HomeReady Mortgage Program

Looking to own a home but not sure you can afford or even qualify for a mortgage?  You might be surprised by the terms of the HomeReady mortgage program, which is specifically designed for creditworthy low- to moderate-income borrowers, offering expanded eligibility for financing.  Note that a credit score of at least 620 is recommended to qualify and further benefits are accessible with a credit score of at least 680.  If that sounds like you, here are several ways in which you can benefit from a HomeReady Mortgage.

Low Down Payment

You’re able to finance up to 95-97% loan-to-value (LTV) for the purchase of a single-unit principal residence, which means that if you’re having trouble coming up with a sizable down payment, you’ll be able to get a mortgage with as little as 3 – 5% of the purchase price of a home, plus fees.  Additionally, gifts, grants, Community Seconds program funds, and cash-on-hand are all permitted as sources of funds for the down payment and closing costs.  And this is not limited to first-time buyers, so you’re still eligible if you’ve purchased a home in the past.

Flexibility

HomeReady Mortgages support HomeStyle Energy, manufactured housing and HomeStyle Renovation type homes.  They also support expanded access to credit responsibility through underwriting with rental unit and boarder income and non-occupant borrowers such as a parent.  There is also no minimum contribution required from the borrower’s own funds.

Unlike standard requirements for other mortgages, HomeReady offers lower mortgage insurance coverage requirements for loans with LTVs greater than 90%.  Insurance is cancellable after the loan balance drops below 80% of the LTV, i.e., after home equity reaches 20% of the purchase value of the home.  Both of these features can lower your monthly payment when qualifications are met.  For those with a credit score greater than or equal to 680, there are risk-based pricing waivers which offer yet another route to better pricing.   

Qualifying Income

HomeReady can be used to purchase or refinance any single-family home, given a few requirements.  First, the borrower’s income must meet the eligibility limit.  Properties in low-income neighborhoods have no income limit while all other properties require that the borrower make 100% of the area’s median income.  Keep in mind, as mentioned previously, that income requirements can include flexible underwriting options such as a parent or other family member.

Education Requirement

Additionally, there is an education requirement which consists of an online Framework course which must be completed by at least one borrower on the HomeReady purchase transaction.  This isn’t just a requirement, however, it’s also a benefit to the borrower.  It provides an understanding of the full spectrum of home ownership so that borrowers may make a confident, informed purchase with peace of mind knowing what’s ahead in terms of responsibilities and costs.  Additionally, working one-on-one with an available counselor can help a borrower pick the right timing, the right house, and the best mortgage for his or her financial situation.  If a Community Seconds down payment is involved, borrowers may instead complete their education course or required counseling so long as it is provided by a HUD-approved agency and is completed prior to closing. See this link for more details. 

Those with a disability, lack of internet access, or other issues may utilize other available delivery methods of the education requirement by calling Framework’s toll-free customer service line (855-659-2267).  This education requirement benefits the borrower by helping ensure sustainable homeownership and a stable financial future with informed decision-making and responsible risk awareness.

Ready to take your first steps toward home ownership or looking to refinance your existing home mortgage?  Contact us so that we can help you put your dream of home ownership within reach.


Are You Ready? 5 Tips to Prepare for Mortgage Approval

Buying your first home is an adventure that can be as scary as it is exciting. In the end, it’s a destination well worth the journey. Buying a house, especially compared to renting, isn’t just a permanent home for your family. It’s a long-term investment in one of the most stable economic markets in the world.

Congratulations on starting this adventure.

Here are a few things you can do to get ready for mortgage approval: 

Estimate How Much House You Can Afford

There are multiple online calculators available to help you pinpoint exactly how much you can afford to pay per month in mortgage, but as a general rule, aim for no more than 2.5 times your gross annual income. If you make $58,000 a year (the average household income in America), a $145,000 home should feel very comfortable, financially speaking. How much that comes out to per month in mortgage payments, however, depends on a few different factors.

Know Your Credit Score

In general terms, the higher your credit score, the better the interest rate you’ll get, but not always. The housing market, the Fed, and the overall strength (or weakness) of the economy also contribute to interest rates. Just know that it’s not entirely personal, and unless you can make a bigger down payment, your interest rate isn’t going to be easily malleable.

For a $145,000 home with a 20% down payment, your monthly payment will be about $550 per month in principle and interest at a 4% interest rate. As a reference point, your payment increases to $620 a month at 5% interest. Note that this doesn’t include tax.

