What is a Reverse Mortgage and How Does It Work?

What is a Reverse Mortgage and How Does It Work?If you’ve recently considered your options for taking some of the equity out of your home you may have heard about reverse mortgage loans. If you meet the requirements for a reverse mortgage it can be an excellent way to tap into the value of your home, freeing up that cash to be reinvested or used for other purposes.

In today’s blog post we’ll explore reverse mortgage loans, explaining how they work and whether or not you’re qualified to receive one.

How Does a Reverse Mortgage Work?

As the name implies, a reverse mortgage is the opposite of a traditional or “forward” mortgage in which you borrow a lump sum of money from a lender to buy a home, paying it back to them over time. With a “reverse” mortgage, instead of paying the lender you will receive money from them which does not have to be repaid until you are either no longer using that house or condo as your primary home or until you fail to meet the obligations of the mortgage contract.

Note that a reverse mortgage is still a loan, which means you will still be required to pay interest on it. As your loan balance increases with principal and interest each month the amount of equity you have in your home will decrease accordingly.

Do I Qualify for a Reverse Mortgage?

According to the federal Consumer Financial Protection Bureau, there are a number of requirements that you must meet in order to qualify for a reverse mortgage. You must be at least 62 years of age when you apply, the home you’re applying with must be your primary residence, and most or all of your outstanding mortgage debt on the home must be paid off.

If you still owe money on your original or second mortgage against the home note that part of the money from the reverse mortgage must be used to pay this debt off.

How Much Can I Borrow in a Reverse Mortgage?

Like any type of loan, the amount of money that you can receive with a reverse mortgage depends on a variety of factors. Your age, the value of your home, any outstanding mortgage debt, current interest rates and Federal Housing Administration requirements will all be taken into consideration when determining how much you will qualify for.

While a reverse mortgage isn’t terribly complex, there is certainly more to the process that can be covered in a single blog post. For more information, contact us today and we can share the specifics of how you might qualify for a reverse mortgage and whether or not it’s your best option for making use of some of your home equity.

Saving for a Mortgage Down Payment? 4 Tips That Will Help You Get There Faster

Saving for a Mortgage Down Payment? 4 Tips That Will Help You Get There FasterFor most people, the idea of saving more money each month is enough of a burden without having to think about investing in a home. A down payment, however, will require a lot more saving know-how and a lot more in liquid assets in order to be able to buy. If you’re trying to find ways to save a bit more each month, here are some sure-fire tips for raising the extra funds.

Re-consider Your Commute

Outside of rent, there are few things that will cost as much money as owning your own vehicle, so instead of holding on to yours, you may want to consider putting it up for sale. While a vehicle costs a lot in gas, there are also costs for maintenance, insurance and parking that quickly add up. By foregoing this expense, you can easily save significantly!

Stick To Your Budget

It might sound like a silly tip, but actually sticking to your budget can make a big difference in how much you’ll save. While most people have a few rules to live by, writing down every receipt and monitoring the things you overspend on can make a marked impact on your surplus when all’s said and done.

Cut Down On Coffee & Lunch

With the hustle of everyday life, many people run out for coffee or lunch every day and forget that these costs add up over time. Instead of spending $5 or $10 here and there, take your coffee to go and make your lunches at the start of each week. It may not seem like much, but this can easily add up to hundreds in just a short time.

Change Your Phone Plan

Many people think that all of the conveniences that come along with a smart phone are a necessity, but data can come at a high price and it may not be worth paying. Instead of eating a high monthly phone bill, talk to your provider about what deals they can offer you and what you can cut back on. It may seem small at first, but it will add up to a lot by the year’s end.

It can seem insurmountable to try and save up enough for a down payment, but the little things that you spend on each day can easily add up. If you’re currently on the market for a home and are considering your saving options, contact your trusted mortgage professionals for more information.

Non-QM Home Loans: How Do They Work?

