Not only do they have smart and streamlined processes in place to make the entire process hassle-free, but they offer plenty of loan options, competitive interest rates, and flexible closings.

If you’re in the market for a mortgage refinance, it helps to know which lenders offer the lowest mortgage rates and the best shopping experience.

We compared all the major mortgage refinance lenders available today to find options with low rates and fair terms. Keep reading to see how they stack up.

Company Reviews for Best Mortgage Refinance

The mortgage refinance process requires some upfront legwork, but the effort can be worth it if you wind up with a better loan. The companies we chose for our ranking of mortgage lenders can help you save money, pay off your loan faster, or both. 

Read over the basic information for each home loan company to find the best option for your needs.

Quicken Loans

Also referred to as Rocket Mortgage, Quicken Loans is known for its seamless online mortgage refinancing process and how easy it is to get started.

Through Quicken’s dynamic online platform, a borrower can upload all the required paperwork, oversee their process, and finish the bulk of the refinance process online.

The company also boasts excellent reviews from past users, and it earned the second spot in J.D. Power’s U.S. Primary Mortgage Origination Satisfaction Study.

Quicken Loans offers origination loans, traditional refinancing, cash-out refinancing, and more through its online portal. Customers can also lean on this lender for help with conventional home loans, VA home loans, FHA loans, USDA loans, and more.

Better

Better promises mortgage refinancing with no lender fees or commissions, and it has streamlined the entire process with modern-day technology. Better applicants get instant mortgage rates after answering just a few questions, and the process is visible and transparent all along the way. 

Although the company has only been in operation since 2016, Better has already funded over $1.7 billion in loans. Applying for a mortgage refinance can be done entirely online, and you’ll get a quote immediately without having to speak with a mortgage officer.

AmeriSave

AmeriSave is an online mortgage lender that offers new home loans as well as mortgage refinance products. This company lets you qualify for lower rates than many brick-and-mortar banks, and you can even wrap your loan closing costs into your new loan if you agree to a slightly higher APR.

AmeriSave also lets you get a free quote for your new loan online. From there, you can complete the entire loan application process using their website and online portal to upload documents.

When it comes to closing on your new loan, they’ll complete the closing anywhere you want — even in your home.

loanDepot

If you’re wondering how to get a mortgage and hoping to complete the bulk of the process from the comfort of your own home, look no further than loanDepot.

This online lender promises refinance products with lower interest rates and/or lower monthly payments than you have now, and with a seamless application process, you can complete entirely online.

After you refinance with loanDepot once, they’ll also waive all the lender fees the next time you use them to refinance a mortgage.

While newer in the industry than some of the other refinance companies out there, loanDepot has funded more than $100 billion in loans since 2010. It’s also important to note that loanDepot scored higher than average in J.D. Power’s U.S. Primary Mortgage Origination Satisfaction Study.

Bank of America

Bank of America promises consumers who want to refinance a “digital mortgage experience” that makes the process more convenient. You can apply for a refinance online, over the phone, or in person, and you can choose from a wide range of mortgage products to suit your needs.

Online preapproval is also offered, and Bank of America offers competitive interest rates and low down payment options.

Bank of America Preferred Rewards clients can also qualify for a $200 to $600 reduction in their loan origination fee. This makes Bank of America an especially lucrative option for consumers who already have a working relationship with them.

Veterans United Home Loans

Veterans United Home Loans is a premier mortgage company for veterans and active-duty military who meet “the basic service requirements set by the Department of Veterans Affairs (VA), have a valid Certificate of Eligibility (COE), and satisfy the lender’s credit and income requirements.”

This means you must have a qualifying military affiliation to refinance your mortgage with this lender.

Veterans United can help connect you with the best VA home loans today — often with lower closing costs and the most competitive rates out there today. Veterans United has also received excellent reviews with an average star rating of 4.9 out of 5 stars across more than 10,000 reviews on Trustpilot. 

Chase

While Chase Bank is popular for its banking products and rewards credit cards, it also offers home loans and mortgage refinancing.

Their mortgage refinancing product lets you replace your home loan with a new one that offers better rates and terms, and you can likely complete the bulk of the mortgage refinance process online. 

Chase promises some of the lowest rates available, and you can even begin the mortgage refinancing process online. The bank also offers a closing costs guarantee that promises you’ll close on time in as little as three weeks, or you’ll get a check for $5,000.

Loans offered: Traditional home loans, adjustable-rate mortgages, jumbo loans, VA loans, FHA loans, USDA loans.

LowerMyBills.com

LowerMyBills.com is not a mortgage lender, but it is a marketplace that lets you compare multiple home loans in one place.

This platform lets you enter basic information about your current mortgage, your monthly payment, and your credit score range to get an idea of the new loan term you could qualify for.

If you decide to move forward and apply, you can enter your information once and get quotes from multiple lenders on the same day. LowerMyBills.com also offers a nifty mortgage refinance tool that lets you see how much you could save with a new home loan.

Mortgage Refinance Guide

If you’re wondering what to do before refinancing, when to refinance, or how to begin the process, you’re in the right place. Read on to learn more about what goes into refinancing your mortgage, why refinance rates are higher than purchase rates, and the paperwork and forms you’ll need to get started.

Benefits of Refinancing a Mortgage

The benefits of a mortgage refinance depend on the homeowner and their specific situation. For example, many consumers refinance in order to decrease the length of their loan term or lower their monthly mortgage payments.

Due to the fact that you get the chance to change up your loan term, refinancing is also one of the best ways to pay off a mortgage early.

If interest rates are considerably lower than they were years ago, refinancing to secure a lower interest rate can also help consumers save money on interest over the life of their loan.

Another benefit of refinancing right now could come into play if the value of your home has increased but you’re still paying private mortgage insurance (PMI) on your original home loan.

By comparing mortgage options, applying for a refinance, and seeking out an appraisal, homeowners with considerable home equity can get the PMI removed from their mortgage.

Cost to Refinance

According to ClosingCorp, the average cost of refinancing worked out to $6,837 nationally including taxes and $3,836 excluding taxes in 2021. Further, closing costs as a percentage of purchase prices declined in 2021 to 1.03% when compared to the 1.06% average in 2020.

That said, your personal closing costs will depend on a broad range of factors including your current income, your debt-to-income ratio, your credit history and credit score, the type of loan you choose, the loan amount, and your loan term.

Potential costs to watch out for and compare include closing costs, loan origination fees, points, and more.

Best Time to Refinance 

Generally speaking, there are a handful of times it makes sense to trade your current home loan for a new one. Should you refinance your mortgage, one of the scenarios below will likely come into play:

• Securing a lower monthly mortgage payment

• Getting a lower interest rate

• Reducing the loan term on your mortgage

• Switching loan products from a 15 vs. 30-year mortgage

• Refinancing to remove PMI

• Switching from a variable rate to a fixed rate (or vice versa)

Any of these situations can create a prime opportunity for mortgage refinancing, but you should still run the numbers to make sure you’ll still end up ahead.

A mortgage calculator can help you compare your future monthly payment to your current one, as well as see how much you could save on interest based on current mortgage rates.

Requesting for Refinancing a Mortgage

After you compare loan offers and decide on a mortgage lender, you’ll need to gather some documentation to begin the refinancing process. Documents you’ll need to have ready can include:

• Proof of income, including W2s or pay stubs

• Homeowners insurance information

• Documents relating to other debts you have

• Statement of assets

• Tax returns

According to Quicken Loans, you may also need to present other documentation based on your situation.

For example, you may need to prepare letters of explanation for past credit issues or employment gaps, documentation that shows child support or alimony payments, or documentation related to bankruptcy on your credit history.

While knowing what you need and gathering this documentation may feel overwhelming, remember that the best mortgage lenders can help walk you through the process. The majority also lets you upload required documentation online and from the comfort of your own home.

Different Kinds of Refinancing Products

When it comes to refinancing your home mortgage, you get to choose from nearly any type of mortgage out there. Generally speaking, your options can include the following:

Adjustable-Rate Mortgage

• Adjustable-Rate Mortgage: An adjustable-rate mortgage comes with a fixed rate for a fixed timeline followed by a variable interest rate for the duration of the loan. With a 7/1 ARM, for example, consumers pay a low fixed rate for seven years followed by a variable rate that changes based on market conditions.

Cash-Out Refinance

• Cash-Out Refinance: While you can refinance your mortgage to secure a lower monthly payment, a lower interest rate, or both, you may also be able to take cash out based on how much equity you have.

FHA Loan

• FHA Loan: FHA loans come with low closing costs, down payment requirements as low as 3.5%, and easy credit requirements.

Fixed-Rate Mortgage

• Fixed-Rate Mortgage: Fixed-rate mortgages come with competitive fixed rates, fixed monthly mortgage payments, and a fixed repayment timeline.

Jumbo Loan

• Jumbo Loan: Jumbo loans are mortgages for homes that cost more than $647,200, and they have stricter qualification requirements as a result.

USDA Home Loan

• USDA Home Loan: USDA loans are zero down payment mortgages that are aimed at buyers in rural areas of the United States.

How We Found the Best Mortgage Refinance Companies

To find the best mortgage lenders of 2024, we looked for mortgage companies that offer transparency when it comes to their mortgage rates, their loan processes, and their loan options.

We compared mortgage lenders based on their ratings from third-party agencies like the Better Business Bureau (BBB) and J.D. Power, and we sought out companies that let consumers complete their refinance process online or over the phone with the help of a mortgage broker. 

Ultimately, we chose the top home mortgage companies that offer mostly positive reviews, a broad range of mortgage options, competitive mortgage rates, and plenty of educational content for their customers.

We also gave preference to lenders who let consumers get a rate quote online without a hard inquiry on their credit report.

Bottomline – Best Mortgage Finance Companies

In 2024, for those on the hunt to refinance their mortgage, the landscape is rife with promising options. With companies like Quicken Loans leading in customer service and Better offering competitive rates, homeowners have a robust selection. 

Whether you prioritize online processes, loan comparisons, or specific discounts, there’s a lender tailored to meet those needs. Before diving into the decision, it’s worth exploring these top contenders to ensure a smooth refinancing experience.

The post Best Mortgage Refinance Companies of 2024 appeared first on Good Financial Cents®.

But while a HELOC and home-equity loan both serve the same purpose, there are major differences in how they work and are repaid. We’re going to dive into those differences to help you decide which loan will work best for you.

What Is a HELOC?

The Benefits of a HELOC

HELOC is an abbreviation for home equity line of credit. The “line of credit” part of the title is what distinguishes a HELOC from a home equity loan.

A HELOC is essentially a revolving line of credit that works much like a credit card, except that it’s secured by your home. Because it is, you’ll not only get the benefit of a larger credit line, but also a much lower interest rate than you can get on a credit card.

And since it is a revolving line of credit, you’ll pay interest only on the outstanding loan balance. For example, if your HELOC is for $50,000, and $10,000 is outstanding, you’ll pay interest only on $10,000.

Much like a credit card, as you repay the balance on your credit line, the available balance will be restored.

Still another benefit is that HELOCs usually have a lower interest rate than a home equity loan. And during the first few years of a HELOC, you’ll pay interest only on the outstanding loan balance. This will leave you with a much lower payment than you’d have with a home equity loan.

HELOC proceeds can be used for any purpose, whether to make improvements on your home, pay off debts, or finance major purchases.

To qualify for a HELOC, you’ll need to have substantial equity in your home. Most lenders will typically lend between 80% and 90% of the value of your home, reduced by the balance of your existing first mortgage.

If your home is worth $500,000, you currently have $300,000 loan on the property, and a lender will provide a HELOC at up to 80% of the value of your home, the HELOC can be set as high as $100,000 ($500,000 X 80%, minus $300,000 for the first mortgage).

The Downsides of a HELOC

As easy as HELOC terms can be, there are some downsides you need to be aware of:

The draw period. That’s the period of time during which you’ll have access to the credit line, after which the loan must be fully repaid. While the typical term of a HELOC can be 20 or 30 years, you’ll only be able to draw funds against the line for 10 or 15 of those years. After that, you’ll need to make payments, including both interest and principal, until the loan is fully repaid.

Variable interest rate. Though HELOCs do have lower interest rates than home equity loans, those rates are variable. That means the rate you’ll pay on your HELOC will rise when interest rates increase. Naturally, when the interest rate rises, your payment will also increase. 

