mortgage financing and programs

FHA Home Loans: How to Pre-apply and Get Approved Before Making a Home Purchase Commitment

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FHA Home Loans: How to Pre-apply and Get Approved Before Making a Home Purchase CommitmentIf you’re in the market for your first mortgage, the Federal Housing Administration may be able to help you. Thanks to the FHA home loan program, you can apply for loan approval before you’ve found a home that you want to buy – which means you know what you can afford before you start your house hunt. Here’s what you need to know about FHA home loans and how they can help you find the perfect house.

Pre-Approval: Assessment Includes Employment History and a Credit Check

The pre-approval process can be done over the phone or online in a matter of minutes. All you need to do is find a lender or mortgage broker in your area and start the application process. You’ll be asked a series of questions and you’ll need to meet several criteria, such as a history of steady employment and consistent income, a credit report in good standing, and a desired mortgage payment of 30 percent of total monthly gross income.

The Variables of the Loan May Change Depending on Your Needs

When the representative for the broker or lender contacts you, he or she may overestimate your property taxes and will assume that you are going to borrow the maximum amount for which you qualify. Therefore, the monthly payment that you are quoted may be higher than the amount that you would pay each month when you actually purchase your home. Based on the property taxes, your down payment and the purchase price of the home, your payment may be higher or lower at closing.

You Will Get a Letter Stating That You Have Conditional Approval

If all goes well, the lender or broker who assessed you will send a letter confirming that you are conditionally approved for an FHA home loan. You may wish to submit this letter with any offer that you make to purchase a house, as without conditional loan approval, a seller may not take your offer seriously. If you are in a bidding war for a home, it may not be possible to win unless you show that you have financing available to close on the property in a reasonable amount of time.

The first step to get a mortgage is to get conditional loan approval. By calling your lender or a broker, it may be possible to obtain pre-approval for the mortgage you need while also negotiating favorable terms. For more information about qualifying for FHA loans, contact your local mortgage professional today.

Buying Land to Build a New Home On? Don’t Forget These Three Important Considerations

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Buying Land to Build a New Home On? Don't Forget These Three Important ConsiderationsWhen most people talk about real estate, they envision buying an already-built house on already-landscaped property. However, buying vacant land and building a new home is a great way to ensure that you get the home that you want in the location that you want. It’s also a major undertaking, which is why you should take these three considerations into account before you buy any land for your new home.

Location, Location, Location: It’s More Important Than You Think

People often hear the phrase “location, location, location” and it’s a very prudent maxim with buying land. The parcel of land that you buy should be in a good geographic location and on stable ground – which means there shouldn’t be any major water sources nearby (like a swamp) and hills should be minimal. You’ll also want to consider zoning regulations that influence the acreage and other regulations that influence how you can and cannot use the land.

Utility Connections Will Be Your Responsibility

New land tends to not have utilities laid out under or over the ground. If this is the case, you will need to invest in electrical, water, and possibly heat utilities for the home.

This process involves communicating between the municipal government and utility companies so that the proper infrastructure is put in place. These costs and the implementation can be quite a headache depending on how isolated the land is from municipal or regional infrastructure.

Access: Look Up Any Easements on the Land

Many homeowners may not realize how legal access to land can affect their purchase. An easement refers to the legal right of other entities to use your land even though they do not own it. Before you buy land, you and your lawyer should investigate whether or not the land has easements, and whether or not these easements may interfere with your goals for the property.

These are just a few of the major considerations you need to make when you buy land. Purchasing a plot of land is quite a bit more complicated than buying a house, and if you’re not prepared, it can easily turn into a nightmare. When properly planned, though, buying land can give you a great backdrop on which to build the house of your dreams.

What’s Ahead For Mortgage Rates This Week – Sept 8, 2014

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Whats Ahead For Mortgage Rates This Week Sept 8 2014Last week’s housing-related economic news was slim, likely due to the Labor Day holiday Monday. On Tuesday, the U.S. Commerce Department reported that construction spending for July increased by 1.80 percent as compared to June’s revised reading of 1.0 percent and expectations of a 1.0 percent increase for July.

The Federal Reserve released its Beige Book report Wednesday; the collection of anecdotes from business contacts within the 12 Federal Reserve districts indicated that the general economy was strengthening as well as labor markets. The Fed noted a shortage of skilled workers. New construction and home sales grew modestly, but the Fed reported that fewer than half of the districts reported growth in real estate activity.

