What Down Payment Assistance is Available When Buying a Home?

downpayment assistance documentSaving enough money for a down payment on a home is a hurdle that most home buyers face early on. Lenders require down payments as a demonstration of your financial responsibility. Having a significant amount of money invested in the house also reduces your risk as a borrower.

In ideal circumstances, lenders prefer to see buyers make a down payment that is 20% of the house’s value. With a down payment of this size, most lenders will also waive the requirement for private mortgage insurance.

Coming up with this amount of money can be difficult for many buyers. Down payment assistance programs are an option that can lower the amount that lenders require or add funding to help cover costs. Knowing about the types of assistance that are available helps you make the best financial decisions on a home purchase.

Check Out Government-Sponsored Loans

The U.S. government backs two main types of loans, and this allows lenders to be more flexible with their requirement. VA and USDA loans offer the option of being able to opt out of making a down payment. The money that a buyer saves from this option can then be used towards other costs that are involved with buying a home.

These loans have specific requirements such as having military experience or falling within certain income limits. Buyers must often submit proof of them meeting the requirements. Veterans and active service members may need to provide a certificate of eligibility, but the extra effort is worth it to avoid having to make a down payment.

Look Into Specialized Assistance Options

Special loans are available for people who fall within specific categories. The Doctor Loan Program is one example of specialized down payment assistance programs. These programs aim to help people within special career fields buy a home. They typically offer loans with down payments ranging from zero to 10%.

Explore State and Regional Programs

VA and USDA loans offer the option of being able to opt out of making a downpayment.The Arizona Industrial Development Authority administers a special home buyer down payment assistance program. This program provides Home Plus loans with down payment assistance that goes up to 5%. The funds can be used for either a down payment on the house or the closing costs during the sale.

There are specific criteria that must be met to be eligible for the program. For instance, the home buyer must fall below the maximum income limits and meet the credit score and debt to income ratio requirements. The process for applying for this program begins with finding a lender that will walk you through each step.

Most first-time homebuyers will find that they can qualify for some type of down payment assistance. Figuring out which one works best for you involves looking at all of the benefits offered by each type of program.

We are here to help you get the help you need to buy a new home. Give us a call and let’s explore all the possibilities.


How to be an ‘Ideal Borrower’ for a Mortgage Lender 

Couple planning to apply for mortgage loan

Homebuyers can position themselves for getting the best interest rates on their new mortgage by taking steps that demonstrate their financial responsibility. 

The ideal borrower for a mortgage lender is proactive about doing the right things to secure their loan. These steps will help anyone stand out when they are ready to apply for a home loan.

Start Working On Your Finances Early

Strong credit reports take time to build. One of the first things that people can do to become an ideal borrower is to check their current credit report. 

Starting early allows time for doing things such as challenging any discrepancies. Analyzing the report can also show areas where buyers can improve such as by reducing their debt.

Seek Pre-Approval

Strong credit reports take time to build. One of the first things that people can do to become an ideal borrower is to check their current credit report

Buyers who seek pre-approval for their loan before they start looking at houses find that the rest of the process is much easier. Lenders appreciate already knowing where a potential buyer stands financially so that they can offer them the best loan options. 

Buyers also benefit from knowing how much they will be approved for so that they can look for houses that fit that price range.

Keep Your Paperwork Organized

Lenders request documentation of important information such as your income. Depending upon how you earn a living, this can get complicated. 

Business owners may need to furnish bank statements and profit and loss statements to prove their income. Commission-based workers may need to use tax returns and other forms to show their long-term earnings if they fluctuate from one month to another. 

Sending documents in a timely manner helps to speed up the application process and get approval. 

Increase Your Understanding of Different Types of Loans

Mortgage lenders may use terms that most people don’t hear every day. A lender may talk about different types of interest rates. Knowing the difference between a fixed-rate loan and an adjustable-rate mortgage improves communication from the very beginning.

Homebuyers may also want to explore the various benefits of FHA, USDA and VA loans. If you find that you don’t understand something during your consultation, then feel free to let us know. It is important to make sure that you fully understand the options so that you pick the best one for your goals.

Begin Saving Money for a Down Payment

money for house down payment

Down payment amounts vary significantly from one loan to another. A larger down payment has benefits such as keeping mortgage payments lower. Some borrowers may also need a down payment to help lower their risk factors for lenders. 

