Tis the season of savings—or so they say. While it’s true that some of the best retail deals of the year are happening right now, some would argue that this is the season of spending. As such, you might be inclined to believe that buying a house is completely out of the question at this time of year, but think again! Homeownership is possible and can be affordable for people of all kinds of financial backgrounds. Take a look at these five tips for making a home purchase affordable and see if your dream of homeownership is possible this holiday season.

Consider a different neighborhood

So you’ve got your dream neighborhood picked out and you can’t stop thinking about it. You can’t imagine living anywhere else. You’re convinced that it’s perfect in every way—except for the price tag. When you’re that invested in a particular neighborhood, it’s tempting to enter a bidding war where you either agree to pay a price that’s way over your budget or have to walk away empty-handed. If this sounds like you, you may want to consider searching for a home in a less expensive neighborhood.

This is where making homeownership affordable requires give and take. Those neighborhoods a little farther from downtown? Don’t write them off completely. You just might have to consider houses in other neighborhoods where location isn’t in such high demand. Although farther from your target location, these areas may just offer more land and a bigger house at a better value.

Save up for amenities

Amenities make for a great place to start when you’re making homeownership affordable for you. If considering a different neighborhood isn’t an option, it might be time to dial it back on your must-haves list. Expand your opinion on what’s acceptable. You may need to refocus your search for “the perfect home” to a search for a great home that has just what you need.

A great home doesn’t have to come with all the latest and greatest features. You may have to be willing to save up and make gradual improvements after you purchase the home. Some characteristics of residential properties that may increase the value of the home include brand new appliances, a finished basement, renovated kitchen and bathroom, new floors (carpet or hardwood), a big yard, and finished landscaping. Look for houses that don’t have these features and you’ll usually find that they’re more affordable.

Lower your utility bills

Let’s face it: Owning a home is expensive. Typical costs include your monthly mortgage payment, a down payment, mortgage insurance, property taxes, and utility bills that are usually higher than those for renters. This list doesn’t even cover all of the costs that some homeowners pay. And don’t forget that, once you buy a house, you give up the convenience of free maintenance that you had as a renter. All repair bills are now in the hands of your financial responsibility.

Nevertheless, there are plenty of options available that help you cut down the costs. Many states and utility companies have programs that help low-income residents pay for utility services. These programs include anything from energy and utility assistance to housing initiatives and more. One example of this is AT&T’s Access program, which provides home internet service to low-income households—some packages are as low as $5 a month! Get this: Some states even provide cell phones for low-income residents. It just goes to show that it’s possible to make homeownership affordable and income-qualified assistance programs for utility bills can help.

Check out FHA loans

Backed by the Federal Housing Administration (FHA), these loans are perfect for borrowers who are trying to make homeownership affordable. Only 3.5% of the total price of the home is needed for a down payment and borrowers can have a credit score as low as 580 to qualify. FHA loans are more flexible in credit, income, and down payment requirements, making them a secure choice for borrowers who might not qualify for conventional loans.

But, with FHA loans, you have to take the sweet with the sour. These loans require you to pay for two types of mortgage insurance—one is an upfront premium that’s rolled into the mortgage payment and the other is an annual premium that’s broken down into monthly installments. In addition, your desired home must meet minimum property standards and pass an inspection made by an FHA-approved appraiser.

Research other government assistance programs

Aside from FHA loans, if you’re on the hunt for affordability, there are many other assistance programs available that are specially made to help low-income residents reach their homeownership dreams. The U.S. Department of Housing and Urban Development (HUD), for example, offers many of these types of government-funded housing programs. Don’t let financial struggles keep you from living in a home that’s suitable for you and your family’s needs.

Don’t believe that homeownership is out of the question this holiday season. If you’re dreaming of owning your own place now or in the near future, take these tips to heart, learn about your options, and find what works best for you.

The post 5 Ways to Make Homeownership Affordable for You appeared first on Cardinal Financial.

So, Who Sets Mortgage Rates? Read On to Learn:

• What the Federal Reserve is and how it affects interest rates
• A description of the 10-year Treasury yield and its impact on rates
• The reason why mortgage interest rates are higher than the 10-year Treasury yield
• How your personal finances can impact your interest rate

What’s the Federal Reserve and How Does it Affect Rates?

You might have heard that the “Fed” sets mortgage interest rates but that’s not exactly true. The Federal Reserve’s policies impact rates, but do not have a direct effect on them. Here’s why:

• The Federal Reserve is the central banking system of the U.S. It works to maintain financial stability for the country and to minimize inflation rates.
• If the Federal Reserve wants to improve the economy, it can create policies to do so. One way they do this is by making it less expensive for financial institutions to borrow money. That means, borrowing money probably becomes less expensive for everyone.
• Of course, the Fed can do the opposite by making funds more expensive if they want to slow the economy down. The Federal Reserve doesn’t directly create mortgage rate changes. But, the interest rates they set for what banks charge each other has a strong influence. You’ll find out why this is important in just a minute.

What Role Does the 10-Year Treasury Yield Play?

