Can you Refinance a Jumbo Loan?

Jumbo mortgages are a great solution when you are purchasing a high-value home where the necessary financing exceeds the loan limits of conforming mortgages. In contrast to conforming mortgages that are often purchased by government agencies like Freddie Mac and Fannie Mae, jumbo loans are typically maintained directly by the lender and create a greater risk. So, what does this mean when it comes to refinancing jumbo mortgages? While jumbo mortgages can be refinanced, the refinancing process for these larger loans is often more challenging than conforming mortgages.

Why refinance a jumbo mortgage loan?

As with any mortgage, there are many different reasons you may consider refinancing your jumbo mortgage. With the rapidly rising home prices increasing home equity, you may be looking for refinancing in order to pull cash out for things like remodeling. If your jumbo mortgage has an adjustable rate, you may be looking for refinancing and, of course, refinancing to improve your interest rate or lower monthly mortgage payments is also a consideration.

How soon can you refinance a jumbo loan?

When it comes to jumbo mortgage refinance, there is no specific rule for how long you have to wait before you can apply for refinancing. However, you must keep in mind that jumbo mortgages are a higher risk for the lender, and this is true for jumbo mortgage refinancing as well. Lenders tend to scrutinize jumbo mortgage refinancing a bit more than other refinancing options and it may take time to find a lender willing to take the risk.

Qualifications

When applying to refinance your jumbo mortgage, there are some standard qualifications you must consider. However, keep in mind that these qualifications can vary by lender.

1. Credit score

The credit score required for a jumbo loan refinance can vary based on the loan terms you are applying for and the requirements of your specific lender. For 30-year fixed mortgages, the minimum credit score is typically 680 or higher while a 15-year fixed mortgage may require a score as high as 700. If you are refinancing an investment property, some lenders may require a score as high as 760 to qualify for refinancing.

2. Debt-to-Income-Ratio (DTI)

Your debt-to-income ratio (DTI) shows potential lenders how much of your income is allocated to recurring bills on a monthly basis. While the standard DTI for conventional loans is 50%, lenders see a jumbo mortgage as an increased risk and will often require a DTI as low as 36%.

3. Cash reserves

With jumbo mortgages, lenders are taking a risk and they want to know that, should you lose your regular income, you have a cash reserve that would still allow you to make your mortgage payments. These cash reserve requirements can vary by lender but, depending on the value of the mortgage, lenders can require a cash reserve greater than or equal to at least 6-12 months’ worth of mortgage payments.

Requirements

In addition to the qualifications mentioned above, lenders will have additional requirements in order to show proof of your income and assets. When applying for a jumbo mortgage refinance, you can expect your lender to require:

• At least 2 years of annual tax returns, including your W-2 forms
• Your most recent pay stubs or proof of regular income
• At least 2 months’ worth of bank statements
• Documentation of any additional income sources

If you are self-employed, you will also need to provide a profit/loss statement and a balance sheet.

Jumbo loan refinancing considerations

While meeting the qualifications and providing the necessary proof of income are the major steps to jumbo mortgage refinancing, there are some other things to consider before you begin the application process, as these things could affect your application.

1. Refinancing after bankruptcy or foreclosure

Refinancing a jumbo mortgage after a bankruptcy or foreclosure is possible, but it may take more time than you expect. In most cases, you will need to wait until this negative item on your credit report expires and this can take up to seven years.

2. Closing costs

Because jumbo mortgages have higher principal balances, you can expect to pay 3%-6% of your total loan value in closing costs when refinancing. For example, in the case of a $1 million loan, you can expect to pay between $30,000 to $60,000 cash upfront when you sign. You can choose to roll this amount into your loan. However, this will increase your principal balance and often raise your interest rate.

3. Longer processing time

Unlike standard refinancing, jumbo refinancing undergoes manual underwriting where lenders take a much closer look at everything. This manual process can take time and, should they find any potential red flags, your application process can be substantially delayed.

When is the best time to refinance?

Because there is no specific time restraint on when you can apply for jumbo loan refinancing, you can apply at any time. However, there are some things to consider. If you have negative marks on your credit report, you may need to take some time to fix these issues or wait for them to fall off your report. If cash reserves are low, you may need to hold off on refinancing until you are able to build them back up before you start the application process.

You don’t have to navigate the home loan process alone

Navigating any home loan refinancing can be confusing and frustrating, but when you are looking at a jumbo mortgage, the stress can often be overwhelming. At Hero Home Programs, our goal is to help everyone become a homeowner and this includes navigating the refinancing process. Our team of experts can help you find reputable lenders that are willing to take the risk on a jumbo mortgage and help walk you through the process. To learn more about how we can help, schedule a call with us today.

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How Do I Qualify for an FHA Home Improvement Loan?

If your home is in need of repairs to make it more livable, such as improvements for energy efficiency or a new, more modern bathroom or kitchen, an FHA Title 1 loan is one option to help finance those repairs. While many borrowers opt for a home equity loan, an FHA Title 1 loan offers an option for those with little to no home equity. But, if no equity is required, how do you qualify for an FHA home improvement loan? While there is no hard credit score requirement and equity is not necessary, there are other broad requirements, such as a debt-to-income ratio under 45% and the home being your primary residence. Here we take a closer look to get a better understanding of the FHA Title 1 loan and other home repair loan options that may be available to you.

What are FHA Title 1 loans?

FHA Title 1 loans are loans backed by the federal government but issued by private lenders. These loans are designed to help low- to moderate-income homeowners finance necessary home improvements when they are unable to qualify for traditional home equity loans. These loans can be used for any modifications that help to make the home more livable and can include the purchase of new appliances. The maximum loan term is 20 years for single-family homes and 12 to 15 years for manufactured homes. The maximum loan amount is $25,000 for single-family homes and a maximum of $60,000 for multifamily properties.

How do FHA Title 1 home improvement loans work?

How a Title 1 Home loan works depends on the amount of the loan. For example, for minor renovation projects costing less than $7,500, your loan is typically unsecured, meaning should you default, you are not at risk of foreclosure. However, for single-family home loans over $7,500 and below the maximum of $25,000, the loan is secured by your home. Funds from these loans can only be used for repairs and additions that improve the living conditions of the home and cannot be used for luxury items, such as adding a new pool. Eligible improvements can include new appliances, disability accessibility improvements, energy-conserving improvements, and other improvements that substantially protect or improve the basic livability or utility of the property.

How do I qualify for an FHA home improvement loan?

