Mortgage and Texas Real Estate News

Your credit score is one of the most critical numbers linked with you. Your credit score and significantly affect your ability to obtain items like a new vehicle or even a dwelling. It is vital to manage your credit profile so you can constantly have the ability to buy the products you want.

Your score can improve by managing your credit responsibly over time and by following some simple recommendations:

Ask For a Free Credit Report Yearly

First, make sure the information in your credit report is accurate.  You are entitled to one no cost credit report yearly from the three credit bureaus - Equifax, Experian and TransUnion.  Visit www.annualcreditreport.com to obtain your free reports. You may also purchase a copy of your credit score report through this website.

Review Your Credit Report for Accuracy

Second, review your credit report for accuracy (last activity, date opened, account balance, account limit) and have incorrect or erroneous information updated.

Reduce Large Credit Card Balances

Third, reduce excessive credit card and revolving account balances, but do not cancel the account. Do not apply for credit that you do not need as excessive credit report inquiries can lower your score.

Avoid Shifting Credit Balances

Next, keep away from transferring credit balances from one account to another just to take advantage of low introductory interest rates. The mix of inquiries and brand new accounts can negatively impact your score.

Steer Clear of Finance Company Type Accounts

Finally, if possible, steer clear of finance company type credit accounts including 12 months same as cash and 90-day accounts. Home loan loans, installment loans and revolving credit card accounts impact your score more favorably than finance company accounts.

David White is a Sr. Mortgage Loan Advisor who specializes in Dallas home loans. David has over 12 years experience aiding his clients with their Southlake home loans.

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Credit Report Score 101

When it comes to qualifying for home loans or many other types of credit accounts, your credit score can greatly affect your ability to get qualified for the credit. For several people, understanding what makes up your credit score is not always understood. There are several factors in your credit score and knowing how each factor affects your score will give you a better understanding of how to get the highest possible credit score. If you manage your credit correctly, you will get the highest possible score which will give you the ability to get qualified for financing like a home loan or auto loan.

What is NOT in Your Score?

First off, there are a few factors that are not part of the calculation of your credit score. They include your occupation, employment information, salary, sex, color, race, marital status plus much more. Keep in mind that only factors that are related to actual credit go into your score.

What Can Affect My Score?

Your credit score is a snapshot of your credit profile at that moment in time. The factors that go into calculating your score are amounts owed, payment history, length of credit history, types of credit used and new credit.

Payment History

This is obvious, but payment history makes up about 35% of your score. Missing a payment has a great impact on your credit score, so it is important to pay all credit accounts on time. If you are currently late on any debts, you want to get those accounts current as soon as possible. The credit bureaus give the highest weight to payment history over the last 24 months.

Amounts Owed

There are several people who make their payments on time and still have a low score because they have maxed out balances on credit accounts like a credit card. The balances on accounts make up about 30% of your credit score. In order to increase your score, you want to reduce the balances on your credit card accounts and keep the balances as low as possible.

Length of Credit History

Length of credit refers to how long an account has been open. The longer the account has been active, the higher your score will be. Credit history makes up about 15% of your credit score. This is why it is so important to not close out any credit accounts as this could reduce your score, even if you never use the account. When an account is closed out, you will lose the history of that account when it comes to calculating your credit score.

New Credit

Anytime you open a new account, your credit score will decrease until that account begins to have some credit history. New accounts only make up about 10% of your score, so you will not see a large drop in your score on a new account, but opening too many accounts all at once will have a huge impact on your score. You should only open a new account if you really need too.

Types of Credit Used

It is crucial to have strong credit accounts on your report. Try to avoid finance company loans or accounts that have 90 day or 12 months same-as-cash accounts. Home loans, installment loans and revolving credit cards impact your score more favorably than finance company accounts. This makes up about 10% of your credit score.

Knowing what factors go into the calculation of your credit score should strongly help you manage your credit so that you can get the best possible score.

David White is a Sr. Mortgage Banker who specializes in Dallas home loans. He assists his clients with their Southlake home loans and has over twelve years experience in the mortgage industry.

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The new FHA Home Loan changes went into effect on Monday, October 4, 2010. The changes to the FHA mortgage program include an increase in the annual mortgage insurance premium as well as a reduction in the upfront mortgage insurance fee. The result to a lot of home buyers is a lower loan amount, but a higher monthly payment.

FHA decided to make these changes due to the nature of the current mortgage environment and to also help lower the risk of loss in foreclosures. Any new FHA case number ordered after October 4 will have to use the new FHA guidelines.

So what does this mean to a future home owners?

Ultimately, the biggest impact in the new FHA home loans is the annual mortgage insurance cost. This has a direct impact on the mortgage loan payment. The new changes will see a rise to the monthly loan payment. For example, a $100,000 FHA mortgage will see the monthly payment increase by $29.17. This can play a major role in a home buyers ability to get approved for a FHA mortgage if they have a high debt-to-income ratio.

