The Benefits to Homeownership Outweigh Mortgage Risks

For someone thinking about purchasing there first home, things can be a little intimidating. You just have to keep telling yourself the benefits far outweigh the risks. 

There are many benefits to owning a home. Sure, there are the usual obstacles to get over. First, most people don’t want to put a lot of their own savings into it, they’d rather just rent. 

Also, they don’t want to have to go through the lengthy process of buying the home and even searching for the right home in the first place. Then they don’t want to have to go through the mortgage process and go into debt to get the home. While these are definitely disadvantages, the simple fact is that there are so many major advantages to owning a home that going through these steps ends up being well worth it in the long run.

The most notable benefit to owning a home is equity. Equity is the value of the home. When mortgaging a home, your initial equity is the down payment you made on the home. As you make additional payments, your stake in the equity of the home rises (since the lender owns the rest of the equity). However, it is also important to note that equity also rises when the value of the home rises. If you are currently renting you are not only building equity for your landlord in most cases the rent you pay is usually a few hundred dollars more then what their mortgage payment is with their lender. When you own the home the equity is solely yours, the equity of the lender does not increase. Also because of recent foreclosures & short sales, there are actually quite a few homes on the market that you could actually purchase with allot of existing equity already in them by the time you close. Due to a lower sales prices vs the actual value of the home. This is why many homeowners are sitting on gold mines.

This equity in your new home can be used for valuable things such as home equity loans and home equity lines of credit. These are low interest loans with the home used as collateral. Equity opens up many valuable new doors and is just one reason why owning a home is one of the best things you can ever do.

Another advantage is the tax savings. So not only is your monthly mortgage payment cheaper then what it would be renting a home, Every dollar of interest paid in each month on the mortgage payments can be used as a tax write-off. This can be a very considerable amount, especially early on in the loan when the interest is front-loaded, and it can save you a lot of money in taxes or get you larger refund. 

Of course, it really comes down to the simple fact that you own a home. That home is yours and that with that comes a certain pride. Owning a home is one of the most important things you will ever do. Don’t pass it up, don’t choose to rent if you don’t have to. There are just too many advantages of owning a home to pass up.

About the Author:

ZFG Mortgage headquarter in Tulsa, Oklahoma is the #1 rated mortgage lender in the state of Oklahoma. At ZFG Mortgage we pride our selves in offering the lowest mortgage rates at the lowest closing costs.  We have & A+ Rated rating with the Better Business Bureau & have been nominated & won numerous awards like the BBB Torch awards and the BBB Honor Roll for NO complaints in the last 3 years! If you are need of a Home loan in Oklahoma, then go with the lender you can trust. Apply online or call for Free Rate quote or Pre-Approval.

ZFG Mortgage

6670 Lewis Ave # 200

Tulsa, OK 74136

Phone: 918-459-6530

Fax: 918-459-6535

Toll Free: 1-877-205-7266

http://www.zfgmortgage.com

How much of mortgage payment can you afford?

When it comes to purchasing a home, one of the first questions you need to ask yourself is How much can I afford? This will also be question that will be on the mind of your mortgage lender. They will use a series of calculations and formulas to come up with a figure, but you can do the same thing for yourself before you even start shopping around. Of course you could do it the easy way and log online to one of the numerous mortgage company websites that offer a pre-qualification calculator, or you could take a little bit of your time and understand what goes into the mortgage lender figuring out the magical number.

This article will give you a better idea of what types of home will be in your price range. Figuring out just how much home you can afford involves numbers and ratios, but it should also involve understanding your own personal preferences and financial behavior. For example, a lender may qualify you for a large amount, but in order to make the monthly payments you would have to cut back on things like weekend movies, dinning out or any other expenses you might have that relate to entertainment. Only you can decide whether or not the bigger house will be worth the lifestyle sacrifices you may have to make.

