You Ask, We Answer: How Often Should I Refinance the Mortgage on My House?

Refinancing a home mortgage can provide you with an incredible range of benefits. These include everything from reducing your mortgage term and lowering your payments to helping you more effectively build equity or pulling equity out to use for beneficial purposes.

One common question that many homeowners ask is how often a mortgage should be refinanced. While there are benefits associated with mortgage refinancing, there are also some points to consider before you rush into the process.

Think About Refinancing Costs

First, remember that each mortgage application will come with refinancing costs. These costs can equate to thousands of dollars in some cases, and they include title fees, lender fees, appraisal fees and more. While these costs can typically be rolled into your home mortgage so that you pay very little money out of pocket, these costs will increase the amount of debt that is tied to your home. When you refinance too often, you are negating the effects of principal reduction from your mortgage payments.

Consider the Impact On Home Equity

Some who refinance will choose a straight rate and term refinance, and they will not pull equity out of their home. Others, however, have the desire to tap into their home equity to pay off other debts, to fix up the house, to take a vacation or for other purposes. When you tap into your home equity, you may be having a negative impact on your financial situation, depending on how you use the funds.

Pay Attention To Your Final Loan Payoff Date

Before you make a decision to refinance your home mortgage, you also should focus on your loan payoff date. Many have the goal in mind of paying off their home mortgage before they retire, and this is especially true if you plan to live in the home after retirement. On the other hand, you may have plans to sell the home and downsize before retiring. Your refinance will adjust your loan payoff date, so this is an important factor to weigh into your decision making process.

You may know people who refinance every year, and you may know others who have owned their home for a decade or longer without ever having refinanced. Each homeowner has a unique financial situation. You can speak with a mortgage professional to learn more about the specific benefits associated with a refinance loan, and you may also keep these points in mind to assist with your final decision.

Suffering from Credit Problems? Understanding Mortgage Lenders and How They Assess Your Credit

One of the most significant factors a mortgage lender will review when you apply for a new mortgage loan is your credit history and rating. While some people have stellar credit, others have a troubled credit history with lower scores.

If you fall into the latter scenario, you may be wondering how lenders will assess your credit situation when you apply for a mortgage in the near future.

Reviewing Your Credit Scores

Initially, lenders will review your credit report to determine your credit scores. Your scores will have a direct impact on the interest rate that you qualify for or if you qualify for a loan at all. There are prime mortgages for good credit borrowers and sub-prime mortgages for those with a blemished credit rating.

If your scores are too low, however, you may not qualify for a mortgage. A mortgage representative can tell you more about their credit rating thresholds and the terms that you may qualify for.

High Debt Balances

Your mortgage lender will dig deeper into your credit report after an initial review of your credit rating. Your debt balances will be reviewed to determine your debt-to-income ratio. Provided your debt-to-income ratio and your credit rating are in line with requirements, high debt balances may not be an issue. Essentially, the lender will determine if you are able to make your payments on time as scheduled or if your debt balances appear to be burdensome. Even if your debt balances are high, you may be approved for a loan if you can afford to make the payments.

Difficulty Making Timely Payments

Your mortgage lender will also review the number of late payments on your credit report as well as the dates for those late payments. When late payments are clustered together, this may indicate a temporary rough patch rather than an on-going issue with making payments on time. However, if you have multiple payments that have been late over the course of the last year or two, this may indicate that you are not creditworthy as a loan applicant.

A credit report can tell a lender many things about you. While it superficially can tell a lender more about your outstanding debts, it also delves into previous financial issues and your overall responsibility with managing debt. If you have suffered from credit problems in the past, you may consider reaching out to a mortgage professional for more insight on how a lender will assess your credit situation.

How Does Making Lump Sum Payments Affect Your Mortgage? Let's Take a Look

Periodically, many homeowners will receive a rather sizable amount of extra cash. This may be from a bonus from your employer, a refund on your tax return, a financial gift from a relative or something else altogether.

While there are many things that you could do with your windfall, you may be wondering if paying down your mortgage balance is a wise idea. Before you make your decision about how to spend your money, consider what impact your lump sum payment will have on your mortgage.

Reduction in Principal Balance

The most obvious impact a lump sum payment will have on your mortgage is an immediate reduction in your outstanding principal balance. Your regular monthly payments will be applied to both interest and principal, but your lump sum payment will be entirely applied to principal. Therefore, you can expect to see a rather sizable reduction in the outstanding balance, and this will have a direct and positive impact on your home equity.

More Effective Loan Payments

Your required monthly mortgage payments will not be lowered when you make a lump sum payment on your mortgage, and you will still be required to pay the same amount to your lender going forward. However, your interest charges for each month will be adjusted. Your interest will be calculated based on the current loan balance each month. A reduction in outstanding balance lowers the interest charges. This essentially makes your future payments more effective at debt reduction and reduces the amount of interest you will pay over the life of your loan.

