How to Reduce or Eliminate Mortgage Insurance

Whether you’re looking to refinance your current mortgage or you’re looking for a new loan, you need to know about private mortgage insurance (PMI) and how it affects you.

PMI is a privately secured insurance that is required on conventional loans with less than 20% equity in the property. This insurance protects the lender against any loss if the borrower defaults on the loan. A mortgage is just a large investment to the lender so they want to protect their interest in your home.

eliminate mortgage insurance

How PMI Works

When you start your loan, a private insurance agent will set up a policy that calculates 2% or more of your loan value that will be charged monthly as a part of your loan. So the higher the overall loan, the more you pay. This amount is based upon your current credit score and the overall down payment.

If you have an FHA secured loan, PMI is required throughout the life of your loan. FHA mortgages are loans that are given to lenders with less than perfect credit scores and lower down payment amounts. So it only makes sense that a PMI would be required.

Reducing and Eliminating PMI

There are multiple ways to reduce and eliminate your PMI. Considering the type of loan is your first start.  If you’re a veteran and you qualify for a VA loan, you’ll never be charged private mortgage insurance. You worked hard to protect your country, now your country wants to protect you.

FHA loans require PMI through the life of your loan. Because FHA loans are available to borrowers who have lower credit scores, and lower down payments, an FHA loan is their only option. But it’s these same factors that make them a higher risk to the lender. Requiring PMI is the lenders way of protecting their interest.

If you have an FHA loan that requires mortgage insurance, the best way to eliminate your insurance is to build your credit, build on equity, and refinance with a new conventional loan.

Conventional Loans

If you have a 20% down payment when you apply for your loan, PMI will not be required on your loan.

Although conventional mortgages may require PMI in the beginning, as you grow the equity in your home you grow closer to eliminating your mortgage insurance. It takes time to build up 20% equity in your home. In the beginning of your loan, more of your payment goes to interest than principle. By paying a bit more every month, you build up equity faster, shortening the length of time required before you can remove the required insurance.

When you hit the point of 20% equity and you qualify, there are two options to look at. If you are sure you have the best loan you can get, you can just request that your lender drop the PMI and lower your monthly payment. But if interest rates are lower, and loans are prime, you might want to consider this time to refinance your house. Contact a broker at Integrity First Lending and see if you qualify for a no closing cost mortgage.

5 Simple Ways to Get Higher Appraisals

Years of building up equity in your home can work in your favor. Before you get ready to call your broker and get your new home upgrade or refinance started, you want to get the most out of your equity. That means getting the best appraisal.

An appraiser is a third party that will give an unbiased opinion of your home’s current value. They are responsible for comparing your home to current marketing values, assessing the value against similar homes in your neighborhood, and the overall condition of your property.

An appraiser helps the lender determine the risk on your home. The lenders are looking for the best return on their investment when putting trust and value into your new mortgage.

higher house appraisal

Get the Outside Ready

Getting your home ready for an appraisal is like putting on your best dress and making sure you focus on your home’s best features.

Start with your home’s curb appeal. Is your front yard trimmed and appealing? This means more than just a mowed lawn. Gardens should be weeded and if possible add a touch of extra color to accentuate your home’s charm.

If you home is being appraised in the warm weather, adding floral planters on your front stoop adds an inviting element to the front of your home. Step back and ask yourself, would you want your family living and playing on this front lawn.

Although the front of your home is your first defense, your back yard should be trimmed and staged as well. Garages, out buildings and decks add value to your home. Make sure your decks are cleaned off and stained. Now is the time for you to do that weekend garage cleanout and have a big garage sale. You can remove all of the extras that you don’t use anymore.

Make the Inside Look Bigger

Once inside your home your appraiser will look at the obvious and the not so obvious. Is there functionality in the layout of your home? Although the layout of your home cannot be changed, the way you perceive flow in your home can be helpful in accentuating its function. Move furniture to open up space and improve walking areas.

Having a clean and organized home creates the perception of space. Put any extra items in your home away and show off its beauty. Don’t overdo the wall décor. This too can give the perception of clutter.

Make It Look New Again

If you want to get the best appraisal from your home, make it feel new again. You can do this by simply putting up a new coat of paint in each of the rooms of your home. Although you may think paint colors that are bright or unique are appealing. This may not be the case to a new buyer who may not have the same taste in color you do. Keep your paint colors neutral and pure.

Your carpets can make you home look older than it really is. Pay a professional to come in and clean your carpets giving them that brand new look. Do you have hardwood floors under your carpet? Consider taking the carpet up and giving your hardwood floors a new life.

