Archive for Mortgage Tips and Advice
You Don’t Need 20% Down to Buy a Home!
Posted by: | CommentsFannie Mae did a recent survey and found that 70% of respondents said now was an awesome time to purchase a home…OK, so why aren’t more people actually buying homes? Well, it COULD be that people still don’t think they can afford the down payment. A colleague of mine in a did his own informal survey of folks he spoke with for 3 straight months, and found that 80% of those surveyed still believe you’ve got to have 20% to buy a home! WHAT??!!
Where does this mis-information come from, the media? Sure, guidelines have tightened up compared to the 2003-2007 “if-you-can-fog-up-a-mirror-then-you-can-buy-a-home” days, but there has never been a 20% down payment requirement for any conventional or government mortgage loan program for the purchase of a primary residence. Investment property, yes, but not on a primary home.
Let’s do a quick run-down of the loan programs out there:
Conventional (Fannie Mae/Freddie Mac): you can still put as little as 5% down with most conventional mortgage lenders, and there are some lenders who can still offer a 3% down conventional mortgage. Now, credit will need to be really strong, and you probably will need to have some “reserves” in the bank to qualify for the 3% down, but hey, it’s there, and many people don’t know it, and that includes a lot of loan officers. Putting less than 20% down will trigger PMI (private mortgage insurance) that is built into the mortgage payment, but it’s not permanent, and could potentially fall off the payment if you keep the home long enough. The PMI on conventional loans is now lower than the mortgage insurance on FHA loans (see below). In my opinion, if you credit scores are 700+, conventional is the way to go. 5% down on a $150k sales price = $7500
FHA: you only need 3.5% down for this government program…that only $5,250 on a $150k sales price. FHA has been through some changes the last 1.5 years to where the monthly mortgage insurance (MIP, Mortgage Insurance Premium) has shot up 130% from where it was, but the down payment requirement is still low. And a great thing about this loan is that you can get gift funds from family members, so technically you don’t need any of your own money for the down payment! This program works well for first-time buyers with no-so-perfect credit and folks who don’t have much to put down. You don’t have to be a first-time buyer either. If income isn’t sufficient for the primary borrower to qualify them for a home purchase, they can add a co-borrower who doesn’t have to live in the home, but they need to be close family members.
VA: Veterans Administration loans are one of 2 true 100% loan programs out there, so no down payement needed. You must be active-duty, reserves, or retired to qualify, but it’s a great program and the rates are similar to FHA and Conventional, with NO monthly mortgage insurance. Don’t have to have perfect credit here either.
USDA Rural Development: USDA loans are 100% 30 year fixed mortgages, no again no down payment required. The property must be an eligible property for the program (must be located in a “rural” area on the USDA map) and you must meet income eligibility requirements for the county in which the home sits (you can make too much money to qualify!). You don’t need perfect credit to qualify, and the rates are similar to regular conventional, FHA, and VA rates.
THDA Loans: THDA stands for the TN Housing Development Agency, and these loans are designed to provide assistance to first time homebuyers, in the form of a grant. The most grant money given is 4% of the loan amount, and the interest rates are a little higher than FHA rates because of the grant. These loans are primarily paired with an FHA loan, and the 3.5% down payment (required by FHA) is covered by the grant, and then the borrower can possibly get the seller to cover some or all the settlement charges. There are income requirements with this one too (you can make too much money and not qualify for it), and if you have the mortgage less than 9 years, you may be subject to an IRS tax, but it’s still a wonderful program for TN residents who want to purchase their first home and who may not have stellar credit or money to put down. Minimum credit score is 620 for this program. More information about this program here.
So as you can see, there a number of ways to purchase a home with 5% down or less, and with home prices being soft, it’s a magnificent time to take advantage of buying real estate. So in 5 years, after mortgage rates and home prices have increased, you can’t kick yourself say “but I thought you had to have 20% down to buy a home!”
Give me a call or shoot me an email if you have any more questions about loan programs, etc. My number is 615 261 1368 and my email is brian@tnhomelender.com.
