Answering The Age-Old Riddle: “The news says rates are going down, should I wait to purchase my home?”

By Scott Steinlauf,  A and N Mortgage Senior Mortgage Consultant

I have been a mortgage originator for just shy of two decades and have been asked this question thousands of times by my clients, probably more actually. It’s a smart question and one I would ask myself.

mortgage rates going up and down

If you’ve turned on the television, glanced at any social media, or have had conversations with your friends or coworkers recently there’s no doubt you’ve heard that interest rates have been on the decline. This is true and based on the state of the world economy there is a good chance that this trend will continue.

The 10-year Treasury yield is down 30% in the last 6 months. This is typically the product most correlated with mortgage interest rates. Mortgage rates are also significantly down during this time, although not to the extent of the 10-year treasury.

You might be asking yourself:

  • Will mortgage rates continue to go down thereby “catching up” to the decline in the 10-year treasury?  
  • Are we at a time in history where money will soon be close to “interest-free” to borrow? 
  • Would it be a huge mistake for me to buy now?

These are all very important questions to ask and keeping an eye on this is what a smart, financially responsible person should do.

My answer is that I don’t know if mortgage rates will go down. I hope they do, but it shouldn’t affect what you decide; whether it’s purchasing or refinancing your home.

Your response is undoubtedly something like, “Of course you would say that you make money  selling loans.” Yes, it’s true. I do make a living originating loans, but let me explain and I think you’ll agree.

Real-Life Example Of A Client

Just under a year ago, my client Steve was deciding whether or not to purchase his first home. Steve was being told by his father that interest rates were about to go down. Steve’s father didn’t work in the home finance industry in any way so how he would have known anything about interest rates is beyond me.

The 30-year fixed mortgage rate was around 4.75% at the time. Currently, the prevailing interest rates on 30-year fixed-rate mortgage are right around 3.75%. Steve’s father took a guess on a 50/50 scenario and guessed right. Based on this presumption, it would appear that it would have been in Steve’s best interest to rent another year at $1,900 a month, and then buy when interest rates went down. 

Is This Correct? Yes, It Is! Here Is Why

Steve was looking for a single-family home in Chicago with a $325,000 price point. He found one he liked and suited his needs nicely.  At 4.75% interest rate his overall monthly housing expense would be $1975. Typically, real estate appreciates at around 3% based on historical averages.  Despite his father’s recommendations, he went ahead with buying a home. He’s very thankful he did and here’s why:

  • Steve’s home went up in the value of 5% in the last year. 
  • He has an additional $16,000 in equity which translates into $16,000 of wealth he would not have had.
  • Steve paid down the balance on the mortgage of an additional $8,000 and now he is $24,000 wealthier.  

Additionally, there were huge tax benefits because his mortgage interest and some other housing expenses were tax-deductible. This put him another $4,000 ahead so now he has created $28,000 of wealth in that year period which he wouldn’t have had otherwise.  This doesn’t factor in that the home he bought was much nicer than his rental so his quality of living improved, nor does it factor in that by buying real estate he diversified his assets and is very proud to be a homeowner.

Perhaps your thought is “Great, but if he would have waited a year to buy the same thing would have happened.  It would have taken an additional year, but because he would be in a lower interest rate overall, he would still be better off in the end.” Keep in mind that we are making a huge assumption he knew rates were going down a full percentage point in the next year (which no one could possibly know).

What Made All This Possible?

Last month I helped Steve refinance, with no costs, and his payments went down $165. Yes! NO COSTS, meaning that no equity was depleted because lender and title fees were covered by the lender (i.e. me). 

You might be thinking something sceptical to the effect of, “No one does anything for free!” and you’d be right.

The title, appraisal, and lender fees for Steve’s refinance loan totalled around $2,000. In a “typical refinance” the closing fees would be added into the new loan amount, but with a NO COST mortgage, the lender covers these fees.

The reason this is possible is that Steve decided to take an interest rate of .125% higher (3.875% instead of 3.75%). Because of his decision, there is more profit on the loan when it is bought on the secondary market. This extra profit was passed on directly to Steve for $2,000. Yes, payments were $14 higher because he took the 3.875% interest rate. But when all is said and done, Steve didn’t have to spend a penny out of pocket nor did his mortgage balance increase. Plus, he is saving $1,980 a year! 

Seek Expert Advice From Mortgage Officers

If Steve would have waited to purchase the same home a year later (assuming the home was still for sale), the purchase price would have gone up 5% to $341,250. He would have paid rent for the entire year and not paid down any principal nor acquired $12,000 in tax benefits. Steve would be $30,000 poorer than he would have been by purchasing the home a year earlier and here’s the kicker: He would be in the same interest rate either way.

This may seem a bit counter-intuitive at first glance, but the numbers speak for themselves.  

Now imagine if rates would have gone up 1% point and he bought a house. He would have lost $30,000 and his mortgage payments would be a few hundred dollars higher for the life of the loan. That’s 30 years! Interesting how things turn out, right?

 

If you have any questions, please contact me today. A and N Mortgage Services Inc provides you with high-quality home loan programs 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, we will help you use your new mortgage as a smart financial tool.

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Things To Consider Before Applying For A Home Loan

So, you’ve finally found the home of your dreams. But if you’re not careful, buying and owning that home can quickly turn into a complicated ordeal. When applying for home loans, it’s all too tempting to accept the first mortgage product you’re offered as long as it gets you the keys to the home you’ve fallen in love with. 

This is why, even if you’re racing to put in an offer on the home of your dreams before someone else snaps it up, it’s recommended that you do your research to be sure that you’re choosing the right home loan for your needs and circumstances. Otherwise, you could find that your choice of mortgage product has far-reaching and long-lasting implications for your future financial well-being. Your home loan will continue to affect you for years and even decades to come. So it’s important that you get this right. 

But don’t worry. If you keep all of the following home loan tips and key considerations in mind, you’ll be able to find the perfect home loan for your property and enjoy years of happy and financially stable living in your dream home!

Rate of Interest: Fixed-Rate or Floating Rate

Your home loan’s interest rate is especially important as it determines how much of your monthly repayments becomes equity in your home and how much of it goes to the bank.  It’s slightly more complicated than choosing the home loan with the lowest rate of interest. You also need to consider which kind of interest works best for you.

Simply put, you have two options when choosing an interest rate that meets your home loan requirements; Fixed Rate or Floating Rate (also called Variable or Adjustable-Rate).

home loanA fixed-rate is, as you might expect, fixed. It remains unchanged throughout the mortgage loan length. This is advantageous in some ways. If you see an interest rate that looks appealing to you, you can apply for that home loan and be assured that you won’t get any unpleasant surprises. And because you know how much you’re paying in interest, it’s easier to gauge how much equity you’re gaining on the property. However, you’re unlikely to find a great deal of variation from lender to lender. 

The alternative is a floating rate. These have adjustable rates within certain parameters. These parameters are defined by the Cost Of Funds Index (COFI), Monthly Treasury Average (MTA) and the LIBOR (London Inter-Bank Offered Rate). Rates will change based on preset margins tied into these rates and will rise on a margin plus index basis.