Once you have determined your own mortgage preferences, you need to look at your finances and resources from the perspective of a potential mortgage lender to figure out how much of a loan you can afford. Lenders will lend you an amount of money based on how sure they are that you have the means and habits necessary to pay them back. In order to determine how much of a potential default “Foreclosure” risk you are, they will look at several key factors: your income, your credit history, and your down payment.

 Of course, mortgage loans are safer loans than most others for lenders, since you are pledging the home and property as collateral for the loan. If you should default on the mortgage, the lender will have the legal right to repossess the home and try to sell it to recover the amount of the money lent to you. Still, no lender really wants to have to go through that foreclosure process as it takes plenty of time and lots of money for lawyer’s fees and paperwork. They would much rather go into the loan feeling confident that you will repay the loan. So, a lender will start by looking at your sources of income. This will include not only your yearly salary, but any bonuses or commissions you receive. It will also include a list of your assets the balances of your savings and investment accounts, and even the value of any cars or boats you own. This helps your lender to see what sources of wealth you could turn to repay your mortgage in the event of a job loss or other crisis.

Lenders use a ratio called the DTI “debt to income ratio” to determine if your income is sufficient for a certain loan amount. While standards vary by lender and have become more stringent since the mortgage crisis of 2008, the general rule is the 28/41 ratio. The front end ratio, the 28, means that lenders like to see that your monthly obligation/debts, excluding your housing payment, do not exceed 28 percent of your monthly income. So for example, if you make $5,000 per month, your monthly payments (auto loans, student loans, credit card bills, etc.) should not be more than $1,400 (28 percent of $5,000.) The back end ratio, the 41, means that your total monthly payments, including the potential mortgage payment, should not exceed 41 percent of your monthly income. So using the same example above, 41 percent of your income would be $2050. If you have monthly debts in the amount of $700, you would have $1350 left over for a monthly mortgage payment. 

Lenders will also use your credit history as a means of determining whether or not to lend to you and how much interest to charge you. Obviously, the better your credit score the better the interest rate will be on your loan & could even mean a better loan product. If you have time and your score is not as high as you’d like it to be, start working now to improve it before you apply for a mortgage. Use our previous post as a guideline on things you can do to improve your credit.

How much of a down payment you plan to make could also have an effect on how much you can afford or how much a lender will loan you. The bigger your down payment, the less risk the lender feels like he is taking on and you will probably receive a better rate, and of course you will pay less interest over time.

Keep in mind if all this seems a little confusing, you can easily just log onto one of the numerous mortgage company websites that offer a pre-qualification mortgage calculators or other helpful calculators that will figure it all out for you. The main thing you should be trying to figure out is to get a rough idea of your mortgage limits before you start shopping for a new home loan. Doing so will make the house hunting process less stressful for you and your family.

  

About the Author:

ZFG Mortgage headquarter in Tulsa, Oklahoma is the #1 rated mortgage lender in the state of Oklahoma. At ZFG Mortgage we pride our selves in offering the lowest mortgage rates at the lowest closing costs.  We have & A+ Rated rating with the Better Business Bureau & have been nominated & won numerous awards like the BBB Torch awards and the BBB Honor Roll for NO complaints in the last 3 years! If you are need of a Home loan in Oklahoma, then go with the lender you can trust. Apply online or call for Free Rate quote or Pre-Approval.

ZFG Mortgage

6670 Lewis Ave # 200

Tulsa, OK 74136

Phone: 918-459-6530

Fax: 918-459-6535

Toll Free: 1-877-205-7266 

http://www.zfgmortgage.com

5 Tips for Repairing Your Credit

Before you make any big financial life changes, it is a good idea to have your credit report in order. Your credit score can affect everything from the interest rate you get on a home loan or an auto loan to whether or not you are hired for a job. If find your current credit score lacking in points, now is the time to put the following five credit tips into action to improve your financial success. Plus consistently living by these tips will help you develop better credit responsibility and habits.

