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Compare Closing LLC

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With all-time low mortgage rates, it is attracting many to purchase a new home.But if your credit score is low you may not qualify for a loan.However, there are options available for someone with a low credit score to help them to be in a better position for buying a new house.The credit score range decides the loans.People with credit scores from 500 to 580 have fewer options than people with a score above 600.But government-backed FHA loans and a non-qualified mortgage are some options that are recommended for a person with a low score.The Federal Housing Administration backs FHA loans and along with being an option for those suffering low credit scores, these loans don’t have any additional fees or higher interest rates.A down payment of 10% may be required by the borrower, but it is a good choice for borrowers with low credit scores.There are more loan options to consider when the credit score is 600 or greater.USDA loan is a popular option in rural areas it comes with zero down payment requirement, but this loan is only available in qualifying areas so one needs to check if the place where they want to live is covered by this loan.To qualify for a conventional loan most lenders will require a minimum of 620 credit scores order.Those with a minimum credit score of 620 have two options — the Freddie Mac Home Possible buyer program and the Fannie Mae HomeReady loan.Low-to-moderate-income borrowers and first-time homebuyers can take advantage of these programs.When beginning the home buying process there are other government assistance programs and grants for first-time homebuyers which need to be researched.A high credit score will give you better access to loans and more options.So, if find your score are low, take steps to improve it.The 1st step is to pay down your credit card balances.Check your credit report for errors and get it rectified asap.
With all-time low mortgage rates, it is attracting many to purchase a new home.But if your credit score is low you may not qualify for a loan.However, there are options available for someone with a low credit score to help them to be in a better position for buying a new house.The credit score range decides the loans.People with credit scores from 500 to 580 have fewer options than people with a score above 600.But government-backed FHA loans and a non-qualified mortgage are some options that are recommended for a person with a low score.The Federal Housing Administration backs FHA loans and along with being an option for those suffering low credit scores, these loans don’t have any additional fees or higher interest rates.A down payment of 10% may be required by the borrower, but it is a good choice for borrowers with low credit scores.There are more loan options to consider when the credit score is 600 or greater.USDA loan is a popular option in rural areas it comes with zero down payment requirement, but this loan is only available in qualifying areas so one needs to check if the place where they want to live is covered by this loan.To qualify for a conventional loan most lenders will require a minimum of 620 credit scores order.Those with a minimum credit score of 620 have two options — the Freddie Mac Home Possible buyer program and the Fannie Mae HomeReady loan.Low-to-moderate-income borrowers and first-time homebuyers can take advantage of these programs.When beginning the home buying process there are other government assistance programs and grants for first-time homebuyers which need to be researched.A high credit score will give you better access to loans and more options.So, if find your score are low, take steps to improve it.The 1st step is to pay down your credit card balances.Check your credit report for errors and get it rectified asap.
Maui County is set to help low- to above-moderate income first-time homebuyers with an assistance program.The county’s Department of Housing announced to assist with down payment and closing costs.This assistance will depend on the individual cases and can equal up to 5% of the home’s purchase price, while not exceeding $30,000.Applicants of the program will be selected by a lottery draw.Mayor Michael Victorino in a statement asked qualifying people to apply for the program immediately.Though the lottery drawing is scheduled for Sept. 17, 9 am, the borrower must submit a credit pre-approval letter from a mortgage lender who is authorized to do business in Hawaii along with a completed application by Aug. 27 at 4:30 p.m.The qualifying terms being — applicants must be U.S. citizens and a resident of Maui County they must occupy the property they are buying as their principal residence.The household income can be 140% of the county’s median annual income, that is $134,260, for the taxable year preceding the application and for the duration of the application process.Minimum for three calendar years prior to the date their applications are submitted the applicants cannot have a 50% or greater interest in fee simple or leasehold land suitable for dwelling purposes or have assets totaling more than $75,000.While calculating assets the retirement accounts and pension funds will not be counted.Applications can be found at the website mauicounty.gov/fthbapp.Or applicants can call (808) 270–7351 for any assistance or visit the Housing Division Office in Wailuku.Reference Source: Star AdvertiserReference Source: Star Advertiserhttps://www.compareclosing.com/mortgagenews/down-payment-and-closing-cost-assistance-for-residents-of-maui-county/