A Change to the Final Loan Payment Date

Because each of your loan payments going forward will be more heavily weighted on principal reduction than on interest charges, the fact is that your final loan payment date can be accelerated. Depending on the amount of the lump sum payment that you make toward your mortgage, this may be an acceleration of a single month, several months or even several years in some cases.

Making a lump sum payment on your mortgage can have many positive effects for you. However, this is not the only option available when deciding how to spend or invest your windfall. Compare these benefits against the benefits of other options available to determine your best course of action. You may also speak with a mortgage professional for personal guidance and assistance.

3 Huge Mortgage Mistakes Made by First-time Home Buyers - and How to Avoid Them

As a first-time home buyer, you may actively be seeking out information about your upcoming purchase. Buying a home is a huge financial move to make, and it can impact your financial situation and even your lifestyle for many years to come. While it is important to learn more about what to look for in a home, it is also important to learn about mistakes home buyers have made. When you learn more about mortgage mistakes that others have made, you can take steps to prevent making those same mistakes yourself.

Committing To A Large Mortgage Payment

Many first-time home buyers contact a mortgage professional to determine what the largest loan amount and monthly payment they qualify for is. However, just because you qualify for a loan amount and monthly payment from a lending perspective does not mean that it is affordable for your budget. After all, you may have a more expensive lifestyle, childcare expenses and other expenses that are not factored into the lending equation.

Not Reviewing All Home Expenses

When you own a home, you will be required to pay for expenses that are not in place when you rent a home. For example, you will have to pay for lawn care, home maintenance tools and supplies, repair bills, homeowners' association dues and more. It is important to allow room in your budget for all of the expenses related to home ownership to ensure that your new home is affordable for you.

Failing To Inquire About Closing Costs

Your mortgage representative is required to disclose all loan charges and fees to you early on in the loan process, but some first-time home buyers do not take the time to thoroughly review or understand these fees. Many are unfortunately surprised by the amount of money they must come to the closing table with at the end of the loan process, and this can be avoided by simply asking questions and reviewing the preliminary loan statement up-front.

Each of these home mortgage mistakes can be costly to a first-time home buyer, but they also are all entirely avoidable. As you begin your loan process and proceed through it to closing, keep these mistakes in mind. Be sure to ask your loan consultant for more information if you have any questions. You can begin the loan process today by contacting a loan consultant directly.

3 Reasons Why Your Mortgage Lender Might Ask for Your Tax Returns - And Why You Should Provide Them

After you have completed the initial loan application and have signed the preliminary loan disclosures, your mortgage loan application will generally receive a preliminary prequalification. This prequalification will be based in large part on your ability to provide documentation to support your statements on your loan application, including your stated income and assets. Typically, a lender will include a request for least the last two to three years of your income tax returns with this documentation. There are several reasons why a lender may need to review your tax returns and why you should provide requested documentation as soon it is requested.

To View All Sources Of Income

Your mortgage lender will typically request a copy of your W2 tax forms, which will show your salary and compensation from your employer. However, the W2 form will not show all sources of income that you may receive. For example, rental property income, dividend income and even alimony or child support are just some of the many types of income that you can document through your tax returns.

To Average Income From Self-Employment

Most lenders will require self-employed borrowers to document their income through their tax returns. They will receive income as well as business-related expenses on the tax return. It is common for mortgage lenders to average this type of income for the previous two to three years. Typically, this is the only way that self-employed income is verified for mortgage purposes.

To Comply With Underwriting Guidelines

There are various types of mortgage loans that you may apply for, including stated income loans and low documentation loans. While not every type of loan that you apply for will require you to submit tax returns, some loans will have this as a firm requirement. Your loan request simply will not be reviewed and approved until you provide the required documentation to the lender.

If you want to be approved for your mortgage, it is important to comply with lender requirements. Providing documentation as soon as it is requested can speed the application process up, and your personal income tax returns may only be some of several documents that you will be required to submit to the underwriter for your loan request. You can speak with your mortgage representative about questions you have regarding required documentation, and you can work diligently to comply with underwriting information requests.

Considering a Reverse Mortgage Loan? Here's What You Need to Know

Many seniors are looking for a great way to improve their financial situation. Retirement or semi-retirement can be difficult due to the need to live on a fixed income. Some may have been unable to save enough in their working years, or their accounts may have been hit hard by stock market fluctuations. Still others are feeling the effects of inflation and the rising costs of medical care and general living expenses. If you are like many other seniors, you may not have a huge cash reserve available in your bank account, but you may have a sizable nest egg in your home. The fact is that you can tap into that equity without selling your home or taking on a mortgage payment when you apply for a reverse mortgage.

