When applying for a loan, one of the most important factors that will come into play is your credit score. Before you start the loan application process, you should have a clear understanding of how your credit score affects your mortgage rate so you can assess your financial situation.

Most lenders use the FICO (Fair Isaac Corporation) model for credit scores. This model provides consumers a numerical value on a scale between 300-850. Typically, the higher your credit score, the lower the interest rate the lender will offer to you. Lenders use your credit score to determine how reliable you’ll be as a borrower and the likelihood that you’ll repay the loan as agreed upon. Essentially, they want to make sure you’ll make your mortgage payments on time each month. A lower score might indicate that a borrower could make late payments or even miss some. This is all part of your credit history, which they will also take into consideration.

So, can a bad credit score ruin your chances at obtaining a mortgage?

Not necessarily. It mostly impacts which type of loan you’ll qualify for and the interest rate you’ll receive. A conventional loan usually requires a minimum of a 620 credit score, whereas an FHA loan has a minimum of 580. However, it’s important to note that while some loan programs accept lower credit scores, they might require a larger down payment or some other way to mitigate the lender’s risk in taking on the loan. In addition, even though someone with a 580 credit score COULD qualify for an FHA loan, it does not mean that they will; it is at the discretion of the lender within the guidelines of the loan programs.

Let’s look at an example of how a 100-point difference in credit score can impact a borrower’s mortgage payment.*

A borrower has obtained a conventional fixed-rate 30-year loan of $200,000 with 10% down, meaning the amount borrowed is $180,000. She has a 750 credit score and received a 4% interest rate. Her monthly mortgage payment is $859 (not factoring in other fees, such as private mortgage insurance (PMI) or real estate taxes that may be included in the payment). Now, say that borrower dropped to a 650 credit score. She instead received a 5% interest rate. That increases her monthly mortgage payment to $966. That 100 point difference between credit scores ultimately means an extra $107 added to her mortgage payment each month. While that might not seem like a big deal, keep in mind the duration of the loan is 30 years. Having a higher interest rate means a yearly difference of $1,284; over 30 years that totals $38,520.

If you’re interested in comparing interest rates and monthly mortgage payments, use our mortgage calculator.

If your credit standing isn’t ideal, there are ways to build your credit score.**

Don’t worry if your credit isn’t the best right now. Raising your credit score can take a lot of time, patience, and discipline. However, if you follow these simple guidelines you will soon notice a positive change in your credit and ultimately your financial future. You’ll be able to qualify for better rates when it’s finally time to buy a home.

To learn more about credit scores and interest rates, contact one of our licensed Mortgage Loan Originators. If you are ready to begin the home buying process, click here to get started!

*The figures used in this example are hypothetical and the results are intended for illustrative and educational purposes only. **Main Street Home Loans is not a credit repair company. Please contact a credit repair company for more information on how to improve your credit score.

With summer over, it’s the perfect time to start preparing for the approaching winter months. Here are some important tips to help you start getting your home ready for fall.

Clean Your Chimney

Clean your Chimney

One of the last things you want to worry about is having your chimney catch on fire. That’s why it is important you regularly check for any buildup of creosote. If there is a sticky black substance thicker than ¼ inch on the back of your chimney, you should schedule a cleaning and refrain from using your fireplace. Meanwhile, prepare by collecting plenty of firewood to last you in the upcoming colder months.

Inspect the Furnace

Check your furnace and other heating systems to ensure they are in good condition and ready to be used. Even if you don’t have your furnace professionally checked, give it a thorough visual inspection. You should replace your furnace filter, even if it looks fine. One important way to maintain your water heater’s lifetime is by cleaning sediment out, which reduces the chance of clogs and increases energy efficiency.

Organize your Tools

Gather your most used fall tools so they are easily accessible, such as a leaf blower or rake. This will keep you from rummaging through your garage or tool shed when you’re ready to use them. You can even pull out your winter tools (ice scraper, shovel, snow blower) to really get ahead of the game. When putting away your garden hoses, make sure you drain all the water out or you’ll risk having to replace them if they rip when frozen water is trapped inside. You should also drain your outdoor faucets and sprinklers after cutting off the water supply.

Clean Your Gutters

Empty the Gutters

It is a popular belief that you only need to clean your gutters out after leaves and other debris start falling, but that’s not true. Be proactive and clean the gutters regularly to prevent clogs before they happen. This will not only require less time and effort but will extend the lifetime of your gutters and could save you from unexpected costs, such as foundation or landscape damages. If you’re not one for maintenance, hire professionals or consider installing gutter guards to really remove the headache of cleaning.

Check your Windows and Doors

The weather stripping on your doors or windows might have leaks. This means that the hot air from your home could be leaking outdoors (and cool air might have been escaping all summer). If you do find leaks, replacing the stripping is a reasonably easy DIY project. If you have the funds, replacing windows or doors with more energy-efficient options will save money you in the long run.

Taking care and maintaining your home is your responsibility as a home owner. These tasks shouldn’t take more than a weekend to knock out. Even if you live in an area that doesn’t experience winter, some of these tasks still apply to your home. Once completed, you can have peace of mind knowing your home is ready for the change in season.

