Pathway To Purchase 2021

Announce Pathway To Purchase

The Arizona Department of Housing (ADOH), in partnership with the Arizona Home Foreclosure Prevention Funding Corporation (AHFPFC), provides down payment assistance to qualified homebuyers purchasing a primary residence in 26 targeted zip codes in 12 Arizona Cities. Pathway assistance is an incentive to purchase in targeted housing markets that have been hardest-hit by foreclosures.

The Pathway to Purchase (P2P) Down Payment Assistance Program provides an attractive 30-year fixed-rate mortgage with a Down Payment Assistance (DPA) second mortgage equal to * 10% of the purchase price. The DPA second mortgage is a five–year forgivable lien against the subject property at a 0% interest rate and no required monthly payments.  The down payment assistance (DPA) can be used toward the down payment and/or closing costs. DPA is only available in conjunction with a P2P first mortgage and is funded by the AHFPFC at the mortgage loan closing.

Program Highlights:

  • Mortgage for the purchase of an Owner occupied, Primary Residences in targeted areas.
  • Borrower(s) Income not to exceed Freddie Mac FHA Advantage ≤ 80% AMI.
  • Purchase Price limit not to exceed $439,860.00.
  • Existing, previously occupied properties only, new construction, including spec homes are not allowed.
  • The DPA provided is 10% of the purchase price * up to a maximum of $20,000.
  • Freddie Mac HFA Advantage mortgage only.
  • The P2P Program is strictly limited to the targeted zip codes in the following cities: (see target area table for specific zip codes).
    • Bull Head City, Casa Grande, Glendale, Green Valley, Kingman, Phoenix, Rio Rico, Sahuarita, Sierra Vista, Tucson, Vail, Yuma.
  • Each borrower must complete a homebuyer education course before closing.

LENDER OR A BANK FOR MY HOME LOAN?

Buying a home is one of the most important purchases you’ll ever make, so it’s best to stay informed of all the options available to you. Although both mortgage lenders and banks can help you get the funds you need to buy, there are pros and cons to each choice.

Traditionally, mortgage lenders have more options for homebuyers than banks.

Depending on your current financial profile, you may qualify for more than one type of loan. However, you’ll find a good fit for you based on your long-term goals, housing needs, current standings.

Mortgage Lenders

A mortgage lender is a bank or financial company that lends money to borrowers to purchase a home. A mortgage lender or bank can be both the loan provider and the servicer of the mortgage. Despite funding the loan initially, the lender will often sell your loan to a larger financial institution, which is typically why lenders can offer lower interest rates than banks.

The good news is consumers have government-mandated protections relating to the servicing of home loans. These protections also cover loan transfers from one servicer to another, so this shouldn’t be a concerning factor when deciding between a bank or a mortgage lender.

In some cases, borrowers may also find that a mortgage lender will be less strictly regulated than a bank and more forgiving of less than perfect credit. This is not always the case, so it’s best to speak with a financial advisor and weigh all options carefully.

Borrowers also could choose a local mortgage company that can help guide them through the home loan process from start to finish. Mortgage lenders must pass several mortgage-related courses and exams, which helps them develop a deep level of knowledge in the industry.

Mortgage Lender Pros

  • Possibility for lower interest rates
  • Diverse loan options
  • Potentially faster closing time
  • In-depth knowledge about the process
  • Can meet with local advisors

Mortgage Lender Cons

  • The lender may only provide online services if there is no physical location near you
  • Your servicer may change after closing

Banks

If you have an existing relationship with your current bank, this may be the more “comfortable” choice. On the other hand, the most comfortable choice may not be the best choice for your long-term goals. The difference in loan type and length could end up saving you thousands of dollars over the life of your loan.

However, some banks offer special benefits or discounts for existing banking customers that choose to apply for a home loan with them. The offers often include special savings or checking accounts, credit cards, and other products. The best way to learn more about this is to reach out to a representative at your bank. (They may also have insight on upcoming promotions to take advantage of.)

