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Author: Ryan Hillard

Founder & Managing Broker

Update in Buying Condominiums

Written by Ryan Hillard on . Posted in Video.

Urgent Update for Condo Buyers and Sellers: New Requirements from Fannie Mae and Freddie Mac to Ensure Smooth Transactions

There’s some new and urgent news out there! 

Transcript

Ryan Hillard: If you’re looking to buy or sell a condo right now! Effective immediately, both Fannie Mae and Freddie Mac are requiring additional documentation with respect to condos in order to ensure the condominium project does not have any significant deferred maintenance. 

There’s a number of things that they can request and some of that documentation may include

Ryan Hillard: 

  1. The H.O.A. can self-certify, and they can also charge a fee to complete the necessary Form 1076. 
  2. They can provide a reserve study that was prepared within a year of the closing.
  3. A structural report completed by an engineer, architect, or building inspector.
  4. A current budget showing no special assessments.
  5. The H.O.A. meeting notes showing no assessment. 

Ryan Hillard: It’s also possible, or likely, that lenders will require a combination of these items, so one of those may not satisfy the entire requirement. Since both Fannie and Freddie are united on this, it is not likely or probably not even possible that you would be able to obtain a conforming loan unless these guidelines are met. 

Ryan Hillard: Finally, this will also affect any transactions that are in process. So again, if you’re looking to buy or sell a condo there are additional items here in respect to deferred maintenance that would need to be taken into account. 

4 Ways to Remove Mortgage Insurance

Written by Ryan Hillard on . Posted in Video.

Removing private mortgage insurance (PMI) on your conventional loan can save you over the life of the loan as well as on your monthly payment.

Transcript

Ryan Hillard: Let’s talk about four ways you can get rid of your mortgage insurance! Mortgage insurance, PMI (Private Mortgage Insurance), is a monthly fee that is added to your loan in the event that you may default, so it will lessen the risk to the lender and protect them if you were to default. You will have mortgage insurance on a conventional loan, and everything we’re going to be talking about is related to a conventional loan, but you’ll have mortgage insurance if you have a down payment that is less than 20% of the value. With that in mind, there are four ways going forward on how you might be able to get rid of mortgage insurance. 

Refinance

Ryan Hillard: The first and most popular way to get rid of PMI is to refinance. If you live in an area where your home value has been increasing and we’re in an interest rate environment where rates are going down, then you can refinance to help save some money with a lower overall payment, and if that’s the situation where the new loan amount is equal to or less than 80% of the new value then you’re going to get rid of your mortgage insurance, and that’s a great way to go! However, we’re not always in that type of environment, and if rates are increasing, the good news is that you still have some options. 

Request Early Cancellation

Ryan Hillard: The next way that you can go about getting rid of mortgage insurance is to request early cancellation. In this case, you can save money by removing the PMI sooner through an early cancellation once you have 20% equity in your home. You can submit a written request to the lender or the servicer and ask the PMI be removed. If you’re wondering who it is that you do reach out to, my first suggestion is there’s going to be a phone number at the top of your mortgage statement; that’s a good place to start. 

Wait for MI to Automatically Cancel

Ryan Hillard: The next way to go about getting rid of mortgage insurance is to just let it cancel automatically. If you just continue making all of your payments on time, and you get to the point where your loan amount is 78% of the original purchase price, then your mortgage insurance will fall off automatically. You don’t need to do anything, and it will just be removed from your loan; that’s a great way to go! 

Get a New Appraisal

Ryan Hillard: Finally, the fourth way to go about getting rid of your mortgage insurance is to get a new appraisal. Now, this is one that not a lot of people or not as many people know about; everybody goes back to, “Well, if I need a new appraisal, then I’m just going to refinance it.” But this is a case where you don’t have to do that. If the property values are rising in your area, then you can request an early cancellation based on the home’s current value, and the current value would typically be measured by a new appraisal. But, before you go and end up ordering a new appraisal, you want to make sure that you check with the lender or the servicer; again, whoever is at the top of your mortgage statement, call that number and see what their rules are for early cancellation. In some cases, they may require you to use a certain appraiser or appraisers, and in others, they may just allow for a broker’s opinion of value, and that would be a cheaper and easier way to go. 

Ryan Hillard: Generally, to cancel PMI based on the current value of the home, you must have owned the home for at least two years and have 25% equity in the home or 75% loan to value. If you’ve owned the home for at least five years, then you cancel it with 20% equity or 80% loan to value. 

Ryan Hillard: That’s four ways we talked about getting rid of your mortgage insurance. I hope that’s helpful; reach out to your lender. If they’re not available, reach out to me. I’ll be happy to help!

