3 Ten Year Means What to US Economy

In April 2018, the 10-year US Treasury yield broke through the critical 3% level. This left analyst wondering what it could mean for the future of the US and global economy.

In April, the yield on this important benchmark bond, which is used to set the price for various debt instruments around the world, went a bit above 3%, a level that some in the market say is dangerous for many investments and the US economy. It also is an important psychological level for the markets because there has not been a 3% yield on 10-year Treasury bonds since 2013.

Many finance wonks think the up or down movement of the 10-year Treasury bond is a crystal ball that can tell us when we will have inflation, recession, bull and bear markets, higher and lower home prices, corporate profits, etc.

As yields rise, and they move inversely to the price of the bond, market players expect higher interest rates from banks, such as in the mortgage markets. Because of higher interest rates, it is likely that companies will see higher costs when they borrow money and will not have as much money to increase salaries and to invest and provide returns to shareholders. Because the 10-year note is so important to set mortgage rates, it can reduce people’s abilities to buy homes.

This has been possibly happening in 2018, as mortgage rates have surged past 4.5%, and some analysts think we could see 5% in the next year. Rates have been moving higher than people’s salaries and wages have increased, and this could prevent some people from buying homes, especially in more expensive areas.

Some high net worth bond investors have said this month that if the 10 year yield goes well above 3%, then traders will being to bet that rates could go higher. This could fuel fears that a market crash will occur and could lead to a significant downturn in the stock market.

However, others argue that the US Federal Reserve has a lot of room for additional rate hikes and this will not seriously damage markets. After all, rates have been kept extraordinarily low since the 2008 market crash.

Others say the 10-year Treasury would need to rise above 4% before it started to really compete with the stock market, especially because of the level of earnings per share that people are seeing from the S&P 500 companies.

The stature of the 10-year Treasury is because so many investor regards it as free of risk. It makes it the one asset to which all others are compared to – mortgages, stocks and bonds. Treasuries are considered risk free because they are backed by the federal government and its ability to levy taxes. Stocks and corporate bonds are higher risk and can fail.

How the 10 Year Treasury Rate Affects You

As the yield on the 10-year note rises above 3%, so do the rates on 10 and 15-year mortgages. That is because the investors who buy bonds want the best rate with the lowest return. If the Treasury note rate drops, then rates on other less safe investments may fall.

Mortgage and other rates on other loans will always be higher than the 10-year Treasury. They need to provide compensation to investors for a higher risk of default. Even if the 10-year Treasury rate falls to zero, mortgage interest rates would still be higher. After all, mortgage lenders have to cover processing costs.

When the benchmark Treasury rate rises, it makes it more costly for you to own a home. You are paying the bank more interest to borrow the same amount of money. As home buying becomes more expensive, demand will generally fall.

While some experts worry about the rate on Treasuries rising above 3%, it is important to keep in mind that higher rates generally mean a stronger economy. There is low unemployment and rising wages, so people needing to pay higher interest rates on mortgages and other loans should be able to handle it, at least theoretically. Rates were extremely low for many years after the last downturn, and this recent uptick in rates is to be expected.


References: http://money.cnn.com/2018/04/24/investing/10-year-yield-3-percent/index.html

pre-qual for home loan

What You Need to Know to Pre-Qualify for a Home Loan This Year

It is common for first time home buyers to get tripped up with mortgage pre-qualification. One of the reasons for this is pre-qualification gets confused with pre-approval.

The pre-qualification step is just an estimate of how much of a home loan you can afford based upon the financial information you have for the past two years. This is information that you give to the lender, but they do not verify the information at this point with your financial documents and credit check. With a pre-qualification, you have an idea what you can afford, and you can then narrow down your options and look at homes that you can afford.

For serious home-buyers, the pre-qualification process is one that some buyers overlook. But lending standards are stricter than a decade ago, so it is important to know how much home you can afford with a pre-qualification.

