Closing Your Loan

If you’re in the process of obtaining a mortgage loan then you are probably interested in getting to closing as quickly and efficiently as possible.  In previous blogs we have discussed how to get to closing; what you need to have and what you can expect through the process, but what happens when you get to the finish line? Your application for a mortgage loan has been approved and you have received a commitment letter from us. The final step before you can call the house your own is the closing, or settlement, of the purchase transaction and mortgage loan. You will have to sign a purchase agreement and your loan request will be approved, but you still have no rights to the property, including access, until the legal title to the property is transferred to you and loan is closed. You should have an understanding of what is involved in the closing process, and here I discuss what you need to do to finish up this process.

When you get to closing, you will sign the necessary documents, the seller will transfer the deed to the property, funds will be collected and disbursed and the closing agent will record the necessary instruments to give you legal ownership of the property. Settlement of a mortgage loan is a legal process, so specific procedures and requirements will vary according to state and local laws. This information applies to closing practices in our area.

As soon as you receive firm approval from us, the lender handling your loan, you will want to confirm the actual date of loan closing. An estimated closing date was probably specified in the sale contract, but a firm date needs to be set by your agent.  The loan closing date will include representation, either in person or through documentation, of all the necessary parties - the buyer, the seller of the property, the party’s agents, the title company, and your lender. Your loan commitment can expire, as can the rate lock agreement, so the settlement date should be set with that in mind.  The settlement date also has to allow adequate time to assemble all of the required documentation. The real estate agents involved in the sale transaction and the lender are often the best people to coordinate the closing arrangements, since they are the most knowledgable and experienced in this area. Most lenders require at least three to five days advance notice of the closing date in order to prepare the loan documents and get them to the closing agent.

Examples of documents that may be required for closing:

• ·         Title Insurance Policy
• ·         Termite Inspection and Certification
• ·         Survey or Plot Plan
• ·         Water and Sewer Certification
• ·         Homeowner’s Insurance
• ·         Flood Insurance
• ·         Certificate of Occupancy or Building Code Compliance Letter

Closing your home loan is a standard process in home ownership, but it there are variances for individual situations. Your process may be shorter or longer than your neighbors and this could be due to the documents needed, the seller’s specifications, the house’s necessary repairs, and your financial agreement. Contact me for only the highest quality lending and begin the process of homeownership.

What Is a Conforming Loan?

This week I will be discussing conforming loans, as a sequel to last week’s blog, where we discussed combination loans. A conforming loan is a mortgage loan that is equal to or less than the dollar amount established by the conforming loan limit set by Fannie Mae and Freddie Mac. The term "conforming" most often refers to a specific mortgage amount; however, the terms "conforming" and "conventional" are frequently used interchangeably. Mortgages that exceed the conforming loan limit are classified as non-conforming or jumbo mortgages.

The Office of Federal Housing Enterprise Oversight (OFHEO) sets the conforming loan limit on a yearly basis. The OFHEO has regulatory oversight to ensure that Fannie Mae and Freddie Mac fulfill their charters and missions to promote homeownership for lower income and middle class Americans. It’s set to provide loan limits and agreements that apply to buyers with less money to spend on a home and those looking for less expensive houses. 

The OFHEO uses the October to October percentage increase/decrease in average housing prices in the Monthly Interest Rate Survey of the Federal Housing Finance Board (FHFB) to adjust the conforming loan limits for the coming year. In other words, they base the loan limit for the following year on the average house prices for the current year.

The term conforming loan became popular sometime after 1970 when Freddie Mac and Fannie Mae created standardized loan documents and processes. If a buyer fits the criteria set forth by Freddie Mac and Fannie Mae, it is known as a conforming loan. Conforming loans for a One Unit primary residence in our area have the following loan limits and minimum down payment requirements:

            

             Conforming Loan; maximum loan amount is $417,000

                        Minimum dawn payment is 5%

            Conforming High Balance Loan; maximum loan amount 1s $625,500

                        Minimum dawn payment is 10%          

           

There is less risk with a conforming loan because lower loan amounts are involved. If you fit the qualifications to obtain a conforming loan then you can use it to purchase your next home. As a loan officer for Intercoastal Mortgage Company, I can not only supply you with the most professional service, but the best quality a lender can provide. We specialize in many different types of loans and are here to help you achieve your dream. Contact me to beginthe process.

What Is a Combination Loan

A Combination loan could be appropriate for your needs if you don't have the necessary funds for a down payment, can't access liquid funds at the time of your purchase, or you need a large loan. Combo loans, sometimes referred to as piggyback loans, is financing that incorporates a second mortgage behind a larger first mortgage.

In this blog we will discuss what a combo loan is and how they can benefit a borrower.  There are several reasons these types of loans are appealing…

1)      Many home buyers do not have the ideal down payment, typically 20%, for that particular property

2)    Many home buyers do not want to put down or liquidate the necessary assets to get to that down payment

3)     May be used as an additional option besides traditional mortgage insurance (MI)

In high cost areas such as ours it can be very difficult to save the required funds to get to an ideal down payment.  Combo loans allow access to funds for borrowers that may not have access to a large down payment.

