Tag Archives: Texas Mortgage Lending

What Impact Does A Soft Credit Check Have On Your Score? Our Houston Mortgage Company Takes A Closer Look

Understanding Soft Credit Check & Its Impact On Your Credit Score

Your credit history does influence a significant part of your financial life choices. A soft credit check is mostly done for promotional or informational purposes at is one of the methods you can employ to ensure that you stay on top of your credit score. Three top-end credit bureaus – the Equifax, Experian, and TransUnion – handle credit reports for consumers and provide one free report annually.

Every time you or any other party checks your credit, it will be reflected in your credit reports. Given this fact, have you ever received an offer for a credit card via email or postage and wondered who the credit card companies knew you would need one or qualify for a credit card? They probably did a soft credit card check to determine if you are eligible for such an offer.

Why Soft Credit Check?

As stipulated by the Fair Credit Reporting Act, all consumer credit reporting bureaus are required to keep a record of all the parties (businesses or organizations) that review your credit score.

In most cases, the soft credit check is done without your knowledge, and you do not get to initiate these inquiries, such as when applying for new credit. But there is an exception to it, which is only when you check your credit score yourself.

The soft credit inquiry may be:

  • A review of your credit history and score by a lender from whom you requested your current line of credit
  • Pre-approved credit offers
  • Review of your credit for certain purposes such as security insurance
  • Review requests from your landlord

The soft credit checks will be reflected on your credit history reports for two years so that they highly all the parties (individuals, businesses, or organizations) that reviewed your credit. Fortunately, the soft inquiries do not dent your credit score or history.

A Soft Check Vs. A Hard Check, What Is The Difference?

A hard credit check is initiated when you request for a line of credit such as an auto loan, credit card, personal loan, or a mortgage. After submitting your application to the lenders, they will make inquiries into your credit history and score to find out if you qualify to get the line of credit.

In comparison to the soft credit check, hard inquiries can hurt your credit history and score. One of the top reasons is the fact that the hard check will highlight high credit risks that the lender will take into consideration when approving your loan request. The more the hard inquiries, the less favorable things are for you since they make it appear as though you are having a tough time managing your finances.

On the other hand, soft credit inquiries are never included in the risk calculation since the checks are conducted without you knowing are for promotional or informational purposes. As such, your credit score is never dented irrespective of the many soft inquiries that are done and appear on your credit history report.

What Are The Benefits Of A Soft Credit Check?

The soft credit inquiries have few drawbacks that are quickly overshadowed by the benefits that include:

  • The queries offer for new and better lines or credit as well as credit cards
  • You can manage to maintain or increase your credit score thanks to the regular inquiries.
  • The checks can help you get pre-approved for better mortgages
  • They can help landlords distinguish you from other tenants when you are interested in leasing an apartment with controlled rent.

Overall, the soft credit checks will let you know the number of inquiries made and by whom, and when. All this information can be reflected in a section of your credit history report. Moreover, you also can review your credit details when you see the need, and you do not have to worry about being penalized.

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What To Watch For When Working With A Home Loan Company In Texas

Texas Loan Companies: What You Need To Look Out For

We have all been there. You have an emergency or bills to pay but have no money at all. A personal loan is the first thing that comes in mind when in a tight spot and need cash fast. With dozens of loan companies at your disposal, you are spoilt for choice, or are you? You, however, shouldn’t borrow from the first company you come across.

There are several important factors that one should consider applying for a loan from any company.

Understanding Personal Loans

A personal loan can be defined as money borrowed from a lender to be paid back with interest at a later time. Lenders have to determine a person’s eligibility for a loan before processing or approving a loan application. Lenders will look into an applicant’s:

  • Income
  • Credit history and score
  • Employment status
  • Debts
  • Expenses

After submitting the loan application papers, the lender starts processing the loan immediately, then calculates how much you should pay for the same. You will, however, get these details once the loan has been approved. Should you be unable to repay the loan in full, the lender might choose to use debt collectors or even use legal action against you.

Why Should You Get A Loan?

Most people are eligible for different types of loans. Nonetheless, you should go about applying for loans simply because you can borrow. Financial experts advise against this and only recommend going for one for genuine reasons. Personal loans should, therefore, be treated with the utmost care to avoid building a mountain of debt on yourself. You should also avoid inquiring about a loan too often, as this too can affect your credit score.

Outlined below are some of the good reasons why people get personal loans.

1. To Pay For Medical Expenses

You can never prepare adequately for a medical emergency. Even your medical insurance might not be enough to cover for all expenses. If your savings are running low and unable to settle the medical debt, you can apply for a personal loan. With the personal loan, you should be able to clear the expenses more conveniently. The loan repayment plans are more manageable as compared to having to pay a lump sum at once.

2. For Home Improvement

A home improvement project can help give your home a value boost. That said, some projects can be too costly for the homeowner, forcing him/her to seek financing instead. A personal loan will come in handy in funding some of the expensive projects such as roof replacement or extensions. Some of these improvements tend to pay the loan off in one way or another.

3. Debt Consolidation

There are times when you will have several loans to service. This means some of the loans might end up being forgotten, forcing you to make late payments. Going for a debt consolidation loan can however help you manage these loans at once. The loans are consolidated into one, meaning you only have to think of one loan from that moment on. This reduces the risk of late payments and additional charges that may come with late payments.

4. Significant Purchases

Big purchases may put a huge dent to your savings account. Some investments, such as when you need to replace appliances in the house, or need to buy a car require lots of money. You can take a personal loan to help top up the amount you already have. Many people take loans to pay for their cars and other major purchases in the house. As long as you are confident, you’ll be able to repay the loan on time, then taking a personal loan can be beneficial.

Factors To Consider When Looking For A Loan Company

As mentioned earlier, it wouldn’t be wise of you to apply for a loan from the first company you see. Shopping around can land you a better deal. Here are some of the factors you need to consider when looking for a lender.

1. Interest rates: Check to see how much the company charges in interest. Variable interest rates may seem enticing but are riskier in the end.
2. Reputation: Look for a company reputable enough to stick to the terms of the contract. In addition to this, the company shouldn’t share your information with other companies or advertisers.

