The SCOOP! Blog by®

Sometimes it’s simply a small notion that someone at work mentioned. A coworker just bought a first home and they just keep talking about it. Or maybe you start noticing For Sale signs around that were there, but you never noticed them. Perhaps you real estate agent friend keeps telling you it’s time to buy and stop renting. Whatever the motive, buying a first home is a pretty big step. All homeowners remember buying their very first home. Pretty much every detail. They remember where they close and can remember what their settlement agent looked like. They certainly remember the down payment and closing costs and getting the keys to the home handed over to them. It’s pretty exciting. If these thoughts are swirling in your head, ask these questions to see if they can push you across the goal line.

How much money do I need?

You’ll need money for a down payment, closing costs and cash reserves. There are a couple of loans that don’t require a down payment, VA and USDA loans, but those are either reserved for certain buyers or the property is located in a rural area. Otherwise, you’ll need a down payment. There are some conventional loans that ask for a down payment of as low as 3.0 percent and FHA loans only need a 3.5 percent down payment. All loans need closing costs to pay for various services from third party vendors. From an appraisal to title insurance, there are fees. Your loan officer can provide a loan cost estimate based upon request. Cash reserves are identified as the number of months’ worth of house payments are left over in the bank after the loan has closed.

How much can I borrow?

That’s a combination of current market rates, the term of your loan, your gross monthly income and current monthly credit obligations. A good estimate can be had by taking about one-third of your gross monthly income. That gives your lender an idea of what you can qualify for as it relates to monthly payment. Then, using current rates, apply that payment to calculate a qualifying loan amount. This is an estimate, but your loan officer will figure this for you.

Am I ready for household maintenance costs?

This is something that many first time buyers don’t take into consideration. When you rent and the hot water heater goes out, it’s a call to the property manager or landlord who comes and fixes it for you. You don’t have to pay for it, it’s part of your lease agreement. The hot water heater belongs to the owner of the property who is responsible for keeping it in shape. When you own a home and the hot water heater goes out, it’s you that has to come up with the funds to fix it. Your agent will also recommend that you have the property inspected by a licensed home inspector. You’ll get a report on the overall condition of your property as well as the condition of appliances.

Where do I want to live?

This is largely based upon how much you can qualify for. When your loan officer provides you with a preapproval and telling you how much you can finance, your agent then locates different areas of town that fits into your budget. Professional agents know the demographics and home values in all areas of town, some you may not even know about. Most buyers want to buy in an area that is close to work with an easy commute. Still others like the urban lifestyle and live in a high-rise condo downtown.

Do I really need an agent?

Yes, you really need an agent. Don’t try to find a home and negotiate a price on your own. You’ll be dealing with another agent who excels at negotiations. You need someone with the same skills on your side. And one other thing, you won’t need to pay for your agent’s services, the sellers take care of that.

Source: To view the original article click here

Posted by Jackie A. Graves, President on August 19th, 2019 7:26 AM

One of the biggest challenges, if not the biggest challenge, is coming up with the money for a down payment on a home. Even if someone is taking advantage of the new conventional 3.0 percent down program or the FHA mortgage, most every loan requires some sort of a down payment. While 3.0 percent doesn’t sound like a whole lot, if you’re buying your first home it usually is. On a $250,000 home, that comes out to $7,500. That’s not even mentioning closing costs. But there are sources for down payment funds that might sometimes be overlooked.

The Bank

Okay, this is the obvious source. From a checking or a savings account, accessing readily available cash from a bank account is the most common. Consumers can save up a little each month until the minimum amount of funds needed have accrued. The lender will ask for copies of the most recent bank statements showing available funds as well as documenting the source of those funds. Most often the deposits are from an employer via direct deposit. Self-employed borrowers who do not receive a regular paycheck on the 1st and 15th will be asked to provide business bank statements as well.

A Gift

There are those fortunate few who do receive a financial gift from a family member. Gift funds must also be tracked to make sure the funds are coming from an acceptable source. Gift funds can come from a family member, relative, or someone in a committed relationship. Lenders want to make sure the gift funds aren’t a loan that must be paid back at some point in the future. There needs to be a signed “gift letter” included with the loan file stating the amount of the gift, the donor’s name and where the funds are coming from. Lenders won’t ask for bank statements from the donor, but do want to know the funds came from an account in the donor’s name.

A Retirement Account

If someone has a retirement account with an employer such as a 401(k), that person can take out a loan against the fund. This is allowable per lending guidelines but is also subject to the employer’s approval. Most retirement funds allow for someone to borrow up to one-half of the employee’s vested balance in the account. With an IRA, first time buyers can withdraw up to $10,000 without penalty. The withdrawal will still be subject to any income tax due.

An Appraisable Asset

If someone owns something that can be appraised by an independent third party, the proceeds when selling that asset are an acceptable source. Selling an automobile is acceptable, for instance because it has an appraised value. Even a highly prized baseball card is an appraisable asset. It’s important to document the transaction from the initial sale to the deposit in the account.

