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Borrowers With Student Loans Might Have An Easier Time Qualifying For An FHA Loan

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Borrowers With Student Loans Might Have An Easier Time Qualifying For An FHA LoanIn the past, a lot of potential borrowers were declined for FHA loans due to the presence of student loans. Now, the Biden Administration along with the FHA has eased a lot of their regulations surrounding student loans, making it easier for borrowers with student loans to qualify for a home loan. The FHA required that FHA mortgage companies calculated the monthly student loan payment as one percent of their outstanding loan balance if the loans were not fully amortized; however, this is now changing.

The One Percent Rule Is Not Always Accurate

Even though the one percent payment rule has been in place for a long time, it is not always the most accurate way of evaluating the size of a borrower’s potential loan payments. For example, a lot of students are on income-adjusted repayment plans, meaning they are not necessarily paying as much as one percent of the outstanding balance every month. This means that some borrowers were getting declined even though they may have had enough money to pay back the mortgage. With numerous borrowers owing more than $100,000 in loans, many applicants for homes were turned down. 

New Guidelines Are Being Put In Place

Under the new guidelines, lenders can use a buyer’s actual monthly payment in terms of debt calculations even if that payment is less than one percent of the total balance of the loan. If the income-adjusted repayment plan means the borrower is not currently paying anything, then the lender will apply 0.5 percent of the outstanding loan balance every month instead of one percent.

A Boost To Borrowers With Student Loans

This change is significant because it alters the way lenders are calculating the debt-to-income ratio. If student loans are no longer making up a large portion of a borrower’s monthly debt payments in the calculation, they might have an easier time qualifying for a first-time home loan. Anyone with student loans who is interested in taking out an FHA loan should talk to a loan officer who is familiar with the updated guidelines. Even applicants who were denied in the past might have a chance to qualify for a home loan under the new rules. 

What’s Ahead For Mortgage Rates This Week – September 27, 2021

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What's Ahead For Mortgage Rates This Week - September 27, 2021Last week’s economic news included reporting on housing markets, housing starts, and building permits issued. Data on new and existing home sales were published along with weekly reports on mortgage rates and jobless claims.

NAHB: Builder Confidence Ticks Up as Demand for Homes Holds Steady

The National Association of Home Builders reported a one-point gain in its Housing Market Index for September with an index reading of 76. Analysts expected no change based on August’s reading of 75. Component readings for the HMI were mixed; the index reading for builder confidence in current market conditions rose one point to 82. Builder confidence in housing market conditions over the next six months was unchanged at 81 and builder confidence in buyer traffic in new single-family housing developments rose two points to an index reading of 61.

Builders continue to face headwinds as materials costs and home prices continue to rise. Home prices present a challenge to would-be buyers who don’t want to pay inflated prices or cannot qualify for mortgages based on rapidly rising home prices. Persistent shortages of homes kept homebuilders busy, but shortages of building materials forced builders to pace construction according to materials availability.

Housing starts rose to a seasonally adjusted annual pace of 1.62 million starts in August; analysts expected a pace of 1.55 million starts, which was unchanged from July’s housing starts. Building permits were issued at a seasonally-adjusted annual pace of 1.73 million permits, which surpassed the expected reading of 1.62 million permits issued and July’s reading of 1.63 million permits issued.

Existing Home Sales Fall in August as New Home Sales Rise

The National Association of Realtors® reported fewer sales of previously-owned homes in August. 5.88 million homes were sold on a seasonally adjusted annual basis as compared to July’s reading of 6.00 million pre-owned homes sold. Slim supplies of previously-owned homes for sale, rising home prices, and competition with cash buyers sidelined buyers who preferred to wait for less challenging housing market conditions.

Limited options in available pre-owned homes boosted new home sales in August. 740,000 new homes were sold on a seasonally adjusted annual basis as compared to the expected reading of 720,000 new homes sold and July’s reading of 729,000 new homes sold.

