Buying Archives - Page 39 of 938

Apache is functioning normally

May 30, 2024 by Brett Tams

The big and bummer news this week:

Interest rates remain at a 23-year-high, and they’re likely to stay that way for longer than anticipated.

The Federal Reserve met earlier this week and, unlike some earlier expectations, decided to hold rates steady. While the Fed typically meets every 6.5 weeks (8 times a year), they’re expected to maintain this stance for several upcoming meetings.

This shift comes as a surprise. Back in January, analysts and investors predicted a decrease in rates by now. Discussions even centered on whether the drop would happen in Q2 vs. Q3.

Nobody is talking about that anymore.

Inflation hasn’t cooled as much as hoped. As of March, the consumer price index stood at 3.5 percent, well above the Fed’s target 2 percent. (April’s CPI data will become available on May 15).

The Fed released a statement on Wednesday citing “a lack of further progress toward the Committee’s two percent inflation objective” in their decision to hold rates steady.

Until inflation drops, interest rates are likely to stay high.

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High interest rates are keeping both homeowners and renters in a bind.

Homeowners Handcuffs vs. Tenant Trifecta

The rapid rise in interest rates is creating a logjam in the housing market.

The national average 30-year fixed rate on a mortgage is 7.75 percent, according to USA Today.

Around 70 percent of homeowners have mortgage interest rates that are more than 3 percentage points below the current rate.

This creates a golden handcuffs scenario — a “lock-in effect” due to the financial penalty that comes from selling.

While this might sound like a ‘champagne problem’ — a problem of abundance — the reality is that many homeowners are reluctant to change jobs, relocate for work or family, or make other moves that would be beneficial to their lives.

The result? A 57 percent plunge in existing home sales last year, according to a report from the Federal Housing Finance Agency.

This drop in supply is one reason why nationwide home prices rose 5 percent last year.

Rising home prices makes life tougher for renters, who feel increasingly shut out of the housing market.

Any renter who aspires to own a home faces a tough trifecta: high interest rates, high home prices, and low inventory.

It’s the opposite side of the coin. Both renters and homeowners face a problem that stems from the same source: a constrained housing market.

There’s not enough supply.

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What can you do?

If you’re a renter who aspires to own:

Househack. Buy a duplex, triplex, or 4-plex, which will offset some of the high housing costs you face.

If you live in an area that lacks multiunits, buy a single-family home and retrofit a portion of it into an autonomous dwelling. Convert the basement or garage into a separate unit. Build an accessory dwelling unit (ADU), which in some regions is called a casita, in-law suite or granny flat.

This holds a dual benefit: you contribute to the solution (creating more supply), while also collecting income to offset your housing costs.

This email won’t cover everything, but a few days ago, I did a YouTube livestream in which I answered a question from a VIP List subscriber who wants to househack. This person calculated that their out-of-pocket housing costs would come to $300 per month. They asked for feedback. Here’s what I said. [Starts at 8 min, 15 seconds]

If you’re a homeowner feeling trapped:

Feeling trapped in your home but the desire to move is strong? Let’s break it down.

First, how urgent is the move? Is it a non-negotiable career or family situation? (These are big reasons to move). Or is it more about wanting a bigger space? (This can potentially wait.)

If moving is crucial, consider becoming an accidental landlord. Here’s the idea:

Hold your current home and rent it out.
Find a rental place in your new city as you save for a downpayment on your next home. (Bonus: reduced transaction costs; higher likelihood of buying after rates decline, which eliminates the cost and hassle of a refi).

Don’t sweat squeezing every last dollar out of your accidental rental. This isn’t a dedicated investment property; avoid the “comparison trap” if you chat with experienced rental investors.

Focus on finding a good tenant who takes care of the place. The rental income should primarily help cover your costs, not maximize your profits.

The profit-maximizing properties are bought with that intention. This is a holding, not an acquisition.

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Jobs boom, stocks soar … yet inflation stays high, money is expensive to borrow, and both homeowners and renters feel stuck.

Confused by mixed economic signals? Listen as I break it down in this First Friday podcast episode.

Enjoy!

— Paula

Source: affordanything.com

Apache is functioning normally

May 30, 2024 by Brett Tams

At a time of year when home prices are generally at their lowest, the long-term financial goal of homeownership likely stayed out of reach for many would-be first-time buyers in the first quarter.

The past several years have seen dramatic home price growth paired with — and largely due to — a low supply of homes for sale. These conditions, along with high mortgage rates, sustained an unwelcoming market for would-be buyers at the beginning of 2024. And among those buyers, first-timers likely felt it the most.

People purchasing a home for the first time generally have lower down payments than repeat buyers, who may have equity in an existing home working in their favor. First-timers may also have lower incomes and less robust credit history, which can work against them in qualifying for the lowest available rates.

When homes become less affordable across the nation — whether through higher prices, higher interest rates or both — it’s often first-timers who are most affected. Indeed, first-time buyers made up just 26% of all home buyers in 2023, according to the National Association of Realtors. This is a decrease from 34% the year before and the lowest on record.

In the first quarter, prices didn’t rise, but they also didn’t come down. Inventory remained low and mortgage rates high. These continued conditions meant little relief in a tight housing market.

Affordability challenges in the cheapest homebuying season

Generally, the first quarter of the year sees the lowest home prices. Demand is low — fewer people buy during the coldest months. In 2024, while prices didn’t grow in the first quarter, home prices across the country remained very high for potential first-time buyers.

Homes were listed at prices five times the potential first-time buyer income in the first quarter, on average. Looking at homes priced around three times your annual income is an old rule of thumb used to help people gauge affordability. Under this guidance, some metros remained easier targets than others for first-timers.

Among the more affordable areas in the first quarter were Pittsburgh, where homes were listed at 2.8 times potential first-time buyer income, Detroit (2.9), Cleveland (3.0), Buffalo (3.2) and Baltimore (3.4). At the other end of the spectrum was Los Angeles, where homes were listed at 12 times first-time buyer income, San Diego (9.3), San Jose (7.7), New York City (7.1) and Boston and Miami, both 7.0.

Though prices were relatively unchanged from the last quarter of 2023, across the nation, they fell very slightly when compared to the first quarter of last year. In two metro areas, Miami and Oklahoma City, prices fell 10% year over year, after accounting for inflation. By contrast, they rose double digits in Richmond (11%), Pittsburgh (11%) and Los Angeles (13%).

First-time buyer tip: Home prices are largely driven by inventory. The number of homes available for sale is paltry, though it rose 15% from the first quarter of last year. If you’re shopping for your first home, keep in mind that buying in this market may mean making sacrifices beyond a high sticker price — you may not find a home that hits all (or even most) of the items on your wish list. Go into the shopping experience knowing what you’re willing to compromise on and where you draw your line to help ensure you don’t end up closing on a pricey home you’re not entirely happy about.

Mortgage rates continue to play an outsized role

Rates on 30-year fixed mortgages have risen from below 3% in 2020 and 2021 to around 7%, on average. In the first quarter of the year, there was brief and subtle respite as rates fell from over 7% to just below. But even this rate is more than twice what people faced when they purchased during the pandemic.

These higher rates play a significant role in affordability, particularly for first-time buyers or those with less room in their budgets. The change in rates from 2020 to 2024 translates to an additional $800 on the monthly payment of an average-priced home and several hundred thousand dollars in additional interest over the life of a 30-year loan.