A Success Story & One Thing You Might Not Know

Written by Ryan Hillard on . Posted in Video.

Maximizing VA Loan Benefits: Leveraging a VA Loan for More

Transcript

Ryan Hillard: Let’s Talk About a Win We Just Had in This Market for a VA Client. Now, as a lot of people know, interest rates have moved up, so it’s kept a lot of people on the sidelines. But I’m here to tell you that people are still buying homes, and it’s still actually a really great time to buy a house, especially when you can negotiate a little bit more with the seller in order to potentially get some concessions and see how we can use those. 

Ryan Hillard: In this case, we had a VA client and the VA loan already has 100% financing with no mortgage insurance and will typically have a lower rate than conventional or other loans, which really just makes it the best loan out there, in my opinion. This client had a middle-of-the-road “risk profile,” meaning it was a very “doable” loan, but it wasn’t right down the middle, so there were a couple of things we had to navigate, but we were definitely able to do so. With the help of an experienced agent, we were able to look at the right properties to get the maximum amount of concessions. 

How do we use those concessions?

  1. Pay off all the closing costs, so we didn’t have to come out of pocket for anything in terms of closing costs. 
  2. Buy down the interest rate further than it already was
  3. Prepay 12 months of HOA fees, which is the maximum allowed for a VA loan
  4. Used seller’s concessions to pay off the borrower’s debt

Ryan Hillard: One of the things a lot of people don’t know that you can do with a VA loan is to use seller concessions to pay off the borrower’s debt. In this case, we were able to use additional concessions to pay off three credit cards. It really seemed like the borrower was making money on this. Not only did they get all of the earnest money back, they also prepaid 12 months of their HOA fees and paid off three different cards. 
Ryan Hillard: This was really a great win for this client, and it’s also just an example of the types of wins that can be had in this market right now!

Dos and Don’ts of Gift Funds

Written by Ryan Hillard on . Posted in Video.

Gift funds can be a helpful way to make a down payment on a home, but there are specific rules and requirements that must be followed in order to use them properly.

Transcript

Ryan Hillard: Hi, this is Ryan Hillard with the Ford Mortgage Group, and today I want to talk to you about the do’s and don’ts of using gift funds to help with the down payment.

Why Gift Funds Are Helpful

Ryan Hillard: When buying a home, the biggest upfront cost is most likely going to be the down payment, where even if you can afford the monthly mortgage payments, the initial cost may be too much for you to do on your own.

According to the National Association of Realtors, in 2019, 60% of home buyers came up with their down payments primarily from their own funds. But this is not always attainable, especially for first-time, time home buyers who may not have the benefit of funds from the sale of their current residents.

That’s where gift funds for a down payment are helpful. Family members or close relatives who wanna chip in and help the home buyer purchase a home are able to do so. The great news is that you can use these gifted funds to make the down payment. Your lender will also want to know some additional details before they allow you to use it.

Who Can Give You Money for Your Down Payment

Ryan Hillard: There are only two specific groups that can give a home buyer money to fund the down payment, and those are one – either friend or a family member as long as they can prove a standing relationship with the buyer. And two – a government agency as part of a program meant to get first-time home buyers into the market.

In either case, you must confirm the relationship between the donor and the recipient. If you plan on getting gift funds from a friend or family member, you will need a gift letter confirming the relationship to the giver, along with some additional details. The letter must also indicate that the money is a gift and that there is no expectation of repayment.

Evidence Needed

Ryan Hillard: Usually, this letter will be provided by the lender, so feel free to reach out to them to get it, and then it will need to be signed by both parties. The lender may also require evidence of the gift, depending on the loan program and how the funds are transferred. For example, if it’s a conventional loan and the funds have been deposited in the borrower’s account, the lender will want to see the gift-givers bank statements to show that there are sufficient funds to make that gift.

They may also ask for a bank slip or an updated account statement from the recipient to show that the funds have been transferred and are available. If the gift funds are sent to the title company ahead of closing, the donor’s bank statements are not typically needed, but the gift letter will still be required.

In this case, the lender will need to confirm that the funds have been received prior to providing the final approval for the loan. So please be sure to get the funds sent in well ahead of time to prevent any delays.

Repayment

Ryan Hillard: Now, one popular question is if, if a buyer can pay back a mortgage gift, and the answer here is no.

This is considered mortgage or loan fraud, which is a crime. If there’s an indication that you do intend to pay back the gift, it can put your loan qualification at risk. If you’re paying it back, then the gift would be considered a loan, and all loans need to be factored into your debt-to-income ratio. Next, let’s talk about seasoning for the fines.

