FBC Mortgage Blog

A mortgage is a secured loan that lenders make to you, so that you can purchase a home . The process isn’t simple. There are several steps, requirements and terms that any borrower must be aware of when going to a bank for a mortgage. First-time homebuyers especially need the additional information.

Entering into a mortgage note without knowing about the process can prove hazardous to the borrower’s finances later. You can prevent future financial trouble by learning 12 things about the process that all buyers should know.

The Jargon 

The terms used to create and define the loan and the home lending process. Knowing the terms can help you in bargaining for the home and in shopping around for a home loan. The most important terms are the following:

Principal: the amount of money that constitutes the loan on the home you are purchasing. This is the amount of money that you will borrow.

Interest: the lenders price for loaning you the money. The first years of loan payments are primarily interest payments, to pay the lender for borrowing the money.

Points: the cost associated with buying your interest rate down. Points are a percentage of the home loan. For example 1 point is equal to 1% of the loan amount.

FICO Score: the credit score that the lenders look for when judging creditworthiness. The scores are gathered from three major credit reporting agencies, which are Experian, Transunion and Equifax.

Closing: the day that the papers are signed and the loan terms are accepted. You get ownership of the home on this day. You also take on the debt for buying it as well.

Down Payment: the money that you pay the lender before the loan is given. A down payment is a percentage of the home price. For example a 5% down payment would equal 5% of the purchase price.

These terms are important for any buyer to know and understand before embarking upon the home buying process. 

Your Numbers

When buying a home, you must know certain numbers that correspond to your personal finances and obtaining a mortgage. You must locate and always know your:

• Credit score
• Loan principal
• Interest rate
• Down payment amount
• Maximum budget for home buying
• The loan term

Knowing these numbers, especially the last one, can be a great help during the home and loan negotiations. The credit score and interest rates change often, so you may have to look them up a few times throughout the process, as needed.

Getting through the home buying process isn’t easy. Making the wrong move can haunt you for the life of the loan. If you have this basic information at your disposal, the process will become so much easier. It will make finding your dream home more of a reality than it ever was before.

The original Home Affordable Refinance Program or HARP was not as successful as it was predicted to be. Designed to increase home retention and lower monthly mortgage payments, this government program helped only eight-hundred thousand homeowners over 3 years. Considering the amount of foreclosures over that period, this program barely made a dent in helping borrowers.

One of the dominant problems with the original Home Affordable Refinance Program was that it did not take into account the fact that many homes lost a substantial amount of value in the crash. This meant that many homeowners who were making timely payments were unable to refinance because they owed more than their homes were worth.

HARP 2.0 takes this fact into account and allows homeowners who owe more than their homes are worth to participate in the program. While this new program seems better than HARP’s first incarnation, it still has strict requirements for participants.

HARP Program Requirements

• Fannie Mae or Freddie Mac must have purchased the homeowner’s mortgage prior to June 1, 2009.

• The homeowner must be current on his mortgage and have no late payments within the past 6 months. This program defines a late payment as any payment that was more than thirty days past due.

• There must be no more than 1 late payment in the last twelve months.

• The homeowner must not have previously refinanced through the Home Affordable Refinance Program.

Removing Barriers to Refinancing  

While still difficult for underwater homeowners, this new version of the government program has removed many obstacles to refinancing that were present in earlier versions of the program. In the previous version, the program limited participants to those who owed less than 125-percent on their homes.

Even with this cap, many banks refused to finance homeowners who owed more than 105-percent. The new program releases the mortgage lender from any liability and does away with the cap. Lenders have the right to place their own caps on LTV ratio, but the 3 largest banks in the United States have stated that they are willing to follow the new program’s guidelines to the letter.

Participants in this program are still subject to lenders overlays. Overlays are additional requirements that lenders can put in place beyond the program’s listed requirements. These overlays generally involve credit score, work history, income level, etc. Mortgage companies can impose overlays, but because of the release of liability, many mortgage companies are willing to offer this program with very limited or no overlays at all.

If you are a candidate for this latest government program, you should see your lender as soon as possible. Demand will be high during the initial months as struggling homeowners flood the banks with applications. You should expect delays, but if HARP 2.0 works as promised it should greatly improve home retention throughout the United States.

Contact FBC Mortgage to get started on securing a HARP loan.

To most people who own a home, it’s a generally accepted principle that having a mortgage is a normal and healthy debt to carry. After all, very few people have the funds to pay off a loan of that magnitude upfront. However, it’s actually a smart financial decision to start paying off your mortgage early for several reasons.

Debt Servicing as Investment

Most people wouldn’t look at paying off debt as a form of investment because it doesn’t pay dividends or interest. However, depending on the market and your loan, paying off your mortgage early can be a better investment strategy than actually investing the money in stocks, bonds, or other vehicles. 

