Buying a house likely is the biggest purchase you’ll ever make. Conventional wisdom says to aim for a 20% down payment on your mortgage. But saving money for a down payment on your dream home can be downright daunting and likely impossible on an average salary.

But there are alternatives to a conventional mortgage. There are some loans where you can buy a house with no money down. Other loans are available with little money down as well.

So how do you know which one is the best for you?

Let’s navigate some of the options.

USDA loan

The USDA loan program – otherwise known as the rural development loan – requires no money down. However, borrowers must meet certain credit and income requirements to qualify. And even though there is no down payment, a “funding fee” of 1% of the total loan amount is required, but that can be rolled into the loan if necessary. According to the 2017 USDA Rural Development Performance Report, nearly 72% of the nation’s land mass is rural. You can see if your area qualifies on the map linked here.

VA loan

If you are an active or retired United States military service member, as well as some reserves, you can potentially get 100% mortgage financing through the Department of Veteran Affairs. In fact, nearly 90% of all VA backed home loans are made without a down payment. You will still need to do a certificate of eligibility and may have to finance a VA funding fee into your mortgage, but overall, VA loans are some of the best mortgage deals out there.

Specialty loans

Some lenders choose to offer loans outside of the traditional, conventional federal regulations.

Some lenders offer no down payment mortgages for physicians, dentists and other medical professionals who are buying a primary residence. They can’t be used for buying a second home or vacation home.

Check with your bank to see what other options they offer.

Conventional 97 loan

For first-time homebuyers, Fannie Mae and Freddie Mac offer a Conventional 97 loan that only requires a 3% down payment that has no income limits, but tighter restrictions than conventional loans, and it carries higher interest rates. They also offer a 3% down payment loan that doesn’t require you to be a first-time homebuyer but it does have income limitations.

To receive a Conventional 97 loan, you will need a strong credit score, reliable income and employment, and a debt-to-income ratio under 43% (in most cases). The property must be your primary residence. This includes a single-family home, a condo, planned unit development or co-op. If you are not a first-time homebuyer, Fannie Mae and Freddie Mac also offer 97% loans with lower interest rates and mortgage premiums, however these are limited by income.

FHA loan

The Federal Housing Administration offers mortgage loans with as little down as 3.5%. FHA loans do require a monthly fee over and beyond your interest rate – similar to mortgage insurance. This is charged to the borrower two different ways; as a one-time fee of 1.75% of the loan amount and as a monthly premium. The duration and cost of your MIP may last for the duration of the loan. However, you do have the option to refinance your home at any point after you close the mortgage. This may be especially helpful when you have paid 20% of the home’s value and can get a new loan that does not require the monthly fee. Similar to the Conventional 97 loan, there are no income limits, the home must be your primary residence.

Lenders at RCB Bank are happy to help answer questions even if you are not a customer. Give us a call or visit our online Mortgage Center.

Opinions expressed above are the personal opinions of RCB Bank personnel and meant for generic illustration purposes only. With approved credit. For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB. Some restrictions apply. RCB Bank is an Equal Housing Lender and member FDIC. RCB Bank NMLS #798151.

Sources:

https://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do

https://www.va.gov/housing-assistance/home-loans/loan-types/

The new year traditionally is a time of reflection and resolutions. If one of your resolutions is to buy a house this year, here are some tips that will help that resolution become a reality.

Improve your credit score

If you have any debts or credit card balances, work on eliminating them or paying them down. Even if completely eliminating your debt isn’t possible, paying it down could increase your credit score – and even a small boost can mean lower interest rates on a mortgage. Also, paying these off might feel good, but don’t close those accounts as that could lower your score if you eliminate the positive reporting tradeline.

Avoid big purchases

Sure, you might need new appliances and new furniture in your new house. But wait until after you’ve closed on your mortgage before pulling the trigger on those purchases. Spending money on big-ticket items decreases your available cash – which is key in the home-buying process. Or if you use your credit card or take out a store line of credit to pay for it, it could hurt your credit score.

Save, save, save

Save every penny you can. Having money saved for a down payment and closing costs can majorly help you in the loan process. The more money you have in savings, the better. Evaluate your spending habits – if you eat out for lunch every day, bring your lunch instead and save the difference. If you stop for coffee a few times a week, skip it and save that money, too. These small things will add up over time.

Research lenders

Finding the right mortgage professional will make the process much easier. Your lender will be your mortgage resource and will help you every step of the way to bring your resolution to fruition. It also will be important to get preapproved for your mortgage, which the lender will help with as well.

Determine what you want in a house

Just what specifics do you want in your home? Do you want to live closer to work, or in a specific school district? These are the things that are good to know ahead of time, and they will help you narrow down available houses. And then, start looking!

Making a resolution and sticking to it always is fulfilling. And if buying a house is on your resolution list this year, these steps should help make the process much easier.

Lenders at RCB Bank are happy to help answer questions even if you are not a customer. Give us a call or visit our online Mortgage Center.

Opinions expressed above are the personal opinions of RCB Bank personnel and meant for generic illustration purposes only. With approved credit. For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB. Some restrictions apply. RCB Bank is an Equal Housing Lender and member FDIC. RCB Bank NMLS #798151.

Timing is everything, and that is especially true when purchasing a house. Whether you’re waiting for the right home or applying for a mortgage, there are many time-sensitive processes to follow to ensure you can get the home and the financing you want.

It may seem like there’s a lot of hurry up and wait going on. But because it is likely the biggest purchase you’ll make in your life, there’s a good reason for the wait.

For traditional mortgages, the most noticeable is the three business-day waiting period between receiving your closing disclosure and the consummation date (often known as your closing day). This three business-day rule was introduced in October of 2015, and it applies to both original mortgages and refinancing.

When your three business-day waiting period starts is determined by your consummation day. This three business-day rule may include Saturdays, but it does not count Sundays or holidays.

For instance, if you want to sign on a Friday and a holiday falls on a Thursday, you must receive your closing disclosure on Monday. Because of this, the three-day period is NOT measured by hours.

You can sign the closing disclosure any time before you sign your final documents on your consummation day.

This waiting period gives you time to review all the documents to ensure that the terms you’re agreeing to match the terms outlined at the beginning of the mortgage process when you received your loan estimate (which lenders are required to disclose no later than three days after receiving your completed application).

The closing disclosure will show you the final terms of your mortgage, including your purchase price, interest rate, APR, closing costs, monthly payment, and more. Between the closing disclosure and consummation, if the APR, loan product type or prepayment penalty changes, that would require a revised closing disclosure, which in turn would require a new consummation date. Other changes to terms and costs outside of these (like title fees and insurance), will warrant a corrected closing disclosure, but will not require a new three business-day waiting period.

Basically, the closing disclosure is designed to protect you from bait-and-switch tactics if a lender promised you one set of terms but then presents worse terms just prior to the consummation day.

Source: https://www.consumerfinance.gov/know-before-you-owe/

Opinions expressed above are the personal opinions of RCB Bank personnel and meant for generic illustration purposes only. With approved credit. For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB. Some restrictions apply. RCB Bank is an Equal Housing Lender and member FDIC. RCB Bank NMLS #798151.

How to Take Advantage of the Equity in Your Home

The equity in your house is one of the most valuable tools you have as a homeowner. It can increase over time, and it can be used to access money in the form of a loan or a line of credit that can pay for big expenses like renovating your home or the consolidation of high-interest debt.

