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Buying a Home This Fall? Here’s How Your Choice of Neighborhood Will Impact Your Mortgage

Buying a Home This Fall? Here’s How Your Choice of Neighborhood Will Impact Your Mortgage If you’re planning to buy a home in the next few months, you’ll want to ensure you choose a great neighborhood to live in – not just because it can improve your quality of life, but also because it can help you get a mortgage. Neighborhood is a factor that lenders consider when you apply for a mortgage, which is why you’ll want to consider a neighborhood’s mortgage implications as well. Here’s what you need to know about how the neighborhood you buy into affects the kind of mortgage you can get.

A Neighborhood Full of Foreclosed Homes Decreases Your Property Value

Buying a home in a neighborhood full of foreclosures can seem like a great deal, as the owners may be willing to accept a lower price so that they can move into a better area. But buying in a foreclosure-fraught neighborhood brings with it a variety of complexities when it comes to getting a mortgage.

The biggest issue is that being surrounded by foreclosures significantly decreases a property’s value. Foreclosed homes tend to attract a criminal element and increase property taxes due to the need for more emergency services in the area. When it comes to getting a mortgage, this limits the amount you can borrow – no lender will give you more than what the property is worth, no matter what the property sells for.

Better Neighborhood Amenities Help You Get a Mortgage

Mortgage lenders look at a variety of factors when deciding whether to issue a mortgage, and one of them is the property’s saleability. Simply put, saleability refers to the likelihood that the lender will be able to sell the property in the event that the homeowner defaults on the mortgage.

If you take out a mortgage and then go into default, your lender will need to sell the property in order to recover its investment. Great amenities like parks, schools, and fitness centers make a neighborhood and the houses in it more desirable to buyers, which means the bank will have an easier time selling the home – and will be more likely to issue you a mortgage.

Buying into a good neighborhood can help you to get a great mortgage at a great rate. That’s why you’ll want to enlist the aid of a professional mortgage advisor to help you to determine the best neighborhoods for buyers. Call your local mortgage professional to learn more.

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How Much Should You Budget for Closing Costs? Let’s Take a Look

How Much Should You Budget for Closing Costs? Let's Take a Look If you’re in the market for a new home, you’re probably trying to budget for all of the expenses that come with a home purchase. After all, the asking price isn’t necessarily the entire amount that you’ll pay – there are other expenses that will factor in to the final price. One such expense is your closing costs.

Closing costs are the miscellaneous fees you’ll pay when you sign the deal to buy your home. But how much do you need to save up for closing costs? Here’s what you need to know.

The General Guideline for What to Expect

Most mortgage advisors will tell you that you should expect to pay about 3 to 5 percent of your mortgage in closing costs. By law, your mortgage provider is obligated to give you a Loan Estimate form which is designed to help you understand the key features, costs, and risks of the mortgage loan. Three business days before the loan closes your mortgage provider will also give you a Closing Estimate form to review all of the costs of the transaction including all closing costs.

How Your Closing Costs Break Down

Your lender will give you a breakdown of costs in your Loan Estimate and Closing Estimate. But in general, there are certain closing costs you can expect to pay.

One cost that most lenders include is the loan origination fee, a small charge to compensate the lender for the time it takes to prepare the initial loan documents. There will also typically be a loan application fee, which can vary per lender.

Your lender may require you to get private mortgage insurance depending on your situation. The title search and title insurance to protect your lender from title fraud is another fee you should consider, and you’ll also likely want to buy title insurance to protect yourself.

There are also several other closing costs to keep in mind, like escrow fees, notary fees, pest inspections, underwriting fees, and the mortgage broker’s commission. All in all, you’ll want to budget approximately $5,000 in closing costs for every $100,000 you borrow.

Closing costs can be quite expensive, which is why you’ll want to make sure you budget appropriately when you buy your new home. A mortgage professional can help you to figure out how much you need to budget for closing costs. Call your local mortgage advisor today to learn more about budgeting for the home buying process.

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The Pros and Cons of Paying Your Mortgage off Biweekly Versus Monthly

The Pros and Cons of Paying Your Mortgage off Biweekly Versus Monthly If you have a mortgage, you’re probably looking for the best option to pay it off. Monthly mortgage payments are an easy-to-manage way to pay for your house – in fact, they’re the most common form of mortgage payment but now, many homeowners are discovering that biweekly payments offer them better results.

