Category: First Time Home Buyer

Why Michigan Mortgage Rates Dropped in 2019

Surprised about Mortgage Rates

March 2019 was the best month for Michigan Mortgage Rates in a Decade! Rates dropped the sharpest they had in a single month since the mortgage meltdown which led to a recession in the late 2000’s.

This is great for anyone that is buying a home or looking to drop their mortgage rate. Many are wondering why rates dropped and will they go up or down.

Why did mortgage rates drop in Early 2019?

The slow economy in Europe is a factor resulting in lower mortgage rates. With the effect of Brexit causing uncertainties for business and long term investment plans, Europe’s economy has been suffering.

When major global economies are halted, investors demand more predictable investments like bonds and mortgage backed securities which create lower mortgage rates.

The Federal Reserve Decided to Leave the Federal Fund Target Range Unchanged

The Federal Reserve does not directly set mortgage rates however they do have a major effect on them. The Federal Funds Rate is the rate at which banks can borrow money from Federal Reserve Funds.

Banks use this rate to base interest rates on loans. If banks can borrow money cheaper, they can lend it out in the form of mortgages and other loans at lower interest rates.

The Federal Reserve released its policy statement showing that they do not expect to hike Federal Reserve Rates for the rest of the year due to the slower growth in the economy.

This caused Treasury Yields to Fall which helps mortgage rates. The Treasury Yields dropped to levels not seen for 10 years which could indicate a future recession.

Home Sales Decline and Housing Inventory Increased

The National Association of Realtors (NAR) reported that the seasonally adjusted rate for sales of existing homes dropped 4.9% in March 2019 from the previous month and were also down year over year 4.7%.

NAR also confirmed that home inventory increased from 3.5 to 3.8 months’ worth which indicates slowing home sales.  Although sales appear to be slowing, this may be due to the 3.8% increase in median home sales prices.

Jobs Report Numbers Low

While the real estate market shows strength, job grown has dwindled. The headline nonfarm payrolls may have disappointed some with only 20,000 new jobs.

The average since taking the survey from 1939 is 125,000 new jobs created. This is the worst number in job growth since September 2017 when two major hurricanes hit.

US Trade Deficit Worst in 10 Years

Recent reports show that the U.S. trade deficit jumped to $59.8 billion. This is the largest it’s been in the last ten years. The uncertainty with Chinese trade tariffs have had a negative impact on US manufacturing and exports.

Will Mortgage Rates go Up or Down?

The million dollar question from all people considering a mortgage is, “Will Mortgage Rates go Up or Down?” If this were easily predictable then everyone would not be wondering this.

There are several factors pushing upward on mortgage rates for the long term. Progress in the US / China Trade Negotiations, Brexit decisions postponed, Oil Prices Rising, the US stock market hitting record highs; these all are negative forces on mortgage rates.

Mortgage Rate Lock Advice

No one can predict the future with certainty. My advice to my friends, family and clients is to review benefits of locking in a mortgage rate or refinancing right now.

  • If it makes sense do it!
  • Do not wait or you will be late!
  • No one can predict Mortgage Rates!

If your mortgage rate is over 5%, now may be a great opportunity to drop into the 4’s for a Conventional 30 year fixed mortgage or even 3’s for a 15 year home loan.

With upward pressure on mortgage rates, it is a risky gamble to wait to see if they will go lower.  If the numbers make sense and add benefit then take advantage of it immediately!

Request Information Now!

Why Conventional Loans are Better than FHA Loans

conventional loans vs fha loans

Conventional Loans are home loans that conform to the underwriting guidelines set by the Government Sponsored Entities, Fannie Mae and Freddie Mac.  In the past, conventional loans were only for elite borrowers that had 20% or more for their down payment. Times have since changed opening up great new programs for low to middle income earners and first time homebuyers.

Why are Conventional Loans Better than FHA Loans

Conventional Loans are now an affordable option for those without the highest credit scores. Mortgage Interest Rates are currently in a tighter spread. By this I mean that the best creditor borrowers and the lower score borrowers will have an interest within 1% to 1.5% of each other.

This is helped by programs like Fannie Mae’s HomeReady Loan and Freddie Mac’s HomePossible Loan. These programs limit the loan level price adjustments (LLPAs) which increases the par offering rate. These programs also allow first time homebuyers to buy a home with only 3% down while FHA requires a minimum down payment of 3.5%.

In the past, Private Mortgage Insurance (PMI) rates would also be absurdly high for lower score borrowers seeking Conventional mortgages. With the competition between PMI companies, mortgage insurance rates have dropped significantly in the past few years. This allows Conventional loans to be very competitive with Government Insurance Loans like FHA mortgages.

Related: See our Conventional Mortgage Calculator

FHA Mortgage Insurance Cost May Cost More than Conventional Loans

Conventional loans may be a better option for homebuyers than FHA Mortgages because of the mortgage insurance savings. On Conventional loans, there is typically a monthly PMI fee if a borrower does not put a 20% down payment towards their purchase. FHA has a similar fee plus an up front charge.

Related: See our FHA Mortgage Calculator

FHA Mortgage insurance VS Private Mortgages Insurance

FHA Mortgage InsurancePrivate Mortgage Insurance
Required on all Loans Required on conventional mortgages with less than 20% down
Two Types of mortgage insurance May be dropped once loan to value is under 78%
Cannot be removed if down payment is less than 10%
What is an FHA Up Front Mortgage Insurance Premium?
May be more expensive Many options for PMI payments
Offers Reduce Premiums for First Time Homebuyer Programs

FHA Loans charge two types of Mortgage Insurance Premiums (MIP). There is Upfront Mortgage Insurance Premiums (UFMIP) which are payable to HUD at close. The UFMIP is calculated as a percentage of the original loan amount. This fee is currently set at 1.75% of the base loan amount. For example, If you borrower $200,000, the FHA UFMIP added to your loan amount is $3,500. This is an extra expense not found on Conventional Loans.

