Buying a Home? Make Sure Your Finances Are in Order First

Below is a guest blog post by Janet Elliot of RE/MAX

Purchasing a new home is part of the American Dream, just as much as graduating high school and college, getting married, and having children. It’s also the hardest part of the dream to achieve; you need patience, resilience, thick skin, and great financial planning.

The latter is the most important aspect of buying a home. With that said, you don’t need loads of money in order to purchase – just decent credit and a solid financial plan. So, before you head out to the local open houses, be sure you’ve first tackled your finances in order to know which homes you can actually afford.

Make Sure You Have the Credit

According to Keith Gumbinger, Vice President of HSH, a mortgage information company, the best mortgage rates are given to potential buyers who have a credit score of 740 or above. However, you can still get a home loan with a credit score of 620; in some cases even a 580 credit score can qualify you for an FHA loan.

Just because you may qualify for a loan at 580, it doesn’t mean that you should apply for one. Lenders use your score to determine whether or not they will lend to you, but also at what rate. Lower credit scores mean higher rates.

The best thing you can do to get your credit score on track before purchasing a home is to get a free credit report from annualcreditreport.com six to twelve months before you go house hunting. This report looks at the three main credit bureaus, giving you insight into your number, and what needs to be taken care of to improve the score.

Doing this up to a year before you start looking allows you plenty of time to increase your score. Mortgage companies aren’t the only ones that look at this number; sellers and real estate agents also look as this number, and it can determine if they will sell to you or take you on as a client. Don’t overlook this step, it’s essential to your success.

Do You Have Too Much Debt?

Your debt is another huge factor when attempting to secure a lender. In fact, it can at times be even more important than your credit score; it’s the first thing they look at when determining your eligibility. The debts they look at include student loans, car loans, credit card payments, and so forth. Ideally, lenders are looking to see if your overall debt plus your potential new mortgage payment is 45% or less than your income.

For example, if your monthly pretax income is $5,000, they want to see that $2,250 or less of it is going toward your mortgage payment and debt. Obviously, the less debt you have, the better. If you can reduce your overall debt by paying off that pesky car loan or student loan, your payment-to-income ratio will decrease and make you a more attractive buyer. In addition, leave older credit lines open, avoid opening new credit lines, stop buying on existing credit, and don’t shuffle your money around; this will leave you in the best position to buy a home.

Set a Budget and Prepare for Your Down Payment

Now that you have your debt and credit score goals where you want them, it’s time to look at your budget and prepare for your down payment. The best way to determine your budget is by using the standard rule when it comes to purchasing a new home. The rule of thumb is to only look at homes that are no more than 2.5 times your gross annual salary. In layman’s terms, if your annual salary is $50,000, look for homes priced no more than $125,000 dollars.

Once you have your max amount, it’s time to speak to lenders to see what your financing options are. You typically will have the choice between two types of mortgages: fixed-rate and adjustable-rate. Fixed-rate mortgages are where your monthly payment and interest rate stay the same the entire time you have the loan, for between 15 to 30 years.

Adjustable-rate mortgages have an introductory interest rate that will change after a specific period of time. Simply put, it could start off at a particular rate for the first two years, but can begin being adjusted annually after that. In general, most real estate agents would suggest that a fixed-rate mortgage payment is the safer financial choice, but every homeowner is different.

Aside from determining your budget and settling on a loan option, you will also need to plan for a down payment. In the best case scenario, you want to have a down payment of 20 percent of the total price of the home, but a minimum of 10 percent down can work for a conventional mortgage loan. Since everyone’s situation is different, some buyers simply cannot come up with that type of down payment.

If you are among those who cannot afford a higher down payment, you can apply for an FHA loan, which can make your down payment as little as 3.5 percent of the cost of the home.

In some cases, if you meet the income limitations of your state, you can even get a five percent down payment loan from traditional loans. Work with your real estate agent and speak with a few lenders to find which style of mortgage and down payment method will be best for your situation.

One Last Thing Before You Make an Offer

Closing costs are another thing to think about before you put in an offer. It used to be you could get some credits for your closing costs and still have your offer accepted, but not so much anymore. To be prepared in the current market, be sure you have at minimum 2.5 percent of the purchase price for closing costs (not including your down payment). This will give you the best chance of putting in a successful offer.

