Why You Don’t Need 20% Down To Buy A Home

I am frequently surprised by how much incorrect information about home financing is out there amongst the public. I often speak to clients of mine who are intelligent and educated yet have absolutely no idea what their mortgage options are, or worse yet, are operating under a false narrative that 20% down is the one and only way to buy a home.

This translates into someone who could be a homeowner but is instead renting in perpetuity.
Which means they are losing out on having both the pleasure of owning their own home and accumulating and appreciating an asset for wealth building.

The largest misconception with the purchasing of a home is that a 20% down payment of the purchase price is required without exception.

THIS STATEMENT IS TOTALLY FALSE. It has been for decades. And it is the main reason there are many people out there renting when they are fully qualified and would benefit greatly from homeownership.

There are several good mortgage products which can work well for buyers depending on their situation, some with 3%  down of the purchase price, some with no money down even.

Mortgage Programs That Offer Low Down Payments

Here is a breakdown of some of the low down payment mortgage programs out there that we offer at A and N Mortgage:

3% Down Payment Conventional Mortgage: This is fundamentally no different than a 20% down mortgage, it is secured through the same conventional agencies (Fannie Mae and Freddie Mac).  

Federal Housing Authority (FHA) Loan: These loans require 3.5% down and are more relaxed on income and credit. One great thing about these is that multi-units (2-4 units) are allowed with the same rates and the same 3.5% small down payment. On a personal note, I purchased a 4-unit building with an FHA loan a few years back because the Chicago mortgage rates on the FHA were better than a conventional mortgage.

USDA Loan: This loan offers 100% financing for those living outside of urban areas. No down payment is required. Over 100 million people are eligible for this program.

Veteran (VA) Home Loan: For those that have military benefits, the VA loan is a fantastic option.  100% financing is offered, so no down payment is required, and no backend private mortgage insurance is required.

Various Grant Programs: As a mortgage banker and broker, A and N offer several proprietary and public sponsored grant programs where as little as $1,000 is needed towards a down payment.

The Bottom Line

The bottom line is that there is an incredible amount of mortgage options available that people don’t know about because they have been so ingrained with the 20% down misnomer.

The soundest way to accumulate wealth is through real estate and those that aren’t taking advantage of that because they haven’t been educated properly are doing themselves a huge disservice.

There is certainly nothing wrong with putting 20% down or more on a mortgage if your financial situation allows it. But no matter what program you choose you should make sure to be fiscally responsible with the housing payments you’re taking on.

With that said, here’s the reality: If someone can qualify for a mortgage responsibly, it will beat renting by leaps and bounds every time. If you have any questions, contact me today or speak with one of our A and N Mortgage specialists to discuss your options.

 

A and N Mortgage Services Inc, a mortgage banker in Chicago, IL provides you with high-quality home loan programs, including FHA home loans, tailored to fit your unique situation with some of the most competitive rates in the nation. Whether you are a first-time homebuyer, relocating to a new job, or buying an investment property, our expert team will help you use your new mortgage as a smart financial tool.

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Everything You Need To Know About Closing Cost Credits

closing creditsSo you’re in the process of buying a new home and the inspection has just been completed. You’re looking forward to getting settled in as soon as possible, but you notice there are some areas of the home that aren’t quite up to par.

Maybe you notice that there are cracks forming on the walls or there is noticeable mildew growing on the bathroom tiles. No matter what it is, you know that you’re going to have to spend some money before you move in for good.

If the property you are buying has been put on the market in an “As-Is” manner, you might struggle to get any credits for closing costs. This is because the home has been advertised as it is and the seller won’t be making any changes before it is sold.

If the home is not listed “As-Is” then you may be able to ask for a closing cost credit. If the seller accepts the credit, you will be able to repair the damages without having to endure extra costs after the closing period.

What Is A Closing Cost Credit?

Closing cost credits are given to a buyer from a seller to credit home repairs. In other words, the seller of the property will give you, the buyer, credit towards potential repairs at closing. This means that you will ultimately pay less at closing time.

Sometimes the seller will offer these credits as an incentive for buyers to make a purchase. If the buyer is on the fence about making the purchase when it comes close to the end, the credits make the house more appealing.

Closing cost credits are also known as a seller concession. The credits are negotiable and need to be agreed upon in writing by both the buyer and the seller. This is something that should be done before the amount is credited to the buyer’s final amount at closing.

How Do Closing Cost Credits Work?

It is very important to understand how these credits work because they will affect the entire buying process of your home. Closing cost credits are typically initiated by the buyer in order to gain credit for repairs and damages.

Once the buyer asks for the credits, they work with the seller to negotiate an amount that works for both of them. The seller has the choice of accepting, rejecting or initiating a counter-offer to the buyer’s request.

If the seller accepts the offer or the two agree on an amount, the seller agrees to pay the amount of the credits so that the buyer doesn’t have to. This amount is usually taken out of the final sale of the property with no upfront costs to the seller.

Benefits Of Closing Cost Credits For Buyers

Closing credits are designed to give buyers a little bit of breathing room right after purchasing a house. For that reason and more, there are a number of benefits for buyers.

The truth is, closing on a house is expensive. There are a lot of different things you will need to take care of after you actually become a homeowner. So these credits give you a little bit of leeway in that sense. They help you save money, time, and energy.

Benefits Of Closing Cost Credits For Sellers

Believe it or not, closing credits are also beneficial to sellers too. Although it might seem as though they are paying out money to the buyer, what they’re actually doing is giving the buyer the opportunity to make a purchase.

If the seller has a house that needs a lot of upgrades then the advantages are even more apparent. In order to get the home up to date and pass inspection, the buyer will want an incentive. Offering them credits at closing is a great way to achieve this.

Closing Cost Credits Are A Win-Win For Both Parties

If the bathroom tiles are worn, tattered or outdated, they probably need to be updated or replaced. Since it generally costs thousands of dollars for a new bathroom having some money taken off the final sale of the house is a huge win.

