fbpx
30yr Rates: FHA 2.25% - APR 3.127%|CONV 2.625% - APR 2.879%
for a free quote!

Homestead Financial Mortgage

Let Homestead Financial Mortgage provide you with a stress-free home mortgage or refinance experience! Ask us anything at anytime because it's always #zerotofindout.

Should you keep Renting or is it Time to Buy?

When you’re asking yourself, “Should I buy or rent?”  there are three significant advantages of purchasing to consider. The first one is payment stability. As a renter, you probably have very little control over your rent being increased year after year. Rather than paying more for rent, consider buying instead. Even if your first property is a condo or smaller home, you might be surprised at how affordable purchasing is. When you’re paying a mortgage instead of rent, you’ll have much more control over your budget. You’ll know what your payment will be month after month, year after year. Another thing that will help your budget are the significant tax advantages you’ll have when you’re a homeowner. With homeownership, you’ll save money because of tax write-offs instead of giving it away to Uncle Sam.

And possibly the most enjoyable factor when comparing the rent vs. buy calculation is the “Pride of Ownership”. There’s a big difference between decorating a home you’re renting versus one you own. When you own your home, you’re the boss. If you want to paint a room or hang pictures, there’s no problem. You don’t have to ask permission. Plus, every improvement you make will go towards increasing your equity. Go ahead and find out what’s right for you with our rent vs. buy calculator.

To learn more, please reach out!

If owning your own home in a rural area sounds like your dream, but you don’t have enough money saved for a big down payment on a house, there’s another option for you! The U.S. Department of Agriculture and Rural Development backs a mortgage program that doesn’t require a down payment or perfect credit to qualify. It’s called the Rural Development Single Family Housing Guaranteed Loan Program, or Section 502 loan, and it’s just for people looking to live in rural locations!

Do you qualify for a USDA home loan? Let’s find out!

Basics of USDA Loans
This non-conventional loan program is designed to improve underdeveloped areas of this great nation, while helping low- to middle-income families purchase a home without a down payment. Not all mortgage lenders offer this non-conventional loan program, but Homestead Financial does!

The United States Department of Agriculture insures loans for homebuyers looking to purchase a primary residence in eligible rural areas of the United States. A USDA loan is designed for people living on limited incomes, so if you make too much money per year, you won’t be eligible for the loan. The income limit is based on the number of people in your household and the county’s income limit, which will vary by location.

You can verify income limits and eligible addresses on the USDA government website or through the realtor you’re working with. Know that 97 percent of areas of the U.S. are eligible for USDA loans, while only 3 percent are not! That’s a wide geographical expanse for you to consider!

In terms of interest, the USDA rates are quite low, and payment assistance can lower your interest rates even farther, if you earn a qualifying income. The standard interest rate changes with the market. Compared to other loan programs, however, USDA mortgage rates are usually the lowest, matched only by VA loans for military veterans. USDA loans are fixed-rate mortgages that last 15 or 30 years. Adjustable-rate mortgages are not available through the USDA program.

Unlike conventional loans, USDA loans allow you to finance the closing costs into the loan, so you generally need very little upfront to make your purchase. You can, of course, still contribute a small down payment, but it is optional. Family and non-family members are allowed to help you cover your closing costs, and the seller may pay closing costs for you as well.

USDA Eligibility and USDA Credit Score Minimums
In all cases, USDA eligibility is based on you, the buyer, and the property you’re looking to purchase. The home must be located in a rural area, which is generally defined as having a population of less than 20,000. You also cannot make more than 15 percent above the local median salary, which will vary depending on where you live. The home you’re considering must be your primary residence. You cannot purchase an investment property or a vacation home with a USDA loan, and only single-family residences qualify.

To receive approval for a USDA loan, you must be able to prove that you have a steady job and income, usually by using your tax returns and pay stubs. You must also have a debt-to-income ratio (DTI) of 41 percent or less. That means that no more than 41 percent of your income should go toward paying off your debts each month. It is possible to qualify for a USDA loan with a higher DTI, as long as you have a credit score higher than 550, stable employment, and have shown a demonstrated ability to save money. Ultimately, your mortgage lender makes the decision. For reference, the maximum DTI for a conventional loan is usually between 36 and 45 percent, depending on credit scores and other qualifying factors.

Generally, buyers using a USDA loan must have a FICO credit score of at least 640, but that can vary by lender. Comparatively, your credit score must be a minimum of 620 to qualify for a conventional loan. However, your interest rates with a conventional loan and a lower credit score may be significantly higher.

USDA Loan PMI
Aside from the above qualifications, buyers considering an USDA loan should understand PMI and loan limits. Private mortgage insurance (PMI) protects the lender in case you default on your loan, and it is included in your USDA home loan as a monthly fee. You may also need to pay an upfront fee. For home purchases, the PMI fee upfront is about 1 percent of the size of the loan, and an annual fee of 0.35 percent, which is added to your monthly payment.

For example, if you take out a USDA home loan for $100,000, you would need to pay an upfront mortgage insurance premium of $1,000 at closing. Then, each month when you pay your mortgage, you pay an additional $29.17 dollars to maintain your PMI. PMI is required on all home loans where you’ve provided less than 20 percent of the home cost for a down payment.

Property Requirements for USDA Loans in Missouri, Kansas, and Illinois
There is no maximum mortgage you can take out for a USDA loan, as long as you meet the debt-to-income requirements. However, the property you choose to purchase must meet certain basic requirements, as they would for any government loan program.

The home must be modest, not an estate or a mansion and be located in a predominantly residential area; it cannot be income-producing, such as a farm or ranch that happens to have a house on the property. Unfortunately, homes with an in-ground pool do not qualify for a USDA loan. The home must also be compliant with zoning restrictions and be clear of termites and other pests.

An approved USDA appraiser must examine and value the home. They’ll look for anything that needs to be repaired that would otherwise make the home unhealthy or unsafe to occupy. Sometimes, your appraiser can identify improvements that you can negotiate with the seller to perform, but even seemingly minor issues could disqualify a home from a USDA loan. Your real estate agent can give you insight about what these items may be when you tour homes before you put in an offer.

Homestead Financial Offers USDA Loans Near You
Homestead Financial is a USDA direct lender, so when you work with us to get a mortgage, we decide whether you qualify for a loan and guide you through the mortgage process. If you’re ready to buy a home, contact us to get started on the pre-approval process, so you’re ready to start working with the real estate agent of your choice.

To learn more, please reach out!

If you’re a military veteran, you’ve worked hard and sacrificed for this country. For more than 75 years, the Veterans Administration (VA) has believed you deserve an opportunity to secure affordable financing for a home of your own, which is why the VA loan program came about.

A VA loan is government-backed, but can be issued by private mortgage lenders, like Homestead Financial, who work for you to close on your loan on-time. So, if you’re a veteran, and it’s time to look into purchasing a home, whether you’re a first-time homebuyer or beyond, look to us to guide you through the VA loan process.

What You Should Know About VA Loans
Homestead Financial is an approved VA lender. When you seek a mortgage through us, we loan you the money for your purchase, and the VA guarantees a portion of that loan. It is basically an insurance policy on the loan, which is why you’re able to get one with such a low down payment. When we work with the VA, you reap the benefits.

VA loans enable you to buy a new home, purchase a fixer-upper and finance the repair costs, or simply refinance and repair your current home. While a VA loan gives you lots of options for how you can use your home loan, you cannot use it to purchase a vacation house or investment property. It will only apply to your primary residence, that is, where you live most of the time. Compared to conventional and FHA loans, a VA loan has a lower down-payment requirement and almost always better interest rates for the duration of your loan.

With a VA loan, you are also eligible to purchase a condo, if it is on the VA’s approved condo list. You also can use your VA loan to buy a manufactured home, as long as it meets minimum property standards, is on its own private land, and is on a permanent foundation.

