mortgage tips and advice Archives - Columbus Ohio Real Estate | Buyer's Resource Realty Services

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!

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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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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Home Buyers Should Compare 30-Year and 15-Year Mortgages

RealSupport — Sat, 16 Mar 2019 19:56:34 +0000

For most Columbus home buyers, the 30-year, fixed-rate mortgage is the loan of choice. The long repayment period makes home ownership more affordable, enabling you to buy more home for the money. But before you lock in 360 consecutive mortgage payments, you should give consideration to the 15-year term.

A 15-year fixed-rate mortgage will save you interest expense over the life of the loan. The interest rate on a 15-year mortgage is generally lower, and the faster amortization helps you build equity. If your goal is to own your home free and clear, the 15-year mortgage helps serve your plans.

The downside: the principal and interest portion of your monthly payment will be much higher than a 30-year mortgage. Once you are committed to this higher payment, there’s no turning back. (Unless you are able to refinance into a longer term mortgage, or sell your home.) 15-year mortgages work best for those who have confidence in their income consistency and financial reserves.

Here’s a comparison of a 15-year mortgage vs. a 30-year mortgage on a $300,000 principal balance. Please keep in mind that these examples are for illustration only; the difference in rates between the two mortgage terms can be greater or lesser, depending on conditions in the financial markets. The actual rates you are offered by a lender depend on your personal creditworthiness.

15-year fixed-rate mortgage, rate of 3.875%, loan amount of $300,000:

$2,200.32 principal and interest payment per month
$96,057.23 total interest over life of loan

30-year fixed-rate mortgage, rate of 4.25%, loan amount of $300,000:

$1,475.82 principal and interest payment per month
$231,295.12 total interest over life of loan

While the 15-year mortgage saves interest expense in the long run, homeowners who plan to sell in 7 or 8 years may not be concerned about this issue. Also, the hefty monthly payment on a 15-year mortgage can be unfeasible for buyers who need the lower payment – and leveraged buying power – of a 30-year mortgage.

Home buyers who take out a 30-year mortgage can save interest and pay off their loan sooner by making additional payments to principal. This gives you the flexibility to pay down the mortgage faster as your cash flow allows. We’ll be happy to refer you to local, trustworthy lenders who can explain all of your mortgage options!

Which mortgage term is right for you? We will help you explore the answer! 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.

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What Columbus Home Buyers Should Know About Mortgage Escrow Accounts

RealSupport — Thu, 21 Feb 2019 05:11:22 +0000

When you buy a home with less than 20% down, your mortgage company will usually require an escrow account for your property taxes and homeowner’s insurance. Your home is collateral for the mortgage debt, and your lender wants to avoid the risks associated with non-payment of these items. They collect the money from you in monthly installments, then make the annual or semi-annual payments directly to these parties on your behalf.

When an escrow account is required, your total monthly mortgage payment will include two components: the principal and interest portion (P&I) and the escrow for taxes and homeowner’s insurance (T&I). If you have a fixed-rate mortgage, the P&I component remains the same within your payment. But the escrow component may be adjusted to accommodate changes in your tax bill or homeowner’s insurance premiums.

If you live within a homeowner’s association, HOA dues may be escrowed within your monthly mortgage payment. You may also have a mortgage insurance premium (MIP for FHA loans or PMI for conventional loans) in your payment as well. For the sake of simplicity, our examples will focus on escrow for the payment of property taxes and homeowner’s insurance premiums.

Say you have annual property taxes of $7,500, and an annual insurance premium of $750. These two items would total $8,250 per year. Your monthly escrow would be based on $4,200 divided by 12 months = $687.50 per month. This $687.50 would be added to your principal and interest payment, to create your total monthly mortgage payment.

One catch: Federal law allows mortgage servicing companies to hold up to 2 months of escrow in reserve, as a safety net against increases in your escrowed bills. Using the above example, your mortgage company could require your escrow account to keep a “minimum balance” of $1,375 equaling 2 months of your escrow deposit. In order to establish and maintain this reserve, the escrow portion of your payment could be occasionally increased.

