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When you obtain a mortgage, you probably remember paying closing costs all too well. Now that you’re refinancing your mortgage, get ready to get reacquainted with them. A refi is really just getting a new mortgage — and so, the closing costs associated with a mortgage refinance are roughly the same as the first time around.

However, it’s possible to reduce these expenses to a degree via a no-closing-cost refinance. A no-closing-cost refinance doesn’t let you avoid closing costs entirely. But it does let you delay them: Instead of paying them upfront in cash, you’ll finance these expenses as part of your loan.

You might consider a no-closing-cost refinance if you plan to stay in your home for a foreseeable, relatively shorter period of time. Here’s the lowdown to help you decide.

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What is a no-closing-cost refinance?

In a typical refinance, a borrower pays a lump sum at closing to cover costs such as the appraisal fee, title search, title insurance and various loan application/origination fees.

In a no-closing-cost refinance, no upfront payment is required. Instead, the expenses are rolled into the loan itself, increasing its principal (and thus, the amount of interest you’ll pay on that principal). Or, the lender might charge you a higher interest rate on the same principal balance.

How does a no-closing-cost refinance work?

No-closing-cost refinancing eliminates closing costs, but there are trade-offs. That includes charging a higher interest rate, which can cost more over the course of the full life of the mortgage.

A no-closing-cost refinance may also include the fees in the financing, so instead of charging them upfront, the fees would be spread over the life of the loan.

Average refinance closing costs

Closing costs can run anywhere from 2 percent to 6 percent of the loan’s principal amount; 3 to 5 percent is the most typical range. Overall, refis tend to run cheaper, closing cost-wise, than new purchases because some expenses (like transfer taxes) won’t exist. When it comes to the loan-related closing costs, they’re about the same, though.

In dollar terms, the average closing costs on a refinance are approximately $5,000, according to Freddie Mac, the government-sponsored entity that backs and buys loans. But the costs themselves, and their amounts, can vary considerably from state to state — anywhere from $1,400 to $10,000.

In addition to an application fee, which some lenders charge and others don’t, common closing costs include:

  • Appraisal fee: The appraisal fee is charged when a professional appraiser inspects the home to determine its value before the lender extends a mortgage offer. It usually ranges from $300 to $450 or more.
  • Credit check: Lenders often charge a fee to pull your credit report in order to determine whether you’re a qualified borrower. This can cost $25 or more per borrower.
  • Origination fee: Some lenders charge a fee to initiate the loan, which typically costs around 1 percent of the amount being borrowed.
  • Title search: A lender will look up the property record of the home title to ensure there are no issues with property ownership or liens. This can cost around $450.
  • Mortgage insurance: Most FHA loans include an upfront mortgage insurance premium that you will have to pay. It is typically 1.75 percent of the loan amount. If you’re doing an FHA streamline refinance, which converts one FHA loan to another, the fee is 0.1 percent.
  • VA funding fee: If you’re refinancing a VA loan, you will have to pay a percentage of the new loan back to the Department of Veterans Affairs. If it’s your first VA loan, you will pay a 2.3 percent funding fee. If you’ve used Refinancing from one VA loan to another VA loan in an Interest Rate Reduction Refinance Loan (IRRRL), or VA streamline, the funding fee will be 0.5 percent.

No-closing-cost refinance pros and cons

Pros of a no-closing-cost refinance

  • No upfront payment. Put your wallet away: There’s no need to liquidate investments to come up with a few thousands in cash. The deal can go through even if you don’t have any savings.
  • Earlier break-even point. When you pay closing costs to refinance, it can take a while for the new monthly payments to help you break even. So that’ll happen faster if you skip that upfront outlay.
  • Money for other things. You can use the funds you would have spent on closing costs for other expenses, home renovations or investments.
  • Savings if you’re moving soon. No-closing-cost refis are more expensive over the long-term. But if you’re only going to have the home for a few more years — less than 10 — you won’t bear the full cost of the higher rate or bigger principal balance. compares multiple lenders and loan options — all in one place. Take the first step by getting pre-approved here for FREE! No SSN Required 

Cons of a no-closing-cost refinance

  • Higher interest rate. Many lenders compensate for the lack of upfront closing costs by charging a higher interest rate. This could be counterproductive, if your aim in refinancing is to score a better interest rate (at least 1 to 2 percent lower).
  • More expensive long term. Whether it’s due to the raised rate or to the increased principal, you’ll be paying more interest than if you’d paid closing costs upfront.
  • Might incur mortgage insurance. Rolling your closing costs into your new mortgage may also affect your loan-to-value (LTV) ratio. This could reduce your home equity to the point where you are now required to pay private mortgage insurance (PMI), which adds to your monthly payment.
  • Higher monthly payment. Your monthly payments will be higher than they’d be if you’d paid the closing costs upfront.

Who is a no closing-cost-refinance best for?

It’s important to figure out how long you plan to stay in the property and what your breakeven timeline on your potential closing costs might be.

  • When it makes sense: If you’re planning to move in a year and it will take two to three years to break even on your closing costs, you’ll still realize a net savings while you stay put, even as you pay a little more in interest on your loan than you would otherwise.
  • When it doesn’t make sense: If you plan to stay in the property for decades and you’ll break even on your upfront closing costs in just two or three years, then a no-cost closing doesn’t make sense, because you’ll wind up paying more in the long run.

If you want your lender to roll the closing costs into the refinanced amount, you need to make sure that your total payments (principal and interest) are less than what they would have been had you paid the closing costs upfront. That’s not always the case.

 Bankrate’s mortgage refinance calculator can help you determine the actual savings and costs of refinancing your current mortgage. You can also check actual refinance rates in your area.

Other ways to cut refinance costs

Getting a no-closing-cost mortgage isn’t the only way to lower your upfront mortgage expenses. Here are some other ways to pay less out of pocket:

 See if you qualify for an appraisal waiver: Some lenders will waive the appraisal fee for existing customers or borrowers who have significant equity in their homes.

Ask for a break on the app fee: If you’re applying with a bank where you already have accounts, ask if they will comp the application fee or other fees. Many lenders give perks like this to existing customers.

Shop around: This is probably the most important thing you can do. Get quotes from multiple mortgage lenders, and make sure to compare all the different terms — not just interest rates, but closing costs and other fees, too. Go with the lender who gives you the all-around best deal.

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Posted by Jackie A. Graves on June 7th, 2023 11:02 AM

The Home Mortgage Disclosure Act (HMDA), which has been in place for more than four decades, requires mortgage lenders to report information about their lending practices.

Yes, it’s a behind-the-scenes, business thing. But it can be a good resource for consumers and borrowers, too. Let’s dive into the HMDA, why it’s important and how you can access HMDA data online.

What is the Home Mortgage Disclosure Act (HMDA)?

The Home Mortgage Disclosure Act (HMDA) is a federal law passed in 1975 that requires mortgage lenders to collect and report loan-level data points about their portfolios and practices. compares multiple lenders and loan options — all in one place. Take the first step by getting pre-approved here for FREE! No SSN Required 


HMDA allows regulators and the public to determine whether lenders are serving the housing needs of their communities in an equitable manner. The law also aims to identify lending patterns that could be discriminatory and provides public officials with information on mortgage lending in their communities so they can make better policy and budgetary decisions.

Consider that, before HMDA was enacted, “there were areas in which residents, often in urban and minority neighborhoods, were not able to obtain mortgages,” says Jared Maxwell, vice president and direct sales division leader with Embrace Home Loans in Middletown, Rhode Island.

Today, HMDA is enforced by the Consumer Finance Protection Bureau (CFPB).

What is included in HMDA reporting?

Among the components included in HDMA reporting are a mortgage applicant’s ethnicity, race, gender and income. “For each record, you can learn about the loan, the property characteristics, the applicant demographics and the lender,” Maxwell says.

