home financing advice Archives - Columbus Ohio Real Estate | Buyer's Resource Realty Services

Columbus Home Buyers, Prepare for Cautious Lenders

RealSupport — Mon, 02 Nov 2020 09:47:09 +0000

For the past 3 months, mortgage interest rates have been averaging below 3% for 30-year Conventional loans. But Columbus home buyers may find that lenders are feeling less generous these days, making any advertised, ultra-low rates difficult to obtain.

Even as rates have declined, lenders have been increasing their credit score requirements. The Mortgage Bankers Association reports that the Mortgage Credit Availability Index (MCAI) dropped by 6.1% in September, indicating that loan approvals are down. The median FICO score for mortgage approvals nationally is 700. In “hot” markets, the median FICO score on approved mortgages is over 750.

What’s going on? Simply put, lenders have enough applications for home purchases and refinances that they can afford to be picky. Another concern is the economy. So far, economic damage from COVID-19 has struck certain industries much harder than others; yet lenders fear the snowball effect that a prolonged pandemic could cause.

Still, you won’t necessarily be denied for a mortgage if your FICO score is below 700 and your down payment is less than 20%. But the interest rates you are offered may be higher than the “teaser rates” shown on lender websites.

To get the lowest possible mortgage rate in the Columbus area, you’ll need the best possible credit score and a strong financial picture! Being financially prepared with limited debt obligations, a considerable down payment and a solid work history helps.

It’s also a good idea to work with Columbus area lenders who know our market! We can refer you to local lenders who will work hard to get you the best options. And as our Buyer-Client, you will get our help in evaluating your mortgage offers, to compare not only rates, but also the fees and costs that are part of your overall financing.

As your Exclusive Buyer’s Broker, we serve your best interests at all times! Unlike real estate agents and brokerages who represent sellers, as an Exclusive Buyer’s Broker, we only represent you, the buyer, getting you the best price and terms with no conflict of interest at all times.

Understanding this distinction could literally save you thousands of dollars not only on the purchase price and terms, but also on seller concessions and home inspection issues, whether you are a first-time homebuyer or an experienced homeowner!

Andrew Show
Exclusive Buyer’s Broker, CEBA-M, MCNE, CSP, PSA,e-PRO, CREM, ABRM, AHWD
Buyer’s Resource Realty Services www.BuyersHome.com
Serving Metro Columbus, Ohio with Exclusive Buyer’s Agents
7100 North High Street, Suite 204, Worthington, Ohio 43085
614-888-4110 | 888-888-4110 Toll Free | 614-839-4110 Fax

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Columbus Home Buyers Could Find Mortgage Approval Tougher

RealSupport — Tue, 05 May 2020 06:04:57 +0000

Columbus home buyers could be surprised by loan denials in the wake of quickly-changing mortgage guidelines. The economic impact of COVID-19 is causing lenders to raise credit requirements nearly across the board.

The evolving underwriting standards vary by lender and mortgage type, but examples include the following:

Higher credit score requirements
Lower debt-to-income ratios (the less outstanding debt the applicant has, the better)
Larger down payment requirements

Lenders are getting tougher on Jumbo mortgages, too. Jumbo borrowers can expect to see higher cash reserve requirements in addition to the above.

The cautious approach comes as interest rates hover at historic lows. This has kept lenders busy with refinance applicants. The surge of refi business allows them to name their own terms somewhat as applicants clamor for cheap interest rates.

If you have a mortgage pre-approval in hand, be extra careful with your credit and finances! Lenders are going to re-verify your employment, income and credit score right up to closing.

If you are ready to seek a mortgage, we can put you in touch with excellent lenders in Metro Columbus! And as our Buyer-Client, you can get our advice on the mortgage offers you receive. Please contact us for more information!

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Mortgage Pre-Approval Remains Essential for Columbus Home Buyers

RealSupport — Sun, 05 May 2019 02:14:13 +0000

Quick! How much home can you afford to buy? The answer might seem simple, but it isn’t! Columbus home buyers need to understand the difference between a mortgage pre-approval, and a mortgage pre-qualification.