When the offer for closing credits is there, you are more inclined to make the purchase as you will have the funds to do everything you need to do to the new house. This makes it a huge win for the seller to have a quick sale.

It is important to note that some mortgage companies will need the buyer to use all of the money to pay towards closing costs such as taxes. Closing cost credits might not always cover the closing costs, but they will help considerably.

So when you look at the bigger picture here, the credits are actually a win-win for both the buyer and the seller.

Do Closing Cost Credits Come Out Of The Seller’s Pocket?

We mentioned this point briefly, but another thing to note is that the seller is not really paying for the closing costs credits out of pocket. The actual money being paid to the seller is seen once the closing cost credit has all been accounted for.

In other words, the credit comes out of the final sale. Think of a closing cost credit as giving the buyer a discount on the house in order to get them to purchase it. When you look at it this way, the seller isn’t losing any out of pocket money.

Tax Implications of Closing Cost Credits

Now you might be wondering what the tax implications are when it comes to these closing cost credits. During a real estate transaction, the closing costs represent the fees that make the actual sale possible.

They usually end up being thousands of dollars from the buyer to settle with lender companies and escrow. Though each transaction is completely unique, buyers can actually benefit when paying taxes for the credits.  To deduct seller-paid closing costs, the buyer must use the itemization method for taxes.

There are a few definitions to take note of when it comes to tax implications so below is a brief summary of each.  You should always consult with a tax advisor for specific information regarding your individual situation.

Seller Credits

This is the dollar amount of closing costs that the seller agreed to pay. With seller credit at closing for repairs, buyers can make an offer with the caveat of a seller credit and the seller might counter back with a reduced amount or another type of credit.

Borrower Points

Sellers might agree to pay for borrower points. Borrower points are percentage points of the mortgage amount. The more points that are paid, the lower the rate. Even though the seller pays them, you as the buyer can still deduct points on a tax return as they count as mortgage interest.

Seller Deductions

Such a seller payment is regarded as a reduction in the net gain of the home. The lower the net gain, the lower the gain will be for taxes that the seller will have to pay.

 

💡Conclusion

For many people, the process of obtaining a residential mortgage is intimidating and complex. Whether you need help with understanding closing cost credits or have other questions regarding your mortgage, A and N Mortgage is here to help. We are an experienced and well established Chicago mortgage company that offers a team of professionals who will work with you every step of the way.  Contact us today to speak with a mortgage specialist and discuss your options.

 

A and N Mortgage Services Inc, a mortgage banker in Chicago, IL provides you with high-quality home loan programs, including FHA home loans, tailored to fit your unique situation with some of the most competitive rates in the nation. Whether you are a first-time homebuyer, relocating to a new job, or buying an investment property, our expert team will help you use your new mortgage as a smart financial tool.

 

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What Are Prepaid Items On My Loan Estimate?

Pre-Paid Items On Loan Estimate

 

Are you in the process of preparing to buy a home? Or thinking about refinancing your current mortgage agreement? If so, there are many factors that should be considered before committing to a new homeowner loan.

In this article, we are going to discuss the prepaid items on your loan estimate and how they differ from closing costs. With help from an experienced mortgage professional, be it a mortgage banker in Chicago or elsewhere, you will have everything you need to know about the prepaid items in your mortgage agreement and how they will impact the overall repayment terms.

Understanding Your Loan Estimate

The first thing that any loan applicant needs to understand is the Loan Estimate itself. The Loan Estimate is a three-page form that provides valuable information related to the estimated costs associated with your loan.

A loan estimate covers the interest rate, monthly payment, total closing costs for the loan, costs of taxes, and insurance. In addition to these estimates, the document includes details on how the figures could change in the future – due largely to wider economic changes.

The loan estimate does not confirm acceptance of the mortgage but instead provides you with an estimated idea of the expected costs should you choose to move forward in the process of buying the home.

What Are Prepaid Items On Your Mortgage?

Prepaid items, otherwise known as prepaids, are a collection of charges that the lender requires you to pay a partial payment on your mortgage agreement. Though the costs aren’t directly linked to the process of borrowing they are associated with the concept of home ownership. Prepaid items are due ahead of getting your loan and are used to fund what is known as an ‘escrow’ account.

Essentially, the lender takes the payment from you in advance and then pays the associated fees on your behalf. These costs include insurance premiums and taxes. They are added to the monthly repayments, making it easier for you to manage every aspect of the mortgage in one fell swoop. These fees additionally provide financial security to reduce the risks for lender and borrower alike.

From a different perspective, prepaid items in mortgage agreements are often seen as a crucial part of the overall process. And, they are just as beneficial for you as it they are for the lender. Given that they will impact the overall monthly repayment premiums, it’s important that they are factored into your budgeting and financial forecasts.

Are Prepaid Items The Same As Closing Costs?

Many prospective new homeowners wrongly assume that prepaid items are the same as closing costs. Although the two are similar, they are not the same thing.

Closing costs are the costs associated with arranging and agreeing on a loan. These are generally one-time fees that are due for services required during the process of actually buying a home and getting a mortgage. These fees include payments to title companies, attorney fees, governmental title recording fees, and lender loan setup fees.

Each item should be listed clearly on your document and can be quite costly. Then again, it is to be expected that when you make a purchase as big as buying a property, it will include fees of this nature as well. Teaming up with a reputable mortgage representative will help you gain the best outcome in all areas of the agreement while also providing the level of transparency you deserve.

It is worth noting that property inspections do not usually fall under the category of closing costs. This may seem a little strange given the process involved, but they are usually completed before confirming the agreement while you can use the findings as a bartering tool too. The exception is when the inspection fee isn’t paid in a prompt manner. In this case, it may be incorporated into the closing costs.

Different Types Of Prepaid Items Explained

When you are presented with your Loan Estimate, you will notice that several items are included on the list of prepaid items. Understanding them on an individual basis will allow you to gain far greater insight into them as a whole, which should help you through the challenge of analyzing different mortgage offers. Especially as many of the fees will fluctuate from one lender to the next.

