Sunrise Homes & Renovations, Inc.

Understanding the Jumbo Mortgage and Why Refinancing is Different

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The contemporary trend towards expansive dimensions is palpable in various aspects of modern life. Oversized soft drinks, large fast-food meals, and expansive smartphones have become ubiquitous. However, one unlikely sector experiencing a similar trend is the realm of mortgages.

Delving into the specifics, what exactly constitutes a jumbo mortgage? How does it differ from its conventional counterpart, and what implications does it hold for potential refinancing? Here’s a comprehensive overview.

Jumbo Mortgages

As the name suggests, the primary distinguishing factor of jumbo mortgages lies in the loan limit. Fannie Mae and Freddie Mac administer mortgage limits nationwide, contingent upon the cost of living in individual states. In scenarios involving high-value real estate, such as luxury properties and commercial holdings, standard mortgages may prove insufficient, thus necessitating the flexibility afforded by jumbo mortgages.

Jumbo mortgages are particularly prevalent in regions characterized by elevated living costs, where real estate values routinely exceed the standard loan limits applicable to high-cost areas.

Qualifying for a Jumbo Mortgage 

Given the higher financial stakes, eligibility requirements for jumbo mortgages are markedly more stringent than those for traditional mortgages. Notably, jumbo mortgages do not fall under private insurance coverage, resulting in a substantially larger down payment compared to standard mortgages. Prospective applicants must convincingly demonstrate to lenders their financial capacity to meet the obligations associated with a jumbo mortgage.

Additionally, a higher credit score is imperative for those seeking a jumbo mortgage. While a credit score of 660 or higher suffices for conventional mortgages, a minimum score of 700 is typically required for consideration by most lenders when applying for a jumbo mortgage.

Jumbo mortgage lenders may mandate that borrowers set aside a minimum of six months’ worth of payments in a dedicated bank account at the time of closing, a requirement that typically stands at two months for standard mortgages. Applicants must also prove to their lenders that their debt-to-income ratio is below 45 percent to qualify for a jumbo mortgage.

Refinancing Complexities

Refinancing a jumbo mortgage introduces heightened complexities compared to standard mortgages. Considerable home equity is a prerequisite for refinancing, and individuals looking to include Home Equity Line of Credit (HELOC) debt in the refinancing plan must adhere to stringent conditions, including the absence of any deductions against home equity in the preceding 12 months.

Specific lenders may impose additional requisites for refinancing jumbo mortgages. For example, homeowners with less than a year of ownership may be directed toward a Freddie Mac or Fannie Mae loan. Regardless of the fair market value at the time of mortgage filing, properties owned for less than a year are typically assessed at their original purchase price.

While jumbo mortgages provide an avenue for acquiring luxury residences or commercial properties, securing one demands meticulous adherence to a stringent set of prerequisites. Prospective applicants are advised to seek guidance from professional advisors to navigate the intricate qualification process successfully.

For those contemplating a jumbo mortgage, engaging with a seasoned mortgage professional is crucial to gaining insights into refinancing alternatives and understanding the qualification criteria. Reach out to your trusted mortgage professional to explore refinancing options and ascertain your eligibility for a jumbo mortgage.

You Ask, We Answer: What Are the Pros and Cons of Private Mortgage Insurance?

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It’s easy to get Private Mortgage Insurance (PMI) confused with homeowners’ insurance, but PMI is an entirely different thing that may or may not be necessary when it comes to your home purchase. If you’re going to be investing in a home in the near future and are wondering what PMI may mean for you, here are some things to consider regarding this type of insurance.

Your Down Payment Amount

If you’ve been perusing the housing market for a while, you’ve probably heard that 20% is the ideal amount to put down when investing in a home; however, you might not realize why. The truth is that 20% down is the suggested amount because this will enable you to avoid having to pay PMI on the purchase of your home. In this regard, PMI is a protective measure for lenders since they may be taking on more financial risk with those who have less equity built up in their homes.

Getting Into The Market

For those who want to get into the real estate market right away and only have 10-15% to put down, PMI can be a means of being able to invest before mortgage rates increase. While buying a home when you want can certainly be a benefit, it’s also worth realizing that PMI is an additional fee and will impact the total cost of your home loan. It may be a risk worth taking if you want to buy now, but if it’s the total cost you’re considering, it may be better to save more before buying.

