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Tapping home equity can be a cost-effective way for homeowners to borrow cash to fund home improvement projects or pay off higher-interest debt. If you have substantial equity in your home — either through paying down your mortgage or a spike in your home’s value — you might be able to snag a sizable loan.

What it takes to borrow from home equity

There are three ways to tap into your home’s equity: a home equity loan, home equity line of credit or cash-out refinance.

Each loan has its own set of pros and cons, so it’s important to consider your needs and how the loans fit in with your budget and lifestyle.

Here are three things you should do before you apply for a loan:

  1. Determine how much equity you have.
  2. Check your credit score.
  3. Look at your debt-to-income ratio.

1. Determine how much equity you have

Your equity is the difference between how much you owe and how much your home is worth. Lenders use this number to calculate your loan-to-value ratio, or LTV, a determining factor in whether you’re approved for a loan. To get your LTV, divide your current loan balance by the current appraised value.

Let’s say your loan balance is $150,000 and your home is appraised at $450,000. By dividing the balance by the appraisal, you get 0.33, or 33 percent. This is your LTV.

Determining your home’s value requires an appraisal. Your lender might request a certified appraiser to inspect your home.

For HELOCs, you need to figure out your combined loan-to-value ratio, or CLTV. This is determined by adding how much money you want — either in a lump sum or as a line of credit — with how much you owe.

For example, if you want $30,000 and you owe $150,000, then you would add those numbers together and divide them by the appraised amount. If the home is valued at $450,000, then the equation would look like this: ($150,000 + $30,000) / $450,000 = 0.4 or 40 percent. Your CLTV is 40 percent.

Most lenders will require a CLTV of 85 percent or less to be approved for a HELOC.

2. Check your credit score

Home equity itself is not enough to secure a loan from most banks. A favorable credit score is essential.

Alex Shekhtman, mortgage broker at LBC Mortgage in Los Angeles, explains that banks are still weary from the 2008 housing crash.

“If you don’t have good credit or you owe a lot already, it’s going to be more challenging to get a loan from one of the big banks,” Shekhtman says. “Banks lost a lot of money during the recession, and now they’re much more careful about who they lend to.”

A credit score above 700 most likely will qualify you for a loan, given that the equity requirements are met. Scores in the 699 to 621 range might get approval but will likely face higher interest rates. Those with scores below 620 probably won’t qualify for an unsecured loan.

You can get your credit report and score for free with myBankrate. Some credit card companies and banks will offer cardholders their score for free, so be sure to check with your financial institution before you pay for your score.

Review your credit reports to make sure there are no errors on them. If you find a mistake, like a late payment or a fraudulent charge, report the problem to the bureau that’s showing the information. Your score likely will improve once the errors are removed. Consumers are entitled to a free credit report every year from each of the three main credit reporting agencies: Experian, TransUnion and Equifax.

3. Look at your debt-to-income ratio

Your debt-to-income ratio, or DTI, is also part of the qualification equation. The lower the percentage, the better. The maximum allowed DTI varies from lender to lender, but most require your DTI to be under 50 percent.

Lenders will add up the total monthly payment for the house, which includes principal, interest, taxes, homeowners insurance, direct liens and homeowners association dues, along with any other outstanding debt that is a legal liability.

That total debt is divided by a borrower’s gross monthly income, which comprises base salary, commissions, bonuses and any other income such as rental income or on-time, up-to-date spousal support, to come up with your DTI.

You can improve your DTI by earning more money, lowering your debt or doing both. Before you apply, be sure to calculate your DTI. If you’re over the limit, then try to pay off as much as you can or consider a part-time job. Pay off loans with the highest interest rates first; the money you save on interest can be put toward paying off any other debt you might have.

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Posted by Jackie A. Graves, President on February 18th, 2018 9:44 AM

FHA versus conventional loan: If you need a mortgage to buy a house, you may find yourself weighing these two options. What's the difference, and which one is right for you?

While the majority of home buyers might assume they should get a conventional home loan, about 40% end up with FHA loans, which are insured by the Federal Housing Administration. To help you decide whether an FHA or conventional loan is better for your circumstances, here's more information about each, including their distinct advantages to you as a home buyer as well as what you'll need to qualify (which may vary by lender).

Conventional loan requirements

Minimum down payment: 5% to 20%
Minimum credit score: 620
Maximum debt-to-income ratio: 43%

Conventional lenders look for borrowers who have well-established credit scores, solid assets, and steady income, says Todd Sheinin, mortgage lender and chief operating officer at Homespire Mortgage in Gaithersburg, MD. As such, these loans have higher barriers to entry than the FHA-backed options. You'd better have your A-game on!


