Mortgage insurance is generally included in a loan when a home buyer puts less than twenty percent down of the value of a home. It protects mortgage companies against financial loss should a homeowner fail to pay. Although it insures the lender, it is commonly the responsibility of the buyer as a closing cost and additional recurring amount. In certain cases, a lender will cover the expense of the mortgage insurance. This article important information on lender paid mortgage insurance for MA home loans.

Important Information On Lender Paid Mortgage Insurance

Some lenders will provide lender paid mortgage insurance loan programs in exchange for a higher interest rate. When a homeowner pays mortgage insurance directly, it stays in effect while the loan amount exceeds eighty percent of the original price or current market value. So at some point, the monthly payment decreases when mortgage insurance is no longer applicable. With lender paid mortgage insurance loans, this reduction in monthly payment will not occur since the higher interest rate continues for the life of the loan. The only means to alter it is to refinance.

Choosing Between Owner Paid and Lender Paid Mortgage Insurance

Even though the interest rate on lender paid mortgage insurance loans may be greater, it can still lead to a lower monthly payment for some buyers. Additionally, mortgage insurance may not be tax deductible for buyers whose annual income is higher than certain IRS guidelines whereas interest paid on a loan is normally tax deductible. Therefore, opting for an increased interest rate and lender paid mortgage insurance might also result in better tax savings for some homeowners.

Help with MA Home Loans

Lender paid mortgage insurance loans can be a good option for some buyers. It is important to analyze the advantages and understand the immediate and long-term benefits. The above is important information on lender paid mortgage insurance for MA home loans and is intended only as an introduction.

No closing cost mortgages are usually requested by buyers with few money to bring to closing. The phrase is a bit misleading as there is always a cost to lending money. The way those expenses are recouped by a mortgage company may be structured differently. The following is an explanation of MA no closing cost mortgages, what you should know, and how it compares to programs with closing costs.

What Are No Closing Cost Mortgages

Closing costs exist with all loans because mortgage companies have expenses related to processing mortgages, compensating brokers, etc. In a usual loan, the exact charges are outlined and listed as closing costs. This leads to more money due at closing, which may be a challenge for all home buyers. No closing cost mortgages were developed to minimize this situation.

There are two primary ways that mortgage companies are able to offer no closing cost mortgages. One method is to obtain a larger interest rate, allowing them to recoup the closing costs over time. The other is to roll the closing costs into the amount of the loan.

Pros And Cons

Whether to use no closing cost mortgages must be based on several considerations. If you plan to pay off your mortgage within a few years, then it can be a good option since the higher interest rate would be effective for only a short period of time. This can be true during times where interest rates are high but are expected to lower in the future or if you plan to own a property for only a few years. On the other hand, if you intend to hold a mortgage for the long term, then the expense of an increased interest rate over the years can be significantly higher than simply covering the closing costs now.

It is important to note that no closing costs does NOT mean that money will not be required at closing. Closing costs really only apply to only some items. Other items, such as escrows, are considered pre-paid expenses. They are not put in the closing costs classification and will therefore still be due at closing.

MA No Closing Cost Mortgages

MA no closing cost mortgages may or may not be the best solution for your mortgage needs. To make an educated decision about what financing program works best for you, compare both the interest rate and fees of each loan. Also consider how many years you expect to keep the mortgage and the the long-term cost. Most of this data may be reviewed by requesting a good faith estimate from your lender.

When looking for mortgages, you will come across information on interest rate and APR. These are usually misinterpreted as being synonymous, but they represent different things. It is helpful for borrowers to analyze both. Below are details on the difference between interest rate and APR for MA home loans.

Interest Rate and APR

Interest rates apply to monthly mortgage payments over the life of a loan. This is typically the figure promoted by mortgage companies. It does not include the initial cost of financing. Fees may vary between loan programs and financing companies. For example, there can be points for one loan but not another. Other costs that may be included are origination and services charges.. The APR combines the interest rate and certain closing costs, so it is a better estimation of overall expense.

