Loan Basics

What is a Loan?

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.

The Basics

These are the essentials on how loans work:

  • You take out a loan when you borrow money from a lender.
  • The amount you borrow is paid back over time, plus interest and applicable fees.
  • Lenders will require an application and consider your credit rating, income and other factors when determining loan approval.
  • Interest rates are determined by your credit rating and other qualifying factors. They can be fixed or variable.
  • Your loan's term is the amount of time you take to pay back the amount borrowed. Loan terms vary depending on loan type, lender and your credit rating
  • Considering how much you need to borrow and comparing loan terms across different lenders could help you save money.
  • The concept of loans is simple on the surface: You borrow money and pay it back. But it's worthwhile to dig deeper. The more you understand, the better you can avoid financial trouble. Being knowledgeable can help you borrow the right amount of money, agree to an affordable payment and payoff term, and find the best interest rate you can qualify for.

Loan Types

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.

Unsecured loans do not require collateral, so they are more of a gamble for the lender.

Common loan types include:

  • Personal loans can be used to pay for nearly any use, though some lenders have restrictions such as no business or education use. They are often used to consolidate existing debt or finance an upcoming expense, like a wedding. Most are unsecured, though secured personal loans are available.
  • Business loans are for launching or operating a business. They may be secured (with cash in deposit accounts, property, or business or personal assets) or unsecured.
  • Student loans are for higher education costs. Federal student loans are offered through the U.S. Department of Education, including undergraduate, graduate and parent loans.
  • Car loans are used to buy a vehicle such as a car or truck and are typically secured by the vehicle.
  • Home loans, also known as mortgages,help people buy real estate. As with car loans, the property you purchase usually acts as security for the loan.

The Loan Process

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

The History of Modern Mortgages

In today’s economy, we know a mortgage as a financial agreement made between a borrower and a bank to purchase a home. Houses typically cost more than a person can pay for out of pocket and/or all at once. Since banking institutions have the means to make large purchases, they can give you a loan for the house you wish to buy and allow you to pay them back over time. So, the mortgage agreement is created to define how much and how long the borrower will pay for the home on a monthly basis before the property is completely paid off. When you’re paying on a mortgage, you don’t technically own your home until you’ve completely paid it off. The property purchased is a form of collateral that ensures that you will pay the bank back. This is why if you default on your mortgage (in other words, you don’t pay your mortgage or “house note”) your house is foreclosed on by the bank who holds your loan.

There are several different types of loan programs that are offered to the public. Some loans are catered to a specific demographic, like the VA loan, designed for United States Veterans and their families. But how did we get from the very first mortgage to the modern-day mortgages that are offered now?

There are documents in England that show record of mortgages existing as far back as the year 1190. In America, mortgages have been around since the late 1800s. (It’s probably safe to say most people built their homes by hand back then). As new immigrants came over from different countries, the need for more homes and property arose. Can you believe in the early 1900s homes required a down payment of 50%? Kind of makes you feel privileged to have lenders of today only asking for a 20% down payment, wouldn’t you say?  Oh, and borrowers in the early 1900s also had to pay off the remainder of their loan in 5 years! That definitely puts our modern 30-year fixed payment into perspective. Compared to borrowers of that time, we’re spoiled.

Steep requirements like those stated above increased the likelihood of defaulting by borrowers. Eventually we hit rock bottom and the Great Depression began in 1929. Thanks to President Roosevelt (F.D.R. to be specific), the New Deal was created and put into law. The New Deal put policies in place to protect lenders and borrowers in financial transactions. New standards were implemented and the cost to borrow money was lowered significantly.

The design of our modern mortgage came out of the desperate financial needs invoked by the Great Depression. Lenders are now held to higher standards and borrowers are offered programs to help with financial needs. Learning from our economic history has helped our government to structure our financial resources and responsibilities of today and for the future.

 

 

When doing your research, always be sure to consult great sources, check out the sources for this article below!

https://www.thebalance.com/the-great-depression-of-1929-3306033

History of The 30 Year Mortgage – From Historic Rates To Present Time

https://www.thebalance.com/mortgage-meaning-and-explanation-315709

 

 

whitney_rush  WHITNEY RUSH, VALLEY WEST MORTGAGE

 

How Prepared Are You?

Buying a home can be a challenging experience for first-timers. Here are some mortgage tips to help get you started.

Start saving for a down payment early

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.

Explore your down payment and mortgage options

Check out the various loan programs:

Loan Terms:

Making a much higher down payment will mean having a lower monthly mortgage payment.

Research your state and local assistance programs

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.

Determine how much home you can afford

You will need to now what's actually within your price range. Find your debt-to-income.

Check your credit

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.

Compare mortgage rates

We recommend comparing at least 3 lenders before making a decision. This could save you more money.

Get a preapproval letter

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.

