The SCOOP! Blog by ChangeMyRate.com®

Answer: The difference between a mortgage interest rate and an annual percentage rate is that a mortgage interest rate is the cost you pay each year to borrow money for a mortgage. An annual percentage rate reflects the mortgage interest rate and other charges.

 

There are many costs associated with taking out a mortgage. These include:

 

  • The interest rate

  • Points

  • Fees

  • Other charges

 

The interest rate is the cost you will pay each year to borrow the money, expressed as a percentage rate. It does not reflect fees or any other charges you may have to pay for the loan.

 

An annual percentage rate (APR) is a broader measure of the cost to you of borrowing money. The APR reflects not only the interest rate but also the points, mortgage broker fees, and other charges that you have to pay to get the loan. For that reason, your APR is usually higher than your interest rate.

 

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Take care when comparing the APRs of adjustable-rate loans. For adjustable rate loans, the APR does not reflect the maximum interest rate of the loan. Be careful when comparing the APRs of fixed-rate loans with adjustable-rate loans, or among different adjustable-rate loans. Don’t look at the APR alone in determining what loan makes the most sense for your circumstances.

 

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If you're shopping for a mortgage, learn how new mortgage rules may help you shop. If you already have a mortgage, use this checklist to see what steps you can take to make the most out of your mortgage.

 

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If you have a problem with your mortgage closing process, you should discuss the issue or matter with your lender. If you’re having issues with your mortgage, you can also submit a complaint  to the CFPB online or by calling (855) 411-CFPB (2372). We’ll forward your complaint to the company and work to get you a response. You may also wish to get your own attorney to take a look at your issue or matter.

 

Courtesy of the Consumer Financial Protection Bureau - To view the original article click here

Posted by Jackie A. Graves, President on August 16th, 2017 5:07 AM

It’s a nightmare situation: You’ve spent months searching for your dream house, finally get an offer accepted, and then … the house doesn’t appraise for the agreed-upon price.

Now what?

 

Take a deep breath

“It can be heart-wrenching for the buyer and seller if the deal falls apart because of the appraisal,” says Suffolk, VA real estate agent Lori Strickland.

But you’re not alone. Low appraisals happen more often than you might think, especially in rising markets.

Sometimes there are insufficient comparable sales applicable to the home you want, or maybe distressed sales in the area have skewed the appraisal.

“Traditional lenders will generally only lend funds up to a certain percentage of the appraised value [80% of appraised value as opposed to 80% of the contract price],” says Michael R. Santana, a Florida attorney.

If the appraisal is lower than your offer, you may need to come up with more cash — but you do have other options.

Look over the appraisal contingency clause

An appraisal contingency clause built into your contract allows you to reevaluate the situation or renegotiate if needed. But even with a contingency clause, you could end up spending more or walking away to look for another house.

Sometimes all parties need to join together to make the deal work: sellers, buyers, and agents. Sellers might come down on price, you might pay closing costs, and agents might even take less of a commission — but the deal still goes through.

Get a second opinion

Maybe the appraiser’s estimate of the home’s value was inaccurate. If so, Sam Heskel, CEO of Nadlan Valuation Inc., recommends a value appeal.

“The appraiser will review the appeal and respond by reevaluating the property or explaining why he or she did not use the comparable sales the lender sent,” says Heskel.

Another option is to try working with your lender to get a second appraisal. They might be willing to accept the subsequent, higher appraisal.

“In some instances, especially if you are well qualified, sellers are willing to pay for the second appraisal to keep the deal on the table,” says Santana.

To help guard against a lower appraisal, make sure you let the appraiser know the reason you made the offer you did.

“The selling agent should meet the appraiser at the property to provide comparable sales and listings,” says Casey Fleming, a former appraiser.

Try not to pay more than appraised value

You might think you have found the only house you’ll everlove, but with that mindset, you’re liable to get hurt. Try to remove your emotions from the equation. “The euphoria of offering and counter offering on a home can quickly become buyer’s remorse,” says Nevada real estate professional Bruce Specter

If you do pay more than the appraisal, you’ll spend more than the house is worth. If you wouldn’t pay more than the list price for a car or even for shoes, you generally shouldn’t do so for a house.

Forget about whether you’re in a hot market

Unless cash buyers are ready to swoop in, you can use the low appraisal as an opportunity to renegotiate.

As long as you’re not in a hot market, Tamela Ekstrom, owner of Haven Real Estate in Detroit, says, “the seller will typically drop down and sell for the appraisal amount.” Once people are entrenched in a deal, they usually try to work things out.

By Trulia Contributor - To view the original article click here

 

 

Posted by Jackie A. Graves, President on August 15th, 2017 5:07 AM
Working with a lender while you buy a home is becoming more automatic and safer than ever before.

Technological advancements lend themselves to countless consumer-facing industries, even transforming ones such as hospitality, travel and banking.

But if you can manage numerous accounts online without ever having to sit down for a face-to-face conversation with another human, why is the process of getting a mortgage so different?

The real estate financing process is often expected to be a series of in-person meetings at banks or other offices, complete with scanning documents of financial background information and a slow approval process.

One possible reason the mortgage industry has been slow to adopt new technology is because the housing crisis caused lenders to clam up, explains Tom Rhodes, CEO of Sente Mortgage, a Texas-based lender that opened just in time for the housing bubble burst in 2007.

But those days are rapidly changing. Lenders are beginning to embrace more new technology, and new lenders are even entering the game based around an automated platform.

“In the last 18 months, we’ve really started seeing where things have gotten easier,” Rhodes says. “Companies are using big data, companies are using more automated systems and processes and using technology to produce a smoother experience.”

Here are four things you should know about how technology is now playing a part in your mortgage process.

Options go beyond the online form. An important part of the mortgage industry’s evolution is automation – not just allowing you to fill out forms online, but also granting access to financial and employment backgrounds without requiring repetitive work for you.

Rather than having to provide all the same detailed pieces of information you would when filling out a paper form, your communication with the lender is more about borrowing programs that would fit best and not what details you have or haven’t provided yet.

By streamlining that process, mortgage lending moves away from a transactional business and “turns into a relationship business,” says Dom Marchetti, chief technology officer for loanDepot, a technology-focused lender.

Other more traditional lenders – banks in particular – are automating their processes as well. One way is by utilizing Roostify, a mortgage technology company that provides an automated platform for lenders.

“It creates an online experience for the consumer, from potentially the moment they express interest in learning more about the lender’s offerings to the moment that they sign their final closing documents,” says Rajesh Bhat, CEO and co-founder of Roostify.

