Mortgage Tips

Renting? 4 Reasons Why You Should Buy a Home

We’ve written a lot about the home buying process over the years, but why should you even consider buying a home? Many people today prefer renting or think that owning a home is out of their reach, but that doesn’t have to be the case.

It can be a big commitment when you buy a home, but it comes with so many benefits. We’ve highlighted four reasons why you should buy a home.

1. Tax Benefits

There are many tax benefits that come with home ownership. These breaks help offset some of your costs:

  • The interest and mortgage insurance you pay on your mortgage is tax deductible.
  • If you bought mortgage points, they’re tax deductible in the year that you bought them.
  • Property taxes that are apart of your monthly payment are deductible.
  • The money you make on the sale of your home (up to $250,000 or $500,000 if you’re married and filed jointly) is tax-free if you have owned the home for at least two years and put the money you make towards the purchase of a new house.

2. Appreciation

Homes generally appreciate in value over time, meaning that the longer you own your home the more valuable it becomes. While there are ups and downs in the housing market, owning a home is generally a smart investment.

When buying a home make sure you consider the area, the condition of the home, and how much land it has. Homes in good condition and in good areas hold their value and generally become more valuable over time.

3. Equity

Home equity is the difference between what you owe on your home and what the house is worth on the market. You can gain equity on your home in two ways:

  • The longer you own your home (and pay down your mortgage) the more equity you have (assuming the value of your home doesn’t dramatically decrease over time).
  • The more your home appreciates in value the more equity you have.

Equity takes time to build, but it is worth it. Investing in your home can have major returns down the road, and leaves you with something of greater value than when you started.

4. Savings

Depending on the market you live in, buying a home can lead to major savings when compared to renting. When you factor in the equity you’re generating, the tax breaks that come with home ownership, and the increase in the value of your property, a home is going to save you money in the long run and leave you with something of value that you won’t get if you rent.

The longer you’re planning on staying in an area, the smarter it is to buy a home. This calculator can help you calculate how long you’d have to live in your home before you start saving money compared to renting an apartment.

Let us Know How We Can Help

The home buying process can be both intimidating and overwhelming. Sometimes it can be hard to know where to start. But if you want the freedom, stability, and predictability of living in your own home – we can help you get started. Reach out today.

What You Need to Know About Condo Loans

Condominiums can be a great low cost, low maintenance solution when you are choosing where to live. Unfortunately, receiving financing for a condo can be more challenging than receiving a conventional loan on a traditional home.

What You Need to Qualify

Loan qualifications for a condo loan are often more stringent and there are a few things to consider when applying for a condo loan:

  • You may need a larger down payment to get the best mortgage rate for your condo.
  • The homeowners association for the condo complex may have additional financial qualifications before you can buy a unit in their complex.
  • Lenders look at not only your financial standing, but also the financial standing of the developers. Different loan programs have different requirements for the condo developers.
  • The condominium complex must hold a certain amount of HOA fees in reserve to satisfy most lenders.

Often condo loans are harder to secure because not all the requirements apply to you, the home buyer. If the developers are financially irresponsible or noncompliant, many lenders won’t give out a loan. When looking at condos make sure that you can trust the developers of the complex you are looking to move into.

Warrantable vs. Non-warrantable Condos

Condo loans are either classified as “warrantable” or “non-warrantable”. Non-warrantable condos are considered risky and can be challenging to finance. Often you’ll need to procure a loan from a specialty lender. Condotels, timeshares, and complexes that require buyers to join an ownership club (like a golf club), are most often considered non-warrantable.

Warrantable condo loans are determined to be more stable by Fannie Mae or Freddie Mac, government-sponsored agencies that determine guidelines for buying homes. Here are some typical requirements for a condo to be considered warrantable:

  • No single person or entity owns more than 10% of the development, including the developer.
  • Over half of the units must be occupied by owners.
  • There is less than 25% commercial space set aside in the development.
  • The homeowners association has never been litigated against.

Warrantable condos are much easier to obtain loans for because they are considered stable by lenders. Make sure you take extra time to find warrantable condos when looking for a new home.

Don’t Forget About the Homeowners Association

One thing home buyers often forget about when they look to buy a condo is the added cost of the homeowners’ association fees. These fees are often monthly and should be included when considering what you can afford.

