Quicken Loan’s 1% Down Mortgage Program

It seems just about everyone is lowering mortgage down payment requirements to deal with rising home prices, this despite the near-record low mortgage rates still widely available.

You see, down payment is still the biggest hurdle to homeownership, and I suppose it was during the previous boom as well. That would explain why zero down mortgages were the norm back in 2006.

The major problem then was that you could also state your income, your assets, and not disclose your job, so long as you had a decent credit score. No skin in the game and no disclosure equals no good.

We’ve learned from those mistakes, I hope, and now underwriting is a lot more sound. Still, people want to buy homes, whether they’ve saved up a large down payment or not. And that would explain why Fannie and Freddie began offering 97% LTV mortgages.


Building off those programs are mortgages with grants that still give the homeowner a 3% down payment, but without the borrower actually having to come up with the three percent in funds.

Instead, many lenders are providing a 2% grant to homeowners and asking that they come up with the remaining one percent, which seems pretty fair.

The use of a grant is allowed under both Fannie’s HomeReady program and Freddie’s Home Possible Advantage, and some banks dole outs funds in accordance with the Community Reinvestment Act.


Quicken Loans 1% Down Payment Option

Interestingly, the largest non-bank mortgage lender in the country, Quicken Loans, quietly rolled out their 1% down payment option back in March, but there wasn’t a press release or any fanfare. There certainly wasn’t a Super Bowl commercial.

I don’t know why that is; I’m just here to tell you about the loan program in case you lack a down payment and are interested. If I had to guess, I’d say that it’s limited to certain types of buyers and thus a national rollout or major ad campaign might be misleading and/or a waste of money.

Anyway, let’s talk about Quicken’s 1% down loan program to see if you might qualify based on what I know about it.

First off, this program can only be used for the purchase of a home, no refinances are permitted. Quicken Loans provides a 2% grant and the borrower brings in the remaining 1% to make it a 97% LTV loan.

I’m not sure if the grant has to be paid back if the borrower sells or refis before a certain period of times passes. Inquire with Quicken about that.

Secondly, the property must be a one-unit owner-occupied property, which includes single-family homes and condos (and townhomes), but not co-ops.

When it comes to credit, the minimum FICO score required is 680, which is considered average (or perhaps a bit below average). So it’s pretty flexible in terms of creditworthiness.

Perhaps more importantly, you must make less than or equal to the median income for the county in which you’re purchasing the home. If the income limit is $75,000, you must earn that or less to qualify for the 1% down payment program.

Speaking of income, the maximum DTI ratio is 45%, which is standard.


Quicken’s 1% Down Might Not Require Any Funds from the Borrower

If there aren’t any additional overlays on this program versus the ones offered by Fannie and Freddie, no minimum borrower contribution is required, meaning the down payment funds and any reserves can be gifted.

The Quicken program also comes with a free “introduction to homeownership” course that is required for first-time home buyers, but available to everyone at no cost.

When it comes to loan types, you’re likely going to be limited to fixed products with a 30-year amortization. Put simply, probably the 30-year fixed unless you can afford and desire a 15-year fixed. That wouldn’t really make sense for someone lacking a down payment.

There will be mortgage insurance, seeing that the loan is well north of 80% LTV, but it might be at a reduced rate as it is via the Fannie/Freddie 97 programs.

I have no idea what the mortgage rates are like, but I assume higher than what you see advertised to account for the higher risk of putting just one percent down. But seeing that rates are so low at the moment, they’ll probably still look pretty favorable.

For the record, Quicken is just one of many lenders out there offering grants to home buyers to push the down payment requirement down to just 1%, so you can always shop around to compare different interest rates and program requirements by lender.

Recently, Guaranteed Rate launched a similar program, as did United Wholesale Mortgage (if you’re using a mortgage broker).

Other regional lenders, such as Fifth Third and BancorpSouth, have introduced zero down offerings.

The mortgage market is changing rapidly to account for higher home prices. So take the time to compare all options, including FHA loans, to see what the best fit is for your situation.

source:  thetruthaboutmortgage.com

Searching for your first home: Rent or buy?

MANILA - Choosing your first home is likely to be one of the biggest financial decisions that you will make. As with all purchases, you can either feel you made the right choice, or regret the investment.

This is why some prefer to initially rent or lease, and then decide whether the neighborhood is right for them. But they could also miss out on the opportunity to buy when the price is more affordable.

So should you rent or buy your first home? The quick answer to this question is it depends. The decision to buy or rent depends on so many factors that varies per individual: your lifestyle, finances, future plans, and even the current real estate market.

What is right for one person may not be suitable for another. For instance, a newly married couple whose career plans include moving abroad would be in a totally different position from a large family with an entrenched business in a specific location.

There are pros and cons for each option. Here’s a run-down of the upsides and downside of buying and renting.

Buying a house means being able to hold on to a hard asset that almost always appreciates in value.

It also lets you and your family establish roots in the community.

Plus it allows you to plan out your life--where your kids will study, where you will work--for the long term.

But expect this to put a dent on your cash flow, since you will need to put in equity, which could go anywhere from 20-60% of the property value.

It also means paying real estate taxes and maintenance costs.

Should you need to dispose of it at some point, you will find this may not always be easy, and you could be at the mercy of market conditions.

Renting is easier on the pocket--you only need to worry about a downpayment and security deposit.

It also gives you a measure of flexibility. If you’re unhappy with the place or your landlord, you can simply end your contract.

 It also means not having to worry about taxes and maintenance costs, which are the landlord’s concerns.

However, property rentals rise, and it means you have to be ready to deal with increasing rental fees, depending on market conditions.

Rent is an outright monthly expense, and does not enhance your asset base.

You have to live with the terms set by the landlord. For instance, the landlord may prohibit you from keeping pets, or may not allow you to drill holes for your pictures on walls.

Still not decided? Look at each of these five factors for more help:

1. Your current life stage and lifestyle. How old are you? The younger you are, it’s more likely that your options are wide open. Career-wise, there’s a possibility of finding a new job, within or outside the city you are now in, which means renting might be better for you. Are you single or do you have a growing family that needs more space? If it’s the latter, consider how owning or renting a home affects their lifestyle.

2. Your future plans. Do you have any plans of moving abroad? If so, then you might be better off renting a starter home. Otherwise, you will have to deal with selling off your home when you leave the country. This may not come easy when you’re about to migrate, and this may not even be at a price acceptable to you. Don’t forget your significant other, if you have one. If you purchase that starter home, do you think your prospective spouse, whose parents live far away, would be happy to move there?

