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Category: Mortgage Education

Homes for Heroes: Helping certain professionals with homeownership

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Buying a home is an exciting, stressful, and emotional experience. If you’re a teacher, nurse, healthcare worker, law enforcement officer, firefighter, military member, or veteran, there are programs to help you make homeownership a little easier. It’s called Homes for Heroes. Since 2002, they’ve helped more than 44,000 people with their homeownership goals.

Homes for Heroes, Inc.
Homes for Heroes is a for-profit company that works with affiliate real estate agents, home lenders, title companies, and home inspectors. They say their mission is to, “provide extraordinary savings to heroes who provide extraordinary services to our nation and its communities every day.”

Eligible participants can receive thousands of dollars in refunds when they work with the program and use the affiliate real estate companies. It’s a good program for home buyers who qualify as there is no catch to it. The organization is able to fund itself through fees paid by the real estate professionals who take part in the program. It’s basically a paid referral program that benefits a select group of home buyers and owners.

Homes for Heroes Foundation
It’s the non-profit side of the company. Homes for Heroes, Inc. donates a portion of its earnings to support the foundation. The foundation then uses those funds (and private donations) to give “Hero Grants” to nonprofit charities that serve heroes in need. From 2009 to 2020, they awarded $842,838 in grants.

A lot of professionals are eligible
Whether you’re a current or former professional, you will likely qualify if your career is listed below. Other types of careers are eligible as well, so speak with your local home lender if your profession is similar to any listed below:

  • Firefighter
  • Paramedic
  • EMT
  • Law enforcement
  • First responder
  • Active military
  • Nurse
  • Doctor
  • Health care professional
  • Educator
  • School administrator

It’s an easy program to use
You can ask your real estate agent or home town lender whether they’re part of the Homes for Heroes program. If they are, they’ll work with you to make you meet the eligibility requirements and all paperwork is completed for you. The more Homes for Heroes-approved professionals you work with, the bigger the refund you’ll receive.

Can you get down payment assistance for your new home?

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First, let’s bust a common down payment assistance myth: it’s not just for lower income home buyers. There are hundreds of down payment assistance programs offered across the country for all types of buyers. Many programs are from communities that want to spur construction or homeownership in a particular area.

It’s always a good idea to look into these programs regardless of how much money you have saved.

Do you have to pay back the funds?
Not always. It depends on the program you use.

Do you have to be a first-time home buyer to qualify?
No. Many programs are available to people regardless of how many times they have purchased a home in the past.

Are the programs hard to qualify for?
Not at all. Some are available to everyone and others have light restrictions.

For those with restrictions, most people still qualify since they have lax income and credit score requirements. As example, you may need to make equal to or less than 115% of the median income for the county in which you live. That means if the median income is $100,000, people who make up to $115,000 qualify. The credit score requirements vary between programs too, but it’s common to need at least 620 (the average FICO score for Americans in 2020 was 711).

For down payment assistance programs to spur homeownership in select areas, there may not be any qualifications beyond living or building in the select area.

Does it matter which type of loan you have?
VA and USDA loans don’t require down payments anyway, so any additional funds you put towards the purchase of your home will help reduce your mortgage amount. Conventional and FHA loans do require a down payment, so the programs will help you qualify for these loans.

How can you find whether there’s a program you can use?
As we mentioned, there are literally hundreds of down payment assistance programs across the country. A state may have a handful of programs but a city’s metro area may have ten times more. The best way to comb through all the programs is to talk to your local home lender. Unlike national mortgage companies, your local lenders know incredibly specific programs available only through your community that will save you thousands of dollars. Contact your local lender and get details on which down payment assistance programs you can use.

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.

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.

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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.

Closing on a home – how to prepare

Posted on by Mann Mortgage

You’re getting ready to close on a new home – congratulations! You’ve completed your house hunt, you negotiated the price, and your offer was accepted. Before you get handed the keys to your new house, there’s one final step you’ll have to complete – closing on your home.

It’s the final step to transfer ownership of the property to you once all contingencies for the sale have been eliminated. To prepare for closing, your lending agency will originate and underwrite your loan and the title company will prepare paperwork for you to sign and make the transfer of ownership legal.

As soon as the seller accepts your offer and all contingencies have been met, the sale of the home is “pending” and closing begins. A thorough home inspection will be completed by a professional inspector to uncover any defects or local building code violations that might impact the value of the house. Your mortgage company will begin the time-consuming task of originating and underwriting your loan. They will be taking a very close look at your finances to decide whether you’ll repay the thousands of dollars you’re asking them to lend you.

Being pre-approved for a loan means your lender already pulled your credit score, verified your income, and gave you an idea of the type and size of mortgage you qualify for. Having this information makes it likely you’ve selected a home you can afford and your lender will help you finance. But being pre-approved is not a guarantee you’ll be given a final approval for your loan. If anything has happened since you were pre-approved that might affect your finances (losing a job, taking out another loan, missing payments on your mortgage, etc.), you could be denied the loan.

It took an average of 49 days in November 2020 for all the paperwork to be completed and the transfer of ownership to be finalized. The number fluctuates a bit every month, but 30 to 60 days is a good estimate. The dedicated loan officers at Mann Mortgage strive to close loans in 30 days or less.

During closing, be ready to hand over a lot of documents to your mortgage company for final approval of your loan. Your loan officer will likely have a lot of questions for you. Answer their questions quickly to avoid delays in your closing date.

You’ll probably need the following:

  • Your last two tax returns
  • Your last two pay stubs
  • Your last two W2 statements
  • Your bank statements for the last one to three months

You may also need:

  • Credit card statements
  • Settlement statements
  • Verification of rent
  • Divorce decree
  • Bankruptcy documents
  • Statement of Social Security or retirement income
  • Copies of rental lease agreements on rental units
  • Contact information for your homeowner’s insurance agent
  • A profit and loss statement
  • Proof of additional income

Some common closing costs are listed below. All of them have to be paid when closing on your new house.

  • Home inspection fee ($500 to 1,000)
  • Loan origination and underwriting fee (0.5% to 1% of the loan amount)
  • Credit check fee ($25 to $60)
  • First month’s interest (varies)
  • Flood certification fee ($15 to $25)
  • Title/escrow services and insurance ($200 to $400)
  • City or county recording fee (varies)
  • Transfer taxes (varies)
  • Realtor or broker fee (2% to 7% of the home’s price)

This isn’t an exhaustive list of every document and fee you’ll pay, but it will give you a good idea of where to start. If you have trouble finding documents your loan officer requests, ask them if there are alternative documents you can provide in their place.

Closing day might start with a final walk-through of the house to make sure it is in good shape and the seller met all contingencies. At the appointed time, you and the seller will meet and sign documents with your title or escrow agent, real estate agent, and possibly an attorney. Take as much time as you need to make sure you understand what you are signing.

Once all the paperwork is signed and any fees are paid, the ownership of the house it transferred to your name and the home is yours.

At any point, if you have any questions about your closing costs, loan options, or getting pre-approved, be sure to talk to your local loan expert at Mann Mortgage. We are here to help you make your closing as seamless and quick as possible.

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