Category: Mortgage

4 Areas Mortgage Lenders Consider Before Lending You Money

If you’re a first-time homebuyer, the idea of borrowing money for a home can feel overwhelming. Where to even start?!?!

Today I’d like to help you understand four of the key areas that Lenders take into consideration when reviewing your loan application. It’s my goal to help you prepare for exactly what to expect as far as what questions you might be asked, and what documents you’ll want to have on hand for the more common types of home loans.

1. Affordability

To determine how much house you can reasonably afford, the lender will calculate your monthly gross income and multiplying that number by .28. This figure is generally representative of the most that a lender will approve you to spend on a mortgage payment each month.

If the payments on a house that you’re considering exceed this number, you’ll need to come up with additional funds to apply towards the down payment, or search for a home in a lower price range.
mortgage lenders

2. Monthly Expenses

While this calculation may seem simple, lenders are extremely strict in their interpretation of how much money you spend every month. For this figure, you can’t simply state that you won’t spend money on clothes just to meet a specific spending ratio guideline.

Instead, lenders use pre-set numbers to calculate this amount. To their credit, lenders understand that every person, couple, and family has personal needs that must be met and so the goal of this calculation is to ensure that your monthly income exceeds these financial needs even when a new mortgage payment is introduced into your budget.

When you’re applying for a home loan, you will be asked for a detailed itemization of your current monthly bills and documentation of your current income. It’s in your best interest to supply all the information regarding your personal finances so qualifying for a loan is based on your current financial situation.

3. Long Term Debt-to-Income Ratio

This ratio takes into account any monthly payments that extend beyond 11 months. Payments for things like car loans, credit card payments, student loans, and other mortgages are included in this calculation.

Other debts that fall into this category include: judgments, tax liens, alimony, and child support. To ensure that you can afford the home that you intend to buy, it’s always best to disclose everything so that you can make the most informed decision possible.

4. Credit Check

Most potential homeowners have secured some credit in one way or another before deciding to apply for a home loan. Lenders look very carefully at your past payment record to see if you made timely payments on these obligations.

They look at everything from how many late and missed payments you’ve had, to the number of “maxed out” credit card balances you carry, and the overall amount of debt you have in total.

A lender will also be extremely interested in any loans that have defaulted and gone into collections. Be prepared to explain these issues in writing, no matter how minor, or your loan could be declined. A poor credit report could result in you paying a higher interest rate which could mean you end up paying tens of thousands of extra dollars over the lifetime of the loan.

The Bottom Line

Taking on a home loan is usually the single most expensive financial commitment anyone makes in their lifetime. Still, many borrowers go into the process unprepared and uninformed.

In the case of home loans, ignorance is not bliss so your best bet is to accurately assess your financial situation, gather the necessary required paperwork, and prepare for the questions that may be asked of you based on your individual circumstances.

My job is to help you do just that. I’d love to talk to you more about buying your first home and I will walk you through all the steps along the way. Give me a call at [phone] soon!

Source: Salted Stone

The information contained in this article has been prepared by an independent third party and is distributed for educational purposes only. The information is considered reliable but not guaranteed to be accurate. The opinions expressed in this article do not represent the opinions of Skyline Home Loans.

May is National Military Appreciation Month so I want to take this special opportunity to thank all of you who are serving now or who have served our Nation in the past!

It is hard to find a way to truly show my appreciation for your selfless service. That’s why today I’m posting this blog about the Veterans Administration (VA) home loan and how it can help military families get the best mortgage they can at an affordable rate with little or even no down payment.va home loans

I know it’s not much in comparison to your sacrifices. But I hope you’ll find the following info to be of help to you or someone you love.

This month – and always! – our family here at Skyline Home Loans salutes our Nation’s military. Thank you for your service to us all!

What is a VA home loan?

Essentially, the VA home loan is a guarantee for part of your loan. With this guarantee, the VA agrees to cover a certain percentage of the loan should you be unable to pay it back.

The VA is not a bank, so the loan itself is instead issued from an approved lending institution and serviced through that entity. Approved lenders accept the VA’s guarantee as comparable to a down payment, and offer mortgage rates and amounts accordingly.

Who is eligible for a loan?

Any veteran, active service member, and surviving spouses (in some situations) may apply. Applicants must have a good credit score and cannot have defaulted on any past VA guarantees.

You must have served in the military for a specific length of time in order to be eligible for a VA home loan. Service requirements for full-time military members vary from 90 to 181 days, depending on when you served.