What Is A Reverse Mortgage?

A reverse mortgage is a unique type of loan that utilizes the current equity in your home and allows you to make regular withdrawals from that equity. Rather than you making a payment to a lender, the lender pays the funds to you. The terms of the mortgage are structured so that you will never owe more money on the reverse mortgage than the home is worth. When you decide to sell it or when your estate is being settled, the home's value will pay off the mortgage. This essentially gives you the opportunity to keep living in your home and to use the equity now when you need it most.

Is This The Right Option For You?

A reverse mortgage is not suitable for everyone, but it may be suitable for you. You can easily learn more about the amount of payments that you could receive on a monthly basis if you were to apply for a reverse mortgage, and you can consider how these payments would ease your financial concerns. This loan will decrease the amount of equity you have in your home over time. Therefore, if you have plans to sell your home later and use the equity for other retirement plans, you should carefully consider if the reduction in equity is feasible for your situation and goals.

One of the best steps that you can take is to learn more about this option. You will not know if a reverse mortgage is suitable for your financial needs and long-term goals unless you take the step of speaking with a loan agent.

You Ask, We Answer: What is Private Mortgage Insurance or 'PMI' and How Does It Work?

For many homeowners, their mortgage payment contains more than just principal and interest. A little something called PMI could be representing a significant portion of that payment, and it's important for home buyers to understand this cost.

What Is PMI?

PMI stands for private mortgage insurance, or sometimes just mortgage insurance. However, it isn't intended to mitigate risk for the homeowner, but rather the bank.

Statistics show that when a home buyer puts less than 20% down on a home, he/she is much more likely to default. So, requiring these buyers to carry PMI helps the bank hedge their losses in the event of a default.

It's important to note that the home buyer doesn't shop for PMI; this is all taken care of by the lender. However, the cost of PMI should be calculated out well before closing to help the home buyer be aware of his/her final mortgage payment.

Who Needs PMI?

Who will need to carry PMI depends on factors like the credit rating of the buyer and the exact mortgage being sought out. However, it's safe to say that most home buyers with less than a 20% down payment will be required to carry PMI.

Does PMI Ever Go Away?

Eventually, PMI can be removed from a mortgage once enough of the principle has been paid down or enough years have passed.

It's important for home buyers to fully understand the terms of their PMI requirement. Sometimes, it will be automatically removed once 20% of the house has been paid off, while other times, refinancing may be required.

Should Those Who Cannot Put 20% Down, Not Buy A House To Avoid PMI?

Unfortunately, this is not an easy question to answer. Yes, PMI is an extra cost that needs to be calculated into the cost of the home – but putting off a home purchase isn't necessarily the right course of action.

For many families, it's financially challenging to save up 20% of the cost of a home. After all, in 2010, the median home price of new homes sold in America was $221,800. A 20% down payment on such a home would be $44,360.

However, many find that it's still cheaper, or just financially wiser, to buy a home with PMI than to continue renting. Each potential home buyer should call their mortgage professional to get more information about market trends in their area and to decide the appropriate course of action.

Are You Applying for a Reverse Mortgage? Here Are 3 Considerations You'll Need to Make

If you're a homeowner who is looking to tap in to the home equity that you've spent years building you may be interested in a "reverse mortgage" or "home equity conversion mortgage". While these unique financial tools aren't for everyone, if you qualify for a reverse mortgage you'll find that this might be the perfect financial solution which allows you to pay off your existing mortgage, or for some other regular expenses that you have.

Let's take a closer look at how reverse mortgages work, including how to qualify, what happens to your existing mortgage and what a reverse mortgage might cost.

Do You Meet the Requirements for a Reverse Mortgage?

In short, a reverse mortgage is a type of home loan in which the lender pays you monthly payments or a lump sum based on the equity that you've built up in your home. At some point in the future – when you move out of the home, or pass away – the reverse mortgage loan will become payable.

As mentioned above, reverse mortgages aren't for everyone. You'll need to be at least 62 years of age and be a homeowner who has enough equity built up in your home to qualify. You'll also need to understand that your lender will scrutinize your current financial position to ensure that you can keep up with property taxes and other regular costs that you may incur.

What Happens to Your Existing Mortgage?

If you have a regular mortgage it's still possible to qualify for a reverse mortgage, but you'll need to use some of the proceeds to pay off your existing mortgage. For example, if you have $50,000 owing on your mortgage and you receive a reverse mortgage for $100,000, you can pay your initial mortgage off and still have $50,000 to use as you see fit.

Do You Know What a Reverse Mortgage Costs?

