home loans http://www.wisebread.com/taxonomy/term/8917/all en-US Weak Credit? You Can Still Get a Mortgage Despite Tough Lending Standards http://www.wisebread.com/weak-credit-you-can-still-get-a-mortgage-despite-tough-lending-standards <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/weak-credit-you-can-still-get-a-mortgage-despite-tough-lending-standards" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/happy_young_family_0.jpg" alt="Happy young family" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Talk to anyone who bought a house in the mid-2000s and they'll probably relate a painless, smooth process. It was a period of easy lending. Whether a borrower had bad credit, good credit, or no credit (am I starting to sound like a used-car salesman?), mortgage lenders handed out no-money down mortgages like they were going out of style &mdash; even qualifying some borrowers without verifying their income and assets. As we know, these loose lending standards helped cause the housing bubble to burst which led to the financial crisis.</p> <p>More than a decade later, mortgage lending standards have tightened, with lenders putting a lot of emphasis on creditworthiness. This isn't an issue for borrowers with good credit. But if your credit score isn't up to snuff, you may have to delay your homeownership dreams.</p> <p><a href="http://www.wisebread.com/5-ways-to-improve-your-credit-score-fast" target="_blank">Repairing a low credit score</a> is obvious fix in this situation. This involves paying your bills on time, correcting errors on your credit report, and keeping your debt to a minimum. But what if you're in the process of repairing your credit? It takes time to build a low credit score back up. So while your payment history for the past six to 12 months might be excellent, your credit score could still struggle.</p> <p>No worries. If your recent credit activity demonstrates a pattern of responsibility, it is possible to get a mortgage with weak credit &mdash; even with strict lending requirements.</p> <h2>Learn about FHA home loans</h2> <p>Conventional home loans are a popular choice because they require as little as 5 percent down and include temporary mortgage insurance. Lenders charge private mortgage insurance (PMI) when conventional borrowers put down less than 20 percent (and then cancel premiums once the property has 20 percent equity). The downside of a conventional loan is that lenders typically require a minimum 620 credit score.</p> <p>A 620 credit score is lower than the loan's previous minimum of 680. Even so, you could find yourself several points shy of the minimum guideline. If that's the case, check out FHA home loans insured by the Federal Housing Administration.</p> <p>This is an affordable alternative to a conventional loan, particularly if you have a weak credit score. Whereas a conventional loan requires a 620 credit score, an FHA loan allows for much lower credit scores &mdash; as low as 500 to 580. This is ideal if you've made a few credit mistakes in the past, yet you're on track to improve your credit score.</p> <p>Anyone can apply for an FHA loan, but it's certainly a fitting solution if you've filed for bankruptcy or experienced a past foreclosure. Currently, borrowers are eligible for an FHA home loan one year after a Chapter 13 bankruptcy, two years after a Chapter 7 bankruptcy, three years after a foreclosure, and three years after a short sale (one year in cases of extenuating circumstances, such as a job loss or illness). (See also: <a href="http://www.wisebread.com/is-an-fha-home-loan-right-for-you?Ref=seealso" target="_blank">Is an FHA Home Loan Right for You?</a>)</p> <h2>Prepare for a higher down payment</h2> <p>Be prepared to fork over a larger down payment if you're buying with weak credit. Even though 20 percent down payments are no longer required by lenders, an FHA home loan does require a minimum 3.5 percent down &mdash; but only if your credit score is 580 or higher. If you apply for an FHA loan with a credit score between 500 and 579, your mortgage lender will require a minimum 10 percent down.</p> <h2>Choose a portfolio lender</h2> <p>Using a portfolio lender is another option with a low credit score. Because many banks sell their mortgages to investors, they have to ensure these loans meet the requirements set forth by Fannie Mae and Freddie Mac, the government-sponsored entities that buy most of the home mortgages in the U.S. This limits the number of bad credit score loans approved by mortgage lenders.</p> <p>But if a mortgage lender or bank doesn't sell a percentage of its loans, they have the freedom and flexibility to approve riskier loan applicants &mdash; but only if the borrower has compensating factors to offset weak credit like a higher down payment, high income, or substantial assets. These loans are known as portfolio loans because the lender retains the loan as part of its own investment.</p> <h2>Expect a higher interest rate</h2> <p>Even though some mortgage lenders and loan programs accommodate weak credit, there's no escaping a higher mortgage rate. A low credit score and higher rates go hand-in-hand. Because the size of a borrower's down payment and credit affects mortgage rates, people with the lowest credit scores usually pay the highest rates. A higher rate increases borrowing costs and monthly payments, which makes homeownership more expensive in the long run.</p> <p>Of course, as your credit score improves, so does the opportunity to refinance your mortgage loan. If you refinance down the road and snag a lower rate, you'll reduce the amount you pay in interest and potentially lower your mortgage payment.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fweak-credit-you-can-still-get-a-mortgage-despite-tough-lending-standards&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FWeak%2520Credit-%2520You%2520Can%2520Still%2520Get%2520a%2520Mortgage%2520Despite%2520Tough%2520Lending%2520Standards.jpg&amp;description=Weak%20Credit%3F%20You%20Can%20Still%20Get%20a%20Mortgage%20Despite%20Tough%20Lending%20Standards"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/Weak%20Credit-%20You%20Can%20Still%20Get%20a%20Mortgage%20Despite%20Tough%20Lending%20Standards.jpg" alt="Weak Credit? You Can Still Get a Mortgage Despite Tough Lending Standards" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/weak-credit-you-can-still-get-a-mortgage-despite-tough-lending-standards">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-13"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/do-you-really-need-a-20-percent-down-payment-for-a-house">Do You Really Need a 20 Percent Down Payment for a House?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/make-these-5-money-moves-before-applying-for-a-mortgage">Make These 5 Money Moves Before Applying for a Mortgage</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-things-to-consider-before-buying-a-home-when-youre-single">5 Things to Consider Before Buying a Home When You&#039;re Single</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-mortgage-details-you-should-know-before-you-sign">5 Mortgage Details You Should Know Before You Sign</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-long-does-it-take-break-even-with-a-home-refi">How Long Does it Take Break Even With a Home ReFi?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing bad credit buying a home credit score down payments equity fha loan home loans homeownership interest rates mortgages portfolio lenders Thu, 05 Oct 2017 08:30:11 +0000 Mikey Rox 2030975 at http://www.wisebread.com How Your New Job Might Affect Your Mortgage Application http://www.wisebread.com/how-your-new-job-might-affect-your-mortgage-application <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-your-new-job-might-affect-your-mortgage-application" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple_stylish_paperwork_635876724.jpg" alt="Woman learning how new job might affect mortgage application" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You just got a new job. Congratulations! New beginnings are an exciting part of life. If you're in the market to qualify for a new mortgage, your new beginning could have an impact on your mortgage application. Here's what you need to know. (See also: <a href="http://www.wisebread.com/5-money-moves-that-will-ruin-your-mortgage-application?ref=seealso" target="_blank">5 Money Moves That Will Ruin Your Mortgage Application</a>)</p> <h2>Continuity of some kind is key</h2> <p>Lenders like to see financial and career stability. If you've recently changed jobs, that's OK, provided that lenders see some kind of continuity.</p> <p>For example, if your new job is in the same field that you've been in for the past two years, the lender would probably be comfortable with that. This is especially true if your new job is a promotion in title, responsibility, or salary. If you took a pay cut, but stayed in the same field, the lender would also likely find that acceptable, as long as your new income is at a level that is appropriate for the size of mortgage you want.</p> <h2>Stability and history in your field matters</h2> <p>Lenders start to get uncomfortable when you move into a brand-new field because they view that as a less stable work situation. That said, this is not an insurmountable problem. Be honest and upfront with your lender. Explain how your previous experience is applicable to your new field. This could take the form of your responsibilities, or similarity in the fields themselves.</p> <p>It is also helpful if you can show that your education and any other training you've received aligns with your new role. You could secure a reference letter from your new employer, too.</p> <p>Remember, getting a mortgage with a lender is a conversation. You aren't putting in an application as a faceless entity. The lender wants to know who you are, what you do, and, most importantly, how you will repay the mortgage. You need to paint a picture of yourself as a responsible professional on a stable career path.</p> <h2>The paperwork you need</h2> <p>In addition to a letter or contract, the lender will also need other paperwork to verify your income. If you have all of this paperwork together before going to the lender, your sense of organization and preparedness will work in your favor. You will need:</p> <ul> <li>Your job offer letter with the details of your start date, title, and compensation. This letter should be on official company letterhead.<br /> &nbsp;</li> <li>At least two pay stubs, though I have recently heard of lenders asking for three or four pay stubs.<br /> &nbsp;</li> <li>The contact information for your human resources department. The lender will eventually need to talk to someone at your company to confirm the information you've provided is legitimate.</li> </ul> <p>A new job and a new home are exciting prospects. Though continuity of employment eases the path to a new mortgage, many people buy a new home in conjunction with a new job. Be prepared with a solid, concise explanation of your decision to change jobs and have your paperwork in order. Also remember to shop around for a mortgage with a few different lenders to secure the best terms and rates. Happy house hunting!</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fhow-your-new-job-might-affect-your-mortgage-application&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FHow%2520Your%2520New%2520Job%2520Might%2520Affect%2520Your%2520Mortgage%2520Application.jpg&amp;description=How%20Your%20New%20Job%20Might%20Affect%20Your%20Mortgage%20Application"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/How%20Your%20New%20Job%20Might%20Affect%20Your%20Mortgage%20Application.jpg" alt="How Your New Job Might Affect Your Mortgage Application" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/christa-avampato">Christa Avampato</a> of <a href="http://www.wisebread.com/how-your-new-job-might-affect-your-mortgage-application">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-mortgage-details-you-should-know-before-you-sign">5 Mortgage Details You Should Know Before You Sign</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/everything-you-need-to-know-about-freddie-mac-and-fannie-mae">Everything You Need to Know About Freddie Mac and Fannie Mae</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-qualify-for-a-mortgage-with-a-small-downpayment">5 Ways to Qualify for a Mortgage With a Small Downpayment</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/do-you-really-need-a-20-percent-down-payment-for-a-house">Do You Really Need a 20 Percent Down Payment for a House?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-surprising-things-lenders-check-besides-your-credit-score">4 Surprising Things Lenders Check Besides Your Credit Score</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Career and Income Real Estate and Housing approval home loans income lenders mortgages new jobs paychecks stability Mon, 02 Oct 2017 08:30:16 +0000 Christa Avampato 2029141 at http://www.wisebread.com Is a 15-Year Mortgage a Good Idea? http://www.wisebread.com/is-a-15-year-mortgage-a-good-idea <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/is-a-15-year-mortgage-a-good-idea" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/coins_stack_in_columns_with_saving_book_and_paper_home.jpg" alt="Coins stack in columns with saving book and paper home" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You're ready to buy a home, and it's time to choose a mortgage. Mortgage loans come in a wide variety of options, including everything from a standard 30-year, fixed-rate mortgage, to loans with interest rates that adjust every year.