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How Much Money Do I Need to Buy a Home

If you’re thinking about buying a home, one of the first questions you may have is how much money you’ll need.  While the answer is almost always “it depends”, one thing is for sure – most people are surprised to find out it takes less money than they think to buy a new home.  In fact, there are many mortgage programs that help people buy homes with NO money out of pocket, and other programs that require very little.  We’ll give you some of the basics here, and if you have any questions, we invite you to reach out to your Mason Mac Loan Officer for full details.

The 0% down payment options

Low down payment option mortgages
The cost of buying a new home may be a lot less than you think with our low down payment options

There are several 0% down payment mortgage options that allow a borrower to buy a home with no down payment money.  Some of these programs also allow for a seller to help with closing costs, so if you qualify for these loans it is possible to get a house without putting any money down!

The VA Loan

If you’re an eligible veteran, you can get up to 100% financing to buy a new home, and both a lender and seller can contribute to closing costs, so you’re able to get a new home for very little out of pocket cost.  VA loans offer a huge bonus in that they have very low fixed rates and no monthly mortgage insurance.  This combination of factors gives veterans access to one of the best loan products available.

The USDA Loan

USDA loans are available to low and moderate income buyers looking to buy outside of major metropolitan areas.  A Mason Mac loan officer can quickly tell you if you’ll qualify based on your income and the area you’d like to buy a home.  Like VA loans, USDA loans require no down payment and allow a seller to contribute toward closing costs, so it’s possible for buyers using a USDA loan to get into a home with little to no money out of pocket.

The DPA Programs

DPA stands for Down Payment Assistance, and comes in many forms.  Sometimes it’s a grant from a local county or organization.  Other times it’s a nationwide program that offers a 2nd mortgage to cover a down payment requirement. DPA comes in many forms, but usually has to be through an approved program that’s been given the OK by HUD or Fannie Mae.  DPA programs often assist with down payment but sometimes can help with closing costs as well.  Your Mason Mac loan officers are very familiar with DPA products in the areas we’re licensed.

The 3% Down Options

Do you need 20% down to buy a home?  This is usually a misconception when people are seeking a conventional mortgage loan, but in reality, you can get a conventional loan with as little as 3% down.  20% down avoids the need for mortgage insurance (PMI), but conventional loans are available with far less down, and like the 0% down programs, allows a seller to contribute toward closing costs.

The Just a Little Over 3% Option

FHA mortgage loans require a 3.5% down payment, and can sometimes offer lower rates and cheaper PMI than conventional loans, making them a great loan option for many borrowers.

FHA loans are also able to be accompanied by DPA help to turn a 3.5% down payment requirement into $0 out of pocket for a borrower down payment.  Sellers may contribute up to 6% of a purchase price toward a buyers closing costs, so FHA is another viable solution for buyers without too much of a down payment.  FHA is especially helpful for buyers with a low down payment and less than perfect credit.  Rates are more forgiving on FHA loans than conventional loans for past credit issues and lower FICO scores.

 

Whether it’s through FHA coupled with a DPA product, a conventional loan, or if you qualify for USDA or VA programs, chances are the amount of money you need to buy a new home is less than you think.  Call a Mason Mac loan officer today to get details, and learn which option is the best for you.  Whether you’re short on funds or looking to put 20% or more down, we’ll have loan options for you!

 

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5 Ways Your Lender Can Help You Get the House

In today’s competitive housing market where many areas nationwide are seeing a far-leaning seller’s market with limited inventory, it’s important for buyers to put their very best foot forward and have all their t’s crossed and i’s dotted before they find “the one”.

Most buyers don’t consider just how much their mortgage lender can help them land their

Loan officers can help buyers win in a competitive sellers market
Your mortgage lender should be an asset in getting your offer accepted

dream home, but aside from a buyer’s real estate agent, the lender is the next most important asset a buyer has when putting together an offer.  Using these 5 tips will help ensure you’ve got yourself in the best position to get an offer accepted.

