First-Time Homebuyer Errors: Timing and Future Expenses

first-time homebuyer errors timing

In parts one and two of this multi-part blog series, we’ve gone over some of the most common errors to avoid if you’re a first-time homebuyer entering the market. While there are several such areas to steer clear of, you also have resources available to you for assistance, including your loan officer and realtor.

At Altius Mortgage and our partners at Mortgage Ogden, we’re proud to offer several loan programs that are ideal for first-time homebuyers, plus expertise on how to navigate the market if you’re entering it for the first time. In today’s final entry into our series, we’ll go over some of the errors we sometimes see later in the process, plus what you should do to avoid them and ensure you’re in a great position moving forward with your new home.

Other Credit Applications

It’s vital to be aware of the timing gaps between when you apply for your mortgage and when the home sale will actually be closed, which will be a few weeks in most cases. And during this in-between period, we strongly recommend taking on any other kind of credit application, whether for a car loan, furniture purchases or any other reason.

This is because your credit is still a deciding factor during this period, where your lender will be evaluating your credit score, debt-to-income ratio and your income to determine your creditworthiness. If you apply for other forms of credit that require hard inquiries, these will lower your credit score and may increase your debt-to-income ratio, neither of which will look good to your lender. As a result, your mortgage interest rate or fees on the mortgage might be changed, or your closing could be delayed.

Shopping Too Early

While we know the home shopping part of this process is what you’re really looking forward to, you can’t be impatient here. If you’re evaluating or even visiting properties before being at least pre-qualified or pre-approved for a mortgage, you’ll be doing so blind – without a true idea of your purchasing power or the ability to make a competitive offer. Instead, speak to your loan officer about the steps for being pre-approved.

Improper Cost Calculations

Finally, one mistake some first-timers make is miscalculating various long-term expenses as they close on their home. In some cases, these refer to various homeownership costs, including utilities, homeowners’ insurance and related expenses. In others, they’ll refer to repair or renovation needs that are required in the home, including some that will present safety or long-term property risks if they aren’t remedied.

For more on how to avoid common pitfalls among first-time homebuyers, or to learn about any of our home loan services or mortgage rates, speak to the staff at Altius Mortgage today.

First-Time Homebuyer Errors: Programs, Savings, Points

first-time homebuyer errors savings

In part one of this multi-part blog series, we went over some of the common errors first-time homebuyers often make as they enter the market. Many of these are based on simple misunderstandings or myths that have arisen over time, but there are also some simple resources that will allow you to avoid these risks.

At Altius Mortgage and our partners with Mortgage Ogden, our quality loan officers are here to serve as one of these resources, assisting clients with numerous loan programs ideal for first-time buyers and providing several other areas of expertise. What are some of the other common issues we see our first-time buyer clients get wrapped up in, and how can you avoid these?

Missing Out on First-Timer Programs

As we just noted above, and as all first-time buyers should be aware, there are several programs out there that are either specifically designed for you or are often used for buyers in your position. These allow for themes like lower down payments, moderate interest rates or other benefits – but as a buyer, you have to do your research and determine which of these might be beneficial to you, something your loan officer will help you with.

Here are some of the specialty loan programs you might be eligible for:

  • FHA loans: These loans, backed by the Federal Housing Administration, allow for down payments as low as just 3.5% of the purchase price. In addition, they also have lower credit thresholds than other loan types, allowing you to qualify even if you might not have for a conventional loan.
  • VA loans: These loans are guaranteed by the US Department of Veteran’s Affairs, and are for military members, veterans and certain spouses. They allow for no down payment and 100% financing.
  • USDA loans: Meant for homes in rural areas, these loans are backed by the US Department of Agriculture and also allow for zero down and 100% financing.

Running Savings Dry

While you might use a sizable chunk of your savings for a down payment and closing costs on your home, it’s important not to sap them completely. It’s vital to leave funds available for unexpected repairs or costs once you move into the home, plus things like moving expenses. This is another area where our loan officers will be happy to provide basic advice.

Misunderstanding Discount Points

For some, the use of discount points – fees you pay up-front to reduce your interest rate down the line – might be valuable. Whether you go for discount points will depend on the break-even period, or how long it takes for this up-front cost to be exceeded by the monthly savings you’ll receive from a lower interest rate. In reality, only a small percentage of buyers will truly benefit from discount points, and you should inquire specifically with your loan officer about their benefits before considering them.

For more on how to avoid common first-time homebuyer errors, or to learn about any of our home loans or mortgage rates, speak to the staff at Altius Mortgage today.

