Category: Refinance (Page 6 of 11)

Keys to a Fast Mortgage Approval – Have These 6 Items Ready

August 1, 2017 / Tom Bonetto

Before you get set to make that offer on your dream home, it’s vitally important to be qualified for that mortgage, if you will be financing the property.

With that in mind, there are a half-dozen necessary documents that you will need to prove your reliability to a mortgage lender.

Here are the documents you’ll want to make sure you have when the time comes for pre-qualification and approval.

Recent Paystubs

It can be more difficult to gain mortgage approval if you have inconsistent work history or are self-employed, so you’ll need to show 2 months of recent pay stubs to prove consistent employment.

Copy of Driver’s License and Social Security Card

Our underwriters will need to verify your identity against your credit report and other items.

Previous Tax Returns and/or W2s

In order to ensure the earnings information you’ve provided to the lender is correct, you’ll most likely need to provide your federal tax returns for the two years prior to your mortgage application. In addition, you may also be required to provide your W-2s as backup documentation.

Bank Statements

In order to identify where the down payment or closing costs are coming from, you’ll need to present bank or savings statements to show that you have the money necessary for the transaction. If you are planning on receiving a gift from parents or relatives for that down payment, you’ll need a letter to show where the funds are coming from and to show that the funds are, in fact, a gift.

Investment and Asset Statements

It’s certainly a good sign to the lender if you have a healthy balance in your checking and savings accounts, but you’ll also need to provide any statements for mutual funds and other investments. While they may not be necessary to prove financial soundness, they will help with approval if you have a lot of money saved.

A List Of Your Debts

This process might not be the most fun, but your lender will also want to know about any outstanding debts like auto loans, credit card payments or student loans. The majority will show on the credit report obtained by the lender, but don’t fail to tell your loan officer about all debt related issues.

The mortgage application and approval process isn’t easy, but it isn’t rocket science, either! Having the appropriate documentation and being upfront about your debts, you may be able to speed up the timeframe. If you’re currently looking at your mortgage options, don’t hesitate to contact me to find out more. It would be my pleasure to help!

Cash Out Refinances for Student Loans

July 31, 2017 / Tom Bonetto

Mortgage giant Fannie Mae has once again re-tooled some of their guidelines. This time it is regarding student loans and how they are treated in debt-to-income ratios for qualifying for a mortgage. This really is fantastic news.

It gets even better for homeowners who have student loans, as Fannie Mae is offering improved pricing on cash out refinances for paying off student loans.

The Big News

Effective immediately, Fannie Mae will waive the “loan level price adjustments” (LLPA), or rate increase adjustment, on cash-out refinances when student loan are being paid off. LLPA’s are intended to adjust for the “risk based” pricing and they directly impact mortgage rates.

Here’s a practical example: a cash out refinance with a loan to value of 80% and credit scores of 740 or higher, has a price adjustment of 0.875 points! This is typically factored into the cost of the rate. (you can click here for Fannie Mae’s LLPA matrix).

The lower your credit score, the higher the adjustment is because of the anticipated higher risk for the loan. Get this….if student loans are being paid off, the extra cost of the LLPA is waived!

The Specifics

In order to qualify for the new special student loan cash-out refinance, the following must take place:

at least one student loan must be paid off;
loan proceeds must be paid directly to the student loan servicers at closing;
only student loans that the borrower (home owner) is personally obligated are eligible;
student loan must be paid off in full with the proceeds from the refi. No partial payments are allowed;
property may not be listed for sale at the time of the transaction.

Homes in the California and Arizona area have appreciated at a solid rate over the last few years. Now may be a great opportunity to eliminate student loan debts…especially with the preferred lower mortgage rate! Please do contact me for more regarding this program.

How Much Do Extra Mortgage Payments Save You?

July 8, 2017 / Tom Bonetto

Paying extra on your home loan can make good financial sense.

It really means a guaranteed return on investment, which isn’t the case for other investments like stocks or mutual funds.

If your current mortgage interest rate is, say, at five percent, you are guaranteed to “earn” five percent — by saving interest — on any amount of principal you pay off.

Borrower Options

Most conventional, FHA, and VA loans allow the borrower to make extra payments (known in the industry as prepayments), without any penalty or fee.

To be clear, making extra mortgage payments might not be the right strategy for everyone, however.

Homeowners often refinance instead, into a 15- or even ten-year mortgage. This drastically cuts their interest rate and slices years off their mortgage.

For shorter-term loans, sometime is the 3% range, make refinancing a very attractive proposition.

Deciding to refinance or make additional payments takes some examination, but the right choice could help you save thousands in interest and get you closer to a mortgage-free life.

Find out more here, from The Mortgage Reports

Big Savings

By making extra principal only payments, the savings could be huge.

For example, a 30-year fixed-rate mortgage at 4% and $200,000 borrowed would require about $140,000 in interest over the life of the loan.

But if you were to prepay just an additional $100 a month toward principal, you would save about $30,000 in interest, and pay off that loan five years quicker.

Here’s another prepayment benefit: unlike the capital gains and dividends earned on other types of investments like stocks and bonds, the savings earned from prepayments are not taxable.

In many cases, taking a longer-term loan at 30-years might be a great option – especially if you pay off the principal faster. You get the flexibility of a smaller monthly payment, but can pay the mortgage down quicker, if you choose.