For example, if your interest rate is 7%, you have to look at your other investments and ask what their guaranteed return is. If it’s less than 7%, as many investment vehicles currently are, then you are spending more on interest on your mortgage than you are earning through investments. It just makes more sense to pay off higher interest loans early so that you spend less on interest.

Mortgage Compounding Works Against You

In savings accounts and investments, compound interest is your friend and earns you more money. When it comes to debt, compound interest means that you’ll pay for your home twice in interest if you make regular payments for 30 years. The good news is that if you make just one extra mortgage payment per year, you can pay off your loan in approximately ten years or less. Even small extra principal payments early in your loan can make a big difference in the length of your loan and the amount of interest you pay.

Peace of Mind and Financial Freedom in the Future 

Making extra payments in the current years will free up your finances in the future. If you build up your equity now, you will have the option to take out a home equity loan in the future for important purchases or investments. 

No matter what your reason, choosing to pay your mortgage off early is a good decision for your financial future. For more information on paying your mortgage off early and other ways you can save money over the life of your loan, contact FBC Mortgage, LLC. Our staff can evaluate your current loan and make sure it is the right one for your housing and financial goals.

A home mortgage, for most people, is the largest debt they will take on in their lifetime. While a mortgage is a liability that you are responsible to pay, it can also be a vehicle for helping you to consolidate other high-interest debt. Here are three ways to use your mortgage for consolidating debt.

1. Use a Cash-Out Refinance

For an existing home mortgage, a cash-out refinance is one way to use your home for consolidating debt. This option involves refinancing for an amount higher than the principal owed on your current loan. For instance, if your home is worth $250,000 and you currently owe $150,000, you could refinance to a $200,000 loan and use the additional $50,000 (less closing costs) to pay off credit card or other high-interest debt. The interest rate on your new mortgage will most likely be much lower than the interest rate on your credit cards, and the debt will be easier to manage with only one monthly payment.

2. Use a Home Equity Loan

Another option to consolidate debt with a home mortgage involves taking out a home equity loan. This is similar to option one, but does not involve refinancing. You will save on closing costs, but you may have a higher adjustable interest rate than a cash-out refinance. However, the rate should still be much lower than the one you have on your credit cards.

3. Take Out a New Mortgage

Sometimes it is possible to consolidate debt when buying a new home, although it is hard because you don’t have existing equity to tap into in the home. This method may require a sizable down payment, and since some of that down payment will go towards the debt consolidation, your mortgage insurance premiums may be larger. Rather than going this route, it’s probably a better idea to use your liquid assets to pay down high-interest debt prior to seeking out a mortgage. This option has the added value of improving your credit , and thus improving your chances of getting a good interest rate when you do take out a mortgage.

No matter what options you are considering to consolidate your high-interest debt, it is important to weigh all the factors involved to make sure you are truly saving money long term. For more information on how a mortgage can help you consolidate your debt, contact FBC Mortgage, LLC now . We can provide you with a free consultation to help determine the right mortgage for you.

With the large number of distressed properties available on the market today, a savvy buyer can pick up a great bargain if they do their homework and make the right choices. A short sale (where the lender agrees to forgive some of the debt owed on a home in order to sell before it goes into foreclosure) may seem like a great way to save some money.

But this type of sale involves some significant risks. Here are some important things to take into consideration when thinking about purchasing a short sale:

What Hidden or Additional Costs Will I Incur with this Purchase?

Although a short sale can potentially be a great deal, it can also carry with it hidden costs that can add up quickly. If the seller has no funds, the buyer may get stuck paying costs normally covered by the other party, such as overdue homeowner’s association fees, back taxes, or a site survey.

How Long Can I Afford to be in Negotiations on this House?

Ironically, short sales often take longer than normal sales to close and you could be going back and forth for months with the bank that financed the seller’s original purchase. If you have a moving deadline, or if you have to stay in expensive temporary housing until closing is completed, the savings you’ll have from a pre-foreclosure may be counterbalanced by the expenses you’ll incur waiting.

How Much Can I Afford in Renovations, and How Much Work am I Willing to Do?

In a normal home sale, you have the option to request that the seller make repairs or improvements based on what’s found in the inspection. In a short sale, the home is usually sold “as-is,” so any repairs or renovations would be your responsibility. It’s important to weigh what your budget is and whether the price you will be paying is worth the hassle of fixing up the home yourself.

Although there are many factors that can sour the sale of a pre-foreclosure home, there are certainly plenty of deals out there for the buyer who is willing to look around and make a smart decision. If you are considering buying one of these distressed homes, the most important thing you can do is make sure you use a mortgage lender that is familiar with the pre-foreclosure purchasing process .

What D.C. Doesn’t Understand: The Housing Fix is Easy

I recently wrote a letter to President Obama, the content of which is briefly described below. Amazingly enough, I have received no response to date. Unfortunately, homeowners in underwater mortgages continue to suffer as our unresponsive representatives in Washington lack any understanding of the U.S. housing market.

