The Effect Real Estate Taxes and Insurance have on Mortgage Loan Approvals and Monthly Mortgage Payments

The Effect Real Estate Taxes and Insurance 

have on  Mortgage Loan Approvals 

and Monthly Mortgage Payments

     There is an acronym in the Mortgage Loan Industry known as PITI.  This stands for:

• Principal
• Interest
• Taxes
• Insurance(s)   (Insurance for Homeowners Premium and Monthly Mortgage Insurance must be calculated and included in an Estimated Housing Payment.  Mortgage Insurance is required if a Down Payment is less than 20%).

     If buying a property within a Homeowners Association, you can add an "A" to the end of that list/word, so it becomes PITIA.
 
     PITI/PITIA is the actual total housing payment that is arrived at when a Loan Officer is "pre-approving" a Home Buyer.  

     As Mortgage Lenders, we tend to focus mostly on the Sales Price or Loan Amount for Home Buyers' Pre-Approvals.  But I'm ultimately trying to pin down the Maximum Payment of PITI/PITIA.  This payment is then compared to the Home Buyer's gross monthly income for what's called the Housing Ratio ... or Front-End Ratio.  

     To arrive at the Total Debt Ratio, or Back-End Ratio (ideally 43% in this day and age), I add the Mortgage Payment (PITI/PITIA) to the other monthly debt my Borrowers have ... that debt coming from Auto Loans, Student Loans, Installment Payments, Credit Card Payments, Child Support (if applicable) that my Borrower may have.

     So what is the significance of this seemingly straight-forward lending exercise??

     I want to illustrate how important it is to know if the piece of property my Borrower is considering for purchase lies within a Homeowners Association ... and if it does, what the corresponding Association Dues are.

     Knowing the last available Real Estate Tax Bill is also important for a Mortgage Lender and Borrower.  That bill is needed in order to calculate a Monthly Payment.  If Mortgage Insurance is needed, there are various factors that impact and figure into the cost of that Insurance (i.e., Credit Scores, Down Payment Percentage, Owner-occupied VS Investor, etc.).  

     And lastly, the Principal and Interest (P&I) Payment is calculated based on the appropriate combination of Loan Amount and Interest Rate.  Add the Estimate for monthly Homeowners Insurance ... and I get a reliable PITI/PITIA.

     Without a "reliable" and accurate PITI/PITIA, I'd be gambling with your Approval in Underwriting, especially when you're approaching the Maximum Allowable Debt-to-Income Ratio (DTI).  Debt-to-Income Ratios are best kept at 43% to 45% (or less), for your optimum chance of receiving Loan Approval. 

     The Effect Real Estate Taxes and Insurance have on  Mortgage Loan Approvals and Monthly Mortgage Payments.  Home Buyers need an accurate calculation of their total Monthly Mortgage Payment in order to make sound decisions surrounding their Mortgage financing and home purchase.  It may seem like I'm asking a lot of questions when we're in the Pre-Qualifying stage of your Mortgage Process.  But as you can see from above, the success of your Approval depends on me asking them. 

     *  Hoping to Buy, Refinance, or Construct a Home within a Lincoln-Way Community (Manhattan, New Lenox, Mokena, Frankfort), Will County, or elsewhere in Chicagoland?  Contact me today!  I'll put my 36 years of Mortgage experience and expertise hard to work on your behalf.

     I can be easily found at:

Direct:  815.524.2280

Cell or Text:  708.921.6331

eFax:  815.524.2281

gmundt@goapmc.com

www.genemundt.com

Click HERE for a FREE Mortgage Consultation!

Ready to Apply for your Mortgage?

             

               

Gene Mundt, Mortgage Lender, a Lender with 36 years of mortgage experience, will offer you exemplary mortgage service and advice when seeking:  Conventional, FHA, VA, Jumbo, USDA, and Portfolio Loans in Chicago and the greater Chicagoland region, including:  The Lincoln-Way Area, Will County, (New Lenox, Frankfort, Mokena, Manhattan, Joliet, Shorewood, Crest Hill, Plainfield, Bolingbrook, Romeoville, Naperville, etc.), DuPage County, the City of Chicago, Cook County, and elsewhere within IL. 

This Week's Mortgage and Real Estate Moments Newsblast ...

