Tag Archives: Mortgage

3 Mortgage Mistakes You Can’t Afford To Make

Mortgage loan agreement with house key chain and key on topA home is not something you buy every day, and it is one of the most expensive purchases you will ever make. That is why you should play it smart when purchasing your home. Before diving into the world of housing financing, you ought to do some research so that you do not fall for these house loan mistakes.

1. Assuming your credit score

An excellent credit rating ensures that you qualify for attractive rates. It proves to the lender that you can afford to repay your Salt Lake City home’s mortgage. Having poor credit might not only cause your loan to be denied, but it might also mean paying high interest rates. When you want to get a house loan, start working on your credit rating to ensure that it is in good standing by the time you start shopping for the loan.

2. Making yourself house-poor

If you commit a large part of your monthly income to house-related expenses, you might be left with too little or no money for other expenses. Make sure that your mortgage payments are less than 28% of your pretax earnings. Spending more than you can afford is be the biggest mistake a homeowner can make.

3. Being unrealistic about your financial capacity

It’s easy to pay more attention to the interest rate instead of the loan type. A 15-year fixed mortgage can have a lower interest rate than a 30-year fixed mortgage, but can you afford the premiums for the 15-year loan? The same applies to a short-term adjustable loan. Although the interest is initially low, the rates might fluctuate significantly. Never go for an option that will over strain your finances.

Purchasing a house for the first time can be daunting, especially when it involves you getting a house loan. Make sure you avoid these mistakes and find help if you are stuck.

Available Options for Mortgage Repayment

man showing a mortgage contractApplying for a mortgage is the ideal way to realize your dream of homeownership. There are many choices you will make when getting a mortgage. Among the most important decisions is your interest rate. This affects your overall loan amount, and hence you should be diligent when selecting one.

After getting the best mortgage rate your Utah lender has to offer, you will get several options for your repayment. This encompasses your interest and principal.

Here are the typical repayment options you will select from.

Interest-Only Repayment

With this repayment plan, you will only be required to pay interest on your loan amount monthly. This assures you of low monthly mortgage payments. Your principal, however, remains unchanged. Interest-only repayment is an ideal choice if you are expecting a significant amount of money in the future.

Capital Repayment

After finishing your interest repayments, you will be required to pay your loan capital. Your lender will need to review your repayment strategy to ensure you have money at the end of your mortgage term to make this payment.

Common strategies for mortgage repayment include investments or savings as well as pensions and property investments. You should keep track of your repayment plan to ensure you have enough money to repay the capital.

Combined Interest-Only and Part-Repayment

This repayment option includes paying your interest as well as a small amount of your loan principal. At the end of your mortgage term, you will have a small amount of principal to clear.

Though the monthly repayments for this option might be high, it is convenient if you expect no large payout in future and have no investment plans.

Though these are the typical repayment option in the mortgage sector, terms vary depending on your lender. You can, however, negotiate the best conditions for your situation. With a good interest rate, making your monthly payments regardless of your repayment option will be hassle-free.

Avoid These Mistakes When Buying Your Dream Home Through Mortgage

Couple discussing with real estate agentWhile owning a house ranks high on the to-do list of many people, realizing this dream can prove to be tricky. In fact, more than 38 million American households struggle to pay off their mortgage.

Most of these families took on a home loan that was way above their financial capabilities, and now they’re suffering the consequences. To avoid falling into this category, Primary Residential Mortgage, Inc. and other reputable mortgage companies in Oregon noted that you need to take a few proactive measures. Here are some of them:

Don’t get too much house

It’s common for first-time homebuyers to fall in love with a house that’s beyond their price range. Don’t make this mistake, though, as it will leave you vulnerable to foreclosure. For starters, you have to sign up for a bigger loan that you can afford, which gives rise to a series of misfortunes. These could be monthly repayments greater than the recommended 30% or stretching the loan for many years, or both. A long repayment period might seem like a good deal until you factor in the accrued interest.

Don’t settle for an expensive loan

Surprisingly, you have a say about the cost of your home loan. Well, not directly, but your creditworthiness determines the interest rate. Raising a 20% deposit, having a credit score above 700, and a credit utilization ratio of below 30% can make you get friendly rates. The same case applies if you don’t let any of your bills go to collections.

In addition to the accruing interest, unpaid bills lower your credit score and ruin your financial history. Lenders dig into your financial background to determine how much of a risk you pose to them. If you come off as a risky client, they peg you to a higher interest rate bracket.

Failing to prepare adequately when buying a house throws your finances into shambles and could lead you to lose your house. However, with the right preparation, you can ensure a smooth home owning process and avoid foreclosure.

Mortgage Terms in Layman’s Terms: What Exactly is Debt to Income Ratio?