Ogden First-Time Homebuyer Errors: Credit, Quotes, Down Payment

first-time homebuyer errors credit

While entering the homebuying and mortgage market for the first time may feel somewhat intimidating to some people, the reality is that you’re in a much better position here than your parents would have been a decade ago when it comes to information and resources. Due primarily to the internet and our connected society, including resources like this blog, homebuyers have numerous robust resources at their disposal to help them navigate the mortgage and home purchase process.

At Altius Mortgage and our partners at Mortgage Ogden, we’re here to help with not only numerous loan programs geared specifically to first-time homebuyers in Ogden and other parts of Utah, but also important information and resources to help you move through this process – including the ability to work with our great loan officers to receive financing. Our officers will inform you on numerous areas of this process, including helping you steer clear of a few of the mistakes first-timers often make in several different realms as they enter the mortgage and homebuying world. This multi-part blog series will go over several of the most common errors and how you can avoid them.

Lack of Purchasing Power Understanding

First and foremost, you have to have an understanding of the purchasing power at your disposal before you move any further. That is, how much home can you realistically afford, based on both the down payment required and the expected monthly payments – and how these compare to your household income.

This is a great example of an area where modern resources make things simple. While your parents might have had to do this math by hand, today there are numerous quality mortgage calculators online, including on our Altius Mortgage site. These will allow you to plug in basic numbers for your income and expenses, then get a broad idea of what you can afford.

Avoiding Credit Areas

Credit is vital for any mortgage application, and it’s a simple reality that you will have to scrutinize yours a bit during this process. Especially if your credit is subpar, but even if it’s not, you should plan to take the time to look up your credit score and request a copy of your credit report from bureaus so you can check it for errors.

Single Rate Quote

Just like any other area where you have numerous options, you should be comparing the available rates that are out there. Don’t simply take the first rate you’re offered – check if you might be able to get a better number by applying with multiple lenders.

Small Down Payment

Down payment is a curious area within the mortgage world. On the one hand, it’s a complete myth that you must have 20% of the purchase price for a down payment no matter what – there are numerous programs that allow for much smaller down payment amounts, as low as zero down or 3.5% down in other cases.

However, lower thresholds don’t mean the down payment isn’t important. Putting too little money down will mean your remaining principal balance and interest payments are high, and this will put some buyers in a position they can’t afford. In some cases, it might be prudent to wait six months or a year to add to your down payment savings before you enter the market.

For more on first-time homebuyer mistakes to avoid, or to learn about any of our mortgage loan programs or mortgage rates in Ogden and other parts of Utah, speak to the staff at Altius Mortgage today.

Home Tour Tips: HVAC Unit, Location, Child Themes

home tour HVAC location

In part one of this two-part blog series, we went over some of the top areas to be keeping an eye on when touring homes you’re considering for purchase, including mortgage and budget-related themes. There are several important variables to consider while seeing homes you might think about making an offer on, from standard market factors to several personal areas that speak to your individual needs and desires.

At Altius Mortgage and our partners at Mortgage Ogden, we’re here to help. We offer numerous mortgage loan products, including several mortgage programs ideal for first-time homebuyers, but also a whole host of areas of expertise for our buyers, who we strive to assist in every way possible. While home tours are generally carried out either on your own or in the company of your realtor, there are a few areas where you may have questions or require tips from your loan officer. Here are some of the other important themes to be considering while touring a home or group of homes.

HVAC Unit

We went over some basics on appliances and fixtures in the home in part one here, but the HVAC unit and system deserves its own section. As one of the highest-value components in any home, the comprehensive HVAC system often has a major impact on your budget required, whether for the mortgage itself or for future repair needs.

For instance, if the furnace or AC condenser in a home you’re looking at are over 10 years old, you should be planning to replace these in the next few years. These are not cheap jobs, so if you plan to move forward with such a home, you need to budget properly – both for the mortgage and closing costs themselves and for this significant future expense.

Location Factors

While there are several location-related elements you can check on without actually visiting a home, such as proximity to various areas you visit often, there are also those you should get an idea of in-person. For instance, walking around the neighborhood itself and getting a feel for it is often an important task, as is inquiring with neighbors about the quality of the neighborhood.

Children Considerations

Both in terms of location and other factors, whether you have children is a major variable here. If you do, a big chunk of your location search will often revolve around the school district you’ll live in and the schools your children will attend. In addition, you’ll want to consider child-friendly elements of the home and whether the space is properly outfitted for your needs.

For more on areas to look into when touring homes, or to learn about any of our mortgage rates or related home loan services, speak to the staff at Altius Mortgage today.