The real estate market is competitive right now, with many sellers taking multiple offers of the asking price and choosing the most solid one. Rise above the competition with closing costs already accounted for. By following these steps, you will be in the perfect position to put in an offer on your dream home. Now it’s time for the fun stuff – heading out to open houses!

janetelliotJanet Elliott has served as a Realtor with REMAX for 28 years in the metro Atlanta area. Janet is also a Certified Residential Specialist or CRS. This is a designation achieved by less than 1% of real estate agents. When not practicing real estate, Janet can be found spending time with family and friends out on the water!

HOLY TRID! New Regulations for the Mortgage Industry Start Today!

Today marks the 1st day of new federally mandated regulations known as “TRID” (TILA-RESPA Integrated Disclosures). The Consumer Financial Protection Bureau (CFPB) has introduced these new regulations as part of their “Know Before You Owe” initiative.

New forms are part of TRID whose purpose is to help make it easier for borrowers to understand complex mortgage documentation. Home mortgages are important for consumers so that they can achieve the dream of homeownership. As much as we try to make the mortgage process less complex for our clients it is still not as simple as we all would like. These new TRID forms look to help with the complexity by merging four forms into two forms.

The New Forms

During the mortgage process, we as the mortgage lender are required to give you these two new forms. One form, the Loan Estimate, you will receive early in the process. The second form, the Closing Disclosure, you will receive later on so you can review the final loan terms before you close.

The Loan Estimate

The Loan Estimate replaces both the initial Truth-in-Lending (TIL) statement and the Good Faith Estimate (GFE).

Within 3 business days after receiving certain information on your loan application (income, property value, etc.) you will be sent a Loan Estimate.

Your Loan Estimate (LE) consists of three pages. The first page lists general information about your loan:

Applicant info and property details
Loan type, purpose and terms
Projected payments during the loan term
Estimated closing costs and how much cash you’ll need at closing

The second page of the Loan Estimate breaks down the closing costs:

Origination Charges (this covers our expenses to do the loan)
Other Costs (third-party charges like homeowners insurance)
Calculation used to determine estimated cash required at closing
Adjustable interest rate table, payment table (for ARM loans only)

The last page shows information about your lender and further details to help you choose which loan is right for you:

Contact info for us “the lender” and your loan originator
Comparisons (consistent table format to make comparing different loans easy)
Other Considerations (details specific to this loan from this lender)
When you’ve decided on your loan option, you MUST sign the Intent to Proceed document. Without this consent, we as your lender cannot move forward with processing your loan.

Closing Disclosure

The new Closing Disclosure replaces both the final Truth-in-Lending disclosure and the HUD-1 statement.

When your loan has been processed and is ready to close, you will have a final discussion with us to go over the loan and its terms. We want to make sure you understand and agree to everything. We will then provide you a Closing Disclosure detailing your loan terms.

The Closing Disclosure is designed to be easy to read and contains the same information as the Loan Estimate essentially. It will reflect your final fees, charges and includes additional information relating to your escrow account (which holds funds to pay your taxes & insurance(, if applicable. You need to review and confirm everything matches what you have agreed to.

The New 3-Day Waiting Period

We as your lender are required to give you a minimum of three business days to review the Closing Disclosure before your closing can take place. If changes to the Closing Disclosure are made, another three-day review period may be required.

To prevent a delay in the closing of your loan, it is important to acknowledge receipt of the Closing Disclosure as soon as you receive it.

Here at Mason-McDuffie Mortgage we have been working hard to make sure our clients have a seamless transaction with these new regulations. If you have any questions about the new regulations or forms, please contact your Loan Originator, or you can email us at info@mmcdcorp.com.

Benefits of a Homestyle Renovation Loan

homestyle loan benefits

According to Fannie Mae, the “HomeStyle Renovation mortgage permits borrowers to include financing for home improvements in a purchase or re-finance transaction of an existing home”.

The HomeStyle Renovation Loan gives borrowers a convenient option to pay for renovations. Additionally, this loan provides an alternative to a second mortgage, home equity line of credit or other type of financing.

Eligible borrowers for the HomeStyle Renovation Loan include:

  • Home Buyers
  • Homeowners
  • For-profit investors
  • Non-profit investors
  • Local Government Agencies

Potential Borrower Benefits:

  • Cost-effective way to make home improvements.
  • A single loan provides the borrower with lower closing costs and potentially lower interest rates on a first mortgage.

