Blog | Archives for November 2019

Three Things to know about VHDA loans

By Southern Trust Mortgage
November 18, 2019

If you are buying a home in Virginia, chances are you’ve heard the phrase “VHDA loan” once or twice. Simply put, VHDA (Virginia Housing Development Authority) loans are a type of loan unique to the commonwealth of Virginia. The goal of a VHDA loan is to offer affordable housing opportunities to residents of the commonwealth of Virginia who might otherwise not be able to purchase a residence of their own. The information available on VHDA loans is substantial, so we have pared it down into three concise points that, while not exhaustive, give a good picture on what getting a VHDA loan could mean for you.

1. What are the requirements to qualify for a VHDA loan?

VHDA loans are designed specifically for first-time homebuyers, meaning that eligible applicants must have no property ownership to their name within the past three years. To qualify for a VHDA loan you must not exceed the maximum income requirement and you must complete the VHDA’s Homeownership Education Class, among other credit requirements. You must also intend to occupy the property as your primary place of residence, and the home you plan to purchase must not exceed certain lot sizes and sale prices.

2. Who benefits most from VHDA loans? Are grants available?

Anyone who is a first-time homebuyer can apply and be checked for eligibility, but certain benefits to the program are offered to borrowers the VHDA has called community heroes. By partnering with the FHLB (Federal Home Loan Bank), VHDA now offers a grant program called The Community Heroes Grant. This grant is available to people who meet the initial VHDA requirements and fall into one of the following groups:

Educators: employees of accredited, state-recognized, or public schools, certified teachers or administrators in education agencies, or employees of post-secondary level public education institutions.
Law enforcement officers, firefighters, and first responders: employees of law enforcement agencies or fire departments on a federal, state, or local level, or any other first responder, including emergency medical technicians (EMTs), National Guard, and reservists.

Another benefit offered with VHDA loans is the Down Payment Assistance (DPA) grant. Through this grant, eligible borrowers can receive a percentage of the purchase price to help with the down payment. Maximums and restrictions do apply to this grant (for example, the DPA grant can only be used with eligible VHDA loans), but there is no repayment, and you could potentially receive up to 2.5% of the purchase price of your home.

A third grant offers qualified borrowers closing cost assistance, with some borrowers receiving as much as $1,500 towards their closing costs. Since it is a grant, no repayment is required, and it can potentially be used in conjunction with other grants such as the DPA grant.

As is the case with all grants and assistance, restrictions apply and certain requirements must be met. To see which grants or assistance programs you might qualify for, contact your loan officer.

3. What is the most popular type of VHDA loan?

By far, the most sought-after type of VHDA home loan is the FHA Plus loan. This loan -which is technically two loans- is financed by the VHDA and insured by the FHA. In addition to the mortgage on the residence, this loan includes a second mortgage to help fund the down payment and closing costs. The upside to this is if you qualify, you can potentially finance 100% of your house through the two loans, with a fixed rate for 30 years on both the first and second mortgage.

The VHDA loan is a great product that has helped thousands of first-time homebuyers just like you realize their dream of homeownership. To learn more about VHDA loans, the requirements, restrictions, guidelines, or to have any of your remaining questions concerning VHDA loans answered, contact Southern Trust Mortgage today.

Blog | Archives for November 2019

Four things young homebuyers should look for

By Southern Trust Mortgage
November 12, 2019

If you’re under the age of thirty and shopping for a new home, there’s a good chance you’re new to the buying process. To help you make an informed decision, we’ve created a list of four key things to keep in mind as you shop for your next home.

1. A home that you can envision living in for the next five-to-ten years.

Most experts agree that, in order to see some return on the investment you make when you buy a home, you should plan to stay in the home you purchase for at least five to seven years. With that in mind, ask yourself what the future looks like for you while you shop. You don’t have to plan for every single possibility when purchasing, but leave room for a life change or two when choosing your home. With a little planning, you shouldn’t outgrow your home before you’re ready, or before you’re able to see a return on your investment.

2. A home that is well maintained by the previous owners.

Since purchasing new construction can be more expensive than straightforward purchases, many young and first-time buyers purchase previously owned homes; therefore, it’s important to assure the condition of the home before committing. While buying a fixer-upper can be appealing to many buyers, since most buyers under the age of 30 are purchasing their first home, it’s recommended that fixer-uppers are saved for later in life. The reason for this is the costs of renovating a home can quickly balloon, and even if you finance the repairs through a special mortgage that accommodates renovations, you may find yourself having to pay for many of the fixes out of pocket. Rather than risk further debt, we recommend that you look for a house that has been cared for meticulously by its past owners. You can get a better idea as to the condition of the house you’re considering by getting a home inspection for your new home. In some cases, you can opt-out of having a home inspection performed, but it’s generally agreed upon by real estate experts that a home inspection is good to have. The detail with which an inspector reviews the home can be described as meticulous, so following the inspection, you will know every nook and cranny of the home you’d like to buy.

