Showing posts from April, 2017
Buying a Home? Here Are The Costs You Need to Know About

Are you buying  a home in the near future? Have you started visiting real estate websites looking at different properties in various parts of town? Maybe even calculated an estimated monthly payment? Then congratulations, you’re soon on your way to becoming a home owner. Yet you’re already aware there are costs involved when buying a home while there are little to none when renting. In order to help better prepare you for your financial journey, here are some costs associated with buying a home you need to know about.
Down Payment. This isn’t a cost so much as it is a transfer of assets, but you’ll still find your bank account lightened. Most loans require a down payment of some sort so you’ll need to count those funds needed to close. There are loans that do not require a down payment, VA and USDA loans, but you will still need cash to close.
Closing Costs. Closing costs are charges associated with obtaining a mortgage loan. Ther…
3 Unique Sources for a Down Payment

Unless you qualify for a VA loan or are pre-approved for a USDA loan, you’ll need a down payment of some sort. And beyond the down payment there will also be funds needed for closing costs on the loan as well. When you apply for a mortgage one of the first things your loan officer will want to know is how much money you have available to close on a home loan. You can have a little or you can have a lot but you will still have to provide evidence to the lender at some point that you do have enough money to close. Most often this is done simply with copies of your bank statements. But if you don’t have enough money in a checking or savings account, there are some other resources you might not have thought of.
A family member can provide a financial gift to you for the necessary funds needed to close. Or, a qualified non-profit can also help out with necessary funds. You’ll need to provide a level of documentation as it relates to the source of funds m…
My Spouse/Partner Has Bad Credit, Can I Still Get a Mortgage?

When buying and financing a home with someone else, everyone on the loan application will be evaluated. For instance, say a couple decides to buy a house and apply for a loan. Each person is approved individually and both must be approved before the loan can go through. Let’s say one person makes $5,000 per month and the other $6,000. The lender will add those two together when calculating qualifying income. Yet both must adhere to other employment requirements. Both must be employed for at least two years, for example. If one person has two years but the other only six months, the person with only six months on the job won’t be able to use that income to help qualify.
Okay, but what if they both have been on the job for two years or more and the income on the application can be used, what happens if one person’s credit score is too low? What happens if a spouse or partner has bad credit, can the other person get a mortgage…
How to Qualify for a Rental Property

Thinking of becoming a landlord? Thought of the prospect of buying a rental unit and letting the tenant in essence make your mortgage payment for you? Owning real estate is one of the easiest ways to increase wealth over time but there are some things you need to know in advance when considering buying a financing a rental unit. Here is what you need to know.
Conventional Only
Unless you’re financing a duplex or a 2-4 unit property and live in one of the units, government-backed financing options of VA, FHA and USDA can’t apply. Those mortgages are only for an owner-occupied property. That leaves conventional mortgages underwritten to standards issued by Fannie Mae and Freddie Mac to be used.
Down payment requirements for a rental unit are typically 20% of the sales price of the home but you can get a slightly better rate with 25% down. Interest rates on these loan programs will also be slightly higher compared to a loan for a primary residence but…
FHA Loans vs. Conventional Loans: Which are Better?

Are you a first time home buyer? Thinking about it, just a little? First, we’re excited for you because it is quite an experience both buying and owning your very own home but at the same time it can get a little confusing. Especially so when it comes time to shop for a home loan. There are so many different terms, many of which you’ve never even heard of before, that a lot of it can just go over your head. Your loan officer will always be there to walk you through the process but if you haven’t gotten that far yet let’s take a moment to separate two mortgage programs- FHA loans and conventional mortgages.
FHA loans, mortgage programs underwritten to standards issued by the Federal Housing Administration, carry a government guarantee to the mortgage company which compensates the lender should a loan ever go into default. This guarantee is financed by two separate mortgage insurance premiums. An upfront mortgage insurance premium is a…
Is There Really a “No-Closing Cost” Mortgage?

Closing costs associated with getting a mortgage are a part of every transaction. Borrowers discover they need some cash for a down payment based upon the type of loan the loan officer suggested but also an amount set aside for closing costs. Lenders require various third party reports and services in order to comply with lending guidelines. Your loan officer will provide you with a Cost Estimate that will list each potential service and the associated fee. For example, you just signed a sales contract for a home. Your lender will need an appraisal in order to complete the loan approval process. Without an appraisal the lender can’t approve the loan. There are other fees associated with credit reports, settlement services, title insurance and so on.
Okay, but what about those “no closing cost” loans you keep hearing about? Do you still need to pay for a credit report and an appraisal if there are no costs involved? Well, there are costs, i…
3 Things You Didn’t Know About USDA Loans