This is why many floating rate interests start out with such attractive low rates. While rates may remain low, floating rates always carry a slight element of risk. 

Interest Rate Negotiation

Whether you opt for a fixed or floating rate, the best thing to do is to shop around and try and get as many quotes as possible. You may be surprised by how much you could save. Keep in mind that lenders cannot “price match” one another’s rates (to do so would be to discriminate against other buyers of similar circumstances).

However, that’s not to say that there’s no room for negotiation. 

You see, mortgage lenders are able to credit closing costs to a borrower under certain conditions. The most common is when lenders need to stay competitive in a climate of falling rates or when delays result in blown credit lock (a lender’s commitment to honor a set interest rate for a set time period). In these circumstances, you may be able to negotiate a more favorable deal. 

Check Your Credit Score

It stands to reason that if they intend to offer you a large sum of credit, one of a lender’s key home loan requirements would be the applicant’s credit score. It’s easy to check your credit score online without adversely affecting it by using an online tool like Experian, Equifax or TransUnion. 

If you’ve never checked your credit score or are unsure what it means, let us break it down for you. 

Your credit score is a 3 digit number that can range from 300 (Poor) to 900 (Excellent). There are 5 determining factors that make up your credit score and these are as follows:

  • Payment History- How well you’ve paid back previous debts (35% of total score)
  • Total Debt- How much you already owe overall (30%)
  • Credit History- How well you’ve paid off previous debts (15%)
  • Credit Types- What kind of debt you’ve had prior e.g. loans or credit cards (10%)
  • New Credit- How much you’re looking to borrow right now. (10%)

Minimum credit scores for most home loans are between 620 and 640.

Home Loan Eligibility Criteria

While every lender’s home loan eligibility criteria may vary, there are still certain criteria which prospective buyers will be expected to meet. 

Things To Consider Before Applying For A Home LoanFirst of all, the buyer will be expected to provide a down payment on the property. The bare minimum down payment is usually 3% – 3.5% of the value of the property. For FHA loans, the more you have to offer as a down payment the less of a factor your credit score becomes. For example, with a 10% deposit, a mortgage can be approved with a credit score anywhere between 500 and 580. VA loans, on the other hand, have no minimum credit score. 

Debt to income ratio is also important in assuring lenders that you will be able to pay back your home loan and make monthly repayments. For conventional loans, a ratio of up to 50% may be acceptable. For FHA loans, however, the ratios are set by the Department of Housing and Urban Development (HUD). At present, the front-end ratio (housing only related costs like mortgage payments, insurance and property tax) is 31% and the back-end (all monthly debt including car payments, credit cards etc.) is 43%.

You’ll also need to provide your employment history to show that you have a good history of gainful employment, meet certain residency requirements (in most cases the property will need to be your primary residence for at least one year). Regardless of how much of a down payment you have, a lender will expect you to take out mortgage insurance. 

These requirements can differ a great deal depending on the type of loan, whether conventional FHA or VA.  A mortgage representative can help you understand these requirements as they apply to you. 

Employment Stability For The First-Time Buyers

One of the most common pain points among first-time buyers is that they’re just starting out in their careers and don’t have demonstrable employment history or stability. Still, that doesn’t mean that they can’t apply for a home loan. In fact, loans have been approved on the strength of job offers.

Typically, a lender will want to see your past two years’ employment history and payment records. This does not mean that you need to have been conventionally employed. If you have been self-employed and have accurate books this is also acceptable. 

It’s worth noting that some lenders may exclude bonuses, overtime or commissions as evidence of income and job stability, especially if you have less than 2 years’ job history.

Affordability: Insurance, Utilities, Maintenance

As tempting as it is to choose a property at the upper limit of what you can afford to borrow, keep in mind that affordability is about much more than your mortgage payments. It’s about insurance, utilities, maintenance and all the other associated costs that come with owning a home. Can you manage these effectively alongside your existing monthly expenses like car payments, loan repayments, credit cards etc. and still have enough disposable income for savings and happy life?

Loan Length: Longer-Term Loans vs Shorter-Term Loans

Few of us find it easy to project our thoughts 25-30 years into the future. Who knows what we’ll be doing and what our lives will be like at that point? Nonetheless, that’s what you’ll need to consider when determining the right mortgage loan length for you. 

Longer-term loans have lower monthly payments, but more of that goes on higher rates of interest so it takes longer to gain meaningful equity on the home. Shorter-term loans, on the other hand, have higher monthly repayments but lower interest rates so you have more equity.

There’s a balance to be found there. You want to keep monthly payments affordable, but you certainly don’t want to have to worry about high mortgage payments when you reach retirement age. 

Finding A Qualified Mortgage Lender To Help You Through The Process

As you can see, there’s a lot to consider when applying for a home loan and going it alone can be difficult. That’s why it’s advisable to find a qualified mortgage banker or broker in Chicago to fight your corner. Not only can they help demystify mortgage products, home loans and interest rates, but they can also often access better products which aren’t always available to the public.

Conclusion

When you’re ready to make a move on the home of your dreams, take a good look before you leap. There’s a lot to consider and a great many factors can muddy the waters when finding and applying for home loans. Consulting a qualified mortgage lender or broker can make it easier to make an informed decision that’s right for you. After all, this is a decision that’ll stay with you for decades. You wouldn’t want to make it arbitrarily, would you?

 

If you have any questions, please contact me today. A and N Mortgage Services Inc provides you with high-quality home loan programs 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, we will help you use your new mortgage as a smart financial tool.

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Your Guide To FHA Loan Requirements

What Are FHA Loans?

An FHA Loan is a mortgage loan which is insured by the U.S. Federal Housing Administration. Often aimed at first-time buyers and low-income earners, an FHA loan can enable applicants to obtain a mortgage with a relatively small down payment.

When you take out an FHA loan, the typical down payment required is just 3.5% of the property value you want to buy. This is considerably less than the down payment than that is required for a conventional mortgage.  If you were to try and obtain a standard, non-FHA mortgage, for example, you may be expected to pay a deposit of 3.5%-20% of the property’s value. 

Your Guide To FHA Loan RequirementsBy enabling people to obtain a mortgage with a small down payment, FHA Loans are helping people to get on the property ladder and ensuring that people with limited savings can still access mortgage loans.

What Are The Credit Score Requirements?

There are a number of requirements to qualify for an FHA loan, as these types of home loans aren’t available to everyone. To be eligible for an FHA loan, you’ll need to have a credit score of at least 500. 

Your FICO credit score tells lenders how creditworthy you are, how much credit you already have and how well you’ve kept up with repayments. Generally, the higher your credit score, the better. To obtain a standard conventional, non-FHA mortgage, you would need a credit score of at least 580-620, although many commercial lenders will charge high-interest rates if your credit score is at the lower end.

In contrast, FHA loan requirements state that you can be eligible for an FHA loan with a credit score as low as 500. However, to qualify for the lowest down payment advantage, you’ll need a credit score of at least 580. 

If you have a FICO credit score of 580 or higher, FHA home loan requirements state that you could benefit from the low down payment advantage and just put down a 3.5% down payment on the property you want to purchase. 