Getting Money Back

Whether you’re a homeowner or not, most people don’t look forward to tax time no matter how much money they get back. However, if you have PMI for your home, you’ll not only be able to get a variety of tax deductions, but you will also be able to get back some of the money that you invested into your private mortgage insurance. It may not be enough of a deduction to compete with saving up, but if you’ve found the perfect home the deductions can serve as an added incentive.

While you’ll only be required to pay PMI if you put down less than 20%, it can be a benefit if you’re looking to purchase a home right away. If you’re currently pursuing your options on the real estate market, reach out to one of our mortgage professionals for more information.

The LTV Ratio: How ‘Loan-to-Value’ Works and Why You Need to Understand This Ratio

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Are you in the market for a new home? If you plan on using mortgage financing to buy your next home you’ve likely heard the phrase “loan-to-value” or the acronym “LTV” before. Let’s take a quick look at the loan-to-value ratio including why it’s important, how to calculate it, and how it can affect your mortgage.

What is the Loan-to-Value or LTV Ratio?

In short, the LTV ratio is a number that compares how much money you owe against your home with its resale value in the marketplace. A low LTV ratio indicates that you have far more equity in your home than you owe in mortgage payments; conversely, a high LTV ratio indicates that you owe almost as much as your home is worth.

Calculating your LTV ratio is easy. Simply divide the amount that you have (or will have) remaining in your mortgage by your home’s value. For example, if you own a home worth $250,000 and you still owe $150,000 on your mortgage, the calculation would be $150,000 divided by $250,000, which gives you an LTV ratio of 0.6 or 60 percent.

Why is the LTV Ratio Important?

Your LTV ratio is important for a number of reasons. First, your mortgage lender will use this figure as part of their risk calculation when they assess your financial suitability for your mortgage. If you’re only putting 5 percent of the purchase price in as a down payment you’ll have an LTV ratio of 95 percent, which is a more risky loan than one with an LTV ratio of 30 percent and thus will almost certainly come with a higher interest rate.

If you have an LTV ratio higher than 80 percent and you’re getting a mortgage from a conventional lender you’ll also be required to pay for private mortgage insurance or “PMI”. Although PMI rates generally sound quite low – in the neighborhood of 0.5 to 1 percent – they can add hundreds of dollars to your monthly mortgage payment. Note that PMI may not apply to you if you’re seeking out a government-backed mortgage from Veteran’s Affairs, the USDA, or the FHA.

While the LTV ratio might seem simple, this number can affect your mortgage in a variety of ways. Contact your local mortgage advisor today to learn more about the LTV ratio and to have your questions answered by an experienced professional.

On Time, Every Time: How Being Late on Monthly Payments Can Affect Your Mortgage

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On Time, Every Time: How Being Late on Monthly Payments Can Affect Your MortgageAre you the type of person that struggles with remembering to pay their bills on time? You’re not alone. People across the country regularly submit late monthly payments, inflicting terrible damage to their credit. Let’s take a quick look at how paying your loan or other monthly payments late can have a negative impact on your mortgage.

Your Credit Score Is At Risk

As you already know, almost all banks, credit cards, mortgage companies and other lenders rely on your credit score to help assess the risk of lending money to you. Paying any of your payments late – even something as small as your mobile phone bill or a department store credit card – can result in negative marks showing up on your credit report. If you are late enough times or fail to repay the late payment in full, then your score will start to drop.

Refinancing Can Be Affected

If you already have a mortgage, then a lower credit score can be a problem when you try to refinance. The process of refinancing involves taking out a new mortgage, in which your lender will reassess your risk using your credit score as one of the indicators. If you have been making late payments, you might end up having to settle for a higher interest rate or you may even be declined for the new mortgage.

Making A Late Payment? Contact Your Lender

If you are caught in a bind and have to make a late payment, it is best to get a call in to your lender as soon as possible. First, there may be a grace period in which you can be a few days late without any penalty. If that little bit of breathing room is all you need to get caught up, you’re set. If not, you can let them know your circumstances and discuss what options you have.