This information appears to be consistent with recent media reports of falling home sales, mortgage originations and demand for homes. Analysts say that mortgage lenders remain wary of loosening mortgage credit standards without protection from having to repurchase faulty mortgages from Fannie Mae and Freddie Mac.

Mortgage Rates Saw Little Change

Freddie Mac reported that average mortgage rates and discount points saw little change last week. The average rates for a 30-year mortgage and a 5/1 adjustable rate mortgage were unchanged at 4.10 percent and 2.97 percent respectively. Discount points were also unchanged at 0.40 percent. The average rate for a 15-year fixed rate mortgage fell by one basis point to 3.24 percent with discount points also lower at 0.50 percent.

Non-Farm Payrolls Add 142,000 Jobs, Unemployment Rate Unchanged 

The Bureau of Labor Statistics Reported that 142,000 new jobs were added in August. Analysts had expected 228,000 new jobs added, but many analysts said that the abrupt decline in jobs added was a fluke. A couple of short-term incidents impacted retail and automotive sectors as a supermarket chain cut hours and fewer July layoffs in the automotive sector led to fewer workers called back in August. The unemployment rate remained at 6.10 percent.

Weekly jobless claims rose to 302,000 against expectations of 300,000 new jobless claims and 298,000 new jobless claims in the prior week.

What’s Ahead

This week’s scheduled economic news is also light on housing and mortgage reports. Retail spending, consumer credit, and federal budget data are some of the reports set for release.

You Ask, We Answer: Understanding the Real Estate ‘Short Sale’ and How This Process Works

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You Ask, We Answer: Understanding the Real Estate 'Short Sale' and How This Process WorksA short sale is something that occurs when a homeowner is not able to make the mortgage payments on time due to a financial hardship. Instead of foreclosing on the property after one or more missed payments, the bank may agree to allow the homeowner to turn the home over to the bank, which will sell it to as close to market value as possible.

Here’s what you need to know about how short sales work and what circumstances might call for one.

Step 1: The Homeowner Provides Information To The Bank

The first step in the short sale process is for the homeowner to submit an information package to the bank. The homeowner will provide information such as the reason for the short sale, an authorization letter allowing the real estate agent to talk to the bank, and a financial statement. In addition, the seller may need to provide an HUD-1 statement as well as a list of comparable homes in the area.

Step 2: The Buyer Makes An Offer

Once the house is put on the market, a buyer can make an offer just as he or she would on any other home. The seller will then have the opportunity to accept any offer that he or she receives from a prospective buyer.

Step 3: The Bank Makes A Decision About The Offer

Once the seller accepts an offer to buy the home on short sale, the seller is responsible for sending information about the sale to the bank. Before the sale is finalized, the bank must approve the buyer’s offer. It could take as little as two weeks or as long as 120 days for the bank to approve the offer.

However, not all short sales are immediately approved. The seller’s bank bank might decline the buyer’s offer for one reason or another. A bank may decline a short sale offer if the bank negotiator thinks the house is worth more than the buyer’s offer or if the seller violates a clause in the short sale agreement – such as moving out of the property and violating a clause that states only owner-occupied properties are eligible for short sale.

Buying a home that is being sold as a short sale requires patience and an ability to move at the bank’s pace. Working closely with an experienced lender or mortgage broker may make it easier to get through the process without a lot of hassle or drama. 

Children Leaving the Nest? 3 Pieces of Sage Advice You Can Share About How to Manage a Mortgage

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Children Leaving the Nest? 3 Pieces of Sage Advice You Can Share About How to Manage a MortgageWhen your children are about to step out into the world on their own, you want to help them on their way. This especially holds true when it comes to buying a house. As your sons or daughters prepare to take the plunge into home ownership, make sure they follow three crucial tips that will help them during the mortgage process.

Don’t Bite Off More Than You Can Chew

One of the biggest mistakes that homeowners make is choosing a home that is beyond their price range. Your children need to remember that they are going to be paying for their home for a long time. A crushing house payment could be difficult to manage.

In order to find a reasonable mortgage, you need to look at the numbers. The bank, or mortgage lender, will generally look at a client’s income, debt, and the current mortgage rate to determine an acceptable amount when purchasing a home. Your children can look at their own budget, lay out all of their costs, and determine how much spending room is left for a house payment.