From there, the online platforms are also designed to provide detailed updates about your application and the approval process and often allow you to e-sign documents so you avoid adding new meetings to your existing list of sit-downs throughout the homebuying process.

Face-to-face options remain. Of course, there’s no way every consumer looking to purchase a home is going to feel comfortable getting a mortgage online, whether it’s a tech-literacy issue or simply because you may enjoy an in-person conversation.

“Every bank needs to provide that option to support consumers who don’t wish to engage online at all – you have to be able to support that,” Bhat says.

Even the lenders focused on automated processes, such as Rocket Mortgage by Quicken Loans or loanDepot, offer human interaction to help you each step of the way.

“We get to interact with you on your terms,” Marchetti says of loanDepot’s platform.

Security and protection is a major focus. We hear almost every day about a new data hack in a retailer, firm or even hospital that has compromised consumers' private information. Knowing how much valuable information is compiled during the mortgage approval process, companies are taking measure to reduce the chances of that happening.

Especially for companies specializing in the tech aspect, securing your information is a major part of the job – and it’s an ongoing process. “When information comes into our solution, we are effectively encrypting everything at rest and in transit,” Bhat says.

Marchetti explains that loanDepot has placed particular focus on keeping hackers from reaching client information, having blocked repeated attempts to access company data. Key to protection is segmentation to avoid a mass download of information, he says, so “if you get access to a piece, you don’t get a whole.”

But the greater level of protection isn’t just for the consumer’s benefit – the automated process itself allows for heightened transparency between the borrower and lender, cutting down on potential for fraudulent information being given to the lender, Marchetti says.

The industry is poised for tech growth. Even with the progress of the last year and a half, the mortgage industry is likely in just the beginning stages of its evolution to catch up with the travel, banking and other tech-transformed industries, Rhodes says.

He points out, in particular, that while employment verification for homebuyers has been automated with Sente Mortgage and other companies, it doesn’t work with all types of employment yet. “The box is still pretty small,” Rhodes says.

But with the ball rolling, it’s only a matter of time before more people qualify for a fully automated process, and the mortgage industry loses its antiquated reputation. But the general practice of shopping around for a mortgage should remain the same – work with the lender to find the right mortgage program for you.

“We’re still in the early days of this. … I think it’s going to be a radical improvement in the process,” Rhodes says.

Homebuyers and other borrowers can reasonably expect for automation in verification of employment and financial history to expand to cover more people as technologies develop and a larger portion of the industry gets on board.

Further behind-the-scenes automation means the loan approval process can be streamlined and made more accurate. Already, Fannie Mae's Automated Property Service uses its extensive information to provide a predicted property value and a confidence score to be used as a factor when considering eligibility for the Home Affordable Modification Program. As more major industry players support a more transparent process, small and large lenders nationwide will be able to automate more as well.

By Devon Thorsby - To view the original article click here

Posted by Jackie A. Graves, President on August 14th, 2017 5:06 AM

Take advantage of workshops aimed at helping you get past the initial steps of purchasing a house.

For most, homebuying seems to be an overly complicated process. Viewed from a wider lens, you have multiple steps – mortgage application and approval, making an offer, competing with other buyers, contract negotiation, the due diligence period and (hopefully) a successful closing – rolled into one larger process that leads to your home purchase.

For something the majority of Americans will undertake at least once in their lifetime, shouldn’t it be easier?

All told, simplifying the homebuying process is hard without taking out key elements that ensure honest lending, sales negotiations and understanding of the details of the deal for both the buyer and seller. But resources for homebuyers to better get a handle on the process are growing.

First-time homebuyer workshops are popping up throughout the U.S. as real estate agents, lenders and agencies approved by the U.S. Department of Housing and Urban Development have taken up the task of providing more transparency for homebuyers about getting approved for a mortgage, making an offer and preparing to close on a home.

This is particularly important as new buyers flood the market. First-time buyers make up about 35 percent of homebuyers in the U.S., according to the National Association of Realtors’ 2016 Profile of Home Buyers and Sellers.

For many, an education in jumping into homeownership is necessary. “They’re coming in fresh and brand new and just wanting to understand the whole process,” says Darlene Bharath, a housing counselor for Belair-Edison Neighborhoods Inc., a nonprofit housing organization in Baltimore and a HUD-approved counseling agency.

Of the 50 people that typically attend the organization’s semimonthly homebuyer classes, between eight and 10 have spoken to a lender or real estate agent so far, but the rest aren’t quite ready, says John Watkins, also a housing counselor at Belair-Edison Neighborhoods Inc.

Homebuyer workshops aren’t exclusive to first-time buyers. Jessica Diaz, a Realtor for Coldwell Banker Residential Services in the Atlanta area who puts on first-time homebuyer workshops with colleagues, notes clients listing their home with her decided to attend her recent workshop because they previously purchased their home from the builder and wanted a refresher course on the buying process for an existing home.

“It took the edge off, because [buying and selling] can be scary to do at the same time,” Diaz says.

A first-time homebuyer class can be key to pointing out steps you may have previously been unaware of, walk you through some of the challenging aspects and help you identify the right timing and location for your home purchase. Here are eight things you’ll learn in a first-time homebuyer boot camp.

Your credit history is important. You’ve probably heard this once or twice already, but a first-time homebuyer class starts with the basics – and the most basic thing you can know about buying a home is that your credit matters when you apply for a mortgage.

Alexandra Conigliaro Biega, a Realtor with Coldwell Banker Residential Services in Bostonwho also hosts first-time buyer workshops with colleagues, says the stress put on knowing your credit score and available credit leads a lot of workshop attendees to determine whether they can buy now or if it’s better to wait and improve their credit.

Preapproval is a must. Beyond your credit, mortgage preapproval is key to both setting a budget and looking good to sellers. Being preapproved means a loan underwriter has examined your financial credentials and, barring any issues with the home's condition or appraised value, confirms you qualify for a certain mortgage amount.

“The first step is to get preapproved – we don’t know what to look at without knowing the budget,” Diaz says.

You may qualify for assistance programs. Lenders often offer or are able to be a part of larger mortgage programs that make it easier for you to purchase a home – whether it’s a down payment assistance program, a grant for the purchase price of your home or another form of monetary assistance.

A lender representative is often present in a first-time homebuyer workshop and will help guide you as you search for the mortgage program or low down-payment program that can best help you, but the organization that hosts the seminar may assist as well.

Belair-Edison Neighborhoods Inc., for example, works with homebuyers to apply for the right grants or programs, many of which actually require attendance of a homebuyer boot camp, among other requirements, before you’re considered eligible.

