Thursday, May 26, 2016

The Pros & Cons of Small Downpayments

     It can be hard sometimes to save a large chunk of money at once, say, for a downpayment on a home.  You already have rent, car insurance, health insurance, a car payment, utility bills and everyone needs the internet.  Those are just basics!  If you stick to a nice budget it could be easy enough to save a decent size downpayment in a couple of years on top of everything else, not including emergency spending!  But say you had a chance to get into your own home after just a couple of months of saving?  You could avoid years of spending rent money that would be lining someone else’s pocket.  

     Here are some of the Pros and Cons when considering making a low down payment purchase.

Con:  Putting less down typically means higher interest rates and monthly fees.  Often times terms of the contract on lower down payment loans requires purchasing mortgage insurance, but not in all cases.  There is a financial incentive to putting more money down up front.  However, getting into a home now can be worth it over trying to save on top of renting.

Pro:  Instead of saving for a house on top of paying rent, a lower downpayment loan will at least get you in a house you can start paying on now.  It may cost you more in interest, but it could be worth it when it’s going into your own property, in some cases, the extra interest costs can be made up for in less than a year.

Con:  Making a smaller downpayment on a home doesn’t mean you can afford a bigger one.  This is a misconception people make when budgeting.  Remember the cost of running a larger home is well, more!  You can’t hold a landlord responsible for replacing large appliances and you can’t bail to cheaper housing if your income suffers in any way.

Pro: Most people throughout their career receive periodic raises, so just because you’re not at your earning goal yet, doesn’t mean you won’t be.  Being able to make bigger payments down the road can make up for the higher interest cost up front.

     Ultimately, building equity in your home is a safe investment.  You’re protected from rent spikes and you can write off all of your mortgage interest premiums on your tax return every year.  Not to mention, owning your own home can be great! 

Tuesday, May 24, 2016

A Homebuyers Checklist

Getting into a home can take some serious planning.  While it’s easier to get a loan with a good rate then most people think, it helps if you have a plan in place— and a good credit score!  Staying organized is a good tip when first deciding to buy a home.  Gathering all the proper documentation, getting your credit ducks in a row and finding a mortgage that best suits your budget takes time.  My biggest tip in the process is DON'T start looking for a home until you know what you're preapproved for. It's the best way to temper the disappointment of a home selling before your loan goes through, and that's no way to start off one of the best investments of a lifetime!

Here's your game plan to ace the homebuying process
By: Mathew Frankel

If you’re new to the homebuying process, or if it’s just been a while, then the thought of mortgages, inspections, and house hunting can be a little intimidating. However, as long as you know what to expect, it doesn’t need to be. So here’s a quick guide that can help you through each step of the process, from first thinking about buying a home to closing the deal.

1. Check your credit and strengthen it if necessary
You can obtain a conventional loan with a 620 FICO score, but that doesn’t make it a good idea. According to recent data from, someone with the minimal credit score can expect to pay over $82,000 more in interest over the life of a $250,000, 30-year mortgage than a top-tier (760-plus) borrower.

So, before you even start the homebuying process, check your own credit. Make sure you use an actual FICO score, as this is what most lenders see. Doing this first will give you plenty of time to work on your credit score if necessary. A small increase can make a big difference in the long run, so here are a few suggestions if you need to do a little damage control.

2. Decide on a reasonable budget
It’s possible to obtain a mortgage whose payment makes your total monthly debts 45% of your pre-tax income, but by no means should most people spend this much. Depending on your tax bracket, 45% of your pre-tax income could be almost all of your after-tax income, and this doesn’t leave much for anything else. In order to prepare for a budgeting discussion, here’s a link to an in-depth article that can help you figure out how much you should realistically spend on your home.

3. Research mortgage options
There are several types of mortgages available. Conventional loans are the most common, and they require a 3% to 20% down payment. Remember that many loan issuers will require you to pay private mortgage insurance if you fail to provide a 20% down payment. There are also FHA loans with low down payment requirements and easier credit standards than conventional loans, VA loans for qualified current and former military personnel, and USDA loans for borrowers in certain rural areas (the latter two don’t require a down payment at all). In addition, many banks have their own loan programs, so it’s a good idea to do a little research.

