Ready to own your own home? Ready to make the investment of your lifetime? Here are three things to know financially when buying your first home.
Preparing to buy your first home is both exciting and stressful. Before you start down the road of home ownership, it is vital that you have all of your finances in order and that you fully understand what is in store for your budget. Here are three things to know financially when buying your first home.
Mortgage and Down Payments
The world of mortgages and down payments can be confusing for the first-time homebuyer. Understanding the differences between a fixed-rate and an adjustable mortgage will help you to make a more informed decision. You also need to plan how much money you want to put down on the home. There are several advantages of placing a 5 percent down payment, but it’s important to consider what works best for you and your financial situation. Keep in mind that if you put less than 20 percent down, it is likely you will be charged a monthly fee for private mortgage insurance (PMI). Consider the pros and cons as you're weighing the offsetting advantages of placing a 5 percent down payment.
Set a Price Range
Picking the right price range is an imperative step in finding the right house for your personal needs and your budget. When it comes to real estate, timing is everything. If you are shopping in a buyer's market, you are going to get more for your dollar. There are a host of online tools to help you figure out how much home you can afford. A lot of times, a real estate agent can also help you to figure out how much you can afford. You also need to examine your current and projected lifestyle to determine how much you can spend. For example, if you plan on having children in the future, you need to add these costs to your overall budget, especially if one parent plans on staying home with the kids.
Budget for Extra Expenses
The costs of purchasing a house go well beyond the basic outlay for the down payment and insurance. Chances are that if this is your first home, you will be upgrading to a significant amount of additional space. This will likely necessitate that you set aside extra money for new furnishings. If you are moving into a newly constructed home, it is also probable that you will need a budget for landscaping. Depending on the condition of the home, you will want to have some cash on hand for repairs and renovations.
Equipping yourself with the right tools and knowledge will help the process of buying your first home go more smoothly. All of the stress will be worth it once you are relaxing in a place you own.
Think you are ready to "take the leap" and buy your first home? Here's things you need to think about and do as you get ready to make your biggest investment.
Buying your first home counts as one of life's rites of passage. It's an exciting time, but it's also fraught with some legitimate concerns. It's best to deal with those concerns before you get too involved in the process. This allows you to make better decisions overall. Here are some factors to keep in mind as you're moving through the pre-buying process.
Determine Your Price Range
Probably the biggest factor in your home-buying venture is price. You'll have to determine how much money you can afford to pay for a home mortgage each month. While it's natural to want to dream a bit when you're buying your first home, it's easy to get carried away with these feelings. If this happens, you could wind up trying to buy a home you can't afford. It's better to find a home that doesn't force you to pay more than you currently do for rent. It's even better if you find a home that costs less.
Mortgage and Down Payments
Many banks require you to have at least 20% of the home's purchase cost to put down before they even think about lending you money. However, that can be a significant amount for someone to put aside. For example, if you want to buy a home worth $300,000, you're looking at a $60,000 down payment. If you find yourself in this predicament, you may want to look for a lender who will work with you and accept a down payment closer to 5%.
There are several advantages of a 5% down-payment, but determine what's right for you. Here's a look at a few of them. First, you don't have to wait quite as long to build up savings if you pay 5% down. On a $300,000 home, that's $15K instead of $60K. That's a much easier amount to set aside. Second, if you get into a home quicker, then you're paying to own a home instead of paying rent. You're contributing to an investment. Finally, paying this amount also allows you to keep more money in savings, which can come in handy come home improvement time. Keep these advantages of placing a 5% down-payment in mind.
Get Your Credit in Order
Unless you're paying for a house outright, you're probably going to have to borrow money. Start getting a handle on your credit score long before you start the buying process. It isn't unreasonable to plan on working on your credit for a year or two if you have some problems
with your credit.
While this thought may seem like a lot of work, it'll be worth it come buying time. A solid credit score will only help you, especially if you want to pay a lower amount down. A banker will be more inclined to lend you money if they know that you have a good payment history.
Buying your first home comes with a lot of challenges. Factors like home prices, down payment and credit scores all play a role. Your best bet is to do your research and start getting your finances in order. Doing this will help you regardless of where you are in the home-buying process.
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Mortgage insurance is a stable, cost-effective way to obtain a low down payment mortgage, and offers distinct benefits to borrowers. It has been a cornerstone of the U.S. housing market since 1957, providing more than 30 million families with the opportunity to own homes despite financial barriers. If you are considering purchasing a home, it is important to understand your options, including your low down payment options.
(BPT) - For many Americans, the biggest hurdle in buying a home is the down payment. According to a recent report, 49% of non-homeowners stated that not having enough money for a down payment and closing costs was a major obstacle to purchasing a home. Many people also mistakenly believe lenders require a 20% down payment to qualify for mortgage financing.