So is a biweekly payment the better option for you? Which payment strategy best fits your individual circumstances? Here’s what you need to know.

Biweekly Payments: Pay Off Your Mortgage Faster and Save on Interest

Biweekly payments are becoming increasingly popular for a variety of reasons. With a biweekly payment, you’ll pay less money in total interest payments over the course of the whole mortgage, and you’ll pay your mortgage off faster. Biweekly payments also make it easier to budget for your mortgage because they coincide with your paycheck, and the biweekly payment system forces you to make extra payments toward your principal.

That said, biweekly payments also have some disadvantages. If you’ve bought a home at the very top tier of what you can afford, you might not have the budget flexibility for extra payments. Your lender may also force you to pay a $300 setup fee or a processing fee for each payment.

Monthly Payments: Easier to Afford for Large Homes

Paying your mortgage off on a monthly basis has long been the standard, for a variety of reasons – for instance, most homeowners are typically more comfortable with monthly payments as they were the norm during the owner’s years as a renter. It may also be easier to manage monthly payments if you work as an independent contractor and don’t always get paid every two weeks.

Monthly mortgage payments are more affordable for owners of larger homes, which typically come with larger mortgages. A monthly payment schedule also means you make one less payment per year, and for those on a strict budget, this can help to make the daily necessities of life more affordable.

Monthly mortgage payments were once the expected norm, but now, a lot of homeowners are choosing to make biweekly payments in order to pay off their mortgages faster and better budget their money. Monthly payments still remain popular, though, for a variety of reasons.

So which one is better for you? A qualified mortgage advisor can help you determine your best course of action. Call your local mortgage professional to learn more about your mortgage payment options.

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Understanding the Jumbo Mortgage and Why Refinancing These Mortgages is Different

Understanding the Jumbo Mortgage and Why Refinancing These Mortgages is Different It seems like everything is getting jumbo sized these days. Jumbo sized soft drinks. Jumbo sized fast food meals. Jumbo sized smartphones. But one thing that nobody thought would get jumbo sized? Is mortgages.

So what exactly is a jumbo mortgage? How is it different from a standard mortgage, and what does that mean for your refinancing options? Here’s what you need to know.

Jumbo Mortgages: Larger Sums For Enterprises And Wealthy Buyers

As the name implies, the main factor that sets jumbo mortgages apart from standard mortgages is the loan limit. Fannie Mae and Freddie Mac impose mortgage limits all around the country, limits that vary depending on the cost of living in each individual state. But in situations involving highly valuable real estate – like luxury properties and commercial real estate – standard mortgages simply don’t give buyers the freedom they need.

Jumbo mortgages are also common in areas with high costs of living, where real estate frequently surpasses the standard loan limit in high-cost areas.

How Do You Qualify For A Jumbo Mortgage?

As would be expected when higher sums of money are involved, the eligibility requirements for a jumbo mortgage are much stricter than for a traditional mortgage. Jumbo mortgages aren’t subject to private insurance, which typically means a down payment on a jumbo mortgage will be significantly larger compared to a standard mortgage. That also means people applying for jumbo mortgages must demonstrate to lenders that they have the income and wealth to pay the debt.

Jumbo mortgages also require a higher credit score. While most buyers can get a mortgage with a decent interest rate if their credit score is 660 or higher, buyers applying for a jumbo mortgage need a credit score of at least 700 to even be considered by most lenders.

Jumbo mortgage lenders can require borrowers to have at least 6 months worth of payments set aside in a bank account at the time of closing, while the requirement is typically two months for most mortgages. If you want to qualify for a jumbo mortgage, you’ll also need to prove to your lender that your debt-to-income ratio is below 45 percent.

Larger Sums Make Refinancing More Complicated

When trying to refinance a jumbo mortgage, you’ll face tighter restrictions compared to a standard mortgage. You’ll need to have a significant amount of equity in your home before you’ll be considered for refinancing. And if you’re planning to roll your HELOC debt into the refinancing plan, you’ll have to ensure that you haven’t made any deductions against your home equity for the past 12 months.

Some lenders may also have other special requirements when refinancing a jumbo mortgage. For instance, if you’ve owned your home for less than a year, you might have to opt for a Freddie Mac or Fannie Mae loan – and regardless of what fair market value is for your property at the time you file for the mortgage, it will usualy be assessed at its original purchase price if you’ve owned it for less than a year.

Jumbo mortgages can be a great way to buy a luxury home or commercial investment property. But in order to be issued a jumbo mortgage, you’ll need to meet a strict set of requirements.