Home buyer tip: If you’re considering waiting out the high rates, temper your expectations — rates may moderate toward the end of 2024, but they’re unlikely to go below 6%, according to the latest mortgage rate forecasts. You can use the time spent waiting for a less expensive mortgage to build a bigger down payment. Moderately lower rates and a larger down payment can make a considerable difference in the affordability of your monthly payments.

What constitutes affordability is shifting

The guideline that says an affordable home is one listed around three times your income may have originated decades ago when government officials promoting affordable housing and lenders used that ratio. But getting a rough idea of affordability by looking at homes listed at three times your income is most useful when homes are actually priced in that range. In other words, as home prices rise considerably and incomes don’t, such guidance makes an “affordable” home more elusive.

Looking at national averages, homes haven’t been selling for close to three times the typical income since 2011.

The three-times-income guidance isn’t meant to be the final say in whether you can afford a home, but rather a starting point. Affordability measures that account for expenses such as taxes and mortgage rates are a more precise gauge.

First-time home buyer tip: There’s no harm in estimating affordability when you’re looking at listings on your phone with a simple income-to-price ratio. Even if homes are priced four or five times your income where you’re looking, it starts to give you some sense of how far of a stretch the purchase might be. Be aware that much more goes into home buying and homeownership costs. A home affordability calculator can help you plan for the details, including your other debt obligations, down payment amount, mortgage insurance, interest rates and homeowners insurance.

METHODOLOGY

Monthly median list price and list count figures are from monthly inventory data from the Realtor.com residential listings database as of May 1, 2024. All nominal list prices were adjusted to March 2024 dollars using the U.S. Bureau of Labor Statistics’ consumer price index. All monthly median figures were compiled into quarterly averages.

The median age of first-time home buyers is 35, according to the National Association of Realtors’ 2023 Profile of Home Buyers and Sellers. Estimated income for first-time home buyers was derived from the U.S. Census Bureau’s 2022 American Community Survey metro-level median household income for householders ages 25-44 — the range likely to include most first-time home buyers — and adjusted to March 2024 dollars using the Bureau of Labor Statistics’ Employment Cost Index.

Interpret metro rankings with caution. Due to margins of error in income data and rounding, there may be overlap in affordability ratios.

San Juan, Puerto Rico, is among the 50 most populous metros but was excluded from the analysis due to insufficient inventory data.

Source: nerdwallet.com

Apache is functioning normally

May 30, 2024 by Brett Tams

Retail banking involves offering financial services to individual consumers rather than businesses or other banks. It encompasses a range of products and services, such as checking and savings accounts, mortgages, personal loans, credit cards, certificates of deposit (CDs), and more.

Retail banking is different from corporate banking, which is the part of the banking industry that serves large companies and corporate customers. Retail banks can be local community banks, online banks, or the divisions of large commercial banks. Credit unions also offer retail banking.

Read on for a closer look at what retail banking is and how it differs from corporate banking.

What Is Retail Banking?

Retail banking, also known as personal or consumer banking, refers to financial services provided to individuals. This type of banking is designed to serve the general public and to help people and families manage their money, obtain credit, and save for the future.

Retail banks focus on making banking services easily accessible, either through physical branches, ATMs, and/or online platforms. These banks play a crucial role in the economy by offering checking accounts, high-yield savings accounts, certificates of deposit, loans, and other financial products that help individuals safely store, manage, and grow their money.

Though some retail banks also work with small businesses, retail banking is different from corporate (also known as commercial) banking, which involves working with commercial entities, such as large businesses, governments, and institutions.

Most large-scale banks have retail banking divisions. Credit unions and smaller banks, on the other hand, may be exclusively focused on retail banking.

Recommended: 12 Things To Consider When Choosing A Bank

How Does Retail Banking Work?

Retail banking works by offering financial products and services tailored to consumers. These services are designed to help individuals and families manage their finances efficiently, save for the future, and access credit cards and loans. Retail banks make money primarily through interest on loans, fees for services, and charges for various banking products.

Features of Retail Banking

Retail banking offers a hub for all of your basic financial transactions. Here’s a look at some of the products and services they provide.

• Savings and checking accounts: Retail banks offer savings and checking accounts to help individuals manage their money. Savings accounts typically earn interest, while checking accounts provide easy access to funds for day-to-day transactions.

• Consumer loans: Retail banks commonly offer personal loans, auto loans, and home mortgages. These loans can help people finance significant purchases or investments, such as buying a home or car.

• Credit Cards: Retail banks issue credit cards that allow consumers to borrow money up to a certain limit for purchases. These cards often come with rewards, cash back, and other incentives.

• Online and mobile banking: Retail banks typically provide online and mobile banking services, allowing you to manage your accounts, transfer money, pay bills, and access other banking services from your computer or smartphone.

• Investment services: Some retail banks offer investment products like mutual funds, retirement accounts, and brokerage services to help customers build wealth over time.

• Customer service: Retail banks typically emphasize customer service. Many provide personalized financial assistance through branch staff, call centers, and online support.

Types of Retail Banks

Retail banks come in various forms, each catering to different customer needs and preferences. Here’s a look at some of the main types of retail banks.

• Commercial banks: Many people access retail banking through one of the large, commercial banks, which generally offer a retail banking division along with corporate banking services.

• Credit unions: Credit unions are nonprofit financial institutions owned by their members. They often provide similar services to commercial banks but with a focus on serving the financial needs of their members, usually offering lower fees and better interest rates.

• Online banks: Online banks operate exclusively online, without physical branches, though you typically have access to a partner network of ATMs. They often offer higher interest rates on savings accounts and lower fees due to reduced overhead costs.

• Community Banks: Community banks are smaller, locally-focused institutions that prioritize serving the needs of their local communities. They offer personalized customer service and often have a strong understanding of their local markets.

Recommended: Big Banks vs Small Banks: Key Differences?

How Is Retail Banking Different From Corporate Banking?

Retail banking and corporate banking represent two different sectors of the banking industry, each serving different customer bases and offering different services.

Retail banking focuses on individual consumers, providing them with products like bank accounts, personal loans, and credit cards. Corporate banking, on the other hand, serves businesses and corporations, offering services like business bank accounts, commercial loans, trade finance, and employer services.

Transactions in retail banking are typically smaller in size and higher in volume compared to corporate banking, which tends to focus on larger, more complex transactions.

If you’re wondering whether you would be better served by retail vs. corporate banking, here’s a snapshot how the two compare.

	Retail Banking	Corporate Banking
Client base	Individual consumers	Businesses, institutions, banks, government entities
Products and services	Personal checking/savings accounts, mortgages, personal loans, credit cards	Business checking/saving accounts, business loans, merchant services, global trade services, employee benefits plans
Loan amounts	Lower	Higher
Transaction frequency and amounts	High number of transactions for low amounts	Low volume of transactions for more significant amounts

The Takeaway

Retail banking is the public face of banking that provides banking services directly to individual consumers rather than businesses or other banks. Most of us bank at a retail bank or retail division of a large commercial bank whether we realize it or not.

Whether you use a brick-and-mortar bank, online bank, or credit union, retail banking offers products and services that allow you to manage your money, access credit, save for the future, and work toward your financial goals.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

What is an example of retail banking?