Many borrowers have worked very hard to save for a large down payment.  When a borrower faces the reality of having to part with their savings, they may feel as though they are not going to be able to replenish their savings in the manner they would like.  A combo loan allows them options in retaining a portion of their savings.

Many people must purchase MI if they lack the traditional 20% down payment. MI applies to the first loan on your home in the event that the loan amount exceeds 80% of the purchase price or value in a refinance.  When you have a combo loan, the first loan is for 80% of the lesser of the purchase price (or the appraised value in the case of a refinance) and the second loan is for the remaining balance. The second loan normally has a higher interest rate than the first loan.

The advantage to you as the borrower is that the interest from both loans is now tax deductible. Also if you desire to pay down your loan, the second loan is for a smaller amount than the first, therefore easier to pay off. The total payment for the combination loan can be lower than if you had traditional MI. These loans are typically known as 80-15-5 (5% down payment) or 80-10-10 (10% down payment). Your down payment can be for any percentage or dollar amount. Here are two different scenarios to illustrate the option:

•                    80/15/5- This scenario involves putting down 5% of the purchase price, and financing a first mortgage of 80% of the purchase price, coupled with a second mortgage comprising 15% of the purchase price.

•                    80/10/10- This scenario involves putting down 10%, and financing a first mortgage of 80% of the purchase price, coupled with a second mortgage comprising 10% of the purchase price.

Dividing a mortgage into two loans enables you to avoid having to pay mortgage insurance. It is typical for lenders to require mortgage insurance when you finance more than 80 percent of the home’s value. If you qualify for and choose to go for a combination loan, you may avoid mortgage insurance, thereby saving money on the premium. You may also save on closing costs when the two loans go through the same lender and close at the same time. You also benefit from combination loans when your loan amount exceeds the limit for conforming loans. As of 2010, the cut-off for a conforming loan is $417,000 in most states and $729,750 for designated high-cost areas (later reduced to $625,500).  You divide up the loan so that the larger amount stays under the limit, and obtain the lower conforming interest rate for the first loan. You will want pay off the second higher-rate loan over a short period of time to decrease costs. We will be discussing conforming loans in greater detail in a future blog.

Before President Bush signed into law the Tax Relief and Health Care Act of 2006, mortgage insurance premiums were not tax deductible. As of January 1, 2007, borrowers can now deduct mortgage insurance payments on their tax returns. There are some complexities to deciding whether to get a combination loan or mortgage insurance; you have to determine what works best for your individual situation. Your mortgage lender should be able to consult with you about your best options. At Intercoastal Mortgage Company we specialize in all aspects the loan process and do our best to ensure you get your desired house. Contact me for afree consultation and take the first steps toward homeownership.

Understanding a Good Faith Estimate

A Good Faith Estimate (GFE) is an important yet sometimes confusing mortgage document that potential homeowners and those refinancing their homes may encounter. A GFE could also be one of the most powerful negotiating tools for you to land the best deal on a mortgage loan. This document helps ensure borrowers end up with the same terms they were quoted at the closing table. In this blog I discuss what a Good Faith Estimate is and how you can use it.

A Good Faith Estimate is the estimated closing costs associated with taking out a mortgage loan to buy or refinance a home based on your personal information. Included in the GFE is a summary of your anticipated loan terms, an itemized list of all the various costs involved with financing, and how much money you will need to bring with you to closing. In the past, lenders provided potential borrowers with Good Faith Estimates, however, there have been many changes in the way these are used and provided to clients.

We will need some information from you so be prepared when you come in, call, or apply online to fill out a loan application. Here is a list of what we will need from you to give you a good faith estimate:

·       Your name

·       Your monthly income

·       Your social security number (to obtain a credit report)

·       The desired property address

·       Estimate value of the property

·       Loan amount

·       Other items necessary and relative to the loan

The Good Faith Estimate is provided to potential homeowners to help them avoid overpaying for a loan and sets forth the expected interest rate. Loan charges, third-party fees, and other costs associated with the loan must be displayed uniformly. In the past, lenders weren’t always uniform in their estimations of fees included on the Good Faith Estimate and how such fees should be disclosed. Sometimes sellers agree to pay all or some of the buyer's closing costs, but when they don’t a GFE comes in very handy to maintain the expected expense of purchasing a home.

At Intercoastal Mortgage Company we provide our clients with an accurate Good Faith Estimate and the most professional service a lender can provide. Contact meand begin the loan process to own your own home.

5 Tips to Prepare for a Home Loan

People often ask when the best time to buy a house is. The answer is: right now. Current mortgage rates are the lowest they’ve been in many years. Though it is not as easy to quality for a home loan now as it was several years ago, borrowers who are prepared and have the professional support of a quality lender, improve their position considerably. This blog discusses the best way to prepare for a mortgage loan, so when you are ready for home ownership, you have a better chance of successful funding.

