27 Oct 2023
By Kevin Gahagan
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Turned Down for a Mortgage? What to Do if You are Declined

Home Mortgage

If you have been declined for a mortgage, you may think that buying that new home is out of reach. However, there are ways to turn a rejection into an approval and to find a more accessible loan. Here are just a few steps you can take to learn about your loan options and get the mortgage that works for you.

Find Out Why The Mortgage Application Was Denied

The first step to getting a second opinion is to find out why your mortgage application was denied. Banks commonly deny mortgages for reasons like a low credit score, a high debt-to-income ratio, or concerns about the applicant’s past and present employment status.

To qualify for a mortgage, most lenders want to see someone with a credit score of 640, a debt-to-income ratio of less than 43 percent after the mortgage is included and at least 30 days in your current position if using wage income to qualify for the loan.

Not All Lenders View An Application The Same Way

A good reason why it is worthwhile to ask for a second opinion about your ability to get a loan is because no two lenders will view an application the same way. For one lender, a credit score of 650 is insufficient for getting a loan – but another lender might be more than happy to offer you a mortgage with a score of 650. To get a second opinion, you may wish to talk to a mortgage broker who will be able to scan a variety of loan programs to find one that works for you.

There Are Ways To Find Down Payment And Closing Cost Assistance

Those who have a low credit score or other questionable metrics may be able to qualify for a loan by offering a larger down payment. While a first-time buyer may not have the cash on hand to make a larger payment, there may be programs that provide grants or low-interest loans that can be used as part of your down payment or to help pay closing costs. With this extra money, it may be possible to overcome lender objections and obtain a mortgage.

If your mortgage application has been rejected, it doesn’t mean that you can’t get a mortgage from another lender. If you’re ready to buy a house but just need to clear the mortgage approval hurdle, there are ways to get a leg up.

26 Oct 2023
By Kevin Gahagan
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What Are The Pros And Cons Of ‘No-Deposit’ Mortgage Deals For First-Time Buyers?

Home Financing Tips

“No-deposit” mortgage deals for first-time buyers refer to mortgage options that allow buyers to purchase a home without having to put down a deposit or a down payment. Here are the pros and cons of such deals:

Pros:
Lower upfront costs: The most significant advantage of a no-deposit mortgage is that it eliminates the need for a substantial upfront deposit. This can be beneficial for first-time buyers who may struggle to save a large sum of money for a deposit.

Increased affordability: With a no-deposit mortgage, first-time buyers can purchase a home with a smaller amount of savings.

Potential investment opportunities: By utilizing a no-deposit mortgage, first-time buyers can allocate their savings toward other investments or use the funds for home improvements.

Cons:
Higher borrowing costs: No-deposit mortgages typically involve higher borrowing costs, including interest rates and fees. Lenders often consider these deals riskier, so they may offset the risk by charging higher interest rates or requiring additional insurance or guarantees.

Limited mortgage options: No-deposit mortgage deals are not as widely available as traditional mortgages. Lenders may have specific eligibility criteria or restrict the types of properties that qualify for these deals.

Negative equity risk: By not providing a deposit, buyers immediately start with little or no equity in their property. If property prices decrease, there is a higher risk of falling into negative equity. Negative equity occurs when the outstanding mortgage balance exceeds the value of the property.

Stricter eligibility criteria: Lenders offering no-deposit mortgages may impose stricter eligibility criteria. They may require a higher credit score, proof of stable income, or additional financial commitments. First-time buyers with a limited credit history or irregular income may find it more difficult to qualify for these deals.

Long-term financial implications: Opting for a no-deposit mortgage means taking on a higher level of debt. Buyers must carefully consider their long-term financial situation and ensure they can comfortably afford the mortgage repayments.

It is essential for first-time buyers to thoroughly research and assess their individual circumstances before committing to a no-deposit mortgage. Consulting with a mortgage advisor or financial professional can provide further guidance and help make an informed decision.

25 Oct 2023
By Kevin Gahagan
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What is a Closed-End Second Mortgage?

Home Mortgages

A closed-end second mortgage is a type of loan that allows a borrower to obtain a lump sum of money using their home as collateral. It is considered a “second” mortgage because it is taken out in addition to the borrower’s primary mortgage.

The term “closed-end” refers to the fact that the loan has a fixed amount and a predetermined repayment schedule. This means that once the borrower receives the lump sum, they cannot access any additional funds from the loan. The repayment schedule typically ranges from 5 to 15 years and involves monthly payments that include both principal and interest.

Here’s how a closed-end second mortgage typically works:

Application and Approval: The homeowner applies for the loan with a lender and provides documentation such as income verification, credit history, and home appraisal. The lender will use this information to determine the amount of money the homeowner is eligible to borrow and the terms of the loan, such as the interest rate and repayment schedule.

Loan Disbursement: Once the loan is approved, the lender will disburse the funds to the homeowner in a lump sum.

Repayment: The homeowner will then begin making monthly payments that include both principal and interest until the loan is fully paid off. The repayment schedule typically ranges from 5 to 15 years.

Fixed Amount and Predetermined Repayment Schedule: Closed-end second mortgages are called “closed-end” because they have a fixed amount and a predetermined repayment schedule. This means that once the borrower receives the lump sum, they cannot access any additional funds from the loan.