Let’s start with why the 10-year Treasury yield exists. The Federal Reserve sells 10-year Treasury bonds (and bonds with other durations too) for $1,000 each, which can be purchased by investors. These investors are usually banks or other financial institutions. Basically, investors loan money to the government by purchasing a bond. In return, bondholders are guaranteed an interest payment every six months. After a decade of interest payments from the government, the investor is repaid the initial $1,000 invested; the principal.

Treasury bonds are viewed as one of the “safest” investments since the government has never failed to repay the promised amount. Even better, financial institutions and investors can sell Treasury bonds to others in a secondary market (and to fund the money they lend to others). This is where the “yield” of the 10-year Treasury bond comes in. But before we get into the details of Treasury bonds and their yields, here’s what you really need to know – in a nutshell:

30 year Mortgage interest rates tend to track the 10-year Treasury yield. When the yield goes up, so do mortgage rates. The opposite is true when the yield goes down.

Good with the basics? Go ahead and skip the rest of this section. We recommend picking back up in the “Personal Finances” section below. Are you a number-nerd or just a very curious human? Read on here…

The Secondary Market

The secondary market refers to the selling of pre-owned Treasury bonds by investors and financial institutions. The amount existing bonds are sold for determines the 10-year Treasury yield.

Low Yield Market

• When demand is high and Treasury prices rise, yields fall. That’s because someone buying a bond on the secondary market will have to pay more than the $1,000 face value, thanks to all the purchase competition.
• Of course, when you buy something at a premium price, you make less money by owning the bond (because you paid more for it). In other words, the financial yield on that bond is lower.
• Low yields on Treasuries mean lower rates on mortgages.
• Sure, investors make less money on lower-yield bonds. But, selling these bonds is easier, since lots of people want to buy them (ie: high demand).
• That means lending money overall is less risky. And interest rates always come down to risk. Less risk equals a lower rate.

High Yield Market

• When demand for Treasury bonds is low, investors can buy them at a discount.
• This situation is the opposite of the low yield market described above; when you buy a bond for less than face value, you’ll make more money by owning it (because you spent less when you bought it). In other words, the financial yield on that bond is higher.
• In the high yield market, selling bonds (and other loans) becomes more difficult. That’s all because of the low demand in this scenario.
• And that means the higher the Treasury yield, the higher the mortgage interest rate.

EXAMPLES:

Low Yield – You buy a handful of 10-year Treasury bonds from an existing bond owner for $1,100 each, instead of $1,000. You pay more for the bonds because many other investors are interested in them too. It’s the supply and demand relationship you probably learned about in Econ 101. High demand for Treasury bonds usually happens when investors think the economy might not be doing so well. This means that an investment with almost no risk – like a Treasury bond – becomes more attractive. Because of the higher price you paid for the bonds, you’ll make less money back when the government reimburses you for the face value of the bonds.

High Yield – You buy a handful of 10-year Treasury bonds from an existing bond owner for $900 each, instead of $1,000. You get this great discount because there aren’t many other investors interested in buying these bonds. (Those other would-be bond purchasers are probably buying more risky types of investments because the economy is doing pretty well). Because of the low price you paid for the bonds, you’ll make more of a profit when the government pays you back for the face value of the bonds.

All this buying and selling of 10-year Treasury bonds is referred to as the secondary market. The market selling rate gives us the 10-year Treasury yield.

Then Why are Mortgage Interest Rates Higher Than the 10-Year Treasury Yield?

Now that you have an idea of how “risk-free” treasury bonds influence mortgage rates, let’s talk about the mortgage-backed securities market (MBS). Mortgage-backed securities are issued by companies like Cardinal Financial. They contain mortgages Cardinal Financial lends, plus loans from other industry participants.

These bundles of home loans have additional risk when compared to Treasuries. Namely, “prepayment risk”. Here’s why:

• Remember, with 10-year Treasury bonds, one receives a fixed rate of interest for 10 years and then receives the initial principal investment back at the end of the 10 year period.
• Since mortgage-backed securities contain loans made to individuals for their homes, those individuals have the option to pay the loans back at anytime. The loan gets repaid whenever a mortgage borrower refinances, sells their current home, or just becomes able to pay their mortgage in full.
• If a loan gets repaid before the end of the mortgage term, the holder of the mortgage-backed security stops earning interest on the loan. That means less money for the loan holder.
• Early mortgage payments tend to increase and decrease at times an investor would not prefer. For example, when rates are dropping and the price of their mortgage-backed securities investment should be going up, it’s also the time when borrowers are more likely to refinance and return the principal.
• Conversely, when rates are going up and the price of the mortgage-backed securities investment is going down, borrowers are less likely to refinance and return the principal, thereby extending the period with lower mortgage-backed securities prices.
• Remember the “higher risk equals higher rates” thing? It comes into play here too. This “prepayment” risk results in higher rates associated with mortgage-backed securities as compared to Treasuries. That’s why mortgage interest rates are higher than the 10-year Treasury yield.

How Do Your Personal Finances Factor In?

Now that you know how general mortgage interest rates are set, it’s time to talk personal finances. Your income and financial history play big roles in the amount of risk a mortgage lender takes when they give you a loan. Just like with Treasury bonds, higher risk means a higher interest rate and lower risk means a lower interest rate.

