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What First-Time Home Buyers Don't Know About Mortgages

Joseph Coupal - Monday, February 12, 2018

Prime Lending at The McMullen GroupWhen it comes to mortgages, there's a big gap between what people think they need in order to get one and the reality of what buyers are successfully doing—especially young people.

But you know what? When it comes to what might be the biggest purchase of your life—one that can be incredibly intimidating for first-time buyers—it’s nice to know real facts. And in the mortgage market, reality is very often different from perception. Or, for that matter, myth.

Last week, the National Association of Realtors issued its 2017 Aspiring Home Buyers Profile report. The report cites data from surveys taken in the third quarter of 2016 about down payments.

The report summarized that 39% of nonowners believe they need more than 20% for a down payment on a home, 26% believe they need to put down 15% to 20%, and 22% believe a down payment of 10% to 14% would work.

So on average, those non-owners thought a down payment would need to be about 16%. The reality? The average down payment on purchase mortgages in 2016 was 11%.

In fact, when we drill into the purchase mortgages taken out by people under 35, who represent the majority of first-time buyers, we see the average down payment was even lower, at just under 8%. In other words, aspiring first-time buyers think it takes twice as much to buy a home than it really does.

Perception, meet reality

But averages can be misleading, right? Especially when there is a wide distribution, like we observe with down payments. When we dig into what actually happened in 2016 we find that most young people buy homes with ... less than 5% down. That's less than one-third of what the average nonowner had assumed!

As with many things in life, the most correct answer to the question of how much you need to put down is “it depends.” There are a slew of important factors like who you are, your financial circumstances, the home's location, and the price of the home.

It is possible to buy a home with a mortgage with no money down. VA and USDA loans are the most popular loans that offer the ability to put no money down. In 2016, 16% of buyers under 35 put no money down.

The largest share (36%) of loans for buyers under 35 in 2016 was for people putting down something less than 5%. The options there include loans offered through the U.S. Department of Veterans Affairs and the U.S. Department of Agriculture, but also 3% down payment programs backed by Fannie Mae and Freddie Mac (aka conforming loans). And, of course, this includes the traditional 3.5% FHA mortgage that is primarily targeted to first-time buyers.

More than half of young people who successfully bought a home with a mortgage in 2016 put at most 5% down. The average dollar amount for these buyers was $3,500. That's right, if you have #FOMO from your friends buying homes, the majority of them are putting down just a few thousand dollars.

How are they doing it? The aforementioned mortgage products (conforming, FHA, VA, and USDA) represent almost 99% of the mortgages to people under 35 in 2016. There is nothing exotic about this.

And it doesn't require perfect credit, just fair credit. The average FICO was 713, and the floor we observed in FICOs (below which very few mortgages were made) was 639.

Put that all together and you can see that for the millennial dreaming of buying a home this year, you need a FICO score of at least 639 and enough money that you could put down at most 5%. If you live in a typical American town, what you need could be as little as $3,500.

That sounds a lot more attainable than most people think. The truth is out there! Take advantage of it.

For more information on home mortgages, contact Prime Lending at The McMullen Group.

realtor.com


Documents Needed for a Mortgage Preapproval: A Checklist

Joseph Coupal - Tuesday, February 06, 2018

Prime Lending at The McMullen GroupTo get preapproved, you’ll need documents that verify your income, employment, assets and debts.

Getting preapproved for a mortgage before you go home shopping isn’t required, but it is a good idea, especially in a seller’s market, where competition among buyers is intense. Unlike a prequalification, a preapproval letter lends weight to your bid on a home, proving to sellers that you have the financial clout to stand behind your offer.

To get preapproved, you’ll need to verify your income, employment, assets and debts, says Bob McLaughlin, senior vice president and director of residential mortgage at Bryn Mawr Trust, in Bryn Mawr, Pennsylvania.

It’s likely you already have many of the records you’ll need, or easy access to them. Gathering the documents shouldn’t take more than a week, depending on the lender’s requests and whether you need records from outside sources, like an attorney or county government.

Even for a preapproval, your lender may want more documents, especially if you’re self-employed or your income comes from several sources. Also be prepared to share information such as your Social Security number, which is used to check your credit reports and scores; your employer’s name and address; and your hire date.

Here’s a list of documents you’ll need.

Documents needed for mortgage preapproval

INCOME AND EMPLOYMENT

The documents required to verify income depend on how you get paid. This step is easiest for workers with a paycheck from one source, which provides an annual W-2 form, and who have little or no overtime or shift differentials.