An example of retail banking, also known as consumer banking, is when an individual opens a savings account at a local bank. The bank then allows them to deposit funds, withdraw money, and earn interest on their deposits. The same bank might also offer them a checking account for daily transactions, a mortgage to buy a home, and a credit card for everyday purchases. These services are all examples of retail banking, which is aimed at meeting the personal financial needs of individual consumers.

What are the largest retail banks?

The largest banks in the U.S. that offer retail banking include:

• Chase

• Bank of America

• Wells Fargo

• Citibank

• U.S. Bank

• PNC Bank

• Goldman Sachs Bank

• Truist Bank

• Capital One

• TD Bank

Who uses retail banking?

Retail banking is used by individual consumers to manage their personal finances. This includes:

• Students

• Young adults

• Working professionals

• Couples

• Families

• Retirees and seniors

• Small business owners

What are the retail banking products?

Retail banking offers a variety of products and services tailored to the financial needs of individual consumers. These include:

• Savings accounts

• Checking accounts

• Personal loans

• Mortgages

• Credit cards

• Certificates of deposit (CDs)

• Investment products

• Online and mobile banking services

• Debit cards

Photo credit: iStock/Passakorn Prothien

SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.

The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOBK-Q224-1885621-V1

Source: sofi.com

Apache is functioning normally

May 30, 2024 by Brett Tams

The Yahoo view: A USAA mortgage may be a wise choice if you’re eyeing a VA or conventional loan and qualify for USAA membership. The mortgage lender charges no origination fees on VA products and focuses primarily on military members and their families.

USAA is a long-standing financial institution that serves military members, veterans, and their family members. It offers banking, insurance, retirement, and investment services to these consumers, as well as VA and conventional mortgage loans.

To use any of USAA’s products or services, you must become a member. Only U.S. military members and veterans, pre-commissioned officers, and spouses or children of these are eligible.

In this article:

Key benefits

USAA offers a variety of VA loan products, including purchase loans, jumbo loans, Streamline Refinances, and cash-out refinances.
USAA also offers a low-down-payment loan for first-time home buyers and several conventional loan options.
The lender charges no origination fees on VA loan products.
The company’s Home Resource Library can help you better understand the buying and financing process.

Need to know

Only U.S. military members, veterans, precommissioned officers, or spouses/children of these parties are eligible for USAA products.
USAA offers only VA and conventional loan products. It does not have USDA or FHA loan programs.
USAA’s physical locations are limited to four states: Colorado, New York, Maryland, and Texas. It still offers mortgages nationwide, though, and you can apply online.
USAA doesn’t offer conventional loans or refinancing in Hawaii or any cash-out refinancing in Texas.

USAA for VA loan home buyers

USAA offers insurance, banking, retirement, and investment services for military members, veterans, and their families, so it’s no surprise that the VA loan — for those who are in or have served in the U.S. military — is its primary lending product. In fact, according to Home Mortgage Disclosure Act (HMDA) data, VA loans accounted for over 64% of USAA’s purchase mortgage originations in 2023.

The lender offers a variety of VA products, including VA purchase loans, VA jumbo loans, VA Streamline Refinances (IRRRLS), VA jumbo Streamline Refinances, and VA cash-out refinances. USAA requires no down payment or origination fee on any of these loans.

USAA for home equity lending

USAA doesn’t offer home equity loans or home equity lines of credit (HELOCs), but it does offer cash-out refinancing — another strategy for borrowing from your home equity. The lender offers VA cash-out options, including traditional and jumbo, and conventional cash-out refinances.

With cash-out refinancing, you’ll take out a new mortgage larger than your current one. The new loan pays off the old one and replaces it entirely. You’ll then be paid the difference between those two balances and can use the cash however you see fit.

Learn more: HELOC versus home equity loan

USAA mortgage rates

USAA is pretty upfront about its mortgage rates and makes them easy to find on its website. You’ll see sample rates on the “Home Loans” page and the “Mortgage Rates” and individual loan pages. Sample rates are available for all loan programs that the lender currently offers. For example, you can find USAA VA mortgage rates on its “VA Loan” page.

On the Mortgage Rates page, you’ll find the numbers broken down into interest, APR, and discount points — giving you insight into how USAA came up with its sample rates. USAA doesn’t go into its assumptions for these rates, but it does offer a disclaimer that they “are not available to every borrower.” The lender also doesn’t give you the option to see a sample rate without discount points. You’ll need to fill out USAA’s online application for a more accurate rate quote.

Dig deeper: APR versus interest rate — What you need to know when mortgage shopping

Applying for a mortgage with USAA

USAA lets you apply for a mortgage online, so the process can be fairly quick and simple. You may also contact a USAA loan officer by phone to start your application or visit one of the lender’s five financial centers. These are located in Colorado Springs, Colo.; West Point, N.Y.; Highland Falls, N.Y.; Annapolis, Md.; and San Antonio, Texas.

There is a USAA mortgage calculator that you can use to determine what your monthly payment may be based on your home price, interest rate, down payment, and loan term. You can also add in taxes, insurance, and homeowners’ association dues for a more accurate number.

This is the lender’s only mortgage-related calculator, though it does have a fairly comprehensive home-buying resource library you can browse for more guidance.

Dig deeper: Try the free Yahoo Finance mortgage calculator

How USAA compares to other mortgage lenders

USAA mortgages vs. Navy Federal mortgages

USAA and Navy Federal are membership-based institutions only open to certain military and government personnel (and their loved ones). But at the mortgage level, Navy Federal outshines its counterpart. The company offers a wider array of home loan options, including home equity loans and HELOCs.

Navy Federal also has more calculator tools, special offerings (like a no-refinance rate drop), and live chat help, which USAA does not.

Navy Federal mortgage review

USAA mortgages vs. Veterans United Home Loans

Veterans United Home Loans is similar to USAA in that it only lends to a select group of military and government personnel. The big difference is that Veterans United offers just one product — the VA loan. The company is the nation’s No. 1 lender by volume in the space, and in 2023, originated over 58,000 VA loans totaling more than $144.5 billion, according to the Department of Veterans Affairs. Veterans United also offers a 24/7 helpline, as well as credit counseling and Realtor services, which USAA does not.

If you want a conventional loan or investment, banking, or insurance services, though, USAA is your only choice among the two.

Veterans United Home Loans review

USAA mortgage FAQs

What credit score do you need for a USAA mortgage?

The credit score you’ll need depends on the USAA loan program you choose. With VA loans, the government doesn’t set a hard minimum, but USAA prefers a minimum 640 credit score. For conventional loans, you’ll usually need at least a 620 to qualify.

Does USAA pay closing costs?

USAA doesn’t cover closing costs, but it also doesn’t charge one of the most common ones — the origination fee (at least on VA loans). This could save you quite a bit on your up-front mortgage costs.

Who qualifies for a USAA mortgage?

To get a USAA mortgage, you’ll first have to become a USAA member. Only U.S. military members, veterans, precommissioned officers, and the spouses/children of these parties are eligible.

Does USAA have an origination fee for mortgages?

USAA does not charge origination fees on its VA mortgages, which comprise the bulk of its lending business. Origination fees typically cost between 0.50% and 1% of the total loan amount.

What are USAA mortgage interest rates?

USAA’s mortgage interest rates change often, but the company displays them prominently on its website and loan pages. Keep in mind that advertised rates often assume a high credit score and include discount points, so they may not accurately reflect the exact rate you’ll qualify for.