Seasoning

Ryan Hillard: If possible, it’s a good idea to ensure that gift money is seasoned when it comes time to use it as a down payment. Your lender will want proof that the funds have been in your, in the buyer’s account, for a substantial amount of time to show that the buyer hasn’t just gathered a bunch of cash on a short-term basis.

Ultimately, the cost of the down payment is only one expense to consider in the home buying process, and the home buyer will also have other expenses to pay, which would include closing costs for appraisal, credit title insurance, uh, any underwriting fees, and then establishing the escrow account for homeowner’s insurance and property taxes as well.

Dos and Don’ts of Getting a Down Payment Gift

Ryan Hillard: Now, I hope that overview has been helpful, but before we wrap up, I want to provide a recap of the dos and don’ts of getting a down payment gift. To start off with, you do want to get a signed statement from the gift giver, but you do not want to tell the lender that the funds are a gift when it’s actually a loan.

You do want to remind the gift giver to provide a paper trail or keep that paper trail, but you do not want to change or add any money that you cannot explain. Do get the money in advance and know how seasoned money works. Do not assume that all types of loans will allow for the down payment gift. Do talk to your lender about any more specific requirements they may have. When you speak to your lender about which loan program is best for you, be sure to let them know upfront that you plan on using gift funds for the down payment. Some loan programs have strict guidelines about how much money you can use for the down payment and also who can gift you the money. If you’re in the market for a new home and want a little help, don’t hesitate.

Just make sure to follow the advice of your lender and ensure that you accept such a gift in the proper manner. Thanks for watching.

Buy and Refinance Homes Without an Appraisal: Using UWM’s Appraisal Waiver Pre-Check

Written by Ryan Hillard on . Posted in Video.

Save time and money with an Appraisal Waiver Pre Check

As a broker, you always strive to save time and money for your clients. The appraisal process can be a major hindrance to the mortgage process, as it is time-consuming and costly. Fortunately, United Wholesale Mortgage (UWM) has provided a valuable tool for brokers called an appraisal waiver pre-check. This tool enables brokers to check if a property qualifies for an appraisal waiver before going under contract, simplifying the process and making it more competitive.

Transcript

Ryan Hillard: Hey everyone. Ryan Hillard here with the Forward Mortgage Group.

What is an Appraisal Waiver Pre Check?

Ryan Hillard: Today I want to talk about a great tool that we have available to us as brokers called an appraisal waiver pre check. And what this is, is pretty much exactly what the name implies. It gives us the ability to go out to the UWM site, United Wholesale Mortgage, which is one of the, one of the better lenders out there that we send a lot of loans through. They help protect us as brokers in a number of ways and help us be more efficient.

The Benefits of an Appraisal Waiver Pre Check

Ryan Hillard: One of the ways that they allow for efficiency, and there are a lot of them, is by allowing us to go out and see before we go under contract on a property that we’re looking to purchase, can we get an appraisal waiver for that? Or before we’re going to do a refinance, can we get an appraisal waiver and just make the process a little bit easier, save a little bit of money, and in the aspect of going on a purchase, makes us a little bit more competitive?

Especially if we’re up against multiple offers where maybe we can say that we don’t need the appraisal because we have this in our back pocket already, it’s really simple, and it’s the first thing that I do every time anybody says that they’re looking at a property or if they’re looking at a couple of different homes, they’re getting ready to put in an offer on a home.

How to use an Appraisal Waiver Pre Check

Ryan Hillard: What we do is just go to the site of UWM and click on their appraisal waiver precheck. I enter a property address right here and enter the city, whether it’s Denver, Littleton, Highlands Ranch… you get the idea. The state, obviously, and the zip code. Go down here, and select the transaction type, in this case, to see if it works for a purchase. I check the eligibility and let it run its thing in the background. And so we can see that the LPA, which is a Freddie Mac product, we will not get it from that. But on DU or Desktop Underwriter, which is Fannie Mae, we’ll get it if we run it through Fannie Mae. It’ll tell us the maximum loan amount that we’ll be able to qualify for in order to still get the appraisal waiver.

Appraisal Waiver Pre Check for Purchases and Refinances

Using an Appraisal Waiver Pre Check for a Purchase

Ryan Hillard: You can see why we’d want to use this tool and how it helps us be a little bit more competitive and a little bit more efficient, and everybody likes saving some money.

Right now, appraisals are probably somewhere around 600, $650, give or take. It allows us to put that money into the borrower’s pocket instead of paying another third-party fee. It helps us be a little bit more competitive with our timelines and how we compete for an offer.

