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Looking to Close Faster? Follow This Easy Guide to Speeding Up the Mortgage Process

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Looking to Close Faster? Follow This Easy Guide to Speeding Up the Mortgage ProcessIf you’re buying a home, you’ll want to try to get your mortgage processed as quickly as possible. Improperly filed mortgage applications are one of the biggest reasons why home sales get delayed, and if you have a hard move-out date already set, it’s critical that your mortgage process goes smoothly.

With careful planning, though, you can shorten the mortgage process and get your financing approved faster. Here’s what you need to do to speed up the approval.

Get Your Paperwork in Order Before You Apply

One of the biggest reasons why mortgages get delayed is because the applicant is missing a vital piece of paperwork. Something like a missing pay stub or a forgotten home insurance document can hold up the mortgage process, so make sure you have everything you need before applying for your mortgage.

When you apply for your mortgage, you’ll need pay stubs dating back four weeks, plus a bank statement for the last 30 days. Note that you’ll need the actual mailed statement from your bank – online screenshots don’t qualify. You’ll also need a homeowner’s insurance declaration document and any legal documents pertaining to your finances, like a divorce decree.

Keep Your Finances Consistent Once You’ve Applied

Once you’ve started the mortgage approval process it’s critical that you keep your finances fairly consistent, as major changes will mean your mortgage lender will need to restart the evaluation process. Try to avoid making larger than usual bank deposits, and don’t take out a new loan or credit card. Keep your credit card usage similar to where it’s been in the past.

If you do end up making major changes to your finances, make sure you send the proper documentation to your lender as soon as you can. Call ahead of time to make sure you know what you need to send.

Don’t Forget to Mention Assets and Debts

Before your mortgage is approved, your lender will want to take a thorough look at your existing debts and assets. If you exclude information, your lender will need to spend extra time untangling the situation and determining your proper finances. Make sure you tell your lender about any and all investment properties you own, mortgages on other homes, or loan and credit card balances that are past due.

Getting a mortgage is a complicated process, but having your documents in order can speed things up and ensure you get your mortgage on time.

Mortgages 101: How to Calculate How Much You Will Need for Your Down Payment

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Mortgages 101: How to Calculate How Much You Will Need for Your Down PaymentIf you’re planning to buy a home in the near future, you’re probably already in the process of saving up for a down payment. But if you haven’t seen a mortgage advisor or started looking at properties yet, you probably don’t have a good idea of what a down payment will cost you. Different mortgages have different down payment requirements, and you’ll need to figure out ahead of time how much of a down payment you need to put forward.

Following are some general guidelines. Be sure to speak with a knowledgeable, local lender to get the best advice for your area

How can you calculate what you’ll need for a down payment?  Here’s what you need to know.

Look at What the Lenders Are Asking For

When it comes to down payments, you’ll need to take into account what lenders want to see. A lender wants to know that you can afford the home you’re planning to buy. That’s why a sizable down payment looks great on a mortgage application.

Although you can pay as little as 5 percent down, a 20 percent down payment looks better on paper. It also means you don’t have to get private mortgage insurance, which will save you money in the long run on a conventional mortgage.

Use Your Debt-to-Income Ratio as a Guideline

Your debt-to-income ratio is a measurement that you can use to determine what kind of a mortgage you can afford. Your down payment will be subtracted from your total mortgage, and it’s your monthly mortgage payment that will determine your debt-to-income ratio.  As a general rule, your non-mortgage housing expenses (or your back end ratio) should probably account for no more than 28 percent of your before-tax income.  With all housing costs included (mortgage or rent, private mortgage insurance, HOA fees, etc.) most lenders are looking for the debt-to-income ratio (the front end ratio) of 36 percent or less.

Lets say for example, you want to get a $300,000 mortgage amortized over 25 years and you expect to make a $25,000 down payment, your monthly mortgage payment will be approximately $916.67. To afford that mortgage payment, you’ll probably need to have a total before-tax household income of around $3273.82 per month. But if you were to increase your down payment to $50,000, your monthly payment decreases to about $833.33 making the debt-to-income ratio lower if you made the same amount of money.  