Before you consider applying for an FHA Title 1 loan, you need to make sure that you meet the basic loan requirements. Some of these requirements include:

1. Primary residence that you have resided in for at least 90 days before applying for the loan.
2. While there is no minimum credit score required for this loan, you will undergo a credit check and must provide verifiable income.
3. Debt-to-Income Ratio below 45%.
4. Cannot be delinquent or in default of another federally guaranteed loan.

Pros and cons of FHA Title 1 loans

As with all loan options, there are pros and cons that you should consider before applying. While an FHA Title 1 loan is backed by the federal government, they are provided by individual lenders, so you may find different rates from different lenders, so it is important to shop around before accepting a loan. Here we highlight some of the main pros and cons associated with FHA Title 1 home improvement loans.

Pros

• Minimum qualification requirements
• No home equity is necessary
• Unsecured loans available
• Low, fixed interest rates

Cons

• Insurance premiums are required at a 1% annual insurance premium on the amount borrowed.
• Repairs are limited based on the loan spending limits
• You must use an FHA-approved lender

Other Options for Home Improvement Loans

While an FHA Title 1 loan is a great option for many borrowers, it will not meet the needs of everyone. What is you your renovations exceed the $25,000 limit? What if you are looking to purchase a new home that requires additional renovations, and you want to finance both? If either of these scenarios sounds familiar, you may need to consider other home renovation loan options. These can include:

• Fannie Mae HomeStyle® Loan
• Freddie Mac CHOICERenovation or CHOICEReno eXPress Loans
• FHA 203(k)
• Home Equity Loan
• Home Equity Line of Credit (HELOC)
• USDA Rural Development Home Repair Loan

To learn more about these home improvement loan options, read “How to Get a Home Loan That Includes Renovation Costs?”

Navigating Home Improvement Loans

The idea of home renovations, finding qualified contractors, and figuring out how to live in your home while renovations are underway can be stressful enough. Trying to navigate the home improvement loan process, however, doesn’t need to be that stressful.

At Hero Home Programs, our goal is to help people achieve homeownership in their dream home, and this includes helping people navigate the home improvement loan process. To learn how our team can help you find the home improvement loan that will meet your needs, contact us today.

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How to Get a Home Loan That Includes Renovation Costs?

Whether you have an existing home that needs a new kitchen, or you have an eye on a new home with a low asking price but a lot of necessary home renovations before it is really livable, a home renovation loan can allow you to make the necessary home improvements without the cash upfront. These home improvement loans are available for those looking to make renovations that will increase the value of the property and you don’t need perfect credit to qualify for many of the available options. But when is a home renovation loan the right choice? Which loan option provides you with the best home improvement opportunities? How do you qualify for a home renovation loan?

What is a home renovation loan?

A home renovation loan is a loan that incorporates additional funds for the purpose of home remodeling or home repairs. In many cases, a home renovation loan is a mortgage that covers the home price as well as the additional funds. However, this can also include a mortgage refinance with a cash payout for remodeling, a home equity line of credit, a government-backed loan, or an unsecured personal loan.

Why should you consider a home renovation mortgage?

When deciding on a home renovation loan, you must begin by considering the benefits and the risks. Will your home renovations increase your property value or reduce your long-term costs? For example, roof repairs, new siding, and updated windows can help improve your home’s overall appearance but also provide weatherproofing and make your home more energy-efficient. However, you must determine if the cost of the home renovations and of the loan will fit your budget and that the renovations to your home will not make your home overly expensive compared to similar homes in your housing market, leaving you with damaged marketability should you decide to sell.

How do home renovation loans work?

When it comes to this type of loan, there are multiple options available. Each of these options has specific qualifications, as well as pros and cons. Before applying for a renovation loan, it is important to understand the differences and determine which loan option will work best for you.

1. Fannie Mae HomeStyle® Loan

The Fannie Mae HomeStyle loan enables buyers to finance the purchase of a home as well as the renovations planned and have the full loan amount combined into one mortgage. For those that already own the home, this loan option allows for refinancing that combines the original mortgage with the renovation costs. The money for renovations goes into a separate escrow account that directly pays the renovation contractors, so the borrower does not have direct access to the funds.

How to qualify
Qualifying for a Fannie Mae HomeStyle loan is similar to qualifying for any Fannie Mae home loan. While there are no income limits, there are caps on how much you can borrow that match the loan limits for conforming loans that follow the Fannie Mac guidelines. A borrower will need a minimum credit score of 620 and a debt-to-income ratio of less than 50%. You must have a down payment of at least 5% (though some first-time buyers can qualify at 3%). This percentage is determined by the home loan price plus the amount of renovation. For example, if your home is $150,000 and you are borrowing an additional $100,000 for renovations, your down payment would be 5% of $250,000.

Pros

• One monthly mortgage payment that covers both the home principal and renovation costs, with only one set of closing costs.
• May offer lower interest rates than conventional improvement loans.
• Available for many different property types.

Cons

• Renovations are limited to 75% of the post-renovation value of the home.
• Acquiring funds can take longer than a conventional mortgage loan.
• Can have higher fees and closing costs than other loan options.

2. Freddie Mac CHOICERenovation Loan

Similar to the Fannie Mae HomeStyle loan, the Freddie Mac CHOICERenovation loan allows you to finance both the purchase price of the home and the renovation costs, giving you one mortgage payment. This loan is also available to refinance an existing property with an additional amount for renovations. Renovations must be completed within a year of loan closing and are available for a variety of different property types. For those with smaller home renovations, Freddie Mac also offers the CHOICEReno eXPress loan option that applies for renovations under 15% of the home value.

How to qualify
While the Freddie Mac CHOICERenovation loan does not have any specific credit score of debt-to-income ratio requirements, borrowers must meet the same requirements necessary for any other Freddie Mac conventional loan, including a credit score of at least 620 and a DTI of 36% or less.

Pros

• Able to combine the purchase price and renovation into one mortgage payment.
• Available for single-family homes, primary residences, second homes, and investment properties.
• Low down payment options
• Mortgage amount based on after-renovation property value
• Permits the use of sweat equity

Cons

• Renovations must be completed within the first year.
• Bank-owned properties can require additional approvals that can extend the approval processing time
• Renovation costs are capped
• May require higher closing costs and fees
• Can have a higher mortgage rate

3. FHA 203(k)

The FHA 203(k) loan is another loan option that allows you to purchase a home and include the renovations in one mortgage. This loan option includes two different types: Limited and Standard. Limited 203(k) loans are capped at $35,000 for renovations while the Standard option is for more major renovations. With more lenient qualifications, this loan option often appeals to borrowers with less than perfect credit.