So just what is home equity? It is your home’s market value, minus the amount you owe on it. This is why it usually increases over time – as you pay off your mortgage, you’re subtracting less against the home’s market value. Also, if your home increases in value, your equity rises as well. However, the opposite is true as well – if your home decreases in value, your equity may drop if it decreases more than what you’re paying on the mortgage.

Differences Between a Loan and a HELOC

A home equity loan gives you a lump sum of money up front, and you make payments over the life of the loan at a fixed interest rate to pay it off.

A home equity line of credit (HELOC) is similar to a credit card – you establish a line of credit, with your home as collateral – and you use the credit when you need it. You pay interest only on the money you use, and you can also continue to use the funds as you repay them. These rates are typically adjustable.

How to Build Home Equity

You can make additional payments to the principal of your mortgage to build equity faster.

Appreciation of your home also will increase the equity over time. The increase in value of your home over time is not guaranteed, but has been typical over the most recent history of the real estate market in the United States.

Also, if you make home improvements, that may increase your home’s value, which in turn would increase your equity. Not all home improvements are the same, however, so be sure to research to find out which one would add the most value to your home.

Benefits of Using Home Equity

The Tax Cuts and Jobs Act of 2017 lets homeowners deduct the interest on home equity loans or lines of credit if the money is used to “buy, build, or substantially improve the taxpayer’s home that secures the loan.”

Also, because you’re borrowing against your home, it would be a secure loan or line of credit. Typically loans secured by homes have lower interest rates than other loan options.

Drawbacks of Using Home Equity

Remember that your home secures the amount that you borrow through a home equity loan or line of credit. If you don’t pay your debt, the lender may be able to force you to sell your home to satisfy the debt. Also, some lenders may charge fees, so be sure to look to see if the fees are what you would consider excessive.

Also, if you sell your home using a real estate agent, there are fees associated with the sale transaction from the real estate agency, title company, and more. These costs can be as much as 10% of the value of the home. If you max out your equity and owe more than 90% or so on your home, you may not have enough equity to sell your property after accounting for the fees.

If you’re interested, ask more questions to seek out answers

Ask all the lenders you interview to explain the loan plans available to you. If you don’t understand any loan terms and conditions, ask questions. They could mean higher costs. Knowing just the amount of the monthly payment or the interest rate is not enough. Pay close attention to fees, including the application or loan processing fee, origination or underwriting fee, lender or funding fee, appraisal fee, document preparation and recording fees, and broker fees; these may be quoted as points, origination fees, or interest rate add-on. If points and other fees are added to your loan amount, you’ll pay more to finance them.

Lenders at RCB Bank are happy to help answer questions even if you are not a customer. Give us a call or visit our online Mortgage Center.

Opinions expressed above are the personal opinions of RCB Bank personnel and meant for generic illustration purposes only. With approved credit. For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB. Some restrictions apply.  RCB Bank is an Equal Housing Lender and member FDIC. RCB Bank NMLS #798151.

Consider refinancing into a shorter-term loan

Paying off your mortgage is a marathon, not a sprint.

But what if you’ve reached a point of the marathon and found a way to run the rest of it downhill?

Now is a great time to consider refinancing your loan from your current 30-year note to a 15-year mortgage. You’ll likely end up paying significantly less interest over the term of your new loan compared to your current loan.

The interest rate for a 30-year mortgage in 2006 averaged more than 6.0%. Recent rates for a 15-year home refinance have been in the 2%’s. This is a potential savings of tens of thousands of dollars by refinancing.

Your savings come as the amortization schedule pays down much faster with more money going to principle and less to interest. For example, if you got a $100,000 loan with a 30-year repayment period in January 2006 paying 6% interest, the monthly payment would be around $600. The amount of interest paid per payment would range from around $100 at the first payment to around $250 in 2021. If you refinanced the remaining balance of around $71,000 into a new 15-year loan with a 2% interest rate, the monthly payment would drop to around $460 per month and would save approximately $25,000 in interest compared to the 30-year loan.

But does refinancing your loan make sense?

There is no cookie-cutter approach to refinancing. There are many factors to take into consideration before taking the plunge. The example scenario described above could be different for your situation depending on a variety of unique factors specific to you and your mortgage.

Do you plan on staying in your house for a while longer, or do you plan on moving soon? If you don’t plan on staying in your current home much longer, it likely would not make sense to refinance because of the cost and fees associated with refinancing. Interest rates can emotionally draw you to refinance, but be sure to do the math of how much will you would save monthly and/or over the life of the loan versus how much it costs to refinance. For example, if it cost $4,000 to refinance and you save $100 per month, it will take 40 months — a little over 3 years — to recoup the cost. If you plan on moving prior to that time frame, it probably would not be worth the “feel good” rate.

Other related costs with refinancing

Before jumping into anything, don’t forget to factor in other costs. Can you recoup the cost and gain savings after the break-even point?

There may be closing costs, processing fees, appraisals, loan origination fees, discounts fee, underwriting, and tax service fee. Some third party fees, such as appraisers and title company fees, likely will be the same no matter what lender you choose. Most of the time, the savings over the life of the loan will more than offset these costs, but you should do your due diligence to check this yourself just to make sure.

Choose the lender that works best for you and try to get your rate locked in as soon as possible when you refinance. Lenders at RCB Bank are happy to help answer questions even if you are not a customer. Give us a call or visit our online Mortgage Center.

Opinions expressed above are the personal opinions of RCB Bank personnel and meant for generic illustration purposes only. For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB. With approved credit. Some restrictions apply.  RCB Bank is an Equal Housing Lender and member FDIC. RCB Bank NMLS #798151.

Get a mortgage prequalification before you start home shopping

If you’re shopping for a home, the first step you should take is to get prequalified for your mortgage.

Buying a home can be daunting, especially for first-time homebuyers. But having a roadmap can make the process easier. And that’s where a mortgage prequalification comes in.

By prearranging financing, you can save a considerable amount of time. A lender will examine your credit report, pay stubs, bank statements, etc., and be able to tell you what they think you’re qualified to borrow. Remember, you’re the only one who knows what you can afford based on your living costs. Rather than looking at a myriad of properties, you can narrow your search down to a handful of homes that fit a purchase price and mortgage payment you can make comfortably and examine those in great detail. You’re also less likely to be let down or become disillusioned when you fall in love with a property only to find it’s out of your price range.

If you apply for prequalification and later decide you’re not ready to buy a house in your desired price range, it’s better to learn that before you start shopping for houses.

Prequalification allows you to move quickly and shows you’re serious

The housing market is booming right now. Houses aren’t on the market for very long. If you want to purchase your dream home before someone else snatches it from you, you need to make sure you’re ready to submit an offer immediately.

When a seller is looking at multiple buyers with interest in their property, it’s important to stand out from everyone else. Say there were three other buyers, and you were the only one with a prequalification letter. You will have a much better chance of getting the seller’s attention because you have direct evidence of your ability to obtain financing. This should reduce any skepticism or anxiety a seller may have.

Timeframe

Once you get prequalified, you’ll receive a prequalification letter. Check your expiration date and keep it in mind while you’re shopping for your future home. Prequalification letters generally are valid for 90 days. If you haven’t purchased a home by then, you can request a renewal by submitting your up-to-date financial information again.

Taking the time to go through the prequalification process for a mortgage has some distinct advantages. Once a lender gives you the green light, it can help you find a great property at a fair price, while eliminating a lot of hassle.