</p> <p>Then there's the 15-year, fixed-rate mortgage. It comes with an interest rate that doesn't change and is lower than the one you'd get with a 30-year loan. But because this loan has a shorter term, it also comes with a higher monthly payment.</p> <p>Should you consider a 15-year, fixed-rate home loan? Maybe. There are pros and cons to this type of mortgage.</p> <h2>The pros</h2> <p>Let's first look at some of the upsides to a shorter-term mortgage loan.</p> <h3>You'll pay a lot less interest</h3> <p>Say you take out a mortgage loan for $200,000. If you take out this loan as a 30-year, fixed-rate mortgage with an interest rate of 4.10 percent, you'll pay more than $140,000 in interest if you take the full three decades to pay off your loan.</p> <p>Say, instead, you take out that $200,000 as a 15-year, fixed-rate loan with an interest rate of 3.25 percent. You'd pay just under $53,000 in interest if you paid off this mortgage over its full term.</p> <p>That's a savings of about $87,000 in interest.</p> <h3>Your interest rate will be less</h3> <p>You pay less in interest on a 15-year, fixed-rate loan for two reasons. First, because the loan is paid back in half the time, you pay off a greater amount of its principal balance with each monthly payment. Secondly, 15-year loans come with lower interest rates than 30-year versions because you aren't holding the bank's money for as long.</p> <p>According to the Freddie Mac Primary Mortgage Market Survey, the average interest rate on a 30-year, fixed-rate loan stood at 3.78 percent as of September 2017. The survey showed the average rate on a 15-year, fixed-rate loan was 3.08 percent during the same time frame.</p> <p>If nabbing the lowest possible interest rate is important to you, a 15-year, fixed-rate mortgage is a good choice.</p> <h3>You'll free up your money faster</h3> <p>Because the term is cut in half, you'll pay off your mortgage faster if you go with the 15-year version. Once you've paid off your mortgage loan, you'll be able to spend or invest the dollars that once went to your lender.</p> <p>Just be aware that many homeowners never pay off their loans in full. You might refinance your 15-year loan to another type long before you pay it off. Or you might sell your home and move before you reach the end of your term.</p> <h2>The cons</h2> <p>Here are the downsides to a shorter-term mortgage.</p> <h3>Your monthly payment will be higher</h3> <p>Because you pay off a 15-year mortgage in half the time as you would a 30-year version, your monthly payments will be higher.</p> <p>How much higher? If you take out a $200,000 30-year, fixed-rate mortgage with an interest rate of 4.10 percent, your monthly payment, not including property taxes and homeowners insurance, would be about $966.</p> <p>If you take out that same $200,000 in the form of a 15-year, fixed-rate loan with an interest rate of 3.25 percent, your monthly payment would be about $1,400, again not including property taxes and insurance.</p> <p>That's a big difference. Yes, it might sound good to eliminate all the extra interest payments that come with a 30-year loan. But if you'll struggle to make the monthly payments that come with a 15-year loan, the shorter-term mortgage is not a good move.</p> <h3>There's less flexibility</h3> <p>If you're worried about the higher monthly payments of a 15-year mortgage, but also concerned about paying too much interest over the life of your loan, you can take out a 30-year, fixed-rate mortgage and pay a bit extra toward your loan's principal balance every month.</p> <p>Doing this often enough will put a dent in the amount of interest you pay. And if there's a tighter month in which you don't have as much extra money, you can simply make your required mortgage payment without sending along a bit of extra cash toward principal.</p> <p>However, if you take out a 15-year mortgage, you must make the higher mortgage payment each month. You don't have the option of paying less. If your budget is already tight, or if you're struggling with high amounts of other debt, the smaller payments of a 30-year loan might make more sense.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fis-a-15-year-mortgage-a-good-idea&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FIs%2520a%252015-Year%2520Mortgage%2520a%2520Good%2520Idea-.jpg&amp;description=Is%20a%2015-Year%20Mortgage%20a%20Good%20Idea%3F"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/Is%20a%2015-Year%20Mortgage%20a%20Good%20Idea-.jpg" alt="Is a 15-Year Mortgage a Good Idea?" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/is-a-15-year-mortgage-a-good-idea">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-mortgage-details-you-should-know-before-you-sign">5 Mortgage Details You Should Know Before You Sign</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/weak-credit-you-can-still-get-a-mortgage-despite-tough-lending-standards">Weak Credit? You Can Still Get a Mortgage Despite Tough Lending Standards</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-it-safe-to-re-finance-your-home-close-to-retirement">Is it Safe to Re-Finance Your Home Close to Retirement?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-you-should-consider-an-adjustable-rate-mortgage">Why You Should Consider an Adjustable-Rate Mortgage</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-long-does-it-take-break-even-with-a-home-refi">How Long Does it Take Break Even With a Home ReFi?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing 15-year mortgage home loans interest rates monthly payments mortgages principal pros and cons short term loan Tue, 26 Sep 2017 08:30:10 +0000 Dan Rafter 2025923 at http://www.wisebread.com 5 Mortgage Details You Should Know Before You Sign http://www.wisebread.com/5-mortgage-details-you-should-know-before-you-sign <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-mortgage-details-you-should-know-before-you-sign" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-475902363.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>Taking out a mortgage is a big financial commitment. Not only are mortgage loans expensive, they also represent the biggest monthly payment for most consumers' budgets.</p> <p>That's why it's so important to ask the right questions before signing the documents that officially close your mortgage. Here are five key questions you need to ask your lender when looking over your mortgage documents.</p> <h2>1. What are my closing costs?</h2> <p>Taking out a mortgage isn't free. Your lender and several third-party service providers will charge you what are known as closing costs, the fees you'll have to pay for your mortgage loan. You can expect to pay from 2 percent to 5 percent of your home's purchase price in closing costs.</p> <p>This means for a home costing $200,000, you can expect to pay between $4,000 and $10,000 in closing costs. That's a lot of money, and often consumers roll the amount into their final loan, which can slightly increase their monthly payment.</p> <p>Fortunately, uncovering your closing costs is an easy process. Your lender must send you a form known as a loan estimate within three business days of receiving your loan application. This form includes a list of your estimated closing costs. At least three days before closing your loan, your lender will provide you with another form, the closing disclosure. This form lists your final closing costs.</p> <p>It's important to study both of these forms to make sure your closing costs are what you expected them to be.</p> <h2>2. What is my interest rate?</h2> <p>When you pay a mortgage loan, a good chunk of your monthly payment will go toward interest. In fact, during the earliest years of your mortgage, a far larger percentage of your monthly payment will go toward interest than toward paying down your principal balance.</p> <p>That's why getting the lowest possible interest rate makes such a difference in both the amount of interest you'll pay during the life of your loan, and how much you'll pay each month.</p> <p>Here's an example: Say you take out a 30-year, fixed-rate mortgage loan for $200,000 at an interest rate of 3.76 percent. Your monthly payment &mdash; not including property taxes and homeowners insurance &mdash; would be about $927.</p> <p>If on that same loan your interest rate was 4.76 percent, your monthly payment would shoot up to $1,044, not including taxes and insurance.</p> <h2>3. What is my monthly payment?</h2> <p>Your monthly payment doesn't just include the amount you pay in interest and principal. Most lenders require that you pay extra with each payment to cover the yearly cost of your homeowners insurance and property taxes.</p> <p>Your lender will then take this extra money and deposit it into an escrow account. When your taxes and insurance come due each year, your lender will use this money to pay these bills on your behalf. This can add hundreds of dollars to your monthly payment, so knowing this ahead of time is important.</p> <p>Don't be fooled into thinking that your mortgage payment <em>only</em> includes your mortgage loan. Your property taxes and insurance make a big difference in your monthly bill.</p> <h2>4. What type of loan do I have?</h2> <p>There are several types of mortgages out there. The most common are fixed loans, usually with terms of 30 or 15 years. With these loans, your interest rate remains the same until you pay off the loan, sell your home, or refinance it.</p> <p>You might also opt for an adjustable-rate loan. With an adjustable-rate mortgage, the interest rate remains fixed for a set period &mdash; usually five to seven years &mdash; and then adjusts according to whatever economic indexes your loan is tied to. Your loan's interest rate could adjust every year or it could adjust every five years. It all depends on your loan's specifics.</p> <p>Consumers choose adjustable-rate loans because their initial interest rates are usually lower than those you'd get with a fixed-rate loan. But adjustable-rate loans do come with more risk: When your loan adjusts, your new rate could be higher than the rate you would have had if you had gone with a fixed-rate loan.</p> <h2>5. Is there a penalty for paying early?</h2> <p>They're not as common as they once were, but some loans come with a prepayment penalty. This means that you'll have to pay a penalty &mdash; often about 2 percent of your loan's remaining balance &mdash; for paying off your mortgage before it's due. Often, lenders who charge prepayment penalties assess them if you pay off your loan in the first two to five years.</p> <p>You might not worry about such a penalty. After all, you'll never pay off your mortgage loan in two to five years, right?</p> <p>But a prepayment penalty may also kick in if you decide to refinance your loan or sell your home during the penalty phase. Because of this, it's best not to sign onto a loan with a prepayment penalty.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F5-mortgage-details-you-should-know-before-you-sign&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F5%2520Mortgage%2520Details%2520You%2520Should%2520Know%2520Before%2520You%2520Sign.jpg&amp;description=5%20Mortgage%20Details%20You%20Should%20Know%20Before%20You%20Sign"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/5%20Mortgage%20Details%20You%20Should%20Know%20Before%20You%20Sign.jpg" alt="5 Mortgage Details You Should Know Before You Sign" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/5-mortgage-details-you-should-know-before-you-sign">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-it-safe-to-re-finance-your-home-close-to-retirement">Is it Safe to Re-Finance Your Home Close to Retirement?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-surprising-things-lenders-check-besides-your-credit-score">4 Surprising Things Lenders Check Besides Your Credit Score</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/weak-credit-you-can-still-get-a-mortgage-despite-tough-lending-standards">Weak Credit? You Can Still Get a Mortgage Despite Tough Lending Standards</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-whats-included-in-a-homes-closing-costs">Here&#039;s What&#039;s Included in a Home&#039;s Closing Costs</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-a-15-year-mortgage-a-good-idea">Is a 15-Year Mortgage a Good Idea?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing closing costs home buying home loans homeownership interest rates lenders monthly payments mortgages penalties questions Fri, 04 Aug 2017 08:00:06 +0000 Dan Rafter 1990976 at http://www.wisebread.com It's Now Easier to Get a Home Loan Even If You Have Student Loan Debt — Should You? http://www.wisebread.com/its-now-easier-to-get-a-home-loan-even-if-you-have-student-loan-debt-should-you <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/its-now-easier-to-get-a-home-loan-even-if-you-have-student-loan-debt-should-you" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/house_and_keys.jpg" alt="House and keys" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Student loan debt has snowballed to the point where many young people are delaying the purchase of a home. On one hand, it's hard to save up for a down payment when you're already $37,172 in debt &mdash; the average for class of 2016 graduates. On the other hand, student loan debt can make it hard to qualify for a mortgage at all.</p> <p>Fannie Mae, the nation's largest purchaser and guarantor of mortgages, recently addressed the second problem by changing two key rules for borrowers. Because Fannie Mae buys mortgages from about 1,800 lenders that follow its rules, these changes at Fannie Mae affect potential home loan borrowers all over the country.