First Time Home Buyer Archives Page 7 of 8

Buying a Home with Zero Down

June 25, 2020/0 Comments/in Blog/by mimortgage

What is a “Zero-Down” Loan?

A zero-down home loan is a no-down-payment mortgage offered by the United States Department of Agriculture (USDA) for eligible rural and suburban home buyers.

You might be thinking, “but I don’t live in a rural area.” That’s OK. While the purpose of the USDA loan program is to boost home ownership in rural areas, the USDA’s definition of “rural” is wide ranging and includes many villages, small towns, suburbs and exurbs of major U.S. cities.

These loans are issued through the USDA Rural Development Guaranteed Housing Loan Program. USDA loans have been available since 2007. They are generally intended for low- or moderate-income borrowers.

What Are the Benefits of a USDA Loan?

USDA loans offer many benefits over traditional mortgage loans.

$0 down payment. This is the obvious benefit.
Competitive interest rates. USDA loans typically offer some of the lowest interest rates on the market. Interest rates on USDA loans are determined by several contributing factors, however the primary factor is your credit profile, as is the case with all mortgage options. Those with higher credit scores often receive the most competitive rates, although borrowers with less than stellar credit may still qualify for a low rate due to the USDA guarantee.
Low monthly mortgage insurance
Lenient requirements. USDA loans are designed to provide homebuyers with lenient eligibility requirements that help low-to-moderate income purchasers obtain a home.

USDA Loan Eligibility

At a minimum, USDA loan program guidelines require:

U.S. citizenship or permanent residency
Ability to prove creditworthiness, typically with a credit score of at least 640
Stable and dependable income
A willingness to repay the mortgage, as indicated by at least 12 months of no late payments or collections
Adjusted household income is equal to or less than 115% of the area median income. See here for income guidelines.

A credit score of 640 or above usually helps eligible borrowers secure the best rates for a guaranteed USDA loan with zero down payment. Such a score also rewards you with a streamlined or automated application process.

You can still qualify for a USDA loan if your credit score falls below the margin or if you have no credit history at all. However, the interest rates may not be as favorable. In addition, applicants with no traditional credit history may still qualify for these loans. However, you’ll need to show a reliable financial standing through evidence like timely utility or tuition payments.

How Do I Apply?

Applying for a USDA loan is pretty straightforward.

The first step is to choose a USDA lender, such as Michigan Mortgage. We specialize in USDA loans. Once you are working with us, we’ll find out what home you are interested in, where it’s located, your asset and debt situation, and how much you need to borrow. We will conduct a credit check to assess your credit score, just as we do with a traditional mortgage.

Once all that is done, we’ll ask you to provide documentation, including:

Government-issued ID
W-2 statements
Recent pay stubs
Bank statements

The application process is pretty easy, really. Our loan officers are skilled at making everything go smoothly and helping you navigate the process and get you in your home as soon as possible.

This blog post was written by experts at Mortgage 1 and originally appeared on www.mortgageone.com. Michigan Mortgage is a DBA of Mortgage 1.

The COVID-Compliant Way to Refinance or Purchase a New Home

April 30, 2020/0 Comments/in Blog/by mimortgage

With all that is taking place around us, purchasing a home may not be top-of-mind for most people.

But then again, maybe it is. Before this crisis hit, the spring home buying season was just getting started. And the reality is, many families do need to sell and buy homes, even during a pandemic.

Once the crisis passes, there will be even more buyers and sellers. Some mortgage forecasters are predicting a pent-up demand of buyers flooding the market.

If you anticipate house shopping once the all-clear is given and social distancing rules are eased, now is the time to get ready.

Those who are pre-approved will be in a better position to have their offers accepted once the real estate market gets back into full or partial stride.

Another way home owners are taking advantage is by refinancing. Mortgage rates are still historically low. Many consumers are enjoying big savings by refinancing.

Many of you might be thinking, “how can I get a mortgage with social distancing rules in place and me stuck at home?”

The answer is: with the Home Snap mobile app from Michigan Mortgage.

Even in normal times, Home Snap offers convenience for getting a new home loan or refinancing. The app lets you do everything from the convenience of your home. The app lets you get pre-approved, view your progress, securely upload documents, digitally sign documents, and easily message your loan officer.