Maximize Your Down Payment

A higher down payment results in a lower mortgage payment. Period. For a $145,000 home, a 3% down payment will cost you about $755 a month in principle and interest, including PMI (see below). A $30,000 down payment cuts your total loan so much that you can expect to pay $150 less, about $620 per month. When you get into the $200,00 or $300,000 house range, the difference between a 5% down payment and a 20% down payment is the difference between a Ford Focus and a Cadillac CT6. 

Knowing your comfort level is important. It’s easy to forget that a mortgage is just a loan. You’re borrowing money. Being realistic about your employment status, future earnings, and borrowing limits is key to smart home ownership.

Saving for as large a down payment as possible is not just a matter of lowering your monthly payment. It can also be the difference between buying a house with 3% equity compared to 30% equity. Just because you can afford a $190,000 home with $10,000 down doesn’t mean that’s the right financial decision, especially when a $150,000 house with a $30,000 down payment may be the safer choice.

Weigh the Pros & Cons of PMI

If you don’t put down at least 20% of the home value, expect to pay PMI, or “Private Mortgage Insurance.” This is literally an insurance policy for lenders loaning money to someone with limited savings. Those who cannot put down at least 20% are seen as higher risk, so PMI is used to protect lenders against the threat of loan default.

PMI ranges from 0.3% to 1.2% of the total amount of the loan. Assuming a minimum 3% down payment, expect to pay an extra $420 per year ($35 per month) to $1,600 ($140) in PMI on a $145,000 house.

The downside of PMI is that it’s non-refundable. If you can avoid paying it–if you can afford a 20% down payment–do. The extra hundred dollars a month can be invested in far better ways, offering far better rates of return.

The benefit of PMI is that many people wouldn’t be able to get into a house without it. If a 1% tax makes the difference between renting–literally paying for your landlord’s mortgage–and paying down your own mortgage, there’s no reason to hesitate. In the two to five years it takes to pay down your mortgage to an 80% loan-to-value ratio (the equivalent of 20% in equity), the 4% average return on the housing market has no comparison to paying rent for five years with no assets and no equity. 

Don’t Forget Taxes

Taxes and fees vary by state, city, and ZIP code. Ask your realtor for a realistic analysis of projected taxes for the area you’re looking to buy.

How much you can afford to pay in mortgage per month depends on your annual income, down payment, credit score, and the cost of the house you want to buy. Use Zillow’s mortgage calculator for a general idea of what size house you can comfortably afford, or contact us today to see how we can help get you into a house that’s right for your family, your future, and your budget.


3 Ways to Prepare for Mortgage Approval

You have been wanting to move into your own home for quite some time, but are not sure where to begin. In order to work towards mortgage approval, here are three things you need to do to really invest in the future you want. Remember, if you are not able to move into your dream home right away, you can always move later. The point is to get started!

Know What You Can Afford

Do you have a household budget? If not, please sit down with pen and paper or spreadsheet and create one. You will amazed how much disposable income you actually have at the end of the month. Look at everything, including your Starbucks habit. Work hard to account for every penny. It seems like a daunting task, but it really isn’t. It’s the first step in your mortgage approval process. Here is a short list to get you started:

  • Begin with your paycheck. What is your monthly take home pay? If you have a partner, you need to include their information, too.
  • Deduct all fixed, monthly payment amounts, such as: rent, car payments, student loans, charge cards, utilities, child support, and anything else you may have.
  • Deduct all non-fixed monthly expenses. This part is more difficult. How much do you spend on gas, clothes, and dining out (even if you charge it), coffee, etc. The list may be long, but this is also something you have control of and can curtail if necessary. This is your disposable income. If it is higher than you thought, congratulations! Although, you may still want to tweak it, and you will see why in a minute. If it is lower than you thought, or perhaps you had no idea what it might be, you really need to take some drastic changes. These are not tweaks, these changes may include pleasure points you will have to limit yourself to. Did you ever think about how much you give Starbucks in a week? The cost of a White Chocolate Mocha is $4.75 without taxes. If you have one each day on your way to work, you are spending $23.75 weekly, $95.00 monthly. Let it be a weekly treat to yourself and you are still saving $76.00 a month. A 48 ounce serving container of Folgers, bought at Walmart averages $9.98, and that’s without a coupon, see the difference? Put your money back into your pocket.

