A Guide to Purchase-Money Mortgage

Estate agent giving house keys to client after signing agreement contract real estate with approved mortgage application form.

You may have lost a lot of savings and credit-worthiness during the coronavirus pandemic. Perhaps your savings and credit score were on the low side even before the pandemic.

Either way, purchase-money mortgages are largely utilized by potential home buyers who do not have enough money in the bank for a traditional down payment on a home. And by folks who have bad credit and are unable to get approved for a mortgage through a bank or other lender.

Unlike traditional bank mortgages, purchase-money mortgages come with mostly non-negotiable and quite high-interest rates.

A Guide to Purchase Money Mortgage

So, we already know after reading the first few paragraphs above that difficulty for those with poor credit or the lack of cash to put down on a house along the usual paths — thus turning to a purchase-money mortgage.

But what exactly are the details surrounding a purchase-money mortgage?

Basically, a purchase money mortgage is allocated to the new home buyer by the actual seller.

Yup. You read that right.
Also known by terms such as “seller financing” and “owner financing,” a purchase-money mortgage is literally when the seller of the house issues a loan to the home buyer (or borrower, to be exact here).

The Purchase Money Mortgage Lowdown

Purchase-money mortgages can be designed to appear a lot like traditional loans. Also, they can consist of having the home buyer take over the seller’s current mortgage.

  • There are those buyers who are able to secure a traditional loan from a bank or lender. BUT are not approved for enough of a loan to cover the monetary gap that needs to be filled in order to cover the difference between the home’s purchase price and the necessary down payment for the home
  • Then, there are those buyers who are not able to secure a loan of any amount at all

In either situation, because the buyer is unable to acquire the entire loan amount needed for the home purchase by way of a bank or other lender, the buyer then needs to provide the seller with an agreed-upon down payment amount along with a vital security instrument, such as a promissory note, to prove the loan’s existence. This kind of security is usually a legal recording of the transaction and/or process within public records.

This security instrument or promissory note is an important protection against future lawsuits or disputes between the buyer and the seller.

A Purchase Money Mortgage is Very Unlike a Traditional Mortgage

A purchase-money mortgage is a loan that the property seller him or herself issues to the new home buyer. It is a very large piece of the property transaction.

Very unlike a traditional mortgage, getting or acquiring a purchase-money mortgage basically goes like this:

  • Does the home’s seller have a clear title? If so, the buyer and seller agree on an interest rate, monthly payment, and loan term. The buyer pays the seller for the seller’s equity on a month by month installment basis
  • The seller takes on the role of a typical bank, in a sense, by offering the seller the money to buy the home
  • After the very last payment or in the event of a refinance situation, only then does the buyer receive the deed

Lease-purchase Agreement

There also exists what is called a lease-purchase agreement.

A lease purchase occurs when the seller gives the buyer equitable title and leases (instead of selling) the property to the buyer. Once fulfillment of the lease-purchase agreement is met, the buyer will then receive the title along with credit for a portion (or all) of the rental payments made toward the home’s purchase price. From there, the buyer usually acquires a loan in order to pay the seller.

Feeling a Bit Confused? Here’s a Purchase Money Mortgage Process Example

Say hello to Kelley. She is fully aware that she won’t be able to get approval for a conventional bank mortgage due to her low credit score and lack of savings. Kelly looks for a new house anyway. And when she finds the home that is right for her and her family. She goes ahead and asks the seller for a purchase-money mortgage.

Let’s say the house Kelley is interested in buying costs $200,000. Kelley gives the seller a down payment of $10,000. And then she acquires a purchase-money mortgage, directly from the seller, for the $190,000 that remains. The seller is paid back the purchase-money mortgage in monthly installments. Kelley is aware that this type of mortgage holds a higher interest rate than a typical bank loan.

Estate agent are presenting home loan to client.

The Pros of a Purchase Money Mortgage

Seller Pros:

  • When a seller finances a portion, or all, of a home’s purchase, the entire sale process can be finished in a shorter amount of time. This is great for owners who want to quickly sell their homes
  • When a seller finances the purchase of their home, they can consider the loan, with the monthly payment plus interest that goes along with it, as additional income. Furthermore, the seller is allowed to sell the loan’s promissory note to an investor in exchange for a nice, lump-sum payment
  • A purchase-money mortgage gives the seller the opportunity to get the full listing price – or higher – for their home
  • Among the most stressful parts of selling a house is in preparing the home for the market and making costly improvements and renovations. When a purchase-money mortgage is involved, the seller is much more apt to leave the house as-is. This affords the seller enormous cost savings
  • When a seller finances the entire purchase of the home purchase, the seller keeps the property’s title until the buyer pays off the loan. Should the buyer fail to keep up with the monthly payments, the seller can take back the house at any time

Buyer Pros:

  • Even though the buyer’s credit score is low to poor, the seller may still request the buyer’s credit report. However, in a purchase-mortgage situation, the seller’s credit expectations of the buyer are typically low and much more flexible than the requirements and expectations of conventional lenders
  • Payments tend to be easier to negotiate. For example, if the seller asks for a down payment that is more money than the buyer has, the seller may allow the buyer to make lump-sum payments toward the down payment on a scheduled basis
  • Mortgage closing costs are considerably lower than the same type of costs through a bank or other lender
  • In a purchase-mortgage situation, the buyer does not need to wait for lender financing, nor hassle with the mountain of paperwork that goes along with the lender process. That means the buyer can close on the house more quickly and take possession of the house earlier

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How to Get Pre-Approved for a Home Loan?

House model with agent and customer discussing for contract to buy

Finding a home loan is often a lengthy and involved process, one that requires you to understand things like your credit score, its effect on your acceptance, and much more. While your lender can walk you through these steps and ensure that you are satisfied, you may still find yourself confused about how to get pre-approved for a home loan and what steps are required for each lender.

That’s why we wrote this extensive and in-depth article. In it, you’ll learn about pre-approval, why it’s a great idea, and the various steps that help make your pre-approval easier. Just as importantly, you’ll learn how we can help to make this process smoother for your needs. By working with us, you can better understand your home loan and the necessary steps for approval.

Mortgage Rates

According to expert predictions 30-year fixed rates will increase to 4% in 2022. While refinance originations are expected to drop by 62%, getting a mortgage for the purpose of buying a home is expected to increase 9%.

Source: CNBC

What Is Pre-Approval?

Home loan pre-approval is a process that many lenders take to improve your chances of success. First, they determine how much you can borrow from them and examine your credit score and history to understand what loan programs make the most sense for you. They’ll also use this information to examine what kind of interest rate is appropriate for you and your borrowing needs.

When going through pre-approval, they’ll check a variety of different financial elements in your life. Each of these factors is carefully weighed and examined before they pre-approve you.

Pre-approval doesn't guarantee that you'll get a loan. However, it does give you and your lender a better understanding of what to expect from each other.

Factors that help with this decision include:

Credit Score

Your lender will examine your current credit score and weigh other factors that play into it. For example, they'll see how well you've paid past debts, what steps you took to consolidate your credit, any potential defaults on your loans, and much more.

Income and Debt

Everybody has an income to debt ratio that lenders use to gauge their mortgage. This ratio weighs how much money you make in a year versus how much you pay for your debts. A higher or unbalanced ratio will likely result in higher interest rates and less appealing loan terms.

Employment History

Your lender will examine your current income situation and your past employment history to weigh your financial situation. This process may require interviews with your employer or other steps that help to gauge your whole financial situation.

After your initial meeting and pre-approval process begins, you’ll get a written statement from the lender. This statement includes all information they found from you and gives sellers a better idea of whether you’re a safe investment. In addition, these letters provide you with around 60-90 days of leeway during which to get your loan and seal your home deal.

Why Get Pre-Approved?

Is it strictly necessary to get pre-approved when buying a home? There’s no law that says you have to get pre-approved. In the past, this process was considered more of a luxury than a necessity. However, that has changed in modern real estate. Pre-approval has become an essential part of buying a home. If you don’t get pre-approved, you sabotage your chances of getting a house.

Why is that the case? The benefits of pre-approval for both the buyer and the seller are significant. First, as the buyer, they give you the chance to understand what your lender is likely to provide for you. Beyond that, it shows the seller that you’re serious about buying a home and will take whatever steps are necessary. In other words, when you get pre-approved, you:

  • Show the seller that you’re a safer investment than others
  • Improve your chances of getting a better interest rate
  • Let you know where you might need to improve your financial health
  • Understand more about how much you can afford when buying
  • Work more efficiently with a variety of different lenders
  • Get taken more seriously by potential home sellers
  • Improve your chances of sealing a home deal

This last point is critical to highlight here. Many sellers will look with suspicion at an offer without pre-approval. They’re likely to either ignore your bid or not take it seriously, making it harder to get the financial support that you need. Pre-approval is basically a necessary step in today’s real estate market. Those who don’t do it are only making life harder for themselves.

As a result, it is crucial to know how to get pre-approved for a mortgage and what steps you must take here. You already understand what your potential lender will examine before pre-approving your loan. However, you need to understand each of the steps in this process to avoid making a mistake. Application errors could result in denial, even if your financial health is robust.

How To Get Pre-Approved For A Mortgage

Pre-approval is a surprisingly streamlined process, one that usually takes only one meeting with your lender to start. Most of the hard work will be done by your lender, as they weigh your finances to decide your home-buying fate. It may be frustrating to rely so much on them, but there’s not much you can do to change that. Here are the steps you can take to get pre-approved.

Collect All of Your Important Information

You need to provide your lender with all the financial documents they typically need when applying for a mortgage or loan. These items help to make it easier to show that you can make the payments on a loan. Just a few of these items include:

Proof of Income Things like tax returns, pay stubs, or deposit numbers from your back all qualify.
Employment Verification Bring a notarized letter from your boss to show you are employed.
Credit History Your lender will examine your credit history via a background check.
Identification Bring a few sources of identification, like your Social Security card and driver's ID.
Debt-to-Income Ratio Show proof of your current debts and how much money you earn.

Once you have gathered all of this information, you can decide to visit your lender or wait a little longer. It’s not always best to get immediate pre-approval. Let’s take a look at a few times when it is best to ensure that you know when to apply for a mortgage.

Choose Your Pre-Approval Period

Have you started looking for a home yet? If you haven’t, it is a good idea to consider pre-approval before you even begin. You don’t want to find out too late that your dream home is just outside your abilities! So start with pre-approval and then move on to looking for a home.

Get your credit score checked first to see if you fall within the 680-720 zone. If you’re lower than 680, anticipate some troubles with getting approved. If you’re lower than that range, don’t bother with pre-approval. Instead, move on to the next section here to learn more about improving your success chances.

Meet With Your Lender

After you’ve set up an appointment with your lender, you can present your information to them and discuss the type of home you want. They’ll consider your wants and needs before doing the pre-approval. In this way, they can provide you with a deeper insight into what you expect in this situation. Just as significantly, they can minimize any potential complications you may experience.

Your meeting is going to be reasonably short. Unfortunately, they can’t make a decision right then but will talk about what they’ll do and what factors they’ll weigh. They may also suggest other steps you can take, such as talking to your financial adviser and much more. Now, you’re going to have to play the waiting game: the least enjoyable part of getting pre-approved for a home mortgage.

Waiting for the Letter

Tom Petty sure knew what was up when he wrote: “Waiting is the Hardest Part.” That initial application process requires at least a three-business-day wait from your lender. That’s the minimum amount of time you can expect! For example, if you apply for a loan late on Friday, your lending officers won’t even look at it until Monday. But, on the other hand, if things go smoothly, that means you could wait until Thursday of the following week!

There’s not much you can do to speed up this process. Lenders have to work at their pace because they usually have many loans they’re working on at the same time. Understand, too, that it may even take longer than three business days. For example, if you applied on Monday, a three-day wait would be until Thursday. Longer delays could go until Friday or even the following week.

Don’t panic if you don’t hear from your lender at that time! They are required, by law, to send you a letter about your application. It will come. Until then, just keep your mind focused on other things. Driving yourself crazy waiting isn’t worth it. Also: longer wait times don’t mean an increased risk of denial. It just means your lender is busy and needs time to work.

Happy couple is standing near new house with cardboard boxes.