Keep in mind that like a traditional mortgage, a reverse mortgage has costs attached. You'll need to pay mortgage insurance premiums, service fees, lender fees and other third-party fees that are typically referred to as "closing costs".

Learn More About Your Reverse Mortgages Options

A reverse mortgage can be an excellent way to take advantage of the equity that is currently locked up in your home. To learn more about reverse mortgages, contact your local mortgage professional and they'll be able to share their guidance and expertise.

Be Prepared for Your Mortgage Pre-approval Interview by Having Answers to These 4 Questions

So – you've completed an initial mortgage pre-qualification and now you're ready to take the next step and meet with your lender or mortgage advisor for the pre-approval interview. Are you ready?

At this stage of the application process your lender will dig into your financial background to ensure that you're fully capable of making your mortgage payments and that you don't present too high a risk. Let's take a quick look at a few questions you should know the answers to before you go in for a mortgage pre-approval.

Do You Have a Specific Home in Mind?

If you've already picked out the perfect new home, be sure to bring along some of the details when you meet with your lender. At minimum you'll want to know the price range that you're expecting to buy in so that your mortgage advisor can try to find a mortgage that allows you to purchase the home and still meet your other financial goals.

What is Your Current Income from All Sources?

Your income (and that of your spouse, if you have one) will be a major factor in the size of your mortgage, your payment terms and the interest rate that you qualify for. If you have a significant income and it's clear that you will have little trouble making the mortgage payments you'll likely qualify for a shortened amortization period that includes a lower interest rate. Conversely, if you can only afford to make a bare minimum monthly payment you'll be facing a longer mortgage term.

Do You Have Any "Black Marks" on Your Credit?

If you have any negative spots in your credit history you'll want to ensure that you're able to answer for them, because your lender will certainly ask about them. Be honest and confident, and remember that the lender wants your business as much as you want to receive a pre-approval for mortgage financing.

What Are Your Plans in the Next Five to Ten Years?

Finally don't forget that interest rates will continue to fluctuate and that may have an impact on your mortgage in the near future. Be sure to share any major financial plans that you have with your mortgage advisor as they can keep you appraised of any refinancing opportunities that come about.

Buying a home is an exciting time – one that will be far less stressful if you are fully prepared for the many steps along the way. Contact your local mortgage professional today to learn more about how you can get pre-approved for mortgage financing.

Understanding Mortgage Insurance and the Difference Between FHA, VA and USDA Mortgages

Are you thinking about using mortgage financing to buy a new home? If so, you've likely heard about mortgage insurance policies requirements and you may be wondering how they will affect you. In today's blog post we'll explore mortgage insurance and explain the difference between conventional, FHA, VA and USDA mortgage insurance policies.

How Does Private Mortgage Insurance or "PMI" Work?

While there are a number of reasons that your lender may require mortgage insurance, in general you'll be required to purchase a conventional PMI policy if you are putting less than 20 percent of the home's value in as a down payment. Another way your lender might explain this is that you have a "loan to value" or "LTV" ratio of higher than 80 percent, which means that the amount of your loan divided by the value of your home is higher than 0.8.

The cost of your private mortgage insurance policy will vary depending on a number of factors, such as your financial situation, FICO credit score, the cost of your home and more. Generally speaking you'll be required to pay from one-half to one percent of the cost of your monthly mortgage payment in insurance fees. Once your LTV ratio moves below 80 percent you may no longer be required to pay for PMI.

How Does VA Mortgage Insurance Work?

If you qualify for a mortgage from Veterans' Affairs you'll be pleased to know that you won't be required to pay for mortgage insurance. In some instances you actually won't be required to pay a down payment either, meaning that you may be able to borrow up to $400,000 to purchase a home without having to invest a cent of your own capital.

How Does USDA Mortgage Insurance Work?

Did you know that the Department of Agriculture runs a mortgage program? The USDA Rural Development mortgage offering is government-backed and like the VA mortgage program above you can finance 100 percent of the cost of your home without investing a down payment. However, unlike the VA program you'll be required to pay for mortgage insurance. Currently the annual mortgage insurance premium on USDA loans is 0.5 percent.

How Does FHA Mortgage Insurance Work?

Finally, don't forget about the Federal Housing Administration's mortgage program. If you qualify for a FHA-backed mortgage, you'll be paying about 1.35 percent in mortgage insurance premiums if you make the minimum down payment.

As you can see, there is a bit of a learning curve involved with fully understanding how all of the different types of mortgage insurance work. To learn more about mortgages and how insurance can benefit you, contact your local mortgage professional today.

