Author: mackinhouston

Home Possible loan income limits and more

By Marty Arneberg on 7/30/2021

Tags: mortgage options and proce

  • Home Possible pros and cons

Fannie Mae and Freddie Mac share the goal of keeping mortgages affordable for the American people. Part of that initiative is Freddie Mac’s Home Possible mortgage program. Introduced in 2014, Freddie Mac’s Home Possible mortgage program is designed as a helping hand for prospective buyers who might not be able to secure a conventional mortgage. 

By lowering some of the financial barriers to borrowing, low-to-moderate-income applicants have a better chance of becoming homeowners through this program. Lower down payments, credit flexibility and availability to both first-time and repeat buyers are just a few of the typically heavy costs that are made a little easier with a Home Possible mortgage. 

While the financing program does require you to pay for private mortgage insurance, those payments can be canceled once you reach 20% equity in the home. Before we go into detail about the advantages of a Home Possible mortgage, let’s make sure you meet the income limits to qualify in the first place. 

What are the Home Possible income limits? 

To be an eligible Home Possible buyer, the amount you earn can’t surpass your geographic area’s annual median income. If you’re unsure what this requirement means for your location, check out Freddie Mac’s eligibility map. Simply enter the street address for the area and find out the income requirements for your desired neighborhood.

Using this tool not only provides you with the area-specific Home Possible income limits, but helps determine what level of financing you’re eligible for. An income of less than 50% of the county area median qualifies you for a Very Low Income Loan. If your income is greater than 50% but less than 80% of the county median, you’ll likely qualify for a Low Income Home Possible Loan.

If you do qualify, your level of income will further indicate how much of a down payment you’ll be expected to provide. The amount of interest your lender attaches to the loan is also impacted by your level of income. 

If you live in an area with a higher median income, it could be easier to secure a Home Possible mortgage. 

How do you qualify for a Home Possible mortgage?

Before issuing a Home Possible mortgage, your lender will take a close look at your financial background to determine whether you fall within the eligibility standards. This type of lending offers clear advantages, but those benefits are only available if you meet these criteria: 

  • Debt-to-income ratio
  • Credit score
  • Homebuyer education

Debt-to-income ratio

For any mortgage, lenders will take a close look at your debt-to-income ratioto determine whether you can afford monthly payments. This measurement highlights how much of your gross monthly income is already committed to other debts. Car payments, student loans or hospital bills all factor into your debt-to-income ratio, since they’ll limit how much you can contribute for a mortgage. 

To be eligible for Home Possible lending, your total debts, in addition to your new mortgage payment, cannot eat up more than 45% of your monthly income. 

Credit score

Home Possible loans might come with stricter credit requirements than other mortgage assistance programs. If you apply with a credit score of 680 or higher, you can avoid additional lending expenses that come with other mortgage programs. 

Homebuyer education

As a first-time homebuyer, you’ll be required to to complete a homeownership education program before your Home Possible application can be approved. 

You can sign up for one of these courses via a HUD-approved finance agency, mortgage lender or community development institution. For an online option, you can access Freddie Mac’s CreditSmart program, which might be a more convenient means of completing the requirement. 

These courses generally go over the mortgage process, money management strategies and the importance of a solid credit background.

Pros of Home Possible mortgage

Pros of Home Possible mortgages

Home Possible mortgages were created to ease some of the burdens buyers face when applying for a mortgage. As a result, the program carries a number of advantages not found in other financing packages: 

  • Down payment requirements 
  • Cosigner opportunities

Down payment requirements

When researching mortgage options, you’ll quickly realize the down payment requirements on Home Possible mortgages offer a clear advantage. On a typical home loan, buyers would have to hand over at least 20% of the sales price for a down payment in order to avoid any mortgage insurance requirements. 

Home Possible mortgages, however, will require a significantly lower amount: 3% of the sales price is all you’ll need for a down payment. On a $200,000 home, you’d have to pay $6,000 for this stage of the mortgage process. Applying for a conventional mortgage on the same property would mean paying $40,000 for this upfront cost alone.