Although zero down payment loans are available, it is better to plan to put down some type of initial payment just to avoid being surprised. Buyers who end up not being required to make a down payment can use this money toward closing costs and moving expenses.

Avoid Opening New Lines of Credit

Your creditworthiness is assessed towards the beginning of the home buying process, and it may be checked again at the end. Avoid applying for new credit cards or different types of loans until the home purchase is finalized. This prevents a sudden drop in the credit rating that could affect whether the loan goes through as expected.

Ideal borrowers are informed, organized and responsible. In addition to building up your financial standing, take the time to speak with a specialist who can guide you through the loan application process.

 


New Mortgage Limits for 2020

Young couple talking to mortgage specialist about home loansThe new year represents a time when home buyers can take advantage of new mortgage limits that help them get into a house that fits their needs.

In 2008, the Housing and Economic Recovery Act mandated that the conforming loan limit used by conventional lenders must be adjusted each year to reflect changes that occur in the average home prices. This law helps to ensure that homebuyers have access to loans that are reasonable given the home prices in their area.

How Are FHA and Conventional Loans Different?

The loan limits that a homebuyer must comply with will vary depending upon the type of loan they get. An FHA loan is insured by the Federal Housing Administration. The Department of Housing and Urban Development regulates the loan limits for this type of loan.

People may choose this type of loan to help overcome potential barriers to home ownership such as a low credit score.

Conventional loans are not insured by a federal agency. Instead, the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Corporation (Freddie Mac) purchase and guarantee loans so that lenders can offer them to homebuyers.

Due to the differences between FHA and conventional loans, the limits set each year are not typically the same.

What Are Conforming Loan Limits?

Conforming loan limits are those that Fannie Mae and Freddie Mac must follow.

The Federal Housing Finance Agency regulates those organizations and sets the loan limits each year. They do so by using the House Price Index Report that is issued by the Federal Housing Finance Board.

In 2019, it was found that house prices increased by 5.38%. This percentage is used to calculate the maximum conforming loan limit for 2020. The limit in 2019 for a single-family home was $484,350.

In 2020, it is $510,400. Keep in mind that this is the baseline limit for an average housing market. High-cost living areas can have different loan limits.

What Are the Limits for High-Cost Areas?

Young couple buying houseCertain parts of the country are known for having higher housing prices. Parts of New York, California and Florida tend to fall into this category.

An area is considered high-cost if 115% of the median home value in the location exceeds the conforming loan limit. The loan limits for these areas are calculated by using a specific multiple of the median home value.

The limits are also capped at being no more than 150% of the current baseline conforming loan limit.

Currently, the majority of high-cost areas also saw home values rise. With the current baseline loan limit being $510,400 for an average priced area, high-cost areas can expect a maximum loan limit of $765,600.

What Are the FHA Limits?

Understanding how loan limits change from year to year helps homebuyers know their options for securing a loan in their desired areaFHA loan limits are influenced by those set for conventional loans, but they are usually slightly lower.

For a low-cost area, the 2020 limit is $331,760 for a single-family home. The FHA also extends higher loan limits for high-cost living areas, and there is a maximum ceiling on these limits as well.

What Are Jumbo Loans?

In some cases, buyers want to purchase a home that exceeds the loan limits. These loans are considered riskier for lenders since they are not backed by Freddie Mac or Fannie Mae.

Buyers face stricter requirements for these loans, such as higher credit scores, but it can allow a person to get into the house of their dreams.

Understanding how loan limits change from year to year helps homebuyers know their options for securing a loan in their desired area. Our loan specialists can help buyers find out the actual limits in their area, along with which type of loan works best for their budget.


Buying a New Home? Questions You Should Ask

Questions to Ask Before Buying a New Home Infographic

Questions to Ask Before Buying a New Home

1. How much should I budget for a home?
Start by determining how much of a mortgage you can fit into your budget.
2. Can I secure a loan?
Before you start home shopping, you can seek a pre-approval for a loan.
3. What type of loan should I get?
– 15-year mortgage loan or one that spans 30 years
– Fixed or variable rate loan?
4. Does the house meet my needs?
Get a good feel of the layout and make sure it will fill your requirements.


