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A good debt-to-income ratio

It’s the amount of debt you have compared to your income. Lenders use your debt-to-income ratio to decide whether you’ll be likely to repay your debts to them.

To figure out what your debt-to-income ratio is, add up your ongoing monthly bills. Minimum credit card payments, rent, auto loans, and student loans. Only consider your minimum payments, not the total amount you owe. Add them all up and divide it by your gross monthly income (before taxes and other deductions). This is your debt-to-income ratio and it’s written as a percentage.

As example, if you had a $1,100 monthly car payment, $300 minimum card payment, and $300 minimum student debt payment, your total monthly bills would be $1,700. If your monthly income is $5,000, your DTI ratio would be 1,700/5,000 = 0.34. 0.34 x 100 = 34. Your DTI would be a very healthy 34%.

DTI scores
Your lender’s biggest concern is whether you can pay back the loan. Your DTI score is just one of the calculations they use to help decide. They’ll also look at your FICO score, employment history, income, assets, and more.

At a minimum, they want to see your ratio under 50%. It’s ideal to have yours closer to 35%, but ranges between the two are acceptable.

Average debt per American
It’s difficult to tell what an average DTI ratio is, but we can say what the average amount of debt is. A 2021 CNBC report calculated the average American has $90,460 in debt. That includes their credit cards, personal loans, mortgages, and student debt. The higher an individual’s income, the higher their debt (and the easier it is for them to pay off).

Age 18 to 23: $9,593
Age 24 to 39: $78,396
Age 40 to 55: $135,841
Age 56 to 74: $96,984
Age 75+: $40,925

>> What do home lenders do when you have student loan debt?

Reducing your DTI
There are just two ways to do it. Reduce your monthly expenditures or increase your monthly income. Both options will take time and effort but pay off in the long run.

Rather than deciding on your own if your DTI is too high, consider talking to your home lender to go over it together. Local home lenders, like Mann Mortgage, will review your DTI and work with you and your unique financial decision to find the right loan.

6 things you shouldn’t do when you’re pre-approved for a mortgage

Just because you’re pre-approved for a loan doesn’t mean you’re guaranteed to get final approval on your loan. When your offer has been accepted and it’s time to begin closing on your loan, your mortgage lender is going to take another detailed look at your credit history, assets, income, and FICO score. You want to make sure you look just as good as you did the day you got pre-approved. How can you do that? 

Don’t miss payments
They’re going to see whether you’ve been late or missed any payments on your credit cards or loans since you were pre-approved. Just one 30-day late payment can negatively impact your credit report by many points. Make sure you have all your medical bills, parking tickets, and utility bills up-to-date and paid too! 

Don’t apply for new credit
Applying for new credit will lower your credit score and, if you’re approved, increase your debt-to-income ratio – a key factor lenders consider when you apply for a mortgage. These changes could affect the terms of your loan or get it denied altogether.

Don’t change jobs
This might be out of your control, but it’s best to stay with the job you had when you had your loan pre-approval. Switching jobs could signal a change in income, which may impact the amount you’re approved to borrow.

Don’t make any large purchases
You might be tempted to start shopping for furniture or appliances for your new home, but you shouldn’t do it. If you put the charges on your credit card, your debt-to-income ratio will change. And if you pay cash, you’ll have less money for a down payment or as an asset. Hold off on any large purchases until you’ve closed on your new home!

Don’t make big deposits
Any big cash deposits into one of your accounts prior to your mortgage closing looks fishy to an underwriter. They’re trained to spot evidence of borrowers needing to be gifted money for their mortgage – a clear sign the borrower may default. If it’s inevitable that you’ll have a deposit over $1,000, expect to be able to show the origin of the funds to your mortgage company. Transferring money between your accounts is generally fine.

Don’t refinance your loans
Don’t refinance your loans for a lower rate until after your home loan has closed. Refinancing is considered taking out a new line of credit, which isn’t good for someone looking for a mortgage. An established loan you’ve been making regular payments on looks better to mortgage underwriters than a new lower-interest loan you haven’t made many payments on yet.

