How to Buy a Home Without a 20% Down Payment

One of the first things you’ll hear when you start considering homeownership is that you’ll need a hefty chunk of change upfront. Most financial planners recommend putting down a 20% down payment. On the current national median home price of $306,700, that comes to $61,340. And that’s serious money.

But if you don’t happen to have that kind of cash on hand, you’re not alone. Quicken Loans Vice President of Capital Markets Bill Banfield notes that the most common barrier to homeownership isn’t being able to afford the monthly mortgage payment—it’s being able to save the down payment.

Thankfully, there are other ways to go about buying a home that don’t require you to put 20% down, like the following:

Federal Housing Administration loans

The Federal Housing Administration requires a down payment of only 3.5%. Compared to 20%, that’s pretty sweet—but these government-backed mortgages aren’t for everyone. To be eligible, you’ll need a decent credit score, of at least 580. Scores as low as 500 may qualify, but then you’ll need to put 10% down.

Another stipulation is that you’ll have to pay mortgage insurance, an extra fee that’s required on home loans where less than 20% has been put down. There are also limits on how much money you can borrow, with a minimum and maximum between 65% and 115% of the median home price in an area—on average between $271,050 and $625,000. Still, in spite of these restrictions, these loans are plentiful and a boon to home buyers, particularly those who are entering the housing market for the first time.

VA loans

If you or your spouse has served in the military, Uncle Sam has your back! You may quality for a Veterans Affairs loan, which requires 0% down and, unlike FHA loans, no mortgage insurance, since the Department of Veterans Affairs insures the loan on your behalf.

To get a VA loan, you’ll need to present a certificate of eligibility, proving one of the following requirements:

• 90 consecutive days of active duty during wartime (including from Aug. 2, 1990, to the present; see other qualifying dates), or 181 days during peacetime.
• six years in the National Guard member or reserves.
• You were wounded in service, even if you served for less than the specified time.
• You’re a widow or widowers of a member of the military forces who died in action or from injuries suffered while on duty.

USDA rural development loans

The United States Department of Agriculture also offers 0% money-down loans to home buyers who qualify as having low or moderate income. And the threshold for “moderate” can be quite high depending on where you live; in San Francisco, it amounts to $141,000 for an individual.

And while eligible properties are typically in rural regions where space isn’t at a premium, this doesn’t necessarily relegate you to the sticks. A full 97% of the United States is covered under USDA loans; check whether any address or area is covered at USDA.gov.

State and local home buyer programs

The federal government isn’t the only one offering down payment assistance. In fact, there are 2,290 down payment programs across the country that offer financial assistance, kicking in an average of $17,766, according to one study.

Generally, these programs have income limitations and require you to take a home-buyer class. Find programs in your area on the National Council of State Housing Agencies website, or at the Down Payment Resource, which offers a calculator that can show you what you may be eligible for.

Credit unions

You may be able to get a mortgage with no down payment or a limited down payment from a credit union—a nonprofit banking cooperative whose members can typically borrow at lower rates.

In order to qualify, you will probably have to meet limited income requirements—such as a maximum of 80% of the median area income. You’ll also need a decent credit score. But the policies can vary widely, so check. For instance, the San Francisco Federal Credit Union recently offered 100% financing for up to $2 million to borrowers with an average credit score of 747 and $219,000 income.

How to find down payment help in your area

Start by talking with a lender, mortgage broker, or your Realtor to determine not only what home you can afford, but also what programs and financial assistance you might be eligible for. You can also see how much home you can afford by punching your numbers into realtor.com’s mortgage calculator.

Source: Realtor.com, Nichole Odijk DeMario
http://www.realtor.com/advice/finance/20-percent-down-payment-for-a-home/

What Is Interest? The Fee That Can Tack Thousands Onto Your Mortgage

You’ve probably overheard homeowners boast that they nabbed a “great interest rate” on their mortgage. But what is interest, exactly?

Essentially, interest is an extra fee you pay your lender for loaning you the money you need to buy a home. Lenders, after all, don’t just fork over their money out of the goodness of their hearts.

“They want to be compensated for putting money in your pocket,” says Jack Guttentag, author of “The Mortgage Encyclopedia.” Since mortgage lenders are providing cash upfront to make homeownership possible, they require you to repay the debt plus interest.

Now, if you’ve got a lot of dough lying around and want to pay for the whole house upfront with an all-cash offer, you can avoid paying interest. But let’s face it, most of us aren’t living in this dreamy scenario, which makes home loans and interest par for the course—so it pays, literally, to know how it all works.

How interest rates on home loans work

When you get a mortgage, your interest payment is calculated as a percentage of the total loan amount. For example, say you get a 30-year $200,000 loan with a 4% interest rate. Over 30 years, you would end up paying back not only that $200,000, but an extra $143,739 in interest.

Month to month in the above scenario, your mortgage payments would amount to about $955 per month. Part of that monthly payment would go toward paying back what you borrowed (an amount known as your principal), and the rest goes toward interest.

The exact proportion varies month to month—early on, homeowners typically pay more interest and less principal—but that composition changes as the loan matures. For instance, in your very first month for the above scenario, you’d pay $288 to your principal and $666 to interest. By your last check to your lender 30 years later, you’d pay $951 toward principal and $3 toward interest (check out realtor.com®‘s mortgage calculator to punch in your own numbers).

So what does this payment schedule mean for homeowners? It means it will take time for you to build equity in your home, since you’re largely paying interest during the early years. Yet there’s an upside to this reality: Interest on a home loan is deductible on your taxes, so early on you will get a big tax break that dwindles as your equity rises.

Why interest rates fluctuate

Fluctuations are based on several factors.

“During a period of slack economic activity, [the Federal Reserve] will provide more funding and interest rates will go down,” says Guttentag. Conversely, “when the economy heats up and there’s a fear of inflation, [the Fed] will restrict funding and interest rates will go up.”

These financial shifts could be stressful if they affected your monthly mortgage payments, but luckily when you get a home loan, there’s a way to shield yourself from this roller coaster by getting a fixed-rate mortgage, which locks in your rate at whatever level it is at the time you apply. It remains the same over the life of your loan (typically 30 years). Or else, if you don’t mind the market’s ups and downs, you can opt for an adjustable-rate mortgage.

How to get a low-interest loan

Not everyone who applies for a home loan gets the same interest rate. It varies widely depending on a variety of factors.

Probably the biggest variable is you: Interest rates for home loans vary depending on the borrower’s credit score. Good credit leads to lower interest rates, which is why it’s important to know your credit score and keep it stellar.

Your interest rate can also vary based the type of loan you get: 15-year loans, for example, typically offer lower interest rates than 30-year loans. ARMs have lower interest rates than fixed-rate mortgages (at least at first).

The bottom line: Paying interest may be a reality to homeownership, but how much interest you pay runs a wide gamut, so make sure you grasp the basics before you apply.

Source: Realtor.com, Daniel Bortz
http://www.realtor.com/advice/finance/what-is-interest-home-loan-mortgage/?is_wp_site=1

First-Time Home Buyers Come Out in Force—but Face New Challenges

If there’s one thing that characterizes the residential real estate market for most of the past four years, it’s that the supply of homes for sale has been low, low, low. Month after month, buyers have told us in our surveys that the biggest challenge they face in making a purchase is simply finding a home that meets their needs.

For the past 47 months straight, the level of existing housing inventory—the overall supply of houses available on the market—has never exceeded 6 months worth. In July, the National Association of Realtors® reported that we had a 4.7-month supply of existing homes; the new-home supply in July was even lower. (Six to seven months of supply is typical of a balanced supply-and-demand market.) Inventory might be low, but demand is still high. The number of home buyers visiting realtor.com® in August was up 16% over last August. And yet the number of homes for sale was down 8%.

But a startling thing happened in August. Finding a home was no longer the No. 1 reported issue holding back buyers. No, the new No. 1 problem was time—as 35% of buyers said they had just started to explore so were not ready yet to buy.

Indeed, in August, 59% of buyers had been looking for less than three months. The number of people just starting to explore went up last August as well, but not as dramatically, nor did they represent the majority of active buyers.

OK, so what’s going on here, anyway?

The high number of those just starting to dip their toes into the market this year is related to a sizable shift toward first-time buyers. Last August, 35% of buyers identified themselves as first-time buyers. This August, the share of first-time buyers jumped to 51%.

As a result, new challenges, mainly financial, are also emerging as more of a concern for the market. After all, the supply-demand imbalance has also been driving up home prices.

This August, 9.4% of buyers reported having difficulty qualifying for a mortgage. That was up from 5.6% last year.

The need to improve credit scores doubled as a problem from last year, increasing from 9.7% of all buyers in 2015 to 19.5% this August.

And not having enough funds for a down payment? That rose from 16% last year to 25% this year.

