Category: Loans
Building or restoring a home is a significant commitment that requires a decent amount of time and money. Luckily, construction loans exist to remedy this problem. Before the recession in 2008, small builders had better access to capital, but now they frequently put the buyer in the position of obtaining the construction loan. These loans can be tough to acquire without previous banking history due to a lack of available collateral— such as a finished home. Construction loans are typically short-term loans with a maximum of one year and have varying rates. This type of loan will also have a higher rate than a permanent mortgage loan. Borrowers should be prepared to build some allowances into their construction timetables since delays due to weather and material or labor availability are reasonably frequent.
When and How are Construction Loans Useful?
As the borrower, you have several options when building your own home. You can get a construction loan or use the equity in your existing home to finance building your house. Once you settle for this option, it’s time to find a homebuilder. Hiring an architect is like hiring any professional — you want to work with the best. Contact your local chapter of the National Association of Home Builders to get recommendations, and ask your friends, family or known real estate agents who specialize in new home construction. When interviewing possible builders make sure they have experience in the type of residence that you want. Ask about their licensure and insurance, and make sure they’ve got a solid reputation within your community. After construction is completed — when a certificate-of-occupancy is issued, and contractors have been fully paid — the borrower’s loan will usually roll over into a mortgage loan. Some lenders will combine these two loans into a single 30-year loan with one closing. This is called construction-to-permanent financing. However, these types of loans pose a greater loan-to-value risk to the bank so borrowers should be prepared to put down higher down payments or more collateral. If you own the land already, you can use that as collateral. Our construction loan program offers competitive fees and rates, as well as flexible draw schedules, to keep you and your builder or contractor moving efficiently throughout the process.
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But Isn’t New Construction Only for the Wealthy?
There are several ways you can finance your new construction, no matter the situation. Whether it’s financed by the builder or the buyer, we will help you find the one perfect for you and your lifestyle. There isn’t a required minimum down-payment of 20% because the down-payment will depend on numerous factors. Depending on the equity of the land, the location, your situation – it can all change the amount of down-payment required.
But the Loans are Limited and I Need to Own the Land First, Right?
If you own the land, the equity will act as all or part of your down-payment. If you do not own the land, it will be purchased with the first draw after the construction loan is closed. Loan options, along with down-payments, vary depending on many factors. However, the key thing to remember here is that there are options out there for you. Depending on the lender, the type of home, and terms, your options for construction-to-permanent loan options can vary.
There are different requirements for each loan, and while they are uncommon, they are not unusual. If you’re interested in applying for a construction loan, contact one of our home loan experts today!
Is your dream home a little more expensive than most lenders will agree to? Well, have no fear, a jumbo loan is the best way to get the financing you need for your dream home. Jumbo loans were created to help people move into a dream home, even if it was more than most lenders would agree. Because of the amount of money involved, the risk of this type of loan is high. Jumbo mortgages typically exceed conforming loan limits to get buyers into luxury properties. More recently, jumbo mortgage rates have been historically low, which is attractive to people wanted to borrow large amounts. In addition to low rates, interest on jumbo loans — up to $1 million— can be tax deductible, but you’ll need to check with a qualified accountant. If you want a loan amount over the conforming limit, it is possible to use a non-jumbo conventional loan plus a second mortgage to make up the difference.
When & How are Jumbo Loans Helpful?
If you’ve heard the term “Jumbo Loan” before and have been confused as to what it means, that’s understandable. The “Jumbo” in “Jumbo Loan” doesn’t refer to the size of the house, rather, the price. A Jumbo Loan is a mortgage loan exceeding the loan limits established by government regulation. The jumbo loan limit is $424,100. However, it does go up to as much as $625,000 in more high-cost areas of the country. Jumbo loans do not fit the typical standards of mortgage loans, so they are a great way for qualified buyers to purchase a luxury home. The ideal bowers will have low debt-to-income ratios, high credit scores, and the ability to put down a large down payment. If you fit these requirements, you may find that a jumbo loan will get you into the house you desire. If this fits your situation, let us know. We’ll get you the financing you need at payments you can afford!
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What Does My Credit Score Need to be to Qualify for a Jumbo Loan?
The higher, the better. Typically, to get approved for a Jumbo loan you need a credit score of 700 or above. However, this may vary with lenders. Typically, lenders will require a down payment of at least 20 percent. This price range is because there are no private mortgage insurance options for Jumbo loans. As with the mortgage, interest rates will vary depending on the lender. However, due to the amount involved, interest rates can exceed $1 million. The good news is that this amount is tax deductible. If the price of the home you want to buy is over $424,100, then this loan is for you. Anything above this range is beyond government regulations, so there are not private insurance options.
