Tag Archives: Home Buying

All You Need To Know About Home Loans

Here at USAgencies Credit Union, we provide a variety of products and services to meet your specific financial needs and in the most ideal ways possible. One such example is home loans. Let’s take a closer look at how its application process works.

What is a home loan?

A home loan, or a mortgage, enables you to purchase a home without having to foot all the cash out of your pocket when purchasing. You will, however, need to make a down payment, which is typically between 3.5-20% of the home’s appraised value, along with closing costs and some other fees. The lender then finances the rest of the purchase. You’ll repay the loan, along with interest, over the course of (generally) 15 to 30 years.

Are all home loans alike?

Before you get started, you’ll need to choose a mortgage type. A conventional loan will necessitate a 5-20% down payment on the home. There’s also an FHA loan, which only requires a down payment of 3.5%, but necessitates mortgage insurance. If you’re a military veteran, consider obtaining a VA loan, which lets you buy a home with zero down payment.

Once you’ve chosen the kind of loan which is best for your scenario, you may be given a choice of repayment arrangements for that loan. Here are the three common types of mortgages:

  1. 30-year fixed-rate mortgage. The interest rate on this 30-year mortgage will remain fixed no matter the changes to the national rate.
  2. 15-year fixed-rate mortgage. This mortgage will also have a fixed interest rate, but the term lasts just 15 years. The monthly payments will be higher, but the overall interest paid over the course of the loan will be significantly lower.
  3. Adjustable-rate mortgage (ARM). An ARM gives the borrower a lower interest rate in the early years of the loan, and then a gradual increase (adjustment) in rate over the rest of the life of the mortgage.

What do I need to know before applying for a home loan?

A home is likely to be the largest purchase you will ever make. To qualify for one, you will need to prove that you are living a financially responsible life and that you can afford the monthly payments.

The primary way lenders gauge your financial responsibility is through your credit score. This number is like a grade that tells lenders how you’ve handled your past credit card accounts and other debts. It will include the length of time you’ve had your credit cards and loans open, the timeliness with which you’ve made your payments, the trajectory of your debt and the amount of available credit you might use. Most lenders will only grant a home loan to borrowers with a credit score of 650 or higher. You can check your score for free with My Credit Score in our Online and Mobile Banking. You might also consider ordering a free credit report from all three major credit bureaus once a year at AnnualCreditReport.com.

During the time leading to your mortgage applications, make sure to pay all your bills on time, don’t open new credit cards and work on paying down overall debt. A higher credit score will help you get approved quicker and it will net you a lower interest rate on your loan.

Another crucial factor in determining your eligibility for a mortgage is your debt-to-income ratio, or your DTI. Lenders want to know how big your collective outstanding debt will be in relation to your income if you receive the home loan. Most lenders will only allow a maximum DTI of 36%.

When should I apply for a home loan?

While you won’t need the loan until you are ready to close on a house, it’s a good idea to start the process before you begin house-hunting. Your lender will let you know whether you can expect to be approved for a loan and will provide you with an estimate of how much house you can afford so you don’t face disappointment later.

When initially applying for a home loan, ask your lender for a letter of pre-approval. This letter confirms you are preapproved for a home loan up to a specific amount. Having this letter in hand shows real estate agents and sellers that you are serious about buying. Most pre-approvals are only good for 60-90 days, so make sure you’re ready to start house hunting before you get yours.

How do I apply for a home loan?

To apply for a home loan at USAgencies Credit Union, connect with us to help you get started. Make sure all of your financial paperwork is in order and hold onto all important financial documents in the months leading up to your application.

To make it easier, we’ve created a list of the information and documents you’ll need:

  • Name of current employer, phone and street address
  • Length of time at current employer
  • Official position/title
  • Salary including overtime, bonuses or commissions
  • Two years’ worth of W-2s
  • Profit & loss statement if self-employed
  • Pensions and Social Security check stubs
  • Proof of child support payments
  • Copies of alimony checks
  • Statements for all checking and savings accounts
  • Investments (stocks, bonds, retirement accounts)
  • Proof of any gifted funds from relatives
  • Car loan information

You will also need to explain any blemishes on your financial record; including bankruptcies, collections, foreclosures and delinquencies.


Have more questions about Buying or Refinancing, or ready to get your application started? Connect with us at 503.275.0300 or visit our website. 

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USAgencies Credit Union
NMLS#: 441193

Tips to Improve Your Credit Before Buying a Home

Brought to you by our friends at the Bureau of Consumer Financial Protection

In general, the best mortgage interest rates go to borrowers with credit scores in the mid-700s or above. These borrowers also typically have the most offers available to them.

Haven’t checked your credit report recently? Now is the time to do so. You’ll have concrete information to help you make the best decisions about what to do next. And, you’ll find out if there are any errors on your credit report that may be lowering your credit scores. You’ll also see which areas you may be able to improve. Checking your own credit won’t hurt your credit scores.

It’s important to understand that you don’t have just one credit score. There are many credit scoring formulas, and the score will also depend on the data used to calculate it. Today, most mortgage lenders use FICO scores when deciding whether to offer you a loan, and in setting the rate and terms. Most mortgage lenders request and evaluate your credit scores and the scores of any co-borrowers from all three major credit reporting companies and make their decisions based on the middle score.

Check out our step-by-step guide to checking your credit reports and scores. We cover the basics on how credit reports and scores work, how to get a copy of your reports and scores, how to check for errors, and how to file a dispute if you find errors.

If you’re worried about your credit scores, rebuilding your credit (or building it for the first time) won’t happen overnight. But there are steps you can take and mortgage options you can consider if your score isn’t where you want it to be.

Questions? Connect with our Loan Specialists today at 503-275-0300 Option 2.