So, how do lenders determine risk (and therefore, your rate)? These are a few basic factors:

1. Your credit score – Basically, the higher your credit score, the lower your interest rate is likely to be. Since your credit score tracks your financial history, a higher score tells the lender that your loan is less risky than a lower score.
2. Your monthly income as compared to your monthly debt – The more money you have leftover after paying your monthly bills, the less likely you are to skip a mortgage payment. This means that people with a higher percentage of leftover income (after paying debts) present a lower risk to lenders. And, you guessed it, that means a lower interest rate. The calculation of income compared to debt is known as the debt-to-income ratio.
3. Your down payment percentage – This one’s simple. The more of your house that you pay for up-front, the lower the risk to the mortgage lender – and the lower the rate. That’s because the financial burden on a borrower is higher than if they make a smaller down payment (say, 3%). On the other hand, someone who makes a larger down payment (say, 20%) faces less of a repayment load. So, higher down payments signal a higher likelihood of monthly mortgage payments (and less risk to the lender).
4. The length of your loan – The longer the loan, the higher the interest rate. That’s because, to lenders, more time waiting for repayment means more time for someone to default on their loan. Plus, money is worth less when paid back later because of inflation. So, longer loans are higher-risk.

The takeaways? Keep your eye on the 10-year Treasury yield if you want to track mortgage interest rates and focus on your personal finances for your lowest rate.

Interested in more mortgage info? Sign up for our newsletter. No spam, we promise. Just quarterly updates about home loans and homeownership.

The post Who Sets Mortgage Rates? Everything You Ever Wanted to Know appeared first on Cardinal Financial.

Buying a house with a friend (a.k.a. “co-buying” with your BFF) is becoming more and more popular among Millennials, the generation born roughly between 1981 and 1996. There are many reasons why people love to analyze Millennials, but for us, it’s that they’ve continued to make up the largest number of homebuyers in the market at 37%. This makes Millennials the generation to watch.

Which brings us back to co-buying. Why are they doing it? For starters, Millennials are buying a house with a friend as a way to overcome economic hurdles. On average, they owe quite a chunk of change—nearly $90,000 in overall debt (as of 2020). And if they’re trying to avoid becoming boomerang kids, working to pay off debt and afford living expenses results in very little money in their savings accounts. Not to mention the housing market has been a very competitive sellers’ market, making homes more expensive and bidding wars inevitable.

But, they’re also co-buying with their best buds for reasons rooted in trends. Remote work is a trend that’s been growing exponentially, even before the pandemic. Millennials are also shameless purveyors of the sharing economy, which allows them to enjoy access without ownership. Lastly, Millennials are known for putting off marriage and starting a family, but given all the economic hurdles we’ve listed, this trend is a conundrum of the chicken-or-the-egg sort.

So, we’ve covered some of the reasons why Millennials might be buying a house with a friend. Now let’s look at the pros and cons as well as some practical advice.

Pros to Buying a House with a Friend

1. Buying a house with a friend cuts the price of the home in half (or more, depending on how many friends go in). This means you can buy a house with less money saved up, which is perfect for Millennials.

2. Similarly, co-buying expands your opportunity since it gives you more buying power. With the added buying power of another homeowner, you’d have more homes available to you.

3. When you buy a house with a friend, you’re both able to start building equity sooner. This allows you to stake your claim in an appreciating real estate market earlier than you would’ve been able to alone.

4. It’s an investment you both can benefit from. When you’re ready to move on, you can rent it out for passive income while sharing landlord responsibilities.

5. And for the Millennials that buy a house with a friend instead of solo renting a studio apartment, it fulfills the desire for communal living while also reaping the benefits listed above.

Considerations When Buying a House with a Friend

Ah, yes. Buying a house with your bestie for the restie. Sounds like a forever sleepover and we’re here for it! Except, it’s a pretty weighty decision that comes with some serious considerations to ponder.

1. When you’re buying a house, you need to be completely open about your finances. This includes your credit scores and/or credit reports, how much cash you have available for a down payment, and what you’re able to spend on a monthly budget. We know you’re open with your friends, but are you prepared to be this open?

2. Do you know how you’ll share the property? If one of you contributes more to the down payment or the monthly payment, or lives in the owner’s suite, how are you going to split the ownership financially? This also impacts your finances when tax time comes and when you go to sell the property as you’ll have to decide who gets what share of the equity.

3. Get it all in writing. It’s more than just the mortgage: there are all kinds of expenses associated with homeownership. This includes taxes and insurance, maintenance and repairs, upgrades and remodeling, and HOA fees (if applicable), just to name a few. You and your friend(s) should sit down and write how you’ll share these costs as well as the process you’ll follow to make these decisions. Hey, no one said doing business with friends was all fun all the time.

4. What happens when things change? Not if; when. Because even though it feels like the way things are is how they’ll be forever, inevitably one or both of you will find a partner, change jobs, or be impacted by some other major life event. Or worse, there might be a falling out and one of you might want to move out. In any event, it’s smart to have a written plan for the future and make sure it covers legal and financial obligations for different scenarios.

We know you’re open with your friends, but are you prepared to be this open?