Mortgage Rates Mixed, Jobless Claims Rise

Freddie Mac reported mixed readings for mortgage rates last week as average rates for fixed-rate mortgages rose and the average rate for 5/1 adjustable rate mortgages fell. Rates for 30-year fixed-rate mortgages rose by two points and averaged 2.88 percent. The average rate for 15-year fixed-rate mortgages rose by three basis points to 2.15 percent. The average rate for 5/1 adjustable rate mortgages fell by eight basis points to 2.43 percent. Discount points averaged  0.70 percent for 30-year fixed-rate mortgages and 0.60 percent for 15-year fixed-rate mortgages. Discount points for 5/1 adjustable rate mortgages averaged 0.30 percent.

New jobless claims rose to 351,000 initial claims filed from the previous week’s reading of 335,000 initial claims filed. 2.85 million continuing jobless claims were filed as compared to the prior week’s reading of 2.71 million continuing claims filed.

What’s Ahead

This week’s scheduled economic reporting includes readings from S&P  Case-Shiller on home price growth, pending home sales, and construction spending. The University of Michigan will release its monthly Consumer Sentiment Index and weekly readings on mortgage rates and jobless claims will also be published.

Getting Your Mortgage Application Approved As A Self-Employed, First-Time Homebuyer

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Getting Your Mortgage Application Approved As A Self-Employed, First-Time HomebuyerA significant number of people are self-employed, which means they might be relying on this income to apply for a mortgage. It is true that people who are self-employed may face additional challenges when trying to get approved for a home loan when compared to someone with traditional W2 income, these are obstacles that can be overcome. With the right qualifications and documentation, even first-time homebuyers who are self-employed should be able to qualify for the home loan they need.

Lenders Assess Someone’s Ability To Repay The Loan

First, lenders are trying to make sure the person will repay the loan. Lenders believe that someone with W2 income has a stable job and a guaranteed salary, which means they are more likely to repay the loan; however, someone who is self-employed has other ways of demonstrating that he or she can repay the loan. Self-employed individuals can use tax returns, payroll receipts, and records from financial institutions that serve as documentation of the applicant’s income or assets. This means standard W2 forms and pay stubs might no longer be necessary.

Navigating Eligibility Requirements

Next, self-employed individuals need to meet the eligibility requirements. This includes two years of self-employment, a reliable income, a strong credit score with a clean credit report, cash for a down payment, and a low debt to income ratio. It is possible for a first-time homebuyer to get a loan for less than five percent down; however, closing costs can be significant. Realistically, first-time homebuyers should plan on spending close to five percent of the home’s value to get approved for a first-time home loan.

Understanding Mortgage Options

Finally, self-employed first-time homebuyers should be aware that there are multiple loan options available. For example, there are FHA and VA loans for those who qualify. USDA loans and jumbo loans might also be an option. There are bank statement mortgages and conventional options available as well. Self-employed individuals might have to visit several of these programs to see which ones work the best. The programs vary in terms of their down payment, minimum credit score, and credit history requirements. It is prudent to work with a professional loan officer who has experience helping self-employed, first-time homebuyers get approved.

Reviewing The Basement Options For Homeowners: What To Know

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Reviewing The Basement Options For Homeowners: What To KnowEven though not every home has a basement, those that do usually fall into one of three categories. The most common examples of basements include poured concrete, masonry block basement, and precast panels. What do homeowners need to know about the different types of basement construction? 

Concrete Basements

Concrete basements are the most common examples. There are several advantages of going with a concrete basement. First, concrete basement walls are resilient. They can resist possible cave-ins, standing up to natural pressure created by wind, water, and soil. Furthermore, concrete basements are also fire-resistant while creating joint-free basements that can increase property values.

Even though concrete basements are water-resistant, hydrostatic pressure can allow water to permeate over time, creating mold and mildew issues. Homeowners need to keep a close eye on the humidity of a concrete basement to make sure this is not happening in their homes.

Block Masonry Basements

Another popular type of basement is called a block masonry basement. This structure is created with cinder block or masonry units that are connected to one another. Ultimately, this creates a waterproof structure. This is a highly resilient, cost-effective construction option that is much easier to install. Therefore, homeowners can save money on labor and materials. The walls are also more durable if they are reinforced using a steel rebar. 