HELOCs can be reduced or frozen. A lender can reduce or freeze your HELOC under certain conditions. That can include a significant decline in your credit score or in the value of your home. For example, though your HELOC may be for $50,000, a drop in your credit score may cause the lender to freeze the line, denying you access to the unused portion of your line.

What Is a Home Equity Loan?

The Benefits of a Home Equity Loan

A home equity loan works much like a HELOC, except that it is a true loan, and not a revolving line of credit. You can think of it as a smaller version of your first mortgage. You’ll take a fixed loan amount, receive the proceeds at closing, then make regularly scheduled monthly payments until the loan is fully paid.

Because it is a fixed rate loan, the interest rate will be higher on a home-equity loan than it will be on a HELOC. But you will have the benefit of a fixed interest rate and monthly payment throughout the term of the loan.

Qualification for a home-equity loan works much the way it does with a HELOC. The lender will offer you access to between 80% and 90% of the value of your home, less the existing first mortgage balance.

You’ll also need to have good or excellent credit, as well as a stable income that will comfortably accommodate the new loan payment.

The Downsides of a Home Equity Loan

Like a HELOC, home equity loans have their own share of disadvantages:

Once the loan is taken, there are no more funds to access. This is unlike a HELOC where you can access the funds as needed, and even repay them ahead of time.

Higher cost than a HELOC. Though both loan types have closing costs, those costs are typically higher on a home equity loan. The interest rate will also be higher. While a HELOC may be available at, say, 4.75%, you may pay 6% for a home equity loan.

Higher monthly payments. HELOC payments are interest-only, at least during the draw period. However, home equity loan payments include both interest and principal, resulting in higher payments.

How a HELOC Compares With a Home Equity Loan

How a HELOC and a Home Equity Loan Are Similar

The primary similarity between a HELOC and a home equity loan is that both are loan programs designed to enable you to access the equity in your home.

This is generally a more cost-effective way to retrieve equity from your home than doing a cash-out refinance of your first mortgage. Not only may a cash-out refinance cost more than a HELOC or home equity loan in closing costs, but you may lose the benefit of an attractive interest rate if rates have gone up since the original loan was taken.

Both HELOCs and home-equity loans are also very flexible loan arrangements. You can either borrow the funds for a very specific purpose, like making an addition to your home, or to cover a series of expenses over several years.

How a HELOC and a Home Equity Loan are Different

The main differences between a HELOC and home equity are loan funds access and repayment.

Where a home-equity loan is a one-time loan, generally designed for a specific purpose, a HELOC is a revolving credit arrangement. You can borrow money as you need it, repay it, and pay interest only on the outstanding balance.

A home equity loan requires full payment of interest and principal throughout the term of the loan. A HELOC requires only the payment of interest during the draw period. However, once the draw period is over, you will be paying a combination of interest and principal on a HELOC, which will make it much more like a home equity loan.

When to Choose a HELOC

You should choose a HELOC when…

• You want to tap the equity in your home and pay the absolute lowest rate and monthly payment possible.

• Your plan is to use the HELOC as a source of funds, above your emergency fund. There’s no specific purpose for the funds, but you want them available for major expenses as they arise.

• You’re okay with the variable rate arrangement, perhaps because you plan to keep the outstanding balance low or repay the line early.

When to Choose a Home Equity Loan

You should choose a home equity loan when…

• You need a large amount of money quickly, perhaps because you want to add an addition to your home or cover the cost of an upcoming wedding.

• You prefer the stability of a fixed interest rate and monthly payment.

• You plan to stay in your home for many years, giving you plenty of time to fully repay the home equity loan.

• You want to consolidate variable-rate loans, like student loans and credit cards, into a single fixed-rate loan.

Where to Get a HELOC or Home Equity Loan

LendingTree is the leading online loan marketplace in America. You can use the platform to get a new first mortgage, credit cards, student loans, car loans, business loans, and other types of financing, in addition to HELOCs and home equity loans. Scores of lenders make their products available on LendingTree, which makes it an excellent choice to search for and find the best HELOC or home equity loan arrangement for you.

Figure is a direct HELOC lender, offering loans on single-family residences and townhouses. You can get a HELOC from Figure for second homes and investment properties, in addition to primary residences. They’ll lend up to $250,000, and you must have a minimum credit score 680. The entire loan application takes place online, and rates start as low as 3.00% APR.

Quicken Loans (ACCORDING TO THEIR WEBPAGE, QUICKEN LOANS DOES NOT OFFER HELOCS. THERE IS NO MENTION OF HOME EQUITY LOANS.)

AmeriValue (THE WEBSITE IS EXTREMELY LIMITED, AND I COULD FIND NO EVIDENCE THEY OFFER ANYTHING OTHER THAN FIRST MORTGAGES, NOT HELOCS OR HOME EQUITY LOANS.)

The Bottom Line – HELOC vs Home Equity Loan

HELOCs and home equity loans offer homeowners flexible access to their home equity, but they have crucial differences. A HELOC is like a revolving credit line secured by your home, offering lower interest rates and payments based on the outstanding balance. In contrast, a home equity loan provides a lump-sum amount with fixed interest rates and monthly principal and interest payments.

Choosing between them depends on your financial goals. HELOCs suit those seeking flexibility and lower initial costs. Home equity loans are ideal for large, one-time expenses or consolidation with a preference for fixed rates.

Both options help you leverage your home’s equity, so pick the one aligned with your specific financial needs and objectives.

The post HELOC vs Home Equity Loan appeared first on Good Financial Cents®.

If you choose to do a mortgage refinance and possibly pull cash out of your home, your lender will order an appraisal and a person will put a value on your home.

If you choose to sell your home a realtor will find comparable homes and your ultimate value will be determined by what someone else is willing to pay.

However, if you want to track your home’s value over time, a number of online home appraisal sites can help you understand your home’s value better.

To play around with some of the online home appraisal apps on the market and to learn more about your home’s value, read below.

Why Your Home’s Value Matters

Outside of providing a place for your family to live, your home is an important part of your financial plan, too.

Here’s why it matters: 

• Investment value:  Over time, your home should theoretically increase in value. According to the Federal Housing Finance Agency, home value prices increased 3.0% between the second quarters of 2022 and 2023 and 4.3% since 1991.
  
  When your home increases in value, your net worth increases. If you sell your home later, you will make money on your investment.

• Borrowing power: This is especially true if you ever wind up borrowing against your home’s value. If the value of your home increases significantly, you’ll have a lot more leeway when it comes to taking out a home equity line of credit, or HELOC to pay for expenses like a remodel, a car, or education for your kids.

• Tax implications: “Keeping an eye on the market value and property tax assessment value is important so that you’re not paying tax on an artificially inflated property value by mistake, or vice versa,” says Minnesota Financial Advisor Jamie Pomeroy.

• Resell value: “If you are within 3 years of selling your home, you will want to keep tabs on the value and the real estate market in hopes that you can sell at an opportunistic time,” says Jose V. Sanchez, financial advisor and contributor to LifeInsuranceToolkit.com.

• Estate planning: Finally, knowing your home’s value can be important when it comes to estate and elder law care planning as well, notes Joseph A. Carbone, Jr., CFP  Founder and Wealth Advisor of Focus Planning Group.

• Homeowners insurance: Don’t overlook the fact that knowing the value of your home is critical to making sure you have enough homeowners insurance coverage.

So, if you are actively considering a mortgage refinance or a home equity loan, your best option is to get a free quote. You can see what your rate will be and how much you can get approved for, by selecting your state below.

Convinced? Here are websites that make the task of tracking your home’s value easy and fun:

How Much Is Your House Worth? Top 10 Best Online Tools to Help You Estimate Your Home’s Value:

1. Zillow

2. Trulia

3. Redfin

4. Realtor.com

5. Real Estate ABC

6. Eppraisal.com

7. HomeGain.com

8. Chase Mortgage Services

9. RE/MAX

10. ForSaleByOwner.com

1. Zillow

Zillow is one of the biggest – and most popular – websites for monitoring your home’s value. One financial advisor I spoke to, Joseph Carbone, says the best part about Zillow is the layout of the site and how easy it is to use.

Just by entering your home’s value into the website’s friendly interface, you’ll get a Zestimate – a Zillow-created estimate of your home’s value. Beyond finding out how much your home might be worth, you can also shop for homes in your area with the website’s consumer-friendly tools.

How to find your home’s value:
Type in your address and Zillow will immediately let you know if they have a Zestimate for your home. You can also create an account, claim your home, and get regular updates on any changes in value. They have really set the bar high for all the other free home value estimators that exist today.

2. Trulia

Trulia.com works similarly to Zillow. Once you reach the website, you can enter your home address and learn how much your home might be worth. Instead of offering a Zestimate, however, Trulia offers the average listing price for similar homes in your area.

Other information offered on Trulia includes the average list price for all homes in your area, along with standard details on your home – square footage, lot size, and bed/bath information.

If you plan to refinance your home, Trulia is also ready to help with its own approved set of lenders.

How to find your home’s value:
After searching your address on the home screen, you’ll be brought to a page with a lot of information about your house and property, and you’ll be asked to contact them for an estimate.

3. Redfin

Another website that has become popular among real estate enthusiasts and homeowners is Redfin Estimate.

With Redfin, you can enter a handful of details about any property and learn about the local neighborhood, the “walkability” of a property, and how much property taxes cost each year.

Plus, values might be slightly more accurate on this website, notes financial advisor Sanchez.

“As a broker, Redfin uses the most accurate data from the Multiple Listing Service (MLS) to calculate your property’s current market value”

Jose V. Sanchez

How to find your home’s value:
Redfin gives you an immediate estimate of your home value just by entering your home address into the search bar on the homepage and selecting “See Home Estimate”. While calculating, they give you a breakdown of how they make their estimates.

4. Realtor.com

While Realtor.com might sound like a hub for real estate professionals, this website is free for anyone to use. Just enter your house address into the site’s homepage and you’ll learn an array of details including a price estimate of your home.

Beyond a pricing estimate, you’ll find out about the local schools, median listing prices in the area, and even property tax assessments. This tool is also great for learning about your neighbor’s home and how much they might be paying.

How to find your home’s value:
Type in your address in the search bar, select “Home Value”, and you’ll get an immediate estimate, with the option to sign up for an account, claim your home, and get regular updates tracking its value.

5. Real Estate ABC

Real Estate ABC links up with Zillow.com to provide the same Zestimate you’ll receive there. What I really like about this site, however, is that it lists a ton of sales data for recent home sales in your area.

If a house sold down the street, you’ll eventually be able to find out how much the buyer paid on Real Estate ABC. Since recent sales are the best indicator of your home’s current value, this kind of data can be priceless.

How to find your home’s value:
The interface for the site is pretty simple and outdated, but enter the necessary info in the provided fields, and you’ll get your home value immediately. They don’t require any contact information and also provide up to 30 comps for each address.

Related article: Home Sweet Home: What is the True Cost of Having Your Own Home?

6. Eppraisal.com

Eppraisal.com works similarly to the other sites on this list, offering its own estimate of your home’s value in certain cases and a Zillow.com Zestimate in others.

Beyond house prices though, Eppraisal offers details on homes sold nearby, plus current refinancing rates and more.

With Eppraisal.com, you can get all this data for free – and you don’t even have to enter your email address.

How to find your home’s value:
Enter the address in the search bar in the top right corner, and you’ll be given the results of your property value immediately — no contact necessary. You’ll be given both Eppraisal’s estimate as well as Zillow’s and the difference can be surprising.

7. HomeGain.com

While HomeGain.com is mostly a home shopping tool, one of their widgets lets you find the value of your own home for free. 

The downside with HomeGain is that they require you to enter your email address to get “unlimited MLS data” for your area. Unfortunately, this usually means you’ll end up on a huge mailing list – whether you like it or not.

How to find your home’s value:
Follow the prompts on HomeGain’s homepage to find your home value estimate, and eventually, you’ll be asked to input contact information for someone to reach out to you. The interface is nice, but you won’t get immediate results with this one.

8. Chase Mortgage Services

While this might seem strange, Chase Bank has its own home property value tool offered for free online. Simply enter your home address, your state, and your zip code to learn how much your home might be worth.

Instead of giving an exact estimate, Chase offers a price range they feel your home falls into. Since they also offer an estimate of all of your neighbor’s home values, this is a fun tool to play around with. Best of all, it’s free, easy to use, and doesn’t require you to enter any personal data.

How to find your home’s value:
Simply enter your address to get a range estimate for the value of your house. You’ll also get a list of a few nearby sales for comparison.