Understanding the Difference Between a Mortgage Pre-qualification and a Pre-approval

If you're in the market for a new home and you've been researching mortgages, you've likely come across the terms "pre-qualification" and "pre-approval". While these terms are self-explanatory in some circumstances, they are quite different in regards to mortgage financing.

In today's blog post we'll explain the difference between a mortgage pre-qualification and a pre-approval.

Pre-qualification: an Initial Look at Your Mortgage Options

The first – and easiest – step on the way to receiving mortgage financing to buy a home is known as pre-qualification. During this process you'll meet with a mortgage advisor or lender who will assess your financial history including your current income and any debts that you might have. Using these numbers they'll perform a quick calculation that suggests how much mortgage financing you might qualify for when you're ready to buy a home.

Your mortgage professional will also answer any questions that you might have about the process, including what interest rates you may qualify for, how much you'll need to invest in your down payment and more.

Pre-approval: A Conditional Mortgage Commitment

After you've been pre-qualified for your mortgage and you're ready to start looking for a new home you'll go through the pre-approval process. At this time your mortgage advisor or lender will take a much deeper look into your current financial situation, including pulling a credit report to assess how much risk they will have in lending you money. You'll also complete a full mortgage application as this will allow your lender to get a conditional approval for a certain amount or range. Finally you'll be informed about the interest rate and the terms of the mortgage once you find your new home and complete the purchase.

The Final Step: Finding the Perfect Home

Now that you've been pre-approved and have received a conditional commitment from your lender, you're ready to find that perfect new home. On top of having a better idea of your price range and what you can afford, you'll find that sellers are far more receptive to your offers as having a pre-approval signals that you're a serious buyer who is ready to make your move.

When you're ready to buy your new house or condo, your local mortgage professional is ready to help. Contact them to learn more about pre-qualification, pre-approval and your financing options. Enjoy your new home!

The LTV Ratio: How 'Loan-to-Value' Works and Why You Need to Understand This Ratio

Are you in the market for a new home? If you plan on using mortgage financing to buy your next home you've likely heard the phrase "loan-to-value" or the acronym "LTV" before. Let's take a quick look at the loan-to-value ratio including why it's important, how to calculate it and how it can affect your mortgage.

What is the Loan-to-Value or LTV Ratio?

In short, the LTV ratio is a number that compares how much money you owe against your home with its resale value in the marketplace. A low LTV ratio indicates that you have far more equity in your home than you owe in mortgage payments; conversely, a high LTV ratio indicates that you owe almost as much as your home is worth.

Calculating your LTV ratio is easy. Simply divide the amount that you have (or will have) remaining in your mortgage by your home's value. For example, if you own a home worth $250,000 and you still owe $150,000 on your mortgage, the calculation would be $150,000 divided by $250,000, which gives you a LTV ratio of 0.6 or 60 percent.

Why is the LTV Ratio Important?

Your LTV ratio is important for a number of reasons. First, your mortgage lender will use this figure as part of their risk calculation when they assess your financial suitability for your mortgage. If you're only putting 5 percent of the purchase price in as a down payment you'll have a LTV ratio of 95 percent, which is a more risky loan than one with a LTV ratio of 30 percent and thus will almost certainly come with a higher interest rate.

If you have a LTV ratio higher than 80 percent and you're getting a mortgage from a conventional lender you'll also be required to pay for private mortgage insurance or "PMI". Although PMI rates generally sound quite low – in the neighborhood of 0.5 to 1 percent – they can add hundreds of dollars to your monthly mortgage payment. Note that PMI may not apply to you if you're seeking out a government-backed mortgage from Veteran's Affairs, the USDA or the FHA.

While the LTV ratio might seem simple, this number can affect your mortgage in a variety of ways. Contact your local mortgage advisor today to learn more about the LTV ratio and to have your questions answered by an experienced professional.

Buying a Home with a Mortgage? A Quick Guide to Closing Costs and What to Expect

Whether you're just starting to shop for a new home or you've already found the perfect new house and you're ready to submit an offer, if you're taking out a mortgage loan to cover some of the home's purchase price you should be aware of the various closing costs you may encounter.

In today's blog post we'll share a quick guide to closing costs and what you can expect to pay when you buy a new home.

What Closing Costs Do Buyers Typically Pay?

As you move forward in the home purchase process you'll incur a variety of fees that cover document preparation, inspections and other services that are required to fully process your mortgage. Your application and processing fees cover the cost of preparing your loan application and submitting it to your lender. Your credit report fee covers the cost of pulling a credit report which is used to assess your suitability for a mortgage and whether your loan is worth the risk.

You'll likely pay an appraisal fee as you'll need a proper appraisal of the home's value, and you may need to pay a flood certification or survey fee depending on where the home is physically located. Additional fees that you may incur include wire transfer fees, commitment fees, courier fees and private mortgage insurance application fees.