Home Buyers with high debt-to-income ratios will have to consider paying off some debts before buying a house or consider a higher down payment to offset the increase in monthly payment.

Even with the changes to the FHA loans, these types of mortgages are still fantastic for first time home buyers and people looking for loans with low down payment options.

FHA home loans also offer people lower rates and have more flexibility when it comes to seller concessions. FHA loans also offer the ability for the down payment to come from a gift from a parent or family member.

It is important when buying a new house that you talk to a loan consultant to discuss all your mortgage options and see which loan program best fits your needs.  Since there are many types of home loans, it is important to get all the information you can so you can make an informed decision.

David White is a Senior Loan Officer who specializes in Dallas home loans and assist his clients with their mortgage needs.

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A mortgage is one of the biggest financial decisions one will make during their lifetime and it is crucial to make sure that you understand the terms of your loan.

One of the most important parts of your mortgage loan is your loan interest rate. Several home owners believe that the lowest interest rate is the most important part of a loan, but this is not always true.  Interest rates and the associated closing cost play an crucial roll in the home loan and both effect each other.

Home loans with the lower interest rates will have the highest closing cost, but when closing cost decreases, the interest rate will rise.  It is like a see-saw, when one side goes up, the other side goes down. This is due to the fact that to lower your interest rate you have to buy a discount point.  Discount points lower your interest rate usually by .125%-.25%.

If you take a higher home loan rate, you will receive a premium or a credit of cost that can lower your total closing cost. By taking a higher rate, the closing cost will be reduced.

When shopping for a home loan, it is crucial to find the balance between interest rates and closing cost.  Here are some important questions one needs to ask when deciding the interest rate for your mortgage:

* How long will I keep the mortgage loan or the home that I am buying?

* What is my breakeven mark for purchasing down my interest rate?

* How much money I will save over the lifetime of the mortgage loan?

These are important questions because not all home owners are in the same situation.  If you plan on keeping your loan for a small amount of time (2-5 years) it might be a better option to reduce closing cost and take a higher rate, but if you plan on keeping the loan for an extended amount of time, buying down the interest rate will be the best option.

Also, when purchasing a house, if the seller is paying for some of your closing cost, you can use the seller credit to help reduce your interest rate by purchasing a discount point or just decrease the total amount of closing cost. Ultimately, the decision to buy down a lower rate should be based on how long you plan on keeping the mortgage loan.

Discuss all your options with your mortgage adviser today to see what option is best for you!

David White is a Sr. Loan Advisor who specializes in Southlake home loans.  David has over 12 years experience in the mortgage industry assisting his clients with their Dallas home loans.

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FHA has changed the upfront and annual mortgage insurance premiums effective October 4, 2010.

The upfront premiums have decreased from 2.25% to 1%.  The upfront premium is required on all FHA mortgage loans.

The annual premium, which is paid as a monthly MI fee on the mortgage payment, has increased from .55% to .90% for any loan greater than 95% for a 30-year note.

For 30-year mortgage loans with loan-to-value ratios under 95%, the annual premium is .85%.

For 15-year mortgage loans with loan-to-value ratios greater than 90%, the annual premium is .25%.  For 15-year mortgages under 90% LTV, there is no annual premium.

For a 30-year mortgage at $100,000 with an LTV of 96.5%, the annual premium is $900 or $75 per month.

The new changes will see an increase to the total monthly payment for a FHA home loan.

For more information, please contact our mortgage consultants today!

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When it comes to getting the lowest interest rate for a mortgage loan, the best way to get the lowest rate is to purchase a buy down on the rate. The purchasing of discount points to lower the rate can save you money over the long term of the loan, but it is important to know whether a discount point will help you save money.

What Is a Discount Point?

First, discount point or a buy down is the term referring to the cost of lowering the mortgage rate. Usually a discount point is a percentage of the loan amount. One discount point refers to one percent of the loan amount. For example, if you are applying for a $300,000 home loan, then one discount point would cost $3,000.

A discount point can lower your rate anywhere from .125% to .375% on average. The cost of lowering the rate can change from day to day when loan rates are updated.

So, when should you consider purchasing a discount point to your loan? The best way to figure out the advantages of discount points is to consider the cost of the point and how much the savings will be over the lifetime of the loan. Each point you pay will lower your mortgage rate and also lower your monthly house payment, but each point will also increase your closing cost.

The Break Even Point

The breakeven point is when the cost of the discount point and the monthly savings evens out. For example, if you pay $2000 in points to reduce your rate and save an extra $50 per month, it would take 40 months to recover the cost of the discount point. Any payment beyond the 40th month is a savings for you. So as long as you keep the home loan past the breakeven point, then it is a great idea to buy a discount point.