House hunting comes after mortgage prep. Securing your financing is certainly a big step, but it’s just the beginning – once you’re preapproved for a loan, it’s time to start house hunting.

At your first-time homebuyer workshop, you’ll likely get an overview of how you can begin searching online for available properties, as well as your real estate agent’s role in finding houses, touring them and narrowing your options.

Conigliaro Biega says she often includes a housing market report in her course materials, which can help homebuyers narrow the area they’re looking to buy in based on affordability and other personal factors the buyer has to weigh, such as commute time, schools and safety.

Next are offers, going under contract and due diligence. Once you’ve found the right house, naturally it comes time to make an offer and begin negotiations. Those leading the boot camp can provide details about this part of the process that are specific to your state or city, as local laws can have a significant impact on each part of the process.

One part in particular is due diligence – when the buyer has a certain period of time under contract to inspect the home and conduct research to reveal any potential problems. Laws vary by state as to what the seller is required to tell you, so it’s imperative that you move quickly to discover any code violations, cracks or leaks that need fixing or even an unseemly past that could make you rethink buying the house.

Closing and beyond. In an overview of homebuying, the natural end seems to be when you close on your home and take possession of the property. But there’s so much more to homeownership that can serve as an unpleasant surprise if you’re not ready.

In addition to lenders, agents, appraisers, inspectors and more discussing their role in the purchase process, Bharath says a representative from a title and escrow company is typically in attendance, as well as a homeowners insurance representative to discuss coverage once the home is yours.

There may be one-on-one options. Most professionals putting on the class welcome more personal questions about the homebuying process, and at HUD-approved counseling agencies, there are typically one-on-one meeting options to go in depth about your own qualifications for homeownership. For some programs, completing the workshop and a one-on-one session is required to be approved for a mortgage- or down payment-assistance program.

“Once the client comes in to schedule a one-on-one interview, we’ll address their individual situations, so we’ll look at their pay stubs, income tax returns, bank statements and things of that sort to determine how much of a house they can afford to purchase, as well as what grant they would be eligible for,” Watkins says.

There will likely be more than one pro. Many first-time homebuyer workshops bring in additional real estate professionals to help explain certain parts of the process – a lender, home inspector, title representative and more. For Diaz, one of the biggest takeaways from the class is that a homebuyer won’t be working alone or just with one agent, but an entire team of people to successfully make a purchase.

“There’s so much that people don’t know, they don’t even know where to begin,” she says. “And I think it’s helpful for these people to learn that it’s not just the agent that you’re dealing with, but it’s a whole team of people.”

By Devon Thorsby - To view the original article click here

Posted by Jackie A. Graves, President on August 13th, 2017 7:22 AM

How do you go from dreaming of owning a home to holding your first set of keys? If you’re like most first-time buyers, the down payment is your biggest hurdle. But, it could pay off big time to know your down payment options.

There are more than 2,400 homebuyer programs available across the country–they can be as unique as the homebuyers and communities they serve. Let’s break down the basics of today’s homebuyer programs.

What are homeownership programs? 

Programs can include loans, grants, tax credits and other programs for eligible homebuyers that can help them achieve the down payment faster, cover closing costs and get into a home sooner than they would have otherwise.

Who offers these programs?

  • State Housing Finance Agencies (HFA) often offer the broadest array of opportunities.

  • Cities and Counties offer programs with criteria adjusted for local median income and home prices.

  • Housing Authorities

  • Non-profits

  • Employers

How do you qualify?

Both you and the home you are purchasing must be eligible. Homeownership programs are for owner-occupant buyers only, no investment properties. You must make a minimum investment, qualify for a first mortgage and complete homebuyer education. Common eligibility factors include the home’s sales price, homebuyer income and homeownership history.

And, your occupation can help give you a boost. There are often additional benefits, or even entirely separate programs, for educators, protectors, health care workers, veterans and households with disabled members.

Do you have to be a first-time homebuyer?

First, it’s important to know that a first-time homebuyer is defined as someone who hasn’t owned a home in 3 years. So, if you’ve owned in the past, but are renting now, you may be a first-timer again! Plus, across our databank of programs, 37 percent don’t have a first-time homebuyer requirement.

3 most common types of programs

Down Payment Programs

These programs are normally soft second or third mortgages or grants, providing benefits such as 0% interest rates, deferred payments and forgivable loans. The assistance amounts will range from a few to tens of thousands of dollars and can be used towards the down payment, closing costs, prepaids, principal reductions and/or repairs.

Don’t count out high cost markets. Program benefits and eligibility requirements are adjusted based on a percentage range of the area’s median income and home prices.

If you’re purchasing a home in a target area designated by the housing finance agency, you may receive special benefits such as higher assistance amounts, more lenient income requirements and if there’s a first-time homebuyer requirement, it may be waived.

Affordable First Mortgages

Many larger housing finance agencies, particularly at the state level, offer first mortgages to accompany their down payment assistance programs. These first mortgages typically offer a below market interest rate, and may even have reduced closing costs, fees and no mortgage insurance requirements.

They are often funded by state housing finance agencies and may subsidize portions of the interest to offer effective rates below what the normal market can provide, helping lower your buying costs and monthly payments.

The USDA also has two first mortgage programs: the Rural Direct Loan and the Rural Guaranteed Loan. Both loans are primarily used to help low- and moderate-income individuals or households purchase homes in rural areas. Funds can be used to acquire, build (including purchase and prepare sites and provide water and sewage facilities), repair, renovate or relocate a home.

Mortgage Credit Certificates (MCC)

This annual federal income tax credit is designed to help first-time homebuyers offset a portion of their mortgage interest on a new mortgage as a way to help qualify for a loan. As a tax credit, not a tax deduction, the MCC helps you reduce your annual taxes dollar for dollar. The mortgage credit allowed varies depending on the state or local government that issues the certificates, but is capped at a maximum of $2,000 per year by the IRS. MCCs can often be used alongside another down payment program.

As an example, if you were to receive an MCC that offers a 25% credit on a $200,000 loan for 30 years with a rate of 4%, the allowable tax credit would be figured as follows.

Plus, you can continue to receive a tax credit for as long as you  live in the home and retain the original mortgage.

Courtesy of Down Payment Resource: To view the original article click here

Posted by Jackie A. Graves, President on August 12th, 2017 6:26 AM

If you bought a house with a down payment of less than 20 percent, your lender required you to buy mortgage insurance. The same goes if you refinanced with less than 20 percent equity.

