Kevin P. Nguyen

Equity Zone Mortgage-Elk Grove, California

Don’t Let Confusion With Mortgage Jargon Cost You

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No More Confusion About Mortgage Jargon, Understand ItA recent study of US and UK home buyers, conducted by the London based Nationwide Building Society, found that more than 40% of people buying homes were confused by the jargon that lenders used to describe mortgages.

When it comes to taking out a mortgage on your home, could confusing mortgage jargon be costing you money and causing you to make ill-informed choices?

According to the study, only 31% of home buyers understood what the term “LTV” meant, an acronym that stands for “loan to value” and describes the ration between the amount of the mortgage and the value of the home.

Not only did the survey show that many mortgage borrowers were confused about what the terms meant, but they also were shy about asking for explanations of various words that they didn’t understand.

In order to make a wise financial decision and choose the right mortgage for you, it is essential to do your research and understand exactly what you are signing up for. If you are unsure of what a mortgage term means, don’t be afraid to ask your lender for clarification.

Here are a few of the common mortgage jargon words that many homebuyers don’t understand:

Adjustable Rate Mortgage

This is a loan that has an interest rate which will fluctuate over time, such as every three years or every year after the first five years. This type of mortgage can be advantageous if you plan to sell the home within the first few years of owning it. Another option is a fixed rate mortgage, which does not fluctuate.

Qualifying Ratios

This is a calculation that your mortgage lender will make in order to determine the largest mortgage that you could possibly afford to obtain. The calculation is made by looking at your income, your existing debt and other factors.

Stips Or Stipulations

If your mortgage lender mentions “stips” they are probably talking about stipulations, which are the requirements that are submitted in order to clear your mortgage to close. This includes verifications of your bank statement as well as proof of employment and rent. Verification of Rent and Verification of Employment are often abbreviated as VOR and VOE.

HUD

This refers to the US Department Of Housing Development Settlement Statement that you will be required to sign when taking out a mortgage. This document contains the details of the arrangement, including all fees agreed upon.

These are just a few examples of mortgage jargon that you might not be familiar with. If you have any more questions about taking out a mortgage on a home, contact your trusted mortgage professional.

What You Need To Know About Mortgage Insurance

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What You Need to Know About Private Mortgage InsuranceIf you are on the verge of buying real estate, you’ve probably heard the term Private Mortgage Insurance. Mortgage professionals talk about it a great deal, but you may be asking, “What is it exactly? And why should I care?”

Private Mortgage Insurance Defined

PMI is required by lenders if the down payment of a purchase is less than 20 percent of the home’s value. It protects the lender if the borrower defaults on the loan.

It also makes the lender more apt to loan, even if the down payment is as low as 3%, because in the long run, the lender’s investment is protected.

You Pay For It

Unlike other types of insurance which you pay to protect your interest in an asset, you pay Private Mortgage Insurance to the mortgage company to protect its interest in your new real estate. (Note that PMI is not usually tax deductible. Check with a tax professional for details.)

Make It Go Away: PMI Can Be Terminated Once You’ve Paid Down Your Loan

Once you pay down your mortgage to the point where it hits the magical 80% of the original purchase price or appraised value, whichever is less, you can request cancellation of PMI. The Homeowners Protection Act requires that loans made after 1999 include notifications to the borrower when you arrive at this point in your payments.

Your PMI payments must be automatically canceled once you pay down your loan to 78%. At closing, and on a yearly basis, you should receive information from your lender about when you can request cancellation.

Whether you’re ready to buy real estate or need more information before taking the plunge, I can help. Contact your trusted mortgage professional today.

Read This Before Signing Your Reverse Mortgage

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Read This Before Signing Your Reverse MortgageThere are many reasons people take out reverse mortgages. However, this option is usually considered by cash-strapped seniors who own their homes and are looking to ease the burden of their golden years.

The beauty of reverse mortgages is that you’ll receive money as long as you are current on property taxes and homeowners insurance.

While this seems like an appealing opportunity, it’s a decision that should not be made lightly. Not only is the reverse mortgage complicated in itself, but homeowners make all sorts of mistakes when they’re too quick to sign the dotted line. So if you’re considering one, be wary of the common pitfalls below.

Buying Into A Scam

With reverse mortgages becoming a more common option for those over 62, mischievous opportunists are searching for ways to solicit seniors in need of help. Scammers will take advantage by charging high fees, funneling off parts of payments, creating fake loans or committing identity theft. Ensure you use a lender approved by the Federal Housing Association.

Confusing Your Payment Options

Reverse mortgages come in many forms. You can get the amount in one lump sum. Tenure payments are another option that give you a certain amount each month until you die or move out. There are also term payments, lines of credit, and modified tenure and term payments. You need to take the time to research your options and decide which one will be best for you in the long run.

Compromising Government Assistance

There are several government assistance programs that set asset limits on your monthly spending. These programs provide aid for low-income and disabled individuals. If any assistance programs financially support you, then be sure to consult their advisers before determining your reverse mortgage plan.

Disregarding Other Options

Reverse mortgages are extremely expensive and many people see them as their only option. However, there are other alternatives. Consider taking out a personal loan, downsizing or even taking on roommates. The Golden Girls always seemed to have fun.

A reverse mortgage could be just the thing to give you the extra cash flow you need and ease your mind. However, make sure you’re consulting a trusted home financing specialist, reading the fine print and have carefully considered all your options.