For example, you can determine if a borrower received a mortgage or if they were denied, didn’t complete the application or something else happened to prevent the loan from being originated.

Loan-specific pricing and fee information, including negative spreads, as well as details on loan features like balloon payments and negative amortization features, are also reported. The data further includes details about preapprovals and loans sold from one institution to another.

Some data are excluded from public reporting to safeguard an applicant’s privacy, such as the applicant’s name, dates of the application and actions taken, property address and credit score. Additional fields, including exact loan amount, age, debt-to-income (DTI) ratio and property value, are modified into ranges for this same reason.

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In all, lenders report:

  • Application dates
  • Loan types
  • Loan purposes
  • Loan amounts
  • Mortgage rate spreads
  • Property type and location
  • Applicant ethnicity, race, and gender
  • Applicant income
  • Whether the loan was approved, denied, or the application withdrawn
  • The denial reason, if applicable

Why HMDA reporting is important

HMDA data serve as a comprehensive source of publicly available information on the U.S. mortgage market. The information offers valuable insights, such as:

  • Whether lenders adequately serve the mortgage lending needs in their area
  • Whether there are any discriminatory lending practices occurring
  • Whether an area needs public or private investment to help revitalize its property market

“For example, consumers searching for a mortgage loan can compare the publicly available lending data for differences in credit decisions, terms and pricing by age, race, ethnicity or geography among various financial institutions available to them for their lending needs,” explains Christopher Sicuranza, partner and head of the Banking, Insurance and Capital Markets Practice for Guide house, a management consulting firm in Washington, D.C. “Therefore, the HMDA data provide an opportunity for consumers to vote with their wallets and only do business with those financial institutions they believe align with their values based on prior lending activity.”

Lenders also use the data, says Kimberly Wachtel, corporate compliance manager for Inlanta Mortgage in Pewaukee, Wisconsin. “It can tell us a lot about our own business, what our peers are doing and where we may differ and/or align. When lenders are more in tune with their loan performance, they can better serve their communities. Financial institutions should review their data regularly to ensure their loan data lines up with their lending model,” she notes.

What has changed with HMDA reporting?

Over the years, HMDA has experienced a few facelifts to better fulfill its goals, including changing who’s required to report the data, adding pricing information and requiring more data to be collected overall, says Wachtel.

Today, mortgage lenders are required to complete more than 100 fields across several data points on either an annual or quarterly basis, based on the institution’s size, using a new reporting platform, according to Sicuranza.

“The increase in the number of data fields as well as improvements in public accessibility and the technological interface allow for all members of the public to better understand and visualize lending patterns in their communities,” says Sicuranza.

In 2018, financial institutions became obligated to report data related to home equity lines of credit (HELOCs), which was previously optional. They were further required to define coverage requirements if the institution originated at least 100 closed-end mortgages or 200 open-end lines of credit in the two preceding calendar years. The closed-end number was adjusted to 25 in 2022.

The Consumer Finance Protection Bureau (CFPB) recently began soliciting input on HMDA, as well. “In other words, even more HMDA changes may be on the way for consumers to keep on their radar,” says Sicuranza.

How to find HMDA data online

You can access HMDA data easily and for no cost online through the CFPB website. Scroll to the “Download HMDA data” section, where you have the choice of downloading data from years 2007 to 2017 or accessing more recent data and summaries, including data for a particular financial institution.

The Federal Financial Institutions Examination Council (FFIEC) also has the most recent HMDA data. There’s also a HMDA Data Browser that lets you filter, aggregate, download and visualize HMDA datasets.

To view the original article, click here

Posted by Jackie A. Graves on June 6th, 2023 1:29 PM

For most Americans, taking out a mortgage makes buying a home possible. Obtaining this sort of financing — never a stress-free procedure — has gotten even more stressful of late, given the lightning rise in mortgage rates. You might even wonder if it’s still possible to qualify for a mortgage and buy a home.

Don’t fret: Getting a mortgage can take some time and effort, but we’re here to help. This guide to getting a mortgage breaks down every step of the process so you’ll know what to expect.

What are mortgage lenders looking for?

Mortgage lenders, like any lender, want reassurance that you will pay back the money that you borrow. That means they’re looking for reliable, creditworthy applicants with sufficient income, consistent repayment histories and manageable levels of debt. Safe bets, in other words. compares multiple lenders and loan options — all in one place. Take the first step by getting pre-approved here for FREE! No SSN Required 


They’re also looking at the value of the property you want to buy, making sure it’s worth enough to serve as collateral for your new loan.

Factors that go into a lender’s decision on whether or not to approve your mortgage application include:

  • Credit score. If your credit history shows a pattern of reliable repayments, low credit utilization, a good mix of credit accounts and a reasonable number of credit inquiries, you probably have a credit score that will earn you one of the best interest rates. It is possible to get a mortgage with a low credit score, though, so don’t rule out homeownership before talking to a lender about your situation.
  • Income and employment. How much money you’re bringing in and a steady work history are key factors in mortgage approval. Stable employment and income high enough to afford the monthly payment will help you qualify for a mortgage.
  • A low DTI. Everyone has debts; the key, as far as lenders are concerned, is how your obligations stack up against your earnings, a figure known as a debt-to-income (DTI) ratio. If your debts make your DTI ratio too high, you may have trouble qualifying, even if you have a healthy income: the lender might doubt your ability to manage the monthly payments.
  • Assets. Your lender will want to look at how much is in your bank account and how much any other assets (like a second home or investments) are worth.

Steps for getting a mortgage

Step 1: Strengthen your credit

A robust credit score (in the 700s, preferably) demonstrates to mortgage lenders that you can responsibly manage your debt. “Having a strong credit history and credit score is important because it means you can qualify for favorable rates and terms when applying for a loan,” says Rod Griffin, senior director of Public Education and Advocacy for Experian, one of the three major credit reporting agencies.

If your credit score is on the lower side, you could still get a loan, but you’ll likely pay a higher interest rate.

To improve your credit before applying for your mortgage, Griffin recommends these tips:

  • Make all payments on time and reduce your credit card balances. Your payment history on your report goes back two years or longer, so start now if you can.
  • Bring any past-due accounts current, if possible.
  • Review your credit reports for free at Check for errors on your credit reports and contact the reporting bureau immediately if you spot any. An error might be a paid-off loan that hasn’t been recorded as such, or an incorrect address, for example.
  • Check your credit score (often available free from your credit card or bank) at least three to six months before applying for a mortgage. When you review your score, you’ll see a list of the top factors impacting it, which can tell you what changes to make to get your credit in shape, if needed.

If your score isn’t the strongest, there are financing options, such as FHA loans, that can offer approval for people with scores as low as 580 or even lower.

Step 2: Know what you can afford

It’s fun to fantasize about a dream home with every imaginable bell and whistle, but it’s much more practical to purchase only what you can reasonably afford. Rising interest rates make monthly mortgage payments even higher, so you might have to adjust your expectations (if not your budget) to find an affordable home.

Katsiaryna Bardos, finance department chair at Fairfield University in Fairfield, Connecticut, says one way to determine how much you can afford is to figure out your debt-to-income ratio (DTI) — a criterion lenders often look at, as noted above. DTI is calculated by summing up all of your monthly debt payments and dividing that figure by your gross monthly income.

“Fannie Mae and Freddie Mac loans accept a maximum DTI ratio of 45 percent. If your ratio is higher than that, you might want to wait to buy a house until you reduce your debt,” Bardos suggests. Many financial advisors recommend keeping the ratio closer to 36 percent, especially for conventional loans (that is, non-government ones).

Even with the 45 percent threshold, the lower your DTI ratio, the more room you’ll have in your budget for expenses not related to your home. That’s why Andrea Woroch, a Bakersfield, California-based personal finance and budgeting authority, says it’s essential to take into account all your monthly expenses and your set-asides for far-off plans.