Tax returns: Copies of your two most-recent federal and state returns may be required.

Income:

  • W-2 wage earners: Copies of W-2 forms and your two most recent payroll stubs. If income includes overtime, bonuses or differential pay, you may need your most recent end-of-year payroll stub.
  • Self-employed, freelancers and independent contractors: Self-employed borrowers, including sole proprietors, partnerships and S-corporations, need a year-to-date profit and loss statement and two years of records, including the Form 1099s you used to report income and file taxes.
  • Real estate income. Document the rental income, address, lease and current market value of a rental property if you will use this income to qualify for a mortgage.

ASSETS

  • Bank statements: Copy 60 days’ worth of statements for every account whose assets you’re using to qualify for the mortgage. Include even blank pages of the statements.
  • Retirement and brokerage accounts: Two months of statements from IRAs, investment accounts (stocks and bonds), and CDs. The last quarterly statement from 401(k)s showing the vested balance. As with bank statements, include every page, even blank pages.

DEBTS

Monthly debt payments: Lenders examine your payment obligations to calculate your debt-to-income ratio. List all monthly debt payments, including student loans, auto loans, mortgage and credit cards. Include each creditor’s name and address and your account number, loan balance and minimum payment amount. If you have no credit history, utility bills may be used to help you qualify for a mortgage based on nontraditional sources of credit.

Real estate debt: If your current property is mortgaged, have your most recent statement — showing the loan number, monthly payment, loan balance and the lender’s name and address — and the declaration page of the insurance policy.

OTHER RECORDS

Rent: Renters need to show payments for the last 12 months and provide contact information for landlords for the last two years.

Divorce: Have your court divorce decree ready, if applicable, and any court orders for child support and alimony payments.

Bankruptcy and foreclosure: Ask your lender what documents they’ll need and how long you should wait after bankruptcy or foreclosure to re-enter the housing market.

Down payment gift letters: Lenders will want to talk about your down payment. You’ll need to show the sources of the money you plan to use. If your funds include gifts, you’ll need to get letters from your donors showing they don’t expect to be paid back. Gift letters aren’t required for preapproval but borrowers need to know to be prepared.

Whew. You’re done for now. Keep those files handy, though. You’ll need these documents again when applying for the loan.

For more information on home mortgages, contact Prime Lending at The McMullen Group.

nerdwallet.com


How to Choose the Best Home Mortgage

Joseph Coupal - Monday, January 29, 2018

Prime Lending, The McMullen Group, Boston, MAInventory debts, credit score, income and other bills to help you choose between a government or conventional, fixed- or adjustable-rate and conforming or non-conforming mortgage.

Buying a home is probably the largest purchase you’ll make in your lifetime. And choosing the right type of mortgage loan is one of the most important decisions you’ll make in the homebuying process. With so many different options out there, it can be hard to find an affordable home loan that meets your financial goals.

Start by asking yourself “How much house can I afford?” After taking inventory of your debts, credit score, income and other monthly bills, you can make an informed decision about the terms of your mortgage.

Here are three key loan decisions you’ll need to make.

  • Mortgage type: Government-backed or conventional
  • Interest rate: Fixed or adjustable
  • Loan size: Conforming or non-conforming

Mortgage type: Government-backed or conventional

There are two main types of mortgages: a conventional loan guaranteed by a private lender or banking institution, or a government-backed loan.

Most government-backed mortgages come in one of three forms:

FHA loans, insured by the Federal Housing Administration, were established to make homebuying more affordable, especially for first-time buyers, by allowing down payments as low as 3.5% of the purchase price.

VA loans are insured by the Department of Veterans Affairs and offer buyers low- or no down payment options and competitive mortgage rates. They’re available to current military service members and veterans only.

USDA loans are backed by the U.S. Department of Agriculture and are geared toward rural property buyers who meet income requirements. All three programs follow the limits for conforming loans and have low down payment requirements. More on that later.

Conventional home loans, on the other hand, are offered and backed by private entities such as banks, credit unions, private lenders or savings institutions. Borrowers need good credit to qualify. This is because the loans aren’t guaranteed by an outside source — so the possibility of borrower default poses a greater risk for lenders.

Conventional loans have terms of 10, 15, 20 or 30 years. They also require much larger down payments than government-backed loans. Borrowers are expected to put down at least 5%, but that amount can vary based on the lender and the borrower’s credit history.

