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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

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 Backward

In order for child support income to be considered, we must be 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 here. Each recipient is required t to obtain an 8 digit key code to access their account.

2. 3 Years Forward

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 Fast

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.

To learn more, please reach out!

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?”

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,

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”

For many people, owning a home is a goal they’ve long looked forward to. But many first-time homebuyers suffer from sticker shock when they begin to realize just how much money is needed to purchase a home. Suddenly there’s a whole list of costs associated with getting to the closing date--and that doesn’t take into account the down payment or the closing costs themselves. What’s a prospective homeowner to do? Luckily, there’s a way to help alleviate some of this stress. Seller concessions are often added into the selling price to help lower closing costs. But what are seller concessions?

Seller Concessions Defined

Seller concessions is a term that refers to a scenario where the seller of the home agrees to pay a portion of the closing costs on behalf of the buyer. This lowers the amount of cash the buyer needs to bring to the closing. Negotiating for seller concessions can be a great tactic to employ if you’re tight on cash and feel like you may run short at closing time.

Asking for concessions means that you and the seller agree on a sale price for the home that includes the cost of the concessions. Here’s an example:

Let’s say you’re looking at a home that’s listed at $200,000. You and the seller agree on a sale price of $205,000, with the additional $5,000 going toward your closing costs. This reduces the amount of cash you’ll need at closing, but it increases your mortgage by $5,000. Many homeowners feel this trade-off is worth it because it allows them to pay that $5,000 over time instead of having to come up with the cash up front. This is a viable way to buy a home when large amounts of cash are difficult to come by, but just remember that you’ll actually be paying more than $5,000 thanks to the addition of interest on the loan.

Seller Benefits

Seller concessions are not required, but many sellers are willing to use them if it means they’re able to sell their house faster. In a buyer’s market, seller concessions are fairly common. They’re also frequently used when the seller is in a tight spot, having already purchased a new house without selling the old one first. In this instance, it’s to the seller’s benefit to offer concessions to the buyer to get the sale to move as quickly as possible so they don’t have to carry two mortgages.

Buyer Benefits

Gaining concessions from the seller reduces the cash needed at closing. Many homeowners are surprised when confronted with the list of fees associated with purchasing their first home. Here’s a list of closing costs that are eligible for seller concessions:

  • Appraisal fees
  • Home inspection fees
  • Property taxes (in some states, these must be paid from the sale date through the end of the year)
  • Legal fees (some states require a lawyer to look over the sale contract)
  • Title insurance
  • Mortgage points (used to lower the interest rate on the mortgage)
  • Loan origination fees
  • Recording fees

Any of the above are fair game during the negotiation phase of the sale. If you can get the seller to pick up one or two of these, it’ll help with cash flow at the end of the transaction.

Limits on Seller Concessions

There is a limit to the amount that sellers can offer in concessions. By law, sellers are not allowed to pick up all your closing costs even if they wanted to. Overseers in the mortgage industry (entities like HUD and Fannie Mae) set limits on seller concessions to keep housing prices from becoming artificially inflated. Caps imposed on seller concessions vary based on the type of mortgage you’re working with.

Conventional loan – up to 9% of the selling price with a loan to value ratio of 75% or less.
FHA loan – maximum of 6% of the sale price.
USDA loan – maximum of 6% of the sale price.
VA loan – capped at 4 percent of the loan amount; applies only to certain costs such as the VA funding fee and payments of prepaid closing costs.

Source: US News and World Report

Also keep in mind that every mortgage is different, and each mortgage type has its own rules when it comes to the calculation of a down payment. Seller concessions may not be applied to the down payment.

It’s important to understand that getting concessions from a seller does not put cash in your pocket. Concessions are paid at closing time and cover specific fees associated with the loan closing.

Negotiating Seller Concessions

Requesting seller concessions may help you get into the house of your dreams if you ask for them during the negotiation process. An experienced real estate professional can be a big help in this regard. Talk your situation over with them as early in the process as possible because your need for concessions may determine whether the home you have your eye on is accessible to you. If the seller already has four offers on it that don’t require concessions, you may not want to waste your time or theirs by requesting them.

Keep your offer as simple as possible. Sellers like buyers that don’t need a lot of hand-holding or make a lot of requests during the negotiation process. Limit your requests for repairs, replacements, or other items if you plan on asking for concessions. This will increase your odds of getting them. Your real estate agent can help you determine what to ask for if you need concessions to close the deal.

It also bears mentioning that the sale price you settle on with the seller still has to align with the appraised value of the home. Otherwise, the underwriter may decline to underwrite the mortgage.

Determining Whether You Need Seller Concessions

There’s a lot to consider when using seller concessions to buy a new home, but this is a very feasible way for many homeowners to afford their first home. Homestead Financial Mortgage is ready to help you determine whether seller concessions might be helpful in your case. Contact us or stop in at one of our branches in St. Louis, MO; Overland Park, KS; Glen Carbon, IL; or Godfrey, IL, to get your questions answered and start the pre-qualification process for your first mortgage.

Contact us today to find out more!

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”

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”