Don't Be Overwhelmed With Paperwork

We know with any purchase process gathering all of the necessary documents can be quite hassle even for the most organized. All lenders want and need detailed information about your finances to determine if you quality for a home loan.

We've provided a basic list that can help assist with this daunting task. Keep in mind each situation is uniquely different so if you don't know what you need ask your lender.

Proof of income

Lenders want to know that you'll be able to repay the loan. Depending on your income history and size of loan, you may have to show additional documentation

Debts

Your debt can seriously impact your debt-to-income ratio which can be Up to 57% FHA Up to 50% for Conventional across the board*

*May fluctuate*

Assets

Having assets just in case unexpected expenses occur after you close on the house is a factor in the home buying process.

If you received money towards the down payment as a gift, you may be required to provide documentation/letter stating it was a gift and not a loan.

Bank Statements, investment records, retirement accounts, real estate, auto titles, and any other investments require that you provide documentation.

Other paperwork

This can include a signed 4506-T form, that allows your lender to get a transcript of your tax returns from the IRS.

If you have filed bankruptcy in the past several years, you may be asked for your bankruptcy discharge papers.

Documentation that you're involved in any lawsuits or co-sign on any loans

If you're renting out your current home a lease agreement and income received may need to be provided.

If you're a renter with a private landlord, 12 months of cleared checks on time may be required or a form confirming on-time rent.

 

The mortgage industry is striving to make this 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

 

Military Veteran Benefits in Nevada

Just over a quarter of a million veterans live in Nevada as of 2018 and we’ve got a list of major benefits that you may not know about that includes a veteran home in Boulder City.

 

VA Home Loans

We offer A $0 down payment mortgage option available to Veterans, Service Members and select military spouses. These loans are guaranteed by the U.S Department of Veteran Affairs.

Contact Us Today! (702) 696-9900

Our experienced team is ready to get you your dream home!!

 

Veterans Tax Exemption

Available to any veteran with wartime service. The exemption may be applied to either a veteran’s vehicle privilege tax or real property tax. You’ll need to take your DD214 or discharge papers to your local assessor’s office.

 

Disable Veteran Tax Exemption

Available for any veteran with a service-connected disability of 60 percent or more. The amount available varies between $6,250 to $20,000 of the assessed value, depending on the percentage of disability and the year filed. Must have an honorable discharge. Benefits can be passed to the widow or widower of a disabled veteran. This may be applied to vehicle or personal tax.

 

Career

Veterans receive preference points when testing for open and open non-promotional examinations for state jobs. Must have an honorable discharge.

 

Veteran Education Benefits

National Guard: The University of Nevada system may grant a waiver of tuition and laboratory fees for any active member of the Nevada National Guard.

Children and Surviving Spouses (National Guard)

The University of Nevada system may grant a waiver of tuition and laboratory fees for any child or surviving spouse of a Nevada National Guard member killed in the line of duty.

A child may use the waiver for 10 years after they attain the age of 18 years. A surviving spouse may use the waiver for 10 years after the member's date of death.

 

Grant-In-Aid for the Family of a Member Killed in the Line-Of-Duty

Dependents of an active duty member killed in the line of duty while permanently stationed in Nevada may be eligible for a financial grant that does not require repayment.

 

Recreational Benefits

Hunting & Fishing: Disabled Veteran

The State of Nevada Wildlife Division issues discounted hunting & fishing licenses to any honorably separated veteran who has a service-connected disability of 50% or more.

Hunting & Fishing: Active Duty

The State of Nevada Wildlife Division will issue a discounted combination license to Nevada residents stationed outside of Nevada and home on leave.

State Parks

Honorably discharged Nevada veterans with a permanent disability of 10 percent or more can get a pass for free entrance to all state parks, camping, and boat launch facilities. There is a low annual renewal fee.

 

Remember if you’re in the market to purchase your dream home let us know!

In-House Processing | Underwriting | Funding & More

VA | FHA | Conventional | Reverse | Refinance & More

Non- Occupant Borrower

Income flexibility help to meet the diverse needs of today’s home buyers by expanding access to creditworthy, low- to moderate-income borrowers. The non-occupant borrower income flexibility allows a parent, or anyone else willing and financially able, to be a borrower on the loan.

Example:
A millennial couple is buying their first home, and his mother would like to help. She is willing and able to be a borrower on the mortgage loan, but she will not live in the home. Because the borrower’s mother will be an actual borrower on the mortgage loan, her income and liabilities are considered from a qualifying perspective and will be included in the combined debt-to income (DTI) ratio. https://www.fanniemae.com/singlefamily/homeready

Resources: www.fanniemae.com

First Time Homebuyers

Tips for First-Time Home Buyers

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:

Down Payment Tips

(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.

Local Assistance Programs

Application Tips

Shopping Time

It's All About the Budget Not The Bass

Mistakes to Avoid

We're here to help you along the way. When you're ready to purchase let us know!

