Thankfully, there are other ways to go about buying a home that don’t require you to put 20% down, like the following:
Author: | Sep 26, 2016
The Florida’s Hardest-Hit Fund Program is back and offers a bridge to homeownership with up to $15,000 downpayment assistance. This program provides federal funding for qulified first time homebuyers in areas hardest hit by housing and job market decline. Brevard County is one of the few counties where this is availalbe. What a fantastic time to to purchase your first home.
As a full service brokerage, Atlantic Real Estate Brokerage can help every step of the way. We can introduce you to lenders that offer this program, and the move on to finding you the perfect home. But there are a lot of details thrown in along the way and that is what your REALTOR will be able to help you with. Laying out the homebuying plan and executing it !! That is our speciality.
There are several criteria for homebuyers to qualify for this program, however this is a fantastic opportunity to first time homebuyers to get into a new home with less money down. A few things to consider:
- The downpayment assistance is a 5 year deferred loan that is forgiven at 20% per year
- Must be first mortgage with a 30 year term
- Must be primary residence
- Education is required
To find out if you qualify, call us and we will introduce you to one of our lending partners that offers this loan.
About Atlantic Real Estate Brokerage – Satellite Beach, FL
Laura D Hazlett has been a Florida Broker for over 8 years and in the Real Estate Management Industry for over 12 years. She is a proud mother of a college graduate (USF), is a graduate of University of Miami, and a successful business owner. Laura’s no-nonsense approach to real estate makes transactions easy, because of her direct style of communication and her team of successful partners.
Laura has assembled a great team of Agents. Selected with professionalism and a concierge approach to clients and vendors, Atlantic Real Estate Brokerage Agents are the best in their field. They are selective with their client base which proves to be an effective way to serve all clients with world-class service.
The Worst Mortgage Advice Home Buyers Actually Believe
Getting a mortgage is a daunting prospect, which explains why so many people seem eager to pat your hand and say, “Let me give you a little advice.” Sure, those pearls of wisdom may come from an ocean of good intentions, but the suggestions might not necessarily be right for you. In fact, they could be dead wrong.
So before you take some friendly outside counsel as gospel, be sure to check it against our list of the worst mortgage advice people often give.
‘Don’t bother getting pre-approved for a mortgage’
Why you might hear this: Hey, you’ve barely begun shopping for a home! There’s no need to get all serious about mortgages just yet. And besides, a mortgage pre-approval isn’t real anyway— your application isn’t reviewed by an underwriter,
Why it’s bad advice: While a pre-approval might not be “official,” it will help you avoid major problems down the road.
“Getting pre-approved by a bank is one way to avoid the heartbreak that comes from falling in love with a house you can never buy,” says Maryalene LaPonsie of MoneyTalks. “It may also give you an edge if there are multiple offers for the same property. A seller will feel more confident selecting a bid from someone with a mortgage pre-approval rather than a person who hasn’t even begun the process.”
‘Get your mortgage from the bank where you already have an account’
Why you might hear this: When it comes to convenience, you just can’t beat the bank you’re already using. Plus, since you have an existing relationship with it, it’ll give you the best rates, right?
Why it’s bad advice: You already know to shop around for a home. You need to do the same with your loan.
“Even though the big bank where I keep my checking and savings accounts claims they’ll give me better service and an easier application process, that may not always be true,” says Albert Tumpson, a banking and real estate attorney who owns several properties and refinances them every couple of years. “I’ve found more favorable terms with other venues. Always go with the most favorable terms.”
‘Don’t bother reading the fine print’
Why you might hear this: Because actually perusing all that mortgage paperwork will drive you insane! And besides, this is the standard contract that everyone gets. Just sign here, here, and here—and you’ll save yourself a ton of headaches.
Why it’s bad advice: Because that fine print contains some clauses that could cost you serious money!
“Take your time and go over every last word with a fine-toothed comb,” says Jamie, a homeowner who purchased her second home two years ago. She was astounded when her lender asked her to sign a mortgage contract involving hundreds of thousands of dollars without “bothering” to read the details. Jamie ended up taking several hours to go over the contract and found several items to dispute. So what if the process took a little longer? It was well worth the wait.
‘Always go with the lowest interest rate’
Why you might hear this: A lower interest rate means lower monthly payments. Duh.