Homeowner’s Insurance

Every homeowner is obligated to take out homeowner’s insurance. The monthly premium offers financial protection against damages caused by natural disasters, for example, and covers the cost of repairs. You may be required to pay the first few months in advance via the escrow account before modifying this payment to be on a rolling basis through the use of the monthly payments. While factoring in this extra cost can be frustrating, it’s better to be safe than sorry.

Property Taxes

Property taxes are an ongoing charge associated with owning property and are the most difficult to comprehend. The tax proration of your property will be stated in the purchase contract but could be changed by the attorney review so it is an issue you need to look out for on all letters sent by attorneys.

The tax value of the property is based on the previous year’s tax bill, which is why this charge can change from one year to the next due to a host of different factors. The date of closing, the value of your home and the amount of the loan will impact the charges applied. As for the prepaid cost, you will be required to pay an amount equal to the first few months worth of taxes into the escrow account before the lender takes care of the repayments themselves.

On a related note, you will be due to pay your first month’s private mortgage insurance (PMI) premium in advance if your down payment is under 20% of the property value.

Per Diem (Daily Interest)

Per Diem, otherwise known as daily interest, relates to the amount of money that needs to be paid in advance from the closure day to the end of the month. However, it’s worth noting that the first payment isn’t due until the following month.

For example, if you closed June 15th, you would pay daily interest through the end of June and your first payment would be due August 1st. The August payment will be the money that is due for the month of July.

Why It’s Important To Work With An Experienced Mortgage Professional?

There are many different ways to handle your property purchase and loan agreement. Given the importance of purchasing a house and the amount of money involved in relation to prepaid items, it’s important that you take the right pathway.

With so many documents and prepaid costs to consider, it’s very easy to get swallowed up by the sheer volume of information. This can lead to overlooking important factors such as changes to interest rates or other costs. If you fail to recognize the full picture, the chances of taking on an agreement that isn’t right for you are greatly increased. Meanwhile, it’s almost impossible to weigh up different loan offers when you don’t understand the finer details of the Loan Estimate.

Using a knowledgeable mortgage banker or broker allows you to bypass those problems to receive clear and transparent information and advice. This can save you time and money in addition to gaining the best outcome. If nothing else, taking this approach will provide peace of mind as you will avoid any potential setbacks and problems.

Hire A Market Leader With A & N Mortgage

If you want to work with an experienced and trusted mortgage banker, then consider A and N Mortgage. With A & N, you are guaranteed a level of service that is guaranteed to help you find the best mortgage offers, understand the full terms of the loan estimate, and secure a fast and transparent process so that you can get into your brand new home ASAP.

At A & N our leadership has been recognized nationally with our EVP Kiki Calumet being named as a market leader by Forbes magazine.

Conclusion

After reading this article you should be able to understand the basics of pre-paid items on your loan estimate. If you need more help understanding these items, contact one of our mortgage professionals today.

 

A and N Mortgage Services Inc, a mortgage banker in Chicago, IL provides you with high-quality home loan programs, including FHA home loans, tailored to fit your unique situation with some of the most competitive rates in the nation. Whether you are a first-time homebuyer, relocating to a new job, or buying an investment property, our expert team will help you use your new mortgage as a smart financial tool.

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Kiki Calumet Honored As A Market Leader in Forbes

Kiki Calumet honored as a market leader in ForbesImage Credit: Five Star Mortgage Awards

We are proud to announce that one of A and N Mortgage’s Executive Vice Presidents was honored as market leader by Forbes. Check out the February 2019 issue of Forbes to read the article.

Find out more about this award winner by going to kikicalumet.com.

 

A and N Mortgage Services Inc, a mortgage broker in Chicago, IL provides you with high-quality home loan programs, including FHA home loans, tailored to fit your unique situation with some of the most competitive rates in the nation. Whether you are a first-time homebuyer, relocating to a new job, or buying an investment property, our expert team will help you use your new mortgage as a smart financial tool.

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Visa Classifications and Applying for a Mortgage as a Non-U.S. Citizen

mortgage for non-USA citizens

To many people, owning a home in the United States is seen as the ultimate financial goal. But if you’re planning to do so as a non-U.S. citizen then there can sometimes be additional requirements beyond those for U.S. citizens that are important to know about before you get into the home-buying process.

In this article, we’re going to outline some of the documents that are needed in order for non-citizens to apply for a mortgage, how your visa classification can impact whether mortgage financing is available to you or not, the importance of having a social security number, and why you need to build your credit history as a non-U.S. citizen.

visa classification - part 1/4

Applying For a Mortgage as a Non-U.S. Citizen

One of the first challenges you’ll face as a non-U.S. citizen is gathering the right documents. Lenders may have varying policies regarding what documents are required in order to apply for a mortgage, so it’s important to work with a lender that clearly outlines what is needed and is willing to help you every step of the way.

That’s one of the main reasons why you choose a mortgage expert consultant such as A and N Mortgage, as they have a long history of working with non-U.S. citizens seeking to buy a home.

If you’ve immigrated to the U.S. as a permanent resident, then you can apply for a mortgage in the same way a U.S. citizen would be able to. However, you do need to be able to prove your residency status in the U.S.

Documents such as a green card, employment authorization card, or a valid visa and foreign passport can be used. If your documents are soon to expire, then it’s important to renew your documents in preparation for the mortgage process.

Similarly, if you’re considered a conditional permanent resident, then you can apply in a similar fashion but you must be able to provide an unexpired two-year green card or an unexpired foreign passport with a temporary I-551 stamp which serves as an endorsement for permanent residence for a year.

For immigrants who are not citizens or residents but were granted asylum, it’s possible to work and obtain financing much like a resident of the U.S. You must be able to prove that you are a refugee or have been granted asylum status.

The process of applying for a mortgage can be complicated, so it’s important to speak to a mortgage expert if you’re in need of assistance. A specialist can help you with procedures related to applying for your first mortgage.

Visa Classifications and Their Importance in the Mortgage Process

Before entering the U.S., you’ll often need to apply for a visa in order to enter the country. Depending on your visa classification, you’re afforded certain benefits and may be limited in what you’re able to do.