What Happens When the Appraisal Is Lower than the Contract Sales Price?
Posted by: | CommentsI don’t normally do this, but I’m posting some very relevant information from a local Nashville TN realtor about what happens when the appraisal value comes in lower than the sales price: http://nashvillehomes.org/the-home-didnt-appraise-for-the-sales-price-now-what-tn-real-estate/
It’s a quick and easy to read, and definitely worth your time!
Mortgage Nashville- What to Do if You Don’t Have Any Credit?
Posted by: | CommentsMortgage Nashville- What to Do if You Don’t Have Any Credit?
Having credit is pretty much a necessity these days if you need to borrow money, especially getting a mortgage. But if you don’t have any credit yet, that’s okay. We can help you get started.
Watch the below video and you’ll learn how easy it can be to establish your credit profile and qualify for a mortgage loan or any other type of credit. If you implement these quick tips that are in this video, in less than 6 months you can be in a MUCH better position to get financing if you need it.
Mortgage Nashville Video Link: http://budurl.com/WhatToDoIfNoCredit
Mortgage Nashville- The Top 10 Credit Myths
Posted by: | CommentsMortgage Nashville- The Top 10 Credit Myths
As the economy continues to struggle, far too many consumers get taken avantage of by those claiming to be financial gurus and credit repair specialists. Because of this, I want to arm you with information that will help you protect your finances and your family from such “predators”. This video will do just that- it covers the top 10 credit myths, so you can avoid credit advice which can potentially damage your credit. Enjoy.
Mortgage Nashville Video Link: http://budurl.com/TopTenCreditMyths
Mortgage Nashville- Managing Your Debt Strategically
Posted by: | CommentsMortgage Nashville- Managing Your Debt Strategically
It’s pretty obvious that the way you manage your debt has a big impact on your credit socres, but did you know that there are some very common and preventable mistakes that poeple make that can cost their credit scores 100 points?
I want to help you create an overall debt strategy that will lead to your long term financial freedom. This video tip contains one of the best-kept secrets for improving your credit score. Discover what the credit-card-balance-to-credit-limit ratio is and what you should do if you exceed the recommended limits.
Video Link: http://budurl.com/ManageDebtStrategy
Mortgage Nashville- Getting Your Credit Mix in Check
Posted by: | CommentsMortgage Nashville- Getting Your Credit Mix in Check
This video provides a great tip which is sure to give you the know-how to develop a high-quality credit profile. There is a misconception when it comes to the credit mix need to generate high credit scores, and since this mix makes up a percentage of your actual credit score, this video tip is particularly valuable. Watch and learn which credit account types are the ideal ones to have and how they can be used as a tool for your financial freedom.
Mortgage Nashville Video Link: http://budurl.com/GetCreditMixinCheck
Mortgage Nashville- Credit Disputing Do’s and Dont’s
Posted by: | CommentsMortgage Nashville- Credit Disputing Do’s and Dont’s
Have you ever looked through your credit report only to find a credit card with a huge balance, and it didn’t belong to you? How about a car loan with a late payment history, and you’ve never missed a payment? Disputing erroneous items on your credit report is a MUST, especially when the information isn’t yours or is just reported incorrectly.
Were you aware that if you don’t follow proper procedures when disputing, your efforts can actually have the opposite effect, and your credit scores could actually drop? My goal is to make sure that your disputing efforts produce the desired results, which is why I wanted to share this extremely valuable tip with you…Disputing Do’s and Dont’s. Just invest 6 minutes with this video, and you will not only save yourself hours of frustration and unnecessary work, but you’ll learn the 10 tips to help you avoid the common mistakes many consumers make in the credit disputing process.
Video Link: http://budurl.com/DisputeDosAndDonts
Mortgage Nashville- Dispute, Negotiate or Wait
Posted by: | CommentsMortgage Nashville- Dispute, Negotiate or Wait
Cleaning up your credit is no easy task, but it is crucial for your financial health. Dispute, negotiate or wait: these are the action steps you can take when cleaning up your credit profile. While it might seem like an impossible task especially when credit repair is not your full-time job, let me help you simplify things with a valuable video tip. Watch to learn where to begin, whether you decide to open a dispute, negotiate or wait.
