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VA Loan Colorado – Everything You Need to Know

Written by Ryan Hillard on . Posted in Article.

Are you a military member, veteran, or family member looking for the perfect home in the beautiful state of Colorado? VA home loans offer incredible benefits and opportunities, making your dream of homeownership a reality. This comprehensive guide will walk you through everything you need to know. Let’s dive in!

Short Summary

  • VA Loans in Colorado offer no down payment, no mortgage insurance & more lenient credit requirements.
  • Obtaining a VA loan involves finding an approved lender and understanding closing costs & the funding fee.
  • There are no loan limits on VA loans over $144,000 for eligible veterans, service members and survivors who have full entitlement.

Understanding VA Loans in Colorado

A veteran in Colorado looking at a VA loan application

VA loans in Colorado provide a cost-effective solution to home buying for active service members, military veterans, and their families. They are an excellent option for those looking to purchase a new home. These government-backed mortgages provide flexible and affordable terms, making homeownership more accessible for qualifying borrowers.

So what exactly is a VA loan, and how can it help you achieve your dream of owning a home in Colorado?

What is a VA Loan?

A VA loan is a government-backed mortgage option available to veterans, service members, and surviving spouses. It allows them to finance a home with no down payment, no mortgage insurance, and lenient credit requirements. This means you can secure a home loan without having to save up a large down payment or worry about additional mortgage insurance costs.

VA loans are issued by lenders, such as mortgage companies, mortgage brokers, and some banks, and are guaranteed by the United States Department of Veterans Affairs (VA).

Benefits of VA Loans in Colorado

One of the most significant benefits of VA loans in Colorado is the ability to purchase a home with no down payment. Additionally, VA loans offer lower interest rates compared to conventional loans, which can save you thousands of dollars over the life of your mortgage.

Furthermore, VA loans do not require private mortgage insurance (PMI) or mortgage insurance premiums, which can be a substantial monthly expense for homeowners with conventional or FHA loans. These benefits make VA loans an attractive option for eligible military members, veterans, and their families.

Eligibility for Colorado VA Loans

A veteran in Colorado discussing VA loan eligibility with a loan officer

In order to qualify for a VA loan in Colorado, you’ll need to meet the Department of Veteran Affairs’ qualifications and those of the mortgage lender. This includes obtaining a Certificate of Eligibility (COE), which verifies your military service and eligibility for a VA loan, as well as meeting specific credit score and income requirements set forth by the lender.

It’s important to note that even if you have a bankruptcy or foreclosure in your financial past, you may still be eligible for VA financing.

Certificate of Eligibility

A Certificate of Eligibility (COE) is a document that proves your eligibility for a VA loan based on your military service. Veterans, active military personnel, and members of the national guard are eligible for a Certificate of Eligibility (COE). Additionally, families of service members may also be approved to receive this document. To obtain a COE, you can submit evidence of your service or your spouse’s service to the VA by mail or through the VA’s eBenefits portal. Mortgage lenders provide a convenient way to apply for a COE. Get in touch with one today to get the process started.

Proof of service typically includes documents such as discharge or separation papers (DD 214, Certificate of Release or Discharge from Active Duty), history of retirement benefits, or signed statements of service. These documents help validate proof of service.

Multiple VA Loans

Did you know that you may be eligible for multiple VA loans under certain circumstances? If you have sold a previous VA-financed home or have paid off a previous VA loan, you may qualify for another VA loan. Having two active VA home loans at the same time is a one-time allowance, with the only exception being mandatory assignments that require purchasing a home in the new location.

This allows you to take advantage of the benefits of VA loans even if you have already used your VA loan benefits in the past.

VA Loan Process in Colorado

A veteran in Colorado discussing VA loan process with a loan officer

Securing a VA loan in Colorado involves several steps, including finding a VA-approved lender, obtaining a Certificate of Eligibility, and gathering necessary documentation such as employment and tax information, as well as bank statements. Additionally, the VA loan process requires a VA appraisal and pest inspection (if determined by the appraisal), as well as understanding and managing closing costs and the VA funding fee. While the conventional loan process may differ, it’s essential to be well-informed about the specific requirements for a VA loan.

Let’s take a closer look at each of these steps.

Finding a VA-Approved Lender

A picture of a VA-approved lender in Colorado offering VA loans for veterans, with the keyword va loan colorado prominently displayed on the sign.

Finding a VA-approved lender is critical for a smooth VA loan process, as they are familiar with the specific requirements and guidelines of VA loans in Colorado. Examples of VA-approved lenders in Colorado can be found with an online search but it may be more beneficial to obtain a loan through a licensed mortgage broker such as Forward Mortgage Group.

You can also find additional resources for locating VA-approved lenders in Colorado on the official VA website. Make sure to research and compare lenders to find the best fit for your needs.

