Showing posts from August, 2016
You Inherited a House- Now What?

Inheriting real estate is a long standing event that even when those who are inheriting the property expect to acquire the home there are still some decisions to be made, both financial as well as emotional. If you grew up in the home there are memories there and if you sell the property there are some financial consequences as well. Let’s look at what happens when you inherit a home.
Sell It. This is perhaps the most common option at some point, especially if there are other siblings involved who are also new owners. The proceeds of the sale are split between the siblings and most often avoid capital gains taxes due to what is known as a “step-up.” This means the value of the home is the fair market value of the property upon the death of the parents. If you’re the sole inheritor and you decide to sell, there may also be other liens attached such as property taxes. If there is a mortgage, you will pay off the mortgage during the settlement process and …

If you’re beginning to think about buying your first home, congratulations! We know it’s a big step but all homeowners were first timers once and they can all tell you they might have been a little anxious yet in reality the process was much simpler than first imagined. Today, mortgage loan approvals are essentially streamlined. Here’s how the loan approval process works and what you can expect your lender to ask for.
When first applying, you’re getting your preapproval letter. This is a letter prepared by your lender that states you have been preapproved by the lender and all you need to do is find a home and the lender takes it from there. To get a preapproval, your lender will ask for your most recent paycheck stubs, your two most recent W2 forms or your two most recent federal income tax returns if you’re self-employed. You’ll also be asked for copies of your most recent statements from the accounts you’ll be using for a do…

The mechanics regulating your monthly principal and interest mortgage payment are hardwired into your note. Unless you refinance your current loan, nothing in the note can change. Even if your loan is sold to another lender, the new lender must follow to the letter the requirements of the note. Yet even if you have a fixed rate mortgage where your principal and interest payment doesn’t change. Your monthly mortgage payment might.
If you have an adjustable rate loan, you know in advance that your monthly payment can change. Approximately 60 days out from your annual adjustment period, you’ll get a notice from your lender regarding your new interest rate. You’ll know in advance of this change and expect it. The lender researches the current index upon which your rate is based and then adds the margin, with respect to interest rate caps on the loan.
If you have a hybrid mortgage, a loan where the rate remains fixed for an initial period, you…
6 Things You May Not Know about Debt Consolidation
Consolidating debt can be a good thing when multiple credit accounts begin to add up. With various credit cards and installment loans, all with different interest rates and terms, sometimes it can be a bit confusing when making payments. Too many accounts and it becomes easier to miss a payment or assessed a late fee. Your credit report won’t reflect a late payment unless it’s more than 30 days past the due date but the creditor notices and you’re often hit with a late fee or a higher rate. When thinking about consolidating your debt, here are some things you absolutely must know before you proceed.
Terms are Different.  Just as a credit card will have different terms than say an automobile loan, so too can the type of debt consolidation loan. Such loans can have fixed or variable rates and have terms ranging from 5, 10 and even 30 years. Know in advance what you’re getting into.
Longer the Term, the Lower the Payment. A consolidation l…

Lenders take equity very seriously. So much so they will require you to have some before issuing a mortgage loan. That is, unless you’re using a VA or USDA loan. Equity is the initial cash pledge from you and is your down payment on the mortgage. The amount of your initial equity is spelled out in your sales contract. Along with the sales price, your agent will also enter the down payment amount from you and a loan amount. Your initial equity will be listed quite prominently on the first page of your contract. Your earnest money deposit will also be listed as well. Your equity is the difference between the current market value of the home and the amount of any existing mortgage(s).
Some loans require more down payment than others. FHA loans ask for at least a 3.5 percent down payment from you as your initial equity. Without that equity position, a lender won’t approve your FHA application. Conventional loans ask for at least 5.0 percent down alt…

Getting a mortgage soon? Then you’d also better get ready learning a little bit of mortgage lingo, too. Lenders, like most any industry, have their own set of terms used when processing and approving a mortgage loan. There are a lot of them, but here are some of the most important to understand and getting a mortgage.
Annual Percentage Rate- The annual percentage rate, or APR as it’s commonly referred as, is the cost of the amount of money borrowed expressed as an annual rate. The APR includes your note rate along with additional closing fees needed in order to close your loan. The greater the difference between the note rate and the APR means there are more closing fees associated with the mortgage.
Automated Underwriting System- An automated underwriting system, or AUS, is an application that electronically issues a conditional loan approval after evaluating a loan application. The lender then follows the instructions listed on the A…