The loan you choose will depend on your financial situation, how much you have to put down and where you want to buy a home. It is always a good idea to talk with a lender before deciding what loans to choose. Lenders at RCB Bank are happy to help answer questions even if you are not a customer. Give us a call or visit our online Mortgage Center.

Opinions expressed above are the personal opinions of RCB Bank personnel and meant for generic illustration purposes only. For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB. With approved credit. Some restrictions apply.  RCB Bank is an Equal Housing Lender and member FDIC. RCB Bank NMLS #798151.

What to Know: Rural Development Program

Does buying a home feel out of reach because you think you haven’t saved up a down payment? Take a look at the U.S. Department of Agriculture Rural Development Loan (RD loan or USDA loan), which may provide up to 100 percent financing for qualified households purchasing homes in eligible rural areas.

If you live in a designated rural area, you may qualify for a USDA Rural Development Loan. This program helps rural individuals, families, communities and businesses obtain the financial support they need to improve their quality of life and economies. If you would like to buy a home in an eligible rural area, the USDA currently offers two types of loans:

Direct Loans

• Low to very low-income homebuyers
• Offered directly by the USDA
• 33-year fixed interest rate (typical term)
• Applicant’s income must be below local low- or very low-income limits as determined by the USDA
• Payment assistance may be available
• Apply at your local USDA Rural Development office

Guaranteed Loans

• Moderate-income homebuyers
• Offered by lenders such as banks, and guaranteed by the USDA
• 30-year fixed interest rate
• Applicant’s income must be below local moderate-income limits determined by the USDA
• Apply with a local USDA-approved lender

If you need help, you can also get repair and refinance loans through the USDA rural development program. Repair loans are offered directly by the USDA, while a loan to refinance is offered by lenders such as banks.

Financing for Rural Development Loans

Rural development loans do not require a down payment and must not exceed the purchase price limit set by USDA. They do charge a funding fee that is financed into your loan along with a monthly guarantee fee. New construction is allowed, but limited to 90% loan-to-value and the home cannot ever have been occupied. The eligibility of the loan will depend on several factors including, but not limited to, your adjusted household income, debt ratio, credit score and the property.  Other requirements for a guaranteed loan include:

• You must live in an eligible rural area. Generally, rural areas with a population of 35,000 or less are eligible.
• Meet income eligibility based on your area (cannot exceed 115% of median household income).
• Agree to personally occupy the dwelling as your primary residence.
• Be a U.S. Citizen, U.S. non-citizen national or Qualified Alien.
• Generally, you cannot own any other real estate.

Rural Development Interest Rates  

If you are looking to buy or refinance, talk to a lender first to explore your eligibility, financing and down payment options. I am here to help, even if you are not an RCB Bank customer.

Sources

Are You Looking to Buy a Home or a Homeowner Needing Help (usda.gov)

Single Family Housing Guaranteed Loan Program | Rural Development (usda.gov)

Single Family Housing Direct Home Loans | Rural Development (usda.gov)

The loan you choose will depend on your financial situation, how much you have to put down and where you want to buy a home. It is always a good idea to talk with a lender before deciding what loans to choose. Lenders at RCB Bank are happy to help answer questions even if you are not a customer. Give us a call or visit our online Mortgage Center.

Opinions expressed above are the personal opinions of RCB Bank personnel and meant for generic illustration purposes only. For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB. With approved credit. Some restrictions apply.  RCB Bank is an Equal Housing Lender and member FDIC. RCB Bank NMLS #798151.

How to Buy a Second Home

If you visit the lake regularly or love the idea of having a home away from home, it may be worth it to invest in a second home. With mortgage rates still near historic lows, now may be the time to buy property in your favorite vacation or travel destination.

Second Home Loan Requirements

There are specific requirements for defining a second home. Fannie Mae’s second home requirements are:

• It cannot be a full time rental or investment property. Second home loans tend to have lower rates than rental and investment properties.
• Restricted to single-unit dwellings.
• Must be suitable for year-round occupancy.
• Cannot be subject to any agreements that give a management firm control over the occupancy of the property.
• The borrower must have exclusive control over the property.

You may also need to need to meet minimum distance requirements from your primary residence. If it is located in a recreational area such as a lake or a ski resort, the minimum distance requirements may not be required.

Conventional Financing for a Second Home

The loan process is similar to purchasing a primary residence with small differences in minimum down payment and reserve requirement. Second homes require at least 10% down. The lender will need to verify you have sufficient funds for closing and between 2-6 months’ worth of reserves to cover both your primary and second home loan payments. Since government loan programs (FHA, VA, USDA) are not available for second home financing, let’s look at other financing options.

Second Home Financing: Cash-Out Refinance

A cash-out involves refinancing your primary residence mortgage and receiving cash for the remaining equity. You need sufficient equity in your home for this to be an option. For example, if you owe $100,000 on your home worth $500,000, you may be able to cash out up to 80% loan-to-value (LTV), which would be $400,000 minus the $100,000 you owe. This leaves you with $300,000 in cash to purchase your vacation property. You can choose term options from 5-30 years fixed or adjustable, plus you’ll have one monthly payment, not two.

Second Home Financing: Home Equity Line of Credit (HELOC)

A Home Equity Line of Credit (HELOC) adds your loan to your primary residence. Typically, this loan will not pay off your current mortgage, but be a second lien adding to your monthly expense on top of your current mortgage. Depending on the lender, this loan may go to a LTV higher than 80%, which helps if you need more funds than what 80% will allow. The drawback is this type of loan is typically adjustable and at a higher rate than today’s conforming loans.

Opinions expressed above are the personal opinions of RCB Bank personnel and meant for generic illustration purposes only. For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB. With approved credit. Some restrictions apply.  RCB Bank is an Equal Housing Lender and member FDIC. RCB Bank NMLS #798151.

How much is required for a down payment on a house?

How much money you need for a down payment on a house depends on your budget and what type of loan you apply for. You may have heard that 20% down is what you need, but that is simply a preferred number, not a requirement for many lenders. If you are able to put 20% down it will reduce your monthly mortgage payments and will likely allow you to avoid a Mortgage Insurance Premium (MIP) every month. However, many borrowers do not have 20% down. Here are some of your options if you do not have a large down payment for your house.

House Down Payments with No Money Down

USDA Loan

If you are considering a home in a suburban or rural area, the U.S Department of Agriculture Rural Development loans offer up to 100% financing to qualified homes in eligible areas. Since USDA loans are federally backed, they often have interest rates lower than conventional loans as well. You may also be surprised to find what the USDA considers a rural area. According to the 2017 USDA Rural Development Performance Report, nearly 72% of the nation’s land mass is rural. You can see if your area qualifies on the map linked here.

VA Loan

If you are an active or retired United States military service member, as well as some reserves, you can potentially get 100% mortgage financing through the Department of Veteran Affairs. In fact, nearly 90% of all VA backed home loans are made without a down payment. You will still need to do a certificate of eligibility and may have to finance a VA funding fee into your mortgage, but overall, VA loans are some of the best mortgage deals out there.

