loan are:

Age – As harsh as it sounds, age plays a role in your home loan calculations.

Employment Status – if you are in a stable full-time job, then that is a big check in the plus column because a regular income shows the bank that you are in good standing to make your payments every month. The amount you are earning will also directly influence the amount you can borrow.

Credit Rating / Credit Card History –  If you have been living a debt free life, or at least maintaining your credit card by paying off your purchases in a simple large lump sum each month, then you score maximum points. The better managed your credit card history, the better image you produce for the banks looking to lend you money.

Choosing the Right Home Loan for You

There is more to finding a home loan than just understanding your home loan eligibility. Loan types and duration are also deciding factors.

The core loan types you should be looking at:

Fixed Interest –  The simplest loan. All you need to do is set your interest rate for 15-30 years and simply let your payments run. A great loan for those that are buying with the intention of staying put, and want to know exactly how much they will be paying for the foreseeable future.

Adjustable Rate Mortgages – If your credit rating is working against you, then you can counter balance this to some degree by taking a flexible interest rate loan. Here, the rate is set for a shorter period of time and will then be adjusted.

Federal Housing Administration Loan – For many people, being able to save the average 20% needed for a downpayment on a home, can be tough. With FHA home loans, you can put down as little as 3.5% on a down payment and move on with a fixed interest rate.

The only caveat with this is that you need to take out mortgage insurance, which you can spread over the life of the loan. This totals to approximately 1% of the full loan value.

Buying a Home is the Biggest Decision You Will Make

Making the decision to buy a home is one of the biggest things you will do in your life. To do so without due care and attention can be problematic.

By first understanding your home loan eligibility you can get yourself started on the next phase of your life with a clean conscience, knowing that you are not getting yourself into financial trouble.

If you need help with arranging your home loan or are looking for a quote, get in touch with us today. We are here to help.

A Complete Guide to VA Loans For Veterans

loans for veterans

I’m sure it comes to no surprise to you that today’s economic climate is difficult to navigate when looking to buy a home, perhaps especially for veterans.

It can be overwhelming considering that many types of loans for veterans that are out there.

We know what to do and what not to do when buying a home. A VA mortgage loan can be a great option for veterans and their families, and we’ll help explain why.

What are VA Loans for veterans?

A VA (Veterans Administration) Loan is a mortgage loan provided to American veterans of the armed forces.

This loan is popular amongst other types of loans for veterans because there is no required down payment as well as no private monthly mortgage insurance.

This loan can be used towards:

  • purchasing a home
  • building a home
  • refinancing an existing mortgage

Benefits of a VA Loan

I’ve briefly mentioned a couple of the benefits of VA loans, but let’s look at those benefits a little more in depth.

No required down payment

Down payments can often amount to 5% of the loan, which can be extremely costly to provide upfront.

No required down payment is a great option for veterans and military families who cannot afford to provide a down payment on a mortgage, or who might want to save that cash for something else.

This doesn’t mean that you can’t provide a down payment (in fact, if you do anyway it could decrease the funding fee), but it’s a great option for those looking to own without a lot of cash on hand.

No required mortgage insurance

Many conventional loans require borrowers to have expensive private mortgage insurance.

Instead of this, VA loans have an upfront funding fee that goes to supporting the VA Loan program.

Low interest rates

VA loans have a lower average interest rate than other types of loans, which will save you money in the long run.

Limited closing costs

“Closing costs” is a general term for a myriad of extra charges you can face as a loan borrower as you are finalizing a loan.

The great thing about VA loans is that the VA loan program actually limits the amount of closing costs you as the buyer would have to pay (even not allowing certain fees to be paid by VA loan borrowers).

Getting Approval

Once you’ve reviewed all the information and have decided this is the loan for you, it’s important that you are both eligible and are able to get approval for the loan.

First, you should get a certificate of eligibility from the VA. You should also have a sufficient, steady income as well.

Finally, they will check your credit score.

Be careful to not spend too much right before you apply for the loan, as this can negatively affect your credit: stay away from other large purchases (like a car for example) until after you’ve secured the loan.

Conclusion

VA loans can be an excellent option for veterans looking to own a home, especially considering this program’s success.

We understand that loans and mortgages can be daunting and overwhelming.

Hopefully this information has helped you to understand one option for you and your family.

Share this article if you found the information helpful, and if you have any questions, feel free to reach out to us!

3 Helpful Benefits For First Time Home Buyers

benefits for first time home buyersDid you know a number of benefits for first time home buyers exist today?

Buying your first home is an exciting, important, and sometimes stressful process. For first time home buyers, special benefits sweeten the deal and encourage sales.

The term first-time buyer refers to individuals who’ve not purchased a home in 3 years. Most first-time buyers range from 18-34 years old, however bounce-back come in all ages.