1. Know Your Credit Report

First things first do you even know what your credit report looks like? Do you know what your credit score is right now? A majority of Americans don’t. You can get a free copy of your credit report once a year from each of the three major credit reporting bureaus- Equifax, Experian, and TransUnion. (You will have to pay a small fee for the actual credit score.) Taking advantage of this free report yearly is a smart idea that will help you to monitor your credit and be aware of the contents. You have to know what your score is before you can decide how to fix it.

Your credit score will be a three-digit number between 300 and 800. Anything over 720 is considered excellent credit. Anything below 640 is considered poor credit. The better your score, the better rates you’ll get on loans and you’ll be more likely to be accepted for jobs and apartments.

2. Correct Any Errors

Once you have a copy of your credit report, examine it for errors. If there is a legitimate mistake, correcting it with the credit agencies can improve your score by roughly 30 points or more. Look for things like payments reported as being paid later than they were or any collections or judgments, if you find that there inaccurate then contact the creditor for a update or removal request. Be sure to get written confirmation from the creditor stating that it was & error. The reason you should always obtain a letter is in the event you apply for a loan or have your credit pulled at a later date and the discrepancy shows up again, you should have proof of the mistake.  After reviewing the credit if you find & inaccurate late payment or anything else that’s & error, you can also write or email the three major credit reporting bureau requesting a correction. The credit bureaus will then investigate the matter with the creditor and if it is inaccurate they will update the credit withing 30 to 60 days.

3. Reduce Your Debts

A big part of your credit score is determined by your debt-to-available credit limit ratio. A good rule of thumb is to keep your account balances at 30 percent or less of your available credit lines. You can do this by paying down your credit cards or store cards with the highest balance first, or if you have to switch some of the balance from one card to less used one. Do not, however, open more credit accounts to spread out the debt balances. That will imply to the bureaus that you are so irresponsible with credit you already have that you need more. This may lower your score.

4. Pay All Your Bills on Time

The biggest portion of your credit score is in fact your history of timely (or untimely) payments. Make sure that you pay ALL of your bills on time. If you need to create some sort of reminder system for yourself, do it! Automatic bill paying by internet is a helpful function as well. 

5. Give It Time

Finally, while this is not a very proactive step, it is important. It can often take six months or more to see real improvement in your credit score, so be patient. Try to limit the amount of time creditors pull your credit. A single credit inquiry can cost your credit score between 1-5 points according to the 3 major credit bureaus. Be sure to give yourself at least 6-12 months to repair your credit, before you apply or re-apply for that car loan or home mortgage.

If you are Interested in preparing yourself or your credit, be sure to read some of our other helpful blogs credit, real estate or mortgages today.

About the Author:

ZFG Mortgage headquarter in Tulsa, Oklahoma is the #1 rated mortgage lender in the state of Oklahoma. At ZFG Mortgage we pride our selves in offering the lowest mortgage rates at the lowest closing costs.  We have & A+ Rated rating with the Better Business Bureau & have been nominated & won numerous awards like the BBB Torch awards and the BBB Honor Roll for NO complaints in the last 3 years! If you are need of a Home loan in Oklahoma, then go with the lender you can trust. 

ZFG Mortgage

6670 Lewis Ave # 200

Tulsa, OK 74136

Phone: 918-459-6530

Fax: 918-459-6535

Toll Free: 1-877-205-7266

http://www.zfgmortgage.com

12 Month Future Home Buyers Preparation Guideline

Buying a home is a big step – one that should be carefully planned out and prepared for. Ideally you should start preparing yourself and your finances for the purchase about one year in advance. This is the first part in an article series designed to give you a rough home buying preparation timeline. We will first take a look at the things that need to be done the twelve to six months before you plan to buy a home.

The Twelve to Six Month Countdown List

At this point, you know your goal is to buy a home. Now you need to figure out what it is going to take to do so. There are three basic things that mortgage lenders base your mortgage acceptance on: your credit score and history, your debt-to-income ratio, and your assets.