If your dream home required you to apply for a jumbo loan, contact one of our home loan experts today! We will help you get everything you need to get approved as quickly as possible.
Potential homeowners have a variety of options when it comes to securing mortgage loans. One of these options is a USDA rural loan. But what exactly is a USDA loan? How can an interested homebuyer get approved for a USDA home loan? What are the interest rates, income limits and other requirements? Here at Assurance Financial, we have the answers for you.
- What Is a USDA Loan?
- What Is the History and Intent of the USDA Loan Program?
- Who Typically Uses or Benefits From a USDA Rural Loan?
- Who Can Qualify for a USDA Loan, and What Can the Loan Be Used For?
What Is a USDA Loan?
The United States Department of Agriculture (USDA) offers loans to people who currently live or want to live in eligible suburban and rural locations. If you and your property are eligible, the USDA rural loan may be an excellent financing option for you.
What Is the History and Intent of the USDA Loan Program?
In 2014, as a part of its Rural Development program, the USDA invested nearly $20 billion to help thousands of families buy and improve their homes. This program is designed to enhance the quality of life and economies in suburban and rural areas. It offers no down payment and low-interest rate mortgage options readily available to eligible areas.
USDA loans were created with the intent of serving people who have lower incomes. For a conventional loan, high-income earners can generally get approved easily, while those with lower incomes may struggle to secure a similar type of mortgage loan. USDA loans were created for those people, and even have income limits in place that prevent applicants who have a larger income from qualifying. USDA loans were also formed to focus on rural communities, so you cannot qualify for a USDA loan for a property in a metropolitan area.
Contrary to popular belief, you don’t need to be a farmer or to become a farmer to secure a USDA rural loan. A USDA loan can certainly be used to purchase a farm, but it can also be used to buy any residential home in a rural or sometimes suburban area. You don’t need to grow crops to secure a USDA rural loan as long as you meet the income and other eligibility requirements.
The intent of the USDA rural loan program was to give potential homebuyers an affordable and accessible financing option. At Assurance Financial, we strive to align our application process with those qualities in mind by making every step as simple and fast as possible.
Who Typically Uses or Benefits From a USDA Rural Loan?
Rural loans all center around being in an eligible area. If you live in an eligible area, you can use and benefit from a USDA rural loan in several different ways.
If you are repairing or renovating an existing home in the eligible area, you can get up to nearly $30,000 in assistance. Don’t worry if your income is low, as these types of loans are meant for low-income borrowers. And, while lenders will look at your income and credit history, the application is very lenient when it comes to credit. The better credit you have –– the sweet spot is 620 and higher –– the less strict your underwriting will be and the better your loan terms may be.
USDA mortgages exist especially for high-need applicants, such as:
- Those without safe or sanitary housing.
- Those who aren’t able to secure a traditional mortgage loan.
- Those whose income falls below the low-income line in their region.
Loans are limited to homes that are equal to or less than 1,800 square feet and hold a value that is less than the region’s loan limit. Nationwide, the limit is generally at $216,840.
So what are the benefits of a USDA rural loan for eligible borrowers? A USDA loan:
- Is an affordable financing option for those with low or moderate income.
- Can offer 100% financing, meaning you may be able to also roll your closing costs into your mortgage.
- Offers one of the lowest mortgage insurance rates on the market, second only to VA loans for veterans. You may be able to avoid mortgage insurance altogether with a larger down payment.
- Does not require a down payment.
- Is not limited to first-time homebuyers.
- Offers 30-year fixed rate terms.
- Allows for seller contributions to closing costs.
USDA rural loans can be an excellent financing option with a ton of great benefits.
Who Can Qualify for a USDA Loan, and What Can the Loan Be Used For?
The uses and benefits of a USDA rural loan may sound appealing, but can you qualify for a USDA loan? Review the requirements to determine whether you can get approved for a USDA home loan and whether this loan is right for you:
- Income level: Your income is relatively low for your region. USDA loan income limits are determined by factors such as region and household size, so check the income eligibility page to see if you qualify.
- Type of property: Your loan will be used for a primary residence. If you’re opting for a repair loan, you’ll need to occupy the property.
- Credit history: You are able and willing to meet credit obligations. Your ability to meet your credit obligations must also be verifiable, such as whether you have a reliable income.
- Citizenship: You are a U.S. citizen or eligible noncitizen. Noncitizens must be able to meet the requirements for eligibility.
- Location of property: Your new property is eligible. Your property won’t be eligible in a metropolitan area, but a suburban area may be eligible.