It might seem a bit odd that the United States Department of Agriculture, or USDA, has a mortgage program but it does. The USDA loan is designed to finance purchases that are located in a rural or semi-rural area and for the right buyers there is no better option. USDA loans aren’t as popular as they should be because many mortgage lenders ignore the program, and that’s a shame. Here are some things many don’t know about this program and can help narrow down the choices when selecting a financing option.
Zero Down There is only one other mortgage program in today’s marketplace that does not require a down payment. The VA home loan doesn’t require a down payment but is reserved for veterans of the armed forces and other eligible individuals but the USDA loan doesn’t require you to be a member of anything. The USDA mortgage asks for nothing down. If you’re seeking to finance a property while coming to the settlement table with as little cash to c…
3 Ways to Improve Your Credit Score

Credit scores are three digit numbers ranging from 300 to 850 and is calculated using an algorithm using five separate factors. Credit scores rise and fall based upon a consumer’s recent credit history and are directly impacted by consumer behavior. To improve credit scores, there are some things borrowers can do to get their scores back where they need to be.
Timely Payments
The single biggest factor when calculating credit scores is payment history. It’s important to pay credit accounts on the due date but sometimes that’s not always possible. If you pay more than 15 days past the due date it’s likely you’ll incur late fees and higher interest charges but as payments relate to credit scores, negative marks are made when your payment is more than 30 days past the due date. Scores will fall further still when payments are made more than 60 and 90 days past. Making timely payments will repair scores faster than anything else you can do.
Should I Get Out of My Adjustable Rate Loan?

Consumers can choose between and adjustable rate mortgage, or ARM, or a fixed rate loan. Fixed rates offer long term stability while adjustable rate mortgages offer lower initial start rates, which is why many borrowers select an adjustable rate loan. However, the initial rate for adjustable rate mortgages is sometimes referred to as a “teaser” which is set artificially low in order to attract a borrower. Or, the loan program is of the hybrid type which is an adjustable rate mortgage which keeps the initial rate fixed for a predetermined period of time, say for 3, 5, 7 or even 10 years. Hybrid start rates are also lower than fixed. But because adjustable rates do in fact adjust, as interest rates rise so too will the individual borrower’s mortgage rate rise as well.
To keep rates from adjusting too high over time, interest rate caps are put in  place limiting how high the rate can ever be by as much a five or six percent above the start ra…
What To Expect At Your Closing

It’s been quite the ride, no? From simply wondering whether or not to buy a home to actually shopping for a property as well as selecting your lender, you might be amazed at the number of plates that have to spin. There are documents to sign and paperwork to complete while your lender orders multiple third party services such as an appraisal, title and credit. There really is a lot going on. But now, your loan has been approved and your loan papers have been delivered to your escrow agent. You now have a scheduled day and time to sign your papers at your closing. What can you expect?
One of the first things your escrow agent will do is prepare your Settlement Statement at least one day prior to your closing.This document reflects the various charges by third parties, your loan amount, your down payment and the earnest money sitting in a credit account. This statement shows not only the various charges but who is responsible for what. At the same time you…
Do Lenders Need Tax Returns If You’re Not Self-Employed?

Lenders are required to make sure you can afford your monthly mortgage payment. They do this by comparing your monthly credit obligations along with your gross monthly income. Credit account payments are verified by reviewing your credit report and your income by looking at copies of most recent pay check stubs covering a 30 day period. Upon review of both, your lender will arrive at your debt-to-income ratio. If you’re self-employed, you may not have pay check stubs and even if you do issue pay checks the lender will also ask for copies of your two most recent federal income tax returns, both personal and business.
For the self-employed borrower, the lender will average net business income over the previous two years while also needing to verify income from one year to the next is relatively consistent. They can only do this reviewing income tax returns because there are neither pay stubs nor W2 forms. But lenders can also ask …
Getting a Mortgage For a Manufactured Home

Manufactured housing construction has come a long way since its early days when manufactured homes were referred to as mobile homes and indeed were very mobile. There were wheels attached to the home and the unit wasn’t necessarily permanently attached to a foundation. If the owner wanted to, the unit could be hitched to an automobile or truck and moved away. As such, when financing a mobile home there really was only one choice and that was to take out an installment loan just like financing an automobile with higher rates and shorter loan terms. A mortgage today however for a manufactured home is available providing borrowers with more favorable terms and when financed properly a loan for a manufactured home is just as competitive as most any other option.
The manufactured home must be considered as real estate and taxed as real property. A manufactured home is built at the factory and delivered to the dealer. Sometimes a manufactured home …
How to Combine Two Mortgages Into One - And Why

There are times when refinancing makes sense and it may make a lot of sense when it’s determined that refinancing a first mortgage makes sense on its own but financing an outstanding second lien can make the decision even better. What are the differences between first, second and even third liens? What are they and what is the importance of lien position?
A first mortgage is the one used to fund the primary purchase. A couple sees a home listed for $350,000, puts 20% down and finances $280,000. This mortgage is the first one based upon age and recorded as such at the county recorder’s office. There may also be a second mortgage that can be taken out at the same time as the first or later on. When used simultaneously with a first mortgage to buy and finance a home, the second mortgage can be the amount that is the difference between the down payment and the first mortgage. If the couple decided to put only 10% down, they could take out tw…
Mortgage Pre-Approval: Understanding the Process