If you’re considering a jumbo mortgage, a professional advisor can help you understand your options. Contact your trusted mortgage professional to learn more about refinancing options and how you can qualify for a jumbo mortgage.

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FICO Scores 101: How to Shop for a New Mortgage Without Harming Your Credit Score

FICO Scores 101: How to Shop for a New Mortgage Without Harming Your Credit Score It’s difficult to begin shopping around for a new mortgage without the facts on how this can affect your FICO score.

Anybody who is holding off for fear that their credit score will be ruined by multiple credit checks has nothing to worry about. Mortgage brokers require this information to give an accurate quote, so many credit checks by different companies will have a miniscule effect on credit scores.

The system has been designed this way because a mortgage is not considered to be ‘bad debt’ by lenders and consumers should have the right to shop around without fear of their credit being destroyed by it.

Understanding The ‘Tiers’ Of Credit Checks

FICO scores are affected each time a credit inquiry is requested to check a borrower’s credit report. This makes sense, as every time somebody searches for new credit they increase their ability to acquire significant debt.

Thankfully, not all credit checks are created equal and they do not affect FICO scores in the same way. A mortgage loan is not considered remotely close to store credit cards, which allow a person to get into more debt. Debts on mortgages only get lower as time goes on, ranking them very low on the list of things lenders consider bad credit.

The One Thing To Know Before Shopping For A New Mortgage

Every time a credit card company or consumer loan company pulls a credit check, the borrower’s FICO score will fall, but this will not happen when multiple mortgage lenders pull the same person’s credit score.

This is because each credit card has the chance to accumulate debt, whereas only one mortgage will be taken out. So once a mortgage lender pulls your credit score, you will only receive one ‘ding’ even if other lenders pull your score afterwards.

Here is the important part: there is only a 14-day window from the first credit check where all other credit inquiries will be ignored. So it is imperative to plan ahead and shop around within a two week period to limit the impact on your FICO score.

Shopping around when looking for a new mortgage is a necessary step to getting the best possible deal, and thankfully the system is designed around not punishing people for doing this. It can be very intimidating to do alone and working with a professional mortgage specialist can relieve stress and get you the best deal on your new mortgage.

If you have any questions please contact your trusted mortgage professional for advice on the right steps to getting your new mortgage.

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Looking Ahead: How to Ensure That You Are Taking Full Advantage of Mortgage Tax Credits

Looking Ahead: How to Ensure That You Are Taking Full Advantage of Mortgage Tax Credits One of the major benefits to purchasing a home with a mortgage are the tax credits that can be taken advantage of when April 15 comes around.

Many homeowners are unaware of what mortgage related expenses can be deducted and, more importantly, which ones can no longer be deducted.

Receive A Tax Deduction For Interest Paid On The Mortgage

The most common tax credit associated with mortgages is the interest paid credit. This allows borrowers to deduct the cost of the interest paid on their mortgage on their taxes, which in many cases is the largest tax break available to homeowners.

Interest paid deductions on taxes are available to second mortgages as well as first time mortgages and are available on home equity lines of credit as well as home equity loans.

Mortgage Insurance Is No Longer Tax Deductible

Unfortunately, as of 2014 any mortgage insurance paid was no longer considered tax deductible. This came as a shock to many borrowers who planned their finances around receiving the tax credit.

Although mortgage insurance is no longer tax deductible, there are still other home related deductions that can be taken advantage of. Real estate taxes can be deducted the year they are paid and discount points purchased at the time of the sale can also be used as a deduction.

The IRS treats discount points as mortgage interest that is pre-paid and allows deductions on certain loan types.

Using Tax Information To Plan Ahead When Buying A Home

There is a limit imposed by the Internal Revenue Service on how large a loan can be to qualify for an interest paid tax deduction. Any loan that is over $1 million dollars is not allowed to have the interest paid towards it deducted when tax time rolls around.

This knowledge can be used to put the borrower in a beneficial situation in years to come when they plan to purchase a home. Limiting any loan to under $1 million dollars, no matter what the cost of the property, will allow the interest paid into it to be deducted the following year.

The tax laws are always changing and differ from state to state, so it is advised to contact a mortgage specialist with knowledge on mortgage tax laws to provide more information on which deductions you qualify for.