“The last thing you want to do is get locked into a mortgage payment that limits your lifestyle flexibility and keeps you from accomplishing your goals,” Woroch says — a condition known as “house poor.”

You can determine how much house you can afford by using Bankrate’s calculator, which factors in your income, monthly obligations, estimated down payment and other details of your mortgage.

Step 3: Build your savings

Your first savings goal should be: enough for a sufficient down payment.

“Saving for a down payment is crucial so that you can put the most money down — preferably 20 percent to reduce your mortgage loan, qualify for a better interest rate and avoid having to pay private mortgage insurance,” Woroch explains.

It’s equally important to build up your cash reserves. One rule of thumb is to have the equivalent of roughly six months’ worth of mortgage payments in a savings account, even after you fork over the down payment. This cushion can help safeguard you if you lose your job or something else unexpected happens.

Also, don’t forget closing costs, which are the fees you’ll pay to finalize the mortgage. They typically run between 2 percent to 5 percent of the loan’s principal. They don’t include escrow payments, either, which are a separate expense. Generally, you’ll also need around 1 to 4 percent of the home’s price for annual maintenance and repair costs.

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Step 4: Compare mortgage rates and loan types

Once your credit score and savings are in an adequate place, start searching for the right kind of mortgage for your situation. You’ll also want to have an idea of how mortgages work before moving forward.

The main types of mortgages include:

  • Conventional loans – These are best for homebuyers with solid credit and a decent down payment saved up. They’re available at most private lenders: banks, credit unions, independent mortgage companies.
  • Government-insured loans (FHAVA or USDA) – These can be great options for borrowers who do not qualify for a conventional loan or who meet specific criteria, such as being a member of the military for a VA loan.
  • Jumbo loans – These loans are for more expensive properties, whose price tags exceed the federal threshold set for ordinary, aka conforming, loans ($726,200 in most parts of the country or $1,089,300 in more expensive areas). If you need to finance more than that for your dream home, you’ll need to get a jumbo loan from a commercial lender.

Look at the interest rates and fees for each loan, which collectively amount to its annual percentage rate (APR). Even a small difference in interest rate can result in big savings over the long run. Also consider things like whether you’ll have to pay for mortgage insurance, and for how long.

 Mortgages can have a fixed or adjustable rate, meaning the interest rate stays the same for the duration of the loan term or fluctuates over time, respectively. Most home loans have 15- or 30-year terms, although there are 10-year, 20-year, 25-year and even 40-year mortgages available.

Adjustable-rate mortgages (ARMs) might come with a lower rate and monthly payment initially but can become more expensive over time if rates rise. If it’s an interest-only ARM — meaning for a set period, your payments only go towards interest, not the loan principal —  it’s almost guaranteed that your payment will increase once your rate-lock period ends. If you can’t afford that risk, the fixed-rate is the way to go.

Step 5: Find a mortgage lender

Once you’ve decided on the type of mortgage, it’s time to find a mortgage lender.

“Speak with friends, family members and your agent and ask for referrals,” advises Guy Silas, branch manager for the Rockville, Maryland office of Embrace Home Loans. “Also, look on rating sites, perform internet research and invest the time to truly read consumer reviews on lenders.

“[Your] decision should be based on more than simply price and interest rate,” says Silas. “You will rely heavily on your lender for accurate preapproval information, assistance with your agent in contract negotiations and trusted advice.”

If you’re not sure exactly what to look for, you might want help. A mortgage broker can help you navigate all the different loan options available to you and possibly help you get more favorable terms than you’d be able to secure by applying on your own. Remember that interest rates, fees and terms can vary substantially from lender to lender.

Step 6: Get preapproved for a loan

It’s a good idea to get preapproved for a mortgage once you’ve found a suitable lender. With preapproval, the lender will review your finances to determine if you’re eligible for funding and an amount they’re willing to lend you.

“Many sellers won’t entertain offers from someone who hasn’t already secured a preapproval,” Griffin says. “Getting preapproved is also important because you’ll know exactly how much money you’re approved to borrow.”

Be mindful that mortgage preapproval is different from prequalification. A preapproval involves much more documentation and a hard credit check; mortgage prequalification is less formal and is essentially a way for a lender to tell you that you’d be a good applicant.

Still, preapproval doesn’t guarantee you’ll get the money or any particular loan terms. That has to wait until you’ve actually found a place to purchase.

Step 7: Begin house-hunting

With preapproval in hand, you can begin seriously searching for a property that meets your needs. When you find a home that has the perfect blend of affordability and livability, be ready to pounce.

“It’s essential to know what you’re looking for and what is feasible in your price range,” Bardos notes. “Spend time examining the housing inventory and be prepared to move quickly once the house that meets your criteria goes on the market.

“Utilize social media and ask your agent for leads on homes going on the market before they are listed on the MLS,” he also recommends.

Step 8: Submit your loan application

If you’ve found a home you’re interested in purchasing, you’re ready to complete a mortgage application. These days, most applications can be done online, but it can sometimes be more efficient to apply with a loan officer in person or over the phone. You might be better able to establish a relationship with the loan officer in person, too, which can work to your advantage if you have questions in the process or issues come up.

The lender will also pull your credit report to verify your creditworthiness.

Step 9: Wait out the underwriting process

Even though you’ve been preapproved for a loan, that doesn’t mean you’ll ultimately get financing from the lender. The final decision will come from the lender’s underwriting department, which evaluates the risk of each prospective borrower, the nature of the property, and determines the loan amount, interest rate and other terms.

“After all your financial information is gathered, this information is submitted to an underwriter — a person or committee that makes credit determinations,” explains Bruce Ailion, an Atlanta-based real estate attorney and Realtor. “That determination will either be yes, no or a request for more information from you.”

There are a few steps involved in the underwriting process:

  1. First, a loan officer will confirm the information you provided during the application process.
  2. After you make an accepted offer on a home, the lender will order an appraisal of the property to determine whether the amount in your offer is appropriate. The appraised value depends on many factors, including the home’s condition and comparable properties, or “comps,” in the neighborhood.
  3. A title company will conduct a title search to ensure the property can be transferred, and a title insurer will issue an insurance policy that guarantees the accuracy of this research.
  4. Finally, you’ll get a decision from the underwriter: approved, approved with conditions, suspended (meaning more documentation is needed) or denied.

Step 10: Close on your new home

Once you’ve been officially approved for a mortgage, you’re nearing the finish line. All that’s needed at that point is to complete the closing.

“The closing process differs a bit from state to state,” Ailion says. “Mainly it involves confirming the seller has ownership and is authorized to transfer title, determining if there are other claims against the property that must be paid off, collecting the money from the buyer, and distributing it to the seller after deducting and paying other charges and fees.”

There are a variety of expenses that accompany the closing. Common closing costs include:

You will review and sign lots of documentation at the closing, including details on how funds are disbursed. The closing or settlement agent will also enter the transaction into the public record.

What documents do you need to get a mortgage?

Getting a mortgage involves a lengthy process. Your lender is likely providing hundreds of thousands of dollars to purchase a home, so it wants to make sure that you’ll be able to repay that loan.

Expect to need the following documents for the underwriters, who are evaluating your application:

  • Previous years’ tax returns
  • Proof of income
  • Proof of employment and employment history
  • Bank statements
  • Brokerage statements
  • Documentation of other assets and debts
  • Documents outlining any gifts you’ve received to help pay for the home
  • Identification
  • Rental history

Your lender will request the specific documents it wants to see.

Bottom line on getting a mortgage

They say you shouldn’t put the cart before the horse. The same is true in the homebuying process. You’ll need to complete several steps to finance a home, so the more you learn about what’s required, the better informed your decision-making will be.

If you’re denied a mortgage, there’s no barrier against trying again in the future.