Finally you'll also encounter a number of closing costs that aren't directly related to your mortgage, including insurance costs, attorney fees, property taxes, government filing or recording fees and more.

Consider Negotiating with the Seller

It may be worth asking the seller to pay some - or all - of your closing costs, depending on the offer that you've submitted and how strong of a negotiating position you're working from. Trust in your real estate agent's advice in this regard as you'll want to avoid spooking the seller by asking them to cover costs that they didn't anticipate.

As you can see, there are a number of different closing costs that you may encounter when you purchase a new home. An experienced mortgage professional will help you to better understand these costs and can show you areas where you may be able to find some additional savings. When you're ready to buy your next home, contact your local mortgage professional and they'll be happy to share some advice.

USDA Mortgages: Take Advantage of These Low-Rate Mortgage Loans to Buy a New Home

Are you thinking about buying a home in a rural or suburban area? If so, you'll want to take a look at the United States Department of Agriculture's mortgage programs as you may qualify for them.

In today's blog post we'll introduce the USDA Rural Development Single Family Housing Guaranteed Loan Program, explain the benefits of this mortgage program and how to determine if you qualify.

What is a USDA Mortgage Loan?

The USDA mortgage program is one of a number of programs in which the federal government will guarantee a mortgage loan as long as the recipient meets certain criteria. The intent of this program is to provide a boost to residents of rural or suburban areas who are struggling to obtain a traditional mortgage.

USDA mortgage loans are an ideal solution for those who are looking for 15 or 30-year amortization periods as they tend to have lower interest rates than mortgages offered by banks and other lenders.

USDA Mortgage Loan Benefits

There are numerous benefits to USDA mortgages that make this an enticing option compared to a mortgage from a traditional lender. As these loans offer full 100 percent financing you won't have to place a large down payment when buying the home. The USDA offers very competitive 15 and 30-year fixed interest rates, something you won't find from many banks or other mortgage lenders.There's also no maximum home purchase price with USDA mortgages, however note that you'll still be limited by your risk and your ability to manage the monthly mortgage payment.

USDA Mortgage Loan Requirements

The USDA mortgage program is open to all homebuyers that meet a number of initial requirements. The home you intend to purchase has to be located in a rural area (as determined by the USDA) and it cannot be a vacation home or investment property. As with any mortgage, you'll need a relatively clean credit history. Finally, note that your annual income will also be assessed and you'll need to prove that you're within 115 percent of the region's median income.

As you can see, the USDA Rural Development Mortgage program can be an excellent option if you're planning on buying a home in a rural or suburban area. Contact your local mortgage advisor today and they can explain the USDA home loan program and answer any questions that you might have.

Three Key Tips to Help Ensure Your Mortgage Pre-Approval Isn't Declined

If you're thinking about buying a new home and using a mortgage to help cover some of the purchase costs, it's a good idea to get an initial pre-approval from your lender before putting in an offer.

In today's blog post we'll share three quick tips that can help to ensure that your mortgage pre-approval isn't declined.

Demonstrate Your Income and Good Credit

A mortgage is a major financial transaction and one that carries a certain amount of risk for the lender. It's your goal to help them see that you have the ability to make your monthly payments and that there is very little risk in approving your mortgage. Be ready to demonstrate all of your sources of income and that your credit rating is clean.

It may be worth paying for your credit report before starting the pre-approval process so you can clean up any black marks or false reports and so that you can see what the lender will see when they check your credit history.

Choose the Right Property at the Right Price

As the home you're buying will be used as collateral to back the mortgage, the lender will need to see that there is enough value in the home to cover the cost of the mortgage should you fail to pay it back. The "loan to value" or LTV ratio is the amount of your mortgage divided by the value of the home. For example, if you're borrowing $150,000 to buy a home valued at $200,000, you'll have a LTV ratio of 75 percent. Keep in mind that each lender will have their own target LTV that they prefer to work with, so you may need to shop around a bit.

Start the Process with Multiple Lenders

Finally, if you feel that your income or credit history isn't perfect you may want to consider visiting a couple of different mortgage lenders to see what they can offer you. There are dozens of different mortgage products on the market today, and each lender has their own set of qualification criteria that they will use to assess risk and whether they feel that you can afford to pay the mortgage back. Getting a second opinion may help you to discover a more suitable mortgage or one with a better interest rate.

As you can see, there are a number of ways that you can work to ensure that your mortgage pre-approval passes without a hitch. For more information about pre-approvals and to get the process started, contact a local mortgage professional today. After you're approved it's only a matter of time before you'll be moving in to your new home.

