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Facts or Myths

  • “It’s impossible to get low down payment loans.” – FACT! FHA down payments are 3.5% and VA is 0%. In some areas, there may be some 0% down payment USDA loans available. FNMA and Freddie Mac have 3% down payment programs.

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  • “It takes perfect credit to get a loan.” - FACT! There is a relationship of better rates to better credit but many issues on a credit report can be explained or corrected. The way to know for sure is to speak to a reliable lender.
     
  • “If I’ve had a bankruptcy or foreclosure, I can’t qualify.” - FACT! Credit history following a bankruptcy or foreclosure is very important and there can be extenuating circumstances. It only takes a few moments with a reliable lending professional to find out if your individual situation will allow you to qualify for a new mortgage.

  • “Getting pre-approved is expensive.” - FACT! Usually, the only expense to getting pre-approved is the cost of the credit report which could be around $35. The advantage is that you will know that you qualify for a particular mortgage amount.

  • “I should wait to qualify until I find a home.” - FACT! It can take weeks to qualify for a mortgage especially if there are issues that need to be corrected. The best interest rates are only available for the highest credit scores. It is to your advantage to start the qualifying process early in your home search.

  • “All lenders are the same.” - FACT! Reliable lending professionals will explain the entire process before collecting fees, quote fees up-front, have competitive products, do what is necessary to get the loan approved and close at the locked rate and terms. Ask for recommendations from recent borrowers.

  • “Adjustable Rate Mortgages are more expensive than fixed rate mortgages.” - FACT! Adjustable Rate Mortgages can be less expensive than fixed rate mortgages if the buyer’s circumstances warrant it. If a buyer is only going to be in a home for a few years before selling, it can be determined if an ARM loan will result in the lowest way to finance the property. There are many variables and you need to be aware of them before deciding which type of loan to finance your home purchase. 

Buyers and Sellers need solid information to make good decisions. Call us with your questions or to get a recommendation of a reliable lender who can give you the real facts.

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Posted by Landa Pennington on January 2nd, 2017 7:31 PM

 Pay More or Less

Paying more for your house payment does not make your home more valuable. It does mean that the mortgage rate may be higher than it has to be.

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Even though fixed rates may never again be as low as they are currently, an adjustable rate mortgage may provide the lowest cost of ownership depending on how long a borrower plans to own a home. There are different types of ARMs but the one in this example is a 30 year mortgage with the rate fixed for five years and can adjust every one year after that based on independent indexes.

Another feature of a FHA ARM is the maximum rate change in one period is 1% and the maximum lifetime cap is 5% over the initial rate.

In the example below, the payment on the adjustable is $153.48 lower for the first five years or 60 payments. Another interesting thing is that lower interest rate loans amortize faster than higher interest rate loans. In this example, the ARM has a lower unpaid balance at the end of the first five years by $4,239.

The total savings on the ARM at the end of the first period is $13,477. If a borrower felt confident they would sell the home prior to the breakeven point of 8.5 years, the ARM would produce a lower cost of housing even if the mortgage rate escalated the maximum at each adjustment period.

To help determine whether you pay more or less, consult with a trusted mortgage professional and your real estate agent to learn the advantages and disadvantages of different programs. To try your own comparison, check today’s rates at the Freddie Mac Mortgage Rate Survey and plug your numbers into an ??  Equity Accelerator.

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Posted in:Residential Loan and tagged: Home Mortgage
Posted by Landa Pennington on April 28th, 2015 9:38 PM

FHA or Conventional?

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Buyers with a minimum down payment are generally faced with the decision of whether to get a FHA or a conventional loan.  With the new 3% down payment program on conventional loans, it may become more confusing which loan to pursue.


The two loan programs have mortgage fees that can differ greatly.  FHA has a 1.75% up-front mortgage insurance charge in addition to the monthly mortgage insurance charge which was recently lowered by .5%.

FHA’s mortgage insurance is a fixed amount where conventional mortgage insurance providers’ fees are determined by individual companies and according to the credit score of the borrowers.  A borrower with a good credit score will be charged less than a borrower with a marginal credit score.

Mortgage insurance on conventional loans can be cancelled when the equity in the property reaches 20%.  FHA mortgage insurance in most cases, is paid for the life of the mortgage.  Once a borrower has a 20% equity in their home, to eliminate the monthly FHA mortgage insurance, they would need to refinance the home with a conventional loan and would not be eligible for any refund of the up-front fee paid at closing or added to the mortgage.

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If a borrower has a low credit score, FHA may be the better choice because conventional underwriters may have a higher minimum score.  FHA loans also tend to be more lenient than conventional loans when a borrower’s total monthly debt exceeds 45% of their monthly income.  FHA tends to allow borrowers a shorter time frame after foreclosures and bankruptcies.

The decision-making factor is which mortgage will provide the lowest cost of housing including payment and all loan fees.  A lot of information is necessary to make a good decision and typically, the borrower isn’t able to acquire it on his/her own.

A trusted mortgage professional is very valuable in not only providing the information but guiding the borrower through the entire process.  Your real estate professional is uniquely qualified to make such a recommendation. 

Posted in:Residential Loan and tagged: LoanHome Loan
Posted by Landa Pennington on March 27th, 2015 10:41 PM

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