What Is Debt-Service Coverage Ratio (DSCR)?Corporate, government and personal finance have the debt-service coverage ratio applicable to them.In relation to corporate finance, the debt-service coverage ratio (DSCR) is the quantification of a business’s available cash flow to pay current debt obligations.With the DSCR investors would know if a company has enough income to pay its debts.The number of export earnings required by a country to meet annual interest and principal payments on its external debt is the DSCR for government finance.For personal finance, a DSCR is a ratio used by bank loan officers to decide income property loans.Understanding the Debt-Service Coverage Ratio (DSCR)No matter what the context is, corporate finance, government finance, or personal finance, the DSCR shows the ability to service debt given a particular level of income.The ratio mentions net operating income as a multiple of debt obligations to be paid within a year, this includes interest, principal, sinking funds, and lease payments.The formula and calculation of DSCRNet operating income and the total debt servicing for the entity are required for the formula of the debt-service coverage ratio.A company’s revenue after deducting certain operating expenses (COE) is net operating income, it does not include taxes and interest payments.It is often regarded to be equivalent of earnings before interest and tax (EBIT).Some calculations comprise non-operating income in EBIT.It is important to apply consistent criteria when calculating DSCR whether you are a lender or investor weighing the credit-worthiness of different companies or are a manager comparing different years or quarters.The lenders may calculate DSCR in a slightly different manner for a borrower.Total debt service consists of current debt obligations, including any interest, principal, sinking fund, and lease payments that are pending in the coming year.Both the short-term debt and the current portion of long-term debt will be included in a balance sheet.As interest payments are tax-deductible, whereas principal repayments are not the income taxes complicate DSCR calculation.So by computing the total debt service is a more accurate way to calculate the TDS.What Does DSCR Tell You?Before making a loan the lenders will assess a borrower’s DSCR.It is negative cash flow when the DSCR is less than 1, meaning the borrower will be unable to cover or pay current debt obligations without borrowing more.A DSCR of 0.95 means that there is only so much net operating income to cover 95% of the annual debt payments.In the context of personal finance, this would mean that every month to keep the project afloat the borrower would have to dig into their personal funds.Though usually, lenders disapprove of negative cash flow, if the borrower has strong resources in addition to their income then some lenders allow it.If the debt-service coverage ratio is close to 1, like, 1.1, then the borrower is unsafe, and a small decline in cash flow could lead to unable to service its debt.So lenders may want the borrower to maintain a minimum DSCR while the loan is outstanding.Some agreements will look at a borrower falling below that minimum to be risky.When a DSCR is greater than 1 it would mean the entity, either an individual, company, or government has enough income to pay for its current debt obligations.A lender’s demand for the minimum DSCR will depend on macroeconomic conditions.When the economy is growing, the credits are more readily available, leading the lenders to be more forgiving of lower ratios.Whereas lending to less-qualified borrowers can, result in, affecting the economy’s stability, as was the case in 2008 leading to the financial crisis.When subprime borrowers could obtain credit, especially mortgages, with little scrutiny.When these borrowers began to default, it leads to a collapse of the financial institutions that had financed them.The Difference Between Interest Coverage Ratio vs DSCRThe occasions a company’s operating profit covers the interest which must be paid on all debts for a given period is known as the interest coverage ratio.This is indicated as a ratio and is most often worked out on an annual basis.Just by dividing the EBIT for the established period by the total interest payments due for that same period, the interest coverage ratio can be calculated.The EBIT, which is usually called net operating income or operating profit, is calculated by deducting overhead and operating expenses, like the rent, cost of goods, freight, wages, and utilities, from revenue.This number shows the amount of cash available after removing all expenses necessary to keep the business running.A company is considered financially stable when the ratio of EBIT is higher than the interest payments.This metric only regards interest payments and not payments made on principal debt balances which may be required by lenders.The debt-service coverage ratio is a little more extensive.This metric evaluates a company’s ability to meet its minimum principal and interest payments, including sinking fund payments, for a given period.When EBIT is divided by the total amount of principal and interest payments required for a given period to obtain net operating income then you can calculate DSCR.The DSCR is a slightly stronger indicator of a company’s financial well-being as it takes principal payments along with interest into account.A company having less than 1.00 of debt-service coverage ratio does not generate enough revenue to cover its minimum debt expenses.So in regards to business management or investment, this represents a risky prospect as even a short period of lower-than-average income could result in disaster.ConclusionDSCR stands for a measure of cash flow with borrowers to pay current debt obligations.To analyze firms, projects, or individual borrowers, the DSCR is used.Depending on macroeconomic conditions a lender demands the minimum DSCR.The lenders may be more forgiving of lower ratios if the economy is growing.https://www.compareclosing.com/blog/about-dscr-debt-service-coverage-ratio/