“If you are unable to qualify for a loan with favorable terms, it may make more sense to simply wait until you can make the necessary changes to improve your credit history before trying again,” Griffin suggests. “A bit of patience and planning can save a lot of money and help you get the home you want.”

 To view the original article, click here

Posted by Jackie A. Graves on June 5th, 2023 1:23 PM

Mortgage rates have been on a wild tear recently, reaching 20-year highs topping 7% near the end of last year and bouncing around unpredictably ever since. And since even slight fluctuations in rates end up costing homebuyers hundreds of dollars a month, it’s understandable that many are paralyzed by indecision—should we buy or wait for rates to drop?—or else scrambling for any advice on how to stay ahead of the curve and keep their costs in check.

To help, we’ve compiled a few tactics we’ve heard from real estate experts and homebuyers on how to outsmart the turbulent tides of rising rates.

While some methods might strike some as unconventional, you may find that they’re becoming increasingly common in today’s unpredictable real estate market. If you’re tired of taking a wait-and-see stance or of simply sitting and praying for rates to head south, read on for some clever end runs, along with the pros and cons of these unusual approaches. compares multiple lenders and loan options — all in one place. Take the first step by getting pre-approved here for FREE! No SSN Required  1. Mortgage rate buy-downs

Mortgage rate buy-downs have attracted attention ever since rates shot up in mid-2022, and for good reason: They remain one of the easiest ways to make a dent in higher financing costs.

In essence, someone makes an upfront payment to lower the monthly interest rate for the first few years of the loan. That someone may be the seller of the property or the homebuilder if you’re buying new construction, if you’re in a position to request some concessions from either. It can also be you.

One of the most popular products, the 2/1 buy-down, for example, entails an upfront payment to reduce the first year’s interest payments by 2 percentage points and the second year’s interest payments by 1 percentage point. By the third year, the original interest rate kicks in.

But many homebuyers taking on buy-downs expect to watch the mortgage market, hoping for a chance to refinance into a lower rate permanently at some point.

“Right now the 2/1 and 3/2/1 buy-downs are one of the more common things we see, and really does make sense for a lot of buyers,” says Leslie Bandy, a real estate agent with Red Oak Realty in Oakland, CA. “We do not see these high rates sticking around. We may not get down to 3% but hopefully 5% in the not-too-distant future.”

Lenders say it’s critical to do the math on all varieties of buy-downs and see what is most comfortable for you.

Brian Weinberg, a loan officer with Planet Home Lending in Denver, says that in his local market, conditions still strongly favor sellers, who have little reason to offer concessions.

Instead, many borrowers have taken advantage of a 1-year buy-down paid by Planet, which offers that deal in the hopes those clients will stay with the company for the long term.

“It’s a no-brainer for the consumer,” Weinberg says.

One important thing to keep in mind: You need to qualify for the higher monthly payment that will kick in after the buy-downs fade away.

2. Seller financing

Another strategy that’s grabbed attention recently is seller financing. Just as it sounds, this involves a homeowner giving a home loan to the buyer of the property, who then pays the seller back plus interest. The buyer hopefully benefits with a lower interest rate than what a bank offers, while the seller benefits by being paid back at an interest rate that’s likely higher than what a savings account or CD would yield.

“Seller financing is a great strategy for buying and a great strategy for the seller,” says Josh Dobson, a lender at BluPrint Home Loans in Modesto, CA, who goes by @mortgagedadof3 on TikTok.

This is especially true in situations where the seller doesn’t want to take a lump sum of cash, and all the capital gains implications that may go with it.

Dobson and other experts caution that it’s critical to make sure all the t’s are crossed and i’s are dotted. Use attorneys to draft the agreement, make sure you know who’s responsible (the buyer or the seller) for paying the property taxes, and be absolutely sure the title to the home is clear.

Even with those precautions, some experts remain wary.

“These may offer an alternative pathway to homeownership for some families, but they are typically riskier than mortgages,” says Tara Roche, project director with the Pew Charitable Trusts.

Consumer protections, if there are any, tend to be governed by state law, not the federal guidelines that emerged out of the subprime crisis, Roche notes.

What’s more, if you enter into this kind of agreement, you almost certainly will not be able to qualify for many traditional bank products like home equity loans or lines of credit, nor the kinds of homeowner protections that may arise in emergencies, such as the COVID-19-era forbearance programs.

Still, many real estate professionals who work directly with buyers and sellers say it can work.

Red Oak’s Bandy represented the buyers in a deal where the sellers wanted to provide financing and would have been able to offer a much lower rate than a bank or other traditional lender.

“We would want to have everything reviewed and make sure any potential questions that we or the lawyer could come up with would be answered,” Bandy says. “But it does seem that in certain situations, it could be a win-win.”

3. House hacking

Buying a home that may double as an investment property might be counterintuitive if you’ve been struggling to find something affordable, but it’s one of the most tried-and-true approaches to becoming an owner, and it’s seeing a major resurgence today.

“I call it house hacking,” says Julie Chang, a San Diego–based agent with Pacific Sotheby’s International Realty. “It really is about lowering the cost of living.”

Instead of searching for the elusive single-family dream home, for example, you might buy a duplex and rent out half of it. You might buy a property with an accessory dwelling unit and rent that out. Or you may even be able to swing a 3-4 unit building and rent out all of the units you’re not living in.

Chang has helped several buyers achieve homeownership this way, and when the math works out, she says, “You can live nearly for free. You can’t beat that!”

The most important takeaway for buyers is that you do not need 20% down. Just like with mortgages for single-family homes, you may be able to finance with as little as 3% down.

There are, of course, many considerations. Some lenders and mortgage programs will allow you to apply the rent you expect to receive to your income to qualify for a bigger mortgage, but some will not. Some will allow that income to be considered, but only for long-term rentals, not shorter ones like those on Airbnb. Similarly, some cities and states have very strict requirements about whether and under what circumstances they’ll allow ADUs and short-term rentals.

You must also take into account the time associated with being a landlord—dealing with toilets and tenants, as the saying goes.

But on the flip side, Bandy points out, many of the expenses that may come along with homeownership are now business expenses and are therefore tax-deductible.

“It may not fit with your American dream vision of a beautiful house and a yard, but it can be a way to get your feet into the market at an affordable price, and you are building equity and saving money,” she says. “You can find those situations where the rent on a property is going to take care of the mortgage, and you can get into that for a low-down payment. You have to get your foot in the door wherever you can.”

If you think you're ready to shop around for an FHA loan, you can use to help you easily get prequalified in minutes. No SSN Required.
4. Down payment assistance and first-time buyer programs

Another way to get your foot in the door: tapping one of the nearly 2,000 programs across the country that offer financial help with your down payment. These down payment assistance programs are one of the best-kept secrets to buying a home.

Contrary to what some may believe, you do not have to be a first-time buyer to qualify for assistance—although there are also plenty of resources specifically for first timers.

Buyers can find programs in their area at Down Payment Resource. Every state also has what’s called a Housing Finance Agency, which can be a helpful resource in many ways.

These programs may offer down payment assistance, first-time buyer assistance, closing cost help, and so on. You might need to meet residency requirements, or buy only in certain geographic areas, or occupy the home as your primary residence for a certain period after buying, so make sure you understand all the fine print.

In addition, many private lenders have similar programs of their own. Dobson says his company has two down payment programs that may boast looser guidelines than many HFA programs.

“Each program has its positives and negatives,” Dobson says. He advises borrowers to work closely with a lender who can examine all the options and see if any can be combined.

5. Bridge loans

On the other end of the homebuyer spectrum from first timers are people who are selling one home in order to buy another. Borrowers in that situation—especially at the market’s higher end—might consider a bridge loan to help them make the transition.

True to its name, a bridge loan helps home sellers buy a new house before they’ve sold their current property via a loan using the old home as collateral. Once a seller has bought the new home and sold the old one, the loan is converted into a mortgage for the new home.

