Portland Metro Real Estate and Community News

Oct. 21, 2019

FHA Loans: What They Are And Who Qualifies

FHA Loans: What They Are And Who Qualifies

 

In your house hunting you may have come across a mention of FHA loans.  FHA stands for Federal Housing Authority, and the loans available through this program are designed to help people qualify for loans and purchase homes more easily.  If you are wondering about getting an FHA loan for your home purchase, the first thing to do is to learn a little about them and find out if you might qualify.

 

FHA And HUD

 

The FHA is part of HUD-the U.S. Department of Housing and Urban Development.  It exists to help people who might not otherwise be able to apply successfully for a home loan purchase a home.  The FHA insures the loan against default, which means that if the buyer fails to pay the mortgage, the lender will not lose the money because the FHA will cover it.

 

Who Can Get An FHA Loan?

 

Just about anyone can apply for an FHA loan.  There are no income level requirements, either on the high or low end, and even people with some credit problems can qualify.  You will have to meet a certain credit level, however, and you must have a debt to income ratio that is acceptable for the program to prove you can pay the mortgage.

 

There are specific FHA loan programs for first time buyers, seniors, and people looking to purchase a “fixer-upper” home as well.  The many programs can suit just about any buyer.

 

Limits With FHA Loans

 

The main problem many people run into is that the limit on how much you can borrow on an FHA loan may make it difficult to purchase the house you need.  Allowable amounts are usually on the low end of the market, and it can make house hunting a challenge.  If you are willing to take on a home that needs some work, you will probably have better luck with an FHA loan.

 

If you need to buy a home with a low down payment and are having a little trouble qualifying elsewhere, an FHA loan might be a good option for you.  Every state has different laws and requirements for qualification, so check with your state to find out what the process will be.  FHA loans can help people get into a house who might not otherwise have the opportunity to buy.

 

Posted in Finance
Oct. 14, 2019

Equity And Refinancing

Equity And Refinancing

 

Refinancing is something that most people will do at some point in their home ownership years.  The reasons are many; sometimes it's to get a better rate, sometimes to combine a first and second mortgage.  Still others will refinance to take money out from the equity on the home and pay bills or do renovations.  Whatever the reason, equity plays a major role.

 

What Is Equity?

 

Simply put, equity is the difference between the value of your home and what you owe on it.  Although the term is very common, the truth is that not every homeowner has equity, and in fact some may be in the opposite position.

 

Equity increases over time when, as a general rule, the value of a home increases while at the same time the mortgage loans are being paid down.  In difficult economic times, equity may build slowly or even be lost.

 

What Does Equity Have To Do With Refinancing?

 

While it is possible to refinance a home in which there is little to no equity, it is more difficult.  You can refinance for a better rate, but you won't be able to take any money out on the loan.

 

When the house is “upside down,” meaning that the amount owed is higher than the current value of the home, refinancing becomes much more difficult.  In most cases this situation will not qualify for a refinance, although many mortgage companies do allow refinances up to a certain percentage above the market value.

 

Refinances in these situations can be done, but they are a little different from doing a refinance with equity.

 

Cash-Out Refinancing

 

Many people refinance in order to take some cash out of the home's equity.  When you do this you are drawing on the value of your home.  Taking out cash against the equity you have in your home can be a helpful way to pay off bills or take on renovations.  It's important to note, however, that it comes with some risk.

 

If you refinance and use up all the equity in your home, and then the value of your home drops, you could find yourself upside down.  You will also be unable to use that equity in the future should you decide to sell and need a down payment on your new home.  Keep these things in mind before you make the decision to proceed with a cash-out refinance.

 

The equity you have in your home makes a big difference in the type of refinancing available to you, making the two closely related.

 

Posted in Finance
Oct. 7, 2019

Do You Really Need A Broker?

Do You Really Need A Broker?

 

A mortgage broker's job is to match you with a mortgage company that can offer you the best terms on your home loan.  Most brokers work with a list of companies and can consider a variety of options for you.  Do you really need a broker, or is it better to do the legwork yourself to make sure you get the best rate?  There are a few things to consider.

 

Do You Have The Time?

 

It's a good idea to shop around for the best rate on your mortgage, and not everyone has the time to look at various companies and compare them.  A broker handles some of that work on your behalf.

 

For those who are looking to get approved for a mortgage quickly and don't have the time to look around and see which is the best lender for their needs, a broker might be a good idea.

 

No One Checks Everywhere

 

Most brokers have a set list of companies they work with in order to check rates and loan terms.  They usually have a relationship with those companies and know enough about them to make a good call as to which might work best for you.

 

Of course, no broker will be able to check every possible lender.  If you do the work of comparing rates yourself, you likely won't check every possibility either.  However, you might look at different places than the broker would.  That doesn't mean you will do much better, but it is a possibility.

