The Lending Coach

Coaching and teaching - many through the mortgage process and others on the field

Category: Mortgage (page 1 of 12)

VA Loans: Some Specifics and Fee Structures

Veterans Affairs mortgages, better known as VA loans, offer considerable benefits for eligible military veterans, service members and spouses who want to buy a home.

What makes the VA loan so attractive to veterans is that they offer no down-payment loans and more lenient credit and income requirements than conventional and FHA mortgages.

With that said, there is some confusion surrounding what can and can’t be charged to the veteran at closing. The article below will outline some of the benefits of the VA loan as well as the fee structure associated with the loan.

The Specifics

VA loans generally offer more competitive rates compared to conventional financing. In many cases, these loans consistently offer the lowest rates on the market, according to reports by mortgage software firm Ellie Mae.

VA mortgages are made through private lenders and are guaranteed by the Department of Veterans Affairs, so they don’t require private mortgage insurance, known as PMI.

Most members of the regular military, veterans, reservists and National Guard are eligible to apply for a VA loan. Spouses of military members who died while on active duty or as a result of a service-connected disability also can apply.

The Details and Fee Structures

The seller is allowed to pay all of the veteran’s closing costs, up to 4% of the home price. So, it is possible to avoid paying anything out of pocket to close your home purchase.

If you have little or no funds available for closing cost, let your real estate agent know that you are purchasing your home with a VA loan. Your agent may be able to request that the seller pay for some or all of your closing costs.

Also, the VA limits the amount of fees the lender can charge. This is a great benefit to the VA loan.

Fees Not Allowed to be Charged to the Veteran

Some fees are not allowed to be charged, per VA loan guidelines. Here are the specifics:

Attorney Fee

An attorney fee cannot be charges unless it is for anything besides title work.

Escrow Fee/Settlement Fee/Closing Fee

The VA does not allow the veteran to pay an escrow fee. The escrow fee varies greatly and can be quite expensive, so this is a great benefit to the VA loan.

Application Fee

This is a fee the lender sometimes charges up front before the borrower takes an application. This is not allowed on VA loans.

Mortgage Broker Fee

Sometimes charged by mortgage brokers when they broker a loan out to the lender.

Closing Protection Letter (CPL)

The CPL fee is often included in the escrow fee but sometimes charged separately. It is a letter that makes the title company responsible if escrow does not appropriate loan proceeds correctly.

Document Preparation Fee

Fee charged by escrow for preparing final loan documents.

Lock-in Fees

Fees charged by the lender to lock the interest rate.

Courier Fee/Postage Fees

Sometimes there are original documents that need to be hand-carried or sent via overnight service, and can’t be emailed or faxed. In this case, the escrow company will often charge a courier fee to ensure these services are paid for. The veteran is not allowed to pay these fees.

Notary Fees

Fees charged by escrow to send a notary to the borrower for a signing appointment outside escrow’s office.

Termite Report

The veteran cannot pay for a termite inspection or report in all but 9 states in the US.

Tax Service Fee

This fee is paid to the mortgage company to ensure they pay the real estate taxes.

The Fine Print

This list of allowable and non-allowable fees above is not all-inclusive and there may be other fees on your purchase transaction that are not mentioned here. In that case, it’s best to contact your lender to find out if the charge is allowable on VA loans.

Fees That Can Be Charged to the Veteran

VA Upfront Funding Fee

This fee goes directly to the Veteran’s Administration to defray the costs of the VA program. This is not a fee that is generally paid for in cash at closing – usually VA homebuyers opt to finance it into their loan amount. If the fee is wrapped into the loan amount, it does not increase the total amount of cash needed to close the loan.

Appraisal Fee

The appraisal is paid by the veteran and is usually paid at closing.  For more regarding appraisals, go here….

Origination Fee

The VA limits the lender’s compensation on VA loans to 1% of the loan amount. This fee is meant to compensate the lender in full. Fees for items such as processing and underwriting may not be charged if this 1% fee is charged to the veteran.

Third Party Fees

Companies involved in the transaction other than the lender are called third parties. Examples are title and escrow companies, credit reporting agencies, and appraisers. Their charges are called third party fees. Common fees are title insurance policies, recording fee, credit fee, and flood certifications.

Prepaid Items

Prepaid items are items the buyer has to pay in advance. Lenders require insurance policies and taxes to be paid in advance. Not paying for taxes and insurance can jeopardize the integrity of the collateral for the loan, which is the house.

