A Look at Some Mortgage Assistance Programs in Texas

Having their own home; a place where the family members can be themselves without any inhibitions, is every family’s dream. That said, getting approved for a home loan in Texas or any other part of the U.S. can prove to be an uphill task for borrowers with financial difficulties such as an unhealthy credit score, income limitations, and past credit problems. This is where mortgage assistance programs come into picture. From low interest rates to relaxed qualifying norms, these programs come with various benefits and are designed to help borrowers with financial problems. The state of Texas, specially has quite a few mortgage assistance programs that have helped several families realize their dream of owning a house. In this post, we take a look at some mortgage assistance programs in Texas. Read on.

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1. VA Loans

Available to veterans, active duty and reserve members  of the armed forces and surviving spouses of veterans killed on active duty, VA loans come with a number of benefits such as lower interest rates, zero down payment, and zero private mortgage insurance premium. VA loans are backed by the Department of Veteran Affairs and provided by private lenders such as banks and mortgage companies. VA loans can be broadly classified into three categories: purchase loans, interest rate reduction refinance loans, and cash-out refinance loans. Eligibility depends on various criteria such as the borrower’s military service, credit score, and income.

2. FHA Home Loans

Administered by the U.S. Department of Housing and Urban Development, FHA home loans are one of the most popular programs among first time homebuyers who have very little savings. The program has relaxed eligibility criteria such as low down payment ( 3.5 percent of the purchase price), flexible debt to income ratios, and relaxed credit score requirements. The closing costs, too, are lower as compared to other programs. Borrowers, however, have to pay mortgage insurance premiums, which hedges the lender against the losses that may arise if the borrower defaults.

3. USDA Mortgage Loan

USDA mortgage loan is one of the newest kids on the block of mortgage assistance programs. Backed by the United States Department of Agriculture, these loans are provided to rural property buyers and owners. These loans do not require any down payment, and borrowers can roll the closing costs into the loan. The program is designed to help homebuyers from the lower income group and places a restriction on the income limits of the borrower (which cannot exceed 115 percent of the median income for the area). Borrowers must also not have any adequate housing and should be financially sound to afford the payments.

Sum up

These are some of the most popular mortgage assistance programs in Texas. A couple of other mortgage assistance programs worth your consideration are: SETH, and Texas Mortgage Credit Certificate Program. Discuss these programs with your lender and request them to suggest the program with the best home loan rates in Texas.

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4 Mortgage Mistakes You Must Avoid

Obtaining a home loan is one of the biggest financial decisions that most of us make in our lifetime. The amount that is borrowed is big and the loan term for which the amount is borrowed may also go up to anywhere between 20 to 30 years.  Making any mistake at the time of borrowing a home loan in Texas may lead to increased financial obligations. It is, therefore, important to make a smart choice and avoid the common mortgage mistakes that most first time home buyers in Texas make. To help, we list four home loan mistakes you must avoid.

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1. Not Comparing Different Home Loan Options

You may find this surprising, but most first time home buyers in Texas do not shop for the best home loan in Texas. One of the reasons they cite for not researching about different home loans is their lack of knowledge when it comes to weighing the pros and cons of different home loans. Well, if such is the case, it is advisable to hire the services of a home loan consultant who can help compare between the different home loan options to let you choose the one that suits your requirement the best.

2.  Ignoring the Fine Print

Do not make the mistake of ignoring to go through the terms and conditions of the home loan agreement. This will help you avoid any issues later that may arise because of any hidden charges, prepayment penalties or late payment fees that the lender did not, or forgot to, inform you about. Read the entire document thoroughly and ask questions if you have any doubts. Asking a friend, family member or home loan consultant to have a second look is also a great option.

3. Over Committing

Many first time home buyers in Texas make the mistake of applying for an amount more than what they can afford, or not taking into account a financial contingency. While any lender will study your spending pattern to determine your borrowing capacity, but you still need to account for the savings you should make to cope with untoward incidents such as loss of income, family emergency and others.

4. Not Applying for a Fixed Loan

Many borrowers make the mistake of foregoing a fixed loan and applying for a loan with adjustable loan rates. While applying for an adjustable home loan is a great idea when the rates are near their all time high and the probability of them going southwards is much more than these rates going up, it is not a good idea to apply for an adjustable rate mortgage when the rates are already low. That’s because, in such a scenario the chances of rates going up from their all-time lows are much more than them going down, further.