Choose A Shorter Term For A Mortgage

When the time comes to sign the dotted line, the mortgage lender will offer various payment terms for your child’s home loan. Twenty-five to thirty years is the typical term for most mortgages, but the sooner the mortgage is paid, the better. Advise your children to choose the shortest possible term while still living within their means.

Make Extra Payments When Possible

Your children can pay their mortgage off sooner by making extra payments. While this may seem like a challenge, it can be accomplished with careful budgeting.

Making one extra payment a year will shorten the length of the loan and put more equity into the home. Whether your children plan on staying put or want to buy another home down the line, they’ll appreciate it when they have paid off a considerable chunk of their mortgage.

Getting a mortgage is a rite of passage and a milestone that thousands of Americans encounter every year. Make sure that your children get the best mortgage available by following these tips. For more helpful information, or to make sure your children are getting a good deal, contact a trusted mortgage professional today.

Applying for a Mortgage? Three Questions Your Lender Will Ask You – and How to Prepare Your Answers

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Applying for a Mortgage? Three Questions Your Lender Will Ask You - and How to Prepare Your AnswersBefore approving a mortgage, your lender is going to have to do his due diligence to ensure that you can afford a loan large enough to pay for a house. That means your lender will be asking you several questions about whether or not you can afford a mortgage.

Here’s how you can prepare to answer these questions in a way that will increase your likelihood of approval.

How Stable Is Your Income?

Your lender is going to want to know that your income is going to be stable over the life of the loan. This means that you should be able to document steady employment, that investment income is going to be stable or that the alimony that you receive from your former spouse will continue to come in for the foreseeable future. To document your income, you can provide bank statements, pay stubs or tax returns from the previous three years.

How Much Do You Have In The Bank?

A lender is going to be interested in how much you have in reserve in case you lost your job or suffer an unexpected medical expense that could make it harder to pay your mortgage. For a conventional mortgage, you may be required to have three to six months’ worth of expenses in the bank or in other assets that you could liquidate. To show how much you have in the bank, you can provide bank statements or balance statements from any other account where you may get money from if need be.

Where Is The Money For The Down Payment And Closing Costs Coming From?

While some lenders don’t mind if the money is gifted from a qualified source such as a family member, friend or employer, other lenders will require that the money for a down payment or other costs comes straight from your own bank account. To prove where the funds are coming from, you will need to show when the money was deposited into your bank account if using your own funds (or a gift letter if the funds are being gifted).

A mortgage lender needs to be sure that you are able to repay any loan that you are approved for. That means you’ll want to present your lender with solid, documented proof that you have a steady income and ample cash reserves to pay the mortgage and associated fees. For more information about what lenders look for in mortgage applicants, contact a qualified mortgage professional today.

What’s Ahead For Mortgage Rates This Week – Sept 2, 2014

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Real Estate Secrets: Understanding the 'Option Period' and What This Term Means for You as a BuyerLast week’s economic news included several reports related to housing. The Case-Shiller and FHFA reports for June showed a further slowing in home price growth. New home sales for July fell short of the expected reading, but pending home sales exceeded expectations. The details:

Case-Shiller, FHFA: June Home Price Growth Slows

The Case-Shiller 10 and 20-City Home Price Index for June moved from May’s year-over-year reading of 9.40 percent growth to 8.10 percent in June. Home prices grew by 1.00 percent on a month-to-month basis in June as compared to May’s reading of 1.20 percent.

Demand shrank due to increasing inventories of available homes and stricter mortgage standards. For the first time since 2008, each of the 20 cities tracked showed slowing growth in home prices. Home prices are about 17 percent lower than their pre-recession peak in 2006. Case-Shiller also reported that the national median home price rose by 2.90 percent year-over-year to $269,800.

Analysts said that slower gains in home prices coupled with increasing confidence among home builders signals a return to more normal housing market conditions.

FHFA reported that home prices for purchase transactions grew by 0.20 percent less than May’s year-over-year reading of 5.40 percent. FHFA reports on properties connected with mortgages owned or backed by Fannie Mae and Freddie Mac.

New Home Sales Slip in July, Pending Home Sales Gain

The Department of Commerce reported that New Home Sales missed expectations for July with a reading of 412,000 new homes sold on seasonally adjusted annual basis. June’s revised reading was 422,000 new homes sold, and analysts expected new home sales at a rate of 430,000 in July against June’s original sales pace of 406,000. Three out of four regions posted slower growth rates for new home sales, with the South posted a gain in new home sales. New home sales were 12.30 percent higher than one year ago.

