CENTURY 21 CUDDY



Posted by CENTURY 21 CUDDY on 9/27/2020

Photo by Vlada Karpovich from Pexels

Buying a second home is an exceptional opportunity. You can expand your real estate portfolio, creating an investment strategy for building wealth over the long term. It’s also nice to have a home, one you can use on the weekends to get away. Whether you want to buy a home on the beach, on a lake in a densely wooded area or a home across the country, your first step is securing financing.

Know the Costs of Buying a Second Home

Purchasing a second home does mean more responsibility. It may mean a second mortgage, insurance costs and property maintenance. You’ll be paying utilities, upkeep and taxes on a multiple properties. Using this information, calculate how much you want to spend each month in these areas. Then, you can start looking for the home that fits.

Work to Build Your Down Payment

Buying a second home affordably is easier to do when you can apply a sizable down payment. Most often, home buyers need between 3 and 20 percent of the purchase price available as a down payment. The more you have, the less you finance or the larger of a home you can safely purchase.

With second homes, you may have additional avenues for securing that down payment. This includes savings, of course, but it may also include borrowing against the equity in an existing home to use as a down payment.

Choosing a Loan Program for Your Needs

One of the challenges of buying a second home is proving to lenders you can afford the mortgage payment and other costs. There are loan programs available to help you, but the options are somewhat limited in terms of federally sponsored programs. You may have used a VA or FHA loan, for example, to purchase your first home. These are generally just for the primary residence, not second homes.

However, there are other loans available to you. Conventional loans, which are still some of the most commonly sought-after loans available, are available to most people. Lenders will look at things such as:

  • Credit scores
  • Repayment history on existing loans
  • Debt-to-income ratios
  • Income reliability
  • Property value
  • Like any other home loan, it will be backed by the value of the home you purchase. In that way, the home must be worth at least as much as you plan to borrow.

    Debt-to-income ratios tend to be a big factor for most lenders. Fannie Mae-based loans often require a ratio that is up to 45 percent if you have at least 25 percent down and a moderate credit score. That means your monthly payments need to be under 45 percent of your gross income.

    It’s also important to consider how you plan to use the property. Lenders need to know if the home will be vacant (getting insurance for it can be difficult). They also want to know if you plan to produce a second income from it. If so, you need to ensure your loan covers this type of use.

    The good news is that most conventional lenders off second home loans. Find the dream home you’ve been looking for, and then work with a lender to secure the purchase.




    Categories: Mortgage  


    Posted by CENTURY 21 CUDDY on 5/10/2020

    If youíre hoping to buy a house in the near future, youíll want to focus on saving for a down payment.

    Down payments are a way to let a lender know that you are a low-risk investment, and a way to save money on interest over the term of your loan.

    If you have your other finances in order--a good credit score and stable income--thereís a good chance that making a 20% or more down payment will land you a low interest rate that can save you thousands while you pay off your loan.

    How large should my down payment be?

    The larger the down payment you can afford, the more money youíll likely save in the long run. While there are ways to get a loan with no or very small down payments, these arenít always ideal.

    First, if you put less than 20% down on your home loan, youíll be required to pay private mortgage insurance, or PMI. These are monthly payments that you make in addition to the interest that is accrued on your loan.

    So, if you donít put any money down on your home, youíll accrue more interest over your term length and youíll pay PMI on top of that.

    What affects your minimum down payment amount?

    Lenders take a number of factors into consideration when determining your risk. If youíre eligible for a first-time home owners loan, a veteranís loan, or a USDA loan, your loan can be guaranteed by the government. This means you can likely pay a lower down payment while still receiving a reasonable interest rate.

    When applying for a mortgage, be sure to reach out to multiple lenders and shop around for the rates that work for you. Many lenders use slightly different criteria to determine your eligibility to pay a lower down payment.

    Other things that affect your minimum down payment include:

    • Credit score

    • Location of the home you want to buy

    • Value of the mortgage

    Saving for a down payment

    Youíll get the most value out of your mortgage if you put more money down. However, if youíre currently living in a high-rent area, it could mean that itís in your best interest to get out of your apartment and start building equity in the form of homeownership.

    If you want to buy a home within the next year or two, there are a few ways you can help increase your savings.

    First, determine how much you need to save. Depending on your housing needs and the current market, everyone will have different requirements. Do some home shopping in your area online and look for homes that are within your spending limits. Remember that you shouldnít spend more than 30% of your monthly income on housing (mortgage, property taxes, etc.)

    Next, find out what a 20% down payment on that home would be, adjusting for inflation.

    Once you have the amount you need to save, remember to leave yourself enough of an emergency fund in your savings account to last you a month or two.




    Tags: Mortgage   down payment  
    Categories: Mortgage   down payment  


    Posted by CENTURY 21 CUDDY on 1/26/2020

    Image by Shutterbug75 from Pixabay

    With a mortgage, a buyer is applying for financing to purchase the property in its entirety. They're relying on their credit and assets for approval before assuming responsibility of the full property. In a land contract, you're cutting out the need for a formal lender and relying on the seller to approve or deny your application.

    The seeming simplicity of the transaction may make some people discount the importance of negotiation. However, there are a few things to keep in mind so both the buyer and seller are comfortable with the terms of the agreement. 

    Talk to the Seller 

    With a land contract, you may be more beholden to the seller than you would be to a lender in a traditional mortgage. If the seller thinks of you as a tenant rather than an owner of the place, you'll need to discuss their exact involvement over the course of the contract.

    Because the seller won't receive the full value of the property upon sale, their financial insecurity is entirely understandable. They may want to check up with you over the phone, in-person, or through a third-party. If you're uncomfortable with the level of oversight, you may need to speak up or find a different property. 