Conclusion

Obtaining a home loan is a big financial decision, and therefore, you cannot afford to make any mistake. One of the ways to avoid a mortgage mistake is to talk to the lender and take their help to clarify your doubts. An even better idea is to hire a home loan consultant who can walk you through the process of choosing and applying for a home loan that best suits your requirement.

Are You a First-Time Homebuyer? Here are 5 Tips You Must Follow

As a first time homebuyer you might be going through mixed emotions. You might be excited and tensed, both at the same time. While the excitement of owning your home would be at its peak, the tension of whether you are making the right decisions would be no less. Whether you are a first time homebuyers planning to buy a home in Texas or anywhere in the US, we list five tips in this post to help you ease the tension and make your home buying process simpler. Let’s take a look.

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1. Assess Your Financial Capability

Before taking up a long-term liability such as a home loan, you need to be sure that you will be able to repay it on time. To be sure, you first need to determine your repayment capability. Evaluate your asset and liabilities, as in pen down your income and your expenses to find out what amount you can spare on a month to month basis for repaying the loan.

2. Review Your Credit Report

Credit score is one of the most important factors that underwriters consider when approving a home loan. It is, therefore, important for you to maintain a healthy credit score. To ensure everything’s okay on the credit front, keep reviewing your credit report on a regular basis. If there are any errors talk to the credit rating agencies and get them fixed before you apply for a home loan.

3. Weigh Different Home Loan Options

There are more than a few home loan programs for homebuyers looking for a home loan. Which home loan should you opt for, is something that you need to determine. You need to start by first listing down the programs that you are eligible for. Once you have listed the programs do a comparative study by weighing the pros and cons of each program and how they affect you, in particular.

4. Get Pre-qualified

Once you have decided which home loan suits you best, you need to get a pre-qualification from the bank. The pre-qualification process involves lenders reviewing your financials to evaluate your repayment capability and determine a pre-approved amount that they can lend you. Though the amount is a ballpark figure, it helps you narrow down your search by giving you an idea of the properties you should be considering.

5. Seek Professional Help

Hiring a professional to help you with your home buying process may cost you a few dollars, but they are worth the spend. You can hire a home buying consultant who can help you with all the aspects of home buying, be it property search, home loan approvals and home inspection. In addition to these aspects, a home buying would also help you consider aspects such as water damage and homeowners association fees, which you may forget, especially if you are a first-time homebuyer.

Conclusion

Home buying is a huge responsibility, and as a homebuyer you need to consider a lot of factors when buying a new home. Now that you have been through this post, we hope you are more confident of buying a new home. If you are a first time home buyer in Texas, we especially recommend seeking professional assistance.

Debunking Some Common First-time Homebuyer Myths

First time homebuyers have many questions concerning things they must consider when buying a property, the amount they must spend, and the different sources they can tap to finance their investment. To assist first time home buyers in Texas and other parts of the U.S., many government bodies operate loan programs for first time home buyers. The aim of these programs is to help first time homebuyers secure home loan at relaxed norms. It is also important for homebuyers to avoid some common myths related to buying a home for the first time. To help buyers take steps in the right direction, the post lists some such misconceptions and corresponding facts. Take a look.

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1. Buyers Must pay 20 Percent of the Loan Amount as Down Payment

Many buyers think they need to pay 20 percent of the loan value when buying a home. Though there is no denying the fact that paying 20 percent down payment can help lower your interest rates, this certainly is not a qualifying criterion to get a loan. Many  lenders offering conventional loans accept a lower downpayment, if you are willing to pay a higher interest rate. Opt for a private mortgage insurance, a fee that lenders charge for borrowers who pay less than 20 percent down payment. You can also opt for a loan program backed by government bodies such as USDA loan, VA loan, or FHA loan that have relaxed down payment norms.

2. Buyers With bad Credit Cannot get a Loan

A good credit score is one of the important factors lenders consider when approving a home loan case. That said, many lenders offer loans to buyers with bad credit provided they are ready to pay a higher interest rate. Further, lenders offering VHA, USDA, and FHA loans have relaxed credit score requirements and in some cases lend even to borrowers with a weak credit score (600 or less).

3. Using the Services of a Real Estate Agent is a Waste of Money and Time

There is no denying the fact that in this Internet age buyers can get important info with the click of a mouse. Many real estate sites have listings that provide info about vacant properties, and circle rates. All properties, however, are not listed which can result in the buyer missing out on some good houses within their budget. Local realtors have info about such properties and can help the buyer get the best deal according to their requirements. Further, real estate agents are negotiation experts and can help their clients save more when investing in a property.