Before you talk to a lender and start to pre-qualify for a loan, here are some tips to remember:

  • A prequalification is not a loan. Many first-time homebuyers think prequalifying for a mortgage is the same as getting a preapproval and loan. It is not. You need to be approved for the loan before there is a financial commitment on your and the lender’s part.
  • You should research the mortgage lender. Getting pre-qualified for a home loan will determine the mortgage amount you get. So, you should get with a mortgage lender who you like and is easy to work with. It is smart to talk to a lender with good reviews and ratings, is highly experienced and can provide good explanations of the entire mortgage approval process. Also, look for a lender who is known to communicate well with the home buyer.
  • You do not have to work with that lender. Whoever prequalifies you for a mortgage is not necessarily the lender you must work with to get the mortgage. Most lenders will obviously encourage you to work with them, but you do not need to do so. When you actually get preapproved for a mortgage, you will more than likely be working with that lender because you will have provided all of your financial information to the lender and put in considerable time in the process.
  • You need to prepare. First time home buyers should prepare for a loan prequalification just like they would for a preapproval. The more precise the information you provide to the lender, the more precise the information will be about the size of the loan you can afford.
  • Do not fudge. Be as accurate as you can about how much you earn, your debts and credit. In the end, the lender will check your financial information anyway, so it will be better for all parties if you are as honest and as accurate as possible in the early stages of the mortgage process.

loan pre-approvalNow that you have a better understanding of pre-qualification, you should learn more about pre-approval. Let’s say that you have been pre-qualified for a mortgage amount of $250,000. To move to the next step, you need to get a pre-approval. This is where you will provide your financial documents and prove to the lender your assets and liabilities. Necessary documents include two years of tax returns, pay stubs, three months of bank statements, and a profit and loss statement for the year if you are self-employed.

Here are some important tips for the home loan pre-approval process:

Know Your Credit Score

You only need to take a couple of minutes online to order a credit report. But far too many people start house and loan hunting without checking their credit score. It is not a good idea to assume you have a good credit score; there is also a chance of identity theft these days.

Your credit score has a major effect on your mortgage rate and approval. Many lenders want to see a credit score of at least 640, and 680 or more is better. If you have a score below 680, many conventional lenders will deny your mortgage application.

Save Money

For the most part, getting a home loan with zero down is not possible today, unless you qualify for a USDA or VA loan. All other options, like the FHA mortgages require at least a 3-5% down payment and putting down more is better than less. The money you have in the deal, the more likely the lender is to approve you. Plus, if you put down 20%, you will be able to avoid paying for expensive monthly mortgage insurance.

Stay at Work

Stay in your job until your mortgage is closed and you have the keys to your new home. You do not want to leave your job in the middle of getting a mortgage. The lender will do a final employment and credit check before issuing the final loan approval.




References: https://www.refiguide.org/first-time-home-buyers-mortgage-guide/

fannie mae no appraisal

How to Refinance with Fannie Mae with No Need for a New Appraisal

Do you have a Fannie Mae-backed mortgage, want to refinance, but do not want to have to do a new appraisal? You might be in luck. Thanks to a recent Fannie Mae program, some homeowners might not need to pay for or wait for an appraisal to do a mortgage refinance.

Rather than wait for an inspection by a human being, Fannie will use the automated valuation model on certain qualifying loans. Fannie Mae already does waive property appraisals on approximately 3% of loan applications that come into the automated underwriting system. Under the new enhanced property inspection waiver system, that number may rise to 10%.

This is a big deal because a human being doing an actual appraisal takes time. You need to schedule it typically a week or so before the day, have him spend several hours doing the appraisal. Then, you wait up to 10 days for the appraisal report. If you need to refinance now, the delay can be a problem. Plus, you can pay up to $500 for a new appraisal. It is a nice thing to avoid when you can, and Fannie Mae may let you do so.

Note that Fannie Mae’s no appraisal option applies only to refinance loans on single family homes and condos with a value up to $1 million. The loan amount must be less than the limits set by Fannie Mae, which will vary by area of the country. Also, the loan to value cannot be more than a certain amount.

On limited cash out refinances, where you take out no cash or just enough to cover closing costs, Fannie Mae may allow you to go up to 90% loan to value. It is estimated that 25% of limited cash out refinances might qualify for the appraisal waiver.