For more information on the HomeStyle Renovation Loan, please contact your local Mason-McDuffie Mortgage Loan Officer or find one here http://www.mmcdcorp.com/find-loan-officer.

All information for this post was sourced from Fannie Mae.

Mason-McDuffie Mortgage IS ready for QM

Today the CFPB’s new Ability To Repay / Qualified Mortgage (ATR / QM) regulation goes into effect for loans with an application date of January 10, 2014 forward.

We are ready!

The rule is complex and operationally challenging, and there are still many aspects that remain unclear. The investor market is still working through its requirements for documentation and its appetite for different types of loan products.

However, there is a simple way to be in compliance with this complex regulation – make QM / Safe Harbor loans.  QM loans are presumed to meet all of the Ability To Repay requirements under the regulation, and Safe Harbor status protects the company from any potential frivolous legal actions from borrowers who later want to claim that they did not have an ability to repay the loan.

Mason-McDuffie Mortgage is ready for QM (Qualified Mortgage) and ATR (Ability to Repay), in fact – so are our Loan Officers. Our audit has shown that less than 1% of our closed loans fell outside of the QM standard, which was far better than the 20% mark shown with the other lenders. It’s important to know how your company will compare. Here at Mason-McDuffie Mortgage, we are happy to already be positioned for success in originating loans that meet the QM standard. Our operations and compliance staff are production oriented while navigating the challenges of new regulations in our industry. As an originator it is important to know that you work on a platform of success in these ever changing times. So you must ask yourself, is your company is ready for QM?

We are.

Marilyn J. Richardson – President & CEO

GDP Rises, but Consumer Spending Eases!

Featured Chart for Friday, November 8thMortgage Market Guide (www.VantageProduction.com)

The first of three readings on 3rd Quarter Gross Domestic Product showed that the US economy expanded by 2.8%, up from the 2nd quarter reading of 2.5% and well above the 1.9% expected. The rise was due in part to a buildup in inventories, a pickup in trade and increased spending by state and local governments.

However, within the report, consumer spending, the main driver of the US economy, fell to a paltry 1.5% from 1.8%, the slowest rate in three years.

(Click image for a larger view)

fea_chart_110813_print

Interest Rate Charts from Mason-McDuffie Mortgage

In this market it helps to look back at the history of interest rates. We hope you find the information helpful.

Click Here for the 30 Year FHLMC Rates On 30-Year Fixed-Rate Mortgage Chart

Click Here for the 200 Year Historical Rates On 30-Year Fixed-Rate Mortgage Chart

Click Here for the 20 Year FHA Interest Rate Average For 30 Year Fixed-Rate Mortgage Chart

Click Here for the Rent vs. Buy Index Chart

Click Here for S&P/Case-Shiller Home Price Indices Chart

 

Please call us at 877-275-6662 or email info@mmcdcorp.com if we can help you with your home financing needs.

Jason C. Frazier – CIO
Mason-McDuffie Mortgage Corporation

MBA: Stevens Calls for End to Government Shutdown

Washington, D.C. (October 3, 2013) – David H. Stevens, President and CEO of the Mortgage Bankers Association (MBA), today issued the following statement in reaction to the government shutdown and its affect on the housing market.

“The federal government shutdown will have a growing impact on the housing market the longer it continues. If this shutdown is temporary, the ones affected most will be out of work federal employees. However the longer it goes, the greater impact it will have on borrowers, the housing market and the national economy.

“Lenders processing loans that need tax transcripts, social security number verification, or FHA home loans face longer delays and reduced functionality from HUD, IRS, and the Social Security Administration. Different loan programs have different requirements, and these disruptions impact lenders in different ways, leading to confusion and fear among borrowers about whether they will be able to close on a home purchase or refinance. There are significant impacts on multifamily lenders, as well. Rental housing properties awaiting FHA financing cannot move forward.

“The furloughs can disrupt time-sensitive mortgage transaction deals by interfering with borrower lock agreements and causing interest rate disparities from the time of closing to the time the loan is securitized.

“For these reasons there must be a resolution so that borrowers and lenders are able to return to business as usual.”

The Impact of the Government Shutdown on the Mortgage Process

Though the media and both political parties would like you to believe that there will be no immediate impact on American businesses, that isn’t exactly true for the Mortgage industry.

Here at Mason-McDuffie Mortgage we want to make sure that everyone understand exactly what the impact will be if you are currently in process for a Mortgage Loan or starting out the Loan Application process.

