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Loan Estimate

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After applying for a mortgage, you will receive a loan estimate. Lenders must give you a loan estimate within three days of receiving your application.

The loan estimate provides details about the loan that you are requesting. This form was created in 2015.

The information you get with a loan estimate may include the following: Monthly payments, estimated interest rates and total closing costs.

Information about insurance and taxes will be provided. You can also find out how interest rates and payments could change at any given time. You will also be informed about the special features of your loan through this form. It will inform you if your loan has a prepayment penalty. If applicable, the loan estimate will also include negative amortization. Even if your payments are on time, negative amortization can increase your mortgage loan balance.

The description of your loan product will include the negative amortization option.

As the title suggests, this document contains preliminary information that is not final. Although it is an estimate, it can help determine the loan you should apply for and make a commitment to.

Buyers will be provided with a loan estimate that includes prepaid interest, third-party fees and closing costs. The buyer will also receive a detailed estimate payment to get a full picture of the transaction’s costs. It is easy to compare and see the costs of different lenders as all will use the same document.

Lenders cannot hide fees with loan estimates, which can also be a useful comparison tool.

Lenders are required to give you a loan estimate within three business days after you submit your mortgage application. Before they can provide you with a loan estimate, lenders will need some information, such as your legal name, social security number and proof of income. They also require proof of desired property address, price, and loan amount.

You’ll find the following information in the first page and section of a loan estimate:

  • * The term of your loan is usually 30 years. However, other terms may be possible.
    * Product refers to the type of mortgage that you are applying for such as a fixed-rate mortgage or an adjustable-rate mortgage.
    * What loan type is it? For example, is it a conventional or VA loan? It could be an FHA loan or VA loan.
    * A rate lock is when your lender locks down the interest rate on your mortgage and the expiration date.

Information is provided in the second section.

  • * How much you can borrow and how it can be increased
    * The interest rate is a percentage and can be increased.
    * Monthly principal and interest is the monthly mortgage payment, excluding homeowners’ insurance and property taxes.
    * A prepayment penalty is a fee you may have to pay if your loan was not repaid by the due date or you made an additional payment.
    * If there is a balloon payment. This is a lump sum that you must pay at the end your loan term

Information is included in the third and fourth sections.

  • * Payment calculation: Breaking down your monthly mortgage payment, principal and interest, private Mortgage Insurance Premiums, if applicable, as well as escrow amounts
    * Monthly estimated payment
    * Estimated taxes and insurance.
    * Mortgage closing costs estimates
    * Cash to close is the estimated cash amount, which includes closing costs and any other charges you may have upfront

The second page of a loan estimation includes three major elements: loan costs, other charges, and cash to close.

The second page should focus on the origination fees and any fees that you will be charged for items you cannot shop for. These charges vary from one lender to the next, so it is important to compare them. Other charges are not subject to much variation between lenders. You can search for the services needed to close a mortgage. This includes how much they cost. You can’t shop services such as an appraisal or credit check.

The name of the loan officer or lender will be included on page three. This information is useful for comparing loan estimates. The first will show you how much of your loan principal your loan will pay off over the first five year. It’ll also show your annual percentage rate (APR), and total interest percentage.

It’s a great time to review your loan estimate and ask any questions that you may have.

 

Original Blog: https://realtytimes.com/archives/item/1045883-what-is-a-loan-estimate?rtmpage=

USDA Loans Aren’t Just For Farmers

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You wouldn’t be alone in thinking USDA loans were only for rural farmers.

The program is accessible through the United States Department of Agricultural. The Rural Development (RD), which was initially called the Farmer’s Home Administration, administers the program.

Russell Hood, an originator of the Meriden-based company Planet Home Lending, stated that about half of those looking for a mortgage through Planet Home Lending don’t know anything about USDA loans.

It is worth taking the time to find out if you are eligible. You might be surprised at who qualifies. USDA loans can offer many advantages over other programs if you’re eligible.

Most people are aware that USDA mortgages are intended for rural residents. Many people think they won’t be eligible because they don’t consider themselves rural residents.

