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Finding it hard to save for a down payment?

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Making small changes to your habits can make a big difference in your ability to save. Saving takes some pre-planning and discipline and a well-executed strategy.

Here are a few ideas to help you save.

  1. Take it right out of your paycheck and transfer a fixed amount into a special savings account. This is probably the most convenient and practical way to save. Take it right out of your paycheck. Make sure you set up an automatic direct deposit into a savings account that is earmarked for your down payment only. Commit to using this money for a down payment and no other purpose.
  2. Take advantage of special programs including down payment assistance programs. Check with your lender to see what type of down payment assistance programs they offer. See if you qualify with the FHA, the U.S. Department of Agriculture Rural Housing Service and the Veterans Administration. Also, check out local housing authorities, such as MSHDA. If the lender doesn’t offer these programs find a knowledgeable, reputable local lender that specializes in these programs.
  3. Skip vacations for a year. Make if a fun goal to forego any large vacations. Plan a staycation, or a night somewhere, and focus on how great it feels to get closer to your goal.
  4. Lower your expenses. Look at your budget to see what small things you can cut per month. Cut out a coffee per week, make your own pizza on Friday night. If you don’t have a budget, sit down and make one and evaluate it quarterly to see how you are doing. Shop at Costco, Aldi and other discount stores.
  5. Sell your stuff on EBAY or Craigslist. If you have Designer clothes, furniture, antiques, art, gaming devices that you barely use, consider selling them and putting the proceeds in your down payment account.
  6. Start a Side Hustle. Commit to a temporary period of time and put all of the money in your down payment account.
  7. Ask for a raise. If you’ve been thinking about a raise, and feel you deserve one, now may the time to talk to your superior about the value you bring to your organization.
  8. Use gift money. Parents or relatives may be able to gift money to help out a first-time home buyer. Gifts can come from your family, spouse or a domestic partner. Be sure to include the amount of the gift on your loan application and check with your lender as the best way to obtain and track this. To be recognized as a “gift” the donor will have to sign a gift letter saying there’s no expectation of repayment, interest, or anything else.
  9. Be wise with your money. Think about your purchases before you make them. Are there cheaper brands at the grocery store that are the same quality as the premium brand? Are there restaurants that offer the same quality and experience that are a little less expensive? Do you need another tan sweater? Be mindful about your purchases and avoid impulse purchases.
  10. Use your tax refund. Set aside a percent of your tax refund to deposit into your down payment savings account.

For more ways to save for a down payment, reach out to our team at Michigan Mortgage. We’re here to help in any way we can.

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Home Maintenance Checklist: Leave Buyers with a Great Impression

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First impressions matter!

According to the National Association of Realtors, the average home buyer will look at 10 homes before making an offer. When a potential homebuyer walks in to your home, how will your home make a positive and lasting impression?

Most buyers are looking for a move-in ready home that appears to be well maintained, with ample storage, and it’s the little things they notice when assessing the over-all condition.

Make sure you inspect your home through the eyes of these potential buyers, then fix the most obvious items. Take inventory of all repairs and get to work.

  • Make sure all door hardware is in working order and replace if necessary.
  • Do all windows open easily and have a secure window lock?
  • Reglaze bathtubs if needed. This is a very easy, inexpensive but important fix.
  • Make sure caulking is clean and applied well in bathrooms and kitchen.
  • Repair any cracks in ceilings and walls.
  • Fill in any holes left by picture hangers and wall art.
  • Touch up painting in all rooms.
  • Replace shower head with a new, clean one.
  • Repair any leaking faucets or supply valves.
  • Make sure all outlets and light switches are working.
  • Replace old, dirty and paint covered electrical covers with new ones.
  • Put the correct bulbs in light fixtures and make sure there are no bulbs burned out.
  • Buyers are looking for neutral colors, so if there are boldly colored rooms, repainting in neutral tones will be helpful.

Cleaning and Decluttering

  • Remove clutter. Picture frames, accessories, files, books, small appliances should be removed from counters.
  • Scrub all surfaces.
  • Make sure your home is free of all smells including animals, food, cigarette smoke, etc.
  • Clean all baseboards.
  • Clean all light fixtures and ceiling fans.
  • Clean windows and sills inside and out.
  • Clean all closets and keep them tidy and clean.
  • Have carpets professionally cleaned and/or replaced if necessary.
  • Hardwood floors should be mopped and oiled.
  • Dust blinds.
  • Replace old, moldy shower curtains.
  • Remove grease and grime from kitchen cabinets and appliances.
  • Make sure cupboards and drawers are wiped out and clutter free.
  • Make sure garage can house cars not boxes and junk.