Basic Qualifications for a VA Loan
Just like with any mortgage, there are minimum qualifications you must meet to take out a home loan. First, you will need to provide a valid Certificate of Eligibility (COE). You can apply for this document through the Veterans Administration website, or by filling out a request form and submitting it by mail. If you are the surviving spouse of a veteran, or the spouse of a veteran who is missing in action or is a prisoner of war, you may also qualify for a COE. If you need help obtaining your COE, Homestead Financial can help! 

All borrowers on the loan must have acceptable FICO credit scores. The government does not require any minimum scores, but does allow individual mortgage lenders to determine their own requirements. Generally, we recommend you have a credit score of 620 or higher, however, and you cannot be in default for any other type of government loan. You must also have an acceptable income to be able to pay for the loan while you own the home.

Your income is measured through a debt-to-income ratio (DTI). Usually, the maximum DTI you can have while qualifying for a VA loan is 41 percent, but every mortgage lender is different. A DTI of 41 percent means that no more than 41 percent of your income should go toward paying off all your debts each month — including auto loans, student loans, and other debts. To compare, the maximum DTI for a conventional loan is usually between 36 and 45 percent.

Let’s take a look at a DTI example to illustrate what we mean. Let’s pretend your gross income — the total amount of money you earn each month — is $5,000. Your debt obligations each month are a $300 car payment, $100 toward your credit card balance, and your new mortgage payment of $1,600. That’s a total debt obligation of $2,000. Divide that debt obligation by your gross monthly income. In this example, your DTI is 40 percent, and you’d qualify for a VA loan.

VA Loan Funding Fees and Other Obligations
To get a VA loan, you have to pay a funding fee, which is based on the percentage of the total loan amount. This fee can vary by year, so always check with your mortgage lender. Funding fees range from 1.4 percent to 3.6 percent, and depend on whether you have a down payment, if this is your first VA loan or not, and your type of military service. There are certain reasons you can be waived from paying a funding fee, as well as reasons you may receive a refund of the fee.

When you purchase a home with a VA loan, you also will need to pay for certain closing costs. You can negotiate with the seller of the home to pay up to 4 percent of the closing costs, called seller’s concessions, including your VA funding fee. Work with your realtor to determine how much of the closing costs you’d like to ask the seller to pay when you put in an offer on a house for sale.

Unlike with other non-conventional loans or conventional loans with less than 20 percent down payment, you will never have to pay Private Mortgage Insurance (PMI) on your VA home loan. This is just another reason to take full advantage of your VA benefits, and it can save you hundreds, if not thousands, of dollars per year.

Property Requirements for VA Loans
If you don’t plan to pay a down payment with your VA loan, there are limits to how much money you can borrow. Your loan amount will vary depending on the county where you live, and some places where Homestead Financial lends, like St. Louis, MO; Overland Park, KS; and Glen Carbon, IL; have larger limits for places with higher costs of living. Commonly, the limit for a single unit is $510,400, but the amount is subject to change.

As with any government-backed loan, the VA requires the property you buy to be safe, sanitary, and structurally sound. Cosmetic issues do not affect your loan, but the appraiser who values the home will consider the foundation, roof, and heating and cooling systems (if applicable). Any necessary repairs made to the home must adhere to special VA guidelines.

Why Choose Homestead Financial for a VA Loan Near You
Homestead Financial is a VA loan direct lender, so when you work with us to get a mortgage, we’re the ones who approve your loan. This enables us to get you to closing as quickly as possible, all while we provide excellent service throughout the process.

Contact us today to get pre-approved so you can begin working with your real estate agent to find the home of your dreams!

To learn more, please reach out!

Buying a home can be a daunting process, full of what seem to be complicated steps and frustrating collaboration between the buyer and seller, real estate agents, real estate lawyers, and mortgage companies. Some people avoid buying a home and opt for renting to avoid the stress, and because they aren’t sure they can afford a mortgage to begin with. At Homestead Financial, we take the headache out of home-buying and help people from all financial backgrounds become homeowners. How do we do it? We’ll explain!

Step One: Get a Mortgage Pre-Approval
Before you begin shopping for a home, you’ll want to get pre-approved for a mortgage. Having a pre-approval letter shows sellers that you’re serious about buying a home when it’s time to make an offer.

On your first call with Homestead Financial, we will tell you the loan amount you’re pre-qualified to spend on a new home. We’ll take into consideration things like your annual income, your credit score, and the down payment amount you have saved. Even if you don’t have a 20 percent down payment for a conventional loan, there are loan options you can qualify for!

Step Two: Begin Working with a Real Estate Agent & Get to Shopping!
A real estate agent specializes in helping you find the right house for your lifestyle. They are experts in the housing market in your area, and can help you narrow down your search to specific neighborhoods and housing types based on your pre-approval.

To find a great real estate agent, ask your family, friends, or coworkers for their recommendations. Word-of-mouth can help you find the right agent for you. You’ll want to find an agent you like working with so they can fully represent you in the home-buying process. We do not recommend working with the same real estate agent representing the seller of a house you’re interested in.

Once you’ve secured a real estate agent, they will probably begin sending you daily emails with the latest house listings. You’ll review the listings and let them know which houses you’d like to see in person. Keep in mind your budget and your list of priorities as you shop around for a new home. Decide the home features you can compromise on and which you must have, and stick to it as you shop around. Remember that the one thing you cannot change about a home is its location. Once you find a house you love, it’s time to move to the next step in the process.

Step Three: Make an Offer On a Home
If you’ve found a home you love, you’ll let your agent know you’re ready to make an offer. Your real estate agent can help you determine the best offer to make on the home, based on the list price, condition of the home, how long it’s been listed for sale, and the current market conditions. If it’s a buyer’s market – one where there are lots of houses available – you might get a better deal on the home than if it’s a seller’s market – one where there are few houses for sale, but lots of shoppers.

Your offer should include the amount of money you’re offering for the home, as well as any additional conditions of the offer, such as the appliances or other items you’d like to include in the sale, and contingencies like a home inspection. You’ll also want to include the closing date.

The seller will accept your offer, turn down your offer, or counter your offer with a deal they like better. If your offer is accepted, or you accept the counter offer, then congratulations! You’re on your way to home ownership!

Step Four: Finish Your Application with Homestead Financial
With an accepted offer, you can now complete your full loan application. You should move fast, as you have only a short window of time once the contract is signed.

You’ll need:

  • A copy of the signed contract
  • Current pay stubs
  • W-2s from all employers for the past two years (or 1099s if you’re self-employed)
  • ID, such as a driver’s license
  • Federal tax returns for the past two years
  • Bank statements for the past two months
  • Retirement account statements

Now is the time to ask lots of questions about the loan process, your mortgage, and more. Make a list of questions you think of as you go, and ask your dedicated loan professional at Homestead Financial.

Step Five: Get a Home Inspection and an Appraisal
As Homestead Financial works to process and approve your loan application, you’ll need to schedule a home inspection to check on the condition and soundness of your new home.

Professional home inspectors are unaffiliated with the home seller or mortgage lender and check over all facets of the home:

  • Visible Structure: Foundation, framing, floor joists, rafters, etc.
  • Electrical Systems: Breaker or fuse boxes, outlets, light switches, wiring, etc.
  • Plumbing Systems: Bathroom and kitchen pipes, water supply, drains, etc.
  • Roof: Shingles and structure
  • Overall home condition

Your home inspector will go through the entire home – all visible areas of it – and make notes of areas that need improvements or maintenance. You will receive a copy of the final report and can use it to ask the seller to make repairs prior to closing on the home.