- Debt-to-income ratio: Your monthly payment will be equal to or less than 29% of your monthly income if your credit score is 680 or less. Unless your credit score is above 680, your debt-to-income ratio also cannot be greater than 41%.
To be eligible for a USDA rural loan, you must prove your U.S. citizenship or eligibility as a noncitizen, dependable income –– typically for a minimum of two years –– and acceptable credit history. Most lenders want borrowers with a credit score of 620 or higher, but those with lower scores can still be eligible by meeting stricter underwriter requirements. USDA loans also usually offer low interest rates and don’t require a down payment. You may need a decent credit score and history, but a high score isn’t necessary for qualification.
Maybe you qualify for a USDA loan, but what exactly can you use the loan for?
There are three types of USDA home loan programs — loan guarantees, direct loans and home improvement loans or grants.
1. USDA Loan Guarantees
The USDA guarantees mortgages issued by a participating local lender, similar to VA and FHA loans. This is a 90% guarantee and allows eligible buyers to get low mortgage interest rates without a down payment. However, you will need to pay a mortgage insurance premium if you do not put money down. With a guarantee, if you are unable to pay back your mortgage, the government will cover the losses for the lender. The amount you finance cannot exceed the value of the home or purchase price.
A USDA guaranteed loan comes with income limits, but these are higher than for USDA direct loans. Guaranteed loans also charge an upfront fee of 1% along with a monthly fee of 0.35% for mortgage insurance. For a loan of $120,000, for example, a borrower would pay an initial fee of $1,200 and a monthly mortgage insurance fee of $420.
To calculate your upfront cost on your USDA guaranteed loan, multiply the loan amount by 0.01. To calculate the monthly mortgage insurance fee on your guaranteed loan, multiply the loan amount by 0.0035.
2. Direct Loans
Direct loans issued by the USDA are for low and very, very low-income applicants. These income thresholds vary by region, and the maximum amount you can finance depends on how much you’re capable of repaying depending on your income, any other debts and any payment assistance you may be eligible for. Interest rates are around 3.5% for the majority of borrowers but can be as low as 1% with subsidies. Repayment periods can also last to a total of 38 years, which is beyond the standard 30-year mortgage term. For these direct loans, you may be required to undergo education in homeownership and be charged a fee for this education.
3. Home Improvement Loans or Grants
USDA home improvement loans or grants allow homeowners to repair or upgrade their rural home. This also includes modernizing or repairing the home to remove safety and health hazards. Alone, loans can provide up to $20,000 of financing. For eligible seniors who may be able to combine a loan with grants, the USDA can provide financing of up to $27,500. The interest rates for repair loans are 1%. Income limits vary by region and household size, so you should consult the USDA eligibility page to figure out your local limit.
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What Is the Application Process for a USDA Loan?
Fortunately, the USDA rural loan is meant to be as affordable and accessible as possible, and so is our application process. Applying for a mortgage with us at Assurance Financial takes just a few minutes. You can progress quickly through our online application and discover the options that are available for you.
We understand that applying for a mortgage can seem like an overwhelming process, especially if it’s your first time in the market or if you’ve been rejected for a mortgage loan before. That’s why USDA rural loans can be an excellent financing option since they tend to be easier to qualify for.
1. Get Prequalified
With Assurance Financial, you can get prequalified by providing your credit score and other financial details. You can get a free, no-obligation quote within 15 minutes by starting online or by speaking to a loan officer.
2. Fill out Your Application
After you find a property you like, you fill out your complete application. With Assurance Financial, you can complete your application online. We perform the rest of the process in-house — we never outsource underwriting.
To fill out your application, here is some of the financial information that you’ll need:
- Assets: You no longer have to fax bank statements to give us information on your assets. With our integrated system, you can simply log in to your bank accounts.
- Tax returns: Copies of your federal tax returns from the past two years may be requested. If you use TurboTax, you can simply log in using our system and complete this step quickly.
- Credit score: Your credit score can determine whether you qualify for a mortgage and what the terms of your mortgage will be, so your payment history, debt and other types of credit may all be taken into account during your application process.
- Proof of income: If your employer uses a well-known payroll company such as ADP, you just need to use your payroll login to prove your income.
- Proof of identification: Snap a photo of your government-issued photo ID to prove your identity and upload it to your application. Yep, it’s that simple.
3. Processing the Application
Processing your application includes underwriting and appraising. After processing is complete, we decide whether you are approved for a loan.
4. Funding Your Mortgage
If we determine that you are eligible for a mortgage loan, and we can fund your loan, the next phase is signing with a notary, funding the loan and closing the mortgage. At closing, you’ll sign all necessary paperwork, such as the documents for your loan. After the paperwork is back to us, the check will be delivered to the home’s seller. Finally, you’ll be able to pack your bags and move into your home!