Private mortgage insurance is expensive, and you can remove it after you have met some conditions.

How to get rid of PMI

To remove PMI, or private mortgage insurance, you must have at least 20 percent equity in the home. You may ask the lender to cancel PMI when you have paid down the mortgage balance to 80 percent of the home's original appraised value. When the balance drops to 78 percent, the mortgage servicer is required to eliminate PMI.

Although you can cancel private mortgage insurance, you cannot cancel Federal Housing Administration insurance. You can get rid of FHA insurance by refinancing into a non-FHA-insured loan.

Canceling PMI sooner

Here are steps you can take to cancel mortgage insurance sooner or strengthen your negotiating position: Refinance: If your home value has increased enough, the new lender won't require mortgage insurance.

  • Get a new appraisal: Some lenders will consider a new appraisal instead of the original sales price or appraised value when deciding whether you meet the 20 percent equity threshold. An appraisal generally costs $450 to $600. Before spending the money on an appraisal, ask the lender if this tactic will work in the specific case of your loan.
  • Prepay on your loan: Even $50 a month can mean a dramatic drop in your loan balance over time.
  • Remodel: Add a room or a pool to increase your home's market value. Then ask the lender to recalculate your loan-to-value ratio using the new value figure.

Refinancing to get out of PMI

When mortgage rates are low, as they are now, refinancing can allow you not only to get rid of PMI, but to reduce your monthly interest payments. It's a double-whammy of savings.

The refinancing tactic works if your home has gained substantial value since the last time you got a mortgage. For example, if you bought your house four years ago with a 10 percent down payment, and the home's value has gone up 15 percent over that time, you now owe less than 80 percent of what the home is worth. Under these circumstances, you can refinance into a new loan without having to pay for PMI.

Many loans have a "seasoning requirement" that requires you to wait at least two years before you can refinance to get rid of PMI. So if your loan is less than 2 years old, you can ask for a PMI-canceling refi, but you're not guaranteed to get approval.

What mortgage insurance is for

Mortgage insurance reimburses the lender if you default on your home loan. You, the borrower, pay the premiums. When sold by a company, it's known as private mortgage insurance, or PMI. The Federal Housing Administration, a government agency, sells mortgage insurance, too.

Know your rights

By law, your lender must tell you at closing how many years and months it will take you to pay down your loan sufficiently to cancel mortgage insurance.

Mortgage servicers must give borrowers an annual statement that shows whom to call for information about canceling mortgage insurance.

Getting down to 80% or 78%

To calculate whether your loan balance has fallen to 80 percent or 78 percent of original value, divide the current loan balance (the amount you still owe) by the original appraised value (most likely, that's the same as the purchase price).

Formula: Current loan balance / Original appraised value

Example: Dale owes $171,600 on a house that cost $220,000 several years ago.

$171,600 / $220,000 = 0.78.

That equals 78 percent, so it's time for Dale's mortgage insurance to be canceled.

For a fuller explanation of the above formula, read this article about figuring the loan-to-value ratio to remove PMI.

Other requirements to cancel PMI

According to the Consumer Financial Protection Bureau, you have to meet certain requirements to remove PMI:

  • You must request PMI cancellation in writing.
  • You have to be current on your payments and have a good payment history.
  • You might have to prove that you don't have any other liens on the home (for example, a home equity loan or home equity line of credit).
  • You might have to get an appraisal to demonstrate that your loan balance isn't more than 80 percent of the home's current value.

Higher-risk properties

Lenders can impose stricter rules for high-risk borrowers. You may fall into this high-risk category if you have missed mortgage payments, so make sure your payments are up to date before asking your lender to drop mortgage insurance. Lenders may require a higher equity percentage if the property has been converted to rental use.

By  Holden Lewis - To view the original article click here

Posted by Jackie A. Graves, President on August 11th, 2017 5:56 AM

If you want to show sellers you're seriously interested in buying their home, getting mortgage pre-approval is a critical first step. It proves that, after digging through your financials, a lender is willing to give you money to buy a house.

"Getting pre-approved is a great way to differentiate yourself when making an offer," says Linda Walters, a Realtor® in Wayne, PA.

Unfortunately, a pre-approval isn't a one-and-done process. In fact, if your home search drags on for several months, there's a chance your pre-approval won't be valid after a certain point. Let's explore how long a pre-approval letter remains valid and what to do if yours expires before you find a house.

Pre-approval vs. pre-qualification

It's important to understand that pre-approval is different from pre-qualification.

To get pre-approval, the lender will review your financial information such as bank statements, pay stubs, W-2s or 1099s, a year or two of your tax returns, and your credit report. Once the numbers are crunched, the lender will provide you with a pre-approval letter certifying you are qualified to borrow a certain amount of money at a certain interest rate. Pre-approval does not lock you into a deal with a lender; in fact, it's wise to speak to a couple of lenders before signing a mortgage.

On the flip side, getting pre-qualified for a loan is much less of a financial deep-dive. The lender simply estimates what you'd probably qualify for based on information you provide about your income, debts, and assets. It's good information to have if you're not sure you can get a mortgage, but it doesn't mean as much to sellers as pre-approval does.

Why mortgage pre-approval matters

"If you want to purchase a home, you will have to demonstrate that you are financially able to buy it," says Cathy Baumbusch, a Realtor in Alexandria, VA. "It doesn't make sense to look for properties to purchase without first knowing what price range you qualify for and are able to purchase," she says.

If you are in a competitive market, a pre-approval letter is often needed for your offer to be taken seriously.

How long does your mortgage pre-approval last?

It varies from lender to lender, but mortgage pre-approval is typically valid for about 90 days, according to Baumbusch. Your letter will have a date on it, after which it is no longer valid.

The reason pre-approval letters "expire" is because banks need the most up-to-date information about your salary, assets, and debts. Three months is long enough that you could have left a job, taken on new debts, or spent what was previously in your bank account.

In fact, even if you're pre-approved, most lenders will want an updated set of pay stubs and bank statements around the time of closing. Hey, nobody ever said getting a mortgage was easy!

What do you do if your mortgage pre-approval has expired?

If you're still house hunting past the expiration date on your pre-approval letter, you just need to get another one. If you go to the same lender, it "can be updated by reverification of your financial documents," says Sheree Landerman, a Realtor in Farmington, CT.

You will need to provide updated pay stubs and bank statements, but if nothing major has changed in your financial world, it should be no problem to get a fresh pre-approval letter from your lender.

