Michael Santos

MLB Residential Lending

3 Positive Reasons To Get A 15-Year Mortgage

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3 Positive Reasons To Get A 15-Year MortgageMost people can’t pay for a home outright, so they finance it with a mortgage loan. 30-year mortgages are more conventional, but they also come with a significant interest price tag.

People who have a stable career and the income to afford larger payments, or who are nearing retirement, may want to take out a 15-year mortgage. Here are some reasons to consider one.

Save Money Over The Life Of The Loan

The total interest paid on a 30-year loan can be nearly as much as the principal. While it can be difficult to see the bigger picture when facing a mortgage payment that will be a good bit higher, consider this: Paying off a loan in 15 years versus 30 years will save tens of thousands of dollars in interest, and in some cases, as much as $100,000.

Interest rates on 15-year mortgages are also typically lower than other longer-term home loans, which provides additional mortgage interest savings.

Build Equity Faster

Equity refers to how much of your home you’ve already paid for plus what it appreciates in additional value over time. If your home is worth $250,000 and you owe $190,000 on your loan, you have $60,000 in equity.

Since more money is going toward the loan principal rather than interest on a 15-year loan, you build equity faster, which is beneficial for numerous reasons. It lowers your loan-to-value ratio and may improve your chances of getting a home equity loan, which can be used for large expenses.

Become Mortgage-Free Sooner

Instead of having a housing payment later in life, that money is freed up for retirement or other expenses. 

If retirement is on the horizon for you in the next 10-20 years, ditching your mortgage payment sooner rather than later is wise. Once you are on a limited income, you will want as few expenses as possible. Plus, having the option of a home equity loan for emergencies is attractive.

There are several excellent reasons to get a 15-year mortgage. Run the numbers with your trusted home mortgage advisor and decide what makes the most sense for you.

How Does My Existing Debt Affect Getting A New Mortgage?

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How Does My Existing Debt Affect Getting A New MortgageCarrying debt is a common problem that people have. Some of the most common types of debt include student loans, credit cards, and motor vehicles. When you are interested in buying a new home, you often think about whether or not your debt is going to hurt your chances of qualifying for a new mortgage.

Fortunately, you may still get a new home with that debt. There are several factors that may determine whether or not you qualify.

Your Debt to Income Ratio

The debt to income ratio is a major factor that the mortgage lender is going to consider when deciding whether or not you will qualify for a new mortgage. In general, the magic number is 43 percent. If your debt exceeds 43 percent of your total income, the lender will have a hard time giving you that new mortgage.

For example, if you make $5,000 per month, you will want to have less than $2,150 in monthly debt payments. To make yourself a more attractive candidate for a mortgage, try paying off some of your existing debt.

Taking A Look At The Credit Score

The lender is also going to consider your credit score. The higher your credit score is, the more likely the lender will reward you with a loan. In order to keep your credit score high, make sure you manage your debt well.

Making your debt payments on time will keep your credit score high. Missing debt payments will lower your score. Manage your existing debt well and you will have a better chance of qualifying for a mortgage.

Making Sure You Can Handle A Mortgage

Finally, the lender is also going to take a look at whether you can take on the responsibilities of owning a home. The monthly mortgage payment isn’t the only expense you will be taking on. Some of the other issues you will have to handle include property taxes, maintenance costs, and homeowners’ insurance. 

The bank or credit union will want to ensure you can handle these costs. To make these expenses easier to bear, it might be a good idea to pay off some of that existing debt.

Investing In A New Mortgage

Looking for a new home is exciting. You can purchase a house with existing debt as long as it is minimized and managed well. Think about these factors before investing in a mortgage. And as always, consult with your trusted local mortgage professional for the best advice on your personal situation.

What is Owner Financing When Buying A Home?

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What is Owner Financing When Buying A HomeThere are many options when it comes to taking out a loan on a new home. One of the options that people might have heard about is called owner financing. In general, the property owner takes the place of a traditional lender.

Instead of someone taking out of a loan from a bank or a credit union, they take out a loan from the owner of the property. Similar to a traditional loan, the buyer will make payments to the seller over a period of time with a certain interest rate.

The Structure Of Owner Financing

If someone elects to go with owner financing, there are several terms that will specify the repayment structure. The most common structure is called a note and mortgage.

This is a secure form of financing. It is also the closest in structure to a traditional mortgage from a bank. The seller will put together a note that specifies the size of the loan and how it will be repaid. The mortgage will secure the seller with the property in case the borrower cannot repay the loan.

The buyer is still placed on the title of the home. Then, the mortgage is recorded with public records, just as in a traditional loan. There are other types of seller financing; however, this is the most common structure.

The Structure Of Repayment

You may have questions regarding this type of financing when compared to a traditional mortgage. Just as in a traditional mortgage, the repayment terms can vary. You will still have the opportunity to negotiate the terms of the loan.

Typically, interest rates are close to that of a loan from a bank or credit union. There are still options to set up a fixed-rate or adjustable-rate mortgage as well.

The Benefits Of Seller Financing

There are several benefits for both the buyer and the seller. First, seller financing may allow the seller to avoid paying capital gains taxes on the property. This can also help the seller offload a property that otherwise might not sell.

The buyer will also be able to purchase a home without having to borrow from a bank. Often, there is less paperwork and fewer fees. Finally, a buyer that might not qualify for a traditional bank loan might be able to buy a home through seller financing.

Understanding Owner Financing

It is important for everyone to think carefully before signing up for this type of financing. This is a unique option that you should understand when looking for a home.  Consult with your trusted home mortgage professional to get the best answer for your particular situation.

 

Common Reasons Why Buyers Are Denied A Mortgage

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Common Reasons Why Buyers Are Denied A MortgageWhen you are buying a new home, it is an exciting process. You have spent months searching and have found the home you want to purchase. You are ready to move into the home of your dreams. 

