A good step to take before you start planning on buying a house is to get a good idea of your monthly payments will be. You can figure out what payment you are comfortable with, and then can see what price range of home you'll be looking at.
As a general rule the total payment including taxes and insurance will be just under 1% of the sales price. There are a couple things to keep in mind though.
First, this is just a rough estimate. Interest rate, insurance and property taxes are all variables. So please use it as a general guideline, not an exact calculator.
Second, the further that you move higher than $150,000 the rule becomes less and less than 1%. For example, at $150,000 the payment may be $1400, but for a $400,000 house the payment would be $3200.
Third, this is assuming a down payment of 5%. A larger down payment will lower the payment further.
Fourth, this is not for condos. Condos will be a little more because of HOA dues.
If you want to calculate an actual payment, please go to my mortgage calculator on my website www.america-lending.com.
Hope that helps!
Monday, November 24, 2008
Monday, November 17, 2008
Escrow accounts
Escrow accounts are accounts that lenders set up to recieve payments from borrowers to use to pay property taxes and homeowners insurance. In this way a borrower can send in 1/12 of the yearly tax and insurance bill each month instead of coming up with the full amount at the end of the year.
When you put down less than 20% as a down payment, the lender will require you to have escrow accounts. The lender wants the escrow accounts as they can be sure the taxes and insurance are paid on time. They also collect interest on the money.
If you put down at least 20% (or get a second loan so your first LTV (Loan To Value) ratio is less than 80% of the price) you can elect to waive the escrow accounts. Since the lender doesn't get to collect interest on that money any more they charge a fee, usually 0.25% of the loan amount.
At closing lenders also collect 3 months worth of taxes and insurance as a buffer against rising taxes and insurance. They are regulated by the Federal government on how much they can hold in escrow. So if your taxes drop, you should receive a partial refund from the lender. Conversely if they go up, your escrow payments will increase.
For most borrowers escrow accounts are a good idea as the payments are spread throughout the year and it's easier to let the lender handle it. However, for some it's preferable to pay the fee so that they can make interest on their own money.
I'd be happy to look at any loan scenario you may have. Just email me billconover@america-lending.com.
When you put down less than 20% as a down payment, the lender will require you to have escrow accounts. The lender wants the escrow accounts as they can be sure the taxes and insurance are paid on time. They also collect interest on the money.
If you put down at least 20% (or get a second loan so your first LTV (Loan To Value) ratio is less than 80% of the price) you can elect to waive the escrow accounts. Since the lender doesn't get to collect interest on that money any more they charge a fee, usually 0.25% of the loan amount.
At closing lenders also collect 3 months worth of taxes and insurance as a buffer against rising taxes and insurance. They are regulated by the Federal government on how much they can hold in escrow. So if your taxes drop, you should receive a partial refund from the lender. Conversely if they go up, your escrow payments will increase.
For most borrowers escrow accounts are a good idea as the payments are spread throughout the year and it's easier to let the lender handle it. However, for some it's preferable to pay the fee so that they can make interest on their own money.
I'd be happy to look at any loan scenario you may have. Just email me billconover@america-lending.com.
Sunday, November 2, 2008
Closing Costs, how much are they?
As equally important as interest rate is closing costs when choosing your mortgage loan. Closing costs are different for each lender and the amount is inversely related to interest rate. So the higher your closing costs, the lower your rate and vice versa.
Closing costs can be broken down into two categories: lender fees and third party fees. Lender fees are those that are charged by the lender and therefore the lender has control over these fees. It's very helpful to know this when comparing loans from different lenders. Lenders have to assume what the third party fees are and their assumptions are not always the same. So to compare use lender fees and rate and take out third party fees. Third party fees will be the same independent of the lender you use.
I'll start with lender fees. There is typically an Underwriting fee, a Processing fee, a Tax Service fee, a Document Prep or Attorney fee, and an Application fee. These fees vary from lender to lender but here are there rough ranges. UW fees are $400 to $700, Processing is $350 to $550, Tax service is around $100, Doc Prep from $85 to $350 and Application is $250 to $450. A lot of times the Application fee will cover the appraisal and credit report.
So expect between $1,200 and $2,000. Of course the lender can work these into the rate if they wish, please see my previous post for more info.
Third party fees include: Title policy, Title Escrow fee, Survey, Recording Fees, and HOA transfer fees. The owner's title policy is paid by the seller in Texas, but the buyer is responsible for paying for the Lender's title policy to cover their interest in the property. This is usually $100 to $250. The Escrow fee is charged by the title company to handle the transaction and is $200 to $400. Surveys are $440, but many times the seller will already have one that you can use for free. Recording fees are $150 or so. HOA fees are $200 to $600, this is only applicable if the property has a Home Owner's Association.