Cosigner opportunities

Unlike some mortgage product options, Home Possible loans allow you to apply with a non-occupant cosigner. A cosigner acts as a backup source of repayment when the primary borrower can’t keep up with their payments. This arrangement is especially helpful for those with little or no credit looking to secure a mortgage on their own.

If a parent or relative with an established credit history agrees to join your loan as a cosigner, you’ll have a much better chance of financing approval. 

Cons of Home Possible mortgages

Despite the clear benefits of this mortgage program, there are a few disadvantages that might discourage you from taking on a Home Possible loan:

  • Limiting income restrictions
  • Strict lending requirements

Limiting income restrictions

If you already live in an area with a relatively low median income, the amount you make might disqualify you from the Home Possible program.

Strict lending requirements

According to Freddie Mac’s lending guidelines, eligible Home Possible applicants need to have a credit score of 680 or higher. Compared to other home loan programs, this can be a tall barrier to entry. 

FHA loans, another government-sponsored mortgage assistance program, have much more lenient credit lending terms. With a score as low as 580, you could still secure this type of loan. VA mortgages don’t come with an established credit score minimum at all, but lenders will still attach their own lending thresholds. 

In conclusion

Home Possible loans are an excellent way to get a foothold in the world of real estate, as long as you can qualify. The income limits on these loans, however, might negate some of the advantages that come with this agreement.

Whether you’re a first-time or repeat buyer, Home Possible mortgages might provide the homebuying solution you’re looking for. If you’re still unsure whether this is the best way to begin the mortgage process, it’s always a good idea to meet with a loan officer and get the full picture of your lending options.

Disclaimer Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Restrictions may apply, contact Guaranteed Rate for current rates and for more information. All information provided in this publication is for informational and educational purposes only, and in no way is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. Guaranteed Rate, Inc. does not guarantee the quality, accuracy, completeness or timelines of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error free. Some information in the publication may have been provided by third parties and has not necessarily been verified by Guaranteed Rate, Inc. Guaranteed Rate, Inc. its affiliates and subsidiaries do not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort (including negligence) or other tortious action.Guaranteed Rate does not provide tax advice. Please contact your tax adviser for any tax related questions.Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Restrictions may apply, contact Guaranteed Rate for current rates and for more information. All information provided in this publication is for informational and educational purposes only, and in no way is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. Guaranteed Rate, Inc. does not guarantee the quality, accuracy, completeness or timelines of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error free. Some information in the publication may have been provided by third parties and has not necessarily been verified by Guaranteed Rate, Inc. Guaranteed Rate, Inc. its affiliates and subsidiaries do not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort (including negligence) or other tortious action.Guaranteed Rate does not provide tax advice. Please contact your tax adviser for any tax related questions.

What is PITI? Principal, interest, taxes and insurance

By Jeff Keleher on 7/30/2021 Tags: mortgage basicsbuying a home

What is PITI? Principal, interest, taxes and insurance

The mortgage industry loves acronyms — APR, ARM and LTV, just to name a few. You don’t always need to familiarize yourself with these terms as a borrower, but there are some mortgage acronyms you absolutely should know. Chief among them: PITI (principal, interest, taxes and insurance).

PITI has a huge impact on your mortgage, whether you realize it or not. It basically determines what your monthly mortgage payments will be. For anyone interested in buying a house or refinancing an existing mortgage, PITI is an acronym you should get to know.

PITI meaning: What does PITI stand for?

PITI stands for principal, interest, taxes and insurance, which are the four main components of your mortgage payment. Depending on the exact terms of your lending agreement, you may have additional expenses that are bundled into your monthly housing costs. But PITI represents the lion’s share of your mortgage payments.

Let’s break down each piece to see how PITI adds up:

  • Principal
  • Interest
  • Taxes
  • Insurance

Principal

The principal is the total amount of your home loan. If you buy a $500,000 house with a $50,000 down payment, then you would need a $450,000 mortgage. That $450,000 is your principal, which you will pay off over the course of the loan.