Low Cost Down Payment Options for a House

Conventional 97 Loan

A few years ago, Fannie Mae and Freddie Mac started offering a Conventional 97 loan that only requires a 3% down payment for first-time homebuyers. This loan has no income limits, but tighter restrictions than conventional loans and it carries higher interest rates. To receive a Conventional 97 loan, you will need a strong credit score, reliable income and employment, and a debt-to-income ratio under 43% (in most cases). The property must be your primary residence. This includes a single-family home, a condo, planned unit development or co-op. If you are not a first-time homebuyer, Fannie Mae and Freddie Mac also offer 97% loans with lower interest rates and mortgage premiums, however these are limited by income.

FHA Loan

The Federal Housing Administration offers mortgage loans with as little down as 3.5%. FHA loans do require a mortgage insurance premium. This is charged to the borrower two different ways; as a one-time fee of 1.75% of the loan amount and as a monthly premium. The duration and cost of your MIP may last for the duration of the loan. However, you do have the option to refinance your home at any point after you close the mortgage. This may be especially helpful when you have paid 20% of the home’s value and can get a new loan that does not require mortgage insurance. Similar to the Conventional 97 loan, there are no income limits, the home must be your primary residence.

The loan you choose will depend on your financial situation, how much you have to put down and where you want to buy a home. It is always a good idea to talk with a lender before deciding what loans to choose. Lenders at RCB Bank are happy to help answer questions even if you are not a customer. Give us a call or visit our online Mortgage Center.

Sources

VA Home Loan Types | Veterans Affairs

Welcome to Rural Development | Rural Development (usda.gov)

Federal Housing Administration | HUD.gov / U.S. Department of Housing and Urban Development (HUD)

Opinions expressed above are the personal opinions of RCB Bank personnel and meant for generic illustration purposes only. For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB. With approved credit. Some restrictions apply. RCB Bank is an Equal Housing Lender and member FDIC. RCB Bank NMLS #798151.

Mortgage Refinancing Basics

What is refinancing?

A mortgage refinance is when you replace your current mortgage with a new mortgage. There are many reasons why homeowners may want or need to refinance:

• To shorten the terms of their current mortgage.
• To get a lower interest rate than their current mortgage.
• To use the equity of the home to finance a large purchase, pay for an emergency or consolidate debt.
• To convert your loan from an adjustable interest rate to a fixed interest rate.
• To get the PMI (primary mortgage insurance) requirement removed. Many FHA loans require mortgage insurance for the life of the loan. A conventional loan will generally not require mortgage insurance if you have paid your loan balance down to 78% or less of the appraised value.

When to Refinance

In order to know if refinancing is a good option for you, you need to understand your long-term goals and your current financial situation. If you are refinancing to take advantage of lower interest rates, there are mortgage calculators that give you an estimate of how much it will cost to refinance and how much you can save over the life of the loan.

You also want to consider the break-even point, or how long it takes to earn back the money you spent to refinance. For instance, if it will take seven years to earn back the money you spent to refinance and you plan on moving in three years, it is probably a bad idea to refinance your loan.

Your personal finances can also determine if it is a good idea to refinance. If you need lower monthly payments because money is tight, refinancing might be a good option to relieve the monthly stress of the payment.

How to Refinance Your Home

In order to refinance your home, you will need to get approved for a loan the same way you did for the original financing. The first thing to do is have your documentation ready. This can include pay stubs, bank statements, a credit check, tax documentation and anything else your lender requests. It is also important to know that a strong credit score will have a positive impact on your refinancing terms. You may want to wait a few months to improve your credit score before starting the process.

Once your documentation is in order and your credit score is in a good place, you should then apply for a refinance with several different lenders. Apply at three or four places and do so in a short-time period so it reduces the impact on your credit score.

After you receive the loan estimate from different lenders, compare those documents and determine how much you will likely pay in closing costs. Closely compare the lenders’ fees, which could include the Origination Fee, Discounts Fee, Underwriting, Processing and Tax service Fee. Some third party fees, such as appraisers and title company fees, will likely be the same no matter what lender you choose.  Choose the lender that works best for you and try to get your rate locked in as soon as possible. Then you will work with your lender to close on the loan in the exact same way you closed on your mortgage the first time.

No matter what you decide, do your research and ensure it makes financial sense to refinance before beginning the process. Lenders at RCB Bank are happy to help answer questions even if you are not a customer. Give us a call or visit our online Mortgage Center.

Opinions expressed above are the personal opinions of RCB Bank personnel and meant for generic illustration purposes only. For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB. With approved credit. Some restrictions apply.  RCB Bank is an Equal Housing Lender and member FDIC. RCB Bank NMLS #798151.

Types of Construction Loans

A variety of constructions loans are available to homebuyers. It all depends on your specific situation. If you want to shop around and potentially use more than one lender, then getting two separate loans (one for the construction and then a second to pay off the construction loan and put the debt into monthly payments) may be the best choice. If you prefer to work with one bank and one lender, a construction-to-permanent loan may be the best finance solution. The important part is that you talk with a trusted banking professional before making any decisions.

Construction Only Loan

In this scenario, the borrower actually gets two loans. The first loan finances the construction of the home and the second loan refinances the construction into a long-term mortgage. This type of loan allows the homeowner to work with different lenders for the construction and permanent financing if they would like. The upside of doing this this loan is that you may have more flexibility if there are cost overruns and you can typically draw out money more often. A potential downside is that you typically cannot lock-in your interest rate or obtain full underwriting approval on your permanent loan until 90 days or less before home is complete.

Construction-to-Permanent Loan

With a construction-to-permanent, or “one time close,” loan you finance the construction of your home and the permanent financing with a single loan. In this type of a transaction the lender releases the money to the builder, contractor or other authorized suppliers as the phases of the construction are complete. The upside of this type of loan is that you know the details of your permanent financing up front. The downside is that these loans may be more limited in the number of times you can draw money to pay builders and contracts. It can also be more difficult to change your loan amount due to cost overruns.

Renovation Loan

If you see the home of your dreams, but it is a fixer-upper, a home renovation loan may be the right solution. A home renovation loan is based on the value of your home after the renovation is complete. This means you are borrowing against the future equity of your home and not just its current value. This may be a good option if the renovations are likely to increase the value of your home and/or reduce the long-term costs of the home.

Home Equity Line of Credit (HELOC)

A HELOC is a line of credit secured by your home based on the current equity of your home. A HELOC may have lower closing costs than a traditional construction loan. Another upside is that most banks only charge interest on what you draw, or use, from the HELOC and not from the total amount approved. A potential downside is that rates for a HELOC are often variable and can increase throughout the life of the loan.

Lenders at RCB Bank are happy to help answer questions even if you are not a customer. Give us a call or visit our online Mortgage Center.

Opinions expressed above are the personal opinions of RCB Bank personnel and meant for generic illustration purposes only. For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB. With approved credit. Some restrictions apply. RCB Bank is an Equal Housing Lender and member FDIC. RCB Bank NMLS #798151.

If you are an active or retired United States military service member, you can likely get help buying or refinancing a home. The Department of Veteran Affairs (VA) Loan helps current and former military members get better mortgage terms than you would with a private lender loan.

Eligibility Requirements for VA Home Loans

You may be eligible for a VA-backed purchase loan if the following three requirements listed below:

• Qualify for a VA-backed home loan Certificate of Eligibility (COE). Your COE is based on your service history and duty status. If you are currently active, you will need to show you served for 90 continuous days during wartime or 181 days during peacetime. If you are a veteran, your eligibility will depend on when you served, for how long and under what circumstances you exited the military. Click here for a full list of COE requirements for veterans. You are not required to have your COE to apply for a VA loan. Most lenders are able to pull your COE through the VA’s automated system.

