Refinance

Low Rates Won’t Last Forever – Prepare Ahead

Because interest rates have been so low for so long, you can’t blame people for believing this is the norm.

But families who financed homes in the 1980’s know otherwise. In fact, if it were 1980, you would be looking at mortgage rates that were in the 13–15 percent range, as opposed to today’s rates of 3–5 percent.  Rates can and do swing widely.  While it’s unlikely that rates will increase to this level anytime in the near future, if you’re purchasing a property in 2017 (especially if you are a first-time buyer), you may want to discuss your home financing options with a mortgage professional at MiLEND.

Renters in particular should be concerned about predictions that rent increases nationally are expected to outpace increases in housing prices in 2017; as a renter, at least get a picture from a mortgage professional of the alternatives available to you in the current low-rate environment.  The state of interest rates is really only one factor of many you need to consider if you are buying a home in the near future.

You also need to be aware of other factors that come into play, including your assets and your credit.  Down payments, closing costs, and other expenses incurred in the process require assets; if you need to start saving now, you’ll need to know how much.  And if your credit rating needs attention – such as paying down debt to get your debt-to-income ratios in line, or addressing items on your credit report – start now and you’ll be ahead of the game when you’re ready to launch your home search.

Even if you are planning on purchasing a home within a longer time frame (three to six months), you’ll want to discuss with a mortgage professional what may lie ahead, how to manage your expectations, and what actions to take now.

Content provided by MiLEND, Inc. 

An Escrow Account Can Work in Your Favor

When you decide on your mortgage and lender, you may want to consider an escrow account.

An escrow accounts primary function is to hold money to pay for mortgage-related bills.  Escrow accounts can be a useful tool in the home purchase or refinance process.  The types of loans where escrow accounts are necessary include FHA and VA loans.  All conventional loans over an 80% Loan-to-value require escrow as well.

Escrow accounts are usually held by the lender and are set up when you take out a mortgage. To fund the account, you make an initial deposit at your loan closing. At that point, the lender calculates an amount to be added to your monthly mortgage payment for the homeowner’s insurance premiums and property taxes.  For example, if you purchase a home with property insurance totaling $100 a month, prior to closing you must pay the insurer $1,200 for the first year’s coverage.  This $100 per month will then be added to the mortgage payment and held in the escrow account until it’s needed to pay the next year’s insurance premium.

In the same way, the property tax amount will be added to the mortgage payments and held in escrow to pay the property tax bill.  These bills will be paid on the customer’s behalf from the escrow account, thanks to mortgage servicing (the handling of the daily functions of a mortgage.)  The responsibility for mortgage servicing can rest with a lender like MiLEND, Inc that follows defined procedures and are regulated by the federal government.

The service provider will make adjustments to the escrow account annually, as property taxes and insurance premiums do change. If one expense is underestimated, one would need to top up their monthly mortgage payment which can be done by writing a check for the difference.  On the other hand, overages would be refunded.  Under certain circumstances you may be able to waive the escrow account, but your lender may require a higher down payment and/or credit score.

Bank Statements: The Lender’s Window to Your Wallet

Your bank statements, like your credit report, are a window to your finances and your life. They are so much more than showing a lender your assets.

Lenders are looking for things like checks that have been returned for insufficient funds. If they discover these, they will want to get to the bottom of what happened. Was it caused by a bad check written to you? Was it mismanagement of your own finances? How did this happen? How often does this happen? What will keep it from happening in the future, if they loan you money for your new home?

Other red flags lenders watch for include large, non-payroll deposits that seem to have no source. Was it the proceeds from the dining room set at the garage sale last month? Was it a reimbursement check for the office supplies you recently purchased? You may be asked to write a letter of explanation for items like these during the mortgage process.

If the deposit is a gift from someone for your home purchase, and that person is an eligible donor, the lender may ask for a signed gift letter. This must state that the deposit is for the purchase of the home and that there is no expectation of repayment on your part. The lender may also ask for proof from the donor of his or her ability to give you this money. The donor must verify that it came from a legitimate source, such as a bank account, where it has been for several months.

Why does the lender need such detail? It’s because there is a good chance that your loan will be sold to investors, perhaps multiple times. Investors will take a peek through the lender’s financial window, and your lender wants them to like what they see.

Contact MiLEND today and see what all their loyal, satisfied customers have been saying all along. When you combine their level of world class customer service with the benefit of saving money, it becomes clear that MiLEND is the premier lender to use for all your loan and mortgage needs!

Prequalification and Preapproval Are 2 Different Documents

To the average consumer, there’s little or no difference between “prequalification” and “preapproval” letters, but to lenders – and real estate agents – there’s a world of difference.

A prequalification letter is easier for a buyer to obtain. When a prospective buyer meets a lender to find out how     much house he or she can afford, the buyer may provide certain information such as employment, income and assets without providing documented proof. The lender assumes the information provided is correct and complete, and will base their decision on the information provided. Pre-qualified borrowers are not underwritten by the lender’s underwriter.