VA Appraisal and Pest Inspection

A VA appraisal is required to ensure that the property you’re purchasing meets VA guidelines and is free of any major defects or infestations. A pest inspection is only required in Colorado if the VA appraiser determines the property has an active infestation or a high probability of developing one, and is typically related to termites. The VA appraisal process in Colorado is similar to other states, with VA fee appraisers determining the reasonable or market value of a property for VA home loan guaranty purposes. This appraisal can take up to 10 business days to complete.

Additionally, the pest inspection must be completed by a VA-approved pest inspector who is licensed and certified in the state of Colorado.

Closing Costs and VA Funding Fee

Closing costs and VA funding fees are additional expenses associated with obtaining a VA loan. Closing costs typically include appraisal fees, title fees, and other administrative costs. The VA funding fee is a one-time fee paid to the VA to help cover the cost of the VA loan program. This fee is calculated based on the loan amount, the type of loan, and the borrower’s military status.

It’s important to note that some of these costs may be covered by the seller or lender, as the seller can pay up to 4% of the closing costs.

VA Loan Limits and Entitlements in Colorado

A veteran in Colorado discussing VA loan limits and entitlements with a loan officer

VA loan limits and entitlements in Colorado play a crucial role in determining the maximum loan amount you can obtain without a down payment. These limits, also known as the VA loan limit, vary based on the cost of living within each county and depend on your entitlement status.

Let’s explore how these loan limits and entitlements are determined and how they can affect your home-buying process.

County-Specific Loan Limits

In Colorado, county-specific loan limits determine the maximum amount a borrower can obtain without a down payment, which may vary based on remaining entitlement and the cost of living in each county. However, if there is full entitlement, then VA loan limits do not apply.

It’s important to research the available entitlement and loan limits in the county where you plan to purchase a home to ensure that you’re aware of any down payment requirements.

Zero Down Payment Options

VA loans in Colorado offer zero down payment options for qualified borrowers who are buying primary residences. VA loans offer many advantages, such as lower interest rates and no requirements for mortgage insurance. This is one of its biggest advantages.

To be eligible for a zero down payment VA loan, borrowers must meet the VA’s eligibility requirements, which include having a valid Certificate of Eligibility, being an active duty service member, veteran, or surviving spouse and having a good credit score. This allows eligible borrowers to purchase a home without the need for a large upfront payment, making homeownership more accessible.

Types of VA Mortgage Programs in Colorado

A notepad with notes about fixed-rate and adjustable-rate for VA loans in Colorado

Beyond the standard VA home loan, there are several types of VA mortgage programs available in Colorado. These include VA direct loans, cash-out refinance loans, interest rate reduction refinance loans, and home loans for regular purchases.

Among the most popular options are fixed-rate and adjustable-rate VA loans. Let’s take a closer look at these two types of VA mortgage programs.

Fixed-Rate VA Loans

Fixed-rate VA loans in Colorado are mortgages that have a set interest rate for the life of the loan, typically with terms of 10, 15, 20, 25, or 30 years. The primary advantage of a fixed-rate VA loan is that it provides a consistent interest rate throughout the life of the loan, giving stability and predictability for borrowers.

To be eligible for a fixed-rate VA loan, borrowers must meet the VA’s eligibility requirements, such as having served in the military, being a veteran, or being a surviving spouse of a veteran.

Adjustable-Rate VA Loans

Adjustable-rate VA loans are another option for borrowers in Colorado. These loans have competitive interest rates that are fixed for the initial period and then adjusted annually or as specified thereafter. This means that the interest rate may change over time, offering potential savings for borrowers who plan to sell or refinance their home in the near future.

The eligibility requirements for adjustable-rate VA loans are similar to those for fixed-rate VA loans, with borrowers needing to meet the VA’s eligibility criteria and obtain a Certificate of Eligibility.

Colorado VA Home Buying Tips

A veteran in Colorado moving into new home after using VA home buying tips

Navigating the Colorado VA home buying process can be challenging, but with the right knowledge and preparation, you can successfully achieve your dream of homeownership. Understanding the VA home loan process is crucial to ensure a smooth experience. Here are some tips to help you through the process. First, consider the total cost of the loan, including closing costs, the VA funding fee, and any other fees associated with the loan. This will help you create a realistic budget and ensure you’re financially prepared for your home purchase.

In addition to budget considerations, it’s crucial to research neighborhoods and find the perfect location for your new home. Take the time to visit different areas, research school districts, and consider factors such as commute times and local amenities. Working with experienced real estate professionals can greatly assist in this process and make your home buying journey smoother and more enjoyable. They can help you find the perfect property, negotiate the best price, and guide you through the necessary paperwork.

Summary

VA loans in Colorado offer incredible benefits and opportunities for military members, veterans, and their families. From no down payment options to lower interest rates and flexible loan terms, VA loans make homeownership more accessible and affordable. By understanding the VA loan process, eligibility requirements, loan limits, and entitlements, you can successfully navigate the Colorado VA home buying process and achieve your dream of owning a home. With the right knowledge, preparation, and professional guidance, your dream of homeownership in Colorado can become a reality!

