What is a Mortgage Rate Lock?

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The mortgage lending world is full of terms that may not be familiar to you but are important to understand if you are considering buying a home or refinancing. One of those terms is mortgage rate lock. 

A mortgage rate lock is an arrangement between a lender and a borrower in which a mortgage’s interest rate is locked for a certain period of time. Typically, the locked-in rate will be the current market interest rate.

Some lenders choose to charge borrowers a lock fee if they choose to lock in the interest rate. Also, it’s common for lenders to start at a higher rate in case the homebuyers do not exercise their options to lock in a rate.

When a borrower and lender agree to a mortgage rate lock, it is important that both parties are bound by the agreement. This agreement would mean, for example, that the borrower could not unlock the rate because the market interest rate had lowered. Interest rates will usually be locked from the moment that the mortgage is offered until it is closed.

Unless a change occurs to the loan application, the interest rate will stay the same and will not be affected by market changes. Changes to the mortgage application, such as an increased loan amount or an updated credit score for the borrower, can result in the interest rate changing. Interest rates can also change if the home is appraised at a higher or lower amount than expected, or the borrower changes the type of mortgage for which they are applying.

Mortgage rate locks have some drawbacks from the borrower’s standpoint. For example, if the market rate falls during the term of the mortgage, a borrower would not be able to take advantage of these lower rates. The same would be true for lenders if the market rate rises.

A lock deposit can be a good way to make sure that both the borrower and the lender hold to the terms of the mortgage lock agreement. This deposit shows that both parties are committed to upholding the agreement. A loan estimate and a rate lock can be issued at the same time, and the period of the mortgage rate lock can be between 10 and 60 days. A longer rate lock period typically means that the borrower and lender have agreed to a higher interest rate.

Questions about mortgage rate locks or anything related to home mortgages? Please contact us today. 

Your Offer Can Beat a Cash Offer!

couple in front of new house

The word on the street is that the sellers’ market is slowing down. But that doesn’t mean cash offers are a thing of the past. For a seller, cash offers may mean a faster closing, but they also may mean a lower offer and extra demands in the deal. Here are some ways you can still “win the deal,” even if you’re not paying cash.

1. Prove you are ready to buy: Get a Performance Guarantee with Universal Lending. Our Performance Guarantee is a conditional loan commitment that guarantees your earnest money up to $10,000. Essentially, you’re putting in an offer that has already gone through underwriting. Other homebuyers may offer a pre-approval letter, but a Performance Guarantee is even better.

2. If you don’t have a Performance Guarantee, get a pre-approval letter. Your pre-approval letter says that you are qualified to buy a home. Other buyers will have this letter, so if you don’t, you are at a disadvantage.

3. Choose a lender that can get deals done quickly. Universal Lending is known as a quick-closing lender and our loan officers would like to help your offer beat a cash offer.

4. Make a higher offer. Even if your buyers are eager to sell, more money may sweeten the deal. Cash buyers often offer less for the home, in exchange for the fast closing, but at the end of the day, they are still hoping to get as much money as they can. You may be surprised that you don’t have to offer thousands of dollars to beat the cash offer; a higher offer of just $1,000 may be enough of an incentive.

5. Offer a bigger down payment or more earnest money. The more you put down, the more serious you seem about your offer.

6. Make your best offer your first offer. Assume that there will be little or no negotiation on your offer and make your best offer right off the bat.

7. Learn what the seller’s terms are. A good real estate agent will find out what the seller is looking for. Does the seller need to stay in the home until they find a place to move? Are they looking to sell quickly and move out right away? Knowing this information ahead of time will help you make an offer that has a better chance of getting accepted.

8. Be flexible. Can you be accommodating on a closing date? Can you ask for fewer repairs? A little flexibility may go a long way.

9. Get another vote of confidence from your lender. An updated pre-approval letter is a great start. A phone call or video email from your loan officer is even better. One final push saying how strong of a buyer you are may be the key that helps you close the deal. A confident lender will instill confidence in the sellers.

When you’ve found your dream home, you want your dream home! Make sure you give it your best shot when you make your offer. Happy homeownership!

Why Winter May Be the Right Time to Buy Your New Home

Daughter and Father near the Fireplace

It may be turning cold outside but fall and winter just may be the best time for you to get a hot deal on a new home. Don’t let the blues of shorter days keep you from house hunting in the fall winter. There are some good reasons that now may be the best time to buy your new home.