What is an FHA Annual Mortgage Insurance Premium?

The Second type of Mortgage Insurance on FHA Loans is Annual Mortgage Insurance Premiums (MIP). This calculation varies based on loan-to-value and loan term but is as high s .85% of the original loan amount. For example, if you borrowed $200,000 the annual MIP would be $200,000 * .0085 = $1,700 which is split up over 12 months and added to your monthly mortgage payment. In this example, your payment would increase by $141.67 for MIP.

April 2013, FHA made a major change which started the shift away from this loan type. They changed the way annual FHA mortgage insurance fees were charged by making FHA Mortgage Insurance Premiums payable for the life of the loan. In past years, it would drop off under certain circumstances similar to Conventional Loans when your loan was paid under 78% of the home’s value.

Conventional Loans are more Attractive to a Seller than FHA Financing

In many areas of the country, there is a shortage of homes for sale which creates a sellers market. This means that sellers can be more picky when accepting offers from buyers on their homes.

When a buyer is making an offer with FHA financing, a seller may be reluctant to accept due to additional requirements for the home’s conditions compared to Conventional Financing. Having a Conventional Loan Pre-Approval may make the difference from getting your offer accepted or getting rejected by a seller.

Why Would Anyone Still Do FHA Loans over Conventional Loans?

There are certain circumstances where FHA finance may be a better option than a Conventional Loan.

FHA Loans with Down Payment Assistance

Many Mortgage Down Payment Assistance Programs (DPA) work only in conjunction with FHA financing. If a borrower does not significant funds available or down payment, DPA programs may help the buy a home.

FHA Loans Allow for Lower Credit Scores

Conventional Loans have minimum credit score requirement of 620. If a borrower has a credit score lower than this, FHA financing may be the only option. Currently FHA allows for credit as low as a 530 with a 10% down payment or as low as 580 with only a 3.5% down payment. Many borrowers with a credit score lower credit scores may have no problems qualifying for FHA financing when Conventional loans are not an option.

FHA Loans Have Shorter Wait Periods Than Conventional Loans

FHA loans have shorter wait periods for major life events such as bankruptcy or foreclosure.

  • FHA loans only require a 2 year wait period from Chapter 7 Bankruptcy while Conventional requires 4 years.
  • FHA requires a 3 year wait period for foreclosures while Conventional Loans require 7 Years.
  • These wait periods may allow a borrower to buy a home with FHA financing while conventional is not an option.

FHA Loans allow for Higher Debt To Income Ratios than Conventional Loans

A borrower may be better off with an FHA loan over conventional financing if they have a high Debt To Income Ratio.

  • Conventional Loans typically require a borrower to have a Debt-to-Income (DTI) of 45% or less to qualify with a maximum DTI of 50%.
  • FHA is more flexible with higher debts allowing a maximum of 56.9%. Borrowers with higher debts may only qualify for FHA Loans.

FHA Streamline Refinance

If a borrower already has an FHA Loan but does not have a significant amount of equity in their home, they may qualify for a rate reduction through an FHA Streamline Refinance. This loan type may allow them to drop their rate and payments without an appraisal or documenting income and with little to no costs. This is a program unique to FHA financing and can help a borrower that purchased their home when their credit scores were lower but have since improved.

Summary of Why Conventional Loans are Better Than FHA Loans

With the current guidelines set by FHA, Fannie Mae and Freddie Mac, Conventional Loans may be a better fit for buyers than FHA loans. Conventional loans offer lower down payments of only 3% for first time homebuyers while FHA loans require 3.5% down. Mortgage insurance may be significantly cheaper on Conventional loans versus FHA loans. Lastly, submitting an offer with Conventional Financing may be more attractive to sellers over an FHA Pre-Approval.

To get more information on what loan type maybe the best fit for your situation, call a licensed loan officer today at 800-555-2098 or request information below.

Request Information Now!

Top 3 Myths About Using a Mortgage Broker

Mortgage Broker Myth #1

One of the biggest myths of using a Mortgage Broker is that they do not have control of the underwriting process. Many retail lenders and banks claim this because they have employees that underwrite the file whereas a mortgage broker works directly with the end investor to underwrite the file.

Retailers claim they can go directly to the underwriter and have them clear any unusual conditions however the retail underwriters are typically more cautious because they have to underwrite to the end investor’s standards and sell the mortgage to them after closing. If they make a mistake, the end investor may refuse to purchase the loan.

Local Mortgage Brokers have a choice on which bank or end investor they want to send their loans. If one does a poor job by not clearing the loan quickly, the mortgage broker may choose to no longer do business with them. This forces underwriters to remain accountable and nimble on clearing conditions.

If a retail loan officer at a bank or direct lender is having difficulties clearing the conditions on their loan, they have no other options because they are held captive to their once underwriter which is the only option they have.

Mortgage Broker Myth #2

The second myth about using a mortgage broker is that they take longer than a retail lender or a bank. According to the January 2019 Ellie Mae Mortgage Origination Survey of many major banks and lenders, the average time to close a mortgage is 45 days!

Using a mortgage broker, the average closing time is 21 days which is less than half of the retails and bank lenders. Taking over 30 days to close a loan with a mortgage broker would be uncommon or the result of 3rd party issue.

Mortgage brokers operate more quickly because all they do is mortgage loans. While banks may have other services such as auto loans, credit cards and checking accounts, these are distractions from closing mortgages quickly!