On a cash out refinance, Fannie Mae will go up to 70% loan to value if the home is occupied by the homeowner, or up to 60% if the home is a vacation home or is an investment property.

Also, to Fannie Mae needs to have a physical appraisal for the same property with the exact same borrower in the Uniform Collateral Data Portal. This is a database into which lenders enter home appraisals for any mortgages that are submitted to Fannie Mae or Freddie Mac.

This is a huge treasure trove of electronic information that is collected by human appraisers that Fannie and Freddie can use to come up with automated appraisals, but it only has been in existence for five years. So a homeowner who wants to refinance a loan that is more than five years old probably will not qualify for the appraisal waiver.

All of this data has been collected from appraisers over the years and it can be used for the advantage of Fannie Mae and some homeowners. Some appraisers are not very happy about it, but if you qualify for the waiver, you certainly will be!

However, many experts say the new Fannie program has only a limited effect on appraisers. The Appraisal Institute is not as concerned about the no appraisal offer and is more concerned about the no cost automated appraisal alternative that Fannie Mae introduced a few years ago.

This new program is more geared towards new purchase transactions. This program would be advantageous for many home buyers because it would make it easier to close on a home and reduce delays and costs. This could be very helpful if you are in a bidding war on a property in a hot area of the country.

Even with the Fannie Mae waiver program helping out some refinance customers, refinances continue to slow as of mid-2018. Total mortgage refinances fell five percent for the week ending in May 2018. The higher rates for refinances is turning off many people. A 30-year conventional refinance rate is around 4.8%, which makes it less attractive to refinance. A year ago, refinance rates were in the high 3s to low 4s.

If you want to refinance, you should probably strongly consider it soon because rates seem to be on a long term rising trajectory.




credit unions

My Credit Union Has No Mortgage Insurance on 100 Percent Financing.  What’s the Catch?   No Catch just member benefits.

You have your mind set on your dream home, but have you given any thought yet to who your lender will be? Commercial banks and online mortgage lenders are not the only organizations that can issue mortgages. Credit unions are also a valuable option that might even save you some money. Keep reading to learn how.

Mortgage Overview

Any time you take out a mortgage, there are costs involved, no matter where you get the mortgage. Whoever provides the mortgage to you needs to make money. Closing costs are, for example, usually 3% to 5% of the loan amount. This varies quite a bit depending upon the state and the lender. Also, if you put down less than 20%, you will usually need to get mortgage insurance. Mortgage insurance protects the lender against default. This insurance can cost you at least $100 to $200 per month.

But in some cases, you can save on things such as closing costs and mortgage insurance by using a credit union for your mortgage loan.

Overview of Credit Unions

Credit unions are not for profit, member owned cooperatives that have been increasing their presence in the mortgage market. In 2015, credit unions had 11% of the mortgage market, which was an increase from 7% two years before.

Many experts believe that more Americans are turning to credit unions for their mortgages to save money in various ways. Here are some of the ways a credit union could help you.

You May Save Money

One of the best things about credit unions is they are nonprofit, so they tend to have lower fees on their mortgages. Lower fees and rates at credit unions help the borrower. The credit union usually passes their savings onto the members. At a bank, their sole purpose is usually to make revenue for their investors.

You may find that your credit union is able to charge lower closing costs on your mortgage because they are charged less themselves on some of the costs of finalizing the mortgage. This can really help you to save money when you come to the closing table.

There also are some credit unions that have mortgages with less than a 20% down payment that do not have mortgage insurance. Typically, the credit union will pay the mortgage insurance and charge you a slightly higher rate. But this higher rate will usually be less than what a conventional lender would charge.

Not a Mere Number

When you get a mortgage from a bank or other mortgage lender, you usually are just a number. But with a credit union, it is more likely you will know your servicer. Also, with a regular mortgage, it is very common for the company that collects your mortgage payments to change many times over the life of the loan. This does not usually happen with a credit union.

Staying with the same mortgage servicer can help you avoid late fees that can happen when there is confusion about where to send your loan payments.

