When it’s time to get a loan, what counts?
Here are the factors that count the most when getting a home loan.
Income: Generally, lenders look for two years of stable income based off of your gross monthly income (pay before taxes).
Debts: Installment debt (car payments, credit card payments, personal lines of credit, etc.) are added together with your proposed mortgage payment to determine your ability to qualify for the loan.
Employment History: “Stability” is the key word here. In this case, they want to make sure you’re able to make your loan payment every month for years to come.
Credit History: Numerous late payments on debt, or a credit report that indicates a lack of ability to use credit wisely are red flags for a lender.
Property: In this case, the lender wants to make sure that the value of the property would more than cover the loan amount if it had to be sold following foreclosure. Note that the appraised value and the purchase price may not always match.
What do you need when applying for a home loan?
To apply for a home loan, you'll likely need:
- Paycheck stubs
- Copy of the purchase and sale agreement
- Proof of other income
- Outstanding loans
- Rental or landlord information
- Employer's name and address
- Past bank and brokerage statements
- Your past home address
How much should you put down on a house?
Putting 20% down is often ideal for more financially established buyers or those with a larger cash or savings reserve.
Benefits of a larger down payment includes:
- A smaller monthly mortgage payment
- More equity in case you need to move and sell
- No private mortgage insurance
- Less risk when selling
For those who would like to put less than 20%, many lenders offer loans that require a smaller down payment. Here are some benefits to putting less than 20% down:
- More cash on reserve for emergencies
- Likely to become a homeowner faster, since you won't have to save as much cash
- Greater financial cushion for your lifestyle
When should you refinance?
Conventional wisdom said that you should consider refinancing if you can drop your interest rate by about 20%. But be sure to look at what you owe before you refinance and compare it to your loan balance after refinancing. If you’re adding thousands to your mortgage balance, you may be negating any savings you would realize from a lower interest rate.
When will I begin to save money from a refinance?
To calculate when your finance will actually begin to save you money, take the total cost of your refinance and divide it by your monthly savings after you refinance. This will tell you how many months it will take to pay off the refinance. You will need to live in the property longer than the number of months it takes to payoff to actually realize any savings.
Can I invest my refinancing savings?
Mortgage refinancing can save you tens of thousands of dollars. If you're not strapped for cash, be sure to have a plan in place for the money you save from refinancing.
- Will you invest in your child's education?
- Do you plan to prepay your mortgage so you can pay off your loan early?
- Are you going to add your monthly savings into a 401(K) or another retirement savings account?
Be sure to run some financial calculations to see just how much you can save, and have a plan in place for your savings to get the most out of your mortgage refinance.
What is an all-in-one construction remodeling loan?
WaFd Bank’s All-in-One Construction Remodeling Loan is a home loan based on the estimated value of your home after the remodel. To determine that value up-front, we order an appraisal based on your plans for improvements. The entire project is underwritten at one time and you can lock in a permanent, fixed interest rate before you even start the project. Please note that rates can change daily. Subject to a lock-in deposit.
Which remodeling projects have the most cost recouped at resale?
|Project||Job Cost||Resale Value||Cost Recouped|
|Attic Insulation (fiberglass)||$1,343||$1,446||107.7%|
|Entry Door Replacement (steel)||$1,413||$1,282||90.7%|
|Manufactured Stone Veneer||$7,851||$7,019||89.4%|
|Minor Kitchen Remodel||$20,830||$16,699||80.2%|
|Garage Door Replacement||$1,749||$1,345||76.9%|
Which remodeling projects have the least cost recouped at resale?
|Project||Job Cost||Resale Value||Cost Recouped|
|Backup Power Generator||$12,860||$6,940||54.0%|
|Master Suite Addition||$119,533||$77,506||64.8%|
Is building a house more expensive than buying one?
This is a tricky question, but in general, yes, it is cheaper to buy a house than purchase land and build one from scratch.
Caveat: costs can vary greatly depending on factors like a buyer’s flexibility with location, renovations they’d like to make on a pre-built house, and how long the buyer’s planning on staying in either home.
Does building a house give a lesser return on investment than buying a house?
Not always. There are many aspects to consider when building a home, such as how “standard” or “unique” the features and layout are, how long you’re planning to live in the house, and whether or not there are “green” rebates available in your area.
In general, expensive features or structures that make your home and property more “niche” can limit the number of prospective buyers when it comes time to resell, which can result in needing to lower your future asking price.
If you plan to live in the home for many years, property value appreciation can offset the uniqueness. If you “build green”, the cost of owning an energy efficient home is often much lower. Plus, some states offer rebates or tax incentives for environmentally friendly features, like solar panels.