An Easy Fix to Cure the Economy

As the CFO of FBC Mortgage, LLC, Orlando’s largest privately owned Mortgage Bank, it pains me to see a clear solution as the problem worsens by the day. Problems that litter the news are uniquely correlated – the U.S. Debt Crisis, high unemployment, most underemployed workers since the Great Depression, underwater mortgages, foreclosures, short sales, U.S. GDP in free fall, stock market volatility – it just continues in a morbidly viscous circle. However, the housing fix is easy and it will quickly cure what ails the U.S. economy.

This is as basic as I can describe the fix (so Washington can hopefully understand). Allow responsible, underwater homeowners to refinance their home without an appraisal.

Appraisals of foreclosed or distressed properties continue to drag down the value of homes of those of us fortunate not to be in foreclosure. The continual declination of home prices, due to current appraisal rules, has led to the largest moral dilemma of our time, the context of which shakes the U.S. financial system to its very core. If the price of a borrower’s home declines, will a borrower repay a debt lent from a U.S. bank?

Government Programs are Not the Solution

We have seen government programs for over two years fail to counteract this dilemma. And the worst part is that Washington has encouraged this behavior while the big banks fuel the fire. Why is it that the bank will only take your call if you are behind in your payments? Do borrowers really need to destroy their credit to get someone to listen to them?

The beauty of refinancing a borrower with a high interest rate is threefold because it: (1) reduces the payments for the borrower, helping to keep the borrower in the house, (2) helps the borrower avoid foreclosure, which in turn, helps home prices stabilize and (3) funnels the savings from the reduced payments into the struggling U.S. economy.

The change needed wouldn’t take 2,000 pages from the House and Senate. Maybe five at the most. The fix is easy. But will Washington ever understand?

Dyron Watford, MBA, CPA
FBC Mortgage, LLC
Chief Financial Officer

How to Get a Mortgage Abroad

It’s no surprise that many people who vacation in Orlando fall in love with the area. With all the amusement parks, shopping, fine dining, and attractions located in close proximity, Orlando is the ideal holiday spot for all ages.

For visitors from other countries, however, the question arises on how to get a mortgage abroad to finance their dream vacation home. International visitors are probably already familiar with the mortgage process in their home country, but most mortgage companies will not finance properties outside the country in which they are based. Foreign visitors will have to use a U.S. company to finance their Orlando mortgage.

U.S. Citizenship Not Required to Get a Mortgage in the U.S.

Luckily, you don’t have to be a US citizen to get a mortgage in the United States. International applicants have to meet the same requirements as a US citizen to qualify for a mortgage. This includes passing a credit check and providing sufficient proof of income and assets. Applicants can also expect to need at least 20% of the purchase price for a down payment. Some companies require 25% or more for a second home or investment property.

Qualifying for a Mortgage in the U.S.

The process for qualifying for a mortgage in the U.S. is similar for a citizen or an international visitor. Foreign applicants, however, have a few extra items to consider in their decision to purchase a vacation home in Orlando.

Purchasing property in the United States does not afford residency status to the purchaser, so it’s important to be mindful of the restrictions of the visa held by the traveler. Since a foreign national can’t live in their second home full time, utilizing a local property management company to rent the home out as a vacation spot for part of the year is a great way to subsidize payments.

There are no limitations on international buyers becoming landlords, but these owners may need to apply for a US taxpayer identification number to pay taxes on any profits.

Finance a Mortgage in Orlando with a Skilled Company

Calling another country home doesn’t exclude a buyer from having a little piece of the magic of Orlando all their own. Although the process of getting an Orlando mortgage is the same no matter what the nationality, an international buyer should work with a mortgage company or real estate agent who has experience working with foreign buyers.

One thing that you probably need to do after getting a divorce is to refinance your home. Your ex is going to want to get the mortgage out of his or her name as soon as possible. Therefore, you want to refinance so you can afford to stay in the home. There are several things that you need to do when refinancing after divorcing your spouse.

Check Public Records

First, make sure that your spouse filed the necessary paperwork that deeded the property over to you. You will not want to begin the refinancing process until the property is in your name only. Once you know that you rightfully own the property, you can begin the process of mortgage refinancing.

Choose a Mortgage Lender

You might have a current lender that you know and trust, but it will not hurt to shop around for a better deal. Interest rates are very competitive now, so a lower interest rate and lower closing cost can save you thousands of dollars. You should compare transaction fees and the other fees that refinancing will cost you. You should also check your credit score.

Contact a Mortgage Lender

Once the quit claim deed has been filed, you can contact a lender to ask about refinancing. In many cases, you will be asked to supply a copy of the Final Judgment and the quit claim deed to prove that you solely own the property. Your ex might need to sign paperwork closing out the original mortgage, and it may be necessary for him or her to be present at the time of closing. However, in some states, this is not required.