After you’ve negotiated any repairs with the seller, it’s time for an appraisal. Homestead Financial will set up the appraisal for you and will send our appraiser to the home to determine your home’s value. An appraiser takes into the condition of the home, its finishes, and comparable homes that recently sold in the area. In general, the appraisal should not be less than the purchase price of the home; if it is, you may need to finance the difference out of pocket, renegotiate the purchase price, or cancel the transaction altogether. Your lender and your real estate agent can help you determine how to proceed.

Once these steps are completed, Homestead Financial will finish processing your loan. When your loan gets to the underwriting department, you should be prepared to answer clarifying questions. It behooves you to answer these questions quickly to keep your loan moving forward.

Step Six: Close on Your Home Loan
When your loan is processed and fully approved, you’ll need to sign documents to complete the sale. Your real estate agent, the seller’s agent, the mortgage company, and the title company will coordinate your date of closing.

Closing typically takes place at a title company, but it also can happen at your real estate lawyer’s office. At closing, the seller will receive their money, and you receive the keys to your new home. You’ll need to make sure you bring a certified check to closing to pay your down payment and other prepaids.

Contact Homestead Financial to Start Your Pre-Approval
If you’re ready to get started in the home-buying process in Kansas City, MO or St. Louis, MO, contact a mortgage expert at Homestead Financial! We’ll help determine the type of loan you’re qualified for and get you started down the path to home ownership.

To learn more, please reach out!

Before you begin looking at houses for sale near you, you’ll need to get pre-approved for a mortgage from a home loan lender. One of the most important things to consider is the type of home loan to fit your needs. There are two basic types of home loan: a fixed-rate mortgage and an adjustable-rate mortgage, also called an ARM. Depending on your financial situation and repayment preferences, an ARM or fixed-rate might be the best bet for you. A mortgage lender like Homestead Financial can help you determine what you qualify for.

What is a Fixed-Rate Mortgage?

Home buyers who get a fixed-rate mortgage receive a home loan in which the interest rate remains the same through the full term of the loan, most commonly for 30 years, but terms can vary. Monthly payments with a fixed-rate mortgage never change — unless taxes or insurance rates in escrow increase or decrease on your home. The principal and interest rates stay the same.

When you take out a fixed-rate mortgage on a home, you’ll get an amortization schedule from your lender. This schedule outlines exactly the number of payments you’ll need to make, and at what amount, as well as the balance remaining on your loan after each payment. You’ll be able to look to the amortization schedule to determine how much you’ll spend in interest throughout the life of your loan.

What is an ARM Loan?
Home-buyers with an adjustable-rate mortgage can expect the interest rate to fluctuate over the years. The mortgage ties the interest rate to a margin that includes a stated index, such as the Libor or Treasury bill yield, and a spread. The index can change, but the spread always remains the same. An ARM loan adjusts based on the mortgage terms, so if interest rates increase, so, too, will your monthly payment.

What if Interest Rates Change?
With a fixed-rate mortgage, if interest rates drop, you must refinance your home to get the benefit of the lower rate. To refinance, you will need to contact your mortgage lender to discuss options. You may need to pay for a new loan origination fee, among other things, to complete a refinance.

With an ARM loan, your interest rate changes every year. You do not have control over your interest rate with this type of loan. However, because you could end up with a very low interest rate for certain years, your monthly payment could be reduced throughout your loan term. Conversely, if interest rates drastically increase, your monthly payments will increase. You do not need to refinance for your interest rate to change.

What are the Types of ARM Loans?
Depending on the ARM loan you choose, your interest rate will remain fixed for a period of years before changing every year on the anniversary of the mortgage, for the remainder of your loan term. In this way, an ARM is a hybrid loan, because homebuyers do get a fixed interest rate for a certain number of years.

A 3/1 ARM, also known as a 3-year ARM, is a loan with a fixed interest rate for the first three years, but the rate changes once per year for the remaining term of the mortgage.

Similarly, a homeowner with a 5/1 ARM loan will enjoy five years of a fixed-rate mortgage, with the interest rate changing once per year. A 7/1 ARM loan and a 10/1 ARM loan work similarly, in that the first number in their name is the length of time in years with a fixed interest rate.

Case Study
To better understand how a fixed-rate mortgage and an ARM loan differ, let’s take a look at two loans: a 30-year fixed-rate mortgage, and a 5/1 ARM.

For simplicity’s sake, let’s say you’re purchasing a home for $100,000. You have a $20,000 down payment, and a 30-year fixed-rate mortgage with a 5 percent interest rate. Your homeowner’s insurance is $1,000 per year, and your annual property tax is 1 percent.

With this fixed-rate loan, you’ll have an $80,000 loan balance and will make monthly mortgage payments of $649 per month for 30 years. In the first five years, you’ll have paid $19,230 in interest and $6,537 toward the principal of the loan. In year 30, you’ll have paid your entire principal – $80,000 – and a total of $74,468 in interest.

Comparatively, with a 5/1 ARM loan with the same loan balance, property tax, starting interest rate, and homeowners insurance, you’ll start out with a $596 monthly payment, a monthly savings of $53 per month. In the first five years, you’ll have paid the same amount in principal and interest as you would with a 30-year fixed. However, by year 30, you are projected to have paid $142,198 in interest. Of course, this can vary depending on what the interest rates are each year of your loan term.

When Should I Choose an ARM Over a Fixed-Rate Mortgage?

Based on the case studies, it seems like an ARM loan doesn’t save you money in the long-term because of interest rates. However, there are compelling reasons to choose an ARM.

  • You may qualify for a lower interest rate on an ARM loan than a fixed-rate loan, depending on the current financial climate. Some lenders charge more interest on a fixed-rate loan than an ARM loan.
  • The savings in the mortgage payments in the first few years of the loan gives homebuyers extra money to invest elsewhere.
  • ARM loans can be a cheaper way for borrowers to finance a home, especially if they don’t plan to live there for very long.

Choose Homestead Financial for Your Mortgage

Homestead Financial serves homebuyers in the Kansas City, MO and St. Louis, MO metropolitan areas, including Godfrey, IL and Glen Carbon, IL, and Overland Park, KS. We’re the “gold standard” in mortgages for every property type, and are ready to take care of every step of the home loan process for you.

To learn more, please reach out!

Congratulations! You’ve fallen in love with a house and made an offer on it, and it’s been accepted! An important next step is hiring a reputable inspector to perform a thorough home inspection of all major systems. There are very rare cases when you might skip a home inspection, but for the average buyer, the inspection is of utmost importance. Home inspections not only identify issues with the home you’re buying and get them repaired, but they also can help you finance your mortgage.

What Home Inspectors Look For
When you hire an independent inspector to look over the house you’re buying, they’ll examine the house’s structure, electrical systems, plumbing systems, roof, heating and cooling, and overall home condition.

You can choose to attend the home inspection, but note it can take a few hours to complete. When the inspection is finished, you’ll receive a copy of the report that details any issues or maintenance needs in the home. You can then use that report to negotiate repairs on the home or a credit on the purchase price. You’ll talk to your real estate agent about the repairs you’d like to see done on the home, and they will convey those requests to the seller’s agent.

What Repairs Can I Negotiate?
Your home inspection report can include major repair needs, deferred maintenance, and minor fixes. As the buyer, you can decide what repairs need to be made for you to move forward with buying the house.

If the inspection is unsatisfactory, you can back out of the home purchase, but know you will not get a refund for the inspection, and in some cases, you might lose the earnest money you put down on the house when your offer was accepted. The seller also can decline to perform any repair you ask for. Use the inspection as a tool to ensure you’re comfortable with purchasing the home in its current condition.

When you negotiate a repair to the home, the seller must complete it at least ten days before closing and provide proof of work completion, such as receipts. When you complete your walkthrough of the home upon closing, you and your real estate agent will determine whether the repairs were done to a professional standard. If they were not, the seller may have to fix the new issues.

What Repairs Can I Negotiate?
Generally, you can request any repairs you want based on the inspection report, but you cannot ask the seller to upgrade finishes or make other changes based on personal taste or preference.