The term “mortgage” is a funny one. Just the word itself is odd. It does have a meaning however with Latin roots. “Mort” means death or an end and “gage” is a pledge or a promise. In practice, when the loan is paid off and the pledge kept, the loan ends or dies. For instance, if you get a 15 year mortgage, the borrowers promise to repay the lender based upon the terms of the note and when the loan is paid in full, the loan goes away and the promise is kept.
Here in the United States, prior to the 1930s, individual banks made their own lending decisions and lending guidelines varied greatly. This period was way before the Fair Credit Reporting Act and discrimination was common and rarely even thought about. For instance, a bank could deny a loan application to a couple if the woman was pregnant. The bank thought that when the baby was born the woman would have to quit her job to take care of the child. This would be unheard of today.
Down …

In short, yes. But with some qualifiers attached. “Low” is a relative term and although lenders do rely on credit scores during the approval process they’re not the only factor. Important, yes, but exclusively so not necessarily. It depends upon the type of loan you’re applying for.
Credit scores range from as low as 300 to as high as 850 although any mortgage lender will tell you they’ve never encountered a loan with either a 300 or an 850 score. There are three credit repositories, Experian, Equifax and TransUnion and they all use the same algorithm to come up with a score. There will typically be slight variances within the three reported scores due to when and where the credit information was reported to each of the three. Lenders will use the middle score, ignoring the lowest and highest.
Most lenders will ask for a minimum credit score of 620 but some loan programs allow for a score as low as 580. Not every lender will approve a loan…

If you’re soon going to buy your very first home and getting a mortgage, wheels start to spin pretty fast and the next thing you know, 30 days have passed and your closing date is tomorrow. Your lender approved your loan during that period and prepared your closing documents for you to sign and once signed you get handed over the keys to the home. But what can you expect at a home loan closing? Any surprises?
There shouldn’t be any surprises. That doesn’t mean there never are any but lenders are required to provide you with an initial closing statement three days prior to the day of your closing clearly pointing out how much money you’ll need to bring to the closing. If some of the numbers don’t look right this is the time to contact your Lender and discuss any differences in fees from the initial Loan Estimate they provided you at application.  Some fees that come in higher than disclosed may be paid for by the lender if there was not a valid chan…
LOCK IT IN: THE IMPORTANCE OF RATE LOCKS If you’ve been shopping around for a mortgage or you’re checking out current interest rates to see if a refinance makes sense, you’ve discovered interest rates can change from day to day and sometimes even during the course of a business day. Mortgage rates are tied to a specific index and as that index changes so too can interest rates. Mortgage companies price their loans on those very same indexes and that’s why interest rates from one lender to the next are very similar to one another. But until you lock in that rate, those rates will continue to flux with the market.
There are no universal guidelines that all lenders must follow regarding interest rate locks but mortgage companies won’t allow you to lock in a rate over the phone if you don’t have a loan application on file and even more you will not be able to lock if you are shopping for a new home but don’t have a property picked out.  If you do have a property and a completed loan appli…

Credit scores are those three digit numbers ranging from 300 to 850 that reflect a borrower’s most recent credit history, primarily in the past two years. The better the credit, the higher the score. Mortgage lenders use FICO scores when evaluating a mortgage application but the approval process doesn’t stop there. There are other things involved when obtaining a mortgage approval, regardless of any score, low or high. Most mortgage programs require a minimum score of 620 yet this minimum can vary based upon the lender and type of loan being applied for.
But let’s say someone applies for a mortgage loan and is told their credit score is 780, reflecting an excellent credit history. But there are problems. The score isn’t enough for a loan approval. For example, lenders have to determine there are enough funds available to close on a mortgage. Lenders do this by reviewing bank statements. If the bank statements show there aren’t e…