Among the four components of PITI, principal represents the single biggest ticket item on your mortgage payment. In some cases, you may hear your lender refer to the principal as the “face value” of your loan, but the two terms are essentially interchangeable.

Interest

Mortgage lenders charge interest on every home loan they extend, which is then built into your monthly payments. Run the numbers in any mortgage calculator, and you’ll see that most of the money you spend on your housing costs will go to the loan principal and mortgage interest. In many cases, lenders structure amortization schedules so interest is paid in arrears. That means your monthly payment includes the principal plus interest on the unpaid principal balance from the previous month.

Given the importance of interest in your total housing costs, be sure to take a look at current interest rates before choosing a lender. And remember, you may be able to refinance at a later date to take advantage of lower rates.

Taxes

Every homeowner needs to pay property taxes, and those expenses are usually included in your monthly housing costs. With each payment you make, a portion is set aside in escrow to cover your tax obligations. Typically, that monthly portion is 1/12th of the expected annual tax bill. Then, when tax season rolls around, your lender will pay any property taxes you owe using those ear-marked funds in your escrow account.

Insurance

Mortgage lenders require every borrower to obtain homeowners insurance before approving a home loan. Homeowners insurance provides coverage in case your house is damaged by fire, storms or other hazards, while also helping recoup the costs of replacing lost, stolen or damaged possessions. Payment is often handled in the same fashion as property taxes, with 1/12th of your annual premium set aside in escrow each month to cover your premiums. Keep in mind that with both taxes and insurance, you may need to prepay a few extra months at closing. This way, you’ll be sure you have enough in escrow to cover those bills.

What does PITI mean for your mortgage?

Because PITI represents the bulk, if not all, of your housing costs, it’s an extremely important concept to wrap your head around. You need to consider each expense when figuring out how much house you can afford.

Many people fall into the trap of taking their expected principal and simply dividing it by the number of months of their loan — say 360 (30 years times 12 months) for a 30-year fixed rate mortgage — to predict their monthly housing costs. But your property taxes, homeowners insurance and interest payment all add a significant amount of money to your mortgage payment. Use a reliable home affordability calculator that accounts for PITI to accurately determine how much you can spend on a new house.

PITI impacts loan approval

Lenders will also review your expected PITI when processing your mortgage to make sure you can afford to pay back your loan. PITI is by no means the only factor that lenders weigh when considering a loan application — debt-to-income ratio, existing debt and credit history are all important criteria as well — but it’s a big one. 

Lenders prefer PITIs that represent a smaller percentage of the borrower’s income. An often-cited rule states that your PITI should be no more than 28% of your gross monthly income. That’s not set in stone, by any means. Lenders may be OK with a PITI as high as 43% of your income, but they’ll look at your total debt picture. If you have a lot of other existing debt, like auto loans, outstanding credit card bills and student loans, lenders will be less likely to approve applications with such high housing costs.

Still, lenders are more likely to approve your loan if your PITI is significantly lower than your take-home pay. Otherwise, if the numbers don’t add up, you can’t expect to qualify for a mortgage.

Bottom line: PITI is the most accurate measurement at your disposal to see how much you’ll pay in housing costs each month. And that will tell you both how much home you can afford and what kind of mortgage you’ll qualify for.

How is PITI calculated?

How is PITI calculated?

You need to break down each of the four components listed above to calculate your PITI. To do that, you may have to iron out some other details like how big of a down payment you plan to make and how big of home loan you think you will need. Let’s take a look at each piece of the puzzle:

  1. Principal: Subtract the down payment from the purchase price of the loan. That will leave you with the loan’s principal.
  2. Interest: Rather than try and figure out on your own how much interest will cost over the life of the loan, you’re better off using a mortgage payment calculator. Simply plug in the loan amount, the interest rate, type of loan and loan length to get a fairly accurate idea how much you’ll pay. Look at current mortgage rates to get a sense of what interest rate you’ll get on your home loan.
  3. Taxes: Property taxes vary significantly across different housing markets, and you may pay thousands of dollars more in one location compared with another. Look for property tax information covering your specific real estate market. Often, you’ll need to know the county and appraised value of the home to get the best results. If you have an annual tax figure, be sure to divide it by 12 to figure out your monthly cost.
  4. Insurance: Homeowners insurance premiums depend on a bunch of different factors: the age of the house, proximity to flood zones and insurance claims you filed in the past. Reach out to your insurance company to get a quote for any particular house you’re considering.