For instance, a government official that is granted diplomatic immunity technically cannot qualify for a mortgage because they are not subject the U.S. law. This is often known as a Class A visa and is often given to ambassadors, diplomats, and other officials traveling in the country.

On the other hand, those with a Class E visa are able to secure a mortgage. This visa type is given to those who are employees of a foreign country that conduct trade in the U.S. or employees of a company or person that are overseeing investments in the U.S.

A full list of visa classifications and their eligibility for a mortgage can be found in the attached PDF below. It lists every single visa type, the classification, and also if financing will be available to those individuals.

A and N Mortgage – Visa Classification Flyer

Other Common Visa Classifications

Class F visas

Class F visas are given to academic students and foreign medical graduates. Classifications F-1 and F-2 are also in the same category with F-1 defined as foreign students that must return home after their studies and F-2 defined as the spouse or children of an academic student. Academic students with a Class F visa will not be able to secure a mortgage regardless of their classification. If you have a Class F visa but have been granted an Employment Authorization Document, then it is possible to qualify with this status.

Class H visas

As for Class H visas, eligibility for a mortgage will depend on the sub-classification. For example, visas of Class H-1B, H-1C, H-2A and H-2B will be eligible for a mortgage. However, trainees with a Class H-3 visa and the spouse or the child of someone with an H-1 to H-3 Class visa will not be eligible.

Class B visa

Despite temporary workers with Class H visas being eligible for a mortgage, Class B visa holders that are defined as a “visitor to the United States” cannot secure a mortgage even if they possess a Class B-1 visa that is defined as a “temporary visitor for business reasons”. Although Class B-1 and Class H visas are both defined as “temporary”, their classifications are different.

The “business reasons” definition for Class B-1 is considered too vague and will not suffice when securing a mortgage. This is one of the reasons why it’s important to fully understand your visa classification so that there are no confusions regarding your eligibility to purchase a home as a non-U.S. citizen.

Class O-1 visas

Class O-1 visas are given to those who possess “extraordinary ability in sciences, arts, education, business or athletics” and will be eligible for a mortgage. Interestingly, assistants to O-1 visa holders (classed as O-2 visa holders) are also able to secure a mortgage as a non-U.S. citizen and the spouse or child (classed as O-3 visa holders) can also seek a mortgage. This is different from other visa classifications were those associated with someone eligible for financing cannot secure a mortgage such as Class H and Class L.

If you’re unsure about your visa classification or how to proceed, then you should consider contacting us at A and N Mortgage so we can help explain the various visa classifications and if you’ll be eligible for a mortgage.

The Importance of Having a Social Security Number

If you’re not a citizen of the U.S, you will need to have a Social Security number in order to apply for a mortgage. You can apply for a Social Security number in a variety of ways, such as applying in your home country before moving to the U.S. or by visiting a Social Security office in person.

Having a Social Security number is also important if you’ve recently entered the U.S. This is because you won’t have any credit history and you’ll have to build it up again as a non-U.S. citizen. With a Social Security number, you’ll have an easier time identifying your credit history which is linked to this unique number.

In order to apply for a Social Security number, you’ll need to be able to prove your identity and work-authorized immigration status. Documents that will be accepted by the office include:

  • Form I-551 (Lawful Permanent Resident Card, Machine-Readable Immigrant visa)
  • Admission stamp showing a class of admission permitting work
  • Form I-94 (Arrival/Departure Record)
  • Form I-766 (Employment Authorization Document/EAD)

Once you can prove your identity and immigration status, you can then fill out an application form for a Social Security card (Form SS-5) and submit it to the office.

Building a Credit History as a Non-U.S. Citizen

As a non-U.S. citizen that is applying for residency, you’ll have no credit history and you’ll need to build it up if you want to be eligible for a mortgage and be offered better rates. To do this, you’ll have to obtain a Social Security number so that your credit file can be identified as yours.

It’s the only way to have a unique identification that ties you and your file. Building a credit rating will not only help you get a mortgage in the U.S, but it will also make other aspects of life easier such as obtaining financing for other items.

Ideally, a two-year credit history within the U.S. is needed along with a good credit score. Some lenders will allow you to use your credit history form a reputable foreign credit reporting agency. Or you may be able to prove your creditworthiness by providing verification from foreign creditors. Exceptions can be made to the two-year history, so please contact an A and N Mortgage loan officer to discuss this.

Have A and N Mortgage Help You Get Your Next Mortgage

From explaining visa classifications to detailing mortgage options available to you, our team of specialists at A and N Mortgage is here to help. We understand that there are many challenges in navigating the mortgage landscape as a non-US citizen. With competitive rates and a vast amount of products and services, we have everything you need. We offer mortgages in Chicago (our headquarters) and are in nine states and growing.

 

A and N Mortgage Services Inc, a mortgage banker in Chicago, IL provides you with high-quality home loan programs, including FHA home loans, tailored to fit your unique situation with some of the most competitive rates in the nation. Whether you are a first-time homebuyer, relocating to a new job, or buying an investment property, our expert team will help you use your new mortgage as a smart financial tool.

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7 Dos And Don’ts During The Mortgage Process

Do's and Don'ts during mortgage process

If you’re ready to purchase a home then one of the first considerations you might have to deal with is a mortgage, often known as a home loan. You’ll find many mortgage bankers and mortgage brokers in Chicago that are willing to offer their services.

But before you decide to take the plunge and speak to one of these companies, it’s vital that you learn more about the process so that you get a better understanding of how the mortgage process works. You’ll learn what’s involved on closing day and if there are any potential pitfalls that you could avoid.

Preparation is the most important component of a successful home purchase.  There are numerous options available such as detailed articles on the mortgage process, online mortgage applications, and mortgage calculators  that will help you through the entire process.

It’s good to understand the options you have available and which ones are best suited for your personal circumstances. So without further ado, let’s take a look at the dos and don’ts of the mortgage process.

