Ways To Save For A Down Payment

Saving Money

Saving for a down payment can seem like a daunting, impossible task. This is especially true if you’re already tackling debt and a mountain of bills. However, there are ways to save up for your dream home and still make ends meet. Let’s break it down.

Where should you begin?

Calculate How Much to Save

It’s impossible to save toward a goal that you’re unsure of. Before you plan out a budget, you have to decide how large of a down payment you want to make. This can, of course, be an estimated amount, but you want to make sure the number in your head and the number your finances reflect are similar.

A 20% down payment may be the best option for some homebuyers. However, for other buyers looking to purchase their first home or who need more financial flexibility, a smaller percentage might be more attainable. There are a variety of loan options that require little-to-no down payment at all.

DON’T FORGET: A down payment smaller than 20% will require Mortgage Insurance. MI allows more homebuyers the opportunity to purchase a home sooner than anticipated because it offsets the risk the lender would typically assume on a low down payment transaction. If you’re planning on putting down less than 20%, you will need to factor MI into your monthly payments.

When you have a price range for your dream home and a (realistic) goal for your down payment, use a Mortgage Calculator to estimate what your monthly mortgage payment will be. If the number looks a little higher than you’re hoping for, it may be in your best interest to save toward a more significant down payment.

Determine Your Timeframe 

Depending on the size of your down payment, your annual savings goal will change. It’s also essential to plan for any situations that could cause you to be unable to save toward your down payment goal. Have you considered renovations to your current home? Are you planning on getting married or having kids within this timeframe? What about potential medical costs?

Planning for obstacles will help you determine a realistic amount to save each paycheck and give you peace of mind, as well.

IMPORTANT TIP: Pay attention to interest rates within your savings timeframe as well. Study market trends. If interest rates are traditionally lower in the spring, you might want to push your savings timeline up to get the best rate.

Budget, Budget, Budget

Now that you’ve determined a timeline and savings goal, it’s time to look at where this money will come from. If your savings goal is more ambitious than your current savings habits, changes will have to be made. Whether it’s picking up a side hustle or cutting back on your weekend spending, make clear financial goals for each paycheck.

Get creative when trimming your budget! It’s often the little costs that add up in the end, not the big purchases you planned on. Consider:

  • Skipping the drive-thru and pack your lunch
  • Making coffee at home
  • Using a public park or space to work out (not a gym)
  • Renting a movie instead of going to the theater
  • Working a few extra hours instead of going home early

It may also be necessary to pull your money out of riskier investment vehicles such as stocks or investment trusts. For the time being, you may need to move your money to a traditional savings account separate from your regular accounts.

Don’t Forget About Additional Costs

Don’t let the price tag of a down payment cause you to overlook the smaller, but still costly fees of purchasing a home. You may need to factor in:

  • Mortgage Insurance
  • Appraisal and Inspection Fees
  • Closing Costs

The most important thing to remember when saving is to stick to your goal no matter what. It will pay off in the end!

Whether you’re saving plan starts today, or you’re ready to find your dream home, our Mortgage Advisors are here to help.

Increase Purchase Power

Purchase Power

With a limited inventory of affordably priced homes and a high demand, searching for a house can feel exhausting. Although the competition and dreaded multiple offer situation may make you want to put off purchasing a home until the market slows, 2020 is actually a great time to buy. Here’s why.

In the Spring, mortgage rates hit historic lows. Homebuyers this time last year were locking in rates around 4.5%, and currently, rates remain steady in the 3% range. Considering the vast majority of buyers finance their homes, mortgage rates directly impact most people’s purchasing power! But how exactly do interest rates affect how much home you can afford?

The lower the rate, the more purchasing power you have which means you can get more house for the same monthly payment. With a lower interest rate, more of your money goes directly to the principle of the loan—maximizing how much home you can afford and minimizing the monthly payment. With each 0.125% shift in mortgage rates, your buying power changes, and a 1% difference could add $30,000 to your budget. Who doesn’t want more house for the same amount of money?! Even if you haven’t saved the full down payment you want, a low-interest rate will likely translate into ample savings on your monthly payment.

Rates are predicted to stay around 3% through 2020, so if you are on the fence about buying, it may be in your favor to start looking now. These historically low rates will allow you to stretch your dollars and give you more flexibility to find a home that is perfect for you.

Contact us today!