If you don’t have a lot of cash saved up for a down payment but have solid credit and a stable income, a government-backed loan is likely the way to go.

If you don’t have a lot of cash saved up for a down payment but have solid credit and a stable income, a government-backed loan is likely the way to go. Keep in mind that if you choose a conventional or government-backed loan and you’re making less than a 20% down payment, you’ll have to pay for private mortgage insurance.

If you can afford to save up a large down payment and build your credit score while lowering your debt-to-income ratio, a conventional loan is a great choice that can eliminate some of the extra fees and higher interest rates that may come with a government-backed loan.

Interest rate: Fixed or adjustable

Once you’ve chosen your loan, you’ll decide whether you want a fixed or an adjustable rate. Your choice determines the interest you’ll be charged.

The interest rate on a fixed-rate loan never changes. If you’re settled in your career, have a growing family and are ready to set down some roots, a 15- or 30-year fixed-rate loan might be your best bet, because you’ll always know what your monthly mortgage payment will be. It’s worth noting, though, that if other fees are rolled into your monthly mortgage payment, such as annual property taxes or homeowner’s association dues, there may be some fluctuation over time.

Adjustable-rate mortgages, or ARMs, have interest rates that reset at specific intervals. They typically begin with lower interest rates than fixed-rate loans, sometimes called teaser rates. After the initial term ends, the interest rate — and your monthly payment — increases or decreases annually based on an index, plus a margin. They most often appeal to younger, more mobile buyers who plan to stay in their homes for just a few years or refinance when the teaser rate is about to end. Paying a lower interest rate in those initial years could save hundreds of dollars each month that could fund other investments.

Loan size: Conforming or non-conforming

The amount of money you borrow tells your lender a lot about your level of risk — and it has a big impact on your interest rate. For this reason, home loans fall into two main size categories: conforming and non-conforming.

Conforming loans meet the loan limit guidelines set by government-sponsored mortgage associations Fannie Mae and Freddie Mac. In 2018, conforming home loans for single-family homes in most of the continental U.S. are limited to $453,100. In designated high-cost areas, such as Hawaii and Alaska, the conforming loan limit for single-family homes goes up to $679,650.

Loans can be non-conforming for a few different reasons. Some, called jumbo loans, are for borrowers whose loan amounts are higher than the conforming loan limits in their areas. Jumbo loans are considered riskier and come with higher interest rates to protect lenders. You’ll need to make a larger down payment (at least 20%) and have pristine credit to qualify for one. Other types of non-conforming loans include those made to borrowers with poor credit, high debt or recent bankruptcies.

If you want to stay within conforming loan limits so you get a lower interest rate, you’ll need to tailor your home search to properties priced below the loan limit for your area. If you want a house that’s priced above your local limit, you can still qualify for a conforming loan if you have a big enough down payment to bring the loan amount down below the limit.

The bottom line

All of these options might seem overwhelming at first glance. But bear in mind that the type of loan you wind up getting will depend largely on your credit profile, income and overall financial goals. Before you start shopping for a home loan, take complete stock of your finances and try to boost your credit score as much as possible.

For more information on home mortgages, contact Prime Lending at The McMullen Group.

nerdwallet.com


What Determines the Total Cost of Your Mortgage

Joseph Coupal - Monday, January 22, 2018

Prime Lending, The McMullen Group, Boston, MCosts to secure financing are a big factor when it comes to getting a mortgage. And knowing why your loan costs a certain amount is critical to being able to understand how lenders price loans in the marketplace. People tend to think of interest rates when it comes to mortgages, but that’s not the only cost to consider.

Here’s what you need to know about the things that determine your mortgage fees.

Do I Really Have to Pay Mortgage Fees?

Remember, all loans come with fees and all fees are paid for by someone. You can have what seems like the perfect loan and there will still be fees, like closing costs. There are two situations where you might not have to pay all of the closing costs. The first way is for a seller to credit the closings cost when you purchase your home. The second is to select an interest rate that generates an overage, or credit, which is applied to your loan fees.

For the purpose of this discussion, we’ll focus on the factors that determine your interest rate and any points associated with that rate.

Two factors that determine your loan fees above anything else are your loan-to-value (LTV) and your credit score. Your loan-to-value (LTV) is the difference between the loan amount you are seeking and the value of your home. Your credit score is particularly important to how your loan is priced because it determines the risk associated with your loan.

