In a competitive market where homes have multiple bids, home buyers wanting to sweeten their deal can be tempted to cut certain contingencies in order to make their offer stand out to the seller. However, the risks of waiving a home inspection contingency could be more devastating to the buyer than just losing the home to another bidder.
What is a Home Inspection Contingency?
A Home Inspection Contingency permits a buyer to enlist a home inspector to look over the home for damages before the deal closes. On the chance that real issues are found in the home, the purchaser has the privilege to negotiate with the seller for repairs or retreat from the deal totally. If a buyer opts out of the home inspection, sellers may be drawn to this offer because they can sell the home “as is” and they are not responsible for issues that aren’t obvious. But this also means that the buyer is purchasing the home “as is” and has no way of knowing what they are in for until they are the new owners of the home.
Common Home Inspections Include:
- Heating and Air Conditioning
- Ventilation and Insulation
Inspectors don’t only look at the unseen parts of a home; they can provide an in-depth analysis which can pinpoint things that may become a problem down the road. A costly roof repair may not be necessary immediately, but it makes a big difference to know how soon it will need to be repaired or even replaced.
Warn your clients that most experts recommend always getting a home inspection. If borrowers waive the inspection, they could easily end up with a home which requires thousands of dollars’ worth of repairs. Unfortunately, by this point they won’t be able to back out or ask the seller for help with repairs.
Buying a home is a major financial undertaking. We strive to educate clients and referral partners on all aspects of a home finance to help alleviate concerns and ensure a smooth home financing process. Call The Polder Group At Summit Funding Today!
Private Mortgage Insurance (PMI) is required for many home buyers who do not have the full 20% down payment to purchase a home. It costs between 0.20% to 1.50% of the balance on your loan each year, based on the borrower’s credit score, down payment and loan term. The annual cost is added to the monthly mortgage payment.
What is PMI?
PMI is insurance which reimburses the lender in the case the borrower defaults on the home loan. It also allows borrowers to refinance their home even if they do not have 20% equity. This is not the same as homeowners insurance, and this insurance does not pay the mortgage if a borrower loses their job. This is simply a way for your client to get into a home without needing to put 20% down to purchase a home.
How do I cancel PMI?
According to the Homeowners Protection Act, a borrower has the right to request the cancellation of their PMI on the day the mortgage falls to 80% of the original value of their primary residence. However, there are other important criteria which must be met to cancel PMI:
- PMI cancellation requests must be in writing.
- Homeowner must be current on mortgage payments with a good payment history.
- Homeowner may have to show there are no other liens on the home (for example, a home equity loan or home equity line of credit).
- An appraisal may be required to demonstrate the loan balance isn’t more than 80% of the home’s current value.
We are always here to help foster your client relationships and assist in their continuous education. If you have any questions, call or email The Polder Group with Summit Funding!
Qualifying for a mortgage with student loan debt is a common obstacle among the American Millennial population. Millions of American Millennials (born between the early 1980’s and early 2000’s) are faced with high amounts of student loan debt but are eager to purchase their first home and move on to the next stage of their lives.
According to a study by The Institute for College Access & Success, the average amount of student loan debt in the United States is $28,950, and some states have an average of over $33,000. There is no doubt that student loan debt can have a negative impact on these young adults looking to purchase a home in the next few years. However, the situation may not be as dire as it seems.
There are two main ways borrowers can lessen the impact of student loan debt on their finances:
1. Fix or improve Credit/FICO score
Making a late payment, or missing one altogether can negatively affect a borrower’s credit score, limiting their ability to qualify for lower interest rates and loan programs. On the other hand, on-time student loan payments can help positively increase a borrower’s credit score and help build their credit, increasing their ability to qualify for more affordable loans. Keep in mind these steps to improving credit.
2. Decrease Debt to Income (DTI) ratio
When qualifying borrowers for a loan, Lenders do not focus on the total debt burden but instead look at a borrower’s Debt to Income Ratio (DTI ratio). The DTI ratio is a percentage which compares the sum of all of the monthly payments a borrower makes, divided by their total gross monthly income. The lower the ratio, the easier it will be to qualify for a loan. If your borrowers’ DTI is higher than 36%, they may want to consider taking steps to reduce it.
- Increase monthly payments- extra payments can help lower overall debt quicker
- Avoid taking on more debt- reduce the amount charged to credit cards and avoid new loans
- Postpone large purchases until you have more savings
- Recalculate DTI monthly to keep track of your progress
Important: Get Pre-Approved
Meeting with a mortgage banker get pre-approved will help the borrower understand potential that issues might occur when purchasing a home. This will also help them to recognize their goals and know what to shoot for when saving money and reducing their DTI ratio.
Don’t let your first-time buyers perceive student loan debt as a major obstacle to qualify for a mortgage. Have them meet with a Loan Officer from “The Polder Group” early in the process to alleviate concerns, and obtain an accurate picture of their ability to qualify.