What SHOULD you do?
Talk to your mortgage expert if you have any question on your current credit score or how your actions will affect your pre-approval. Your local Mann Mortgage branch is dedicated to making your experience both personalized and hassle-free.

What is a home equity line of credit?

A home equity line of credit (HELOC) uses the equity you’ve built in your home as collateral to get an additional loan. Since you’re using your home as collateral, lending institutions generally are able to offer much more favorable interest rates than you would get from an unsecure borrowing source (like a credit card company).  

Home much money can you get from a HELOC?
Each lending institution has different guidelines that dictate how much they can lend you. Their guidelines are usually based on your loan-to-value ratio (LTV), which is the amount of principal on your mortgage compared to your home’s appraised value. Most often, you’ll need at least 20% equity in your home (which is a LTV of 80%) to qualify. As example, if your home’s current value is $300,000 and the remaining balance on your mortgage is $250,000, you would have an LTV of 83%. For many lending institutions, you would not qualify for a HELOC.  

However, if your home’s current value is $300,000 and the remaining balance on your mortgage is $175,000, your LTV would be 57.9% and you would normally qualify for a HELOC for up to 80% of the equity in your home. In this example, you may have access to $65,000. 

Be aware that many lenders won’t give you a HELOC for less than $25,000.  

How do you get the cash?
Much like a credit card, you’ll have a revolving line of credit available. You can access your funds through an online transfer, a check, or a credit card. As you borrow more from your line of credit, your payments will increase though the rate of interest will remain the same.  

When do you have to pay back your HELOC funds?
Even if you get a HELOC, you don’t have to use the funds. As long as your lender doesn’t require you to do minimum draws, it could be a good source of emergency cash or a temporary safety net. If you do need to use the cash, the interest rates are lower than the rates tied to credit cards. 

The benefits of a HELOC
Even if you get a HELOC, you don’t have to use the funds. As long as your lender doesn’t require you to do minimum draws, it could be a good source of emergency cash or a temporary safety net. If you do need to use the cash, the interest rates are lower than the rates tied to credit cards.

The cons of a HELOC
The rate on your HELOC might fluctuate, and if it goes too high, you may have a hard time paying off your interest. Furthermore, your lender may decide to reduce your line of credit if your home’s value takes a drastic dip. And, don’t forget your overall debt load will increase with a HELOC or any other second mortgage.

Alternatives to a HELCO
One potential alternative is a cash-out refinance, which you could also use to pay for a home renovation or to pay off credit card bills.

>> Learn more about a cash-out refinance.

Is a HELOC right for you?
If you have enough equity built into your home and need cash for a home improvement, to cover medical bills, to pay off credit cards, or to sustain your lifestyle after losing a job, a HELOC might be a great solution. To find your home’s current value and how much you could get from a HELOC, contact your local Mann Mortgage expert today.

How much will your down payment on a house be?

A down payment is a minimum cash payment a buyer makes during the closing process to secure a loan on a home purchase. Down payment requirements vary for different types of loans, and can range from as low as 0% of the total purchase with a VA loan to as much as 20% or more for conventional or jumbo loans. Similar to your mortgage rate, your down payment amount will be determined in large part by your credit score, the purchase price of the home, and the type of loan you and your loan officer determine will help you the most given your circumstances.

The amount you need depends on the type of loan you get. Below are the six most common types of home loan options and their minimum down payment requirements.

Conventional loan
Minimum down: 3%
These loans are used for purchasing a primary residence, secondary home, or investment property. Though you can put down 3%, you will have to pay private mortgage insurance (PMI). It ranges in cost from 0.55% to 2.25% of the original loan amount per year and is broken down into monthly payments. It ranges in cost from 0.55% to 2.25% of the original loan amount per year and is broken down into monthly payments. Once you own 22% of your home, you can stop paying PMI. You can avoid PMI altogether with a 20% down payment.