Precast Panel Basements

Finally, homeowners may also encounter a precast panel basement. These usually involve concrete panels that are molded in a different location before being transported to the construction site using a crane. Typically, these walls are strong and resilient. They do provide waterproof qualities, but if the joists have been neglected, they can develop moisture penetration issues. These panels also have to be treated with boric acid to prevent pest infestations. 

Options For Basements: Homeowners Should Work With A Professional

Ultimately, there are plenty of options available when homeowners are looking to construct the basement. Examples include full basements, partial basements, walkout basement, and crawl spaces. Homeowners need to work with a construction professional who has experience building basements. Each option has its individual benefits and drawbacks, so homeowners need to inquire about permits and environmental factors that might make one type of basement superior to another. 

 

Worried About Mortgage Rates Going Up? 3 Steps to Prepare Yourself Financially

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Worried About Mortgage Rates Going Up? 3 Steps to Prepare Yourself FinanciallyMortgage rates have been at record lows for quite some time, making it easy for new homebuyers to finance their dream homes. But what comes down will eventually go back up, and with the world economy expected to rebound in 2016, we’re about to start seeing more expensive mortgages.

So what can you do to prepare yourself before mortgage rates start to rise? Here are three strategies that will keep you ahead of the game.

Start Saving More Money Now

If you have a variable rate mortgage, you’ve benefitted from great interest rates that this world won’t see again for quite some time. Hopefully, you’ve taken advantage of this low-interest period to save up some cash. If so, you’re going to be in a great position for when interest rates rise – and if not, you’ll want to start saving as much as you can now to ensure you can weather the storm.

It’s far easier to save money now, with interest rates low, than it will be when your mortgage payment starts to rise. So start squirreling away as much of your paycheck as you can.

Pay Down as Much of Your Principal as Possible

Another great way to prepare for the rise in interest rates is to pay down your principal amount. The total amount of interest you’ll pay goes up when rates go up, but by paying down your principal, you can take a big bite out of your debt before it has a chance to snowball. So pay down as much of your principal as you can afford – it’s easier to pay down interest on a smaller principal amount.

Switch to a Fixed Rate Mortgage

One of the best ways to take advantage of low rates and ensure you get a great deal is to switch your floating rate mortgage to a fixed rate mortgage. Locking in your low interest rate with a fixed rate mortgage means you’ll pay less interest over the term of the loan, but it also means you’ll only have a set amount of time to pay your mortgage in full. If you’re in a position to predict when you can pay back your mortgage, you’ll save a lot of money by locking in your low rate.

Mortgage rates haven’t been this low in a long time, and likely won’t be this low again for many years to come. That’s why, if you’re a homeowner, you’ll want to do everything you can to prepare for higher interest rates before they get here. Contact your trusted mortgage advisor to learn more about how to manage interest rates and make sure you have the right mortgage for your situation.

Keeping A Closet Organized: The Top Tips

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Keeping A Closet Organized: The Top TipsHomeowners need to make sure they maximize every square foot of their home. This includes the closet. Many people get frustrated when they look at their closets because they feel like they cannot find what they are looking for. Anyone who is struggling to keep their closet organizers should take a look at a few important points below.

Remove Items That Are No Longer Being Used

The first step in creating more space in a closet is getting rid of items that are no longer being used. First, take a look at all the items on the hangers. Then, see if it has been worn during the past year. If not, it is time to get rid of it. In addition, it might be helpful to remove clothing items that are not in season. Then, store them until the weather changes again. Creating more space in the closet can make it easier to keep the closet organized.

Check The Quality Of The Hangers

Next, take a look at the hangers. It is critical to use the right hangers because the wrong hangers could damage the clothes. Even though it is tempting to keep clothes on hangers that came from the store, they could stretch the clothes out over time, ruining the appearance. Try to use hangers that have pads on them. These softer hangers will not leave impressions on the clothes, extending their lifespan. 

Create More Storage In The Closet

Finally, remember that not everything has to go on a hanger. There are some items that can be folded or tucked away in drawers. That is why it might be helpful to invest in alternative storage options in the closet. This could include cubbies that hang from the bottom of the shelf. Or, it might be nice to install drawers at the bottom of the closet. This could be another way to create more storage space and keep the closet organized. 