However, if your FICO credit score is between 500-579, you won’t be able to obtain the low down payment option. While you could still be eligible to obtain an FHA home loan, you would need to put down a minimum of a 10% deposit, based on the property’s value.

FHA Loan Requirements To Secure a Mortgage

Although FHA loans can be one of the easiest ways to secure a mortgage, there are requirements you’ll need to meet. To be eligible for an FHA home loan, you’ll need to have:

  • A credit score of 500 or higher
  • Be at least 18 years of age
  • At least two years of employment history
  • Proof of regular employment, including paychecks, W2s and tax returns
  • Mortgage insurance (MIP)
  • A maximum debt-to-income ratio of 43%, with student loan payments, factored in (This can be extended to 50% in some instances)
  • An appraisal carried out by an FHA-approved appraiser

You also need to occupy the property as your primary residence, although non-occupying co-borrowers may be permitted. If you have declared bankruptcy in the past, at least two years must have passed before between this and applying for an FHA loan. Similarly, if you have owned a property which has been foreclosed on, you’ll need to wait for at least three years before being eligible to obtain an FHA home loan.

FHA Loan Requirements For First-Time Buyers

FHA loans are popular with first-time buyers because they enable you to buy a property with a low down payment. First-time home buyers may have a poor credit rating, which makes an FHA loan the perfect choice. While credit scores between 500-579 will require a 10% property deposit with an FHA loan, many people would find it virtually impossible to obtain a mortgage from any mortgage lender with a credit score in this range.

Unlike with a conventional mortgage loan, you can use a monetary gift as your down payment when applying for an FHA loan. If family members or friends want to help you move up on the property ladder they are legally able to provide the funds for an FHA loan down payment. While some commercial lenders won’t allow this, an FHA loan doesn’t prevent you from using a financial gift to pay part or all of your down payment.

FHA Loan Requirements For Low-Income Buyers

While many first-time homebuyers benefit from acquiring an FHA loan, you don’t have to be a first-time buyer to qualify. For example, if you want to sell your existing home and move to a larger property an FHA loan could be the ideal solution.

If you have a limited amount of savings, an FHA loan can help you to move up on the property ladder because you won’t have to put down a large deposit. If you are a borrower with a low income, it can take years to save a substantial deposit, which can delay your ability to buy your own home for quite some time.

Even if you have a low income, you can still qualify for an FHA home loan. Provided you have steady employment and meet the other requirements (as stated above), there’s no reason a low income should prevent you from securing an FHA loan. 

Down Payment Requirements For FHA Loans

If you have a credit score of 580 or higher, you can obtain an FHA loan with a down payment of 3.5%. If your credit score is 500-579, you will need a down payment of 10% to obtain an FHA loan.

However, these requirements are still far less than most commercial mortgage lenders and ensure you can buy a property even if you have a poor credit rating or limited savings for a down payment.

What Are FHA Closing Costs?

All mortgages have closing costs, and FHA loans are not excluded. However, you may find that your FHA closing costs are less than those enforced by most commercial lenders.

Typically, FHA loan closing costs to amount to approximately 2%-5% of the purchase price of the property. These fees cover the cost of home appraisals, origination fees, titles and other mandatory costs. While 2%-5% may sound like a relatively small amount, this depends on the value of the property you’re buying, so it’s important to factor them in when planning your budget. 

Keep in mind that closing costs vary from one FHA-approved lender to another, so be sure to shop around and compare lenders before making your decision.

What Are FHA Approved Lenders?

Not all banks, mortgage bankers, mortgage brokers and financial institutions can offer FHA loans. Instead, there are FHA-approved lenders who are able to process FHA loan applications and issue the loan. To become an FHA-approved lender, the organization must be approved by the U.S. Federal Housing Administration. 

The Department of Housing and Urban Development makes it easy to find an FHA-approved mortgage lender in Chicago. Simply enter your location into their website, and they’ll provide a list of organizations which offer FHA loans. 

However, fees, such as closing costs, are variable, so one lender may charge more than another. To make sure you’re getting the best deal, take the time to compare lenders. 

FHA Loans At A and N Mortgage

As an FHA-approved lender, A and N is proud to offer FHA loans to first-time buyers, with a low income and poor credit history. We’re committed to helping you buy a property, regardless of your situation. 

Provided you meet the standard criteria and can show that you’re eligible for an FHA loan, A and N Mortgage can help you to take your first steps up the homebuying ladder. With a dedicated team of Mortgage Consultants and Loan Officers, we can help you find the right home loan and even secure your pre-approval so you can start house hunting straight away. 

Conclusion

Buying a property has always been trick, but FHA loans have made the dream a reality for millions of people. Almost half of first-time homebuyers rely on an FHA loan to purchase their first property, which shows just how popular and effective the scheme really is.

By providing additional security to lenders, the government is helping people invest in their own homes, even if they have a limited down payment or poor credit history. If previous financial problems have prevented you from buying your home or if you’ve been unable to save a large deposit, an FHA home loan could give you the opportunity to buy your very own property.

Of course, purchasing a property and obtaining an FHA home loan can seem daunting at first. If you’re unsure how to apply for an FHA loan or you simply want to find out more about how the process works, why not get in touch with us today? 

Our friendly team is always on hand to provide advice and assistance and we can help you to start your application. To find out more about FHA loans in the greater Chicago area, contact A and N Mortgage now at 773-305-LOAN.

 

A and N Mortgage Services Inc, provides you with high-quality home loan programs 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 Guide To Reverse Mortgage Loans

Are you interested in increasing your income after you retire? Do you have a home with a fully or mostly paid off mortgage? If so then you might want to consider a reverse mortgage loan. You probably have heard about reverse mortgage loans before but you could be unclear of the details.

Here we’ll provide all the information including reverse mortgage loan requirements and how to make sure you select the reverse mortgage loan services that are right for you.

What Is A Reverse Mortgage Loan?

reverse mortgage

Reverse Mortgage – A & N Mortgage

“A reverse mortgage is a special type of loan that allows older homeowners to withdraw some of the equity in their homes and convert it into cash.”

It’s designed to help retirees meet pressing financial obligations without having to sell their houses or make additional mortgage payments.

With a reverse mortgage, you use a property to guarantee the loan just like with a standard mortgage. Instead of making payments to a lender, a homeowner receives payments from the lender. A reverse mortgage is paid off when you no longer live in the property. The loan will be paid when you die or move into long term care.

Although a homeowner does not have to make monthly payments with a reverse mortgage, you are still financially responsible for the general upkeep of the house. Your property must be kept in good condition and you need to cover everything from insurance to property tax.

You also need to be aware that whereas with a traditional mortgage the amount decreases, a reverse mortgage loan increases due to interest costs and fees. The costs are added each month and the equity in your home will also decrease.