For example:

  • You could ask the seller to repair damage to cabinet doors, but you cannot ask the seller to upgrade the countertops to granite.
  • You could ask the seller to repair damage to the existing exterior vinyl siding, but you cannot ask the seller to re-side the house in a color you prefer.
  • You can ask the seller to replace a foggy pane of glass in a door, but you cannot ask the seller to remove an existing standard door and install a French door.

What Is a Credit?
If the seller does not wish to make a repair, or it is inconvenient to do so prior to closing, but they concede to do it, the seller can meet the buyer’s demands by offering a monetary credit to the buyer.

A repair credit is usually paid in the form of a certified check directly from the seller to the buyer upon closing. However, sometimes the credit can come in the form of a lowered purchase price on the home. State law and lender policies determine which is the best way to proceed with a credit.

How Does the Inspection Help Me with My Mortgage?
Repairs you ask the seller to make to the home can save you money on a home purchase because you do not have to finance these fixes separately. You do not have to pay out-of-pocket for these repairs, nor does the negotiated price of the home increase because of them.

If a seller offers you a credit because they cannot complete the repair or do not want to pay out-of-pocket for the full cost of the repair, you will either receive a certified check from them, or they will reduce the purchase price of the home.

If they write you a check, you can use it to finance the repair. With this check, you do not have to use your own savings on the repair.

A seller might instead reduce the purchase price of the home to accommodate for the cost of the repair the buyer will have to pay to conduct. However, many lenders consider this concession a risk to the sale and do not allow the credit as a line-item in the final settlement statement. Check with your mortgage lender about the best way to proceed in this instance.

Sometimes you can negotiate repairs that ultimately help to increase the value of the home you’re buying, and those repairs are typically done prior to the appraisal being completed. The appraiser takes into account the home’s condition when determining value, so a home that appears to need fewer repairs may be worth more money. This means you may already have a small amount of equity in your home immediately upon closing. If you’re paying Private Mortgage Insurance (PMI) because you did not make a 20 percent down payment, this equity is a step toward dropping the PMI more quickly.

Finance Your Home Loan with Homestead Financial
Although credits and repairs can save you money and even partially finance your home loan, you still need a mortgage lender to get you the loan in the first place! If you’re ready to start the home-buying process, it’s time to get pre-approved.

If you’re looking for a St. Louis or Kansas City home loan, the experts at Homestead Financial can get you started. Contact us today to learn more about the type of home loan you qualify for.

To learn more, please reach out!

Many people are surprised at the number of steps they have to go through to buy a new home. It’s not as simple as getting a loan, picking the house, and closing the sale. There are several steps in between finding your new home and moving in, and the process can be overwhelming, especially for first-time home buyers.

It’s nice to have someone on your side to guide you through the process. While there are many St. Louis mortgage lenders who are able to help with your mortgage, there’s only one mortgage lender who’s willing to walk you through the entire process. Homestead Financial Mortgage is a St. Louis mortgage specialist with expert mortgage loan officers who are educated in the entire home-buying process from start to finish. Homestead Financial Mortgage offers lots of resources to help home buyers get through the purchase process quickly and with as little stress as possible.

Pre-approval vs. Pre-qualification

Mortgage pre-approval is one of the first steps on the road to homeownership. Many home buyers use the terms pre-approval and pre-qualification interchangeably. However, they’re not quite the same thing. Pre-qualification is basically a snapshot of where you sit financially at a given point in time. This is put together based on verbal information that you provide to your mortgage lender. A pre-qualification letter gives you an idea of the interest rate and terms you can expect based on your financial status.

Pre-approval goes more in-depth, using bank statements, credit reports, retirement account statements, and other documentation to gain a clearer picture of your ability to obtain and repay a home loan. Sellers like to work with buyers who have a pre-approval letter. They know this letter means there’s little risk that the purchase will fall through because of financing issues. The pre-approval letter includes more detail than a pre-qualification letter, including an estimate of the loan amount, the interest rate, and the estimated monthly payment.

Steps to Mortgage Pre-Approval

Here are a few things you can do ahead of time to ensure that you’re pre-approved for a home loan. 

Know your credit score. Much of the mortgage pre-approval process starts with your credit score. The higher the score, the more willing a mortgage lender will be to loan you money. Generally, a credit score of 620 or higher will get you the best interest rate on your mortgage.

Clean up your credit report. While you’re checking your credit score, take a look at your credit report, too. Make sure that everything you see in the report is legitimate, and dispute any errors that you find. Close any accounts you’re no longer using. The fewer open accounts that show up on your credit report, the better you look to a lender. Every consumer is entitled to one free credit report per year from one of the big three consumer credit companies (Experian, TransUnion, or Equifax) or at annualcreditreport.com.

Calculate your debt to income (DTI) ratio. Mortgage lenders operate within specific guidelines when it comes to making home loans. Most St. Louis mortgage lenders will want your debt to income ratio to come in at or below 36%, which means that no more than 36% of your total gross income is allocated toward paying monthly obligations, including your housing. Each lender is different, and some lenders may have a slightly different threshold, but knowing your DTI before you talk with any mortgage lenders is helpful.

Plan for a down payment. The amount of money you put down on a new home significantly impacts the amount of your monthly mortgage payment. The more you put down upfront, the less you have to borrow. And the less you borrow, the smaller your monthly payment will be and the less you’ll pay in interest over the life of the loan. Make plans in advance to save up the cash you’ll need for a down payment. For a conventional mortgage, a down payment of 20% is standard, although not necessarily required. There are also other types of mortgages that require a smaller down payment for those who qualify. Your mortgage loan officer can help you sift through the options that may work for you.

Don’t forget closing costs. Closing costs are another item that must be paid in cash, and they can be considerable depending on the size of the loan. Don’t forget to save up money for closing costs during your planning phase. These costs typically run between 3% and 5% of the loan amount and are due at the time of closing.

Gather all your documents. Start gathering all the documents you’ll need during the pre-approval process, and put them in a file where they’re easily and quickly accessible. Documents that you’ll need include the following:

  • Current pay stubs
  • W-2s from all employers for the past two years (or 1099s if self-employed)
  • Some form of identification, such as a driver’s license
  • Federal tax returns for the past two years
  • Bank statements for the past two months
  • Retirement account statements 

It’s better to include too much documentation than to find out you need something and don’t have it. If you’re in doubt, put it in the folder. You can always set it aside later if you don’t need it.

Homestead Financial Mortgage is Here to Help

Homestead Financial Mortgage is one of St. Louis’ leading mortgage lenders. In addition to our St. Louis branch, we have branches in Overland Park, Kansas, Glen Carbon, Illinois, and Godfrey, Illinois. Our professional mortgage officers are well-versed in the entire home-buying process; we even have real estate professionals that we can refer you to if needed. Our goal is to take the fear and stress out of buying a home, especially for first-time home buyers.

If you’re ready to start the pre-approval process for your home loan, give us a call, visit us online, or stop in and see us at one of our branch locations. We’ll make sure your home-buying experience is the best it can be!

To learn more, please reach out!

If you’re in the market for a new home in St. Louis, you’re in luck. The residential housing market is strong right now, and buyers are in a good position to get the home they have their eye on – if they can afford it. For a buyer to have a shot at the home of their dreams, they have to have cash on hand for an earnest deposit and a down payment. They also have to be approved for a mortgage. A St. Louis mortgage company like Homestead Financial Mortgage can help you get the edge over other potential homeowners. Sellers sell to the person they know can pay for the home. If you’re starting to search for home loans, you need to be prepared.

Sorting through the Confusion

There are several types of home loans available to potential homeowners. Not all of them fit every buyer’s situation, and expert St. Louis mortgage lenders can help you sift through the options. Before you start looking for your new home in earnest, it’s important to understand the basic types of mortgages so that you can determine the option that will work best in your case. 

