From first-time homebuyers to people who want to move into more spacious homes, there is something for everyone in Long Island. While easy accessibility to New York City is a boon, there’s much more you’ll find in Nassau and Suffolk Counties. However, the best places to live in Long Island for young adults are not necessarily the same as the ones for families.

Given that most young adults and millennials are likely to exceed their budgets when looking for homes in New York City and its immediate surroundings, home-buying trends in the region indicate that many are turning outward.

Incidentally, Long Island, despite the infamous Long Island Expressway, has plenty to offer, of which the Long Island Rail Road (LIRR) network is only one example. The proximity to beaches and robust education systems offered by different school districts are among the other perks of living in this region. So, which are the best neighborhoods in Long Island for young adults and millennials?

Aspects that might require your attention when looking for the best Long Island neighborhoods include, but do not limit to:

• Access to the LIRR
• Access to public schools
• Rating of the school district
• Cost of living
• Local amenities
• Access to and quality of parks
• Local job opportunities
• The presence of other young families

Even if you limit your search to Nassau and Suffolk counties, you still have a significantly large area to cover. Having to choose between two cities, over 10 towns, and more than 200 villages and hamlets, arriving at a decision might seem like a daunting task. Fortunately, paying attention to your requirements can make the process considerably simpler. The list that follows gives you insight into some of the best neighborhoods in Long Island.

 

Greenport

The history of Greenport dates back to the mid-1600s. It went on to become a major shipbuilding and whaling village in the late 1700s. Now, its bustling harbor is home to scores of upscale yachts as well as small fishing boats. It comes as no surprise that many think of Greenport as the best place to live in Long Island.

This village in Suffolk County makes it to several lists of best neighborhoods in Long Island, and not without reason. It consistently ranks as the safest region on the island. The downtown area boasts of several restaurants and boutiques. In addition, some of the island’s best vineyards are in Greenport. Access to the Greenport Railroad Station ensures you do not have to brave the expressway traffic when heading into or out of NYC.

The Greenport Union Free School District provides public education in the region. The average home value in Greenport is around $903,000*.

Smithtown

Ranked among the best towns to live in Long Island, Smithtown, in Suffolk County, lies along Long Island’s north shore. Located midway across the island, Smithtown offers a family-friendly atmosphere through its picturesque tree-lined streets. With the average annual household income of the region exceeding $110,000, Smithtown is among the more affluent Long Island towns. On the other hand, the average home value of around $710,000* works well for young adults and millennials who don’t have large budgets.

Driving to Manhattan can take around an hour and a half. However, Smithtown has a railroad station, so you may make good use of the LIRR as well. The Hamptons is a short drive away, as are the North Fork vineyards, the Blydenburgh County Park, and the Caleb Smith State Park.

Hauppauge Shopping Center, Maple Commons Shopping Center, and Nesconset Plaza offer numerous alternatives for shoppers.

The Smithtown Central School District includes two high schools, three middle schools, and eight elementary schools.

 

Bellmore

Located along the south shore of the island in Nassau County, Bellmore is a hamlet that offers peace and quiet. The ideal suburban setting of this picturesque waterfront community makes it perfectly suitable for young adults and millennials who are wondering where to live in Long Island.

The Bellmore railroad station ensures that your commutes to NYC remain hassle-free. Jones Beach Park is nearby, and it hosts various concerts and events throughout the year. The John F. Kennedy International Airport is around 15 miles away.

Bellmore Shopping Center houses several commercial establishments and shops. Robbie Plaza and Merrick Mall are easily accessible as well.

The school districts of Bellmore include the Bellmore School District, the Bellmore-Merrick Central High School District, and the North Bellmore School District. The highly-rated John F. Kennedy High School is open to Bellmore students. The annual Mathematical Olympiads for Elementary and Middle Schools take place in Bellmore.

The average home value in Bellmore is around $728,000*.

Roslyn

Roslyn, in Nassau County, might be up your alley if you’re after an affluent and airy neighborhood. One of the main reasons that put this village on the list of best neighborhoods in Long Island for families and older millennials is the quality of its schools. While Roslyn Public Schools serve seven communities, they cater to just around 3,000 students.

Students from Roslyn High School have a good acceptance rate across top colleges, and their average SAT scores are noticeably better when compared to the scores of students from other parts of New York. The Roslyn Union Free School District includes five schools – Roslyn High School, Roslyn Middle School, East Hills School, Heights School, and Harbor Hill School

Residents of Roslyn get several alternatives from which to choose when it comes to shopping. These come in the form of Harbourview Shoppe, Americana Manhasset, Wheatley Plaza, the Suburban Shopping Center, and TJ Maxx.

If you wish to get to Manhattan, all you need to do is catch a train from the Roslyn station. Driving to midtown could take around 40 minutes. The average home value in Roslyn is around $1,344,000*.

 

Massapequa

A little further east from Bellmore is Massapequa, a hamlet in Nassau County. Massapequa has a railroad station, so getting to Manhattan is easy. It has six elementary schools, as well as middle and high school alternatives, making it among the best neighborhoods in Nassau County for families and millennials.

If you love being around nature, you may use your free time to explore the bordering Massapequa Preserve. The Massapequa Cove makes for an idyllic fishing spot and recreational area.

For shopping, residents have easy access to Sunrise Mall, Holiday Park Shopping Center, Macy’s, HomeGoods, Marshalls, and Sears.

The average home value in Massapequa is around $704,000*.

 

Stony Brook

This hamlet on the north shore of the island in Suffolk County was founded as an agricultural enclave during the Colonial Era. It grew in prominence as a resort town and is now among the region’s major tourist and education hubs.

Schools in Stony Brook fall under the purview of the Three Village Central School District. Recognized as one of the best towns in Long Island, it is home to the popular Stony Brook School and Stony Brook University.

The region is connected to the LIRR network by the Stony Brook station. The Long Island Museum of American Art, History, and Carriages is in Stony Brook. Avalon Park and Preserve is no more than a short drive away.

Coventry Commons Center, Stony Brook Square, Smith Point Plaza, and Three Village Shopping Center are located within short driving distances.

The average median home value in Stony Brook is around $682,000*.

Lake Ronkonkoma

Lake Ronkonkoma is a part of the Long Island towns of Brookhaven, Smithtown, and Islip in Suffolk County. While a major part of this census-designated place (CDP) is located in Brookhaven, the land that surrounds the actual lake is a part of Islip. This region is connected to the LIRR network through the Ronkonkoma railroad station. It functions as the western terminus of the Greenport Branch and the eastern terminus of the Ronkonkoma Branch.

The Sachem Central School District looks after public schools in Lake Ronkonkoma. The lakeside Lake Ronkonkoma County Park offers baseball fields, handball and basketball courts, a picnic area, as well as a fishing pier.

For shopping, residents of the area can turn to Lakeshore Plaza, Gatelot Plaza, Lake Grove Shopping Center, and Kohl’s.

The median home value in Lake Ronkonkoma is around $510,000**, making it suitable for young adults and millennials who are looking at affordable alternatives.

 

Holtsville

If you wish to limit your search to affordable houses in Long Island, Holtsville requires your attention as well. The average home value in Holtsville is around $575,000*. A major part of this hamlet is in the town of Brookhaven, whereas a small portion is also a part of Islip. The region is served by the Sachem Central School District.

The Holtsville train station was closed in March 1998 because of low ridership. Now, most commuters from the region make use of the Medford and Ronkonkoma stations. The Wildlife and Ecology Center Animal Preserve is in Holtsville.

Depending on where in Holtsville you live, you may shop at Waverly Shopping Center, Holbrook Center, Expressway Plaza, Morris Avenue Shopping Center, or Lake Shore Plaza.

 

Wantagh

Wantagh makes it to the list of the best neighborhoods in Long Island for young adults and millennials because of different reasons. Originally named “Jerusalem”, this hamlet in Nassau County is in close proximity to Jones Beach Island. The Wantagh railroad station connects its residents to Manhattan easily. Besides, the region boasts of some great schools.

The Wantagh Union Free School District serves the residents of this region. It consists of the Wantagh Elementary School, the Mandalay Elementary School, the Forest Lake Elementary School, Wantagh Middle School, and Wantagh High School. Wantagh holds the distinction of being the only School District in the state in which all schools have been acknowledged as National Schools of Excellence.

Some parts of the hamlet’s peripheral neighborhoods are served by the Seaford Union Free School District, the North Bellmore Union Free School District, and the Levittown School District.

The Wantagh State Parkway, the Sunrise Highway, the Seaford – Oyster Bay Expressway, and Merrick Road pass through Wantagh and they have major intersections or entrances/exits here.

Cherrywood Shopping Center, Wantagh Woods Plaza, and Willow Wood Shoppes are in close proximity.

The average median home value in Wantagh is around $707,000*.

Commack

This CDP roughly corresponds to the hamlet with which it shares its name. It is located in the Long Island towns of Smithtown and Huntington, and both are a part of Suffolk County. Access to the LIRR network comes through Northport, Huntington, and Smithtown stations.

The region is served by the Commack Union Free School District. It has four primary schools, two intermediate schools, one middle school, and one high school. Commack is home to the Hoyt Farm Nature Preserve, the Whitman Hollow Park, and the Hamlet Golf & Country Club.

Commack residents may meet their shopping requirements by visiting the Mayfair Shopping Center, Commack Corners Shopping Center, Commack South Shopping Center, Commack Commons, Veterans Memorial Plaza, or Walmart.

The average home value in Commack stands at around $716,000*.

 

Jericho

Situated on Long Island’s North Shore, Jericho is a hamlet and CDP in Nassau County. It found a place in the top 50 places to raise a family in the U.S. by Niche in 2024. Residents who wish to make use of the LIRR may turn to Westbury, Hicksville, or Syosset stations.

Jericho has four schools, and public schools in the region are part of the Jericho Union Free School District. The Westbury Union Free School District is close by, as is the Hicksville Union Free School District. SUNY Old Westbury’s main entrance is in Jericho.

Residents don’t have to venture far to shop, given that the area is home to shopping malls such as Jericho Commons, Jericho Atrium, and Jericho Executive Plaza.

The average home value in Jericho is around $1,117,000*.

 

Syosset

Syosset is a hamlet and CDP in the Town of Oyster Bay in Nassau County. It is situated on the North Shore of Long Island. Residents of the region get easy access to the LIRR from the Syosset station.

Syosset has 11 schools, and public schools in the region are part of the Syosset Central School District. Plainview-Old Bethpage Central School District and Hicksville Union Free School District are close by.

Syosset Center, Syosset Plaza, Syosset Corners, and East River Plaza offer numerous options for shopping.

The average home value in Syosset is around $972,000*.

 

Merrick

Merrick is a hamlet and CDP in the Town of Hempstead in Nassau County. Situated on Long Island’s South Shore, several young families looking for good schools and proximity to water feel this is among the best areas to live in Long Island. Merrick has an LIRR station.

Merrick has 14 primary and secondary schools. Public schools in the region belong to the Bellmore-Merrick Central High School District or the North Bellmore Union Free School District. Other alternatives come from the nearby Freeport Union Free School District and the Bellmore Union Free School District.

Residents of Merrick can find various shops and other commercial establishments at Merrick Mall and Merrick Commons. The area also has a HomeGoods store.

The average median home value in Merrick is around $776,000*, which makes it one of the more affordable places to live in Long Island.