Frequently Asked Questions

How to qualify for VA loan Colorado?

Be current active military with 90 consecutive days of service, an honorably discharged Veteran, a member of the National Guard, a Reserve member, an eligible surviving spouse, or granted Veteran status through civilian employment to qualify for a VA Loan in Colorado. For Veterans, National Guard and Reserve members the minimum active-duty service requirements will depend on when you served.

What are the benefits of a VA home loan in Colorado?

VA Home Loans in Colorado offer significant benefits to Veterans, such as zero down payment, lower interest rates, no mortgage insurance requirements and the VA guaranteeing a portion of the loan amount.

These favorable conditions make VA loans an attractive option for eligible borrowers.

What credit score is needed for a VA loan?

While the VA does not have a minimum credit score requirement, some lenders will have their own overlays and it can therefore vary by lender.

What is a Certificate of Eligibility, and how can I obtain one?

A Certificate of Eligibility is a document that proves your eligibility for a VA loan based on your military service. You can easily obtain one by submitting proof of service to the VA or applying through a VA-approved lender.

Can I have multiple VA loans at the same time?

Yes, you may be eligible for multiple VA loans under certain circumstances.

Pre-Qualification vs. Pre-Approval: What’s the Difference?

Written by Ryan Hillard on . Posted in Video.

Pre-Qualification vs. Pre-Approval: Understanding the Crucial Difference

Transcript 

Ryan Hillard: Hi, this is Ryan Hiller with the Ford Mortgage Group, and today I want to talk about the difference between a prequalification and a preapproval and why they’re important. What often happens is that these two terms are used very interchangeably, and it depends on who you’re talking to. Someone can mean the same thing by them, but it’s important to create a distinction. When someone begins the process, they’re going to reach out, and they’re going to say, “Our agent told us that we need to talk to you in order to get pre-qualified or pre-approved.” 

Pre-Qualification

When you fill out an application, either online or in person, and pull your credit.

Ryan Hillard: What happens is that if we’re pre-qualifying someone, then what they are doing is they’re filling out the application, which you can do online, and we’re pulling their credit. That’s it. We’re not going the extra step further to look at any documents or verify anything, and we’re kind of taking their word for it to say, okay, this is what it looks like right now. Everything based on the information that you’ve given us in the application as you presented it looks good.

Pre-Qualifications are a good start but is not what you need for a smooth transaction.

Ryan Hillard: While that’s a good place to begin, it’s not the place that we need to be, especially in a very competitive market, in order to ensure a smooth transaction, which is always going to be our goal. 

Pre-Approval

After submitting an application, we will send a request for a list of documents needed to verify the information on the application.

Ryan Hillard: To get pre-approved, after we have the application, we’re going to then send a request for the documents to say, these are the items that you need so we can collect those, we can go through them, and we can confirm and validate the information that is in the loan application. An example of the difference may be something like someone said they had a certain amount in their bank account, and then we look at the bank account, and it either has more or less money.

Ryan Hillard: Obviously, we need enough to cover the down payment and closing costs, so that’s what we’re looking for. The bigger issue typically comes when we’re looking at income because examples of where this may get misconstrued and unintentionally, with no ill intent, but the difference would be where if someone puts in their net income, for example, and what I mean by that is they’re putting in their income after taxes and deductions and what we do is look at their gross income, so, before those items, if they are a W2 employee, for example. Other or bigger examples come when someone is self-employed, and we need to go through and look at tax returns in different documents for ad backs or deductions. 

If someone puts in their NET income (after taxes) on the application, we would make sure to look at their gross income.

Ryan Hillard: Also, when there’s variable income, things like commissions, bonuses, overtime, so on and so forth, if the employee has not been receiving these items long enough or this type of income long enough, then we may not be able to use it, and it could not be eligible income. It’s important for us as a loan officer to take a look at it, understand the guidelines, go through, make any corrections that may need to be made in order to verify and validate the income. Now, if there is a trickier income situation, we do have the ability to do a full TBD underwrite and send this off to an underwriter, who can further confirm the income just to make sure that everybody is on the same page. 

If the employee has not been receiving variable income (commission, bonuses, overtime, etc.) for a long period of time, it may not be used as eligible income.

Ryan Hillard: Our goal in doing this is always going to be to ensure a smooth transaction and that there are no hiccups or any issues with the underwriting process once we’re under contract. In order to get under contract, what happens is that when we present the offer, I’m going to pick up the phone, and I’m going to call the listing agent, and I’m going to have a conversation with them about the application and the client. I’m not giving away any confidential information, so there’s no concern about that, but what I’m saying is that we’ve looked at their income, we have the documents, so on and so forth. We’ve been able to confirm everything that is in there because what they want to know is that there aren’t going to be any issues with the underwriting process of this file once we are under contract. They know that everyone is going to be able to deliver as expected, and we’re going to be able to go through, have a great process, have a smooth transaction, and everybody will be happy at the end of the day.