Among those homeowners, there’s “more interest than ever in buy-before-you-sell,” says Richard Redmond, a private lender in Marin County, CA, and author of “Mortgages: The Insider’s Guide.” “High-income sellers want to make a noncontingent offer, but a lot of their assets are tied up in the home they currently own.”

A bridge loan will generally cost you about 2 percentage points of the loan amount as an origination fee, Redmond says, and you’ll pay an interest rate roughly 3 percentage points higher than a conventional loan while you’re paying the bridge loan.

To view the original article, click here

Posted by Jackie A. Graves on June 3rd, 2023 4:17 PM

Home prices remain high, new construction for entry-level housing is lagging and inventory is squeezed. Add in inflation outpacing wages, rising mortgages rates and increasing consumer-debt levels, and many hopeful homebuyers might feel iced out of the market altogether.

Small wonder that many of today’s homebuyers rely on mortgage assistance programs to buy a home. There are more than 2,500 grants and loans programs nationally, with at least two active programs in each state, according to a recent report by the Urban Institute.

The increase in low down-payment lending is perhaps a reflection of some of the problems Americans are facing. Traditionally, FHA has been the main source of low down-payment lending, but that’s changed in recent years. Conventional lenders, like Bank of America, as well as Fannie Mae and Freddie Mac have low down-payment programs.

The bulk of these assistance programs are geared toward first-time homebuyers. Let’s explore how to qualify for them. compares multiple lenders and loan options — all in one place. Take the first step by getting pre-approved here for FREE! No SSN Required 

Who qualifies as a first-time homebuyer?

The term “first-time homebuyer” can be misleading — at least, as far as many of these programs are concerned. The result is that people who actually qualify mistakenly pass up the opportunity for assistance.

In addition to those who have held title to a home, under many programs, individuals who haven’t owned a home in at least three years count as a first-time buyer. This distinction can make all the difference to applicants who were homeowners several years ago and are back in the market today. Alanna McCargo, president of Ginnie Mae, agrees that this can be confusing for some buyers.

“There’s a lot of misperceptions about what it takes to qualify for these programs. People are confused by income levels, they think they made too much, or they don’t realize that they could have owned a home before to qualify,” McCargo says.

In other words, you don’t have to actually be a virgin homeowner to count as a first-timer. You just need to have not owned a home for a while.

First-time homebuyer qualifications

Not having previously owned or home or not having owned one in the past three years is just one of the requirements to qualify for first-time home buyer programs. Additional criteria may vary based on the lender and the loan program, but typically include:

  • A minimum credit score of about 620
  • Steady income
  • Two-years employment history
  • 3% down payment
  • Debt-to-income ratio lower than 43%

Here’s a look at some popular home loan programs for first-time buyers:

Loan program

Who is eligible?

Down payment requirement

Additional features

HomeReady Program through Fannie Mae

First-time and repeat buyers welcome


• Must complete a homebuyer education course
 • Must meet income criteria


First-time homebuyer indicates no ownership interest in a home in the previous three years


Must complete a homebuyer education course

Home Possible

First-time and repeat buyers welcome


Must meet income criteria

HomePath Ready Buyer

First-time homebuyer indicates no ownership interest in a home in the previous three years

First-time buyers can get 3% in closing cost assistance

Must complete a homebuyer education course

If you’re unsure about a program’s qualification requirements, terms and rates, ask your lender to explain it to you and put it in writing whenever possible.

Other requirements for first-time homebuyers

So, now you know the answer to whether you qualify as a first-time home buyer again. But when purchasing a home, there are other standards to meet.

You’ll also need to meet the credit score requirements of the lender, satisfy any income restrictions, and have a relatively low debt-to-income ratio.

When are you considered a first-time home buyer again?

The key to qualifying for many first-time buyer programs is not whether you’ve owned a home previously, but how long ago you owned the home. Many programs consider you a first-time home buyer again if you owned a home three or more years ago but have since sold the home or no longer hold title to it for any reason.

There are other reasons as well that you might be considered a first-time home buyer, even if it’s not your first rodeo. Under the U.S. Department of Housing and Urban Development’s (HUD) rules, for example, you are considered an eligible first-time home buyer again if you:

  • Did not own principal residence during the previous three years
  • Are a single parent who only owned a home with a former spouse while married
  • Are a displaced homemaker who previously owned a home with a spouse

In fact, even if you’ve owned more than one previous home, you can still qualify.

Frequently asked questions about first-time homebuyer qualifications 

What is the minimum income to qualify for first-time buyers?

There’s no single set number. If it’s a state-run mortgage program, income levels often have to be within a certain percentage of the median annual gross income of region where the home is based.

How do first-time homebuyer qualifications vary by state?

First-time buyer program qualifications often vary slightly from state to state in terms of income and credit score requirements. Many HFA loan programs have residency requirements too — you have to live (or at least pay taxes) in the state.

If you think you're ready to shop around for an FHA loan, you can use to help you easily get prequalified in minutes. No SSN Required.

Next steps for qualifying as a first-time homebuyer

Purchasing a home can be challenging, especially amid the current environment with intense competition for the limited inventory available and steep mortgage rates that make a purchase even more costly.

The good news is there are many first-time homebuyer programs that can help. Take the time to identify programs in your area that may be able to help make your homeownership dreams a reality. Start with your state or municipality’s housing finance authority. Or drop into a local bank or credit union: They often have information on programs, especially if their institution is an approved lender for one.

And remember, these programs may be available to you even if you’ve owned a home in the past.

To view the original article, click here

Posted by Jackie A. Graves on June 1st, 2023 2:56 PM

If you’re an eligible active-duty military member, veteran or surviving spouse, you can use a VA home loan — backed by the U.S. Department of Veterans Affairs (VA) — to buy a new property or refinance an existing mortgage. VA loans come with big perks — no need to make a down payment, for example — but there are some potential downsides, as well. As you begin the mortgage process, it’s important to learn all the details of what it means to have a loan backed by the VA.

Pros and cons of a VA loan

Any time you’re making a major financial decision, it’s important to weigh the upsides and downsides, and a VA loan is no exception.


Benefits of a VA loan

VA loans come with a long list of big benefits for prospective homeowners. The advantages of VA loans include:

No down payment requirement

While conventional mortgages require a down payment of at least 3 percent of the purchase price, VA loans allow eligible borrowers to become homeowners without putting a penny down upfront. That makes a big difference: Recent Bankrate data shows that 40 percent of Americans who don’t own homes cite an inability to cover a down payment and closing costs as a primary driver for continuing to rent.

No mortgage insurance

If you’re comparing VA loans vs. FHA loans and conventional loans, VA-backed loans offer a big point of differentiation: no mortgage insurance. That’s a fee you’ll pay on all FHA loans — both an upfront premium and an annual premium throughout the loan term. You’ll also pay private mortgage insurance on a conventional mortgage if your down payment is less than 20 percent.

Lower interest rates

Lenders tend to charge lower rates for VA loans than they do on conventional loans, which means you can save a lot of money on interest in the long run, especially over a 30-year loan.

Lower closing costs

The closing costs associated with a VA loan might be less than those for other loans, since the VA limits the origination fee a lender can charge to no more than 1 percent of the mortgage.

Easier qualifications

The VA doesn’t have a minimum credit score requirement, and some lenders allow for lower scores compared to conventional loans. VA loans also allow for a higher debt-to-income (DTI) ratio, which can help you qualify for a more expensive or larger home.

Convenient refinancing options

With a VA cash-out refinance option, you can finance up to 90 percent of the value of your home; or you can opt for an Interest Rate Reduction Refinance Loan (IRRRL) that can potentially lower your rate through a streamlined process that doesn’t require an appraisal. Both refinancing options might make a VA loan more appealing overall.

