Tag Archive for: mortgage application

Lower Your Mortgage Rate with the FHA Streamline Refinance

September 1, 2021
blog backyard table with friends

The FHA Streamline Refinance is still one of the best ways to reduce your monthly mortgage payment without the hassle of a traditional refinance. It’s fast and efficient and requires minimal documentation to refinance your mortgage at a lower rate.

One catch: the FHA streamline refinance is only available for homeowners who currently have an FHA home loan. If you’re not sure whether or not your mortgage is an FHA loan, connect with one of our mortgage advisors. We’re happy to help.

FHA loans are still one of the top 5 home loans selected by first-time homebuyers, so there’s a good chance you’re eligible. For homeowners with an existing FHA home loan, the streamline refinance is the fastest way to lock in a lower rate and reduce your monthly mortgage payment.

Top reasons homeowners apply for the FHA streamline refinance:

  • Lower your mortgage rate to market rates
  • Reduce your monthly mortgage payment
  • No income verification required
  • No credit check required
  • No home appraisal required

Quick note! If you have equity in your home and a good credit score, you might want to refinance your FHA loan to a conventional loan, which we blogged about here. Get rid of mortgage insurance premiums and access more with cash out.

What to expect when you apply for an FHA streamline refinance:

The FHA (Federal Housing Administration) home loan is a government-backed home loan popular for first-time homeowners. If mortgage rates have dropped since you first bought your home, it makes sense to refinance.

But what if you haven’t built much equity in your home yet? What if your credit score has dropped? What if your employment situation has changed or become unpredictable?

When you apply for the FHA streamline refinance, you can take advantage of low mortgage rates and lower your mortgage payment without having to provide much documentation. The loans are government-insured, and lenders figure if you’re able to make your current mortgage payment on time, then you’ll be able to make a lower mortgage payment even easier.

Main Benefits to the FHA Streamline Refinance

The top benefit is the ability to lower your interest rate without the extra paperwork of a traditional refinance.

If your mortgage rate is higher than 4.5%, connect with a local mortgage advisor. The FHA streamline is the easiest and fastest refinance loan available.

  • No home appraisal is required. Even if your home value has dropped, you can still qualify to lower your mortgage payment.
  • MIP (mortgage insurance premium) could decrease.
  • There is no credit check. If your credit score has dropped since your last mortgage, it won’t negatively affect your refinance rates or loan terms.
  • Refinance rates are typically lower than industry averages.
  • There is no income verification required. If you’ve recently lost your job or been laid off, you could still qualify for a lower mortgage payment.

How do I qualify for the FHA streamline refinance?

The FHA Streamline offers rate and term home loans common to most refinance programs. You can refinance to a 30-year fixed rate, a 15-year fixed rate, or an adjustable-rate mortgage. Beware that if you restart the clock to a 30-year fixed-rate mortgage, you may end up paying higher MIP over the life of the loan. To apply for a streamline refinance, you must meet the following eligibility requirements and provide noted documentation.

Eligibility requirements:

  1. The current mortgage must be an FHA home loan.
  2. Past 3 months of mortgage payments must be on-time payments.
  3. Must provide a current mortgage statement with at least 6 months’ payment history. (Equal to a 210 day minimum waiting period since the date of your last refinance or purchase.)
  4. The FHA Streamline Refinance needs to benefit the homeowner financially by reducing your interest rate (including insurance) by at least 0.50%.
  5. Need to provide employer information (lender might verify employment, but not income).
  6. Must present current utility bill to verify your primary residence.
  7. Must provide recent bank statements (60 days) to verify available funds for closing costs

* If you don’t meet these requirements, be assured that there are several refinance options available! Talk with a qualified mortgage advisor to discuss your financial goals. We can help you discover the best path to refinance your mortgage and save you money in the long term.

Can I get cash out with an FHA streamline refinance?

No. The FHA streamline is limited in scope and works similar to a rate and term refinance. You’ll be able to refinance to a lower mortgage rate and set a new term for the duration of your loan.

If you’re interested in refinancing with cash out, talk with a local mortgage advisor. There are several refinance options that can save you money and help you access the equity in your home, which we blogged about here.

Will I need to pay MIP (mortgage insurance premium) with an FHA streamline?

In most cases, yes. Your MIP can be canceled for some homeowners, especially if you put more than 10% down when you bought your home. If you want to cancel your MIP, talk with a mortgage advisor. We can help explain the best options that will help you save money on your mortgage.

Are there closing costs for an FHA streamline refinance?

Yes. For a standard FHA streamline, homeowners are expected to pay closing costs when they refinance. The bulk of the closing costs typically aren’t allowed to be rolled into the new loan and usually amount to 2-5% of the loan amount. That said, talk with your lender about options to reduce your closing costs or negotiate fees, which we blogged about here.

Next Steps

The FHA streamline is a smart move if you want to refinance to lower your mortgage payment. But with mortgage rates so low, you might want to consider all your refinance options to find the best fit. Take action and connect with a local mortgage advisor to discuss your financial goals. We’d love to help.

Buying a Townhouse to Get an Affordable Mortgage

August 26, 2021
blog townhouse 2

Want an affordable mortgage? One strategy is to aim for a property with a low purchase price. Even better, find a low-priced property in a desired location where home values are on the rise. Enter townhouses, condos, and fixer-uppers. Buying a townhouse can be a great first step to becoming a homeowner, with a few payoffs along the way.

Townhouses and condos both offer lower maintenance and community living. On the other hand, a fixer-upper offers a solid opportunity to buy an under-priced house in a great location. But does the idea of a fixer-upper sound like a mountain of stress? Sometimes DIY is better on Netflix.

Townhouses are growing in popularity for a handful of reasons–prime locations, minimal maintenance, lifestyle amenities, and a sense of community in a home that still offers privacy. So if you’re looking to become a homeowner in 2021, buying a townhouse is worth considering. 