Types of Reverse Mortgage Loans

There are three main types of reverse mortgages available to homeowners:

  • Single-purpose Reverse Mortgage
  • Home Equity Conversion Mortgage (HECM)
  • Proprietary Reverse Mortgage

Home Equity Conversion Mortgage or HECM is the most common type of reverse mortgage loans. The mortgage is backed by the Federal Housing Administration and provides various flexible choices for payments. A borrower’s payment options include:

  • A single, lump-sum
  • Fixed monthly payments over a specified period of time
  • Fixed monthly advances while you reside in your home
  • A line of credit

Alternatively, a single-purpose reverse mortgage allows the homeowner to borrow against their home equity for a lender-approved expense. These expenses typically include property taxes or repairs to a home. The loan is usually provided in a lump sum to cover the specific financial requirement you have.

The next option is a proprietary reverse mortgage. This type of loan is more suitable for those who have homes that are of a higher value because they give the homeowner access to larger monthly advances.

Reverse Mortgage Loan Procedure Explained

With one of these reverse mortgages, a certain level of equity in your home is converted into payments for you. Payments can be a lump sum or multiple payments over a set period. The payment schedule can be completely flexible to your needs.

You’ll need to think about how big of a loan you qualify for a reverse mortgage. The amount is determined by your age, the current rate on the mortgage, the value of your home and the age of a partner. Keep in mind that your partner also has to be a certain age to qualify for a reverse mortgage. Typically, the older you are, the more you will be able to borrow.

Using a reverse mortgage calculator, you can get a rough estimate of how much a reverse mortgage could offer. Be aware the amount may differ between providers. You then need to choose whether to opt for the single lump sum or multiple payments. A potential deciding factor here is that the lump sum provides fixed interest whereas with multiple payments the interest is variable.

Reverse Mortgage Requirements

There are several reverse mortgage requirements you should be aware of before you apply for the loan yourself. These include:

  • Age
  • Use of the home
  • Ownership
  • Level of debt
  • Income
  • Understanding

Age is one of the most important factors. You need to be at least 62 years old to qualify for a reverse mortgage loan. The homeowner must also be looking for a loan that will be backed by a primary residence. Vacation homes are not qualified properties for a reverse mortgage loan.

Reverse Mortgage Benefits

Reverse Mortgage Benefits

The property should also be one hundred percent owned by you or only have a small mortgage. If you are still paying off your mortgage when you decide to apply for a reverse mortgage loan, then you will need to pay off the existing mortgage first. For this reason, you should have at least 50% equity in your property before you apply for a reverse mortgage loan.

There are also issues with debt to consider. The homeowner cannot have any federal debt delinquencies including tax debts or student loans. Furthermore, your credit score can be a determining factor. There is no set credit standard but you will have a better chance of securing a reverse mortgage loan if your credit score is healthy. You can guarantee a great credit score by keeping debts paid and balances in check.

You do need to provide that you have a suitable level of income. Proof of a good income will show that you are able to pay for everything including insurance and other expenses linked to your home.

Finally, you will need to meet with a HUD-approved reverse mortgage expert. The counselor will provide you with all the information you need before you decide which reverse mortgage loan is right for you.

Pros And Cons Of  A Reverse Mortgage

Pros Of A Reverse Mortgage

Big benefits of a reverse mortgage loan include:

  • Flexibility
  • Tax-free loan
  • Freedom to leave money for relatives

One of the biggest advantages of reverse mortgage loans is that you will be able to choose a payment option that suits you best. The money that you get from a reverse mortgage is also not considered income. As such, while you will have to pay insurance, you won’t have to worry about paying taxes on a lump sum reverse mortgage payment. You also don’t have to worry about the loan limiting your medical or social security payments. Furthermore, you can continue living in your home which ensures that you have a place to live and you can eliminate monthly mortgage payments.

You might be worried that you will be leaving nothing for your heirs. However, with a reverse mortgage loan, descendants do gain access to the remaining home equity once the mortgage has been paid off. Descendants are also not responsible if the amount exceeds the home value. With a reverse mortgage loan, descendants will not be required to pay the remainder of the loan once you pass on.

Cons Of A Reverse Mortgage

There are a few issues with reverse mortgage loans to be aware of including:

  • Confusion over conditions
  • High fees
  • Impact on income

One of the issues with reverse mortgages is that many people do find them to be confusing. The confusion can lead to unexpected consequences after taking out the reverse mortgage. Lack of information surrounding the loan is also why you are required to sit down with a qualified counselor.

You should also be prepared for fees that are significantly higher than a traditional mortgage. High fees may take you by surprise and the value that you are leaving people behind may decrease over time. On the other hand, you will never leave descendants with debt to be paid out of their own pocket with a reverse mortgage loan.

While social security benefits will not be affected, government based payments like Medicaid could be adjusted after qualifying for a reverse mortgage. As such, this type of loan could still impact your income, albeit in minor ways.

Changes to regulations have also made borrowing more difficult while increasing the payments that you will be expected to pay upfront. That said, there are still good deals on the market for those interested in reverse mortgage loans.

How Can You Shop For A Reverse Mortgage?

benefits of Reverse Mortgage

Applying for a Reverse Mortgage

If you are interested in shopping for reverse mortgage loan services, make sure that you consider a wide range of companies. Make sure that you use their calculator or gain a quote from different providers to find out exactly what each company can offer you.

Consider the type of interest rates you will be expected to pay as well as any fees on top of the initial loan.

It’s important to speak to a mortgage advisor who can recommend the best loan option for your individual needs.

Conclusion

Remember you need to consider reverse mortgage loan requirements and check that you are eligible. If you are, we suggest you explore the reverse mortgage services offered at A&N Mortgage.

We offer highly competitive rates on any reverse mortgage loan provided and can be incredibly nimble as a mortgage banker and broker. Do you think a reverse mortgage loan could be the right choice for you?

 

A and N Mortgage Services Inc, provides you with high-quality home loan programs 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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Low Down Payment Mortgages That Allow You To Buy A Home Much Sooner

If you’re like most first-time home buyers, when it comes to finding a home loan, one obstacle tends to get in your way more than most. We’re talking about down payments. High down payment requirements can serve as the first and biggest roadblock for those who might have trouble saving up enough to get a home loan.

home mortgageFHA and VA loans offer some low-to-no down payment loans but aren’t accessible to all. Here, we’re going to look at the latest option: conventional mortgages with down payments as low as 3%. We’re going to look at what you need to know about them and who they might work best for.

What Is A Conventional Home Loan?

Simply put, a conventional home loan is one that doesn’t have any kind of guarantee or insurance provided by the federal government. They aren’t backed by agencies like the Federal Housing Authority or Veteran Affairs. As such, conventional loans follow the requirements set out by the two larger mortgage loan buyers in the US; Fannie Mae and Freddie Mac.

Conventional loans account for 60% of all home loans issued throughout the country. Often, they come with higher credit score requirements, meaning they can be tougher to apply for, but they can result in lower interest rates than other types of home loans.   

Down Payments For A Conventional Home Loan

There are no set guidelines for what is considered a standard down payment when it comes to conventional home loans. However, they usually require down payments that are in the 5 to 20% range.

There are now some conventional loan programs that offer down payments as low as 3 percent of the overall value. Exceptions that fall into the lower down payment option include the Conventional 97 Loan and the HomeOne programs that offer 97% of the property’s total value, meaning that buyers have to pay only a 3% down payment. 