How to Use APR Information

When assessing a range of loan programs from the same or different lenders, the APR offers an easy comparison. You can be presented with one loan with high fees and another with low fees and a separate interest rate for each. The actual expense includes both the up-front expenses plus what you pay over time. The APR may therefore assist with the analysis.

APR Disclaimer

There are some things that borrowers should keep in mind when it comes to APR figures. It is compiled based on the life of a mortgage. If you pay off your loan sooner, the actual APR may be more. Also, one mortgage that appears to have a lower APR than another may end up being higher if the number of years were adjusted. The best APR is not necessarily the better option. Because most home buyers do not retain their mortgage for its entire term, this can be important.

Additionally, some APR estimates are not exact. For instance, the interest rate on an adjustable rate mortgage will alter but the amount cannot be predicted. The APR on these loans are calculated using the beginning rate.

Help With The Difference Between Interest Rate And APR For MA Home Loans

To perform a good comparison of your APRs, it is essential to ask for quotes within a short time frame (on same day if feasible) as interest rates are continually changing. Also keep in mind that your actual rate is not determined unless you lock in. Always review the interest rate and APR together to better understand the mortgage and associated costs. An experienced loan officer can provide further guidance on the difference between interest rate and APR for MA home loans.

FHA is a mortgage where private mortgage insurance is subsidized by the Federal government. Most major mortgage companies offer the program. Although it is commonly used by first time buyers, it is not limited to them. This blog offers MA FHA Mortgage Overview and pre-approval guidance to help you decide whether it is a mortgage that you should consider.

Benefits Of FHA Loans

There are several important benefits of FHA loans. The minimum down payment for FHA mortgages is 3 percent, which aids buyers who do not have a lot of funds saved. They also allow borrowers to use gift money for the down payment and closing fees. An additional benefit is the simplified refinancing process. It allows a refinance to a lower payment without needing a new appraisal, which is helpful if loan rates and home values both drop. The mortgages may also be assumed, meaning that it may be transferred to a borrower (if they qualify). This can help if interest rates are high. Finally, FHA does not penalize buyers for FICO scores. Although home buyers must still have satisfactory credit, higher interest rates do not result from lower scores.

Disadvantages Of FHA Financing

There are disadvantages of FHA financing to note. FHA mortgage insurance (MI) is often more than a conventional loan. There is an up-front fee at closing and a repeating fee due each month until the loan reaches 80 percent of the purchase price or current appraised value (borrowers must request the removal of PMI or wait for the legally required lower threshold for it to be automatically removed). For condo purchases, the complex must satisfy specific criteria such as minimum reserve funds and sufficient owner occupancy percentages. Most converted duplexes may be difficult to get approved. Single family real estate must also meet certain requirements geared towards safety.

FHA Pre-approval Guidance

Prior to applying for a pre-approval, pull your credit score and correct any mistakes. Also gather important financial documentation such as bank accounts, tax forms from past years, recent pay stubs, and investment account statements. Underwtiters will routinely ask for a copy of these items. Consult with a loan officer to obtain potential monthly payments (based on a specific purchase price and your credit qualifications) and closing fees prior to advancing too far in the process.

MA FHA Mortgage Overview

FHA makes buying a home possible for certain buyers who may otherwise not qualify for financing. It may also make refinancing or listing a home less complicated if rates dramatically change. However, it does have higher fees and property requirements, so not every buyer is able to or may wish to select an FHA loan. Consult with an FHA loan professional to better evaluate this program.

When you are qualified for a home loan, it is based on a specific monthly payment. The interest rate is estimated (as well as other figures such as property taxes and homeowners insurance). Interest rate fluctuations affect MA home loan pre-approvals because it impacts the principal and interest portion of the total payment. It is useful for buyers to understand this because an increase or decrease in rates can affect purchase price limits.