One major downside of a bank loan is that they often come with stricter lending guidelines. Not to say that a mortgage lender would have lower standards, but your loan may take longer to close if you’ve had a major financial event, such as a foreclosure or bankruptcy.

Bank Pros

  • Existing relationship
  • May offer special rates

Bank Cons

  • Less mortgage lending experience
  • Possibly longer closing time
  • Stricter lending standards

Interested in learning more? Contact a Mortgage Advisor for a complimentary consultation!

QUESTIONS YOU SHOULD ASK YOUR MORTGAGE ADVISOR

When it comes time to apply for a home loan, your Mortgage Advisor will cover the basics with you. This will typically include your interest rate, which loan solutions you qualify for, etc. However, there are a few important questions you can ask your lender to let them know what you need further clarification on.

What is my interest rate?

Rates are currently lower today than they’ve been in over 50 years, which is great news for homebuyers and those looking to refinance to a lower rate. However, there is no guarantee what your rate will be until your financial situation has been thoroughly evaluated. Multiple factors affect your rate, including:

  • Credit score
  • Property type and location of the home
  • Loan term
  • Interest rate type (fixed or adjustable)
  • Home price and loan amount

What are my loan options?

Depending on where you stand financially, you may qualify for multiple loans. Each loan will have different minimum down payment and credit score requirements. Your mortgage will also differ by the type of rate (fixed or adjustable.) Ask your advisor to walk you through all of your options and explain what the long-term of each loan will look like.

If you have circumstances that prevent you from falling within the traditional mortgage parameters, your loan options might change. For example, if you’re self-employed, your bank statements would be evaluated, rather than your tax returns.

Will I have to pay Mortgage Insurance (MI)?

If you put down less than 20% of the purchase price of the home, you will most likely have to pay Mortgage Insurance. MI is also typically required on FHA and USDA* loans. This helps offset the risk the lender would normally assume on a low down payment transaction.

What additional costs will I pay at closing?

Closing costs vary from loan-to-loan because many fees are based on the exact amount of money borrowed. The more you borrow, in general, the higher your costs. However, it is a general rule that closing costs run between 2-5% of the sale of the home.

Even though they’re called “closing costs,” you may be asked to pay some fees as the loan process progresses, like home inspections and appraisals. While your estimated closing costs will be included in the loan estimate, many of the fees listed can change along the way.

Does my partner have to be on the mortgage?

The short answer is no. Having a spouse as a co-borrower on a mortgage can often increase your odds for qualification if they have a good credit score, employment history, and income. In some cases, one spouse may have credit issues or complex income, which could work against you when applying for a mortgage. In that case, it may be more beneficial to have only one borrower on the loan.

However, both spouses may have to have their credit checked, so you’ll need to speak with your Mortgage Advisor about this. If you change your mind later on, a non-borrowing spouse can be added to the home’s title, or both spouses could refinance the home, which will allow you to apply again as co-borrowers on the new mortgage.

What Is An Escrow Account?

With an overwhelming amount of new terms and phrases to learn in a short amount of time, it can be hard to keep track of it all. That’s where we come in! Today’s topic: escrow accounts. What are they, and why are they beneficial to homebuyers?

What You Need to Know

An escrow account is typically used for two reasons— to protect a homebuyer’s “good faith” deposit before the transaction closes and afterward, to hold the homeowner’s funds for taxes and insurance. The homebuyer can create an escrow account, but the buyer’s real estate agent will typically be the one to open this account.

HELPFUL INFO: During the homebuying transaction, the account may be managed by a specialized company or agent; your escrow company and title company may be the same.

How it Works

Let’s say you find your dream house and put down an earnest money deposit to let the seller know you’re interested. This deposit doesn’t go straight to the seller’s pockets. Instead, these funds are deposited into an escrow account. When your housing transaction closes, the money is then put toward your down payment and closing costs.