Can You Improve Your Chances of Pre-Approval?

If you’ve been denied pre-approval or worry that you will be rejected, it is easy to feel trapped. Many people with poor credit scores or questionable employment histories may feel like they can never bounce back from these concerns. That’s not the case, but emotions like those can be hard to combat. They may make it hard for you ever to consider buying a home seriously.

Thankfully, it is possible to improve your chances of success by investing in a few simple steps. These let you improve your credit score, pay off some debts, and make your pre-approval easier. Of course, you’re not going to finish these steps in a few days, weeks, or even months. Instead, they provide a long-term strategy for enhancing your pre-approval process and include how you can:

Pay Off Debts

Do you owe a lot of money on a credit card or have money on a car payment? If you have too much debt, your credit score will suffer. Try to raise it to at least 720 by paying off debts. This might take you a year or more but is more than worth the time and energy.

Report Credit Errors

While credit reporting services are usually pretty accurate, they are not perfect. For example, it is possible to get an error on your score, such as if someone with a similar name is accidentally included in your score. Talk to a credit report company to learn more about this process.

Watch Your Credit Ratio

People with too much credit usage often end up struggling to find a high-quality pre-approval. You want to have a debt-to-income ratio of 36 percent or less. Anything more than 43 percent will scare away most lenders, so save up and start paying.

Save Up for a Big Down Payment

Most sellers want you to have at least a 10-20 percent down payment before agreeing to sell. However, if you pay as much as 30-40 percent in your down payment, you could improve your chances of pre-approval. Only spend what you can afford.

Reading about these steps may be frustrating or even off-putting for many people. After all, it requires you to spend more money that could be put down for your home. In addition, for most people, it may take a year or more to go through some of these steps. That kind of slow progress is frustrating, of course, but it is essential because it can help to rebuild your credit and improve your pre-approval chances.

Thankfully, most people who take care of their bills, make good money and spend time assessing their financial situation should have little difficulty handling these steps. Before you start, though, it is essential to know what kind of lenders make the most sense for you. Then, by working with Goalry and our unique app, you can minimize your risk of financial struggles and improve your success rate.

Finding a Lender You Can Trust With Goalry

Goalry provides trusted financial help by providing users with an easy-to-use search application. Though we are not lenders, we have created a detailed list of the best lenders in the world. You can then search in our app to find one who will work with you. Filter your search based on things like credit requirements, the difficulty of pre-approval, and much more to find the lender you want.

We also include contact information and much more that all help to make this search easier to execute. Do you want a lender that pre-approves people with poor credit? Our app can help you find a professional who meets that need. Do you want a lender that provides a specific interest rate range? We can also help you there. Our application is fully adjustable and can be tweaked to meet any of your needs, providing the detailed help necessary to minimize any poor borrowing decisions.

Download our app, set up your profile, and start searching today to get help with pre-approval. When searching, don’t forget to save your search parameters. Doing so lets you get in touch with past searches or make new ones based on what you find. You can also use the contact information to search the lenders’ websites or call or email them directly to get help.

Final Thoughts

If you’re learning how to get pre-approved for a home loan and you want to do it as smoothly as possible, there are many steps you can take. You can work with us at Goalry, talk to your personal financial adviser, reach out to your local bank or lender, and explore various lending options. Just because one lender denies you early approval doesn’t mean you can’t get it elsewhere.

That’s the nice thing about this process. You can usually find someone willing to work with you to provide you with an outstanding home loan. However, you may have to research this process to find which lenders make the most sense for you. Then, you can talk with the home seller to see if they have any preferred lending options. In this way, you can do everything smoothly and efficiently.


Can You Get a Mortgage for Land Without a Plan to Build?

Aerial shot of single homes development.

Many open lots exist on the real estate marketplace, providing investors with many unique possibilities. For example, you can buy multiple blank lots and build high-quality housing for rent. Or you can develop commercial properties with new stores and other similar structures. But can you get a mortgage for land? And if so, what guidelines must you follow?

Please read on to learn more about land mortgages and loans. Understanding these factors will make finding one simpler. It will also improve your ability to develop land and create great real estate deals.

What is a Land Loan?

Land mortgages or loans provide cash for people buying property without any buildings. Lenders offer money for commercial, residential, or even industrial properties. The loans vary in percentage and amount, depending on the purchasing situation and things like collateral. They also consider the use of the land and other factors before deciding to grant a loan.

It would help if you had a good credit score to get the best possible rate. Each lender provides different expectations and guidelines for their borrowers. For example, some may ask for a minimum 750 credit score. Others may ask for specific types of collateral. You must provide income and debt information to show you can afford the property. The lender then checks on the land to gauge its quality.

Tell them how you plan to use the land, and they’ll look at zoning, land-use restrictions, and surveys. This information shows whether your land can be used in this way. You must explain your intended use of the land in detail. Lenders want to make sure that the loan is not risky. They may turn you down if they find your intended usage is unsafe or too dangerous for their needs.

Why Might Lenders Turn You Down?

Many reasons exist for denial. Understanding a few will help make it easier for you to choose this lending option. For example, you might be turned down if:

  • Your credit score is too low, or your spending history questionable
  • Your income doesn’t seem high enough to pay for developing the land
  • Pollution or other problems exist on the ground that may limit its use
  • The intended purpose for the land seems too unlikely or expensive
  • Zoning or legal restrictions make your intended use impossible
  • Potential concerns over utility access and other situations
  • Lack of easy access to the property, which may require extensive work
  • Landscaping concerns that may make the building more difficult
  • Soil concerns that may make farming hard, such as a heavy clay density
  • As you can see, most concerns center around your possible use of the land. Lenders need to know how you plan on developing the land to minimize their risk. They won’t give you a mortgage or loan if you don’t explain your usage. Some might deny you if you don’t have a detailed plan for its development. These plans often include things like:
  • The type of buildings or facilities you plan on building on the land
  • Methods you plan on using to develop the property to a higher level
  • Utilities you will bring to the property to make it usable
  • Potential sources of income to establish the land properly

Provide these details to your lender to make their job easier. They will then take various steps to verify the potential of your plan. We’ll talk more about this process later in this article.

Types of Land Mortgages to Consider

Let’s take a look at what types of land mortgages you have as options. All of them have specific requirements.

Raw Land Loan

As mentioned earlier, raw land requires development to use correctly. And raw land loans require a detailed description of how you’ll use the land. You’ll need to showcase every step of the development process to assuage the lender. Then, you’ll likely pay a sizeable down payment and need good credit. Thankfully, raw land costs less than developed property. So, you might still do well with this option.

Unimproved Land Mortgages

What’s the difference between unimproved and raw land? Unimproved land typically includes some utilities and amenities. However, it requires electrical and gas meters. Some also require phone boxes. Thankfully, lenders consider this land less risky than raw property. Therefore, they’re more likely to approve your loan. That said, you still need to provide a detailed description of the property’s use.

Improved Land Loans

Improved land includes most utilities, water, and easy access to roads. Some may even include landscaping and driveways from past buildings. These loans require the least down payment and provide better interest rates. In this way, they’re the easiest type for most people to obtain. However, improved land lots may be hard to find. As a result, investors often buy them very quickly when they’re available.

Construction Loans

After buying property to develop, you need a construction loan. These include options like construction-to-permanent and stand-alone loans. The first type consists of all construction and mortgage costs. The second requires two different loans for each. Expect a down payment of at least 20% with this loan.

Benefits and Drawbacks of This Lending Option

Now that you know the answer to the question “can you get a mortgage for land?” you must gauge if it’s the best option for you. The many pros and cons of this lending option make it suitable for many people. So let’s take a look at these factors to make your decision easier to process and understand.

The Benefits of Land Mortgages

Land loans provide many advantages to a potential real estate mogul. Understand each of these benefits before applying. Doing so will help guide you through this process more efficiently. Knowledge is power in financial matters, and this information is essential to know.

Do you want to build a dream home that you can’t find anywhere else? Then, consider a high-quality land mortgage. Buy a blank lot, prepare it for construction, and then build the home you want. Otherwise, you’d have to pay to demolish an existing house, which is a waste of time and resources.

Most lenders will have unique land loan options available for you.

However, their choices often vary based on many factors. For instance, they may not specialize in land loans and have fewer available. Or they may limit their loans to a specific number each year. Talk to your lender to learn more.

Construction lenders often look to your credit history when deciding on your loan. An excellent land loan helps to make this decision easier. They’ll use the information on your loan to evaluate your lending situation. They’ll likely reduce your construction loan more readily as a result.

The Drawbacks of Land Mortgages

While we believe this lending option is a great choice, drawbacks do exist. They do not outweigh the positives, in our opinion. However, a fair understanding requires a grasp of potential issues. Let's take a look at the most common concerns to make this decision easier for you to handle.

Most land loans lack collateral that helps to calm lender’s nerves. Unfortunately, this may make getting a loan more difficult. It would help if you had exemplary credit and a clear development plan. Expect to apply a few times if you don’t have your plan in order right away.

Lenders often place higher interest rates on land loans due to their riskier nature. An excellent credit score will help a lot here. However, you may find interest rates vary wildly. We’ll take a look at some standard land loan interest rates below to make your decision easier.

Most lenders ask for a higher down payment for land loans. Their inherently riskier nature often makes this step necessary. On the other hand, this may be a benefit. A higher down payment does cut back on your monthly mortgage payments. However, some may not have the available cash.

Qualifications for a Land Mortgage

Lenders typically check three personal things when approving your land loan. These include credit score, DTI, and down payments. Expect more stringent demands for a land mortgage than you’d typically experience. These guidelines help weed out potential bad borrowers. Thankfully, most can be negotiated if you work with an understanding and adaptable lending partner.

You Require a Good DTI

Your DTI (debt-to-income) ratio indicates how well your income covers your debt. It calculates how much of your total income goes to cover necessary debts. Most lenders want a score no higher than 36%. Land mortgages follow this guideline. However, lenders may not provide a loan if you’re at or near this threshold. So, again, pay off your debt to minimize this problem and its impact.

You Should Pay a Good Down Payment

Most lenders expect a hefty down payment for a land loan. Expect, minimally, 20% of your total land cost. However, some lenders may ask for as much as 25%. Talk to your lender about this amount and try to talk them down a little. It may not work, but it is better to try and fail than not try at all. Don’t borrow money from a lender to make this payment. Doing so may create an odd financial repayment cycle.

You Need a Strong Credit Score

Lenders require a reasonably strong credit score for land mortgages. You’ll need at least 680-700 minimum to qualify. However, they may offer you weak loan terms or high-interest rates. So raise your credit before applying for a loan to improve your rates. Aim for a score of 725-750 for the best results. However, an even higher score will benefit you more. So pay off some debt and get your credit under control.

Interest Rates to Expect

Interest rates vary depending on the type of land you purchase. For example, lot land consists of clear and somewhat developed property that’s ready for construction. On the other hand, raw or recreational land requires more work to prepare and results in higher interest rates due to the higher risk. Let’s break down the possible interest rates for both to make this process easier for the buyer:

Lot Land

  • 10-Year Fixed Loans – 4-5%
  • 15-Year Fixed Loans – 4.3-5.3%
  • 20-Year Fixed Loans – 4.6-5.6%
  • 30-Year Fixed Loans – 4.65-5.65%

Raw or Recreational Land

  • 10-Year Fixed Loans – 4.25-5.25%
  • 15-Year Fixed Loans – 4.55-5.55%
  • 20-Year Fixed – 4.85-5.85%
  • 30-Year Fixed – 4.9-5.9%

As you can see, shorter-term loans heavily decrease your interest. However, your monthly payments increase. After all, you must repay your loan in a shorter period. Some investors can’t afford that kind of monthly cost. However, longer-term loans produce a higher overall payment cycle. Therefore, we’d suggest going with the shortest option you can afford to minimize an intensive repayment process.