Non-QM Home Loans: How Do They Work?There are a lot of people who dream of owning a home one day, but few people have the cash to purchase a home outright. Therefore, you will probably need to take out a loan to buy a house; however, what happens if you cannot qualify for a loan with the traditional loan requirements? If you are not a W2 employee, you may need to go with a Non-QM loan. What do you need to know?

What Is A Non-QM Loan?

A Non-QM loan is a non-qualified mortgage. What this means is that you do not meet the standard requirements to qualify for a mortgage. Some of the factors that you need to meet to qualify for a traditional mortgage include meeting the necessary income requirements, having pay stubs, having a debt-to-income ratio that satisfies the lender’s requirements, and taking out a mortgage that is 30 years or less. Your fees also cannot be more than 3 percent of the value of the loan. There is a common misconception that having a Non-QM loan is bad, but that is not the case. Everyone is in a different employment situation, and a Non-QM loan could be the right move for some people. 

Why Take Out A Non-QM Loan?

There are a few reasons why you should consider taking out a Non-QM loan. First, they require less documentation than other mortgages, so you might not need to produce W2s or employment verification to qualify for a loan. You also may not have to meet strict credit score requirements. If your credit score is not the best, you can still take out a home loan with a Non-QM option.

Who Should Get A Non-QM Loan?

There are many people who should consider taking out a Non-QM loan. If you plan on applying for a home loan without proof of income, this might be the right option. Furthermore, if you are a freelancer, or if you are not a W-2 employee, this could be a solid choice. There are plenty of people who could benefit from this loan, and it is important to work with a professional who can help you.

Ready to Buy Your First Home? Don’t Forget to Check Your Credit Score – Here’s Why

Ready to Buy Your First Home? Don't Forget to Check Your Credit Score – Here's WhyWhether you’re just out of college, recently married or simply haven’t jumped into the market yet, buying your first home is an exciting prospect. It can also be an expensive one, which is why most people will take out a mortgage to help finance the cost.

If you are planning on engaging with a mortgage lender, you’ll need to have your finances in order. In today’s post, we’ll share a few key reasons why you’ll want to check your credit score well in advance of buying your first home.

Your Credit Score Is A Signal For Lenders

As you know, mortgage lenders have a responsibility to lend to those individuals and families who are at a low risk of default. So when a mortgage lender starts to dig into your financial background, they are looking at your credit history and credit score to help them assess that risk.

Note that having a low score doesn’t necessarily mean you have bad credit. If you’re still in your 20s and have only had a credit card, your score might be low even though you are fully capable of managing a mortgage.

Your Score Impacts Your Mortgage Interest Rate

As mentioned above, your credit score helps to signify your risk. If your credit score is in a lower range, perhaps a 640 or 660, you’re presenting a greater risk than someone with a score of 760 or 800. Because of this, the interest rate that you pay on your mortgage will in part be determined by your credit score. Those individuals who present a higher risk pay a higher rate to compensate. And vice versa, if your credit is spotless you can expect to pay a lower interest rate.

You’ll Need Time To Challenge Any Issues

Finally, you’ll need to give yourself some lead time to challenge any irregularities with your credit report. The credit reporting agencies aren’t perfect and they do make mistakes. There may be some old, retired credit card or other debt sitting on your report which is holding the score down. Even worse, there may be some incorrect delinquency or other error which ends up as a big red flag for potential mortgage lenders.

As you can see, it’s worth spending the time to check your credit score. You get to check it for free once per year, so take advantage of the opportunity. And when you’re ready to discuss buying your first home, contact your trusted mortgage professional. We’ll share how to navigate the credit score and mortgage process so you can land the home of your dreams.

What’s Ahead For Mortgage Rates This Week – September 19, 2022

What's Ahead For Mortgage Rates This Week - September 19, 2022Last week’s economic reporting included readings on inflation, retail sales, and consumer sentiment. Weekly readings on mortgage rates and jobless claims were also released.