Typically, you need at least a 620 credit score and ideally a 20% down payment, although you can put down as little as 5% if you so wish—just know that on any down payment under 20%, you’ll have to pay private mortgage insurance, an extra monthly fee meant to mitigate the risk to the lender that you might default on your loan. (PMI ranges from about 0.3% to 1.15% of your home loan.)

Most conventional loans also require a maximum 43% debt-to-income ratio, which compares how much money you owe (on student loans, credit cards, car loans, and—hopefully soon—a home loan) with your income. So for instance, if your household take-home income amounts to $5,000 per month, that would mean you should spend no more than $2,150 per month on your mortgage and other debts.

Conventional loan advantages

  • Conventional loans don't require mortgage insurance, as long as you put down at least 20%.
  • Conventional loans can cover higher loan amounts than FHA loans, which are restricted to county limits.
  • Conventional loans, on average, are processed faster than FHA loans.

FHA loan requirements

Minimum down payment: 3.5%
Minimum credit score: 580
Maximum debt-to-income ratio: 50%

FHA loans are great for first-time buyers or people without sterling credit or much money. Created by the Federal Housing Administration, these loans are insured by this government agency, so that guarantees that lenders won’t lose their money if borrowers default on their mortgage. In short, it allows lenders to take on riskier borrowers, while also helping hopeful home buyers in less-than-ideal circumstances achieve the dream of homeownership.

To qualify for an FHA loan, you need at least a 3.5% down payment and a credit score of 580, says Tim Lucas, editor at Applicants with lower credit scores (e.g., 500) may not be out of the running entirely, but must cough up a larger down payment of at least 10%.

These loans also have looser debt-to-income requirements of up to 50%. So for example, if your monthly income is $5,000, your payments for your mortgage and other debts should not exceed $2,500.

FHA loans may be a boon to home buyers (particularly first-timers) who might not qualify for a loan otherwise, but they do have a few disadvantages. For one, they’re usually capped at $417,000 (in certain high-cost areas, the limit is $625,000)—meaning you may have limited buying power. Also, because the federal government insures these loans, you have to pay an upfront mortgage insurance premium (currently, the fee is about 1.75%) and annual mortgage insurance (typically 0.85% of the borrowed loan amount), which remains throughout the life of the loan (or until you can refinance the loan into a conventional mortgage).

FHA loan advantages

  • FHA loans have lower down payment requirements (3.5%) than conventional loans (typically 5% to 20%).
  • FHA loans have lower credit score requirements (as low as 580 for qualified borrowers).
  • FHA loans have less stringent DTI requirements (50% or less) than conventional loans.

FHA vs. conventional loan: Which should you pick?

Generally if you have the means and qualifications to afford a conventional loan, this is the one to opt for, since it has fewer restrictions (and is faster to get). However, if you're a less-than-ideal home buyer with a mediocre credit score, down payment, or income, then an FHA loan may be the best—or only—avenue open to you.

Check with your lender to know where you stand, or plug your numbers into an online home affordability calculator to get a ballpark idea of whether an FHA or conventional loan is right for you.

For more smart financial news and advice, head over to MarketWatch.

To view the original article click here

Posted by Jackie A. Graves, President on February 17th, 2018 8:58 AM

World events are conspiring to make it more expensive for you to borrow money to buy a house.

Mortgage rates have increased for five consecutive weeks, according to Bankrate data, bringing interest on a 30-year fixed rate loan to 4.44 percent, the highest level in 11 months, while home prices continue to rise due to a lack of available homes.

After years of tepid economic growth, animal spirits are aflame. Inflation and wage growth recently found a groove, while the Federal Reserve’s plan to raise short-term interest rates multiple times for a consecutive year has reduced the value of government debt. The yield on 10-year Treasures is close to a four-year high. (Bond prices and yields are inversely related.)

Oh, and China may reduce its appetite for U.S. bonds.

Homebuyers should get off the fence

Mortgage rates are moved by the yield on 10-year Treasuries, rather than short-term rate hikes by the Fed. That’s why mortgage rates fell throughout 2017, for instance, even as the central bank raised the federal funds rate three times.

Rates remain cheap, however, compared to historical prices. A 30-year fixed-rate mortgage came with an interest rate above 6 percent just before the Great Recession in 2007.

Potential homeowners should get off the fence and make a bid, assuming you have an affordable home target and adequate savings, because rates are likely only heading north.

Why mortgage rates are increasing

You’ve seen this movie before.