Applying for a Land Mortgage

You may find working with a local bank near your potential property gives you a better chance of success. However, lenders around the nation may also work with you. Thankfully, you can apply for a land mortgage with minimal issues. Most lenders follow this simple application process:

  • Talk to a community bank or credit union for the best chance of success
  • Fill out the proper paperwork, which will vary based on your bank
  • Submit your application, including the description of how you plan to use the land
  • Wait to hear back, usually a three-day waiting process for most land loans
  • Read the loan agreement sent to you in the mail, including the terms
  • Decide if you want to accept their terms and sign it and return it to them

Denial may throw you off when applying for this type of loan. However, you can use it again and adjust the terms, such as offering a higher down payment. Most lenders will work with you to provide the help you need. If not, you may need to seek out another option. Thankfully, you should find a financial institution willing to work with you on this process.

Local credit unions often provide the best interest rates and terms. They may require a higher down payment, though. Talk to a few different options to gauge your best result. Bigger national banks also provide an excellent borrowing option. They may offer less attractive rates but may be more likely to approve your application.

As a result, you must search for a while before choosing a mortgage lender. Don’t pick the first option you find! Doing so is likely to disappoint you. Instead, do a little research, talk to lenders, and gauge their value to you. Follow the steps below, and you’ll improve your chances of finding a high-quality lender you can trust.

Finding a Great Land Loan

Reach out to various lenders to find a high-quality borrowing option for a land mortgage. They will discuss the multiple options available to you. They’ll perform all the steps described above to make this process easier. Most people find a lender reasonably quickly if they have good credit. Unfortunately, others may have a more challenging time understanding their options or finding a lender.

Do you have bad credit or can’t find a lender who trusts in your land development ideas? Download our app and sign up for a profile today. Set up your lending needs, search through various land loan providers, and reach out to each. Our app includes information on interest rates, application processes, and more. We also provide personalized search options for each of our users to improve these steps for you.

While we don’t provide the money for you, we do make it easier to find a lender. And sometimes, that’s all you need to improve your chances. So why not check out our app before applying for a land mortgage? You might be surprised at how much it helps you.

Final Thoughts on Land Loans

Don’t forget that land loans usually require a secondary source of financing to develop your property. All steps of this process lead to applying for this type of loan. After all, property in and of itself rarely provides a great return on your investment. However, developing it allows you to build your dream home or produce high-quality commercial store options. So get creative and have some fun!


The 7 Best Mortgage Lenders That Make You Feel At Home

Calculator with Magnifier Searching

Finding the right mortgage loan is an essential step in purchasing a home. There are many different mortgage lenders out there. You need to find the best one for your needs. Many mortgage lenders provide mortgage loans that won’t work for you. Doing your research is important. You should start your search for a mortgage loan by analyzing the lenders out there. You need to know what to look for in a good lender.

Here we have a compiled list of the best mortgage lenders. In compiling this list, we wish to provide useful information to any consumer out there. The list below provides lenders who provide mortgage loans to a wide variety of consumer types. Regardless of your financial situation, you can find a mortgage lender offering a suitable product. As long as you have a high enough credit score to qualify for a mortgage, you should be able to find a mortgage lender on the list below who you can do business with.

The 7 Best Mortgage Lenders to Consider

When you start looking for a mortgage, you might feel overwhelmed. There are many lenders out there, and there are many types of mortgages. It can be complicated to evaluate the hundreds and thousands of lenders out there. Yet it’s important that you don’t select a lender randomly. You need to be informed regarding your choice of lender.

We want to help you to become familiar with the best mortgage lenders. The mortgage you choose will impact you financially. You don’t want to pay more than necessary for your mortgage loan. Finding a fair and affordable deal is your priority.

Go through the information below on seven great mortgage lenders. Look at the products and approval requirements of these lenders. Then, you can find the best lender to meet your borrowing needs.

Citi Mortgage

Citi Mortgage logo.

If you’re looking for a good mortgage lender, consider Citi Mortgage. This mortgage provider is worth considering. Citibank is a huge, mainstream financial institution. The company, therefore, has a good reputation. You can rest assured that you’ll get a fair deal with Citi Mortgage.

One good thing to know is that Citi Mortgage has a wide variety of mortgage products available. You can get either adjustable-rate or fixed-rate mortgages from Citi Mortgage. You can also choose from a variety of loan terms including 10, 15, 20, or 30-year mortgages.

One of the biggest advantages of taking out a mortgage with Citi is the options to enjoy a low down payment. You can put as little as three percent of the home value down to take out a mortgage with Citi. If your credit score is high but your savings are low, Citi Mortgage might be the answer. However, a relatively low down payment isn’t the only advantage. You can also benefit from the fact that Citi Mortgage offers mortgages on properties in every state in the country. If you’re already banking with Citibank, you could take advantage of a discounted mortgage. It’s also worth noting that Citi will consider data outside your credit report. If your credit score is low but you have a strong history for making regular payments on rent, for example, you could still qualify.

You’ll also want to be aware of a few disadvantages of a mortgage loan with Citi Mortgage. You can’t apply online to work with this mortgage provider. Though Citi is among the best mortgage lenders, you will have to pay an application fee to apply with Citi as part of the mortgage process. Another thing to consider is that there are origination fees on these mortgage loans.


Chase mortgage logo.

Chase bank is another financial institution to mention when discussing the best mortgage lenders. Like Citi, Chase is another large financial institution. This means that Chase has a recognized reputation for providing standard financial products like mortgages. Also, like Citi, Chase offers mortgage loans with as little as 3 percent as a down payment, depending on the loan type.

You can qualify for a mortgage from Chase with a credit score of 640. One advantage that Chase offers over Citi is that you can apply online. As with Citi Mortgage, Chase also offers discounts on mortgage products for pre-existing clients.

There are a lot of different loan products available from Chase. You can take out a traditional mortgage. You can also get home equity, refinances, or jumbo mortgage loans from Chase. The case offers fixed and variable rate mortgages.

One of the disadvantages of a mortgage loan from Chase is that you will have to pay both, an origination and an underwriting fee. You will also need to speak with a mortgage banker as part of the process of applying.

Quicken Loans

Quicken Loans logo.

Those who take out a mortgage loan from Quicken Loans are often surprised with the convenience of the process. You can take out a loan from Quicken Loans if you have a credit score of at least 620. You can also benefit from the convenience of applying online. One thing that’s particularly easy with Quicken Loans is verifying employment. This can be done instantly for many American workers. You might be particularly interested in borrowing from Quicken Loans if you are taking out a fixed-rate mortgage. Quicken Loans offers custom fixed-rate mortgage loan products. These can vary in term length between eight years and 30 years.

If you’re interested in an FHA loan, you might want to work with Quicken Loans. Quicken Loans also offers USDA loans. There are also some Freddie Mac and Fannie Mae products carried by Quicken Loans. Quicken Loans is in some ways slightly more limited in terms of the products they carry. They do not carry home equity loans, for example. Quicken Loans relies a great deal on credit score data. If your credit score is low, you might struggle to get approved. Unlike Citi Mortgage, Quicken Loans will not allow alternative credit data to strengthen your application.

Quicken Loans is among the best mortgage lenders for many consumers. This mortgage provider might be ideal depending on your unique needs. It might be worthwhile to research your options with Quicken Loans if your credit score is strong and you’re looking for a fast and convenient online process.


KeyBank logo.

There are quite a few mortgage products to consider from KeyBank. There are also some home equity loans you might want to consider if you already own a property. One thing to know upfront is that KeyBank only offers mortgages in 15 states. If you don’t live in one of these 15 states, you’ll have to look elsewhere.

That being said, there are numerous advantages to working with KeyBank on your mortgage. KeyBank can potentially offer you a mortgage loan for no money down. If your credit and income are strong enough, you could potentially b a property without paying anything upfront. Homebuyers are often surprised at the various discounts they can take advantage of with KeyBank.

States in Which KeyBank Offers Mortgages:
  • Alaska
  • Colorado
  • Connecticut
  • Idaho
  • Indiana
  • Maine
  • Massachusetts
  • Michigan
  • New York
  • Ohio
  • Oregon
  • Pennsylvania
  • Utah
  • Vermont
  • Washington

You might be able to be approved for a loan with KeyBank despite not having a traditional credit history. KeyBank considers nontraditional credit data in qualifying applicants for mortgage loans. You might find KeyBank to be among the best mortgage lenders if you are interested in a Fannie Mae HomeReady Mortgage. This is one of the federally backed mortgage loan features that KeyBank offers.

One drawback is that you can’t apply online with KeyBank. Another drawback is that KeyBank doesn’t offer any USDA mortgage loans.

Rocket Mortgage

Rocket mortgage loan

If your credit score isn’t very high, Rocket Mortgage might be a good option for you. You can qualify for a mortgage from Rocket Mortgage with a credit score as low as 580. Rocket Mortgage also offers a full range of mortgage products. In addition to both fixed and adjustable-rate mortgages, Rocket Mortgage also offers jumbo, FHA, USDA, and VA mortgages.

If you’re looking for the best mortgage lenders with extensive online capabilities, Rocket Mortage is a good option. In fact, Rocket Mortgage offers one of the most convenient mortgages processes out there. They also give you a lot of opportunities to customize your loan to your needs.

On the other hand, Rocket Mortgage might not be a good option if you want one-on-one assistance. Another possible drawback is that your interest rate might be high with Rocket Mortgage. Also, Rocket Mortgage might not approve you if you’re carrying a particularly high debt load.

Guild Mortgage Company

Guild Mortgage Company logo

It might be a good idea to apply for a mortgage with Guild Mortgage Company. This mortgage provider offers mortgage in 48 states. This means that this company most likely provides mortgages in your area. However, this company does not provide mortgages in New Jersey or New York. Another thing that puts Guild Mortgage Company among the best mortgage lenders is its long history. Guild Mortgage Company has been in business since 1960.

Those who are buying a home for the first time might be especially interested in working with Guild Mortgage Company. The company has a reputation for being especially helpful with first-time home buyers. Another advantage of working with Guild Mortgage Company is that they offer so many different mortgage products. You can take out a conventional mortgage loan with Guild Mortgage Company. You can borrow an adjustable-rate or fixed-rate mortgage. You can also apply for FHA, USDA, or VA loans. If you are struggling to save up a down payment, you can take advantage of down payment assistance with Guild Mortgage Company.

There are a few fees to be aware of if you take out a loan from Guild Mortgage Company. You will have to pa an insufficient funds fee of $15 with these mortgage loans. You could also be charged a late payment fee that depends on the amounts that are past due on your mortgage account.


AmeriSave Mortgage logo

AmeriSave is a good mortgage lender to work with if you’re wanting to apply for government loans. This lender takes consumers with credit scores as low as 620. They are among the best mortgage lenders because they don’t charge you to apply. They also don’t charge you an origination fee. One huge perk you can enjoy with AmeriSave is that you can get rewards as high as $4,500 if you buy a property using the assistance of one of the companies affiliated real estate agents.

The major drawback to being aware of when it comes to working with AmeriSave is that interest rates can be a little on the high side. That being said, you don’t have to have a large down payment with AmeriSave. In fact, you can qualify with a down payment of only three percent of the home value.

There are many different mortgage products available from this lender. You can work with AmeriSave to purchase a home. You can also work with AmeriSave to refinance your existing mortgage. You can take out government-backed mortgages like FHA, USDA, and VA mortgages with this mortgage provider. The average amount for an AmeriSave mortgage is slightly more than $250,000. If you are looking to buy a home with a price of around $250,000, AmeriSave might be a good mortgage provider to work with.

Things to Look For in a Good Mortgage Lender

For buying a house mortgage, there are a few key considerations. You need to know how to evaluate various mortgage lenders. Your mortgage lender is important to your financial health.

You need to consider the costs of the mortgage. You have to pay your entire mortgage plus interest back over time. You also have to pay various fees for some mortgages. It’s important to shop around. As with any large purchase, you want to find the most affordable option available.

Cost isn’t the only consideration. You also need to find a mortgage lender that will be there for you when you have questions. It’s good to work with a mortgage lender that will be flexible about repayment. Things might come up that cause you to be late on a payment. You want to look for a mortgage lender that won’t penalize you too severely if you need to skip a payment.

Steps to Evaluating These Mortgage Lenders

To find the best mortgage lenders, you need to go through a few steps. Start by analyzing your situation. Then consider exactly what you’re looking for. You probably are looking to by a property in a particular area. Maybe you are dreaming about the country life. In that case, you should think about rural mortgages. You’re also looking for a property of a certain size with certain amenities. Determine what you want to start out. Then determine how much your envisioned home will cost you.

