Getting a mortgage for the first time is one of the biggest steps, and it’s one that can cause a lot of confusion. A simple online search will dig up a ton of information, including many common mortgage myths and misconceptions. So how do you separate fact from fiction? Keep reading, and we’ll explore the truth about mortgage loans and what you need to know.

Myth #1: You need a 20% down payment to purchase a home.

While many financial experts recommend putting down a 20% down payment when you purchase a home, is it really necessary? The answer is no. You don’t need that 20% magic number. In some cases, conventional loans will accept as little as 3% down, and some government-backed loans don’t require anything at all.

The 20% recommendation simply exists because of PMI, or private mortgage insurance. PMI is a type of insurance that’s typically tacked on by mortgage lenders if you choose not to put down that amount. It gives your lender a sense of security, protecting them if you were to get behind on your payments. You’ll usually see it added to your monthly mortgage payment amount, although some may ask for a one-time up-front premium paid at closing.

While it’s smart to make sure you’re in a good spot financially to buy a home, you don’t have to fixate on the 20% down payment number if you’re OK with paying PMI.

Myth #2: You have to have perfect credit to qualify for a mortgage.

Another common checklist item before buying a home is to improve your credit score. But does it really need to be squeaky-clean and perfect? Nope! This is just another common mortgage myth.

However, you don’t want to have terrible credit, either. Most mortgage lenders will have a minimum requirement, but this varies depending on the type of loan you take out and who insures the loan. A conventional loan may require a credit score of 620 or higher, for example, while an FHA loan may look for as little as 500. The latter is a specific option for borrowers deemed a higher risk due to low credit scores and little money to put toward a down payment. Keep in mind there may be other requirements to hit; however, as well as the need for PMI, which we covered in the previous section.

Something else to note: changes in the marketplace overall have made it easier to buy a home altogether, with experts reporting marked drops in credit standards and mortgage rates as a way of enticing people to buy.

Myth #3: Debt will ruin your chances of getting a good mortgage.

Debt often goes hand-in-hand with your credit score, so another common mortgage myth is that you should pay off all of your credit cards, student loans, and so on before purchasing your first home. Unfortunately, this isn’t always a realistic option for home buyers; these days, student loan debt is widespread among millennials, mostly, and paying off loans can take years — much longer than you want to wait to become a homeowner. The good news is, debt won’t ruin your chances of locking in a good mortgage rate.

What does matter is your DTI, or debt-to-income ratio. Simply put, how much of your monthly income goes toward debt and recurring expenses? That percentage calculation is what your lender uses to assess your risk. Typically, a DTI of less than 50% makes you an acceptable candidate, even if you have debt as part of those monthly expenses.

While a lender might offer a less-risky buyer a better mortgage rate, it doesn’t mean you’re out of the running. This is why it’s so important to shop around for your mortgage loan! Working with a mortgage broker instead of a bank, for example, gives you access to a wide variety of lenders, allowing you to find the right one for your individual needs.

Myth #4: Applying for a mortgage will affect your credit.

Your credit score is quite a hot topic when it comes to mortgages. And it’s no surprise since it’s a number that follows you around (to either your benefit or detriment) your entire life.

But we need to address another common mortgage myth here when it comes to the homebuying process. While we always recommend applying for pre-qualification before you even step foot in your first open house, many people worry that this step will ding their credit score — especially if you’re shopping around, as we suggested above. Good news: you’re in the clear.

About 10% of your FICO score comes from recent credit inquiries. While applying for a pre-approval will temporarily affect your score, you probably won’t even notice the hit until after you’ve completed your full pre-approval, which is typically done once you’re ready to make an offer.

Myth #5: It’s near impossible to get a loan if you’re self-employed.

Let’s go back to your DTI ratio now. What happens if you don’t have a steady income month over month? With so many people taking advantage of the gig economy, this is becoming much more common these days.

Here’s the gist: if you’re self-employed, the process of securing a mortgage is a little different… but certainly not impossible. At the end of the day, the lender is still looking at how much you earn vs. how much you spend. To determine this without a W2, they’ll typically ask for other types of documentation, such as:

• Income tax returns for the two most recent tax years
• Business income tax returns, if you’re operating as a corporation or partnership
• Profit and loss statements
• A copy of your business license

Keep in mind that you may be seen as a slightly more risky loan candidate, so the mortgage myths we listed above — namely, having a solid credit score and a 20% down payment — may be more of a reality for you. Again, shopping around and working with a well-established mortgage broker can help you find the right lender for your situation.

Myth #6: Once you have a mortgage loan, you’re locked in.

So you’ve secured your mortgage loan, and maybe you’re a few years into homeownership. Congrats! But what happens if your financial situation changes? Perhaps you lose your job, and you’re looking for ways to lower your monthly expenses. Or, maybe you’ve worked your way up the corporate ladder and have the means to pay off your loan early.

In most cases, you’re never “locked in” to your mortgage, so these are both options that may be available to you.

With interest rates incredibly low right now, refinancing is a popular option that can lower your monthly payments OR give you some extra cash to play with if you choose a cash-out refinance.

As for paying off your loan early, check your paperwork first; some lenders include “prepayment penalties” inside the terms of your loan, so make sure you understand any stipulations or rules in place.

