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Fully underwriting pre-approvals

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60 minute response times

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Close in 15 days

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Achieve Your Dreams of Homeownership with Home Loans

Buying a home can be a wonderful adventure. You will finally have a place to call your own, and one that doesn’t require you to throw money away on rent each month. Homeownership is an investment in your future due to increasing home equity that also pays off right now with a place to live.

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Factors That Affect Loan Eligibility

There are many elements that play a role in the mortgage loan process. You may qualify for different types of loans depending on your income, credit score, financial assets, closing date, and military service status. Here are a couple of things to consider when beginning your search for home loan lenders.

Whenever you apply for a loan, lenders will conduct a credit report to check your debt and payment history. If you have a high credit score, then you will gain access to better terms for a home loan, such as lower interest rates. Those with higher credit scores may not be able to find a lower interest rate, at least not with a conventional loan. If you can build up your credit score before entering the mortgage process, you will have a chance to save money on the home.

Mortgage insurance is not the same thing as homeowners insurance. The latter is meant to protect homeowners when damage occurs to their property. Mortgage insurance protects lenders from risky borrowers who were unable to afford a good down payment. Typically, if you cannot pay a 20% down payment on the cost of the house after closing fees, then mortgage lenders will require mortgage insurance to be part of your monthly payments.

Another factor that will determine whether or not you are approved for a loan is your capacity to pay a monthly payment. For a conventional loan amount, you will have to pay at least 3% of the down payment to even be considered for a mortgage, but this will mean your estimated monthly payment will go up. The higher the down payment, the lower the monthly mortgage payment. When you weigh this monthly cost, plus utilities and homeowners insurance, you must be able to cover this with your gross monthly income. This is where the monthly debt-to-income ratio will play a role, as well as other factors like employment history, gift funds, medical bills, etc.

The interest rate of a mortgage loan is incredibly important. A lower interest rate means that the total cost of the mortgage will be lower over the life of the mortgage. There are many types of loans with different interest rate clauses. Conventional fixed-rate loans guarantee that even if the market fluctuates, the borrower will continue to pay a fixed-rate mortgage payment for the entire loan term, though other factors can affect the monthly payment like property taxes. There is an option to buy discount points or mortgage points which means you pay a fixed amount to get a better rate. An adjustable-rate mortgage may start with a fixed rate for a few years. However, depending on the agreement, once a certain period has passed, the adjustable rate mortgage can fluctuate. This will cause your monthly mortgage payment to depend on the market conditions. Typically, this option works better for frequent movers or people who plan to sell within five years. There is also an option known as interest-only payments, where your monthly bill will only go toward an interest payment for an agreed-upon period.

A closing disclosure often includes additional costs, such as real estate agent fees, attorney fees, title deed fees, and more. Usually, you can wrap up closing costs into the total amount.

It's easy to find the loan that suits you best when you've got options

Types of Loans

People come from different backgrounds and have different lifestyles, which is why Hero Mortgage offers multiple loan terms and products for prospective buyers. Not all credit unions or other lenders can provide as many options to their clients. Here are a few loans you might qualify for with a primary residence purchase to help you find the right mortgage broker.

FHA Loan

The Federal Housing Administration will insure or “back” some loans for people who will have a hard time affording houses.

Since the federal government agency is backing the loan amount, lenders can experience reduced risk for the amount they give out. An FHA loan is beneficial for low-income buyers because it requires a lower down payment, lowers closing fees, and has an easier credit score threshold. FHA loans require an equal housing lender meaning the lender can’t discriminate based on race, color, religion, national origin, sex, handicap, or familial status.

VA Loan with Lower Monthly Payment

VA loans are subsidized by the Department of Veterans Affairs. They help active-duty service members, eligible veterans, and qualified surviving spouses able to afford homes more easily. This type of loan program often includes no down payment, no mortgage insurance for a lower monthly payment, and a low credit score requirement. These loans are provided by private lenders like banks and mortgage companies. Not all VA loans require a down payment. However, many veterans choose to use a down payment to lower their monthly mortgage payment.

Conventional Loan

A conventional mortgage loan is available to most buyers. Conventional simply means that it is not backed or subsidized by a government entity.

Within this category fall two subcategories, conforming and non-conforming loans. A conforming mortgage falls within the limit set by Fannie Mae and Freddie Mac for loans that they will back, an amount that sits at $726,200 for most markets in 2023. Any loans that are above that amount are considered too high-risk to back, so they are considered non-conforming loans.

Jumbo Loan

Another name for non-conforming loans is jumbo loans. These are used to finance any loan amount that is above $726,200. Since they are considered riskier, they often come with requirements for a higher down payment and sufficient cash reserves, so eligible borrowers are fewer in number.

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