I hope that’s helpful, but if you have any other questions, please feel free to reach out to me at 720-201-7261. You can email me at ryan@fwdmortgagegroup.com. Or you can go to my website at www.forwardmortgagegroup.com and get all of my contact information there. Have a great day.

The Two Most Common Questions Homebuyers Ask

Written by Ryan Hillard on . Posted in Video.

Navigating Homebuying: The Right Questions to Ask for a Smoother Process

Transcript

Ryan Hillard: Hi! This is Ryan Hillard with the Forward Mortgage Group and when we’re talking to homebuyers who are in the process of purchasing a home, getting pre-approved there are almost always two questions that they ask. I don’t want to say they’re the wrong questions, but they’re not the right questions. What we want to do today is address those two questions and then say, “How can we make them better?” What are the right or better questions that we can be asking to get information that is more specific, more pertinent, or more important to us as a homebuyer. As we go through the process and the discussion, we’re going to be asking you, the homebuyer, different things like: 

  1. What are your plans for this home? 
  2. How long do you want to stay there?
  3. How much money do you have to put down?
  4. Is this a primary residence or an investment property?
  5. Is this a second home?
  6. Do you have an idea of what your credit looks like?

Ryan Hillard: All of these different things that go into the equation to finding the best product and program for you! When we do that, and we kind of get to the end, or sometimes it’s even in the beginning. People may lead with this. They’ll ask the first question, which is…

What is my Interest Rate?

Ryan Hillard: Now, everyone seems to have a very big fixation on the interest rate, and I understand; I get it. It’s what has been marketed to everyone as the most important thing, but I’m here to tell you that maybe it’s not the most important thing; it’s one of the important things, but not always the most important thing. We know that if someone is only selling you on an interest rate, there’s a number of ways they can do that. I can tell you that your interest rate is going to be lower, but maybe not tell you and hide it in the fine print that you’re going to be paying a lot of money in order to get that rate. Might be a little deceptive, but there’s also a lot of online lenders and others that may do that and try to hide some of these things to hide the true cost of that rate to you. Now, another way or another tactic is someone could just put you in the wrong program. If everything were equal and I knew all that you cared about was the interest rate, than I can say, “Here you go, here is an FHA program, and it’s going to have a lower interest rate if everything is equal than what you might qualify for on a conventional loan.” That’s great. I’ve answered the question of, “What’s the best rate you can give me?” But, again, in those types of situations, you end up paying more for it in different ways; maybe more it’s more in mortgage insurance, maybe it’s more upfront costs. These are different items we would want to look for so we can make sure that we’re taking advantage of everything you have to put you in the best situation possible; so in doing that, what we’re going to do is run different scenarios. We’re going to show you what happens if your credit were to improve a little bit. Would that help you? What would happen if you put a little bit more down? If you were to get the funds or resources to put that down, would that help you? If you’re not going to be owning this home for a longer period of time, what does that make our options look like? Different things that will really assess how to put you in the best position to take advantage of the best rates, payment, and other factors once it comes time to lock in that rate. To wrap this part up, we know that rates are going to move on a daily basis, so the conversation we’re having about rates today may not hold true when you’re at the point of purchasing your home. Whether that’s next week or next month, or whenever that may be, the rates are going to change. We want to make sure we’ve accounted for all of those changes or potential changes by also showing you this is what it looks like today, but if rates were to move and they were to increase, here’s what it looks like. That way, you’re prepared for the market, you’re prepared as a homebuyer to go out and understand what the impact of changing or moving rates would be to make sure that it still fits within your budget. 

What’s the Maximum Amount I Can Qualify for?

Ryan Hillard: The next question that we get a lot as we’re going through this process is, “Well, what’s the maximum amount that I can qualify for?” It’s a good question, I would want to know what the maximum I can qualify for as well, but it’s not always that pertinent or tailored to you. If I said, “You could get qualified for a 2 million dollar loan!” Would you want to be qualified for a 2 million dollar loan? I don’t know. The reason you might not want to is you might not want is because you don’t want the payment that goes along with it. Too often, there is a disconnect between the home purchase price and the monthly payment, so what we want to do is ask different questions. We want to understand if I’m looking around this price range and I want my monthly payment to be around this price range. How do I understand these types of things? So the question ends up being, “How much can I be approved for by keeping my payment within this range?” Then when we go back and look at the other factors like your down payment and your credit score, we can start drawing out scenarios and show you as you’re shopping if we keep everything else equal and we take your payment at $400,000, $425,000, $450,000, $475,000, now you’re better equipped as you start looking at homes to know what might happen to the payment if I start moving up or down that price range. There are no surprises as you get to the point where you really want to make an offer. 