The market has seen growth despite higher prices in part because of pent-up demand from very qualified buyers who were able to meet the challenging mortgage qualifications that are the norm these days. You want proof? Just check out the higher average credit scores on purchase mortgages.

A key question for the months ahead is whether a higher share of first-time buyers is ready or capable of qualifying for a loan and closing on a house.

If you are among those first-time buyers who are just starting to look, there are a few things that you can do now that will improve your chances of success in the future:

1. Get your financial house in order. Know your FICO score, and work to get it above 700 to improve your ability to qualify and to get a better rate.
2. Understand what you can afford to put down. The average down payment this year is 11% nationally, but it varies dramatically by market and by loan type. If you are struggling to come up with a down payment necessary for your market or type of mortgage, research down payment assistance programs.
3. Get all of your financial records organized, including recent bank and financial statements, the past two years of income tax filings, and pay stubs.
4. Record the details of any debts you may have, from revolving credit card balances to car payments and student loans. You will need all of this before you can work with a lender.
5. Finally: Find a lender and get pre-approved. We still have very limited supply, so being pre-approved continues to be a key part of a successful buying strategy if you intend to finance a purchase with a mortgage. A pre-approval letter as part of an offer will communicate to the seller that you have the ability to close.

Source: realtor.com, Jonathan Smoke

http://www.realtor.com/news/trends/first-time-home-buyers-face-different-challenges/?iid=rdc_news_hp_carousel_theLatest

6 Little White Lies That Can Help You Buy a House

When you find a home you’re dying to own, you might assume that honesty is the best policy when dealing with the seller (or the listing agent). And it is … to a point. But keep in mind, buying a home is a high-stakes poker game—er, negotiation—where revealing exactly what’s going on in your head, heart, and bank account could cost you big-time.

Of course, you should never outright lie when you’re trying to buy a house. We’re on the record on that point, right? Good! But all that said, you might need to tiptoe around the truth sometimes.

So before you say something you’ll regret, here’s what info to gently spin so the ball stays in your court.

White lie No. 1: ‘I’d ideally like to move in by X date’

What you really mean: “I have to be out of my current place by X date! Help!”

Recently Bob Gordon, a Realtor® with Berkshire Hathaway in Boulder, CO, walked through an open house with a client who fell in love with the charming home—and excitedly approached the listing agent, announcing she was going to make an offer. Oh, and she had to be out of her current home in 30 days.

“That’s when I jumped in and took my client outside,” Gordon notes. The lesson he drove home to his client (and wants to pass on to others) is that if you absolutely have to move by a certain date, sellers will smell your desperation and play hardball. So it’s better to soft-pedal this info and pray they’re eager to move out quickly, too (as many sellers are).

White lie No. 2: ‘We’ve made every effort to get our finances in order’

What you really mean: “God, we hope we can afford this.”

You don’t want a seller to worry that your contract will fall through, so keep all money concerns (like fears about loan denials) to yourself.

“Most of these issues can be covered by generic financing contingencies,” assures Kyle Alfriend, managing partner for Alfriend Real Estate Group Re/Max Achievers in Dublin, OH. If not, you should probably wait to make an offer until your issues are resolved.

White lie No. 3: ‘We’re really excited about this house’

What you really mean:  “We must have this house! Seriously, we’ll do anything.”

Of course, homeowners will be flattered to know you love their home, but for your wallet’s sake, you need to play it cool, says Paul Silverman, a broker associate for Martha Turner Sotheby’s International Realty Circle of Excellence in Houston. “If sellers know that you’re absolutely in love with the home, they might not be as willing to negotiate.”

White lie No. 4: ‘We’re not sure yet what our top offer will be’

What you really mean: “The most we can possibly pay is ___.”

“You shouldn’t let the seller or seller’s agent know what you’re willing to pay, no matter how much you want the house,” advises Laura Usher, president of Cape Cod & Islands Association of Realtors and a Realtor for Kinlin Grover Real Estate in Brewster, MA. “Negotiation is part of the strategy in the home-buying process. It’s important not to show your hand.”

White lie No. 5: ‘We’re guessing there are other houses that also offer what we want’

What you really mean: “This is the only house that has the price point/pool/school district we want. Period.”

“Sellers must price their homes against the competition, and this is the greatest tool the buyer has,” says Alfriend. Because of that, try not to gush like a schoolgirl with a crush about any features that make the home unique.

Even “if this is the only home in your price point with a pool, walking distance to a school, three-car garage, or five bedrooms,” Alfriend says, “don’t let the sellers know that these are critical to your purchase decision.” If you do, they’ll know they have the upper hand.

White lie No. 6: ‘We have a few more questions’

What you really mean: “We’re getting cold feet.”

Freaking out a little about your decision? Please don’t express your jitters to the home sellers. Feeling nervous is entirely normal—or a sign that you should ask more questions to clear up any concerns.

For instance, if you’re wary of whether the pool and yard will require too much upkeep, go ahead and ask the sellers how many hours they spend on maintenance (or what they pay someone to do it for them). Or if you’re leery about neighborhood safety or wonder if there’s good access to public transit, there are plenty of ways to research the area online and get more info. Or, if you’ve truly got a case of cold feet, you may just need a reality check from a trusted friend or your real estate agent about how, say, you’ve looked at plenty of homes to make the right decision. But this sounding board should not be the home seller—unless you want some major drama on your hands.

Source: Realtor.com, Stephanie Booth
http://www.realtor.com/advice/buy/white-lies-that-can-help-you-buy-a-house/?iid=rdc_news_hp_carousel_theLatest

Happy Varamaha Lakshmi!!!

Happy Varamaha Lakshmi!!!

Identity Theft : Getting Mortgage-Approved When Your Credit Is Stolen

Lenders Have Rules In Place For Credit Theft Victims

If you’re an identity theft victim, getting a mortgage will be harder, but not impossible.

More than 17 million Americans -- seven percent of adults -- experienced at least one incident of identity theft in 2014, according to the U.S. Bureau of Justice Statistics. That number is sure to be higher today.

Identity theft is, unfortunately, a part of life in the information age. But mortgage lenders understand this fact and employ special guidelines in these situations.

Mortgage applicants do not have to forego homeownership plans due to wrecked credit, but proactive response to any incident is important.

Learn how lenders deal with identity theft, and know your options as you apply.

Report Identity Theft Immediately

To have any credibility as a victim, you have to report the incident to your local police and to the government.

For lenders to consider you an identity theft victim, you must:

Provide a copy of a police report
Complete an affidavit of identity theft available from the Federal Trade Commission
Write a letter of explanation
It’s also a good idea to send your documents to all three major credit bureaus -- Equifax, TransUnion and Experian -- and place a fraud alert on your reports.

Lenders must personally contact you to ensure you are the one applying for credit, when a fraud alert is in place.

Get Approved Via "Manual Underwriting"

Once you’ve established that you’re an identity theft victim, lenders can “manually underwrite” your loan file, rather than running it through a computerized automated underwriting system (AUS).

Manual underwriting means a human goes through your credit report and application line-by-line and applies “make sense” guidelines. For example, if your credit history has no major blemishes prior to the identity theft, it’s easier to make the case that you’re a good risk.

The AUS, though, may not issue an approval due to poor, albeit erroneous, information.

Manual underwriting by a human allows lenders to be more flexible when identity theft is involved, but manually-underwritten loans often have tighter eligibility criteria.

For instance, the lender may require lower debt-to-income ratios or larger downpayments than they would if underwriting a file via the computerized system.

Still, a human-generated approval could be a good solution for well-qualified applicants.

Getting Around Credit Score Minimums

Most mortgage programs have minimum credit score requirements, and if they don’t, the lender will impose them.

This can be a major problem: identity theft victims can see their credit scores plummet when the thief opens accounts and doesn’t pay them.

Fannie Mae, Freddie Mac, and government mortgage agencies have different ways of dealing with the credit score requirements.

FHA loans

The U.S. Department of Housing and Urban Development, the overseer of the FHA program, says that applicants must include identity theft affidavits or police reports to dispute fraudulent charges.

The fraudulent accounts can then be excluded from the application.

USDA home loans

Likewise, USDA loan guidelines state that lenders can exclude credit data that is “significantly inaccurate.”

The agency instructs its lenders: “If an applicant does not have a usable credit score in connection with their loan request, then the use of non-traditional credit references is acceptable.”

Non-traditional credit reports are built manually and can include history from utility companies, landlords and other accounts that may not normally be reported to credit bureaus.

VA mortgages

The Department of Veterans Affairs, administrators of the VA home loan program, do not state a minimum credit score for the program. This makes it easier for identity theft victims to get around an inaccurate score if their “real” credit history is acceptable.

However, most VA mortgage lenders impose minimum credit scores. You’ll need to prove you were a victim of credit theft and also work to remove the erroneous information.

Conventional loans

Conventional loan rule makers, Fannie Mae and Freddie Mac, also address identity theft situations.

