Down Payment vs. Closing Costs

If you're thinking of buying a house, you've probably heard of the terms "down payment" and "closing costs."

Most first-time homebuyers think these two terms mean the same thing, especially since both involve paying out some cash up front.

But they are not the same.

In this video, we're going to talk about the difference between down payment and closing costs so that you'll know what to expect during the homebuying process.

First up is the down payment. Down payment is a portion of the home's purchase price that you, the homebuyer, need to pay out of pocket. The down payment amount required depends on the type of loan you have.

If you have a Conventional loan, you'll have to give 3% down for first-timers and 5% for experienced homebuyers. But you are also required to have a minimum credit score of 620.

If it's an FHA loan, you're required to give 3.5% if your credit score is 580 or higher. If your score is lower than 580, then you'll have to give 10% down.

Both VA and USDA loans might require 0% down, but they have strict requirements. For example, VA loans only apply to military personnel and their families. And USDA loans are limited to houses located in rural areas.

On the other hand, closing costs are fees associated with buying a home. This includes expenses such as application fees, escrow, property taxes, and underwriting fees. Closing costs would depend on your loan size but are usually about 2 to 5% of the home's purchase price.

Buying a home on your own is not easy

Do you have questions about the homebuying process? Need help in getting the home of your dreams? Ebenezer Mortgage Solutions is here for you. Call our mortgage broker today at (813) 284 - 4027.

How to Build a Credit Score for Beginners

A credit score is a crucial factor on your financial journey. It's a three-digit number that shows lenders your capability of repaying a loan.

Although it takes time and patience to build, having a good credit score gives you access to many benefits, including better mortgage terms and rates. Unfortunately, many people don't really know where to begin when it comes to building credit scores. And most often, you need credit to build credit, which can be confusing and frustrating if you're just starting out.

So what can you do?

Method 1: Open a secured credit card.

A secured credit card is a great tool for those who are just starting with their credit journey. It's easier to get a secured card from the bank that you're already with.

To open a secured credit card, you have to provide your bank with a security deposit, which will then serve as your card's limit. For example, if you deposited $300, then your credit line is also $300.

Now let's say you've been using your secured credit card responsibly, paying your bills on time and keeping your credit utilization low. In that case, your bank will return your deposit after a few months and offer you an unsecured credit card.

Method 2: Be an authorized user.

If your family member or friend has a good credit score, you can ask to be an authorized user on their credit card.

Being an authorized user means you're piggybacking on their credit history and credit score. Once you have developed a credit score, you can then get your own credit account.

Now the important things here are trust and responsibility. The other person would trust you not to destroy their credit health by racking up debt on their account. You must reward their trust by managing the credit line responsibly and making payments on time for any purchases you make.

Method 3: Get credit for paying.

Did you know that you can get credit for paying utility bills, cell phone plans, or even streaming services? You can sign up for credit-building tools that pull your monthly bill payments into your credit profile. This is helpful if you want to build credit without opening a credit card. But just make sure that the tool you're using reports to the credit bureaus.

You can also request our help

Got more questions about what you need to apply for a mortgage? Ebenezer Mortgage Solutions can answer your questions and even do the hard work for you to have a stress-free mortgage application process. Call us at (813) 284-4027.

What Is a Mortgage Escrow and How Does it Work?

When you obtain a mortgage to purchase a home, your lender will most likely require you to put money in escrow. In this article, we'll talk about what a mortgage escrow is and how it works.

What is an Escrow?

An escrow is a contractual arrangement wherein a third party holds the money on behalf of the other two parties in a transaction. This money will be kept in an escrow account and will only be released when the contract agreement has been met.

Usually known as an escrow agent, this third party is not concerned whether the seller or buyer is ahead. Additionally, using a third-party service helps make the transaction between the two parties safer by protecting their assets until they have fulfilled their respective obligations.

How Does Mortgage Escrow Work?

There are two purposes for escrow accounts in a mortgage:

(1) To protect the buyer's earnest money; and

(2) To house the homeowner's insurance and property tax payments.

Escrow Account for Earnest Money

If you make an offer on a home, and the seller accepts it, you'll usually have to provide earnest money.

Earnest money, also known as a good faith deposit, is an amount that shows you have the intent and ability to go through with the purchase. The amount that you provide is usually 1%-3% of the home's purchase price. This money will be kept in an escrow account.

In exchange for the buyer providing earnest money, the seller will take the house off the market. When all the conditions of the transaction have been met, the funds will then be released to the seller as part of the purchase price.