4. A 30-Year Mortgage is Always the Best Option

Many first time home buyers prefer opting for a 30-year mortgage instead of a 15-year one due to the low EMI. 30-year mortgages, however, have a higher interest rate. When choosing between the two mortgage terms, it all comes down to the buyer’s preference. Borrowers who are cash strapped but do not mind paying a higher interest rate can opt for a 30-year mortgage. For buyers with a steady income and savings opting for a 15-year mortgage can be the better of the two options.

Conclusion

Buying a home for the first time can be a daunting task as the buyer, in most cases, has no or very limited clue about the factors to consider when investing in a property. If you are a first time homebuyer, avoiding these myths can help you take informed decisions. Further, when opting for a loan, discuss the pros and cons of different programs with your lender or a loan consultant.

Closing Costs VA Loan Borrowers Must Know About

Closing costs are one of the major costs associated with taking a VA home loan in Texas or any other state in the U.S. Typically, the VA loan closing costs vary in the range of 1-3 percent of the loan amount. The actual amount depends on many factors such as the property’s value, lender fees, and HOA fees. To lessen the burden of home loan borrowers, VA allows sellers to pay a part of the closing costs. If you too are looking for a Texas VA home loan, it is important for you to know about these costs. Here’s a list of some of the most important allowable and non-allowable VA loan closing costs. Take a look.

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Allowable Costs

Loan Origination fee

Lenders charge a loan origination fee of 1 percent of the total loan amount to cover the costs associated with processing the loan. Some common administrative costs associated with processing a loan are- application fee, notary fee, document preparation fee,  and tax service fee.

Appraisal fee

It is common for lenders to order a property appraisal before approving a home loan. The aim of this exercise is to ensure the property’s worth is not less than the value claimed by the buyer. The average VA appraisal fee is around $400-$450 for a single family residence. The fee is non-refundable, even if the loan is not approved.

VA Funding fee

VA funding fee is charged by the VA to offset losses that arise when a borrower defaults. VA funding fee varies in the range of 1.25 percent to 3.3 percent of the total amount depending on the service type, and the down payment amount. Veterans drawing a disability compensation or widows of veterans who died in the line of duty are exempted from paying this cost.

Non-allowable Costs

Attorney fee

Hiring an attorney to help with the interpretation of the sales contract or a timely closure, attracts an attorney fee of around $400. The VA, however, does not allow VA loan borrowers to pay an attorney fee except the title work.

Notary fee

The notary will validate the transaction between you and the seller by verifying the signatures of parties involved. Notary fees usually varies between $2-$20. The actual amount will depend on the regulations of the state where you get the sale deed notarized.

Tax Service fee

Tax service fee is charged to ensure that buyers pay the due property taxes. In case of conventional loans, the cost has to be paid by the buyer, however, VA does not allow veterans to pay this cost.

Conclusion

Closing costs form a major part of the home buying costs. Buyers can negotiate with the seller to pay a part of their closing costs as the VA allows sellers to pay up to 4 percent of the home loan as a part of the closing costs. Veterans can also finance closing costs into the loan,however, that would mean a higher monthly payment obligation.

5 Possible Hurdles You May Need to Cross When Obtaining a VA Loan

Though obtaining a VA loan is one of the easiest ways for veterans to secure their dream home in Texas and elsewhere in the US, some applications don’t go through. The reason is that some veteran applicants fall short of the qualifying requirements laid by the Department of Veteran Affairs. From a typo in the loan paperwork to misrepresentation of facts in the loan application, there can be several other reasons for the rejection of your VA loan application. To make sure your VA loan application is not rejected it is important to first know about the possible roadblocks in obtaining a VA loan. Continuing the discussion, the blog post discusses five hurdles you should know about before applying for a VA loan in Texas and elsewhere in the US.

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1. Low Income

The Department of Veteran Affairs require the applicants to have the “minimum residual income” to qualify for a VA loan in Texas and elsewhere. The minimum residual income, as the name suggests, is the amount left after incurring monthly expenses and the limit differs across states. Income is kept as one of the parameters to assess VA loan suitability, just to make sure the applicant has the financial bandwidth to comfortably pay monthly mortgages after getting done with fixed monthly expenses.