Another reason to add a discount point is when the seller is paying the buyers closing cost. This is a way to get a lower mortgage rate and not have to pay for the charge yourself. With todays market, most sellers are paying for buyers closing cost. Of course, there are limits to what the seller can pay.

Premium Pricing

A discount point helps lower the rate, but some people would rather take premium pricing and reduce closing cost. Premium pricing will reduce the closing cost by a percent of the mortgage and by doing so, raise the rate of the mortgage. Again, it is crucial to know where the breakeven point is. For premium pricing, the idea is to keep the mortgage only for a short period and have the loan refinanced or paid off before the breakeven point.

For more information on discount points or premium pricing, contact a mortgage advisor.

David White is a Sr. Home Loan Officer who specializes in Dallas home loans. David helps his clients with Texas home loans.

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When applying for a mortgage, it is important to be as prepared to make the loan process as easy as possible. There are five basic questions you should ask your mortgage officer to make sure that you are getting the best possible mortgage and to make sure that your mortgage loan will close on time.

What Is The Mortgage Program I Am Applying For And What Are The Terms Of The Loan?

There are several different types of home loans and when applying for a mortgage, you need to know if you are applying for a Conventional, VA, FHA or any other type of mortgage loan program. Each program has different requirements when it comes to down payment, job history and credit score. Also, you need to ask your loan banker what the term of the mortgage will be. Are you applying for a fixed rate loan? Do you want a 30-year note or a 15-year note? Understanding the term of the mortgage and the loan program can make the process move quicker.

Are There Any Upfront Fees Associated With The Mortgage?

Some mortgage companines require an application deposit before taking your mortgage application. Sometimes, these deposits are nonrefundable. These deposits can increase your total closing cost. Most mortgage lenders will require customers to pay for the appraisal, which is now a common practice. Be prepared to pay for the appraisal, but there are many lenders who do not ask for an application deposit.

What Is The Rate and Fees For My Mortgage Loan?

It is important to know the loan rate and the closing cost affiliated with the home loan. When comparing home loan offers, it is important to only compare the fees the mortgage company controls. These are called lender fees and they will make up section A of the Good Faith Estimate or on the HUD-1 form, these will be the fees in the 800 section. Common lender fees are processing, underwriting, loan origination fee, application fee, discount points and document preparation.

To compare offers, see what the total lender fees are and the rate of the mortgage. For example, if one lender is charging $3000 in lender fees are a rate of 4.25% and another lender is charging $2000 for the same rate, obviously the second lender is cheaper.

What Are The Loan Turn Times?

Sometimes getting the lowest rate and lowest closing cost is not always the best deal. Mortgage lenders that charge less cannot always close your mortgage loan on time. The service you will receive from a lender that is the lowest in price might not be the same from another company that is a little higher in closing cost. Think of it this way, do you expect to get better service from Macys or Wal-Mart?

If you are wanting the best service and want your loan to close on time, ask the lender if they have any closing guarantees. Some lenders have guaranteed closing to where if they miss the closing date, they will lower their fees. This is important if you are buying a new house and must close on a particular day.

What Are The Required Documentation Needed?

Always ask the mortgage consultant what the required documentation you will need to provide in order to process your loan request. Having these documents ready at time of application can greatly speed up your loan request. Basic asset and income documentation is usually what the company will require.

David White is a Senior Loan Officer who assists his clients with Texas home loans. He has over twelve years experience with Dallas home loans.

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People are always looking for ways to earn more money and invest for their futures. One of the best ways to invest money to make more money is in real estate, and with the current market situation, now is a great time to invest in the real estate market.

Whether you are looking to purchase your first house or searching to purchase an investment property, now is the time to act. Current home mortgage loan rates are low and there are many outstanding deals out in the market.

Return on Investment

Over time, the return on your investment is good when it comes to real estate. House values over time generally increase. Keep in mind that you should not consider real estate investing if you are wanting a speedy return on your money. Just like stocks, the real estate market prices will rise and fall, but over time, most properties will see a rise in value. Depending on which market you invest in will depend on the rate of return. For example, the Dallas-Fort Worth area sees about a 2% rise in property values per year.

Using Real Estate For Additional Income

When it comes to additional income, buying rental houses is a good way to generate additional income plus build wealth over time.  Each rental house can assist with creating cash flow for property home owners. It is important to remember to start out slow with investment properties and make sure that you maintain the property.

Many investors are jumping on the opportunities to buy homes at reduced prices and turning the properties into positive cash flow investments.

Not all properties are good rental properties, so it is important to review the possible rent income compared to the cost of owning the property to make sure that buying the house is a good investment.

Building Wealth And Becoming A Millionaire

Over 90 percent of the millionaires use real estate in some sort of fashion in building their wealth because real estate offers a great way to consistently increase wealth. Home owners have tenants pay for the mortgage while they benefit from the increase in property values over time. If done correctly, real estate investing can be a great way to have a monthly income in retirement years.

