When preparing to buy a home, borrowers often focus on one thing above all else — improving their credit score. While healthy credit can increase your chances of securing favorable financing, it’s just one piece of the mortgage puzzle.

A number of additional factors can impact your odds of approval, many of which never appear on your credit report. Here are five to consider.

1. Debt-to-Income Ratio (DTI)

A DTI ratio is monthly debt divided by gross monthly income. For example, $2,400 of monthly debt divided by $6,000 of gross monthly income equals a DTI of 40%. The higher the ratio, the more it can signal financial strain and little room to safely take on more debt.

A borrower with a low DTI ratio (typically under 36% to 43%) is considered less of a financial risk. To reduce your ratio, pay down high-interest loans and credit cards and avoid taking on new debt.

2. Employment History

Proof of a steady, full-time income helps establish financial stability. Lenders typically ask for 12 to 24 months of pay stubs (or bank statements for independent contractors). Keep in mind that changing jobs during underwriting can result in mortgage delays or denial.

3. Liquid Assets and Reserves

Accessible personal wealth can increase the odds of mortgage approval. Why? Borrowers with healthy checking and savings accounts are more capable of covering debt obligations in times of financial hardship without relying on external financing.

4. Down Payment Amount

A sizable down payment demonstrates purchasing power and financial discipline. It also means the borrower is more invested in the home purchase from day one. With more equity at stake, the motivation to stay current on payments is even stronger.

5. The Property Itself

Mortgage approval typically requires a home appraisal. This evaluation helps confirm the property is safe, livable and worth the contract price. In some cases, this step can be skipped with an appraisal waiver.

Any questions? Reach out to explore your financing options.

For younger homeowners with plans to build a family, a larger home can provide ample room to grow. But as time goes by and the nest starts to empty, all that extra space can quickly become a burden. Sound familiar?

The decision to downsize is never easy. But moving to a smaller home can simplify your life in several ways. Here are five signs it might be time to consider downsizing.

1. You no longer need the space. Children grow up and move out, friends and family go their separate ways and entertaining becomes less of a priority. Suddenly, your once cozy and bustling interior starts to feel vast, vacant and lonely.
2. Mobility is becoming a concern. Aging joints and muscles can make navigating multistory homes a pain. If going up and down stairs is getting more difficult, imagine how challenging they’ll be in just a few years. Additionally, some home styles (e.g., Victorians) are much harder to renovate for accessibility than others (e.g., ranch style).
3. You’re falling behind on maintenance. More square footage and acreage means more time and effort spent on housecleaning, yard work and other routine tasks. Instead of struggling with the upkeep, downsizing can help significantly reduce that burden.
4. The costs are becoming prohibitive. Mortgage payments, property taxes, insurance, maintenance and other expenses quickly add up — and larger homes simply cost more. As the costs of living and utilities continue to rise, your budget could be stretched even thinner.
5. You could use the money elsewhere. Downsizing can free up home equity to eliminate debt or fund retirement, education or even a second home if you have a favorite vacation destination in mind.

Of course, moving to a smaller home means you’ll have less space for furniture and storage. Measure everything, declutter early and be realistic about what you can take with you. Planning ahead can make the transition much smoother.

To explore your financing options, reach out today.

For buyers who want to build rather than buy, construction loans offer a path from empty lot to finished home. Not only that, but they can cover everything from land and permits to materials and labor.

Construction-to-permanent loans are the most common choice, but construction-only loans are also available. Here’s a look at construction loan options and how they work.

Construction-to-Permanent (C2P) Loans

This option funds construction for a fixed term, typically 6 to 18 months. Repayment begins during construction, but payments are made on interest only. Once the project is complete, the loan automatically converts to a traditional 15- to 30-year mortgage, and payments apply toward both interest and principal.

One application and a single set of closing costs can save thousands in duplicate fees.

Construction-Only Loans

Like C2P loans, construction-only loans provide funding for the same fixed term with interest-only payments. But once construction is complete, there is no automatic conversion. You either pay off the loan in a lump sum or secure new, traditional financing.

