Does Your Type of Home Loan Require Mortgage Insurance?

insurance

Are you in the process of getting a new home mortgage or refinancing an existing mortgage? While checking out various types of loans, you may discover that you’re required to pay mortgage insurance. You may wonder why some lenders require this type of insurance? Below are some answers to your questions.

What Is Mortgage Insurance?

Often, most home buyers have difficulty saving enough money for a down payment on a home. Mortgage insurance enables you to buy a home with a smaller down payment than what otherwise may be required.

Typically, lenders require mortgage insurance for loans with down payments of less than 20% of the home’s purchase price. This type of insurance protects your lender – not you – should you fall behind on your mortgage payments and go into foreclosure. This financial guaranty enables lenders to accept a smaller down payment when giving you a home loan.

What Types of Home Loans Require Mortgage Insurance and Under What Circumstances?

Several different kinds of loans are available to borrowers with low down payments that require mortgage insurance.

mortgage insurance

Conventional Loans

For conventional loans, private mortgage insurance or PMI is arranged by your lender and provided by private insurance companies. If you’re buying a home, PMI is required on a conventional loan with a down payment of less than 20%. If you’re refinancing your home with conventional loan and your equity is less than 20% of the value of your home, you’ll also be required to pay PMI.

Typically, you’ll pay PMI premiums until you have enough equity in your home to have a loan-to-value ratio (LTV) of 80%. LTV is the amount of money you borrowed divided by the value of your home.

PMI rates vary depending upon your down payment amount and your credit score. For a conventional loan with PMI, you’re required to have little or no payment at closing. And you’ll pay your insurance premiums monthly. You may cancel your PMI under certain circumstances.

Federal Housing Administration (FHA) Loans

If you’re getting an FHA mortgage, mortgage insurance premiums (MIP) are mandatory on all FHA loans, regardless of the size of your down payment.

For FHA loans with more than 90% LTV, you’ll have to pay mortgage insurance for the life of your loan. For FHA loans with 90% LTV or less, you’re only required to pay MIP for the first 11 years.

MIP rates are the same no matter your credit score. However, you may see a slight price increase if your down payment is less than 5%. Not only will you have a monthly MIP cost to pay, you’ll also have an upfront cost that’s paid as part of your closing costs. However, you can roll the upfront insurance premium cost into your mortgage.

U.S. Department of Agriculture (USDA) Rural Housing Loans

The USDA doesn’t require you to make a down payment on USDA Rural Housing loans. Therefore, to cover this risk, you’re required to pay mortgage insurance. Even if you make a down payment – regardless of the amount, you must pay for this insurance.

The mortgage insurance on USDA Rural Housing Loans is paid upfront as a Funding or Guarantee Fee at closing time. However, you do have the option to finance this fee into your home loan.

Additionally, you’ll also pay an annual fee that’s lumped into your monthly mortgage payments. You’ll have to pay this annual fee for the life of your home loan.

Department of Veterans’ Affairs (VA)-backed Loans

With a VA home loan, you’re not required to make a down payment. Additionally, you won’t have any monthly mortgage insurance payments. However, all veterans taking out a VA loan generally are required to pay an upfront funding fee. This funding fee is a percentage of your loan amount. The fee cost varies depending upon:

You can pay this funding fee in cash at closing time, or you can finance it into your mortgage.

Talk to Your Mortgage Broker for More Information about Mortgage Insurance

For many borrowers, mortgage insurance is an essential part of home-buying costs. If you’re not sure which type of home loan is right for you – or if you may be required to pay mortgage insurance, contact one of the mortgage specialists at Grandview Lending, your mortgage broker in Indianapolis, at 317-255-0062. We can help you evaluate your options and explain how mortgage insurance may factor into your equation. We can also help you figure out how much you’ll have to pay in either upfront fees or as part of your monthly mortgage payment. By understanding all your loan options and any mortgage insurance costs, you can make the best home loan decision based on your needs.

If you are ready to begin, please contact us today at (317) 255-0062. We look forward to helping you finance your investment of land in Indiana.