    Make sure you understand your obligations during this time. Some buyers are treated as a renter of the property — until it comes time to make significant and costly repairs. If you're responsible for all upkeep, you may be able to negotiate more freedom in exchange for the additional expense. 

    Think Through the Finances 

    One of the starkest differences between a traditionally financed home and a land contract is the speed of repayments. Even if you do find a seller willing to extend the contract, it can still be a major strain on your finances. As you factor in your current assets and credit score, you should also consider the future.

    If the final payment is large enough, it may still require a substantial loan. If your credit hasn't improved enough by the time the contract nears the end, it could be a significant blow to your savings. And if you can't meet the terms of the contract, the seller will get to keep the money you've already paid them (as well as the property). 

    Negotiating a land contract means thinking through the repercussions of each clause. While the terms may seem looser than a standard mortgage, there may be strings attached that aren't as obvious at first glance. Ensure that you understand your financial and practical responsibilities before signing on the dotted line. 




    Tags: loans   Financing   home loan   finance  
    Categories: Mortgage  


    Posted by CENTURY 21 CUDDY on 9/29/2019

    As the workforce changes and a growing number of companies seek out contractors and freelancers, many Americans find themselves in a gray area when it comes to their income. They may put in full-time hours, but on their taxes they work for themselves.

    Mortgage lenders are cautious about who they lend to. They want to make sure you are a low-risk investment who has reliable, predictable income to ensure that theyíll earn money off of your loan.

    This can sometimes make it difficult for freelancers, contract workers, or the self-employed. Not only might your taxes be unconventional, but your income could vary depending on the time of the year and the amount of business you receive.

    Itís easy to see why many people would be anxious about applying for a mortgage under these circumstances. However, if youíre self-employed, thereís no need to worry. You can still get approved for a mortgage at a fair interest rate--you just need to do a bit of work to provide the right documents to your lender.

    In this article, weíll show you what documents and proof of income youíll likely need and how to present it to a lender to make the process run as smoothly as possible to get you approved for your mortgage. Hereís what you need to do.

    Organize your records

    Before applying for a mortgage, itís a good idea to take a look at your record-keeping process. As a self-employed worker, youíre probably already used to tracking your own income. However, this will help the lender analyze your income easier and move the process along more quickly.

    Having a master spreadsheet of your dated invoices, paid amounts, and the names of your clients is a good place to start. Youíll also want detailed, easy to read information for your previous employers, landlords, references, and any other information you think will be pertinent.

    Next, gather your tax documents for the last three to five years. As a self-employed worker, you likely file a Schedule C (Form 1040) and a Schedule SE. Make sure you have copies of these forms.

    Dealing with deductions

    Many self-employed workers write off business expenses in their tax returns. Travel expenses, internet, and other costs associated with doing business are all ways to save by reducing your taxable income. Doing so can save you money, but it can also reduce your net income which is what lenders will see when you provide them with your information.

    If youíre hoping to get approved for a bigger loan, one solution is to plan your taxes in the year prior to applying for a mortgage. Make fewer deductions than you normally would to increase your net income.

    Be ready to clarify

    When a mortgage lender is reviewing your information, make sure you are open and available to provide any information that can be helpful to them in considering your application. Being prompt and accurate with your responses will signal to your lender that you are willing to work with them.





    Posted by CENTURY 21 CUDDY on 3/17/2019

    Itís hard to overstate the importance of credit scores when it comes to buying a home. Along with your down payment, your credit score is a deciding factor of getting approved and securing a low interest rate.

    Credit can be complicated. And, if you want to buy a home in the near future, it can seem daunting to try and increase your score while saving for a down payment.

    However, it is possible to significantly increase your score in the months leading up to applying for a loan.

    In todayís post, weíre going to talk about some ways to give your credit score a quick boost so that you can secure the best rate on your mortgage.

    Should I focus on increasing my score or save for a down payment?

    If youíre planning on buying a home, you might be faced with a difficult decision: to pay off old debt or to save a larger down payment.

    As a general rule, itís better to pay off smaller loans and debt before taking out larger loans. If you have multiple loans that youíre paying off that are around the same balance, focus on whichever one has the highest interest rate.

    If you have low-interest loans that you can easily afford to continue paying while you save, then itís often worth saving more for a down payment.

    Remember that if you are able to save up 20% of your mortgage, youíll be able to avoid paying PMI (private mortgage insurance). This will save you quite a bit over the span of your loan.

    Starting with no credit

    If youíve avoided loans and credit cards thus far in your life but want to save for a home, you might run into the issue of not having a credit history.

    To confront this issue, itís often a good idea to open a credit card that has good rewards and use it for your everyday expenses like groceries. Then, set up the card to auto-pay the balance in full each month to avoid paying interest.

    This method allows you to save money (youíd have to buy groceries and gas anyway) while building credit.

    Correct credit report errors

    Each of the main credit bureaus will have a slightly different method for calculating your credit score. Their information can also vary.

    Each year, youíre entitled to one free report from each of the main bureaus. Take advantage of these free reports. Theyíre different from free credit checks that you can get from websites like Credit Karma because theyíre much more detailed.

    Go through the report line by line and make sure there arenít any accounts you donít recognize. It is not uncommon for people to find out that a scammer or even a family member has taken out a line of credit in their name.

    Avoid opening several new accounts

    Our final tip for boosting your credit score is to avoid opening up multiple accounts in the 6 months leading up to your mortgage application.


    Opening multiple accounts is a red flag to lenders. It can show that you might be in a time of financial hardship and can temporarily lower your score.







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