Construction-only loans offer flexibility on the permanent financing side — you choose your end loan once construction wraps up. The trade-off: you’ll need to qualify twice and cover two sets of closing costs.

Qualifying and Funding

Like traditional mortgages, construction loans require documentation of assets, income and debt. Rates are typically higher due to greater risk to the lender, and a 20% to 25% down payment may be required. Construction loans also require the submission of construction plans, including project timelines and budgets.

Unlike traditional mortgages, funds are disbursed in stages instead of one lump-sum transfer. Builders make draws in installments at key stages of construction, with inspections required for draw approval. Payments are tied to actual progress.

Planning on buying or building your dream home? Reach out if you have any questions about financing.

Weighing your mortgage options? Before making any big decisions, make sure you’re not comparing apples to oranges.

Mortgage rates can be expressed as two different percentages: a nominal interest rate or an annual percentage rate (APR). And while the numbers may look similar on paper, the costs they represent can be significantly different.

Let’s define the terms and put them into proper context.

Interest Rate vs. APR
Interest rate is the percentage a lender charges on the principal balance of a loan annually. APR is the percentage a lender charges on the principal balance of a loan — plus all additional upfront costs. Since the total includes origination fees, broker fees, points and closing costs, the loan amount is technically larger and the APR is typically higher.

While the interest rate applies only to the principal balance, APR reflects the total cost of the loan. Both numbers are important, but APR provides a clearer picture of what you’ll actually pay over time.

Illustrating the Difference
The actual formulas for calculating interest and APR can get quite complicated, but free online calculators can provide a general estimate. Consider this simplified example:

If you purchase a $375,000 home with a 20% down payment ($75,000), your principal loan balance would be $300,000. At 6% interest with fees of $6,800, the APR on a 30-year loan would be approximately 6.215%.

Six percent interest on $300,000 is $18,000 annually, but at 6.215% APR, the amount increases to $18,645. At a glance, that’s not a significant difference, but over a 30-year loan term the costs can really add up.

Compare Carefully
Thanks to the Truth in Lending Act (TILA), lenders are required to disclose both the interest rate and APR on mortgage loans. This information should be listed in each Loan Estimate.

Any questions? Reach out today for helpful answers.

Mortgage rates aren’t what they once were, but buyers are still moving forward. Many are choosing to secure the home they want now, with plans to refinance later if rates improve.

As rates gradually ease, homeowners are starting to revisit those refinancing plans. But if you’ve recently purchased a home, how soon can you refinance your mortgage?

Short answer: It depends.

Lender and Loan Type Matter

Conventional mortgages can be refinanced almost immediately at the discretion of the lender. But a wait of up to 12 months may be imposed. Other loans have more specific requirements:

• Cash-out loans may require up to 12 months of waiting (and 20% home equity).
• FHA loans have a 210-day waiting period and must be in good standing.
• VA loans must wait 210 days, and VA IRRL (Streamline) loans must also provide a “net tangible benefit” such as a reduced rate or lower monthly payment.
• USDA loans require a 12-month wait, 12 months of on-time payments, and must result in a reduced monthly payment ($50 minimum).

When Refinancing Is Beneficial

• Rates have dropped. Refinancing at a lower rate can reduce monthly payments and save thousands of dollars over the life of your loan.
• Your current rate is adjustable. Adjustable-rate mortgages make future interest and monthly costs unpredictable. Refinancing at a fixed rate provides financial consistency.
• Your credit has improved. A higher credit score may qualify you for more favorable loan terms.
• You need cash. Cash-out refinancing uses equity to fund home improvements and other big-ticket purchases.
• Refinancing can also be used to consolidate home loans, add or remove a borrower, and eliminate private mortgage insurance (PMI).

Other Considerations

A new loan means new closing costs, typically 2% to 6%. Refinancing also resets the amortization clock on your loan, which temporarily delays equity accumulation. Prepayment penalties may also apply.

Have any questions? Reach out today.