3. Your financial status. Can you afford to pay the down payment for the starter home that you want? If you are thinking of taking out a loan for this home, do you have enough income to support the monthly payments? Note that your expenses as a homeowner will not be limited to just the mortgage payments, but will also include maintenance costs, real estate taxes, and in some cases, condominium dues and homeowner’s fees.

4. The neighborhood where the property is located. It’s been said that there are three things to consider when you buy property, that’s location, location and location. Let’s say you have identified the neighborhood where you intend to stay for the medium term. Evaluate the neighborhood and determine if it has good potential to become a growth center. What are planned developments being undertaken by the government and other private companies in the area? If the area’s potentials look promising, and if your finances permit, then it may be worth purchasing your starter home here. On the other hand, if the neighborhood is riddled with problems such as flooding, security issues, and urban blight, you may wish to simply rent a place for the time being.

5. The current real estate market. Don’t forget to consider the current real estate market before deciding if you would purchase or just rent a property. It is always better to buy when it is a buyer’s market than a seller’s market. Plus, look at interest rates if you intend to take out a loan for this purpose. The lower the rates, the cheaper it is to buy a starter home.

source: www.abs-cbnnews.com

What You Need To Consider When Buying A Home

Buying a new home can be one of the most stressful things you do in your lifetime. You are forking out a lot of money for this place, so it has to be right on many levels. The whole buying process can be emotional from start to finish. The house search, the viewing, the phone calls and the anticipation of waiting for things to go through. It’s certainly not as easy as heading to the store buying something and that’s the end of it. So with that in mind, I thought it would be a good idea to share with you some of the things to consider when buying a house.
 
Putting the emotions aside can be difficult. But embracing them is just as important because your emotion will help you to make the right decision overall. It’s not an easy thing to do, buying a home. So cut yourself some slack and prepare yourself as much as you can. It can be a rollercoaster ride.

Location, location, location

One of the of first things you have to consider is the location in which you are buying your new home. It may need to tick a lot of boxes. What you have to consider are yourself and your family. So the location must be close enough for your to commute to your job. There Is no point moving far away as a long commute to work will only eat into your day. If you don’t drive into work, then you will need to find out whether the location has good transport links. 

Other factors to consider will be the local schools if you have children to think about. Do they have good reports? Are they close enough to get to? Sometimes it’s the more practical things we forget to think about. Things like whether there are supermarkets or shops close by. Perhaps local restaurants or entertainment. All of these things need to be factored in to decide whether the location is right for you and your family. Pinpointing the locality in which you want to search will make things much easier. It means that you know the place works, so when you begin your viewings, you only have to focus on the property.

Speak to an agent you trust

An estate agent is one of the people you will talk to most when it comes to buying a new home. So it’s essential you have confidence in them, and you feel you can trust them. This is the person you will speak to in regards to what you want out of a place. So you will trust their judgement when the provide you with options. You could get in touch with this office at Entwistle Green nor others like it. 

Having confidence in the people that will be helping you through this process is important. You are spending a great deal of money on this property. It’s an investment as well as a home, so it has to be handled right from start to finish. The process is already difficult enough without having people involved you don’t trust or have no confidence in. 

The type of property you need

Once you have decided on your location and made contact with some agents the next thing to do is decide on the type of property you want and need. The first thing to do is decipher the things you need to have. So this is the number of bedrooms you need as a minimum. Whether you require off road parking. If the house has a garden or yard. These are things that you can’t do without. The fundamentals. The next thing you then do is add the nicer details. An extra bedroom would be great, for example. Or a garage would be a nice bonus. Things like that. It’s important to communicate all of this with the agents looking for your property. They need to know what you must have and what you would like to have. This will make their search much easier. You also need to determine the type of property you want. You may only want a house, but you might consider a bungalow. Or perhaps you are looking for a more modern living arrangement so would consider an apartment. Ask yourself all the hard questions and if it is easier, make a list, so you stick to what you want.


Will you consider a project?

Another big question to ask yourself is whether you would consider a project or not. A project can be one of two things. It could either be something that needs a lot of work. Perhaps a complete renovation that may not allow you even to live in it before some work has taken place. Or it could mean something that requires modernising. That is totally liveable but just needs bringing up to date. Or if any of those are not an option then you need to specify that you want something that is done and ready. 

What you will find is that there will be a range of properties available. Ranging from the derelict to the pristine. You need to decide where your cut off point would be. The less work that needs doing, the more money you will pay upfront for the privilege. But there are other factors to consider. Things like whether you have the time, patience and funds in place to carry out any necessary work. Again it’s about asking how far you will go for the right place and communicating that to your agents. 

Have you got the financials in place?

The big money question is whether or not you have the finances in place to go ahead with a sale. Mostly this tends to be an agreed mortgage in principal, and your deposit saved up and ready. It’s a good idea to know all of this and have it in place before you begin your search. It will determine your budget and what you have to spend. However, it also means that if you do see something that will cost that bit more you can easily go back and ask whether or not you can stretch to it. 


Use your head as well as your heart

It is so easy to get drawn into the emotional side of things when it comes to buying a property. But this is where you have to reign yourself back a little. While the emotion will always determine whether or not you love a place or hate it. Your head will be able to tell you whether or not it’s the right decision or the wrong one. It can be easy to fall in love with a quaint cottage with a rose garden. But if it needs more money than you have spent on it then it won’t be the right place for you. 

Listening to both will be conflicting at times, which is why buying a new home will never be a snap decision you make. There are a lot of factors to consider. Some sensible and some emotional. But they are equally important to the decision making process. You also have to consider the other parties involved. You partner, or kids, for example. Will they like it, do they love it? Will they live there?

Be aware that the home search can take longer than you think

Searching for a new home can take longer than you think. It is very evident that it is rare to buy the first house you see. Unless you are lucky enough that it happens to tick every box. It may, at times, become a little soul destroying seeing place after place and none of them being quite right. But patience is important when it comes to buying a home. What you have to remember is that you are spending a lot of money. This place has to be right, the location, the type of property. It all has to work for you and anyone else involved. 

Try and enjoy the process and learn where you can. You will find that each viewing gets easier, that you know what you are looking out for. You will certainly refine exactly what you want as time goes on. It may take longer than you want it to, but it will be worth it in the end. 