Although earnest money is not a fee, it can be forfeited. If the sale falls through because the buyer decides to withdraw from purchasing, the seller gets to keep the money.

However, if the sale falls through because of certain circumstances, the buyer will get to keep most, if not all, of the earnest money. Examples of these circumstances are the house not passing the home inspection or if the home appraises at a lower value, but the seller doesn't want to lower the purchase price.

Escrow Account for Insurance and Property Tax

After closing, your lender will set up an escrow account. This account will hold a portion of your monthly payments to pay for insurance premiums and property tax.

The primary purpose of this escrow account is to ensure that you consistently pay your obligations on time. Although this might cause you to have higher monthly payments, you wouldn't have to worry about paying the yearly insurance and tax bills.

The amount required for your premium and taxes can change every year. So to ensure that there are enough funds in your escrow account, most lenders would require two month's worth of extra payments.

Lenders would review your escrow account once a year to make sure that they are not collecting too much or too little. If their review shows that they've collected too little, you'll have to cover the difference. But if the analysis indicates that they have accumulated too much, they will give you a refund.

Additional Information About Mortgage Escrow

What Escrow Doesn't Cover

Escrow is a handy tool for homeowners, but it won't cover everything. Examples of expenses an escrow won't cover are HOA fees, utility bills, and taxes other than your property tax.

Is Escrow Avoidable?

Although it's possible for homeowners to pay the premiums and property tax themselves, not everyone will have this option. The lender will require an escrow depending on the type of loan you get and your financial profile.

If your down payment is less than 20% for conventional loans, the lender will require you to have an escrow account. For VA loans, you need to have at least a 10% down payment and good credit health to opt out of having an escrow account. And borrowers of FHA loans are all required to have an escrow account.

Who Will Manage Your Escrow Account?

Your lender will manage your escrow bank account. It's the lender's responsibility to make sure that they collect enough and pay your bills on time. If you have missed or late payments, even though you already have an escrow account, your lender will be liable for the penalties.

Final Words About Mortgage Escrow

A mortgage escrow helps simplify your home buying and homeownership experience. Without it, it would be your sole responsibility to ensure those payments are sent accurately and on time to all the parties involved in the transaction.

If you have more questions about mortgages or need help applying for a home loan, our mortgage broker can help you.

Call us today at (813) 284-4027 or send us your application by clicking here.

5 Golden Rules To Consider When Acquiring a Mortgage

Acquiring a mortgage has its advantages and disadvantages. For one, it allows borrowers to purchase a home sooner. However, it comes with a monthly responsibility which can be a burden if not taken care of properly.

To help you have a better and healthier borrowing experience and prevent you from becoming house poor, here are 5 golden rules to consider when acquiring a mortgage.

Have an Emergency Fund

Before you start applying for a home loan, build an emergency fund first. Most financial experts advise you to keep at least three months' worth of salary. This ensures that you'll have enough to cover your expenses if ever something comes up, such as job loss or anything that would cost a substantial amount of money.

Only Borrow What You Can Pay

In other words, "live within your means".
Depending on your credit health, you might be approved for a bigger loan which you can use to purchase a bigger house. That's great! However, just because a higher loan is available to you does not mean you should take it immediately. Consider your lifestyle and expenses when figuring out how much house you can afford. If you're going to spend most of your salary on paying off your mortgage, your other financial goals such as retirement, vacation, or your child's education might become harder to achieve.

Shop for Rates

Don't settle for the first mortgage offer that you receive. Instead, shop around for the best deals and rates that will suit your situation and financial needs. Using a mortgage lender can make this rule easier for you to follow. At Ebenezer Mortgage Solutions, we will find the best deals for you and process the applications to multiple different lenders, so you don't have to. And with our experience and knowledge, we'll also help you decide which one suits you best.

Understand the Fine Print

Applying for a mortgage involves a lot of paperwork. Although it might take a while, make sure that you understand what you're getting into before signing it. This way, there will be no unpleasant surprises. At Ebenezer Mortgage Solutions, we're always ready to help you better understand the terms and conditions of your contract. And if you have any questions or concerns, never hesitate to ask.

Pay Consistently and On-Time

Make your monthly mortgage payments on time, every time. Missing a repayment can significantly impact your credit score, which might affect your borrowing capability in the future. Additionally, after a grace period of usually 10 days, lenders will charge a late fee of 5% of the overdue payment. And if you fail to pay this late fee on your next payment, your mortgage will not be considered current. If you miss your mortgage repayment for 90 days, this would mean that you have defaulted on the loan, and your lender can repossess your home.

