Buying a Home in a Seller’s Market

We are in the midst of a booming seller’s market. In real estate, a seller’s market occurs when the demand for homes is greater than the supply. This is the inverse of what happens in a buyer’s market, which is when there is plenty of supply but not as much demand for houses. As the name suggests, a seller’s market is great for sellers but can be difficult to navigate as a buyer. Here are some tips for buying a home in a seller’s market.

Get Prequalified

Getting prequalified for a mortgage is incredibly important in showing sellers you are serious about buying. Prequalification is an estimate of how much you can afford to borrow from a lender, allowing you to explore specific loan options fitting your financial situation. Knowing that you have talked to a lender and been prequalified shows a seller that you will actually be able to secure a mortgage and therefore are serious about your interest and offer. Prequalification also helps you in your home search as it allows you to set a realistic budget so you don’t waste time going after homes that cost more than you’re able to afford.

Work with a Knowledgeable Real Estate Agent

You always want to work with a savvy agent when buying a home, but it’s especially important when searching in a seller’s market. You need to choose someone who is fast to communicate both with you and on your behalf to others. It’s also in your best interest to choose someone who has knowledge about and experience in the neighborhoods you’re looking to buy in. In some cases, your agent can even offer insight into upcoming inventory which can give you an edge in securing a home as soon as it hits the market.

Stick to a Budget

When a bidding war starts—which is likely in a seller’s market—it can be easy to get carried away. When starting your home search, set a strict limit on how much you’re willing and able to spend on a home. Exceeding your price limit may get you into the home you want, but it can (and often will) cause financial stress and hardship in the future, so it’s important to consider the ramifications of going outside your budget. Look at the bigger picture, like how much the home is actually worth and what kind of payments you can truly afford.

Give Your Best Offer

A seller’s market is not the time to go in with lowball offers. It is common in a seller’s market to see homes go for above asking, sometimes considerably so. Work with your agent to determine what a strong, realistic offer is going to look like for a given property. Be prepared for bidding wars to break out.

Temper Your Expectations

When inventory is limited as it is in a seller’s market, the “perfect” home may not come on the market when you’re looking—and even if it does, there’s no guarantee you’ll be the one to buy it. As the saying goes, beggars can’t be choosers, and in a seller’s market, you can’t be too choosy. This isn’t to say you should sacrifice your list of must-haves, but make exceptions to things that can be changed. For example, you can always add on or renovate in the future, but you can’t change the home’s lot size or location. It’s also not the best time to ask for add-ons in your offer, like inclusions or requesting updates be made. In a seller’s market, the seller has the power, so buyers should seek to be as flexible as possible.

Personalize Your Offer

In a seller’s market, sellers are often faced with multiple offers at once. Sometimes, it’s the little things that can make a difference. Consider writing a letter to the seller to go with your offer. Share a little about yourself and explain what you love about the home. This is your chance to appeal to their emotions, not their bank account. Keep it short and sweet and be sure to say thank you. If your offer is one of two comparable bids, this level of added personalization may make yours stand out to a seller.

Are you ready to take on the challenge of buying in a seller’s market? Talk to one of our experienced Loan Officers today to learn more about your mortgage options!

Federal House Financing Agency Announce New Refinance Program for Low-Income Borrowers

The FHFA has announced a new refi program to benefit low income borrowers with single family mortgages. These mortgages will be backed by Fannie Mae and Freddie Mac. This new program is designed to help those who were not in a position to take advantage of 2020’s low rates.

This new option could save borrowers and average of $100-$250 a month on their mortgage but lenders will be required to ensure it saves the borrower at least $50 a month. Simultaneously, the borrower’s interest rate will drop by at least 50 basis points. Lenders will also provide a maximum $500 credit for an appraisal if the borrower is not eligible for an appraisal waiver.

“We look forward to implementing Fannie Mae’s new RefiNow option as soon as possible to ensure all eligible homeowners are able to avail themselves of this money saving opportunity,” says Fannie Mae’s CEO, Hugh Frater.

Qualifications for this program:

  • Must own a GSE-backed mortgage
  • Income must be at or below 80% of the area’s median income
  • Current on mortgage payments for the last 6 months and missing no more than 1 payment in the last year
  • Must not have a mortgage with an LTV ratio greater than 97% and DTI cannot be higher than 65%
  • FICO score must be 620 or higher

The Federal House Financing Agency plans to roll this out to those eligible tentatively beginning this summer.