This article was edited by Laura Grace Tarpley

Source: finance.yahoo.com

Apache is functioning normally

May 29, 2024 by Brett Tams

An irrevocable letter of credit (or ILOC) is a written agreement between a buyer (often an importer) and a bank. As part of the agreement, the bank agrees to pay the seller (typically an exporter) as soon as certain conditions of the transaction are met. These letters help reduce a seller’s concern that an unknown buyer won’t pay for the goods they receive. It also helps eliminate a buyer’s concern that an unknown seller won’t send the goods the buyer has paid for.

Irrevocable letters of credit are often found in international trade, though they can be used in other types of financial arrangements to ensure that a seller will be paid, even if the buyer fails to uphold their end of the bargain.

Key Points

• An irrevocable letter of credit is a written agreement between a bank and a buyer to guarantee payment, ensuring that the seller will be paid even if the buyer fails to fulfill their obligations.

• Irrevocable letters of credit cannot be canceled or modified in any way without the explicit agreement of all parties involved.

• Irrevocable letters of credit are commonly used in international transactions but can be used in other situations as well.

• Alternatives to irrevocable letters of credit include trade credit insurance and standard letters of credit, which offer different levels of flexibility and protection.

What Is an Irrevocable Letter of Credit?

Simply defined, an irrevocable letter of credit represents an agreement between a bank and a buyer involved in a financial transaction. The bank guarantees payment will be made to the seller according to the terms of the agreement. Since the letter is irrevocable, that means it cannot be changed without the consent and agreement of all parties involved.

Irrevocable letters of credit can also be referred to as standby letters of credit. Once an irrevocable letter of credit is issued, all parties are contractually bound by it. This means that even if the buyer in a transaction doesn’t pay, the bank is obligated to make payment to the seller to satisfy the agreement.

Having an irrevocable letter of credit in place is a form of risk management. The seller is guaranteed payment from the bank, which can help to reduce concerns about the buyer failing to pay. And it ensures that the seller will follow through on their obligations by providing whatever is being purchased through the agreement. In simpler terms, a standby letter of credit or irrevocable letter of credit is a sign of good faith on the part of everyone involved in a transaction.
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How Does an Irrevocable Letter of Credit Work?

An irrevocable letter of credit establishes a contractual agreement between a buyer, a seller, and their respective banks. It effectively creates a safeguard for both the buyer and the seller, in that:

• Buyers are not required to forward payment until the seller provides the goods or services that have been purchased.

• Sellers can collect payment for goods and services, as long as the conditions outlined in the letter of credit are met.

The bank issuing the letter of credit acts as a go-between for both sides, guaranteeing payment to the seller even if the buyer doesn’t pay. Assuming the buyer does fulfill their obligations, they would then make payment back to the bank. In a sense, this allows the buyer to borrow from the bank without formally establishing credit in the form of a loan or credit line. (Check with your financial institution to learn what fees may be involved.)

Before an irrevocable letter of credit is issued, the bank will first verify the buyer’s creditworthiness. Assuming the bank is reassured that the buyer will, in fact, repay what’s owed to complete the purchase, it will then establish the irrevocable letter of credit to facilitate the transaction between the buyer and seller. Irrevocable letters of credit are communicated and sent through the SWIFT banking system.

Recommended: How Do Banks Make Money?

Irrevocable Letter of Credit Specifications

The exact details included in an irrevocable letter of credit can depend on the situation in which it’s being used. The conditions that are set for the completion of the transaction will also matter. But generally, you can expect an irrevocable letter of credit to include:

• Buyer’s name and banking information (that is, their bank account number and other details)

• Seller’s name and banking information

• Name of the intermediary bank issuing the letter of credit

• Amount of credit that’s being issued

• Date that the letter of credit is issued and the date it will expire

An irrevocable letter of credit will also detail the conditions that must be met by both the buyer and seller in order for the contract to be valid. For example, the seller may need to provide written verification that the goods or services referenced in the agreement have been provided before payment can be issued. The letter of credit must be signed by an authorized bank representative. It may need to be printed on bank letterhead to be valid.

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Do I Need an Irrevocable Letter of Credit?

You may need an irrevocable letter of credit if you’re doing business with someone in a foreign country. You may also require one if you are conducting a transaction with a new company or individual (one with which you don’t yet have an established relationship).

Irrevocable letters of credit can help to mitigate some of the risk that goes along with international transactions. These letters ensure that if you’re the seller, you get paid for any products or services you’re providing. They also protect you if you’re the buyer, promising that products or services are delivered to you.

An irrevocable letter of credit could also come in handy if you’re still working on building credit for your business and you’re the buyer in a transaction. The bank will pay the money to the seller; you’ll then repay the bank. Payment may be required in a lump sum from your business bank account or another source. Or the bank may also offer the option of repaying it in installments over time. Repaying your obligation could help to raise your business’s creditworthiness in the bank’s eyes. This may make it easier to take out other loans or lines of credit later.
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Alternatives to Irrevocable Letters of Credit

An irrevocable letter of credit is not the only way to do business when engaging in international transactions. You may also consider trade credit insurance or another type of letter of credit instead.

Trade Credit Insurance

Trade credit insurance, also referred to as accounts receivable insurance or AR insurance, is used to insure businesses against financial losses resulting from unpaid debts. You can use trade credit insurance to cover all transactions or limit them to ones where you believe there may be a heightened risk of loss, such as transactions involving foreign businesses.

A trade credit insurance policy protects your business in the event that the other party to a financial agreement defaults. It can insulate your accounts receivable against losses if an unpaid account turns into a bad debt. Purchasing trade credit insurance may be an easier way to manage risk for your business overall, as it’s less involved than an irrevocable letter of credit.

Recommended: Business Loan vs Personal Loan: Which is Right for You?

Letters of Credit

A letter of credit guarantees payment from the buyer’s bank to the seller’s bank in a financial transaction. Like an irrevocable letter of credit, it establishes certain conditions that must be met in order for the transaction to be completed. But unlike an irrevocable letter of credit, a standard letter of credit can be revoked or modified.

You might opt for this kind of letter of credit if you’re doing business with someone you don’t know and you want reassurance that the transaction will be completed smoothly. A regular letter of credit may also be preferable if you’d like the option to modify or cancel the agreement.

The Takeaway

An irrevocable letter of credit is something you may need to use from time to time if you run a business and regularly deal with international transactions. It adds a layer of protection to buying and selling, as a bank is saying it will cover the transaction. An ILOC, as it’s sometimes known, can provide reassurance when working with a new business or establishing your company overseas. The letter cannot be changed, so you’re getting solid peace of mind.

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FAQ

What is the difference between a letter of credit and an irrevocable letter of credit?

A letter of credit and irrevocable letter of credit are largely the same, in terms of what they’re designed to and in what situations they can be used. The main difference is that unless a letter of credit specifies that it is irrevocable, it can be changed or modified by the parties involved.

What is the cost of an irrevocable letter of credit?

You generally need to pay a transaction fee for an irrevocable letter of credit. The fee is typically a small percentage of the transaction amount. The rate will vary from bank to bank.

Does an irrevocable letter of credit expire?

Yes, an irrevocable letter of credit will typically state the date by which the seller must submit the necessary paperwork in order to receive payment.

