Understanding FHA vs Conventional Loans

When it comes to purchasing a home, no matter if it’s here in San Francisco or somewhere else, you might want to learn the differences between FHA vs conventional loans so that you can get the best loan for you. Loan professionals state that it is not as easy to get a mortgage loan as it used to be with the unfortunate housing crisis that occurred several years ago.  This is why it is best to understand the ins and outs of the various types of loans available.

FHA Loans

If your credit score is under 600 and you are short on the 10% down payment that is usually standard, look into acquiring an FHA loan.  These loans, normally guaranteed by the Federal Housing Administration, are usually easier to get approved for and you may only need 3.5% down. The reason they may be easier to obtain is because lenders feel safer issuing them since they are backed by the federal government. Keep in mind though, that you may be required to purchase mortgage insurance, which adds monthly expenses to your budget. If you do have to purchase mortgage insurance, be prepared to pay 1.5% of the loan amount at closing and a 0.5% annual fee. The only way to skip the monthly fees are if you have at least a 20% down payment, in which most people do not have.

FHA loans are more popular for first-time home buyers who simply do not have a high credit score or a lot of money saved for a down payment for a home.

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Why You Should Decline Mortgage Life Insurance

Many times when you purchase a home and put down less than 20 percent for a down payment, you’ll be required to purchase a mortgage life insurance product. If it is a requirement, there’s little you can do to get around it. It isn’t the end of the world since it does pay off the home mortgage note if you die before payoff. If you have a choice in whether to purchase the product or not, you should decline. In most cases it ends up being an unnecessary expense that decreases in value over the years.

Don’t get mortgage life insurance confused with private mortgage insurance because they are different.  Mortgage life insurance will cover the remainder of your mortgage incase of death before you are paid in full.

Most Policies are Expensive

Mortgage life insurance is expensive. The reason is because you typically get it at the start of your loan. The insurance company is taking a gamble as to whether you will die within the first few years, which leaves them having to pay a large amount of money to clear the note. They also typically cover anyone, regardless of health conditions. In other words, everyone bears the weight of covering those with bad health. Regular life insurance policies can be much more selective on who they cover and the rates they charge each individual.

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What Is A Home Construction Loan?

If you have been thinking about building a home instead of purchasing a pre-made one, building can be a wonderful experience. You get to design the home as you wish and feel like you are a part of the process.  Building your own home takes a great deal of time and it takes money. Most people do not have all of the money up front to build a home, so they have to take out a construction loan.

What is a home construction loan?

A construction loan is a short loan that you take out from the bank to pay for your new home construction. What typically happens is that you take out a short-term loan for the amount of time it takes you to build your home, usually about one year. When the new home is completed, it is then that you will have to get a new loan to pay for the rest of the construction loan. Sometimes this is called the “end loan”.  The end loan will typically be a new loan that is more conventional when it comes to financing a home, such as a fixed-rate 15 year mortgage.

How to qualify for a construction loan

Banks are typically a bit more cautious when it comes to lending money for a construction loan because the building process doesn’t always go smoothly. Sometimes builders don’t do the kind of job they were supposed to do or the house isn’t worth what it was supposed to be worth.  Sometimes construction stops for one reason or another.

Because of this, banks usually have strict requirements for construction loans.  Here are several:

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How to Get Financing For a Rental Property

Financing for a rental property

So you’re ready to invest in your first rental property, but you don’t have all the cash lined up that you need. This is where financing can come in handy, but it might not be as easy as you think to get your hands on the money. It can be an overwhelming situation, and not one that you should tackle lightly, but if you take the right steps, it can be a very lucrative decision that could pay off big time. If you’re  ready to get financing for a rental property, there are some tips to keep in mind that can help make your dream happen.

Decide what you’re going to do with the property

There are several types of rental properties you can buy, including an already existing house or one that’s pre-construction, the latter of which means you could be involved in the design of the home. You should also decide if you want to buy a fixer-upper or a home that’s already in  good condition. The former will require more of a time and money investment up front, but it could be worth it in the long run.

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So You’re Retired and You Want to Refinancing Your Mortgage

You’ve reached the point of retirement, and you’re considering refinancing your mortgage in favor of different terms. While there’s no problem with that, banks are getting extremely strict about who they choose to help. Nowadays, you can have a considerable amount of assets, but if you don’t meet their criteria in two particular areas – credit score and income – you could find yourself facing a roadblock. So what are five things you need to do before and during the process of refinancing your mortgage.

Check your credit score

As mentioned above, your credit score plays a huge part in the process of refinancing your mortgage. If it’s not where you would prefer it to be, then you may be better off waiting until you can clean it up a bit and raise it to the point where a loan officer would consider it excellent, especially if you don’t have a substantial amount of income coming in. 

Determine your total amount of income per month

In addition to your credit score, your income is the other main half of the equation when it comes to refinancing your mortgage. What you may consider a good amount of income may not be deemed enough by the bank. It’s better if you have a two-income household; the chances are higher that you’re going to be considered a risk if your income is only from one person. Pull together the paperwork from your social security and any other type of income so you can show it to the lender and can see where you stand. 

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Home Ownership vs Renting – How Do I Decide?

If you’re at a point where you’re debating between home ownership vs renting, you’re not alone. It’s a big decision to make, especially considering the monetary investment that’s required. The best way to figure out what to do is to weigh the options side-by-side and consider what’s best for your particular situation. So how exactly do you go about making such a huge decision?

