Types of Mortgage Loans

Buying a home can be a confusing process. Especially when it comes to picking the right mortgage for you. This is something that your mortgage loan originator (MLO) can help you with. To give you a head start at understanding the different types of loans, I am going to share the basics of each loan type. Note: The eligibility and requirements for loans is on a lender-to-lender basis.

Conventional, Fixed Rate: Conventional loans offer some great perks. Down payments as low as 3%, however, if you make a 20% down payment, you don’t have to purchase mortgage insurance. Mortgage insurance is cancelable when home equity reaches 20% and mortgage insurance is offered at a lower cost compared to FHA loans. The minimum required credit score is 620. Conventional loans allow for all occupancy types, including primary residence, second home, and investment properties.

FHA: An FHA loan is the most common loan type, especially among new home buyers. The minimum down payment required is 3.5% of the purchase price. However, some institutions offer special programs that can lower your down payment. Your total monthly mortgage payment cannot exceed 30% of your gross monthly income. You must have consistent employment for 2 years and verifiable income. Eligible properties for an FHA loan are a home with 1-4 units, a condominium unit, or a manufactured home that sits on a permanent foundation. These loans require mortgage insurance which helps protect the lender from losses due to defaults on mortgage loans.

FHA 203(k): This is a renovation loan. Say you want to buy a fixer upper or the home you wish to purchase is not exactly in its glory, this would be the loan for you. It adds the cost of repairs into the loan amount so you don’t have to have the cash on hand for the fix-ups. Some of the repairs that can be included in this loan are roofs, flooring, basement/attic finishing, plumbing, electrical, bathroom/kitchen modernization and window/door replacement. FHA 203(k) loans require a minimum of $5,000 in needed repairs but have no maximum limitations. The repairs need to be quoted and executed by a licensed contractor.

VA (Veterans Affairs): VA loans do not require a down payment and limits your closing costs. VA loans also do not require you to purchase mortgage insurance although some implement a funding fee. There is no penalty to pay the loan off early. You must be the personal occupant of the home, have sufficient income and suitable credit. There are many other eligibility requirements for VA loans. To find out if you qualify, contact your MLO.

For more information, to see if you qualify, or for any other mortgage related questions, feel free to contact:

Michael Poldruhi
CrossCountry Mortgage, Inc
Direct: (440) 375-1040
Cell: (216) 906-3833
Email: mpoldruhi@myccmortgage.com

Moving Checklist

It can be very overwhelming making sure everything runs smooth on moving day. Use this checklist to help keep everything in order:

  • Once everything is moved out, do a sweep of all closets, cupboards, basement, and attic spaces to make sure nothing is forgotten.
  • Put a note on the doors at the new house stating which room it is. Label boxes so the moving crew know which room to put them in.
  • Be sure to mark boxes with breakable items as “fragile”.
  • Consider holding a yard sale or donating to charity old or unwanted items to avoid cluttering your new home.
  • If moving into a new district, be sure to register your kids for school.
  • Call all your current utility companies to schedule termination of service and call all your new utility companies to schedule activation of new service. Services to include could be gas, electric, water, trash, cable and internet, lawn service, and alarm company.
  • Notify your post office of the change of address. You’ll also have to change your billing address on all credit cards and notify your bank, healthcare provider and health insurance company, get a new driver’s license and passport, and don’t forget your friends and family!
  • Unpack your everyday essentials first. Things like toiletries, a few days worth of clothes, dishes, bedding, and electronics chargers.
  • Leaving pets or small children with a sitter on moving day can give you one less worry on an already busy day.

The Home Buying Process

Buying a house can be confusing and stressful. Especially for first time home buyers. Understanding the home buying process will make you feel more comfortable and ensure everything goes a little smoother.

The first step is to get pre approved for financing. This is very important for a few reasons. Knowing how much you are pre approved to borrow will determine the price range you should be searching in. Things like credit, financial history, and your debt to income ratio determine how much your lending institution will allow you to borrow. Don’t waste your time looking at houses that are out of your price range. Having a pre approval letter will also put you in a stronger position to close earlier and negotiate a better price. Sellers are less likely to negotiate with a buyer that is not pre approved because they have no assurances that you will be able to afford the cost of their house.

After you’re pre approved and you’ve hired a realtor (when purchasing a house, a realtors services cost you nothing, that’s right, NOTHING, so why wouldn’t you?!), you’re ready to begin looking for that perfect house. This can be a short and easy process or a long process depending on your needs/wants and what is available on the market at the time. One thing that can help speed up this process is separating your needs from your wants. You might want a finished basement but if there are no current houses with finished basements in your price range are you willing to settle for unfinished then plan to finish it in the future?

So, you’ve found the perfect house, your realtor has gone through negotiations, and you have a signed contract. Now what? Once the purchase agreement (PA) is signed you apply for your loan. This is different than getting pre approved and must be done within 3 days of signing the purchase agreement. Next comes the inspections. Unless the county you’re buying in requires a certain inspection such as a septic inspection, you can opt in or opt out of any inspections. Most common inspections are the general home inspection which is always highly recommended, mold, radon, septic if the home has a septic system. Unless negotiated and stated in the PA, the inspections are paid by the buyer at the time of the inspection. After inspections are completed and all requested repairs, if any, are made by the seller, the lender then orders the appraisal. As long as the appraisal comes back at or above the purchase price, you’re on your way to closing!

On average it takes 30-45 days from contract to close. Be patient and don’t hesitate to talk to your realtor or lender about any questions or concerns you have along the way. After all, that’s what they’re there for!