Kris Zeigler's Mortgage Report

While there is a lot of negativity regarding the amount of student loan debt piling up in the U.S. the news isn’t all bad. Student loans are a valuable asset and have the potential to produce great rewards such as higher income and higher homeownership rates.

While student loan debt will affect your debt-to-income (DTI) ratio, staying on top of your payments each month will help to boost your credit score. Your DTI is a key factor in qualifying for a mortgage. If you have over 50k or pay more than 10% of your monthly income in student debt then your chances of owning a home could be at risk.

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As the housing industry gets increasingly competitive more young couples are choosing to purchase a home before tying the knot. According to the National Association of Realtors, 25% of buyers are single. Traditionally the purchase of a home would come after marriage; however, millennials are realizing that it could be a smart financial move if the opportunity arises. Delaying marriage has allowed couples to buy larger homes as they have more money saved up for a down payment.

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As you know, homeowners insurance is required in order to obtain a mortgage loan. There are a number of factors that can affect the cost of homeowners insurance. For instance, did you know that people with average credit are paying 29% more for homeowners insurance than those with excellent credit?

Maintaining your credit is one of the smartest things you can do as it affects so many important aspects of your life. While not all insurers use credit scores to determine insurance premiums there is a definite correlation between credit history and insurance risk.

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While it can be more difficult to obtain a mortgage if you are self-employed it is not impossible. The most important part of the process will be verifying your income as you will not have the paystubs like you would from a typical job. Therefore several tax documents and other forms will be required to prove your eligibility.

If you are self-employed and are applying for a mortgage you will be requested to provide a great deal of documents which can sometimes seem a little extreme, but rules and regulations must be followed. If you prepare ahead of time by gathering your documentation this will make the process much faster.

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If you have previously gone through the process of buying a home, you may have already experienced having your loan sold to another company. If not, don’t worry if/when this happens to you as this is a very common practice in the industry. Most all loans in today’s market will be sold at least once throughout the life of the loan.

There are two parts of the loan that can be sold – the mortgage note and the servicing rights. This means that in some cases the owner of your mortgage note is not the same company you’re paying each month. Whenever there is a transfer taking place, whether it is your mortgage note or the servicing, you will be notified at least 15 days ahead of time.

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It’s important to understand that there is not an exact time frame until your holding the keys to your new home. The home buying process is different for everyone but generally once you have a sales contract, you can expect to close anywhere from 30-45 days.

The first step in the home buying process is to analyze your finances to determine your budget. You will work with your mortgage lender on getting pre-approved for a mortgage which will let you know the loan amount you qualify for based on your credit and income. This is the first step towards financing your home and you can get preapproved within 24 hours.

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When you are in the process of obtaining a mortgage loan you will not only need to provide a lender with a down payment on the home, but also a variety of other fees called closing costs. Closing costs are generally paid by the homebuyer at the time of closing, but sometimes can be rolled into the loan amount, and other times a portion of the closing costs can be paid by the seller.

Closing costs vary depending on certain factors such as the loan amount, the type of loan, length of the loan, etc. You can expect to pay anywhere from 2-5% of the purchase price of the home in closing costs, which covers the expenses of both the lender as well as third party services such as inspections and appraisals. When you apply for a loan your lender will provide you with a Good Faith Estimate (GFE) which will outline all the costs that you will be charged.

Some of the items you may see on your GFE include:

Myth 1: The Interest Rate Determines the True Cost of the Mortgage
The annual percentage rate (APR) is what is used to determine the true cost of the mortgage. The APR includes the interest rates, points, mortgage insurance, and all other fees. This figure will give you a better idea of the total cost over the life of the loan.

Myth 2: Mortgage Rates Change Only Once Per Day
Mortgage rates change frequently often several times per day based on market activity. Work with your loan officer closely to determine the best strategy for locking in a good rate.

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If you have been through the process of buying a home or even a car you know the importance of your credit score and how it can impact your purchases. You probably know the most common things that can affect your credit, but there are some other things that may surprise you that you should be aware of.

For instance, it is widely known that things like late payments or high credit balances will hurt your credit score but did you know that closing a credit account could affect your credit as well? If you close an account you will lose all of the positive credit history that you have built with that account. The length of credit history accounts for 15% of your credit score so build your credit wisely.

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If you are interested in saving a significant amount of money each month you should consider refinancing your mortgage through the Home Affordable Refinance Program (HARP). Over three million homeowners have already taken advantage of this government program that gives homeowners the opportunity to refinance even with little or no home equity.

Even though HARP has been around since 2009 there are still nearly 700,000 people who may be eligible for HARP savings. In the Chicago area alone there are over 42,000 loans out there that could reap the benefits of this refinance program.

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