9. RE/MAX

Real estate firm RE/MAX has also jumped into the game with its own home value estimator. While this is likely a ploy to get you to use their services when you sell your home, the online tool is free and easy to use.

Best of all, you don’t have to enter any personal data or offer your email address to get a free estimate of your home’s value.

Once you enter your address, you’ll be presented with a color map of your neighborhood along with all of your neighbor’s home values.  Since real estate firms use MLS data to come up with estimates, this tool tends to offer a fairly realistic estimate of most home values as well.

How to find your home’s value:
Follow the simple prompts to get automated estimates that you can compare to one another. For a more accurate valuation, you can contact them.

10. ForSaleByOwner.com

While this site was created to help homeowners advertise and market their own homes in lieu of a realtor, it offers several tools any homeowner can benefit from as well.

Their Pricing Scout tool is free and easy to use. Once you sign up, you’ll get an estimated market value of your home based on recently sold comparable properties in your area and a summary of local real estate characteristics.

How to find your home’s value:
Literally, just type in your address and get a review including a sliding scale for market value as well as a list of neighborhood comps.

Tracking Your Home’s Value

We’ve watched home values go up most of our lifetimes. Rising home prices have a significant effect on our wealth, and ability to borrow. Even if you don’t plan to sell your home, watching your home’s value increase over time can be a lot of fun.

Many people have used their home equity smartly to consolidate personal debt or to invest in building a business from their home. While it’s important to always understand your asset values, try not to get attached to the ups and downs too much.

Chances are, a realtor will be able to offer more insight into your local market than any online real estate tool ever could.

The post 10 Awesome Websites That Let You Estimate Your Home’s Value appeared first on Good Financial Cents®.

With a home warranty in place, you get the peace of mind that comes with knowing many of your home’s major components are covered for repairs or replacement. The best part? You can pay a monthly cost or an annual fee, and you can customize your warranty to provide the exact coverage you need.

That said, not all home warranties are equal, and some offer more features or better pricing than others. With that in mind, we compared the top 20 home warranty companies to find ones that stand by their promises and come with a generous list of inclusions.

Select Home Warranty made our ranking due to their robust home warranty plans with many inclusions, but we can also recommend American Home Shield, Choice Home Warranty, and other companies that offer quality home warranty products.

***Monthly plan costs are based on a 3,000-square-foot home in Central Indiana.

Our Picks for Best Home Warranties in March 2024

• Select Home Warranty: Best Comprehensive Plans

• Liberty Home Guard: Best for Online Claims

• American Home Shield: Best for Flexibility

• America’s 1st Choice Home Club: Best for Established Homeowners

• First American Home Warranty: Best Budget Option

• Choice Home Warranty: Best for 24/7 Service

Best Home Warranties – Company Reviews

While each provider that made our ranking offers high-quality home warranties, some home warranty plans may be better suited to your needs. The following home warranty reviews can help you decide which home warranty plan will provide the coverage you need the most, whether you want comprehensive coverage for every component of your home or you’re mostly seeking a basic warranty plan.

Select Home Warranty offers three different plans that can help you cover unexpected repair bills. Options include a Bronze Care basic plan, a mid-tier Gold Care home warranty plan, and a Platinum Care plan with all the bells and whistles.

With their Platinum plan, you can get all major components of your home as well as all your major appliances covered for one plan fee. Coverage can protect your air conditioner, heating, plumbing system, heating system, ductwork, electrical, water heater, plumbing stoppage, garbage disposal, clothes washer, and all major appliances down to your ceiling fans. Select Home Warranty also lets you add on additional coverage for pools, central vacuums, sump pumps, well pumps, standalone freezers, sprinkler systems, and more.

Liberty Home Guard offers three home warranty plans for consumers — an appliances plan, a systems plan, and a Total Home Guard home warranty plan that provides coverage for nearly every working system and appliance in your house. The company also lets customers choose add-on coverage for components such as a pool and spa, a well pump, a sump pump, septic system pumping, and more.

This home warranty provider also stands out due to their service availability and online claims process. Liberty Home Guard says you can submit your claim by phone or online 24/7, and that they’ll have a technician at your home within 24 to 48 hours in most cases.

American Home Shield has been in business since 1971, so the company has had a long time to build a solid reputation in the home warranty space. This provider made our ranking due to the flexibility of their plans (ShieldSilver, ShieldGold, and ShieldPlatinum), which let you cover your home’s major systems, your appliances, or all of the above depending on your needs.

American Home Shield’s comprehensive Combo Plan provides broad coverage for 21 components of your home, including all the major systems like your electrical system, water heater, home appliances, and more. You can also build your own home warranty plan, which allows you to pay for only the coverage you want and need.

AFC Home Club made our ranking due to the fact you can use any licensed and insured technician for your home repairs. This makes more sense for established homeowners who may already have a network of technicians or companies they are comfortable with.

This home warranty provider also offers a broad selection of plans as well, which can include home appliances like a cooktop as well as major home systems. Customers can also add on additional coverage for components such as a sump pump, a central vacuum, and a standalone freezer. Add-on coverage for roof leaks is also available.

First American Home Warranty made our ranking due to the pricing of their plans, which can range from $38 to $48.50. Their highest-tier plan “Premium” plan covers most of the main components of your home, from your electrical systems to plumbing and major home appliances such as washers.

First American Home Warranty also offers flexible payment options and a network of pre-screened professionals who can perform needed repairs. You can also request service 24 hours a day and 365 days per year.

Choice Home Warranty made our ranking of best home warranties due to their 24/7 service options, as well as the fact customers can quickly and easily file a claim over the phone or online.

This provider offers two main coverage plans to choose from — a basic home warranty that covers appliances and many major home components, and a Total Plan that covers almost all of your home’s components that are prone to breakdowns. Choice Home Warranty also lets you customize your home warranty with additional coverage for pools and spas, septic tank pumping, and more.

Home Warranty Guide

What Is a Home Warranty?

A home warranty works similarly to other kinds of warranties, including extended warranties on electronics. Customers pay an upfront fee or a monthly fee for their service contract, and they receive protection for repairs or replacements of covered items for the duration of their contract term.

As American Home Shield puts it, a home warranty is a “year-long, renewable home service plan that keeps you protected should a covered breakdown occur.”

They add that a home warranty “helps cut the cost to repair or replace many of the systems and appliances in your home and complements your homeowners’ insurance policy by protecting things that your insurance doesn’t.” Of course, your home warranty coverage will only include normal wear and tear, not deliberate sabotage or repairs stemming from a lack of adequate maintenance and cleaning.

What Does a Home Warranty Cover?

The best home warranty plans provide broad coverage you can count on, but they don’t all cover the same components, so it might be a good idea to check out sample contracts on each service provider’s website.

In fact, some home warranties only provide coverage for a select number of items in your home, such as your home appliances. Things like trash compactors, built-in microwave ovens, ranges, refrigerators, and laundry machines are commonly covered, for instance. Other plans provide more robust coverage for major systems like your electrical system and plumbing, as well as your home’s water heater and HVAC system.

Fortunately, the best home warranties will let you customize your plan to suit your needs. For example, you may be able to add on coverage for “extras” or optional add-ons you have around your property, such as a second refrigerator, pool or spa, sump pump, septic tank, and even your ice maker and garage door opener. Some home warranties even provide coverage for roof leaks.

How Much Is a Home Warranty?

The cost of home warranties depends on the specifics of your property, the home warranty provider you select, and the tier of coverage you want. However, our research shows that most home warranties cost between $37 and $70 per month, without including extras such as the service call fee or taking deductibles into account.

Keep in mind that the best home warranties with comprehensive coverage charge monthly fees on the high end of that range. Meanwhile, you can get modest coverage for appliances and some of your home’s systems for less than $40 per month. Cancellation will also carry an associated fee, which can range between $50 to $75 dollars.

Ultimately, you should consider your home warranty as part of the costs of owning a home.

What Is the Difference Between a Home Warranty and Home Insurance?

Where a home warranty provides coverage for the repair and replacement of your home’s systems and appliances, home insurance protection plans provide coverage for the structure of your home. For example, homeowners insurance protects against hail and tornado damage when it occurs. This kind of insurance can also rebuild your home from the ground up if you face a total loss due to fire or other covered events.

Homeowners insurance also comes with liability coverage that can protect you in the event someone is injured on your property and sues you for damages. Our guide to home warranty vs home insurance explains more about how each of these coverage options works in terms of home protection.

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Are Home Warranties Worth It?

Like any other type of warranty coverage, home warranties can be worth it if you need to file a claim. For example, you may find you’re very happy with your home warranty plan if your electrical system needs major repairs, or if your HVAC system breaks down. You may also glean excellent value from your home warranty if several of your home appliances need replacement, or if you have roof leak coverage and actually have to use it. In many cases, a home warranty is a home update worth the money.

That said, even the top home warranty companies can seem like a waste of money if your home’s components never need replacement or repairs, or if the company’s response times and workmanship guarantees aren’t up to snuff. The value of most home warranties is in the peace of mind they provide homeowners. When you have a home warranty in place, you can rest assured you won’t be faced with thousands of dollars in surprise repair bills when you least expect it.

At the end of the day, home warranties can also help you settle the debate between renting vs buying. A home warranty lets you enjoy homeownership without being on the hook for unexpected repair bills, just like you would be able to if you rented.

How We Found the Best Home Warranties

To find the best home warranties for 2024, we compared home warranty plans and their features. Our methodology included getting pricing for a standard, 3,000-square-foot home in Central Indiana to serve as a basis for our comparison, and we looked for companies that offer several plan options with the ability for customers to customize their coverage limits.

In the meantime, we purposely chose home warranty companies that are transparent about their plan inclusions, costs, and fees. We also looked for companies that let customers file a claim online or over the phone with the promise of speedy service thereafter.

Finally, we only included companies in our ranking that have a “B” rating or better with the Better Business Bureau (BBB).

Summary of the Best Home Warranties of 2024

• Select Home Warranty: Best Comprehensive Plans

• Liberty Home Guard: Best for Online Claims

• American Home Shield: Best for Flexibility

• America’s 1st Choice Home Club: Best for Established Homeowners

• First American Home Warranty: Best Budget Option

• Choice Home Warranty: Best for 24/7 Service

Home warranties offer coverage for repairs or replacements of major components, with customizable plans available for a monthly or annual fee. Among the top options are Select Home Warranty, American Home Shield, Liberty Home Guard, and others that provide various features and inclusions. 

Homeowners can choose plans based on needs such as comprehensive coverage, online claims convenience, flexibility, established homeownership, budget-friendliness, or 24/7 service. When considering a home warranty, matching needs with plans can bring peace of mind and financial security.

The post 6 Best Home Warranty Companies – Updated 2024 appeared first on Good Financial Cents®.

Though we’re going to go through the many steps necessary to learn how much house you can afford, you can also take advantage of our home affordability calculator to speed the process.

What Affects How Much House Can I Afford?

Getting a mortgage is unique to each individual because it’s based on several factors:

Type of Loan

There are different types of mortgage loans, and each has its own specific requirements. For example, you may choose to apply for a conventional, Jumbo, FHA, VA, or USDA mortgage. Each is likely to result in a slightly different loan amount.

The Loan Term

You’ll need to do an analysis of the 15 vs 30-year mortgage. With its longer term, a 30-year mortgage will result in a lower monthly payment. That will enable you to qualify for a larger loan amount, and thus a higher-priced home — though you’ll be paying back the mortgage for longer.

Down Payment

The smaller the down payment, the higher the mortgage amount, and the higher the monthly payment, the less house you’ll be able to afford.

For example, a VA mortgage requires no down payment at all. But the 100% financing feature will produce a high monthly payment. By contrast, taking a conventional or Jumbo loan with a 20% down payment will enable you to buy more houses due to its lower house payment.

Income, Debt and Debt-to-Income Ratio (DTI Ratio)

Your ability to qualify for a mortgage will depend on the combination of your annual income and debt. Not only will you need sufficient income to carry the new house payment, but also any existing debt you will have after closing.

Your debt burden will include any student loan payments, car loans, and credit card debt.

This is calculated using what’s known as the DTI. The formula takes the new house payment, plus other monthly debt payments, and divides the total by your stable gross monthly income.

Though the “ideal” DTI is no higher than 36%, most lenders will go up to 43%. And if you have strong compensating factors, like a large down payment and excellent credit, a DTI of 50% may be allowed.