Consumer Inflation Rate Falls as Gas Prices Decrease

Lower gas prices was welcomed news to consumers last week, but analysts said that high inflation would continue to impact consumer goods including groceries. The core inflation rate, which excludes volatile food and fuel prices, rose by 0.60 percent, which was twice the expected month-to-month pace of  0.30 percent. Rapidly rising inflation could cause the Federal Open Market Committee of the Federal Reserve to raise its target interest rate range again in a further attempt to slow runaway inflation.

While lower gas prices provided good news for consumers, rising costs for food, clothing, and household goods added to financial pressures for many families. The Fed indicated that it would increase its target interest rate range as needed to ease rapidly rising prices.

The consumer price index rose by 8.30 percent year-over-year, which exceeded the expected reading of 8.00 percent, but fell short of July’s year-over-year reading of 8.50 percent growth. The year-over-year reading for core consumer prices showed 6.30 percent growth which exceeded expectations of 6.00 percent growth and July’s reading of 5.90 percent growth.

In related news, retail sales rose by 0.30 percent in August and exceeded expectations of 0.10 percent month-to-month growth but fell short of July’s reading of 0.40 percent growth in retail sales. August’s retail sales excluding autos were -0.30 percent lower than in July. Analysts expected 0.10 percent growth in sales based on a flat reading of 0.00 percent growth n July. Consumers assumed a wait-and-see position about spending and chose to hold on to their cash.

Mortgage Rates, Jobless Claims

Freddie Mac reported higher average mortgage rates as the average fixed rate for 30-year mortgages exceeded six percent for the first time since 2008. Rates for 30-year fixed-rate mortgages averaged 13 basis points higher than in the previous week at 6.02 percent; rates for 15-year fixed-rate mortgages averaged 5.21 percent and five basis points higher. Rates for 5/1 adjustable rate mortgages averaged 29 basis points higher at 4.93 percent. Discount points averaged 0.80 percent for 30-year fixed-rate mortgages and0.90 percent for 15-year fixed-rate mortgages. Discount points for 5/1 adjustable rate mortgages averaged 0.20 percent.

Fewer new jobless claims were filed last week with 213,000 first-time claims filed as compared to the previous week’s reading of 218,000 initial jobless claims filed. Analysts expected 225,000 new jobless claims to be filed. The University of Michigan’s Consumer sentiment rose to an index reading of 59.5 in September as compared to the expected reading of 60.0 and August’s reading of 58.2. Consumer sentiment readings over 50 indicate that most consumers feel positive about current economic conditions.

What’s Ahead

This week’s scheduled economic reports include readings on the U.S. housing market, sales of previously-owned homes, data on housing starts, and building permits. issued Weekly readings on mortgage rates and jobless claims will also be released.

Man Vs. Machine: Why Using a Human Mortgage Professional Is Better Than Trusting an App

Man Vs. Machine: Why Using a Human Mortgage Professional Is Better Than Trusting an AppAre you currently house-hunting or plan to be in the near future? If you plan on using mortgage financing to pay for your home, you will soon discover that there’s no shortage of options available to you. You can meet with a local mortgage professional, apply for mortgages online and even download mobile apps that promise to set you up with a mortgage. However, is every option equal?

Let’s explore why, in the epic battle of man versus machine, you will want to place your trust in a human mortgage professional.

Human Mortgage Professionals Have Local Experience

The first and most important reason you will want to work with a human mortgage professional is their understanding of the local real estate market. While you are likely to be working with a real estate agent, your mortgage advisor is another pair of eyes-and-ears that can help to keep your home purchase on the right path. They are also working regularly with many local clients and can share insight and information that no website or app will be able to come up with.

A Human Can Appreciate Your Unique Financial Situation

Online and app-based mortgage technology is… cold. Algorithms are processing the math and other hard facts about your financial history, with little consideration of you and your family as people. When you meet with a human mortgage advisor, you’re speaking with someone who understands the challenges that regular people face. They have also worked with numerous other clients and can appreciate why certain circumstances may have come up in the past.