2. Low Property Appraisal

Qualified VA appraisers conduct property appraisal to determine the “fair market value” of the property before deciding an appropriate loan amount. Simply put, the VA appraisal is an assessment of the property’s value and habitable conditions. Though the appraisal process is a win-win proposition for the lender and the loan applicant, it can impact the loan amount if the property comes out to be undervalued. Most VA lenders are willing to sanction a loan amount equivalent to the “appraised value” and not the one quoted by the seller.

3. Bad Credit Score

Though the VA loan program has no minimum credit score requirements to apply, applicants shouldn’t underestimate the value of a sound credit score. The VA loan program is federally backed; however, the government needs to protect the interests of both the lender and borrower. That said, you should focus on improving your credit score before even thinking about applying for a VA loan in Texas. Most lenders prefer a 620 credit score; however, it doesn’t mean that securing a VA loan is impossible beyond 620. Improve the credit score as much as you can to increase the odds of securing VA finance in one go.

4. Unacceptable Property Purpose

If you are thinking to buy a holiday home for staying once in a while, the VA loan is probably not the option. You can secure a VA loan to buy a property in Texas or elsewhere in the US, provided it’s going to be your primary residence. Remember that you can still rent a portion of your primary residence as it’s not against the VA guidelines, however, VA loans can’t be used to finance holiday homes or rental properties.

5. High Debt-to-Income Ratio

If your monthly income is already tied up in other debts, it may hamper your chances of getting a VA loan approval. VA lenders give weightage to an individual’s debt-to-income ratio for assessing suitability. The best way to solve this problem is to wait until a debt is completely paid off before applying for a mortgage or better, try consolidating the debt to the loan amount to reduce the size of monthly payments. You can also find a co-borrower to get away with a high debt-to-income ratio.

Wrapping Up

The VA loan program has several guidelines, and therefore, it’s essential to get acquainted with the process before applying for a loan. The roadblocks mentioned in this post are avoidable, if you do your homework to fulfill the eligibility criteria. Spend some time researching the intricacies of the program, or even better, seek professional assistance from a reputable mortgage firm to increase the odds of getting your loan application accepted.

A Guide to Understanding VA Funding Fee

VA home loan in Texas and other parts of the U.S. are offered to American veterans or their surviving spouses. These loans are guaranteed by the US Department of Veteran Affairs and come with several benefits such as zero down payment, lower than usual interest rates, and no prepayment penalty. While most of the closing costs can can be paid by the seller, veteran borrowers are required to pay the VA funding fee, a onetime fee, out of their pocket. Veteran borrowers may also get this fee rolled into their loan account. If you are on active duty or a retired veteran, and are thinking of obtaining a VA home loan in Texas, you must know about the VA funding fee.

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Defining VA Funding Fee

VA funding fee is charged to lower the taxpayer’s burden and cover any losses that may arise due to the borrowers defaulting. The fee is paid directly to the VA and helps them continue providing benefits such as zero down payment to borrowers. Funding fee is a percentage of the loan amount and depends on many factors such as your military category, and whether you are buying your first home or a subsequent property. You can either choose to pay the VA funding fee upfront in cash or request the lender to roll this cost into your loan amount.

The Fee Amount

To be eligible for a  VA loan you do not have to provide down payment, however, paying some amount upfront helps and can lower the quantum of VA funding fee, which is 2.15 percent of the total amount for borrowers with no down payment. You can lower this to 1.5 percent by paying a down payment of  5 to 9 percent of the loan amount. If you have more cash at your disposal, pay 10 percent of the loan amount or more, which would help bring the VA funding fee down further to around 1.25 percent. Borrowers with a previous VA loan are required to pay 3.3 percent of the loan amount as VA funding fee.

Exemptions

Qualified veterans with a service related disability are exempt from paying VA funding fee. Surviving spouses of veterans who died in the line of duty, or due to a service-connected injury or disability can also apply for this benefit. Eligible borrowers need to apply for this exemption and must mail documents such as Certificate of Eligibility, a copy of the VA notification of disability rating, signed VA Form 26-8937, and documentation of retirement income received to the VA.

Conclusion

VA funding fee is one of the major costs associated with getting a VA home loan in Texas. When applying for a loan, ask your lender about the VA funding fee. The good news is that you can ask the lender to roll the cost in your loan amount, which makes owning your dream home affordable. That said, you must also remember that this will increase your monthly payment obligation.