4. Figure out where your down payment and closing costs will come from
Once you decide which mortgage type is right for you, you’ll need to figure out when your down payment is going to come from. Some types of mortgages allow some or all of the down payment to come from a gift, while others are more restrictive. In addition, plan on spending in the range of 1%-3% of the home’s price for closing costs. Plus, most lenders want to see that you have enough money in reserves (this can be in retirement accounts) to cover your mortgage payments for a few months.

5. Gather your documentation
When you apply for a mortgage, the lender will ask you for lots of documentation. By gathering it all ahead of time, you can help expedite the process, and obtain your approval faster. To help you get started, you should plan to need the following documents when applying:

  • Income verification/employment — Last two years’ tax returns, W-2s, 1099s, and your last few pay stubs
  • Credit/ID — Drivers’ license, Social Security card, or acceptable alternatives
  • Financial condition — Bank and brokerage account statements including retirement accounts, proof of funds to close, a gift letter (if your down payment is coming from a gift

Keep in mind that this isn’t a complete list, and your lender may ask for more information.

6. Get a preapproval
A mortgage preapproval is essentially the same thing as applying for a mortgage, just without a specific home in mind. In order to obtain a preapproval, a lender needs to check your credit, verify your income and employment status, and may need to see other documentation as well. Keep in mind that this is different from a prequalification, which is based on unverified information you provide and won’t carry nearly as much weight when shopping for a home. A preapproval is a commitment to lend you money and makes you look like a much more serious buyer.

7. Hire a real estate agent
Technically, this one is an optional step. You can buy a home without a real estate professional, but there are a few reasons not to do so. First, the real estate agent will do all of the research, contracts, and other time-consuming parts of the homebuying process for you — preventing your home search from turning into a full-time job. Additionally, a good real estate agent will have an extensive knowledge of the local market and can guide you through the entire process from looking at houses to sitting down at the closing table.

8. Look at houses
This is the fun part. Once you’ve narrowed it down to the neighborhoods you like, the best advice I can give is to make a list of what you have to have and things you simply want. Walk away from properties that don’t have the things on your must-have list, but it is silly to lose an otherwise perfect home for easily fixable cosmetic issues.

9. Make an offer
When it comes to offers, it’s important to appear to be a serious buyer, while still trying to get the best deal possible. As I mentioned before, this is something your real estate professional can help you with, as there are a lot of variables that go into making an offer. Is the home overpriced or priced correctly? Is your local market a buyer’s market or seller’s market? And how long has the home been sitting on the market?

10. Get an inspection and wait for the closing day
After the seller accepts your offer, you generally have a short inspection period (three to five days is common). During this time, you have the option, but not the obligation, to hire a professional to do a thorough inspection of the property. However, the inspection is a must-do. The last thing you want is to move into a house only to find out that the supposedly new HVAC is really 30 years old, the home has structural issues (like a load-bearing wall was inadvertently removed at some point), or that the entire electrical system isn’t up to code and is unsafe. All three of these have actually come up during my own home searches — and the home inspections revealed them and gave me an “out.”

One of the most common questions I get asked by homebuying friends is “Why does it take so long to close on a home?” And the short answer is that it often has little to do with you or the seller — the mortgage and legal processes simply take a long time. Chances are that after the contracts are signed, you’ll still have a month or more to wait before you actually get the keys. This can be a stressful time, but as long as you follow your mortgage processor’s instructions in a timely manner, the finish line should be within reach.

To read the original article, click here.

Friday, May 20, 2016

Spring Carnival Success!

Thanks to everyone who came out yesterday to our AWESOME Spring Carnival!  Everything turned out great from the band, to the cotton candy, to the *Special* Snow Cones.  I hope everyone had as much fun as I did and I hope our next event will be just as successful!

Tuesday, May 17, 2016

How to Pay Off Your Mortgage Faster

From Business Insider, Jessica Mai talks to Kalyn Brooke, an expert on reducing expenses, who offers some really great, practical (and achievable!) tips on how to pay off your mortgage faster!  Many people don't take the plunge into homeownership because they're worried about committing to seemingly endless monthly payments.  But in reality, beyond the interest rate, you are in control of your payments and how quickly you pay off your mortgage— not the bank!  These are great tips on how to take control of your mortgage and pay it off even faster!