In these restricted times, Home SNAP is a necessity. Like workers at many companies, Michigan Mortgage loan officers are working from home for the time being. But that doesn’t mean the mortgage services we provide have stopped.

Using Home Snap, you can:

Start the Application Process
Calculate Payments Easily
Securely Scan and Upload Documents From Your Phone
Digitally Sign Documents
Message Your Loan Officer and Realtor Instantly
See Your Progress
Get Updates as You Go

With mortgage rates at record lows, many homeowners are taking advantage by refinancing their existing mortgages. Home Snap is ideal for these homeowners as well.

“We have many customers who are using Home Snap to refinance safely and securely while they are sitting at home, all without having to meet face-to-face. Customers love the convenience and safety, as well as the great rates.”says Mortgage 1 CEO Mark Workens.

In pre-coronavirus times, hundreds of Michigan Mortgage customers took advantage of Home Snap to get a new mortgage or to refinance. You can, too. To get started, visit the Home Snap page on our website.

This blog post originally appeared on mortgageone.com. Michigan Mortgage is a DBA of Mortgage 1.

Analyzing Your Current Financial Situation

March 12, 2020/0 Comments/in Blog/by Rob Garrison

Long before you make an offer on your dream home, it is important to honestly look at your current financial situation.

Variables such as your credit score, employment history and how much you have saved for a down payment can greatly influence the type of loan that you qualify for. Equally as important, the type of loan you qualify for can impact how viable and attractive your offer is to a potential seller.

It is important for you to analyze your spending habits. If you do not have a budget, you should start one now. This will help you understand you spending habits so that the lifestyle that is important to you will be maintainable as a homeowner.

One of the most important considerations is how comfortable with your monthly payment. For a great app to calculate a payment, click here.

As a rule of thumb, total housing costs should be no more than 25 percent of your net pay. So, if your net monthly household income is $3500 per month, a safe mortgage payment would be $875. No two households have the same expenses, so it is important to honestly look at what your expenditures are when you do a budget.

Note that lenders do not use net income when they calculate your debt to income. They use gross pay. The formula they use oftentimes (but not always) allows you to borrow more than you may be comfortable with or should spend. I call this giving you enough rope to hang yourself. No one wants to be house poor and feel strapped paying for a mortgage they really can’t afford. That is why knowing your budget, comfort level is so important.

It is also important that you are aware of the expenses prior to closing.

Earnest Money or Good Faith Deposit
Home Inspection
Appraisal Fee
Closing Costs and Pre-Paids

These costs vary and some of them can be paid on your behalf by the seller. Additionally, it is a good idea (and sometimes required by financing) that you have a few months mortgage payments in reserves, any moving costs, furniture, appliances, etc. You can typically estimate how much you will need for these costs by getting pre-approved for a loan by a lender that you trust and is highly recommended to you.

Your credit rating is a primary factor in qualifying for a mortgage.

The type of loan, down payment required and the interest rate you qualify for are all dependent on your credit score. Sometimes you will need funds to pay down credit or pay off derogatory credit.

It is important to consider all of these variables well in advance of looking for a home to purchase. Make sure you have enlisted a trusted advisor who can guide you through this process so that when the time comes, you will be in tip-top shape to purchase your dream home.

What is debt-to-income ratio?

October 24, 2019/0 Comments/in Blog/by Rob Garrison

Your debt-to-income (DTI) ratio is the percentage of your income that goes toward paying your monthly debts. DTI can often be overlooked as many people assume that a good credit score and a high income are the only two factors needed to be taken into consideration when seeking to purchase a home.

However, for many lenders, that’s not enough to be considered a good mortgage candidate. As a borrower, your DTI is utilized in various situations to determine your level of risk. For instance, if your DTI is too high, opportunities to make a big purchase, such as a mortgage, may be limited.

How to Calculate Your DTI Ratio

DTI Ratio = (Monthly expenses ÷ Pre-Tax Income) x 100
Start by adding up your monthly bills such as:

Rent or house payment
Alimony or child support
Student loans
Auto payments
Other

Next, divide your total sum by your gross monthly income (income before taxes). Multiply by 100. Your result is your DTI ratio.