3. A home that is close in proximity to the things that are important to you, like family members or your workplace.

Perhaps you’d like to be near your parents, for both your peace of mind and theirs. Maybe you want to be close to the center of your city in order to take full and frequent advantage of the nightlife. Whatever it may be, choosing a home that has close proximity to what is important to you is a common desire for buyers of every age. When you begin your search, your real estate agent will ask you for a general idea of where you’d like to live in your town or city. If there’s a particular location you’d like to be near, you can tell him or her you’d like to live within a certain number of miles of “x”. They will then compile a set of listings that meets those criteria as well as your budget.

4. A home that is affordable.

While almost everyone has a version of their dream house in mind when they’re shopping for a new home, it’s important to measure your wish list against what you can easily afford. Depending on how much you are able to spend when you purchase your home, certain things on your wish list may need to fall by the wayside for now. Not sure how much you can afford to spend on a home? No need to worry; at Southern Trust Mortgage, we offer something called Priority Approval. Unlike pre-qualification letters from other lenders, Priority Approval is a true credit approval that does not require a property to determine your potential loan amount. After receiving a Priority Approval, you can take your approval letter to your real estate agent, who can then search for homes strictly within that amount and with the reassurance that you qualify for a mortgage from a reliable lender.

We know the loan process can be intimidating to new buyers, but rest assured our team of loan experts at Southern Trust Mortgage is on hand always, ready to assist you in making the leap into homeownership. Contact us today so we can help make home happen for you.

Blog | Archives for November 2019

3 Important Numbers During the Mortgage Process

By Southern Trust Mortgage
November 4, 2019

Don’t let the title mislead you; there are many more than three important numbers at play during the mortgage process! It could be argued, however, that the numbers we outline below are the most important during the mortgage process. Credit score, debt-to-income ratio, and loan-to-value ratio each play a valuable part in the mortgage process, and having “good” numbers in each category can be the difference between loan approval or denial, or can mean saving thousands of dollars throughout the life of your loan.

Credit Score:

Chances are you are already familiar with the concept of a credit score. Whether or not you know your credit score, at the time of application, the loan officer you are working with will pull a credit report. There are two kinds of credit reports; the “hard” check which is done when you are ready to submit a loan application, and a “soft” check, which is done right before closing to make sure no new debts have been added and no derogatory credit events have occurred during the process. While the soft check does not affect your score, a hard check does have a slight impact on your score, typically less than five points. In both cases, the credit report will contain three credit numbers, which are your credit scores with the three main credit bureaus (Experian, Equifax, and TransUnion). A good credit score is important because mortgage lenders use your credit score to determine the likelihood of you being able to pay back your loan. Most loan types have a minimum credit score for eligibility. In most cases, the better your credit score is, the better the interest rate the lender can offer you. Having a better credit score can potentially mean saving thousands over the life of your loan. Have a less-than-stellar credit score? Not to worry; at Southern Trust Mortgage, we offer free credit guidance through our in-house credit expert. Our expert can help you rehabilitate your credit score, helping you achieve the best possible score before applying for your mortgage.

Debt-to-Income Ratio:

Debt-to-income, also called DTI, is how lenders determine how much you can afford to pay in a monthly mortgage payment when taking your already established monthly debt into consideration. By adding the proposed mortgage payment to your current monthly debts and dividing it by your gross monthly income, lenders will be able to determine whether you can comfortably pay your home’s mortgage. To that end, lenders set DTI limits for their borrowers. The lower your DTI, the easier it may be to qualify. In most cases, paying down unsecured revolving debt to 30% of their limits can not only improve your debt to income ratio but also improve your credit scores.

Loan-to-Value Ratio:

The loan-to-value ratio, or LTV, is how lenders measure how much equity you have in your home. Think of LTV as the percent you need to pay on the principal balance in order to own your home completely. The higher your LTV is, the more you are borrowing through your lender. For purchases, lenders typically have a maximum LTV, which translates to a minimum down payment. Your LTV maximum will depend on your property type, loan product, loan amount, and whether you’re a first-time home-buyer, among other factors. If your LTV is greater than the lender’s limit, you may have to increase your down payment or find a new property at a lower price. For a refinance, your LTV comes into play if you are looking to cash-out or get rid of mortgage insurance on a non-government loan.

No matter your credit score, DTI, or LTV, Southern Trust Mortgage experts are ready to help you every step of the way during the mortgage process. Contact us today and let us help make home happen for you.