Immediately after the 2016 election, investors sold government debt en masse, causing the 10-year yield to rise from 1.88 percent on Nov. 8 to 2.60 percent five weeks later. That dramatic rise was predicated on investors thinking a newly Republican controlled Washington would bring about faster economic growth through infrastructure spending and tax cuts.

Optimism waned throughout 2017, though, as the GOP failed to overhaul the Affordable Care Act, casting doubt on their cohesion as a governing party. The long-promised massive infrastructure bill never materialized, while the prospects of a tax overhaul dampened. By the first week of September, the 10-year yield was 2.05 percent.

But then Republicans made progress on a $1.5 trillion tax bill, while the employment picture continued to brighten, and the U.S. economy grew at a solid clip over the last six months of the year.

With Congress agreeing to a $300 billion spending bill, which will only throw more coal on the burning economy, investors see fewer reasons to own bonds. Economic growth and higher pay could result in long-awaited inflation gains. Prices have been rising below the Fed’s 2 percent target, according to the central bank’s preferred prices gauge, for years now.

Higher inflation is a boon for fixed-rate borrowers but hurts debtors. The January jobs report, which showed a 2.9 percent-year-over year earnings increase, was a signal to market observers that inflation may be coming.

Meanwhile, Bloomberg reported in January that China, the largest foreign holder of U.S. debt, may reduce or cease U.S. debt purchases, causing market jitters.

Should you be worried?

Given the recent run-up in yields, you may be worried. But don’t panic just yet.

“This is not alarming,” notes Chris Vincent, fixed income portfolio manager at William Blair. “There is no significant drama in the credit markets.”

Markets, after nearly a decade of low rates and low growth, are adjusting to the new normal and corresponding volatility.

And while China may own over a trillion dollars of U.S. debt, that’s less than 20 percent of all debt owned by foreign nations, and a fifth of what America owes itself.

You are entering a world where it’s going to become more expensive to borrow money. It’s time to get used to it.

To view the original article click here

Posted by Jackie A. Graves, President on February 16th, 2018 6:42 AM

More and more people are refinancing their homes to solve their financial woes...but why? One reason is that refinancing saves homeowners an average of $4,264/year.

In fact, just last year almost 2,000,000 people refinanced their homes to the tune of $749 billion. While many have already taken advantage of historically low rates, there are still 6.7 million homeowners that have yet to cash in on the potential savings.

You see, this opportunity was born out of the 2008 Housing Crisis. The Fed dropped rates to historical lows to fight off the recession and opened a window where many Americans could refinance and save. But recently the Fed has signaled interest rates are about to rise.

That’s why it’s important to see if you could benefit from refinancing, before it’s too late. 

So, what should you do if you still haven’t refinanced?

You can start by checking out LendingTree free calculator that lets you see how much money you can save every month.

Considering LendingTree has already helped fund over $60 billion in mortgage loans in just the last five’s no wonder that they are one of the largest and most trusted players in the space.

Need more convincing on why refinancing is right for you? Well just keep reading for the top five reasons, and you'll quickly discover that refinancing is the biggest financial “no-brainer” of 2017! 

Reason #1 - Take Advantage Of Historically Low Rates Before They Go Back Up  

As we mentioned above, borrowing rates have dropped to historical lows and they can’t stay this low for much longer. In fact, the Fed has already taken steps towards the next rate hike.  That’s why it’s so important you take advantage of this opportunity now. 

And we’ll make it easy for you…

Use the calculator below to estimate your new payment and potential savings - chances are, you'll like what you see.

Not bad!  You could save a total of $57,618 off your entire mortgage or $160 per month!

While this estimate is pretty accurate and based on average rates, it only takes a few moments to find your exact savings. Just hit the orange "calculate your payment" button above to lock-in your rate today.

Reason #2 - Your Financial Situation Has Changed

Life is always changing, we know that.  You might have taken a new job that pays more… or you might have new expenses that stretch your money further and further every month.

So another loan type might make more sense for you today. 

You might be able to cut your 30-year mortgage down by years and still repay the same amount of money.  For example, say you took out a 30-year loan at 6% in 2007. 

You could’ve refinanced that in 2014 at 3.55% and paid off your house 9 years earlier (saving $118,058!).

Or if you’re looking for an extra $250 per month, you might be able to refinance your 30-year mortgage at a lower rate and make smaller monthly payments.

Another option is if you have an adjustable rate mortgage, you could refinance to a fixed-rate mortgage.  You'll lock-in one of the lowest rates ever to protect yourself against the likelihood of rates rising in the future.  And it'll be much easier to plan and budget for the long term.