I hope this helps you if you find yourself in the buying process. Keeping a level head throughout it all will be important. But making sure you are clear on what you want from the start will be the best thing you can do.

source: 20smoney.com

7 Mistakes to Avoid as a First-Time Home Buyer

First-time buyers are often a bit overwhelmed at the thought of buying a house.

The intention of this article is to help prepare you for what NOT to do when buying a house for the first time, and you’ll pick up some great information along the way.

Without further ado, let’s dive in…

1. Not educating yourself on the buying process


One of the best tips we can give to anyone who’s buying a house for the first time is to educate yourself on the steps involved when buying a house. Too many first-time home buyers are jumping into the housing market because it ‘feels’ right and this is a mistake. How can you know what feels right when you’ve never done it before?

Instead of buying a house based on feelings, you need to buy a house based on facts. Before committing to buy a home, you need to make sure that you’re ready to buy your first house.

Do you know what first time home buyer programs are available in your area? First-time home buyers have a number of benefits available to them that offer big time savings.

Find a top local Realtor in your area and ask them specifically to chat with other first time home buyers they’ve worked with in the past. Don’t hesitate to gather information on the experiences of others who have worked with them.

2. Not preparing to buy a house

Time to start saving. Once you think you have enough money saved, you are going to pay for the inspectors, the attorney, the appraiser, etc.

Not preparing properly is a common buyer mistake, especially one among first-time buyers who have never purchased a house before.

If you’re buying a house for yourself then you should have no problem putting together a list of your priorities. Those who are buying with a significant other will have to strategically prioritize what matters most to both people who will be living in the house. Those buying with the intentions of starting a family will have different priorities.

Knowing your priorities ahead of time is going to make for a much easier home search. The location should be priority #1 when buying a house – you can change the condition of a house, you can’t change the location (or the school district).

3. Finding the house before the location

A lot of time first time home buyers will wait to find the perfect house that will never hit the market. There are some things buyers MUST be willing to sacrifice in order to find a great home at a great price in an excellent location. If there is one thing a home buyer should never settle on, it’s location.

Buying a big house in a bad location is a common first-time buyer mistake. You should buy a house based on the priorities you have in a location, and narrow down your criteria before you start previewing homes.

One common mistake a first time home buyer will make is failing to buy a house in the location they want because they are ‘tempted’ to buy a mansion in a location that is less desirable. Once you start previewing homes outside of your desired area you’ll confuse yourself. For instance, someone with a budget of $300,000 will be able to buy a much bigger house in Durham, NC than they would if they bought a home in Cary, NC. The difference here is schools, amenities, safety, commute time and more.

4. Overextending on your budget

One of the worst mistakes a first-time buyer can make is overextending on your budget. Your home instantly becomes a burden instead of something you can enjoy. One of the best things you can do as a homebuyer is reverse-engineer your monthly costs before you buy a house.

If you can spend 3-6 months calculating an average cost to live, you can set budgets for how much you’re comfortable spending and saving. Whatever is left over is a comfortable monthly payment on a house (don’t forget about mortgage insurance).

For those purchasing a home with less than a 20% down payment, private mortgage insurance is likely to be included as a requirement in owning your home. Private mortgage insurance will typically go away once you have paid back 20% of the loan.

 5. Not having the right real estate team in place

Your real estate team is like a group of coaches for first-time home buyers. Everyone makes mistakes, it’s human nature. It’s your real estate team’s job to make sure they coach you through the mistakes proactively.

As a first time home buyer, it’s important you assemble the right real estate team. You’ll want to ensure you have the right mortgage lender, real estate agent, home inspector, and attorney.

Having the right real estate team in place will go a long way in your home purchase as they will be able to guide you throughout the process. Make sure you find a team that works well with you and works well together to ensure a smooth home buying experience!

6. Buying based on emotion

The best decisions you can make when buying a home are the ones based on facts. Too often I watch a buyer make an offer on a home they love only to be outbid by another offer. Hearing that the home sold to someone else is not easy. It’s one of the toughest things you can hear as a buyer, especially if it’s your first time.

Becoming depressed as a buyer is a common mistake first-timers make.

When you allow yourself to become depressed your body does two things typically. One, it shuts down completely and it no longer wants to buy a house because there was too much ‘pain’ experienced. Or two, you will buy anything just to feel better about missing out on the last home.

These are commons mistakes made by all sorts of buyers, not just first-time buyers.

If you make an offer and the home sells to someone else then treat it like a GOOD thing. You just picked out one of the most desirable homes on the market, meaning you recognize a good deal! Pat yourself on the back, and go find a better one!

7. Not calculating the true costs

Are you ready for all of the costs that come with buying your first house, and all the costs that come with homeownership? There is going to be a wake-up call for first-time home buyers who are looking at just their principal and interest monthly payments. There are many more costs that come with both purchasing a home and owning a home.

Looking at ‘what you can afford’ when buying a home is a common first-time buyer mistake.

What you can afford, and what you can afford while maintaining your current lifestyle are two entirely different numbers.

Some of the recurring costs you’ll want to be sure you include when buying a house are:

    Property Taxes
    Mortgage Insurance (If you put less than 20% down)
    Home Maintenance
    Homeowner’s Insurance
    Utility Bills

Final thoughts on mistakes made by first-time buyers:


It is imperative to factor loan origination fees, attorney fees, inspection fees, appraisal fees, mortgage insurance, and any other closing costs into your budget when buying a home. It is your job as a buyer to make sure you factor all the costs involved when purchasing a home. Your Total Mortgage loan officer or your realtor will be critical in helping you understand which fees apply to you, how much those fees will be, and what your options are.

I cannot stress to my buyers enough is that location is the most important part of a home. You can change the price, you can change conditions–you cannot change the location.

If you can avoid making these 7 mistakes when purchasing your first house, you are going to be in much better shape than most of the second and third-time home buyers out there!

source: totalmortgage.com

Is Minority Homeownership on the Rise?

Last year the national homeownership rate increased in three consecutive quarters for the first time since 2009. Many observers hailed it as a sign that the homeownership rate, which measures the percentage of homes that are occupied by the owner, has reversed course and now will continue to increase.

Less noticed, though, were signs of improvement in minority homeownership rates. Hispanic homeownership rose to its highest level since the third quarter of 2012. African-American homeownership rose and fell during the year and white-only homeownership—though still 20 to 30 points higher than minorities—ended 2015 lower than it has been in many years.

