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Month: April 2021

Are government mortgage relief ads scams?

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There are a lot of online ads saying some version of, “If you’re a homeowner who owes less than $300,000 on your mortgage and haven’t missed a payment in 6 months, you’re eligible for a mortgage relief program approved by Congress!”

What are these ads?
Normally, if you interact with these ads you’ll be redirected to a site that will ask you your home type, credit score, loan, zip code, and more. Then they give you a list of mortgage companies to contact. Basically, these ads are great at catching your attention (they’ve been around for over a decade) then funneling you to one of the mortgage companies that has helped pay for the ad. The overall goal of these ads is for you to refinance your loan with one of the mortgage companies they are working with.

If you interact with these ads, you’ll be bombarded with more of them on YouTube, TikTok, Facebook, Google… you’ll see them everywhere. They’re harmless, but they can be annoying.

Are these programs real?
Homeowners who aren’t able to make their mortgage payments do have options for help, but the claims in the ad are misleading. The mortgage amount they list and number of months of unmissed payments varies by ad and is there just to catch your attention so you click the ad.

Will the government help you pay less for your mortgage?
There are government relief programs available such as the Home Affordable Unemployment Program for unemployed homeowners, Principal Reduction Alternative, the Home Affordable Foreclosure Alternatives Program, and more. Every program requires documentation and approval to use. The ad makes you feel like it’s easy to qualify, and that’s just not the case.

What can you do if you’re struggling to make your payments?
Contact your home lender. Your local home lender is an expert in national, state, and community programs for assistance. In addition to assistance programs, you’ll likely hear about the two most common ways to keep your home if you are in a situation that makes it difficult for you to pay your mortgage: refinancing and forbearance.

Refinancing
When interest rates are lower than you’re currently paying, it’s always a good idea to consider refinancing. A refinance means you apply to take out another mortgage to pay off and replace your original loan. If your refinance is approved, you’ll pay a fee for closing costs. In return, if your new mortgage has a lower interest rate, you may have a lower monthly payment. You could also refinance to a mortgage with a different loan term to lengthen or shorten the amount of time to pay back your loan. Or you could refinance to a different mortgage program completely. As example, homeowners with 20% equity in their home could refinance into a conventional loan to avoid paying mortgage insurance fees.

A refinance will not damage your credit and may lower your monthly payments. It can be a great option to consider.

>> Learn more about refinancing

Forbearance
If you are unable to make your home payments, you can work with your lender to temporarily reduce or suspend your mortgage payments. This is called forbearance. Usually, your home lender decides whether you qualify for it and what the terms will be.

The ads you see likely play on the theme of forbearance. On occasion, Congress passes a bill to modify some terms for government-backed home loans – such as the terms for being able to go into forbearance. As an example, during the COVID pandemic, Congress put in place temporary mortgage relief under the COVID stimulus package. It’s called the CARES Act Mortgage Forbearance and applies to FHA, VA, USDA, Fannie Mae, and Freddie Mac government-backed loans (70% of homeowners have one of these loans). This bill is unique because it states your lender cannot deny your request for forbearance under the CARES Act or demand proof of financial hardship. So, it makes forbearance an option to everyone with a government-backed loan – no questions asked.

Whether you go into forbearance through government mortgage relief program or not, it will not reduce what you owe – you will have to pay back your missed payments in the future. Forbearance will appear on your credit history, but if you fulfill your part of the agreement, it won’t lower your credit score.

Can you refinance and go into forbearance at the same time?
If you get a forbearance through your lender, most of them require you wait three months after forbearance ends to refinance. If you do it through a government mortgage relief program (like the CARES Act) you may be allowed to refinance while being in forbearance. Talk to your lender to see what options are available to you.

If you or a loved one are having concerns about making mortgage payments, contact your trusted home lender.