Enlisting a reputable Realtor will insure that your home is in tip top shape to sell. Your local Realtor knows what homebuyers in your area are looking for!

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Can you get a mortgage with no credit?

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Sometimes young clients who have not established credit are interested in getting home financing. Other times, clients who have never taken out any credit and pay cash for everything decide it is time to buy but don’t have enough cash.

How did those folks get into a home loan?

With most sub-prime loans going by the wayside, options for these people are limited but not completely closed.

FHA has a no credit loan when a borrower has no credit score but can prove a 12-month pay history on three lines of non-traditional credit.

For example, if someone has utility bills, car insurance, rent, or even something like Netflix, they may be able to get financing. We simply have to get the pay history from the creditor to show they have been on time for 12 months. Note that if they have any derogatory credit like collections, they can negate this option.

Oftentimes, clients with no score also have no non-tradition credit they can add. These clients will need to establish a score. This is not as difficult as it sounds.

If they cannot get a traditional credit card, they may be able to get a secured credit card. Most banks and credit unions will give a credit card that is secured by cash. There may be a minimum amount required, but usually $300 deposited with the bank can secure a card. The consumer then uses that card just like any other credit card to establish credit. This will take about six months and will be good credit for them as long as the balance is under 30 percent of the high credit limit when credit is pulled.

Pitfalls: Many people think that paying off derogatory credit (like collections) or closing out accounts with late payments is s good thing. While this may be the right thing to do, it may not help their score. Having new activity on a derogatory account can often LOWER the score!

Every situation is unique. That is why a consultation with a knowledgeable advisor is the best course of action. Call us for more details on how to establish credit and what is not advisable given your situation.

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Success Story: Laura McCarthy

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As part of our “Success Story” series, we’d like to introduce you to Laura McCarthy, a woman that doubted her ability to achieve the American Dream of homeownership but trusted Michigan Mortgage to guide her home. This is her story.

Homeownership is a dream for many, especially for those looking to provide a safe and stable environment for their children.

Some know the dream is in reach while others question their ability to make the large purchase at every turn. Laura McCarthy was one of those people. She thought homeownership was something she may never achieve.

“As a single mom, to be honest, I did not think I would be able to purchase a home given my past credit history,” Laura said. “I was renting and my money was going nowhere with nothing to show for it. I was hesitant and extremely nervous and thought the people at Michigan Mortgage would laugh me out of their office.”

Much to her surprise, that wasn’t the case at all. It was far from it, actually.

“Dave Lehner and I are old high school chums,” she said. “I knew he would be willing to help me and be able to tell me if my dream was a possibility. He instantly put my fears aside explaining my options and being honest in what I should do with what I could afford.”

Laura knew she was in the right place. Not only did she trust the guidance offered by Dave and his team, she worked with a Realtor that was also a friend.

“I chose to work with Amy Rudholm because of her expertise in the field, her patience, her knowledge and willingness to help me find exactly what I needed and to be sure I was making the right decision,” Laura said.

“Amy told me many times ‘it’s my job to get you exactly what you want’ and she went above and beyond in making that happen,” she continued. “We looked at many homes and she gave me her honest opinion and we kept moving forward. The home I chose was for sale by owner and Amy did not hesitate to work with the sellers and was diligent in making sure I got exactly what I wanted!”

“The inspection process was a bit overwhelming, but once again, Amy was there every step of the way and put my mind at ease.”

Dave and his team made sure to be available anytime Laura needed a little help.

“I had lots of questions every day and no one from the Michigan Mortgage office ever made me feel like I was crazy or bothering them at any time,” she said. “They answered all of my questions and kept me updated daily with emails that were encouraging.”

“Jill, Ronda and Team Lehner were amazing to work with and treated me like family.”

When we received the final clear-to-close, it was a celebration for all!