6 Options to Pay for a Home Renovation

home renovation

Did you buy your dream home 10, 15, 20, or more years ago? Unfortunately, after many years, home buyers often discover their dream home isn’t that dreamy any more. And, they find themselves contemplating a home renovation project.

Homeowners may decide to renovate for a variety of reasons. Their family has grown, and they’ve run out of space. Their kitchen and/or bathroom look dated. Or, an elderly family member may need to move in, which requires accessibility and safety modifications.

If you’re thinking about making improvements to your home, you may wonder how you’re going to pay for your home renovation costs. Below are some different options to help you fund your home improvements.

Option 1: Pay Cash

If you don’t want to finance your home improvements, you can always pay cash. You could buckle down on your expenses and start saving money. You could use a tax refund check or a bonus from work. Or, you could ask a family member for a loan.

Option 2: Pay with a Credit Card

You could pay for your home renovation with your credit card, but that can come with huge ramifications. You could run out of cash and/or credit halfway through your renovations, which would make it impossible to get a consolidation loan to finish up the work. Additionally, if you can’t pay for your entire renovation costs, the unpaid balance on your credit card will rack up heavy interest. Also, if you use more than a third of your available credit, your credit scores could take a hit, too.

Option 3: Get a Home Equity Loan or Home Equity Line of Credit (HELOC)

Getting a home equity loan or HELOC can make sense since any home improvements can increase your home’s value and earn more equity. A home equity loan is a fixed loan with a set payment schedule. A HELOC is a revolving line of credit with a variable interest rate and repayment schedule.

To get a home equity loan or HELOC, you typically need at least 20% equity in your home. Your home equity is the portion of your home that you truly own. To find that number, you take your home’s total market value and subtract the outstanding balance on your mortgage and other liens.

If your combined loan-to-value (CLTV) is too high, you can either pay down your current mortgage or wait until the value of your home increases. The money for your loan or HELOC is borrowed against your home, so your home will be used as collateral for the loan.

Option 4: Take Out a Fannie Mae HomeStyle® Renovation Loan

A Fannie Mae HomeStyle Renovation loan enables you to refinance your current mortgage and include the costs of your home improvements, so you don’t have to take out a second mortgage, HELOC, or other more costly financing methods. Therefore, you’ll only have one home loan, interest rate, and monthly payment.

You can refinance your home with a HomeStyle Renovation loan for up to 75% of your property’s as-completed value. In other words, that’s the appraised value of your home once you’ve completed the renovations.

With a HomeStyle Renovation, you can finance any “value-added” renovations to your home, including structural modifications, energy-efficiency updates, plumbing and electrical system changes, and landscaping.

Option 5: Obtain an FHA 203k Rehabilitation Loan

If you have an older home that needs significant repairs, an FHA 203k Rehabilitation loan may be a finance option for you.

Two different types of FHA 203k mortgage loans are available. The regular 203k loan covers the costs for structural repairs, remodeling, a new garage, or landscaping. The streamline 203k loan is for minor repairs such as energy efficiency improvements, a new roof, new appliances, or non-structural repairs like painting.

With an FHA 203k loan, you are required to provide a detailed proposal of the work you want to do and the cost estimates for each item. Additionally, you’ll have to pay mortgage insurance for the life of the loan.

Option 6: Get a Reverse Mortgage Loan

Are you age 62 or older? Do you own and live in your home? Do you live on a fixed income? If your roof starts leaking, your HVAC system goes out, or you need structural home repairs, how are you going to get the money to make these renovations? A reverse mortgage loan may be your answer.

With a reverse mortgage loan, you can tap into the equity in your home to make the renovations you need. Plus, you don’t have to make any monthly mortgage payments to repay your loan. However, your loan must be repaid if your home is sold or the last remaining borrower on the home title dies.

Do You Need a Loan for Home Renovation Costs?

