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Mortgage questions abound when you’re a first-time home buyer. Compounding the challenge is the embarrassment over interrupting the conversation with a would-be lender or seller to ask, “‘Scuse me, what is a credit score? How much money do I need as a down payment?” Everyone knows this stuff, right?

  www.realtor.com/advice/finance/your-mortgage-questions-answered

No, they don’t all know—so you should ask these questions. Or, at the very least, study up a bit so you know the basics. To help get you up to speed, here’s a crash course on the most common mortgage questions and answers you need to know. Take five to read on, and wonder no more.

1. What do you need to get a mortgage?

Before loaning you money, lenders want to see proof that you’ve proven reliable paying off past debts, so you’ll need to start establishing credit.

“There are ways to verify your past payments on utility bills, cellphone, and rent,” notes Michael E. Matthews, senior vice president of PrimeLending. “Get a credit card, pay it back carefully. Your car and college loans—those things help you establish credit and help you get a mortgage.”

2. If you have bad credit, how do you improve it?

Matthews talks to a lot of borrowers who come to him with this mortgage question. They think they have bad credit but are doing better than they think.

His first tip: Check your credit report.

It’s free to download one copy each year, and you may be pleasantly surprised by what you find. And if the news is bad, there’s still hope.

“If you’ve got bad credit, a lot of times there’s aged activity on there—an old collection, a medical bill, something you didn’t know about,” Matthews says. And these “errors” can often be fixed, boosting your credit score fairly quickly.

If you do have a bunch of bad marks and late payments, however, start paying on time and your score will gradually improve. Here are some ways to raise your credit score.

3. What’s the difference between a mortgage pre-approval and a pre-qualification?

“Pre-qualification is not going to hold the same weight as a pre-approval,” says Matthews. “You can go online and get somebody to print you out a pre-qual letter. And you’ll find that if you’re negotiating with an agent and they’re looking at a pre-qual letter, it’s probably not worth much to them.”

A pre-approval letter—involving lenders fully checking your finances in a verifiable way—takes more time and effort, which is exactly why it carries much more weight. If you’re serious about buying a home, get pre-approved to show you mean business. Here’s more on the difference between mortgage pre-approval vs. pre-qualification.

4. How much down payment do you need for a mortgage?

The gold standard down payment for a mortgage is 20%—so if the home’s price is $200,000, you’d ideally have to pony up $40,000 of your own money to get the loan.

If you don’t have that much, all is not lost. You can put down less, but that means you’ll have to pay PMI, or private mortgage insurance. It’s an extra fee of about $50 to $100 a month that lenders will require to mitigate the risk that you might default on your loan due to your lack of funds.

“There’s risk there that literally has to be accounted for, and that ends up being insurance that adds to your mortgage payment,” says economist Jonathan Smoke. “When you put less down, the trade-off is you actually have to spend more on a monthly basis.”

That said, there are some exceptions that allow a buyer to avoid PMI even with a small down payment. Buyers who are in the military, veterans, and family members of veterans may be able to avoid PMI with a Veterans Affairs loan. And once your equity in your home rises above 20%, you can stop paying PMI.

5. What kind of down payment assistance is available?

If you’re looking for help with a down payment, Smoke says, the “bank of Mom and Dad” may be a smart start—if your parents have the means to pitch in. Gifted money can help many people qualify for a loan, he says, although you absolutely must tell your lender that the money was a gift—fibbing on this front will raise red flags.

If private assistance isn’t an option, or isn’t enough, never fear—there are over 2,000 down payment assistance programs across the country that can help, as long as you meet eligibility requirements in terms of income and credit.

Check with your real estate agent or lender, as they may be able to tell you about programs in your area that will help you become a homeowner.