Whichever category you fit into, you might not know about the benefits available to you. In this article, we’ll go over some of the benefits for first time home buyers.

Mortgage Interest Deductions

Tax rates favor homeowners. In fact, home ownership is often thought of as a shelter from taxes.

For many, the mortgage tax deduction benefit overshadows the intangible benefits, like pride in owning a home.

How can you qualify? Your mortgage balance must not exceed the cost of your new home. Mortgage interest proves deductible on your tax returns. This is a great benefit because interest is the largest part of a mortgage payment.

Property Tax Deductions

Property taxes for your first home are deductible for income tax purposes as dictated by the Internal Revenue Service. Vacation homes can also benefit from this tax deduction.

Capital Assets

Most people consider their first home a starter home. When you decide to move, you’ll benefit from gaining capital assets.

How does this work?

If the profit you make on your home is more than what is allotted for any tax exclusion, the profit is considered a capital asset. These profits receive special tax treatment.

Even if you profit from the sale of your home, the taxable portion of that profit remains small.

Use Your Mortgage To Build Equity

Each month that you pay your mortgage, you not only pay interest, you also pay the principal balance of the loan. The more of this you pay off, the more equity in your home you secure. This means more ownership for you.

Your Home Appreciates

The real estate market is volatile. It occurs in cycles.

Across the board, homeowners see their investment as a safeguard against inflation of the market.

First Time Homebuyer Loans

First time homebuyer loans come with low down payments, reduced interest, and limited fees. They’re offered to first time home buyers through the Federal Housing Administration.

This type of loan acts as a benefit for first time home buyers because of its minimal restrictions. Consider a first time home buyer loan a large down payment is out of reach, you cannot meet high-interest payments and fees, or your credit score is low.

All of these factors make these loans too good to miss out on for many buyers.

Benefits For First Time Home Buyers in 2017

As you can see, many tangible benefits for first time home buyers exist today. From tax deductions to an easier loan process, buying a home offers more than pride in ownership.

Starting your first home search? Contact us today to learn more about mortgage loans that work for you!

What’s Ahead For Mortgage Rates This Week – June 5, 2017

Last week’s economic releases included readings on inflation, core inflation pending home sales and multiple reports from the labor sector. Weekly readings on mortgage rates and new jobless claims were also released. Pending home sales were lower and weekly jobless claims rose, which illustrates continued volatility in the economic sector.

Inflation rose 0.40 percent in April, which matched projections and exceeded April’s reading of 0.30 percent. Core inflation, which excludes volatile food and energy sectors, grew by 0.20 percent and exceeded expectations of 0.10 percent growth based on a negative reading of -0.20 percent in March. The Federal Reserve has set an annual inflation rate of 0.20 percent as a benchmark for economic recovery.

Housing Data Mixed

Case-Shiller released its 20-City Housing Market Index for March; Home price appreciation held steady at 5.90 percent on a seasonally-adjusted basis year-over-year. Month-to-month, home prices rose by 0.90 percent. Seattle, Washington had the highest pace of home price growth in March, with 12.30 percent. Portland, Oregon followed with 9.20 percent home price growth and Dallas, Texas had the third highest level of year-over-year home price growth at 8.60 percent. Month-to-month home prices grew at a pace of 0.90 percent.

Despite indications of high builder confidence in current and future housing market conditions, construction spending decreased by -1.40 percent in April. Analysts expected an increase of 0.50 percent in construction spending based on construction spending growth of 1.10 percent in March.

Builders have consistently cited concerns over affordable lots and skilled labor, but industry professionals are not sure why high builder confidence in housing markets doesn’t correspond to lagging construction spending rates. Building more homes is viewed as the only path to easing high demand for homes caused by a shortage of homes for sale.

The Commerce Department reported fewer pending home sales in April with a reading of -1.30 percent; the March reading was -0.90 percent. Pending home sales typically indicate further closed sales and trends in mortgage loans.

Mortgage Rates Mixed, New Jobless Claims Rise

Freddie Mac reported slight change in mortgage rates last week; the average rate for a 30-year fixed rate mortgage was one basis point lower 3.94 percent. Rates for a 15-year fixed-rate mortgage averaged 3.19 percent and was unchanged from the prior week. The average rate for a 5/1 variable rate mortgage rose four basis points to 3.11 percent. Discount points averaged 0.50 percent for all three types of mortgages.

New Jobless Claims Hit 5Week High

First-time claims rose from the prior week’s reading of 235,000 new claims to 248,000 new claims filed. Analysts had expected 239,000 new claims filed. Analysts said that higher claims were connected to the Memorial Day holiday and characterized last week’s higher number of claims as a “blip.”