By Audrey Ference - To view the original article click here

Posted by Jackie A. Graves, President on August 10th, 2017 5:35 AM

Buying a home can cause sticker shock when you consider that hundreds of thousands of dollars are on the line. Before you close the deal, you’ll need to prepare yourself for another financial shocker: closing costs.

You’ll have to pay closing costs whether you’re buying a house or getting a mortgage refinance. It may be a bit overwhelming when you get your first look at the various costs you’ll have to pay to close your loan.

But don’t stress. We’ve broken down what you’ll have to pay — property taxes, mortgage insurance, title search fees and more. Closing costs will make more sense once you understand what they cover, and how they protect the biggest investment you’ll likely make in your lifetime.

The total you’ll pay can vary greatly according to your home’s purchase price. The average homebuyer will pay between about 2% and 5% of the loan amount in closing fees.

Your lender is required to outline your closing costs in the Loan Estimate and this Closing Disclosure you receive before the big settlement day. Take the time to review them closely and ask questions about things you don’t understand.

Here’s a closer look at the closing costs you’ll face.

Property-related fees

 

Appraisal fee: It’s important to a lender to know if the property is worth as much as the amount being borrowed. This is for two reasons: The bank needs to verify that the amount you need for a loan is justified, and the bank also wants to make sure it can recoup the value of the home if you default on your loan. The average cost of a home appraisal by a certified professional appraiser ranges between $300 and $400.

 

Home inspection: Most lenders require a home inspection, especially if you’re getting a government-insured mortgage. Before lending you hundreds of thousands of dollars, a bank needs to make sure the home is structurally sound and in good enough shape to live in. If the inspection turns up troubling results, you may be able to negotiate a lower sale price. But depending on how severe the problems are, you have the option to back out of your contract if you and the seller can’t come to an agreement on how to fix the issues. Home inspection fees, on average, range from $300 to $500.

 

Loan-related fees

 

Application fee: This covers the cost of processing your request for a new loan and includes costs such as credit checks and administrative expenses. The application fee varies depending on the lender and the amount of work it takes to process your loan application.

 

Assumption fee: If you take over (“assume”) the remaining balance of the seller’s mortgage, you may be charged a variable fee based on the balance.

 

Attorney’s fees: A number of states require an attorney to be present at the closing of a real estate purchase. Depending on how many hours the attorney works your case, the fee can vary dramatically.

 

Prepaid interest: Most lenders require buyers to pay the interest that accrues on the mortgage between the date of settlement and the first monthly payment due date, so be prepared to pay that amount at closing; it will depend on your loan size.

 

Loan origination fee: This is a big one. It’s also known as an underwriting fee, administrative fee or processing fee. The loan origination fee is a charge by the lender for evaluating and preparing your mortgage loan. This can cover document preparation, notary fees and the lender’s attorney fees. Expect to pay about 1% of the amount you’re borrowing (a $300,000 loan, for example, would result in a loan origination fee of $3,000).

 

Points: By paying points, you reduce the interest rate you pay over the life of your loan, which results in more competitive mortgage rates. One point equals 1% of the loan amount. So if the loan were $500,000, a 1-point payment would be $5,000. Generally, paying points is worthwhile only if you plan to stay in the home for a long time. Otherwise, the upfront cost isn’t worth it (check for yourself with our calculator here).

 

Mortgage broker fee: If you work with a mortgage broker to find a loan, the broker will usually charge a commission as a percentage of the loan amount. The commission averages from 1% to 2% of the home’s purchase price.

Mortgage insurance fees

 

Mortgage insurance application fee: If you put less than 20% down, you may have to get private mortgage insurance. (PMI insures the lender in case you default; it doesn’t insure the home.) The application fee varies by lender.

 

Upfront mortgage insurance: Some lenders require borrowers to pay the first year’s mortgage insurance premium upfront, while others ask for a lump-sum payment that covers the life of the loan. Expect to pay from 0.55% to 2.25% of the purchase price for mortgage insurance, according to Genworth and the Urban Institute.

 

FHA, VA and USDA fees: If your loan is insured by the Federal Housing Administration, you’ll have to pay FHA mortgage insurance premiums; if it’s insured by the Department of Veterans Affairs or the U.S. Department of Agriculture, you’ll pay guarantee fees. FHA insurance premiums are about 1.75% of the loan amount, while USDA loan guarantee fees are 2%. VA loan guarantee fees range from 1.25% to 3.3% of the loan amount, depending on the size of your down payment.

Property taxes and insurance

 

Annual assessments: If your condo or homeowner’s association requires an annual fee, you might have to pay it upfront in one lump sum.

 

Homeowner’s insurance premium: Usually, your lender requires that you purchase homeowner’s insurance before settlement, which covers the property in case of vandalism, damage and so on. Some condo associations include insurance in the monthly condo fee. The amount varies depending on where you live, your home’s value, and whether it’s in a potential disaster area (such as a flood plain or earthquake zone).

 

Property taxes: Buyers typically pay two months’ worth of city and county property taxes at closing.

Title fees

 

Title search fee: A title search is conducted to ensure that the person selling the house actually owns it and that there are no outstanding claims or liens against the property. This can be fairly labor-intensive, especially if the real estate records aren’t computerized. Title search fees are about $200, but can vary among title companies by region.

 

Lender’s title insurance: Most lenders require what’s called a loan policy; it protects them in case there’s an error in the title search and someone makes a claim of ownership on the property after it’s sold.

 

Owner’s title insurance: You should also consider purchasing title insurance to protect yourself in case title problems or claims are made on your home after closing.

 

By Deborah Kearns - To view the original article click here

Posted by Jackie A. Graves, President on August 9th, 2017 5:05 AM

Whether you’re purchasing a prefab dwelling, building a new construction home, or planning to fix up an older house, you’re probably excited about the prospect of closing the deal and moving in.

Not so fast. Buying a home is an expensive proposition – the biggest investment that most families ever make. While you aren’t required to cover the entire purchase price up front, you do need to come up with a substantial cash sum before you can close on your house.

You need to worry about common closing costs such as your home inspection, lender appraisal, and title insurance. Taken together, these expenses are nothing to sneeze at – depending on your situation, they can amount to anywhere from 3% to 6% of the total purchase price. In buyers’ markets, you might have luck convincing your seller to pay some closing costs, but that’s far from guaranteed.

The Biggest Closing Cost of All

Most line items are small change compared with the biggest closing expense of all: your down payment.

Though it’s due at closing, the down payment usually isn’t considered a closing cost. That doesn’t make it any less impactful, though. Your down payment plays an important and sometimes decisive role in whether you can close on your dream house – or, let’s be real, the best house you can afford on your budget.