6. What types of home loans are available?

Loan types vary widely, but Barbara A. Carrollo-Loeffler, director of consumer and residential lending at Provident Bank in Jersey City, NJ, says loans typically fall into two camps. The first includes loans with an adjustable rate, meaning the interest rate could change after a period of time. The second includes loans that are “fixed” or “term,” meaning the rate will stay the same for the length of the borrowing period. Generally term or fixed-rate loans are more common and considered the safer option, but it all depends on your circumstances, including how long you plan to stay in the home.

Here’s more info on the pros and cons of various types of home loans, and which one is right for you.

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

Jeanne Sager has strung words together for the New York Times, Vice, and more. She writes and photographs people from her home in upstate New York.
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Interesting. Unfortunately, it makes sense when woman still make less than men in so many occupations.

home-buying-tips-for-single-income-women

SEATTLE – April 23, 2018 – Real estate website Estately recently conducted a study showing how America’s gender wage gap affects home affordability and ownership for women.

http://www.floridarealtors.org/NewsAndEvents/

To find out, Estately used 2016 U.S. Census data to compare men’s and women’s median salaries in the 50 most populated U.S. cities. Based on those salaries and assuming a monthly mortgage payment of 28 percent of the gross monthly income, the site used a mortgage calculator to determine the maximum home price each salary could afford.

Armed with this information, Estately reviewed the homes currently for sale in major cities across the country and identified the percentage of homes men versus women could afford.

The results in some urban centers were bleak. Seattle, for instance, has the biggest wage-based housing gap. Men can afford nearly 150 percent more homes than women.

Colorado Springs, Miami, San Diego and San Jose also topped the list with significant gaps. For instance, in Colorado Springs men can afford 122.5 percent more homes than women, while further down the list in San Diego, the difference is still a significant 68.5 percent.

With these results in mind, we asked real estate and personal finance experts to share their top tips for single women seeking to purchase a home.

Don’t let the down payment scare you away
Coming up with the funds to make a down payment on a home can often seem impossible, particularly when so many Americans have sizeable student loan bills and more.

Andrina Valdes, division president at Cornerstone Home Lending, urges buyers not to let this part of the process discourage them.

“Over and over again, potential home buyers report saving for the down payment as the biggest hurdle to homeownership. When you’re relying on one income to save up for it, the problem can seem insurmountable,” says Valdes.

The good news is there are all kinds of down payment assistance programs that can help individuals get into a home for less money down.

The Federal Housing Administration loan is popular among first-time and single-income home buyers thanks to its 3.5 percent down payment requirement. There are also programs offered by the Veterans Administration and also USDA loans that may require no down payment at all, says Valdes.

Line-up a guarantor or co-purchaser
The reality is that many single income households, whether they’re run by men or women, need assistance in buying a home in today’s market.

Experienced agent Julie Gans of Triplemint suggests lining up a qualified guarantor, co-purchaser or someone who might be able to gift money for your home purchase.

Consider a fixer upper
A growing trend among home buyers with limited means has been buying older properties and rehabbing them, says Ralph DiBugnara, president of Home Qualified.

“There are a few mortgage products in the market right now that make that easier,” said DiBugnara. “Fannie Mae has a loan called Home Style and FHA has what’s called a 203k loan. They both allow you to not only finance the purchase price but also construction costs in the loan to help your home look new.”

Look at homes well below your means
Real estate analyst Julie Gurner, of FitSmallBusiness.com, says it’s critical that single income households buy properties that are well below the amount they’ve been pre-approved for.

“You see that gorgeous home at the top of your range? Pass on it, and you’ll be glad you did,” said Gurner. “Single women and single income families have to be especially mindful to buy a home below their means … It gives them an additional expense cushion every month. Things come up. Doctor visits, your car breaks down, or your furnace breaking can be a big financial hit if you don’t have the ability to absorb it. On months where nothing goes wrong, you have the ability to save.”

As a single income earner, it’s important to protect yourself financially and be able to provide the necessities that make life stable. Having a home below your means can give you both and a great place to live.

House hunt during the right season
When it comes to finding an affordable home, time of year can make a big difference.

