saleztrax

Condo Loans Made Easier: Understanding Fannie Mae’s Project Approval Through DU

Thu, 10 Jul 2025 19:38:01 GMT

When it comes to financing a condo, the approval process can feel a little more layered than with a traditional single-family home. But here’s some good news: Fannie Mae has a tool that can take some of the guesswork out of condo project reviews—Desktop Underwriter® (DU®).

If you’re a loan officer or mortgage professional navigating the condo loan world, here’s what you need to know.

What is DU Project Review Approval?

DU (Desktop Underwriter) is Fannie Mae’s automated underwriting system, and it can determine project eligibility for certain condo loans. This helps streamline the process for borrowers buying into established, warrantable condo projects.

Here’s how it helps:

Saves Time: DU can indicate whether a condo project is eligible without requiring a full project review upfront.
Increased Clarity: DU findings will now clearly state if the project is conditionally approved—cutting down on surprises down the line.

What to Look for in the DU Findings

When a condo loan runs through DU, the approval findings will include this language when the project is eligible:

"The project appears to meet the applicable Fannie Mae project eligibility requirements for loans delivered to Fannie Mae..."

This language signals that the condo project meets the guidelines—but it’s always subject to final validation, including required documentation like the limited review or full review as needed.

Quick Reminders:

Approval Isn’t a Free Pass: Even with DU approval, all standard condo documentation (budget, insurance, HOA questionnaire, etc.) still needs to be reviewed and retained.
Check Eligibility Requirements: The DU approval assumes the property type and borrower scenario align with eligibility rules. If not, manual reviews may still be required.
Be Proactive: DU doesn’t eliminate the need for due diligence—it simply helps you spot eligible projects earlier in the process.

Why This Matters

For LOs and processors alike, understanding how DU evaluates condo projects means fewer delays, fewer surprises, and a smoother path to closing. This is especially helpful when working with first-time condo buyers or agents unfamiliar with the nuances of condo lending.

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Simplify Self-Employed Income Calculations with Fannie Mae's Tool

Mon, 03 Jun 2024 19:29:29 GMT

Original Source: singlefamily.fanniemae.com

Calculating income for self-employed borrowers is not easy and can be time consuming and complicated for even the most seasoned originators. With a growing workforce of self-employed borrowers, and multiple options available, originators need a clear way to calculate income that’s both accurate and efficient.

With Fannie Mae’s latest solution, we offer a new way to calculate income that increases the certainty of the calculation and helps reduce cycle time.

Available through a free web interface or an automated integration with a partnering technology service provider (TSP), Income Calculator can help:

Easily calculate income for self-employed borrowers.

Maximize the borrower’s income by utilizing allowable add-backs not found in 4506-C tax return transcript data, which may result in lower DTI due to higher income being calculated.

Determine the qualifying monthly income before submitting to DU.

Originate with confidence – we offer enforcement relief of reps and warrants on the income calculation.

If this tool doesn’t meet your needs or if you require additional assistance, our Processors are all well-versed in calculating income and are ready to help you every step of the way.

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Outsourcing in Mortgage Processing: The Strategic Edge with Saleztrax

Tue, 09 Jan 2024 15:00:02 GMT

Original Source: saleztrax.com

In the dynamic mortgage industry, the key to success lies not just in navigating changes but in embracing solutions that enhance operational efficiency and client satisfaction. Saleztrax, under the leadership of Justine Vega, provides such a solution through innovative outsourcing services.

The Saleztrax Vision:

Guided by Justine's mantra, "Positively Processing for Success," Saleztrax is more than a mortgage processing company; it's a partner in success. With over 43 years of industry experience, Justine's vision has always been to streamline the mortgage process while maintaining the essence of personal relationships in business.

Why Outsourcing?

Increased Efficiency: Outsourcing with Saleztrax harnesses deep industry knowledge, leading to more efficient loan processing.

Cost Savings: Mortgage Loan Originators, broker agencies and lenders can reduce overhead by outsourcing mortgage loan processing allowing them to invest more in core business functions.

Quality and Compliance:

High standards in accuracy and regulatory compliance are a hallmark of Saleztrax's services.

The Saleztrax Difference:

Saleztrax stands out in its approach to outsourcing - it's not just about the services offered but the value of personal connections. Our team works closely with clients, ensuring a seamless fit with their existing operations and maintaining the personal touch that is often lost in technical processes.

Client Success Stories:

Our clients, ranging from MLOs to large brokerages, have experienced significant improvements in processing times and client satisfaction, all while maintaining the personal approach that is crucial in the mortgage business.

Conclusion:

Saleztrax is not just an outsourcing option; they're a strategic partner that understands the importance of efficiency, quality, and personal relationships in the mortgage industry. Embracing our services means enhancing your business’s capability to serve your clients effectively and personably.

To learn more about how Saleztrax can revolutionize your mortgage processing with a personal touch, call us at 727-483-9820 or fill out our quick contact form by clicking here . Let's embark on a journey of success together!

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Fannie Mae Selling Guide Updates: What You Need to Know

Fri, 15 Dec 2023 19:10:23 GMT

Original Source: saleztrax.com

Fannie Mae, one of the largest providers of mortgage financing in the United States, regularly updates its Selling Guide to reflect changes in the housing market and financial industry. In SEL-2023-11, issued on December 13, 2023, several significant updates were introduced to streamline processes, improve efficiency, and enhance eligibility criteria for borrowers. In this blog post, we will break down these changes to help you understand how they may impact you as a lender, borrower, or other industry professional.

Income Calculator:

What's New: Fannie Mae has introduced an Income Calculator tool, allowing lenders to determine monthly qualifying income for self-employed borrowers more accurately.

Requirements: To use this tool effectively, ensure that all information submitted is accurate and complete. A copy of the Findings Report generated by the Income Calculator must be kept in the loan file.

Effective Date: Lenders can start using this tool immediately.

Verification of Employment Alternatives:

What's New: Lenders can now use alternative methods to verify employment within 15 business days prior to the note date.

Options: Borrowers can provide the most recent paystub meeting specific requirements or bank statements dated no earlier than 15 business days before the note date.

Responsibility: Lenders remain responsible for income, employment, and asset representations and warranties.

Effective Date: Lenders can implement these changes immediately.

Restricted Stock Units and Restricted Stock:

What's New: Restricted stock units and restricted stock are now considered eligible income sources.

Requirements: Documentation must be provided, including evidence that the stock is publicly traded, vesting schedules, bank statements, and IRS W-2 forms.

Effective Date: Lenders can use this income source starting from March 1, 2024.

Using Nontaxable Income to Adjust Gross Income:

What's New: Lenders can treat 15% of Social Security income and the full amount of qualifying child support income as nontaxable income without additional documentation. Example: Benefit amount: $1,500 Nontaxable amount: $1,500 x 15% = $225 Gross-up amount: $225 x 25% = $56 (rounded to the nearest dollar) Qualifying income: $1,556 (does not require additional documentation)

Note: If the lender opts to gross-up more than 15% of Social Security income, documentation to support that the additional income is nontaxable must be included in the loan file.

Effective Date: This policy change can be applied immediately.

Certified Shared Equity Program List:

What's New: Fannie Mae has introduced a Certified Shared Equity Program List to assist lenders in identifying programs that meet specific requirements.

Responsibility: Lenders must still review all applicable Fannie Mae requirements.

Effective Date: Lenders can use this list immediately.

Financial Reporting Requirements:

What's New: Large non-depository sellers/servicers are now required to submit a Mortgage Bankers' Financial Report Short Form (Form 1002A) monthly in addition to quarterly reporting.

Effective Date: Applicable sellers/servicers must comply by May 31, 2024, for the April 2024 monthly reporting.

Sale of eMortgages to Fannie Mae:

What's New: The Selling Guide now incorporates guidance on delivering eMortgages to Fannie Mae, emphasizing the use of special purpose legal documents.

Clarification: Certain loans no longer require supplemental documents for certification.

Effective Date: Immediate implementation.

Requirements for Use of Attorney Title Opinion Letters:

What's New: Lenders may obtain either a lender's title insurance policy or, in limited circumstances, an attorney title opinion letter for specific transactions.

Conclusion:

These updates to Fannie Mae's Selling Guide aim to make the mortgage process more efficient and accessible for lenders and borrowers. Stay informed about these changes and consult Fannie Mae's resources for detailed information on each topic.

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Navigating the 2024 Loan Landscape: FHA, VA, Conventional, and USDA Loan Limit Updates

Tue, 12 Dec 2023 17:10:12 GMT

Original Source: saleztrax.com

As we step into the new year, changes in loan limits that promise to reshape the lending landscape. The Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), conventional loan programs, and the U.S. Department of Agriculture (USDA) are all adjusting their limits for 2024. Here's a comprehensive breakdown of the latest developments:

FHA Loan Limits 2024

The FHA recently unveiled its revised loan limits, slated to take effect for case numbers assigned on or after January 1, 2024. This adjustment impacts nearly every county in the U.S., with increases in both standard and high-cost areas.

1-Unit Properties: The limit for 1-unit properties is set to rise from $472,030 to $498,257.

High-Cost Areas: Regions classified as high-cost will see a significant increase, from $1,089,300 to $1,149,825.

To leverage these new limits, it's crucial to note that the FHA case number must be assigned on or after January 1, 2024. The earliest closing/funding date using the 2024 limits will be in January 2024. For a detailed breakdown by county, interested parties can refer to HUD’s Maximum Mortgage Limits web page .

Important for 2023 FHA applicants: Case numbers assigned before January 1, 2024, need to be canceled, necessitating the assignment of a new case number on or after January 1, 2024 to access the increased limits.

VA Loan Limits 2024

Full Entitlement

For Veterans with full entitlement, the VA does not publish a maximum guaranty amount for loans exceeding $144,000.

Partial Entitlement

Maximum Guaranty: Veterans with partial entitlement will see a maximum guaranty as a percentage of the conforming loan limit, set at $766,550 for 2024.

Effective Date: To use the 2024 limits, the closing date must be on or after January 1, 2024.

Location-Based Limits: For properties in counties with differing loan limits, VA's maximum guaranty for veterans with partial entitlement aligns with the 2024 conforming one-unit county loan limit where the property is situated.

Conventional Loan Limit Increase for 2024

Aligning with Fannie Mae and Freddie Mac's conforming loan limit increases, conventional loan programs are undergoing changes.

1-Unit Standard Balance Limit: This limit rises from $726,200 to $766,550.

1-Unit High Balance Limit: High balance limits see an increase from $1,089,300 to $1,149,825.

Loan amounts continue to vary by county and number of units. Fannie Mae's Desktop Underwriter (DU) and Freddie Mac's Loan Product Advisor (LPA) will be updated to reflect the new 2024 limits on December 2nd and December 3rd, respectively.

For a detailed breakdown of 2024 loan limits by county and unit, refer to the FHFA Conforming Loan Limits link .

USDA Loan Limits 2024

In the realm of home financing, the U.S. Department of Agriculture (USDA) stands out with its unique approach to loan limits in 2024.

No Published Maximum Loan Amount Limits: Unlike other loan programs, USDA does not publish specific maximum loan amount limits. Instead, USDA loans require a condition commitment that accurately reflects the intended loan amount for the process to move forward.

No Closing/Funding Date Restriction: A notable distinction of USDA loans is the absence of closing or funding date restrictions. With no imposed maximum loan amount limit, borrowers benefit from greater flexibility in choosing their closing dates, making USDA loans an attractive option for those seeking a more adaptable financing solution.

As potential homebuyers explore their financing options, the USDA's approach offers a refreshing departure from the constraints associated with other loan programs. The absence of specific limits and date restrictions provides borrowers with the freedom to navigate the homebuying process with greater ease and flexibility.

In the dynamic landscape of real estate financing for 2024, the FHA, VA, conventional, and USDA updates serve as a reminder of the diverse options available to homebuyers, each with its own set of advantages and considerations. As we navigate the evolving terrain of housing finance, understanding the nuances of each loan program becomes paramount in making informed decisions for a successful homebuying journey.

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Fannie Mae's LTV Ratio Update: Boosting Access to Credit and Affordable Housing

Fri, 08 Dec 2023 18:27:53 GMT

Original Source: saleztrax.com

Fannie Mae's recent adjustment to its LTV (Loan-to-Value) ratios, effective from November 18, 2023, signifies a proactive response to the evolving needs of the housing market. In this blog post, we'll delve into the details of these changes, particularly focusing on how Desktop Underwriter Version 11.1 is shaping the landscape for two- to four-unit properties, principal residences, and various transaction types.

To address the critical need for increased credit access and support for affordable rental housing, Fannie Mae adjusted the maximum allowable LTV, CLTV, and HCLTV ratios for specific transaction types. Notably, the maximum ratios for two- to four-unit properties, principal residences, and select transactions were increased to 95%.

Transaction Types Affected:

Principal Residence Purchase
Limited Cash-Out Refinance

Maximum LTV Ratios:

Exclusions:

This change does not apply to high-balance mortgage loans and loans that are manually underwritten.

For Further Reference:

Lenders can find additional details in the Fannie Mae Selling Guide here . Stay informed about these updates, which took effect last week, and explore the broader implications for the mortgage industry.

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VantageScore 4.0 Could Inject $1 Trillion into Mortgage Market

Tue, 14 Nov 2023 14:30:00 GMT

Original Source: saleztrax.com

A recent study conducted by VantageScore has revealed that a transition to the VantageScore 4.0 model, which two government-related loan buyers are considering, could potentially bring about a significant revitalization in the mortgage market. The study suggests that this transition could lead to an estimated annual increase of $1 trillion in mortgage originations. This potential transformation in credit scoring systems has created significant buzz in the mortgage industry, offering a glimmer of hope for an industry facing challenges in sourcing viable origination leads.

The Impact of Credit Score Modernization

The adoption of VantageScore 4.0 has garnered substantial attention as it has the potential to reshape the mortgage landscape. While FICO, the current credit score provider, has made projections about serving more borrowers with their newer 10T score, VantageScore's latest research delves deeper into how many borrowers might realistically qualify using its scoring metric.

According to the study, a vast number of individuals aged 25 to 65 have a qualifying credit score of 620 or higher, totaling approximately 4.9 million potential borrowers. However, this number is narrowed down further by considering median home prices and the average household size, which stands at 1.83 adults.

One important aspect to consider is the current limited availability of resale homes, with new construction playing a significant role in the market, representing almost one-third of inventory. Despite this, existing homes continue to dominate the market.

When the study applies additional filters based on forecasted resale home prices for 2023 and 2024, it estimates that an additional 2.7 million borrowers could join the market, contributing to the potential $1 trillion in additional annual originations.

Inclusivity and Market Reach

A significant portion of the borrowers who would become eligible through the utilization of VantageScore 4.0 are individuals residing in markets targeted by Fannie Mae and Freddie Mac's mandates. These markets often include rural areas and minority communities, making VantageScore's proposition even more attractive for diversifying mortgage lending.

Notably, many of these newly eligible borrowers do not have thin credit files but rather possess debt management histories classified as inactive due to a lack of a reported tradeline within the last six months. This approach to evaluating creditworthiness contrasts with FICO's philosophy, which tends to be more cautious regarding the minimum usage required to establish a reliable credit track record.

Reliability and Predictive Ability

VantageScore's ability to predict a loan's relative default rate has been assessed and ranked on a 100-point scale, with higher numbers indicating better performance. The study rates VantageScore 4.0 at 68.6 for originations and 84.2 for outstanding loans. These scores indicate a strong predictive ability for VantageScore's credit model, underlining its potential for sound risk assessment in the mortgage market.

Conclusion

The potential transition to VantageScore 4.0 presents an exciting opportunity for the mortgage market, offering the promise of increased originations and broader access to homeownership for millions of potential borrowers. While the full implementation of credit score updates may not occur until 2025, VantageScore and FICO are encouraging lenders to experiment with their scoring models in the private market to familiarize themselves with the metrics. This shift could not only stimulate the mortgage market but also help bridge gaps in access to credit for traditionally underserved communities, bringing a positive transformation to the industry.

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The 8 Do's and 7 Don'ts When Getting a Mortgage

Wed, 04 Oct 2023 14:57:18 GMT

Original Source: saleztrax.com

Securing a mortgage is a significant financial step that requires careful planning and thoughtful decisions. To assist you in navigating this process smoothly, we've put together a list of 8 Do's and 7 Don'ts. By following these steps, you can enhance your chances of obtaining a mortgage with favorable terms and achieving your dream of homeownership.

The 8 Do's:

1. Seek Guidance from Professionals : Reach out to mortgage professionals, real estate agents, and financial advisors. Their expertise can offer valuable insights, helping you make informed decisions and avoid common pitfalls.

2. Check Your Credit Early : Begin by reviewing your credit reports from the three major credit bureaus—Equifax, Experian, and TransUnion, which you can access for free once a year at annualcreditreport.com. Take action to correct any errors and work on improving your credit score if necessary. Importantly, checking your own credit does not impact your credit scores.

3. Keep Your Financial Documents in Order : Stay organized by collecting important financial documents, including tax returns, W-2s/1099s, award letters, pay stubs, bank statements, court orders, and any other relevant paperwork. Having everything readily available will expedite the application process.

4. Get Pre-Approved: Prior to beginning your home search, obtain pre-approval for a mortgage from a lender. This not only establishes your budget but also showcases your commitment as a serious homebuyer to sellers.

5. Save for a Down Payment: Start saving for a down payment well in advance. A larger down payment can lead to better loan terms and lower monthly payments.

6. Budget for Closing Costs: Be prepared for closing costs, which can amount to several thousand dollars. Understanding these expenses in advance will help you plan your finances accordingly.

7. Stay Current on Existing Debts: Continue making on-time payments for all your existing debts, including credit cards, loans, and student loans. Consistent financial responsibility is a significant factor.

8. Communicate Openly with Your Lender: Maintain open communication with your lender throughout the process. Respond promptly to requests for information or documentation to avoid delays.

The 7 Don'ts:

1. Don't Switch Jobs: Changing jobs during the mortgage process can create uncertainty about your income, potentially leading to application delays or even denial.

2. Don't Miss Payments: Late payments on existing debts can harm your credit score and put your mortgage eligibility at risk.

3. Don't Apply for or Open New Credit Before Closing: Avoid applying for new credit or opening new accounts shortly before closing. These actions can disrupt the mortgage process and lead to delays or alterations in loan terms.

4. Don't Co-Sign for Others: Co-signing for someone else's loan can increase your financial obligations, affecting your ability to qualify for a mortgage.

5. Don't Close Credit Accounts: Closing credit accounts may reduce your credit limit and increase your credit utilization ratio, potentially damaging your credit score.

6. Don't Change Banks: Consistency in your banking history is essential. Changing banks during the mortgage process can lead to delays in providing necessary documentation.

7. Don't Make Large Deposits: Be cautious about large, unexplained deposits into your bank account. Lenders may scrutinize these transactions, so ensure you can document the source of significant deposits.