5 Tax Breaks for First Time Homeowners

Property Tax Deductions

Property taxes are paid to the state and/or county and are deductible from federal income taxes. These can include real estate taxes as well. Before the TCJA was passed, you could deduct an unlimited amount for these taxes, as long as you could document that the deduction matched the actual amount of the taxes you paid. For tax years 2018 through 2025, the new cap is a maximum deduction of ten thousand dollars.

State Incentives

Each state offers a specific incentive for buying a new house. These are most often in the form of programs for first-time homebuyers and will most likely help you subsidize the down payment on your mortgage. In addition to statewide offers, some states also have targeted funds or special programs aimed at certain geographic or metropolitan areas in the state, so be sure to visit your state’s housing agency website to see if there is additional help available to you.

Tax Credit for Mortgage Credit Certificate Holders

This credit is to help people in lower-income brackets buy a home. Since it’s a tax credit, it’s beneficial because it lowers the overall amount of taxes you owe. In order to qualify for this tax credit, you need to have a state-issued Mortgage Credit Certificate. The amount varies based on financial need and the price of the home. You can claim this mortgage interest credit even if you take the standard deduction, whereas a home mortgage interest deduction can only be taken if you itemize your deductions instead of taking the standard deduction. For example, Pima County offers 20% back! Say you paid $1,000 in interest, you would get a credit back of $2,000!

Tax Credit for Home Improvements

There are certain improvements you can make to your new home that qualify for the Residential Renewable Energy Tax Credit. If you install solar panels or other sources of solar energy, you could qualify for this credit on your tax return.

Penalty-Free IRA Payouts

If you have an IRA or other pre-tax retirement savings accounts, you could withdraw money from those accounts to help you pay for your first house. Typically there are fees for early withdrawals (before the age of 60), but if you are buying your first house, you can deduct up to $10,000 from your traditional IRA without penalty. If you’re married and your spouse also has a traditional IRA, they can also withdraw $10,000 for the same home purchase. Additionally, if you have a Roth IRA, you could withdraw contributions you’ve made without penalties, regardless of your age. If you’ve had your account for at least five years, the withdrawal would also be tax-free. Finally, if you are withdrawing from your retirement accounts in order to purchase a home, you should consider the amount of time it will take to recoup those funds so that you do not negatively impact your future retirement income.

All potential tax benefits should be verified with a professionally licensed tax advisor if you have questions about these or other tax benefits for first-time homebuyers, contact your tax advisor.

If you’d like a referral for a tax advisor or have questions about anything related to the home-buying process

 

How To Find The Right Real Estate Agent For You

Sometimes the most difficult part of buying a home is simply knowing where to start. That’s why it’s crucial to have a team of professionals guiding you every step of the way. Your real estate agent and mortgage lender should be educated, informed, and willing to find the ideal long-term solution that meets your wants and needs.

So, where do you begin? Should you get a loan? Talk with an agent? Let’s break it down.

Start with a Lender

The first step toward owning the home of your dreams is knowing exactly what you can afford. This is why you should meet with a lender before doing anything else. Having a good idea of what homes are within your budget will save you time, and possibly money, in the end.

Not to mention, having an approval letter from a lender can increase your bargaining and buying power when it comes time to make an offer, especially in bigger cities and booming markets.

Do Your Research

If your lender is local, they’ll most likely have a list of recommended real estate agents in your area. The Polder Group only works with all the top agents in Arizona and can give you the best recommendation for your needs.

When searching, it’s important to know the difference between a real estate agent and a Realtor. (That’s right— there’s a difference.) You’ve most likely heard these two terms used interchangeably, but there are actually distinctive requirements for each role.

A real estate agent is a professional who has obtained a real estate license to assist in the buying and selling of properties. In some cases, agents will have a specific focus, either listing or buying.

A Realtor, on the other hand, is a real estate agent who is also an active member of the National Association of Realtors (NAR).  Agents within this organization are required to adhere to an extensive Code of Ethics, which can be an attractive quality to buyers who want to know the agent they’re working with has their best interest in mind.

Interview Your Agents

Once you’ve found a few agents that meet your basic standards, it’s a good idea to interview them. This is your opportunity to learn more about the agent’s style, personality, and willingness to work with you.

You’ll want to hit on these topics while interviewing potential agents:

How long have you been in the business? A young agent could have more time to focus on your transaction, but most real estate agents learn as they go. A seasoned agent will have experience more speedbumps and will know how to avoid them.

 

What is your intended strategy to buy/sell my house? As a buyer, you need to know how willing your agent is to spend time searching for a home that meets your needs. As the seller, it wouldn’t hurt to know ahead of time what their average listing price to sales price ratio is. Does their selling strategy support your financial needs, and if not, do you need to reconsider?