FHA loan
Minimum down: 3.5%
Depending on your credit score, you may be able to secure a loan guaranteed by the Fair Housing Administration (FHA) with as little as a 3.5% down payment. FHA loans are available to people with lower credit scores (as low as 500), higher debt-to-income ratio (up to 50%), and with smaller down payments than some conventional loans allow. FHA loans allow the money for a down payment to come from a gift or charitable organization. Borrowers will need to pay an annual mortgage insurance premium (MIP) of between 0.45% to 1.05% of the loan amount – this fee will be paid annually but broken down into 12 payments and added to the monthly mortgage bill. If borrowers put down a 10% down payment, they’ll pay MIP for 11 years. If they put down less than 10%, they’ll pay MIP for the lifetime of the loan.

Jumbo loan
Minimum down: 20%
When someone needs a loan for more than conforming loans allow ($548,250 is most states), a jumbo loan is an option. Since they are too large to be guaranteed by Fannie Mae or Freddie Mac, qualifications to get this loan are tight and borrowers will need an excellent credit score. A 20% down payment is standard, but some lending institutions may require more.

USDA loan
Minimum down: 0%
These loans are designed to improve the economy and quality of life in rural America. If you’re buying a primary residence in a rural area, you may qualify for a USDA loan. You’ll need a credit score of 640 (though some lenders will offer loans for less) and meet income restrictions for the area you’re buying in. Borrowers will pay an annual fee equal to 0.35% of the loan balance (broken down into 12 monthly payments and added to the mortgage bill) as well as a one-time funding fee of 1% of the loan amount due when the loan closes.

The USDA provides this color-coded map to show which areas they classify as “rural”.

VA loan
Minimum down: 0%
If you’re an active member or veteran of the U.S. military (or a surviving spouse) you may be eligible for a Veterans Affairs (VA) loan. The VA doesn’t set a minimum credit score requirement for VA loan eligibility, but lenders typically will. Normally, it’s around 660, but you’ll need to check with your individual lender to see what their qualifications are. Borrowers will need to pay a one-time funding fee of 1.4% to 3.6% of the loan amount and can be paid upfront or rolled into the loan amount. There are no private mortgage insurance fees associated with a VA loan.

What’s the right down payment for you?
Finding the down payment amount depends on your financial goals, your loan eligibility, and other factors. Work with your loan officer at Mann Mortgage to identify the loan programs you qualify for and to help you decide which is best option for achieving your home buying goals.

Buying a house when you have student loan debt

More than half of all college students have taken on some form of debt in order to pay for their education – mostly through student loans. The average outstanding amount owed? Between $20,000 and $24,999. If you’re among those that have student loan debt, what are your options for getting a home loan?

How Do Lenders Look at Debt?
When issuing credit, lenders biggest concern is whether a borrower will be able to pay the loan back. They use a lot of calculations to figure it out. One of the major ones is to divide the borrowers’ monthly debts by their monthly gross income. This is called a borrower’s debt-to-income ratio.

To get an idea of your debt-to-income ratio, consider the amount you pay each month for your minimum credit card payments, auto loan, rent, mortgage, student loan, and other monthly payments. Keep in mind that lenders will look at what you pay each month, not the total amount you owe. If you have $20,000 in student loan debt and make $200 monthly payments, your lender will use the $200 monthly payments in the calculation. Now, divide the amount you pay each month by your gross monthly income (before taxes and other deductions). This is your debt-to-income ratio.

Generally, lenders want to see, at a minimum, a ratio of 50% or less.

Should You Pay Down Your Student Loans Before Getting a House?
Thinking about waiting to purchase a home until your student loan debts are paid down can feel like putting your life on hold. Whether you should pay off or down your student debt really depends on your unique financial situation. The price of a home ownership far exceeds just the monthly mortgage bill. There’s insurance, property taxes, utilities, maintenance, and plenty of small expenses. On the flip side, making a wise investment in a home could provide you with financial stability in the right real estate market.

Speak openly with your home loan officer to decide whether now is the right time for you to invest in a home. They’ll be able to give you expert advice about your real estate market, interest rates, and financial requirements for loans you may qualify for.