Conclusion:

By following these Do's and Don'ts, you can simplify the mortgage process, enhance your financial standing, and boost your chances of securing a mortgage that aligns with your homeownership objectives. Keep in mind that thoughtful planning and responsible financial management are fundamental to achieving successful homeownership. Good luck with your journey toward owning your dream home!

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Navigating Non-QM Loan Products: Empowering Self-Employed Gig Workers

Tue, 19 Sep 2023 19:13:48 GMT

Original Source: saleztrax.com

Unlocking Opportunities for Self-Employed Workers

In an evolving economy characterized by the rise of the gig workforce, self-employment has become a viable and rewarding career path. However, this transition has exposed a major challenge in the mortgage industry: traditional loan qualification processes often fail to accommodate the unique financial profiles of self-employed individuals. Mortgage loan officers frequently struggle to qualify these individuals due to the irregularity of income and unconventional tax structures that are inherent to gig work. In this article, we delve into the complexities faced by self-employed gig workers in securing traditional mortgages and explore the merits of Non-QM (Non-Qualified Mortgage) loan products as a solution to bridge this gap.

The Hurdles of Traditional Mortgage Qualification for Self-Employed Individuals

Traditional mortgage qualification processes primarily rely on consistent W-2 income and a stable employment history. This approach, while suitable for traditionally employed individuals, does not align with the dynamic income streams and tax deductions that characterize self-employment. Self-employed gig workers often face difficulties in qualifying for traditional mortgages due to:

1. Irregular Income: Gig workers frequently experience fluctuating income, which traditional lenders consider risky and difficult to assess accurately.

2. Tax Deductions: Self-employed individuals can claim various deductions to minimize their taxable income, which can make their earnings seem lower on paper and hinder mortgage approval.

3. Limited Documentation: The documentation required for self-employed individuals can be extensive and sometimes challenging to provide, especially when income sources are diversified.

4. Short Employment History: Gig workers who recently transitioned to self-employment may not have the required stable employment history that traditional lenders seek.

The Appeal of Non-QM Loan Products for Loan Officers

Non-QM loan products have emerged as a lifeline for mortgage loan officers aiming to assist self-employed gig workers. These innovative products offer more flexibility in qualifying borrowers by considering alternative metrics beyond traditional income verification. Loan officers are increasingly inclined to offer Non-QM products because they:

- Expand Client Base: Non-QM loans enable loan officers to tap into a previously underserved market, including self-employed individuals with varying income structures.

- Flexible Qualification Criteria: Non-QM loans allow loan officers to consider factors beyond standard income documentation, like bank statements and business cash flow, to assess a borrower's repayment capacity.

- Tailored Solutions: Non-QM products can be customized to fit the unique circumstances of self-employed gig workers, offering them a path to homeownership that was once out of reach.

Understanding How Non-QM Loan Products Work

Non-QM loan products operate under different rules than traditional mortgages. They prioritize a holistic view of a borrower's financial situation rather than relying solely on income stability. Key features of Non-QM loans include:

- Alternative Income Verification: Non-QM loans consider various sources of income, such as bank statements, business receipts, and even assets, allowing self-employed borrowers to showcase their ability to meet mortgage payments.

- Flexible Debt-to-Income Ratio (DTI): Non-QM loans often have more lenient DTI requirements, acknowledging that self-employed individuals might have higher DTIs due to business expenses.

- Diverse Property Types: Non-QM loans can cover a wide range of property types, including investment properties and non-warrantable condos, providing options for borrowers with different real estate goals.

Saleztrax Mortgage Processing: Empowering Non-QM Loan Processing

Navigating the landscape of Non-QM loan products can be complex, but tools like a Contract Mortgage Processor can offer invaluable assistance. Saleztrax Mortgage Processing specializes in providing knowledge about Non-QM products and collaborates closely with Non-QM lenders. Their expertise streamlines the loan origination process by:

- Product Familiarity: Saleztrax Mortgage Processing equips loan officers with in-depth knowledge about Non-QM loan options, ensuring they can confidently guide self-employed borrowers toward suitable solutions.

- Lender Collaboration: With close ties to Non-QM lenders, Saleztrax Mortgage Processing facilitates smoother communication and application processing, expediting approvals.

Unlocking New Possibilities: Contact Saleztrax Mortgage Processing Today

Empower your mortgage origination journey by embracing Non-QM loan products. If you're a loan officer seeking to assist self-employed gig workers in achieving their homeownership dreams, contact Saleztrax at 727-483-9820. Discover the potential of Non-QM loans and revolutionize the way you navigate the modern mortgage landscape.

Bridging the Gap with Non-QM Loans

The landscape of employment is shifting, and the mortgage industry must adapt to cater to the unique financial situations of self-employed gig workers. Non-QM loan products offer a pathway to homeownership for individuals who have historically faced challenges with traditional mortgage qualification. By understanding the hurdles that self-employed borrowers encounter, recognizing the advantages of Non-QM products, and utilizing resources like Saleztrax Mortgage Processing, mortgage loan officers can confidently offer innovative solutions and ensure that the dream of homeownership remains within reach for everyone.

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How earnest are you about buying that house? Prove it with earnest money!

Fri, 09 Jun 2023 12:30:00 GMT

Original Source: read ynest.com

Let’s say you’re shopping for your first house, and you’ve just finished touring one you really like. It checks off most of your must-have boxes, so you decide to make an offer (exciting!). You and your real estate agent go back to their office to write a purchase agreement. While completing the offer, they turn to you and ask how much earnest money you want to put down.

Wait … what? Earnest money? You’re confused because, until now, all talk of money has focused on the offer price, sale price and down payment.

Don’t worry, you’re not the first new homebuyer who isn’t familiar with earnest money.

What is earnest money?

Earnest money , also called a good faith deposit, is what you give the seller to make them feel more confident about accepting your offer and taking their home off the market while the sale is pending. It isn’t required, but sellers rarely accept an offer without earnest money – especially in a competitive market – because it reassures the seller that you’re serious about buying their house and won’t just walk away from your offer.

“I tell my buyers there are 2 prerequisites to making an offer on a house – a pre-approval letter and a good faith deposit,” says Richard Harris, a REALTOR® with Century 21 in Chandler, AZ. “Earnest money expresses your serious intent to buy the home; it shows you’ve got skin in the game.”

Personally, I think of earnest money as an engagement ring. It’s a symbol that demonstrates your intent to follow through on your offer. Like with many things in life, talk is just talk until you put your money where your mouth is.

How much money should you give as earnest money?

While there is no set amount, earnest money is typically 1%-3% of the home’s sale price. If you’re buying in a very competitive market, offering a larger amount can give your offer an edge over others.

Do you get your earnest money back if you don’t buy the house?

That depends. If you decide to walk away from the deal simply because you changed your mind or for other personal reasons, you can kiss your earnest money goodbye. The sellers keep it because they must now spend time and money to put the house back on the market.

This is why the more earnest money you put down, the more attractive your offer is to the seller. Sellers know it’s much harder to walk away from $10,000 than $1,000, so they’ll take note of that when considering offers.

However, there are 4 types of contingencies that are considered valid, legal reasons for backing out of a deal (assuming they’re included in your purchase agreement). If any of these contingencies occurs, you’re able to get your earnest money back:

Home inspection contingency – If the house fails the inspection due to defects and seller doesn’t agree to remediation (i.e., fix the problem)
Appraisal contingency – If the house appraises for less money than the sale price and the seller won’t lower the price of the house
Financing contingency – If the buyer can’t secure financing for a mortgage loan on the house
Selling house contingency – If the buyer is unable to first sell their current house

When these contingencies are included in the purchase agreement, you can get your earnest money back if the contingencies are not satisfied.

In a seller’s market that leads to bidding wars, some buyers choose to forgo some or all of these contingencies to present a more attractive offer that may have a better chance of getting accepted. This can be a risky endeavor because if any of those situations occurs and the sale doesn’t go through, you’ll lose your earnest money with no house to show for it. If you’re considering omitting these contingencies in your offer to purchase, consider the risks very carefully before doing so.

Where does the earnest money go?

Earnest money is held temporarily in a third-party escrow account for safekeeping until it is applied to the purchase price at the sale closing.

Is earnest money part of the down payment?

Yes! The good news is that once the offer is accepted, your earnest money becomes part of the down payment or can be used for your closing costs . So even if you’re unfamiliar with the practice of paying earnest money, you can factor the amount in your existing budget for what is admittedly already a pricey journey.

Good luck finding your dream home!

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Who can gift money for a down payment on a mortgage loan?

Fri, 26 May 2023 12:30:00 GMT

Original Source: readynest.com

Saving up enough money to put a full down payment on a home isn’t always an easy feat. It can take blood, sweat and tears to scrape up the funds needed to come up with 20% of the purchase price of a home. By blood, sweat and tears, I mean you might have to get creative and cancel your $10 Netflix monthly subscription for a few years. Who wants to sacrifice that?

If you’re lucky enough to have loved ones who are willing to offer financial support, there’s another option that can help you come up with down payment funds: gift money. How do down payment gift funds work, and who can provide gift money for a down payment? Read on to find out!

Determining the down payment amount

Before we get into gift funds, let’s first look at how much a “typical” down payment might be. This amount varies widely and depends on the home’s purchase price.

Say you’d like to purchase a home with a price tag of $250,000. In this case, you’d need:

$7,500 for a 3% down payment
$25,000 for a 10% down payment
$37,500 for a 15% down payment
$50,000 for a 20% down payment

Even a 3% down payment, the minimum many lenders will allow, is a large investment. If you even have that much to begin with, you may have other priorities for some of that money – investments, furnishings and improvements for your new home, or a fund for home maintenance or emergencies. Check out our down payment calculator to run your own numbers and view different scenarios that demonstrate how various down payment amounts affect your savings and ability to buy a home sooner rather than later.

A down payment solution: Gift funds

Money gifted to you could be a viable way to put a dent in that down payment amount needed to get a mortgage loan. Depending on the type of loan, many lenders will allow you to use money gifted to you by family as part of your down payment. If you have family members who can help support you financially, you could use gift funds as down payment money so you can buy a home sooner. If you’re wondering who falls under the category of "family," it varies depending on the loan program. Check with your lender to be sure.

What gift funds can be used for and who can provide those funds

Here are some things to keep in mind if you plan on using gift funds for your down payment:

Gift funds can be used for the down payment, closing costs and interest points . Many lenders will allow you to use gift funds to cover the entire amount of the down payment, depending on your credit score and their loan underwriting guidelines
If you’re getting a conventional loan through Fannie Mae or Freddie Mac, gift funds must come from family. Other loan programs may have different restrictions – your lender will be able to provide you specific guidance
As of 2022 , the IRS allows parents to collectively gift a child up to $32,000 without paying tax on that money, and other family members can gift up to $16,000 without paying tax
Gift recipients generally do not pay tax on down payment gifts, and there’s no actual limit on the dollar amount someone can be gifted to use toward the purchase of a home if the home will be the borrower’s primary residence
Many lenders require documentation of gift money, like a signed letter from the donor(s) and verification of transfer of funds. But if you can keep any gift money in your own bank account for a couple of months prior to applying for a mortgage loan, the bank may not require such detailed asset verification since those funds are considered “seasoned”
You cannot use gift funds from anyone who would profit from the home purchase, such as the real estate agent or builder

The bottom line

The gift of money can help borrowers get over the down payment hurdle, taking weight off their shoulders and helping them get into homes sooner. If you know you’ll be receiving gift funds to put toward your down payment, be ready! Prepare to document the sources of those funds for your lender and comply with any related/applicable restrictions so your mortgage loan process is as smooth and seamless as possible.

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Should you buy a home during uncertain times?

Fri, 12 May 2023 12:30:01 GMT

Original Source: readynest.com

A down payment is your initial investment in your home, and for many would-be homebuyers, it's the most daunting hurdle. How much should you put down, and what kind of low-down-payment mortgage options could help you afford to buy sooner or expand your choices?

When there is no “normal,” when is the best time to buy a house?

Since March of 2020 and the COVID-19 pandemic, “normal” has been difficult to describe – and not something we could select with the push of a button. And for those thinking of buying a home over the last few years, the market has been anything but what used to be thought of as a “normal.” Across the country, home appreciation ascended rapidly in 2020, 2021 and the start of 2022, due in large part to high demand and low inventory.

Economic concerns swept the country in the second half of 2022, and we saw a significant jump in mortgage interest rates accompany those concerns. Gone were the low rates in the 3% range and we saw 30-year fixed mortgage interest rates climb to about 7% before pulling back slightly. According to Freddie Mac, 30-year fixed mortgage interest rates began 2022 at 3.22% and ended the year at 6.42% .

Whether it was the change in interest rates, whispers of possible decline in home values, or news outlets reporting on a possible recession, many people who were thinking of buying a house found themselves, like me in front of the washing machine, having a moment of pause. In fact, the number of mortgage applications submitted was 42% lower in 2022 than the year before, according to a CNBC report .

To buy now or to wait

While a moment of pause in uncertain economic times is understandable, should you let that stop you from buying a home soon? While it seems like a simple question, the answer is anything but simple. Each person must account for their own circumstances and make the decision that best suits their individual needs, but there are a few things that I suggest you consider as you attempt to answer that question for yourself.

Mortgage interest rates

Higher mortgage interest rates generally mean a larger monthly mortgage payment, so buying a house now likely means your monthly payment will be higher now than if you bought a house last year. Depending on your circumstances, it could be a sizeable difference. Does that mean you should wait for mortgage interest rates to go back to the low 3% range? Unfortunately, no forecast I’ve seen is predicting that will occur anytime soon.

The fact of the matter is, mortgage interest rates are volatile and change daily (in some cases, many times throughout the day), so no one knows where the rates will be 3 or 6 months from now. They could be lower. They could easily be higher, too.

While you cannot control where interest rates are now or where they are headed in the future, there are mortgage options you can choose that can make a difference in the interest rate of your mortgage loan. Some mortgage options allow you to pay money up front to lower your interest rate; your loan officer can explain your available options and how they affect your specific situation.

Depending on how long you intend to own the home, you may also want to consider an adjustable-rate mortgage (ARM) , which may provide a lower initial rate than a 30-year fixed-rate mortgage . Find more information on how ARMs work here.

Re g ardless of what rate you ultimately receive, it's important to make sure you will not overstretch yourself financially, leaving nothing left for repairs, living expenses or savings. If you can comfortably afford the mortgage payment, then you may not want to wait. If you can’t, waiting would be more prudent.

Home prices

There are 2 factors to consider when it comes to home prices. The first and most obvious is, of course, how much the home will cost you at the time you buy it. However, unlike buying a car, you purchase a home expecting it to increase in value over the time you own it. This increase in what your home is worth over the time you own it is commonly referred to as "home price appreciation."

Now, there is no guarantee that your home will appreciate in value. It could stay the same or decline in value. In fact, according to Zillow’s Home Price Expectations Survey , some economists think home prices may decline in the short term, while others think they’ll continue to increase. Even those economists surveyed who expect home prices to decline still predict cumulative home price appreciation over a 5-year span.

Ultimately, my advice is for you to consider how long you plan to own the home you are buying. If you plan to own it for only a year or two, this current economic cycle may suggest you hold off making a home purchase. If you plan on owning it for longer, it’s more likely you could weather a small decline in home values and enjoy home appreciation gains later (assuming those forecasts are correct).

Housing market

The paragraphs on home prices above could lead one to try to time the market and wait for home prices to decline a bit before ultimately buying that home. If that’s your mindset, the other area I’d recommend you consider is the current housing market. In 2020 and 2021, the country saw one of the strongest seller markets in history.

Limited housing inventory and large demand of those looking to purchase a home led to a very competitive market for homebuyers. It was common to have homes receive multiple offers within hours of hitting the market, forcing buyers to offer 10%, 20% or even 50% over the asking price in an attempt to win a bidding war.

While those tactics may have led to an accepted offer, many buyers discovered they were buying the home for more than what their bank was willing to lend them, which in turn required them to come up with thousands of dollars more of their own money to purchase the home. At the same time, many buyers were waiving contingencies, such as the home inspection , to get their offer accepted over others.

We have an entire story dedicated to the importance of getting a home inspection , so I won’t highlight that here. However, my point is that buying a home in a more balanced or “normal” market, when you may only be up against 1 or 2 other buyers rather than 20 and where you can actually inspect the home you are about to purchase, may better fit your risk appetite than buying during what the country saw happening in the housing market in 2021.

Does it all just come out in the wash?

One upside to potentially waiting could be saving for a larger down payment . Of course, while you wait, rents may go up, homes may appreciate and become more expensive, and interest rates may change, so your extra savings may not go as far as you hoped. That’s why we created our buy now vs wait calculator : to help you run the numbers for your own situation.

One last item to consider is: Why do you want to buy a home in the first place? If it’s purely for financial reasons, then while I’d still suggest you consider the items above, perhaps waiting a few months makes sense for you. However, for most of us, the lifestyle benefits of homeownership – such as place to call your own, a yard, a garage or a washing machine – matter as much or maybe even more than the financial benefits. If that's true for you, and you can comfortably afford to buy a home now, you should ask yourself, “Do I really want to wait to start enjoying those lifestyle benefits?”

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Low-down-payment mortgage options

Fri, 28 Apr 2023 12:30:00 GMT

Original Source: readynest.com

How much should you put down on a house?

As a homebuyer, you have a finite amount of money to work with. How do you decide how much of your savings to spend and how much to reserve? A larger down payment generally means a smaller monthly payment and more equity . A smaller down payment may mean a larger mortgage payment every month, but may also help you afford to buy a home sooner or widen your homebuying options.

Only you can decide what makes the most sense for your individual situation, but it's never a good idea to sink your entire savings into a down payment. In fact, your lender may even require you to have some money left in savings after you close. Your lender has a vested interest in knowing that you can weather an unexpected expense – it wants to make sure you can keep paying your mortgage.

When you consider how much to spend on your down payment and how much to keep in savings, think about:

Emergency funds (experts recommend 3 to 6 months' living expenses)
Immediate expenses related to buying your first home (repairs, renovations, new appliances or furniture)
Other investment goals (college savings, retirement savings)

Low-down-payment mortgage options

Once you determine the dollar amount you can afford (and want) to put down on a house, it's time to consider that amount in relation to home prices.

It's a common misconception that you must put 20% down on a home. If you do put 20% or more down, you won't need to pay mortgage insurance (more on that later). But you may have to save for a long time or put too much strain on your bank account to reach that threshold.

The minimum down payment most lenders allow is 3% to 5% of the purchase price of a house. For all down payments less than 20% of the purchase price, your lender will most likely require that one of these entities guarantee your loan:

US Department of Veterans Affairs (VA)
Federal Housing Administration (FHA)
A private mortgage insurer

Regardless of which guaranty option you end up with, your lender will review:

Your willingness to repay your loan, based on your prior use of credit
Your ability to repay, based on the amount and stability of your income
The amount of your investment in the property (your down payment) from savings and other sources
Whether the property's value and marketability provide adequate security for your loan

Here's a quick overview of each option.