Here's this week's helpful and timely Mortgage and Real Estate-related info and news I thought you'd find of interest ... Spring is a great time to make plans for home updates, repairs, and remodeling.  Kitchens are often a primary focus.  If that's true for you, you'll find these BH&G slides of real interest ... Top 10 Countertop Materials ... With exposure to water, heat, sharp knives, and more, countertops carry a heavy burden in the kitchen. Discover the pros and cons of each countertop material to help you make the right choice for your kitchen. (MORE ... ) Tax Hacks 2014: 8 Tips to Avoid an Audit ... Wouldn’t it be nice if the IRS released its secret formula for how it selects individual tax returns for audit? That way, we’d do everything we could to stay under the radar and not be selected for further review. Fewer than 1 percent of tax returns are audited, which is good news for all. But there’s no way to guarantee you’ll be exempt from the IRS’ prying eyes, so all you can do is take the proper precautions and hope for the best. (Video Below &  MORE ... )

Thinking you may want to buy a new home (or have a client that is), remodel, or Refinance during 2014?  Check out this next article, then let's talk!  We'll check your credit and get you on the right path moving forward: Credit score killers ... Your credit score can make or break your financial future.  Not only is it used to determine whether you're creditworthy enough to open a credit card, land a mortgage, rent an apartment or get an auto loan, but it also plays a big factor in the interest rate you qualify for. (MORE ... ) Preparing to Buy a Chicagoland Home:  Seller-Paid Closing Costs Looking out my office window right now, you'd never know that Spring ... and Spring's busier Chicagoland housing market isn't that far off.  Yet, it's true ... Chicagoland First-time Home Buyers (those typically purchasing homes from the low $100K's to the low-$200K's) and anyone else hoping to buy during this upcoming Spring's warmer-weather market, should be making their plans NOW, while winter snow is still on the ground and temperatures are frigid.  So, if you're a hopeful Chicagoland First-Time Home Buyer (or anyone seeking Mortgage financing) what should you be considering or educating yourself about right now ... at the beginning point in your process?  (MORE ... ) As always, shout out with any questions you or your clients may have.  I'll be happy to hear from you and assist you in your needs.   Gene   Chicagoland Mortgage Lender - NMLS 216987 www.genemundt.com Direct:  815.524.2280 Cell or Text:  708.921.6331 eFax:  815.524.2281 gmundt@goapmc.com

The Importance of Homeowners Insurance in the Mortgage Process

The Importance of Homeowners Insurance

in the Mortgage Process    

     
     Once they've signed a Contract for the purchase of their new Will County or Chicagoland home, I urge all my Borrowers to actively begin their search for Homeowners Insurance. 

      Getting comparison quotes is a great idea when shopping for Homeowners Insurance.  Making a decision to secure a policy , no later than a week to 10 days prior to Mortgage Closing, is especially important.  Waiting too long can cause issues and hold-ups with Underwriting and Closings.

     Once a decision regarding Homeowners Insurance has been made, it's common practice in the Chicagoland area to pre-pay for the first FULL year of Homeowners Insurance coverage prior to or at Closing.  The initial Annual Premium payment is paid directly to the selected Insurance Company.  Proof of the Annual Premium having been paid is then provided to the Mortgage Lender.  

    The Homeowners Insurance Policy must contain a "Mortgagee Clause" that names the Mortgage Company as beneficiary of monies paid upon loss of property up to the amount of the Mortgage held.  It also states that the notice of any cancellation on the Homeowners Insurance Policy must be made to the Mortgage Company.  Other additional protections for the Mortgage Company also apply.

     After the Mortgage closes, payment for future  Homeowners Insurance Policy premiums is provided for by monthly installments made as part of an Escrow Account established for the Borrower.  At the time future Homeowners Insurance Annual Premiums come due, the Mortgage Lender then pays the yearly premium from the funds collected in the Borrower's Escrow Account.

     If the yearly premium cost of the Borrower's Homeowners Insurance changes, the monthly amount collected for the Insurance portion of the Borrower's Escrow is then increased or decreased accordingly.  Escrow Payments must correctly reflect 1/12th of the yearly Insurance Premium in each monthly payment.  

     Borrowers must know that Real Estate Taxes and Homeowners Insurance are typically contained within a Borrower's Mortgage Payment and an Escrow Account will be established for them at the time of their Mortgage Closing.  An Escrow Account must be established when their Loan-to-Value is greater than 80% (meaning they made a Down Payment on their home purchase of less than 20%).  

     Those that make a Down Payment of 20% or more can choose to pay Taxes and Homeowners Insurance on their own without the establishment of an Escrow Account.  If this method of payment is chosen, proof of Real Estate Taxes and Homeowners Insurance payments must be provided to the Mortgage Lender. 

     Again, it is important to start your search for a Homeowners Policy in advance of your Mortgage Closing.  In the Will County or Chicagoland area, should you be in need of a referral for a reputable Insurance Agent (or other real estate professionals) to help you, please contact me.  I'll be happy to provide you with the names of many of our area's best professionals.