Can you provide a list of references? Any agent worth their salt will have a long list of references willing to speak on behalf of them.

How much do you charge? Most real estate agent fees are negotiable. According to The Balance, agents will typically charge from 1% to 6% to represent one side of a transaction, either the seller or the buyer. A listing agent might charge 3.5% for herself and another 3.5% for the buyer’s agent, for a total of 7%. Percentages will vary. Keep in mind, a top agent might charge more for their services.

Trust Yourself

At the end of the day, you should go with an agent that you trust and know will help you in any way possible. But don’t forget to:

  • Review your contract
  • Double-check any references
  • Take time to consider all options

Ready to begin the journey to homeownership? Contact The Polder Group Today and let us help you get started on the best foot possible

Mortgage Process Paperwork

At The Polder Group, we find that borrowers often comment about the amount of paperwork mandated for mortgage loan applications. Many buyers are told that the process was much less complicated fifteen or twenty years ago.

There are two main reasons for the change: government guidelines, and the fact that banks do not want to be in the real estate business.

Turning Problems into Solutions

During the run-up to the housing crisis, many people “qualified” for mortgages they could never payback. This led to millions of families losing their homes, and something the government wants to make sure won’t ever happen again.

As a result of that foreclosure crisis, banks were forced to take on the responsibility of liquidating millions of foreclosed homes and negotiating millions of short sales. Just like the government, they don’t want more foreclosures. The combination of those factors spurred the banks to tighten up their lending practices.

Consider this scenario: If you loan your friend $20 to cover dinner, you expect them to eventually pay you back. There’s no paperwork, and you know they’re good for the money. On the other hand, loaning a friend $5,000 to buy a car is something entirely different. It’s not quite the same easy transaction as a bar tab.

Now imagine you have to loan your friend $500,000 to buy a home! You can see why all lenders, including PG at Summit Funding, want to make sure the property is valued correctly, the seller is the legal owner, and the buyers earn what they say they earn.

Paperwork You’ll Need

What kind of paperwork will you expect to see throughout the process? Things usually start with the loan application. Underwriting your loan requires documents and signatures, and you may be required to produce, in hard copy or electronically:

Tax Returns

Pay Stubs

W-2s (or other proof of income)

Bank Statements (and other assets)

Credit History

Gift Letters

Photo ID

Renting History

When your loan closes, you’ll also be asked to sign the loan documents, and vouch that you have received the loan and title documents.

The good news is that stricter paperwork means lenders, feel more comfortable offering low mortgage interest rates. People who bought homes fifteen or twenty years ago experienced a simpler mortgage application process but also paid a higher interest rate. The average 30-year fixed-rate mortgage was 8.12 percent in the 1990s and 6.29 percent in the 2000s.

Important Documents to Save

The busyness of life can quickly cause things in our lives to pile up— especially when it comes to mail, statements, and other important documentation. Although it may be tempting to just throw all of this clutter out, there are important mortgage documents you should hold on to, rather than toss out.

Mortgage Statements

A mortgage statement is a document prepared by your mortgage holder. It’s then provided to you with the current status of your loan. You’ll receive these on a monthly basis after you close your loan. You’ll want to hold on to these statements for the life of the loan, at the very least.

Deed

Your deed is the document you need to prove you have a claim to your property. It’s recommended that you keep this document for as long as you own your home. Even though most municipalities keep online land records with a virtual deed, you should still hold on to your personal paper copy in case you need to quickly prove ownership of your home.

Purchase Contract & Seller Disclosures

A real estate purchase contract is a binding agreement between two parties for the transfer of a home or other property. Equally important is the seller disclosure, which is a set of documents completed by the seller of the home that lists any known issues with the property during the time of ownership.

Both of these documents provide the new owner with written evidence of the home’s condition in case a problem is discovered that was not originally disclosed by the seller. Keep these documents for as long as you own your home.

Home Warranty

In the unfortunate event that you need to replace or repair a portion of your house, the home warranty will include all the information you need. This form can be thought of as a written record of protection. Keep this document for as long as you own your home.

Final Settlement Statement

After closing a buyer (and seller) will receive a copy of their final settlement statement. It’s a good idea to keep this document since it lists out the distribution of all the fees and who paid for what, as well as confirms the official settlement date.

 

Do you still have questions about getting a mortgage? Contact The Polder Group at Summit Funding To Learn More.