Mortgage Loan AgreementDebt to Income ratio (DTI) is precisely what it sounds like. It’s how much debt you owe in comparison to your income. Lenders use this ratio to figure out whether a borrower is capable of maintaining mortgage monthly payments. They use DTI for purchase loans, including refinancing, as well.

DTI could likewise help you determine how much you can afford for a house deposit. Take note that DTI doesn’t measure a person’s willingness to pay, only the potential economic burden of a monthly mortgage payment.

Debt to Income Ratio Explained

Every single working person knows this scenario all too well:

Each month you try to figure out how much money you could keep and how much money you have to pay for all sorts of bills. You have regular bills for electricity and water, perhaps for your Internet and mobile phone, as well transportation costs and groceries. In addition, there’s money you need to pay off your debts — your mortgage, credit card, personal loan, or student loans.

Do you feel that sometimes all your available cash goes into repaying your debts? This means that your debt to income ratio might be too high for you to handle, says money experts and mortgage brokers in Sandy. Put simply, your DTI is a specific number expressing the link between your overall debts each month and your monthly gross income.

How Can You Calculate Your DTI

To calculate, you divide your total monthly payments for all your debt by your monthly gross income. For example, let’s say you put in $400 monthly for student loans and $1,600 monthly on your home loan. This means that you pay off $2,000 for your debts monthly. Your monthly gross income is the amount of your earnings before deductions and taxes — let’s say it’s at $6,000. This means that your debt to income ratio is 33%.

Your DTI is a critical measure of a borrower’s financial security. You increase your chances of securing a mortgage with a better rate if you have a low debt to income ratio. Likewise, a low DTI would allow you to take more financial risks and deal with them better.

Redeem Your Mortgage: 4 Things You Can Do

MortgageOne of the best feelings in the world is knowing that your mortgage has already been paid in full. So why not redeem your mortgage early on?

A redeemed mortgage is a mortgage that has been fully paid by the borrower. This means the end of monthly payments and the start of full control over your property. And yes, there are ways to do this without waiting for 25 years or so.

Ways to redeem your mortgage

  1. Pay more

Had your bonus for the month? Use it to pay your mortgage. Paying more than the usual is one of the most effective means to redeem your mortgage early on. Easier said than done as you need to manage your monthly expenses, but it is definitely doable.

  1. Pay more often

Instead of paying once a month, paying it bi-monthly would make you finish paying your mortgage at a shorter amount of time. This also means lesser interest rates. Discuss with a Salt Lake City mortgage company on how you would be able to avail this option.

  1. Refinance to lower interest mortgage

Technically, shifting to a lower interest rate would mean paying less for a longer amount of time. Do refinance to a lower interest rate mortgage but keep your payments the same. If the minimum is $700/month in your previous mortgage and the minimum is $500/month when you refinance, still stick with your $700/month payment.

  1. Refinance to a shorter period mortgage

Refinancing to a shorter period would mean lower interest rates and shorter payment period but higher monthly payments. If your monthly expenses allow you to pay more than the usual, then you may opt to choose this method.

Overall, discipline is the key to redeeming your mortgage earlier. Tightening your financial belts for a few months is definitely worth it, if it means being debt free earlier.

Questions to Ask When Applying for an Armed Forces Mortgage Loan

Mortgage LoanGetting a mortgage loan is one of the most convenient ways of securing a home for your family. There are direct mortgage lenders who offer convenient armed forces loans and VA loans at competitive interest rates. Consider a number of factors before making your final decision to avert any regrets down the road.

What is the interest rate?

According to Direct Mortgage Loans, most armed forces loans have shorter processing time to provide servicemen with the money they need. Before anything, the lender should provide you with accurate information about the interest rate and fees. The document you will receive should indicate the annual percentage rate (APR), points, and all other charges when repaying the loan.

What is the closing cost?

In most cases, the loan borrowers pay a closing fee for the services offered by the lender and the real estate company involved in the agreement. Being aware of these costs will help you make the necessary financial plans. The lender should provide a written estimate of the costs within three business days after you submit your loan application.

Can I lock the interest rate?

Fluctuations in the real estate market have a direct impact on interest rates. Locking the interest rate will cushion you from getting a higher rate between the time you apply and complete repaying the loan. Fees may apply, so inquire about them to make a conclusive decision.

Is there a prepayment penalty?

Some lenders impose a penalty to clients who prepay their loans. Take the time to inquire about the penalty specifics to make the necessary adjustment on your repayment plan.

The answers provided to these questions will help you to know if taking the armed forces loan is worth it. Be sure to read and understand all the terms and conditions to avoid any disagreements and inconveniences later on.