</p> <h2>Debt that someone else is paying off no longer counts against you</h2> <p>For example, your parents or your employer might be making your student loan payments. In the past, a lender would still count those payments as part of your <a href="http://www.wisebread.com/3-ways-student-loan-debt-can-affect-your-mortgage-application" target="_blank">debt-to-income ratio</a>, a key figure used to determine whether you can afford to make mortgage payments. But now, Fannie Mae will recognize that if you're not the one paying the bill, that loan won't actually affect your ability to pay your mortgage.</p> <p>This new rule will also apply to other kinds of debt that someone else is paying for you, such as car loans or credit card balances. To qualify, you'll need to provide documentation showing that someone else has made payments on the debt for the past 12 months.</p> <h2>Flexible payment plans are recognized</h2> <p>One of the benefits of carrying a federal student loan is that you may qualify for an income-based repayment program, lowering your monthly obligation to a certain percent of your available income. This is great &mdash; until you apply for a mortgage and find out that Fannie Mae uses the standard payment amount, not the lower amount you're actually paying, to determine your debt-to-income ratio.</p> <p>From now on, lenders working with Fannie Mae can instead use the lower, flexible payment amount &mdash; meaning that more applicants with student debt will qualify to buy a home.</p> <p>With these two changes, many more young people will qualify to buy homes &mdash; a change that is probably good for the economy and the housing market. But is it a good idea for<em> you</em>? Some questions for graduates who will be affected by the Fannie Mae decisions &mdash; and for other student loan borrowers &mdash; to ask.</p> <h2>What would you do if you had to take over your own student debt payments?</h2> <p>For people who have their loans paid by employers or others, investing in a nice house may seem like a no brainer. Say you're a young doctor practicing at a hospital that covers student loan payments as part of its compensation package. Great! You are able to buy a four-bedroom home with a swimming pool.</p> <p>But then the hospital files for bankruptcy and you are let go. You can get another local position with a private practice, but it won't pay for your student loans. Will you be able to pay your new mortgage and student loans at the same time?</p> <h2>What if the government changes student debt repayment rules?</h2> <p>If your income is already so limited that you qualify for a modified loan repayment plan, it's worth pondering whether buying a home is the right move at this stage in your life. Congress could decide to end that program in order to save money. Think about if and how you could make a standard debt payment and a mortgage payment if the rules change.</p> <h2>Do you have enough saved for a down payment?</h2> <p>It used to be that buyers routinely plunked down 20 percent of a home's value upfront. Nowadays, most buyers make down payments of between 5 percent and 10 percent. If you've been making large student loan payments, you may not have this money saved up. (See also: <a href="http://www.wisebread.com/4-easy-ways-to-start-saving-for-a-down-payment-on-a-home" target="_blank">4 Easy Ways to Start Saving for a House Down Payment</a>)</p> <h2>Will you be able to afford maintenance?</h2> <p>When working out your hypothetical budget as a homeowner, don't stop after accounting for your student loan payments and the mortgage. You need to set aside money for things that break and systems that wear out, from the doorbell to the roof. You never know when something is going to need replacing, but a rule of thumb is to budget 1 percent of a home's value for maintenance each year. So if you plan to buy a $200,000 home, make sure you can afford to set aside $2,000 annually for repairs.</p> <h2>How will you handle a financial emergency?</h2> <p>A financial emergency can be bad enough if you're renting and are forced to break your lease and move somewhere cheaper. But once you're committed to owning a home, a loss of income could mean losing the home as well. And homeowners with hefty student loan debt are that much more vulnerable.</p> <p>Before you sign that purchase contract, it's a good idea to have several months of mortgage payments in an emergency fund. If you <a href="http://www.wisebread.com/where-to-turn-for-help-when-you-dont-have-an-emergency-fund" target="_blank">don't have an emergency fund</a>, at least have a plan for how you would pay the mortgage if you lose your job. Could you turn to a relative for support? Could you advertise for roommates? Sell your car?</p> <p>Taken altogether, it's clear that there is no one-size-fits-all answer to whether you should buy a house before your student loans are paid off. Homeownership comes with a lot of benefits, such as the mortgage interest tax deduction, so it may not be something you want to put off for the years it could take to pay off the student loans.</p> <p>But rushing into homeownership before you have a stable income and emergency reserves would be a mistake for anyone &mdash; and that much more so for folks with heavy student debt.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fits-now-easier-to-get-a-home-loan-even-if-you-have-student-loan-debt-should-you&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FIt%2527s%2520Now%2520Easier%2520to%2520Get%2520a%2520Home%2520Loan%2520Even%2520If%2520You%2520Have%2520Student%2520Loan%2520Debt%2520%25E2%2580%2594%2520Should%2520You-.jpg&amp;description=It's%20Now%20Easier%20to%20Get%20a%20Home%20Loan%20Even%20If%20You%20Have%20Student%20Loan%20Debt%20%E2%80%94%20Should%20You%3F"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/It%27s%20Now%20Easier%20to%20Get%20a%20Home%20Loan%20Even%20If%20You%20Have%20Student%20Loan%20Debt%20%E2%80%94%20Should%20You-.jpg" alt="It's Now Easier to Get a Home Loan Even If You Have Student Loan Debt &mdash; Should You?" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/carrie-kirby">Carrie Kirby</a> of <a href="http://www.wisebread.com/its-now-easier-to-get-a-home-loan-even-if-you-have-student-loan-debt-should-you">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-ways-student-loan-debt-can-affect-your-mortgage-application">3 Ways Student Loan Debt Can Affect Your Mortgage Application</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-valuable-rights-you-might-lose-when-you-refinance-student-loans">8 Valuable Rights You Might Lose When You Refinance Student Loans</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/do-you-really-need-a-20-percent-down-payment-for-a-house">Do You Really Need a 20 Percent Down Payment for a House?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/make-these-5-money-moves-before-applying-for-a-mortgage">Make These 5 Money Moves Before Applying for a Mortgage</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/weak-credit-you-can-still-get-a-mortgage-despite-tough-lending-standards">Weak Credit? You Can Still Get a Mortgage Despite Tough Lending Standards</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Real Estate and Housing debt payments debt to income ratio down payments emergency funds fannie mae flexible payment plans home loans mortgages rule changes student loans Mon, 31 Jul 2017 08:30:04 +0000 Carrie Kirby 1981838 at http://www.wisebread.com How Long Does it Take Break Even With a Home ReFi? http://www.wisebread.com/how-long-does-it-take-break-even-with-a-home-refi <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-long-does-it-take-break-even-with-a-home-refi" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_s_hand_putting_house_model_on_coins_stack.jpg" alt="Woman&#039;s hand putting house model on coins stack" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Refinancing your mortgage loan to one with a lower interest rate makes good financial sense &mdash; usually. It all depends on how much lower your interest rate will be, how much you owe on your loan, and how long you plan to stay in your home.</p> <p>Refinancing a mortgage isn't free. Costs vary by lender, but you can expect to pay from 1.5 percent to 2 percent of your outstanding loan balance to close a refinance. If you owe $200,000 on your mortgage loan, that comes out to $3,000 to $4,000 &mdash; no small amount. But if your monthly mortgage loan drops by enough, you'll recoup those costs quickly. Then, the savings you enjoy each month will start adding up.</p> <p>Determining how long it will take you to break even on your refinance requires a bit of math. Let's crunch the numbers.</p> <h2>Finding the break-even point</h2> <p>Say you have been paying off a $250,000 30-year, fixed-rate mortgage with an interest rate of 4.50 percent. Your monthly mortgage payment &mdash; not including the extra costs of property taxes and homeowners insurance &mdash; will be about $1,266.</p> <p>Now, say when you're ready to refinance, your mortgage balance is down to $200,000. If you refinance that balance to a new 30-year, fixed-rate mortgage with an interest rate of 3.85 percent, your estimated monthly payment, again not including taxes and insurance, will fall to about $937 a month. That's a savings of about $329 a month, or $3,948 a year.</p> <p>If you spent $3,000 in closing costs on your refinance, you'd hit the break-even point on your loan in less than a year.</p> <p>But refinancing doesn't always come with such a quick payback period.</p> <p>For example, if you have been paying off a 30-year, fixed-rate loan of $200,000 at an interest rate of 4.15 percent, your monthly payment, not including taxes and insurance, would be about $972. Say you now owe $190,000 on this loan and you refinance it to a 30-year, fixed-rate loan with an interest rate of 3.85 percent. This will drop your monthly payment to about $890, a difference of $82 a month or about $948 a year.</p> <p>If it costs you $3,000 to refinance that mortgage, it will take you a little more than three years to hit the break-even point. If you plan on living in your home and paying off your new mortgage for more than these three years, this refinance might still make financial sense. The payback period, though, won't be quite as quick.</p> <h2>Speeding up break-even</h2> <p>You can reduce the amount of time it takes you to reach the break-even point in several ways.</p> <p>First, you can shop around for a mortgage lender that charges lower fees. You are free to close your refinance with any lender that is licensed to do business in your state. You don't have to work with the lender to which you are already sending your monthly mortgage payments. Obviously, the lower your upfront costs to refinance, the quicker you'll hit your break-even point.</p> <p>Nabbing the lowest possible interest rate also will help speed up the break-even point. The lower your rate, the lower your monthly payment will be. Getting a lower rate, though, requires a strong credit score.</p> <p>Before applying for a refinance, order free copies of your credit reports from AnnualCreditReport.com. These reports won't give you your credit score, but they will show you whether you have any late or missed payments on your record. Such financial dings will lower your credit score. If you have blemishes on your credit reports, qualifying for an interest rate low enough to make a refinance worthwhile might not be possible.</p> <p>You can also order your FICO score from the three national credit bureaus: TransUnion, Equifax, or Experian. This will usually cost you about $15, but will let you know for sure how high or low your credit score is. If you want to get your score for free, you can call a lender and explain that you want to refinance. This lender will often check your current score, and can let you know immediately whether it is high enough to justify a refinance.</p> <p>Finally, the more you've paid off on your existing mortgage before you refinance, the quicker you'll reach your break-even point. Most lenders won't approve you for a refinance unless you've already built up 20 percent equity in your home. So don't run to refinance just a year after taking out your existing mortgage. Unless your home has shot up in value dramatically, you probably won't have enough equity to qualify for a refinance, or to make it financially worthwhile.</p> <h2>Other factors to consider</h2> <p>Of course, lowering your monthly payment isn't the only reason to refinance. You also want to reduce the amount of interest you pay on your loan.</p> <p>That's why you might consider refinancing from a longer-term loan to one with a shorter term. Doing so will usually increase your monthly payment because you are cutting the number of years it takes you to repay your mortgage. But refinancing from a 30-year, fixed-rate loan to a 15-year, fixed-rate loan could save you plenty in interest.</p> <p>If you take out a 30-year, fixed-rate mortgage of $200,000 at an interest rate of 4.2 percent, you'll pay more than $150,000 in interest if you take the full 30 years to pay off your loan. If you instead take out a 15-year, fixed-rate loan for $200,000 at an interest rate of 3.5 percent, you'll pay less than $60,000 in interest if you take the full term to pay off this loan.</p> <p>The best move to make when considering a refinance is to go over the numbers with a mortgage lender. A lender won't charge you for a preliminary look at your mortgage and credit. But a lender will be able to tell you how long it will take to recover the costs of refinancing and whether you'll qualify for a low enough interest rate to make refinancing a viable choice.