What Home Loans are Available to People with Student Debt?

Many loan options are available to people regardless of the type of debt they have. Some favorites among young borrowers with student loans are conventional, USDA, VA, and FHA loans.

Conventional loans
If you have decent credit and can make a down payment of at least 3.5%, a conventional loan will offer you many great benefits including PMI fees that stop once you reach 22% equity in your home.

USDA loans
If you’re looking to purchase a primary home in an area defined as “rural” by the USDA, a USDA loan is a great choice. Chief among the benefits for those with student loan debt is a 0% minimum down payment and no private mortgage insurance fees.

VA loans
Another great 0% down payment option for those who are former or current members of the U.S. military. VA loans are available to fund the purchase of primary residences only.

FHA loans
If your credit has been diminished by student loan payments, consider an FHA loan. They’re available to borrowers with FICO credit scores as low as 500. You’ll have to make a down payment of 3.5 to 10% depending on your credit score, but it may be a good option to start building financial stability with a home.

Should You Buy A Home Now?
Depending on your financial goals, taking advantage of the low interest rates might be a great choice. Contact your local loan officer to help you make the decision about whether you’re ready for home ownership or if it would be more advantageous to wait.

Mann Mortgage Named one of America’s Best Place to Work by Outside Magazine

Each year, Outside magazine accepts submissions from companies around the U.S. to be included in their prestigious list of Best Places to Work. Outside vets each company’s workplace culture, demographics, work-life balance, and perks of the job. In addition, they do an extensive anonymous survey with current employees to get their take on the work environment. Only those companies that excel in both areas – providing excellent company benefits and getting great reviews from employees – make it to the list of 50 Best Places to Work.

To be eligible for the award, everyone at Mann Mortgage completed an anonymous survey. They were asked to rate areas such as their relationship with their supervisor, their work environment, their confidence in the leadership team, their role satisfaction, and their pay and benefits. The survey results were 75% of Mann’s total score, and they were high enough to rank us as the #12 Best Place to Work in the US.

This year, a theme among companies that made the Best Place to Work list was embracing the new working environments where social distancing and creative team building are the norm. At Mann, we quickly adapted to working, meeting, and partying remote – 40% of us now work from our home offices. Like many of the companies on the list, we’ve found working remote to be an effective and efficient way to work and we’ll continue to allow it, even once the pandemic is over.

“We’re thrilled that we, a mortgage company, are included in this list of exceptionally innovative companies. These organizations are defining what great corporate culture looks like in this country, and we are honored to be included with them,” said Cassidy O’Sullivan, business executive for Mann Mortgage. “We want Mann to be a positive place where people are excited to come to work and have a voice in the company.”

Mann Mortgage’s positive corporate culture was also recognized by Mortgage Professionals America who gave the company a Top Mortgage Workplace 2020. Of the hundreds of mortgage companies that were nominated, Mann Mortgage was one of only 29 who received the award.

“These awards show our employees do a great job making each other feel welcome, needed, and heard” said company CEO, Jason Mann, “and I’m just so grateful to be part of such an exceptional team.”

Mann Mortgage is based out of a beautiful Kalispell, Montana. We’re always on the lookout for talented and fun-loving people to join our team. Our corporate office hires for positions such as quality control, underwriters, and product specialists. We also have branch offices across the United States that hire loan officers, production assistants, processing agents, mortgage sales managers, and more. You can view and apply for open positions at mannmortgage.com/careers or email your resume and cover letter to jobs@mannmortgage.com.

Buying a home with challenged credit

Buying a home with bad credit can be a challenge, but it’s not impossible. Your credit score – whether it’s good or bad – is just one of the factors your home lender will use to decide whether you’re eligible for a loan.