Fewer buyers are house hunting.
Most home buyers shop in the spring and summer, when homes pop up for sale like tulips. Because there are so many fewer buyers, winter home buyers are more likely to get a good deal on the house they want.

Lower prices.
With fewer buyers in the market, home sellers often lower prices to attract the buyers who are out there.

Sellers are motivated.
Motivated sellers may be a great thing for home buyers, as they are more willing to negotiate. When you find the house you are looking for, you may be able to negotiate on price, closing costs, repairs, and even items such as appliances or other items you want included in the sale.

Inspections may turn up more or different items in the different seasons.
You will have the opportunity to see the house at work in the winter. Gutters, windows, heating systems, etc. get put to test during the colder months. You may miss some of the curb appeal of the manicured lawn when shopping in the winter, but you’ll know if the plumbing is working at full capacity and able to handle extremes.

Don’t miss out on buying your dream home because it’s cold outside. Seize the opportunity to put the season to work for you.

FHA Loans – Great Options for First-Time Home Buyers

new beginnings

If you’re a first-time homebuyer, an FHA loan may be the right loan for you. 

An FHA loan is insured by the Federal Housing Administration and protects lenders from financial risk. Lenders have to meet certain criteria for their loans to be termed “FHA-approved,” after which the FHA backs the loans the lender issues in case a borrower defaults on the mortgage. Borrowers must also meet requirements to qualify for one of these loans.

Why are FHA loans good options for first-time homebuyers? Because other home loan programs generally have higher credit score and down payment requirements, FHA loans are a great option for first-time homebuyers who have not had as much time to save for a large down payment or meet the credit score requirements.

Of course, are some other considerations to make before jumping in. 

Additional fees as well as private mortgage insurance add to the cost of the mortgage, and you may have a higher interest rate.

If you are ready to consider an FHA loan to help you make your first move, contact Universal Lending today to get started down the path of homeownership. We’ll discuss all of your home loan options with you so you find the right loan for you. 

 

Why Do Home Loan Rates Move Up and Down?

Miniature House on A Blue Financial Graph

More now than in recent years, we are hearing the question: Why are home loan rates rising so much? 

The Federal Reserve monitors the U.S. economy and, when necessary, takes steps to address inflationary concerns to avoid economic recession. When the Fed discusses interest rates, it is primarily concerning the Fed Funds Rate, which is the rate banks use when lending money to each other overnight.

Home loan rates, on the other hand, are dictated by the trading of Mortgage Backed Securities (MBS), which are a type of Bond.

At the real heart of home loan rate movement is the dual relationship between Stocks and Bonds, as they compete for the same investment dollars on a daily basis. Inflationary pressures, economic conditions and geopolitical events all influence the direction of both Stocks and Bonds.

When economic reports are weak or disappointing, investors often move their money from riskier investments like Stocks into Bonds, which are considered safer. Since home loan rates are tied to Mortgage Bonds, this helps home loan rates improve.

In contrast, strong economic news often causes investors to move their money into Stocks to take advantage of any gains. This can cause Mortgage Bonds and home loan rates to worsen.

Inflation reduces the value of fixed investments like Bonds. This means that a low inflation environment tends to be good for Mortgage Bonds and home loan rates, while high inflation can cause both to worsen.

Political turmoil or economic crises around the world can also cause investors to move their money into the safety of the Bond markets, helping Mortgage Bonds and home loan rates improve.

If you are second-guessing whether now is a good time to purchase a new home, contact us. We’ll analyze your financial situation together and create a plan that’s right for you. And if you have friends or family members considering a home purchase or refinance, please share our information with them.

Q&A about VA Loans

Military Father and Son

VA loans are $0 down payment mortgage options available to veterans, service members and select military spouses. VA loans are issued by private lenders and guaranteed by the U.S. Department of Veterans Affairs (VA).

Since its inception in 1944, more than 22 million VA loans have helped veterans, active duty military personnel and their families purchase homes or refinance mortgages.

How does a VA loan compare to a traditional/conventional home mortgage? Read on.

What is the down payment?

  • VA loans: 0% down.
  • Conventional loans: Up to 20% down.

Do I have to pay mortgage insurance?

  • VA loans: VA loans do have a form of mortgage insurance, the VA Funding Fee. It is usually 3.3% and financed into the loan up front. If the borrower separated from the military with a qualifying disability, the funding fee is waived to 0%.
  • Conventional loans: If buyers do put down less than a 20% down payment, they must pay for private mortgage insurance.