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Source: sofi.com

Apache is functioning normally

May 29, 2024 by Brett Tams

The majority of homebuyers stick with the very first mortgage product offered, opting to not shop around with other lenders, a study conducted by an online financial services marketplace found.

Over 54% of borrowers with mortgages on a recent home only received one mortgage offer, a LendingTree survey published Monday said. In cutting their home buying journey short, borrowers may not be getting the best deal for themselves.

The survey, which gathered the opinions of over 2,000 participants in mid-April, concluded that 45% of homebuyers with a mortgage who shopped around got a lower offer than their first.

In breaking down the survey responses, only a mere 22% of borrowers got two offers and 17% got three or more offers.

Millennials in the group were more likely to comparison shop with 62% reporting doing so, while 28% of boomers in the questionnaire say they weighed different options. Meanwhile, a greater share of women (62% of the female respondents) said they are likely to accept the first offer without shopping around, compared to 46% of men.

Figuring out how much borrowers can actually save if they shop around is contingent on mortgage rates and loan size, but it can be a significant chunk of change, said Jacob Channel, senior chief economist at LendingTree, in a written statement Monday.

“That said, it’s not out of the realm of possibility for someone who received multiple offers and then picked the one with the lowest rate to save hundreds of dollars a month, thousands of dollars a year and tens, if not hundreds, of thousands of dollars over the lifetime of their loan,” he added in a press release.

Almost 30% of those surveyed said the top reason for not seeking multiple mortgage offers stemmed from confidence that they were receiving the best rate, followed by 20% saying they had a desire to use the lender recommended to them by their real estate agent.

Refinances, however, are a different story, with the survey finding that out of the 45% of homebuyers who’ve refinanced the mortgage on their current home, 56% shopped around.

A little over 80% of those who shopped around found a lower rate than their current lender offered, the report concluded

To no one’s surprise, a good chunk of the survey’s participants said mortgage rates have had an impact on when they decided to buy a home.

Over a third of buyers (35%) purchased a home earlier than planned to take advantage of low rates. Comparing genders, 43% of men were swayed to purchase a home due to lower rates versus 26% of women respondents.

Meanwhile, about 57% of respondents say they met with a real estate agent before they met with a lender during their home buying process.

Source: nationalmortgagenews.com

Apache is functioning normally

May 29, 2024 by Brett Tams

Combining finances with a partner can happen at any stage of your relationship, even if you’ve been married to your partner for a long time. It can be a great opportunity for a couple to get on the same page about what they want their financial future to look like, especially when it comes to big considerations such as child care, homeownership and retirement.

An academic study published in the Journal of Consumer Research in 2023 found that couples with joint bank accounts experience less financial conflict and greater harmony within their relationships. The study results indicated that couples who merged their finances had a strong sense of financial partnership. In contrast, couples with separate bank accounts tended to operate in a more “tit for tat” financial exchange.

If you and your partner feel like it’s time to combine your finances, here’s how you can work toward merging your money.

Taking the plunge on merging finances with your partner

Perhaps you’ve kept your finances separate out of convenience, but now you’re getting tired of making online transfers to your partner for every shared expense. Or maybe you’ve got a considerable expense coming up and you want to streamline your accounts.

Jen Mayer, an accredited financial counselor and founder of the Brooklyn, New York-based firm Fully Funded, often works with couples who are deciding whether to combine their finances after a long time together. The first thing she likes to do is retrace the couple’s steps.

“When helping these couples, we usually want to know why their finances weren’t merged originally,” Mayer says. “There may be some beliefs about money from someone’s childhood — like maybe their parents had a bad marriage with a lot of conflict around money — that led them to want to keep their finances separate. We have to work out those beliefs first.”

Once a couple is aware of potential hang-ups around money, they can communicate more about their money management, goals and expectations as they begin the merging process. They might find that shared bank accounts can make their lives easier, but they also might choose to partially merge their accounts and keep separate accounts as well so each partner can have independent spending money.

Ultimately, if you’re married, Mayer says, all of your money is in the same pot and belongs to both people. A couple just has to decide how they will manage it.

How to merge finances long after marriage

Track spending habits and consider making a budget. For some, the act of tracking income and expenses can bring up uncomfortable feelings.

“If someone hasn’t been tracking their spending, they might not want to know where their money is going,” Mayer says. “But that information is data, and knowledge is power. If you want to change things, you have to be able to make informed decisions with that data.”

Once you have details about your income versus expenses, you and your partner can decide how much you want to spend on groceries, dining out, clothes and more. You also might make bigger decisions, such as moving into a home with lower rent or buying a car with a monthly payment that you can more easily afford.

Discuss how you’ll split shared expenses. Couples rarely have equal incomes, but when you’re married, your household expenses become a shared responsibility. To avoid resentment, couples should discuss an equitable arrangement for how expenses will be paid and who is responsible for which financial tasks in the household. For example, if one partner makes twice as much money as the other, perhaps they’ll contribute double to household expenses.

Open a joint account or add your partner to an existing account. If you don’t have a shared checking or savings account, you can shop around for a new account or see if your bank will allow you to add a co-owner to an existing account. Keep in mind that co-owners each have full ownership of the account and can withdraw as much money as they see fit. You may want to set spending limits with each other so you’ll both be informed about big purchases and avoid potential overdrafts. For a shared savings account, you’ll want to look for a high-yield account that helps you earn as much interest as possible on your money.

As you navigate the world of shared finances, remember that a strong financial partnership starts with a commitment to honest communication, teamwork and shared goals. These values can help you maintain a solid foundation in your marriage, too.

Source: nerdwallet.com

Apache is functioning normally

May 29, 2024 by Brett Tams

Homeownership is possible with bad credit home loans

The range of home loans for bad credit available today often surprises buyers.

Many lenders will issue government-backed FHA and VA loans to borrowers with credit scores starting at 580. Some lenders even offer FHA loans with a credit score as low as 500, though this is far less common.

With a credit score above 600, your options open up even more. Conventional mortgages require only a 620 score to qualify. And with a credit score of 680 or higher, you could apply for just about any home loan.

Verify your home loan eligibility. Start here

In this article (Skip to…)

Can I buy a house with bad credit?

Yes, you can buy a house with bad credit. While getting approved for a home loan with bad credit is challenging, it’s not impossible.

Check your home loan options. Start here

Across the industry, the lowest possible credit score to get a mortgage loan is 500. However, it’s important to note that mortgage lenders willing to accommodate such low scores are few and far between.

Additionally, these lenders usually charge higher interest rates to offset the risk associated with lending to borrowers with poor credit histories.

What do mortgage lenders consider a bad credit score?

The definition of a bad credit score varies between mortgage lenders. But, as a rule of thumb, the FICO scoring model considers scores below 580 to be “poor” or “bad.” If you’re looking for a mortgage with a credit score below 620, it may be considered a “low credit mortgage.”

Verify your home loan eligibility. Start here

FICO credit score ranges:

Below 580: Bad credit
580 to 669: Fair credit
670 to 739: Good credit
740 or above: Excellent credit

Still, some home buyers can qualify for a home loan with a FICO score as low as 500, depending on the loan program.

Home loans for bad credit

Home buyers seeking bad credit home loans have multiple programs to choose from. Yet, the FHA loan stands out as the most common mortgage option for those with poor credit histories.

When comparing home loans for bad credit, evaluate the loan terms, interest rates, and monthly payments to determine which suits your personal finances best.