Homeowners financing a home with less than 20% down payment are required to pay for mortgage insurance. While lenders must automatically cancel private mortgage insurance (PMI) when the outstanding loan balance drops to 78% of the home’s original value, many homeowners are unaware that they can request cancellation a little earlier; potentially saving them money!
PMI monthly costs vary, depending on the size of the down payment and credit score and can be expensive for consumers. The Homeowners Protection Act requires that homeowners have the right to request their lender cancel PMI once their loan-to-value has reached 80%; much sooner than waiting for it to cancel automatically at 78%. Homeowners that meet the required criteria could potentially save themselves money on their monthly payments.
The Consumer Finance Protection Bureau (CFPB) has been cracking down on mortgage servicers that fail to provide notice to borrowers or have “excessive delays” in processing borrower PMI cancellation requests. If eligible, borrowers can request a PMI cancellation by contacting their mortgage payment servicer.
Unfortunately, PMI cancellation does not apply to FHA or USDA government backed loans. They require payment of mortgage insurance premiums for the entire life of the loan. The mortgage insurance cannot be cancelled; instead, homeowners would need to refinance their loan into a conventional mortgage.
If you or your clients have questions regarding mortgage insurance or other home financing needs, don’t hesitate to contact us. Learn more about potential tax deductions on mortgage insurance premiums.
The recent National Association of Realtors 2015 Profile of Home Buyers showed 95% of first-time home buyers and 86% of repeat buyers financed their home purchase. Clients in the market for a new home can increase their chances of a successful home buying transaction by following some of these tips.
Check Credit Reports
Credit reports can affect a client’s mortgage rate and ability to qualify for home financing. It’s important they review their credit report for any errors and take measures to boost their credit score if needed. Homebuyers can always check their credit report for free here.
Get Pre-Approved for a Mortgage
Before clients start a home search, always meet with a mortgage lender to get pre-approved. It will not only strengthen their offer, it helps clients understand their buying potential and helps real estate agents define the field of eligible properties that they can afford. Know the difference between a pre-approval and a pre-qualification!
Boost the Budget
Beyond helping clients create a budget for a home within their range, consider also looking for ways that could help reduce some of the costs. Seller or lender credits or grant funds can help offset closing costs or help with larger down payment funds, possibly expanding their search options.
The average person moves 11.3 times in their lives so it’s also important that clients consider the resale value when looking at homes. While a client may purchase their home as a long-term investment, keep in mind that they may one day need to sell it.
Buying a home is a major financial undertaking. Summit strives to educate clients and referral partners on all aspects of a home finance to help alleviate concerns and ensure a smooth home financing process. Contact us today!
Are you new to town? Do you want to find out where the locals hang out? We asked our staff here at Summit Funding about their hang out spots and we wanted to share the top 10.
- The Rialto (Great Shows!) Tucson brings some of the best and also unique artists to this venue. The best part is the size, which allows for a very intimate feel! The worst seat in the house is about 50 feet away. It is just fun, and a Tucson must! – Celina Stude, Loan Partner
- Cup Cafe at Hotel Congress is probably my most favorite place on the planet! It’s soooo good! Three words BLOODY MARY BAR! Every Sunday the Cup Café serves up the best breakfast This hotel is a big part of Tucson’s history.- Conner Sohns, Loan Officer
- Barrio Brewing Co. is what you would call a hidden gem. The building is next to a railroad and looks industrial, I really dig it!! I love checking out the UofA games and trying the new beers that they have on tap. – Dan Ford, Processor
- Rocks and Ropes is an indoor rock climbing gym. I went as a first time climber, and I had so much fun that I now go twice a year with friends. – Krystal Fountain, Loan Partner
- Prep and Pastry is hands down the best place to have brunch. The staff is on point, and always friendly. They sell out of space quickly but it is so worth it. Make sure you try the mimosas. – Ana Garcia, Business Development
- Maracana Indoor Sports Arena is the home of two amazing indoor soccer fields. You don’t have to be in a league, you can play in a “pick-up” game for only $5. – Derrick Polder, Senior Loan Officer
- Roadhouse Cinemas is the only movie theater in Tucson where I can have a Lazy boy style recliner, a cocktail and a bowl of nacho chips while I watch my favorite box office movies. -Kyle Taylor, Loan Officer
- Penca is the place to go if you want authentic Mexican food. I always order the carne asada tacos and the tortillas are always fresh, soft and obviously delicious. This place is authentic and a great date night. – Alex Pacheco, Loan Partner
- Reilly Craft Pizza & Drink is the bee’s knees! The pizza is amazing and they have three separate bars. Bar number one is inside the restaurant. Bar number two is down in the basement and reminds me of a speak easy. Bar number three is the beer garden outside. – Padraic Macoby, Loan Partner
- R Bar is so trendy and the décor is modern. The bar is all Red, hence the name. They have some very original cocktails and they play classic movies on the wall. I is a hidden location but a cool hang out. – Leticia Armenta, Greetings Partner