More Information Available

For more information regarding VA loans and eligibility, don’t hesitate to contact me – as it would be my pleasure to help!

Rising Interest Rates Aren’t Deterring Buyers

Mortgage interest rates have risen consistently over the last year-and-a-half. At that time, rates for the 30-year fixed were just under 4%. Lately, the average is closing in on 5% percent for a 30-year fixed-rate mortgage.

Let’s take a look at the facts and crunch the numbers. You’ll likely find that minor rate fluctuations won’t affect a buyer’s ability to purchase a home

Despite these rising mortgage rates, there’s good news:

  • Rising mortgage rates don’t have to stifle the buyer’s dream of owning
  • In fact, a new study by Redfin shows that rising rates aren’t scaring off many shoppers
  • Rates remain historically very affordable, even if they are a bit higher today

Source: You can find out more here – by reading Erik Martin’s entire piece at The Mortgage Reports

What the research found on interest rates and purchasing patterns

A recent survey of potential buyers by Redfin reveals some interesting findings:

  • Only one in 20 would call off their search if rates rose above 5 percent
  • One in four said such an increase would have no impact on their search
  • Nineteen percent would increase their urgency to find a home before further rate increases
  • Twenty-one percent would look in other areas or search for a more affordable home
  • One-third would slow down their search to see if rates came back down

This means that many buyers understand the environment today – and realize the long-term benefits of home ownership.

How to read the data

Taylor Marr, senior economist at Redfin, says these results are telling.

“Only a small share of buyers will scrap their plans to buy a home if rates surpass 5 percent. This reflects their determination to be a part of the housing market,” he notes.

Marr says buyers are well aware that rising mortgage rates mean slightly higher monthly payments. Yet buyers are willing to make compromises, as they understand that actual wages are higher today, making the purchase more affordable. Also, they know that real estate generally appreciates.  Finally, today’s rates remain very low, compared to historical norms.

“By historical terms, 5 percent mortgages are not that high. A rate below 7 percent is really a good deal on long-term money,” Joshua Harris, clinical assistant professor of real estate at NYU’s Schack Institute of Real Estate, says. “Plus, rents are generally high. So even at 5 percent, many buyers will still be saving money on monthly housing costs.”

What buyers can do now

Most experts recommend the following steps:

Buy now if you can afford it – “While rates are going up, so are home prices in most markets,” says Harris. “The job market is great. Many are seeing wage growth in many sectors. These forces will push rates up and give people more money to spend on a house. So waiting can be a very costly decision if you need a house and don’t want to rent.”

Get your financial house together – start the pre-approval process and get qualified for a loan. “Ask questions and understand the monthly payments you’ll need to make,” suggests Suzanne Hollander, real estate attorney, broker and Florida International University instructor. Will your income be able to cover the principal, interest, taxes and insurance? Will it provide enough money to live the lifestyle you prefer?”

Don’t sweat a minor rate hike – “So long as you intend to hold the home for at least five years, these small fluctuations shouldn’t affect your decision to buy,” Harris adds.

With economic gains outpacing mortgage rate interest rates in many markets, you may be better able to buy a home today than at any time over the last 10 years. Don’t hesitate to reach out to me and find out more!

The Top 5 Down Payment and Mortgage Insurance Myths

For first-time home buyers, it can be more than overwhelming to hear all the stories from friends and colleagues about getting their first home loan.

Many times they are led to some false conclusions.

If they don’t know the real facts about the loan qualification process, it can keep them from taking the necessary steps toward owning the home they’ve been dreaming about.App form

Let me clear up some facts and make sure the correct information is out there.

The Top 5 Down Payment and Mortgage Insurance Myths

Number 1: Borrowers need a 20% down payment

According to the National Association of Realtors, the majority of first-time home buyers believe they need at least a 10% to 20% down payment. However, that’s simply not true with all of today’s different loan types and programs. Across the US, today’s average down payment is generally in the range of 5-10%. Even so, there are loan programs that allow as low as 3% and even a few no-down loan options.

Number 2: Mortgage Insurance (PMI or MIP) is required on all home loans with less than 20% down

Mortgage insurance is generally required by the lender when a borrower purchases a home using conventional financing with less than a 20% down payment. But there are dollar house questionmarkloan programs available that don’t require PMI. VA Loans do not require PMI, for instance. There are other loan programs with possible reduced mortgage insurance, so be sure to check in your mortgage lender to find out what might fit your particular situation.