Freddie Mac says, “For a FICO score to be usable, it must be based on sufficient, accurate information. Too little information, or information that is significantly inaccurate, make the FICO score unusable for mortgage underwriting.”

Fannie Mae’s position is similar: “Lenders are obligated to take action when contradictory, derogatory, or erroneous information would justify additional investigation or would provide grounds for a decision that is different from the recommendation DU delivers.” DU, or Desktop Underwriter, is Fannie Mae’s automated underwriting system.

Talk with your lender about your options based on the home loan for which you apply. There is a good chance there is a workaround available to you.

You Might Pay Higher Interest Rates

Identity theft victims can end up paying higher mortgage rates, unfortunately. That’s because for many programs, borrowers with better credit scores get discounted loan fees, while those with lower scores pay more.

Typically, government-backed mortgage programs are less likely to impose higher fees on lower-score applicants.

Applicants with diminished credit should try a process known as a rapid rescore, which can raise your credit score by more than 100 points in days, not months or years.

Use A Rapid Rescore To Delete Erroneous Credit

If you have written proof that your derogatory credit history is the result of identity theft, you can ask your lender to use a rapid rescore.

Rapid rescoring is a service available only through lenders -- you can’t initiate it on your own.

For $25 to $50 per account, a rescoring service will verify your accounts and remove inaccurate derogatory information, usually in just a few days.

You will need to gather all available documentation regarding the identity theft and submit it to your lender, who will then request the rescore for you.

Your cleaned-up report includes a score unaffected by the identity thief’s fraudulent accounts. If you need a mortgage in a hurry, and you have written proof that your bad credit history is invalid, this is probably the best way to get a mortgage after identity theft.

What Are Today’s Rates?

Mortgage rates are low, and it’s an ideal time to take advantage of low payments, even if you are a victim of credit-related crime. Today’s consumer protections make it easier than ever to qualify despite erroneous credit information.

Get a quote from a lender now. No social security number is required to start, and your information is transferred securely to a knowledgeable lender who can answer your questions.

Source: The Mortgage Reports, Gina Pogol
http://themortgagereports.com/21579/identity-theft-getting-mortgage-approved-credit-score

Mortgage Math Made Simple

What’s more terrifying than global warming, national economic collapse, or a zombie apocalypse?  For many of us, it’s math—especially the type involved in securing a mortgage to buy a home.

But mortgage math doesn’t have to be intimidating. Though a home loan does indeed involve a few equations, it’s fairly easy to break it all down into the kind of simple arithmetic every home buyer can understand and, more important, needs to know.

Take note: The latest figures available show the median home costs about $220,000, so we’ll use that figure as a base for our calculations. Other figures we’ll use: an average family’s annual salary is about $54,000 and it carries $7,630 in debt.

How much do you need for a down payment?

Though you can contribute as little as 3.5% of a home’s value for a down payment, lenders consider an ideal down payment to be 20% of a home’s total price. So here’s the math on that for the average-priced home:

20% of $220,000 = $44,000 down payment

This would leave $176,000—the amount a home buyer will need for the mortgage.

Another reason to aim for 20% down: You’ll avoid paying private mortgage insurance, which is typically required under that threshold. And that will cost you about $1,000 per year, says David Bakke of Money Crashers.

(Still, if that hefty 20% is an unattainable goal, at least try to put down 10% for a significantly better interest rate than you’d get with 3.5%.)

How much will a mortgage cost per month?

A mortgage can be paid off in numerous ways, but one of the most typical is to stretch those payments out over 30 years—that way, you break it down into bite-size pieces. Building off the numbers above, here’s how much your average mortgage would cost per month:

$176,000 at 4% interest rate = $840.25 monthly payment

Keep in mind, this monthly bill does not include property taxes, home insurance, HOA dues, or other home-related maintenance fees, which vary by area but are in the ballpark of a few hundred per year for a home at this price.

Also note that the longer you stretch out your mortgage payments, the more you’ll end up paying in interest. Over 30 years, the total you’ll fork over in interest amounts to $302,490.33!

But there are ways to lower the amount you pay in interest—like paying off your loan faster. Finish in 15 years, and you’ll end up paying only $234,333.13 in interest. Granted, for a 15-year loan you’ll have to cough up more per month—$1,301.85 instead of $840.25. But the upside is you’ll save a sizable chunk in interest over the life of your loan, and be mortgage-free in half the time. So if you can afford it, it’s an option worth considering.

How much mortgage can I afford?

Of course, you’ll want to buy a home that you can comfortably pay for. So, how do you know how much is too much, too little, or just right? The way they do this is by determining your debt-to-income ratio.

For most conventional loans, experts say you’ll want your DTI ratio lower than 36%. That means your debts don’t exceed more than about one-third of your income. But how does a mortgage fit into that?

To figure that out, start with your gross income (what you take home before taxes). Let’s say your family pulls in the U.S. average, which is $54,000 per year. Divide that over 12 months to get your monthly income.

$54,000 / 12 months = $4,500 income per month

Then total up your debts—including what you owe on credit cards, auto insurance, and college loans. Remember, debt includes only items that appear on a credit report, not recurring expenses like groceries or phone bills. Since the average American carries an average debt of $7,630 per year, we’ll use that number. Divide that by 12 to get your monthly debt:

$7,630 (average debt) / 12 months = $636 debt per month

Now, add that monthly debt to your average monthly mortgage payment of $840.25 to get your total debt owed per month:

$636 debt + $840.25 mortgage = $1,476.25 debt per month

Next, divide your monthly debts by your monthly income

$1,476.25 monthly debt / $4,500 monthly income = 33% DTI

In this scenario, the debt-to-income ratio is 33%—just below the 36% cutoff. Which means this mortgage would most likely pass the bank’s muster with flying colors! Calculate your own DTI here.

See? Not so hard. Granted, this is a simplified version of mortgage math; your own results will depend on your income, debts, and other circumstances. But if there’s one thing we hope you take away from this, it’s that mortgages are nothing to fear—a little knowledge goes a long way. And if you get stuck, there’s no need to copy from your neighbor’s paper, since we have this handy mortgage calculator to help you whiz through these permutations with ease.


Source: Realtor.com, Margaret Heidenry
http://www.realtor.com/advice/finance/mortgage-math-made-simple/?iid=rdc_news_hp_carousel_theLatest

Should I Buy Now Or Wait Until Next Year?

Source: Keeping Current Matters

BREXIT AND U.S. REAL ESTATE: IS BRITAIN'S FOLLY OUR FORTUNE?

Last week, Britain voted to leave the European Union, an unexpected and historic decision that has been scrutinized all over the world - and is causing the kind of political hindsight and regret within Britain that has many asking if the vote can be undone. Or redone.

But while Brits wonder what comes next for them, aftershocks are reverberating through the rest of the world. The net worth of the world's top earners got clobbered post vote, and the U.S. stock market took a big hit, dropping sharply as of the next full trading day. American 401(k)s lost as much as $100 billion, according to a speech given by Democratic Presidential candidate Hillary Clinton.

But a run toward "safer" assets as a reaction to Brexit could actually present a huge opportunity for Americans. Looking to buy a house? This could be your best chance in years.

"Britain's decision to leave the European Union could benefit a group thousands of miles away," said the Wall Street Journal. "Several lenders posted rates for 30-year, fixed-rate mortgages of about 3.5% on Monday, nearing a 3.5-year low, and analysts expect coming reports to show that average U.S. mortgage rates have decreased since the Brexit vote Thursday. The main reason: Investors have flocked to the safety of U.S. Treasuries, pushing interest rates lower as riskier assets such as stocks tumbled. Mortgage rates tend to move up and down with 10-year Treasury rates, though the relationship isn't perfect."

Bankrate agrees it's a great time to lock in a rate, with the "average 30-year fixed-rate mortgage…down 10 basis points from a week ago."

Mortgage activity is up in the days since the Brexit vote - "Lenders across the country said refinancing applications since Thursday are up between 10% to 40% compared with typical volume this time of year, said the Wall Street Journal - with buyers looking to take advantage of low rates and new hope for refinancers.

In fact, this may be one of the best opportunities "since the Great Recession - for mortgage borrowers to lower their monthly payments, reduce the term of the mortgage or take out some cash," said the Milwaukee-Wisconsin Journal Sentinel. "With interest rates already hovering near historic lows - and then getting kicked down a notch by the "Brexit" surprise - another chance for homeowners to refinance a mortgage at near-bottom rates appears to be under way."

Lower rates have created anticipation of "a miniwave of refinancing in coming weeks" by lenders, said the Wall Street Journal. "In all, 40% of borrowers have loans with a rate of 4.5% or higher, according to CoreLogic Inc., a real-estate analytics firm, meaning they could save about $90 a month on average by refinancing at 3.5%."