There are eight basic types of home loans. An overview of each follows. Getting familiar with these loans and how they work will give you a better idea of what to expect when you are ready to apply for a mortgage.

Look at the Basics First

Before we go into the types of mortgage loans, it’s crucial for you to understand a little more about how your mortgage loan payments are calculated. Two components that directly impact this number are the term and the interest rate.

Term. This is the length over which you’ll be paying off the money that you borrow to purchase your new home. Thirty years is the most common term, but many homeowners are opting for shorter terms when they can afford it. The shorter the term, the higher the payment is likely to be; however, you’ll pay your home off faster and pay less over the long run with a shorter-term mortgage. 

Interest rate. Interest is what you pay the bank for the use of their money. The interest rate on a mortgage can be either fixed or variable. A fixed interest rate is just that: fixed. It’s the same amount every month; it’s easy to budget for. A fixed rate doesn’t deliver any surprises. A variable-rate mortgage (also known as an adjustable-rate mortgage) has an interest that varies from month to month or year to year. A variable-rate mortgage looks appealing on the front-end because the interest rate is usually lower in the beginning years, resulting in a lower monthly payment for the homeowner. Over time, however, the rate adjusts upward, impacting the monthly payment amount. There are good reasons for getting a variable rate mortgage. A St. Louis mortgage expert can help you determine whether this is the right option for you. 

Types of Mortgage Loans

Below are the most common types of mortgage loans.

Conventional loan. A conventional loan is one that meets all of Fannie Mae’s lending requirements (also called underwriting guidelines). Fannie Mae, which stands for the Federal National Mortgage Association, is a governmental entity assigned to oversee the mortgage lending process. The government does not secure a conventional loan, and the homeowner must pay private mortgage insurance, which protects the lender if the loan goes into default.

Unconventional loan. Unconventional loans do not adhere to Fannie Mae guidelines. Unconventional mortgages include subprime mortgages and other government-insured loan programs. The following fall under the unconventional loan category:

Subprime mortgage. A subprime mortgage is designed to help those who have challenges qualifying for a conventional mortgage. Situations such as divorce, unemployment, or medical costs can prevent a homeowner from meeting Fannie Mae guidelines. In this situation, a subprime loan may seem like the best bet, but beware. These loans often come with high interest rates and prepayment penalties because of the risk to the lender.

FHA loan. FHA (Federal Housing Administration) loans are often an appropriate solution for first-time St. Louis mortgage applicants because these loans can be had for a down payment of as little as 3.5%. They also have lower requirements when it comes to a qualifying credit score. That catch here, though, is that homeowners will pay a mortgage insurance premium for the life of the loan.

VA loan. VA loans allow military veterans to purchase a home with virtually no down payment or mortgage insurance. These loans come with an origination fee that’s based on several things: whether it’s your first VA loan, the amount of money borrowed, your military status, and the down payment amount. Take these into consideration before going this route because the origination fee can add a sizable amount to the loan. Also, if the housing market changes for the worse, you could be left making payments on a house that has decreased in market value.

USDA/RHS loans. People who live in rural areas and can demonstrate a need for financial assistance may be a candidate for a USDA loan. This program, managed by the Rural Housing Service, allows qualifying rural residents to purchase a house with no down payment at below-market interest rates.

Homestead Financial is Your St. Louis Mortgage Company

The mortgage programs above are the most common, but there are many other loan options available. A professional St Louis mortgage loan officer can help you sort through your options and choose the one that works best for your situation.

Homestead Financial Mortgage is different from other St. Louis mortgage lenders. We take pride in offering exceptional mortgage loan services to our customers, walking you through the entire home purchase process from start to finish. Our mortgage professionals are highly qualified and are happy to answer any questions you have regarding homeownership. Give us a call today to learn more, or visit one of our branches to get started. You’ll find us in St. Louis, Missouri; Overland Park, Kansas; and Godfrey and Glen Carbon, Illinois.

To learn more, please reach out!

In this article, we’re going to unpack exactly why it’s easier than ever to get an online mortgage using financial technology, or fintech, and why smart lenders offer solid online mortgage pre-approvals every day. And it’s not just millennials who are taking advantage of online mortgage applications. Tech-savvy seniors also appreciate how easy the entire process is.

So, the answer is–YES. You can get a mortgage from your couch.

How Technology is Improving the Borrower Mortgage Experience

Applying for a mortgage can be stressful, especially if you’re a first-time homebuyer. But, when you apply online from the comfort of your home, not only will you have convenience, you’ll also have digital mortgage tools at your fingertips like:

  • Mortgage calculators – so you can see how much of a house payment you can afford.
  • Credit score reporting – that shows you your score instantly.
  • Mortgage loan programs – suggested for your particular circumstances.
  • View current interest rates – and compare them to get the best deal when purchasing or refinancing.
  • Comparison shopping – you’ll be able to compare programs, rates, and down payment requirements.

So, whether you’re buying a home or refinancing your current one, getting a conventional loan, FHA, VA, or USDA loan, it’s fast, easy, and secure to get an online mortgage pre-approval.

Borrower Experience BEFORE Online Mortgage Applications Were Available

Only a few years ago, before mortgage lending online was available, anyone applying for a home loan would go through the same steps:

  1. Make an appointment to meet face-to-face with a mortgage loan officer.
  2. You’d probably have to ask for time off of work because the appointment would take a few hours.
  3. Gather up every type of documentation possibly needed, including taxes, bank statements, divorce papers, child support documentation, and go make copies.
  4. At the copy store, disassemble all documents, pull out staples (what a hassle), make copies, re-staple.
  5. Finally, arrive at the mortgage office with papers in hand.
  6. Meet with your loan officer so they could fill out the mortgage application for you while you sat there, wondering how long this would take.
  7. If you have kids with you, it would take twice as long.

And that was just the beginning. All of your documents would be put into folders and passed along to the different employees at the lender including, the loan officer, loan processor, and underwriter.

If there were any questions from the underwriter, they’d need more documentation, and you’d repeat steps 1 to 7 above.

Borrower Experience WITH Online Mortgage Applications

  1. Grab your phone or laptop.
  2. Find a comfortable spot on the couch.
  3. Search for local digital mortgage lenders.
  4. Check out a few lenders.
  5. Take a break and grab a snack.
  6. Apply online and sign documents.
  7. Upload your taxes, bank statements, ID and anything else you need
  8. Get an online mortgage pre-approval instantly.

How easy was that? Plus, when you take advantage of mortgage lending online, there’s no need to take time off work. You can apply 24/7 at your convenience. With all of your documents uploaded (and extremely readable), your loan will speed through the lines of the loan officer, processor, and underwriter.

If the underwriter needs more information or documentation, it’s easy for you to email what’s required. With this digital environment, everything goes faster, and your loan is approved and closed much quicker than it would have been only a few years ago.

Online Mortgage Approval in 14 Days!

In the past, before online loan applications, typically, it could take over a month to get approval. Plus, all the wasted time running back and forth to the lender’s office. Now it’s frickin-easy to apply and buy a home quickly.

Rather than taking over a month–your loan can be approved in only 14 days.

From Your Couch

When it’s time for you to move, you will have to get off the couch, but that’s OK because you’re going to your new home!

And if you’re refinancing, you can sit on that couch as long as you want. It’s your house and your rules!

Can Anyone Refinance or Apply for a Loan Online?

Yes, of course, anyone can. BUT not everyone should.

At Homestead Financial Mortgage, about 50% of our customers apply online. Although we talk on the phone and communicate via email and text, we never meet them face-to-face. That’s fine with them because in most cases they are:

  • Busy & tech-savvy
  • But then there’s the other 50%

We’re the Best Online Lender Who’s Also Local

As an online mortgage lender, we still have half of our customers who want to come into our office and meet face to face. They all have their reasons. Here are some of the top ones:

  1. They want to sit down and check us out – see if they like us.
  2. They don’t feel comfortable sending documents over the internet.
  3. They have lots of questions about the mortgage process and need guidance.
  4. They’re past customers and want to visit – coming in for another mortgage is like “old home week.”