     

     *  Hoping to Buy or Refinance a home in New Lenox, Will County, or elsewhere in Chicagoland?  Contact Me Today!  I'll put my 40+ years of Mortgage experience hard to work on your behalf.

     I'm easily found at:

Gene Mundt

Mortgage Originator  -  NMLS #216987  -  IL Lic. #031.0006220  -  WI License #216987

American Portfolio Mortgage Corp.

NMLS #175656

Direct:  815.524.2280

Cell or Text:  708.921.6331

eFax:  815.524.2281

gmundt@goapmc.com

www.genemundt.com

             

      

Gene Mundt, Mortgage Originator, an Originator with 40+ years of mortgage experience, will offer you exemplary mortgage service and advice when seeking:  Conventional, FHA, VA, Jumbo, USDA, and Portfolio Loans in Chicago and the greater Chicagoland region, including:  
The Lincoln-Way Area, Will County, (New Lenox, Frankfort, Mokena, Manhattan, Joliet, Shorewood, Crest Hill, Plainfield, Bolingbrook, Romeoville, Naperville, etc.), DuPage County, the City of Chicago, Cook County, and elsewhere within IL & WI. 

Your Mortgage Referrals & Testimonials are Always Appreciated!

   

     

     

Be a Good Student when Buying your First Will County or Chicagoland Home

     

 Be a Good Student when Buying your 

First Will County - Chicagoland Home

    

     If you're hoping to buy your first home in Will County or elsewhere in the Chicagoland area, you've probably been given many tidbits of advice (asked for and unsolicited) ...  

     Advice on this topic is not hard to find.  It's all over the internet.  And there are many eager to share their expertise and experiences.  I've written posts on this subject. 

     The process can be challenging.  I won't paint you unrealistic expectations.  Issues can arise within any transaction.  

     But many of these issues and challenges can be minimized or totally avoided.  YOU, the first-time homebuyer, do hold power within your home buying and financing process.  

     What do I mean?

     Much of the drama, the stress, time delays, and challenges you might have heard about can be avoided if you approach your transaction in the following manner:  

     Approach your Home Buying and Mortgage financing process just as you did when you were a student seeking good grades ...  

• Prepare yourself for your buying transaction and financing thoroughly  
• Do the research needed
• Ask questions
• Seek answers
• Follow directions 
• Take notes 
• Be organized before, during, and after
• Pay attention to detail and accuracy
• Turn your "homework" in on time
• Expect the need for some revisions along the way

     Prepare yourself mentally.  Try to remain positive.  

     I promise to do the same and be your advocate the entire way ...  


    
     
     *  Hoping to Buy, Refinance, or Construct a home in a Lincoln-Way Community (New Lenox, Frankfort, Mokena, Manhattan), Will County, or elsewhere in the Chicagoland area?  Contact me today.  I'll put my 40+ years of Mortgage experience hard to work on your behalf.
     I can be easily found at:

Gene Mundt

Mortgage Originator  -  NMLS #216987  -  IL Lic. 031.0006220  -  WI Lic. #216987

American Portfolio Mortgage Corp.

NMLS #175656

Direct:  815.524.2280

eFax:  815.524.2281

Cell/Text:  708.921.6331

www.genemundt.com

gmundt@goapmc.com

               

         

Gene Mundt, Mortgage Originator, an Originator with 40+ years of mortgage experience, will offer you exemplary mortgage service and advice when seeking:  Conventional, FHA, VA, Jumbo, USDA, and Portfolio Loans in Chicago and the greater Chicagoland region, including:  The Lincoln-Way Area, Will County, (New Lenox, Frankfort, Mokena, Manhattan, Joliet, Shorewood, Crest Hill, Plainfield, Bolingbrook, Romeoville, Naperville, etc.), DuPage County, the City of Chicago, Cook County, and elsewhere within IL & WI. 

Your Referrals are Always Appreciated and Welcomed!

  

    

     

     

     

    

    

     

     

Preparing to Buy a Chicagoland Home: Seller-Paid Closing Costs

Preparing to Buy a Chicagoland Home:

Seller-Paid Closing Costs

     Looking out my office window right now, you'd never know that Spring ... and Spring's busier Chicagoland housing market isn't that far off.  Yet, it's true ...

     Chicagoland First-time Home Buyers ... and anyone else hoping to buy during this upcoming Spring's warmer-weather market, should be making their plans NOW, while winter snow is still on the ground and temperatures are frigid. 

     So, if you're a hopeful Chicagoland First-Time Home Buyer (or anyone seeking Mortgage financing) what should you be considering or educating yourself about right now ... at the beginning point in your process?

     First of all, find yourself a knowledgeable, experienced Mortgage Lender to work with.  Not sure how to do that?   