Ryan Hillard: 

Just to recap, two questions we get asked are:

  1. What is my interest rate?
  2. What is the maximum amount I can qualify for?

But, if we’re looking at these a little bit differently, the two questions that I would argue are asked a little bit better would be:

  1.  How do I get in the best position to keep my payment low, given my situation?
  2.  If I want to keep my payment within this range how much can I afford based on that with all of the factors that you know?

Ryan Hillard: I hope that’s helpful. If you have any questions on this, if there’s anything else I can answer for you, please feel free to reach out to me. This is Ryan Hillard with the Forward Mortgage Group.

Would you Rather –  Home Buyer Edition

Written by Ryan Hillard on . Posted in Video.

Would You Rather: Homebuyer Edition – Low-Interest Rate vs. Higher Negotiation Power

Transcript

Ryan Hillard: We’re going to call this “Would You Rather: The Homebuyer Edition.” In this version of “Would You Rather,” we have two options. 

  1. The first option is: would you rather have a lower interest rate that is going to look somewhere, let’s just say maybe down in the low 3’s or closer to 3%, but you have to give up your inspection rights, you don’t get to negotiate at all, and you’re going to have to look at multiple homes, submit multiple offers, probably get rejected a lot before you do finally go under contract if you’re willing to endure the market that long. And, just for fun, as a kicker, you’re going to have to pay an additional $50,000, $100,000, $150,000, maybe even more, over the asking price of a home. And, fully guarantee that amount if it doesn’t appraise. 
  2. If we look at option B: would you rather have a higher interest rate, maybe something to the mid to upper 6’s, but you’re more likely to go under contract on your first, second, or third offer if it’s well-written, and you’re able to negotiate on things like possible the purchase price or maybe seller concessions that you can use to pay closing costs or help buy down the interest rate. 

Ryan Hillard: Which would you rather do? Let me know in the comments! 

What If Your Rate Goes Down Before you Close?

Written by Ryan Hillard on . Posted in Video. No Comments on What If Your Rate Goes Down Before you Close?

Understanding What Happens to Your Locked Interest Rate if Rates Improve Before Closing

Transcript

Ryan Hillard: Are you wondering what might happen to your interest rate if you’ve already locked it but rates improve before you actually close? If so, then this is gonna be the video that you wanna check out.

The Importance of Market Conversation When Locking Interest Rates

Ryan Hillard: Now what happens in most situations is when you go to lock your interest rate, you should be having a conversation with your lender about what is going on in the market, and how volatile is it? Where do we anticipate that those rates are going to go? And taking that in combination with your own risk tolerance to make as educated of a guess as possible as to whether or not you wanna lock the rate and have it set right there or if you want to continue to float and see if the market improves or not. Now, assuming that you were to lock the rate, but you’re not closed on your loan yet, and the market actually improves…

What Happens if Rates Improve Before Closing?

Ryan Hillard: There may be a couple of options to take advantage of that, which in my opinion is probably pretty kind of the lenders, just because if rates were to increase, the lender is not gonna come back to the borrower and say, “Hey, I know we agreed on this over here, but we’re gonna retrade on our agreement and now we’re gonna charge you something higher.”

Lender Float-Down Policy or Rate Renegotiation Policy

Ryan Hillard: However, we do often see that borrowers will come back and say, yeah, I know we agreed on this rate over here. But the market got better. So, we want to take advantage of that improvement. So in order to account for this, a lot of lenders will have what we either call a float-down policy or a rate renegotiation policy or guideline.

Guidelines for Lender Float-Down Policy or Rate Renegotiation Policy

Ryan Hillard: Now, first, this is something that will and can vary among each lender. They’re gonna set their own guidelines for this type of policy. And there are some common things that they may keep in mind, but again, make sure that you are with the lender that you’re working with; if they do or do not have one of these policies in place, in an improving interest rate environment.

Some commonalities among them might be that you need to be through underwriting first. Meaning they want to basically know that this loan is going to close before they go and spend more money to renegotiate on a lock or anything like that. Also, they may not give you the full difference or the full benefits.

So just for a pure example case, let’s say that rates are in the mid-fives, and then they come down closer to five or somewhere than the high fours, maybe something like that. And rather than giving you the benefit or the borrower the benefit of going all the way down to what it would be exactly today.

They might either meet you halfway or give you, you know, a certain amount of that improvement. That way, they’re not out of pocket for the entire cost, and everybody still gets to win to some extent. And then another thing to keep in mind is that in some cases, they may want you to, or they may require you to close within a certain number of days once that renegotiation policy has already been set and has been established.

Assessing Risk Parameters and Making Educated Decisions

Ryan Hillard: And then, finally, you will only be able to do this once. This is probably the most common feature among these that they’re not gonna give you every little bit of improvement along the way if you are in the very beginning of this process, and you’ve already taken advantage of it once, and the market continues to improve, it is likely that you won’t be able to take advantage of it again. So it really is a thing where you need to assess your risk parameters, your risk tolerance, have a conversation with your lender, and make an educated decision to the extent possible, because none of us have a crystal ball that we can go and look at and tell you exactly what interest rates are going to.