What is a bad credit?
Bad or “low credit” typically means your FICO score is under 600. FICO credit scores range from 300 to 850 and represent how likely you are to pay back a loan. Your score is calculated based on your payment history, amount owed, length of your credit history, new credit, and the mix of credit you have. Your score is used by lending agencies to determine whether you’ll be eligible for a loan and at what interest rate. The closer your score is to 800, the more loan options and lower interest rates you’ll have access to. Lenders tend to define the scores as:

Exceptional: 800+
Very good: 740 – 799
Good: 670 -739
Fair: 580 – 669
Very poor: 300 – 579

To check your credit report annually, you can visit annualcreditreport.com to see what your current FICO score is. It’s free to use once a year and it won’t impact your credit rating.

What’s the minimum credit score needed for a home loan?
There isn’t a universal minimum credit score needed to get a home loan. Instead, each mortgage lender decides the minimum credit score they’ll accept. But when a score is under 600 it’s classified as “subprime” and your loan options drop significantly. A score under 550 is going to have very limited loan options with very high interest rates.

Other factors mortgage companies use
Besides your FICO score, a lender will evaluate how much money you have for a down-payment, how much debt you already have, your credit history, and your income. To increases your chances at getting a loan with bad credit, the best option is to have as large a down payment as you can afford to minimize your risk to the lender.

A potential borrower with a low credit score but a sizeable down payment and a decent credit history is more likely to be approved for a loan than someone with low credit, a small down payment, and no credit history.

How much more will bad credit scores cost in the long run?
Since early 2020, interest rate on mortgages have dropped. Lower mortgage rates mean smaller monthly payments for principal and interest – and a lower cost for the loan over its life. That said, there’s still a big difference between how much someone with good credit will pay compared to someone with a bad credit score.

From the chart below, you can see a borrower with a credit score of 639 will end up paying $95,091 more in interest over the lifetime of the loan than a borrower with a credit score of 760.

Source: MyFICO.com

What home loans are available to someone with bad credit?
FHA loans are insured by the Federal Housing Administration and are designed specifically for borrowers with low credit and lower-to-middle income. You’ll need a down payment to qualify for FHA loans, but your mortgage lender may be able to secure a loan through them even if you have a FICO score as low as 500.

The best way to evaluate your loan options is to speak with a local mortgage expert. Based on your financial goals, loan eligibility, and local real estate conditions, they’ll be able to help you find the right loan for your needs.

Why are VA loans are 0% down?

Department of Veterans Affairs (VA) loans are available to current and previous U.S. military service members and their spouses for financing a home. The loan is given by an independent mortgage company or bank, and the Department of Veterans Affairs guarantees a portion of the loan will be paid back if the borrower defaults. That guarantee makes VA loans less risky for lenders and it is what allows it to be offered without a down payment requirement by your mortgage lender.

Are VA loans a good deal?
Like all loans, it depends on you and your financial situation. There are some benefits to VA loans that many people may want to take advantage of while other veterans may find a different type of loan works better for them. The chief benefits of a VA loan are:

  1. You don’t need a down payment
  2. You don’t need a perfect credit score
  3. You can have a higher debt-to-income ratio
  4. You don’t need to pay monthly mortgage insurance
  5. There’s no limit to the loan amount
  6. It can be used to purchase a second home with no down payment (it’s called the VA bonus entitlement)


The catch
With all good deals, there’s a catch. For VA loans, you’ll have to pay a small funding fee (2.3% if you put 0% down) to offset the loan program. This is a one-time fee that will be paid at closing or rolled into the mortgage amount (which will increase the monthly payments and interest paid over the life of the loan). This fee is waived for anyone with a service-connected disability.

Should you get a VA loan?
Whether a VA loan is right for you depends on your unique financial situation. If you have money for a down payment, you may be better off getting a different type of loan. Contact your local loan officer and together you can go over your options and pick the best one for you.

What is a cash-out refinance?

A cash-out refinance is when a borrower has a mortgage they’ve been paying off and they replace it with a new mortgage for more than their remaining principal. The difference between the principal balance of the first mortgage and the new one is given to the borrower in cash.