Easier to get back on your feet after a financial hurdle

You also won’t need to wait as long to get a VA loan if you’ve been through a foreclosure, bankruptcy or short sale, says Kerry Sherin, consumer advocate for Ownerly, a home valuation company based in New York City.

“The waiting period for a VA loan can be up to half the time of a traditional loan: two years following a foreclosure, two years after a short sale unless all payments are on time — in which case there is no waiting period — two years after a Chapter 7 bankruptcy and 12 months after on-time payments while in Chapter 13,” says Sherin.

Mortgage is assumable

VA loans are assumable, meaning that a buyer — who, with lender approval, does not need to be a veteran — can take over the terms of the VA loan on the home they’re buying instead of receiving a new loan. VA loan assumptions are especially beneficial when interest rates are on the rise, as you could assume a loan with better terms than you could get in the current market. While loan assumptions require extra steps for the seller to keep their full VA loan entitlement after the sale, they can be an excellent perk for a buyer.

Disadvantages of a VA loan

There’s a flip side to every form of financing, including VA loans. The disadvantages include:

Required VA funding fee

While you won’t pay for mortgage insurance with a VA loan, you will pay a funding fee at closing (although this fee can be financed into your loan, increasing the total amount you owe). If you’re taking out your first VA loan and putting down less than 5 percent, the funding fee equates to 2.15 percent of the loan amount. If you do plan to put money down or have obtained a VA loan in the past, the fee can range from 1.25 percent (for first-time or repeat borrowers putting at least 10 percent down) to 3.3 percent (for repeat borrowers with less than 5 percent down).

Not all borrowers are required to pay the funding fee. For example, if you receive compensation for service-connected disabilities or are a veteran’s surviving spouse, you might be exempt from paying the funding fee.

Property restrictions

VA loans limit the type of property you can buy (and your purpose for it). First off, manufactured homes are subject to more scrutiny, including a structural engineering examination. Additionally, properties purchased with a VA loan are designed to be owner-occupied, so it’s more challenging to use a VA-backed loan to earn rental income. It is possible, though, if you live in one unit of a multi-unit property and rent out the other units.

Less flexibility

With a VA loan, you aren’t allowed to waive certain contingencies, such as the home inspection or appraisal, to make your loan offer more attractive to a seller. Some sellers, for that matter, are also less inclined to accept an offer with VA loan financing. They might assume that some myths about VA loans are true and place more weight on an offer from a buyer with a conventional loan.

Is a VA loan the best option for you?

For many borrowers, VA loans are a slam dunk. However, even if you’re eligible, there are times when a VA loan might not be your best choice.

“For example, if you are an eligible borrower who currently owns a home but wants to sell and purchase another primary home to yield a large down payment — 20 percent or more — from the sale that you can put toward your next home purchase, a VA loan may not make sense for your next property,” says Rob Killinger, senior loan officer at Movement Mortgage in Massachusetts. “If you were to use a VA loan in this scenario, you may be required to pay the VA funding fee, whereas a conventional loan program would not require such a fee.”

On the other hand, a VA loan offers special benefits that other financing does not. “For instance, a qualified borrower could purchase a two- to four-unit property with a zero down VA loan that they plan to live in instead of a single-family home,” says Killinger. “In comparison, a conventional loan requires a minimum 15 percent down on a multi-unit property.”

Still, the funding fee can be expensive. If you are planning to remain in your home for less than two years, it might not be worth it to pay this fee to get a VA loan.

If you’re still not sure whether a VA loan makes sense for you, consult closely with your loan officer, who can present all of the different mortgage options you qualify for and help guide your decision.

Alternatives to a VA loan

A VA loan isn’t your only choice of financing. Consider the following options, especially if you don’t qualify for a VA loan:

  • Conventional loan – There is no funding fee on a conventional loan, and you can use it to purchase investment properties and second homes. The interest rates tend to be higher than for VA financing, however, and a down payment is also required, as well as private mortgage insurance if you’re putting down less than 20 percent.
  • FHA loan – An FHA loan is also backed by the government and requires you to pay an upfront mortgage insurance premium, similar to the VA loan’s funding fee. However, you’ll also pay an annual mortgage insurance premium. Your interest rate might also be higher.
  • USDA loan – As with a VA loan, there is no down payment required for a USDA loan, but it is only for borrowers in designated rural areas. USDA loans also come with income restrictions, and the property must be a single-family home. Plus, only 30-year fixed-rate financing is available.

To view the original article, click here

Posted by Jackie A. Graves on May 29th, 2023 12:13 PM

As affordability challenges conspire to keep would-be buyers out of the housing market, the nation’s two largest mortgage lenders have rolled out programs that allow borrowers with modest incomes to qualify for a loan with just 1 percent down.

Rocket Mortgage, the largest lender in the U.S. in 2022, announced its ONE+ program this week. United Wholesale Mortgage, the No. 2 lender, launched its Conventional 1% Down loans in April — then made them significantly more generous following Rocket’s announcement.

The rival programs piggyback off of Fannie Mae’s HomeReady mortgages and Freddie Mac’s Home Possible loans. Those initiatives allow borrowers who make less than 80 percent of their neighborhoods’ median income to obtain a conventional loan with just 3 percent down. compares multiple lenders and loan options — all in one place. Take the first step by getting pre-approved here for FREE! No SSN Required 

Both programs come at a time when home prices remain near record highs and mortgage rates are more than double what they were two years ago.

“With affordability being tougher, people are getting boxed out,” says Bill Banfield, executive vice president of Capital Markets at Rocket Mortgage. “Free money helps people want to buy a home.”

How the 1% mortgages work

To make 1 percent down a reality, both lenders cover 2 percent of the 3 percent down payment needed to obtain a HomeReady or Home Possible mortgage. The borrower supplies the remaining 1 percent.

Rocket offers this scenario as an illustration: A buyer of a $250,000 home with a HomeReady or Home Possible mortgage needs at least 3 percent down, or $7,500. Under its new program, Rocket covers $5,000, or 2 percent of that down payment, through a grant. The borrower then needs to put down just $2,500, or 1 percent.

Rocket’s program also covers private mortgage insurance (PMI) at no cost to the borrower. Typically, lenders require borrowers to pay these insurance premiums if their down payment is less than 20 percent. On a $242,500 loan, those premiums can run as much as $245 a month, according to Rocket.

ONE+ is available to first-time and repeat homebuyers, and there are no limits on assets, just income (more on that below).

United Wholesale Mortgage’s program is similar, following the same guidelines as HomeReady and Home Possible. The lender pays 2 percent of the purchase price, up to $4,000. That means the down payment benefit maxes out at $200,000; a borrower who takes a $400,000 loan under the program would get 1 percent of the down payment from United Wholesale Mortgage and need to come up with 2 percent.

When United announced its program in April, the down payment assistance was limited to borrowers making less than half of the area median income. After taking criticism on social media — and after Rocket rolled out its more generous income limits — the lender boosted its income limit to 80 percent.

What are the income limits?

To qualify for the 1 percent down programs — or any HomeReady or HomePossible loan — you can’t make more than 80 percent of the median income in the area where you’re buying. Those figures vary widely throughout the U.S. A few examples of the 80 percent limit:


No more than $76,560


No more than $84,560


No more than $76,480

New York City

No more than $90,080

San Francisco

No more than $120,880

To see income limits in your area, enter an address into this map on Fannie Mae’s website.

Is there a catch?

These programs are a sweet deal for borrowers — so much so that there’s no guarantee the terms will stay the same, as evidenced by United Wholesale Mortgage’s decision to boost income limits.

What’s more, the down payment assistance is so generous that the nation’s two largest lenders could decide to pull the plug.

“Some of the features on this are costly for the lender,” says Rocket’s Banfield. “We’ll have to see how it all plays out.”