The Immediate Impact
:

Mortgage Lenders need to verify Social Security Numbers for all borrowers. Currently this is not possible due to the shutdown.

All loans that are in need of tax transcripts to continue processing or get final approval of your loans will be delayed until the shutdown is over.

The shutdown has caused the USDA offices to close.  This means that existing loans that have been submitted to USDA for review will be delayed until their offices reopen. This also means that Rural Housing’s GUS approval system will be unavailable. Finally, Rural Housing will not issue Loan Note Guarantees or issue any new commitments during this time.

HUD/FHA/VA should continue somewhat normally provided that the shutdown does not drag on too long. There will be some reduced functionality and possible delays due to limitations in staff.

Borrowers that have been furloughed and whose employment is directly affected by the Government shutdown can expect delays in processing and/or closing of their loans.

According to the MBA, “A shutdown lasting a few days would slightly inconvenience lenders in processing loans, however a longer delay would have more serious impacts. Purchase loan volume could shrink and impede the recovery of the housing market. Additionally, long-term furloughs may disrupt time-sensitive mortgage transaction deals by interfering with borrower lock agreements and causing interest rate disparities from the time of closing to the time the loan is securitized.”

You can read a detailed analysis of the government shutdown on the mortgage industry by following this link here.

We will keep our customers and business partners informed with any updates. We all hope that the Government Shutdown will be short lived and will be brought to a resolution soon.

– Mason-McDuffie Mortgage

1st MMCD Volunteer Day at the Oakland Zoo – Anne-Marie Hsieh

(Special thanks goes to Anne-Marie Hsieh for organizing and managing this whole process)

There was a small, but VERY MIGHTY group of us, blazing the trail for our 1st MMCD Volunteer Day at the Oakland Zoo on Saturday!!!!

A gigantic thank you to Danielle Danson (and her friend Amanda!), Brittany Christensen (who drove ONE HOUR to get there!) and Jim Black for putting on the red shirt and carving out some time to help out at the Zoo.

We met in the lower lot (free parking!), and divided up into groups based on the needs of the Zoo that day.

One group split off to rake leaves and general clean up around the Education Center – while we, the mighty MMCD Team hiked over to the Sun Bear habitat. We were provided with gloves, lopping shears – and started removing blackberry bushes!!! We learned that the Zoo uses no pesticides, therefore – all edible plants are fed to the animals. Apparently giraffes LOVE blackberries! Thorns and All. Whoa!

We had a break mid- morning and could go to the café for a free drink (2nd perk..lots to follow! ). We finished up around 1130 – and around 1145, the bear keeper led us “back stage” to see the bears up close in the enclosure where they sleep at night. The oldest of the 3 bears came from a sanctuary in Malaysia (where the bears are poached for their livers…or maybe it’s kidneys…) The younger girls were born at the San Diego Zoo to a mother who had also been rescued from Malaysia. They have caramel colored “bibs” on their chest which are unique to each bear, allowing them to be identified by people who can read bear spots!

After we saw the bears up close and personal, we walked up to the viewing area where we saw the bears run out and climb onto their perches where some tasty treats were set out for them – they started with corn on the cob!

They girls sleep in hammocks, get along fairly well, have a sense of smell at or better than a dog’s. They know their “routine”, and move easily into their enclosure when it’s bed time (I think the little biscuits they get helps!).  One of the challenges the Zoo keepers have is finding daily enrichment activities which doesn’t involve food.

Last month, the volunteer group was tasked with clearing stick from the elephant habitat. Nobody knows what next month will bring – it depends on the needs of the Zoo that day, and how many people show up.

We received discounts for our food – a free sky ride – AND when the ticket taker saw my Volunteer shirt – free train ride as well!

I couldn’t have imagined a better way to spend my Saturday morning…as you can see from the pics – Daddy and the kiddos DID join – and had a ton of fun.

There was a lot of people who had expressed interest, but had scheduling conflicts etc…If you think you’d like to volunteer at another Oakland Zoo day – please let me know. Hands On Bay Area (HOBA) couldn’t have made it any easier – and I believe they lead a group at the Oakland Zoo once a month.

Removing blackberry bushes has never been so fun!!!!

Thank you again to our small but might MMCD Volunteer Team.

That morning will stay in my heart as a great day.

– Anne-Marie

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