Once you have all four of those expenses, simply add them together to get your PITI. As an added step, divide the PITI by your gross monthly income to find out how much of your budget will be spent on housing costs. Remember that although the 28% figure is a general guideline, you don’t want to devote an overly large percentage of your salary to housing alone.

Don’t overlook other housing costs

PITI is an extremely important figure to keep in mind when figuring out your monthly housing costs, but it doesn’t always fully encompass all of your expenses. In some scenarios, there will be additional costs you need to account for. And while none are as expensive as the combined forces of PITI, they could impact your ability to comfortably pay your mortgage loan each month.

  • PMI
  • Flood insurance
  • Extra hazard insurance
  • HOA fees

PMI

PMI stands for private mortgage insurance, which you’ll need to pay each month if you put less than 20% of the purchase price forward as a down payment. Lenders will require you to pay PMI each month until you’ve gained at least 20% equity in the property. That’s only for conventional mortgages, though. If you buy a house with an FHA loan, you’ll have to pay PMI throughout the life of the loan, regardless of the down payment size.

Flood insurance

Homeowners insurance covers water damage caused by leaks and burst pipes, but not rising water. If you live near a river, lake, ocean or other body of water, check if your home sits on a flood plain. Listing agents should disclose if property is located in a Special Flood Hazard Area (SFHA), but you can also find this information through your local government’s publicly available resources.

Your lender will also check your home’s SFHA status and may require extra flood insurance to defray the cost of structural repairs. Plus, it’s just good sense to prepare for the worst if you live in a high-risk flood zone. Flood insurance has a reputation for being somewhat pricey, so keep that in mind when planning your housing costs.

Extra hazard insurance

Hazard coverage comes standard with just about any homeowners insurance policy, but you may want additional protection in case your home is at risk for other environmental disasters. Earthquakes, sinkholes and landslides can all be covered by separate insurance plans, for instance. Hurricanes are a bit trickier since you need to address each source of damage — strong winds and flooding — individually. That means taking out additional insurance policies, which further increase your monthly housing expenses.

HOA fees

If you’re buying a condo or moving into a deed-restricted community, you’ll likely need to pay homeowner’s association (HOA) dues. HOA fees can pay for anything from water utilities in condo buildings to maintenance of common areas and upkeep or beautification projects in HOA neighborhoods. Unlike the other housing costs listed above, HOA fees are typically paid separately from your mortgage and do not come out of escrow. These assessments run, on average, around $200 a month, but can go even higher than that. So, budget accordingly. 

How much PITI can you afford?

Creating a housing budget is one of the most fundamental and important steps in the homebuying journey. As we noted earlier, lenders may approve your loan even if you plan to spend as much as 43% of your gross monthly income on PITI.

Devoting that much money to housing alone may not fit everyone’s lifestyle, though. You need to take a clear-eyed look at your finances to figure out what’s realistic. Here are a few common expenses that may impact your PITI:

  • Car loan payments
  • Health insurance premiums
  • Utilities
  • Groceries
  • Savings
  • Investments
  • Credit card debt
  • Student loans

If you need to lower your PITI payment to fit your house budget, your best options may be to simply reassess your home search. Consider looking at less competitive real estate markets where you can really stretch your dollars.

In conclusion

PITI is an important concept in real estate, representing most — if not all — of your housing costs. As a prospective homeowner, you need to factor in each part of PITI — principal, interest, taxes and insurance — when budgeting for your monthly mortgage payments.