Summary

Millennials consider co-buying for many different, valid reasons. It can be difficult to plan for the next big steps in life when you haven’t even tackled homeownership. Thus, buying a house with your BF4L might make homeownership attainable when it otherwise wouldn’t be. However, it’s important to consider the possible risks, talk them over with your co-buying buddy, and craft a written agreement to make sure you have a plan for the future.

The post What You Need to Know About Buying a House with a Friend appeared first on Cardinal Financial.

Getting a home loan can seem complicated. But here’s the good news: you’re never alone. From your loan originator and underwriter to the home appraiser and insurance company, here’s a look at the 10 mortgage MVPs who play a part in the home loan process.

1. The Mortgage Lender

First things first. A mortgage lender is an institution that finances your mortgage: It could be an independent lender, a credit union, or a bank. It’s always best to shop around and find the right lender (and the right loan) that fits your needs. Many borrowers go with a lender that offers a low rate, but you can’t underestimate the value of a hassle-free online process that fits your lifestyle.

2. The Mortgage Loan Originator

Think of your mortgage loan originator as your personal guide through your home loan journey. From the very beginning, they’ll speak with you personally, help prepare your loan application and step you all the way through the process. Loan originators take the time to get to know you and your unique financial situation, so they can help fit the right loan to you. They’ll compile your financial documents (pay stubs, W-2s, tax returns, etc…) and coordinate with everyone throughout the loan process.

Home Purchase Process

3. Buyer’s Agent

Just like you can shop around for a lender, find the real estate agent that’s right for you! If you’re looking to buy a home, a real estate agent (or buyer’s agent) specializes in helping you find the right home for the right price. They’ll help you browse through home listings, tour homes that are on the market with you, help you write an offer, and negotiate with the selling agent when it’s time to buy.

4. Seller’s Agent/Listing Agent

The seller’s agent, as you can probably guess, represents the seller of a property. A seller’s agent, otherwise known as a listing agent, aims to sell a client’s home quickly and at the best possible price. Just as a buyer’s agent works on the buyer’s behalf, a seller’s agent represents the seller’s interests. Your real estate agent will work closely with the listing agent to negotiate on a fair price, as well as any post-inspection or repair request negotiations.

5. Home Inspector

As a buyer, you want to make sure your new home is safe and free of any major structural issues before you sign on the dotted line. That’s why you’ll hire a home inspector to perform a detailed inspection of the house, and provide a full report of anything in need of repair or replacement. If there are any issues—from major foundational problems to smaller, fixable ones like a cracked window—the inspector will note them in their report. You can then use the findings to either adjust your offer, ask the seller to make repairs, or walk away from the home. A home inspection is not a requirement, but it’s a common practice and a good idea to make sure you’re making a wise investment!

6. Home Appraiser

Before the deal is sealed, your lender will ask a third-party appraiser to determine the value of the home you’re purchasing. Appraisers are often local professionals who do research on the market and visit the home to assess its condition and value. If the appraiser finds that the home is worth less than expected, you might need to renegotiate the price or pull your offer.

7. Loan Processor

You’ve worked with your mortgage loan originator to create your application. Once it’s time to submit it, your loan processor will step in. A loan processor is like a fact-checker, who verifies where you work, your income, your financial documents, and helps get you a final loan approval, once you reach that point. If any of your documents are missing, incomplete, or incorrect, the loan processor will get in touch with you to straighten out any issues.

8. Underwriter

Once the loan processor is finished compiling all the necessary information, an underwriter will give your application a formal review. An underwriter is a licensed professional who will check your income, assets, credit history, debt, property details, and loan amount to evaluate the risk in giving you a mortgage. Once the home appraisal is complete, and the loan value matches up with the appraised home value, the underwriter can approve the loan for closing.

9. Insurance Company

Your home will likely be the most valuable thing you ever own, so take your time finding the right homeowners insurance that protects you, should the worst happen. It’s up to you to shop around for the best coverage and the best rates. If you live in an area that floods often, you might want to find a company that offers insurance packages against natural disasters, hail, rain, or wind.

10. Title Company/ Real Estate Attorney

A title company or real estate attorney (some states require buyers to use an attorney) can search through public records and make sure there are no issues that would get in the way of your home purchase. They look for things like liens against the property, overdue taxes, and zoning restrictions. Then the title company or attorney also facilitates scheduling your closing date and actual closing, making sure closing documents are executed, your new home’s title is filed, and that funds are distributed from buyer to seller.

What’s next?

Now that you’re acquainted with some of the MVPs of the mortgage process, where do you go from here? The best way to get started is to reach out to one of our experienced loan originators (You know, those nice people we told you about at the beginning?).

A Cardinal loan originator can help step you through the process, whether you’re looking to make new memories in a new home, or you want to refinance your current space. And if you’re ready to get going ASAP, you can always crunch the numbers on our mortgage calculator or refinance calculator!

What are some of the benefits of homeownership that you’ve heard about? Keep the conversation going on Facebook or Twitter!

The post 10 Key Players Involved in Getting a Mortgage appeared first on Cardinal Financial.

1. Pre-approval

What to expect:

To pre-approve you for a loan, we’ll check your credit and review your financial and employment history. It’s our goal to estimate what you might be able to afford and the loan amount you could realistically pay back.