The definition of “rural” can change between different government programs. For USDA loans, however, “rural” can be a surprisingly low standard. It refers to any town, village or city with fewer then 20,000 inhabitants that isn’t located in a Metropolitan Statistical Area. An MSA is defined by the Census Bureau as a group of counties that surround a city with more than 50,000 inhabitants.

There is also some flexibility for fast-growing areas to remain eligible for “rural” status for a period beyond these points.

This means that 97% of America’s land mass is considered “rural” to qualify for a USDA loan. According to a report, 34% of Americans live in an area eligible. Even suburbs outside of major cities like the western part of Olympia, Washington’s capital, and parts Long Island, New York, are eligible.

USDA loans can also be very useful in helping people who otherwise wouldn’t be able to purchase a home. To be eligible for a USDA loan you must be not eligible for a conventional PMI free mortgage. You’d need to pay a minimum of 20% down payment in order to achieve this, which many people don’t find realistic.

One of the greatest benefits of USDA loans is the fact that you don’t have to make any down payments.

If you are eligible, one final reason to consider USDA loans is that they don’t have as much impact on your finances than other government-sponsored mortgage programs. It’s often a better option if the income and property meet the USDA standards.

The upfront funding fee for most government-backed mortgages is usually 1%. This is lower than the 1.4% to 3.6% charge for VA loans, and 1.75% for FHA loan. FHA loans have an additional fee of 0.45% to 1.5%.

USDA loans are often offered at lower rates. This is partly due to the way RD works together with lenders to provide USDA Guaranteed loans. This is a bad term as it does not guarantee you will get a loan. The USDA “guarantees” up to 90% loan amount. In other words, if you default on your loan, the USDA will reimburse your lender up to 90%.

Although this guarantee does not directly benefit you, it can make things more affordable for you. Lenders are almost guaranteed to recoup some costs in one way or another. This means they can pass lower rates on to you. That could result in significantly lower monthly payment with USDA loans.

USDA Direct loans are cheaper than conventional mortgages. The fixed rates for low-income and very low-income buyers were set at 3.25% as of October 2022. This is compared to 6.65% for a conventional loan. The average USDA loan cost $178,400 in 2021. This is $380 less than what you would pay if you borrowed conventionally.

 

Original Blog: https://finance.yahoo.com/news/zero-down-usda-mortgages-arent-100000653.html?guccounter=1&guce_referrer=aHR0cHM6Ly93cmVuZXdzLmNvbS8&guce_referrer_sig=AQAAAEMfd_s6cf9cnjRg0x12RmnucbOROcR906XA3ztVq5J9aer0l4bSUkxUFB1PFtF6tNXBmMtHZDwWjWCjGfjlYJZKBRyn1jXmUAqGA9qW95XW9lRqq1wR2LFGKnvTYJ2r3MZWVV0zD9OAkyxJbok30FkWB5tB8zeonGDjhM1ifUgf

 

How Lenders View and Treat Financial Gifts

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You might consider asking your parents for some help in buying your first home. Lucky you! The biggest hurdle for most homebuyers is securing the funds to pay the down payment and cover closing costs. However, a little financial help can go a long ways in obtaining a financial boost. It is important to understand how lenders treat financial gifts before you apply for a loan. What’s important?

Lenders will need to verify that the financial gift is legitimate. The lender will match what appears on your paycheck slips with deposits verification from your bank statements if you submit your bank statements. Deposits should appear on the dates you receive your pay, i.e. if you are paid on the 15th and 1st. If you receive a financial gift, however, the money will appear in your account. Lenders will need to know the source of this irregular deposit.

Lenders want you to be sure that the money in your bank accounts is not from a loan. You will have to repay the loan in either monthly installments or one lump sum. This can impact your ability to repay your mortgage, and at the minimum, increase your debt-to-income ratios.

Family members, qualified non-profits, and life partners are all eligible sources for gift funds. No matter what source you may be, you will need to submit a letter from the donor acknowledging that the funds were a financial gift. You are not expected or required to repay them. You may decide to repay the donor in full or in part if you so choose.

You will need to explain where the funds came from when you receive the gift. Lenders have the right of verifying that the donor is able to pay the gift. They can also expect to be paid back. The donor’s source of gift funds will be noted in the gift letter. Simple ‘from our bank’ will suffice.