Top 10 Interior Design Trends in 2020 to Freshen Up Your Home

modern interior design of a living roomThe year 2020 is all about bringing fresh new ideas to your living space. You may need to freshen up the overall design scheme of your new house.

Or, you may just be ready to remodel and update your current home to increase its value.

These are the top 10 interior design trends that we are already seeing pop up, and they can serve as inspiration for getting your house ready for the upcoming year.

Top 10 Interior Design Trends

1. Look for Hidden Kitchen Features

The open kitchen concept is great for socializing. You’ll still find that builders are opting for this popular design plan. However, they’ve also started adding elements that disguise the clutter.

During your home tours, look for kitchens with slide-out counters and false cabinet doors that drop down to hide unsightly appliances when they are not in use.

2. Swap Fresh for Dried Floral Bouquets

The focus this year is on finding more time to do things that you enjoy. Fresh flowers are beautiful, but they take a lot of work.

Dried floral bouquets are back in style. We love how great this trend works with home staging since they retain their appearance and are allergy-friendly.

3. Choose Classic Blue

There are home loans available that can help you renovate a new home before move-in or remodel your current home

Neutral tones are still in style, but designers are moving toward other hues to modernize color schemes. Gray retained its reign as the most popular color last year.

Now, blue has taken first place, and a classic shade of this color works in any room.

4. Mix In Old and New

The minimalist look has lost its luster for living spaces. Now, you can feel free to turn your living room into a cozy space that shows off your personality.

Try bringing in a vintage armchair that you can surround with a shelf full of your favorite books or souvenirs from your last vacation.

Keep in mind that this design trend may not work if you are staging a house to sell, but it can give you the inspiration to find your perfect forever home to fill with conversation pieces.

5. Go All Out With Prints

Wallpaper made its way back into style during the past few years. In 2020, it is meant to be used for more than just a statement wall.

Whether you love floral or geometric prints, try pulling the look from your walls to your furniture and other pieces of decor.

6. Try Two Toned Kitchen Cabinets

A stark white kitchen is no longer in. Two-toned kitchen cabinets create a more interesting effect. You can go for a full upgrade by using a light color for the lower cabinets and a darker one up top.

You can also make a minor change by swapping out the hardware to a darker or lighter shade.

7. Choose Sustainable Materials

The move toward more eco-friendly homes continues, and buyers are looking for homes that fit their lifestyle views.

Using sustainable materials for countertops, cabinets and floors shows that you care just as much about the environment as you do your home.

8. Round Out Your Furniture

Those sleek, clean lines are now out of fashion. This year’s look is softer, and you’ll find couches in curved shapes that invite people to relax and move closer together to chat.

9. Give a Guest Bathroom Personality

New bathroom decor is bold and bright

Bathrooms are now being viewed as a place to show off your creativity without clashing with the rest of your house. Designers are replacing light neutral shades with bold and bright wallpaper, statement rugs and unique lighting that brings out a bit of your fun side.

10. Create a Social Space

People are choosing to stay in more, and this is causing designers to utilize every space. That small room that is too tiny for a bedroom may be the perfect cocktail lounge with the addition of a bar cart and couch.

Interior design is all about creating a home that feels as good as it looks. Remember that there are home loans available that can help you renovate a new home before move-in or remodel your current home. If you’re ready to upgrade the design of your home to add value and make every moment more enjoyable, give us a call about applying for a home equity loan.


Are VA Loan Appraisals Tougher?

VA Loan appraisal form Your status as a military veteran gives you access to benefits that make buying a home easier. Yet your VA loan does come with a few requirements. A VA loan appraisal must be completed before a lender can approve the loan.

At first glance, these appraisals are intimidating. You may have even heard that the ones that are required by the VA are tougher than those used for conventional loans. The truth is that these appraisals are designed to be stringent, but they serve an honorable purpose.

Appraisals are meant to accomplish two important goals. First, the lender and the federal government need to be sure that the loan you take out represents the property’s fair market value. Second, the appraisal is meant to ensure that veterans have a safe and comfortable place to live.

Remembering that the appraisal process is meant to help you select a home that is a wise investment is the best way to get through this phase of buying a house. You can also do things that make the process easier. For instance, choosing a house that is in good repair makes it less likely that the appraiser will find something wrong.

What Are the Minimum Property Requirements?