Mortgage Broker Myth #3

The third mortgage broker myth is that mortgage brokers cost more than banks and retail lenders. This could not be further from the truth!

For nearly all loans that mortgage brokers close, there are zero origination fees. This means no underwriting fee, no origination fee and no processing fees. For many banks and lenders these fees could be thousands of dollars that are charged to the clients and add to the cost of buying a home.

Mortgage brokers have access to the lowest rates in the mortgage industry. As a mortgage broker, they receive wholesale rates from the end investors. Generally speaking, mortgage brokers have low overhead and thinner margins which allows them to pass huge savings on to their clients. Lower costs and overhead result in lower than average rates.

Why to Use a Mortgage Broker

With mortgage rates on the rise, consumers are becoming more aware of high rates and fees that are charged by large retail lenders and banks. By simply getting a 2nd quote from a local mortgage broker, a client could save thousands of dollars on the up front costs of their mortgage and tens of thousands of dollars over the life of their loan by getting a lower interest rate.

Mortgage Brokers: Low Rates, No Fees, Quick Closings.

Mortgage brokers are mortgage experts that specialize only in home loans. They work directly with the end investors to close loans quickly and efficiently and pass on low rates and, for most loans, zero lender fees!

To speak with a mortgage broker, give us a call today at 800-555-2098 or request information below!

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How to get the Best Mortgage Loan

getting the best mortgageWhen it comes to home loans, there are hundreds of loan programs and options that you may want to consider. Many first time home buyers do not know where to start when they want to buy a home. It is overwhelming to most people who do not have experience buying a home or getting a mortgage. The good news is, a loan officer can be your tour guide to help you get the best mortgage loan.

A loan officer’s job is to review your financial situation and provide home loan options. They will help to narrow down mortgage programs that do not fit your goals and also ones that you may not be eligible for.  Here are the basic categories that you should review with your loan officer to get the best mortgage for your situation.

What Mortgage Program is the Best?

There are several loan programs that you can apply for including Conventional Loans, FHA Loans, VA Loans, USDA Rural Development Loans, Jumbo loans, and Portfolio Loans. Each loan program has its pros and cons.

Related: Conventional Loan vs FHA Loan vs VA Loan vs USDA Home Loans

You may not be eligible for some programs. VA Loans, for example, require that you have served in the military. If you haven’t served, then this would not be a loan option for you. Conventional loans typically require higher credit scores and are more rate sensitive to lower credit scores. USDA RD Loans, have income limits and restricted areas where you can purchase.

As you can see it is nearly impossible to quickly learn all the ins and outs of each program when you are buying a home. A loan officer can help offer options on what loan program may be the best fit for your situation.

What Mortgage Term is the Best?

loan term

Once you decide on what mortgage program will be the best fit for your situation, you will need to decide on a mortgage term. Loan terms range anywhere from 10 years to 40 years for some programs.  For most loan programs we could even offer a 17 year loan or a 27 year mortgage based on your goals.  The most popular mortgage option is a 30 year mortgage.

Many financial advisers recommend a 15 year fixed rate mortgage. This allows you to get a great rate and pay off your mortgage quickly. Typically loan rates are lower for shorter term loans. The downside is that the monthly payment will be higher the shorter your loan term is.

A traditional 30 year mortgage term has low payments but most of the payment goes directly to interest for the first several years. Many people are shocked at how little their loan balance goes down after a year or two of mortgage payments.

Be sure to ask your loan officer what mortgage term is best for your goals.

Include Escrows or Waive Escrows?

escrows or waived escrows

When you get a mortgage you may have the option to include escrows into your mortgage payment. An escrow account is a savings account held for you by your mortgage servicer that is specifically for paying the property taxes and home owners insurance on your home.

Typically, government insured mortgages including FHA, VA and USDA require you to have an escrow account included with your mortgage.

Conventional loans may allow you to waive escrows. This means that you would be responsible to pay your own taxes and home owners insurance bills when they become due.

Many people like escrow accounts for the ease of payment. It is one less thing homeowners need to worry about when buying a home. On the other hand, some people would rather waive escrows and keep their own savings where they can earn interest and be more in control of their funds.

Fixed Rate or Adjustable Rate?

A major choice to consider when getting a mortgage is if you would rather have a fixed rate or an adjustable rate. Most homeowners choose to have a fixed rate that does not change for the life of your loan. This gives predictable payments and certainty that your payment will not adjust.

Other homeowners wish to choose an adjustable rate mortgage, commonly refereed to as an ARM Loan. Typically ARMs start off with a lower rate which is locked for a set number of years (3, 5, 7, or 10 years). Once the initial fixed period is up, the rates are subject to adjustments to the LIBOR or other indexes. If the rates go up, your mortgage payment goes up. If the rates go down, your mortgage payment goes down.

Choosing a fixed rate is thought to be a more safe and secure loan option. ARMs should be carefully considered for financially savvy homeowners. Be sure to ask your loan officer about ARM Loans if you are interested otherwise a fixed rate mortgage is most likely the best choice.

What Interest Rate Should I Pick?

picking your interest rate

Lastly, when getting a mortgage, you have to pick a mortgage rate. Many people do not realized that they have options for different mortgage rates. Once you select all of your other mortgage details, your loan officer will present your mortgage rate options.

When it comes to mortgage rates, you also need to consider the fees associated with getting the loan. Typically, the lower the rate, the higher the fee. Conversely, the higher the rate, the lower the fees.

Should I Pay Discount Points?

pay discount points

If you want the lowest rate possible, you can certainly request a rock bottom interest rate but be prepared to pay discount points for a rate lower than the market rates.