The following things play out in terms of how your loan is priced:

High Loan-to-Value (LTV) Loans

Loan adjustments start at 65% LTV, in increments of 5%, all the way up to 95% LTV on conventional loans. For example, if you’re looking for a conventional mortgage and you have 20% equity in the home — 80% LTV — your loan will be priced worse than someone who has 30% equity and 70% LTV.

Your Credit Score

Your credit score is the barometer the lender uses to gauge your potential for default. The higher your credit score, the less likely you are to default, and the less risk the lender assumes by granting you that mortgage. When it comes to mortgages, credit scores generally break down like this:

  • 740+ — Excellent
  • 720-739 — Great
  • 700-719 — Good
  • 680-699 — Fair
  • 620-679 — Poor

Occupancy

If the property you are looking to purchase is a second home or a rental property, you might end up paying an additional pricing adjustment in the origination of your mortgage loan. Rental properties are especially known for this pricing adjustment. This change can influence an interest rate by as much as .375 compared to a primary home loan.

Property Type

If your property is a condominium and/or a multi-family property, you can generally expect to pay more. Specifically, this is because both types of properties contain more risk to both Fannie Mae and Freddie Mac than a single-family home.

Condominiums also have rules and regulations that single-family homes do not. A multi-family property, such as a duplex, is more risky because there is another unit involved and more potential liability compared to a single-family home.

Some General Guidelines

If you are looking for a mortgage with a high loan-to-value and a great credit score such as a 95% financing … then you can expect to be paying interest rate of .375 to .5 more than what you might see advertised online or in print.

If you are financing a triplex as either an owner or a non-owner-occupied transaction … then, if the property is a primary home, you can expect to pay about .5% in the form of a discount point based on the rate chosen.

If you will be renting your property out for investment purposes … then you can expect to pay as much as .5% more in the interest rate, with up to one discount point based on the rate chosen.

Final Thoughts

The moral of the story is that not all mortgage rates and pricing are created equal. If you are pricing out a loan with a lender and your scenario falls into any one or more of the intricacies outlined in this post, you can expect to pay more for the type of financing you are seeking.

For more information on home mortgages, contact Prime Lending at The McMullen Group.

credit.com


Four Ways to Buy a House, Even if You Have Bad Credit

Joseph Coupal - Tuesday, January 16, 2018

McMullen Group, Hanover, Boston, MAThings are looking better for our economy, but if you are like millions of Americans who suffered devastating losses in the Great Recession, you may still have rotten credit that's preventing you from buying the home you want. However, all is not lost!

Below is a guide through the actual problem you are facing, and a look at the top four ways to beat the system and buy your next house NOW.

It’s all about your credit score. That is a three digit number that a computer says represents the sum total of your life and determines whether you win or lost at the game of loan applications.

There are several significant ways around your credit score. But first, what IS your credit score?

Answer: It’s a three digit number that is produced by a company named FICO. It supposedly is a predictor of the likelihood that you will pay back money that you borrow today, and it is supposedly based only on five key factors of your credit history:

  1. Payment history
  2. Amounts Owed
  3. Length of Credit History
  4. New Credit
  5. Types of Credit Used

You can view your credit score on a daily basis for free on a daily basis at CreditKarma.com. They don’t even ask for a credit card, so you know they aren’t trying to scam you.

So, how do we still buy a house, even with a bad credit score?

FOUR WAYS TO BUY WITH ROTTEN CREDIT:

Owner Finance. Under this scenario, you are looking for a seller who is willing to allow you to buy their house with some amount of cash as a down payment, but instead of you obtaining a traditional loan and making payments to the bank, the seller “carries back” a mortgage on the house and you make monthly payments to the seller for principal plus interest. All the details are open to negotiation. You will need an attorney.

Rent To Own. Sometimes called a lease-purchase, the buyer is not quite ready to purchase, so he rents the house for a period of time and has the option of buying the house under certain terms and conditions at some point in the future. This has the advantage of allowing the buyer to “try out” the house for a year or two or three before making a final decision of whether or not to buy. Once again, you will need an attorney.

FHA Loan. The FHA loan program is widely used by first time home buyers. IT has various plusses and minuses, all of which you need to understand in advance, but the most important feature is that applicants are now required to have a minimum FICO score of only 580 to qualify for the low down payment advantage, which is currently at around 3.5 percent. If your credit score is below 580, however, you aren't necessarily excluded from FHA loan eligibility.