RELATED: Are you a first-time homebuyer? Check out these special advantages for first-time homebuyers in 2021

Condo vs. Townhouse vs. Single-Family Detached Home

What’s the difference? And which is best? In broad strokes, all three are individually owned properties and are considered single-family dwellings. As a new homeowner, it comes down to lifestyle and what’s important to you in a home. Do you want a low-maintenance property that’s close to downtown and has shared amenities? Would you rather spend your weekends on a fixer-upper with lots of privacy?

CONDOMINIUM

Condos offer lifestyle amenities similar to apartment living. Homeowners are responsible for the interior and that’s it. The exterior, landscaping, facilities and community spaces are maintained by the HOA (Homeowners Association). Be prepared to share a few walls and the noise that comes with it. The upside: condos are low-maintenance and offer shared access to amenities like fitness gyms, pools, and parks.

TOWNHOUSE

Townhouses might just be the perfect balance between condos and single-family detached homes. When you buy a townhouse, you own the dwelling plus the land (usually a small space in the front and back). As the homeowner, you’re responsible for the interior, exterior, and land maintenance within your property line.

A townhouse offers more square footage in a multi-story dwelling. You’ll have a private entrance and 1-2 shared walls (on either side of your property.)

Townhouses offer more privacy than condos, front and backyard spaces, a private driveway and garage, and community amenities. The HOA is responsible for maintaining shared amenities such as pools, tennis courts, clubhouses and the like.

SINGLE-FAMILY DETACHED HOME

Detached means no shared walls! Single story, multi-story, or a sprawling compound, your home is privately owned right up to the property line defined by the title. As the homeowner, you own both your dwelling and the land. 

You’re free to use your land however you’d like (limited by city ordinances). Build a workshop, raise chickens, install a built-in kitchen, or plant an orchard. What’s more, with a detached home you’re free to tear it down and build your dream home. You own everything within your property lines. Ask your real estate agent about any restrictions set by the city.

One Caveat on HOA fees: Many single-family detached homes are built as part of a planned community that includes a Homeowners Association. You’ll enjoy shared amenities such as pools and tennis courts, but you’ll also have to pay HOA fees. In addition, any home renovations or landscaping updates will need to meet HOA regulations. 

Find Your Neighborhood 

Location is still the biggest determiner of home prices, and buying a townhouse is no exception. Look for a townhome property that fits your lifestyle and your wallet. Consider a few things: Do you want to buy a bigger home after a few years and keep a townhouse as a rental? Are you downsizing now and the townhome is your new forever home? Take note of resale values, school districts, lifestyle and community events in the area.

Find a qualified mortgage expert in your local area

Q&A on Buying a Townhouse (what our clients are asking)

Is buying a townhouse less expensive than a single-family home?

Not always. Townhouses are often viewed as a low-cost alternative for first-time homebuyers. But townhouses can often be in a similar price range as single-family homes, especially in desired locations with rising home values. You’re paying a premium for the area, not necessarily the square footage of your home.

For example, let’s say you are looking to buy a property for under $700k in a premium location with well-rated schools, high safety ratings, and rising home values. You find a townhouse and a single-family home, and both list for $680k. Both properties are in the same school district with similar neighborhoods and access to restaurants, public transportation, parks and the like.

The difference here will most likely be the condition of the home. The $680k detached single-family home might be on the lower end of the housing market for the area. As a result, it will probably be much older and need a fair amount of work and renovation.

By contrast, the $680k townhouse will likely be newer and in better condition, updated with modern appliances and amenities.

As with any new home purchase, don’t forget about closing costs, which we blogged about here.

Do you have to pay HOA fees when you buy a townhouse?

Yes. Homeowners Association (HOA) dues are standard when you buy a townhouse. The fees are paid quarterly or monthly to cover ongoing upgrades and maintenance for all shared amenities. 

Worth noting, not all HOA fees are created equal. When you’re ready to buy a townhouse, take time to compare amenities and costs with other townhouse developments in the area. Are the grounds and facilities well maintained? Do they have the amenities that are important to you, like tennis courts or expansive poolside areas?

You get to decide if the fees are reasonable and whether or not the community spaces offer what you want.

Is it easier to qualify for a mortgage when you buy a townhouse?

The easiest way to qualify for a mortgage is to work with an experienced mortgage advisor to get pre-approved. Buying a townhouse isn’t much different when it comes to home loan options, but there are a few factors to consider. 

Buying a townhouse will require a few more steps required by mortgage lenders to get approved. Often, the home appraisal will include an inspection of the entire grounds to ensure the community spaces are well-maintained and up to code.

A mortgage advisor can keep things moving forward stress-free. Find out how to get pre-approved quickly, which we blogged about here.

Get Pre-Approved For the Best Financing

Getting pre-approved is the best way to secure an affordable mortgage at a low mortgage rate. You’ll know exactly how much you can afford and shop with confidence.

Note that financing a townhouse is different than getting a mortgage for a condo or single-family detached home. Mortgage lenders have specific regulations when it comes to buying a townhouse. Be prepared to provide additional documentation to meet mortgage requirements. 

Getting pre-approved for a mortgage will help ensure you’ve got everything in place before you make an offer.

Talk to a local mortgage advisor about your financial goals. Buying a townhouse in 2021 can put you on the fast track to financial freedom. Getting preapproved for a mortgage is the best next step!

The Final Remix

Buying a townhouse can be a perfect choice when you want a low-maintenance home with modern appliances, good square footage, and a small footprint. Enjoy the benefits of community spaces, shared amenities, and privacy without the maintenance required for a detached single-family home. When you’re ready to get pre-approved for an affordable mortgage, buying a townhouse is the perfect next step.

Take Action

Mortgage pre-approval is a smart move when you’re buying a townhouse. An experienced mortgage advisor can help you get pre-approved and get your financing secured, so you can shop with confidence. Connect with a mortgage advisor to discuss your options and get an affordable mortgage that saves you money. We’d love to help.