National Guard and Reserve members may also apply, but minimum service requirements may be longer if you have never been called to active duty.

What limits apply to the loan?

The limits of the guarantee stand at 25% of the loan, but the limits on the overall size of the loan for which the VA can do a 25% guarantee vary according to location. As of 2014, according to the US Department of Veterans Affairs, the basic entitlement is a $36,000 guarantee per service member or up to 25% of a loan below the limits. Loan limits start at $417,000 and may vary according to the County the property is located in. All loan limits are subject to change.

What information will you need to apply?

As with any home loan, you will need basic information about your income, assets, and credit history, as well as proof of your military service history.

Required documents include:

  • Valid identification documents (driver’s license, passport, etc.)
  • Proof of service, such as a DD Form 214 for veterans or current statement of service for active members
  • Pay stubs for at least the most recent two months
  • W2 forms and/or tax return forms
  • Proof of assets, including recent investment statements

Different lenders may require slightly different information, but these are generally the only documents needed to obtain approval from the VA.

How do you apply for a VA home loan?

The first step in applying for a VA home loan is to obtain a Certificate of Eligibility (COE). While lenders may have access to automatic VA approval when you submit your mortgage application, it’s always a good idea to apply for the COE ahead of time.

Automatic approval only works if all required information is already available, so your loan could be delayed if you put off obtaining the COE.

You can apply for your COE online through the VA eBenefits Portal, or by sending a completed Form 26-1880 to the VA Loan Eligibility Center. The address for mailed applications is printed in the upper right corner of the required form.

The COE serves as a VA pre-qualification, guaranteeing that you will receive the stated coverage for your loan. With COE in hand, you now have to apply with an approved lender for the full amount of the mortgage.

Keep in mind though, that even with a COE, it’s ultimately dependent on the financial institution to approve or deny your loan. They may accept the VA guarantee for the entire down payment, or may require additional collateral or out-of-pocket down payment. The lending institution also determines exactly how much they’re willing to lend based on your income and credit history.

The purpose of the VA home loan is to ensure that you and your family are able to obtain adequate housing by reducing or eliminating the burden of a down payment. And if the loan remains in good standing and is completely paid back, then you may qualify for additional VA guarantees in the future.

All limits and guidelines are reviewed regularly by the Veteran’s Administration to ensure that they continue to meet current needs. Any questions regarding specific situations can be directed to the Regional Benefit Office serving your state.

For more information about VA home loans check out my free eBook. Download it today!

Explaining Mortgage Points and Tax Deductions*

mortgage pointsTax deductions are a hot topic these days. It seems we’re all looking for ways to owe Uncle Sam less and keep more in our pockets. Did you know that mortgage points can be deductible in many situations?

This topic can get a little confusing so let’s start with the basics.

What are mortgage points?

Points are a part of the closing costs for obtaining a mortgage. Paid to the mortgage lender, each point is 1% of the loan value. In the example of a $200,000 home with a $170,000 mortgage, one point of the mortgage would be $1,700.

There are two different types of points. The first is origination points, also known as the origination fee or broker fee. Lenders charge points as a way to make a profit. They are basically used to recover some of the costs of loan origination. Depending on the lending institution, they can be negotiated in part or in full.

The second is known as the discount points. Borrowers pay for discount points in order to obtain a lower mortgage rate. This process is known as a “buy down”. Purchasing one point generally will result in a quarter of a percent (0.25%) reduction in a fixed interest rate and a 0.35% decrease on an adjustable rate loan. Like origination points, these too are negotiable.

How are points deductible?

The IRS allows for the deduction of any extra charges paid by the homebuyer as a part of the closings costs for obtaining a mortgage. Origination points are not deductible because they are part of the mortgage fees and not an extra. Discount points are extra though. They are tax deductible*.

After the homebuyer obtains a mortgage, at the end of the year they will receive a Form 1098 Mortgage Interest Statement. The points paid to purchase the home will appear on the form in Box 2. Discount points can be deducted under “Schedule A” of a 1040 tax form if the homebuyer itemizes the deductions.

What are the eligibility requirements to deduct points?