US Department of Veterans Affairs (VA) loans

If you're an active member, veteran or reservist of the US armed forces, check with your lender regarding the possibility of financing a loan guaranteed by the VA. You may be able to put as little as 0% down (as long as the sales price doesn't exceed the appraised value ). Borrowers don't pay mortgage insurance, but are required to pay a funding fee.

Eligibility for specific home loan benefits depends on the type and length of service. Learn more at benefits.va.gov/homeloans .

Federal Housing Administration (FHA) loans

The minimum down payment for an FHA-guaranteed loan is 3.5%, but you may be required to put more down if you have a lower credit score .

FHA financing can help homebuyers with lower credit scores get access to a home loan, as FHA loans will typically accept credit scores below 620.

FHA loans include 2 types of mortgage insurance premiums:

The upfront mortgage insurance premium (MIP) is 1.75% of the home loan amount. You can roll it into your mortgage (but you will of course increase your monthly mortgage payment)
The amount of the monthly MIP is based on how much you put down and the length of your home loan. If you finance an FHA loan with less than 10% down and a term greater than 15 years, you cannot cancel the monthly FHA insurance payment, so you'll be paying it for the life of the loan

There are certain limitations with FHA loans; check with your lender regarding these options.

Conventional loans with private mortgage insurance (private MI)

If you finance a conventional mortgage guaranteed by a private mortgage insurer, you may be able to put as little as 3% down, depending on your lender's requirements. (Full disclosure: Readynest is brought to you by MGIC , a private MI company.) While private MI insures loans with credit scores all the way down to 620, borrowers with better credit scores typically pay less for private MI on a conventional loan than for FHA mortgage insurance.

The most common private MI option is a monthly premium paid by the borrower. The premium appears on your monthly mortgage statement, but the MI does not increase your loan amount, and no additional funds are required at closing. You can usually cancel this MI coverage once your loan amount falls to 75% to 80% of your home's value ( more on cancellation here ).

There are other MI options to consider, including plans where you pay all or a portion of your MI premium as a lump sum either at closing or finance it into your loan amount. This option will reduce or eliminate your monthly premium. Some lenders also offer a plan where they pay the MI premium, but they may increase the loan fees or the interest rate to cover the cost.

Learn more about private MI.

Gift funds

If you're lucky enough to have family members who want to help you become a homeowner, congratulations! Just be aware of the rules that may apply to a down payment gift. It's not as simple as cashing a check from mom or dad, adding those funds to your own savings, then writing a larger check for your down payment.

Your lender will want to confirm any deposits in your account from friends or family are gifts, not loans. Why? If you get an unofficial loan to help with your down payment, you'll end up paying your mortgage payment AND a separate payment to the Bank of Mom and Dad, which could put you on shakier financial footing. And that's a lose-lose-lose for the bank, you and your unofficial lender.

Long story short: Your lender may require a gift letter – a note from the donor that says you don't have to pay the money back. If you know some of your down payment will be coming from a gift, check your lender's requirements.

Down payment assistance

In addition to low-down-payment mortgage programs, there are more than 2,500 programs across the country that provide down payment assistance to qualified borrowers. Often this assistance comes in the form of a grant or forgivable second mortgage loan – money that does not need to be repaid as long as certain conditions are met.

There are also some programs out there with special eligibility requirements. For example, you could qualify for special assistance if you belong to a certain demographic (e.g., Native American) or work for the US military or in education, law enforcement or healthcare.

Down payment assistance and mortgage insurance (both FHA and private) are not mutually exclusive. Learn more about down payment assistance on Readynest or at DownPaymentResource.com .

Down payment considerations checklist

Review your savings to determine how much of your own money you can comfortably afford to put down on a house while reserving funds for emergencies or other expenses
Consider whether you have access to any gift funds to supplement your own savings; if so, make sure to ask your lender what documentation you'll need to provide
Ask your lender to thoroughly explain your low-down-payment mortgage options, including VA loans (if applicable), FHA loans and conventional loans with private MI
Check your eligibility for down payment assistance, and talk to your lender about programs in your area

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Why homebuyers shouldn't wait until 2024 for cheaper home costs

Fri, 14 Apr 2023 17:53:28 GMT

Original Source: cnbc.com

With U.S. home prices dropping and mortgage rates projected to dip sometime in 2024, homebuyers might be wondering if they should wait until next year to land a more affordable deal.

But with the economic outlook particularly murky right now, buyers shouldn’t be overly concerned with timing their purchase, real estate experts tell CNBC Make It.

The average interest rate for the benchmark 30-year fixed mortgage reached 7.08%, as of Monday. However, with the economy expected to cool and possibly dip into a recession, many recent forecasts expect rates to drop to 6% or below in 2024, including a Fannie Mae projection of 5.2%.

A drop of 1% in mortgage rates works out to about $200 in monthly mortgage costs, for a 30-year fixed rate on a $300,000 home loan, according to CNBC Make It’s mortgage calculator.

Meanwhile, home prices continue to weaken and are already down 2.7% from their June peak, according to the S&P Case-Shiller home price index. Forecasts are a mixed bag, but most expect prices to either remain flat or continue cooling by 1% to 10% from 2022′s highs.

Should you buy a home in 2023 or 2024?

While it might be tempting to hold off on buying a property until a better deal arrives, there’s no guarantee that mortgage rates will drop or that homes will become more affordable in 2024, say real estate analysts and economists interviewed by CNBC Make It.

Despite forecasts of lower mortgage rates in 2024, don’t expect them to bottom out to the record lows of the past decade, either, says Lawrence Yun, chief economist at the National Association of Realtors.

“Returning to mortgage rates of 3% or 4% is not going to happen, in my view,” says Yun, who points out that historically rates have been higher. The low rates of 2020 and 2021 were “unique” and those that got them were “lucky,” he says.

Plus, if “mortgage rates go back down to that level, people can always refinance their mortgages,” says Yun.

As for home prices, a price correction is largely expected to be short-lived due to a chronic shortage of homes. Declining mortgage rates could also stoke demand, which would likely push prices higher. It’s also important to note that real estate trends vary by region, which means that home prices in your area might not drop in either 2023 or 2024.

“I wouldn’t necessarily wait around and see if you can get the best possible deal because timing the housing market is very difficult,” says Cristian deRitis, deputy chair economist at Moody’s Analytics. His firm predicts another 5% to 10% drop in home prices from their peak over the next 18 to 24 months, after which prices will start rising again.

While professional house flippers might need to worry about short-term fluctuations in home prices and interest rates, regular homebuyers who plan to live in their homes more than five years should be less concerned about timing the market, he says.

The short-term forecast for home prices is “a modest decline,” he says. “You might overpay a little bit in the short term, but if your tenure is long enough, it’s not going to make much of a difference.”

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Don't let these 5 fears hold you back from owning a home

Fri, 24 Mar 2023 17:30:00 GMT

Original Source: readynest.com

If you haven’t applied for a mortgage, why not?

Despite the fact that most Americans want to own a home one day, many of them are worried about starting the process now. In my 20+ years in the mortgage industry, I have spoken to many people about when and why they decide to apply for a mortgage – and why not. In many instances, it seems to come down to a very human emotion: the fear of rejection.

Feel the fear – but do it anyway

That fear of rejection is very understandable! After all, the mortgage process requires you to be pretty vulnerable: strangers will be looking at your credit history , your bank account and your spending habits. But if you take a leap of faith to apply for a mortgage and find out where you stand, you may find you’re more prepared to buy a home than you thought. And even if your application is denied, you’ll learn a lot about what you need to do next to become mortgage ready – information you may not have known if you didn’t decide to take that leap of faith.

Are one or more of these 5 fears holding you back from applying for a mortgage?

1. “My credit won’t be good enough to qualify for a mortgage.”

You can’t move forward if you don’t know where you stand. Read up on credit basics and then get a copy of your credit reports at annualcreditreport.com . In general, you’ll need a score of at least 580 for an FHA loan or 620 for a conventional loan .

Some lending programs do exist for people with lower credit scores, or for those who don’t have much credit history. For example, Thrive Mortgage has its very own credit restoration program called Thrive4Home. Until you pull your own credit and sit down with a lender , you may not know what you might be able to qualify for.

2. “I won’t be able to afford the monthly mortgage payments.”

A monthly mortgage payment depends on many factors – the amount you borrow, the length of your loan, your interest rate, and taxes and fees, to name a few. You won’t know how your current rent payments will compare to a monthly mortgage unless you run some numbers using the prices of homes in your area. Getting preapproved by a lender could also show you how much home you can afford and what the monthly mortgage payment might be.

While a monthly mortgage payment can be intimidating, any renter knows that renting comes with its own risks and uncertainty. Rents continue to rise, and there’s no guarantee your rent will stay the same year to year. According to rent.com , the average rental price for a 1-bedroom apartment showed a year-over-year increase of 27% in August 2022. If you get a fixed-rate mortgage , your monthly mortgage payment will not increase unless your taxes and insurance do.

Remember that your home is an investment, not just another monthly bill. Paying rent gives you a 0% return on investment. A monthly mortgage payment earns you equity . In addition, your home will appreciate over time, adding value to your investment. While the actual rate of appreciation can vary quite a bit based on location, the market ( home prices rose almost 17% in 2021 !), and other factors, homes have historically averaged about 3.5% in annual appreciation . When you rent, your landlord reaps the benefit of that appreciation; when you own, the benefit is yours.

3. “I don’t have enough money for a down payment.”

One of the most persistent housing myths is that you need to put 20% down to buy a house. It’s true that putting down a larger down payment will lower the amount you borrow, thus lowering your monthly payment. But if you wait to even start your homebuying journey until you have 20% to put down, you may be waiting a long time.

There are many low-down-payment mortgage options out there, including FHA loans, VA loans, and conventional loans with private mortgage insurance . Most lenders offer one or more of those products, which require a minimum down payment of between 3% and 5%.

Down payment assistance (DPA) programs can also help you put less money down. Some DPA programs, like grants that cover some or all of the down payment and closing costs , don’t have to be repaid. Other DPA programs take the form of second mortgages that may require repayment, or may offer forgiveness of the second mortgage loan if certain conditions are met. Again, a lender can help you understand what is available in your area.

4. “A house requires too much maintenance.”

Some renters worry that owning a home will leave them on the hook for costly repairs and maintenance. Being a homeowner is indeed a responsibility, and you’ll want to maintain your home both for your own comfort and to protect your investment. If repairs and maintenance are just something you don’t want to deal with at all, continuing to rent may make the most sense for you.

But if maintenance is the only thing stopping you from becoming a homeowner, consider that:

A home warranty can help cover the cost of repairs to house systems or appliances – and can make the home repair process less intimidating since the warranty company will handle finding contractors to make the repairs. If the condition of a home you are considering for purchase is a concern, the seller may be willing to pay for the first year of a home warranty plan
Many major systems and appliances come with individual warranties for a set period of time. Depending on the house you purchase, you may find that you have at least some coverage for repairs (this is a good thing to know before you buy, of course!)

5. “I don’t want to be tied down.”

Other renters worry that by buying a home they’ll be stuck in the same place. It’s true that changing ownership of a property is more complicated than ending a lease , but that property is also a financial asset. If you no longer want to live in the house, you could:

Sell it and buy a new house, using the equity you earned to buy a bigger house or one in a different neighborhood or city
Sell it and return to renting, using the equity you earned to make other investments
Turn it into an investment property by renting it out

Don’t be intimidated

Buying a home can seem like a complicated, intimidating process. But don’t let fear stop you from getting to the starting line. Getting preapproved or applying for a mortgage can help you see where you stand.

The worst that can happen is you will be denied for the loan. “Denial” is a scary word, but remember that it doesn’t mean “never” – it means “not yet.” And knowing why you were denied for the loan will help you make the changes you need to make to become mortgage ready. A good loan officer will take the time to explain your situation and will help you make a plan.

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How You Can Begin to Build Wealth with a Starter Home

Fri, 10 Mar 2023 18:30:00 GMT

Original Source: myhome.freddiemac.com

If you want to break into the housing market, a starter home can help you achieve your homeownership goals.

As the name suggests, a starter home is a modest home that serves the short-term (5-10 year) needs of a first-time homebuyer, particularly young professionals or newlyweds. This is in contrast to a forever home, which typically includes more of your wants versus needs over a longer term (20-30 years).

There is no standard starter home type, but a condominium, townhouse or older single-family home could be considered a starter home. It may not have every amenity or as much space as you would like in a forever home, but the main feature of a starter home is that it’s typically more affordable.

While there are pros and cons to waiting to buy, holding out on homeownership until you can afford your forever home could postpone your opportunity to start building wealth sooner. A starter home gets you in the door of homeownership.

Here are three financial benefits of purchasing a starter home.

Starter homes are more affordable

Depending on your financial situation, it may make sense for you to purchase a home now rather than continue to rent. If you are willing to be flexible on your starter home’s features or location, knowing you only intend to live there for 5-10 years, you will likely be able to find a more affordable home. With a more affordable home, it will take you less time to save for a down payment and your monthly payments will be smaller than those on a more expensive home.

Starter homes can help build wealth

Buying a starter home now allows you to build wealth sooner rather than waiting to buy your forever home later. A starter home helps you build wealth in a few ways:

Home Equity . Equity is the difference between the current amount you owe on your mortgage and what your home is worth. Equity is built by making regular mortgage payments toward your loan principal . The more equity you have in your home, the more of it you own.
Home appreciation . Appreciation is the positive change in value of your home. While there is no guarantee your house will increase in value, well-maintained homes in a strong market have a good chance of appreciating over time. You can also increase the value of your home through updates or renovations .
Tax benefits. Homeowners may be able to take tax deductions which could save money and help build financial stability. Use our tax deductions calculator to estimate your potential savings.

Starter homes are a long-term financial asset

Purchasing a home is a large investment. But by the time you’ve outgrown your starter home, you may have gained significant equity, which will come back to you when you sell it. Another option, if you have the financial means, is to keep your starter home and rent it as an additional income source.

A starter home can give you homeownership experience and the financial benefits that come with it. For more information about buying a home, visit My Home by Freddie Mac® .

Subscribe to our blog and stay up to date about changes in the market that effect buyers. Or contact us to learn more about mortgage processing services.

Qualifying for a Mortgage When You’re Self-Employed

Fri, 24 Feb 2023 18:30:00 GMT

Original Source: myhome.freddiemac.com

The mortgage application process can be challenging for self-employed homebuyers when it comes to providing documentation.

When applying for a mortgage, lenders will look at your credit history , the amount of capital you have, the type of property you plan to purchase and your capacity to repay the loan. Your capacity to repay the loan is typically determined by your income and employment history. This step can be complicated for homebuyers that do not have traditional documentation of their income and employment.

Here are a few tips to help you through the homebuying process if you’re self-employed.

Proof of income

Depending on the nature of your self-employment, you may have income from freelance work, side jobs, gig work, contracting or a business you own. To determine how much you're able to borrow , lenders will combine your sources of income into your total taxable income.

Lenders want to see that the amount you earn from self-employment is steady or (ideally) increasing over time. For homebuyers with a traditional job, paystubs and W-2s serve as proof of regular income. But for self-employed individuals, income records could include:

Two years of personal tax returns.
Two years of business tax returns including schedules K-1, 1120, 1120S.
Year-to-date profit and loss statement.
Balance sheet.

Debt-to-income ratio

Once you provide proof of income, your lender will evaluate your Debt-to-income (DTI) ratio , which is the percentage of your gross monthly income used to pay your mortgage and other debts. DTI is calculated based on your income after expenses and this can be tricky for self-employed borrowers.

As a self-employed taxpayer, you may want to deduct as many business-related expenses as you can because it reduces your taxable income — and your tax bill. On the other hand, less taxable income could create a higher DTI based on the lower amount listed on your tax documents. This is important to keep in mind when you are preparing to buy a home.

Employment history

Most mortgage lenders require at least two years of consistent self-employment in the same industry, so it's important to keep good records of your work history. The following documents can be used to show consistent self-employment:

Letters from current clients.
Signed CPA statement.
Business license (if you are a business owner).
Proof of insurance for your business.

If you haven't been self-employed for two full years, lenders may accept a W-2 from a previous employer in combination with the documents listed above.

As you begin your search for the right home, it's important to work with a team of professionals who can help you make informed decisions along the way. They will be an invaluable resource in navigating the process as a self-employed homebuyer.

For more information about the homebuying process, visit MyHome® by Freddie Mac .

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How to Use Your Tax Refund to Buy a Home

Fri, 10 Feb 2023 18:21:53 GMT

Original Source: myhome.freddiemac.com

The upfront costs of homebuying can be significant, but your tax refund from the IRS can be a useful supplement to your homebuying budget.

Whether you are expecting a refund in the hundreds or thousands of dollars, there are several ways you can use those funds to bring yourself closer to homeownership.

Save for a Down Payment

Saving for a down payment can be one of the largest barriers to homeownership, and the typical homebuyer makes a down payment between 5% and 20% of the purchase price . Using your tax return to help with a down payment may help you reach your goal more quickly than expected.

You can also explore low down payment mortgages, such as Freddie Mac's Home Possible® and HomeOne® mortgages , which require only a 3% down payment.

Down payment assistance programs can also help you bridge the cash gap. Consider meeting with a housing counselor to discuss your options.

Pay for Closing Costs

Before you officially take ownership of your home, you are required to pay fees to your lender, real estate agent and other third parties involved in the homebuying transaction. These are known as closing costs . This is another area where you could direct your tax return.

Typically, homebuyers will pay between 2% and 5% of the purchase price of their home in closing costs, or between $4,000 and $10,000 on a $200,000 home. Closing costs will vary depending on where you live, so be sure to review your situation to fully understand your costs .

Lower Your Interest Rate with Discount Points

During the homebuying process, your lender may present you the option to pay discount points to buy down your mortgage interest rate. A "point" equals 1% of the loan. Discount points are’ essentially an upfront interest payment to lock in a lower interest rate on your fixed-rate mortgage, ultimately saving you money over the life of your loan .

Using your tax refund to pay discount points can help lower the amount of your monthly mortgage payments.

For more information about becoming a homeowner, visit My Home by Freddie Mac® .

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23 Tips to Improve Credit in 2023

Fri, 20 Jan 2023 21:05:58 GMT

Original Source: experian.com

Quick Answer

You can improve your credit score by making on-time payments, keeping balances low and limiting new credit applications. Find more tips for improving credit in 2023 below.

Last year brought inflated prices and interest rate hikes, both of which put increased pressure on households. Not only is it possible that your budget got tighter in 2022, but the cost of borrowing got higher too. That means paying a higher interest rate on credit cards, personal loans and mortgages.

