Post by cshm_admin

When you apply for a home mortgage, lenders will check your credit score, income, assets, and debt. All of this will get factored into an algorithm to figure out if you are credit-worthy enough to be granted a loan. Most of the standards used by lenders are set by the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. Many lenders want to resell the mortgages they make to these GSEs, so they have to play by their rules. This includes making loans under certain dollar limits and only to borrowers with credit scores above certain thresholds. Mortgages that meet all the GSE criteria are called “conforming” loans because they conform to the prescribed requirements. Thanks to their government backing, these loans often come with lower interest rates and other preferred terms.

However, there may be times when a “non-conforming” loan, or non-qualified mortgage, may fit your situation better. They may not receive government guarantees, but here are five reasons why a non-conforming mortgage could be helpful to you.

1. Flexibility
   Because it is non-conforming, this type of loan can be tailored to fit the needs of the borrower with fewer rules.
   
2. Credit Leeway
   Conforming loans require a minimum credit score of 620 for most mortgages, but there is no credit score requirement for non-conforming. Credit score will be just one factor considered as part of the entire financial picture.
   
3. More Home-type Options
   Conforming loans are not available for all types of homes. Non-conforming mortgages can cover everything, as long as the lender feels it make good fiscal sense. This could include non-warrantable condos and co-ops, multi-unit condos, timeshares, assisted living units, manufactured homes that have been moved from their original location. In fact, for many of these situations, non-conforming loans are the only option.
   
4. Alternate Ways to Prove your Income
   With conforming loans, income verification is essential, especially because it factors into the debt-to-income ratio. Both of these factors determine whether you’ll qualify for a mortgage. With a non-conforming loan, however, the lender can verify your income in a non-traditional way like bank statements, or the income verification can be waived altogether in some cases. Instead of relying on your income as a decided factor, non-conforming loans can consider your current home equity, your cash flow, and assets. This often works better for self-employed buyers and those with seasonal commissions.
   
5. Lower Down Payments
   Some government-backed loans are actually considered non-conforming, including VA, USDA, and FHA mortgages. These cater to first-time and lower-income buyers and have minimal or even no-down payment requirements. However, if you are applying for a jumbo loan, one with a loan amount above the conforming limit, you will likely be required to make a down payment of at least 10% to 15%. 

You may have to pay higher interest rates or contribute to private mortgage insurance with many of these non-conforming loans, but they might be the easiest way for you to qualify for homeownership. And if your financial picture looks more traditional down the road, you can always refinance into a lower-cost conforming mortgage.

Call us today and we can help you understand all of the options that we offer.

You finally saved up enough for a down payment and you can almost taste being a homeowner, but then you hear about closing costs. Coming up with a few extra thousand dollars sounds impossible. Before you give up on the dream of buying a home, here are a few creative ways to pay for your closing costs without waiting and saving even more.

What are Closing Costs?

Closing costs are all the fees associated with the mortgage process. For example, part of the closing costs go to the lender for their work in researching and setting up your loan. The fees also cover things like title insurance, appraisal costs, property taxes, and escrow accounts. The exact charges vary by area and by lender. They can range anywhere from 2% - 5% of the loan total. So, if you take out a loan for $250,000, you could expect to pay between $5,000 and $12,500 in closing costs.

How To Avoid Paying Out of Pocket

• Roll Closing Costs into the Loan
  One of the most common ways to save on upfront cash is to have your lender tack the closing costs on to the balance of the loan. This will increase your monthly mortgage payment a little, but it might be much easier to afford than a huge lump sum.
  One of the most common ways to save on upfront cash is to have your lender tack the closing costs on to the balance of the loan. This will increase your monthly mortgage payment a little, but it might be much easier to afford than a huge lump sum.
  
• Exchange Closing Costs for a Higher Interest Rate
  Some lenders will pay all or part of the closing costs for you if you agree to a higher interest rate (which translates to a higher monthly mortgage.) These are often called low-cost or zero-closing costs loans. 
  
• Ask the Seller to Pay
  If you have a motivated seller, you may be able to negotiate to have them pay the closing costs. They do this in the form of a closing-cost credit from the proceeds of the sale. Most loans allow sellers to give up to 6% of the sales price to buyer closing costs. Of course, in a hot sellers’ market, this is an unlikely option.
  
• Look for Work-Related Benefits
  If you are in the military, there are plenty of programs that can help with closing costs even if you’re not doing a VA loan.
  
  If you’re in a union, you might also qualify for closing cost discounts and rebates. You can contact your union representative to see if your union offers this benefit.
  
• Choose an FHA loan
  Federal Housing Administration loans are geared toward first-time home buyers and lower-income buyers. Through these mortgages, agents, sellers, and lending brokers, can all contribute to closing costs.
  
• Use Gift Money
  Many loans allow family members to gift you funds for your down payment and closing costs. If one of your loved ones is willing to subsidize your home buying costs, talk to your lender about which loans allow for that option.

With a little creativity and some legwork, it is possible to avoid paying an additional chunk of cash for closing costs and jump into the homeownership now. Call us today and we can help.

Roughly 9% of all U.S. homebuyers in 2020 were unmarried couples. If you and your partner are considering a house purchase before tying the knot, there are some important questions you should ask yourself to see if it makes sense.

1. How does the law see our purchase?
   In a few states, you are considered to be in a common law marriage by living together, but in the majority of the country, you are simply viewed as individuals when it comes to your assets.  That means you’ll need to decide together what clauses and protections to put into your property agreement.
   
2. Should we both be on the mortgage?
   If one of you can qualify on your own for the mortgage, you do not have to put both names on it. This might be more helpful if one of you has poor credit that might make it harder to be approved or would increase the interest rate on the loan. However, if there are disputes down the road, the partner not on the mortgage would lose all claim on the house, even if they have been contributing to the monthly payments all along. It is possible to put just one partner on the mortgage, but both names on the title. The risk is greater to the one on the mortgage though, as in a dispute they will have to legally split the home’s value with the partner who has had no technical financial responsibility for the home loan.
   
3. What happens if we break up?
   Of course, you never plan to break up, but things change. If there is no property agreement when you two split, the home must either be sold or one of you can buy the other out. It is much better to specify the details of such a situation while you are both amicable; otherwise, it could end up being a disastrous financial battle. 
   
   If you break up and one of you wants to keep the house, you’ll have to refinance the mortgage to get the other person’s name off the loan. If you have to buy the other person out, you might be able to use a cash-out refinance to pay them their portion from the saved-up equity. 
   
4. What happens if one of us dies?
   If you were married and without children, the house would legally pass to the surviving partner, but that will not necessarily apply to you if you have not left a will or specified such circumstances in the original purchase agreement. Before you sign on to the mortgage, you’ll need to decide the type of ownership you’ll have on the property deed. It can be “joint tenancy with rights of survivorship,” which means the survivor inherits the deceased person’s share of the home. The other option is tenancy in common, where each person owns a percentage of the house and when they die their share goes to their estate or trust. 
   
5. Who gets the tax benefits?
   If there are any mortgage interest deductions available for your house, only one of you will be able to claim them on your taxes as you are filing separately. You should decide who gets to take advantage of this and put it in writing to prevent any future disputes.

Buying a home with an unmarried partner can require extra caution and steps, so be sure you understand the implications before making your purchase. Call us today if you have any questions.