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Critical Documents That You’ll Need to Have Ready Before Applying for a Mortgage

Five Critical Documents That You'll Need to Have Ready Before Applying for a Mortgage If not done properly, applying for a mortgage can be stressful and time consuming, but with the right preparation the entire process can be seamless. Here are some crucial pieces of information that almost any lender will require before approving a mortgage.

Tax Information From The Previous Two Years

One of the most important documents a borrower will be asked for is their federal tax return along with a signed Form 4506-T, which will allow the lender to contact the IRS directly for their version of the federal tax return to compare to the ones provided. This allows them to examine the documents for any sign of fraud.

Documentation On All Owned Assets

The mortgage lender will require proof of every current asset owned by the borrower. This will include any current real estate titles along with bank and mutual fund statements and documentation on current investments. Don’t be shy, every asset owned is a better sign to the lender.

Documentation On All Owed Debts

On the opposite side of the coin, the mortgage lender will also want to be made aware of any current debt. All debts, from major student loans to miniscule credit card debts, will need to be documented and given to the lender. It’s important to provide information on monthly payments that need to be made, even if it appears insignificant.

Two Years Of W-2s For Employed Borrowers

Almost every lender will require a Form W-2 for the previous business year to see how much income was earned by the borrower. Many will require at least two years’ worth of W-2s to see if the income has been consistent.

Two Years Of 1099s For Self-Employed Borrowers

Alternatively, any self-employed borrowers will be required to provide profit and loss statements to show the current status of their business. Like W-2s, the lender may require documents showing profit and losses for at least two years if the business has been in existence that long.

Having all your documents ready in advance to applying for a mortgage can go a long way to helping the process go smoothly. The documents needed for a mortgage change from person to person depending on their situation, so make sure you speak with a qualified mortgage professional in advance to get a better idea of which documents you will need to supply.

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First-Time Home Buyer? 3 Budgeting Tips to Help Make Your Mortgage Payments Easier

First-Time Home Buyer? 3 Budgeting Tips to Help Make Your Mortgage Payments Easier Buying a new home is an exciting time, but excitement can easily turn to stress if there isn’t enough money to pay the monthly mortgage bill. The added expense can take some time to get used to, but there are ways to make the payments easier, especially in those first few months when money is the tightest.

Prioritize The Mortgage Bill And Pay It Immediately

This may seem like a counterintuitive tip for anybody looking for help making mortgage payments, but it is easily the best one and the one that provides the most trouble for homeowners.

Late mortgage payments come with hefty fees that make it harder and harder to pay the next mortgage bill in full and on time. It’s a slippery slope that can end in foreclosure if the mortgage bills go unpaid for too long.

Don’t Get Carried Away With Household Spending

What’s the first thing most couples do after finally purchasing their first home? If they moved in from a smaller apartment then filling in the empty space will probably be at the top of their list.

Spending sprees are all too common after moving into a new home. There are extra rooms that need to be furnished and extra space that needs to be filled in with a larger television or another sofa.

These purchases will severely limit the mortgage budget and could lead to late payments right from the start for anybody who gets carried away. Put a budget in place for new furniture and stick to it so that there is always money for the mortgage.

Limit Spending In The First Few Months

The biggest change for anybody moving into a new home is the extra expenses they aren’t used to paying. Water, power, heat, air conditioning, internet and cable are all things that could be included when renting and once those bills start coming in it can be alarming.

It doesn’t matter how careful they are, budgeting can take a huge hit if new homeowners are expecting to pay the same as they were in their previous home. Always wait the first few months before making any purchases to get used to the new monthly bills that will be waiting.

Making mortgage payments starts with getting a mortgage you can actually afford. Make sure you consult with a professional who will be able to help you find the best deal and get a mortgage that won’t break the bank each month.

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The Quick and Easy Guide to Understanding the Math Behind Your Mortgage Closing Costs

The Quick and Easy Guide to Understanding the Math Behind Your Mortgage Closing Costs It’s amazing that in a year with extremely low mortgage rates being reported around the country, closing costs are up by as much as 6% from the previous year. Part of the reason for this is that the stricter regulations on loans have increased the costs to banks, and they always find a way to pass on new costs to the consumer.

Understanding Third-Party Closing Costs

When closing on a mortgage the borrower will notice a long list of additional fees that they are expected to pay for. These can range from insignificant into the thousands of dollars depending on the state and the deal. When looking at these fees you will notice that some are third-party fees.