Credit

Your credit report is a highly influential document these days. Lenders use it as a reflection of your responsibility with credit sources. They also use your credit score as a gauge of how much risk there are assuming by lending you money. In fact, the interest rate that they will offer you on a mortgage is often directly related to your credit score - the higher your score, the better your rate. So your task is to start now to make your credit score as attractive as possible to lenders. It generally takes at least six months for any credit practice improvements to be reflected in your score, so don’t delay! 

First, pull a copy of your credit report and score from one or all of the three major credit reporting agencies, TransUnion, Equifax, and Experian. With your report in hand, scan the document for any blatant errors. Be sure to report these immediately to the credit bureaus to have the information corrected. Next look for reasons by your credit score may be lower than you want. Once you have identified problems areas in your credit habits, it’s time to go to work! The most important factors in improving your credit score include making very punctual payments on all your credit accounts (you may want to consider setting up automatic bill payments) and lowering the balances on all your credit accounts. During the next year you should also steer clear of opening or closing credit accounts, as this will generally bring down your score.

Debt-to-Income Ratio

Your income is an important factor in obtaining a home loan. Lenders want to make sure you have a stable, sufficient income to be able to support the mortgage payments. Beyond simply determining your income, lenders will want to know how you are using your income to see whether you could afford the loan. Mortgage lenders often use the 28/36 rule in determining whether or not you qualify for a loan. The 28 part of the ratio means lenders like to see that your total monthly debts are equal to or less than 28 percent of your monthly income. Those debts would include credit card payments, student loans, car payments, etc. The 36 in the ratio means that lenders prefer that your total debts plus your mortgage payment will not exceed 36 percent of your monthly income. Some lenders will be more lenient on these percentages, but they are a good rule of thumb. Starting a year before you want to buy, you should evaluate your debt and make a plan for reducing it to within the 28/26 ratio. Reducing your debt will also improve your credit score!

Assets

A third factor lenders will use in determining your eligibility for a home loan is your assets. This next year should be a year of saving. Not only do you need to save as much as possible for a good down payment, but you also have to be prepared to pay for the loan closing costs (which could run anywhere from several hundred to a few thousand dollars.) Once you actually get into a home, there will be plenty of expenses related to the upkeep of the house. Plus some lenders may even require that you have a couple mortgage payments’ worth of money saved away in order to avoid default for awhile if you have some sort of financial crisis or emergency.

In the next part of this series we will outline the important preparation steps to take during the three to six months before you buy a home.

There are many things that need to be done in order to feel confident on the day your home loan closes. The first part of this article detailed the issues to be dealt with during the six to twelve months before you buy, including improving your credit score, reducing your debt-to-income ratio, and saving for all the necessary fees. This portion will help you figure out the important steps you need to during the three to six months before you plan on buying a home.

THE SIX TO THREE MONTH COUNTDOWN LIST

Determine Your Price Range

Now is the time to start figuring out just how much house you can afford to buy. While it is great to fantasize about the size and layout of your dream house, you have to determine how much of that dream house can fit into your budget. You should realize that some lenders may be willing to qualify you for a bigger loan than you can truly afford. It is up to you to decide on your financial limits. You may want to use the 28/36 ratio discussed in the last article to calculate how much your monthly mortgage payment should comfortably be. Basically, your mortgage payment plus all your monthly debts combined should be no more than 36 percent of your monthly income. So for example, you earn $5,000 per month. Your monthly debts total $700. Thirty-six percent of $5,000 equals $1800. Subtract your monthly debts ($700) from that total and you have room in your budget for a $1100 monthly mortgage payment. Don’t worry; if all this seems to confusing, almost any mortgage lender’s website provides a handy calculator that will do the calculations for you.

Plan for Home-owning Costs

You started your home buying savings plan several months ago, but now you need to calculate just how much it is going to cost to remain a homeowner. Find out how much you will have to pay for property taxes and homeowners insurance. You should also take into account the fact that if you are planning to move into a bigger place, your utility bills will likely be larger as well. You should also plan into your budget and savings plan for various home repairs that will need to be taken care of. Once you figure out the total amount for all these expenses you will have a better idea of what it will cost to maintain your home.