3. Repayment terms: Only go for the company offering flexible repayment terms. A trustworthy company will be willing to discuss the repayment terms with the customer.

4. Upfront fees: Some companies will require you to pay upfront fees. Most of these companies aren’t worth it.

5. Customer care: Customer support is critical too. You should be able to reach the company at any time of the day when in need. They should also be responsive to inquiries.

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Important Tips About Home Equity Loans

Important Things You Should Know About Home Equity Loans

Home equity loans offer a way to borrow money to purchase big-ticket times. It is critical to understand the facts about these loans to ensure that you make the best financial decisions.

If you are thinking about taking a home equity loan out, first you should know about the 13 things below.

1. What Is a Home Equity Loan? (HEL)

This type of loan is where a borrower uses the equity in their home as collateral on the loan. Home equity loans let you borrow a large lump sum of money based on your home’s value, determined by a professional appraiser, and the current equity in your property.

There are both adjustable-rate and fixed-rate home equity loans that are available and they also have different amounts of time for repaying the debt, and typically range from 5 to 30 years. There are also closing costs that must be paid, but they are much less than the ones paid on a full mortgage.

Fixed-rate home equity loans offer the predictability of a fixed interest rate from the very beginning, which is preferred by some borrowers.

2. What Are The Best Uses For A Home Equity Loans?

Usually, home equity loans are best used for individuals who need money to pay for a major expense, such as a home renovation project. One thing that home equity loans are not especially useful for is to borrow small sums of money.

Typically lenders don’t want to deal with making small home equity loans. About the smallest amount that you can get is $10,000. For example, Bank of America has a minimum of $25,000 for its home equity loan amount, while Discover offers $35,000 to $150,000 home equity loans.

3. What Is a Home Equity Line of Credit? (HELOC)

This is a revolving line of credit that is based on your home’s equity. After the limit has been set by the lender, you will be able to draw on the line of credit whenever you want to over the life of your loan by simply writing a check against this line of credit.

A HELOC in some ways is similar to credit cards: you don’t have to borrow the entire amount of the loan, and your available credit gets replenished as you continue to pay it back. You could, in fact, pay the loan back in full over the draw period, then re-borrow the total line of credit amount, and then repay it once again.

Typically the draw period will last around ten years with a repayment period of 10 to 20 years. You only pay interest on the amount you borrow from the total amount that is available, and usually, you are not required to repay the loan until the draw period closes.

Sometimes HELOC loans also have an annual fee. The repayment period for a HELOC has adjustable interest rates, and usually, they are based on the prime rate, although often they can be converted over to a fix-rate loan following a certain time period. Also, there are usually closing costs that need to be repaid on a loan.

4. What Is A Home Equity Line Of Credit The Best For?

A HELOC is usually best for individuals who are expecting to need a varying amount of money over time. For instance, to get a business started. If you do not need as much as is required by a home equity loan, you can choose a HELOC instead, and borrow only what you actually need.

5. What Are the Benefits of Home Equity Lines of Credit and Home Equity Loans?

Beyond having access to large amounts of money, home equity lines of credit and home equity loans also have the advantage is usually the interest that you pay is tax-deductible for people who itemize deductions, since it is same as conventional mortgage interest.

Federal tax law lets you deduct mortgage interest on home equity debt of up to $100,000 ($50,00 each for married people who file separately). However, there are some limitations, so consult with your tax adviser in order to determine what your eligibility is.

Because home equity line of credit and home equity loans are secured by your house, the interest rates tend to be lower as well compared to what you would pay on an unsecured loan or credit card.

6. What Are the Main Disadvantages of Home Equity Lines of Credit and Home Equity Loans?

The debt that you are taking on from a HELOC or HEL is secured by your house, which means that your property is the collateral on the loan and may be at risk if you do not make all of your loan payments. You could potentially be foreclosed on your home and lose if you are delinquent on your home equity loan, and also the same thing is true on your main mortgage.

In the event of a foreclosure, the first to be paid off is the primary mortgage lender, then the home equity lender gets paid with whatever is remaining.

If the value of your home declines, you might go underwater and end up owing more money than your home is worth. Rates on HELOCs and HELs also have a tendency to be higher than what you would pay currently on a mortgage and then fees and closing costs can start to add up.

7. Can I Determine What My Equity Is?

If you have an interest in learning how you can qualify to get a home equity loan, the first thing that needs to be determined is the amount of equity you have in your home.

Equity is the part of your house that you own, while that part that you owe is owned by the bank. If your house has a $250,000 value and you owe $200,000 still on your mortgage, and the equity that you have is $50,000, or 20%.

This information is commonly referred to as the loan-to-value ratio – which is the balance that is remaining on your loan that is compared to the value of your property – and in this case, it is 80% ($200,000 is 80% of $250,000).

8. How Can I Qualify To Get a Home Equity Loan?

In general, lenders will usually require you to have an 80% loan-to-value ratio at least that remains after a home equity loan to be approved. This means you will need to own over 20% of your home before being able to qualify to get a home equity loan.

If you own a $250,000 house, you need 30% equity at least – a mortgage loan balance of a maximum of $175,000 – to qualify to get a home equity line of credit or equity loan of $25,000.

9. If I Have Bad Credit Can I Still Get A Home Equity Loan?

Many lenders require a good or excellent credit rating in order to qualify to get a home equity loan. To get a home equity loan it is recommended to have a credit score of at least 620 and to get a home equity line of credit you might need to have an even higher score than that.

However, there are some situations where someone with bad credit might still be able to get a home equity loan if they have a low debt-to-income ratio and have a high amount of equity in their house.

If you believe you will be shopping for a home equity line of credit or home equity loan fairly soon, you should first consider taking the steps to improve your credit.

10. How Soon Will I Be Able To Get A Home Equity Loan?

You can technically get a home equity loan right after you buy a house. However, home equity usually builds up slowly, and that means it may be a while before you have built up enough equity in order to qualify for a home equity loan.

It may take five to seven years to start to pay down on the principal of your mortgage and start to build equity.

The normal processing time for a home equity loan can be anywhere from two to four weeks.