Figure out what your credit standing is. If your credit score is lower than 580, you probably have little to no chance of getting a mortgage loan. Once you analyze your income and credit score, figure out which lenders mentioned above are most likely to work with you.

You should now understand how to shop for a mortgage. You should also have some key information on who the best mortgage lenders are. The sooner you get started preparing to apply for a mortgage, the sooner you’ll be a homeowner. You might be surprised at how easy it is to qualify for a mortgage. Resourcefulness and effort are key. You need to put time into acquiring the information you need to become a homeowner.

Some mortgage lenders offer fair and accessible products. Others offer mortgages you may not qualify for. Still, others provide mortgage products but don’t offer good customer service. Some mortgage lenders charge interest rates that are excessively high. You need to understand which mortgage lenders are the best on the market.

Factors that Mortgage lenders use during the loan process

In Conclusion

Home ownership is a dream that’s within reach for so many consumers. Unfortunately, a lot of consumers don’t know which lenders to work with. Research the seven mortgage lenders mentioned here. Then, you can apply for the best prospect for your financing needs. Strengthen your finances with the right mortgage. Owning a home puts you in complete control of your living situation. We hope to help you on your journey to home ownership with this important information.


Everything You Need to Know About Collateral Loans

Paper cut of model house with coins on wooden table.

You’re probably familiar with several types of collateral loans without being aware that’s what they’re called. If you’ve ever paid for a home over time or financed an automobile, you’ve probably used a collateral loan. In a typical mortgage, the home itself acts as security for the loan; if you don’t make your house payments, the lender may take it from you. A car or truck loan – especially on a new vehicle – is quite similar; if you miss enough payments, the dealer, bank, or credit union can take (or take back) the automobile in question.

Collateral Loans: What Are They and How They Work

At their most basic, collateral loans are any loans backed up by collateral – the stuff of value which lenders can take ownership of if the borrower is unwilling or unable to fully repay the loan in a timely manner.

If that sounds somehow harsh or unfair, keep in mind that without collateral loans, most of us would never be able to afford those sorts of big ticket items. Our home buying options, for example, would be to save up until we had enough to pay cash, or live with our parents until they passed on and left us their house. Personally, I don’t find either of those particularly promising.

Thanks to the modern mortgage structure, however, almost anyone can finance their home over a 15 or 30-year period. Lenders still care about your credit history and such, but they have the home itself as collateral as well, which allows the sorts of ridiculously low interest rates we’re currently experiencing in home loans.

Let’s Talk Terms (The Terminology of Collateral Loans)

Before we push ahead with different situations in which collateral loans might be a good option, it might be helpful to clarify a few of the terms I’m going to use or which you’re likely to encounter if you’re researching collateral loans for your own use.

Collateral / Collateralization

As you’ve no doubt picked up on by now, “collateral” refers to the home, car, or another item of value you offer as security for a loan. When you use your property or assets this way, they become “collateralized.” The term “collateralization” can be used in reference to the process itself or in reference to the loan or the items offered up as security.

You will thus hear that the loan has been “collateralized” or remember that you can’t sell your truck because it’s “collateralized” for a small personal loan on which you’re still paying. You may also come across a reference to the “collateral value” of your property, referring to the amount it’s worth as collateral. This may be different than what you paid for it or how much it’s worth to you personally.

Secured Loans / Security

If your loan is backed up by collateral, it’s a “secured loan.” The term references the lower risk taken by the lender when an item of value is being offered as “security”. If you don’t make your payments, they take ownership of your collateral and sell it to recoup their losses. That’s not really what lenders want to do; they’re not looking to make a living selling used boats or whatever. What this does, however, is enable lenders to offer loans they might not otherwise, based on your credit score or credit history, and to extend better terms than they would even if they did approve the loan minus your collateral.

Unsecured Loans

If your loan is NOT backed up by collateral, it’s an “unsecured loan.” These rely entirely on your creditworthiness as indicated by your credit history and current credit score. Lenders may, to a lesser extent, factor in your current reliable income and job situation.

Failure to make your payments on time, or to make them at all, will hurt your credit (making it even harder to borrow money on decent terms in the future) and may lead to collections or legal action, but it WON’T directly result in losing your home or car because those things haven’t been offered up as collateral. Because this means greater risk to the lender, expect lower loan limits and higher interest rates on most unsecured loans.


Your “assets” are anything you own that has financial value and are thus might be used as collateral. Some assets, like your home or car (assuming you have enough “equity” in them – that you’ve paid enough on THEIR loans that you “own” part of their value) are fairly typical as collateral. They’re easily converted into cash if necessary and have a fairly predictable value.

Savings accounts or investments are also “assets”. Their value to lenders depends on how “liquid” they are (how easily they can be transferred and converted into cash) and the likelihood they’ll hold their value over the life of your “secured” loan.

Atypical assets – your semi-rare comic book collection, those sacred mummy heads you inherited and are currently on loan to the local museum, that one-of-a-kind triple-neck 8-string guitar designed, built, and signed by Rick Nielsen of Cheap Trick – may be more difficult to use as collateral since their value is slightly more subjective and they’d be more difficult to convert to cash.


This is the “stored value” you own in various forms. If you’re halfway through paying off your car, and its current value is $12,000, you have around $6,000 worth equity in it. The same holds true for your home. If its market value is currently $195,000 and you owe $115,000, you have equity of about $80,000 to work with (although most lenders won’t advance more than 80% of the value of whatever you’re collateralizing). Savings accounts or investments are a bit easier to compute. If you have $7,341 dollars in savings, that’s equity worth $7,341.

Note: We’re using “assets” and “equity” more or less interchangeably here, but technically they’re not the same. In the most formal financial sense, “assets” tend to be things of value – tangible items – that have financial value. “Equity,” when having a very serious business-type discussion, refers to the cash value of everything you could convert to cash easily, minus existing liabilities.

In other words, Equity = Assets – Debts/Obligations. This distinction is useful in some contexts, but for our purposes it’s like arguing about whether the U.S. is a “democracy” or a “republic.” It depends on who’s using the terms and what they’re using them for.


You’re no doubt aware that liquids easily change form to adapt to circumstances. Pour your drink into a tall, thin glass, and your drink fills up the tall, thin shape. Spill it on your keyboard, and it quickly fills in every crevice and finds its way into the inner workings of your computer. “Liquid Assets” are those easily converted into cash. “Liquidity” refers to how easy (or not) this conversion is. Used cars in good shape have great liquidity; rare books in ancient languages may be just as valuable, technically, but are harder to immediately turn into cash.


Interest is the primary cost of a loan. Figured as a percentage of the total borrowed. Interest rates tend to be higher if you have a limited credit history or a low credit score. Because the lender is assuming a greater risk by loaning you money and hoping you’ll repay. Greater risk means greater reward, at least in modern American capitalism. Interest rates are typically lower if you have a good credit score because the risk is less. The same is true if you’re able to offer up collateral of greater value than the loan amount. The same rate of interest can be computed in numerous ways (which we won’t go into here). So it’s important to pay attention to the details when rate shopping for your best loan options.

Default / Recourse

“Default” is a fancy word for “stopped paying” and “recourse” is a fancy word for what the lender has a right to do if you stop paying. If you still owe money on a loan and you stop paying for any reason, you’ll eventually be declared “in default”. Whether this is triggered at 30 days, 60 days, or longer, and what penalties are triggered once you’ve “defaulted” varies from loan to loan. This is the point, however, at which lenders can report you to a collection agency, take legal action, or seize control of whatever assets you collateralized to secure the loan.

So, to summarize, the reason you may be asked to offer part of your assets as collateral is so that the lender has recourse if you default. You agree because you wanted to secure a lower interest rate than you could get with an unsecured loan. And you know you have sufficient equity for adequate collateralization. (See how much fancier that sounds than “I had to sign a paper saying the bank will take my truck if I don’t make my loan payments”?)

Advantages of Collateral Loans

There are a wide variety of collateral loans, each with its own features and potential pitfalls.

In general, however, there are a number of positives to collateralizing your assets in order to get the best terms on a secured loan. (I thought we might get more comfortable with all the fancy terms if we used them more.) What I’m saying is, there are reasons you might want to explore collateral loans for whatever your current needs might be.

Available for Poor Credit

If you have limited or poor credit, offering collateral might make the difference between getting a loan and being denied. Lenders have to make a reasonable profit – that’s how business works. In their case, that means two primary things have to happen with some regularity. First, they have to loan out money at interest (with interest being their profit), and second, they have to get repaid with a minimum of extra effort. If it costs them twice what they’re making in interest to track you down and force you to pay, the lender loses money in addition to your credit being damaged. That’s no fun for anyone. With collateral, there’s a better chance you’ll pay, and better protection for the lender if you don’t.

Lower Interest Rate

Offering collateral can secure you a better interest rate. This works for the same reasons we just discussed a loan approval. Lower risk means lenders can offer better terms – especially a lower interest rate. They don’t have to make a LOT on each loan if they’re relatively sure of repayment. Plus, lenders want you to be happy and say nice things about them. And come back to them for your future financial needs as well. Reputable lenders aren’t looking to “defeat” you; they want you both to come out OK on the other end because that’s what’s best for business.

Your Collateral Allows You to Take a Higher Amount

You may be able to borrow a larger amount if you have sufficient collateral. Let’s say you’re planning some major home renovation and remodeling. You’ve run the numbers, and it’s the best thing for your family now and the value of your home in the coming years. But the estimates you’ve gathered for getting the work done are higher than you’d hoped, and your credit is OK, but not great. Being able to use your home’s equity as collateral gives lenders the security they need to extend you the full amount. The risk is less for them but greater for you… if for some reason you’re unable to make your payments in the future, you could lose your nicely remodeled and renovated home.

List of financial situations when you should consider a collateral loan list.

Collateral Loans Provide “liquidity”

If your wealth is largely tied up on assets with low liquidity, it might make more sense to borrow against them than to convert them in order to finance whatever you need to do. This is more often the case with businesses than with personal collateral loans.

Collateral Loans are a Great Way to Build Credit

One of the realities of modern American life is that almost all of us need access to financing multiple times over the years. At some point, you’re going to want to buy a home, finance a car or truck, pay for a wedding, take a vacation, pay off medical bills, or start a small business. Each time you do, potential lenders will check your credit. The higher it is, the more flexibility you’ll have and the better the terms you’re likely to be offered. The lower it is, the more difficult it is to do, well… pretty much everything.

Collateral loans are also a good way to finance debt consolidation. If you’re ready to get serious about your household budget and take more effective control of your personal finances, collateral loans can act as a foundation for making that happen.

You are not your credit score. It’s not a reflection on you as a person. It is seriously inconvenient, however, and expensive over time. A few small collateral loans allow you to obtain credit. But just as importantly, as you pay them back, you’re building your credit history and raising your credit score. So that’s pretty awesome.

Potential Pitfalls of Collateral Loans

Well, there’s the biggie – if for any reason you’re unable to repay the loan in full, you can lose whatever you’ve put up as collateral. Even if the lender takes your collateral and sells it to recoup their investment, late or unpaid loans will still damage your credit substantially. As with ANY loan in ANY form for ANY reason, make sure you have a budget. And a good reason to borrow and a clear pathway to repayment before you even begin rate shopping.

There are a few minor inconveniences as well. Obviously you have to have an asset or assets of value in order to offer them up as security. There’s more paperwork than with an unsecured loan. Because lenders will require a formal valuation of the assets you’re offering as collateral. That means it may take a bit longer to get your loan as well.

Final Thoughts

We’re never going to tell you what the best choice for you or your family is when it’s time to borrow or refinance. What we will do is try to give you all of the information necessary for you to make an informed decision.

It probably won’t surprise you to know that we’re big fans of online lending around here. We don’t loan money ourselves, but we maintain a curated database of reputable online lenders who specialize in creative solutions and surprisingly competitive terms. And many of them, as it turns out, aren’t as quick to request collateral as traditional financial institutions. I’m not saying it never happens – just that you’d be surprised at the options you might have.

If you’re looking to borrow or refinance, consider all of your options before making your final decision. Collateral loans are ONE of those options, but they’re probably not the ONLY one.