But if you find yourself in that position, it’s certainly worth asking to see if you are able to take advantage of a rate renegotiation or float-down option.

Thinking about how rates impact your finances? Consider our innovative All In One Loan™ product. This tool combines your mortgage, banking, and loan accounts, potentially decreasing interest costs and giving you more control. Ready for a revolution in your financial management? Discover the All In One Loan™ today.

What are Closing Costs?

Written by Ryan Hillard on . Posted in Article. No Comments on What are Closing Costs?

Buyer’s Closing Costs

When you buy a home there are closing costs. These are costs that go above what you are paying for your down payment. Closing costs are your out-of-pocket fees used for items like getting your home loan, having the house appraised, getting the title transferred into your name and so on. Your closing costs can range between one and three percent of your loan amount, depending on different factors.

This means if you’re taking out a $300,000 mortgage loan, closing costs could range from $3,000 to $9,000. The amount a home buyer has to pay in closing costs can vary a lot depending on the home price, location, and other factors.

Typical closing costs paid by the buyer include:

  • Origination Fee — This is the fee from your mortgage lender used to set up and process your application, verify your documents, underwrite, and close your loan. 
  • Appraisal Fee — This is the fee to have your home appraised. 
  • Title Search and Title Insurance — A title search insures that your new home’s title is clear, and no one else can claim rights to the home or property. Title insurance provides protection against undiscovered claims.
  • Upfront Mortgage Insurance or Funding Fee — Some home loans require an upfront fee to insure or ‘guarantee’ the mortgage. Government-backed home loans like FHA, VA, and USDA mortgages, all have an upfront fee, though you can roll this fee into your loan amount instead of paying it at closing.
  • Discount Points — Discount points let you ‘buy’ a lower interest rate by paying an extra fee at closing. 
  • Escrow — Escrow is set up so that you pre-pay money that will be placed in an escrow account and disbursed as necessary to pay for your property taxes and homeowner’s insurance. You will also have your down payment due at closing, but this typically is not thought of as a ‘closing cost.’Any earnest money you paid when you made an offer on the house will be credited toward your down payment at closing.The type of mortgage you choose can also have a big effect on your closing costs. And the biggest of these is mortgage insurance.Mortgage insurance or MI is only paid when putting less than 20% down to buy the home with a conventional loan.  The Mortgage Insurance helps protect the lender.  Most mortgage insurance is paid with your monthly payment and considered an annual payment, however there are some loan programs that also have an initial mortgage insurance premium that is called an Upfront Mortgage Insurance Premium and may be due at closing as well.  Let’s look at some of these types of programs with Upfront Mortgage Insurance.
  • FHA Upfront Mortgage Insurance Premium (UFMIP)The first program is FHA home loans which require annual mortgage insurance an upfront insurance fee. The upfront mortgage insurance premium, or UFMIP — is equal to 1.75% of the loan amount, or $1,750 for every $100K borrowed. Despite its name, FHA upfront mortgage insurance doesn’t have to be paid at closing. Most borrowers roll this cost into their loan amount rather than pay it with cash. Rolling UFMIP into your loan will greatly reduce your closing costs. But it does mean you’ll pay interest on the fee over the life of your home loan.
  • VA Loan Funding FeeVA loans do not require annual mortgage insurance. But they do require a one-time ‘funding fee’ due at closing unless the veteran has exempt status. For first-time home buyers, the VA funding fee is usually equal to 2.3% of the loan amount. Buyers who have used a VA loan before will pay 3.6% of their loan amount. If you make a down payment of 5% or more, the VA funding fee is reduced. VA home buyers also have the option to roll this fee into their loan amount instead of paying it along with their closing costs.
  • USDA Guarantee Fee Like the FHA loan, the USDA home loan program requires both an upfront mortgage insurance fee and an annual one. USDA’s upfront fee is equal to 1% of the loan amount and can be added to the mortgage balance to reduce closing costs. It’s important to be aware of all the costs associated with buying a home so that you have enough money to pay your closing costs. If you’re not sure, check with your lender, they will cover your closing costs and your options. There are several costs to be aware of when buying a home, but the great news is that our team is here to help you throughout the process.

Five Things You Should Do Before You Buy a Home

Written by Ryan Hillard on . Posted in Article. No Comments on Five Things You Should Do Before You Buy a Home

Buying a home can be a stressful and confusing time for many homebuyers. But it does not have it be. One of the first things you should do when you are considering buying a home is to know your credit score.