6 Ways to Pay Off Your Mortgage Faster
By: Jessica Mai

A mortgage is expensive.

Buying a home is one of — if not the — biggest expenses a person will ever have, says Kalyn Brooke in her book, "31 Days of Radically Reducing Your Expenses."

Brooke, founder of lifestyle site Creative Savings Blog, was content with making the minimum payments for her mortgage, but soon realized how much it was affecting the rest of the budget.

"My wake-up call happened the first time I really looked at that end-of-year mortgage statement in the mail and realized how much interest I was paying on top of my loan," she writes. "I promised myself right then and there that I would do whatever steps necessary to pay my mortgage off as quickly as possible."

Currently, Brooke and her husband are working towards paying off the mortgage on their first home in New York along with making payments to their new second home in Florida.

Here are six tips Brooke shares to help whittle down your payment:

1. Make one extra payment per year
This is perhaps one of the most beneficial steps you can take to help lower your mortgage payments, according to Brooke.

"Even if you don't do anything else, make just one extra principal payment every twelve months," Brooke writes. "Not only will you shave years off your loan, you'll also save thousands of dollars in interest."

If you don't have the cash on hand all at once, Brooke suggests talking to your bank to find alternatives to making a one-time payment, such as sending extra payments every two weeks to spread out the impact.

2. Knock out PMI
Private mortgage insurance (PMI) is an additional fee tacked onto your monthly payment to protect your lender if you don't make enough payments.

You only pay PMI if your down payment is less than 20% of your home cost, so if you're abiding by the traditional advice that recommends putting down that 20%, you should be in the clear.

However, if you put down less, you're probably paying this extra fee. If you're being charged PMI you should know it, but you can also reach out to the holder of your loan to find out how much it costs.

Brooke suggests making extra payments to get 20% equity in your home and eliminate your PMI to pay less on your mortgage every month.

"However, don't expect banks to keep track of this for you — I've heard stories of homeowners paying more PMI than they had to because they didn't stay on top of it," Brooke write in her book. "So keep track, and call your bank when you reach that 20% equity mark."

3. Consider refinancing
Refinancing your mortgage means getting a new loan to pay off your old mortgage at a lower interest rate, and Brooke suggests doing so when interest rates are low.

However, to refinance a home you have to go through a round of closing costs, which is a collection of administrative fees required to process the new loan. It could be a few thousand dollars upfront, but "depending on how long you stay in the home it could be worth the upfront cost," Brooke writes.

4. Have your property reassessed
Property taxes fluctuate with the market, so if the current rate is lower than when you moved in, you could end up with a lower monthly payment as well.

"For those of us who have taxes included in our mortgage (also known as escrow account), there's a good chance you can lower your monthly payment just by having it reassessed," Brooke writes.

To get an assessment, Brooke suggests first contacting a realtor to find comparable properties on the houses in your area and comparing the numbers to your home, rather than going to a private company where they might charge a fee.

"If the current value [of your home] is significantly lower [than when you got your mortgage], call your tax assessor and have them send you a form to fill out with your findings," Brooke writes. "The office will then determine whether or not your home is worth reevaluating."

Brooke does mention that this option is a little bit of a gamble since it changes with the housing and real estate markets, but it's "definitely worth researching."

5. File for property tax exemption
Some states offer tax exemption or credit on property taxes for residents. However, it depends on which state you live in, how long you've lived in the property, and your personal situation.

Because potential exemptions are highly specific and subject to change over time, Brooke suggests calling your local tax commissioner or doing a quick Google to see if you're eligible.

It varies from state to state, but property tax exemptions are more likely if you are over 65, disabled, or a veteran (in fact, Veterans Network United has a full list of veteran tax exemptions by state).

6. Downgrade to a smaller property
"A smaller home could mean a smaller mortgage payment, lower utilities, and less property taxes all around, so it's definitely worth considering if you don't need as much space," Brooke writes.

She also suggests looking into alternative home options such as RVs, mobile homes, and trailers.

Along with making extra payments and eliminating taxes, Brooke also suggests analyzing your monthly purchases and eliminating anything you don't need in order to free up more money for your payments.