If you have a loan through Mann Mortgage, your loan officer will want to hear about your concerns, understand your current financial situation, and offer solutions to help. Don’t struggle alone. We are experts in national, state, and community programs that can help you afford your home. We’re here to make it possible for you to buy, refinance, build, and keep a home.

Should you rent an apartment or buy a house?

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Deciding whether to rent or buy is complex. The right choice for you depends heavily on where you live and the local housing market. There are benefits to either option, and it’s a good idea to consider both before you make your decision.

Advantages to buying
It’s a long-term investment
From January 2020 to 2021, home prices nationally rose 11.2% according to the S&P CoreLogic Case-Shiller Index. Most homeowners purchase their home hoping it will be worth more money in the future. And, historically, they do appreciate in value. The amount can depend on how desirable an area it’s in, job growth in the community, housing demand, and the quality of the school district.

Easier to budget
Your landlord can’t raise your rent on a whim, but they can do it when your lease ends. Give or take, it usually goes up between 3% to 5% a year. If you’re renting month-to-month, it can raise even faster – every 30 days with proper notice. With a mortgage, your rate is set when you take out your loan. If the interest rate drops, you’ll have the option to refinance and save even more. Knowing how much you’ll pay for your home for years to come is a great comfort when budgeting and planning for your future.

You can make it yours
You can renovate or decorate your home to your liking.  Paint the walls, redo the landscape, renovate a bathroom… your home is your canvas. And, any improvement you make could also increase your property’s value.

More privacy
Compared to an apartment complex, a single-family home provides loads of privacy. You won’t hear other families, pets, music, or parties through thin walls. And, likewise, you won’t have to worry about upsetting neighbors if you decide to host a late night party.

A sense of home
Buying and living in a house creates a deeper sense of permanency than renting a home. Buying or building a home is a good idea if you’d like to settle down and settle into a routine.

Advantages of renting
It’s easier to relocate
If you’ve got a more nomadic lifestyle, renting is perfect. You can set a countdown for once your lease is up, then you can try a new neighborhood, city, state, or country. If you rent furnished apartments, it’s even easier to pack up your things and head out to a new adventure.

Fits a transitional life
If you’re lifestyle is temporary, like you are just settling into a relationship, thinking of a career move, or going to school; an apartment might suit you well. Your life may change quickly, so it’s good to have the ability to relocate or change your home size and style when you’re ready.

Worry-free maintenance
Not everyone is handy or enjoys working around the house. In an apartment, you won’t have to mow the lawn, shovel the driveway, water the grass, fix a burst pipe, replace a broken appliance, or worry about any maintenance. All these activities are physical, take time, cost money, and can disrupt plans – and they can be avoided in an apartment.

What is mortgage insurance

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Mortgage insurance is an insurance policy that benefits the lender in the case a borrower defaults, dies, or is otherwise unable to meet the obligations of their loan. If that should happen, the insurance company would pay the lender a portion of the principal balance of the loan. The insurance policy is paid for by the borrower and they are still required to pay back their loan if they should default. The biggest benefit of mortgage insurance for a borrower is it allows the lender to extend credit to those they otherwise would not due to the size of the borrower’s down payment.

Interested in a home loan?

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Where do mortgage insurance payments go?
Your monthly payments are sent to an insurer that will pay a portion of your remaining loan balance to your lender in the event you default on your home loan.

If you default, does mortgage insurance pay off your loan balance for you?
No. If you fail to pay back your home loan according to your initial arrangements, most lenders will allow a grace period of around 120 days to help you catch up. After that period, because you failed to pay back your mortgage loan, your lender has the right to sell your home to recoup the debt. This is called foreclosure. Your lender will keep the proceeds from the home sale as well as a payout from PMI. If there is still a remaining balance on your loan, you will be responsible for repaying it.

Many home loans have mortgage insurance, but it works a little differently for each one.