The preapproval letter is a much more detailed process in which the lender verifies, with documented proof, the information provided by the buyer such as employment, income and assets. Tax returns will be pulled from the IRS, and the buyer’s assets will be verified.  The lender’s underwriter will review all this information to determine the amount of loan the buyer qualifies for.  The preapproved buyer will have their file completely processed and underwritten by the lender.

The next step in the process is for the lender to issue a “commitment letter.” This can only happen once the buyer has found a property, and the lender has seen the appraisal, the title, and the flood cert, among other documents. The underwriter must issue a clear-to-close approval where all conditions have been met.  This letter proves the lender is sufficiently confident with all the documentation to approve the mortgage.

It makes sense as a buyer to obtain a preapproval letter to provide to the sellers when the sellers are reviewing multiple offers.   The seller will give those offers with a preapproval letter more consideration when making a decision.

Contact MiLEND today and see what all their loyal, satisfied customers have been saying all along. When you combine their level of world class customer service with the benefit of saving money, it becomes clear that MiLEND is the premier lender to use for all your loan and mortgage needs!

Conventional and FHA Loans: Which is Best?

While the list of options seems to be shrinking for mortgage customers, understanding the differences between two of the major programs, Conventional or FHA, and when you might want to use each, should help to make you a more informed consumer.  Each has its own unique benefits.

Benefits to Conventional Loans

One benefit to having a Conventional loan is that there is no upfront mortgage insurance premium required and no mortgage insurance required if the loan-to-value is 80% or less of the value of the home.  FHA, alternatively, charges 1.75% of the loan amount as an upfront mortgage insurance premium and there is also a monthly mortgage insurance premium regardless of the loan-to-value position.  If the loan amount on the Conventional loan exceeds 80% of the home’s value, there will be a monthly mortgage insurance payment. In lieu of a monthly payment on conventional loans, though, a client may opt for a single premium option. Ask one of our licensed loan officers for additional information, and which is right for you. Keep in mind, again, that no upfront mortgage insurance premium is charged on conventional loans.  The monthly mortgage insurance payments may be cancelled, on conventional loans, when the loan-to-value of the mortgage reaches 78% of the home value (additional specifications may be required, per mortgage related guidelines).

Conventional loans can be on multiple property types as well. Eligible properties include: Owner-occupied properties, second homes and investor properties. FHA loans are available only for Owner-occupied properties (unless when performing a streamlined refinance, or under special circumstances).

Benefits to FHA Loans

FHA loans do not require as much of a down payment as a Conventional loan.  FHA allows a down payment of as little as 3.5% of the sales price compared to a Conventional loan that will generally require a minimum down payment of 5.0%. FHA also has lenient guidelines, pertaining to less than ideal credit history and income requirements, as opposed to Conventional loans, which can be more difficult to qualify for, in certain situations.

FHA allows for a streamline refinance on an existing FHA loan with limited credit requirements, no appraisal required, nor income verification.  Conventional refinancing requires a full credit review, income verification and the need for a new appraisal (unless when taking advantage of Fannie Mae or Freddie Mac’s Home Affordable Refinance Program).

Contact MiLEND today and see what all their loyal, satisfied customers have been saying all along. When you combine their level of world class customer service with the benefit of saving money, it becomes clear that MiLEND is the premier lender to use for all your loan and mortgage needs!

What You Need to Know about PMI

Private mortgage insurance (PMI) is a reality that is hard to escape, especially for first-time home buyers.  PMI does not give the borrower additional homeowners’ insurance coverage but rather protects a lender against loss if the borrower defaults on a loan, and enables borrowers with less cash to have greater access to home ownership.

The cost is based on the type of mortgage product you secure, the amount you borrow for your house and the amount of your down payment,  and is added to your monthly payments. On average the cost runs about 5% annually of your total mortgage amount.

Removing PMI

Private mortgage insurance should never be permanent. Prior to agreeing to and signing the mortgage loan, ask for a written disclosure from your lender stating when the PMI payments can be removed from the monthly mortgage payments.  Once you have paid at least 20% of your loan, it is up to you to contact your lender and ask to have the PMI payments terminated.  It is a good idea to make this request by phone and in writing.  They most likely will agree to do this if you have made your mortgage payments in a timely manner.

To avoid PMI, consider asking your mortgage broker if they will waive private mortgage insurance requirements if you accept a higher interest rate on the mortgage loan.  If they do, you may see on average an increase of .75% to 1%, depending on the down payment.

Contact MiLEND today and see what all their loyal, satisfied customers have been saying all along. When you combine their level of world class customer service with the benefit of saving money, it becomes clear that MiLEND is the premier lender to use for all your loan and mortgage needs!