Verify your home loan eligibility. Start here

Although each loan program and lender has its own unique credit score requirements and minimum down payments, here’s what you can generally expect to see:

FHA loan: 500 credit score

An FHA mortgage is a government-backed loan guaranteed by the Federal Housing Administration. This is why they’re a good option for borrowers with bad credit. You can qualify for an FHA loan with a low credit score of 500 and a 10% down payment, or 3.5% down if your FICO is 580 or above.

FHA loans accept applicants with credit scores as low as 500.
Applicants with scores between 500 and 579 need a 10% down payment.
Borrowers with low or bad credit may pay higher mortgage interest rates, but FHA loan rate increases are typically lower than conventional loans.
An upfront and annual mortgage insurance premium (MIP) is required, which adds to the loan’s overall cost.

Another appealing quality is that, unlike conventional loans, FHA-backed mortgages don’t carry risk-based pricing. This is also known as “loan-level pricing adjustments” (LLPAs). Risk-based pricing is a fee added to loan applications with lower credit scores or other less-than-ideal traits.

Check your FHA loan eligibility. Start here

FHA loans are a strong option if you’re seeking home loans with bad credit. This type of mortgage offers lenient qualifying credit requirements and no risk-based pricing adjustments.

Non-qualified mortgage (Non-QM): 500 credit score

Non-QM loans offer a more flexible lending criteria for those who do not meet the strict qualifications of conventional mortgages, with some available to borrowers with credit scores as low as 500.

Tailored for applicants unable to qualify for mainstream home loans.
Usually charge higher interest rates compared to other types of loans.

For individuals with bad credit, non-QM loans provide an alternative path to homeownership, albeit with potentially higher costs.

Check your bad credit home loan options. Start here

If you’re interested in a non-QM loan, check out the specialty mortgage programs some banks and credit unions offer that are neither conventional loans nor government-backed. Or, work with a mortgage broker who can recommend products from various lenders that might fit your needs.

VA loan: 580 credit score

The Department of Veterans Affairs offers VA loans to veterans, active-duty service members, and some military-affiliated borrowers. VA loans do not require a down payment or ongoing mortgage insurance payments.

VA loans do not have a minimum credit score, but lenders typically prefer a minimum of 580 to 620.
Borrowers with lower credit scores get rates comparable to those with higher credit scores.
VA loans are renowned for offering the lowest interest rates available.
A one-time funding fee is included, which most borrowers roll into their closing costs.

Verify your VA loan eligibility. Start here

VA loans are among the best options for financing a home for those who qualify, regardless of credit history.

Conventional loan: 620 credit score

Conventional loans are arguably the most common type of mortgage. Borrowers with low credit scores may wish to consider alternative options because a conventional loan would most likely have higher interest rates and fees.

A minimum credit score of 620 is generally required.
Loan-level price adjustments (LLPAs) are based on credit score and loan-to-value ratio (LTV).
Private mortgage insurance (PMI) is required for down payments of less than 20% of the home purchase price.

As your LTV rises and your credit score falls, your fee goes up. For instance, a borrower with a 20% down payment and a 700 credit score will pay 1.25% of the loan amount in LLPAs. But an applicant with a 640 score and 10% down will be charged a fee of 2.75%.

Verify your conventional loan eligibility. Start here

Still, despite the higher costs associated with lower credit scores, conventional loans remain a viable option for many, with FHA loans often presenting a more cost-effective route for bad-credit borrowers.

Fannie Mae HomeReady: 620 credit score

The HomeReady program by Fannie Mae offers an avenue for low- to moderate-income borrowers to secure financing with just a 3% down payment.

A minimum credit score of 620.
Available to both first-time and repeat home buyers.
Offers reduced rates for private mortgage insurance compared to standard conventional loans.

Verify your HomeReady eligibility. Start here

HomeReady is an excellent program for those looking to finance homes in low-income communities.

Freddie Mac Home Possible: 660 credit score

Freddie Mac’s first-time home buyer program, Home Possible, can help buyers get into homes with a 3% down payment.

Minimum credit score of 660
Must be a first-time home buyer
Down payment assistance programs are available for those unable to save the required down payment.

Verify your Home Possible eligibility. Start here

This loan program is particularly well suited for first-time home buyers with moderate credit.

USDA loan: 640 credit score

USDA loans are popular with home buyers in qualifying rural areas because they offer zero-down payment options and competitive mortgage rates.

Applicants need a minimum 640 credit score to qualify.
The property must be situated in a designated rural area.
Household income cannot exceed 115% of the area median income (AMI).
Whether you’re purchasing a home or refinancing your current mortgage with a USDA loan, you’ll pay a 1% upfront guarantee fee and a 0.35% annual fee.

Verify your USDA loan eligibility. Start here

A USDA mortgage is a government-backed loan guaranteed by the U.S. Department of Agriculture. This is why USDA loans are a great option for people looking to buy real estate in a rural area because they have flexible credit requirements and require no down payment.

Bad credit mortgage lenders

A less-than-perfect FICO score doesn’t mean you’re confined to dealing with subpar mortgage lenders. Surprisingly, some top-tier lenders specialize in assisting borrowers whose credit scores hover around or even dip below 600.

While it’s true that qualification may not be possible for everyone and your interest rate might be above what a “prime” mortgage borrower would receive, you have just as much right to seek out the best mortgage rates, fees, and customer service. Don’t let your credit score deter you from exploring all available options.

For comprehensive advice on finding the right lender for your situation, check out our guide to the best bad credit mortgage lenders. This resource lists the top lenders specifically catering to bad credit home loans, helping you make an informed decision that aligns with your needs.

How to get a home loan for bad credit

Improving your chances of getting a bad credit home loan may seem daunting, but there are strategies to boost your loan approval odds. As you begin the loan application process, mortgage underwriters will review your entire financial history. If your credit is low but the rest of your financial picture looks good, you’re more likely to get approved.

Check your home loan options. Start here

By following these proven steps, you can significantly improve your appeal to lenders and streamline your home buying process.

Check your free credit report for accuracy

The three major credit bureaus (Experian, Equifax, and TransUnion) make mistakes sometimes. Your creditors can report inaccurate information to the credit bureaus, too. Monitor your credit history to notice errors before they lower your score. The government has set up a website where you can check your credit accounts free: annualcreditreport.com

Dispute inaccurate information

If you do find inaccurate information in your credit history, be sure to file a dispute, especially if the errors include huge blemishes like foreclosures, repossessions, or collections accounts.

Collections accounts can linger on your credit reports for years. They can negatively impact your financial standing even after they’re paid, as paying off a collection upgrades its status to “Paid” but doesn’t remove it from your report.

Negotiating for its complete removal, known as “Pay for Delete,” by contacting the collection agency and offering payment in exchange for deletion from your credit report is a game-changer. Always ensure this agreement is in writing before making any payments, effectively erasing the financial mishap and potentially boosting your credit score.

Get mortgage loan preapproval

Securing mortgage preapproval is a pivotal step for buyers with bad credit. It not only clarifies your budget but also boosts your appeal to sellers. The preapproval process can also pinpoint where to improve your credit so be honest about your finances when seeking preapproval; lenders may suggest programs for credit issues.

Lower your DTI and credit utilization ratios

Lenders evaluate your debt-to-income ratio, or DTI, to determine if you can afford a new monthly mortgage payment. Reducing existing debts before submitting a mortgage application can make qualifying for a home loan easier.