There are a couple of terms in the mortgage industry that sound familiar and while many think the terms are interchangeable they’re not. Those two terms are pre-qualification and pre-approval. Similar, but different. But it’s important to understand the basic difference between the two terms and while they cover the same aspects of someone’s ability to obtain a loan approval one is vastly more important than the other. A pre-qualification is a determination, based upon a conversation with a loan officer that person could qualify for a home loan along with a monthly payment schedule and an approximate loan amount. A pre-qualification is good for a future buyer to find out how much is available but a pre-approval takes the process one step, major step, further- verification of the information provided.
A telephone conversation is general in nature and the loan officer would ask you how much you make each month, your current monthly credit…
Ways to Use a Cash Out Refinance

As property values continue to rise and homeowners are discovering their overall financial profile keeps improving. Homeowner equity is the difference between what is owed on the mortgage and the current appraised value of the property. As homeowners pay down the mortgage balance more equity is created. So too is equity created simply because the value of the property has grown. When you combine both paying down the loan with ever increasing values still more equity is created. That also means homeowners have access to more cash in the form of equity.
There are two ways to access homeowner equity beyond simply selling the property. A homeowner equity line of credit is in fact a credit line accessible by the homeowners at any time, much like a credit card or personal line of credit. The homeowners can then pay back the amount borrowed in part or in full when due. A home equity line of credit will have a variable rate and can be higher compared to a fix…
How Does a Streamline Refinance Work?

When talking to your loan officer about your options there will be conventional and government-backed loans. Conventional loans are those underwritten to guidelines established by Fannie Mae and Freddie Mac and are the most common. Government-backed loans include VA, FHA and USDA home loans and offer low or no-down payment financing options for a primary residence. Conventional loans can be used to finance a primary residence, vacation or second home or a rental property. However, when it comes time to refinance, government-backed loans have a feature conventional loans do not called a “streamline.”
A streamline is so-called because during the refinance procedure there is much less paperwork required. And that’s just for starters. Streamline loans don’t require an appraisal nor is income and employment verified. Let’s take a look at streamline options.
VA. Sometimes referred to as the Interest Rate Reduction Refinance Loan, or IRRRL, the VA streaml…
How Are Credit Scores Calculated?

The concept of credit scoring has been around in some form for quite some time. Yet during the latter part of the 1990’s did credit scoring really begin to affect mortgage loan approvals. For a time, credit scores were part of a request for a credit report and at first lenders would refer to the score but not make it a requirement. Instead, the individual underwriter still made the final determination of credit worthiness. Today, almost every loan program available has a minimum credit score requirement. How are these credit scores calculated?
The emergence of credit scoring was initiated by the FICO Company who created the original algorithm used to calculate a credit score for mortgage loans. The score is a three digit number that ranges from as low as 300 to 850, with 850 indicating absolutely flawless credit over the previous few years.  What affects this number? There are five categories.
The most important category is Payment History which accou…
5 Things You Didn’t Know About FHA Loans

Thinking of an FHA loan? Did your loan officer suggest FHA financing for your situation? For buyers who want to come to the settlement table with as little cash as possible then the FHA mortgage is certainly an option. Yet here are five things you may not now about this mortgage.
It’s Guaranteed
FHA loans come with a guarantee to the lender. Not to you, but to the lender. Should the loan ever go into default the lender is compensated for the loss as long as the lender approved the loan using proper FHA guidelines. This guarantee is financed by two mortgage insurance policies, an upfront policy equal to 1.75% of the loan amount and an annual premium paid in monthly installments.
It’s Easier
Minimum credit scores for FHA loans are typically lower compared to conventional loan programs with a down payment of less than 20% of the sales price. While the FHA doesn’t set a minimum credit score individual mortgage lenders do and this minimum is a score o…
ARM or Fixed: Which Is Better?

That’s a very good question and one you might have heard more than once. The question of an ARM vs. a Fixed Rate Mortgage is age-old and one the very first questions your loan officer might ask. You can do your own research about which is better but the answer might very well be neither. Or both. Or maybe just one of them. Confusing? It shouldn’t be but there are times when the answer is pretty much automatic while at other times it takes a bit more thought. Let’s explore the questions you should ask and answer to help guide you the rest of the way.
A fixed rate loan is pretty basic. The interest rate you choose when you lock in your loan is the rate is the same rate throughout the life of the loan. A fixed rate never changes. It’s fixed. An ARM, or an adjustable rate mortgage, can adjust over the life of the loan but only under the provisions set forth in your note.
An ARM has an index on which the rate is based plus a margin that is added to it. A comm…