Three common misconceptions before applying for a mortgage loan
Georgia’s Own mortgage experts discuss three common misconceptions you should know about before applying for a mortgage loan.
At Georgia’s Own Credit Union, we’re here to provide our members with an exceptional experience. We know mortgage lending can be a little intimidating so we want to tackle three common misconceptions and telling you what you really need to know before applying for a mortgage loan.
- “I need a minimum of 20% for my down payment.” – This is actually false. There are loans available with 10% down, 5%, 3% and even 0% down payment requirements.
- “The details don’t really matter.” – Actually because mortgage lending uses what is called risk-based pricing, the details in a mortgage loan are your best friend. This means the mortgage loan that you qualify for and the rates associated with it are determined by your specific details.
- “I need perfect credit to qualify for a mortgage loan.” – Here’s the big secret, no one has perfect credit. Yes, some people have excellent payment records, but that doesn’t mean it won’t be a challenge. Always assume the best and work your mortgage loan officer so they can help you get what you need.
Don’t let the intimidation factor of the mortgage process get you down or stop you from achieving your dreams. Remember, your Georgia’s Own representative is ready to help you with your mortgage lending needs.
Why should I choose Georgia’s Own for my mortgage?
Why should I trust Georgia’s Own for my mortgage needs? Georgia’s Own mortgage experts tell you why.
At Georgia’s Own Credit Union, we’re here to provide our members with an exceptional experience, that means we want to focus on three things for you:
- Service – We go beyond a friendly smile and establish a set of clear service level commitments so that our members can depend on us to be there ally.
- Products – Our team has worked hard to develop a wide range of fixed and adjustable rate mortgage products that best suit your financial situation.
- Cost – In addition to offering low mortgage rates, we also work to reduce fees, including eliminating the State of Georgia Intangible Tax.
With a wide variety of mortgage products, Georgia’s Own can get you in the home of your dreams. Remember, your Georgia’s Own representative is ready to help you with your mortgage lending needs.
Home inspection vs property appraisal
Georgia’s Own mortgage experts describe the difference between a home inspection and a property appraisal.
At Georgia’s Own Credit Union, we’re here to provide our members with an exceptional experience. The mortgage process consists of many moving parts and then one thing that towers above them all is the review of the home. This includes both the evaluation assessment and detailed review of the home’s condition. Let’s explore the difference between the home inspection and property appraisal.
A home inspection is a non-invasive visual inspection of the residence, performed for a fee by an independent vendor you hire. The inspection is designed to identify any observed material defects including, but not limited to, the foundation, electrical, plumbing, roof, etc.
A property appraisal is the homes estimated market value based on comparable recent sale of homes in the neighborhood and is conducted by a licensed appraiser. Appraisals are ordered by the lender to protect the interest of the lender.
If you have more questions, remember, your Georgia’s Own representative is ready to help you with your mortgage lending needs.
Three C’s that help determine mortgage loan approval
Georgia’s Own mortgage experts discuss the three basic C’s that help determine mortgage loan approval.
At Georgia’s Own Credit Union, we’re here to provide our members with an exceptional experience. While mortgage lending can be intimidating, we’ve broken it down into three things you should know.
- Creditworthiness – Contrary to popular opinion, this isn’t just a review of your FICO score. An assessment of your credit takes into account the details of all reported debts to determine a pattern of satisfactory payment history and your ability to support debt similar to what you’re requesting.
- Capacity – Capacity is how much you make, how much you have for a down payment and how much you’ll have when the transaction is done. The goal is to ensure that the home will not be a financial burden for you.
- Collatoral (Property) – This is the assessment of the home you want to buy which examines zoning, type, general condition, functionality, marketability and location because the home is the asset that secures the loan you’re seeking. The review also determines the value of the home.
Getting the most out of your loan officer during the mortgage process
Georgia’s Own mortgage experts tell you what you should do to get the most out of your loan officer during the mortgage process.
At Georgia’s Own Credit Union, we’re here to provide our members with an exceptional experience and no one is more focused on doing that than your ally, your mortgage loan officer. So how do you get the most out of your loan officer?
Your loan officer is your personal subject matter expert. Their job is to help you find the best loan product and terms based on what you want to accomplish. During your initial conversation, your loan officer will conduct a free, basic review of your financial situation and provide you with a pre-qualification which tells you how much home you can afford. Once you’re ready to move forward, your loan officer will help you start your application and do a pre-approval, which is a more in depth version of the pre-qualification.
During the pre-approval process we will verify your income, debts and other aspects of your financial situation. We’ll ask questions such as: how long you plan to live in the home? Do you want to pay off the loan quickly or do you want a longer term if possible? Do you want to put down a large down payment or as little as possible.
Remember, this process is all about, so make the most of it! Your Georgia’s Own representative is ready to help you with your mortgage lending needs.