Wondering where you can go to get help with your home renovation financing needs? Grandview Lending is an Indianapolis-area mortgage broker company that helps individuals obtain the home loans and funds they need to make home improvements. We have experience with HomeStyle Renovation loans, FHA 203k Rehabilitation loans, Reverse Mortgage loans, USDA Rural Housing loans, and many other types of loans. Our home loan experts can help you assess your options and walk you through all the pros and cons of each, so you make the right decision based on your needs.

Contact us today at 317-255-0062 for more information. Get started on finding the funds for your home renovation now!

 

Note: These materials are not from HUD or FHA and were not approved by HUD or a government agency.

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6 Reasons to Refinance Your Mortgage

refinance

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Are you wondering if now is the right time for you to refinance your mortgage? The refinance specialists at Grandview Lending have heard many homeowners voice a variety of reasons on why they want to refinance. Below are some of the common reasons you may choose to refinance your home loan.

Reason #1: You Want to Refinance to Get a Lower Interest Rate

Many homeowners refinance their mortgage, so they can swap their higher interest rates for lower ones. Refinancing to get a lower interest rate can help you save money on your monthly mortgage payments. Therefore, you’ll have extra money each month in your pocket to spend on other items you may need. Plus, refinancing can help save you thousands of dollars in interest that you would be paying over the life of your loan. Think of all the things you could do with that money instead. Therefore, if the present interest rate is lower than your mortgage by two percentage points, you may want to consider refinancing.

Reason #2: You Want to Refinance Because Your Borrower Profile Has Improved

How can your borrower profile improve? Perhaps, you’ve worked hard to improve your credit scores and have cleaned up some of the negative stuff on your credit report, your credit profile has likely gone up. Or, maybe the value of your home has increased, which has pushed your loan-to-value (LTV) ratio into a lower tier, improving your borrower profile. Therefore, you may be able to get a lower interest rate than what’s on your current mortgage.

Reason #3: You Want to Refinance to Switch Your Mortgage Type or Term

When you bought your home, you selected a specific loan type and term for your mortgage. For example, you may have a  5/1 ARM, FHA loan, conventional loan, or another loan product. As for terms, you may have a ARM that adjusts your interest rate after a certain amount of time or you could have a 15-year or 30-year fixed rate mortgage.

When you refinance your mortgage, you have the option to change your loan type and term to take advantage of the benefits offered by the new loan. For example, maybe you want a FHA loan, VA loan, USDA - Rural Hosing loan,  conventional loan, or another loan product with lower interest rates. Or, maybe you currently have a 30-year fixed rate mortgage and you want to pay off your mortgage sooner by changing to a 15-year fixed rate. Or, maybe you need to the exact opposite. Perhaps you want to reduce your large monthly payments by extending your 15-year fixed rate to a 30-year fixed rate.

Reason #4: You Want to Refinance to Get Money for Home Improvements

Are you thinking about renovating your kitchen or bathroom? Maybe, you want to add new siding or put on a new roof? If you have enough equity in your home, you may be able to do a cash-out refinance. Cash-out refinancing enables you to refinance your current mortgage for more than the amount you currently owe. With the extra money, you’ll be able to spend it on the things you want to do. Many homeowners prefer a cash-out refinance instead of taking out a home equity line of credit (HELOC), especially when they’re doing home improvements. Just make sure your interest rate will be lower than you’re currently paying.

Reason #5: You Want Refinance to Build Equity Faster

Are you tired of paying so much in interest? By refinancing to a shorter loan term, such as a 30-year loan to a 15-year loan, you can reduce the amount of your monthly payment that goes toward interest. Therefore, you’ll can build up equity and pay off your principal faster.

Reason #6: You Want Refinance to Consolidate Debt

If you have a couple mortgages or other non-mortgage debt like credit cards or a loan, you can refinance to consolidate all your debt into one loan. And, you may be able to save money in the process with a lower interest rate compared to what you’re paying now.

Are You Ready to Refinance?