Let us know if we can help.


How to End Your Mortgage PMI Payments Immediately?

Female hands holding small house, natural background

When you get a house mortgage with a down payment that is less than 20%, the lender will require you to buy private mortgage insurance. The same would be true if you refinanced with less than 20% equity. However, mortgage PMI payments can be expensive so it’s best to remove them as soon as you can.

Ways to Get Rid of Your Mortgage PMI Payments

There are different ways to get rid of your mortgage PMI payments, depending on your situation.

Pay Down Mortgage for Automatic Termination of PMI

This is not going to be the fastest way to get your mortgage PMI payments over with, but under the rules, mortgage lenders are required to drop PMI when your balance reaches 78% of the original purchase price, and you haven’t missed any payments and are in good standing.

The lender also requires you to stop the PMI at the halfway point of your amortization schedule. For example, if you have a 30-year loan this midpoint is 15 years. The lender needs to cancel the PMI then, even if your balance hasn’t reached the percentage point. This is called final termination. Removing PMI in this manner works for those with traditional mortgages who have paid according to the payment schedule. Remember, you need to be up to date on payments.

Request PMI Cancelation When Your Balances Reaches 80%

Instead of just waiting for an automatic cancellation, a faster option is to ask the servicer to cancel PMI once the loan balance is at 80% of the home’s original value. If you are going to be making your payments as scheduled, you will be able to find this date on your PMI disclosure form. You can also request this from the servicer. If you have some cash on hand, you can get to this point faster by making some extra payments.

You can also prepay the principal on the loan and reduce the balance. This will help you build some equity faster to get to this point and help you save on interest payments. Even something as small as an extra $50 a month can mean a big drop in your balance and interest over the term of the loan.

Some people decide to do a lump sum toward the principal or make just an extra mortgage payment every year. In order to estimate the amount, your balance needs to be eligible for cancellation, just multiply the original home price by 0.8. To cancel your PMI, you need to send a request to your lender in writing, be current on payments and have a good payment history. You may also need to meet other requirements for the lender, such as making sure there aren’t any liens on the home. You may also need to get a home appraisal. If, by chance, your home value has lowered, it’s possible you won’t be able to cancel PMI.

What Does Mortgage Insurance Do?

Mortgage insurance is designed to reimburse the lender if you default on your home loan. You, as the borrower, are responsible for paying the mortgage PMI payments. When a company sells the insurance it’s known as private mortgage insurance. However, the government does sell mortgage insurance as well. This means PMI doesn’t apply to all mortgages with down payments below 20%. 

Refinance to Get Rid of Your Mortgage PMI Payments

If mortgage rates are low then you may want to consider a refinance for a number of benefits. Mortgage refinancing can save on interest costs or reduce your monthly payments. In addition to helping you save money, refinancing may enable you to get rid of your PMI. If your new mortgage balance is below 80% of the home value then you can get even more savings. In order for this refinancing strategy to work, your home needs to have gained value since the last time you got a mortgage. With refinancing, you want to weigh the closing costs against the potential savings from the new loan terms to see if it is worth it.

Refinancing is a strategy that works well in neighborhoods where home values are rising. If your home value has declined then refinancing may have the opposite effect. It’s possible that, if you want to refinance your mortgage, you may need to add PMI if your home equity has dropped.

Refinancing to get rid of your mortgage PMI payments usually doesn’t work well for a new homeowner. Some loans have a requirement that makes you wait at least two years before you are able to refinance to get rid of these payments. If your loan is less than two years old then you can ask about this but it’s not possible that you will be guaranteed approval.

Get a Reappraisal if Your Home Has Gained Value

In an area where homes are increasing in value, your home equity could reach 20% ahead of the schedule.

If this is the case, you may find that it’s worth it to pay for a new appraisal. Let’s suppose you have owned your home for at least five years and the loan balance isn’t more than 80% of the new valuation then you can ask for PMI to be canceled. If you have owned the home for at least two years then the remaining mortgage balance can’t be any greater than 75%.

Appraisals can range between $450 and $600, depending on your area. Some lenders might be willing to accept a broker’s price opinion instead and this can be a much cheaper option for you. If this is the case for you, it’s best to speak with your lender about the potential to cancel your PMI requirement. If you have added some extra amenities or even renovated parts of your home then the home could have also increased in value, which also means more equity. Whether it’s a pool, common upgrades, or an extra room, check to see if it increases your value.

What to Know About Getting Rid of Mortgage PMI Payments

Whether you are paying PMI every month or as part of a lump sum, it’s not fun. However, you should be aware not to make your financial situation worse by trying too hard to get rid of PMI. Many financial experts will agree that it’s important to have some liquidity in case of an emergency. You don’t want to tap into your retirement funds or savings to reach that 20% equity mark. Speak with a financial advisor to make sure you are on the right track to reach it instead of tapping into savings.

As long as you aren’t taking on an FHA loan, you won’t be married to PMI. You are able to drop it once you get that 20% in equity. This means you may only be paying for a few years, depending on how fast your home appreciates. Don’t feel the need to use every last bit of your cash to make a bigger down payment that avoids PMI. You don’t want to be left in a situation that doesn’t provide you with financial flexibility, especially as you move into a new home.

Requirements to Cancel PMI

No matter how you are canceling your PMI, there will be different requirements. Any PMI cancellation must be done in writing. You need to have a good payment history and be current on your payments. You will need to make sure that you don’t have any liens on the home and have to prove this. For example, you can’t have a home equity line of credit. An appraisal can be helpful to demonstrate that the loan balance isn’t too high compared to the home’s current value.

    Important Criteria for PMI cancellation
  • Additional payments that reduce the principal balance of your mortgage to 80% of the original value of your home
  • Your request must be in writing
  • Good payment history
  • No junior liens (such as a second mortgage) on your home
  • The value of your property can't declined below the original value of the home
Source: consumerfinance.gov

Different Types of Mortgage Insurance

While you may be paying mortgage insurance, it only covers the lender. There are different types of mortgage insurance and each will work a little differently, depending on your type of home buying options.

PMI for a Conventional Mortgage

Many lenders will still offer conventional mortgages with low down payment requirements and some are as low as 3%. A lender will require that you pay for this private mortgage insurance, also known as PMI if you have a down payment that is less than 20%. Before you buy a home, it’s best to use a PMI calculator in order to estimate the cost of your PMI. This will vary according to the size of the loan, your credit score, and some other factors. Typically, this will be added to your monthly mortgage payment.

FHA Mortgage Insurance Premiums

FHA loans are insured by the Federal Housing Administration. And these loans have down payments as low as 3.5% and there are easier credit qualifications when compared to conventional loans. This loan requires you to pay mortgage insurance upfront and an annual payment, regardless of what you have for a down payment. The upfront premium will be 1.75% of the loan amount. The annual premiums can range from 0.45% to 1.05% of the outstanding balance. You will pay this for the life of the FHA loan.

USDA Mortgage Insurance

USDA loans, backed by the U.S. Department of Agriculture, usually are 0% down loans for suburban and rural homebuyers. There can be two different charges for mortgage insurance, including an upfront guarantee fee paid in the beginning and an annual fee you need to pay for the life of the loan. The federal government will evaluate the fee each fiscal year and can change it. However, your fee doesn’t fluctuate and they are fixed when the loan closes.

VA Mortgage Insurance

VA loans, similar to other government-backed loans, don’t have any down payments and feature low-interest rates for retired, disabled, and active military members. While these loans don’t require mortgage insurance, many borrowers will pay a funding fee that is between 1.25% and 3.3% of the loan amount. This fee will depend on a variety of different factors, including whether or not you have applied for a loan before and how big your down payment is.

Can You Avoid Mortgage Insurance?

The main way to avoid mortgage PMI payments is to make a down payment that equals 20%, or one-fifth, of the purchase price of the home. For example, if the home costs $180,000 then you would need to pay at least $36,000 to avoid paying PMI. While it’s the easiest way to avoid mortgage insurance, a down payment of this size may not be a feasible option.

Another option to avoid paying this is for qualified borrowers to get a piggyback mortgage. A home equity loan or second mortgage is taken out at the same time as the first mortgage. This means that 80% of the purchase price is then covered by the first mortgage, 10% is covered by the second loan, and then the final 10% is covered by the down payment. This will eliminate the need for PMI. With a home valued at $180,000, the first mortgage would be $144,000, the second mortgage would be about $18,000, and your down payment would be $18,000. This may be a more feasible option when saving.

A final option is the option of lender paid mortgage insurance where the cost of PMI is included in your interest rate for the life of the loan. While you are technically avoiding PMI payments, this means you are paying more in interest over the life of the loan.

Know Your Rights About Mortgage PMI Payments

Those who are making mortgage PMI payments should be aware of their rights under the Homeowners Protection Act. This is a federal law that will protect you from excessive PMI charges. This means you have the right to get rid of your payments once you have built up a certain amount of equity in the home. Lenders will all have different rules for canceling PMI but they have to let you do so.

Before you get a mortgage with PMI, ask for an explanation of PMI rules and the schedule and make sure you understand it. This will help you actually track progress toward ending the payment. If you feel like your lender isn’t following the rules for getting rid of PMI, you can report the situation to the Consumer Financial Protection Bureau.

In Conclusion

There are some ways to avoid PMI but in many instances, it isn’t feasible for a borrower. This is why a borrower may be looking for a way to end mortgage PMI payments immediately. There are four different ways to do this, depending on your financial situation and the type of loan you have. There are reasons to avoid PMI so it’s best to get to the point where you can cancel it as soon as possible, as long as you aren’t getting into worse financial shape by doing so.


Mortgage Loan Options When Buying a Fixer-Upper

Interior designer showing wood swatches to his customer, laptop, tools and house projects on desktop top view

A fixer-upper may need extensive renovations before you’re able to move in. A  standard mortgage doesn’t cover this type of situation. Thankfully, there are two types of mortgage loan options that combine the mortgage with a renovation loan, so you don’t have to put in multiple applications for this process. When you shop mortgage lenders, you can use the renovation loans for your ideal setup.

Mortgage Loans For a Fixer-Upper

There are two basic mortgage loan options. A standard mortgage loan covers the sale price of the home and the seller receives it in one portion. The home’s price is based on its appraised value and that of comparable properties surrounding it. The funding you receive only covers the cost of the home – it does not include any extra funding.

A renovation mortgage loan covers the cost of the home’s sale price and renovations. The loan consists of two parts. The first pays for the home’s sale price, much like a standard mortgage loan. The second portion is the amount for the renovation funding, and it sits in an escrow account. After the mortgage lender conducts a successful inspection of the renovation project by the mortgage lender, they send the money to the contractors doing the work.

The total loan amount that you get depends on the type of renovation mortgage you select, the scope of your work, and the completed appraised value of your home following all planned renovations.

FHA 203(k)

The Federal Housing Administration offers a government-backed renovation loan called the FHA 203(k). The financial institution that offers the loan also issues it, but the FHA insures it in the event that a borrower defaults on the loan. This allows lenders to have a higher risk tolerance and be willing to work with people who have credit profiles or income that are not generally ideal for a conventional mortgage loan.

This mortgage loan option is available as a standard and streamlined option and covers renovations that are cosmetic in scope, or structural. Luxury renovations are not supported by this loan, although the definition of luxury may be dependent on the lender that you’re working with and whether you have the same things in mind when you think about luxury products. A streamlined FHA 203(k) is for renovations that will total $35,000 or less.

These renovations must not include structural work. The advantage of the streamlined loan is that it’s great for getting a renovation mortgage loan quickly that can cover many cosmetic concerns. A standard loan requires more documentation, but it allows you to add in major structural work and is for projects that will exceed the $35,000 limit. The minimum amount of rehabilitation is $5,000 and the house has to be at least a year old. So you need to keep all this in mind when you look at mortgage loan options.

Some Requirements for the FHA 203(K) Loan

For the FHA 203(k) loan, you must be using it as a primary residence. If you have a 10 percent downpayment, some lenders may be willing to work with credit scores as low as 500. However, 580 is the necessary credit score for access to 3.5 percent downpayment options. Lenders may have higher requirements, and 620+ is a common number that they aim for. When you use the standard FHA 203(k) option, you need to work with a HUD consultant. They guide you through the contractor bidding process for the renovations, as well as acting as an overseer when it comes to the inspection process.

