Are you considering purchasing a new construction home?
Is an Adjustable-Rate Mortgage right for you?
When you shop for a mortgage, whether it’s for a new home or a refinance, you’ll soon hear about adjustable-rate mortgages (ARMs). For some, an adjustable-rate mortgage is an automatic no. If that is the case, it is usually for one of three reasons:
They’re uncomfortable with any risk;
They’re unaware of just how an ARM works;
They can predict the future with relative certainty.
While ARMs definitely have their advantages, make sure you understand them before getting into one.
How ARMs work
All ARMs start out as fixed-rate mortgages for the first 3, 5, 7, or 10 years. An ARM will appear like this, where the first number in the terms “3/1,” “5/1”, or “7/1” denotes the number of years that the rate will be fixed. Usually the lower the number is, the lower the initial rate. During the fixed period, there is no risk and typically a healthy savings. The second number shows how many years before the rates can be adjusted once that fixed period has expired.
After this fixed period, the rate can fluctuate. The rate itself is made up of both fixed- and variable-rate components. The variable component will be based on some index such as Treasury bonds. This is added to the fixed-rate component set by the lender when you determine your starting rate.
Your decision to obtain an ARM should be based on how long you plan to live in this home. Having reasonable expectations for future sale or refinancing is all it can take to make an ARM worth considering. If you believe that you could be living there for a long time, you may want to consider opting for a fixed-rate mortgage. The reason? If you have an ARM and have to refinance at some time in the future when rates are higher, you might find yourself in a fixed-rate mortgage with a much higher rate.
Lenders give you a discounted rate up front because they know the rate will float with the market later on. If you sell your home or refinance again prior to that happening, it’s their loss. You have the advantage here because you control the timing of your next step.
One way to prepare for the possibility of a higher rate and payment later is to pay extra principal each month to reduce your balance faster. If the rate ultimately adjusts up, your balance will be lower and the payment change will be less as a result. As well, you would already be accustomed to paying more.
The Bottom Line
A fixed-rate loan provides the certainty that it will never change. An ARM provides a guaranteed savings but for a limited period of time. The best way to decide is to balance your expectations for using any particular loan with the peace of mind that can come from being assured of stability, even if your timeframe changes.
Inlanta Mortgage NMLS 1016, 182565
Reverse Mortgage Loans
Reverse Mortgage loans give seniors the ability to live in their home, with no monthly mortgage payments¹, by converting home equity into cash while still maintaining ownership!
Home Equity Conversion Mortgages (HECMs), also known as reverse mortgage loans, were created over 25 years ago to help homeowners age 62 and older convert a portion of home equity into tax-free money.³
How does it work?
A reverse mortgage loan allows you to turn some of the equity in your home into cash to improve your financial situation. With a reverse mortgage loan, you will remain on title and can stay in your home without making monthly mortgage payments during the loan period.¹ The borrower will be required to pay for property taxes, home insurance and home maintenance. The loan balance becomes due upon the occurrence of other events including non-compliance with the loan terms.
This federally-insured loan offers multiple ways to receive the proceeds and gives you the ability to spend the cash as needed. Common uses of Reverse Mortgage loans include:
- Paying off debt
- Cover costly medical bills and prescriptions
- Home repairs and modifications
- Delay Social Security benefits²
- …and much more!
Important features of a reverse mortgage loan include:
- Proceeds from a Reverse Mortgage loan are tax-free³.
- There are multiple ways to receive the loan proceeds, either as a line of credit, a term payment, a tenure payment or lump sum.
- Live in your home with no monthly mortgage payments¹ .
- The borrower must be 62 years or older (a nonborrowing spouse may be under age 62)
- The home must be and remain the borrower’s primary residence
- The borrower must own the home
- The borrower must meet the financial requirements of the HECM program
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Already a customer and need help? Contact us.