Everyone’s financial goals are different when it comes to refinancing. If you think it’s time you should refinance your home loan, contact the mortgage experts at Grandview Lending in Indianapolis. We’re more than happy to discuss your refinance options and help you make an informed decision based on your needs. Get going on your refinance journey and start saving money – call us today at 317-255.0062.

 

Use a Local Mortgage Broker to Get the Edge in a Bidding War

mortgage brokerShopping local can provide you with many benefits – that includes for a mortgage professional. Buying a home in a tight housing market may lead to a bidding war. When you have a locally based mortgage broker, like Grandview Lending, you can stand out from the crowd, which may strengthen your offer.

How Can Working with a Local Mortgage Professional Help You?

An online lender may offer a borrower convenience. You can shop around for rates and terms. You can even submit all your paperwork online. However, an online lender can also be to your disadvantage when it comes to bidding wars.

Online lenders and banks often work with a smaller group of lenders. Therefore, you don’t have much choice when it comes to choosing your mortgage loan. Grandview Lending works with lots of different national and regional lenders. They can offer a wide variety of loan options that meet your specific needs.

Real estate agents like to work with home buyers who have brokers that know the local market. A local broker can understand the housing trends in the local market. They know what types of mortgages are available for the area since they live in the area. An online lender won’t have this knowledge.

Agents also want to work with brokers who successfully get deals done. Since 2006, the mortgage professionals at Grandview Lending have helped many Indianapolis-area buyers get into their dream homes. When a bidding war occurs, the listing agent and the home seller can feel more confident that the sale will close when you’re working with an experienced mortgage broker.

Additionally, reputation matters. Borrowers want to work with someone they can do business with. They want the old-fashioned personal service that Grandview Lending can give. They want to be able to talk with someone when they have questions. With brand name banks and online lenders, you’ll be hard pressed to get that personal touch.

Speed is another factor for many agents. Often, sellers who receive multiple offers will choose a buyer who can close quickly. Local mortgage brokers can help buyers achieve quicker closings by staying on top of the mortgage loan process.

Plus, many agents often have working relationships with local mortgage brokers. That way, questions can be answered quickly and negotiations can go faster.

Work with a Trusted Mortgage Broker

If you’re in the market for a new home, contact the mortgage professionals at Grandview Lending by calling 317-255-0062 or toll free at 866-690-4920. They can assess your mortgage needs and help you find the right loan option for your situation.

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What You Should Know About Your Credit Score

credit score

Photo credit: iStock / Courtney Keating, Veridium Photo

Unless you’re paying cash to purchase your home, which most homebuyers can’t do, you’ll need to get a home loan. That means lenders will look at your credit score to determine whether they’re going to approve you for a mortgage or not.

What Does Your Credit Score Mean?

Your credit score is a three-digit number that represents your ability to pay off your debt. It's calculated based on information on your credit report. Your credit report includes personal facts about you, your financial history, and information about how well you’ve handled your finances and paying your debts in the past. Lenders look at your credit score to decide if you’re going to manage your mortgage loan well and pay off your debt in a timely manner.

What Credit Scores Are Used by Lenders?

While lenders may use a variety of credit scores, the main credit reporting agencies – Equifax, Experian, and TransUnion – use the FICO (Fair Isaac and Corp.) Score. Your FICO Score is determined using a proprietary mathematical equation. This calculation looks at your credit report and compares it to hundreds of thousands of other credit reports to determine your credit risk level.

What It the Average Credit Score?

Credit scores can range from 300 to 850 points. Generally, the higher your score, the better. Lenders will perceive you to be less of a credit risk. Average credit scores range between 660 and 720. Typically, a score above 680 will increase your chances of getting a home loan. However, the minimum credit score needed to buy a home isn’t set in stone. This number is affected by the state of economy. Plus, the type of loan you’re getting, such as a conventional, FHA, or VA loan, can affect the minimum credit score required.

Why Do You Need to Know Your Credit Score?

You need to know your score before you apply for a mortgage since it can affect:

Can Your Credit Score Change?