Another boon to those looking to buy: an expected rise in interest rates will now likely be delayed until 2017. "Economic turbulence could prompt the Federal Reserve to hold off on raising interest rates until next year, which would likely help keep mortgage rates low," said the Wall Street Journal.

And then there's the popular idea that turbulence in international markets could pump up the interest in U.S. real estate by foreign buyers. Many experts think U.S. home equity could get a boost as demand for American real estate continues to grow.

"Some analysts believe that Britain's exit from the EU could lead to added demand for American real estate, especially in major cities like New York and Los Angeles," said Fortune. "Investors are primed to look at the U.S. real estate market as a reasonable alternative to the London market, which has long been a haven for the global rich to stow their excess wealth."

Source: RealtyTimes, Jaymi Naciri
http://realtytimes.com/consumeradvice/buyersadvice1/item/45687-20160630-brexit-and-us-real-estate-is-britains-folly-our-fortune

5 Most Common Questions About Mortgages—Answered

Not exactly sure how a mortgage works? Don’t feel bad—the average home buyer doesn’t either. The whole process is filled with head-scratching questions, from how big a down payment has to be to why your interest rate isn’t as great as you’d hoped. To help clear up some of your confusion, here are some of the most common questions home buyers ask about mortgages, as well as some expert answers.

Q: Do I really need a 20% down payment?

A: The gold standard for a down payment is 20%, but if you don’t have the cash, there are plenty of ways to put down less and still get a house. Topping the list: A Federal Housing Administration loan lets borrowers put down as little as 3.5%, but you’ll need to meet certain qualifications, including a minimum credit score of 500 and steady employment for at least two years.

And if you’re active or retired military (or a surviving spouse of a veteran), a Veteran Affairs loan allows you to put 0% down, says Todd Sheinin, mortgage lender and chief operating officer at New America Financial in Gaithersburg, MD. And those aren’t the only workarounds; some counties and states offer loan programs that enable borrowers with low income to receive a down payment subsidy.

Q: Why is my mortgage’s interest rate offer higher than the one I saw advertised?

A: If you see an ad for a remarkably low rate, take a closer look and you’ll notice a disclaimer (typically an asterisk) saying this is the best possible rate. To nab it, you’ll need a high credit score (750 or above) and a low loan-to-value ratio, which essentially means you’re making a sizable down payment of at least 40% of the home’s price, says Richard Redmond, a mortgage broker at All California Mortgage in Larkspur and author of “Mortgages: The Insider’s Guide.”

But if your borrowing scenario is not that spectacular, you’re considered more of a risk—and your interest rate will rise to reflect that. In addition to your credit score and loan-to-value ratio, it will depend on your loan size, the type of property you’re buying (e.g., condo versus single-family house). Bottom line: Read the fine print when evaluating your loan options.

Q: Is a 30-year fixed-rate loan the best option?

A: While the 30-year loan with a fixed interest rate may be the first mortgage most home buyers think of getting, “there’s no one-size-fits-all loan option,” says Redmond. For instance, although adjustable-rate mortgages have a bad rap, ARMs do make sense in certain circumstances—like if you plan to move soon, before the rates adjust. They may also make sense if you can’t afford a home with a fixed-rate mortgage, since those interest rates are slightly higher.

Meanwhile, a 15-year loan might make more sense than one for 30 years if you have enough cash to cover the bigger monthly bills. Why? Because you’ll end up paying far less in interest. For instance, if you get a 30-year mortgage on a $250,000 loan at 3.58% (the current interest rate), you’ll pay $1,134 per month and $168,628 in interest by the time those 30 years are up. Buy that same home with a 15-year loan at today’s 2.86% (the shorter time you borrow the money, the lower the rate), and your monthly payments balloon to $1,710—but you’ll pay only $43,306 in interest by the time you’re done. (Use realtor.com®’s mortgage calculator to get a rough idea of the numbers before meeting with a lender.)

Q: What is private mortgage insurance, and why do I need it?

A: If you’re using conventional nongovernment financing and can’t afford to make a 20% down payment, you’ll have to pay private mortgage insurance. PMI kicks in if you end up unable to pay your mortgage. Since your lender loses money in this scenario, PMI pays it benefits to offset that loss. You can expect to pay about 0.3% to 1.15% of your home loan in PMI. This can be a sizable sum, but it may make sense if you want to buy a home now rather than wait until you can amass a bigger down payment.

“PMI has a negative connotation, but it’s not the worst thing in the world,” says Sheinin. Another option? Have your lender cover the mortgage insurance. You’ll pay a higher interest rate, but “it’s often cheaper than paying PMI yourself each month,” says Sheinin.

Q: What happens if I can’t pay my mortgage?

A: Depending on the lender, you may have a grace period of a week or more to make the payment, says Craig Jaffe, a financial planner at United Capital in Boca Raton, FL. Miss the deadline and your account becomes “delinquent,” which can immediately hurt your credit score. Know you’re going to miss a payment? Notify the lender in advance to find out your options.

“You might be able to qualify for a forbearance, which provides a period of relief from making the full payment,”  says Jaffe.

Source: Realtor.com, Daniel Bortz
http://www.realtor.com/advice/finance/common-mortgage-questions/?iid=rdc_news_hp_carousel_theLatest

Down Payment Assistance Programs Save Qualifying Homebuyers More Than $17,000 on Average Over Life of Loan

NEW ORLEANS – June 9, 2016 — RealtyTrac® (www.realtytrac.com), the nation’s leading source for comprehensive housing data, today released a joint report with Down Payment Resource analyzing the impact of down payment assistance on the cost of buying a home — including the down payment and monthly house payments for a median-priced home in 513 counties nationwide. The report was released at the National Association of Real Estate Editors 50th Annual Journalism Conference in New Orleans.

The report found that across all 513 counties analyzed, buyers using available down payment assistance programs can save an average of $17,766 representing 41 percent of a year’s wages compared to buyers who do not use down payment assistance.

The total savings breaks down to an average savings of $5,965 on the down payment for a median-priced home, and an average savings of $11,801 on monthly house payments over the life of the loan for a median-priced home.

The report combined public record sales deed data for single family homes and condos collected by RealtyTrac with average down payment assistance data collected from 2,477 down payment assistance programs across the country by Down Payment Resource along with the latest average weekly wage data available at the county level from the Bureau of Labor Statistics.

“Saving for a down payment can be difficult for prospective first-time homebuyers given the absence of substantial wage growth in recent years combined with the burden of student loan debt many are struggling under,” said Daren Blomquist, senior vice president at RealtyTrac. “Even just a 3 percent down payment requires 14 percent of annual wages on average across the 513 counties we analyzed, and in 67 counties a 3 percent down payment requires more than one-fifth of annual wages.”

“Homeownership programs not only help buyers overcome the initial cost of purchasing a home, but also produce a compounding positive impact on the homeowner’s saving and wealth-building capability,” said Rob Chrane, CEO at Down Payment Resource. “In fact, these programs are now the last frontier in the fight to preserve homeownership affordability. Rates are never going to be substantially lower, and home prices continue to trend higher.”

Markets with biggest down payment assistance savings

Markets where buyers using down payment assistance programs can realize the biggest total dollar savings compared to buyers not using down payment assistance were Kauai County, Hawaii ($80,148 total savings over the life of the loan); Placer County, California, in the Sacramento metro area ($78,539); San Francisco County, California ($77,411); Orange County, California in the Los Angeles metro area ($74,268); and Shasta County (Redding), California ($70,806).

Other markets with total savings of more than $50,000 over the life of the loan included counties in Miami, New Orleans, Seattle, Orlando, and New York.

“Any ability that buyers have to assist with current down payment requirements is positive — especially when we consider our region’s first time buyers who are sometimes facing an uphill battle as to whether to continue paying escalating rents, or save towards a down payment on a home,” said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market. “However, Seattle’s housing market remains incredibly competitive and many buyers are either paying cash or have substantial down payments. These buyers are seen as lower risk than those using down payment assistance and are therefore more likely to win in a multiple-offer situation.”

Markets where buyers using down payment assistance programs can realize the biggest savings as a percentage of average annual wages compared to buyers not using down payment assistance were Kauai County, Hawaii (191 percent of annual wages); Shasta County (Redding), California (176 percent); Sevier County (Sevierville), Tennessee (161 percent); El Dorado County, California in the Sacramento metro area (160 percent); and Allen County (Lima), Ohio (157 percent).

“While down payment assistance programs are beneficial for assisting buyers in achieving the American Dream of homeownership, current low available housing inventory is creating an inability to leverage such programs to the benefit of buyers,” said Michael Mahon, president at HER Realtors, covering the Cincinnati, Dayton and Columbus markets in Ohio. “Couple current market conditions with certain sellers and agents restricting access to viewing of properties in consideration of marketing programs to create hyper-sensitivity regarding property availability, and we have what many are considering a potential environment of disparate impact relating to the inability of the Protected Class Buyers under the U.S. Fair Housing Act to leverage such down payment assistance programs in achieving their family goals of homeownership.”