Lenders will review your expected PITI when considering a home loan. Even though borrowers may get approved with a PITI as high as 43% of your gross monthly income, it’s best to keep that number as low as possible. In general, your total debt picture — housing + cars + loans + credit cards — needs to be in the 43% to 45% range. When in doubt, talk to an experienced mortgage expert to better understand your financing options and what kind of loan you’ll qualify for.

Disclaimer

Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Restrictions may apply, contact Guaranteed Rate for current rates and for more information.All information provided in this publication is for informational and educational purposes only, and in no way is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. Guaranteed Rate, Inc. does not guarantee the quality, accuracy, completeness or timelines of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error free. Some information in the publication may have been provided by third parties and has not necessarily been verified by Guaranteed Rate, Inc. Guaranteed Rate, Inc. its affiliates and subsidiaries do not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort (including negligence) or other tortious action.Guaranteed Rate does not provide tax advice. Please contact your tax adviser for any tax related questions.

A New Home Is More Than A House

Investing in your present and future can sometimes look like buying a home. Are you ready to take that step? #thehelpfulLO #home #house #listreports #homeowner #dreamhome #wheretheheartis #happyhome #loanofficer #realestate

Espisode #1 – MortgageMack Live with Darrel Creacy

Episode #1 MortgageMack Live with Darrel Creacy

https://youtu.be/2tFErHRwqDA

Darrel shares his journey in the Coast Guard, working his way up to rescue pilot to becoming an Entrepreneur, father, husband and author of two books.

Having been friends for nearly 15 years, Darrel was the perfect guest.  Darrel has always expressed loyalty and friendship not to mention that Darrel seems to know how to fix anything.

Do Corvette Engines Fit Into the Body of a Ford 150?

During our friendship, I’ve watched Darrel labor over an old beat up F150 with the intent of installing a Corvette engine.  I would question him regularly and say….”Hey!”, “Should a Corvette engine every be put into a F150!?”  Darrel paid no mind and eventually was successful, but not without constant maintenance.  LOL!

Darrel is so knowledgeable about his industry that I would have no problems referring him to a buyer or Realtor.

Espisode #1 – MortgageMack Live with Darrel Creacy
Darrel Creacy, Owner and Operator of Amvet Inspections, Entrepreneur and ex-LifeFlight and Coast Guard Pilot

Darrel is Father and mentor.  His son Derek who used to run marathons with my family is now mentoring to be an inspector just like is father.

If you need a realiable, knowlegdable and friendly inspector, reach Darrel at:  Amvet Inpsections.

Thanks for tuning in.  See you next week at 830 a.m. for MortgageMack Live – Monday Morning Commute

Building a Facebook ad with a Remine audience

https://youtu.be/rhYw0CO_zMo

Last week we created a Remine audience. This week we created an ad to target that audience for listings. Next we plan to create an image ad targeting listings from prospects from Remine.

Remine – Episode #30

https://youtu.be/5mMBYjLwc8I

A Faster, Easier Way to Do More Business

Offered as a core product in more than 40 MLSs, Remine’s Property Intelligence Platform® creates an opportunity beyond just a transaction.

Hard Money Loans – Episode #29

https://youtu.be/P8rtDbOuue8

If you’ve ever wanted to be an real estate investor or are currently a real estate investor in need of purchase or construction financing for residential or commercial property, then tune in to today’s broadcast with, Hard Money Allen!

  • Hard Money Allen
    Allen Harry, Hard Money Entrepreneur 936-777-3917
    allenharry1953@gmail.com

Hard Money Loans – Based on Collateral

  • No income or credit required
  • Must provide photo ID to Title Company
  • 30% down payment…lower down payments available on case by case.
  • Call for rates
  • 20 year amortization
  • Must renew every 12 months
  • Lender and title fees provided upon request
  • Must close with approved title company
  • Borrower to pay appraisal fee at loan application; $450 – May be higher depending on the size and nature of the property
  • No prepayment penalty
Hard Money Allen
Hard Money Loans for purchase or new construction for residential or commercial – contact Allen Harry at 936-777-3917

Would you like to do more business with builder in 2019?

