Mortgage Blog



Despite rising home prices, it’s still cheaper to own a home than to rent, reports CNBC. But the toughest part for those who want to buy is actually finding a home.

“One thing we added this month to our REALTORS® Confidence Index is analyzing data on REALTORS®’ comments,” said Danielle Hale, managing director of housing research at NAR. “The two biggest phrases in the comments this month were ‘low inventory’ and ‘multiple offers.’”Inventory levels in April dropped 9 percent compared to a year ago, and listings spent an average of 29 days on the market before selling—the shortest timeframe since the National Association of REALTORS® began tracking such data in 2011.

The least expensive homes are the toughest to find. Sales of homes below $100,000 dropped 17 percent in April year-over-year. Also, sales of homes under $250,000 dropped more than 6 percent. Yet a new Trulia report shows it’s cheaper to buy than rent in all of the nation’s 100 largest metro markets. So while consumers may have more financial incentive to buy now, they are hard-pressed to find an actual home to buy.

The report shows that buying a home is 33.1 percent cheaper than renting, but there are big differences across metros. For example, it’s more than 50 percent cheaper to buy than rent in Baton Rouge, La., if a consumer is purchasing with a 20 percent down payment and 30-year fixed-rate mortgage. On the other hand, in San Jose, Calif., buying is only 3.5 percent cheaper than renting.

Source: “It’s Cheaper to Buy a Home Than Rent, But Only If You Can Find One,” CNBC (May 24, 2017)


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Posted by Jill Kohler on May 29th, 2017 2:19 PM

Programs expand mortgage eligibility for those burdened by student debt




Last week, Fannie Mae unveiled three new programs to help aid current homeowners and future homebuyers who are blocked from eligibility and financing by the burden of student debt.

Fannie Mae first announced an expansion of its cash-out refinance program with SoFi. The GSE also announced the implementation of two other programs to help widen eligibility for borrowers. One helps potential borrowers whose debt is paid by others. The third solution allows lenders to accept student loan payment information on credit reports, making it easier for student debt holders to qualify for a loan.  

So, how do these new programs help current homeowners and future homebuyers who are bogged down by student debt when financing a home? Here’s an outline of what each new solution does and how it can help.

Student loan cash-out refinance

This option offers homeowners the flexibility to pay off high interest rate student debt while potentially refinancing to a lower mortgage interest rate.

Johnathan Lawless, Fannie Mae’s director of consumer outreach, said this option is ideal for parents who may have home equity to cash in on because it could be used to pay for their child’s education debt. But Lawless did warn that refinancing may negate any benefits the borrower receives in the original loan contract, such as the ability to enter into forbearance or an income-based repayment plan.  

Debt paid by others

Fannie Mae has widened borrower eligibility by excluding from the borrower’s debt-to-income ratio any non-mortgage debt, such as credit cards, auto loans, and student loans, that are paid by someone else.

Student debt payment calculation

Fannie Mae has changed how student debt is calculated when applying for a mortgage, making it more likely for borrowers with student debt to qualify for a loan by enabling lenders to accept student loan payment information on credit reports.

Lawless explained that if you’re on an income-based repayment plan, the lower payments will now count toward your debt-to-income ratio to help determine mortgage eligibility.

“The day we announced this, I received a call from a lender who had a borrower on one of these plans and their monthly payment was $100, but because of the policy on how to put the debt into the ratio, they were actually using $600,” Lawless said. “We announced the change and they went back into the application and updated it to $100 and it went from not being approved to being approved.”


Betsy Mayotte, director of consumer outreach and compliance for American Student Assistance, an organization aimed at helping students and universities overcome student debt, said the changes are exciting and reasonable.

“This could be a great option for Parent PLUS and Grad PLUS loans,” she said.

Mayotte stressed that borrowers should become more educated about their options when exploring how to pay for student debt.

“People get so caught up in interest rates,” Mayotte explained. “They get tunnel vision and may not see what they’re giving up. Federal loans have discharge options if something terrible happens, such as disability and death.”