Fortunately, taking steps to improve your credit can help you lower the cost of borrowing. Whether you're feeling confident or anxious about your finances heading into 2023, your credit score can be a key contributor to whether you'll be able to meet your goals.

Good credit means having a FICO ^® Score ^☉ of 670 or higher. The higher your score, the more access you'll have to the most favorable, least expensive loan and credit card options. And good credit can help you in other ways—like by making it easier to rent an apartment, for example. If you're ready to commit to optimizing your credit in 2023, here are 23 ways to do it.

1. Plan to Resume Paying Federal Student Loans

Since March 2020, federal student loan borrowers have not had to make monthly payments, and interest rates have been set at 0%. That forbearance period is currently set to end in summer 2023, or when uncertainties surrounding federal student loan forgiveness are resolved. As it stands now, the status of student debt relief remains unclear. Make sure you keep abreast of the latest news on forgiveness by visiting the U.S. Department of Education's Federal Student Aid website. You can also sign up for email updates on federal student loans.

The most important factor in your credit score is payment history. Help protect your score from the adverse effects of a missed student loan payment by making sure you're prepared for payments to resume. Review your budget to determine whether the resumed payments will stretch you financially. If you're concerned about your ability to afford your loans long term, talk to your servicer about signing up for an income-driven repayment plan.

2. Set Up Automatic Bill Payments

The best way to avoid missing a monthly loan or credit card payment is to put your bills on autopay. Make sure you have enough money in your checking account to cover each bill to avoid an overdraft. When you know you won't have to deal with a sudden score dip after a forgotten bill, you can focus on other ways to improve credit.

3. Pay Down Balances

The second most crucial component in your credit score is your credit utilization, and primarily how much revolving debt you're carrying compared with your total available credit. In 2021, consumers saw a reduction in average credit card balances and, subsequently, their credit utilization ratios. That helped the average U.S. credit score rise to a record-high 714 in 2021—the fourth consecutive year of an increase.

Make it a goal to reduce any high-interest credit card debt first, since that likely costs you more money in interest than, say, an auto loan or federal student loan does. Decreasing your credit card balances also shows potential lenders that you're responsible with credit. Experts suggest keeping your credit utilization below 30% of your credit limit at all times; those with the highest credit scores usually have a rate in the single digits.

4. Handle Debt in Collections

If you currently have an unpaid debt that's gone to collections, consider negotiating it down or disputing the debt if you think it's an error. A debt in collections is likely more than three months past due, and either the original creditor or a debt collector may be contacting you very frequently to get its payment.

You have the right to request the debt collector stop contacting you, but it's in your best interest to deal with the debt: You may pay off the debt in full or work out a negotiated settlement with the lender. Ignoring the debt could mean wrecked credit and potentially a lawsuit, eventually leading to garnished wages or a lien against your property.

5. Get a Credit-Builder Loan

If you're focused on building credit from scratch or recovering after a hit to your score, a credit-builder loan from a credit union could help. You'll make fixed payments for six to 24 months, and your money will sit in a savings account you'll be able to access at the end of the loan term. In the meantime, the lender will report your on-time payments to the credit bureaus, which could strengthen your score.

6. Seek Out a Secured Credit Card

Another option for building credit is to get a secured credit card. It requires a cash deposit, typically around $200, which becomes your credit limit (you may be able to provide a larger deposit for a higher credit line). You can then use the credit card as you would any other, and the deposit protects the issuer from the possibility that you won't pay off your balance. If you use a secured card responsibly, your card issuer could upgrade you to a traditional unsecured card in the future.

7. Join an Account as an Authorized User

You can also improve credit by joining a trusted family member's or friend's credit card account as an authorized user. You'll be able to use the card to make purchases, and the card's payment history will show up on your credit report. That makes it crucial to pick someone whose credit you will benefit from. Work with the primary cardholder to pay them for your purchases, as they'll be ultimately responsible for any balance on the card.

8. Dispute Credit Report Inaccuracies

You can get a free credit report from each of the three main credit bureaus at AnnualCreditReport.com. Check them each carefully, and file a dispute with the appropriate bureau if you find something on your report you believe shouldn't be there, such as an incorrectly reported late payment. You can also report the problem to the appropriate loan or credit card issuer, which may then update the information with the bureaus. Fixing any issues could give your credit scores a lift.

9. Get Credit for Monthly Bill Payments

Experian Boost ^®ø lets you add eligible on-time phone, utility and streaming payments to your credit report, which may cause your FICO ^® Score to rise. It's free, but it will only affect your Experian credit report and scores. The average Experian Boost user who sees a credit score increase improves their credit by 13 points.

10. Keep Old Accounts Open

Even if you no longer use an old credit card, it's typically best to keep the account open. That's because your credit scores benefit from a long credit history and a high total credit limit. Closing established accounts will shorten the average age of your accounts and lower your total credit limit.

It will take years before an account closed in good standing drops off your credit report, but the effects on your credit utilization rate are immediate. If a credit card comes with a high annual fee you can't afford, closing the account could be a good option—or ask your issuer to downgrade the card to a no-fee version if possible.

11. Limit New Lines of Credit

When you apply for a new credit card or loan, a hard inquiry will appear on your credit report, possibly leading to a brief dip in your score. Plan to apply only for the credit you truly need, after you've done enough research to understand which accounts you'll likely qualify for—and avoid new loans you may have difficulty paying—so you can help your credit improve.

12. Apply for Loans Within a Short Time Period

Lots of hard inquiries in a short time could be an indication to lenders that you're searching for lines of credit you won't be able to pay. Smart borrowers, though, will apply for a few loans of the same type—such as a mortgage, car or personal loan—to compare rates. For that reason, credit scorers treat multiple hard inquiries of the same loan type made around the same time as one, reducing the negative effects on your credit score. So try to submit applications within a short time frame, ideally two weeks. Keep in mind, though, that the scoring models don't offer this same allowance for credit card applications; all of these will count individually regardless of when you submit them.

13. Pay Off Credit Card Balances Every Month

In addition to lowering existing debt balances, minimize ongoing debt by making it a goal to pay off your credit cards each month. Zeroing out your balance each statement period keeps your credit utilization low, which is one of the best ways to strengthen credit. You'll also avoid incurring interest charges.

14. Track Your Credit Score

When you monitor your credit score, you can intervene quickly if it drops. You can address factors that influence your score, such as high balances, late payments or too many recent hard inquiries. There are many ways to check and monitor your credit score for free, including through your current credit card issuer or bank, or through Experian.

15. Protect Your Personal Information to Avoid Fraud

Your credit can be affected by identity theft if fraudsters access your personal information to open accounts in your name. To help keep your data safe, use a password manager to create and store unique passwords and avoid making financial transactions on public Wi-Fi networks, which could be vulnerable to hackers.

16. Responsibly Add to Your Credit Mix

Lenders look for a mix of accounts in your credit file to show that you can manage multiple types of credit. These include installment loans, for which you pay a fixed amount per month, and revolving credit, which comes with a limit you can charge up to (as is the case with credit cards and home equity lines of credit).

If you only have one type of credit in your file, adding something different could improve your credit mix. But while credit mix accounts for 10% of your FICO ^® Score, you shouldn't apply for new credit accounts simply to improve your score. That could put you at risk of taking on debt you can't repay.

17. Create a Budget

To help pay off debt and keep your spending in check long term—especially if the chaos of the past few years affected your finances—take time in 2023 to make a budget. This process will offer clarity on the amount you're earning and how much you can safely spend on discretionary items. You'll then be more likely to make smart choices when you're tempted to use a credit card, and you can prioritize limiting your credit utilization.

18. Work With a Nonprofit Credit Counseling Agency

If you feel unsure about how to set up a budget or start attacking debt, a certified credit counselor at a nonprofit agency can provide a free initial consultation to discuss first steps. Credit counselors also offer debt management plans, which can help some borrowers pay down overwhelming debt.

19. Avoid Credit Repair Scams

Some for-profit companies claim to be able to remove negative information from your credit report for a fee. But the truth is that no company can legally erase information from your file if it's accurate. Avoid spending money on credit repair and take tried-and-true steps to improve your score instead, like lowering debt balances and paying your bills on time.

20. Add Rent Payments to Your Credit Report

If you regularly pay rent on time, add those payments to your credit report to boost the amount of positive information reported to the credit bureaus. You can do so by signing up with a service such as Experian Boost, which adds eligible rent payments to your Experian credit report for free.

21. Get a Loan With the Help of a Cosigner

Making on-time payments toward an installment loan, similar to making timely payments on a credit card, helps build credit history. Besides using a credit-builder loan, getting a traditional one such as a car loan can add positive information to your credit report and improve your credit mix.

If you can't qualify for a loan on your own, a cosigner can help—but make sure the cosigner knows what they are getting into. If you can't afford to repay the loan, it becomes their responsibility. Also, as always, only seek out a loan if you really need it, not simply to improve credit. Potentially boosting your score should be an added bonus or motivation, not the central reason.

22. Ask for Credit Line Increases

Increasing the credit limit on your credit card—while maintaining the same amount of spending—lowers your credit utilization rate, which can improve your credit score. Some credit card issuers may automatically increase your line after you've used the card actively and responsibly for a certain period of time. But in other cases, it may be worth it to request a credit limit increase.

Your issuer may pull your credit when deciding whether to grant you an increase, which could temporarily lower your score by a few points, but the long-term benefit of a higher limit could be worth it. Just be sure you don't run up the balance on your card, or your score will likely suffer.

23. Have Patience

Improving credit isn't an immediate process. An excellent credit score is most often the result of years of conscientious financial behavior. While some strategies will let you see small improvements quickly, joining the ranks of those with the highest credit scores will take time. If 2021 brought with it new or continued financial strain after a destabilizing 2020, just commit to doing your best in 2023—and try to avoid moves that could jeopardize your credit score.

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Mortgage loan limits are increasing in 2023 – here’s what to know if you’re taking out a home loan

Fri, 06 Jan 2023 20:29:55 GMT

Original Source: cnbc.com

Borrowers can look forward to higher limits for conforming conventional loans and FHA loans in 2023.

In spite of skyrocketing mortgage rates, average home prices are still increasing by double digits year over year . To help potential homebuyers caught between this crunch of high home prices and mortgage rates, two federal entities—the Federal Housing Finance Agency (FHFA) and the Federal Housing Administration (FHA)—will raise conforming loan limits and FHA loan limits for 2023.

Taken together, conforming conventional loans and FHA loans accounted for 85% loans issued for primary residences in 2021, according to the Consumer Financial Protection Bureau’s (CFPB) mortgage market trends report . Increasing their limits should help give more buyers access to an important tool for overcoming historically high home prices .

How will these changes impact your home-buying experience?

If your budget for buying a home was near the 2022 limits for FHA or conforming loans, you may be able to take out a larger loan without resorting to a jumbo loan (which is usually more expensive and harder to be approved for). That said, the yearly adjustment in loan limits isn’t likely to be the biggest factor in whether you can afford a house. Your local real estate market, personal finances, and the current mortgage rates will all have a larger effect on whether you can close a deal on a home.

What’s a conforming loan? What’s a conventional loan? Why does it matter?

Financing a home purchase is complicated enough without getting lost in the jargon. Here’s a cheat sheet to help you keep track of the terms.

A conforming loan is a loan that is structured according to guidelines set by the government-sponsored entities Freddie Mac and Fannie Mae, as well as the FHFA.
A conventional loan is any loan issued by a private, non-government entity, such as a bank. Not every conventional loan is a conforming loan.
Conforming loans tend to charge lower interest rates to lenders than non-conforming loans.

Conforming loan limits for 2023

The conforming loan limit for your area determines the boundary between when a conforming conventional loan turns into a jumbo loan, which requires a larger down payment and typically has a higher interest rate.

Conforming loan limits also establish which loans can be purchased by Fannie Mae or Freddie Mac on the secondary mortgage market. Because lenders can more easily sell conforming loans, they tend to make these loans more affordable for borrowers (compared with jumbo loans).

Conforming loan limits are based on the average home price of an area and change each year to reflect the current home values. Homebuyers shopping for a single family home in designated low-cost areas (the vast majority of the country) will be able to qualify for a conventional loan of up to $726,200 in 2023, a $79,000 jump over the 2022 conforming loan limit.

Conforming conventional loans are available for properties with one to four units.

FHA loan limits for 2023

The FHA loan limit for low-cost areas is set at 65% of the conforming loan limit and is higher in areas where homes are more expensive. To account for the higher cost of construction in places like Hawaii or Alaska, FHA loans issued in those areas have their own special limits. Because the FHA loan limit is tied to the conforming loan limit, the FHA will back mortgages for single family homes in low-cost areas up to $472,030 in 2023. That’s an increase of $51,350 over 2022.

What’s the difference between conventional and FHA loans?

Aside from the varying loan limits, there are significant differences between FHA loans and conventional loans.

F HA loans are issued by private mortgage lenders , but are guaranteed by the government. This government backing classifies FHA loans as non-conventional, but it also makes the loans less risky for banks. As a result, it’s usually easier for borrowers to qualify for an FHA loan than for a conventional or conforming loan. If you have issues with your credit, you’ll typically find it much easier to obtain an FHA loan.

Conventional loans fall into two categories: Conforming and non-conforming loans. Loans that that don’t meet the FHFA’s standards are considered non-conforming conventional loans, and include jumbo loans and other niche products.

Conforming conventional loans are not backed by the government, but they meet the standards set by the FHFA and can be sold by your lender to Fannie Mae or Freddie Mac . Conventional loans have fewer restrictions, but can be harder to qualify for.

Many of these guidelines for conventional and FHA loans are the minimum standards the government sets for these types of mortgages. Most lenders have additional standards beyond what the government mandates. For example, many mortgage lenders will require you to have a higher credit score than compared to government minimums (and you’ll need an even higher score if you want the best interest rate ).

How to choose the right loan type for you

The best mortgage for you depends on your personal financial situation, the type of property, and other factors, such as where the home is located.

First, see what you can qualify for. Mortgage lenders will preapprove you for a loan based on your income, credit score , assets, and other considerations. If you’re eligible for both an FHA loan and a conventional loan, then you’ll want to compare the mortgage rate and fees for each loan type.

FHA loans require an upfront mortgage insurance payment of 1.75%, in addition to a monthly mortgage insurance premium. Paying an extra 1.75% may not sound like a lot, but for a $200,000 loan that’s $3,500. You also can’t waive the monthly insurance premium with an FHA loan (in most situations) without refinancing into a conventional loan. With a conventional loan, the private mortgage insurance is waived once you have a loan-to-value of 80% (i.e. 20% equity in the property).

In a hot real estate market where sellers receive multiple offers, it may be challenging to get an offer accepted with a FHA loan. Conventional loans are generally more appealing to sellers because they are looked at as being easier to deal with. This is partly because FHA loans have a stricter appraisal and inspection process compared to conventional loans.

One advantage of FHA loans is that they’re easier to qualify for, especially if you have a lower credit score . For borrowers with average credit , you’re likely to find the mortgage rate and monthly insurance premiums are more reasonable with an FHA loan.

There are also nuances to your local market that may impact which type of loan is right for you. It’s a good idea to have a conversation with your mortgage lender and real estate agent to determine what type of mortgage is the best fit for your home buying or refinancing goals.

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Prequalifying for a mortgage

Tue, 27 Dec 2022 13:30:00 GMT

Original Source: readynest.com

Prequalifying shows you how much you can afford to spend on a home based on where you stand financially, taking into account your income , debt and savings, among other factors. Lenders also consider current interest rates.

Prequalifying can determine:

An estimate of the home purchase price and monthly mortgage payment you can afford and qualify for

How much money you’ll need for a down payment (the difference between the purchase price and the amount of your mortgage)

Saving goals you need to set and achieve

Who can help me prequalify?

A loan officer or home-purchase education counselor can help you prequalify.

Prequalifying is not a commitment on your part to work with a particular lender or real estate agent, and it doesn’t guarantee you a loan on the lender's part – that all happens during the actual loan application process. But prequalifying can help you narrow your house hunt and avoid potential disappointment.

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Down Payment Assistance

Mon, 12 Dec 2022 13:30:04 GMT

Original Source: readynest.com

Many renters run the numbers and realize the cost of a monthly mortgage payment can be comparable to rent. The bigger homeownership hurdle? Often, it’s the down payment .

You might be surprised to learn that there are down payment assistance (DPA) programs out there designed to help people who can afford a mortgage payment, but don’t have quite enough saved for a down payment.

How much do I need for a down payment?

It’s a common misconception that you must put 20% down on a home. In fact, there are a number of loan options out there that will allow you to make a down payment of less than 20% – including mortgage insurance (MI), provided by the Federal Housing Administration or a private MI company. Readynest is brought to you by MGIC , a private MI company. Learn more about mortgage insurance .

Whether you use mortgage insurance or not, you can still qualify for down payment assistance to help you cover that initial investment – whether it’s 3%, 20% or anywhere in between.

What is down payment assistance?

There are over 2,500 programs across the country that provide down payment assistance to qualified borrowers, most often first-time homebuyers. In the mortgage world, the definition of a “first-time homebuyer” includes people who have owned a home in the past but not in the last 3 years. It’s definitely worth checking with your lender to see if you qualify, even if you think you probably don’t.

Often this assistance comes in the form of a grant or forgivable second mortgage loan – money that does not need to be repaid as long as certain conditions are met.

Those conditions vary widely from program to program, but could include:

Property location
Property price
Income limits
Your length of time in the home
Participation in a homebuyer education course

There are also some programs out there with special eligibility. For example, you could qualify for special assistance if you belong to a certain demographic (i.e., Native American) or work for the U.S. Military or in education, law enforcement or healthcare.

Who provides down payment assistance?

Down payment assistance programs are offered by state Housing Finance Agencies (HFAs), cities or counties, local nonprofits organizations, or even large employers. Some of the funds for state and local programs are provided by the Department of Housing and Urban Development (HUD), but the federal government doesn’t make individual grants.

Lenders may also offer their own programs to help first-time homebuyers purchase a home.

How can I find down payment assistance?

A loan officer can help you understand the down payment assistance programs available in your area and your individual eligibility. Not all lenders participate in all DPA programs out there, so look for a mortgage professional who seems knowledgeable about assistance options.

If you aren’t quite ready to talk to a lender, here are some places to do a little research on your own:

Try Down Payment Resource®’s national database . Answer a few questions about your household and see how many programs may match your circumstances.
Check HUD’s list of local homebuying programs
Look up your State Housing Finance Agency

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Don't let these 5 fears hold you back from owning a home

Mon, 28 Nov 2022 13:30:00 GMT

Original Source: readynest.com

If you haven’t applied for a mortgage, why not?

Feel the fear – but do it anyway

Are one or more of these 5 fears holding you back from applying for a mortgage?

1. “My credit won’t be good enough to qualify for a mortgage. ”

2. “I won’t be able to afford the monthly mortgage payments.”

3. “I don’t have enough money for a down payment.”