Increase Down Payment. If your credit score is below 580, you can still be considered for approval under the FHA loan program, but you must increase your down payment to at least 10 percent of the purchase price. That may seem like a lot, but the solution is to start saving today, and at the same time start working on improving your credit score. The sooner you start, the closer you will be to your goal of your next new home!

THE BOTTOM LINE: There are real and viable alternatives to needing perfect credit when you want to buy a home to live in. You need to understand the rules of credit scoring and the down payment requirements, but you still have options.

The good news is this: for most Americans, owning their own home is still likely to be the best investment they ever make.

For more information on home mortgages, contact Prime Lending at The McMullen Group.

fox5atlanta.com


Signs You’re Ready To Buy Your First Home

Joseph Coupal - Monday, January 08, 2018

Prime Lending, The McMullen Group, Boston, MARenting an apartment has its perks. You’re not responsible for maintenance and upkeep and you may have access to amenities like a swimming pool and/or fitness center. And while the apartment life is right for some people, it’s not necessarily the best long-term solution for everyone.

If you are an apartment dweller, but wondering if it might be time to move on to homeownership, here are 9 signs you’re ready to take the leap.

You’re Too Close for Comfort — If you’re tired of hearing your neighbors through the wall, or feel like they’re encroaching on your personal space, it may be time for a single-family home with a little space between you and the neighbors. When you buy a home, you get to choose just how close it is to the next-door neighbors — whether that’s 50 feet or 500 (or more)!

You’re Running Out of Room — Apartments are nice for singles, and even married couples with no kids, but by the time you start adding little ones to the family, the walls of your apartment may feel like they’re beginning to close in on you. If you’re planning on adding to the family, or even if you’d like to have space for out-of-town guests to stay (other than on the couch), purchasing a home can give you the space you need.

Things Are Breaking and Not Getting Fixed — If your kitchen sink backs up, or you’ve got an infestation of insects, the best you can do is contact your landlord and ask for help. But if you’re not getting a response, and things are beginning to fall apart in your apartment, with no help from your landlord, it’s time to get out from under that lease. While the responsibility falls on your shoulders when you own a home, that’s not necessarily a bad thing. You call the shots. So if you need to call in pest control, the plumber or repairman, you can, and you can schedule those repair at a time that works best for you.

You’re Tired of Building Equity For Your Landlord Every Month — Sure, renting may be easier and even cheaper in some aspects, as you’re not responsible for routine home maintenance and when something expensive goes out, like the AC, you’re not on the hook for the repairs. But when you rent, all that money you pay month after month, year after year, doesn’t get you anything except a place to stay for another month, and you’ll never see that cash again. When you buy a house, with each house payment, you’ll gradually build equity — money you could see again if you choose to sell down the road. By making a monthly home mortgage payment, you’re actually building your wealth, little by little.

Rent is On the Rise — You may have secured a great deal at the time you first signed your lease, but as every renter knows, when it comes to rent charges, nothing ever stays the same. Apartment complexes and even private landlords have the option to raise the rent based on market rates, or even their own whim, if they so desire. If you’re tired of the uncertainty, it’s time to buy a home and lock in an interest rate so you’ll know just how much you need to budget for housing from one month to the next.

You Could Use a Tax Break — Did you know homeowners qualify for certain tax perks? If you’re a first-time homebuyer, there may be a tax credit available, but every homeowner with a mortgage loan under $1 million is able to deduct any interest paid from their taxes. In the first few years, the majority of your monthly mortgage payment goes toward interest, so you’ll see a higher tax break in the beginning, when you’re trying to get your feet under you as a homeowner. If you purchase mortgage discount points when you close on your home, that money is also tax deductible.

You’re Ready to Invest in Personalizing Your Space — Feeling inspired from all the Fixer Upper you’ve been watching and ready to take on a decoration or renovation project of your own? Put the brakes on it if you’re living in a rental; your landlord will probably want to approve any changes first, even down to paint color. If you own your home, you have the freedom to make it what you want and let your personality shine through.

You Dream of Green Space — Just think how nice it would be to open the back door and tell the kids — or dogs — to go play outside. When you live in apartment, any outdoor space you’ve got access too is community property. But if you live in a home, you’ll likely have a yard and own your own little piece of earth. Put in a pool, build a garden, create an outdoor living space — however you want to use it, the choice is all yours.

