Have a Question?
GENERAL MORTGAGE ADVICE
These responses are for general knowledge and consideration. Consult with your attorney, tax advisor or financial planner for specific answers to your individual circumstances.
Should I Buy or Rent?
Should I refinance?
Start with your credit score!
Have a downpayment.
Dealing with Bankruptcy.
Seller Paid closing cost.
When to escrow.
Should I Buy or Rent.
If you rent you're making the mortgage payment for someone else. You're not building equity (money) for yourself and you're losing the tax advantage of interest deductions. The advantage to renting is that someone else has to deal with maintenance problems, insurance and other owner related costs. It's a personal choice as to which is right for you.
If you're paying $800 a month in rent, You would be paying a similar amount to buy a $100,000 home @ 5%, 30yr fixed rate mortgage. The principal and interest payment would be $536.82. homeowner insurance about $50, monthly taxes about $150, mortgage insurance about $50 and about $25 a month for homeowner's association dues; totaling $796.83. REMEMBER, this is a example and these numbers will vary with each borrower's ability to qualify and property cost(tax, insurance, etc.). It's worth your time to see exactly what you qualify for in a home mortgage.
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Should I refinance?
Why do you want to refinance?
I have an ARM. Probably Yes. This is an excellent time to get out of an ARM that will adjust in the next few years. Get a stable fixed rate. There are some exceptions. If you still have several years to go AND you're not going to stay in the property, it might not be worth the cost to refinance. There is no cost to you at American South Lendng, Inc. to find out what your options are.
To get a lower rate. With today's rates hovering in the low 5% range, it's an excellent time to refinance. If you can improve your rate by AT LEAST 1% it will probably save you money in the long run. The higher your rate, the faster the savings, which justifies the cost. Rather than just look at the rate improvement, try to look at the cost to refinance divided by the savings. How long does it take to get your money back? You should consider it. It doesn't cost anything to find out the benefits to refinance based on your situation and qualifications.
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I want Cash-Out. Getting cash out to pay off debt may be an excellent reason. Credit cards, for example, have a higher rate than your home mortgage and take a long time to pay off. Easing your monthly cash demand may be very helpful for you. Also, your home mortgage interest is tax deductible.
Cash-out refinances have changed in these past few years. Qualifications are higher and the loan to value on your property has been reduced. Conforming programs have their own fee structure based on LTV, credit score, etc. FHA limits are 85% LTV and VA is 90%. These parameters change often. Your Sr. Loan Officer can show you the benefits vs the cost. Remember, qualifications change often.
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Have Good Credit!
It all starts with your credit score! There are three credit bureaus; Equifax, Experian and TransUnion. Your credit accounts report to these companies each month. Your credit score is calculated based on several factors; payment history, current balance-to-maximum limit, how long you have had the account, etc. Each bureau calculates the score differently and variations do occur. When qualifing for a mortgage, your middle score is used. If you have a co-borrower, the lowest middle of all borrowers is used. It doesn't matter who has the higher income.
The time to review your credit is before you apply for a loan. Errors or other incorrect information can be removed (with proof) and your scores could improve.
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Have a downpayment (VA and USDA may not require one).
Unless you're applying for a VA or USDA loan, you're going to need a downpayment. These agencies allow for 100% financing. FHA requires 3.50% downpayment. That's $3,500 on a $100,000.00 loan.
Conforming, VA and USDA allow for gift funds as a downpayment. Also, the downpayment can be from a gift from a relative. FHA requires that the downpayment come directly from the borrower's funds.
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Any Bankruptcy?
Conforming guidelines make you wait 4 years from a Chapter 7 discharge and 3 years from a Chapter 13 date of filing. FHA/VA will allow a bankruptcy after 2 years.
All require re-established credit, current on payments, no lates and all accounts to be in good standing.
Underwriters, who review, validate and approve the loan, are required to take a hard look at any bankruptcy, foreclosure, short sale or other issue that adversely affects your mortgage history.
Bankruptcy does not slam the door on home ownership but it does present a challange to the potential buyer/refinancer. Your Sr. Loan Officer can review your specific situation.
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Seller Paid closing costs.
On a home purchase, the Seller can pay 3% of the sales price if your borrowing 90% or more and up to 6% if you're borrowing 90% or less. There are some restriction on what these funds can be used to pay. Closing costs yes but not for your taxes, insurance, etc.
These percentages vary with program. Review your qualifications with Your Sr. Loan Officer.
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When to escrow.
Escrows are the monthly payments, included in your mortgage payment, for taxes and homeowner's insurance. Most all loan programs require escrows if you borrow above 80% LTV. Below 80% you have a choice to escrow or not. Most lenders have a .25% fee to NOT escrow.
FHA and VA always require escrows.
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