"Remember, when you commit to reducing debt, especially something as big as a mortgage, you must sacrifice some things in order to save," she writes. "It's not always fun, but think of how much you'll be able to put towards that mortgage if you save every possible penny!"

For the full article, click here.

Monday, May 16, 2016

May Carnival!

Okay you guys...  It's time for the May Social for the Richmond Mortgage Bankers Association and it's going to be a fun one!  When was the last time you've been to a true carnival?  One with prizes and games and good ol' burgers and dogs? I imagine it’s been a long time— which is why this is going to be extra fun!  

We have a popcorn maching, a cotton candy machine and some special, adult snow cones to be enjoyed!  Carytown Burgers and Fries will be catering, which means all of the awesome food and adult beverages are INCLUDED with your ticket.  

So come listen to live music, test your luck on the Wheel of Fortune to win giftcards and giveaways, browse The Gypsy Trunk, and play a game of cornhole!  Seriously, you could have a worse Thursday.

Thursday, May 12, 2016

All the Downpayment Details

From a Certified Financial Planner, Hal Bundrick, comes this article clarifying the downpayment option ups and downs.  You always want the best deal, the biggest downpayment - those things are important to shop around for.  The best deal, however, is to get into a house today and start putting your hard-earned money toward your future investment!

How Much Downpayment Do You Need to Buy A Home?
By: Hal Bundrick

The down payment. Cue the dramatic, fear-filled suspense music. Yeah, it’s scary. Coming up with enough cash to put down when buying a house is the single biggest roadblock for most hopeful homebuyers. But how much do you really need?

A standard down payment
Most lenders are looking for 20 percent down payments. That’s $60,000 on a $300,000 home. (There’s that scary music again.) With 20 percent down, lenders will love you more. First off, you’ll have a better chance of getting approved for a loan. And you’ll earn a better mortgage interest rate. There are all sorts of other benefits too:

  • Lower upfront fees (we’ll talk more about that in a second)
  • Lower ongoing fees (more on that too)
  • More equity in your home right off the bat
  • A lower monthly payment

Of course, there is one big, juicy caveat: The down payment is not the only upfront money you have to deal with. There are loan closing costs and earnest money to consider as well. Before the dramatic music returns, let’s explore some lower down payment options.

Getting in for less
You can actually buy a home with as little as 3 percent down. Why did we wait so long to give you that good news? Well, let’s provide the details first before we weigh the pros and cons.

The Federal Housing Administration is a government agency charged with helping homebuyers — especially first timers — get approved. The FHA assists mortgage lenders to make loans by guaranteeing a portion of the balance. That’s how you can put less money down — in fact, as little as 3.5 percent.

Plus, Fannie Mae and Freddie Mac, the government-sponsored companies that drive the residential mortgage credit market, have announced 3 percent down payments on home loans. Some major commercial lenders are also offering low down payments — and even no down payments — as incentives to spur loan demand.

And if you’re an active or retired service member, or live in a rural area, you may have access to zero down payment programs through the Department of Veterans Affairs or the Department of Agriculture’s Rural Development program. It’s always a good idea to ask a lender about down payment options when you’re shopping for a mortgage.

Or is it more?
So, which is it: Do you want to put $60,000 or $9,000 down on that $300,000 home? Or does zero down make you spring into a happy dance? Sounds like a pretty easy decision, right? But you knew there would be fine print.

A lower down payment makes you a bigger risk in the eyes of the lender. That’s why it will look for help from one of those government programs to guarantee a portion of the loan. The thing is, you pay for the guarantee. It’s called mortgage insurance. There will be an upfront fee and likely an ongoing charge built into your monthly payment.

Some of the programs don’t require mortgage insurance, but will charge an “upfront guarantee fee” or “funding fee.” Whatever you call it, a fee is a fee. And as a “higher risk,” you’ll likely pay a higher interest rate for the life of the loan in addition to the other fees.

Making the right move
It’s tempting to go with the lowest all-in upfront charges when trying to buy a home. But the key to building net worth is to buy smart, especially when it comes to such a large purchase as a house.

Lenders are required to disclose all fees and it’s always a good idea to shop around with multiple mortgage providers to get your best deal. Plus, the more you explore your options, the more you’ll learn about the process. Taking time to compare the fees from different lenders can save you thousands of dollars over the long haul.