If you want to make sure you are having the lowest costs to get a mortgage, then you may want to consider a slightly higher interest rate. Picking a higher rate may allow you to have no lender fee or even receive a lender credit that will apply towards other closing costs and pre-paid items like taxes and insurances.

Deciding what rate and fee combination can seem difficult, but your loan officer can help you do a break even analysis to compare the time to break even on your investment of paying points for lower rates.

Lets look at an example: If you were to pay 2 points on a $100,000 loan for a lower rate, this would cost you $2,000 in extra closing costs. By getting the lower rate, lets say you save $50 per month.

To find your break even point, you will divide your extra costs of $2,000 by your savings of $50 which would give you 40 months, or 3.33 years to break even on your up front investment.

If you plan on staying in the house for 5 years, then you will save more than your costs therefore paying points may make sense. If you plan on selling your home in 2 years, then you would not benefit from the up front investment and you would be better off taking the higher rate with lower fees.

There are many factors to consider to get the best mortgage for your situation. It is not as easy as simply picking the lowest rate. Be sure to work with a trusted loan officer that can help review all the mortgage programs to get you the best mortgage for your situation.

For more information on home loan programs or to review the best loan for you, request information below or call a loan officer at 800-555-2098.

Request Information Now!

Breakdown Your Credit Score

Credit Score Breakdown

When buying a home, your credit score is an important factor in your home loan approval. It is important to know what is on your credit and what credit score you have when applying for a mortgage.

While, the exact scoring models are proprietary and not released by the credit bureaus to the public, credit experts have determined the weight of each factor that determines your credit score.

Related: Buying a home with Bad Credit may be possible with FHA Home Loans. We accept applications down to a 580 credit score!

What Makes up your Credit Score

Payment History

Paying your bills on time is the most important factor for your credit score. Weighted at 35% of the total score, paying bills late can devastate your credit rating.

Amounts Owed

Credit to Debt ratios are the second most important factor which is weighted at 30% of the overall score. The good news about this is that it is a quick and easy fix to improve your credit scores. For example, if you have a credit card with a $500.00 limit and you owe $490.00, it is essentially “Maxed Out” which reflects poorly on your credit rating. Paying down this debt to under 30% of the limit ( $150 or less in this example) would boost your scores quickly!

Length of Credit History

The length of time you have had accounts open is the next rating factor. At 15% of the credit rating, the credit bureaus know that maintaining long credit relationship with banks and lenders proves that you are a good credit risk and positively affects your score. For this reason, it is important to keep old credit lines open even if you are not utilizing them.

New Credit Inquiries

Having your credit pulled is an necessary evil when applying for a mortgage. What is not necessary is having it pulled by 10 different institutions for different credit types. If you apply for credit cards, auto loans, and mortgages over a short period of time, your credit rating may drop.

Types of Credit

The final major category that determines your credit score is the types of credit that you hold. Long term investments such as a mortgage can positively impact your credit. If you only have revolving credit such as credit cards, your credit depth is shallow and may not give you the highest credit scores possible.

Click here to Download Our Credit Tip Flyer!

How to Improve your Credit Score

There are simple techniques to improving your credit scores. It is important to monitor your credit from time to time and make sure all of the information is accurate. If there are errors, you can dispute the information directly with the bureaus to have it corrected. It is not suggested that you do this before or during the mortgage process as it may cause delays.

Additionally, paying down revolving account balances can quickly boost your credit scores. While there are no magical fixes to your credit, there are several best practices that you should do to increase your credit score.

Tips to Improve your Credit Rating

  • Correct inaccuracies on your credit
  • Pay all your bills on time.
  • Do not apply for too many lines of credit.
  • Do not max out credit cards.
  • Keep older credit lines open.

Contact a mortgage expert today by calling us at 1-800-555-2098 or simply apply online below. We are happy to help!

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5 Steps to do When you get Denied for a Mortgage

mortgage denial

The feeling of rejection can be overwhelming especially if it is for a mortgage denial. If you applied for a mortgage to buy a home, chances are you were making major plans in your life to prepare for your move. You were probably excited and told friends and family and now must deal with the embarrassment of telling them you couldn’t get approved for a loan.

Before you throw in the towel and accept that you cannot get a mortgage, there are 5 steps you should take to review your options.

1) Ask Your Loan Officer Why You Were Denied for a Mortgage

When a home loan gets denied, the financial institution that you applied with must issue a Notice of Adverse Action. This is a form sent to you within 30 days of your mortgage denial. Regulations require the form to list “A statement of specific reasons for the action taken.”

If you are still unsure why your loan was not approved, you should ask your loan officer why you were denied. It is your loan officer’s job to properly explain to you why your loan was not approved and provide options and alternatives.

2) Confirm Your Information is Correct on your Loan Application and Credit Report

Once you know the specific reason why your mortgage was denied, your next step is to confirm that all of your information was accurate on your loan application. Take another look at your information on the application that you signed and confirm that your income, assets, and liabilities are all accurate.

If the reason for your loan denial was due to credit, you should request a free copy of your credit report which can be done annually to confirm your information is accurate. Review all items to make sure there are no errors. Common errors on credit are late payments and collection accounts that do not belong to you.

If you have errors on your credit report, provide documentation to your loan officer and ask about options to do a rapid rescoring of your credit to fix the errors. You could also contact the credit bureaus directly and request corrections which could take 30+ days.

3) Look in the Mirror and Confirm if Now is the Right Time to get a Mortgage

If your mortgage was denied, it may make sense to look in the mirror and ask yourself if now is the right time to get a mortgage. Many times, people get the idea of buying a home but they are unable to keep up with their current bills. Adding a mortgage on to your already tight budget may be a poor financial decision.