11. Is It Possible To Have More Than One Home Equity Lines of Credit?

It is possible to have more than one home equity lines of credit, but it is rare, and not many lenders offer multiple ones. You would need to have excellent credit and substantial equity in order to qualify for multiple home equity lines of credit or loan.

If you apply for two HELOCs at once but from two different lenders but do not disclose them it is considered to be mortgage fraud.

12. How Are The Best Banks To Get Home Equity Loans From?

Brokers, mortgage lenders, credit unions, and banks all provide home equity loans. A little shopping around and research will help you determine which of the banks are offering the best interest rates and home equity products for your situation.

Start with the credit unions and banks where you have a relationship already, but also ask for referrals from family and friends who have received loans recently and also make sure that you ask about fees. Insight can also be provided by real estate agents.

If you are not sure of where to get started, the following are a couple of options for you to consider:

  • -Lending Tree works along with qualified partners in order to the best interest rates and provides an easy way of comparing lending options.
  • -Discover provides home equity loans range from $35,000 up to $150,000 and they make it very easy to apply for loans online. At closing, there is no cash required or application fees.
  • -Bank of America on primary homes provides HELOCs of up to $1,000,000, makes it very easy to apply for online, and for existing bank customers offers fee reductions, but does have higher debt-to-income ratio requirements to many other lenders.
  • – Citibank has options for applying in person, over the phone, or online for both HELOCs and HELs. Citibank will also waive closing costs and application fees – but on HELOCS there is an annual fee that they charge.
  • – Wells Fargo currently only offers HELOCs with fixed rates, but discounts are offered to Wells Fargo customers, and reduce interest rates if the closing costs are covered.

13. How to Apply for a Home Equity Loan

Before you are able to apply for a home equity loan there are certain requirements that must b met. Follow the five steps below to improve your chances of getting approved for a home equity loan:

  • – Check your credit score. Having a good credit score makes it easier to qualify for a home equity loan. Before you apply for a loan, review your credit report first. If your credit score is less than 620, and you aren’t desperate to get a loan, you might want to take the necessary step to improve your credit before applying.
  • – Determine what your available equity is. The amount of your equity will determine how large of a loan you are able to qualify for. You can get a general sense of the amount of equity that your house has by checking websites like Zillow in order to determine what its current value is and then deducting the amount that you owe still. The lending institution’s appraiser will determine what the official value of your house is (and therefore what your equity is) when you apply for the loan, but you can get a pretty good sense of the amount of equity you might have by doing a bit of research first.
  • – Check your Debt – YOur likelihood of qualifying for a home equity loan will also be determined by your debt-to-income ratio. If you have lots of debt, you might want to work at paying it down first before applying to get a home equity loan.
  • – Research rates at various lending institutions and banks. NOt every lending institution and bank will require the same qualifications, fees, or rates on their loans. Do your search and before you start the application process, review multiple lenders.
  • – Collect the required information. It may be a lengthy process to apply for a home equity line of credit or home equity loan. You can speed up things by collecting the necessary information before you get started. Depending on the lending institution you work with, you might have to provide tax returns, pay stubs, a deed and more.

If you need to have a loan to help with covering your upcoming expense, be sure that you are prepared. Check our Loan Learning Center to review more resources on different kinds of loans that are available.

FAQs on Home Equity Loan

The following are a couple of the more commonly asked questions on home equity lines of credit or home equity loans:

  • Why is a home equity loan a good option for financing?
  • Usually, home equity loans come with a lower interest rate compared to another form of credit or traditional loan. Also, it is a secured loan and your house is the collateral. Therefore, the bank views the loan as less risky. Also, as previously mentioned, it is a tax-deductible form of financing.
  • Variable or Fixed Interest Rate?
  • Home equity loans have a fixed interest rate since it is considered to be an installment loan. But a home equity line of credit might have an interest rate.

Why does a home equity loan have closing costs?

Closing costs are necessary to set a home equity line of credit or home equity loan. These closing costs may cover the property appraisal fee for finding the value of the house, title and property insurance, mortgage filing and preparation fees, a title search on the property, attorney’s fees, and application fee. Overall, fees might total up to two to five percent of the total amount of your loan.

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Whats A Loan To Value Ratio?

What is the Loan to Value Ratio 

The Loan-to-Value Ratio is one of the most important basics when it comes to applying for a mortgage.

If you are shopping for a new home or are already applying for a mortgage then you will have heard of the loan-to-value ratio before. The acronym LTV is used a lot in the news, as well, and cropped up frequently when people found themselves in negative equity when the housing market crashed over a decade ago.

No matter what the situation in the housing market, it is important that you understand LTV, and that when you apply for a home loan you get the best deal that you can. Having an LTV that is too high can mean that you have to pay a lot more for your mortgage and that your refinance options and loan eligibility become poorer.

The LTV ratio is easy to calculate:

  • Just divide the loan amount you are applying for by the appraised value of the property.
  • That gives you the ‘loan to value’.
  • The hard part is determining the true value of your home.
  • The LTV ratio is the amount of the mortgage loan, divided by the purchase price or the appraised value of the property (whichever is lower).

If you are refinancing a mortgage, then the LTV is the outstanding loan balance divided by the property’s appraised value.

Lower LTV figures are better when it comes to getting a good rate on your mortgage.

Let’s take a look at a few simple calculations

Let’s calculate a typical LTV ratio:

  • Property value: $600,000
  • Loan amount: $450,000
  • Loan-to-value ratio (LTV): 75%

In the above example, we would divide $450,000 by $600,000 which gives us a result of 0.75, or 75%

You can do calculations like that in your head, or using a standard calculator. There is no need to use an online “LTV Calculator”. The arithmetic is not complicated and it’s a one-step process. It’s something that anyone can do, and it will arm you with some useful information for getting ready to apply for a mortgage.

Once you know your loan to value, that gives you an idea of the equity you hold in the property. In this case, your loan is for 75% of the property, so the remaining 25% of the property is the ownership that you hold.

It is important to know your proposed (or current) LTV so that you can show to the lenders that you actually have some money to put into the property. Lenders like to know how much of a risk they are taking when they allow someone to borrow from them.