Other markets with total savings of more than 130 percent of average annual wages included counties in Orlando, Los Angeles, Miami, Nashville and Memphis.

Average assistance covers 3 percent down in 82 percent of counties

Across all 513 counties, the average down payment assistance available through down payment assistance programs was $12,434, nearly twice the average 3 percent down payment of $6,424 on a median-priced home.

“These programs often make the difference between buying a home or not,” added Chrane of Down Payment Resource. “In most cases, the assistance results in a greater financial cushion by preventing homebuyers from liquidating their savings and retirement accounts to come up with a down payment.”

Average down payment assistance available was higher than a 3 percent down payment on a median-priced home in 422 of the 513 counties (82 percent), including Los Angeles County, California ($39,964 average down payment assistance compared to $15,450 for 3 percent down on a median-priced home); Cook County, Illinois in the Chicago metro area ($8,058 average assistance compared to $6,090 for 3 percent down); Harris County, Texas in the Houston metro area ($16,521 average assistance compared to $5,985 for 3 percent down); Maricopa County, Arizona in the Phoenix metro area ($19,067 average assistance compared to $6,750 for 3 percent down); and San Diego County, California ($25,262 average assistance compared to $14,460 for 3 percent down).

Markets where average assistance does not cover 3 percent down

Average down payment assistance was lower than a 3 percent down payment on a median-priced home in 91 of the 513 markets (18 percent).

Major markets where a 3 percent down payment on a median-priced home was higher than the average down payment assistance available included New York County (Manhattan), New York ($13,917 average down payment assistance compared to $34,500 for 3 percent down on a median-priced home); Fairfax County, Virginia in the Washington, D.C. metro area ($5,000 average assistance compared to $14,100 for 3 percent down); Salt Lake County, Utah ($5,313 average assistance compared to $8,078 for 3 percent down); Montgomery County, Maryland in the Washington, D.C. metro area ($4,680 average assistance compared to $11,550 for 3 percent down); and Baltimore County, Maryland ($6,173 average assistance compared to $6,210 for 3 percent down).

Other markets where a 3 percent down payment on a median-priced home was higher than the average down payment assistance available included counties in Philadelphia, San Francisco, Chicago, Kansas City, Des Moines, Portland, and St. Louis.

Source: RealtyTrac, Realtytrac Staff
http://www.realtytrac.com/news/home-prices-and-sales/2016-down-payment-assistance-affordability-analysis/

5 Ways You Didn’t Know You Could Save for a Down Payment

Buying your first home conjures up all kinds of warm and fuzzy emotions: pride, joy, contentment. But before you get to the good stuff, you’ve got to cobble together a down payment, a daunting sum if you follow the textbook advice to squirrel away 20% of a home’s cost.

Here are five creative ways to build your down payment nest egg faster than you may have ever imagined.

1.  Crowdsource Your Dream Home

You may have heard of people using sites like Kickstarter to fund creative projects like short films and concert tours. Well, who says you can’t crowdsource your first home? Forget the traditional registry, the fine china, and the 16-speed blender. Use sites like Feather the Nest and Hatch My House to raise your down payment. Hatch My House says it’s helped Americans raise more than $2 million for down payments.

2.  Ask the Seller to Help (Really!)

When sellers want to a get a deal done quickly, they might be willing to assist buyers with the closing costs. Fewer closing costs = more money you can apply toward your deposit.

“They’re called seller concessions,” says Ray Rodriguez, regional mortgage sales manager for the New York metro area at TD Bank. Talk with your real estate agent. She might help you negotiate for something like 2% of the overall sales price in concessions to help with the closing costs.

There are limits on concessions depending on the type of mortgage you get. For FHA mortgages, the cap is 6% of the sale price. For Fannie Mae-guaranteed loans, the caps vary between 3% and 9%, depending on the ratio between how much you put down and the amount you finance. Individual banks have varying caps on concessions.

No matter where they net out, concessions must be part of the purchase contract.

Related: New Law Protects You from Surprise Closing Costs

3.  Look into Government Options

The U.S. Department of Housing and Urban Development, or HUD, offers a number of homeownership programs, including assistance with down payment and closing costs. These are typically available for people who meet particular income or location requirements. HUD has a list of links by state that direct you to the appropriate page for information about your state.

HUD offers help based on profession as well. If you’re a law enforcement officer, firefighter, teacher, or EMT, you may be eligible under its Good Neighbor Next Door Sales Program for a 50% discount on a house’s HUD-appraised value in “revitalization areas.” Those areas are designated by Congress for  homeownership opportunities. And if you qualify for an FHA-insured mortgage under this program, the down payment is only $100; you can even finance the closing costs.

For veterans, the VA will guarantee part of a home loan through commercial lenders. Often, there’s no down payment or private mortgage insurance required, and the program helps borrowers secure a competitive interest rate.

Some cities also offer homeownership help. “The city of Hartford has the HouseHartford Program that gives down payment assistance and closing cost assistance,” says Matthew Carbray, a certified financial planner with Ridgeline Financial Partners and Carbray Staunton Financial Planners in Avon, Conn. The program partners with lenders, real estate attorneys, and homebuyer counseling agencies and has helped 1,200 low-income families.

4.  Check with Your Employer

Employer Assisted Housing (EAH) programs help connect low- to moderate-income workers with down payment assistance through their employer. In Pennsylvania, if you work for a participating EAH employer, you can apply for a loan of up to $8,000 for down payment and closing cost assistance. The loan is interest-free and borrowers have 10 years to pay it back. Washington University in St. Louis offers forgivable loans to qualified employees who want to purchase housing in specific city neighborhoods. University employees receive the lesser of 5% of the purchase price or $6,000 toward down payment or closing costs.

Ask the human resources or benefits personnel at your employer if the company is part of an EAH program.

5.  Take Advantage of Special Lender Programs

Finally, many lenders offer programs to help people buy a home with a small down payment. “I would say that the biggest misconception [of homebuying] is that you need 20% for the down payment of a house,” says Rodriguez. “There are a lot of programs out there that need a total of 3% or 3.5% down.”

FHA mortgages, for example, can require as little as 3.5%. But bear in mind that there are both upfront and monthly mortgage insurance payments. “The mortgage insurance could add another $300 to your monthly mortgage payment,” Rodriguez says.

Some lender programs go even further. TD Bank, for example, offers a 3% down payment with no mortgage insurance program, and other banks may have similar offerings. “Check with your regional bank,” Rodriguez says. “Maybe they have their own first-time buyer program.”

Not so daunting after all, is it? There’s actually a lot of help available to many first-time buyers who want to achieve their homeownership dreams. All you need to do is a little research — and start peeking at those home listings!


Source: HouseLogic, Erik Sherman
https://www.houselogic.com/buy/first-time-home-buyer/down-payment-assistance/

New Mortgage Rules For Self-Employed Borrowers

If you’re self-employed, you must meet different requirements than a salaried person to qualify for a mortgage. The rules about how that works were updated in recent months to take an even closer look at your business income, so let’s review the rules for self-employed people borrowing for the first time, and for those who will be impacted by new rules next time they get a loan.

Self-employed borrower basics

Two of the most important things lenders review to qualify you for a mortgage are income and assets, which respectively, determine how much monthly payment you can afford and where your down payment is coming from.

When it comes to income, self-employed borrowers report income as sole proprietors or owners of entities like corporations, partnerships, or limited liability companies (LLCs).

As a sole proprietor, you will file your self-employed income on IRS Schedule C, which tracks your income and expenses for a given year.

Unlike with salaried employees, who get to use their gross income for loan qualifying, sole proprietor borrowers must qualify using their net income from Schedule C. Furthermore, lenders calculate a 24-month average of net income for sole proprietors (as opposed to sometimes requiring just one year from salaried borrowers), and if the most recent Schedule C has lower net income than the previous year, lenders will use worst-case income by calculating a 12-month average of the most recent year.

If you’re self-employed and conduct business via a corporation, partnership, or LLC, the IRS requires these entities to file separate sets of tax returns. If you own 25 percent or more of the entity, you will need to provide lenders with these full business tax returns, as well as your personal returns.

Just like with Schedule C, lenders will average income for 24 months using two years of filed business (and personal) returns, and if the most recent year is lower, they will average 12 months of the lower year.

When it comes to assets, self-employed borrowers sometimes have a lot of their money in their business, and may want to use those funds for down payment. Some lenders will let you do this, and if so, they often require that your tax preparer verifies that use of business funds for a home purchase won’t have a material impact on the business.