     Here are a few suggestions:  

1. Inquire with Real Estate Agents that transact in Chicago or the Chicagoland area in which you hope to live.  
2. Check with Real Estate Attorneys, your friends or family members that have Closed on a Mortgage loan recently. 
3. Talk to Insurance Agents or others that work in the local real estate industry.  
4. Gather names and note those mentioned multiple times. 

     Don't skimp on the attention you give to this matter ...  

     Do your homework.  Find the right person for you.  (For more info, help, and guidance, click HERE.)

     Once you've found your Loan Officer, have a long talk with them about your finances and your Credit.  Get Pre-Approved to discover:

•   What Home Buying options exist for you
•   Your Credit Scores 
•   Your Credit capabilities
•   If elements of your Credit need polishing 
•   The Price Range of home you can buy
•   Establish a time frame for your upcoming purchase

     
     One of the most important topics you'll talk about with your Loan Officer will be regarding a Down Payment on your home purchase.  At this time in the year, I often hear from Borrowers that Income Tax Refunds will be a contributing source to their Down Payment funds.  

     For Buyers hoping to utilize Income Tax Refunds during their home purchase (or Agents working with those Buyers), it's critical to make sure that Income Tax Returns are filed as early as all supporting documentation (W-2's, etc.) is received.  

     Tax Returns should be filed electronically, as this expedites the depositing of Tax Refunds into Checking or Savings Accounts, not to mention, the time it takes a Lender to confirm your 2014 Filing with the IRS.

     It's important for Home Buyers to know ...  Income Tax Refunds ARE acceptable to Lending Underwriters when saving/accumulating assets to buy a home.  

     Since most loan programs require Down Payment funds to come from the Buyer, it's important to demonstrate Down Payment funds as verifiable money in accounts.  (Accounts can be Savings, Checking, Money Market, Mutual Funds, Bonds, Stocks, and Retirement.)

      

Keep in mind that the:

• Minimum Down Payment on FHA Loans is 3.5% 
• FHA requires a 3.5% Down Payment, but ALL or PART of that Down Payment can be a Gift
• Minimum Down Payment on most Conventional Loans is 5% 
• At this time, it remains totally acceptable for Sellers to pay Closing Costs.  

     In the case of Sales Prices under $100,000, it's typically necessary to get Seller-paid Closing Costs (due to regulations put in place as of January 10, 2014, per the Consumer Financial Protection Bureau (CFPB).  

     Certain Closing Costs ARE allowable when Seller-paid.  That simply allows your Loan Officer to cover the cost of traditional fees incurred in a Real Estate purchase at Closing time. 

     I've included a breakdown of the guidelines (as of this writing) on the maximum allowable Closing Costs that a Seller can pay.  These Costs are expressed as a percentage (%) of the Sales Price ...

     For Conventional Loans:

• Fannie Mae -  3% if Owner-Occupied and (see Below) *
• Freddie Mac - 3% (2.5%in some cases) if Owner-Occupied
• Investment Property - 2% Cap

    * 3% if LTV/CLTV Ratio is Greater than 90%

       6% if LTV/CLTV is 75.01% - 90%

       9% if LTV/CLTV is 75% or Less              
     For FHA:

• Up to 6%

     For VA:

• Up to 4% 

    
Preparing to Buy a Chicagoland Home: Seller-Paid Closing Costs ...  As you can see, there's quite a list of things to talk over with your Loan Officer when you hope to buy a Chicagoland home.  It's normal to have lots of questions.  So, let's get started and get those questions answered.  

     Contact me now so together we can best prepare you to buy a home ...

     *  Hoping to Buy, Refinance, or Build a Home in Chicago or the greater Chicagoland area?  

     Contact me!  I'll put my 40 years of mortgage experience and expertise hard to work on your behalf.
     I'm easily found at:

Gene Mundt

Mortgage Originator  -  NMLS #216987  -  IL Lic. #031.0006220  -  WI License #216987

American Portfolio Mortgage Corp.

NMLS #175656

Direct:  815.524.2280

Cell/Text:  708.921.6331

eFax:  815.524.2281

www.genemundt.com

gmundt@goapmc.com

             

           

Gene Mundt, Mortgage Originator, an Originator with 40 years of mortgage experience, will offer you exemplary mortgage service and advice when seeking:  Conventional, FHA, VA, Jumbo, USDA, and Portfolio Loans in Chicago and the greater Chicagoland region, including:  The Lincoln-Way Area, Will County, (New Lenox, Frankfort, Mokena, Manhattan, Joliet, Shorewood, Crest Hill, Plainfield, Bolingbrook, Romeoville, Naperville, etc.), DuPage County, the City of Chicago, Cook County, and elsewhere within IL & WI.