Analysts said that improving labor market conditions and the slower rate of home price growth are positive trends for housing markets as more home buyers can afford to buy homes. Mortgage rates are approximately one-half percent lower than last year, which also increases affordability.

Pending home sales exceeded expectations for July to an 11 month high, which may ease concerns over July’s dip in new home sales. The National Association of REALTORS® Pending Home Sales Index rose to 105.9 in July as compared to June’s index reading of 102.5. Homes under contract increased from a negative reading of -1.30 percent in June to July’s reading of +3.30 percent. Pending home sales are considered a strong indicator of future home sales.

Mortgage Rates Mixed. Consumer Confidence Jumps

Freddie Mac reported that average mortgage rates were little changed. The rate for a 30-year fixed rate mortgage was unchanged at 4.12 percent. 15-year mortgages had an average rate of 3.25 percent which was an increase of two basis points over the previous week. The average rate for a 5/1 adjustable rate mortgage moved from 2.95 percent to 2.97 percent. Discount points were unchanged at 0.50, 0.60 and 0.50 percent respectively.

Two gauges of U.S. consumer confidence indicated stronger levels of consumer confidence in the economy. The Consumer Confidence Index rose to 92.4 in August from July’s reading of 91.9 and exceeded a lower expectation of 88.5. The University of Michigan’s Consumer Sentiment Index rose to 82.5 against July’s reading of 79.2 and the expected reading of 80.1. Increasing consumer confidence suggests that as more consumers become comfortable with current economic conditions, they may be more confident about buying homes.

What’s Coming Up

Next week’s economic reports include construction spending and the Fed’s Beige Book Report. The Bureau of Labor Statistics will also release Non-farm Payrolls and the National Unemployment Rate for August. No activity is scheduled for Monday due to the Labor Day holiday.

Six Key Questions to Ask when Hiring a Real Estate Agent to Market and Sell Your Home

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Six Key Questions to Ask when Hiring a Real Estate Agent to Market and Sell Your HomeThe work of a real estate agent can make or break how a prospective buyer feels about the property. Now that it’s time to sell your home, you want to find the right agent to market it.

How do you find someone you can trust who will make you feel confident they can sell your home quickly for the best price possible? Here are the questions you should be asking.

Are They Licensed?

This one is the easy one. You should be working with a member of the National Association of Realtors®. It is also important that you check whether they have any complaints on record about their practices.

You can check with your state’s real estate department as well.

Are They Successful?

A successful real estate agent is more than the number of sales they have completed. You should also find out the average difference between listing and selling prices on their most recent sales.

If an agent is closing deals at far below the original asking price consistently, that might be a red flag.

How Busy Are They?

Make sure you ask in advance how often the agent will contact you and how they will keep you informed of potential buyers. If you’re going to be working with one of their associates at times, you should know.

How Familiar Are They With Your Neighborhood?

A real estate agent is not just marketing your home – they’re marketing your entire community. If they have closed nearby sales before, they are familiar with the selling points of the neighborhood as well as the right price range for properties similar to yours.

How Much Commission Do They Expect?

Normally you will pay the agent about 6 percent of the sale price. If you find one that offers their services for a low percentage, you should know why. Are they just trying to stay competitive? Or do they expect you to do a large share of the marketing yourself?

Do They Have A Plan?

The real estate agent should be able to tell you exactly which marketing techniques they would use for your home and how they plan to promote the listing. They should come to the table with ideas from the very beginning.

Now that you have a clearer idea of the basics, use the internet to find trusted real estate agents in your area. Then pick up the phone and begin your journey toward becoming a successful home seller today.

Case-Shiller, FHFA Report Slowing Growth in Home Prices

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Case-Shiller FHFA Report Slowing Growth in Home PricesThe Case-Shiller 10 and 20-City Home Price Indices for June reported year-over-year gains of 8.10 percent while the Case-Shiller National Home Price Index covers all nine census regions and reported a year-over-year gain of 6.20 percent.

Readings for all three indices worsened as compared to May readings, and all cities tracked showed slower growth in home prices. The National Home Price Index, which is now published monthly, rose by 0.90 percent from May’s reading, and both the 10 and 20-City Index posted month-to-month gains of one percent.