Are the interest rates for VA loans competitive?

  • VA loans: The VA backing gives lenders a greater degree of safety, which means the interest rates can be more competitive than non-VA loans.
  • Conventional loans: Without government backing, banks take on more risk with conventional loans, which can result in less-competitive interest rates.

How easy is it to qualify for a VA loan?

  • VA loans: Because the loan is backed by the government, banks assume less risk and have less stringent qualification standards for VA loans, making them easier to obtain.
  • Conventional loans: Conventional loans require stricter qualification procedures that can put homeownership out of reach for some homebuyers.

Can I do a cash out refinance? 

  • VA loans: Borrowers can do a cash out refinance up to 100% of their home’s value.
  • Conventional loans: Borrowers with conventional loans must leave some equity in their home when doing a cash out refinance.

What else should I know about VA loans? 

  • VA eligibility is re-usable. A lot of people think they are only eligible for a VA loan one  time, but they are able to get VA loans more than one time.
  • You can have more than one VA loan at a time. It’s a myth that you can only have one at a time.
  • VA loans are assumable.

 You or someone you know may be the perfect fit for a VA loan. Contact a loan officer today to learn more about VA loans and other types of home loans that may be a good fit for you. 

 

You Can Take Control of Some of What Affects Your Home Loan Interest Rate

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Interest rates are at the top of everyone’s minds right now, especially if you are in the market for a home. But your interest rate isn’t set in stone. Several factors play into the interest rate on your loan, and you are in control of a lot of what affects it. Here are some of the things that can affect the interest rate on your home loan. Let us know if we can help you determine what your home loan may look like.

1. Credit scores
Borrowers with higher credit scores generally receive lower interest rates than borrowers with lower credit scores. Lenders use your credit scores to predict how reliable you’ll be in paying your loan. Credit scores are calculated based on the information in your credit report, which shows information about your credit history, including your loans, credit cards, and payment history. If you’re considering buying a home now or later, check your credit score and do what you can to get it as high as possible.

2. Home location
Your home loan’s interest rate may be impacted by the in which you are purchasing. Part of this could be due to the health of the housing market in your state or county. If the housing market is healthy, the lender is less likely to risk default on the loan, so the interest rate may be lower.

3. Down payment
The more money you put down on your home, the lower your interest rate will likely be. You don’t have to put down 20 percent to get a loan, but if you do, you may get a better interest rate.

If you cannot put down 20 percent or more, you will be required to purchase private mortgage insurance (PMI). PMI protects the lender in the event a borrower stops paying the loan. The cost of PMI is added to the overall cost of your monthly mortgage loan payment. You may be offered a slightly lower interest rate with a down payment just under 20 percent, compared with one of 20 percent or higher. Why? You’re paying mortgage insurance, which lowers the risk for your lender.

When determining your down payment and subsequent interest rate, keep in mind the overall picture of what you are borrowing. The larger the down payment, the lower the overall cost to borrow. Getting a lower interest rate can save you money over time. But even if you find you get a slightly lower interest rate with a down payment less than 20 percent, your total cost to borrow will likely be greater since you’ll need to make the additional monthly mortgage insurance payments.

Look at the overall loan and payments, not just the interest rate, when getting a home loan.

4. Loan term
The term of your loan is how long you have to repay it. In general, shorter term loans have lower interest rates and lower overall costs, but higher monthly payments.

5. Interest rate type: fixed or adjustable
There are two general types of interest rates: fixed and adjustable. Fixed interest rates do not change over time. Adjustable rates may have an initial fixed period, after which they go up or down each period based on the market.

Your initial interest rate may be lower with an adjustable-rate loan than with a fixed rate loan, but that rate might increase significantly at a later date.

6. Loan type
There are several broad types (categories) of mortgage loans, such as conventional, FHA, USDA, and VA loans, all of which have different eligibility requirements. Interest rates can be different depending on what loan type you choose. Your lender will discuss different options with you and will help you choose the right loan to keep you and your family financially secure.

7. Discount points
Points, or discount points, lower your interest rate in exchange for an upfront fee. By paying points, you pay more upfront, but you receive a lower interest rate and therefore pay less over time. Points may be a good option if you will keep the loan for a long time. There are also tax benefits for discount points for the purchase of your primary residence. Talk to your accountant or attorney about this.

Getting a home loan is about more than just the cost of the house or the interest rate. There’s a lot to understand, and it is our privilege to help you navigate the home buying process. Please contact us if we can answer any questions.