Mayotte encouraged borrowers to look into any program with their eyes wide open and to think about the long-term implications, cautioning that “if you used home equity to pay off $60,000 in student loans, that could be a $600 payment a month and if you can’t afford that, you could lose your house.”

Source:  housingwire.com








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Posted by Jill Kohler on May 4th, 2017 8:06 AM

In a tough economy borrowers worry about foreclosure and bankruptcy, and the effects such issues can have on the ability to borrow. One big topic these days regarding FHA loans involves the required waiting period for new FHA home loans after filing bankruptcy or foreclosure.

A good example of a frequently asked question in this area: "When does the waiting period began per FHA Guidelines? If you included a conventional loan in a Chapter 7 bankruptcy, does the waiting period began at the discharge date? Or does the waiting period began at the trustee sale?"

After Chapter 7 bankruptcy, (not to be confused with Chapter 13 bankruptcy rules) the borrower must wait out the FHA's minimum "seasoning" period. At the time of this writng, that period is two years plus any additional amount required by the lender. Some banks will require that a borrower wait a total of three years before applying for a new home loan.

Other lenders may be willing to work with qualified borrowers after the FHA two-year minimum for Chapter 7, but it is important to note that the required waiting period begins from the time the bankruptcy is discharged--NOT the time the bankruptcy is filed.

Here is some additional information on waiting periods and other requirements for both Chapter 13 and Chapter 7 bankruptcy:

CHAPTER 13 BANKRUPTCY WAITING PERIODS

FHA rules allow a lender to consider approving an FHA loan application from a borrower who is still paying on a Chapter 13 Bankruptcy-but only if those payments have been made and verified for a period of at least one year.

The borrower isn't automatically able to apply for a new FHA loan if they meet this requirement--the court trustee's written approval is a condition of the policy. Additionally, the borrower must write a detailed explanation of the bankruptcy and submit it with the loan application. The borrower must have good credit, a satisfactory employment history and other financial qualifications.

CHAPTER 7 BANKRUPTCY WAITING PERIODS

As mentioned above, all borrowers must wait least two years after the discharge date of a Chapter 7 Bankruptcy. The discharge date should not be confused with the date bankruptcy was filed.

As with Chapter 13 bankruptcy, FHA regulations demand a full explanation to be submitted with the FHA home loan application. To get a new FHA insured mortgage loan after Chapter 7, the borrower must qualify financially, establish a history of good credit in the wake of the filing of the Chapter 7, and meet other FHA requirements.


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Foreclsoure
Posted by Jill Kohler on October 28th, 2016 9:33 PM

 

escrow

When you first bought your house, you may have been asked by a lender whether you wanted to escrow your taxes and insurance or not.  Usually to the new homebuyer, you usually don't know what that means.  If you have been escrowing for a number of years, you undoubtedly know by now that your mortgage payment has gone up. Reason being, once per year, your mortgage servicer is required by federal law to update your account and make sure that they are not over collecting monies from you. Is there is a significant overage, they must return the overage to you.  This doesn't usually happen.  What normally happens is that taxes go up, homeowners insurance usually goes up. You just forward the bills to your servicer, they pay them, and every once in a while your payment goes up 20 or 30 dollars.  You pay it and life goes on and one day you realize that your taxes have gone up 800 dollars and your homeowners 360 bucks. That is the typical experience of escrowing.

On the other hand, for those who don't, or do not wish to escrow, a different situation often plays out. Once you bought your house, you paid the original tax bill and bought a homeowners policy with a check. Hopefully you set out with some type of plan to budget 1/12 of those bills in a special account so that when next years bills come do, you can just withdrawal the money, pay the bill and all is well. What sometimes happens is the "out of sight, out of mind" theory, followed by the "didn't I just pay that".   Yes, you did...last year.  Unless you have iron discipline, it can be challenging to try and save the money each year.  Even if you are successful for a while, things come up. It's there to dip into for car tires, home maintenance, etc all with the good intention of replacing it as soon as you can because taxes arent do for a while yet.

My final word on this one, from my own experiences as both a homeowner who has done both and as a lender is, "When in doubt, go the escrow route." 