Reasons To Think Twice Before Paying Off Your Mortgage Too Quickly

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Reasons to Think twice before paying off your mortgage too quicklyMost of the financial advice out there is focused on how you can pay off the mortgage on your home as quickly as possible, from making lump sum payments to switching to bi-weekly payments rather than monthly.

However, there are a few things that you might want to consider before you put all of your financial efforts into paying off your mortgage as quickly as possible.

Diversifying Your Investments

Of course, paying off your mortgage as fast as possible has a number of obvious advantages. You will be able to own your home a lot sooner and you will decrease the amount of interest you pay over the years. However, are you diversifying your assets?

Savvy investors know that they should decrease their risk by spreading their money into a number of different types of assets and investments so that they don’t have “all their eggs in one basket.”

If you have extra money and you want to invest it, you might want to make sure that you have a variety of investments including savings, stocks and bonds, rather than just investment in your home.

Liquid Assets

Another thing to consider is that having your money invested in your home means that it will not be a very liquid asset. If you needed the cash right away, you could have to sell your home or take out a home equity loan, which is a complex and time consuming process.

Before investing all of your money in your mortgage, consider creating an emergency fund as well so that you have some easily accessible money when you need it.

Earning More With Better Investments

Before investing all of your money in your mortgage, find out whether you would be able to earn more by investing it into other opportunities such as interest-bearing bonds. Sometimes stocks, bonds and mutual funds have better returns over time than the typical mortgage interest rates.

Perhaps paying off your mortgage as quickly as possible is the best option for you. However, make sure that you consider all of the factors before committing to this decision.

To find out more about mortgages and your home, contact trusted mortgage professional today.

7 Tips On Getting A New Mortgage After Bankruptcy

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7 Tips On Getting A Mortgage After BankruptcyYou have found your dream home and you are eager to get a mortgage, move into the property and start enjoying life there. However, there is only one problem standing in your way – the fact that you have been through some hard financial times in the past.

If you (or your partner) have been bankrupt previously, will this affect your chances of being able to buy the home you want?

The good news is that it is still possible to obtain a mortgage even if you have been bankrupt before.

Here are some tips that will help you to increase your chances of mortgage success:

  • Choose the right lender. Some lenders may not approve your new mortgage if a bankruptcy shows up on your credit history. However, there are some that do as long as you are able to prove that you have the income to make your payments.
  • If your bankruptcy was caused by factors that are beyond your control, it may be easier to get a new mortgage as opposed to a bankruptcy that was caused by poor money management. Explain the circumstances of your credit history to your mortgage loan officer.
  • When you are buying a home after bankruptcy, try to save up as much of a down payment as possible. Your lender may want to see a minimum of 10% as a down payment, but more is better.
  • Build up your credit again by always paying your credit card bills each month along with any other debt. The higher your credit score, the better chance you will have of being able to obtain a mortgage.
  • Avoid writing checks that you think might bounce, as this shows up poorly on your credit report as well. Any retirement plans or 401 K assets will make your credit look good, so if you can set these up it may help you to obtain a mortgage.
  • Don’t switch jobs right before applying for the mortgage, the lender wants to be able to see that you have a reliable source of income and that you have been at the same line of work for a good amount of time.

Keeping these tips in mind will help you to obtain a mortgage even if you have been bankrupt before.

For more information about buying a home and securing your next mortgage please contact your trusted mortgage professional today.

It’s Important To Follow These Specific Steps When Using Gift Funds For Your Down Payment

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It's Important To Follow These Specific Steps When Using Gift Funds For Your Down PaymentAs lenders tighten mortgage guidelines for Elk Grove home buyers, minimum downpayment requirements are increasing.

Several years ago, you could finance a home with nothing down. Today, most conventional mortgages require at least 5 – 10 percent.

Incidentally, these guideline changes have led to an increase in the number of home buyers accepting cash gifts from family.

Gifts are allowed in most cases but the problem is, if you don’t accept the gift in a “lender-friendly” way, the mortgage underwriter could reject it, and negate it.

Three Steps To Success With Your Down Payment Gift Funds

You can’t just deposit a cash gift into your bank account. You have to follow a series of steps and keep records.

  1. Provide an acceptable gift letter signed by all parties
  2. Provide documentation of the gifter’s withdrawal of funds via teller receipts
  3. Provide documentation of the giftee’s deposit of funds via teller receipts

Lenders require these 3 steps for two basic reasons.  First, they want to make sure that the cash gift is “clean” (i.e. not laundered).  Second, they want to make sure the gift is really a gift and not a loan-in-disguise. It’s why lenders typically require that the loan application be accompanied by a signed, dated letter.

For example:

I am the [relationship to recipient] of [name of recipient] and this letter serves as evidence that I am gifting [name of recipient] [amount of gift] to be used for the purchase of the home at [complete address of property]. This is a gift — not a loan — and there is no expectation of repayment. Signed, [Signature of gifter]

Keep The Cash Gift Funds Separate From Your Other Money

As an additional step, home buyers receiving cash gifts should make sure that gifted funds are not commingled at the time of deposit.

If the cash gift is for $10,000, therefore, the bank’s deposit slip should indicate that a $10,000 deposit was made — nothing more, nothing less. Don’t add a random $100 deposit to the transaction, in other words. The $100 deposit should be a separate transaction.

It’s also worth noting that gifting funds between family members can create both legal and tax liabilities.

If you’re unsure about how donating or receiving a gift may impact you, call or email me directly. If I can’t help you with your questions, I can refer you to somebody that can.