Mortgage News – Page 2

The Importance Of Establishing Credit

September 14, 2015 by admin

Wallingford PA Real Estate - Wallingford PA - Credit Cards

Establishing A Credit History Is Key When Applying For A Mortgage

It takes credit to get credit. Lenders prefer borrowers with low balances, a long history of on-time payments and a mix of credit utilization – for example, a car loan, student loans, and a couple of revolving accounts such as credit cards.

Perhaps you are a young professional with a high income and you are ready to buy a house, or you are a recent college graduate and have eschewed credit cards or taking out loans, so you have no credit history. Or perhaps you are recently divorced and your credit history was all under your ex-spouse’s name.

It is possible to use what is known as alternative credit from other financial records, such as rent checks, insurance premiums and utility bills. This process is time-consuming, taking as much as three times longer as a normal file, and in the end you will end up paying a higher interest rate than a person with an established credit history.

You will definitely have an easier time qualifying for a loan if you take the time to establish a credit history. You can begin by opening at least two traditional credit lines.

A credit history and credit score known as a FICO score, can be established in as little as six months if you open accounts with a credit card provider that reports to the three main credit reporting bureaus, Equifax, TransUnion, and Experian. If the major credit card companies will not approve your application, apply for a secured card. With a secured card, you give the card company a deposit, usually the same amount as the card’s limit, and use it just like a typical credit card. You can choose to pay the card off monthly or carry a balance and make payments. Just make sure you make your payments on time and keep the balance to less than 25% of the card’s limit. A good source for obtaining a secured credit card is your bank or credit union.

Your three-digit credit FICO score is a key number. Lenders rely on FICO scores to determine how likely borrowers are to make their mortgage payments on time. A high credit score, a FICO score of 740 or higher to be an excellent one, means that borrowers have a history of paying their bills on time. A low score and the assumption is they do not.

The mortgage-approval process is driven by credit and lenders want to see that you have the ability and the willingness to pay back your mortgage loan.

Wallingford PA Real Estate – Wallingford, PA 19086

Gift Funds – Rules To Follow

March 4, 2015 by admin

Follow The Rules When Using Gift Money

The National Association Of Realtors (NAR) reported in a 2012 home buyer survey that 24% of buyers utilized gift funds to help them purchase their home. If you are considering using gift funds in your purchase transaction there are some rules that must be followed in order for the funds to pass an underwriter’s scrutiny.

There are several guidelines that that need to be followed in order to properly process and deposit gift funds in your bank account for your purchase.

Complete a gift letter that will be supplied by your lender which must include the following:

– The amount of the gift

– Address of the property being purchased

– The relationship of the giver to the gift recipient – the donor must be a family member

– Wording that states that the gift is indeed a gift and that the funds are not a loan to be repaid

– Date the funds were transferred

– Signatures of donor and recipient

Create a paper trail of the money

– Deposit the funds into an account that will be used as the source of all funds for the transaction

– Keep all deposit receipts associated with the gift fund deposit

– Donor will need to show ability to produce the funds via bank account statements, etc.

– Donor will need to show the money has come out of their account, i.e. cancelled check

– Recipient will need to document the funds coming into their account, the funds that are deposited must match the amount specified in the gift letter exactly via account statements

Failure to adhere to the rules of gifting could result in the denial of your loan. Above all underwriters are interested in a detailed tracking of the funds from donor account to recipient’s account.

Rules for gifts vary by loan type:

Conventional Mortgages

– If you put down 20% or more, it can all be from a gift

– If you put down less than 20%, part of the money can be a gift, but part must come from your own funds. This minimum contribution varies by loan type

– Gift money can only be used on primary residences and second homes

FHA and VA Mortgages

– All of your down payment can be gift money

– If your credit score is below 620, at least 3.5% of your down payment must be your own money

– Gift money can only be used on primary residences

Wallingford PA Real Estate – Wallingford, PA 19086

3% Down Payment Options Being Offered For 1st Time Buyers

December 10, 2014 by admin

Mortgage giants Fannie Mae and Freddie Mac announced on Monday that they would begin offering programs for 1st time home buyers that will require down payments as low as 3%.

Through it’s My Community Mortgage program which starts this week Fannie Mae will offer this new program to qualified borrowers who have a minimum credit score of 620. Freddie Mac’s program, Home Possible Advantage begins in March.

These conforming conventional loan programs will offer 1st time buyers an alternative to FHA programs that offer a 3.5% down payment options but have the disadvantage of higher cost mortgage insurance.

These programs are in response to the housing industry’s concerns that tightening credit standards and higher down payment programs that have sidelined many 1st time home buyers. Saving sufficient money for a down payment has often been cited as a significant obstacle for 1st time home buyers.

Wallingford PA Real Estate – Wallingford, PA 19086

How Are Mortgage Interest Rates Determined?

November 18, 2014 by admin

What is behind the daily fluctuations of mortgage interest rates? When you are shopping for a mortgage it is important to understand the basic influences of mortgage rates and how they are determined. Mortgage rates are generally offered in eighths, so you’d see 4%, 4.125%, 4.25%, 4.375%, and so forth. There are two main components that determine your mortgage rate. The first is the market rate for mortgages, and the second is your individual financial situation.