Number 3: Mortgage Insurance is Permanent

Mortgage insurance is in place to protect the lender when there is less than 20% equity built up. Once more than 20% equity is in place, this insurance can be removed. Believe it or not, PMI will automatically be terminated when the principal balance reaches 78% of the original value. You can also request cancellation sooner in writing if your home value has increased enough (contact your lender for exact requirements and instructions).

For those with FHA loans, borrowers can refinance into a conventional loan to eliminate the insurance when your loan-to-value reaches 80%.

Number 4: Mortgage Insurance Protects the Borrower

Interestingly, many borrowers make the mistake of thinking that PMI is insurance that either protects the home or protects them if they end up in a foreclosure situation.House_key_digital

Actually, mortgage insurance is in place to protect the lender from default on the loan, which enables lenders to help more borrowers get loans. It does not provide protection for the borrower if they go into foreclosure.

Number 5: No Gifts Can Be Used for a Down Payment

It’s common for today’s U.S. buyers to receive cash down payment gifts. First-time home buyers are most likely to receive a cash gift among all buyer types, but repeat- and move-up buyers receive them, too.

The down payment gift rules are (1) the gift must be documented with a formal “gift letter”; (2) a paper trail must be shown for the gifted monies as they move from the giver’s account to the home buyer’s account; and (3) the gift may not be a loan-in-disguise. You can find out more about the specific of gifts from Dan Green at The Mortgage Reports here.

Now that you know more of the facts about down payments and mortgage insurance, let me know how I can help you begin your home ownership journey!

Tom Title Bar

The Ever-Changing Mortgage Lending Landscape – Alternative Options Included

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Historically, mortgages in the U.S. were traditionally financed by banks. Interestingly, these institutions also operate other lines of business, like offering deposit accounts, safe deposit boxes, and insurance products.

But today, mortgage lending is anything but old-fashioned, and as buyers are looking to lenders other than banks to fill the void. home loan tiles

Fortunately, these newer financial institutions continue to create innovative mortgages that fit the diverse needs of borrowers, rather than forcing consumers to conform to rigid standards. The end result is more people with the financing to afford the home they need, rather than being shut out of homeownership entirely.

The trend away from banks and toward nontraditional lenders is a relatively recent development that is reshaping the financial landscape in the U.S. This can be seen in a report of the top U.S. mortgage lenders by market share in 2011 compared to 2016. Get this, in 2011, 50 percent of all home financing was underwritten by the five biggest banks in the country.

interest-rateJust five years later, however, six of the top 10 mortgage lenders by volume were considered “non-bank lenders” that focus on home loans almost exclusively.”

Explaining the shift in the mortgage market

Why are more homebuyers choosing non-bank lenders over traditional banks?

Much of the shift has to do with the increasingly strict standards that banks adhere to when vetting mortgage applications. Prospective homebuyers were expected to have stellar credit scores, high income and significant net worth already established before being approved for a traditional loan.

However, this is not the financial reality for millions of Americans. The new lenders can be a better alternative for families that have imperfect credit for one reason or another and just need a second chance.

Secondly, the new mortgage lenders are much more in tune with their customers and provide a far better experience. There is a much greater level of personalization, With the larger banks, on the other hand, customers can just become a number.magnifier-inspection-house

These new lenders have dramatically increased their market share purely on the basis of the superior service and support they provide.

Finally, the speed in which mortgage lenders can close transactions is much quicker than those of traditional banks. There are fewer layers in these organizations decision making can be made at a faster pace.

Traditional banks are not known for their efficiency, and the result for mortgage applicants is a long, drawn-out process of signing paperwork and enduring waiting periods

Many mortgage lenders can close loans in under 25 days, where that is not the case with larger institutions.

Non-Prime Lending Options

The need for non-prime products is growing, as conforming loan rules have tightened.  Working with a lender that can only provide standard, conventional products will limit a legitimate and legal funding resource for many customers.

Approved_pagadesignA bank statement loan or a loan on a non-warrantable condo are examples of “non-prime” products.  A bank statement loan, among other things, can support the private business owner who has significant expense associated with their business and can still satisfy credit and ability to repay. These are individuals who will not qualify under the conventional guidelines of Fannie/Freddie but still have the ability to service a mortgage on time.

For investors, there are products that utilize the rent from the property to qualify for a loan. In this option, the debt coverage ratio measures the ability to pay the property’s monthly mortgage payments from the cash generated from renting the property.