Make sure that you collect the proper documents. Most lenders will want to see your tax returns for the previous year, as well as your W-2 and 1099 forms. You probably will also need to provide proof of employment, such as pay stubs or other documentation from your employer.

After everything is in place, you will hopefully be approved. The last step will be to show up at the closing and sign the paperwork. Your refinance will then be complete.

Refinancing after a divorce could be the first step in helping you regain control of your life. You need to protect yourself and your credit; so get your home refinanced, and then you can start looking toward your future.

The housing industry has been supported and partially subsidized by the government since the Great Depression. Today, people looking to buy their first homes can take advantage of loans guaranteed or insured by the federal government.

The Department of Housing and Urban Development, acting through its subsidiary the Federal Housing Administration, can help new borrowers. The Federal Housing Administration (FHA) offers insured mortgages for borrowers who qualify. Private lenders are relieved of the risk of lending to these borrowers because the FHA insures the loans. This can be a great boon to borrowers with less than perfect credit or who may need a gift to close.

Veterans Administration

Government home loans can help people buy their first home even if they have a checkered credit history. Government loans do this through programs like the Federal Housing Administration insured mortgage program. The FHA is not the only agency that is in the business of providing home loans. Other government agencies and departments can help borrowers obtain their first home.

The Veterans Administration and the United States Department of Agriculture also offer these programs. The Veterans Administration (VA) helps discharged and active members of the U.S. military find homes. The VA offers both zero down payment and low down payment options, accommodating both savers and non-savers.

Department of Agriculture

The United States Department of Agriculture (USDA) offers zero down payment options for civilians. In fact, the Department offers a loan option where borrowers can receive financing equivalent to 102 percent of the purchase price. The extra 2 percent goes toward home repairs, which can be completed either before or after the sale.

The USDA program is designed for lower-income borrowers. The Department stipulates that borrowers must not exceed 80 percent of the median income for their area. This program is one of the few government-backed home loan offerings that does not require mortgage insurance. This saves the borrower hundreds of dollars each month.

Select the Government Program That’s Right For You

Each government program is right for different borrowers. The veterans program is only open to current or past members of the military. USDA and Federal Housing Administration loansare the best government home loans on the market for non-military buyers. Credit has become so important that borrowers without a high enough credit rating essentially get locked out of key markets. These government programs help them break the credit barrier to homeownership. Usually they have low rates, and programs that require mortgage insurance are often less expensive than private options. These programs are a great boon to first time home buyers.

FBC Mortgage, LLC is an award winning company that specializes in government home loans for first-time home buyers. To find out which government home loan is right for you, click here to schedule your free mortgage consultation.

Prospective homebuyers received good news earlier this year when the 2011 Federal Housing Administration loan limits were announced. Each year, the department of Housing and Urban Development (HUD) sets FHA loan limits for the year and they are specific to each county within each state. For 2011, the loan limits remained at the same levels they have been, despite the mortgage meltdown of the past few years.

Additionally, since the credit restrictions on conforming loans have been increased, the more lenient standards of the Federal Housing Administration are very attractive to prospective homebuyers in all demographics. Several new home loan programs are available to assist homeowners in refinancing their current loans as well as preventing foreclosure. These programs include:

•FHA
•FHA 203 K
•Reverse Mortgages
•Fannie Mae
•Freddie Mac
•VA
•USDA

Since the Federal Housing Administration rates are still at record lows, the higher loan limits maintained for 2011 mean that more borrowers will be able to afford homes; loan limits for 2011 start at $271,050 and super jumbo loan limits for high cost areas are in excess of $1 million.

Advantages of These Loans

•Smaller down payments
•Lower interest rates
•More lenient credit requirements
•First time home buyer program
•Assumable loans with qualifications

Compared to conventional loans, Federal Housing Administration home loans require as little as 3-1/2% down. Although 2011 saw the institution of a minimum credit score requirement, government loans remain easier to qualify for, with the minimum credit score being at 500 although most lenders require a 620 score to qualify for a Federal Housing Administration home loan.

Federal Housing Administration interest rates currently hover between 4% and 5%, depending on the length of the mortgage desired, which is considerably lower than conventional rates. Loans are available as either fixed or adjustable rate mortgages.

The mortgage crisis affected FHA loans as well as conventional, but credit requirements are still less restrictive for this type of government loan than for a traditional conventional mortgage loan. In addition, the substantially lower interest rate enables prospective homebuyers to qualify for more home for their money.

First-time buyers, even those with damaged credit, can utilize these government loans to realize their dream of owning a home.

Prospective home buyers interested in obtaining a Federal Housing Administration home loan can click here to research FHA mortgage limits.