With home prices climbing really fast, and the bidding wars becoming common, many buyers are forced to pay all cash leading to fears that the country will face another housing bubble resulting in a terrible crash.Industry executives and economists feel this explosion in home prices is temporary as home prices can’t go above 20% year-over-year forever.They say the housing market today is very different from the mid-2000s recession that damaged the economy.The difference is a massive shortage of homes and home builders are being very cautious about adding new supply now.Another major difference is that banks, home buyers, and regulators are not over-lending or overborrowing.AnetaMarkowska, chief economist at Jefferies said in some ways this is an even hotter housing market than before the Great Recession because the risk of this turning into a bubble is much lower.They observed that the current supply situation is opposite to the bubble period because back then, there was a massive overbuilding issue.Around 2 million homes were being built per year, compared to the 1.6 million today.When there is excess supply the market crash, said Markowska.The end of June 2021, saw just 1.25 million existing homes for sale which is close to 19% down from a year ago.Lawrence Yun, chief economist at the National Association of Realtors said that we have a housing shortage and prices don’t decline in shortages.According to data published by S CoreLogic Case-Shiller Indices in May, the home prices surged by 16.6%, rising from the 14.8% gain in April.According to the NAR, in June the existing home prices continued to grow, leading to the median price for an existing home hitting a record $363,300, which is 23% up in the last 12 months.Because of these price gains, the housing market is self-correcting.According to data in June the new home sales unexpectedly dropped to the lowest level since April 2020.Instead of paying the exorbitant prices, some prospective home buyers have decided to wait and rent which is a blessing in disguise, because home prices may be able to cool off as inventories rise to prevent a boom-bust dynamic said Markowska of Jefferies.Reference Source: WTVAhttps://www.compareclosing.com/mortgagenews/home-prices-cant-keep-going-up-forever-says-experts/
The pandemic led to recession-induced low-interest rates, and eager homebuyers setting off the housing market boom.The median price also rose up to 24% since the onset of the COVID — 19.On 31st July, the foreclosure moratorium, which prevents foreclosures of federally-backed mortgages, will come to an end.And the mortgage forbearance program will end on Sept. 30.Over 7 million homeowners have been enrolled in the forbearance program since the beginning of the pandemic.But because of the improvement in the economy, that number has dropped.As per the data of July 11, there are still 1.75 million borrowers who have enrolled in the forbearance program.The foreclosure crisis during the housing bubble was very bad, leading to tens of millions of financially strained homeowners were underwater where the borrower’s remaining mortgage balance was greater than the home’s value and they had no choice but to face foreclosure.This year that’s may not be the case because these homeowners are having sizable home equity so if they are unable to pay the mortgage they can simply sell their home in the currently searing housing market and settle for a smaller or rental home.Reference Source: Fortunehttps://www.compareclosing.com/mortgagenews/foreclosure-situation-not-expected-to-be-as-bad-as-during-the-recession-period/
About Property InspectionA non-invasive, visual inspection of a property, that is carried out by a fully qualified professional is called a Property Inspection.These property inspectors evaluate buildings and their components.A property inspection has its own pros and cons.It can give you peace of mind, at the same time you also discover things that you’re not prepared to deal with.Property inspections take place for different reasons.Though you don’t need to experience all these types of inspections, it’s always useful to know what to expect when you’re faced with it.Pros of a Property InspectionWith an inspection, you know that your property is up to code and it also confirms that the property is safe and meets the required building codes.When it’s inspected and no major issues are found then it is considered as best case.Your property could be worth more than you thought it would.The appraisal of your home requires a few inspections.The interior and the exterior is appraised by a third-party appraiser who will inspect and compare your home with similar homes in the area to come up with a price that they think your home is worth, which could be much higher than you originally thought.Cons of a Property InspectionDuring a property inspection, serious issues might be found.For instance, the property inspector might detect structural cracks in the foundation, raised levels of radon, or a termite infestation the remedy for which can cost you a lot of money.Another drawback of getting your property inspected is the possibility of getting an inspector who’s just simply looking to find faults.By finding faults he might want to justify the expense of being hired for the property inspection.A report could include a list of minor fixes that can be easily repaired, like the cracks in a driveway or cleaning of the air duct vents.Though they are minor, they have the potential to shoo off prospective buyers.Similarly, they might be used to try to negotiate the purchase price down.Types Of Property InspectionsI — City Inspections:When the inspections can be conducted by the city or municipality at the location of your property it is city inspection.Certificate of Occupancy which is also known as a CO certifies that the property is fit to be lived in.This certification is required by some municipalities when you build a new home, you renovate a home, or when you sell an investment property.A Certificate of Habitability is to ensure that the building meets certain health and safety codes.Thereby ensuring that it’s, suitable to be lived in.