  1. The loan is secured for your primary residence.
  2. Your primary residence is located in an area in which buying points is practiced.
  3. The price paid for the points was consistent with the prices in the area.
  4. The homebuyer must use the cash method of accounting, in which income is reported the year it is received and then deducted in that year when it’s time to pay.
  5. The points were only used on closing costs, such as appraisal fees, inspection fees, title fees, attorney fees, or property taxes, and no initial fees.
  6. The homebuyer is the one who purchased the points. Points that were outright purchased by the seller, or purchased with money borrowed from the lender or mortgage broker are not deductible.
  7. The loan is being used to buy or build a primary residence.
  8. The points were calculated to be a percentage of the principal amount of the mortgage (i.e. 1%).
  9. The amount appears on the settlement statement (a form known as the HUD-1 Settlement Statement) or Closing Disclosure.

Apart from being all around helpful to most homebuyers during the initial purchase and taxes associated with buying a home, there are other perks of mortgage points. One of the biggest is that the deduction can be spread out over the life of the mortgage. This is especially helpful if you – for one reason or another – do not itemize your deductions. Another major perk is that points can be used for home refinancing.

That’s a lot to take in. Hope you found it helpful. Call me soon at [phone] and we can talk more about mortgage points in the home loan process.

Source: Salted Stone

*Skyline Financial Corp. and its loan officers are not tax advisors. Always consult a tax professional for details.

We’ll get you moving FAST AND EASY!

mortgage
One of the main reasons I chose to work for Skyline Home Loans is because they make closing loans quickly such a priority. We have an incredibly hard-working and dedicated family here. In fact, Mortgage Executive Magazine just ranked us number 35 of the Top 100 Mortgage Companies in America for 2015. Our loan volume grew to more than $3.2 billion last year, a 48% increase over 2014.
top mortgage
That much loan volume doesn’t happen if loans are just sitting around waiting to be processed. Our entire operations and support team works hard every day to process loans accurately and quickly.

The type of loan you’re applying for and the complexity of your financial situation will ultimately determine the time it takes to close.

The good news is that some things are in your control… like, having all your documents in order, sharing as much information with me as possible during the process so we can address concerns before they become problems, and putting your patience and trust in me along the way.

For the rest of it – the moving parts that are out of your control like getting the home appraised, purchasing insurance and running a title check – I’m here to help guide and get it moving. And I will keep you updated along the way.

We’re always working on getting loans done better and I can’t wait to show you how! Call me to set up an appointment so we can talk soon. I can be reached at [phone]!

I’m Talking “APR” and I Don’t Mean April!

Oh, the mortgage world! It’s filled with acronyms and abbreviations.

A-P-R is a common one though. It stands for annual percentage rate. And, it is NOT the same thing as your loan interest rate.apr

Interest Rate

The interest rate on your mortgage is the rate you agree to pay the lender each month for allowing you to borrow the money from them. That’s fairly easy to understand.

Annual Percentage Rate

APR takes into account some of the costs you pay to get the loan. This can mean origination fees, points, mortgage insurance and other costs. It does not include things like application fees, appraisals, title insurance and document preparation fees.

APR is super important when loan shopping because it helps you compare offers. In fact, the federal government requires lenders to quote APR because loan offers often are made on different terms and it’s the only way to truly compare loans accurately.

APR helps you understand how much you’re paying overall – through the life of the loan. It helps answer the question of whether paying more upfront for a lower interest rate is worth it.

Interpreting APR

On the surface, it may seem like you should always go with the loan that has the lower APR. But this isn’t always true.

Even though one loan may cost more upfront and less over time, it still may not be the better choice.

Let’s say you’re planning to be in your house only a few years, then it may not make sense to pay more upfront in order to save more over 30 years’ time. You may be better off paying less upfront at a higher rate over time.

What’s next? Call me at [phone] to talk about your loan and let’s crunch some real numbers together!

Source: FAQ section on Skyline website

Lenders Watch for These Signs of Fraud

Last time, we shared about some lenders misrepresenting themselves to borrowers and what you should watch out for to protect yourself and find a reputable lender. Today, I want to share how I work to protect myself and my company from fraudulent claims of borrowers.

According to the data firm, CoreLogic, at the end of the second quarter of 2015 signs of fraud in mortgages decreased 8.9% year-over-year due to interest rates being lower than expected. There’s less incentive for borrowers to misrepresent themselves or their financial situation.
signs of fraud
However, there are still those who try to deceive us. Fraud negatively impacts the mortgage industry and economies. Here are some “cases” I watch for:

A Case of Fake Identity

Identity fraud with home equity lending could become more prevalent, according to the senior director of fraud solutions at CoreLogic. Because home equity loans don’t always require face-to-face interaction, identity fraud is more likely.

A Case of Overvaluing the Home

With purchase loans on the rise, the risk of saying the home is worth more than it actually is, is increasing.