Learn How Mortgage Goat Can Help

We hope that addressing the six mortgage myths above has helped you feel more confident and empowered during the home buying process. And when you’re ready to take the next step on a pre-qualification or pre-approval, we’re here to help!

We make connecting with a mortgage broker easier than ever, so you can focus on what matters: finding that dream home. Contact us today to get started!

The post 6 Top Mortgage Myths Debunked appeared first on Mortgage Goat California.

Moreover, this year is the prime time to make a move. The COVID-19 pandemic has driven mortgage rates even lower, so buying a home in this day and age is now an achievable dream for many.

It’s an excellent time to think outside of the box, as well. If you’re considering buying a foreclosed home, it’s time to get educated. Who is this option right for? What are the pros and cons of buying a foreclosed home? Keep reading as we explore everything you need to know.

Who Should Buy a Foreclosed Home?

Before 2008’s mortgage crisis, buying a foreclosed home wasn’t exactly straightforward. Doing so meant scouring legal filings to find auction information about the homes and going through a lengthy process to finalize the deal. Nowadays, however, the process is pretty similar to buying any other home.

But if it sounds a little nerve-wracking, you’re not alone. Many foreclosed homes are in poor condition, and you might run into a lot of competition from house flippers who do this kind of thing for a living.

But here’s the thing: a foreclosed home can also be an incredible deal. That’s one of the huge “pros” to know when you’re thinking about the pros and cons list.

Buying a foreclosed home could be an amazing opportunity for you if you…

• Have enough cash in your savings for unexpected repairs since the sale will go through “as-is” in some scenarios
• Aren’t afraid of a challenge, or you love doing renovations!
• Understand the value and potential of a good deal on a home — and can stay patient throughout the process

How to Buy a Foreclosed Home

Next, let’s dive into the process of buying a foreclosed home. Although it’s similar to buying a “regular” home, there are a few key differences to point out.

Secure your mortgage pre-approval.

Although some foreclosed homes may require a cash purchase, not all of them do. Before you begin your search, one of the smartest things you can do is get pre-approved for a mortgage, so you’re ready for anything! Keep in mind that part of this exercise should include understanding how much house you can reasonably afford. Even if you’re getting a great deal on a home, make sure it fits into your budget.

Another thing to know is that sometimes there are restrictions on using specialized government loans (such as a VA loan, FHA loan, or USDA loan) for a foreclosed home. If you want to use one of these types of loans, make sure to do your research first, as there are specific housing standards that need to be met. Your inventory may not be as large as those who have been approved for a more conventional loan.

Start Your Search

Next, it’s time to start shopping! Working with an agent — ideally, one who is well-versed in real estate owned (REO) sales — is a good first step, as they’ll have access to the Multiple Listing Service (MLS) and can help you through the process. Other ways of finding foreclosed properties include:

• Using a site like Zillow, filtering results by foreclosure
• Searching bank websites, as some will advertise foreclosed properties in their possession
• Simply driving through neighborhoods and looking for foreclosure signs

Know the Right Questions to Ask

You’ll also want to know the right questions to ask, so you’re ready to move quickly when you see a property that you like. Important questions to ask include:

• Are there any liens on the home that will need to be taken care of?
• Who will you be buying the house from, specifically — i.e., the homeowner, a bank, or through an auction?
• When was the home’s last inspection, and will there be an opportunity for an inspection before closing?
• How long has the home been unoccupied?
• What’s the neighborhood like, and are there other foreclosed homes in the area that might affect this property’s value?

Make Your Offer

Ready to make an offer? Great! This step will vary depending on who owns the home, and an experienced REO agent can help you through the process.

If a bank owns the property, be sure to make a strong offer. Unlike individual homeowners, banks typically set their prices exactly where they need it to recoup their losses, so there isn’t any wiggle room. There may also be a lot of competition for the home, depending on the home’s condition, price, and neighborhood. Including a solid down payment can also help show the lender that you’re a serious buyer.

Complete the Sale

Let’s say your offer has been accepted — congrats! You’ll then go through the steps to finalize your loan and complete the sale. If an inspection is allowed, take full advantage of that before finalizing everything, as that will give you a better idea of what repairs or maintenance might be needed. Our advice? Be prepared to put in some work. Most foreclosed homes require extensive repairs to get up to code, especially if the house has been unoccupied for a while.

Here’s How Mortgage Goat Can Help

Purchasing a home is a fantastic experience, and today it’s more achievable than ever. While buying a foreclosed home isn’t for everyone, the benefits are there for the right buyer. If you do it right, you can end up saving a ton of money in the long-term, with the opportunity to renovate your new home and really make it your own.

Ready to get started? Mortgage Goat is here to help you with step #1 in the process: your mortgage pre-approval! With Mortgage Goat, you’ll get instant loan estimates and the best mortgage rates available, all in three easy steps. Contact us today to get started!

The post What You Should Know About Buying a Foreclosed Home appeared first on Mortgage Goat California.

Nationwide, we’ve seen a hot seller’s market, with sale prices going up and overall inventory remaining low. The good news? Mortgage rates have stayed at an all-time low. So even with the current trends, it’s a great time for buying a new home or refinancing your mortgage.