Escrow accounts are balanced each year to compare the outgoing disbursements against the funds being deposited. This may be referred to as an escrow analysis. It works similar to balancing a checking account, and rarely do things line up perfectly. Tax and insurance bills can change year to year, and your escrow account may run a shortage, or a surplus, as a result.

In the event of a surplus, your lender will send you a check for the amount of over-payment. Don’t celebrate with this refund; the same escrow account may show a shortage the following year. This is especially true for new construction, when the property hasn’t been fully assessed yet, resulting in an initial tax bill that is abnormally low. Your best bet is to save any escrow refund, so you can be prepared when the scales tip the opposite direction.

In the case of an escrow shortage, your lender will collect the difference from you. First, your monthly escrow payment will be increased to match the actual payout from escrow. If your monthly escrow was estimated on disbursements of $8,250 a year, but they actually amounted to $9,000 a year, your new monthly escrow requirement will be $750 a month. ($9,000/12 = $750.)

But wait, there’s more! Your lender also needs to recover the $750 difference, which wasn’t collected from you in advance. (This situation happens when a tax or insurance bill comes in higher than estimated.)

To make up for the shortage, your mortgage company will give you two options: 1) pay the shortage in a lump sum of $750, or 2) prorate this over the next 12 months, adding it to your monthly payments. If you choose the latter, you’ll have an extra $62.50 tacked on the new $750 escrow payment, for a total of $812.50.

If you have an escrow reserve, or two-month cushion required, your lender will tack on a little extra to bring this reserve balance in line with your new escrow calculations.

Assuming you have no further increases in tax or insurance bills the following year, the shortage proration in the escrow payment would drop off. What to watch out for, are year-over-year increases in tax bills, insurance premiums, or other obligations managed in your escrow account. If something is always “going up” in cost, your escrow account could be in a perpetual game of catch-up.

The good news: having an escrow account provides built-in monthly savings towards your property taxes, homeowner’s insurance and other obligations. If a tax bill comes in higher than expected, your mortgage company still pays it on time, and collects the difference from you later. There is no interest or penalty on an escrow shortage – but there are interest and penalties on past-due tax bills, along with other serious consequences.

Columbus home buyers should keep property tax bills, insurance premiums and other ownership expenses in mind when considering their home buying budget! These expenses can increase as time goes on. If you do not have an escrow account requirement, you’ll need to plan ahead and save diligently for these items on your own.

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 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.

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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Home Buyers Carrying Heavier Debt Loads

RealSupport — Sun, 15 Apr 2018 04:01:18 +0000

How much debt would you be willing to carry to achieve home ownership? For an increasing number of home buyers, the answer is nearly half of their monthly income. According to a recent report by CoreLogic, as published in the Wall Street Journal, 1 in 5 home buyers have debt-to-income ratios of 45% or more.

This is the highest percentage of heavily-leveraged home buyers since the run-up to the housing bust. While there’s some concern among industry analysts, the general consensus is that today’s buyers have better credit scores, and therefore represent less risk, despite the uptick in debt loads.

The rising debt levels follow the loosening of mortgage underwriting standards by Freddie Mac and Fannie Mae during 2017, which allowed borrowers to have debt-to-income ratios as high as 50%. This ratio refers to “back-end” DTI, meaning that the debt load calculation includes the new mortgage payment, as well as any consumer debt payments, such as car loans, student loans, credit card payments and so on. (Read more about mortgage financing in our free e-book, “How to Buy a Home like a Pro!”)

In essence, it’s “ok” by this underwriting standard to devote half of your gross monthly income to making debt payments! The problem is, gross income is not the same thing as monthly take-home pay. What may sound workable on paper, may not be a comfortable, practical or wise situation for home buyers to place themselves in.

To their credit, Freddie Mac and Fannie Mae increased the allowable DTI ratios to help more home buyers stay in the market. Rising home prices and rising mortgage interest rates have crimped home affordability around the country. As a result, average mortgage payments have risen by 5% during the first quarter of 2018, compared to the same period a year ago. Economists expect that average mortgage payments will rise by 10% or 15% by the end of the year.

