Category: Mortgage (Page 51 of 61)

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

Mortgages for Foreign Nationals

February 13, 2017 / Tom Bonetto

Here’s an interesting observation from the National Association of Realtors – they estimate that 60% of homes purchased by international buyers were all-cash transactions, as opposed to just one-third of domestic sales.

Secondarily, did you know that many lenders are willing to extend credit to non-citizens – sometimes without a credit history in the United States? Non-citizens can even qualify for government-insured mortgages, which have the advantage of requiring low down payments.

One point to keep in mind is that the requirements for getting a home loan depend in large part on one’s residency status. Most borrowers tend to fall within one of the following groups:

Permanent residents with a green card (Form I-551)
Non-permanent residents with a valid work visa (E1, E2, H1B, H2A, H2B, H3, L1 and G1-G4)
“Foreign nationals,” whose primary residence is not in the U.S.

Source: Getting A Mortgage For Non U.S. Citizens | Investopedia

Target this important segment: Foreign Nationals & Non US Citizens

Lending to foreign nationals and non-US citizens is regulated under the Ability to Repay or QM laws – depending on the buyer and property type. But just because the buyer does not fulfill the conventional and FHA guidelines does not mean they can’t obtain approval for a mortgage.

Non-QM products are a great option in this situation. These products certainly have different guidelines and interest rates compared to conforming loans. But remember, you are dealing with a very different buyer as well. These buyers understand and expect different guidelines. The agents who are successful in this niche understand these mortgage products and develop specific marketing goals to grow this lucrative segment.

In many cases, approvals are not difficult – and here are a few notes for some foreign national specific mortgages:

Up to 75% LTV
No US Credit required
12 months reserves required
Loans up to $750,000
DTI up to 50% considered
7/1 ARM and 30-year options available

The point is this – these Foreign National loans allow any reasonably qualified buyer access to capital for purchasing the home of their dreams. Serious agents and lenders must have command of these mortgage products.

Knowing Your Options

Having command of these products also includes marketing strategies focused on serving the needs of these important buyers. I spend a lot of time working with real estate agents talking about various marketing tools, product education, and compliant co-branded marketing strategies designed to grow our business. Please feel free to call, email, or text anytime if you would like to discuss some of these strategies as well.

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

Don’t Fear Multiple Credit Inquiries When Mortgage Shopping

February 6, 2017 / Tom Bonetto

Can a borrower have multiple credit inquiries without hurting their FICO score?

This question regarding credit inquiries is one that I receive all the time from borrowers and agents alike. Rightfully so, the borrower should be able to shop lenders for the best available rates and services. FICO scores play a big role in borrower’s ability to secure affordable financing. Too many hard credit pulls lowers credit scores. It is certainly a logical question – how does a borrower shop lenders when each lender needs a credit pull in their name?

Actually, there are laws in place to protect the consumer who wants to shop around for the best mortgage rate.

Credit bureaus don’t ding you for “too many credit inquiries” when you shop for a mortgage.

Source: Don’t Fear Multiple Credit Inquiries When Mortgage Rate Shopping | Mortgage Rates, Mortgage News and Strategy : The Mortgage Reports

The good news is this. A borrower can pull a tri-merge credit report multiple times in the same 45-day period. Click on the article above for more details. Rest assured, you have the ability to have multiple lenders pull your credit so you can shop for the best financing for your personal situation.

According to the Consumer Federal Protection Bureau (CFPB), the impact on your credit is the same regardless of the number of inquiries, as long as the inquiries are made by mortgage brokers or lenders within a 45-day window.

However, it’s important to note that some companies are still using older FICO models. These older FICO models allow for just 14 days for multiple inquires to have the impact of just one.

For this reason, a good rule of thumb is to try to limit your credit pulls for rate shopping to two weeks.

Seeking too much credit in a short period does, however, drag down your credit score. A lower credit score typically means a higher interest rate, and a harder time getting a mortgage.

For most people, though, a credit inquiry affects their credit scores by less than 5 points.

As always make sure you get the best advice possible from qualified real estate professionals, lenders, and financial advisors.

“Your Home Is A Better Investment Than Bonds” – US News

January 30, 2017 / Tom Bonetto

Believe it or not, there’s a nice way to measure the “investment value” of your home – and you can do it via the bond market. Jeff Brown from US News and World Report has written an interesting piece on how to quantify your home as an investment – and it’ really worth the read!

Find out more from Jeff Brown at US News and World Report here…

Many homeowners look upon their homes as a valuable asset they can utilize for retirement through downsizing or a loan. They count on building equity in the traditional way, by paying off the debt month-after-month and enjoying some price appreciation.

“There’s another option: making extra principal payments on the mortgage to reduce the debt faster. Every dollar used to pay down the loan earns a “yield” equal to the loan rate, since it saves you from having to pay that amount of interest.” – Jeff Brown, US News and World Report

“If your loan charges 4 percent, prepayments earn 4 percent, a lot more than you’d get in bank savings or a 10-year Treasury note, now yielding a paltry 1.8 percent.”

“A very conservative investor who is averse to debt may find paying off his or her mortgage is the right choice,” says Eric Meermann, a planner with Palisades Hudson Financial Group in Scarsdale, New York. “If the alternative is sticking your money in a money market or savings account, you’re better off paying (the mortgage off) early.”

Brown uses the example of a homeowner with a $300,000 mortgage for 30 years at 4 percent would pay $1,432 a month in principal and interest.

By adding about $150 a month in prepayments, the loan could be paid off five years early, reducing total interest charges by about $40,500. Without the prepayments, the homeowner would still owe nearly $78,000 after 25 years.

With that said, although today’s bond yields make mortgage prepayments appealing, stocks returns could beat prepayment yields substantially. Index funds tracking the Standard & Poor’s 500 index are up nearly 8 percent this year, and averaged 6.7 percent a year over the past decade.

That’s generally much better than you’re likely to do with a mortgage prepayment.

While Americans have traditionally thought of the home as a rock-solid investment, many homeowners suffered deeply from the home-price plunge in the Great Recession, when millions ended up owing more than their home was worth.

So you can lose money investing in your home, though there’s less chance of ending up underwater if prepayments have trimmed the debt.

In most of the country, housing markets are a lot stronger than they were in the years after the financial crisis. But although a nationwide price collapse is very rare, they do occur here and there from time to time, so assess your local market before committing more money to your home.