Doing the Math: Down Payment Requirements for Various Specialty Mortgages

Although there are certain laws around how much of a down payment you’ll need, in some cases the rules are different. The Veterans Affairs office provides mortgages through private lenders designed specifically for active military service people, veterans, and their spouses. A VA home loan requires zero down payment for loans that are within the maximum conforming loan limit, with a 25% down payment on the difference if you opt to buy a house worth more than the loan limit.

Your down payment size will influence a variety of other factors, like your mortgage terms and whether lenders are willing to give you a mortgage. A mortgage professional can help you understand the nuances of down payments. Check with your trusted mortgage or real estate advisor to learn what will for your particular situation.

Can You Give a Relative a Gift of Cash for a Mortgage Down Payment? Yes – Here’s How

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Can You Give a Relative a Gift of Cash for a Mortgage Down Payment? Yes – Here’s HowA new house is a major investment. Even if you have a mortgage, the bank and the seller will still expect a sizeable down payment. That’s why lots of people regularly gift down payments to friends and relatives – it’s a great way to help young people start out on the path of home ownership.

But what are the rules around gifting down payments? Can you simply give someone everything they need? Although it’s a generous thought, it’s not always possible – here’s what you need to know.

Make Sure You Write a Gift Letter

If you’re giving one of your relatives money for a down payment, you’ll need to accompany the money with a gift letter. A gift letter is a letter written to the mortgage company that clearly asserts the money is a gift, not a loan. There are several key components that mortgage companies need to see on a gift letter, so make sure you have everything they need.

You’ll need to include your name, address, and phone number, as well as your relationship to the homeowner and the amount of the gift. Your letter should list the date on which you gifted the money and clearly explain that you do not expect to be repaid. Finally, you’ll need to include the address of the property being purchased and then sign the letter.

Tell Your Relatives to Pay the Right Down Payment Amount

When your relatives give their down payment, they’ll want to ensure they pay the right amount from their own money to ensure they don’t run afoul of any mortgage laws. In a conventional mortgage agreement, the borrower can pay the entire down payment with a gift if their down payment is worth at least 20% of the purchase price. If the down payment is for less than 20%, then the borrower can use gift money, but must also put forward a certain minimum amount that varies by loan type. For mortgages insured by the Federal Housing Administration or the Department of Veteran Affairs, the rules are slightly different.

Giving the gift of a mortgage is a great way to help friends or family members become homeowners. But with mortgages, there are strict rules around gifts. Contact your trusted real estate professional or mortgage officer to learn more about giving the gift of a mortgage.

How Much Should You Budget for Closing Costs? Let’s Take a Look

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How Much Should You Budget for Closing Costs? Let's Take a LookIf you’re in the market for a new home, you’re probably trying to budget for all of the expenses that come with a home purchase. After all, the asking price isn’t necessarily the entire amount that you’ll pay – there are other expenses that will factor in to the final price. One such expense is your closing costs.

Closing costs are the miscellaneous fees you’ll pay when you sign the deal to buy your home. But how much do you need to save up for closing costs? Here’s what you need to know.

The General Guideline for What to Expect

Most mortgage advisors will tell you that you should expect to pay about 3 to 5 percent of your mortgage in closing costs. By law, your mortgage provider is obligated to give you a Loan Estimate form which is designed to help you understand the key features, costs, and risks of the mortgage loan. Three business days before the loan closes your mortgage provider will also give you a Closing Estimate form to review all of the costs of the transaction including all closing costs.

How Your Closing Costs Break Down

Your lender will give you a breakdown of costs in your Loan Estimate and Closing Estimate. But in general, there are certain closing costs you can expect to pay.

One cost that most lenders include is the loan origination fee, a small charge to compensate the lender for the time it takes to prepare the initial loan documents. There will also typically be a loan application fee, which can vary per lender.

Your lender may require you to get private mortgage insurance depending on your situation. The title search and title insurance to protect your lender from title fraud is another fee you should consider, and you’ll also likely want to buy title insurance to protect yourself.

There are also several other closing costs to keep in mind, like escrow fees, notary fees, pest inspections, underwriting fees, and the mortgage broker’s commission. All in all, you’ll want to budget approximately $5,000 in closing costs for every $100,000 you borrow.

Closing costs can be quite expensive, which is why you’ll want to make sure you budget appropriately when you buy your new home. A real estate professional help you to figure out how much you need to budget for closing costs. Call your local real estate agent today to learn more about the home buying process.