West Islip

Situated on Long Island’s South Shore, West Islip is a hamlet and CDP in the Town of Islip. The region’s natural western boundary comes in the form of Hawley’s Lake, Deer Lake, Sampawams Creek, and Swan Creek. The Islip station gives residents of the region easy access to the LIRR.

West Islip is home to four elementary schools and two middle schools. Public schools in the area are part of the West Islip Union Free School District. The Bay Shore Union Free School District and the North Babylon Union Free School District also offer some alternatives.

The Southdown Marketplace in West Islip is a well-rated supermarket. Other shopping alternatives come in the form of Captree Village, South Bay Commons, and Gardiner Manor Mall.

The average home value in West Islip is around $653,000*, making it one of the best Long Island neighborhoods from an affordability point of view.

 

Valley Stream

This village in Nassau County is situated in the southwest part of the town of Hempstead. In 2017, Money Magazine picked Valley Stream as the best place to live in Long Island. The area offers a dense suburban feel and boasts of several restaurants, bars, coffee shops, and parks. Valley Stream has an LIRR station.

As one of the best neighborhoods in Nassau County, Valley Stream has a total of 18 schools. Public schools in the region are part of the Valley Stream Central High School District or the Elmont Union Free School District. The Hewlett-Woodmere Union Free School District and the Valley Stream 13 Union Free School District are nearby.

Shopping alternatives come in the form of a Walmart Super Center, Green Acres Mall, Green Acres Commons, and Macy’s.

The average home value in Valley Stream is around $678,000*.

 

Levittown

Previously known as Island Trees, Levittown is a hamlet and CDP in the Town of Hempstead in Nassau County. It is situated between the villages of Farmingdale and Hempstead. While the region does not have its own LIRR station, residents may access the train network through Hicksville, Bethpage, Wantagh, or Bellmore stations.

Levittown has 11 primary and secondary schools. Public schools in the region are part of the Levittown Union Free School District or the Island Trees Union Free School District. The Bethpage Union Free School District and the Hicksville Union Free School District are nearby too.

Levittown Plaza, Levittown Mews, Nassau Mall, Gardiners Plaza, and Tri-County Mall give shoppers plenty from which to choose.

The average median home value in Levittown is around $632,000*, making it one of the best places to live in Long Island if you wish to buy a house without spending too much.

 

Plainview

Plainview is a hamlet and CDP in the town of Oyster Bay. It is situated near Long Island’s North Shore. Residents benefit through several parks nestled between homes, which is one of the reasons that put it on the list of the best neighborhoods in Long Island for families and millennials.

The 77,000 square meters Plainview-Old Bethpage Community Park is located on Washington Avenue. Depending on where you live, you could use the Hicksville, Bethpage, or Syosset LIRR stations.

Plainview has seven schools. Public schools in the region belong to the Plainview-Old Bethpage Central School District or the Bethpage Union Free School District. The Syosset Central School District and the Hicksville Union Free School District also offer some alternatives.

Plainview Shopping Centre, Woodbury Plaza, and Manetto Hill Plaza are home to a number of shops and other types of businesses.

The average home value in Plainview is around $848,000*.

East Meadow

East Meadow is a hamlet and CDP in the Town of Hempstead in Nassau County. Incidentally, there are almost no meadows in the region anymore because of post-World War II development and urbanization. The Nassau University Medical Center and Eisenhower Park are located in East Meadow. Access to the LIRR network comes through Hicksville and Westbury stations.

The region is home to six primary and secondary schools, and public schools here are part of the East Meadow Union Free School District. The North Merrick Union Free School District and the Uniondale Union Free School District are in close proximity.

Residents of East Meadow are spoilt for choice when it comes to shopping. Their options include East Meadow Mall, Clearmeadow Plaza, Meadowbrook Square, Stew Leonard’s Plaza, Stop & Shop, Marshalls, and Walmart.

The average home value in East Meadow is around $704,000*.

 

How Do You Go About Buying a Home?

Once you’ve decided to transition from being a renter to a homeowner and have narrowed down on a few nice neighborhoods in Long Island, you need to start looking for homes based on your specific needs. For instance, how important is proximity to an LIRR station for you?

Data suggest that there is a significant drop in the availability of entry-level homes, so people looking for affordable places to live in Long Island might have to deal with limited options. However, the average home value appreciation of 3.4% from March 2023 to March 2024 can serve as good news for prospective buyers.

Here are some other aspects that need your attention if you plan to buy a home in Long Island any time soon.

 

Mortgage Rate Trends

According to Freddie Mac, the average interest rate on a 30-year fixed-rate mortgage (FRM) increased by 0.61 percentage points from April 2023 to April 2024. As of April 11, 2024, the average interest on a 30-year FRM stood at 6.88%. These numbers bode as good news for prospective home buyers, all the more so because of the significant increase in interest rates from April 2023 to October 2023. What also helps is that most experts expect mortgage rates to remain favorable in the near future.

 

Affordability

A simple rule of thumb is to limit your budget to three times that of your annual household income. For instance, if you and your spouse earn $150,000 each year, set the higher end of your budget at $450,000.

 

Down payment

Save as much money as you can to put toward the down payment. The more you pay as down payment, the less you end up paying as interest through the course of the loan term.

 

Get Prequalified

Getting preapproved for a mortgage gives you a good indication of how much you qualify to borrow, so you may limit your search to homes that match your budget. It also gives sellers an indication that you are a serious buyer. Not getting preapproved, on the other hand, exposes you to deal breakers in the underwriting process after you have narrowed down on a house you wish to purchase. As a result, it is important that you get prequalified before beginning your search for a suitable home.

Attend Open Houses

Attending open houses gives you an easy way to look at what’s on offer. You get insight into the existing market, while also getting to identify the best Long Island neighborhoods based on your specific needs. By looking at homes that are up for sale, you may determine what amenities you wish to have, as well as ones you may do without. When you’re attending open houses, take time to explore the neighborhood as well.

 

Making an Offer

Once you find a house you like, make a competitive offer. Remember that other prospective buyers might also be interested in buying the same home. Homes in some of the best areas to live in Long Island might be subject to bidding wars, so prepare ahead of time. While paying more than the asking price might work for some, walking away might be the order of the day if it comes to stretching your budget.

 

Choosing the Right Mortgage Lender

No matter which of the Long Island neighborhoods you choose, working with a good mortgage lender is important. When selecting a mortgage lender, you must look beyond the interest rate on offer. Different types of fees associated with your loan can increase its cost significantly. Besides, a good lender provides flexibility in terms and conditions. For instance, some lenders let borrowers make weekly, fortnightly, or monthly repayments. Another aspect that requires your attention is the level of customer service any lender provides.

 

What Type of Loans Are There?

You get to choose from two basic types, government-backed and conventional loans.

• Government-backed mortgages. These come in the form of USDA loans backed by the U.S. Department of Agriculture (USDA), VA loans guaranteed by the Department of Veterans Affairs (VA), and FHA loans insured by the Federal Housing Administration (FHA). If you qualify for any of these loans, you do not have to worry about making a substantial down payment.
• Conventional mortgages. These are typically offered by mortgage lenders, banks, credit unions, and private lenders. When compared to government-backed alternatives, these tend to require higher down payments. In addition, your credit score has an effect on the approval process and the interest rate you get.

 

Conclusion

With an area that covers over 1,400 square miles, Long Island has homes to cater to different needs. Whether you want your family to live in the lap of nature or want your kids to have a great education, you get to choose from various Long Island towns, hamlets, and villages. What also helps is that the island has neighborhoods to suit different budgets.

Once you’ve narrowed down on the best neighborhoods in Long Island, the next step is to look for a reliable mortgage lender and determine how much you can afford to borrow. You may then look for homes accordingly.

 

 

* Values taken from Zillow.com on April 17, 2024.

** Values taken from Redfin.com on April 17, 2024.

Several homeowners think about refinancing their mortgages for a variety of reasons. While someone might refinance for a lower interest rate, someone else might choose this path to move from an adjustable interest rate to a fixed-rate mortgage. In any case, knowing how the process works is crucial in determining if mortgage refinancing is the best option for you.

What Is a Mortgage Refinance?

Refinancing a mortgage does not involve making changes to the terms of your existing mortgage. Instead, it involves replacing an existing mortgage with a new one. This requires applying for a new mortgage, and once a lender approves your application, it repays your old loan. After this happens, you need to start making repayments toward the new one, and the previous mortgage no longer exists. Some people even choose to consolidate their other debt into a new mortgage.

Can You Refinance Your Mortgage?

Since refinancing a mortgage requires applying for a new one, you need to meet certain eligibility criteria. These depend on the type of mortgage you select although some lenders have their own requirements as well.

The Time Period

One of the most common questions surrounding refinancing a mortgage is “Is it always possible to refinance a mortgage?” In several scenarios, it is possible to refinance a mortgage without needing to wait. Exceptions come in the form of:

• If you wish to refinance with your existing mortgage provider, you might need to wait for up to six months.
• To refinance with a cash-out mortgage, your property should have served as your primary residence for at least 12 months prior to your application.
• Qualifying for an FHA streamline refinance requires having made a minimum of six monthly payments, with the mortgage being at least 210 days old.
• With VA loans, you need to wait until you make at least six monthly payments or for at least 210 days after making the first payment.
• If you opt to refinance through a streamlined or non-streamlined USDA loan, all your payments during the last 180 days should be on time.
• USDA’s streamlined assist refinance program requires having made all your payments during the last 12 months on time.

The 12-month waiting period that applies on cash-out refinancing does not apply if you’ve inherited the property or received it through a separation or divorce.

Credit Score

Applying for a mortgage requires meeting credit score requirements and this is no different with mortgage refinancing. More often than not, the minimum credit score you need depends on the type of mortgage you select, although some lenders have their own minimum limits. Here are the minimum credit scores you typically need to qualify for different types of mortgages.

• Conventional loans: 620
• VA loans: 620
• USDA loans: 640
• Jumbo loans: 700
• FHA loans: 500 with a 10% down payment, and 580 with a 3.5% down payment

If you don’t meet this requirement, it is best that you work on improving your credit score before applying for a new mortgage.

Home Equity

Home equity refers to how much of your home’s value you own. This is the amount you stand to receive if you sell your home and pay off your mortgage entirely. When it comes to conventional and cash-out refinancing, you typically need at least 20% equity to qualify. However, some lenders can go down to 10%.

If you have less than 20% equity in your house, you may check if you qualify for VA cash-out refinancing. While the Department of Veteran Affairs allows eligible applicants to refinance with no equity at all, most lenders who provide VA loans tend to cap it at 10%.

Debt-to-Income Ratio

Your debt-to-income (DTI) ratio indicates how much of your monthly income goes toward servicing your debt. It requires dividing the total of all your monthly payments by your gross monthly income. You get to see this number as a percentage. Most lenders look for DTI ratios of 40% or lower. The higher it is, the more difficult it is to qualify for mortgage refinancing. If your DTI is higher than 40%, consider reducing your debt before applying for a new loan.

Income

No matter which type of mortgage you wish to get, you may expect lenders to take a close look at your income because it has a significant effect on your ability to repay the loan. As a result, you will need to provide proof of income that comes in the form of your employment history, tax returns, W-2s, 1099s, and recent paystubs.

