by Junyi
18. April 2012 07:16
With so many home loan options out there, it can be a tough decision to choose the right one! This fun and easy quiz will give you a better idea of which home loan is the right choice for you!
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by Susan
15. February 2012 11:45
FHA home loans are a practical choice for many home owners. There are many reasons which are explained in our previous blog, so please feel free to check that out. If you’re curious as to who took advantage of this government endorsed program last year, then look no further!
This infographic will give you a comprehensive view of FHA loans that were endorsed in HUD’s Fiscal Year 2011. It includes a breakdown of how many FHA Loans were used to refinance for a better terms, pull cash out and purchase a new home. In addition, it profiles the average borrowers’ LTV and credit score. Hope you find this information educational and helpful on your path to homeownership!
Designer Junyi Wu
by Susan
2. February 2012 08:55
It is no secret that mortgage rates have been dropping the last few years. As this chart clearly exemplifies, rates are at new lows, and today’s rates are even lower. So what does the future hold for mortgage rates? Will they drop lower or should borrowers act now?
Mortgage News Daily says, “Things have never been as good as they are right now in terms of MBS and the rates that lenders are offering. We certainly don't rule out the possibility that things could get even better, but we'd sure hate to have missed out on this opportunity if they don't.” There is always a chance for rates to drop even lower, but taking advantage of historical lows right now might be the way to go.
And just this week, according to Yahoo Finance, the average rate on the 30 year fixed mortgage fell to a new low, resulting in the cheapest rates in history.
Whether you are looking for an FHA loan or a Conventional loan you are going to get a great rate if you act soon. Not sure what loan is best for you? Check out our previous blog about FHA vs. Conventional loans.
Designed by Junyi Wu
by Susan
26. January 2012 08:50
What loan is right for me? My neighbor refinanced with an FHA loan, should I get that type of loan too? If you are first time home buyer or looking to refinance, you are probably asking yourself these kinds of questions. Different situations require different types of loans. In this blog we will take a look at FHA and Conventional loans. Using examples, this blog will give you a better understanding of these two loans, their benefits and their drawbacks.
Joe the gnome collector: FHA is the Way
Joe has a low credit score due to his obsession with garden gnomes. He maxed out many credit cards buying garden gnomes, and traveling to see different gnomes throughout the world. Joe now needs a house (and garden) to put all his gnomes. His parents offered to help him with the down payment, but he is still not sure how he will be approved for a loan. An FHA loan may be the perfect for Joe. Let’s check out why.
An FHA loan offers easier credit qualifying guidelines than a Conventional Loan. This is due to the fact that the Federal Housing Administration(FHA) insures this type of loan. The FHA does not lend the money, they guarantee the loan. Therefore the lender doesn’t take a financial risk by extending credit to a borrower-like Joe. Due to the fact that the government is backing the loan, a lender is able to offer a competitive interest rate. A low interest rate can really help save the borrower a lot of money. Maybe Joe can buy some more gnomes with the money he saves!
The requirements necessary for obtaining an FHA loan are relatively simple. Joe does not need to be worried about having the perfect credit score to get an FHA loan. Currently, FHA guidelines state you only need a 500 credit score to qualify for an FHA loan, where a conventional loan will require at least 640. However, this number may vary from lender to lender.
Another advantage to an FHA loan is that only a 3.5% down payment is required for approval. This number is lot smaller than other loan types which will ask for anywhere from 5-20% of the loan. In addition, the down payment does not necessarily have to come from the borrower’s pocket. The money is allowed to come from a family member, employer or charitable organization as a gift. In Joe’s case, his parents can “gift” Joe the down payment.
A big downside to the FHA loan is the Mortgage Insurance Premium. It is required, regardless of how much money you put down, for the first 5 years of the loan. It is collected at loan closing in addition to an annual premium collected in monthly installments. The borrower ends up paying about 1% of the loan amount at closing, and then .25% annually for the duration of the loan term.
Kate: Conventional is the new Pink
Kate has a very high credit score. She wants to buy a home and has saved enough to make a down payment of 20%. Kate has decided to settle in Beverly Hills, her dream home is a bit pricey so she will need a large loan. A Conventional loan is likely the right choice for Kate.