What Are Conventional 97 Loans And HomeOne Loans?

Here are a few key features and facts you need to know about both types of loans: 

Conventional 97 loan (offered by  Fannie Mae): Up to 97% financing on loans with a $484,350 maximum loan limit, eligible for those with a credit score of 620 and above who have a debt-to-income ratio of 43% or lower. It’s eligible for single family homes, PUD, condos, townhomes, and CO-OP, but to owner-occupied buyers only and not real estate investors. Lastly, at least one of the borrowers taking the loan must not have owned a house in the 36 months prior to applying.

HomeOne loan (offered by Freddie Mac):  Up to 97% financing on 30 year fixed rate loans for a primary residence. There are no income or geographic limits on where you can apply for a HomeOne loan. There are no mortgage reserves required, but at least one of the borrowers must be a first-time homebuyer, and all borrowers must occupy the property. However, borrowers can still own other properties.

Pros And Cons Of A Low Down Payment Conventional Loan

Like all loans, conventional loans with 3% down payments have their own unique advantages and disadvantages to consider:

Pros of Low Downpayment Conventional Loan:

  • 3% down payment makes it much easier to get a loan; that’s even lower than the 3.5% down payment requirement for an FHA loan
  •  Attractive for first-time homeowners
  • High maximum loan amount makes it easy to get the kind of home you want

Cons of Low Downpayment Conventional Loan :

  • Higher credit score requirements (about 620) than an FHA loan
  • Maximum loan amount cap might be restrictive for some who want to buy a more expensive home (jumbo loan amount)
  • Cannot be used for homes that include multiple units
  • Cannot be used for property investments or to buy rental income homes
  • Low down payment homes require private mortgage insurance

Comparison With Federal Housing Authority Loans

Federal Housing Authority (or FHA) loans were designed to help more Americans buy houses rather than rent them. As such, they have previously allowed buyers more flexibility than prior conventional loan standards. These loans are borrowed from traditional lenders, but insured by the FHA. You can read more about them on our in-depth look at FHA loans.

However, now that Conventional 97 loans and HomeOne loans have set standards for conventional home loans with down payments as lose as 3%, how do FHA loans compare? Here, we’re going to look at the unique advantages of both kinds of loans.

Let’s start by looking at the FHA loan advantages, particularly in comparison to the Conventional 97  loan:

  • Typically lower interest rates
  • Minimum credit score requirement of 580
  • Higher loan insurance premiums as it requires an upfront fee and permanent mortgage insurance
  • Flexible qualification criteria
  • Accessible for those with debt-to-income ratio as high as 51%
  • FHA loans are assumable
  • Student loans in deferment not counted in your debt-to-income ratio

In comparison, here are some of the advantages of Conventional 97 loans:

  • Private mortgage insurance is required initially but cancels as soon as the overall loan-to-value ratio reaches 78%, unlike FHA loans where the mortgage insurance payment (MIP) is permanent and can never be canceled.  (FHA borrowers must pay a one-time up-front mortgage insurance payment plus an ongoing monthly payment to compensate for the increased risk of the low down payment.)
  • House must be owner occupant for at least one year.
  • Minimum down payments of 3% are available, which is .50% lower than what FHA loans  require (3.5%)
  • Higher maximum loan amounts are available. (Up to $484,350 versus $314,827 on single-family properties in high-cost areas.)

While FHA loans are slightly more accessible, due to their more flexible credit and debt-to-income ratio requirements, conventional home loans with lower down payments can end up being the more cost-effective loan choice for new homeowners thanks to their lower down payments and the ability to cancel the mortgage insurance. They typically do have slightly higher interest rates, but at least buyers looking for low-interest rates have more than one option at their disposal now.

FAQs About 97% LTV Home Purchase Loans

If you’re interested in a conventional home loan with 3% down, then you might want to know exactly what that means moving forward. Here are the answers to some of the most frequently asked questions regarding 97% LTV home purchase loans.

  • How much home can I buy with a conventional home loan?: The maximum loan amount of these loans is $484,350, which means that with your 3% down payment added on top, you could buy a home for up to $436,216.
  • What’s the minimum credit score requirement: The minimum credit score requirement is 620, but most lenders will usually ask for a score that’s at least at 680 or higher.
  • What’s the maximum debt-to-income ratio requirement?: While this can change depending on your credit score, the highest DTI requirement for 3% down conventional home loans is 43%. 
  • Are FHA loans cheaper?: While you do pay a higher interest rate on 3% down conventional loans, they can save you money in the long-run as the insurance on the loan will cancel when you reach 78% loan-to-value ratio, which doesn’t happen with FHA loans. Overall, conventional home loans tend to be cheaper.
  • Can I use gifts as a down payment?: Yes, you can have up to 100% of your down payment funded by gifts received from family members and friends.
  • What kind of properties can I use this loan for?: 3% down home loans are only available for owner-occupied borrowers buying for single family homes, PUD, condos, townhomes, and CO-OP properties.
  • Do I have to be a first time home buyer?: Yes, but this doesn’t mean that you can’t have ever owned a home before. Conventional 97 loan program specifications state that a first time home buyer is someone who hasn’t owned a home in three years.
  • If I’ve owned a home, can I apply alongside someone who hasn’t?: Yes, only one of the borrowers has to be a first-time home buyer.
  • Can self-employed individuals apply for one?: Yes, so long as you can provide 2-years’ worth of federal tax returns, you can use a Conventional 97 home loan.

If you want to know how any of the other low down payment loans from A and N Mortgage work, such as the FHA loans we offer, we also provide FAQs on those to help you better understand the options available to you. We will help you understand which low down payment option works best for your circumstances. 

Our 3% Down Services And Other Low Down Payment Loans

At A and N Mortgage, we offer a variety of different low down payment loans, making it much more affordable to begin owning your first home. Whether you’re looking for conventional home loans, FHA or VA loans, we offer the best Chicago rates on mortgages as low as 3% down. Here are a few of the options we offer:

  • Conventional loans with 3% Down
  • Federal Housing Authority (FHA) loans with 3.5% Down
  • Veteran Affairs (VA) loans with 0% Down

All of the loans currently offered from A and N Mortgage are available in Chicago, Illinois, and we are licensed in 9 other states. We are a top mortgage lender in Chicago, Lincoln Park, Logan Square, Wicker Park, and Edgewater. 

A and N Mortgage Services Inc, 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.

Posted in homebuying, Tips and Tricks | Leave a comment

My FHA 203K Personal Renovation Mortgage

MASTER PENTHOUSE

I can’t think of any mortgage with a worse reputation than the FHA 203K renovation home loan. But because of this mortgage, I lived rent-free for as long as I wanted, and then made a profit of over $600,000. So now I’m making it my mission to tell everyone how great these mortgages can be!

It is a common belief that renovation loans are an absolute nightmare. These loans are thought to have unfathomable amounts of paperwork, hoops to jump through, and other aggravations. Consequently, 203K

Renovation loans are the most underutilized and underserved mortgage there is.

However, if utilized properly, a renovation loan is one of the most powerful financial vehicles there is. It is not without its challenges, but logistically it is just a regular mortgage with a few more moving parts.