That means shopping during the right seasons, when prices traditionally are more negotiable and inventory is better, says Valdes.

Recent data from Trulia shows that there’s a 7 percent spike in starter home inventory during the fall, making it an ideal time to find a good deal. On the flipside, starter home inventory drops by more than 20 percent during the summer, making the warmer months a less appealing market.

Minimize credit card debt
As you embark upon your housing search, it’s critical that you reduce existing debt. This helps on a variety of levels.

For instance, not only does it make you a better mortgage applicant, it will also help once you’re in your new home dealing with a whole host of new expenses.

Gans, of Triplemint, suggest tackling credit card debt in particular.

“Pay off all credit cards prior to purchase to lower your income to debt ratio,” advises Gans. “This reduces your liability and makes you look more appealing to a seller.”

http://www.floridarealtors.org/NewsAndEvents/

Copyright © 2018 North Jersey Media Group Inc. This article originally appeared on Credit.com.

WASHINGTON – Aug. 1, 2017 – Fannie Mae, the large quasi-government agency that sets the guidelines for lenders selling their home loans on the secondary mortgage market, is adopting some new procedures that should make it easier for many borrowers with student debt, and those who cosigned for them, qualify for a home loan. Large student debt is one of the barriers for many young people trying to qualify for a mortgage.

Beginning immediately, Fannie Mae is expanding cash-out refinances that let borrowers use the lower interest rate equity in their home to pay off higher interest rate student debt. The refi program should help not just students who borrowed money for themselves, but also parents who cosigned for them. (Private student loans made by banks and other lenders typically require cosigners.)

While the cash-out refi program will enable many borrowers to trade low interest mortgage debt for higher interest student loans, the program does carry some risk. Student loans are unsecured while mortgages are secured by the home. If the borrower runs into financial difficulty, the home could be at risk.

Also, federal student loans come with protections like flexible repayment options and payment deferment if the borrower runs into financial trouble. Those protections end if the debt is refinanced into a mortgage. Private student loans, however, do not usually have those protections.

Another change allows borrowers applying for a mortgage to exclude debt being paid by others, such as credit cards and student loans being paid by parents or employers, from their application. That change will help give these borrowers a better debt-to-income ratio, some important criteria in a mortgage application, improving their chances of qualifying for a mortgage.

A third change will help borrowers with student loans on a flexible payment plan, which tie monthly payments to income. Previously, Fannie Mae required lenders to use higher monthly loan payments rather than borrowers’ lower flexible payments in determining debt-to-income. Now, lenders can use the lower payments which should help more borrowers qualify for a mortgage.

Many millions of student borrowers are on flexible payment plans. Hopefully, all of these changes will make it easier for young people to get into the housing market.

Copyright © 2017 The Enterprise, Linda Goodspeed. Goodspeed is a long-time real estate writer and author of In and Out of Darkness.

http://www.floridarealtors.org/NewsAndEvents/

Many first-time home buyers receive down payment assistance from a family member or close friend, but they may not realize there are specific guidelines they must follow when they take money from others for a home purchase.

Read more: Help Clients Get Smarter About Ownership

First off, the down payment must be considered a gift. If it’s considered a loan, the lender must then factor that into the mortgage approval amount, and your buyers may then qualify for less than they may have needed to.

Your buyers will need a gift letter from the person or persons who gave them the money. The person who gifted your buyer the money will need to state on paper that he or she does not plan on asking for the money back in return and that it is, indeed, a gift.

“The gift letter is very serious,” says Casey Fleming, mortgage adviser and author of “The Loan Guide: How to Get the Best Possible Mortgage.” “While it is doubtful that a lender would ever audit a file after the fact to see if the recipient is paying the donor back, if the transaction goes bad, you might very well find yourself with a subpoena in your hand.” Remember, you cannot lie on a mortgage application. It’s a felony.

The gifter may also be required to provide bank statements, possibly even up to two months of statements from their account.