Work with a Reputable Lender

One of the things a listing agent will consider when advising their seller whether or not an offer is a good one is the name of the mortgage company on the pre-approval letter.  Especially in a multiple offer situation, a seller is likely to choose the offer that’s most likely to make it to the closing table on time and with no headaches or financial harm.   That means if your competition is working with a reputable lender and you’re pre-approval is from anonymousmortgage.com or ABClowestrateXYZ Mortgage, you’ll be at a disadvantage with all other things being equal.

It’s a bonus if the listing agent knows the company and has had a good experience in the past.  If the seller asks for their input, reassurance and a seal of approval from their agent can help an offer in getting accepted.  On the flip side, if a listing agent has had a terrible experience with the lender, the seller will likely hear all about it before making a decision.  Choose your lender wisely, and be wary of internet refinance lenders.

Have a Responsive Loan Officer with Stellar Communication

Sometimes that dream home is viewed at 7pm, or 10am on a Saturday.  Sometimes, that dream home will be slightly above the amount on your pre-approval (or maybe you have a pre-approval, but need one for a different amount).  In a competitive market, if you need an update from your loan officer and their business hours are 9-5 Monday-Friday, or if they take days to respond to your questions or voicemails, you’ll be at a serious disadvantage if other offers are going in ahead of yours.

Your loan officer shouldn’t be available 24/7, but a good loan officer is always responsive, always returns phone calls, and has an eye on their email in the evenings and on weekends – after all, the real estate business doesn’t stop in the evenings and weekends.  Your loan officer shouldn’t, either.

Get Pre-Underwritten (and DON’T get “prequalified”)

If your lender hasn’t reviewed your application, your credit, and supporting documentation, then you’re not pre-approved regardless of what they tell you.  A ‘prequalification’ is a flimsy notice that you may qualify for a loan, but it’s not nearly as assuring as a pre-approval, which involves a complete application, credit, automated underwriting, and supporting documentation reviewed by the loan officer.

Better yet, work with a lender that offers a pre-underwriting program to let the seller and their agent know that if they choose your offer, there won’t be any surprises.  With pre-underwriting, your mortgage lender will put together a full file and submit it to underwriting before a property is found.  This way, once an offer is accepted, all that’s left to do is the property-related work – inspections, appraisal, and insurance – giving a buyer the same strength as a cash buyer.  Pre-underwriting says to a seller “we’re better than pre-approved, we’re fully approved pending you accept our offer”.

Your Loan Officer Should Explain Your Pre-Approval ON Your Pre-Approval

Put yourself in a seller’s shoes and consider what looks better:

“Mr/s Seller, this buyer is preapproved” OR “Mr/s Seller, we have reviewed this buyer’s credit, income documents, proof of funds needed to close, and have received an approval through automated underwriting.”

Of course letting the seller know that the loan officer completed a thorough review of a buyer’s loan application is the better way to go – but few mortgage lenders do this.  Make sure you work with a loan officer that does.

Make Sure Your Lender Calls the Listing Agent

Your loan officer should act as a huge advocate when you’re putting an offer in on a house.  Calling the listing agent offers the opportunity to explain your strengths as a buyer, but just as importantly shows the listing agent that the lender you’re working with is professional and a good communicator (one of the biggest complaints of real estate agents is that lenders lack proper communication skills).

When buying a home, it’s a team sport.  Buyers want to buy a home, and sellers want to sell.  A loan officer should let a seller and their agent know that they’re a part of the team, and that they’ll do everything they can to make everyone’s life easy, not just the buyer.  A quick phone call also gives the loan officer a chance to explain the pre-approval process, and gives the listing agent a chance to ask any questions they may have.  Communication is very important in the home buying process, having a lender that’s proactive in this area is a major bonus. If you’re currently perusing your mortgage options, please reach out to one of our Mason-McDuffie Mortgage professionals.

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Credit Score Got You Concerned? Here’s 3 Ways to Get It Together

Credit Rating ScoreIf you’re worried about your bad credit, you’ll want to do everything in your power to improve your rating as quickly as possible – especially if you are looking to purchase a home in the near future. Improving your credit rating can give you access to better interest rates on mortgages or even help you to get that job you’re after.

IMPORTANT! If you are currently involved in a home loan transaction, speak with your trusted mortgage lender before taking any action regarding your credit!

