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Sep 23

Mortgage Demands from Buyers on the Rise

While last week’s interest rates did an unexpected turnaround, it doesn’t seem to be slowing down interested prospective homebuyers. Hungry real estate shoppers helped to offset the slightly lower numbers of potential homebuyers wanting to refinance. Mortgage applications remained at a somewhat standstill this week with a light dip of 0.1%, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week. 

Home loan applications to refinance fell by 4% but were nearly 150% higher this year. Meanwhile, mortgage applications to buy a home went up by 6%, leading to an overall annual increase of 15%. What caused the spike? Potential property shoppers are recently coming back to the market even though the supply of homes are far from meeting market demand. Last year, many homebuyers opted not to buy properties thanks to increased interest rates and higher prices, so some of that buying interest is returning now. 

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) increased to 4.01 percent from 3.82 percent, with points decreasing to 0.37 from 0.44 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate increased from last week but is the highest numbers in the past two months but still down 87 basis points, in comparsion to last year.

“The jump in U.S. Treasury rates at the end of last week caused mortgage rates to increase across the board, with the 30-year fixed-rate mortgage climbing to 4.01 percent – the highest in seven weeks,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Refinancing activity dropped as a result, driven solely by conventional refinances.”

Mortgage applications to buy a freshly constructed, brand new home shot up by 33% this year according to another report by the Mortgage Bankers Association. 

It seems mortgage demand from home buyers are jumping, despite interest rates spike. 

May 10

How to Get a Mortgage with Bad Credit

When dealing with a mortgage, you’ll hear a lot about your credit score. There are rarely loans that are bigger than a mortgage loan, and your credit history is the primary way lenders have to see how you are with loans. The higher the loan, the bigger the risk for the lender, and thus the more important it is for them to have assurances in place and to make sure they can trust you’ll pay the loan back.

Your credit is important, and the higher your credit score, the better. However, having a low credit score doesn’t always mean you won’t get be able to get a mortgage, as there are different programs available to help you get a mortgage loan so you can buy a home. Through this guide, we’ll give you some tips and ways you can still get a mortgage, even with a bad credit score.

For starters, you could always wait until you’re able to work your credit score back up to a better score, but that may not be a viable option for everyone.

FHA or VA Loans

FHA and VA Loans are great options to consider when you want to get a mortgage but have lower credit. They’re designed to accommodate and welcome potential borrowers who do have lower credit but are still looking to buy a home. FHA loans are a government-funded program that helps homebuyers with low credit buy a house. The required downpayment is is much lower than a regular loan, but you’re more restricted on how expensive a home you can buy. Similarly, a VA loan allows veterans or active duty military members to get a mortgage and buy a home with no down payment required. There are restrictions on what houses you can buy, but is a great option for those who don’t have the funds to buy added funds.

Increase Down Payment

A big part of determining your loan qualifications is the down payment you’re able to pay, with a higher down payment being better. If you can save up enough to make a significant down payment (the closest you can get to 20% the better, and even more would be great) then you can help boost your eligibility for a home loan.

Lower Debt to Income Ratio

Debt to income ratio is what many lenders use to determine what you can afford, as they can see how much you money you make vs how much you already have to pay out for your debts. If you can lower some of your debts and decrease the debt to income ratio, it’ll help you with your potential mortgage eligibility.

Leverage Your Rental History

Your rental history usually isn’t included on a credit report, so if you can get a log of your renting history, providing a long-standing history (at least one to two years) of consistent payments on-time, you can help show lenders that you’re reliable on your payments.

Breakdown Your Credit Report

It never hurts to write a letter or sit down with a lender and explain your credit history, why the negatives are there and the plan you have for the future. While it isn’t an official way to better your credit, if you have a good recent history, you may be able to convince a lender that you’re heading in the right direction and can handle monthly mortgage payments.

Credit Unions/Community Banks

Credit unions or community banks may provide more lenient options to get a mortgage, working with you to manage your debt and help you get a home loan with low credit. If you’re already with a credit union or community bank, it can be especially helpful if you’ve stayed in good standing with them.

The important thing to know is no matter the way you get your mortgage if you have bad credit you’re unlikely to get the most favorable terms possible. You have may a higher interest rate, loan insurance or other unwanted terms. However, if you’re looking to buy a home now, and don’t have time to fully rebuild your credit, these options may help!

couple home house
Feb 28

Fixed Rate Mortgages vs Adjustable Rate Mortgages

Fixed rate mortgages or adjustable rate mortgages. Deciding between what type of mortgage loan to choose can be tough! That’s why we are here to help you break it all down!

