Winning With Wade - Guardian Mortgage Video Blog with Wade Betz

Are You Ready to Get Rid of Your Mortgage Insurance?

2017-07-26T13:45:00.002-07:00

How can you get rid of your mortgage insurance? The answer depends on your loan type.

Removing mortgage insurance is different for conventional and FHA loans. However, most people may not realize that the removal of mortgage insurance, regardless of loan type, is actually dictated by the federal government.

If you take out an FHA loan, your ability to remove mortgage insurance is predicated on the down payment amount. If you put more than 10% down, you are only required to pay mortgage insurance for 11 years. If you put less than 10% down, then you have to pay mortgage insurance for the entire life of the loan. So, keep that in mind if you are considering an FHA.

Conventional loans carry private mortgage insurance, or PMI. Most people think that once they get to 80% loan to value, the mortgage insurance falls off. That’s not exactly true. The rule states that if you pay mortgage insurance, it automatically falls off at 78% loan to value, but you can request to remove it at 80% LTV. Contact your loan servicer once you reach 80% and ask to get that PMI removed.

Appreciation in value adds a bit of a wrinkle to this process.

Appreciation in value does add another wrinkle to this process. A lot of customers say, “My home appreciated in value since I bought it. Now I have the 20% equity and would like to remove my mortgage insurance.”

That is fine, but the rules for using appreciation as justification are different than the rules based on the original purchase price. You are ineligible to use appreciation as justification years zero through two of owning the home. Between the two and five-year mark, you need 25% equity for justification; after five years, that number goes back down to 20%.

Your loan service will require an updated appraisal at that time to make sure that you have subsequent equity levels.

If you have any other questions about removing mortgage insurance, just give me a call or send me an email. I would be happy to help you!

Texas-Specific Equity Loan Rules

2017-06-29T12:00:00.000-07:00

Equity loans are treated differently here in Texas. Here are the things you need to be aware of.

You may not realize it, but we actually have some of the most conservative equity laws in the country down here in Texas. They limit the maximum loan-to-value of your financing to 80% of the home’s value. Regardless of the financing you are doing, the state requires an appraisal to be conducted to determine its value to make sure it doesn’t exceed the 80% threshold.

There are a few different types of equity loans out there. Here’s a little bit of information about each.

Equity lines of credit are variable and can be used for practically anything. Standalone second liens are typically taken out for home improvements. Cash-out refinances are when you refinance your entire loan balance in excess of what you want to borrow to get cash out of the property.

You can only have one equity loan at a time.

There are advantages and disadvantages to each, but one thing about these loans is universal in Texas. Whenever you take one out, there is a 12-month cooling off period until you can touch it. If you did a cash-out refinance and rates cratered immediately after, you are prevented from refinancing again until after the period has passed.

Also, keep in mind that in Texas, you are only allowed one equity loan on a property at a time. If you did a cash-out refinance, for example, you are not allowed to take a home equity LOC out after the fact.

If you have any questions for me or would like to discuss your specific scenario, don’t hesitate to give us a call or send us an email. We look forward to hearing from you.

Can You Buy a Home for Your Parents?

2017-06-07T09:01:00.000-07:00

Have you thought about buying a home for your parents? Their level of mortgage qualification goes a long way in determining how the transaction will play out.

Many people would like to buy a home for their parents, but don't know the best way how. The answer largely depends on the circumstances of the parents.

Fannie Mae guidelines allow a child to buy a property for their parents, and if the parents don't qualify, the child can purchase it as a primary residence. The advantage of this is the lower interest rates and lower down payment requirements.

How you buy a house for your parents depends on their unique circumstances.

If the parents qualify for a mortgage, the child can still purchase the property, but it has to be structured as an investment property purchase, which will have more restrictive down payment requirements and higher interest rates.

If you or anyone you know are thinking about buying a home for your parents, we'd love to sit down with you and talk about the intricacies of this kind of transaction and how to put you in the best possible position. We'd be honored to serve you.

How to Handle a Mortgage During a Divorce

2017-06-01T14:16:00.000-07:00

A marriage ending is a difficult situation, but deciding on the outcome of your home and mortgage doesn’t have to be another headache.

If a marriage ends, what happens to the house and the mortgage?

It's important to know the plans for the home. You can refinance to remove one person from the loan or sell the house.

Texas is a community property state. A refinance may not be necessary if you dictate in the divorce decree who will be obligated to make the payments. However, the downside is that the departing spouse's credit is still tied to the home. If the occupying spouse misses a payment, it would still negatively affect the other's credit. That's why I recommend refinancing.