Contact one of our Loan Officers today to see if you qualify!

Source: FHFA releases new refi option for low-income borrowers – HousingWire

7 Ways to Avoid Mortgage Sabotage

Homebuyers are often not aware of what can cause issues within the home loan process and potentially sabotage your goals. Read these tips to learn some ways to avoid home mortgage sabotage!

Credit Cards and New Debt

Do not apply for any new credit of any kind! That creditor will show up on your credit report, and the lender will have to verify there is no new outstanding debt. If you are planning to add debt or pay debts off for your home mortgage closing, wait until you have spoken with your Loan Officer. A paid debt may not show on your credit report, and the lender will have to re-verify each creditor’s current balance, which takes time. It may be possible to pay off those debts at closing, with no effect on your approval process. This also includes making any hefty purchases for your new home, such as furniture, appliances, etc.

Do Not Move Cash/Savings Around

Lenders must verify all funds before your home mortgage closing, including the source of those funds. Moving assets around can create a paper trail nightmare. The best advice is to leave everything where it is, even if the purpose of the move is to pool your funds for buying the house. After your accounts have been verified and the lender gives you the “ok”, you can consolidate your accounts if needed.

Large Deposits

All sources of funds for the transaction must be verified. The lender will be looking at any large deposits into your asset accounts (checking, savings, money market, etc.). You should be prepared to document the source-such as a copy of a paycheck, bonus check, money from the sale of an asset, etc.

Do Not Pack Financial Papers

Keep all pages of your tax returns, along with any W-2’s, 1099’s, or K-1’s and any other financial papers from the past two years in a handy place. If you sold a home in the past two years, have your (HUD-1) Settlement Sheet handy. You may have to provide more items, which your Loan Officer will outline.

Become a Paper Hound

Save all pages of all your bank statements and pay stubs from now until closing. The lender will need these while they are processing your home mortgage, so please make sure you keep them handy!

Gifts

Gifts from relatives are very common in the purchase of a home. However, there are specific ways a gift must be handled to avoid a paper trail nightmare. If you are receiving a gift, hold off on accepting the funds until you have spoken with your Loan Officer. There is a Gift Letter form you may use which provides instructions.

Selling Something?

If you are selling an asset such as a car, an antique, or baseball card collection to come up with the cash for closing, make sure you document the asset. For example, if you purchase a car, obtain the check from the buyer, car title, and a bill of sale. You may need to get a certified appraisal for the item.

When in doubt, always consult your Loan Officer. They will help guide you through the home mortgage process and answer any questions you might have along the way. Are you looking to purchase a home? Reach out to one of our Loan Officers today! And for more information on what you should avoid during the home mortgage loan process, click here.

What is LTV and Why is It Important?

When researching the home buying and lending process, odds are you’ve encountered the acronym LTV at some point. But what does LTV mean and why does it matter? Read on to find out!

What is LTV?

LTV stands for loan-to-value ratio. Expressed as a percentage, LTV is the difference between the mortgage amount and the market value of a property. This compares the size of your loan to the value of the home you’re purchasing.

Why is it Important?

A loan-to-value ratio is very important to your lender because it represents how risky your loan is to them. The more money you borrow compared to the value of the home, the riskier the loan is to your lender because they have more money at risk if you were to default on the loan. The lower your loan-to-value, the less risky it is to a lender. Therefore, a lower LTV can improve your chances of getting a lower interest rate; conversely, a higher LTV may result in a higher rate.

How to Calculate It

A loan-to-value ratio is easy to calculate. Simply divide the loan amount by the purchase price or, in the case of refinances, the appraised value. Let’s say you want to buy a home valued at $300,000 and are able to put down 15% which is $45,000. Take $300,000 minus $45,000 to get $255,000 as the loan amount. To calculate LTV, divide $255,000 (loan amount) by $300,000 (home value) to get 0.85. Loan-to-value is always expressed as a percentage, so a result of 0.85 would translate to an LTV of 85%. In general, the higher your down payment, the lower your loan-to-value.

What is a Good LTV?