Do you have questions about mortgages?

If you have more questions about mortgages or need help with your mortgage application, Ebenezer Mortgage Solutions will help you. Call our mortgage broker today at (813) 284-4027, and let's work together on getting you the home of your dreams.

8 Tips to Boost Your Mortgage Approval

If you're planning to buy a house, you're most likely thinking of applying for a mortgage as well. But trying to get approved for a home loan can be as stressful as buying the house itself. To help you with this, we've provided these 8 tips to help boost your chances of mortgage approval.

1. Plan Ahead

Before you go shopping for a house or applying for a mortgage, consider first how much home you can afford.

Examine your lifestyle and financial needs by reviewing at least a year of your records. This includes how much you spend on groceries, education, childcare, entertainment, or any other current expenses.

Additionally, take into account future expenses of buying and owning a home. Prepare for out-of-pocket expenses such as closing costs, home inspections, and downpayment. You also have to consider homeowner expenses such as monthly payments, utilities, and maintenance.

Be realistic about what you can spend now and in the future. There's nothing worse than buying into a home you can't afford.

2. Get Preapproved

A mortgage pre-approval is when a lender confirms your creditworthiness. The lenders will check your credit score, income and employment status, amount of your down payment, debt-to-income ratio, liabilities, and assets. They will then give you a set loan amount and interest rate.

Mortgage pre-approvals are usually valid for up to 90 days. This will give you enough time to look for a house within your price range based on the mortgage deal you have been offered.

3. Give Your Credit Health a Checkup

Before applying for a mortgage, check your credit score and credit history. This will help you become aware of any errors and late payments, so you can correct them before the lenders get to see your report. Moreover, knowing your credit score beforehand will also give you more time to increase it if needed.

4. Reduce Your Debts

Ironically, paying off your debts may hurt your credit score. However, not settling them can also hurt you financially in the long run—not to mention it can be mentally stressful.

The best thing that you could do is to lessen your credit utilization to at least 30%. For example, if you have a credit card with a limit of $2000, your balance should be about $600.

If you have multiple credit accounts, you can consider consolidating them. Consolidating debts may cause a drop in your credit score. But as long as you make payments on time, your score would quickly improve.

5. Speak With A Mortgage Broker

Before applying for a mortgage, it's important to understand what you can afford, which program would suit you, and what are the needed requirements. A licensed mortgage broker can explain all this to you.

But that's not all! Hiring a mortgage broker can also make the home buying process easier.

At Ebenezer Mortgage Solutions, our professional mortgage broker will speak to various lenders and banks, so you don't have to. We will find deals and offers that would suit your situation and financial needs and, with our expertise, help you decide which one is best for you.

6. Have Stable Employment

Lenders will avoid risky clients. Improve your credit reputation by maintaining stable employment and a steady cash flow. As much as possible, stick with your employer while you are applying for a mortgage. Moreover, avoid taking low-paying jobs or quitting to become self-employed.

7. Minimize Expenses

It's easy to say, "I will minimize expenses," but we all know it takes much discipline to do it. Nonetheless, it needs to be done to reduce debt and increase your down payment.

You can start by tracking your spending and eliminating unnecessary expenses. This is why the first step in this list is to plan ahead, so you have enough time to change your spending habits.

Additionally, shift your mindset from getting that temporary gratification of buying what you want to the convenience and security of owning your new home.

8. Save Up

Save as much as you can for the down payment. Yes, you can place a lower down payment, but putting a 20% down payment has its perks. With a 20% down, lenders are more likely to approve your application. You can also avoid paying for PMI, have a smaller loan, and enjoy lower monthly payments.

Do you have more questions, or need help with your home mortgage applications?

Talk to a qualified mortgage broker today by calling us at (813) 284-4027.

9 Common Mortgage Mistakes You Need to Avoid

Careful consideration can help you avoid making lasting mortgage mistakes. Even just a few of these blunders can cost you thousands on your new home. Avoiding the following common mortgage mistakes can help you feel confident in your home buying decision. It also allows for a better chance of mortgage acceptance and better financial security in the long run.

Not Getting Pre-approved

Before you start looking for a home or apply for a mortgage, you need to get pre-approved. Pre-approval tells you how much money you can borrow. This allows for a more realistic house-hunting budget based on how much monthly mortgage payment you can afford.

To pre-approve you, lenders look into certain factors, including your employment history, credit score, debt to income ratio, and total income. Most real estate agents only work with pre-approved buyers because they have a higher chance of securing financing for the home.