Today, multiple refinance rates dropped.Both the popular refinance term; 15-year fixed and 30-year fixed saw a slump in their average rates.There was also a decrease in the average rate on 10-year fixed refinance mortgages.Refinancing rates keep changing constantly.But right now they’re exceptionally low.If you are looking to refinance your existing mortgage, this might be the right time to reduce your interest rate.As the refinance rates are hovering around 3%, homeowners who’ve not refinanced yet have a chance to secure an exceptional rate.But it isn’t just about the rate the decision to refinance, also involves closing costs to consider.So be sure that you’re saving in interest payments should outweigh the fees you pay only then will it be a sound financial decision.Even a “no-closing-cost” refinance has fees, which instead of being charged upfront, are added to your loan.The interest rate of the average 30-year fixed refinance is 2.99%, a decrease of 12 basis points from last week.The interest rate of the average 15-year fixed refinance is 2.32%, a decrease of 10 basis points from the week earlier.The average 10 years fixed refinance rate is 2.34%, which is a decrease of 11 basis points from last week.Reference Source: Timehttps://www.compareclosing.com/mortgagenews/refinance-rates-fall-today/
This week the Mortgage Bankers Association’s latest Forbearance and Call Volume Survey revealed that the total number of loans now in forbearance decreased by 26 basis points from 3.76% to 3.50% in a week’s time.1.75 million homeowners are in forbearance plans shows the MBA’s estimate.There is a drop of 8 basis points in the share of Fannie Mae and Freddie Mac loans in forbearance.Ginnie Mae loans in forbearance dropped 42 basis points and the forbearance share for portfolio loans and private-label securities (PLS) dropped 61 basis points.There were a 19 basis points decrease in the percentage of loans in forbearance for independent mortgage bank (IMB) services and for depository servicers the percentage of loans in forbearance decreased 36 basis points.Mike Fratantoni, MBA’s Senior Vice President and Chief Economist said the new forbearance requests dropped to their lowest level since last March, resulting in the largest weekly drop in the forbearance share since October 2020 and the 20th consecutive week of declines.He added that the forbearance share decreased for every investor and servicer category.Fratantoni said that the latest economic data of the job market and consumer spending is showing a good recovery of the economy.Reference Source: World Property Journalhttps://www.compareclosing.com/mortgagenews/mortgage-loans-in-forbearance-drops-to-3-5/
About Land LoansWhen you are deciding on home buying and are looking to purchase a home, you can also consider building your own home.The thought of building a home can seem perfect until you as homeowners realize how much would it cost to build a home.Even if building a house can be expensive, there are various ways to make it more affordable for first-time homeowners.one of the ways is through land loans.If you’re interested in building a house, you might choose to apply for land loans.There are a few lenders who offer land loans and they can assist you.Meanwhile, let us understand more about land loans.What is a Land Loan?A loan that is used to finance the purchase of a plot of land is termed a land loan.When a buyer is interested in buying a piece of land to build a home or utilize the land for business purposes this land loan can be useful.If you want to obtain a land loan, then the type of loan you take will depend on the location of your land and how do you intend to use the land.Raw land loans, unimproved land loans, and improved land loans are the three most common types of land loans.Types of Land LoansRaw land loan:Raw land means completely undeveloped land with no electricity, sewers, or road facility.You’ll need to apply for a raw land loan if you’re interested in this type of land then apply for a raw land loan.As it would be difficult to get financing for undeveloped land, it’s necessary that you create a solid, detailed plan for how you intend to develop the land.This project of yours will show the lenders that you’re committed to it and don’t pose a risk.If you have a large down payment and good credit then you increase your chances of qualifying for the loan.Even if the purchase of raw land is cheaper than developed land, it will have higher interest rates and big down payments in comparison to other land loans.Unimproved land loan:Unimproved land is quite similar to raw land, but it is comparatively more developed.Many a time unimproved land has some basic utilities and amenities, but may not have an electric meter, phone box, and natural gas meter.Even if an unimproved land loan is less risky than a raw land loan, it still can be difficult to obtain, This too needs you to make a detailed plan, a sumptuous down payment, and have a strong credit score.As unimproved land loans aren’t the riskiest type of loan, the down payments and interest rates won’t be as high as for a raw land loan, but it’s possible that they are higher than other types of loan financing.Improved land loan:Improved land has access to things like roads, electricity, and water unlike raw land and unimproved land.Improved land is the most developed type of land, so it is more expensive to purchase.However, compared to a raw land loan or unimproved land loan, the interest rates and down payments of an improved land loan are lower.Though it’s equally important to put down a significant down payment and have a good credit score.Obtaining a land loan is similar to obtaining a mortgage loan by a buyer, but it is not easy to determine what the land is worth because there is no property collateral.This means that lenders consider land loans as riskier transactions, and demand higher down payments and interest rates than what they would charge for a typical home loan.How does a Land Loan Work?As there are different types of land loans, each has its own qualifying requirement to meet for the borrowers.However, when a borrower applies for a land loan there are a few general guidelines that are taken into consideration.Like it is with any other loan here too a borrower needs to have an excellent credit score.A borrower would also need to explain their intended use of the land, which could vary depending on the type of loan they’re interested in.A borrower needs to highlight aspects of the property like zoning, land-use restrictions, surveyed boundaries, and access to utilities which will give lenders an idea of how risky the loan might be.Once the lender takes these factors into account, they can issue the rates and obligations of the land loan.The interest rates of land loans tend to be higher than mortgage interest rates as they’re considered riskier.However, if they have a better credit score and debt-to-income ratio then a borrower can qualify for lower rates.After the rates of loans are determined and the borrower has been approved by a lender and agreed to the loan’s terms, the borrower is responsible for making a down payment and repaying the loan with the decided interest rate.Pros and Cons of Land LoansIf applying for a land loan is on your bucket list, you’ve realized by now that it will have its own pros and cons.To help make this decision easier, let’s look at some pros and cons and identify how they’d apply to your personal needs and financial situation.Pros:Applying for a land loan is beneficial for you if building a home or business is important to you.The biggest benefit is having an opportunity to build the home of your dreams.If you’re looking at the land for commercial purposes, then it can give businesses the opportunity to take advantage of the promising areas.If you are a visionary and are creative and patient, using the land loan to build a home or business would be the perfect option for you.Cons:Applying for a land loan.