4. “A house requires too much maintenance.”

But if maintenance is the only thing stopping you from becoming a homeowner, consider that:

A home warranty can help cover the cost of repairs to house systems or appliances – and can make the home repair process less intimidating since the warranty company will handle finding contractors to make the repairs. If the condition of a home you are considering for purchase is a concern, the seller may be willing to pay for the first year of a home warranty plan

Many major systems and appliances come with individual warranties for a set period of time. Depending on the house you purchase, you may find that you have at least some coverage for repairs (this is a good thing to know before you buy, of course!)

5. “I don’t want to be tied down.”

Sell it and buy a new house, using the equity you earned to buy a bigger house or one in a different neighborhood or city

Sell it and return to renting, using the equity you earned to make other investments

Turn it into an investment property by renting it out

Don’t be intimidated

The opinions and insights expressed in this blog are solely those of its author, Tay Toliver, and do not necessarily represent the views of either Mortgage Guaranty Insurance Corporation or any of its parent, affiliates, or subsidiaries (collectively, “ MGIC ”). Neither MGIC nor any of its officers, directors, employees or agents makes any representations or warranties of any kind regarding the soundness, reliability, accuracy or completeness of any opinion, insight, recommendation, data, or other information contained in this blog, or its suitability for any intended purpose.

Subscribe to our blog and stay up to date about changes in the market that effect buyers. Or contact us to learn more about mortgage processing services.

Mortgage Interest Rates Forecast 2022 & 2023

Mon, 31 Oct 2022 12:00:04 GMT

Original Source: noradarealestate.com

Mortgage Interest Rates Forecast: Will Rates Go Up?

Mortgage rates have risen since the start of 2022, reflecting investors' concerns that the economy is heating up and that the Fed will cool it down and reign in inflation. U.S. Treasury bond rates, which mortgage rates follow, encountered two tough patches this year: in late February, when Russia invaded Ukraine, and in mid-May when investors worried about poor consumer spending. Bond yields and mortgage rates declined throughout these times.

The Federal Reserve does not determine mortgage rates, and the central bank's choices do not have the same direct impact on mortgage rates as they have on other products such as savings accounts. The Fed does, however, determine borrowing costs for short-term loans in the United States by changing the federal funds rate. The federal funds rate can have an impact on 10-year Treasury bond yields, which are used to calculate most mortgage rates.

Essentially, the Fed does not set mortgage rates directly, but its policies can affect the financial markets and movers who do. Most analysts predict that mortgage rates will continue to rise given the inflation numbers continuing to increase. Since mortgage rates are tied closely to the performance of the 10-year Treasury market plus a margin to account for the additional riskiness of home lending. The long-term mortgage rates are expected to rise due to the overall turmoil in the world’s economy.

Let's take a look at the chronology of the Fed hiking its benchmark interest rate in 2022. It hiked its federal funds benchmark rate by 25 basis points in March 2022, to a range of 0.25% to 0.50%. The rate increase represented the Fed's first rate increase since 2018. The Federal Reserve announced in early May 2022 that it would boost the target range for the federal funds rate to between 0.75% and 1%.

In order to reduce the size of the Federal Reserve's balance sheet, the Fed declared that it will sell Treasury and mortgage-backed assets. In order to combat the sustained rise in inflation, the Fed raised the rate by 75 basis points, or 0.75%, in June 2022. This increase pushed the target rate range from 1.5% to 1.75%, marking the greatest single rate hike since 1994. In July, after the Consumer Price Index indicated annual inflation of 9.1%, the Fed raised interest rates by 0.75% to a target range of 2.25% – 2.5%.

Before becoming less hawkish and considering a pause in rate hikes, Fed officials have stated that they want to see several month-to-month inflation rates annualize to less than 3%. Treasury yields have jumped across the curve, with the two-year rate soaring as much as 21 basis points to about 3.78%, the highest since October 2007.

The expectation is that this will reduce inflation, but it will also likely raise interest rates for borrowers. In September, with inflation remaining persistently high, the Federal Reserve raised the target range for the federal funds rate by 0.75% to 3%-3.25%. The Federal Reserve also issued median predictions, indicating that the target rate is expected to be 4.4% by the end of 2022.

The Fed raised the federal funds rate by 75 bps to the 3%-3.25% range during its September meeting, the third straight three-quarter point increase, pushing borrowing costs to the highest since 2008 According to the interest rate predictions, the central bank believes that more rate hikes will be required to achieve its 2% inflation objective. In fact, many experts think that rates will rise into 2022 (at each of the Fed's remaining sessions), with the next expected increase occurring in November.

The Fed's remaining meetings are scheduled for November and December. High mortgage interest rates imply you pay more interest, which can lower your purchasing power because you can't borrow as much money. This is because less money will be paid toward the principal (the amount borrowed) and more money will be paid toward the interest. Higher interest rates may assist in reducing the housing demand that is now driving up prices.

If you're looking to buy a home, keep an eye on the local market and consider locking in your rate when you're ready to go. It's also important to remember that just because you qualify for a certain amount doesn't imply you should borrow the maximum. Spend some time calculating how much house you can afford, including monthly payments. Work with your lender to calculate your monthly mortgage payment based on different loan amounts and interest rates.

The Fed's policies affect lenders' cost of money, not mortgage rates. Most lenders have factored in inflation-related cost hikes. Since December, costs have paralleled Fed moves. Mortgage rates sometimes rise before predicted lender cost rises to minimize sticker shock. Therefore, volatility in mortgage rates is expected. The recent Fed rate rise affects your finances. It will undoubtedly raise credit cards, home equity, and line of credit interest rates (HELOCs).

Rate rises generate increased rates on high-yield savings accounts and other savings instruments. Experts say the recent Fed rate hike shouldn't prompt homebuyers to hesitate or change their plans. Rate and conditions vary on a borrower's credit, loan type, and mortgage lender. ARMs and HELOCs are likewise related to the prime rate, but 15- and 30-year mortgage rates are fixed and tied to Treasury yields and the economy. Rates have practically doubled since the start of the year, reducing buyers' purchasing power.

Those with adjustable-rate mortgages or who want to get one soon should expect higher rates. Many Americans with variable-rate private student loans might see interest rates hike next month. Home prices, rentals, and inflation are all at historic highs. A recession is imminent, and more corporations are declaring layoffs to stave off a consumer spending slump.

People are contemplating big-ticket purchases because of employment uncertainties. Higher borrowing rates have impacted real estate demand . New and existing house sales declined in the first half of the year, while contract signings dropped sharply in the summer. As a result, many house sellers are seeing their properties linger on the market longer. Price cuts are a go-to for sellers. As fall and winter approach, we may anticipate home markets to rebalance and pick up speed.

Mortgage Rate Predictions 2022 – 2033

Mortgage experts are split on which way mortgage rates will move in the coming week (Oct. 13-19). According to Bankrate's weekly poll, 60% believe rates will rise, 20% believe rates will fall, and 20% believe rates will remain unchanged. Inflation is still problematic, the Fed will continue to raise rates aggressively, and there is a growing supply of mortgage-backed bonds that must be absorbed as the Fed withdraws.

After rising sharply in the first few months of 2022, the 30-year fixed mortgage rate began to fluctuate in June, approaching 6 percent before stabilizing in the 5s. As of now, mortgage rates are moving above 6 percent. Federal Reserve policy has no direct effect on fixed mortgage rates, but for a time, the central bank's actions led to a decline in 10-year Treasury yields, which drive the movement of fixed mortgage rates. For September and beyond, analysts expect more rate volatility, with inflation one of many markers to watch.

Major mortgage and real estate market organizations differ in their short-term rate prognostications, although not by much. Fannie Mae, for instance, predicts the 30-year rate to average 5.1 percent by the end of this quarter versus a 5.5 percent average forecasted by Freddie Mac. And the Mortgage Bankers Association foresees a 5.3 percent average rate for the 30-year mortgage across the third quarter.

The Fed is battling inflation. With the pandemic's waning influence, inflation at 40-year highs, and the Fed predicting four more rises, interest rates might continue to rise in 2022. An imminent recession has produced rate decreases and might cause more any week. Freddie Mac, the MBA, and other industry heavyweights disagree on whether 30-year mortgage rates will rise or level out by 2022.

Experts are forecasting that the 30-year, fixed-rate mortgage will vary from just above 5% to as high as 7% by the end of 2022. Here are some of the earlier mortgage interest rate predictions made for 2022.

Realtor.com Chief Economist Danielle Hale: “For mortgage rates, we’re likely to see upward pressure with much less intensity. Mortgage rates are currently near 5.5%, and I expect them to hover between 5.5% and 6% between now and the end of 2022.”

MBA Chief Economist Mike Fratantoni: Mortgage “rates may have already peaked and could stay between 5% and 5.5% through the remainder of 2022.”

National Association of Realtors (NAR) Chief Economist Lawrence Yun: “Mortgage rates bouncing along near 6% is certain for the remainder of the year. They could go up even close to 7%, especially if oil and gas supply further lags and pushes up the critical energy prices during the winter heating season.”

Zillow Vice President of Capital Markets Paul Thomas: “Mortgage rates are likely to be volatile in the near term as markets are pricing in the competing influences of high inflation and Federal Reserve rate hikes against increasing risks of economic slowdowns and a potential recession. Considering the current situation, we’re more likely to see higher rates by the end of the year than lower ones.”

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Should you adjust your thinking on adjustable-rate mortgages (ARMs)?

Thu, 27 Oct 2022 19:56:31 GMT

Original Source: readynest.com

Knowing what’s a good deal and what’s not with personal loans is challenging. Predatory lending takes advantage of this by offering tempting deals that wind up being too good to be true. So it’s essential to know what to look for to avoid becoming a victim.

This guide will provide you with practical tips for avoiding predatory lenders and advice to protect yourself from their various schemes.

Why fixed-rate mortgages have been so popular – and why adjustable-rate mortgages are making a comeback

When you think about it, it isn’t surprising that fixed-rate mortgages have been so dominant. As the name implies, a fixed-rate mortgage is just that…fixed at that rate, meaning it won’t change for the entirety of the mortgage . Interest rates were so low for so long that the idea of “locking” the rate in made perfect sense. In addition, the difference between the interest rate on a fixed-rate mortgage and an adjustable-rate mortgage has been almost nonexistent.

Plus, ARMs add a layer of complexity with scary words like Index , Margin, and Initial, Subsequent and Lifetime Caps .

However, as interest rates begin to rise, and the difference between fixed-rate mortgages and ARMs begins to widen, we see renewed interest in ARMs. After all, very often an ARM will start with a lower interest rate, and therefore a lower monthly payment. That you are reading this blog may show your own renewed interest.

So, let’s take a moment to “de-scarify” some of the terms and we’ll see that ARMs aren’t as complicated as they appear at first. Once we better understand how ARMs work, we’ll examine who should consider them and why, so you can determine if an ARM may be right for you when buying a home.

How ARMs work

A fixed-rate mortgage is fixed for the entire term of the loan, most commonly 30 years as a 30-year term will have a lower monthly payment than a 15-year term.

With an adjustable-rate mortgage, the initial rate (the rate you have at the start that is used to determine your monthly mortgage payment) is fixed for a set period of 1 to 15 years, sometimes known as the initial fixed rate period. 5 and 7 years are perhaps the most common initial fixed-rate periods. From there, the interest rate will adjust at certain set time periods. Depending on the ARM it could be every 6 months or every year.

With a 5/1 ARM, the interest rate would stay unchanged for the first 5 years of the mortgage, then adjust every year thereafter. A 7/6 ARM would have an initial rate set for 7 years and adjust every 6 months.

Okay, but adjust to what? This is where the term index comes into play. The index is one of 2 variables that will determine the new rate and thus the homebuyer’s new monthly mortgage payment. The lender will set the index to be used. There are several indexes, but common ones include the Secured Overnight Financing Rate (SOFR) and the Constant Maturity Treasury (CMT).

The index alone doesn’t tell us the new rate. For that we need to also know what the margin is. The new interest rate at the time of adjustment is the sum of the current index rate plus the margin. Typically, the margin is 2%-3% and won’t change over the life of the loan.

So, let’s walk through an example. As of mid-June 2022, interest rates for 30-year fixed-rate mortgages were around 5.75% . Let’s assume a person selected instead to do a 5/1 ARM, which around the same time had an interest rate of 4.33%. The initial rate would be 4.33% and remain fixed for the first 5 years of the loan.

After 5 years the rate will adjust. For our example, we’ll say the Index is the SOFR, mentioned above. We don’t know what the SOFR rate will be 5 years from now, but since in mid-June 2022 it was around 1.45%, for our example let’s say it will be 3% in 5 years. Let’s also assume that the margin for the 5/1 ARM was 3%. So 3% + 3% means the new interest rate for the next year will be 6%, up from the initial rate of 4.33%.

Or maybe not! This brings us to rate caps . Because a larger increase in interest rate likely would mean a significant increase in the homebuyer’s monthly payment, lenders use rate caps to limit how large of an increase can occur. There are 3 caps to know about when accepting an ARM:

The initial adjustment cap limits the amount the rate may change at the first adjustment. A common initial adjustment cap is 2%. In our example above, using an initial rate of 4.33%, the maximum interest rate after adjustment would be 6.33%.
The subsequent adjustment cap is a limit on how much the rate can change after the first adjustment. Again, 2% is common, but keep in mind that this cap is based on the previous interest rate, not the initial. If the first rate adjustment reached the maximum of 6.33%, at the next adjustment, if a 2% subsequent cap was in place, the maximum new interest rate would be 8.33%.
The lifetime cap is the limit on how high the interest rate may go over the life of the loan compared to the initial rate. A common lifetime cap may be 5%, which in our example means the homebuyer’s rate will never be more than 9.33%.

What is the advantage of an adjustable-rate mortgage vs a fixed-rate mortgage?

Now that we see how an ARM works, what are the advantages and disadvantages compared to a fixed-rate mortgage?

The biggest advantage of an ARM is that it will typically have a lower rate at the start than a fixed-rate mortgage, especially a 30-year fixed-rate mortgage. That lower rate, however, is only guaranteed for the initial period. That lower rate translates to a lower monthly payment, which could make a mortgage more affordable or provide money to save or invest elsewhere.

The disadvantage? An ARM is more complex than a fixed-rate mortgage and the homebuyer may face a significant increase, even with the caps in place. This could lead to “payment shock” should the monthly mortgage payment increase significantly during an adjustment period.

Is an adjustable-rate mortgage right for you?

Unfortunately, it is impossible for me to answer that for you. You must decide how comfortable you are with your understanding of the specifics of the ARM you are considering and your comfort level with knowing your rate may increase in the future.

I would advise that if you are considering an ARM because you believe the only way you can afford to buy a home is with that lower initial rate, you should probably wait on buying altogether.

However, here are a few items to consider.

How long do you intend to live in the home? According to the National Association of REALTORS®, in 2021, the average tenure in a home was 8 years before selling. First-time homebuyers often stay in a home for a shorter period than the national average, so if you plan to stay for 4 or 5 years, there is a chance you will move before the first adjustment on an ARM even occurs (depending on the ARM you select)
Do you anticipate your income changing? If you’re early in your career and believe your income will grow over the next several years, then you may be able to absorb a higher monthly mortgage payment should the rate adjust higher. On the flipside, if you believe your income may decrease, then a safer route may be an affordable fixed-rate loan
Do you anticipate any large expenses in the near future? If your child will be starting college in 5 years and you will be paying tuition, you may not want to risk a potential increase to your monthly mortgage payment at that same time if you were to take out a 5/1 ARM

The most important advice I can give you is simply to make sure you fully understand how your mortgage works, whether it’s an ARM or a fixed-rate mortgage. If there is something you don’t understand, be sure to ask your loan officer . She is there to help guide you and wants to answer any questions you have!

REALTOR® is a registered trademark of the National Association of REALTORS.

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US mortgage rates could surge to 8.5% as inflation rages: economist

Thu, 27 Oct 2022 17:38:59 GMT

Original Source: nypost.com

Surging US mortgage rates could shoot through a critical threshold and soar to 8.5% in the wake of another alarming inflation report for September, according to a prominent economist.

Federal data released Thursday showed inflation ran at a hotter-than-expected 8.2% in September. The Federal Reserve is all but guaranteed to implement more sharp interest rate hikes in response — a policy move that will lead mortgage rates to test highs not seen in more than two decades.

Mortgage rates hit a 20-year high this week, with the average 30-year fixed loan hitting 6.92%, according to Freddie Mac. A looming jump above 7% would erase a key psychological barrier and likely cause rates to head toward a new threshold of 8.5%, according to Lawrence Yun, chief economist for the National Association of Realtors.

“Today’s inflation rate report is going to test that 7% level,” Yun said during a presentation at the National Association of Real Estate Investors in Atlanta on Thursday, according to Bloomberg . “Once it’s broken, the next level of resistance is 8.5%, which would be another big shock to the housing market.”

Yun based his prediction on an analysis of mortgage rate trends and identified 8.5% as the next key level of resistance for the market. In other words, an 8.5% average mortgage rate is the next level at which the market could retrench in the coming months.

Mortgage rates have more than doubled since the start of the year — exacerbating an affordability crisis that has driven many prospective homebuyers to wait for conditions to improve. Home prices have begun to fall in many markets, while the volume of mortgage applications and other housing activity has slowed.

“Once one army makes a breakthrough, there’s a huge advance,” Yun said in regard to mortgage rates, according to Bloomberg.

Earlier this week, Freddie Mac chief economist Sam Khater noted mortgage rates have hit their highest since April 2002 and that the “next several months will undoubtedly be important for the economy and the housing market.”

“We continue to see a tale of two economies in the data: Strong job and wage growth are keeping consumers’ balance sheets positive, while lingering inflation, recession fears and housing affordability are driving housing demand down precipitously,” Khater said

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How to Avoid Predatory Lending: A Practical Guide for Financial Consumers

Mon, 29 Aug 2022 16:52:45 GMT

Original Source: deedstreetcapital.com

This guide will provide you with practical tips for avoiding predatory lenders and advice to protect yourself from their various schemes.

What exactly is predatory lending?

Predatory lending is a type of lending that uses unfair or deceptive practices to convince someone to take out a loan that he or she may not be able to afford. It benefits lenders at the expense of borrowers, who are often lured in by the promise of low payments, only to find out later that the loan comes with high fees and interest rates.

Predatory lending can leave borrowers:

Struggling to make payments
Owing more money than they originally borrowed
Facing foreclosure or bankruptcy

There are many different types of predatory lending, but they all share one common goal: to take advantage of unsuspecting borrowers.

Who does predatory lending hit the hardest?

Although anyone can fall victim to predatory lending, certain groups are more at risk than others. These include:

Minority groups
Elderly people
Single mothers
Recent immigrants
Low-income earners and people with poor credit

Predatory lenders often target such borrowers because they perceive them to be less likely to shop around for a better deal or understand their loan terms. So regardless of who you are, it’s vital to be aware of the signs of predatory lending.

