Why Every Home Buyer Should Get Mortgage Pre-Approval

What is the benefit of having a Mortgage Pre-Approval when looking for a new home?

There is a difference between a Mortgage Pre-Qualification and a Mortgage Pre-Approval.

A mortgage pre-qualification is based on the information you verbally give to your loan officer to  get a snapshot of how big a house you might afford and how much money you can afford to borrow to buy it.

A Mortgage Pre-Approval is an application file reviewed by an underwriter to be sure your income; assets and credit history qualify you to get the loan you are applying for.

Knowledge is Key:  A Mortgage Pre-Approval gives you a firm idea of how much house you can afford. The underwriter bases this amount using a formula that compares your income to your total outstanding debt.
The Debt:Income Ratio (DTI) is derived from the monthly payments that show up on your credit report and the income documents you surrendered as part of the process. This will keep you focused on the big picture and help to prevent being disappointed if you fall in love with a home that is too expensive.

Improve Your Negotiating Position:  When a seller is comparing two offers and one of the buyers has Mortgage Pre-Approval there is a high confidence level that the deal will go through and close sooner. This may help you to win in a competitive bidding situation.

Confidence in Your Offer:  Knowing that the key information in obtaining a mortgage has been reviewed by an underwriter will give you, and the seller, confidence that your offer is bona fide.

Keeping Your Spending On Track:  Having detailed information on your interest rate, mortgage payment, closing costs and down payment requirements will help you stay within your monthly budget.

Time is Valuable:  Knowing what you can and cannot afford can save you time and frustration in the house hunting process. This will help your Realtor find the perfect house in your price range.

Move in Quicker:  Having Mortgage Pre-Approval will save you time when you submit your complete mortgage application for approval. Everything has been done beforehand. All you need is and inspection, appraisal and closing documents. The faster you close, the sooner you can begin to enjoy your new home.

pre-approval 2If you are looking to buy a new home, a Mortgage Pre-Approval is the smartest way to get into your new home. Call Me at 860.945.9284 to discuss the right mortgage option for your family and to take advantage of my  FREE Jump Start Mortgage Pre-Approval service.

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100% USDA Loans Now Cheaper: Lower MI in 2017 for USDA Loans

usda 2The USDA Guaranteed Rural Housing Development Loan (aka USDA RHD Loan) is extremely popular with Millennial Home Buyers.  That’s because the program requires Zero Down Payment. That’s right… 100% Financing is available to purchase eligible properties in select areas of Connecticut.

And, it just got more attractive  Just in time for the New Year, the USDA lowered its new year.jpgUp-Front Mortgage Guarantee Fee from 2.75% to 1.00%. And… it also reduced its Monthly Mortgage Insurance Premium from 0.50% to 0.35%

The USDA loan is now one of the most affordable home loans available, This fee reduction makes the RHD less expensive than FHA products. A USDA home loan can make owning a home less expensive than renting one  and could be the avenue for Millennial Home Buyers to move into a new home in 2017. 

What Is a  USDA Loan? The United States Department of Agriculture partners with approved local lenders to assist homebuyers with competitive interest rates and loan terms to buy their primary residence in select areas of Connecticut

The Program Offers:
usda 3100% Financing – No Down Payment is Required. Coming up with a Down Payment is one of the biggest barriers to entry into the housing market for Millennial Home Buyers. A USDA mortgage eliminates that obstacle.

Closing Costs Can Be Rolled Into the Loan Amount. The closing costs associated with obtaining a mortgage can be included in the loan amount when the appraised value exceeds the contracted sales price.
Liberal Credit Scores. The USDA Guarantee allows lenders to approve mortgages that would not qualify under guidelines for other programs. Applicants with credit scores down to 640 are eligible for this loan.
Debt:Income Ratios: To qualify, you must meet debt-to-income requirements. The DTI ratio limits are 29% (for PITI) and 41%. The reduced fees make it easier to meet these ability to pay guidelines.

Millennial Home Buyers often chose the more expensive FHA loan program, even when they are buying in USDA-eligible areas. If you are buying in a suburban or rural area, it pays to check USDA eligibility maps. Choosing USDA can save you the 3.5% down payment that FHA requires. And, now that the reduced mortgage insurance fees are in effect, you can save money each month over FHA

Eligible home buyers should weigh the benefits of a USDA loan.

First Home Buyer Tips They Don’t Teach You in School

teacher.jpg
You don’t learn about how to buy a house in school. They don’t teach you  what you need to apply for a mortgage, what kind of loan you’ll need, or what PMI is (it’s called private mortgage insurance)

And let’s not mention that you need to shop around for the best deal — or you can hire somebody to do that for you.

So here are some First Home Buyer Tips to help guide you through the home buying experience. 