Mortgage applications are commonly denied because the underwriter’s research finds omissions on the borrower’s application. For example, if you pay child support and did not tell your loan officer, an underwriter may discover this extra obligation on your paystubs. Underwriters also have software to scan public records for previous foreclosures, judgments and real estate owned. Any of these factors could easily lead to your loan being denied if you did not disclose this information up front.

A loan officer’s job is to work with you as a team to find solutions to get you approved for a mortgage. Be straight forward with your loan officer so they can better assist you and anticipate potential issues up front. If you applied for a loan and it was denied because you withheld information when you did your loan application, you should a step back and refocus your frustration on fixing the underlying issues.

4) Work to Fix the Reasons Why Your Mortgage Was Rejected

There are a million ways a mortgage can be denied. It is difficult to anticipate all potential underwriting issues up front despite you and your loan officer’s best efforts. Now that you know the reason why your loan was rejected, you should work on fixing the reasons so you can re-apply in the future. Here are some common reasons why mortgages are denied and solutions to get your ready for approval:

Your Loan was Denied because your Credit Score is Too Low

If your credit score is too low, there may be easy things that you can do to improve the score. The quickest and easiest options is to pay down credit card balances. Part of your credit scoring equation is your credit/debt ratio. All three major credit bureaus analyze the amount of available credit and how much of that you are utilizing.

To get the highest credit scores, you will need to pay down your credit card. For example, if your credit card limit is $1,000 and you owe $989, this is essentially a maxed out credit account which reflects negatively on your scores. To improve your credit you should pay down your balance to 30% or less of your credit limit. In this case you would need to pay down the balance to under $300. You will then need to wait for the creditor to report again to the credit bureaus before having your credit report updated.

Fixing errors on your credit should be another easy solution to improving your score. You can certainly contact the credit bureaus and dispute inaccurate information on your own or you could speak with a credit repair agency for assistance. This process can take several months and should not be done during a loan application.

If your credit score was too low, you may still qualify for other loan types. Conventional mortgages are very credit score driven while FHA Loans are more flexible on credit requirements.

Your Loan was Denied due to High Debt-to-Income Ratios

If your loan was denied because your debt-to-income ratio was too high, this means that you have too much debt for your qualifying income. There are two solutions to this problem, A) Increase your income or B) Reduce your Debts.

  1. Increasing your income sounds great but it may not be an easy solution. If you have been promised a raise at your job but not gotten it yet, then you may want to speak with human resources about getting a raise. If you are a w2 employee, underwriters will allow your new pay rate for qualifying right away. Getting a 2nd job may help you with more cash flow, but typically you cannot count income from a 2nd job unless you have a 2 year history of working more than one job.
  2. The easier answer to fixing your debt-to-income ratio is to examine your current obligations and see what debts you could get paid off. This includes, paying off credit cards or installment loans or selling things. If your goal is to buy a home, it may be a good time to sell that expensive camper to get rid of the monthly payment. Alternately you could look at buying a less expensive house that would better fit in your budget. Lastly, you could review options to consolidate debt and refinance high interest credit cards into a lower payment.

Your Loan was Denied due to Insufficient Assets

When you buy a home, you are required to document the money needed for your down payment. Part of the underwriting process is sourcing and seasoning your assets. This means that you need to show where your money came from if it was freshly deposited into your bank accounts. Unverified deposits must be subtracted from your available assets that you can use to qualify for a mortgage.

If your loan was denied because you did not have enough cash, there are several solutions you can consider:

Look for Mortgage Options with a Low Down Payment or No Down Payment: The current lender you are working with may not have as many options for low down payment mortgages. There may be home loans that require less cash for your down payment.

Save up Money in your bank account:

Cash on hand cannot be used to qualify for a mortgage. You cannot deposit large sums of money into your bank account and use it to buy a home. An alternate option to this is to deposit only your weekly paycheck and let that accumulate while you pay your expenses with the cash on hand.

Look for Gift Options:

When buying a home, you may be able to get a gift from a family member to use towards your down payment. Most loans allow for this as an option. Have a conversation with your family members and see if they have some available asset they could gift to you so you can become a home owner.

The last option to review if your loan was denied because of insufficient assets is to sell your belongings. Remember documentation is key if you are going to sell things to use as a down payment on a home. You should keep a thorough paper-trail including a sales agreement signed by both parties, an appraisal of the item you are selling, documentation that you are the owner of the item and proof of payment such as a copy of the check or money order. Do not accept cash as cash cannot be easily verified.

5) Get a Second Opinion from a Different Mortgage Company

If you have completed the first 4 Steps and did not find a quick solution to get approved for a mortgage, then the best answer is to get a second opinion from a different mortgage company. No two lenders are alike. All lenders have different guidelines and requirements for financing. A bank or lender may have denied your loan due to one of their internal “overlays” which is an additional restriction on financing.

Your best chances at financing are to get a second opinion form a mortgage broker. Mortgage brokers will have access to multiple banks and lenders and can review all your home loan options with one application. Typically mortgage brokers can also offer lower rates and lower costs than other banks and lenders.

To get a second opinion on your home loan options call a licensed loan officer at Riverbank today at 800-555-2098. Our experienced loan officers will take the time to review why you were denied by the other lender and provide solutions to help get your approved for a mortgage.

Request Information Now!

How to Get Your Offer Accepted

tips to get your offer accepted

If you have been searching for a house in the last couple of years, you will be familiar with what the real estate industry calls a “lack of inventory”.  This means that there are more people looking to buy houses than there are people interested in selling homes and there is more competition on each home.  This imbalance causes a housing shortage which can be a frustrating situation for families looking to buy a home and makes getting your offer accepted a tough task.