When it comes to mortgages for self-employed borrowers, you’ll need to provide tax returns for the preceding two years, year-to-date balance sheets, business account statements, and profit-loss statements. Applicants with W-2s may look forward to a simpler process.

What Is the Purpose of Refinancing a Home?

Not everyone refinances a mortgage for the same reason. Here are the most common reasons to consider refinancing:

• Lower interest rate: Interest rates keep changing. If there is a noticeable difference between your mortgage’s interest rate and existing rates, you might end up saving money by paying less toward interest.
• Term change: Some choose to refinance their mortgages to reduce or extend the term of the loan. For example, your existing mortgage comes with a 30-year term. However, you feel that you can afford to make larger monthly payments now and wish to refinance to a 15-year alternative. The opposite can hold true as well.
• Changing the type of mortgage: Switching from one type of mortgage to another is not uncommon and one of the most common examples is refinancing an adjustable-rate mortgage (ARM) to a fixed-rate mortgage. If you switch from an FHA loan to a conventional loan, you get to stop paying mortgage insurance premium (MIP).
• Using your equity: If you opt for a cash-out refinance, you get to borrow more money than you owe toward your existing mortgage. If the value of your home has increased, you might be able to get adequate funds to consolidate your other debts or renovate your home. When you borrow against the equity you build in your home, you stand to benefit from considerably lower interest rates than other types of loans.
• Paying down your balance: Not a very common option, a cash-in refinance involves getting a new mortgage and making a lump sum payment at the onset to bring down its balance. You may consider this alternative if you want to stop paying private mortgage insurance (PMI) or have negative equity.

How to Refinance Your Mortgage?

The process of refinancing an existing mortgage is largely the same as the one you follow when you apply for it in the first place. This is because you need to apply for a new mortgage and a lender needs to approve your application. However, you need to begin by establishing a clear goal. For example, do you want to lower your monthly payment, extend the loan term, or use the equity you’ve built? Then, you need to follow these steps.

• Check your credit score: While your credit score has an effect on the type of mortgage you may get, it also affects the interest rate that comes with your mortgage. Simply put, the better your credit score, the lower the interest rate you stand to get. If your credit score is less-than-desirable, consider improving it before moving forward.
• Look at the equity you’ve built: Having less than 20% equity in your home limits your options when it comes to the number of lenders who might be willing to give you a new mortgage.
• Select a refinance type: Determine the type of mortgage refinance that might work best for you based on your specific requirements. Your options include rate and term refinance, cash-out refinance, cash-in refinance, and no-closing-cost refinance.
• Submit your application: Once you select a lender, submit an application along with all the required documents surrounding your income, assets, and debt. The lender uses the information you provide to determine if you qualify.
• Consider locking the interest rate: Your lender might give you the option of locking the interest rate it offers so it does not change before the loan’s closing, typically by paying an added fee. Lenders usually offer rate locks for 30, 45, or 60 days. Some offer rate lock extensions too. The flipside of not locking the rate is that it might increase by the time you reach the closing table, although it may decrease as well.
• Wait for the underwriting to complete: The underwriting process involves verifying all the information and documents you provide with your application. While your lender will scrutinize your finances and creditworthiness, a home appraisal is also a part of the process.
• Get ready for an appraisal: You may expect the lender to carry out a home appraisal at this stage to determine your home’s existing market value. If you’ve carried out extensive repairs/improvements or modified the home significantly after purchasing it, let the appraiser know as it might result in a higher appraised home.
• Close the loan: With the underwriting and home appraisal out of the way, you move to the closing table. Make sure you go through the Closing Disclosure carefully in advance and don’t hesitate to seek clarification from your lender if you have any doubts or questions. If you have not rolled in the closing costs in your new mortgage, you’ll need to pay them at this stage.

How Closing Costs Work

Bear in mind that there is no such thing as a no-cost mortgage refinance and you will need to pay closing costs. However, several lenders give you the option of rolling the closing costs into the loan. This way, you don’t have to pay closing costs at the onset but get to pay them through the course of the loan term because they become a part of the principal amount.

Pros and Cons of Refinancing Your Home

When interest rates fall, it’s common for homeowners to wonder if they might benefit by refinancing their existing mortgages, and there are other advantages as well. However, it is prudent to look at the negative side of refinancing before moving forward with the process.

Advantages of Refinancing a Home Loan

• Possibility of getting a lower interest rate
• Ability to increase or decrease monthly payments
• Pay off the new loan sooner
• No need to make a down payment
• Get cash out and use the money for different purposes
• Consolidate high-interest debt and save on interest charges
• Move from an adjustable-rate to a fixed-rate mortgage
• Option to add a co-borrower

Disadvantages of Refinancing a Home Loan

• Need to pay refinancing fees/closing costs
• Taking cash-out can bring down the equity you hold
• A longer loan term typically means paying more toward interest
• A slight negative impact on your credit score

Conclusion

If you choose to take the mortgage refinancing path, you get the ability to change the terms of your mortgage by lowering your monthly payments or paying it off sooner than initially planned. Besides, it can also give you access to funds if you want to use the equity you’ve built in your home. However, as with any major financial decision, it’s important that you weigh the pros and cons, and you may also want to discuss it with your financial planner.

Once you determine that refinancing a mortgage is right for you, take time to compare your options, be it in the form of the types of mortgages for which you may qualify or the lender you should select. Remember that choosing a reliable mortgage provider can make your refinancing process seamless and rewarding.

If you’re thinking about relocating to Florida and play your cards right, there’s a good chance you’ll end up having a great experience. Sure, you’ll enjoy sunshine all year round, have beaches in close proximity, and get easy access to some amazing national parks. In addition, you also stand to gain from the financial benefits of moving to Florida.

1. Lower Taxes

Many people move to the Sunshine State each year, yet not everyone is aware of the tax benefits the state has to offer. So, what are the tax advantagesof moving to Florida? These come in the form of no personal income tax, lower property taxes, no estate tax, and more. However, while you might get to save on taxes, you should get all the information about possible tax benefits by contacting your account/financial planner or tax advisor.

Personal Income Tax

Taxes are burdensome, to say the least, and Florida aims to ease this burden on its residents to some degree. One of the tax benefits of living in Florida is that the state does not charge any personal income tax. What this means is that no part of your paycheck goes toward paying state taxes. Depending on your income, this could lead to significant savings.

Consider this – you live in Pennsylvania and earn $100,000 per year, paying 3.07% as personal income tax in 2024. By moving to Florida and earning the same amount, you save $3,070 each year.

Tax on Retirement Benefits

Since Florida does not impose personal income tax, it does not tax social security benefits, pensions, IRAs, and 401(k)s. This gives retirees the means to stretch their income a little more. What also helps is you don’t have to pay personal income tax if you choose to work part-time as a retiree.

Estate/Inheritance Tax

Thanks to a federal change, Florida eliminated the provision of charging estate tax on December 31, 2004. As a result, when there is a transfer of estate or other assets upon someone’s demise, no estate or inheritance tax applies to the transfer. What this means is if you inherit property or money, you don’t have to pay taxes to the state.

Property Tax

Probable benefits in property taxes apply to homeowners and not renters. Besides, this depends on the state from which you move. Consider these state-wise annual property tax rates on average-value homes collated by BankRate for the 2022 tax year.

1. New Jersey: 1.79%
2. Illinois: 1.78%
3. Connecticut: 1.57%
4. Vermont: 1.43%
5. Nebraska: 1.36%
6. Pennsylvania: 1.29%
7. New Hampshire: 1.28%
8. Ohio: 1.27%
9. New York: 1.26%
10. Iowa: 1.25%

The same list puts Florida at the 30^th spot, with its annual property tax rate on an average-value home at 0.67%. So, is it worth moving to Florida for tax purposes from the point of view of paying property taxes? It can be, if you move from the 29 states that are above Florida on this list.

In addition, you also stand to bring down your property’s taxable value by up to $50,000 with the Homestead Exemption. While one half of it applies to all the taxing authorities, the other half does away with School Board taxes and is applicable on properties that have assessed values of over $50,000.

2. Affordable Housing

Data released by World Population Review surrounding median home prices by state indicates that the median home value in Florida stands at $407,200. The top 10 on the list are:

1. New York: $819,900
2. California: $785,900
3. Hawaii: $720,200
4. District of Columbia: $668,250
5. Washington: $618,000
6. Massachusetts: $614,700
7. Colorado: $580,900
8. Utah: $529,600
9. Oregon: $510,900
10. New Jersey: $477,600

With Florida taking the 18^th spot, it’s only fair to include housing costs as one of the financial benefits of moving to Florida. However, much like any other state, there can be a significant difference in the prices of homes based on where you wish to purchase one, with smaller towns offering more affordable options than large metropolitan areas. Besides, how expensive a house you can afford also plays a role.

3. Business-Friendly

Florida continues to rank among the top states in the country for business because of a streamlined regulatory environment, cost of doing business, and pro-business tax policies. Consider these statistics collated by Florida Power & Light Company and SelectFlorida that highlight the state’s business-friendliness.

• Florida takes the top spot for offering the best tax climate in the Southeast.
• It is the number one state in the country for attracting and developing talent.
• It ranks as the second best state for doing business in the U.S.
• It ranks number one for innovation.

The state’s 5.5% corporate tax rate helps it attract mid-sized and large businesses alike, and you may also benefit from clean energy-based tax exemptions. It comes as no surprise, then, that the Tax Foundation places Florida at the fourth spot in its State Business Tax Climate Index.

4. A Thriving Economy and Job Market

Data shared by USAFacts indicates that Florida’s economy ranks fourth in size among all the states. In addition, its unemployment rate of 2.9% in November 2023 was lower than the country’s overall unemployment rate. It also highlights that the economic growth of the state is higher than the country’s overall average. Given that the state boasts of a thriving economy and job market along with a business-friendly climate, scores of businesses have already chosen to shift base to Florida.

According to HireAHelper’s 2023 Corporate Relocation Study, 86% more corporations have moved their headquarters to Florida since 2017 in comparison to the number of businesses that have moved their head offices out of the state, which is the highest gain for any state. The three cities that have gained the most include Jacksonville, Tampa, and Miami – putting them on the list of the top cities in the country for relocation of corporate headquarters.

Some of the prominent names that have taken to Florida, either by shifting their headquarters or by building/increasing their presence here, include:

• Blackstone
• Lockheed Martin
• Goldman Sachs
• Paysafe
• Luminar Technologies
• Argo AI
• Amazon
• Walmart
• FedEx

5. Reasonable Cost of Living

Florida’s cost of living index stood at 100.3 in 2023, which was pretty much at par with the national average. This index accounts for different costs like housing, groceries, healthcare, transportation, and utilities. Given the reasonable cost of living in Florida, you may expect to get more value for your dollar if you move here from a state such as Hawaii, Massachusetts, California, New York, Maryland, or Washington.

6. Affordable Higher Education

SelectFlorida points out that Florida has remained the number one state in the U.S. for higher education for five consecutive years, and that it awards more than 100,000 science and engineering degrees each year. However, the reason higher education makes it to the list of the financial benefits of moving to Florida is the affordability factor.

If you plan to send your children to college, Florida not only provides some great alternatives from which to choose, but also ensures providing good education without burning a hole in your pocket.

EducationData highlights that the average in-state tuition at public institutions in the U.S. during the 2019-2020 academic year was the lowest in Florida, at $4,463. In addition, the average cost of studying at local community colleges during 2020-2021 was 28.43% less than the national average, and the average cost of studying at private universities during the same period 9.65% less than the national average.