Utah Home Tour Tips: Budget and Mortgage, Appliances, Remodels

home tour tips mortgage

Within the majority of homebuying situations, multiple things are happening at once. Most buyers will be touring homes at the same time as they’re working with their loan officer and mortgage lender on basic approval and related areas, for instance, and while these are certainly two distinctly different parts of the process, they tend to cross over in some basic ways.

At Altius Mortgage and our partners at Mortgage Ogden, we’re here to help with comprehensive mortgage loan services, from standard home loans to first-time buyer programs, mortgage refinancing and many others for Utah clients. However, our loan officers are not limited to their expertise in the mortgage realm alone, and we often serve as basic advisors and confidants to our clients in several areas, including how their home tours may occasionally interact with our roles. For instance, if you’re considering touring a home that’s above your originally-planned budget, your loan officer will work with you to obtain a pre-approval letter at this higher range if you decide to make an offer on the home.

What are some general themes you should be keeping in mind when it comes to touring homes? This two-part blog series will go over several.

Price and Budget

Your overall budget will obviously be a significant factor here, as will the listed price of any home you’re touring or considering. This is one major theme you’ll have a chance to evaluate ahead of time through online listings and other resources, though as professionals in the industry will tell you, you can never truly know a home’s quality until you see it in person.

One major tip here: Be sure to budget for more than just your mortgage. You need additional funds for closing costs, long-term maintenance and any potential emergencies that come up, and sapping your entire savings just to get the home will leave you in a bad spot financially.

Quality and Age of Appliances

Another important factor in any home tour is the quality and age of the major appliances that will be remaining in the home, such as the dishwasher, various plumbing fixtures, and possibly several others. If all the major fixtures are only a few years old, you can be confident knowing they won’t need replacement anytime soon; if there are older items, however, you may have to budget for replacements or repairs within the next couple years.

Remodeling Qualities or Capabilities

For many buyers, the home’s remodeling capability will be a huge factor, and something you’re looking at closely during a home tour. Not only should you be considering this from a budgetary standpoint, you should also be looking for simple areas or components that can be easily remodeled or upgraded to meet your eventual goals. Is there some extra room in your kitchen that might allow for an island upgrade, for instance? Or perhaps there’s a certain wall in the home that you feel you could tear down to create a more open space. The potential themes here are limitless, but you need to be able to spot them.

For more on what to be looking for as you tour homes and obtain a mortgage loan, or to learn about any of our mortgage rates or related services in Utah, speak to the staff at Altius Mortgage and our partners at Mortgage Ogden today.

Understanding Escalation Clauses in Home Offers

escalation clauses home offers

Buyers who have been on the home market anytime in the past six months are well aware: It’s a seller’s market out there. Many homes will have multiple offers placed on them within just days of hitting the market, and buyers – plus their realtors and loan officers – are looking for ways to improve offers and make them more attractive to sellers.

At Altius Mortgage and our partners at Mortgage Ogden, we’re happy to serve the vital loan officer role in this process, offering mortgage loans for a variety of buyers. We’ve assisted numerous clients with everything from pre-approval and confirmation of purchasing power through finalizing their loan, and we’re happy to offer several areas of expertise when it comes to improving offer quality. One tool that some buyers are using is the inclusion of what’s called an escalation clause in their offer to the seller – what is an escalation clause, how does this work, and should you consider using one in your next offer? Here are some basics to consider.

Escalation Clause Basics and Example

Also simply referred to as an escalator in some circles, an escalator clause involves a buyer stating in their offer that while they are offering a certain monetary amount, they are actually prepared to pay some extra if needed – to a certain point, which will also be defined in the offer.

As a simple example, let’s say you’re considering a home that was listed at $300,000, and offering at this listing price. However, you’re also including an escalation clause that says you are prepared to go over the asking price by $10,000. In this case, if another prospective buyer offers a maximum of $305,000, you would be the winning bid as part of your escalation clause.

In other cases, an escalation clause can be done differently. You can state that you will beat the next-highest offer by some amount, usually $1,000 or sometimes more – in the above example, if you used this method, your offer would automatically trigger to $306,000 if the next-highest offer was $305,000.

Do I Need an Escalation Clause?

There’s no such thing as “needing” an escalation clause, but these have absolutely become more common over the last six months or so as the market has become so tough. If you’re offering on a great home you know will have several offers, an escalation clause is often a great way to put all your cards on the table and perhaps gain an advantage over other buyers. Your realtor will often be able to speak to the seller’s agent and determine if lots of offers will be coming in – if this is the case, you may consider an escalator.