Yes! It can go up or down depending upon your financial actions. If your score isn’t where you want it to be right now, you can do things to improve it, such as:

However, you should keep in mind, any time you have your credit pulled for credit card or auto loan applications, your credit score will take a hit. Also, if you make a habit of paying your bills late or missing payments, your score will suffer, too.

Will You Be Able to Get a Home Loan?

While your credit score is big factor when it comes to getting a mortgage, it doesn’t tell lenders everything they need to know before they decide who gets a home loan or not. Every lender uses their own criteria to make that determination. So, really it depends on the lender.

Need a Home Mortgage?

Whether you’re looking to purchase a new home or refinance your existing residence, contact the mortgage specialists at Grandview Lending in Indianapolis. We can look at your credit score and financial situation to help you find the best mortgage solution based on your needs. Give us a call today at 317-483-0403 to schedule a consultation and start the loan process.

 

Closing Costs: What You Need to Know

closing costs

Buying a home is a huge investment, but it comes with expenses home buyers need to be prepared for. You must get your finances in order, so you improve your credit score to qualify for a better interest rate. As a home buyer, you need to figure out how much home you can afford. You'll need to save money for a down payment. Plus, you need to get pre-approved for a home loan. The list of things to do can seem endless to home buyers. But there’s one aspect of buying a home that many first-time home buyers – especially millennials – often forget about or don’t totally understand: closing costs.

Below we answer some frequently asked questions about closing costs. With this information, you’ll be better prepared when it comes to finalizing your mortgage deal.

closing costs

What Are Closing Costs?

Closing costs are the fees you pay at closing when the property title is transferred from the seller to you, the buyer.

What Do They Cover?

Closing costs cover the fees for services performed during the home-buying process. Without these services, the home-buying process wouldn’t be carried out very efficiently and you may not find out issues about the property.

These costs can include fees for:

Aren’t Closing Costs Included in My Down Payment?

No. Your down payment is the amount of money you give your mortgage lender as an advance payment on your mortgage. While you make your down payment when you sign off on your loan paperwork, this is a separate payment. It doesn’t include any closing costs.

How Much Are Closing Costs?

Your closing costs can vary based on your mortgage lender, the size of your home and its price. Generally, they run between 3% to 6% of the home’s purchase price. On average, the cost for closing is around $6,000.

Who Pays for Closing Costs?

Typically, the home buyer is the one who pays for these costs.

How Can I Avoid Paying Them?

In some cases, you can ask the seller to pay for some of these fees. However, in a seller’s real estate market, the seller is likely to say “no.” But if the seller is working hard to close the deal with you, they may pay some of your closing costs.

Another option is a low or no-closing-costs mortgage. With this type of loan, your lender will pay your closing costs for you, and roll these costs into your loan. However, a no-closing-costs mortgage usually comes with a higher interest rate. While essentially, you’re paying for your closing costs over time rather than upfront, you’re also paying interest on these fees.

An additional solution is to roll your closing costs into your mortgage. But, again, you’ll be paying interest on those fees over the next 15 to 30 years.

How Do I Find Out What My Closing Costs Will Be?

You can find out what your costs will be at closing on the Loan Estimate and Closing Disclosure Forms. These forms help you understand your mortgage and estimate the costs you’ll have to pay. You should carefully read these documents. While some figures on the estimate may change; others like the interest rate and origination fee are fixed. If you don’t understand what fee is for, or if the cost seems high, contact your lender for more information.

Ready to Purchase a New Home?

Whether you’re just starting the home-buying process or you’re getting ready to close, understanding your closing costs can help you when it’s time to finalize purchase process. When you work with mortgage broker, like Grandview Lending in Indianapolis, our mortgage experts will work with you to find the right home loan with the best terms and lowest rate for you based on your needs. We’ll answer any questions you may have about the mortgage process and your closing costs. And, we’ll help make the transaction process go as smooth as possible.

At Grandview Lending, we’re dedicated to helping you reduce the risk – and stress – of your loan process. Contact us today at 317-255-0062 for more information. We’ll help you find the best mortgage loan for not only today, but tomorrow as well.