Lenders use this ratio as a guide to help them understand whether the property will generate enough cash to pay the mortgage expense.

The debt coverage ratio is calculated by dividing the property’s month net operating income (NOI) by a property’s monthly debt service. The monthly debt service is the total of the mortgage principal and interest payment, taxes, insurance, and any HOA fees.

Contact The Right Lender

When you are shopping for you lender, make sure that he/she has a wide variety of products available and takes the time to understand your individual needs. That will make all of the difference – and it would be my pleasure to help!

Tom Title Bar

The Latest on Interest Rates for 2018 and 2019

The Federal Reserve lifted the federal funds rate last month by a quarter percentage point to a range of 1.75 percent to 2 percent. The Fed has indicated that there will most likely be two more rate hikes this year.

Most financial experts expect the Federal Reserve to raise rates at least 3 times in 2019, as well.

Mortgage interest rates don’t necessarily move in step with the federal funds rate, as they are more closely tied to the 10-year Treasury Bond. So, borrowers today looking to get a mortgage aren’t directly affected by the latest Fed hike.

However, the federal funds rate does contribute to the longer-term trends of the 10-year Treasury, and long-term fixed mortgages as a result.

With the Fed likely lifting rates multiple times over the next couple of years, the trend for long-term mortgage rates is up. 

Many experts are forecasting that mortgage rates could move near the 6% range sometime in 2019.

Why is the Federal Reserve raising rates?

Well, it’s a bit complicated, but there are some very good reasons – and they are all designed to help foster stable, economic growth.

‘Quantitative Tightening’

Between 2009 and 2014, the US Federal Reserve created $3.5 trillion during three phases of what was called “Quantitative Easing”.  It was the Federal Reserve’s response to help reduce the dramatic market swings created by the recession about 10 years ago.

This seems to have helped the economy avert disaster, but their impacts were far from ideal. Nonetheless, the economy slowly lifted off as consumers rebuilt their balance sheets and asset values rose.

Today, the Fed is slowly reversing this stimulus program. They’re raising short-term rates and shrinking their bond and mortgage back securities portfolio.

The consensus thinking is that the Federal Reserve members fear that inflation will take hold if they keep interest rates artificially low.

Historically, when the bonds owned by the Fed mature, they simply reinvested the proceeds into new bonds.  It essentially keeps the size of the balance sheet stable, while having very little impact on the market.

However, when quantitative tightening began in October of 2017, the Fed started slowing down these reinvestments, allowing its balance sheet to gradually shrink.

In theory, through unwinding its balance sheet slowly by just allowing the bonds it owns to mature, the Fed can attempt to mitigate the fear of what might happen to yields if it was to ever try and sell such a large amount of bonds directly.

Essentially, the Federal Reserve is changing the supply and demand curve and the result is a higher yield in the 10-year treasury note.

Inflation and Interest Rates

Inflation is beginning to inch up as the labor market continues to improve. Most indicators suggest inflation has been climbing in recent months. If you look at both the Producer Price Index and the Consumer Price Index, you will see the trends.

This is a general reflection better economic data, rising energy prices, and increased employment.

Rising inflation is a threat to government bond investors because it chips away at the purchasing power of their fixed interest payments. As mentioned earlier, the 10-year Treasury yield is watched particularly closely because it is a bedrock of global finance. It is key in influencing borrowing rates for consumers, businesses and state and local governments.

Positive labor and economic news keeps coming in (as predicted over the last 6 months), and the prospect of inflation will put pressure on bonds and interest rates.

What It All Means

So, it is safe to say that we will continue to see pressures in the bond market and mortgage interest rates overall. These increases do look to be gradual for the time being, but consistent and into 2019, for sure.

With that said, home prices are increasing nationally at nearly 6%, so the increase in interest rate will be more than offset by the increasing value of one’s home!

Secondly, home buying power is still extraordinarily high, despite rising home prices and rate hikes. Find out more about that here.

In reality, now is a fantastic time to purchase. Contact me for more information, as it would by my privilege to help you.

Home Buying Power Still High, Despite Rising Prices and Rates

I’m receiving calls and questions all the time regarding mortgage qualification and home buying in today’s changing interest rate and price appreciation marketplace.

Your home buying power is the result of several variables – but there’s great news today when you consider increased income and historically low mortgage rates.