The best thing about the 203k is that with a down payment of only 3.5%, the entire home, and all the improvements can be financed at a low interest, 30 year fixed, government-insured mortgage.
What I saw as the ultimate way to reap the maximum benefit out of this loan was to purchase a multi-unit property. So long as a property is 4 units or less and one intends to live in one of the units for 12 months, this loan can be done, and it is considered an owner-occupied property.

My plan was to find a 4-unit property in an area that I saw as safe to live in with upside to become even nicer. I wanted a property in need of a full rehab, preferably a gut right down to the studs. My goal was to have a large unit where my family could live and three rental units that would cover the cost of the monthly mortgage, taxes, and other expenses. Finding, or more accurately, creating, such a place would give me significant instant equity in the home, no mortgage payment since the rents would cover this in full, and the ability and likelihood for considerable and consistent appreciation.

ATTIC (VALUE ADD!!!….NEW BEDROOM AND DEN)


One thing to note when looking for any property is the potential for “value add”. Because this home had an unfinished basement and attic, both with high ceilings and good structure, this easily allowed for incredible upgrades to the property (Take a look at the before and after pictures)

I searched through many properties and finally found a Fannie Mae owned foreclosed property that had just been listed. I got in to see it and it was exactly what I was looking for. I put down a purchase contract on the spot and my offer was accepted!

The finance took under 30 days, which confirms that if everything is done proactively and with a seasoned mortgage banker, this is a practical and reasonable mortgage product.

The home was purchased for $465,000 with $5,000 in seller’s closing cost credits. We were going to put another $230,000 in improvements. Since this is a one-time close the overall mortgage was for $695,000 (purchase price plus improvements). We put $20,000 for a down payment, and we were ready to roll.

We were gutting the house right down to the studs and when we were finished the three rental units paid for the entire mortgage, taxes, insurance and operating expenses of the building in full.
The work took 6 months, and, in the mortgage, we financed 6 months of mortgage payments so there was no cost of carry during the renovation period.

Three years went by with all the housing expenses covered in full. The area where we bought had become extremely desirable, our place was showing a massive Return on Investment (ROI) and we decided to sell the home.

Before we even put the property on the market, we received an offer of $1,200,000. We took it and closed the following month.

BASEMENT (VALUE ADD!!!…AN ENTIRE NEW UNIT)


In 3 years, on top of living rent free, we made a profit of over $600,000!

This undertaking is something I am very proud of. It shows that with a good plan and the right guidance anyone can do something like this and wisely accumulate wealth through their biggest asset.

It is also very gratifying to create something that wasn’t there before – a beautiful home that makes the community a little nicer.

These renovation loans have become a great passion for me and I have thoroughly enjoyed learning every nuance of them. There is another great government backed renovation loan called a Fannie Mae Homestyle mortgage that my clients have been using to amazing success that is a wonderful option as well. This product allows for the financing of renovations for investment properties, luxury items, and many other incredibly useful things. On a side note, these renovation loans are not just for purchases either. If you currently own a home and are looking to do improvements both relatively minor, or totally massive, this is an avenue well worth checking out.

MASTER BATHROOM


 

 

 

 

 

 

 

 

If anyone has questions, thoughts, comments or would like to speak in person I am always available and love to talk about all types of mortgages for purchases or refinances, especially these renovation loans.

Check out the before and after listings on Redfin:

Purchased September 2014:
https://www.redfin.com/IL/Chicago/1355-W-Walton-St-60642/home/14108710/mred-08636320

Sold September 2017:
https://www.redfin.com/IL/Chicago/1355-W-Walton-St-60642/home/14108710

Scott Steinlauf
773-350-6989
scotts@anmtg.com
NMLS #: 213442

Posted in How To, Scott's Blog | Leave a comment

Why You Should Consider Refinancing Your Mortgage This Summer

Summer refinance tips

If you haven’t thought about it yet (or done so), this summer may be the perfect time to refinance your mortgage. Mortgage interest rates are still very low and have just recently dropped again. If you’re a homeowner with good credit and sufficient equity in your home, odds are the lower refinance rates are within your reach.

By refinancing your mortgage, you can cut your mortgage payment and possibly shorten the term of the loan. Paying your loan off in a shorter time period is not only a surefire way to save money over the life of your loan, but it is also a way to obtain a more attractive rate on your mortgage.

If you don’t think you can handle higher monthly payments with a shorter-term loan, go with the longer term and make additional principal payments as circumstances allow.

Though you may not get the best rate currently available, you’ll avoid getting stuck with a high contractual monthly payment that could be a stretch for your monthly finances. You can still save money in the long term by paying less in interest on the newly refinanced mortgage.

Although the potential savings with refinancing can be significant, there are a number of factors to take into consideration.  In this article, we’ll provide insights and tips to help you better understand if this is an opportune time or not.

Rates Are Still Low

One of the first reasons you should consider refinancing now is because mortgage rates are at an 18 month low. The refinance boom, however, may be short-lived.

During the first part of 2019,  it was expected that the Federal Reserve would continue with its policy of raising interest rates.  U.S. economic growth was strong and the gross domestic product (GDP) rose by over 3%. After the first quarter, however, things started to change primarily because of uncertainty due to unresolved trade issues with China, Mexico, and other international partners.  The markets reacted accordingly and mortgage rates dropped.

Mortgage rates can rise and fall all the time for a number of different reasons.  When you’re thinking about refinancing your mortgage, doing it when rates are low lets you grab the opportunity while it’s there. If you wait too long, mortgage rates could rise again, and you will have to wait until another dip if you want to make the most of your savings.

Mortgage Refinance Tips

If you think that you might be ready to refinance your mortgage, there are many things to take into account to ensure you get the best deal. Taking a look at your current circumstances and using a mortgage refinancing calculator can help you to work out what approach you should take when you do decide to refinance. Below are a few of our best tips to help you along the way.

Make Sure It’s The Right Time To Refinance

External factors are important, such as low mortgage rates, but it also needs to be the right time for you to refinance.  A general rule of thumb is that you should have at least 20% equity in your home. If your equity is less than 20 percent, and you have a good credit rating, you may be able to refinance anyway.

Refinancing makes sense for a lot of people, but it’s not the right choice for everyone. If you’re going to refinance your mortgage, you should think about the long-term and not just the immediate financial effect. You need to plan to stay in your home long enough that you will be able to get back the three to five percent of your home value that you will spend on closing costs.

Think About Your Refinance Goals

It’s important to think about why you want to refinance your mortgage and what your goals are for doing so. Maybe you want to pay off your mortgage as quickly as possible. Or maybe you want to pay less interest overall. You decide what’s right for you.

If you simply want to pay off the loan as quickly as possible, you will want to look for the shortest term that offers monthly payments that you can afford. If your aim is to pay less interest, you will want a low-interest rate over a shorter term, while if you want to lower your monthly payments, you need a low-interest rate over a longer term.

Refinancing to a mortgage with a shorter term will usually be the best option unless your priority is lowering your monthly payments. A shorter loan term saves you money long-term, rather than offering short-term savings. You save money with a lower interest rate, plus save money over the life of the loan by paying less interest.