A mortgage pre-qualification is an informal estimate of your home buying power, based on unverified information you give to the lender. Lenders sometimes market “instant pre-qualification” to buyers, in the hopes of attracting new business. At best, a pre-qualification can give you a frame of reference for your potential home buying power. There is no commitment by the lender to actually loan you money in any amount.

A mortgage pre-approval takes you through a full application and underwriting process. In this situation, all of your employment, financial and credit information will be verified. You’ll need to provide copies of your last 2 years of income tax returns, plus 2 months of bank statements, a month’s worth of pay stubs, and authorize a review of your credit report.

Due to automated underwriting, the pre-approval process doesn’t take is long as it once did. Depending on the lender and the type of mortgage you seek, you might have an answer in a matter of weeks, days, hours – or even minutes. The reply you receive will be one of the following:

Approved
Approved with conditions
Suspended (more info/documentation/verification required)
Denied (reasons for denial will be provided by lender)

While no one wants to receive a mortgage “pre-denial,” it’s far better to discover an issue with financing before you make an offer on a home! It gives you the opportunity resolve issues – and reapply – before you have a home on the line.

If you’ve done your homework, such as reading our free e-book, “How to Buy a Home like a Pro,” you will likely have performed some financial preparation prior to your mortgage application. Things like a steady employment history, consistent income, good credit, good savings habits, and modest debt levels will help your chances of approval.

Once you have a mortgage pre-approval in hand, you can browse homes for sale in the appropriate price range. You can submit a confident offer when you find the right property.

Home buyers who write offers with a mortgage approval contingency, without showing any reasonable proof of financing ability, are not taken too seriously by home sellers.

When you are ready to begin your mortgage pre-approval, we can help! We will refer you to local, highly reputable mortgage lenders in Central Ohio, who will explain your financing options. When you become our Buyer-Client, we can also help you evaluate the mortgage offers you receive!

Andrew Show
Exclusive Buyer’s Broker, CEBA-M, MCNE, CSP, PSA,e-PRO, CREM, ABRM, AHWD
Buyer’s Resource Realty Services, www.buyershome.com
Serving Metro Columbus, Ohio with Exclusive Buyer’s Agents
7100 North High Street, Suite 204, Worthington, Ohio 43085
614-888-4110 | 888-888-4110 Toll Free | 614-839-4110 Fax

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Mortgage Strategies for Columbus Home Buyers

RealSupport — Sat, 24 Nov 2018 07:39:43 +0000

Making wise mortgage decisions can save you money as a Columbus home buyer! While you can’t control the direction of interest rates, you can put yourself in a position to receive the best possible mortgage offers. Here are mortgage tips and strategies every home buyer should know!

Strengthen your credit. Your credit score, loan-to-value ratio, and debt-to-income ratio are all considered by the lender. It’s easiest to look at it this way:

The higher your credit score, the better.
The larger your down payment, the better.
The lower your monthly debt payments, the better.

The lowest interest rates are awarded to borrowers who have the very best credit, and the lowest risk profile. Mortgage underwriting is complicated, and involves more than the items above – but this gives you a good start!

Pay attention to rates. Each week, Freddie Mac publishes the Primary Mortgage Market Survey (PMMS), which shows the national average for mortgage interest rates. This snapshot includes three main mortgage types. It includes the average points, if any, lenders are charging to issue those rates. As of November 21, 2018, the PMMS looked like this:

30-year fixed-rate mortgage = 4.81% with 0.4 points

15-year fixed-rate mortgage = 4.24% with 0.5 points

5/1 adjustable-rate mortgage = 4.09% with 0.3 points

These rates are subject to change daily, and are for example purposes only.

Consider your mortgage loan options. While the 30-year, fixed-rate mortgage is popular, you’ll enjoy a lower rate, and pay less interest overall with a 15-year mortgage. Keep in mind, the shorter term will mean a larger monthly payment.