I’m linking today to an article by Amy Hale of The Mortgage Reports that really nails the answer. Go here for the entire article – and I’ve highlighted the key pieces below.

Are home prices really that high?

It might seem like home prices just keep rising, but according to the historical numbers, today’s housing is actually very affordable. “Real” home prices—those adjusted for income and interests rate changes—are currently 32.5 percent below their housing boom peak from 2006.

Home buyers still hold the power

According to the latest First American Real House Price Index, which aims to measure overall housing affordability by considering changes in income, interest rate and actual home prices, consumer home buying power is still strong.

“While unadjusted house prices have been on the rise since the end of 2011, nearly a seven-year run, consumer house-buying power has also increased by 14.3 percent over the same period,” said Mark Fleming, First American’s chief economist.

“House-buying power, how much one can buy based on changes in income and interest rates, has benefited from a decline in mortgage rates since 2011, and the more recent slow, but steady growth of household income.”

Buying power is actually up significantly from 2011 because real wages have actually increased over that time – household income has risen nearly 20% over the last 7 years. Also, mortgage lenders have relaxed some of the tight requirements and ratios for qualification. This combination makes it a great time for buyers and borrowers.

The real story on home prices

Overall, “real” home prices aren’t even close to their historical peak. In fact, according to Fleming, they’re currently 32.5 percent below July 2006’s prices and 9 percent lower than in January 2000.

Don’t let sticker prices fool you. American home buying power is still high. Want to get in on the market? Reach out to me for some answers, as it would be my privilege to help!

Rents Continue To Rise – Is It Time To Consider Purchasing Instead?

According to a new report, if you’re renting a house in hopes of saving money, you might want to re-think that strategy. Amy Yale at The Mortgage Reports shows that single-family rents are up significantly over the year –particularly on lower-end properties.

You can access Amy’s article in its entirety here….

According to industry expert CoreLogic and their Single-Family Rent Index, rents on single-family properties are up 2.8 percent over the year.

On lower-priced properties (those with a rent lower than 75 percent of the regional median), rents have risen nearly 4 percent in the same period.

The Reason

Molly Boesel, CoreLogic’s principal economist, says growing demand for entry-level homes is the single largest factor:

“Single-family rent price growth remained solid in January,” Boesel said. “High demand and low supply for entry-level properties drove lower-priced rentals to have faster price growth than higher-priced rentals, revealing affordability pressures in this segment of the rental market.”

Hale also states that Phoenix showed over-4 percent gains in rent over the year.

The reason for these regional increases? Per Hale and CoreLogic, it’s strong economic growth, low levels of new construction, and increasing employment opportunities.

“Phoenix experienced 4.5 percent year-over-year rent growth in January 2018, driven by employment growth of 2.7 percent,” CoreLogic reported. This is compared with the national employment growth average of 1.4 percent, according to data from the United States Bureau of Labor Statistics.

This nationwide problem threatens to get worse before it gets better. Apartment builders are building more units, potentially creating supply that is beginning to crest. With that said, demand still exceeds the supply, especially for affordable housing.

Continuing The Trend

The relentless shortage of housing has lead to dramatic increases in rental rates – and the implications of high rent, and declining home ownership, could be profound over time.

“Almost all the housing demand in recent years has been filled by rental units,” says Sara Strochak, a research assistant with the Urban Institute. She also states that single-family rentals have gone up 30% within the last three years.

The trend began with large firms buying up cheap homes during the recession and turning them into cash-generating rentals—often rented by families who’d lost their own homes or who could no longer qualify for mortgages.

As is always the case with the supply and demand curve, high number of renters has caused rents to increase significantly – in many places, high enough for buying to become the better option.

The Solution

With rents continuing their upward climb, it might be time to consider buying or building a home.

One of the great underlying opportunities here is that buying a home can actually be  cheaper than renting. Renters interested in reducing expenses and collecting tax benefits should absolutely talk to a mortgage lender prior to signing that rental contract.

Current market trends this summer really should encourage home ownership – find out more here….

Mortgage uunderwriting guidelines have been slowly loosening and those that were denied for a mortgage last year may qualify this year.  There are also multiple down-payment assistance programs for borrowers with little to no down payment available.

Again, the first step should be contacting your local mortgage professional and work on pre-qualification.  Next, contact your real estate agent and begin your home search!

 

Today’s Mortgage and Real Estate Environment – Early Summer 2018 Edition

Believe me, I understand that home inventories are tight across the country. And that is making home buying a bit challenging right now.