¹If you qualify and your loan is approved, a HECM Reverse Mortgage must pay off your existing mortgage(s). With a HECM Reverse Mortgage, no monthly mortgage payment is required. Borrowers are responsible for paying property taxes and homeowner’s insurance (which may be substantial). We do not establish an escrow account for disbursements of these payments. A set-aside account can be set up to pay taxes and insurance and may be required in some cases. Borrowers must also occupy home as primary residence and pay for ongoing maintenance; otherwise the loan becomes due and payable. The loan becomes due and payable when the last borrower, or eligible non-borrowing surviving spouse, dies, sells the home, permanently moves out, or defaults on taxes and insurance payments, or does not comply with loan terms. Call 1-239-936-4232 to learn more. A Reverse Mortgage increases the principal mortgage loan amount and decreases home equity (it is a negative amortization loan). These materials are not from HUD or FHA and were not approved by HUD or a government agency.
²Social Security benefits estimator available at www.ssa.gov/estimator.
³Loan proceeds are paid tax-free; consult your tax advisor.
Top Workplace Award 2016
We are pleased to announce that Inlanta Mortgage has again been named a Top Workplace by theMilwaukee Journal Sentinel. 2016 marks the third consecutive year Inlanta has won the Top Workplace award.
Top Workplace Award Criteria
Top Workplace honors are awarded to companies whose employees have rated their companies highly in categories such as leadership, direction, ethics, culture, training and benefits. Top Workplace award winners do not know whether their employees have rated them favorably until a third-party, Workplace Dynamics, collects and reviews all results. This is the third year that Inlanta Mortgage has received the Milwaukee Journal Sentinel’s prestigious Top Workplace award.
In addition to being named a Top Workplace by the Milwaukee Journal Sentinel, Inlanta has been consistently recognized as one of the “50 Best Mortgage Companies to Work For” by Mortgage Executive Magazine and one of the country’s “Top Mortgage Employers” by National Mortgage Professional.
Our Mission Statement
Our mission is to be the home financing partner that you trust to serve your family, friends, and community. Through our family of dedicated mortgage professionals, our commitment is to deliver an exceptional experience. Our unwavering dedication to integrity, honesty, and ethics is the foundation of all of our relationships.
About Inlanta Mortgage
Headquartered in Brookfield, Wisconsin, Inlanta Mortgage is a growing mortgage banking firm committed to quality mortgage lending, ethical operations, and strong customer service.
Inlanta Mortgage offers Fannie Mae/Freddie Mac agency products, as well as a full suite of jumbo and portfolio programs. The company is an agency approved lender for Freddie Mac and Fannie Mae, FHA/VA, FHA 203K and USDA. Inlanta Mortgage also offers numerous state bond agency programs. Review Inlanta’s mortgage loan programs.
Inlanta Mortgage, Inc. NMLS #1016
Perhaps you are outgrowing your current house, or have been forced to relocate due to a job transfer? Regardless of the motivation for keeping one property while purchasing another, let’s address this question with the mortgage approval in mind:
So, Do I Have To Sell?
Yes. No. Maybe. It depends.
Welcome to the wonderful world of mortgage lending. Only in this industry can one simple question elicit four answers…and all of them may be right.
If you are in a financial position where you qualify to afford both your current residence and the proposed payment on your new house, then the simple answer is No!
Qualifying based on your Debt-to-Income Ratio is one thing, but remember to budget for the additional expenses of maintaining multiple properties. Everything from mortgage payments, increased property taxes and hazard insurance to unexpected repairs should be factored into your final decision.
What If I Rent My Current Property?
This scenario presents the “maybe” and the “it depends” answers to the question.
If you’re not quite qualified to carry both mortgages, you may have to rent the other property in order to offset the mortgage payment.
In that scenario, the lender will typically only count 75% of the monthly rent you are proposing to receive.
So if you are going to receive $1000 a month in rent and your current payment is $1500, the lender is going to factor in an additional $750 of monthly liabilities in your overall Debt-to-Income Ratios.
Another detail that can present a huge hurdle is the reserve requirement and equity ratio most lenders have. In some cases, if you are going to rent out your current home, you will need to have at least 25% equity in order to offset your payment with the proposed rent you will receive.