A Down Payment Assistance Program

Down payment assistance programs are typically overseen and/or issued by a county or state agency. Such programs typically require the borrowers’ gross monthly income to not exceed certain limits and are often available to first time buyers. These programs can also be geographically targeted to help low to moderate income communities flourish. Down payment assistance can come in the form of a grant, which means there is no repayment required, or a loan which can be forgiven after living in the property for a certain period of time, typically three years or more.

Source: To view the original article click here

Posted by Jackie A. Graves, President on August 18th, 2019 8:38 AM

Ever wonder how people achieve high credit scores? 750? 790? 800+? It’s not fantasy but there are those who are both dedicated to building a pristine credit file or simply pay their bills on time and their scores gradually rise. But getting these high numbers is no accident. There’s a method to all this and if you’re wanting to get your scores in the stratosphere or just want to improve your current credit standing, there is a roadmap for you to follow.

You must first understand how these three digit scores are calculated. Scores range from as low as 300 to as high as 850. Although I’ve never seen any score as low as 300 or as high as the perfect 850. Personally, I think either is impossible to achieve. That said, those with excellent credit didn’t get those scores by accident. Credit scores assign values to five different credit patterns. Those are:

• Payment History
• Utilization
• Length of Credit History
• Types of Credit Used
• Credit Inquiries

Payment History is listed first because it has the greatest impact on a score. This one category alone makes up 35% of your total score. This makes sense because this is the one single measure of someone uses and manages credit. A consumer credit report won’t list when account payments were made but will list when a payment is made more than 30, 60 and 90 days past the due date. As long as a credit account payment was made before 30 days, the score won’t be negatively impacted, and scores will gradually improve. Note, if someone makes a monthly payment say 20 days past the due date, while it won’t impact the score the consumer will likely pay some sort of late payment fee to the creditor. If a payment is made more than 30 days past the due date, scores will begin to falter. More so if a payment is made more than 60 and then 90 days past the due date.

The second most important category is credit utilization. Some may think that carrying a zero balance and leaving the account alone that way is a good way to increase credit scores. That’s not the case at all. And if you think about it, how would any algorithm calculate a credit score if there is no activity, right? Utilization accounts for 30% of the total score. There should also be a running balance instead of paying off the credit account to zero each month. Most creditors report payments at different times so carrying a balance is typically an automatic. However, scores do improve is the running balance is approximately one-third of the total credit line.

How long someone has used credit also contributes to the total score. If someone has used credit for a long time, that counts more toward a score compared to someone brand new to the credit world. Even if someone with a history and a credit newbie have perfect credit histories, the person who has used credit responsibly over a longer period of time will be rewarded. This category represents 15% of the total score.

Finally, using different types of credit accounts helps out. A car loan, credit card and installment accounts are a good mix and accounts for 10% of the total score. Recent credit inquiries also make up the final 10% of the score. Credit inquiries are those when an individual makes multiple requests for new credit accounts within a relatively short period of time. One of two recent inquiries won’t do much harm but more than that can.

How consumers achieve high credit scores means concentrating on the first two, payment history and utilization. These two alone make up nearly two-thirds of the total score. By paying attention to payment history and keeping a running balance near the magic mark, scores can and will begin to rise from any level.

Source: To view the original article click here

Posted by Jackie A. Graves, President on August 17th, 2019 8:41 AM

FHA. 30-year conventional. 15-year term. With so many loan options out there, how do you know which is best? There is not one across-the-board winner because everyone’s situation is different. But there are pros and cons of each that might make one loan work better for you. We’re comparing and contrasting some of the most popular options to help you make the best choice when buying a house. 

30-year fixed-rate conventional

This is a 30-year loan with rates that are fixed every month. These loans follow Fannie Mae and Freddie Mac guidelines and are not backed by the government like FHA loans.

Pro: With set payments, there’s no need to worry about rising rates. Loans are available for a range of buyers, with options like HomeReady and Conventional 97 that offer as little as 3% down. Also, there is no upfront mortgage insurance fee like you have on FHA loans.  

Con: You have to pay PMI if you put less than 20% down. There also may be higher credit score requirements than FHA loans.  

15-year fixed-rate 

A 15-year fixed-rate option also has fixed rates for the life of the loan. If you’re the type who wants to pay your home off more quickly, this could be a good choice.

Pro: You pay far less interest over the life of the loan and pay off your home in half the time. 

Con: Monthly payments are higher.


FHA loans are federally insured, which is why down payment and credit score requirements are more relaxed. 

Pro: FHA loans require as little as 3.5% down. Credit score requirements are also lower than conventional loans. You can typically qualify for a loan with a 3.5% down payment at a 580 score, and may be able to get a loan with a score as low as 500 if you have 10% down. 

Con: You’ll have to pay mortgage interest, which you can’t get rid of unless you refinance. FHA loans also come with an upfront mortgage insurance fee.

Adjustable rate

“An adjustable-rate mortgage (ARM) is a type of mortgage in which the interest rate applied on the outstanding balance varies throughout the life of the loan,” said Investopedia. “Normally, the initial interest rate is fixed for a period of time, after which it resets periodically, often every year or even monthly. The interest rate resets based on a benchmark or index plus an additional spread, called an ARM margin.”