And then there’s the 50/50’s. These customers want to stop by the office when it’s convenient for them, but they’ll use technology such as the online application and uploading documents.

That’s the advantage of using a local lender. There are a lot of online mortgage companies. But, when you choose Homestead Financial Mortgage you can have the best of both worlds – technology and personal face-to-face customer service.

Choosing Your Mortgage Lender Wisely

Mortgages are more accessible than ever to obtain, directly, or indirectly, technology is having an impact on us all and even for those who do not directly use it. Underneath all the bells and whistles, you’re still dealing with a loan originator. Shop, talk, and make your choice based on what works for you. Take the time to get to know your online mortgage lender; this is a big step.

At Homestead Mortgage, we offer high-tech with high-touch customer service to give you the loan you want FAST. Contact us today!

Summary

Getting a mortgage online is right for you if…

You’re tech-savvy:

  • You use a computer daily
  • You’re comfortable uploading documentation

You have a crazy schedule:

  • You have ZERO time
  • You work, have kids, have a life

To learn more, please reach out!

When a homeowner is looking to sell their current home and purchase a new home, we often get questions about a bridge loan. After speaking with the buyer, we realize the better product for them is a conventional loan with a “Recast.” Let’s first look at what a bridge loan is, and then we’ll explain a recast.

 What is a Bridge Loan?

Here’s a simple bridge loan definition: it’s a temporary loan that uses the home equity of your current home to make a down payment on a new home.

What is Mortgage Recast?

A mortgage recast is when a borrower makes a large, lump-sum payment on the principal of their existing mortgage after closing.  The servicer re-amortizes the monthly payment based on the new principal balance and cancels the mortgage insurance (if applicable).

Why Is Recasting a Better Option Than a Bridge Loan?

Here’s the short answer – because you save money. Here’s why:

  • A bridge loan is an additional mortgage with another set of closing costs and transaction fees. Plus, a bridge loan comes with high interest and are adjustable vs. standard fixed-rate mortgages.
  • With a mortgage recast, the buyer will take out a new mortgage for the home they’re purchasing and come up with the standard 5% down payment. So, they’ll need to be able to afford two payments (current home and the new home) until their existing home sells.

How Does a Bridge Loan Work?

Step 1: Paul and Ellen have a home at 123 1st Street. They owe $100,000 and will sell it for $200,000. They will buy a new home at 456 2nd Street for $300,000. They will put 5% down ($15,000) and finance $285,000.

Step 2: Once they move into their new home on 456 2nd Street, Paul and Ellen are now ready to put 123 on the market.  They sell their old home for $200,000 and pay off the $100,000 mortgage. They still have $100,000 left from the sale. Let’s see how to recast their mortgage.

Step 3: Paul and Ellen take the $100,000 from their sale and pay down  (recast) their mortgage on their new home at 456 2nd Street. Servicing now changes the payment based on the new principal balance for the remaining term. Plus, with over 20% equity, there’s no mortgage insurance.

A Mortgage Recast is a Smart Move

As with any real estate transaction, there are mortgage recast pros and cons, but there are many more advantages than disadvantages. And whenever possible, we help borrowers choose to recast, over, taking out a bridge loan. As long as you have enough means to afford two payments for a stretch, it’s worth it. Plus, there’s considerable value to the convenience of buying your new home first–before listing your old home. It takes a lot of stress out of the entire process.  If you’d like to see if recasting your mortgage is a possibility for you, contact us today.

Summary

Recasting is right for you if…

You can afford:

  • Two house payments for a while &
  • Have 5% down payment for the new home

You value the convenience of:

  • Finding a new home and moving in
  • Before selling your old home

To learn more, please reach out!

Down Payment

 

The Numbers vs Emotion argument…

Meet Marcus and Kelly – they are a young couple, selling their home and buying a new one. Being that it’s a seller’s market, Marcus and Kelly will do very well and walk with $100,000 from their sale.

So, what do they do with the money? Do they put some, half or all of the funds down on the new home purchase? We are going to break down what the best decision is, by the numbers, for the purchase of their $250,000 “forever home”.

 

 


Option A
(20% down)
Option B
(ALL Funds)
RATE 4% 4%
LOAN AMOUNT $200,000 $200,000
DOWN PAYMENT $50,000 $100,000
PAYMENT $954.17 $716.12
INVESTABLE FUNDS $50,000 $0
MONTHLY INVESTABLE $0 $237

Marcus and Kelly have come down to option A, putting 20% down, having a $200,000 loan amount and investing the remaining $50,000. Or option B, putting the full$100,000 down, having a $150,000 loan amount and investing the difference in payment, which is $237/month.

Future Value Analysis – @ 8% Return

Option A Option A Option B Difference
YEAR 10 $85,542 (less additional $237/mo) $43,358 $39,184
YEAR 15 $122,686 (less additional $237/mo) $82,011 $40,675
YEAR 30  $461,466 (less additional $237/mo) $353,215 $108,251

 

 

To properly analyze, Marcus and Kelly are assuming an 8% return on their funds. Option A returns are adjusted for the higher mortgage payment and option B assumes that the difference in mortgage payments is invested each month.

By using the same assets, with proper investment advice, option A winds up giving Marcus and Kelly an additional $39,000 by year 10, and $100,000 over 30 years, just by properly applying the concept of time value of money.

So to conclude, provided the difference in payment won’t keep you up at night and you have time for your investments to grow, then only put 20% down and invest the rest with a knowledgeable investment advisor.

To learn more, please reach out!

Numbers you should remember: $110k, $50k and $220k

In this 2017, inventory challenged market, a renovation mortgage is becoming more and more of an option for you to turn an ordinary house into the home of your dreams.

What is a Renovation Mortgage?

Simply (as possible) put, a renovation mortgage is a transaction where you finance in the improvements. However, in order for the lender to take on the risk, the funds are held in escrow and disbursed in progress payments as the work is completed, phase by phase.

The name of the products are either a 203k (FHA) or Homestyle (Conventional)

 

So, how does a Renovation Mortgage work?

In the case of a purchase, you can buy a beaten down home, usually a foreclosure or a home that is dated or otherwise in some state of disrepair.

Purchase Price $110,000

You can get a bid from a contractor for say $50,000 to improve the home to your specifications.

This means you’re financing $160,000.

After the home is complete, the home then becomes worth say $220,000.

Why might this be the perfect option for you in today’s housing market?

In every corner of the real estate market, all we are hearing is “inventory shortage, inventory shortage”! This option can help you turn the house that no one wants, into the home you love!

 

This statement always raises an eyebrow…or 10, when I say in this market, with just a moderate down payment, you can buy a home for less than what you pay in rent.
 

Buy a home for less than rent

This is how it comes out by the numbers:

Let’s take a $175,000 house in this market, assuming a 5% down payment.

Principal and Interest  @4.25 817.88
Taxes @1.25% 182.29
Insurance  100.00
Mortgage Insurance    81.74
Total     $1,181.88

 

Lets compare that to a reasonable rent payment in this market of $1,250. This is how we come to prove the statement that you can buy a home for less than your rent.

Even further, after the tax benefits of mortgage interest, and the doors which this immensely valuable deduction opens, the net effect means an amazing savings to the home buyer over renting.

For more information, check out HomesteadU

Before Picking a Real Estate Agent

Picking a Real Estate Agent

In “Tips for Picking a Real Estate Agent — Part I,” we discussed the importance of doing your homework. Before you pick a real estate agent it helps to obtain a list of what they’ve listed and sold the past twelve months, to verify licensing and disciplinary action with state boards, to seek out agents who are the recipients of designation awards as well as those with the right credentials. In “Tips for Picking a Real Estate Agent — Part II,” we discuss additional tips for deciding on the most well-suited person to find or list your home.

