Mortgage Tips

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.

Homeowners Insurance, Private Mortgage Insurance, and Title Insurance – What’s the Difference?

Whether you are buying a home or refinancing your home loan, insurance is important to understand and consider when you’re planning your financial future. Many first-time homebuyers can confuse private mortgage insurance from homeowners insurance, and title insurance. We outline the differences so that you know what to expect when it comes time to refinance or buy a home.

What is Homeowners Insurance?

Homeowners insurance (sometimes referred to as hazard insurance) policy covers damages to your home and your belongings, and accidents on your property, as outlined in your policy. In contrast to private mortgage insurance (PMI), homeowners insurance is designed to protect you as the homeowner.

Homeowners insurance is not always mandatory. For example, if you have paid off your entire mortgage, you are not required to have homeowners insurance. However, it is extremely encouraged to avoid risking what is often the largest expenditure of your life.

In Florida, homeowners insurance does not cover damage from floods and sinkholes. Homeowners will need to purchase additional coverage for these natural disasters.

What is Private Mortgage Insurance?

Mortgage insurance that is provided by a private mortgage company is referred to as private mortgage insurance (PMI). PMI is different from homeowners insurance because it protects the lender, not the homeowner. If at any point, a customer is unable to make loan payments, PMI protects lenders from any defaults on the loan.

As the borrower, you will be responsible for paying the premiums of the insurance until you are eligible to cancel PMI. Premiums are most commonly paid monthly, but can also be paid for upfront with your down payment.

For Conventional loans, borrowers who put down less than a 20% down payment are required to acquire private mortgage insurance. If you are refinancing your home loan and have less than 20% equity in your home, you will also be required to acquire mortgage insurance.

When Can I Cancel My PMI?

When you acquire private mortgage insurance, you will be told how long it will take to pay your loan sufficiently before you are able to cancel your mortgage insurance.

If you obtained your loan after July 29, 1999, you can request cancellation of PMI when your loan-to-value (LTV) reaches 80%. Your LTV is calculated by dividing your loan amount by the purchase price or appraised value of your home. To terminate your PMI, you must prove the following to your lender:

  • Good payment history
  • That the property value has not decreased since purchase
  • No liens against your property

Lenders are required by the Homeowner’s Protection Act of 1998 to cancel PMI at 78% LTV if the loan is current or has reached the midpoint of the payoff.

To learn more about your options to refinance or cancel your PMI, contact our loan experts at Chris Doering Mortgage today.

What is Title Insurance?

A title insurance policy protects a lender and homeowner against any loss resulting from a title error or dispute, such as fraud, forgery, and improperly recorded documents. All mortgage lenders require lender’s coverage for an amount equal to the loan and it lasts until the loan is repaid. As with mortgage insurance, it protects the lender but the borrower pays the premium at closing. An owner’s policy is also typically issued simultaneously at closing to protect the homeowner.

Start the Home Buying Process with Chris Doering Mortgage

There are many details to consider when purchasing a home. At Chris Doering Mortgage, we’re dedicated to helping our customers through every single step of the home buying process. We strive to educate and empower each homebuyer to ensure they receive a loan that makes sense for them and their future.

If you are thinking about purchasing a home or would like to learn more about your options, contact our team today.

The Underwriting Process – What Will They Evaluate?

When a home buyer applies for a home loan, the application is accepted or rejected based on criteria that prove that the applicant is a financially stable and reliable candidate to make their payments on time. Requirements and qualifications vary based on each home loan program.

An underwriter is a hired vendor responsible for reviewing each application to assess the risk of lending to a borrower. This process not only protects the lender from potential default but also protects the borrower from entering a loan that they cannot afford.

During their assessment, they take three factors into consideration. Each factor is weighted differently based on the type of the home loan.

The Underwriting Process – The 3 C’s

To fully assess the risk of a borrower, underwriters review a borrower’s credit, capacity, and collateral. Based on their assessment, they determine if the borrower’s application matches the guidelines and qualifications of the home loan requested.

Credit

An underwriter will assess a borrower’s credit score and history to predict the borrower’s ability to make their payments on time and in full. How well an applicant has paid their debt in the past is a great indication of how well they will continue to do so in the future.

Credit history is perhaps the most important factor in a borrower’s application for a home loan. Credit scores are evaluated based on payment history, amounts owed, the length of your credit history, and types of credit. Normally, payment history and amounts owed are weighted the most heavily by an underwriter.
If you have concerns about your credit, contact one of our loan originators today to determine the best plan for obtaining a mortgage.

Capacity

Assessing a borrower’s capacity answers the question “Can the borrower pay off their debt?” Capacity is evaluated based on income, employment, and current debt. These evaluations determine whether or not a borrower can afford their current obligations and a new mortgage payment.

