Category: Mortgage (Page 50 of 61)

Adjustable Rate Mortgages in Today’s Environment

March 13, 2017 / Tom Bonetto

Adjustable rate mortgages (ARMs) are becoming more attractive as home prices rise and fixed interest rates increase.

Buyers can now look to save money with an adjustable rate home loan, as the purchase landscape is now starting to change a bit. These types of mortgage will continue to become more attractive with tighter inventories and monetary policy.

Fixed Rates Are On The Move

The mortgage world has been enjoying the benefits of low interest rates for quite some time. As rates are expected to rise in the immediate future, it is important for realtors and lenders to be knowledgeable about the products available for our customers that will still enable them to get into a home they love.

Source: How ARM Rates Work: 3/1, 5/1, 7/1 And 10/1 Mortgages | Mortgage Rates, Mortgage News and Strategy : The Mortgage Reports

ARMS Can Open Doors

As rates climb, the adjustable rate mortgage is more important than ever. Often this product is misunderstood, so knowing exactly how ARMS work, and when they can actually benefit your client, is important. The right ARM can actually increase the buyers qualified amount. Lower rate ARMS often allow buyers to qualify for a bigger loan.

Realtors should choose lenders that are able to articulate the benefits of different products to their clients. If clients are educated about their purchasing power, they have a better chance of finding a home mortgage that helps them to achieve their goals.

Educating Your Buyer Increases Their Purchasing Power

Because ARMS work differently than a fixed rate loan, realtors and lenders should work together to help buyers navigate the benefits that come with an ARM’s low interest rate. The borrower must also be educated as to what happens to the rate as the loan matures. Keep in mind that in a rising rate environment, an ARM can be a very smart move. If your buyer hits the cap and the rate continues to climb, they are in the advantage.

Let’s Talk

If you are interested, please do reach out to talk in further detail about the mortgage products and how to expand your market base. I look forward to partnering with agents ready to take on the challenge of the change in interest rates, by offering products tailored to today’s economy.

The views expressed are my own and do not necessarily reflect those of American Financial Network, Inc.

6 Ways Mortgage Shoppers Are Saving On Closing Costs

March 6, 2017 / Tom Bonetto

It is not uncommon for buyers to find the perfect home right at the top of the their budget. While it is our job as realtors and lenders to always find the most competitive rates, these clients need our expertise more than most.

If getting into a home is contingent on affordable closing costs, there are things that can be done to make this process less stressful.

Source: 6 Ways Mortgage Shoppers Are Saving On Closing Costs | Mortgage Rates, Mortgage News and Strategy : The Mortgage Reports

Lower Your Closing Cost Bill

Depending on the loan amount and the location of the home, loan applicants can pay anywhere from 3% up to about 6% of their home price, in closing costs. While some costs associated with the location of the property cannot be controlled, other steps can be taken to cut costs incurred by the buyer.

Closing costs can accumulate rather quickly as lenders pay for credit reports, attorney services, title services and more.

Those costs are covered by either the borrower, the seller, the lender, or a combination of the three.

It is important to understand what motivates a lender or a seller to cover these costs, as you strategize with your buyers.

Be Aware of the Other Costs that come with a Mortgage Loan

In addition to standard closing costs, buyers should be made aware of other fees associated with a mortgage loan.

Getting buyers ready to hear terms like prepaid interest, homeowner’s insurance, property taxes, escrow deposit for taxes and insurance, and loan discount points, will help the process not seem so daunting, especially to a first time buyer

What Are a Buyer’s Options?

While most people evaluate loans by rate shopping, that is not always the most effective way to choose a loan.

Buyers should know how to compare lender’s charges, and should understand how to avoid paying too many points on a loan.

When possible, advise buyers to close near the end of the month to help save on prepaid interest.

For some buyers, choosing to buy up the interest rate, and not buy it down with loan discount points, can motivate a lender to pay a part or all the closing costs.

Finally, it is always an option to ask a motivated seller to help with closing costs.

Understanding the costs associated with a loan is important for all the parties involved, as a good deal for a buyer benefits all of us.

Please schedule a time to talk if you are interested in more ways to qualify your buyers. I look forward to getting your clients into the home of their dreams.