Impact on Victims and Communities

The impact of predatory lending is far-reaching. It destroys the finances of individuals and families and undermines the stability of entire communities. Through disproportional lending and foreclosures, predatory lenders have significantly impacted minority neighborhoods.

Studies show during the subprime mortgage crisis, the foreclosure rates of black and Hispanic neighborhoods were about three times higher than those of predominantly white areas.

Red Flags: How to Spot a Predatory Lender

Now that we’ve discussed what predatory lending is and who it targets, let’s look at its features and behaviors. If you’re thinking about taking out a loan, be on the lookout for the following red flags:

No Credit Check

Some lenders claim they don’t perform credit checks regardless of the borrower’s credit history. While there are some types of loans that don’t require a credit check—such as secured loans, where the borrower offers collateral—most do.

If lenders say they don’t need to check for credit history, they may be trying to take advantage of borrowers with bad credit who are desperate for financing.

High-Interest Loans

Predatory lenders often charge exceptionally high interest rates, sometimes with annual percentage rates (APRs) exceeding 600 percent. Such high APRs can make it difficult, if not impossible, for borrowers to repay the loan, leading to cycles of debt.

According to Federal Reserve consumer credit data, as of February 2022, the average interest rate on a personal loan is 9.41 percent. So if, for example, you’re being offered a personal loan with an APR of 15 percent or more, that’s a sign you might be approaching a predatory lender.

Of course, there are some legitimate reasons why a lender might charge a higher interest rate. For example, it might offer you a higher APR if you have poor credit because you’re considered a high-risk borrower. However, it’s a likely red flag if it charges a much higher interest rate than other lenders typically charge for your credit score.

False, Misleading or Abusive Loan Terms

Predatory lenders not only charge high interest rates and fees, they’ll also press you to sign contracts with loan terms stacked heavily in their favor.

Such terms might include:

Mandatory arbitration clauses that prevent you from taking legal action if the lender mistreats you
Other risky loan features that include balloon payments and loan flipping
Unfair late payment penalties and additional hidden fees (see below)
Be sure to read the fine print carefully and consult with an attorney or financial advisor if necessary.

Other Excessive Fees and Penalties

In addition to high interest rates, predatory lenders often charge excessive fees. These can include:

Application fees
Late payment fees
Prepayment penalties for paying off your loan early
Annual membership fees
Transaction charges

Beware of any lenders who seem to be charging an unusually high number of fees, especially if they’re not upfront about them. These fees can add up quickly, making it harder to repay the loan.

High-Pressure Sales Tactics

If a lender tries to pressure you to sign before you’re ready, that’s a giant warning sign. The lender may try to rush you by saying the offer applies only for a limited time, a decision is needed immediately, or that you’re not qualified for a traditional loan and have no choice but to take their offer.

Don’t fall for it! Take your time to understand the terms of any loan agreement, and never sign anything if you’re not comfortable with it.

Lack of Communication

When you’re shopping for a personal loan, you should be able to get clear answers to your questions from the lender.

If the lender avoids your calls or gives you the run-around, that’s a sign the lender is not truthful about its products or services. In contrast, a reputable lender will be upfront and transparent about its loans, interest rates and fees.

Unsolicited Offers

If you’re not actively shopping for a loan, avoid unsolicited offers. These can come from emails, phone calls or even mailers. A good rule of thumb is to never respond to unsolicited loan offers. If you’re in the market for a personal loan, it’s best to compare offers from multiple lenders on your terms.

Empty Spaces in Documents

When reviewing a loan contract, watch out for any empty spaces. Predatory lenders may leave blanks in the document to later fill in terms that are not favorable to the borrower. Have an attorney or financial advisor review any loan documents before signing.

Common Types of Predatory Lending and How to Avoid Them

We’ve gone over some of the signs of predatory lending. Now let’s look at some of the most common types of predatory lending. While you might want to avoid certain loan types altogether, you can safely use others if you are careful.

Payday Loans

A payday loan is a short-term, high-interest loan that typically comes due on the borrower’s next payday. The main feature of these loans is that they are easy to qualify for, even if the borrower has poor credit. While this may sound like a good deal at first, it’s critical to be aware of the dangers of payday lending.

According to the Consumer Financial Protection Bureau, a typical payday loan may carry an APR of around 400 percent.
Payday loans typically come with high fees, sometimes as much as $30 for every $100 borrowed.
Payday loans are often due on the borrower’s next payday, leaving the borrower struggling to make ends meet until the next paycheck arrives.
If the borrower cannot repay the loan, he or she may be required to take out an additional loan to cover the original debt, creating a vicious cycle of debt.

If possible, it’s best to avoid payday loans altogether. But if you find yourself in a situation where you need a loan, be sure to shop around for the best deal. Or consider alternatives, such as personal loans from a credit union or online lender. Some federal credit unions offer payday alternative loans, or PALs, with lower interest rates, fees and repayment terms than traditional payday lenders.

Auto Loans

Another common type of predatory lending involves car loans. Many auto dealers sell overpriced cars and loans to customers with poor credit by offering financing through their in-house lending company.

Tip to avoid overpriced car loans: Instead of using the dealership’s financing, get pre-approved for an auto loan from your bank or credit union. That will give you negotiating power and help you avoid being taken advantage of by unscrupulous auto dealers.

Car Title Loans

Not to be confused with auto loans, a car title loan is a secured loan where the borrower uses his or her car as collateral. These loans are typically easy to qualify for even if the borrower has poor credit.

Like payday loans, car title loans often come with extraordinarily high interest rates , equating to an APR of about 300 percent. Avoid car title loans, if possible. But if you can’t, shop around for the best available rates and carefully read the loan terms for hidden fees or other unexpected charges.

Balloon Payments

Under balloon payment loan terms, borrowers must make small monthly payments for a limited period. But at the end of the period, they must pay a large lump sum, known as the balloon payment, to pay off the remaining balance.

Loan Flipping

Loan flipping is when a lender convinces a borrower to refinance his or her loan multiple times within a short period. The lender then charges additional fees each time the borrower refinances the loan. The resulting costs quickly add up, leaving borrowers with a much higher balance than they can afford.

Loan Packing

Predatory lenders might try to add unnecessary products or services to a loan, such as extended warranties, credit insurance or gap insurance. These products are often overpriced and of little value to the borrower.

Reverse Redlining

Reverse redlining is when lenders target low-income borrowers and minorities with predatory loans. While it was widespread during the subprime mortgage crisis, the practice persists today .

Negative Amortization Loans

A negative amortization loan is where the monthly payments are less than the cost of accrued interest. So unless the borrower makes additional payments, the loan balance will continue to grow larger over time. Avoid these loans, if possible.

Asset-Based Lending

Asset-based lending is when a lender uses the borrower’s assets, such as home equity, as collateral for the loan. While this type of loan can benefit business owners, it can be risky for consumers who could lose homes and other assets if they default on the loan.

Subprime Mortgage Lending

Because of the colossal economic devastation brought about by the subprime mortgage crisis and the resulting Great Recession, subprime loan practices have come under intense scrutiny in recent years.

Leading up to the housing market crash, predatory mortgage lenders employed many of the dubious practices mentioned above at scale. They issued millions of subprime loans featuring balloon payments, negative amortization and other onerous terms that borrowers could not possibly hope to repay, resulting in widespread foreclosures and evictions.

In the wake of the crisis, Congress passed the Consumer Protection Act, which included an “ability to repay” rule. It required lenders to verify that borrowers have the financial means to repay their mortgage loans before issuing them. While today’s banks supply subprime mortgages on a much smaller scale, predatory loans remain a problem in the industry.

If you are unable to obtain a conventional mortgage, a private mortgage note may be a better option.

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Dispelling Myths about Qualifying for a FHA Loan: Webinar Series

Wed, 22 Jun 2022 14:17:44 GMT

Original Source: www.hud.gov

This series is a great resource for prospective homebuyers, current homeowners, as well as loan officers who have clients who are considering an FHA-insured loan.

Dispelling Homebuying Myths Educational Webinars

FHA is pleased to offer the following events and training, including a series of pre-recorded training modules, covering multiple topics on FHA Single Family Housing policies, processes, and technology.

New hyperlinks will be added to the pre-recorded webinars as they roll out weekly throughout the month of June.

The information provided in these webinars will give the knowledge needed to feel confident and secure in the decision to take the next steps. It will be available on the HUD.gov page , so be sure to check back each week throughout the month for a new webinar.

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What is an escrow or impound account?

Wed, 25 May 2022 14:42:24 GMT

Original Source: consumerfinance.gov

An escrow account, sometimes called an impound account depending on where you live, is set up by your mortgage lender to pay certain property-related expenses.

What is an escrow or impound account?

An escrow account, sometimes called an impound account depending on where you live, is set up by your mortgage lender to pay certain property-related expenses.

The money that goes into the account comes from a portion of your monthly mortgage payment. An escrow account helps you pay these expenses because you send money through your lender or servicer, every month, instead of having to pay a big bill once or twice a year.

Many lenders require that you pay your taxes and insurance using escrow, so they can make sure that the bill gets paid. Your mortgage servicer will manage the escrow account and pay these bills on your behalf. Sometimes, escrow accounts may also be required by law.

Your property taxes and insurance premiums can change from year to year. Your escrow payment—and with it, your total monthly payment will change accordingly.

Tip: If your loan doesn’t include an escrow account, you will have to plan to pay these large expenses yourself. Be sure you budget for these extra costs and stay current on your taxes and insurance payments. If you fail to pay your property taxes, your state or local government may impose fines and penalties or place a tax lien on your home. You could also face foreclosure.

In addition, if you fail to pay your taxes or insurance, your lender may:

Add the amounts to your loan balance
Add an escrow account to your loan
Purchase new homeowners insurance for you and bill you for it. This lender-purchased insurance, known as force-placed insurance , is typically more expensive than homeowners insurance you pay on your own.

Even if your lender does not require an escrow account, consider requesting one voluntarily. An escrow account makes it easier to budget for your large property-related bills by paying small amounts with each mortgage payment. That way you don’t have to scramble to pay a large property tax bill or insurance premium when it comes due.

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Credit-builder loans: What they are and how they work

Mon, 09 May 2022 13:30:09 GMT

In a Nutshell

Original Source: creditkarma.com

You can usually qualify for a credit-builder loan even if you have bad credit or no credit. The lender agrees to loan you a certain amount of money, which it deposits into an account it controls. You’ll make payments on the loan, and the lender reports those payments to the three major consumer credit bureaus — TransUnion, Experian and Equifax — to create or add to your credit history. When the loan is paid off, the lender finally gives you the funds.

Credit-builder loans help solve the most frustrating problem you face when trying to improve your credit.

Because lending involves risk, lenders are more inclined to lend money — and to offer better terms — to people who have good credit . This is because good credit signals that someone is more likely to pay back a loan. But you can’t build good credit unless a lender gives you a chance to prove you are worthy. This makes sense from a lender’s perspective — they don’t want to take a chance on a borrower whose riskiness is unknown. But it’s really frustrating if you’re trying to borrow and no lender wants to be the first to do business with you.

Fortunately, there are ways lenders can provide you a loan without taking a risk that you won’t pay it back. One such way is with a credit-builder loan.

“ Credit-builder loans offer a solution to the daunting challenge of raising your credit score — if done the right way, ” advised Sacha Ferrandi, founder and principal of Source Capital Funding, an equity-based lender.

With a credit-builder loan, a lender doesn’t actually give you access to money you’ve agreed to borrow until you’ve paid for the loan in full. Since they control the funds, and therefore don’t risk anything, lenders that offer credit-builder loans are more willing to give them to borrowers with poor or no credit. Once you’ve got the loan, the lender reports on your payment history to credit-reporting agencies . This helps you build credit , because you’re creating a history of on-time loan payments.

How does a credit-builder loan work?

Credit-builder loans are typically offered by small financial institutions, such as credit unions and community banks.

When you get a credit-builder loan, the money you agree to borrow is deposited into a bank account held by the lender. You’ll then make monthly principal and interest payments — which are reported to credit bureaus — for a term usually around six to 24 months. When the loan is paid off, you get the money from the account.

The benefits of a credit-builder loan are twofold: You’re building a little nest egg while also building credit.

Will a credit-builder loan really improve your credit scores?

Whether credit-builder loans improve your credit depends on you.

Lenders report payments on these loans to credit bureaus. If you make your payments on time, this builds positive payment history , which, for example, accounts for 35% of your FICO credit scores . But if you’re late making a payment, that’ll be reported, too. And when you don’t have much of a credit history, a single late payment can be a big setback.

The drop in your scores depends on where you started and your current credit — but myFICO reports that your FICO scores could fall as much as 60 to 110 points. That’s a lot when you consider that the FICO scores range is 300 to 850.

How can you get a credit-builder loan?

To obtain a credit-builder loan, you’ll need to …

Find a financial institution offering one. In addition to local banks and credit unions, some online lenders offer credit-builder loans. Confirm the lender will report payments to the three major consumer credit bureaus.
Decide how much to borrow. The typical loan amount is between $300 and $1,000.
Comparison shop among different lenders . There might be big variations in interest charged, monthly payment amounts, fees, repayment periods and loan origination costs.
Apply for a loan . You’ll need to provide basic information, such as your name and address. But unlike with most loans, having bad credit when applying won’t disqualify you.

Once you’re approved and your loan is granted, you’ll make payments until the loan is repaid in full, after which the funds are then distributed to you.

How much does a credit-builder loan cost?

Costs of a credit-builder loan vary depending on the lender. When looking for your loan, pay attention to …

The APR: APR, or annual percentage rate, is the amount your lender charges you to borrow the funds. An APR of less than 10% is common with credit-builder loans, but some have higher rates.
Interest payments: Lenders offering credit-builder loans may keep some or all the interest you pay, giving you only the remaining balance at the end of the loan term.
Other fees and costs: Lenders may charge an application fee for the loan or charge late fees if you don’t pay on time.
The loan repayment term: The longer your loan term, the more interest you’ll pay.
Maximum and minimum loan limits: You don’t want to borrow too much or too little. If you borrow a larger amount of money it could take you longer to pay back, which means paying more in interest.

Finding a lender that offers favorable terms ensures you’ll be able to use a credit-builder loan to boost your credit without spending a fortune.

Bottom line

A credit-builder loan can be a great tool to build credit from scratch or improve low credit scores. Just make sure to find the right lender and understand the loan terms — and of course, never make a payment late or you’ll undermine your credit-improvement efforts.

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4 Factors You Can Control That Affect Your Mortgage Interest Rate

Mon, 02 May 2022 13:30:03 GMT

For most of us, buying a home means obtaining a mortgage.

Original Source: readynest.com/

As with almost all types of loans, your mortgage will likely come with an interest rate. That rate plays a significant role in determining what your monthly mortgage payment will be, and therefore, how much home you can afford.

So, how are interest rates determined?

Not surprisingly, there are many factors that affect mortgage interest rates, some of which are not within your control – such as the country’s economic outlook. At a very high level, if the US economy is doing well and unemployment is low, mortgage rates likely will increase. The better the economy, the more people who are doing well and can afford to buy, so demand is high. On the flip side, if the economy is struggling and job growth is lower than expected, rates will likely decline in order to try to spur demand to borrow.

Another area beyond our control that may impact current mortgage interest rates is inflation. If inflation is on the rise, typically interest rates will follow suit.

There are more factors in the mix, including the bond market, actions by the Federal Reserve and others, however my father ingrained in me long ago the importance of “controlling what you can control,” so let’s move on to some factors we can do something about.

4 factors you can control that affect your interest rate

When a lender provides you a large sum of money to buy a home, they are taking on the risk that you may not pay them back. Therefore, they look at several risk characteristics or factors when determining whether to make the loan – and how much they will charge you (via your interest rate) for their assuming that risk. The lower the perceived risk on their part, typically, the lower the interest rate they will charge.

The good news is you have control over some of these factors. Again, there are many factors lenders consider, but here are 4 that you can control.

How points and lender credits impact your interest rate

It may not be a “risk characteristic,” per se, but another factor in your control is: are you willing to pay more at closing in order to lower your interest rate? Many lenders will offer homebuyers the option to pay “ points ” or “discount points” in return for a lower mortgage interest rate. The lower interest rate can of course reduce your monthly mortgage obligation, however the trade-off here is you’ll owe more at closing which could impact your down payment or leave less in savings for unexpected expenses.

These become more important when comparing loans with different interest rates to ensure you are looking at all factors that impact your overall cost of borrowing money – both at closing and over the time you are paying your mortgage. The APR you see listed alongside an interest rate is meant to help guide you in that comparison, though some don’t find it as helpful as they would like it to be. For more on APRs, please see: Understanding interest rate vs APR.

One more word on interest rates

Understandably, you would like to receive the lowest rate you can. However, interest rates can change not just daily, but sometimes multiple times a day. Trying to chase the lowest rate is a difficult task and can drive you crazy. A difference in an eighth or quarter of a rate may not have as significant an impact on your monthly payment as you might think.

My advice? Do what you can to help yourself get a lower mortgage interest rate, but first and foremost, make sure you’re working with a lender and loan officer that you trust. After all, the purchase of a home will be one of the largest purchases you’ll ever make.

Subscribe to our blog and stay up to date about changes in the market that effect buyers. Or contact us to learn more about mortgage processing services.

Your medical debt may no longer hurt your credit score — here’s why

Fri, 08 Apr 2022 14:02:21 GMT

Original Source: www.cnbc.com

Medical debt will start falling off credit reports this summer. Here’s what you need to know.

If you have looming medical debts on your credit report, there’s relief on the way. The three largest credit bureaus, TransUnion, Equifax and Experian are removing cleared medical debts from consumers credit reports beginning in July. This means that if you’ve paid your medical bill in full and the debt is still sitting on your credit report as a negative mark, this negative mark will now be removed.

This is a relief for millions of Americans that are battling an estimated $88 billion in medical debt, according to a report published by the Consumer Financial Protection Bureau last month.

These debts have had significant long-term financial consequences on consumers as these paid debts that were sent to collections remained as a red-mark on their reports, leaving them with fewer options for housing, loans and credit cards. Moreover, studies show that these debts can rollover into further medical issues such as stress and high blood pressure — leading to even more medical debt .

So if you’ve had medical debt in recent years, or are currently dealing with it, there’s change on the way that can potentially benefit your credit score — and overall financial health.

Select investigated the decision by the credit bureaus, what it means for consumers and how to handle your current or past medical debt.

Medical debt on your credit report may soon disappear

On Friday, it was announced that medical debt remarks will be wiped away from millions of credit reports beginning this summer. The move will wipe away an estimated 70% of negative medical debt remarks, giving many a hopeful jump in their credit score .