Fannie Mae HomeStyle

There are many mortgage loan options out there. The next we’re talking about is maybe not so familiar to you. The Fannie Mae HomeStyle loan has more flexibility on the type of homebuyers who can use it, as well as the renovations that you do to your home. Unlike the FHA 203(k) renovation mortgage, the HomeStyle mortgage allows primary residents, people buying second homes, and property investors to access this product. However, we can see the expanded access reflected through higher credit score requirements. The base requirement is 620 minimum for a credit score. Your downpayment is either 3 percent or 5 percent. You get access to a lower downpayment if the home is owner-occupied, it’s the first time you ever purchased a home, or you have a low to moderate-income level for the area.

You need to work with an inspector who will approve the renovation documentation by the contractor. And you can choose your own contractors and the renovation loan also covers associated administrative costs of these projects. If you’re unable to live in the home while it’s being worked on, you can have up to six months of payments on your mortgage covered in the loan amount so you have a place to live during the process.

Fannie Mae HomeStyle Utilization

The renovations that are allowed with this mortgage product include cosmetic, structural, and luxury. You have a lot more leeway to add high-end touches to your home, as long as they’re permanently affixed to the property. It’s designed more for people who want to upgrade the home they already live in or people who are looking for a good return on their investment or a vacation home. You can finance renovations that can cost as much as 75 percent of the appraised value of the completed home. You have to complete these renovations within a set time limit, which is typically one year from when you get the loan.

The maximum mortgage amount given from Fannie Mae is $484,350 on a single unit property. This amount may be adjusted for particularly high-cost areas, in which case it maxes out at $726,525.

Why Choose a Fixer-Upper

A fixer-upper is an excellent option for many home buyers who are not finding home inventory that meets their needs. Here are a few of the benefits of choosing a fixer-upper.

Save Money

If you have a tight home budget or you would like to live in a neighborhood that’s more expensive, a fixer-upper can be a good approach to getting the type of home in the location that you’re looking for. You’ll be able to get mortgage tips and find your way into a home that is affordable without needing to compromise on where it’s located at.

This benefit is particularly useful if you’re trying to get into a certain school district or you want to move closer to your work to lower the commute time. Sometimes in areas that become incredibly popular, going fo a fixer-upper is the only way to access a lower-priced home that’s in line with how much houses used to cost there. To really save money, looking into mortgage loan options is mandatory. So start on time and make sure you pay attention to details.

Putting in Sweat Equity

If you like taking on projects, using your handy skills to handle a whole house is an excellent way to express that and decrease how much you need to pay for a house. You get to bring your own preferences to the table and leverage your willingness to put work into your own home. You get a lot of satisfaction over checking off items on the to-do list, whether you want to take a DIY approach or you are working with contractors (or both!).

Reducing the Price Tag of Renovations

When a home seller renovates their home shortly before selling it, they’re going to try to maximize the income that they’re making off of those improvements. Because of this, you’re not just paying the base cost of the renovations. You’re also paying for the improved value of the home, as well as whatever profit the seller is attempting to put on top of that work. When you choose a fixer-upper to renovate, you are paying for the base pricing of the project without any of the overhead that ends up in the listing price. This also influences which of the mortgage loan options you choose.

Customize Everything

Cookie-cutter houses are enough to make me yawn, and that’s the case for a lot of people. You’re not a cookie-cutter human, so getting a fixer-upper and doing renovations on it is the perfect way to show off your unique style. When you have full creative control, you get to make the housework for your lifestyle and family. Make the perfect room flow, divvy up the space in the way that makes the most sense, and put in the touches that make you happy to walk into your home.

Apartment before and after restoration.

Paying Less Property Tax

When you make a home purchase, the property tax that you’re responsible for calculated by looking at the home’s sale price. While it will probably be re-appraised down the road, in the meantime, you could be saving thousands of dollars per year on taxes.

Less Competition

Many home buyers want something that’s move-in ready and newer. They don’t want to mess around with renovations or trying to imagine what the house would look like with changes. They just want to make a straightforward purchase and are willing to pay extra for the convenience. These houses get a lot of competition in many areas, but the fixer-upper is not. You end up being at a better place when you’re negotiating with the seller, which can lead to many perks in the process.

Make Your Home Worth More

Want to sell your home eventually? Improving a fixer-upper means that you’re going to get back a lot more than you paid. This is especially true when you’re in a hot neighborhood and you got in there by buying the cheapest house on the best block. So keep in mind that whichever of the mortgage loan options you choose, you may, ultimately, get your investment back and earn money.

Choose Where You Allocated Your Resources

A chef’s kitchen doesn’t make a lot of sense for a couple that primarily eats out at restaurants. You can choose exactly where your renovation resources are going. So that you get the best features in the areas that you care about the most. This creates a home that is uniquely suited to your needs in the short and long-term.

Considerations Before Buying a Fixer-Upper

A fixer-upper is an excellent option for many home markets. But there are a few considerations you want to keep in mind so you can avoid mistakes in the process of buying house and renovation.

Can You Deal With Months of Renovations?

In the big picture, you deal with renovations for a short period of your life. Then you can go on to enjoy a great customized home. However, that’s little comfort in the event that the renovations get in the way of your daily life. If you are buying a home that requires top to bottom renovations and there’s no untouched part of the house, you may want to consider adding rental or mortgage funding into mortgage loan options you look into, while you wait for renovations to complete.

Home renovation Cost Estimator by House Size.

Are You Able to Deal With Cost Overruns and Schedule Changes?

A home renovation includes a lot of moving parts, and they don’t always work together properly. There are many reasons that a renovation project can get behind schedule, or go over budget.  You need to be ready for things to not go as smoothly as you’d like. And be able to roll with the punches. If that level of uncertainty is stressful, then you may want to consider a move-in ready house instead

Do You and Your Family Members Agree on The Scope of The Renovation?

You don’t want to take out a renovation mortgage loan and then find out that people in your family are upset because you didn’t add in the renovations that they like. It might be hard to come to a consensus on each aspect of the project. But make sure that everyone is on the same page. And willing to make compromises to make the best possible house for everyone involved

Think about the short and long-term when you are putting together a renovation plan. Your kids may be fine sharing rooms today, but are they going to feel the same way when they’re teenagers? What happens to the playroom as a family gets older? Do you have hobbies that are shoved in a corner because there is no dedicated space? What type of storage solutions will be necessary for a new property? Consider all of these questions so that you’re not overlooking anything major during this process.

In Conclusion

Fixer-upper mortgage loan options are a perfect solution for many home buyers. There are mortgage products that support both mortgage and renovation funding. You can consult a mortgage broker who can offer you various options from different lenders.

Get yourself in the home of your dreams. If you’re making major structural changes to the property, spend some time observing how you use your current home. The flow from room to room, and areas that you would like to improve. You don’t want to go through the trouble of restructuring a house just to have the flow end up being completely opposite of the ideal for your family. Use the help of a HomeStyle or FHA 203(k) renovation mortgage loan option!


How to Find A No Income Verification Mortgage Loan?

You have reached that time in life where you feel ready to settle down and live the homeowner’s life. So you want a house. And you want to decorate it. You keep seeing those Wayfair commercials and thinking, “Hey, I have just the place for that.” Then, you realize you do not. Actually, you live in a tiny apartment. Or a mobile home. Or an RV. Maybe, you still live with your mom and dad. Bummer. Uh oh.

How to Find a No Income Verification Mortgage Loan

You just got a notion to search for mortgage requirements. You found out how hard it can be to qualify. What is that income check thing?

When you apply for a standard mortgage, you learn that the lending institution will not only check your credit, it will check your income. You must have verifiable income at an appropriate level for them to approve you.

That means you must provide your pay stubs, your employer’s name, phone number and address, your W-2s, your tax returns plus copies of your bank statements. The lending institution may contact them via mail, email or phone to verify your income. This applies to both a mortgage for the initial purchase and a refinancing loan.

So, what does one do if you happen to be self-employed? What if you own your own business?
You can apply for a no income verification mortgage although this cuts into your interest rate shopping. That does not mean you can have no income. It is handy though in several valid situations.

Who Can Use a No Income Verification Mortgage?

While many individuals may find this handy, a few common scenarios exist. You might want to read on if any of these situations apply to you.

  • You invest in real estate and carry over passive losses. These eradicate your earnings on paper although you have proven cash flow.
  • You work on commission and your income varies vastly from month to month.
  • You own your own business and pay yourself, but without a formal paycheck or you are a sole proprietor.

No Income Verification Mortgage Qualifications

Very simply, you qualify for a no income verification mortgage. It requires you to still provide documentation of your income, but a different set of documents than a standard mortgage. You need to have an IRS 1099 or be retired, but with a steady income.

Some organizations, like Mortgage Depot, offer a no income check program. To qualify, you must deposit a 25 percent down payment for the total cost of the purchase transaction and obtain 65 percent Loan to Value (LTV) financing for refinancing. Other requirements exist, but that is the monetary minimum. The Depot’s program is available in 46 states. While you must provide a significant outlay to qualify, you will NOT have to provide the following:

  • Tax returns,
  • W2’s,
  • Pay stubs

Through the program, you can qualify for loan amounts of up to $3 million on investment properties of one to four residential units or condos. In NY, you can use the loans for a primary residence. Other property options include multifamily and mixed-use properties of five units or more, as well as automotive service, office, retail, self-storage and warehouse space. There is no limit to how many properties you can own.

The Self-Employed Borrowers Program

You may not qualify for the no income verification mortgage, but you may qualify for its separate Self-employed Borrowers’ program. This is a different program. If you are self-employed and did not meet the occupancy requirements of the Mortgage Depot No Income Verification Mortgage program, you might qualify for the Self-employed Borrowers’ program. This uses bank statements to verify an individual’s business or personal deposits to calculate income and lets your occupancy include your primary residence.

This probably sounds odd since the lender still is verifying that you have income. These alternatives simply let you use a different form of income to prove you can pay back the loan. No institutions of finance will approve a loan without you proving that you can pay it back. These methods though do allow you to have the bank or credit union consider alternate income which can include the following:

  • Social Security benefits,
  • Pension funds,
  • Child support payments,
  • Funds from retirement account distributions,
  • Unemployment benefits,
  • Disability payments,
  • Employment offers for a future position that includes the salary and start date,
  • Housing/rental income,
  • Capital gains from investments,
  • Income from a spouse or partner,
  • Trust income,
  • Savings or cash,
  • VA benefits,
  • A government annuity

Potential Lender Requirements

Your lending institution may require a few various items before agreeing to extend a loan to you if you do not have a typical income source. These items range from setting up automated payments to a co-signer.

You would need to set up automated payments so your monthly amount due was deducted on the same date each month from your bank account. This ensures you consistently pay in full and on time.

You might need to provide collateral such as a paid in full vehicle or another property. It is usually easier for a person to obtain a secured loan than any other type.

A cosigner is a third-party individual who applies for the loan with you. If you purchased a new car when you were a teenager, you probably already took out a loan once that used a cosigner. If you fail to pay your loan payments on time, the bank will contact your cosigner for the funds.

Your Credit Is Very Important When Getting a No Income Check Mortgage

Your credit history and credit score still matter. Besides your raw score, any bank will consider your debt repayment consistency and your credit utilization. So, what if you do have less than perfect credit? That is when you have to take a few months – at least six – to improve your score first. Improving your credit is one of the most important mortgage tips to follow.

While you have many ways to check your credit, going to Creditry lets you check your credit, then monitor it, too. You can learn to better manage your credit by using its blog. You can learn important things like:

  • How to organize your payment due dates,
  • How to request to move a due date,
  • Calculating your credit-to-debt ratio,
  • The impact of opening or closing a credit line on your credit score

You need to learn those things so you can better manage your credit and build a strong financial history. You also need to check your credit so you know your FICO score. If it is above 679, you need not worry. Credit scores range from 350 to 850 (or 900, depending on the credit bureau). A 680 places you in the good range. If you have a score that places you in the good, very good or exceptional range, you should have an easy time obtaining a loan although you have retirement, variable or unearned income as the source or sources for your monthly payments.