You’re Planning for the Future — Buying a home is like making an investment in your future. Sure, you still have to make your monthly payments, but the more equity you build, the more financial freedom you have to purchase another home, buy investment properties, or put away for retirement. Owning a home gives you a measure of security for your future, something you can’t put a price tag on.

If you’re looking for a place to call your own and you’re ready to claim your part of the American Dream, contact PrimeLending at the McMullen Group today to speak with a mortgage expert in your area. Our experienced mortgage lenders will help you secure a mortgage loan to buy your dream home.

primelending.com


Renovation Financing for New Year's Resolutions for Your Home

Joseph Coupal - Tuesday, January 02, 2018

Prime Lending, The McMullen Group, Boston, MAWith renovation financing, homes that need a little TLC can get the attention they deserve.

PrimeLending and the McMullen Group can show you how renovation programs may be good options to finance a first, second or investment home, plus any needed improvements, all with one loan. Improvements can range from basic repairs to:

  • Update the kitchen or bathrooms
  • Install new carpet or flooring
  • Replace the roof, siding or windows
  • Upgrade the electrical, plumbing and/or heating systems

To bring out the best in the property of your choice, contact The McMullen Group today!


How to Choose the Best Mortgage

Joseph Coupal - Monday, December 18, 2017

McMullen Group, Hanover, MAInventory debts, credit score, income and other bills to help you choose between a government or conventional, fixed- or adjustable-rate and conforming or non-conforming mortgage.

Buying a home is probably the largest purchase you’ll make in your lifetime. And choosing the right type of mortgage loan is one of the most important decisions you’ll make in the homebuying process. With so many different options out there, it can be hard to find an affordable home loan that meets your financial goals.

Start by asking yourself “How much house can I afford?” After taking inventory of your debts, credit score, income and other monthly bills, you can make an informed decision about the terms of your mortgage.

Here are three key loan decisions you’ll need to make. Read more below.

  • Mortgage type: Government-backed or conventional
  • Interest rate: Fixed or adjustable
  • Loan size: Conforming or non-conforming

Mortgage type: Government-backed or conventional

There are two main types of mortgages: a conventional loan guaranteed by a private lender or banking institution, or a government-backed loan.

Most government-backed mortgages come in one of three forms:

  • FHA loans, insured by the Federal Housing Administration, were established to make homebuying more affordable, especially for first-time buyers, by allowing down payments as low as 3.5% of the purchase price.
  • VA loans are insured by the Department of Veterans Affairs and offer buyers low- or no down payment options and competitive mortgage rates. They’re available to current military service members and veterans only.
  • USDA loans are backed by the U.S. Department of Agriculture and are geared toward rural property buyers who meet income requirements.

All three programs follow the limits for conforming loans and have low down payment requirements. More on that later.

Conventional loans, on the other hand, are offered and backed by private entities such as banks, credit unions, private lenders or savings institutions. Borrowers need good credit to qualify. This is because the loans aren’t guaranteed by an outside source — so the possibility of borrower default poses a greater risk for lenders.

Conventional loans have terms of 10, 15, 20 or 30 years. They also require much larger down payments than government-backed loans. Borrowers are expected to put down at least 5%, but that amount can vary based on the lender and the borrower’s credit history.

If you don’t have a lot of cash saved up for a down payment but have solid credit and a stable income, a government-backed loan is likely the way to go.

If you don’t have a lot of cash saved up for a down payment but have solid credit and a stable income, a government-backed loan is likely the way to go. Keep in mind that if you choose a conventional or government-backed loan and you’re making less than a 20% down payment, you’ll have to pay for private mortgage insurance.

If you can afford to save up a large down payment and build your credit score while lowering your debt-to-income ratio, a conventional loan is a great choice that can eliminate some of the extra fees and higher interest rates that may come with a government-backed loan.

Interest rate: Fixed or adjustable

Once you’ve chosen your loan, you’ll decide whether you want a fixed or an adjustable rate. Your choice determines the interest you’ll be charged.

The interest rate on a fixed-rate loan never changes. If you’re settled in your career, have a growing family and are ready to set down some roots, a 15- or 30-year fixed-rate loan might be your best bet, because you’ll always know what your monthly mortgage payment will be. It’s worth noting, though, that if other fees are rolled into your monthly mortgage payment, such as annual property taxes or homeowner’s association dues, there may be some fluctuation over time.