PMI for conventional home loans
Conventional home loans are offered to anyone so long as they, and the real estate they are securing a loan for, meet the minimum requirements of the lender. Down payment can be as low as 3%. Your lender will likely require you to pay private mortgage insurance (PMI) for down payments of less than 20%. PMI can be cancelled once you reach 20% equity in your home and the lender will cancel it automatically once you have 22% equity.

Calculate your PMI payments.

MIP for FHA home loans
Federal Housing Administration (FHA) loans feature down payments as low as 3.5% and easier credit qualifications than conventional home loans. Regardless of your down payment amount, if you have an FHA loan you will have to pay both an upfront and annual mortgage insurance premium (MIP). The upfront premium is 1.75% of your loan amount, and the annual premium is between 0.45% to 1.05% of the average balance of your loan per year.

Annual MIP payments will be made in monthly installments for the life of the loan if you put down less than 10%. If you put down more than 10% you will pay it for 11 years.

USDA mortgage insurance
Loans from the United States Department of Agriculture (USDA) are available with 0% down payment to purchase a home in an area defined as rural. For these loans, you will have to pay two fees: an upfront guarantee fee you pay once and an annual fee you will pay every year for the life of the loan. The upfront guarantee fee for 2021 loans is 1% of the loan amount and you pay it when your loan closes. The annual fee is 0.35% of the average loan balance for the year and is divided into monthly installments and added to your mortgage payment.

No mortgage insurance for VA home loans
The United States Department of Veterans Affairs (VA) home loans are a type of mortgage available to assist active service members, veterans, and surviving spouses in buying, building, and retaining a home. A VA loan allows qualified borrowers to purchase a home with 0% down payment and without mortgage insurance.

Mortgage insurance can be expensive, but don’t let it keep you from getting into a new home. Work with your Mann Mortgage lender to find what your mortgage insurance payments would be or whether you can qualify for a loan that doesn’t require it. Together, you can decide on the right path forward to get you into a new home.

What happens when a home lender checks your credit?

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One of the first steps in applying for a loan is having a home loan lender check your credit to see what you’d qualify for. What does that mean and what impact will it have on your credit score?

Interested in a home loan?

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Your lender will see your credit report
You begin building your credit history with your first credit card or loan. The history of how you handle your credit builds your credit report. Your home lender will request a copy of your credit report from one of the three major credit reporting bureaus – Equifax, Experian, or TransUnion. Their report includes the following about your credit:

Personal identifiable information – As example, your social security number, date of birth, name, and employment information. This is used to verify your identity.

Credit accounts – A list of any credit accounts you have. This includes credit cards, auto loans, mortgages, student loans, etc. Your report shows the date you took out credit, the credit limit or loan amount, your payment history, the account balance, and whether you’ve made payments on time.

If any of your accounts went into collection (even if they weren’t credit accounts), there will be a record of it on your report for seven years. Paying off the debt will not remove the record from your report faster.

Credit inquiries – A list of times when companies have pulled your credit history. Only those made in the past two years remain on your report and only those done within the last year impact your credit score.

Public records – A list of instances of bankruptcy. Chapter 7 bankruptcy remains on your report for ten years and Chapter 13 will remain for seven.

Your credit will take a small hit
When your home lender requests a copy of your credit report from a credit bureau, it indicates to the credit bureau you’re looking to take on additional debt. It results in a small negative impact on your score – usually five points or less. It’s an unavoidable part of getting a home loan and your score will bounce back again in a few months.

Don’t let this small hit on your credit keep you from contacting other lenders to find a better rate or home loan term. Within a 30-day window, you can have other home lenders pull your credit report without it impacting your score again. Credit bureaus know it’s a good idea for consumers to shop around to find the best rate, so they won’t penalize you for it.

You’ll get unsolicited credit offers
It’s common to start receiving phone calls or letters from other lenders after your credit report is pulled. How did these other lenders know you were looking for a loan and why are they contacting you?

