Could an FHA loan be the loan for you?

/2 Comments/in /by

What is an FHA loan?

FHA stands for the Federal Housing Administration, which is a government agency. The FHA was created by the Housing and Urban Development Department (HUD) to increase homeownership in the U.S.

This loan was designed to allow more home buyers to qualify for home loans by allowing for lower credit scores and lower down payment requirements. FHA loans only require 3.5 percent down payment and in some circumstances, allow for credit scores as low as 580. The borrowers are required to pay mortgage insurance monthly (calculated at .85 percent of the loan amount) as post of the total payment.

FHA Credit Score Requirements

To qualify for a loan, the FHA may allow for credit scores under 580, but the borrower typically has to put more money down as most lenders do not wish to assume the risk, especially after the housing crisis of 2008. If your credit score is below 580, it is highly recommended that you improve your credit score before applying for a mortgage.

Who are candidates for FHA loans?

  • Borrowers with a low credit rating
  • Borrowers that cannot afford a large down payment
  • Borrowers using a gift for a down payment
  • Borrowers with high debt-to-income ratios
  • First time home buyers

Down Payment Requirements

Perhaps the most significant benefits of an FHA loan is the 3.5 percent down payment requirement. Many conventional programs require down payments ranging from 5 percent to as high as 20 percent.

As an example, if you are purchasing a $200,000 home, a private loan will require no less than 5 percent down, or $10,000. With an FHA loan, at 3.5 percent down, the down payment would be $7,000 for a $200,000 home.

Each home buyer has a unique set of circumstances that impacts the type of loan that will be best. Make sure you work with a local lender that spends the time to educate you so you are able to choose the best loan for your situation.

Exterior image of a beautiful home

Tips for Buyers in a Seller’s Market

/0 Comments/in /by

Don’t let your dream home slip through your fingers. A solid pre-approval letter will give you a leg up.

Getting preapproved and having a dependable, air-tight written pre-approval from a respectable lender could never be more important than it is today.

In what is called “a seller’s market” multiple offers are being made days and sometimes hours after a property is listed on the market. We have seen purchase agreements that are tens of thousands of dollars more than list price.

This seller’s market has created some unique challenges that serious buyers need to be prepared for.

1. Standing out among the crowd. Anytime you have a competitive situation, you want your offer to stand out among all the others. The best way to do this is to submit your pre-approval letter with the offer. At a minimum, the pre-approval letter should tell the seller that the lender has reviewed your credit, income and assets.

2. Seller concessions. For a long time, seller concessions (i.e. a clause where the seller contributes to the buyers closing costs and prepaid costs) have been common place. However, in this market, sellers are getting more reluctant to except those terms. Aside from this reducing the net proceeds to the seller, sellers understand that many appraisals are not coming in at the contract price. Until comparable sales catch up with the market, this may prove to be an issue.

3. Large earnest money deposit. Another attractive strategy for buyers is to put down a large earnest money deposit. This says to the seller that you are serious about their house and are willing to put money on the table. If The buyer decides to walk away from this agreement, they would lose those funds. I have also recently seen buyers agree to have an earnest money deposit being non-refundable for any reason if buyer does not obtain financing.

4. Quick close date. Buyers are offering to close their transaction faster than other offers. This is attractive to a seller that is trying to purchase another property. Unfortunately, those promises are dependent on more than just the lender. To get from start to finish on a closing, there must be cooperation from appraisers, title companies, realtors, borrowers, sellers, as well as the lender. Nevertheless, in this market it has never been more important to have a lender that has all of their ducks in a row so that the buyer can get to the closing table as quickly as possible.

5. The added phone call. For many of my clients, I will personally call the listing agent after I send a pre-approval letter to let them know that this buyer is good to go. It’s amazing how far that will go to get your offer excepted.

6. Out of town or unknown lender. I’ve heard multiple realtors tell me that they do not except pre-approval letters from lenders they are not familiar with. Right or wrong, this is an important reason to get approved from a local reputable lender.

In a market where your pre-approval is more important than ever, it is imperative that borrowers connect early and thoroughly with the right lender. We’re here to help!

Service Rewards logo

Rewarding Home Discounts for Honorable Service

/1 Comment/in /by

Over the past 20 years, we have had the honor and pleasure to work with many clients that we consider local heroes.

There are those professions, the ones that attract a special kind of person, that make a positive different in our communities and our country.

To honor those heroes and to show our gratitude, we have designed a program to give savings to police officers, firefighters, first responders, government employees, veterans, military personnel and teachers.

At Michigan Mortgage, we are committed to maximizing what our heroes can save on a home.