So how can you boost your FICO score quickly and easily? Here’s what you need to know.

Get Your Credit Report And Dispute Any Errors

Credit reporting agencies don’t always keep 100% perfect records, and there’s a good chance that your credit report contains at least one error. One recent FTC study found that 25% of consumers have an error on their credit report and that in 5% of cases, the errors were actually severe enough to impact the loan terms that borrowers were able to negotiate.

You can get your annual credit report from all three credit reporting agencies for free. Carefully read over it. If you see any errors – if your name is misspelled, if they have the wrong address on file, or if there are late or unpaid charges that you didn’t make you can dispute the items in question.

Try Maintaining A Lower Utilization Ratio

Your debt-to-credit ratio (also known as your utilization ratio) is one of the more important factors that determine your credit score. It measures the outstanding balance on your accounts in relation to the total credit available to you, which helps lenders assess your capacity to take on new debt.

If this number goes beyond 30 percent, you’ll start to see your credit score drop. Ideally, you should aim for a utilization ratio below 10 percent this will prove to your lender that you can responsibly pay for the credit you use.

Have Recurring Bills? Automate Your Payments

Automating your monthly payments can be a great way to boost your credit score. Whether it’s your mortgage, your credit card, or your student loan, a pre-authorized monthly payment will ensure that everything gets paid on time and give you a great credit history.

Your FICO score is a number that will determine your eligibility for mortgages and other loans. These are general tips to help with your credit score and improve the overall reporting of your credit.

Reach out to one of our mortgage professionals at Mason-McDuffie Mortgage to learn about what kind of a mortgage your credit score can afford you.

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3 Things That Determine Your Mortgage Interest Rate

Minimum FHA Mortgage Credit Scores Are Falling: Here's What You Need to KnowWhen you initially start shopping for a home mortgage, you may be drawn to advertisements for ultra-low interest rates. These may be rates that seem too good to be true, and you may gladly contact the lender or mortgage company to complete your loan application. However, in many cases, mortgage applicants are unpleasantly surprised and even disheartened to learn that they do not qualify for the advertised interest rate. By learning more about the factors that influence your interest rate, you may be able to structure your loan in a more advantageous way.

Your Credit Rating

One of the most important factors that influence an interest rate is your credit score. Lenders have different credit score requirements, but most have a tiered rating system. Those with excellent credit scores qualify for the best interest rate, and good credit scores may qualify for a slightly higher interest rate. Because of this, you may consider learning more about your credit score and taking the time to correct any errors that may be resulting in a lower score.

The Amount Of Your Down Payment

In addition, the amount of your down payment will also play a role in your interest rate. The desired down payment may vary from lender to lender, but as a rule of thumb, the best home mortgage interest rates are given to those who have at least 20 to 30 percent of funds available to put down on the property, and this does not include subordinate or secondary financing. If you are applying for a higher loan-to-value loan, you may expect a higher interest rate.

The Total Loan Amount Requested

In addition, the total loan amount will also influence the rate. There are different loan programs available, but one of the biggest differences in residential loans is for very large loan amounts. The qualification for a jumbo loan will vary for different markets, but these loans qualify for different rates than conventional loans with a smaller loan amount.

While you may be able to use advertised interest rates to get a fair idea about the rate you may qualify for, the only real way to determine your mortgage rate will be to apply for a loan and to get pre-qualified. Contact us at Mason-McDuffie Mortgage by visiting our Facebook page at facebook.com/masonmcduffiemortgage to request more information about today’s rates and to begin your pre-qualification process.

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Thinking of Buying a Second Home? Assess Your Finances First

The decision to buy a second home may be made for a number of reasons. For example, you may have a destination where you and your family love to spend free time in, and you may be ready to settle into your own space in this location. You may be considering the tax benefits associated with a second home, and you may even have plans to live in the home as your primary residence after you retire.

While there may be numerous benefits associated with the purchase of your second home, you may be concerned about how affordable it will be for you to manage the additional expense of a second mortgage payment.

