It's the Most Wonderful Time of the Year ... (Unless it Ruins Your Credit)

It's the Most Wonderful Time of the Year ...

(Unless it Ruins Your Credit)

It's that time of the year again ...  

And that means the Holidays are here!  Decorations, holiday songs, family gatherings, eggnog, parties ...

And Shopping!

Like the majority of Americans, you've probably found yourself ... or will find yourself ... doing one or both of the following during the Holiday Shopping Season:

• Standing at a register in a store paying for a holiday purchase
• Making a holiday purchase online

And inevitably, you'll find yourself being asked at the time of check-out ... or at some later date via an email or text ... if you'd like to apply for credit at that store or online site.  Some sort of "special discount", gift, or temporary low-interest rate will most likely be dangled in front of you as an enticement to action. 

Now, I've written on this topic many times in the past.  But I do so once again today because of its timely and great importance.  Especially so, for those that have already entered the home buying/mortgage application process ... or those hoping to buy and finance in the next year or so.

As a Chicagoland - IL/WI loan officer, I've had the opportunity to view many Credit Reports.  And I've seen large amounts of credit/debt that was initially established during the Holiday Shopping Season on those Reports.  New debt that can produce huge credit ramifications for those looking to buy a home.

So I urge you ... 

STOP!  

Take the time to think it over thoroughly ... whether it be at the cash register or while you're online. 

Say "NO" to that new credit offer, unless you fall into one of the following categories: 

• Your Credit/Credit Score can withstand the new credit inquiry
• You can handle the new debt and make monthly payments on time, consistently, and faithfully
• You are NOT making application for loan
• You are NOT already in the mortgage process
• You are NOT hoping to buy a home in the near future
• You are NOT maxed-out on present credit cards
• You have NOT already applied for other store/credit cards
• You know ALL the terms of the new credit account associated with the offer
• You know what other credit obligations you have and the total of ALL your debt
• The "enticement" offer is so valuable it offsets the negatives of taking on more debt
• You have NO credit history and are trying to establish one for a future home purchase

Retailers know and are counting on the fact that you are emotionally tied to making the purchase in-hand.  And that you may possibly be under stress (emotional, physical, and financial) and time constraints to make that purchase.  It's easy to fall prey. 

But make no doubt about it:  While the savings reaped on the initial purchase may be welcomed (and possibly substantial), the retailer is making that offer knowing that they will best the customer.  If they didn't think they'd ultimately make money with the offer, they wouldn't be making it.  

Retailers are not charitable organizations ...

So again, STOP.  Take the time to pause and think things through.  Will the new credit serve a good purpose for your finances and credit or cause future financial stress?  

What will be most beneficial to you moving forward?  The immediate savings or the more long-term ones?  Then answer that salesperson or online inquiry accordingly ...

 * Hoping to Buy or Refinance a home in New Lenox or elsewhere in Chicagoland?  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 Licensed

American Portfolio Mortgage Corp.

NMLS #175656

Direct: 815.524.2280

Cell/Text: 708.921.6331

gmundt@goapmc.com

eFax: 815.524.2281

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.

Referrals are Appreciated and Welcomed!

Considering Buying a Home? You Need to Check-Out my Mortgage Wish List First

Considering Buying a Home?

You Need to Check-Out my Mortgage Wish List First

As a Grampa, I'm very aware of "Wish Lists".  The topic is of grave concern to my 3 grandkids, especially at this time of the year ...


My little cuties, Henry, Marilyn, and Evie, aren't the only ones working on a Wish List.  Their Grampa Gene is too.  Only mine is a Wish List for Borrowers ... those hoping to buy or refinance a home.

What do I ask for on that Wish List?

1. The Gift of Knowledge
2. Proactive Acts of Prevention

Pretty exciting, right?

But if received, they would facilitate or eliminate the majority of issues that crop up for Borrowers AFTER they've received a Pre-Approval.  One or the other (or both) would  address the "mistakes" I most commonly see committed during that portion of the Mortgage Financing Process.

Below are the issues I see arise most often ... and how my "Wish List" addresses each:

     1.  Problem:  Acceptance of a cash gift or check to be used for Earnest Money, written by someone NOT named in the Contract or the Loan Application.
     Knowledge Cure:  If a Buyer and Mortgage Applicant, the check for Earnest Money should be written from your funds.  Consider it an advance on YOUR Down Payment or the funds needed to Close.  
     Important Preventative Steps:  Checks from Non-Borrowing, Non-Buying Parties cause problems!  Don't use them.