Hear some basics on the commitment needed to start the dispute process, some educational resources to help you with the ins and outs of negotiating your credit, and why waiting or d0ing nothing could seriously cost you in the long run. This is the 4th video in the Credit series…
Mortgage Nashville Video Link: http://budurl.com/DisputeNegotiateWait
Mortgage Nashville- Creating Your Credit “Take-Action Plan”
Posted by: | CommentsMortgage Nashville- Creating Your Credit “Take-Action Plan”
This video is 3rd in the series…Hopefully by now, you have a copy of your credit report and you are ready to take action. I remember seeing my first credit report; I really had no clue where to start! Since I know just how frustrating the layout of a report can be, I wanted to share with you some tips on how the 3 credit bureaus (Equifax, Experian, and TransUnion) show your information on their report.
At first, the layout of the credit report might seem like “Greek”, but by the end of the video, you should be able to go through each trade account and locate any items that might be pulling your scores down. In fewer than 10 minutes, you’ll learn how to create your very own action plan, so that you can be headed towards a better credit situation…
Video Link: http://budurl.com/CreditActionPlan
Mortgage Nashville- Getting Complete Picture of Your Credit Situation
Posted by: | CommentsMortgage Nashville- Getting Complete Picture of Your Credit Situation
We’ve all seen the many ads, commercials and mailers that say “Call for your free credit report today.” But how can we know which ones are legit? As a consumer myself, I get overwhelmed with all the ads, which is why I want to give you a quick tip on the 3 reputable ways to get a copy of your own credit report.
Watch the below video to find out why pulling your own credit is ESSENTIAL and what key items to be aware of when ordering your report. Never worry again about what might be on your report by getting a complete picture of your credit situation. It’s up to YOU to take action so you can have financial freedom!
Video Link: http://budurl.com/GetCompleteCreditPic
Mortgage Nashville- Your Credit and Setting Your Score Goal
Posted by: | CommentsMortgage Nashville- Your Credit and Setting Your Score Goal
This video is first in a series which covers on of the most important aspects of getting a mortgage loan- your credit. Our economic situation in the U.S. has created a tough credit environment, and credit has become of utmost importance for all consumers. It’s why I’m so committed to helping clients take control of their financial future, so that they can not only qualify for the best interest rate on Nashville home loans, but that they are in a great position when financing a vehicle, shopping for insurance, applying for a new job, etc.
So you can take control of your financial health and future, I’m providing this quick video which will help you 1) set a realistic credit score goal, 2) understand how long it might take to reach that score goal, 3) know what a good score looks like, and 4) learn how having a good score can ultimately save you thoussands of dollars. Enjoy….
Video link: http://budurl.com/SettingYourScoreGoal
THDA Loans- The Great Advantage Program
Posted by: | CommentsTHDA Loans- Great Advantage Program
Of the 3 different THDA loans (TN Housing Development Agency) available, the Great Advantage program falls right in the middle, in terms of the financial assistance offered and interest rate. This program is ideal for the first time buyer who might already have some or most of their down payment and closing costs in the bank, but who still need a little help. THDA loans are typically based on an FHA loan, so a borrower would need a 3.5% down payment. Whereas the Great Start (GS) program offers a 4% grant to qualified buyers for down payement or closing costs, the Great Advantage (GA) program offers a 2% grant. While the assistance is less, the interest rate is over .25% lower than than the Great Start Program. Currently the GA program rate is only 5.05% which is right in line with market FHA rates. This is particularly impressive when you consider you’d get a $3000 grant for a $150,000 loan amount.
Like the GS program, qualified borrowers would need to complete an 8 hour homebuyer education class prior to closing. For more information about THDA Loans, see my other articles on the subject.