You could save tens of thousands of dollars with a shorter loan term and lower interest rate, even if your monthly payments increase. However, it’s important to keep in mind that these savings can alter if your interest rate changes.

Consider A Cash-Out Refinance

When housing prices are rising, you can take advantage of it. If you’re thinking about refinancing your mortgage, a cash-out refinance might be a good option for you. It helps you to release the equity in your home so you can benefit from the cash that you have put into it.

With a cash-out refinance mortgage, you might not be saving on your payments, but you do benefit from unlocking your equity instead. It’s also good to note that some lenders set a limit on how much cash you’re allowed to take out, so you should be aware of this when refinancing your mortgage.

Balance The Costs Of Refinancing

Refinancing your mortgage can save you money through your monthly payments or across the term of the loan. However, it will also cost you to refinance, with fees to pay that are important to take into account.

Before refinancing, you need to think about when you will recover the costs of refinancing. It should be easy to work this out if you know how much you’re going to save each month. With this information in hand, you can then decide whether it’s the right time to refinance. If you’re planning to sell soon, for example, it might not make sense to refinance your home.

Use A Mortgage Refinancing Calculator

Having a clear budget is essential when refinancing your home. General examples can be helpful, but they don’t apply to your specific situation. By using a refinance calculator, you can plug in the numbers that are relevant to you and get helpful numbers. Find out how much you could save with a quick calculation.

Get A Free Analysis

If you’re not sure whether refinancing is right for you or how to get the best deal, a refinance analysis can help. When you use an experienced mortgage banker or broker like A and N Mortgage, you can get free advice on whether it’s the right move and what your next steps should be.

Save By Paying Points

The option to pay points before you close the refinance deal can help lower the interest rate on your mortgage even further. This involves paying money upfront so that you can permanently buy down the interest you pay. If the point system makes financial sense for your specific situation, it could be worth the upfront cost to do it this way.

Pay Close Attention To Your Credit Score

Another thing you want to consider when you refinance is your credit score. Many lenders have strict rules. A credit score of 760 or higher is usually required to get the best rates.

However, if your credit score isn’t ideal, you can improve it fairly quickly. Start by checking for and addressing any errors on your credit report. You should also make sure to pay your bills on time and avoid getting too close to your credit limit. Also, you can work on paying down your credit card debt.

Key Takeaways

 

  • Remember that interest rates are at a new low and may not stay here for long so don’t miss out on this opportunity

 

  • Consider different factors affecting refinancing costs, including terms, rates, and points, to see if refinancing will help you save money

 

  • Check that you have adequate home equity of at least 20% before refinancing your mortgage as it will make it easier to qualify for a loan

 

  • Have a good credit score before applying for refinancing, and make sure your debt-to-income ratio is 36% or less

 

  • Calculate your break-even point and check how refinancing will affect your taxes

 

  • Talk to a mortgage professional who can easily help you with each of these steps

Refinancing your mortgage this summer could be a good move for you, but you should do some research before making a decision. The easiest way to do this is to talk to a knowledgeable representative from a mortgage company who can help you determine if this the right financial move 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.

Posted in 'A & N Mortgage', 'financial tips', Chicago, conventional mortgage, refinance | 1 Comment

What To Expect on Closing Day

Closing on a property can often seem like a process that takes forever. There are many steps to purchasing a home from making an offer and negotiating on the property you want to buy, finding a mortgage professional to help you along the way, and getting proper financing in place.  All of your efforts become a reality when you’re finally the legal owner of your new home.

So when you’re approaching the closing on a house, you want to be sure that you have all your ducks in a row. It’s important to be aware of what you need to have lined up so that the mortgage closing runs smoothly. Today we’re going to help you do just that.

 

 

How To Prepare For Closing Day

First and foremost, you want to ensure that all of the paperwork is complete and processed properly beforehand. Your loan officer can help you with all kinds of paperwork, from gathering the proper documents to reporting gift funds that you are using to purchase a home. Having everything finished at least three to seven days before the day arrives will help prevent you from being held up or running into any roadblocks at closing.

Below is a brief overview of your closing day checklist.

PREPARE FOR THE CLOSING DAY

Be Ready With Your Down Payment

Having your down payment ready is one of the most important financial aspects of closing on the purchase of a home.  It helps to make sure the money isn’t tied up somewhere else. Your down payment will be comprised of an earnest money deposit (good faith deposit) that is used to open escrow and must be delivered within 3 days of the signed contract and the balance of your down payment that is due right before the closing.

Verify Your Escrow Account Details

If you have an escrow account to hold your money until it’s time to close, it’s important to verify that everything is in place. You’ll want to go back and double check that all of the money that is required is in the account.

Cash For Closing

When you complete the purchase, you may need cash to close the deal. For this transaction, it is more likely that you will use a cashier’s check, certified check, or wire transfer to cover anything you need to pay for your purchase price and closing costs.

Proof Of Insurance/Insurance Binder

You’ll also need to have your homeowners’ insurance in place before you can take ownership of the property. Make sure that you have proof of your insurance so that you can show it on closing day as part of the other documents that you have.

Good Faith Estimate Document

A Good Faith Estimate of Closing Costs is required by law from your lender or mortgage broker and must be provided within three days of you applying for a mortgage. Have this with you on closing day so that you know the closing costs that are involved.

Copy Of Sales Agreement Contract

A copy of your sales agreement contract is also important to have when closing day arrives. It’s always important to have your own copy of a contract so that you know what’s in it, and you can double check to make sure nothing has been changed in the seller’s copy.

Inspection Reports

Carrying out a home inspection before buying a home is essential. After you have completed the home inspection, make sure that you have the report with you when closing day arrives. It’s also useful to have it with you when you do a final walkthrough, especially if the current owner has agreed to fix anything.

Any Other Documents

Be sure to have any documents that you supplied your mortgage company to get approval for your loan. With copies of these documents, you will be able to present any necessary evidence while you’re signing paperwork.

Keep in mind, the actual cash and documentation you need to bring along to closing can vary. For instance, your down payment may already be held in an escrow account, so you would just need to sign that over to the seller during the closing. Your mortgage broker will inform you what you need to bring and what they will bring with them to the closing.

As well as bringing necessary paperwork and cash to close for closing day, make sure that you have a photo ID with you.

 

Schedule Your Closing Day

In order for closing day to take place, you need to make sure that you have a date set. Your mortgage banker or broker will be able to help you to schedule the closing so that everything will run smoothly.

When you choose a date, it’s highly recommended to avoid the last day of the month. This is because if there are any delays in the closing and it runs into the next calendar month, it could increase the closing costs such as prepaid interest and prepaid property taxes. And, when you do set a date, you should plan to be available for the day or for at least half the day. Try to take the time off work so that you have plenty of time to get all of the paperwork and other things in order when you arrive for closing.

Arrange A Final Walkthrough

After you have scheduled your closing day, the next thing you’ll want to do is to arrange a final walkthrough of the property in order to check its condition. You should schedule this at least one day before closing so that you have time to make any observations and take action if you notice anything out of the ordinary.