Low Credit Scores- Not so Fast

Credit unions can be a good choice for the person but usually they are seeking a borrower that has high credit scores. Gone are the days that credit unions take risks on a lower or middle-income loan to a person with mediocre credit than many other originators. Credit unions do sometimes offer special mortgage programs for first time buyers.

For instance, there is a credit union in Raleigh NC that at one time offered 100% financing for up to $400,000 with no private mortgage insurance. That is not a typical loan that is offered at traditional lenders after the last market crash.

Last, getting into a credit union is not as difficult as you may believe. There are some credit unions that are for specific alumni and other types of groups that you must belong to. But there are other credit unions in large cities that anyone can belong to. In large part, they operate like a regular bank, but you may find that they charge lower fees and have better mortgage programs with lower interest rates than traditional lenders.


References: https://www.bankrate.com/finance/mortgages/get-mortgage-from-credit-union.aspx


How Bahamian Private Mortgage Insurance Companies Are Getting Rich on the Back of American Homeowners.

Americans who want to buy a home with less than a 20% down payment usually must have private mortgage insurance or PMI. Private mortgage insurance is issued from independent insurance companies, with many of them currently located in the Bahamas. The insurance protects the lender if you no longer make payments on your home loan. PMI usually is set up by the lender and is provided by various private mortgage insurance companies.

There is some controversy about what PMI companies are charging customers these days. Although the economy is fairly strong and default rates are low, many Bahamian private mortgage insurance companies are charging a lot, and some say are getting rich off of American homeowners. When you consider the fact that the monthly PMI cost on a $200,000 house can be $150 or more, it is easy to see why some in the industry say these Bahamian insurance companies are charging too much.

If you are putting less than 20% down on your home, you will need to know more about mortgage insurance. Below is more information.

Different Types of PMI

There are two major types of mortgage insurance. The first is the type that is purchased by the US government and is made for FHA loans, also called MIP. The other is PMI that is used on conventional loans that are purchased from the private sector, often these insurance companies in the Bahamas.

What Mortgage Insurance Costs?

On conventional PMI, what you pay will depend upon how much you put down and what your credit score is. It also can depend upon the insurer. But in many cases, the premium for PMI can range from $30 to $70 per month for every $100k you borrow. Thus, you can be paying $150 or $200 per month for PMI, if you buy a typical home of $250,000 or $300,000. Again, this all seems a bit unfair to some people when you consider default rates are very low. But mortgage lenders need to have assurance they will be paid back, so mortgage insurance is a necessary evil for people who put down less than 20%.

Who Is Required to Have It?

When the amount you put down is less than 20%, you must have PMI on a conventional mortgage. These payments are usually paid until you have sufficient equity in the home to have at least 20% equity. This amount is reached both through paying your mortgage on time and any appreciation that occurs. Home values are on the rise to the tune of 7% or so from last year. So, you may find that you have more equity in your home than you think. Some homeowners might be able to cancel their PMI sooner than later.

When Do You Pay?

Most PMI companies have you pay your mortgage insurance along with your monthly mortgage payment. Lenders also have policies in some cases that allow you to pay PMI in a lump sum when you close.

How Long You Need It?

You need to have PMI on a conventional loan until you have enough equity in the home to equal 20% of the home’s value and have an LTV of 80%. However, if you have an FHA loan, you may be required to have mortgage insurance for the life of the loan if you put down less than 10%. This really seems like those Bahamian insurance companies are getting rich in this case!

How Do You Avoid PMI?

For conventional loans, you can avoid paying PMI by putting down at least 20% on your home. There also are some mortgages that will pay your mortgage insurance for you, but this will come with a higher interest rate. This may not be in your best interests if you plan to stay in the home for a long time. You will pay more in interest than it would cost you to pay the mortgage insurance yourself.

On a conventional loan, you can request to have PMI cancelled once you have reached 20% equity on the home. However, if this is occurring through appreciation, you may need to pay for a new appraisal to show the lender that the value of the home has risen sufficiently to give you at least a 20% stake.

The bottom line is that MPI may seem unfair and that some offshore insurance companies are getting rich off of you for no reason. But it is important to remember that the lender has a higher risk when you put down less than 20% on your home. By paying mortgage insurance you are protecting the lender, and it allows you to get into a home of your own much sooner than you otherwise would have.