Review Your Credit Report

Have you actually looked at your credit report? Do you know your credit score? This is taken very seriously by mortgage providers and significantly affects your chances for mortgage approval. Why, you ask? Because this determines how much money lenders feel comfortable lending you, and how high your interest rates will be. The lower the number the higher the rate, and of course the opposite is true: higher score, lower interest rate. Know your numbers, and if they are low, take steps to improve them. One sure way to improve them is to pay down or off your credit card debt. If you have any judgments, find out what they are for, and how you can get them removed; these bring down your score, fast. It may take a while to get this resolved, but in the meantime, you are taking other positive steps in procuring your home.

Save For a Down Payment

Now we go back to budget. You must make a down payment or in many instances, at least be able to pay closing costs. The positive steps you take in amending your budget will help you get to house shopping sooner than you realize. Earmark that money for a single purpose. Sometimes it is easier if you open a separate designated bank account, and immediately transfer it each pay period. Do not touch it; watch it grow. Were you able to find $100.00 a month? That’s $1200.00 a year. Good job! You are now much closer to buying your home.

Pacific Mortgage Group is here to help you get moved in to your home ASAP! Licensed in six states so far, and working with over 100 lenders, we are more than happy to assist in getting financing for your home loan. Contact us to see if you qualify for $0 closing costs. Let’s make you a homeowner.


Current & Future Interest Rates Trends October 18′

Now that the traditional spring/summer buying and selling season is over, let’s take a look at how interest rates have been trending—and what may be in store in the coming months.

Generally, the interest rates on a 30-year fixed-rate mortgage and on a 15-year fixed-rate mortgage have been stable throughout the spring and summer real estate season. In the chart below from Freddie Mac’s Primary Mortgage Market Survey, the interest rates have fluctuated only 0.12 percentage points on the 30-year fixed-rate and only 0.14 percentage points on the 15-year fixed-rate from April through August.

This stability in the rates is something we’ve seen the last two years during the same April-August timeframe, with a variance of 0.17 percentage points in the 30-year fixed and 0.14 percentage points in the 15-year fixed in 2017 and 0.17 in the 30-year fixed and 0.12 in the 15-year fixed in 2016.

 

Month 30-Year Fixed 15-Year Fixed
April 4.47% 3.93%
May 4.59% 4.07%
June 4.57% 4.04%
July 4.53% 4.01%
August 4.55% 4.02%

 

The weekly figures for the last six weeks also show fairly steady rates. Since August 16, the 30-year fixed has varied only 0.14 percentage points and the 15-year fixed has varied only 0.14 percentage points.

 

Weekly 30-Year Fixed 15-Year Fixed
August 16 4.53% 4.01%
August 23 4.51% 3.98%
August 30 4.52% 3.97%
September 6 4.54% 3.99%
September 13 4.60% 4.06%
September 20 4.65% 4.11%

 

 

The steady interest rates are a result of a variety of factors that have been applying pressure—both upwards and downwards—on the rates. The balanced economy, strong corporate earnings and worries over rising inflation have applied upward pressure while slowing home sales, concerns about the global economy, and other international “drama”—such as the recent currency problem in Turkey—have applied downward pressure on the rates.

Going forward, two opposing factors that may influence interest rates in the near future are the Federal Reserve’s pronouncement that we’ll see one or two more hikes to the key short-term interest rate this year and the possible economic ramifications of the current tension surrounding tariffs and trade.

As always, to get the best information on interest rate trends, talk to your mortgage professional. ∆

 

© Left Field Media


Do You Qualify for a Jumbo Loan?

In most areas, conventional loans are limited to just over $400.000. Of course in certain, more expensive, residential areas, those amounts may be higher, sometimes even up to around $700,000. But what if the home of your dreams is currently selling for well over what a conventional loan in your area will offer?

The answer is that you need a jumbo loan. Of course the next question is do you qualify for one? According to bankrate.com, there are three main qualification areas that will answer that question.

Qualification #1: Can you afford at least 20% down payment on the home? Just a few years ago this requirement was only 5% in some cases, but things have changed. A credit squeeze that started in late 2007 frightened some lenders away from jumbo loans entirely. Now they are back, but they are looking for clients that can put a substantial amount down to lessen their risk.

Qualification #2: You must be able to fully document your income. They want cold, hard proof that your annual income is exactly what you say it is.

Qualification #3: If you get the loan, will the monthly mortgage payments be less than 38% of your monthly income before taxes? If yes, then you should be in good standing. Of course the smaller percentage of your income that will be needed for the mortgage the better.