 

Handling Paperwork

 

A broker handles a lot of the paperwork for you in terms of getting a pre-approval for a loan and helping you to process documentation.  If you choose to find your own loan, you will have someone at that location who will handle paperwork for you, but if something falls through you may have to start all over again elsewhere.  With a broker, it can be easier to move on if a loan doesn't work out.

 

Either way, there will be some paperwork you need to handle, and much of it handled by another person.  With a broker, however, the process of applying for loans can be a bit easier since they will take some of the guesswork out of choosing a lender.

 

Working with a broker is optional, but can be beneficial to many people.  Especially if you don't know a lot about mortgages, letting an expert handle the details can ensure things go smoothly.

 

Posted in Finance
Sept. 30, 2019

Common Home Financing Terms Explained

Common Home Financing Terms Explained

 

If you are new to home financing, you may be a little confused by some of the common terms that are used in the process.  These common terms will help simplify getting your home loan and ensure you understand what stage you are at and what comes next.

 

Getting A Loan

Pre-Qualification:  This is a term that means you have been provided an estimate of what sort of loan you can expect to obtain based on your credit score and what's currently available.  It doesn't guarantee you a loan or any loan terms.

Pre-Approval:  This means that you have actually applied for a mortgage and the loan has been approved.  Your approval is usually good for a certain time period during which you are guaranteed the terms of the loan.

Locked In:  This is a term that means you have been promised a certain interest rate for a certain time period, usually 30 days.

 

Basics Of Loans

Principal:  This is the amount that is owed on the loan, the actual amount financed excluding interest.

Interest Rate:  This is the amount of interest, expressed as a percentage, that you will be paying on your loan.

APR (Annual Percentage Rate):  Often confused with the interest rate, the APR is actually the yearly cost of financing the loan amount.

Term:  This is the length of time over which the loan will be repaid.

Amortization:  Paying off a large loan (mortgage) over a specified period of time.

Points:  This is an amount of money that a buyer can choose to pay to the lender in order to get a lower interest rate.  A point equals one percent of the loan amount.  This is usually paid at closing in order to get a lower rate.

Completing The Process

Closing: ,This is the point at which the loan is complete and the terms become active.  At closing everything will be signed and completed.

Closing Costs:  Fees and other costs that must be paid at the time the loan closes in order to make the terms active.

Loan Funding:  This is the time at which the lender actual provides the funds requested in the loan.

These are some of the most common terms you will hear as you go through the process of obtaining a mortgage.  Be sure to talk to your broker or loan officer if you have any questions regarding these or any other terms you come across; this will ensure you feel in control of the process and are entering your mortgage agreement with full understanding of the terms.

 

Posted in Finance
Sept. 23, 2019

Can You Buy A Home With No Down Payment?

Can You Buy A Home With No Down Payment?

 

Coming up with a down payment in today's economy can be difficult.  In most cases the down payment is expected to be 20% of the purchase price, and in some markets where housing prices are high that can be nearly impossible for the average person to save.  So are there ways to get around this?  Can you buy a home even if you don't have the down payment?  There are a few ways to get into a home in spite of lacking the required 20%.

 

The 80/20 Loan

 

Also known as a piggyback mortgage, an 80/20 loan is a simple way to get a home without a down payment, but it can be a bit more expensive-or a lot more.  Basically, you take out a separate loan for the 20% portion of the purchase price.  You are financing your down payment.  You then take out a larger loan for the remaining 80%.  The interest rate on the 20% loan is usually a lot higher than the larger loan, so the best bet for any homeowner is to pay it off as quickly as possible.

 

The 20% portion of the loan is usually on a shorter term than the larger portion as well, and may have a balloon payment.  This means, for example, that the loan might amortize over 15 years, but after 10 years a balloon payment is due-meaning you have to either refinance or pay the balance.  There are also some variations on this loan, such as an 80/15/5 loan, where you put down 5%, take out a 15% loan for the rest of the down payment, and then finance the remaining 80% as a standard mortgage.

 

100% Financing Loans

 

While this type of loan used to be easier to get, today fewer places offer them.  There are still some places where you can get 100% financing on your home, but be prepared to pay PMI-Primary Mortgage Insurance.  This is something that the mortgage company will charge to protect themselves against the possibility that you will default on the loan.  It is charged on any loan when more than 80% of the value is being financed in most cases.  These 80/20 loans avoid PMI by financing less in one loan.

 

It is possible to buy a home with no or very little down payment, and there are a few other special programs such as FHA loans out there to help.  Do your research, and be sure you know which option will best fit your budget.

 

Posted in Finance
Sept. 19, 2019

Calculating Your Monthly Mortgage Payments

Calculating Your Monthly Mortgage Payments

 

One of the most important factors to consider when buying a new home is affordability.  As a general rule, mortgage payments should not exceed 25-30 percent of your monthly take-home pay.  The best way to know what you can afford is to determine the possible payment range by comparing the price of the home with other essential ingredients.