Without that hefty amount of equity, you will have to qualify to afford BOTH mortgage payments. You will also need some significant cash in the bank.
Generally, lenders will require six months reserve on the old property, as well as six month reserves on the new property.
For example, if you have a $1500 payment on your old house and are buying a home with a $2000 monthly payment, you will need over $21,000 in the bank.
Keep in mind, this reserve requirement is incremental to your down payment on the new property.
What If I Can’t Qualify Based On Both Mortgage Payments?
This answer is pretty straightforward, and doesn’t require a financial calculator to figure out.
If you are in this situation, then you will have to sell your current home before buying a new one.
If you aren’t sure of the value of the home or how your local market is performing, give us a ring and we’ll happily refer you to a great real estate agent that is in tune with property values in your neighborhood.
As you can tell, purchasing one home while living in another can be a very complicated transaction. Please contact us at anytime so we can review your specific situation and suggest the proper action plan.
Related Articles – Mortgage Approval Process:
- Basic Mortgage Terms
- How Much Can I Afford?
- Common Documents Required For A Mortgage Pre-Approval
- Top 8 Questions To Ask Your Lender During Application Process
- What’s The Difference Between An Investment Property, Second Home and Primary Residence?
- Seven Items Real Estate Agents Need To Know About Your Mortgage Approval
Most people are surprised to learn what appraisers actually look at when determining the value of a real estate property.
A common misconception homeowners generally have is that the value of their home is determined after the appraiser has completed their physical property inspection.
However, the appraiser actually already has a good idea of the property’s value by the time they have scheduled an appointment to stop by the property.
The good news is that you don’t have to worry so much about pushing back an appointment a few days just to “clean things up” in order to help influence the value of your property.
While a clean house will certainly make it easier for the appraiser to notice improvements, the only time you should be concerned about “clutter” is if it is damaging to the dwelling.
The Key Components Addressed In An Appraisal
Location, view, topography, lot size, utilities, zoning, external factors, highest and best use, landscaping features…
Quality of construction, finish work, fixed appliances and any defining features
Age, deterioration, renovations, upgrades, added features
Health & Safety:
Structural integrity, code compliance
Above grade and below grade improvements
Is the property conforming to the neighborhood?
Is the property functional as built – style and use?
Garages, Carports, Shops, etc..
Curb appeal, lot size, & conforming to the neighborhood are obvious to the appraiser when they drive down into the neighborhood pull up in front of your home.
When entering your home, they are going to look at the overall design, condition, finish work, upgrades, any defining features, functional utility, square footage, number of rooms and health and safety items.
Be sure to have all carbon monoxide and smoke detectors in working condition.
Since the appraisal provides half the weight in any credit decision involving the security of real estate, the appraisal should be done by a qualified, licensed appraiser whom is familiar with your neighborhood, and the type of home you are buying, selling or refinancing.
If you’re interested in what specifically appraisers are looking for, here is a copy of the blank 1040 URAR form that is used by every appraiser in the country.
Related Update on HVCC:
Appraisers hired for a mortgage transaction on a conforming loan are chosen from a pool of qualified appraisers at random. Neither you nor your lender has the flexibility of deciding which appraiser will inspect your home.
This recent change was brought on with the Home Valuation Code of Conduct HVCC, and is effective with conventional loans originated on or after May 1, 2009.
Related Appraisal Articles:
Hey, I gave my real estate agent a $5000 Earnest Money Deposit check… Where does that money go?
According to Wikipedia:
Earnest Money – an earnest payment (sometimes called earnest money or simply earnest, or alternatively a good-faith deposit) is a deposit towards the purchase of real estate or publicly tendered government contract made by a buyer or registered contractor to demonstrate that he/she is serious (earnest) about wanting to complete the purchase.
When a buyer makes an offer to buy residential real estate, he/she generally signs a contract and pays a sum acceptable to the seller by way of earnest money. The amount varies enormously, depending upon local custom and the state of the local market at the time of contract negotiations.
An Earnest Money Deposit (EMD) is simply held by a third-party escrow company according to the terms of the executed purchase contract.
