Understanding Loan Types: A Deep Dive into Conventional Loans

by Kelsea Oravic | Oct 1, 2024 | Loans, Mortgage

Understanding Loan Types: A Deep Dive into Conventional Loans

Loans | Mortgage

When it comes to financing a home, understanding the different types of loans available can be daunting. One of the most popular options for homebuyers is the conventional loan. Within this category, there are two options: fixed-rate loans and adjustable-rate loans. In this blog, we will be breaking down these types to help you decide what might be your best option if going the conventional loan route.

What is a Conventional Loan?

A conventional loan is a type of mortgage that is not backed by the government. These loans are typically issued by private lenders and are subject to stricter credit and income requirements. Because they’re not insured by the government, lenders usually require higher credit scores and larger down payments compared to government-backed loans like FHA or VA loans.

Advantages of Conventional Loans

Flexible Terms: Conventional loans offer a variety of terms, usually ranging from 10 to 30 years.
No PMI with 20% Down: If you can put down at least 20%, you won’t have to pay private mortgage insurance (PMI), which can save you money.
Competitive Rates: With a strong credit score, borrowers may find better interest rates.

What’s the difference between a fixed-rate and adjustable-rate mortgage loan?

Fixed-Rate Loans

What Are They?

Fixed-rate loans have the same interest rate throughout the life of the loan. This means your monthly mortgage payment (principal and interest) will remain the same, providing stability and predictability.

Pros of Fixed-Rate Loans

Predictability: Your monthly payments won’t change, making budgeting easier.
Long-term Stability: If you secure a low interest rate, you can benefit from it for the duration of the loan, which can be particularly advantageous in a rising interest rate environment.
3. Easier to Understand: Fixed-rate mortgages are straightforward, making them an ideal choice for first-time homebuyers.

Cons of Fixed-Rate Loans

Higher Initial Rates: Fixed-rate loans often start with higher interest rates than adjustable-rate loans, which can increase your monthly payments.
Less Flexibility: If interest rates decrease, you’ll be stuck with your higher rate unless you refinance.

Adjustable-Rate Loans (ARMs)

What Are They?

Adjustable-rate mortgages (ARMs) have interest rates that can change over time based on market conditions. They typically start with a lower initial rate for a specific period, after which the rate adjusts periodically.

Pros of Adjustable-Rate Loans

Lower Initial Rates: ARMs usually offer lower initial interest rates compared to fixed-rate loans, which can mean lower initial payments.
Potential for Lower Payments: If interest rates remain stable or decrease, your monthly payments may be lower than those on a fixed-rate mortgage.

Cons of Adjustable-Rate Loans

Payment Uncertainty: Your payments can increase significantly after the initial fixed period ends, making it harder to budget.
Rate Caps: While ARMs often have caps that limit how much your interest rate can increase at each adjustment and over the life of the loan, sudden spikes can still happen.
Complexity: ARMs can be more complicated to understand, with various terms and conditions that borrowers must be aware of.

Choosing the Right Loan for You

Deciding between a fixed-rate and an adjustable-rate loan depends on your financial situation, how long you plan to stay in your home, and your risk tolerance.

Fixed-Rate Loan: Ideal for buyers who value stability and plan to stay in their homes long-term. It’s a great choice if you expect interest rates to rise.
Adjustable-Rate Loan: Suited for those who are comfortable with some level of risk and plan to move or refinance within a few years. If rates remain low, this can lead to significant savings.

Understanding the differences between fixed-rate and adjustable-rate conventional loans is crucial for making informed financial decisions. Take the time to evaluate your personal circumstances, future plans, and market conditions to choose the best option for your home financing needs. Whether you opt for the stability of a fixed rate or the potential savings of an adjustable rate, being informed will help you make the best choice for your situation.

Contact our mortgage experts for help making the right loan choice for you.

The content provided in this blog is for informational purposes only. Nothing stated is to be construed as financial or legal advice. Some products not offered by JVB. JVB does not endorse any third parties, including, but not limited to, referenced individuals, companies, organizations, products, blogs, or websites. JVB does not warrant any advice provided by third parties. JVB does not guarantee the accuracy or completeness of the information provided by third parties. JVB recommends that you seek the advice of a qualified financial, tax, legal, or other professional if you have questions.

