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Increase Your Chances of a Mortgage Approval

Increase Your Chances of a Mortgage Approval 1200 628 John Robinson

Increase Your Chances of a Mortgage Approval

Getting approved for a mortgage is easier than you think, but you do have to be proactive, plan ahead, and set your expectations appropriately before you begin.

In many areas of the country, homes are selling quickly, and there may be fewer properties on the market. So you’ll need to be on your A-game before you start to look.

If you’re planning to purchase a home and wondering how to go about it, a good place to start is with a mortgage professional at MiLEND, Inc.  Here’s the way it will go: To gain a baseline of information, your mortgage consultant will ask about the basics, such as your income and your credit status.  He or she will run your credit information through what is called an automated underwriting system (AUS). Based on the information you provide, the AUS will show whether you can qualify for a mortgage at that time.

If for some reason you are unable to qualify, the AUS will provide very detailed information on what you need to do to qualify.  Even if you do qualify and are in a position to buy a home at that time, you still will want to find out from your mortgage consultant what payments you can afford before you start looking. You don’t want to fall in love with a home only to find out later that it’s out of your reach.  Your mortgage professional can also discuss assets and credit; lender guidelines change frequently, and you will want to know what the current guidelines mean to you.

Credit is extremely important in determining whether a lender will approve you for a mortgage. If you need to pay down or pay off debt, it may take some time. Knowing ahead means you can start now.  Don’t be disappointed later; talk to your mortgage specialist now.

This content provided by MiLEND, Inc. 

Lagging Millennial Home Buyers: Just Give Them Time

Lagging Millennial Home Buyers: Just Give Them Time 1024 536 John Robinson

Lagging Millennial Home Buyers: Just Give Them Time

Those involved in the real estate market may have noticed some demographic changes recently. Where before real estate (and much else) revolved around baby boomers, it’s now about the millennials. And while numbers vary, there are now some 75 million of them.

According to the most recent census, millennials—those in the 18–34 age range—now represent more than 25 percent of the population and 32 percent of potential home buyers, notes a survey by the National Association of Realtors® (NAR). As they age, they’ll further surpass baby boomers.

This change impacts everything from technology to the family dynamic and, of course, real estate. NAR studies show that the proportion of first-time home buyers is down for the third year in a row, despite low mortgage rates and other economic factors that suggest first-timers should be buying.  Why? A Pew Institute survey conducted in 2013 shows that millennials are living at home longer, or they and their parents may be buying homes together for cost-saving reasons. Renting—which many millennials would prefer—has become less viable in many areas as rents skyrocket and inventory drops.

Another contributing factor in the shift in the demographic of home buyers is the shift in the job market. A New York Times article from earlier this year states that many of the new jobs are appearing in urban areas, where housing is often the most expensive. And millennials like to live, work and play in cities.  At the same time, they’re having trouble finding those jobs. Credit and student debt are concerns as well, and all this is limiting the ability of the first-time millennial home buyer to save for a down payment. Conventional financing (obtaining a mortgage without requiring mortgage insurance) needs a 20 percent down payment, and credit requirements are more stringent than with Federal Housing Administration. Asset reserves are necessary. Lower down payment options (namely FHA) allow a buyer to put down as little as 3.5 percent, excluding escrow account requirements, but the cost of entry is high.

Currently, FHA requires an up-front mortgage insurance premium (which is financeable) of 1.75 percent of the amount financed; the monthly insurance premium will vary based on down payment and term of the mortgage.  Millennial buyers, however, do want to buy homes. In summer 2015, millennials made up 30 percent of buyers, according to Realtor.com chief economist Jonathon Smoke. Most of these cited family changes (marriage, kids) as their reasons for purchasing.

Give them time, says Smoke: “They should represent two-thirds of all household formations over the next five years. Job creation will favor them. Their economic opportunities are strong. And they’re planning to start families, which increases the desire to purchase a home.” Adds Lawrence Yun, NAR chief economist: “The return of first-time buyers to normal levels will eventually take place in upcoming years as those living with their parents are likely to form households of their own, first as renters and then eventually as homeowners.”

Concludes Smoke: “They’re just getting started, and their sheer size will drive activity in housing for decades.”

Content provided by MiLEND, Inc. 

Understanding the Basics of Flood Insurance Coverage

Understanding the Basics of Flood Insurance Coverage 1024 536 John Robinson

Understanding the Basics of Flood Insurance Coverage

So, what is flood insurance, and how does it work?

It seems that almost daily, we see news coverage of one area or another that has been seriously affected by flooding, and you may be asked to obtain flood insurance, or increase the coverage you already have.

