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Mortgage 101

Make a smart decision about your home loan 

There are many factors to consider when deciding which mortgage will work for you.

Whether you’re a first-time home buyer, buying a second home, building or renovating a home, or looking to refinance. BBVA is here to help you finance your dream home. We want to answer your mortgage questions and provide the knowledge you need to make a confident decision.

 

Buying a Home

Buying a home is a big event. From applying for a mortgage to buying your first home or investing in a vacation getaway, we’re here to guide you through the journey.

As you begin looking for your home, having a prequalification letter will help you know your price range and will strengthen your ability to negotiate with sellers.

Once you have found a home that fits your needs and the seller has accepted your offer, it’s time to start a mortgage application. 

If you’re interested in buying a house, but are concerned about the health of your credit or believe you have a low credit score, don’t be discouraged.

Private mortgage insurance (PMI) is a type of mortgage insurance that protects your lender if you stop making payments on your loan. In most cases, PMI is required for a mortgage when the loan amount is more than 80% of the home’s value. PMI can be canceled once the home’s loan-to-value ratio (LTV) is 80% or less. By law, it must be removed once the home’s LTV reaches 78% based on the original payment schedule at closing, depending on the occupancy and unit type.  Note that PMI only applies to conventional loans. Other loan types may have their own types of mortgage insurance. FHA loans, for example, require mortgage insurance premiums, which differ from PMI. Click the link below for more mortgage basics.

Private Mortgage Insurance (PMI) is often required for conventional mortgage loans when the down payment is less than 20% of the home’s sales price or appraised value. PMI is typically 0.5% to 1% of the mortgage total paid yearly through monthly payments. Mortgage insurance guidelines vary between lending programs. The good news is that PMI is eligible for cancellation once the home’s loan-to-value ratio (LTV) is 80% or less.  By law, it must be removed once the home’s LTV reaches 78% based on the original payment schedule at closing, depending on the occupancy and unit type. Before getting serious about a mortgage, it’s important to know the costs involved. Calculators are useful tools for determining those costs.

When you compare mortgage loans, here’s how to determine which loan is best for you. Of course, you want the lowest interest rate possible. Your credit score and amount of down payment affect the rate. You can also buy discount points to lower the rate. Each point costs 1% of the loan amount. When considering points make sure you plan to stay in the house long enough to make the upfront cost pay off. A calculator is handy for that decision. 

You need to be certain that you’re being offered the right type of loan for your situation. For example, an FHA loan is often the better choice for those with lower credit scores since it has a lower down payment requirement than a conventional loan. VA loans have benefits specifically for veterans, and U.S. Department of Agriculture loans are tailored for those living in rural areas. Click the link below for more mortgage basics.

 

There are many types of loans available when shopping for a mortgage—conventional, FHA, and VA are three of the best known. Essentially though, almost every mortgage falls into one of two categories. The most common type of mortgage is a fixed-rate mortgage. Just as its name implies, this loan has an interest rate that’s fixed, not changing for the duration of the loan. The advantage of a fixed rate is that your principal and interest payment amount never changes and your rate is locked in even if rates increase in the marketplace. If you’re planning on staying in your home for a long time, a fixed-rate may be a good choice.

Additional principal payments applied to your  mortgage loan can have a significant effect on shortening your loan term. This tried and true method for reducing a loan’s duration works because the extra payment is applied directly to the principal. In the long-term, paying a little more now could save you thousands by shortening the term, assuming you make all scheduled payments on time. Our calculator makes it easy to see how significant this extra payment can be.

 

A home mortgage is the biggest investment most of us will ever make. So you want to make sure you’re being smart with your decision. The first thing you need to do is create a budget, that can help you determine the monthly payment you can afford. Most experts believe that your mortgage payment shouldn’t exceed 28% of your gross monthly income. Next, you’ve got to find the loan amount that fits within your budget. Our calculator can help.  But remember, only you can decide how much you’re comfortable paying for your housing each month. Based on your whole financial picture, think about whether you want to take on the mortgage payments plus the costs of ownership such as appliances, repairs, and maintenance.

Reaching a Loan-to-Value (LTV) ratio of 80% is key to having Private Mortgage Insurance (PMI) removed from your loan. Adding extra payments to your monthly mortgage payment could dramatically shorten the time it takes to get to an 80% LTV based on the original value of your home because the extra payment is applied directly to the principal. In the long-term, paying a little more now could save you thousands by shortening the term. Our calculator makes it easy to see how significant this extra payment can be.

Before determining how much your monthly mortgage payment will be, you need to first create a budget that can help you determine the monthly payment you can afford. Most experts believe that your mortgage payment shouldn’t exceed 28% of your gross monthly income. Next, you’ve got to find the loan amount that fits within your budget. Our calculator can help. 

Additional principal payments applied to your  mortgage loan could have a dramatic effect on shortening your loan term. This tried and true method for reducing a loan’s duration works because the extra payment is applied directly to the principal. In the long-term, paying a little more now could save you thousands by shortening the term, assuming you make all scheduled payments on time. Our calculator makes it easy to see how significant this extra payment can be.

Refinancing Your Mortgage

Refinancing to a lower interest rate can lower your monthly mortgage payments—but is it right for you? We’ll help you weigh the pros and cons to make the right decisions for your life.

Looking to lower your interest rate and get your loan paid off sooner? Then it might be time for you to consider refinancing.

Refinancing your mortgage can make monthly payments more manageable by stretching out the remaining loan term.

A cash-out refinance with BBVA can be a great way to finance home improvements, consolidate debt, cover an emergency expense, or take care of other financial needs.

 

Building or Renovating Your Home

Building a new home? Renovating your current home or a newly purchased “fixer-upper?” Whatever your plans, you’ll need to make important decisions along the way. That’s why we’re here.

Building a new home comes with the responsibility of making many decisions—including where you finance your loan, hiring a contractor, and more.

Installing new flooring? Updating your kitchen appliances? These home improvement projects are a great way to refresh your home. Here's a few tips to consider before you start.

Renovating your home is one of the best ways to improve its value. But before you get started, it’s important to understand which home improvements help or hurt your resale value.

 

Applying for a Home Equity Loan or Line of Credit

Borrowing against your home’s equity is a great way to finance home renovations, college tuition, and other big expenses. Learn more about HELOCs and home equity loans.

When you need money for home renovations, college tuition, or other expenses, sometimes a second mortgage is the answer. BBVA can help make your home’s equity work for you.

A home equity line of credit, or HELOC, is a line of credit that uses your home as collateral. With a HELOC, you can draw from an approved credit amount at any time within the draw period.

Learn how a home equity line of credit (HELOC) works and decide if this convenient personal finance tool is right for you.

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