Preparing for Your First Mortgage
Buying a house is not something you should do without some good financial knowledge and advice. Your first mortgage should be thoroughly thought out and well planned. Now that you’re thinking of purchasing a home, use the next 12-18 months or so to prepare yourself.
Prepare Your Credit Early
Houses are not cheap. In order to pay for one, you’ll have to get a home loan and pay it off in monthly installments. How much you’ll have to pay is dependent upon your mortgage lender and your credit score. You credit can take a while to build and even longer to repair if it’s damaged, so start working on it early. See an article by Megan Ortiz on how to Establish, Raise, and Maintain your credit score HERE . Get into the habit of paying everything on time even if it doesn’t go on your credit report. Make a detailed list or a spreadsheet of all of your financial responsibilities from utility bills to student loans. If you practice good habits, eventually they will become second nature. Be meticulous about getting things paid on time or early if you can. Practice makes perfect.
Pay Off Your Debt
Loan officers are going to calculate your debt to income ratio, so the less debt you have the better. Things like car notes and credit card payments will be looked at and taken into consideration before a lender will agree to give you a loan. If the total amount of the debt you already have plus the debt you will have after being given a home loan will exceed 43% of your total income, you’re going to have a tough time getting someone to lend to you. So be sure to calculate your debt and pay it down to the lowest amount possible.
Visit Valley West Mortgage and Meet with a Loan Officer
Before even looking at homes, it’s a good idea to sit down and chit chat with a loan officer. Let him or her know your intentions, what kind of home you wish to buy and how much you’re willing to spend. He should be able to run some numbers for you and give you a breakdown of how much you can afford and how much his company would be willing to lend to you, including rates and such.You want to feel comfortable doing business with your chosen mortgage company so ask as many questions as necessary. Any loan officer that isn’t willing to take his time with you and answer your questions isn’t worth your time.
Keep Accurate Records
Start keeping your tax returns, pay stubs, and banks statements in a safe and secure place. In this digital age, it’s easy to order your financial documents from the IRS or from your bank, so be sure to acquire and retain a few copies somewhere at home, as these are documents that you will have to provide to your mortgage company when they are processing your loan.
Don’t Over Spend
As we all know, getting a new home is exciting and I’m sure you’ll be busting at the seams with new decorative ideas for your home. However, keep in mind the hefty amounts of money that have to be spent just to purchase the home (closing costs, down payments, etc.). Don’t go spending all of your extra money, preparing for a new home and then end up without a home to put all of your stuff in because your credit report came back indicating that you don’t know how to handle money.
Last but not Least, Keep a Steady Income!
In order to qualify for a loan, you must have a solid work history. The reason why? Because no one is going to want to lend to you if they don’t know that you have the means to repay them. Having a job is good, keeping a job is even better. Another thing is the type of pay you receive. If you’re on salary where you work, you’re more than likely in a career based job, which means you’ve probably been in your position for a while and you aren’t likely to leave that company any time soon. If you’re on an hourly job, and you haven’t been there for a solid 18-24 months you may have a harder time convincing your loan officer that you aren’t going to default on your loan.
The biggest tip that I can give you is to be prepared. Acquiring a new home is a big step, and it’s not one that should be taken lightly. If you aren’t financially ready to buy a new home, take these few steps to get yourself ready. There is nothing more joyous than owning your own home, you deserve it!
WHITNEY RUSH, VALLEY WEST MORTGAGE
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.
Veterans receive preference points when testing for open and open non-promotional examinations for state jobs. Must have an honorable discharge.
- 10 points: disables veterans with written proof of service-connected disabilities
- 5 points: veterans with honorable discharge, un-remarried surviving spouse of veteran
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.
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.
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
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)
Down Payment Letter
There are 3 steps that should be taken in order to avoid denial from your lender:
- Correctly Written Gift Letter
- Documenting the Gift from the Giftor
- 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.
Reason To Refinance. Eight reasons to save money
What exactly is a refinance? Simply put, a refinance (or REFI for short) is a loan that has been financed again. There are dozens of beneficial opportunities that are presented to homebuyers that choose to refinance. In most cases a refinance allows for the borrower to obtain a new loan with a lower interest rate and lower monthly payments. It’s important for current homeowners to know that a refinance could mean saving some money every month and as a result, having more money in your pocket as well. As a proud representative of Valley West Mortgage, a company that specializes in refinancing, I’d like to share with you 8 reasons why you should refinance your home loan. Do we all need another reason to refinance?