Lower LVR ratios mean you own more of the property and are likely to get a better mortgage rate.
The more equity you have or the bigger the downpayment you can put in, the better.
Low LTV means less risk and less interest.

If someone has more ownership then they are less likely to end up falling behind on their payments and the mortgage company is less likely to need to foreclose on them because the homeowner has more to lose.

If they do end up struggling with payments, they could sell the property and not be faced with a massive loss.

Mortgages are tiered, with the tiers based on the LTV ratio. Someone who has a lower LTV ratio will be able to get lower interest rates, and those who have a higher LTV will have to pay a bigger mortgage or more closing costs.

Let’s consider a situation where you have a less than perfect credit score, and lenders want to charge you more interest. The adjustment you are faced with will grow even more if you have a higher loan to value ratio because that means even greater risk.

If you have a loan to value ratio of 80 percent and a poor credit score then that could mean you are faced with a .25 percent higher mortgage rate. If your loan to value ratio was 90 percent then the hit could be 0.5 percent. That might not sound like a lot, but over the term of the mortgage, it could see you paying an awful lot more. It makes sense to find ways to make a bigger down payment and to bring your mortgage as low as possible.

If you can, try to repair your credit score over a few years as well so that you have more loan options open to you, regardless of your equity and downpayment.

The 80% LTV Threshold Matters

It is important to keep your LTV below 80%
That will help you to secure a lower interest rate for your mortgage
It will also help you to avoid Private Mortgage Insurance
Most borrowers will elect to put down a deposit of at least 20%l so that they can avoid mortgage insurance and pricing adjustments

You don’t always need to put down 20% to get the benefits of having a lower LTV, though.

Looking at our first example once more, let’s raise the initial mortgage to $480,000 and add an additional mortgage of $60,000. This gives a combined loan-to-value ratio of 90% since the total amount borrowed is $540,000 on a $600,000 property.

The first mortgage is for 80%, and the second mortgage is for 10%.

Breaking up home loans into ‘combo mortgages’ allows you to keep the loan to value below the threshold, reducing the interest rate and also avoiding the need for private mortgage insurance. Many borrowers opt to do this.

Banks and mortgage companies do have limits on the LTV and CLTV that they allow, so you are not going to be able to borrow more than the property is worth. Many lenders set their thresholds at 80, 90 and 100 percent depending on the value of the property and the credit history of the borrower. These limits were introduced when the credit crunch hit, and they are gradually being relaxed, but it still makes sense to be cautious with borrowing.

If you are looking for a mortgage at the moment, then you are likely to have heard a lot about loan to value ratios. Hopefully, those figures will have cleared things up for you, and you will have some idea of what you should be aiming for. If you want to minimize the interest that you pay and improve your prospects of getting accepted by a good lender for the property of your dreams then you would do well to try to reduce your loan to value as much as you possibly can.

Out of all of the elements of working out mortgage eligibility and how much interest you might pay, figuring out the loan to value ratio is perhaps the easiest. Just divide the amount of the loan by the appraised value to get the LTV.

The hard part is often working out the value of the property.

The loan to value ratio, or LTV, is the value of the being applied for divided by the worth of the property (defined as the lower out of the appraised value and the purchase price).

In the case of an existing mortgage, this is the outstanding loan balance, divided by the most recent appraised value.

The lower the number that you get when you calculate the LTV, the better.

If you are lucky enough to be dealing in fairly round numbers, you should be able to calculate the LTV in your head, for example:

  • Property value: $1,000,000
  • Loan amount: $700,000
  • Loan-to-value ratio (LTV): 70%

All you have to do is divide the loan amount ($700,000) by the value of the property ($1,000,000). This gives us 0.7, or 70%.

You can do this on a calculator, or in your head. There is no need to use a specialist LTV calculator, although if you’re already on a mortgage website then you might want to try it just to use their other tools as well.

The result, 70% is good, because it means that the hypothetical borrower has 30% ownership of the property. This means that lenders will view them as fairly low risk and that they might get a good rate for their mortgage.

To summarize:

  • Lower LTV ratios mean that you own more of the property
  • Lenders see this as a good thing and offer better rates
  • A low LTV means more equity in the property or a bigger down payment
  • More equity means less risk for the lender
  • There are ‘breakpoints’ where if you get the LTV below that level you will be offered more favorable mortgage rates from the mainstream lenders

The lenders know that if someone has more ownership they are less likely to fall behind on their loan repayments and that in the event that they do fall on hard times they are more likely to be able to just sell the property without ending up facing a loss. This means that it is safer to lend to those people and that they will get better prices. In many cases, those with very low LTV ratios will not just see lower interest rates, but also lower closing costs. Keeping the LTV below 80% is valuable too because it helps to avoid private mortgage insurance.

Someone who has a poor credit score should look to avoid a high LTV because they will already be getting charged more for their mortgage. By reducing their overall risk they can reduce the negative impact that their poor credit score is having on them, although improving the score as well will go a long way.

Someone who has a poor credit rating and pays 0.25% more than average for an LTV or 80% would likely end up paying 0.5% more for an LTV that is above 90%. It makes sense, then, for those who have poor credit histories to look for ways to reduce their LTV to below the 80% threshold. The lower the loan to value ratio is, the better, for any borrower but especially for those who have a poor credit rating.

In the long term, building a good credit history is the best option for anyone, whatever their situation. Those who are planning to apply for a mortgage should definitely investigate their credit history.

The Crucial 80% LTV Threshold

  • You should always aim to have an LTV of below 80%
  • This will save you a lot of money
  • Lower LTV ratios mean lower interest rates
  • An LTV below 80% will allow you to avoid private mortgage insurance (PMI) too
  • The traditional way of avoiding higher LTVs is to put down a deposit of 20% when you buy a home so that you can reduce the total amount you pay over the term of the mortgage

You don’t have to do that though, there are other ways to save money on your mortgage and reduce the LTV.

One option is to take out a first and a second mortgage. The total (or ‘combined loan to value ratio’) of the two mortgages may be above 80%, but each mortgage will have a lower loan to value.