Credit Score

The minimum credit score for each loan type is generally as follows:

• Conventional – 620

• Jumbo – 660 or higher

• FHA – 580, but some lenders will go as low as 500 with a 10% down payment

• VA loans – no minimum credit score specified, though individual lenders may have their own requirements

It’s important to understand that not only will your credit score determine your loan approval, but it will also affect your interest rate. The higher your credit score, the lower the interest rate.

This will translate into a lower monthly payment, and into the ability to qualify for a higher mortgage amount.

If your credit score is below those listed above, you may want to enlist the services of one of the best credit repair companies. That may offer you the fastest way to improve your score.

Interest Rate

The interest rate you’ll pay on your mortgage is one of the primary factors in your monthly payment.

As an example, let’s look at a $300,000 mortgage using two different interest rates. The first is a 4% rate for someone with a credit score well above 700; the second is 5.5% for a borrower with a credit score of 630.

• A 30-year mortgage at 4% will result in a payment of $1,761.

• A 30-year mortgage at 5.5% will result in a payment of $2,032.

The difference between the two payments is $271 per month. That means you’ll qualify for a larger mortgage at 4% than you will at 5.5%.

This is just as important when it comes to refinancing your current mortgage into a new one. When that happens, be ready to investigate the best mortgage refinance companies.

How to Calculate Your Down Payment

The amount of the down payment you make will have a major impact on your loan amount. The more you put down, the lower your loan amount and your monthly payment.

It will help to know what the minimum down payment requirements are based on the type of loan you are applying for.

The minimum down payment requirements for each of the four primary mortgage types are as follows:

• Conventional: 5% but can be as low as 3% for first-time homebuyers and for lower-income borrowers

• FHA: 3.5%

• VA: 0% (100% financing)

• Jumbo Loans: 10% or higher, depending upon the purchase price of the property, or the property value for refinancing

The down payment percentages above are only the minimum requirement for each loan type.

Strategies for Saving for a Down Payment

How to save for a house down payment is one of the biggest issues for would-be homebuyers. Since most mortgage loan types will require a down payment, it’s important to have a strategy to at least reach the minimum requirement.

Here are five general strategies to implement to help you reach your down payment goal:

1. Set Your Down Payment Target: This will require knowing how much home you can afford, the loan amount you’ll qualify for, and the cash you’ll need at the closing table.

2. Set Up a Budget: Saving money for any goal will likely require gradually reducing expenses to find cash to save.

3. Open a Dedicated Savings Account: This is a mission-critical step. Setting up a separate account specifically for your down payment will not only help you track exactly how much you have saved, but it will also avoid mixing your dedicated home-buying funds with other savings intended for other purposes.

4. Automate Your Savings: The best way to do this is through payroll deductions directly into your dedicated savings account. That will enable you to save money without any additional effort on your part.

5. Bank Windfalls: By saving your tax refund, bonus income, or other windfalls, you’ll reach your down payment target even faster.

You should also know that it may be possible to make a down payment using a gift from a family member. Check with the mortgage lender you’re working with to see what the specific requirements are based on the loan program you’re using.

Why Shopping for a Lender Is So Important

This may be the most underrated part of the homeownership experience. You may assume all lenders charge essentially the same rates and closing costs, but that isn’t true, especially when you factor in the different types of mortgages, from FHA loans to conventional loans.

In the search for the best mortgage rates, you may come across a lender with a lower interest rate than anyone else.

But that should raise a red flag, alerting you of two possibilities:

1. The Lender Is Quoting a “Floating Rate.” That is, it may be the rate is available today, but not 30 or 60 days from now when you plan to close on the home. Always inquire what the rate will be if you lock it today for your intended closing date.

2. The Lender May Be Advertising a Very Low Interest Rate, but One With Very High Closing Costs. That’s most likely because the rate will have been “bought down” through the payment of discount points.

Those points will raise your closing costs, making the loan more expensive than those of the lender’s competitors.

In conducting your search for financing, be sure to concentrate on the best mortgage lenders. Those are the lenders that have either been recommended to you or are among the major lenders in your area or the industry in general.

Factors That Influence Your Decision-Making

The only way to know your housing budget for certain is to meet with a mortgage representative and get prequalified. The lender will request your employment and income information and may even run a credit check.

Armed with that information, as well as the amount you intend to put down on the home, the lender will be able to give you a fairly accurate house price.

If you’re planning to buy a home in the next 60 to 90 days, you may even want to get pre-approved.

A pre-approval is different from a prequalification because the lender will actually request and obtain documentation supporting your income, assets, and credit.

Based on that information, they’ll issue a formal approval, subject only to the selection of a property, property appraisal, and routine closing conditions.

Pre-approval upfront will not only provide assurance that you’ll be qualified for the loan you need, but it will also help when you submit offers on houses you’re interested in.

Property sellers love a pre-approved borrower because it removes the risk of inability to get financing. The preapproval may even help you to get a better price.

In this guide, we’ve used a similar methodology to mortgage lenders in assessing home affordability.

We spelled out the need to consider your overall financial situation, including income, non-housing debts, the interest you’ll pay on the new loan, and the down payment in calculating approximately how much house you can afford. 

Final Thoughts on How Much House You Can Afford

As you can see, there are many moving parts in determining how much house you can afford. That’s why we’ve spelled out all the factors involved in coming up with a reliable estimate of what you can afford.

Just remember that your current budget isn’t necessarily the upper limit. As discussed in the previous section, there are steps you can take that will help you to qualify for a higher-priced home.

The post How Much House Can I Afford? appeared first on Good Financial Cents®.

We’re going to discuss both the different types of mortgage loans and the various programs that offer them. However, this is a general discussion of the most popular types, since there are more less-popular loan types and even issuers.

The Different Types of Mortgage Programs

There are four primary mortgage programs available:

Conventional

Generally speaking, conventional mortgages refer to loans that are funded by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).

They’re typically originated by banks, credit unions, mortgage banks, mortgage companies, and other lenders, then sold to one of the two major mortgage agencies.

These loans are also typified by what’s known as their conforming loan limits. That is, there is a limit to the amount that can be loaned under a conventional program. That limit is generally $766,550 for 2024.

However, conventional loans can be higher for two- to four-family homes, and also for properties located in areas designated as high cost.

(These are the higher cost housing markets usually located on the East and West Coast, including New York City, Boston, Washington DC, San Francisco, and Los Angeles.)

Conventional mortgages are also distinguished from FHA and VA loans by the mortgage insurance requirement.

Commonly referred to as private mortgage insurance, or PMI, it is a type of insurance coverage that pays the mortgage lender part of the loan balance if you default on the loan.

Some of the Major Features of Conventional Mortgages Include the Following:

• The minimum down payment is 5%, but they do offer loans with as little as 3% down for first-time homebuyers as well as low- and moderate-income households.

• Unlike FHA and VA mortgages, PMI is only paid on a monthly basis as part of your loan payment. There is no required upfront mortgage insurance cost.

• The minimum credit score for conventional loans is 620, but you’ll get a better interest rate the higher your credit score is.

• Conventional loans can be used for the purchase of second homes and investment properties in addition to primary residences.

• Loans are available in both fixed-rate and ARMs.

FHA

FHA loans work much the same way as conventional loans, but the parameters are more basic. For example, the minimum down payment requirement is 3.50%, even for first-time homebuyers.

But the two main features of FHA loans, the ones that most differentiate them from conventional mortgages, are:

Mortgage insurance is collected in two ways. Much like conventional loans, there is a monthly premium added to your house payment.

But there’s also an upfront mortgage insurance premium (UFMIP) that’s added to your loan balance, though it can be paid out of pocket at the time of loan closing.

Other Features of Fha Loans to Be Aware of Include:

• Though the minimum down payment is 3.5%, FHA loans are commonly used in conjunction with down payment assistance programs that enable buyers to purchase homes with no down payment.

• While FHA is more accommodating to lower credit scores, the program should not be viewed as a subprime mortgage. You won’t be able to get a loan if you’re six months out of bankruptcy, or if you have a recent pattern of significant late payments.

• FHA loans are available for owner-occupied, primary residences only. They cannot be used to finance investment properties or second homes.

• Loans are available in both fixed-rate and ARMs.

VA Loans

VA loans have much more in common with FHA loans than they do with conventional loans. That’s because, much like FHA loans, VA loans have mortgage insurance provided by a government agency (the Veterans Administration).

Mortgage insurance is charged as a one-time, upfront fee, with no monthly premium added to your house payment.

The loans are provided by participating lenders, which can include banks, credit unions, and other mortgage lenders. They are available only to eligible veterans and current members of the US military.

However, the big advantage of VA loans is that they provide 100% financing. That means an eligible veteran can purchase a home with no money down. And while the mortgage insurance premium is charged upfront, it’s added to the loan amount, so there is no upfront cost.

The 100% loan provision applies to the conforming loan limit. But VA loans are also available for higher-priced properties if need be. However, the borrower will have to produce a down payment equal to 25% of the amount that the loan exceeds the conforming loan limit.

For example, if the loan exceeds the limit by $100,000, the borrower will be entitled to 100% financing on up to $548,250 but must front $25,000—25%—for the excess amount.

Basic Features of VA Loans Include the Following:

• The loans are available only to eligible current and former members of the US military and their families.

• Though there is an upfront mortgage insurance premium for the loans, there is no monthly premium payment required.

• Loans are available for financing only for owner-occupied primary residences. Much like FHA loans, they’re not available for investment properties or second homes.

• The VA has no established minimum credit score, but borrowers are expected to demonstrate responsible credit management.

Jumbo Loans

As the name implies, Jumbo loans are larger loans that exceed conforming loan limits. As such, they’re typically used to purchase or refinance higher-priced properties. Loan amounts can be as high as several million dollars.

Jumbo loans have more in common with conventional loans than they do with FHA and VA loans. But unlike conventional loans, which are funded by Fannie Mae and Freddie Mac, Jumbo loans are provided by independent lenders, like banks.

Because they are, lending guidelines are less standardized than they are with other loan programs. In general, they have stricter loan requirements.

Basic Features of Jumbo Loans Include the Following:

• Loan amounts can range from just above the conforming loan limit to as much as several million dollars.

• Loans may be available for second homes and investment properties, but a lender may also restrict them only to owner-occupied primary residences.

• They generally need good or excellent credit to qualify. Minimum credit scores can be anywhere from 650 to more than 700.

• The typical down payment requirement is at least 20%. And you can expect that percentage to increase on higher loan amounts.

• Because they are larger loan amounts, interest rates charged on Jumbo mortgages are typically higher than what they are on other loan types.

Fixed-Rate vs Adjustable Rate Mortgages (ARMs)

Fixed-rate and ARMs are the two primary types of mortgage loans offered under the four main mortgage programs (conventional, FHA, VA, and Jumbo). While they’re both offered by FHA and VA, most borrowers choosing one of these loan programs opt for a fixed-rate loan.

However, the same is not true with both conventional and Jumbo loans. ARM loans are somewhat more popular with each of these loan types. This is especially true of Jumbo loans, which cater to higher-income borrowers who are often interested in getting the lowest interest rate possible.

Overall, however, ARM loans tend to be fairly rare these days. According to information released by Bankrate in 2023, ARMs comprise less than 18.6% of mortgages made in 2023. This is due to the recent phenomenon in which ARM loans are only slightly lower than fixed rates.

In addition, with fixed rates at record lows, it makes sense for most borrowers to lock in those rates rather than taking a chance on still lower rates with ARMs.

A fixed-rate loan is exactly what the name implies. Both the interest rate and the monthly payment are fixed for the life of the loan. Loan terms range between 10 and 30 years.

At the end of the loan term, the principal of the loan will be fully repaid. That will be true in the case of both a fixed-rate loan and an ARM.

ARMs

ARMs offer a fixed interest rate for a specific amount of time. Typical initial terms are three years, five years, seven years, and 10 years. After the initial fixed-rate period, the loan will become a one-year adjustable, with the rate changing nearly every year.

Interest rates on ARMs are based on a common index, such as the one-year US Treasury bill, or the six-month LIBOR. The lender will then add a margin (percentage points) to the index to produce the interest rate that future rate changes will be based on.

For example, if the yield on one-year US Treasury bills is 1.00% at the time of adjustment, and the margin is 1.50%, your interest rate will reset at 2.5%. That rate will be good for one year and will be readjusted using the same formula as the date of the next adjustment.

ARM Interest Rate Cap Limits

Fortunately, ARMs have rate caps that limit how high the rate can go on any single adjustment, or even over the life of the loan.