Reason To Refinance: Cash Money
A Cash out refinance is the kind of refinance that will allow the borrower to receive some money for the equity (or the value) of their home. This kind of refinance will allow you to obtain a higher loan amount than what you already owe, and in turn you will get difference for the two loans in cash. For example, if the total cost of your home is $400,000 and you’ve already paid $100,000 on the loan, then you’ve still got $300,000 to pay off. If by chance you need $50,000 to pay off a debt, put a down payment on a new car, invest in a stock, or embark on some other business venture, you could refinance your current home loan to $350,000. This will include your former balance of $300,000 plus the $50,000 that you wanted. The difference of $50,000 will be given to you in cash.
Reason To Refinance: Lower Interest Rates
If you bought your house at a time when interest rates were high, a refinance could give you the chance to get a lower mortgage rate. This kind of refinance (in most but not all cases) will make your monthly payments lower, meaning you could pocket the money you would have been spending on your mortgage payment.
Reason To Refinance: Save For Something Special
If your daughter’s Sweet 16 is coming up or you want to take family vacation next year, you could refinance for lower mortgage payments, save the extra money and put it towards something you really want.
Reason To Refinance: Change In Household
If you have a spouse who has passed away or maybe an ex-spouse who no longer lives with you, you could refinance the loan into just your name. Or maybe your parents bought you your first home and now that you’ve got a family of your own you want to refinance the payments into your name instead of your parents’ names.
Reason To Refinance: Get Out Of An Adjustable Rate Mortgage (ARM)
An Adjustable Rate Mortgage is a type of loan that allows for your interest rate to go up or down. When rates are low an ARM could be phenomenal for your finances, but when rates rise and Arm can be financially draining. A refinance will give you the opportunity to change your mortgage to a fixed rate mortgage, meaning your payments will not fluctuate with rates.
Reason To Refinance: Change Your Bank
If you originally took out your mortgage loan will a small state bank or credit union and you are moving to a state where this bank doesn’t do business, you could refinance your home loan with a new bank that is closer to you.
Reason To Refinance: Shorten The Life Of Your Loan
Although refinancing to a higher mortgage payment won’t save you money right away, it could save you money in the long run. If you refinance and change your loan term from a 30 year fixed mortgage to a 15 year, the amount of interest you would have paid at the end of your 15 year loan will be significantly less than what you would have paid had the life of your loan been longer.
Reason To Refinance: Credit Card Debt
Thousands of Americans are spoiled by the luxury of credit cards. We can spend now and pay later. The problem occurs when we get a little too credit happy and we lose control. Drowning in credit card debt is not a way to live your life. The constant letters and phone calls from bill collectors can be agonizing. Refinancing on your home loan can provide you with a way to pay on credit card debt.
WHITNEY RUSH, VALLEY WEST MORTGAGE
Escrow Account Information You May Not Know
One of the terms that is often used in the mortgage business, especially during the closing of a mortgage loan is “Escrows” or “Escrow Account”. An escrow account, sometimes called an impound account, allows you to pay the homeowners insurance and property taxes on your home. It’s important that your taxes are paid on time and in full to the county tax assessor to avoid penalties and tax liens. Essentially, every month the deposit amount for your escrow account will be added to your total mortgage payment. This deposit amount that will go into and build up your escrow account is determined based upon your insurance premium and your annual property taxes. The exact amount will be calculated at the closing of your mortgage loan. You may be wondering, “Why is the deposit for my escrow account added to my mortgage payment by my lender, instead of my lender giving me the freedom to pay it on my own?” The answer to that is simple. It’s for your own protection. Countless homeowners and new homeowners in particular have trouble keeping up with their taxes and insurance. Your lender adds your escrow account payment to your mortgage payment to ensure that every month there is money deposited into the escrow account.