Fall is also a great time to purchase a home. For those looking for a dream home and finding one that needs a little TLC, there are renovation and rehab loan options that will help cover costs. For more information about renovation loans or the homebuying process, contact one of our licensed Mortgage Loan Originators. If you are ready to begin the process, click here to get started!

If you’re ready to buy a home, you should prepare to have an earnest money deposit. This can be an extremely important part of the homebuying process as it essentially lets a home seller know how serious you are as a buyer. So, what is earnest money?

An earnest money deposit, otherwise known as a good faith deposit, is a sum of money that you pay to the seller to let them know you are ‘earnest’ and will follow through on the contract. It is the closest thing to being able to ‘put your money where your mouth is.’ The money doesn’t go directly to the seller but will be held in escrow or a trust by a third-party who holds all finances during the transaction until the sale is finalized and complete. At closing, the deposit will go towards your down payment or closing costs.

The amount of earnest money is not a set amount and will vary based on the market. Typically, it is about 1-3% of the purchase price of the home, but it ultimately depends on the seller. In a buyer’s market you can expect to put down a smaller deposit, however,  in a seller’s market you could be going up against multiple bids so a larger deposit will likely strengthen your offer.

You can receive your earnest money back if the sale doesn’t go through, but it depends on why it didn’t. If you have the right contingencies, or conditions, in the contract and the seller doesn’t meet them, you can get your money back. For example, if the seller agreed that the home appraisal will match the sale price, but it comes back lower, you can back out of the deal. If you decide that you no longer are interested in the house or if you fail to meet the timeline specified in the contract, the seller has the right to keep your money. That’s why it is so important you’re completely serious and ready to purchase the home when you submit the deposit.

To learn more about earnest money, contact one of our licensed Mortgage Loan Originators. If you are ready to begin the home buying process, click here to get started!

We are thrilled to announce that we are now better serving our Spanish speaking clients by offering our online application in Spanish! All of our Home Loan Consultants’ business websites offer the feature to complete the loan application in Spanish. Simply locate your preferred Home Loan Consultant, or search by specific branch in your respective state, and apply using the Application tab.

Please visit our company website www.mainstreethomeloans.com to apply today!

Getting ready to purchase a home is a huge financial undertaking. While you are probably aware of having to save up for a down payment, you might not know about closing cost fees. Don’t be taken by surprise at the closing table; here’s what you need to know about closing costs.

WHAT ARE CLOSING COSTS?

Closing costs are the fees charged for services performed during the home purchasing process that you will pay at closing. Closing is the final step of the loan process and is a meeting between you (the buyer), the seller, and closing officer (a lawyer or title/escrow company representative, depending on the state). You will review the legal documents provided in your loan package and execute all required documents. This step is extremely important, as it is the final confirmation of the loan terms as discussed with your lender.

WHAT FEES ARE INCLUDED IN CLOSING COSTS?

The closing costs you might have to pay will vary based on the property, where you live, and the loan you choose. The following are a few of the most common fees you may see.

  • Application fee: charged by your lender to process your loan application
  • Home Appraisal: paid to the appraisal company for confirming the value of the home
  • Home Inspection: paid to the home inspector who determined the condition of the home; usually required by lenders
  • Origination: charged by the lender for administrative costs, such as preparing documents. Origination fees are usually charged as a percentage of the loan.
  • Underwriting: fee for evaluating and verifying your loan, charged by your lender
  • Credit Report: your credit history and score will be pulled to determine your eligibility for a loan and interest rates.
  • Title Survey: paid to the title company for doing a very thorough research of the property’s records.

Again, closing costs will not be the same for everyone as they vary by region. On average, most homebuyers typically pay about 2 to 5 percent of the home purchase price. For example, if the home costs $250,000, you might pay between $5,000 and $12,500 in closing fees.

CAN I AVOID CLOSING COSTS?

It is likely you might be able to avoid some closing cost, but not all. Here a few ways to save on closing costs.

  • Look/Ask for discounts: Your lender might offer a discount or even waive your application fee.
  • No-closing-cost mortgage: This option eliminates closing costs, but not completely. You will be charged a higher interest rate, or the fees will be rolled into the total cost of the mortgage. This is a good option for those who might not have the cash at the time of home purchase but be aware that it will end up costing more in the long run.
  • Shop Around: Your lender will probably have preferred vendors, such as title companies, home inspection, etc. It is not required that you use these vendors, so do some research and shop around to find one who meets your needs.
  • Negotiate: Both you and the seller are responsible for paying certain fees. For example, the seller typically will pay the title transfer and realtor commission. You can try negotiating with the seller to have them assume some of your fees.

Your lender will provide you with an estimate of what closing costs will be at the beginning of your application process, which will allow you the chance to shop around to find the best lender and deal for you. After finding a lender and going through the loan process, you will receive a closing disclosure, or the final closing cost total, at least 3 business days prior to closing. This is your time to make sure everything looks right and if you have questions or find a mistake, you have time to contact your lender. If you’re worried about how much you’ll pay in closing costs, there’s plenty of options for you! NFM participates in most state bond programs that provide closing cost assistance.

