Tag Archives: home loans; lenders

Freddie Mac’s Home Possible Loans

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With as little as 3% down payment required, Freddie Mac’s Home Possible Mortgage loans are ideal for low to moderate-income borrowers with few savings, first-time homebuyers, borrowers with shallow credit histories or retirees on a limited budget. 

The benefits to borrowers are more flexible sources of funds for the down payment that can include gifts, grants, employer assistance, secondary borrowing, the borrower’s money, and other approved sources. Because the down payment is lower than the benchmark 20% down, you’ll pay private mortgage insurance. This protects the lender should you default, and the cost is based on your loan-to-value ratio and credit scores. Expect to pay $40 to $80 per month for every $100,000 you borrow. However, Home Possible mortgages have reduced mortgage insurance for loan-to-value ratios greater than 90 percent. 

Other benefits include flexible property options, including condos and 1-4 unit homes, caps on credit fees, mortgage flexibility including 15-to 30-year fixed rate loans and some adjustable rate products, income flexibility and refinance options. 

Required credit scores depend on the type of loan product you want and whether or not you’re buying a single unit or up to four units in the same building, but you should have a credit score of at least a minimum of 660 to 680 for single occupancy.

If you’re hesitant about getting into a low-down payment loan, don’t be. These loans are only available through your lender if they meet Freddie Mac’s underwriting standards. Freddie Mac wants you to build wealth and security through homeownership. 

Your Rights As a Borrower

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When you shop for a mortgage loan, you have certain rights that are guaranteed by the federal government’s Consumer Financial Protection Bureau. Knowing your rights will help you get the best loan possible.

You have the right to:

  1. Receive equal treatment by the lender, so that a credit decision isn’t based on your race, Your Rights As a Borrowercolor, religion, national origin, sex, marital status, age, or whether any of your income is from public assistance.
  2. Shop for the best loan type for you, whether adjustable or fixed rate, and compare the fees of different lenders.
  3. Be informed about the total cost of your loan including the annual percentage rate (APR), points and other fees. Your interest rate is based on your credit history and credit scores, the borrowed amount and how much you’re putting as a down payment.
  4. Receive a Loan Estimate and Closing Disclosure Form, formerly known as a Good Faith Estimate, before you agree to the loan and pay any fees. Compare the exact loan product you want as offered by two or more lenders.
  5. Know which fees are not refundable if you decide to cancel the loan agreement, such as the fee to research your credit.
  6. Ask questions about loan terms and fees that you don’t understand.
  7. Know the reason if your loan was turned down.

Ask your lender to show you the advantages and disadvantages of each loan product so you can choose the best one to suit your needs. As always, consult your financial advisor before making any decision.

Private Mortgage Insurance: Pros and Cons

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Why Private Mortgage Insurance Is a Good Play

For many home buyers, putting 20 percent down on a home makes little financial sense, yet consumers resist using private mortgage insurance (PMI). Here are a few reasons why PMI is a good move.

PMI protects the lender and you. PMI protects the lender in case you default on your loan, allowing you to borrow hundreds of thousands to buy a home with as little as three percent down for a conventional loan.

Interest rates are low. With rates in the low four percent range, the borrowing costs to buy a home are ridiculously low compared with car loans and other lines of credit.

Using OPM is smart financial planning. Other people’s money is a great way to get into the game. Thanks to PMI, the bank’s insurer takes the risk. Twenty percent down on a $400K home is $80,000. Three percent down would be $12,000, which is a $68,000 difference.

PMI can be removed. PMI can be removed when your loan balance is paid down to 78 percent of the purchase price. Or if your lender appraises the home to show an increase in market value great enough to eliminate PMI.

There are other reasons to love PMI. You’ll likely lose more in equity than it would take to save such a large down payment, at today’s sales pace. And it’s tax deductible.

That said, putting less money down is going to work for you only if you can afford the higher monthly payment, or you can choose a less expensive home. At least you’ll be in the game. Please consult your financial advisor before making any home-buying decisions.

Contact Berkshire Hathaway HomeServices today to get help or ask questions regarding your next home loan.

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