References: https://www.zillow.com/mortgage-learning/private-mortgage-insurance/

CFPB Legal Capacity Diminished by Trump.  All Bark No Bite Threat to the Banking System.  How Does this Affect Mortgage Products?

Since President Trump took office, he has been working hard at scaling back parts of the Dodd Frank Act, including the legal capacity and scope of the CFPB Consumer Finance Protection Bureau. Director Mick Mulvaney has been busy with a number of changes that some say will take the bite out of the agency and affect consumers and how they get mortgages.

When Mulvaney became the acting director of the CFPB in January, he told the agency staff that the philosophy of the previous director was to push the envelope in its mission to root out what the previous director said were ‘the bad guys’ in the financial world.

Mulvaney has said that the notion of pushing the regulatory envelope scares him somewhat; he thinks it is inappropriate for any federal government entity to push the regulatory envelope looking for a ‘bad guy.’ Mulvaney noted that he would only look to file lawsuits against unavoidable and quantifiable harm. The agency is relying more on its efforts for rule-making as a change engine rather than enforcement, so the CFPB is not looking as much at lawsuits and fines to scale back bad financial behavior. Rather, the CFPB is looking to create and implement new rules, rather than changing dangerous financial practices.

In the several months since Mulvaney has been leading the CFPB, he has brought in policies that are reducing rulemaking, enforcement and personal data being collected. Some argue that enforcement was the biggest area the CFPB has had an impact on yet. The new rules for payday lenders, mandatory arbitration and prepaid cards were thought to be major victories for the CFPB, but they all are being slowed or killed since Mulvaney took leadership.

The new direction of the CFPB has had many fearing that Mulvaney would actually shut down the agency, or at least gut it from the inside. Mulvaney has told people in the agency that the law does not allow him to actually shut down the CFPB. But there is no question he is working to scale back its ambitions. This past January, the acting director requested the Federal Reserve not give the CFPB any money for Q2 2018. Instead, he said the CFPB should use some of its $177 million reserve fund to handle current operations. With this new mission being laid out by the Trump administration, it is making clear that the CFPB is going to be smaller, quieter and not as active a financial regulator.

The CFPB and the Mortgage Markets

One of the aspects of the Dodd Frank Act that was seen as important was attempting revamp how mortgages were underwritten in the US. Before the last crash, it was possible to get a mortgage with limited assets, little documentation, and even without proof of employment. These days under Dodd Frank and the CFPB, it is difficult to get a mortgage unless you actually can prove that you have income and a job. This is not going to change under the different scope of the CFPB.

The mortgage market in many ways is as healthy as it has been in a long time. While interest rates are considerably higher than they were a year ago, incomes are also higher, and unemployment is lower. As the economy is getting better, mortgage rates continue to go up, with a conventional, 30-year mortgage rate now at 4.75%.

The higher rates seem to have been driving more people buying homes because some are afraid that prices will continue to climb. Many financial experts expect mortgage rates to go through the important barrier of 5% in the not too distant future.

Mortgage rates mostly depend upon what investors expect. Good economic news in recent months conversely tends to be bad news for interest rates because a strong economy increases fears about inflation. Inflation leads to some fixed rate investment products such as bonds to lose their value. The possibility of inflation makes bonds not as appealing. When fewer people want bonds, the price for them decreases, and rates will rise in response as more people are putting their money into other investments.


References: https://www.theatlantic.com/business/archive/2018/01/cfpb-trump-mulvaney/551504/

mortgage insurance premium

Can I Recover Mortgage Insurance Premium Payments that Have been Collected for Years with No Basis from My Loan Servicer?

Many people do not like paying for mortgage insurance because they feel like it is an expensive waste of money. If you have less than 20% equity in your property on a conventional mortgage, you need to pay for mortgage insurance each month to insure the property in case of default. If you have an FHA mortgage, you are generally required to pay mortgage insurance for the entire life of the loan, unless you put down at least 10%.