Do’s & Don’ts During The Mortgage Process

1. Pre-Qualification and Pre-Approval

Do perform an initial mortgage pre-qualification to get a rough estimate of how much you can afford. This is often done through an online mortgage application and you’ll need to provide documents that support your application.

This process is to ensure that once you find a home that you like, you can make a stronger application with a higher chance of success because your lender has already approved that you are able to afford a home in a certain price range. This will also help you figure out what type of home you can afford so that you know the correct price range to aim for.

Don’t start looking around for a home until you are pre-approved. The pre-approval process is vital for helping you set a budget, so the last thing you want is to look for a home that you think you can afford, but in reality, it’s completely out of your budget.

This is a mistake that many people make when looking to purchase a new home. On the bright side, it could reveal that you actually have a larger budget than you initially assumed.

2. Financial Decision Management 

Do prepare a savings plan to mitigate financial issues. Nobody likes unexpected costs so it’s important to have a savings plan in place so that you can pay for your deposit, your mortgage repayments and also larger purchases that you have planned for.

Keeping a budget and financial record of your expenses can help you create a savings plan that will ensure you have enough money to satisfy your lenders.

Don’t make large unplanned purchases that could drastically change your savings plan. It’s not every day that we decide to shell out a huge sum of money for something, but you should do your best to avoid making big purchases and accumulating more debts and applying for more loans.

Affecting your credit rating could have negative consequences for your mortgage application so make sure you avoid any large purchases especially if they’re on credit and not with the money in your bank account.

If you absolutely have to make a large purchase for something important, then make sure it’s a planned expense that is detailed in your savings plan so you know how to work around it.

3. Credit Score Rating

Do think smart about your current credit rating and continue to improve your credit rating when possible. The last thing you want to do is ruin your credit rating with more loans or by ignoring inaccuracies within your credit report. Make sure you request a copy of your credit report and focus on resolving any issues that may be outstanding or incorrect to ensure that lenders see an up-to-date and corrected version of your current credit rating.

Don’t do anything that could compromise your current credit rating score. This involves taking out new lines of credit, making large purchases before submitting your online mortgage application or making late payments for utilities, rent, and other purchases.

This could potentially lower your credit rating score and it will cause your mortgage broker to think twice about accepting an agreement with you.

4. Questions

Do remember that you can ask questions to your mortgage banker or mortgage broker. Questions are appreciated by mortgage lenders  because it shows that you’re willing to go the extra mile in understanding how the mortgage process works.

If you’re working with a mortgage banker or mortgage broker in Chicago, then it’s important to ask as many questions as you need to feel comfortable during the loan process. It may seem like a difficult task but what’s important to your mortgage representative is that you feel confident and knowledgeable in your decisions all the way till closing day.

Don’t overwhelm yourself by trying to understand everything on your own. There are plenty of resources available on the internet that will teach you about the mortgage process, but it’s always better to speak to someone in the industry such as your mortgage advisor.

It can feel overwhelming trying to understand all of the complex technical terms involved and it will only make things more difficult in the long run.

5. Financial Stability

Do ensure that you have a stable job and sources of income before purchasing your home. Stability is one of the key factors in the loan process because if you can’t show that you have a stable income, you’re less likely going to have your new loan approved.

It may take longer to process your online mortgage application and you may even be rejected if your income isn’t stable enough.

Don’t try to make drastic changes to your lifestyle or employment status. This means quitting your job or changing your career path shortly before purchasing a home. This raises red flags and can cause some major setbacks and slowdowns during the whole mortgage process.

However, the exception to this rule would be if you have a positive employment change, such as being promoted to a higher position or starting up a new business or stream of income. In this situation, your mortgage application won’t be affected negatively.

6. Changes in Income or Lifestyle

Do keep documentation regarding any income or lifestyle changes. This extra step will ensure that you can prove any changes in your life such as marital status and changes in your household size or income.

In most cases, this should include payments, statements, money deposits and also other documentation that your lender might request from you. These documents are important on the closing day because it will allow your lender to finalize their offer.

Don’t make large changes to your income, lifestyle or bank without having a record of it. Mortgage lenders don’t like it when they are sudden and difficult-to-explain changes made to your accounts or lifestyle.

For instance, if you suddenly deposit a large sum of money then your mortgage broker may find that it’s a strange or questionable sum of money. As long as you have a paper trail that explains the lump sum (such as a paycheck) then it will help in the long run.

Don’t be surprised if your mortgage broker asks for additional records that they didn’t mention previously. You should be prepared enough that you always have documents available to prove any changes that you’ve made in your life or related to your financial situation.

7. Take Help from Experts

Do hire assistance and work with professionals when purchasing a home. This is to ensure that you get all of the legal help required and it ensures that you don’t miss anything in the documents provided to you during the mortgage process and on closing day.

There are plenty of mortgage bankers and mortgage brokers in Chicago that you can hire for assistance and there are plenty of online resources to assist you in the process of purchasing your first home.

Don’t try and do everything yourself. There are plenty of people that make the mistake of trying to save money by refusing to hire any kind of professionals to assist them, but this can end up being a poor choice because they might miss crucial documents, they might take too long responding to certain requests by the seller and it could be more costly in the long run.

Conclusion

Hopefully, this article has shown you some useful information on how you can better prepare for the mortgage process. The takeaways from this are that you should always have records for anything related to your finances including career changes, pay raises and changes in your household.

You should also not be afraid to contact people for assistance because the mortgage process can be rather difficult to understand without a trained professional helping you. We’ve also included a downloadable flyer that will explain 10 things that you should avoid doing before closing your mortgage loan. It’s a convenient flyer that will serve as a checklist of things to avoid before the closing day so that you don’t run into any unexpected roadblocks.

For more impartial advice on the mortgage process, then don’t hesitate to check out our own mortgage resources page for more information.

 

 

A and N Mortgage Services Inc, a mortgage banker in Chicago, IL provides you with high-quality home loan programs, including FHA home loans, tailored to fit your unique situation with some of the most competitive rates in the nation. Whether you are a first-time homebuyer, relocating to a new job, or buying an investment property, our expert team will help you use your new mortgage as a smart financial tool.