7. Low-Cost Vacation

Florida serves as the perfect base for people who enjoy vacationing and traveling. For starters, the Sunshine State is home to some highly sought-after tourist destinations, from beaches to theme parks to national parks. This eliminates the need to take long-haul trips for the holidays because there’s a good chance that the experience you seek is not far from home.

Florida is great for people who like to take a cruise once in a while. This is because you no longer have to spend money to take a flight to your port of choice as the state has a few popular ones of its own. These include:

• Port of Miami – Miami
• Port Tampa Bay – Tampa
• Port Canaveral – Cape Canaveral
• Port Everglades – Fort Lauderdale

If you don’t mind a long drive, you also benefit from some great options that the neighboring states have to offer. From Tennessee’s Smoky Mountains to Georgia’s history-soaked Savannah to the live music scene and vibrant nightlife in Louisiana’s New Orleans, you’re only a road trip away from a quick getaway.

8. Elderly-Friendly

Data released by the Population Reference Bureau indicates that Florida was home to the second highest percentage of population aged 65 years or older in 2020, with 21.3% of its population above this mark. Given the significant number of seniors who live in this state, it’s fairly common to find businesses that offer generous senior discounts. Several senior communities and clubs also play their part by providing affordable amenities and activities.

In addition, the Florida Department of Elder Affairs provides an array of programs and services that can help keep finances in check, some of which include:

• Home Care for the Elderly (HCE)
• Medicaid Long-Term Care Services
• Memory Disorder Clinics
• Program of All-Inclusive Care for the Elderly (PACE)
• Adult Care Food Program
• Elder Farmers Market Nutrition Program
• Health & Wellness

Should You Buy or Rent?

If you decide to move to Florida and are unsure if you should live on rent or buy a home, pay attention to these aspects.

• Down payment. Buying a house typically involves getting a mortgage, for which you’ll need to make a down payment. While there are some types of mortgages that don’t require down payment, you need to qualify for them to enjoy this benefit.
• Mortgage payments. Once you get a mortgage, you need to keep making mortgage payments every month until you pay off the loan completely.
• Job security. Having a steady source of income ensures that you can keep making your mortgage payments in a timely manner.
• Creditworthiness. Getting a mortgage can be difficult if you have average or poor credit. On the other hand, the better your credit score, the lower the interest rate you stand to get.
• Level of commitment. Buying a house requires some level of commitment and you should consider taking this path if you plan to live in the house you purchase for five or more years.

Benefits of Buying

Based on where you live, buying a home might cost you less per month than living on rent, especially if you qualify for a VA loan or USDA loan. Once you start making payments toward your mortgage, you begin building equity in your house, and as you keep repaying the loan, your equity keeps increasing. Buying a home can result in tax savings because you may include a percentage of the amount you pay toward interest as deductions, and this is something you should discuss with your tax adviser.

As a homeowner, you don’t have to worry about relocating each time your landlord raises your rent.  Another benefit of buying a home is you get the freedom to make changes based on your likes and dislikes.

Conclusion

So, is it worth relocating to Florida and do you really save money by moving to Florida? The answer to both questions is in the affirmative, provided you’re moving from a place that has a higher overall cost of living. Given that Florida ranks higher than most states in the country when it comes to its economy, taxes, housing costs,  job market, and education, there’s a good possibility that moving here might work well for you.

If you plan to purchase a home once you move to Florida, start by arriving at a suitable budget and identifying the type of loan you wish to get. The next step should be to select a reliable mortgage provider and get pre-approval. This gives you an indication of how much the lender is willing to lend. Then, look for homes accordingly and consider using the services of a real estate agent to streamline the process.

One of the most important factors to consider when getting a mortgage is how long your mortgage term should be. This decision can have a significant bearing on your finances in the years that follow. There is no predefined best mortgage term length because this aspect varies based on individual requirements. As a result, you need to think about the specifics of your case to determine if a short- or long-term mortgage might work better for you.

 

What Is a Mortgage Term?

The term of a mortgage refers to the duration your lender gives you to repay the loan entirely. In, the U.S., the most common mortgage term is 30 years, and you also get to choose from 10, 15, 20, and 25 years. However, not all mortgage providers offer the same options. One of the key reasons this factor plays a vital role in getting a mortgage is that it can have a significant impact on the overall cost.

 

What Is a Short-Term Mortgage?

Short-term mortgages have terms ranging from 10 to 15 years. While it is possible to find mortgages with even shorter terms, it’s not easy. From a borrower’s point of view, short-term mortgages tend to come with lower interest rates and higher monthly payments than long-term mortgages. In addition, a short-term mortgage enables you to build equity in your house faster.

What Is a Long-Term Mortgage?

The duration of a long-term mortgage extends to 15 years or more. 30-year fixed-rate mortgages hold the largest market share in the country. The longer your loan term, the more time you get to repay the money you borrow, which translates to lower monthly payments. However, you end up paying more toward interest.

Usually, 15-year mortgages come with the most competitive interest rates. If you get a 30-year mortgage, you typically still have the option of paying off the entire money ahead of time without incurring a penalty.

While some lenders provide 35- and 40-year mortgages, they don’t fall under the conforming loan bracket. This means they don’t have to abide by the rules for conventional loans set by Fannie Mae and Freddie Mac.

 

Why Are Long-Term Mortgages Popular?

Long-term mortgages, especially with terms of 25 years and more, are becoming rather popular with first-time homebuyers, which is mainly because of the affordability factor. After all, rising property prices are making it increasingly difficult for borrowers to opt for short loan terms because they come with significantly higher monthly payments. A 30-year mortgage, when compared to a 15-year alternative, can lower monthly payments greatly, allowing a first-time buyer to move forward with buying a home.

 

Potential Drawbacks of Long-Term Mortgages

One disadvantage of getting a long-term mortgage is you’ll end up paying more in the form of interest. It also means you’ll have to keep making monthly payments for longer. For example, if you get a 30-year mortgage in 2025 and stick to making just the monthly payments, you’ll own your home outright by 2055. However, the prospect of needing to make monthly payments is not necessarily negative because you no longer pay rent and continue building equity in your home. Plus, it’s common for incomes to increase with time.

Is It Better to Have a Short or Long Mortgage?

The answer to, “Is a long- or short-term loan better?” depends on your circumstances, and it’s important to understand the key differences between the two. Given that you need to make payments toward a long-term mortgage over a prolonged period, it costs less per month when compared to a short-term mortgage. However, it also means that the overall cost of the mortgage will increase because you’ll need to pay interest charges over the long term too.

While a short-term loan increases your monthly payments, you get to pay off the entire balance sooner. This means you end up paying less interest.

Consider these examples to get an idea of the difference in interest charges based on your loan term. In both examples, the home price is $200,000 and you make a $40,000 down payment.

30-Year Fixed-Rate Mortgage

• Interest rate. 6.61%
• Monthly payment. $1,022.91
• Total of 360 Mortgage Payments. $368,248.01
• Total interest. $208,248.01

15-Year Fixed-Rate Mortgage

• Interest rate. 5.93%
• Monthly payment. $1,344.13
• Total of 180 Mortgage Payments. $241,942.95
• Total interest. $81,942.95

One way to determine which loan term might work best for you is to use an online mortgage calculator. You may view existing weekly averages of interest rates on the Freddie Mac website, which you can then use in your calculations. This will give you a clear indication of how your monthly payments will vary based on different loan terms, and you may choose one according to your affordability.

 

15- Or 30-Year Mortgage

While getting a 15-year loan term can save you a tidy sum of money in the long run, you need to make sure you can afford to make the higher monthly payments. If you feel you might face challenges, consider going with a 30-year mortgage. You may also want to consider when you would like to be mortgage-free. For example, if you wish to pay off your mortgage before you retire in the next 26 years, a 25-year loan term might be the way to go.

A 15-year loan term is ideal if you can make your monthly payments comfortably, with your budget having adequate room to meet your other financial obligations and expenses. It can also work well if you wish to build equity quickly, which you may then use to pursue other financial goals by getting a home equity loan, home equity line of credit, or cash-out refinance.

Older homebuyers who build enough equity in their homes by the time they are 62 years of age may even consider taking reverse mortgages in the future.

Is It Better to Get a Longer Mortgage and Overpay

Most lenders let you pay up to 20% of your loan balance every year without imposing any fees or penalties. If you prepay your mortgage or make extra payments, you can get the money you pay to apply to the loan’s principal amount and not the interest. By bringing down the principal amount, the amount you need to pay as interest reduces too. Some other benefits of making extra payments include:

• Build equity faster
• Pay off your mortgage sooner
• Bring down your debt-to-income ratio (this can help you qualify for lower interest rates on loans you take in the future)

 

Find Out About Prepayment Penalty

Before you decide to make extra payments toward your mortgage, find out if your lender charges a prepayment penalty. This penalty usually applies if you sell your home, refinance your mortgage, or make a substantially large payment. In addition, when applicable, prepayment penalties typically stay in place only for the first three years of a loan’s term. While some types of loans come with prepayment penalties, not all do. For example, it is illegal to charge prepayment penalties on VA loans issued to members of the military and single-family FHA loans.

 

How to Pay Off a 30-Year Mortgage Sooner?

More often than not, homeowners can pay off their 30-year mortgages early if they adhere to a few simple ground rules. For starters, you need to understand how mortgage payments work with regard to amortization. In simple terms, it refers to how a lender applies your payment toward the principal amount and the interest.

When you start repaying your mortgage, a major portion of your payments go toward interest charges and only a small percentage covers the principal. Toward the end of the loan term, given that you have already paid most of the interest, much of your payment covers the principal. To build equity, you need to bring down the principal amount. The sooner you do so, the quicker you get to build equity.

If you want to pay off your mortgage faster, these pointers might be of assistance. In the first three instances, you need to instruct your lender to apply the extra payment toward the principal and not the interest.

• Make larger monthly payments. If your budget permits, start making more than the required monthly payment. You may increase or decrease the extra amount at any time.
• Make extra one-time payments. If you cannot commit to making extra payments each month, you may make a lump sum payment of any amount at any time. This is a great option if you receive extra funds.
• Make biweekly payments. If you make a payment every two weeks instead of once a month, you end up making one full extra monthly payment each year.
• Opt for a mortgage recast. Recasting a mortgage involves making a substantial lump sum payment and then asking your lender to re-amortize your loan based on the reduced principal amount. However, not all mortgages allow recasting, and this is something you need to check with your lender. In this case, while the loan’s term and interest rate remain the same, you get to make lower monthly payments. You save in interest charges as well.

Should You Refinance a 30-Year Mortgage to a 15-Year Mortgage?

If you plan to refinance an existing 30-year mortgage to a 15-year mortgage, the first thing you need to consider is whether you will be able to keep up with the higher monthly payments over a period of time. Then, you need to look at the difference between the existing interest rate on your mortgage and the rate you qualify for on a new 15-year mortgage.

While a lower interest rate can lead to monetary savings, you also need to account for the expenses associated with getting a new mortgage, such as loan origination fees and closing costs. If you wish to refinance a mortgage within the first two to three years, you might need to account for a prepayment penalty too.

Since different variables can be at play when you refinance a mortgage, make sure you carry out your calculations in advance. If you don’t see yourself coming out on top, making extra payments toward your existing mortgage might be a better solution.