VA Loan AppraisalThese appraisals go one step beyond the ones that are used for conventional loans by having the appraiser check to make sure that the property meets the VA’s Minimum Property Requirements.

Some of these requirements are fairly easy to meet, such as making sure that your house is designed to be a residence with adequate living space. Others may be tougher, but they are meant to make sure that your house is safe and structurally sound. For instance, basements must be dry and properly vented.

What If the Minimum Property Requirements are Not Met?

If the requirements are not met, then you have the option of fixing them. You can also ask the seller to cover the cost of any repairs. For example, the seller may decide that fixing a bad roof is worth doing since most buyers will request it. Once you correct the issues, you can then have the house reinspected to get your loan approved.

What If the Home Is Appraised With a Lower Value?

There are times when a home’s value comes back low. When this happens, you have several options besides just walking away. You can work with your real estate agent to request that the seller lower their asking price for the property. While they may not always agree to do so, this is often the fastest and easiest way to move forward with the sale.

VA Loan Appraisal InformationIf you are determined to buy the property, you can also put up your own cash to make up the difference between the asking price and the amount you can get approved for the loan.

If you feel the appraisal was faulty, then you may also be able to seek a Reconsideration of Value. The VA is aware that an appraisal may sometimes be incorrect, and a loan specialist can help you work through the process of having it reviewed.

The appraisal process may leave you feeling anxious about your home purchase, but they tend to go fast. We can also work with you each step of the way to make sure that you know your options if the appraisal reveals that you need to take further action.

Jimmy Vercellino is an experienced Phoenix mortgage lender. He and his team work hard to provide a timely, efficient and excellent home loan process for buyers. As a loan specialist, Jimmy manages the entire process for his clients, making the home buying experience a pleasure instead of filled with stress.


Hidden Costs When Buying a House

couple planning to buy a houseYou’ve carefully planned your budget to buy a house. You may have checked out the prices for homes in your preferred neighborhood. While this is a great start, you also want to avoid being surprised by these often unexpected costs that are involved with many home purchases.

Home Inspections and Appraisals

Many lenders require you to get your home inspected before you sign the final papers. This inspection checks for major issues that impact the value of the home. For instance, a house with faulty electrical wiring poses a fire risk. A home appraisal also lets the lender know that the home is actually worth the selling price.

Closing Costs

These expenses often seem to be the most mysterious for first-time homebuyers. This is because they can vary according to the circumstances surrounding the home purchase. In most cases, you can expect to pay lender and title or attorney fees. You may also need to cover the cost of the interest that accrues between the time of closing and the beginning of the next month.

On average, you can expect to pay about two to three percent of your home’s value in closing costs, and even the small fees for notaries and other necessities add up. There are usually several options to cover these expenses. Some of these fees can be worked into seller concessions. Others may be rolled into your total loan. We can help you figure out which strategy for covering these costs is best for you.

Escrow

Hidden Costs When Buying a HouseThis expense can be lumped in with your closing costs, but it is worth exploring in greater detail. An escrow account contains a portion of the property taxes and insurance that is expected to be due for your house over a period of time. Lenders tend to require you to pay anywhere from three months to a full year of these expected payments.

An escrow account benefits you by using a portion of your mortgage payments to cover the insurance and taxes. Certain types of loans, such as an FHA loan, typically require you to have an escrow account.

Property Taxes

Property taxes are easy to overlook, since they tend to get added to your mortgage payments as part of the escrow account. However, you need to think about this expense if you are not setting up an escrow fund. You will also need to think about any potential increases that could occur with the valuation of your property over the next year or two. In some cases, supplemental taxes can be assessed that you need to cover after your home purchase.

Private Mortgage Insurance

Hidden Costs When Buying a HouseLenders require you to pay private mortgage insurance (PMI) whenever you don’t have enough of a down payment to give you at least 20% equity in your home. You may be eligible for a loan that allows you to put less money down while still avoiding PMI. You can also drop this insurance once you achieve enough equity in your home to satisfy the lender’s requirements.

There are many factors that influence the potential additional fees that you face when you buy a house. In some cases, we can help you overcome extra expenses through seller concessions and special types of loans. Remember to explore all of your options for offsetting hidden costs, so that you can maximize the home you can buy with your budget.