Nevertheless, I see a great opportunity in this market for first time buyers, investors, and existing homeowners who want to take advantage of rising equity.

Look at it this way….real wages are moving up, home equity is rising, and interest rates are keeping inflation at bay.

The Current Outlook

This is a recipe for a strong, long-term real estate market.

A decade ago, the housing market was the U.S. economy’s biggest weakness. Now, it offers crucial support.

The housing market has been trending on a path higher for some time now as it gradually recovered from the financial meltdown nearly a decade ago. Interestingly, it has even gained additional strength lately, despite broadly higher home prices.

This is due to the fact that owning a home right now is one of the better investments you can make.

Some analysts are saying that a rise in mortgage rates, prompted by higher Treasury yields and inflationary pressure, could eventually cut into demand for new homes.

The benchmark 30-year fixed mortgage hit nearly 5% at the end of April, its highest since early 2014, according to weekly data from Bankrate.com. As recently as September, it was right at 4%.

Still, the economy is much stronger than it was the last time rates spiked in 2013, which means the housing market has more ability to withstand higher mortgage rates than it used to, most analysts say.

As a matter of fact, real wages are up for the first time in 10 years, giving would-be buyers more purchasing power.

Couple that with expected equity increases in those home purchases, this looks to be a fantastic time to purchase.

The Data

Industry experts are also predicting an increase in purchases. Industry giant Zillow predicts that 2018 will shape up to be an even hotter real estate market than in 2017.

An analysis conducted by Zillow Research, a division of Zillow Group that operates the Zillow real estate marketplace, found that homes sold faster than ever in 2017 largely due to shrinking inventory.

Rising Rents Means It’s Time To Buy

The analysis has shown that rents have been increasing consistently the past three to four years. In the last year, for example, rents have over increased 4% nationwide.

That’s not necessarily a giant jump, but those increases year after year add up. If buyers can lock-in a monthly mortgage, that alone is a huge incentive to get into the home buying market.

Per Forbes Magazine: “according to an online survey of more than 1,000 active buyers conducted in early March by Toluna Research for realtor.com, 23% of millennials surveyed indicated that rising rent was a trigger for their home buying purchase.

Realtor.com reports that HUD data shows rents were up in 85 of the top 100 metro areas, including nine metros where rents were up by double-digit percentages from a year ago.”

More from Forbes: “These are the market dynamics and challenges Millennials face especially in urban areas where they naturally migrate.

Craig Furfine, clinical professor of finance at Kellogg School, Northwestern University thinks differently. ‘An alternative viewpoint is Millennials have been reluctant to enter the housing market having witnessed the effects of the housing collapse of a decade ago. Now they see interest rates rising and they think now may be a good time to buy’.

Interestingly, just like their baby boomer parents, many Millennials want that family home with a yard and in a good school system. It seems like the foundation of home ownership desire hasn’t really changed in a long time.

Don’t hesitate to reach out to me for more, as it would be my privilege to help!

A Great New Zero Down Payment Option – The Chenoa Fund

Choosing the right loan type is an important part of home buying. There are many different mortgage options available, and each comes with its own set of benefits – including a zero down payment loan option.

Making a good decision about your down-payment is one of the key aspects getting the most value from your home purchase.

The amount you put down will play a large role in your monthly payments, your mortgage rate, and how much home you can qualify for.

For some buyers, making a large down payment makes sense. For others, there are options that require little or no down payment. There is no “good” or “bad” down payment amount. It depends on the buyer’s situation and long-term goals.

For more, check out The Mortgage Reports and Tim Lucas’ article here….

The Chenoa Fund – A Great No-Down Option

100% Home Financing

The Chenoa Fund provides first mortgages to any borrower meeting minimum credit standards. This is not a narrow, limited program for which only a select few borrowers can qualify. There is no first-time home-buyer, income or geographic restrictions or recapture provisions with this particular program.

Borrowers who qualify for a first mortgage may also receive assistance with their down payment.

Second Mortgages

Under FHA guidelines, Chenoa Fund is qualified to provide borrowers with grants or second mortgages to cover the borrower’s 3.5% minimum contribution (down-payment), with rates as low as 0% to help in qualifying.

Borrowers qualifying for an FHA first mortgage through Chenoa Fund can obtain a grant or second mortgage if they have at least a 640 credit score, a 43% debt-to-income ratio, and meet other qualification guidelines.