Mortgage credit availability has hit a 10-month low, which ended more than half a year of credit supply gains.Last weekend, the Mortgage Bankers Association reported a fall in its Mortgage Credit Availability Index (MCAI) by 8.5% to 118.8 in June, signaling a contraction of lending standards.In March 2012 the index was set to 100.Joel Kan, AVP of economic and industry forecasting at MBA, said that mortgage credit has not recovered since the sharp downturn in the first half of 2020.He cited that the GSE policy changes were the cause of the drop in credit availability which reduced the availability of high LTV refinance loans.He said because of this there has been an addition of refinance programs that are designed to reduce costs for lower-income borrowers, but the full impact of those new loan programs can be seen in due course.Along with the tightening in supply because of policy change, there was also a withdrawal in jumbo ARM offerings, that resulted in the lowest supply of jumbo credit since February 2021.The Conventional MCAI jumped 17.1%, and the Government MCAI dropped by 1.4%.Of the Conventional MCAI’s component indices, there was a decrease of 11.5% in the Jumbo MCAI and a drop in the Conforming MCAI by 23.5%.Reference Source: MPAhttps://www.compareclosing.com/mortgagenews/change-in-gse-policy-leads-to-difficult-hoops-in-mortgage-standard/
During the pandemic last year the Federal Housing Finance Agency (FHFA) had imposed costly mortgage refinance fees, which it is eliminating.The Adverse Market Refinance Fee cost 50 basis points, and the lenders were required to pay Fannie Mae and Freddie mac this amount for each such loan delivered.Both the government-sponsored enterprises (GSEs) guarantee, packages, and sells mortgages under the FHFA umbrella.The fee is equal to half a percentage point of the loan amount, it was introduced because of the loss the FHFA expected to incur due to the pandemic, which left millions of homeowners with no jobs.But the predicted losses did not happen.Instead, the housing market began rising and as the economy began a recovery the jobless rates also fell.Leading the FHFA to announce the expiry of its Adverse Market Refinance Fee requirement on Aug. 1.Along with protecting the homeowner, the FHFA said by aborting the extra fee they will be able to help the growing affordability problem of the house prices.America’s affordable housing crisis was worsened financially due to the pandemic.Families can take advantage of the low-rate environment and save more money because of the elimination of the Adverse Market Refinance Fee said, Acting Director Sandra L. Thompson.She added that with this action FHFA’s is supporting affordable housing and simultaneously protecting the safety and soundness of the enterprises.Reference Source: MSNhttps://www.compareclosing.com/mortgagenews/fhfa-decides-to-abort-its-adverse-market-refinance-fees/
What is a Commercial Real Estate Loan?Income-producing property that is exclusively used for business instead of residential purposes is known as Commercial real estate (CRE).Retail malls, shopping centers, office buildings and complexes, and hotels are examples of commercial real estate.A commercial real estate loan accomplices the task of financing (including the acquisition), development, and construction of these properties.In short commercial real estate loans are mortgages secured by liens on the commercial property.Borrowing for commercial real estate is different from a home loanJust like your home mortgages, banks and independent lenders provide commercial real estate loans.Finance for commercial real estate is also provided by insurance companies, pension funds, private investors, and other sources, like the U.S. Small Business Administration’s 504 Loan program.Loan repayment schedulesThe commercial loan terms range from 5 years to 20 years, and often the amortization period is longer than the term of the loan.For instance, a lender might take a commercial loan for a period of 7 years and an amortization period of 30 years.So the investor would make payments for 7 years of an amount depending on the loan being paid off over 30 years, followed by one final balloon payment for the entire remaining amount on the loan.Loan-to-value ratiosA loan to value ratio (LTV) measures the value of a loan against the value of the property.In commercial real estate loans, a lender calculates LTV by dividing the amount of the loan by the lesser of the property’s appraised value or its purchase price.For instance, a $90,000 loan’s LTV on a $100,000 property would be 90% ($90,000 ÷ $100,000 = 0.9, or 90%).Lower the LTV the more possibility to qualify for favorable financing rates.LTVs, for commercial loans generally fall into the 65% to 80% range.A particular LTV depends on the loan category.Debt-service coverage ratioA debt service coverage ratio (DSCR), compares a property’s annual net operating income to its annual mortgage debt service that includes principal and interest.So the property’s ability to service its debt can be measured.Commercial lenders also calculate it by dividing the NOI by the annual debt service.Rates and fees for commercial real estate loansCompared to residential loans the interest rates on commercial loans are generally higher.Appraisal, legal, loan application, loan origination, and/or survey fees are the additional fees that are added to the overall cost associated with commercial real estate loans.Some costs have to be paid before the loan is approved or rejected, whereas the others are to be paid annually.For instance, at the time of closing, there may be a one-time loan origination fee of 1%, and an annual fee of 0.25% until the loan is paid fully.A $1 million loan, might attract a 1% loan origination fee that is $10,000 to be paid upfront and a 0.25% fee of $2,500 paid annually along with the interest.PrepaymentTo preserve the lender’s anticipated yield on a loan a commercial real estate loan may have restrictions on prepayment.If the debt is settled before the loan’s maturity date the investors will likely have to pay prepayment penalties.There are four basic types of penalties if the loan is paid off early:Prepayment penalty: This basic prepayment penalty is calculated by multiplying the current outstanding balance by a specified prepayment penalty.Interest guarantee: Even if the loan is paid off early the lender still is entitled to a specified amount of interest.For instance, a loan may have a 10% interest rate guaranteed for 60 months and a 5% exit fee after that.Lockout: The borrower cannot pay off the loan before a set period of time, like a five-year lockout period.Defeasance: It is a substitute for collateral.Instead of paying cash to the lender, the borrower exchanges new collateral like the U.S. Treasury securities, in place of the original loan collateral.