A Case of Overinflated Income

Loan application anomalies suggesting consumers might have lied about their incomes dropped more than 7% in the second quarter. But this deception could become more common if rates rise and it becomes harder for consumers to qualify with their actual incomes.

A Case of Unemployment

CoreLogic reports indicate that there were 7% fewer indicators that consumers were lying about jobs listed on their applications in the second quarter of 2015. But the fraud and anti-money laundering prevention department at Freddie Mac recently found in loan reviews that a there were many situations where the borrower was not employed at closing as represented in an approved application.

A Case of Undisclosed Debt

Consumers don’t always reveal all their mortgage debts during the application process, which is another indicator of fraud, and impacts the entire mortgage industry.

In the end, nobody benefits from fraudulent claims. I’m in the business to help quality people get quality loans! If you’re that type of person, let’s talk! Call me today at [phone].

Sources: National Mortgage News and Core Logic

Use Caution If Told These Tales

At Skyline, we pride ourselves in doing business in an honest and straightforward manner. Unfortunately, in our industry, there are some ways in which lenders sometimes misrepresent or confuse things for buyers.
use caution
According to National Mortgage News, the following are 6 phrases that some lenders use that could be a red flag for buyers.

‘I Work For the Government’

Just because a lender funds a loan guaranteed by the government’s Federal Housing Administration (FHA), does not mean that the lender is a public official. Sometimes lenders may misrepresent themselves to borrowers and lead them to believe they are. This is actually a violation of the Consumer Financial Protection Bureau rules and a situation to be wary of if you ever encounter it.

‘You Need Medical Documentation’

If you are disabled and a lender asks you to provide documentation from a physician to prove your disability to qualify for a FHA loan, there’s something up! A request for medical records is considered a type of discrimination. Privacy laws protect your medical records and you should not be required to share them.

‘You’re Expecting? That May Be A Problem’

Government programs do not allow loans to be delayed or denied due to pregnancy or maternity leave. If you’re told that, it is time to find a new lender.

‘What a Deal!’

If you see rates advertised for less than what can actually be provided by a lender, then they are violating Consumer Financial Protection Bureau rules.

‘You Could Never Lose Your Home’

Unfortunately, it is possible. If you are using a Home Equity Conversion Mortgage and can’t meet the requirements outlined, such as maintaining the property, you could lose your home.

‘Yes, I’m Licensed’

You can check lenders’ credentials through the Nationwide Multistate Licensing System and Registry to make sure they have a license and have passed exams as part of their licensing requirements.

Next, we’ll take a look at how buyers sometimes confuse or complicate situations with the things they say too. Learning from other people’s mistakes along the way!

If you’re looking for a loan officer who will treat you the right way and be upfront and straightforward, I’d love to talk to you about how I can help. Call me at [phone] or email at rebecca@elitelendingteam.net anytime!

Source: National Mortgage News

What If I Could Save You Years and Thousands?

Saving years and thousands on your home loan might be simpler than you think. I’m not talking about some kind of special offer or a gimmick. In fact, at Elite Lending we strive to help our clients understand all aspects of a loan, including paying it off early.

Some lenders may avoid the topic or try to sell you some kind of accelerated payment plan, but I want to help you save money where I can the good ol’ fashioned way – with proper planning.

Assuming your loan does not have any pre-payment penalties (ask me!), here’s two simple ways that may work within your budget for paying your loan down faster:
saving thousands on mortgage

Make One Extra Payment Annually

Let’s say your monthly mortgage payment is $1,231.89. Throughout the year, set aside some extra spending money or a bonus check from work until you have saved up an extra $1,231.89. When you have it, send in an extra payment of that exact amount. Make sure you indicate that the extra payment is going toward your principal.

Pay More Each Month

If you’re able to pay even more than your monthly mortgage requires, try rounding up or paying an extra set amount monthly. Some people like to take their monthly mortgage amount, divide it by 12 and then add that amount to the payment monthly. Whatever works for you. The more you pay now, the less interest you’ll pay long term.

Figuring out all these calculations and deciding what’s best for your situation can be challenging on your own. Call me at [phone] or email me rebecca@elitelendingteam.net at anytime! Together, we can plan to save you time and money.

Skyline Financial Corp. and its loan officers are not financial planners. Always consult a financial professional for details.