Contact me for more details…

Other Zero-Down Options

USDA Loans

USDA loans could be the right choice for those who want a home in a suburban or rural area. Find out more here…

The United States Department of Agriculture (USDA) backs this loan in an effort to promote home-ownership and economic development in less-dense areas.

But don’t let the word “rural” concern you, as its definition is quite generous, per the USDA. Many suburban areas just outside of major metro centers are within USDA home loan boundaries.

USDA loans offer 100 percent financing, so the buyer doesn’t need to put any money down on their home if they don’t want to.

VA Loans

Another popular zero-down loan program is the VA loan. The U.S. Department of Veterans Affairs (VA) offers this loan program to active military members and veterans of the U.S. armed forces.

VA loans also carry the lowest mortgage rates of any loan type, typically around 0.25% below rates for conventional loans – and no mortgage insurance is required!

Also, a VA loan can be extraordinarily flexible. Lenders allow credit scores down to 620 or lower thanks to strong government backing and the VA utilizes a different debt-to-income calculation. VA loans were created to make home-ownership accessible and affordable for military members and veterans.

Options Between 3% and 5% Down

3% Down Conventional

Fannie Mae and Freddie Mac both have low down-payment options where the home-buyer needs only 3% down, making the loan-to-value (LTV) ratio 97. This mortgage option generally requires a credit score of at least 620.

This loan requires private mortgage insurance, but depending on your credit score, the mortgage insurance could be less expensive than that of FHA.

Those looking to keep the home and loan long term might opt for this loan; mortgage insurance automatically drops off when you build 22% equity in the home. FHA mortgage insurance remains for the life of the loan. Also, homeowners must refinance to cancel FHA mortgage insurance.

Because conventional PMI can be cancelled, buyers often opt for it, even when it is more expensive than FHA mortgage insurance.

3.5% Down FHA Loan

One of the most popular low down-payment options is the FHA loan. These mortgages are backed by the Federal Housing Administration (FHA) and require a credit score of just 580 and a down-payment as little as 3.5%.

FHA loans require a monthly mortgage insurance premium (MIP) payment. This is FHA’s “brand” of mortgage insurance and serves the same purpose as private mortgage insurance (PMI) on conventional loans. While mortgage insurance of any type means extra cost, it also means the buyer can put less money down and buy a home sooner.

Low down-payments are not the only reason FHA loans are popular.  Because of their lenient credit requirements, debt-to-income ratios, and low down-payment, many home buyers will find that an FHA loan works best for them.

The Next Step

Make sure you find out more by contacting your local mortgage professional and working on pre-qualification. It would be my pleasure to do just that!

 

Your Local Mortgage Lender – A Serious Advantage

I’m linking to a Wall Street Journal article by Leigh Kamping-Carder that outlines the benefits of shopping local – even for your mortgage.

That’s right – even in today’s day and age – the advantage of having a local lender still has its privileges!

Why?  Hasn’t technology taken over the mortgage process?

The Ability To Close the Transaction on Time

Kamping-Carder states: “Agents want to work with buyers whose lenders know the local market and have a record of getting deals done. That reassures the listing agent and the seller that a sale will close. In markets like San Francisco, Seattle and Boston, where buyers frequently go up against multiple offers and all-cash bids, confidence that a sale will happen can separate a winning bid from the rest”

“In tight housing markets where bidding wars are common, buyers who need financing can strengthen their offers by working with a locally based mortgage broker or loan officer, real-estate agents and lenders say.”

Sure, online lenders can offer convenience and even slightly lower rates in some instances. But real estate agents in markets with lower inventories (i.e. the western United States) consistently reiterate that the ability to close quickly should be considered one of the most important factors when choosing a lending partner.

Speed Is Key

Speed really is a big deal, as sellers fielding multiple offers will choose the buyer who can close quickly. Many local mortgage firms can close the deal inside of 30 days – and many times even less. The typical big bank or online lender is closer to 45-day time-frame to get a loan.

Local mortgage lenders in fast-paced markets are tuned to quicker closings – and they generally have the relationships with the real estate agents and title companies to move things along at a faster pace.

Personal Service

Most buyers and real estate agents will tell you that working with a local mortgage professional results in more personal contact, the ability to get questions answered promptly, and an overall better experience.

More often than not, the big banks and online lenders won’t be able to work odd hours to push those deals through quickly. That 1-800 telephone number won’t be answered at 9pm on Friday, but your local lender will most likely be there!

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