So when it comes to ideas of building wealth, you should consider buying a property. Start off small with purchasing your first home and moving on from there. Take the time to understand the market and do research on each possible property before taking the next step. Know your financing options and know the different home loan programs available for investors.

David White is a Senior Home Loan Consultant who specializes in Dallas home loans.

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There are several home loan options available to home purchasers in today’s market. For many, putting 20 percent down on a property is not an option, so many home buyers have to look for loan programs that require less than 20 percent down. These mortgage programs will require private mortgage insurance also known as PMI. The mortgage insurance increases the monthly mortgage payment, but for some people, there is another option as well.

Some people will consider adding a second mortgage loan. These loans are also called piggy back seconds or purchase money seconds. The advantage of a second home loan is a reduced down payment, no mortgage insurance, and in most cases a reduced total monthly house payment.

Lower Down Payment

By adding a second home loan, you are able to have a reduced down payment and still avoid mortgage insurance. In order to avoid mortgage insurance, a buyer must put down 20 percent, but with a second mortgage loan, you are actually in a sense financing a portion of the down payment. Second home loans usually help the client put as little as 5-10 percent down on a new property.

This is where the term 80/10/10 or 80/15/5 comes into consideration. The numbers represent the loan-to-value ratio compared to the purchase price of the property. The first number is the first mortgage which is usually 80 percent of the sales price. The second number is the second loan and the final number represents the down payment. For example, if a buyer purchases a property for $200,000 and does an 80/10/10 loan program, then the first mortgage would be for $160,000, the second loan would be for $20,000 and the down payment would be $20,000.

No Mortgage Insurance

By splitting the loans into two, mortgage insurance is avoided. This can save the person hundreds of dollars a year.

Lower Monthly Loan Payment

For the most part, the monthly mortgage payment is lower when you split the mortgages into two separate home loans. Keep in mind though, that the second loan will have a higher rate.

Getting Approved For A Second Or Piggy Back Mortgage

In order to split the mortgages, you must get qualified for a second loan. Second lien companies have tougher mortgage guidelines and usually require a credit score of at least 700. Also, the maximum debt-to-income ratio for the purchase cannot surpass 45 percent.

Finally, several second lien lenders will not do a second mortgage for a first time home buyer. Also, some loan programs, like FHA home loans, do not allow a second lien at time of purchase.

Not everyone will have the ability to split their mortgage loans at time of purchase, so it is important to discuss with your loan consultant all your options when it comes to purchasing a new house.

David White is a Senior Loan Consultant who specializes in Dallas home loans.

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Preparing to buy a home is one of the largest events in your life. The process to buy a home can seem overwhelming and at times be nerve wracking. From finding the right house to getting approved for a mortgage loan, the home buying process can seem difficult, but if you are prepared for the process, then it will be much easier to buy your new house.

The first step in preparing to buy a new home is to find the right financing for the house. Getting qualified for a purchase home loan is an significant step in the process. Below are some steps you can take to make the mortgage loan process much easier. Keep in mind that home loans are not a difficult process as long as you are prepared upfront.

Income Documentation

First, have all your documents ready at time of application. Several lenders require a two year history of income to be verified by supporting documentation including income forms like W-2s, most recent pay stubs, tax returns and any award letters for retirement income or social security income. If you are self employed, you will also need to provide two years business tax returns as well.

Supporting your income with documentation is an crucial part of your application. You want to make sure that the application shows the accurate amount of income you make. If you claim income that cannot be verified, this can affect the mortgage decision.

Here are some significant questions to consider when looking over your income tax returns. Do you claim a loss of income on your return? Do you show a minus number in any of the attached schedules on your return? If you answer yes to these questions, let your home loan consultant know as this can affect your loan decision.

Asset Documentation

Second, you will need to have your asset documentation. This is normally done by assembling the last two months bank statements. The mortgage lender will use the bank statements to verify that you have enough assets to cover the closing cost, down payment and reserves needed for the closing.

Reserves are the amount of funds that must remain in your account after closing to show that you have extra cash. Many lenders require at least 3 months reserves, which is based on one month’s mortgage payment. For example, if you mortgage payment is $1500, then the lender may require $4500 in reserves.

Additional Documentation

Finally, collect all additional documents that a mortgage company may require including a bankruptcy or divorce decree papers. If you have any of these documents, make sure to let your loan advisor knows so that they can complete the loan application correctly.

It is important that the loan application is completed with the most accurate information as possible. It is better to know if a problem will occur in the beginning of the mortgage process than towards the end.

Having the needed documentation prepared upfront is a way to lessen the stress of the home buying process by making the mortgage process much easier.

David White is a Senior Mortgage Advisor who helps his clients with Dallas home loans.

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