This is because your down payment is a key part of the offer you present to the seller. The general rule of thumb is simple: the larger the down payment, the stronger the offer. More precisely: the greater the down payment’s share of the total purchase price, the more likely the seller is to accept.

Historically, the ideal down payment has been at least 20% of the purchase price. On a $200,000 house, that’s $40,000. In recent years, smaller down payments have come into vogue, thanks to looser underwriting requirements and growing acceptance among sellers.

Nevertheless, scraping together a down payment is a tall order, especially for first-time homebuyers in expensive coastal markets. According to CoreLogic, the average home price in California’s Bay Area topped $700,000 in 2016 – and that figure includes relatively inexpensive bungalows in East Bay suburbs, as well as ultra-pricey row houses in San Francisco proper.

That doesn’t mean it’s impossible to save for a down payment. It just requires time and fiscal discipline. If you can follow some or all of the following tips and strategies, I’m confident you’ll realize your dream of homeownership faster than you thought possible – even if it means scrimping in the short term.

Tips and Tricks to Save for Your Down Payment

1. Determine Your Expected Down Payment and Timeframe

First, figure out about how big your down payment will be.

Down payment size is a function of three overlapping factors: your desired initial loan-to-value (LTV) ratio, your time horizon (when you want to buy), and local housing market conditions. When people talk about budgeting for a future home purchase, they generally refer to list prices: “We’re willing to pay $300,000,” or “We can afford $250,000, but no more.”

However, on the matter of affordability, the most important number is the down payment amount. If you can’t cobble together a $50,000 down payment on a $250,000 house (or a $400,000 house, if you’re putting down less than 20%), then you can’t afford that house.

The top end of your affordability range, then, is the highest down payment you can save for within your allotted time horizon, without undershooting your target LTV. So, if you want to buy a $300,000 house with a 20% down payment in three years, you’ll need to have $60,000 set aside for that purpose 36 months from today.

Of course, you need to bring more than just your down payment to closing. To be safe, assume your other closing costs will add up to 6% – near the top end of the realistic closing cost range. On a $300,000 house, that’s another $18,000, for a total of $78,000.

Lastly, don’t completely deplete your bank account to buy your dream home. It’s wise to have at least three months’ income in liquid savings as an emergency fund, regardless of your near- or long-term goals. Six months is even better.

2. Shrink Your Required Down Payment With a Special Loan

If you’re looking to buy on an accelerated timetable, live in an expensive housing market, or doubt your ability to save for a 20% down payment on an acceptable house in your target neighborhood, look into special loan programs with lower down payment requirements.

Some of the more common special loan programs are listed below. Other options exist, so check with local, state, or federal housing authorities to learn what’s available for families in your area and circumstances.

  • FHA Loans. FHA mortgage loans are insured, but not originated, by the federal government – specifically, the Federal Housing Administration. Known as 203b mortgage loans, they require just 3.5% down. They can be used on one- to four-family homes and typically carry lower interest rates than conventional mortgage loans, though your exact rate will depend on your creditworthiness and other factors. Underwriting standards are also much looser than on conventional mortgages – you can qualify with a credit score below 600.

  • VA Loans. If you or your spouse is a current or former member of the military, your family may qualify for a VA home loan backed by the federal government (Department of Veterans Affairs). On the down payment front, VA loans are even better than FHA loans – they require no money down, though you’re free to put money down and reduce the total amount you must borrow. If interest rates drop after you’ve been in your house for a while, look into VA streamline refinance loans (IRRRL), which can reduce your rates significantly at a lower cost than a conventional refinance loan.

  • USDA Loans. If you’re buying a home in a rural or outer suburban area, you may qualify for a USDA loan, another type of federally insured loan designed to bring housing within reach for lower-income country-dwellers. Unlike FHA and VA loans, USDA loans are direct loans – they’re made by USDA itself. Use USDA’s property eligibility map to see if you qualify.

  • Conventional 97 Loans. Conventional 97 loans are just as they sound: conventional mortgage loans that let you put as little as 3% down, for a maximum LTV of 97%. They’re backed by Fannie Mae and come in different configurations, so be sure to read Fannie’s fact sheet before applying.

Beyond program-specific requirements, these special loans have some important drawbacks. Perhaps most importantly, they carry private mortgage insurance (PMI) premiums until LTV reaches 78% (though you can formally request PMI removal at 80% LTV). In some cases, these annual premiums can exceed 1% of the total loan value – an extra $3,000 per year on a $300,000 loan, for instance.

Special loans can also weaken your offer. Some sellers are reticent to sell to first-time homebuyers with FHA or Conventional 97 loans, reasoning that their finances may be shaky and the deal may fall apart before closing. All other things being equal, rational sellers are likely to favor conventional 20%-down offers over lower down payments.

3. Take Advantage of National Down Payment Assistance Programs

Relatively few prospective homeowners realize that they could qualify for national down payment assistance programs that can reduce their out-of-pocket down payment costs by thousands of dollars.

Resources abound, but the National Homebuyers Fund is representative. Since 2002, it has provided more than $200 million in direct grants to more than 30,000 buyers. It has a slew of grant option backed by various institutions – you can see the requirements for the Citibank-backed Sapphire option here, for instance.

NHF grants may only be available in certain states and on loans of certain sizes. Other conditions may apply as well, so it’s a good idea to contact the organization directly and speak with your lender before assuming that you’ll qualify.

4. Look Into State-Specific Down Payment Assistance and Resources

Your state and perhaps local governments may offer down payment assistance programs as well. For instance, in my native Minneapolis, the Minnesota Homeownership Center has a handy Down Payment Assistance finder that tells prospective homeowners about down payment financing and non-financial assistance resources available in their areas. In California, Golden State Finance Authority provides direct, need-based grants (with some strings attached) worth up to 5% of the loan amount – not an insignificant sum in pricey California metro areas like San Francisco and Los Angeles.

5. Pay Off Outstanding Credit Card Debt

Prospective homeowners often face a fraught choice: pay off their outstanding credit card balances or save for their down payments.

For many folks, paying off credit card debt is a high-priority goal. Even low APR credit cards typically charge interest rates north of 10% APR. On an average balance of $1,000, that’s $100 in interest charges each year. If your debt load is higher, adjust accordingly.

Because they’re secured by physical property, mortgages almost always have lower interest rates than credit cards, even when the borrower’s credit is less than perfect. Faced with the choice to purchase a home at 5% APR or carry credit card debt at 15% APR, most people would select the former.