“It was smooth and quick and before I knew it, we were closing and celebrating,” Laura said. “I happened to be out of town the day I could get the keys and move in, so thanks to my family and Amy’s connections, they made it happen so that I came home to my new house ready to move in!”

Laura, Taylor and Lindsay (her two beautiful children!) have had nothing but fun in their new home. It’s the only place they want to be.

“I cannot thank Michigan Mortgage enough,” Laura said. “Top notch, stellar organization and would (already have) recommend them to anyone looking to purchase a home that needs a little extra help and guidance along the way like I did.”

Laura can’t thank Amy and Dave enough for helping make her dream home a reality.

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HELOC vs. Cash-Out Refinance

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The mortgage industry has one flaw: There is no built-in way to access equity.

For many home owners who want to use their equity to pay off debt, start a business, invest in the market, or just use the money for purchases, they cannot unless they take out another loan. The two most popular ways to do this is with a home equity line of credit (HELOC) or a cash-out refinance.

A HELOC is a second mortgage secured by your home. A cash-out refinance is a first lien mortgage that “cashes out” some of your equity in your home. Which is better depends on your situation, the market and your goals.

Here are a few factors that might help make the decision easier for you and your family.

1. Take a look at your current interest rate. If your mortgage interest rate is low compared to the current market and you are borrowing a low amount compared to what is owed on your first mortgage, a HELOC maybe you best option. Why? Although the equity line is higher interest, it is only on a relatively low amount and you can keep your low rate on your first mortgage.

If current rates are lower than your first mortgage or if you are borrowing an amount approaching 50 percent of the current amount owed on the mortgage, it may be better to do a cash-out refinance. This is because the equity line interest is generally higher than the current market rate could make your payment higher. Additionally, because the equity line is generally adjustable, there is a risk that volatility will make your payment unpalatable.

2. Analyze payment vs. interest savings vs. risk. If your ultimate goal is to keep your payment as low as possible, an equity line might be a good choice. Remember, the equity lines are usually interest only and therefore the monthly payment stays relatively low. However, there is a risk in them because they are also adjustable.

If you’re goal is to pay your mortgage off as quickly as possible and pay the least amount of interest, a cash-out refinance is often times better. Again, this is because you pay both principal and interest on cash-out refinances and they are fixed rates.

3. Pay attention to costs. If the up-front costs are a determining factor, the equity line is the way to go. HELOCs are generally free, whereas, a cash-out refinance will add principal to your current mortgage.

4. Keeping it all in one loan. Many people do not like the idea of having two different loans. Even if the equity line is with your first mortgage servicer, there will be two different loans with two different payments and two different statements. These will also have different terms and most likely different rates. On a cash-out refinance there will all be one loan, one term and one rate.

When determining whether to do an equity line or the cash-out refinance it is important to determine long term goals, what your current needs are, and which option will put you in a better position in the long run.

Talk to a trusted advisor to help you navigate your best options.

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Is there a “perfect” time to buy a home?

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No matter what is happening with home prices and mortgage interest rates, the right time to buy a house is when you are ready to take on the financial and emotional responsibilities of homeownership.

It’s easy to fall in love with a house, but committing to one for the long term can be more challenging.

“Buying a home is a serious investment,” said Loan Officer Rob Garrison. “Before you start shopping home listings, it is important to sit back, do your homework and analyze your personal and financial goals as well as your lifestyle before you take the plunge.”

“Don’t buy just because everyone else is, make sure you are ready.”

Start by answering these questions.

1. Why do you want to buy?
An important first step is to evaluate your reasoning behind wanting to buy. What do you hope to gain from purchasing a home? How does that fit into your short and long term goals? Consider how long you plan on spending time in one place, as it can tie you to that place. It is
important to take your career into consideration as well as the possibility of an expanding family.

2. Do you know what you can afford and still continue to live the lifestyle you are accustomed to?
You will likely need to take out a mortgage. It is important to begin by checking your credit score from three different reporting bureaus to assess whether you are able to obtain a mortgage. Then, there is the question of your down payment. There are zero down government options as well as 3-20 percent options, depending on your situation. Looking at your cash savings is an important first step.

3. Will you be staying there for five years or more?
When you purchase a home, the general rule is that you want to be sure you will be in the same location for at least five years. Otherwise, you are likely to take a hit financially. Of course this depends on the area you live in.