Will I always save money if I do most of the work myself?
No. This line of thinking can be dangerous to your body, mind AND wallet. If you have time to allot to the many aspects of building a home, and you’re familiar with construction work, then by all means – pick up a hammer. But remember – time is money. Unfortunately, the more a job costs a professional to do, the more of your time it’s likely to take. Before you start tackling any aspect of building a home, put in the research.
If you’re unsure as to whether you can tackle a project, opt for the professional route. In general, you’ll spend more money hiring someone to fix damage done by DIY-ing than you would have spent if you had paid someone from the start. Another bonus of hiring an experienced contractor is that they often provide warranties on the products and work they complete, either personally or through subcontractors, covering you in the event that repairs or reinstallation is needed.
What should you look for when shopping for a lot?
Start in your price range. Exact figures will vary, but in general, most experts agree that the cost of buying the land and preparing it should not take up than 25% of your total construction budget.
Research zoning requirements. There are a variety of types of zoning classifications, but you’ll want to be sure your land is classified as residential before you make any commitments. Do some number crunching.
What is the annual tax rate on the property? The tax rate can dramatically impact how much you’ll pay over time on the lot. Your state’s department of revenue will be able to inform you of applicable taxes and their rates.
Where will you get your water? If you’re building a home “in town,” then you will likely have access to a municipal, or city, water supply. If the lot is in a rural location, then you’ll need to do a little more research.
Review applicable ordinances and covenants. Check to see if the lot is subject to homeowners association (HOA) dues and if the residents are required to follow “covenants.”
How do I choose land for my new home?
Aside from the obvious (cost), consider the following questions in the hunt for homeland:
- Are modern conveniences readily available?
- How is the area? School districts, crime rate, amenities?
- What is the quality of soil?
- Are there any unusual zoning requirements?
- What is the elevation?
How long do you have to finalize details once you’re approved for a lot loan?
What can a home equity loan cover?
A HELOC* can cover:
- Remodels and repairs
- Educational costs
- Energy-efficient appliances
- A more fuel-efficient car
- Medical bills
- Unexpected expenses
*Not available in Texas.
What is a HELOC?
A HELOC is a loan that is underwritten using your current home’s value. For example, if you’ve owned your home for 10 or so years, then you likely have a significant amount of equity, or money, invested in it.
A HELOC essentially serves as a sort-of second mortgage, so the bank would give you a maximum loan amount for you to use based on the equity that you have in your home.
HELOCs have a “draw period,” typically ranging from 5 to 10 years, during which time borrowers can access the funds. During the draw period, the borrower is only required to pay interest on those funds that they actually drew out and used. After the draw period closes, borrowers are required to pay off the HELOC, or refinance it to another loan, during the repayment period. Repayment periods typically range from 10-20 years.
What’s the advantage of using a HELOC?
HELOCs are beneficial because you’re only paying interest on the funds you actually use, so if you’re not sure how much money you’ll need, then a HELOC can be a good option. As with any loan, you’ll want to talk to a financial expert and be confident you can pay off the HELOC before establishing one.
Remember, ultimately the goal of homeownership is to own your house free and clear, so if you’re unsure as to whether you can handle additional payments after the draw period, then you may want to explore other avenues of funding, or look at adjusting your existing budget.
How can I request a third party mortgage payoff quote?
In order to receive a mortgage payoff request quote, email the request along with borrower’s authorization to firstname.lastname@example.org.
I have my mortgage with WaFd Bank, which collects escrow to pay my Home Owner’s Insurance. I got a notification my Homeowner’s insurance premium is past due?
Is HELOC interest tax-deductible?
HELOC interest payments may be tax deductible based on specific income qualifications and whether you occupy the home as a primary residence, 2nd home, or use it as an investment property. Please consult your tax professional for your specific situation.
How much equity do you need for a HELOC?
The amount of equity needed for a HELOC will depend on a number of factors such as whether you have an existing mortgage that will or will not be paid off when you apply for your HELOC and whether you have any other existing liens on your home. In general, lenders use a calculation called a loan to value (“LTV”) that allows a borrower to use 80% of the value of their property for a HELOC and any other existing mortgages that you owe on your home. The LTV will also vary according to your individual credit and finances and whether you occupy the subject property as your primary residence, 2nd home or use it as an investment property. Contact your local WaFd loan officer to get specific details for your individual situation.
Is a HELOC a second mortgage?
A HELOC can be a 2nd mortgage if you have an existing 1st mortgage that will not be paid off by your HELOC. Contact your local WaFd loan officer to see if your financing request qualifies for our no cost HELOC.