 

Figure Out How Much You Want To Borrow

 

Your first step to calculating your monthly mortgage payment is knowing how much you want to borrow.  This can be determined by subtracting your down payment amount from the purchase price of the home, which will give you the amount that you will need to request from a lender.

 

Know Your Rates

 

The next step is to determine the current interest rates for the purchase of a home.  Rates vary and may change often, so check with your lender for current rates.  It's worth noting that the interest rates you receive will, in part, be based on your credit history.  This means that knowing your FICO score and credit rating will give you a good idea as to how your interest rates will be calculated.

 

Choose Your Loan Term

 

Your monthly mortgage payments will be determined by a number of factors, including the term of your loan.  If you were to borrow $250,000, your monthly payments would be less with a 30-year mortgage than with a 15-year mortgage.  The reason is because it would take larger monthly payments to get the loan paid off quicker, which is why you will need to select a loan term before calculating your payments.

 

Additional Costs To Consider

 

Your total mortgage payment will include taxes, homeowner's insurance and possibly even private mortgage insurance (PMI) if you provide less than 20 percent down and your loan requires it.

 

Just The Facts & Figures

 

Now that you know how much you need to borrow, have chosen your loan term and are familiar with the current interest rates, it's time to calculate your payment.  Most lenders offer a mortgage calculator on their Web site or you can get an estimate by speaking with your lender.

 

If you still need help in calculating your potential monthly mortgage payments, don't hesitate to ask your REALTOR®, mortgage broker or lender.

Posted in Finance
June 28, 2019

Buying A Home With Past Credit Problems

Buying A Home With Past Credit Problems

 

Buying a home can be both exciting and stressful but, for those with past credit problems, the process may also seem intimidating. The good news is that many lenders have adapted to the idea that many hopeful homeowners simply need a second chance, which means that past credit problems no longer have to define your future.

 

Credit Blemishes

 

When life unexpectedly takes a turn for the worst, it's not always possible to come out without a few bumps and bruises. Every day, people are faced with late or missed credit card payments, mortgage foreclosures, bankruptcy proceedings, auto repossessions and even civil judgments that will affect their credit reports for years to come. Whether it's from a job loss, injury or just a simple case of temporary hardship, credit blemishes are often a part of life. The good news is that they no longer have to prevent you from becoming a homeowner.

 

Give Yourself A Little Credit

 

After experiencing a credit problem, most lenders will want to see an attempt to rebuild your credit through a steady payment history with a new account. This can be accomplished by applying for a credit card and maintaining a responsible use of the account. If you aren't approved for an unsecured card, you can always apply for a secured credit card. Either will rebuild your credit over time and will help to show lenders that your past credit problems are just that - in the past.

 

Clean Up Your Credit Report

 

Before applying for a home loan, make sure that you check your credit report from each of the three major credit reporting agencies. Every 12 months, consumers can request a free copy of their credit report from Experian, Equifax and TransUnion. If anything is incorrect or found to be inaccurate, filing a dispute with the credit reporting agency can help to get the information corrected before speaking with a lender.

 

When you apply for a home loan, the lender will access your credit report for the purpose of determining your creditworthiness. In an effort to ensure that you have the best possible chance at being approved for the loan at the best possible interest rates, making sure that your credit report is accurate is a must.

 

Save Up For A Down Payment

 

Some home buyers often qualify for a mortgage with down payments as low as five percent (three percent for FHA loans), but those with past credit problems may be required to shell out up to 35 percent or more for a down payment on their new home. A buyer who pays a larger down payment obviously has more vested interest in the home and may, thereby, be less likely to default on a loan. If you have past credit problems, check with your lender about specific down payment requirements and start saving!

 

Creative Financing Options

 

If you've exhausted all of your conventional efforts and are still turning up empty, don't give up just yet. Alternative financing is an option that many home buyers use to purchase a home. We can provide you with details regarding any lease purchase and/or owner financing properties, which may require no credit check, no bank qualifying, a low down payment and competitive interest rate options.

 

Posted in Finance
June 21, 2019

Bridge Financing: What Is It?

Bridge Financing: What Is It?

 

When it comes time to finance your new home and you still have a loan on another home you own but plan to sell, you are likely to run into the term bridge financing. This is a special type of financing that can help solve the cash flow problems created by the need to complete the purchase of one home before you complete the sale of the other.

 

Filling In The Gap

 

It can be difficult to get the sale of your current home to coincide perfectly with the purchase of the new one in order to avoid a problem with cash flow. If you have a sale closing in 90 days on the old home, but find that you need a short escrow to close the deal on the new home, this can create a gap in cash flow.