How to qualify
To qualify for an FHA 203(k) loan, borrowers must have a minimum credit score of 500 and a maximum debt-to-income ratio below 45%. Down payments can be as low as 3.5% for lenders with a credit score over 580 and 10% for those below 580. The home you are purchasing and renovating must be your primary residence and meet FHA property eligibility requirements. Your loan cannot exceed FHA loan limits for your area.

Pros

• Lower qualification requirements making this loan appealing to those with less than perfect credit.
• One mortgage payment for both home loan and renovation.
• Low down payment.

Cons

• Loan requires a mortgage insurance premium (MIP)
• Can only be used to purchase a primary residence.
• No renovations can be performed by yourself.
• Involves more paperwork than many of the other loan options.

4. Home Equity Loan / HELOC

A home equity loan is a lump-sum loan at a fixed rate that provides up-front cash for home renovations at a fixed rate. A home equity line of credit (HELOC) is similar however, instead of up-front cash, this loan option provides a credit limit with a revolving balance and a draw period of five to 10 years.

How to qualify
To qualify for a home equity or HELOC, borrowers generally need at least 20% equity in their home, a credit score of over 600, and a stable, verifiable income history of over two years.

Pros

• Home equity loans offer a fixed interest rate and payment amounts that do not fluctuate.
• HELOC allows you to draw money as you need and only pay interest when you draw a payment.
• Loans can be used for a variety of different renovations, including DIY renovations.

Cons
HELOCs have variable interest rates, meaning your rates and payments can increase over time.

5. USDA Rural Development Home Repair Loans

Offered through the USDA’s Rural Development program, borrowers can apply for a USDA Rural Development Home Repair Loan to homeowners in rural locations looking to improve their current property.

How to qualify
In order to qualify for these loans, the loan must be for a primary residence, have an income that exceeds 50% of the median income in the county, and live in an eligible rural area.

Pros

• No down payment is required
• Low-interest rates, credit score requirements, and origination fees.

Cons

• Geographical requirements for properties
• Income limits
• Must be a primary residence

Covering renovation costs with your home loan

Whether you are looking to purchase a new home that needs some renovations, or you love your current home but would really love a more modern kitchen or bathroom, home renovation loans can help you achieve your dream home.

At Hero Home Programs, we understand how important home ownership is and how having the perfect home makes all the difference. If you are considering a new home purchase with renovations or simply looking to improve your current home, our team can help you navigate the renovation loan process. To learn more, contact us today.

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Guide to FHA Loan Limits for 2022

Across the United States, home prices are surging. In order to keep pace with home inflation, the Federal Housing Administration is increasing the FHA loan limits for 2022. These new FHA 2022 loan limits will give borrowers access to a wider range of homes and achieve the goal of homeownership.

What are the new FHA loan limits and what are FHA loan requirements? Here at Hero Home Programs, we offer an in-depth look at FHA loans, the new limits, and how you can qualify for an FHA loan.

What is an FHA loan?

An FHA loan is a home mortgage loan insured by the Federal Housing Administration. While the FHA insures these loans, they are underwritten and administered by third-party mortgage lenders and are often the loan choice for many first-time homebuyers as they have lower requirements than many conventional loans.

How do FHA loan limits work?

FHA loan limits are the maximum amount that the FHA will insure for the purchase of a property. The idea behind FHA loans is that the FHA guarantees the lender that the balance of the loan is covered if the borrower defaults. This government guarantee makes banks more willing to make mortgage loans to those that may not otherwise qualify for a conventional loan. FHA loans often accept lower credit scores and down payments to qualify, making them ideal for low- to moderate-income and first-time homebuyers. For this reason, the FHA sets a limit on the amount they are willing to insure, thus creating the FHA loan limits. This amount limits the amount of home price you can choose from.

What is the most you can borrow with an FHA loan?

The FHA establishes the loan limits every year based on the median home prices throughout the country. However, there are some considerations regarding the actual FHA loan limit in the area you are looking for a home and the type of property you are looking to buy.

1. Single-Family (One-Unit)

In 2022, the baseline limit for an FHA loan for a single-family home was set at $420,680. However, as we mentioned above, this amount can actually go much higher, depending on the location you are looking to purchase in. For example, in some high-cost areas, where the median home price is much higher, such as in California, the FHA limit increases to $970,800. In areas of Alaska, Guam, Hawaii, or the U.S. Virgin Islands, these limits can go as high as $1,456,200.

2. Multifamily

Suppose you are looking to purchase a multifamily property. In that case, the FHA loan limit again depends on locations but also depends on the number of units in the property you are considering. For example, a 2-unit property limit begins at $538,650 but can go up to $1,243,050 for properties in high-cost areas. These limits increase with the number of units, with a 4-unit property ranging between $809,150 to $1,867,275.

How FHA loan limits are set

The U.S. Department of Housing and Urban Development (HUD) looks at conforming loan limits throughout the country and uses these figures to determine FHA loan limits for every area. The lowest limit, known as the “floor,” is 65% of the national conforming loan limit. In 2022, this amount is $420,800. The highest limit, known as the “ceiling,” increases by 150% and only applies to areas where the median home prices are much higher.

FHA loan requirements

To qualify for an FHA loan, there are requirements that you much meet as a borrower. These include:

• Credit Score: Borrowers must have a minimum credit score of 500 with a 10% down payment. Borrowers with a 580+ credit score may qualify with a down payment of as little as 3.5%.
• Residence: The property you are purchasing must be your primary residence.
• Property Standards: To back an FHA loan, the FHA requires that a property meet its building standards.
• Debt-to-Income Ratio (DTI): Your DTI cannot be above 43% and your mortgage payment cannot account for more than 31% of your total monthly income.

To learn more about FHA loan eligibility, read “Am I Eligible for FHA Loan?”

Qualifying for an FHA Loan in 2022

2022 is the year to make your dream of homeownership come true and the increased FHA loan limits mean you may have a wider range of home options available to you. As a first-time homebuyer, the team at Hero Home Programs understands how overwhelming the home buying process can be and we are here to answer any questions you may have and help you achieve your homeownership goals. To learn more about how our team can help, contact us today.

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Foreclosure and Credit Score

A home foreclosure can reduce your credit score and affect your ability to qualify for new loans, including a new mortgage. How does a foreclosure affect your credit score? How long does a foreclosure stay on your credit? Are there things you can do to avoid foreclosure?

What is a foreclosure?