FICO’s New Credit Score Making It Easier To Get Home Loan

FICO released a new way to score credit: UltraFICO. Potential borrowers – especially those in the 500 to 600 FICO score range or who have little to no credit history – may be able to qualify for mortgages they previously didn’t qualify for. UltraFICO does this by helping to establish credit based on banking and savings activity, rather than credit cards, loans, and other debt.

How may this affect getting a mortgage?

Here’s how:

For potential borrowers, enhancing credit scores with UltraFICO may help them qualify for a mortgage they previously did not qualify for. It may even improve the terms of a loan or open up new financial opportunities when it comes to the details of a loan. UltraFICO may act like a “second-chance score” to benefit two main groups of consumers:

  • Those with little-to-no credit history.
  • People rebuilding credit after a personal financial breakdown.

For lenders, UltraFICO allows them to enhance a borrower’s traditional FICO credit score by pulling non-traditional financial information. For borrowers in the 500-600 range, this could turn a “no” into a “yes.” Lenders use financial details previously not visible on a traditional credit report:

  • Evidence of saving money
  • Maintaining a bank account over time
  • Avoiding a negative balance in an account
  • Regularly paying bills
  • Making other bank transactions

The new score may impact approximately 15 million consumers. It may help those consumers who currently don’t have the debt history required for a traditional FICO credit score.

The new UltraFICO Score is scheduled for launch as a pilot program in early 2019. It is expected to be available to lenders by mid-2019.

CFPB investigates Zillow’s Co-Marketing Program: What Agents Should Know

 

The CFPB’s recent action against Zillow speaks volumes about the mortgage industry’s regulatory atmosphere when it comes to advertising compliance. With costly fines and other serious penalties for marketing rule breakers, loan officers and their business partners can’t afford to ignore the signs of the times.

To help you navigate this arena with confidence, we have gathered the following information detailing the most common compliance blunders they encounter, with 3 ideas on how you can avoid potentially disastrous mistakes.

Always split payment, and show proof

All co-marketing material/expenses must be split based on pro-rata share, and be documented. This means if I pay for half of a co-marketing flier with you, the flier needs to show both of us, with an equal share of the marketing space. You also need to retain copies of checks, co-op forms, etc. when marketing with another person.

Get use to the verbiage

Unfortunately, mortgage compliance can take the fun and elegance out of marketing. We cannot boast about having the best rates or guarantee to close a loan within a set number of days. If your referral partner is engaged in these kinds of promises, it could be best to have a conversation with them, or if need be, steer clear of them altogether since this kind of rhetoric is inviting trouble.

Get use to the disclaimers

Our disclaimers are required by law. We know how ugly some of the long regulatory verbiages can be, or how picky marketing materials have to be to avoid triggering massive disclosures. However, as frustrating as these can be, there is no room for flexibility. The disclosures have to be there to protect everyone involved. If we don’t include these on our advertisements, it will be a serious reason for concern.

If you have questions about our industry, please let us know. We’d be happy to assist you in any way we can! The Polder Group at Summit Funding

Your HomeReady

 

Segments of the potential mortgage market are completely ignored by some lenders. Not only is this a poor business choice, but ignoring certain populations can be seen as a discriminatory practice by regulators. At PRM, we want to serve all communities and bring the dream of home ownership within reach. Through Fannie Mae’s HomeReady program, we can help you to grow your business in underserved communities for credit-worthy clients with low to moderate income. With flexible income guidelines not seen in other conventional programs, HomeReady helps PRM to assist you in bridging the gap for clients who otherwise would have limited financial options. Segments of the potential mortgage market are completely ignored by some lenders. Not only is this a poor business choice, but ignoring certain populations can be seen as a discriminatory practice by regulators. At The Polder Group, we want to serve all communities and bring the dream of home ownership within reach. Through Fannie Mae’s HomeReady program, we can help you to grow your business in underserved communities for credit-worthy clients with low to moderate income. With flexible income guidelines not seen in other conventional programs, HomeReady helps The Polder Group to assist you in bridging the gap for clients who otherwise would have limited financial options.

 

HomeReady Flexible Income Guidelines

 

  • Rental income acceptable
  • Boarder income acceptable
  • Non-Occupant Co-Borrowers acceptable
  • Expanded eligibility for lower income families by potentially using income derived from occupants other than the borrower as a compensating factor
  • Flexible DTI requirements
  • HomeReady increased home affordability in other ways, with low down payment options, which can be less than the required amounts for FHA loans. Additionally, your client also doesn’t have to be a first-time homebuyer, and properties can be more than 1 unit.