Data shows that by using private mortgage insurance (MI), millions of homebuyers with down payments as low as 3% or 5% have been approved for affordable and well-underwritten mortgages.
In the past year alone, MI has helped more than 1.1 million borrowers purchase or refinance a mortgage. Nearly 60% were first-time homebuyers, and more than 40% had annual incomes below $75,000.
How MI works
In addition to the other elements of the mortgage underwriting process — such as verifying employment and determining the borrower’s ability to afford the monthly payment — lenders require borrowers to commit some of their own money before approving their mortgage loan. This is where MI entered the system more than 60 years ago, to bridge the down payment gap and help creditworthy borrowers qualify for a mortgage without large down payments.
Benefits of MI
MI is a stable, cost-effective way to obtain a low down payment mortgage, and offers distinct benefits to borrowers. It’s been a cornerstone of the U.S. housing market since 1957, providing more than 30 million families with the opportunity to own homes despite financial barriers. If you are considering purchasing a home, it is important to understand your options, including your low down payment options. To learn more, visit LowDownPaymentFacts.org.
(BPT) - The homebuying process is exciting, but can also seem fraught with added costs, like a home inspection, title insurance and closing costs. And if you can’t afford a full 20 percent down payment on a conventional home loan, then you will most likely pay for private mortgage insurance (MI). Some people consider private MI yet another added cost, but it helps creditworthy middle-income homebuyers qualify for home financing sooner with a low down payment. Is it really an added cost if it saves time and money in the long run?
For most people, low down payment home loan options include conventional loans with private MI and government-backed loans like those offered by the Federal Housing Administration (FHA). While comparable, each of these options has important differences. For example, the minimum down payment for an FHA mortgage is 3.5 percent while it’s only 3 percent on a conventional, privately insured mortgage.
Another key feature of private MI is that it can be canceled when a borrower reaches 20 percent equity in his or her home. Borrowers who purchase a home with private MI can typically cancel it within 5 to 7 years, resulting in their monthly bill going down. Private MI’s cancelability makes it a more affordable option over FHA-backed mortgages, which typically require mortgage insurance premiums for the entirety of the loan term. Both are offered by most mortgage lenders, so it’s smart to ask a loan officer for both options so you can compare and do the math.
The myth that a homebuyer needs 20 percent down to obtain a mortgage is simply not true. Low down payment mortgages are widely available and used every day across the country. In 2018, the National Association of Realtors found that first-time homebuyers typically put down 7 percent, while repeat buyers put down an average of 16 percent. Many homebuyers choose a lower down payment option to preserve some savings for home improvements or save for other goals. The time it could take to save up a 20 percent down payment is significant. On average, it could take up to 20 years to save a full 20 percent, plus closing costs, for a $257,700 house — the national median sales price. With home prices on the rise, the amount of time it takes to save up could only increase. Private MI can mean the difference between getting into the home of your dreams sooner or waiting for years.
For over 60 years, more than 30 million homeowners of all backgrounds have used private MI to successfully buy their homes. In the past year alone, private MI helped more than one million borrowers nationwide purchase or refinance a mortgage. According to a study by U.S. Mortgage Insurers, 56 percent of purchase borrowers were first-time homebuyers and more than 40 percent had incomes below $75,000.
For decades, millions of homeowners and prospective homebuyers have relied on private MI to help them affordably and responsibly purchase their homes — in turn helping them build personal wealth. Today’s historically low mortgage interest rates are a good reason to buy a home now. It is estimated that in 2019, the average rate for a 30-year fixed-rate mortgage will be around 5 percent. Borrowers should take advantage of these historically low mortgage interest rates because experts forecast that primary mortgage rates are on the rise.
Getting a mortgage with private MI and keeping more of your hard-earned money in the bank can be a very smart way to invest in your future. Check out lowdownpaymentfacts.org to learn more.
(BPT) - If you haven't made solid financial plans, now would be a good time to consider a life insurance policy to protect you and your family in your time of need - or protect your loved ones in your absence.
Given the importance of life insurance, it's surprising that 37.5 million American households lack such a policy, according to the 2016 Facts About Life study by the industry group LIMRA. That may be because many people misunderstand how such policies work and how much they cost. For example, recent Insurance Barometer studies by LIMRA and Life Happens found 63 percent of Americans cite expense as the reason they don't carry term insurance, yet 80 percent overestimate the cost - millennials by 213 percent and Gen Xers by 119 percent.
While some Americans hope to rely on other sources to protect their families, they may not realize all the benefits life insurance offers. Every family has different needs, and some life insurance products are flexible enough to offer customizable options to provide a measure of financial security to your spouse and children - the people that matter most.
