Where do buyers begin?
Haley Newton, a loan officer with Starkey Mortgage in Sherman, said the first step in the buying process is not finding a house, rather it’s getting qualified for a home loan. Buyers need to first find out how much house they can afford and if they can actually purchase a home.
“A lot them want to know what the first step is, and many people believe that the first step is finding a house, but that’s actually the second step,” Newton said. “You want to get qualified with a local lender to know what you’re pre qualified for, and then go out and find a house, which is the hard part.”
What documents do buyers need to provide to get qualified and pre approved?
qualification is typically the quick and easy initial step and approval is a more involved process. The qualification process starts with an application, which most lenders have available online, though Newton said buyers can call a lender or meet them in person to fill it out. After buyers fill out an application, which covers the buyers’ finances and history, the lenders will verify the information for preapproval and that requires the supporting documents.
“Once they’re prequalified, we’ll give them a list of documents they need depending on their application,” Newton said.
The list typically calls for pay stubs from the last 30 days, tax returns for the last two years, bank statements for the last two months, W-2s, IDs and Social Security cards.
Jeremy Lewis, branch manager of Grayson Home Loans, said sometimes the lender may require divorce decrees and documentation to indicate other income depending on the buyers’ situation. After approval, Lewis said he usually gives the buyers a call, and they figure out a loan program that best fits the buyers.
How much do buyers need for a down payment?
Short answer: It depends on the loan.
Lewis said the down payment is often the main concern for buyers, and it’s not a set amount. Depending on the loan type and what programs the buyers are eligible for, the down payment can be as little as zero down. Loans from the Federal Housing Administration, Veteran Affairs and the U.S. Department of Agriculture each have a set of stipulations that include the percentage required for the down payment.
“It depends on the loan type they’re going with — whether it be a conventional loan, an FHA loan, a VA loan or a USDA loan, it will determine what they’re going to have to place down — what their initial investment is going to be,” Lewis said. “There are still those out there out there that think they have to put 10 to 20 percent down, which is not correct. They can, in certain programs, put as little as zero down.”
Newton said there are down payment assistance programs in the state that can help cover the amount needed. These programs are income based and are capped anywhere from $55,000 to $75,000 depending on the program.
What’s the deal with closing costs?
In addition to a down payment, buyers also need funds to cover the closing costs. Lewis said the closing costs depend on the loan amount as a higher loan amount is going to cost more. About half the closing costs are directed to building the buyers’ escrow account, and the other half is a combination of fees for items such as the title and appraisal.
“Closing costs are another piece of the puzzle they’re going to have to come up with,” Lewis said. “However, in a Texas residential contract, you can ask the sellers to pay a certain percentage, depending on the loan type, for your closing costs.”
Buyers can negotiate with the sellers and ask that the seller pays a portion of the closing costs, which if the buyers qualify for a down payment assistance program, the initial costs can be very low.
“If you’re able to use the down payment assistance programs in addition to requesting the seller to pay some of their closing costs, they can actually get into a home with little to nothing down,” Newton said.
What is an escrow account?
“It kind of works like a separate checking account, and the purpose of that account is to pay the yearly tax bill that comes due every January, and their insurance premium that’s due once a year depending on when they closed on their home,” Newton said.
The initial money put into the escrow account is part of the closing costs, and Lewis said homeowners then add to it monthly when they make their house payments. The account is for buyers to put back money so property taxes and insurance are covered.
“Say when their tax bill comes due in January, there will be plenty of money in the account for them to pay their taxes, so that way they’re not coming up $2 to 3 to 5,000 all at once to pay their tax bill,” Newton said.
Can buyers purchase a home with a bad credit score?
Newton said buyers don’t necessarily need the best credit in order to get a home loan, and she noted that first-time home buyer programs have recently lowered their credit score requirements.
“A lot people around here they don’t necessarily have bad credit, they just don’t have a lot,” Newton said. “They don’t use their credit.”