The down payment is just the first financial hurdle. The monthly payments last a lot longer. Let’s get out of here before that spooky music comes back.

For the full article, click here.

Thursday, May 5, 2016

Closing A Loan; A Borrower's Guide

Straight from the Spring Real Estate Guide, is this article that easily explains to borrowers the new rules when it comes to disclosures, payment estimates and all those documents you're faced with when price comparing and closing on a loan!  I couldn't have said it better myself.  The new system makes it streamlined and straightforward so the borrower has no surprises and better yet, feels confident in one of the biggest purchases they'll make in a lifetime!

How to Navigate the New Rules for Closing a Loan
By Ian Salisbury

The consumer watchdog agency has given mortgage shoppers new shopping tools, but they come at a price (for now).

It’s long been an uncomfortable rite of passage for home buyers. When you show up to close the deal, you’re confronted with a foot-tall stack of papers to review and sign on the spot. Now the Consumer Financial Protection Bureau, a federal agency created in the wake of the financial crisis, is streamlining the process to make it easier to comparison shop.

Starting last October, prospective buyers receive two new disclosures instead of the previous four. (You can see samples on the CFPB website.) Like many of the government’s post-financial crisis reforms, the new mortgage regulations have sparked some industry grumbling (a need to overhaul computer systems, for one). For you, these new forms can help you save. Here’s how to navigate the new system.

Compare apples to apples

The three-page loan estimate, the first of the two new disclosures, should arrive three days after you apply for a mortgage. You’ll see all the key information you need to pick a loan: the interest rate, the monthly payment, and your closing costs. You’re still likely to be faced with a long list of fees for everything from an appraisal to a title search. But unlike in the past, when mortgage companies could and often did use all kinds of different names for these charges, the new language is prescribed by the CFPB, making comparison shopping easier.

Even better, the mortgage estimate is legally binding. While lenders have a bit of wiggle room—especially if the details of your purchase change—they are legally obligated to stick to the terms. So when you do settle on a lender, keep the loan estimate handy.

To get this form, you may have to pay a small application fee, typically associated with the costs of pulling your credit report. Still, aim to collect this valuable loan estimate from several offers you are really serious about, says Greg McBride, chief financial analyst at “By spending $30 now, you might save $3,000 later on,” he says.

Do one more review

Once you’re ready to close, you need to check that the mortgage terms are what you expected. Hence the stack of documents you used to face when you arrived at the lawyer’s office. These have been overhauled by the CFPB too. You should now receive a second five-page document called a closing disclosure no later than three days before you are set to ink the deal. While this largely contains the same information as the loan estimate, the new window is designed to give you time to review it thoroughly and work out any discrepancies with your loan officer.

Budget for delays

While the extra time and firmer loan terms are a boon to consumers, the highly automated mortgage industry is still adjusting to these advances. Not only do lenders have less room for error, but they’re facing tighter deadlines.

For instance, since the second disclosure must be delivered three days before the close, missing this deadline can delay a sale. In many cases, that’s exactly what’s happened. In November, right after the regulations went into effect, delays were blamed for a 10% drop in the number of sales that closed that month.

While mortgage companies are working out the kinks, don’t play it close. Advises Las Vegas realtor Linda Rheinberger: “Plan for a 45- to 60-day closing.” With today’s low interest rates, a new mortgage can be worth the wait.

For the full article, click here.

Tuesday, May 3, 2016

RMBA May Carnival

As the Richmond Mortgage Bankers Association's Social Chair, it is my pleasure to invite you to our Spring Event...Carnival!   Thursday, May 19th, Join us for Burgers, Hotdogs, Cotton Candy, Popcorn and lots of fun Carnival Games!  Held at the American Legion, Post 354 in Bon Air, there will be beer along with *Special* Snow Cones to get the festivities started!  Talk with colleagues and industry professionals while we kick off RVA's festival season and the start of amazing summer weather!  There are sponsorship opportunities still available with lots of perks, so for more information visit the Facebook Event Page.

Thursday, May 19
5 pm - 8pm
Non-Members Attend for: $30.00
Members Attend for: $25.00
BAND: The Killer B's