For example, you could borrow $800,000 on one mortgage and $100,000 on another, for a combined loan to value of 90% on a $1,000,000 property. The bigger of the two mortgages, however, would still be just 80%. The CLTV would be 90% because the other mortgage has an LTV of 10%.

Combo mortgages can help to keep the LTV on each mortgage below key thresholds, and this will help you to avoid higher interest rates and the misuse of private mortgage insurance. There are limits on the size of the total loan that you can take out and you will not usually be able to borrow more than the total value of the property. Many lenders prefer people to not borrow more than 90 percent of the property value, depending on your credit history.

There are different limits depending on the type of home that you want to buy.

  • FHA loans can often be as much as 96.5%
  • Conforming loans may reach 87%
  • VA and USDA loans are often allowed to be zero deposit/100% LTV

If you are buying an investment property, jumbo or cash-out refi then you are likely to see more restrictions on the total amount that you can borrow. Non-government loans are likely to be more restrictive than a government one as well. Refinances can sometimes be less flexible than loans to purchase a house in the first place.

Loan amounts are increasing. It wasn’t all that long ago that the limit for an FHA loan was 95%, but now Fannie Mae and Freddie Mac are in competition against the FHA which is driving loan amounts up.

Veterans and those who live in rural areas may be able to borrow more than those who are in bigger cities. It is a good idea to shop around, wherever you are buying a property because there are a number of options to buy properties from private lenders that may be willing to offer more flexible financing. There is no need to head straight to the lenders that are advertising on TV. A little legwork could save you a lot of money.

If you have a higher LTV than you would prefer, the good news is that there are a number of ways that you could potentially reduce it.

Borrowers Have Options to Lower Their LTV

For a home purchase loan, use a larger downpayment.
Ask for gift funds as a way of making your downpayment greater.
Break your mortgage up into a combo loan.
Make additional payments or put in a lump sum payment and refinance so that the LTV is lower when you apply.
Wait for amortization and appreciation of the home to reduce your LTV over time.

If you’re purchasing a new property, then the main option is to save and have a bigger downpayment. Yes, that’s not always easy, but it is often possible.

Ask if someone is willing to act as a co-borrower for you or to gift you the money.

Alternatively, look into ways of breaking up the financing into separate loans, and having a first and second mortgage.

With refinancing, you have the option of paying the balance down more aggressively before you apply. Make extra mortgage payments, or wait a bit longer before refinancing.

This could help you if you are close to the LTV threshold, or you need to get below a conforming loan limit.

It’s important to pay close attention to the LTV, because if it is above 80% then you may be paying more than you need to. There are other thresholds, too, where if you can reduce the LTV you may pay less interest.

If you aren’t under urgent need to refinance, then why not take the zero effort approach to reduce your LTV. Just sit back and watch as your house value increases over time. This will lower the LTV in the process. Of course, that isn’t guaranteed to happen. Home values can fall as well as rise.

In general, real estate prices rise over the long term, so your best bet is to be willing to ride out the changes, and to refinance at a time when it is financially suitable for you.

With people who are looking for a cash-out refinance, a jumbo loan, or to acquire some investment property, there are far more restrictions. The Loan to Value is likely to be limited to 70 or 80% at most.

Be aware that if you borrow a lot of money you are taking a big risk. There are borrowers who are now in negative equity because they owe more on their current mortgage than the value of the property today. This can happen for many reasons, and since the housing market is cyclical, you can never be sure that your ‘expensive’ house today will still be in demand in ten year’s time.

Having negative equity (an LTV ratio that is over 100%) is not a problem if you can meet the repayments on your mortgage and you are not planning on moving. It is a problem if you need to move home or if you need to refinance your mortgage. It’s also a problem if you are on a mortgage that is not fixed rate, and the lender charges you more because your LTV is so high.

The Home Affordable Refinance Program has helped a lot of ‘underwater’ homeowners to get back into the black by refinancing on a lower rate without a limit to their LTV. You will need to have a loan that is under Fannie Mae or Freddie Mac if you want to take advantage of that refinance option. There are similar options such as FHA streamline refinance for FHA loans or the VA IRRRL for VA mortgages.

Underwater borrowers can recover. It may take them some time to get back to the same financial standing as someone who bought when the property market was low, but it is possible for them to build equity if they are patient and think long term.

Home buying should not be a hasty decision. It is something that you should work on steadily.

Remember the following:

  • Lower LTV ratios mean bigger savings
  • You will usually get lower interest rates with bigger deposits
  • Long term, you will pay less to repay the mortgage
  • Put more of your money towards paying off the principle by having a low LTV
  • Keep your LTV under 80% to avoid PMI
  • You will have access to more lenders if you have a lower LTV
  • Even people who have a poor credit rating can save money by using a bigger deposit
  • You are more likely to get approved for a mortgage if the lender sees you as being lower risk.

Before making a decision, let one of the experts at The Texas Mortgage Pros help you find out exactly what loan is best for you.  Contact us today Or Call Us @ (866) 772-3802

How Do You Build Home Equity?

11 Ways To Effective Build Home Equity

Home equity is really booming these days.

At a final glance, that total equity on mortgaged properties was approximately $10 trillion with approximately $6 trillion being tappable, according to Black Knight’s recent figures.

Yes, this is a “T and not a “B.” However, just a couple of years ago, you would never have guessed this.

During the early 2000s, everything was all about tapping into your home’s equity line a cash-out refinance or line of credit.

The using your home as an ATM thing for making lavish purchases to just to pay your bills every month.

This resulted in the narrative quickly changing to foreclosures, loan modification programs, underwater mortgages, negative equity, declining equity and so forth.

Funny how this works.

The reversal of fortunes was caused by zero down mortgages and crashing home prices, many of which were not underwritten properly to start with.

Most of the people who ran into problems buying houses at unsustainable prices at the height of the market, while also relying on 100% financing at the same time to close the deal.

That causes many homeowners to consider walking away or to leave, as housing price depreciation became the leading driver of defaults.

However, for many people who stuck around and were able to ride things out, they are in great shape actually and in a much better position now than they were when they took their mortgages out initially.