Mortgage Products for Residential Real Estate Investors

March 4, 2017 / Tom Bonetto

Home prices have been on a steady climb from the depths of the housing crash, leaving many wondering if it is still a good time to invest in the residential real estate market.

According to the National Association of Realtors, or NAR, 85% of major metro areas saw gains in existing, single-family home prices in over the last 2 years, while only 14% saw a price decline.

Relatively low interest rates are attracting investment buyers, and limited inventory is behind escalating prices in some desirable areas. Nearly all forecasters are predicting continued steady growth in most of the country.

If you’re ready to seek out financing for your residential investment property, here are a few things to consider.

There are a wide variety of loan programs out there for the residential investor – so make sure you take the time to do your research.

For example, we have partners that offer a “no-income” loan – meaning that loan qualification is based only on the cash flow of the particular property. No tax returns, no stated income, and no debt-to-income calculations required! Reach out to me for more information.

Here are some key strategies for the real-estate investor….

Be a ‘strong borrower’

Although many factors — among them the loan-to-value ratio — can influence the terms of a loan on an investment property, investors should check their credit score before attempting a deal. It will have the greatest impact on a loan’s terms.

Credit scores in the 700s are best – but there are programs available for those with scores of 660 or better.

Have a down payment ready

For “no income” investment loans, you will need to put down 25%. For more conventional versions, 20% will suffice.

In addition, reserves in the bank to pay for all your expenses, personal and investment-related, for at least six months also have become part of the lending equation.

Shy away from big banks

Do you research prior to obtaining financing. Make sure to vet the lenders you are considering, and investors shouldn’t be afraid to inquire about their credentials, and then verify them.

Generally, mortgage lenders and brokers are good option because they have access to a wide range of loan products.

Larger banks can be more difficult to work with and more stringent on their borrower requirements.

Think outside the box

If you’re looking at a good property with a high chance of profit, consider planning for that down payment. You can find that renovation money through home equity lines of credit or even from some life insurance policies months before the transaction.

As always, research your investment thoroughly before turning to any riskier sources of cash.

Financing for the actual purchase of the property might be possible through private loans, as well.

Just be aware that you may be met with some skepticism, especially if you don’t have a long history of successful real estate investments. Some peer-to-peer groups also require your credit history to meet certain criteria.

Mortgage After Bankruptcy: How To Qualify Despite Your Financial Setback

February 25, 2017 / Tom Bonetto

Home ownership is an achievable goal – even for those with poor credit histories

I often speak with potential home buyers and agents about how to finance a home after a bankruptcy or other credit setback. Conversations with people who have had credit struggles are usually accompanied by a sense of despair.

Often, they can’t see a way to repair their credit issues while saving money for down payments. The fact of the matter is this, for those who are serious and disciplined in repairing their credit, home ownership is an achievable goal.

Bankruptcy is not the end of your mortgage or home ownership goals.

You can get approved in as little as one day after a bankruptcy in some cases.

From the conventional standpoint, you can be ready in as little as 2 years with some planning.

Source: Mortgage After Bankruptcy : How To Qualify Despite Your Financial Setback | Mortgage Rates, Mortgage News and Strategy : The Mortgage Reports

Research, Learn, and Understand Resources Available

While I certainly don’t want to sugarcoat the seriousness nature of bankruptcy and poor credit, I do want to offer some words of encouragement. First and foremost, understand the guidelines for many loan programs reward potential buyers who are successfully coming out of a negative credit environment. Government loan programs have features specifically designed to acknowledge responsible credit repair. Yes, these features are more expensive than conventional loans. But, owning a home is almost always better financially than renting.

Options for Immediate Purchase After Bankruptcy

There are some lenders, in fact, that offer mortgages 1 day out of foreclosure, short sale, or bankruptcy. These non-QM lenders offer fantastic options with surprisingly affordable terms, considering a recent credit event. Here are a few of the specifics:

Loans up to $1 million
Up to 85% LTV
Debt-to-Income ratios of up to 50% considered
Owner-occupied, 2nd homes, and investment properties
Non-warrantable condos considered
Jumbo loans available
5/1 ARM or 30-year options available

Chapter 7 Bankruptcy Waiting Periods for Conventional Loans

Each loan type has its own waiting period guideline after a bankruptcy. Waiting periods for the four major types of loans are as follows.