Pro: Rates are often lower during the introductory or fixed period than what a borrower can get with a fixed-rate loan, making homeownership more affordable initially. 

Con: Once the ARM gets past the fixed period, monthly payments can skyrocket, leaving owners unprepared and possibly in danger of defaulting. 

USDA loans 

Looking to buy in a rural area? You may qualify for a USDA loan. USDA-eligible homes may also be located in some suburban areas. You can check eligibility on their website.  

 Pros: USDA loans offer low or even no down payments and low interest rates. Rates can be as low as 1% with subsidies on direct loans.

Cons: Household income is capped and a mortgage insurance premium is required for down payments under 20%.

VA loans

Veterans Administration (VA) loans help military members and veterans purchase homes.

Pro: VA loans tend to have the lowest average interest rates, and loans are available with no down payment. In addition, there is “no monthly mortgage insurance premiums or PMI to pay,” according to

Con: They’re not available to the general public, and veterans must meet a list of conditions

Source: To view the original article click here

Posted by Jackie A. Graves, President on August 16th, 2019 8:31 AM

What is escrow? In real estate, an escrow account is a secure holding area where important items (e.g., the earnest money check and contracts) are kept safe by an escrow company until the deal is closed and the house officially changes hands. Escrow is also a contractual arrangement in which a third party—usually the escrow officer—maintains money and documents until the deal is done and escrow is closed.

How escrow works

The escrow agent is a third party—perhaps someone from the real estate closing company, an attorney, or a title company agent (customs vary by state), says Andy Prasky, a real estate professional with Re/Max Advantage Plus in Twin Cities.

The third party is there to make sure everything during the transaction proceeds smoothly, including the transfers of money and documents, and to hold assets safely in an escrow account until disbursement.

Escrow protects all of the relevant parties in a real estate transaction, including the seller, the home buyer, and the lender, by ensuring that no escrow funds from your lender and other property change hands until all of the conditions in the agreement have been met. Along the way, proper documentation is filed with the escrow agent or the escrow company as each step toward closing is completed.

Contingencies that might be part of the process could include home inspectionrepairs, mortgage approval, and other tasks that need to be accomplished by the buyer or seller. And every time one of those steps is completed, the buyer or seller signs off with a contingency release form; then the transaction moves to the next step (and one step closer to closing).

Once all conditions are met and the transaction is finalized, the closing costs are paid and the money due to the sellers is disbursed from your lender. Meanwhile an escrow officer clears (or records) the title, which means the buyer officially owns the home.

How much does escrow cost?

That varies—as well as whether the buyer or the seller (or both) pays—with the fee for this real estate service typically totaling about 1% to 2% of the cost of the home.

The earnest money deposit

Earnest money—also known as an escrow deposit—is a dollar amount buyers put into an escrow account after a seller accepts their offer. The escrow company holds the money in an escrow account for the duration of the transaction.

Another way to think of it is as a "good-faith” deposit into an escrow account, which will compensate the seller if the buyer breaches the contract and fails to close.

Can you borrow earnest money from your lender?

Most home buyers come up with cash for escrow and deposit it into the escrow account from their own funds. The payment amount is small compared with the cost of the home and the loan, and the home buyers may not even have a mortgage lender yet when they make an offer on a home.

However, earnest money can be borrowed from your lender, but there are certain rules involved. First-time buyers are most likely to need to go to their mortgage lender to make this escrow account deposit. Your lender will ultimately count the deposit toward closing costs and the down payment on the house.

How escrow protects you during the real estate buying process

Escrow may seem like a pain, but here's how it can work in your favor. Let's say, for example, the buyer had a home inspection contingency and discovered that the roof needed repairs. The seller agrees to fix the roof. However, during the buyer's final walk-through, she finds that the roof hasn’t been repaired as expected. In this case, the seller won’t see a dime of the buyer’s money until the roof is fixed. Talk about a nice safeguard!

Sellers benefit from escrow, too: Let's say the buyers get cold feet at the last minute and bail on the transaction. This may be disappointing to the seller, but at the very least, buyers have typically ponied up a sizable chunk of change for their earnest money deposit. This money, often totaling 1% to 2% of the purchase price of a home, has been held in escrow. When buyers back out with no legitimate reason, they forfeit that money to the seller—a decent consolation for the sale's failure and the expense of making mortgage payments and other expenses while the home was off the market.

Escrow, in other words, is the equivalent of bumpers on cars, keeping everyone safe as they move forward in a real estate transaction. Odds are, no one's trying to swindle anyone. But isn't it nice to know that if something does go wrong, escrow is there to cushion the blow?

What is an escrow account on a mortgage account?

When a homeowner makes monthly payments to the mortgage servicer, part of each payment goes toward the mortgage and part of it goes into an escrow account for payment of property taxes and insurance premiums such as homeowners insurance or mortgage insurance. When those bills are due, the escrow service uses the funds in the escrow account to make payment to your insurance company and to the county for property taxes.