If you’ve heard about the new and upcoming refinancing fee imposed by the Federal Housing Finance Agency (FHFA), however, you might be wondering how that will affect your plans. Keep reading to learn about what you can expect.

What Is the New Fee, Exactly?

Here’s the gist on the new fee: starting on December 1st of this year, the FHFA will begin imposing a 0.5% refinancing fee on any new refinance mortgage. Known as the Adverse Market Refinance Fee, it was originally supposed to take effect on September 1 — but this was met with a lot of opposition among political leaders, lenders, and consumer interest groups.

As people spoke out about the fee, noting that it would dampen one of the few economic bright spots in our country today, the FHFA postponed the start date to December and added a few exemptions. Under the new guidelines, you can avoid the fee if:

• you lock in your rate prior to December 1,
• your loan amount is below $125,000,
• you’re working with a direct or portfolio lender, or
• you have a jumbo loan or a low-income government-backed mortgage (FHA or VA loans, for example) that doesn’t adhere to typical Fannie Mae or Freddie Mac standards

But, what gives? Why add a refinancing fee for the typical homeowner?

Freddie and Fannie have said the new fee is necessary to protect against risk and losses during a tumultuous economic time, as well as to help pay for various forbearance programs and moratoriums on foreclosure and evictions.

With the average 30-year fixed-rate mortgage lingering around 3% APR since the spring, some argue that the fee makes for an easy target as many homeowners look to lower their monthly mortgage payments via refinancing. Mortgage software giant Ellie Mae reported that refinancing accounted for a whopping 65% of their closed loans in May, compared to a low 32% in May 2019.

How Will the Fee Affect Homeowners?

As a homeowner, there are a few things you should know right off the bat.

First, there is not a requirement for lenders to pass the fee on to their consumers. Meaning, lenders might choose to eat the cost, given the high profit margins they’ve seen as the refinancing applications keep rolling in. Though we can’t say for certain what will happen (and each lender is free to make that decision individually), it’s still a possibility.

If the lender does opt to charge the consumer, there are a few ways they can incorporate it into the loan:

• It can add it into the loan amount
• They might increase your interest rate
• They can include it as part of your closing costs

Of course, this is in addition to the typical fees associated with refinancing, which include application fees, credit check fees, appraisal or home inspection fees, discharge fees, Lenders Mortgage Insurance (LMI), and state registration fees (where applicable). On average, mortgage refinancing fees are around 2% to 6% of your total loan amount.

That being said, there are still plenty of good reasons to refinance, even if you’re hit with the extra fee. With the record-low rates, the impact on your monthly mortgage could still be significant. The average savings is around $300 a month, which is nothing to sneeze at. (Check out this handy calculator from NerdWallet to estimate your savings.) It’s predicted that the fee might reduce those savings by a mere $15 per month.

Why We Still Recommend Refinancing

Knowing this information, should you still move forward with refinancing?

Our answer is a resounding yes.

The potential for monthly savings is the biggest reason why we still recommend refinancing, even if you’re not able to lock in your rate prior to December. Other benefits include the opportunity to repay your loan faster (by switching from a 30-year to a 15-year, if that’s the right situation for you), removal of your mortgage insurance (if applicable), and the ability to extract equity by opting for a cash-out refinance.

Here are some good tips to keep in mind, though:

• Make sure the time is right. Similar to selecting the right time to buy a new home, make sure you’re set up for refinancing success. If you have a good debt-to-income ratio, a great credit score, and you’re comfortable at your monthly spending levels, it’s worth looking into.
• Shop around. Don’t automatically go with the same lender as your original mortgage, even if you feel like you’re in a rush to get things done before December. Not all lenders charge the same fee, so take your time to shop around.
• Work with an alternative mortgage lender, for better inventory. Rather than acting as the direct lender (like a traditional bank would), mortgage marketplaces like Mortgage Goat act as “middlemen” that connect loan originators to clients. This means that they offer prospective buyers a number of lenders from which they can choose. You then have the flexibility to select a lender with a mortgage rate that best suits their needs and finances.

Refinance with Mortgage Goat

Here at Mortgage Goat, we’re here to help you at every step of the process, whether you’re getting a new mortgage or refinancing a current one. With a great plan in place and a partner like us, you can reduce your monthly mortgage payments so you have more leftover in your pocket. We work with over 100 lenders to secure you the best rate out there, and all you have to do is take a few minutes to fill out our simple, 100% online application.

Ready to learn more? Contact us to start your pre-approval instantly.

The post Everything to Know About the New Refinancing Fee (And Why You Shouldn’t Let It Stop You) appeared first on Mortgage Goat California.

But buying a home is also incredibly rewarding. So why put your dreams on hold? To help you feel more confident, we’ve put together a handy checklist so you can determine if it’s the right time for you. Buckle up, keep reading, and find out for yourself!

Does Everything Add Up, Financially?

First up, some real talk: if your income isn’t quite where it needs to be (and/or you’ve got a lot of debt on your shoulders), it’s probably not the best time to buy a house. Obviously you need to make enough to cover a monthly mortgage, utilities, and any repairs or maintenance that the home might require. But your finances will also affect the loan you’re approved for.