Possible Reasons to Avoid an Escalation Clause

On the flip side, some realtors won’t work with escalation clauses – whether the seller’s agent or even your own agent. This is for a few reasons, including the possibility that there aren’t multiple offers; in these cases, adding an escalator really just signals to the seller that you’re willing to pay more than what you offered, and often limits your leverage in negotiations. In addition, for the second form of escalator we went over above, where you offer a set amount above the next-highest offer, there’s some serious potential risk here if another offer comes in very high.

For more on escalator clauses, or to learn about any of our mortgage loan services, speak to the staff at Altius Mortgage today.

Mortgage Payment Components: Taxes and Insurance, Part 1

mortgage payment components taxes insurance

In part one of this two-part blog series, we went over some basics on the important components involved in a standard mortgage payment. While the final number involved in your monthly payment is the most important broad consideration for any mortgage borrower, understanding the various factors that contribute to this eventual tally is also a vital task.

At Altius Mortgage and our partners at Mortgage Ogden, we’re happy to help with any of these basic areas for our clients as they look to understand any part of their mortgage or home loan options. We’re proud to offer many mortgage programs specifically for first-time borrowers who have not been through this process before, and might need our assistance with some of these areas. Today’s part two of our series will go over a couple other important components of a standard mortgage payment to be aware of.

Tax Component

Another important section of your mortgage payment will be for property taxes, which are in place due to your jurisdiction and are used to fund various public services like trash collection and others. In many cases, property taxes will be collected as part of your payment each month, then held in a separate escrow account until the end of the year – this means you’re paying single payments instead of one large lump sum at the end of the year.

In addition, this escrow format usually involves the lender covering the difference if the final tax amount comes out higher than expected, then billing you for it in future payments. This also helps the borrower avoid a tax lien. For those who do not have 20% of the purchase price available for a down payment, lenders will often require this escrow format as a way of protecting them from a huge property tax bill if there’s a foreclosure. FHA loans, in addition, will require escrow accounts be used.

Insurance Payments

Finally, there are two types of insurance that might be found as part of your mortgage payment:

  • Homeowners’ insurance: In many cases, homeowners’ insurance and flood insurance will be collected by lenders and placed in escrow. This may lead to more favorable terms if you agree on this. A lender cannot require you to use a particular insurer here, but they can require that such insurance be carried.
  • Private mortgage insurance (PMI): In cases where you are paying less than 20% down for your home, private mortgage insurance must be maintained until a certain amount of the loan has been paid off. PMI protects the lender from potential risks.

For more on the components involved in your mortgage payment, or to learn about any of our mortgage rates or other home loan solutions, speak to the staff at Altius Mortgage today.

Mortgage Payment Components: Principal and Interest, Part 1

mortgage payment components principal interest

While there are a number of components involved in any mortgage situation, from mortgage rates to various mortgage programs and term lengths, the eventual goal of borrowers and lenders alike is to arrive at a simple number: A monthly mortgage payment. This is the amount borrowers pay over the life of their mortgage, and it contains a few specific areas where your money will go toward as you make payments.

At Altius Mortgage and our partners at Mortgage Ogden, we’re happy to offer a wide range of mortgage options, from first-time homebuyer programs like FHA loans to numerous options for mortgage refinancing if you’re in need. We help make things simple for our clients, including laying out all the factors that will be involved in their upcoming mortgage payment that create the final number they’re paying each month. What are these elements, and how does each impact your equity and long-term finances within the mortgage? This two-part blog will go over each important component of your mortgage payment.

Principal Balance

The simplest and most straightforward area you pay money toward in a mortgage is your principal balance, which just refers to the actual amount of the mortgage loan itself. Each mortgage payment you make should contain at least some amount of principal balance, but this amount will actually increase as the mortgage goes on – this is because you’re paying down more interest earlier on, and also means you can’t simply divide your principal by your total number of payments to know how much of it has been paid off.

Now, there are certain situations where you might be able to pay down your principal balance faster than your schedule anticipates. If you have the funds available, speak to your lender about adding a bit extra to each payment, or making an extra payment once or twice a year that can be applied fully to your principal balance. Over a period of several years, this can make a major impact.

Interest Paid

The other major component that most are well aware of in a mortgage payment is your interest, which is defined by the percentage of the total loan you’re paying as an incentive to the lender for loaning you this money. As we noted above, you’ll generally begin by paying more interest early in the mortgage, but will then pay less as the loan goes on.

As you may have guessed, shorter loans will come with higher interest rates. In addition, your rates may be higher if your loan amount is higher, or if your credit score is lower than average.

For more on the various components of your mortgage payment you’ll be paying each month, or to learn about any of our mortgage rates or home loan services, speak to the staff at Altius Mortgage today.