If more money accumulates in your escrow account from monthly payments than is necessary to pay property taxes and insurance, the mortgage company sends you a refund check, and may lower your monthly mortgage payment. On the other hand, if insurance premiums and property tax expenses go up, your mortgage holder may send you a bill for the difference, or raise your monthly loan payments.

Source: To view the original article click here

Posted by Jackie A. Graves, President on August 15th, 2019 8:18 AM

Should you prepay your mortgage? For some homeowners it’s a financially savvy move—but for others, beefing up their loan payments just doesn’t make sense. To help you figure out whether prepayment is right for you, here are the pros and cons cited by financial experts.

Pro: You'll cut down on the interest you owe

Interest is the extra fee you pay your lender for loaning you the cash you needed to buy a home. After all, lenders don’t just hand out dough for free—they’re in the business to make money.

By increasing your monthly mortgage payments—also called “prepaying” your mortgage—you’ll effectively save money in interest charges. Those savings can add up big-time.

For example, let’s say you take out a $200,000 mortgage with a 4% fixed interest rate and a 30-year term. If you continue to make your minimum monthly payments, you’d be forking over $143,739 in interest over 30 years until the debt is paid off. But, by paying an extra $100 per month, you’d pay only $116,702 in interest over a 25-year time span—a savings of $27,037.

Pro: You’ll get your mortgage paid off sooner

By accelerating your mortgage payments, you’ll also be shortening how long it takes to pay off the loan, which would increase your cash flow in the future. That’s a huge incentive for some borrowers.

“For families with young children, where the parents are concerned about paying for their children’s college tuition, sometimes we will recommend they increase mortgage payments so that when their kids head off to college their mortgage obligation is gone,” says Joe Pitzl, a certified financial planner for Pitzl Financial, in Arden Hills, MN.

Paying more money each month toward your mortgage’s principal can also give you peace of mind, says Marguerita Cheng, a certified financial planner at Blue Ocean Global Wealth in Gaithersburg, MD.

“Emotionally, it’s gratifying knowing that you’re paying your mortgage sooner than you originally planned to do,” Cheng says.

Pro: You’ll build equity faster

No matter how much money you put down on your mortgage, your home equity is the current market value of your home minus the amount you owe on your loan. So say your home is worth $250,000 and your mortgage balance is $200,000. In this case, you’d have $50,000, or 20%, in home equity.

Making larger mortgage payments toward your loan's principal would enable you to build equity faster. Having more home equity can be a tremendous boon if you’re looking to get a home equity loan or home equity line of credit, such as to pay for home improvements, says Tendayi Kapfidze, chief economist at Lending Tree.

Pro: It helps your credit score

Showing that you have less debt—and that you manage your debts responsibly, by paying your mortgage off early—can raise your credit score. That can help if you’re planning to apply for a car loan or a second mortgage on a vacation home, since your credit score would affect the interest rate you qualify for.

Con: Prepaying reduces mortgage interest, which is tax-deductible

Because prepaying your mortgage reduces your mortgage interest, it may not make sense from a tax-savings perspective. Mortgages are structured so that you start off paying more interest than principal.

For example, in the first year of a $300,000, 30-year loan at a fixed 4% interest rate, you'd be deducting $10,920. (To find out how much you paid in mortgage interest last year, punch your numbers into our online mortgage calculator.)

Nonetheless, taking a mortgage interest deduction under the new tax law requires itemizing deductions—and itemizing may no longer make sense for many homeowners, since the standard deduction jumped under the new tax plan to $12,200 for individuals, $18,350 for heads of household, and $24,400 for married couples filing jointly.

Another thing to consider: In the past, you could deduct the interest from up to $1 million in mortgage debt (or $500,000 if you filed singly). However, for loans taken out from December 15, 2017, onward, only the interest on the first $750,000 of mortgage debt is deductible, says William L. Hughes, a certified public accountant in Stuart, FL.

Con: You could miss out on more lucrative investment opportunities

Every dollar you put toward your mortgage principal is a dollar you can’t invest in higher-yield ventures, such as stocks, high-yield bonds, or real estate investment trusts, Pitzl says.

That being said, “you’d be assuming more risk by investing your money in, say, the stock market instead of putting the money toward your mortgage,” Pitzl points out.

“You have to consider your risk tolerance before you decide where to put your extra cash,” says Cheng.

Con: You may miss paying off higher-interest debts

For many homeowners, paying off higher-interest debt—such as from a credit card or private student loan—is more important than prepaying their mortgage, Cheng says.

Think about it: If you’re carrying a $400 debt on a credit card from month to month with a 20% interest rate, the amount of money you’re paying in credit card interest is $80 per month—that would be leaps and bounds higher than what you’d be paying in mortgage interest on a home loan with a 4% interest rate.

Con: Prepaying a mortgage could hamper achieving other financial goals

Building your retirement savings is crucial, of course. However, some people make the mistake of prepaying their mortgage instead of maxing out their retirement contributions, Cheng laments.

“At the bare minimum, I recommend my clients do a full 401(k) match with their employer,” she says.