When you look around your home consider the value of your windows. Putting new windows in your home can create great value in your home. This does not necessarily mean you need to replace your windows. Start with a good cleaning inside and out. Putting up simple and yet attractive window dressings can give your rooms a blast of color and class.

Point Out the Unique

Does your home have any unique points of interest? It’s these unique elements in your home that give value over the others on your street. Remember that your appraiser has to follow rules when doing an evaluation. Make your home stand above the rest and get a few more dollars added to your appraisal.

Get a New Appraiser

Although appraisers are now required to follow a stringent set of rules, it is still based on the opinion of one person. If you feel like your appraisal was low, get another one. There is no rule that says you can’t get a second opinion.

The amount of your refinance is dependent on it’s evaluation, so make sure your home is all dressed up and ready to go. Any amount of money you put into improving the look will come back to you in the end.

For great rates on refinance or other mortgages, contact Integrity First Lending. We make the home loan process easy!

5 Ways to Avoid Home Purchase Problems

Buying a home can be a complex process, and some homeowners find themselves with a mortgage that doesn’t work for them, or home repair problems that they can’t afford. A little work up-front can save you years of headaches and thousands of dollars.

Avoid home purchase problems

Check Your Credit Score First

Home buyers need at least a credit score of 620 to qualify for a loan. The higher your credit score the better the rate and terms of the loan. Some new buyers will not find their latest credit score, make an offer on a home, put earnest money down, and then try to qualify for a loan. If anything has changed your score to a lower number than what you were expecting, it could terminate the agreement, and you could lose all of the earnest money you deposited.

Get Pre-Approved for a Mortgage Before Shopping for a Home

Even if you know your credit score, lenders factor in many other financial variables that could raise or lower the amount they are willing to lend. The best way to know how much home you truly qualify for is to get pre-approved by the lender. Nothing can be worse than finding the perfect home only to find out later that you can’t qualify for it. A mortgage broker can shop for the best interest rate and terms that fit your situation. You can then shop confidently with your pre-approved amount.

Get a Home Inspection Before Purchasing

Sometimes, in an effort to get that home no matter what, first-time buyers may be tempted to not pay for an inspection. Structural and other necessary home repairs can dramatically increase your initial costs.

A home inspection is a must for all home buyers. Sellers should expect it.

An inspection should be done by a certified inspector who is trained to find problems with the foundation, the roof, plumbing, heating and air conditioning, electrical, and the presence of mold or pests. If any problems exist, you may get the seller to pay for them. If not, you will need to consider the costs and decide to move forward with the purchase or back out without penalty.

Negotiate on Home Price

It is best to work with an experienced and reputable real estate agent to help locate a home and negotiate on your behalf. A real estate agent will understand market trends, home values in the area, and how competitive other buyers are at the time.

In a highly competitive climate, you do not want to try to start with a low ball offer. If you really want the home, your first offer should be at the fair market value for the home. If for some reason your offer comes in too low, or negotiations go back and forth too long, the seller will often find a buyer with a better offer and you end up losing your home over a relatively small amount of money.

Whatever you or your real estate agent negotiates, get it in writing. Verbal agreements are not binding and you will most likely lose if it comes down to a legal battle.

Wait to Acquire New Debt Until the Deal is Done

Nothing will kill a home loan closing faster than a change to your credit situation. While your loan is processing, buying a new car on credit can be just as damaging as opening a new account at a local furniture store. Put off opening new credit accounts or making major purchases until after your loan closes and you have the keys to your new home.

If you can avoid these mistakes and keep learning all you can to help protect yourself, you will come out well and soon you will be living happily in your first home.

We’d love to help get you into your first home. Let’s get you pre-approved.

3 Ways You Save Big by Starting a Home Loan Application Now

Starting a home loan application means you are on your way to receiving your pre-approval letter. That letter will let you know exactly how much you can borrow. That knowledge will help you save time and money as you search and make an offer on a home.

Start a home loan application

Get a jump on fixing any financial issues

Going through the application process will help identify any financial issues that need to be addressed. Things like credit score, debt-to-income ratio, work history, and more are reviewed by the lender. If any issues need addressing, this gives you an opportunity to do that to make sure you qualify.

Save money by positioning for a better rate

You won’t get a true rate for your situation until you apply for a home loan. The information given in your application allows a mortgage broker to shop around for the best terms and rates that fit your situation.

If a financial issue may take time to correct, you may want to consider correcting that issue and re-applying at a later time to qualify for a better rate or higher mortgage amount. In the long run you could save thousands of dollars.