Adjustable-rate mortgages, or ARMs, have interest rates that reset at specific intervals. They typically begin with lower interest rates than fixed-rate loans, sometimes called teaser rates. After the initial term ends, the interest rate — and your monthly payment — increases or decreases annually based on an index, plus a margin. They most often appeal to younger, more mobile buyers who plan to stay in their homes for just a few years or refinance when the teaser rate is about to end. Paying a lower interest rate in those initial years could save hundreds of dollars each month that could fund other investments.

Loan size: Conforming or non-conforming

The amount of money you borrow tells your lender a lot about your level of risk — and it has a big impact on your interest rate. For this reason, home loans fall into two main size categories: conforming and non-conforming.

Conforming loans meet the loan limit guidelines set by government-sponsored mortgage associations Fannie Mae and Freddie Mac. In 2016, conforming home loans for single-family homes in most of the continental U.S. are limited to $417,000. In designated high-cost areas, such as Hawaii and Alaska, the conforming loan limit for single-family homes goes up to $625,500.

Loans can be non-conforming for a few different reasons. Some, called jumbo loans, are for borrowers whose loan amounts are higher than the conforming loan limits in their areas. Jumbo loans are considered riskier and come with higher interest rates to protect lenders. You’ll need to make a larger down payment (at least 20%) and have pristine credit to qualify for one. Other types of non-conforming loans include those made to borrowers with poor credit, high debt or recent bankruptcies.

If you want to stay within conforming loan limits so you get a lower interest rate, you’ll need to tailor your home search to properties priced below the loan limit for your area. If you want a house that’s priced above your local limit, you can still qualify for a conforming loan if you have a big enough down payment to bring the loan amount down below the limit.

The bottom line

All of these options might seem overwhelming at first glance. But bear in mind that the type of loan you wind up getting will depend largely on your credit profile, income and overall financial goals. Before you start shopping for a home loan, take complete stock of your finances and try to boost your credit score as much as possible.

For more information on home mortgages, contact Prime Lending at The McMullen Group.

Nerdwallet


5 Ways To Pay Your Mortgage Every Month

Joseph Coupal - Monday, December 11, 2017

McMullen Group, Hanover, Boston, MAMortgage payment taking a bite out of your budget? Use these hacks to make it easier to pay each month, and speed up your loan repayment in the process.

Your mortgage is likely your largest monthly bill. But if you use the following five hacks, you can make that slice of the pie easier to fit into your budget. You can even save money on your loan and pay it off faster if you use your savings right! Here’s how.

1. Share your space

It’s the ultimate mortgage payoff hack: get someone else to pay the bill for you! It may sound crazy, but it’s possible if you’re willing to share your living space with others in exchange for rent. Roommates can help share other expenses too. Just be sure you’re prepared to be a live-in landlord. Make the process even easier: You can list an extra bedroom using Trulia’s free Room For Rent service!

Renting out space in your house not an option? Look to other “idling assets” you may be able to monetize. You can share (and charge for access to) things like bikes and cars.

2. Use a mortgage accelerator

Mortgage equity accelerators are a newer product on the U.S. market, although homeowners in Australia and the U.K. have used them for years. These products work by opening an account with a line of credit that you automatically deposit your paycheck in each month. You can pay all your bills and living expenses out of the account. At the end of the month, whatever is left in the account is applied to your mortgage payment. The idea is that you’ll spend less than you earn — and much less than the cost of your mortgage — so the “extra” cash is automatically applied straight to your loan. That helps you pay it off faster.

The downside is that you may need to pay a service or company to set up a mortgage accelerator for you. The additional cost of having a third party manage the account could outweigh the potential benefit. With smart budgeting and good spending discipline, you could reduce costs and apply the extra savings to your mortgage on your own.

3. Cut your living expenses

If you can hack some of the costs that come with owning a home, you can reduce your overall expenses and make it easier to pay your mortgage. This isn’t about depriving yourself or becoming a penny pincher. It’s about dropping or replacing expensive products and services with their less-expensive competitors.

You could say goodbye to your cable company and switch to streaming services. Netflix, Hulu, and Amazon Prime offer excellent programming and are a fraction of the cost of traditional cable. Even better, there are more savings to be had if you go in with friends or a sibling on a family plan — you might be able to trim the costs for your cell phone, streaming, and other services in half.

If you can’t cut the cord entirely, call your cable company and ask about different packages or service tiers that can help you save a few bucks each month. Another savings opportunity? Skip the expensive gym membership and use free alternatives such as streaming workouts online or lacing up your sneakers for a run.