The goal is to keep your DTI ratio as low as possible. The lower the ratio, the less risky you are to lenders. An adequate DTI ratio is below 36 percent. Typically, having a DTI ratio of 43 percent is the maximum ratio you can have in order to be qualified for a mortgage.

Front-End DTI vs. Back-End DTI

There are two variations of DTI: Front-End and Back-End.

A front-end DTI calculates how much of a person’s gross income is going towards housing costs.
Front-End DTI = (Housing Expenses ÷ Gross Monthly Income) x 100

A back-end DTI calculates the percentage of gross income going toward other types of debt (credit cards, car loans, etc.).
Back-End DTI = (Total monthly debt expense ÷ Gross Monthly Income) x 100

The main difference between Front-End and Back-End DTI ratios is that the front-end ratio only considers the mortgage payment and other housing expenses whereas the back-end ratio considers all other types of debt. Lenders will utilize this ratio in conjunction with the front-end ratio to approve mortgages.

Why is Knowing Your DTI Ratio Important?

Your DTI ratio is utilized by lenders as a measuring tool. Your DTI ratio helps lenders determine your ability to manage your finances, specifically, your monthly payments to repay the money you borrowed. Keep in mind that lenders do not know what you will do with your money in the future, so they refer to historical data to verify your income and debt totals. Moreover, your DTI ratio illustrates that you have a sufficient balance between your income and debt, thus, are more likely to be able to manage your mortgage payments.

If you are considering buying a home or have questions about your DTI ratio, give us a call!

This blog post was written by experts at Mortgage 1 and originally appeared on www.mortgageone.com. Michigan Mortgage is a DBA of Mortgage 1.

Appraisals vs. Home Inspections

October 17, 2019/3 Comments/in Blog/by Courtney Coon

As Michigan Mortgage Loan Officer Dave Lehner would say, “Don’t buy a money pit!”

What exactly does that mean?

Appraisals are required as past of the home-buying process. Home inspections are not, but they may be one of the most beneficial things you can do for your financial future. A home inspection will ensure that you don’t buy a money pit.

Here’s the difference between the two.

Appraisals

Required.
An appraiser provides a professional opinion of the home’s value. They do not analyze the “systems” of the home.
The goal is to make sure buyers are not overpaying for a home.
A home is appraised based on size, the number of bedrooms and bathrooms, functionality and recent sales of similar properties in the area.
The cost is typically between $400 and $575.

Home Inspections

Optional.
A home inspector will examine the physical structure as well as the “systems” of the house ranging from the foundation to the roof.
The home’s HVAC system, plumbing and electrical components, roof, attic, insulation, walls and ceilings, windows and doors, floors, foundation and basement will be assessed.
The home inspector is a licensed professional.
Buyers can use the inspection results to renegotiate the purchase price and request that the sellers make home improvements.
The cost is typically between $300 and $500.

As lenders, we’re responsible for ordering appraisals before proceeding to the closing table. We have no control over which appraiser is assigned to which home. The homebuyer is typically responsible for paying the appraisal fee.

Because the home inspection is not required, inspectors are hired by the homebuyer. We work with a pool of reliable experts and are happy to recommend one that will best meet your needs. The home inspector is working on the buyer’s behalf, so the cost is paid for by the buyer.

If you have questions about appraisals or home inspections, don’t hesitate to reach out. We’re here to help in any way we can!

How to Eliminate Mortgage Insurance

October 3, 2019/0 Comments/in Blog/by Rob Garrison

Most buyers have heard of Mortgage Insurance and know that it is insurance that does not protect them but rather the lender against them defaulting on the home loan.

What most buyers don’t know is how they can avoid or when it can removed from their mortgage.

Mortgage insurance (MI) comes in the form of a few different names but it is essentially the same thing.

Conventional loans refer to it as PMI (Private Mortgage Insurance) whereas FHA and Rural Development (RD) refer to it as MIP (mortgage insurance premium). VA does not have it at all but they have a funding fee on most loans that is added to the principal balance. FHA and RD have a similar add on fee that is called upfront mortgage insurance.

Regardless of what it is called and where it is charged, MI is a fee that lenders use to offset the losses that occur when people don’t pay on their loans. It is charged to many to pay for the sins of a few.

For conventional loans, if you have 20 percent down, you will not be charged MI.

FHA and RD have mortgage insurance as a monthly fee regardless of the equity position, so even if you put 20 percent down on these loans, you will have mortgage insurance.