A common cap structure is 5/2/5. Each number represents the maximum percentage by which the fully indexed rate (index plus margin) can adjust at the time of adjustment.

The first number means the rate cannot increase by more than 5% above your original interest rate for the initial rate change. If your original rate is 2.50%, the most the lender can increase it to is 7.50%.

The second number (2, or 2%), is the most the rate can change on subsequent adjustments. If your initial rate is 2.50%, and it increases to 3.50% at the first adjustment but then jumps to 7.5% on the second adjustment, the highest rate you’ll pay is 5.50%. That’s the 3.50% rate, plus 2%.

The third number in the sequence represents the most the interest rate can increase over the life of the loan. In the example above, that’s 5%. That means if your initial rate is 2.50%, the highest rate you can be charged over the life of the loan is 7.50%, regardless of how high-interest rates go.

If you’re interested in taking an ARM, be sure to familiarize yourself with the interest rate caps associated with the loan. The lender must disclose this to you at the time of application, but it will also be included in the closing documents.

Make it a point to request the documents that specifically indicate the cap arrangement on your ARM before signing any paperwork. Once the loan closes, the cap structure cannot be changed.

When Should You Use a Fixed-Rate Mortgage Over Other Types?

Fixed-rate loans are typically the better choice when you plan to stay in the home for many years. If you expect the current home to be your “forever home,” or you expect to be there for at least 10 years, a fixed-rate mortgage is usually the best option.

It will provide rate and payment protection regardless of what’s happening with interest rates. And should rates drop after you take your loan, you can always refinance to get the benefit of a lower rate.

A fixed-rate mortgage is also strongly advised if you want to minimize homeownership risk. An inherent disadvantage of ARMs is that rates can rise, perhaps enough to threaten your ability to remain in the home. If this is a concern you have, choose a fixed-rate mortgage.

Along the same line, fixed-rate mortgages are generally a better choice for first-time homebuyers. They provide greater predictability and eliminate a potential interest rate shock that comes with ARMs.

However, given that interest rates are currently at historic lows, it makes abundant sense to lock in a fixed rate now. Though it’s always possible interest rates will go even lower in the future, it’s hardly guaranteed.

And whenever anything is at a historic low, the likelihood of further declines is much less likely to happen.

When Should You Use an ARM?

An ARM is best used when you expect to stay in your home for no longer than the fixed-rate term of the loan. For example, if you expect to live in a home for the next five years, you may be comfortable with a 5-year ARM. It’s likely you’ll move out of the home before the first interest rate adjustment hits.

Of course, the single biggest reason for taking an ARM at all is because of an interest-rate advantage. For example, if an ARM carried an interest rate a full two percentage points below that of a fixed-rate loan, the savings in the initial years might justify the risk of rate adjustment.

Unfortunately, the rate spread between ARMs and fixed-rate mortgages is nowhere near that high. That largely explains why ARMs now represent a very small percentage of all mortgages taken.

Where to Get the Right Mortgage Type

There are plenty of institutions where you can get a mortgage, whether conventional, FHA, VA, or Jumbo. But if you don’t have a favorite bank or credit union, the big national mortgage lenders are an excellent choice.

Rocket Mortgage is the online face of Quicken Loans, the largest retail mortgage lender in the country. They provide all types of mortgage loans, but they operate entirely online, streamlining and speeding up the application process.

loanDepot is also a nationwide lender, offering conventional, Jumbo, FHA, and VA loans. Similar to Rocket Mortgage, they offer an all-online application to speed up the loan application process.

Veterans United is the go-to choice for veterans and active-duty military personnel looking for VA mortgages.

As the largest VA mortgage lender in the country, they specialize in the loan type and even offer a network of VA-friendly real estate agents to help you find a home and navigate the closing process.

Credible is an online mortgage marketplace that provides an opportunity to get rate quotes from several lenders.

In a matter of minutes, you’ll complete a brief online application and receive multiple quotes to choose from. That will eliminate the need to get quotes from individual lenders one at a time.

The Bottom Line on the 4 Main Mortgage Types for Every Buyer

Selecting the right mortgage involves understanding the pros and cons of different types. Conventional loans, funded by Fannie Mae and Freddie Mac, offer various terms and down payment options but require private mortgage insurance (PMI).

FHA loans, backed by the Federal Housing Administration, cater to lower credit scores, have lower down payments, and include mortgage insurance premium (MIP). 

VA loans, designed for veterans, offer 100% financing, no monthly mortgage insurance, and flexible credit standards. Jumbo loans suit high-value properties but need excellent credit and larger down payments.

Fixed-rate mortgages ensure stability, while Adjustable Rate Mortgages (ARMs) offer initial low rates with potential future adjustments.

The post The 4 Main Mortgage Types for Every Buyer appeared first on Good Financial Cents®.

Most of the top lenders also make it easy to shop around and compare mortgage rates online and from the comfort of your home, and many specialize in mortgage loan products that help first-time buyers ease their way into homeownership. 

If you’re shopping for a new home or you need to refinance the mortgage for a property you already own, you should find out which mortgage lenders offer the best loans and terms.

Keep reading to find out which lenders beat out the others to get on our list of the best mortgage lenders for 2024. 

Our Picks for Best Mortgage Lenders of March 2024

• Quicken Loans (Rocket Mortgage) – Best Overall
• Better – Best for Streamlined Process
• North American Savings Bank (NASB) – Best for First-Time Homebuyers
• Veterans United Home Loans – Best for VA Loans
• Citibank Mortgage – Best for Citibank Customers
• NBKC Bank – Best for Subsidized Loans

Best Mortgage Lenders – Company Reviews

Quicken Loans (Rocket Mortgage) – Best Overall

Founded in 1985, Quicken Loans has grown to become one of the largest mortgage originators in the United States. Be aware that the company officially changed its name to Rocket Mortgage in 2021, so both names are used interchangeably.

Either way, Quicken Loans (Rocket Mortgage) offers a wide variety of home loans of all sizes, and they specialize in both purchase loans and home refinancing products. They’re authorized for VA mortgage lending and other federal loan programs, jumbo mortgages, and adjustable or fixed-rate plans.

The Quicken Loans website makes it easy to find out what kind of loan fits your needs, how much you can qualify for, and what kind of interest rate you’ll pay. However, you can also call in to speak with a customer service representative who can answer your questions and give personalized mortgage advice. 

The best part? Borrowers can complete the entire mortgage process online from start to finish. Quicken Loans (Rocket Mortgage) also earned the top spot in J.D. Power’s 2023 U.S. Primary Mortgage Origination Satisfaction Study.

Better – Best for Streamlined Process

Better was originally founded in 2014, and the company stands out from the crowd as a modern solution to a complicated process. The entire mortgage process is completed online when you choose Better, so you don’t have to work with a mortgage representative or visit an office in person. 

While Better doesn’t offer some products, such as HELOCS or VA loans, its rates are quite low, thanks to investor-matching technology. Further, Better received above-average customer satisfaction scores from J.D. Power. Finally, it also has an average star rating of 4.13 out of 5 stars among more than 1,100 customer reviews shared with the BBB.

North American Savings Bank (NASB) – Best for First-Time Homebuyers

North American Savings Bank (NASB) was originally founded in 1927, and the company maintains its headquarters in Kansas City, Missouri. They have since grown to become a major provider of various home loan products, including VA loans for eligible military members and veterans.

NASB offers several mortgage assistant programs geared to first-time homebuyers as well, including a program called Home Buying Advantage and a Zero Down Home Loan Program. The company also offers a seamless online mortgage process with the option to monitor your loan through an online dashboard and upload your required documents through their portal.

Once you negotiate a successful offer on a home you want to buy, North American Savings Bank even offers personalized counseling to help guide you through the process.

Veterans United Home Loans – Best for VA Loans

Veterans United Home Loans is a highly rated mortgage company that focuses on VA home loans, which are only available to veterans, certain active-duty military, and qualifying spouses. These loans let you qualify for some of the lowest mortgage rates available today with easy qualification requirements. Borrowers can use their VA home loan benefit to purchase a home or to refinance into a home loan with better rates and terms.

Veterans United also boasts some of the best rankings of all mortgage companies in J.D. Power’s 2022 U.S. Primary Mortgage Origination Satisfaction Study.

In fact, it scored 905/1,000 possible points, earning the second spot only behind USAA. Veterans United also boasts an average star rating of 4.82 out of 5 stars across more than 1,900 reviews shared with the BBB, where the company is accredited with an A+ rating.

Citibank Mortgage – Best for Citibank Customers

Citibank is known for its checking and savings accounts as well as its top credit card offers, but this bank also offers a variety of mortgage products. Not only does it offer purchase loans for buyers who are looking for a new home, but it also offers refinance loans for homeowners who want to trade their mortgage for a new one with better terms.

The company lets customers manage the bulk of their mortgage process online, even making it possible to qualify for a $500 credit at their mortgage closing. It also promises fast pre-approval with its SureStart® program, which can help you secure a deal on a home when you make an offer.

Citibank also offers periodic promotions for its mortgage products, which may include a specific amount of your closing costs and lower interest rates for existing Citi customers.

Overall, Citibank is worth exploring — particularly if you bank with it already.

NBKC Bank – Best for Subsidized Loans

NBKC was originally founded in 1999 as the National Bank of Kansas City, yet the company has changed its focus to online banking since its early days. The bank currently focuses on subsidized loans, plus VA loans for military members, veterans, and eligible family members.

While in-person customer service is available only in Kansas and Missouri, the bank’s phone support makes its services available to customers in all 50 states. NBKC also promises a fully online mortgage application process, although you may need to speak with an agent to get a rate quote based on your home’s value and where you live.

Finally, it’s worth noting that NBKC has an average star rating of 4.85 stars out of 5 across more than 1,400 user reviews with the BBB. The company is also accredited by said agency, and they have an A+ rating to boot.

Mortgage Loan Guide

As you take the time to compare the best mortgage lenders, it’s smart to learn as much as you can about the application process, the different lenders, and your various loan options. Read on to learn more about mortgage products and how they work.

How Do Mortgages Work?

When consumers take out a mortgage, they borrow a specific amount of money and agree to pay it back over time. Generally speaking, buyers need to have a down payment to purchase a home, and they’ll be charged an interest rate on their mortgage that’s based on an annual percentage rate (APR).

The mortgage loan is backed by the equity in the home they’re purchasing, so borrowers can lose their home to foreclosure if they fail to keep up with their monthly payments. That said, homeowners also build equity in their homes as they make payments over time, and they will own their property outright once the final mortgage payment is made.

Mortgages come in many different forms and may include fixed-rate mortgages, adjustable-rate mortgages, and other home loans geared to veterans and first-time homebuyers. 

Types of Mortgage Loans

There are many different loan products for potential homeowners, with some geared specifically to certain types of homebuyers. The main loan options available for a home purchase or refinance are highlighted below:

• Conventional Home Loans: Conventional home loans are the most common type of mortgage, and they are geared toward consumers with good credit and a down payment of at least 3%.
• Fixed-Rate Mortgages: Fixed-rate mortgages offer borrowers a fixed interest rate, fixed monthly payment (principal and interest), and a fixed repayment timeline that usually lasts 15 to 30 years.
• Adjustable-Rate Mortgages (ARM): ARMs are 30-year home loans that come with interest rates that can change with market conditions. With a 5/1 ARM, for example, you pay a competitive fixed interest rate for the first five years, followed by an interest rate that adjusts with market conditions.
• FHA Loans: Federal Housing Administration home loans let borrowers get a mortgage with easy credit qualifications, low closing costs, and a down payment as low as 3.5%.
• VA Loans: Veteran’s Authority home loans are only for eligible military members, and they come with no down payment requirement, competitive rates, low closing costs, and no requirement for private mortgage insurance (PMI).
• USDA Loans: United States Department of Agriculture loans are insured by the United States Department of Agriculture, and they help eligible borrowers purchase homes with no money down in specific rural areas.
• Jumbo Loans: Jumbo loans are mortgages that are for higher amounts than conforming loan standards in your area. In most parts of the country, the 2024 conforming loan limits are set at $766,550 for one-unit properties.

How to Apply for a Mortgage

Whether you’re buying a home or hoping to refinance a mortgage you already have, there are several steps required to move through the process. Once you check your credit score and confirm you can get approved for a mortgage, follow the steps below to apply.