Credit score scale
Improve Your Credit Score Fast

You can also very quickly boost your credit score by altering your credit utilization. When you try to obtain a no income verification mortgage, you will find your credit score means even more. This is the toughest type of mortgage to get. If you can quickly pay off some of your existing debt, you can up your score quickly. Your credit utilization score refers to the total amount of credit you have available versus how much you are using. This comprises 30 percent of your credit score. If you pay down your balances but keep the accounts open, then you can quickly increase your score.

Things that makes up your credit score

No Income Verification Mortgages Rarer Now

Today it is even harder to qualify for because of the rarity of these loans. This type of mortgage became wildly popular in the early 2000s. While they did help the tiny percentage of individuals with high incomes that could be tough to document, lenders started misusing them for their gain. They began extending the loans to subprime borrowers around the time the housing bubble developed. That made for twice the problem for the financial industry.

It got worse. As lenders continued to extend loans to subprime borrowers, without reliable income, the problem grew. Then those who outright did not qualify began to apply. They knew they did meet the qualifications and they lied on their loan applications to get approved. No income verification mortgages began to get the name “liar loans”. The name liar loans became most applicable in expensive markets where mortgage approvals were extremely rare for all but prime borrowers. The subprime borrowers could not afford the homes for which they applied for mortgages and they defaulted on the loans.

About 2005, the finance industry revamped its low- and no-income verification loans, deciding to try to save themselves by offering more loans. They loosened the requirements which at least meant people no longer had to lie on the applications, but the subprime lenders dropped the qualifications too low in exchange for a higher interest rate. During the period from 2000 to 2007, no income verification mortgage loans more than quadrupled. In those seven years, the loans rose from two percent of home loans to nine percent.
Here’s the deal. Banks and those employed by them have incentives to make loans. Those incentives tipped the scales to them offering too many to people who should not have them. The main reasons are:

  1. Loan officers earn a commission on every loan. It does not matter if the homebuyer defaults on the loan or not. The loan officer still gets paid.
  2. Mortgage lenders planned to re-package the loans and sell them to investors as mortgage-backed securities.
  3. The bank itself makes money on the loan origination fees, so the volume of loans makes them money automatically. Bad or good loan, as long as it went through the system, the bank got paid.

All of the mistakes accumulated and in 2008, the boom went bust, and the banking/financial crisis occurred. According to The Financial Crisis Inquiry Report, by the time the crisis came to a head, investors held more than $2 trillion of the repackaged mortgage-backed securities. They also had invested in about $700 billion of collateralized debt obligations which included mortgage-backed securities.
Delinquencies and defaults occurred the most in what real estate calls sand states – the states of Arizona, California, Florida, and Nevada. Real estate’s expense in these desirable locations caused serious delinquencies – those where payments are late by more than 90 days. That accounted for 13.6 percent of sand state mortgages. Compare that to 8.7 percent nationally.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 created a rule set that lenders must meet to end the bad decision-making. It included an “Ability-to-Repay” rule that requires the mortgage lending institutions to confirm each borrower can repay the loan before offering it.

The history lesson comes so you understand just how tough it will be to qualify for one of these mortgages, especially if you live in a sand state. The only loans to which the Dodd-Frank did not apply were those for loan modifications timeshares, reverse mortgages, and temporary bridge loans.

No Income Verification Mortgages Today

A select number of financial lending institutions still offer no income verification mortgages but now the government mandates the qualifications for obtaining one of these loans. The required credit scores range significantly higher and these types of loans come at great expense to the consumer. You will need a score of “very good” or “excellent” to qualify now. This type of mortgage still comes with a higher interest rate than a typical mortgage. The updated law does not apply to business and commercial mortgage purchases.

Final Thoughts

You could purchase a home as a business investment to qualify for a no income verification mortgage. You also could apply for a generic type of personal loan. Loanry provides various educational tools to determine which loan type works best for you. You can complete a small form to get started and it will suggest for you the best loan solution(s). You may get an email of suggestions or you may get automatically forwarded to a lender that offers loans to individuals with your credit history.


No Closing Cost Mortgage: We All Like No Cost

A no closing cost mortgage can be a bit confusing but it’s one of the residential mortgage types that are available to you. With this term, you may think that the fees are being paid by someone else or being waived completely. With a no closing cost mortgage, you are instead paying the closing cost with your loan balance instead of out of pocket. Not every bit of your closing costs will be able to get folded into your loan. But the closing costs you pay at the signing will be less than with a traditional mortgage.

How Does a No Closing Cost Mortgage Work?

There are two different ways that lenders structure no closing costs mortgages. The differences are subtle but the result is the same.

1. A lender can have you finance the closing costs. With this loan, the lender just adds your closing costs to the total loan balance. The monthly payments will be higher because you are now paying the closing costs with interest for the full length of the term.

2. The second option is that the lender absorbs the closing costs but you have a higher interest rate. This also means you will be paying more each month since your total interest costs will be higher over the life of the loan.

No matter how the lender does it, your monthly payment will increase slightly. You will pay less at closing time but pay more over the life of the loan.

What Are the Closing Costs?

Every house mortgage will come with some closing costs. Closing costs can be pretty high and typically range from about 2% to 5% of the loan amount. It may be helpful for you to calculate the closing costs for your particular situation so you can get an idea. If you are purchasing a $250,000 home then you may be paying anywhere from $5,000 to $12,500 at the settlement table for closing costs. The closing costs vary with your specific situation and location. Common closing costs include the appraisal cost, title insurance, tax service provider fees, taxes, and prepaid costs, such as homeowners insurance and property tax. Lenders can also add loan origination fees and application fees that can increase the closing costs.

There really isn’t a way to get a home without closing costs. You have the decision whether or not you pay them with cash when you are signing the loan or add them into the monthly mortgage payment. However, there are ways to reduce the closing costs by negotiating third-party charges and lender fees. It’s also possible to qualify for housing grants or closing cost assistance in some areas. Many of the grants can be free money and you don’t need to prepay them unless you move or refinance. If you have a military connection, VA loans have a limit on the closing costs that are allowed.

Pros and Cons of a No Closing Cost Mortgage

One of the main advantages of using this type of loan is the upfront savings. With this loan, it helps a borrower who is short on funds to close. This is helpful if you have made a large down payment and already paid out of pocket for your inspection and appraisal. You may still want to have some cash on hand to make upgrades and renovations once you move into the home. You may not need the cash on hand for home improvements but may need it for other expenses, such as medical expenses. Maybe you would rather have the peace of mind that having a large emergency fund brings.

Assigning a dollar amount to the savings will depend on the purchase price and closing costs. If paying for closing costs out of pocket would drain your cash then a no closing cost mortgage can be the obvious choice. However, you should weigh the original savings against what you may pay in interest over the loan when you have a higher rate. Even just a small fraction of a point can cost you thousands of dollars over the loan term.

An Example

Buyer A has a 4% rate, while Buyer B has a 4.25% rate. Both are purchasing a $250,000 home. Buyer A pays $179,674 in interest while Buyer B pays $192,746. This is a difference of $13,072. You then have to add this interest to the additional interest Buyer B is paying for the closing costs in the loan. Financing the closing costs can make it harder to qualify for a loan and the higher interest rates can mean a bigger monthly payment, which could push your budget. If your borrower qualifications are already tight then the higher interest rate could be an issue.

Debt to Income Ratio

Your debt-to-income ratio is the percentage of your income that is going toward paying your debt each month. Many lenders like to see a number of 43% or less. This figure will include what you are spending on your mortgage, as well as student loans, credit cards, and any other debts you have. If you are accepting a higher rate to pay for the closing costs then this will increase your monthly payment. When you are increasing your monthly payment, you have a higher debt obligation.

Even if you are okay with the extra interest and are getting a no closing cost mortgage, it doesn’t mean that you don’t have any money due at the table. Your lender may allow you to have a loan that covers customary closing fees, such as tax recording or escrow. However, you may still have to pay for things typically charged as closing costs, such as private mortgage insurance, transfer fees, or real estate taxes.

Is a No Closing Cost Mortgage Right for You?

If you are considering a no closing cost mortgage then you should think through the decision carefully. You should weigh the pros and cons and keep some things in mind. What is your motivation for getting the no closing cost loan? How much are you saving by not paying any closing costs upfront? What is the new loan rate and how much does it affect your monthly payments? How long do you plan to stay in the home?

The decision on whether or not a no closing cost mortgage is right for you is going to depend on how long you plan on staying in the home. If you are going to stay in the home for the full mortgage term then you will end up paying more for the closing costs, in the long run, thanks to the interest rate. However, if you plan on moving within a few years of buying then the financial impact of the higher interest rate may not matter as much. If you have short-term plans with the financing then not paying closing costs may be a good strategy. However, if you think of this home as your forever home, it’s probably best to pay closing costs upfront, instead of throughout the life of the loan.

Things to Consider With a No Closing Cost Mortgage

You can use different mortgage calculators to determine if a no closing cost mortgage is right for you but there are also some other things to consider.

Do You Have Enough for Closing Costs?

Many people are only eligible for a loan if they can agree to have a certain amount for a down payment. This can be the bulk of savings for many people and there just isn’t enough to pay for closing costs. Instead of having to dip into an emergency fund or savings, a no closing cost mortgage may be the only way that you can go through with the purchase. If this is the case, you have to decide if the price of this type of mortgage is right for you or if you should save more before you purchase a home.

How Long Will You Be in the Home?

This can help you determine the break-even point of how long you will be in the home with the added monthly payments. If closing costs are $10,000 then it may take you about 8.3 years to break even. After this, you are paying more than if you would have just paid the closing costs upfront.

Is There an Early Repayment Penalty Clause?

If you decide to go the higher interest rate route while thinking that you can pay off the loan ahead of the break-even point, you need to check if this is an option. Many mortgage contracts have a penalty for the early repayment of a loan. If your lender does have this, it could make it harder to avoid paying closing costs upfront and avoid paying even more over the course of the loan.

Examples of Closing Costs

  • Loan Origination FeeThe origination fee is so that the lender can prepare your loan. The average fee is about 1% of the loan.
  • Appraisal FeeDuring the appraisal process, a professional comes to the property to assess the value. Many appraisers charge $300 to $500 for their services.
  • Title FeesThe document you receive when you buy your home is the deed. The title shows that the seller legally transferred ownership of the property to you. Title insurance saves you from any errors in the records of your property or home.
  • Credit Report FeeLenders need to check your credit score and some lenders will pass the fee of checking the score back to you during closing. These fees can range from $25 to $50 depending on your state and your lender.
  • Prepaid InterestThe lender can ask that you pay the first month’s interest upfront during the closing. This will depend on the interest rate and that depends on the type of loan you have and your credit.
  • Discount PointsThese are optional and this is the fee you would pay the lender in exchange for a lower interest rate. Each point costs 1% of the total loan amount and you are able to buy multiple points.

Are There Other Ways to Get Rid of Closing Costs?

If you are hoping to avoid closing costs then a no closing cost mortgage may not be the only thing that will work for you. You can also take other routes to help manage some of the costs. One of the first things you want to do is ask the lender to waive some of the closing fees. It doesn’t hurt to ask but don’t expect too much. A more realistic solution can be to ask the seller to cover some of the closing costs by using a concession. A seller concession works by determining the closing costs you want the seller to pay.

If the seller agrees then that amount is added to the purchase price. You get a mortgage for the new purchase price and then the original purchase price is paid to the seller and the differences go to the closing cost. This is a legal way to roll the closing cost expenses into your loan, which wouldn’t normally be allowed unless you are refinancing. However, it’s still important to note that if you are rolling the closing costs into the loan, you are paying interest on them. When you increase the total loan amount, you are increasing the monthly payment as well.

Even with a seller concession, you still need to bring money to closing. The number of seller concessions you can have will depend on the loan type. If you want to ask the seller to pick up some of the closing costs, be sure to get help from your real estate agent. Agents are able to help with negotiations for seller concessions once your offer has been accepted.

Reducing Closing Costs

Besides a seller concession, there are ways to reduce the closing costs you are paying.

Lenders have different fees. So it’s even more of a reason to go mortgage loan shoppingAnd see which lender offers the lowest closing costs. You can ask a lender to match lower closing costs you see offered elsewhere. There are some services in the closing costs that you are allowed to shop around for before committing. You don’t have to go with the provider the lender suggests if you can find a lower price.