Consider All Of The New Expenses Related To The Purchase

A second mortgage payment may be a rather major expense to take on, but it is not the only expense related to buying the new property. In order to ensure that the mortgage payment is affordable, you need to ensure that all aspects of secondary home ownership are affordable for you.

For example, consider HOA dues, repairs and maintenance expenses, property taxes, insurance and cleaning or lawn care service since you will not be available to handle these chores on a regular basis. If you can comfortably take on all of these expenses, you may make your purchase with confidence.

Increase Your Emergency Savings Account Balance

While your current budget may easily accommodate the new mortgage payment and the related expenses, the unfortunate truth is that your income or expenses may not remain static in the future. You may suffer from unemployment or a serious illness that reduces your income. You may have extra expenses due to a car accident or severe damage to a home.

These are just a few of the many things that can happen, and it is important that you have an adequate cash reserve in your emergency savings account that allows you to pay for all of your expenses for at least several months. Because your expenses will increase substantially with your new mortgage payment, you may need to increase your emergency savings account balance.

While it can seem intimidating to take on a new mortgage payment and other related household expenses for a second home, you may be able to more comfortably take on this additional expense when you follow these tips. For more information, speak with one of our mortgage professionals at Mason-McDuffie Mortgage to get a quote for your new mortgage payment and interest rate.

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Why Your ‘Debt-to-Income Ratio’ Number Matters When Obtaining a Mortgage

If you are looking to buy a home, you may want to consider shopping for a loan first. Having your financing squared away ahead of time can make it easier to be taken seriously by buyers and help move along the closing process. For those who are looking to get a mortgage soon, keep in mind that the Debt-to-Income ratio of the borrower plays a huge role in the approval of your mortgage application.

What is a Debt-to-Income Ratio?

A debt-to-income ratio is the percentage of monthly debt payments compared to the amount of gross income that a person earns each month. Your gross monthly income is typically the amount of money you earn before taxes and other deductions are taken out. If a person’s monthly gross income is $2,000 a month and they have monthly debt payments of $1000 each month, that person would have a DTI of 50 percent. The lower the DTI the better. 43 percent is in most cases the highest DTI that potential borrowers can have and still get approved for a mortgage.

What Debt Do Lenders Review?

The good news for borrowers is that lenders will disregard some debt when calculating a borrower’s DTI. For example, utilities, cable, phone and health insurance premium would not be considered as part of your DTI. What lenders will look at are any installment loan obligations such as auto loans or student loans as well as any revolving debt payments such as credit cards or a home equity line of credit.In some cases, a lender will disregard an installment loan debt if the loan is projected to be paid off in the next 10-12 months.

What Is Considered Income?

Almost any source of income that can be verified will be counted as income on a mortgage application. Wage income is considered as part of a borrower’s monthly qualifying income. Self-employed individuals can use their net profit as income when applying for a mortgage, however, many lenders will average income in the current year with income from previous years. In addition, those who receive alimony, investment income or money from a pension or social security should make sure and include those figures in their monthly income as well when applying for a loan.

How Much Debt Is Too Much Debt?

Many lenders prefer to only offer loans to those who have a debt-to-income ratio of 43 percent or lower. Talking to a lender prior to starting the mortgage application process may help a borrower determine if his or her chosen lender offers such leeway.

A borrower’s DTI ratio can be the biggest factor when a lender decides whether to approve a mortgage application. Those who wish to increase their odds of loan approval may decide to lower their DTI by either increasing their income or lowering their debt. This may make it easier for the lender and the underwriter to justify making a loan to the borrower. For more information, contact one of our mortgage professionals at Mason-McDuffie Mortgage.

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What’s Ahead For Mortgage Rates This Week – August 22, 2016

Last week’s economic news included the NAHB Housing Market Index, Commerce Department releases on housing starts and building permits issued. Weekly reports on mortgage rates and new jobless claims were also released.

Shortages of available single-family homes have driven up home prices and increased competition among homebuyers; short inventories of homes for sale are affecting affordability in many areas, although buyers seem motivated by lower mortgage rates and some easing of mortgage requirements. Analysts have repeatedly said that the only solution to the shortage of homes is building more homes.