     2.  Problem:  Needlessly transferring money from one bank to another ... or from one account to another within the same bank. 
     Knowledge Cure:  A common misconception held by Borrowers is that all funds needed to cover Down Payment and Closing Costs (known as Cash to Close) must be accumulated or deposited in one Account.  That's NOT true.
     Important Preventative Steps:  Separate accounts, separate investments, separate banks can all be verified and documented.  And their collective balances can be totaled to demonstrate enough Cash to Close.  Rely on the process and Processor to accomplish this.

     3.  Problem:  Working fewer hours during the period of the home search and contract negotiations ... or just before applying for a home loan.  (Note:  This is a problem of particular importance for hourly-paid employees) 
     Knowledge Cure:  Mortgage Underwriters look unfavorably at low YTD (Year-to-Date) Gross Incomes reported on submitted recent paystubs (required for Loan Application).  
     Important Preventative Steps:  It's important (when possible), to retain normal hours/pay during all phases of the home buying/application process.
   

 4.  Problem:  Accepting "Cash" or "Gifts of Cash" and depositing them into the Bank for which the funds needed to Close get verified.
     Knowledge Cure:  Cash has no acceptable means of being verified and counted as acceptable Funds to Close by a Mortgage Underwriter.
     Important Preventative Steps:  Do NOT deposit cash into the bank accounts utilized for Mortgage Application.

     5.  Problem:  Changing jobs prior to or after Mortgage Application without consulting your loan officer.
     Knowledge Cure: In terms of job history, length of employment, verification of income, this matters ... especially if the employment includes an actual change of employers. 
     Important Preventative Steps:  Even if the change in employment is an improvement, make sure to talk to your LO prior to the changes being made.  

     6.  Problem:  "Magician Funds" ... funds initially reported in a bank account that disappears then reappear in a later deposit.
     Knowledge Cure:  Mortgage Underwriters need to know you have enough money to make your future mortgage payments, cover Closing Costs, etc.  That means all funds need to be "seasoned" and verifiable, in your account, for a minimum of  60 days.
     Important Preventative Steps:  Plan ahead.  Make sure all deposits are "seasoned" and in your account(s) well ahead of your Mortgage Application.  If you receive a bonus, gift, etc. ... make it traceable and document it fully.  (Mortgage Underwriters will require that you do so)

Make my Wish List YOUR Wish List too.  Avoid problems during your critical Underwriting Process and at Closing time by proactively educating yourself regarding the needs and demands of Mortgage Approval.  

Follow the tips above ... gather the Documentation you'll need for your financing proactively ... and your home buying and financing wishes will come true.

The process will be far less stressful, go much more quickly, and end successfully ...

* When in need of Mortgage info or service when buying a home in New Lenox, or elsewhere in the Chicagoland - IL - WI region, contact me. I'll be happy to 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 Licensed

American Portfolio Mortgage Corp.

NMLS #175656

Direct: 815.524.2280

Cell/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 in IL & WI.

Referrals are Appreciated and Welcomed

   

  

Heard Private Mortgage Insurance is Scary? Not If You Know the Facts

Heard Private Mortgage Insurance is Scary?
 Not If You Know the Facts

If you've done much research regarding mortgage financing, you've probably heard the term "Private Mortgage Insurance" ...

You may have also heard that Private Mortgage Insurance is scary or should be avoided.  But in reality, in the right situations ... it can be the solution to your home buying and financing challenges.

What do I mean?  

Let me start by explaining what Private Mortgage Insurance is ...

Private Mortgage Insurance, often referred to as PMI, is insurance provided by a private mortgage insurance company.  The insurance protects Lenders against loss (to an 80% Loan Limit) if a Borrower defaults on their mortgage.  This, in turn, enables Lenders to offer financing options to Borrowers making smaller down payments.   (Mortgage Insurance is provided and available through several privately owned companies.)  

As housing prices have risen and it's become more challenging to save for down payments, Private Mortgage Insurance has become an option considered more frequently by Borrowers.  When utilized, it enables Borrowers to receive Loan Approval, even when they have placed less than 20% down payment on a home purchase.  That can be a very welcomed advantage.

Next:  Private Mortgage Insurance Costs, How PMI is Paid, Pros and Cons

Home Buyers/Borrowers must know ... utilizing the Private Mortgage Insurance option does come at a cost.  Typically that cost is paid in monthly increments as a portion of the monthly escrow payment, along with prorated shares of Real Estate Taxes and Homeowners Insurance.  Once the Lender receives the payment it, in turn, pays that same amount to the Private Mortgage Insurance Company

There are varying stages or levels of Private Mortgage Insurance charges/costs.  Costs are based on the increments of Down Payment percentages made by a Borrower (3%, 5%, 10%, and 15% Down Payment).  