What you’ll need

Be prepared to provide some basic information, such as your name and employment information. Feel free to have some key questions prepared so you can ask your Loan Originator (LO) while you have their attention.

Pre-approval tips

Remember this is just the beginning of the process, so keep an open mind and establish a good connection with your LO. They will be your main point of contact over the course of your loan.

2. Find the right home

What to expect

Let us help you find an expert real estate agent in your area at no additional cost to you. We have a network of highly rated real estate agents who have the experience and knowledge to help you find the right home. If you already have an agent, we can make that partnership seamless. With your permission, we’ll send your pre-approval letter directly to them and give them all the updates necessary to keep your file up-to-date as you search.

What you’ll need

A computer and an Internet connection. Most home buyers begin their search online where countless resources exist. You’ll also want to compile a list of wants and needs to map out your goals and manage your expectations—and communicate these to your real estate agent.

Home search tips

Be realistic about your search and remember that your LO and your real estate agent are there to help you and answer questions. Once you’ve chosen the right home, ensure that the purchase price on your pre-approval letter matches the offer that you are ready to submit for the house.

3. Gather info for application

What to expect

Here comes the paperwork—good thing most of it will be digital! We’ll need to obtain several different forms of documentation to get your loan paperwork ready. Most borrowers consider this the hardest part of the entire process because of all the documentation required. But, we work our hardest to make sure this part of the process runs smoothly and efficiently for you, however, your cooperation is crucial to close on time.

What you’ll need

If you are employed (not self-employed) you’ll need to provide us with the following files:

U.S. Individual Income Tax Returns (IRS Form 1040) for the two most recent tax years, including all schedules (the federal portion only). If you have not filed for either of the two most recent tax years, provide a copy of the Application for Extension of Time to File U.S. Income Tax Return (IRS Form 2350) and a copy of your most recently filed return. (Note that the Request for Transcript of Tax Return [IRS Form 4506-T] does not provide complete tax returns. You must provide complete tax returns to fulfill this requirement.)

For each current job you hold, provide pay stubs that cover the last 30 days and a Wage and Tax Statement (IRS Form W-2) for the two most recent tax years.

Application tips

Work closely with and respond quickly to your assigned LO to ensure that you move swiftly through the application process. Remember that, although this part requires a lot, all of this is necessary so that we can verify you are capable of making payments on your loan. Note that your employment status will determine the documents you’ll need to provide. Check out our complete list of mortgage documentation by employment type.

4. Secure your rate and lock your loan

What to expect

Once you’ve found your home and schedule a closing date, it’s time to find your optimal lock period. Each lock period has a different rate and price combination. We will consider the price implications of each lock time and take into account your best interest. At this point, we will also work with you to schedule your home appraisal and/or inspection. Once we’ve secured your rate and completed necessary scheduling, your loan will be assigned a Processor to get your loan to the finish line.

What you’ll need

The executed purchase contract.

Rate/Lock tips

Schedule your appraisal as soon as possible and start shopping for homeowners insurance. Do not open any other accounts or apply for credit. Doing so may impact your debt-to-income ratio (DTI) and may hurt your chances of closing on time. See our detailed list of mortgage dos and don’ts to set yourself up for success.

5. Processing

What to expect

Now that we have your most up-to-date documentation, your Processor will gather any remaining items and submit your loan to Underwriting. From there, we will issue your Conditional Approval Letter, your Processor will work out any remaining conditions, and they will partner with your agent so they know we are on track to close.

What you’ll need

Once your loan is final approved, you will need to schedule a closing appointment to sign the final documents.

Processing tips

Be sure to schedule your signing as soon as possible so that all parties can plan accordingly. Your cooperation will help ensure a timely closing!

6. The closing table

What to expect

Once you are ready to close and your closing appointment is scheduled, just show up and be ready to sign. Your closing package will be waiting for you to review with an attorney and/or notary.

What you’ll need

Your ID and the necessary funding to complete the transaction.

Closing tips

Practice your John Hancock. And don’t forget your ID!

7. Welcome home!

What to expect

Congratulations! You may now move into your new home. Expect lots of housewarming gifts, friendly smiles from the neighbors, and the warmth and excitement that comes with the beginning of a new chapter.

What you’ll need

We love to join our new homeowners in the excitement of moving in. Snap a photo of your move-in moment—whether that’s a selfie on your front porch, unpacking your boxes, or a shot of your home’s interior—send us the snapshot with #moveinmoment on social media for a chance to be featured on any one of our channels!

Move-in tips

Throw a housewarming party so your friends and family can see your new place. Introduce yourself to the neighbors. Don’t forget to send us your #moveinmoment!

The post 7 Steps on the Path to Homeownership appeared first on Cardinal Financial.

According to a 2016 Housing Wire study, the peak season for buying and selling homes begins in March. Sellers start thinking about ways to get their home ready and first-time buyers begin their research on homes and lenders. But for many first-time buyers, they’re not sure how to take out a mortgage, let alone what questions to ask to get them there. Luckily for first-time home buyers, we’re here to help, and we sought the expert advice from one of our own loan originators Shaun Dunphy. Here’s a list of first-time home buyer questions to ask your lender.