“This program is special and something we believe in,” said Dave Lehner, loan officer and co-branch manager. “We are committed to our Service Rewards program because the people that go above and beyond to help, protect, teach and serve deserve a break. It takes a special person to sacrifice for our country, protect us from harm and teach our children without asking for anything in return.”

“Giving back is a small ‘thank you’ for all they do or have done for our community and we owe it to them.”

When you register with our Service Rewards program, you are eligible to receive the following discounts associated with purchasing a home.

  • Realtor Fees
  • Mortgage Closing Costs
  • Appraisals
  • Title Fees
  • Home Inspections
  • Home Cleaning, Restoration and Moving

We have partnered with local professionals that feel it is important to pass along savings to these heroes.

“We are so grateful and appreciative to our local partners for their commitment to the Service Rewards program,” said Rob Garrison, loan officer and co-branch manager. “Their discounts are a clear recognition of the sacrifices and value that service heroes bring to our nation and community.”

The process is quite simple. Visit our website, register as a Service Rewards member and we will put you in contact with a local realtor participating in the program.

If you’d rather, give us a call at 231-799-2606 and we can guide you through the process.

Image showing a client filling out home insurance application

Everything you need to know before shopping for homeowners insurance

/1 Comment/in /by

Long before you’re “clear to close,” your loan officer will request information related to homeowners insurance. Have you done the leg work to find the best coverage for the best rate?

We sat down with Ryan Hendrickson, owner and agent with Farm Bureau Insurance, to help guide you through the process to home ownership.

Michigan Mortgage: Buyers must obtain homeowners insurance before securing a mortgage. When in the process should they start getting quotes from local agencies?

Ryan Hendrickson: I would recommend getting a quote as soon as an offer has been accepted. When purchasing a home, especially in this seller’s climate, a speedy close is often a requirement of the offer. If you’re able to finalize your homeowners insurance early in the process, you will insure that it will not cause any unnecessary delays in your loan closing.

MM: Should home owners shop around and compare rates?

RH: Absolutely! It is always smart to compare rates. Your homeowners insurance is a large determination in what your “cash to close” is going to be. When you are purchasing a home, money can be tight. Saving even a little money can go a long way.

MM: That’s good to know. Thank you! After the home is purchased, how often should homeowners shop around for new rates?

RH: Price is obviously an important factor when determining or keeping your insurance with a company. I would recommend checking around if you ever notice a significant increase to your rates.

Remember, there are determinations other than price. You also have to look at convenience, coverage and customer service. Simply stated; would you ever buy a car by just looking at cost? Or adversely; buy a car without looking at cost? You’re likely not going to be happy either way. With homeowners insurance you need to be sure you are taking coverage and cost into consideration. When you do have a claim, you want to be sure that you have a good policy and are not only looking for a 15 minute, 15 percent discount.

MM: Why is it important for buyers to work with a local agent as opposed to a national branch or call center?

RH: Everyone has a different level of understanding when it comes to home and auto insurance. Most of the time it is a bit confusing. When working with a national branch or call center there are many facets of Michigan insurance law that they might not be familiar with. I would always recommend going local for two reasons: Your dollars stay in your community and we know Michigan insurance.

If you have more questions about homeowners insurance and its impact on the home buying process, your Michigan Mortgage Loan Officer is here to help.

The Do List

The Do’s and Don’ts of Buying a Home

/1 Comment/in /by

Are you thinking about buying a home but have no idea where to start or what to do? You aren’t alone.

First time home buyers are often bombarded with conflicting information regarding the home buying process, depending on who they are talking to.

The process is simple, given the right advice from the right professionals.

It is important to sit down with a trusted advisor that’s willing to educate you along the way. Have your loan officer analyze your spending habits and your budget so that you can make the best decisions for your unique situation.

At Michigan Mortgage, we created a list of the Dos and Don’ts related to the home buying process to help better navigate you through this exciting time. Our goal is to make your experience as smooth and painless as possible.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Last but not least, don’t sign anything you don’t understand or don’t feel comfortable with. Ask questions and expect answers. If you don’t understand, ask for a better explanation.

It is your home and your journey. Don’t let someone else dictate your decisions. Working with the right professionals will ensure that this process is actually fun, as it should be!

Exterior image of a beautiful home

Focus on Your Mortgage First

/14 Comments/in /by

Assuming that you are good to go on the mortgage front can be risky.

Unless you are an individual financing the transaction with cash, your mortgage will dictate the home shopping process itself.

Don’t put the cart before the horse.

Without a mortgage from a reputable and trusted lender, you may not get a house in today’s market. While shopping with a reputable realtor is important, make sure you allot the time and attention to your home loan first.