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First-Time Home Buyer Tips

by Kelsea Oravic | Oct 1, 2024 | Loans, Family Finances, Mortgage

The Ultimate Guide for First-Time Homebuyers

Loans | Mortgage

-Congratulations! If you're reading this, you're probably standing on the brink of one of life's most exciting milestones: buying your first home. Whether you’re dreaming of a ranch-style country home or a sleek modern two-story house, the journey to homeownership can be thrilling but also a bit overwhelming. Don’t worry—we’re here to help you navigate the process with ease. Here’s your comprehensive guide to making the home-buying experience as smooth and successful as possible.

1. Understand Your Budget

Before you start browsing listings, it’s crucial to get a clear picture of your budget. Consider the following:

Down Payment: Typically, you'll need 5-20% of the home’s price as a down payment. The more you can put down, the better your mortgage terms may be.
Closing Costs: These can include appraisal fees, title insurance, and legal fees, often totaling 2-5% of the home price.
Monthly Payments: Don’t forget to factor in mortgage payments, property taxes, home owners’ insurance, and maintenance costs.

Tip: Use online mortgage calculators to get an estimate of what you can afford. This will give you a rough idea of your price range and help you avoid falling in love with a home that’s out of your reach.

2. Don’t Skip the Preapproval

We understand it’s exciting to start scouring the internet for the perfect house. However, it’s important to get pre-approved for a mortgage to help set a realistic budget and understand what you can afford.

It’s also important to understand the difference between prequalification and preapproval.

Prequalification: A prequalification is an estimate of how much home you can afford. It is informal and based on information you provide.
Preapproval: A mortgage preapproval is an official letter from a lender of your choice that tells you how much money you can borrow based on your financial status, such as W-2s, bank statements, and credit score.

What are the benefits of preapproval?

Clarifies your budget: You’ll understand how much you can borrow, allowing you to shop within your budget.
Stronger offers: Sellers will view you as a serious contender, increasing your chances of securing the home you want and making your offers more competitive.
Streamline the closing process: You’re less likely of running into last minute delays with your mortgage lender.

What are the benefits of prequalification?

Know where you stand without risking your credit: You’ll receive a ballpark estimate of how much money you may be able to borrow, often times with a soft inquiry that will not affect your credit rating. (Note: Some prequalification’s may require a hard inquiry).
Quick turnaround: Getting prequalified is fast and easy. It will provide you with helpful information that can guide you to making better buying decisions.

3. Understand Your Loan Options

Did you know the type of loan you choose for financing your mortgage will influence your down payment amount, the type of home you can buy and more? It’s important to understand your options before selecting a loan.

Conventional Loan: A conventional loan is the most common type of home loan. These loans are typically issued by private lenders and are subject to stricter credit and income requirements but offer several different term options with most people choosing between 15 and 30-year terms.
- Fixed-Rate Loan: Interest rates stay the same over the life of the loan.
- Adjustable-Rate Loan (ARM): Interest rates can change over the life of the loan.
Federal Housing Administration (FHA) Loans: An FHA loan allows you to buy a home with less strict financial and credit score requirements making them appealing to first-time homebuyers.
Department of Veterans Affairs (VA) Loan: VA loans are exclusive to veterans, active-duty members of the armed forces and National Guard, and qualified spouses. If you qualify, you can purchase a home with 0% down.
Shared Equity Loan: Also known as family-backed mortgages, a shared equity loan allows parents or other relatives to help homebuyers obtain financing with a small down payment.

4. Maintain Your Credit

During the preapproval process, lenders will pull your credit history and continue to monitor your report during your buying journey. This is not the time to open any new lines of credit. If it is discovered you have taken out another loan or line of credit, your credit balance has increased, or you’ve started making late payments on your credit cards or loans, it may risk your final mortgage approval or decrease the value of how much home you can afford.

It is important to keep paying your bills on time and avoid opening any new lines of credit. Additionally, you don’t want to attempt to influence your credit ratings, for better or worse, because lenders are looking for consistent and reliable behavior patterns for future payments.

5. Save for a Down Payment

If you qualify as a first-time homebuyer, you can benefit from assistance programs that range from 0% to 3.5% down. However, if you have a down payment for at least 20% of the purchase price, you’ll be able to avoid private mortgage insurance (PMI) on a conventional loan.