According to Bankrate.com today, the average rate on a 30-year fixed mortgage is 3.08% with an APR of 3.30% the rate went down 2 basis points since the same time last week from 3.10%.The 15-year fixed mortgage has an average rate of 2.42% with an APR of 2.71% rose 2 basis points from 2.40%.The 30-year jumbo mortgage average rate is 3.04% with an APR of 3.16% has dropped 3 basis points today from 3.07% a week earlier.The average rate on a 5/1 ARM is 2.82% with an APR of 3.96% it was 2.84% last week.For purchasing a home, mortgages and mortgage lenders are a necessary part, as it would be difficult to understand what you’re paying for and how much can you actually afford.A mortgage calculator helps you estimate your monthly mortgage payment depending on your interest rate, the purchase price, down payment, and other expenses.You will need:The home priceAmount of your down paymentThe interest rateThe loan termAnd any taxes, insurance, and HOA fees if applicable, to calculate your monthly mortgage payment.Along with saving for your down payment have some reserve funds for inspection and appraisal, closing costs, ongoing costs, furnishings, repairs, and renovations.Before home seeing activity it helps to get a pre-approval for a mortgage, which shows that you are a serious buyer.You will need your Social Security card, W-2 forms, pay stubs, bank statements, tax returns, and any other documents that the lender asks for to get pre-approval of the mortgage.Reference Source: Forbeshttps://www.compareclosing.com/mortgagenews/mortgage-rate-today-and-preparation-for-home-buying/
What is a Short Refinancing?It is a financial term referring to the refinancing of a mortgage by a lender for a borrower who is currently in default on their mortgage payments.Short refinancing of a mortgage is done by the lender for the purpose of helping a borrower avoid foreclosure.A new loan amount is usually less than the existing outstanding loan amount, and the difference is sometimes forgiven by the lender.Even though the payment on the new loan will be lower, sometimes a lender chooses short refinance just because it is more cost-effective than the foreclosure proceedings.How does a short refinance work?The lender may be forced to foreclose on the home when a borrower cannot pay their mortgage.As we know the mortgage is a loan that is secured by the collateral of a borrower’s property, the borrower is obliged to pay back the debt with a predetermined set of payments.As mortgage, is one of the most common debt instruments, it is used by individuals and businesses to make large real estate purchases without paying the entire value of the purchase up front.Over the number of years, the borrower repays the loan, along with interest, till the entire amount is paid off and they own the property free and clear.If a borrower is unable to make payments on their mortgage, the loan goes into default.Then the bank has a few options of which foreclosure is the most widely known option by the lenders, it means the lender takes control of the property, dislodges the homeowner, and sells the home.However, foreclosure is a long and expensive legal process that a lender might want to avoid because they may not receive any payments for up to a year after beginning the foreclosure process and they will also lose out on fees associated with the procedure.Some lenders may offer a borrower who is at risk of foreclosure the solution of a short refinance.A borrower too may ask for this option of short refinance.These are advantageous for the borrowers — A short refinance allows a borrower to keep the home and reduces the amount owed on the property.The downside of this being because they’re not paying the full amount of the original mortgage the borrower’s credit score will take a hit.Difference between a short refinance and other foreclosure optionsAmong several alternatives to foreclosure a short refinance is just one of them, which could be more cost-effective for the lender.Another possible solution is to enter into a forbearance agreement which is a temporary postponement of mortgage payments.The borrower and the lender negotiate the terms of a forbearance agreement.A lender could also choose for a deed in lieu of foreclosure that requires the borrower to deed the collateral property back to the lender meaning giving up the property in exchange for release from the obligation of paying the mortgage.Example of a short refinanceSuppose the market value of a borrower’s home dropped from $200,000 to $150,000, and he still owes $180,000 on the property.With a short refinance, the lender would allow him to take out a new loan for $150,000, and the borrower wouldn’t have to pay back the difference of $30,000.With this arrangement and he would have a lower principal and also, his monthly payments would be lower, which could help him better afford it.ConclusionInstead of going through a lengthy, expensive foreclosure, a lender may prefer to offer a short refinance to a borrower.While a short refinance could leave a dent in the borrower’s credit but even late or missed mortgage payments will do the same.A forbearance agreement or a deed in lieu of foreclosure may be considered by lenders as both may be more cost-effective.https://www.compareclosing.com/blog/what-is-short-refinancing/