To learn more about closing costs or bond programs, contact one of our licensed Mortgage Loan Originators. If you are ready to begin the home buying process, click here to get started!

If you are looking to purchase a home, you may have wondered what is needed to qualify for a mortgage. When your lender is determining whether you qualify for a home loan, many factors you may not have considered may come into play. Here are a few mortgage do’s and don’ts to keep in mind during your home buying process.

The mortgage process will require effort and patience, but moving into the home of your dreams will be worth it! If you have any questions about the mortgage or home buying process, contact one of our licensed Mortgage Loan Originators. If you are ready to begin the home buying process, click here to get started!

Loan Programs for Home Remodeling

As the weather starts to warm up, homeowners might begin thinking about home improvement projects. That’s why May is National Home Remodeling month! Owning a home is one of the biggest investments you’ll make, so it’s important to keep up with home maintenance.

As of 2015, 66% of the US owner-occupied housing stock was built before 1980, with around 38% built before 1970, according to the National Association of Home Builders (NAHB). Many of these homes are going to need repairs, renovations, or updates.

There are many renovation and repair loan options available, but we will focus on three: Conventional, FHA, and VA renovation. If you are looking for financial assistance for projects or you’re considering purchasing a home that needs a little TLC, here are a few loan programs for home remodeling.

FHA 203(K)

The FHA 203(K) renovation loan allows a qualified borrower to purchase or refinance a home and finance the cost of renovations/repairs into the overall final loan. (Not to exceed 110% of the after-improved value of the home). The repairs allowed on a 203(K) are not restricted to FHA required repairs that would be deemed necessary by a consultant and/or appraiser but can include a “wish list” of items such as:

Luxury items such as installation of a pool, BBQ pit, or even a hot tub are not allowed.

FHA offers two versions of the 203k program, Limited 203(K) and Standard/Full 203(K). All work must be completed within 180 days of closing.

Limited 203(K)

This program allows the borrower to finance into the loan limited/non- comprehensive repairs:

Main Street Home Loans requires a minimum of $3,500 in repairs for this program. A HUD consultant is not required to perform an inspection of the property on this type of renovation program but may be used.

Work cannot displace the borrower from the home for more than 15 days. If the house will be vacant for longer than 15 days, the Standard 203(k) must be used. The Limited program allows a disbursement at closing up to 50% of the estimated materials and labor costs before beginning construction but only when the contractor is not willing or able to defer receipt of payment until completion of the work, or the payment represents the cost of materials incurred prior to construction.

Standard/Full 203(K)

The Standard/Full 203(K) program allows the borrower to finance in many more items than the limited program.  Repairs with this type of 203(K) can include structural alterations, conversions from 1 to 4 units, work that requires plans, and many more.  A HUD-approved consultant is required. The borrower must meet with the consultant to determine not only the mandatory items but any “wish list” items that are to be included in the cost of repairs.

With the Standard program, the borrower can be displaced from the home for up to 6 months.  Mortgage payments can be financed into the loan for the time that the house is deemed uninhabitable during the renovation period. The HUD consultant will deem the number months that can be financed into the loan. Please inquire as to the availability of financing in mortgage payments with your 203K specialist.

Fannie Mae’s HomeStyle®

The Fannie Mae HomeStyle® Renovation loan allows a qualified borrower to purchase or refinance a home and finance the cost of renovations/repairs into one final loan. (The total renovation cost cannot exceed 75% of the after completed value of the home based on the appraisal or the total acquisition cost, whichever is less). The sales price plus the total cost of renovations is considered the total acquisition cost. All repairs must be completed within 180 days of closing.

Limited HomeStyle®

This program allows the borrower to finance into the loan limited/non-comprehensive repairs:

Main Street Home Loans requires a minimum of $3,500 in repairs for this program. A HUD consultant is not required to perform an inspection of the property on this type of renovation program but may be used.

Standard/Full HomeStyle®

The Standard/Full HomeStyle® program allows the borrower to finance any type of repair including structural alterations and repairs, additions, work that requires architectural plans, and much more. The borrower must meet with a HUD consultant to determine the repairs to be included into the loan.

Up to 6 months mortgage payments can be financed into the loan for the time that the HUD consultant deems the house uninhabitable during the renovation period. Please inquire about the availability of mortgage payment financing with your renovation specialist.

VA Renovation

The VA renovation loan is a great option for Veterans who may be buying a home that needs a little work, or perhaps they want to do some modernization to their current home.

This program allows the borrower to finance into the loan limited/non-comprehensive repairs:

 

Every home is unique and will require varying repairs and updates. But with these mortgage loan options, your dream of updating your home or becoming a homeowner are possible!

You can also keep in mind the possibility of building your home from the ground up as there are many construction loan options available as well.

If you have any questions about renovation loans or want more information about the homebuying process, contact one of our licensed Mortgage Loan Originators. If you are ready to begin the process, click here to get started!

 

*Total renovations must not exceed $35,000; this is inclusive of repair amount, contingency of 10-15%, inspection fees, title update, permits and renovation fee.