Newton said lenders will work with buyers and give them steps to take over 60 to 90 days to boost their credit score to where they can buy a home.
“It can be intimidating but we can walk them through it,” Newton said.
Buyers should consult with local lenders, and Lewis said he guides buyers through the process so they know what to expect.
“There’s so many different moving parts to a loan anymore,” Lewis said. “I try to keep everyone versed and ready for what’s to come in the process and what to expect.”
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Do you have an existing Louisville Kentucky VA Home Loan or conventional loan that you are interested in refinancing? While interest rates are still low, there are many advantages to refinancing now in order to get a lower interest rate, take cash out of the equity in your home, consolidate credit, or make home improvements. If you are interested in refinancing with a Kentucky VA Loan, the VA has programs that can assist you. Below are some questions other people have asked about the Louisville Kentucky VA Refinancing programs. Follow the headers to find information about Louisville Kentucky VA Refinancing. If you cannot find an answer here, a VA Loan Specialist can be contacted online or by phone to answer all your refinancing questions.
- What is an Interest Rate Reduction Refinancing Loan (IRRRL)?
- Do I have to be eligible for a lower interest rate in order to qualify for a VA IRRRL?
- If it is called an Interest Rate Reduction Loan, why does the VA allow me to refinance my ARM to a higher interest rate?
- Can I refinance with the VA if I am already using my Loan Guarantee entitlement with my current mortgage?
- What out-of-pocket expenses will I have when refinancing?
- Do I have to use my current lender to refinance?
- Do I have to go through the credit check and appraisal process again when refinancing?
- Do I have to get another Certificate of Eligibility?
- What fees does the VA charge for an IRRRL?
- Does the VA have any requirements for me to get an IRRRL?
- Can I include the cost of home improvements in my IRRRL?
- Can I take cash out of an IRRRL?
- What is a VA Cash Out Refinancing Loan?
- What can I use the cash I take out of my home for?
- Can I consolidate debt with a Cash Out Refinance Loan?
- How much cash can I take out of my home equity?
- I am delinquent on my current mortgage. Can I still get a VA Cash-Out Refinance Loan?
- How much does the VA guarantee my loan for with a VA Cash Out Refinance
- Was your question not answered?
An IRRRL is the VA’s Interest Rate Reduction Refinancing Loan, also known as a VA Streamline Refinance. An IRRRL is a loan that refinances your existing VA Loan into a new VA Loan with a lower interest rate, or from an adjustable rate mortgage (ARM) into a fixed rate mortgage. A Certificate of Eligibility is not required for an IRRRL.
Not necessarily. In order to qualify for an IRRRL, the VA requires you to obtain a lower interest rate if you are going from a one fixed rate mortgage to another fixed rate mortgage, but if you are going from an adjustable rate mortgage to a fixed rate mortgage, the VA will allow you to refinance to a higher interest rate.
If it is called an Interest Rate Reduction Loan, why does the VA allow me to refinance my ARM to a higher interest rate?
Since you are refinancing your adjustable rate mortgage into a fixed rate mortgage the interest rate may be higher initially, but you will save money over time. With adjustable rate mortgages you may get a lower interest rate than a fixed rate mortgage for the first few years, but after that your interest rates increase and you are paying higher rates than you would with a fixed rate mortgage. This is why the VA allows you to refinance into a higher fixed rate of interest on your mortgage before your adjustable rate on your current mortgage increases.
Can I refinance with the VA if I am already using my Loan Guarantee entitlement with my current mortgage?
Yes. As long as you are refinancing your VA-guaranteed mortgage, then you can use this program to get more favorable loan terms and save money over the long run. If you’re ready to get started with your VA Refinance, contact a VA Refinance Specialist now.
None. The VA allows you to finance all closing costs associated with refinancing into your new mortgage. Your lender may have some fees, but you will need to consult them to find out what they expect you to pay up front, if anything.
