Why Your Bank Statements Will Affect Your Mortgage

November 20, 2020 by Cindy Steelman

Bank Statement Loan Tips In Roseville California

A first-time homebuyer in Roseville, or anywhere, knows that there is quite a bit of paperwork involved. You can’t really avoid this, no matter how much you try. Applying for a mortgage can be particularly daunting but at Steelman Mortgages we make it easy.

One of the your important documents a lender will ask for is your bank statements.

Do you know what this tells your mortgage lender in Roseville, aside from what you spend in a month? Quite a lot.

Bank Statements

Bank statements are documents that are issued either monthly or quarterly, which give a summary of banking activity. These are sent through USPS, e-mail, or sometimes both. Banks generally give you statements so that you can keep better track of your funds and, should there be inaccuracies, report them in a timely manner.

If you have both a checking and savings account, activity from both will likely be in the same singular statement. This also summarizes how much money is in your account and shows a rundown of activities throughout a set period.

If you are self-employed, in addition to bank statements, you must have your federal tax returns submitted. If you are working in a company, then you are on a payroll, which means you would have to provide recent pay stubs alongside W-2s and your federal tax returns.

“Underwriting” is a process that lenders use to analyze your documents and they will give you an approval or a denial depending on many factors. One is verifying your bank statements wherein underwriters do research and assess the risk level you pose. Red flags can pop up during this phase, if there are any, such as a low savings account balance, overdrafts, and unstable income. A sudden deposit of a large amount is a major red flag, as it may be a loan that doesn’t reflect on your credit report.

This is important because your down payment is meant to prove that you are a responsible borrower with savings towards a down payment from a steady income. Once that is done, your lender will give you a definitive yes or no.

Sourced and Seasoned

It’s not just about having bank documents to present; it’s what the bank statements themselves contain. Any mortgage lender will always be looking to see if the assets contained in your account are “sourced and seasoned.” By that, it means they know where your funds are coming from (“sourced”) and that these funds have been in your bank account for some time, not just suddenly dropped in there (“seasoned”).

Both factors essentially assist in fraud avoidance. This also gives your lender all the assurance they need to see that you are not using a loan to make a down payment. Therefore, at least two bank statements (all pages) are required.

Steelman Mortgages: Your Roseville Mortgage Broker

Essentially, your bank statement serves as a way for your lender to verify that you have enough funds to make the monthly payments. It also lets them know that you can cover a down payment and any closing costs required.

Looking for a reliable mortgage company in Roseville and throughout California? Steelman Mortgages is here for you. Call us at (916) 847-7263!

Why an FHA Loan Has a Leg Up on Conventional Mortgages

November 11, 2020 by Cindy Steelman

Nothing stunts a home loan application like a low credit rating or inability to make the minimum deposit. Instead of dedicating corporate hours towards a downpayment that you aren’t likely to afford any time soon, why not consider an FHA loan? This mortgage is ideal for prospective homeowners in poor financial health and provides government assistance.

What is an FHA Loan?

As compared to its conventional counterpart, which requires at least a 5% down payment, a credit score of 620 or higher, and debt-to-income (DTI) of 45%, the government-backed FHA loan is more forgiving of first-time homebuyers.

Guaranteed by the Federal Housing Administration, an FHA loan offers lender compensation if you end up defaulting. However, you won’t apply for your loan through the FHA itself—you’ll still have to link up with a regular mortgage lender.

An FHA loan requires only a 3.5% down payment, a credit score of 580 or higher, and a DTI of 50%. In some cases, you can apply with a credit score of as low as 500.

Qualifying for an FHA Loan

Being a “low-income” individual won’t automatically qualify you for an FHA loan. To be eligible, you must satisfy the following criteria:

A 3.5% down payment with a credit score of at least 580—between 500 and 579, you’ll need to put down a down payment of 10%.
You’re purchasing a single or multi-family home for up to four families. You can also buy a condominium or manufactured home.
You must adhere to a borrowing capacity that will depend on the type of property you purchase. Consult the US Department of Housing and Urban Development website for state and county information regarding borrowing limits.
You do not intend to purchase a property with significant structural or safety issues.

The Different Types of FHA Loans

FHA loans come in various shapes and sizes that include the following.

Traditional. This mortgage pertains to a primary residence for a single or multi-family home and is available at a fixed or adjustable rate.

Home Equity Conversion or Reverse Mortgage. This loan is available for older homebuyers who want to tap into equity as cash.