What qualifies you as a first-time homebuyer?

According to the U.S. Department of Housing and Urban Development, a first-time homebuyer is an individual who meets any of the following criteria:

An individual who has had no ownership in a principal residence during the 3-year period ending on the date of purchase of the property. This includes a spouse (if either meets the above test, they are considered first-time homebuyers).
A single parent who has only owned with a former spouse while married.
An individual who is a displaced homemaker and has only owned with a spouse.
An individual who has only owned a principal residence not permanently affixed to a permanent foundation in accordance with applicable regulations.
An individual who has only owned a property that was not in compliance with state, local or model building codes and which cannot be brought into compliance for less than the cost of constructing a permanent structure.

If you meet any of these requirements, you may qualify for an FHA loan or other programs that provide down payment assistance loans and grants.

6. Save for Closing Costs

We’ve spent a lot of time discussing saving for your first home. Everyone always thinks about the down payment, but may overlook the closing costs. Closing costs are upfront expenses, ranging from 2 to 5 percent of the total loan amount, that go to your lender on closing day. These might include:

Application fee
Origination fee
Appraisal fee
Attorney fee
Discount points
Homeowners insurance
Title insurance expenses
Property Taxes

In your Closing Disclosure, you will see your exact closing costs. But don’t fret, as a first-time homebuyer, you may qualify for government-backed grants or loans that assist with closing costs.

7. Writing Down What Makes Your Dream Home a Dream Home

Once you are ready to start house hunting, it’s important to know what kind of home you are looking for. This will not only help you when searching online, but help your real estate agent suggest homes. Start a list of your needs, non-negotiable and nice-to-haves.

Do you need 3 bedrooms but would like to have a swimming pool? Write it down.

This will help you shop for homes and be less stressed when comparing properties.

8. Find a Qualified Real Estate Agent

You found a home online you like, now what? Working with a qualified real estate agent makes the buying process less stressful. They can help by:

Finding and showing you homes that fit your needs and price range
Helping you decide how much to offer
Submitting an offer letter on your behalf
Helping you negotiate with the seller’s agent
Attending the closing with you

9. Submit Your Offer with Confidence

Don’t risk losing your earnest money deposit, also referred to as good faith deposit. When you are ready to make an offer on a home, make sure you are 100% committed to the purchase of that home. Giving a good faith offer tells a seller you are serious about buying their home. Often, it is equal to 1-3% of your total home price, and goes towards your down payment. If you back out of your offer for a reason not listed in the offer letter, you’ll lose your deposit.

10. Hire an Inspector

Purchasing your home is likely one of the largest purchases you make in your life – one in which you want as much information as possible. For example, learning that your home will need a new roof in the next year may change your mind about wanting to buy it, or the amount you’re willing to offer. This is why you should not waive a home inspection. Home inspections can uncover potentially hazardous items in a home, such as bad wiring or structural issues, that you may not have noticed when you went to tour the home and save you money in the long run.

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7 Ways Social Media Makes You Vulnerable to Identity Theft

by Kelsea Oravic | Sep 12, 2024 | Fraud

7 Ways Social Media Makes You Vulnerable to Identity Theft

Fraud

In an age where our lives are intricately intertwined with social media platforms, the line between what's personal and what's public can easily blur. While we share our thoughts, experiences, and photos with friends and family, we might unknowingly be exposing ourselves to a different kind of audience – identity thieves. Identity theft is a serious threat in the digital age, and social media can unwittingly serve as a goldmine for those seeking to steal personal information. Here are seven ways social media makes you a target for identity theft.

1. Over-sharing Personal Information

One of the most common mistakes people make on social media is oversharing personal information. From posting your full name, birthdate, address, and even your phone number, every piece of information you share can potentially be used by identity thieves to piece together your identity.

2. Location Tagging

Checking in at your favorite coffee shop or tagging your exact location in a vacation photo might seem harmless, but it can provide valuable information to identity thieves. By knowing your whereabouts, they can track your movements and potentially intercept packages or gain access to your home.

3. Public Profiles

Many social media users have public profiles, meaning anyone can view their posts and personal information. Even if you're cautious about what you share, having a public profile exposes you to a wider audience, including cybercriminals looking for easy targets.