There are two types of Conventional loans: conforming and non-conforming. Conforming loans have terms and conditions that comply with guidelines dictated by Fannie Mae and Freddie Mac. These two companies purchase mortgage loans from lenders then package them into securities and sell them to investors. Fannie Mae and Freddie Mac guidelines establish the maximum loan amount, borrower income, credit standards and the down payment necessary to get a home loan.
Loans that are above the maximum loan amount set forth by Fannie Mae and Freddie Mac guidelines are called non-conforming loans, and are also known as Jumbo loans. These loans are distributed on a smaller scale and therefore have higher interest rates than regular conforming loans.
Conventional loans give the borrower more flexibility when it comes to loan amounts while an FHA loan caps out at $271,000 in most areas. Since Kate’s dream home is in Beverly Hills, her loan amount will most likely be above the FHA loan cap, so a Conventional loan is her only choice.
Conventional loans often do not come with the amount of provisions that FHA loans do. Conventional loans do not require mortgage insurance if the loan to value is less than 80%-in other words, if the borrower can make a down payment of 20%. Because Kate has saved enough to put 20% down, a Conventional loan will be a better option because she will not have to pay for mortgage insurance. In addition, if the property you are buying is more of a fixer-upper, the Conventional loan is the only option. The appraisal requirements to get an FHA loan are extremely severe, making it nearly impossible to buy a fixer-upper with an FHA loan. Lastly, if you have a credit score over 720, a Conventional loan will be more beneficial to you. You will end up receiving a better rate on a Conventional than an FHA loan. Kate wants to get the best interest rate possible. She will likely get a better rate with a Conventional loan because her credit score is above 720.
In closing, an FHA loan is easier to obtain, but no matter what you have to pay mortgage insurance. A Conventional loan requires a higher credit score and more money down, but does not have as many provisions. Hopefully some of the questions in your head have been answered!
by Susan
14. December 2011 13:54
“More than 2.5 million people were turned down for mortgages in 2010, according to the Federal Financial Institutions Examination Council. That’s about 23% of all those who are seeking a loan to buy a house,”-Daily Finance. It’s no secret that borrowing standards have become tighter in recent years. Lenders are taking a more detailed look at everything about a prospective borrower to decide if they should be approved for a home loan. As a potential homebuyer you should be prepared for this. In this blog we will discuss some ways in which you can increase your chance of approval for a mortgage.
Do your research.
Before you start the process of applying for mortgages, make sure to do your homework on the different loans out there. Read up on the loans that you think may work for you. Let the agent know what you’re interested in and why-it will help the agent help you by knowing what you really want and are looking to do. Doing this will help make the process smoother for everyone and the lender will appreciate working with you.
Find out where your credit score stands.
One of the first things you should focus your attention on is improving your credit score. Get a copy of your credit score and check it thoroughly for any mistakes. If you happen to find any discrepancies report those immediately. If you have a low credit score, you are less likely to receive approval for a mortgage. The higher your credit score, the better interest rate you will be able to receive. For more information check out our previous post to find out what else you can to do increase this pivotal number!
Save! Save! Save!
The more that you save for your first house the better off you will be. If you can make a bigger down payment, you are more likely to get approved for a mortgage. In addition, putting down a bigger percentage can help you get a better interest rate.
Pay off any debt.
When you apply for a mortgage, lenders take a look at your debt to income ratio. The more monthly financial commitments you have the less the lenders are willing to let you borrow. It is best to pay off any outstanding debt you may have before trying to apply for a mortgage. Again this will prove to the lenders that you are financially responsible.
Present yourself in the best light.
When you’re communicating with a loan officer, try to demonstrate that you are a competent, cooperative, polite and trustworthy person. One way to do this is to share your online profile with them (whether it be Facebook, LinkedIn, etc). This will help them put a name to a face and a loan to a home and family. For more information on working with your loan officer, please see our previous post, Your Loan Officer is Interviewing You: Tips to Impress!