Now Use Rental History to Get Approved for a Mortgage

August 16, 2021
blog family on grass

We’ve got good news for qualified renters who are ready to buy a home. Fannie Mae recently announced a new mortgage lending rule that will make it easier for homebuyers to get a mortgage even without a long credit history. This new update expects to produce greater eligibility and higher approval rates for homebuyers with good rent payment history.

Why the Breakthrough Rule is Helping Homebuyers

Applying for a mortgage can feel like a huge undertaking. You’ve got to save for a down payment, organize all your financial documentation, verify income and employment status, and decide how much you can afford. Then there’s your credit report. If you have a high credit score, this is just a simple task to cross off the list.

But what if you don’t have an established credit history? What if you pay your bills on time and save every month, but you don’t have credit cards or car loans? It’s almost like you get penalized for living debt-free and managing your money well.

This new rule is shifting the tide. Higher approval rates are in store for homebuyers with good rental history.

RELATED: Find out if you’re eligible for additional first-time homebuyer advantages

How to Use Rent Payment History to Get Approved for a Mortgage

Just say yes! The new change will allow mortgage lenders to automatically integrate rent payment history to establish creditworthiness. Fannie Mae has updated the underwriting system to automatically pull rent payment history from your bank account. Your mortgage lender only needs one thing: your approval.

Why is this valuable?

Mortgage lenders look to credit history to assess risk. When a homebuyer has a high credit score and a solid credit history, they might qualify for a better mortgage. On the other hand, mortgage applicants with thin credit or short credit history are typically considered higher risk.

With the new rule in place, mortgage lenders can automatically include rent payments during the underwriting process. The updated software integrates with banks and credit unions to automatically recognize rent payments and populate your mortgage application with your rent payment history.

Based on Fannie Mae research which sampled mortgage applicants who were declined, “17% could have received an Approve/Eligible recommendation if their rental payment history had been considered.“

How will homebuyers benefit from the new Fannie Mae initiative?

Renters with “thin” credit and a consistent rent payment history will benefit the most. “Thin” credit typically refers to a homebuyer who doesn’t have much credit history to assess. So while there might not be any negative marks on their credit, there also isn’t much payment history to pull from.

For example, perhaps you don’t have any credit cards and never had a car loan. Or maybe you have student loans or credit cards, but the accounts haven’t been open for very long. In these situations, a rent payment history that shows consistent on-time payments could help you get approved for a better mortgage.

Before this new approach, mortgage lenders would ask landlords to verify rent payment history. The process was tedious and not always accurate.

Now, mortgage lenders can automatically integrate rent history into mortgage applications to help homebuyers establish creditworthiness.

What’s more, the new update will only affect positive change for eligibility. According to the press release, “the new update is a positive change for eligibility – only consistent rent payments will be considered to improve eligibility. For qualified renters who may have limited credit history but a strong rent payment history, [it] creates new opportunities for homeownership. Any records of missed or inconsistent rent payments identified in the bank statement data will not negatively affect the applicant’s ability to qualify for a loan sold to Fannie Mae.“

Side note, if you’re still paying off student loan debt, check out this recent post. You’ll find strategic tips to help you qualify for a mortgage.

How do I apply for a mortgage using rent payment history?

  1. Find out how much you can afford using this free mortgage calculator.
  2. Connect with a local mortgage advisor.
  3. Tell them you’d like to automatically include your rent payment history.
  4. Discuss your home loan options.
  5. Get your best mortgage!

A qualified mortgage advisor will help you build a credit profile to your advantage using your rent payment history. Once you start your application and access your rental history, your mortgage advisor can secure the best mortgage possible at the lowest rate.

What if I have a low credit score or bad credit? 

Rent history that shows on-time payments will help, but your credit report will have a bigger impact on a mortgage lender’s final decision. In this case, it’s better to work on raising your credit score quickly. Check out this short read with actions you can take to boost your credit score in less than 60 days, which we blogged about here.

Another option is to consider buying a home with a family member or good friend, which we blogged about here.

Summary

Fannie Mae recently announced a new rule which makes it easier for renters to become homeowners. Mortgage lenders can now automatically include rent payment history to help establish creditworthiness.

So if your credit report is thin or not well-established, but you have a long history of on-time rent payments, this can help you get approved for a preferred mortgage.

Take action now to apply for a home loan and get approved while mortgage rates are low.

Next Steps

When you’re ready to apply for a home loan, an experienced mortgage advisor can help you put together a solid credit profile and help you get approved. We offer homebuyers preferred rates, custom loan options, government-backed mortgages, conventional loans, and more. Connect with a local mortgage advisor to discuss your options and get approved. We’d love to help.

Will Mortgage Rates Rise With Inflation?

January 25, 2022
buy a home, mortgage, inflation, mortgage blog

Buying a new home in 2022 can bring a sense of stability and financial security. Especially in the middle of an era where very few things feel certain. Despite unpredictability in almost every area of our lives, mortgage rates have remained historically low these past two years.

Last summer, with signs of economic recovery and a drop in covid, mortgage rates began to shift upward just a bit. Then Omicron arrived along with a new cycle of pandemic exhaustion. Nevertheless, mortgage rates remained low and ended the year hovering near 3.0%. But the economic recovery that seemed hopeful has shifted downward, and inflation is starting to gain ground.

It’s fair to say that the current market is extraordinary and uncommon: the combination of high inflation and low mortgage rates is rare.

Many homebuyers are asking if now is the right time to buy a home. It’s a difficult decision for sure. Will mortgage rates rise? Will the housing market be stable? Will home equity continue to grow? How will the markets react as we move deeper into 2022?

Trends that used to signal predictable movements are now in question. This article can help.

RELATED: Top home loans for first-time homebuyers

It’s difficult to imagine rates remaining low for much longer. The link below provides a snapshot of mortgage rates over the past 50 years.

Click here to view the analysis

Follow the inflation rates in the link below, and you’ll find that inflation rates are almost always in sync with mortgage rates. When one rate rises, the other increases. When one drops, the other follows.