4. Friend Requests from Strangers

Accepting friend requests from people you don't know opens the door to potential identity theft. Scammers often create fake profiles to gather information about their targets, so it's essential to be wary of who you connect with on social media.

5. Phishing Scams

Social media platforms are breeding grounds for phishing scams, where cybercriminals impersonate legitimate organizations or individuals to trick users into revealing sensitive information. These scams can take many forms, including fake customer service inquiries, bogus contests, or fraudulent messages from friends' compromised accounts.

6. Weak Passwords and Security Settings

Using weak passwords or neglecting to enable security features on your social media accounts can make it easier for hackers to gain unauthorized access. Once they're in, they can harvest personal information, send malicious links to your contacts, or even lock you out of your account entirely.

7. Data Breaches

Despite social media platforms' efforts to safeguard user data, data breaches can and do occur. When a breach happens, hackers gain access to vast amounts of personal information, including usernames, passwords, and even credit card details. This stolen data can then be used for identity theft or sold on the dark web to the highest bidder.

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Safeguarding Your Identity

by Kelsea Oravic | Sep 5, 2024 | Fraud, idLock

Safeguarding Your Identity

Fraud | idLock

Father and daughter dressed as superheroes

In today's digital age, safeguarding your identity has become more critical than ever before. With the rise of technology, identity theft has become increasingly prevalent, posing a significant threat to individuals and businesses alike. From financial fraud to identity fraud, the consequences of identity theft can be devastating. Therefore, it's imperative to take proactive measures to protect yourself against this growing menace.

Understanding Identity Theft

Identity theft occurs when someone unlawfully obtains and uses another person's personal information for fraudulent purposes. This information can include social security numbers, credit card details, bank account information, and more. Cybercriminals employ various techniques to steal this data, including phishing scams, malware attacks, data breaches, and social engineering tactics.

The repercussions of identity theft can be far-reaching. Victims may suffer financial losses, damage to their credit scores, and even legal troubles resulting from criminal activities committed in their name. Moreover, recovering from identity theft can be a long and arduous process, requiring significant time, effort, and resources.

That’s why we’ve outlined these essential steps for protecting against Identity theft:

Strengthen Passwords and Use Two-Factor Authentication: Create strong, unique passwords for all your online accounts and regularly update them. Additionally, enable two-factor authentication whenever possible to add an extra layer of security.
Be Cautious of Phishing Attempts: Exercise caution when responding to unsolicited emails, messages, or phone calls requesting personal information. Be wary of links or attachments in suspicious communications, as they may lead to phishing websites or malware downloads.
Secure Your Devices and Networks: Keep your computer, smartphone, and other devices updated with the latest security patches and antivirus software. Use encrypted connections, such as HTTPS, when browsing the internet, and secure your home Wi-Fi network with a strong, unique password.
Monitor Financial Accounts Regularly: Review your bank statements, credit card bills, and credit reports regularly for any unauthorized transactions or suspicious activity. Reporting any discrepancies promptly can help mitigate potential damage.
Safeguard Sensitive Documents: Store important documents, such as passports, social security cards, and financial statements, in a secure location. Shred documents containing personal information before disposing of them to prevent dumpster diving.
Limit Sharing Personal Information: Be cautious about sharing sensitive information online, especially on social media platforms. Avoid posting details such as your full birthdate, address, or financial information that could be used by identity thieves.
Freeze Your Credit Reports: Consider placing a freeze on your credit reports with the major credit bureaus to prevent unauthorized access to your credit information. This can help prevent new accounts from being opened in your name without your knowledge
Educate Yourself About Identity Theft: Stay informed about the latest identity theft trends and scams to recognize potential threats. Educate yourself and your family members about best practices for protecting personal information and staying safe online.

Feel Confident with an idLock Checking Account

Identity theft is a pervasive and ever-evolving threat that requires proactive measures to mitigate. That’s why we’ve got you covered with IDProtect, an included benefit with our idLock checking accounts. Protecting your identity is not just about protecting your finances; it's about safeguarding your peace of mind and maintaining control over your digital footprint in an increasingly interconnected world.

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The Mortgage Process: Dos and Don’ts

by Kelsea Oravic | Aug 29, 2024 | Loans, Mortgage

The Mortgage Process: Dos and Don’ts

Loans | Mortgage

Do's

Don'ts

Save up for your down payment and closing costs.