Homeowners association (HOA) fees often provide certain services that offset some of the cost and provide convenience to the homeowner, such as:

  • Lawn Care. This means that you don’t have to mow the lawn or trim the bushes.
  • Pest Control. Many HOAs schedule inspection and treatment from a pest control company to avoid pest infestations.
  • Exterior Maintenance. Roof and siding repairs that may come up are often covered, potentially saving you money on what would be a costly repair.

Combined with a higher down payment, condos can require a lot of upfront work for the home buyer. Make sure that you can afford both the HOA fees and your mortgage before you apply for a mortgage loan for a condo.

We Are Here to Help

You don’t have to figure out how to obtain a condo mortgage loan alone. At Chris Doering Mortgage, we have years of experience in all types of loans and we can help you. Call us or come by the office and we will help you through the entire process.

Mortgage Fraud: Buyer Beware

Did you know that Florida is one of the worst states for mortgage fraud? In fact, the mortgage fraud levels in Florida are three times higher than the national average!

What is Mortgage Fraud?

The FBI says this about mortgage fraud: “It is crime characterized by some type of material misstatement, misrepresentation, or omission in relation to a mortgage loan which is then relied upon by a lender.” Any lie meant to deceive the bank into providing a mortgage loan is considered mortgage fraud.

Victims of this crime can be devastated financially. Those who are already down on their luck financially are most commonly targeted for mortgage fraud. Knowing the common schemes perpetrated by these criminals can save you money and give you peace of mind.

Lenders and buyers alike can commit mortgage fraud. Beware, and know that mortgage fraud is considered a very serious crime. If you are caught committing fraud, you can be charged with a felony.

Two Types of Mortgage Fraud

Generally, there are two motivations for mortgage fraud, for profit or for housing:

  1. For profit – This type of fraud is generally committed by lenders and industry insiders. They take advantage of their knowledge of the mortgage industry and manipulate it for monetary gain. The FBI prioritizes this type of fraud.
  2. For housing – Typically committed by the borrower in an effort to acquire a loan so that they can buy a house.

Common Mortgage Schemes

Knowing the types of schemes out there can protect you from falling prey to predators, or making a mistake yourself.

Borrower Fraud

  • Inaccurate income statements – If you are self-employed and fail to accurately report your income in order to receive a loan, you are committing mortgage fraud. The lender takes into account your income when giving you a loan. By inflating your income to receive a larger loan, you are defrauding the lender and increasing the chances that you default.
  • “Under the table” down-payments – Sometimes a seller, desperate to sell their home, gives the home-buyer money for the down-payment that the buyer can’t afford on their own. The larger down-payment can sway the lender to provide a loan to the buyer who cannot truly afford the home.
  • Giving the down-payment as a gift – Legally you are allowed to take money given to you as a gift and using it toward a down-payment for a home. However, if you pay back that “gift” under the table once the home is purchased, you are committing fraud.
  • Not really occupying the home – If you own a home, but do not live in it, chances are the bank will charge you a higher interest rate on the loan. Claiming you live in a home to receive a lower interest rate, when you live somewhere else, is committing fraud.

Committing borrower fraud to buy a home is not worth the pain you could be causing yourself. Even if the authorities do not catch you, you are setting yourself up for potential financial disaster.

Buying a home you cannot truly afford puts you at significant financial risk. Rather than rush to get a mortgage, take your time, save, and enjoy the benefits of getting a mortgage you can truly afford.

Lender Fraud

Lender fraud can make victims of either homeowners or lenders. There are many variations of these schemes, so it is important to be wary. Take caution if someone offers you something that seems too good to be true – it probably is.

  • Foreclosure “rescue” – If you are at risk of foreclosure and someone offers you a way out, beware! The defrauder will offer to save your home by taking the deed to the home and transferring it to an investor. They then have the homeowner pay them rent while they “re-establish their credit.” Unfortunately, the money you pay this investor is not going toward the mortgage and the house usually forecloses within a year.
  • Loan modification – This scheme is very similar to foreclosure rescue. If you are at risk of foreclosure, someone will come to you offering to negotiate a more favorable mortgage loan on your behalf. They charge you large fees upfront, and then do not act, or negotiate bad terms, allowing the bank to foreclose on your home.
  • Air loans – This type of fraud defrauds the lender more than a homeowner. Someone creates a fake borrower who requests a mortgage loan with no collateral. They fabricate employers, credit agencies, appraisers, and more to convince the lender that this is a real person. The lender gives a loan to this fake borrower and the defrauder takes the money.