You can consider adjustable-rate mortgages, which offer low introductory rates. In the example above, the 5/1 ARM means your interest rate stays the same for the first five years. Afterwards, it will adjust every year for the remainder of the mortgage.

Do the math on mortgage points. A point equals one percent of the principal amount borrowed. When you pay points, you’re basically paying interest in advance. In return for this up-front money, the lender grants you a somewhat lower mortgage rate. As you saw in our PMMS rate examples above, points may be shown in any fractional amount.

Points are paid at closing with other out-of-pocket costs. If you wish, you can opt to “roll” your points into the mortgage loan with other closing costs. Remember that paying points at all is completely optional!

Lock the rate. A rate lock means your lender promises to honor the offered rate for a specific amount of time. This protects you from the daily changes in rates that happen in the financial markets. Generally, the rate lock gives you enough time to get through the closing process.

When you’re happy with the mortgage offer, and you don’t want to gamble with the future rate environment, lock it in! But if you think rates might be heading lower, you can opt to wait a bit, or try shopping rates with another lender. (Remember, your personal creditworthiness plays a large role in the rates you’ll be offered.)

Educate yourself! Our free e-book explains these matters in detail! Obtain your copy of “How to Buy a Home like a Pro” by clicking here. There’s no charge, no obligation, and we never share your email address with anyone else.

Andrew Show
Broker, CEBA-M, MCNE, CSP, PSA,e-PRO, CREM, ABRM, AHWD
Buyer’s Resource Realty Services, www.buyershome.com
Serving Metro Columbus, Ohio with Exclusive Buyer’s Agents
7100 North High Street, Suite 204, Worthington, Ohio 43085
614-888-4110 | 888-888-4110 Toll Free | 614-839-4110 Fax

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Why Columbus Home Buyers Shouldn’t Fudge the Mortgage Application

RealSupport — Fri, 12 Oct 2018 04:49:22 +0000

Mortgage fraud is on the rise. But this time, it isn’t part of a bigger scheme orchestrated by white-collar thieves. Instead, there’s an uptick in home buyers who are attempting to cheat their way into a mortgage approval.

There are two main patterns: mortgage applicants who claim a higher income than what they report to the IRS, and applicants who create pure fiction.

In the first case, buyers may not realize that today’s lenders must follow strict criteria to calculate self-employed income. The buyers may have understated their income to the IRS to reduce their taxes, but this haunts them later when trying to obtain a mortgage. (Potential tax fraud aside.)

In next scenario, desperate home buyers have turned to fraud-enabling tools on the Internet to create falsified employment records. This includes completely fake pay stubs from make-believe companies, to modified pay stubs showing a higher income, or a longer length of employment. Some fraud-enabling websites even provide (for a fee) an employment verification to back up the fictitious info.

Other fraud trends include falsifying owner-occupancy, and creating fake “gift” down payment letters.

Even a so-called white lie can cause serious headaches. A buyer might think that a loan denial is the worst that could happen, so what is there to lose? And if the loan goes through, there’s nothing that can happen after closing, right?

Wrong. Deliberately presenting false information to a lender is bank fraud, which is punishable with fines and jail time – and possibly an acceleration clause on the mortgage, which would induce foreclosure. Mortgage applicants who try and cheat the process stand to lose much more than the house!

Fortunately, the vast majority of such fraud cases are caught during the underwriting or servicing process. The current fraud volume, while on the rise, is only about 1% of all applications. Today’s fraud attempts are fueled by an increasingly-automated mortgage process, and buyers who won’t take “no” for an answer.

Home buyers shouldn’t attempt to defeat the mortgage application or underwriting process. A mortgage denial isn’t a life sentence. A reputable lender will do their best to find the right mortgage for your situation, and help you qualify legitimately. If you are denied for the loan for any reason, a reputable lender will discuss the denial and offer suggestions to help you succeed in the future.

We only refer our Buyer-Clients to local, trustworthy lenders!