A Growing Minority Population

Some forecasters see the tide of minority homeownership changing for the first time since 2007. The coming decades will see rapid growth in minority households, particularly Hispanic households. Over three-quarters of household growth from 2010 to 2020 and 88 percent of the growth from 2020 to 2030 will be among minorities.

In both decades, the largest segment of that growth is predicted to be Hispanic households. From 2010 to 2020, whites are the second largest group at 23 percent. But in the following decade, whites are expected drop to 12 percent and the broad “other” category (Asians, American Indians, and people of other or more than one race) takes their place at 24 percent, followed by African Americans at 20 percent.

Out of the 22 million new households from 2010 to 2030, 9 million will be homeowners. More than half of the new homeowners are likely to be Hispanic, 11 percent black, and 29 percent people of other races. A 2014 study by the Urban Institute projects that Hispanics will account for 55.5% of new homeowners from 2010 to 2020.[1]

How Higher Prices Help Minorities Qualify

Though conventional wisdom maintains rising prices make it harder for some minorities to buy homes, a new study by two economists at the Federal Trade Commission suggests that higher prices mean better times for minorities.

This is, the economists argue, because they are accompanied by a loosening of lending standards. Rising values alter lenders’ judgments about acceptable levels of risk and rates of return. “This variation may then translate into changes in the outcomes experienced by minority borrowers relative to non-minorities,” the study said.

The study found that as the rate of home price inflation within a metropolitan area increases, the gap between African Americans and whites shrinks, suggesting that, in times (or places) in which real estate is booming, mortgage lending appears to be more equal than in times (or places) in which real estate is declining. A 10 percentage point increase in the rate of house price inflation, for example, tends to be accompanied by a 0.5 to 1 percentage point decrease in the gap between the African American denial rate and the white denial rate, on average. These magnitudes amount to approximately 5–10% of the overall mean black–white denial difference.

Could the levelling of the African American homeownership rates last year reflect changing lending standards? Lending standards, especially for the FHA loans widely used by minority buyers, have loosened significantly since November 2012, before the recovery began and October 2015. Median FICO scores are down from 704 to 654, loan-to-value rations are down from 95 percent to 81 percent, and debt-to-income ratios are up from 28/41 to 29/46.

Outlook: African Americans Face Barriers

While the number of African American homeowners will rise—their 11 percent share of new homeowners actually will exceed whites’ share by 2020—the black homeownership rate will decline fairly dramatically and the gap between the black and Hispanic population will widen. This trend has percent, versus 47 percent for Hispanic households. By 2030, only 40 percent of African American households will own their homes.

The declining African American homeownership rate does not just reflect differences in age—it reflects a failure of policy and market trends to address the African American homeownership gap, according to the Urban Institute.[2]

In every age group, current trends and policies are widening the ownership gap between African Americans and other groups. This gap reflects two fundamental factors:

First, African American homeownership was particularly battered in the housing crisis, sharply reducing household wealth among African American families and dramatically lowering the long-term prospects for recovery for black homeownership at all ages.

Second, African Americans continue to lag other races and ethnicities in employment, wages and income.

These factors together contribute to a bleak homeownership forecast for African American families without dramatic changes in policy.

source: totalmortgage.com

Housing Market Predictions for 2016

In 2015, the housing market saw prices continue their climb from where they were a few years back. There’s no telling what exactly 2016 has in store for us, but there’s no denying it’s gotten off on the wrong foot.

Depending on who you talk to, the current problems are either a temporary setback or indicative of things to come. Covering both ends of the spectrum, here are a few things that may–or may not–unfold in the 2016 housing market:

Rising housing prices
Svenja Gullen, Chief Economist at Zillow, and self-proclaimed optimist believes that housing prices are set to rise 3.5 percent in 2016. That’s slightly down from 2015’s nationwide average of about 4 percent. Of course, local markets can vary drastically with their performances, and there will no doubt be cities that will outperform the national average. Denver, Dallas, Miami, Seattle, and Pittsburgh all seem poised to do just that. Zillow has the following as their top 10 housing markets for 2016:

    Denver
    Seattle
    Dallas-Fort Worth, Texas
    Richmond, Va.
    Boise, Idaho
    Ogden, Utah
    Salt Lake City
    Omaha, Neb.
    Sacramento, Calif.
    Portland, Ore.

Rent will go up

Rent.com released their 2015 Rental Market Report, and it doesn’t paint a pretty picture for renters. According to the report, vacancy rates are the lowest they’ve been in almost twenty years. That means demand is high, resulting in little wiggle room when negotiating the price of rent. It doesn’t help when property managers are eager to get after the benjamins, with 88% saying they raised their rent in the past 12 months.

The report also showed that 68% of property managers believe that rising rent will continue in 2016, with an average of 8%. Keeping up with constantly rising rent can be a battle when your income isn’t increasing at a similar rate, which is exactly what’s been happening.

Eager home buyers will continue to struggle

The NAR’s Housing Opportunities and Market Experience (HOME) survey shed some light on the desires of prospective home buyers in 2016. It showed that 94 percent of current renters who are 34 years of age or younger want to own a home in the future. Out of all renters, 83 percent said they have a desire to own, and 77 percent think that homeownership is part of their American Dream.

The inability to afford to buy was the top reason for not currently owning (53 percent), followed by the flexibility of renting as the second most popular reason (19 percent). Lifestyle decisions such as getting married, starting a family or retiring were cited as top reasons for shifting to owning at 33 percent, and improvement in their financial situation came in second at 26 percent.

The clear takeaway from all of this data is that people want to own homes, it’s just difficult to make the dream a reality–especially for young buyers. With wages barely rising and rent soaring, it can be incredibly difficult to put money away for a down payment. It’s particularly burdensome for borrowers who are already struggling with high student loan debt.

The economy will falter

Of course, there are some outliers that do not think the U.S. economy is as strong as the pundits and politicians lead everyone to believe. While most people are blaming foreign affairs for our recent domestic stock market troubles, a few are saying that the cause is actually the Fed’s decision to raise interest rates last month.

They claim that because the Fed’s free money is no longer propping up the markets, the economy is slowly sinking down to its true form. In this scenario, the Federal Reserve is forced to backtrack on its commitment to raise rates, and will ultimately have to cut rates. Home prices could take a hit if the situation got bad enough. This would be terrible news for homeowners. Will it happen? Unfortunately, we’re forced to wait to find out.

source: totalmortgage.com

6 Essential Skills Every Homeowner Needs

Owning a home definitely requires a different set of skills than living in an apartment.  If you’re feeling a little overwhelmed, here’s a short list of the 6 of the most important skills you should master.