Save time by speeding the time to closing

When all issues are resolved and you have a pre-approval letter in hand, that document will help make you and your offer more attractive to the seller of the home, oftentimes putting your offer ahead of others. The seller will see an serious buyer, an approved funding amount, and will imagine a much smoother and faster closing process. Your negotiations will be taken more seriously and you can find yourself saving time and money in many areas.

Your mortgage broker can help you get a pre-approval letter by having you complete a loan application. You can go to IntegrityLending.com and start the application process online.
We’d love to help get you into your first home, approved and saving money.

Get Your Pre-Approval Letter by Starting Your Application.

Start Your Application Now

Home Negotiation Do’s and Don’ts

You usually don’t get what you don’t ask for when negotiating. So ask responsibly. You want to create a reasonable and fair offer that benefits both parties.

In the process, there are some Do’s and Don’ts that can help make sure you are getting a good deal.

Home buying negotiation

Do’s:

  • Have your real estate agent negotiate for you. An experienced and reputable agent will help you get the deal you want. They should know the market, pressure points for sellers, common and flexible areas of negotiation, and how to time offers and counter offers. Much of the negotiating process is a business dance of sorts. Your realtor will know how to dance well.
  • Know what is most important to you. Knowing this will help temper a common desire to defeat the seller. If you get what matters most to you, you will know what are more flexible negotiating points for you. For instance, is a rock-bottom price more important than having the seller make expensive repairs to the home? Are you more interested in the closing date or that the seller pays the closing costs?
  • Learn the seller’s motivation to sell the home. Knowing whether the seller is looking for a quick sale, has not been able to sell the house for some time, or other factors can help you and your realtor craft an offer that satisfies the seller better.
  • Get it in writing and pictures. If appliances, furniture, or other features are included, spell it out in the contract. Take pictures of what’s included too, so it is very clear to both parties what has been agreed to.

Don’ts:

  • Don’t give a lowball offer. Using a realtor will help prevent you from offering too low and insulting the seller. You would rather get a counter offer from the seller, rather than have the seller tell you to take a hike.
  • Don’t base your offer off of an estimated value you saw online. Online services that list home values can be extremely inaccurate. Trust your realtor to help you come up with the right offer to make. If the home is listed at or below fair market value, it’s unlikely you will get it for less. However, if it’s priced above fair market value and it’s been on the market for a while, a lower offer would be an appropriate starting point.
  • Don’t get hung up on decor. Things like paint, window coverings, light fixtures, appliances, countertops, and carpet can all be easily changed. Don’t make these a focal part of your negotiations. Focus on more important things instead.
  • Don’t show your hand. While you want to learn the seller’s motivation for selling, you do not want to let the seller know any vulnerabilities like how much you’d be willing to concede to get the home. Especially don’t show any desperation, no matter how much you want the home.

Keep your options open as you begin negotiations. Be willing to walk away over major issues, and be willing to compromise where it makes sense to you. Negotiation is your friend. Use all of these tips to make your purchase that much sweeter.

We’d love to help get you into your first home, happy and satisfied. Give us a call at 801.542.0961 or fill out our quick & easy pre-qualification form!

7 Steps to the Home Buying Process

There are at least 7 things you must do to win in the home buying process. Winning means getting a fair deal and being satisfied with your purchase. These 7 things should happen after you receive your pre-approval letter.

Avoid home purchase problems

  1. Work with a reputable and referred real estate agent. You don’t want to just work with the seller’s agent to save the seller money. You need an experienced pro that keeps your best interests at heart, knows local property values, and can help in the negotiation process. Since the seller pays realtor’s costs, it makes sense to use a pro.
  2. Create a wish list. Separate your wish list into 2 categories “Needs” and “Wants.” This will help you prioritize what you really should have in your first home and knowing what you could live without if you have to. This will make it easier to eliminate homes or narrow your search to homes that will suit your needs better.
  3. Expand your location search. While you may have your favorite target neighborhoods or school districts to consider, expanding your search can open many opportunities for a bigger property, a safer neighborhood, a less expensive alternative, or other desirable features.
  4. Visit the property multiple times. Homes can look different at different times of the day. Higher traffic on the streets, increased surrounding noise, and other issues may happen at different times of the day that may dramatically affect your lifestyle. Make sure you would like to live there at all times of the day.
  5. Make an attractive offer. Don’t kill your chances of getting that perfect fit home by low balling an offer or being difficult about a few thousand dollars. Over a 30 year loan period, a few thousand dollars is literally a handful of dollars more per month. Instead, make a fair offer for the property. Your realtor can help you. A fair offer coupled with a pre-approval letter will dramatically improve your chances of getting the seller to accept your offer.
  6. Select a reputable home inspector. You will see this tip repeated in other videos and content on our website. You must pay for an inspection to protect yourself from buying a home with structural hazards and expensive repairs. In case your seller is unwilling to pay for needed repairs, you will want an escape clause in your initial agreement that will allow you to back out of the deal. Your real estate agent can help you with this.
  7. Lock in Your Rate ASAP. Once you have selected your home, lock in your rate. You can lock in your rate up to 5 days before your closing. Get the rate lock in writing with a reasonable expiration date, one that won’t expire before that closing. Your mortgage broker will work closely with you on this one.