Interest Rate Fluctuations

Interest rates may change on a daily basis. At certain times, they can even do so many times on the same day. As a buyer, you will not know what your particular interest rate is until you identify a home, have an estimated settlement date, and lock in the interest rate. Thus, there is some uncertainty, particularly for price sensitive borrowers. It is useful to find out what interest rate was originally used to determine the pre-approval and to keep your pre-approval up-to-date. During times when interest rates are constantly or dramatically moving, speak to your loan officer before preparing an offer on a property to verify that you still qualify to purchase it.

Interest Rate Fluctuations Affect MA Home Loan Pre-approvals

Mortgage payments normally include principal, interest, property taxes, hazard insurance, and mortgage insurance (if the down payment is less than 20%). For the purposes of this example, we will only cover the principal and interest component. Assume that a buyer qualifies for a $300,000 property based on a thirty year home loan, 3.5% down payment, and 5% interest rate. The principal and interest portion of the payment is roughly $1554. If the interest rate increases by half a percent, that same home buyer will then qualify for only $283,638. That is a reduction of over $16,000 in the purchase price, which will be a smaller home. On the other hand, if interest rates reduce by 0.5%, the price limit improves to $317,843. The figures below illustrate the impact of other increments for this same buyer using a monthly principal and interest payment of $1554:

Knowing Your True Price Limit

You should ask your lender regarding the maximum payment amount for which you qualify. Using this information, you can better determine the feasibility of properties before making an offer. Keep in mind that there are several calculations for the total figure: interest rate, property taxes, property insurance, and mortgage insurance. If you plan to purchase a home close to the qualification limit, then it is very important to watch interest rates. Your loan consultant and real estate broker can assist you with these calculations and provide other information on how interest rate fluctuations affect MA home loan pre-approvals.

Reverse mortgages could be beneficial in certain circumstances. It is important to get all the facts before getting a reverse mortgage. This blog offers details on reverse mortgages for MA homes.

Reverse Mortgage Overview

A reverse mortgage is a special type of home loan that allows you to convert a part of the equity in your property into cash. However, unlike traditional equity loans, borrowers are not required to make monthly payments towards the loan. Repayment is delayed until the homeowners no longer use the property as a principal residence or fail to comply with the requirements of the mortgage. The amount paid back includes the equity taken out, interest on the loan, and other applicable fees.

Who Qualifies for Reverse Mortgages

Not every home owner can use a reverse mortgage. You must…

• Be at least 62 years old.
• Own a home that you live in as a primary residence.
• Have a qualifying property type.
• Have equity in the real estate.
• Participate in a reverse mortgage counseling session.

How Much Can You Borrow?

The amount of a reverse mortgage is based on the age of the borrower, the current interest rates, the appraised value of the home, and FHA mortgage insurance limits. Older borrowers are allowed to extract a higher amount equity. Cash can be received as a lump sum, a fixed amount each month, or through a credit line.

Additional Details On Reverse Mortgages For MA Homes

Reverse mortgage programs are completed by most mortgage companies. Closing charges are high, so it should only be used when no other mortgage programs are feasible. Program specifics and fees can differ, so be sure to obtain estimates from a few different mortgage providers before making a decision. The details on reverse mortgages for MA homes provided above is intended simply as an overview. Program terms may vary, so contact reverse mortgage experts for advice based on your situation.

Individuals selling one property and buying (or building) another may face challenges with coordinating both events, especially in competitive environments. Bridge loans can be a useful solution to this dilemma. The information below on MA bridge loans – how bridge loans work will assist you with understanding this financing alternative.

MA Bridge Loans – How Bridge Loans Work

Many sellers have equity in their existing real estate. There may be a gap in the date those funds are available if a new home must be closed before the old real estate sells. Bridge loans are temporary loans that bridge that gap. It is a substitute for home equity loans (since many lenders do not approve home equity loans for properties on the market).