Escrow Accounts Details
Like we discussed earlier, your taxes need to be paid in order to keep away penalties from the county. Your insurance needs to be paid so that in the event of a fire or natural disaster you will have coverage for the repairs. By having money deposited into your escrow account when you make your monthly mortgage payment, you ensure that your escrow account will be padded with cash when it comes time for your taxes and insurance to be paid. Some mortgage banks require that an escrow account be established if you as the borrower have made a down payment of less than 20% of your loan amount. Your escrow account is held by a third party, usually an escrow officer or title agent, so you never have to be concerned with whether or not your payment will be applied to correct account. Your escrow officer will handle all of the payments and paperwork for you.
We went over a lot in this article, so let’s review.
- Your escrow account is (metaphorically) a tank or a safe. When you make your monthly mortgage payment, a portion of it is taken out and put into your escrow account.
- The money in your escrow account is then used to pay your property taxes and homeowners insurance.
- Your escrow account is usually set up by your real estate agent or your mortgage lender.
- Having money in your escrow account is important for you as the borrower to keep away fines and delinquent tax fees
FHA BRINGS IN THE NEW YEAR WITH MIP CUTS FOR BORROWERS!
FHA BRINGS IN THE NEW YEAR WITH MIP CUTS FOR BORROWERS!
The Federal Housing Administration, also known as the FHA, has decided to bless borrowers this year by cutting mortgage insurance premiums. Who is the Federal Housing Administration? The Federal Housing Administration, simply called the FHA, is the government body that sets standards for the processing of mortgage loans. Most notably, the FHA insures loans made by banks that have been FHA approved. The Mutual Mortgage Insurance Fund created and backed by the FHA has grown exponentially in the past four years under the Obama Administration. This means that the FHA now has the flex room it needs to provide an opportunity for savings for deserving and responsible borrowers.
What does cutting Mortgage Insurance Premiums mean for our borrowers?
The cut in MIP (Mortgage Insurance Premiums) will apply to FHA loans with a closing or disbursement date on or after January 27, 2017. The FHA cut in Mortgage Insurance Premiums is going to do wonders for the borrowers who have to deal with this new environment of rising interest rates. The FHA is predicting that homeowners will be able to save an average of $500 per year. The cut in Mortgage Insurance Premiums means that the cost of housing will decrease and the opportunity for mortgage credit availability will meaningfully expand. In a nutshell, more borrowers will have the opportunity to take out FHA loans because the cost of obtaining an FHA loan is being reduced.
What does cutting Mortgage Insurance Premiums mean for Valley West Mortgage?
We love originating loans for our borrowers at Valley West Mortgage. We (as your lender) bear risk every time we lend money to homeowners. To offset that risk, borrowers pay a Mortgage Insurance Premium at closing as well as an annual mortgage insurance premium that is a small percentage of the loan amount. That premium paid by the borrower then goes toward the Mutual Mortgage Insurance Fund, an account that will pay back the lender if the mortgager falls on hard times and defaults on their loan. Mortgage Insurance Premiums being cut by the FHA means that we will be able to originate even more FHA loans for our borrowers because the required premium at closing will be of a smaller amount than it has been in the past.
The Federal Housing Administration or FHA, charges a small percentage of your loan amount to insure your loan against a default. This small percentage that is paid once at closing, and once annually is called your Mortgage Insurance Premium or MIP. The MIP is a part of the cost of your loan. When the cost of the mortgage insurance premium is cut, it allows more borrowers to meet the debt to income ratio that is required to take out an FHA loan. Borrowers that may not have been eligible to meet the standards before now have a chance to enter into the homeowners world. Lenders for whom business may have been slow as a result of rising interest rates will now be happily overflowed with business from borrowers who are looking to take advantage of this remarkable opportunity.
When doing your research, always use great sources! Check out the sources for this article below.
- WHITNEY RUSH, VALLEY WEST MORTGAGE
Private Mortgage Insurance is Temporary. Here's Why.