It's important to know the plans for the home.

The timing will dictate whether an owelty lien is used. In Texas, if you're trying to refinance to remove one spouse, many times you need to take cash out to pay them their share of the equity. Texas has limits for the maximum loan-to-value you can have on a cash-out refinance of 80%. Depending on what the home appraises at or the agreed payment, it may or may not be enough equity to take out. The alternative is the owelty lien, which gets put on the property for the agreed-upon amount and prevents the occupying spouse from refinancing or selling the property without guaranteeing payment to the departing spouse.

It's the most secure way to get equity out of the home. However, it needs to be agreed upon before the divorce is finalized. Sadly, I many people come to me after the divorce is already finalized, so this option is off the table.

Selling the property releases both parties from the obligation of the mortgage, but they both still need to move somewhere. That's why it's still important to speak with a mortgage lender to get the situation resolved.

For more information on this sensitive topic, click here.

If you or anyone you know is in this situation and needs guidance, don't hesitate to give me a call or send me an email. It would be my honor to help you through this process.

Finding Out the Truth About Your Credit

2017-05-03T09:03:00.003-07:00

Can you trust online credit reports if you are thinking of buying a home? Unfortunately, the answer is no, and there are a few reasons why.

You have probably seen advertisements for free credit scores online. However, those sites can be fairly misleading.

Why? Those websites are selling their own version of a credit report, which is not the same as the FICO credit score that your lenders look at.

In fact, major credit bureaus have come under scrutiny and were recently fined for making misleading ads that told consumers they were buying a FICO lending score.

The only site out there that gives you a true FICO score is MyFico.com. I use this site personally to track my own credit. However, that website is selling you the latest, most detailed version of the FICO credit report—which is not the version lenders are required to use.

Fannie Mae and Freddie Mac require lenders to use version four of the report, even though version nine is the latest and most advanced. As a result, there could be a big difference between what you see on consumer sites and the credit score your lender actually pulls.

Make sure you talk with a lender early on in the process.

That’s why it’s so important to chat with a lender early on in the process to make sure that there are no red flags or anything that would prevent you from purchasing a home.

If you have any questions, please don’t hesitate to reach out to me. I would be happy to help you!

The Different Types of Mortgage Insurance and How They Function

2017-02-23T12:56:00.000-08:00

Contrary to popular belief, mortgage insurance can benefit you greatly as a consumer, and here are the three different types you need to know about.

To many people, the topic of mortgage insurance carries a negative connotation, but it shouldn’t. It has its place in the mortgage process and can benefit you as a consumer. There are three main types of mortgage insurance you need to be aware of.

Know the goals of your property before picking a mortgage insurance.

The most common type is borrower-paid monthly mortgage insurance. This is where the monthly amount gets added to the principal and interest portion of your payment. You would then make that payment each month until you get to a 78% loan-to-value ratio.

The other type is single-premium financed mortgage insurance. This is where the lifetime costs of the mortgage insurance get financed into the loan amount. It keeps your interest rate the same, but it adds to the loan amount. This actually results in a lower monthly payment because you don’t have the interest rate at that higher amount each month.

The last type is lender-paid mortgage insurance. This is where the lender pays the lifetime cost of the mortgage insurance in exchange for you agreeing to a higher interest rate. A higher interest rate has a negative connotation with most consumers, but the reality is that it results in the lowest possible monthly payment, and it’s even lower once you consider the after-tax mortgage interest deduction. This is a good way to structure your loan, but not if you’re going to keep the loan for a very long time.

The benefit of the monthly mortgage insurance is that it can fall off once you get to the 78% loan-to-value ratio. If you finance it in as a lump sum into the loan amount or roll it into the interest rate, there’s nothing to fall off because it has already been factored in.

The rules to remove monthly insurance are pretty complicated, and which structure makes the most sense for you is largely dependent on your goals for your property.

My staff and I would be honored to help walk you through this, so if you have any more questions or know anyone looking to purchase a home in the next six months, please don’t hesitate to give us a call. we‘d love to speak with you!

How Can You Get the Effect of Bi-Weekly Payments Without the Middleman?

2017-01-31T12:40:00.001-08:00

Today you'll learn about an alternative to making bi-weekly mortgage payments that will save you money and achieve the same effect of making an extra payment every year.

We often get questions from clients asking about bi-weekly payment options.

The fact is, once you close on a transaction, you're going to get inundated with junk mail, much of which will be requests for you to sign up for a bi-weekly payment option. This means that instead of paying your mortgage once a month, you'd pay twice a month.