Your buyers also likely will want to get the down payment in advance during the early planning stages of their house hunt. That could also help save them from possible delays later on.

“If the funds are ‘seasoned’ — meaning that they’ve been in the account long enough so that the last two bank statements don’t show the deposit — the gift does not have to be addressed,” Fleming says.

Also, there is a limit to how much your buyer can be gifted tax-free. Any gift of $14,000 and up will face a tax bill, under current rules.

That said, “it is $14,000 per year per donor, so a couple could give $28,000 ($14,000 from each) to their child,” Fleming says.

Source: “Getting a Down Payment as a Gift? Avoid the Mistakes That Could Mess You Up,” realtor.com® (Nov. 28, 2016)

 

With inventory below historic numbers and demand still strong, you could be missing out on a great opportunity for your family.

1. Demand Is Strong

The latest Realtors’ Confidence Index from the National Association of Realtors (NAR) shows that buyer demand remains very strong throughout the vast majority of the country. These buyers are ready, willing and able to purchase… and are in the market right now!
Take advantage of the buyer activity currently in the market.

2. There Is Less Competition Now

According to NAR’s latest Existing Home Sales Report, the supply of homes for sale is still under the 6-month supply that is needed for a normal housing market at 4.7-months.
This means, in most areas, there are not enough homes for sale to satisfy the number of buyers in that market. This is good news for home prices. However, additional inventory is about to come to market.
There is a pent-up desire for many homeowners to move, as they were unable to sell over the last few years because of a negative equity situation. Homeowners are now seeing a return to positive equity as real estate values have increased over the last two years. Many of these homes will be coming to the market this fall.
Also, as builders regain confidence in the market, new construction of single-family homes is projected to continue to increase over the next two years, reaching historic levels by 2017. Last month’s new home sales numbers show that many buyers who have not been able to find their dream home within the existing inventory have turned to new construction to fulfill their needs.
The choices buyers have will continue to increase. Don’t wait until all this other inventory of homes comes to market before you sell.

3. The Process Will Be Quicker

Fannie Mae announced that they anticipate an acceleration in home sales that will surpass 2007’s pace. As the market heats up, banks will be inundated with loan inquiries causing closing-time lines to lengthen. Selling now will make the process quicker & simpler.

4. There Will Never Be a Better Time to Move Up

If you are moving up to a larger, more expensive home, consider doing it now. Prices are projected to appreciate by 5.3% over the next year, according to CoreLogic. If you are moving to a higher-priced home, it will wind up costing you more (both in down payment and mortgage payment) if you wait.
According to Freddie Mac’s latest report, you can also lock-in your 30-year housing expense with an interest rate around 3.46% right now. Interest rates are projected to increase moderately over the next 12 months. Even a small increase in rate will have a big impact on your housing cost.

for more info:   http://www.realtor.org/reports/realtors-confidence-index

President Obama Takes Steps to Increase Homeownership

 

Today President Obama announced plans to help increase homeownership in America, and target first time home buyers by lowing the annual cost of the FHA mortgage insurance premiums by 50 basis points.

Residential News » United States Edition | By Miho Favela | January 8, 2015 – See more at: http://www.worldpropertyjournal.com

This announcement is now getting praise by many real estate professionals and organizations.

David H. Stevens, President and CEO of the Mortgage Bankers Association says, “The MBA applauds President Obama and his administration for continuing to look for ways to help first time home buyers, grow the housing market and strengthen the economy. Specifically, MBA is pleased about the decision to make a 50 basis point reduction on the annual FHA MIP, something MBA has called for in the past.  This is a win-win.  It’s good for borrowers and good for FHA, helping the agency stabilize its market share and continue to rebuild the MMI fund.

“Additionally, we were encouraged that President Obama called for GSE reform, which hopefully will spur action on Capitol Hill.  And the coming changes to Fannie and Freddie’s rep and warrant framework that he mentioned should help lessen the high level of uncertainty lenders face and allow them to use the full extent of the GSE credit box to serve more qualified borrowers.”