Work with a Mortgage Company You Can Trust

When it comes to getting a home, it can be the most significant and rewarding purchase in your life. Working with someone you trust provides peace of mind. Our mortgage professionals are experienced and know how to guide you through the home buying process. Don’t allow yourself to fall victim of predators looking to defraud you. Work with a mortgage company you can trust!

Financing Manufactured Homes: What You Need to Know

What is a manufactured home? For years manufactured homes were often thought of as synonymous with “mobile homes”, but they have become so much more. Manufactured homes are now a viable option for many families. They face more stringent building codes and are often indistinguishable from traditional homes. Before 1976, mobile homes were financed similarly to cars, but because the perception of what a manufactured home is has changed, there are companies that now offer more traditional home loans.

“Manufactured” vs. “Modular” vs. “Mobile” Homes

There are many different terms used around manufactured homes and it can get confusing in determining what is meant by a “manufactured” home. One major issue is perception, mobile homes are thought of as low quality, but today mobile and manufactured home construction is regulated by the Housing and Urban Development (HUD) branch of the federal government.

All terms, manufactured, modular, and mobile, refer to homes built in a factory and then set up on site. The difference is in the way they are set up. Modular homes are designed to local building codes. They are often built on a permanent foundation and look like a more traditional home.

Manufactured and mobile homes have less stringent local regulations. Because their construction is federally regulated through HUD, they are not inspected for local building codes. Often they are built off-site and then brought on location and hooked up to water, electricity, and sewage (all of which is inspected locally). Unlike modular homes, manufactured homes do not need to be set on a permanent foundation

Do I Need a Special Loan?

No, while in the past manufactured homes were financed differently than traditional homes, today you can finance a manufactured home through standard home loan programs. Conventional, VA, and FHA home loans are available to all those who might want to purchase a manufactured home. The loan option you choose to apply for may be determined by your financial situation.

Conventional Loan

The most stringent program, a conventional loan is also the least popular way to finance a manufactured home. They require a higher down payment, higher credit score, and a lower debt-to-income ratio. There are benefits to a conventional loan though. You can use a conventional loan to finance a manufactured home as your second home or investment property.

VA Loan

VA loans are offered through the US Department of Veteran Affairs and are only applicable to veterans of the United States Armed Forces. If you are a veteran, a VA loan may be the right fit for financing your manufactured home. VA loans will require a higher credit score, but do not require a down payment. This means that you can finance 100% of the value of the manufactured home!

FHA Loan

FHA Loans are usually the most popular route in financing a manufactured home. FHA loans are backed by the Federal Housing Administration and are a great option for lower-income families. Often FHA loans do not require a large down payment, or a perfect credit score.

To qualify for an FHA loan, the home must be permanently attached to a foundation and be built before 1976. If you are interested in obtaining an FHA Loan for a manufactured or modular home, contact one our experts who can help you get started.

What Are My Next Steps?

Once you have found the program you think will work best for you, apply for the loan and get pre-qualified. Make sure you have record of your personal assets, debts, your employment verification, and residential history.

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Should I Buy Mortgage Points?

What are Mortgage Points?

Mortgage points, or discount points, are fees paid to the lender when you close on your home in exchange for a reduced interest rate. In essence, they are a down payment on interest when you purchase your home.

One mortgage point usually costs one percent of your loan amount. For example, if your mortgage is $100,000, one point costs $1,000. Most lenders will let you purchase up to three points on your mortgage.

What is My Breakeven Point?

When trying to determine whether or not buying purchase points is right for you, first try to determine your breakeven point. The breakeven point is how long it takes to recoup the money you spent up front on discount points. Below is the formula used to determine your breakeven point:

Points Cost ÷ Monthly Payment Savings = Months to Reach Breakeven Point

The longer you stay in your home the more sense mortgage points make. If you spend $4,000 on points and you are saving $50 a month on interest it would take you 80 months or over six and a half years to break even on what you spent on mortgage points. If you plan on staying in your home long-term, make sure that you are financially prepared for the extra expense mortgage points to bring to the home buying experience

Additional Considerations

Beyond how long it might take to break even, there are other considerations:

  • The interest rate discount you receive depends on the lender, it is not a set rate.
  • There may be a tax benefit to purchasing mortgage points.
  • If you decide to go with an adjustable rate mortgage, mortgage points typically only apply during the fixed rate period of your mortgage. Make sure that your breakeven point occurs before that fixed rate expires.

Not all lending programs are created equal. It’s helpful to have an expert help sort through what options may be available. Having experience on your side can save you both time and money.