I am often asked how clients can get rid of mortgage insurance. Obviously, not everyone has enough savings to put 20 percent down but they don’t want to have this fee on their loan forever.

Again, RD and FHA have it no matter how much you put down, but for conventional loans, there are a couple creative ways to get rid of the mortgage insurance.

Option 1: Pay a fee upfront and not have a monthly mortgage insurance at all. While this helps reduce the total monthly payment, it is not always a wise decision. If the borrower will not be in the loan for long enough to recoup charge to remove it, the benefit it is not advisable to buy out of the MI. Similarly, it does not make sense to buy out of MI in an interest-rate environment that seems to be going down. In other words, if the person is likely to refinance or sell in the next 24 -to-36 months, it probably does not make sense to pay a flat fee to get out of the mortgage insurance.

Given enough time in the mortgage, however, you can save up to 50 percent of what you would otherwise eventually pay monthly. In other words, paying upfront gives you a discount if you stay in the loan long enough.

Option 2: Have the lender pay it for you. This is called lender paid MI. Buyer beware on this tactic. While this sounds great, there is no free lunch; that maneuver will inevitably increase your interest rate.

Option 3: Get a first mortgage and a second mortgage. Assume a buyer had a 10 percent down payment. They would finance 80 percent of the sale price on the first mortgage but then close the loan with a second mortgage for the remaining 10 percent. It sounds like a great idea until you realize that the interest rate on the first mortgage has a substantial price adjustment when you piggyback it with a second mortgage. Additionally, the second mortgage itself is generally a higher interest rate and oftentimes interest only. In the end, this tactic is not usually worth the effort.

If a buyer opts to have normal monthly MI, which many do, the next question is how does one get rid of Mortgage insurance once they have it?

Previously we mention that that on FHA and RD the mortgage insurance stays on for the life of the loan. This means the only way to eliminate the insurance is to refinance.

For conventional loans, mortgage insurance is eliminated in a couple of different ways.

It is automatically removed once a consumer pays 22 percent off of the originally borrowed loan amount. It can also be removed with an appraisal that shows 20 percent equity. A third way to remove the mortgage insurance is with a refinance.

In an environment where there has been a lot of equity, interest rates have been reduced, and the consumer has paid down the loan enough, refinancing is often times very good option.

All of this is to say that the need for a trusted advisor who manages your debt annually is imperative. Our job is just beginning once you close your loan. We help you build financial wealth with real estate and manage your debt to your advantage. We are here to guide you.

Now is the Time to Get Your Mortgage Online

September 26, 2019/0 Comments/in Blog/by Courtney Coon

Technology touches all aspects of our lives, from banking to shopping to dating. The mortgage industry is no different. Buying a home today is vastly superior to what it was years ago, thanks to the benefits of online mortgage applications like Home SNAP. Gone are the long wait times, the reams of paperwork, and the outlandish fees.

Online Applications Make a Mortgage Easier

What makes today’s home buying process so much easier? In a word: technology.

Technology has streamlined the mortgage lending process in the same way technology streamlines other transactions. Today, applying for a mortgage is faster, easier, more accurate and less costly for millions of home purchasers. Online tools such as “Mortgage in a SNAP” make the loan application process simpler and faster. They make home-buying a breeze.

Benefits of an Online Mortgage

For home buyers, the benefits of technology to the mortgage application process are easy to summarize.

Convenience
Accuracy
Lower fees
Speed

Online mortgage apps speed up mortgage lending in multiple ways. Technology reduces paperwork. It eliminates the need to send documents via the mail. It nullifies the need to meet in person to sign documents.

Convenience

Online mortgage apps provide convenience to mortgage lending by allowing borrowers to complete their applications any time, from anywhere. Borrowers also have the ability to login and view the status of their loan application at any time. Online mortgage platforms like “Mortgage in a SNAP” allow users to apply for a mortgage without having to meet or call a loan officer.

Accuracy

Online mortgage apps improve the accuracy of mortgage lending. All of the financial data is calculated and transferred automatically by computers. There is no room for error.

Lower Fees

For all of the reasons cited above, online applications lower the fees of mortgage lending. Mortgage lenders like Mortgage 1 use technology to reduce expenses by automating parts of the underwriting process. By offering faster closing and greater insight into the process, mortgage technology not only creates a more convenient experience, it also lower costs.