U.S. inflation rate from 1960-2022 mapped with mortgage rates:

Click here to view the chart

Based on these historical trends, most mortgage lenders predict rates to rise along with inflation as we move into 2022. But nothing is certain.

If you’re considering buying a home in 2022, now is the time to take action. Rates are still low and home loan terms are favorable for qualified buyers.

Connect with a mortgage advisor to discuss your goals. The right mortgage can help you build financial security through homeownership.

How a Rise in Inflation Affects Mortgage Rates

When many of us consider inflation, we often think of the weekly grocery bill or gas prices going up. We might notice that clothing costs more or eating out has a higher price tag.

In broad terms, inflation happens when prices for goods increase and purchasing power decreases. For example, if the rate of inflation jumps to 10%, then it would take $110 to buy items that would have cost $100. When the rate of inflation starts to rise consistently, everyone feels it in day-to-day expenses like groceries, gas, transportation, and retail goods.

On the flip side, when earnings rise faster than the rate of inflation, buying power increases. As a result, the household dollar can stretch a little further. As a result, people tend to spend more, save more and invest more.

Related: Get started now with a qualified mortgage advisor in your local area

What This Means for Mortgage Rates in 2022

Today, the rate of inflation is rising and if it continues to move upward, it will have far-reaching economic implications–from goods and services to investment returns and yes, mortgage rates.

This is because mortgage rates operate similarly to bonds. When the inflation rate rises, purchasing power is lower, which directly impacts the market that buys and sells mortgages. When buying power decreases, interest rates go up to keep investors fully engaged.

As the rate of inflation increases, the Fed raises interest rates. As interest rates go up, mortgage rates increase, and the rate of return on mortgages continues to keep investors, well, invested.

Meanwhile, new homebuyers applying for a mortgage face a higher mortgage rate.

RELATED: Find out how much you can afford with this mortgage calculator

How to Decide if Now is the Right Time to Buy a Home

Nothing is certain in economic forecasting, and mortgage predictions are no different. However, the one clear thing is that mortgage rates remain at historic lows. With mortgage rates still below 4%, a mortgage continues to be one of the least expensive ways to borrow money and invest. 

What’s more, with a mortgage, you’re potentially building financial security. With a 30-year fixed-rate loan, your monthly mortgage will be the same for the entire life of the loan. No changes. No surprises. You can build home equity and financial security in the same move.

Talk with a mortgage advisor to discuss your goals and find out if homeownership is your next best move. 2022 could be your year.

RELATED: Learn the Truth About No-Closing Cost Loans

Next Steps

Connect with a mortgage advisor. There are several custom loan options, along with FHA loans, VA loans, conventional mortgages and jumbo loans with great mortgage rates right now. So whether you’re a first-time homebuyer or on your third renovation, the right mortgage can help you toward financial security. We’d love to help.

Refinance to a Fixed-Rate Mortgage and Lower Your Payment

June 15, 2022
mortgage blog, refinance, fixed-rate mortgage

With the pandemic still impacting loans and interest rates, now is an ideal time to consider refinancing from an adjustable-rate mortgage to a fixed-rate mortgage. Mortgage rates have been inching upwards since earlier this year. Slowly at first, but the jumps are increasingly hard to ignore. If you have an adjustable-rate mortgage (ARM), now is a good time to refinance to a fixed-rate mortgage.

Historically, mortgage rates rise with inflation. Investors watch the trends with caution, and often mortgage rates rise based solely on the anticipation of inflation. Add the fact that the Fed is also raising the federal funds rate, and it’s hard to ignore the potential long-term rise of mortgage rates.

The truth is, many homeowners can save a lot of money in interest and lower their mortgage payment by refinancing to a 15-year fixed-rate mortgage or a 30-year fixed-rate mortgage.

If you’re concerned about your mortgage payment and want the financial stability of a fixed-rate mortgage, we can help. Connect with a local mortgage advisor to discuss your goals.

Related: Find out how much you can save right now with this mortgage refinance calculator

How the Federal Funds Rate Affects Mortgage Rates

When the Fed decides to increase the federal funds rate, it directly impacts mortgage rates. For those homeowners who currently have an ARM or a HELOC, this means your rates could jump without much warning. The result could be a higher mortgage payment, higher equity loan payments, or more of your payment will go toward interest every month instead of principal.

Adjustable-Rate Mortgages

Adjustable-rate home loans have variable interest rates. This means that the rate will fluctuate, rising or falling based on the fed funds rate. If the fed funds rate goes up, your rate will go up, and your mortgage payment will go up. There are different caps for each loan, limiting how much your mortgage payment can increase. Talk with a local mortgage advisor to determine if refinancing your home loan can save you money and protect your mortgage payment.

HELOC (Home Equity Line of Credit) and Home Equity Loans

Most home equity loans and HELOCs are directly tied to the prime rate (which is typically 2-3 percentage points above the federal funds rate). Therefore, if the federal funds rate goes up, this causes the prime rate to increase, and interest rates for HELOCs and home equity loans will rise in tandem.

Similarly, HELOCs have a flexible rate that is impacted directly by the federal funds rate. This means your HELOC rate can rise at any point, and with a higher rate, you’ll have a higher payment.

As an aside, most home equity loans are fixed-rate loans, which means your payment won’t change. However, since home equity loans typically have a higher interest rate than a fixed-rate mortgage, it could be wise to refinance.

If you’re concerned about your mortgage payment, we can help.

 

How to Compare Offers and Get the Best Fixed-Rate Home Loan

Working with a qualified mortgage advisor can help you compare loan offers and get your best mortgage. What’s more, a mortgage advisor can explain refinancing options that you might not know about and get you a better home loan that can save you money.

We’ll guide you through these five steps toward a better mortgage:

  1.  Discuss your situation and share your homeownership goals.
  2.  We’ll analyze the market and lock in your best mortgage rate.
  3.  Review your new refinancing options together.
  4.  Gather the final documentation for underwriting.
  5.  Verify the value of your home with a home appraisal.