New rules for self-employed borrowers

In February 2016, Fannie Mae updated self-employment income calculation guidelines for borrowers who own partnerships and S corporations. These guidelines impose stricter analysis on income and debt trends of a company to determine whether the company has sufficient assets to support the withdrawal of earnings to pay its owners.

If you own an entity like this, your income from the entity shows up on a form called Schedule K-1. This form is part of the entity’s tax filing, and the figures on this form get carried over to your personal tax return as income.

This income most often comes in two main forms: “ordinary business income” and “distributions.”

New rules for self-employed borrowers now impose conditions on whether you can use either of these forms of income. For example, if distributions are greater than ordinary business income, then ordinary business income may be used to qualify. But if distributions are less than ordinary business income (or distributions don’t exist), then there are a host of guidelines to determine how you qualify.

These guidelines will be specific to your profile and they will vary by lender, so the best way to determine whether you qualify for a loan as a full or part owner of a corporation or partnership is to find a local lender who can analyze your tax returns for you.


Source: Zillow Blog, Julian Hebron
http://www.zillow.com/blog/new-mortgage-rules-self-employed-197638/

Frustrations Fly Over FHA Loan Hangups

At the Real Property Valuation Forum during the 2016 REALTORS® Legislative Meetings & Trade Expo Tuesday afternoon, real estate professionals, appraisers, and underwriters all aired grievances about the difficulty and confusing language of the FHA loan process, in particular the new FHA single family handbook and its effect on appraisals.

John Anderson ABR, CRB, and broker-owner of Twin Oaks Realty Inc. in Minneapolis, Minn. says he’s seen a huge reluctance on the part of sellers to accept offers that will be financed by loans insured by FHA. “Sellers are looking the other way and saying ‘I don’t really want to deal with FHA,’” he said. Still, he said that some 25-30 percent of his deals are FHA-insured and noted that sometimes it’s more of a word-of-mouth reluctance than actual experience of collapsed deals. “Often it’s because of misconceptions… sellers are saying ‘I hear there’s problems with FHA appraisers.’”

As a housing programs policy specialist with FHA, Gary Eisenbraun did his best to explain the limits of the FHA’s power to change the process, noting that appraisers don’t decide where the home should be valued. “The appraiser has a responsibility to tell the story. It’s the underwriter that clears the property,” he said. Anderson and Eisenbraun were a part of a panel of experts who took questions from the audience over a range of issues affecting appraisals and home sales.

While some noted that recent changes to the FHA's handbook on appraisals seemed to imply that appraisers’ work is more akin to that of the home inspection community, Eisenbraun disputed that, noting that appraisers and lenders can always order a more experienced or capable inspector to do follow-up work that will help the lender determine proper value. “HUD would never expect anyone to put themselves in a dangerous situation,” he said. “We don’t expect the appraiser to be a chemist.”

Another point of contention was the practice of appraisers asking to see outside home inspection reports. “The home inspection should never be given to the appraiser,” Eisenbraun said. “That’s giving someone something they really don’t need in order to determine value and acceptability of the property to HUD.”

Perhaps the greatest number of individual questions from the audience centered around the working order of appliances. The way Eisenbraun laid it out, FHA doesn’t technically require any appliances to be present or in working order; just that occupants have areas in which they can sleep, eat, prepare food, and bathe. “We are not saying you have to have kitchen appliances unless they are conveyed in the context of real estate,” he said. “But if it’s customary in your local market then it may be considered real estate.”

Several questions from the audience were about issues that arose in connection with appliances that aren’t in tip-top shape. Eisenbraun said the basic functionality of an appliance should be the litmus test. If the fridge can keep the milk cold, it’s working. If the ice maker doesn’t appear to be making ice, “maybe that has a defect on the overall contributory value” but it’s not really a deal-breaker for the appraisal.

There were calls from the audience and panel participants to increase training, but Eisenbraun said there was only so much the federal government could do at the local level, and appealed to real estate professionals and lenders to stay involved in the appraisal process and to demand a high level of performance from appraisers.

Anderson added that sales associates and brokers have a responsibility to consider future appraisals when they work with sellers to determine the price of a home. “We have to build our cases when we list our properties, just like appraisers have to, [otherwise] we’re not doing our fiduciary duty,” he said, telling attendees to consider the work of the appraiser throughout the listing process. “Sometimes we think, ‘We just sell them and you make it fit,’ but it doesn’t really work that way.”

Source: RealtorMag Online, Meg White
http://realtormag.realtor.org/daily-news/2016/05/11/frustrations-fly-over-fha-loan-hangups?om_rid=AAFmZk&om_mid=_BXM6DaB9Ni0xND&om_ntype=RMODaily

Five Smart Home buyer Strategies

The National Association of REALTORS® has announced that there's a housing supply shortage. Homes are selling quickly and home prices are starting to inch up again. It's becoming a seller's market in many areas.

Any time the market changes, it's time to change strategies. During a buyer's market, buyers have the upper hand and can make more demands to sellers over their homes' price and condition. During a sellers' market, buyers concede the upper hand to sellers and are more willing to accept higher prices and terms.

When homes are in short supply, buyers don't have the luxury of taking their time, teasing sellers with lowball offers, demanding that every little thing be fixed, and shopping for homes with multiple real estate agents. Do these five steps instead.

Make a good first impression. Not only do you need to impress sellers, you need to impress real estate agents. Hire one agent and let him or her profile your needs to the marketplace. Be specific about your must-haves so you don't waste your agent's and your time viewing homes that lack what you want most. When you find the home you want, send the seller a letter along with your offer outlining why you love the home.

Get preapproved by a lender. Not only will you know how much home you can buy, you'll be ready to make an offer quickly. Your real estate agent can include the fact that you're financially preapproved by your lender in with the offer, which will carry weight with the seller.

Shop within your price range. In a seller's market, it's wise to shop for homes within or slightly below your price range. This will give you more room to make full-price offers or above in case the home you want is in a bidding war with other buyers. You'll be able to pay your own closing costs. Trying to buy a home out of your reach during a seller's market will only cause you and your agent frustration.

Be flexible. No home is perfect. To get more home for your money, you might shop for an older home that needs renovation. Try to look past ugly wallpaper and stained carpet and visualize the home with more attractive finishes. You may be able to get more living space in an established neighborhood than with a newer home that is priced higher for similar square footage.

Be ready. Be ready to see a new listing at a moment's notice. Be ready to make an offer when you believe this is the right home for your household. Once a seller has accepted your offer, proceed as if you're in a normal market. Set a reasonable closing date that accommodates the seller as much as possible. Confirm the offer with your lender. Schedule the inspections you'll need and don't nitpick the seller over small things.

Whether you're in a buyer's market or a seller's market, you should feel good about the home you choose, the deal you make, and the courteous way you treated all parties to the transaction.

Source: RealtyTimes
http://realtytimes.com/consumeradvice/buyersadvice1/item/44369-20160506-five-smart-homebuyer-strategies

Mortgage Payments When You Are In Financial Trouble

None of us can appreciate -- nor anticipate -- the future. Although we always believe it will never happen to us, once in a while, calamity strikes, and then we have to address these very hard and difficult questions.

You own a house, with a sizable mortgage. Suddenly, you (or your spouse) lost their job, and you cannot make the monthly mortgage payments.

There are a number of options you should immediately consider. However, the very first thing you should do is to talk with your lender. Don't just discuss your issues with a low-level employee. Try to go as high up the corporate ladder as you possibly can. And don't be afraid to be honest. Legitimate mortgage lenders will try to work with you, since they don't want to evict you and have to own and carry your house until they sell it.

Here are some of the options which are available to you.

1. Temporary indulgence. Here, the lender, at your request, may grant you a short period of time -- usually not more than three months -- in order to cure any delinquency. However, this is merely temporary relief, and by the end of that short period of time, the borrower must be completely current.

2. Repayment plan. Here, the borrower is given a fixed period of time -- usually not to exceed one year -- in which to bring the mortgage current by immediately making and continuing to make payments in excess of the monthly mortgage payment. It is important to get this repayment plan reduced to a written document, signed by both the lender and the borrower.

3. Special forbearance relief agreement. Here, the regular monthly mortgage payments are suspended or reduced for a period of up to eighteen months from the due date of the first unpaid monthly installment. At the conclusion of this relief period, the regular payments must be resumed; additionally, a comprehensive plan must be agreed upon for the repayment of the amount that has been suspended.

In this case, the lender will make a determination that the default is curable, and based on the current financial and appraisal data, the lender must be satisfied there is a likelihood that the borrower will be able to comply with the repayment plan. Clearly, the burden will be on you to document and justify the plan, so as to satisfy the lender's requirements.

If you are in the military, the Soldier's and Sailor's Relief Act provides various forms of relief, but you should check with your military or civilian lawyer to determine your eligibility under that Act.