The two most common types of mortgages are fixed rate mortgages and adjustable rate mortgages (ARM). As the names suggest, the former ties you in to a predetermined and agreed-upon interest rate while the latter is subject to changes over the course of the loan’s lifespan.

When applying for your mortgage, it’s important to take into considerations factors such as why you’re trying to secure a mortgage.

Are you planning on committing to the loan for the long term? Do you plan on selling your property in a few years? You need to ask these kinds of questions to best decide on the right type of mortgage loan for you!

Fixed Rate Mortgages

If you are looking for lower monthly payments, this is for you! Fixed ate mortgages allow for lower monthly payments but typically feature longer lifespans for the loan.

So that means if you are willing to commit to the long term but don’t want to pay a lot every month, fixed rate mortgages are the way to go.

Fixed rate mortgages makes it easier for you to budget for them. Most importantly, they are straightforward and easy to understand so you won’t have much trouble understanding how it works!

As mentioned above, however, they do typically require longer terms. 30-year terms are by far the most popular so be ready to commit in the long hall.

Adjustable Rate Mortgages

Adjustable rate mortgages (ARM) gives you a fixed rate for a certain amount of time. After that, it is subject to adjustments.

ARMs give you the freedom of not committing over the long term. For example, if you buy a piece of property knowing that you will likely sell it before long, ARMs are ideal.

ARMs offer you more options in the short run by are sometimes more complex and difficult to understand.

Some popular forms of ARMs include the 5/1 Adjustable-Rate Mortgage and the 7/1 Adjustable-Rate Mortgage. Crucially, these are fixed rate mortgages for a set period of time before becoming subject to regular adjustments.

If you are a veteran and eligible for VA loans, note that VA loans can also come in the form of adjustable rate mortgages.

So Which One is Right for You?

That really depends.

As mentioned above, you should ask yourself what your goals are for purchasing a piece of property before taking out a loan. This will give you a better idea of what types of loans fit better with your overall strategy!

Feb 28

Why You Should Consider Bi-Weekly Mortgage Payments

When buying a house and getting a mortgage, it’s important to understand what terms you’re under and how you’re going about paying back the loan. Most loans are typically paid on a monthly basis, and the terms are constructed as such. However, you don’t have to pay monthly and can end up saving a lot of money on your mortgage if you’re able to make bi-weekly payments instead.

If you have a 30-year loan and are making monthly payments, then you’ll pay the full amount of interest over the course of that 30-year term. However, if you make bi-weekly payments, you’re paying more toward the principle of the loan each month, meaning that not only will you pay off your loan faster, you’ll end up paying less in interest because the principle they can charge interest on is decreasing at a faster rate.

Take this example, you have a 30-year mortgage for $250,000, and your interest rate is 6.5%. Under these terms, you’ll pay $318,860 in interest over the course of the loan. Including the original $250,000 principle, your total cost over 30 years is $568,860. But, if you pay an additional half of your monthly payment on a bi-weekly schedule, then your total interest will be $243,037.50, saving you $75,822.50. That’s about $15,000 more than the median American household income.

That’s a significant savings and is largely possible because you’re making an extra payment each there that goes exclusively towards the principle. By paying off your loan faster, you’re also limiting the amount of interest you end up paying over the life of it.

Before committing to a plan like this, it’s important to make sure your mortgage lender will properly distribute your funds to the principle, versus the interest so that you’re actually getting the intended benefit. Reading the fine print and ensuring you know exactly how the money is being distributed and when it’s coming out of your account. Some terms will credit the amount to your loan, but in lumps sums (such as at the end of the year), meaning you’re still paying that interest throughout the rest of the year, and losing a lot of the benefit of paying bi-weekly. And, if you’re paying bi-weekly, but the same amount as what you would pay monthly, there’s still no actual benefit, so it’s important to be sure that you’re paying extra, and you know what amount is going to reducing the principle versus paying the interest.

If you can’t make the bi-weekly payments from the start, most lenders will let you change after the fact (sometimes for a fee), so that’s an option to consider as well. If you do change after the fact, be sure to confirm the terms, as discussed earlier, so you know you’re getting the maximum benefit from making bi-weekly bonus payments.

Feb 22

What is a VA Loan?

When buying your home, there are a variety of different mortgage loans to consider, and choosing between them all can be difficult. For veterans who were honorably discharged and active duty personnel, a VA Loan provides an easy option that is convenient and helps you get a nice home for you and your family. In fact, over 600,000 VA loans were used in 2018, accounting for over $160 billion dollars worth of mortgage loans.

A VA Loan is still offered by private lenders, but has some influence from the United States Government too, as the Department of Veterans Affairs backs a portion of the loan, helping veteran’s get friendly terms on a loan for their home.