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If you’re retired and coping with expenses on a fixed income then a reverse mortgage may be tempting.But looking up closely reverse mortgages may be less appealing.Apart from a number of reverse mortgage scams, lenders too can charge high fees and closing costs, and you might need to pay for mortgage insurance.They also come with variable interest rates nullifying the idea of saving in long run.It is ideal to understand the risks and rewards associated with a reverse mortgage so you can make a better-informed decision.WHAT IS A REVERSE MORTGAGE?Reverse mortgages are only available on primary residences and for people over the age of 62, and available to homeowners who have paid of all or most of their mortgage and can tap into their home equity the loan comes as lump sums or lines of credit that can be accessed when the need arises.The interest accrues on a monthly basis, and the loan need not be paid off until the homeowner moves out or passes away.The accrued interest is added to the loan balance and the amount compounds every month.If the homeowner moves out they need to close out the loan within one year.If the borrower dies, the heir must pay back the loan.THE ADVANTAGES A homeowner instead of downsizing after retirement can use a reverse mortgage and stay in their home.If there is an existing mortgage then the loan proceeds can be used to totally pay off, and free up funds for living expenses.Borrowers don’t have to make payments until they decide to move out of the house or die.Money obtained through a reverse mortgage is not treated as income and hence is not taxable.If the value of the home drops below the reverse mortgage balance, then the heirs only need to pay the value and not the full outstanding balance.For a reverse mortgage, the homeowner does not need to provide income or credit requirements.THE DISADVANTAGES There are many scams that prey on seniors in need of cash to cover living expenses.It attracts additional costs, like origination fees and mortgage insurance of up to 2.5% of the home’s appraised value.The interest rates are variable, so they can increase leading to an escalation in the cost of borrowing.Because interest accrues on an increasing loan balance instead of the loan being paid down over time the borrowers owe more.Interest payments on reverse mortgages aren’t tax-deductible.The equity in your home gets reduced and, your family’s inheritance from your estate reduces.Borrowers are required to meet strict home maintenance so as to protect the resale value of the real estate.If the homeowner fails to sustain any of the loan terms like missing a property tax payment, or not maintaining the home well, then they may have to pay off the mortgage early.Failure to observe the terms of a reverse mortgage can result in default and even foreclosure.Need-based retirement income like Medicaid and Supplemental Security Income (SSI) could get impacted.OTHER MORTGAGE OPTIONSIf you need access to cash, you can consider other alternatives like refinancing your mortgage, taking out a home equity loan, downsize your home, cash-out mortgage refinance, or HELOC.Reference Source: Forbeshttps://www.compareclosing.com/mortgagenews/is-reverse-mortgage-right-for-you/
According to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 9, 2021 mortgage applications increased 16.0 % compared to last week.On a seasonally adjusted basis from last week the Market Composite Index, which is a measure of mortgage loan application volume, increased 16.0 %.On an unadjusted basis, the Index dropped 7 % from last week.There was an increase of 20% in Refinance Index from the week earlier and was 29 % lower this time last year.Increase of 8% in the seasonally adjusted Purchase Index from one week earlier.Decrease of 13% in the unadjusted Purchase Index compared to last week and was 29 % lower than the same time a year ago.Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting said overall applications rose last week due to a drop in refinancing rates.Over the past month, treasury yields have trended down due to the COVID-19 variant affecting the speed of economic growth.Mortgage rates too feel resulting in 30 years fixed rate reaching 3.09%, which is the lowest since February 2021.Last week saw a 20% increase in refinance applications and a 23 % increase in conventional refinance applications.Even though the purchase applications increased last week, the average loan sizes reduced to their lowest level since January 2021.Last week the refinance share of mortgage activity increased from 61.6 % to 64.1 % of total applications.There was also an increase in adjustable-rate mortgage (ARM) share of activity to 3.5 % of total applications.Last week also saw a drop in the FHA share of total applications from 9.8 % to 9.5 %.Same time the VA share of total applications decreased from 10.8 % to 10.3 %.There was no change in the USDA share of total applications from 0.5 %.Last week saw a drop in major rates except for 5/1 ARM.The average rate for 30-year fixed-rate mortgages with conforming loans decreased from 3.15 % to 3.09 % for 80% LTV loansThe average rate for 30-year fixed-rate mortgages with jumbo loans decreased from 3.20% to 3.16% for 80% LTV loans.The average interest rate for 30-year fixed-rate mortgages backed by the FHA decreased from 3.17 % to 3.15 %.The average interest rate for 15-year fixed-rate mortgages dropped from 2.52% to 2.48 %.The average rate for 5/1 ARMs increased from 2.94% to 3.02 %Reference Source: MBAhttps://www.compareclosing.com/mortgagenews/mba-survey-shows-increase-in-mortgage-applications/
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Using Home Equity Loan to Payoff Credit Cards DebtYou may be struggling to bring your debt level down if you have large outstanding balances on your credit cards.If you have been able to make only minimum monthly payments it could take years, or maybe decades, to zero out your cards.If you own your home, you have the option of taking out a home equity loan to payoff credit cards debt.But before taking any action always consider the risks associated and look out for other possible alternatives.What is a Home Equity Loan?Your home has accumulated equity over the years so a home equity loan allows you to borrow against that equity.For instance, if the current worth of your home is $300,000 and you owe $200,000 on your mortgage, you have an equity of $100,000.Based on your equity a bank, credit union, or other lenders may be willing to issue a home equity loan equal to some percentage of it.Factors, such as your credit score will decide how much you can borrow and whether you can get a loan at all in the first place.Pros of using a home equity loan to pay off debt?The main advantage of using a