4. Do you have 3-6 months of emergency savings?
A good rule of thumb is that you have 3-6 months of living expenses in an emergency fund for unforeseen events. Home ownership also requires maintenance and repairs, so a slush fund is recommended to pay for repairs as they crop up.

If after careful evaluation you aren’t ready to purchase a home, there are great short term options to fit your needs. If you are looking for guidance to get yourself ready to purchase, enlisting a trusted, knowledgeable mortgage advisor is a great first step to realizing your dream,
whenever that might be!

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Should I Hire a Real Estate Agent to Sell My Home?

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There’s a reason nearly 90 percent of sellers use a listing agent: selling a home takes time, knowledge of neighborhood trends, and negotiating skills. So, while eliminating the agent’s commission – 6 percent of the sale price, on average – sounds tempting, try to resist.

According to the National Association of Realtors, 82 percent of real estate sales are the result of agent contacts from previous clients, referrals, friends, family and personal contacts.

The Realtors priority is to help set the right price and then get buyers in the door. Agents have access to the most up-to-date information regarding recent sales of comparable homes and competing homes in your neighborhood. You may know that a home down the street was on the market for $350,000, but an agent will know if that home had upgrades and sold at $285,000 after 65 days on the market and after it fell out of escrow three times.

With a market that can shift weekly, if not daily, it is critical to keep abreast of those changes as they impact your home’s marketability and sale price. Realtors know the market conditions data, such as the average square foot cost of similar homes, median and average sales prices, average days on the market, and ratios of list-to-sold prices, among other criteria, will have a bearing on your home.

Contrary to popular belief, Realtors do much more than put an attractive “For Sale” sign in your front yard. Perhaps the most important exposure is through the MLS because it fans out to so many other sites and reaches most people directly and indirectly through its data feed.
Additionally, the agent will help stage and prepare your home for sale, providing professional quality photos and often videos of your home. Great Realtors promote your property through multiple social media channels such as Facebook, Instagram, Twitter, etc. They will promote open houses, have Realtor walk throughs, and most importantly, vet potential buyers so you only deal with serious prospects.

Once you have found a buyer, the agent will make sure buyers are preapproved and negotiate on your behalf. Your agent will help you evaluate very buyer’s proposal without compromising your marketing position. The initial purchase agreement is only the beginning of a process of appraisals, inspectors, title, financing – a lot of possible pitfalls. Your agent will help you write a legally binding, win-win agreement that will be more likely to make it through to closing.

Before skipping a full service Realtor, think hard about the time and effort you want to spend, particularly if the process drags on. The average home takes about 4 months to sell (six in the slowest cities), according to NAR. If costs are a concern, have a frank conversation with your Realtor about what they expect to be paid.

Considering the relatively small cost of hiring a Realtor and the large potential risk of not haring one, it’s smart to find a professional to sell your home.

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How to Buy Your Dream Home When You Have Student Debt

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Many people new to the workforce are strapped with student loan debt. Some are eager to purchase a home but believe that they cannot because they have not saved for a down payment or they will not qualify because of the debt.

Fortunately, there are loans and programs that are designed to help. Below are a few ways that people in this situation can buy a home.

1. Deferring student loans or getting an income-based repayment plan. Student loans are not designed to hamstring people to the point that they cannot afford to own a home. There are several programs available that allow student loan debt to be temporarily deferred or lower the monthly payment based on income.

Here is a resource for helping you navigate each of these. Note that different loan types treat deferred student loans and income-based repayment differently. You will need to go over these guidelines with your mortgage professional.

2. Co-signers. Some loan types will assign 1 percent of the balance of student loans to the debt to income ratio even if the loans are deferred or they are income-based repayment. For these folks, a viable alternative is a co-signer. Fortunately, most loan types will allow for family members to cosign. Again, it is something a good lender will advise and consult you on.

3. Gifts or low-down loans. Some have been unable to save enough money for a down payment. There are alternatives to this as well. Some loans like the USDA and VA loans do not require a down payment. Other loans, like the MSHDA loan, allow for 1 percent and loans through Fannie Mae or FHA allow folks to come in with 3 percent or 3.5 percent. Your loan officer will know all of the options available to you.