To determine your eligibility, mortgage lenders use what’s called a “qualification ratio,” which is your monthly expenses and debt divided by your monthly gross income (your income before taxes are taken out). Lenders can set their own guidelines here, but a ratio of 36% or less is a good goal. It’s smart to take it a step further on your own, too — most financial planners recommend that your total housing expenses don’t exceed 32% of your gross monthly income. So while you might be approved for a certain amount, make sure to run ALL the numbers on your own, as well.

Not looking so hot? If your debt is high, the smart move is to pay most or all of it off before even thinking about buying a home. This includes student loans, credit card bills, and car loans. While you’re at it, check your credit score; it can take some time for your score to improve as you pay off your loans.

If your monthly expenses look out of control, think about some ways you can shrink them. For example, can you cut back on takeout and cook more at home? Do you really need six different streaming services? While you don’t want to ever stretch beyond your means, these small changes can add up over time as you wait for the right time to buy.

Do You Have Enough in Savings?

Fun fact about purchasing a home: there are usually a LOT of “hidden” expenses. This goes for the actual buying process (down payment, closing costs, home appraisals, etc.) but also… for the rest of your life as a homeowner! You no longer have a landlord to call out for repairs — anything that breaks, leaks, or otherwise causes problems is now your expense to deal with.

For your down payment, most experts recommend setting aside 20% of the home’s purchase price. Depending on your lender, you may be able to get away with less. But the more you put down, the more equity in the home you start out with, which means less in interest and fees over the course of the loan. You’ll also cut down your monthly payment a bit, which leaves you more wiggle room for all those emergencies that might come up!

A 20% down payment will help you avoid paying for private mortgage insurance (PMI).

Do You Really Want to Own a Home?

Now that you’ve got the financial elements sorted out, make sure you’ve spent some thinking about whether you truly want to own a home. It may seem like a silly question, but often there are a lot of outside influences at play. Maybe you’re seeing all of your friends buy their first homes and you don’t want to feel left behind. Or perhaps the idea of homeownership outweighs the reality.

But, of course, there are a lot of perks to owning a home. You’ll have total control of the space, without having to get approval from anyone else (unless you have an HOA). You’ll also likely have a more long-term vision, so you can truly “plant your roots” and feel at home. And of course, you’re building equity along the way. If all of that sounds worth it to you, you’re on the right track!

Do You Know Where to Start?

Finally, are you familiar with the home-buying process? While you’ll definitely learn “as you go” for some of it, having a good understanding of the overall process will help a ton so that you’re not surprised by anything. Do you know how to get a mortgage? Do you know how much a home inspection costs, and why you should get one?

Most first time home buyers follow these steps:

Chat with a Lender First, Before Doing Anything Else

Some people start touring homes before understanding what they’re working with financially. Instead, we recommend starting with a lender. That way, you know the best mortgage rates you can take advantage of and how much you can afford to begin with. Don’t worry too much about getting a mortgage, either: online lenders like Mortgage Goat make the process super simple and fast.

For reference, some of the things you need to get a home loan are pay stubs, bank statements, and tax returns from the last several years.

Find a Great Real Estate Agent to Work With

Once you’re pre-approved for a mortgage, connect with a real estate agent to begin your search. Not sure where to start? Try asking friends, family members, or coworkers for referrals, particularly someone with experience in the neighborhoods you’d like to focus on. Market trends can vary widely, so local knowledge and expertise are key. They should also be part of the National Association of Realtors (NAR) and have some certifications under their belt.

Secure Your Financing

You’ve found your dream home, and it’s ready for go-time! At this point you’ll check back in with your lender and begin the closing process. Assuming everything goes smoothly, congrats! It’s time to celebrate. See? Buying a home is easy once you know what to expect.

Let Mortgage Goat Help You Get Started

If  you’ve decided it’s the right time to buy your first home, we’re here to help! With Mortgage Goat, you’ll get instant loan estimates and the best mortgage rates available, all in three easy steps. Plus, it’s 100% online — no trekking to an office or filling out stacks of physical paperwork. Get started today and you’ll see what we mean!

The post When is the Right Time to Buy a Home? Use This Checklist to Decide appeared first on Mortgage Goat California.

As a millennial, unfortunately, you’re probably used to being the brunt of the joke: a generation living with their parents for far too long, waiting “too long” to get married, and carrying a ton of debt. But you know there’s much more to your situation than the stereotype. In fact, back in February, Realtor.com predicted that millennials would make up the bulk of real estate buyers in 2020.

Regardless, buying a home is a big decision! It’s totally normal to feel a little overwhelmed. Keep reading and we’ll share some of our real estate insights, including current market conditions, how millennials buy homes overall, and how to take the first step toward your homeownership journey.

What to Know About the Current Home-Buying Climate

First, let’s talk about the current landscape. Life is a little different in a lot of ways right now thanks to the COVID-19 pandemic, but that doesn’t mean your dream needs to be put on hold. It’ll just look a bit different!

