Category Archives: Pre-Approval

What Is A VA Loan?

The VA Loan became known in 1944 through the original Servicemen’s Readjustment Act also known as the GI Bill of Rights. The GI Bill was signed into law by President Franklin D. Roosevelt and provided veterans with a federally guaranteed home with no down payment. This feature was designed to provide housing and assistance for veterans and their families, and the dream of home ownership became a reality for millions of veterans. The GI Bill contributed more than any other program in history to the welfare of veterans and their families, and to the growth of the nation’s economy.With more than 25.5 million veterans and service personnel eligible for VA financing, this loan is attractive and has many advantages. Eligibility for the VA loan is defined as Veterans who served on active duty and have a discharge other than dishonorable after a minimum of 90 days of service during wartime or a minimum of 181 continuous days during peacetime. There is a two-year requirement if the veteran enlisted and began service after September 7, 1980 or was an officer and began service after October 16, 1981. There is a six-year requirement for National guards and reservists with certain criteria and there are specific rules concerning the eligibility of surviving spouses.

VA will guarantee a maximum of 25 percent of a home loan amount up to $104,250, which limits the maximum loan amount to $417,000. Generally, the reasonable value of the property or the purchase price, whichever is less, plus the funding fee may be borrowed. All veterans must qualify, for they are not automatically eligible for the program.

VA guaranteed loans are made by private lenders, such as banks, savings & loans, or mortgage companies to eligible veterans for the purchase of a home, which must be for their own personal occupancy. The guaranty means the lender is protected against loss if you or a later owner fails to repay the loan. The guaranty replaces the protection the lender normally receives by requiring a down payment allowing you to obtain favorable financing terms.

Why Do Mortgage Interest Rates Change? Part I

To understand why mortgage rates change we need to know why do interest rates change and there is not one interest rate, but many interest rates!

Prime rate: The rate offered to a bank’s best customers.
Treasury bill rates: Treasury bills are short-term debt instruments used by the U.S. Government to finance their debt. Commonly called T-bills they come in denominations of 3 months, 6 months and 1 year. Each treasury bill has a corresponding interest rate (i.e. 3-month T-bill rate, 1-year T-bill rate).
Treasury Notes: Intermediate-term debt instruments used by the U.S. Government to finance their debt. They come in denominations of 2 years, 5 years and 10 years.
Treasury Bonds: Long debt instruments used by the U.S. Government to finance its debt. Treasury bonds come in 30-year denominations.
Federal Funds Rate: Rates banks charge each other for overnight loans.
Federal Discount Rate: Rate New York Fed charges to member banks.
Libor: : London Interbank Offered Rates. Average London Eurodollar rates.
6-month CD rate: The average rate that you get when you invest in a 6-month CD.
11th District Cost of Funds: Rate determined by averaging a composite of other rates.
Fannie Mae Backed Security rates: Fannie Mae, a quasi-government agency, pools large quantities of mortgages, creates securities with them, and sells them as Fannie Mae backed securities. The rates on these securities influence mortgage rates very strongly.
Ginnie Mae-Backed Security rates: Ginnie Mae, a quasi-government agency, pools large quantities of mortgages, securitizes them and sells them as Ginnie Mae-backed securities. The rates on these securities affect mortgage rates on FHA and VA loans.

Interest-rates move because of the laws of supply and demand. If the demand for credit (loans) increases, so do interest rates. This is because there are more people who want money, buyers, so people who are willing to lend it, sellers, can command a better price, i.e. higher interest rates. If you have questions about your mortgage please contact me or visit my web site at www.mortgagelinkhome.com.

Buying a Home! (Part 1)

(This is the first installment of another series of tips and advice on buying your own home.)

There’s no doubt about it–owning a home is an exciting prospect. After all, you’ve always dreamed of having a place that you could truly call your own. Buying a home, however, can be stressful, especially when you’re buying one for the first time. Fortunately, knowing what to expect can make it a lot easier.

How Much Can You Afford?

According to a general rule of thumb, you can afford a house that costs two and a half times your annual salary. But determining how much you can afford to spend on a house is not quite so simple. Since most people finance their homePhoto by Deb Duncan purchases, buying a house usually means getting a mortgage. The amount you can comfortably afford is often tied to figuring out how large a mortgage you can afford. To figure this out, you’ll need to take into account your gross monthly income, housing expenses, any long-term debt, and monthly expenses.

Mortgate Pre-Qualification vs. Pre-Approval

Pre-qualifying gives you the estimate of how much you can borrow and in many cases can be done over the phone. Pre-qualification does not guarantee that you have a loan, but it can give you a rough idea of where you stand.