• Meet the VA—and your lender’s—standards for credit, income and other requirements. A VA Loan is the only loan that does not require student loans deferred over one year to be included in the debt–to-income ratio, which is used by lenders to determine how much you can afford to borrow.

• You will live in the home you are buying with the loan. The VA developed occupancy requirements to ensure that VA loans are for primary residences only. Second homes and investments properties do not qualify for a VA loan. Homebuyers have 60 days to occupy the home after the loan closes, but the VA can extend this limit if you are on active duty or preparing to separate from service. A spouse or dependent child of an active service member also satisfies the occupancy requirement.

VA Loan Benefits

• 100% Financing – The VA guarantees this loan, potentially allowing you to finance the entire purchase price of the home. Nearly all conventional and FHA loans require the loan-to-value to be below 100%.

• No Monthly Mortgage Insurance Costs – Most loans with less than a 20% down payment require you to pay for monthly mortgage insurance. While there is no monthly mortgage insurance, there is a one-time funding fee, based on your eligibility and down payment. You may also be exempt from the funding fee – talk to a lender to find out.

• You Can Have Two VA Home Loans at a Time – VA does allow you to purchase another home if you are choosing to move prior to selling your current VA-financed home. It depends on how much entitlement you have left from the previous purchase and the loan limits in the area where you are buying your new home.

RCB Bank is proud to offer a VA loan benefit to our active duty service members and veterans. We can help you determine your eligibility and qualifications. We will walk you through the process from start to finish. Lenders at RCB Bank are happy to help answer questions even if you are not a customer. Give us a call or visit our online Mortgage Center.

Sources

Eligibility Requirements For VA Home Loan Programs | Veterans Affairs
Chapter 6 Home Loan Guaranty – Office of Public and Intergovernmental Affairs (va.gov)

Opinions expressed above are the personal opinions of RCB Bank personnel and meant for generic illustration purposes only. For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB. With approved credit. Some restrictions apply. RCB Bank is an Equal Housing Lender and member FDIC. RCB Bank NMLS #798151.

Not every state requires home inspectors to obtain a license to do home inspections. Before you hire someone, check the home inspection requirements in your state. Your real estate agent will likely recommend a few inspectors, but you should call and interview them before hiring. Ask for references and a sample inspection report. Find out if they are bonded and insured. Also, examine their website and read reviews on Google, Yelp and Angie’s List™.

Inspections should be thorough with final reports often 25-80 pages long. Key areas that should be included are structural components, exterior features, electrical, plumbing, heating and cooling systems, insulation and ventilation, fireplaces, roof and crawl space. Don’t be afraid to ask questions and insist these areas be examined before they turn in their final report. Most home inspections cost between $350 and $600. If they ask for significantly more or less, that may be a red flag.

Know Your Home Inspection Options

Depending on the home’s age and condition, you may want to perform additional inspections. For instance, properties that do not have access to public sewer systems should have the septic system inspected. Similarly, a home that is not connected to public water should have the well and water tested. A pest inspection to check for termites or other wood destroying insects is also valuable. While all of these inspections may cost money up front, they may save you thousands of dollars in future repairs.

Understand the Benefits of Home Inspection

A thorough and professional home inspection allows you to examine any red flags before you decide to purchase a home. Sewer and drainage issues, such as standing water in the yard, erosion and heaved walkways may indicate the need for expensive fixes in the future. Check to see if the home is in a flood zone and look closely for any water damage or mold. Find the source of the mold or water damage and assess the costs to repair it before making a decision to buy. Foundation and electrical issues are also red flags in any inspection. Electrical issues may increase the chance of fire and major foundation issues may cost up to $10,000 to repair.

Negotiate Repairs that Protect Your Home  

If you feel confident in the results of the inspections and are ready to move forward, another round of negotiations will likely occur to discuss fixes or buyer/seller cost responsibilities. How these negotiations play out depends on the issues discovered during the home inspection. Remember, very few inspections are perfect. You may ask the seller to repair the issues before closing, however sellers are not always motivated to have high-quality work done. Instead, you may want to ask for a price reduction for repairs. You may also ask for a home warranty to cover the first year in case you need to repair the 25-year-old water heater or other appliances. Work closely with your realtor to determine how to approach repairs.

Lenders at RCB Bank are happy to help answer questions even if you are not a customer. Give us a call or visit our online Mortgage Center.

Opinions expressed above are the personal opinions of the author and meant for generic illustration purposes only.  For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB. With approved credit. Some restrictions apply. Equal Housing Lender, Member FDIC. RCB Bank NMLS #798151.

What is Escrow?

As a homeowner, you are responsible for expenses beyond your mortgage payment such as property taxes, homeowner insurance and mortgage insurance. Put simply, an escrow account is set up by your lender and helps you budget for these expenses by including them in your monthly mortgage payment.

How Does Escrow Work?

First, your lender adds up your additional home-related costs outside your mortgage payment, including property taxes, homeowners insurance, mortgage insurance and flood insurance. Then, they divide the total cost of these payments by 12 months and add it to your monthly mortgage payment.

With an escrow account, you make one monthly payment that includes your mortgage principle and interest, plus a percentage of your insurance and tax expenses. Every time you make a mortgage payment, your escrow account grows. When insurance and tax payments are due, your lender uses the money in your escrow account to pay those bills.

Is an Escrow Account Required?

Most lenders require escrow accounts on mortgages where you pay less than 20 percent down. Your escrow account is set up at closing and allows you to pre-pay the required insurance and taxes for the following year.

If you put more than 20 percent down and decide not to open an escrow account, you will need to pay your property taxes and insurance premiums as lump sums. Depending on the value of your home, these payments can cost several thousand dollars each year. Make sure to budget for these costs so they do not catch you by surprise.

Escrow Management: Can my payment change over time?

Yes, if there are changes in insurance costs and taxes, your escrow payment will also change.

Your lender will review your escrow annually. The review looks at updated taxes and insurance costs to ensure the amount paid into the account is enough to cover costs. If costs have decreased, due to a change in insurance for example, there may be an overage and you will be issued a refund. If costs have increased, you will be required to make up the difference.

There are two ways to manage escrow payments if costs increase: 

1. Pay the difference in one lump sum. Your full payment covers the past payments and brings your account to balance. An increase in monthly payments is still necessary to cover the increased costs in the future, but you will not have to pay the shortage in future payments.
2. Divide and pay the amount over the next 12 payments. Paying back your shortage over time will increase your monthly payment because you are paying the shortage plus the increase in costs over the next year. This option will increase your payment by twice what the previous option would increase.

Financially Fit Tip: Shop Around for Insurance

To reduce how much your escrow fluctuates from year to year, review your homeowner’s policy and insurance plans. It is always a good idea to comparison shop and request quotes. If you find a better deal, contact your lender to update your escrow account information.

Lenders at RCB Bank are happy to help answer questions even if you are not a customer. Give us a call or visit our online Mortgage Center.

Opinions expressed above are the personal opinions of the author and meant for generic illustration purposes only.  For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB. With approved credit. Some restrictions apply. Equal Housing Lender, Member FDIC. RCB Bank NMLS #798151.

It is the season for giving thanks, so why not give back to your home. With these inexpensive updates, you can increase the resale value of your home and create a space you love even more.