However, the housing crisis negative effects are still being felt by others even after double-digit house price gains for many years.

If you happen to be one of these homeowners, or maybe you are not but either way, you might be wondering how some home equity can be built.

This way, when it is time for you to sell your house (or refinance the mortgage), you will be able to do it worry-free.

So let’s check out some of the many ways that equity can be built in your home:

  1. Increasing housing prices – whenever prices of houses go up, your equity will increase simply due to the fact that your property will be worth more money. For example, if the current worth of your house is $100,000, and then in five years it increases to $125,000, you will have an additional $25,000 in equity. Unfortunately, as we are all aware, the opposite may occur as well.
  2. Decreasing mortgage balance – Each month, as you are paying your mortgage off, you are paying a portion of the principle (assuming you don’t have an interest-only home loan) and a part of interest. So you gain some home equity with each mortgage payment that you make.
  3. Larger mortgage payments – If every month you make bigger payments, and the extra part goes towards paying down your principle, you will pay your mortgage of much more quickly and increase your home equity much faster. Effective and simple.
  4. Biweekly mortgage payments – With a biweekly mortgage payment plan, throughout the year you make a total of 26 half payments. That will help to shave your mortgage term down save you lots of interest, and also help with building your home equity much faster as well.
  5. Shorter mortgage term – It is also possible to refinance into a mortgage with a shorter term and lower interest rate, like a 15-year fixed mortgage, which due to the bigger payments will result in equity being built much faster compared to when a traditional 30-year mortgage is used.
  6. Avoid refinancing- On the other hand, if you pull out ash and don’t refinance, all of the equity will be retained in your house. During the boom period, numerous homeowners continued refinancing over and over again until all of their equity has been sucked completely dry.
  7. Home Improvements – Making smart home improvements, when the expected value is more than the cost, it will increase the equity in your home through owning a house that is worth more. Although it appears to be the exact same home, stainless steel appliances and quartz countertops draw buyers in still, so you may able to sell your home for a higher price. If you use sweat equity this can even be done for free.
  8. Maintenance – You can be rewarded for keeping your house in top shape when it is time to sell your house. You will be able to sell it for more, as a result since more equity has been created in your house. Frequently home buyers will put in repair requests with sellers, but it will be harder to ask for concessions if your home has been taken good care of. 
  9. Curb appeal – The same thing is true when it comes to home staging. If your home looks good when it is listed, there is a higher chance that it will and for more money. Simple things can really make a huge difference, like lack of clutter, basic cleanliness, flowers, plants, bright lighting, carpet, new paint.
  10. Rent your home out ) When all or part of a property is rented out, you can build equity through using the rent that you get every month from your tenants. It is pretty sweet when someone else is paying your mortgage off, especially when your property is appreciating at the very same time.
  11. Larger down payment – Putting down a bigger downpayment, to begin with, will help you acquire home equity automatically and help to build it more quickly.

Although it may seem as if you are putting money into an illiquid form of investment, having more equity also means having a loan-to-value ratio that is lower, which might result in a lower interest rate, with no mortgage insurance required and make it easier to get financing.

A lower mortgage rate over time will result in you paying less interest and accruing more equity.

Before making a decision, let one of the experts at The Texas Mortgage Pros help you find out exactly what loan is best for you.  Contact us today Or Call Us @ (866) 772-3802

Good Prices For First Time Home Buyers Loans In Texas?

What Is a Good Price for a First-Time Home Buyer? 

Part 4

Finding That Perfect Price For A First-Time Homeowner

There is something that we must all consider and that is known as payment shock, which is basically a large increase in monthly liabilities.

An example of this would be if your housing payment went up 200%, that would be a shocking experience! Imagine paying $1,000 per month for a rental only to have to pay $3,000 per month the next.

You more than likely are beginning to understand what type of situation you are getting into.

It is always going to be better to stay under budget as it is going to take time to deal with the larger costs of owning a home.

This is true once you begin to see all of the other bills associated with owning a home such as that much larger electric bill.

Many times when looking at a home, we tend to over exceed our budgets, which means you have to have a budget ready to go.

Starter Or Forever Home?

Most home buyers usually look for a starter home to begin with.

Typically with time, they will move up to a larger home.

However, one must understand that there are many transaction costs involved in the purchase of a home.

You may consider that buying your forever home right from the get go is a more sensible solution.

Taking the budget out of the equation, it is still not that simple of a process. Home purchases are not only an expensive transaction they are highly time-consuming.

While the cost to close a home is rather expensive, you can expect the process to be rather lengthy.

In addition, it can be just as expensive to sell a home, one must consider repair costs, closing costs, real estate costs, and other associated fees.

In the simplest terms, buying and selling a home is an expensive process, so limiting the experience may be a good one.

If you have the funds, you may just want to look for a forever home and bypass the whole starter home process.

Many millennials have started with this trend and feel as though it is working out for them.

However, statistics have shown that few people stay in the same location for extended periods of time. For many people, they tend to stay in one home for ten years or less.

This just may ruin the fixed mortgage vs. ARM, however, that is a discussion for another day!

You will just have to weight the proc and cons of a starter home vs. forever home to decide what is best for you.

A starter home is going to be your cheaper option in the beginning, however, a forever home may be the cheaper alternative in the long run.

One must simply take the time to decide what is going to work the best for their finances and options at the time being.

In many cases, starting with a starter home is the only way people are able to save up and generate a down payment for their larger home in the future.

However, what do you do if you want to bypass all that and simply buy one home? It helps you avoid a lot of excess costs and headaches.

Plus it gives you a home that you can grow into as a family. In addition, you are not going to find the same level of competition with a forever home as you would with a starter home, so no bidding wars to contend with.

It seems as though that is the best way to go, doesn’t it?

However, this is one of those cases, where it is easier said than done. In all reality, you more than likely will get tired of that home and end up moving down the line.

You are going to find that it can be hard to find a home that is going to match all the various stages of your life at one time.

The Price Depends On Your Needs

There is not one price that is going to fit everyone for their first home.

It is going to vary depending upn your needs and affordability.