*It’s important to keep in mind that the EMD may actually be cashed at the time escrow is opened, so make sure your funds are from the proper sources.
- Earnest Money is submitted to an escrow company with the accepted purchase contract
- At the close of escrow, the EMD is credited towards the down payment and / or closing costs
- If there are no closing costs or down payment, the EMD is refunded back to the buyer
Who Doesn’t Get Your Earnest Money:
- Selling Real Estate Agent – A conflict of interest
- Sellers – Too risky
- Buying Agent – They shouldn’t have your money in their account
Related Articles – Closing Process / Costs
Facts About Identity Theft:
It’s estimated that there were 10 million victims of identity theft in 2008, and 1 in every 10 U.S. consumers have reported having their identity stolen.
The U.S. Department of Justice reported in 2005 that 1.6 million households experienced fraud not related to credit cards (i.e. their bank accounts or debit cards were compromised).
And, the U.S. DOJ also reported that those households with incomes higher than $70,000 were twice as likely to experience identity theft than those with salaries under $50,000.
What Is Identity Theft?
According to the United States Department of Justice, identity theft and identity fraud “are terms used to refer to all types of crime in which someone wrongfully obtains and uses another person’s personal data in some way that involves fraud or deception, typically for economic gain.”
Such personal information may include your name, address, driver’s license number, Social Security number, date of birth, credit card number or banking information.
Victims of identity theft can spend months trying to restore their good name. And most victims do not realize it has happened until they get denied for a mortgage or a credit card.
Ten Ways to Protect Your Identity:
1. Dumpster Diving –
Avoid “dumpster diving” by shredding all papers that contain any personal information.
Criminals sift through trash looking for the following:
-Credit Card Statements
-Credit Card Purchase Receipts
-Credit Card Solicitations (unopened “pre-approval” solicitations)
-Expired Identification Cards (Drivers License, Passports…)
-Expired Credit Cards
2. Personal Info / Phone Calls -
Never provide personal information, including your Social Security number, passwords or account numbers over the phone or internet if you did not initiate the call.
If you are asked for any type of personal information, before giving any information, ask the caller for their name, telephone number and the organization that they are representing.
You should then call the company using the customer service number the company provides with your account statement. Do NOT call the number you were given by the caller.
To reduce the number of solicitations you receive, you can sign up at the do not call registry:
call: (888) 382-1222
3. Look Over Your Shoulder –
Avoid “Skimming and shoulder surfing” (Never let your credit card out of your sight).
Pay with cash. Try never to let your credit card out of your sight to avoid a fraud scheme known as “skimming”.
According to Wikipedia:
“Skimming is the theft of credit card information used in an otherwise legitimate transaction. It is typically an “inside job” by a dishonest employee of a legitimate merchant. The thief can procure a victim’s credit card number using basic methods such as photocopying receipts or more advanced methods such as using a small electronic device (skimmer) to swipe and store hundreds of victims’ credit card numbers.”
Be aware of people “shoulder surfing”. This is when they are looking over your shoulder or standing too close trying to obtain your PIN number when making purchases with your debit card. They may also be listening for your credit card number.
4. Secure Your Mail –
Always mail your outgoing bill payments and checks from the post office or a neighborhood blue postal box and never from home.
Pick up your incoming mail as soon as it is delivered. The longer it sits the better chance a criminal has of stealing it.
-Get a P.O. Box.
-Lock Your Mail Box
Contact your creditors if a bill doesn’t arrive when expected or includes charges you don’t recognize. It may indicate that it was stolen.
5. Read Credit Card Statements -
Review account statements to make sure you recognize the purchases listed before paying the bill.
If your credit card holder offers electronic account access, take advantage and periodically review the activity that is posted to your account.
The quicker you spot any unauthorized activity, the sooner you can notify the creditor.
6. Monitor Credit Report -
Review your credit report at least once a year to look for suspicious activity. If you do spot something, alert your card company or the creditor immediately.
7. Email Links –
Never click on a link provided in an email if you believe it to be fraudulent.
Keep in mind, no financial institution will ask you to verify your information via email.