Keep in mind that although getting pre-approved makes it easier to apply for a mortgage, it's not an assurance that you'll close on that mortgage.

Not Shopping for Rates

Most people compare products before purchasing so they can get the best deal. For example, homebuyers would shop around for houses before saying they found the "perfect" home. But, unfortunately, a lot of these buyers do not do the same for mortgage rates.

Each mortgage lender may offer different rates for the same loan terms. You're not necessarily going to look for the cheapest one, but for the terms that suit your needs and financial situation.

Shopping around for rates can be tiring. But at Ebenezer Mortgage Solutions, this won't be a problem. All you need to do is provide us with the details required for the mortgage application, and we'll be the ones doing the legwork.

Assuming All Mortgages Are the Same

Another mistake that some homebuyers make is thinking that all mortgages are the same. Knowing which type of mortgage is right for you is important since you'll be paying off that mortgage for quite some time.

Should you choose a conventional or FHA loan? Are you qualified for a USDA or VA loan? Should you choose a variable- or a fixed-rate mortgage? 15 or 30 years? These are just some of the questions that you might want to ask yourself in selecting a mortgage. And if you're not sure how to answer, ask for help.

Not Familiarizing Yourself with Mortgage Terms

Mortgage terms can be intimidating, especially for first-time homebuyers. However, it's crucial to understand what your mortgage entails since it can affect you for 15 to 30 years of your life.

For example, understanding the difference between variable- and fixed-rate mortgages might save you more in the long run. Most people also don't know the meaning of terms such as amortization, escrow, and closing costs.

If you're working with a good mortgage broker, you don't have to worry about memorizing all the mortgage terms. At Ebenezer Mortgage Solutions, our mortgage broker will help you understand these terms and help you navigate the home buying process.

Ignoring Your Credit Health

One of the biggest deciding factors for lenders in approving your mortgage is your credit health—specifically your credit score and history.

Each mortgage type has their own minimum credit score requirement. Borrowers with better credit scores also tend to get better interest rates than those who have lower scores.

Unfortunately, fixing your credit score and history takes several months or years. So if you're planning on buying a home, the first thing you need to do is check on your credit health. Make sure that you've paid bills and balances on time. If there are errors on your credit report, dispute them immediately.

Making Changes to Your Credit Accounts After Pre-approval

After pre-approval, some borrowers either close their credit accounts or open new lines. But remember that changes to your credit, whether good or bad, affect your credit score. And making these changes so suddenly might actually hurt your credit score, especially if it's done the wrong way.

Having many credit accounts open does not affect your credit score if they are handled responsibly. But if you really need to cancel an account, try to bring the balance down to zero so you can avoid any credit score damage. It will also help to take stock of your spending habits. But it's best to ask for advice from professionals before making significant changes to your credit accounts.

Saving Too Little for Down Payment

Mortgage products which offer zero or low down payment can be very tempting for most homebuyers. But if you can make a substantial down payment, then do it.

Zero to low down payment offers allow homebuyers to own a house faster. However, it comes with bigger responsibilities such as higher monthly payments and mortgage insurance. It also makes you lose your competitive edge against other buyers who can offer a larger down payment.

Not Preparing for the Additional Costs of Homeownership

Most homebuyers are fixated on the home's purchase price and the amount that they can borrow. And then they get surprised when they have to shell out some extra cash upon closing.

Generally, you have to prepare to pay for expenses such as escrow fee, title insurance, underwriting fee, and home inspection on top of your down payment.

Moreover, after purchasing your home, monthly payments are not the only costs you need to pay. You also need to budget for homeownership expenses such as maintenance, utilities, and home warranty.

Buying More Home Than You Can Handle

Let's say you get approved for a larger mortgage, allowing you to buy that massive house you've been eyeing. But should you do it?

Before you do so, ask yourself, "how much house can I afford?" Then, consider your lifestyle and expenses. You might be able to afford the monthly mortgage payment, but would you still have enough for emergencies, your kids' education, and fun? No matter how beautiful your house is, if you're stressed out about paying for it, then it might become another mortgage horror story.

Final Thoughts

Buying a home takes a lot of careful consideration. The stressful process of searching and applying for a mortgage can add further strain. But by talking to a professional mortgage broker, you can significantly reduce the stress.

Talk to our mortgage broker first to avoid making these 9 mortgage mistakes.

At Ebenezer Mortgage Solutions, our mortgage broker is ready to help answer any questions you might have about the mortgage. They can also assist you in finding the mortgage deal that suits you best. Call us today at (813) 284-4027.