Worried About Mortgage Rates Going Up? Steps to Prepare Yourself Financially

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Worried About Mortgage Rates Going Up? 3 Steps to Prepare Yourself FinanciallyMortgage rates have been at record lows for quite some time, making it easy for new homebuyers to finance their dream homes. But what comes down will eventually go back up, and with the world economy expected to rebound in 2016, we’re about to start seeing more expensive mortgages.

So what can you do to prepare yourself before mortgage rates start to rise? Here are some strategies that will keep you ahead of the game.

Start Saving More Money Now

If you have a variable rate mortgage, you’ve benefited from great interest rates that this world won’t see again for quite some time. Hopefully, you’ve taken advantage of this low-interest period to save up some cash. If so, you’re going to be in a great position for when interest rates rise – and if not, you’ll want to start saving as much as you can now to ensure you can weather the storm.

It’s far easier to save money now, with interest rates low, than it will be when your mortgage payment starts to rise. So start squirreling away as much of your paycheck as you can.

Pay Down as Much of Your Principal as Possible

Another great way to prepare for the rise in interest rates is to pay down your principal amount. The total amount of interest you’ll pay goes up when rates go up, but by paying down your principal, you can take a big bite out of your debt before it has a chance to snowball. So pay down as much of your principal as you can afford – it’s easier to pay down interest on a smaller principal amount.

Switch to a Fixed Rate Mortgage

One of the best ways to take advantage of low rates and ensure you get a great deal is to switch your floating rate mortgage to a fixed rate mortgage. Locking in your low interest rate with a fixed rate mortgage means you’ll pay less interest over the term of the loan, but it also means you’ll only have a set amount of time to pay your mortgage in full. If you’re in a position to predict when you can pay back your mortgage, you’ll save a lot of money by locking in your low rate.

Move to a Smaller More Affordable Home

If the home that you have now is just too much for you, you may consider downsizing. Moving from a large home into a smaller house or condo has not only the benefits of a smaller mortgage and more flexibility, it can also offer a lower utility bill and less cleaning. Downsizing can be stressful, but with a solid plan  you can transition to a smaller home and and save a good amount. If you are considering this option, contact your trusted real estate agent for more information on what would work best for your situation.

Mortgage rates haven’t been this low in a long time, and likely won’t be this low again for many years to come. That’s why, if you’re a homeowner, you’ll want to do everything you can to prepare for higher interest rates before they get here.

Looking Ahead: How to Ensure That You Are Taking Full Advantage of Mortgage Tax Credits

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Looking Ahead: How to Ensure That You Are Taking Full Advantage of Mortgage Tax CreditsOne of the major benefits to purchasing a home with a mortgage are the tax credits that can be taken advantage of when April 15 comes around.

Many homeowners are unaware of what mortgage related expenses can be deducted and, more importantly, which ones can no longer be deducted.

Receive A Tax Deduction For Interest Paid On The Mortgage

The most common tax credit associated with mortgages is the interest paid credit. This allows borrowers to deduct the cost of the interest paid on their mortgage on their taxes, which in many cases is the largest tax break available to homeowners.

Interest paid deductions on taxes are available to second mortgages as well as first time mortgages and are available on home equity lines of credit as well as home equity loans.

Mortgage Insurance Is No Longer Tax Deductible

Unfortunately, as of 2014 any mortgage insurance paid was no longer considered tax deductible. This came as a shock to many borrowers who planned their finances around receiving the tax credit.

Although mortgage insurance is no longer tax deductible, there are still other home related deductions that can be taken advantage of. Real estate taxes can be deducted the year they are paid and discount points purchased at the time of the sale can also be used as a deduction.

The IRS treats discount points as mortgage interest that is pre-paid and allows deductions on certain loan types.

Using Tax Information To Plan Ahead When Buying A Home

There is a limit imposed by the Internal Revenue Service on how large a loan can be to qualify for an interest paid tax deduction. Any loan that is over $1 million dollars is not allowed to have the interest paid towards it deducted when tax time rolls around.

This knowledge can be used to put the borrower in a beneficial situation in years to come when they plan to purchase a home. Limiting any loan to under $1 million dollars, no matter what the cost of the property, will allow the interest paid into it to be deducted the following year.

The tax laws are always changing and differ from state to state, so it is advised to contact a mortgage specialist with knowledge on mortgage tax laws to provide more information on which deductions you qualify for.