No-Appraisal Mortgage Loans: Benefits, Eligibility and More

no-appraisal mortgage loans eligibility

In part one of this two-part blog series, we went over some basics on a relatively rare and unique situation in homebuying, but one that does take place: The no-appraisal mortgage loan. This type, where the home is not appraised in a typical fashion ahead of sale, are not common on residential properties, but may still happen in certain situations.

At Altius Mortgage and our partners with Mortgage Ogden, we’re happy to offer a wide range of home loan options, from numerous programs for first-time homebuyers to options for mortgage refinancing and several other areas. What might be some of the benefits of considering a no-appraisal loan in unique circumstances, how can you figure out if you’re eligible for this to begin with, and which other factors should you be considering before moving forward? Here are some basics.

Benefits of No-Appraisal Loans

For those who are eligible and fit the criteria, the primary benefit of a no-appraisal loan is cost savings. Homebuyers are generally the ones who are responsible for the costs of an appraisal, which tends to cost several hundred dollars at minimum – when no appraisal is necessary, this is a cost that’s avoided.

In addition, no appraisal often allows mortgage situations to close faster. There’s no more need to schedule and appraiser, work around their schedule, plus wait multiple days for their report. In fact, one of the most common instances where this no-appraisal format is considered is when a quick closing date is required by both parties within the mortgage situation.

Eligibility for Appraisal Waivers

Fannie Mae has created rules and guidelines that state who is and is not eligible for an appraisal waiver or other forms of no-appraisal loan. Here are their regulations:

  • You must be a strong borrower with an excellent credit score
  • You must be able to prove your available assets
  • The dwelling must meet certain qualifications
  • You must meet certain LTV ratios based on the type of property
  • There may be disqualifications for certain property types, including multi-family units or those in disaster-impacted areas
  • Appraisal waiver can be denied anytime the lender has a reasonable belief an appraisal is necessary

Prior Considerations

Before going down this path, it’s vital you understand exactly what the ramifications might be. It’s possible your home’s actual value will be significantly lower than the purchase price you’re paying – this is a risk you take, and you cannot hold the lender or the seller liable for an incorrect valuation later on. Ensure you know your rights and have discussed this with your lender and realtor before proceeding.

For more on no-appraisal loans, or to learn about any of our mortgage rates or other mortgage services, speak to the staff at Altius Mortgage today.

No-Appraisal Mortgage Loans: Basics and Alternatives

no-appraisal mortgage loans

For the vast majority of mortgage and homebuying situations, a home appraisal is an important part of the process. This involves a third party appraiser examining the property inside and out to provide a professional estimate of its market value, helping confirm to both buyers and sellers (and even lenders) that the price being agreed upon is realistic plus multiple other areas.

At Altius Mortgage, we’re happy to assist all our clients with the appraisal process if needed, including first-time homebuyers, for whom we offer great mortgage rates and programs while also providing expertise and guidance through this process. We’re also available to work with borrowers for a more unique pursuit: A no-appraisal loan, which is much rarer than the normal appraisal process but will still be used in some cases. This two-part blog will go over the details of this program and why it’s sometimes used, plus the kinds of borrowers who might be good candidates for it.

No-Appraisal Loan Basics

As the title suggests, a no-appraisal loan is a home loan that requires no professional appraisal. There are a few methods by which this type of loan might be attained, the most common of which is known as an appraisal waiver – this gives the homebuyer the right to decline having a traditional appraisal done on their property.

As we’ll dig into a bit further later on, no-appraisal loans are not common at all for private residential properties, largely because they present a great risk to both the parties involved and the lender. If there is no objective evaluation of the property, it could come in far more or less valuable than the mortgage amount – leaving borrowers at risk of default on one side of the coin, or sellers stuck with far less than their asking price on the other. However, as of 2017, both Fannie Mae and Freddie Mac have begun offering some select appraisal waivers.

Appraisal Alternatives

The most common alternative used during a no-appraisal loan is a computer calculation program that plays something of a similar role, though with less specific involvement. This program will utilize information like previous home value and other properties in the area to place a value on the home – but as you may have guessed, this alternative is less precise than an actual in-person appraisal.

In other cases, no appraisal will be required at all.

Refinances

A no-appraisal refinance loan is also possible using this same method, and this is an area that isn’t quite so restrictive. Especially in cases where you’re using the same lender for both your original loan and your refinanced loan, there are often relaxed standards allowing no-appraisal refinances – programs like the VA loan, the FHA loan and the USDA loan all have systems in place to make refinancing easier from an appraisal standpoint.

For more on no-appraisal home loans, or to learn about any of our mortgage loan services, speak to the staff at Altius Mortgage today.