Of course, you could do a lot of things… but to find out what’s best for you, answer a few questions about your unique situation to find out how much you can save, and then speak to an expert for free if you like what you see: 

Reason # 3 - You Currently Have Other Types of Debt

You might have other debt… credit cards, auto-loans, personal loans. 

And with average rates for these sitting at 4.77% to anywhere north of 15.96%, it makes sense to consolidate your debt through the lower rates of your mortgage loan.

All you need to do is refinance with a cash-out option or pick up a home equity loan.  You’ll be getting a much better rate - and cutting your monthly payments down.

Another lesser-known bonus that most people don’t think about, is that mortgage interest is tax-deductible.  So you can cut down on your tax bill too (if this seems like a good fix, make sure to consult with a tax advisor too).  Even better! 

But should you refinance or take out a home equity loan?  The best way to find out is to enter your home info into the free LendingTree calculator You’ll discover which is best for you and can set up a free consultation for answers to any other questions you might have.

Reason #4 - You Were Hit Hard By The Housing Crash

In the aftermath of the Housing Crisis, the Government created the Home Affordable Refinance Program (or HARP). It helps help people with little or no equity refinance their homes at a much better rate.  And they’ve already helped 3.3 million people save money! 

LendingTree specializes in helping people like you do the same.  And they’ve put together a free questionnaire here so you can quickly discover if you qualify.

Reason #5 - You Want To Make a Big Purchase or Go Back to School

We all get squeezed financially…

So when it comes to big money expenses like a new car or wedding, refinancing is better than taking out another loan at a much higher rate.

The same goes for going back into education to boost your long-term income...And for any investments in your own home (like a renovation that increases the property value, but you can also enjoy), a business, or a rental property! 

If you’ve ever wanted to make a special purchase, you should find out the best option available to you.

The Simple, No-Hassle Way to Refinance Your Home

Whether your financial situation has changed, you need to consolidate other types of debt, or you need to make a purchase you’ve been thinking about for a while.

You should refinance your home to take advantage of historically low interest rates. You could go to the bank and be given their so-called ‘best-rate’... Of course, they won’t tell you about the better deals on the market.  Or you could use LendingTree's free online calculator to find out right now!

Remember, this a free service. No-strings-attached. But you need to act now - rates won’t stay this low for long.

Click on your state below to get started now and let us know what you think...good luck!

To view the original article click here

Posted by Jackie A. Graves, President on February 15th, 2018 6:20 AM
What do all of those closing costs pay for?

When you get a mortgage and are ready to complete the purchase of your next home, reviewing your closing costs can feel like visiting a country where you don’t speak the language.

Inscrutable terms. Odd-sounding services. And a sizable menu of fees for things you don’t understand.

One bright spot: Many of these fees can be reduced or eliminated.

“The first thing you need to do is understand that some items here are movable and negotiable,” says Bruce McClary, spokesman for the National Foundation for Credit Counseling.

Here are nine common closing costs explained.
Origination/underwriting fees

The mortgage origination fee is an upfront fee charged by the lender for processing. It’s a percentage of the loan amount — often about 1 percent.

An underwriting fee is charged by lenders to analyze a mortgage application, calculating the riskiness of the loan.

If this is broken out separately from origination fees, it’s something you should be able to negotiate for a reduction or elimination, McClary says.

“I’m already paying an origination fee,” he says. “Why are you having me pay for an underwriting fee?”

Tax service fees

A tax service fee covers the cost of hiring a company that will monitor your property taxes to verify the amount due each year and make sure the taxes are paid on time.

The tax service company is a subcontractor for the mortgage loan servicer. The servicer is the company that collects your monthly payments and distributes the money to local and state tax agencies, the homeowners insurance company and to the investors that own the loan. Your lender might be the servicer, or it might pass along that task to another company.

Courier/delivery fees

With some lenders, you’ll see line item fees for courier or delivery, or similar costs for transporting documents. You might even see “overnight” or “express delivery” charges.

These fees can be relatively minor, so it may be better to challenge larger fees than these types of itemized costs. It’s a more “efficient use of your time to try and make the biggest cut,” McClary says.

Appraisal fee

The appraisal fee covers the cost of the quick home examination to determine the value of the home for a mortgage. “(These fees) will vary widely across the country and even across the state,” says Andrew Pizor, staff attorney with the National Consumer Law Center.

The lender usually picks the appraiser or the appraisalmanagement company. “It should be passed along at cost,” he says.

McClary, of the National Foundation for Credit Counseling, says that if you have motivated sellers, you could negotiate with them to cover the cost.

