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.


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.


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.


5 Financial Benefits: Buying vs Renting

couple holding key of bought houseIn life, being willing to make a change is critical for enjoying greater financial success.

At times, renting has its benefits. You may rent an apartment or house for its location or the ability to split payments with roommates. Yet, there comes a point when the rent cycle may be hurting you financially.

The decision to move toward buying over renting can offer you these financial benefits over time.

Choose Upgrades That Save You Money

Rental homes and apartments typically limit the types of work that you can do on the property. For instance, you may not be able to invest in solar panels or upgrade to an energy-efficient HVAC unit.

With a home, you can plan upgrades that increase the energy-efficiency of your home so that you save on heating and cooling costs each season.

Enjoy Greater Tax Benefits of Buying Over Renting

Homeowners are potentially eligible to choose a mortgage interest deduction when they do their taxes. In most cases, the majority of homeowners are able to deduct all of their mortgage interest.

This deduction also currently applies to interest payments made on loans for both primary residences and second homes.

Since tax laws change from year to year, you will need to consult with a professional to know how much savings this will bring you. However, this deduction helps to offset the cost of any interest that you pay on your mortgage annually.

If this is your first year filing taxes after buying a home, then you may also be eligible to claim things such as closing costs for even more savings.

Skip Annual Rent Increases

Today’s housing market has created a situation where property managers often increase the rent on a property each time a lease is up for renewal. This means that you could be paying more to live in a house that is a whole year older with depreciating appliances.

Once you sign on a mortgage loan, your payments will stay mostly the same each year. Being able to watch your payments stabilize as rental rates rise means you can save more money each year as a homeowner.

Gain Equity With Each Payment

In most rental agreements, all of the money that you pay goes straight to the landlord and property management company. This means that you will never see any of it returned to you in the future.

When you make a house payment, it goes toward paying down the mortgage loan and results in equity. Equity is the market value of your home with the amount that you still owe subtracted, and represents your percentage of ownership.

Build Wealth Over Time

Buying a house requires you to commit to a large investment. This can sometimes make it seem as though renting is better.

However, being able to save money on bills and future housing costs allow you to sock money away for the future. You can also strategize your home purchase so that your new house gains in value over time so that it may be worth more than you invested in the beginning.

For the average homeowner, buying a home is the biggest investment that they will make in their life. Our loan specialists are here to help you make sure that you receive the optimum financial benefits from your decision. Breaking the rental cycle can give you better financial security while also upgrading your quality of life.


Touring Etiquette for Home Buyers

buyer touring house with real estate agent

Home buyers get excited about touring potential new homes. Not only do you get the chance to find your perfect living space, but you also get to check out new design concepts that help you narrow down what you want in a home.

However, you do need to remember that this is someone else’s house, even if it is unoccupied. You may also run into situations where the homeowners are present.

Before you head out for your next house visit, be sure to brush up on these etiquette basics so that you don’t step on any toes.

#1: Be On Time

Searching for a new home sometimes means squeezing in tours after work or seeing several houses on the weekend. While life does get hectic, you need to remember that showing up late gives a bad impression to the seller and anyone else involved.

Try to plan your tours with enough time that you can arrive early. This also gives you some time to check out the overall neighborhood as you drive up.

#2: Limit the People in Your Group

Buying a house is a big decision, and it helps to have other people’s input. However, you should still limit your touring group to only you and any other people who are directly involved in the purchases.

This limits the amount of traffic coming through the home and allows you to focus on finding out the answers to your questions.

#3: Take Care Of the Flooring

Many of the houses that you tour may have brand new flooring or carpets that have just been professionally cleaned. When you arrive, look for clues as to whether or not you should remove your shoes.

For instance, some sellers place a shoe rack or disposable shoe covers nearby to make there preferences clear. If you are unsure of what to do, then follow your real estate agent’s lead. If they slip off their shoes, then you should, too.

#4: Respect the Homeowner’s Privacy

In most cases, it is generally accepted that you need to open up features of the house that will impact your daily life.

For instance, you should feel comfortable opening closets, pantries and other areas that you would not normally enter in a stranger’s house. This helps you to check the condition of these areas along with the amount of space each contains.

However, you should not open anything that the homeowner is likely taking with them or that could contain personal items. For instance, it is best to leave the medicine cabinet and dresser drawers closed.

#5: Ask Before Using the Plumbing

It is always best to handle using the restroom before you arrive for the home tour. If you find yourself in an emergency situation, asking before you go is just polite.

You may also simply want to know if all of the plumbing fixtures in the house work. Always ask the homeowner or the realtor before you flush a toilet or turn on a faucet. The water may already be turned off in an unoccupied home.

As you tour houses, remember that each one could be your future home. When in doubt, just ask if something is appropriate before you do it. This way, you can relax and fully explore the potential of the houses that you visit.


Questions to Ask Before Buying a New Home

Couple asking questions before buying a new home

If you are buying a new home for the first time, you may be wondering exactly what is involved in the process of closing on a home purchase.

You can start by asking these questions, which will help you feel confident when it comes time to finalize your new home purchase.

How Much Should I Budget?

You always want to start off as a new homeowner with confidence that you can afford the payments. Start by determining how much of a mortgage you can fit into your budget.

As you do, be sure to also take into consideration other costs that come with owning a home. Are you planning to live in a community with an HOA? If so, then those fees need to be included in your budget.

You may also need to factor in the costs for remodeling if that is something that you plan to do after you move in. Repairs and home maintenance costs are an additional item to include in your financial plans.

Can I Secure a Loan?

You may have been saving for a down payment and working on your credit. However, this niggling question is often on people’s minds.

Before you start home shopping, you should seek pre-approval for a loan. This will give you the reassurance that you need before moving forward with the next step – searching for a home. Having a pre-approval in hand also shows realtors and sellers that you are serious about buying a new home today.

What Type of Loan Should I Get?

There are specialty loans available for veterans and ones designed for first-time home buyers. You can also choose from a 15-year mortgage loan or one that spans 30 years. There is also the question of whether or not you should get a fixed or variable rate loan.

Getting a loan requires multiple decisions to be made, and the best way to determine the right answer to each is to talk to one of our loan specialists. After taking a look at your financial standing and discussing your goals for the future, we can help you make the right choices.

Does the House Fit My Preferences?

As you walk through the house, get a good feel of the layout and make sure that it will fit your needs. You should also get information on the history of the house. For example, look into whether or not the house has sustained damage from events such as a fire or flood, so that you go into your purchase with a clearer picture of what you are buying.

How Do I Compete Against Other Offers?

Obviously, you want to make an offer on the house that you can afford and that will make sense to the seller. There are a few things that you can do to make yourself stand out.

Consider sending a personal note with your offer, noting a few things that you love about the house, along with your goals for the future. This simple gesture often tugs at the heartstrings of a seller and helps them picture you living in their former home.

As you go through the process of buying a new home, more questions are sure to arise. Be sure to write them down in your home buying journal, and remember to seek answers to each one before you close on your new house. We are here to answer those questions and guide you throught the home buying process.