Fortunately, the National Association of Home Builders reported that builder sentiment concerning U.S. housing markets increased in August. The HMI moved up to a reading of 60 in August as compared to July’s reading of 58. Readings over 50 indicate that a majority of builders surveyed are confident about housing market conditions.

According to NAHB, home builders continued to face obstacles including shortages of buildable lots and skilled labor. Regulatory issues were also cited by some builders, but overall, builders remain optimistic about housing market conditions.

Housing Starts Up, Building Permits Issued Slip in July

Commerce Department reading s on housing starts and building permits issued were mixed; housing starts rose from July’s reading of 1.186 million permits issued to 1.211 million permits issued in August. July’s reading was the second highest since the recession but was driven by multi-family construction. Building permits were lower in August with a reading of 1.152 million permits issued against July’s reading of 1.153 million permits issued.

Analysts said that under present market conditions, there is little reason for homebuilders to increase single-family home production as current pricing has put many would-be buyers on the sidelines.

Mortgage Rates Mixed, New Jobless Claims Lower

Freddie Mac reported that average rates for 30-year and 15-year fixed rate mortgages dropped last week while the average rate for 5/1 adjustable rate mortgages rose. The average rate for a 30 year fixed rate mortgage was 3.43 percent and the average rate for a 15-year fixed rate mortgage was 2.74 percent; both readings were two basis points lower than for the prior week. The average rate for a 5/1 adjustable-rate mortgage was two basis points higher at 2.76 percent. Average discount points held steady for fixed rate mortgages at 0.50 percent; average discount points for 5/1 adjustable rate mortgages were lower at 0.40 percent.

New Jobless claims fell by 4000 claims to 262,000 new claims, which was lower than analyst expectations of 265,000 new claims and the prior week’s reading of 266,000 new claims. Job security is important to home buyers and signs of strong labor markets can help propel would-be buyers into the market,

Whats Ahead

This week’s scheduled economic news includes releases on new and existing home sales and consumer sentiment. Weekly reports on mortgage rates and new jobless claims will be released on schedule.

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Bi-weekly or Monthly Mortgage Payments – Which is better?

A When you apply for a new mortgage, your lender may ask if you want to set up monthly payments or bi-weekly payments. At one time, monthly payments were common, but bi-weekly payments are increasing in popularity. This is because they break a large expense up into two smaller and seemingly more manageable payments. In addition, you can also make what equates to a full extra payment on the mortgage each year with a bi-weekly payment structure. Before you decide which is best for you, consider a few factors.

Your Personal Budget

Many people may believe that if they get paid every two weeks, a bi-weekly mortgage payment is a better option than a monthly mortgage payment. This is not always the case. You should consider other sources of income and how much your payment is in relation to your paychecks. In addition, consider which part of the month your other regular bills are due. This is critical to establishing the best payment plan for you.

Control Over the Payments

You can still enjoy the benefit of making an extra payment per year with a monthly mortgage payment schedule. For example, you would simply need to pay $100 per month more each payment to realize the same results. When you establish a bi-weekly payment plan, this extra payment is automatic. This may be ideal if you do not think you would stick with paying more per month on your own. However, if you want more control over your monthly payment amount and when you make the extra payment, it may be best to choose a monthly mortgage payment.

The Financial Obligation

The final factor to consider is the financial obligation. When you set up bi-weekly payments, your total amount paid per month will be higher. This means that your total financial obligation will be higher than if you had a monthly payment plan. This financial obligation may impact your ability to qualify for other loans or to achieve other goals.

If you want to pay your mortgage off early, you can choose to make an extra small payment with each monthly payment or set up a bi-weekly payment plan. While each will give you the same overall result over the course of the long term, one option may be preferred for your financial situation. Consider the pros and cons of each option carefully to make a better decision for your financial circumstances.

If you have any questions or require more information, contact us at Mason-McDuffie Mortgage 925.242.4400 .

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The Pros and Cons of Mortgage Rate Locks

The Pros and Cons of Mortgage Rate LocksIf you’re just jumping into the game of home purchasing, you are likely considering all of your loan options and may even have heard the term mortgage rate lock. For those who don’t like to gamble, a mortgage rate lock can offer a bit of reassurance, but there are also some downsides to this type of protection. Before signing off on this, here are the details on rate locks so you can make an informed decision.