See Our Programs

See Our Team

Spring has Sprung!

Preparing Your Home for Warmer Weather

It’s that time of year again! The Earth is turning beautifully toward the Sun, sweet smelling spring flowers are budding, and our days are getting longer and brighter. Spring time is quickly approaching with the first day of Spring being Monday, March 20th of this year. We’ve set our clocks forward, we’ve done some spring cleaning to make room for fresh bathing suits and hordes of thong flip flops, but what can we do to prepare the exterior of our homes for the Spring & Summer weather that will be arriving within the next warm breeze?

Examine your Lawn

You can begin to prepare your home for the Spring and Summer months by cleaning up your outside area. Go out to your lawn and pick up any fallen branches that may have separated from trees with the weight of the snow that fell this year. Most of us choose not to venture outside more than we have to in the winter months, so there may be new and uninvited lawn décor that has floated onto your property and gone unnoticed until now. Amp up your curb appeal by gathering and getting rid of any debris that might be blowing around your yard.

Excavate your Gutters

Let’s face it, we don’t know what’s in there. The thought of what might have gathered in the gutters during the winter months can be a little bit scary but they have to be dug out at some point, what better time than the Spring? For those of you who get heavy snowfall in the winter, cleaning your gutters is especially important because you want to be sure that the runoff from any melted snow is being released into the right areas. If you’ve got a crack or a leak in your gutters, your basement might be housing an underground pool without your knowledge. Plus, we all know what they say about April showers! Be sure that the gutters have no blockage and are prepared to take on the rain that will bring out May flowers.

Break out the Grill

One of the best ways to take advantage of the changing climate is to do things that you would normally do inside, outside. Warm weather often brings with it the craving for barbeque and social gatherings. Spring Break, Easter, and Memorial Day hold some of the best opportunities to enjoy time with friends and family. Prepare for the festivities by dusting off your grill, buying some fresh coals and lighter fluid from your favorite home goods store, and get ready to take your meals out to the back patio.

Check your Air Conditioning

AC is a must! Here in Las Vegas, the summer heat can be brutal and air conditioning is absolutely necessary. No matter what city you’re in, the sun is about to show up and show out. Check your AC Unit by cleaning it up and replacing any damaged parts. If you’re not exactly AC savvy call up a professional. Clean AC units function better and last longer.

 

 

 

 

 

 

When doing your research, always be sure to consult great sources! Check out the sources for this article below:

http://www.hgtv.com/design/decorating/clean-and-organize/10-home-maintenance-tips-for-spring-pictures

http://www.mymainstreetrealty.com/news/top-10-tips-to-prepare-your-home-for-spring/

 

 

WHITNEY RUSH, VALLEY WEST MORTGAGE

FHA Denying Support for DACA Mortgage Borrowers

What is DACA

Deferred Action for Childhood Arrivals (Dreamers)

An American immigration policy that allows some individuals with "unlawful" presence in the United States after being brought to the country as children receive a renewable 2 year period of deferred action from deportation and become eligible for a work permit in the U.S.

What is FHA

The Federal Housing Administration (FHA) is the largest mortgage insurer in the world with an active insurance portfolio of over $1.3 trillion. Each year, FHA helps more than a million homebuyers achieve the dream of sustainable, affordable homeownership of single family homes, while our insurance programs for multifamily properties support the availability of over 300,000 affordable rental units, including those for seniors and people with disabilities. FHA's healthcare insurance programs facilitate access to hospital medical care and assisted living in hundreds of communities across the country.

Who is Fannie Mae

Leading source of financing for mortgage lenders, providing access to affordable mortgage financing in all markets at all times. Our financing makes sustainable homeownership and workforce rental housing a reality for millions of Americans.

How are these all connected?

According to the FHA they are not going to be backing mortgages for DACA recipients, however Fannie Mae has stated that it supports (and will support) mortgages for DACA recipients.

“We have a longstanding policy on eligibility for non-U.S. citizen borrowers. Fannie Mae purchases and secures mortgages to non-citizens who are lawful permanent or non-permanent residents of the United States under the same terms available to U.S. citizens,” the government-sponsored enterprise said in a lender bulletin posted on Friday.

Fannie Mae said that it is not changing its existing policies. Rather, the purpose of issuing the bulletin was to provide “additional guidance to help lenders determine eligibility for non-U.S. citizen borrowers” in response to customer feedback on the issue.

 

Resources:

www.housingwire.com

www.ilrc.org/daca

www.wikipedia.com

www.nbcnews.com

 

Gifting Down Payments

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 Payments

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.

 

Commonality

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)

 

Down Payment Letter

There are 3 steps that should be taken in order to avoid denial from your lender:

  1. Correctly Written Gift Letter
  2. Documenting the Gift from the Giftor
  3. Documenting the Receipt of the Down Payment Gift

**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.