4. A short sale. Here, the lender will authorize you to sell the property for what it is really worth, and the lender will get all the proceeds. Let us look at this example. The house can probably be sold at $395,000, but the mortgage is $425,000. The lender may allow you to sell the property for $395,000, giving a real estate broker a commission. The lender gets all the remaining sales proceeds; you get nothing from the sale. However, under this "short sale" approach, you will be relieved of your mortgage. In some cases -- depending on your financial situation -- the lender may want you to pay a portion of the mortgage shortfall; this depends on the lender and is clearly negotiable.

5. Deed in lieu of foreclosure. This is another remedy that may be available to you. Under this arrangement, you deed your property to the lender (or to whomever the lender designates) and this is in lieu of (instead of) foreclosure proceedings. This arrangement is an acceptable and customary procedure when, for example, the borrower is deceased and the estate is willing and able to transfer the property, or the borrower has filed Chapter 7 bankruptcy, and the trustee has abandoned interest in the property.

6. Foreclosure. Here, the lender will sell your property at auction (or in some states at the Courthouse), and you will lose your home and your credit rating (whatever is left of it. Legitimate lenders do not want to foreclose. and they will reluctantly start the process if all else has failed.

7. Bankruptcy. Your final option, of course -- which should be used only as a last resort -- is for you to file bankruptcy. When someone files for bankruptcy, there are many protections that automatically apply from the day the bankruptcy petition is filed with the Bankruptcy Court. The most important protection under the bankruptcy law is known as "the automatic stay." If you are in bankruptcy, no legal action can be taken against your house unless the lender requests the Court for permission to "lift the stay."

You cannot ignore your financial problem, hoping you will win the lottery or find some other immediate source of funds. The level of your cooperation is the most significant aspect that will determine how willing the lender is to similarly cooperate.

Source: RealtyTimes, Benny L. Kass
http://realtytimes.com/consumeradvice/mortgageadvice1/item/43937-20160420-mortgage-payments-when-you-are-in-financial-trouble

Can You Get a Home Loan Without a Full-Time Job?

When Joy and Bryant Wingfield started shopping for a mortgage in 2011, they were turned down left and right. The reason? Bryant didn’t have a full-time job, working sporadically as a guard for a security company.

“One week, he’d freelance for them, and the next, he wouldn’t work at all,” Joy explains. Although she was working full-time, as a couple they didn’t have the steady flow of income that lenders like to see. “Due to these income fluctuations, we were denied mortgages when we first applied.”

It’s a common scenario: One-third of Americans earn their paycheck as Uber/Lyft drivers, freelancers, TaskRabbits, sole business proprietors, eBay sellers, or contract workers. Many of them want to buy a home, but lenders can be leery of extending credit to people who lack full-time employment.

Nonetheless, eventually the Wingfields did manage to nab a $216,000 home loan and purchase a three-bedroom condo in Union City, NJ. So what’s their secret—and how can other home buyers follow in their footsteps? Read on to learn how to land a home loan without full-time work.

Flaunt your track record

Prove to your would-be lender that the real estate investment you’re eyeing is safely within your already established budget.

“Say you’ve been renting for $1,200 a month,” says Rocke Andrews, president of the National Association of Mortgage Brokers. “Say your proposed mortgage plus maintenance brings your monthly housing costs to $1,050. Show you’ve been paying $150 more in rent—and have been doing so consistently over time.” Rent stubs—and a letter from your landlord confirming that you’ve covered your expenses promptly and in full—will bolster your case.

The same goes for documentation from past and previous lenders. The Wingfields, for instance, provided proof that they had paid their student loans, credit-card bills, insurance invoices, and car payments in full and on time.

“Don’t just show you have the ability to cover your debts,” says David Luna, a Salt Lake City mortgage broker and the former commissioner of real estate for the state of Utah. “Pay ahead of schedule if you can, proving you’re willing to make transactions as easy on your lenders as possible.”

Show savings

In order to qualify for a mortgage, you need to prove not only that you have a steady income and a solid credit history, but a generous nest egg in reserve.

“Consider that scenario in which buying a new home would cost you $1,050 per month,” says Andrews. “At a minimum, lenders will want to see that you have a reserve of two months’ expenses, or $2,100. But ideally, you want to have at least six months’ expenses—or $12,600—in assets that you can readily liquidate.” The bigger your safety net, the greater the chances that potential lenders will let your mortgage application fly.

Validate your income

“At a minimum, you want to show that you’ve been doing what you do to earn money—and doing it successfully—for two solid years running,” says Andrews. You also want to demonstrate that your income is rising instead of declining.

“Aim to show that in 2015, you earned more than you did in 2014, and that in 2014, you earned more than in 2013,” says Luna. “Get tax forms and other documents that show your income inching higher and higher for as many years running as possible.”

Get a co-signer

If you can’t land a mortgage on your own, consider asking a family member or business associate to co-sign with you. As a freelancer or contract worker, do you have employers with whom you’ve developed longstanding relationships? Enlist them to help your case. Submit contracts showing you have guaranteed work from them in the future (noting that the longer those contracts stand, the better).

“Also get letters from them stating that you’re reliable and reputable, and that they don’t expect any declines in your income or work for them in the future,” says Andrews. Wingfield’s husband got just such a letter from the supervisor at his security firm (where he eventually landed his current full-time job).

Sum it all up

When you’re done compiling (and carefully proofreading) all the documentation you need to supply, cap it off by writing a letter that summarizes your case.

“Here, you want to connect the dots,” says Luna. “Reaffirm your stability, ability, and willingness. State your application’s strengths. And keep it brief. Three-quarters of a page should do.”

Keep trying

Failed to secure the first home loan for which you applied? Don’t give up hope.

“The lender we thought would be a sure bet—our family credit union, where we had longstanding savings accounts and credit cards—turned us down flat,” says Wingfield. “We managed to land a mortgage not by going with them or with a traditional bank, but by finding a lending company that specialized in helping borrowers whose situations were outside the normal box.” Your real estate broker—and nonprofit agencies in your community that focus on helping homeowners—can steer you toward lenders who are right for you.

“We did what we needed to make our case,” says Joy. “We showed pay stubs, back tax forms, the works. Our mortgage approval took three months, but we got through it because we did our homework—and did it right.”

Source: Realtor.com, Molly Ginty
http://www.realtor.com/advice/finance/get-home-loan-without-full-time-job/?iid=rdc_news_hp_carousel_theLatest

Your Debt-To-Income Ratio Can Tell You How Much Home To Buy

DTI Reveals True Home Affordability

Credit scores often get the biggest headlines.

Your three-digit FICO score is a key factor for qualification and mortgage rates.

But there’s another number that does a better job at telling you what you can afford: your debt-to-income ratio, or DTI.

Your DTI is a comparison between your monthly payments and your income. A low DTI denotes you are buying a home well within your means.

Lenders want to see that you are taking on a sustainable housing payment. That’s good for you and them.

Knowing your DTI before you apply is by no means necessary, but it can help buyers form an educated estimate of their price range.

Many buyers will discover that homes in their area are very affordable as they look at their income, current payments, and future housing costs to determine their DTI.

No Two Buyers' Payments Are Alike

The lender never looks at the amount of debt independent of the applicant’s income.

A certain amount of payments can be too much for one consumer and no burden at all for another.

Think of it this way: $4,000 worth of monthly debt obligations are a real problem for consumers who earn a gross monthly income of just $6,000. But that same $4,000 of debt isn’t nearly as problematic for consumers who earn $18,000 a month.

Figuring your debt-to-income ratio isn’t difficult. Divide your recurring monthly debt obligations into your gross monthly income.

For instance, you would have a 25% DTI with an income of $10,000 and payments of $2,500.

While the formula is easy, it helps to think like a lender when you calculate your debt payments.

Calculate Your DTI Like A Lender

Mortgage lenders are the final decision maker. It’s important to understand how they calculate DTI.

The lender will look at your recurring payments for anything financed, such as cars, student loans, and credit card purchases. If you have monthly child care or alimony payments, these also count as part of your recurring monthly debt.

They will not include non-debt monthly payments such as utility payments, cell phone bills, and gym memberships.

If you’re not sure which of your bills the lender will consider debt payments, obtain a free credit report. Consumers have access to a free report once per year from each of the three major bureaus, Transunion, Experian, and Equifax.

Go through the report and add the payment amounts listed. This is exactly how the lender will calculate your non-housing payment total.

Estimate All Parts Of Your Future Housing Cost

After calculating your non-housing debt, the lender will estimate your new monthly housing expenses.

Your future payment amount will consist of a number of pieces.

• Principal
• Interest
• Mortgage insurance, if any
• Property taxes
• Homeowner’s insurance
• Homeowner association (HOA) dues

You can determine your principal and interest payment with any mortgage calculator. Some even estimate your mortgage insurance cost. Property taxes can vary widely by region of the country. Search for home in your area and price range on a real estate website. Each listing should state the amount of taxes, which you can use for your estimate.