Collateral: A closed-end second mortgage is a type of secured loan, meaning that the home serves as collateral. If the homeowner fails to make payments on the loan, the lender can foreclose on the property and sell it to recoup the outstanding balance on the loan.

Closed-end second mortgages are often used for large expenses such as home renovations, college tuition, or debt consolidation. Borrowers should carefully consider the terms and conditions of a closed-end second mortgage before agreeing to the loan, as failing to make payments can result in foreclosure and the loss of their home.

24 Oct 2023
By Kevin Gahagan
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Reasons You Need an Insurance Binder and How to Get One

Mortgage

When a borrower applies for a mortgage loan, the lender typically requires proof of insurance coverage before they approve the loan. An insurance binder is a document issued by the insurance company that provides temporary proof of insurance coverage until the official insurance policy is issued.

The insurance binder for mortgage loans will typically include information about the property being insured, the coverage limits, and the effective date of the policy. The lender will review the insurance binder to ensure that it meets their requirements for coverage and will usually require the borrower to maintain insurance coverage for the duration of the mortgage loan.

How to Get a Mortgage Insurance Binder:

  1. Choose an Insurance Provider: You typically obtain mortgage insurance from private mortgage insurance (PMI) companies or the Federal Housing Administration (FHA) for government-backed loans. Your lender can recommend PMI providers if you’re not sure where to start.
  2. Application: Once you’ve chosen an insurance provider, you’ll need to complete an application for mortgage insurance. This application will include details about the property, your financial situation, and your loan terms.
  3. Underwriting Process: The insurance provider will review your application and assess your creditworthiness. They will also evaluate the property to determine its insurability.
  4. Insurance Premium: You will be required to pay an insurance premium for your mortgage insurance. This can be a one-time premium, a monthly premium, or a combination of both, depending on the type of mortgage insurance and your specific loan terms.
  5. Obtain the Binder: Once your application is approved and you’ve paid the premium, the insurance provider will issue a mortgage insurance binder. This is a document that confirms you have mortgage insurance in place.
  6. Provide to Lender: You will need to provide the mortgage insurance binder to your lender as part of your mortgage application. The lender will then include this information in your loan file.
  7. Ongoing Premiums: If you have monthly premiums, remember to keep up with these payments for the duration of the mortgage. Failure to pay the premiums could result in the cancellation of your mortgage insurance.

It is important for borrowers to understand that an insurance binder is a temporary document and should not be used as a replacement for the official insurance policy. It is also important to review the insurance policy carefully to ensure that it provides the necessary coverage for the property being insured.

23 Oct 2023
By Kevin Gahagan
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What’s Ahead For Mortgage Rates This Week – October 23, 2023

Financial Reports

This week featured the usual retail sales report which shows consumer demand and as well as an indicator of the velocity of money, not only for consumers but business to business as well. An increase would show an increase in national and local increase in economic activity, which is important as we move into Q4 of the year; where the holiday season is expected to see an increase in consumer activity.

Retail Sales
Retail sales have exceeded expectations this month showing month-to-month increases across the board:

  • Retail sales are up 0.7% from the previous month with an expected increase of 0.3%.
  • Retail sales with auto removed show an increase of 0.6% compared to an expected 0.2% increase.
  • Business inventories are also above the expected increase at 0.4% compared to 0.3%.

Housing Starts & Building Permits
U.S. Housing Starts rebound in September in September after a sharp drop in the prior month. Largely, economists are feeling that builders have been losing confidence since rates have peaked over 7% and housing is expected to trend lower until the end of the year.

  • Construction of new U.S. homes rebounded 7% in September to an annual pace of 1.36 million units after a sharp 1.5% drop in the prior month, the Commerce Department said Wednesday.
  • Building permits, a sign of future construction, fell 4.4% to a 1.47 million rate.
  • Existing home sales beat expected sales with 3.98 million sales compared to the expected 3.90 million sales.

Key point: The pace of construction for single-family homes in September has risen by 3.2% and apartment building construction rose by 17.1%

Mortgage Applications Increased for the Month of October
MBA Mortgage Applications Increase, a measure of mortgage loan application volume again.
Primary Mortgage Market Survey Index

  • 15-Yr FRM rates seeing a week-to-week increase by 0.03% with the rates now at 92%.
  • 30-Yr FRM rates seeing a week-to-week increase by 0.06% with the current rate at 63%

MND Rate Index

  • 30-Yr FHA rates increased week to week seeing a 0.28% basis point increase. Current rates at 40%
  • 30-Yr VA rates increased week to week seeing a 0.30% basis point increase. Current rates at 44%

Job Claims
Those who applied for unemployment benefits last week fell to a nine-month low of 188,000, subverting expectations that layoffs would rise as the U.S. interest rates continued to increase.

Initial Claims were 188,000 compared to the expected claims of 211,000. The prior month was 211,000.

What’s Ahead
This week’s scheduled economic reports include PMI data, along with new home sales. There will also be a national GDP data release which can give an indication of the growth of markets and economy as a whole. Lastly, Personal Income and Spending will be at the tail of the week along with PCE Index numbers.