Even pre-pandemic, we were seeing some changes. As we discussed in this article about how the mortgage industry is changing, some of the biggest shifts have been related to technology. Alternative mortgage marketplaces, like Mortgage Goat, now give prospective homeowners more options and greater rate transparency. And online paperwork processing speeds up the process overall, so you can get approved for your mortgage (and into your new home) faster. All great things! And then COVID-19 hit…

The Impact of COVID-19

While there were definitely some initial uncertainties, with many people delaying their plans to see how things would shake out, the reality is that the real estate market is alive and well. In fact, in some areas it’s booming, as many workers have gotten the go-ahead to work remotely for the foreseeable future and have opted to forgo expensive tech bubbles for the more affordable towns and suburbs.

Additionally, current mortgage rates have remained at all time lows, making it a great time to strike as a first time home buyer. Other housing market updates to note:

• Because of these low rates, the allure of refinancing is stronger than ever for many current homeowners
• With more borrowers (new and existing) clamoring to take advantage, we’re also seeing some of the toughest loan-approval standards in years
• With everything in flux, mortgage lenders may be all over the map in terms of requirements and rates — which is why it’s more important than ever to shop around

What to Know About the “New Normal”

Next, it’s important to note how your experience might be different compared to what your friends or family who’ve bought in the past have told you:

• You’ll likely be connecting digitally with your mortgage broker, which may include virtual home tours, online-based pre-approvals, and video-chat check-ins along the way instead of going into an office (no biggie for you tech-savvy millennials, right?)
• As we mentioned in the last section, mortgage lenders may have stricter requirements — you may need a higher credit score or down payment than you expected
• Lenders might check your employment status multiple times — as unemployment claims surge around the country, your lender may want to make sure you’re still solid at every step of the process
• You may not need an appraisal — typically part of the loan approval process, some lenders are waiving the appraisal requirement simply because these services are so backed up in some areas

Easy, right? You’ve got this.

Tips for Getting Into Your New Home

So what’s it really going to take to get you into your first home? With the current market conditions and industry shifts, we’d say millennials are perfectly poised to make the move. Below are some tips to keep in mind.

Level-Up Your Knowledge

Before you even begin perusing Zillow or starting your next “dream home” Pinterest board, we recommend brushing up on your knowledge of the overall home-buying process. Make sure you understand what you can actually afford, what kind of closing costs to prepare for, what the market is like in your specific city (and desired neighborhoods), your mortgage options, as so on. The more you understand, the better prepared you’ll be from all angles — emotionally, financially, and mentally!

Look Attractive

No, we’re not talking about a trip to the hair and nail salon here. Instead, you’ll need to be an attractive candidate for a loan. This includes:

• Saving up for a solid down payment (ideally 20% of the home’s total cost, although requirements may vary by lender)
• Paying off any credit card or student loan debt
• Establishing a strong credit score (ideally 600+, but requirements can vary here as well)
• Not making any crazy credit moves in the past couple of months (we know that Nordstrom credit card offer is calling your name, but just say no!)

Be Strategic

Finally, make sure you’re being strategic. First time home buyers often get caught up in the emotions of the decision, especially if you think you’ve found your dream home. The reality is there are plenty of homes out there. If you need a bit more time to save up for your down payment or you’re worried about job security, it’s OK to wait. Or, this also might mean adjusting your “must haves” list if you live in a competitive (or pricey) market. Home buying is sometimes about making compromises in location, size, and amenities. And by the way, there’s nothing wrong with the suburbs!

Get Started with Mortgage Goat

Ready to get started? We’re here to rebuild mortgages for the 21st century, and we’ll help you every step of the way. With our easy online application, you’ll get the best rates, tons of options to choose from, and quick approval. Contact us today to get in touch!

The post Our Guide to Home Buying for Millennials appeared first on Mortgage Goat California.

This system is especially important for financial exchanges that involve large sums of money since there are often many terms to the associated contract. In the case of an exchange of goods, like in international sales, there are a number of obligations that need to be fulfilled before the funds can be released. For example, the seller will want confirmation that it will receive the funds it is owed when the goods reach their destination overseas. The buyer will want to make sure the goods are received to go out for distribution before any payment is handed over. An escrow agreement protects both parties throughout these processes, sometimes as a part of the ongoing, long-term operations. 

What does this mean for buying a home? 

Since real estate transactions are usually one-time deals involving larger sums of money, escrow contracts are almost always used to help facilitate the transfer of funds. A representative from the third-party escrow company called an “escrow officer” (usually a lawyer), will help manage the terms of the contract to ensure that both the seller and buyer meet the agreed terms prior to the distribution of the funds. This is particularly useful when the contracts are long or involved, since the parties may have trouble keeping track of the requirements (e.g. a long list of required home improvements or home safety updates prior to the proposed sale). 

The escrow representative keeps track of all the details like the terms of the contract are met and notes if any are not. This ensures that the sale goes smoothly and that both parties are held accountable for completing the terms laid out by the contract. It is in the best interest of the escrow officer to make sure all terms are met successfully since that individual usually receives 1% to 2% of the deal cost. Once the deal has “closed,” the escrow representative records all the details about the transaction and confirms that all terms were met. 

What does this mean for my mortgage? 