Here are the details of the new changes effective July 1:

Paid medical debt that was in collections will no longer be included on consumer credit reports
You’ll have more time before unpaid medical debt is reported on your credit report: Unpaid medical debt that is currently in collections for one year will be reported on credit reports. This is an increase from six months that was enacted in 2017.
Starting in the first half of 2023, Equifax, Experian and TransUnion will no longer include medical debt in collections under $500 on credit reports

Jeff Smedsrud, the co-founder of HealthCare.com and a RIP Medical Debt board member said this is a “tremendous thing” for consumers as medical debt is a financial killer for many — not just the elderly or those with medical conditions. In a recent Healthcare.com survey , all living generations indicated their medical debt has harmed their credit scores, with millennials being the highest at 52%.

And while negative credit score remarks can create long-term financial consequences, medical debt creates a situation where immediate sacrifice is also needed. The same survey indicated one in four Gen Zers and Millennials with medical debt skipped rent or mortgage payments because of their debt. Being late on your mortgage payment can also harm your credit score.

But in recent years, the numbers of Americans with medical insurance has risen dramatically — so where did this mountain of medical debt come from?

How does medical debt work?

Smedsrud summarized medical debt simply: “It’s complicated, its messy.”

The assumption among many Americans is that if they’re insured, their bills will be taken care of. Unfortunately, that isn’t the case. When you have a medical insurance policy, it’s vital to review the Explanation of Benefits (EOB) provided to you by your insurance company. This will let you know what is and isn’t covered by your insurance policy.

Once your insurance company is billed by the medical provider for services, the provider will bill you for the remaining balance that your insurance company didn’t cover. They’ll attempt to collect the remaining balance through phone calls or letters in the mail. If you don’t pay your bills after several months, the debt is sold to a medical collections agency to try and collect on it. And that’s when your credit score can be negatively impacted.

With the new reporting policy announced, this debt will not appear on your credit score for one entire year. After that one year passes, your credit score will then be dinged if what you owe is over $500.

If you have a large amount of medical debt and don’t pay, the medical provider or debt collector could potentially file a lawsuit to collect on the debt, which could lead to garnished wages. While this only happens in a small amount of cases, it doesn’t mean that it couldn’t happen to you. Between 2018 and 2020, more than a quarter of the nation’s largest hospitals and health systems pursued nearly 39,000 legal actions regarding consumer medical debt, according to a ProPublica report .

So if you’re receiving letters about pending medical debt, Smedsrud suggests the following steps:

When you get a bill, notify them you’ve received the bill.
Declare to the provider there are potentially mistakes on the bill. Numbers vary on this, but one study estimates up to 80% of medical bills contain errors.

By doing this, you’re ‘freezing’ the clock on when the provider will label the debt in default, and sell it to a collections agency. This can give you more time to pay what you owe, as well as potentially reduce what you owe if there are real errors on your bill(s).

How to eliminate medical debt and improve your credit score

Smedsrud warns that while this announcement is good news, it “does not eliminate medical debt, and doesn’t eliminate all medical debt on credit reports.” And he’s right.

Regardless if you owe $250 or $50,000 in medical debt, this announcement doesn’t alleviate your responsibility to pay the debt .

However, there are several things you can do to start paying down your medical debt today:

Call the medical provider and negotiate: Smedsrud mentioned that, “providers are more than willing to settle on these things.” They’re willing to get paid something, rather than nothing. So give them a call, review the charges together, and try to negotiate a deal with them. It could be a lower lump-sum payment, or even a payment plan with no interest. He added that, “you’d be surprised, they will take 25 or 50 cents on the dollar.”

Work with independent advocates and government agencies: Smedsrud urged consumers to be their own advocate when it comes to medical bills and debt. Organizations like RIP Medical Debt , HealthWell Foundation and the Patient Advocate Foundation work with individuals to help pay off medical debts. And if you qualify for Medicaid , you can potentially be eligible to have retroactive medical bills covered as well. So if you’re in a bind, it may be worth reaching out to see what services they could offer you.

Consider debt consolidation: If you have one or more medical debts and simply would rather pay it off, you may consider debt consolidation through a personal loan from Marcus by Goldman Sachs . This would get the medical provider or collections agency off of your back, eliminate any potential negative credit score remarks and you can pay it off at a more reasonable pace.

Apply for a 0% APR credit card: If you’re credit score hasn’t been severely damaged, you may qualify for a introductory no-interest offer credit card like the Wells Fargo Active Cash℠ Card . By paying your debt off with a 0% intro APR card, you can pay off the medical provider or collections agency, and pay the credit card issuers at a pace that you may be more comfortable for you. And you may be able to earn some credit card rewards along the way.

Sign up for a credit monitoring service: You may consider signing up for a credit monitoring service such as CreditWise to get a sense of what remarks are on your credit report. By using a credit monitoring service, you can get regular updates on your credit report, and any activity involving it. And since more than one third of credit reports have errors , your score could potentially be weighed down by an incorrect mark. So signing up for a service like this can highlight past remarks, as well as immediately notify you of new credit inquiries.

Bottom line

The recent announcement from the credit bureaus is a great sign for consumers who have paid their medical debts back, but are still suffering from negative marks on their credit score. However, for those still dealing with overdue debts, there are resources available for you to tackle a stressful financial situation.

Subscribe to our blog and stay up to date about changes in the market that effect buyers. Or contact us to learn more about mortgage processing services.

5 Factors That Affect Your Credit Score

Tue, 05 Apr 2022 13:29:45 GMT

Your credit score is a powerful number that can affect your life.

Original Source: www.thebalance.com

Your credit score is a powerful number that can affect your life now and in the future—in some ways that you might not even imagine. Your score determines interest rates you pay for credit cards and loans and helps lenders decide whether you even get approved for those credit cards and loans in the first place.

Unexpected businesses, such as insurance companies, have started to use credit scores to make decisions about you. Utility companies check your credit before establishing new service in your name, and some employers check your credit history (but not your actual credit score) to decide whether to give you a job, a raise, or promotion.

Protecting and building your credit is more important than ever, and how you handle the following five factors can make all the difference in determining your credit score.

Your Bill Payment History

Payment history determines 35% of your credit score. In fact, how timely you pay your bills affects your credit score more than any other factor. Serious payment issues, like charge-offs, collections, bankruptcy, repossession, tax liens, or foreclosure can devastate your credit score, making it almost impossible to get approved for anything that requires good credit.

The best thing you can do for your credit score is to make your payments on time each month .[1]

Your Level of Debt Matters

Your debt level determines 30% of your credit score. Credit scoring calculations, such as the FICO score, look at a few key factors related to your debt. The amount of overall debt you carry, the ratio of your credit card balances to your credit limit (also called credit utilization ), and the relation of your loan balances to the original loan amount.

As a guideline, you should keep your credit card utilization at 30% or less, meaning only charge up to 30% of any card's available limit.

Having high balances or too much debt can heavily affect your credit score. The good news is that your credit score can improve quickly as you pay down your balances.[2]

Your Credit History Age

How old is your oldest credit account? The age of credit is 15% of your credit score and considers both the age of your oldest account and the average age of all your accounts. Having an "older" credit age is better for your credit score because it shows that you have a lot of experience handling credit. Opening new accounts or closing existing accounts can lower your average credit age. For that reason, it's typically not a good idea to open several new accounts at once.[3]

Types of Credit on Your Report

Two basic types of credit accounts exist, revolving accounts and installment loans. Having both types of accounts on your credit report is better for your credit score because it indicates you have experience managing various types of credit.

It's even better if you have loans for different types of assets, such as a car or a home, in addition to credit cards, and maybe a student or personal loan. However, the types of credit only constitute 10% of your credit score, so not having a certain type of credit, such as an installment loan, won't devastate your score.[4]

Number of Credit Inquiries

Each time you submit an application that requires a credit check, an inquiry is placed on your credit report showing that you've made a credit-based application. Inquiries make up 10% of your credit score. One or two inquiries won't hurt much, but several inquiries, especially within a short period of time can cost you many points off of your FICO score. Keep your applications to a minimum to preserve your credit score.

The good news is that only those inquiries made within the last 12 months factor into your credit score.[5] Inquiries completely disappear from your credit report after 24 months.[6]

Note that checking your own credit report results in a "soft" inquiry, which does not affect your credit score.[7]

Factors That Don't Affect Your Credit

Some factors are commonly thought to influence your credit score, but they don't —not directly at least. Information like income, bank balances, and employment status can influence your ability to get approved, but they don't actually factor into the algorithm that calculates your credit score. Age, marital status, and debit or prepaid card usage also do not influence your credit score.

How Often Should You Check Your Credit Report?

Tue, 05 Apr 2022 13:29:15 GMT

How Often Should You Check Your Credit Report?

Original Source: www.usgovconnect.com

The Reasons Why You Should Check Your Credit Report:

1. Protect Yourself Against Fraudulent information.

2. Before Applying For A Loan.

3. Know Your Financial Standing.

You should check your credit regularly in order to see where you stand financially. You should also review your credit to catch fraud, many people do not know that they have been a victim of fraud until they check their credit report.

Fraudulent information can lower your FICO score. It can also make it harder for you to get a credit card or loan. It is important to note that your credit may be checked by an employer. This is especially true if the job requires that you handle money. Additionally, a low credit score can make it harder for you to lease a car, rent an apartment or get the best insurance rates.

How Often Should I Check My Credit?

Some people like to check their credit once a week. Others will check their credit once a month. Keep in mind that you can check your own credit as often as you like without hurting it. In fact, it is a good idea to check your credit regularly so that you can see what is affecting your score.

However, it is important to remember that your score can change from day-to-day. You should focus on the overall trend. While it is important for everyone to check their credit, there are incidences where you will need to check your credit more often. For example, if you have been a victim of fraud in the past, then it is a good idea to check your credit often.

You will also need to check your credit if you plan on getting a mortgage, loan or credit card. The number of times that you need to check your credit will depend on your comfort zone. Once a year may be sufficient for some people.

How to Check Your Credit

Everyone who is over the age of 14 can get one free copy of their report per year. However, people do not need to check their credit until they are 18. You can get a free credit report from www.annualcreditreport.com . You can also call 877-322-8228.

You will not get a copy of your credit score with your report. There are many lenders and financial institutions that will give you your score for free. Additionally, there are some companies that will charge you a fee to sign up for credit monitoring.

What Is Mortgage Insurance?

Wed, 23 Feb 2022 20:10:00 GMT

How It Works, When It’s Required

Original Source: nerdwallet.com

Mortgage insurance protects the lender. You’ll have to pay for it if you get an FHA mortgage or put down less than 20% on a conventional loan.

The traditional target for a home down payment is 20% of the purchase price, but that’s out of reach for many buyers.

Mortgage insurance makes it possible to hand over a much smaller down payment and still qualify for a home loan. It protects the lender in case you default on the loan.

With a conventional mortgage — a home loan that isn’t federally guaranteed or insured — a lender will require you to pay for private mortgage insurance, or PMI, if you put less than 20% down.

With an FHA mortgage, backed by the U.S. Federal Housing Administration, you’ll pay for mortgage insurance regardless of the down payment amount.

USDA mortgages, backed by the U.S. Department of Agriculture, and VA mortgages, backed by the U.S. Department of Veterans Affairs, don't require mortgage insurance. But they do have fees to protect lenders in case borrowers default. So you'll still face an extra cost with these home loans in exchange for the low down payment requirement.

» MORE: What is PMI?

How does mortgage insurance work?

You bear the cost of mortgage insurance, but it covers the lender. Mortgage insurance pays the lender a portion of the principal in the event you stop making mortgage payments. Meanwhile, you’re still on the hook for the loan if you can’t pay, and you could lose the home in foreclosure if you fall too far behind.

This is different from mortgage life insurance , which pays off the remaining mortgage if the borrower dies, or mortgage disability insurance, which eliminates the mortgage if the borrower becomes disabled.

PMI vs. MIP and other fees

Mortgage insurance works a little differently depending on the type of home loan. Here’s what you need to know for conventional and government-backed mortgages.

PMI for conventional mortgages

Many lenders offer conventional mortgages with low down payment requirements — some as low as 3%. A lender likely will require you to pay for private mortgage insurance , or PMI, if your down payment is less than 20%.

Before buying a home, you can use a PMI calculator to estimate the cost of PMI, which will vary according to the size of your home loan, credit score and other factors. Typically, the monthly PMI premium is included in your mortgage payment. You can ask to cancel PMI after you have over 20% equity in your home.

» MORE: Calculate your PMI costs

FHA mortgage insurance premium (MIP)

FHA loans feature minimum down payments as low as 3.5% and have easier credit qualifications than with conventional loans. Most FHA home loans require an upfront mortgage insurance premium and an annual premium, regardless of the down payment amount. The upfront premium is 1.75% of the loan amount, and the annual premium ranges from 0.45% to 1.05% of the average outstanding balance of the loan for that year.

You pay the annual mortgage insurance premium , or MIP, in monthly installments for the life of the FHA loan if you put down less than 10%. If you put down over 10%, you pay MIP for 11 years.

» MORE: Is an FHA loan right for you?

USDA guarantee fee

USDA loans are zero-down-payment loans for rural home buyers. Some USDA loans charge two fees: an upfront guarantee fee you pay once and an annual fee you pay every year for the life of the loan. The 2019 upfront guarantee fee is 1% of the loan amount. The annual fee is 0.35% of the average outstanding loan balance for the year, which is divided into monthly installments and included in your mortgage payment. The federal government evaluates the fees each fiscal year and can change them. But your fee amount will not fluctuate; it is fixed when the loan closes.

» MORE: Is a USDA loan right for you?

VA funding fee

VA mortgages require no down payments and feature low interest rates for active, disabled or retired military service members, certain National Guard members and reservists, and eligible surviving spouses. They don’t require mortgage insurance, but most borrowers will pay a " funding fee " ranging from 1.4% to 3.6% of the loan amount for purchase loans. The fee amount varies based on your down payment amount and whether this is your first VA loan.

» MORE: Is a VA loan right for you?

How to avoid mortgage insurance

Some state first-time home buyer programs offer low-down payment mortgages with no or reduced mortgage insurance requirements.

But generally you’ll need to get a conventional mortgage and put at least 20% down toward a home to avoid mortgage insurance .

If that’s not possible, then budget in the cost of mortgage insurance or VA or USDA fees when calculating how much home you can afford .

Subscribe to our blog and stay up to date about changes in the market that effect buyers. Or contact us to learn more about mortgage processing services.

Who Regulates Mortgage Lenders?

Mon, 14 Feb 2022 19:28:46 GMT

Original Source: www.investopedia.com

Buying a home is one of the biggest investments many Americans make in life. Few can afford a home outright with cash. Realizing the dream of home ownership means finding a mortgage lender who finds an individual worthy enough to advance them a loan . Mortgages are an important part of the financial system. They can be complex, even more so when lenders don't have their clients' best interests at heart. So who regulates the mortgage industry? This article discusses the key players responsible for holding lenders accountable.

Key Takeaways

The federal government regulates the mortgage industry through a number of acts passed by Congress. ¹
Regulation Z in the Truth in Lending Act arms consumers with the information they need to make informed decisions about interest rates, fees, and credit terms. ²
RESPA prohibits real estate agents from receiving kickbacks and prevents lenders from demanding that borrowers use a preferred title insurer. ³

The Basics of Mortgage Regulation

Mortgage lenders must follow rules set by the federal government. These rules require lenders to treat borrowers fairly and equitably. Simply put, the federal government regulates the mortgage industry and does this through a variety of agencies and a host of congressional acts. ¹

Both the Truth in Lending Act (TILA) and Regulation Z were designed to help protect consumers in their relationships with lenders. Under the regulations, lenders are required to disclose information about their products in a way that allows consumers to make meaningful comparisons. Prior to the act, consumers faced a barrage of confusing and misleading terms. ²

Mortgage lending discrimination is illegal. If you think you've been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. One such step is to file a report to the Consumer Financial Protection Bureau or with the U.S. Department of Housing and Urban Development (HUD).

Another key component to mortgage regulation is the Real Estate Settlement Procedures Act (RESPA) . This act was enacted by Congress so buyers and sellers are given disclosures about the full settlement costs related to home buying. ⁴

One of the more significant pieces of regulation is the Dodd-Frank Wall Street Reform and Consumer Protection Act , which Congress passed following the subprime meltdown that contributed to the 2007-2008 financial crisis . Dodd-Frank aimed to deal with some of the problems that led to the subprime crisis, such as predatory lending practices and lax mortgage qualifying standards. ⁵ Congress relaxed provisions under Dodd-Frank in 2018, including easing escrow requirements for depository institutions or credit unions. ⁶

The financial crisis also led to government bailouts of Freddie Mac and Fannie Mae , which were put into conservatorship . The Federal Housing Finance Agency (FHFA) oversees both to ensure the agencies continue to offer support for the mortgage market without the need for further government intervention. ⁷

The passing of Dodd-Frank put more protections in place for consumers, but changes in 2018 relaxed some portions of the act. ⁸

Regulation Z's Truth in Lending Act

Implemented by Regulation Z, the Truth in Lending Act was created in 1968 as a way to protect consumers from malicious, shady, or unfair practices by lenders and other creditors. Lenders are required to make full disclosures about interest rates, fees, terms of credit, and other provisions. They must also provide consumers with the steps they need to take in order to file a complaint, and complaints must be dealt with in a timely manner. Borrowers can also cancel certain kinds of loans within a specified period of time. Having all of this information at their disposal gives consumers a way to shop around for the best possible rates and lenders when it comes to borrowing money or getting a credit card . ⁹

RESPA

This act regulates the relationships between mortgage lenders and other real estate professionals—principally real estate agents—to ensure no parties receive kickbacks for encouraging consumers to use certain mortgage services. The act also prohibits loan providers from making demands for large escrow accounts, while restricting sellers from mandating title insurance companies. ³

Who Enforces Mortgage Regulations?

The Consumer Financial Protection Bureau (CFPB) , an independent government agency, was created to provide a single point of accountability to enforce financial and consumer protection laws. ¹⁰ The Federal Reserve also supervises the banking industry, which extends to mortgage lenders. ¹¹ The U.S. Department of Housing and Urban Development (HUD) oversees Federal Housing Administration (FHA) programs which have provided $1.3 trillion in mortgage insurance to home buyers. ¹² The Federal Housing Finance Agency oversees the activities of mortgage market liquidity providers Fannie Mae and Freddie Mac. ¹³

Examples of Mortgage Regulation

Depending on the violation, consequences of violating mortgage lending regulations vary wildly. If for example a lender is found to be in willful violation of the Truth In Lending Act (TILA) they can actually be imprisoned for up to one year but the most common consequences are monetary penalties. TILA violations tend to carry fines up to $5,000. ¹⁴

Lenders, Realtors, and Appraisers can also be held liable in civil courts for violating mortgage regulations like the Equal Credit Opportunity Act (ECOA) . The ECOA prohibits discrimination on the basis of race, color, religion, national origin, sex, marital status, age, receipt of public assistance, or good faith exercise of any rights under the Consumer Credit Protection Act. ¹⁵

In December 2021, a Black couple in California sued their appraiser after she valued their home at $995,000, which seemed far below the median market value for that area. The couple decided to have a White friend greet a different appraiser, and this time placed some pictures of the friend's White family in their home. The next appraisal came in at $1.48 million. ¹⁶

Filing a Complaint

Consumers with complaints about mortgage lenders should first reach out to the CFPB via the agency’s website. It provides consumers with numerous tools to address lending complaints. ¹⁷ The Federal Reserve, ¹⁸ Federal Deposit Insurance Corporation (FDIC) , ¹⁹ and the National Credit Union Administration (NCUA) also invite consumers to contact them about mortgage lender complaints. ²⁰

Have Mortgage Regulations Changed Because of 2020?