Home buyers who can’t put at least twenty percent (20%) down usually have to carry private mortgage insurance, often an expensive proposition. One good thing about the insurance, though, is that it doesn’t last forever. Private mortgage insurance protects the lender in the event that a borrower stops making payments before building up much equity in the property. A borrower who diligently pays down a loan, eventually crossing that twenty percent (20%) equity threshold, is no longer considered a big risk, and can expect to be rewarded with cancellation of this requirement. Under the Homeowners Protection Act of 1998, lenders must terminate the insurance after a certain point, something that hadn’t been done consistently before then. The act set the termination date as the point at which the principal balance on the loan is scheduled to reach 78 percent of the original value of the home.
In other words, if you buy a home for $100,000 and put ten percent (10%) down, your starting loan balance is $90,000. Once you have paid enough toward principal that the balance reaches $78,000, or twenty percent (20%), the insurance policy should be automatically cancelled.
A compliance bulletin issued earlier this month by the Consumer Financial Protection Bureau reminded lenders that automatic insurance cancellation is required even if the value of the home has declined from the original value (in other words, the sales price).
The law also creates a way to seek earlier cancellation.
The cancellation rules do not apply to the low-down payment loans backed by the Federal Housing Administration as borrowers must pay insurance for as long as they have an FHA loan if the loan was acquired after June of 2013.
Read The Full New York Times Article Posted August 30th, 2015
Social media credit approval is on the way
Social Media plays a huge part in our day to day activities. From staying connected with friends to finding an activity on a Saturday night. With the popularity of Facebook growing every single day, it's no surprise that the Social Media giant is finding new ways to monetize their site in order to generate an annual revenue. Filing a patent is one of the ways the company has to earn additional capital. Social media credit approval
According to an article on The Next Web, On August 4th, 2015 Facebook filed a social media patent that could help filter spam emails and offensive content, improve searches and allow lenders to use your social habits to determine a credit approval. We are already use to the idea of making social media tool more adaptive to daily use, but allowing lenders to use your social media accounts to determine a social media credit approval is absolutely terrifying.
Social media credit approval
The patent filed by Facebook is fairly simple to understand. Lenders would have direct access to your friends list and they would factor in all of your friends credit scores to determine an average credit rating that could factor into your social media credit approval. There are already a huge number of determining factors that play into the credit approval process. Now Facebook wants to make their way into this process. This has the potential to deny millions of Americans the chance to purchase their dream home.
We mentioned in a previous blog post that less than 50% of the American population is saving less than 5% of their monthly income. What would a social media credit approval process do to that statistic? Probably cause that number to drop down to 2.5%.
Facebook hasn’t made it clear how this patent will be used and there are laws in place that determine the criteria lenders can use when deciding your creditworthiness. However, if this social media credit approval process is added into the loan process, it could ruin the way we use social media every day. SO we have to ask, is Facebook trying to make the world a better place, as they have claimed in the past, or are they just trying to make a quick profit for the next quarterly report?
Tiny House are trending right now. Here's why.
Did you know that there exists a whole sub-culture of people who live in tiny houses? I don’t mean tiny like one bedroom, one bathroom. I mean tiny as in about 400 square feet, total. When I learned about this new and unique form of living I thought, why would a person want to live in such a small space? According to TheTinyLife.com, tiny houses focus on smaller spaces and simplified living. Their research shows that there is a large percentage (76% to be exact) of Americans who are living paycheck to paycheck because a large portion of their salary goes toward paying their mortgage. Those who live the “Tiny Life”, save more money monthly as well as annually and they pay off their mortgages much quicker. Let’s look at some of the facts presented to us by the Tiny Life people:
- 78% of tiny house people own their home, compared to the 65% of homeowners who have traditional houses.
- The average cost to build a tiny home is approximately $23,000. Compare that to the estimated $272,000 cost of the standard sized American home.
- Because of the small spacing of a tiny home, heating and cooling costs are significantly lower than the heating and cooling costs of a standard home.
Tiny House Means Savings
Think of the savings! The tiny house crusade is fairly new but it is quickly receiving the favor of Americans. There is a growing number of websites, blogs, news articles, and even television shows that have information on how to start building and/or looking for a tiny home. Besides the obvious financial factors, there are lots of beneficial aspects for people who are looking into purchasing or building tiny homes. Millennials for example are investing in these tiny homes because a lot of them have student loan debt from here to Timbuktu. The stress of repaying student loans can be lessened when your home expenses aren’t buried so deep into your pockets. Single men and women are also an ideal audience for the tiny house market because many single parties find that there isn’t a relevant need for much space for someone with no children and no spouse. Seniors benefit from tiny homes for similar reasons; with an empty nest and no true need for the extra space, they can downsize to a tiny home.