On average you're looking at about $650 if there is an existing survey and there is no HOA.
The total of all closing costs will then be between $2000 and $3000. There are also items that you pre-pay at closing, called you guessed it "pre-paids". Items such as interest, insurance and taxes. I'll cover that in a post later, so please check back next month.
Closing costs can be broken down into two categories: lender fees and third party fees. Lender fees are those that are charged by the lender and therefore the lender has control over these fees. It's very helpful to know this when comparing loans from different lenders. Lenders have to assume what the third party fees are and their assumptions are not always the same. So to compare use lender fees and rate and take out third party fees. Third party fees will be the same independent of the lender you use.
I'll start with lender fees. There is typically an Underwriting fee, a Processing fee, a Tax Service fee, a Document Prep or Attorney fee, and an Application fee. These fees vary from lender to lender but here are there rough ranges. UW fees are $400 to $700, Processing is $350 to $550, Tax service is around $100, Doc Prep from $85 to $350 and Application is $250 to $450. A lot of times the Application fee will cover the appraisal and credit report.
So expect between $1,200 and $2,000. Of course the lender can work these into the rate if they wish, please see my previous post for more info.
Third party fees include: Title policy, Title Escrow fee, Survey, Recording Fees, and HOA transfer fees. The owner's title policy is paid by the seller in Texas, but the buyer is responsible for paying for the Lender's title policy to cover their interest in the property. This is usually $100 to $250. The Escrow fee is charged by the title company to handle the transaction and is $200 to $400. Surveys are $440, but many times the seller will already have one that you can use for free. Recording fees are $150 or so. HOA fees are $200 to $600, this is only applicable if the property has a Home Owner's Association.
On average you're looking at about $650 if there is an existing survey and there is no HOA.
The total of all closing costs will then be between $2000 and $3000. There are also items that you pre-pay at closing, called you guessed it "pre-paids". Items such as interest, insurance and taxes. I'll cover that in a post later, so please check back next month.
Wednesday, August 27, 2008
Interest rate vs Closing costs
When looking for a mortgage many people are in search of the "best rate". While getting a low rate is certainly important, buyers must look at all aspects of a loan before deciding if the loan really is best for them. Brokers and banks can offer a variety of rates, but with each different rate there is an associated set of closing costs.
For instance Broker 1 might advertise 6.0% interest and Broker 2 might advertise 6.25%. The first question you'd want to ask is how much are each of their closing costs. If they are equal or close Broker 1 has the better option. However it's more likely that Broker 1 has higher costs. You'd then have to decide whether it's better for you to pay more now to get a better rate, or to save your cash although paying a higher rate over time.
To make it a little easier to compare both offers, it's usually wise to pick which option would work best for you and then ask the other Broker what set of closing costs he'd offer at that selected rate. This way you'll have the structure you want and can compare apples to apples.
This short post was meant to explain the relation that rate and closing costs have, not to fully explain how to pick your mortgage broker. When looking for and choosing your broker there are many more characteristics that you'll want to evaluate such as: having the right loan program for you, disclosing fees upfront, trustworthyness and ability to close your loan among others.
Feel free to email me with questions. I really enjoy helping people understand the loan process.
For instance Broker 1 might advertise 6.0% interest and Broker 2 might advertise 6.25%. The first question you'd want to ask is how much are each of their closing costs. If they are equal or close Broker 1 has the better option. However it's more likely that Broker 1 has higher costs. You'd then have to decide whether it's better for you to pay more now to get a better rate, or to save your cash although paying a higher rate over time.
To make it a little easier to compare both offers, it's usually wise to pick which option would work best for you and then ask the other Broker what set of closing costs he'd offer at that selected rate. This way you'll have the structure you want and can compare apples to apples.
This short post was meant to explain the relation that rate and closing costs have, not to fully explain how to pick your mortgage broker. When looking for and choosing your broker there are many more characteristics that you'll want to evaluate such as: having the right loan program for you, disclosing fees upfront, trustworthyness and ability to close your loan among others.
Feel free to email me with questions. I really enjoy helping people understand the loan process.
Tuesday, July 29, 2008
Coming up with down payment money
Most loan guidelines will not allow an third party, even a family member, to loan you the money for the loan down payment. In some instances a gift is allowed from a family member though. To set it up properly you'll need to go about it a certain way depending on your situation.
If you have the money for the down payment and closing costs but are still getting a gift from family it's easiest to not even bring up the amount of the gift at all. Many times though buyers don't have enough for the down payment and closing costs so will need the gift to use for closing. In this case as long as the buyer has the required down payment in their own funds then the family member will write a gift letter and it is allowed. The gift letter states who is giving the money, who is receiving the money and that it is truly a gift and doesn't need to be repaid.