So far, the only mortgage regulations that have changed due to the 2020 financial crisis are related to mortgage servicing and forbearance . While changes could still be put in place to adjust mortgage lending regulations, none are currently on the books. ²¹

Why Were Mortgage Regulations Put in Place?

U.S. mortgage regulations are on a perpetual see-saw with regulations put in place after a crisis and slowly eroded over time until the next crisis. The Financial Services Modernization Act of 1999 in part deregulated the lending industry. This is frequently viewed as a contributing factor to the subprime mortgage crisis . As a result of the financial crisis many regulations on mortgages were put back in place with the Dodd-Frank Wall Street Reform and Consumer Protection Act . Then in 2018 reforms were passed in Congress, weakening Dodd-Frank. ²²

What Would Happen if Mortgage Regulations Didn’t Exist?

If there were no mortgage regulations in place, history has taught us that we would see a rise in predatory lending practices. These practices would fall hardest on people who are at a disadvantage in the lending process, like first time homebuyers who come from non-property owning families and cultures. Those who lack the education to understand complex documents and who don't have people they trust to ask would find themselves signing up for more expensive, more complex loan products than other borrowers who have more savvy and cultural advantages. ²³

How do Mortgage Regulations Protect Me?

Mortgage regulations protect all buyers, not just those at a disadvantage in the lending process. Every borrower receives detailed closing disclosures that allow for better understanding of mortgage terms and costs and is given set time periods by law to think over and cancel their loans in addition to numerous other regulations that lead to more transparency and rights for borrowers in the lending process. ²⁴

The Bottom Line

For borrowers looking to get approved for a loan, mortgage regulations can seem like unnecessary and tedious hoops to jump through. However, these regulations are in place to protect all of us. They protect individual borrowers from buying properties they can't afford to stay in and they protect the economy as a whole from falling into another housing bubble driven by unscrupulous lending practices. Numerous regulative authorities and checks & balances are currently in place to try to prevent the 2008 crisis from reoccurring.

Subscribe to our blog and stay up to date about changes in the market that effect buyers. Or contact us to learn more about mortgage processing services.

Landlord Education Test

Tue, 18 Jan 2022 20:10:04 GMT

Original Source: readynest.com

Are you thinking about purchasing a 2- to 4- unit home for rental?

As a term of your financing, your lender may have told you that you need to earn a Certificate of Achievement to show that you understand the risks and rewards of being a landlord.

Consult with your lender to make sure you fulfill your landlord education requirements with an approved program.

This free test meets homebuyer education requirements for Freddie Mac®.

Subscribe to our blog and stay up to date about changes in the market that effect buyers. Or contact us to learn more about mortgage processing services.

Fannie Mae Launches Free Online Education Course

webeducationservices@gmail.com (Justin Babcock) — Mon, 17 Jan 2022 20:45:28 GMT

Original Source: fanniemae.com

Empowering Aspiring Homebuyers to Become Confident, Successful Homeowners

Fannie Mae HomeView Broadens Access to Homeownership Education Resources, Prepares Consumers for All Stages of the Homebuying Process.

Fannie Mae (FNMA/OTCQB) today announced the launch of HomeView™, the company's new online homeownership education course, to help consumers navigate the mortgage and homebuying process confidently and responsibly. Available free of cost, and accessible online anytime on any device at fanniemae.com/education , HomeView provides comprehensive, easy-to-understand content and resources designed to ensure aspiring homebuyers are well equipped to become more informed and successful homeowners.

Complexity in the homebuying process and misinformation or lack of understanding about qualification requirements can discourage potential homebuyers from taking their first steps toward purchasing a home. According to Fannie Mae research, a majority of consumers do not know the minimum credit score, down payment, and debt-to-income ratio needed to qualify for a mortgage, and fewer than 1 in 4 are aware that low-down-payment options are available. Additionally, homeownership education that aligns with the National Industry Standards is required for many first-time homebuyers to qualify for certain mortgage products, including low-down-payment loans. Fannie Mae's HomeView meets this need by giving lenders and prospective homebuyers a free and easy way to benefit from critical homeownership education. By expanding access to reliable housing and financial knowledge, Fannie Mae provides a clearer path to homeownership for more qualified homebuyers, including low- and moderate-income and minority borrowers, helping to advance housing equity and address the homeownership gap among these communities.

"Fannie Mae is committed to creating equitable and sustainable homeownership opportunities for more people. With HomeView, we are providing aspiring homeowners with free tools and information that will demystify the homebuying process and put sustainable homeownership within reach," said PJ McCarthy, Vice President of Affordable Lending and Housing Equity, Fannie Mae. "Broadening access to quality, trustworthy homeownership education is a proven first step to empowering homebuyers to become successful homeowners. HomeView puts people on the path to buying a home while preparing them for long-term success."

Data from Fannie Mae's Q2 2021 National Housing Survey® show that consumers continue to want information about purchasing and owning a home but have lacked a trusted, centralized source. Among those surveyed, all consumer segments – renters and homeowners, and across race and ethnicity – reported significant interest in learning about how much home they could afford as well as their financing options. In particular, Black renters expressed the most interest in learning more about the homebuying process, including the documents required, how to gain pre-approval from a lender, potential down payment assistance programs, and best practices around personal finance and credit score management.

"For many homebuyers, especially first-time homebuyers, the mortgage and home purchase lifecycle can be intimidating and overwhelming. Having a reliable, single source of information in common, everyday language can make the difference for aspiring homeowners, no matter where they are on their housing journey. That's why we're so proud to launch HomeView," said McCarthy. "As a leader in U.S. housing and mortgage finance for more than 80 years, Fannie Mae is able to provide intuitive, credible, on-demand learning to enable all consumers to become more engaged and informed homeowners. We are investing in a full-lifecycle education portal that will continue to be updated and tested, offering additional resources and support. And by making HomeView available for free, we are removing the cost barrier for lower-income borrowers to meet the homeownership education requirement for more affordable mortgages."

Fannie Mae collaborated with consumers and industry experts, including housing counselors, mortgage insurers, government organizations, and other stakeholders, to ensure HomeView content aligns with National Industry Standards for pre-purchase homeownership education and addresses common homebuyer knowledge gaps and pain points. The course includes seven interactive learning modules that guide the user through the steps of buying and owning a home:

Knowing When You're Ready
Saving for Homeownership
Understanding the Mortgage Loan Process
Shopping for a Home with a Real Estate Agent
Making an Offer on a Home
Getting Ready to Close on Your Loan
Welcome to Homeownership

The interactive course components are designed to be completed in 30 minutes or less, and consumers can pause and resume at any time. Users who complete the course and achieve a score of 80% or higher receive a certificate of completion to share with their lender to meet the education requirement for most mortgage products, including low-down-payment loans.

HomeView also provides access to tools and resources, including checklists and calculators, and a link to find HUD-approved local housing counselors for consumers who would like additional support throughout the process of buying and owning a home. There is no limit to the number of times users can take the HomeView modules or access the available resources. At the time of launch, HomeView content is available in English and additional language options will be available in the future.

View the online course and materials at fanniemae.com/education .

Subscribe to our blog and stay up to date about changes in the market that effect buyers. Or contact us to learn more about mortgage processing services.

Freddie Mac Launches Credit Smart Homebuyer U

Mon, 17 Jan 2022 20:10:02 GMT

A Homeownership Education Curriculum

Original Source: freddiemac.com

Freddie Mac announced it has launched a new, comprehensive homeownership education course.

CreditSmart® Homebuyer U.

This course is a free, online resource for consumers who want to learn about home purchase and the homeownership process. CreditSmart Homebuyer U offers six educational modules, each focused on a key learning principle relating to money management, credit, getting a mortgage, the homebuying process and preserving homeownership.

“Becoming a homeowner is an important responsibility and Freddie Mac is committed to providing the tools and resources to ensure a successful path toward sustainable homeownership,” said Danny Gardner, Senior Vice President, Single-Family Affordable Lending and Access to Credit at Freddie Mac. “The goal of this exceptional program is to empower those who are pursuing the dream of homeownership with knowledge to make informed, responsible decisions.”

Freddie Mac stresses the importance of education in supporting financial capability skills among consumers in order to help them prepare for homeownership. CreditSmart Homebuyer U is the latest addition to the CreditSmart “suite” of financial and homeownership education curricula that have been in place for the last 18 years.

According to a recent Freddie Mac survey of the Generation Z (Gen Z) cohort (ages 14-23), respondents reported that while they have received financial education at home and are at least somewhat confident in their future financial well-being, 65% of Gen Z respondents report they are not confident in their knowledge of the mortgage process.

“This survey data also reveals that while members of Gen Z clearly aspire to homeownership, an education program like CreditSmart Homebuyer U is needed and can make a positive impact not only on today’s aspiring homeowners, but on future generations as well,” added Gardner.

CreditSmart Homebuyer U satisfies education requirements for Freddie Mac HomeOneSM or Home Possible® mortgage loans and aligns with the National Industry Standards on Homeownership Counseling and Education (pre-purchase content).

Need a certificate to qualify for a HomeOne® or Home Possible® mortgage? Want to take a deep dive into homeownership? It all starts by clicking here . Learn about bringing your credit up and keeping it there.

Subscribe to our blog and stay up to date about changes in the market that effect buyers. Or contact us to learn more about mortgage processing services.

Your home loan toolkit: A step-by-step guide

webeducationservices@gmail.com (Justin Babcock) — Tue, 21 Dec 2021 21:31:54 GMT

Original Source: consumerfinance.gov

How can this toolkit help you?

Buying a home is exciting and, let’s face it, complicated. This booklet is a toolkit that can help you make better choices along your path to owning a home.

After you finish this toolkit:

You’ll know the most important steps you need to take to get the best mortgage for your situation
You’ll better understand your closing costs and what it takes to buy a home
You’ll see a few ways to be a successful homeowner

How to use the toolkit:

The location symbol orients you to where you are in the home buying process.
The pencil tells you it is time to get out your pencil or pen to circle, check, or fill in numbers.
The magnifying glass highlights tips to help you research further to find important information.
The speech bubble shows you conversation starters for talking to others and gathering more facts.

Download the Consumer Financial Protection Bureau home loan tool kit! The Consumer Financial Protection is a federal agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives.

Subscribe to our blog and stay up to date about changes in the market that effect buyers. Or contact us to learn more about mortgage processing services.

Find A Housing Counselor

webeducationservices@gmail.com (Justin Babcock) — Thu, 16 Dec 2021 20:37:16 GMT

Original Source: consumerfinance.gov

Housing counselors throughout the country can provide advice on buying a home, renting, defaults, forbearances, foreclosures, and credit issues. This list will show you several approved agencies in your area. The counseling agencies on this list are approved by the U.S. Department of Housing and Urban Development (HUD) and they can offer independent advice, often at little or no cost to you. There is also a list of nationwide HUD-approved counseling agencies .

Using the search box below, you can find one near you. Not every housing counselor offers all services, so please look at the list of services offered by each agency.

Subscribe to our blog and stay up to date about changes in the market that effect buyers. Or contact us to learn more about mortgage processing services.

Closing costs are up, but there’s a catch

webeducationservices@gmail.com (Justin Babcock) — Tue, 07 Dec 2021 21:42:20 GMT

Closing costs for single-family properties on average rose by 12.3% in the first half of 2021

Original Source: housingwire.com

The average closing costs for a single-family home increased 12.3% during the first six months of 2021, according to a report published this week by analytics vendor ClosingCorp . And significantly higher home prices were the culprit.

According to ClosingCorp, the average closing costs nationally came in at $6,837 including taxes and $3,836 excluding taxes. The report also found that refi closing costs increased by 4.87% to $2,398 from the reported 2020 average of $2,287.

But things are not always as they seem. Bob Jennings, CEO of ClosingCorp, said that closing costs as a percentage of purchase prices actually declined this year to 1.03% from 1,06% in 2020.

“So, in addition to keeping up with high demand, the mortgage industry is doing a good job in holding down the costs it can control,” Jennings said.

He also added that in June, the average national price hit $373,664 and in July “leading home prices indices registered their highest ever year-over-year gains.”

“Although the average home price increased by nearly $45,000, the closing costs, excluding taxes, on that property only increased by $400,” he added.

The report also shows that states with the highest average closing costs, including taxes, were District of Columbia ($30,352), Delaware ($17,831), New York ($17,582), Washington ($13,909), and Maryland ($12,056).

Meanwhile, states with the lowest closing costs, including taxes, were Missouri ($2,102), Indiana ($2,193), North Dakota ($2,321), Kentucky ($2,355) and Wyoming ($2,509), the report said.

In order to come to these conclusions, the tech vendor “analyzed data on more than 1.9 million single-family purchase transactions that ran through [their] ClosingCorp Fee platform,” said Dori Daganhardt, chief data officer at ClosingCorp.

“We are reporting ‘market-specific’ rates and fees not just network averages charged by the most active settlement services providers in each geographic area,” Daganhardt said.

ClosingCorp also noted in their report that it uses home price data from CoreLogic to estimate closing costs at the state, core-based statistical area and county levels.

In June, CoreLogic announced that it entered into a definitive agreement to acquire all outstanding shares of ClosingCorp.

The transaction was expected to close in the third quarter of 2021, however since then, no updates have been made public.

Subscribe to our blog and stay up to date about changes in the market that effect buyers. Or contact us to learn more about mortgage processing services.

Homeownership Education & Housing Counseling

webeducationservices@gmail.com (Justin Babcock) — Fri, 15 Oct 2021 20:39:08 GMT

Homeownership Education

Original Source: fanniemae.com

Homeownership Education offered through Framework® is an interactive and comprehensive online education program that is designed to help future homebuyers navigate the home buying process. The Framework course makes it simple to meet the requirement. When homeownership education is required, a minimum of one occupying borrower must complete the Framework homeownership education course.

In some situations, borrowers may need to fulfill the requirement in another way. Click here for a list of exceptions. Framework is available in English and Spanish, meets industry standards and consistently receives high marks from learners.

What your borrowers will learn:

How much home they can afford
How to choose the best loan
How to lower their down payment
What to include in their offer
What happens at closing
What pitfalls to avoid before and after closing

Housing Counseling

Housing counseling, also known as advising, is best suited for borrowers facing complex challenges – those who need one-on-one assistance to develop a deep understanding of their housing needs, household budget, and how to resolve potential issues.

Potential borrowers who are pursuing eligibility may benefit greatly from housing counseling from a HUD-approved nonprofit housing counseling agency.

For counseling to fulfill the HomeReady Mortgage education requirement:

Counseling should occur as early as possible and before a buyer selects a home.
Required components must be completed before a buyer enters into a contract to purchase a home.
The assistance must meet HUD standards and cover the content detailed on the Certificate of Completion of Housing Counseling ( Fannie Mae Form 1017) , which must be signed by the buyer and the HUD counselor.
By signing the form, the HUD counselor certifies that the assistance provided meets HUD standards and our requirements.
The lender must retain the completed Form 1017 in the loan file.

Subscribe to our blog and stay up to date about changes in the market that effect buyers. Or contact us to learn more about mortgage processing services.

saleztrax

Condo Loans Made Easier: Understanding Fannie Mae’s Project Approval Through DU

What is DU Project Review Approval?

Here’s how it helps:

What to Look for in the DU Findings

Quick Reminders:

Why This Matters

Simplify Self-Employed Income Calculations with Fannie Mae's Tool

Outsourcing in Mortgage Processing: The Strategic Edge with Saleztrax

The Saleztrax Vision:

Why Outsourcing?

Quality and Compliance:

The Saleztrax Difference:

Client Success Stories:

Conclusion:

Fannie Mae Selling Guide Updates: What You Need to Know

Income Calculator:

Verification of Employment Alternatives:

Restricted Stock Units and Restricted Stock:

Using Nontaxable Income to Adjust Gross Income:

Certified Shared Equity Program List:

Financial Reporting Requirements:

Sale of eMortgages to Fannie Mae:

Requirements for Use of Attorney Title Opinion Letters:

Conclusion:

Navigating the 2024 Loan Landscape: FHA, VA, Conventional, and USDA Loan Limit Updates

FHA Loan Limits 2024

VA Loan Limits 2024

Full Entitlement

Partial Entitlement

Conventional Loan Limit Increase for 2024

USDA Loan Limits 2024

Fannie Mae's LTV Ratio Update: Boosting Access to Credit and Affordable Housing

Transaction Types Affected:

Maximum LTV Ratios:

Exclusions:

For Further Reference:

VantageScore 4.0 Could Inject $1 Trillion into Mortgage Market

The Impact of Credit Score Modernization

Inclusivity and Market Reach

Reliability and Predictive Ability

Conclusion

The 8 Do's and 7 Don'ts When Getting a Mortgage

The 8 Do's:

The 7 Don'ts:

Conclusion:

Navigating Non-QM Loan Products: Empowering Self-Employed Gig Workers

Unlocking Opportunities for Self-Employed Workers

The Hurdles of Traditional Mortgage Qualification for Self-Employed Individuals

The Appeal of Non-QM Loan Products for Loan Officers

Understanding How Non-QM Loan Products Work

Saleztrax Mortgage Processing: Empowering Non-QM Loan Processing

Unlocking New Possibilities: Contact Saleztrax Mortgage Processing Today

Bridging the Gap with Non-QM Loans

How earnest are you about buying that house? Prove it with earnest money!

What is earnest money?

How much money should you give as earnest money?

Do you get your earnest money back if you don’t buy the house?

Where does the earnest money go?

Is earnest money part of the down payment?

Who can gift money for a down payment on a mortgage loan?

Determining the down payment amount

A down payment solution: Gift funds

What gift funds can be used for and who can provide those funds

The bottom line

Should you buy a home during uncertain times?

When there is no “normal,” when is the best time to buy a house?

To buy now or to wait

Mortgage interest rates

Home prices

Housing market

Does it all just come out in the wash?

Low-down-payment mortgage options

How much should you put down on a house?

Low-down-payment mortgage options

US Department of Veterans Affairs (VA) loans

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Federal Housing Administration (FHA) loans

Conventional loans with private mortgage insurance (private MI)

Gift funds