When you have a mortgage on a property, the mortgage is actually a lien on the property. When a borrower fails to meet the obligations of the mortgage, they enter default. While this typically means missed mortgage payments, it can also include the failure to maintain mortgage insurance or maintain the upkeep of the property. Foreclosure is the process that occurs when a lender takes ownership of the property after the borrower enters default.

The foreclosure process has multiple stages that include:

• Payment default: While a foreclosure can begin as soon as the first missed mortgage payment, default typically does not occur until after several payments are missed.
• Notice of default: After 90 days (this timeframe can vary by lender), a Notice of Default is sent to the borrower offering a potential resolution to avoid foreclosure. This stage is considered pre-foreclosure.
• The lender takes possession: If the borrower is unable to make suitable arrangements to rectify the default, the lender takes possession of the property.
• Notice of trustee’s sale: The lender is required to record and publish an impending sale with the county and publish the notice in local newspapers.
• Trustee’s sale: The home is listed and placed for sale through public auction.
• Transfer of ownership to the lender: If the home does not sell at auction, the ownership of the property transfers to the lender.

How does a foreclosure affect your credit?

A foreclosure appears on your credit report within a month or so after the initial foreclosure proceedings begin. While a foreclosure does have a considerable impact on your credit score, the months before foreclosure are likely to cause a greater impact. To reach the foreclosure process, the borrower typically misses at least 3 to 4 monthly payments. Missed payments account for the biggest drop in a borrower’s credit score, so by the time the foreclosure hits your account, the damage is already done.

How long does foreclosure affect your credit?

As mentioned above, a foreclosure appears on your credit report within a month or two of the foreclosure proceedings. This foreclosure entry remains on your credit report for seven years from the time of your first missed monthly payment.

How do lenders see a foreclosure?

While lenders typically look at your overall credit score, a foreclosure entry is often viewed negatively, second only to bankruptcy. A foreclosure entry will keep you from approval by many lenders, despite meeting their credit score requirements and other lending criteria.

What are the tax consequences of a foreclosure?

When it comes to taxes, a foreclosure is treated the same way as the sale of a property. A foreclosure often means the cancellation of your outstanding debt. You are obligated to report this debt cancellation as ordinary income in Box 2 of a 1099-C form that you receive from the lender when this occurs. You are also required to calculate the capital gain from the foreclosure.

Ways to avoid foreclosure

Unfortunately, life can throw curveballs, making it difficult to make monthly obligations, such as your mortgage payment. Missing multiple payments will lead to a foreclosure if simply ignored. However, there are things you can do to help avoid foreclosure and protect your credit score.

1. Contact your lender immediately

If you have experienced a temporary setback, such as a loss of employment, contact your mortgage company immediately to let them know what the situation is. Your lender may be willing to work out a repayment plan that allows you to catch up on missed payments by adding a portion of them to your regular monthly payments. Maintaining regular contact with your mortgage lender will show that you are committed to taking care of your obligations. In some cases, your lenders may also offer one of the additional options below.

2. Request a forbearance

If you are experiencing temporary financial struggles, you may be able to request a mortgage forbearance from your lender. This forbearance places a temporary hold o your mortgage payments for a specified time period. However, at the end of it, you are required to pay the full amount accrued during the forbearance period or commit to a repayment plan established by your lender.

3. Consider a loan modification

A loan modification works similar to a loan refinance and can help to make your current monthly payments more manageable. In many cases, this modification occurs by extending your loan term, allowing for a reduction in monthly payments. Ask your lender if a loan modification is an option.

4. Seek advice from a HUD-certified counselor

If you are feeling overwhelmed, the Department of Housing and Urban Development (HUD) offers housing counseling throughout the country. Their services are typically provided at little to no cost, and they can help walk you through trying to halt the foreclosure process and save both your property and credit.

5. List your home for sale

If you are unable to afford your monthly mortgage payments, putting your home up for sale may end up being your best option. In a strong housing market, you can often sell your home before the foreclosure process starts, allowing you to avoid foreclosure.

6. Talk with your lender about a short sale

If you do not have any luck traditionally selling your home, you can talk with your lender about a short sale option. A short sale means you sell the home for less than the amount you owe. The sale proceeds go directly to the lender, and the lender is willing to forgive the remaining balance. Before you can consider this option, you will need to receive approval from your lender and, when given approval, include the fact that this is a short sale pending approval on all your sale listings.

7. Request a deed in lieu of foreclosure

If you cannot work out payment arrangements or sell your home in time, you can request a deed in lieu of foreclosure. With this, you transfer ownership of the home directly to the lender in exchange for a release from your mortgage obligation. This avoids a negative foreclosure report to your credit and releases you from your payment obligations.

Can you remove a foreclosure from your credit report?

As long as a foreclosure is legitimate, it cannot be removed from your credit report until the 7-year period expires. The best way to avoid a foreclosure on your credit report is to follow the tips listed above.

A foreclosure doesn’t keep you from owning a home.

While losing a home can be devastating to you and your credit, it will not keep you from owning a home again in the future. In fact, it is often possible to qualify for a new mortgage within 2-3 years after a foreclosure. At Hero Home Programs, we understand that life happens. Our goal is to help individuals and families achieve the dream of homeownership and, despite a foreclosure, we can often help. To learn more about our services, contact us online today.

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Are Brick Houses Better?

When you are looking for a new home, you are likely looking for a specific location, how many bedrooms and bathrooms it has, if the kitchen is perfect for entertaining, or if the backyard has plenty of room for the kids to play. But there is something else you should consider. What is the home made of? Are you looking at a brick home or a wood home? Is one better than the other? Are brick houses better than wood? If you are unsure as to which home is better for you and your family, we offer a closer look at the pros and cons of a brick home and how it may benefit you.

Advantages of brick homes

You probably remember the story of the little pigs and big bad wolf and how the brick home saved the pigs because it was far sturdier and able to survive the wolf trying to blow it down. Considering this story, much of it holds true when choosing a home for your family.

Let’s take a closer look at some of the pros associated with brick homes.

Durable exteriors

Brick houses can withstand the elements far better than wood or vinyl. In addition, the lack of wood in the structure of your home means that, should a fire start, it will not spread easily through the home. Bricks can withstand strong impacts and high temperatures.

Environmentally friendly

Bricks are made from a combination of clay and slate, which is natural and very abundant, as opposed to wood, which requires cutting trees. In addition, bricks are very durable, do not degrade like wood can, and, because they are all-natural materials, do not leach chemicals into the environment as treated wood does. Because bricks are so durable, they also offer the ability to recycle should you ever decide to remodel your home. For example, should you decide to remove a non-bearing wall when remodeling, you can recycle those bricks to make a path or line a garden as part of your landscaping.