4. Budgeting. Oftentimes a simple budgeting plan can save the day. At Michigan Mortgage, we review all household income and debts with clients to make sure that they can afford a home and still make all of their monthly payments, including student loan debt. In fact, we will help them create a budget if they don’t have one so that they are comfortable with their bill and the payment of a new home.

While student loans can seem daunting and stifling, they should not stop folks from pursuing the dream of home ownership. If you are ready to make homeownership a reality, contact us today for a consultation.

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How do Escrow Accounts work?

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Escrow “accounts” have more to do with your monthly mortgage payment than the initial home purchase.

When you borrow money from a bank or direct mortgage lender, this account is where the lender will deposit the part of your monthly mortgage payment that covers taxes and insurance premiums.

By collecting a fraction of those annual costs each month, the escrow account reduces the risk that you’ll fall behind on your obligations to the government or your insurance provider each year.

If you are putting down less than 20 percent for your down payment, most lenders will require you to open an escrow account. You will deposit monthly payments into the escrow account to cover your mortgage, plus property tax and insurance premiums; the lender will then take out the mortgage payment and pays the taxes and insurance for you. As for the mortgage insurance, the amount you will have to pay and when, depends on the type of you loan you get, so be sure to ask your lender what to expect.

The biggest advantage of using an escrow account is not having to come up with large payments once a year to pay taxes and homeowners insurance. Typically, it is much easier for people to pay $200 per month into a “forced” savings account instead of paying $2400 all at once.

Mortgage escrow accounts also guarantee your bills are paid on time. Your payments have already been budgeted for you and the money is waiting and available in your account. When the bill is due, the escrow account takes care of everything for you. It’s nice not to have to remind yourself of payment dates, amounts, etc.

A mortgage escrow account is an easy and simple way to manage your annual tax and insurance payments and put them on autopilot.

If you have any specific questions about your account, contact your lender and they can answer any questions you have.

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Tips that Make Getting a Mortgage a Breeze in 2019

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Tip #1: Start early. One of the most important mortgage tips you should know before you get started is to understand all of your financial details. This makes the mortgage process go much more smoothly and eliminates surprises throughout the process.

Tip #2: Check your credit report for errors. Review your credit report to ensure that there are no errors such as incorrect addresses, phone numbers, names or accounts that show up. Your mortgage lender can give you the most detailed credit overview. There are multiple online sources that will provide a free credit report as well.

Tip #3: Work with a qualified lender before making repairs to your credit score on your own. A professional will consult you so that you don’t end up inadvertently lowering your score by trying to repair it on your own.

Tip #4: You can avoid private mortgage insurance if you have 20 percent down. If you do not have 20 percent down, there are multiple loan programs available that require a lower down payment. Your credit score and other variables come into play, so it’s not a one-size-fits-all process.

Tip #5: Make sure you can afford the payment comfortably. Most mortgages have a debt-to-income (DTI) ratio requirement. The DTI is the amount of monthly debt payments you have compared to your monthly income. Most mortgages will allow a maximum DTI of 41 percent; however, this number is not the same for every borrower nor for every loan. Ideally, you want to be comfortable and not stretch yourself too thin so you still have cash on reserve.

Tip #6: Know the right kind of loan for your unique situation. There are multiple loan options available. With conventional, FHA, rural development, VA, doctor loans and MSHDA options, as well as the streamlined 203(k) program, there are numerous nuances and options available to meet every borrower’s unique situation. Make sure you work with a knowledgeable loan officer that will take the time to educate you.

Tip #7: Have your documents ready so you don’t slow down the loan process. The mortgage process requires a great amount of paperwork, so having as much documentation beforehand can save time and energy. A loan officer will need to verify your income, tax documents, employment and a slew of other things.

Here is a checklist of some of the documents you may need (not all will apply to your unique situation).

  • Bank statements
  • Tax returns from the previous two years
  • W2s from past and current employers
  • Pay stubs
  • A list of your debts
  • A list of your assets
  • A gift letter if you’re using gift funds
  • Proof of timely rental payments
  • Credit Report
  • Profit and loss statements
  • Signed purchase agreement
  • Proof of additional income
  • Divorce decree
  • Bankruptcy paperwork

Depending on the loan and your credit history, you may need additional documentation not listed above. To better understand the process and be the most prepared, reach out to your trusted loan officer. We’re always here to help.