The biggest benefit of a VA loan is that there is no down payment required, paired with the more friendly terms for credit and income, making it much easier to get a loan. The barrier to entry is much easier, helping veterans get a nice home for their families.

Entitlements

An important aspect of VA loans are the entitlements, which is an amount the VA guarantees to payback on your behalf should you default on your loan. Generally, the basic entitlement is $36,000, with the usual maximum loan amount being $144,000, that’s like having a 25% down payment. However, it’s important to know that that’s not an official maximum loan amount, and depending on your situation, you can get more. $144,000 is a nice amount for a home in some areas, but not all, and that’s where the bonus entitlement program comes in. If you’re eligible, a bonus entitlement will grant you as much as 25% of up to $726,525 in certain counties, but that’s not all you’re limited to on your loan. Because the maximum loan amount is whatever the lender is willing to offer, the VA sets limits on what they’re willing to work with, meaning anything above is on you to deal with.

Eligibility Requirements:

As military personnel, there are still particular requirements to be aware of when looking into a VA loan. Ways to qualify include:

-90 consecutive days of service during wartime
-181 days of active service during peacetime
-6+ years of active service as a member of National Guard or Reserves
-Significant other of a service member who passed away in the line of duty or due to a disability acquired in the line of duty.

Is there Mortgage Insurance?

Another major benefit of VA loans is the fact that you don’t have to worry about PMI. While other mortgages that offer low down payments, VA loans don’t have that requirement, saving you thousands over what you might otherwise pay on a low down payment mortgage. This also means significantly lower monthly payments, making it even easier to buy a new home with a VA loan.

Additional Funding Fees

While VA loans don’t have down payment requirements or PMI, there is still a funding fee to consider, helping to balance the cost to the taxpayer. If you’re using your first VA loan and putting no money down, you’ll have a 2.15 percent (of the loan amount) fee to pay. If you do make a minimum 10% down payment, you can reduce that fee to 1.25%. Those fees may be a bit hire for Reservists and National Guard members over active-duty members. And, if you’re using the VA loan for the second time, then your fee is 3.3% with no down payment.

Refinancing a VA Loan

Remember, if you already have an active VA loan, but find yourself in a better financial situation, you can always refinance your existing loan to get a more favorable interest rate. No cash is required upfront, as all fees are rolled into the new loan thanks to the Interest Rate Reduction Refinance Loan.

Additional Requirements

Some requirements to consider, while there are usually some exceptions to the rule, is you generally need to move into your home within 60 days of purchase and actually use the home as your primary residence. Investment properties and second homes aren’t available for purchase with VA loans. And, while there is no official minimum credit score required, you’ll generally want to have a minimum of 620. While there is a lot of leniencies, it is still a loan, and you need to prove that you’ll be able to pay back the loan and other heavy debts won’t interfere.

VA loans can be difficult to fully understand, but we hope this was a good start to helping you figure out some of the nuances of a VA loan, and whether it’s for you.

Mortgage Requests Increase!
Feb 21

Mortgage News: US Mortgage Requests Are Increasing!

On Wednesday, the U.S. Mortgage Bankers Association, which gauges U.S. mortgages rates and applications, announced that mortgage applications have increased! This is happening for the first time in five weeks.

According to the Washington D.C.-based Mortgage Bankers Association (MBA), the cost of borrowing funds to purchase homes has hovered near their lowest levels for 10 months. The rates remain low in the face of a relentless stream of mixed economic news and steady inflation rate.

“Mortgage rates held steady on mixed economic news, as core inflation remained firm, while retail sales in December were much weaker than expected. However, overall application activity picked up over the week,” explains MBA associated vice president of industry surveys and forecasts, Joel Kan.

If you haven’t been following U.S. economic news closely, this is what he’s referring to: The original hawkish U.S. Federal Reserve which was leaning towards interest rate hikes has backed away from the position.

Among other ongoing issues are the U.S.-China trade talks which have yet to be resolved.

If you are interested in applying for a mortgage, this is what all of this piece of mortgage news may mean to you.

As U.S. mortgages haven’t been rising, it may be a good time to start your application process.

If you’ve already been thinking about investing in property and real estate, this may be a good incentive.

Lower cost of borrowing means your overall capital commitment is lowered. This is on top of the fact that securing a mortgage home loan already reduces your initial direct capital investment.

For you, this can be a win-win situation! Your cost to borrow funds is greatly lowered. Not only that, securing a home loan means you are free to re-allocate your funds elsewhere! All the while, you’ll be able to invest in the much-sought-after real estate market!