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Posted by Jill Kohler on October 25th, 2016 2:18 PM

Mortgage Application

    Before applying for a Pa mortgage loan, Do Not make Major Purchases of any kind or take on any unnecessary debt if you can avoid it. Reason being that bills for appliances, jewelry, ,furniture, vacations, cars orany of these expenses that may show up on a credit report can affect your DTI. (debt ratio) A 0% interest free loan for a year on some appliances from Home Depot still may need to have a monthly figure attached to it on your credit bureau, often 5% of total balance. That seemingly insignificant amount could be the difference on what rate your lender is able to approve you at, or worse yet, whether you get approved for the mortgage loan at all. Better safe then sorry. Get the loan then buy the appliances (or whatever else) later. You'll be glad you did. 

    Keep your funds where they're at. That includes checking, savings, money markets, CD's, retirement funds, 401k savings, mutual funds or stocks. Remember that a loan officer may need a paper trail of each account and transaction you make and it can be very messy. All loans require proper documentation especially these days. Lenders, banks and credit unions triple check every loan file for quality control, accuracy and fraudulent activity so leave your cash parked where it's at until you get solid advice from your lending professional. And by the way, consider not changing banks either.

Posted in:General and tagged: mortgageloanrefinance
Posted by Jill Kohler on October 21st, 2016 5:33 PM

Top tips for first time buyers

Tips for First Time Home Buyers

Hire a buyer’s agent to save you time and money

If you are considering buying a home, hire a buyer’s agent. An agent will save you time in finding a home that meets your needs. They can send you listings to view the details and photos before actually setting foot out the door. Also, agents often know of new listings that aren’t on the market yet. Besides, the seller is the one that will end up paying the commission, so take advantage of having some representation on your side, it doesn’t cost you anything.

Set up the financing for your new home purchase

Think about getting the loan before buying a home. It is smarter to go house shopping with a preapproval letter in your hand. When that day comes along that you want to make an offer, it will make your offer a lot stronger when the seller doesn’t have to worry so much as to you having to get financing. 
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Negotiate a successful deal that benefits both parties

Make sure your buyer’s agent gives you a list of comparable sales in the area. This will help you determine how much to bid on the home. The last 3 months sales are a good gauge for you to determine what to bid. Remember there are always more details to the offer than just the price. Examples are: how soon you want to move, having a pre-approval, seller’s assist, the items you want them to leave in the house. There are many details so be sure so sit back and think of the things that are important to you.

Make home inspections part of the plan

You may want to make your offer contingent on the home inspection. If you find out the home has foundation issues, you may decide against buying it. Having a home inspection will let you know exactly what you are getting into. Some people hate to spend another $300-$500 on the inspection, but it does give you the opportunity to address with the seller the problems of the home. Also, it lets you negotiate the items you would like them to address.

Remember buying a home is a step by step journey, there is no easy way there. There are many hurdles to go over to end up living in your dream home, but if you take them one step at a time, you’ll be well on your way to home ownership in no time.  

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Posted by Jill Kohler on October 19th, 2016 1:43 PM


mortgage payoff balance
When people look at their mortgage statement they think that is their payoff balance.  This however is not the case. Your mortgage payment is paid in arrears. For example, your July payment is paying June’s interest. Remember when you bought or refinanced your home and the loan originator stated “you’re going to skip one month’s payment” or “you won’t have another payment due until the following month after closing”? Well this is where that payment essentially catches up with you. (Technically, it’s not “that” payment, you’re just always paying the previous month’s interest).


The escrow company will order the payoff from your mortgage company. The interest is prorated to the day of funding/closing. There may be additional fees included in your payoff that the lender will charge, such as:

  • pay off transmission fees
  • unpaid late fees
  • prepayment penalties (you may want to consider delaying a refinance if possible until the prepay period is over if you have a prepayment penalty)

Often times, the escrow company will request the payoff with a few additional days factored in to act as a cushion. The escrow company may (should) order an updated payoff closer to the signing date in order to provide the most accurate figures possible. The lender being refinanced will refund any difference in your favor. In addition, if you have an escrow reserve account for taxes and insurance, you will receive a refund from the lender in approximately 6-8 weeks after closing.

