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Common Credit Score and Down Payment Requirements by Mortgage Type

by Supreme Lending | Nov 7, 2024

For aspiring homeowners and first-time buyers, many questions can arise about the mortgage process. What credit score do you need to qualify? How much down payment is required? Answers are based on several factors including the property, purchase price, and, most importantly, the mortgage type.

Here’s a breakdown to simplify the numbers and help you understand what you need to open the door to your dream home depending on common mortgage types:

What Is a Credit Score?

Commonly determined by FICO® score, credit scores are calculated using the borrower’s financial background information such as payment history, credit utilization, length of credit history, types of credit in use, and recent credit behavior. The average credit score in the United States in 2023 was 715, according to Experian data.

Down Payment Assistance Options

If a homebuyer doesn’t have the required minimum down payment or would like to access more financing, Supreme Lending offers several down payment assistance options for qualified buyers. This can also help first-time buyers open the door to homeownership. Guidelines and eligibility vary depending on the program. For example, the Supreme Dream program offers down payment assistance in the form of a fully forgivable second loan and requires a minimum credit score of 620. Ask your Supreme Lending Loan Officer about qualified assistance programs.

Understanding credit score and down payment requirements for different types of mortgages is crucial for prospective homebuyers. While each loan type has its own guidelines, maintaining a good credit score and having sufficient funds for upfront costs at closing remains a common denominator for securing favorable terms and interest rates. By proactively managing your credit and staying informed about your options, you can navigate the mortgage process with confidence on your journey to homeownership.

Contact your local Supreme Lending branch to get pre-qualified and learn about your home financing options.

10 Homebuying Tips for a Smooth Mortgage Process

by Supreme Lending | Oct 7, 2024

Your Helpful Guide to Mortgage Homebuying Tips

mortgage homebuying tips

Buying a home is one of life’s biggest milestones—a place to make lasting memories, build your future, and truly create a place to call your own. But let’s face it: the homebuying process can feel a bit overwhelming at first. But with the right preparation and guidance, you can navigate your mortgage smoothly and confidently. Whether you’re just thinking about purchasing a new home, buying for the very first time, or a seasoned pro, these 10 mortgage homebuying tips will help you make sense of the process and set you up for success.

1. Save for a Down Payment Early

One of the most important mortgage homebuying tips is saving for a down payment. While some loans may require as low as 3-5% down, the more you have saved, the better. A larger down payment also means a lower loan amount and reduced monthly payment. Working with your local lender early on in the process can help you plan for how much to save for.

2. Don’t Wait to Get Pre-Qualified

Before you even start house hunting, the first step in the homebuying process is getting pre-qualified for a mortgage. Pre-qualification gives you an initial idea of how much you may be able to afford based on information you provide to your lender, including your assets, income, and credit score. Getting a mortgage pre-qualification or pre-approval can also show sellers that you’re a serious, capable buyer.

3. Compare Loan Types

Not all mortgages are the same, so it’s important to understand your options so that you can make an informed decision when it comes to financing your home. Whether it’s a Conventional, FHA, VA, or USDA loan, each comes with its own set of guidelines and down payment requirements. There are also several alternative financing programs including a jumbo loan, bank statement loan, and investment property loans.

4. Explore Down Payment Assistance Programs

Do you know about down payment assistance programs that may be available? These programs are designed to help more people become homeowners with affordable options and flexible guidelines. Depending on the program, assistance can be offered through grants, forgivable loans, deferred payment, or tax credits. Don’t hesitate to ask your lender about these potential opportunities, as they may make a big difference in your homebuying journey.

5. Have Your Documentation Ready

When it comes time to apply for your mortgage, you’ll need to provide a variety of documentation so that your lender can verify your income, employment, and creditworthiness. Common documents include pay stubs, tax returns, bank statements, and W-2s. Having these ready may help speed up the process and avoid delays.

6. Know What’s Included in Your Loan Estimate

After you apply for a mortgage, you’ll receive a Loan Estimate (LE). This document provides you with important information regarding your mortgage application, including the estimated principle payment, interest, taxes, and insurance—also known as your mortgage PITI.