What is considered a “good” loan-to-value ratio depends on what kind of loan you’re applying for. When it comes to conventional mortgage loans, 80% is generally considered a decent LTV ratio. This makes sense when you consider that many lenders look for buyers to pay at least 20% as a down payment. That said, if your LTV is higher than 80%, it doesn’t necessarily mean you won’t be approved or will be saddled with a higher interest rate. There are also some programs that allow for higher loan-to-value ratios. FHA loans allow down payments as low as 3.5% which means a loan-to-value of 96.5% is acceptable. USDA and VA loans may allow no down payment at all, meaning an LTV of 100% can even be acceptable. In general, you still want to aim for a lower loan-to-value, but having one that’s higher doesn’t have to make or break your ability to get a desirable loan.

Want to know more about calculating your home equity? Read more here.

Are you thinking about buying a new home or refinancing your current home? Contact one of our knowledgeable loan officers today to learn more and explore your options!

Meet Your Mortgage Team!

When starting the home loan process, you expect to work with a Loan Officer. But you might not be aware of all the behind-the-scenes mortgage team members that work hard to ensure your loan process goes smoothly from application to closing! So, let’s get to know them!

Your Mortgage Team Consists of:

Loan Officer

Your Loan Officer will be your first stop in the home loan process. Your realtor will be able to suggest a trusted Loan Officer but ultimately the decision will be up to you. Purchasing a home is a big decision and you want the best on your side! Your Loan Officer will gather the documentation needed to get your application and prequalification started and will assist you in choosing a program that will best suit your needs!

Production Assistant

Not all Loan Officers have a Production Assistant but if they do, you may often be in contact with them as well. The Production Assistant is an additional set of hands that can assist in collecting paperwork, communicating with various members of the mortgage team, and provides overall support to ensure a hassle-free home loan process.

Underwriter

After the Loan Officer collects what is needed for your loan application, they send it over to the Underwriter for approval. The Underwriter will make the decision whether to make a loan based on your credit, employment, assets, and other factors. Then they will match this risk to an appropriate rate and term or loan amount.

Loan Processor

Another member you will be in contact with throughout the home loan process is your Loan Processor. Your Loan Processor works with you to collect all the necessary documentation for your loan file. This includes pay stubs, W-2 forms, bank statements, and credit report explanations. They work as a liaison between you and the underwriter, title company, and other parties that may be involved to get you to the closing table.

Closer

Finally, we are at the finish line! The Closer reviews all loan-closing documentation to ensure accuracy and that your mortgage loan is fully compliant. They review for errors and work alongside the Processor, Loan Officer, and title company to get anything corrected as need. Once your closing date approaches and all documents are ready, the Closer prepares the loan package and forwards it to the title company for settlement!

The home loan process may seem a bit daunting at first but having the right mortgage team by your side makes all the difference! At First Home Mortgage, we pride ourselves on having a highly qualified mortgage team to ensure you have a stress-free homebuying experience. To find a Loan Officer in your area, visit www.firsthome.com/loan-officers.

To learn more about the home loan process, read our blog post about home loan milestones.

Spring Cleaning Tips

The return of springtime also marks the return of the annual spring cleaning ritual many partake in. Here are some tips for tidying and sprucing up your space this spring.

Spring Cleaning Tip #1: Go Room by Room

When cleaning, taking a room-by-room approach can make things much more manageable. Consider making a checklist for each room you want to tackle, as your tasks for one room may be far different from another. You can prioritize rooms more in need of improvement. Avoiding bouncing from room to room can help you stay on task and avoid feeling overwhelmed.

Spring Cleaning Tip #2: Prioritize Tasks

Figure out what’s most important to you. You may want to consider tackling projects and tasks you normally put off or avoid so you get them out of the way. However, it is important not to take on too much all at once which can cause quick burnout. If you need help gaining momentum and getting motivated, try taking on some manageable tasks you know you can knock out easily first. Your main priorities really depend on how much needs to get done and what you feel is most important to accomplish.

Spring Cleaning Tip #3: Focus on Clutter

As important as actual cleaning is—like mopping, dusting, and wiping down baseboards—focusing on downsizing clutter can be particularly important and impactful in sprucing up your space. Identify things you want to donate or sell, things you want to throw away or recycle and things you want to keep. Once you’ve collected items you want to keep, make sure they all have a particular place to be stored so you always know where to put them away when cleaning throughout the rest of the year.