Debt-to-income ratio is an important factor in assessing a borrower’s capacity to repay their debt. This is calculated based on several elements of a borrower’s gross monthly income versus their outgoing expenses. Low debt-to-income ratios prove that an applicant can afford their current debt and have flexibility to acquire a mortgage loan.

Lastly, underwriters may also assess the applicant’s current savings and checking accounts as well as their 401(k) to determine the ability to continue paying off their loan in case they were to lose their job or become ill.

Collateral

The home that a borrower is purchasing is considered their collateral. An underwriter considers the value of the home being financed in order to ensure that the loan amount does not exceed the value of the property. To do so, they will request an appraisal of the home.

An accurate loan amount protects the lender from being unable to pay the unpaid balance of a loan in the case that a borrower does not make their payments and the home is repossessed.

Prepare for a Home Loan Application

Protect Your Credit

As you are preparing to apply for a home loan application, consistently monitor your credit score. This will allow you to identify areas of your credit history that need work and errors on your credit report that require disputing.

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Home Loan Pre-Approval – How it Works

Throughout the home buying process, you will encounter a series of steps to take that ensures an easy, efficient and prompt closing. Understanding what you are able to afford is a great first step in shopping for anything. So, why wouldn’t you do so for what could be the largest purchase of your life?

When you get pre-approved for a mortgage home loan, it means that a lender has evaluated your credit, employment history, and residential history to determine which home loans you are eligible for, the conditional size of the home loan that you could borrow and the conditional interest rates that you would be offered.

At Chris Doering Mortgage, we make it our priority to make the process of purchasing a home as easy as possible. That’s why we outline everything you need to know about getting pre-approved for your next home loan. This starts with understanding the difference between being pre-approved and pre-qualified for a mortgage.

Pre-Approved vs. Pre-Qualified

Although they sound similar, there are distinct differences between being pre-qualified for a home loan and being pre-approved.

The largest difference comes down to credit. Unlike a pre-qualification application, home loan pre-approvals require a preliminary credit check. Because of this extra step in the application review, the pre-approval process is more thorough in gauging a borrower’s financial standing. Therefore, it provides a better estimate of what a home loan would look like for the borrower.

A mortgage pre-qualification is a more informal process and does not carry as much weight in the eyes of sellers than a pre-approval. To get pre-qualified, your lender will ask you for information on your assets, income, and liabilities, and give you a ballpark estimate on what kind of loan you may be eligible to secure. Getting pre-qualified for a home mortgage loan is not required for pre-approval but many home shoppers get pre-qualified as a precursor to getting pre-approved. This can be completed over the phone or online using a pre-qualified home loan application.

Both sellers and real estate agents prefer pre-approval. A letter of pre-approval positions you as a legitimate candidate who is ready to buy.

How to Get Pre-Approved for a Mortgage – Documentation You Need

The home loan pre-approval application requires multiple forms of documentation regarding your personal information as well as your financial standing. Understanding what that documentation will consist of and gathering it beforehand will help you stay organized and ensure the pre-approval process is efficient. When applying, be prepared to supply the following:

Personal Assets

Your personal assets are shown through your bank statements from the past few months and any real estate holdings information including: property address, current market value, mortgage lender’s name and address, loan account number, balance and monthly payment.

Personal Debt

Personal debt is evaluated by looking at a credit report and any other new debt that is not yet listed on your credit report such as auto loans, student loans, mortgage loans, credit cards, etc. Your debt-to-income ratio will also be reviewed as a part of your application.

Employment Verification

You will be asked to provide the last 30 days of paycheck stubs as well as the past two years of W-2 or I-9 paperwork. If you are self-employed, you will be required to provide additional information on their business and income.

Residential History

The past two years of residential addresses and mortgage monthly payments will be required in the home loan pre-approval application. If you have rented for the past two years, then the address and landlord’s information will be requested for review.

What’s Next?

Once you have filled out the application and provided all necessary documentation, the application will be reviewed by your lender and a conditional loan amount will be provided. With this amount, you will be able to shop for homes that align with what you will be able to afford.

A pre-approval letter in hand is a great tool to have when you are shopping for a home. Realtors and sellers look at a pre-approval letter as a strong form of evidence that you are prepared to buy a home.

It’s important to note that even if you have a pre-approval letter, this does not mean that the mortgage is locked. Your home mortgage will still be subject to the home’s appraisal, home inspection, and any changes that you might incur financially before closing.

At Chris Doering Mortgage, we help our clients through every step of the homebuying process. Contact our office in Gainesville, Florida to get started on your home loan pre-approval.

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