With this plan, you get the same effect as bi-weekly payments without the middle man and their fee.

The reality of working with these companies, though, is that you'll pay them a month in advance. Then, you'll pay every two weeks, and in turn, they will pay your lender once a month. This will continue until they've built up enough reserves in the escrow account they've set up for you to make that 13th payment a year.

I advise my clients to take that monthly payment you're paying to your lender each month, divide it by 12, and add that amount to what you pay every single month. This results in a 13th payment being made every year. It's exactly the same as the bi-weekly payment plan, with the only difference being that by doing it yourself, you cut out the middleman—and their fee.

If you have any questions about this payment plan, don't hesitate to give me a call or send me an email. I'd be honored to help!

Can Your Lender Close on Time?

2017-01-10T07:36:00.000-08:00

Choosing the right lender is critical if you want to close on time, and today I want to tell you why.

Closing on time is a promise that every lender makes, but the reality is that very few actually do it consistently.

When I have an initial conversation with a borrower and I ask them what’s most important to them, I’ll often hear things like the interest rate, the communication level, the products that are offered, and the ability to close on time. Out of all of those factors, the one that has the most bearing on a successful transaction is the lender’s ability to close on time.

If you take out a loan, it’s very important to partner with a lender that will go through the due diligence steps up front to ensure that you’re fully pre-approved. After that, they should set the correct expectations for you so that when you shop for a home, you know how to properly negotiate for it so the transaction is a smooth one and you have a happy closing.

Nationwide, about one-third of all home loans don’t close on time, according to the Campbell/Inside Mortgage Finance Housing Pulse Tracking Survey. FHA loans only close on time 59.2% of the time. Conventional loans (e.g., those that are backed by Fannie Mae and Freddie Mac) only close on time 63.6% of the time. Cash transactions—believe it or not—only close on time 79.1% of the time.

Who you partner with for your financing has a large impact on your transaction.

Who you partner with for your financing has a large impact on whether you have a successful closing or not. If you or someone you know is planning on purchasing a home in the next six months, please don’t hesitate to give us a call or shoot us an email so we can set up a consultation. We’d be happy to help!

What Are the Benefits of Using a Piggyback Loan?

2016-12-07T09:32:00.000-08:00

Using a piggyback loan when buying a house can result in giving you a lower interest rate over the life of the loan.

What makes piggyback loans beneficial to home buyers? Why would a recast be more advantageous for you?

A piggyback loan is when you take out a single loan for 80% of the home’s value and either 10% or 15% of the remainder to purchase the home. It’s usually either an 80/10 or 80/15/5 split.

Structuring the loan this way usually makes sense when you’re very close to the $417,000 conforming loan limit. There are definitely better ways to structure this if possible, though. I say this because when you structure it with the first and second lien, the interest rate on that first lien is quite a bit higher than it would be otherwise.

If the loan amounts cooperate, most of our clients actually structure this with a single loan, pay the private mortgage insurance, and then pay the loan down in either a lump sum payment as a result of the sale of another property, or with accelerated principal payments throughout the loan so that the mortgage insurance drops off.

At that point, they can then contact us to recast the loan so it acts as a retroactive down payment. What happens, then, is you end up at the same place as if you structured the loan with the first and the second lien. The difference is by structuring it with a single loan with mortgage insurance and throwing in a recast there, you end up with a lower interest rate over the life of the loan, which ends up saving you quite a bit of money.

Structuring your loan this way will give you a lower interest rate.

If you find yourself in a unique situation and you want to talk through it with me and my team, just give us a call or send us an email. We’d be more than happy to help.

How Do You Finance New Construction Homes?

2016-11-21T08:08:00.001-08:00

Financing a new construction home isn't the same as financing for a resale home; you have two main options. Allow me to explain the difference between the two.

When buying a new construction home, the financing works a bit differently. But how?

There are basically two ways to fund new construction—a one-time close or a two-time close. Each has its pros and cons, so I wanted to provide an overview of both.

A one-time close uses one loan from the beginning to fund the construction and purchase of the home. The advantage of this option is that there is only one set of closing costs and there won't be potential issues with qualifying after closing if you have any personal circumstances change. These changes would include things like job loss, for example. The downside to a one-time close loan product is that the interest rate is quite a bit higher.

The alternative is to structure it with two separate loans, or a two-time close. This means you purchase the property and construct the home with construction financing, and when the home is complete, a lender will come in and refinance you to permanent financing. The downside here is that you will have two sets of closing costs. However, the advantage is that the interest rate will be quite a bit lower (assuming that rates hold steady while the home is constructed). The two-time close is the more common of the two options.