The Mortgage Bankers Association Chairman Bill Cosgrove further added, “As an independent mortgage banker whose business includes a significant amount of FHA lending, I can attest that the 50 basis point reduction in FHA’s annual premium will have a significantly positive impact for my borrowers and the housing market. Specifically, this will help first time homebuyers by making FHA loans more affordable.  Given the timing, just as we begin the spring home buying season, I think today’s announcement is just what the market needs.

“MBA looks forward to working with the President, as well other policymakers in Washington, to ensure the real estate finance market continues to strengthen so that all consumers have the opportunity to enjoy the dream of homeownership.”

The California Association of Realtors also chimed in on today’s announcement.

“Reducing FHA mortgage insurance premiums will make it easier for hundreds of thousands of home buyers to get a mortgage and provide greater access to homeownership for historically underserved groups and credit worthy families,” said C.A.R. President Chris Kutzkey. “Moreover, this shift in policy will also increase the volume of borrowers using FHA-backed loans, while continuing to contribute to the solvency of FHA’s Mutual Mortgage Insurance (MMI) Fund and making the dream of homeownership a reality for millions more Americans.” – See more at: http://www.worldpropertyjournal.com

When you pay your mortgage, do you know exactly what you’re paying for? As a homeowner, you should,so here is your mortgage decoded and explained: http://bit.ly/1q3lvfZ

PITI: Your Mortgage Payment Explained – realtor.com
As a renter you are used to sending your landlord a monthly payment, which sometimes even includes your utility payments.Once you become a homeowner, your monthly mortgage payment becomes more complicated.Unless you are paying cash for your home, you will have a mortgage payment. There are typically four parts to this monthly mortgage payment, often referred to as PITI:

  • Principal: This is the portion of your payment that goes to pay down the balance that you borrowed. If you opt for a fixed-rate loan, your monthly payment will not change over the loan term, but the makeup of your payment will change. In the early years of your loan, you mostly pay interest, but gradually you will begin to pay more of the principal. For example, in the first month of a 30-year fixed-rate loan of $200,000 at 4.5%, your payment will be $1,014 with $264 toward principal and $750 toward interest. In 20 years, the payment will still be $1,014 each month—but the payment will be shifted to $647 toward principal and $367 toward interest.
  • Interest: The interest you pay is the cost of borrowing money.
  • Taxes: Your lender usually requires an escrow account and will collect one-twelfth of your annual property tax bill in this account with each mortgage payment.
  • Insurance: You will pay one year of homeowners’ insurance premiums at your home settlement as part of your closing costs, and then your lender will collect one-twelfth of your annual insurance premium in this account with each mortgage payment.

If you make a down payment of less than 20%, your mortgage payment may also include mortgage insurance, a fee you pay that protects your lender in case you default on the loan.

While there are sometimes exceptions to the rule, lenders generally require your house payment to be 31% or less than your gross monthly income. So when you are calculating how much you can afford to spend on a home, you should keep that figure in mind.

Other Housing Expenses

If you buy a condominium or a home within a homeowners association (HOA), you will also need to pay association dues. These dues are not part of your mortgage payment but will be considered as part of your debt-to-income ratio. Condo fees are usually collected monthly, and HOA fees can be collected monthly, quarterly or annually.

When you are making up a housing budget, you also need to estimate your utility costs—which you will pay separately from your mortgage. You can ask the sellers of a home you’re interested in for their average utility bills. Don’t forget you may need to pay not only gas and electric bills but also a water bill and possibly a trash removal fee.

As a renter, you’ve been able to call your landlord when an appliance breaks or you have a plumbing leak, but as a homeowner these problems will become yours. You need to budget for maintenance and repairs, but it can be difficult to predict what issues will arise in any particular year.