Energy efficient

Bricks are extremely energy efficient and are, in fact, the most energy-efficient building material available. They help to keep your home warm in the winter and cool in the summer, helping to keep your utility bills down.

Fire and weather resistant

Clay is a very versatile material that can withstand the high temperatures of fire and withstand just about everything mother nature can deliver. Bricks can withstand high pressure, high humidity, and the normal hot or cold summer and winter temperatures. In addition, if your new home is in a location where things freeze during the winter, bricks tolerate the freeze and thaw cycle much better than any other building material. If your home is located in more tropical, high-humidity locations, bricks resist the common development of mold.

Low maintenance

Homes with wood or vinyl exteriors are often exposed to a number of different elements that can cause damage. For example, a stray baseball can dent and damage vinyl, while excessive rain can cause rot within the wood. Termites and carpenter ants can wreak havoc on wood homes. Sun and rain can cause paint or color to fade, requiring regular painting. Brick homes avoid all these changes and potential damage. In fact, most modern bricks are capable of retaining their color and look for over 20 years, meaning your home can look just as beautiful from day 1 to day 7,300.

Reduced sound

Bricks are far thicker and denser than wood, meaning that a brick-built home has the ability to better dampen sounds from the outside. This is extremely important if your home is located in a noisy neighborhood or near a major highway.

Can increase home value

Due to bricks' durability and low maintenance requirements, they tend to appreciate in value better than their wood or vinyl counterparts.

Endless design possibilities

In addition to the different hues that bricks can come in, there are also various brick sizes and finishing techniques that allow for a wide variety of different exterior appearances.

Lower insurance rates

Because brick homes offer increased durability, they are typically eight percent less to insure, meaning your home insurance premiums are likely to be lower.

Disadvantages of brick homes

While the benefits of a brick home are many, they do also come with some disadvantages. These should also be considered when deciding on a brick home.

Increased repair costs

While bricks are very durable, damage can still happen. When it does, the cost of repair is higher in terms of material and labor than it would be with a vinyl or wood home. While the damage may not occur as frequently, the extra cost is something that must be considered.

Can be challenging to remodel

If you are thinking about remodeling a brick home, they can present a challenge. To create a seamless look, you will need to match any new bricks to the existing bricks, and this can often be difficult. In addition, the construction of a brick structure is more labor-intensive and time-consuming than it is with a wood or vinyl structure.

Painting is more difficult and expensive

While bricks typically hold their color for 20 years, they will eventually fade. Adding a new color to the bricks can be expensive and difficult. Unlike wood or vinyl, bricks are not flat. They are filled with tiny cracks and grooves that make painting more difficult. In addition, you will need to paint each brick separately from the mortar.

Limited color options

If you are looking for a blue or green home, bricks may not be your best option unless of course, you like painting. For the most part, brick comes in hues of gray, red, and yellow.

Extreme fluctuations can cause damage

While bricks do well with the standard freeze-thaw cycle, they do not handle extreme temperature changes as well. For example, if you live in an area where your temperatures go from freezing winter to intense summer overnight, a brick home is not likely to do well. Bricks are unable to tolerate extreme and rapid temperature fluctuations as they do not expand and contract well. When these temperature fluctuations occur, you are likely to see shifts in the foundation and well as crumbling mortar.

Mortar decay

While bricks are very durable, the mortar isn’t quite as durable. Over the years, the mortar can start to decay and break away and will require replacement. Removing mortar and replacing it is called repointing and can be expensive.

Things you should consider before buying a brick house

When you are looking to purchase an older brick home, there are things you need to look for. These key things can be important when it comes to potential repairs or expenses down the road.

• Cracks: Look for stairstep cracks in the brickwork. This pattern of cracking is often an indication of an unstable foundation and can mean major expenses down the road.
• Mortar: Closely examine the mortar in between the bricks. Look for missing areas or signs of crumbling. These early signs may mean repainting will be needed in the near future.
• Lintels: Lintels are the areas between the windows and doors and the brick. Check these areas for any corrosion, cracks, displacement, or holes that can indicate potential problems.
• Walls: Examine every wall of the home, looking for areas where the wall may be bowing outward. This can indicate potential foundation shifts and instability in the walls.

Frequently asked questions

When it comes to brick homes, many homebuyers still have many questions. Here we answer some of the common questions when it comes to brick homes.

How long do brick houses last?
Bricks are extremely durable, and because of that, homes made of bricks can last at least 100 years with minimal maintenance. If well-cared for, such as regular repointing, brick homes can retain their beauty and structural stability for well over 500 years.

Can a brick house withstand a hurricane?
When it comes to withstanding a hurricane, it depends on the quality of the existing foundation and the type of brick structure it is. For example, a home with brick veneer siding can withstand hurricane winds up to 150mph, while a home with solid brick walls can withstand winds up to 185mph.

Are brick houses better in tornadoes?
Just like with hurricanes, brick homes can sustain the strong winds associated with tornadoes as strong as an EF2. However, it is still best to seek shelter in an inside area of the home and cover your head. Anything of an EF2 will likely cause damage to even a brick home.

Finding your dream brick home

While a brick home does offer many benefits, they are not for everyone, and you should consider these pros and cons as you look for your dream home. At Hero Home Programs, we are committed to helping families find and qualify for their perfect home, whether it is made from wood, vinyl, or brick. Contact us online today to learn how we can help you achieve homeownership.

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Are Foreclosure Homes Cheaper?

Years ago, buying a foreclosure home was often difficult for borrowers. Whether you were a first-time home buyer or an investor looking to make a profit, finding foreclosures and jumping through the hoops of the application process made them unappealing. However, after the mortgage crisis in the late 2000s, purchasing a foreclosure home has become similar to buying any other home on the market. So, how do you buy a foreclosed home? Are homes cheaper in foreclosure?

What does foreclosure mean?

When a borrower takes out a mortgage to purchase a property, the mortgage essentially becomes a lien on the property. A home foreclosure occurs when a borrower fails to meet their mortgage payment obligations on a home loan and enters into default. When this occurs, the lender then seizes ownership of the property.

How does foreclosure work?