Benefits of Online Mortgages for First-Time Buyers

Technology provides many advantages to first-time home buyers, specifically. Many of today’s first-time home buyers are technologically savvy, having grown up using computers and smartphones their entire lives.

According to the National Association of Realtors, consumers who grew up using computers and smartphones make up 34 percent of home buyers. As these buyers enter the real estate market, they seek out mortgage lenders who provide convenience and technology solutions. Online mortgage applications do just that. And more.

Are you ready to take advantage of technology to make your home buying process easier? Click here to get the online process started.

This blog post was written by experts at Mortgage 1. Michigan Mortgage is a DBA of Mortgage 1.

Success Story: LaTanya Jackson

September 12, 2019/0 Comments/in Success Story/by Courtney Coon

Credit improvement is no easy task. It takes time, effort, a pre-determined plan and a little help from a trusted advisor.

It’s hard work, but it’s worth it for those hoping to purchase their dream home.

“I began seriously working on my credit in January of 2018,” said LaTanya Jackson. “It took me a little over a year before I was ready to buy a house.”

When she was ready, her co-worker and friend, Nakia Cooper, suggested that she get in touch with Loan Officer Dave Lehner and his team at Michigan Mortgage.

“They welcomed me and my family in a way that made me feel like I was being taken care of from the very beginning,” LaTanya said. “Being a first-time homebuyer, they never made me feel bad about asking numerous questions.”

LaTanya enjoyed getting to know Dave and his team, but described her journey to homeownership as a “rollercoaster.”

“Oh boy – where do I start,” she said. “I would find a house and within 24 to 48 hours, it was off the market. Frustrated was an understatement. By the time I found ‘the one,’ I was at my wits end.”

LaTanya’s Realtor, Eric Sikkenga with Keller Williams Grand Rapids East, helped to smooth the ride.

“All I can say about my experience with him…FUN,” LaTanya said. “He did exactly what he said he would do. He got me into the home of my dreams!”

She calls that home “Heaven.”

LaTanya has yet to move in – she making a few must-have renovations beforehand – but she’s over the moon with joy.

“Even though it needs a few things, my home feels like a little piece of heaven,” she said.

We can’t imagine another move in LaTanya’s future, but if it is, Dave will be the first person she calls.

“Dave and his team exceeded my expectations,” she said. “They were so patient and understanding throughout the entire process.”

“Every email and call was given immediate attention. They made sure I was thoroughly informed about all of my options as a first-time homebuyer.”

We wish LaTanya and her family many happy memories in their new home!

Advantages of Making Extra Mortgage Payments

July 25, 2019/0 Comments/in Blog/by Courtney Coon

A house is the biggest purchase most people make in their lifetimes. The mortgage they obtain to finance that house is likely the biggest single investment they will ever make.

Even with the popularity of shorter terms and creative loans, most mortgages are still the tried-and-true 30-year conventional variety. First-time home buyers staring down the gauntlet of 360 payments spread over the next three decades of their life can feel like there is no end in sight. And for those who dare to look at their amortization schedules, that no-end-in-sight feeling can be even greater.

But there is a way to get ahead of the game: making extra mortgage payments.

Why It Makes Sense to Make Extra Mortgage Payments

Why does it make sense to make extra mortgage payments? Put simply, you will save significant amounts in interest. Most mortgage contracts allow borrowers to make extra payments, and they allow all of the extra money to be applied to the principal amount of your loan. That means you are paying down the real amount of the loan – the money you borrowed – faster. Because the interest part of your loan is calculated on the amount of principal you still owe, reducing your principal amount greatly reduces the interest amount.

According to the web site interest.com, “a $200,000 30-year home loan with an interest rate of 5% would cost $186,512 in interest with the traditional 12 payments a year. Make the equivalent of 13 monthly payments every year, and the loan will be retired in 26 years and you will pay only $153,813 in interest — a savings of $32,699.”

That’s nothing to sneeze at.

How to Make Extra Mortgage Payments

When it comes to making extra payments on your mortgage, there are a variety of tactics that can be used. Each has the same goal in mind: to reduce the principal and, thereby, reduce interest.