This is not out of the ordinary and you are not being taken advantage of. These costs are for services rendered by outside companies at the request of the mortgage lender to make sure everything is in order with the property.

Closing Costs You Can Expect To Pay

Anybody going through the mortgage process for the first time should expect to see several odd sounding terms on the bill. The first is ‘origination’ or ‘processing’ which is the primary fee the lender charges for creating the mortgage.

Other fees include discount points, flood certification, title insurance, credit report and appraisal. These are all necessary for buying a home and should be expected to appear when closing.

The Trick Behind Zero-Closing Cost Mortgages

With closing fees adding up it may seem like a good idea to opt for a mortgage that has absolutely no closing costs if it’s offered. While no money will be required up front, it adds up in the long run.

This is because the lender is making a deal. They agree to pay all the closing costs for the borrower in exchange for a slightly higher interest rate, which will pay out for them over the course of the mortgage.

The amount you can expect to pay really depends on the cost of living and real estate market where you’re buying. A mortgage specialist will be able to talk to you in advance of applying for your mortgage to give you a better idea of what you are looking at paying for closing costs. Contact one today for more information on why you have to pay closing fees and the amount you should be budgeting for.

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What is HARP 2.0 And How Do I Know If I Qualify To Refinance With It

You Ask, We Answer: What is 'HARP 2.0' And How Do I Know If I Qualify For HARP? If you’re looking for home refinancing options, you may have had difficulty in the past – especially if you owe more than your home’s value on your mortgage. Getting refinancing consumes much of your home equity, which is in short supply for people who already have a mortgage.

But with the government’s extension of the HARP Program, you can now refinance your home with a variety of lenders – even if you owe more on your mortgage than your home is worth. This ‘HARP 2.0′ is a great way for responsible borrowers to find mortgage relief.

But how does the program work, and who’s eligible for it? Here’s what you need to know.

HARP: Affordable Refinancing For Low-Equity Borrowers

HARP, the Home Affordable Refinance Program, is a government initiative that was created in 2011. The program is designed to help homeowners who owe mortgages worth more than their home equity – so-called “underwater” homeowners. Under the original HARP program, homeowners with little or no home equity could refinance their home and benefit from lower interest rates – something that wouldn’t otherwise be possible.

HARP 2.0, an updated program, was released in 2012. HARP 2.0 is different from the original program in two critical ways. First, it allows borrowers who have mortgage insurance to refinance their homes. Second, it absolves lenders of any responsibility for fraud on previous loans (which removes barriers to issuing new loans).

Do You Qualify? Eligibility Requirements For The HARP 2.0 Program

HARP 2.0 lists several criteria that applicants must meet in order to be eligible for refinancing.

In order for you to be eligible for HARP 2.0, your mortgage must be owned or guaranteed by either Freddie Mac or Fannie Mae. If you signed your mortgage with another provider, it must have been sold to Freddie Mac or Fannie Mae either on or before May 31, 2009. You must also have no previous refinances under HARP.

(Exception: Fannie Mae loans refinanced under HARP between March 2009 and May 2009 are still eligible for HARP 2.0).

You need to be able to prove your income, employment history, credit history, and assets. Some lenders will require a minimum credit score to qualify for HARP 2.0, although this may not be the case in all instances.

Are you underwater on your mortgage? If you qualify for HARP 2.0, you could refinance your home at a lower interest rate and get the relief you need. Contact your trusted mortgage expert to learn more about how HARP 2.0 can make your mortgage more affordable.

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Posts Tagged ‘Mortgages’

Buying a Home This Fall? Here’s How Your Choice of Neighborhood Will Impact Your Mortgage

Related Articles:

How Much Should You Budget for Closing Costs? Let’s Take a Look

Related Articles:

The Pros and Cons of Paying Your Mortgage off Biweekly Versus Monthly

Related Articles:

Understanding the Jumbo Mortgage and Why Refinancing These Mortgages is Different

Related Articles:

FICO Scores 101: How to Shop for a New Mortgage Without Harming Your Credit Score

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Looking Ahead: How to Ensure That You Are Taking Full Advantage of Mortgage Tax Credits

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Critical Documents That You’ll Need to Have Ready Before Applying for a Mortgage

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First-Time Home Buyer? 3 Budgeting Tips to Help Make Your Mortgage Payments Easier

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The Quick and Easy Guide to Understanding the Math Behind Your Mortgage Closing Costs

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What is HARP 2.0 And How Do I Know If I Qualify To Refinance With It

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