Home foreclosure is a process that allows the lender to take possession of the property after payment default. Foreclosure has multiple stages that the lender must follow before taking complete ownership. These steps include:

• Payment default: The foreclosure process begins when the borrower misses their payment obligations. While default officially begins after the first missed monthly payment, complete mortgage default does not normally occur until after several payments have been missed.
• A notice of default: After 90 days, the lender sends a notice of default to the borrower (This timeframe can vary based on the lender). This notice starts what is known as the pre-foreclosure stage. During this stage, the lender often offers the borrower a payment plan or other potential resolution to the missed payments before the process moves forward.
• The lender takes possession: If an arrangement is not established, the lender takes possession of the property.
• Notice of trustee’s sale: The lender must record an impending sale with the local county and publish a notice in the local newspapers.
• Trustee’s sale: The home is offered up for sale at a public auction.
• Lender ownership: If the home fails to sell at auction, the lender becomes the owner.

Are homes in foreclosure cheaper?

In general, homes in foreclosure or even pre-foreclosure are offered at a price that is lower than the current market value. This happens for a variety of different reasons. In the early stages, the homeowners are trying to unload the property before they lose possession, affecting their credit report. During this time, the seller is looking to move the home quickly, and the price is often well below value. After foreclosure and during the auction stage, the sheriff’s office and the lender are not looking to hold onto a home, so the price is often lower than the market value to move the home quickly. This is also the case when the lender takes complete possession.

Types of foreclosure sales

If you are considering a foreclosure property, you need to be aware of five different types of foreclosure sales.

1. Pre-foreclosures

Pre-foreclosure sales occur when the property owner is still in possession of the home, but the lender has notified them of default. The homeowner has the opportunity to sell the home during this time to repay the mortgage lender and avoid the negative impact of a foreclosure on their credit report. These homes are typically listed in the county and city courthouses and are listed as pre-foreclosures.

2. Short sales

After the notice of default to the homeowner, the lender may agree to accept less for the property than the current mortgage balance. In most cases, the borrower must show proof of financial hardship to the lender. When this happens, the seller can list the home as a short sale property for the amount under what is owed on the mortgage and agreed to by the lender. When properties are listed as short sales, they must also list that these sales are pending lender approval. Receiving approval for a short sale can take longer than a traditional mortgage.

3. Sheriff’s sale auctions

A sheriff’s auction sale takes place immediately after the grace period following the notice of default. This auction typically takes place at the local courthouse at a pre-determined date and time. The auction is designed to sell the home quickly and allow the lender to receive their payment quickly.

4. Government-owned properties

If a property was guaranteed by a federal government program, such as an FHA or VA loan, the government repossesses the home. Once this occurs, the homes are then listed for sale through a broker working for the government agency. In order to purchase these homes, you must look for a registered broker through the U.S Department of Housing and Urban Development.

5. Bank-owned properties

If a home does not sell at auction and is not backed by a government mortgage, the ownership of the home reverts back to the lender and is considered real estate-owned property or REO property.

Pros and cons of buying foreclosed properties

As with any type of home buying situation, buying a foreclosure home comes with various pros and cons. When considering a foreclosure home, it is important to evaluate each of these before deciding.

Pros

• Lower prices: As we have mentioned above, most times a foreclosure home is listed below the current market value.
• Faster closing times: Lenders are looking to recover their investment as quickly as possible, so the purchase and closing process is typically quicker than with a traditional purchase.
• Standard loan options: Unless specified as a cash-only sale, as long as the home is in a livable condition, you can still qualify for conventional and government-backed loans.
• Investment opportunity: Buying a foreclosure home under market value and repairing any potential problems allows you to flip the home for a solid profit.

Cons

• As-is sales: Homes listed as foreclosure properties are typically sold as-is, so you may need to budget for repairs and unplanned expenses as the previous homeowners had no incentive to maintain the property's condition.
• Squatter's rights: While the home may be legally foreclosed, if it has been unoccupied for some time, it may have attracted squatters that will require legal eviction before you can take possession. This process can cost thousands of dollars in legal fees.
• You may not be able to see or inspect the home before purchase: In some cases, interior tours of a foreclosure home are not an option, and you may not really know what you are getting into.
• May need cash: If you are considering the purchase of a foreclosure home at auction, you will need the purchase amount in cash.
• Lots of competition: The market for foreclosure homes is competitive, with many real estate investors looking to scoop up a home that they can quickly flip for a profit. This means that available homes often move very quickly.

Foreclosure homes offer another path to home ownership

Foreclosure sales are not just for investors but first-time homebuyers. Hero Home Programs, we work to help individuals and families achieve homeownership, including the purchase of foreclosure properties. Contact us today to learn more about how we can help you move into your dream home.

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Jumbo Reverse Mortgage: What You Need to Know

You have worked your entire life to build equity in a high-value home. As you reach retirement, you likely have a bucket list of new hobbies, fun adventures, or places you would like to visit. But how exactly do you plan to fund all these amazing adventures? A jumbo reverse mortgage may be the answer you are looking for. What is a jumbo reverse mortgage loan, and how do you qualify?

What is a jumbo reverse mortgage?

A jumbo reverse mortgage is a supersized reverse mortgage that allows older homeowners to borrow against their equity in their high-value properties. Unlike traditional reverse mortgage loans, these loans are considered private or proprietary and are not bound by the regulations of government-backed loans. While this allows for more freedom, it also provides fewer protections for the borrower.

How does it work?

Jumbo reverse mortgages are designed for older adults over the age of 55 that have equity in a high-priced property and are looking for more cash than a government-backed reverse mortgage allows for. This loan allows for the homeowner to receive a lump sum, series of monthly payments, or a line of credit that does not require payment until a specified maturation event occurs. These events can include the borrower's death, the selling or transferring of the property, the home no longer being used as the primary residence, or the borrower failing to maintain property taxes and homeowners’ insurance payments.

How much can you borrow?

How much you can borrow with a jumbo reverse mortgage depends on the appraised value of your home, how much equity you have, and your age at the time of application. The maximum amount allowed is $4 million.

Jumbo vs. FHA-insured reverse mortgages

Jumbo reverse mortgages are considered private or proprietary loans and, unlike FHA-Insured loans, are not required to abide by the Department of Housing and Urban Development rules. While an FHA-insured reverse mortgage requires a minimum borrower age of 62, you can apply for a jumbo reverse mortgage at the age of 55. In addition, a jumbo mortgage allows the borrower to receive a full lump sum amount payment upfront while they are not required to have mortgage insurance.

Why should you consider getting a jumbo reverse mortgage loan?

When you own a high-value home where you owe little to nothing, a jumbo reverse mortgage can be a powerful tool for your retirement.