Once you become a homeowner, you will fund the escrow each month as part of your total monthly mortgage payment. When you make a mortgage payment through your loan servicer, the money will be distributed among multiple categories, such as:

  • Principal and interest on your mortgage
  • Property taxes
  • Homeowners insurance
  • Mortgage insurance

Items not covered through your escrow account:

  • Utilities and other bills
  • Necessary home repairs
  • HOA fees

Is an Escrow Account Required?

The short answer is, it depends. Some loans will require an escrow account to be set up as an additional safety net for the lender, such as an FHA loan. Regardless of whether your state, lender, or loan requires an escrow account, it’s beneficial to have one in place.

Making Payments from Year-to-Year

Each year, your bank receives updated information on your property taxes and insurance payments. They will then perform what’s often referred to as an escrow analysis.

Because escrow is collected in advance, your lender might not have enough funds in your account to cover any increase in taxes or insurance, otherwise known as a “shortage.” In this case, you will owe the difference. However, you won’t be held responsible for this payment until the bank sends you a notice stating the amount outstanding.

Once you receive the notice, you can choose to pay the entire shortage as one lump sum, or you can choose to pay the amount over the next year. For example, if the shortage is $500, you will pay 1/12 of this amount each month.

In the Event of a Surplus

If taxes in your area happen to go down or your payments are overestimated, you will have too much money in your escrow account at the end of the year. Your lender will then pay the appropriate amount to the municipality, and the remaining amount goes to you.

Your lender will either send you a check for the surplus amount or give you the option to leave the money in your escrow account in case of a shortage in the upcoming year.

 Budgeting for the Future

Anticipating whether or not you’ll be required to pay more on your escrow account can be hard to keep track of. If you prefer to plan ahead, pay attention to any correspondence from your insurance company or taxing authority throughout the year, and budget accordingly.

 Questions? We can help! Talk to a Mortgage Advisor today for a no-commitment consolation.

Purchasing a House as an Unmarried Couple

Let’s face it. The idea of splitting the bills, chores, and other various expenses that come with owning a house can sound super appealing. If you’re already in a relationship, owning a home with your significant other seems like a no brainer.

A 2013 study found that one in four couples between the ages of 18 and 34 bought a house together before they were married. With all the signs pointing to “BUY IT!”, we still recommend that you consider the following factors before leaping into unmarried homeownership.

Who Will Apply for the Mortgage?

As you may know, a good credit score can go a long way when getting approved for a home loan. If you or your partner have credit that’s in bad standing, this could affect your chances of approval. Lenders will look at your individual scores from each reporting agency first, then take the middle score. The lowest score between the two applicants will be the score used to determine approval and mortgage interest rate.

So, let’s say you have excellent credit, but your partner is working toward a higher score. Your partner could be on just the title, not the loan. This will, of course, come with additional risk as to the debt of the home financially falls on only one person.

How is the Property Titled?

There are three general title options homebuyers should be aware of, especially if they are buying a home unmarried.

Sole Ownership: Only one name is listed on the deed, and as we mentioned above, this persona has all the rights and responsibilities of homeownership.

Joint Tenancy: Each person will own 50% of the property. If one tenant were to die, their share of the home would automatically transfer to the other tenant. The right of survivorship also prevents estates or relatives from taking the house in the event of your partners’ passing.

Tenants in Common: This allows for unequal ownership. For example, you could own 75% of the property, and your partner owns the remaining 25%.

Do You Have a Backup Plan?

As uncomfortable as it may be, it’s crucial to discuss what will happen to the property if you and your partner were to split up or if one of you were to die.

In the case of death, choosing the right title for you and your partner could make all the difference. However, ending the relationship brings on more uncertainty for ownership. Forbes recommends unmarried couples agree to a partnership agreement or a homebuying prenuptial. This will help address issues such as:

  • Who is contributing financially?
  • How will the mortgage be paid?
  • What happens if you sell the home?
  • What if the relationship dissolves?

By agreeing beforehand, any conflict during a potential breakup could be settled without litigation or mediation.

No matter what your plans may be, we’re here to help! Contact a Mortgage Advisor today for more information.