Blog – Fred Gruber - First Rate Financial Group

23

May

Mortgage Tips

How Much Down Payment Do You Need for a Mortgage When Buying a Home?

If you’re considering buying a home, you’re likely wondering how much you’ll need for a down payment. The common belief is that you need to put down 20% of the home’s purchase price, but that’s not the only option and in many cases, it’s not even necessary.

Let’s break down what’s really required and explore your choices.

The Traditional 20% Rule
Traditionally, lenders prefer a 20% down payment. Why? Because it lowers their risk. If you’re purchasing a $200,500 home (the national median sales price), that is a down payment of $40,100. Understandably, many buyers, especially first-timer, struggle to save that much cash.

The good news is that a 20% down payment isn’t always required to qualify for a mortgage.

Low Down Payment Options
There are a number of loan programs that allow you to purchase a home with less than 20% down. For example:

FHA Loans typically require as little as 3.5% down.
Conventional Loans can offer down payments as low as 3%, depending on your credit score and financial profile.
VA Loans (for eligible veterans and military members) and USDA Loans (for certain rural areas) may require no down payment at all.

These programs are designed to make homeownership more accessible, especially for first-time buyers or those who qualify based on service or location.

The 80/20 Option
Another structure, though less common today, is the 80/20 loan. This involves taking out two mortgages: one for 80% of the home’s value, and a second, typically smaller loan for the remaining 20%. The benefit? No down payment is required upfront. However, the second loan usually comes with a higher interest rate, which can lead to higher monthly payments.

The 100% Financing Option
While 100% financing is harder to find due to tightened lending regulations, some lenders still offer it under specific conditions. These loans don’t require a down payment, but often come with:

Higher interest rates
Mandatory private mortgage insurance (PMI), which protects the lender
Stricter credit and income requirements

PMI is typically added to your monthly mortgage payment and continues until you’ve built at least 20% equity in the home.

The Trade-Off of No Down Payment Loans
While zero-down loans make it easier to buy a home sooner, they also come with trade-offs. You may qualify for a smaller loan amount, face higher monthly payments, and pay more in interest over time. In contrast, a larger down payment reduces your loan balance, improves your interest rate, and lowers your monthly payments.

If saving for a down payment feels overwhelming, don’t let that stop your homeownership goals. There are many programs available to help. Work with a loan officer who can help you explore the options that best match your financial situation and long-term goals.

Whether you’ve saved 3%, 10%, or the full 20%, there’s likely a mortgage option out there that fits your needs.

22

May

By Fred Gruber

Mortgage Tips

What To Do When Your Mortgage Loan is Declined

Getting turned down for a mortgage can be discouraging, but it doesn’t mean the dream of homeownership is over. In fact, understanding why your application was declined is the first step toward making a stronger comeback. Let’s look at some of the most common reasons a mortgage might be denied and what you can do about it.

1. Loan-to-Value (LTV) Ratio
Your loan-to-value ratio is the percentage of the property’s appraised value that you want to borrow. For instance, if you’re buying a $300,000 home and requesting a $270,000 loan, your LTV is 90%.

Lenders typically prefer a lower LTV because it means you’re less of a risk. If your LTV is too high, consider increasing your down payment or looking into mortgage insurance. While mortgage insurance adds to your monthly cost, it can be a path to loan approval in some cases.

2. Debt-to-Income (DTI) Ratio
Your debt-to-income ratio compares your monthly debt payments to your gross monthly income. If you’re using too much of your income to cover existing debts, such as credit cards, car loans, or student loans as it can raise a red flag for lenders.

A general rule of thumb is to keep your total DTI ratio under 43%, though the lower, the better. If your DTI is too high, you may need to reduce your debt before reapplying. Paying off credit cards or consolidating loans can help lower this number.

3. Credit Challenges
Poor credit or no credit can significantly impact your ability to get a mortgage. Late payments, collections, or a limited credit history make it harder for lenders to assess your reliability.

If this is the case, take time to repair your credit. Pay all bills on time, reduce outstanding balances, and consider using secured credit cards to rebuild your profile. For those with little credit history, lenders may look at alternative data, like on-time rent or utility payments, to assess your reliability.

4. Incomplete Documentation or Employment Issues
Sometimes, a loan is denied simply because the paperwork wasn’t complete, or income and employment history couldn’t be verified. Make sure you’re providing accurate, complete information. If you’re self-employed, you may need additional documentation to prove consistent income.

5. The Property Itself
Occasionally, it’s not your finances that are the problem, it is the property. If the appraisal comes in low or there are issues with the condition of the home, the loan may be denied.

In that case, you might be able to renegotiate the purchase price, ask the seller to make repairs, or walk away and find a property that meets lending standards.

Don’t Give Up!
A mortgage denial doesn’t mean you can’t buy a home. It just means you might need to make a few changes and try again. Talk to your loan officer about what went wrong and how to fix it. With the right guidance, you’ll be better prepared for approval next time, and one step closer to the keys to your future home.

21

May

By Fred Gruber

Mortgage Tips

Pet-Friendly Mortgages And How Owning Pets Could Affect Your Loan Choices

We love our pets, they are part of the family. But did you know that your furry (or feathered) friend could play a surprising role in your homebuying journey? While your dog probably will not impact your credit score, being a pet owner can influence where and how you buy a home, and even the type of loan you choose.

As a mortgage originator, I have worked with many clients who did not realize their pets could affect everything from HOA rules to homeowners’ insurance policies. Here is what you need to know before you start the house hunt with your pet in tow.

1. HOA Restrictions Can Limit Your Options
If you are buying a home in a neighborhood governed by a homeowners association (HOA), it is crucial to review their rules regarding pets. Some HOAs have strict regulations about:

The number of pets you can have
Breed and weight restrictions, especially for dogs
Leash and noise policies
Exotic pet bans (such as reptiles, birds, or rodents)

Violating these rules can result in fines, or worse, being forced to rehome your pet. Always request the full HOA guidelines before submitting an offer on a property, and make sure the community is truly pet-friendly.

2. Insurance Matters, Especially for Certain Dog Breeds
Homeowners insurance providers often have breed-specific restrictions that could impact your coverage. Breeds considered “high-risk” by some insurers (like Rottweilers, Dobermans, or Pit Bulls) may result in higher premiums or denied coverage altogether.

Since most lenders require homeowners insurance before closing, this can influence your loan process. In some cases, you may need to shop around for more flexible insurance options or consider a different property altogether.

3. Pet-Proof Properties May Qualify Differently
When lenders assess a property, they consider its condition, safety, and insurability. Pet-related features like fencing, outdoor shelters, or even damage from previous pets could come under scrutiny during appraisals or inspections.

For example, if the home you are buying has excessive pet damage (like scratched floors or odor), the appraiser may lower its value. That could affect your loan-to-value ratio, and in some cases, even delay your closing.

4. Multifamily Properties and Pet Limits
Thinking of buying a duplex or triplex to live in one unit and rent the others? Be aware: pet rules often differ in multi-unit properties. Whether you are planning to house your own pets or rent to tenants with animals, check city ordinances and zoning rules first.

Lenders may also view these purchases differently, particularly if rental income is part of your loan qualification.
Your pet does not need to complicate your path to homeownership, but being informed can help you avoid surprises. As your mortgage originator, I will help you navigate these pet-related nuances to make sure your loan, insurance, and property are a great fit for everyone, paws and all.

Have questions about pet-friendly loan options or neighborhoods? Let’s chat. I’m here to guide you through the process, tail wags included.