It also depends on the age and condition of your home. A home inspector can give you an idea of when you might need to replace particular appliances, but you can also keep about 1% of your home value available for emergency home repairs.

Budgeting for homeownership is a key element to maintaining your ability to keep your home and to help it hold onto its value. Making your monthly house payment is the biggest part of the financial commitment—but certainly not the only one.

August 26, 2014  http://www.inman.com   Insights from Real Estate Connect 
Hear what title insurers and settlement services providers are doing to streamline the closing process for homebuyers and sellers from Matt Morris, CEO of Stewart Information Services Corp., and Patrick Stone, president and CEO, Williston Financial Group.
http://bit.ly/VPUulj

How to streamline the closing process for your buyers and sellers | Inman News
Matt Morris, CEO of Stewart Information Services Corp., and Patrick Stone, president and CEO, Williston Financial Group, talk about how to streamline the closing process for homebuyers and sellers.

Residential News » North America Edition | By WPC Staff | May 29, 2014

According to the National Association of Realtors (NAR), pending home sales in the U.S. improved for the second straight month in April. Gains in the Midwest and Northeast offset declines in the West and South.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, increased 0.4 percent to 97.8 in April from 97.4 in March, but is 9.2 percent below April 2013 when it was 107.7.

Thumbnail image for lawrence-yun.jpg
Lawrence Yun, NAR chief economist, expects a gradual uptrend in home sales. “Higher inventory levels are giving buyers more choices, and a slight decline in mortgage interest rates this spring is raising prospective home buyers’ confidence,” he said. “An uptrend in closed sales is expected, although some months will encounter a modest setback.”

Yun projects the 30-year fixed-rate mortgage to trend up and average 5.5 percent next year. “The extent to which higher mortgage interest rates will impact housing affordability and sales depends on income growth, ongoing improvement in the labor market and any change to mortgage underwriting conditions.”

The PHSI in the Northeast increased 0.6 percent to 79.3 in April, but is 12.0 percent below a year ago. In the Midwest the index rose 5.0 percent to 99.2 in April, but is 6.9 percent below April 2013. Pending home sales in the South slipped 0.6 percent to an index of 111.9 in April, and are 6.4 percent below a year ago. The index in the West declined 2.9 percent in April to 88.4, and is 15.0 percent below April 2013.

With sub-par activity in the first quarter, annual existing-home sales are expected to be modestly below the nearly 5.1 million in 2013, but should be close to 5.3 million in 2015. The national median existing-home price is projected to grow between 5 and 6 percent this year, and in the range of 4 to 5 percent in 2015. – See more at: http://www.worldpropertychannel.com/north-america-residential-news/pending-home-sales-april-2014-pending-home-sales-index-phsi-lawrence-yun-median-home-sales-price-real-estate-news

Daily Real Estate News |      Tuesday, November 01, 2011

Rising utility bills can greatly affect a home buyer’s ability to afford a house, sometimes even more so than property taxes or home owner’s insurance. As such, a new bill introduced in the Senate is calling on lenders to start taking into account a home’s energy costs in standard mortgage underwriting—right along with principal, interest, taxes, and home owner’s insurance.The bipartisan bill, SAVE Act (Sensible Accounting to Value Energy) would require the three major mortgage agencies—Fannie Mae, Freddie Mac, and the Federal Housing Administration—to factor energy costs into every loan they insure, guarantee, or buy. To gather estimated costs of energy bills on a home, lenders would gather data from previous utility bills or from an Energy Department survey database.

The bill also calls on the mortgage agencies to instruct appraisers to raise their property valuations when energy efficiency savings on a home can be shown. The higher value could thenbe used by a buyer to justify a higher loan amount if needed.

Source: “Mortgage Lenders Could Soon Take Homes’ Energy Costs into Account,” BostonHerald.com (Oct. 30, 2011)

Interesting. What do you think?

Annalisa Weller, Realtor®, Certified International Property Specialist

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