• The greater the Down Payment percentage:  The PMI is charged/calculated at a lower percentage of the loan amount (thus lower Monthly Payments toward PMI).
• Credit Scores:  Credit Scores affect the cost of Private Mortgage Insurance.  The higher the Credit Scores, the lower the costs.

But other payment methods for PMI do exist:  PMI can be paid by the Borrower in one lump sum at the time of Closing as part of their Closing Costs.  And in some instances, Lender-paid mortgage insurance is also an option available to Borrowers. (See below for more information).

Next:  The differences between Conventional Loan PMI and  FHA Loan PMI.  

Following are facts regarding both:

Conventional Mortgages:

• Private Mortgage Insurance is required on Conventional Mortgages where the first mortgage loan is GREATER than 80% of the Purchase Price.  
• Costs are calculated based upon: 

1. The Borrower's MIDDLE Credit Score 
2. Down Payment percentage
3. The PURPOSE for the loan (Purchase, Cash-Out Refinance, Etc.)

• For a Borrower-Paid Monthly Payment Plan:  Every 20 point variance in Credit Score, affects the amount of Mortgage Insurance paid 
• Lenders can require the existence of PMI until the Loan Balance is paid down to 80% of the original Sales Price/Value  
• Lenders must release a Borrower from paying any Private Mortgage Insurance when the loan is paid down to 78% of original Value/Price 
• Lenders must remove PMI at the 78% level 
• Borrowers must request the removal of PMI at the point a loan is paid down to 80%
• Refinancing of a loan that has PMI is possible and is a way Borrowers can eliminate or reduce the cost of their Private Mortgage Insurance  

FHA Loans (Federal Housing Administration):

• ALL FHA Loans require Mutual Mortgage Insurance, to some degree or some cost, regardless of Down Payment Percentage.  (The Mortgage Insurance required by FHA is mandatory, guaranteed, and government issued) 
• Variations are based upon the TERM of the Loan (i.e. 30-year or 15-year loans)
• If the Down Payment is 10% or MORE, the cost will be lower than if putting down just the minimum Down Payment (Very much the same as Private Mortgage Insurance)
• FHA charges an upfront, but financeable, Mortgage Insurance Fee of 1.75% of the Loan Amount.
• Most Borrowers choose to borrow the FHA charge.  The cost is added to the true "Base Loan Amount" and is financed over the term of the Loan (30 years).  

      The advantage to borrowing this FHA charge is:  Borrowing typically results in a slightly higher monthly payment ... but saves the Borrower several thousand dollars in costs at Closing.

There are some loans that DON'T have Mortgage Insurance.  Those are:

• VA Loans:  Available only to Veterans with Benefits
• Conventional Loans with 20% or more Down Payment, resulting in a loan amount of 80% (or less) of the Purchase Price
• Loans that charge a HIGHER Interest Rate to "offset" or allow the Lender to pay the PMI on the Borrower's behalf. 
• "Piggy-back" loans, where the Borrower's down payment is 10% of Purchase Price, but there is a Second Mortgage taken at the same time as the First Mortgage, to eliminate the need for any PMI.  

      Typically, the cost or payment for the 2nd Mortgage is less than the cost of the PMI, therefore, a possible advantage to the Borrower.  (A thorough analysis should be conducted with your LO in order that comparisons can be properly made.) 

If you're a hopeful home buyer, keep an open mind regarding Private Mortgage Insurance.  PMI may be a sound, viable, and beneficial solution for you when financing a home.  

Talk to a Lender ... as soon as you decide to buy.

Why?  As you can tell from the info provided above, Private Mortgage Insurance is not "one-size-fits-all".  Every Borrower's scenario is different.  With enough time, a Lender can help you "position" yourself best for the most advantageous mortgage program and PMI option.  

Take the steps to learn all the ins and outs, pros and cons that come with PMI.  Get the facts about PMI as they pertain to you.  That way you can make a sound informed decision moving forward.

To find out if Private Mortgage Insurance can prove of benefit to you when you buy in New Lenox - Chicagoland - IL - WI, Let's talk today ...   

     * When in need of Mortgage info or service when buying a home in New Lenox, or elsewhere in the Chicagoland - IL - WI region, contact me. I'll be happy to 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 Licensed

American Portfolio Mortgage Corp.

NMLS #175656

Direct: 815.524.2280

Cell/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.

Referrals are Appreciated and Welcomed