Then consider joining BROAC – Builder/Realtor Outreach Advisory Council by contacting me at: mack@onetrusthomeloans.com or EL. Craine at:  elc@elcmarketingpartner.com

https://youtu.be/rIV5_sVOXb4

In today’s episode of MortgageMack Live, Special Guest, EL Craine shares his mission and plan for BROAC in 2019.

Winter and Your Home – Episode #26 of MortgageMack Live

https://youtu.be/YEK9Un1KXN0

Everyone’s favorite Real Estate Inspector, Darrel Creacy hung out today to talk about the simple things to do to your home during Winter and in case of a hard freeze.

  1. Have your furnace serviced
  2. Consider spray foam for your attic
  3. Protect your outdoor plumbing

If you’re looking for a qualified real estate inspector with the utmost integrity, I recommend…..AmVet Inspections

Necessity into Success! Tired of living with back and knee pain?

https://youtu.be/B9UKFs_wxX8

NO PAIN MEDICATION FOR ME

My name is JT Anderson. I lived for years with chronic back pain; some days good, some days bad. It was to the point of really not knowing what I could do for the relief. Throughout my life I witnessed my Dad being addicted to pain medication. As I got older, actually in my later teens, I asked my Dad how many he would take a day….about 6 to 9 was his reply. I asked if he was in pain and he told me not really, I just don’t want to be in pain.

My dad died early in his life due to the pain medications slowly destroying his organs; affecting his heart, liver and kidneys. I never thought I would experience pain to such a degree where I would need medications as powerful as the medications my Dad used until about 5 years ago.

PAIN MAKES DECISIONS

My pain had become so severe I was ready to do anything for relief. It had become impossible to carry on my daily activities including my work. My doctor had prescribed pain medications, which I thought I would never take, but they gave no relief; only left me feeling “out of it” and unable to function.

Early one morning, about 1:30am, the pain was so severe I thought I was having a heart attack and my wife had to take me to the local emergency room. I was suffering from cold sweats, vomiting and no feeling in my right arm. These symptoms were caused from the pain medications, not a heart attack. I was treated and released; no pain medications for me!

Long story short, after consultations with my doctor, an MRI was scheduled and the results were 2 fractured discs and 2 bulging discs and I was referred to a neurosurgeon. According to this doctor, he offered epidural injections as an alternative to surgery and I agreed to try this option. The injections were in a series of 3. The first injection went fine; the second injection caused paralysis from my waist down for approximately four hours and they wheeled me out the back door! I told my wife I was not going back for the third but she insisted so I did. The relief I received was brief, only about 6 months and the pain returned.

After this, I was left with the option of more injections or surgery. I simply was not going to give in to back surgery. You see, two of my sisters have had multiple back surgeries. They all failed. One sister has gone so far as to have a device implanted in her back that sends a signal to her brain telling her she is not in pain. What?! What is actually going on in her back?

DISILLUSIONS

Being a back pain sufferer every doctor’s treatment varies, from your Primary Care Physician to a Pain Management Physician, the treatment will be different. From a patient’s point of view, I have never had a physician diagnose my situation accurately. Their recommendation is almost always take pain medication, don’t lift anything heavy, and rest. Problem; masking the symptoms does not help solve the problem.

MY PROBLEM, MY SOLUTION

BACK ON TRAC  STARTED AS A SOLUTION FOR MY NEEDS WITH NO INTENTION OF BRINGING IT TO THE MARKET PLACE. I WAS AN INDIVIDUAL WITH BACK ISSUES AND WANTED RELIEF AND WAS DETERMINED TO COME UP WITH A PIECE OF EQUIPMENT THAT WOULD GET ME THE RELIEF I NEEDED.

 ERGO-FLEX Technologies LLC, 855-823-8722; www.ergoflextechnologies.com; linda@backontrac.com; www.secretstoamilliondollarpractice.com.