Another risk for borrowers: They could find themselves owing more than their homes are worth. Median home prices shrank 1.7 percent from April 2022 to April 2023, and home values could keep declining. For homebuyers who put just 3 percent down, a 5 percent decline in local home prices could put them underwater.

The Great Recession infamously played up the dangers of buying with little equity — but it’s worth pointing out that the mortgage market and housing sector are on much firmer footing now than they were 15 years ago. What’s more, borrowers still must qualify based on such factors as debt-to-income (DTI) ratio.

“There’s no stretching the underwriting,” says Banfield.

More lenders are getting creative

In another nod to the challenges facing buyers in a still-expensive market, Movement Mortgage this month announced it’s now allowing FHA borrowers to take out a 10-year second mortgage to finance the 3.5 percent down payment required for FHA loans. In effect, this eliminates the need for borrowers to put down any money upfront. To qualify, you must have a credit score of 620 or higher.

That offer is just one-way lenders are responding to the one-two punch of an affordability squeeze and a sharp slowdown in mortgage applications since 2021. Lenders have been rolling out all manner of mortgage promotions, including rate buydowns paid for by the seller and discounts on future refinances.

In another variation on the theme, Rocket earlier this year unveiled a new credit card that allows homebuyers to earn up to $8,000 towards closing costs and a down payment. The Rocket Visa Signature Card offers a generous 5 percent back on all purchases, up to the limit — with the stipulation that the rewards are worth full value only if you ultimately get your home loan from Rocket Mortgage.

If you think you're ready to shop around for an FHA loan, you can use to help you easily get prequalified in minutes. No SSN Required.

Other low-down payment mortgage options

Mortgage lenders and regulators recognize that down payments are one of the primary obstacles to homeownership, so there are several low- and no-down payment loan options. Loans backed by the U.S. Department of Veterans Affairs (VA), for instance, don’t require a down payment.

Aside from HomeReady and Home Possible conventional loans, here are other options for buyers looking to make low down payments:

  • FHA loansInsured by the Federal Housing Administration (FHA), FHA loans allow borrowers to put down just 3.5 percent with a credit score of 580 or higher, or at least 10 percent with a score as low as 500. However, FHA borrowers with less than 20 percent down have to pay FHA mortgage insurance premiums (MIP) for the life of the loan.
  • USDA and VA loans: USDA and VA loans don’t require any down payment, but they’re only for specific types of borrowers: USDA loans for borrowers in certain rural areas and VA loans for active-duty service members, veterans and surviving spouses. Neither charge mortgage insurance, but USDA loans come with guarantee fees and VA loans come with a funding fee.

To view the original article, click here

Posted by Jackie A. Graves on May 28th, 2023 12:32 PM

Getting preapproved for a mortgage is almost a requirement in today’s real estate world. In fact, many real estate agents won’t even let you into their cars to go look at houses until you’ve got your preapproval letter in your hand. And that makes perfect sense. Why would a real estate agent take some professional time showing houses if you’ve no such letter in hand. A preapproval letter lets the agent know right off the bat that you’re a serious candidate as a home buyer. Let’s look at four things you need to know about these preapproval letters.

The first thing to know is a preapproval is not the same as prequalification. Although the terms sound similar they’re not. Both terms apply to the mortgage industry but there are some key differences. A prequalification letter - the letter will state that it’s a ‘pre-qual’ - signifies that you’ve had a conversation with a licensed loan officer. With a prequalification, the loan officer will go through a series of questions and at the end of these queries the loan officer will or will not put together a letter that states ‘based upon the information provided’ the individual is in good shape to obtain financing from a mortgage company. compares multiple lenders and loan options — all in one place. Take the first step by getting pre-approved here for FREE! No SSN Required 

Next, the information provided in order to obtain the preapproval letter must be recent. Your loan officer will ask for your two most recent paycheck stubs covering a 30-day period. Note that paycheck stubs have typically been replaced by remittance advice from your employer. This documentation will provide a gross as well as a net amount of income to be used when calculating debt to income ratios. Providing some paycheck stubs you’ve left in your drawer at home won’t cut it. They need to be the most recent. Why? The lender needs to know how much money you make now, not six months ago.

Bank statements will also be needed in order to get a preapproval letter. For those that are self-employed, these bank statements will work in lieu of any paycheck stubs. Bank statements, again your most recent ones, will third-party verify you have enough money that is yours in your bank account to cover the down payment, closing costs and some leftover when the dust has settled. The leftover amounts are referred to as ‘cash reserves.’

To view the original article, click here

Posted by Jackie A. Graves on May 27th, 2023 5:35 PM

Refinancing gives you the opportunity to adjust details of your mortgage, such as the term or interest rate. By refinancing, it’s possible to lower your mortgage interest rate and monthly payments, resulting in some long-term savings.

It’s important to remember, though, that refinancing basically means getting a new mortgage to replace your current loan. And just as there were expenses (aka closing costs) when you got your first mortgage, there are costs that come with refinancing.

Ah, but not all expenses are created equal. Here are some ways to improve your chances of getting a low-cost refinance.

If you think you're ready to refinance now, then start the application process by answering a few simple questions. No SSN Required

How much does it cost to refinance a mortgage?

If you want a low-closing cost refinance, it’s important to understand what expenses you might be on the hook for.

Some closing costs involved when you refinance your mortgage include:

  • Loan origination fee – typically 0.5% to 1% of the mortgage principal
  • Appraisal fee – typically $500 – $700
  • Survey fee (if needed to determine property boundaries) – $400 – $1,000+
  • Credit report fee – $30 – $100
  • Title fee (including title search and insurance) – about $300
  • Taxes – varies by location
  • Discount points – 1% of the loan amount per point

Depending on your lender, you might be able to have some of these waived. Your lender has to provide you with a complete rundown of the fees in your loan estimate. You can also find out which fees are negotiable.

How to lower the cost of refinancing

When getting a low-cost mortgage refinance, there are some steps you can take to lower the overall cost.

1. Get the lowest possible rate

Qualifying for the lowest possible mortgage refinance rate is one of the best ways to save money long-term. Here are some tips for ensuring that you’re likely to get the most favorable rate:

  • Review your credit report. Take a look at your credit report to make sure there aren’t errors. Fixing mistakes can help you boost your score.
  • Improve your credit score. Your debt-to-income ratio (DTI) plays a big part in the terms you’re offered. See if there are some loans you can pay off or outstanding credit card balances you can pay down. Ask to increase your credit limits on any cards. Don’t let delinquent accounts ding your score: Make payments on time and for the minimum amount, at least.
  • Build your savings. If possible, add to your savings. With more savings, you might be seen as less of a risk, and score better rates as a result.
  • Choose your loan term wisely. A shorter loan term usually means a lower rate but often a higher monthly payment. If you can afford the higher payment on a 15-year refinance, you might be able to get a better interest rate than what you’d receive with a 30-year term.
  • Organize your affairs. Know exactly where you stand, what paperwork you need and what to expect. When you’re organized, you’ve got more information and you’re in a better position to negotiate.
  • Compare rates online. Take a look online to see what mortgage refinance rates are available. This can give you an idea of what to expect. Be sure that you’re comparing the annual percentage rate, or APR, on offers, since this includes other fees related to the mortgage. The advertised interest rate doesn’t include these extra fees, and that can impact your costs.
  • Lock in your rate. When getting approval, see if you can lock in your mortgage rate. Locking in your rate can help protect you against increases as long as the loan closes within a set period of time. Lenders might even allow you to take advantage if rates decline during the lock period.

2. Consider a no-closing-cost refinance

One way to get a low-cost refinance is to avoid closing costs altogether. With a no-closing-cost refinance, you don’t incur any upfront fees. That can save you money — at least in the short term.