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What Are The Main Documents Signed At Closing?

For many people, purchasing a home will likely be the most expensive thing they ever do. Because it is such a complicated process it can involve many outside things such as mortgage companies, lenders and even legal representation from lawyers.

With so many different people involved in a potentially complex process, it’s important that you pick out the essentials to ensure that you understand it.

One process that is important to understand is how a deal is officially closed. There are several different types of documentation involved and when they’re signed by both parties, it finalizes the sale and completes the deal. But what kind of documents are actually involved? Let’s talk about it.

What To Expect On Closing Day

When purchasing a home from someone else, the seller will typically sign a deed which transfers their rights to the buyer. The deed is one of the most important documents that closes a property sale and it’s often referred to as a closing document due to its role in the sale and purchase of a property. However, there are also closing documents involved on the buyer’s side as well.

For instance, purchasing a home is an expensive consideration that often involves a loan that has to be repaid under certain conditions. A loan used to purchase a home is referred to as a mortgage and the one offering the money is known as a lender. This involves yet another closing document that ensures the loan will be paid back.

When working with a Chicago mortgage banker or any lender throughout the country, you can expect to sign the following documents when finalizing the sale.

The Note: a ‘promise’ you make to pay your lender

Often known as “the note”, this is essentially a document that shows what you promise to pay your lender when taking out a mortgage. It shows the interest rate, details of the property and also the amount of money you’re loaning. It will also describe how to plan to pay back the money and makes you responsible for all of the payments towards your home. The note can be transferred to another party by an allonge.

Mortgage Document: to secure the lender’s rights to a property

The mortgage document is used to secure the lender’s rights to a property. It’s an agreement between the borrower and lender that lists foreclosure rights should the borrower fail to make the right payments back to the lender. This isn’t the loan itself that you will receive from the lender despite it often being called a mortgage.

This mortgage document is a security agreement that makes your home collateral for the loan should you be unable to repay it. This document is similar to your note but contains more information regarding the property.

The Deed: public record of the ownership of the property

The deed is a public record of the ownership of the property. This is recorded with the county so that there’s a permanent record of it that cannot easily be lost or destroyed. Deeds must be in writing but are often completed with printed forms.

It often includes a description of the property and signed by both parties. Deeds are the most important documents in your closing package because they contain the statement that the seller transfers all rights and stakes in the property to the buyer.

Your Closing Package

The closing process is the final hurdle before the ownership of a home is officially transferred to you. To accommodate the process, you’ll be given a closing package of important documents that includes the note, the mortgage document, and the deed.

In addition, you’ll often find other documents such as a Right to Rescission document which gives you a time frame to change your mind about the transaction, and a Real Estate Settlement Procedures Act document that informs you about your closing documents and your obligations to your mortgage.

However, the note, mortgage document, and the deed are the three main documents that will be included in your closing package. It’s vital that you read through each document and attempt to fully understand their significance before you sign them.

Due to their weight in the homebuying process, it’s common to seek advice from a trustworthy and reliable source to help you through your mortgage application and the closing process.

Conclusion

Having someone that can offer advice and walk you through the entire process step by step will make the process of purchasing a home a lot easier. If you’d like to learn more about the mortgage process, do check out our mortgage resources page for more information.

 

A and N Mortgage Services Inc, a mortgage banker in Chicago, IL provides you with high-quality home loan programs, including FHA home loans, tailored to fit your unique situation with some of the most competitive rates in the nation. Whether you are a first-time homebuyer, relocating to a new job, or buying an investment property, our expert team will help you use your new mortgage as a smart financial tool.

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Your Credit Score – How Does It Actually Work?

You may have heard of the term credit score before now, but maybe you’re not entirely sure what it means. Did you know that 45% of college students have no idea what their credit score is?

It can be quite confusing. So if you aren’t sure what it is or how it is calculated, you might not fully understand the number that pops up.

A credit score is simply a number that has been measured based on your credit file. It determines how well you are able to obtain assets and manage your finances.

But, how do we come up with this number? Well, that’s a good question. Let’s talk about it. In this article, we are going to discuss how your credit score is weighed and some of the determining factors that can impact it.

So, by the time you have finished reading this, you should know how your credit score is calculated as well as the factors that are taken into consideration.

This infographic will help you better understand your credit score:

breaking down credit score - inforgraphic

How Is Your Credit Score Calculated?

There are various factors that contribute to making up a credit score. The exact algorithm that is used to measure it is still kept private. However, we do know most of the criteria credit bureaus consider when determining your score. Each factor carries a certain amount of weight with it, with some being more important than others.

But, what are these factors? We’re glad you asked.

Below we’ve listed them below with an explanation of what each means to help you understand what makes up your credit score.

Factors Impacting Your Credit Score

Your Payment History

First up on the list is your payment history. This is one of the most important areas credit bureaus look at when determining your credit score. Your payment history takes up a massive 35% of your score.

If you have something like a mobile phone bill, car payments or anything like this, you want to be making your payments on time.

If you don’t, this could severely reduce your credit score, and make it so that getting loans or contracts a lot harder. However, you do need to realize that a late payment of a few days is not going to count against you, and this will be the case until the payment is over 30 days late.

It is still best to make your payments when they are due, but if for some reason you need a few extra days, this is not going to impact your credit score as long as you communicate with the account holder (e.g., the person or place you need to make the payment to).

Making your payments on time is going to be the difference between an average (or fair) credit score and an impeccable credit score. Which will ultimately make the difference between getting what you want at a good rate or not getting what you want at all.

The higher your score is, the more likely you are to be accepted for further credit in the future. This is one of the reasons it is so important to make sure that you can make your payments when you accept a line of credit.

If you have any issues with making your payment, you should contact your credit provider and see if you can change your payments. This way, you will still be able to make your payments, and your credit score is not going to suffer.

The Amount Of Debt You Owed

The next thing creditors take into consideration is the amount of debt you owe. This is another highly examined criteria that is carefully considered, taking up about 30% of your score. These percentages might not seem like big numbers, but they add up very quickly.