How is it different than a standard refinance?
In a standard refinance, borrowers work with their lender to get a lower rate of interest or a new payment schedule. Once the standard refinance is secured, they have a new monthly payment amount based on the new agreement – but their balance on the loan remains the same. In a cash-out refinance, a borrower works with their lender to pay off their home’s mortgage balance with a new loan based on their home’s current value. The difference between the original mortgage the borrower is paying off and the new loan is kept by the borrower. In order to have some equity in their home, most cash-out refinances limit the amount a borrower can receive at 80-90% of their home’s equity in cash (VA refinances don’t have this requirement).

In other words, don’t expect to pull out all the equity you’ve built into your home. If your home is valued at $350,000 and your mortgage balance is $250,000, you have $100,000 of equity in your home. You could do a cash-out refinance of somewhere between $80,000 to $90,000.

The benefits of a cash out refinance
If interest rates are at a new low, you have equity built into your home, and if you would like cash on hand to pay off high-interest credit cards or fund a large purchase, a cash-out refinance is something you might want to consider.

The cons of a cash out refinance
There are fees involved in a cash-out refinance, and you’ll have to make sure your potential savings are worth the cost. Like any refinance, you’ll pay closing costs of around 2% to 5% of the mortgage. And if your lender allows you to take out more than 80% of your home’s value, you’ll have to pay private mortgage insurance (PMI). Freddie Mac estimates most borrowers will pay $30 to $70 per month for every $100,000 they borrowed.

And, don’t forget your overall debt load will increase with a cash-out refinance.

Alternatives to a cash-out refinance
One potential alternative is a home-equity line of credit (HELOC), which you could also use to pay for a home renovation or to pay off credit card bills.

>> Learn morre about a HELOC.

Should you get a cash-out refinance?
If you have enough equity built into your home and you get a great rate, they might be a great solution for a home improvement or renovation. To find out what the current rates are and to check your home’s current market value, contact your local Mann Mortgage expert today.

What makes a good starter home?

A starter home is a single-family, condo, or townhome that a first-time homeowner can afford and may outgrow. They’re normally small, modest, and lacking in upgraded amenities. They can be a good investment for some young people and a way to build equity towards a bigger and better house in the future. They’re becoming more expensive and harder to find. Some people are skipping starters altogether – choosing to rent for longer to save money towards a bigger first home purchase.

Stats on starter homes:

  • 31% of home buyers are first-timers.
  • The increased price of homes and the amount of student debt young adults have are impacting the median age of first time homebuyers. It’s the highest it’s been since they started tracking it  – 33 years old.
  • If you’re like most people, you’ll spend an average of 13 years in a home before you sell it
  • The longer you live in your home, the more equity you’ll build in it

Characteristics of a good starter home

It’s in a nice neighborhood
It’s important for you to get a home in as good an area as you can. What exactly is a “good” neighborhood? Generally, it’s one that’s quiet, walkable, in a good school district, close to amenities, and is well maintained. Homes in a good neighborhood will be safe to live in and be easier to sell when you’re ready. If you have any questions about neighborhoods, ask your hometown home lender. They’ll give you an unbiased opinion on the best areas in your community.

The taxes are affordable
Your mortgage is just one portion of what you’ll pay each month for your home. One of the biggest ongoing expenses for your home will be your property tax. This is an annual tax levied by your state and local governments on your land and buildings. And it’s a sizeable fee – usually thousands of dollars. The tax is collected once a year, but many homeowners put money into an escrow account each month to pay the fee. Find out what the current owners paid for their taxes, but be aware the taxes will increase over time. Some states increase property taxes annually while others reassess them at set increments (as example, every 5 years).

Utility bills aren’t too high
Starter homes are no frill, which make them affordable to purchase. The price was kept down by NOT getting the most energy-efficient and latest upgrades. And if the starter home is older, be especially aware of the potential utility costs. You can request to see copies of the seller’s utility bills to see what it may cost you for your electric, water, and other utilities.

It’s affordable
Be strategic about your purchase. If you are planning on selling your home in a few years, think of your starter home as an investment. That means, buy something that will easily sell again. Find the best house in your price and in a good location – and don’t go over budget! If you make a wise purchase now, you’ll be better able to afford an upgraded home in a few years.

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