Hanging things

No more landlord means no more finding creative ways to hang the things you want. Of course, that doesn’t mean you want to damage your walls, either. If you’re hanging something heavy, like a TV or large mirror, you’re going to need to find a stud first, or end up with a big mess.

Installing new locks

One of the first things you should do after that now-empty moving van pulls away from your new house is change the locks on your doors. You have no way of knowing who else has copies of the keys, after all.  But even if you’re not a brand new homeowner, locks can seize or break, and you should have the skill to deal with them.

The specifics of this can differ greatly depending on what kind of lock you’re dealing with, though. So remember to do your research first.

Cleaning the gutters

If you have trees anywhere near your home, then you’re probably going to need to clean out your gutters at least once a year. If you don’t, you can end up with gutters that don’t drain properly and put your roof at risk.

Unclogging a drain

Backed up sinks and showers definitely aren’t the fun part of home ownership, but they happen all too frequently. Depending on the drain and the type of clog, this can mean everything from chemical drain cleaners and plunging to unscrewing your p-trap.

Understanding a circuit breaker

When you overload a circuit—plug in too many electronics, try to vacuum and watch TV at the same time, etc—your circuit breaker fixes the problem by cutting off electricity to the circuit. This helps prevent damage to your system.

When this happens, you should first unplug a few non-essentials. Next head to your electrical panel and find the switch that has been tripped. It will be in the “off” position. Flip it to “on” and you’re all set.

Cutting your water supply
When a pipe bursts or a home repair job goes awry, you better know where you water cutoff is. If you don’t, you’re going to end up with a lot of water in places you’d prefer to keep dry. Most individual fixtures have their own valves, typically near where they connect to the wall.

A main shut off valve, though, can be a little trickier to find.  It can be inside or outside, depending on the house, and will be located where the water pipe enters the house, which can vary.  It’s usually a round brass valve.

source: totalmortgage.com

First Time Homebuyer? Try Your State Housing Authority

One of the best kept secrets about mortgages is the great deals that home buyers—especially first time home buyers—can get on a mortgage from their state housing finance authority. In fact, according to a national survey last year by NeighborWorks America 70% of U.S. adults are unaware of down-payment assistance programs available for middle-income homebuyers in their community.

State housing finance authorities are state-chartered organizations established to help meet the affordable housing needs of their residents. Most housing finance authorities (or HFAs) are independent entities that operate under the direction of a board of directors appointed by each state’s governor.



There are more than 2,400 programs available across the country from state HFAs. For qualifying buyers, they offer first and second mortgages at below market rates, down payment and closing cost assistance, grants and credits to help with monthly mortgage payments, homeownership education and more.

Borrowers with debt payments that are too high to qualify for a conventional loan may be more successful with an HFA loan. Like FHAs, HFAs are exempt from the new ability-to-pay rule that took effect last year, known as the QM Rule.

The programs available through HFAs vary from state to state.  For a directory, you can go to https://www.ncsha.org/housing-help.

In Connecticut, for instance, HFA loans are underwritten by approved lenders. If you live in Connecticut (where, incidentally, Total Mortgage is a participating lender) you should contact your loan officer to learn more about the 38 programs available to home buyers and homeowners from the Connecticut Housing Finance Authority. These include:



The Homebuyer Mortgage Program. 

This is for first-time homebuyers (who have never purchased a home or had an ownership interest in a residence in the past three years) who meet minimum credit, income, and employment standards.

CHFA sets income limits for every town in the state based on local income levels and household size. See CHFA income limits to find out if you qualify.

 Down Payment Assistance.

CHFA also offers loans up to $3000 for first-time buyer who have difficulties raising the cash for down payments and closing costs.

Targeted Areas.

The Connecticut Housing Finance Authority (CHFA) suspends many of its mortgage eligibility rules for homes purchased in areas of the state targeted for revitalization. These “targeted areas” have been recognized by the federal government as likely to benefit from an increase in homeownership.

The cities of Bridgeport, Hartford (except for Census Tract 5245.02), New Haven (except for Census Tract 3614.02), New London, and Waterbury have been designated as targeted areas. Also, portions of Ansonia, Danbury, Groton, Meriden, Middletown, New Britain, Norwalk, Norwich, Stamford, Torrington and Windham have been designated as targeted areas.

Other Programs for Buyers and Owners.


CHFA also offers its residents:

• Mortgage programs for military, police, and teachers
• Homeowner’s Equity Recovery Opportunity (HERO) Loan Program for buying and rehabbing distressed properties
• FHA rehab programs
• HFA Preferred Loan Program for first-time home buyers who qualify for low cost mortgage insurance coverage
• Homeownership Mortgage Program for eligible tenants of publicly assisted housing
• Home Of Your Own Mortgage Program (HOYO) for disabled residents
• Mobile/Manufactured Home Mortgage Program for those purchasing a mobile manufactured home in a state-licensed mobile home park.

 Don’t Forget to Stay Educated

It’s important for new buyers to seek homeownership education. It’s often a requirement for down payment programs and it gives buyers confidence with the home buying process, financing options, including down payment programs, and budgeting.

Take a moment to find out what’s available to you. Don’t assume you won’t qualify. Millions in mortgage and down payment assistance is available through state HFAs every year.

source: totalmortgage.com

6 Reasons Your Mortgage Was Rejected

You might be eager to jump into homeownership. Unfortunately, several things can derail a home purchase.

A mortgage rejection is frustrating and discouraging, but it doesn’t mean you’ll never be able to buy your own place. Here’s a look at six of the biggest threats to homeownership.

1. Co-Signing loans

Whether it’s your child, your sibling or your best friend, cosigning a car loan, a student loan or any other loan for another person can threaten homeownership. This is because the loan shows up on your credit report and you’re listed as a joint borrower.

Understandably, you’re not the primary account holder. However, you are held responsible for the loan if the primary borrower defaults. Cosigning a loan increases your debt-to-income ratio, and unfortunately, the more debt you have in your name, the less you’re able to borrow when buying a home. And sometimes, cosigning a loan can push your debt-to-income ratio over the limit allowed by a mortgage lender, which means you’re unable to get a mortgage until this debt is no longer in your name.