Why it’s bad advice: Lower interest rates can have all sorts of strings attached—often in the form of an adjustable-rate mortgage.
ARMs are not always a bad thing, but just be on the alert when someone suggests an interest-only ARM, says Shant Khatchadourian, president of SKR Capital Group. “Interest-only ARMs can result in significant payment shock, especially if rates increase down the line and amortization kicks in.”
In the past, as interest rates were dropping and home values were rising rapidly, interest-only ARMs worked well for some people—especially those who didn’t plan to stay in the home beyond the length of the loan’s first term. But although interest rates are low, they’re likely to rise soon, so beware.
‘Borrow as much as you’re approved for, even if you don’t need it’
Why you might hear this: Who doesn’t want a bigger and better house? Besides, a bank wouldn’t approve you for all that money unless you could afford to pay it back, right? Right?
Why it’s bad advice: It’s always wise to live slightly below your means, since you never know when life might pitch you a financial curveball, such as a layoff or medical problem.
“You can qualify for monthly payments up to 50% of your income these days,” says Khatchadourian. “But half of your gross income seems like quite a bit for most people, especially when they factor in taxes and insurance.”
So be sure to make a budget, decide what monthly payment you’re comfortable with, and stick to it.
Article From realtor.com by Lisa Johnson Mandell
By knowing how much mortgage you can handle, you can ensure that home ownership will fit in your budget.
Home ownership should make you feel safe and secure, and that includes financially. Be sure you can afford your home by calculating how much of a mortgage you can safely fit into your budget.
Why not just take out the biggest mortgage a lender says you can have? Because your lender bases that number on a formula that doesn’t consider your current and future financial and personal goals.
Think ahead to major life events and consider how those might influence your budget. Do you want to return to school for an advanced degree? Will a new child add day care to your monthly expenses? Does a relative plan to eventually live with you and contribute to the mortgage?
Consider those lifestyle issues as you check out these four methods for estimating the amount of mortgage you can afford.
1. Prepare a detailed budget.
The oldest rule of thumb says you can typically afford a home priced two to three times your gross income. So, if you earn $100,000, you can typically afford a home between $200,000 and $300,000.
But that’s not the best method because it doesn’t take into account your monthly expenses and debts. Those costs greatly influence how much you can afford. Let’s say you earn $100,000 a year but have $1,000 in monthly payments for student debt, car loans, and credit card minimum payments. You don’t have as much money to pay your mortgage as someone earning the same income with no debts.
Better option: Prepare a family budget that tallies your ongoing monthly bills for everything — credit cards, car and student loans, lunch at work, day care, date night, vacations, and savings.
See what’s left over to spend on homeownership costs, like your mortgage, property taxes, insurance, maintenance, utilities, and community association fees, if applicable.
2. Factor in your downpayment.
How much money do you have for a downpayment? The higher your downpayment, the lower your monthly payments will be. If you put down at least 20% of the home’s cost, you may not have to get private mortgage insurance, which protects the lender if you default and costs hundreds each month. That leaves more money for your mortgage payment.
The lower your downpayment, the higher the loan amount you’ll need to qualify for and the higher your monthly mortgage payment.
But, if interest rates and/or home prices are rising and you wait to buy until you accumulate a bigger downpayment, you may end up paying more for your home.
3. Consider your overall debt.
Lenders generally follow the 43% rule. Your monthly mortgage payments covering your home loan principal, interest, taxes and insurance, plus all your other bills, like car loans, utilities, and credit cards, shouldn’t exceed 43% of your gross annual income.
Here’s an example of how the 43% calculation works for a homebuyer making $100,000 a year before taxes:
1. Your gross annual income is $100,000.
2. Multiply $100,000 by 43% to get $43,000 in annual income.
3. Divide $43,000 by 12 months to convert the annual 43% limit into a monthly upper limit of $3,583.
4. All your monthly bills including your potential mortgage can’t go above $3,583 per month.
You might find a lender willing to give you a mortgage with a payment that goes above the 43% line, but consider carefully before you take it. Evidence from studies of mortgage loans suggest that borrowers who go over the limit are more likely to run into trouble making monthly payments, the Consumer Financial Protection Bureau warns.
4. Use your rent as a mortgage guide.
The tax benefits of homeownership generally allow you to afford a mortgage payment — including taxes and insurance — of about one-third more than your current rent payment without changing your lifestyle. So you can multiply your current rent by 1.33 to arrive at a rough estimate of a mortgage payment.