Final Step — Close on your new home loan with a low fixed-rate payment!

Related: Get started now with a qualified mortgage advisor in your local area

Are there closing costs to refinance to a fixed-rate mortgage?

Refinancing to a fixed-rate mortgage will incur closing costs, just like most home loans, which we blogged about here. That said, you can save thousands of dollars over the life of your loan by securing a fixed-rate loan that isn’t subject to the volatility of market rates.

Typically, it takes 5-7 years to recoup non-recurring closing costs after a mortgage refinance. In general, it’s a good move to refinance to a fixed-rate mortgage if adjustable rates are rising and you want the security of a fixed payment for the life of the loan.

Be sure to connect with your local mortgage advisor about your best loan options and lock in a preferred rate.

RELATED: Learn the Truth About No-Closing Cost Loans

Summary

If you have a mortgage with an adjustable rate, a home equity loan, or a home equity line of credit, now is the time to refinance your home loan and secure a fixed-rate mortgage.

Refinancing to a fixed-rate mortgage secures a fixed monthly payment for the life of your loan, no matter how the market shifts. You’ll have a steady mortgage with a predictable monthly payment you can afford, regardless of inflation or future volatility in the market.

Next Steps

If you’re wondering how to afford your ARM mortgage with rising rates, refinancing now can help establish financial stability. When you’re ready to refinance to a fixed-rate mortgage, a local mortgage advisor can help you get approved, lock in the lowest mortgage rate, and secure the right home loan. Connect with a mortgage advisor to discuss your options and make a plan that can help you save money on your mortgage. We’d love to help.

Consider a 15-year Fixed-Rate Mortgage Before Rates Rise

December 21, 2021
mortgage blog, refinance, no appraisal, preferred rate

With the pandemic still impacting loans and interest rates, now is an ideal time to consider refinancing to a 15-year fixed-rate mortgage. Low interest rates are holding, and homeowners can save a substantial amount of interest by refinancing to a 15-year mortgage.

According to economists at the National Association of Realtors, the national average interest rate on a mortgage in 2021 was 3%. However, mortgage rates are slowly climbing above 3.5%, and are predicted to rise throughout 2022.

Now is the time to take advantage of lower interest rates and lock in a low rate with a fixed-rate mortgage. That said, it’s not always an easy decision. So, how should a homeowner decide whether or not to refinance to a 15-year fixed-rate mortgage?

Let’s dig in.

30-year vs. 15-year Fixed-Rate Mortgages: Know the Difference

Refinancing a 30-year mortgage or an adjustable-rate mortgage (ARM) to a 15-year fixed-rate home loan means you will pay less interest over the life of the loan. Depending on your current mortgage balance, this could result in thousands of dollars saved over the life of your loan, not to mention you’ll pay off your house sooner.

What’s more, homeowners who refinance to a 15-year fixed-rate home loan are typically offered a lower interest rate and better loan options. Overall, the savings could be substantial.

Related: Find out how much you can save right now with this mortgage refinance calculator

However, refinancing to a 15-year mortgage isn’t always the best choice for every homeowner. There are things to consider before changing your mortgage payment, such as setting a monthly budget, paying off debt, growing your savings, and pursuing investment opportunities.

A 30-year fixed-rate mortgage can provide a lower mortgage payment with the stability of a fixed payment every month. You’ll pay more interest over the life of the loan, but your monthly payment will be lower.

Whether you decide on a 30-year fixed-rate mortgage or a 15-year fixed-rate mortgage, both home loans provide the stability of fixed monthly payments for the life of the loan.

No surprises, no rate increase, and no change in your mortgage payment.

Consider your monthly budget and long-term financial goals.

Refinancing from a 30-year mortgage to a 15-year mortgage is ideal for homeowners with steady cash flow, substantial savings, and a low debt-to-income ratio.

For homeowners with 17 or more years left in their mortgage payments or for homeowners with an interest rate of 4% or higher, a refinance could help allocate the bulk of your mortgage payment toward the principal balance on your home loan. This means a faster pay off and less interest over the life of your home loan.

Homeowners who have extra room in their budget for a higher mortgage payment and a low debt-to-income ratio are strong candidates. However, homeowners who live on a strict monthly income with little in savings may want to consider other refinancing options to help lower mortgage payments.

Related: Get started now with a qualified mortgage advisor in your local area

Find out how much you can afford.

Mortgage lenders will often offer a lower interest rate for a 15-year mortgage, saving you thousands in the long run. Refinancing to a 15-year home loan can also give you advantages through the home equity you’ve built.

If you’ve paid down your mortgage and built equity since you first purchased your home, your monthly mortgage payments could decrease after refinancing. For example, if your loan-to-value (LTV) ratio is below 80% you’ll have access to better loan options and lower interest rates.

However, if you find that the minimum monthly payment for a 15-year mortgage puts strain on your monthly budget, consider staying with a 30-year mortgage and refinancing with a rate and term refinance which can lower your monthly payment.

Another option is to make bi-monthly payments every two weeks (e.g., 2 additional mortgage payments each year). This approach will slowly reduce the term of your 30-year mortgage while giving homeowners the flexibility to revert to smaller payment schedules when needed. Keep in mind your interest rate may stay at a slightly higher percentage than if you were to refinance. 

Click here to download your free credit report

Are there closing costs to refinance a 15-year mortgage?

Refinancing to a 15-year fixed-rate mortgage will incur closing costs, just like most home loans, which we blogged about here. That said, you can save tens of thousands of dollars over the life of your loan by reducing your mortgage term to 15 years. 

Typically, it takes 5-7 years to recoup non-recurring closing costs after a mortgage refinance. In general, it’s a good move to refinance to a 15-year fixed mortgage if you’re mortgage rate will drop by at least 1% for your new home loan.

Be sure to connect with your local mortgage advisor about your best loan options and lock in a preferred rate.