• Step 1: Research Mortgages to Find the Right Type. The first step in the process is figuring out the type of home loan you want, as well as which type you can qualify for. While you can research on your own, speaking with a mortgage expert to find out which type of loan is suited to your needs can help. 
• Step 2: Compare Multiple Lenders. Once you decide on the type of home loan you want, you should take the time to compare multiple mortgage companies and lender offers. Not only should you read over user reviews and rankings, but you should also compare lenders based on their advertised interest rates and loan fees.
• Step 3: Get Pre-Approved. Next up, take the time to get pre-approved for a mortgage. This step can be completed entirely online, although you’ll need to provide some information, such as your employment history, your income, and your credit score. 
• Step 4: Start Shopping for a Home. Once you’re pre-approved for a mortgage, make sure you have a preapproval letter handy as you begin shopping for a home. This letter should clearly state the loan amount you’re pre-approved for, and it can help you stand out from other buyers when you’re making an offer on a home.

How to Get the Best Mortgage Loan Rates

Several steps can help you qualify for the best mortgage rates and loan terms, including the following:

• Improve Your Credit Score: If you are able to improve your credit score so it falls into the “good” range or better, you’ll be in the best position to qualify for competitive mortgage rates. Having good credit typically means having a FICO score of 670 or higher.
• Pay Down Debt: Paying off unsecured debts can help lower your debt-to-income ratio, which is a major factor involved in qualifying for a mortgage.
• Compare Multiple Lenders: Shopping around with more than one lender is one of the best ways to find the best rates. If you want to save time, consider comparing mortgage rates with a comparison site like LowerMyBills.com.
• Shorten Your Loan Term: Generally speaking, you’ll qualify for lower mortgage rates if you choose a shorter loan term, such as a 15-year fixed-rate mortgage instead of a 30-year home loan.
• Pay Discount Points: In some cases, you may be able to pay discount points that let you lock in a better mortgage rate. These points require a flat upfront fee, and each point can lower your mortgage rate by 0.25% on average.

How We Found the Best Mortgage Lenders

To find the best mortgage lenders of 2024, we compared companies based on features such as their online functionality, customer service options, and third-party ratings from organizations such as J.D. Power and the Better Business Bureau. We also looked for mortgage companies that offer several loan options, including conventional mortgages, VA loans, FHA loans, and more. 

Last but not least, we sought out lenders that offer competitive interest rates and loan terms, as well as those that are upfront and transparent about their fees and processes.

Summary of the Best Mortgage Lenders of 2024

• Quicken Loans (Rocket Mortgage) – Best Overall
• Better – Best for Streamlined Process
• North American Savings Bank (NASB) – Best for First-Time Homebuyers
• Veterans United Home Loans – Best for VA Loans
• Citibank Mortgage – Best for Citibank Customers
• NBKC Bank – Best for Subsidized Loans

The post Best Mortgage Lenders for 2024 – 6 Picks appeared first on Good Financial Cents®.

Then again, I trusted my wife’s judgment so much that I was willing to become a first-time homeowner – even from the other side of the world. Even though we didn’t have a huge down payment, we had several factors working in our favor.

First, we qualified for a VA home loan, which is a type of mortgage that offers looser credit requirements and is backed by the federal government. Because my active military status helped us qualify for this perk, we were able to avoid paying PMI or private mortgage insurance.

Also, our VA home loan allowed us the flexibility to put down a much smaller down payment than we would have otherwise. Lastly, we were entirely debt-free when we became homeowners for the first time.

Since we were taking on the burden of a mortgage, home maintenance, and upkeep for the first time, not having any other debts was a huge bonus in my eyes. When all was said and done, I returned home from Iraq as a first-time homeowner.  As if returning home from a war zone to a wife I loved wasn’t rewarding enough, I returned to a house I actually owned!

What Do I Need to Buy My First Home?

Buying a home is as exciting as it gets, but there are plenty of financial details to consider before you take that first step. First and foremost, you’ll want to make sure your credit is in tip-top shape. By and large, the best interest rates and loan terms go to individuals with good credit. Generally speaking, “good credit” is any FICO score that is 720 or higher.

Once you figure out whether or not your credit needs improvement, you’ll also want to make sure you can truly afford a home and all the upkeep that comes with it. After all, your mortgage isn’t the only new expense you’ll have when you become a homeowner.

Beyond your house payment, you’ll also need to pay for utilities, taxes, homeowner’s insurance, major component replacements, and repairs.

While this percentage may vary some between lenders, most will only loan you money if your total debts – including your mortgage – encompass less than 36 percent of your gross income.

If your family’s gross household income is $100,000 this year, for example, your lender will want you to keep your total debts – including your mortgage and housing costs – under $36,000, or $3,000 per month.

Make sure to keep your debt-to-income ratio in mind as you start saving for your first home. If you’re carrying quite a bit of debt already, you should seriously consider paying it down as you save up your down payment.

Not only will paying off debt give you more wiggle room in your budget, but it may also allow you the flexibility to buy a larger or nicer home.

Related:

• How Much of a House Payment Can You Really Afford?

8 Ways to Save Up for a Downpayment on Your House

Once you have assessed your credit and have your debt situation squared away, one more major hurdle stands between you and your home purchase.

That’s right; it’s your down payment – or the amount of money you “put down” when you purchase your home.

This figure is crucial for a few reasons; first, putting at least 20 percent down on your new home can help you avoid paying private mortgage insurance, or PMI. Second, saving up a large down payment can help you secure a better loan with a lower interest rate. And third, saving up a large down payment makes it easier to afford a house you truly want instead of being forced to settle.

No matter how you cut it, your down payment is more important than many people realize.

And if you hope to become a homeowner in the near future, you would be wise to start saving right away. Want to get started? Here are eight tips that can help you build an epic down payment for your new home:

#1: Figure Out How Much House You Can Actually Afford

First things first. Before you start saving up for a down payment, it helps to know how much house you can actually afford – and how much you need to save. Most of the time, a housing affordability calculator can help with the first part.

By entering details regarding your personal income and debts, you can usually get a general idea of how much you might be able to spend on a home. Once you have a price range to shoot for, it’s fairly easy to figure out a savings goal.

If you hope to save at least 20 percent to avoid paying PMI, which you should, you’ll simply multiply your desired home purchase price by .20.

A $200,000 home multiplied by .20 will leave you with $40,000, which is the down payment you’ll want to shoot for. If you expect to save less, that’s perfectly okay. Shooting for 20 percent is a dream goal, but it’s just not feasible for everyone.

#2: Start a Targeted Savings Account

Once you have an idea of how much you need to save, you should start a targeted savings account that will keep your new housing fund separate from the rest of your savings. By keeping it separate, you’ll ensure your earmarked savings don’t accidentally get spent on something else.

And since you’re saving to hit a specific monetary goal, having those funds separate makes it a lot easier to monitor your progress.

When it comes to savings accounts, the best options are almost always online. Not only can you usually get higher interest rates with an online account, but you can transfer money quickly and easily with the touch of a mouse.

Related:

• Top 8 Best High-Yield Online Savings Accounts

#3: Make Savings Automatic

If you’re worried you’ll get distracted and forget to save, you might want to make your savings automatic. By setting up automatic bank withdrawals or deposits, you allow the bank to take on the bulk of the work for you.

One strategy to consider is having your bank transfer a certain dollar amount from your primary checking to a targeted savings account every payday or on the first or last day of the month.

By having the bank do this automatically each month, you’ll never have to worry about it again.

Related:

• The Best Free Online Budgeting Tools

#4: Save up Windfalls and Raises

While saving money from each paycheck can help you reach your goal in time, adding more money to the pile will help you get there even faster. If you get windfalls, bonuses, or raises at work frequently, make sure these “extra” sums of money don’t go to waste.

Instead of spending your tax refund on a new toy or a vacation, have it transferred to your down payment fund right away.

The same thing should be done with any end-of-the-year bonuses you get at work or other windfalls you might receive. By moving that money “out of sight and out of mind,” you can save it for a time when it really matters.

#5: Use a Cashback Credit Card to Rack up Rewards, Then Stash Them Away in Savings

If you don’t have a cashback credit card already, now may be the perfect time to get one. Across many different card types, some cashback cards offer between 1 – 5 percent cash back on every purchase you make.

By getting a cashback credit card, you’ll earn cashback for every dollar you spend on groceries, utility bills, and household expenses. If you let those rewards rack up over time, you could easily earn hundreds – or even thousands – of dollars towards the down payment on your new home.

Of course, this strategy isn’t for everyone. If you have no trouble paying off your credit card balance each month and avoid credit card interest like the plague, getting a cashback card can be a smart move. But if you have struggled with debt in the past, you should continue avoiding credit altogether.

#6: Open a Certificate of Deposit (CD) or Money Market Account.

If you’re not thrilled with the amount of interest you’re earning in an online savings account or simply want another way to beef up your savings, you can also consider opening a Certificate of Deposit (CD) or Money Market account. With both options, you’ll earn slightly more interest than you would in a traditional savings account, but with very little risk.

Generally speaking, Certificates of Deposit, or CDs, require you to put your money on deposit for a specific length of time in return for a predetermined interest rate or payout. If you know exactly how much you need to save and how long you plan to save for your home, a CD might be a smart bet.

A Money Market account can offer more flexibility since you aren’t required to commit your funds for a specific length of time. On the other hand, you may not earn as much interest as you would with a Certificate of Deposit (CD).

As an aside, you can sign up for a money market account with several excellent online brokers, including TD Ameritrade and E*Trade.

Related:

• 11 Best Low-Risk Investments for High Returns

#7: Go After Bank Bonuses

If you think credit card rewards are easy to earn, you’ll love bank bonuses. Depending on the bank you open an account with, you might earn several hundred dollars just for signing up and meeting certain requirements.

To earn some bank signup bonuses, you’ll need to keep a certain amount of money on deposit for a specific length of time. To earn others, you’ll need to set up a direct deposit each month instead.

Either way, it’s crucial to understand all of the requirements for any bank bonus before you sign up. If you misread the fine print or don’t follow directions, you could miss out on your bank bonus altogether.

#8: Cut Your Spending to Save Even More

If you’re having trouble saving up your down payment, I’ve got one final piece of advice to offer: Cut your spending!

There are times when getting what you want requires some sacrifice, and this might be one of those times. If you can’t seem to save enough to get ahead, you must look for ways to reduce your spending and consumption.

This part may not be fun, but it will help you reach your goal of becoming a homeowner. To start things off, look for the easy ways and “low-hanging fruit” to cut from your monthly budget.

If you’re eating out at restaurants several times per week, for example, stop. If you’re paying a few hundred bucks for your smartphone package, switch plans, for goodness sake. If you’re withdrawing cash to spend each month and have no idea where it goes, make sure to stay away from the ATM altogether.

We all have our own budget drains to deal with, and dealing with yours is one of the best ways to save more money in the long run. So, sit down with your budget and brace yourself for a few painful cuts. It might hurt at first, but it will be worth it in the long run.

Final Thoughts

Buying a house can be absolutely life-changing, but it will be even more rewarding if you have your financial ducks in a row first. Beyond having good credit and keeping your debt at a minimum, a huge down payment for your first home will make life easier.

And the earlier you start saving, the better off you’ll be.

How much did you put down on your first home? Did you have to pay PMI, or did you avoid it?

The post 8 Ways to Save Up the Down Payment for a House appeared first on Good Financial Cents®.

Most lenders don’t do many VA loans, and some do none at all. Since VA loans are a highly specialized mortgage type, it’s best to go with lenders who focus mostly or even entirely on this loan type.

To help you with the decision, we’ve prepared this guide listing what we believe to be the best VA home loans of 2024. We’ll cover each lender, then provide you with a thorough understanding of VA home loans and how they work.

Before we go any deeper, you can scan the comparison table below to get a quick overview of the eight best VA loan lenders of 2024:

Our Picks for the Best VA Loan Lenders March 2024

We’re not going to keep you waiting – below is our list of what we believe to be the best VA home loans of 2024, and what we believe each is best for:

• Veterans United: Best Overall
• USAA: Best for Lowest Rates
• Quicken Loans: Best Online Lender
• PenFed Credit Union: Best for No Lender Fees
• Navy Federal Credit Union: Best for First-Time Homebuyers
• LendingTree: Best Online Mortgage Marketplace
• Wells Fargo: Best Mortgage and Banking in One Place
• loanDepot: Best for Other Mortgage Options

Best VA Loan Lenders – Company Reviews

Below are summary reviews of each of the eight best VA home loans for 2024. Under each summary review is a link to our full review of each particular lender. Feel free to click through if you’d like more information before making a decision on which VA lender to use.