Similarly, paying down credit card debt and personal loan balances also lowers your credit utilization ratio. Credit utilization measures your debt balance against your credit limit. For instance, a $7,000 balance on a $10,000 credit limit results in a 70% ratio, which is considered high. Aiming for a utilization ratio of 30% or lower can significantly boost your credit score.

Improve your payment history

Missed and late payments will lower your FICO score. Be sure to make on-time payments on all your loans and credit cards. It’s a good idea to set your accounts on autopay.

Consider a co-signer

If you’re unable to qualify for a mortgage due to a low credit score, you might want to consider bringing a co-signer into the equation. A co-signer essentially vouches for you, making lenders more comfortable with extending credit your way. In essence, you’re leveraging another person’s higher credit score and financial stability to boost your chances of securing that loan.

That said, it’s crucial to understand the responsibilities and implications for both parties involved. The co-signer’s credit score will be affected, for better or worse, by the loan’s performance. Lenders might also average your credit scores, depending on their specific policies, which can make the loan more attainable. Nevertheless, your interest rates will often be based on the lower of the two scores, meaning you may pay a bit more over the life of the loan.

Avoid unnecessary hard pulls

First things first: not all credit checks are detrimental to your credit score. Soft inquiries, such as those conducted for background checks, don’t affect your score.

However, hard inquiries, like the ones made when you apply for a new credit card or a loan, can lower your score a bit. Each hard pull can reduce your credit score by a few points. So always check whether the creditor will be performing a hard or soft pull on your credit report.

Leverage home equity

For homeowners who are unable to cash-out refinance due to bad credit, a home equity line of credit (HELOC) may be a solution. A HELOC allows access to funds based on the equity built in the home. By tapping into home equity through a HELOC, individuals bypass the strict credit requirements of conventional cash-out refinancing.

This approach can unlock cash for renovations, debt consolidation, or other financial needs, even when a poor credit score would typically close doors to such opportunities.

FAQ: Home loans for bad credit

Check your home loans for bad credit options. Start here

What is the lowest credit score to buy a house?

The lowest credit score typically required to buy a house is 500 with an FHA loan, which requires the borrower to make a 10% down payment. For credit scores of 580 or higher, a 3.5% down payment is sufficient. Conventional loans typically require a minimum credit score of around 620.

Can you get a mortgage with very bad credit?

Yes, it’s possible to secure a mortgage with bad credit, especially through government-backed loans designed to assist borrowers in this situation. Some lenders also offer home loans for bad credit, which are designed to assist potential homeowners with lower credit scores. These loan programs may offer other benefits, such as lower minimum down payments or no down payment requirements at all.

Which mortgage lender is best for bad credit?

Different mortgage lenders will view your application differently, so it’s important to shop around when you have bad credit. Online mortgage lenders have opened up more choices for many low-credit-score borrowers. Make sure to work with someone who has a Nationwide Mortgage Licensing System (NMLS) license.

How are mortgage lenders able to offer home loans for bad credit?

Unlike personal loans and student loans, mortgages are secured loans. The security comes from the value of your home, which your lender could repossess if you default. FHA, VA, and USDA loans have an additional level of protection: backing from the federal government. That’s why you could still get an FHA loan, for example, even with a credit score below 580, which most lenders consider subprime lending.

Can I get a home loan with a 500 credit score?

It is possible to find an FHA lender willing to approve a credit score as low as 500. You may also be able to find a non-QM (non-conforming) conventional lender with a 500 credit score minimum. But you won’t have many choices and must be prepared to make a larger down payment. It will also help if you have fewer other debts compared to your monthly income.

Check your eligibility for a bad credit home loan

It’s possible to buy a house with bad credit.

You’ll likely pay a higher mortgage rate, but you could get on the homeownership ladder now and start building equity. And you can always refinance to a lower rate later once your credit improves.

Want to find out whether you qualify for one of the many home loans for bad credit? Consulting with a mortgage loan officer about your options is free and will help you determine which bad credit mortgage program is best for you.

Time to make a move? Let us find the right mortgage for you

Source: themortgagereports.com

Apache is functioning normally

May 29, 2024 by Brett Tams

Enjoy complimentary access to top ideas and insights — selected by our editors.

High interest rates and low inventory have plagued the housing market, making it particularly difficult for younger adults to enter the world of homeownership. In recent years, millennials have notoriously struggled with owning houses — has Gen Z learned from their struggles enough to create better paths to homeownership?

At the very least, they’re keeping a positive attitude: Research from ServiceLink found that the younger generations had a more optimistic view of the housing market in 2024, with 56% of Gen Zers and 51% of millennials believing that conditions for buying were favorable, compared with 38% of Gen X and 18% of baby boomers. However, the survey results were not all that positive when it came to the respondents’ views on interest rates: Forty-two percent of those who considered buying a home in the past 12 months gave up the quest.

It’s all driving new trends in housing, especially among the youngest working generation. Gen Z is finding creative solutions to alleviate housing costs, with recent college graduates moving back home with their parents at a higher rate, as well as using “house hacking,” or renting out part of your property to afford housing costs.

Read more: Gen Z factors future rental income in home buying decisions

“Housing is very costly. People are definitely more open to sharing space,” Danny Gardner, Freddie Mac’s senior vice president of mission and community engagement, recently told National Mortgage News.

Some loan officers, including John Birke of Movement Mortgage, have developed marketing aimed at tapping into this interest on TikTok, a social media channel the industry has increasingly been experimenting with as a way to reach younger generations.

“I’ve done several videos about house hacking. I think it’s going to become more and more popular in the future,” Birke said. “Both Gen Z and millennials are frustrated that they’ve been essentially shut out of the housing market with few options for buying a home.”

Gen Z may also have more pressing financial concerns to balance such as erasing debt, especially from student loans, according to a FinLocker survey last year. While mortgage lenders are seeking to court young homebuyers with attractive marketing, the appeal of rental income is undeniable.

Read more: Housing affordability initiatives launched this spring

There are, however, a few trends working in Gen Z’s favor. The flexibility of remote work, which Gen Z has benefited from for much of their adult life, gives younger adults the opportunity to buy homes in more affordable areas while still working jobs in expensive, urban areas.

Many Gen Z homeowners likely purchased during the ultra-low rate era of 2020 and 2021, data from Redfin suggests. Their advantageous window compares favorably to Millennials, who in their early 20s lived through the Great Recession, and Gen Xers, who faced mortgage rates around 11% in 1989, when the oldest of that cohort were 24 years old.

Read more about recent Gen Z housing trends below.

Source: nationalmortgagenews.com

Apache is functioning normally

May 28, 2024 by Brett Tams

Affiliate links for the products on this page are from partners that compensate us (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate mortgages to write unbiased product reviews.

Mortgage rates are down this month. So far in May, 30-year mortgage rates have averaged around 6.74%, according to Zillow data, which is 11 basis points lower than the previous month’s average. But whether they’ll go down further depends on how inflation trends in the coming months.

As inflation slows and the Federal Reserve is able to start lowering the federal funds rate, mortgage rates should drop. But it may be a while before affordability improves for borrowers.

On a $250,000 loan with a 6.74% rate, you’d pay $1,620 each month on your mortgage. According to the Mortgage Bankers Association, rates could drop to 5.9% by the end of 2025. With a 5.9% rate, you’d pay $1,483 a month for that same mortgage.