 

Are Adjustable Rate Mortgages Short-Term?

Adjustable rate mortgages (ARMs) are not short-term and they typically come with 30-year loan terms. Unlike a fixed-rate mortgage where your interest rate remains the same through the course of the loan term, an ARM comes with an interest rate that’s fixed for an initial period and then begins to change based on existing market conditions.

The initial period when the interest rate remains fixed is typically short-term and may vary from three to ten years. How often interest rates change after that depends on the specific type of ARM you get.

• 3/1 or 3/6 ARM. The interest rate remains fixed for the first three years and then changes once every year or six months.
• 5/1 or5/6 ARM. The interest rate stays the same for the first five years and then changes once every year or six months.
• 7/1 or7/6 ARM. There is no change in the interest rate during the first seven years, after which it revises every year or six months.
• 10/1 or10/6 ARM. In this case, the interest rate remains the same for the first 10 years and then changes every year or six months.

 

Conclusion

If your budget permits, a short-term mortgage can be a great way to buy a house and build equity quickly. Long-term mortgages, on the other hand, have given scores of Americans the ability to go the homeownership way because they come with more affordable monthly payments. Whether you should opt for a long- or short-term mortgage essentially boils down to your circumstances, and if you’re still unsure about which might work better for you, consider discussing your situation with a reliable mortgage provider.

Westbury, NY — January 3, 2023 — Meadowbrook Financial Mortgage Bankers has been recognized nationally as one of the Top Workplaces of 2024 by Scotsman Guide.

Scotsman Guide is a leading resource for mortgage loan originators nationwide. Esteemed as the industry benchmark for mortgage rankings, they select the companies that stand out amongst the rest. Top Workplaces showcases mortgage companies around the country and all that makes them unique. To make this exclusive list, the editors assessed Meadowbrook’s achievements in operations, DEI, philanthropy, benefits, and corporate culture. Companies who excelled in multiple categories were included on the list of 2024 Top Workplaces.

The past year was filled with various challenges for mortgage professionals. The team at Meadowbrook made a tremendous effort to provide its employees with the support, training, and resources needed to succeed in the volatile market.

“This is a huge accomplishment for Meadowbrook,” said E.J. Gilbride, Executive Vice President of Sales & Mortgage Loan Originator. “Being recognized nationally as a Top Workplace of 2024 is a testament to our unwavering commitment to fostering a supportive and thriving environment at Meadowbrook. This accolade reflects our dedication to our employees and our belief that a strong, collaborative culture is the cornerstone of our success.”

The employees are Meadowbrook’s greatest asset, which is why they celebrate new ideas, personal growth, and collaboration across all departments. This award is not only a testament to past successes, but also motivation to continue evolving within the mortgage industry.

“This achievement speaks to the dedication of every employee at Meadowbrook,” said Erica Wetherall, Executive Vice President – Chief Compliance Officer. “It motivates us to continue our pursuit of excellence in all facets of our operations while fostering an environment where every employee feels empowered and valued.”

By cultivating a strong company culture, employees are able to flourish in their roles. This recognition serves as confirmation that leading with passion and supporting each and every employee is at the forefront of Meadowbrook’s success.

For more information on Meadowbrook, please contact Nicole Andretta at nandretta@mfmbankers.com or (516) 893‑1836.

About Meadowbrook

Meadowbrook Financial Mortgage Bankers Corp. was founded in 2008 with a mission to make the homeownership process simple by providing best-in-class turnaround times, communication, and education throughout the mortgage financing process. Licensed in 26 states, the New York-based mortgage lender prioritizes integrity, transparency, and customer-centricity with each and every client. The team emphasizes the importance of financial education to build lasting relationships with clients and partners based on trust and mutual respect. As an equal opportunity mortgage lender, we take great pride in our efficient processes, extensive product suite, and award-winning company culture.

If you plan to buy a luxury home or are looking in an exclusive neighborhood, there’s a good chance you’ll need a jumbo loan. More often than not, people who buy expensive homes turn to jumbo loans because the funds they require tend to exceed conforming loan limits. So, just what is a jumbo loan, and should you consider getting one?

 

What Is a Jumbo Loan?

Every year, the Federal Housing Finance Agency (FHFA) sets maximum loan limit values for mortgages that Fannie Mae and Freddie Mac guarantee. In 2024, this conforming loan limit (CLL) for single-unit homes across most parts of the U.S. stands at $766,550. It was $726,200 in 2023. While this number serves as the national baseline, it may vary for high-cost areas. For example, the CLL for single-unit homes in Nassau, Kings, and Queens Counties in New York State for 2024 is $1,149,825.

A jumbo loan comes into play if the amount you wish to borrow to purchase a home exceeds the CLL set for the area in question. For example, if you want to buy a $2,000,000 home in NYC and cannot afford/or wish to make a down payment in the amount so as not to exceed the conforming loan limit, you’ll need a jumbo loan. It’s common to refer to a jumbo loan as a non-conforming loan because it exceeds the CLL set by FHFA.

 

How Jumbo Loans Work

Much like conventional loans, jumbo loans come with fixed and variable interest rates, and you get to choose from different loan terms as well. For example, you may opt for a 15- or 30-year jumbo loan depending on your requirements. You may use a jumbo loan to buy a luxury home, a two to four unit property, or a home in a very expensive area. In addition, you may use the proceeds from a jumbo loan to buy a home that will serve as your primary residence or an investment property.

Jumbo Loan vs. Conventional Loan

While there are several similarities between jumbo and conventional/conforming loans, there are some key differences that require your attention. For example, your jumbo loan might come with a higher interest rate than a comparable conforming loan.

 

Creditworthiness

There is a direct effect of credit scores on mortgages, and this does not limit to the interest rate you get. The minimum credit score you need to qualify for a conforming loan depends on the type of mortgage you need. For USDA loans, you typically need a credit score of 640 or higher. With VA loans, you might qualify if your credit score is 620 or higher. If you plan to get an FHA loan, you may qualify with a score as low as 500.

When it comes to jumbo loans, most lenders require applicants to have credit scores of700 or higher, and rather few go as low as 660. This is mainly because lenders view jumbo loans as riskier than their conforming counterparts because Fannie Mae and Freddie Mac do not guarantee them.

 

Down Payment

The section of the jumbo vs. conventional loan comparison tilts in favor of the latter because you get considerably more leeway when making a down payment for a conforming loan. Just how much down payment you need to make for a conforming loan may vary from 0% to 20% depending on the type of mortgage you seek. For example, eligible borrowers may get VA and USDA loans without making any down payment, and FHA loans come with a 3.5% minimum down payment requirement.

Lenders who provide jumbo loans typically require that you make a down payment of 10% to 20%, although some might require that you pay as much as 30%. If you qualify to pay less than 20%, you might need to account for the extra expense that comes in the form of private mortgage insurance (PMI), which is also the case with most types of conforming mortgages.

Consider this – you wish to purchase a home for $2,000,000. Your lender requires that you pay at least 25% as down payment, which amounts to $500,000. Bear in mind that this does not include other expenses associated with the closing costs you’ll need to cover. 

Interest Rates

Traditionally, the higher risk that lenders face when they provide jumbo loans has resulted in their interest rates being slightly higher when compared to conforming loans, often by 1% to 2%. The increased risk comes because neither Fannie Mae nor Freddie Mac guarantees these loans.

 

Qualification Process

Jumbo loans tend to come with more stringent eligibility criteria than conforming loans because of the higher risk that lenders face. You may also expect increased scrutiny of your credit history and income during the underwriting process. This may include additional assessments and a second appraisal.

 

Closing Costs

Jumbo loans tend to come with a more extensive verification process when compared to conforming loans. As a result, it’s common for lenders to charge a higher percentage of a home’s selling price as closing costs. These may vary from 3% to 6% of a home’s value.

Other Jumbo Loan Requirements

One of the key requirements of getting a jumbo loan is for you to have strong credit. In addition, you also need to make a reasonable down payment that could be as high as 30% of a home’s selling price. Other requirements relate to:

• Cash flow. Lenders look at your debt-to-income (DTI) ratio to find out how much of your monthly income goes toward paying your debt. This, in turn, highlights how well you manage your cash flow and the risk you pose as a borrower. While getting a conforming mortgage with a DTI of up to 50% is possible, you typically need it to be 43% or lower to qualify for a jumbo loan. Some jumbo loan providers require DTI ratios of 36% or lower.
• Assets/cash reserves. Jumbo loan providers commonly require applicants to show that they have additional liquid assets or savings of up to 12 months of homeownership expenses. This is to safeguard their interests and minimize the possibility of missed payments.
• Loan-to-value ratio. Loan-to-value (LTV) ratio refers to the amount that a lender is willing to provide in the form of a percentage of a property’s value. For example, if a lender provides a $1,600,000 loan toward a property valued at $2,000,000, the LTV stands at 80%. The maximum LTV typically required for a jumbo loan is 90%.
• Appraisals. While a property appraisal is a norm with just about every type of mortgage, a jumbo loan provider might ask for a second appraisal to confirm the home’s market value. 

 

How to Get the Best Jumbo Loan Rates?

Your credit score has an impact on the interest rate that comes with your jumbo loan because it indicates the level of risk you pose as a borrower. If you’re hoping to get the lowest jumbo loan rates, try and improve your credit score to 760 or higher. Paying all your bills on time and bringing down your credit utilization ratio can help.

The down payment amount may also have an effect on your loan’s interest rate, wherein making a larger payment might bring with it a lower rate.

Pros and Cons of Jumbo Loans

Like most other types of mortgages, jumbo loans come with their share of advantages and disadvantages.

Pros

• Borrow a large amount. A jumbo loan gives you the means to borrow considerably more money than the conforming loan limit set by the Federal Housing Finance Agency.
• Flexible terms. Depending on what works better for you, you may choose from fixed- and adjustable-rate jumbo loans. Most lenders also let you opt for 15- or 30-year loan terms.
• Competitive rates. While lenders tend to view jumbo loans as riskier than conforming loans, the difference in interest rates can be negligible. Besides, if you have strong credit and your finances are in order, you might end up qualifying for a highly competitive rate.

Cons

• Need a good credit score. While you might qualify for a conforming loan with fair/average credit, qualifying for a jumbo loan requires that you have good or exceptional creditworthiness, with a credit score of 700 or higher.
• Need cash reserves. Most jumbo loan providers require that you have at least 12 months of cash reserves to take care of your mortgage payments and other housing-related costs. This is to minimize the risk they face owing to possible defaults.
• Increased scrutiny. Given the risk factor, the underwriting process of a jumbo loan is typically more meticulous than that of a conforming loan. You may expect your lender to scrutinize your financial profile with a fine-tooth comb, requiring that you submit extensive documentation to verify your income, savings, assets, and overall financial condition.
• Tax implications. According to the Internal Revenue Service (IRS), you may deduct interest on your mortgage only on the first $750,000. Any amount of interest you pay over this limit does not qualify for tax deduction. In addition, the Tax Cuts and Jobs Act (TCJA)has capped the state and local tax (SALT) deduction that lets you deduct certain taxes like property tax at $10,000. Both these factors work as drawbacks from the tax savings point of view, and it’s best that you consult a tax expert for details.

 

Should You Get a Jumbo Loan?