The tactics for making extra mortgage payments include the following.

Accelerated Payment Schedule

Rather than making your mortgage payment once per month, or the equivalent of every four weeks, you could make payments every two weeks. This biweekly payment plan results in 26 half-payments, which is the equivalent of 13 full payments for the year. The extra payment each year can shave off eight years from a 30-year loan.

Extra Principal with Each Monthly Payment

If you’re looking to chip away at your mortgage at a more gradual pace, pay a little extra each month. Check with your lender to make sure the additional payment goes directly to the principal. Depending on how much extra principal you pay, you could shorten your loan significantly. And, best of all, because your are shortening the loan duration, you will save significant amounts in interest.

One Additional Payment Per Year

Another tactic is to make one additional, principal-only payment per year. Some people who do this use their income tax refund for this purpose.

One Additional Payment Per Quarter

Making an additional payment each quarter results in four extra payments per year. On a $220,000, 30-year mortgage with a 4% interest rate, you would cut 11 years off your mortgage and save $65,000 in interest.

Lump-Sum Payment

Applying a lump-sum payment toward your principal balance when you come into extra cash — a bonus at work, a sizable inheritance — can shave time from your mortgage. This approach isn’t as consistent as some of the other methods, but, if the lump payment is large enough and depending on where you are in your timeline, it can eliminate many years.

This blog post was written by experts at Mortgage 1. Michigan Mortgage is a DBA of Mortgage 1.

Image showing a happy homeowner's new house!

Success Story: Amanda and Steve Rudat

May 8, 2019/0 Comments/in Success Story/by Courtney Coon

Credit scores don’t appear overnight – it takes time, energy and commitment to grow and build your score.

Amanda and Steve Rudat know that first hand.

“2017 was a good year for us to buy, as we had been working on our credit and finally had the stability in our careers to purchase a home,” Steve said. “We were renting places and getting nothing back in return. We had the money saved up and faith that we could make the commitment.”

Katie Bultema with Greenridge Realty helped Amanda and Steve find the home that best fit their needs.

“We wanted to be able to stay in the area,” Amanda said. “It was also very important for us to make a smart purchase within our budget. We wanted a home that had space for entertaining and room for our dogs to play.”

The couple knew this home would not be their “forever” home, so they focused on properties that had good re-sale value or homes that could appeal to renters in the future.

“Katie was a pleasure to work with and we would recommend her to anyone looking for a Realtor,” Steve said.

Katie was the perfect Realtor for Amanda and Steve. When they set out to find the perfect Loan Officer, they were connected to Loan Officer Hayley Woodworth.

“The person we were last renting from in Montague had worked with Hayley and strongly recommended her,” Amanda said. “We had been friends for a long time and to hear him speak so highly of Hayley was a big interest to us.”

“After getting to meet with Hayley and speak to her, it was really a no-brainer,” she added. “It just felt like a good choice for us.”

“Hayley was everything we were hoping for,” Steve said. “Attentive, supportive and a real go-getter. I can’t think of one time where we were wondering what was going on, what our numbers would look like or if someone would call us back.”

“When you are making these kinds of purchases, it is so refreshing to have a person like Hayley in your corner. You feel like you made a friendship, not a transaction. I feel like she had our best interest at heart.”

Amanda echoed Steve’s thoughts.

“Hayley and the staff work very hard, they are pleasant to be around and make us feel special,” she said. “It feels like family and friendship based on the way the team took care of Steve and I. So responsive, so supportive and we loved that about them. Things that could wait until the next day, Hayley was taking care of at night with us on her cell phone.”

In 2017, Hayley exceeded the couple’s expectations. Earlier this year, when Amanda and Steve decided to purchase their second home, Hayley was the first lender they called.

“We called her up out of the blue and this woman got right to work on things again,” Steve said. “She remembered exactly who we were and she was so thrilled to hear that we were looking to buy again. In no time flat, Hayley had numbers for us to start looking over again so we could budget and plan for our new place.”

“As many times as we shifted gears on her, Hayley just rolled with us on it,” he continued. “We ran so many different scenarios, properties and numbers with her and it was always the same great smile, voice and service.”

“We truly believe Hayley enjoys seeing people succeed in their dreams and purchases and it shows in the way she supports her clients. We are so happy to have found her!”

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