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fhow-long-does-it-take-break-even-with-a-home-refi&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FHow%2520Long%2520Does%2520it%2520Take%2520Break%2520Even%2520With%2520a%2520Home%2520ReFi-.jpg&amp;description=How%20Long%20Does%20it%20Take%20Break%20Even%20With%20a%20Home%20ReFi%3F"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/How%20Long%20Does%20it%20Take%20Break%20Even%20With%20a%20Home%20ReFi-.jpg" alt="How Long Does it Take Break Even With a Home ReFi?" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/how-long-does-it-take-break-even-with-a-home-refi">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-mortgage-details-you-should-know-before-you-sign">5 Mortgage Details You Should Know Before You Sign</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/weak-credit-you-can-still-get-a-mortgage-despite-tough-lending-standards">Weak Credit? You Can Still Get a Mortgage Despite Tough Lending Standards</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-a-15-year-mortgage-a-good-idea">Is a 15-Year Mortgage a Good Idea?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/stop-believing-these-5-home-refinance-myths">Stop Believing These 5 Home Refinance Myths</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-pay-your-mortgage-off-early">Should You Pay Your Mortgage Off Early?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing break-even point home loans homeownership interest rates mortgages payments refinance Tue, 25 Jul 2017 08:30:14 +0000 Dan Rafter 1986882 at http://www.wisebread.com Do You Really Need a 20 Percent Down Payment for a House? http://www.wisebread.com/do-you-really-need-a-20-percent-down-payment-for-a-house <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/do-you-really-need-a-20-percent-down-payment-for-a-house" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-640228744.jpg" alt="Couple learning if they need 20 percent down on a house" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The thought of coming up with a down payment is nerve-wracking for many would-be homebuyers. Some people think they absolutely must have at least 20 percent down to purchase a home. If they don't have anything close to this amount in savings, they give up on their dream of ownership.</p> <p>This doesn't have to be the case, however. Despite what you may have heard, a 20 percent down payment isn't written in stone. There are several other options you can consider. (See also: <a href="http://www.wisebread.com/5-ways-to-qualify-for-a-mortgage-with-a-small-downpayment?ref=seealso" target="_blank">5 Ways to Qualify for a Mortgage With a Small Down Payment</a>)</p> <h2>1. Get an FHA mortgage</h2> <p>FHA mortgages are insured by the Federal Housing Administration. A common misconception is that this loan is specifically for first-time homebuyers, but the truth is anyone can apply &mdash; even repeat borrowers. And the best part? FHA loans only require a down payment of 3.5 percent with a minimum credit score of 580. If your credit score is below 580, your lender will require a 10 percent down payment &mdash; still much less than the traditional 20 percent down. Just keep in mind that you'll have to go to an FHA-approved lender to qualify, and not all FHA-approved lenders will offer the same interest rate.</p> <p>There are some additional costs with an FHA loan. First, you'll pay an upfront premium of 1.75 percent of your total mortgage loan. Second, you'll pay mortgage insurance premiums, or MIP, for the life of the loan. With a conventional loan, mortgage insurance is temporary and the payments typically stop once you build your home equity to 20 percent. With an FHA loan, however, that's not the case. To drop mortgage insurance with these loans, you'll need to refinance once the property has sufficient equity. (See also: <a href="http://www.wisebread.com/is-an-fha-home-loan-right-for-you?ref=seealso" target="_blank">Is an FHA Home Loan Right for You?</a>)</p> <h2>2. Apply for a conventional home loan</h2> <p>Like FHA mortgages, conventional home loans allow you to purchase a property with less than a 20 percent down payment. Standard conventional loans require a minimum down payment of 5 percent, but some specialized conventional products allow down payments as low as 3 percent. Note that these programs typically have income restrictions and often only accommodate first-time homebuyers (including borrowers who haven't owned in the past three years).</p> <p>One example is the Fannie Mae and Freddie Mac-backed Conventional 97 purchase program. Again, some restrictions apply: Both repeat borrowers and new homeowners can purchase a home for 3 percent down, assuming they're using the program for a 30-year fixed-rate mortgage on a single-unit primary residence. The program is limited to loan sizes of $424,100 or less. You'll also need a credit score of at least 620 to qualify for any Fannie Mae-backed loan.</p> <h2>3. See if you're eligible for a USDA or VA loan</h2> <p>Zero-down mortgages became practically extinct after the housing crisis, but you can still find some programs offering 100 percent financing. For example, eligible veterans and active-duty military can apply for a VA-guaranteed home loan and purchase a property with no down payment and minimum closing costs.</p> <p>My husband and I qualified for this type of loan for our first home purchase. We had to jump through plenty of hoops to nail it down &mdash; the qualifications changed midway through our process, requiring us to redo all our applications. It was worth it in the end, however, considering we didn't have enough for a down payment.</p> <p>Another zero-down option is a USDA Rural Development Guaranteed Housing Loan, which is backed by the U.S. Department of Agriculture. To qualify for this loan, though, you must meet set income requirements and purchase a home in an eligible rural area.</p> <p>Neither USDA loans nor VA loans have mortgage insurance. Instead, they come with an upfront premium or funding fee, generally somewhere between 1.25 percent and 3.3 percent of the purchase price of the home.</p> <h2>What to consider when making a down payment</h2> <p>There are a few things you need to consider before deciding if a lower or higher down payment is the best choice for you.</p> <p>If you can afford to give the bank 20 percent down <em>and</em> maintain some cash in savings, a higher down payment is a smart move. You'll want to make sure a home purchase doesn't completely drain your savings, because additional, unforeseen costs will inevitably pop up. I can almost guarantee it, and <a href="http://www.wisebread.com/how-to-make-ends-meet-when-youre-house-poor" target="_blank">being house poor</a> isn't fun. If putting 20 percent down will wipe out all your cash reserves, a lower down payment is the safer choice. (See also: <a href="http://www.wisebread.com/4-easy-ways-to-start-saving-for-a-down-payment-on-a-home?ref=seealso" target="_blank">4 Easy Ways to Start Saving for a Down Payment on a Home</a>)</p> <p>Just be aware that putting less than 20 percent down means you'll then need to take out a bigger loan, which will result in a larger monthly mortgage payment. A smaller down payment can also result in a slightly higher interest rate. There are no hard or fast rules regarding how much your interest rate could increase. However, even a slight increase from 4 percent to 4.25 percent on a $200,000 30-year mortgage can result in paying an additional $30 per month.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/do-you-really-need-a-20-percent-down-payment-for-a-house">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/weak-credit-you-can-still-get-a-mortgage-despite-tough-lending-standards">Weak Credit? You Can Still Get a Mortgage Despite Tough Lending Standards</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-is-private-mortgage-insurance-anyway">What Is Private Mortgage Insurance, Anyway?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-qualify-for-a-mortgage-with-a-small-downpayment">5 Ways to Qualify for a Mortgage With a Small Downpayment</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/make-these-5-money-moves-before-applying-for-a-mortgage">Make These 5 Money Moves Before Applying for a Mortgage</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/its-now-easier-to-get-a-home-loan-even-if-you-have-student-loan-debt-should-you">It&#039;s Now Easier to Get a Home Loan Even If You Have Student Loan Debt — Should You?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing conventional loans down payments equity fha loan home loans mortgages pmi private mortgage insurance zero down mortgages Mon, 15 May 2017 08:00:07 +0000 Mikey Rox 1943628 at http://www.wisebread.com 3 Ways Student Loan Debt Can Affect Your Mortgage Application http://www.wisebread.com/3-ways-student-loan-debt-can-affect-your-mortgage-application <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/3-ways-student-loan-debt-can-affect-your-mortgage-application" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-164113230_0.jpg" alt="Learning how student loan debt affects your mortgage loan application" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>You're ready to buy a home, but you're also paying back federal or private student loans. Will this make it more difficult to qualify for a mortgage?</p> <p>Yes. But that doesn't mean qualifying for a mortgage while paying off student loans is impossible. Here's what you need to understand before starting the home buying process.</p> <h2>Debt-to-income ratio</h2> <p>When determining whether to approve you for a mortgage, lenders look at something called your debt-to-income ratio. This ratio shows how much of your gross monthly income &mdash; your income before taxes are taken out &mdash; your monthly debts eat up. If your debt-to-income ratio is too high, lenders won't approve you for a mortgage because they worry that you won't have enough money each month to handle this significant payment.</p> <p>It's important to remember that mortgage lenders aren't as concerned about your total student loan debt as they are about the size of your monthly student loan payments. Lenders typically want all of your monthly debts, including your new mortgage payment, to equal no more than 43 percent of your gross monthly income. So, if your total debts &mdash; again, including that new mortgage payment &mdash; are at or under that percentage, your odds of qualifying for a mortgage loan are higher.</p> <p>Your student loan payments are considered part of your monthly debt by lenders. For example, if you are paying $300 a month on your student loans, your lender will count that amount when calculating your debt-to-income ratio. If that $300 payment pushes your debt-to-income ratio past 43 percent, you might not be able to qualify for a mortgage.</p> <h2>A deferment won't help</h2> <p>Your student loan might be in deferment while you are applying for a mortgage, meaning you won't have to start making payments on it for six to 12 months. You might think this will help your debt-to-income ratio. After all, when you're applying for your mortgage, you aren't making those student loan payments.</p> <p>But this isn't the case. Lenders will still count your student loan debt against you. That's because lenders know that long before you pay off your mortgage, you'll have to eventually start making those monthly student loan payments. Lenders don't want your mortgage payment to be affordable for 12 months but then suddenly turn into a burden once your student loan payments kick in. When your monthly debts suddenly rise, you might no longer be able to afford those mortgage payments that you were once able to handle.</p> <p>Loans insured by the Federal Housing Administration, better known as FHA loans, were once an exception to this rule. In the past, student loan debt that was deferred for more than 12 months before a mortgage's closing was not counted in applicants' debt-to-income ratios. That changed last year, when the FHA amended its rules. Now, if the lender doesn't know what the monthly student loan payment amount will be when the deferment ends, it must count 2 percent of applicants' total student loan debt as part of their monthly debt.</p> <p>So if you have $30,000 worth of student loan debt, under the new FHA rules, $600 will be added to your monthly debt levels, a figure that could push you over that 43 percent threshold.</p> <p>Borrowers might actually help themselves by getting their student loans out of deferment. That's because their actual monthly payments could be far lower than 2 percent of their total student loan debt. If loans aren't in deferment, lenders will use the actual amount borrowers are paying each month on their student loans. (See also: <a href="http://www.wisebread.com/4-things-you-need-to-know-about-deferring-student-loans?ref=seealso" target="_blank">4 Things You Need to Know About Deferring Student Loans</a>)</p> <h2>Missed student loan payments can hurt, too</h2> <p>Student loan debt doesn't just make reducing your debt-to-income ratio harder. It can also hurt your credit score, if you're not careful about making your payments on time.</p> <p>In addition to debt-to-income ratios, lenders also rely on borrowers' FICO credit scores when determining who qualifies for a mortgage. Most lenders consider FICO scores of 740 or higher to be exceptionally strong. If your score is under 640, you'll struggle to qualify for a mortgage without paying high interest rates. If your score is under 620, you'll have a hard time qualifying for a mortgage at all.