If you are hoping to get financial assistance from qualified sources, it is important to know that it is not as easy as saying “it came from my bank account.” The funds will be used for financing the purchase of your new house. You’ll need proof that the funds are yours and not to be repaid.

 

Original blog: https://realtytimes.com/archives/item/1045762-understanding-financial-gifts?rtmpage=

The Basics of a Barndominum

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People are looking for flexible, creative living spaces. A barndominium (also known as a barndo) is one option. A barndo can be used as a living space, which allows for living, working, and many other activities.

Fixer Upper made barndos a hit years ago. Fixer Upper was a hit HGTV show. The hosts Chip and Joanna Gaines transformed a barn into a home, generating growing interest.

What is it about these home designs that are so appealing to certain people?

A barndominium, a metal structure with interior living spaces, is an example of a barn. These homes are low-maintenance, energy-efficient, and relatively affordable. Barndominums are sometimes described as a warehouse with charm and features like front porches.

Barndos, apart from Fixer Upper, are very popular because people are seeking more affordable options and living arrangements. They are both economical and versatile in function and design.

The steel buildings are spacious and offer plenty of living space. You have the basics like electricity and plumbing. But there are also more luxurious features such as open-concept floorplans and vaulted ceilings.

You can add a workspace to any design, from a warehouse space to a larger office or workshop area.

Barndos are made mostly from steel and their siding is usually made from sheet metal. They look more like a barn or storage building. The living area is designed around an open area. Modern design is often used for the open space.

Barndominiums can be constructed from steel or solid wood timbers. They are as safe as traditional homes, if they’re not, but still offer the same safety. It offers protection from severe weather, water damage and general wear and tear.

A barndominium is typically built in three phases. First, a concrete slab foundation must be poured. Next, the metal frame needs to be built. Finally, the interior living space is created.

While some homeowners prefer to do the majority of the work themselves, others might hire a professional to pour it. Homeowners often hire professionals to insulate their metal frames, even if they do some of the construction.

Conversions and new builds can take six months. If you need to speed up the process, you may consider purchasing a prefabricated barrndominum that comes with all of the available kits. A kit is convenient, although you can’t customize it as much.

These kits include everything you need to build the shell of your house. While some kits are simple and include only the essential components, others have customizations, overhangs and wrap-around porches.

In most cases, a barndominium will be less expensive than a traditional home. A traditional home costs around $145 per square foot. Barndominiums can cost as little as $70-$80 per square foot.

A loan for a barndo may be more difficult than a mortgage on a home. This is because lenders often view these homes as barns, rather than primary residences. Because there aren’t comparable sales, it makes appraisals more complicated and difficult. Although it is more difficult, financing this type of home is possible.

A barndominium has many benefits, including:

  • These homes are affordable and offer good value per square footage, especially for larger families. You may pay less in taxes and insurance than a traditional home.
  • They are durable and last a long time because they have metal roofing and siding. Barndominiums resist termites, rot and mildew, as well as mold.
  • There are almost limitless options for how to lay out the space.

There are some downsides to a barndominium.

The financing issue was first. They can also be difficult to resell. Bardonminiums may be more popular than ever, but they are still not very appealing to a large number of people. It is difficult to resell these floorplans because they are often very personal to the owners.

Before you decide to build a barndominium, make sure you check the local zoning laws. Because of regulations, they are often allowed in cities. They are less common in rural areas where building codes can be more relaxed.

 

Original Blog: https://realtytimes.com/archives/item/1045714-what-is-a-barndominium?rtmpage=

The Most Volatile Mortgage Rates in More Than Three Decades are Causing Struggle with Homebuyers

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A typical house hunter who began looking in July and closed on their home in September saw their potential mortgage rates fluctuate by approximately half a percentage point every four week, according to a new report of Redfin ( Redfin.com), a technology-powered realty brokerage. This is the most volatile period in three months since 1987 when mortgage rates surged after soaring to an all-time high of almost 19% earlier in the decade. The Fed was working to curb severe inflation.