Break Out the Paint

A little bit of paint can go a long way. While it is expensive to replace kitchen cabinets, sanding and painting them costs much less and can make the room feel brand new. The same goes for other rooms in your home. Just remember that neutral colors are better for resale value because they appeal to the most people. Paint can also refresh your old front door and add a pop of color to your house.

Bathroom Basics

There are plenty of ways to update your bathroom without breaking the bank. Bathtub looking a little worn? Paint it with epoxy. This gives the tub a fresh look and immediately improves the look of your bathroom. You can also replace outdated fixtures such as the sink and bath tub faucets to add a fresh touch. If you have old brass fixtures, a bottle of brass darkening solution can give them an antique look for less than $20.

Shine a Light

Every room in your house can benefit from new light fixtures. The first step is deciding what areas need an upgrade. Take an inventory of your lights and choose which ones to replace based on their positive impact.  A new chandelier above your dining room table adds a focal point to the room, while adding track lighting to a living room creates ambience and focuses attention on the furniture. In the kitchen, adding track lighting to the bottom of the cabinets makes tasks easier and adds a sophisticated finish. Just remember to choose something that reflects your style and matches the other lighting in the house.

Curb Appeal

You don’t have to hire a professional landscaping company to give your outdoor space a fresh look. If you already have patio furniture, buy new all-weather pillows to refresh the space. Brighten up a sidewalk or pathway with wire-free battery powered lights. Not only will it make the path safer, it is warm and welcoming. Other simple landscaping tasks include adding a border or edging material around your garden beds, building a fire pit or planting inexpensive perennials.

No matter what home improvement projects you choose, there is a simple and inexpensive way to make old spaces look new. Not only will you enjoy the updates now, they can also improve the resale value of your home in the future.

Opinions expressed above are the personal opinions of RCB Bank personnel and meant for generic illustration purposes only. For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB. With approved credit. Some restrictions apply.  RCB Bank is an Equal Housing Lender and member FDIC. RCB Bank NMLS #798151.

Understanding Closing Costs

Now that you have found the perfect home, it is time to tie up all the loose ends and finalize the sale. Part of this process is to pay your closing costs. Closing costs can be a surprise, as they are more than most buyers expect, especially first-time homebuyers. With a good banker and real estate agent on your side, you can better understand and prepare for these costs. So, what is included in your closing costs?

What’s Included in Closing Costs?

Closing costs can be made up of multiple items. Costs from the lender may include origination fees, points, underwriting, processing, appraisal and a credit report, among other fees. These costs can vary from lender to lender and depend on several factors, but generally cost between $1,000-$6,000. Fees from the title company, such as a closing fee, title insurance, abstracting and the survey, can range between $1,000-$5,000 depending on the title company, state and individual transaction details. There will also be money needed at closing for your prepaid items. These consist of prepaid interest from the day you close through the end of the month, one year of homeowners insurance, as well as reserves deposited into your escrow account for taxes and insurance. Realtor fees are also included in closing costs. The exact amount varies from company to company, but generally they earn about 6%.

Know the Market

In the right market conditions, you may be able to get some or all of your closing costs paid for by the sellers. If homes aren’t selling as quickly or the market is slower, you have a stronger chance of the seller taking on some or all of the closing costs. In a market where houses are selling quickly and there are multiple bids on a property, the chances are slim that a seller will take on closing costs. Certain loan types as well as down payment programs will allow or limit the amount the seller can pay in closing costs.

Homeowner’s Insurance

While your real estate agent or banker may have a company they recommend to use for homeowner’s insurance, you should shop around and compare prices. Often, you can get a better deal or bundle your car and home insurance for savings.

Buying a house is a complicated process, but the more you know about closing costs, how much they cost and whether  you can get any of them paid for by the seller can make the process that much easier.

Opinions expressed above are the personal opinions of RCB Bank personnel and meant for generic illustration purposes only. For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB. With approved credit. Some restrictions apply.  RCB Bank is an Equal Housing Lender and member FDIC. RCB Bank NMLS #798151.

Even if you have student loan debt, there are viable paths to homeownership. The process is easier if you understand debt-to-income ratio, the importance of your credit score and the possibility of refinancing your student loans.

Understand your Debt-to-Income Ratio (DTI)

To determine your debt-to-income ratio your lender divides all your monthly debt payments by your monthly gross income. Debts may include student loans, auto loans, credit card debt, child support payments and your potential mortgage payment. For example, if you make $3,000 per month and owe $1,100 in debt per month, your debt-to-income ratio is roughly 37% ($1,100/$3,000 = 36.667). Depending on the lender, they will likely want to your debts to be less than 45% of your income.

If your student loans are in deferment, the mortgage lender often considers 1% of your total student loans as the monthly payment. However, if you have a document from the student loan lender that indicates you will be on an income-based repayment plan or will pay less than the 1% amount, your mortgage lender may adjust the monthly debt amount.

Increase your Credit Score

Before you apply for a mortgage, you should check your credit score with Equifax, TransUnion and Experian. Generally, if your credit score is below 640, building up your score before you apply for a mortgage can help. One thing that can impact your credit score is your outstanding credit card balance in relation to your card limit – known as credit utilization. When you pay down credit card debt, it helps improve your credit utilization amount. Other ways that may improve your credit score include paying your bills on time, asking for higher credit limits and disputing any inaccuracies in your credit reports.

Refinance Your Student Loans

Another way to lower your DTI ratio is to refinance your student loans and get a lower monthly payment. If you have a strong credit score and meet the refinance qualifications, you may get a lower interest rate on your student loans, which usually means a lower monthly payment. However, you should talk to your mortgage lender before refinancing. Refinancing does appear as new debt on a credit report and may negatively impact your credit score in the short-term.

Even if it takes a little longer than you expected, you may still fulfill your dreams of owning a home. Talk with your lender to find out what you need to do to get started.

I am here to help, even if you are not an RCB Bank customer. You can find my contact information below.

Opinions expressed above are the personal opinions of RCB Bank personnel and meant for generic illustration purposes only. For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB. With approved credit. Some restrictions apply.  RCB Bank is an Equal Housing Lender and member FDIC. RCB Bank NMLS #798151.

Do not assume that just because you are self-employed you can’t get a mortgage. While there are different requirements, you can still work with your lender to buy the home of your dreams.

First Steps

A good way to prepare for the mortgage application is to improve your credit score. Paying off consumer or credit card debt should be a top priority. Banks also like when people who are self-employed have cash reserves to pay the mortgage for six to 12 months. A larger down payment of 10-20% may also offer lenders assurance when applying for a mortgage.

Documentation

Your biggest hurdle to getting a loan when self-employed may be income verification. Since your tax return likely has significant deductions, it may not show the amount of income needed to qualify for a mortgage, you will need additional documentation to show your banker. Your banker may ask for proof of any debts or assets you own, your business taxes for the last two years, earnings statements, savings and retirement balances and profit and loss statements may be required when you apply. Many lenders may also want to see that you have been in business for two years or more and have a low debt-to-income ratio.

Ways to Plan Ahead

• Remember to keep your business and personal finances separate. This will make it easier for the lender to evaluate your liabilities and examine your business profit and loss.
• If you have trouble getting a mortgage on your own, a co-borrower may improve your chances for approval.
• Do not be afraid to call and ask your mortgage lender questions about how to make the process easier. Even if you are not initially prepared to get a mortgage, they can talk you through the process and make suggestions as you prepare to buy.