FHA loans: 2 Years
VA home loans: 2 Years
Conventional mortgages: 4 Years
USDA home loans: 3 Years

Stay Positive and Be Encouraged

It will take time and require discipline to achieve your home ownership goals – but be patient!

There are many strategies which can be employed to repair credit and acquire financial backing to buy a new home. There are also great resources available that offer quality advice on financial planning, real estate planning, and mortgages. Reach out to me as well, for more information and help!

Smaller Down Payment Can Increase Your Rate of Return

February 20, 2017 / Tom Bonetto

As a homeowner, it is most likely that your home will be the largest asset on your personal balance sheet. For many, their home is worth more than all of their other assets and investments combined. What sort of down payment should a borrower put down to maximize their return?

“In this way, your home is both a shelter and an investment, and should be treated as such”, says Dan Green of The Mortgage Reports. In this way, when we view our home as investment, it can guide the decisions we make about our money, including that down payment.

Read more here from Dan at The Mortgage Reports.

The riskiest decision we can make when purchasing a new home? Making too big of a down payment.

A smaller down payment will increase your rate of return

The first reason why conservative investors should monitor their down payment size is that the down payment can limit your home’s return on investment.

Consider a home, which appreciates at the national average of near 5 percent.

Mr. Green uses the following analogy: “today, your home is worth $400,000. In a year, it’s worth $420,000. Irrespective of your downpayment, the home is worth twenty-thousand dollars more.”

That down payment affected your rate of return.

With 20% down on the home — $80,000 –your rate of return is 25%
With 3% down on the home — $12,000 — your rate of return is 167%

When you look at it in those terms, that’s a gigantic difference. With that said, you really should contact a qualified lender to find out more.

There’s another factor that we must consider, though. Buyers must also consider the higher mortgage rate plus mandatory private mortgage insurance (PMI) which accompanies a conventional 97% loan-to-value loan like this. Low-down payment loans can cost more each month.

Green continues, “assuming a 175 basis point (1.75%) bump from rate and PMI combined, then, and ignoring the homeowner’s tax-deductibility, we find that a low-down payment homeowner pays an extra $6,780 per year to live in its home.”

To that I say “So what?”

With three percent down, and making adjustment for rate and PMI, the rate of return on a low-down payment loan is still 280%.

The less you put down, then, the larger your potential return on investment.

Reasons for a Larger Down Payment

Remember, though, that these requirements are just the minimum. As a mortgage borrower, it’s your right to put down as much on a home as you like and, in some cases, it can make sense to put down more.

Purchasing a condominium with conventional loan is one such scenario.

Mortgage rates for condos are approximately 12.5 basis points (0.125%) lower for loans where the loan-to-value (LTV) is 75% or less.

Putting twenty-five percent down on a condo, therefore, gets you access to lower interest rates so, if you’re putting down twenty percent, consider an additional five, too — you’ll get a lower mortgage rate.

Making a larger down payment can shrink your costs with FHA loans, too.

Under the new FHA mortgage insurance rules, when you use a 30-year fixed rate FHA mortgage and make a down payment of 3.5 percent, your FHA mortgage insurance premium (MIP) is 0.85% annually.

However, when you increase your down payment to 5 percent, FHA MIP drops to 0.80%.

Increase Liquidity With A Home Equity Line Of Credit

For some home buyers, the thought of making a small down payment is non-starter — regardless of whether it’s “conservative”; it’s too uncomfortable to put down any less.

Thankfully, there’s a way to put twenty percent down on a home and maintain a bit of liquidity. It’s via a product called the Home Equity Line of Credit (HELOC).

A Home Equity Line of Credit is a mortgage which functions similar to a credit card:

There is a credit line maximum
You only pay interest on what you borrow
You borrow at any time using a debit card or checks

Also similar to a credit card is that you can borrow up or pay down at any time — managing your credit is entirely up to you.

HELOCs are often used as a safety measure; for financial planning.

For example, homeowners making a twenty percent down payment on a home will put an equity line in place to use in case of emergencies. The HELOC doesn’t cost money until you’ve borrowed against it so, in effect, it’s a “free” liquidity tool for homeowners who want it.

To get a home equity line of credit, ask your mortgage lender for a quote. HELOCs are generally available for homeowners whose combined loan-to-value is 90% or less.

The views expressed are my own and do not necessarily reflect those of American Financial Network, Inc