 

In order to qualify for the HomeReady program, your client must meet income requirements for the area the subject property is located in.  For low-income census tracts, there are now income limitations. Income limitations by area can be viewed

Here.

https://www.fanniemae.com/singlefamily/homeready-income-eligibility-maps

 

 

If you have a client you think might benefit from the flexibility of the HomeReady Program, contact The Polder Group Today.

Why Expertise Matters for A VA Loan

 

Most industry professionals know that VA Loans can be a great option for some clients, offering a simple and smart solution to their financing needs. However, as beneficial as the VA loan program can be, these transactions still possess traits which require knowledge and finesse to navigate confidently. Over-eager or inexperienced lenders can turn the underwriting process into a nightmare for your client, so it’s important to have an expert on your side.

 

Mishandling of VA loans is more common than you think.  In November of 2016, the CFPB released a report detailing how many consumers had felt cheated or mislead during the course of a VA Loan. You can read the report here.  In the best of cases, the borrowers felt stressed out or confused by the processes. While some unfortunate clients suffered from buyer’s remorse at the closing table or were declined all together when they were already in contract. The question becomes, why did this happen, and how can you help your clients avoid a situation like this?  We can take a look at the data to see how we can avoid repeating these mistakes.

 

VA Loans – Mistakes and Solutions

 

Mistake 1: For some clients, loan terms were not in the borrower’s best interest. Just because a borrower is a Veteran, doesn’t mean that a VA loan is the right choice for them. Without a qualified Mortgage Banker looking out for the borrower’s best interest, borrower’s found themselves in new mortgages that presented new financial difficulties, instead of making their lives easier.

Solution:  You need a mortgage banker who looks at your client holistically, not just as a commission check with legs.  I treat every client with respect and put their goals and needs first. Like you, I want clients for life, with a relationship based on trust.

 

Mistake 2: In many cases, a thorough examination of the borrower’s financial profile was never performed, so qualification-threatening issues were discovered at underwriting, instead of upfront. A lender may lack a deep understanding of VA guidelines which cause the borrower to be declined.

Solution: This is why my team and I request full documentation upfront from the borrower, so issues aren’t caught in the end or the middle of the underwriting process. I work closely with our underwriters so no one is surprised by guideline changes. No one should sell something they don’t fully understand.

 

Mistake 3: For other clients, communication with the lender was either delayed, or non-existent, causing the process to stretch on endlessly, blowing the borrower’s rate lock period, or allowing sensitive documents to expire.

Solution: My team and I engage our clients with clear, transparent communication at every step of the mortgage process. We update both the client and you, so there is never a need to request the status of the loan. The process can be stressful enough without being left in the dark.

 

All of these errors highlight why expertise in lending matters. You need a lender who knows how to work within the VA system, who can set realistic expectations for all parties involved, and who provides one-on-one, personal service with the history and experience to back it up. And most importantly, you can trust I have your client’s best interest in mind during every step of the process.

 

Contact The Polder Group today if you have questions with how we can help your clients obtain smart and confident VA financing!

POTENTIAL DELAYS IN CLOSING DURING TAX SEASON

With tax season in full swing, many of your clients are working to collect, organize and file their 2016 tax returns. Because final tax information must be received before final loan approval, tax season is an important time in the mortgage industry. Here are some potential delays in closing during tax season:

Delays in Closing during Tax Season

After April 18, 2017, the previous year’s tax returns are required and lenders must have a copy of their transcripts or their filed extension in order to close their loan.

The closer we get to the tax deadline, the slower requests are returned by the IRS because of the high demand. This can delay closing for those borrowers that do not keep records of their taxes or are filing their taxes too close to their closing date.

Requesting Previous Tax Returns

During this tax season, many home closings are subject to delay because clients may not have their most recent tax returns on file. Requesting previous years’ tax returns electronically will help speed up the process and allow for a smoother closing when the client is purchasing a home this season.

 Filing Electronically

Filing electronic tax returns with the IRS may be able to help your clients accelerate the documentation process considerably when buying a home in 2017. For buyers hoping to use their 2016 income to qualify, filing their taxes electronically allows lenders to verify their transcripts much sooner; qualifying them with their most recent income.

If you have clients actively looking for homes, please give us a call so we can figure out if their latest tax returns will be required to qualify. We are happy to help our referral partners proactively account for any IRS tax return delays when writing the purchase contract. We would also love to help educate your clients on the timeline of the loan process. Please don’t hesitate to give The Polder Group a call!