Uncategorized

Buying a home often requires years of saving for a down payment, which is money that a buyer pays upfront toward the cost of a house. This is the immediate equity that a buyer has when purchasing a home. Unless buying with cash funds, the rest of the money comes from a loan. Different lenders require different amounts of money down based on a variety of factors. Lenders refer to a down payment in terms of a percentage of the purchase price.

Private Loans
Private lenders typically prefer that buyers put down 20 percent. Some will accept lower down payments, but those borrowers are considered a higher risk. Lenders want a guarantee and require borrowers with lower down payments to pay for mortgage insurance. This is a policy that pays the lender if the borrower defaults on the loan and the house winds up in foreclosure.

The cost of mortgage insurance depends on the size of the down payment and loan, as well as the borrowers credit score. Mortgage insurance tends to be expensive, which is why many people decide to put off buying a house until they can save enough money to put down 20 percent. If you put down 20 percent, you will have a better chance of being approved by a private lender, and you will also generally qualify for a lower interest rate, fees and monthly payments.

Government Programs
The Federal Housing Administration (FHA) allows borrowers to obtain mortgages with as little as 3.5 percent down. FHA guarantees a portion of the amount borrowed and offers loans at lower rates than private lenders. FHA charges less for down payments of 5 percent or more and does not base its fees on the borrowers credit score.

Fannie Mae and Freddie Mac are government-sponsored companies that make money available for lenders to provide to borrowers. The programs are designed for people with low- and moderate-incomes. These mortgages require as little as 3 percent down. The Department of Veterans Affairs (VA) offers loans with zero percent down for active-duty military members and veterans. The Department of Agriculture also offers loans with no down payment to encourage home purchases in specific rural areas. Borrowers that obtain loans from private lenders guaranteed by the government are required to pay for guarantee fees, but not mortgage insurance.

Finding the Down Payment That is Right for You
The amount you should put down on a house depends on your specific financial situation, including your income, savings and credit score. It also depends on the price of the house you want and whether you want to buy immediately or can afford to wait. Putting down more can significantly lower your monthly payments. You need to make sure you do not use up all of your savings because you will still need to buy furniture and have money set aside for any necessary repairs. You should also consider the fees and closing costs. Compare lenders and weigh your options carefully to make the right choice.

Published with permission from RISMedia.

If you’re shopping for a home loan, you’re likely focusing on interest rates. Below are a handful of questions you may have about the art of the interest rate.

How are interest rates determined?
Interest rates are influenced by shifting economic indicators in your financial market. This type of fluidity means they can change daily, or even hourly. This is why it’s important to shop around.

What does it mean to “lock in” a rate?
Since interest rates are so fluid, many buyers choose to combat this by locking in a rate when they find a good one. A locked rate is a contractual agreement between the lender and buyer that offers the buyer protection from financial market fluctuations that could affect the range of the interest rate. There are four major components to a rate lock: loan program; interest rate; points; and the length of the lock. If your interest rate range is locked and there are no subsequent changes to your loan, the interest rate range on your application generally remains the same; however, if changes are made to your loan, your final interest rate at closing may be different.

What does it mean if your rate is “floating?”
If your interest rate is floating, it means it’s not locked. Instead, it’s fluctuating with the up-and-down movements of the market. The benefit of this is if interest rates decrease, you will have the option of locking in at a lower rate, but if the rates rise, you will lose access to the lower rates.

Published with permission from RISMedia.

A home is the biggest single purchase most people will make. Matt Blashaw, a licensed contractor and host of the DIY network show, Money Hunters, offers six tips for planning and performing routine maintenance that can save dollars as well as future headaches:

• Save on tools ” Unless its a tool you will use often, check local yard sales for good used tools at good prices. If its a tool you may use only once for a specific project, consider renting it.
• Save leftovers ” With most home-improvement projects, there are leftover screws, bolts, and other pieces of hardware left over. Storing them in plastic organizers (as opposed to dumping them in a drawer) can save you from having to buy a bag of a certain size screw when you need only one or two.
• Save on paint ” If you are flexible with color, you can save big dollars by buying oops paint colors from the home store. That is, colors that werent what the customer wanted and therefore refused to accept. Also, consider that one gallon of more expensive paint may be cheaper than buying two gallons of a cheaper brand that will likely require two coats.
• Check toilets regularly – Water leaking from your toilet tank will raise your utility bills and cause premature wear of the toilets internal workings. One a year, add some red food coloring to the water in the tank. Come back in about an hour and see if the water in the bowl is pink. If it is, you have a leak.
• Protect plumbing ” Accumulated fats, oils and hair are the most common causes of clogged pipes. Buy a hair strainer for the shower drain. Do not dispose of fats down the kitchen sink ” and if a pipe is plugged, skip the Drano, which can damage the pipes. Try using a drain snake yourself before you call a plumber.
• Change air filters – Change the air filter in your central heat and air unit often, especially during peak usage months. Thirty days is the absolute longest you should leave an air filter in place.