Cardinal Financial:

When a first-time buyer calls you, how does the conversation usually start?

Shaun Dunphy:

First, I’ll start out with some ice breakers to find out what they’re trying to do and what their goals are. If they tell me they have no idea what they’re doing, I say, “Well, you’re doing the right thing by coming to me and calling us.”

CF:

What are some other questions you ask a first-time buyer?

SD:

I’ll ask them what they’re trying to do, what are their goals, what is the purpose behind their desire to buy a house right now. That’s a good indication of where they’re at in the process. Then I’ll ask about their price point, which helps me start thinking about the right loan I can pair them with.

CF:

What are some other first-time home buyer questions to ask?

SD:

We often get asked, “What are the hidden fees?” And rightfully so. Because people want to know exactly how much it’s going to cost them. And there’s a lot of ambiguity around that until you actually begin the loan process with a loan originator. We’ll uncover those hidden things and we’ll tell you it’s not just about principal and interest—there are other fees associated with the loan process and then there’s the cost of furnishing a home and your utility bills, etc. Our competitors hide fees or they’ll call them something else. We don’t do that—it’s a clear cut, transparent conversation.

CF:

Can you tell us a little bit about the initial steps of the mortgage process?

SD:

First of all, I’d say, make the call. The worst thing you could do is not call us and just start the conversation. It’s my job to answer your questions and educate you on the process—if you didn’t have questions, I wouldn’t have a job.

1. We check your credit score. 2. We review your debt-to-income ratio and ask about your current income. 3. We ask how much you have saved up and how much you realistically want to put down as a down payment. From there, it’s pretty straightforward. I keep the communication lines open with my borrowers so they can reach me anytime because I remember what it was like when I bought my first house.

CF:

It sounds like business is personal for you.

SD:

Yeah, that’s how it is for all the loan originators here. I’m still living in my first home and, when I give borrowers advice, I speak from personal experience. I remember mortgages being a foreign language so I connect with them on a personal level and put myself in their shoes, which makes them feel more comfortable, like they’re not alone. My goal is to set realistic expectations for the borrower and help them make a smart financial decision so they’re not eating ramen every night. I treat my borrowers like they’re my family, like I’m putting my family into a home.

CF:

What are some other first-time home buyer questions to ask?

SD:

I think anything around our process is one of the smartest first-time home buyer questions to ask. Because Cardinal Financial is an online lender, people worry that we’ll lock their loan and never speak to them again. That’s not true. You have a loan originator and a processor talking to each other and talking to you the whole way through. I like sports analogies, so one way I like to explain it to borrowers is that I’m their main point of contact, like the quarterback, and the processor is like the running back communicating with me. Together, we get your loan to the finish line.

CF:

Can you tell us a little bit about the process after the initial steps?

SD:

It’s pretty straightforward. Our loan originators and processors are in constant communication so the process is streamlined. Where there are moving pieces, everyone is on the same page. Even our executives will step in and help with the loan sometimes. That’s how it is, though: We run the company like a family and everyone is working together to get the loan to close. Whatever it takes to carry the borrower home.

CF:

If you could give one final piece of advice to all the first-time buyers out there looking to start the mortgage process, what would it be?

SD:

I would say you’re not alone. If you’ve never done this before, the mortgage process is hazy and confusing. But that’s where I come in. It’s my job to make sure you sleep at night and don’t stress out. It’s my job to calm you down and answer your questions—you can never ask too many questions. I give out my cell number to my borrowers and tell them just to call me anytime. You know, mortgages can be stressful but it’s my job to make it a less-stressful process for them. And there’s a lot of mystery around mortgages, and with that there comes a fear of the unknown. But I like to think of us as the flashlight that guides you through the darkness.

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Crisp air, golden leaves, shorter days—all of nature’s signs show that fall is in full swing. For many, these signs of the approaching cold weather come with a desire to curl up and get cozy in the comfort of your own home. While this might be a natural impulse, the decision to purchase a home should be carefully calculated. Such a monumental choice deserves planning and preparation. This fall, in your search for a home to call yours, be sure to consider these helpful fall home purchase tips.

1. Get to Know Your Credit Score

Your credit score is a great place to start. Before you can get too deep into the search for a home, find out your credit score and keep it handy. This will determine what home financing options are open to you. If you need help understanding your credit score and how you can improve it, give us a call and we’ll be happy to share our expertise.

Here’s what you need to know about credit scores: The higher your credit score, the better. A credit score between 620–639 is generally acceptable to most mortgage lenders and may make you qualified for a USDA or FHA loan. A score between 640–720 is good and will expand your loan options. If your credit score is above 720, it’s considered excellent and should qualify you for just about any mortgage—not to mention lower rates. Typically, as your credit score increases, the number of loan options increases and the interest rates decrease.

2. Financial Stability is a Must

This recommendation might not come as a surprise to most people. It’s widely understood that, in order to purchase a home, you need to have money. Even if you qualify for a 0% down payment mortgage, you will still face various costs that are just part of the process. Additionally, lenders will review your financial situation to determine that you are stable, consistent, and responsible. At a basic level, lenders simply want to make sure that you can and will pay your mortgage. For these reasons, financial stability is crucial to home buying.

