20
Oct
By First Rate Financial Group
Mortgage

A 20 Percent Down Payment: Is This Really Necessary?

A 20 Percent Down Payment: Is This Really Necessary?Purchasing a home is a major decision, and it could be the most expensive financial transaction somebody ever makes. Therefore, it is important to get this right. One of the biggest hurdles for a new homeowner is coming up with enough money for the down payment. A lot of people believe they require 20 percent down to purchase a home. Saving this amount of money can be overwhelming, and some people are wondering, is this really necessary? There are several key points to keep in mind. 

Putting 20 Percent Down Is Not Really Necessary

When taking a look at the prices of homes, putting 20 percent down can seem like a pipe dream for most people. Fortunately, putting this amount of money down is not actually necessary. It is possible for people to qualify for a loan with significantly smaller amounts of money. For example, there are some lenders who might be willing to provide a loan to a first-time homebuyer for as low as 3.5 percent. Even though this is still a lot of money, it is not nearly as much as 20 percent down. Potential homeowners need to do their homework and work with down payment assistance programs to make this process easier. 

Why Do People Put 20 Percent Down?

So, where does the idea of putting 20 percent down actually come from? Many homeowners decide to put 20 percent down because they would like to avoid something called private mortgage insurance, or PMI. This is an insurance policy that potential homeowners may be required to purchase on behalf of the lender to protect the lender in the event of a default. When homeowners reach 20 percent equity in their homes, they can ask for PMI to be canceled. Because most homeowners do not want this additional expense, they may feel compelled to put 20 percent down. 

Find The Right Home Loan

Potential homeowners should not feel like their dreams are derailed simply because they need to put 20 percent down. It is possible to qualify for a home loan with significantly lower down payment percentages, but every homeowner has to assess his or her options. That way, they can make the best financial decision for their individual situation.

 

19
Oct
By First Rate Financial Group
Mortgage

What is an FHA Streamline Refinance?

What is an FHA Streamline Refinance?FHA borrowers have an exceptional program available to them called the FHA streamline refinance. It’s a simple way to get a lower mortgage payment and/or lower rate, but it’s not for everyone.

Read this guide to learn all about FHA streamline refinance and how it works.

What is an FHA Streamline Refinance?

The FHA streamline refinance allows FHA borrowers to skip most underwriting tasks including income and credit verification. It’s a simplified way to get a lower rate or change your loan’s term to get a more predictable payment.

Who is Eligible?

To be eligible for the FHA streamline refinance, you must be a current FHA borrower with a current loan. To qualify, you must meet these requirements:

  • Have an on-time payment history of at least 12 months
  • You must have owned the home for at least 210 days (6 mortgage payments)
  • Show you benefit from the refinance

The on-time payment history shows lenders you can afford a higher mortgage payment with a higher rate and/or riskier terms. Since the streamline refinance should lower your payment or improve your term, it should be even easier to afford the loan.

You must prove there is a net tangible benefit to refinancing. This could mean a lower payment, lower interest rate, or refinancing from an ARM to a fixed-rate term. It must make sense for you to refinance to qualify.

How Does it Work?

If you use the non-credit qualifying version of the FHA streamline refinance, you may not have to verify your credit score or credit history. Some lenders may check it though, so always make sure your credit is in good standing.

If you aren’t sure, pull your credit reports and see if there is any negative credit history you should fix before applying. Look specifically for any late mortgage payments, late consumer payments (credit cards, personal loans, etc.), or overextended credit (using up over 30% of your credit lines).

Most lenders don’t verify your income or employment and you won’t need a new appraisal. Lenders use the value from your original appraisal to determine your LTV and eligibility for the loan.

Most FHA streamline refinance loans close much faster than a traditional refinance because of the smaller documentation and verification requirements.

FHA Mortgage Insurance Refunds

Another great aspect of the FHA streamline refinance is the FHA upfront MIP refund. You’re eligible for the refund from 6 months after taking out your FHA loan up until 36 months. You’ll earn a prorated refund each month.

For example:

  • Month 6 – 70% refund
  • Month 12 – 58% refund
  • Month 18 – 46% refund
  • Month 24 – 34% refund
  • Month 36 – 10% refund

This refund directly lowers the amount of upfront MIP you owe at the closing, lowering your closing costs.

Final Thoughts

The FHA streamline refinance is great for current FHA borrowers who want to take advantage of today’s low rates or better terms. It’s a simple program that most borrowers qualify for as long as they have an on-time payment history and can show they benefit from the refinance.

14
Oct
By First Rate Financial Group
Mortgage

After Closing On A New Home: The Top Tasks To Complete

After Closing On A New Home: The Top Tasks To CompleteClosing on a new home is exciting and many people view their closing date as the finish line; however, even after closing a new home, there is still a lot that has to happen. What do new homeowners need to do after closing on a new home?

Mark The Date Of The First Payment

Every homeowner needs to know the first date of the new mortgage payment. They need to get their bank account set up for an automatic draft, or they need to send a physical check by that time. Keep in mind that the first payment might include a partial payment from the prior month as well.

Understand That The Loan Servicer Might Change

Anyone who is sending a physical check needs to be aware that the loan servicer might change. Many banks sell their loans to another entity, which means physical checks might need to go to a new address. 

Watch For Potential Scams In The Mail

Many new homeowners receive a lot of junk mail and deceptive advertisements from scam artists. Anyone who has questions about the information they receive in the mail might want to talk to their real estate agent or lawyer to see what is real or what is fake. Sometimes, people try to sell homeowners on policies they already have, such as home insurance or mortgage insurance.

Make Sure Property Taxes And Homeowners Insurance Are Set-Up

Homeowners also need to make sure their property tax payments and homeowners’ insurance are set up. Often, the lender will escrow these payments, saving homeowners a significant amount of stress. This also means that homeowners need to make sure the lender is taking enough money every month to cover home insurance and property tax bills at the end of the year.

Look Past The Closing Date

These are a few of the most important tasks all new homeowners need to complete after closing on a new home. That way, nothing important gets overlooked, and homeowners are not surprised by anything they receive in the mail. Talk to a real estate or mortgage professional to learn more.