2. Job hopping

You might be a free spirit who

3. Not having a large enough savings account

Nowadays, lenders don’t only ask to see paycheck stubs and tax returns. They also request bank account statements. They’ll look at your savings accounts and other assets to see whether you have enough funds for a down payment and closing costs. And unfortunately, if you don’t have a sizable savings account, a lender might reject your application until you’re able to build your fund.

4. Not enough credit activity

If you get a credit card to build your credit history, make sure the bank issuing your card reports to the credit bureaus on a regular basis. When applying for a mortgage, the bank will check your credit history. And if you have non-existent credit, this can be just as damaging as having bad credit. Before applying for a credit card or any line of credit, speak with creditors and make sure they’ll report your credit activity to the bureaus every single month.

5. Credit report mistakes

The worst thing you can do is fully trust your creditors to report accurate information on your credit report. Creditors make mistakes, and sometimes they report a late payment or a collection account in error. So you need to check your own credit report at least once a year for accuracy.

If you notice an error, contact your creditor immediately to resolve the issue, or file a complaint with the credit bureaus. Credit report errors can reduce your credit score. And depending on the severity of an error, your credit score might be too low to qualify for a mortgage.

6. Poor credit habits

Mortgage lenders have relaxed their guidelines, and you can get a conventional mortgage with a credit score as low as 620 and an FHA mortgage with a credit score as low as 500. But although lenders have lowered their credit score requirements, your recent credit activity must be positive. For that matter, some banks will reject your mortgage application if you have more than one or two late payments in the past 12 months.

The Bottom Line?

Buying a home is a major accomplishment. Instead of wasting money on rent every month, you can start building equity and increasing your net worth. However, several things can put the brakes on buying a house. If you can identify potential threats to homeownership, it’ll be easier to make decisions that will help you reach your goal.

loves to change jobs every six months to 12 months. But unfortunately, job hopping is a sign of instability. And from a lender’s viewpoint, you’re not stable enough to buy a home. Lenders want to see steady income and employment. Ideally, you should stick with the same employer for at least 24 months before applying for a mortgage. If you must switch jobs, remain in the same field. Additionally, your new income must remain the same or increase.

source: totalmortgage.com

3 Types of Insurances You Need as a Homeowner

Your home is your biggest investment, so it goes without saying that you’ll do anything to protect your property. This is why you have homeowners insurance to covers damage to your property and belongings in the event of theft, fire or natural disaster. Additionally, homeowners insurance provide liability coverage if someone is injured on your property.

If you’re financing your home through a bank, your lender will require homeowners insurance. And depending on where you live, you may have earthquake insurance or flood insurance. You might think this is all the coverage you need. However, if you really want to protect your investment, there are three other insurances to consider.

1. Life insurance

 

Some people put off purchasing life insurance, but tragedies can happen at anytime. If you have children, a spouse or other relatives who rely on your income, a life insurance policy provides your loved ones with financial support in the event of your untimely death.

At the end of the day, you want your family’s life to continue as normal as possible. If you’re the primary breadwinner or contribute to the household expenses, losing your income might force your family to move out of your home and they might struggle to make ends meet.

Life insurance policies can provide peace of mind. The death benefit can cover your funeral costs, pay off the house and other debts, plus provide your family with ongoing financial support. There are no hard or fast rules regarding how much coverage to receive, but some experts recommend purchasing a policy that’s eight to 10 times your annual salary if others rely on your income.

2. Payment protection insurance

 

In addition to life insurance, you can purchase mortgage payment protection insurance from your mortgage lender. Many lenders offer this supplementary insurance policy, which is similar to a life insurance policy, but the death benefit is paid to your mortgage lender. Mortgage payment protection pays off your home loan if you die.

Typically, you have to request payment protection when buying a house, but some lenders let borrowers add coverage anytime within the first three to five years after a purchase. Payment protection premiums are based on different factors, such as your age, whether you’re a smoker and the outstanding mortgage balance. Premiums are paid monthly and included in your mortgage payment.

3. Disability insurance

 

Take advantage of short-term disability insurance if offered through your employer, or look for a policy on the individual market. Disability insurance provides income if you’re temporarily unable to work due to an illness, injury or other medical reasons. This income can cover living expenses and help you stay current on your mortgage payment, which can alleviate payment problems and possible foreclosure.

The amount you’re eligible to receive varies depending on the insurer. For example, some insurance companies offer short-term disability policies that’ll pay up to 60 percent to 70 percent of earnings, whereas other companies only pay up to 40 percent to 50 percent of earnings. Unfortunately, you won’t find a disability policy offering 100 percent coverage.

Bottom Line:

 

Life insurance, payment protection insurance and disability insurance aren’t “only” for homeowners — anyone can benefit from protection. But as a homeowner, you can’t afford to skip coverage. Home is where you’ll raise your family and create memories for years to come. So you need to do whatever you can to protect your biggest investment.

source: totalmortgage.com

New FHA Home Loan Guidelines for 2015

If you need a low-down payment mortgage and you don’t have the best credit score, an FHA home loan can help you get the keys to homeownership. The FHA home loan program has been around since 1934 making homeownership affordable for many.

With the new year underway, the Federal Housing Administration recently announced changes to its program for 2015—changes that benefit many would-be buyers and anyone refinancing to an FHA home loan.

1. Reduced Mortgage Insurance Premiums

FHA home loans only require a 3.5% down payment, which has been a godsend for borrowers who can’t save the traditional 20%. Unfortunately, anyone who puts down less than 20% is required to pay an annual mortgage insurance premium (MIP), which is paid over 12 installment payments and included in the mortgage payment. Borrowers who pay MIP have higher monthly payments than those who don’t, but there’s good news for anyone who closes on an FHA home loan after January 26, 2015.

On January 9, 2015, the Federal Housing Administration announced an upcoming reduction in annual mortgage insurance premiums. For borrowers, this means more money in their pocket every month. This change applies to mortgages greater than 15 years. The reduction of 5% will reduce current mortgage insurance premiums from 1.35% to 0.85% for borrowers to put down less than 5%, and from 1.30%  to 0.80% for borrowers who put down more than 5%.

2. Elimination of Post-Payment Interest Charges

Some conventional mortgage loans charge a prepayment penalty, which is a fee borrowers pay their lender for paying off the mortgage in full within the first two to three years. FHA home loans have something similar, called a post-payment interest charge.