At Assurance Financial, we want to help you secure the right mortgage for the house of your dreams. We’re here to answer any of your questions and help you understand everything you need to know for applying for your loan.
Whether you’re looking to buy a farm or a home or to build or renovate your property, we have the loans and resources to help.
What Areas Qualify for a USDA Loan?
If you’re unsure if you live in an eligible area, the USDA has a map with the areas on them. You can access the USDA’s Income and Property Eligibility site to determine whether your property may be eligible. First, choose the program that interests you.
Next, search the address of your home to check whether the property is located in an eligible area. The process is similar for determining income eligibility.
You can also check the limit that applies to the county where your home will be located. Simply click on the state you are or will be living in to find your county’s loan limit.
If you’re interested in securing a USDA rural loan as an option for financing your home, be sure to first check that the property is eligible for the loan via the USDA’s eligibility pages. You can also reach out to us at Assurance Financial to find out more information about the USDA rural loan requirements in your region.
Apply for Your USDA Loan With Assurance Financial
USDA Rural loans are perfect for homeowners or buyers in many ways. Rural and some suburban homeowners who may not qualify for a conventional mortgage loan may be able to finance their dream home with a USDA rural loan.
The trick is knowing if your current or future home is in the eligible area. Luckily you have us. At Assurance Financial, we will answer all your questions and make sure you have everything you need. We want to ensure you get the USDA loan you need with the terms that work for you.
Why should you finance your home with Assurance Financial? We have an average 4.98 star-rating across thousands of reviews for a few reasons:
- We offer outstanding customer service. We’re here to help, and our glowing reviews illustrate how much we care and the value we put into our clients’ satisfaction with their lending experience.
- We offer a comprehensive approach to financing. With Assurance Financial, you won’t have to deal with the hassle of several different contacts. You can complete the entire loan process under our roof.
- We offer a large variety of loans. Everyone’s financial and personal situation is different, and at Assurance Financial, we offer options for mortgages that can suit every client we serve.
- We offer a simple application process. We offer both a virtual application process and a process with one of our loan officers to make your loan application as smooth and fast as possible.
- We are an approved independent lender. We are both Fannie Mae and Freddie Mac seller and servicer approved. We are also Ginnie Mae issuer approved.
As an independent lender, we know homeownership is the dream for just about every one of our clients, and we aim to make that dream a reality. No matter what your life situation is, whether you’re buying your first home, starting a family or enjoying your golden years, we have the mortgage loan solutions for you. We have loan officers across 28 states, so you can search for a local loan officer who knows information relevant to your location and situation.
At Assurance Financial, you can find end-to-end processing for your USDA loan all under one roof so your journey of securing your dream home is easier. Just contact one of our home loan experts and apply online today!
For most people, buying a home is the most significant purchase they will make in their lifetime. Before you get started on your journey, it is important to understand which mortgage options are out there.
A conventional loan is one of the more popular options, but they come with a few significant requirements. Below we’ve shared a few details about conventional loans that’ll help you understand if they’re right for you.
The Basics of a Conventional Mortgage
The length of most conventional loans is 15, 20, or 30 years. To qualify, you will need a good credit score. The minimum score to be approved can vary from lender to lender, but a score of 620 is usually what you will need to be approved, and a score of 740 will help you secure the best rate possible.
Unlike other loans, a conventional mortgage will require a significant down payment. Most other loans require an initial payment of about 5%, but with a conventional loan you can expect put down up to 20%. The amount varies and depends on your credit history. You will also be responsible for origination fees, appraisal fees, and mortgage insurance.
Loan Limits
There are two types of conventional mortgage loans: conforming and non-conforming.
Conforming loans follow guidelines set by Fannie Mae and Freddie Mac. The rules for these loans are based on the size of the loan. In 2016, home loans for single-family homes were limited to $417,000, while higher-cost areas held limits up to $625,500.
Non-conforming loans are suitable for borrowers who don’t qualify for a conforming loan because the amount is more than what can be backed by Fannie Mae or Freddie Mac. Most lenders charge higher rates for non-conforming loans since they typically carry other fees and insurance requirements.
Is a Conventional Loan Suitable for You?
Conventional loans are a great choice for borrowers with a strong credit history who can afford a down payment of at least ten percent or more. The higher your credit score, the lower your interest rate.
Lenders are also looking for a debt-to-income-ratio that sits around 36%. People with a little more debt than average and a modest credit score may not qualify for a conventional loan. Acquiring a conventional loan is a little more difficult for those with a DTI over 43% and a credit score below 650.