This could be a good deal for a house hunter who is looking to purchase a home worth $500,000:

  • They expected their monthly payment of $3,051 when they began looking in July. This amounts to $1.098million over 30 years, with a 20% downpayment and the 5.7% mortgage interest rate. 435,777 of that total payment is interest.
  • They expected to pay $2,874 per month when they bought their dream home in August. This amounts to $1.035million over 30 years, with a 20% downpayment and a 4.99% mortgage rate. Interest is the largest component of that $372,143 total payment.
  • Their final monthly payment was $3,202 after they had locked in a mortgage rate in September. This amounts to $1.153million over 30 years, with a 20% downpayment and the current 6.29% mortgage interest rate. 490,382 of that total payment is interest.
  • The buyer’s expected total payment fell by $64,000 (5.8%), but then rose by $118,000 (11.4%) between July and August.

Taylor Marr, Redfin’s Deputy Chief Economist, stated that the challenges facing homebuyers today go beyond the declining affordability due to high mortgage rates and high home prices. It is extremely difficult to plan ahead due to the whiplash in mortgage rates that occurs between when homebuyers decide on their budget and when they make an offering.

The Federal Reserve has been increasing interest rates to reduce sky-high inflation, which is why mortgage rates are fluctuating. Last week, the Fed increased interest rates by three quarters of an percentage point to a range between 3% and 3.25%. This was its third major hike in a row. They also predicted that they would reach 4.4% by year’s end. Freddie Mac’s weekly data shows mortgage rates at 6.29%, the highest since 2008. However, a separate daily gauge shows them at 7.08%.

As the Fed tries to reduce inflation, volatility in mortgage rates is likely to continue for the near future. However, mortgage rates should fall within the next 12-18 months if inflation eases, according to Justin Dimler, Redfin’s mortgage company Bay Equity.

Dimler, who is a regional sales manager at Bay Equity Seattle, said that “the good news for those people who can afford to purchase a home” and could refinance to a lower interest rate within a year or so. I advise house hunters who were approved for a loan a few months ago to have their mortgage advisor requalify them. The change in mortgage rates could mean that they are no longer eligible to borrow the same amount.

Refinancing is a possibility for homeowners in the near future, but buyers should be aware of the potential costs.

 

Original Blog:  https://realtytimes.com/real-industry-news-articles/item/1045729-homebuyers-are-grappling-with-the-most-volatile-mortgage-rates-in-over-three-decades?rtmpage=

Can You Purchase a Home with a Home Equity Loan?

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A home equity loan can be used to purchase a house. However, it is not always the best decision. With caveats, home equity can be used to purchase a second or investment property.

A home equity loan allows you to access the equity in your home by taking out a second mortgage. Home equity is the difference between your home’s value and what you owe.

There are two things you should know if you want to use your equity from your home to purchase another property. Is this a purchase of a second house or an investment?

A home equity loan is a great option if you are looking to purchase an investment property.

You can contribute more to your down payment. You can put more towards your down payment with a home equity loan. You will be more competitive in the current market and your monthly payments and interest rates will be lower.

A second property can be more difficult to finance due to the higher down payment requirements. A home equity loan is a better option and can be more affordable.

Home equity loans are secured by collateral which is your home. You will enjoy lower interest rates as a result.

Your home equity could be an asset in wealth building if you are looking to buy an investment property. You should consider the fact that a second house will not bring you income as an investment. This means you will be borrowing money to buy your second home.

There are downsides to using equity to purchase investment properties. You are effectively trading an asset for debt. You are taking the portion of your home you own and then putting it in a loan.

Housing market shifts can make you vulnerable, especially if you have two properties. If something happens in the housing markets, you’re at double your risk. If your property’s value falls, for example, you could owe more on both your home equity loan or your mortgage.

You could lose both your properties if you default on your loan.

It is possible to end up with three mortgages and only two homes. You will need to combine the home equity loan with the loan for your second house.

A downside to consider is that the interest on your home equity loan won’t be tax-deductible due to 2018 tax code changes.

This is the big takeaway: Yes, you can use your home equity to purchase a second home. Sometimes it’s a good option. However, it comes with risks. It’s not always the best decision. You need to carefully consider your particular situation.

 

Original Post: https://realtytimes.com/archives/item/1043687-can-you-use-home-equity-to-buy-another-property?rtmpage=

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