If you fall under the “high earners, not rich yet” (HENRY) section of individuals who earn $100,000 to $500,000 annually and have good credit along with adequate cash reserves, you may consider getting a jumbo loan.

 

Conclusion

If you’re interested in buying a large or expensive home that does not meet conforming loan limits, you may consider getting a jumbo loan. Fortunately, qualifying for a jumbo loan is not as complicated as one might imagine. If you have your finances in order, adequate savings, and a good credit score, you might be eligible to get a jumbo loan for funding the purchase of your dream home. If you want to get the process underway, consider discussing your requirement with a reliable mortgage provider who can guide you through the process.

Mortgage payments continue to remain the biggest monthly expense for many, and not everyone can manage a home loan effectively. No matter whether you wish to purchase a home to live in or for investment purposes, you need to prepare yourself ahead of time. Fortunately, if you know how to manage mortgage payments effectively, you can make the most of your money and pay off your mortgage in a time-bound manner.
 

Make Timely Payments

Data released by Statista indicates that the United States experienced a spike in its mortgage delinquency rate during the second quarter of 2020, touching 8.22%. It stood at 9.3% during the subprime mortgage crisis that ravaged the nation from 2007 to 2010. Fortunately, by the first quarter of 2023, this number dropped to 3.5%.

Keep in mind that late payments lead to delinquencies, which can result in foreclosure.According to ATTOM, 185,580 properties in the U.S. faced foreclosure filings in just the first half of 2023, a substantial increase from 164,581 in 2022.

While making mortgage payments on time is crucial, many end up making late payments or miss making payments due to a variety of reasons. A simple way to avoid this problem is to set up automated payments, where transfers take place from your bank account before each due date. If you’re wary of setting up automatic payments, you can set up reminders on your phone to ensure you don’t miss your due date. If your paycheck comes after your mortgage bill due date, you may ask your lender to change it to a date that is more in line with your pay schedule.
 

Create and Stick to a Budget

The cost of owning a home is often more than your mortgage and utility payments, but following a proactive approach can help you manage your finances effectively. First-time homeowners need to remember that they will be responsible for fixing the problems that used to be their landlord’s headaches in the past. This can also be the case if you upgrade to a larger home because maintenance costs tend to increase with the size of a property. In any case, you need to account for all unforeseeable costs.

It comes as no surprise that one of the top tips to manage a mortgage is to come up with a budget and ensure sticking to it long term. A good way to move forward is to follow the 28/36 rule. In this case, you should spend no more than 28% of your monthly income toward housing, which includes mortgage payments, taxes, and insurance. In addition, you should spend no more than 36% of your monthly income in repaying all your debt, the mortgage included.

Homeowners who are unsure about how to manage a mortgage may start by calculating their net income and tracking their spending. By monitoring your fixed and variable expenses, you will have a better understanding of the costs you can cut back on. Set up spending limits for different categories of expenses. Remember that you might need to make some adjustments to stay on track. You also need to keep reviewing your budget regularly to account for any changes in your financial situation.

Part of working on and sticking to a budget requires that you keep a close eye on your furniture expenses. As tempting as it might appear, steer clear of making expensive purchases that can increase your overall debt and hamper your ability to manage your mortgage effectively.
 

Pay More Toward the Mortgage

It is common practice for homeowners to make 12 mortgage payments per year. By choosing to make bi-weekly payments, you end up making 26 payments over a year. This allows you to make an additional payment each year, lowering the principal amount faster with less interest. Many feel this is the most brilliant way to pay off your mortgage quicker than usual and save in the process.

Another way to pay more toward your mortgage is to round up. For example, if your monthly payment is $1,718, consider paying $1,800 or $2,000 each month. Alternatively, you may increase the amount you pay each month by a few dollars. For instance, you could go from $900 to $910 to $920 and so on. In both scenarios, you stand to save a tidy sum as interest and pay your mortgage off sooner.

Keep Track of Insurance and Property Taxes

Many people don’t realize the cost of homeowners’ insurance and property taxes tend to increase every year. It is particularly important to keep track of insurance costs if you’re paying them through your mortgage because while you might sign up for what seems like a good deal early on might turn into anything but as the years roll by. In some instances, insurance premiums can increase by 10% to 20% in a year. If you find your insurance costs increasing significantly, it might be in your best interest to shop around and look for other alternatives.

When it comes to property taxes, there’s a good chance your municipality will keep increasing them every year. If you think that the taxes you’re paying are not in line with your home’s existing value, you may consider filing a tax grievance petition. In this case, your property’s existing value should be lower than that calculated by the assessor.

The overvaluation of some properties in urban areas results in high taxes. Bear in mind that this assessment is not the same as an approval, and it takes place only from a taxation perspective. If you feel the assessment is incorrect, you may request a reassessment. If the reassessment works in your favor, you benefit by paying lower taxes.

Recast Your Mortgage

If refinancing your mortgage is not an option because your current rate is lower than existing rates, you may look at what recasting has to offer. To recast a mortgage, you need to make a large lump-sum payment to your lender who then re-amortizes your loan. While this helps bring the balance down, there are no changes in the terms of the loan. The result is that you start paying much lower monthly payments and owe less in the form of interest.

Conclusion

Conclusion Now that you’ve gone through the tips to pay off a mortgage early, determine which option might work well for you based on your specific situation. For example, if can afford to, you may make extra payments toward your mortgage to save on interest charges and pay it off sooner. In addition, you need to ensure that you make all your payments on time.

If you plan to get a new mortgage, make sure you discuss your specific situation with a reputable mortgage provider, as this gives you the means to make a well-informed decision.

Until not so long ago, getting a mortgage was typically a tedious task, often taking months for the entire process to complete. Even after filling out lengthy applications and submitting a slew of documents, applicants would be in the dark about whether or not they might get the funds they need until the end. The entire process took considerable time and effort on the part of the borrower and lender alike. However, the widespread use of technology in the mortgage industry has made matters simpler for all.

 

Evolution of Technology in the Mortgage Industry

One of the biggest technological changes that came about before the turn of the last century was the use of loan origination systems (LOS) during the 1980s. They played a vital role in automating the application and approval process, thereby improving speed and efficiency. The evolution of these systems is clear, with newer versions making way for seamless collaboration between mortgage providers, borrowers, and real estate professionals.

 

The Early Days

The main shift toward embracing what technology had to offer came about during the 1990s, when the use of computers for loan origination and record-keeping aided the typically laborious manual underwriting process. With the internet gaining popularity rapidly, more and more mortgage providers started giving borrowers the ability to apply for loans online. Some even began offering online approvals. The other benefits during the initial tech-driven years included:

• Online connectivity between the borrower and the lender
• Automated tools for accepting and classifying applications
• Streamlined underwriting and appraisals
• Lower transactional costs for lenders and borrowers

While the role of technology in the mortgage industry was largely positive, there were some hiccups too. For instance, implementing modern technologies required investing in infrastructure and resources, which not all mortgage providers found possible. This created a divide between those who adopted technological advances and those who did not. In addition, not all lenders wanted to get on board because of concerns surrounding security. A seemingly high learning curve also served as a drawback during the early years.

The COVID-19 Effect

During and after the COVID-19 pandemic, several mortgage providers changed their approach when it came to serving their borrowers, and the role of technology in the mortgage industry became even more prominent. According to survey-based data presented by Infosys:

• Around 99% of lenders feel that technology can play a vital role in improving the mortgage application process.
• 74% think it can simplify the process.
• 67% feel it can reduce data entry work.
• 70% believe it can reduce time to close.

The data Infosys collated also indicates that:

• The leading mortgage providers process loan applications 63% faster than their competition, reducing the average loan processing time by four to six days.
• Most borrowers want to use the internet to learn about their options, submit their documents, and get pre-approval.
• One in four mortgage providers has already made technology-based investments.
• Around 70% of Gen Z and 60% of millennials want to complete the entire process using a mobile app.
• More than 80% of borrowers prefer signing documents electronically instead of visiting physical locations.

Now, just about every player in the mortgage industry has realized the impact of technology. After all, an increasing number of people turn online to seek information about mortgages, compare their options, and submit applications. Thanks to technology, borrowers can even find lenders who complete the entire process, from pre-approval to closing, online.

The Need to Go Online

There’s been a considerable shift in the dynamic between borrowers and lenders over the last few years, especially after the mushrooming of online mortgage platforms. Now, just about every mortgage provider has an online presence. According to the 2023 Borrower Insights Survey by ICE Mortgage Technology:

• More than 50% of Gen X and older borrowers like the fact that the online process eliminates the need for in-person interactions.
• More than 30% of Gen Z and millennial borrowers share this sentiment.
• Over 25% of existing homebuyers would like a mix of digital and traditional tools when they apply for mortgages again.
• 45% of millennials want mortgage providers to offer the flexibility of online and in-person interactions.
• Homebuyers who’ve had five or more mortgages are likelier to interact with lenders using online tools, with traditional methods playing a supporting role.

Given the shift toward offering technology-based solutions, many people are turning online to look for new loans and refinance existing mortgages, and comparing interest rates and loan terms has never been easier.

 

How Do You Get a Mortgage Online?

Most lenders let you apply for a mortgage online, and getting pre-approval over the internet is fairly straightforward. All you need to do is select a lender and submit an application that requires a few personal and income-related details. Some lenders work only in the online space, letting you complete the entire process of getting a mortgage online. However, scams occur in the online mortgage sphere from time to time, so it’s best to remain cautious.

 

Pros of Getting an Online Mortgage

If you choose a good online mortgage provider, you may look forward to multiple benefits.

• You can apply for different types of mortgages like conventional loans, VA loans, and USDA loans.
• Quicker processing of your mortgage.
• Possibility of getting lower interest rates and fees.
• Ability to upload required documents securely.
• Ability to sign documents digitally.

Cons of Getting an Online Mortgage

While getting an online mortgage might come with several benefits, you need to watch out for a few possible pitfalls too.

• Contacting your mortgage provider over the phone might not be easy.
• There’s no guarantee of the rate you’ll get until the final approval.
• Getting approved might be challenging if you have an unsteady income.
• You might not be able to qualify with average credit.

 

The Role of FinTech Companies

Scores of potential homebuyers are taking advantage of the recent rise of FinTech companies in the mortgage industry, and there’s no denying that this is mutually advantageous for banks and FinTech companies alike. Owing to the growth of non-bank tech-driven companies in this field, traditional players have already started upping their ante by embracing technology. This is helping them reach out to larger audiences, provide higher levels of service, and form suitable alliances with FinTech players.

The role of technology in mortgage lending is bound to lead to more advantages even for traditional lenders as long as they are willing to adapt quickly. The benefits they may look forward to include:

• Making existing processes more effective and transparent.
• Using tools to provide enhanced customer experiences.
• Improving communication with customers.
• Using application program interfaces (APIs) that allow integration with third-party add-ons.
• Creating front-end digital partnerships that facilitate onboarding, customer authentication, and loan origination.
• Staying up-to-date with the latest, tools, trends, and technologies.

Artificial Intelligence, Machine Learning, and Process Automation

While artificial intelligence (AI) and machine learning (ML) made their presence felt in different financial services applications before 2020, the mortgage industry started leveraging the potential these technologies had to offer a little later.

