Category: Mortgage Knowledge

HOME BUYING PROCESS

12/19/2016

Buying a home is one of the most exciting times in our lives. At Effective Mortgage Company we work very hard to make sure that you have a positive, fulfilling experience.

Here’s a simple, helpful walk-through of the entire home buying process from start to finish.

Decide on your new neighborhood.
Spend some time researching the cities and neighborhoods that appeal to you. Be sure to think about your “must haves” – for example, do you want to be near a good elementary school, or shorten your daily commute? What about county, parish or township taxes?
Apply for home financing.
This is an essential second step. Be sure to do this before you begin viewing homes – your Effective Mortgage Company, Loan Consultant can pre-qualify* you for financing so you can limit your search to affordable properties. You’ll also receive a Loan Estimate with details of your proposed financing.
Find the right property.
Hiring a REALTOR® to assist you can save you time and money. In addition to sharing his or her knowledge of neighborhoods and available properties, a REALTOR® can help negotiate a better price with the seller.
Discuss your financing options with your Loan Consultant.
Depending on your credit score, down payment, and other factors, you may qualify for more than one loan product. Your Loan Consultant will help you decide which one is the best fit.
Arrange for a home inspection.
Even though Effective Mortgage Company will have your home professionally appraised, it’s always a good idea to hire a professional home inspector – especially if you’re buying an older home. If any major problems are found, you may be able to negotiate repairs or a repair allowance with the home’s seller.
Get ready to close on your home’s financing.
Your Loan Consultant will present you with a Closing Disclosure. This document clearly states the true cost of your home’s financing, the funds owed at closing and any applicable conditions. You’ll also need to shop for homeowner’s insurance before closing.
The big day’s here!
During your closing, you’ll sign your loan documents and present funds to cover your down payment and other costs. Depending on your state, you may receive a deed of trust that secures your mortgage note and other documents related to your purchase.

Now … all that’s left is to collect the keys to your home and celebrate!

*A pre-qualification is not an approval of credit and does not signify that underwriting requirements have been met.

1 Comment

Mortgage Insurance

11/9/2016

0 Comments

Cancelling Mortgage Insurance from Effective Mortgage Company

0 Comments

Escrow Impound Accounts Explained

1/21/2016

0 Comments

An Impound Account, also known as an Escrow Impound Account, is an account set up and managed by mortgage lenders to pay property taxes and insurance on behalf of the home buyer. Accounts are set up with the lender during escrow to ensure that the home buyer's property taxes and insurance are paid on time and in full. After escrow collects the initial deposit for the Impound Account and after the transaction is closed, the escrow company is no longer involved.

How It Works: Each month, an amount equal to about 1/12 of the total sum of the annual property taxes and insurance due is collected from the buyer, along with their mortgage payment, and placed in the account. When the time comes to pay the annual property taxes and insurance, the lender makes the payment from the funds in the account on the behalf of the buyer.

Setting up an Account: Accounts are set up by the mortgage lender during escrow. Escrow collects an Escrow Impound Deposit, typically a deposit of 2-6 months worth of taxes and insurance. This deposit ensures there are sufficient funds to make the payments when they are due.

Common Questions Regarding an Escrow Impound Account:

Is it mandatory to have an Escrow Impound Account? No. The buyer may elect to pay property taxes on their own, and there is usually a small fee when waiving the account. Based on the type of loan, the lender may require the buyer to have one. For any loan where the borrower is putting less than 20% down payment impounds will be required by the lender.

Is it a good idea to have an Escrow Impound Account? Since property taxes and home insurance bills only come about twice a year, many homeowners have a hard time saving for them. This is one less thing to worry about, as the lender makes the payments for the buyer.

0 Comments

Understanding Debt to Income Ratio

4/29/2015

0 Comments

Amount in versus amount out: You hear that all the time in relation to calories when you’re working on your physical health. Here’s a fun fact: it applies to your financial health, too — specifically when you’re applying for a mortgage loan. A mortgage lender will review your credit history, your assets, and your employment, but they’ll also look at your income vs. your expenses, otherwise known as your debt-to-income ratio, or DTI.

Consider this a “big picture” look at your finances. Lenders want to be sure you’re not living paycheck-to-paycheck, and that you can cover your mortgage as well as credit card debt, auto loans, child support and any other recurring monthly debt payments.

The percentage fluctuates, but generally the amount of money you spend on your mortgage and other debts should be no more than 45% of your total monthly pre-tax income. The actual percentage changes based on the type of loan, the sales price of the home, and the lender you choose.

To calculate your DTI, add up your recurring monthly expenses, including your proposed housing expenses, and divide by your monthly pre-tax income. If your housing expenses total $1,000, your car loan is $250 and your credit card averages $300 every month, you’d have expenses totaling about $1,550. If your pre-tax monthly paycheck is $3,750, that gives you a DTI of 41%. This is also known as the “back-end ratio.”

You may see DTI written as a fraction, such as 28/41. The second number is the back-end ratio. The first number is called the front-end ratio. This is the calculation of how much you spend on housing costs compared to your income. When making these calculations, it’s important to remember that your mortgage payment is not your sole housing expense; taxes, insurance, and other fees are part of this number. The most common limit today for a front-end ratio is 28%. FHA loans may allow a higher number.

A few years ago, during the housing boom, some lenders allowed DTIs up to 55% for nonconforming loans. These days, lenders are more wary about ensuring their borrowers are a good risk and unlikely to default on their debt. As credit requirements have risen, DTIs have dropped. So a borrower with a high credit score and low DTI will more easily secure a loan with favorable terms in today’s market. These days, your DTI may be just as important as your credit score when you are applying for a new home mortgage.

It’s important to remember that your DTI is not a true calculation of all your monthly expenses. It does not include food, clothing, fuel, utilities, health/car insurance and other such expenses.

So, just like a bodybuilder trying to bulk up, when you’re looking for a new home financing loan, the amount in (your income) should be greater than the amount out (your expenses).

0 Comments

Effective Mortgage Company

HOME BUYING PROCESS

Mortgage Insurance

Escrow Impound Accounts Explained

Understanding Debt to Income Ratio

Categories

Archives

Our Services

Company

Support Page

Contact Us