5 Reasons You Should Buy vs Rent Your Home

buy vs rent

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Are you currently renting an apartment or home? Have you thought about buying your own home? Many people may find that owning a home just makes more sense financially based on their lifestyle and pocketbook. If you’re trying to decide whether you should buy vs rent, consider these 5 reasons why buying a home may be the right way to go.

You Can Customize Your Home.

Owning your home means you can do whatever you want to your property. If you want to knock down walls to make your house feel more open, you can. You also can change out the carpets for hardwood floors. Or, you can paint your bedroom walls purple. Have you always wanted a swimming pool? You can add one in the backyard. Whatever home improvements you want to make, you can do them without asking a landlord for permission. Plus, you don't have to worry about losing your security deposit. Better yet, sometimes, these home improvements may increase the value of your property, too.

Your Home Is a Solid Investment.

While a home is large purchase, generally, it provides you with a better return on investment compared to other large purchases like a car. Depending on the local market condition, your home should go up in value over time. An experienced real estate agent can’t predict exactly what’s going to happen to a property’s value. But, they can give you an idea of what to expect in the future, based on what’s happened to the property over the previous years.

Your Monthly Payments Will Stay the Same.

When renting, your landlord may raise your monthly rent annually – costing you more money. However, when you buy a home, you’ll likely need to get a mortgage. A fixed rate mortgage is one of the most popular types of home loans. An advantage of a fixed rate mortgage is you’ll have stable monthly payments. So, you'll have greater peace of mind.

Note: Other home ownership payments, like property taxes or homeowners’ insurance may go up annually. Typically, these increases are minimal.  

Equity Is Like a Forced Savings.

One of the benefits of home ownership is you can build equity. When you make your monthly mortgage payment, a portion of that payment goes to pay down the loan each month, giving you equity in your home. Equity is the probable market value of your home minus any liens against the property. Over time, the more you pay on your home, the more equity you have invested. Basically, this investment is like a forced savings. Eventually, when you sell your home after the mortgage is paid off and minus other closing-related expenses, you may walk away with a huge chunk of cash.

You May Be Able to Take Advantage of Tax Deductions.

Homeowners can deduct mortgage interest and property taxes when they file their tax returns each year.

For mortgage interest deductions, with the tax law through 2017, you can deduct the interest you pay on mortgage debt up to $1 million ($500,000, if married filing separately) on your primary or secondary home. Beginning in 2018, the tax law states that for homes bought before December 15, 2017, there is no change to law. But for homes bought December 15, 2017, or later, you can deduct the interest you paid on your mortgage debt for up to $750,000 ($375,000, if married filing separately.)

For property tax deductions, through 2017, the tax law states you can deduct the property taxes you pay on any real estate you own. Beginning in 2018, you can only deduct up to $10,000 ($5,000, if married filing separately) for a combination of property taxes and either state and local income taxes or sales taxes.

More Benefits Why You Should Buy vs Rent

Two of the biggest advantages to owning your own home is you don’t have to worry about your landlord ever kicking you out of your rental property. Plus, you'll never have to talk to a landlord again. However, that also means you’re responsible for all the upkeep of your property.

Still  trying to decide whether to buy vs rent? Currently, interest rates remain at historical lows. Now is a great time to take advantage of purchasing a new home. If you’re ready to pursue home ownership and will need a mortgage to purchase your home, the mortgage experts at Grandview Lending in Indianapolis can help you find the right home loan to fit your needs. We offer a variety of home loan options, like conventional, FHA, VA, and USDA loans, to name a few.  Contact us at 317-255-0062 to learn more. We’ll help you make the best possible decision for you and your family.

Down Payment Insurance: Confidently Buy Your Home

Down Payment Insurance: Confidently Buy Your Home

Photo credit: iStock Photo / Kuzma

Buying a home is a big investment for most buyers. As a part of that investment, you’re often required to put down a down payment on your new home. But what happens if you need to move within 2 to 7 years? More than likely, you would lose your hard-earned assets.  But with PacificPlus Down Payment Insurance Protection, that’s not the case.