Moreover, Pitzl encourages people to build a sufficient emergency fund—typically, a fund large enough to cover three to six months of their essential expenses—before they focus on prepaying their mortgage.

“If you get into a bind, you can’t sell off windows and doors to make ends meet,” Pitzl says.

Con: There may penalties for prepaying your mortgage

Some lenders charge a fee if a client’s mortgage is paid in full before the loan term ends. That’s why it’s important to check with your mortgage lender—or look for the term “prepayment disclosure” in your mortgage agreement—to see if there’s a penalty and, if so, how much it is.

The bottom line: If you don't have enough money to pad your savings before you begin paying off your mortgage early, prepaying your home loan may put you in a financial hole if an emergency crops up.

Still not sure what direction to go in? Consider sitting down with a financial planner to discuss your options based on your personal finances.

Source: To view the original article click here

Posted by Jackie A. Graves, President on August 14th, 2019 7:26 AM

If you're hoping to score a deal while house hunting (and who isn't?), one bargain-basement option well worth exploring is a HUD home. So what is that exactly? Simply put, a HUD home is a property owned by the U.S. Department of Housing and Urban Development, but there's some backstory here, so allow us to explain.

Long before a home becomes the property of HUD, it typically was owned by a regular homeowner who'd made this purchase with an FHA loan. Federal Housing Administration loans are easier to qualify for than a conventional loan because the FHA requires a low down payment (as little as 3.5%). However, if the owner ends up unable to pay his monthly mortgage, he ends up in foreclosure on the FHA loan, which means the home goes to HUD, which then must figure out how to unload this real estate and make back its money.

That's where you come in! The process of buying a foreclosed HUD home varies from a conventional sale in a couple of ways, so here's what you'll want to know before you venture down the HUD real estate path.

Benefits of a HUD home

HUD doesn’t want to own these foreclosed homes any longer than it needs to, so these homes are priced to move, often below market value. Plus, the government agency offers special incentives to buyers in certain markets to sweeten the deal on a HUD-owned home.

For example, the HUD “Good Neighbor” program offers HUD homes in revitalizing areas at a 50% discount to community workers (e.g., teachers, police officers, firefighters, and EMS personnel) who plan to live in the property for at least 36 months.

Other HUD perks: low down-payment requirements or sales allowances you can use to pay closing costs or make repairs on the HUD home—not to mention, FHA financing options. So be sure to inquire with your real estate agent about the unique home-buying possibilities; the HUD route could be an even better bargain than how it first seems.

Another bonus for home buyers is that HUD gives preference to owner-occupants who intend to live in the home for at least one year, so odds are good you'll beat out investors to boot. Another HUD win!

How to buy a HUD home

HUD homes aren't listed on conventional real estate websites, and can instead be found at, where you can shop for HUD properties by state or ZIP code. You never know what you might find in a HUD search, in what location, and at what price. HUD listings typically contain photos, an asking price, and—here's where things get different—a deadline by which you should submit your offer.

HUD homes are sold through an auction process: Once the HUD listing period deadline is past and bids are in, HUD reviews its options. If none of the bids is deemed acceptable (usually because it's too low), HUD extends the offer period and/or lowers the asking pricing until a match is made.

All offers are considered, but in almost every case, the highest acceptable bid wins, says Mark Abdel, a real estate professional with Re/Max Advantage Plus in Minneapolis–St. Paul.

Which begs the question: How much should a hopeful buyer offer on a HUD listing? Well, that all depends on how hot the local market is and the condition of the home (more on that next).

Risks of HUD homes

HUD homes are sold as is—meaning what you see is what you get. If the leaky roof or electrical needs repairs, it's all on you, the prepared home buyer, to cover the costs. And if you're aiming to be an owner-occupant, you'll likely want to square away any renovations quickly. That’s why it’s critical to get a home inspection before you put your bid in.

“A quality home inspection will alert you to what types of repairs or improvements need to be made, which you should factor into your bid accordingly,” advises Abdel.

That’s not to say that HUD homes always sit in disrepair and fall into the fixer-upper category. Each one, once HUD takes it over, is assigned a field service manager, who keeps a watchful eye on the home to make sure it’s secure and provides maintenance while the home is unoccupied.

The HUD field service manager may even oversee cosmetic enhancements or repairs, depending on the home’s condition, before the bidding process begins. Some HUD homes are even move-in ready, so never presume you'll end up with a clunker; you could easily be a lucky HUD buyer!

Where to get HUD home loans

All financing options are available for HUD homes, including FHAVA, and conventional financing. If you’re buying a HUD home that needs repairs, check out a FHA 203k loan, which can allow you to include the renovation costs in the loan.

Your real estate agent can help you determine what programs—FHA, VA, and additional assistance options—you might be eligible for; and your lender may even offer some creative suggestions.

Also: In order to represent you in your bid for a HUD home, your real estate agent must be HUD-approved. Many are, so ask your Realtor® or else you can specifically search for HUD-registered agents at

Source: To view the original article click here

Posted by Jackie A. Graves, President on August 13th, 2019 7:48 AM

The homebuying process is full of acronyms and if you're unfamiliar with them, it can be hard to understand what you're agreeing to.