Paying off credit card debt isn’t always straightforward, though. Focus on your highest-interest debt first (debt avalanche method), even if that means putting as little as $25 or $50 extra toward your payment each month. As your high-interest debt load shrinks, you can move onto lower-interest credit card debt, and you’ll likely accelerate your progress toward a $0 balance. With lower (or no) interest charges eating into your spending and saving power, you can then direct your dollars toward your down payment fund.

6. Round Up and Save Your Change

The advent of online banking makes it easier than ever to save small amounts of money without even realizing it. Some major banks, including Bank of America (Keep the Change) and U.S. Bank (S.T.A.R.T.), empower deposit account holders to save their spare change from every transaction using apps that automatically round debit card payments up to the nearest whole dollar and sock away the remainder in a savings account.

For instance, when you spend $3.69 on your morning latte, your debit card is charged $4, and the remaining $0.31 drops into your savings account. Multiply that by 50 or 100 transactions per month and you’ve got yourself a nice side pot.

7. Set Aside a Portion of Your Tax Refund

Expecting a tax refund this year? Reserve a slice of it to reward yourself for all your hard work last year – a nice restaurant meal, a frugal weekend getaway, a new piece of furniture for your home. Enjoy it.

Then sock the rest of your refund away in your down payment fund. If you reliably receive a $3,000 refund, spend $1,000, and save the rest, you’ll have $6,000 after three years, and $10,000 after five. That probably won’t account for your entire down payment, but it can’t hurt.

8. Set Aside a Portion of Your Performance Bonus

If part of your compensation package involves monthly, quarterly, or annual performance bonuses or profit-sharing payments, apply the same logic to these: Save a portion, then put the rest into your down payment fund.

Since performance bonuses and profit-sharing payments aren’t guaranteed, it’s risky to account for them in your day-to-day or month-to-month budgets anyway. That’s like counting your chickens before they hatch. If you don’t make plans for your bonuses or profit shares before you know you’ll get them, you won’t miss them. Actually, you’ll be grateful for them as they slowly but steadily grow your down payment fund.

9. Make Recurring Savings Deposits

Knowing you need to set money aside each month is one thing. Actually doing it is another. Set yourself a calendar reminder on the same day each month or pay period to transfer a set amount of money – at least 5% of your take-home pay, and ideally 10% – into your primary savings account. You can then separate the share allotted to your down payment from your general savings or other savings goals. Or, better yet, create a separate savings account whose sole purpose is to hold your down payment funds.

10. Automate Your Savings Deposits

What’s even better than recurring savings account deposits? Automated savings account deposits that you don’t have to remember to execute each month. Most banks allow recurring savings transfers from internal or external checking accounts. Examine your budget and determine how much you can afford to save each pay period or month, and then make it happen, preferably on the same date (or the day after) you receive your paycheck or direct deposit. Again, consider a separate savings account just for your down payment fund. If you’re looking to open a new account, go with one of these bank account promotions so you can make the most of the opportunity.

11. Save Your Cash Back Earnings

You can choose to pay off your credit card debt and focus your financial firepower on saving for your down payment without actually canceling your credit cards. The secret: cash back credit cards.

There are literally hundreds of cash back credit cards on the market. Some, like Chase Freedom and Capital One Quicksilver Cash Rewards, are practically household names. Others are more obscure – they might be new, or issued by regional banks with zero name recognition.

By definition, all offer some return on spending. More generous cards with favored spending categories can offer as much as 5% back on a consistent basis, and more on spending with select merchants or on certain items. Many have attractive sign-up bonuses worth $100, $200, or even more. And most don’t charge annual fees.

A cash back credit card (or two, or more) won’t singlehandedly finance your down payment. But, as long as you actually save the cash you earn and remember to pay off your balance in full each month to avoid interest charges, it can provide a helpful boost to your savings efforts.

12. Withdraw from Your IRA Without Penalty

Under certain conditions, your retirement account can serve as a supplemental funding source for your down payment. Specifically, if you’re a first-time homebuyer, you’re permitted to borrow up to $10,000 from a traditional or Roth IRAwithout penalty to fund your down payment.

This isn’t free money, of course. If you have a traditional IRA, you need to pay taxes on the withdrawn amount at your overall rate – 28% in the 28% bracket, and so on. On a Roth IRA held for longer than five years, your withdrawal is tax-free, because you’ve already paid taxes on the contribution.

If you and your spouse both have IRAs, you can both withdraw up to $10,000, for a total of $20,000. Depending on the projected size of your down payment, that could be a sizable boost. And, on Roth IRAs held longer than five years, you can withdraw tax- and penalty-free contributions in excess of $10,000, though any withdrawn earnings are taxable at your normal rate.

However, you also have to consider the opportunity cost of taking that money out of your account, potentially for years (by the time you make additional contributions to cover your withdrawal).

13. Take a 401k Loan

You can also borrow from employer-sponsored 401ks to fund your down payment. On 401k loans, borrowing limits are much more generous: You can borrow up to the lesser of $50,000 or half the value of the account. That’s enough to fund a 20% down payment on a $250,000 house, or a 10% down payment on a $500,000 house.

However, the devil is in the details. You have to pay back your 401k loans, with interest – typically at 2% above the prime rate. On larger loans, that means several years’ worth of three-figure monthly payments and several thousand in interest charges. Plus, if you take out a 401k loan before applying for a mortgage loan, your credit utilization ratio will spike, which could raise your mortgage loan’s interest rate or cause the bank to think twice about lending to you in the first place.

As a general rule of thumb, 401k loans are useful in two situations: for funding small down payments ($5,000 or less) in their entirety or as the last piece of a multi-year, multi-source down payment funding strategy.

14. Earn Extra Income on the Side

If your take-home pay won’t get you to your down payment goal on your desired timeframe, or you’re worried about negatively impacting your lifestyle as you scrimp and save for your dream home, consider increasing your income by picking up a side gig – either by taking on a second part-time job, picking up work as an independent contractor, or exploring the many ways to make money from home.

At-home and on-the-side money-making opportunities are virtually limitless. Your chosen pursuits will likely depend on your unique skills and the assets or amenities you have at your disposal. Some common ideas for monetizing your time, talents, and physical assets include:

  • Freelance writing and editing

  • Freelance web development and design

  • Selling disused possessions (and downsizing in the process) on Craigslist, eBay, Amazon, or a garage sale

  • Driving for a ridesharing app such as Uber

  • Teaching classes through online portals such as Udemy

  • Growing and selling your own produce

  • Selling crafts on Etsy or at a flea market

  • Becoming a medical transcriber

  • Working as a virtual assistant, remote customer service representative, or tech support professional

15. Put Short-Term Down Payment Savings in Low-Risk, Interest-Bearing Accounts

We touched on the wonders of recurring and automated savings above, but it’s worth reiterating that not all savings options are created equally.