Consider this – the mortgage industry deals with large volumes of data and requires carrying out many repetitive tasks. AI and ML, on their part, are rather effective when it comes to analyzing data and performing cognitive tasks. These can include the classification of information, determining potential risk, and even making lending decisions. It comes as no surprise, then, that some of the top mortgage providers are already using these technologies to improve the overall process, from applying for a loan to its eventual funding.

While the traditional mortgage process is typically time-consuming, AI can help speed things up by streamlining workflows as well as by gathering, analyzing, and verifying different types of information. Given the rise of predictive analysis, it’s possible to reduce the need for human intervention and automate the decision-making process.

Some mortgage providers have turned to robotic process automation with the primary aim of reducing operational costs. This technology can also play a role in improving productivity and accuracy because it can help carry out repetitive rule-based tasks quickly and efficiently. Within the mortgage industry, robotic process automation can help in areas like loan origination, application processing, customer service, and quality control. For example, this technology is perfect for loan origination, which is otherwise a highly manual step that’s prone to errors.

 

How Blockchain Technology Is Impacting the Mortgage Industry

It’s safe to say that the mortgage industry can do with better recordkeeping, traceability, and accountability. Blockchain can help address this problem in an effective way. While this technology can increase transparency, it also holds the potential to reduce costs. It can do this by reducing the risk for incorruptible and infallible transaction records, paving the way for near-real-time settlement, and eliminating friction from the process.

In its current form, the mortgage industry is home to scores of brokers whose profits add to overall costs. The entire process of getting a mortgage lacks adequate transparency because different organizations hold details pertaining to government records, title deeds, and bank accounts. Mortgage providers depend on these intermediaries to collect information in order to make lending decisions.

Blockchain can address these problems by assigning unique trackable digital IDs for all properties, and the use of distributed ledgers and smart contracts can help eliminate the existing roles of various intermediaries. In addition, the chain of information that blockchain creates can help address concerns surrounding the transfer of documents and minimize instances of mortgage fraud.

Benefits of Technology for Mortgage Providers

A majority of mortgage providers in the U.S. believe that technology can improve the entire lending experience. Traditional systems continue to have limitations and gaps that technology can address to good effect, and lenders may look forward to various benefits. For example, a single digital platform can connect a borrower, a bank, an underwriter, and any other financial organization. Other benefits include:

• A reduction in manual errors
• Simpler risk evaluation
• Lower operational costs
• Automated collection of documents
• Streamlined review process
• The ability to make quick lending decisions

 

How Will Technology Help Borrowers?

If you look at most of the technology trends in the mortgage industry, you’ll realize that borrowers also stand to gain in different ways.

• The online benefit. Until not so long ago, the entire process of getting a mortgage could take a month or two, of which a considerable time went toward just the underwriting. Now, a homebuyer may apply for a mortgage online in a matter of minutes and even get pre-approval on the same day. The ability to connect with loan officers online is a definite plus for tech-savvy consumers. Besides, some lenders complete the entire process online, including the signing of documents and the final closing.
• Streamlined process and better experience. Getting a mortgage typically involves extensive documentation, and making the process paperless can be challenging. However, technology has helped simplify the process of filling and filing multiple forms as well as collating financial information. Technology has also played a role in improving coordination between applicants and loan officers, as well as in enhancing the overall customer experience.
• Increased transparency. Many mortgage providers use digital platforms that give applicants real-time access to the same information that their loan officers can see, including the status of their applications. Getting to view the queries that loan officers have helps increase transparency levels, and borrowers also get to answer them in a timely manner.

 

Conclusion

Given the existing trends in the mortgage industry, providing a good user experience has become increasingly important, and the use the technology can help free up some valuable time. Mortgage providers can turn to AI and ML to automate repetitive tasks like verification of documents and data entry. Digital tools can enhance the customer experience through user-friendly interfaces as well as ease of uploading and digitally signing documents.

Since the role of technology in the mortgage industry continues to evolve, it’s important for mortgage providers to stay on top of the learning curve. By ensuring that they remain abreast of the latest tools, technologies, and trends, they can also do right by their customers.

Most American home buyers need to get mortgages to purchase homes, which is where their creditworthiness enters the picture. Even though lenders might rely on different eligibility criteria when making lending decisions, some aspects remain the same. For example, you may expect your lender to look at the information you provide in your application and your credit score to determine if it should approve your mortgage. In addition, the effect of credit scores on mortgage rates also needs your attention.

 

Effect of Credit Score on Mortgage Applications

Mortgage providers look at applicants’ credit scores to determine how much risk they pose as borrowers. By going through your credit report, a lender is able to take a look at your credit history and see how well you’ve managed your credit in the past. If you’ve missed making payments, have made late payments, or have delinquent accounts, the same will show on your credit report. Any such instance has a negative impact on your credit score.

If you have a poor credit score, getting a lender to approve your application might seem like an uphill task. A good or excellent score, on the other hand, presents you with way more alternatives.

 

What If You Have No Credit Score?

While getting a mortgage in the absence of a credit score or credit history is difficult, it’s not impossible. However, you’ll typically get only a handful of options from which to choose. This is because lenders have no way of determining how well you handle credit, and if you’ll repay the mortgage in a timely manner. If you find a lender willing to give you a mortgage in such a scenario, you may expect to pay a higher-than-usual interest rate. In addition, you might not find the type of mortgage you seek.

If you don’t have a credit history yet, you may consider building it before applying for a mortgage. This will give you access to more options and you may also benefit from a lower interest rate.

Minimum Credit Score for Mortgages

The type of mortgage you wish to get has a bearing on the minimum credit score you need to qualify. In most cases, you may qualify if your credit score is 620 or higher. If you’re looking for mortgages that offer flexibility in this regard, you may benefit by checking what different government-backed programs have to offer. For instance, you may qualify for a United States Department of Agriculture (USDA) loan with a credit score of 640 or higher.

Typically, these are the minimum credit scores you need to qualify for the following types of mortgages:

• Conforming (conventional) loans. 620 or higher
• USDA loans. 640 or higher
• VA loans. 620 or higher
• FHA loans. 580 or higher with a 3.5% down payment, and 500 or higher with a 10% down payment
• Jumbo loans. 700 or higher

 

What’s a Good Credit Score for a Mortgage?

Mortgage lenders across the U.S. use different versions of the standard FICO score when making lending decisions. The score range varies from 300 to 850. The different models include:

• FICO Score 2 (Experian/Fair Isaac Risk Model v2)
• FICO Score 4 (TransUnion FICO Risk Score 04)
• FICO Score 5 (Equifax Beacon 5)

It’s common for mortgage providers to receive a single consolidated report from the three credit bureaus along with the corresponding credit scores. The range that distinguishes the good from the bad is as follows:

• 300 to 579 – Poor
• 580 to 669 – Fair
• 670 to 739 – Good
• 740 to 799 – Very Good
• 800 to 850 – Excellent

Effect of Credit Score on Mortgage Rate

Lenders look at your credit score to determine the risk you present as a borrower and your ability to keep up with payments. In addition, they also use this number to arrive at an interest rate that can help offset the risk. When getting a mortgage, your credit score has a significant impact on the loan’s terms. More often than not, people with good and excellent credit scores get the lowest interest rates, and the converse holds true as well. Bear in mind that the down payment you make also has an effect on your mortgage’s interest rate.

Even a seemingly small difference in interest rates can have a significant effect on how much you end up paying as interest over the course of the loan term.  The data that follows comes from myFICO, highlighting mortgage rates by credit score and showing how your monthly payments will vary if you get a $200,000 30-year fixed-rate mortgage. The amounts indicate national averages. The mortgage rates are effective as of August 31, 2023.

 

FICO Score – 760 to 850
APR – 6.751%
Monthly payment – $1,297

FICO Score – 700 to 759
APR – 6.973%
Monthly payment – $1,327

FICO Score – 680 to 699
APR – 7.150%
Monthly payment – $1,351

FICO Score – 660 to 679
APR – 7.364%
Monthly payment – $1,380

FICO Score – 640 to 659
APR – 7.794%
Monthly payment – $1,439

FICO Score – 620 to 639
APR – 8.340%
Monthly payment – $1,515

The difference in monthly payments between the top and bottom tiers stands at $218. Over the course of 30 years, this will amount to more than $78,000.

Other Factors That Affect Mortgage Rates

While your creditworthiness plays an important role in the interest rate that applies to your mortgage, lenders look at other factors too. Besides, mortgage rates keep changing based on the Fed’s monetary policy, economic growth, and inflation. When it comes to what a lender looks at to determine interest rates, the factors that make a difference include:

• Location of the home. A report released by the Federal Reserve Bank of Dallas indicates that location plays an important role in mortgage rates, which tend to vary from one metro to the next. This, incidentally, is also the case with rural areas.
• Loan amount and price of the home. If you require a rather small or very large loan amount, you may expect to pay a higher interest rate. The amount you need to borrow is essentially the difference between the home’s selling price and the down payment amount.
• Down payment. Typically, making a large down payment comes with a lower interest rate. This is because your lender will view you as a low-risk borrower, given the equity you hold in your home. If you’re comfortable making a down payment of 20% or higher, doing so might work well for you from the long-term savings point of view.
• Loan term. Shorter loan terms tend to come with lower interest rates when compared to longer terms. However, they require that you make larger monthly payments.
• Debt–to-income (DTI) ratio. Your DTI ratio indicates how much of the money you earn each month goes toward your debt payments. Mortgage providers want this number to be 43% or lower. Lenders view low DTI ratios with favor, which may then translate into a lower interest rate.
• The lender you select. Interest rates may vary even for the same type of mortgage depending on the lender you select. Mortgage providers charge different interest rates based on factors like overhead costs, experience, reputation, and profit margins. Bear in mind that the lender that provides the lowest rates is not necessarily the best because you also need to account for customer service and flexibility in terms.

 

How to Improve Your Credit Score?

If your credit score is not up to the mark, consider improving it before applying for a mortgage. Doing this helps open up more avenues and you may also benefit from a lower interest rate. Following a few simple steps can set you on the right path.

Review Your Credit Reports

Start by getting a copy of your credit reports from the top three credit bureaus – Experian, Equifax, and TransUnion. Go through each carefully to determine why your credit score is low. There are instances when credit reports carry erroneous information, so keep an eye out for these. If you find any error, contact the credit bureau and request it to make the required correction.

 

Pay Your Bills on Time

Among the different factors that affect your credit score, payment history takes the top spot, accounting for 35%. Given the effect this factor has, it’s crucial that you pay all your bills on time. You may keep track of your bills by creating some kind of filing system or setting alerts. Automatically paying your bills by linking them to your bank account is ideal. You may also consider paying your bills using a credit card to earn rewards and improve your credit score, but tread this path only if you’re sure you’ll be able to pay off your credit card balance in full every month.

 

Pay Down Balances

Your credit utilization ratio, which indicates how much of your available revolving credit balance you’ve used, has a 30% weightage in your credit report.  For example, if you have three credit cards with a combined balance of $15,000 and owe a total of $7,500, your credit utilization ratio is 50%. From the credit score point of view, this number should be 30% or lower.

If your credit utilization ratio is over 30%, try to pay off as much of the debt you owe to bring this number down. Getting it to around 10% is ideal if you wish to improve your credit score. Another way to improve your credit utilization ratio is to ask your credit card providers to increase your credit limit. However, it’s best that you refrain from using more credit until you apply for a mortgage.