The last case would be where a buyer does not have enough for the required down payment. Here the buyer needs to receive the gift well ahead of closing and put it into their bank account. When the lender verifies the buyer's assets they will look back 60 days. If the gift has been in there the whole time, it's considered 'seasoned' and is viewed as the buyers own money.
Every loan situation is different so I'd suggest talking with your lender before making any final decisions.
If you have the money for the down payment and closing costs but are still getting a gift from family it's easiest to not even bring up the amount of the gift at all. Many times though buyers don't have enough for the down payment and closing costs so will need the gift to use for closing. In this case as long as the buyer has the required down payment in their own funds then the family member will write a gift letter and it is allowed. The gift letter states who is giving the money, who is receiving the money and that it is truly a gift and doesn't need to be repaid.
The last case would be where a buyer does not have enough for the required down payment. Here the buyer needs to receive the gift well ahead of closing and put it into their bank account. When the lender verifies the buyer's assets they will look back 60 days. If the gift has been in there the whole time, it's considered 'seasoned' and is viewed as the buyers own money.
Every loan situation is different so I'd suggest talking with your lender before making any final decisions.
Monday, June 2, 2008
jumbo rates increase
We've had some decent economic news coming in, so as the stock market has done better it's pushed up mortgage rates. The upward rise has not been dramaticthough and made most of the movement the last two weeks of the month.
Of special concern is the Jumbo mortgage rates. While they've been hovering the the low to mid 7% range since last August, Jumbo mortgage rates increased to the high 8%. That is with no points, but now many lenders' Jumbo rates are 9% and requiring 3 discount points! This is a huge jump, and is going to put serious pressure on those homes that require Jumbo loans.
*Please remember that the conforming limit is $417,000 but that is for the first loan amount only. It is not the purchase price, nor the first and second loans combined.
So when buying a home over $440,000 it's definately worth it to make the first loan amount less than $417,000 through a combination of down payment and a second lien.
Of special concern is the Jumbo mortgage rates. While they've been hovering the the low to mid 7% range since last August, Jumbo mortgage rates increased to the high 8%. That is with no points, but now many lenders' Jumbo rates are 9% and requiring 3 discount points! This is a huge jump, and is going to put serious pressure on those homes that require Jumbo loans.
*Please remember that the conforming limit is $417,000 but that is for the first loan amount only. It is not the purchase price, nor the first and second loans combined.
So when buying a home over $440,000 it's definately worth it to make the first loan amount less than $417,000 through a combination of down payment and a second lien.
Monday, May 19, 2008
how much should you put down?
Here are some other questions I get a lot, "How much should I put down? Do I get a better rate if I put down x, what about y?". There are a couple different downpayment levels that will improve your rate.
If you have 20% to put down, that'll take care of having to get mortgage insurance or a second loan. This savings can equal hundreds of dollars a month and depends on your loan amount. If you have the 20% and are comfortable putting it down, this is a great option to take. If you don't have 20%, or have it but just don't want to put it down, 5 or 10 percent would be other good options.
5% will get you a better rate than 0% down, so I'd recommend that as a minimum downpayment. If you put down 10%, the rate will be the same on the first loan but your rate on the second (or mortgage insurance amount depending on which one you have) will be less.
Those are the main downpayment levels that will result in lower rates and/or payments when buying a home. There are different levels for investment properties and cash out refinances. Feel free to email me with any questions on those billconover@america-lending.com.
Have a great week!
If you have 20% to put down, that'll take care of having to get mortgage insurance or a second loan. This savings can equal hundreds of dollars a month and depends on your loan amount. If you have the 20% and are comfortable putting it down, this is a great option to take. If you don't have 20%, or have it but just don't want to put it down, 5 or 10 percent would be other good options.
5% will get you a better rate than 0% down, so I'd recommend that as a minimum downpayment. If you put down 10%, the rate will be the same on the first loan but your rate on the second (or mortgage insurance amount depending on which one you have) will be less.
Those are the main downpayment levels that will result in lower rates and/or payments when buying a home. There are different levels for investment properties and cash out refinances. Feel free to email me with any questions on those billconover@america-lending.com.
Have a great week!
Wednesday, May 14, 2008
rates moved up today
Rates rose up about an eighth yesterday and another eighth today. They're right about 6.125%.