RELATED: Learn the Truth About No-Closing Cost Loans

What documentation will I need to refinance to a 15-year fixed-rate mortgage?

Applying for a 15-year mortgage is similar to most home loan applications. Mortgage lenders typically require the following documentation to apply for a 15-year fixed-rate mortgage:

  • Identification such as a passport or driver’s license
  • Employment verification
  • Proof of income (e.g., pay stubs, W-2 statements, bonuses, alimony)
  • Recent bank statements
  • Investment account statements
  • Current credit report

If you’re self-employed, ask your mortgage advisor about additional information that might be required.

RELATED: How to refinance a mortgage when you’re self-employed

5 Questions to ask yourself before you refinance to a 15-year mortgage:

  1. Do you have enough money saved for emergencies, home repairs and other financial commitments?
  2. Would you rather pay down your current mortgage by making bi-monthly payments?
  3. Do you have other outstanding debt with a higher interest rate that should be paid off first?
  4. Do you plan on remaining in your current home for at least 7 years to recuperate the closing costs of a new home loan?
  5. Would you be able to increase your mortgage payment and still meet your financial goals?

Summary

To secure the best home loan and the lowest interest rate, homeowners with a steady income and a strong credit history will have the best loan options. Rates are beginning to shift upwards, and now is the perfect time to lock in a low rate and pay off your mortgage in less than 15 years. 

Your mortgage payment might be higher with a reduced term of 15 years, but not always. Take time to review your overall finances, cash flow, investments, and income. Make sure to set a new budget to make room for a new mortgage payment along with home maintenance, repairs, and emergencies.

Next Steps

When you’re ready to apply for a 15-year fixed-rate mortgage, an experienced mortgage advisor can help you get approved, lock in the lowest mortgage rate, and secure the right home loan. Connect with a mortgage advisor to discuss your options and make a plan that can help you save money on your mortgage. We’d love to help.

How to Refinance a Mortgage Without An Appraisal

March 1, 2022
mortgage blog, refinance, no appraisal, preferred rate

For homeowners who want to refinance a mortgage in 2022, uncertainty can cloud the process. Mortgage rates and inflation are in constant flux and it’s hard to know if the time is right. But one factor that can cause unnecessary worry is the home appraisal.

For most homeowners who decide to refinance, the terms of a new home loan are often directly impacted by a formal home appraisal. If you want to refinance to lower your monthly payment or secure a lower rate, preparing for a home appraisal can be stressful.

Did you know that not every mortgage refinance requires a home appraisal? Homeowners who want to refinance a mortgage without an appraisal in 2022 have solid options.

If you’re refinancing in 2022, you might not need a home appraisal. This quick guide helps explain the process.

Related: Learn the truth about zero-cost and no-cost loans

Mortage Basics: How Do Home Appraisals Work With a Mortgage Refinance?

Refinancing a mortgage requires the homeowner to have enough home equity to substantiate a new loan. Typically, most mortgage lenders require an 80% LTV (loan-to-value) ratio. This means that homeowners can apply to refinance a mortgage for up to 80% of their home’s value.

This is where home appraisals come in.

To determine the current market value of your home, a mortgage lender will typically require a  home appraisal.

A licensed home appraiser will evaluate comparable homes in the area along with recent home sales and write up a detailed report to confirm their findings.

Home appraisers serve as neutral third parties, so they don’t represent the homeowner or the mortgage lender.

Sounds easy enough, but if a home appraisal comes back with a lower value than anticipated, it can cause added stress and potentially cause a mortgage application to fall through.

Related: Find out how much you can save right now with this mortgage refinance calculator

How to Refinance a Mortgage Without an Appraisal

First, talk with a local mortgage advisor to verify your current type of mortgage.

When it comes to refinancing a mortgage, all home loans are not created equal.

If you have a government-backed loan, you could be eligible to skip the appraisal with a streamline refinance. For example, if you currently have an FHA loan, VA loan, or USDA home loan, you can typically refinance your mortgage without an appraisal. A streamline refinance establishes the new mortgage with the same type of loan and keeps costs down.

Related: Get started now with a qualified mortgage advisor in your local area

Second, ask your mortgage advisor about an appraisal waiver.

If you want to refinance your mortgage without cash-out, you could be eligible for an appraisal waiver through Fannie Mae. There are a few extra requirements, and it’s not always a fast process.

Third, find out if you’re eligible to use the AVM (Automated Valuation Model)

In the mortgage industry today, some mortgage lenders use the Automated Valuation Model (AVM) to estimate the current market value of a property. If you have over 30% home equity, you could be eligible to skip the home appraisal.

3 Top Loans to Refinance a Mortgage Without a Home Appraisal

1. FHA Streamline Mortgage Refinance – Home Appraisal Not Required

The FHA home loan is government-backed. If mortgage rates have dropped since you first closed on your mortgage, an FHA streamline can help you secure a lower mortgage rate (based on the current rates) and reduce your monthly mortgage payment.

Eligibility:
  • present mortgage must be an FHA loan
  • mortgage must be at least 210 days old
  • on-time payments for the past 6 months are required
  • must have no more than one late payment in the past 12 months
  • homeowner must show a “net tangible benefit” to qualify

RELATED: When is it smart to refinance an FHA loan into a Conventional home loan?

2. VA Streamline Mortgage Refinance – Home Appraisal Not Required

Homeowners who currently have a VA loan are typically eligible. Also called IRRRLs (Interest Rate Reduction Refinance Loans), the VA streamline refinance loan doesn’t require proof of equity. Homeowners can also borrow up to 120% of their home’s value, as long as there is a net tangible benefit to the refinance. As a result, there is no appraisal required.

Eligibility:
  • present mortgage must be a VA loan
  • home must be your full-time residence
  • current mortgage must be at least 270 days old
  • on-time payments for the past 6 months are required
  • homeowner must show a “net tangible benefit” to qualify

3. USDA Streamline Mortgage Refinance – Home Appraisal Not Required

Like other government-backed home loans, a USDA mortgage refinance typically doesn’t require a home appraisal. Therefore, homeowners who currently have a USDA loan are often eligible. In addition, a USDA streamline refinance loans doesn’t require proof of equity, so there is no appraisal required.