Research an Agents Experience

There’s no substitute for experience. Picking the best real agent requires you to research how long the agent has been in business. This information may be obtained from the state licensing authority or by simply asking the agent. An agent who has been in business less than five years is learning on you which isn’t to your benefit. Look for an agent who is actively engaged in your area and in your price range. What you’re looking for is an agent’s knowledge of these two factors and whether or not they can demonstrate them. This shows you what kind of market presence they have.

Look at Current Listings

Another tip for picking a real estate agent is to look at their current listings. You can do this by checking out an agent’s listings online. You can look online in two places — the agency’s own site and Realtor.com. The Realtor.com website is a searchable online database that has compiled properties from the Multiple Listing Service. A website says a lot about a person or business. What you want is an agent who uses their website as an effective marketing tool. If they don’t use their website to effectively market themselves and their clients’ homes, then how will they market yours? An attractive presentation on the web is evidence that this agent cares and understands how important marketing properties is. When you’re on the agent’s website, look at their listings to see how closely they mirror the property you’re looking to buy or sell. Are the agent’s listed properties in the same area as yours? Are the properties in the same price range? The number of listings is important too. The agent should have enough listings to indicate a health business but not so many that you’ll just be a number.

Do Your Homework

Finally, be sure and ask potential real estate agents about other houses that are for sale nearby. A good agent will know about the properties available in your area off the top of his or her head. But before you ask them, be sure you’ve done your homework too. Familiarize yourself with a house in your area that’s recently sold or is currently for sale and ask the agent if he or she knows the property. A good agent should not only know about that particular property, but they should also be able to give you a few details. This will show that he or she knows the homes in your area and is a person who’s on top of the market.

How to Pick a Real Estate Agent

How to pick a real estate agent

One of the most challenging parts of buying or selling a home is picking a good real estate agent. How do you know who’s good and who’s not? Can you rely on word of mouth or should youdo some investigating of your own? Whether you’re a buyer or a seller, there are things you can and should do to assess a real estate agent’s past performance in order to gauge their potential success for finding or selling your home. Here are some tips for picking a real estate agent.

Because we don’t typically have the information about real estate agents that we have about other service professionals, it helps to ask potential agents for a list of what they’ve listed and sold the last twelve months. Be sure to ask the agent if any of the clients listed will be pleased or disappointed before you begin making phone calls. When you speak with past clients ask what the asking price was and then what the sales price was. You’ll also want to ask how long their home was on the market. If you are selling your home, you’ll want to ask if the properties on the list are similar in price, location and other salient features to yours. What you should be looking for is an agent who specializes in the same type of home you’re selling.

Look up a Real Estate Agents Credentials

Another way to check a potential real estate agent’s background is to look up their licensing. There are boards that license and discipline real estate agents in every state. To find out if the person you’re considering is licensed and if they have experienced any disciplinary actions or complaints you’ll want to check with your state’s regulatory body. In some states, like Virginia, Arizona and California, this information is accessible through online databases.

Knowing how to avoid a real estate agent who has been disciplined is one thing but, how do you pick one that’s a winner? Look to the awards. Peer-given awards are huge endorsements. One that speaks mountains is the “Realtor of the Year” designation award. This is awarded by the local or state branch of the National Association of Realtors. These are agents who have been judged to be the best by their peers.

You wouldn’t select a brain surgeon to perform your heart surgery and the same is true when it comes to selecting a real estate agent. You want one with the right credentials. Real estate agents, like doctors, also specialize. When you see alphabet soup after an agent’s name, this indicated this person has taken additional classes and are specialized in certain areas. For example, an agent with CRS (Certified Residential Specialist) behind their name is someone who has completed additional training for handling residential real estate.

If you see 4ABR after their name, this means they have completed additional coursework to represent buyers in real estate transactions. They are an Accredited Buyer’s Representative. An agent with the SRES designation is a Seniors Real Estate Specialist who has completed training that allows them to better help buyers and sellers who are aged 50 and up. An agent with “R” behind their name is a member of the National Association of Realtors. This is an individual who has formally pledged to support the association’s code of ethics. Nearly half of real estate agents out there are realtors compared to one-third five years ago.

In “Tips for Picking a Real Estate Agent — Part II,” we discuss additional tips for deciding on the most well-suited person to find or list your home.

In “When the Going Gets Tough the Tough Buy HUD Homes – Part I,” we discussed why it’s important to work with a real estate agent when it comes to purchasing a HUD home, programs

Couple with new home

that are often available to help you save money on closing costs and why owner occupant buyers have an advantage of real estate investors.

Here are some additional things to consider when it comes to purchasing a HUD home.Purchasing a property that is a government foreclosure offers first time homebuyers with an excellent opportunity to purchase their dream home for a lot less money. However, when purchasing a government foreclosure, you’ll want be sure to remember the importance of doing due diligence. You’ll want to take the time necessary to thoroughly investigate the home’s price to ensure you’re getting a reasonable deal. While preliminary research can be done on websites like Zillow.com, there’s other data that only real estate agents have access to. This is why working with a real estate agent is essential. Your real estate agent can provide you with a comparative market analysis that equips you with the knowledge you need to ascertain if buying a particular government foreclosed property is a good deal in the current home market. Never assume that a property is going to be an excellent buy just because it is a HUD home. When you’ve done your homework, there are fewer surprises and you have the peace of mind that comes with knowing when you’ve truly gotten a good deal.

First Time Home Buyers

Many first time homebuyers may have encountered government foreclosures that are being sold “As Is,” but aren’t fully aware of what to expect with such a property. Government foreclosures that are sold “As Is,” means the property has either suffered some damage or is in need of some repairs. The damage and repairs needed could be minor to extensive and so viewing the property and doing the homework mentioned above is imperative. There are situations where money may be offered in escrow to pay for certain repairs but not always. It’s up to the buyer to view to property, assess any damage and repairs that need to be made and determine if the home is worth the amount of money it will cost to purchase home plus the money it will take to repair it.

First time homebuyers should also be mindful of government foreclosures that have been on the market for longer than four months. For example, if a home here in St. Louis was first listed on the market back in May 2013 and you first see it in August 2013, there are certain repairs that aren’t immediately visible. A small leak around a window or in the roof can cause a home to become overrun by mold both inside and outside the home’s walls. Unless you have a hypersensitive nose or allergy to mold, the only way you’d discover this is several months down the road as the problem grows worse, or by getting a thorough home inspection. Regardless of whether you think a home has mold or not, getting a home inspection is the best way to discover those surprises before you purchase the home. The deal’s not done until closing and so you still have time to change your mind depending on what the home inspector finds. A good home inspection is worth its weight in gold.

Most of the time the damage and repairs needed in many HUD homes simply requires a little bit of know-how and some elbow grease. It’s this know-how and elbow grease that can save you thousands on the next purchase of your home.

When first time homebuyers start their search for a new home many are hesitant to consider looking at HUD homes because they are under the misconception that such properties

aren’tworth as much because they are located in blighted areas. This isn’t always true. The current housing market is flooded with HUD government foreclosures in areas at every price point, making a HUD home a viable option for achieving homeownership. Here are some things to consider when it comes purchasing a HUD home.

The good news about shopping for HUD homes is that there are plenty available on the market today. With so many HUD homes out there you’re bound to find one you like, making the dream of homeownership a reality sooner and more affordable than you might think. Finding the HUD home that’s right for you is no different than buying any other home — it takes the same amount of research. Unlike other homes on the market, a real estate agent is the only person who can legally show you a HUD home. Working with a realtor and sharing your wish list and desired area with them is the best way to find the HUD home that’s right for you.