Basically, if you pay off your mortgage early either by selling or refinancing, your mortgage lender might charge interest for the entire month, regardless of when you actually paid off the mortgage. For example, if you paid off a mortgage on September 3, your lender would charge interest through September 30. New rules, however, get rid of this extra cost. Post-payment interest charges are eliminated beginning January 21, 2015. Lenders can only charge interest up until the date a borrower pays off his loan.

3. Advance Notice for Rate Adjustments

Adjustable-rate mortgages typically start with a rate lowered than fixed-rate mortgages. Unlike a fixed-rate, which has a set rate for the life of the loan, an adjustable-rate mortgage has a temporary fixed rate —  one to five years — and then the rate adjusts annually depending on the market. Previously, FHA home loan lenders gave borrowers a 25-day notice of rate increases. Effective January 10, 2015, lenders must give borrowers with an FHA-insured adjustable-rate mortgage a 60- to 120-day notice of any changes to the monthly payment. This provides borrowers additional time to prepare for higher mortgage payments.

Buying a house is arguably one of the most expensive transactions you’ll ever make in your life. And unfortunately, lack of funds is a home buying hurdle for many people. However, with an FHA home loans, affording a property has become much easier.

source: totalmortgage.com

Getting Rid of Private Mortgage Insurance

You can raise your credit score, save enough cash for closing costs, and maintain accurate financial records. However, if you don’t have at least a 20 percent down payment when buying a house, you’ll have to pay private mortgage insurance.

Private mortgage insurance is required on all mortgage loans with a loan-to-value ratio greater than 80 percent. The annual premium for PMI — which is between 0.5 percent and one percent of the loan — is added to each mortgage payment. Therefore, if you get a mortgage for $100,000, and your mortgage insurance premium is one percent, you’ll pay $1,000 a year for PMI, or about $83 a month.

For the most part, private mortgage insurance is a win-win for both parties. It protects lenders against loss if a borrower defaults on the loan; and PMI puts homeownership within reach for borrowers with less than a 20 percent down payment.

Private mortgage insurance is costly for borrowers — but fortunately, it’s not permanent. Here’s a look at two ways to get rid of private mortgage insurance.

    Borrower-requested cancellation

Since PMI is only required by lenders when a homebuyer has less than a 20 percent down payment, you can ask your lender to cancel mortgage insurance once your property has 20 percent equity — but there are no guarantees.

There are several ways to build equity faster. For example, you can submit extra mortgage payments to reduce your principal balance. There’s the option of paying one half of your mortgage payment every two weeks, which is the equivalent of one extra mortgage payment a year. You can also pay a little more each month, and apply the extra payment to the principal only.


Additionally, home improvements can quickly raise your property’s value and eliminate mortgage insurance sooner. Home improvement projects that pay off include kitchen and bathroom remodels, room additions, and exterior improvements.

To request PMI cancellation, you’ll have to submit a request in writing and follow your lender’s guidelines. If your mortgage is current and your home’s value hasn’t declined, the bank may comply with your request. However, your lender will require a home appraisal before eliminating mortgage insurance. Appraisals cost between $300-$400, depending on the size of your home.


    Automatic PMI termination

The reality is that some borrowers can’t afford to pay down their mortgages early or spend money on costly home improvements. Don’t overly stress about mortgage insurance if you fall into this category. Be patient, and in a few years, your lender will automatically terminate PMI.

The Homeowner’s Protection Act (HOPA) makes it illegal for lenders to unnecessarily charge borrowers mortgage insurance. As a rule, lenders must automatically remove PMI on the date that your “mortgage balance is scheduled to reach 78 percent of the original value of the home” based on the initial amortization schedule, says Sara Millard, senior vice president and deputy general counsel at United Guaranty Corp.
 
So, even if your lender rejects your request to cancel mortgage insurance once your property has 20 percent equity, HOPA stops PMI from becoming a permanent or long-term expense.

Bottom Line

Mortgage insurance isn’t cheap, and paying this premium every month will increase your mortgage payment. To avoid PMI, aim for a 20 percent down payment when purchasing a house. It’ll take longer to buy and you’ll have to make sacrifices, but it’s worth the effort. Besides, a 20 percent down payment not only eliminates mortgage insurance, it also helps you qualify for a better mortgage rate.

source: totalmortgage.com

414,000 Home Sales Won’t Happen This Year Thanks to Student Loan Debt

There’s been a lot of recent buzz about teens and Millennials being extremely bullish on homeownership. And with that comes hope of a stronger housing recovery and even higher home prices in the future.

But it’s one thing to say you’re going to buy a home (or want to buy a home), and another thing to actually do it.

While ambition doesn’t seem to be lacking, the question remains whether many of these young prospective home buyers will actually qualify for mortgages.

A recent report from John Burns Real Estate Consulting noted that 414,000 home purchases would not occur this year thanks to pesky student loan debt.



Using a typical purchase price of $200,000, that equates to nearly $83 billion in lost volume for the real estate industry.

And with 5.26 million new and existing home sales expected this year, that represents about an eight percent loss in transactions thanks to costly student loans.

 Nearly Six Million Pay More Than $250 a Month on Student Loans

There are a reported 5.9 million households under the age of 40 paying over $250 per month on student loans.

That represents 35% of such households and is up from 22% back in 2005. For these households, qualifying for a mortgage gets a lot more difficult thanks to restrictive debt-to-income limits.

It’s compounded by the new Qualified Mortgage rules that limit DTIs to 43%, coupled with the fact that home prices have risen dramatically. The only thing offsetting this is the fact that mortgage rates remain historically low.

For those who can still purchase a home, it reduces their purchasing power by $44,000. So you basically need to look at a smaller home, or a home in a less desirable area.

This can get pretty tricky if the recent grad has accepted a job in a certain locale and doesn’t want to spend half their day commuting.

The prevalence of households with student loan debt also mean it’s more difficult to save for a down payment. And with the FHA becoming a lot less viable for many prospective buyers, more money is needed to get the job done.


Record Number of First-Timers Are Using Gifts to Buy Homes


Perhaps this is why 27% of first-time home buyers received a gift from relatives or a friend last year, per the National Association of Realtors.

That’s up from 24% in 2012 and matches the highest level since NAR beginning tracking in 2009. It’s apparently even higher this year.

The Realtor group also revealed that 54% of first-time home purchases were delayed in 2013 because student loan debt hurt their ability to save for a down payment.