Unless you’re operating on a very long time horizon, it’s not wise to put your down payment funds in the stock market. Stocks, ETFsmutual funds, and other equity instruments are vital components of retirement portfolios, but they’re not appropriate for certain shorter-term savings goals.

Why? Because, over shorter timeframes, market downturns can devastate savings goals. Imagine that you put $20,000 in the market between 2005 and 2007, on your way to an expected $40,000 down payment by 2009. Between mid-2007 and early 2009, U.S. markets lost roughly half their value. In other words, that $20,000 sum would have shrunk to just $10,000, assuming you added no new funds – no doubt crushing your dream of buying a home in 2009.

In the short and medium run, it’s much safer to invest in FDIC-insured instruments such as traditional savings accounts, certificates of deposits (CDs), and money market accounts. Though these instruments have relatively low yields – currently below 2% APY in most cases – the risk of principal loss is extremely low. If you want your down payment to actually be there, in full, when you need it, save investments in FDIC-insured accounts are your ticket.

16. Use a Budgeting App to Stay on Track

For most prospective homeowners, saving for a down payment is a medium- to long-term prospect. Much will happen between the day you decide you want to become a homeowner and the day your future home’s seller accepts your purchase offer.

A budgeting app can reduce the risk that you’ll get knocked off track by unforeseen events. The world is filled with such apps, some of which are quite lightweight – basically, glorified spreadsheets – and others of which have lots of bells and whistles. Among the most common are:

  • Mint is one of the oldest and best-known of the many personal budgeting apps available to U.S. consumers. It has a slew of capabilities designed to increase your understanding of your personal finances, categorize your spending and saving, and become more financially fit overall. It’s free to use, though subsidized by sponsor ads and partner offers.

  • Level Money weighs your expected monthly income against your projected monthly expenses to produce your Spendable, the balance you can safely spend over the course of the month without spending more than you earn. It can easily account for savings goals such as a new home. It’s totally free.

  • Wally is a global personal finance app that provides a complete, intuitive picture of your earning, spending, and saving, all in a lightweight, user-friendly interface. Wally is free, though its developer has plans to add premium features in the future.

  • PocketGuard links your entire financial life – all your disparate accounts – to provide a total picture of your fiscal health. It’s super easy to create goals, and a machine learning component helps create dynamic budgets that let you know when you need to dial back your spending in order to reach them.

Final Word

Your house might be the single biggest purchase you ever make, but it won’t be the only big-ticket item you ever buy. Unless you can comfortably live without a car, you’re likely to buy a new or used vehicle every few years. If you have kids, you’ll need to budget for their education. Once you’re ensconced in your home, you’ll probably want to make sensible improvements that enhance its value or accommodate your growing family. And, all the while, you need to have enough set aside for the unexpected.

Every one of these items, and many others not mentioned here, demand a measured, thought-out savings strategy. As you notch small victories in your quest to cobble together a down payment for your dream home, don’t neglect your other goals – whether you’re aiming to reach them next month, next year, or next decade.

By Brian Martucci - To view the original article click here

Posted by Jackie A. Graves, President on August 7th, 2017 8:46 AM

Loans with low or no down payment

Homebuyers with little money for a down payment are finding more home loans available for a low down payment or even no down payment.

Following are a few options for borrowers seeking low-down-payment and zero-down-payment home mortgages.

iStock.com

No down payment: VA loan

The Department of Veterans Affairs, or VA, guarantees purchase mortgages with no required down payment for qualified veterans, active-duty service members and certain members of the National Guard and Reserves. Private lenders originate VA loans, which the VA guarantees. There is no mortgage insurance. The borrower pays a funding fee, which can be rolled into the loan amount.

For purchase and construction loans, the VA funding fee varies, depending on the size of the down payment, whether the borrower served or serves in the regular military or in the Reserves or National Guard, and whether it's the veteran's first VA loan or a subsequent loan. The funding fee can be as low as 1.25 percent or as high as 3.3 percent.

For first-time purchasers making no down payment, the funding fee is 2.15 percent for members or veterans of the regulator military, and 2.4 percent for those who qualify through service in the Reserves or National Guard.

iStock.com

No down payment: Navy Federal

Navy Federal Credit Union, the nation's largest in assets and membership, offers 100 percent financing to qualified members who buy primary homes. Navy Federal eligibility is restricted to members of the military, some civilian employees of the military and U.S. Department of Defense, and family members.

The credit union's zero-down program is similar to the VA's. One difference is cost: Navy Federal's funding fee of 1.75 percent is less than the VA's funding fees.

iStock.com

No down payment: USDA

The (Department of Agriculture, or) USDA's Rural Development mortgage guarantee program is so popular that it has been known to run out of money before the end of the fiscal year.

Some borrowers are surprised to find that Rural Development loans aren't confined to farmland.

The USDA has maps on its website that highlight eligible areas. In addition to geographical limits, the USDA program has restrictions on household income, and it is intended for first-time buyers, although there are exceptions.

The USDA mortgage comes from a bank, and there is no mortgage insurance. Instead, the USDA levies a 1 percent upfront guarantee fee, which can be rolled into the loan amount, and an annual guarantee fee of 0.35 percent of the loan balance.

Gajus/Shutterstock.com

Low down payment: Mortgage insurance

Qualified borrowers can make down payments as low as 3 percent with private mortgage insurance, or PMI. For most borrowers, PMI costs less than Federal Housing Administration mortgage insurance. But PMI has stricter credit requirements.

PMI has another edge over FHA: Once your mortgage balance is under 80 percent of the home's value, you can cancel PMI. You can't get rid of FHA insurance unless you refinance into a non-FHA loan.

 

iStock.com

Low down payment: FHA

With a minimum down payment of 3.5 percent, the FHA is the low-down-payment option that's available to people with imperfect credit histories.

The FHA charges an upfront premium of 1.75 percent of the mortgage amount. On a 30-year loan with the minimum down payment, there's an annual premium of 0.8 percent of the mortgage amount, or $800 a year for each $100,000 borrowed -- $66.67 a month for a $100,000 loan.

By Holden Lewis - To view the original article click here



Posted by Jackie A. Graves, President on August 6th, 2017 8:42 AM

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