</p> <p>Paying your bills late is one of the biggest reasons for a low credit score. Your student loan payment is officially considered late when it is 30 days or more past due. A single late payment can sink your credit score by 100 points or more. On the other hand, making your student loan payments on time every month will help your score, making you a more attractive borrower.</p> <h2>What you can do about student loan debt</h2> <p>What can you do if your student loan debt is hurting your debt-to-income ratio? You can always improve your ratio by earning more income each month, perhaps by taking on a second job. The more income you make without increasing your monthly debt, the lower your debt-to-income ratio will be. (See also: <a href="http://www.wisebread.com/15-ways-to-pay-back-student-loans-faster?ref=seealso" target="_blank">15 Ways to Pay Back Student Loans Faster</a>)</p> <p>You might also try to consolidate your student loan payments into one loan with a lower monthly payment. That will reduce your overall monthly debt obligation, again improving your debt-to-income ratio.</p> <p>Reducing other monthly debts &mdash; anything from trading in a car with a high monthly payment to paying off your credit cards &mdash; can help, too.</p> <p>Then there's your choice of home. Buying a lower-priced home will result in a lower monthly mortgage payment. That will also reduce your future monthly debt and lower your debt-to-income ratio.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/3-ways-student-loan-debt-can-affect-your-mortgage-application">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/its-now-easier-to-get-a-home-loan-even-if-you-have-student-loan-debt-should-you">It&#039;s Now Easier to Get a Home Loan Even If You Have Student Loan Debt — Should You?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-valuable-rights-you-might-lose-when-you-refinance-student-loans">8 Valuable Rights You Might Lose When You Refinance Student Loans</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/make-these-5-money-moves-before-applying-for-a-mortgage">Make These 5 Money Moves Before Applying for a Mortgage</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/weak-credit-you-can-still-get-a-mortgage-despite-tough-lending-standards">Weak Credit? You Can Still Get a Mortgage Despite Tough Lending Standards</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-make-ends-meet-when-youre-house-poor">How to Make Ends Meet When You&#039;re House Poor</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Real Estate and Housing credit score debt to income ratio deferment home loans missed payments mortgages student loans Mon, 01 May 2017 08:30:13 +0000 Dan Rafter 1935490 at http://www.wisebread.com 8 Times You Need to Walk Away From Your Dream Home http://www.wisebread.com/8-times-you-need-to-walk-away-from-your-dream-home <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-times-you-need-to-walk-away-from-your-dream-home" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-647168754.jpg" alt="Woman learning when to walk away from her dream home" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You think you've found the perfect house. But before you plunge into homeownership, you need to watch out for any warning signs this sale isn't meant to be. Ask yourself whether any of these things apply to you. If so, buying the home of your dreams may just have to wait.</p> <h2>1. You can't afford 20 percent down</h2> <p>The house may have everything you are looking for, but you need to make sure that the sale price isn't beyond your means. Ideally, you want to make a down payment of at least 20 percent. This may be a substantial amount of money, but without that down payment, your lender will likely ask you to pay for <a href="http://www.wisebread.com/what-is-private-mortgage-insurance-anyway?ref=internal" target="_blank">private mortgage insurance</a> &mdash; which can add hundreds of dollars a year to your homeownership costs.</p> <p>Moreover, the more you can put down up front, the smaller your monthly mortgage payments will be. If you are in the market for a home but can't hit that 20 percent mark, consider holding off on buying until you have a larger sum saved. (See also: <a href="http://www.wisebread.com/4-easy-ways-to-start-saving-for-a-down-payment-on-a-home?ref=seealso" target="_blank">4 Easy Ways to Start Saving for a Down Payment on a Home</a>)</p> <h2>2. Your mortgage payments would restrict your ability to save</h2> <p>Even if you have the ability to put 20 percent down on the house, you may find that the monthly mortgage payments are higher than you can reasonably afford. The U.S. government recommends spending no more than 30 percent of your gross monthly income on housing. That means if you earn $3,000 per month before taxes, you shouldn't spend more than $900 per month on your mortgage.</p> <p>You may get approved for a loan much bigger than you expected, but don't use this as an excuse to buy more house than you can afford. If your payments are too high, you will find it harder to live comfortably or save money for anything besides housing costs. If you have to go into additional debt in order to make house payments, then your &quot;dream home&quot; could become more of a financial nightmare. (See also: <a href="http://www.wisebread.com/how-to-make-ends-meet-when-youre-house-poor?ref=seealso" target="_blank">How to Make Ends Meet When You're House Poor</a>)</p> <h2>3. You didn't get a favorable interest rate</h2> <p>There are two key things that impact how much you'll end up paying for a house: the sale price, and the interest rate on the mortgage loan. Even if the sale price is within your predetermined budget, you may find your monthly payments to be onerous if the interest rate is too high. A modest difference in interest rate can mean thousands of dollars in extra costs over the lifetime of a loan.</p> <p>Your past financial history, debt load, and credit score impacts the interest rate that banks are willing to offer. The worse your credit, the higher the rate will be. If your credit score is low, you may be better off in the long run financially if you take time to pay off debt and make yourself more attractive to lenders. (See also: <a href="http://www.wisebread.com/5-ways-to-improve-your-credit-score-fast?ref=seealso" target="_blank">5 Ways to Improve Your Credit Score Fast</a>)</p> <h2>4. Your income situation may change for the worse</h2> <p>You may have found your dream home, but your ability to pay for that house may be based on income that's no longer a sure thing. Have you recently lost your job, or are you on the verge of a layoff? Were you counting on income from investments that have not performed as well as expected?</p> <p>If your income situation is unfavorable, consider waiting to buy a home. You don't want to exacerbate a difficult financial situation by taking on more expense than you can handle at that moment. (See also: <a href="http://www.wisebread.com/make-these-5-money-moves-before-applying-for-a-mortgage?ref=seealso" target="_blank">Make These 5 Money Moves Before Applying for a Mortgage</a>)</p> <h2>5. It's a money pit</h2> <p>You're not opposed to a fixer-upper, but this house has more needed repairs than you bargained for. You also learned that it's horribly inefficient when it comes to heating and cooling. On top of that, there are sizable homeowners association and community fees that you hadn't taken into account. All of this adds up to a house that busts through your budget, and it may be a good idea to walk away. (See also: <a href="http://www.wisebread.com/5-signs-the-house-you-want-to-buy-is-a-money-pit?ref=seealso" target="_blank">5 Signs the House You Want to Buy Is a Money Pit</a>)</p> <h2>6. There are signs that housing prices may drop</h2> <p>It's hard to predict where housing prices will go, but if the market is inflated, you may be better off waiting to see if prices come down. There are countless people who purchased homes during the housing bubble around 2005, only to see home prices drop precipitously. Many of these homeowners ended up underwater on their loans, and some even ended up losing their homes altogether.</p> <p>If you feel like the housing market is overheated and you are willing to be patient, you may save money on the purchase price if you wait for prices to drop. One big caveat to this is that it's also important to pay attention to interest rates. If interest rates are on the rise, it may be better to buy sooner rather than later.</p> <h2>7. The seller wants you to waive an inspection</h2> <p>During the housing boom more than a decade ago, competition for homes was so fierce that sellers often viewed a request for an inspection as a deal breaker. No matter how desperate you may be to land that perfect home, waiving an inspection is a risky proposition that could backfire on you. Without an inspection, you have no way of knowing if a home will be in dire need of repairs, now or down the road. (See also: <a href="http://www.wisebread.com/thinking-of-skipping-the-home-inspection-heres-what-it-will-cost-you?ref=seealso" target="_blank">Thinking of Skipping the Home Inspection? Here's What It Will Cost You</a>)</p> <h2>8. The seller wants you to waive a title search</h2> <p>A search of a home's title is a crucial aspect of the homebuying process. This is where a buyer may uncover things about the history of the home, including when it was built, who has owned it, and whether there are any tax liens. It's extraordinarily risky to waive this contingency, so if a seller insists upon it, consider it a red flag and run. (See also: <a href="http://www.wisebread.com/yes-you-need-home-title-insurance-heres-why?ref=seealso" target="_blank">Yes, You Need Home Title Insurance &mdash; Here's Why</a>)</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/8-times-you-need-to-walk-away-from-your-dream-home">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-ways-to-reduce-mortgage-closing-costs">8 Ways to Reduce Mortgage Closing Costs</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-mortgage-details-you-should-know-before-you-sign">5 Mortgage Details You Should Know Before You Sign</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-i-didnt-pay-my-mortgage-off-in-full">Why I Didn&#039;t Pay My Mortgage Off In Full</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-signs-youre-paying-too-much-for-your-mortgage">8 Signs You&#039;re Paying Too Much for Your Mortgage</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/do-you-really-need-a-20-percent-down-payment-for-a-house">Do You Really Need a 20 Percent Down Payment for a House?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing home buying home loans inspections interest rates mortgage private mortgage insurance red flags title search warning signs Tue, 25 Apr 2017 09:00:12 +0000 Tim Lemke 1931276 at http://www.wisebread.com How to Make Ends Meet When You're House Poor http://www.wisebread.com/how-to-make-ends-meet-when-youre-house-poor <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-make-ends-meet-when-youre-house-poor" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-608518550.jpg" alt="Woman learning how to make ends meet when she&#039;s house poor" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Your home is supposed to be a source of joy, your respite from the rest of the world. But if you can barely afford your housing expenses each month, the pride of owning a home can quickly turn to dread. (See also: <a href="http://www.wisebread.com/8-signs-youre-paying-too-much-for-your-mortgage?ref=seealso" target="_blank">8 Signs You're Paying Too Much for Your Mortgage</a>)</p> <h2>Being house poor</h2> <p>Mortgage lenders say that your total monthly debts, including your mortgage payment, should never equal more than 43 percent of your gross monthly income, your income before taxes are taken out. Financial professionals also say that your housing costs alone ideally should never exceed more than 28 percent of your gross monthly income.</p> <p>If you ignored those percentages when taking out your mortgage, or if a job loss or other financial crisis has reduced your income since you originally bought your home, you might now be feeling the financial pinch of paying for a house that simply consumes too much of your monthly income.</p> <p>Sometimes being house poor is a temporary condition. Maybe you've lost a job, but know that you can afford your home once you find a replacement. Maybe you've suffered an illness or injury that has kept you from working, but you will soon recover enough to begin earning again. Other times, it's a more permanent condition. You simply have a house that is too expensive for your income, even when that income is at its normal levels.</p> <p>If you're in the latter situation, the best decision might be to move and buy a home that is more affordable. If the house-poor problems you face are only temporary, though, you might be able to hold on until your financial situation improves.</p> <p>Fortunately, there are steps you can take if you find yourself struggling to make those housing payments each month.</p> <h2>Can a loan modification help?</h2> <p>Lenders might be willing to modify your mortgage to make it more affordable for you. Modifications might be simple and temporary, such as suspending your mortgage payments for two or three months as a way to allow you to resolve a temporary financial crisis without missing a payment. Or a modification can be more substantial: Lenders might change the terms of your loan, perhaps turning your 15-year loan into a 30-year one, leaving you with smaller monthly mortgage payments. They might also reduce your interest rate, again dropping your monthly payment.