However, it is always wise to look into your future before you make that initial purchase.

Be sure you try to negotiate on the price of the home when you find the right one.

Keep in mind, depending upon your needs and wants is going to have an impact on what you pay.

For every location and number of bedrooms and bathrooms that are required will impact your bottom line.

There are going to be times where your price point and what you need and want are not going to add up and you are going to have to find a way to make things right so you can afford something.

If you do have the extra savings and some wiggle room, you very well may be able to afford your forever home today as opposed to ten years from today.

However, you will still be limited by the amount of homes that are in the market.

Price is always going to be determined by square footage, number of bedrooms, desirability, and of course the location.

Every individual is going to have various needs and find out what they are able to afford is quite different.

Basically, there is not one right number to this equation. It is simply a matter of what you can afford and what is available. As well as how many times you are willing to go through this process.

Before making a decision, let one of the experts at The Texas Mortgage Pros help you find out exactly what loan is best for you.  Contact us today Or Call Us @ (866) 772-3802 click here to go to the first article in this series.

Good Prices For First Time Home Buyers Loans In Texas?

What’s A Good Price For First-Time Homebuyers?

Part 3

Today’s Rates

Those who are buying for the first time might want to aim for prices close to these levels, since starter homes are usually cheaper than others. Having said that, it’s always so simple.

Individual housing markets across the country have a variety of home prices, and a lot of cities fall over the median.

Another thing that is a limiting factor is the homebuyer’s finances, because there’s no way to buy more than you can afford to borrow.

The mortgage lenders and banks will go through your income, your assets, and your down payment, and they’ll tell you that you can only borrow so many dollars.

You can’t exceed your upper bound, but you can find out what it is by going in to get a pre-qualification or even a pre-approval.

You might dream of buying a home that’s worth $1,000,000, but your finances might ground you to something that’s $400,000 at most.

It’s still a good starting point, given that you’ll have established what your affordability and personal price ceiling are like. It also means that when you spend time on Redfin or Zillow, you can just set the maximum filters at $400,000 so that you don’t see anything above that.

If you find yourself not wanting to deal with anyone personally, you could choose to put your financial numbers through some mortgage calculators, but you need to be mindful of the fact that these aren’t nearly as accurate.

In either case, you need to look at things other than money, given how there are other factors in play. They include but aren’t limited to the features you’ll require, how long you intend to live in the home, why you want to buy to start with, and so forth.

Do You Hope To Live Above, Below, Or Just At Your Means?

Do you have fun making do with less? Or do you spend until you’re broke? There’s no law that says you must spend the full maximum that you can afford.

Many find it sensible to stay under their maximum so they walk away with a safety net for things that they can’t anticipate.

Let’s go back to our previous example, where you qualified for a maximum buying power of $400,000. It’s useful, certainly, although that doesn’t mean it’s mandatory to spend all that.

You have credit cards, right? Some issuers will give you credit lines up to $25,000. Did you run out and spend all of that? Unlikely. I doubt you even got close.

That number is just what they’ve figured out from your employment, income, and credit history.

Mortgage lenders also do this, using things like proposed down payments and debt-to-income ratio in order to determine your maximum purchase price.

Again, is spending that much even a good idea? Chances are good, particularly if it’s your first time, that you might be smart to aim somewhat lower.

Consider that homeownership typically comes with a lot of unexpected costs, although seasoned homeowners might not think of them as unexpected at all. However, if you’re a first-time homebuyer, they might just shock you.

Even your monthly bills for home maintenance can keep you up at night. If you weren’t already paying for trash, gardening, water, insurance, and other utilities, and now you suddenly are, it can be a jolt to you, and your bank account.

Also, don’t forget that property tax bill or your monthly mortgage payment. There’s also that new furniture you need to buy. You might even have a baby coming into the picture. It’s a lot to deal with!

Before making a decision, let one of the experts at The Texas Mortgage Pros help you find out exactly what loan is best for you.  Contact us today Or Call Us @ (866) 772-3802 click here to go to the next article in this series.

Good Prices For First Time Home Buyers Loans In Texas?

What’s A Good Price For First-Time Homebuyers?

Part 2

If you have credit cards, then you know that issuers give you credit lines you can spend. Some cards might give you as much as $25,000. Should you actually go out and spend every dollar? No, you shouldn’t, and you probably never came anywhere close to that if you had such a card.

That $25,000 is just what they figured you could safely handle after they went through your reported income, your employment history, and your credit reports.

You can expect mortgage lenders to do much of the same thing. They’ll figure out your max purchase price based on factors like debt-to-income ratio and the down payment you’re willing to make.

This is no different than a credit card in that you shouldn’t spend it all. It’s a smart money move to aim for a home that costs less than your upper bound, particularly if you are buying for the first time ever.

Owning a home has a lot of costs that you might not know about yet. Veteran homeowners know about them, but if your history is in renting, then you don’t.

Just the monthly overhead that keeps your home up can be daunting. If you rented, you maybe had the rent, the power, and the cable or Internet, and some apartments even throw those in these days. You weren’t paying for maintenance, water, trash, landscaping, insurance, or property taxes.

Forget the monthlys. What about the furniture? What about the new baby coming? Oh boy! You also have to factor in something known as payment shock, and that’s basically a big jump in monthly liabilities.

For instance, should your housing payment double, it will stun you. If you had been renting for a grand each month and now owe triple that every month, then you might hear concerns from an underwriter.

You need to be concerned too. At the very least, recognize what you happen to be getting into here.

What’s A Good Price For First-Time Homebuyers?

Trying to buy your first home can make you want to pull your hair out. No matter how much you pay, you’ll lose sleep for a few weeks, if not longer.

When I bought my first home, I buried my head under pillows and stayed there as long as I could every morning. I was stressed out beyond belief.

I eventually talked to one of my friends, and brought it up. He told me that if I was anxious over what could happen, then I was halfway there already. I was told in no uncertain terms to chill out. I tried. I really did try.

You’ll Find Out The Most You Might Afford From Your Lender

Start the process by visiting your bank or a mortgage lender.

Many of them offer pre-qualification or pre-approval letters free of charge and without any commitment on your part.