Here’s an example: If you currently pay $1,500 per month in rent, you should be able to comfortably afford a $2,000 monthly mortgage payment after factoring in the tax benefits of homeownership.
However, if you’re struggling to keep up with your rent, buy a home that will give you the same payment rather than going up to a higher monthly payment. You’ll have additional costs for homeownership that your landlord now covers, like property taxes and repairs. If there’s no room in your budget for those extras, you could become financially stressed.
Also consider whether or not you’ll itemize your deductions. If you take the standard deduction, you can’t also deduct mortgage interest payments. Talking to a tax adviser, or using a tax software program to do a “what if” tax return, can help you see your tax situation more clearly.
With mortgage rates at historic lows, many homeowners are contemplating refinancing their mortgage. Why not? After all, negotiating for a lower interest rate saves you tons of money, right? Well, yes and no. Got that? Read on to learn some of the Hidden Costs of Refinancing.
The fact is, many homeowners are blindsided when they learn that there are a slew of costs for refinancing that can hit your savings hard. And there’s the hassle factor. After all, even though you’ve already been approved for the loan originally, lenders will want to reassess your credit history and your home once again before they agree to refinance your loan. That takes work (and paperwork), and you’ll have to pay to get these things done.
To help you weigh whether refinancing is right for you, we thought we’d clue you in to some of the lesser-known fees you’ll have to cough up to get the job done. (They vary by area; these are ballpark estimates.) And while some of these expenses are fixed based on your specific loan and personal finances (mainly credit score and income), others are negotiable. So don’t be afraid to see if there’s any wiggle room to save some money where you can!
Cost: $75 to $300
This covers the costs of processing your loan refinance request, including the lender checking your credit report. You will likely have to pay this fee, unlike other fees on this list, even if your refi is denied.
Cost: One to six months’ worth of interest payments
Some lenders will slap you with fees for ending your original loan early. Prepayment penalties are typically assessed at 2% to 4% of the original loan amount. Your loan agreement should spell out whether you’re subject to prepayment penalties. (FHA loans do not have any.) However, you may be able to get these penalties knocked off—or at least reduced—by negotiating with your lender. If you’ve been a responsible borrower (i.e., you’ve made your payments on time and in full every month), you should have more negotiating power.
Cost: $300 to $700
When you got your original loan, the lender charged a fee to have an appraiser assess the home and make sure that the property was worth at least as much as the loan amount. The same procedure takes place when you refinance. Bonus: You’ll get a professional opinion on the current price of your home. Sweet!
Home inspection fee
Cost: $175 to $350
Even though you probably got a home inspection when you first bought your place, a lot can change over the years, so your lender will want to recheck the property for any new problems that have cropped up. One potential way to cut costs: Reach out to the home inspector you used when you purchased the property and ask if you can get a discount for being a repeat customer.
Title search and title insurance
Cost: $700 to $900
When you refinance, your lender will want to conduct a title search and get title insurance as safeguards—just as it did the first time around. After all, new liens on the property or other issues may have come into the picture since the first time this search was conducted. To save cash, dig up a copy of your original title report to save the lender some of the legwork of sifting through your home’s title history from scratch.
Attorney review/closing fee
Cost: $500 to $1,000
Most lenders charge borrowers for fees paid to the lawyer or title company that conducts the closing. There isn’t much room for negotiating price here, since they typically charge a fixed hourly rate.
Cost: 0% to 3% of the loan principal
Time for a quick re-education. There are two types of points: origination points and discount points. Origination points are what the lender charges to cover the administrative costs of processing the loan. However, you may be able to negotiate this fee if you use your original lender, who may be willing to offer financial incentives in order to retain your business. After all, it doesn’t want you going elsewhere for your loan. Advantage: you! Use it.
Now let’s move on to discount points, which are optional. But here’s why you should consider them: You’re essentially prepaying the interest on your new loan—which, in turn, reduces your monthly mortgage payment. If you’ve got a stash of cash you can put toward points, this is a great way to save on interest down the road. But you need to calculate your break-even point to determine whether or how many discount points you should purchase, says Titsworth. For example, if you plan on staying in the home for five years and know that you’ll recoup the costs of purchasing the discount points in three years, they’re worth buying. Ask your lender to crunch the numbers to be sure.