7. Prioritize Both an Appraisal and Home Inspection

During the mortgage process, it’s crucial to understand the appraisal and home inspection—and why you should opt to do both. The appraisal is an assessment of the home’s value that most lenders require. This helps confirm that the loan amount aligns with the property’s market value. Meanwhile, the home inspection evaluates the property’s condition and systems. A home inspector can identify any potential repairs or issues, such as roofing damages, electrical problems, or structural concerns.

8. Avoid Large Purchases or New Credit

It’s also important to hold off on making any large purchases or opening new lines of credit during the mortgage approval process. Big expenses like buying a car or furniture, or applying for a new credit card, may affect your credit score and debt-to-income (DTI) ratio. To keep your loan approval on track, avoid major financial moves until after you’ve closed on your new home.

9. Understand Costs Beyond the Down Payment

While the down payment is a big part of the homebuying process, don’t forget about the additional costs involved in securing a mortgage. Beyond the down payment, you’ll need to consider closing costs, which are other fees to process the loan that typically range from 2-6% of the loan amount. Another potential expense is mortgage insurance, which is required for FHA loans and if your down payment is less than 20% for Conventional.

10. Review the Closing Disclosure

Before officially closing on your home, you’ll receive a mortgage Closing Disclosure (CD). This document provides a transparent summary of all loan details, including terms, projected payments, closing costs, and a transaction summary. Lenders are required to provide your disclosure no later than three days before your scheduled closing. Be sure to carefully review all information to ensure it’s correct to avoid any potential delays.

Supreme Lending Is Here to Help

As you can see, the homebuying process has a lot of moving parts. Keeping these mortgage homebuying tips in mind will help ensure your loan experience is a smooth one.

At Supreme Lending, we’re here to guide you every step of the way. Want to learn more about our mortgage services or ready to start your homebuying journey? Contact your local branch today!

Renting vs. Owning a Home: Which Is Right for You?

by Supreme Lending | Oct 2, 2024

Deciding between renting vs. owning a home may be one of the biggest debates when it comes to housing. Both options offer unique advantages, but the key is to find which fits your personal goals and lifestyle. Let’s explore the pros and cons of each option and take a deep dive into the many potential benefits of homeownership and mortgage options that renters may not realize.

Pros and Cons of Renting

Renting offers flexibility and lower upfront costs, making it an appealing option for many. Here are some of the possible benefits and drawbacks of renting.

Pros of Renting

Renting allows you to move more easily, ideal for those who frequently relocate or prefer not to be tied down to one area.
Less Responsibility. When renting, your landlord or property management company is typically responsible for maintenance, repairs, and property upkeep. This saves you the headache of managing those tasks and additional costs.
Lower Upfront Costs. When moving into a new rental, security deposits and first month’s rent are typically more affordable than a down payment for a home and other homebuying costs.

Cons of Renting

No Home Equity. Making rent payments doesn’t build equity—unlike the potential for a home. No equity means you can’t take advantage of opportunities like cashing out on equity with a refinance.*
Limited Personalization. Rental properties often have restrictions on renovations or even simple changes like painting walls and installing new fixtures.
Rising Rents. Unlike a fixed mortgage, rent payments can oftentimes increase every year, sometimes significantly depending on your local market conditions.

Benefits of Owning

While renting may offer short-term convenience, owning a home comes with several potential long-term benefits that renting can’t match. Beyond simply having a place to live, explore these rewards of homeownership:

Potential to Build Equity. Home values may appreciate over time. Unlike renting, homeownership may allow you to build equity as a future investment.
Stable Payments. With fixed-rate mortgages, you have the confidence and peace of mind that your monthly payments will remain the same throughout the life of the loan.
When you own your home, you have the creative freedom to really make it your own. You can make as many home renovations as you want to fit your unique style.
Possible Tax Benefits. Homebuyers may qualify for potential tax deductions. Work with your tax advisor to learn more and see if owning a home could save you tax dollars.
Pride of Ownership. There’s a unique sense of accomplishment and pride that comes with owning a home, allowing you to put down roots in a community.