Using an Appraisal Waiver Pre Check for a Refinance

Refinance Waive Appraisal

Ryan Hillard: Now, in addition to using it for a purchase, as I had mentioned, we can also use it on a refinance. So I’m just gonna keep the same property type in there for right now. And rather than purchase, I’m gonna go up and say, let’s do a rate and term refinance. And we’ll check the eligibility.

We’ll see what happens. And in this case, it actually doesn’t come out. Now that’s okay because the next thing that I would do once we decide we’re moving forward is to simultaneously run through both the Fannie Mae and Freddie Mac automated underwriting systems because even though it might not come up, There’s a chance that it would still come up there.

And so we wanna just make sure that we’re exhausting all the options and possibilities of what it might look like in order to be more competitive, save a little bit of money. I can tell you that just last month, of all the loans that I did, I did three of them that actually had property inspection appraisal waivers.

Is an Appraisal Waiver Pre Check Right For You?

Ryan Hillard: So we did not require an in person appraisal on three of the loans that I did last month. Two of them were purchases, and one of them was a refinance. It made everything happen just a little bit smoother and made the customers just a little bit happier because they knew that they were saving that money. If this is a tool that’s beneficial for you, whether you’re purchasing or refinancing, I’d love to have a conversation and see if there’s a way that we can help put a little more money in your pocket as well.

Update: United Wholesale Mortgage (UWM) is no longer providing Appraisal Waiver Pre Checks. Reach out to inquire if available through other lenders we provide. It’s important to note that an appraisal waver pre-check, endorsed by the Federal Housing Finance Agency, can be a game-changer in the realm of property sales and refinancing. Utilizing this tool, brokers can sidestep the time and cost linked to in-person appraisals, often seen as a hurdle in the mortgage process. By using this appraisal waiver pre-check, brokers can ascertain if a property is eligible for an appraisal waiver and, consequently, fulfill appraisal waiver requirements without the need for a traditional appraisal. This tool holds the potential to pivot the sales price favorably, especially when pitted against competing offers. Employing an appraisal waiver or a property inspection waiver can expedite the process, enhance competitiveness, and translate into substantial savings for the client. Whether for a purchase or refinance, this approach can truly be a win-win for all parties involved.

What If Your Rate Goes Down Before you Close?

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Understanding What Happens to Your Locked Interest Rate if Rates Improve Before Closing

Transcript

Ryan Hillard: Are you wondering what might happen to your interest rate if you’ve already locked it but rates improve before you actually close? If so, then this is gonna be the video that you wanna check out.

The Importance of Market Conversation When Locking Interest Rates

Ryan Hillard: Now what happens in most situations is when you go to lock your interest rate, you should be having a conversation with your lender about what is going on in the market, and how volatile is it? Where do we anticipate that those rates are going to go? And taking that in combination with your own risk tolerance to make as educated of a guess as possible as to whether or not you wanna lock the rate and have it set right there or if you want to continue to float and see if the market improves or not. Now, assuming that you were to lock the rate, but you’re not closed on your loan yet, and the market actually improves…

What Happens if Rates Improve Before Closing?

Ryan Hillard: There may be a couple of options to take advantage of that, which in my opinion is probably pretty kind of the lenders, just because if rates were to increase, the lender is not gonna come back to the borrower and say, “Hey, I know we agreed on this over here, but we’re gonna retrade on our agreement and now we’re gonna charge you something higher.”

Lender Float-Down Policy or Rate Renegotiation Policy

Ryan Hillard: However, we do often see that borrowers will come back and say, yeah, I know we agreed on this rate over here. But the market got better. So, we want to take advantage of that improvement. So in order to account for this, a lot of lenders will have what we either call a float-down policy or a rate renegotiation policy or guideline.

Guidelines for Lender Float-Down Policy or Rate Renegotiation Policy

Ryan Hillard: Now, first, this is something that will and can vary among each lender. They’re gonna set their own guidelines for this type of policy. And there are some common things that they may keep in mind, but again, make sure that you are with the lender that you’re working with; if they do or do not have one of these policies in place, in an improving interest rate environment.

Some commonalities among them might be that you need to be through underwriting first. Meaning they want to basically know that this loan is going to close before they go and spend more money to renegotiate on a lock or anything like that. Also, they may not give you the full difference or the full benefits.

So just for a pure example case, let’s say that rates are in the mid-fives, and then they come down closer to five or somewhere than the high fours, maybe something like that. And rather than giving you the benefit or the borrower the benefit of going all the way down to what it would be exactly today.