If you are self-employed, getting a mortgage may be a challenge. This does not mean you cannot get a mortgage, it simply means you may need to prepare differently to buy a home.

Opinions expressed above are the personal opinions of RCB Bank personnel and meant for generic illustration purposes only. With approved credit. For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB. Some restrictions apply. RCB Bank is an Equal Housing Lender and member FDIC. RCB Bank NMLS #798151. 

Do you want to renovate a home after buying? Are you considering building a new home? In these situations and many others, you will need a construction loan before you start a traditional mortgage. Depending on your situation, different loans are required.

Construction to permanent

With a construction to permanent loan the lender releases money to the builder as phases of the construction are completed.

Upside: Once the build is complete, the loan converts to a standard 15 or 30-year mortgage.

Downside: You have to lock in the interest rate at the beginning of the process. It can take a year or more to build a home and interest rates could be lower by the time you actually move in.

Construction only

Another way to finance the construction of your home is with a stand-alone construction loan. With this loan type, the homeowner take two loans. The first loan finances the construction of the home and the second refinances the construction loan into a long-term mortgage.

Downside: Since you obtain two separate loans, you pay two sets of closing costs and go through multiple loans applications and closings.

Upside: If you want to shop around for mortgage options instead of being locked into one lender’s options, you can secure a lower interest rate.

Renovation construction loans

These loans are available to people who want to do a renovation, but do not have the money to finance it themselves. You have many options to pay for home improvements, including personal loans, lines of credit or government insured loans.

Upside: Renovations can increase the value of your home or reduce your costs in the long-term. Bathrooms, new insulation, kitchens and finishing basements all add value to a home.

Downside: The improvement in home value may not justify the cost of renovations. There is also a chance renovations will cost more or take longer than you expected.

We are to here to help, even if you are not an RCB Bank customer. Connect with a local RCB Bank lender to get answers to your lending questions.

Opinions expressed above are the personal opinions of the author and meant for generic illustration purposes only. With approved credit. Some restrictions apply. RCB Bank is an Equal Housing Lender and member FDIC. RCB Bank NMLS #798151.

If you are considering buying a foreclosed property, it is good to familiarize yourself with the process. There are typically three times during this process when it is possible to buy the property: pre-foreclosure, at auction and after the foreclosure.

What is foreclosure?

A foreclosure is the process where a bank or financial institution takes ownership of a property due to a variety of reasons, but most commonly because of lack of payments on a loan.

Buying pre-foreclosure

It is possible to buy a home before the foreclosure is finalized and the homeowner has vacated the property. The bank is not involved in the sale yet and allows investors to make the homeowners an offer on the home. The benefit is that the buyer can inspect the home and get relevant details before purchasing. The seller also gets a chance to sell the home quickly and without it affecting their credit rating as much. If the sellers do accept your proposal, be prepared to close quickly. You must complete the sale before the lender puts the home up for auction.

Buying at Auction

Once the legal process is complete, the foreclosed property is sold at a public auction to the highest bidder. This process is completed in-person or online, and you are required to register if you want to bid. If you win the bid, you generally have to pay in full immediately after the auction. The bidding generally opens with an automatic starting price of the amount owed on the property.

To buy a foreclosure at auction, there are some things to keep in mind:

1. Do your research — When you buy a foreclosure at auction, you do not receive any guarantee that the property is free of liens or encumbrances. This means you could potentially buy a property that has claims against the property, such as a tax debt. Do a title search on the property you are interested in to make sure you can afford any additional costs. Title searches can be done at the county courthouse, or a title company can run a title for you for a fee.
2. Condition – Since the property belongs to the homeowners up to the point of foreclosure, you are not likely to get a chance to see inside the property. Look closely at any available pictures and drive by the property to inspect the exterior before the auction.

Buying post-foreclosure

Post foreclosures or real estate owned properties are those that did not sell at auction. To try and cover their loss and fees, banks will sell the properties through real estate agencies. The properties are generally sold “as is” and may need repairs. This makes the home inspection essential since you will pay for any repairs. It is also smart to get an appraisal to ensure the bank price is fair.

Buying a foreclosure requires a little more research and knowledge of the process, but armed with that knowledge you can often get a great deal on your next home. Connect with a local RCB Bank lender to get answers to your lending questions. Give us a call or visit our online Mortgage Center.

Opinions expressed above are the personal opinions of RCB Bank personnel and meant for generic illustration purposes only. RCB Bank is an Equal Housing Lender and member FDIC. RCB Bank NMLS #798151.

Spring has historically been the busiest time of year for the real estate market. Maybe it’s the brighter weather, greener earth or the sweet smells of blossoms blooming that stir a desire to move. Whether you are buying or selling your home, there are several ways to spring clean your finances to help improve your credit or help you get a better interest rate on your mortgage.

Consider refinancing your student loan debt.

Student loans can have high interest rates, and are frequently set up on a repayment plan based on your current income. In the case of an income-based plan, you are normally paying interest (and maybe not all the interest you accrue on a monthly basis). Some loan programs require a bank to count a percentage of the student loan balance toward your monthly debt if there is not a scheduled payment showing on your credit report. This percentage is typically more than your required payment, which increases your debt-to-income ratio and can potentially cause you not to qualify. Amortizing your loan and setting a specific repayment time will pay your student loans off over time and may boost your credit as you pay down the balance instead of it increasing due to unpaid interest.

Lower your debt-to-income ratio.

Your debt-to-income ratio is an important factor in mortgage qualification. If you have multiple credit cards payments or high interest loans, your monthly payments can be quite high. If you are able to consolidate your credit card debt or loans into one payment and lower your overall monthly cost, then you can lower your debt-to-income ratio as well.

Limit credit inquiries.

When you apply for credit, e.g. credit card or loan, the lender generally does a hard inquiry or “hard pull” on your credit. These hard inquiries may hurt your credit score, especially if you allow several of them within a short time span. When you are shopping for a mortgage, the inquiries from banks or mortgage companies made within a 14-day period should only count as one hard hit. This should not affect your credit score dramatically. It is when you are applying for a variety of credit types (car loan, furniture store, credit card, etc.) in a short time that it may hurt your credit score.

In contrast, when you check your own credit score, it is considered a soft inquiry and does not affect your credit score.

There are many ways to improve your credit, but most are going to be situation dependent. A trusted mortgage lender will be able to help you and offer guidance on how to improve your credit score. This may take a few months to a year, or it could be as quick as a few weeks depending on your personal circumstance.

Opinions expressed above are the personal opinions of RCB Bank personnel and meant for generic illustration purposes only. With approved credit. For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB. Some restrictions apply. RCB Bank is an Equal Housing Lender and member FDIC. RCB Bank NMLS #798151. 

A mortgage is one of the most expensive and long-term commitments you will make in your life. So how can you both save money and take years off your loan? It’s actually pretty simple. If you pay just a little extra on your mortgage each month or year, you will owe significantly less over the life of the loan.

Although most borrowers know their home is a valuable asset, they often don’t consider how much interest adds to their overall cost. Your mortgage is amortized, meaning you pay regular installments on principal and interest over the specified period of time. Every time you pay your mortgage, interest costs decrease and the principal increases. If you pay nothing extra on the mortgage, the total amount you owe over the life of the loan will not change. However, pay a little extra and you can take years off your loan and save thousands of dollars in interest.