Although it can be tempting to go on a shopping spree for new furniture or start buying home improvement supplies, the best way for you to prepare is to save, save, save. Even if you have your whole down payment saved already, you should also be prepared to pay roughly 2-5% of your home’s purchase price in closing costs.

Make sure you have access to the documents you need.

Your mortgage lender will ask for a variety of different documents to verify your income, your assets, and your identity. Being prepared with either physical or electronic copies when your lender requests them will help speed up the approval process. Some of these documents may include:

2-3 months’ worth of bank statements
Past W-2s and tax returns for all borrowers
Recent paystubs
A valid photo ID
Proof of your current address, if the address on your ID is out of date
Statements for your retirement accounts (IRAs, 401Ks, etc.)

Continue making your payments on time.

Underwriters will be carefully examining your credit history, and most lenders will request an updated credit report just before closing. Make sure that you continue making all your payments in full and on time to avoid issues later.

Notify your lender of changes in your employment.

This includes changes in your pay, position, or pay status (for example, moving from an hourly wage to an annual salary.) We’ll discuss changing employers or employment status later on in this article, but the rule of thumb is to always keep your mortgage lender informed — even if it seems like a negligible difference, it’s better to provide too much information than not enough.

Tell your lender if you plan to use gift funds for your down payment.

Gift funds are exactly what they sound like — money that is given to you as a gift, with no expectation of repayment. They can be used to help you meet your down payment requirements, but different types of loans carry different restrictions on the source of the funds and how much you can receive. For example, some types of loans only allow gift funds that come from relatives, domestic partners, or fiancés; others will allow you to accept money from friends, charities, and down payment assistance programs. And in all cases, gift funds must be properly documented. Make sure you are up front with your lender about your plans to make your down payment, since this can affect the types of mortgages for which you are qualified.

Keep communication lines open.

Closing is a team effort that requires the real estate agent, the buyer, and the mortgage lender to work together. Although your lender and agent will be doing most of the heavy lifting, you can do your part by making sure to respond promptly to phone calls or emails and providing all the documentation your lender requests.

Apply for new credit.

Taking on new debt while you’re trying to apply for a mortgage is a mistake you don’t want to make: Doing so can seriously delay or even completely prevent you from closing. Do yourself a favor and avoid new credit card applications, vehicle purchases, and refinances until after you have your new keys in hand. You should also avoid co-signing for anyone else during this time.

Quit your job or change employers.

One of the things that underwriters look for during the loan approval process is stable long-term employment. Quitting your job or changing employers can signal that your employment situation may be less than stable, which could potentially impact your ability to make your monthly payment. If you do have plans to change jobs, you should notify your lender as early as possible to avoid running into issues later.

Make large, unverifiable deposits or withdrawals.

If you do need to make large deposits or withdrawals, be sure to document their purpose and where the money is going or coming from. For example, if you are taking a distribution from your IRA or 401(k) to help with your down payment, you should keep some sort of proof of the transaction, such as a copy of the check or a form provided by your broker or financial advisor. Cash deposits and withdrawals are the most difficult to verify because they have no paper trail, so avoid them if possible.

Make large advances on your credit card or line of credit.

Although it may seem like a great way to supplement your down payment or closing costs, taking a cash advance on your credit card or drawing on a line of credit can alter your debt-to-income and credit utilization ratios. Just like applying for new credit, this can cause serious issues that may prevent you from being able to close.

Close credit card accounts or pay off loans.

You might think that paying off debt would help your credit, but it’s best to consult your lender before making changes to your credit portfolio. Additionally, paying off your debt now could use up cash that you’ll need to cover closing costs and appraisal fees later.

Write out any NSF (“bounced”) checks.

No matter where you do your banking, you will need to provide copies of your statements. Overdrafts or NSF checks (short for “non-sufficient funds”) can signal problems with meeting your current financial obligations. Be sure to carefully keep track of your account balance, along with any outstanding checks or automatic payments you have coming out.

And last but not least, don't be afraid to ask questions.

Applying for and closing on a mortgage can be stressful, and sometimes it’s downright confusing. Asking questions can help you to understand the closing process, as well as your role in it. Your mortgage lender and your agent are there to help you, so don’t hesitate to speak up when you need clarification or you’d like more information.

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