The underwriting process and criteria for bridge loans will be very different from typical mortgages. Because bridge loans are short-term, they are not normally submitted to the secondary market and therefore need not use the same standards. Minimum credit scores, debt-to-income ratios, and other qualifying factors may range among lenders. During the life of the bridge loan, the homeowner will essentially have two mortgages (one on the hoem listed for sale and one on the new property). Therefore, the borrower must be able to afford both.

Weighing the Pros & Cons of Bridge Loans

Bridge loans allow homeowners to buy and list without the use contingencies on both transactions and scheduling simultaneous closings. This can usually result in additional negotiation ability or facilitate transactions that can otherwise fall apart. It also makes the packing and moving coordination less cumbersome by removing the need for interim storage in same-day closing scenarios. On the other hand, not all borrowers qualify for bridge financing. They also have more fees than home equity financing. Individuals should evaluate these factors with the assistance of both real estate professionals and loan officers.

The First Step

Whether you should obtain a bridge loan is dependent on your financial and real estate goals. A local mortgage company that provides bridge loans can offer more comprehensive information beyond the MA bridge loans – how bridge loans work shown above.

The qualified mortgage rule was issued by the Consumer Financial Protection Bureau in January 2013 as part of the Dodd-Frank Reform Act. It applies starting Jan. 10, 2014 and affects the way lenders must qualify and verify information from borrowers. A summary of the qualified mortgage rule for MA mortgages can be found in this article.

Summary Of The Qualified Mortgage Rule For MA Mortgages

The qualified mortgage rule requires mortgage companies to review financial paperwork of borrowers and to determine their capacity to make payments. First and foremost, the income and assets must be sufficient to repay the loan. Secondly, the ability to pay must be analyzed for the entire life of the loan and not strictly for a shorter length of time. This is a particularly critical rule for loans with lower initial interest rates.

Elements of the Qualified Mortgage Rule

The qualified mortgage rule provides guidelines for assessing the ability to repay, debt-to-income ratio meximums, and a cap on points and fees charged. Lenders will be required to analyze at least eight specific underwriting factors to assess the ability to repay a mortgage. They are:

• Salary and Assets
• Current Employment
• Credit Reports
• Mortgage Payments
• Monthly Payments on Additional Mortgages
• Additional Home Ownership Expenses (Real Estate Taxes, Condo Fees, etc.)
• Other Liabilities
• Debt-to-Income Ratios

Debt-to-income ratios are maxed at forty-three percent. This is actually more than the existing forty-one percent limit. Lastly, points and other charges must not be greater than 3 percent of the mortgage amount. All of these rules go into effect Jan 10., 2014.

Mortgages Being Eliminated

Due to the components of the new qualified mortgage rule, some loan programs will no longer be legal. Examples are ones requiring no documentation, interest-only loans, balloon loans, negative amortization, and those for payment terms longer than 30 years. Even though these categories of loans account for a small percentage of all loans, it will impact specific types of buyers such as those wanting jumbo products.

Intention of the Qualified Mortgage Rule

The real estate and financial crisis is blamed on specific financial practices such as offering home loans with risky terms or buyers receiving home loans that were obviously not within their ability to repay. The new qualified mortgage rule specifically targets toxic loan features. It also seeks to reduce fees charged by lenders. All of this is intended not only to protect borrowers but also to decrease the chances of a future crisis. The above summary of the qualified mortgage rule for MA mortgages is provided only as an introduction. To view full information on the qualified mortgage rule, visit the Consumer Financial Protection Bureau website

There are several major distinct steps in the home purchase process, and several relate to obtaining a home loan. It can be complicated for both first time and experienced buyers. This blog provides important information about home loan process for buying Burlington MA properties and covers what you may want to know prior to beginning the process.