Veterans United takes our top honors as the best overall VA mortgage lender. It’s easy to see why. It’s the largest VA mortgage lender in the country and one that specializes entirely in working with veterans.

For example, the company works with senior members of all branches of the US military, including the Army, Navy, Air Force, and Marine Corps, to help them stay on top of developments affecting veterans. They also offer their Veterans United Lighthouse program.

Not only does it help veterans build and improve their credit, but it also provides a network of real estate agents nationwide who are knowledgeable in VA home purchases.

Why We Like Veterans United: Having the status of the largest VA mortgage lender in the country means veterans are trusting their home financing needs to Veterans United more than any other lender. We also like that the company focuses entirely on VA loans, so they aren’t distracted by other loan programs.

See Our Full Veterans United Review

USAA tends to be on the low end of the interest rate spectrum with VA loans. But there’s a lot more to USAA than just VA loans. It’s a full-service financial provider offering a wealth of financial services designed specifically for veterans. In addition to banking, insurance, and investments, the company specializes in auto insurance, where it consistently ranks at the top of the list for the entire industry.

USAA provides the full range of VA loans, including fixed and adjustable-rate mortgages, as well as jumbo loans. Meanwhile, their USAA Home Learning Center will help educate veterans on the many details of the mortgage lending process.

Why We Like USAA: Not only does USAA provide low rates, but they also offer a wide variety of financial services for veterans. That includes banking, insurance, and investments.

See Our Full USAA Review

Though it’s not widely known, Quicken Loans is the largest retail mortgage lender in the entire country. But mortgage financing is offered through their online lending portal, Rocket Mortgage. It provides a full range of mortgage products, including conventional and FHA loans, in addition to VA loans. That’s important because if a VA loan is not the best option, Quicken Loans can present alternatives.

Quicken Loans gets our vote as the best online VA mortgage lender. That’s because the entire lending process takes place online, so you can apply and track your progress from the comfort of your home or place of employment. You can also upload most of the required documentation needed for the mortgage application process, right on the website.

Why We Like Quicken Loans: The company website indicates Quicken Loans will accept a debt-to-income ratio (DTI) as high as 60%. This is well above the normal maximum of 43%.

See Our Full Quicken Loans Review

With PenFed Credit Union, short for Pentagon Federal Credit Union, it should be obvious that this lender has a strong orientation toward VA loans. In fact, it mainly provides services for those employed by the US government and its agencies. In addition to mortgages, they also provide auto loans and credit cards. PenFed also offers FHA loans, in case that might be a better choice than a VA loan.

Why We Like PenFed Credit Union: PenFed charges no lender fees, like origination or application fees. The only closing costs you’ll pay will be those charged by third parties, like attorneys, appraisers, and title companies. The credit union also provides up to $2,500 in lender credits, which can be used toward third-party closing costs and other expenses.

See Our Full PenFed Credit Union Review

Navy Federal Credit Union is the largest credit union in the United States, and by a very wide margin. And although the name includes “Navy,” they welcome members of all other branches of the US Armed Forces. At the credit union, you can take advantage of banking services, like deposit accounts, auto loans, and credit cards, in addition to home mortgages.

Navy Federal also provides conventional and FHA loans, in addition to VA loans.

Why We Like Navy Federal Credit Union: The fact that this lender is a credit union, and one that caters to military families, makes it a top choice for first-time homebuyers.

See Our Full Navy Federal Credit Union Review

LendingTree is an online loan marketplace, where dozens of lenders offer their loan programs to consumers. Not only does it include mortgages, but you can also find car loans, credit cards, personal loans, and other financial products on the platform. LendingTree is not a direct lender, but the website is free to use.

Of course, the advantage of shopping on an online marketplace is that you can also consider other financing options. In addition to VA loans, participating lenders also offer conventional and FHA loans.

Why We Like LendingTree: It’s an excellent choice for anyone who is primarily shopping for the lowest mortgage rate. By completing a simple online loan application, you’ll get offers from multiple lenders. You can then choose the lender that offers the best combination of rates and terms.

See Our Full LendingTree Review

Wells Fargo is not only one of the largest mortgage lenders in the country but also one of the very biggest commercial banks. That means you can enjoy full-service banking, including checking, savings, CDs, access to a wide variety of loan programs, and even small business banking – with the same company you get your mortgage from.

Wells Fargo provides all types of mortgage financing, including conventional and FHA loans, as well as VA mortgages. And as a bank, they also offer secondary financing, including home equity loans and home equity lines of credit (HELOCs). Eligible VA borrowers should also be aware that Wells Fargo does not charge an origination fee on VA loans.

Why We Like Wells Fargo: Full-service bank that can accommodate all your financial needs, including small business banking if you are self-employed.

See Our Full Wells Fargo Review

loanDepot is a direct lender that, much like Quicken Loans, operates entirely online. That will make for an easy and convenient loan process, including the ability to upload required supporting documentation, right on the website.

loanDept is a direct lender, so you can be confident you will be working with them through the entire mortgage process. The company operates in all 50 states, as well as Washington, DC. Though it’s not as well-known as some of the other lenders on this list, it’s actually the fifth-largest mortgage lender in the country.

Why We Like loanDepot: They offer the full range of mortgage financing products, including conventional and FHA loans, as well as secondary financing options, in addition to VA mortgages.

See Our Full loanDepot Review

VA Home Loan Guide

How Does a VA Loan Work?

In most respects, VA loans work like any other type of mortgage, including conventional and FHA loans. The main difference is that you must be an eligible veteran or an active-duty member of the US military to qualify for a VA loan.

You should also be aware that VA loans are only available for owner-occupied, primary residences. If you want to purchase a vacation home or rental property, you’ll need to consider a conventional loan instead.

Probably the biggest advantage of VA loans is that they provide 100% financing. Not only will that eliminate the need for a down payment, but also for a second mortgage or a home equity line of credit (HELOC).

Though HELOCs have become common for homeowners, it’s always best to understand the pros and cons of a HELOC. Though they have definite advantages, there are certain risks. Either way, they’re usually not necessary if you qualify for a VA loan.

VA loans are available for both purchases and refinances. Rates and fees are lower when you do an Interest Rate Reduction Refinance Loan (IRRRL), as opposed to a cash-out refinance. It’s important to understand when to refinance, then to work with the best mortgage refinance companies for VA loans.

Because of the 100% financing factor, refinances can be more complicated with VA loans than with conventional loans.

Whether you are purchasing or refinancing, it’s important to know how to get the best VA loan rates. Under “How to Qualify for a VA Loan” below, we’ll go over the factors that will affect the rate you’ll pay.

What Is the VA Funding Fee?

When you make a down payment of less than 20% using a conventional mortgage, you’ll be required to pay what’s known as private mortgage insurance, or PMI. This is an insurance policy, you as the homeowner, are required to purchase to partially compensate the mortgage lender should you default on the loan.

VA mortgages do not use PMI. Instead, they have what is referred to as the VA funding fee. This is a fee collected by the Veterans Administration, which will partially compensate lenders for borrower default on the loan. This is especially important with VA loans since they involve 100% financing.

The VA funding fee is paid at the time of closing. If it isn’t paid by the property seller, lender, or a gift from a family member of the borrower, it will be added to the loan amount. This is the most common scenario.

For example, on most purchases, the funding fee will be 2.3%. If the loan amount is $300,000, the amount owed will be $306,900, with the VA funding fee added to the principal amount of the loan. The borrower will then effectively pay the funding fee over the life of the mortgage.

There are various rates that apply to the VA funding fee. Those rates are as follows for 2024:

The VA funding fee is different for refinances. If you are doing an Interest Rate Reduction Refinancing Loan (IRRRL), in which you are refinancing only to lower the interest rate and payment on your loan, the fee is 0.5%.

If you are doing a refinance and taking cash out with the loan, the VA funding fee will be 3.6%.

Just for comparison’s sake, conventional mortgages charge monthly mortgage insurance premiums, which VA loans don’t have. FHA loans have both upfront and monthly premiums.

If you do have to add the VA funding fee to your loan amount, think of it as one of the costs of owning a home. When it comes to VA loans, the funding fee is a big reason why you’ll qualify for the loan.

Pros and Cons of a VA loan

What Is the VA Loan Limit?

For 2024, the standard maximum VA loan amount is $766,550 for a single-family property. However, in areas designated as “high cost,” the maximum loan amount can be as high as $970,800. The maximum limits are higher for owner-occupied homes with 2-4 living units in them.

But even if you want to purchase a home for more than the standard maximum, you can do so using the VA Jumbo program. That’s a program that enables you to buy a higher-priced home, but it will require you to make a partial down payment.

It works like this: Let’s say you want to purchase a home for $926,200. That’s $200,000 above the standard maximum loan limit.

If you only needed to borrow the maximum of $766,550, you could do so with no down payment whatsoever. But under the VA Jumbo Loan Program, you’ll be required to make a down payment equal to 25% of the amount by which the loan exceeds the standard maximum.

Since the property you are purchasing is priced $200,000 over the standard maximum limit, you’ll need to make a down payment equal to $50,000, which is 25% of $200,000.

That may seem like a big chunk of money. But $50,000 represents a down payment of just under 6% on a home worth $926,200.

That’s an outstanding deal since conventional Jumbo loans typically require a 20% down payment.

How to Qualify for a VA Loan?

To be eligible for a VA loan, you must be either an active-duty member of the US military or an eligible veteran. Eligibility is determined by acquiring a VA Certificate of Eligibility (COE). You may have received this certificate upon discharge from the military, but don’t worry if you didn’t. Your mortgage lender will assist you in obtaining the certificate.

Whether you are a veteran or currently on active duty, there are specific requirements for that eligibility based on when you served and for how long. Eligibility will not be granted if you were dishonorably discharged.

Apart from VA eligibility, you can qualify for a VA loan the same way you would with any other mortgage program. While the following information will help you understand the process, it’s best to let a lender show you how to get approved for a home loan.

Other Considerations Your Lender Will Look At

Credit

The Veterans Administration does not set a specific minimum credit score, but rather leaves it up to individual lenders. Most lenders set the minimum score at 620, though some will go lower. The lender will also consider individual components of your credit, such as any history of bankruptcy, foreclosure, or serious delinquencies.

Just as is the case with other types of mortgages, your credit will have a strong impact on the rate you’ll pay on your loan. Be sure to check current mortgage rates based on your current credit score.

Employment

Lenders will generally look for a continuous employment history of at least two years. Military service or college can partially or entirely satisfy this requirement, as long as you have the promise of employment in a job related to your military or college experience.

Debt Ratio

VA generally prefers your total fixed obligations, including both the new housing payment and any recurring debt payments, to be within 43% of your stable monthly income. However, lenders will sometimes go higher if you have compensating factors, like a down payment, cash reserves after closing, or excellent credit.Your debt ratio will be a major factor in answering the question, How much house can I afford?

Your debt ratio will be a major factor in answering the question, How much house can I afford?

Down Payment

Since VA loans are famous for providing 100% financing, a down payment is typically not required.

Closing Costs

These can be paid by the borrower, but also by the seller, the lender, or a gift from a family member.

Types of VA Loans Available

VA loans are available in three basic types, fixed-rate, adjustable-rate (ARM), and Jumbo loans.

Fixed-Rate

These are mortgages with terms ranging from 15 years to 30 years and carry a fixed rate and monthly payment. Though the interest rate on a fixed rate is higher than it will be for an ARM, it’s a much less risky loan since the payment will never change. This will be particularly important if interest rates rise in the future.

Before choosing a 15-year loan, which has a higher monthly payment, you should first consider the implications of a 15-year vs 30-year mortgage. For most borrowers, the 30-year loan will offer a lower payment, which will be a more comfortable fit.

ARM

This loan type has a fixed-rate term, which is followed by annual adjustments. For example, with a 5/1 ARM, you’ll have a fixed rate for the first five years of the loan. After that, the rate will change each year. To keep the payments from going too high upon adjustment, ARMs have rate caps.

For example, in a typical arrangement, the rate will not be able to increase more than 2% on the first adjustment. Subsequent adjustments will similarly be limited to 2%, with a maximum adjustment of 5% over the life of the loan.

However, even with the rate caps, your rate and payment can go up substantially from the initial term. If the loan starts at 4% and has a 5% lifetime cap, you may eventually end up paying 9%. These loans are suitable only if you plan to stay in the home for no more than the initial fixed-rate term of the program.