So, what is flood insurance, and how does it work? It falls to the Federal Emergency Management Agency (FEMA) to study areas and create flood maps, which indicate the risk of flooding and how often FEMA expects floods to occur.

Based on FEMA’s flood maps, a risk factor is determined, which will in turn dictate the type of coverage required. Homes are categorized as being in low/moderate – or high-risk areas. Premiums are then determined and policies issued through the National Flood Insurance Program (NFIP), which was established in 1968 and renewed in 2012, and is set to expire later this year.

Factors that determine risks when issuing an insurance policy include elevation of the lowest point of the structure, the number of floors, and the age of a property.  Flood insurance is always written as coverage above and beyond traditional homeowners coverage. Typical insurance policies are very specific as to what they will and won’t cover, and often situations that are remotely related to flooding, such as backed-up sewers that happen during storms, may require special riders and premiums.

According to FloodSmart.gov, the average annual premium for a flood insurance policy is $700, and premiums are paid annually, in advance.

Content provided by MiLEND, Inc. 

Two of the Biggest Mistakes Home Buyers Can Make

Two of the Biggest Mistakes Home Buyers Can Make 1024 536 John Robinson

Two of the Biggest Mistakes Home Buyers Can Make

Two things are absolutely vital for home buyers to do before they attempt to finance a home: 1) know and understand your credit profile, and 2) think about how your income could change due to life events in the future. Miss these and they will become two of your biggest mistakes.

Credit reports

Knowing ahead of time what an underwriter will see on your credit report is extremely important both for you and your loan originator; in the event that information is incorrect and needs to be changed, you can do it prior to falling in love with a home and making an offer. If there are errors (and depending on their extent), the process can take up to 60 days, or even longer in some cases.

There many ways to get your credit report pulled. The two best options, however, are to have your mortgage professional do it – even if he or she charges you for the service – or you can approach the credit bureaus (TransUnion, Experian, and Equifax) yourself. There also are websites that promise to pull your report for free, but be cautious – there are scamsters out there.

Shortsightedness

Home buyers often don’t foresee changes in family size or employment status that could reduce your household income and the ability to pay your bills. Plan for a rainy day when you decide the amount you want to borrow; you never know when you might need an umbrella. Your mortgage professional can help you anticipate future changes and plan for them.

Content provided by MiLEND, Inc. 

Low Rates Won’t Last Forever – Prepare Ahead

Low Rates Won’t Last Forever – Prepare Ahead 1024 536 John Robinson

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

An Escrow Account Can Work in Your Favor 1024 536 John Robinson

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.

Can an Appraisal Impact My Home Purchase?

Can an Appraisal Impact My Home Purchase? 1024 536 John Robinson

Can an Appraisal Impact My Home Purchase?

An appraisal is a valuation that your lender orders before giving you a mortgage to purchase a property.

It provides an independent assessment of what the property is really worth.  In the event you are unable to make your mortgage payments, and your lender has to sell the property, the appraisal represents the true value of the home and will inform them of the sales price.  The lending company also requires someone to physically see the property and establish if there are structural problems or flooding risks that may impact its current or future value.

You pay for the appraisal

In the case of a purchase transaction, the appraisal is ordered and completed after you and the seller have signed a sales contract.  The buyer will pay for the appraisal in advance.  Regardless of the outcome of the appraisal, this fee is nonrefundable. The lender will hire a third-party appraisal management firm to ensure the appraisal is independent, with little likelihood of bias in the report.  The property is inspected (with somewhat different criteria than a home inspection). The findings are then compared with similar properties in the same area.  After adjustments are made for differences such as the number of bedrooms and bathrooms and lot size, the appraiser comes up with a value.

Your real estate agent is also able to estimate the value of your property. He or she will have access to the same information that appraisers do, and an agent with experience should be able to come very close to the value submitted by the appraiser.  The lender, however, relies on the appraisal report, and that affects you: if the property is priced higher than its appraisal value, your lender is very unlikely to loan you the money to purchase it.

Of course, that also protects you, as you likely won’t want to pay more than the property is worth.

Content provided by MiLEND, Inc. 

Ensure Your Happiness with Your Locked-In Rate

Ensure Your Happiness with Your Locked-In Rate 1024 536 John Robinson

Ensure Your Happiness with Your Locked-In Rate

Just like the stock market, mortgage rates fluctuate. They may move daily, or even hourly, and often significantly in response to global events.