Home Loan Process For Buying Burlington MA Properties

Pre-approval

A pre-approval is a preliminary review of your financial information and credit rating to determine what you may be able to receive as a loan amount. It ensures that you meet the preliminary requirements for a loan. Pre-approvals do not guarantee that you will be able to obtain financing, but is a usual first step in the mortgage process.

Mortgage Application

An application takes place normally after you have an agreement to purchase a property. You may be required to provide additional financial paperwork and information. The specifics on the property are also submitted to the lender for review. They will request a copy of the Purchase and Sales agreement in order to proceed. Your contract will often require that you submit an application before a specific date.

Mortgage Appraisal

An appraisal is mandated by a lender (although you are typically charged the fee for it) to determine the current market value of the home. Appraisers will compare your property to others that recently sold in the area within the last several months. An exact dollar value is provided. Ultimately, the value of the home must justify the amount that the bank is loaning to you.

Commitment

After your financial information and the details on the property are reviewed, the mortgage company provides a commitment letter. This assures the parties that no major problems have been identified and that the lender is somewhat certain that the loan will result in full approval. There may be a few conditions included in the letter such as an employment verification and final credit check. Therefore, it is essential not to complete costly purchases or change your financial condition even after a commitment is issued as it may cause a loan to fall thru.

Clear to Close

A clear to close is basically the final approval of a loan. It indicates that all criteria have been completed and that the lender can send the file to the closing agent. This sometimes takes place within days or hours before the anticipated closing date.

The Closing

The settlement entails signing of documentation and filing of paperwork into public record. Always bring official identification and a money order or bank check for any amount due. Personal checks or cash are typically not acceptable. The exchange of money occurs at or shortly after and the home becomes officially yours!

A Few Final Notes

Deadlines are an important facet of any real estate transfer, so make sure that you know the deadlines and what you must provide to comply with each one. Working with a experienced mortgage professional and real estate professional is a big help. They can provide you with advice and assistance, monitor deadlines, and make it a more positive experience. Contact me, Peter DaMore (Law Offices of Peter T. DaMore Jr.) for additional information on this and similar topics. I may be reached at 781-229-7900 or pdamore@ptdlaw.com.

Veterans have the option of obtaining VA home loans granted by individual mortgage companies but guaranteed by the federal government. The guarantee protects lenders against loss up to a specific dollar amount should a borrower go into foreclosure. With this guarantee, mortgage companies are able to extend veterans options not readily available with other financing. Below is an introduction to the benefits of VA home loans in Burlington MA.

Benefits Of VA Home Loans In Burlington MA

The most well-known features of VA home loans are the options for no down payment and no mortgage insurance. Buyers can borrow up to the entire purchase price, if the appraisal supports the price and the individual lender does not require otherwise. VA mortgages also allow veterans to buy a home by eliminating the additional monthly expense of mortgage insurance, which is normally included in mortgages with low down payments. Other important advantages are…

• Similar closing costs to other loan programs.
• VA loans are assumable.
• No pre-payment penalty.
• Ability to roll in or lower the VA funding fee for the mortgage.

Qualifying for VA Home Loans

To obtain a VA loan, buyers must fit two sets requirements. The first set pertains to their actual service – when time was served, nature of service, and amount of time served. The second set involves the normal credit report and financial analysis by lenders. Veterans can contact any bank offering VA loans to determine eligibility and obtain a pre-approval.

With a pre-approval completed, buyers can then start viewing properties within their price range. Once a property is identified, an offer will be made contingent upon VA financing approval. With a contract to purchase, veterans will then formally apply for a loan and lock in an interest rate. Once the application is approved, a closing can take place. After closing, the loan is reported to the VA. Veterans are only allowed one active VA loan at a time.

This blog is simply a brief overview of the benefits of VA home loans in Burlington MA. For a list of lenders providing VA home loans, contact Peter DaMore at Law Offices of Peter T. DaMore Jr. at 781-229-7900 or pdamore@ptdlaw.com.