Jumbo Loans

We covered this earlier under “What is the VA loan limit,” so we won’t go into any detail here. A VA Jumbo loan is simply a program that enables an eligible borrower to borrow more than the standard loan amount, in exchange for making a down payment equal to 25% of the excess loan amount. Before taking a jumbo loan, be sure to gain a thorough understanding of the VA Jumbo loan. The higher dollar amount does represent a greater risk.

How We Found the Best VA Loan Lenders

There are many mortgage lenders offering VA loans, but only a small percentage specialize in this loan type. To come up with our list of the eight best VA loans for 2024, we considered the following criteria:

The number of VA loans the lender does.

• Specialization in VA loans.
• The number of VA loan programs the lender offers.
• The lender’s reputation.
• Specializations, like accommodating low credit scores, low closing costs, and other services offered by the lender.

In addition, we chose lenders that cover wide geographic areas to benefit as many people as possible.

Summary of the Best VA Home Loans of August 2024

• Veterans United: Best Overall
• USAA: Best for Lowest Rates
• Quicken Loans: Best Online Lender
• PenFed Credit Union: Best for No Lender Fees
• Navy Federal Credit Union: Best for First-Time Homebuyers
• LendingTree: Best Online Mortgage Marketplace
• Wells Fargo: Best Mortgage and Banking in One Place
• loanDepot: Best for Other Mortgage Options

We believe any one of these lenders will be an excellent choice to provide you with a VA loan.

Final Thoughts – 8 Best VA Loan Lenders of 2024

Selecting specialized VA loan lenders is vital in the competitive mortgage market. This guide highlights top choices: Veterans United for veterans, USAA for low rates, Quicken Loans for online convenience, PenFed Credit Union for no fees, Navy Federal Credit Union for first-time buyers, LendingTree for online comparisons, Wells Fargo for banking integration, and loanDepot for diverse options. 

Each lender addresses unique needs, offering tailored solutions for VA loans in 2024.

The post 8 Best VA Loan Lenders of 2024 appeared first on Good Financial Cents®.

Let’s start at the top—making the decision to buy a home—then work down to the closing at the very end.

1. Make Sure You’re Ready to Buy!

Most people are pretty sure when they’re ready to buy. Or are they?

This is a more important consideration than most people give it. Often, the motivation to buy a house comes from what we might call external sources. These include well-meaning family and friends, as well as a culture that emphasizes buying a home.

But before you pull the trigger, ask yourself a few important questions:

• Am I ready to take on the long-term obligation that a house requires?

• Will I be okay with performing needed maintenance, like landscaping, snow removal, and, sometimes, an endless run of repairs?

• Do I plan to be in the home for at least five years, or is it likely my career or my internal compass will have me looking to make a move in a year or two?

• Do I really have the financial strength to own a home, or will I be stretching my budget to an uncomfortable level?

Answer these questions honestly. If there are too many “no” answers, you may be better off renting for a while longer. Ownership requires commitment, and you shouldn’t be buying if you feel you can’t make that commitment.

2. Get Prequalified for Financing

This involves contacting a mortgage lender and completing an application. The prequalification will be based on the information you supply, and the lender doesn’t normally require you to provide documentation to support your income, employment, or savings.

It’s not an approval, and it shouldn’t be construed as one. But it does give you valuable insight into how much financing you can qualify for. By adding the amount of your anticipated down payment to that financing, you’ll get an idea of how much house you can afford.

3. Start a Workable Savings Plan for Your Down Payment

Unless you plan on getting a zero down payment mortgage, like a VA loan or an FHA or conventional loan with down payment assistance, you’ll need to have a down payment of at least 3%–5% of the purchase price of the home.

If you make a larger down payment, especially 20% or more, you may be able to eliminate the need for costly private mortgage insurance (PMI). In addition, a larger down payment can enable you to qualify for a higher-priced home.

Begin working now to accumulate your down payment funds. That may include a long-term savings accumulation program, or banking windfalls, such as from the sale of personal items or receipt of your income tax refund.

4. Improve Your Credit Score

When you get prequalified for a mortgage, the lender will likely pull your credit report. Request a copy of that report to see what your credit score is.

How much loan you will qualify for, as well as the price it will involve, are closely connected to your credit score. A higher score will enable you to qualify for a larger loan at a lower rate.

Take advantage of the time between prequalification and formal loan application to increase your credit score. Improving a score by 40 or 50 points can lower your rate and result in a lower monthly payment.

5. Decide What Kind of Home You Want

This is where the home-buying process becomes fun. Make a list of what you want your new home to have.

For example, do you want a one-story home or a two-story one? Three bedrooms or four? Two bathrooms or three? Large property (plenty of growing room) or small property (low maintenance)? Detached home or condominium? Fixer-upper or move-in ready?

Also, spend time considering the location. In fact, the “three rules of real estate” are location, location, and location. Though that “rule” is somewhat tongue-in-cheek, it’s also very valid. The location will determine the price you pay for the home, the school district you’ll be located in, proximity to shopping and recreational amenities, and even how long your commute to work will be.

Location should generally be the first consideration because it’s the one factor that cannot be changed once you buy the home. You can expand the home, upgrade its features, and add amenities, but you can’t change the location.

6. Get Pre-approved for a Mortgage

In Item #2 I recommend getting prequalified for financing. While prequalification and pre-approval may sound similar, they are actually very different.

With prequalification, you’re consulting with a mortgage lender to determine the amount you may borrow, based on your income and credit standing. The pre-qualification is mainly for your own information.

Pre-approval is the more substantial version of prequalification. Just as the name implies, you’ll actually be making an application for your mortgage. In the process, you provide all necessary income, employment, and savings documentation.

Where prequalification is primarily for you in the shopping process, pre-approval is mostly for real estate agents and property sellers. The lender will issue a pre-approval letter, which will ensure agents and property sellers of your ability to qualify for the financing. It’s often required by property sellers before they’ll even accept a contract offer.

With a pre-approval in hand, you’ll already have your mortgage in place. It’ll be just a matter of shopping for and finding the right property.

Choosing the Right Lender

It can be confusing to decide which mortgage lender to choose from the many hundreds that are available. If so, you may want to choose one of the four lenders below. These are some of the most popular mortgage lenders in the country, and for good reason.

• Rocket Mortgage is the online face of Quicken Loans, the largest retail mortgage lender in the country. They provide all types of loans to consumers across the country. Their online process makes for a quick and easy application, often with less time to close than other lenders.

• loanDepot offers lending across the country, including conventional, Jumbo, FHA, and VA loans. Similar to Rocket Mortgage, they offer an all-online application to speed the loan application process.

• Veterans United is the top source of VA loans in the country. They work primarily with veterans and even have a real estate network with veteran-friendly real estate agents and brokers.

• Credible is an excellent choice because it’s an online mortgage marketplace. By filling out a brief online application, you get rate quotes from several lenders. You can then choose which one offers the best program and pricing.

7. Find the Right Real Estate Agent for You

The real estate agent is the person who is going to act as your guide on your journey to find a home. Choosing that person shouldn’t be taken lightly.

You’ll want to be certain the agent you work with is not one who is only concerned with closing “deals.” Those are “numbers people” who only want to make as many sales as possible. But you’re not a “deal”; you’re a person or couple who are looking to buy the right home.

That will require the services of a real estate agent who has the right motivation. The agent should spend a good deal of time asking you questions upfront about the type of property and location you want. He or she should also get to know you a bit, understand your preferences, and build trust.

The best way to find the right real estate agent is to ask people you know who had a successful home buying experience with an agent. Ask family, friends, neighbors, and coworkers. If the name of an agent is recommended more than once, there’s a good chance you have found the right person.

8. Start Looking at Homes

At this point, you’ll have three critical parts of the home buying process in place: your financial qualifications, the type and location of the home you want, and a real estate agent you’re comfortable working with. That’s when it’s time to begin looking at homes.

You can do an online search of available properties through websites like Realtor.com and Zillow. Since properties on both sites are commonly listed through real estate agents, your agent should be able to help you visit those properties.

Be sure to look at several properties before making your choice. Even if the perfect home turns out to be the first one you look at, you owe it to yourself to look at several more. Sometimes the perfect home only becomes perfect once you’ve investigated the alternatives.

9. Making an Offer

Once you’ve found the right home for you, it’ll be time to make an offer. Fortunately, your real estate agent will handle the details of that offer. Even so, be sure the agent explains all provisions in the offer to you. Though it may be called an offer, it will become the contract of sale once it’s accepted by the seller.

An offer should have multiple provisions you should be aware of:

• Most obviously, the offer price.

• The anticipated closing date.

• A financing contingency that will enable you to withdraw the contract if you fail to obtain mortgage approval (which shouldn’t be a problem if you’ve been pre-approved).

• Whether or not the seller will be paying part of or all your closing costs.

• A home inspection provision (see below).

• A list of any non-realty items that will be included in the sale, such as a refrigerator, washer or dryer, or property amenities, like a gazebo or an above ground pool.

• Any repairs you want to have completed prior to closing.

These are standard provisions included in most real estate offers and contracts. But since you’re making the offer, you can include or exclude any provisions you like.

It’s very important to remember that an offer is just that, an offer. It’s your first indication of interest in the property. The property seller may accept your offer as is (unlikely), counteroffer (most likely), or reject the offer entirely. If the seller’s terms are unacceptable, you’ll also need to be prepared to move on to another property.

10. Schedule a Home Inspection

A home inspection can cost between $200 and $500, but it will be money well spent. You should not overlook this step, either. The home inspection protects your interests, even if it might threaten the sale.

A detailed home inspection will assess the structural integrity of the home, as well as the functionality of its components. If any items are found to be deficient, it will be an opportunity to have the seller make needed repairs. If the seller refuses, and you purchase the home anyway, you’ll pay the cost of those repairs after closing.

It’s common for contract offers to include a dollar threshold on repairs revealed by the home inspection. For example, the seller might want to limit repair costs to no more than, say, $2,000. If required repairs exceed that limit, the seller will have the option to void the contract.

However, if you want to purchase a home anyway, you can continue with the closing and pay the cost of the repairs yourself.

11. Hire a Closing Attorney

This largely depends on your state of residence. In some states, attorney representation for both buyer and seller is the norm. In others, a single closing attorney represents both parties for the closing. And in still others, title companies perform the closing function, and no attorneys are involved at all.

Even if you live in a state where a single closing attorney or title company is the norm, you can still choose to have an attorney. If nothing else, you can pay an attorney to review the final contract. This will give you an opportunity to learn if there are any provisions that may not be in your best interest.

12. Get Ready for Closing

This is mostly a matter of complying with any requirements from the mortgage lender. For example, the lender will require you to supply any documentation related to the conditions of the loan approval. They will also require you to obtain an acceptable homeowners insurance policy on the home you’re purchasing.

To make the closing process as stress-free as possible, be sure to comply with any lender requests quickly and completely. That will include having any remaining down payment funds ready for the closing date. Be sure to allow yourself time for this function, since you will typically be required to provide a cashier’s check to ensure the funds are available at closing.

13. Set Up Your Move

Determine whether you will do a self-move or if you will hire a professional moving company. This should be done as soon as your offer is accepted by the seller. At that point, it’ll be time to begin arranging the logistics of the move.

In addition to contacting a moving company, you’ll also need to begin notifying family, friends, and vendors of your change of address. That will include informing banks, brokers, retirement plan trustees, insurance companies, and lenders of your new address, as well as the date of the transition.

In each case, you’ll need to coordinate the change with the property seller and utility company. If the utility company is one you have never done business with in the past, they may require you to provide a security deposit to ensure payment.

14. Closing Day

If you faithfully completed all the steps above, the closing should be little more than a signing ceremony. All you’ll need to do is show up—with your cashier’s check—and sign a bunch of papers. Once you do, the property will be yours, and the closing agent will turn the keys over to you.

One step to be aware of on closing day is the walk-through inspection. That’s where you do a final walk-through of the property to make sure everything is as you expected it to be. It will be much easier to make this determination on closing day when the seller has removed all his or her possessions.

15. Try to Relax!

That’s easier said than done when you’re going through what is likely the biggest financial transaction of your life. But if you’ve been following through with all the steps in this checklist, it’ll just be a matter of letting the process go forward.

As much as possible, try to enjoy the entire process. It’s a unique experience, and one you’ll remember for the rest of your life.

The post The Home Buying Checklist: Your Guide for 2024 appeared first on Good Financial Cents®.