People dislike mortgage insurance so much they sometimes wonder if there is any way they can get their mortgage insurance premiums back? After all, they have paid their mortgage on time, so why shouldn’t they get their money back? Generally, this is not possible. The reason is that the lender is taking a higher risk when you have a lower down payment and they must be reimbursed to a certain degree for taking that risk. Mortgage insurance is the price you pay for being able to buy a home with a lower down payment and lower credit score (in some cases).

Avoiding PMI Loans

People hate PMI so much, but there are simple ways to not pay it. You simply can make a 20% down payment and never worry about PMI at all. This can save you thousands of dollars per year in mortgage insurance costs. On the down side, you could be limited in your house budget if you put down 20%. On a $200,000 home, that is $40,000. This is a lot of money to save up and not everyone can do it.

FHA Loans and MIP

If you an FHA insured loan today, you generally need to pay mortgage insurance forever with FHA. This will continue for the life of the loan, unless you put down 10%. In that case, mortgage insurance can be cancelled after 11 years.

Lender Paid Mortgage Insurance

For some people, putting down 20% for their down payment is just too much. If this is the case, you may want to look at lender paid mortgage insurance premium. With LPMI, the lender pays the mortgage insurance when the loan is closed, and the monthly cost of the mortgage insurance is eliminated. It is built into the loan cost. The lender paid mortgage insurance option can put a lot of money back in your pocket if you do not want to put down 20%. LPMI programs are generally only an option on conventional loans.

Cancelling Mortgage Insurance

Yes, you can get rid of mortgage insurance in many cases. Once you reach 20% equity with a conventional loan, you can request PMI be cancelled. Most situations will necessitate an appraisal to determine what the value of the home is so you can show the lender you do have a 20% equity stake.

With conventional loans, you will need to make a written request to the lender once you have 20% equity in the property. It will automatically come off after you reach 22% based upon the amortization schedule in your mortgage paperwork. Automatic cancellation will not happen if you get to this point earlier in the schedule. You will need to pay for an appraisal to confirm the value.

To cancel your PMI, you need to be current on your loan payments for at least the past year for the lender to listen to your desire to cancel PMI.

Overall, you may not like mortgage insurance, but it does provide you with a way to get into a home well before you have a 20% down payment saved up.


References: https://www.quickenloans.com/blog/dont-want-pay-mortgage-insurance-heres-avoid

Mortgage Insurance Rates Going Up with Interest Rates.  What Does this Mean to First Time Homeowners?

Higher mortgage interest rates and mortgage insurance rates are making it harder for first time home buyers to get a mortgage in 2018. While the US economy is doing well, the higher rates make it more challenging for buyers with no equity in a previous property to be able to afford a home.

In popular metro areas such as Denver, buyers are hurrying to close a deal before the rates get much higher, which stand at approximately 4.7% as of May 2018. While these rates are low in historical terms, they are at least a point higher than last year.

In Dallas some buyers are moving further out to find homes they can afford, as prices in this area are going up as much as 10% per year. In Los Angeles, there is a massive home shortage and most homes that go up for sale receive several offers.

The problem with higher interest rates is that just a .5% higher rate can increase your monthly payment and add tens of thousands of dollars of interest payments over the life of a 30-year mortgage. In 2018, home prices are rising faster than incomes in much of the country and the higher rates can be more than enough to shut many first-time buyers out of the market. Plus, higher mortgage insurance costs are occurring as the hot housing market is allowing insurers to raise their rates as well. Mortgage insurance rates being higher also affects first time home buyers. If you put down less than 20% on your home, you must pay for mortgage insurance unless you have a VA mortgage. Most first-time home buyers have difficulty coming up with a 20% down payment, so higher mortgage insurance rates affect them especially.

First time home buyers can expect that a combination of low inventory, higher prices, higher mortgage rates and higher mortgage insurance rates will make it harder to buy a home in 2018. Some economists think the economic indicators mean US home sales this year will remain flat even though the economy is strong as a whole. For example, a buyer in Colorado highlighted by USA Today this month said that he put in 11 offers on homes and lost out every time to other buyers who offered more money. Rising rates made it harder for him to afford a home.

