Month: March 2017

Spring may bring thoughts of your dream home – and what better time for a home search than now?

By the time summer comes you could be happily ensconced in your new home. Think outdoor living and a relaxed intro to a new neighborhood.

But before the dream turns into a full-fledged home search, there are several things to consider. One of the most important is your credit score and what that score may mean as far as your mortgage options.

To advance to the search phase, you’ll need to know what your credit score looks like now and where it ultimately needs to be for you to be in a position to purchase a home. So now is an ideal time to contact your mortgage professional to review your credit.

Indeed, you can pull your own credit, but what you need is a way to interpret what’s on the report and how it will impact you throughout the lending process. Many things that you may see as minor on your report may actually make a significant difference in accessing the programs and interest rates you want.

For example, if you carry a lot of credit card debt or if one card has a higher balance than most lenders feel is appropriate, that’s a negative. But if your mortgage advisor draws this to your attention, you’ll have time to pay off or reduce your balance before you start to search.

And the sooner you start, the sooner you can be in your dream home.

To some, including property taxes in your monthly mortgage payment is a no-brainer; for others, not so much. Must your property taxes be included in your mortgage payment or can you pay them separately?

The answer depends on the type of mortgage and your equity in it (the value of your home above what you owe on it).

And it boils down to the risk that lenders are prepared to take.

In addition to the risk your lender incurs on the loan amount, there is a risk that the borrower won’t make his or her property tax payments.

And even a property with a paid-up mortgage can still be taken by a governing body, such as a tax assessor, for nonpayment of taxes.

Borrowers who have little savings after their down payment may be unable to put away sufficient money to pay their monthly property taxes. Lenders are concerned about what may happen if unforeseen expenses occur.

Federal Housing Administration mortgage programs require that all mortgage payments include property taxes, mortgage insurance, and property insurance.

This is, in part, due to the fact that many buyers put down as little as 3.5% and may have less-than-ideal credit.

With conventional or Fannie Mae-type loans, each individual lender has its own escrow requirements, mostly based on down payment amount and credit profile.

While lenders may be likely to waive escrow requirements for someone putting down 35% to 40%, they would be unlikely to do so for a borrower with a 15% to 20% down payment.

Even with a very large down payment, the lender may charge a premium in the form of a rate increase to waive escrow and cover the added risk.

And for the borrower, there’s this positive take: Isn’t it better to include these costs in the mortgage payment than to worry every month about how to cover them?