SIx mistakes to avoid when refinancing your home
Mortgage rates are at an all-time low, which is an ideal time to swap your current home loan for one with a better rate or term. Most homeowners choose refinancing to reduce their monthly payment, and why not? Your mortgage just went on sale!
Others want to use some of the equity they’ve accumulated to fund a remodel, a large purchase, or an investment.
Refinancing is a terrific option, but it’s not as simple as signing a few docs, and you’re out the door. In some instances, refinancing can actually increase your interest rate rather than lowering it. It can be costly, so be sure you do some legwork before you seal the deal.
Here are six of the most common mistakes that homeowners make when refinancing their mortgage:
1. Thinking refinancing all about the rate
When you refinance your mortgage, you’re in the market to save some money. For most borrowers, that means a lower interest rate. There are, however, a lot of other factors that affect mortgage pricing, like closing costs, origination fees, and points, for example.
All of these costs can vary from one lender to another. A super-attractive low rate can be used to disguise a loan with unusually high fees, or it can be based on paying discount points up front. Make sure you’re comparing apples to apples. Ask about the additional costs that are factored into the price and be wary of major changes made after the fact. You want a mortgage lender who invites you into the process and helps you choose the pricing options that best meet your needs, not theirs.
2. Not objecting to junk fees
Expect some fees when you refinance, but be on the lookout for junk fees. Closing costs like loan origination, title, and application fees are legitimate and unavoidable, but some lenders might add on additional costs. Document preparation or delivery, or an excessive charge for pulling your credit report are some common examples of bogus fees. As a general rule, if you can hire someone to do it for less or can do it yourself for free, question it.
Although not necessarily a junk fee, you should also object to a prepayment penalty fee. Might you pay off your loan early? Probably not in the way you think, but remember, paying off your loan early also includes refinancing it again in the future, which is always a possibility.
Prepayment penalties are common in a “no-cost” refinance where the lender recoups those costs by charging a slightly higher rate. They usually expire in a few years, but it ensures that the lender still gets paid if you sell or refinance before they can recover the refinancing costs. If you must agree to a prepayment penalty in order to get your loan approved, make sure it does not apply after more than 3-5 years.
3. Not getting enough bang for your buck
There are costs to refinancing your loan, so make sure you’re a winner in the end. If you refinance and only reduce your rate by a small fraction, maybe half a percentage point, you need to calculate your break-even point—the time it’ll take you to recoup the cost of refinancing your loan. If you save $100 a month, it’ll take you just over four years to recoup your $5000, but if you only save $50, it’ll take you twice as long. Do you plan to stay in your home for more than eight years? For some, that’s an absolute yes, for others, a definite no.
Generally, experts agree that you need to save at least three-quarters of a percent to make it a smart transaction, but each borrower’s plans and circumstances are different. Just make sure it’s not only advantageous for the here and now monthly payment, but also your long-term financial future.
4. Taking out too much equity
Many people refinance as an opportunity to borrow against the equity they’ve accumulated in their home. It’s an attractive way to borrow money because the rates are low compared to other types of loans, and the interest is usually tax-deductible.
Borrowers should be careful, however, that they don’t take out too much equity and leave themselves at risk if housing prices take a deep dive—again. No one ever wants to owe more than their house is worth. You also don’t want to boost your mortgage payment so high that there’s no wiggle room should a financial emergency arise. Leave enough cushion, so you’re not living on the edge.
5. Stretching the term of your loan
Most borrowers begin homeownership with a 30-year mortgage. They pay it down for a few years and then refinance. Now they’re into another 30-year mortgage. Sure, it reduces your monthly payment because you’re spreading your remaining principle over more time, but chances are, even with a lower interest rate, you’ll pay more over the lifetime of the loan.
Unless you’re financially stressed and need to reduce your monthly payment, you might consider refinancing into a new, shorter-term loan that’s closer to the time you have left on your current loan. Shorter-term mortgages traditionally have lower rates. You can save money and a few years on your mortgage without a significant increase, if any, in your current monthly payment.
6. Skipping the Good Faith Estimate review
The Good Faith Estimate is a detailed breakdown of your mortgage loan, including the interest rate and all fees. Be sure to review it carefully and make sure it matches your expectations, without any exceptions. Also compare your final documents at closing to the Good Faith Estimate, especially when it comes to fees. Don’t hesitate to questions any discrepancies and don’t be afraid to walk away if there are significant differences. Chances are that the Good Faith Estimate and the documents will be in good order, but some unscrupulous lenders may try to tack on some fees at the last minute to generate extra income on the loan.
Refinancing your mortgage has advantages and disadvantages, too. So, do your homework, find a reputable lender, and work together to find a mortgage solution that meets your objectives. As a smart shopper, you already know what to look for and which questions to ask, so you’re already ahead of the game.