Renting vs. Buying: Seven Key Questions to Consider

How long do you plan to stay in one place? If you’re planning to stay in one location for several years, buying may be a smarter option.
What’s your financial situation? Do you have enough savings for a down payment and closing costs? Evaluate your finances and get pre-qualified to determine your options.
Are you ready for the responsibilities of homeownership? Owning a home comes with additional responsibilities than renting such as on-going maintenance, repairs, and upkeep.
What’s your credit score? Your credit score plays a significant role in qualifying for a mortgage and getting favorable loan terms.
What are the housing market trends in your desired area? Depending on your local area, it may make more sense to rent if housing prices are too high or out of your budget.
Do you value flexibility or stability more? Consider your current lifestyle preferences. If you’re not ready to settle down, renting may offer the flexibility you need. However, if you’re drawn to a more stable living situation, homeownership may be the better option.
What are your long-term goals? How could homeownership fit in with your broader financial and lifestyle goals, such as the potential to building equity, undergoing home renovations, investing in real estate, or creating a family home.

Down Payment Assistance & First-time Homebuyers

Don’t forgot to explore down payment assistance and first-time homebuyer programs that may help open the door to homeownership sooner than you think! FHA loans offer several benefits for first-time buyers, including lower down payment and credit requirements. While Conventional loans may only require as low as 3% down for qualified first-time buyers.

Ready to Stop Paying Your Landlord’s Mortgage?

Deciding between renting vs. owning a home is a big decision that depends on several factors such as your mortgage qualification, long-term plans, and personal preferences. While renting offers flexibility, homeownership may offer long-lasting benefits.

Ready to explore your homebuying options? Contact our team at Supreme Lending to discuss how to make your mortgage work for you!

*By refinancing an existing loan, total finance charges may be higher over the life of the loan.

The Hidden Costs of Homebuying: What to Know Beyond the Down Payment

by Supreme Lending | Sep 30, 2024

Buying a home is a major milestone, and while most prospective buyers are focused on saving for the down payment, there are additional homebuying costs to consider. From closing costs to ongoing home maintenance expenses, it’s important to understand the costs beyond the down payment. Let’s dive into those homebuying costs so you can be well prepared.

Down Payment: The First Major Cost

The down payment is often the largest upfront cost when buying a home. The down payment requirements depend on the type of loan to determine what you may qualify for.

Conventional loans typically require at least 5% for eligible borrowers. For first-time homebuyers, the minimum requirement can be as low as 3%.
FHA loans require as little as 3.5% down, making them a popular choice for borrowers looking for more flexible guidelines.
VA and USDA loans offer no down payment requirement for eligible military veterans, active military, or buyers in defined rural areas.

Plus, there are several down payment assistance programs available to help more people achieve their dream of homeownership. While the down payment is a key part of purchasing a home, it’s not the only cost to keep in mind.

Closing Costs: Hidden Homebuying Fees

Beyond the down payment, closing costs are another significant upfront expense buyers must account for. These are fees and expenses necessary to finalize your home purchase and close the loan. Closing costs typically range from 2% to 6% of the home’s purchase price. Here’s a breakdown of common closing costs:

Loan origination fee is charged by your lender for processing your mortgage.
Appraisal fee covers the cost of having your home professionally appraised to determine its market value.
Home inspection fee is paid to inspect the home for any necessary repairs or safety hazards.
Title insurance and search fees ensure the property’s title is clear of any disputes or liens.
Escrow fee is charged by the third party handling the closing process.
Property taxes and homeowners insurance are typically prepaid for a portion of the costs at closing so they’re included in your mortgage escrow account.

Ongoing Costs of Homeownership

After closing on your mortgage, owning a home comes with ongoing expenses that many new buyers often overlook. These homebuying costs are essential to consider when planning for the long-term.