Eligibility:
  • present mortgage must be a USDA loan
  • current mortgage must be at least 12 months old
  • on-time payments for the past 6 months are required
  • homeowner must show a “net tangible benefit” to qualify
  • homeowner must meet the USDA debt-to-income ratio required

RELATED: Learn the Truth About No-Closing Cost Loans

Summary

When it comes to getting a home appraisal, a lot of homeowners worry about the final number. What is my house worth? Will the home appraisal meet the criteria I need for a mortgage refinance? If my house appraises too low, should I wait and see if the market ticks upwards?

Skipping the home appraisal can streamline the process, save you money, and help you refinance a mortgage faster.

A no-appraisal refinance often costs less and requires less documentation. What’s more, a mortgage refinance without an appraisal will close faster than a standard mortgage refinance.

RELATED: How to refinance a mortgage when you’re self-employed

Taking Action

If you want to refinance a mortgage without an appraisal, connect with a local mortgage advisor to discuss your goals. The right home loan can help you build financial security and save money on your mortgage. There are several custom mortgage refinance options available for 2022. We’d love to help.

Apply Now–Refinance Rates Drop Below 3%

July 31, 2021
blog home exterior


In response to the FHFA’s recent announcement to eliminate the 0.5% adverse market refinance fee, mortgage lenders are driving mortgage rates lower in a race to compete for business. In the past two weeks, mortgage rates have dropped substantially, falling below 3% for qualified borrowers.  The official change takes effect on August 1, 2021. 

If you’re ready to refinance your mortgage, this is good news. Take action now to refinance your mortgage and access the lowest mortgage rates in years.

These quick steps can help you get started.

How to Fast Track Your Mortgage Application and Refinance Your Mortgage

Low interests rates are only one part of a mortgage refinance. The truth is, shopping for the lowest rate won’t always help you save money when you refinance your mortgage. Several factors directly impact your refinance rate, including your credit score, loan-to-value ratio, and the loan product. Specific lenders might advertise super-low refinance rates, but it may end up costing you more based on your approved mortgage rate and closing costs.

Step 1: Connect with a local mortgage advisor

Talk to a mortgage advisor right away if you’re considering refinancing your home mortgage. An experienced mortgage advisor can start the process quickly and help you lock in the lowest rate possible. What’s more, they’ll uncover hidden opportunities and customize a mortgage refinance to meet your long-term financial goals.

No matter your credit score or employment status, there are refinancing options available for most homeowners.

* If you’re facing foreclosure or nearing the end of forbearance, connect with a mortgage advisor today to discuss your options.

Find a qualified mortgage expert in your local area

Step 2: Estimate how much you can save

Use a free mortgage calculator to find out how much you can save when you refinance your mortgage. Decide which factors are most important to you, then connect with a mortgage advisor to discuss your mortgage goals. For example, maybe you want to refinance to a 15-year mortgage or change from an adjustable-rate mortgage to a fixed-rate mortgage.

Use this mortgage refinance calculator to see how much you can save

Step 3: Download your free credit report

You can download a free copy of your credit report once every 12 months. It’s a good idea to look for any errors in advance. Your credit score has a direct impact on the terms of your loan and your mortgage rate. By reviewing a free copy of your credit report early, you can fix errors ahead of time.

Click here to download your free credit report

Step 4: Gather required documentation for a refinance

Start gathering paperwork you’ll need to verify income and assets, employment information, bank statements, and tax returns. Ask your mortgage advisor for a quick list to help keep things on track. An experienced mortgage advisor will provide a checklist to follow and will make sure the process runs smoothly.

If you’re self-employed, your mortgage advisor can talk with you about additional information that might be required.

Questions about refinancing? We hear you.

What are my options for refinancing a mortgage?

If your current mortgage is more than 6 months old, here are the most common options worth considering:

  • Cash-out Refinance
  • Streamline Refinance
  • Rate and Term Refinance
  • Renovations & Remodels
  • Consolidate a Second Mortgage

Consider investment opportunities or other ways to extend your home equity. For example, refinance your mortgage with cash-out and invest in a second property. Or apply for a renovation loan to increase the value of your primary residence.

Can I refinance my mortgage without getting a home appraisal?

A home appraisal is necessary in many cases, but not always. Depending on your refinancing terms, the mortgage lender may require an appraisal to verify your home’s current market value.

However, you might have the option to bypass a home appraisal. Talk to a mortgage advisor to see if you qualify for a no-appraisal refinance. 

If you have an FHA loan or a VA loan, talk with a local mortgage advisor about the FHA streamline or the VA IRRRL (Interest Rate Reduction Refinance Loan). These are just a few refinance options that don’t require an appraisal.

RELATED: Talk with a local mortgage expert to find out if you qualify for a no-appraisal refinance

Are there closing costs to refinance a mortgage?

Yes. Most borrowers want to refinance a mortgage to save money and lower their monthly mortgage payments. However, if you refinance at a lower mortgage rate but face high closing costs, it might not save you money in the long run. We recently blogged about that here.

Review this sample Loan Estimate to find out which fees are negotiable. 

Closing costs typically include:

  • Origination Fee
  • Appraisal Fee
  • Credit Report Fee
  • Prepaid Homeowner’s Insurance
  • Prepaid Interest
  • Property Taxes
  • Mortgage Insurance

When you refinance a mortgage, many homeowners have the option to pay the closing costs upfront, roll them into the loan, or get a lender credit in exchange for a higher rate. Review the numbers to decide whether or not refinancing your mortgage is truly saving you money. 

RELATED: Learn the Truth About No-Closing Cost Loans

What documentation will I need to refinance my mortgage?

Refinancing a mortgage is similar to starting an application for a home loan, with a few exceptions. Mortgage lenders require varying documentation depending on the type of mortgage refinance.