PMI, APR, LTV… say what? Don't stress when you hear acronyms you don't recognize – we're here to help! Let's get started with some of the most important acronyms and their definitions, so you can sound like a pro as you go through the homebuying process.


  • APR (Annual Percentage Rate)The annual percentage rate tells you the annual cost of borrowing money based on the loan amount interest rate, and certain others fees. The APR is the bottom-line number you can use to shop and compare rates among lenders.

  • FRM (Fixed-Rate Mortgage): A fixed-rate mortgage has an interest rate that does not change during the entire term of your loan. This is the most common type of mortgage, giving you certainty and stability over the life of the loan.

  • ARM (Adjustable-Rate Mortgage): A adjustable-rate mortgage usually give you lower monthly payments at the onset, but over time your payments will change with interest rates. With this type of mortgage your interest rate adjusts after an initial period — typically 3, 5 or 7 years — and resets periodically.

  • LTV (Loan-to-Value): The loan-to-value ratio divides the amount of money borrowed by the appraised value of the home and tells you how much of your home you own versus how much you owe on your mortgage. Lenders use it to help evaluate the risk and terms of your loan.

  • DTI (Debt-to-Income): The debt-to-income is the percentage of your monthly income that goes toward your monthly debt payments. Lenders typically use this to measure your ability to manage monthly payments and repay debts.

  • PMI (Private Mortgage Insurance): Private mortgage insurance  is an insurance that protects lenders from losses if a homeowner is unable to pay their mortgage. It is required for homebuyers who make down payments that are less than 20% of the home purchase price. Typically, PMI will be incorporated into your monthly mortgage payment.

  • P&I (Principal and Interest): Principal and interest are the portion of your monthly mortgage payment that goes toward paying off the money you borrowed to buy your home. For most homeowners your principal and interest make up the majority of your monthly mortgage payment — but not all of it.

  • PITI (Principal, Interest, Taxes and Insurance): Together, principal, interest, taxes and insurance make up your total monthly mortgage payment. Calculating your total monthly payment, not just principal and interest, is an essential part of the loan approval process because it will give you a more accurate picture of the costs of homeownership.

  • UPB (Unpaid Principal Balance): The unpaid principal balance is the amount of principal still owed on a loan. On a typical monthly mortgage payment, a portion of your payment is applied to the interest and a portion is applied to the principal. The following month's interest is based on your UPB. You can check how much how much of your payment is going towards your principal by looking at your amortization schedule.

  • HOA (Homeowners Association): 20% of America's homeowners that live within a community governed by a Homeowners Association. If you are considering buying in one of these communities, it's important that you pay your fees as scheduled – typically monthly, quarterly, or annually. HOA fees vary from community to community and may cover services such as trash removal, lawn care and maintenance for common areas, pest control.

Words matter! Learn your homebuying lingo now so that when it's time buy a home you can talk with confidence about one of the most important investments you'll ever make. To learn more about the homebuying process visit My Home by Freddie Mac®.

Source: To view the original article click here

Posted by Jackie A. Graves, President on August 12th, 2019 8:15 AM

What is an FHA loan?

An FHA loan is a government-backed mortgage insured by the Federal Housing Administration, or FHA for short. Popular with first-time homebuyers, FHA home loans require lower minimum credit scores and down payments than many conventional loans. Although the government insures the loans, they are offered by FHA-approved mortgage lenders.

FHA loans come in fixed-rate terms of 15 and 30 years.

How FHA loans work

FHA’s flexible underwriting standards allow borrowers who may not have pristine credit or high incomes and cash savings the opportunity to become homeowners. But there’s a catch: borrowers must pay FHA mortgage insurance. This coverage protects the lender from a loss if you default on the loan.

Mortgage insurance is required on most loans when borrowers put down less than 20 percent. All FHA loans require the borrower to pay two mortgage insurance premiums:

Upfront mortgage insurance premium: 1.75 percent of the loan amount, paid when the borrower gets the loan. The premium can be rolled into the financed loan amount.

Annual mortgage insurance premium: 0.45 percent to 1.05 percent, depending on the loan term (15 years vs. 30 years), the loan amount and the initial loan-to-value ratio, or LTV. This premium amount is divided by 12 and paid monthly.

So, if you borrow $150,000, your upfront mortgage insurance premium would be $2,625 and your annual premium would range from $675 ($56.25 per month) to $1,575 ($131.25 per month), depending on the term.

FHA mortgage insurance premiums cannot be canceled in most instances. The only way to get rid of the premiums is to refinance into a non-FHA loan or to sell your home. FHA loans tend to be popular with first-time homebuyers, as well as those with low to moderate incomes. Repeat buyers can get an FHA loan, too, as long as they use it to buy a primary residence.

FHA lenders are limited to charging no more than 3 percent to 5 percent of the loan amount in closing costs. The FHA allows home sellers, builders and lenders to pay up to 6 percent of the borrower’s closing costs, such as fees for an appraisal, credit report or title search.