The Down Payment: Everything You Need to Know About Your Down Payment on a New Home

Whether you're just starting to shop for a new home or you've found the perfect house and are crafting your offer, if you're taking out a mortgage to help cover your real estate purchase you've likely given some thought to your down payment.

In today's blog post we'll explore the topic of down payments and share how the amount you put down on your home will affect your mortgage.

How Your Down Payment Affects Your Mortgage

As you know, your mortgage is essentially a large long-term loan that is paid back with interest over a set time period. If you put a large down payment against the purchase, you will not only reduce the amount that you'll need to pay back, but you'll also reduce the lender's risk and this may allow them to provide you with lower interest rates.

Conversely, if you can't place very much down on your home and you're left borrowing as much as you can you may find that your mortgage comes with higher interest rates or that some mortgage lenders refuse your business entirely.

The Gold Standard: 20% of the Purchase Price

For the vast majority of homeowners it's expected that they will be able to contribute at least 20 percent of the home's purchase price. For example, if you are buying a $200,000 house you'll need to have at least $40,000 available for your down payment. Note that the 20 percent figure isn't a hard requirement; some mortgage lenders will be willing to approve you with less, but you may be subject to private mortgage insurance, higher interest rates and more.

Saving Up Your Down Payment

Depending on your financial situation and the cost of your home you may find that saving up 20 percent of the purchase price to put toward a down payment places a strain on your finances. If you still have a year or more before you're ready to jump into the real estate market, consider putting some money aside each month that can be used for a down payment. If you receive any lump sum payments like a tax return, save this in your down payment fund as well.

As you can see, your down payment is one of the more important considerations you'll have to make when buying your home with a mortgage. If you have questions about mortgages or down payments, be sure to call your local mortgage professional today as they'll be able to share their guidance and expertise to help you make the best financial decision.

Refinancing Your Mortgage: Understanding the Various Types of Refinancing

Whether you've been thinking about ways that you can draw on your home equity to fund a renovation project or you want to take advantage of low interest rates before they rise again, refinancing your mortgage is an excellent option.

In today's blog post we'll introduce mortgage refinancing and discuss a few of the ways that you can use this tool to help accomplish your financial goals.

Cash-In and Cash-Out Refinancing

Many homeowners refinance their mortgage in order to take some of the home equity out for other purposes. In a "cash-out" refinancing, you take out a new mortgage loan which is greater in value than your current loan. After paying off the existing mortgage you'll receive a check for the difference which can then be reinvested in home upgrades or put to use elsewhere in your financial portfolio. You may also be able to get a better interest rate in this type of refinancing, saving additional money over the long term.

Do you owe more on your mortgage than your home is currently worth but still want to take advantage of lower interest rates? If so, "cash-in" refinancing is an option that can help you to avoid the mortgage insurance costs that you may be facing when you refinance. As the name implies, cash-in refinancing will provide you with a loan that is for less than the amount that you currently owe, so you'll need to add "cash-in" to make up the difference.

Home Affordable Refinance Program or "HARP" Refinancing

If you find that you're unable to refinance your mortgage as the value of your home has declined, the federal government's Home Affordable Refinance or "HARP" Program may be an option. HARP was developed to assist homeowners in the wake of the 2008 financial crisis and the resulting instability that was caused in the real estate and mortgage markets. If you have been making your mortgage payments on time, have a mortgage guaranteed by Fannie Mae or Freddie Mac and your current "Loan to Value" ratio is greater than 80% it's likely that you'll qualify for HARP refinancing.

The above are just a few of the ways that you can refinance a mortgage to better suit your needs and financial goals. Contact your local mortgage professional today to learn more about refinancing and to discuss how you can tap in to the home equity that you've built up over time.

How to Use a Mortgage Calculator to Determine Your Monthly Payments, Interest and More

Are you thinking about using a mortgage to buy a new home? Buying your own piece of local real estate is a major financial investment and one that can require some pretty complex math to fully understand.

In this blog post we'll discuss mortgage calculators and how to use one of these tools to determine your monthly mortgage payments, interest charges, amortization periods and more.

Determining Your Principal and Down Payment Amounts

To get started with a mortgage calculator you'll need to know how the price of the home and how much you intend to contribute as a down payment. Generally speaking you'll want to place a down payment of at least 20 percent in order to avoid having to pay for private mortgage insurance and to give you access to better interest rates.

Choosing Your Interest Rate and Amortization Period

Now that you have an idea of the amount of mortgage financing you'll need, the next step is to choose your interest rate and amortization period. Different lenders will offer different interest rates for every one of their mortgage products, so again you'll want to play around with these numbers and run the calculation to see which combination of mortgage financing, interest rate and amortization period gives you a monthly payment that suits your budget.