Getting a home loan involves not just applying for the mortgage but also the lender gathering data from various third parties. It can get a little confusing at times and you’ll encounter some loan terms you might not have heard before. But to make sure you understand the entire mortgage approval process, lenders are also required to provide you with certain consumer protection information.
The Equal Credit Opportunity Act, or ECOA, prohibits lenders from discriminating against any protected class. Lenders are forbidden from making lending decisions based upon someone’s race, color, religion, national origin, sex, marital status, age or using any public assistance funds.
The TILA/RESPA Integrated Disclosure Rule, or TRID, is a mortgage disclosure process combining the Truth in Lending Act and Real Estate Settlement Procedures Act. The TILA provides the Loan Estimate provides a list of the primary loan features, costs of the loan and is intended to…

Lenders need to validate your credit history, income and how much funds you have available to close on a purchase transaction. After you submit a loan application, the lender will also pull a credit report and obtain a credit score to validate a responsible credit history. Your pay check stubs and W2 forms will show how much money you make and if you’re self-employed your federal income tax returns will be reviewed. And to make sure you have ample cash in the bank for a down payment and closing costs, you’ll need to provide copies of your most recent bank statements. Sometimes however, those bank statements contain information that you might have to answer to. What could that be?
Let’s say you get paid on the 1st and 15th each and every month and you direct deposit into your checking account $3,238 each and every time. Lenders will use this information to verify with these bank statements you are employed and these deposits…

Mortgages are designed around three basic bits of data, the interest rate, the loan type and the loan term. Mortgages are either available with a fixed rate or a variable one. Once you decide between fixed and variable, you’ll then select the interest rate from a list of available rates for that program. Finally, you’ll decide the term of your loan.
When you first begin researching mortgage loans, you’ll often see choices between a 30 year and a 15 year loan. The longer the loan term the lower your monthly payment will be but you will also pay more interest over time compared to the 15 year option. However, the 15 year payment can be so much higher than the 30 year plan the borrowers can’t qualify for the mortgage. But it’s not necessarily a choice between a 30 year and a 15 year term. There are other options.
Most loan programs are offered in terms as short as 10 years up to 30 in five year increments. This means mortgage terms are available in 10, 15…

Do you want to finance a home with as little money down as possible yet still have a competitive interest rate? There are three basic options for those who want to come to the closing table with as little money as possible and they are all government-backed. VA loans don’t require a down payment but are reserved for veterans, active duty personnel, National Guard and Armed Forces Reserves and spouses of veterans who died as a result of a service related injury. The USDA home loan program also doesn’t require a down payment but the property must be located in a specific area, primarily in rural and semi-rural areas and there are income limits placed on the borrowers. The third option, the FHA mortgage, is the most flexible of the three and can be used by anyone.

The FHA loan does require a down payment but the down payment is only 3.5 percent of the sales price of the home. It’s not as competitive as the VA and USDA program, but it’s close. On a $200,000 home, th…
Many couples struggle when they decide to buy their first home. They might argue over their wants, needs, and their budget. Many couples make a lot of mistakes along the way with their new mortgage. These mistakes can happen during the mortgage process while others will happen after they buy the home.
Here are some common mistakes that first-time home buyers make.
Not being pre-approved for a loan. If you are pre-approved for a loan, you already have a lot of the paperwork done for a mortgage. You know that you are likely to be able to get a loan when you find a home that you like. You also know what your price range will be when you start looking at homes.
Forgetting about other costs. There are more costs to consider than just the mortgage and settlement. You are going to need to get an inspection, an appraisal, along with other costs. As a home owner, you are going to have to pay property taxes and home owner’s insurance. You will also …

Buying and financing a home requires taking on a mortgage. Without a doubt, and you’ve heard this before, this purchase in all likelihood will be the biggest financial undertaking in your career. Mortgage loans are a good thing. Without them someone would have to save up enough cash to pay for the home outright or take out very short term loans like they did prior to the introduction of FHA mortgages way back in 1934. When choosing a mortgage you’ll choose not just the program but also the term of the loan.
Loan terms are typically available in terms ranging from 10 to 30 years in five year increments. Lenders offer 10, 15, 20, 25 and 30 year loan terms. Longer loan terms provide lower monthly payments but there is a downside to the longer term- more interest paid to the lender. A 30 year mortgage will have nearly three times as much interest as a 15 year note. However, due to the higher payments someone may not qu…