Utilities include monthly bills such as electricity, gas, water, and internet. These are widely dependent on the size and location of your home.
Landscaping and yard maintenance, whether you hire a service or handle it by yourself, keeping up with lawn care, tree trimming, and other outdoor maintenance can add up.
Homeowners Association (HOA) fees are required when your property is in a community with an HOA. These fees may be monthly or annual and cover community maintenance and amenities.
Property taxes are ongoing local government taxes based on the assessed value of your home. Property taxes may increase over time, so review your tax bills carefully.
Homeowners and mortgage insurance are often required. Homeowners insurance helps protect the home in the event of potential damages, while mortgage insurance protects the lender in the event of a loan default.
Ongoing maintenance and repairs will occur over time, from replacing appliances to fixing the roof or plumbing. It’s smart to set aside funds for common home upkeep expenses to avoid hidden costs surprising you.

What’s Next?

We hope these additional homebuying costs are not so hidden anymore! The journey to homeownership comes with several financial considerations beyond the down payment. By understanding these homebuying costs, you can be prepared to buy with confidence.

If you’re ready to explore your mortgage options, contact Supreme Lending today. We’re here to help guide you through the loan process and beyond.

FHA Loans for Non-First-Time Homebuyers: How It Works

by Supreme Lending | Sep 20, 2024

Can repeat buyers qualify for FHA loans?

When you think of an FHA loan, it’s often associated with first-time homebuyers. After all, FHA loans are widely known for lower down payment and flexible credit requirements. But did you know that FHA loans are not just limited to first-time homebuyers? Insured by the Federal Housing Administration, FHA loans are available to anyone who meets the guidelines, including repeat buyers.

Whether you’re upgrading to a larger home, downsizing, or simply moving to a new area, FHA loans can still be a valuable mortgage option for eligible borrowers. However, there are some caveats. Let’s explore why repeat buyers may consider an FHA loan, how it works, and answer a few frequently asked questions.

FHA Loan Benefits for Repeat Buyers

Lower Down Payment

One of the key benefits of an FHA loan is the down payment requirement as low as 3.5% of the purchase price for qualified buyers. For repeat buyers who may have limited equity from a previous home sale or do not want to pay for a sizable down payment, this lower down payment may be appealing.

Flexible Credit Score

FHA are also known for their flexibility when it comes to a borrower’s credit score. While Conventional loans typically require a score of 620, the minimum for FHA loans is 580.

Competitive Rates

FHA loans often come with competitive interest rates, even for buyers who may not have top-tier credit. Locking in a lower rate may make a significant difference in the monthly mortgage payment and may result in potential savings over the life of the loan.

Assumable Loan

One of the most unique features of an FHA loan is that it’s assumable. This means that if you sell your home in the future, the buyer can essentially take over your FHA loan, including the rate, if they qualify. When you’re looking to sell the home, this could make the offer more attractive to potential buyers, especially if interest rates are higher than when you purchased the loan.

Gift Funds

FHA loans also allow mortgage gift funds to be used for 100% of the down payment or closing costs. In this case, family members or other eligible donors may give you the money to cover the upfront costs with no repayment obligation.

FHA Loans for Repeat Buyers: Frequently Asked Questions

Can non-first-time homebuyers use an FHA loan?

Yes, FHA loans are not reserved exclusively for first-time homebuyers. As long as the property is your primary residence and you meet the income, credit, and other qualifications, you may consider an FHA loan – regardless if it’s your first home or not.

Can FHA loans be used for second home or investment properties?

FHA loans are designed for primary residences only, which means you cannot use them to buy a second home or an investment property.

Can I have more than one FHA loan at a time?

In general, FHA only allows you to have one active FHA loan at one time. This is because the mortgage is designed for primary residences only. However, there may be exceptions such as relocating for work, a growing family, or having been a co-signer. Each situation is unique and requires proof to qualify for an exception. That’s why it’s important to work with a knowledgeable lender to go over your options.

Do FHA loans require mortgage insurance?

Yes, FHA loans require both an upfront mortgage insurance premium and ongoing monthly mortgage insurance payments. These payments help protect the lender in case of a default on the loan. Unlike private mortgage insurance for Conventional loans, FHA mortgage insurance premiums typically remain for the life of the loan unless you refinance into a non-FHA mortgage.

Ready to Take the Next Step?

The journey of homeownership doesn’t end after your first home purchase. Even if you’re not a first-time homebuyer, discover how FHA financing may still help open the door to your next home. Contact Supreme Lending today to get pre-qualified.

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