How to qualify for an FHA loan

To be eligible for an FHA loan, borrowers must meet the following lending guidelines:

FICO score of 500 to 579 with 10 percent down or a FICO score of 580 or higher with 3.5 percent down.

Verifiable employment history for the last two years.

Income is verifiable through pay stubs, federal tax returns and bank statements.

Loan is used for a primary residence.

Property is appraised by an FHA-approved appraiser and meets HUD property guidelines.

Your front-end debt ratio (monthly mortgage payments) should not exceed 31 percent of your gross monthly income. Lenders may allow a ratio up to 40 percent in some cases.

Your back-end debt ratio (mortgage, plus all monthly debt payments) should not exceed 43 percent of your gross monthly income. Lenders may allow a ratio up to 50 percent in some cases.

If you experienced a bankruptcy, you must wait 12 months to two years to apply, and three years for a foreclosure. Lenders may make exceptions on waiting periods for borrowers with extenuating circumstances.

FHA vs. conventional loans

Unlike FHA loans, conventional loans are not insured by the government. Qualifying for a conventional mortgage requires a higher credit score, solid income and a down payment of at least 3 percent for certain loan programs. Here’s a side-by-side comparison of the two types of loans.

FHA loans vs. conventional mortgages



Credit score minimum



Down payment

Between 3% to 20%

3.5% for credit scores of 580+; 10% for credit scores of 500-579

Loan terms

10, 15, 20, 30 years

15 or 30 years

Mortgage insurance premiums

PMI: 0.5% to 1% of the loan amount per year

Upfront premium: 1.75% of the loan amount; annual premium: 0.45% to 1.05%

Interest type

Variable rate, fixed rate

Fixed rate

Types of FHA loans

In addition to its popular FHA loan, the FHA also insures other loan programs offered by private lenders. Here’s a look at each of them.

FHA 203(k) loans — These FHA loans help homebuyers purchase a home — and renovate it — all with a single mortgage. Homeowners can also use the program to refinance their existing mortgage and add the cost of remodeling projects into the new loan. FHA 203(k) loans come in two types:

The limited 203(k) has an easier application process, and the repairs or improvements must total $35,000 or less.

The standard 203(k) requires additional paperwork and applies to improvements costing more than $5,000, but the total value of the property must still fall within the FHA mortgage limit for the area.

Home Equity Conversion Mortgage, or HECM — A HECM is the most popular type of reverse mortgage and is also insured by the FHA. A HECM allows older homeowners (aged 62 and up) with significant equity or those who own their homes outright to withdraw a portion of their home’s equity. The amount that will be available for withdrawal varies by borrower and depends on the age of the youngest borrower or eligible non-borrowing spouse, current interest rates and the lesser of the home’s appraised value or the HECM FHA mortgage limit or sales price.

FHA Energy Efficient Mortgage (EEM) program — Energy efficient mortgages backed by the FHA allow homebuyers to purchase homes that are already energy efficient, such as EnergyStar-certified buildings. Or they can be used to buy and remodel older homes with energy-efficient, or “green,” updates and roll the costs of the upgrades into the loan without a larger down payment.

FHA Section 245(a) loan  — Also known as the Graduated Payment Mortgage, this program is geared at borrowers whose incomes will increase over time. You start out with smaller monthly payments that gradually go up. Five specific plans are available: three plans that allow five years of increasing payments at 2.5 percent, 5 percent and 7.5 percent annually. Two other plans set payment increases over 10 years at 2 percent and 3 percent annually.

How to find FHA lenders

Borrowers get their home loans from FHA-approved lenders rather than the FHA, which only insures the loans. FHA-approved lenders can have different rates and costs, even for the same loan.

FHA loans are available through many sources — from the biggest banks and credit unions to community banks and independent mortgage lenders. Costs, services and underwriting standards vary among lenders or mortgage brokers, so it’s important to shop around.

Learn more about how to find the best FHA mortgage lender.

FHA loan limits for 2019

For 2019, the floor limit for FHA loans in most of the country is $314,827, up from $294,515 in 2018. For high-cost areas, the ceiling is $726,525, up from $679,650 a year ago. These limits are referred to as “ceilings” and “floors” that FHA will insure. FHA updates limit amounts each year in response to changing home prices.

FHA is required by law to adjust its amounts based on the loan limits set by the Federal Housing Finance Agency, or FHFA, for conventional mortgages guaranteed or owned by Fannie Mae and Freddie Mac. Ceiling and floor limits vary according to the cost of living in a certain area, and can be different from one county to the next. Areas with a higher cost of living will have higher limits, and vice versa. Special exceptions are made for housing in Alaska, Hawaii, Guam and the Virgin Islands, where home construction is more expensive.

FHA loan relief

Loan servicers can offer some flexibility on FHA loan requirements to those who have suffered a serious financial hardship or are struggling to make their payments.

That relief might be in the form of a temporary period of forbearance, a loan modification that would lower the interest rate, extend the payback period, or defer part of the loan balance at no interest.

Source: To view the original article click here

Posted by Jackie A. Graves, President on August 11th, 2019 8:25 AM

It’s a question homeowners ask when interest rates tumble: Should I refinance my home mortgage or stick with the loan I have?