When you are negotiating a mortgage, you can “lock in” the mortgage interest rate through an arrangement with your lender. The arrangement will specify a time period over which you can lock in at the current interest rate. Before you lock in your rate, you need to ensure the rate is one you are happy with not just for now, but for as long as you have the mortgage.

Because rates fluctuate, it can—and does—happen that after you’ve locked in, rates fall. A lock is a commitment on your part and your lender’s part to accept a certain interest rate, and it’s unlikely that you will be able to get it lowered once you’ve made this commitment through the agreement with your lender. On the flip side if the rates go up you lender cannot raise you rate during the lock-in period.

To be able to lock your loan, you must be either fully approved or close to being fully approved.  This is to protect the lender, because by locking in your rate, he or she is making a commitment to the investor who will ultimately purchase your mortgage.  If the lender can’t deliver on your promised mortgage, he or she will be required to pay a fee for the use of the money between the date the rate was locked and the date the investor is notified that the loan won’t be delivered. This can become expensive for the lender. Both you and your lender should respect the mortgage lock.

Lenders are unlikely to be able to predict rates in the future, and ethically they can’t—and shouldn’t—advise you on what will happen to rates. Everyone has access to the same market information; your lender has no more insight into rates than you do. Expect your lender to explain the process, but not to help you decide when to lock in.

Content provided by MiLEND, Inc. 

75 Million Millennials Are About to Shape the Future of Real Estate

75 Million Millennials Are About to Shape the Future of Real Estate 1024 536 John Robinson

75 Million Millennials Are About to Shape the Future of Real Estate

Bob Dylan was so right: ‘the times, they are a-changin’. And the residential real estate market is being swept right along.

While in Dylan’s day it was about the group known as baby boomers, it’s now about the millennials—more than 75 million of them. According to the most recent census, millennials now represent more than 25 percent of the population and 32 percent of potential home buyers.

That means that many of you reading this are or soon will be looking for somewhere to live. Your impact is inescapable, and here’s the upshot to date:

Studies in recent years, including one by the Pew Institute in 2013, show that a sizable proportion of 18-to-34-year-olds are still living at home. Another trend is adult children and their parents looking for accommodations together for cost-saving reasons, a recent National Association of Realtors® survey found.

But not everyone is concerned for millennials: Jonathon Smoke, chief economist of Realtor.com, is bullish on them. He reports that in summer 2015, millennials made up 30 percent of buyers, many of whom cited family changes (marriage, kids) as their reasons for purchasing.

And while credit and student debt remain concerns for potential millennial home buyers, give them time. Says Smoke: “They should represent two-thirds of all household formations over the next five years. Job creation will favor them. Their economic opportunities are strong. And they’re planning to start families, which increases the desire to purchase a home. They’re just getting started, and their sheer size will drive activity in housing for decades.”

Content provided by MiLEND, Inc. 

You Can Reduce Your Closing Costs, But Should You?

You Can Reduce Your Closing Costs, But Should You? 1024 536 John Robinson

You Can Reduce Your Closing Costs, But Should You?

All of the costs incurred in the course of purchasing or refinancing a home are called “closing costs.” They include fees that you pay the lender, most importantly the origination fees, but other fees as well, such as appraisal, title, and recording fees.

Closing costs are usually paid from the borrower’s funds, but often you can lower them with seller credits. As well, your lender may agree to waive some of your closing costs. Sellers are often willing to cover some of your closing costs in exchange for a slightly higher purchase price, and lenders may be willing to collect less closing costs at the closing by charging a slightly higher interest rate.

Seller credits and trade-offs                                                                            

These may sound great, but note that a higher home price or a higher interest rate will cost you more in the long run. When you begin the prequalification process, consider these “benefits” but ensure you know the downsides.

Your real estate agent can help you decide the true worth of a sellers’ credit, while your lender can explain all the mortgage options available to you, including trading a higher rate for reduced closing costs. The decision, however, is yours.

Your down payment is also required at closing, and the amount of these funds (Down payment is not considered a cost) absolutely can’t be reduced by seller or lender trade-offs. Fortunately, you can use monetary gifts from close relatives to partially or completely reduce the down payment amount that comes out of your own funds, and you may also able to use approved government or other nonprofit down payment assistance programs. 

The qualified professionals at MiLEND are more than happy to offer free advice on how to avoid unnecessary costs. For over two decades, MiLEND has helped thousands of home buyers make their American dream come true. Their helpful, licensed loan experts will take the personal approach to getting you approved for a home loan, refinance, reverse mortgage, or any one of their other helpful loan products or services.  Contact MiLEND today

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