If you think about it, the amount you owe and your payment history added together make a total of 65%, so you need to be careful.

In order to maintain a good credit score, you want to keep your loan or credit utilization as low as possible. A helpful guideline many people follow is keeping your utilization ratio at about 30% of your credit limit.

For example, if you have $3,000 of available credit, you only want to only borrow $900. Keep this in mind when you are working out what you need to borrow on credit and make sure that you can make the payments on what you have borrowed.

It is always going to be better to owe a little across multiple credit lines, than a lot on one. The total amount of debt that you owe is going to be one of the most important factors to consider for your credit score, and it can have a massive impact on the number that is calculated.

Lowering your amount of debt can be the key to getting a better credit score, and you want to be borrowing less to do this.

The Length Of Your Credit History

Another thing that loan officers take into account is the length of your credit history. Though it weighs in significantly lower than the other two factors we have mentioned, this does not make it unimportant.

Roughly 15% of your credit score is going to be made up based on the length of your credit history. This means that a history of responsible borrowing and paying back is going to work in your favor here.

The longer history you have had with proving that you can be trusted to pay back what you owe is going to be a great way to get yourself a high credit score.

People who have a credit score of 700 or over are generally considered to have a good credit score. However, those who manage to earn themselves a credit score of over 800 are viewed as having excellent credit.

You will find that most of the people who have this high score typically have less than three credit cards, all of which have been open for over six years.

Credit Inquiries

If you are thinking of opening a new credit line, you need to think carefully about this choice. 10% of your credit score is calculated based on your new credit lines, and if you are opening multiple in a short period, this is going to lower your credit score.

In some cases, when you apply for a mortgage, all of the inquiries that you make within 30 days are going to be grouped as one inquiry, meaning that this will not have a significant impact on your credit score.

When you are looking for a new line of credit, you want to make your inquiries rather close together. Some mortgage companies will allow your inquiries to be grouped together as one inquiry and you will not have your score impacted by much.

This is going to be useful for people who need new credit, but like to look around for what is the best offer to them.

Type Of Credit You Have

The last factor that loan officers will consider when looking at your credit score is the type of credit that you have. This will make up 10% of your final score. You might have more than one credit line at the moment, and this is fine, meaning you have nothing to worry about.

For example, you might have a car that you are making payments on, a credit card, a mortgage, etc. Having this experience with multiple credit lines might actually be able to help your credit score, as it proves that you are reliable and lenders can trust you to pay back what you borrow.

So keep in mind that there are different types of credit that you can acquire. An installment loan such as for a car is different from a loan that utilizes a revolving credit system, and so on.

Credit Building Tips

A few things you can do to rebuild your credit and increase your score are:

  • Make a few extra small payments to help you pay off any debt that you owe
  • Make all of your payments on time
  • Only spend money that you have and keep a low balance on any line of credit that you have
  • Allow some of the inquiries and hard pulls to fall off your credit report before applying for more

 

Conclusion

As many as 52% of Americans haven’t viewed their score in the past year. Having a good credit score is the key to having everything you want. If you’re trying to repair or rebuild your credit, the first thing you need to do is take a look at it. See where it’s at and then break down your score into sections you can work on one at a time.

You may also want to consider seeking advice from a mortgage company such as A and N Mortgage.

When it comes to opening a line of credit as they are one of the top companies in this field. They will be able to help you better understand your credit score, and what it can mean for your loan options.

 

A and N Mortgage Services Inc, a mortgage banker in Chicago, IL provides you with high-quality home loan programs, including FHA home loans, tailored to fit your unique situation with some of the most competitive rates in the nation. Whether you are a first-time homebuyer, relocating to a new job, or buying an investment property, our expert team will help you use your new mortgage as a smart financial tool.

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2019 Best Mortgage Companies to Work For

Rated #1 for companies with less than 99 employees and #4 overall.

A & N Mortgage Services Inc. has been named one of 2019’s Best Mortgage Companies to Work for. This program was created by National Mortgage News and Best Companies Group.

This annual survey and awards program was designed to identify, recognize, and honor the best employers in the U.S. mortgage industry. The inaugural list is made up of 37 companies.

“Securing and retaining top talent is one of the biggest challenges faced by every employer,” said Austin Kilgore, editor in chief of National Mortgage News. “We launched this annual ranking to recognize companies committed to investing in their employees’ growth and development and to inform executives looking for insight on how to boost job satisfaction among their own teams.”

Companies from across the United States entered a two-part survey process to determine the National Mortgage News’ Best Mortgage Companies to Work for. The first part consisted of evaluating each nominated company’s workplace policies, practices, philosophy, systems, and demographics. The second part consisted of an employee survey to measure the employee experience. The combined scores determined the top companies and the final ranking. Best Companies Group managed the overall registration and survey process, analyzed the data, and determined the final rankings.

To be considered for participation, companies had to be a for-profit, not-for-profit business or government entity operating a facility with at least 15 employees working in the United States for at least one year. Additional conditions applied; for more information on eligibility and other aspects of the program, please visit www.bestmortgagecompaniestoworkfor.com.

National Mortgage News honored all the winners and revealed the final rankings in a special report published in January, 2019.

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Should You Refinance Or Get A Home Equity Line Of Credit?

Refinance Or Get A Home Equity Line Of Credit

 

If you are looking to make some improvements to your home, but you don’t want to dip into your personal savings, there are some options for you to consider. You might want to consider refinancing your mortgage or taking out a home equity line of credit (HELOC).

If you don’t know what either of these options are, don’t worry, that’s where we come in. In this article, we are going to talk about the difference between the two, and what considerations you need to think about when deciding which of these options you want to go for.

What Does It Mean To Refinance Your Home?

When you replace the mortgage that you have with a different type of loan, this is known as home refinance. Many people will refinance if they want to lower their monthly payments for their mortgage, or if they are trying to reduce the interest rate. Another reason people do this is to change their loan program. So, they may currently have an adjustable rate mortgage, but they want to switch to a fixed rate mortgage.