There are government foreclosures in cities all across the country. If you have a specific area or neighborhood in mind, there’s a good chance you’ll find a HUD home in that area and at your desired price point. In some cases the previous owner has simply defaulted on their loan and moved out, leaving the house in excellent condition. However, there are some instances when the home has sustained damage. But if you’re handy, you may be able to benefit from purchasing a HUD home that comes with money in escrow with repairs or specific programs that offer funding for rehabilitating and repairing HUD properties.

Many first time homebuyers never even consider a HUD home because they believe it will be difficult for their bid to win against real estate investors. The truth of the matter is owner occupant buyers have an advantage over investors because investors are not allowed to bid on HUD homes until the property has been listed for 30 days. Working with a real estate agent to submit a competitive bid that’s more likely to be accepted is the best strategy.

Many first time homebuyers save a long time to come up with closing costs and escrow fees. Fortunately, help is available for these expenses when purchasing a HUD home. There are some cases when HUD will pay up to 3% of closing costs for buyers who have negotiated for it in their bid for the home. And depending on the situation, HUD will also pay the escrow fee, potentially saving homebuyers $350-$900. Savings like these make a huge difference when it comes to making the purchase of your new home more affordable.

In “When the Going Gets Tough the Tough Buy HUD Homes – Part II,” we will discuss due diligence, “As Is” foreclosures and things to consider when looking at properties that have been on the market for several months.

With housing inventory down 40% or more from two years ago, purchasing a house has become much more competitive. To land the home of your dreams you have to be savvy, creative and well-educated about your local housing market. This begs the question, how do you beat other buyers to the property you want? Here are some methods to consider.

Tips for buying your dream homeA fundamental part of buying your dream home is knowing the difference between what you need and what you can live without. Real estate brokers often advise their clients to come up with a wish list of everything you want in a home. But it’s also helpful to be realistic and make a list of things you can and cannot live without. A four bedroom house might be nice, but if you can manage with just three, that’s one less bedroom you’ll have to clean or pay for. You should also consider how long you plan to live in the home and your future needs, especially if you plan to start a family. Plan to buy a home to accommodate a growing family for five to seven years ahead.

Another way to beat other buyers to the property you want is to get pre-approved for a loan rather than pre-qualified. When you get pre-approved for a loan, you know the exact amount you can borrow. A pre-approval letter shoes potential sellers you are a serious buyer and have the funds to go through with purchasing the home. While there are investors who will offer to buy the same house for cash, your pre-approval letter is the next best thing to an all-cash offer.

Knowing the neighborhood where you plan to buy a home is essential as well. Relying on real estate agents for a home search in the multiple listing service is not the best way to find the right neighborhood. You’ll want to thoroughly research a location so you can determine whether or not the neighborhood offers the amenities that you prefer. When you know a neighborhood well and like it’s amenities, you’re better prepared to move quickly when the right home goes up for sale.

When it comes to a competitive housing market, it helps to be in the know and be ready to go. A good real estate agent will notify you right away when a house that matches your criteria shows up in their listings. But not always. After all, you probably aren’t their only client. This is why many savvy buyers who found their dream home set up mobile alerts with several consumer real estate listing sites and hit the refresh button frequently throughout the work day. When the house you’ve been watching for comes on the market, you’re ready to go.

It never hurts to make yourself stand apart from the competition. Attaching a personal letter to your offer that tells a little bit about your family and why you want the house can make a big difference to the seller. In some cases it could beat out all-cash offers. There’s something to be said when the seller sees that the home will go to a good family who can not only afford it but will also take care of it.

The last thing a seller wants is a lowball offer and no one wants to spend a lot of time going back and forth either. Especially since the seller could receive a higher offer and take it. In a competitive housing market it’s best to make an offer that’s close to or even above the list price. It should be an offer you feel good about and one you where the seller is more likely to come back with a stronger counteroffer.

Finally, do your best to avoid adding any stipulations, requirements or requests for personal property in your offer. When you include add-ons it complicates things. When it comes to comparing offers, it’s easier for the seller is to seek offers that are cleaner and more clear-cut. You can always talk to your real estate agent about items that can be negotiated after the offer is accepted.

First Time Home Buyers

In “The Fifteen Most Commonly Asked Questions by First-Time Homebuyers Part II,” we discussed down payments, loan qualification, working with Homestead mortgage and mortgage costs. In this article we’ll discuss what first time home buyers should take with them when they are ready to apply for a mortgage, how to determine which mortgage is best for you, how much to offer when you find the home you want, what to do if your offer is rejected and what to expect at closing.

Applying for a Mortgage

When first time homebuyers are ready to apply for a mortgage they can save a good amount of time if they bring everything they need with them to Homestead. Be sure you have your social security numbers for you and your spouse with you. You’ll also want to bring copies of your statements for your savings and checking accounts for the past six months; evidence of financial assets like stocks and bonds; recent paycheck stubs that will detail your earnings; a list of all your credit card accounts with the monthly amounts owed on each, the account numbers for car loans and any other loans along with the balance, your income tax statements from the last two years and the name and address of a person who can verify your employment.

With so many different types of mortgages out there it’s difficult to know which one is best for you. This is why it’s ideal to learn as much as you can before you start the process. Many first time homebuyers use a fixed-rate mortgage, a mortgage where the interest rate remains the same for the term of the loan. This is typically 30 years. The benefit to having a fixed-rate mortgage is always knowing exactly how much your monthly payment will be which allows you to budget accordingly. There are also Adjustable Rate Mortgages (ARM), a loan with an interest rate and monthly payments that can go up or down as often as once or twice a year because the adjustment is tied to a financial index, usually the U.S. Treasury Securities index. ARMs have allowed many first time homebuyers to get into a more expensive home because the initial interest rate is lower. A third type of mortgage many first time homebuyers often take advantage of is an FHA mortgage, a mortgage that’s insured by the FHA. Thanks to this insurance, many first time homebuyers have qualified for loans who might not have otherwise.

How Much Do I Offer on the Home.  

First Time Home buying couple

First time homebuyers frequently ask how much they should offer when they find the home they want. Consider if the seller’s asking price is in line with similar homes in the area. You should also determine if the home is in good condition or if you’ll have to spend a lot of money to make it the way you want. Another factor that should be considered is how long the house has been on the market. Usually, the longer a home is on the market, the more motivated a seller is to accept a lower offer. Be sure you can afford a mortgage required to purchase the house. Finally, you and your spouse will want to discuss how badly you want the house. Your offer is more likely to be accepted the closer your offer is to the asking price.

If your offer is rejected, it’s not the end of the world. You are in the driver’s seat and have a choice. You can either walk away or negotiate. Negotiations can go back and forth several times before many deals are made. In some cases sellers are willing to cover some or all of the closing costs in exchange for a higher offer on the home. The important thing is to not lose sight of what you really want and can afford.

But if your offer is accepted, congratulations! In a few weeks your loan will be ready to close. At closing you’ll sit with your broker, the closing agent and sometimes the seller’s agent and seller. The closing agent will guide you through a stack of papers you and the seller will sign. The closing agent is there to answer your questions and will provide a basic explanation of each page. It’s a good idea to know what you’re signing especially since you’re committing to paying a lot of money for a lot of years. Your Homestead loan specialist will provide you with an estimate of closing costs and what you’ll need at closing.

In “The Fifteen Most Commonly Asked Questions by First-Time Homebuyers Part I,” we discussed the tax benefits of home ownership, HUD homes, buying a home with bad credit, home ownership for single parents and working with a real estate broker. In “The Fifteen Most Commonly Asked Questions by First-Time Homebuyers Part II,” we’ll discuss down payments, loan qualification, working with Homestead mortgage and mortgage costs. Continue reading “The Fifteen Most Commonly Asked Questions by First-Time Homebuyers – Part 2”