However, you need to make sure you understand whether your lender is actually waiving your closing costs or simply shifting some of the fees. There are two main ways that no-closing-cost refinances work to help you avoid paying a lump sum upfront:

  • Higher interest rate: Your lender might charge you a higher interest rate to make up for the no-closing-cost refinance. The lender still ends up recovering what you would have paid in closing costs because you’re paying more in interest.
  • Roll fees into the principal: The lender can add the closing costs to your overall loan balance. Convenient — no need to dig up cash on closing day — but it increases the total sum you’re borrowing, and the amount that interest is going to be calculated on.

One caveat: Both of these scenarios result in paying more in interest over time, either because of the higher rate or because you have a bigger principal amount.

If you think you could benefit from refinancing your mortgage, then start by answering a few quick questions to see what you could qualify for

3. Compare mortgage lenders

You are not required to refinance with your current lender, and you can get a better mortgage rate simply by shopping around with multiple lenders. In fact, a study by Freddie Mac estimates you could save an average $600 annually over the life of your loan by obtaining at least two rate quotes. At least four rate quotes could save more than $1,200 annually.

Plus, if you get an attractive quote from one lender, you could have leverage with the next — or your primary mortgage place.

Where to start? Bankrate has compiled a list of top mortgage refinance lenders to consider.

4. Consult with your lender

You can also try negotiating your closing costs with the lender. Certain fees might be able to be reduced or waived, so ask if there are discounts or waivers available. Sometimes, if you’re already a borrower with the lender, or if you can show some other compelling reason (like you’ll choose another lender with a better offer), you might be able to get a break. If you don’t ask, you don’t get.

How to calculate if refinancing is worth it for you

Whether refinancing is worth it depends on your individual situation as well as the numbers. However, it’s not just about avoiding upfront closing costs. How long you’ll be in the home and your own preferences play a role in the decision, too.

In particular, a no-closing-cost refinance can work well if you won’t stay in the home for very long: a good rule of thumb is if you plan to be out of the house within five years. If you can save on overall costs before you plan to move out, it might be worth the cost, and even be a net benefit.

With a loan like this, though, the extra or higher interest can add up to much more than the original closing costs if you keep the loan for another 15 to 30 years — so if you plan to stay put, consider other options. It might make more sense to pay your closing costs upfront in a lump sum, rather than doing something that increases the interest you pay.

Even if you’re remaining in the home, refinancing still can be worth it — if you can save much on interest and payments, either with a lower interest rate or a shorter loan term.

Bottom line on a low-cost refinance

There are a variety of ways to score a low-cost refinance, from qualifying for the best rates to avoiding closing costs, from juxtaposing mortgage offers to negotiating with lenders.

You can use a mortgage refinance calculator to determine your total costs and how much you’ll pay over the long and short terms. Run the numbers and consider your circumstances to make the choice that works best for you.

To view the original article, click here

Posted by Jackie A. Graves on May 15th, 2023 1:00 PM

Comparing mortgage offers helps you find the lowest possible rate, which can ultimately save you thousands in interest. If you’re not careful about how you comparison-shop, though, you could unnecessarily hurt your credit score, which can make it harder to qualify for the best rate.

With a bit of planning, this doesn’t have to be the case. Here’s how to shop for a mortgage without hurting your credit. compares multiple lenders and loan options — all in one place. Take the first step by getting pre-approved here for FREE! No SSN Required 

How shopping for a mortgage impacts your credit score

When exploring mortgage options, your credit score typically only takes a hit when you obtain a loan preapproval from a mortgage lender. That’s because getting preapproved involves a “hard” credit inquiry, when the lender looks at your credit history and score.

If you obtain a prequalification, however — a step down from a preapproval — you might not see any change to your credit score, because prequalifications involve a “soft” credit pull (more on prequalifications versus preapprovals below). Learn more about the difference between hard and soft credit inquiries. That said, some lenders use the terms “prequalification” and “preapproval” interchangeably, so be sure to confirm the prequalification doesn’t require a hard credit check before moving forward.

Can you get preapproved for a mortgage without a credit check?

Credit checks are a standard part of the mortgage preapproval process, so it’s highly unlikely you’ll get preapproved without agreeing to one.

How to shop for a mortgage without hurting your credit score

Here’s how to avoid dinging your credit score when shopping for a mortgage:

Shop for your mortgage within a short timeframe

When you’re ready to get preapproved for a mortgage and want to compare offers from multiple lenders, aim to do it within a 45-day time frame. That’s because in this window, all of the credit inquiries different lenders make appear as one inquiry on your credit report. While your score might be affected by the single inquiry, it won’t be impacted as much as multiple inquiries on your report. That said, it can be a good idea to get prequalified well before this time frame so that you have more time to compare rates and fees.

Get prequalified for a mortgage

Getting prequalified for a mortgage — some lenders call this a rate check — can be a smart strategy if you’re concerned about damaging your credit score as you comparison-shop.

To prequalify you for a loan, lenders check your credit report, but conduct a “soft” inquiry, or soft pull, in which they prescreen your report without it affecting your score. A “hard” credit inquiry, in contrast — which happens when you get preapproved or formally apply for a loan — can adversely impact your score. Prequalification allows you to shop around and compare rates without this risk.

Keep in mind: While getting prequalified can help minimize damage to your score, it is no substitute for getting preapproved when the time comes. In today’s seriously competitive seller’s market, a preapproval is necessary to prove to sellers you’ll be able to get financing if your offer is accepted.

Hold off on applying for new credit

If you’re also considering opening a new credit card or taking out a personal loan while you shop for a mortgage, be aware: Multiple inquiries for different types of credit can negatively impact your credit score, hindering your efforts to obtain a competitive mortgage rate.

If possible, wait until you officially close on your mortgage before applying for additional forms of credit.

Check your credit report

Whenever you apply for a loan, knowing where you stand credit-wise is important. If you check your credit report well in advance of comparison-shopping for a mortgage, you can take proactive steps to improve it if needed — or fix any errors — putting you in the best position to get the lowest rate without accumulating unnecessary inquiries on your report.

You can get a free copy of your credit report from each of the three major credit reporting agencies each year at Don’t worry — checking your credit report won’t affect your score.

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Pay down debt

If your credit score could use improvement, one of the best ways to raise it is to pay down your debt, like credit card balances. If doable, pay off a credit card balance in full — bonus points for keeping the balance as low as possible moving forward.

Keep in mind, though: It might make more sense from a mortgage qualification standpoint to pay down or pay off another loan instead of putting all of your excess funds toward eliminating credit card debt, even if the credit card debt has a higher interest rate. That’s because mortgage lenders review your debt-to-income (DTI) ratio through the lens of monthly payments. If your student loan payment, for example, is higher than your minimum credit card payment, it might be better to focus your debt payoff strategy on the loan, which would lower your DTI.In cases like this, it’s helpful to have an experienced loan officer in your corner to advise you on the best ways to qualify for the lowest rates.

Improving your credit score before getting a mortgage

The most attractive interest rates are reserved for borrowers with solid credit scores. With a credit score of 740 or higher, you can get a lower interest rate, reducing your monthly payment. To improve your score, check for any errors on your credit report that could be dragging it down, such as incorrect contact information or an unreported satisfied loan. If you need to dispute anything, contact the credit bureau right away.

In the meantime, be sure to make timely payments each month and bring any past-due accounts current. Also, pay down your credit card balances, if possible, to improve your utilization ratio, and avoid applying for new credit. It might also help to become an authorized user on a relative’s credit card if they have an exceptional payment history and manage the card responsibly.

Bottom line

Protecting your credit score is important, even if you’re not shopping for a mortgage. Once you’re approved for a home loan and moving through the closing process, continue to maintain your score by refraining from applying for other types of credit, and continuing to pay down balances when possible.

To view the original article, click here

Posted by Jackie A. Graves on May 12th, 2023 10:51 AM


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