While a home refinance may ultimately be a smart financial move, a number of questions must be considered first that will help evaluate your specific situation.

Here are some of the top questions to keep in mind:

Can I lock in a fixed interest rate or lower my interest rate?

Locking in a fixed or lower interest rate or lower payment are good reasons to refinance.

Homeowners with a variable rate mortgage, for example, might want to refinance to a fixed rate loan to avoid higher payments if rates rise. With fixed rate loans, the monthly payment stays the same for the life of the mortgage. Snagging a lower interest rate that results in savings on your monthly mortgage cost might also make refinancing a good option.

“Typically, lenders will offer a selection of refinance loan types and can lock in a rate once the borrower is ready to apply,” said John Cabell, director of wealth and lending intelligence for J.D. Power. “The exact monthly payment may be hard to pin down until all transaction fees are finalized, and sometimes those details are not finalized until closing.”

Can I lower my total interest expense?

Paying less total interest over the term of a new loan compared with the remaining term on an existing loan can be another good reason to refinance. However, in some cases switching to a mortgage with a lower rate but a longer term could result in you paying more interest over the life of the loan despite having a smaller monthly payment.

Bankrate’s refinance calculator can help you do the math.

Do I have enough equity?

If your home is worth more than you owe on your existing mortgage, you’re in a much better position to refinance than if you have no equity.

A home with a lot of equity built up will have a lower loan-to-value ratio (LTV), which banks prefer as it makes the loan less risky. An LTV of 80 percent or less also eliminates the need for private mortgage insurance. It also makes it easier to refinance for a larger amount than your existing mortgage, known as a cash-out refinance. Funds raised in a cash-out can be used to pay down debt, fund home improvements or help with college costs.

“By studying nearby home sales and speaking with a local realtor, you may be able to get a general idea on the value of the home,” said Sherry Graziano, senior vice president and mortgage transformation officer at SunTrust. “You can then compare that to what you still owe on your mortgage to see what equity you have built. If it’s too little, it may not be worth refinancing and may not meet the lender requirements.”

Is my credit score high enough?

If you have a good history of making your mortgage payments and paying your other bills on time, you’re in a much better position to refinance than if you’ve made some late payments or missed any payments that hurt your credit rating.

“Your credit score will affect your eligibility for loans and low interest rates,” said Cabell. “Knowing your score before applying for a refinance and building a good score over time are important for ensuring you have the most financial flexibility.”

Lenders should be able to tell you up front whether you’re qualified for specific refinance offers based on your credit score.

How much will I pay in closing costs?

It may not make sense to pay points and closing costs to refinance even if you could lower your interest rate, payment or total interest expense.

“Generally, the amount of closing costs you’re willing to pay should not exceed the financial benefits of the lower refinance interest rate,” said Cabell. “That fact requires validating before you commit to the transaction, though, so consumers should make sure the lender provides assurance in writing.”

A rule of thumb is to calculate how many months it will take to recoup your closing costs. Let’s say your closing costs are $3,000 and your monthly savings are $125 after the refinance. It would take you 24 months to breakeven and start enjoying the cost savings of the lower interest rate on the new mortgage.

It’s also worth noting that some lenders offer a no-cost option that lets you get the benefits of refinancing at a higher interest rate without paying any costs. This typically comes with a higher interest rate, however.

How long do I plan to own my home?

Yet another factor to consider before embarking on a home refinance is how long you expect to own the property. If you’re planning to move within a few years, refinancing may not make sense, even if you could get a lower interest rate.

The reason? There might not be enough time to offset your closing costs, despite a lower monthly payment.

“If the borrower is considering selling the property within the next few months or couple of years, it may not be advisable to refinance since the borrower may not recoup the upfront fees and interest over such a short timeframe,” said Cabell.

On the other hand, you may be able to lower the upfront costs if you’re willing to accept a slightly higher interest rate. But that could mean that it wouldn’t make sense for you to refinance.

What costs are involved in a refinance?

Refinancing can cost hundreds or thousands of dollars, depending on the loan amount, the type of loan, the region of the country where the property is located and other factors.

Typical costs include an appraisal fee, credit report, title insurance and closing or attorney’s fees.

“The cost to refinance will depend on the lender and associated third parties, so it pays to understand those cost obligations before committing,” said Cabell.

Reasons to refinance a home loan     

Just because rates are at historical lows, doesn’t mean refinancing is the right decision for everyone.

“Homeowners should have a clear financial objective and see refinancing as one of a multitude of options to achieve that objective,” said Graziano, who outlined the following key reasons one might want to refinance.

  • To alter the terms of the loan by shortening or lengthening the life of the loan
  • To take advantage of a lower interest rate, resulting in lower monthly payments and paying less total interest over the term of a new loan.
  • To replace an adjustable-rate mortgage with a fixed-rate mortgage
  • To consolidate debt or to finance educational expenses or home improvement projects

Source: To view the original article click here

Posted by Jackie A. Graves, President on August 10th, 2019 9:39 AM


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