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The Fed Raised Rates….Why Did Mortgage Rates Drop?

The Fed Raised Rates….Why Did Mortgage Rates Drop?

Homestead Financial | Mortgage Rates Drop

The U.S. Federal Reserve raised its key, Federal Reserve Funds Rate (Fed Funds) .25% on Monday, March 13th, 2017 for the second time this year, citing economic growth, job gains and confidence.

Then the mortgage market did something odd. Mortgage rates dropped. The yield on the 10 year US treasury peaked at 2.60% the day the FOMC chair, Janet Yellen announced the Federal Reserve would raise its key Fed Funds rate to 1.00%, from .75%.

The reason? Consumer debt gets pricing from DC and mortgages get their pricing from Wall Street. Fed Funds is the interest rate the Federal Reserve changes its member banks for short term loans. There is no direct correlation between the Federal Reserve raising rates and mortgage rates.

So in other words, Fed Funds going up has an effect on your credit card rates and consumer loan rates, rates tied to the prime lending rate, but not mortgage rates.

So what do I do if I’m in the mortgage market? The best indicator of mortgage rates is the yield on the 10 year US Treasury which can be found here https://finance.yahoo.com/quote/%5ETNX?p=^TNX

4 Tips for Using Child Support to Qualify for a Mortgage

Quite often we see mortgage applicants, generally single mothers applying for financing that have income from a job and child support.  Sometimes, the child support is the make or break item that is the difference in qualifying the applicant for a home loan.

However, due to the inconsistent nature inherent in some child support relationships, there are a number of rules that apply to getting the child support payments to qualify as income for a mortgage applicant.

Below are 4 tips to use in advance of your mortgage application to make sure child support income can be included by your mortgage lender.

1. 6 Months Backwards

In order for child support income to be considered, we must ba able to document a 6 month history of receipt. This is due to so many parents not making the required child support payments. Proving receipt for 6 months can be problematic though. In some cases where child support is administered by the state government, for example, state of MO Child Support Enforcement has a link to document payment history of their cases, which is available at https://dssapp.dss.mo.gov/payments/WbMdi3OrdersByCaseListSvr.ASP Each recipient is required t to obtain an 8 digit key code to access their account.

2. 3 Years Forwards

Also, like most income that is not directly derived from work, the rule of thumb to qualify for a mortgage is to show that the income stream will continue for at least 3 more years. Effectively, this means the children for which the borrower receives financial support can’t be any older than 15 at the time of application.

3. Check Please! 

If not paying via some online vehicle, try to be paid by check. It helps if there is a copy of the check which can be verified with the deposit receipt on the bank statements.

 

4. Deposit the check quickly, by itself and wholeSingle Dad Mortgage

The child support check should be deposited as quickly as you receive it, and should be deposited by itself and do not take any cash out of the deposit. So in other words, don’t hold on to the check to deposit with a payroll check and don’t take cash from the deposit.

So, for example, Sally, who lives in Warrenton, collects child support of $1,100 per month is paid by check for 2 children ages 12 and 10. She regularly copies the front of the check and deposits the check by itself and whole. A mortgage company will be able to use this as income towards qualifying for her mortgage by producing 6 months of bank statements and copies of the checks showing a check for $1,100 and deposits for $1,100.

To conclude, it is possible to include child support as income toward qualifying for a mortgage application. It does take some planning and documentation.

 

If you have anymore questions or want to discuss this further, please feel free to reach out to Jayson Hardie at 636-256-5712, it costs ZERO to find out!

What’s the Minimum Down Payment I Need to Buy a Home?

For anyone trying to save enough money to buy a home, especially their first home, the question always comes up about home much does a person need to put down on a home. This amount varies based on loan type. Here is a summary along with the pro’s and cons of each. Continue reading “What’s the Minimum Down Payment I Need to Buy a Home?”

5 Tips to Qualify for a Mortgage After Bankruptcy

Young Couple and BankrupstcyAfter the Great Recession, many have been trying to pick up the pieces and move on with their lives, or just get back to where they were. Today we’ll talk about how to qualify for a mortgage after bankruptcy. How to manage your credit afterward, how to manage your finances, and when you can expect to be able to qualify for a mortgage.

Qualifying for a mortgage after bankruptcy isn’t a forever wait. In fact, you can qualify for a mortgage as soon as 2 years after a bankruptcy.

If you’re one of the unfortunate many who have filed for bankruptcy(bk), the road back to credit health starts with which type of bankruptcy you filed. A Chapter 13 bk is easier to work with in that the payback plans helps re-establish credit history, but the 3-5 year payback plan takes your timeline out longer. A chapter 7 is over faster, but it can be more problematic especially if the borrower didn’t reaffirm on any trade lines(or keep any accounts open) after their filing

What do I need to do?Bankruptcy - Recovery

  1. Re-Establish credit. Get your credit score above 640
  2. Do not miss any payments
  3. Pay your rent and other bills by check
  4. Check your score before your 2 year window opens.
  5. Clean up any outstanding inaccuracies

Re-Establish Credit

This can be easier said than done. Getting a secured credit card will help. A secured credit card is when you put a deposit down on a credit card to secure the amount of your credit limit. Capital One has a secured credit card program. Other department stores have on the spot approvals with low credit score requirements that can get you started. Their interest rates may be higher, but so long as you pay off your balance at month end, you should be safe. The goal is to have 3 trade lines, plus the payments for where you live reporting for at least 12 months before you apply.

 

Get your score above 640

FHA will approve most borrowers 2 years after a BK, but participating banks have established a market where the minimum credit score to qualify is 640.

Do not miss any payments

In order to qualify for a mortgage 2 years and 1 day after your BK, you must have re-established credit and can not have missed any payments since the discharge. So, from the time of your discharge, you must be squeaky clean!