While home buyers may be tempted to do “whatever it takes” to buy a home, you must think twice before accepting indebtedness that could hurt your ability to save for emergencies, or put away money for retirement and other needs. If you are marginally qualified to buy a home now, you might be better off paying down others debts first, or saving longer to make a larger down payment. Plan well, and buy smart! You’ll thank yourself later!

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Mortgage Market News Encouraging for Columbus Home Buyers

RealSupport — Sat, 10 Jun 2017 02:12:54 +0000

If you’re buying a Columbus home this summer, there’s good news: mortgage interest rates are behaving themselves. In fact, according to Freddie Mac’s weekly mortgage survey as of June 8, 2017, rates on 30-year fixed rate mortgages are at a seven-month low!

Volatility in the financial markets has kept mortgage rates in check, even though the Federal Reserve has nudged up the benchmark rate twice in recent months. Here’s a snapshot of where rates are hovering:

30-year fixed-rate mortgages with a point of 0.5 are averaging 3.89%
15-year fixed-rate mortgages with a point of 0.5 are averaging 3.16%.

A “point” is pre-paid interest, and basically allows you to buy down your interest rate. One point is equal to 1% of your mortgage balance. On a $200,000 mortgage, one point would cost $2,000. Points are optional, and whether or not it’s worth paying them depends on your personal financial situation; but with interest rates this low it typically is not a good idea!

Please keep in mind that the above rates are examples of weekly industry averages, and interest rates may change several times daily, or not at all for many days. Your actual mortgage interest rate depends on the financial markets, your credit score, and your overall creditworthiness.

Another bit of good news for home buyers: Fannie Mae will change its debt-to-income requirements for new mortgages as of July 29, 2017. This applies to the “back-end” ratio of the DTI calculations, meaning that your income, monthly debt obligations and new mortgage payment are all considered. The new allowed DTI ratio will be 50%, an increase from 45%.

What this means, is that Conventional mortgages are becoming more competitive with FHA mortgages, which already allow higher DTI ratios. This expands comparable mortgage choices for home buyers, and improves your opportunities for mortgage qualification.

When you are ready to speak to a mortgage lender, contact Buyer’s Resource Realty Services first! We will refer you to local, trusthworthy lenders who take the time to explain all of your options, while offering very competitive rates and low closing costs. And when you become our Buyer-Client, we’ll help you analyze your mortgage offers and explain how they affect your home buying power.

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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Mortgage Process Could Get Easier for Columbus Home Buyers

RealSupport — Thu, 22 Oct 2015 23:30:17 +0000

The next time you buy a Columbus home, the paperwork for your mortgage could be a bit easier, thanks to changes in Fannie Mae requirements. The government-sponsored entity, which secures a high percentage of U.S. mortgages, intends to simplify the underwriting process and make home loans more accessible for underserved borrowers.

Mortgage lenders using Fannie Mae guidelines will soon be able to bypass the collection of paycheck stubs, or direct deposit transmittals, for income verification. Instead, lenders may rely on employment and income information compiled by Equifax. You may be surprised to learn that your salary is part of a nationwide consumer database, but Equifax has been collecting this data from cooperative employers for several years.

Starting in 2016, Fannie Mae will also allow lenders to use alternative scoring models in their automated underwriting system. This will help home buyers who may lack a traditional credit profile, but have payment histories with landlords and utility companies. Meanwhile, borrowers who have typical credit profiles will still need to meet minimum score requirements.

There’s one more detail in the underwriting changes. In the near future, Fannie Mae will allow lenders to consider “trended” credit data. This means that not only will your credit score be evaluated, but your overall credit habits will be examined more closely. Namely, lenders could decipher your debt patterns, such as whether you allow your credit card balances to rise, or whether you pay your accounts in full each month.

The new underwriting guidelines should streamline the mortgage approval process for lenders and home buyers. It will also expand home ownership opportunities for underserved borrowers. However, credit evaluations are likely to become more detailed, due to the sophistication of automated reporting.

Ready to buy a Columbus home? 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.

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

The post Mortgage Process Could Get Easier for Columbus Home Buyers appeared first on Columbus Ohio Real Estate | Buyer's Resource Realty Services.

Ignorance Isn’t Bliss When Buying a Home!