 

Bridge financing allows you to close that gap and provides for the time period between the new purchase and the sale that will eventually provide the needed cash for that purchase.

 

Down Payments And More

 

Most people don't have enough cash on hand to pay the down payment on a new home prior to closing on the sale of the previous home. This can make it difficult to buy the home you want when you haven't yet sold your current home or are still in escrow.

 

Bridge financing allows you to make the purchase by covering down payments or other costs involved as part of the loan process. It will cover the difference on the expectation of payment in the near future.

 

Qualifying For Bridge Financing

 

Not every purchase transaction will qualify for bridge financing. In addition to credit requirements, you will need to have a strong expectation of the cash coming in to fund the new loan. Bridge financing doesn't guarantee that either loan will go through, and a problem with one loan can usually mean a problem with both. It is rare to obtain open bridge financing where there is no certain date for the assets to become liquid, since this comes at a high risk

 

In most cases bridge financing is only used for a very short period of time. Your mortgage expert can explain the details to you and let you know if bridge financing is an option for your situation.

 

For many people, this type of financing can make all the difference in the ability to purchase the home they really want while still waiting on the sale of a previous home.

 

 

Posted in Finance
June 14, 2019

Balloon Payments: What They Mean To You

Balloon Payments: What They Mean To You

 

In your research on home loans, you may have come across the term “balloon payment.” This usually refers to a large lump sum that is due after a certain period of time on a loan, and is part of the loan agreement. It usually appears on smaller second mortgages that are expected to be paid off more quickly.How exactly does a balloon payment work? It's relatively simple.

 

Smaller Monthly Payments

 

When you take out a second mortgage or select an 80/20 loan as your main mortgage plan, that smaller mortgage is usually spread out over a shorter period of time. These mortgages are often 15 year loans rather than the standard 30 years you see on a larger mortgage. In many cases, there is a caveat to the 15 year loan that makes it somewhat less than a true 15 year loan.This is where the balloon payment comes in.

 

In order to make the monthly payments lower, the loan is spread out over 15 years-meaning you make the payments as though you were going to take 15 years to pay it off. However, at the ten year mark you are required to pay off the remaining balance of the loan. This is the balloon payment.For ten years, you make payments at the 15 year rate, but for that privilege you have to pay off the rest of the loan at ten years.

 

Why A Balloon Payment?

 

If you were to pay off the same amount of money in ten years' time, the monthly payment would be much higher. In many cases this would make the loan not affordable. It may seem counter-intuitive to have to pay a large lump sum before the end of the loan, but the expectation in this case is that you will refinance the home before that time. In most cases, ten years is enough time to see some equity built in the home, which will allow you to refinance at a better rate and get rid of the second mortgage altogether.

 

Balloon payments may sound a bit frightening at first, but the reality is that few homeowners ever actually have to pay them. They can make it easier to afford your monthly payments and get the loan you need for the home you want.

 

 

Posted in Finance
June 7, 2019

Avoiding Mortgage Fraud

Avoiding Mortgage Fraud

 

Unfortunately, fraud and identity theft are increasing at an alarming rate every year, and mortgage fraud is one of the most important types of fraud from which you will want to protect yourself. So what constitutes mortgage fraud, and how can you prevent this from happening to you?

 

What Is Mortgage Fraud?

 

Essentially, mortgage fraud is defined by the FBI as any material misstatement, misrepresentation, or omission relied upon by an underwriter or lender to fund, purchase, or insure a loan. There are several different types of mortgage fraud, and each is a serious offense that can have a huge impact on you and your credit. Here is a basic list of the most common types of mortgage fraud.

 

  • Undisclosed Kickbacks - This includes any financial deals between a buyer and seller that are not included in the mortgage documents.
  • Falsifying Income - Inflating your income is a serious offense on any loan document, especially a mortgage.
  • Undocumented Non-Owner Occupancy - Rates and other fees can be higher for income and rental properties, but resist the temptation to hide this fact in order to save money.
  • Inflated Purchase Price - In some cases this method is used to obtain a higher appraisal of a property, but it is illegal and may cost you your home.

 

How To Protect Yourself

 

The purchase of your home will probably be the greatest financial investment you will ever make. Ensuring that you know what constitutes mortgage fraud is half the job, but it is also important to know how to protect yourself from professionals who may not have your best interests in mind. In general the best method is to ensure that your real estate agent and mortgage lenders are professionals with considerable experience, professional credentials, and good references. It is also important to keep in mind that if an offer seems too good to be true, or if you feel that your REALTOR® or lender has given you advice that sounds as if it might fall under the category of mortgage fraud, you seek the advice of another professional. In this way you can avoid getting yourself into what may be a potential financial disaster.

 

Your property is not only your home, but also your greatest asset, and losing it to mortgage fraud can be avoided when you are armed with these facts.

 

 

Posted in Finance