Mortgage rates are closely tied to the yield on the 10-year Treasury bond. In general, people tend to refinance their mortgages, or sell their homes and buy new homes, in 10-year cycles. You can expect to see cycles of seven to 10 years for mortgages, so the 10-year Treasury bond is a pretty good measure if you want an idea of what’s happening.

If the yield goes up on 10-year Treasury bonds, then mortgage rates are likely to move higher. Likewise, if bond yields move lower, mortgage rates are likely to head lower as well. A good rule of thumb is to expect a 1.60% to 1.80% spread between the yield on 10-year Treasury bonds and mortgage rates.

This means that if the 10-year Treasury yield is at 2.4%, you can expect to see mortgage rates at right around 4.0% to 4.25%. The rate will never be completely predictable but you can get a general idea of which way mortgage rates are likely to head by looking at Treasury yields.

If bond yields increase mortgage rates increase, if bond yields decrease mortgage rates decrease.

Economic activity: One of the biggest factors in what happens with mortgage rates is economic activity. We get a lot of economic measures, from readings of the Consumer Price Index, to measures of Gross Domestic Product, to information about Consumer Confidence. All of these measures influence mortgage rates.

Basically, when the economy is in good shape, demand for mortgages increases, and interest rates move higher in response, since incentive to encourage people to buy homes isn’t needed as much. When the economy slows down, mortgage rates drop as lenders try to attract borrowers.

Mortgage rates are also shaped by such events as Federal Reserve Policy Announcements, the state of the housing market, and regional mortgage activity.

Your Personal Financial Picture

The ultimate influence on whether you pay the best available rate, or whether you are charged more, is your own financial situation.

Lenders take a look at your individual situation and use that to determine whether or not you will get the best possible rate, as determined by the market, or whether you will pay more. If you are seen as a bigger risk, you will pay a higher interest rate for your loan, since the lender is taking on a bigger risk that you will default on the loan. Here are some of the factors in your personal situation that impact your mortgage rate:

Your credit score: This is a three-digit summary of your financial reputation. Your credit score represents your ability to handle credit. If you have a higher score, the lender thinks it is likely that you will repay your loan, and is more willing to charge you a lower rate.

Loan term: The longer your loan term, the bigger the chance that you will default. If you choose a shorter loan term, and a faster payoff, you will be rewarded with a lower interest rate.

Down payment: You pay less when you have more of an equity interest in the property. The more you can put down for your down payment, the more you are likely to save in terms of interest. A 20% down payment will most likely result a lower mortgage rate.

Points paid: You can also pay points in an effort to reduce your mortgage rate. You can pay money up front, and see a reduction. A point represents 1% of your home’s purchase price. For each point you pay, you can expect to see a reduction of about 1/8 of your loan rate. So, if you are buying a home for $200,000, one point is $2,000. If your loan rate is quoted at 4%, you can get it down to 3.875% by paying that $2,000. Pay two points ($4,000) up front, and you could see it drop to 3.75%.

The determination of what interest rate an individual borrower will pay is subject to a number of factors, and it is always wise to speak to several lenders to shop for the best rate available.

Wallingford PA Real Estate – Wallingford, PA 19086

FHA Mortgage Financing – Pricing Itself Out Of The Market?

July 14, 2014 by admin

The FHA mortgage program is intended to provide the opportunity for borrowers with less than stellar credit a means of obtaining financing for a home. The door is getting more and more expensive to open as years of mortgage insurance increases have driven the monthly premiums to lofty heights.

Despite the fact that mortgage delinquency rates are down as a whole, the FHA holds a disproportionate share of the mortgage default market. Higher rates of default among FHA borrowers has forced the FHA to increase the cost of its Mortgage Insurance Premium (MIP) five times in the last five years.

Just how much more expensive is MIP versus conventional mortgage insurance? On average a FHA borrower will pay 45.9% more for mortgage insurance with a FHA loan versus a conventional loan for the same amount financed.

FHA VS CONVENTIONAL MONTHLY INSURANCE RATES

*MORTGAGE*	*CONV*	*FHA*	*DIFF*
100,000	$74.42	$108.56	+$31.14
150,000	$111.63	$162.84	+$51.21
200,000	$148.33	$217.13	+$68.80
250,000	$186.04	$271.41	+$85.37
300,000	$223.25	$325.69	+$102.44

Coupled with the change last year revoking the ability of new borrowers to cancel insurance premium payments once they have built up sufficient equity in their homes, FHA mortgages have lost much of their appeal.

FHA financing grew to as high as 28% of the financing market in recent years and filled an important gap in the mortgage financing industry allowing borrowers who could not qualify for a mortgage under conventional underwriting guidelines or did not have down payment amount sufficient enough for a conventional program. Now FHA financing is becoming less popular, and one could argue less affordable, and FHA’s market share is slipping.

Due to skyrocketing mortgage insurance premiums FHA borrowers are encountering the reality of buying a less expensive home in order to keep their monthly payments in line.

The big question is with a sputtering housing market how many potential buyers are being forced to sit on the sidelines and delay a purchase until they can qualify for a conventional program, or worse never becoming a buyer at all?

Wallingford PA Real Estate – Wallingford, PA 19086

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FHA and VA Mortgages

S. Clark Kendus