1. Eliminate larger mortgage balance

Suppose your original home purchase required a jumbo loan, and you are currently carrying a jumbo loan balance. In that case, a jumbo reverse mortgage can take advantage of the equity you have in the home and use it to pay off your original loan balance, eliminating a monthly mortgage payment that may become unaffordable.

2. Ability to have more available equity

A jumbo reverse mortgage allows you to take advantage of the equity in your current home, giving you the cash available to support your retirement and provide a safety net.

3. You need to remodel the home

As you age, you may experience health changes that require you to make safety upgrades to your home to allow you to maintain your home residence. For example, mobility challenges may require a wheelchair ramp or a stairlift. A jumbo reverse mortgage allows you to make these home improvements.

4. Robust borrower protections

Government-backed reverse mortgages typically offer a wide range of built-in protections, such as protecting the borrower from paying the difference if the loan balance rises higher than the home's current value and allowing a spouse to remain in the home after the borrower’s death. While jumbo reverse mortgages offer similar protections, every loan is different, and you must check with your lender to ensure which protections are offered.

Pros and cons of jumbo reverse mortgage

As with any home loan program, there are many pros and cons associated with a jumbo reverse mortgage. When choosing a loan option, it is important to weigh the pros and cons to determine which option is best for you.

Pros

• A jumbo reverse mortgage offers a more significant borrowing amount
• You can receive a lump-sum payout or line of credit
• Mortgage insurance is not required
• You do not need to wait until 62 to apply for the loan and can apply as young as 55 years of age
• More homes qualify as they do not need to be approved by the FHA

Cons

• Your loan has a higher interest rate than FHA-backed reverse mortgages
• Borrower protections may not be as robust as FHA-backed reverse mortgages
• Lack of guidelines increases the risk of mortgage scams
• Limited time for an open line of credit

Eligibility and requirements

Because government rules do not regulate jumbo reverse mortgages, eligibility requirements can vary by lender. However, common requirements include being at least 55 years of age, using the home as your primary residence, and having at least 50 percent equity in the home.

Enjoying retirement with a jumbo reverse mortgage

You have worked hard to reach your retirement, and you should enjoy your golden years. A jumbo reverse mortgage allows you to take advantage of all your hard work and the equity you have created during your lifetime. However, because these loans are not government-backed, they can increase your risk of mortgage scams.

At Hero Home Programs, we work to help ensure borrowers receive the loans they need to maintain their homes and lifestyle. Contact us today to learn how we can help you receive a jumbo reverse mortgage with a reputable lender and have the retirement you deserve.

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How is Mortgage Insurance Calculated?

When considering a new home, many borrowers expect to pay for homeowners’ insurance to protect their investment should any problems arise. In much the same way, lenders turn to private mortgage insurance, or PMI, to protect them if a borrower is unable to make their mortgage payment.

How does mortgage insurance work, and how is private mortgage insurance calculated?

What is Private Mortgage Insurance (PMI)

Private mortgage insurance, also known as PMI, is an insurance policy that many conventional home lenders require to help ensure that they are protected if the borrowers cannot make their mortgage payments. This insurance helps ensure the lenders that they can recover some of their investment in the event of default. But it is also beneficial for the borrower as, in most cases, this lender protection often allows borrowers to become homeowners when they are otherwise considered a risk.

How does mortgage insurance work?

Mortgage insurance works by lowering the risk to the lender when making a home loan. In many cases, the addition of PMI to a mortgage allows borrowers to qualify for a loan when they might not otherwise be able to. In most cases, borrowers with less than a 20 percent down payment are required to have PMI for a conventional loan. Most FHA and USDA loans require PMI as well.

How much does PMI cost?

The cost of PMI varies by loan program and several different factors that we will discuss below. On average, the cost of PMI is about 0.5 to 2.25 percent of the loan amount each year you have the loan. Your PMI can be paid upfront or added to your monthly mortgage payment.

How is Private Mortgage Insurance calculated?

As mentioned above, mortgage insurance is calculated as a percentage of your mortgage loan amount. For example, if your original loan is for $250,000 and you have a PMI rate of 1%, your mortgage insurance would be $2,500 for the year. This amount can be paid upfront or broken down and added to your monthly mortgage payment.

Annual mortgage insurance is re-calculated every year based on your loan balance. As you pay off the loan, your PMI costs go down.

Factors that determine mortgage insurance rate

With PMI rates ranging between 0.5 and 2.25 percent, how do you know your PMI rate? The PMI rate that you receive depends on a variety of different factors.

Loan size

The biggest determining factor for your PMI rate is the size of your home loan. As you might expect, the higher your loan is, the higher your PMI is likely to be. This is because the lender takes a bigger risk on a higher loan value.

Down payment

In general, PMI is required for any loan with a down payment of less than 20%. However, your PMI rate is also dependent on just how much you put down. While many loans offer as low as 3%, the smaller down payment will result in a higher PMI rate. Even if you are still under the 20% down payment threshold, the higher your down payment amount, the lower your PMI rate.

Mortgage type

The type of mortgage you choose can make a difference in your PMI rate. Adjustable-rate mortgages tend to have a higher PMI than fixed-rate mortgages. This is because interest rates can rise, meaning your monthly payments can increase.

Credit score

Your credit score can make a big difference in your PMI rate, as with anything loan-related. The higher your credit score, the more creditworthy you appear to the lender, thus showing less risk. While a conventional loan typically requires a credit score of 620, for other loans, such as FHA, a credit score can go as low as a 500. You can expect to pay a higher PMI percentage with scores this low.

Frequently Asked Questions

When it comes to home mortgages and PMI, borrowers often have numerous questions. Here we offer answers to some of the most common PMI questions.

1. Do you need PMI?

This depends. In general, a lender will require PMI if your down payment is less than 20% of the total loan amount. However, PMI is not required for the entire length of your mortgage. Once you reach a 78% loan to value ratio (LTV), the lender should automatically remove your PMI. In addition, your PMI is removed when you reach the halfway point of your loan term. For example, with a 30-year mortgage, the PMI is removed at the 15-year mark even if you do not reach the 78% LTV.

2. Is PMI required?

In general, PMI is required on any conventional home loan with less than 20% down payment. However, there are exceptions. In some cases, lenders offer a PMI-free conventional loan but will instead bump up your interest rate for the life of the loan.

3. Is mortgage insurance a bad thing?

While the additional cost of PMI may seem like a bad thing on the surface, the truth is PMI often gives borrowers a path to homeownership that would not otherwise be available. Without PMI, borrowers would be required to wait until they had the available 20% down payment, making homeownership difficult. In addition, PMI is not required for the life of the loan and is eventually removed once you meet the criteria.