Consider these other common myths about life insurance:
Myth: Life insurance is only available through financial advisors. In fact, quality policies for your entire family are often available through your employer or your spouse's employer. For example, Boston MutualLife Insurance Company offers a range of workplace solutions paid for by employers, employees or both, including permanent life, term life, critical illness, accident and disability insurance. Talk to your company's HR department about the process involved in securing comprehensive coverage for your family.
Myth: Workplace policies can't offer enough options for your needs. You'll find that well-established life insurance companies understand the market well enough to offer a range of flexible products, including policies that are payroll deductible, stable in cost regardless of your age, portable when you're changing jobs and available with add-on riders or other insurance types through the same carrier.
Myth: Young, healthy people don't need life insurance. The truth is, your health can change at any time and it's best to expect the unexpected. Uninsured people can easily leave behind personal, medical or mortgage debts and/or funeral expenses that end up burdening family members or executors when they die.
Myth: Your life insurance policy only covers you, not your family. Not true. Some products protect you, your spouse, your dependent children and even your grandchildren, often at one affordable cost. That's why marriage and becoming a parent can be excellent reasons for buying new policies.
Investing in life insurance is a crucial step to take to protect yourself and your family from unexpected losses. But it doesn't have to be confusing or complicated. Find more detailed information about life insurance options for you and your family at www.BostonMutual.com.
Here are four steps to take today to spruce up your money management process and get yourself on the path to financial health.
(BPT) - Are you feeling good about your finances? Or do phrases like “account balance,” “credit score” and “retirement savings” give you a twinge of anxiety?
Don’t worry, you’re in good company. Only 24 percent of millennials have basic financial literacy, according to the National Endowment for Financial Education. When it comes to getting their financial house in order, most millennials would prefer not to set foot in that proverbial house in the first place. Getting yourself out of debt and building enough savings to cover your expenses in an emergency is a marathon, not a sprint. Small, incremental changes in your financial habits today can make a big difference in your financial health months or even years from now.
Take these steps today to spruce up your money management process and get yourself on the path to financial health.
* Check your credit score. Before you start the work of realigning your finances, you should check your credit score and review your credit report. It helps to know where you stand financially, and the good news is, even if your credit score is not as high as you’d like it to be, you can take steps to improve it. Establishing a history of on-time payments and maintaining a healthy credit utilization ratio are two things that could improve your credit score quickly. One way to access your credit score without any cost is to find out if your bank or lender offers your VantageScore through their website.
* Knock down your debt. Track down all your accounts — checking, savings, investment, credit cards and other loans — and do the math to find out your net worth. That’s your benchmark to help you track your progress. In the beginning, the truth can hurt, however, knowing how much you have in savings and knowing how much you owe gives you a valuable blueprint for where you need to direct your energy. From there, put together a household budget, and figure out where you can trim expenses, so you can pay ahead on your debts, one account at a time.
* Automate your savings. You’re much more likely to accumulate savings when you make the decision once and let the rest happen automatically. Log onto your bank account and set up an automatic transfer from checking to savings, starting with a small amount, preferably timed with your regular pay day. If you can manage to set aside $85 a month, in a year’s time, you’ll have set aside a full $1,000. That’s a decent emergency fund for things like car repairs and doctor bills.
* Open a retirement account. Here’s another way to automate savings. If you haven’t done so already, start contributing to a retirement plan. Even better, if your employer makes a plan and a match available to employees, sign up as soon as you can. If you can’t afford to contribute the full amount to get the full match, start with a small percentage, and slowly add on.
Taking the first steps to gain control of your finances isn’t easy. Setting up good financial habits today can leave you in a better place tomorrow. Test your credit score knowledge at CreditScoreQuiz.org, and be sure to visit VantageScore Solutions to learn what things influence your score, and what you can do to improve it.
State laws determine the process for surrendering the manufactured home title when the home is permanently affixed to the land, becomes part of the real estate, and is no longer considered personal property separate from the land. Like manufactured homes, modular homes are also constructed indoors, sheltered from the elements. But unlike manufactured homes, modular homes do not require a title. Since they are built to International Residential Code standards and not the HUD Code, ownership of modular homes is treated the same as site-built homes.
(BPT) - On June 15, 1976, the U.S. Department of Housing and Urban Development (HUD) instituted the Federal Manufactured Home Construction and Safety Standards — more commonly referred to as the “HUD Code.”
With these regulations, HUD defined the safety and quality standards required for construction of a manufactured home.
This was a pivotal moment for the manufactured home industry. Prior to the HUD Code, these homes were built with portability as a primary focus and were commonly referred to as “mobile homes” — hence the difference in terms.
You will often see the terms “mobile” and “manufactured” used interchangeably. But, according to the Manufactured Housing Institute, the HUD code draws a line of distinction between the two.