I’d be more than happy to sit down and talk with you about mortgage term related options. Contact me here for more!

New Fannie Program to Solve Student Loan Debt Qualification Issues

May 29, 2017 / Tom Bonetto

A truly groundbreaking mortgage solution is now being offered by Fannie Mae, as the country’s biggest mortgage agency is making getting approved for a mortgage much, much easier.

Fannie Mae announced three new features that will help those burdened with student loans to qualify to buy a house, or pay off their student loans via a refinance.

“We understand the significant role that a monthly student loan payment plays in a potential home buyer’s consideration to take on a mortgage, and we want to be a part of the solution,” said Jonathan Lawless, Vice President of Customer Solutions, Fannie Mae.

The new program is called Student Loan Solutions, and represents a huge shift by Fannie Mae.

Source: The Mortgage Reports and Tim Lucas

Change #1: Student Loan Payment Calculation

Fannie Mae has changed how lenders calculate student loan payments.

Lenders may use the student loan payment as it appears on the credit report for qualification. Period. That may seem like common sense, but it’s not how things have been done in the past.

Change #2: Student Debt Paid By Others

Just because a payment shows up on a mortgage applicant’s credit report does not mean he or she pays it.

Often, that obligation is taken care of by a parent or another party.

In these cases, Fannie Mae is disregarding the payment altogether. That applies not only to student loans, but payments for all debts.

Change #3: The New Student Loan Cash-Out Program: Pay Off Education Loans With A Refi

Perhaps the biggest shift of all is Fannie Mae’s rework of cash-out rules regarding student loans.

Typically, cash-out refinances come with higher rates. They are considered higher risk by lenders and Fannie Mae.

So, according to Fannie Mae’s loan level price adjustment matrix, a lender must charge an extra 1%-2% of the loan amount in fees or more, just because the loan is deemed “cash-out”.

Now, Fannie Mae does not consider the loan a cash-out transaction if loan proceeds completely pay off at least one student loan.

This loan classification has never been seen before — a kind of hybrid between no-cash-out and cash-out financing. Fannie Mae simply calls it the Student Loan Cash-Out Refinance.

Please do reach out to me to discuss these significant changes to see how I might be able to help you either purchase or refinance!

Is A Jumbo Mortgage Better Than A Conforming Home Loan?

May 8, 2017 / Tom Bonetto

What Is A “Jumbo” Mortgage?

A “jumbo” mortgage is a loan that larger than the current conforming guidelines established by Fannie Mae or Freddie Mac. Today, a mortgage that exceeds $424,100 is considered “non-conforming.”

So, when you finance expensive property, you need a jumbo mortgage. Interestingly, the borrower has to play by different rules, because mortgages for high-priced homes are not necessarily standardized.

Jumbo Mortgages: They Are Back

During the mortgage crisis a number of years ago, jumbo loans all but vanished. The ones that remained came with guidelines that were nearly impossible for homeowners to meet.

Jumbo loans generally meant high down payments, higher interest rates, and high credit standards – which made these loans essentially obsolete.

But as the real estate market steadily recovered, jumbo loans have been re-entering the lending landscape.

In fact, homebuyers in the market for a larger loan may be pleasantly surprised to know that jumbo mortgage rates are nearly as low as conforming rates.

Source: The Mortgage Reports

Conforming Rates vs. Jumbo Mortgage Rates

Years ago, the difference between conforming mortgage rates and jumbo rates ranged between half a point to two full points.

These days, however, the spread between jumbo rates and conforming rates is minimal – sometimes as little as 1/10th of a percent, according to a number of surveys out in the marketplace.

Look At Jumbo ARMs

Adjustable rate mortgages can be over one percent lower than fixed-rate jumbo loans. For borrowers with larger loans, ARMs are popular alternatives.

That’s because with bigger balances, the effect of a lower interest rate on what you pay each month is more pronounced.

In addition, jumbo ARM rates can sometimes be lower than their conforming counterparts.

Many jumbo ARMS are not sold to investors, but are instead held by lenders on their own books. These “portfolio” mortgages can be made according to whatever guidelines and pricing the lenders establish.

The market is much less homogeneous, and the smart shopper can often find a bargain with a lender trying to expand its market share or build up its pipeline.

Jumbo ARMs come with introductory periods in which their rates are fixed. You can find loans fixed for three, five, seven, or ten years.

If you don’t keep your mortgage for more than the introductory period, you’ll never even have to deal with rate adjustments. And interestingly, most borrowers don’t hold on to those mortgages for more than 7 years.

Compare and Shop Jumbo Mortgage Rates

Unlike conforming mortgage rates, which typically differ by .25 to .5 percent between competitors, jumbo mortgage rates can vary largely from one lender to the next.

Jumbo lenders can serve different markets — alternative documentation, non-prime, unorthodox properties, or borrowers with big down payments and perfect credit — and that affects the rates charged.

This means that when conforming mortgage rates are higher, jumbo rates don’t necessarily follow that the same path.

It definitely pays to shop and compare.

Unlike smaller mortgage loans, a half percent difference in the interest rate on a $700,000 loan amount can add up over time.

$700,000 at 4.375% = $3,495
$700,000 at 4.875% = $3,704

The difference between these two scenarios adds up fast. Over five years, $209 per month saves over $12,500.

Let’s Talk

If you are interested, please do reach out to talk in further detail about jumbo mortgage products. It would be my pleasure to help!

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