Proper Way To Rate Shop For A Mortgage...

 Good Morning!

If you’re rate shopping for a mortgage – here are some guidelines for you to keep in mind…

1) Get a Loan Estimate (LE). There’s always a relationship between fees / points / and rate. …You won’t know what that relationship is unless you look at a LE. (A low rate is great, but if you are paying points to get it – it may not be so great after all.)

2) When looking at the LE – focus on the mortgage fees. These are the only fees the loan officer really knows at the time he/she is creating the LE. They will just be estimating the title fees, insurance, and taxes.

3) Pay attention to the date on the LE – or rate quote. The rate market changes daily. You have to compare apples to apples. …To compare two rates generated 1 week apart is a waste of time. The rate that appears higher may actually be priced more competitively than the lower rate – depending on when the quote was generated.

That’s it for today!

Have a good day! …and thanks for reading.

Brett

 

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How To Avoid Paying Mortgage Insurance When You Buy A House...

 Good Morning!

If you have a conventional loan, and your loan to value ratio is over 80% – you will be paying monthly mortgage insurance to the lender.

No one likes paying monthly mortgage insurance.  It’s extra money added to your payment every month, and it doesn’t help pay down the balance of the loan.

If you want a conventional loan and your LTV is over 80%, but don’t want to pay monthly mortgage insurance there are two ways to avoid this…

1)   One would be Lender Paid Mortgage Insurance.  We pay the MI for you.  The rate generally is .25 to .375 higher, but there is no monthly mortgage insurance.

2)  Get a piggyback loan.  This is where we make two loans for you.  …A first mortgage at 80%, and a second mortgage at 15%.  This way you just put down 5%, and there is no monthly mortgage insurance payment.

Thanks for reading!

Have a good day

Brett

 

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Three Important Changes To FHA Loans Regarding Student Loans...

 Good Morning!

HUD came out with three important changes to FHA loans.  Specifically regarding how they underwrite student loan payments used to calculate a debt to income ratio.

These changes take effect August 16, of 2021.

1)  Previous rule:  If you have a student loan we have to use at least 1% of the balance as a payment towards the debt to income calculation.  Even if the loan is deferred.

Change 1:  If a borrower has an income based payment now all we need is the paperwork from the servicer showing the new payment.

Change 2:  We may now may exclude the payment from the Borrower’s monthly debt calculation where written documentation from the student loan program, creditor, or student loan servicer indicates that the loan balance has been forgiven, canceled, discharged, or otherwise paid in full.

Change 3:  In the absence of an income based payment we will now use one half of one percent (0.005%) of the loan balance to calculate a payment.

These are welcome and important changes to anyone applying for a mortgage that has student loans.  People who couldn't qualify for a loan due to a high debt to income ratio, may now qualify depending on their ratio using this new calculation.

That's it for today!

Thanks for reading!

 

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Be Aware Of This If You Change Jobs During The Loan Process...

 Good morning!

Sometimes we have people apply for mortgages that have recently changed jobs.

Here are a few things to keep in mind if you or someone you know is about to change jobs and apply for a mortgage…

The underwriter will want to see your first paycheck at the new job at a minimum, and often they will want to see your first 30 days of paychecks.

The underwriter isn’t trying to make your life difficult by asking for your new paychecks. …This is a common guideline in the mortgage industry.

There is one circumstance where you can change jobs and not have to supply your new paycheck prior to approval…

If you continue to work for the same company, but you are just changing jobs within that company then you won’t have to produce a new paycheck.

If you have more questions on this – don’t hesitate to give us a call or shoot us an email!

Have a good day today! …and thanks for reading.

Brett

 

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How Yesterdays Fed Announcement Affects Mortgage Rates...

 Good Morning!

Mortgage rates are on the rise today.

This is due to the Fed's announcement yesterday that they may be increasing their lending rate in 2023.  Even though the Fed
lending rate has no direct impact on mortgage rates, an announcement like that still affects the mortgage rate market.

The Fed didn't say when they may start to reduce their bond purchases, which would more directly affect mortgage rates.

Hopefully, it will be a small bump in the road and rates will rebound favorably.

That's it for today!

Thanks for reading!

Brett

 

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How A No Cost Refinance Works...

 Good Morning!

I have people ask me about no cost refinances.

I wanted to take a minute and tell you exactly how a no cost refinance works.

There are two pools of funds you have to address when you refinance…

1) Closing costs.

2) Pre paids. (taxes, interest, and insurance)

A no cost refinance will cover your closing costs. You would still be responsible for the pre paids (although we can roll them into the loan) – because you would pay these costs whether you refinance or not.

Now, if your current loan is escrowed you would be reimbursed the balance in your escrow account after closing. So, this would be a wash for you.

Let me give you an example of how a no cost refinance works…

Let’s say your current rate is at 3.75%. …and let’s say normal closing costs on your refinance loan would be $4,000.

There are two ways to approach this refinance…

1) You can take the very lowest rate in the market at the time. …Let’s say it’s 2.75%. If you elect to go this route – you would either have to pay the closing costs yourself, or we could roll them into the loan. Either way you are paying for the closing costs.

2) You could take a slightly lower rate – say 3.00%, and we (the lender) can pay the $4,000 closing costs for you.
Option 2 is a true no cost refinance. You were able to lower your rate and monthly payment for free. It didn’t cost you any money to do it!

If you would like for us to review your current situation for a no costs refinance – just give us a call, or shoot us an email.

That’s it for today!

Have a good day today! …and thanks for reading.

Brett

 

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Down Payment Requirements For Various Loan Programs...

 Good Morning!

One of the most common questions I get from borrowers is “How much will I have to put down to get a mortgage?”

Here are your minimum down payment options on the loan products currently available in the marketplace.

Loan Programs…

VA loan: No down payment necessary. No monthly MI. This is the best loan going if you can qualify for it.

USDA: No down payment necessary. Low monthly MI. Mainly for rural areas or outlying suburbs. Has geographic and income restrictions.

FHA: The minimum down payment is 3.5%. Great rates, has upfront and monthly mortgage insurance.

Conventional: You will need 5% down for Conventional loans. (3% for first time home buyers)

The bottom line:

1) If you have less than 5% to put down VA and USDA are best if you qualify for them. Otherwise FHA is a wonderful loan program – very friendly to the borrower.

2) If you have 5% or more to put down you can get a Conventional loan, and you will have multiple loan choices.

That’s it for today!

Have a good day! …and thanks for reading.

Brett

 

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Don't Do This When Applying For A Mortgage...

 Good Morning!

Mortgage tip: If you are about to get into the loan process to buy or refinance a house – don’t go out and buy things on credit.

It sounds simple, and you would think most people would know this without being told.

…but, I have a loan right now where a borrower got himself into trouble from doing just this very thing.

There are three possible complications:

1) You have to explain the inquiries on your credit.

2) It will raise your debt to income ratio if you take on additional credit.

3) If you finance an amount over 50% of the available credit it could negatively affect your credit score.

So, while you are in the loan process – don’t apply for anything that would involve credit.  (appliances, lawn equipment, etc.)

That’s it for today.

Thanks for reading!

Brett

 

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Proper Way To Complete A Lease Option...

 Good Morning!

When you give someone option money at the onset of a lease option agreement – you are going to have to prove you gave that money when you get a loan to buy that house.

How do you prove it?

If it’s certified funds you need to keep a copy of the certified check.

If it was a personal check – you need to keep a copy of the cancelled check (front and back).

Don’t give cash!

Anything less than this – the underwriter will not give you credit for giving that money.

That’s it for today!

Have a good day today! …and thanks for reading.

Brett

 

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