Research the Loan Programs Available

Finally, this is also the time to start studying your options in terms of the various loan products available. These days there are 4 different loan options available to borrowers as far at the program type:

FHA Mortgage: A government backed program that requires 3.5% down payment.

Conventional Mortgage “Fannie Mae/ Freddie Mac Loan” : Require as little as 5% down.

USDA Home Loan “RD Loan” : A loan option that doesn’t require any down payment, but has restrictions on max income and property location.

VA Home Loan: Offers up to a 100% financing, but requires the borrower to be veteran or active duty military.  

Research the differences between fixed rate loans and adjustable rate mortgages. List the pros and cons of each type of loan for your situation. After you understand the basics you can dive into more specific programs. You can consider the choice between a 30-year, 15-year, or even 20-year fixed rate loan. Or you may find that you favor a Adjustable Rate Mortgage “ARM”. Once you have discovered your preferences you will be prepared for the next stage of preparation: shopping around for a mortgage.

In the next part in this series wet will give you a run-down of the things that you need to do two months ahead to the time the mortgage loan closes.

 THE FINAL THREE MONTHS COUNTDOWN LIST

The final part of this article will walk you through a outline the important tasks to be done starting from three months until you plan to

Review Credit

We have already discussed how important your credit report and score are in obtaining a mortgage loan, so now is a great time to recheck your credit and look again for errors that could be corrected before you apply for a home loan. You should also try to find ways to decrease the balances on your existing credit accounts as this will help beef up your score before application time. Of course, continuing to make timely payments during this period is essential to maintaining your credit score, so make sure you stay current in all your accounts.

Another word of caution: do not open or close any credit accounts from this point forward until your mortgage closes. Opening more accounts make it look as if you are desperate for more credit sources, while closing accounts might increase your debt-to-available credit ratio, both of which may pull your credit score down. Don’t do it!

Shop for the Best Lender and the Best Rate

Now is the right time to start shopping around for the right mortgage lender with the right deal. Be sure to research what the current average interest rates are for people with credit scores like yours. Then get quotes from several different lenders and compare the interest rates and fess offered. It is often more helpful to compare loans based on the annual percentage rate (APR) rather than simply on the interest rate because the APR takes into account closing costs, points, and other fees. It is a more accurate reflection of the true cost of the loan.

Get Pre-approved

Once you have found a trustworthy mortgage lender who has offered you good terms on a home loan, you should ask for a letter of pre-approval. This means that the lender has sat down and thoroughly reviewed your income, debts, and assets and is willing to promise you funding up to a certain amount. You can bring this letter with you as you shop for homes. Sellers and real estate agents like pre-approved buyers because they know they are serious and have the funding to make good on their offer.

Shop for a Home

Now comes the exciting step of selecting the right house for your needs. You may want to enlist the services of a real estate agent to help you find the right neighborhood and the home with all the features you are looking for. Once you have located the perfect house, you can place your bid with confidence and proceed on to the loan application process if your offer is accepted. Having done all your homework and carefully prepared for this end goal will make for a much less stressful purchase process!

About the Author:  

ZFG Mortgage headquarter in Tulsa, Oklahoma is the #1 rated mortgage lender in Oklahoma.At ZFG Mortgage we pride our selves in offering the lowest mortgage rates at the lowest closing costs.  We have & A+ Rated rating with the Better Business Bureau & have been nominated & won numerous awards like the BBB Torch awards and the BBB Honor Roll for NO complaints in the last 3 years! If you are need of a Home loan in Oklahoma, then go with the lender you can trust. Apply online or call 1-877-205-7266 for Free Rate quote or Pre-Approval.

ZFG Mortgage

6670 S Lewis Ave #200

Tulsa, OK 74136

(P) 918-459-6530

(F) 918-459-6535

(Toll Free)  1-877-205-7266

http://www.ZFGMortgage.com