Five cities including Detroit, Las Vegas, New York, Phoenix and San Diego posted larger gains in June than for May.

Regional Home Price Growth: NYC Leads Cities in June

According to the Case-Shiller 20-City Index, New York City led home price growth in June with a reading of +1.60 percent. Chicago, Detroit and Las Vegas posted gains of 1.40 percent with Las Vegas posting its largest home price gain since last summer.

Year-over-year, Las Vegas posted the highest growth rate at 15.20 percent. San Francisco’s home price gains slowed to a year-over-year rate of 12.90 percent. Phoenix posted its slowest home price growth since March of 2012 with its June reading of 6.90 percent.

Home Prices Rise, But Modestly

While home prices in all cities tracked by Case-Shiller rose for the third consecutive month, analysts said that the Federal Reserve may increase its target federal funds rate as soon as the first quarter of 2015. This would lead to higher mortgage rates, which could further flatten home price growth.

Home affordability became an issue for many would-be buyers after the rapid rate of home price growth seen in 2013. Lower demand for homes could also impact the rate of home price appreciation as inventories of available homes rise. With these factors and no one knowing exactly when the Fed will act to raise rates, it’s unlikely that home prices will rapidly escalate in the coming months.

FHFA Reports Slower Home Price Growth in June

FHFA, the agency that oversees Fannie Mae and Freddie Mac, reported that June home prices slowed from May’s reading of 5.40 percent year-over-year to 5.20 percent year-over-year in June. FHFA reports on properties connected with mortgages owned or guaranteed by Fannie Mae and Freddie Mac. FHFA shared some positive trends for seasonally adjusted purchase-only home prices in its June report:

  • June’s home prices rose in 40 states.

  • Home prices rose for the seventh consecutive month

  • Home prices rose for 23 of the last 24 months with the November 2013 as the exception.

  • Home prices rose in the second quarter of 2014 in 74 of 100 metropolitan statistical areas (MSAs) tracked by the federal government.

  • Home prices in the Pacific and Mountain census districts continued to slow in the second quarter. After rapid growth in home prices in 2013, this appears to indicate and expected adjustment rather than an unexpected crash in home prices for these regions.

While slower growth in home prices is of concern to homeowners, more affordable prices will likely encourage more would-be buyers to become actual buyers.

Refi or Wait? How to Choose Between Refinancing Your Mortgage Now or Waiting Until You Need the Money

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Refi or Wait? How to Choose Between Refinancing Your Mortgage Now or Waiting Until You Need the MoneyRefinancing your existing mortgage may provide you with the opportunity to lower your interest rate, reduce your mortgage payment and adjust your loan term. For those homeowners who have lived in their home for more than a few years, pulling equity out of the property for everything from a luxurious vacation to making home improvements is a tempting potential benefit.

However, with property values and interest rates adjusting frequently, you may wonder if now is the best time to refinance your mortgage.

Using Equity From Your Refinance

One factor to consider when debating between refinancing now and waiting relates to pulling equity out of your home. If you need access to the cash now for home improvements or other purposes, refinancing now may be ideal. Even if you do not need access to your equity for several months or longer, you can lock in today’s rates and invest the money in other vehicles, such as CDs or bonds, until you need the cash.

Anticipating Market Changes

You may have heard that the interest rates for home mortgages have been slowly rising, and while they remain close to historic lows, they are projected to continue to rise. Nobody can predict with certainty how interest rates will adjust in the next few months and years, and locking in today’s rates may be beneficial. Keep in mind that if rates decline significantly in the near future, you can always look into refinancing again.

Reducing Your Principal

If you have a higher interest rate on your existing mortgage, your principal balance may be reduced at a slower rate than if you refinance to a lower interest rate. In addition, if you refinance from a 30-year term to a shorter term length, your principal balance will also be reduced more quickly in most cases. In many situations, refinancing your home mortgage today may establish a more efficient repayment schedule that allows you to accrue equity at a faster rate.

Each homeowner has unique factors to consider when refinancing based on property value, credit rating, existing loan terms and other factors. While many will benefit by refinancing an existing mortgage today, you can speak with a mortgage professional for specific advice and recommendations regarding your situation. Call your trusted mortgage representative today to inquire about the options and to begin working on your refinance loan application.

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