When your home lender requests a copy of your credit report, it alerts the credit bureau that you’re looking for a loan and they turn this knowledge into a commodity. Within 24 hours, the credit bureau will sell information about you and the loan you’re applying for to lending agencies. They can provide your name, address, credit score, and type of loan you applied for.

Some lenders will buy your information (called a trigger lead) from the credit bureau if, based on your data, they would like to do business with you. They will call, email, or mail you their own mortgage offer which may be better than the one your lender is giving you. In theory, the more offers you get, the more likely it is that you’ll get a good deal. That’s why selling and buying trigger leads is legal in all 50 states.

Mann Mortgage has made the decision not to purchase trigger leads for our competitors’ customers. We feel it’s an invasion of privacy that can expose people to identify theft. If you are currently working with Mann Mortgage and have any questions about the offers you receive or who an offer came from, please contact your Mann Mortgage lender right away. They will be able to help you.

Remember – your credit score is only part of your loan application
Your credit score and history are important components of your home lender’s decision on whether to extend credit to you. They’ll also consider the length of your credit, your down payment, your debt-to-income ratio, your total assets, and your current income. Your lender will take a holistic view of your financial situation to determine whether they’ll extend credit to you.

>> Once a year, you can check your own credit score for free and without negatively impacting it at Annual Credit Report.com.

When you’re ready to get a home loan, contact your local Mann Mortgage home loan experts. In addition to going over your credit and loan eligibility, they’ll get to know you and answer any questions you have about financing the right home for your needs.

Now is a great time for a renovation loan

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If you’re looking to purchase a new home but are struggling to find one you can afford, you’re not alone. Across the country, inventory is low and bidding wars are the norm. In the hottest markets (Austin, Phoenix, Nashville), homes are listed for a week or less before they have more than a dozen offers all for more than asking price. Getting your offer accepted is like winning the housing lottery.

Rather than giving up on your dream to get a new house, try switching tactics instead. There’s a mortgage trick savvy home buyers have used for years to get a beautiful home: renovation loans. Think of it this way… We’re all seen dated and odd houses sit on the market while turn-key houses fly off the shelves. Why not purchasing that ugly house and remodel it into a home that works for you?

Home renovation loans work a little like a conventional mortgage, except the cost of renovating the home is tacked onto the loan. So rather than taking out a loan for the purchase price, you take out a loan for the purchase price plus the renovation budget.

Interested in a renovation loan?

Take the first step

How much might extra might a renovation cost? These top renovation projects give you a quick idea of what homeowners paid in 2020, according to HomeAdvisor:

  1. Home addition ($52,157)
  2. Inground pool ($49,245)
  3. Kitchen remodel ($35,317)
  4. New exterior siding ($13,974)
  5. Bathroom remodel ($13,401)
  6. New roof ($9,375)
  7. New windows ($9,131)
  8. New cabinets/countertops ($5,832)
  9. New flooring ($4,680)
  10. Decking and porches ($3,291)

Homeowners looking to finance a remodel have two options: FHA 203K loan or Fannie Mae’s HomeStyle Renovation loan. Each is a great option, so let’s break them down.

FHA’s 203K remodel loan
This is a great option for families in low-to moderate-income brackets It’s a loan provided by FHA (Federal Housing Administration). It provides a minimum of $5,000 for renovations and major structural repairs. The kicker is you have to hire a HUD consultant to oversee the project and the money can only be used for:

  • Structural alterations and reconstruction
  • modernization and improvements to the home’s function
  • Elimination of health and safety standards
  • Changes that improve appearance and eliminate obsolescence
  • Reconditioning or replacing plumbing
  • Installing a well and/or septic system
  • Adding or replacing roofing, gutters, and downspouts
  • Adding and replacing floors and/or floor treatments
  • Major landscape work and site improvements
  • Enhancing accessibility for a disabled person
  • Making energy conservation improvements
     

Even with those restrictions, it’s a great loan if you’re eligible. Qualifications for getting the 203k Renovation Loan is similar to getting a FHA loan.