Note that an appraisal is not the same thing as a home inspection, though they are often confused. In a typical inspection, a home inspector spends a half-day going over everything from the roof to the crawl space, in order to point out any potential problems with the home.
Title insurance

Title insurance covers the cost of doing a title search to make sure no one else has a claim to the property. It also pays for an insurance policy that will offer protection if claims surface later.

There are usually two policies. One covers the buyer, the other covers the lender.

You may be able to trim these costs.

“Always ask about the reissue rate,” Pizor says. The reissue rate is a homebuyer discount on the cost of an owner’s title insurance policy.

If your house has been sold relatively recently, most of the heavy lifting on a title search already has been done and there is less risk and less to check. The reissue rate takes that into account.

If you can take advantage of a reissue rate, it can mean “a decent savings,” Pizor says.

Attorney/settlement fees

Some states charge an escrow fee. “Escrow is the neutral party between the buyer and the seller sometimes used in lieu of an attorney,” says Beth Peerce, a vice president with the National Association of Realtors and a real estate broker in Los Angeles.

Escrow is licensed by the state, and it can be a less expensive option than attorney fees, she says. Instead, a fee is paid to the title or escrow company, for conducting the closing.

Depending on where you’re buying a home, the closing will be handled by an escrow agent or an attorney, and the charge is often listed as the “settlement fee.”

Settlement fees typically run from $400 to more than $1,000, depending on location, says Mike Dimech, senior vice president of operations for Norcom Mortgage.

Don’t confuse escrow fees with money held in escrow. The latter is money held for payments made periodically for flood insurance, property taxes and property insurance.

Municipal charges

Recording fees, title fees and transfer taxes are costs that local municipalities charge when a property changes hands. The exact terms will vary, but these costs are incurred to record that the property now belongs to someone new.

If you’re unsure of these costs, call your county or municipality to make sure the charges right. “There shouldn’t be any padding here,” Pizor, of the National Consumer Law Center, says.

Prorated property tax

Prorated property taxes often catches buyers by surprise.

Property taxes are often collected by lenders in advance, she says. And while the current owner has paid property taxes up to the closing, this cost covers the buyer’s portion from the closing date to the end of the tax year.

Other bogus fees

Be alert for phony fees listed under vague names for services. In this category are prep fees, quality control fees, file storage fees and email fees.

“I saw an email fee once for $50,” Pizor says. “That took some gall.”

The key to spotting bogus charges is to question them. “If you don’t know the vocabulary or it’s new to them, don’t be afraid to ask questions,” says Ron Phipps, former president of the National Association of Realtors. “Get over that.”

To view the original article click here

Posted by Jackie A. Graves, President on February 14th, 2018 8:03 AM

What is 'FHA Loan: Basics and Requirements'

An FHA loan is a mortgage issued by federally qualified lenders and insured by the Federal Housing Administration (FHA). FHA loans are designed for low-to-moderate income borrowers who are unable to make a large down payment.

As of 2018, these loans allow the borrower to borrow up to 96.5% of the value of the home (with a credit score of at least 580; otherwise, a 10% down payment is required). The 3.5% down payment requirement can come from a gift or a grant, which makes FHA loans popular with first-time homebuyers.

BREAKING DOWN 'FHA Loan: Basics and Requirements'

FHA loans were introduced after the Great Depression in the 1930s. During this time, defaults and foreclosures skyrocketed. In response, the government created federally insured loans that gave mortgage lenders peace of mind, reduced lender risk and stimulated the housing market. By insuring mortgages, lenders were (and still are) more inclined to issue large mortgages in cases where they normally would not have approved the loan application.

Who are FHA Loans for?

FHA loans are offered to low-income individuals who have credit scores as low as 500. Individuals with a credit score between 500-579 can obtain an FHA loan with a down payment of 10%; individuals with a credit score higher than 580 can get an FHA loan with as little as 3.5% down. The Federal Housing Administration does not lend the borrower the money to take on a mortgage or to buy the house. Rather, the borrower pays a monthly or annual mortgage insurance premium to the FHA to insure the loan, which the lending institution issues to him or her. In case of default, the lender’s financial risk is minimized because the FHA would step in to cover the payments.

Having no credit history is not a problem with an FHA loan. Instead of your credit report, the lender may look at other payment-history records, such as utility and rent payments. Even people who have gone through bankruptcy and foreclosure may still qualify for an FHA loan. However, the lower the credit score and the lower the down payment, the higher the interest rate.