BEFORE YOU START LOOKING
♦  Have a conversation with your significant other about what you’re millenial 2looking for, what you need and what you can do without. Standing in the living room during an open house with your real estate agent isn’t the time to argue about wanting three bedrooms instead of four.
♦  Know your financial records. What’s your credit score? How much Low Monthly Paymentsoutstanding debt do you have? What monthly payment can you afford?
How much money did you make last year? You’re going to need to know all of this information. Have all of your paperwork ready to go.
♦  Know your limit — if you can’t afford a $450,000 house, don’t go look at $450,000 houses.
♦  Shop around. There are dozens of real estate agents, attorneys, and mortgage officers so don’t settle. These people are going to work for you, their job is to make you happy. You’re going to be on the phone and meeting with them frequently, so make sure you like who you’re working with.
♦  Do your research. When you do decide on a real estate agent, he or she isGet Pre-Approved going to want to know what your price range is, what neighborhoods you’re interested in, if you want to be close to schools, expressways, public transportation, etc. Know what you want and Get Pre-Approved! 

WHILE YOU’RE LOOKING
♦ This is the big one you’ll be glad someone told you about.
Don’t get too attached to a house, because if it the deal doesn’t work out, for whatever reason, you’re going to be devastated.
♦  Be willing to negotiate, it’s a big part of the game.
♦  This goes hand-in-hand with negotiating: put your foot down and don’t let anyone take advantage of you. If the seller is asking for way more than you’re told the house is worth, or if they’re not willing to fix something that is broken or at least negotiate the cost, you have to be ready to walk open houseaway. There will be more houses, trust me.
♦  Don’t just purchase a house by its listing. Go look at EVERYTHING. A lot of houses look different in person than they do on-line, good and bad.

First Home BuyerI have the belief that anyone that deserves to own a home should be able to do so. The American Dream is still attainable for those buyers who do their homework, establish a game plan and work hard to achieve that goal. I’m here to help.

Source: http://www.silive.com/news/index.ssf/2016/06/buying_your_first_house_things.html

Preparing To Own Your First Home

Preparing To Own Your First Home
referralAs a First Time Homebuyer, you’re about to make one of the biggest financial decisions of your life. For Millennials, a new home represents the most expensive purchase they’ll ever make. One of the best things you can do is read, research and learn about the mortgage application process. The more you prepare, the more confident you’ll feel about purchasing the home you want.

Mortgage Pre-Approval
Being pre-approved by a lender gives you the confidence to shop for a new house, knowing exactly how much you can afford. You can avoid looking at properties that don’t fit your budget. The pre-approval helps you know exactly what is possible right from the start. In fact, most realtors expect you to be pre-approved.

How Much Can You Afford?
A good place to start is to look at your current expenses. You probably have FHA MIboth “fixed” expenses… i.e. car payments, taxes, or day care … and “discretionary” expenses… i.e. things like travel, clothing, entertainment, or other areas where you can decide how much to spend.
Then, make up a budget. You’ll see how much of your monthly income is already committed to “fixed” expenses, as well as how much you have to spend on a mortgage payment, taxes, and insurance for a home.
Of course, how much you can afford also depends on how much debt you have. Long-term debt – i.e. debt that will take more than 10 months to pay off – is what lenders are most concerned about. If you have long-term debt that is considered “excessive” for your income, it will probably limit how much you can borrow. If you have a lot of long-term debt, you may want to pay off some of it before you apply for a mortgage.

mortgage financeRemember: I’m always here to help make things easier.  Reach out to Me at rick.cignoli@norcom-usa.com to discuss your mortgage options and to take advantage of my FREE Jump Start Mortgage Pre-Approval service.

FNMA Enables Norcom Mortgage To Close More Conventional Loans

Changes in FNMA Guidelines Enables Norcom Mortgage to Close More Conventional Loans 

News Flash
Here’s What’s New …

1.   Unreimbursed Business Expenses. Buyers earning <25% of their income from commission, bonus or overtime no longer have to account for a reduction in income due to unreimbursed employee expenses. That means tradesmen in particular may use their total gross income to qualify for a mortgage and not be penalized for taking advantage of legitimate business deductions.

2.   Move Up Buyers. Buyers moving up to a bigger home and converting their current residence to investment property no longer need a minimum 30% equity position in the vacated property in order to use the rental income from the vacated property for debt service on the new home. All rental income from the former residence can now be used immediately.

3.   Cash Reserves.   Buyers using stocks, bonds, mutual funds and retirement accounts now can use 100% of their vested balances toward the asset reserve requirement. If those balances are >20% of the funds needed for the down payment and closing costs, buyers no longer need to show proof of liquidation for those funds. Less paperwork means faster closings.

Contact Me Today to Learn More! At Norcom, We Make Homes Happen!

The Mortgage Underwriter and Your Mortgage Application

The Mortgage Underwriter is one of the most important people in the Mortgage Application process. Without the approval of an underwriter, no lender will fund or close on a loan. It is the job of the underwriter to ensure a borrower can repay the loan they are applying for and to determine that the sales price is supported by the appraisal value before granting lending approval.

app approvedApproval of a Mortgage Application is based on several things: income, credit history, debt ratios, and savings.
♦  A borrower must be able to prove a stable income and job history needed to repay the loan.
♦  They also must have a credit history that reflects a stable record of repaying obligations and a balanced debt to income ratio. Additionally, a borrower’s monthly debt must fall within acceptable limits determined by the loan product’s guidelines.
♦  Lastly the borrower must show that they have enough money saved for their down payment and closing costs. It is also smart to have a few months of mortgage payments saved away in case of an emergency.