Jimmy Vercellino is an experienced Phoenix mortgage lender. He and his team work hard to provide a timely, efficient and excellent home loan process for buyers. As a loan specialist, Jimmy manages the entire process for his clients, making the home buying experience a pleasure instead of filled with stress.

The Vercellino team operates a boutique-style mortgage branch with a specific culture centered around “serving families”. He is able to originate loans in 46 states and his bank maintains a full line of conventional, government (FHA and VA) and jumbo loan products. He has received several loan production awards including National Top 1% Mortgage Broker Award.


How Does a Balloon Mortgage Work?

illustration of a balloon mortgage

Balloon mortgages used to be one of the primary loan types used by people buying a home.

Although the practice of issuing these types of mortgages has recently become less popular, there are times when one could work to your advantage.

What Is a Balloon Mortgage?

A balloon mortgage is written to cover a shorter period of time than a typical home loan. In most cases, this ranges from 5 – 7 years.

During this time, you make payments on the loan. However, the payments are lower than those for a traditional loan. The terms of your balloon loan may have you paying only the interest on the loan.

This type of mortgage allows you to keep your payments low, but with the understanding that you will have one large payment at the end.

The opportunity to pay the remaining principal balance all at once can have benefits for people in certain situations. But it’s important to understand the potential challenges that can occur if you are unprepared for the end of your loan term.

What are the Pros and Cons?

The most obvious benefit of this type of loan is being able to keep your payments low. This arrangement is ideal when you know that you won’t be staying in the house for many years. People who move often for work sometimes use this balloon loans.

Buyers who are planning to fix up a house and resell it often prefer a balloon mortgage. Buyers may also benefit from this type of loan during a time when the interest rates are very high. By keeping the term short, they may be able to refinance for a lower rate at the end of the term.

The biggest drawback to a balloon mortgage is that it is risky if you are unsure about being able to make the final large payment. This often happens if your financial circumstances change, such as losing a high paying job.

You may also find it hard to make the payment if the home loses value, or if it does not sell fast enough to coincide with the end of the loan term. If interest rates continue to rise during the terms of your loan, then you may also be unable to secure lower rates when you try to refinance.

Can You Reset a Balloon Loan?

As with any type of loan, there are special circumstances that can apply. When you set up your loan, you may be able to establish that it can be reset at the end of its term. This will allow you to change to a better interest rate, or new amortization schedule, to continue to pay down the loan without having to make the final large payment.

What If You Can’t Make the Balloon Payment?

How Does a Balloon Mortgage Work?

Smart financial planning means understanding every possible outcome. If you cannot make the balloon payment, you could be forced to default on the loan. You may also be tasked with the decision of selling your home when you were not planning to do so.

The majority of those who cannot make their balloon payment either sell their property or decide to refinance the loan. In either situation, you could still come out ahead if your home has increased in value, or if interest rates have gone down. Mortgage loan options are designed to help both borrowers and lenders work out agreements that benefit everyone.

A balloon mortgage is one option you have to obtain a loan to fit your specific situation and needs. This type of loan should never be entered into lightly. Professional advice should be sought before making a decision.

Our loan specialists are ready to help you understand your best option for purchasing your new home. This includes reviewing your situation regarding a balloon mortgage.


Using Your Equity to Increase Your Home’s Value

beautiful house in ArizonaOwning a home has many advantages. One of the biggest ones is being able to accumulate equity with every payment that you make.

Your home equity is simply the amount of money that you have personally invested in your home, beyond what you owe to the lender. At first glance, this money may seem inaccessible while you still own your house. However, you can access it using home equity loans, which help pay for projects that add value to your property.

How Do I Determine My Home’s Equity?

The first thing that you need to know is your property’s full value. In some cases, a professional home appraisal must be done before a lender will approve you.

By subtracting the amount of money that you still owe on the mortgage loan from your home’s total value, you will arrive at the amount of equity you have.

For example, let’s say your home is appraised at $200,000 and your mortgage amount is $150,000.

$200,000 less $150,000 = $50,000 equity in your home

Lenders tend to take this one step further by figuring out your loan to value ratio. This is done by dividing the amount you owe on the home by the current value. This percentage amount is then compared to their standards for issuing loans.

$150,000 divided by $200,000 = 75% loan to value ratio

In most cases, a second mortgage combined with the first home loan should not total more than 75-80% of the overall value of your home. This minimizes the risk to the lender and helps to ensure that you can afford to pay back the loan if you were to default.