Spring Cleaning Tip #4: Don’t Forget About Outside

Your outdoor space needs attention, too, especially if it was neglected during winter. Clean and declutter your garage just as you would a room in your house. Remember to clean your gutters, fences, windows, patio furniture, and siding as needed and take care of your lawn.

Spring Cleaning Tip #5: Work on Creating Good Habits

Though spring is a great time to get some serious cleaning done, you can cut down on how much you have to do next spring by cultivating positive habits to practice all year long. Start each morning by making your bed. Try taking 15 minutes at the end of every day to tidy up and put things away. Designate certain days for certain tasks, such as laundry on Sundays and vacuuming every Wednesday. Continue taking a room-by-room approach when cleaning.

Are you thinking about refinancing your home or buying a new one? Contact one of our knowledgeable loan officers today to explore your financing options!

Managing Your Finances Before Buying a Home

Buying a home is one of the biggest investments you’ll make in your lifetime, if not the biggest. There are things you can do to better prepare financially.

Save for a Down Payment

While there are loan options available that allow for little to no down payment, you may find that putting down the standard 20% to avoid private mortgage insurance is in your best interest. No matter what percentage you’re putting down, you don’t want to completely drain your entire savings. If you do, you aren’t leaving yourself with money for closing costs or any potential unexpected emergencies that may arise. Try earmarking savings specifically for a down payment, but don’t discontinue paying your bills or saving for emergencies. If you’re really serious about saving for a down payment, consider tightening your budget and cutting back on unnecessary spending.

Improve Your Credit

The higher your credit score, the better position you’re in to secure a desirable rate. If your score isn’t where you want it to be, there are things you can do to improve it such as making payments on time and keeping credit utilization below 30%. You can also dispute errors with your credit report directly with the credit bureau. You should avoid opening or closing lines of credit as this can negatively impact your credit score.

Pay Off Your Debt

Paying off your debt is always a good thing, but it can be especially important when preparing to buy a home. The lower your debt, the better your debt-to-income ratio (DTI) which is an important metric used by lenders when determining how much you can afford and your general eligibility. Additionally, paying off debt can help raise your credit score. Plus, the less debt you have, the more money you have to put toward a down payment and other expenses that come along with buying a home.

Get Pre-Qualified

There are many benefits to getting pre-qualified. Pre-qualification gives you an estimate of how much you can afford to borrow which helps you explore loan options best suiting your situation and set a budget as you begin your home search. When the time comes for you to actually buy a home, pre-qualification signals to sellers that you are serious about buying and can give you an edge over non-qualified buyers.

Are you thinking about buying a home? Contact one of our qualified loan officers today to learn more!

The Dangers of Rate Shopping

Buying a home will most likely be the largest purchase you ever make.  With that in mind, you might assume having the lowest interest rate is best, but this is not always the case.  The lowest advertised interest rate may not be your best option.  Some lenders and mortgage brokers advertise low rates but don’t inform you of all the additional points and fees that come with the mortgage.  Here are a few tips to take into consideration before rate shopping.

Rate Shopping Tip #1: Look at Points and Fees

Always ask about points, lender fees, broker fees, and settlement costs. Points are pre-paid interest that affects the quoted interest rate.  You can ask to have your points quoted as a dollar amount instead of just a percentage.  For example, on a $200,000 loan, one point would equal $2,000.

Rate Shopping Tip #2: Shop Smart

Interest rates fluctuate daily. Talk to your Loan Officer about when the best time to lock in on a rate is.  First Home Mortgage values honesty and service, so any questions you may have for your Loan Officer will be answered diligently, fairly, and in regard to your best interest. If you contact different lenders, make sure you provide each lender with the same information.  Such information will include the quality of your credit, location, type and use of your property, the size of the down payment, and/or the amount of home equity you have.

Rate Shopping Tip #3: Finding the Best Lender

Customer service may be the most important consideration when shopping for home financing. During the loan process, you should feel comfortable disclosing your financial information and asking questions. A trustworthy lender will be responsive and will assess your situation carefully to best suit your home buying needs. Make sure to choose a lender who can offer personalized options and takes the time to understand your goals.  Just remember interest rates don’t always matter.

If you have any questions or would like to get started on this home-buying journey, contact First Home Mortgage Corporation today!  We provide the mortgage you need to make “home” happen by delivering customer service that not only fulfills goals but exceeds expectations.