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Use our free mortgage calculator to see how today’s mortgage rates would impact your monthly payments. By plugging in different rates and term lengths, you’ll also understand how much you’ll pay over the entire length of your mortgage.

Mortgage Calculator

$1,161
Your estimated monthly payment

Total paid$418,177

Principal paid$275,520

Interest paid$42,657

Paying a 25% higher down payment would save you $8,916.08 on interest charges
Lowering the interest rate by 1% would save you $51,562.03
Paying an additional $500 each month would reduce the loan length by 146 months

Click “More details” for tips on how to save money on your mortgage in the long run.

Mortgage Rates for Buying a Home

30-Year Fixed Mortgage Tick Up (+0.23%)

The current average 30-year fixed mortgage rate is 6.81%, up 23 basis points from where it was this time last week, according to Zillow data. This rate is down compared to a month ago, when it was 6.94%.

At 6.81%, you’ll pay $653 monthly toward principal and interest for every $100,000 you borrow.

The 30-year fixed-rate mortgage is the most common type of home loan. With this type of mortgage, you’ll pay back what you borrowed over 30 years, and your interest rate won’t change for the life of the loan.

20-Year Fixed Mortgage Rates Inch Up (+0.09%)

The average 20-year fixed mortgage rate is nine basis points up from where it was last week, and is sitting at 6.25%. This time last month, the rate was 6.67%.

With a 6.25% rate on a 20-year term, your monthly payment will be $731 toward principal and interest for every $100,000 borrowed.

A 20-year term isn’t as common as a 30-year or 15-year term, but plenty of mortgage lenders still offer this option.

15-Year Fixed Mortgage Rates Go Up (+0.25%)

The average 15-year mortgage rate is 6.08%, nine basis points lower than last week. It’s down compared to this time last month, when it was 6.21%.

With a 6.08% rate on a 15-year term, you’ll pay $848 each month toward principal and interest for every $100,000 borrowed.

If you want the predictability that comes with a fixed rate but are looking to spend less on interest over the life of your loan, a 15-year fixed-rate mortgage might be a good fit for you. Because these terms are shorter and have lower rates than 30-year fixed-rate mortgages, you could potentially save tens of thousands of dollars in interest. However, you’ll have a higher monthly payment than you would with a longer term.

7/1 ARM Rates Inch Down (-0.05%)

The 7/1 adjustable mortgage rate is down five basis points from a week ago, currently at 6.78%. It’s up slightly compared to a month ago, when it was at 6.69%.

At 6.78%, your monthly payment would be $651 toward principal and interest for every $100,000 borrowed — but only for the first seven years. After that, your payment would increase or decrease annually depending on the new rate.

5/1 ARM Rates Nearly Flat (+0.03%)

The average 5/1 ARM rate is 6.68%, a three-basis-point increase from last week. It’s down compared to where it was a month ago, when it was 6.75%.

Here’s how a 6.68% rate would affect you for the first five years: You’d pay $644 per month toward principal and interest for every $100,000 you borrow.

30-year FHA Rates Essentially Flat (-0.01%)

The average 30-year FHA interest rate is 6.15% today, which is just one basis point down from last week. This rate was 6.07% a month ago.

At 6.15%, you would pay $609 monthly toward principal and interest for every $100,000 borrowed.

FHA mortgages are good choices if you don’t qualify for a conforming mortgage. You’ll need a 3.5% down payment and 580 credit score to qualify.

30-year VA Rates Increase a Bit (+0.13%)

The current VA mortgage rate is 5.96%, 13 basis points higher than this time last week. This rate was 6.25% a month ago.

With a 5.96% rate, your monthly payment would be $597 toward principal and interest for every $100,000 you borrow.

Mortgage Refinance Rates

30-Year Fixed Refinance Fall (-0.33%)

The average 30-year refinance rate is 7.32%, 33 basis points lower than last week. It’s down compared to a month ago, when it was 7.87%.

Here’s how a 7.32% rate would affect your monthly payments: You’d pay $687 toward principal and interest for every $100,000 borrowed.

Refinancing into a 30-year term can land you lower monthly payments, but you’ll ultimately pay more by refinancing into a longer term.

20-Year Fixed Refinance Rates Decrease (-0.30%)

The current 20-year fixed refinance rate is 6.70%, which is down 30 basis points compared to a week ago. This rate was 7.05% this time last month.

A 6.70% rate on a 20-year term will result in a $757 monthly payment toward principal and interest for every $100,000 you borrow.

15-Year Fixed Refinance Rates Drop (-0.40%)

The average 15-year fixed refinance rate is 6.18%, which is 40 basis points lower compared to last week. It’s also down compared to this time a month ago, when it was at 6.71%.

A 6.18% rate on a 15-year term means you’ll pay $854 each month toward principal and interest for every $100,000 borrowed.

Refinancing into a 15-year term can save you money in the long run, because you’ll get a lower rate and pay off your mortgage faster than you would with a 30-year term. But it could result in higher monthly payments.

7/1 ARM Refinance Rates Tick Down (-0.10%)

The average 7/1 ARM refinance rate is 6.68%, down 10 basis points from where it was last week. It’s down from a month ago, when it was 8.06%.

Refinancing into a 7/1 ARM with a 6.68% rate means your monthly payment toward principal and interest will be $644 for every $100,000 you borrow. This will be the payment for the first seven years, then your rate will change annually unless you refinance again.

5/1 ARM Refinance Rates Barely Inch Down (-0.03%)

The 5/1 ARM refinance rate is 6.49%, which is just three basis points lower than it was this time last week. It’s down compared to this time last month, when it was 6.75%.

A 6.49% rate will result in a monthly payment of $631 toward principal and interest for every $100,000 borrowed. You’ll pay this amount for the first five years of your new mortgage.

30-Year FHA Refinance Rates Flat (No Change)

The 30-year FHA refinance rate is 5.79%, which is the same as it was last week. This rate was 6.03% this time last month.

A 5.79% refinance rate would lead to a $586 monthly payment toward the principal and interest per $100,000 borrowed.

30-Year VA Refinance Rates Tick Up (+0.15)

The average 30-year VA refinance rate is 5.91%, which is up 15 basis points compared to where it was was last week. This rate was 6.04% a month ago.

At 5.91%, your new monthly payment would be $594 toward principal and interest for every $100,000 you borrow.

Are Mortgage Rates Going Down?

Mortgage rates started ticking up from historic lows in the second half of 2021 and increased over three percentage points in 2022. Mortgage rates also rose dramatically in 2023, though they started trending back down toward the end of the year. Though rates have been somewhat elevated recently, they should go down by the end of 2024.

For homeowners looking to leverage their home’s value to cover a big purchase — such as a home renovation — a home equity line of credit (HELOC) may be a good option while we wait for mortgage rates to ease further. Check out some of our best HELOC lenders to start your search for the right loan for you.

A HELOC is a line of credit that lets you borrow against the equity in your home. It works similarly to a credit card in that you borrow what you need rather than getting the full amount you’re borrowing in a lump sum. It also lets you tap into the money you have in your home without replacing your entire mortgage, like you’d do with a cash-out refinance.

Current HELOC rates are relatively low compared to other loan options, including credit cards and personal loans.

Molly Grace

Mortgage Reporter

Source: businessinsider.com