During your walkthrough, you should check for alterations, changes or damage to the property that might have occurred since the accepted your sales offer and you signed the purchase agreement. If there are any discrepancies, you will want to resolve them before closing or by requesting an addendum to the sales contract. The addendum should also contain details about what recourse you have should the seller fail to live up to their end of the agreement.

Who Is Present At the Closing?

There may be several people at the closing, including the buyer and the seller. Other people who might be there include:

  • Seller’s agent
  • Title company agent
  • Closing agent
  • Real estate lawyers for buyer and seller
  • Buyer’s real estate agent

What Happens During the Closing?

The closing day involves a lot of paperwork, so be prepared to go through it all. But what actually happens during the closing?

  1. You will pay any costs that you have yet to pay
  2. The seller will sign documents that transfer property ownership to you
  3. You will sign a settlement statement, a mortgage note as a promise to repay the loan, and a mortgage or deed of trust to secure the mortgage note
  4. The title company will register the new deed in your name

All of these documents are important to sign. It might get a bit boring, but you need to have all of the paperwork in order if you want everything to be official. You might think that you can simply sign everything in a few minutes, but you can’t rush everything.

Potential Problems On Closing Day

There are some potential problems that you should watch out for that could lead to the closing falling through. Though these problems don’t occur often, it’s important to be aware of them. For example, the seller might have been asked to make repairs but failed to do so. They could also change their mind about selling or fail to have the cash required to close.

There’s not much you can do about problems on the seller’s side, but you can prevent problems from your side. These issues may include a change in your financial situation, failing to conduct a final walkthrough, and not having the right amount of cash required to close. If you are well prepared for the closing day these issues are easily avoidable.

The Importance Of Working With An Experienced And Helpful Mortgage Company

If you want a closing day on your property to be successful, be sure to find an experienced mortgage company to work with you every step of the way.  They can assist you with all your paperwork to help ensure that you are prepared for the big day.

Helpful Mortgage Company

If you have any questions about the closing process or want to apply for a home loan, please feel free to contact A and N Mortgage at (773) 305-LOAN (773-305-5626) to speak with one of our mortgage specialists today.  We’re an established, respected Chicago mortgage company and have been listed as one of the top 100 mortgage companies two years in a row.  We also have an A+ credit rating with the BBB for ten years running.

Posted in FAQs, Home Page Blog | 2 Comments

How The Housing Market In Chicago Is Starting To Favor Buyers In 2019

horizon architecture Chicago The housing market in Chicago is growing increasingly intriguing in 2019. There are a number of real estate trends that are shaping the market today.

The prices of houses in Chicago have gone up only slightly in the past year and recent expert predictions indicate that there could be a small increase in the next year.  

All of this comes together to create a housing market that might just favor buyers in 2019 and 2020. In this article, we’ll provide an overview of the housing market in Chicago, the factors that are causing a shift in favor of buyers, and why this may be a good time to buy.

Chicago Sees A Rise In Real Estate Construction

The metro area in Chicago is one of the biggest across the country. There’s a very dense population here and plenty of housing up for sale. In the past year alone, Chicago has seen some of the largest growth in new home construction compared to other major cities.

Altogether there’s been around a 60% increase in new real estate development between February 2018 and February 2019. With a vast amount of new properties under development, there is now a strong inventory of existing homes for sale.

The increase in construction and the availability of houses for sale means that Chicago has a ready supply of real estate inventory. With inventory to supply, it naturally puts the ball more into the buyer’s court. There are many options available for potential buyers which provides you with more choices than ever before.

Lack Of Population Growth in Chicago

One of the reasons that a lot of housing markets tend to drift in favor of sellers is because of the increase in population. As the population rises, the demand for homes goes up. Therefore, you have a simple case of supply and demand. If the demand is high the prices can be set higher in favor of the seller.

The population in Chicago has remained relatively flat with the most recent survey stating that in April 2010 to April 2017 we saw a growth of just 0.8%. To put this figure into context, the country’s population went up by 5.5% in the same time. But, of course, not all areas of the country are growing and the population can wax and wane. Big cities such as New York and Los Angeles have also experienced a drop in population too.   

When you combine the lack of population growth with the new construction and the existing supply of housing, you have the perfect recipe for a buyer’s market. There’s plenty of inventory to supply and it’s increasing.

Favorable Mortgage Rates

Chicago mortgage rates are considered to be some of the most competitive in the United States. Not only that, but national mortgage rates are at the lowest they’ve been in years. And to add to this, the Federal Reserve announced in January that it has no plans to raise the interest rates this year.

The reasoning behind this decision is mainly down to concerns over the potential slowing of the economy so this actually works in your favor. If the interest rates are lower, you can finance your home with at a desirable rate. And if you choose a fixed rate mortgage, you can keep that low rate for the life of the loan.

As a leading Chicago mortgage company, we’ve seen a rise in mortgage applications throughout 2019. It’s no coincidence that this comes when the average rate for a 30-year fixed mortgage is hovering around 4.25%.

Naturally, favorable mortgage rates help create a buyer-friendly housing market. You can now get a more affordable mortgage and buy the home of your dreams.

Why Do Some Homes Take A Long Time To Sell?

When there are a growing population and a high demand for property, homes tend to sell very quickly. But, what do you think happens when the population isn’t rising? You end up with a lot of homes that are on the market for months before they’re sold. When this happens sellers become more desperate the longer a house takes to sell. As a result, the power is in your hands as a buyer.

On the contrary, when a house sells quickly, it’s a seller’s market. As the buyer, you’re desperate to find a home but all the good ones are selling before you get a chance to make a bid. In this case, the prices go up as sellers see the demand so you’re more likely to bid higher than usual to keep away the competition.

Now May Be The Perfect Time To Buy A Home In Chicago

Are you actively looking to buy a home in Chicago? Now may be the perfect time to do so. The local housing market is in favor of the buyer because:

  • Chicago mortgage rates are favorable
  • There’s plenty of real estate options available
  • The population is stagnant, meaning the house prices aren’t rising
  • The market is slow, so you have the upper hand

If you are planning on buying a house, then you’ll need to spend a lot of time searching for a mortgage lender. You’ll want to find Chicago mortgage company that offers exceptionally competitive rates. So as a result, you’ll have a more affordable mortgage.

With the mortgage rates in Chicago being so low, it’s a great time to invest. There is no shortage of housing options and there’s not as much competition compared to other cities. Plus, with a  solid business environment and new housing developments, more people will be enticed to move here.

By buying when the market is slow and house prices are favorable, you have the opportunity to earn a significant return on your investment when you sell your home in the future. This makes it an even better reason to buy.

Conclusion

Overall we want you to understand that the housing market in Chicago is starting to favor buyers and now is a great time to purchase a home. So if you are thinking about buying a house in Chicago then consider talking with one of our mortgage specialists today.  This way you can buy the home of your dreams before the market starts getting more competitive and shifts back in favor of sellers.

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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Why You Don’t Need 20% Down Payment 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.

Mortgage Programs That Offer Low Down Payments

Get Pre-Approved

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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