5 Misconceptions About Home Buying

Many people have preconceived notions about how to buy a house and what it takes to do it, but they aren’t always true. There are many pervasive myths surrounding the home buying process; read on for 5 misconceptions about home buying.

The First Step is to Look for a House

When someone is interested in buying a home, often times the first thing they do is start looking at houses. Before looking at homes, you should consult with a Loan Officer about getting pre-qualified for a mortgage. There are lots of benefits to prequalification including getting a more concrete estimate of how much you can afford and signaling to sellers that you are serious about buying.

Down Payments Are the Only Up-Front Cost

As nice as it is to think the only up-front cost of buying a home is the down payment, that’s not true. It’s important to keep closing costs in mind. A buyer can generally expect to pay closing costs between 2% to 5% of the loan amount, so it can be a considerable amount. Don’t forget about the cost of a home inspection, too. There are also moving costs to consider as well. It’s important not to completely drain your savings to put towards a down payment as there are these other costs to keep in mind (plus you should keep some money saved for potential emergencies and unforeseen expenses).

You Must Make a 20% Down Payment

The rule of thumb when it comes to down payments is that you should put down 20%. This doesn’t have to be the case. There are an abundance of down payment assistance programs and specialty loan programs available that allow for smaller down payments. For example, FHA loans allow for down payments as low as 3.5%. However, bear in mind that in most cases, you’ll have to pay private mortgage insurance (PMI) or mortgage insurance premium (MIP) when putting down less than 20%.

Your Credit Score Has to Be High

When it comes to buying a home, the higher your credit score, the better. However, you don’t necessarily have to have a stellar credit score to qualify for a home loan. There are even some loan options specifically tailored towards people with lower credit scores, such as FHA loans. Additionally, there are things you can do to improve your credit score so you’re in a better position to buy.

Don’t Buy a Home in Fall or Winter

Spring is notoriously the most popular time to buy a home, but that doesn’t mean you can’t, or shouldn’t, buy during other parts of the year. While many assume home buying in the fall and winter is something to avoid, it doesn’t have to be. There can even be benefits to home buying during the colder months, such as less competition from other home buyers and particularly motivated sellers.

There are a lot of misconceptions about home buying, so seeking the help of real estate and mortgage professionals can help you clarify what’s true and get you on the right path to homeownership. If you’re interested in learning more about the mortgage process and exploring your options, contact one of our experienced Loan Officers today!

Protecting Your Personal Information Online When Applying for a Mortgage

In this day and age, parts of the mortgage process have evolved to include virtual components. It is essential that you take steps to safeguard your personal information and data online. Here are some tips to keep in mind:

Apply with a Reputable Lender

It’s important that you choose a trusted lender to handle your mortgage needs. Be sure to do your due diligence when picking a lender and certainly before sending them any information. There are scammers out there who create fake mortgage websites with the goal of collecting your personal information. Check your lender’s NMLS number to ensure it is valid and correct and look for reviews online or referrals from people you know.

Use Secured Networks

You want to use a secured network for all your online dealings but especially when submitting personal information. Avoid using public networks. Make sure you’re on a password protected network that you trust so hackers can’t get in and steal your data.

Be Cautious Responding to Emails

Even if an email appears to be from your bank or loan officer, if it seems suspicious, don’t answer it. Beware of phishing scams that imitate legitimate email addresses with the purpose of gathering your personal information to use and exploit. If you’re unsure an email is on the up and up, reach out to your loan officer to confirm the email is actually from them before you click any links or submit any information. When possible, you should avoid sending sensitive information or documents over email, and instead opt to deliver this information in person or through a secure online portal.

Use Strong Passwords

When creating any online account, you want to make sure you have a strong password. This is especially the case when it comes to accounts associated with your mortgage. Seek to not only meet password length and complexity requirements but exceed them; the stronger the password, the better. Avoid using the same password across platforms. Enabling two-factor authentication when possible is also a good idea as it adds an additional layer of security when signing into accounts.

Trust Your Instincts

If something seems fishy to you, contact your loan officer directly to ensure everything is legitimate and you’re safe to act. It is much better to be safe than sorry when it comes to the security of your personal information and data. When in doubt, give your loan officer a call.

If you’re interested in starting the home loan process, contact one of our Loan Officers today to learn more!

Connect With Us