It is the Mortgage Underwriter’s job to make sure all of these factors meet particular loan guidelines. The underwriter will evaluate all of this information and sometimes ask for more information or explanations from a borrower to clarify and support their decision on the  Mortgage Application.

Mortgage Underwriters also review the Appraisal to make sure it is accurate and thorough, and that the home is truly worth at least the purchase price. A property’s appraised value is also reviewed by the underwriter to ensure the value supports the amount of the loan you are requesting. A good underwriter will also take into consideration the condition of the property, the location of the property and how it may be affected by natural disasters, such as floods.

An Mortgage Underwriter does his or her best to evaluate the potential risk involved when lending to a borrower. In January 2014, the Consumer Financial Protection Bureau enacted stricter requirements on some mortgages, which included tougher background checks into your bank account, spending and employment history.  If an underwriter does not follow all guidelines and makes a poor lending decision and the loan defaults, meaning a borrower stops making payments on their mortgage, it could result in a hefty cost to the lender.

The Mortgage Underwriter has final approval and final responsibility for the Mortgage Loan.  They must make important decisions based on the facts presented in the file, their own judgments and similar application experiences. The Mortgage Underwriter has to take a calculated risk and do his/her best to determine if a file adheres to not just the letter but the intent of the loan program guidelines. It is not an easy job.

First Home Buyers and the Ability to Repay Rule. What It Means To You.

The Consumer Finance Protection Bureau (CFPB) has implemented certain laws decreeing that before banks grant a mortgage they must make a good-faith effort to determine that First Home Buyers, will be able to pay the loan back. The Ability to Repay Rule (ATR) went into effect in January 2014.

Why is the Ability-to-Repay Rule Important?

FHA MIThe Ability-to-Repay rule will make sure that consumers assume mortgage obligations that they can afford and it protects all parties from the negative effects of loan defaults.
Lenders must determine that applicants for mortgage loans will have the ability to repay the loan. All lenders must collect and verify certain consumer financial information including:
1.  Current or reasonably expected income or assets
2.  Current employment status
3.  Credit history
4.  The monthly payment for the proposed new mortgage
5.  Monthly payments on other mortgage loans you get at the same time
6.  Monthly payments for other mortgage-related expenses (such as property taxes, homeowners insurance, mortgage insurance, Condo fees)
7.  Other current debt obligations including child support and alimony payments
8.  Borrower’s current monthly debt payments plus the proposed monthly mortgage obligation compared to the borrower’s monthly income.Your monthly debt payments, including the mortgage, compared to your monthly income is … the all important “debt-to-income ratio”
You must have enough assets or income to pay back the mortgage.
Lenders have to verify income and credit information from a reasonably reliable third-party source. The lender must determine that you can repay the loan. If your income shows on yourMortgage Checklist tax return, you might be able to use it to qualify.
Be prepared to provide copies of bank statements, mutual fund and 401k statements to prove you have the ability to cover the down payment statements and closing costs and any reserves to cover any financial problems down the road.  https://mortgagemarketdigest.wordpress.com/2013/03/14/mortgage-application-checklist/
The allowable Debt-to-Income Ratio is capped at 43 percent.
That is, once the mortgage is issued, the borrower’s fixed debt service costs, including the mortgage, credit cards, car loans, student loan debt, and nearly anything else recorded by the credit bureaus, a Borrower’s DTI cannot be greater than 43 percent of pre-tax income.
This isn’t a radical change. For years now, whenever I meet with a new buyer, I always ask about their comfort level with a mortgage payment. We discuss debt repayment, taxes, insurance and PMI and back into the mortgage amount they can afford. I can’t recall the last time we ever got close to this cap.
What will be the Impact on First Home Buyers?
Mortgage ApprovedBuyers will likely find a more stringent loan approval process that requires a lot more documentation verifying the statements made on the application. Lenders already pull a current credit report and verify employment just before issuing a “Clear-to-Close” on the file. Don’t be surprised if lenders start asking for additional documentation to re-verify income and assets just prior to closing too.
Bottom Line
It’s really back to basics in the mortgage industry. That’s what it should be and should have been. If a buyer has worked hard to deserve a new home and can afford one, then they should be able to buy one. Regretfully, it has taken federal regulation to try and strike a balance between protecting consumers from predatory lending to uneducated, unsophisticated consumers, and shutting off the flow of credit to the housing sector.

Call Me at 860.945.9284 to discuss the right mortgage option for your family and to take Get Pre-Approvedadvantage of my FREE Mortgage Pre-Approval service. Then call your agent to schedule a showing and be ready to make an offer.
With today’s attractive rates, and my direct relationships with trusted lenders who offer a wide range of affordable mortgage programs, you just might be able to move into your new home this spring.
Licensed in all 6 New England states; NY & FL too. I’m here to help.