Tip Number One:

Get Your Credit Report and Scores for Free

To get a home loan there are several factors that come into play, but your FICO or credit score is one of the most important. You can check your credit report and get your scores online for free. The Fair Credit Reporting Act requires each of the nationwide credit reporting companies — Equifax, Experian, and TransUnion — to provide you with a free copy of your credit report, at your request, once every 12 months. Once you have your credit report be sure to review it and check for any errors.

Tip Number Two:

Look for Errors on Your Credit Report

Mistakes on credit reports are bigger issues than you may realize. If you do find inaccuracies, you can dispute them with the three major credit bureaus. They have 30 days to investigate your dispute. If they find that the item in question is inaccurate, they will correct it.
The higher the credit score the more likely you are to get approved for a home loan, so check what you can do to improve your score.

Tip Number Three:

Improve Your Score Before Applying

A few points difference in your credit score can be the difference in whether you qualify for a home loan or not. There are a few things you can do to increase your scores. First, pay down the balances on your credit cards. Your credit utilization ratio is your credit limit divided by your card balance. This ratio accounts for 30% of your overall credit score, only payment history has a bigger impact. For example, if your credit limit is $10,000 and your balance is $6,000 your utilization ratio is 60% which is high. The lower your credit card balances are the higher your credit rating will be. Some credit experts advise keeping your balances below 20% of your credit card limit.

The next thing you can do is to make all your payments on time. 35% of your credit score is based on your payment history so it’s important to pay all your bills on time. If you’re a forgetful person you can set up auto pay with your creditors, so you never miss a payment.

If you are wanting to buy a home, do not apply for, or open any new credit. This means to hold off on buying a new car or opening a credit card until after you close on your mortgage.

Tip Number Four:

Check Your Savings

You will need a certain amount of cash in the bank to buy a home. If you are living paycheck to paycheck then it probably is not the ideal time for you to apply for a loan. There are more upfront costs associated with getting a mortgage loan besides the down payment. There are closing costs and fees that you will need to pay to the appraiser, lender and title company, so you need to make sure you have enough cash on hand when you get ready to close. And one of the most important things you should do before you go out looking for a home is to get pre-approved.

Tip Number Five:

Get Pre-Approved

A pre-approval means you have completed a mortgage application and a mortgage lender has checked credit and verified income and assets. You will need to submit documentation verifying your income, assets and savings and your lender will be able to help you through this process. Most sellers today will not even consider an offer from a buyer who has not already been pre-approved, so plan on meeting with your mortgage lender before you go shopping for your home.

Buying a new home is exciting and there are a few simple things you can do before you start looking that will help you through the process.

Contact us to find out more about buying your home! We are happy to help!

First Time Home Buyer Guide

Written by Ryan Hillard on . Posted in Guide. No Comments on First Time Home Buyer Guide

Benefits of Home Ownership

Although the experience of owning your first home can be fulfilling and exciting, the actual financing and buying process can be quite overwhelming. From choosing the right neighborhood for your lifestyle to reviewing your financing options, there are a lot of important decisions that you need to make to buy a home. By understanding the home buying process and the financing options available, it should bring you some peace of mind, while helping you make informed financial decisions.

Tax Benefits

There are many advantages to home ownership, such as tax benefits, building wealth and securing financial stability. As a homeowner, you can deduct your monthly mortgage interest and your property taxes on your income tax. Certain costs incurred during the purchase of a home are also tax deductible. Be sure to save all of your closing documents, as you will need them throughout the process and in the future. It is best to contact a tax professional to receive more detailed information on what deductions you may be eligible to receive.

Although the experience of owning your first home can be fulfilling and exciting, the actual financing and buying process can be quite overwhelming. From choosing the right neighborhood for your lifestyle to reviewing your financing options, there are a lot of important decisions that you need to make to buy a home. By understanding the home buying process and the financing options available, it should bring you some peace of mind, while helping you make informed financial decisions.

Building Wealth through Home Ownership

Owning a home can help you build wealth in two ways – growth in equity and appreciation. Growth in equity happens as you pay down your mortgage. A certain percentage of each mortgage payment goes towards a reduction in the total amount owed. Typically, payments in the first few years of the mortgage are primarily applied to interest on the loans. As time passes, however, more and more of each payment is applied to the outstanding loan amount and your equity in your home increases. Appreciation is when the value of a property builds over time. Historically, real estate market values tend to grow over time. Also, when you update existing features or remodel a home, the value of your home may increase.

Financial Stability through Home Ownership

As a homeowner, you gain more financial stability over the years of owning a home. Fixed-interest home loan payments remain stable year-after-year, as opposed to rent payments, which may increase year after year. Since salaries generally rise over time, the fact that mortgage payments remain steady over time can help you manage, plan and grow your wealth.

The Home Buying Process

Once you have made the decision to buy a home, you may ask yourself “What should I do first??”

The home buying process begins by finding out how much you qualify for. This means that you will need to first meet with a lender and review your financial documentation to find out how much you qualify for. Once you find out how much you qualify for, you can begin looking for a house. Once you find a house you like, you will make an offer and then you will be able to close on your house.