In addition to the traditional first mortgages, the FHA offers a reverse mortgage program known as Home Equity Conversion Mortgage (HECM). This program helps seniors convert the equity in their homes to cash while retaining the titles to their homes. FHA also offers a special product known as an FHA 203(k) loan, which factors in the cost of certain repairs and renovations into the loan. This one loan allows an individual to borrow money for both a home purchase and home improvement. This can make a big difference for a borrower who does not have a lot of cash on hand after making the down payment. The FHA’s Energy Efficient Mortgage program is a similar concept, but aimed at upgrades that lower the utility bill. The cost of newer, more efficient appliances, for example, becomes part of the loan.

How FHA Loans Work

In order for an FHA loan to be approved, the borrower must have mortgage insurance. An FHA loan requires two types of mortgage insurance premiums (MIP) to be made by the borrower – an Upfront Mortgage Insurance Premium (UPMIP) and an Annual MIP. The upfront MIP is equal to 1.75% of the loan amount (as of 2018) and is paid at the time of closing. A borrower who was issued a home loan for $350,000 will have to pay a UPMIP of 1.75% x $350,000 = $6,125. The payments are deposited into an escrow account set up by the US Treasury Department, and the funds are used to make mortgage payments in case the borrower defaults.

The annual MIP payments are made every month by the borrower. The payments vary according to the loan amount, length of the loan, and the original loan-to-value ratio (LTV). The typical MIP cost is usually 0.85% of the loan amount. Following our example above, the borrower would have to make annual MIP payments of 0.85% x $350,000 = $2,975, or $247.92 monthly. This is to be paid in addition to the cost of UPMIP.

When you buy a home, you may be responsible for certain out-of-pocket expenses such as loan origination fees, attorney fees, and appraisal costs. One of the advantages of an FHA mortgage is that the seller, home builder or lender is allowed to pay some of these closing costs on your behalf. If the seller is having a hard time finding a buyer, he or she might just offer to help you out at closing time as a deal sweetener.

Additional FHA Loan Requirements

While FHA loans give mortgage opportunities to people with low income or low credit and people who may be first-time homebuyers, there are specific lending requirements outlined by the Federal Housing Authority.

First, a borrower must have a steady history of employment or worked for the same employer for the past two years. This is important because the FHA requires a borrower's front-end ratio –  which is the summation of the monthly mortgage payment, HOA fees, property taxes, mortgage insurance and homeowner’s insurance – be less than 31% of total gross income. However, it is possible to be approved with a 40% ratio. Additionally, a borrower's back-end ratio – which is the summation of the monthly mortgage payment and all other monthly consumer debts –  is required to be less than 43% of total gross income. However, it is possible to be approved with a ratio as high as 50%.

Those who are self-employed will need two years of successful self-employment history, documented by tax returns and a current year-to-date balance sheet and profit and loss statement. Applicants who have been self-employed for fewer than two years but more than one year can be eligible if they have a solid work and income history for the two years preceding self-employment and the self-employment is in the same or a related occupation.

Furthermore, borrowers must be at least two years out of bankruptcy, unless a borrower who has recently gone through bankruptcy has demonstrated that it was an uncontrollable circumstance. Borrowers must also be at least three years removed from any foreclosures and demonstrate that they are working toward re-establishing good credit. However, a borrower who is delinquent on his/her federal student loans or income taxes, won’t qualify for an FHA loan. A borrower must also be of legal age in the state where he is applying for a mortgage, have a valid Social Security Number and be a lawful US resident.

In general, a property financed with an FHA loan must be the borrower's principal residence and must be owner-occupied. This loan program cannot be used for investment or rental properties. Detached and semi-detached houses, townhouses, row houses and condos within FHA-approved condo projects are all eligible for FHA financing.

Finally, the lending institution that the borrower is using must be approved by the FHA board since the FHA is not a lender, but an insurer. In other words, the money for an FHA mortgage is not given to borrowers by the FHA; rather, borrowers receive the funds from an FHA-approved lender, and the FHA guarantees the loan. On one hand, this means that different lending institutions might offer the borrower a very similar mortgage (or might turn the borrower down) because the FHA’s loan guidelines don't change based on who money can be borrowed from. On the other hand, the FHA offers lenders flexibility in setting their own standards for determining loan eligibility, and many lenders’ minimum requirements are higher than those set by the FHA. As a result, one institution may approve an FHA loan while another rejects it.

Are FHA Loans for you?

While an FHA loan may sound great, it is not for everybody. People with credit scores less than 500 will usually not be eligible for an FHA loan.

A borrower who can afford a large down payment may be better off going with a conventional mortgage as they could save more money in the long run through the lower interest rates and mortgage insurance premium that conventional lenders provide. 

Talk to an FHA advisor to determine whether this type of mortgage is right for you.