A Human Will Go To Bat For You If Needed

Finally, don’t forget that a human mortgage professional is invested in your success. A mobile app isn’t going to understand when it needs to go the “extra mile” to ensure that you get the financing you need. You can trust that a human will push for that extra bit of funding or those better repayment terms as they’re on your side.

The above are just a few of the many reasons that you will want to work with a human mortgage advisor rather than using a website or mobile app. Don’t believe us? Give your local professional (and human!) mortgage team a call today. 

What To Know About Your Debt-To-Income Ratio When Buying A Home

What To Know About Your Debt-To-Income Ratio When Buying A HomeWhen you apply for a mortgage, your lender will do some quick math to figure out how much of a loan you can afford. Your lender will consider many factors, and one of the most important ones is your debt-to-income ratio. It is usually shortened to DTI, and understanding this formula can help you better understand how big of a house you can afford. 

An Overview Of A DTI

Your DTI represents the amount of money you spend compared to the amount you make. Your lender is going to have very strict DTI requirements when deciding whether you can be approved for a mortgage. The lender wants to make sure you are not taking on a loan that you cannot afford to pay. If you cannot pay back your mortgage, your lender ultimately loses that money. Generally, your lender will want to see a lower DTI as they go through your application.

Front-End DTI

Your front-end DTI includes all expenses related to housing. This includes your homeowners’ association dues, your real estate taxes, your homeowners’ insurance, and your future monthly mortgage payment. In essence, this will be your DTI after your lender gives you a potential loan. 

Back-End DTI

Then, your lender is also going to take a look at your back-end DTI. This the first two other forms of debt that could go into your DTI. A few examples include car loans, student loans, credit card debt, and personal loans. Generally, this is the most important number because it is debt that you already carry when you apply for a mortgage. Your lender can always make adjustments to your home loan to fix your front-end DTI, but your lender does not have any control over your back-end DTI. 

What Is A Strong DTI?

Every lender will take a slightly different approach, but lenders prefer to see a total DTI somewhere around 32 or 34 percent. If you already have this much debt when you apply for a mortgage, you may have a difficult time qualifying for a home loan. On the other hand, if you don’t have a lot of debt, your lender may qualify you for a larger home loan. 

 

The Quick and Easy Guide to Determining How Big of a Mortgage Your Family Can Afford

The Quick and Easy Guide to Determining How Big of a Mortgage Your Family Can AffordAre you shopping around for a new house or apartment? One of the key considerations you will need to make is figuring out how much you want to invest in your new home. Below you’ll find our quick and easy guide to determining just how much “house” you can afford. Let’s get started!

Start By Making A Proper Budget

The first thing you’ll want to do is sit down and get a full budget put together. The easiest way to get the process started is to begin with two lists: income and expenses. For the income list, write down the amount of money your family brings in each month after taxes. If you have side income sources or extra income that tends to fluctuate over time, use the average amount for the past six months.

For the expenses list, write down all the spending that you do each month. Start with the major, stable items like rent, utilities and the like. Then work your way through to discretionary spending like dining out and other sources of entertainment. If it helps, go through your bank and credit card statements to ensure that you are not missing anything.

Once you have an accurate budget, you’ll know exactly how much you can afford to pay toward your mortgage payments each month.

Figure Out How Much You Can Put Down

Next, you’ll need to think about how much cash you want to pay as a down payment on your home. The larger the down payment you can afford, the smaller amount of mortgage financing you’ll need. While it might seem like a good idea to put as much as you can down, there are some things to consider. Any money you put against your down payment is going to be unavailable to you, which reduces your financial options. You’ll also lose the opportunity to invest it, which means missing out on potential returns over time.

Determine How Much House You Actually Need

Finally, give some thought as to how large or luxurious a home you want to buy. For example, if you have a small family and don’t need a large four- or five-bedroom house, you can instead opt for a smaller but more luxurious home. Conversely, if space is a priority, you may want to forego the high-end options to ensure you have enough room.