Improve Closet Organization

Ultimately, there are plenty of ways to keep a closet organized. By removing items that are not being used and increasing storage space in the closet, it might be easier to find what is needed. This is a great way to keep the closet clean. 

 

What’s Ahead For Mortgage Rates This Week – September 20, 2021

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What's Ahead For Mortgage Rates This Week - September 20, 2021Last week’s scheduled economic reporting included readings on consumer prices, retail sales, and the University of  Michigan’s preliminary Consumer Sentiment Index. Weekly readings on mortgage rates and jobless claims were also released.

Consumer Price Growth Slows in August

The Consumer Price Index reported that consumer prices grew by  0.30 percent in August as compared to July’s consumer price growth pace of 0.50 percent. Core consumer prices, which exclude volatile food and fuel sectors, also slowed in August to a pace of 0.10 percent as compared to July’s reading of 0.30 percent growth. Used-car prices fell for the first time in six months but remained 32 percent higher year-over-year. Inventories of new and used cars were lower due to supply chain problems caused by the pandemic.

August’s Consumer Price Index rose by 5.30 percent year-over-year;  the Core Consumer Price Index grew by 4.00 percent year-over-year in August, which was unchanged from July’s year-over-year consumer price growth. Analysts expressed mixed opinions about how quickly inflation will slow, but Federal Reserve Chairman Jerome Powell said that the Fed expects inflation to slow to the Fed’s targeted pace of 2.00 percent within the next year. Federal Reserve policymakers expect materials and labor shortages to ease as the post-pandemic recovery continues.

Retail Sales Rise in August

Retail sales rose by 0.70 percent in August and surpassed negative projections and July’s reading of -1.80 percent. Analysts said that inflation accounted for some of the increased sales, but said that consumers were spending despite the spreading  Delta variant of the Coronavirus. Retail sales rose by 1.80 percent when automotive sales were excluded. Shortages of new and used cars dragged down the pace of retail sales.

Mortgage Rates, Jobless Claims

Freddie Mac reported little change in mortgage rates last week. Rates for 30-year fixed-rate mortgages averaged two basis points lower at 2.86 percent; Rates for 15-year fixed-rate mortgages dropped by seven basis points to 2.12 percent on average. Rates for 5/1 adjustable rate mortgages rose by nine basis points to an average of 2.51 percent. Discount points averaged 0.70 percent for 30-year fixed-rate mortgages and 0.60 percent for 15-year fixed-rate mortgages. Points for 5/1 adjustable rate mortgages fell to 0.10 percent on average.

Initial jobless claims rose to 332,000 first-time claims filed as compared to the previous week’s reading of 312,000 initial claims filed. Continuing claims fell with 2.67 million ongoing jobless claims filed as compared to the prior week’s reading of 2.85 million ongoing claims filed.

The University of Michigan released its preliminary Consumer Sentiment Index for September and reported a one-point increase in September’s index reading of 71.0. Analysts forecasted a reading of 72.0 based on the August reading of 70.3.

What’s Ahead

This week’s scheduled economic reporting includes readings from the National Association of Home Builders,

The Federal Reserve’s Open Market Committee will release its post-meeting statement and Fed Chair Jerome Powell will give a press conference. Commerce Department readings on housing starts and building permits will be released along with weekly readings on mortgage rates and jobless claims.

Is An Escrow Account Right For You?

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Is An Escrow Account Right For You?When someone is looking at purchasing a home, they usually focus on the purchase price of the home and the potential monthly payment. At the same time, there are other costs that need to be included as well. This includes home insurance and real estate taxes.

As a result, many homeowners find themselves asking if they should use an escrow account or not. What do homeowners need to think about and how can they make the right decision?

What Is An Escrow Account?

First, it is important to define an escrow account. An escrow account is an account that contains money for items such as insurance and taxes. That way, homeowners are not blindsided by a major bill at the end of the year. Some people may be required by the lender to have an escrow account, but those who are putting 20 percent down may have an option to use an escrow account or to handle this on their own. With an escrow account, the money that is required for real estate taxes and homeowners’ insurance is broken up into 12 months. That way, homeowners can pay a little bit every month instead of paying it all at once, when the money might get tight. When should homeowners use an escrow account?