The housing shortage has created a spike in home prices. According to the National Association of Realtors, “The median existing-home price for all housing types in March was $250,400, up 5.8 percent from March 2017 ($236,600).” This increase in prices has been affecting home affordability nationwide.

Infographic from http://www.simplifyingthemarket.com/en/2018/04/27/existing-home-sales-grow-despite-low-inventory-infographic/

Locally in West Michigan, it is very difficult to find affordable homes under the $200,000 range. For first time homebuyers and those looking to downsize they are seeing multiple offer situations and bids far over the home’s listing price. Some desperate buyers are going as far as to waive their right to inspections and guaranteeing to pay above appraisal amounts. For those that do not have access to large amounts of cash, they may have a hard time competing with their bids.

How to Get your Offer Accepted to Buy a Home in a Sellers Market in Michigan

Getting your offer noticed in a stack of multiple offers is not an easy feat. Many sellers are reviewing several offers for their home and simply disregarding lower priced offers and also offers with contingencies and what they consider riskier financing. Here are 8 tips on how to make your offer stand out and get your offer accepted to buy a home in Michigan.

1) Get a Strong Pre-Approval to Strengthen your Offer

To get your offer accepted there are several things a buyer can do. First of all you should speak with a local, knowledgeable, licensed loan officer that can Pre-Approval you for the strongest type of mortgage that you can qualify for. Typically sellers see conventional as the best type of financing because it has less requirements for the home’s condition than other loan types and can close quickly. Receiving a strong pre-approval from a local lender will put you a leg up on the competition with generic automated letters from the big national companies.

2) Consider Alternatives to Seller Paid Closing Costs

If a buyer does not have enough funds to cover their own closing costs then it is a common practice to ask the sellers to pay their closing costs as part of their offer. The sellers will view this as additional costs and reduce their proceeds from the sale. Alternatives to Seller Paid closing costs should be considered including:

  • Pay your own closing costs
  • Ask about low down payment or zero down loans
  • Get a gift from a family member for your costs
  • Ask the lender for lender credit option to reduce your costs
  • Look for ways to reduce your closing cost by shopping insurance and title company fees

3) Give the Sellers Occupancy After the Closing

Many sellers are hesitant to sell because they are fearful that they will not be able to find a new home in time to transition their belongings to a new house. It may help to calm their fears by giving them extra time to move after you close on the purchase of their house. It is common these day to offer 30 days after close for the seller to vacate the property. This may be an important reason why they choose your offer over others.

4) Personalize your Offer By Writing a Letter

As cheesy as it sounds to write a heart felt letter, my experience shows that it works! Many times there are a lot of emotions and memories that come with a house. It may be the place where they raised their children.

They may have put sweat and tears into building the house. It might have been a house that was in the family for generations.  All these factors compel the sellers to want to make sure it goes to a deserving family that will appreciate it as much as they do. Simply tell them why your happy little family would be deserving and that you will take great care of the place.

5) Offer to Pay Seller’s Closing Costs

If you have access to cash and feel strongly about getting your offer accepted, you could offer to pay for the sellers closing costs. In Michigan, Property Transfer Tax and Owner Title Insurance are typically paid by the seller unless otherwise agreed to by the buyer. If a buyer agrees to pay the sellers closing fees, the sellers would net more from the sale and walk away with more money.

6) Remove Contingencies from your Offer

Many times families will have contingencies before they can buy. For example, if you plan on selling your home before buying your next home, then you may write your offer contingent upon the sale of your home. This is a risky unknown for sellers. Your house may take a long time to sell which would not work with the seller’s timeline.

If you are able to qualify for a new home while still owning your other home, then it may be advantageous to submit your offer without a contingency for the sale of your home. Other contingencies you could remove would include appraising at sales price, or even waiving property inspections. These should be carefully considered as a last resort to get your offer accepted.

7) Adding an Escalation Clause as Part of your Offer

Speak with your real estate agent about how an escalation clause may work for your situation. In general, a clause would be added stating that if someone else offers higher than your offer, you will automatically increase your bid higher than theirs. You would want to make sure you set a cap on the maximum amount you are willing to offer.

8) Ask your Loan Officer to Call the Listing Agent to Confirm your Pre-Approval

Having a loan officer that will go above and beyond to fight for you is an important part of buying a home. Studies show that having a local loan officer versus a big bank or online lender increases the strength of your pre-approval. Part of a seller’s concern when reviewing offers on their home is that the buyer’s financing may fall through. If your loan officer has already received your documentation and confirmed that you are a well qualified buyer, then ask them to call the listing agent to confirm the details and give the sellers confidence in accepting your offer!

To review home loan options with a Licensed Loan officer simply complete the form below to request a free consultation or call us now at 1-800-555-2098.

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Conventional Loan vs FHA Loan vs VA Loan vs USDA Home Loans

compare home loan options

When shopping for a mortgage it is a good idea to compare loan options. Many lenders offer a variety of home loans that might fit your needs. Each mortgage options has it benefits and weaknesses that should be considered for your individual loan needs.

Lending guidelines are not the same for all mortgage lenders.  All banks and mortgage companies operate off the same set of guidelines for the specific mortgage programs however each may have its own overlays. Lending overlays are additional conditions or interpretations of the set guidelines.  For example, FHA loans with a 3.5% down payment allows as low as a 580 credit score but most banks and lenders add an overlay that requires a 640+ credit score.

The best way to review mortgage options is to speak with a licensed loan officer that will be an expert on the loan options. They will help to review the pros and cons and assist with comparing home loans that may be the best for you.

The chart below compares Conventional Loans vs FHA loans vs VA loans vs USDA Rural Development Loans.  These are the most popular loan options that most borrowers will review. As you can see below, if you have had a recent bankruptcy or foreclosure then Conventional would not be an option.