A new study from Fannie Mae revealed that there is a “lack of mortgage focus” out there and that lack of focus is more prevalent among low and moderate-income borrowers.

In about half of the cases in the Fannie Mae study found that lack of research and planning meant they didn’t qualify for a loan at all. Those people were forced to go back to the drawing board. Some were asked to improve their credit score and other needed to add to their savings to qualify.

We get it! The loan process – and the work it may take to get you approved for a mortgage – isn’t anything like the fun of going out shopping for a new home. Picking out a neighborhood, paint colors, kitchen counters are WAY more fun than looking at your credit, your savings and your current and past job situation. Analyzing the not-so-fun stuff is necessary to avoid being sorry when you can’t buy the house of your dreams.

Remember, wasted time can actually end in a higher mortgage rate, a potentially higher home price and the possibility of missing out on a house that you really, really want.

The time you put in upfront can reduce the overall amount of legwork through the process and will increase your chance of getting the right mortgage and the right house…the first time around.

Bidding War Infographic

Bidding War? A Local Lender May Be the Winning Ticket

/6 Comments/in /by

In one of the most competitive housing markets in history, a local pre-approval is not only a good idea, it is a necessity in giving buyers a competitive edge when competing with other buyers for their dream home.

Home purchasers seeking to stand out in this competitive housing market should consider a mortgage based on the area in which they are making the offer.

“In a housing market where bidding wars are common, buyers who need financing can strengthen their offers by working with a locally based mortgage broker or loan officer,” said David Riemersma, Coldwell Banker Woodland Schmidt (Grand Haven, Michigan).

Listing agents want to work with buyers whose lenders know the local market and have a proven record of getting deals done. The listing agent’s job is to make sure that the offer on their client’s home will close, and in a timely manner. In markets such as West Michigan, where buyers frequently go up against multiple offers and all cash bids, confidence that a sale will happen can separate a winning bid from the rest.

Borrowers have many options on line, but listing agents caution that a small difference in rates isn’t the most decisive factor in choosing a lender.

“Ability to close is the single most important factor Realtors are looking for from borrowers in multiple offer situations, and a reputable, proven lender gives us the most assurance that we will close,” Riemersma said. “The lender has ‘skin in the game’ unlike a remote lender who has no relationship with the borrower or the community they are purchasing in. Reputation matters.”

Speed is another factor when sellers are fielding multiple offers. The seller will choose a buyer that can close quickly. In a fast-paced market, local lenders have their processes in place to work quickly in a competitive market place unlike many outside, or online lenders.

A 30-45-day closing is often going to be beat by a shorter closing time table, provided by an experienced local Mortgage broker.

“When I see a preapproval from out of town, or from an online lender, a red flag goes up,” said Jeff Grysen, At Home Realty (Grand Haven, Michigan).

Finally, working with a mortgage lender who has an existing relationship with the buyer’s agent brings a level of personal contact, providing prompt answers to questions.

“You can call the lender on the weekend or send a text at 9:30 at night and get an answer, which is huge in this market.” Grysen said.

Online or out of town lenders often times are too slow to respond in a fast-paced market, causing a buyer to lose out and have to start from scratch.

Image of a family hanging up an American flag

Benefits of VA Loans in Michigan

/0 Comments/in /by

One amazing benefit for veterans and qualifying military is a VA loan. It’s amazing how many eligible VA borrows are not advised of this product when shopping for a loan. Many lenders do not provide a VA loan or do not have a working knowledge of the benefits this product offers them and their families.

A few benefits include:

1. Zero down. Purchasing a home with no out-of-pocket money can sometimes mean the difference of being able to buy now or having to wait. For some, a zero-down option is the only way that they can ever purchase a home if they are on a fixed income. For others it is a way they can save their money for home improvements or other investments. Regardless of the reason, the VA loan is one of the few loans that allows a zero-down option.

2. Truly $0 out of pocket. On a VA loan, the purchase agreements can be structured whereby the seller pays the closing and prepaid costs (setting up escrow). This allows for a truly zero out-of-pocket loan.

3. No monthly mortgage insurance. The VA loan does not require any monthly mortgage insurance (PMI). When compared to FHA or conventional loans, this can be $100-plus a month savings depending on the loan amount. While VA has a funding fee (which can be rolled into the loan), that fee is waived if the Vet is VA disabled at least 10 percent.

4. A lower credit score is allowed. There is, often times, a misunderstanding that VA loans are difficult to obtain. This is simply not the case. Because the borrower does not have to document cash to close and because the credit criteria is flexible with the VA, these loans tend to be easier to approve and often times are faster to close.