Each financing type has its own pros and cons.

If you have more questions about financing a new construction home in the DFW area, give me a call or send me an email. My team and I would be more than happy to help you.

Opting Out of Junk Mail Is Easy

2016-10-28T12:19:00.002-07:00

After you close a real estate transaction, there are certain documents that have to be filed with the county courthouse. The unfortunate thing is that county courthouse records are public access, and marketing companies will routinely buy this information to tailor their solicitations to new loan recipients.

With that being said, there are three things you can do to reduce the amount of junk mail you receive from credit bureaus and marketing companies who purchase your information from other sources:

1. Go to optoutprescreen.com. This is the shared web portal for the three major credit bureaus. By opting out of that website, you can remove your credit profile from being sold to third parties. All those offers and solicitations will cease, and you can opt out for any period of time, whether it be five years or permanently. If you do opt out permanently, there is a bit more paperwork you have to fill out.

2. Opt out of direct marketing from dmachoice.org. This is the police for all the catalog mail and other mail that isn’t tied to your credit profile. It does have a nominal fee and lasts for only five years at a time.

3. Visit catalogchoice.org. If you want to take things a step further, you can visit this site and input the different vendors that slipped through the cracks from your other opt outs and block their solicitations as well.

"The less junk mail the better"

The days when we don’t receive any junk mail are sometimes the greatest days of all. If you have any questions for us or any real estate needs we can help service, don’t hesitate to give us a call or send us an email. We look forward to hearing from you.

2 Ways to Finance Your New Construction Home

2016-09-22T09:28:00.004-07:00

When you buy a new construction home, there are two options when it comes to financing: a one-time close or a two-time close. Tune in to learn the pros and cons of each.

When you buy a new construction home, there are basically two financing options available for you: a one-time close or a two-time close. Each option comes with advantages and disadvantages.

A one-time close finances the purchase and the construction of the home at the same time. The advantage of doing that is you only have to worry about one set of closing costs. Also, if something affects your ability to qualify for a loan down the line, such as job loss or a job change, you won’t have to worry about your home purchase because you have already closed.

The downside of a one-time close is it comes with a higher interest rate because you have to finance the construction and the home all in one fell swoop. The longer you plan to be in the home, the less advantageous this financing is.

A two-time close allows you to take out a construction loan to purchase the property and then refinance the loan into permanent financing once construction is complete. This option gives you a much lower interest rate, which is great. However, you will have to take care of two sets of closing costs. The other issue is that interest rates may change while the property is being constructed..

Each financing option has pros and cons.

Ultimately, there are pros and cons to each financing option. If you are buying a new construction house and would like to learn more, my team and I would be happy to answer any questions you may have. Just give us a call or send us an email. We would be happy to help you!

How to Handle a Low Appraisal

2016-09-12T12:01:00.002-07:00

Whether you’re buying or refinancing, a low appraisal can make things much more complicated. We’ve got some tips to share on how to remedy the situation.

Many people have no idea what to do if an appraisal comes in low on a home they are trying to buy or refinance. There are a number of different options you have based on what kind of product you have. The first big distinction to determine is if it is a home purchase or refinance.

If it is a home refinance, your lender would have started the loan with an assumption of what the appraisal would be, and priced your loan accordingly. If the value happens to come in lower, it could put you into a higher risk loan. If you’re trying to do a cash-out loan, it could also prevent you from being able to take cash out.

Lenders won't lend more than the appraised value.

For a purchase loan, it’s a little more different and complex. The sales price is set by the sales contract. The lender is only allowed to lend on either the sales price or the appraised value; whichever is lower. When you have a low appraisal come in as a buyer, there are three different ways to handle this:

1. Ask the seller to renegotiate the sales contract to bridge the gap.

2. Rebut the appraisal by providing the lender additional information for the appraiser to consider that they may have missed.

3. Accept the value as-is, and by doing so, cause your cash to close to increased.

That’s kind of the big picture overview of what happens when you have a low appraisal. No matter what happens, your loan officer will be contacting you to resolve these issues as soon as possible. If you have any questions for us, don’t hesitate to give us a call or send us an email. We look forward to hearing from you.

Dissecting the Loan Process for You

2016-08-22T09:20:00.000-07:00

Today, I'd like to talk about everything that goes into the loan process.

What all goes into the loan process?

The loan process starts once a lender has a 1003 Form, also known as a loan application. With that, they’ll pull a credit report. From there, they’re going to request the specific documentation from you in order to pre-approve you for your loan. As we’ve previously covered, the most common documentation include tax returns, W2s, paycheck stubs, bank statements, and other things of that nature.