Savings Habits And Risks

First, some homeowners would rather handle real estate taxes and home insurance on their own because they want to be in control of their finances. While this is fine, some lenders might see this as an increased risk. If they view that homeowner as a risk, then they could use this as an excuse to raise the rate on the loan. Homeowners need to make sure they do not have to pay more for the loan simply because they are not using an escrow account.

Next, homeowners also need to think about their individual saving habits. Because home insurance and real estate taxes are often paid as one lump sum, this could be a lot of money leaving the account at once. If homeowners do not have appropriate saving habits, they might not set this money aside when the payment is due. If they fall behind on their real estate taxes, they could place themselves at risk of losing the home.

A Home Improvement Loan: How To Get One

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A Home Improvement Loan: How To Get OneWith more people spending time at home than ever before, many people are wondering how they can go about changing the way the home is laid out. This can be an expensive project, which is why many people are interested in getting a home improvement loan.

With many people buying outdated houses, there are numerous projects that many homeowners want to finish; however, this process is not the same as applying for a mortgage. There are home equity lines of credit, cash-out refinance opportunities, and financing through the contracting company. How is the process of applying for a home improvement loan different, and what do homeowners need to know?

Gather The Right Information Before Tapping Into Home Equity

One of the most common ways homeowners complete projects is to tap into the equity in the home. Therefore, no matter what option someone chooses, they need to make sure they gather the right information. All homeowners must make sure they have a great credit score before pursuing this option. Homeowners have the right to check their credit score once per year free of charge. They also need to have documents that verify their income, as lenders will want to take a look at someone’s debt to income ratio. Other forms of debt include car payments, credit card debt, and student loans.

Compare The Cost Of The Loan Options

Next, homeowners need to take a look at the cost of each loan. There are home equity loans, home equity lines of credit (HELOCs), and cash-out refinances. The interest rates on these loans can vary depending on the market, and many of them will have closing costs as well. Homeowners need to take a look at the costs and the interest rate to figure out which option works best for them. Some of these loans have adjustable rates on them, which can make them risky, and some of these loans have limits that are dependent on the amount of equity in the home.

Fixer Upper Loans Are Available

Those who have purchased a home in dire need of repairs might qualify for a rehabilitation loan, which is a Federal Housing Administration (FHA) 203(k) rehabilitation loan. This provides funds for renovations and repairs that are necessary to restore a home. Consider all options available before deciding.

What Are The Requirements To Sell A Home Using An FHA Loan?

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What Are The Requirements To Sell A Home Using An FHA Loan?Before an owner can market a property to buyers that want to use a FHA loan, he will want to familiarize himself with the FHA’s standards. FHA won’t insure loans on just any property.

While their standards aren’t as stringent as they used to be, a home needs to be in relatively good condition to qualify for FHA financing.

Location And Lot

To qualify for FHA financing, the property has to be located on a road or easement that lets the owner freely enter and exit.

The access also has to be paved with a surface that will work all year a long dirt driveway that washes out in spring won’t qualify.

The FHA also wants the lot to be safe and free of pollution, radiation and other hazards. For that matter, it also needs to provide adequate drainage to keep water away from the house.

Property Exterior

The FHA’s requirements for making a loan start with the home’s roof. To pass muster, the house must have a watertight roof with some future life left. In addition, if the roof has three or more layers of old shingles, they must all be torn off as part of the replacement process.

The property’s exterior has to be free of chipped or damaged paint if the home has any risk of having lead paint. Its foundation should also be free of signs of exterior (and interior) damage. It also needs full exterior walls.

Property Interior

The property’s interior also needs to be inspected. FHA standards require that the home’s major systems be in good working order.

Bedrooms should have egress routes for fire safety and the attic and basement should be free of signs of water or mold damage.

The bottom line is that the FHA wants to make loans on homes that borrowers can occupy. This doesn’t mean that a home has to be in perfect condition to be sold to an FHA mortgage-using borrower. It just needs to be a place that they can live.