Common documentation to pull together:

  • Identification such as a passport or driver’s license
  • Employment verification
  • Proof of income (e.g., pay stubs, W-2 statements, bonuses, alimony)
  • Tax returns for the past two years 
  • Recent bank statements
  • Investment account statements

If you’re self-employed, ask your mortgage advisor about additional information that might be required.

RELATED: How to refinance a mortgage when you’re self-employed

Summary

Refinance rates have dropped again and are below 3% for qualified borrowers. That said, refinancing your mortgage might not always be the best financial decision, especially if the fees and closing costs start adding up. Start your application early and review your loan estimate so you can compare potential savings. You can refinance your mortgage for a lower interest rate and a better mortgage payment by discussing your options with a qualified mortgage advisor. 

Next Steps

When you’re ready to refinance a mortgage, an experienced mortgage advisor can help you get the lowest rate and the best terms available. Connect with a mortgage advisor to discuss your options and make a plan that can help you save money on your mortgage. We’d love to help.

Jumbo Loans and New Conforming Limits for 2022


December 14, 2021
mortgage blog, jumbo loan, conforming limits 2022, preferred rate

The Federal Housing Finance Agency recently announced the new conforming loan limits for 2022, which will increase the amount you can borrow without needing to apply for a jumbo loan.

For a single-family home in most of the U.S., the new conforming loan limit has increased to $647,200 and up to $970,800 in areas with a substantially higher cost of living — such as Hawaii, Alaska, Washington D.C. and many high-cost counties throughout California.

Visit the FHFA site here to see the loan limits in every U.S. county.

If you’re looking to purchase a home that goes above conforming limits in your area, consider applying for a jumbo loan. Jumbo loans have stricter criteria to qualify, but a jumbo loan can provide extreme flexibility and make your dream home a reality.

Jumbo loans are available for single-family homes, multi-unit properties, vacation homes, and investment properties. Qualified borrowers will have a low debt-to-income ratio, verified income, a 20% down payment and high credit score.

Jumbo Loans, Conforming Loans, and the FHFA

A conforming loan is often referred to as a “regular mortgage.” Conforming loans fall in a broad category of home loans that meet the mortgage limits set by the FHFA (Federal Housing Finance Agency). Each year, the FHFA adjusts these limits based on a number of economic factors in order to regulate the secondary mortgage market and keep lending practices competitive and efficient.

In short, conforming limits determine the maximum amount homeowners can borrow to purchase a home with a government-backed loan. For example, FHA loans, VA loans, USDA loans are all government-backed home loans.

Related: How to buy a duplex with FHA-financing

When you want to purchase a home above conforming limits, you can apply for a jumbo loan. Jumbo loans aren’t guaranteed by Fannie Mae or Freddie Mac and therefore are considered riskier for lenders. But mortgage lenders are ready and eager to approve jumbo loans for qualified borrowers.

Jumbo loans are also more flexible. Since the FHFA doesn’t limit jumbo loans, mortgage lenders can decide how much risk they’re willing to take with each borrower. So if you have strong credentials, such as a high credit score and a low debt-to-income ratio along with a 20% down payment, you’ll be a good candidate for a jumbo loan.

Related: How to Get A Fast Mortgage Pre-Approval

How to Qualify for a Jumbo Loan in 2022

The criteria are more strict for jumbo loans since the loans are larger. Also, since jumbo loans are government-backed, mortgage lenders assume more risk. As a result, jumbo loans typically have slightly higher mortgage rates and stricter requirements.

High Credit Score

To qualify for a jumbo loan, most borrowers will need a credit score above 700. The higher your score, the better home loan you’ll get. A high credit score will give you the best rate, better loan terms, and the lowest mortgage rate.

Related: How to boost your credit score in less than 60 days

Low Debt-to-Income Ratio

Your debt-to-income ratio is one of the biggest factors that mortgage lenders consider. A low DTI shows the lender that you have the cash flow necessary to afford a big mortgage payment. Also, with a low DTI, the lender can see that you’re not overextended when it comes to debt or other financial obligations.

High Cash Reserves

Jumbo loans typically require at least a 20% down payment. Giving evidence of high cash reserves shows the lender that you won’t be house poor once your mortgage gets approved. In some cases, mortgage lenders want to see that a homebuyer has at least one year’s worth of mortgage payments in cash assets.

Bigger Down Payment

Jumbo loans often require 20-30% down for the best home loan. Some lenders will approve a jumbo loan with only 10% down. In contrast, government-backed conforming home loans such as FHA loans only require 3.5% down, and conventional loans only require 3%.

Formal Home Appraisal

Mortgage lenders will sometimes require a second home appraisal. Home appraisals verify the current market value of the home. Since your home will be the collateral for your mortgage, lenders often want to secure a firm confirmation that the home in question is valued correctly.

Related: What to Expect with Your Next Home Appraisal

What documentation will I need to apply for a jumbo loan?

Applying for a jumbo loan is similar to most home loan applications. Notably, jumbo loans have stricter qualifying requirements. For this reason, make sure you have all the required documentation and that your financial and employment information is verifiable.

Mortgage lenders typically require the following documentation to apply for a jumbo loan:

  • Identification such as a passport or driver’s license
  • Employment verification
  • Proof of income (e.g., pay stubs, W-2 statements, bonuses, alimony)
  • RSU, ESPP shares, or other stock options
  • Tax returns for the past two years 
  • Recent bank statements
  • Investment account statements
  • Down payment source
  • Current credit report

If you’re self-employed, ask your mortgage advisor about additional information that might be required.

RELATED: How to apply for a jumbo mortgage if you’re self-employed

Next Steps

When you’re ready to apply for a jumbo loan, an experienced mortgage advisor can help you get approved, lock in the lowest mortgage rate, and secure the right home loan. Connect with a mortgage advisor to discuss your options and make a plan that can help you save money on your mortgage. We’d love to help.