Andrew Show
Broker, CEBA-M, CNE, CSP, PSA, e-PRO, CREM, ABRM, AHWD
Buyer’s Resource Realty Services, www.buyershome.com
Serving Metro Columbus, Ohio with Exclusive Buyer’s Agents
7100 North High Street, Suite 204, Worthington, Ohio 43085
614-888-4110 | 888-888-4110 Toll Free | 614-839-4110 Fax

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Columbus Home Buyers Should Prepare for Higher Interest Rates

RealSupport — Sun, 07 Oct 2018 08:30:37 +0000

The Federal Reserve increased its benchmark lending rate by .025 in September, the third such increase so far in 2018. Analysts predict another possible rate hike in December. What does it mean for Columbus home buyers?

Most notably, mortgage interest rates are rising. As of September 27, the average interest rate on a new, 30-year fixed-rate mortgage was 4.72%. About a year ago, the average rate on this mortgage was 3.83%. While the difference is slightly less than 1%, it has an impact.

For example, a $300,000 mortgage at 3.83% would give you a principal and interest payment of $1,403 a month. If you made this monthly payment each year for the full 30-year loan term, you’d repay a total of $505,080. ($300,000 to principal, with total interest paid of $205,080.)

Borrowing $300,000 with a rate of 4.72% gives you a principal and interest payment of $1,560 a month. The higher interest rate costs you $157 more per month! Over the life of the mortgage, your total repayment would be $561,428, meaning you’d pay $56,348 more in interest.

On another front, higher mortgage rates mean that debt-to-income ratios can be harder to meet. During the mortgage underwriting process, your gross monthly income is compared to all of your monthly debt payments – student loans, credit cards, car payments, ect. This is known as “front-end” DTI. Next, the lender adds your projected mortgage payment into the mix, for the “back-end” DTI.

In the most generous underwriting criteria, your back-end DTI cannot exceed 50% of your gross monthly income. Naturally, the higher the mortgage interest rate, the higher your DTI will be.

But when interest rates are rising, a variety of consumer debts also see higher rates and higher monthly payments. If you are carrying any credit card balances, student loan debts or other loans with variable-rate interest, you’re likely to be paying more for them. When these monthly payments rise, it affects your DTI – not to mention your wallet!

If you’re unsure of the rate and terms on your current debts, now is the time to examine them and create strategies for paying them down. Reducing your variable-rate consumer debt will save you money, and put you in better shape for mortgage approval!

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Mortgage Pre-Approval Can Fall Flat on Home Buyers

RealSupport — Fri, 10 Aug 2018 06:53:36 +0000

A couple of our Buyer-Clients recently experienced a last-minute problem with their pre-approved mortgage. They came to us with a pre-approval in hand from a reputable lending institution, though the actual loan officer was someone new to us. Things looked good for weeks, until two days before closing!

What happened is this: there was an input error on the loan application, concerning the start date of employment. Somehow, this went undetected in prior verifications until the last minute. The Buyer-Clients did not have a copy of the loan application, and had no idea there was any kind of problem until the lender abruptly denied the loan. (The length of employment didn’t meet the underwriting criteria for Freddie Mac or Fannie Mae.)

This is why we make sure our Buyer-Clients are protected by a financing contingency in the purchase contract! Despite your best efforts, things beyond your control can happen. Having a mortgage denied is always unpleasant, but the stress of being denied two days before closing is incredible. The last thing you’d want, is to be on the hook for a home purchase that you could no longer finance! A financing contingency should never be waived, no matter how “hot” the market is.

Fortunately, in this case, we were able to find another lender who was willing to step in, and accept the length of employment as sufficient. The closing date had to be pushed back by about 12 days, but our Buyer-Clients are now happy homeowners.

The moral of the story: a mortgage pre-approval is a reasonable assurance of financing, but it isn’t an iron-clad commitment by the lender. The mortgage underwriting process is refreshed shortly before closing, re-checking employment, income, debt levels, credit scores and banking information.

It’s important not to “rock the boat” before closing. Once you have a pre-approval in hand, do not make big purchases, make big cash deposits or withdrawals, or change jobs.