These tips will help you prepare to obtain a mortgage:

·       Have an idea of how much you can afford - though this can change once you consult with your qualified loan officer, it helps to have a starting point. Start by completing a loan application form for us so a loan officer has their specific financial information and can run qualifying numbers

·       Know your credit scores - it is easy to obtain a credit report.  This will give you scores and show any areas of concern which you may need to address

·       Know what documentation you are going to need. Our application process at Intercoastal Mortgage Company is very easy and streamlined, your loan officer will tell you what you will need to produce as you move through to closing your loan. Examples of documentation would be copies of pay stubs, W-2 forms, and bank statements.

·       Have your documents ready when we need them - when you find the house you want, you don’t want your processing delayed while you search for documents.

·       A little education can go a long way - know the current interest rates, learn how closing costs, points, and different types of loans effect the terms. We help our clients put all of this in perspective to make the best choice for their individual situation.

Good credit is the key to obtaining a mortgage with favorable terms in this lending market. Get copies of your credit scores and credit history and study the reports carefully to make sure there are no errors or issues to resolve. Make sure you know your budget, and be prepared for unexpected expenses.  We will help you with any questions and assist you in this process for the best possible outcome. Contact me and you can begin the process of home ownership.

Buying a Home with Little or No Credit

Establishing good credit is very important when seeking a loan. This is a critical element that lenders evaluate your ability to handle debt and make payments on time. There are a few suggestions for how to establish good credit, such as securing a credit card, car loan or other personal loan. Once you have the credit, be sure to make timely payments on all your bills, and pay at least the minimum payment on your new credit card every month. Keep records of payments for such expenses as phone, utilities, and rent payments. This offers documentation of your credit worthiness, should you need it. Don’t fall into the “more is better” trap where credit cards are concerned. One or two established accounts may be better than several accounts -- avoid taking on excessive debt as this may decrease your credit score and ability to qualify for a home loan. This blog is about what you must do to purchase a house when your credit is not well established.

The three general things lenders consider when qualifying applicants for a home loan are credit, income, and assets. Of course, there is more complexity to the qualification process, but these are the main categories that are reviewed. If you do not have an extensive credit history, you must show you can handle a mortgage loan through your income and assets, and you may be asked to put down a sizable down payment to mitigate the risk of loss.

Here are some options to help you with the process of homeownership if you have little or no credit:

• ·        Raise your credit score with credit card purchases and other credit purchases
• ·        Ensure all other areas of your financial life are strong and intact such as job, rental history and outstanding monthly bill payments
• ·        Find a co-signer with strong credit who will lend their financial strength to your mortgage application - consult with your loan officer on the implications of this approach

There are options available if you are trying to obtain a home loan with no credit. Government-sponsored FHA (Federal Housing Administration) loans may be a good option for you to consider. We offer several types of mortgage loans, with options to suit a variety of situations. The main thing is to contact me so I can help you determine which option is best for you to use to buy your new home.

What’s The Best Way to Get a Down Payment

For many potential homebuyers, the money necessary for a down payment is often the biggest deterrent to home ownership. A typical down payment for a house is 20%. Many people, particularly first time home buyers who do not have money from the sale of their previous home, don’t have that much cash available. This blog is about helping you with the process of homeownership by giving you some tools to acquire the most important prerequisite; the down payment.

Suppose you have found the perfect house and interest rates are still low, but the one thing standing between you and your dream home is a 20% down payment. We’ve compiled a list of several ways you can acquire enough money for a down payment. As with all aspects of the mortgage lending industry, which can be complex, these suggestions should be run past your loan officer to get their professional input prior to making any decisions:

·        Monetary Gifts - Ask your parents or a relative give you money as a gift. You may agree to pay the money back (more like a loan) but acquiring the funds in the form of a gift rather than a loan is preferable for certain mortgages. All gifts need to be documented as such.

·        Shared Costs - Ask the seller to pay all or part of your closing costs. Many loan programs allow seller contributions.

·        Zero Point Loan - Consider this as a way to help lower your closing costs. In some cases you can even take a slightly higher interest rate in exchange for a credit back from your lender at settlement.

·        Low/No Down Payment - Ask your loan officer about some of the loan programs available today that require little or no money for a down payment. Examples include; 100% financing, 103% financing, 80/15/5 loans and more.

·        Borrow from Yourself - You may have financial resources in a retirement plan, such as a 401K or Thrift Savings Plan (TSP). You may consider borrowing money from your retirement funds or from the available cash value of a life insurance policy. Consult your tax or insurance advisor for these options.

·        Sell Something of Value - You may consider selling an asset to raise cash for your down payment, such as a car or boat.

The down payment will be a critical factor in whether you get the house you want. As stated in previous blogs, there are many options available and we are here to help. Don’t let the amount of a typical down payment keep your from exploring your options to own a home.  Now is the time to buy for multiple reasons so don’t miss out on these low home prices and mortgage rates. Contact me and get the house you desire.