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Home Ownership : 5 Questions to Guide Your Decision

This article was developed as part of USAgencies Credit Union’s partnership with EverFi, Inc.

As winter melts into spring, you’ll likely start to see “For-Sale” signs popping up in your neighborhood.

Buying a home can be an exciting milestone in your life, and it’s important to educate yourself on the financial implications of home ownership before you make an offer. Whether you’re a first-time home buyer or a current owner looking to sell or refinance, there are a few key questions that should help guide your decision:

5 Questions About Home ownership

1.What are the pros and cons of owning vs. renting?

Owning a home is a long-term commitment. Recent studies show that the average buyer expects to live in their new home for 13 years before selling. While home ownership allows you to build equity and take advantage of tax benefits, owning also comes with risks.

2.Am I ready for the responsibilities of home ownership?

While property is generally considered an appreciating asset, home values are tied to economic conditions. Having your financial house in order is an important first step to buying a house! Are you confident in your ability to pay your bills on time? Are you able to budget for unanticipated costs?

3.How much home can I afford?

Determining how much home you can afford goes beyond the list price of a property. Other factors that will affect your monthly payment include interest rates, taxes, insurance, income, debt, and future monthly expenses – to name just a few. While there are numerous “affordability” calculators out there, it’s important to first understand the whole picture.

4.How will lenders evaluate my mortgage readiness & make loan decisions?

Are you familiar with the “Four C’s of Loan Credit?” – Capacity to pay back the loan, Capital, Collateral and Credit. Lenders evaluate these different factors to determine your eligibility and the terms of a mortgage loan.

5.How will my credit score impact my ability to buy?

Your credit score and the information in your credit report are key factors in whether or not you’ll be approved for a mortgage and at what interest rate. When was the last time you checked your credit?

No matter what stage of home ownership you are exploring, expanding your knowledge about the key financial questions to ask when buying a home will help you make a long-term decision that benefits you!


Have questions about Buying or Refinancing, or ready to get your application started? Connect with us at 503.275.0300 Option 2 or visit our website. 

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USAgencies Credit Union
NMLS#: 441193

Homebuying 101: Investment Properties

Throughout the next several weeks we’ll be posting articles and info on various aspects of the home buying process. Topics will cover everything from saving for a down payment, to refinancing, to purchasing investment properties, and more. We encourage you to connect with us on any questions you might have, and to share this information with friends and family.

With mortgage rates near all-time lows, now might be a good time to consider purchasing a rental property. The process of purchasing a rental home will vary depending on your circumstances, but here are a few considerations involved with the process:

What type of down payment will you have for the property?

Your down payment will impact how much home you can afford and can influence your rate, depending on the loan-to-value (LTV) of the property. Typically, one can get a better rate with a 75% LTV ratio, compared to one of 85% (loans greater than 80% LTV will also require mortgage insurance). The interest rate will vary based on the percentage of down payment (25, 20, 15). In addition to your required down payment you will need to have the equivalent of six months of PITI (principal, interest, taxes, and insurance), based on the property, in savings as a reserve.

Is this your first rental property?

Borrowers who have demonstrated income from other rental properties in their past two years’ tax returns are treated differently than those who are purchasing their first rental property. A soon-to-be new landlord will need to qualify for the new loan using their existing resources (assets, income, etc.) and will not be able to use anticipated rental income from the new property. Those with past rental income, as demonstrated in their past two years’ tax returns, will be able to claim a portion of the   income derived from the new rental property to qualify for the new loan.

I want to purchase a different home and want to rent out my current home. What do I need to know?

As mentioned in the previous question, you will need to have a certain amount for the down payment for the new primary home and that will depend in part on the purchase price of the home. Additionally, you will need to qualify for both the old payment (PITI) and the new payment (PITI) unless you have a documented landlord history. With landlord history you can use a portion of the estimated rental income from the new rental property to assist in qualifying for the new loan.

What if I am looking at a Vacation Home that I will be using as a Second Home?

There is different treatment for vacation or second homes that are not used as rental properties. Treatment for second or vacation homes tends to be more favorable and is typically treated the same as your primary residence.

I’ve heard that if I buy a home with all-cash, I can get a better deal. Is that true?

Maybe, but that is not guaranteed. Keep in mind that if you pay cash up front, you will need to wait a minimum of six months before you can potentially qualify for a loan on that property. You will need a new appraisal on the property if you choose to explore refinancing that property after you purchase it with all cash.

What is the process for getting a pre-approval for a Rental Home?

You will need to go through the same process as you would for purchasing any home. Documentation needed includes:

  • Paystubs dated within the last 30 days
  • W2s for two years. If you are self-employed or if you have rental income from existing rental properties, you will need to submit your tax returns for the past two years. If you are retired, you will need to submit any award letters from Social Security and/or your Government Annuity Letter
  • Bank statements (savings/checking) for two months
  • TSP, 403B, 401k, IRA and any other retirement account statements (last quarter)


Next Steps…

Whether you’re considering your first investment property, or your 10th, one of the best ways to understand your lending options is for you to speak with an experienced mortgage loan officer, like Steven Raymond, VP of Residential Lending at USACU. Steven can help guide you through the process and present you with the best options for your individual needs.

 

Questions?

Steven Raymond, VP or Residential Lending at USAgencies Credit Union, has over 30 years of experience in the mortgage industry. Steven’s seen it all, as far as mortgages go. If you have questions—about purchasing costs, getting pre-approved, or anything else mortgage-related—talk to Steven!

Steven Raymond 
Vice President of Residential Lending, NMLS#: 234025
Direct: (503) 275-0329
Toll-free: (800) 452-0915 x329
Email: sraymond@usacu.org

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Apply for a mortgage online now.

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USAgencies Credit Union
NMLS#: 441193