Doing these 7 things will ensure you are making a reasoned choice in the home you choose. They will also help you and your offer be attractive to the seller. And finally, they will help you protect yourself and minimize your costs.

We’d love to help get you into your first home, happy and satisfied. Give us a call at 801.542.0961 or fill out our quick & easy pre-qualification form!

Home Loan Pre-Approval: Your Secret Weapon

A pre-approval letter is an official document from a lender that lets the borrower know you are serious, you can get the money, and that the closing process should be smooth and fast. This letter can be shown to sellers at the appropriate time to show the specific mortgage amount they are approved for. These are all things the seller would love to know up front, making it easier for them to accept your offer on the home.

Home loan pre-approval

Pre-approval vs. pre-qualification

A pre-approval is different from a pre-qualification. A pre-qualification simply looks at your income, debt and assets. A lender can give you a very rough estimate of what you might be able to afford. At this point your credit score and history, employment history, and other factors have not been considered yet.

Complete a loan application

A pre-approval occurs after a complete loan application has been completed. An advantage of going through a mortgage broker for this process is that the broker has many more options available to them to match the best loan possible to your situation. Banks and other institutions are often limited by the loan products they offer internally. A mortgage broker literally shops the nation, often beating what the banks and other institutions can offer.

Advantage over other home buyers

As you shop for a home, you may encounter many sellers who started the loan process with other buyers only to learn later that the buyers could not qualify for the loan. Oftentimes, sellers need to sell their property quickly at a fair price. Any delays could be costly to them. Armed with your new secret weapon in hand, your pre-approval letter, sellers will entertain your offer as one with less risk. This can also give you a huge advantage when there are competing offers on the same home.

Your mortgage broker can help you get a pre-approval letter by having you complete a loan application. You can go to IntegrityLending.com and start the application process online.

We’d love to help get you into your first home, armed with a secret weapon.

Get Your Pre-Approval Letter by Starting Your Application.

Start Your Application Now

Attack First-Time Home Buyer Challenges with Confidence

Not knowing what you can afford can be a major stumbling block as you try to navigate through the home buying process.

Hand of the businessman with the house

Know your credit score

Buyers can be best served by finding their current credit score, cleaning up any negatives on their credit report, keeping account balances below 30% of their limits, saving enough for a larger down payment, and by getting pre-approved for their loan. Doing these things will maximize your borrowing power while minimizing your interest rates and other costs.

Know your home buying expenses

Many first-time buyers will casually look at their budget, guess how much of a mortgage payment they think they can afford, and then calculate the size of loan they want to go for, based on that monthly payment amount they calculated. The problem with this is first-time buyers often do not anticipate the additional expenses that go beyond the down payment.

These expenses may include an earnest money deposit that keeps the buyer from seeking other offers while you are negotiating and waiting for processes. An earnest money deposit may be as much as 3% of the purchase price. Let’s say the purchase price of the home is $200,000. A proper earnest money deposit may be $6000.

Closing costs of the loan are typically 2-5% of the purchase price. On that same home, the closing costs could be between $4000-$10,000.

Expenses may also include any prepaid interest and upfront escrows for property taxes and homeowners insurance. These can be in the hundreds to thousands of dollars each.

Expenses can include ongoing monthly homeowners’ association (HOA) fees. HOA fees often range from $200-$400 per month.

You should include an inspection for around $500-$800, and appraisal fees which could be at least a few hundred dollars.

Have cash reserves

While it’s not required, another good rule of thumb is to have 2-6 months of cash reserves equal to the new house payment. This is for unforeseen incidentals like repairs, home improvements, and temporary loss of income.

Armed with the knowledge of these extra expenses, and knowing that you have prepared for each one of them, will help you search for a house you can afford, make a proper offer, know where you can negotiate, and could end up saving you a lot more money.

Seek advice from a professional

As with any challenge that might arise, get more information, seek the advice of a professional, and prepare yourself with confidence.

We’d love to help get you into your first home, paying as little as possible.

Are you ready to ask some questions and talk about the possibility of buying your first home?

We’ll be here for you every step of the way. Give us a call at 801.542.0961 or fill out our quick & easy pre-qualification form!