An amount that you borrow and agree to repay under specific terms.
Usually a formal agreement, loans involve two parties: the borrower and the lender.
The contract specifies the terms and conditions of the loan, and once you sign, you are legally obligated to adhere to it.
Before pursuing and taking out a loan, learn how they work and how you can borrow smartly, safely and at the lowest possible cost.
These are the essentials on how loans work:
There are two basic types of loans: secured and unsecured.
Secured loans are collateralize by money in a separate account, the property you purchase or other assets, such as your home or vehicle. If you don't repay as agreed, the lender can claim the collateral to pay off the debt. Because of this guarantee, the lender's level of risk is low.
Common loan types include:
Some types of loans are more involved than others. For example, you may have to submit extensive paperwork in underwriting for mortgages or business loans. But the overall process is fairly consistent with all loan types.
Applying: Some lenders offer prequalification or preapproval, but to actually obtain a loan, you'll ultimately need to fill out an application. A loan application will ask for personal information, typically your name, date of birth, Social Security number, address, phone number and email address. You'll typically need to include income and employment details. Some loan types may require details about your assets (cash in savings and investment accounts, as well as any property) and liabilities (your financial obligations).
Qualifying: Once your application is received, the lender will assess it for approval. This is also known as underwriting. With most loans, this is when a lender will check your credit report and score. At this point, the lender will decide whether you're approved for the loan and if so, what terms you qualify for, such as the loan amount and annual percentage rate. For some loans, like mortgages, loan processing and underwriting may include appraisal, inspection and other steps to gather more information about the property or your financial status.
Disbursement: If you qualify for the loan, the funds will be disbursed to you or a designated recipient, such as a title company for mortgages. Disbursement may also be referred to as loan closing. Disbursement time can vary widely depending on loan type and individual lenders. Online lenders may offer access to funds within 24 hours with an electronic deposit. Disbursement for other loans can take longer. For example, it can take two weeks to two months for a private student loan to be sent to you or your college. Whenever and wherever the money lands, it becomes your debt once it's disbursed.
Paying the balance: The payment amount and due date will be listed on the agreement you signed. A portion of your payment will go toward financing, and the rest will be applied to the principal. If the lender uses the simple interest method, interest will be calculated on the outstanding balance due. If you increase the payment, interest fees will decrease along with your debt. On the other hand, if the lender computes interest prior to, the interest for the term of the loan is already factored in, so you won't reduce interest if you pay the loan early.
The lender may report activity on the loan to the three credit reporting agencies: Experian, TransUnion and Equifax. Paying on time can improve your credit rating and save you money by avoiding late fees.
Refinancing: You might want to change your loan's terms at some point – for example, getting a lower interest rate or extending your loan's repayment term. Refinancing is essentially getting a new loan to pay off an older one, ideally with better terms.
Remember that, as a borrower, you have the power to choose which loan type works best for you. Research the best terms that you can qualify for, then borrow prudently.
Looking to purchase a home? Give Us A Call Today! (702) 696-9900 or (888) 931-9444
Resource: U.S.News
Buying a home can be a challenging experience for first-timers. Here are some mortgage tips to help get you started.
It's quite common to put 20% down, but many lenders will now permit a much lesser percentage, and first-time buyers programs allow as little as 3% down. Putting down less than 20% could mean higher costs and paying for mortgage insurance, even a small down payment amount can still be hefty.
Check out the various loan programs:
Loan Terms:
Making a much higher down payment will mean having a lower monthly mortgage payment.
Many states offer assistance programs for first-time home buyers with perks such as down payment assistance, closing cost assistance, tax credits and discounted interest rates.
You will need to now what's actually within your price range. Find your debt-to-income.
Your credit score (FICO) will be one of the key factors in whether you're approved, and it will help determine your interest rate and loan terms. Speak to an expert about any disputes you may have on your report.
We recommend comparing at least 3 lenders before making a decision. This could save you more money.
As you get closer to buying a home, it’s smart to get a preapproval, where the lender thoroughly examines your finances and confirms in writing how much it's willing to lend you, and under what terms. Having a preapproval letter in hand makes you look much more serious to a seller and can give you an upper hand over buyers who haven’t taken this step.
In a competitive real estate market with limited inventory, it’s likely you’ll bid on houses that get multiple offers so having a preapproval letter will increase your purchasing power.
If you search the internet for 'home buying' you'll find an abundance of tips and tricks but they're all pretty much the same.
The end result is you purchasing your dream home so we're here to help you through the process from start to finish.
There are 4 categories:
(A) Conventional that conform to standards require as little as 3% down. 20% down no PMI required
(B) FHA (Federal Housing Administration) permit as little as 3.5% FICO Score of 580 or higher
(C) VA requires no down payment, no minimum credit score. May pay a VA funding fee.
We're here to help you along the way. When you're ready to purchase let us know!
Receiving & using a cash gift is one of the most common processes when purchasing a new home. Most forms of cash gifts are used for the 20% down payment.
We've provided a brief breakdown of the process and how to ensure you're not denied from your lender due to in proper gifting.
Down payment "gifts" can make it easier to purchase a home.
Loan programs including FHA, VA, USDA, Conventional, and Jumbo loans, allow the use of cash gifts.
First-time home buyers are most likely to receive a cash gift among all buyer types to make a 20% down payment.
You can often qualify for the lowest mortgage rates offered and with a 20% down payment, there is no requirement for PMI (Private Mortgage Insurance)
Mortgage limits are capped at $484,350 except within those high cost areas where homes exceed the national average
High Cost Areas are capped at $726,525 for single-family homes, and multi-unit homes.
Low-down-payment loans also allow cash gifts for down payment. (ie. as little as 3% down)
There are 3 steps that should be taken in order to avoid denial from your lender:
**There may be tax implications for givers of a cash gift for down payment and for the receivers. Everyone's tax situation is different. Please consult a tax advisory for more information.**
If you have questions about a "Down Payment Gift." Contact Us Today! We will be happy to walk you through the process.
Mortgage & Homebuyer Concerns
House Prices Are The Culprit
Who would have guessed we would be back to the similar movie The Day After Tomorrow? All areas of the housing market are bracing themselves.
More then half of the industry are saying the rising of interest rates have been their biggest hurdle since the World Record Jump of 2007. The industry needs to drive forward with the digitization of the mortgage application process.
And future home buyers? Well, they’re right there with them. First time home buyers don’t have a vast inventory of affordable homes available to them and 20% have credit history challenges.
The Solution
We having a growing presence in the purchase market that will require continued support and customization as we continue to play a meaningful role and drive demand in the housing market.
Without one we don't have the other.
Contact Us Today! 702-696-9900 Learn More About Our Mortgage Options Today.
#mortgage #homebuyers #realtors #thestruggleisreal #valleywestmortgage
Resource: https://www.mpamag.com/
Conventional rates today fell considerably today but, do you know what does effect the rates to rise and fall as they do?
The most crucial clues offset each other — Return of investment (Treasury Yield) on the government's debt obligation rose while oil prices fell. Shown below are some factors you might want to consider:
Predictions indicate for the year 2018 we should only see less than four rate hikes in 2018. So if your looking to purchase soon contact us today! And keep an eye on the markets!
We're striving to make the applicate process more streamline by offering services that are more automated and user friendly.
Visit Valley West Mortgage for our Online Application and our Secure Document Uploading.
Resources: www.themortgagereports.com, www.mortgagedaily.com
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