What Is PacificPlus Down Payment Insurance Protection?

Sometimes, life events happen outside of your control that can impact your home. You could be forced into a situation where you could lose the down payment investment you made on your home.

PacificPlus Down Payment Insurance Protection is insurance that protects your down payment – even if you must sell your home in a declining real estate market and move. The program covers your down payment costs (up to 20% of your home’s value or a maximum of $200,000). Once all program requirements are met, you’ll be reimbursed for any potential losses.

With PacificPlus down payment insurance, you don’t have to worry about losing your nest egg or your retirement savings if you’re an investor. You’ll have peace of mind, knowing you’re protected.

How Does It Work?

PacificPlus Down Payment Insurance Protection works like an insurance policy to protect you from unforeseen life changes that may require you sell your new home and move. These life events can include a career move, a new baby, an elderly parent who must move in with you, or more.

For example, let’s say you’re a potential home buyer, but your job requires you to move frequently. You’d love to buy house, but you’re afraid your career will require you to move within a few years, causing you to lose your down payment investment.

By purchasing PacificPlus Down Payment Insurance Protection, you can go ahead and buy a home, knowing your down payment is protected.

Therefore, you purchase a home and put down $20,000 as a down payment. Five years later, you receive a promotion that requires you to relocate to another city. Unfortunately, the real estate market is down, forcing you to sell your home for less money than you paid. Without PacificPlus protection, you could have lost your $20,000 down payment. But since you have PacificPlus, you’re reimbursed your $20,000.

It’s really that simple!

What Else Do I Need to Know?

PacificPlus Down Payment Insurance Protection is available as a feature on the following Pacific Union loan products:

Some additional facts about PacificPlus Down Payment Insurance Protection you should know:

Where to Get PacificPlus Down Payment Insurance Protection?

If you’re interested in learning more about PacificPlus Down Payment Insurance Protection, contact the mortgage specialists at Grandview Lending in Indianapolis. We want to make the mortgage experience easy for our customers while helping them to protect their down payment investment. With the right tools, you can make the best financial decision for your individual situation – and gain back control when life’s unexpected occurrences happen. Call us today at 317-255-0647.

FHA Loans Offer Home Buyers Multiple Benefits

FHA loans

 

With all the various mortgage loan options that home buyers can choose from, loans backed by the Federal Housing Administration (FHA) are some of the highest in demand. In fact, about 1 in 5 borrowers use an FHA loan to finance a home purchase.

Why are FHA loans so popular? This video explains some reasons why home buyers are choosing to get FHA loans.

 

 

Besides great low rates, low down payments as small as 3.5%, and closing options within 30 days or less, here are some other benefits you can receive with FHA loans.

FHA mortgage insurance premiums are lower than in the past.

While you may not think of FHA mortgage insurance premiums as a benefit, this insurance is what allows lenders to issue FHA loans to home buyers at low rates and for very small down payments. It also protects the lender in case you were to default on your loan. The good news is, FHA MIP rates have dropped since 2014. And there are ways you to reduce your FHA MIP annually, such as getting a 15-year mortgage term for your loan, or making a down payment of at least 5 percent. Or, you can eventually refinance your loan out of a FHA MIP.

You can use 100% gift funds for your down payment.

You can use gift funds from relatives, an employer, an approved charitable group, or a government homebuyer program, to pay your entire 3.5% down payment. However, you will need to follow the gift fund process. If you’re not sure what that entails, talk to one of the mortgage experts at Grandview Lending in Indianapolis.

You can get approved even if you have a high debt-to-income ratio.

Your debt-to-income ratio (DTI) compares how much you owe monthly to how much you earn. It’s basically the percentage of your monthly income (before taxes) that goes to pay your rent, mortgage, credit cards, and other debt. The current (2015) limits for FHA DTI are 31% for monthly housing payments and 43% for total debt. However, there are exceptions if you’re slightly above those numbers. Just talk to your Grandview Lending mortgage specialist to see if you qualify.