To help demonstrate financial stability, have a good amount of money in your savings account (at least enough to cover the cost of a down payment), pay your bills on time, and be honest about your finances. It’s in your best interest not to open any lines of credit, move large amounts of money, or close any bank accounts during the loan process. Movement like this may hinder your chances of making it to the closing table.

3. Employment Stability is a Must

Job stability goes hand-in-hand with financial stability. Job stability generally means your earnings have remained at a certain level for at least two years. If you are self-employed, you will be required to provide at least two years of bank statements and tax returns. Again, the goal is for your lender to see that you are stable, responsible, and have the income to make mortgage payments. The more stability you can prove, the greater your chances of getting approved for a loan.

4. Get Ready to Root

Renters: This is important. Your mobile lifestyle was great while it lasted, but maybe it’s time to settle down. Well, buckle in because purchasing a home is a long-term commitment. Before you put money down on a house, make sure it covers all of the must-haves on your list—the right neighborhood, the right location, the right school district, etc. Ask yourself “Can I see myself living here for the next seven years?” If the answer is yes, you’re one step closer to being ready to put down roots in that location. Want more information on how to navigate the transition from renting to buying? Read our guide to buying versus renting.

5. Map Out Your Wants vs. Needs

Who doesn’t love a good, old-fashioned pros-and-cons list once in a while? This fall, decide exactly what you are looking to get out of a home. Write down what you want to have and what you need to have. A family of five might be interested in a four-bedroom craftsman with a large backyard while a 30-year-old bachelor might be better suited for a two-bedroom condo. In addition to bedroom/bathroom combinations, you should consider other aspects of the home, such as acreage, the year it was built, distance from the nearest grocery store, and more. In this endeavor, be honest with yourself and be mindful of the possibility of your expectations clashing with reality.

6. Know What to Expect

As with most of life’s milestones, buying a home is a learning process. It’s common for borrowers to lack understanding of the path to homeownership. Some don’t realize the costly fees associated with a mortgage, others misunderstand the roles of the real estate agent and mortgage lender in the process. It’s not easy to know what to expect on your own, so frequent conversations with both your agent and your lender are in your best interest.

During the mortgage process, make sure you are available by phone or email so that your lender can get ahold of you when they inevitably need to communicate with you. Your cooperation will help the process move along nicely. And always remember that mortgage experts like ourselves are well-prepared and equipped to share our expertise and set accurate expectations so you can enjoy a smooth road to homeownership. This leads us to our next fall home purchase tip.

7. Give it Sweet Time

Patience is the key to sanity in the process of purchasing a home. Like setting accurate expectations, keep in mind that organizing your finances takes time, negotiating takes time, finding the right home takes time, and more. You can expect an average of 90 days for the total experience—from the moment you start seriously house hunting to the day your loan is closed and funded.

There are certain things you can control: Knowing what you want out of a house and organizing your finances are aspects that you can have done and ready before you begin. The rest of the home buying process should move quickly once you have your responsibilities in check. Plus, our mortgage experts are fast and efficient, always working to get you to the closing table on time.

The Bottom Line

This fall, prepare yourself for homeownership the smart way with these helpful tips. Not quite ready? No problem. These fall home purchase tips can be applied to any season. Remember this: Home buying is a process that doesn’t come naturally to most people, but whenever you’re ready, we’re here to help.

The post 7 Tips for Purchasing a Home This Fall appeared first on Cardinal Financial.

GOOD: Removing any open credit disputes on your credit profile

If you added a consumer statement to your credit report, it’s best for you to remove it in order for us to accurately assess your credit score and approve your loan. Adding consumer statements is a common practice that can be helpful in removing credit disputes on your record. However, disputes take time to remove, so it’s best to do this well before you apply for a loan. In order to lift the dispute and remove the statement, simply contact the creditor and request removal. Ask the creditor to provide a letter confirming the dispute has been lifted so that, if necessary, you can supply this letter to us.

GOOD: liquidating or making available any loans or gifts.

Before we can approve your loan, we will review your bank statements to ensure any 401(k) loans, gift funds, IRA distributions, CD liquidation, or investment fund liquidations have been completed and are available in a checking or savings account. This step ensures that your loan amount and payment plan is accurate for your income and assets.

GOOD: unlocking any credit report freezes.

Credit freezes are designed to prevent a credit reporting company from releasing your credit report without your consent. These take time to clear. If you have freezes on your credit report, be sure to remove them for all three of the major credit bureaus (TransUnion, Equifax, and Experian) before your loan process begins. You should not reinstate these until your loan is fully funded. If you begin the loan process before clearing the freezes, it can delay the processing of your loan and cause you to incur additional fees for rate lock extensions.

GOOD:  resolving any derogatory credit items.

Derogatory items (such as collections, judgments, and charge-offs) can negatively impact your credit score and prevent you from getting the best deal possible—or prevent you from getting a loan at all. Before you shop for a mortgage, obtain a copy of your credit report from all three credit bureaus (TransUnion, Equifax, and Experian) and clear up any derogatory items or resolve disputes.

GOOD: making all payments on time.

