24
May
By First Rate Financial Group
Mortgage

Running A Quick Financial Health Check Before You Apply For A Mortgage

Running A Quick Financial Health Check Before You Apply For A Mortgage Getting a mortgage is a significant financial decision, and it is crucial to ensure that you are financially prepared before applying for one. Conducting a quick financial health check before applying for a mortgage can help you determine your financial standing and your ability to afford a mortgage payment.

Here are some reasons why you should consider conducting a quick financial health check before applying for a mortgage:

  1. Check your credit score: Your credit score is an important factor that lenders consider when deciding whether to approve your mortgage application. Check your credit score to see where you stand and take steps to improve it if necessary.
  2. Review your debt-to-income ratio: Lenders will also look at your debt-to-income ratio, which is the amount of debt you have compared to your income. If your debt-to-income ratio is too high, you may not be able to qualify for a mortgage. Try to pay down debt and increase your income to improve your debt-to-income ratio.
  3. Calculate your down payment: Most lenders require a down payment of at least 20% of the purchase price of the home. Calculate how much you’ll need for a down payment and make sure you have enough savings.
  4. Determine your monthly housing costs: Take a look at your monthly income and expenses to determine how much you can afford to spend on your mortgage payment, including property taxes and insurance. Make sure you’re comfortable with the monthly cost before applying for a mortgage.
  5. Get pre-approved for a mortgage: Once you’ve completed these steps, it’s a good idea to get pre-approved for a mortgage. This will give you an idea of how much you can borrow and the interest rate you’ll receive.

Conducting a quick financial health check before applying for a mortgage is a smart move. It can help you identify any financial issues, improve your mortgage eligibility, and ensure that you are prepared to take on the financial responsibilities of homeownership.

By following these steps, you’ll be able to quickly assess your financial health to increase your chances of being approved for the loan and determine whether you’re ready to apply for a mortgage.

18
May
By First Rate Financial Group
Mortgage

What is a Bridge Loan and How Does it Work?

What is a Bridge Loan and How Does it Work?A bridge loan, also known as interim financing, is a short-term loan used to provide temporary financing until a borrower secures long-term financing or sells an asset. Bridge loans are commonly used in real estate transactions, such as when a buyer needs to close on a new home before selling their current home.

Bridge loans are typically secured by the borrower’s current property, which serves as collateral. The amount of the loan is determined by the equity in the borrower’s property and the value of the property they are purchasing. The loan is intended to bridge the gap between the purchase of a new property and the sale of the existing property.

Bridge loans often have higher interest rates and fees than traditional loans, due to their short-term nature and the increased risk associated with them. They may also require a lower loan-to-value ratio, which means that the borrower may need to put down a larger down payment to secure the loan.

Once the borrower secures long-term financing or sells their existing property, they can use the proceeds to pay off the bridge loan. In some cases, the borrower may choose to refinance the bridge loan into a traditional mortgage if they are unable to sell their existing property within the loan term.

Requirements for A Bridge Loan

The specific requirements for a bridge loan can vary depending on the lender and the purpose of the loan, but there are a few general requirements that borrowers should be aware of:

Collateral: A bridge loan is typically secured by collateral, which is often the property being purchased or the borrower’s current property. The lender will require a valuation of the collateral to determine the loan amount.

Creditworthiness: Although bridge loans are often easier to qualify for than traditional loans, lenders will still look at the borrower’s credit history and credit score to determine their ability to repay the loan.

Exit strategy: Lenders will want to see a clear plan for how the borrower intends to repay the loan. This could include selling the existing property, securing long-term financing, or other means.

Loan-to-value ratio: Bridge loans typically require a lower loan-to-value ratio than traditional loans, which means the borrower may need to provide a larger down payment to secure the loan.

Fees and interest rates: Bridge loans often come with higher fees and interest rates than traditional loans due to the increased risk and short-term nature of the loan. Borrowers should be aware of these costs when considering a bridge loan.

It’s important for borrowers to carefully consider their financial situation and their ability to repay the loan before taking out a bridge loan. Consulting with a financial advisor or a reputable lender can also help borrowers determine if a bridge loan is the right option for them.

17
May
By First Rate Financial Group
Mortgage

What You Need To Know About Your Home Appraisal And Your Mortgage

What You Need To Know About Your Home Appraisal And Your MortgageWhen buying a home, there are certain steps a buyer should go through before the home sale is official. First the buyer makes the offer, then the offer is accepted.

Next the buyer schedules the inspection and home appraisal. Finally, everyone is ready for closing.

It’s easy to overlook the impact of some of these steps, but when it comes to a mortgage, the home appraisal is actually quite important. Banks want to see that they are lending money for an investment that is worthwhile, so that appraisal is a crucial step to getting financing. Here is what buyers need to know about how the appraisal could affect their mortgages.

Understanding The Home Appraisal Process

The home appraisal gives a home valuation expert the chance to evaluate the home a buyer’s considering to determine its market value. Home appraisers are highly trained, state-licensed professionals that know how to evaluate homes and assign value to them.

The appraiser will use various approaches to determine the final appraised value. The appraisal typically happens after an offer on the home was approved but before the lender loans the money.

The Appraisal And Mortgage Approval

The appraisal is one factor that a mortgage lender considers when deciding whether or not to approve a final loan request. Even if a borrower had preapproval, a low appraisal could cause the mortgage to fall through.

Why is this? A lender only wants to lend enough to cover what the home’s actual value, and if the appraisal comes in lower than what the borrower is asking for, the lender can deny the loan.

If the lender does not deny the loan completely, they may refuse to lend more than the home’s value. In order to buy the home at the agreed price, the buyer may need to come up with the difference in cash at closing.

What Can Buyers Do If The Appraisal Is Low?

If an appraisal comes in low on the home someone wishes to buy, the buyer shouldn’t panic. It is possible to get a new appraisal at a higher value.

First, consider the condition of the home. Did the seller let some things fall into disrepair? If the seller fixes those items, a new appraisal may be higher.

Does the home look rundown or cluttered? This shouldn’t affect the appraisal, but it can sometimes cause the appraiser to trend lower. Sometimes, simply asking for a second opinion might get a slightly different appraised value.  That said, if the appraisal is low, make sure to evaluate the purchase price. Is it in line with current market conditions and the overall condition of the home?

If the answer to that question is no, then the offer may be too much for the home. The appraisal, in this case, gives the buyer the opportunity to reevaluate the purchase decision.

When it comes to mortgage approval, the appraisal is one of the critical steps in the process. If a buyer has shopped wisely, the home should pass with flying colors, and soon the home sale process will be over.  As always, your trusted mortgage professional is the best resource for appraisal information in your local market.