Even then, snags can happen. Ask your lender for a copy of the mortgage application and double-check the information. Stay in touch with your lender throughout the home buying process, and respond promptly if your loan officer contacts you with questions.

The post Mortgage Pre-Approval Can Fall Flat on Home Buyers appeared first on Columbus Ohio Real Estate | Buyer's Resource Realty Services.

What Columbus Home Buyers Should Know About Adjustable-Rate Mortgages

RealSupport — Fri, 20 Oct 2017 04:50:39 +0000

As Columbus home prices rise, more home buyers are using adjustable-rate mortgages to finance their purchase. Nationally, adjustable-rate mortgage applications jumped 40% from the first quarter of 2017 to the second quarter, coinciding with the spring home buying season.

Adjustable-rate mortgages, or ARMs, aren’t for everyone because of their complexity, but they can be a strategic option. Initially, the interest rate and monthly payment on an ARM loan is smaller than that of a fixed-rate mortgage. The lower ARM payment can allow home buyers more cash flow during the early years of ownership, freeing up funds for home renovations or other needs.

The catch: after the ARM introductory period, which is usually between 1 to 5 years, the interest rate adjusts periodically, according to the market index assigned to the loan.

Many ARM loans use LIBOR as a market index – sort of an international version of the Federal Reserve’s benchmark rate. COFI is another market index that may be used. The index that applies to your loan would be disclosed in your loan documentation.

In other words, future economic conditions, and the prevailing cost of money, control the direction of your ARM interest rate. ARM loans are a gamble. If rates go up, so will your mortgage payment!

Even if rates head lower, it’s no guarantee that your future payments wouldn’t be higher anyway. This is because a margin is added to the index to calculate your new interest rate. So, if your index falls a bit, but then a 2% margin is added, odds your new payment could still be higher than the original.

The margin is determined by your lender at the time of your ARM application. Buyers who are considering an ARM loan must pay close attention to the margin being set!

Now, some good news. Most ARMs have rate caps that limit how high your interest rate can go. Here’s how the Consumer Financial Protection Bureau explains them:

Initial adjustment cap. This cap says how much the interest rate can increase the first time it adjusts after the introductory, fixed-rate period expires. It’s common for this cap to be either 2% or 5%. This means the first rate change can’t be more than 2 or 5 percentage points higher than the initial rate.

Subsequent adjustment cap. This cap says how much the interest rate can increase in the adjustment periods that follow. This cap is most commonly 2%, meaning that the new rate can’t be more than two percentage points higher than the previous rate.

Lifetime adjustment cap. This cap says how much the interest rate can increase in total, over the life of the loan. This cap is most commonly 5%, meaning that the rate can never be more than five percentage points higher than the initial rate. (Some lenders may have a higher cap.)

ARM’s work best for home buyers who intend to occupy the property for a few years until they relocate, trade up, or sell for a profit (hopefully) after making renovations. Home buyers who are putting down roots could be better served by a fixed-rate mortgage, especially as today’s interest rates remain very reasonable.

The best decisions are made when you have good information and expert advice! As your Exclusive Buyer Broker, we will refer you to trustworthy, local lenders who will explain all of your options. And because we provide our Buyer-Clients fiduciary representation, we can help you review your mortgage offers!

Contact us with your home buying questions! Remember, we are with you every step of the way…all the way home!

Andrew Show
Broker, CEBA, CEBA-M, CNE, CSP, ABR-M, e-PRO, GREEN
Buyer’s Resource Realty Services
Serving Metro Columbus, Ohio with Exclusive Buyer’s Agents
7100 North High Street, Suite 204, Worthington, Ohio 43085
614-888-4110 | 888-888-4110 Toll Free | 614-839-4110 Fax

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Columbus Renters Should Prioritize Saving for a Home

RealSupport — Tue, 01 Dec 2015 05:04:17 +0000

Rising rental costs are making it more difficult for first-time home buyers to save money for a down payment, according to recent articles published by CNBC and Zillow. In many areas of the country, renters are challenged by housing costs that are rising faster than the pace of wages, forcing would-be buyers to choose between their savings goals.