You can get what is called a cash-out refinance, in which the loan amount on the owned property is beyond the cost of the transaction.

What Is A Home Equity Line Of Credit (HELOC)?

A home equity line of credit (HELOC), is a loan that is set up as a line of credit. It’s like a credit card with a maximum amount to be loaned over a period of time instead of as a lump sum. Where a home equity loan is usually a lump sum paid to the borrower with a fixed payment term.

The borrower can borrow up to the maximum amount within the draw period which will be set by the lender, and then the amount paid back will be whatever has been drawn, plus interest. The same as with a credit card, the borrower might have a minimum repayment due each month, but they can pay any amount they like as long as it is over the minimum that has been set.

Factors You Should Consider While Choosing Between Refinance and HELOC

refinance or heloc

Time Frame of Loan

One of the most important factors that you should be looking at when it comes to considering your options on refinancing versus a HELOC is time. You need to be thinking about the amount of time that you are going to be keeping your home before you can even consider looking into interest rates, cost etc. This is because depending on how long you will have your home, this will be how long you need to pay back the amount of money that you will have borrowed.

Both of these loan options will provide you with the same thing, the money that you need to make the home improvements of your dreams. However, each loan type does have a distinct purpose so you need to make sure that you have considered all of the factors before you choose one. For example, a home equity line of credit involves adjustable rates that they can change on a monthly basis, whereas the cash option for refinancing is going to be better long-term.

A HELOC only has interest based on a per month basis, and this might sound enticing, which is why so many people opt for this. However, what most people forget is that because this is the case, the interest rate can rise from month to month. So, a payment you could afford today, may change (and may not be the case) by tomorrow. This won’t happen with a cash-out refinance loan and is an important reason why you need to consider the amount of time you need the loan for.

Interest Rates

As a borrower, one of the first things to take into consideration when you refinance is the mortgage interest rate. People like to feel as though they have managed to get the lowest interest rate possible, and this is what makes them feel good about accepting the new loan. The thing that you need to remember here is that if you are going to be completing home improvements, the mortgage interest rate is likely not going to be as important as the level of risk that you accept when you swap over your loan.

If you have a fixed amount of interest right now, such as 6%, it isn’t going to make much difference if the HELOC interest rate is higher than this at something like 10% if you only need the money for a short period of time. This is because most of the money that you owe for your mortgage debt is still going to sit at 6%.

However, if you need the money for a longer period, then passing up a 7.5% blended interest rate is not going to make much financial sense. This is why you need to look closely at the two options and look at the interest rates immediately after you have decided how long you need the loan for.

Closing Costs

Closing costs are going to be an important consideration and it’s one that many people often forget about. If you look at it objectively, the HELOC will typically be less expensive than a total refinance, meaning that if this is going to be an issue for you, you want to be considering a HELOC.

You do however need to keep in mind the risk that you take with the adjustable interest rate with a HELOC, and when you are considering this, make sure you include the overall cost in your calculations. What we mean by this is that you need to compare the short-term closing costs total with the long-term cost of all the repayments added together.

Both of these loans are going to have some sort of cost attached to them, and it is important to do thorough research into what each option means for you. If you need something that is fixed term, a HELOC is not going to be good for you.

Advantages & Disadvantages Of HELOC

advantages - disadvantages of HELOC

Advantages of HELOC

One of the main advantages of getting a HELOC over a home refinance is that it is better for short-term situations. Where refinancing a home would be more practical and cost-effective in the long term, a HELOC is going to be the best solution for those people who are going to be in the position to pay back the money sooner rather than later. As the money is not given in a lump sum, the borrower does not have to use all the money on the credit line and therefore may find themselves owing less.

On the other hand, if you are looking for something over a longer period, you need to consider a refinance loan as it will give you a better amount of savings over the years that you borrow. This is going to be the case even if the interest rates go up and down throughout the loan period.

Home equity loans also provide tax benefits. Unlike a typical loan that you could be using, the interest rate of a HELOC can be partially tax deductible. Always consult with your tax advisor for additional information before making decisions in this regard.

Another big benefit is that you don’t have to worry about needing a super credit score. Your credit score typically doesn’t have a significant impact on whether you get approval for a HELOC. Although, you may still need to deal with higher interest rates and greater fees if your score is poor.

Finally, HELOCs are completely accessible. So, whenever the borrower requires money, they can simply make a withdrawal. This is completed through a check or a credit card.

Disadvantages of HELOC

There are several notable disadvantages with using a HELOC that must be considered before you fully commit to obtaining one. The first is the possibility of foreclosure. If you are granted a home equity line of credit through a lender, the borrower’s home is then used as collateral. Defaulting on a HELOC then puts you at risk of losing your home. As such, it becomes crucial that you do manage to keep your payments on time.

Furthermore, HELOCs come with a certain level of uncertainty. Your credit line could be reduced or the HELOC frozen due to changes in home value or your credit situation. As well as this, HELOCs use variable rates. This means that you will need to be cautious of spikes in ratings. This makes it incredibly difficult to know what your bill will look like on a month to month basis.

You could also be at risk of developing more debt by using a HELOC. It’s quite common for HELOCs to be used to cancel out bills due on high-interest credit cards. This does make sense because they often have lower interest rates. However, it is possible and indeed common to accumulate more debt when attempting this.

Conclusion

As you can see there are several determining factors for you to take into consideration when deciding whether or not you should refinance or get a HELOC. Both loan types have their advantages and disadvantages and work differently according to different scenarios. For more information on these options, speak with a loan representative at a mortgage company in Chicago or elsewhere. They can help you decide which one is the best fit for you.

 

A and N Mortgage Services Inc, a mortgage banker in Chicago, IL provides you with high-quality home loan programs, including FHA home loans, tailored to fit your unique situation with some of the most competitive rates in the nation. Whether you are a first-time homebuyer, relocating to a new job, or buying an investment property, our expert team will help you use your new mortgage as a smart financial tool.

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