When you’re ready to explore your mortgage options, we’re ready to help. Contact your trusted mortgage professional at your convenience. We’re committed to helping you purchase the home of your dreams.

The Minimum Credit Score For VA Home Loan Approval: What To Know

The Minimum Credit Score For VA Home Loan Approval: What To KnowWhen you are applying for a home loan, you need to make sure that you meet the minimum credit score requirements. If you decide to go with a traditional loan, the credit limit can be high, making it hard to qualify for a home loan. In contrast, you might be able to qualify for a VA home loan with a much lower credit score. What do you need to know?

The VA Does Not Have A Minimum Credit Score Requirement

One of the major benefits of applying for a VA home loan is that you do not need to worry about meeting a minimum credit score requirement. There is no minimum credit score you need to qualify for a VA home loan, as there are lots of factors that the lender will consider when reviewing your application. Your credit score is only one factor. At the same time, you are encouraged to have a credit score between 580 and 660 to increase your chances of being approved for a home loan.

There Are Other Benefits Of Applying For A VA Home Loan

In addition to the lack of a credit score requirement, there are other benefits of applying for a VA home loan. For example, you do not have to worry about putting any money down. While you might be able to get a lower interest when if you decide to put money down, you are not required to do so. You also do not have to worry about paying PMI, even if you do not put 20 percent down. This is just another way that a VA home loan can help you save money.

A VA Home Loan Could Be The Right Option For You

With so many benefits of applying for a VA home loan, it makes sense to do so; however, you need to make sure that you meet the eligibility requirements. For this reason, you should work with a professional who can make sure you qualify for a VA home loan for your next purchase.

What’s Ahead For Mortgage Rates This Week – September 12, 2022

What's Ahead For Mortgage Rates This Week - September 12, 2022Last week’s economic reporting was minimal due to the Labor Day Holiday. Fed Chair Jerome Powell Weekly readings on mortgage rates and jobless claims were also released.

Fed Chair: Rates Expected to Remain Higher

Chair Powell said that interest rates will remain high for a longer than expected time as “history cautions against prematurely loosening [monetary] policy.” The Federal Reserve has a legislative mandate to maintain its target interest rate range at or near 2 percent, During a discussion at the Cato Institute, Chair Powell said that the longer inflation remains above the target rate range the more likely the public will view high inflation as normal.

Chair Powell addressed concerns about political influence on Fed policy. “ I can assure you that we never take into consideration external political considerations.” While President Biden supports the Fed’s policies,  Massachusetts Senator Elizabeth Warren expressed concern that too many rate hikes could raise unemployment. Chairman Powell would not indicate how much the Fed may raise rates at its next monetary policy meeting on September 21 but analysts said the rate hike would likely be 0.75 percent or 0.50 percent at the least.

Mortgage Rates Rise, Jobless Claims Mixed

Freddie Mac reported higher mortgage rates last week as the average rate for 30-year fixed-rate mortgages rose by 23 basis points to 5.89 percent. Rates for 15-year fixed-rate mortgages averaged 5.16 percent and were 18 basis points higher than in the previous week. Rates for 5/1 adjustable rate mortgages averaged 4.64 percent and were 13 basis points higher on average. Discount points averaged 0.70 percent for 30-year fixed-rate mortgages and 0.80 percent for 15-year fixed-rate mortgages. Discount points for 5/1 adjustable rate mortgages averaged 0.40 percent.

New jobless claims fell to 222,000 initial claims filed last week as compared to the previous week’s reading of 228,000 new jobless claims filed.  1.45 million continuing jobless claims were filed last week as compared to the previous week’s 1.44 million ongoing claims filed.

What’s Ahead

This week’s scheduled economic reporting includes readings on month-to-month and annual inflation, retail sales, and consumer sentiment. Weekly readings on mortgage rates and jobless claims will also be released.