They might either meet you halfway or give you, you know, a certain amount of that improvement. That way, they’re not out of pocket for the entire cost, and everybody still gets to win to some extent. And then another thing to keep in mind is that in some cases, they may want you to, or they may require you to close within a certain number of days once that renegotiation policy has already been set and has been established.

Assessing Risk Parameters and Making Educated Decisions

Ryan Hillard: And then, finally, you will only be able to do this once. This is probably the most common feature among these that they’re not gonna give you every little bit of improvement along the way if you are in the very beginning of this process, and you’ve already taken advantage of it once, and the market continues to improve, it is likely that you won’t be able to take advantage of it again. So it really is a thing where you need to assess your risk parameters, your risk tolerance, have a conversation with your lender, and make an educated decision to the extent possible, because none of us have a crystal ball that we can go and look at and tell you exactly what interest rates are going to.

But if you find yourself in that position, it’s certainly worth asking to see if you are able to take advantage of a rate renegotiation or float-down option.

Thinking about how rates impact your finances? Consider our innovative All In One Loan™ product. This tool combines your mortgage, banking, and loan accounts, potentially decreasing interest costs and giving you more control. Ready for a revolution in your financial management? Discover the All In One Loan™ today.

Should You Refinance?

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Refinancing a mortgage means:

  • You take out a new home loan with new loan terms.
  • The new loan pays off your original mortgage.

Reasons to Refinance

  • Many homeowners choose to refinance to:
  • Get a lower interest rate or monthly payment to free up room in their budget.
  • Shorten their loan term which reduces the interest they pay and can help them pay off their loan faster.
  • Switch from an Adjustable Rate Mortgage (or ARM) to a Fixed Rate Mortgage so that their monthly payment is fixed.
  • Pay off credit card or other debt.
    Remodel their home.

Refinancing a home can be a smart financial move, but you need to take time to evaluate your situation before you jump into refinancing.

Things to Consider Before You Refinance

How Much Equity Do You Have in Your Home?

Over the years, values have increased, which means for many homeowners, you have built up equity in your home. Your equity is the portion of the home that you own and is calculated by subtracting the mortgage balance, that’s what you owe on your current mortgage, from your home’s market value. For conventional mortgage refinances, you will need to have at least 20% equity in your home to avoid paying private mortgage insurance.

How Much Are Closing Costs?

Your mortgage professional will be able to tell you what your closing costs will be to refinance your mortgage. The cost to refinance a mortgage will vary according to your interest rate, credit score, loan amount and the lender you choose. The closing costs of a home refinance generally include credit fees, appraisal fees, points (which is an optional expense to lower the interest rate over the life of the loan), insurance and taxes, escrow and title fees and lender fees.
If you have enough equity in your home at the time of refinancing, you may choose to finance your closing costs and fees by adding them to your mortgage balance. You may also decide you want to take some cash out with your new mortgage, this cash may be used to cover your closing expenses.
A no-cost mortgage does not mean that it costs you nothing. With a no-cost mortgage you will have the cost of the mortgage tied into the interest rate, which means you could end up with a higher interest rate.
You’ll want to be sure to check with your licensed mortgage professional to find out your refinance options. I am happy to help you determine if now may be a good time for you to refinance.

How Much Interest Will You Pay?

Cutting your interest rate can help you pay less interest over the life of a new loan, compared with the remaining term of your original loan.
However, even with a lower monthly mortgage payment, you could be paying more interest over the long term by stretching out your new loan term. You could calculate how much interest you would be paying on both loans and compare the amounts. If it makes sense for you to refinance, especially if you are going to be lowering your monthly payment, then it may be a good time for you to refinance.

What’s Your Current Interest Rate?

If you don’t know what your current interest rate is, you can find it by looking at your monthly mortgage statement.

How Long Will You Be in Your Home?

Even if you can lower your interest rate and monthly payment, refinancing might not make sense if you are not going to be in your home for the next year or two. It’s going to take some time to recoup the cost associated with refinancing your home and if you plan on moving soon, you won’t have time to recover the cost of refinancing. If you have 21 years left to pay off your existing mortgage and you get a new 30-year mortgage, you’ve just added nine more years of paying a mortgage before it is paid off. You may want to consider getting a loan for less than 30 years. If you can lower your monthly payment or even keep your payment the same but pay your mortgage off faster, you could be debt free faster.

What are Closing Costs?