It is essential to pay your monthly payments on time, even if it means making some small sacrifices in other areas. The better your credit score looks, the more opportunities you will have to make positive financial moves in the future. To learn more about monthly mortgage payments or to take out a mortgage on a new home, contact us today. Our team of mortgage professionals is here to help you find a mortgage to buy the home of your dreams.

Thinking Of Renovating? Cash-out Mortgage Refinancing Might Be the Best Way to Fund It

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Renovating in 2018? Cash-out Mortgage Refinancing Might Be the Best Way to Fund ItIf you are a homeowner thinking about a significant home renovation, you have probably already considered your budget. As with any large project, you need to have the ability to pay the expected costs plus have a little bit extra set aside, just in case. The great news is that if you are a homeowner with a mortgage, you may qualify for cash-out refinancing, which can be a helpful way to leverage some of your home equity to cover renovation costs.

In today’s blog post we’ll explore the topic of cash-out refinancing and how this unique financial product can help to solve your budget woes.

What is Cash-Out Refinancing?

If you have never heard of it before, you are probably wondering exactly how cash-out refinancing works. In short, you refinance your existing mortgage into a new one while keeping the difference in cash. For example, if you have $100,000 left on your mortgage, but your home is worth $200,000, you might decide to refinance to $150,000. You will then be left with $50,000 in cash, which you can pull out to cover the cost of renovations or for other purposes.

Note that this is different from other forms of mortgage refinancing, which may or may not increase your total balance.

Some Of The Major Pros Of Cash-Out Refinancing

As you might imagine, there are significant pros to cash-out refinancing. If you decide to use the funds for renovation purposes, you are essentially using your mortgage to increase the value of your home. That is, of course, assuming you complete renovations which boost your home’s value!

Cash-out refinancing can also provide better or more stable interest rates than a loan or a home equity line of credit. This depends on a variety of circumstances, so be sure to check with your lender.

A Few Other Considerations To Keep In Mind

As with any financial product, there are some considerations to keep in mind. You may be extending the length of your mortgage, or refinancing to a different interest rate. You also can’t just walk in and sign for cash-out refinancing. There will be a process similar to the one that you went through when you got your current mortgage.

As you can see, cash-out refinancing is an excellent option for homeowners looking to use some of their home equity to finance other expenses. To learn more about this type of refinancing or to explore other mortgage options, contact us today. 

What Is Mortgage Insurance and How Does It Benefit Me?

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What Is Mortgage Insurance and How Does It Benefit Me? Let's Take a LookAre you in the market for a new home? If you are considering a mortgage, you may be curious about mortgage insurance, commonly referred to as PMI or MI. Let’s explore the topic of mortgage insurance, including how it works to reduce risk and how it benefits you as the mortgage borrower.

Mortgage Insurance = Risk Reduction

You might not know this, but the toughest part of the home buying process for many individuals and families is coming up with the required down payment. For example, if you were to buy a $200,000 home, you may want to invest $40,000 or $60,000 or more in the down payment. The remainder would be borrowed in your mortgage, which you would then pay off each month.

Most mortgage lenders require a minimum of 20 percent as a down payment. In the example above, this means having $40,000 cash on hand before you buy the home. If you can’t come up with this much, your lender may require mortgage insurance be purchased to protect them in case you default on the loan.

Mortgage Insurance Can Help You Qualify

Since mortgage insurance reduces the lender’s exposure to risk, it can help you in a number of ways during the qualification process. First, you can put less in your down payment than you had initially intended, which can increase your buying power and the size of home you can afford. Mortgages backed with a private insurance policy tend to be approved a bit faster than those that aren’t. Also, if you decide that you don’t need it later, many mortgage insurance policies can be canceled, which saves you a bit of money.

Look For Supplemental Benefits

Finally, don’t forget to ask your mortgage lender about any supplemental benefits offered with your mortgage insurance policy. Some policies protect you in the event that you lose your job or provide a partial claim advance if you can’t pay your mortgage. Note that not all policies have these benefits, so be sure to ask.

While it is true that mortgage insurance provides benefits to lenders, it also offers significant benefits to you as the borrower. To learn more about mortgage insurance or to get pre-approved for a mortgage so you can buy a home, give us a call today. Our friendly team of real estate professionals is happy to help.