To view the original article click here

Posted by Jackie A. Graves, President on February 13th, 2018 6:39 AM

It’s easy to find your dream home and envision your life there, but harder to actually buy that home unless you know how to get a mortgage. So let’s take a look at the main things you need to know.

How Lenders Evaluate You

To qualify you, lenders look at three main factors:

1. Affordability. Lenders use a debt-to-income (DTI) ratio which tells them what percentage of your income will be going towards all of your bills. They will let you spend as much as 43 percent of your income on housing and non-housing bills.

2. Credit health. Lenders will run your credit report from all three credit bureaus — Equifax, TransUnion, and Experian — and base your loan approval on the middle of your three scores. In addition to scores, the reports lenders pull will also show them your full credit history which they also consider. If you run your own credit scores, your lender won’t use them — they must use their own, and the reports they pull will most likely produce different scores than you’re able to obtain as a consumer. See below for how to review your credit history for free.

3. Skin in the game. Lenders consider down payment and how much money you’ll have left over after you close a home purchase — they review this against the DTI to consider how fast you’ll be able to build up reserves. As noted below, lenders will still allow very little down, and some loans don’t require money left over after close. But even in situations like this, you should consider whether you want to own a home with no reserves.

Know Before You Owe

Mortgage planning is not just as simple as budgeting for a down payment. You’ll need to plan for three categories of cash-to-close when buying a home.

1. Down payment. Current or past members of the U.S. military can get a loan with zero down, and everyone else can put as little as 3 percent down on a conventional loan and as little as 3.5 percent on an FHA loan. If you want to avoid the extra monthly cost of mortgage insurance, you typically need to have a down payment of at least 20 percent.

2. One-time closing costs. These include lender and appraisal fees, title insurance and transaction settlement fees, home inspection fees to make sure the property you’re buying is acceptable to you.

3. Pre-paid costs due at closing. When you close on a home, it might be the middle of a month or a local property tax cycle. So the interest you’ll pay on your mortgage for the remainder of the closing month gets prorated and you prepay it when you close. Same with property taxes. Also lenders require you to prepay one year of homeowner’s insurance at closing. And if you’re getting a loan that requires you to save up for property taxes and insurance by paying into an account monthly, you’ll have to prepay that as well — it’s called an escrow or impound account.

The Federal government has a program called Know Before You Owe, which requires all lenders to follow a standard format for disclosing cash-to-close line items to you.

This way you can see the total cash you’ll need and nothing will be a surprise. Therefore, it’s good to connect with a lender even if you’re early in the home buying research process. They will give you these disclosures so you have a very accurate assessment of cash needed to meet your home buying goals.

Mortgage Budgeting

A homeowner’s budget isn’t just a mortgage payment. It’s also property taxes and insurance, and mortgage insurance if the down payment is less than 20 percent.

So as you plan your mortgage budget make sure to use a mortgage calculator that includes these items. And when you’re ready to talk to a lender, the disclosures noted above include a breakdown of these monthly cost line items.

Homeowners can currently deduct mortgage interest and property taxes from their gross income when filing tax returns to ultimately pay less tax and therefore lower their total cost of homeownership, but when budgeting, it’s best to budget with the pre-tax numbers because that’s what’ll be due each month — the tax benefit comes after you file each year.

If you’re buying a condo or a home within a planned development such as a gated community, find out what the homeowner’s association (HOA) dues are and include that in your budget.

Then of course as a homeowner, you are responsible for your own maintenance and upkeep on the home, so you’ll want to build that into your budget too.

Preparing For the Mortgage Process

You can save for a down payment and cash to close, or lenders also allow you to receive gift funds for a home purchase.

If you have the ability to get gift assistance, it’s worth considering because the rate of home appreciation in your area may outpace your savings rate, making it more expensive to buy the same home later rather than now.

As for making sure your credit is clean, there is only one Federal government-sanctioned free credit report service — You can use this to review your credit history to see if there are errors or derogatory items you need to clean up.

The factor that causes credit scores to fluctuate the most month over month is credit card balances. To keep your credit score the highest, try to keep your credit card balances at 30% or less of your credit limit.

Deep Dive On How To Get A Mortgage

If you want to go deeper on individual topics see Zillow’s How To Get A Mortgage library.

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Posted by Jackie A. Graves, President on February 12th, 2018 6:38 AM

What is the value of your home? It depends on what you mean by "value."

Tax assessed value

This figure varies throughout the U.S. since it is determined by the taxing authority of the city, county, or state where you live. Sometimes it is the same as the market assessed value and other times counties will multiply the market value by an assessment ratio to get the tax assessed value, which is often lower than the market assessed value.