How to Remove PMI From Your Nashville Mortgage Loan
Posted by: | CommentsHow to Remove PMI From Your Nashville Mortgage Loan
The word PMI conjures up a lot of emotion, usually not the good kind. PMI, or Private Mortgage Insurance, is required on conventional loans when the borrower doesn’t have at least a 20% down payment. (FHA loans have it too, but the most common FHA loan, the 30 year fixed, has it regardless of down payment). Since it could add as much as $300/mo to the payment, my Nashville mortgage clients are very interested in knowing just how to get rid of this insurance as soon as possible.
But most people assume that as soon as they have a 20% equity position in their home, they can simply have it removed from the loan. They assume this because this is what they have been told by many Nashville mortgage originators, realtors, and even title agents, all who are generally very well informed. It’s compounded by the fact that the mortgage servicers themselves have not done a good job of notifying their customers when it can be removed.
So what’s the real scoop? It really depends on whether you’re basing the percentages on the increase in the value of your property (vs. the balance), whether it’s based strictly on your pay-down of the principal balance to below the 80% threshold, or if neither of these, the original amortization schedule itself.
Increase in the Value of Property: the Homeowner’s Protection Act of 1998 (HPA) does not require the lender to consider the current property value, so a borrower will have to check with the mortgage servicer to see if they would be willing to do so. Most lenders won’t consider dropping PMI when a new appraisal is used if the borrower hasn’t had the loan for at least 2 years, because Fannie Mae (FNMA) policy requires at least 2 years from the date of closing in order to drop the PMI. After having the loan for 5 years, FNMA allows for dropping it at 80% using a new appraisal. Between 2 and 5 years, they want you to have the loan-to-value ratio below 75%.
Borrower Accelerated Pay-down of Principal (Cancellation): the HPA does cover these circumstances. If the borrower has paid the principal balance down to 80% or below of the lesser of the purchase price of the home or original appraised value, they can contact the servicer and request that the PMI be cancelled. They must submit the request in writing, have had a good payment history, and satisfy any lender requirements such as asserting that they have no 2nd mortgage on the property, and that the property value has not gone down. If the require the latter, it might mean they’ll want a new appraisal, which could cost up to $400 or so. You’ll definitely want to contact them to find out what their exact procedures are for your getting rid of PMI on your Nashville mortgage loan.
Automatic PMI Termination: the HPA also covers this scenario. When the mortgage principal balance, according to its initial amortization schedule, and regardless of the current outstanding balance on that date, reaches 78% of the original value of the home (lesser of the purchase price or original appraisal), the PMI can be cancelled. For example, on a $200,000 sales price and a 10% down payment, it would take about 8 years for the PMI to be terminated by this schedule. Most lenders will follow this schedule, but some won’t, so you have to be diligent. If your PMI remains in your payment after this, you must call the servicer and request to have it removed from your mortgage, per HPA.
Final PMI Termination (worst case): Under HPA, if PMI hasn’t been canceled or otherwise terminated, it must be removed within 30 days of the loan balance reaching the midpoint of the amortization schedule. E.g., on a 30 year loan, the midpoint would be a 15 years, or 180 months. The borrower must be current on the mortgage.
If your situation falls into the bottom 3 scenarios above, and the servicer you are dealing with tells you something different, you can dispute their claim by referencing HPA. If that doesn’t work, you can always take it to the entity regulating the servicer in question, which is typically the Office of the Comptroller of Currency (OCC), http://www.occ.treas.gov/customer.htm. Being proactive could save thousands of dollars on your Nashville mortgage!
THDA Loans- The Great Start Program
Posted by: | CommentsTHDA Loans- Great Start Program
The THDA loan program which offers the most financial assistance to first-time buyers in TN is the Great Start Mortgage Program. Just like the Great Advantage and Great Rate Programs, it is usually an FHA loan, but it can also be a VA or USDA loan (which are both 100% programs).