Construction to Permanent. This loan is specifically for homebuilders.

203(K) Rehab. This mortgage allows for home improvements and additional funds.

Energy Efficient Mortgage (EMM). This mortgage allows you to roll the costs of eco-repairs to appliances and fixtures such as furnaces and insulation without adding to your deposit.

The Advantages of an FHA Loan

The primary advantage of an FHA loan is its lenient borrowing demands. As compared to conventional loan stipulations, the credit and debt requirements of FHA loans are incredibly forgiving. There are no income limits and you do not have to be a first time homebuyer.

What You Should Look Out For

FHA has a mortgage insurance premium that can come up to 1.75% of your loan upon closing. This also comes with a monthly payment of 0.45% to 0.85% of your loan cost.

Some home buyers won’t save up enough to make a 3.5% deposit. If you’re part of this statistic, you may need to consider a USDA (very good for rural areas and has income limits) or a VA loan (available only to members of the military community).

FHA will also restrict you from borrowing under a certain amount, and if your chosen property poses severe safety risks.

FHA Loans with Steelman Mortgages in Roseville

Though an FHA loan demonstrates fairly evident benefits, it doesn’t always complement low-income borrowers. Always discuss with a lender what your best options are—whether that be to consider an FHA loan or otherwise. If you’re a first-time homebuyer in Roseville, consult with our experts at Steelman Mortgages to determine how you can best finance your purchase. Call (916) 847-7263 for a free home purchase qualifier and to kick-start your application.

Homebuyer’s Guide: What to Consider Before Signing a Deal

October 29, 2020 by Cindy Steelman

Buy A Home In Roseville Sacramento And Throughout California

Many would-be owners are eyeing the real estate market for long-term investments. With property prices increasing every year, it’s necessary to make an early and affordable purchase before the market becomes too saturated with potential buyers.

Since buying a home is a long-term investment, you must weigh every critical factor before you close a deal. First-time homebuyers often make the mistake of not evaluating their options, which cause them to miss out on other more beneficial opportunities. For this reason, you need to be well-prepared before you settle on any offers given to you.

The Importance of Patience

Creating a sense of urgency is a common tactic that marketers use to sell a product as soon as possible. It’s present in the real estate market as a powerful and persuasive tool to influence potential buyers to sign a deal immediately. Although a property may have a geographic advantage or a compelling offer at first glance, you must know how to expand your options. Broadening your alternatives will help you look at different perspectives to weigh the true value of your prospects.

Before you settle on a deal for a prospective home, here are three things you should consider:

Hiring a realtor to expand your options. A realtor will help you project the overall net worth that you’ll be spending on a home. They will also help you ensure that the property is worth its value in terms of its features and strategic market value. Don’t be afraid to spend a little extra when finding a reliable realtor. Doing so will give you a broader view of your options and what you can do to haggle your prospective purchases’ initial offer.
Thinking of your finances’ long-term implications. Staying within your budget range is a crucial part of maintaining a long-term investment. It ensures that you won’t run into a potential financial crisis once things go south for various reasons. This means that you should think beyond the short term. It’s common for first-time homebuyers to only consider their mortgage options based on their current financial standing. However, you want to consider the future if you were to have some sort of job change that would impact your income. It’s best to choose a home that won’t be a contributing expense if you have less than your regular income on hand. Some lenders recommend looking for a property that’s around a third of your gross income. The amount should account for all housing-related costs, from mortgage to insurance and tax payments.
Looking beyond the initial purchase price. Understandably, first-time homeowners want to focus on the affordability of a property. However, it’s only one aspect that you should consider. You should also evaluate additional upkeep costs like home maintenance, insurance, homeowner association fees, and real estate taxes. These will vary depending on the state and city of your chosen prospect. Some sellers can offer a generously low purchase price but contain plenty of these maintenance expenses. It’s best to research everything you’ll be spending and coordinating before and after you settle a deal with the seller.

Buying Your First Home with Steelman Mortgages

Like any financial decision in your life, you must never be too hasty about closing a deal. Although certain offers may have time-bound deadlines, you shouldn’t let it influence you to make rash choices. It’s best to keep a calm head and evaluate all your options to settle on an informed decision.

Part of owning a home is finding the right mortgage lender to finance your purchase. If you’re a first-time home buyer in Roseville, CA, we can help you out. Contact us today at (916) 847-7263 so that we can assist you in your financing needs.