For example, suppose where you live, homes are assessed at 100 percent of market value. If you have a home that has a market value of $150,000, your home will be assessed at $150,000. However, if your taxing authority assesses homes at 70 percent of value, your $150,000 market value home will have a tax assessed value of $105,000.

Tax appraised value

This is the value of real or personal property based on the valuation established by a government tax assessor.

Market assessed value

This is the price the government tax assessor estimates the property would sell for on the open market as of the effective date for the assessed value for the year in question. The assessor’s market assessed value is based on actual historical sales of similar properties for a specified study period.

For example, a market assessed value with an effective date of January 1 may have been determined considering comparable sales during the previous 12 months ending September 30 of the previous year. Sales study periods vary by assessment jurisdiction. Because historical sales are used, assessed values are typically less than current market values.

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Posted by Jackie A. Graves, President on February 11th, 2018 8:40 AM

Before you get the keys to the home that you're buying, you'll go through the closing process. Besides signing lots of papers, it also includes paying certain fees. How much money are we talking about?


A homebuyer typically pays between about 2% and 5% of the home purchase price in closing fees, but the amount varies widely depending on where you live.

For an idea of how much you'll pay in closing fees, check out's annual state–by–state survey. Be aware that the amounts are based on good faith estimates for a hypothetical $200,000 mortgage loan from up to 10 lenders in a city (or several cities) in each state plus Washington, D.C. The loan in this scenario was for the purchase of an existing single–family house, not brand–new construction. The hypothetical buyer was not a first–time homeowner, made a 20% down payment, and had excellent credit. Also, the estimates excluded some fees that you might need to pay.

Learn more about what to expect at closing on My Home by Freddie Mac®, where you'll find a closing costs calculator and Meet the Experts video series as well as lots of other information and resources.

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Posted by Jackie A. Graves, President on February 10th, 2018 11:59 AM

What is the Mortgage Closing Process?

A mortgage closing is the last step in buying a home: At the end of the closing, the buyer becomes the legal owner of the home. This article will walk you through the details of a mortgage closing so you’ll know exactly what to expect.

What Happens at a Mortgage Closing?

At a mortgage closing, all legal documents — both those related to the mortgage loan and those related to the transfer of the property from the seller to the buyer — are signed. These documents may include your mortgage note, in which you promise to repay your lender; the home deed, which grants you ownership of the home; the Real Estate Settlement Procedures Act paperwork, which states that you understand the closing process and financial obligations related to your mortgage; the Truth in Lending Disclosure Statement, which lays out the terms of the loan including the annual percentage rate and information on points; and the HUD-1 Form, which itemizes all the costs related to the sale of the home.

It’s not just document signing. Money may also transfer hands: The buyer and sometimes the seller may pay costs related to escrow or closing to the lender, and the lender gives the closing agent money to cover the mortgage amount. Other things that may occur: The buyer shows proof of homeowners insurance so that the lender will fund the mortgage loan, and the closing agent sets up an escrow account for the buyer, which will help the buyer pay taxes and insurance on the property. Finally, the buyer will receive the title to the property; the seller or a representative of the seller will give the buyer the keys to the new place; and the closing company, attorney or title company officially records certain documents such as the warranty deed.

Who Will Attend the Mortgage Closing?

Who attends a mortgage closing will vary depending on where you live, but in general, these parties are likely to attend a closing: The buyer; the seller; the escrow/closing agent; attorneys for both the buyer and the seller (the attorney may be the closing agent); someone from the title company; the mortgage lender; and real estate agents.

When Will My Mortgage Close?

The mortgage closing is the final step in the home-buying process before you officially own the home. So before the closing, you’ll first need to find a home you like, make an offer, get approved for the mortgage loan and have the seller accept your offer. Once all that is finished, you will close on the home. The closing is completed once all the documents are signed and the required monies have changed hands (see above).

How Does a Mortgage Closing Differ for a Purchase Loan vs. a Refinance Loan?

For one, the parties present at a closing for a refinancing are different (and there are fewer of them) than those at a purchase closing: There is no seller (it’s a refinance of your existing loan) or real estate agent present, and sometimes it’s just the owner of the home and a representative for the lender.

Furthermore, at a closing for a refinance loan, you’ll get something called a rescission period. This is a three-day window during which you can walk away from the refinance loan without penalty. The lender must then refund the fees you paid and give up its rights in your property. If you do not decide to rescind, your lender will fund your new loan, and the closing agent will use the funds to pay off your previous mortgage loan.

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Posted by Jackie A. Graves, President on February 9th, 2018 7:08 AM


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