If none of these options seem to fit your life situation then a portfolio loan may be your last resort. Portfolio mortgages are home loans that do not fit the agency guidelines. They take a more common sense approach and make exceptions on loan requirements if the borrower is has financial strength in other areas. The trade off is that they typically require larger down payments and have higher rates than other loan programs.

Home Loan Comparison Chart

April 11th, 2018:Conventional LoansFHA LoansVA LoansUSDA Loans
Minimum Required Down Payment3% of Purchase Price3.50% of Purchase Price
(Only 1.5% required for our FHA Down Payment Assistance Program)
Zero DownZero Down
Annual Mortgage Insurance Rates (Paid Monthly)Private Mortgage Insurance (PMI)  ranges from .10 to 1.5% of the loan amount annually based on Residency Status, Credit and Loan to Value.Mortgage Insurance Premiums (MIP) ranges from .80% to .85 % for loan terms over 15 years and .45% to .95% for loan terms of 15 years or less.NONE.5% of loan amount
Additional CostsIncrease to rate or loan fees based on credit score1.75% Upfront Mortgage Insurance Premium added to your loan balance or paid in full at closing.0% fee if Disabled Veteran or surviving spouse
2.15% for First VA Loan Standard Military
2.40% for First VA Loan National Guard or Reserves
3.3% Subsequent Loans
2.00% Funding Fee added to your loan balance.
Minimum Credit Score620+ credit score530+ with 90% loan to value and 580+ for 96.5% loan to value550+ credit score580+ (Additional requirements including proof of Rental History under 620 score)
Maximum Loan Amount$453,100 Loan Limit
(Read More)
$294,515 Loan Limits for Single Family Homes
$377,075 for Two Units
$455,800 for Three Units
$566,425 for Four Units
$453,100 Loan Limit$453,100 Loan Limit
Allowable Seller Contributions

Principal Residence & Second Homes
LTV Greater than 90% = 3%
LTV 75.01-90% = 6%
LTV 75% or less = 9%

Investment Properties
ALL LTV ratios = 2%

6% Seller Contributions payable towards Buyer Closing Costs and Pre-Paid items.4% Seller Contributions payable towards Buyer Closing Costs and Pre-Paid items.USDA sets no maximum however most lenders set 6% Seller Contributions payable towards Buyer Closing Costs and Pre-Paid items.
Required Waiting Period after BankruptcyChapter 7 requires 4 Years from discharge date
Chapter 13 requires 2 Years from discharge date
Chapter 7 requires 2 Years from discharge date
Chapter 13 requires 1 Years from discharge date
Chapter 7 requires 2 Years from discharge date
Chapter 13 requires 1 Years from discharge date
Chapter 7 requires 2 Years from discharge date
Chapter 13 requires 1 Years from discharge date
Required Waiting Period after Foreclosure

7 Years from Completion

3 Years from Completion2 Years from Completion3 Years from Completion

To review home loan options with a Licensed Loan officer simply complete the form below to request a free consultation or call us now at 1-800-555-2098.

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Budgeting to Become a Homebuyer

budgeting for home ownership

You have found yourself in debt, but you have also found yourself wanting to buy a home.  You want to pay off the money that you owe all while saving up money for your dream home. It is possible? First off, you should know that you are not alone. Many people find themselves in situations such as this, but there is a way to come out of this and end up in a home that you love.

Budgeting is the Place to Start to Prepare for a Home Purchase

Let’s be real budgeting can be overwhelming, but hear me out! Instead of thinking of budgeting as a restriction think of it as a guide. A guide that will lead you down to a path of financial stability. And besides what is more terrifying — budgeting or being in debt?

Step 1) Budgeting: Track your expenses

Start by writing down your expenses. How much do you spend on food? Gas? Going out? Track what you are spending for one month and when you are done determine if that amount of money is over or under what you can afford.

Step 2) Budgeting: Reduce expenses

Figure out what things you can cut back on. Do you really need to do things like going out to eat five times a month? Probably not.

Look for alternatives to the things you normally do. Instead of going out to eat for lunch at work, pack your lunch. Instead of going out to the movies, rent one and have a comfortable night in with your friends, family, or significant other. If you want to go out try finding coupons for the place you are going and save money that way. One thing you should ask yourself when shopping for things that you really do not need is if you would rather have that particular item or a home.

Step 3) Budgeting: Save Money

Once you have figured out ways to cut back on spending, put the extra money into a savings account. Try and save up an emergency fund of at least $1000 or whatever you feel comfortable with. It can be hard to eliminate credit card debt, for example, when you do not have an emergency fund established because something expected can happen and force you to use your cards and bring you more into more debt.

One way to earn money is by selling your possessions that you do not want or need.  You can use the profits from this to reduce debt or save up for a down payment. Just make sure that you are receiving sales receipts for the items that you sale so that you have documentation for the lender on how the money got into your account. You could also use the money from the things that you sell to live off instead of taking money out of the bank.

Step 4) Budgeting: Pay down debt

When you have an emergency fund saved up, then it is time to start paying off your debts and raise your credit score! At the very least you should make sure you are making your minimum payments. Lenders usually look at the minimum balances that are reported to credit companies in order to calculate your debt-to-income ratio.

So once you have your emergency fund established use the money that you were putting into the fund into either the card/loan with the smallest balance to get it paid off quickly or into the card/loan with the highest monthly balance (if you are able to pay it off in a relatively decent amount of time).

This can take time. It can take up to 30 to 60 days to show that you have paid on a credit card or a loan. You can try calling your credit card companies to figure out when they report to the credit companies. This can help you find out when it will be best to pull your credit when applying for a mortgage.

What About Loans that Require Zero Down?