Published with permission from RISMedia.

If you’re shopping for a home, you most likely want a house with a garage. During your search, you’ll come across houses with attached or detached garages. You’ll need to decide which is the right choice based on your familys needs and preferences.

Pros and Cons of an Attached Garage
The most common reason why people choose a house with an attached garage is convenience. You could simply pull your car into the garage and walk into your house. That could make things easier if you have young children and need to carry their backpacks, musical instruments or sports equipment, as well as groceries, into the house on a regular basis. An attached garage also means you wouldnt need to walk through rain or snow to get to your house.

There are some downsides to an attached garage, however. The biggest concern is security. If you used an electronic garage door opener and forgot to close the door, someone could enter your house. It’s also possible that the garage door opener could malfunction or be hacked. Another concern is fire. If your car caught fire in the garage or fluid leaked and ignited, the fire could quickly spread and engulf your entire house.

Depending on the size and shape of the lot, an attached garage could be limited in size. It might be difficult or impossible to fit two cars, and you might be forced to park one or more vehicles in the driveway or on the street.

Reasons to Consider a Detached Garage
If you dont have young kids and dont mind getting wet on a rainy day, a detached garage might be a better choice. Since a detached garage can be built anywhere on the property (provided it doesnt violate local building codes), there’s more flexibility in terms of size and design. If you have several vehicles, you might be able to find a house with a large detached garage or build one after you move in.

If you plan to use your garage for a hobby, a detached garage could be better for both you and your family. Since the garage would be separated from the house, you would have more privacy. You wouldnt need to worry about the noise from power tools or the odors from chemicals that you used for painting or working on your car bothering your family.

A detached garage can also be safer. If you plan to store flammable chemicals, having the garage separated from the house could contain the damage if something accidentally caught fire. In addition, someone who entered your detached garage wouldn’t be able to enter your house.

Which Is Right for You?
For some homebuyers, an attached garage is extremely important, while a detached garage is an acceptable or even preferable alternative for others. Think about your familys circumstances and preferences and how you would like to use your garage to make a decision.

Published with permission from RISMedia.

Affordability is a big issue for renters looking toward homeownership. Beyond the purchase price, putting together a 20 percent down payment is a big roadblock for many people.

It doesnt have to be, however. While 80 percent of millennial renters say they cant afford to buy a house, according to an Apartment List survey, there are various options that they may not be aware of.

Youve probably heard of Federal Housing Administration (FHA) and United States Department of Veterans Affairs (VA) loans, and of Fannie Mae, a government agency that backs mortgages, but there are other programs to help buyer into their first home.

FHA / VA / Fannie
FHA loans are insured to give lenders a layer of protection if you default on the mortgage. They typically have competitive interest rates, smaller down payments and lower closing costs than conventional loans. A low credit score can still warrant only a 3.5 percent down payment.

The VA guarantees home loans that help active military members, veterans and surviving spouses. VA loans dont require a down payment or minimum credit score.

Fannie Mae and Freddie Mac are government-sponsored entities that back home loans for low- and moderate-income families. Down payments can be as low as 3 percent.

USDA Loan
The U.S. Department of Agriculture, or USDA, focuses on homes in rural areas and guarantees the home loan. Borrowers dont have to buy or run a farm.

A credit score of 640 or higher typically gets an applicant streamlined processing. A lower score is allowed but may require extra documentation about payment history.

Good Neighbor Next Door
This program sponsored by the U.S. Department of Housing and Urban Development helps law enforcement officers, firefighters, emergency medical technicians and K-12 grade teachers buy homes.

A 50 percent discount off a homes listed price is available through the program in areas labeled “revitalization areas.” Buyers must commit to living in the home for at least 36 months.

FHA Section 203(k)
If a fixer-upper fits more easily into your budget, a Section 203(k) rehabilitation program loan thats backed by FHA can help. It considers the value of the home after youve made improvements, and lets you borrow the money for these fixes, rolling it into your mortgage. The down payment can be as low as 3 percent.

Published with permission from RISMedia.