RealSupport — Thu, 30 Apr 2015 20:13:13 +0000

Two interesting articles caught our eye this week. The first, from industry publisher Inman News, suggested that some people aren’t buying homes because they fear being rejected for a mortgage. According to an industry survey of potential home buyers, 54% did not apply for a mortgage because they assumed they would not qualify!

The fear of mortgage denial is based in the tighter underwriting standards that became commonplace several years ago. And while down payment requirements have eased somewhat, credit scores and debt-to-income ratios remain under strict scrutiny. Yet 2 out of every 3 mortgage applications are currently being approved. This is a sharp improvement over the lending environment in 2013, when a 40% rejection rate was the norm. Times have changed!

On the other end of the spectrum, an article in Housing Wire states that 42% of prospective home buyers know very little about financing a home. It points to buyer surveys by Chase and ClosingCorp that show a lack of understanding about mortgages and closing costs. These same respondents indicated they plan to buy a home within the next 18 months. Without proper information, many of these buyers will end up failing, or paying far too much!

Columbus home buyers should not make assumptions about mortgage financing or the home buying process, one way or the other. There is a wealth of free information available to help you prepare for home ownership, such as our comprehensive ebook, “How to Buy a Home Like a Pro.”

The guidance of expert professionals also takes the fear and uncertainty out of your home buying experience. By obtaining information and constructive advice up front, you’ll be able to make home buying and financing decisions with confidence. Here’s how we help you:

1. We provide a free, no-obligation Buyer Conference that offers a look at your financing options. We explain the pros and cons of each mortgage program, and how each program affects your mortgage payment and closing costs.

2. We provide you with valuable checklists and insider info to help you get the best loan for your needs, with the best rates and terms!

3. We include supplemental financing info in our Educated Buyer Notebook. This notebook is an indispensable resource for our Buyer-Clients, and helps take the stress out of home buying.

4. Because we have a fiduciary relationship with our Buyer-Clients, we can help you evaluate your financing offers, and identify the lender and program best suited to your needs. This is a completely objective review performed without bias; we are here to protect your best interests! This is just one example of the peace of mind and confidence that you’ll enjoy when working with an Exclusive Buyer’s Broker.

When you are ready to buy a Central Ohio home, turn to Buyer’s Resource Realty Services! We can refer you to reputable mortgage lenders, and help you find the best solution for your financing needs.

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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Mortgage Opportunity Improves for First-Time Home Buyers

RealSupport — Thu, 11 Dec 2014 00:40:51 +0000

First-time Columbus home buyers may find mortgages easier to obtain, thanks to changes in lending guidelines by Freddie Mac and Fannie Mae. The new mortgage programs allow down payments as low as 3%, and will broaden homeownership opportunity for low-to-moderate income borrowers.

While Freddie and Fannie do not issue mortgages directly, they are the 900-lb gorillas in the secondary mortgage market. Namely, they purchase mortgages from lenders and provide security to the market. They also set many of the common underwriting rules that are applied to borrowers.

The new mortgage programs could provide welcome relief for creditworthy borrowers who were regulated to the sidelines. Each entity has its own version, with Freddie Mac launching the “Home Possible Advantage” Program in upcoming weeks. This is a conventional mortgage allowing 3% down and a debt-to-income ratio up to 43%. It is designed with first-time borrowers in mind, and requires completion of a home buyer education program.

Fannie Mae’s 3% down payment mortgage is similar, and rollout of the program is underway. It is available to borrowers who have not owned a home in the past three years. Borrowers will also be able to refinance under the same program, and roll-in $2,000 of the closing costs.

In both cases, mortgage insurance premiums will be required. However, Freddie and Fannie mortgage insurance premiums are expected to be priced lower than FHA premiums. All told, the new changes may bring a competitive environment to entry-level mortgages.

It should be mentioned that the bulk of Freddie and Fannie underwriting guidelines are not changing; credit score thresholds and affordability standards will remain intact. Documentation requirements will not be any less onerous. This is not a return to the carefree days of subprime lending. Instead, it’s a practical adjustment that helps qualified borrowers overcome the down payment hurdle.

Have questions about qualifying for your mortgage? Let us help you! We can refer you to reputable mortgage lenders in Central Ohio. 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.

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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