Using a Mortgage Calculator for Refinancing

If you're thinking about refinancing your current mortgage you can also use a mortgage calculator to help make the math a bit easier. Simply use your outstanding mortgage balance as the principal amount and then choose an amortization schedule that fits your financial goals. Be sure to keep an eye on your interest payments, as you may find that by refinancing to a longer amortization period your monthly payments go down but your total interest paid is quite a bit higher.

Don't Forget the Closing Costs

Finally, don't forget that there are numerous "closing costs" – fees, taxes and more – which you'll need to factor in to your overall calculation. Closing costs will include everything from home appraisal fees to government filing fees and property taxes, and will vary depending on the home and the city or community you're buying in.

While online mortgage calculators can handle the tricky math to determine monthly payments and interest costs you may still find that you have questions about your mortgage or some aspect of the process. For more information, contact your local mortgage professional and they'll be happy to share their advice and expertise.

Did You Know That Your FICO Score Can Drastically Affect Your Mortgage? Here's Why

Are you about to apply for a mortgage loan in order to buy a home? If so, you may be curious about your credit score and how this might impact your financing.

Let's take a quick look at how FICO credit scores can affect your mortgage and share a couple of ways that you can boost your score to ensure your application is approved.

What is a FICO Score?

The Fair Isaac Corporation (FICO) is the country's leading producer of credit scoring information and is the primary source that most lenders will check to assess how much risk you present. FICO combines information from credit bureaus such as TransUnion, Experian and Equifax and produces a score ranging from 300 to 850.

The higher your FICO score is, the better your credit history and the lower the risk you present to lenders. If you have a score above 750 you can expect that most lenders will offer you a mortgage and likely a very good interest rate. If you have a score below 620 or 630 you may find it challenging to get approved and below 500 it will be almost impossible.

How Does a FICO Score Affect My Mortgage?

Your FICO score will affect you in two main ways. First, as mentioned above your FICO score will help to determine whether or not you are approved for a mortgage. Second, you'll find that the interest rates offered to you by various lenders will change based on your FICO score. An individual with a score of 800 and very clean credit presents much lower risk than someone with a score of 500, and thus a higher score generally means a lower rate.

How Can I Boost My FICO Score?

If you find that your credit score is a bit low and you're concerned that it will have a negative effect on your mortgage application there are a few steps you can take. First, get a full copy of your FICO score and credit history so you can see who is reporting to the credit bureaus and what information they are providing. You may find that there are mistakes or old items that have not yet been removed which you can then challenge to have taken off of your credit report.

While your FICO score can certainly impact your mortgage and your interest rate you shouldn't let a low score hold you back from applying. Contact your local mortgage professional today to discuss your options and to determine whether or not your credit will cause you to have any issues in securing a mortgage to pay for your new home.

You Ask, We Answer: What is a "Reverse Mortgage"?

If you've recently considered your options for taking some of the equity out of your home you may have heard about reverse mortgage loans. If you meet the requirements for a reverse mortgage it can be an excellent way to tap into the value of your home, freeing up that cash to be reinvested or used for other purposes.

In today's blog post we'll explore reverse mortgage loans, explaining how they work and whether or not you're qualified to receive one.

How Does a Reverse Mortgage Work?

As the name implies, a reverse mortgage is the opposite of a traditional or "forward" mortgage in which you borrow a lump sum of money from a lender to buy a home, paying it back to them over time. With a "reverse" mortgage, instead of paying the lender you will receive money from them which does not have to be repaid until you are either no longer using that house or condo as your primary home or until you fail to meet the obligations of the mortgage contract.

Note that a reverse mortgage is still a loan, which means you will still be required to pay interest on it. As your loan balance increases with principal and interest each month the amount of equity you have in your home will decrease accordingly.

Do I Qualify for a Reverse Mortgage?

According to the federal Consumer Financial Protection Bureau, there are a number of requirements that you must meet in order to qualify for a reverse mortgage. You must be at least 62 years of age when you apply, the home you're applying with must be your primary residence, and most or all of your outstanding mortgage debt on the home must be paid off.

If you still owe money on your original or second mortgage against the home note that part of the money from the reverse mortgage must be used to pay this debt off.

How Much Can I Borrow in a Reverse Mortgage?

Like any type of loan, the amount of money that you can receive with a reverse mortgage depends on a variety of factors. Your age, the value of your home, any outstanding mortgage debt, current interest rates and Federal Housing Administration requirements will all be taken into consideration when determining how much you will qualify for.

While a reverse mortgage isn't terribly complex, there is certainly more to the process that can be covered in a single blog post. For more information, contact your local mortgage professional today and they can share the specifics of how you might qualify for a reverse mortgage and whether or not it's your best option for making use of some of your home equity.