Let’s say your lender allows 80% loan to value ratio.

$200,000 x .80 = $160,000 maximum amount allowed

$160,000 less $150,000 current loan amount = $10,000

In this case, you can borrow $10,000 against your equity.

What Is a Second Mortgage?

You may hear of a home equity loan being referred to as a second mortgage. This is because it is simply a new type of home loan that you can apply for after you have earned equity in your home.

A second mortgage uses your home equity as security that you will pay it back. The terms of these loans tend to be shorter than initial mortgages. Most are required to be paid back within 10 to 15 years.

What Is a Home Equity Line of Credit?

Refinancing a Home LoanA home equity line of credit differs slightly from a second mortgage by not being issued in one lump sum. Instead, you can draw from this line of credit, as needed, over a period of time, such as 5-10 years.

In the first stage of the loan, you will typically only make payments on the interest until it is fully funded. After the initial period is over, it then works like a traditional second mortgage, where you pay on both the interest and the principal.

The advantage of this type of loan is that you have more control over how much money is issued at once.

Using Equity to Increase a Home’s Value

Since your home equity serves as collateral for this loan, it is best to focus on projects that increase its value.

A kitchen or bathroom remodel are common options that bring you a better quality of life, while also making your home more valuable.

Exterior repairs, universal design conversions, and upgrades to home heating and cooling systems are other common reasons why people use their equity to obtain a second home loan.

When done correctly, using home equity loans to increase your home’s value can increase your equity over time. Remember that these loans should always be handled using smart choices, such as making long-term investments in your property.

Our loan specialists can also help you identify strategies to get the best rates on your loan, so that your payment is affordable and you’ll feel good about your decision.


Why Do Home Prices Fluctuate?

price of different homesHome prices are constantly changing. You may have even heard about the housing market being in the buyer’s or seller’s favor over the years.

Naturally, understanding what causes a home’s price to go up helps you pick the best time to buy or sell a house.

While the size and location of a house plays a part in the price, it also helps to be aware of the other factors that influence price fluctuations.

 

How Does Supply and Demand Affects Prices?

The biggest reason behind home prices going up and down is based upon this basic economic principle. When the supply of houses goes up, you can expect the prices to go down due to a lack of competition. Locations with a low supply of houses naturally have higher prices.

In Arizona, certain neighborhoods are experiencing a high volume of interest. These areas may require you to be competitive with your bids since there may be fewer houses available to help lower the prices. This is common in urban areas with older houses that are located near popular business districts.

Some of Phoenix’s newer neighborhoods are helping to lower the cost of housing. With so many new homes being built, buyers are often able to benefit from prices starting to stabilize.

Will Home Prices Affect Mortgage Interest Rates?

Home prices do not typically affect mortgage interest rates since these are based more upon factors such as wage increases. However, lower interest rates tend to drive up prices on homes since it means that more buyers may be flooding the market.

What Other Factors Affect Price Averages?

Why Do Home Prices Fluctuate?Price fluctuations are also caused by factors such as the location and nearby amenities. People sometimes want to move to the latest new neighborhood, and this can temporarily drive the prices up. You can sometimes see this when a large corporation opens new headquarters in an area, causing a flood of employees to move in.

The cost of construction supplies and manpower can also affect home prices. Your home may cost slightly more or less depending upon the current cost for building materials. Although this tends to be a modest contributor to home price fluctuations, it can affect a substantial area during times of heavy home building activity.

Is It Smart to Buy When Prices are Climbing?

It’s always a good idea to try to buy a house when the prices are lower. However, there are times when it is still smart to jump on a home purchase even though the prices are rising. When you factor in the current rising cost of rent, a mortgage gives you stable payments that may make the slighter higher home price worth it.

Houses also tend to increase in value over time. Buying during a rising price trend can still mean that your house becomes worth more in the end than you need to spend now. Making sure to buy a house that is in good condition helps to ensure that it increases in value. You also want to get the best rates on your mortgage loan to further increase the payback that you receive on a home investment.

Waiting for home prices to hit the ultimate low may seem like a good theory, but the recent trend does not show home prices bottoming out any time soon. Instead, it is best to focus on making smart financial choices that can help offset the cost of rising home prices in the Phoenix area.