5. Additional incentives. Michigan Mortgage has created a program called Service Rewards whereby we and participating vendors give discounts for things like closing costs, realtor fees, title work and home inspections as a way to show our appreciation for their sacrifices and service!

To learn more about VA loans or our Service Rewards program, call one of our mortgage specialists today.

Image showing a graph being analyzed

What determines my mortgage interest rate?

/28 Comments/in /by

In the quest for a home, one of the first questions a borrower asks is: What is the interest ratee today?  The answer often times has to do more with the borrower then the lender. Surprised?

Here’s how borrowers can impact their interest rates.

  1. Credit Score: Lenders use your credit scores to predict how reliable you will be in repaying your loan and is the most significant variable in deciding your credit score. In general, consumers with a higher credit score receive a lower interest rate than those with buyers with lower credit scores. Mortgage rates vary considerably between credit scores of below 640 and above 740.
  2. Down Payment:  Because mortgage lenders see a lower level of risk when you have more stake in the property, a larger down payment can mean a lower interest rate. With 20 percent or more down, your interest rate will be lower. There are loans available with good interest rates that require PMI which is mortgage insurance to protect the lender in the event a borrower stops paying their loan.
  3. Loan Amount: Depending on the size of the loan, home buyers can pay higher interest rates on loans that are particularly high or low. The lender will have to adjust the rate due to the costs of a smaller loan and the risk factors that come with a large loan amount.
  4.  Loan Term or Duration: The term or duration is how long you to pay the loan back to the lender. Typically, shorter term loans have lower costs and interest rates, with higher monthly payments. Longer term loans will have monthly payments because they are spread out over a longer time period. Your Michigan Mortgage loan officer can analyze your unique situation to guide you to the best loan for you.
  5. Loan Type: There a number of loan types to choose from, all having different eligibility requirement.  Rates can vary significantly depending on what type of loan is chosen. The most common types of loans are known as conventional, VA, RD, and FHA loans. You can learn more about the different loan options by visiting our website at www.michmortgage.com.
  6. Home Location: Often times, lenders offer slightly different interest rates depending on the state they live in.  whether you are purchasing in a rural or urban area can also be a factor. So, it is important to talk to a local lender versus a national lender to get accurate rates.

There is no cookie cutter process to determine your interest rate. By understanding how your interest rates are determined will give you a better understanding of the best loan and interest rate for your unique situation. Michigan Mortgage’s highly knowledgeable loan officers can guide you to the very best loan for your needs.

Tips to improve your credit score

How to Improve Your Credit Score

/14 Comments/in /by

In today’s world, your credit score may be the most important number impacting your buying power. Can you purchase a home? Can you buy a car? Do you qualify for a credit card? Ask your credit score.

Whether you’re in the red or in the green, your credit score is key.

We sat down with our in-house credit expert, Loan Officer Assistant Jill Dobb, to talk more about credit scores and the impact they may have on your home-buying experience.

Michigan Mortgage: What elements of the home-buying process are affected by credit score?

Jill Dobb: Credit scores play a big role in all aspects of the home-buying process. First, it determines whether or not you qualify. It also determines the type of loan you qualify for and the interest rate associated with that loan. Your credit score will also determine if you qualify for a loan assistance program or are able to get a better rate on private mortgage insurance.

MM: If a customer is interested in working with us, what should be their target credit score?

JD: Typically, we like to see at least a 620 credit score for customers pursuing an FHA loan. We can be a little more flexible with a VA loan and service customers with a 600 score. We ask that our Conventional customers aim for a 680, but with a good mortgage history, we may be able to offer Conventional financing to customers with a lower score.

MM: If buyers fall short of our target credit score, what steps do you suggest they take to improve their score?

JD: A credit card, also known as a revolving line of credit, has the biggest impact on credit if you desire a quick turnaround. If you have a credit card, use it wisely. Always make your payments on time and keep a low balance compared to your card limit. For clients who do not have a credit card, we recommend that you get one right way and start using it. Remember, credit cards are a great tool to improve your credit, but if used inappropriately, they can negatively impact your score.

Shopping for your dream home is far more exciting than credit scores and mortgage loans, but both are equally important.

“Many times, shoppers get excited about a home rather than a mortgage, which is totally understandable,” Dobb said. “However, when they are not able to move forward with the process of actually purchasing a home, it causes them a great deal of frustration.”

In today’s competitive market, it is especially important to speak with a knowledgeable lender so you can actually find the house of your dreams and obtain financing.

To avoid the letdown, our goal is to establish a healthy relationship with each one of our customers. We aim to educate and offer advice for each client’s unique situation.