Pay your rent and other bills by check

Do you best to pay any monthly obligations by check and not by cash. For borrower’s who are borderline, being able to produce cancelled checks to show payment history can be the deciding factor for approval or denial of your mortgage application. If you’ve always paid by cash, there is no objective proof the payments were actually made.

Check your credit score before your 2 year window opens.

If you want to qualify for a mortgage as soon as you can after a bankruptcy, then the time to pull your credit is not at 2 years. You should pull your credit 6 months after your bankruptcy to make sure all of the trade lines that were discharged in BK report that way and not as collections and any new trade lines you have re-established are now reporting correctly in your favor.

Clean up any outstanding inaccuracies

In many cases after a BK, accounts that were supposed to be reporting as discharged, don’t report correctly, many times they report as collections or write offs. If you pull your credit early enough, you have plenty of time to correct them. The longer you wait to correct in-accuracies, the harder it is due to lack of documentation and support for the new action.

To conclude, it is possible to qualify for a mortgage as soon as 2 years after a bankruptcy will a good amount of discipline, planning and effort.

Take a look at when you can get a mortgage again after bankruptcy,

Buying a Home After Foreclosure

If you’ve experienced foreclosure you might think you’ll never be in a position to buy another home again. Foreclosure certainly impacts your credit score but it’s only a matter of time before you can once again apply for a mortgage. The question many people have is how long they have to wait before buying a home after foreclosure. How long depends on the circumstances of your foreclosure, your ability to increase your credit score, the type of loan you’re prepared to apply for and the foreclosure waiting period. Continue reading “Buying a Home After Foreclosure”

What President Obama’s Reelection Means for Homeowners

Though both presidential candidates were short on specifics about their housing policy, refinancing, new mortgage regulations and mortgage interest deduction all won on Election Day. Here’s what President Obama’s reelection means for homeowners.

While Mitt Romney talked about economic stimulus throughout much of the campaign, the Obama Administration made it easier for homeowners to refinance with historic low mortgage rates and plans to make refinancing available to even more borrowers in the next four years. Refinancing gives homeowners more spending money and is a form of economic stimulus. Housing policies that help for folks on the verge of losing their homes are still in the works.
New mortgage regulations are coming like the Consumer Financial Protection Bureau established by the Dodd-Frank Act. Set to take effect by January 2013, these new mortgage standards will trigger legal and financial implications for lenders should a mortgage be judged to be beyond a borrower’s ability to repay. Critics of the Dodd-Frank Act, like Mitt Romney, have argued that such a plan holds back mortgage lending. Legislators will need to strike a delicate balance between giving lenders the incentive to expand mortgage credit while also protecting consumers from high risk loans. Continue reading “What President Obama’s Reelection Means for Homeowners”

Using Seller Concessions to Help Finance Your Home Purchase

With a depressed housing market on the mend, this presents a great opportunity people looking to buy their first home. As is with most first time home buyers, cash is at a premium. Today we’ll talk about a clause in a real estate purchase used to help called seller concessions.

What are seller concessions?

Seller concessions, like it sounds, is where the seller of a home, “concedes” some of their proceeds to help the buyer pay for mortgage and other closing costs and or prepaids on the purchase of a home. The offer to buy the real estate normally comes with a minor upward adjustment to sales price to allow the seller to get to the same net figure. If done correctly, this can reduce the amount a borrower has to bring to closing by thousands of dollars.
How do seller concessions work?

For example, Michelle, in Kansas City is buying a home for her first time. She wants to buy a home for $200,000, qualifies for a 95% mortgage and has roughly $10,000 to put down. Michelle can offer $204,000 with $4,000 in seller concessions. The math works out as follows:

No Seller Concessions With Seller Concessions
Purchase Price $200,000 $204,000
Closing Costs and Prepaids $4,000 $4,000
Seller Concessions $0 $4,000
Total Due $204,000 $204,000
Loan Amount $190,000 $193,800
Due at Closing $14,000 $10,200

The above example illustrates how offering a higher sales price, but asking for seller concessions to pay for closing costs allows the seller to get to their target sales price but helps the buyer get into their home with the minimum amount of cash possible. The mortgage balance is a little higher but the change to payment is negligible and cash is at a premium.

To conclude, the use of seller concessions will help a buyer purchase a new home when money for closing costs is scarce. This helps credit worthy buyers purchase homes and sellers obtain what they were hoping to get out of their property.

Rebuilding Your Home’s Equity with Refinancing

The main reason homeowners today refinance is to get a lower interest rate. But what many homeowners don’t realize is that refinancing helps them to rebuild the equity in their homes more quickly. For those of us who bought homes prior to 2006, most of us have less home equity than we used to because our homes are worth considerably less than they were a few years ago. Therefore, we have less home equity. Fortunately, refinancing can help homeowners to rebuild the equity in their home.
Continue reading “Rebuilding Your Home’s Equity with Refinancing”

How Can I Get a Mortgage if I’m Self Employed

For many small business owners, the economy has been tough. With tightening mortgage regulations, qualifying for a mortgage has been tougher, causing many applicants to ask, “How can I qualify for a mortgage if I’m self employed”.

Here are 5 tips for a smooth mortgage application for a self employed person.

1.      Understand the income you make:

Ever heard of the saying, “Give me the bottom line”? The saying has roots in the financial industry.  Sure you may have grossed $150,000 last year(Top Line), however, writing off $140,000, leaves you with a Bottom Line of….you guessed it $10,000. So lenders are forced to qualify a borrower making $10,000 per year which won’t buy you much of a home in this day and age.

Gone are the days of writing your income on a loan application with no supporting documentation. Today all qualifying income must be documented. Continue reading “How Can I Get a Mortgage if I’m Self Employed”