No. If you want a new lender, you can choose from any mortgage lender on the VA-approved lender’s list. Make sure that you shop around for your refinancing loan. By going to several lenders, you will get more offers and you can choose the best loan terms for you and your family. Be careful of lenders that try to deceive you into thinking they are the only lender that can finance a VA IRRRL. The VA has a long list of approved lenders, and you should shop around.
The VA does not require another credit check and appraisal because it has already approved you for the loan guarantee in the first place. However, lenders usually do require a credit check and appraisal when refinancing because they need to make sure you are still credit worthy and the property still has a higher market value than their maximum loan amount. For more information about this, check out VA Appraisal, Qualification and Approval FAQ’s.
No. You have already been approved by the VA for your home loan guarantee, and refinancing does not require a Certificate of Eligibility.
The VA only requires a 1.5% funding fee of the value of your new loan. There are no other fees involved with the VA. If a lender tries to tell you that the VA charges extra fees you should contact the VA to see if something has recently changed and, if not, you should find a new, ethically responsible lender.
The VA has the following eligibility requirements for an IRRRL:
- You must be refinancing an existing VA Loan into a new VA Loan in order to use this program.
- You need to certify that you have been occupying the property. For your original loan you had to sign an agreement stating you would be the primary occupant of the home, and now you will have to sign an additional agreement saying that you have been the primary occupant.
- You cannot take more out on your new loan than what you currently owe. The loan can be more only as a result of fees and closing costs being financed into the mortgage.
You are allowed to include up to $6,000 in your refinancing loan for the purpose of energy efficient home improvements. Any other home improvements are not eligible.
No. An IRRRL from the VA is only for the purposes of obtaining a better interest rate on your mortgage loan in order to save you money over time.
This is the type of refinancing loan the VA offers for those Veterans who want to take cash out of the equity in their homes. You must be refinancing an existing VA Loan in order to use the VA Cash Out Refinancing Program.
Anything you want. Make sure you consult your lender to see if they have any restrictions on what you can use the money for.
Yes. As a matter of fact, many lenders prefer that you do consolidate all of your debt into your new loan because it makes you less of a credit risk for them.
Your home’s value is on a Certificate of Reasonable Value, and you are allowed to take up to 90% of this amount. On top of this you are also allowed to finance the VA funding fee and include up to $6,000 for energy efficient home improvements.
This depends on your lender. The VA allows it, and many lenders will also allow you to refinance as long as you are financially able to make the new payments. If you are a delinquent on your current mortgage because of excess debt, the lender will probably require you to consolidate that debt into your new mortgage loan in order to lower you interest rates on your unsecured debt and give you a more affordable monthly payment.
The highest amount the VA will guarantee a Cash Out Refinance mortgage for is $36,000.
Still have questions?
More information on refinancing options is available through the Department of Veterans Affairs or by contacting your VA Regional Loan Service Center.
- Louisville VA Streamline Refinance (mylouisvillekentuckymortgage.com)
- VA Loan Frequently Asked Questions – Military VA Loan Information – MilitaryVALoan.com (militaryvaloan.com)
- VA Loan Frequently Asked Questions – Military VA Loan Information – MilitaryVALoan.com (militaryvaloan.com)
- Closing Costs When Buying or Refinancing a Home for A Louisville Ky Home Mortgage (mylouisvillekentuckymortgage.com)
- VA Loan Benefits – VA Home Loan Benefits – MilitaryVALoan.com (militaryvaloan.com)
- Kenucky Mortgage Interest Rates (louisvillekentuckyvamortgage.blogspot.com)
- Updated Guidelines for HARP 2.0 Refinance of Louisville Kentucky Mortgage Loans (mylouisvillekentuckymortgage.com)
- FHA Refinancing to Avoid Foreclosure (streamlinerefinance.net)
- KHC Mortgage Interest Rates (louisvillekentuckyvamortgage.blogspot.com)
- Substantial Aspects Throughout Mortgage Brokers – A fundamental Investigation (interestratescanada542.typepad.com)