At your signing appointment, ask to receive a copy of your payoff statement. Check to see how recently it was requested. If it was ordered at the beginning of the transaction and you have since made a mortgage payment, you can ask the closer to order an updated statement prior to closing (with a refinance, there is a three day right of rescission that takes place, so there should be enough time for this to take place with most lenders).


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Posted by Jill Kohler on October 18th, 2016 2:51 PM

FHA Loan

FHA loans are the new most popular mortgage loan. During the housing boom, subprime mortgages were all the rage. But as the housing market fell apart, lending standards tightened and the benefits of FHA mortgages are more prevalent.  FHA is a good alternative to for first time buyers to be able to qualify and become a homeowner even though they don't have a large amount of cash to put down.

You can borrow 96.5% of the value of the home. You only need to come up with a 3.50% downpayment. Minimum credit scores are typically lower, as well as you won’t be disqualified if you have a bankruptcy or foreclosure. With FHA loans, you can also refinance with them. You need to be current on your payments, but you may not need to get your home appraised. And typically there is a lot less paperwork involved. FHA currently allows sellers to contribute up to 6% towards the buyers closing costs. Lastly, FHA loans come with fixed rates. Many reasons homeowners got into trouble was their mortgages were adjustable rates and their monthly payments became very unstable.

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Posted by Jill Kohler on October 17th, 2016 4:26 PM

Credit Tips


One of the most important factors today in getting a Pennsylvania mortgage is knowing your credit score and history.  Your credit is going to determine a lot of things, whether you can get a mortgage, how much you'll have to put down and what your interest rate will be.

If you've had a blemish or two on your credit report (and who hasn't these days) here are a few tips toward improving your scores. 

  • Keep your bill payment history on time for 24 months.
  • Open several new accounts and use them by making the minimum payment for a number of months.
  • Open a secured credit card (Orchard Bank has a good one)
  • Don't keep running your credit report. Wait 6 months
  • Talk to a qualified professional about your situation
Posted by Jill Kohler on October 14th, 2016 4:08 PM

401k for home purchase
Many people consider this option since they don't have money set aside in their savings account. By withdrawing money from your 401k you will have to pay early withdraw fees as well as taxes on the money you take out. On the other hand, it may be worth it if you found the right house.

As a first time homebuyer you can often avoid the penalties, but you will have to pay taxes on the money. However, you can usually take the money out of your 401k without a penalty if you basically take out a loan on the money,( if your employer permits loans.)

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Also, unless you are putting at least 20% down on the home purchase, you will more than likely have pmi insurance. Since there isn’t going to be a huge difference in the monthly payment on the insurance itself, it may be in your better interest to consider not borrowing from the 401k unless you have enough to put the entire 20% down to avoid the insurance all together.

If you have an accountant I would suggest you sit down with them and see what this impact would have on each situation in relation to your taxes.  It is unique to every individual.

Posted by Jill Kohler on October 13th, 2016 11:05 AM

Fixed versus adjustable rates

With a fixed-rate loan, your payment stays the same for the entire duration of the mortgage. The amount of the payment that goes to principal (the loan amount) increases, but your interest payment will decrease accordingly. Your property taxes increase, or rarely, decrease, and your insurance rates might vary as well. But generally monthly payments for a fixed-rate loan will increase very little.

Your first few years of payments on a fixed-rate loan are applied mostly to pay interest. The amount applied to principal increases up slowly each month.

You might choose a fixed-rate loan in order to lock in a low interest rate. People select fixed-rate loans when interest rates are low and they want to lock in at this lower rate. For homeowners who have an ARM now, refinancing into a fixed-rate loan can provide greater monthly payment stability. If you have an Adjustable Rate Mortgage (ARM) now, we can help you lock in a fixed-rate at the best rate currently available. Call Net Equity Financial Mortgage at (215)741-3131 to discuss how we can help.


Adjustable Rate Mortgages — ARMs, come in a great number of varieties. ARMs are normally adjusted every six months, based on various indexes.