If you will need to take out a mortgage to cover the cost of your home loan, keep in mind that you and your lender may also enter into an escrow agreement. Mortgage lenders often use third party escrow accounts to hold the money for insurance and property tax purposes. If this is the case, you will be responsible for paying the estimated tax and insurance costs, including interest. This may seem like a hefty requirement upfront, but rest assured that at the end of the year the lender will need to adjust your monthly amount to match the reported tax and insurance amounts. If you paid too little, usually you can make up the difference over the course of a year. If you paid too much upfront (more common), you will receive a refund from the lender. 

We’re just a phone call away to answer any of your mortgage questions. Give us a call, today at (619) 480-0262, we’d love to chat. 

The post What is Escrow and Why is it Important? appeared first on Mortgage Goat California.

1. Information and applications are available online 

The web is a great source of information about the mortgage application process. In addition to helpful “how to” sites that lay out each step of the application, new mortgage marketplaces allow you to quickly apply online and review lender and rate options before you ever need to consult with an advisor. In the past, prospective homeowners relied on professionals for advice about which lenders offered certain rates; now, you can easily research and compare lenders yourself online. While you will eventually need to consult with a professional to complete the application, reviewing these resources beforehand can help you feel prepared when you begin the in-person consultation process. 

2. Experts can help  

Once you are familiar with the kind of mortgage you want as well as what rates and lender options are available to you, you should schedule a one-on-one session with a professional to ensure that you have all the information you need to make an informed decision. Some mortgage marketplace sites, like MortgageGoat, allow you to schedule these sessions online, and even offer bilingual support! While applying and getting approved for a mortgage is easier now than ever before, having a professional available to you along the way for questions and concerns can help make the process even smoother. 

3. There are more lending options than ever  

There are a number of options when it comes to choosing a lender, including traditional banks, credit unions, and non-bank lenders. The best option for you depends on a number of factors, including your credit score and whether you are a first-time buyer. As a first step to learning more about your options, you can visit a mortgage marketplace online. After entering preliminary information and running a credit check, these sites will connect you with potential lenders and rates for which you qualify. 

If you are a first-time homebuyer and are worried about getting approved for a mortgage, there are a number of lending assistance programs that might help. Ask your advisor about lenders that partner with state agencies to offer discounts on mortgage rates, assistance on the down payment, or educational resources more broadly. These programs are specifically designed to make mortgages more affordable for first-time homebuyers. Some programs also offer affordable rates for veterans, individuals with hefty student loans, or public servants. If you qualify for more than one of these benefits, some lenders will allow you to combine them to ensure that you can afford your first home! 

4. FHA loans can help make a home more affordable 

One of the main misconceptions about getting a mortgage is that you will be responsible for 20 percent of the home’s purchase price as a down payment. These days, this is rarely a requirement! With a reasonable credit score, you can qualify for a mortgage with a down payment of 5 percent or less (even if the entire amount is gifted from close family). A NAR survey of over 8,000 homebuyers found that almost 90% of homebuyers chose to finance the purchase, and the median down payment amount for first-time homebuyers was 5%. An FHA loan (offered by the Federal Housing Administration) allows you to get a mortgage and only pay 3.5% as a down payment. FHA loans also have less stringent requirements for income and credit scores, which makes qualifying for the loan much easier. 

There are a couple of requirements that come with these government-backed loans that you should review before you apply, including limits to the total amount that you can borrow as well as required mortgage insurance, which protects the lender if you are not able to make your monthly payments. While this insurance is typically not costly, it is another consideration when you are calculating your expected monthly payment.  

If you are interested in an FHA loan, be sure to ask your lender about their options. While most mortgage marketplaces offer FHA loans, some banks may not. 

5. Investing in a home is worthwhile 

With rents increasingly becoming unaffordable all over the country, there has never been a better time to consider investing in a home. Depending on where you live, monthly mortgage payments are often much lower than median renter’s monthly payments. On top of that, when you pay monthly rent you are simply handing money over to a landlord. Monthly mortgage payments represent much more valuable future investments, especially if you factor in the resale value and tax breaks! 

Fill out our quick, 100% online mortgage application to start your home buying journey, today. 

The post Why You Shouldn’t Be Worried About Getting a Mortgage appeared first on Mortgage Goat California.

The good news is that many of the misconceptions about owning a home are simply not true—buying and owning a home is easier than ever. Here’s why: 

Credit standards are lower than you think 

One of the barriers preventing young people from investing in a home is the belief that they need a perfect credit score in order to apply. While having a higher credit score will always give you more options, the reality is that there are many ways to get approved for a mortgage with less-than-perfect credit. Government-backed loans from the Department of Agriculture, the Department of Veterans Affairs, as well as the Federal Housing Administration (FHA) offer mortgage packages that are designed to accommodate individuals with lower credit scores and/or income. 

On top of that, the required down payments can also be much lower; FHA loan down payment requirements can be as low as 3.5% compared to the traditional 20%. Ultimately, these resources make it possible for individuals who do not have a typical “homeowner” to be able to invest in a home. 

Monthly mortgage payments are often lower than rent 

There is a widespread misconception among millennials that owning a house is more expensive than renting. But according to data reported by the finance website GOBankingRates.com, it’s actually cheaper on average in 42 states to own a home. The distribution of monthly payments across the US showed that paying rent was shown to be economical in only 8 states. 