Criminals may link you to phony “official-looking” web site to confirm your personal information. This is known as “phishing”.
According to Wikipedia:
“Phishing” is the criminally fraudulent process of attempting to acquire sensitive information such as usernames, passwords and credit card details by masquerading as a trustworthy entity in an electronic communication.
8. Opt Out –
Opt out of credit card solicitations. (Take your name off marketers’ hit lists)
You can opt out of credit card solicitations by calling 1-888-567-8688 to have your name removed from direct marketing lists.
You can do this online at OptOutPrescreen.com, which is the official consumer credit reporting industry opt-out website for the three credit companies:
9. Safeguard Your Social Security Number -
Protect your Social Security number.
Never carry your Social Security card or anything else with your social security number on it in your wallet or purse, along with your driver’s license.
Do not put your Social Security number or driver’s license number on any checks you may write.
Only give out your Social Security number when absolutely necessary.
10. Read Privacy Policies –
Find out what company privacy policies are (know who you are dealing with).
Inquire as to why it is being asked for.
Ask who has access to your number.
Ask if you can arrange for them not to share your information with anyone else.
Related Credit / Identity Articles:
However, the number of “Open and Active Trade Lines” seems to be the common denominator in most approvals.
A trade line is basically a credit card, installment loan or other credit liability that is reported to the credit bureaus and displayed on a credit report.
Credit Trade Line / Approval Bullets:
- Banks usually won’t count a trade line that is less than 12 months old.
- The minimum number of trade lines most lenders find acceptable is 4 open and active trade lines.
- Lenders like to see at least one credit line of $5,000, or all credit lines to total $1,000 or more.
Exceptions to Trade Line Rules:
Interestingly enough, a recent list of Mortgage Insurance requirements included a favorable trade line requirement, which read:
Min 3 trade lines @ 12 mo reporting. Cannot be ‘authorized user’
Basically, this means as long as the lender, and the loan program allow for less than 4 trade lines, this mortgage insurance company will accept only 3 trade lines that are in the borrower’s name.
Another exception to this rule is if you have no FICO score, and no negative trade lines.
In this case you may qualify for an “alternative credit” loan. The most common loan of this type is insured by FHA, but there are select programs that are usually targeted to assist people whose culture does not trust or use banks.
Borrowers applying for a non-traditional credit loan will still need to prove they have successfully paid their bills on time for 12 months by clearly documenting at least four creditors. A verification of rent from a property management company, power, utilities, cell phone… are alternative sources of credit that can be used.
*A letter from a landlord or creditor stating that the bills were paid on time is not acceptable forms of proof. Lenders will need canceled checks and / or copies of bank statements to start out with.
Since not all companies report to credit bureaus, it’s possible to get a complimentary credit report at AnnualCreditReport.com to verify your total reported trade lines.
Related Credit / Identity Articles:
While the basic Rule-of-Thumb for acceptable credit history is a minimum of four trade lines documented on a credit report, there are alternative methods of building a credit picture that an underwriter can use to make a decision for a loan approval.
For potential home buyers with little or no credit history, keeping records for 12 months of paying bills on time is essential for mortgage loan approval. In fact, loan officers will appreciate receiving proof that you have paid a variety of accounts regularly and on time. Even if you do not have a credit history, or your credit report isn’t as good as it could be, this may enable you to get a mortgage.
The industry term for this is “thin credit.”
Some loan types, namely FHA and USDA, will accept alternative credit sources in order to establish proof of financial responsibility.
Alternative credit is unreported to the bureaus, but will still be verified and can be instrumental in a home loan approval.
Those with thin credit don’t usually have bad credit, but have just not had an opportunity to build enough traditional credit, such as bank/store credit cards, auto loans, etc.
Alternative Sources for Building Credit:
- Rental History – Canceled checks and letter from property management company
- Medical Bills – 12 months of statements from medical billing company showing paid as agreed
- Utilities – power, gas, water, cable, cell phone
- Auto Insurance
- Health / Life Insurance – as long as it’s not auto-deducted from pay check