Making swaps such as biking to work rather than driving or cooking at home instead of dining out can benefit your wallet and your waistline. Signing up for a grocery pick-up or delivery service can help you cut back on impulse buys — if you don’t set foot in the story, you won’t be tempted. Digital coupons, cash-back sites, and apps can make it easy to save on your necessities. It is possible to enjoy life more by spending less money!

4. Use your tax refund and other “bonus” money

Do you normally get a tax refund? Apply that money to your mortgage instead of spending it this year. Or look at your withholdings. You can adjust those to pay less in taxes throughout the year and keep more money in your paycheck. With this small salary boost, you’ll have more cash to pay on your mortgage every month.

You can use the same hack with cash from gifts, work bonuses, or any kind of windfall. Dedicate a portion of bonus money to your mortgage payment. And if the thought of using all this “extra” cash on something boring like a mortgage pains you, set aside a small amount — even just a dollar a day — for splurges and fun spending. Then use the rest to knock down the balance of your loan.

5. Put extra funds toward your loan’s principal

When you start using these hacks to pay your mortgage every month, you want to make the most of your savings. You can do that by using the money you save to pay down your home loan faster (as long as there’s no penalty for prepayment). Apply your extra funds in one of two ways. You can make an extra payment on your mortgage each month, or you can add the extra money onto your regular payment and pay more than what you owe each month.

Either strategy will help you pay your mortgage faster, which can save you tens of thousands of dollars in interest over the life of the loan. Just make sure any extra payment is applied to the loan’s principal and not just interest payments. To do so, you’ll need to be current on all your payments. Then call your loan servicer and ask if they have a process for putting extra payments toward the principal balance of your mortgage. Follow the steps they provide to make sure your money goes to the right part of your loan.

For more information on refinancing your home or paying off your mortgage, contact Prime Lending at The McMullen Group.

trulia.com


Guide To Refinancing Your Home

Joseph Coupal - Monday, December 04, 2017

McMullen Group, Hanover, Boston, MAAre you considering a home mortgage refinance? There are a number of reasons you may want to consider refinancing your home mortgage loan: from getting a lower rate to lowering your monthly payments to switching from an adjustable-rate mortgage to a fixed-rate mortgage. Perhaps you want to secure a shorter term or cash out equity from your home.

Whatever your reason for refinancing your mortgage, we know it can be an overwhelming process. That’s why we’ve put together this guide to refinancing your home mortgage. Follow these steps to reduce your stress and ensure a successful refinance.

Determine if Refinancing is Right for You — There can be many benefits to refinancing, but no two home mortgages, personal or financial situations are ever the same. Before you start the process, determine if refinancing is right for you. If your home has increased in value, you have a relatively new mortgage or interest rates are low, it’s probably a good time to consider refinancing your mortgage. Our online refinance calculator can be a helpful tool in assessing your options.

Gather Your Documentation — Refinancing requires the same paperwork you needed for your original mortgage. Update your files and obtain the latest copies of your pay stubs, tax returns from the past two to three years, credit report, statement of outstanding debts and statements of your assets. Review your credit report carefully and take steps to correct any errors. If you’re planning to refinance your mortgage, now is not the time to apply for new credit cards or make any major purchases as your lender may check your credit days before closing on the refinance.

Talk to a Lender — Start by talking to a mortgage lender you can trust, like PrimeLending, to determine your refinancing options. A professional will run several scenarios and help you weigh the pros and cons of refinancing. You can find one of our home loan experts in your community to get started.

Submit Your Application — If you have decided to proceed and submit your application, your lender will then review your credit, verify your income and schedule an appraisal of your home. The appraisal report is an important factor, but know you’ll be responsible for picking up the bill (usually $300 to $500). After your application and all necessary paperwork has been submitted, it’s normal to receive additional questions from the lender. PrimeLending uses instant notifications to keep borrowers in the loop throughout the process.

Close on Your New Loan — Once your application for refinance has been given the green light, you’re ready to set a closing. If you run into any potential problems, you’ll have three business days after signing the closing documents to cancel the refinance if necessary.

With rates remaining low, refinancing continues to be a smart option for many homeowners. Contact one of our home loan experts to see how we can help you make a smart refinancing decision.

For more information on how to refinance your home, contact Prime Lending at The McMullen Group.

primelending.com


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