</p> <p>Lenders are not obligated to modify your mortgage loan, of course. But you won't find out if they're willing to make these changes if you don't call.</p> <h2>Refinancing might help</h2> <p>You might also <a href="http://www.wisebread.com/refi-shy-how-to-determine-if-now-is-the-time-to-refinance?ref=internal" target="_blank">try to refinance</a> your existing mortgage to one with a lower rate or longer term. This will drop your payments, maybe to a level that you can more easily afford.</p> <p>Be aware, though, that refinancing isn't free. It might cost you $2,000, $3,000, or more to refinance, depending on the size of your loan &mdash; though you can usually roll these closing costs into your new loan instead of paying them upfront in one lump sum. Refinances take time, too. It can take 30 days or more for a refinance to close, so make sure you don't miss any payments during this time.</p> <h2>Cutting expenses</h2> <p>If staying in your home and reducing your monthly financial stress is a priority, then cutting expenses is a crucial step. You might not be able to lower your mortgage payment or property taxes, but you may be able to lower your utility bills. Cutting an expensive cable package or adjusting the thermostat by a few degrees can save you a substantial amount of money each month.</p> <p>Take a hard look at your budget and make the cuts. You might miss fun events and spend more time batch cooking, but it's worth it if you can keep your home. You might also take bigger steps. Is your monthly auto payment high, too? Consider selling your expensive car and buying one that comes with a smaller monthly payment.</p> <h2>Get a side gig</h2> <p>You can also boost your monthly income by taking a side job &mdash; anything from driving for a ride-sharing service like Lyft, to freelance writing, to a shift at your local grocery store. (See also: <a href="http://www.wisebread.com/15-ways-to-make-money-outside-your-day-job?ref=seealso" target="_blank">15 Ways to Make Money Outside Your Day Job</a>)</p> <p>These jobs might not be glamorous, but if they boost your income each month, they can make those housing payments seem less fearsome. Again, you'll have to determine if working extra hours at a side job is worth being able to stay in your home.</p> <h2>Prioritize your home spending</h2> <p>Your mortgage is just one cost of owning a home. There's also the cost of maintenance, which financial experts say you should expect to spend about 1 percent of your home's purchase price on each year.</p> <p>You can't avoid maintenance. If you do, that dream home of yours might fall down around you. But you can prioritize your spending, something that can trim your monthly expenses. Don't spend money on a major bathroom remodel, or other purely cosmetic changes. But if your gutters need cleaning, your walls need painting, and your driveway needs sealing, do spend on those fixes, and do as much of it as possible on your own. Much of the cost in home repairs is in the labor. If you can do something safely and properly, doing it yourself will save a lot of money. Never try something that is beyond your skill and knowledge. YouTube videos can only take you so far. (See also: <a href="http://www.wisebread.com/the-top-10-diy-jobs-homeowners-should-avoid?ref=seealso" target="_blank">10 DIY Jobs Homeowners Should Avoid</a>)</p> <h2>Consider selling</h2> <p>If you are in danger of missing your mortgage payments, a refinance or modification isn't possible, and budget cuts won't make enough of an impact, it is time to consider selling your home.</p> <p>No one wants to give up on their home, especially if you consider it a dream residence. But it's simply not viable to think you can live 15 or more years scraping together for housing payments.</p> <p>If you want to sell quickly, a short sale might help. In a short sale, your lender allows you to sell your home for less than what you owe on your mortgage. For instance, if you owe $250,000 on your loan, your lender might approve a short sale for $225,000. By offering your home at a lower price, the hope is that it will sell at a faster pace, before you have to miss any mortgage payments.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/how-to-make-ends-meet-when-youre-house-poor">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-we-all-just-stop-paying-the-mortgage">Should We All Just Stop Paying the Mortgage?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-long-does-it-take-break-even-with-a-home-refi">How Long Does it Take Break Even With a Home ReFi?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-ways-student-loan-debt-can-affect-your-mortgage-application">3 Ways Student Loan Debt Can Affect Your Mortgage Application</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-you-should-be-saving-big-with-bi-weekly-mortgage-payments">Why You Should Be Saving Big With Bi-Weekly Mortgage Payments</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-your-new-job-might-affect-your-mortgage-application">How Your New Job Might Affect Your Mortgage Application</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing credit score foreclosure home loans house poor lenders missed payments modifications mortgage payments refinance Mon, 03 Apr 2017 08:30:12 +0000 Dan Rafter 1917875 at http://www.wisebread.com Make These 5 Money Moves Before Applying for a Mortgage http://www.wisebread.com/make-these-5-money-moves-before-applying-for-a-mortgage <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/make-these-5-money-moves-before-applying-for-a-mortgage" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-506317138 (1).jpg" alt="Making money moves before applying for a mortgage" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>Each year, millions of people apply for a mortgage and purchase a home. This, however, shouldn't convince you that getting a home loan is a piece of cake. In reality, a mortgage is one of the hardest loans to qualify for. But if you make these money moves before meeting with a lender, you can swing the odds in your favor.</p> <h2>1. Pay off debt</h2> <p>Getting approved for a mortgage doesn't require zero debt, but the more you currently owe, the harder it can be to qualify for a desired amount.</p> <p>To avoid any roadblocks along the way, come up with a clearsighted plan to pay off as much of your debt as possible, especially <a href="http://www.wisebread.com/the-fastest-method-to-eliminate-credit-card-debt?ref=internal" target="_blank">credit card debt</a>. A high <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score?ref=internal" target="_blank">credit utilization ratio</a> &mdash; which is your credit card balance compared to your credit limit &mdash; can lower your credit score and make it difficult to qualify for a mortgage or trigger a higher mortgage interest rate.</p> <p>As a personal goal, keep credit card balances below 30 percent of your credit limit. To attain this, stop using cards and pay more than your minimums every month. Also, ask creditors to lower your interest rate. If you can pay less interest, you'll reduce the principal faster.</p> <p>Take it a step further and make higher monthly payments on other types of debts as well, such as a car loan, student loan, etc. This is to your advantage because the less expenses you have, the easier it'll be to adjust to a mortgage payment.</p> <h2>2. Determine what you're comfortable spending</h2> <p>Your mortgage lender decides an affordable amount based on your income and existing debt. Still, it helps to have an idea of what <em>you </em>are comfortable spending on a house before meeting with a bank. Typically, banks allow borrowers to spend between 28 percent and 31 percent of their gross monthly income on a mortgage payment.</p> <p>Do the math and calculate 31 percent of your gross monthly income, and then review your budget to see if you can realistically afford this amount on a monthly basis. After determining a comfortable monthly payment, use a mortgage calculator to estimate the maximum you can borrow based on the desired payment range.</p> <h2>3. Devise a savings plan</h2> <p>Qualifying for a mortgage entails money &mdash; lots of it. Not just money for the monthly payment, but also <a href="http://www.wisebread.com/4-easy-ways-to-start-saving-for-a-down-payment-on-a-home?ref=internal" target="_blank">cash for a down payment</a> (between 3.5 percent and 20 percent of the home's value), plus there's the cost of closing. These fees can run up to 5 percent of the purchase price.</p> <p>Even if you can afford a house payment at a certain price point, you'll only qualify for a particular amount if you have enough in reserves for mortgage-related fees. Let's say you want to purchase a $300,000 house. Your income may show an ability to afford the monthly payment. But if you only have $7,500 in savings for a down payment, instead of the required $10,500 (assuming you get an FHA home loan), you can't purchase the home. You then have two options &mdash; purchase a cheaper home, or postpone buying until you save additional cash.</p> <p>Once you have an idea of how much you'll spend on a property, devise a plan to save for your down payment and closing costs. Based on your amount of disposable income each month and your desired time frame for purchasing a property, decide how much to save. Keep this money in a designated high-yield savings account.</p> <h2>4. Pay your bills on time</h2> <p>There are no hard rules regarding how many late payments a lender allows within 12 or 24 months before applying for a home loan. If there are late payments on your recent credit history, it's up to your lender to calculate the risk level and determine whether you're creditworthy. To do this, some lenders request an explanation to assess whether lateness was due to irresponsibility or circumstances beyond a borrower's control. (See also: <a href="http://www.wisebread.com/5-simple-ways-to-never-make-a-late-credit-card-payment?ref=seealso" target="_blank">5 Simple Ways to Never Make a Late Credit Card Payment</a>)</p> <p>Either way, late payments in your recent history can result in a higher interest rate, which means you'll pay more for your home loan in the long run. Therefore, aim to pay all your bills on time. If you often forget due dates, set up recurring or automatic monthly payments.</p> <h2>5. Shop around for lenders</h2> <p>According to the Consumer Finance Protection Bureau, 47 percent of homebuyers don't compare mortgage lenders when applying for a home loan. What's even more surprising, 77 percent apply to only one lender at all. It might seem convenient to get this step out of the way ASAP, but it just doesn't make smart financial sense.</p> <p>When you're ready to apply for a home loan, you need to do research and shop around. Don't just settle for the first mortgage lender who approves you. You might be eager to get the process underway, but be patient. The first person to give you the green light might not be offering the lowest interest rates (or charging the lowest fees), which could mean the difference between thousands of dollars. Maybe they're just not the right fit for you, or they don't take the time to really earn your business. You won't know unless you compare, and that step can save you a lot of stress (and money) down the line. (See also: <a href="http://www.wisebread.com/4-mortgage-secrets-only-your-broker-knows?ref=seealso" target="_blank">4 Mortgage Secrets Only Your Broker Knows</a>)</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/make-these-5-money-moves-before-applying-for-a-mortgage">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/weak-credit-you-can-still-get-a-mortgage-despite-tough-lending-standards">Weak Credit? You Can Still Get a Mortgage Despite Tough Lending Standards</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-things-to-consider-before-buying-a-home-when-youre-single">5 Things to Consider Before Buying a Home When You&#039;re Single</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/do-you-really-need-a-20-percent-down-payment-for-a-house">Do You Really Need a 20 Percent Down Payment for a House?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-youre-too-old-or-too-young-for-a-mortgage-loan">4 Reasons Why You&#039;re Too Old — Or Too Young — For a Mortgage Loan</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-surprising-things-lenders-check-besides-your-credit-score">4 Surprising Things Lenders Check Besides Your Credit Score</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing buying a home credit history credit score debt repayment down payments home loans mortgages saving money tax deductions Mon, 20 Mar 2017 10:30:21 +0000 Mikey Rox 1908934 at http://www.wisebread.com My 2016 Budget Challenge: Can a Paint Job Help an Old House Pass a Re-Fi Appraisal? http://www.wisebread.com/my-2016-budget-challenge-can-a-paint-job-help-an-old-house-pass-a-re-fi-appraisal <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/my-2016-budget-challenge-can-a-paint-job-help-an-old-house-pass-a-re-fi-appraisal" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple_painting_walls_539825724.jpg" alt="Couple doing paint job on old house" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>[<em>Editor's Note: This is the latest episode in Max Wong's journey to find an extra $31,000 in a single year. Read the whole series </em><a href="http://www.wisebread.com/topic/max-wongs-budget-0" target="_blank"><em>here</em></a><em>.</em>]</p> <p>We paid off our home equity line of credit two years early! It was a Festivus miracle.