For example, a survey of renters revealed that they were saving for multiple priorities, which bumped saving for a home purchase further down the list. Here’s how savings priorities stacked up:

59% of renters are saving for an emergency fund
51% are saving for retirement
50% are saving for a child’s education
39% are saving for a down payment on a home

The renter survey, published by Freddie Mac, shows that 55% of potential buyers have put off their home purchase plans. The reasons given include lack of an adequate down payment, limited affordable home inventory, and insufficient credit scores.

What the survey doesn’t tell us, is what these renters truly know about mortgages and the home buying process. Down payment requirements have eased in the past year, with Freddie Mac and Fannie Mae offering programs with just 3% down. Loans backed by the Federal Housing Administration require only 3.5% down. Eligible veterans and military personnel can access VA-backed mortgages with zero down payment. Credit score requirements have also softened a bit.

Renters should also consider how home ownership can help them achieve better financial stability. For example, a fixed-rate mortgage means that the principal and interest portion of your mortgage payment (P&I) never changes. But on the national average, rents have gone up by 5% this past year alone. When you consider the cumulative effective of annual rent increases, it’s easy to understand why some renters struggle.

Owning a home may also give you the opportunity to itemize your income tax return. Expenses like points (prepaid interest), mortgage interest, and property taxes are typical deductions. Home ownership can open the door to itemized tax return filing, enabling taxpayers to take advantage of additional deductions. Please see a professional tax preparer for details, and visit the credits and deductions page of IRS.gov.

Renters who wish to become homeowners can begin by organizing a monthly budget. While it may not sound like much fun, taking control of your finances is one of the most self-empowering things you can do. Controlling your spending and prioritizing savings will help you establish good financial habits, and put you on the path to successful home ownership.

Contact us with your home buying questions! Remember, we are with you every step of the way…all the way home!

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Columbus Home Buying…with Children!

RealSupport — Thu, 06 Feb 2014 01:45:46 +0000

If you have children, your Columbus home search may have special considerations. Naturally, you’ll want to find a home in a good school district. You may also want a home with a fenced backyard, with close proximity to neighborhood parks.

But in order to find the ideal home for your family, you’ll want to keep a few more tips in mind!

Kid-friendly neighborhoods have common elements you should look for:

Backyard swing sets, play forts
Toys and bicycles in the yard
Basketball hoops
Neighborhood playgrounds
Low-traffic residential streets
Streets and sidewalks in good condition
School bus stops within a reasonable walk
Children!

The best way to learn about the kid-appeal of a neighborhood, is to observe it at the beginning and ending of a school day. Are children walking to the school, or to the bus stop together? Is there a crosswalk safety attendant? After school, are kids socializing in yards or playgrounds?

Public safety is also a prime concern, and there are a few ways you can check a neighborhood’s crime activity. Websites like www.mylocalcrime.com give you at-a-glance summaries of recent crime reports. And to screen for the presence of registered sex offenders, visit the Electronic Sex Offender Registration and Notification Ohio Database.

What about the home itself? Lead-based paint is common worry for parents and expectant mothers. As a rule of thumb, it’s generally assumed that any home built prior to 1978 may contain lead-based paint. However, it may not be feasible to rule out all homes that were built before 1978, especially since many of them are in prime neighborhoods. Fortunately, there are ways to mitigate your risk against lead-based paint exposure and other common hazards. Visit the City of Columbus Healthy Homes website for a practical guide.

We’ve given you a lot to think about, but there’s more! We have a ton of home buying tips for you in our FREE e-book , “How to Buy a Home Like a Pro.” These pointers could literally save you thousands of dollars, so please take advantage of it!

As your Exclusive Buyer’s Broker, we represent you, and only you, in the home buying process! This means we will always go the extra mile to help you find the right home. We work in your best interests at all times – at no cost to you!

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