Here is how it works: a borrower meets both the guidelines of FHA and the eligibility requirements of THDA loans, but needs help for closing costs or down payment. Since FHA loans require a 3.5% down payment, this loan works great because it essentially offers the highest possible assistance (4% grant money) to the borrower. This grant can cover the down payment, the closings costs, or both, and is calculated by taking 4% of the FHA loan amount. When combined with the allowed 6% max seller financing concessions, it would allow the borrower to potentially have a no-down payment loan, along with all closing costs and prepaid items covered. (Note: FHA will most likely lower the max seller concession to 3% in early summer 2010)
The interest rate for the Great Start loan is currently 5.35%, based on a 30 fixed loan. As a matter of fact, all THDA loans are 30 fixed terms, and the rate for this program is just modestly above the market FHA rate, which is excellent when you consider the grant. Rates on these loans don’t change as often as regular FHA loans, as the rates are determined by the TN Housing Development Agency and their bond issuance. In other words, the THDA loan rate is the same regardless of which lender you choose.
With the demise of 80/20 combination loans, 100% subprime loans, and the seller-funded down payment assistance programs like Ameridream, the THDA Great Start program is currently only 1 of 3 loan programs, including the USDA Rural and VA program, which offers a buyer the ability to have no money down as well as partially or fully covered closing costs (with seller help). A few more very important points: the home must be a primary residence, the borrower(s) must be first-time buyers (not owned a home in the last 3 years) or must be purchasing a home in a targeted county, must take a Homebuyer Education class before closing, and may be subject to Federal recapture tax (doesn’t affect most buyers). Please see my other articles for more general information on the awesome THDA loan program.
How DO You Find Your Best Nashville Mortgage Lender?
Posted by: | CommentsHow DO You Find Your Best Nashville Mortgage Lender?
I recently heard the following from a radio commercial for a Nashville mortgage- “while other lenders are raising their rates, we’re keeping OURS low … Huh? At first “glance,” it sounds great- this lender is going the extra mile by giving borrowers the lower rates they deserve, despite the increasing rate environment that all the other lenders are affected by.
Well, as nice as it might sound, it just doesn’t work that way. All lenders are subject to the same rate gyrations, and so the biggest rate difference you’ll find among lenders is typically just a measley .125%, or at most .25%. There won’t be one Nashville mortgage lender who has the “corner” on the low-rate market, because if they did, word would get out, and then that lender would be slammed with so much business they’d have to raise rates high enough to stave off the onslaught of incoming mortgage applications.
So when you hear advertising like this, the best conclusion is that the lender is charging more closing costs to the borrower to achieve the “lower than market rate” status. It’s easy to advertise low rates and then not even disclose the heavier closing costs (aka “points”) required to get the better rate. The only time you’ll get a hint of the higher closing costs is when the lender advertises the APR, which is a goverment formula that takes into account the closing costs. But just seeing or hearing the APR % doesn’t really help the average consumer know what the closing costs are which make it up. You’d have to get that lender to give you a Good Faith Estimate, and to get that you’d have to do a full application. Then, you’d have to do the same with 2 or more other lenders to find out how they all stack up. You’d have to make sure the lock period is the same, and also get the rate quote/estimate on the same day, if not same time of day, since rates can literally change hour to hour. So in the end, it’s quite easy for a lender to make these claims, because it’s so difficult to know for sure if they are right.
The better lenders don’t have to advertise “teaser rates” hoping to get their phone to ring. They simply offer each client a competitive rate, and reasonable closing costs, and then back it up with stellar service. Service that includes being available after hours, educating clients about what programs make the most sense for their situation, attending the closings to make sure everything goes smoothly, following up months and years after a loan is closed, etc. Just like about anything else out there, one of the best ways to find out who will offer you this kind of service is to simply ask around for a referral.
If you are in need of a Nashville mortgage, feel free to give me a call at (615) 261-1368. I’d be happy to provide you great advice tailored to your situation, and a very competitive quote. And should you decide to move forward, you’ll get nothing but great service - I promise! Your repeat business and referrals are my best advertisement.