Consider how long you’re staying in one place

If you’re planning on living in one place for a short period of time, or you’re not sure how long you’re going to stay, buying a house may not be in your best interest. It’s not always the easiest process to buy a house, and it would be a shame to go through the entire process only to have to sell it in the near future. Renting gives you the opportunity to leave at any time without the huge hassle. 

Think about the initial cost you can afford

With a house, you have to put down at least 10% of the cost, which typically totals up to around $15,000 or more. When you rent, it’s usually a month and a half worth of rent plus any additional deposit such as one for a pet. If you can’t afford to put down a huge chunk of change, you’re better off renting. 

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What Does Homeowner’s Insurance Cover? How Much Do You Need?

If you are a homeowner or if you are looking to purchase a home, it is important to get familiar with the ins and outs of homeowner’s insurance.  Do you know what such insurance covers? Do you have any idea how much you need?  Read on to learn what you need to know before purchasing homeowner’s insurance for your home.

What types of coverage are there?

Standard homeowner’s insurance

This type of insurance helps you out when you have a mortgage to pay back and something happens to your home. If you have a fire, you are covered.

Flood insurance

Floods are not covered under standard homeowner’s insurance, but you can purchase flood insurance separately to protect your home. The National Flood Insurance Program will protect a home up to $250,000 for the structure and $100,000 for the furnishings. Should you have a home that is more expensive, there is excess flood insurance that you can purchase.

Earthquake insurance

If you live in an area that is prone to earthquakes, you can purchase earthquake insurance separately.

Not that many homeowners get additional disaster coverage for one reason or another. Even those in areas that are prone to floods shy away from purchasing flood insurance. In fact, statistics indicate that only about 12 percent of homeowners in flood-prone and earthquake areas actually purchase such insurance policies to protect them. Basically, they are hoping that such a natural disaster won’t happen to them, but hope doesn’t always do the trick.

Assess your needs

Most people understand that there is a chance their home could burn down, so they realize the significance of insurance for such, but many do not think other natural disasters can affect them. If you do happen to live in an area that has floods or earthquakes, you really ought to consider purchasing such insurance to cover your home in the case of a disaster. There are plenty of homeowners who thought they were exempt from a flood or earthquake or mistakenly thought their standard homeowners insurance covered for such and it didn’t. Asses your needs wisely and if you have any questions, don’t hesitate to call an insurance agent for clarification.

What does home owner’s insurance cover?

The majority of standard homeowner’s insurance policies cover your possessions, including things like art, jewelry, and collections.  For example, if you have a policy that provides $200,000 coverage, most likely your policy will cover up to 75% of that, so you’d have about $150,000 coverage for your possessions. Beware though that some policies will only cover the depreciated value of your possessions, so that nice big screen television that you got five years ago for $2,000 may only be worth half that price now.

Most items are covered under fire or theft under a standard policy, but beware that some items may not be covered if broken or if they simply disappear from the home or the auto. If you have items that are particularly valuable, you can purchase special coverage for such items.

What To Do When You’re Underwater on Your Mortgage

Falling behind on your mortgage can be a frightening experience. You’re worried about losing your home, you feel like there’s nothing you can do, and you have no idea what direction to go in. Once you get 90 days behind on your mortgage payments, the lender can start foreclosure proceedings, so you want to make sure not to get to that point. While the situation might seem hopeless, all is not lost. There are several things you can do when you’re underwater on your mortgage.

Don’t pretend the problem isn’t happening

Acting like you’re not having mortgage problems is the easiest way to make the issue even larger. It may take all the pride you have, but you need to start seeking help if you don’t know what to do on your own. There’s no shame at all in doing so, especially if it helps you stay in your home.

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Understanding Contingencies and What They Mean

When you are in the market for buying a home, you have a tide of emotions along with wants and needs, logic and fancy, dreams and realities, all combating for attention as you navigate these exciting and difficult waters.  In the process, you may have encountered a home that appears to be just what you have wanted to find.  It has all the features you want, it has an attractive price, a good neighborhood; everything that says you should make an offer.

Just one question: it shows the listing as “contingent” or “contingent offer.”  You are suddenly presented with the need of understanding contingencies and what they mean.

A tour in the dictionary will give you a basic definition of “contingency:” something that is subject to change.  But in terms of real estate, that has some very specific implications and there are several.  They all imply that a prior offer for the home is being entertained, but that does not mean that the sale is a sure event.  There are several conditions that may preclude finalizing a deal with the initial buyer; you may still have an opportunity to buy the home.

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How to Deal with Floating Interest Rates on a Pending Sale

For the great majority of us, purchasing a home will be the largest dollar value contract we will ever transact.  Also for the majority of us, it will not be a cash transaction; we will acquire a mortgage and that means we will acquire an interest payment along with the principle, the actual value of the loan for the sale price of the home minus any down payment we bring to the table.

There are several different types of loan packages available for a mortgage, but they devolve into two basic types: a fixed interest rate and a floating, or variable interest rate.

Each has advantages and disadvantages.  We will concentrate on the latter, the floating interest rate, since the fixed is fairly straight forward: a locked rate for the duration of the terms of the contract.  It is locked regardless of what the interest rate market does in fluctuation.

However, a floating interest rate will vary according to the market.  Imagine a boat moored in a slip at a marina on the ocean shoreline.  Even if the dock is fixed by piers mounted into the ground underwater, the boat is going to rise and fall with the ebb and flood of the tide.

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