Most ARM programs have a "cap" that protects you from sudden monthly payment increases. Some ARMs can't increase more than 2% per year, regardless of the underlying interest rate. Sometimes an ARM features a "payment cap" which ensures your payment can't go above a fixed amount over the course of a given year. Additionally, the great majority of ARM programs have a "lifetime cap" — this means that your rate will never go over the cap amount.

ARMs most often feature the lowest, most attractive rates toward the start. They guarantee that interest rate for an initial period that varies greatly. You've likely heard of 5/1 or 3/1 ARMs. For these loans, the initial rate is fixed for three or five years. It then adjusts every year. These loans are fixed for a certain number of years (3 or 5), then adjust after the initial period. Loans like this are best for people who expect to move within three or five years. These types of ARMs most benefit borrowers who plan to move before the initial lock expires.

Most borrowers who choose ARMs choose them because they want to get lower introductory rates and do not plan to stay in the home longer than the initial low-rate period. ARMs can be risky when housing prices go down because homeowners can get stuck with increasing rates when they can't sell or refinance at the lower property value.

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Posted in:General and tagged: mortgageloanParates
Posted by Jill Kohler on October 12th, 2016 5:40 PM
This is one of the most common questions we hear from potential home buyers and borrowers. The simple answer is a minimum of 3.5 to 5% in cash of the amount of the property you're planning on purchasing. This assumes decent credit (above 620 mid score) 2 years continuous employment, documented income (current paystubs, w-2's) with the total payment (including property/school taxes and insurance) or PITI no more than about 31% of gross monthly income for monthly housing expense. Bear in mind this is a minimum set of criteria. We fund loans through many different wholesale banks and each of those lenders has their own set of underwriting guidelines (and some can be downright picky) If you are planning on applying for a purchase mortgage anytime soon, you may want to speak with a qualified mortgage professional to review your credit, financials, accounts and ratio's to prepare in advance before entering the market and falling in love with your dream home. 

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Posted by Jill Kohler on October 11th, 2016 11:17 AM

Getting a mortgage loan, whether FHA, refinancing, or conventional can take a little doing, but here are a few tips to prepare for the process. 

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1) Gather all your financial information in one place. Current W-2's (or 1099's), at least last years tax returns, preferably the last 2 years, current mortgage statements, 1 month of current pay stubs for all borrowers,

2) Have an idea of what your credit score is.   A lender will pull a trimerge report from 3 major credit bureau's and have some questions about these issues.  The lender may also guide you in the right direction if your credit is less than perfect on what steps to take to improve it.

3) Be honest and provide accurate information on your application. Credit reports,  bank accounts, and jobs are all verified. It's a lot easier to deal with an issue upfront than find out later in the loan process after you've paid for an appraisal and things are moving along.

4) Respond promptly to any requests for additional information so that you get your approval sooner.  

Posted by Jill Kohler on October 10th, 2016 3:34 PM

Getting a mortgage loan, whether FHA, refinancing, or conventional can take a little doing, but here are a few tips to prepare for the process.

Get your FREE Quote Now!

1) Gather all your financial information in one place. Current W-2's (or 1099's), at least last years tax returns, preferably the last 2 years, current mortgage statements, 1 month of pay stubs for all borrowers, a copy of your hazard insurance declarations page and agent number.

2) Have an idea of what your credit report looks like.  Is your credit perfect, do you have a slow paying account, have you missed a mortgage payment in the last 12 months.  A lender will pull your report from 3 major credit bureau's and have some questions about these issues.  The lender may also guide you in the right direction if your credit is less than perfect on what steps to take to improve it.

3) Be honest and provide accurate information on your application. In today's mortgage market, everything is double and triple checked.  Credit reports, addl sources of income, bank accounts, part time jobs are all verified. It's a lot easier to deal with an issue upfront than find out later in the loan process after you've paid for an appraisal and things are moving along.

4) Respond promptly to any requests for additional information so that you get your approval sooner.

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Posted by Jill Kohler on July 15th, 2011 4:22 PM

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