Simply put, college students are spending a lot more money on tuition but salaries don’t seem to be rising.

In fact, incomes appear to be dropping, with college graduates aged 18 to 34 years old working full time experiencing a $3,300 drop in average annual earnings from 2007 to 2012 (adjusted for inflation), per Census Bureau data.

Factor in all the competition in the housing market that demands either a larger down payment or a higher bid and you’ve got a recipe for renting.

Perhaps the home builders will take note of this trend and start constructing more affordable housing.

Tip: There’s nothing wrong with accepting a gift from a parent or relative because a low down payment can raise your mortgage payment three different ways, which could cost you a lot more long-term.

source: thetruthaboutmortgage.com

Get a better mortgage deal with these six steps

For most would-be homebuyers, making a run at homeownership is going to mean getting approved for a home loan.

It's a process that, at best, can be stressful and confusing. Borrowers can be better prepared by taking steps to study their options and learn what to expect from a lender.

"It's surprising to me that people tend to spend more time in pre-purchase research for a car than they do for a home mortgage," says Chris George, president of home mortgage lender CMG Financial.




Keeping up to date on changes in the mortgage market is necessary, because the government, which essentially backs 90 percent of new home mortgages, keeps tweaking the guidelines for the loans it will guarantee.

In early April, for example, the Federal Housing Administration put into effect several new mortgage rules, including one that raises the cost of mortgage insurance for borrowers who take on FHA-backed loans, among other changes.

Here are six tips for improving the chances that the mortgage math will add up in your favor:

1. BUILD A STRONG CREDIT SCORE

One of the main factors that lenders look at to determine a borrower's creditworthiness is, aptly, their credit score.

Bad borrower behavior like late credit card or other loan payments, having a foreclosure or bankruptcy in one's credit report and carrying high balances will weigh down your credit score.

Most banks sell the home loans that they make to government-owned mortgage companies such as Fannie Mae and Freddie Mac. To do that, those lenders must adhere to certain lending criteria.

Loans backed by the Federal Housing Administration will accept FICO scores below 600, but expect to pay a significantly higher interest rate the lower your score. A stellar score ranges from 760 to 850 and can give you greater negotiating power over the terms of the mortgage and ultimately, the total cost of the loan.

One way to mitigate the impact of a low score: Make a higher down payment, George says.

If your credit is less-than-stellar shape, make sure you give yourself time to rack up good credit history well before you attempt to apply for a home loan. This starts by checking your credit.

Consumers are entitled to a free credit report every 12 months from each of the credit bureaus: Experian, TransUnion and Equifax. You can get copies at www.annualcreditreport.com .

2. KNOW YOUR LOAN OPTIONS

Apart from increasing the chances of qualifying for a loan, making a down payment of at least 20 percent of the sales price or appraised value of the home will spare you from having to pay private mortgage insurance.

If you can't afford that, you might qualify for financing on an FHA-backed loan. Those loans allow borrowers to make a down payment of as little as 3.5 percent of the purchase price. That's great if you're a first-time buyer and haven't saved up for a bigger down payment. But to protect itself from potential loan defaults, the FHA requires lenders to charge extra fees to cover monthly mortgage insurance payments.

Until this week, the FHA had dropped the mortgage insurance requirement for homeowners with 30-year loans who made payments for five years and managed to bring their loan-to-value ratio to 78 percent. Now, borrowers with a loan-to-value ratio between 78 and 90 percent will be able to stop making mortgage insurance payments after 11 years. But those borrowers who still have a loan-to-value ratio greater than 90 percent will be required to pay mortgage insurance for the life of the loan.

"No matter how much of your loan you pay down, you'll always have to pay that insurance premium, and that's pretty significant change," says Rick Sharga, senior vice president at mortgage lender and servicer Carrington Mortgage Holdings.

Another change that went into effect: The FHA is requiring that borrowers put down at least 5 percent on home loans of $625,000 or more. That's up from 3.5 percent, but actually less than the 10 percent down that most lenders require.

3. CONSIDER MAKING A LARGER DOWN PAYMENT

Given the prospect of not being able to get out of paying private mortgage insurance, some experts say borrowers who can afford to put down more than 3.5 percent on a home should consider getting a loan that's not backed by the FHA, sometimes known as a conforming loan.

Such a loan typically only requires that the borrower make a 5 percent down payment. Although that means you still would have to pay private mortgage insurance, at least you're not locked in, notes Jack Guttentag, Wharton School professor of finance emeritus and founder of www.mtgprofessor.com , which offers advice and online calculators for weighing different mortgage scenarios.

That mortgage insurance can be cancelled automatically when the loan-to-value hits 78 percent. "You're generally better off getting a conforming loan," Guttentag says.

4. KEEP AN EYE ON FEES

In addition to a down payment, you'll also have to set money aside for closing costs, which can run into the hundreds or sometimes thousands of dollars.

Lenders charge all manner of fees, some of which are negotiable, while others are not. They are required to itemize all fees required to close the deal, so review them carefully.

Your bank could charge you to cover items such as credit reports, appraisals, documentation and administrative costs. The total expense will vary depending on where you live and your particular situation.

Also, if you end up with mortgage insurance, that could cost $100 or more a month, depending on the type of loan.

5. WAIT FOR A GOOD DEAL

Rising home prices and warnings, usually trumpeted by lenders, that interest rates will soon rise can create a sense of urgency to purchase a home. But if your finances and credit score are not solid enough to enable you to qualify for a loan at an affordable rate, it's best to not rush into buying.

To boost your chances of getting a good deal on a home loan, Guttentag recommends having a credit score of 740 or better, making a down payment of 20 percent.

6. COMPARISON SHOP

It's prudent to get a feel for what different mortgage lenders will offer. After all, getting a home loan is not unlike getting financing for a car. There is some room for negotiation, says George.

He suggests borrowers approach lenders and state what kind of loan term and interest rate they want, and how much of a down payment they're willing to make. Borrowers also should ask what can be done to accomplish this with the least amount of points, or fees that can be charged based on a percent of the loan amount.

As leverage, it's best to have quotes from competing lenders, which can be obtained on several websites. They may be enough to sway the lender to match more favorable terms offered by the competition.

In addition to Guttentag's site, you can find mortgage calculators and pricing quotes at www.bankrate.com and www.zillow.com/mortgage-rates .

source: newsday.com