He said that the rates continued to climb, and the more it happens, the smaller home you have to buy. The man eventually settled on a new $370,000 townhome with an interest rate at 4.7% but he cannot lock his rate until later in May, so it is possible that he could have to pay more. Some industry experts think we could see 5% rates before the end of 2018. This could really put a damper on the housing market for first time buyers.

Right now, the national median home price is $225,500, which is 3.8 times the median income of $59,000. In cheaper parts of the country in the Midwest, it is easier for first time buyers to get into homes. In Pittsburgh, a median priced home is only $125,000 which is only 2.2 times the median income of the area of $56,000. But in Los Angeles and Seattle, the median price of homes is as high as $600,000, which is eight or nine times the median income of $66,000. This is putting first time buyers completely out of the market.

If you are a first-time home buyer and are worried about being priced out of the market with higher rates, mortgage insurance rates and higher prices, here are some tips:

  • Ask your lender about first time home buyer programs. Some lenders work with state agencies to provide first time home buyers with rate discounts, help with down payments and educational resources. You may be able to find a grant to help you with your down payment, for example.
  • Look for lenders that offer government backed loans. Government backed mortgages are good choices for many first-time buyers. They offer low rates and low-down payments. FHA home loans are great for first time buyers with 3.5% down payments and rates that are below market.
  • Make sure you very carefully shop mortgage interest rates. You may be enticed by a super low interest rate in an advertisement. But this number often does not include all the closing costs and fees and could be for only the best credit borrowers. You are better off looking at APRs which have all costs figured into the number.

The reality is that it may be harder to find a home to buy in some areas of the country right now for the first-time home buyer. It really comes down to what part of the country you are in. But there are often options available to help you to get into a home loan you can afford so you can enjoy the American Dream.


References: https://www.usatoday.com/story/money/personalfinance/real-estate/2018/04/18/mortgages-homeownership-get-tougher-rates-rise/527530002/

primary residence

Can I Consider Two Homes My Primary Residence If I Spend Time Equally?

Anytime you apply for a mortgage, you must tell the lender if the home is going to be your primary residence, your second home or a vacation property. The status of the home is important because second homes and rental properties are a higher risk for the lender. Any home that you do not live in most of the time is more likely to result in a mortgage default.

Find out how the best mortgage lenders define primary residence in today’s home loan guidelines.

If you are financing a second home, usually the lender will charge a significantly higher mortgage rate for that home. Also note that most government backed mortgages do not allow you to finance second homes or rental properties. But what if you have two homes and you are living in each one about 50% of the time. Can you finance each one as your primary residence? Experts say this depends upon the circumstances. Banks and mortgage lenders will usually solve this issue by looking at the particulars of your case.

For example, the lender will look at how far apart your homes are, and whether your job creates a need to have two homes. Also, the lender will look at the size and location of your family to determine if you really need to have a second home as your primary residence.

There are some limited exceptions where government backed mortgage providers will consider allowing you to have a second primary residence:

  • Relocation: It is possible to get a second FHA home mortgage on another primary residence without selling the old home. But you need to be relocating at least 100 miles, and the relocation has to be related to your job. For example, you might work from an office in your town and also work at the company headquarters in another part of the state. If you buy a home near the other office, you might be able to finance the new home as a primary home without selling the first one.
  • Larger family: You also can be eligible for another primary residence if your family is too big for your current home, and you have a loan to value that is 75% or lower. This means you must have at least 25% equity in your current home. This can be helpful if you are moving other members of the family in to share the expenses or to take care of aging parents or relatives.
  • Break-Ups: You might be allowed to have another primary residence mortgage if you are leaving the current home permanently, but the co borrower is continuing to live there.
  • Co-Borrowing: If you are co borrower on another person’s primary residence but you do not live there, you can usually finance your own primary residence. But remember that being a co borrower will create contingent liability. This means you could be responsible for making the payment on that property if the co borrower does not meet their obligations.

If you want to buy a primary residence while you still have ownership of the other property, you will need to show the lender the transaction makes sense. If you are buying a new home in the same city, and you want to convert your old home to a rental property, you can help make your case to the lender by showing a rental agreement with your tenant.