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Do You Qualify for a Conventional Loan?
Contact Assurance Financial today to see if a conventional loan is suitable for you. Our team of home loan experts is prepared to address any questions or concerns you have about the loan process.
Click here for more information about conventional loans at Assurance Financial.
Many homebuyers don’t realize there are several government home loans designed specifically for first-time buyers until it’s too late! Below we’ve listed a few of the most popular programs and shared some details that will help you land an excellent mortgage package.
FHA Loan
An FHA loan is distributed and insured by the Federal Housing Administration. The FHA is an agency within the U.S. Department of Housing and Urban Development. With an FHA loan, the lender won’t experience a loss if you default on the mortgage. These loans come with competitive interest rates, lower down payments and closing cost than conventional loans. If your credit score is 580 or higher, you may be eligible for a down payment as low as 3.5 percent of the purchase price. However, if your credit score is lower than 580 you may still qualify for an FHA mortgage, but the down payment will be at least ten percent of the purchase price.
USDA Loan
The United States Department of Agriculture has a homebuyer assistance program focusing on homes in selected rural areas (no farm required). The USDA guarantees the loan, and in some cases, no down payment is required, and the payments are fixed. Applicants with a credit score of 640 above undergo a simple process. With a score below 640 you can still qualify for a USDA loan. However, the lender will ask for extra documentation about your payment history. The loan program includes some income limitations, which varies by region.
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VA Loan
Active-duty military members, veterans, and surviving spouses are eligible to receive a loan backed by the United States Department of Veterans Affairs. The VA guarantees a portion of the loan, leaving room for lenders to offer some special features. VA loans come along with competitive interest rates and don’t require a down payment. Loan recipients aren’t required to pay for private mortgage insurance (PMI), and there’s no minimum credit score needed for eligibility. If meeting payments on the mortgage become difficult, the VA will help negotiate a deal with the lender on your behalf.
Good Neighbor Next Door
The Good Neighbor Next Door Program is sponsored by HUD and assists law enforcement, firefighters, teachers, and emergency medical technicians with housing. The program offers a 50 percent discount on a home’s listed price in locations deemed “revitalization areas”. To be eligible, you must commit to living in the home for at least 36 months.
Fannie Mae or Freddie Mac
Fannie Mae and Freddie Mac collaborate with local lenders to offer mortgage options benefitting low to moderate-income families. Lenders supported by Fannie Mae and Freddie Mac can offer competitive interest rates and accept down payments as low as three percent of the purchase price.
Ready for the Next Step?
Want more information about government home loans? A home loan expert at Assurance Financial is ready to help you choose the right loan for you today. Our team of loan officers is qualified to help you find a program that fits your needs. Click here for more details and to get started today.
Obtaining a home loan isn’t a one-step process. Below we’ve laid out the most essential aspects of the home loan process. Our guide will help you be prepared for every step of the way!
Save Up for a Down Payment
The home loan process always starts with saving. Depending on the type of loan you choose, you may be required to make a down payment ranging from 2.25% to 20% of the purchase price of the home. Start by creating some room in your monthly budget for the down payment. The most convenient method is establishing an automatic deposit to a savings account, specifically for your home loan. If a large down payment isn’t realistic for you, consider an FHA loan. This loan program is designed for home buyers who can only make small down payments.
Track Your Credit Score
Having a good credit score makes the home buying process a breeze! Before you start the buying process, get a copy of your credit report. Looking at your report will help you understand how your credit profile appears to potential lenders. Once you’ve examined your credit profile, you can begin taking steps to improve your credit score if need be.
Get Organized & Prepared
When you submit your mortgage application, you’ll need to hand over a few important financial documents to your lender. Take some time to get organized and find all the records you need to provide your lender. Having these documents at the ready will accelerate the processing of your loan application. In most cases, you’ll need to provide your last two pay stubs, your previous two tax returns, your most recent W-2 form, and current bank statement.
Discover Which Loan Option is Best For You
Despite their sound advice, the loan program that worked best for your parents may not always be ideal for you. Take some time to research which loan program will fit with your current financial situation. Everyone has a set of unique financial needs. With a little digging, you’ll be able to find the loan that best suits your needs.
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Contact a Lender
Once you’ve done all your research and assembled the necessary documents, it’s time to visit your lender. They’ll be able to assist you with all the heavy lifting involved in the mortgage process.
At Assurance Financial, we guide each of our clients through the home loan process, ensuring total transparency and support along the way. Our team of mortgage experts specialize in residential home loans and are here to help you. For more about our loan process, click here.