 

Fix Delinquencies

Fixing a minor credit card delinquency like missing a payment is fairly easy but ignoring any bill over a prolonged period might have serious implications. While the issuer of the credit will close your account, your debt might end up with a collection agency and you might risk facing garnishment of your wages. Besides, its mention might stay on your credit report for up to seven years.

Paying off debt that’s with a collection agency might have a positive effect on your credit score depending on the model in question. If you have serious delinquency, you should ideally start making payments as quickly as possible. Contact the issuer of your card to check if it has any hardship program. Consider settling the debt if you’re okay with making a lump sum payment. Getting in touch with a credit counseling agency to get on a debt management plan might also be an option.

 

Don’t Close Old Accounts

The length of your credit history has a 10% weightage in your credit score, and the longer it is, the better. As a result, if you have any old account you plan to close, think again because doing so may have an adverse effect on your credit history’s length. Closing a relatively new account, on the other hand, will not have as damaging an effect.

Don’t Apply for New Credit

New credit accounts for 10% of your FICO score, and each time you apply for new credit, your credit score goes down by a few points. As a result, it’s best that you don’t apply for any form of credit until you get your credit score on track.

 

Conclusion

Having poor creditworthiness and a low credit score might work as a dampener if you wish to get a mortgage. This is because lenders view applicants from this bracket as high-risk borrowers. Besides, even if you qualify for a mortgage, your credit score still plays a role in the interest rate you get. If you have an average credit score, you may consider improving it before applying for a mortgage because it can pave the way for a better deal.

Now that you know the effect of credit scores on mortgages, determine if yours is good enough to apply for a home loan. If so, consider getting in touch with a mortgage provider to find out if you qualify for preapproval. You may then look for homes based on the amount for which you qualify.

 

 

Disclaimer

The payment on a $300,000, 30-year fixed rate loan at 6.50% and 75% loan-to-value (LTV) is $1,896.20. The Annual Percentage Rate (APR) is 5.692%. Payment does not include taxes and insurance premiums. If you add taxes and/or insurance to your mortgage payment then the actual payment will be greater. Some state and county maximum loan amount restrictions may apply. This is an example and is for illustrative purposes only.

Buying a home can be an exciting yet daunting process, which is why it’s best to tread with caution. If you find a house you like, carrying out an inspection on your own before making an offer is ideal as it can save you time and heartache. While perfection is typically hard to find, an inspection enables you to narrow down on a home that’s in fairly good shape. This DIY home inspection guide highlights why you should go through the process and the aspects that need your attention.

 

Why DIY Home Inspections?

Consider this – you make an offer on a home only to find out through the home inspection report that it comes with some serious flaws. While a home inspection contingency might give you the means to back out of the offer, you would still have spent considerable time in the process, and you’ll need to start over again. Carrying out a DIY home inspection before you make an offer minimizes this risk greatly.

Conducting a DIY home inspection makes it to the list of the top tips for buying a home because it gives you the means to identify existing and potential problems. With a checklist in place, you get an indication of what to look for and where, which helps simplify the process. It also helps avoid surprises in the professional inspection report you get later, because you know of some or most of the problems beforehand.

Bear in mind that while a DIY home inspection is always good, you should still opt for a professional inspection before you make the purchase. This is because a certified home inspector comes with the right training and tools that can help fill any gap you might have in your DIY inspection.

How to Do a Home Inspection Before Buying?

Carrying out a DIY home inspection tends to take time, so it’s ideal that you give yourself a few hours to go through the process. The inspection requires looking at different parts of a house, from its exterior to its attic and basement.  You need to pay complete attention to the process because you don’t want to miss out on any problem.

The Exterior

While most homes can withstand the elements, inclement weather conditions might affect older structures without leaving any visible signs, and this is where a professional home inspection can help.

When carrying out a DIY inspection, look for cracks in the foundation and walls. Inspect the deck and structural boards to see if there’s any rot, especially at the ends. Vines on walls can be cause for concern, as can leaning stairways, bowing walls, cracked/missing siding, dislocated posts, damaged beams, and peeling/flaking paint.

If the home has a septic tank, find out how long it’s been in place. Remember that tanks over 30 years old are near their end and might need replacement soon. In addition:

• If there’s a sprinkler system, test its water pressure and overall functioning.
• Look for holes and cracks in the walkway and driveway.
• See if all the outdoor lights are working.
• Determine the sturdiness of the fence and look for loose boards.
• Determine if the garage door works as it should (especially if it comes with a remote).
• Check for dead patches in the lawn.

The Roof

The roof of a home is among its most important part, which is why its inspection is vital. While the roof is typically difficult to inspect on your own, and climbing it is one way to get a clear picture, you may still identify problems from the ground. For example, you can use binoculars to examine the shingles and look for cracking, cupping, and curling. Loss of texture can indicate that the shingles need replacement. Look for cracks and rust in the roof’s gutters. Other causes for concern include cracked or rusty flashing, painted-over vents, and any obvious sag in the roof.

The Kitchen

When it comes to the kitchen, start by determining if there is enough storage space to meet your needs, as this is something no home inspector can gauge. Check the tiles and countertops for chips and cracks. Open and close drawers and cabinets to ensure they function properly and don’t serve as obstructions. In addition:

• Check if the water faucets work fine.
• Look for leaks under the sink.
• Check all the burners of the stove.
• Turn the oven on to see if it works.
• Check the condition of the refrigerator, dishwasher, microwave, and garbage disposal unit.

The Bathroom

While a certified home inspector is the best person to inspect a bathroom, you may still cover a few important points in your DIY home inspection.

• Check the toilet flush.
• Run water in the tub and sink to see if it drains.
• Check if the tub has cracks, chips, or stains.
• Look for chipped, loose, and broken tiles.
• Ensure that the bathroom is well-ventilated.
• Determine if there’s enough storage space.

Crawlspaces, Attics, and Basements

While it’s common to use these spaces for little other than storage, they feature prominently in most home inspections, all the more so because they usually don’t receive the same level of attention as the rest of the home.  When inspecting any such space, keep an eye out for:

• Inadequate insulation
• Poor ventilation
• Musty or damp smells
• Water stains
• Decaying wood
• Cracks in the foundation

Walls and Ceilings

Check if the walls and ceilings suffer from discoloration because yellow spots are indicative of water-induced damage. Large spots might be cause for concern because they’re typically a sign of leaky roofs or ice dams. Smaller spots, on the other hand, are usually a result of sweaty or leaking pipes, and might indicate significant behind-the-scenes damage.

If you find black spots on walls or ceilings, there’s a good chance you’re dealing with mold. While treating mold is possible, addressing the excessive moisture that results in the mold might not be easy. If you find mold in the bathroom, improving its ventilation might fix the problem. However, mold in the basement might become a recurring problem.

The presence of powdery white deposits in basements along concrete slabs and the foundation typically point to water seepage. This is also the case if you come across corroded concrete blocks or bowed walls. When examining crawl spaces, the presence of musty smells, rotting wood, and mold typically indicate moisture-related problems.

Your inspection should also cover gaps between the flooring and walls, significant cracks, peeling or flaking paint, sagging ceilings, and leaning walls.

Doors, Windows, and Furnaces

Doors play a key role in keeping a home secure, which is why they make it to most DIY home inspection checklists. When inspecting doors, here’s what you need to look for:

• Decaying or rotting wood
• Bowed frames
• Trouble in opening and closing
• Non-functional latches and locks
• Rusted or exposed lintels
• Cracked/broken glass
• Missing/cracked caulk around frames and joints
• Exterior doors with improper weather-stripping

If you come across fogged windows, know that replacing them is not cheap. Windows exposed to excessive condensation might indicate an under-the-weather furnace or heat exchanger. However, it might be hard to spot signs of condensation during the summer. Make sure you find out how old the furnace is and check stickers that indicate its service history. While a well-maintained furnace might last for up to 40 years, the typical lifespan ranges from 20 to 25 years.

The Plumbing

When you turn the water on in the kitchen or bathroom, determine if there’s a drop in pressure after some time. Run the water for a few minutes to check if it drains quickly enough. Determine if all the drainpipes in the kitchen and bathroom go into walls, because if they run directly into the floor, there’s a possibility that the drains are vented poorly. Adding a vent is not easy and requires using the services of a plumber. Other red flags you need to look out for include:

• Gurgling noises coming from pipes
• Leaking or rusty pipes
• Unlevel or unsteady toilets
• Presence of mold
• A buildup of sediment in hot water tanks
• Code violations

Looking to Purchase a Home on Long IslandContact Us

Switches and Electrical Outlets

While there are various aspects surrounding electrical fitting that you should ideally leave to a professional home inspector, there are a few problems you might be able to diagnose on your own. Use a receptacle tester for checking electrical outlets to ensure their wiring is okay. New electrical outlets might indicate a recent wiring job. If you find reverse polarity, it might indicate that a professional did not carry out the job. In addition, keep an eye out for:

• Non-functioning switches and outlets
• Painted outlets
• Three-prong outlets without grounding
• Concealed breaker boxes
• Breaker box switches without labels
• Exposed and uncapped live wires

 

What About a Professional Home Inspection?

While not necessary, you should get a certified home inspector to inspect the house you wish to purchase as this gives you a better picture of its condition. In most instances, the buyer pays for the inspection, unless a seller agrees to as part of the negotiation process.

The average cost of a home inspection varies between $281 and $402. Just how much you need to pay depends on the size of the home, its location, its age, and the checks that the inspection covers. Bear in mind that not all home inspectors cover the same elements, so it’s important to find out what they’ll look at during the inspection.

What’s Home Inspection Contingency?

The contract that you draw up when you make your offer can include different contingency clauses, one of which includes home inspection contingency. This clause implies that you have the right to withdraw your offer or ask the seller to carry out repairs based on the inspection report. If you choose to withdraw the offer, you stand to get your deposit back.

If you include a home inspection contingency clause in your offer letter, you get a predetermined time period to carry out the inspection and potential follow-ups. For example, if the home has an electrical problem and the inspection report suggests getting an electrician to give it a look, you need to do what’s required before the end of the given timeframe. In most instances, buyers get one to two weeks to complete the inspection.

 

The Most Common Problems

While just about every home comes with its own share of problems or shortcomings, some are more prevalent than others. The corresponding do-it-yourself home inspection checklist highlights the most common ones.

• Structural. Foundation problems are typically expensive to fix, and there are instances when you can’t fix them at all.
• Roof. Older homes might have problems with their roofs, and replacing a roof costs a tidy sum.
• Pest infestation. It’s common for home inspectors to find pests, especially termites. This can be a problem because a full-blown infestation might even cause structural problems.
• Mold. Homes in humid climates might suffer from mold, the presence of which can cause illnesses. In addition, mold can spread quickly.
• Plumbing. Running toilets and leaking faucets are fairly common. While relatively easy to fix, these indicate that s home’s overall upkeep is not up to the mark. Clogged drains might indicate more serious problems.
• Electrical. Old homes might have outdated wiring and electrical systems that do not meet modern standards. You need to take electrical problems seriously as they could be potential fire hazards.

 

Conclusion

If you plan to buy a house, a DIY home inspection gives you the means to identify existing and potential problems, which, in turn, gives you an indication of whether or not to make an offer. You should ideally give yourself enough time to go through the entire home carefully, its exterior and interior alike. When it’s time for a professional inspection, you may look for a certified inspector on your own or ask your mortgage provider for references.