They’ll look at your finances to figure out how much they can afford to lend you.

This will establish how much you can spend when you hunt for a home.

Data from the National Association of Realtors looked at the national median prices of single-family homes in the fourth quarters of 2017 and 2018. They went from $247,800 up 4% to $257,600.

Before making a decision, let one of the experts at The Texas Mortgage Pros help you find out exactly what loan is best for you.  Contact us today Or Call Us @ (866) 772-3802 click here to go to the next article in this series.

Good Prices For First Time Home Buyers Loans In Texas?

What’s A Good Price For First-Time Homebuyers?

Part 1

Buying your first-ever home can get rather nerve-wracking. No matter how much you pay, whether that feels like a lot or a little, you’re going to have some nights early on where you can’t sleep.

When I first bought a place, I buried myself under my blankets and didn’t come out for a while, and that happened for more nights than I want to admit. It was very stressful.

I even talked to a friend about this, and he told me that if I was worrying about what-ifs, then I was practically already there. He told me to chill out, okay? I got it.

The Lender Tells You How Much You Can Afford

Your first stop is probably going to be a mortgage lender or bank.

You might get a pre-approval or pre-qual letter free of cost or obligation.

You can use that to determine how much you can afford just based on your current finances.

That will at least set up a price ceiling you can use as an upper limit for your home search.

There’s no universal answer that suits everyone, but we’re able to talk about underlying stuff that comes up with solutions that work for you.

The National Association of Realtors has data that claims the national median home price for an already existing home for a single family during the last quarter of 2018 was $257,600, which was up 4 percent from the previous year, when it was $247,800.

First-timers might want to look for prices close to these points because starter homes usually fall on the cheaper side of the price scales. Then again, it’s not always so simple.

Home prices in different housing markets around the country are all over the place, with a lot of cities being over the median.

Also, your finances will factor in since they will limit just how much you’re able to afford, and there’s no way around that.

The mortgage lender or bank is only going to let you borrow so many dollars based on your down payment, income, and assets.

That means you could just visit to get your pre-approval or pre-qualification so you can know just how much you are able to afford. This is known as an upper bound, meaning you know you can’t exceed it.

Even if you’d like to purchase a million-dollar home, you might wind up getting limited to properties worth $400,000 because of your finances.

This is a good start since you at least have a pretty good idea what your price ceiling and affordability are. It means you’re able to set your filters on things like Zillow and Redfin so they don’t exceed your purchase price of $400,000.

If you’d rather not talk to anyone, you can even just run numbers on your own through a mortgage calculator, although odds are that it won’t be nearly as accurate.

Either way, you should look past money because there are certainly other considerations, like why you’re buying to start with, just how long you intend to stay, the features you might need, and so forth.

Do You Plant To Live Within, Below, Or Above Your Means?

Are you a frugal soul that enjoys getting by with less? Or do you swing for the fences? It’s not necessary to spend the full maximum that you’re able to afford.

It can even make some sense to buy under so you wind up with a safety net that can cover unexpected costs.

Using the instance from earlier, assume you only qualify for a maximum purchase price of about $400,000. It’s helpful, sure, but it also doesn’t mean that you should spend it all.

Before making a decision, let one of the experts at The Texas Mortgage Pros help you find out exactly what loan is best for you.  Contact us today Or Call Us @ (866) 772-3802 click here to go to the next article in this series.

Are 30-Year Fixed Mortgage Loans In Texas In Danger?

Should We Worry about the 30 Year Fixed Mortgage

Part 2

Calabria Used a 30-Year Fixed Mortgage

Investigative reporting done by The Wall Street Journal has shown that nominee Calabria actually has a 30-year fixed loan on his current residence, which was bought back in 2010. At that time the rate range for these types of loans were anywhere from 4.23% to 5.10%. Rates did drop after that, and he may or may not have taken advantage of a re-finance, another reason these loans and their terms are so popular.

In addition to this it is worth noting that Calabria’s public testimony has no mention of these loans in his prepared remarks. He also re-affirmed that he will be serving Congress and not imposing his own view on how things should be done. While some of this should be expected no matter what when it comes to public hearings and testimonies, it does seem like this is a topic that would come up if a major part of his vision was putting these loans on the chopping blog.

All Smoke Or Is There Any Fire?

As always, it’s hard to know for sure how this is going to work until everyone is in place and actually on the job. While it makes sense to have concern, but at the end of the day based on the reporting right now, this is probably more of unnecessary worry than actual legitimate concern for the pro-30 year loan crowd. In today’s economy few want to take the risk of big or wholesale changes unless they really are confident in this being a necessary change to avert disaster as well as having a clear plan in place to defend against public criticism or importance. The idea that a loan program that is involved in 90% of home purchases & 80% of all mortgages will change or disappear overnight. Even if an adjustment is made away from these loans, this is definitely going to be a long-term shift. That makes the “sudden disappearance” of these loans very unlikely. In the end a major point to consider is that most homeowners only stay on a property for 5-10 years before they move to a different property. Paying more for an interest rate they won’t keep for close to 30 years just doesn’t make sense.

The Texas Mortgage Pros team consists of mortgage professionals all over Texas. We are committed to providing our clients with the highest quality service for your mortgage needs. Combined with the lowest rate and multiple loan programs available in your area – Spring, San Antonio, Tomball, The Woodlands, Dallas, Austin and Houston, Texas. Our outstanding mortgage professionals with years of experience will work with you one-on-one to ensure that you get the home loan that is tailored specifically to meet your situation and expectation. Whether you are purchasing your dream home, first home, refinancing an existing loan, or consolidating debt, our highly experienced team of loan officers can help you find the right loan program at the lowest rate possible.

Our ultimate goal is to create a lasting relationship with each of our clients that we may continue to provide excellent service for many years to come. Unlike many of the larger nationwide mortgage companies that are out there, all your information will be kept secure and private. Our name is trusted throughout the lending community.

 

Before making a decision, let one of the experts at The Texas Mortgage Pros help you find out exactly what loan is best for you.  Contact us today Or Call Us @ (866) 772-3802 Click here to go to the first article in this series.