Don’t just go through the loan estimate right away. Take the time to evaluate each item with the lender and question what each fee covers. This can be a good way to identify any unnecessary or padded fees. Keep an eye out for fees that have a similar name. This could mean the lender is likely charging twice for the same thing.

Once you have a handle on the fees you are paying then you are able to start negotiating. Ask for more vague fees to be knocked off the final total. Ask the lender to give you a closing disclosure form when it’s available. This details the final closing costs. Compare it to what was on the loan estimate and then ask the lender to justify the discrepancies.

You can minimize the prepaid daily insurance charges by closing toward the end of the month. Plan ahead and try to schedule your closing when you will have to pay less money upfront.

If you are buying in a low-interest rate environment then you likely don’t need extra points. Paying for points can add up fast so save that money and pay it toward the closing costs.

Alternative Lower Cost Loans

A no closing cost mortgage isn’t the only way to save money. And you may find that there are alternative loans out there to decrease the amount of cash you need upfront.

FHA Loans: These loans are offered by private lenders but are insured by the Federal Housing Administration. Under this program, you can have as little as 3.5% down on a home, saving you money on upfront costs.

VA Loans: These loans are offered to veterans and service members but may be loans that don’t require any down payment.

USDA Loans: These loans are backed by the U.S. Department of Agriculture and are designed for borrowers in rural areas defined by the agency. Under this program, borrowers may be able to take out a loan without making a down payment.

Final Thoughts

A no closing cost mortgage allows you to bundle many of the closing costs into your loan. This way, you end up paying more over the life of the loan in interest. But you don’t have to have a large amount of cash upfront. This may make sense for you depending on if you have the funds for closing, how long you are going to be in the home, and how the structure of your mortgage. There are ways to lower closing costs so you aren’t stuck paying a huge fee upfront. Or having to bundle it into the loan. There may also be alternative lower-cost loans that don’t require large down payments. So you don’t have to bring as much cash to the signing table. Always shop around for your mortgage options so you are picking the right one for your situation.


Mortgage Broker Fees Explained: Home Loans 101

Shopping around for a house mortgage is an important step of the process. However, many people don’t have time to contact different lenders and look at all the little details so they choose to go with a mortgage broker instead. Before you decide to go with a mortgage broker, you should understand how mortgage broker fees work so you can make sure it’s the right decision for you.

How Do Mortgage Broker Fees Work?

Unlike a loan offer, a mortgage broker doesn’t work for a bank. Brokers are independent and must have a license. They will charge a fee for their service, which can be paid by you as the borrower or the lender. The fee will usually be a small percentage of the loan, which varies between 1% and 2%. If you are paying these fees, the dollar amount can be paid upfront or added into the loan. Mortgage brokers will need to disclose fees/ upfront and only charge what is disclosed. Every fee should be itemized and the mortgage broker will need to tell you exactly why each fee is being charged. Fee costs will vary depending on the number and size of the loans.

The Dodd-Frank Act put in new regulations on how mortgage brokers get paid and how the fees work. Prior to this, lenders could compensate brokers if the brokers could get their clients to agree to high interest rate loans and then sign off on the fees. There were few laws in place in order to protect clients. As a result of this, there is more protection for clients.

Now mortgage brokers can’t charge hidden fees, can’t tie the pay to your loans’ interest rate, can’t get paid for steering you in the direction of an affiliated business, and can’t be paid by both you and the lender. Unless you pay the cost upfront, mortgage brokers will generally not receive payment unless there is a closed deal.

What Does a Mortgage Broker Do?

When you go to the bank to get a loan, the bank offers you only the loans they carry. Since it’s only one institution, the loan options can be limited and may not suit your needs.

If you go to a mortgage broker, he or she can have a variety of loan options from various lenders. It’s the mortgage broker’s job to find the best mortgage rate tailored to you and this is why they charge mortgage broker fees. For example, if you need to get a house but can’t afford more than 5% down payment then your mortgage broker should approach lenders that have those terms.

Lender Paid Compensation

With a lender paid fee, a broker will connect a homebuyer to a mortgage lender and then the lender will pay the broker. Brokers can receive different compensation from different lenders. For a homebuyer, this structure can work out because they don’t have to pay for the broker when the deal is closed. However, you will still cover the commission indirectly, usually by paying a higher interest rate.

A drawback to this payment structure is that brokers can be biased by the compensation given by different lenders. A responsible broker should be offering the most affordable option, regardless of the commission they are getting paid. Unfortunately, not all brokers can be so honest and if the broker is going to prioritize their own profit then the homebuyer can end up paying a lot more than what is needed.

Borrower Paid Compensation

When a mortgage broker users a borrower paid fee schedule, the homebuyer pays for the broker’s services when they close on the loan. This payment will come in the form of an origination fee. The fee will vary based on your state of residence, your broker, the complexity and size of the loan, the housing market, fee caps, and more.

Borrower compensation also isn’t always in the form of origination fees and can just be another miscellaneous fee. Even if the borrower is paying this fee, it’s still advantageous to borrowers since it will remove the broker’s temptation to choose a more expensive lender who gives them higher compensation. The broker is more motivated to choose an affordable lender since they will be paid the same.

Which Mortgage Broker Fee Structure Is Right for You?

Regardless of the compensation structure, you will end up paying the broker’s fees in one way or another. The right fee structure for you will depend on whether you want to make the payment over the course of the loan or upfront. If you are able to have the money upfront then a borrower paid compensation option can be your best bet. This way you can avoid inflating your loan payments. You also won’t have to worry about whether or not the recommendations were just influenced by the broker’s desire for higher compensation.

Fee schedules can vary by different brokers. If you want to get a good deal, you will have to comparison shop. Be sure to look at the whole picture, including other lender fees and the interest rate for the best overall value. Brokers will not usually have a salary or any base pay. Brokers get paid by commission. If you see a broker advertising a no-cost loan, this should make you suspicious. Ask how a broker is being compensated if they aren’t disclosing that information to you.

Do You Need a Mortgage Broker?

Since there are mortgage broker fees, you may be wondering if you actually need the services of a mortgage broker. There are pros and cons to using their services but it’s helpful to know that mortgages can be complicated and it can be difficult to actually crunch all the numbers yourself.

Pros of Working with a Mortgage Broker

Brokers will give you all of your options. Many homebuyers just choose a loan from the bank where they already have a checking account but it helps to know all your loan options from a variety of lenders. Shopping around is the key to finding the best deal and a broker can deliver a more ideal loan than one bank ever could. Brokers are able to save you time. While it’s possible to compare all your options on your own, it can be time-consuming.

Brokers can handle all the negotiations with the lenders and many have relationships with certain banks that allow you to speed up the process. If you are in a rush then using a broker can help. Brokers will give you specialized attention and factor in your specific characteristics to match your application to the best lender for your circumstances. This can be helpful if you are an abnormal candidate but it can also help even if you do have good credit.

Cons of Working with a Mortgage Broker

No matter where you get the loan from, there will be fees. These can be in the form of appraisal fees, origination fees, and application fees. Some mortgage brokers can get some of the fees waived. However, brokers still charge their own mortgage broker fees. Mortgage broker fees are usually paid by you but in some cases can be paid by the lender. Whether it is added to the loan or paid upfront, it can still be a chunk of change. You need to know what your mortgage broker is charging you and weigh it against the benefits.

Mortgage brokers are independent from banks but they can still have biases. Some brokers can have a long history of dealing with a certain lender and favor them. In some cases, the lender may pay the mortgage broker fee, which sounds great unless the loan has undesirable terms.

Different Mortgage Broker Fees

Mortgage brokers may have different ways of naming their fees. Here are some that you may find.

Some brokers will add their fees to the origination fees by the lender. If this is the case, you want to ask for a breakdown. Loan origination fees will be a percentage of the loan.

This is a fee that lenders pay brokers for getting the client to agree on an interest that is higher than the going market rate. If you are going to choose this deal with your broker then check to see if the interest rate is competitive. If the broker is not charging you this fee then someone is paying this fee.

This fee will usually be charged if a borrower is looking for a jumbo loan. They are typically charged as a flat fee for setting up the loan. If the broker isn’t charging this fee then check to make sure the broker isn’t getting a yield spread premium from the lender.

In some cases, a mortgage broker will add administrative fees to the standard fee. If you see these fees on your agreement, ask to have them be waived. Unless you are at high risk due to your credit profile, you can usually negotiate your way out of these types of fees.

How Do You Find a Mortgage Broker?

Mortgage broker fees are important but it should only be one factor when you are shopping for a broker.

The best way to find a broker is by asking relatives and friends for referrals and make sure they have actually used the mortgage broker. Learn what you can about the services, communication style, and approach to clients to make sure it’s the right fit for you. You can also ask your real estate agent. Some real estate companies do have an in-house mortgage broker as part of their service but you don’t need to be obligated to go with that individual or company.

There are some different questions you can ask. Ask how the application process works. One of the main reasons for using a broker is to make the home buying process easier. The best mortgage brokers can provide information on the mortgage application process, such as a comprehensive list of documents you need to complete an application. The broker should take into account your personal circumstances and ask questions about your situation so they can find the best solution. Find out how long the entire process will take. You want to know what to expect and if the broker can guarantee on-time closings. Check the track record of the broker. Does he or she have a good reputation? How long has he or she been in business? Read reviews and ask for references.

Mistakes You Should Avoid When Buying a House

There are a lot of mortgage tips out there but there are some mistakes you should avoid when getting a mortgage, whether you are a first-time buyer or looking to refinance.

Not Getting Pre-approved

Not shopping for a mortgage until you have already found your dream home can be a big mistake since you can be too late. Many sellers require a pre-approval notice be given with an offer and the process can take days or even weeks. It’s best to apply for pre-approval before you look at any available properties. When you do this extra step to prepare your finances, you are ready to submit an offer quickly when you find the perfect home.

Borrowing Your Max Amount

The pre-approval can help you figure out how much you can afford to spend. Many buyers believe that the amount on their pre-approval letter means that is the amount they can spend. Instead, it’s better to think of the loan amounts as a range. You may have the ability to borrow that much but you don’t necessarily want to go that far. It’s best to do some budgeting on your own. Look at your income and expenses in order to figure out how much you would be comfortable putting toward a mortgage each month. Use that number and play around with a mortgage calculator until you land on the price of how much home you should really be buying.

Overestimating Abilities

Buyers may be willing to take on remodeling and repairs in order to get a lower sale price. The repairs may require more money, time, and skills than buyers have. If you are looking at a fixer-upper property that will need a lot of care, make sure that you are honest about your abilities. Do you have previous remodeling experiences? Can you afford professional help? What will happen if there are unforeseen expenses and problems?

Not Reading the Fine Print

You should be reading everything you are signing in full. This is easier said than done so it’s easy to skip a section. This mistake can cost you a lot. When you are negotiating an offer, you need to know exactly what you are agreeing to before you sign. The mortgage broker fees are just one of the things you need to understand when getting a mortgage.

Not Getting an Inspection

Inspections are there for the buyer’s benefit and skipping inspections may not give you more bargaining power. If you choose to waive any inspections then you agree to take financial responsibility for any repairs that can come up, even if the problems pre-date your ownership. Weigh your options carefully if you decide to not get an inspection.

Forgetting About the Closing Costs

Budgeting to get a home isn’t just about what you can afford as the monthly mortgage payment and down payment. You also need to consider closing costs. Closings costs are paid at settlement and include the fees needed for the transaction. The exact amount you will pay at closing will depend on your property but it usually between 2% and 5% of the purchase price.


A mortgage broker can help you when it comes to where to shop for a mortgage and finding the best deal for your situation. Brokers do have mortgage broker fees that you will need to understand when it comes to getting the deal. Some of the time the lender pays mortgage broker fees and other times borrower pays these fees.

There are advantages and disadvantages of working with a mortgage broker that you will want to weigh out. You also want to make sure you are getting a broker that will give you the best deal and really help you with your application process. Whether or not you work with a broker, be sure to avoid some home buying mistakes and know the mortgage process in order to make sure it all goes smoothly.