Tuesday, May 13, 2008
alternatives to mortgage insurance
I always get asked the question "Do I have to pay mortgage insurance?". It's a good question, why would you want to pay for insurance that only benefits the lender not yourself? If you're not putting down at least 20% to get your loan amount less than 80% of the sales price, conventional underwriting will require you to obtain and keep mortgage insurance with your loan.
However there are two exceptions though that I use quite often. The first is to obtain a first lien loan at 80% of the sales price and then use downpayment and a second loan to cover the other 20%. In a common scenario a buyer will put down 5%, get a second loan for 15% and get a first loan for 80%. As second loans don't require mortgage insurance they do charge a higher interest rate. In most cases though the total payments still work out to being less than one loan with mortgage insurance.
The second exception is to get a loan with Lender Paid Mortgage Insurance, or LPMI. In this case a buyer can put down less than 20% but instead of paying for mortgage insurance themselves the lender obtains and pays for a policy. To cover this extra cost, the lender will charge a slightly higher interest rate, typically 1/4 to 1/2 % higher. Again in most cases this will be a less expensive route than to get a loan with buyer paid mortgage insurance.
There are a number of other details to think about when deciding which route to take. I'd be happy to answer any questions you have. You can email me at billconover@america-lending.com.
However there are two exceptions though that I use quite often. The first is to obtain a first lien loan at 80% of the sales price and then use downpayment and a second loan to cover the other 20%. In a common scenario a buyer will put down 5%, get a second loan for 15% and get a first loan for 80%. As second loans don't require mortgage insurance they do charge a higher interest rate. In most cases though the total payments still work out to being less than one loan with mortgage insurance.
The second exception is to get a loan with Lender Paid Mortgage Insurance, or LPMI. In this case a buyer can put down less than 20% but instead of paying for mortgage insurance themselves the lender obtains and pays for a policy. To cover this extra cost, the lender will charge a slightly higher interest rate, typically 1/4 to 1/2 % higher. Again in most cases this will be a less expensive route than to get a loan with buyer paid mortgage insurance.
There are a number of other details to think about when deciding which route to take. I'd be happy to answer any questions you have. You can email me at billconover@america-lending.com.
Tuesday, May 6, 2008
Steady since Friday
Rates went up an eighth on Friday and remain the same today. If I was looking to lock a loan, I'd hold off and see how this week shapes up for rates.
Thursday, May 1, 2008
rates are dropping
Rates have come down by a quarter of a point between yesterday and today. If you're in the loan process now, it's a great time to lock in!
Tuesday, April 29, 2008
fannie mae cracking down on low credit borrowers
Fannie Mae has come out with new price hikes to their mortgage rates for those borrowers without perfect credit. Up until February if Fannie would approve the loan, everyone got the same rates. Now Fannie may approve someone, but if their credit score is below 720 (which is really excellent credit) they will have a higher, and sometimes much higher, interest rate.
So for all the media hype of making loans better and more affortable, here is the largest GSA doing the exact opposite. I'm not saying that it doesn't make sense, only that the media needs to get it right.
let me know what you think
Bill
So for all the media hype of making loans better and more affortable, here is the largest GSA doing the exact opposite. I'm not saying that it doesn't make sense, only that the media needs to get it right.
let me know what you think
Bill
rates up, rates down
They did come up on Friday, and now they've come back down some. A lot of news is coming out this week so it will continue to be very volatile.
Thursday, April 24, 2008
rates likely will rise
Unfortunately my earlier prediction of where rates were headed on Tuesday missed the target. Upon news that the Fed is cutting rates next week by an expected 1/4 point, rates bounced up 1/8th today. Still pretty low, right around 6.25% but certainly not the lowest they've been.
Bill
Bill
Wednesday, April 23, 2008
100% hard to find
PMI (Private Mortgage Insurance) companies are tightening up their standards after getting hit with some heavy losses due to the national foreclosure problem. While conforming loan underwriting standards still techincally allow for 100% or zero-down loans they do require mortgage insurance. Roughly a month ago the PMI providers decided it was in their best interest to stop writing policies unless a buyer puts at least 5% down. So while 100% loans used to be quite the norm, now they're non-existant.
Although this does hurt some buyers trying to buy a home, overall it's good for the industry as the added oversight will certainly allow fewer bad loans to get approved.
Enjoy your Wednesday,
Bill
Although this does hurt some buyers trying to buy a home, overall it's good for the industry as the added oversight will certainly allow fewer bad loans to get approved.
Enjoy your Wednesday,
Bill
Tuesday, April 22, 2008
Rates dipping slightly
Mortgage rates have risen in the past 7 days but have shown signs of falling yesterday and today. Currently they're 6.125%. I'm hoping that they'll come down to 6% by the end of the week.
crossing my fingers!
Bill
crossing my fingers!
Bill
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