It’s important to make sure you pay all bills on time while your loan is being processed. We are required to update your credit report prior to your loan closing and any missed payments could jeopardize your loan.

BAD: changing jobs during (or right before) the loan process.

When you take out a mortgage with us, we will review your two-year employment history, including income history and consistency. Most loan programs require that we review and verify your earnings through 30-days worth of pay stubs, your W-2 Form, and your IRS Form 1040. If you don’t provide this evidence, you may not qualify for a loan, and changing jobs during or before your loan process begins may hinder our ability to verify your employment and income.

BAD: allowing anyone to run your credit report.

Toward the end of your loan process, we will access an updated version of your credit report. If you’ve had numerous inquiries since we accessed the initial credit report, this could bring down your credit score and may result in less-favorable loan terms or loan denial. This kind of activity would require a written explanation as to the reason for and outcome of the inquiry. To avoid any hassle, it’s best to wait until after your loan has funded before checking your credit score again.

BAD: taking on new debts.

It’s part of the loan process to ensure you haven’t acquired any new debts during the loan process. If we find new debts on your record, we’ll have to include them in your debt-to-income ratio (DTI). In such a situation, we would require you to explain the new debt and its terms. If your DTI is already close to the maximum allowed by the lending guidelines, the added debt could result in loan denial.

BAD: cosigning for anyone for any type of debt.

Like taking on new debts, you shouldn’t cosign on anyone else’s debt either. If we discover a newly cosigned debt on your record, we will have to include it in your DTI—even if someone else will be making the payments. If your DTI is already close to the maximum allowance, this new debt responsibility could result in loan denial or a change in your approved terms. If you plan to cosign for someone else’s debt, be sure to do it after your new loan has funded.

BAD: transferring funds or making any large deposits.

If such funds or deposits cannot be verified (such as cash gifts or cash on hand) it’s better to wait until after your loan has funded. We will review your bank statements and examine any large deposits other than payroll deposits. Large deposits, undocumented funds, or any similar activity can cause delay or denial of your loan altogether.

It’s our commitment to ensure your loan transaction with us is exceptional. Follow these dos and don’ts and see how mortgage lending can be simpler than you thought.

The post Making Good Choices for a Smooth Home Loan Process appeared first on Cardinal Financial.

Not surprisingly, purchasing a home is one of the most pivotal decisions a person could make in their lifetime. It’s an expensive investment into your future—a home that you’ll probably live in for several years. Because of factors like these, most people spend an abundance of time and energy researching houses on the market before they take their pick. However, what many home shoppers don’t realize in the process is that they don’t spend enough time and energy researching mortgages. This common misstep can lead to prospective first-time buyers believing all kinds of mortgage myths and misconceptions. Allow us to debunk the top four.

All Mortgages Are Created Equal

Far too many potential buyers believe the myth that all home loans are the same, regardless of the lender from which they come. This is absolutely false. A $100,000 mortgage with a 3% interest rate is not identical across lenders. When shopping for a mortgage, be sure to ask about closing costs and other additional fees, which could be as low as $1,500 and will depend on the loan and lender. Remember that you will have to provide this payment at closing or roll it into the mortgage, which will increase your monthly payments. You’ll have to decide which method is smartest and most affordable for you, but you’d be remiss to overlook this step.

Pre-Approved and Pre-Qualified Mean The Same Thing

Home shoppers are often convinced that to be pre-approved also means pre-qualified for a mortgage. These two terms may sound similar but they’re quite different. To be pre-qualified for a mortgage, a buyer will provide their information to a lender who will then calculate an estimated loan amount for which the buyer may be approved. This process of pre-qualification is informal compared to the pre-approval process.

When you are pre-approved for a mortgage, the lender verifies your income and assets, checks your credit, and commits to lending you a mortgage up to the pre-approved amount. This formal process may result in final approval, depending on your desired house’s appraisal amount. You can think of both of these processes like a job interview. To pre-qualify, your potential employer looks at your application and makes sure that you didn’t lie about your age or address. But to be pre-approved, the employer would meet you for an in-person interview, ask about your experience, and decide whether you are the right candidate for the job. Consequently, pre-approval in this example may result in the employer offering you the job.

You Need A Huge Down Payment

All too often, renters get purchase-aversion because they think 20% down is a requirement to buy. This isn’t entirely true. While a larger down payment means lower monthly payments, a $20,000 cash down payment (or similar amount) is not always required. Take our fixed rate conventional loans for example: The average prospective borrower may be eligible for as little as 5% down. Or consider VA and USDA loans which require 0% down for borrowers who meet their conditions and requirements. Don’t be discouraged by the notion of mandatory down payments that break the bank—it’s just not entirely true.

It’s All About Interest and Principal

Borrowers often fumble with the common idea that interest and principal are the only two elements of your monthly mortgage payment. This, unfortunately, underestimates your total because it fails to include insurance and taxes. These absolutely necessary additions can add hundreds of dollars to a monthly payment. It’s imperative that borrowers factor these amounts into their interest-plus-principal payment to ensure the most accurate estimate. Whether you’re ready to buy or still dreaming of owning your first place, consider these components and be informed before making the decision to buy.

The post The 4 Biggest Mortgage Misconceptions appeared first on Cardinal Financial.