home equity loan to pay off credit card debt is that you’ll secure a much lower interest rate than what you are paying on your credit cards.For instance, the average interest rate on a home equity loan is average around 5 %, while the average credit card could be ranging more than 19%.When you use a home equity loan to pay off credit cards, it will also simplify your life, where you will have just one bill to pay each month instead of several bills.Earlier the interest you paid on a home equity loan was tax-deductible, which has been suspended, at least for the next few years.But credit card interest was not deductible.Because of the Tax Cuts and Jobs Act of 2017, only if you use the loan to either buy, build, or improve your home that secures the loan then the interest on home equity loans was deductible.Now that provision is put on hold for at least until 2026.Cons of using a home equity loan for paying off credit card debtThe major snag of taking out a home equity loan to pay off debt is that your home would be on the line.As your home serves as collateral for the loan, the lender could seize and sell it if you are unable to pay back your loan.You’ll also face serious financial consequences, especially in your credit score when you can’t repay credit card debt.As credit card debt is not secured by your home, you’ll be at far less risk of losing your home.You can keep your principal residence even if you have to declare bankruptcy because of your debts.Is a Home Equity Loan the Answer?A home equity loan may be a good way to pay off high-interest credit card debt, provided everything goes as per the plan.It can also cost you your home in a worst-case scenario.ConclusionOne alternative to be debt-free is to use a home equity loan to pay off credit cards.Compared to most credit cards a home equity loan generally charges much lower interest rates.The downside of using a home equity loan to pay off credit cards is that you could lose your home if you are unable to repay it.To decide if it’s a practical option, you need to identify how strong or how the week is your current financial situation.If you have a secure job or a means of a consistent flow of income and are confident that you’ll have no problem, keeping up with the payments, it could be ideal for you.But if your job is not dependable and you have no other financial resources then a home equity loan could be a risky option.https://www.compareclosing.com/blog/home-equity-loan-to-payoff-credit-cards-debt/
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Laci Jo Littleton-Gomez, a realtor with I Sell Houses, describing the situation said even with a limited number of properties on the market, and a larger number of people interested in buying the real estate market in Southern Oklahoma has been booming.she says there are a lot of shoppers but not many buyers, so it’s definitely a wonderful time to sell, if you have a property to list, you can make lots of money.And if you need to sell your home to purchase another home to move into, she says one needs to plan well and strategize.Tyler Mikrot, a realtor with I Sell Houses, noticed that the market for land is more competitive than the market for housing.Mikrot said that the major reason for the land prices going up is because of the cannabis farms coming in.Many people loaded with cash from out of state come in to grow cannabis.these people are able to pay the above list price.So localities who are looking to buy land but do not have that kind of finance, get pushed out of the market.If someone is looking to buy a home Mikrot advises them to get in touch with a local agent, who knows the market, what is going to get listed soon, and also knows what’s currently under contract.Just like the buyers market the rental market is too is busy said Littleton-Gomez who has a property management company with over 90 properties, and most of the time there are zero vacancies, and the market is so tight that as soon as one gets vacant it gets rented immediately.Reference Source: Ardmoreitehttps://www.compareclosing.com/mortgagenews/southern-oklahoma-housing-market-experiencing-boom/
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To identify and eliminate bias in lending and to develop a more diverse mortgage workforce using technology the National Association of Minority Mortgage Bankers of America (NAMMBA) has collaborated with fintech company Finastra.As Finastra is partnering with NAMMBA, it will have access to a varied talent pool of the association’s members.Finastrawill works with NAMMBA and supports sustainable homeownership in communities across the United States of America by providing training, education, and career development resources.With this, they will support the NAMMBA’s efforts in enriching and improving the situations of women and minorities working in the housing industry.Puja Agrawal, chief operating officer of Americas for Finastra said, Finastra with its technology wants to tackle significant challenges around financial inclusion, fairness in financial decisions, and support for individuals and communities.While partnering with NAMMBA in its mission to support women and minorities in the real estate finance industry, they intend to bring greater opportunities for all on the path to homeownership.NAMMBA founder and CEO Tony Thompson said that they too are excited to forge a long-term partnership with Finastra and welcome their support in pursuing NAMMBA’s vision for the mortgage space.He added that in the next five years, NAMMBA will expand its mission to cultivate diversity and inclusion in other areas of financial services, like retail banking and wealth management.Finastra is the largest pure-play software vendor serving the entire financial services industry, and their partnership will help NAMMBA achieve this goal said, Thompson.Reference Source: MPA Maghttps://www.compareclosing.com/mortgagenews/aiming-fair-treatment-and-equality-in-the-housing-market-nammba-joins-hand-with-finastra/
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