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Buyer’s Closing Costs

When you buy a home there are closing costs. These are costs that go above what you are paying for your down payment. Closing costs are your out-of-pocket fees used for items like getting your home loan, having the house appraised, getting the title transferred into your name and so on. Your closing costs can range between one and three percent of your loan amount, depending on different factors.

This means if you’re taking out a $300,000 mortgage loan, closing costs could range from $3,000 to $9,000. The amount a home buyer has to pay in closing costs can vary a lot depending on the home price, location, and other factors.

Typical closing costs paid by the buyer include:

  • Origination Fee — This is the fee from your mortgage lender used to set up and process your application, verify your documents, underwrite, and close your loan. 
  • Appraisal Fee — This is the fee to have your home appraised. 
  • Title Search and Title Insurance — A title search insures that your new home’s title is clear, and no one else can claim rights to the home or property. Title insurance provides protection against undiscovered claims.
  • Upfront Mortgage Insurance or Funding Fee — Some home loans require an upfront fee to insure or ‘guarantee’ the mortgage. Government-backed home loans like FHA, VA, and USDA mortgages, all have an upfront fee, though you can roll this fee into your loan amount instead of paying it at closing.
  • Discount Points — Discount points let you ‘buy’ a lower interest rate by paying an extra fee at closing. 
  • Escrow — Escrow is set up so that you pre-pay money that will be placed in an escrow account and disbursed as necessary to pay for your property taxes and homeowner’s insurance. You will also have your down payment due at closing, but this typically is not thought of as a ‘closing cost.’Any earnest money you paid when you made an offer on the house will be credited toward your down payment at closing.The type of mortgage you choose can also have a big effect on your closing costs. And the biggest of these is mortgage insurance.Mortgage insurance or MI is only paid when putting less than 20% down to buy the home with a conventional loan.  The Mortgage Insurance helps protect the lender.  Most mortgage insurance is paid with your monthly payment and considered an annual payment, however there are some loan programs that also have an initial mortgage insurance premium that is called an Upfront Mortgage Insurance Premium and may be due at closing as well.  Let’s look at some of these types of programs with Upfront Mortgage Insurance.
  • FHA Upfront Mortgage Insurance Premium (UFMIP)The first program is FHA home loans which require annual mortgage insurance an upfront insurance fee. The upfront mortgage insurance premium, or UFMIP — is equal to 1.75% of the loan amount, or $1,750 for every $100K borrowed. Despite its name, FHA upfront mortgage insurance doesn’t have to be paid at closing. Most borrowers roll this cost into their loan amount rather than pay it with cash. Rolling UFMIP into your loan will greatly reduce your closing costs. But it does mean you’ll pay interest on the fee over the life of your home loan.
  • VA Loan Funding FeeVA loans do not require annual mortgage insurance. But they do require a one-time ‘funding fee’ due at closing unless the veteran has exempt status. For first-time home buyers, the VA funding fee is usually equal to 2.3% of the loan amount. Buyers who have used a VA loan before will pay 3.6% of their loan amount. If you make a down payment of 5% or more, the VA funding fee is reduced. VA home buyers also have the option to roll this fee into their loan amount instead of paying it along with their closing costs.
  • USDA Guarantee Fee Like the FHA loan, the USDA home loan program requires both an upfront mortgage insurance fee and an annual one. USDA’s upfront fee is equal to 1% of the loan amount and can be added to the mortgage balance to reduce closing costs. It’s important to be aware of all the costs associated with buying a home so that you have enough money to pay your closing costs. If you’re not sure, check with your lender, they will cover your closing costs and your options. There are several costs to be aware of when buying a home, but the great news is that our team is here to help you throughout the process.

Five Things You Should Do Before You Buy a Home

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Buying a home can be a stressful and confusing time for many homebuyers. But it does not have it be. One of the first things you should do when you are considering buying a home is to know your credit score.

Tip Number One:

Get Your Credit Report and Scores for Free

To get a home loan there are several factors that come into play, but your FICO or credit score is one of the most important. You can check your credit report and get your scores online for free. The Fair Credit Reporting Act requires each of the nationwide credit reporting companies — Equifax, Experian, and TransUnion — to provide you with a free copy of your credit report, at your request, once every 12 months. Once you have your credit report be sure to review it and check for any errors.

Tip Number Two:

Look for Errors on Your Credit Report

Mistakes on credit reports are bigger issues than you may realize. If you do find inaccuracies, you can dispute them with the three major credit bureaus. They have 30 days to investigate your dispute. If they find that the item in question is inaccurate, they will correct it.
The higher the credit score the more likely you are to get approved for a home loan, so check what you can do to improve your score.