It also is required to have at least 25% equity in your old home to count your new one as your primary residence. This requirement is still in effect from the old days when people who were underwater on their old house were buying new homes in the same city and walking away from their previous mortgage.

The bottom line it is possible in some cases to have two primary residences for mortgage purposes. Just make sure that you do not tell the mortgage company that one home is your primary residence and then fail to live there the required amount of time. Lenders have been known to do post-closing investigations to make sure you are actually living where you say you are. If they discover you are not living in the home, they can call the loan due. It also is mortgage fraud to tell the lender you are going to live somewhere and not actually live there.




Is Home Refinancing a Thing of the Past, Where Do Americans Get Cash Now?

Interest rates for both traditional and cash out refinance mortgages are on the rise in 2018, with rates for firsts around 4.5%. The higher rates that have been coming due to better economic indicators and Federal Reserve rate increase hikes, have put a bit of a damper on refinances for the past few months.

What is the outlook for cash out refinances? Is it a thing of the past, or will people still do refinances in the coming years? Below is more information to consider to help you make your home refinancing decision.

Overview of Home Refinancing Loans

Refinancing your first mortgage can be a good idea if you can save interest and lower your rate. Refinancing with cash out may be a smart move if you can save on your rate and also pull out cash for things that you need. According to financial experts, you may want to consider a refinance in 2018 in these situations:

  • You can get rid of PMI: With a conventional loan, you are required to pay PMI until you have reached 20% equity. One of the most popular refinance products is the no PMI mortgage, because borrowers can get rid of the PMI payment monthly. Homes have been appreciating nicely in 2018 with 7% increases overall according to some surveys across the country. You could find yourself with more equity than you thought you would. If so and you are near 20% equity, refinancing to get rid of mortgage insurance can be a good idea. If you have an FHA-insured mortgage and are nearly 20% equity, consider a refinance into a conventional loan to escape mortgage insurance; you generally must pay mortgage insurance on FHA loans for life.
  • You can go from an ARM to a fixed rate mortgage: If you have an adjustable rate mortgage, you may want to go into a fixed rate loan with your refinance. This will provide you with more stability over time as far as your payment. But rates have gone higher since 2017, so you could find the rate is going to be higher with a fixed mortgage. Consider a 15 year fixed rate mortgage to score a lower rate, if you can handle the higher payment.
  • You are able to cut your rate by 1%. Many experts say it is worth refinancing if you can reduce your rate by 1%. Remember that every new loan you do incurs thousands in closing costs, so you really do not want to refinance your loan unless you can save a lot on the interest rate.

If you are in the following situations, you may not want to refinance right now:

  • There is too little difference between your current rate and new rate. Rates on first mortgages are 4.5% or higher right now. If you have a rate that is close to that, you will probably not want to refinance. You also should resist the temptation to refinance anyway and pull out cash. The major reason to refinance should always be to get a lower interest rate.
  • You want to pay off old debts. Some people like to pull out cash with a refinance to pay off debt. But you are transferring your unsecured debt to a debt secured by your home. If you fail to pay your mortgage, you could end up losing your home. Many people argue the only reason to pull out equity with a refinance is to do something that will pay you back, such as renovating the home or paying for college tuition. Buying investment property is another possibility.
  • The breakeven point is not in your favor: If the rate is not low enough, you may not end up saving enough money to outweigh the cost of refinancing. If your refinance saves you $100 per month and the refinance cost $4000, you have to pay more than four years to make the deal break even.
  • You have a small amount of home loan left to pay: If you only have a few years left on your mortgage, you may find there is little financial benefit to refinance now. You could get a lower monthly payment, but you will pay thousands in closing costs and fees.


The bottom line on home mortgage refinancing in 2018, especially when taking cash out, is to tread carefully. Rates are higher now and you may have a harder time saving money with a refinance after you account for closing costs. Another possibility is to consider a second mortgage instead of replacing the first mortgage. Your second mortgage rate could be in the 6% range, and that would allow you to access some of that built up equity at a still low interest rate.

It appears we are in a long term rising interest rate market, so for now, we expect to see fewer people taking advantage of refinances as the cost of borrowing money gets more expensive for the foreseeable future.