You may qualify with lower credit scores.

Different lenders have different rules regarding minimum credit scores. In a recent report, the average credit score for completed Fannie Mae and Freddie Mac home loans were 754. However, this same report showed that the average FICO for closed FHA loans was about 60 points lower at 686. Generally, FHA loan requirements allow for lower credit scores – about 37% of FHA approvals fell in the 650-699 credit score range while 24% of applicants were in the 600-649 range.

There are lots of FHA-approved lenders.

As a mortgage broker firm, Grandview Lending can help you shop around for the right FHA loan, so you’re not confined to the FHA loan products offered by your bank or another mortgage lender. We have access to many different lenders. Plus, because different lenders use different underwriting methods, if you’re declined by one lender, you could be approved by another.

If you’re ready to take a look at FHA mortgage loans, contact Grandview Lending. We offer several types of FHA loan products like fixed rate, adjustable rate, construction loan, renovation loan, and refinance products. Call us today at 317.255.0062 for a pre-consultation session to learn how you can do FHA the right way.

Interest Rates Are Still Low. Time to Buy a Home?

interest rates

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Got your eye on a charming two-bedroom bungalow? Or, maybe a four-bedroom French colonial with an updated kitchen is more your style.

No matter what style of home you love, if you’re ready to buy, now is the time to act. Although interest rates are slightly higher than five years ago, they’re still on the low end when you compare them over the past 45+ years. Look at the infographic below to see what we mean.interest rates

As you can see interest rates are lower than they’ve been over the years, but that doesn’t mean they’ll stay that way forever. It’s not unreasonable to expect them to go up in the near future. But why is that? There are several factors that affect mortgage interest rates:

Inflation

As inflation causes overall prices to increase, it decreases how much you can buy over time. Mortgage lenders maintain interest rates in comparison to inflation to make sure their interest returns on loans provide them with a real net profit.

The Level of Economic Growth

Mortgages rates are also influenced by economic growth indicators, like the gross domestic product (GDP) and the employment rate. When we have higher economic growth, generally, people have higher incomes and are spending more, including buying homes. With a higher demand for mortgages, interest rates tend to rise. Naturally, the opposite applies in a weak economy. Employment and wages decline, spending habits decrease, the demand for home loans is reduced, and, consequently, interest rates are lower.

Federal Reserve Monetary Policy

While the Federal Reserve doesn’t set mortgage interest rates, it does establish the Fed Funds rate and adjusts the money supply upward or downward. It’s these actions that have an impact on interest rates. Generally, increases in the money supply cause rates to go downward, while a tightened money supply results in higher rates.

The Bond Market

Banks and other investment firms offer mortgage-backed securities (MBSs) as investment products. MBSs are loans with similar characteristics like credit score, term length and equity amount that are packaged together. Mortgage bonds enable lenders to make money now instead of waiting 30 years, so they can continue to make loans to other people. However, MBSs have an impact on mortgage rates. When mortgage rates are down, people are more likely to buy MBSs. But when the economy is doing well, people are more likely to sell their mortgage bonds and put their money in the stock market. Therefore, to attract more investors in MBSs, mortgage rates need to be higher.

Housing Market Conditions

Mortgage rates are affected by trends and conditions in the housing market. If fewer homes are being built or put on the market for resale, less homes are being purchased which pushes down demand for mortgages and reduces interest rates.

What Does This Mean for You?

If interest rates were to rise, that means you would pay more in interest over the years, which could equal a substantial chuck of change depending upon your loan amount. Therefore, to save money, it makes sense (and cents) to purchase a home while interest rates are low.

If you’re ready to shop for a new Indianapolis-area home, contact Grandview Lending to get preapproved for a mortgage loan. We know some of this interest rate stuff and mortgage process can be hard to understand, so don’t hesitate to ask questions. Our mortgage experts will be happy to provide you with answers and help you through the process of obtaining the right mortgage loan for your situation. Call us today at 317-255-0062.