Tip Number Three:

Improve Your Score Before Applying

A few points difference in your credit score can be the difference in whether you qualify for a home loan or not. There are a few things you can do to increase your scores. First, pay down the balances on your credit cards. Your credit utilization ratio is your credit limit divided by your card balance. This ratio accounts for 30% of your overall credit score, only payment history has a bigger impact. For example, if your credit limit is $10,000 and your balance is $6,000 your utilization ratio is 60% which is high. The lower your credit card balances are the higher your credit rating will be. Some credit experts advise keeping your balances below 20% of your credit card limit.

The next thing you can do is to make all your payments on time. 35% of your credit score is based on your payment history so it’s important to pay all your bills on time. If you’re a forgetful person you can set up auto pay with your creditors, so you never miss a payment.

If you are wanting to buy a home, do not apply for, or open any new credit. This means to hold off on buying a new car or opening a credit card until after you close on your mortgage.

Tip Number Four:

Check Your Savings

You will need a certain amount of cash in the bank to buy a home. If you are living paycheck to paycheck then it probably is not the ideal time for you to apply for a loan. There are more upfront costs associated with getting a mortgage loan besides the down payment. There are closing costs and fees that you will need to pay to the appraiser, lender and title company, so you need to make sure you have enough cash on hand when you get ready to close. And one of the most important things you should do before you go out looking for a home is to get pre-approved.

Tip Number Five:

Get Pre-Approved

A pre-approval means you have completed a mortgage application and a mortgage lender has checked credit and verified income and assets. You will need to submit documentation verifying your income, assets and savings and your lender will be able to help you through this process. Most sellers today will not even consider an offer from a buyer who has not already been pre-approved, so plan on meeting with your mortgage lender before you go shopping for your home.

Buying a new home is exciting and there are a few simple things you can do before you start looking that will help you through the process.

Contact us to find out more about buying your home! We are happy to help!

First Time Home Buyer Guide

Written by Ryan Hillard on . Posted in Guide. No Comments on First Time Home Buyer Guide

Benefits of Home Ownership

Although the experience of owning your first home can be fulfilling and exciting, the actual financing and buying process can be quite overwhelming. From choosing the right neighborhood for your lifestyle to reviewing your financing options, there are a lot of important decisions that you need to make to buy a home. By understanding the home buying process and the financing options available, it should bring you some peace of mind, while helping you make informed financial decisions.

Tax Benefits

There are many advantages to home ownership, such as tax benefits, building wealth and securing financial stability. As a homeowner, you can deduct your monthly mortgage interest and your property taxes on your income tax. Certain costs incurred during the purchase of a home are also tax deductible. Be sure to save all of your closing documents, as you will need them throughout the process and in the future. It is best to contact a tax professional to receive more detailed information on what deductions you may be eligible to receive.

Although the experience of owning your first home can be fulfilling and exciting, the actual financing and buying process can be quite overwhelming. From choosing the right neighborhood for your lifestyle to reviewing your financing options, there are a lot of important decisions that you need to make to buy a home. By understanding the home buying process and the financing options available, it should bring you some peace of mind, while helping you make informed financial decisions.

Building Wealth through Home Ownership

Owning a home can help you build wealth in two ways – growth in equity and appreciation. Growth in equity happens as you pay down your mortgage. A certain percentage of each mortgage payment goes towards a reduction in the total amount owed. Typically, payments in the first few years of the mortgage are primarily applied to interest on the loans. As time passes, however, more and more of each payment is applied to the outstanding loan amount and your equity in your home increases. Appreciation is when the value of a property builds over time. Historically, real estate market values tend to grow over time. Also, when you update existing features or remodel a home, the value of your home may increase.

Financial Stability through Home Ownership

As a homeowner, you gain more financial stability over the years of owning a home. Fixed-interest home loan payments remain stable year-after-year, as opposed to rent payments, which may increase year after year. Since salaries generally rise over time, the fact that mortgage payments remain steady over time can help you manage, plan and grow your wealth.

The Home Buying Process

Once you have made the decision to buy a home, you may ask yourself “What should I do first??”

The home buying process begins by finding out how much you qualify for. This means that you will need to first meet with a lender and review your financial documentation to find out how much you qualify for. Once you find out how much you qualify for, you can begin looking for a house. Once you find a house you like, you will make an offer and then you will be able to close on your house.

The home buying process is simple and typically happens in this order:

Step One

Collect Financial Records

Your lender will ask you for your financial records to determine your financial stability, creditworthiness and ability to repay the loan. These items will cover your job history, credit score, income and assets.