But the cost is not the only factor that should go into the decision. Paying monthly rent to a landlord is essentially throwing money away—you are not investing in an asset that could increase in worth. Usually, when you factor in the projected resale value and tax breaks you receive from being a homeowner, buying a home makes much more sense financially compared to renting. 

Individuals with student loans can still afford a home 

One of the main concerns for young people is whether they will be able to afford monthly mortgage payments in addition to student loan payments. Student debt is at an all-time high nationwide, and the monthly payments can be crippling. Luckily, there are more resources than ever to help make homeownership affordable despite the recent increase in student debt. State agencies have started to offer discounts on mortgage rates, assistance for down payments, and resources to help first-time homeowners throughout the process, and extra assistance is available to those with student loans, veterans, or public servants. 

The requirements for qualification vary state-to-state, as well as by lender and location, so make sure to consult with a professional about your options before deciding how to finance your home. 

You can apply online 

The process of applying for a mortgage has changed dramatically in the last decade. Before the housing crisis in 2008, the larger banks that once handled the majority of mortgages increased their requirements for applications and became hesitant to approve clients with low credit scores. Many of them no longer offered the more affordable Federal Housing Administration (FHA) loans that offered mortgages at lower rates and down payment requirements. This was a crippling shift for many young, first-time homeowners without the capital to buy a home from traditional lenders.   

In response, there has been a movement toward online applications that give prospective homeowners more options and greater flexibility. Called “mortgage marketplaces,” these sites allow clients to enter their financial information online and receive information about their eligibility quickly. They can also review a number of lenders and rate options before consulting with a bank or advisor. In addition to making the application process smoother overall, these marketplaces have introduced more transparency to the process and ultimately contributed to making homeownership affordable.

Applying online means less paperwork

Before the mortgage marketplace movement, applying for a home loan involved compiling mountains of paperwork, coordinating many in-person visits, and long delays in processing. Now that the majority of the process can be completed online, applying for a home loan is dramatically simpler. Prospective homeowners can access educational information online before starting the process, complete the application online, and receive multiple lender options so that they can make informed and careful decisions. There has never been a better time to get a mortgage and become a homeowner! 

Take the first step in your home buying journey by filling out our simple, 100% online application. 

The post Why Buying a Home is Easier Than It’s Ever Been appeared first on Mortgage Goat California.

What is refinancing? 

Let’s back up to review what refinancing is all about. “Refinancing” refers to the process of replacing an old mortgage with a new one. This is usually a smart move financially because it allows homeowners to take advantage of a current interest rate that is lower than the rate they agreed to when they signed up for the original mortgage agreement. 

But you’ll need to take your credit history into account when weighing all the options. Borrowers with very strong credit scores who have an original mortgage with a “variable” loan rate (subject to the fluctuations of the market) may be able to convert their loan to a fixed rate, which means less guesswork and usually less money. Borrowers with lower credit scores or accumulated debt will need to strategize when refinancing to make sure the new rate is better than the original. 

People choose to refinance their homes for many reasons: to reduce the amount they owe each month for a mortgage payment, to lower the overall interest rate of the loan, to take cash “out of” the home to help cover other large purchases, or simply to switch mortgage companies. Most people choose to refinance when they have “equity” on their home, which is the difference between the worth of the home and the amount that is owed through the home loan.  

How do I get started? 

If you suspect refinancing might benefit you, you first need to assess your current mortgage rate in order to determine the “Combined Loan to Value” (CLTV) ratio. This ratio is an indicator of whether you have “equity” on your home or not by comparing your mortgage loan balance to your home’s value. It takes into account all credit lines that you may have used to pay for your home. The percentage value is calculated by taking your current mortgage balance plus your potential home equity loan amount, then dividing that number by your home value. A lower number is better since that indicates a higher home value (denominator). A low CLTV percentage means you are in a good position to refinance your home.  

When is the best time to refinance? 

Deciding when to refinance can be tricky, depending on what’s happening with the market trends. While you should never refinance without considering all the factors at play, below are a few common reasons people choose to go through with refinancing. 

1. You have an adjustable-rate mortgage 

If you have an adjustable-rate mortgage (ARM), check when it is due to “reset.” These types of loans periodically can be switched to either a fixed mortgage or a different ARM, and usually, either option will save you money since it means that your rate would be guaranteed for a longer period of time (irrespective of what the market is doing). If you have an ARM and the reset period is coming up, do some research or consult a professional to determine whether refinancing will save you money long-term.  

2. You have a higher income  

Let’s say you were in an entry-level job when you first took out your mortgage, but after a couple of promotions, you are in a much better financial position. This ultimately means that your debt-to-income (DTI) ratio, which can increase your credit score (see point #3!). Having an income boost and a bump in your credit score almost always puts you at an advantage when it comes to refinancing. 

3. Your credit has improved  

If you were not able to get a competitive mortgage rate due to a low credit score, but your credit has since improved, consider refinancing! You likely qualify for much lower rates with a higher score. This sounds like an obvious one, but you’ll still want to weigh all the options before refinancing (do some research about market trends, etc.) since the credit score is just one factor in the equation. 