What Is A Rate Lock?

For many people who are buying a home in such a tumultuous market, the idea of interest rates can make the heart race a little faster, but this is the purpose of rate locks which offer consistency in a market in flux.

Instead of having to deal with day-to-day fluctuations of the rate – which increases or decreases what you owe – a rate lock is a lender promise that you will be held to a specific rate or your rate will not rise above a certain number.

Easy Balancing Of The Budget

The easy thing about utilizing the rate lock, especially for a buyer who is less familiar with the market, is that it will enable you to instantly determine your monthly payments based on that rate. Instead of having to pay more per month, you’ll be able to estimate exactly what your payment will be and it won’t rise above the limit you’ve set for yourself. While daily fluctuations can be a drag, a mortgage lock takes the guesswork out of the day-to-day.

The Added Cost Of Security

It might seem like a rate lock is an option that everyone would utilize, given the stability, but lenders charge for this type of offer because of the risk factor. While lenders can certainly stand to gain if your rate lock is higher than the interest rates, in the event that they rise beyond this point, they will end up losing money. So, while a 30-day rate lock may not end up costing you, this type of lock stretched over a longer period may actually end up costing you more than fluctuating rates.

If you’re not familiar with the world of investing and interest rates, a mortgage rate lock can sound like a great idea; however, there are downsides to this offer and they’re worth considering before getting locked in. If you are currently on the hunt for a home, you may want to contact one of our mortgage professionals for more information.

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How to Determine the Right Mortgage for You: The Pros and Cons of Each Type

How to Determine the Right Mortgage for You: The Pros and Cons of Each TypeFinding the right mortgage can be a struggle. There’s a wide array of mortgage products on the market, and you don’t always need to get a mortgage through your bank – and with so many options, it’s hard to know which one is your best bet.

Your ideal mortgage will depend on your own individual financial situation, but when you understand how different kinds of mortgages work, it’s easier to choose the right one. Here’s what you need to know about mortgage types.

Fixed-Rate Mortgages: Home Financing At A Guaranteed Rate

A fixed-rate mortgage is exactly what it sounds like: A mortgage with a fixed interest rate. With a fixed-rate mortgage, your interest rate is locked for the life of the mortgage loan and cannot change.

When interest rates are at historical lows, a fixed-rate mortgage is an ideal financing option. By purchasing a fixed-rate mortgage at a low interest rate, buyers lock in low payments and are protected from sudden rate increases. However, fixed-rate mortgages are more difficult to qualify for when interest rates are high.

Variable-Rate Mortgages: Lower Rates And Larger Loans

A variable-rate mortgage is a mortgage wherein the interest rate fluctuates over time. Typically, the interest rate will stay constant during a set period of time near the start of the mortgage, and then start to vary. These mortgage rates rise and fall in line with the prime lending rate or one of the financial indeces like Treasury Bills or the LIBOR.

The major advantage of a variable-rate mortgage is that its lower initial rates and payments allow buyers to qualify for larger homes. Buyers can also take advantage of falling interest rates without having to refinance. However, variable-rate mortgages can quickly become expensive if interest rates see a sharp rise – and while some mortgages put caps on the maximum annual increase, these caps may not apply to the first rate change.

Interest-Only Jumbo Mortgages: Flexible Terms For Wealthy Buyers

An interest-only jumbo mortgage is a specialty mortgage designed specifically for wealthy buyers purchasing luxury homes. The major advantage of this kind of mortgage is that borrowers can make interest-only payments for the first 10 years of the loan. A possible downside is that interest-only payments purposefully never pay down any portion of the principal balance of the mortgage. For this reason, interest-only mortgages are typically only available to well-heeled buyers who can afford a hefty down payment and prove that they have large cash reserves.

Finding the right mortgage can be a challenge. That’s why it helps to consult with a mortgage advisor who understands the terms and rates, and can negotiate a great deal for you. For more information or to apply for a mortgage today, contact your trusted mortgage professional.