Mortgage Archives – Page 174 of 231 – Fred Gruber

27

Mar

Mortgage

Over 5 Trillion Dollars In Home Equity May Lead To More Cash Out Transactions

US homeowners now have over 5 trillion dollars in home equity which is a very large amount of money! So this year may be the year for a lot of cash out refinances and other home equity mortgage products. Most often, when you are purchasing a home, you are buying at or below the appraised value and you are making a down payment.

The good news is this means you have “instant equity” in your home. And over time you build more equity as you make your monthly mortgage payments as well as any potential home price appreciation.

This build up of equity gets some homeowners thinking about taking cash-out from your home to pay off credit card bills, purchase a car or pay for college expenses. However, it is important understand, there are rules as to what can and can’t be done.

Cash out refinance, equity loan or second mortgage

There are three basic ways to access the equity in your home which are common these include:

Cash out refinance – you refinance your current mortgage and you request cash-out for the equity. For example, if your home is worth $200,000 and you have a current mortgage of $100,000 you may be able to access an additional $60,000 to $70,000 in cash depending on your lenders requirements
Home equity loan – a home equity loan is typically a line of credit that you take out with your local bank. These loans are typically what are known as “revolving” where you can access the funds over and over again as you make payments. Home equity loan interest payments are not tax deductible after the recent tax reform plan
Second mortgage – in order to qualify for a second mortgage on your home, the lender would require you to meet specific credit requirements as well as certain debt-to-income ratios.

In most cases, lenders will require borrowers to have had their mortgage at least one year before they are allowed the option of any type of cash-out refinance. However, Ginnie Mae (GNMA), the investor for FHA and VA home loans allow cash out transactions after 6 monthly payments and a minimum of 210 days in the home.

While you may already have a substantial amount of equity in your home, lenders are taking an additional risk if you are allowed to “tap into” that equity. Before you make the decision to access the equity, talk to your trusted mortgage professional regarding possible restrictions.

22

Mar

By support

Mortgage

What Changes Occurred In FHA And FNMA Rules During 2018?

The FNMA HomeReady Program

Those who are involved in the mortgage industry must keep updated on changes to FHA, and Fannie Mae (FNMA) loans. Since loan limits and other changes are often made annually, keeping up with these changes helps make sure consumers get the right information at the time of their application.

Many of the changes for 2018 are modest, but still impact existing, and new homeowners.

Changes To Loan Limit Amounts

FHA loan limits change on an annual basis as per the Housing and Economic Recovery Act of 2008. Using this, the FHA is required to base the insured mortgage amounts on 115 percent of median housing prices by county. While many counties in the United States did not see changes this year, 3,011 counties saw a change for loan applications submitted after January 1, 2018. These changes mean the upper loan limits in higher-priced markets increases to $679,650 and the lower limits are $294,515. These limits are for new home purchases and for refinancing existing FHA loans.

Another significant change which must be considered is what FHA or FNMA considers a conforming loan. In prior years, this amount was $424,100, it has now been increased to $453,100. This is important because for many homeowners, jumbo mortgages seem out of reach.

Changes To Down Payment Requirements

While FNMA did have a minimum requirement for down payment at five percent, FNMA and Freddie Mac are both offering three percent down payment programs in 2018. It is important to be aware that FNMA limits this program to those borrowers who intend to use the home as their primary residence. The following conditions must be met to qualify for the 97 percent loan to value program:

The mortgage securing the property must be at a fixed rate
The property must be a co-op, PUD, condo or other one-unit home.
The property cannot be a manufactured home
The borrower must intend to occupy the property as their primary residence
One of the buyers cannot have owned a home in the last three years
Loans must be equal to or less than $453,100
Borrower’s credit score should be 620 or higher

FHA loans do require borrower to put down a minimum of 3.5 percent of their new mortgage. However, the also offer greater flexibility with credit requiring borrowers have a credit score of 580 and further allows the entire down payment to be gifted to the buyer. Borrowers with credit scores between 500 and 579 who can put down 10 percent are eligible for FHA mortgages.

Another important program FNMA offers is for first-time buyers. Specifically, the idea was to make owning a home easier for a larger market of buyers. This program offers some flexibility that standard FNMA loans do not offer including:

Lower private mortgage insurance (PMI) rates
100 percent gifted down payments and closing costs
97 percent loan to value
Co-borrower income may be used to qualify for a loan
Household member income may be included, even if not a borrower
Rental income and/or boarder income may help a borrower qualify
Borrowers must complete a home buyer’s education course

These changes are significant for many borrowers and include some flexibility with income limits. Borrowers living in low-income areas face no maximum income limits. Borrowers in other areas cannot exceed 100 percent of the median income for the area.

Do Not Overlook FHA Streamline Refinance

Borrowers who have an existing FHA loan can take advantage of this program. Borrowers who changed jobs, have faced credit issues, or who have homes who lost some value may be able to refinance their home into a lower interest rate, or eliminate mortgage insurance premiums. To qualify, borrowers must be current on their mortgage payments, cannot have been late on their mortgage payments more than 30 days in 12 months, and have had their current mortgage for a minimum of 210 days. Because of this seasoning requirement, borrowers must have made six mortgage payments at the time of the refinancing.

Thanks to the flexibility of this program, borrowers need not worry about income verification, appraisals, or credit score. The refinance terms must benefit the borrower in a tangible way. For example, a borrower who currently has a six percent adjustable mortgage and now qualifies for a six percent fixed rate mortgage can demonstrate a tangible gain. Therefore, assuming they meet the other requirements, their mortgage would qualify for the streamline finance. For many borrowers, this could help significantly, particularly if their home has lost value, or they have suffered a temporary decrease in their income.

Mortgage programs change frequently making it imperative to verify all program requirements before presenting them to borrowers. Fortunately, FNMA and FHA are making home ownership attainable for more borrowers than ever before thanks to more flexible down payment options, credit scoring changes and increased loan limits.

20

Mar

By support

Mortgage

The Four Best Questions To Ask Before Refinancing Your Mortgage

1) Do I have enough equity to get a mortgage?

To get a conventional loan, you will usually need to have at least 20 percent equity. This means that your house will have to be worth at least $250,000 to get a $200,000 loan. If you have less equity, you could end up having to pay for private mortgage insurance, which can easily add $100 or more to your monthly payment.

2) How’s my credit?

Most lenders will look at your credit score as a part of determining whether or not to make you a loan. With conventional lenders, your rate will depend on your score and the higher it is, the lower your payment will be. Other lenders, like the FHA and VA programs have an all or nothing rule. If you qualify, your rate won’t be based on your credit, but if your score is too low, you won’t be able to get any loan.

3) What do I want to accomplish?

Mortgages typically offer a choice as to their term. While the 30-year loan is the most popular, shorter term mortgages save you money since you pay less interest over their lives. They also get you out of debt sooner, at least with regard to your house.

The drawback is that they carry higher payments since you pay off more principal every month. This can make them less affordable for some borrowers.

4) How’s my current loan?

If you have an adjustable rate mortgage, you may want to switch to a fixed rate mortgage simply for the additional security it offers you. On the other hand, if you are planning to move relatively soon, your current mortgage could be a better deal whehter it’s fixed- or adjustable-rate.

When trying to decide what to do, compare the cost of refinancing with what it would cost you in additional interest to hold on to your existing loan. While the breakdown is different for every borrower, generally, you’ll need to keep your current house and loan for anywhere from three to six years to break even on the costs of refinancing.

Deciding what to do with your mortgage can be complicated. Working with a qualified loan broker that can consider every angle with you can help you to make a better decision.