Sources: interest.com and bankrate.com

Own A Home, Get A Tax Break

Real estate and home ownership is a huge part of our country’s economy. That’s why Uncle Sam has incentives to encourage Americans to purchase homes. He wants owning a home to be a help for you, not a burden.
get a tax break
Here are some tax incentives for home owners that you might not know about:

First-time Homebuyer Credit

As defined by the IRS, a first-time homebuyer is “any taxpayer who has not owned another principal residence at any time during the three years prior to the date of purchasing the home.” The original version of this federal tax credit terminated in 2010 for civilian homebuyers and in 2011 for homebuyers who were members of the military. However, there are other forms of the first-time homebuyer tax credit that still exist, such as the Mortgage Credit Certificate, otherwise known as the MCC.

Mortgage Credit Certificate (MCC)

The MCC allows homeowners to claim a tax credit on some of their mortgage interest paid. This amount is then used to reduce the amount of federal taxes the homeowner would pay to the IRS. The standard rate for the MCC is 20% of the mortgage interest paid annually.

Mortgage Interest Deduction

The interest paid on a mortgage can be added as an itemized deduction on a standard Form 1040, Schedule A. Assuming the itemized deduction is greater than the standard deduction, this can lead to substantial savings for homeowners, particularly in the earlier years of homeownership when the mortgage balance (and the mortgage interest along with it) is at its highest.

Mortgage Points Deduction

The IRS allows for the deduction of any extra charges paid by the homebuyer as a part of the closings costs for obtaining a mortgage. Origination points are not deductible because they are not extraneous charges; they are a part of the mortgage fees. By contrast, discount points are extra, and are tax deductible.

After the homebuyer obtains a mortgage, at the end of the year they will receive a Form 1098 Mortgage Interest Statement. The points paid to purchase the home will appear on the form in Box 2. The discount points can be deducted under “Schedule A” of a 1040 tax form. As with the Mortgage Interest Deduction, points can only be deducted if the homebuyer itemizes the deductions.

Energy Credits and Exemptions

The Home Energy Credit allows homeowners to recoup up to 30% of the costs of (with a cap of around $1,500) for installing energy efficient windows, doors, furnaces, air conditioners, heat pumps, hot water heaters, and more.

Mortgage Interest Credit Deduction

This is one of the lesser discussed tax deductions simply because it does not save homeowners as much money as some of the other deductions. But mortgage interest credit is an allowable deduction that should not be overlooked.

The simple description of the Mortgage Interest Credit is that it’s a credit designed to prorate your mortgage for the first month if it applies in that scenario. It allows new homeowners to get credited for interest whenever a mortgage closes and funds within the first five days of a given month.

IRA Penalty Exemption

For any individual who is buying, building, or rebuilding their first home, you have the opportunity to distribute $10,000 from your IRA if the money will be used towards expenses related to the home, including closing costs.

Others

And finally, there are home improvement, home business deductions, as well as medical home improvement deductions available to homeowners who meet eligibility requirements.

As you prepare for this tax season or are considering buying a home, remember that there are many tax benefits that come with being a homeowner. While it might take a bit of research to uncover all of them, a good tax accountant can help you take advantage of all the deductions you may qualify for.

Source: IRS.gov

Skyline Financial Corp. and its loan officers are not tax advisors. Always consult a tax professional for details.

2016 – Year for New Home and Monkey

Chinese calendars might say 2016 is the Year of the Monkey, but according to CNN, 2016 is the year to buy a new home.
year for a new home
So, why a new home in 2016?

  1. Home prices are steadying. Home values, which have been on the rise over the last few years, are starting to settle and slow down.
  2. There’s more homes! With prices up and now steadying, more sellers will list their homes. Plus, builders have adjusted new home development to attract more starter and mid-value home buyers.
  3. Borrowing for cheap may change. Interest rates are expected to start climbing again during 2016. Though slight increases are expected, the longer a buyer waits, the more likely rates will be higher.
  4. Renting still bites. Rental fees keep climbing and taking a bigger bite out of budgets. Even with a slight interest rate increase, the cost of owning a home is predicted to be less than renting in most cities.

And, for those monkeys out there born in 1920, 1932, 1944, 1956, 1968, 1980, 1992, 2004, and 2016… According to Chinese zodiac, you may want to purchase on the 14th or 28th of the month to be lucky. Purchase a home facing north, northwest or west and you might just have your best year yet!

If you’re ready to find out if 2016 is your year to buy and want to get the loan process started, contact me at [phone] or rebecca@elitelendingteam.net. We are ready to help you!

Sources: CNN and China Highlights