4. You have other loans 

Most people with a mortgage have also borrowed money elsewhere—whether it is via credit cards or student debt. The interest rates for these types of loans are usually much higher than home loans. If this is the case, and you are paying a significant amount of interest each month to cover the other loans, you can “consolidate” your loans so that you’re paying the same interest rates for all loans across the board. This can be done through the process of refinancing. 

5. You live in a desirable location 

When it comes to real estate, it all comes down to the home worth. That, in turn, depends on where you live. If you live in a location like San Diego where property values are steadily increasing, refinancing will likely work out in your favor. 

Take advantage of dropping mortgage rates by digitally connecting with a mortgage broker to learn about your refinancing options. 

The post The Ultimate Guide to Refinancing appeared first on Mortgage Goat California.

If you’re not sure where to start, this guide is for you. Keep reading and we’ll explore the differences between a mortgage broker and a banker, and how to make the right decision for you.

What is a Mortgage Broker, and How is it Different From a Bank?

First things first: what exactly are the differences between the two? A bank and a mortgage broker will both help you secure a home loan, but the behind-the-scenes details are where things differ.

Simply put, here are a few of the key differences:

• A broker works with many banks or other lending institutions and is able to shop around to find you the best rates and terms. Think of a broker as the middleman between you and the potential lenders and banks.
• A bank, of course, is a direct lender that represents one institution.

So, which is right for you? We’ll get into that next.

Mortgage Brokers vs. Banks: Advantages to Using a Mortgage Broker

Most would-be homeowners are on the hunt for the best loan rates. After all, you’ll be stuck with your mortgage for anywhere from 8-30 years, so you’ll want a monthly payment that you’re comfortable with! Here are some of the big advantages of using a mortgage broker.

Access to a Wide Variety of Lenders

Because brokers have access to many direct lenders, they can shop around and match you with the right one for your situation. They’re like your personal travel agent, selecting from the best airlines, hotels, and car rental companies to find you the best deal for your individual needs. They’ve got your back, and they’ll work with you to get it right.

Brokers Will Save You Time (and Stress!)

A broker will also save you time in the long-run. Since you’ll only need to submit one application in total, rather than one for every bank or lender on your own, this can be a huge relief. You’ve likely got enough on your plate right now, anyway! Once you’ve submitted one application to your broker, they’ll run through your options with you, including rates, points (if applicable), and closing costs. Simply put, they make the comparison easier.

Brokers Can Save You Money

While there are no guarantees that a broker can find a cheaper rate than a direct lender, let’s be real: most consumers don’t have the time (or the right means) to go out and rather all of the lenders and rates available to them. Approaching your bank can be time consuming, and even then you only have one comparison point to consider. In most cases, it will end up being much more cost-effective to work with a broker instead of taking your chances and going direct.

Also, keep in mind that brokers have access to loans at a wholesale rate from lenders, which often means a lower cost to begin with—so any cost increase attributed to your broker’s fee usually ends up a wash.

Brokers Are There to Help

Overall, your broker will be there to represent you and your interests, rather than those of a bank—where you might just be a number (or a commission) for them. As such, you should expect to provide a lot of information upfront to your broker about your needs and your individual situation. Have questions along the way? Your broker is there to help you find answers and offer knowledgeable advice that’s in your best interest. Have a complicated situation? An experienced mortgage broker will know how to find innovative solutions.

Moreover, your broker can help steer you away from lenders that should be avoided. If you see a rate that seems too good to be true, you’ll often find sketchy payment terms buried deep in the contract. And over the life of a loan, this can be a very expensive mistake. As a new homeowner especially, you’re likely learning a lot about mortgages and all of the vocabulary that goes along with it— it can be a lot! Your broker is there to help you fully understand the offers on the table.

Mortgage Brokers vs. Banks: A Few Things to Know

Of course, there may be some situations where working with a mortgage broker isn’t the right fit for you. Here are a few things to keep in mind.

Brokers Typically Charge a Fee

In exchange for their services and connections, brokers will typically charge a fee. Sometimes the fee is paid for by the lender, and sometimes it’s added into your closing costs—so you’ll definitely want to research this and understand the terms before you sign anything.

Brokers Don’t Always Have the Best Deals

Like we mentioned earlier, there’s no guarantee that your broker can get the best deal. If you have an established relationship with a bank (i.e. if you’ve been a member for many years with current accounts, or you have other types of loans with them), they may quote you better rates or be more willing to work with you to secure a great deal. Loan officers at these kinds of institutions also have a bit more flexibility. They may be able to offer you special deals, make exceptions to standard policies, or even waive certain fees. Again, you’ll want to factor this in as you make your decision and compare your options.

How Mortgage Goat Can Help You

So, is it better to get a mortgage from a bank or broker? We hope the information above has helped you understand your options.

Ready to explore what a mortgage broker can do for you? At Mortgage Goat, we’re your friendly mortgage broker in San Diego, here to help you every step of the way. We work with over 100 lenders to secure you the best rate out there. All you have to do is take a few minutes to fill out our simple, 100% online application. Contact us and get started today!

The post What’s the Difference Between a Mortgage Broker and a Banker? appeared first on Mortgage Goat California.