A mobile home refers to a home manufactured prior to the standards set by the HUD Code. Back then, the homes were built to voluntary industry standards enforced at the state level in 45 out of the 48 states in the continental U.S.
With the birth of the HUD Code, manufactured home now refers to a factory-built home constructed to those federal standards.
The HUD Code regulates, among other things, energy-efficiency standards, durability, transportability and quality. It also sets standards for the performance of HVAC, plumbing and electrical systems.
While the difference in quality between today’s manufactured homes and pre-HUD Code mobile homes is evident, you may be wondering how the terms “mobile” and “manufactured” are so often confused.
One similarity that may be the biggest contributor to the confusion is titling.
Like the mobile homes built prior to HUD Code, modern manufactured homes also require a title. So what does that mean?
Requirements for titling vary by state, but generally a manufactured home requires a title much like an automobile. This is because a manufactured home is considered personal property.
As personal property, a manufactured home is typically taxed separately from the land on which it sits. Visit https://drivinglaws.aaa.com/ for more general information on state-specific laws regarding the titling of manufactured homes.
State laws determine the process for surrendering the manufactured home title when the home is permanently affixed to the land, becomes part of the real estate, and is no longer considered personal property separate from the land.
Like manufactured homes, modular homes are also constructed indoors, sheltered from the elements. But unlike manufactured homes, modular homes do not require a title. Since they are built to International Residential Code standards and not the HUD Code, ownership of modular homes is treated the same as site-built homes.
For more information from Vanderbilt Mortgage and Finance Inc. about manufactured or modular homes, visit www.vmfhomeloan.com/first-time-buyers/.
Vanderbilt Mortgage and Finance, Inc., 500 Alcoa Trail, Maryville, TN 37804, 865-380-3000, NMLS #1561, (http://www.nmlsconsumeraccess.org/), AZ Lic. #BK-0902616, Loans made or arranged pursuant to a California Finance Lenders Law license, GA Residential Mortgage (Lic. #6911), Illinois Residential Mortgage Licensee, Licensed by the NH Banking Department, MT Lic. #1561, Licensed by PA Dept. of Banking.
(BPT) - Across the nation, thousands of seniors have used a Home Equity Conversion Mortgage (HECM), commonly called a reverse mortgage loan, as a savvy way to access the equity in their homes as part of their retirement strategy.
Those who are interested in a reverse mortgage loan should know that there are six main phases to the process: 1) educating and qualifying, 2) counseling, 3) approval, 4) funding, 5) using and 6) settling.
1. Educating and qualifying
The HECM process begins by contacting an FHA-approved lender who will review the borrower’s situation, educate them on the HECM program, and determine if they would likely qualify for a reverse mortgage loan.
“Once the lender has determined that the borrower is eligible, they work closely with them to shape the loan so it fits their needs,” says Paul Fiore, Chief Sales Officer for American Advisors Group, the leading reverse mortgage lender in the nation. “At AAG, this is a highly personalized process designed to give the borrower the best outcome for their financial situation.”
Once qualified, borrowers are referred to reverse mortgage counseling, an important consumer safeguard mandated by the government. During counseling, a HUD-approved HECM counselor reviews the borrower’s needs and circumstances. They consider how the funds might best be distributed, the financial and tax implications, and whether a HECM is right for them. If so, an application is submitted to the lender.
Next, the property will be appraised, and after that the approval process will begin. Before closing on the loan, borrowers will choose between several loan disbursement options, from taking it all out in a lump sum, receiving fixed monthly payments, opening a line of credit or any combination.
After the closing papers are signed, the homeowner has three business days to change their mind and cancel the loan (except if the loan is being used to purchase a new home). After the rescission period has passed, the funds are ready to be paid out through the payment option selected, subject to an initial disbursement limit that is determined by HUD.
5. Using your loan
The loan servicer will generally disburse funds via direct deposit or mail on the first business day of the month, following the funding of the loan. The borrower can live in the home as long as they like without making monthly mortgage payments, as long as they continue to pay property taxes and insurance on the home, maintain it in good condition and comply with any other loan terms.
6. Settling your loan
If the last surviving borrower sells or transfers the property, passes away, or does not use the property as a principal residence for more than 12 months, the loan has reached a “maturity event,” meaning that the loan comes due and no further funds can be disbursed. Borrowers also have the option of paying off their loan in full at any time without penalty.
Following a maturity event, an appraisal will be ordered by the loan servicer to determine the property’s current market value. The heirs can sell the property to repay the loan, or purchase the property for 95 percent of its appraised value. Since HECMs are non-recourse loans, the proceeds from the sale of the home are the only asset that can be taken to pay the loan’s balance, even if the loan amount exceeds the value of the home.
A home equity conversion mortgage can be shaped to fit an individual’s needs. With new consumer safeguards in place, many seniors are discovering that it is an important part of their retirement strategy.
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