Let’s look at this closer. If you get a 30-year loan for $250,000 and it accrues 4% interest per year, you will end up paying $179,674 in interest over the life of the loan. This is a big number, but one you can reduce by budgeting some extra money for your mortgage.

Using the example I’ve just described, the monthly mortgage payment is $1193.54 per month. If you can make one extra mortgage payment per year, you can save over $28,000 in interest over the life of the loan! Make it a Christmas present and pay a little at a time or make one lump payment at the end of each year. Paying just a little extra on your mortgage is the gift that keeps giving.

The more knowledge you have about the mortgage process, available loan options and your individual qualifications, the more satisfying your homebuying experience will be. Connect with a local RCB Bank lender to get answers to your lending questions. Give us a call or visit our online Mortgage Center.

Opinions expressed above are the personal opinions of the author and meant for generic illustration purposes only.  The monthly payment calculation expressed above is not for any specific loan type and is meant for generic illustration purposes only. For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB. With approved credit. Some restrictions apply. Equal Housing Lender, Member FDIC. RCB Bank NMLS #798151.

If you are preparing to buy or refinance a home, take a look at your VA Loan option, which offers lower out-of-pocket financing than traditional lending options. Here are five benefits of VA Loans.

No. 1. 100% Financing

The U.S. Department of Veteran Affairs (VA) guarantees this loan, allowing you  to finance the entire purchase price of the home. Nearly all conventional and FHA loans require the loan-to-value to be below 100%.

No. 2. No Monthly Mortgage Insurance Costs

Most loans with less than a 20% down payment require you to pay for a mortgage insurance premium (for FHA loans) and private mortgage insurance, commonly referred to as PMI, for conventional loans.

While there is no monthly mortgage insurance, there is a one-time funding fee, which ranges from 1.5% – 3.3%, based on your eligibility and down payment. You may also be exempt from the funding fee if you were awarded a service-related disability.

You are also able to roll your funding fee into the loan to help keep your out-of-pocket expenses lower at closing.

No. 3. More Flexible Underwriting Standards

A VA Loan is the only loan that does not require student loans deferred over  one year to be included in the debt–to-income ratio, which is used by lenders to determine how much you can afford to borrow. Also, a VA loan allows for higher debt ratios than other loans like FHA, conventional and rural development.

No. 4. You Can Have Two VA Home Loans at a Time

VA does allow you to purchase another home if you are choosing to move prior to selling your current VA-financed home. It depends on how much entitlement you have left from the previous purchase and the loan limits in the area where you are buying your new home. Your mortgage lender can help you calculate your entitlement and qualification.

No. 5. VA Jumbo Option Available 

In most counties today, the maximum loan limit for conforming conventional and VA loans is $484,350. However, there are certain counties where the VA maximum loan limit exceeds $484,350; these loans are known was VA Jumbo loans. These amounts are current as of the time of writing this article. Most Jumbo loans require 20% down payment; however, VA loans do not. Depending on your eligibility, you may be able to pay a 10% or less down payment.

You can learn more about eligibility requirements at www.benefits.va.gov. Search VA home loans.

When it comes to obtaining a VA Loan, you want to work with a qualified VA mortgage lender.  RCB Bank is proud to offer a VA loan benefit to our active duty service members and veterans. We can help you determine your eligibility and what you qualify for. Plus, once you start the loan process, we’re here to walk you through start to finish.

Connect with a local RCB Bank lender to get answers to your lending questions. Give us a call or visit our online Mortgage Center.

Opinions expressed above are the personal opinions of the author and meant for generic illustration purposes only.  For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB. With approved credit. Some restrictions apply. Equal Housing Lender, Member FDIC. RCB Bank NMLS #798151.

There is a lot of incorrect information out there that may persuade you not to pursue getting a home. Before you run in fear, talk to a lender first about your concerns, so we can help you know what is truth or myth.

Myth #1: You have to have a 20% down payment in order to get a mortgage – WRONG.

There are many down payment options. For instance, if you are a veteran, or buying in a rural location, you could potentially get into your new home with little to no down payment.

Several first-time homebuyer loan options start with a 3% down payment, and Federal Housing Administration (FHA) offers financing options starting with a 3.5% down payment.

With all of these down payment options, homeownership may be more BOOlievable than you think.

Myth #2: Being Pre-Qualified is the same as being Pre-Approved – WRONG.

Pre-qualification is based on un-verified information. This is an initial look at your application to make sure there are no major red flags that may prevent you from getting a mortgage. For example, a pre-qualification may use an estimate of your credit score and compare your income with your debts to see if you can support a mortgage payment. The pre-qualification process is quick and is based on information you provide to your lender. A pre-approval is a more extensive process where the lender uses verified information (e.g., your credit report and pay stubs) to determine which mortgage you actually qualify for.

Without a pre-qualification or pre-approval, home shopping may become a frightfully batty experience.

Myth #3: Shopping around for lenders will hurt your credit – WRONG.

Multiple inquiries can hurt your credit, but FICO allows for rate shopping by grouping all similar inquiries made within a 30-day timeframe as one hard-hit. This allows you to shop around as long as it is within 30 calendar days.

When shopping lenders, be sure to ask what fees they charge, what the interest rate and annual percentage rate (APR) are, and if you aren’t putting 20% down, what is the cost for private mortgage insurance (PMI).

Don’t be spooked by misinformation about mortgages. Talk to a lender and get the truth. I’m here to help you have a FANGtastic homebuying experience, even if you are not an RCB Bank customer. Connect with a local RCB Bank lender to get answers to your lending questions. Give us a call or visit our online Mortgage Center.

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Obtaining a mortgage requires a lot of documentation, multiple forms, financial records, third-party paperwork; not to mention multiple layers of inspection to verify your information is accurate. Financial changes during your loan process can invalidate paperwork and delay your loan closing. Here are four ways to avoid delays in the loan process.

No. 1: Inform lender of a job change ASAP.

You submit pay stubs and W2’s to your lender, but, right before closing, your lender may request employment verification from your employer. If your job or income status changes, this can potentially create a holdup in the loan process; or worse, your loan may be denied, even if you were pre-approved. A job change requires updated documentation and approval verification. Some jobs have a probationary period, which too may affect your loan approval process. If you are planning a job change, let your lender know as early as possible as this can also help you avoid delays.

No. 2: Resist increasing debt.

A few days before closing, your lender runs a final credit check to check for new debt. If you open a new credit card, finance new appliances or furniture, buy a car, co-sign on another loan or take on more debt, new documentation is required. Resist the urge to make big purchases during your loan process. New debt may affect your loan qualification.

No. 3: Avoid big financial changes.

Most lenders require up to two months of bank statements for proof of funds used for your home transaction. Changing banks during your loan process may cause a delay in obtaining the necessary statements. Moreover, any large deposits made into your account need explanation. Most loans will allow a gift, but these funds require additional documentation signed by you and the person making the gift.

No. 4: Keep credit card balances low.

A large portion of your credit score reflects your credit utilization. Keeping credit card balances under 20 percent of your available balance helps your credit score. When it comes to your mortgage, your credit score helps determine both your interest rate and mortgage insurance (if required). A higher credit score helps you qualify for better rates, saving you money over the life of your loan.

Before you make major financial changes, talk to your lender first. This will help you avoid delays or setbacks during your mortgage process.

We are here to help even if you’re not an RCB Bank customer. Connect with a local RCB Bank lender to get answers to your lending questions.

This article is published in Value News, November 2018 Issue, valuenews.com.