</p> <p>Kind of.</p> <p>Earlier this year, we failed to refinance the mortgage of Dinky Manor not once, but twice. We could not get our ramshackle, 1,000 square foot house to appraise for the whopping $640,000 we needed to get Mr. Spendypants out of his horrifically structured, pre-2007 housing crash home loan.</p> <p>For all of you wondering about that $640,000 for 1,000 square feet&hellip;I guess you don't live in Los Angeles.</p> <p>On Thanksgiving Eve, our friends Mary Ellen and Bob invited us out to dinner with Betsy and Murray (Mary Ellen's sister and brother-in-law). As Mary Ellen and Bob are both Wise Bread readers, they immediately started quizzing us about the 2016 Budget Challenge. They wanted to know all the sordid details &mdash; like how Mr. Spendypants puts up with my ever-increasing level of crazy. We were in the middle of whining about <a href="http://www.wisebread.com/my-2016-budget-challenge-reduce-debt-or-save-for-an-emergency" target="_blank">our underemployment</a> and our ever more <a href="http://www.wisebread.com/my-2016-budget-challenge-how-to-decide-when-to-sell-your-house" target="_blank">complicated real estate situation</a> when Murray reached across the table and handed me his business card.</p> <p>Murray is a mortgage banker.</p> <p>We followed up with Murray at his office the following week. He had already looked at a ton of real estate data for our area and couldn't understand why the house hadn't appraised for over $600,000. He started crunching the numbers. He thinks he can figure out how to refinance Dinky Manor's mortgage.</p> <p>However, Murray had two immediate demands. First, Dinky Manor needs an exterior paint job, stat. The fact that our house is the dumpiest on the block isn't helping our cause. Alas, we don't have the $17,000 it would cost to hire professionals to paint the house, so Mr. Spendypants and I will spend a relaxing winter holiday scraping and sanding 80 years of bad paint jobs off the outside of our home. Luckily, one of my best friends is a retired painting contractor. He has agreed to come out of retirement to help us rehab the house for the appraisal before the mortgage rates jump any higher.</p> <p>Could we pay down the home equity line of credit? This was Murray's second ask. Although our debt-to-loan ratio is better than average, if we zap our HELOC down to zero, it would make us look much less risky as borrowers.</p> <p>Conceptually, paying off the debt is a no-brainer. What the bank wants dovetails nicely with my goal of paying off the loan (that is due in 2018) by the end of this year. It's the actual execution of this goal that sucks. After a <a href="http://www.wisebread.com/my-2016-budget-challenge-everything-breaks" target="_blank">solid start in January</a>, finding extra cash this year has been more difficult than we anticipated. Could we juggle the finances to pay off our loan at this later date without completely cannibalizing our emergency fund? Short answer: sort of. We took a $6,000 chomp out of our emergency fund. Since there is a small but real chance of us both being underemployed come March, and a somewhat larger chance that this mortgage refinance will fall through, this move makes us financially vulnerable.</p> <p>Worst case scenario: We have to take out a new line of credit in March as a precaution. While this would not be the end of the world, that situation would not be ideal. I would like to avoid being that loser personal finance writer who can't kick her debt habit.</p> <p>Best case scenario: The re-Fi goes through and we both find decent employment in March. If this happens we will be able to put the money we were using to pay down the HELOC each month toward replenishing our emergency fund and paying down the new, less expensive mortgage at a faster pace.</p> <p>Fingers crossed.</p> <h2>Progress So Far</h2> <p>Although we did pay off a $15,000 loan with money we had socked away, I am not adding the $6,000 we pulled out of our emergency fund to the plus column of my 2016 budget challenge because we are going to have to pay our emergency fund back, as fast as humanly possible.</p> <p>Panic is a really good motivator. If only we'd had that kind of &quot;inspiration&quot; all year long. We earned a combined $3,258.98 in the first two weeks of December. Here's how we did it.</p> <p>Mr. Spendypants and I DJ'ed a corporate Christmas party. Although we did not win one of the flat screen televisions that were raffled off as door prizes, we did make $1,500 for five hours of work. Also, we ate at least $800 in foie gras cotton candy, spearified olives, and wagyu beef, so that was a great job perk.</p> <p>To take advantage of the holiday shopping fever, I had planned to spend the first two weeks of December selling every single thing that is not nailed down in the house on eBay and Etsy. Alas, this did not happen, so my house is still filled with crap we don't need. Mr. Spendypants and I deemed it more prudent that I use every available second of daylight doing yard work and prepping to paint the house in advance of the looming mortgage appraisal appointment. We will save a lot more money if we can refinance the mortgage than I could ever make selling our stuff online.</p> <p>Even with my new, yucky manual labor schedule, I managed to earn $1,758.98 on the side. In a previous incarnation, I was a jewelry designer. Mary Ellen and Betsy were nice enough to buy $243 in old stock from me for holiday gifts. I made $41 selling books to a second hand bookshop. I have been <a href="http://www.wisebread.com/5-easy-to-make-deluxe-gifts-for-under-15" target="_blank">propagating succulent cuttings</a> from my garden all year long. I made $124 selling little potted plants off my front porch to passers-by. I made $10.73 selling an old dress (that I had gotten for free) to a consignment store. One of my neighbors paid me $25 to run an errand for her, and another neighbor paid me $100 for pet sitting. I made $100 from writing jobs. I sold $707 in jam, honey, and handmade lip balm. Although I barely have any merchandise for sale on Etsy, I received a last minute order that netted me $363.25.</p> <p>Phew.</p> <p>Because I source holiday gifts year round, we actually managed to spend $0 on holiday gifts for friends and family this year. Just about everyone got <a href="http://www.wisebread.com/start-now-you-can-make-these-23-delicious-holiday-gifts" target="_blank">homemade goodies</a> that I had made in advance or gifts paid for through barter. This was a total win. Unfortunately, we did not get to wallow in our thrifty genius for long. We have spent $495 on painting supplies for the house so far&hellip;</p> <p><strong>Goal:</strong> $31,000.00</p> <p><strong>Amount Raised:</strong> $33,126.40</p> <p><strong>Amount Spent:</strong> $14,093.66</p> <p><strong>Amount Left to Go:</strong> $11,967.26</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/max-wong">Max Wong</a> of <a href="http://www.wisebread.com/my-2016-budget-challenge-can-a-paint-job-help-an-old-house-pass-a-re-fi-appraisal">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-it-safe-to-re-finance-your-home-close-to-retirement">Is it Safe to Re-Finance Your Home Close to Retirement?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/quicken-loans-review-competitive-rates-and-good-customer-service">Quicken Loans Review: Competitive Rates and Good Customer Service</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/my-2016-budget-challenge-how-to-decide-when-to-sell-your-house">My 2016 Budget Challenge: How to Decide When to Sell Your House</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-your-new-job-might-affect-your-mortgage-application">How Your New Job Might Affect Your Mortgage Application</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-mortgage-details-you-should-know-before-you-sign">5 Mortgage Details You Should Know Before You Sign</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing appraisal budget challenge HELOC home equity line of credit home loans max wongs budget mortgages re-fi refinancing Fri, 13 Jan 2017 10:30:36 +0000 Max Wong 1870057 at http://www.wisebread.com Surprise! There's a Gender Gap in Mortgages, Too http://www.wisebread.com/surprise-theres-a-gender-gap-in-mortgages-too <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/surprise-theres-a-gender-gap-in-mortgages-too" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_chalk_house_29878474.jpg" alt="Woman facing gender gap in mortgage lending" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The gender gap in earnings is well known. According to a recent report by the Economic Policy Institute, the typical woman can expect to earn 83 cents for every dollar that the typical man earns.</p> <p>But studies show another gender gap that negatively impacts women: Research published by the Urban Institute in September said that women tend to pay more for their mortgages even though they are statistically more likely to pay their loans on time than men.</p> <h2>The Numbers</h2> <p>According to the Urban Institute, about 15.6% of female borrowers have what is known as a &quot;higher-priced mortgage.&quot; Borrowers with such mortgages are charged higher interest rates to borrow their home-loan dollars.</p> <p>How high these rates are at any given time varies. The Urban Institute uses the same definition of higher-priced mortgage used by the Home Mortgage Disclosure Act: a mortgage loan with an annual percentage rate that is higher than the benchmark interest rate known as the Average Prime Offer Rate. That rate stood at 3.58% for a 30-year fixed-rate loan as of June 20 of this year.</p> <p>The Consumer Financial Protection Bureau considers a first mortgage loan to be a higher-priced mortgage if its annual percentage rate is 1.5% or more higher than the Average Prime Offer Rate.</p> <p>The Urban Institute found that while 15.6% of female-only borrowers are paying off higher-priced mortgages, just 15% of male-only borrowers are doing the same. The institute found that male-female borrowers who apply for loans together receive higher-priced mortgages only 7.6% of the time.</p> <h2>Why Are Women Paying More?</h2> <p>Why do single women pay more for their mortgages? It's difficult to tell. It might come down to income. The Urban Institute reported that single female borrowers tend to have lower annual incomes than single males. According to the institute, single female borrowers earned an average of $69,200 a year. Single male borrowers had an average income of $94,700. Male-female borrowers had an even higher annual income of $119,000.</p> <p>Income is one of the financial factors that lenders consider when deciding who qualifies for a mortgage and what interest rates they pay. Lenders often charge higher rates as a form of financial protection when they worry that borrowers' incomes are lower, because they fear that these borrowers will be less likely to pay their loans back on time.</p> <p>Borrowers with lower incomes also have less money for a down payment. When borrowers put down less for a house, they are typically charged a higher interest rate, again to make up for the extra risk that lenders take on when loaning them money. Lenders assume that borrowers who put less money down are more likely to stop paying their mortgage loan if they suffer a financial crisis.</p> <p>But what about FICO credit scores? These three-digit numbers tell lenders whether borrowers have a history of paying their bills on time or if they tend to miss payments and run up credit card debt. Lenders charge higher interest rates to borrowers with low credit scores.</p> <p>But from 2004 to 2014, the Urban Institute found, female-only borrowers had an average FICO credit score of 711, similar to the average 712 score of male-only borrowers. That score is significantly lower, though, than the 725 average score submitted by joint male-female borrowers.</p> <p>Credit bureau Experian reported in March of this year that the average FICO credit score for all women is 675, a bit higher than the average score of 670 for men. Women also had 3.7% less average debt than men, according to Experian.</p> <h2>Better Record</h2> <p>Despite paying more for their mortgages, female-only borrowers tend to do a slightly better job of paying them on time than do male-only borrowers. According to the Urban Institute, female-only borrowers had a default rate on their loans of 9.6% from 2008 through 2010. Male-only borrowers had a slightly higher default rate of 9.7% during this same time.</p> <h2>What to Do?</h2> <p>What does all this mean for women applying for mortgage loans? If they are applying for mortgages on their own and want the lowest interest rates possible, they need to make sure that their finances are strong.</p> <p>This means that their FICO credit score should be at least 740 if they want to qualify for the lowest interest rates. It also means that their monthly debts, including their estimated new mortgage payment, should be 43% or less than their gross monthly income.</p> <p>Single male borrowers need to focus on the same factors, of course. But the research from the Urban Institute indicates that strong FICO scores and debt-to-income ratios are especially important for single females who want to avoid the financial burden of a higher-priced mortgage.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/surprise-theres-a-gender-gap-in-mortgages-too">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-mortgage-details-you-should-know-before-you-sign">5 Mortgage Details You Should Know Before You Sign</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-a-15-year-mortgage-a-good-idea">Is a 15-Year Mortgage a Good Idea?