Homeowner’s insurance can be anywhere from $50 to $200 or more per month, but for the typical house and borrower, should be around $75.

HOA dues almost always apply when buying a condo, but often when buying a single-family home in some neighborhoods too. Search for homes in desired neighborhoods to check common HOA dues, if any.

Use All Your Income

Most U.S. workers’ paychecks bear little resemblance to their actual income.

A large amount is removed for income taxes, Medicare, and Social Security taxes. In addition, many workers voluntarily contribute to a 401k plan and pay medical insurance premiums too.

The end result is take-home pay that is significantly less than gross income.

Fortunately, the lender will use all your income to calculate your DTI.

In addition, you can also include monthly rental income, any alimony payments you receive, pension income, disability income and many other payments you receive each month.

However, lenders may calculate these income types differently than you would. For instance, only 75 percent of your rental income “counts” toward qualifying income.

Likewise, self-employed income can be difficult to calculate on your own. The lender will deduct any write-offs from total business income.

The point is, be conservative when estimating non-salaried income. Lenders will provide an income analysis as part of the pre-approval process. If you are self-employed, this may be the only way to know your lender-calculated income.

Many Exceptions To The 43% DTI Rule

When applying for a mortgage loan, you want to aim for a debt-to-income ratio that is lower than 43 percent. That’s because 43 percent is the highest DTI many loan types can hit and still be considered a Qualified Mortgage.

A Qualified Mortgage is one that the Consumer Financial Protection Bureau considers sustainable by the buyer. The rule came out of the 2010 Dodd-Frank Act as an effort to protect consumers after the housing downturn of last decade.

But the forty-three-DTI rule is by no means hard-and-fast.

For instance, Fannie Mae’s new program, HomeReadyTM, allows a 50 percent DTI when non-borrower household members are contributing to homeownership costs.

Likewise, FHA loans and VA home loans which receive approvals are considered Qualified Mortgages despite their DTI.

Borrowers who do apply for a loan with a 43 percent cap have options if they are above the DTI limit.

They can target a lower-priced home, which would reduce their estimated new monthly mortgage payment and debt-to-income ratio.

Home buyers can also refinance their auto loan, or consolidate student loans and credit cards to reduce the monthly payment. The lender does not factor in loan balance, but only the minimum amount due each month. Reducing payments helps, even if loan balances don’t change.

Let Your Budget Make The Decision

The key is to get your debt-to-income ratio to a level that is not only attractive to lenders but is also comfortable for you. Your lender might approve you with a debt-to-income ratio of 40 percent, but you might not feel comfortable with monthly obligations that consume that much of your monthly income.

Your payment comfort level may be much lower than the housing expense the lender approves.

Before you apply for a mortgage, take the time to roughly calculate your debt-to-income ratio. This number will tell you plenty about how much of a monthly mortgage payment you can comfortably afford.

And don’t be afraid to be more conservative when it comes to your debt-to-income ratio. Enjoying homeownership starts with sustainable, comfortable costs.

Source: The Mortgage Reports, Dan Rafter
http://themortgagereports.com/20054/your-debt-to-income-ratio-can-tell-you-how-much-home-to-buy

Down Payment Insurance: Smart Protection or Total Waste of Money?

The housing crash of 2008 shattered the long-held notion that a home is a rock-solid, inviolable investment in your future. With home prices climbing steadily again to what seems like improbable (and possibly unsustainable) heights in some markets, many fear that we’re in another housing bubble—one that could burst, taking their life savings with it.

That’s why buyers may see the appeal in a new product from Dallas-based startup ValueInsured: +Plus, down payment insurance for homeowners. In a nutshell: It offers protection where protection didn’t previously exist.

However, the jury is still out on whether it’s a smart (additional) investment or the equivalent of feeding cash directly into the septic system.

It works like this: New homeowners can insure down payments of up to 20% for up to $200,000, paying a one-time premium when they close. Costs depend on how much they’re insuring and what state they’re in.

Then if home prices have fallen and these still relatively new homeowners have to move—say for a new job or to a bigger place after having triplets—ValueInsured will make sure they’re not out the difference.

Customers in all 50 states and Washington, DC, can get the insurance directly through the company or when they secure a mortgage through Amalgamated Bank. Buyers can also have their premiums included in their Amalgamated mortgages using a lender credit to pay the premium.

For example, a buyer who insures a 10% down payment of $25,000 on a $250,000 home in Ohio would pay a one-time fee of $1,455.52, according to ValueInsured’s website. If the buyer insured a 20% deposit of $50,000, it would cost $1,837.50. The costs of premiums vary by state.

“Nobody knows where life is going to take them,” says Joe Melendez, CEO of ValueInsured. “It’s about empowering a home buyer to purchase a home knowing that the money they’re putting into that home is insured in the event that they need to move and the value of their home is down.”

But if it sounds too good to be true… The insurance product, launched in the fall, comes with a few significant limitations. Homeowners have to wait two years before they can file a claim. And it’s good for up to only seven years after the day they closed. Seven years and one day? You’re out of luck.

The home must be a primary residence—the owners can’t be renting it out. And you won’t get your money back if you’re foreclosed upon (yikes) or if your home is seized under eminent domain (double yikes). Don’t even think about selling to a family member, either.

And again, this is down payment insurance—the policy doesn’t cover any upgrades you make, or costs related to the purchase or sale of the home.

The biggest catch: Home values are measured by a federal housing index for each state instead of how much the price for an individual residence declined. Those who buy the insurance will only receive a check for whatever is less: their down payment, their lost equity, or the drop in the index.




Here’s the problem: Take the example above, where you lose $20,000 (6.7%) on the home sale. If your state’s index doesn’t show a loss, then you won’t get a cent. Or in another scenario, say you lose that same $20,000 on the sale, but the state index is only down 3%. According to the state calculation, your home has lost only $9,000 in value, and that’s the amount that you’d get back.

“There’s just a lot of red flags here for me,” says Bob Hunter, director of insurance at the Consumer Federation of America, a Washington, DC–based, national coalition of about 350 pro-consumer groups. He is familiar with +Plus, although he has not specifically looked at a policy.

“I warn people not to buy new products, because they’re usually higher-priced,” says Hunter, a former Texas insurance commissioner. That’s because insurers don’t know on new products how much they’ll wind up reimbursing customers. And “they typically put in a lot of exclusions and other limitations to hold down their possible payouts.”

Hunter also worries that the five-year period in which homeowners can submit claims is too limited.

Protecting one’s down payment may indeed appeal to those living in turbulent real estate markets that got walloped when the housing bubble burst, says Michael Barry, a spokesman at the Insurance Information Institute, an industry-funded educational organization in New York.

Here’s the problem: Take the example above, where you lose $20,000 (6.7%) on the home sale. If your state’s index doesn’t show a loss, then you won’t get a cent. Or in another scenario, say you lose that same $20,000 on the sale, but the state index is only down 3%. According to the state calculation, your home has lost only $9,000 in value, and that’s the amount that you’d get back.

“There’s just a lot of red flags here for me,” says Bob Hunter, director of insurance at the Consumer Federation of America, a Washington, DC–based, national coalition of about 350 pro-consumer groups. He is familiar with +Plus, although he has not specifically looked at a policy.

“I warn people not to buy new products, because they’re usually higher-priced,” says Hunter, a former Texas insurance commissioner. That’s because insurers don’t know on new products how much they’ll wind up reimbursing customers. And “they typically put in a lot of exclusions and other limitations to hold down their possible payouts.”

Hunter also worries that the five-year period in which homeowners can submit claims is too limited.

Protecting one’s down payment may indeed appeal to those living in turbulent real estate markets that got walloped when the housing bubble burst, says Michael Barry, a spokesman at the Insurance Information Institute, an industry-funded educational organization in New York.

“[But] I’d be reluctant to cut another check at closing,” he says. “This is just one more additional expense.”

Despite the caveats, the concept of down payment insurance is alluring to real estate agents such as Deb Counts-Tabor.

Bidding wars have become common in the white-hot Portland, OR, market where she works, and desperate buyers, rattled by the limited number of homes for sale, will often pay well over the list price.

“People are going $10,000, $20,000, $30,000 over the asking price and waiving their appraisals because they want the house,” says Counts-Tabor, of Oregon Realty. But “if the market adjusts before they can pay that down, they end up underwater.”

It might make sense for buyers who worry they may have overpaid, she says.

Denver real estate agent Kristal Kraft would agree. Two of the properties she recently represented sold for nearly $30,000 more than their list prices as Denver’s market becomes increasingly competitive.

“It would give buyers peace of mind,” says Kraft, of the Berkshire Group. “They can be assured they can get some of their money back.”

Source: Realtor.com, Clare Trapasso
http://www.realtor.com/news/trends/down-payment-insurance/?iid=rdc_news_hp_carousel_theLatest