If you think about it, all of these qualifications make sense. No lender wants to lend money that they don’t fully expect to get back–with interest. Meeting these three requirements goes a long way in helping a lender feel comfortable with agreeing to your jumbo loan.

One note, though, is that you shouldn’t expect to get a fixed rate loan for these higher-end amounts. Adjustable-rate loans are common for this market. The good news is that the interest rate can be relatively low for these loans.

Need more information? Please contact us and we will answer any questions you may have about your loan options.


Three Reasons Not to Ignore The Holiday Season

There’s no doubt that mortgage refinancing is very stressful. After all, who has fun crunching numbers and dealing with lenders? However, the upcoming season is something to look forward to. It’s not something to ignore, and will give you a break from the hassles of your finances. Here are a few reasons why you shouldn’t ignore the Holiday season.

#1. Your Family is Essential

Though mortgages and finances are very important, family is just as essential. Not only do the Holidays come around only once a year, but it’s also a time where many people put aside their usual tasks, to spend time with those they care about. Of course that’s not to say the Holidays are the only time we see our family members, but between debts, jobs, and loans, the interactions we have with our loved ones are sometimes very limited.

#2. It Will Be Over Before You Know It

The Holidays are a time to relax, enjoy yourself, and spend time with the family. However, the bright lights and Christmas trees come and go as quickly as they’re put up. If you spend all your time and energy focusing on financial tasks (instead of focusing on your family and the true meaning of the season), you’ll realize what a missed opportunity you had. That’s not to say you should neglect what you need to do, but it’s the best moments in life that tend to pass us by in the blink of an eye. Make every moment during the season last.

#3. You Will Have A Fresh Start 

Once the Holidays are over and you’ve had your break, you’ll be rejuvenated and ready to accomplish your tasks. It’s not just for your direct benefit, but for our benefit as well. Generally speaking, if sufficient breaks aren’t taken, it may affect one’s determination to complete what’s required of them. After all, mortgage refinancing isn’t easy to deal with when experiencing a burnout.

After you’ve enjoyed the Holidays, contact us regarding home loans and mortgages. Thanks, and have a happy new year.


The benefits of using mortgage brokers!

You may be wondering if there are any benefits that are inherent in working with mortgage brokers, and we’re here to assure you that there are, indeed, benefits of working with brokers. Here, then, is the list of benefits you will receive when you work with a mortgage broker:

  • It will save you time and effort. You don’t have the time in the day to go searching for the best deal on your mortgage — and it definitely takes a long time to find the perfect deal. But that’s all the mortgage broker does, and will ever do: find the perfect deal on your mortgage. By hiring a mortgage broker to handle this important part of the home-buying process, you will be saving time and effort.
  • Mortgage brokers already have contacts and relationships in the banking industry that put them at a distinct advantage over non-professionals. These relationships will be suited to your needs — for instance, if you have poor credit, you will need one kind of mortgage broker; if this is your first time buying a home, you will need another kind of mortgage broker.
  • Finally, your mortgage broker will be able to streamline your application materials into one package. If you were to fill out a new application for each mortgage you were looking to apply for, you would waste time and energy and money in the process.

We are a committed team, here to help you find the right mortgage rate for your needs. We understand that every borrower is different, and we offer a variety of services to meet your individual requirements. For more information about us and our services, contact us today to see what we can do for you.

What does a mortgage broker do?

The Benefits of an Adjustable Rate Mortgage

Over the past several years, many people have developed some strong opinions against an adjustable rate mortgage. However, there are actually several reasons that this type of mortgage is still relevant in today’s society. Is this the right decision for you? Learn more about this mortgage below in order to find out.

Low Interest Rates

One of the best things about this type of loan is that it allows you to save a great deal of money when it comes to the interest that you begin paying on your home. Typically, your ARM rate will be significantly lower than a fixed rate, which allows you to save money. To help increase the value, consider adding the savings to the principle of your home in order to pay it off faster.

Short-term Loans

Adjustable rate mortgages are especially attractive to those who do not plan to stay in their home for an extended period of time. This could be those who are only at a location temporarily or who are simply looking to upgrade their home not long after purchasing it. Regardless, this type of loan will help them to save money in the short run so that they can move on quickly.

Most people believe that ARM rates will only increase as time progresses. However, the opposite is actually true as well. When the rates are down, your loan payment will also decrease. This allows you to pay more towards the principle of your home and less to the interest.

If you are considering an adjustable rate mortgage, be sure to contact us today.