The home buying process is simple and typically happens in this order:

Step One

Collect Financial Records

Your lender will ask you for your financial records to determine your financial stability, creditworthiness and ability to repay the loan. These items will cover your job history, credit score, income and assets.

PITI

When evaluating your future housing expenses, it’s important to take into consideration the entire housing expense, not just the mortgage payment. Mortgage lenders use PITI calculation (Principal, Interest, Taxes, Insurance) to determine the total monthly housing expense. HOA (Homeowner Association) fees will also be added to the calculation when applicable. The PITI calculation will be used as one of the components of the Debt-to-Income ratio.

Total Debt-to-Income Ratio

When evaluating your ability to repay the loan, your lender will calculate your debt-to-income ratio or DTI. The DTI is your total minimum monthly debt (proposed PITI, credit cards, student loans, car payments, etc.) divided by your gross monthly income. The lower your debt-to-income ratio, the higher the likelihood of getting the home loan terms you want.

Credit Score

A credit score is generated by a credit reporting agency and is calculated from several pieces of data in your credit report. Both positive and negative information is considered in the calculation, including payment history, amounts owed, length of credit history and types of credit used. The higher the score, the better your loan rates are likely to be.

Step Two

Evaluate Your Home Loan Options

When you are shopping for a mortgage loan it is especially important to work with a licensed mortgage professional who you feel comfortable with and who you feel you can trust.  

Your mortgage professional can help you:

  • Identify any credit issues that may hinder a loan approval.
  • Guide you through the loan application and closing process.
  • Help you determine a purchase price and monthly payment that fits in your budget.
  • Help you compare different loan programs so you choose the best one for your financial needs.
  • Manage and address any issues that may come up along the way.

When choosing a mortgage, there are many factors to consider which would affect your monthly payments, closing costs, amount of cash needed at closing and total amount paid for your loan.

These factors include:

  • Whether the loan is Fixed or Adjustable Interest Rate
  • Number of years (or term) that you will be making payments
  • Down payment amount
  • Mortgage insurance options
  • Fees

Do not be afraid to ask questions so that you fully understand the impact of these factors on your home loan. The more knowledgeable you are, the more comfortable you feel and if your lender cannot answer your questions you may not be working with the right lender. 

Do not be afraid to ask questions so that you fully understand the impact of these factors on your home loan. The more knowledgeable you are, the more comfortable you feel and if your lender cannot answer your questions you may not be working with the right lender.  

Here are a few questions that you may want to ask:

  • “What’s the difference in monthly payments between a 15-year term and a 30-year term?”

While a 15-year term will result in a higher monthly payment, you may qualify for a lower interest rate. Plus, you would be finished paying for your home in half the time, saving a significant amount on interest payments.

  • “What interest rate would I qualify for if I chose an Adjustable Rate mortgage?”

Usually, adjustable rate mortgages have a lower starting interest rate, resulting in a lower initial monthly payment. Adjustable rates tend to increase over time. However, if you plan on staying in the home for only a few years, this may be a viable option. And if you are bringing in less than 20 percent for a down payment, you will want to know about mortgage insurance. 

  • “How would mortgage insurance affect my monthly payment and how long would I have to pay it?”

Mortgage insurance reduces the down payment requirements for the borrower, but it will increase your monthly payments. Depending on the type of loan and the specific insurer, you may be able to eliminate the mortgage insurance payments once your balance drops below a certain level. There are many other questions you may have. Be sure to write them down, so that you do not forget to get information on all the details.

Step Three

Finding Your New Home

Once you have been approved for a loan, the next step is to find your dream home! The house hunting stage can be fun and exciting, but it is important to keep your priorities in mind when evaluating potential homes.

For example, perhaps you have found a beautiful, large home, but the school district is rated poorly. Is a smaller house in a better school district a better fit? This depends on your family’s unique needs.

You may have to look at dozens of homes before you find one that suits your lifestyle, budget and includes all the features that you and your family desire. However, you should be prepared to readjust your priorities during your home search in order to find a home that is in budget and fits all your needs. 

As you search for homes and find one that you are set on, you will want to make an offer. But when you get ready to make an offer, you will want to be sure to work with a reputable real estate agent, who can help you through the entire process.

A real estate agent can also be a great asset in helping you find your dream home. Real estate agents generally have access to home sale listings that you may not be able to access on your own.

A good real estate agent can help you by:

  • Reviewing your wish list and researching potential homes.
  • Making arrangements to show the homes that fit your requirements.
  • Researching neighborhoods, schools and tax rates.
  • Negotiating a purchase price and making the offer. 
  • Assisting in the purchase and closing process.

Wherever you are in the home buying process, the first step is to find out how much you qualify for and that begins by meeting with a lender. If you’re ready to take the first step in the home buying process, contact Forward Mortgage Group today for a free consultation with one of our experienced lenders.