Larger Down Payment Vs. Mortgage Points

Sometimes it is more economical to use the money that would be spent on mortgage points on your down payment. Use a mortgage calculator to see what your payments would be with a higher down payment then compare that to the discount you would receive by buying mortgage points.

Down Payment

Larger down payments can be a cheaper and more effective way to lower your mortgage payments compared to mortgage discount points. The more money you save for the down payment, the less you have to borrow in a loan. By borrowing less money, you will have fewer interest payments and will be able to pay off the mortgage faster.

Mortgage Points

Mortgage points are effectively a down payment on the interest you will pay over the life of your loan. For the first few years of your mortgage, you will primarily pay off interest. By buying mortgage discount points, you reduce the amount of interest owed on the home without paying off any of the value of the house. This reduces your monthly payments based on the amount of interest you pay for up front.

Mortgage discount points are an additional cost beyond your down payment and closing costs. Make sure that you can afford that additional expense. Our loan experts will sit down with you and help you decide if this makes sense for you. Reach out to our team today!

When are Mortgage Points Right for Me?

Buying a home and paying upfront for your mortgage points might make sense if you plan on staying in your home for a long time with a fixed interest rate. Because mortgage points add additional cost, it is important to be financially prepared. If you think mortgage points might be the right fit for you or you simply have more questions, our experts are here to help. Contact us today!

How to Buy a Home After Bankruptcy

There are two forms of bankruptcy, Chapter 7 and Chapter 13. Chapter 7 bankruptcy requires assets to be liquidated in exchange for the cancellation of debt. Which means, whatever is owned by the debtor is sold in an attempt to pay off the creditors.

In Chapter 13 bankruptcy, however, a payment plan is established and monitored by the court until the debt-holder is able to get free from their debts. Those with regular income can file Chapter 13 bankruptcy and regular payments are assigned to pay off their creditors over the next three to five years.

When someone is clear of their debts they are discharged from their creditors. Becoming discharged from debt means that you are no longer legally required to pay any remaining debts. In terms of home buying, your ability to qualify for a mortgage is determined by how long you have been discharged from bankruptcy and that minimum length of time depends on the type of loan.

Post-Bankruptcy Home Loan Requirements

Every mortgage is different, and receiving a home loan after bankruptcy can depend on your credit score, how long you have been discharged, and your debt-to-income ratio.

Conventional Loans

Conventional mortgages are not backed by the government and they have the most stringent requirements after bankruptcy. If you have filed for Chapter 7 bankruptcy, there is a waiting period of at least four years after discharge. Chapter 13 bankruptcy requires you to wait at least two years after discharge or four years after dismissal. In addition, they may require higher credit scores and larger down payments.

FHA Loans

FHA loans are mortgages backed by the Federal Housing Administration, and they were created to make home buying easier for middle and low-income families. If you have filed for Chapter 7 or Chapter 13 bankruptcy, the legal waiting period requirement for FHA mortgages is at least 2 years. For both Chapter 7 and Chapter 13, your credit history after bankruptcy will be thoroughly reviewed and considered. Our mortgage experts can walk you through the process and help you determine if an FHA loan makes the most sense for you.

VA Loans

VA loans are guaranteed by the United States Department of Veteran Affairs and are available to United States military service veterans. VA mortgages, like FHA loans, require a minimum 2 year waiting period after the bankruptcy discharge. In addition to the waiting period, there are credit score requirements on a VA loan. Applicants may also be asked to provide a debt-to-income ratio. A lower credit score or high debt-to-income ratio might disqualify you for a VA loan, especially after filing for bankruptcy.

Where Do I Start?

It may seem daunting to apply for a home loan after bankruptcy, but there are three things to consider before applying for a mortgage:

  • Wait – Take stock of your financial situation.
  • Save – Make sure you have enough funds for the expenses a home brings.
  • Plan – Put a plan in place so that you can handle whatever may come your way. It’s also important to avoid any derogatory credit or collections after a bankruptcy.

Bankruptcy can affect your credit for up to 10 years. This makes it crucial to know where you are financially. Make sure that you have enough money saved for a larger down payment and for unforeseen expenses that may arise. The larger your down payment is the easier it may be to secure a mortgage.

Remember that homes come with extra expenses and upkeep. Having extra money saved away will help down the road. If you feel ready to own a home, we are here to help. Please contact one of our mortgage professionals and we will work with you to help you secure the loan you need to get into your dream home.

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