If you’re really serious about buying, however, you’ll probably want to get pre-approved for a loan. Pre-approval is when we verify your income, your assets and perform a credit check. This process lets you know exactly how much you can borrow. This involves completing an application, revealing your financial information, and working together to decide how much money you want to spend on a monthly basis.

It’s important to note that the mortgage you qualify for or are approved for is not always what you can actually afford. Before signing any loan paperwork, take an honest look at your lifestyle, standard of living, and spending habits to make sure that your mortgage payment won’t be beyond your means. This is one of the many reasons why we take the time with you to work on customizing your mortgage to fit your needs and monthly budget.

To find out how you can pre-qualify or get pre-approved for a loan, just e-mail me and I’ll help you get started.

Ellen

Today’s Vocabulary Lesson

Commitment: An agreement, frequently in writing, between a lender and a borrower to loan money at a future date, subject to certain conditions.

Comparables: Refers to similar properties used for comparison purposes in the appraisal process. These properties will be reasonably the same size and location, with similar amenities and characteristics, so that the approximate fair market value of the subject property can be determined.

Condominium: Ownership of a single unit in a multiunit building or complex of buildings. Along with this goes a share of ownership of the common areas.

Contingency: A condition that must be met for a contract or a commitment to remain binding.

Conventional Mortgage: Any mortgage loan that is not insured by FHA, guaranteed by VA, of funded by a government authorized bond sale or grant.

Convey: To transfer real estate from one person to another.

Credit Report: The report to a prospective lender on the credit standing of a prospective borrower

Go to the Mortgage Glossary at Mortgage Link to see the rest of the alphabet!

Ellen

Today’s Vocabulary Lesson

Cap (interest rate): The maximum interest rate increase allowable on an adjustable rate mortgage. Does not result in negative amortization. See Negative amortization.

Cap (payment rate): The maximum payment amount increase allowable on an adjustable rate mortgage. May result in negative amortization. See Negative amortization.

Certificate Of Title: A statement that shows ownership of property, stating that the seller has clear legal title.

Closing: The concluding day of the real estate transaction, when title and deed pass from seller to buyer, the buyer signs the mortgage and pays the purchase price and closing costs.

Closing Costs: Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Also called “settlement costs.”

Closing Statement: A financial disclosure giving an account of all funds received and expected at closing, including the escrow deposit for taxes, hazard insurance and mortgage insurance for the escrow account.

Commission: An agent’s or broker’s fee for bringing the principals together and helping to negotiate a real estate transaction, often a percentage of the sales price or flat fee.

Go to the Mortgage Glossary at Mortgage Link to see the rest of the alphabet!

Ellen

Today’s Vocabulary Lesson

Balloon Mortgage: A mortgage with periodic payments that do not fully amortize the loan. The outstanding balance of the mortgage is due in a lump sum at the end of the term.
Bridge Loan: A short-term loan secured by the equity in an as-yet-unsold house, with the funds to be used for a down payment and/or closing costs on a new house. There is no payment of principal until the house is sold or the end of the loan term, whichever comes first. Interest payments may or may not be deferred until the house is sold.
Broker: The person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them.
Buydown: Money advanced by an individual (e.g. builder, seller, buyer, lender, developer) to lower monthly mortgage payments for a few years or the whole term.

Need to learn a term that starts with C through U? Go to the Mortgage Glossary at Mortgage Link!

Ellen

5 Things You Must Know Before Obtaining a Mortgage: #1

Photo by Deb DuncanIndustry research has revealed that there are 5 common mistakes that most homebuyers make in mortgage shopping that can have a significant impact on the outcome of this critical negotiation. If handled correctly, these issues could result in a mortgage that will cost you less over a shorter period of time.

1. You can, and should, get pre-approved or fully approved for a mortgage before you go looking for a home 

Pre-approval is easy, and can give you complete peace-of-mind when shopping for your home.
I can provide a written approval letter for you at no cost and no obligation, and it can all be done quite easily over the phone or via e-mail. More than just a verbal approval from me, a written approval specific to the home that you are making an offer on is as good as money in the bank. It entails filling out a mortgage application and having your credit and assets reviewed.


 “Subtle changes in the way you approach mortgage shopping, and even small differences in the way you structure your mortgage, can cost or save you literally thousands of dollars and years of expense.”


Go to my web site at Mortgage Link for more information or send me an e-mail. We can start the process NOW so you won’t have to stress about it later. It feels good to be at the head of the line.

Ellen

This is part 1 of a 5-part series on how to keep the stress low and the savings high when you get a mortgage. By paying close attention to resolving these five common issues, you will improve your chances of getting the property you want, and get the kind of mortgage you can handle in the long term.