Piggy Bank

If you do not have money saved, you may still be eligible for a zero down home loan with Riverbank Finance.  We offer great zero down programs including the USDA Mortgage and VA Loan. USDA loans only apply for rural homes and VA loans acquire you to be eligible for military benefits. Ask your loan officer if you are eligible for these options.

Keep in mind, even with zero down loans, there are costs in addition to the down payment. those trying to get a mortgage would also need funds saved up for appraisals and closing costs. To save on cash at closing, a buyer could as the seller to pay for these costs as party of the sales agreement.

Low Down Payment Mortgages

A common misconception is that you need to save 20% for your down payment. While there are benefits to applying a large down payment, most people do not have access to that large of a bundle of cash. We have several low down payment options that might be perfect for your situation!

1% Down Conventional Loan

Riverbank Finance LLC is pleased to offer the Conventional 1% Down Mortgage with Equity Boost home loan program. In this program, you can purchase a home with 3% equity, but only 1% down payment. How does that work? You, the buyer, contribute 1% and we, your lender, contribute 2% giving you a total of 3% equity at close.

FHA Loan with Down Payment Assistance

Another great low down payment options is our FHA loan with down payment assistance. With this program you will get a gift of 2% of the sales price towards your down payment. This means that you would only need 1.5% down for the required down payment.

One of the most important things is to not make budgeting and saving money seem like a chore or else it might make you want to stop trying. If you need advice on what you should do in your situation give Riverbank Finance a call and let our trusted loan officers help you find a solution to your debt issues and help you get the home that you want.

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8 Common Mortgage Questions

For some, buying a home can be a scary experience, but it doesn’t have to be. The first step of the homebuying process should be to do research. Researching is one of the most important things that future homebuyers could and should do. Here are some commonly asked questions about mortgages and the homebuying process.

1. Am I able to get a mortgage if my credit is not that great?

Even if your credit score is not the greatest you may still be able to qualify for a loan. Having a higher credit score is beneficial though as it allows for buyers to get better interest rates. This saves them from paying thousands of dollars more than someone who has a low credit score. The minimum credit score for conventional loans is 620, while the minimum score that the FHA, VA Loan, and USDA Mortgage will allow is 580. That being said, lenders have their own minimum scores that they will accept.

2. What type of home loan is best for me?

It all depends on your situation. If you have a high credit score and money for a down payment, conventional would probably be a good choice for you. At Riverbank Finance, we have loan options that will pay up to 2% of the 3% down payment requirement if the client has a credit score of 720 or higher for conventional loans. This is great because then it means you only have to put 1% down on your home.

If your credit score is between 620 and 720, the down payment can be as low as 3%. If your credit score is not that great, a FHA loan would probably be the best for you, but you will need a 3.5% down payment. A USDA loan is great for those who are looking to live in a rural area and want to put zero down. Veterans can apply to get a VA loan which is also zero down.

Related: Michigan Down Payment Assistance Program

3. How do I get pre-approved for a mortgage?

Call up Riverbank Finance today if you are looking to get pre-approved. Our loan officers will be able to tell you over the phone whether or not you are pre-approved. You will be asked about your income, available assets, current debts, employment, details about the property, and credit. It is beneficial to get pre-approved because it not only lets the seller know that you have a lender ready to work with you, but it also tells the seller that you are a serious bidder.

4. What documents are required for a home loan?

Typically, you be required to send in the following documents:

  • Driver’s License
  • Social Security Card
  • 1 Month Worth of Paystubs
  • 2 Years of Most Recent W2s
  • 2 Years of Most Recent Tax Returns (if self-employed or commission)
  • 2 Months Bank Statements
  • Most Recent Quarterly Retirement Statement
  • Home Owner Insurance Quote
  • Purchase Agreement

Once your file is in processing you will be asked for additional documents specific to your situation.

5. Should I buy mortgage discount points?

That depends on your situation. One point usually costs about 1 percent of the mortgage and usually reduces your interest rate by 0.25 percent. Sometimes it does not make financial sense to buy points. Especially if you do not plan to live in the house for that long of a time. It can take a long time to make up the expenses that it cost to buy the points. If that is the case, then buying points may not be so beneficial for you. On the other hand, if you plan on keeping the property for a long time then buying the points can potentially save you thousand of dollars in interest.

6. How much do I have to pay for closing costs?

Closing costs will vary for each loan. They could range anywhere from 0 to 5 percent but usually average to about 2 to 5 percent of the purchase price. Closing costs typically include fees from title insurance, property taxes, mortgage application fees, and homeowners insurance. If you ask for seller’s paid concessions that can cut down on the amount of closing costs that you need to pay.

7. How long does it usually take to close?

At Riverbank Finance, we aim to close our loans within 20 to 30 days. The industry average time to close a mortgage is currently around 43 days according to the Ellie Mae mortgage survey. The amount of time can vary though depending on your situation. It is important to keep in touch with your loan officer and processor though the whole course of the loan. It is also extremely important to get the additional documents that are asked for in order to keeping the loan moving.

8. What does the process look like?

First, your loan officer will take you through the pre-approval process listed above. Your loan officer will then help you complete a loan application. After you are pre-approved or if you are pre-qualified you will be asked to send in your official documents. Your loan officer will check these over and make sure that they match up to the information given early.

After you have sent in a purchase agreement your loan will go into processing. You and your loan processor work together to send in the additional documents that the underwriter asks for in your conditional approval. Once all of these conditions are met your loan can be scheduled to close.

If you have any additional questions, please call Riverbank Finance at 800-555-2098 and ask to speak with one of our loan officers. Or sign up on our website. Remember the homebuying process does not have to be hard if you do your research up front!

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