Unfortunately, you have found out that your request for a mortgage has been denied. This can be a deflating experience. Fortunately, there are ways to avoid this by understanding the most common reasons why a buyer is denied for a loan.

The Loan Requirements Have Changed

One of the most common reasons why you might be denied a mortgage is that the terms of the loan have changed. For example, the lender might have raised the minimum credit score requirement. This might sound unfortunate; however, it does happen from time to time.

Loan requirements might change from the pre-approval stage. If this happens, think about searching for a loan from a different lender.

You Added Debt

The debt to income ratio is going to matter when applying for a loan. If you are pre-approved for a loan and your amount of debt changes, the lender is going to look at this closely. Common forms of debt include student loans and credit cards.

Even small changes in your debt amount can impact your ability to qualify for a loan. Try to avoid buying a new car or maxing out a credit card during the mortgage application process. This will help you keep the loan you’ve worked so hard to earn.

You Changed Jobs

Finally, employment status also matters to the lender. When you take out a loan, the lender needs to know that this will be repaid. This depends on you having a steady stream of income from your job. 

If you decide to change jobs between the time of pre-approval and the time of purchase, your employment history and income stream do not mean as much. While changing employment will not totally disqualify you, make sure to discuss this possibility with your lender. Changing jobs within the same field is likely fine; however, moving to a new career entirely can be a red flag.

Mortgage Denials are Frustrating

It is frustrating to have your request for a loan denied. Fortunately, understanding these common reasons can help you avoid this deflating experience. Think about all of these possible scenarios when you apply for a home loan. And rely on the expertise of your trusted home mortgage professional.

3 Ways To Avoid Mortgage Insurance

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3 Ways to Avoid Mortgage InsuranceWhen you are buying a home, you may run into a number of hurdles to complete the purchase. One of the items that you may be asked to purchase is called private mortgage insurance, often shortened to PMI. This is a unique insurance policy that your lender, such as the credit union or bank, may ask you to buy in order to protect themselves. In this insurance policy, the bank protects themselves against losing money if you end up defaulting on your loan.

Unfortunately, if you are asked to purchase PMI, this will increase your monthly mortgage payment. Therefore, most people try to avoid it. Fortunately, there are a few ways to do this.

Increase the Size of Your Down Payment

Typically, the lender will ask you to purchase PMI if your loan to value ratio is off. In most cases, the lender will ask you to buy PMI if you put down less than 20 percent. It is important to remember that this is still handled on an individual case-by-case basis and each lender handles this differently. 

Invest in a Piggyback Mortgage

Another option to avoid PMI is to invest in something called a piggyback mortgage. In this case, you are splitting your mortgage into two policies. For example, if you put down 10 percent, you would need to take out a mortgage for the other 90 percent.

When you take out a piggyback mortgage, you split this 90 percent loan into one mortgage for 80 percent and the other for 10 percent. The drawback of this policy is that the second loan might have a higher interest rate than the first. This can help you avoid having to take out PMI.

Try Building the PMI Into the Loan

Finally, the last option is to roll them into the cost of the loan. In this case, the lender avoids asking you to purchase PMI and instead charges you a little bit more money for the loan. You won’t have a section on your bill for “private mortgage insurance” but you will have a slightly higher monthly payment anyways. Remember that you can refinance to a lower rate later, saving some money; however, it might be harder to eliminate PMI.

Avoiding Mortgage Insurance

These are a few ways that you can avoid purchasing PMI. This will help you keep your monthly payments low. As always, speak with your trusted mortgage professional for personal advice on your specific situation.

How To Get Your Free Annual Credit Report And Why You Need It

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How To Get Your Free Annual Credit Report And Why You Need ItYour credit report influences whether or not you’ll qualify for a mortgage and what kind of interest you’ll pay on that loan. This isn’t something you can safely ignore. Smart homebuyers understand the importance of monitoring credit scores and credit reports. Here is some information about how to get your credit report.

Free Credit Report Available

You’re entitled to free credit report, according to the Fair Credit Reporting Act. You can get one free report each year from each of the three major credit bureaus; Experian, Equifax and Transunion.

The easiest way to get your free report is to go to AnnualCreditReport.com. This is the official site that was originally established by the Fair Credit Reporting Act. 

How To Get Your Free Credit Report

Once you reach the site, create an account by registering. Have as much of your available credit information available when you request your free credit report. The reason is because the site will need to verify that it’s actually you requesting the credit report. If you have your information at hand, it will be easier and faster to confirm your identity.

This is just a process that the site has in place to protect your identity from fraud. They might ask you things like past residences, past credit card companies, or something else. 

Why You Need To Get Your Free Annual Credit Report

When you apply for a home loan, the lender will pull your credit report and review it. They’ll look for signs that you are a good credit risk. Things they consider include how you handle your debt to income ratio, whether or not you pay your bills on time and if you have any negative notations on your credit report.

For this reason, you should look at your own credit report before applying for a mortgage. This gives you a chance to fix anything that is incorrect in your credit report and an opportunity to improve your credit report if it’s not in great shape. 

You Can Help Prevent Identity Fraud

Another important reason to review your free annual credit report is to prevent fraud. If you see anything unfamiliar on your report, such as loans you didn’t take out or balances for things you don’t recognize, you can immediately act on those issues so they don’t affect your chance at getting approved for a home loan.

Always be proactive when it comes to your credit history. By availing of your right to a free annual credit report, you can ensure that your credit is in as good as possible condition when you go to apply for a mortgage.

If you are looking for a new home or if you are interested in refinancing your current property, be sure to consult with your trusted home mortgage professional to discuss financing options.