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-it-safe-to-re-finance-your-home-close-to-retirement">Is it Safe to Re-Finance Your Home Close to Retirement?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/weak-credit-you-can-still-get-a-mortgage-despite-tough-lending-standards">Weak Credit? You Can Still Get a Mortgage Despite Tough Lending Standards</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-you-should-consider-an-adjustable-rate-mortgage">Why You Should Consider an Adjustable-Rate Mortgage</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing gender home loans interest rates mortgage gap wage gap women Tue, 29 Nov 2016 11:00:09 +0000 Dan Rafter 1834563 at http://www.wisebread.com Everything You Need to Know About Freddie Mac and Fannie Mae http://www.wisebread.com/everything-you-need-to-know-about-freddie-mac-and-fannie-mae <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/everything-you-need-to-know-about-freddie-mac-and-fannie-mae" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple_new_house_000085110139.jpg" alt="Couple learning everything about Freddie Mac and Fannie Mae" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>If you're applying for a mortgage loan, you've undoubtedly heard the names Fannie Mae (<a href="http://www.fanniemae.com/portal/index.html">Federal National Mortgage Association</a> or FNMA) and Freddie Mac (<a href="http://www.freddiemac.com/">Federal Home Loan Mortgage Corporation</a> or FHLMC). But if you're like most consumers, you have little idea of what Fannie and Freddie actually are, and more importantly, what they do.</p> <p>Both Fannie and Freddie have the same purpose: They buy mortgages from banks, mortgage companies, and savings and loans in order to free up more of their capital for mortgages. These lenders use the extra cash gained by selling their loans to Fannie and Freddie to lend more mortgage dollars to future homebuyers. (See also:&nbsp;<a href="http://www.wisebread.com/everything-a-first-time-home-buyer-needs-to-buy-a-house?ref=seealso" target="_blank">Everything a First-Time Home Buyer Needs to Buy a House</a>)</p> <p>In other words, the purpose of Fannie Mae and Freddie Mac is to ensure that there is mortgage money in the system when you're ready to take out a mortgage loan.</p> <h2>The History of GSEs</h2> <p>You might think of Freddie Mac and Fannie Mae as lenders. That's incorrect. They are officially known as <em>government-sponsored enterprises</em>, or GSEs. And they are the only two GSEs in the country.</p> <p>As a GSE, both Freddie and Fannie are privately owned. But they do receive financial support from the federal government. In return for that support, Fannie and Freddie have agreed to purchase a specific number of loans made by private lenders to low- or moderate-income borrowers. Lenders face a higher risk that such borrowers will default on these loans, and they might not be willing to make as many of them if the two GSEs didn't agree to purchase a percentage of them.</p> <p>It's impossible to know how many of these loans to low- or moderate-income borrowers lenders would make without the promise of these future purchases by the GSEs. But the federal government believes that without the efforts of Freddie and Fannie, the number of these loans would drop.</p> <p>Freddie and Fannie provide what is known as a secondary market for mortgage lenders. They purchase mortgages from lenders, hold some of them in their own portfolios, and sell some as securities that they guarantee. Freddie Mac and Fannie Mae only purchase conforming mortgages that are not guaranteed by a government agency, such as the Department of Veterans Affairs and the Federal Housing Administration.</p> <p>Because they receive support from the federal government, the securities that Fannie and Freddie sell are considered especially safe investments. In fact, investors consider the securities sold by the two GSEs to be almost as safe as securities issued by the federal government itself.</p> <h2>How Do the GSEs Help You?</h2> <p>You won't deal directly with either Freddie Mae or Freddie Mac when you are applying for a mortgage loan. You'll work instead with a private bank or lender. But the presence of the two GSEs does make a difference for you: Mortgage experts estimate that the mortgage interest rates borrowers pay average about a quarter-percent lower than they would be if Freddie and Fannie didn't exist.</p> <p>That quarter-percent drop in your interest rate means that you'll pay less each month for your mortgage payment, and that you'll pay less in interest if you keep your loan for its entire term.</p> <p>You also have a better chance of qualifying for a mortgage loan today if you are a low- or moderate-income borrower, thanks to the commitment by the GSEs to buy a certain number of loans made to such borrowers.</p> <p>This doesn't mean that everyone loves the GSEs. Far from it. The federal government bailed out Fannie Mae and Freddie Mac in September of 2008 after the housing crisis sent both GSEs into an economic spiral. As part of this bailout, the U.S. Treasury Department was given permission to purchase up to $100 billion in Fannie Mae and Freddie Mac preferred stock and mortgage-backed securities.</p> <p>Because of this, the federal government's Federal Housing Finance Agency put both GSEs into conservatorship. This bailout cost U.S. taxpayers $187 billion. However, in 2012 the U.S. Treasury made a decision to put all profits from Freddie and Fannie back into the general fund. Because of this decision, the bailout has since been repaid, and with interest.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/everything-you-need-to-know-about-freddie-mac-and-fannie-mae">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-9"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-your-new-job-might-affect-your-mortgage-application">How Your New Job Might Affect Your Mortgage Application</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-mortgage-details-you-should-know-before-you-sign">5 Mortgage Details You Should Know Before You Sign</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/its-now-easier-to-get-a-home-loan-even-if-you-have-student-loan-debt-should-you">It&#039;s Now Easier to Get a Home Loan Even If You Have Student Loan Debt — Should You?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-qualify-for-a-mortgage-with-a-small-downpayment">5 Ways to Qualify for a Mortgage With a Small Downpayment</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/do-you-really-need-a-20-percent-down-payment-for-a-house">Do You Really Need a 20 Percent Down Payment for a House?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing fannie mae freddie mac government sponsored enterprises GSE home loans lenders mortgages Wed, 11 May 2016 09:30:26 +0000 Dan Rafter 1705412 at http://www.wisebread.com Is it Safe to Re-Finance Your Home Close to Retirement? http://www.wisebread.com/is-it-safe-to-re-finance-your-home-close-to-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/is-it-safe-to-re-finance-your-home-close-to-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/house_payments_money_000007934078.jpg" alt="Learning if it&#039;s safe to refinance your home close to retirement" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Lower mortgage rates can save you hundreds of dollars on your monthly payments. Refinancing your mortgage to a new one with a lower rate would then seem to make sense.</p> <p>But what if you're approaching retirement? Is refinancing a smart move when you're planning to leave the workforce in five years or less?</p> <p>Not surprisingly, the answer depends on your unique financial situation and your goal from a refinance. (See also: <a href="http://www.wisebread.com/4-mortgage-secrets-only-your-broker-knows">4 Mortgage Secrets Only Your Broker Knows</a>)</p> <h2>Consider the Time Factor</h2> <p>If your main goal is to reduce your monthly costs, refinancing might make sense. But if you plan on moving from your home shortly &mdash; in, say, less than five years &mdash; then a refinance might not be the best option. That's because refinancing a home loan isn't free. The typical refinance costs thousands of dollars &mdash; money that you'll usually roll into your new loan amount and pay off over time when you make your regular monthly payments.</p> <p>It might take you several years to save enough money each month to recover the closing costs. If you're moving too soon (and retirees often move from their homes sooner than they originally planned), you might not generate enough monthly savings to even pay back those initial closing costs.</p> <p>Then there's the time factor. A refinance, unless you are reducing the term of your loan at the same time, means that you'll be paying off your mortgage for a longer number of years. As a retiree, you might instead prefer to pay off your current mortgage in a shorter amount of time.</p> <p>&quot;One consideration is the length of the term on the new loan,&quot; said Arvin Sahakian, co-founder and vice president of BeSmartee, a start-up designed to help consumers search for mortgage loans online. &quot;When people refinance their mortgage, they are re-setting the loan term and essentially starting over again.&quot;</p> <p>As an example, if you are paying off a 30-year fixed-rate mortgage that you have been making payments on for 15 years, you'll have an additional 15 years left to pay off that loan. If you refinance that loan to a new 30-year one, you've just increased the lifespan of your mortgage by another 15 years. Do you want that monthly payment hovering over you for another 15 years, even if refinancing will result in immediate monthly savings?</p> <p>That's not an easy question to answer, especially when you consider how much of your payments on a new mortgage loan, even one with a lower interest rate, will go toward interest instead of principal.</p> <p>&quot;The first few years of mortgage payments on a new loan are designed to go toward the interest, and less towards the principal,&quot; Sahakian said. &quot;As the years go by, more of the monthly payments go toward the principal, and less toward the interest, so this is another important consideration.&quot;</p> <h2>What the Numbers Say</h2> <p>It's important for every homeowner to crunch some numbers before deciding to refinance. But it's <em>especially</em> important for those nearing retirement who might need to recover their refinancing closing costs in as few months as possible.</p> <p>Say you owe $150,000 on a 30-year fixed-rate mortgage with an interest rate of 5%. Your monthly payment, not including insurance and taxes, will be about $805. If you refinance that same amount to a 30-year fixed-rate loan with an interest rate of 3.95%, your monthly payment will drop to about $711 a month &mdash; a savings of about $94 a month, or $1,128 a year.</p> <p>That sounds good, right? But remember, refinancing can be expensive. Say refinancing that $150,000 costs $4,500 in closing fees. It will take you almost four years to save enough from your refinance to pay back these closings costs. Is that worth it? If you stay in your home for eight years or more, it might be. If you end up moving in five years, it might not be.</p> <p>But say you owe $200,000 on a 30-year fixed-rate loan with an interest rate of 5%. Then your monthly payment, again not counting taxes and insurance, would be about $1,073. If you refinance that $200,000 to a new 30-year fixed-rate loan but at an interest rate of 3.95%, your monthly payment would fall to about $949 a month. That's a savings of $124 a month, or $1,488 a year. If your loan closing cost that same $4,500, it would take you just a bit more than three years to generate enough savings to pay for your closing costs. That shorter time frame might make it more worthwhile for homeowners nearing retirement.</p> <p>There is another factor to consider, though. If you'll absolutely need to reduce your monthly living expenses after you retire, then refinancing might make sense, even if it will take you longer to recover the costs of closing.</p> <p>&quot;Many Americans who retire typically see their retirement income fall to nearly half of what they earned while they worked full time,&quot; Sahakian said. &quot;This is one of the considerations borrowers should account for when making a decision about refinancing. Will they be able to afford the monthly payments associated with the mortgage, insurance, and property taxes on their retirement income?&quot;</p> <p><em>Are you considering a home refinance?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/is-it-safe-to-re-finance-your-home-close-to-retirement">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-mortgage-details-you-should-know-before-you-sign">5 Mortgage Details You Should Know Before You Sign</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-mortgage-secrets-only-your-broker-knows">4 Mortgage Secrets Only Your Broker Knows</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-surprising-things-lenders-check-besides-your-credit-score">4 Surprising Things Lenders Check Besides Your Credit Score</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-a-15-year-mortgage-a-good-idea">Is a 15-Year Mortgage a Good Idea?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-valuable-rights-you-might-lose-when-you-refinance-student-loans">8 Valuable Rights You Might Lose When You Refinance Student Loans</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing Retirement closing costs home loans interest rates mortgages refinancing Mon, 08 Feb 2016 14:00:06 +0000 Dan Rafter 1649872 at http://www.wisebread.com