Make sure that all documents get sent in a timely fashion.

Once you’re pre-approved, you’re free and clear to start shopping for your new home and hopefully place a property under contract. Once you’ve placed a property under contract, make sure you forward that contract to your lender as soon as you can so they can update the federal disclosures to be sent to you. We’re required to send you a loan estimate within three days of you identifying a property address to us.

Once your lender has those disclosures electronically signed, they’ll be able to move your file forward into the underwriting phase. During the underwriting phase, the underwriter will review everything and issue a conditional loan approval. At that point, the processor will introduce themselves to you and send you a needs list to help clear the conditions of the loan. By “conditions,” we usually mean an updated bank statement or paycheck stub.

Once final loan approval is granted, the file will be sent to a pre-closing quality control reviewer, and then onto the closing department where the closing package can be prepared for you. Once the closing disclosure gets sent to you, it has to be acknowledged by you three days prior to closing, or the closing would have to be pushed back. Once the lender has the closing disclosure, the next step is for you to show up at the official closing with a valid photo ID and any certified funds that are required for it.

Stretch out your forearm beforehand, because you will be signing a lot of documents. After that, you can count yourself as a happy owner!

If you have any more questions or need help with this process, just give us a call or send us an email. My team would be happy to help.

You Need These Documents to Get Pre-Approved

2016-07-27T12:19:00.003-07:00

Today, I'd like to talk to you about what documents you need to get pre-approved for a home loan.

Click Here to request a Consultation

Click Here for a Pre-Approval Request

To get fully approved for a mortgage, you need to make sure all of your documents are in order. We’re going to talk about some of the documents you will definitely need in order to get approved, and when you should have them ready.

The first one you’ll need is a 1003, by far the most important document lenders need to complete an approval. We use that to pull a credit report and from that point we can dig into all the specifics required. The high-level overview will need two years of tax returns, two years of W-2s in addition to the two most recent paycheck stubs covering a 30-day pay period. You will also need to provide the two most recent account statements for whatever bank accounts or asset accounts you have.

The reality is that there are literally dozens of potential documents we could be requesting, but until we get the loan application and review your credit we won’t be able to tell you. When you’re ready to purchase a home, make sure you’re prepared for a pre-approval. The document request is just an initial request. There will likely be more requests throughout the process as we get closer to closing.

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We want you to be able to make an offer on your dream home.

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At the end of the day, our goal is to be in compliance with the government by showing that you have the ability to repay a loan and have been given no special treatment. We document your file so we can stay compliant and try to shrink any problems that may occur from the get go. We want you to be able to make an offer on your dream home when it comes along, so that’s why a pre-approval is so important.

If you have any questions for us, don’t hesitate to reach out. Give us a call or send us an email, we would love to hear from you.

The Difference Between Pre-Qualification & Pre-Approval

2016-07-06T13:33:00.001-07:00

Today, I'd like to talk about the difference between pre-qualification & pre-approval.

Click Here to request a Consultation

Click Here for a Pre-Approval Request

You may have heard real estate professionals tell you that you need a pre-approval letter or a pre-qualification letter to buy a home. Do you know the difference between these letters?

In Texas, we have the conditional qualification letter and the conditional approval letter. When most consumers contact us about getting a letter, they are referring to the conditional qualification letter. One of the quirky things about the state of Texas is that lenders are required to list the documents that they have and have not verified on that letter.

When people contact us saying that they want a pre-qualification letter, most think that we'll help them with a loan application by pulling their credit and writing them a letter. While that's fine and we can do that, we must list on the document that nothing has been verified, and that can make it a very weak letter. In today's highly-competitive real estate market, you need as strong a letter as possible when making your offers.

For that reason, we encourage our clients to take it a step further and provide us with the supporting documents so that we can issue a strong letter for them. Almost all of our clients take us up on that, and we can do it very quickly just as long as they provide us all the info in a timely manner.

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In today's market, you need as strong of a letter as possible

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Again, there is that second type of letter in the state of Texas - the conditional approval letter. The great thing about this letter is that once you've been pre-approved, we can push your file forward to an underwriter for full credit approval. Basically, all of the hard work of the loan is done up front, the underwriter signs off on everything, and, with the exception of getting an appraisal on the property, you are completely done with your mortgage. With all the hard work done up front, the time frame for being under contract is shortened, and the experience is just more enjoyable all around.

If you're looking to buy and looking for a lender, we'd be honored to serve you. Send us an email or give us a call and our team will get working with you right away.