PURCHASE

It’s exciting buying a property, and we are excited to help you with the financing. If you are either buying the property for you and your family, or for investment purposes, here is some information that should help you understand what’s out there in terms of products:

Down Payment:

If you are buying the property for yourself or your family then:

• 0% – You can buy a property with zero down if you are an eligible veteran
• 3% – FHA loan or Fannie Mae or Freddie Mac’s program.
• 5% to 15% – Typically require you to obtain mortgage insurance or you end up with an interest rate that is effectively a little higher.
• 20% – the amount required to avoid mortgage insurance on a fannie mae or freddie mac type of loan.

If you are purchasing a residential property for investment purposes then:

• 15% – is possible through an institutional lender if you have a credit score or 700 or higher.
• 20% – is possible through an institutional lender if you have a credit score or 600 or higher.

Credit Scores:

• 500 – This is what is typically referred to as, Non-prime, and would likely require 35% down-payment, and would be offered at a higher than normal interest rate.
• 600 – This score opens the door to GSE type loans like FHA and Va loans.
• 620 – Is usually the score needed to get a fannie, Freddie Mac type loan.

If you are purchasing the property for investment purposes, underwriting guidelines for Credit Scores are not as formulated, but factor in to the investor’s analysis of the property and the terms they are willing to offer.

Income:

If you are purchasing a home for yourself then you must show your ability to repay your loan. That is typically based on a 43% debt-to-income ratio. There are some products that will go as high as a 50% debt-to-income ratio.
If you are purchasing a home for investment purposes then the ability of the property to pay the potential mortgage and related property expense is analyzed instead of your ability to make the payments.

REFINANCE

Get a Lower Rate

If you had bad credit when you got the loan or have a higher rate, refinancing will help you lower the rate.

Cash Out Equity

If you have big expenses or major purchases, doing a cash-out refinance may be a great idea. You will however need lot of equity and cash-out refinance will have a rate higher than a regular refinance, but it may still be a much less expensive than borrowing from some where else or breaking into your retirement nest.

Move to a Shorter Term

Moving from a 30 Year Fixed to a 15 Year Fixed could be one of the best financial decisions. Even if you have a rate which is below the current market rates, moving to a 15 Year Fixed can save you hundreds or thousands of dollars. However, you should qualify and should be comfortable with a higher payment.

Move to a Longer Term

Sometimes, it’s the other way around. You got into a short-term mortgage to save on interest cost. But because of changed circumstances, you cannot service the steep payments. In that case moving from a 15 Year Fixed to a longer term like 20, 25 or 30 Year mortgage may be a better idea. You will save on your monthly payment and get the breathing room that you are looking for.

Move From ARM (Adjustable Rate Mortgage) to Fixed Rate Mortgage

If you have had an Adjustable Rate Mortgage and are getting worried about the future rise in rates, moving to a Fixed-rate mortgage (FRM) may be a good idea. This is recommended if you plan to keep the mortgage for a while.  Locking in a low fixed rate for the life of the loan could give you some peace of mind.

Eliminate your Mortgage Insurance (MI) Premium

Has your home’s value gone up? If you have 20% equity in your home it’s time to get rid of the pesky mortgage insurance.