The financial and liberating benefits that come from downsizing make tiny homes worth the transition. Even if a tiny house isn’t quite the house for you, it’s a trending topic for those who are interested and it’s a wonderfully new idea for those who choose to take part.
When you begin your new mortgage, you’re likely to hear about escrow accounts, homeowner’s insurance premiums and property taxes, but did you know that they can be some of the most difficult portions of loan servicing? To prevent complications down the road and make payment simpler for new homeowners, escrow accounts are often required by loan providers to cover insurance premiums and tax costs for your new property. These accounts are in place to hold your estimated monthly dues until their annual collection, and the additional monthly expenses are typically added to your mortgage payment for a simple, one payment solution to the costs of your property. While it sounds simple, complications can arise as a result of fluctuating costs and misguided estimates, so knowing the ins-and-outs of escrow calculation is a necessity of any successful mortgage. Let’s take a closer look at the individual portions that amount to your escrow account, as well as possible pitfalls to keep in mind while searching for your dream home.
Mortgage Escrow Account Benefits
The first portion of your escrow fund is meant to cover property tax costs, which are due once per year and can change depending on the assessed value of your home.
Property tax payments are based on the assessed value of your new home. Since a new value assessment is typically performed a year after a home is purchased or constructed, an updated appraisal could lead to a major boost in regard to your tax obligations. Discovering the true costs associated with property taxes can be difficult, and, depending on the time of year in which you purchase your new home, the costs could put a major dent into your down payment and relocating funds. While an escrow account estimates costs to make the transition easier, be mindful of the upcoming reappraisal to avoid a shock when entering your second year of homeownership. Contacting the county property appraiser and tax collector could be a worthy endeavor to get a better estimate of the tax bills which your new home will present in the upcoming future.
With property tax values fluctuating based on home value, escrow account estimations can sometimes leave homeowners with additional funds due when tax time rolls around.
Many new homebuyers overlook the specifics of escrow accounts, which can present issues regarding annual tax bills, according to The Street. For example, if your new home appraisal calls for a $200 monthly boost to your mortgage payments, your monthly installments could see an even larger jump. Since payments are estimated for the year, you’ll also have costs for the current year to consider. Suddenly, your escrow account needs are raised $400 per month, and your housing budget is stretched to its limit. While savings or deferment options could help you cover the costs more effectively, it is vital to consider the importance of property tax assessments on escrow accounts when deciding upon a housing budget.
Homeowner’s insurance premiums are also covered in annual payments, so the estimated costs are collected and placed into your escrow account each month to keep your property insured against catastrophe.
Insurance premiums are the other portion of your escrow account. Luckily, those costs are more easily estimated in most cases. Depending on the location of your new property, additional policies could be required to cover natural disasters including hurricanes, earthquakes and flooding, so check with your lender and real estate professional when determining a proper budget for your housing search. Similar to property tax increases, however, a boost in insurance premiums can lead to premium increases for multiple years being due simultaneously. Careful planning and adequate savings are necessary to prepare for enlarged payment obligations regarding your mortgage.
Foregoing a Mortgage Escrow Account
If you prefer to avoid escrow accounts and have a dedication to savings, mortgages without escrow accounts could net you a financial gain through safe investment throughout the year.
According to BankRate, avoiding escrow accounts and investing your annual payments can be a worthwhile option for some additional income. While the same risks of premium increases are present, saving the money while investing in low-risk money market accounts and certificates of deposit can provide a noticeable increase in funds if your dedication to monthly saving is maintained. Just remember, by forgoing an escrow account, the responsibility for property tax payments and homeowner’s insurance premiums is in your hands, which can be a bit of an inconvenience when separate tax bills must be paid individually. To find out more about escrow accounts, depend on the knowledge of your real estate professional and mortgage lender to find the perfect scenario for your needs.
More about the author:
Cleo D. is a writer whose interests include homes for sale in Georgetown and the Austin area, stock market trends and snowboarding.