PITI

When evaluating your future housing expenses, it’s important to take into consideration the entire housing expense, not just the mortgage payment. Mortgage lenders use PITI calculation (Principal, Interest, Taxes, Insurance) to determine the total monthly housing expense. HOA (Homeowner Association) fees will also be added to the calculation when applicable. The PITI calculation will be used as one of the components of the Debt-to-Income ratio.

Total Debt-to-Income Ratio

When evaluating your ability to repay the loan, your lender will calculate your debt-to-income ratio or DTI. The DTI is your total minimum monthly debt (proposed PITI, credit cards, student loans, car payments, etc.) divided by your gross monthly income. The lower your debt-to-income ratio, the higher the likelihood of getting the home loan terms you want.

Credit Score

A credit score is generated by a credit reporting agency and is calculated from several pieces of data in your credit report. Both positive and negative information is considered in the calculation, including payment history, amounts owed, length of credit history and types of credit used. The higher the score, the better your loan rates are likely to be.

Step Two

Evaluate Your Home Loan Options

When you are shopping for a mortgage loan it is especially important to work with a licensed mortgage professional who you feel comfortable with and who you feel you can trust.  

Your mortgage professional can help you:

  • Identify any credit issues that may hinder a loan approval.
  • Guide you through the loan application and closing process.
  • Help you determine a purchase price and monthly payment that fits in your budget.
  • Help you compare different loan programs so you choose the best one for your financial needs.
  • Manage and address any issues that may come up along the way.

When choosing a mortgage, there are many factors to consider which would affect your monthly payments, closing costs, amount of cash needed at closing and total amount paid for your loan.

These factors include:

  • Whether the loan is Fixed or Adjustable Interest Rate
  • Number of years (or term) that you will be making payments
  • Down payment amount
  • Mortgage insurance options
  • Fees

Do not be afraid to ask questions so that you fully understand the impact of these factors on your home loan. The more knowledgeable you are, the more comfortable you feel and if your lender cannot answer your questions you may not be working with the right lender. 

Do not be afraid to ask questions so that you fully understand the impact of these factors on your home loan. The more knowledgeable you are, the more comfortable you feel and if your lender cannot answer your questions you may not be working with the right lender.  

Here are a few questions that you may want to ask:

  • “What’s the difference in monthly payments between a 15-year term and a 30-year term?”

While a 15-year term will result in a higher monthly payment, you may qualify for a lower interest rate. Plus, you would be finished paying for your home in half the time, saving a significant amount on interest payments.

  • “What interest rate would I qualify for if I chose an Adjustable Rate mortgage?”

Usually, adjustable rate mortgages have a lower starting interest rate, resulting in a lower initial monthly payment. Adjustable rates tend to increase over time. However, if you plan on staying in the home for only a few years, this may be a viable option. And if you are bringing in less than 20 percent for a down payment, you will want to know about mortgage insurance. 

  • “How would mortgage insurance affect my monthly payment and how long would I have to pay it?”

Mortgage insurance reduces the down payment requirements for the borrower, but it will increase your monthly payments. Depending on the type of loan and the specific insurer, you may be able to eliminate the mortgage insurance payments once your balance drops below a certain level. There are many other questions you may have. Be sure to write them down, so that you do not forget to get information on all the details.

Step Three

Finding Your New Home

Once you have been approved for a loan, the next step is to find your dream home! The house hunting stage can be fun and exciting, but it is important to keep your priorities in mind when evaluating potential homes.

For example, perhaps you have found a beautiful, large home, but the school district is rated poorly. Is a smaller house in a better school district a better fit? This depends on your family’s unique needs.

You may have to look at dozens of homes before you find one that suits your lifestyle, budget and includes all the features that you and your family desire. However, you should be prepared to readjust your priorities during your home search in order to find a home that is in budget and fits all your needs. 

As you search for homes and find one that you are set on, you will want to make an offer. But when you get ready to make an offer, you will want to be sure to work with a reputable real estate agent, who can help you through the entire process.

A real estate agent can also be a great asset in helping you find your dream home. Real estate agents generally have access to home sale listings that you may not be able to access on your own.

A good real estate agent can help you by:

  • Reviewing your wish list and researching potential homes.
  • Making arrangements to show the homes that fit your requirements.
  • Researching neighborhoods, schools and tax rates.
  • Negotiating a purchase price and making the offer. 
  • Assisting in the purchase and closing process.

Wherever you are in the home buying process, the first step is to find out how much you qualify for and that begins by meeting with a lender. If you’re ready to take the first step in the home buying process, contact Forward Mortgage Group today for a free consultation with one of our experienced lenders.