Fannie Mae’s HomeStyle Renovation loan
These renovation loans are available through Fannie Mae and don’t have restrictions like the 203k FHA loan. You can use the funds for virtually anything you want. Add a tennis court, an inground pool, an over-the-top fountain – and you can do it to both your primary residence as well as a secondary vacation or investor home. The improvement has just two requirements in order to be eligible:

  • It must be permanently affixed to the property
  • It must add value to the property

This loan has a lot of possibilities for new purchasers, investors, and secondary home buyers. It’s an opportunity to purchase and renovate a home to gain quick equity.

Refinance and renovate the home you’re in
If you can’t purchase the home you want, consider refinancing with a renovation loan and make your current home the one you want. Renovation loans are available for the initial purchase of the property or when refinancing. Doing it now while rates are low may be a smart move for some homeowners.

If you’re open to getting a fixer-upper home and renovate it, reach out to your local Mann Mortgage lender. Together, you can talk about the market in your area, what you’d qualify for, and they can even recommend a builder to work with.

7 ways to save when building a house

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When it comes to building, the general rule for keeping it affordable is to keep it as simple as possible. A simple crackerbox-style house on a flat lot in a subdivision with utilities is going to be much more affordable than a Victorian house in the woods built into a steep hill.

1. Work with your lender to find your budget

Before you even start looking at house plans, contact a trusted local home lender that offers construction loans to see what you qualify for and what your best option is. A good lender will take time to get to know you, your financial goals, and help you come up with a financial plan to build a new home you can afford for many years to come.

2. Find a simple home plan

Houses with a small square footage but complex design will cost more to build than you expect. When selecting a house plan, look at the footprint and roof. The structures with the most basic footprint (think of a house that’s just four exterior walls) and simple roofline (a roof that looks like an inverted V without any dormers) is the most economical to build. When it comes to the interior space, consider where plumbing is located. Plans with bathrooms, kitchens, and laundry rooms clustered together are more economical to build.

3. Build up, not down or out

Foundations and roofs are expensive. To keep your build more affordable, limit both. If you need more space, pick a simple two-story house with a small footprint over a single-story ranch.

4. Find a flat lot

Building on sloped land brings a lot more challenges than flat ground. If your building site is already sloped, your builder will have to level it out. They can cut into the ground to make it flat, they can bring in soil to fill in the plot and make it level, or they can build the home on supporting wood or steel columns. All of these options add additional costs you wouldn’t have if you built on a flat lot. You’ll also find that drainage and sewage will be more difficult and more costly when you’re building on a hill.

5. Find a lot with utilities

Bringing in utilities is expensive. In order to begin your construction project, your builder will need a power source. If, as example, you purchase a lot that doesn’t have electricity going to the build site, be sure to understand the cost of bringing it in. Most power companies will install service lines for free – so, perhaps from the road to a build site that’s 100 feet away. But if your build site is down a half mile driveway, you will likely have to pay for the wiring to bring electricity to your site. The cost can range between $25 to $50 per foot. For a half mile, that could be between $66,000 to $132,000. If your site doesn’t already have water, you’ll have to put in your own well.

6. Contact builders to get an estimate for the plan you want to build

If you have a basic house plan and an idea of where you’d like to build, most home builders will be willing to give you a rough estimate of the cost per square foot. As you call around, you’ll find that some builders specialize in luxury homes while others focus on homes that are more budget-friendly. Eventually, you’ll find one that fits your budget and home style. Be sure to find out how busy they are and when they’d be able to start the build. These are both important factors to consider – especially if you’ll be renting an apartment during the build.

7. Affordable finishes

At some point during your build, you’ll have to start making choices about what kind of finishes you’d like. Consider linoleum or carpet instead of wood flooring. Or laminate countertops in place of granite. Consider basic rods instead of closet cabinetry. These finishes can always be upgraded in a few years if you decide you really want them.

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