In other labor-sector news, ADP reported 253,000 new private-sector jobs in May; the Commerce Department reported 138,000 new government and private sector jobs. This reading may be revised based on an expected 185,000 public and private-sectors jobs for May and April’s reading of 174,000 public and private-sector jobs.

National unemployment ticked down in May to 4.30 percent. Analysts had expected no change in April’s reading of 4.40 percent.

Whats Ahead

This week’s scheduled economic news includes readings on job openings, consumer credit along with weekly reports on mortgage rates and new jobless claims.

What You Need To Know About Getting Your Next Mortgage

Yes, It's Getting Easier to Get a Mortgage. Here's How You Can Take AdvantageIt can be hard to stay on top of the changing real estate market from day-to-day. As a matter of fact, there are more available mortgage products out there than ever before for many kinds of homebuyers. If you’re wondering how you can take advantage of easier lending opportunities and strike while the iron is hot, here are some things to consider.

Take Care Of Your Credit

While many regulations on mortgage applications may have been loosened in recent years, having a better credit score will still enable you to qualify for a mortgage much easier. Instead of risking it, ensure that you’ve obtained a copy of your credit score and are aware of where you stand as a financial risk. By working on your credit and correcting any errors on the report, it will be that much more likely to have your mortgage application approved.

Saving For A Down Payment

It’s often said that 20% is the ideal amount to put down in order to avoid private mortgage insurance, but it’s not the required amount in order to invest in a home. While it may save money in the long run to put more money down, there are many opportunities for putting a lot less down and still being able to purchase. You may want to hold off until you can save up for your down payment, but possibilities do exist for mortgages with as little as 3.5% down.

Dealing With Closing Costs

Saving up for a down payment and deciding to invest in a monthly mortgage payment is a significant commitment. Adding mortgage closing costs to that can be a bridge too far for many potential homebuyers. Fortunately, many lenders are offering the opportunity for closing costs like origination and attorney fees to be included in the total cost of the loan. While this will bump up the amount of your monthly payment, it can make a mortgage more feasible from the start.

For many people, there’s a lot of stress that goes along with applying for a mortgage, but with lower down payments required and closing costs included in the total price, getting approved has become a lot easier. If you’re currently in the market for a new home, contact us for more information.

What’s Ahead For Mortgage Rates This Week – May 22, 2017

Last week’s economic reports included readings from the National Association of Home Builders, Commerce Department readings on housing starts and building permits and weekly reports on mortgage rates and new jobless claims.

NAHB Housing Market Index Rises, Exceeds Expectations

Builder Sentiment rose two points in May, which exceeded expectations of no change to April’s reading of 68. Builders and analysts said that short inventories of available homes continue to drive demand for new homes. While index readings jumped immediately after the Presidential election in November, builder enthusiasm settled when tariffs on lumber were increased.

Two of three components used in calculating the NAHB Housing Market Index reading. Builder confidence in current housing market conditions gained two points to a reading of 76; Confidence in market conditions over the next six months gained four points to 79. The reading for buyer traffic in new home developments fell one point to 51. Any reading over 50 is considered positive in NAHB HMI reports.

Housing Starts, Building Permits Lower in April

Despite rising home builder confidence in current and future housing markets, housing starts and building permits issued were lower in April than for March. According to the Commerce Department, 1.172 million homes were started in April as compared to 1.203 million housing starts reported in March; April’s housing starts were 0.070 percent higher year over year. Analysts had expected a reading of 1,259 million starts, which are calculated on a seasonally-adjusted annual basis.

Builders started single-family homes at a seasonally- adjusted annual pace of 835,000 homes in April, which indicated that builders may be gaining confidence in building homes for sale as compared to rental units. Building permits were issued at a pace of 1,229 million on a seasonally-adjusted annual basis; this was lower than the March reading of 1.260 million permits issued.

The apparent lag between strong builder sentiment and housing starts and permits could be due to ongoing concerns over increasing materials prices and shortages of buildable lots and labor needed to ramp up home construction.

Mortgage Rates, Weekly Jobless Claims Fall

Mortgage rates fell last week. Freddie Mac reported that the average rate for a 30-year fixed rate mortgage averaged three basis points lower at 4.02 percent. Rates for a 15-year fixed rate mortgage averaged 3.27 percent, a drop of two basis points over the prior week. Mortgage rates for a 5/1 adjustable rate mortgage averaged 3.13 percent, which was one basis point lower than the prior week. Discount points were unchanged at an average of 0.50 percent for all three mortgage types reported.

New jobless claims were lower than expected last week, with 232,000 new claims filed as compared to 240,000 new claims expected and 236,000 claims reported the prior week. Low readings for new unemployment claims suggest strong jobs markets, but can be volatile and subject to adjustment.

Whats Ahead

This week’s scheduled economic reports include readings on new and existing home sales and consumer sentiment. Mortgage rates and new jobless claims will also be released.