4. Is mortgage insurance tax-deductible?

Yes! Just like any other form of mortgage insurance, PMI can be deducted when you file your income tax return each year.

PMI offers a quicker path to homeownership

While the idea of an added cost to your mortgage payment is never appealing, PMI enables many borrowers to purchase a home without a large down payment. It protects the lenders from potential risk and makes you, as a borrower, more appealing to the lender, enabling you to achieve homeownership sooner.

At Hero Home Programs, we understand how confusing all these terms can be when purchasing your first home. Our goal is to help everyone achieve homeownership with the best rates possible. To learn more about how we can help, schedule a call with us today.

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Home Renovation Loans for Bad Credit

Whether you’re looking to make minor updates to your kitchen or need a complete bathroom remodeling, home renovation projects can be expensive. Unfortunately, many home improvement loans are reserved for borrowers with exceptional credit. If your credit leaves a lot to be desired, you may think your home renovation dreams are out of reach. Fortunately, there are home renovation loans for bad credit available and some possible alternatives that can allow you to get the renovations your home needs.

How to get a home improvement loan with bad credit

Despite a poor credit history, if your home needs renovations, there are ways to secure the financing required to cover these improvements. While it may require a bit more work on your end, it is still possible.

Get a co-signer

If you struggle to get a home improvement loan on your credit alone, you might consider adding a co-signer to your loan application. This is where another party, such as a friend or family member, signs onto the debt to help you secure the financing you need. Based on their credit, you may be able to secure better terms and a lower interest rate.

Government loans

Government loans, often through the U.S. Department of Housing and Urban Development (HUD), offer programs for homeowners to fund home renovation projects. For example, the FHA Title 1 loan is designed to help those with less than perfect credit secure a loan to cover repairs to their residential property. The FHA Streamlined 203 (K) program allows homeowners to finance up to $35,000 into their mortgage in order to cover home improvements.

Private lenders

Private lenders are another option. Many lenders specialize in home renovation loans for those with poor credit. These lenders are often more willing to provide these loans because they know the loans are being used to increase the home's value.

How to choose the right home renovation loan

Shopping for a home renovation loan can feel like a challenge when you have less than perfect credit. With not as many options available, you may be tempted to take the first loan you qualify for. However, when looking for these loans, you must take the time to consider the interest rates, terms, and fees before applying for and accepting a loan.

Interest rates

It is important to compare your options, which is especially important for interest rates. Many lenders can provide rates through soft credit inquiry when applying for a loan, which does not affect your credit score as a hard credit inquiry. You may need to apply to various lenders to compare potential interest rates. Ensuring that each lender runs a soft inquiry is essential to ensure that your credit score does not plunge further while comparing rates.

Fees

Many loans targeting those with less than perfect credit often come with origination and administration fees. While some of these fees can be added to your monthly payment amount, others may come out of the principal balance at the time of funding. When comparing lenders, it is important that you take these fees into consideration.

Terms

As with any loan, the terms are just as important as the interest rate when it comes to your home renovation loan. The longer your loan term is, the more interest you will pay over the life of the loan. When considering your ideal terms, you need to consider the highest monthly payment you can afford and remain manageable to choose the shortest terms possible. Be sure to give yourself a cushion when considering this, as choosing a higher monthly payment that may be a struggle can result in late payments and further damage to your credit score.

Alternatives to home renovation loans if you have bad credit

While a home renovation loan is often your best option, it isn’t your only option. You can consider alternatives, and if your renovations can wait, it may be beneficial for you to focus on other improvements first.

Credit Card

Funding your home renovations with a credit card is an alternative to a home renovation loan. If you have a current credit card with the available credit, this may be the best place to start. Applying for a new credit card is another option, but there are some things to consider. Applying for a credit card creates a hard inquiry on your credit, further dropping your credit score. In addition, with bad credit, chances are you will not receive approval for a new card with enough credit to cover your home improvement expenses.

Home equity loan

If you have at least 15% to 20% of the equity in your current home, your best option may be to apply for a home equity loan to fund your home improvements. Because this type of loan is considered a secured loan on your home, the interest rates are often lower, and your approval rates are higher.

Improve your credit score

If your home renovations can wait a little bit, your best option is to take some time to improve your credit score. Doing this will help ensure you qualify for a home renovation loan that offers better rates and terms when you are ready to apply for a loan. Following these steps will help you improve your credit score:

• Request a copy of your credit report and review, ensuring that all the information is accurate and identifying potential problems that you can address.
• Address any negative accounts on your credit report.
• Continue to pay all your bills on time or early.
• Pay down your current debt to reduce your credit utilization.
• Use any current credit card responsibility. This means making payments on time and keeping your overall balance low.

Home Renovation Is Still Possible with Bad Credit

While working to improve your overall credit score is your best bet when qualifying for a home renovation loan, there are ways to still qualify for the loan you need. At Hero Home Programs, we work with borrowers to help ensure they find a quality home and the best possible lending options to help them achieve homeownership or the home renovation loan they need.

If you are interested in learning more about how we can help, contact us online today.

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How Does Divorce Affect Credit Score?

If you are currently going through a divorce, you are not alone. Statistics show almost 50 percent of all marriages in the United States will end in divorce or separation. While this major life change can take an emotional toll, it can also greatly affect your financial stability and credit score.

How does divorce hurt your credit? Does divorce show up on a credit report? Here we look at exactly how a divorce can hurt your credit and what steps you can take to help protect your credit.

Divorce and credit score

Your credit reports do not contain your marital status, and signing divorce papers does not directly affect your credit. However, your accounts are often affected by the division of assets and accounts with a divorce.

Missing payments on joint debt

If you and your spouse have joint accounts, these are usually addressed within the divorce decree. A judge decides which debt each party is responsible for. Unfortunately, creditors do not take these judgments into consideration. In their eyes, this joint debt is the responsibility of both parties. Should your ex-spouse miss a payment, it will also affect your credit score.

Closing of joint credit cards

In many cases, couples decide to close joint accounts during a divorce. While closing joint accounts helps avoid any potential concerns of missing payments by the spouse responsible for the debt, losing a card with available credit can greatly affect your credit utilization. For example, you and your spouse each have individual accounts with a credit limit of $5,000 and then a joint account with an available limit of $5,000. The joint account has a full available limit, and your personal card has a balance of $2,500. With both cards, your credit utilization is 25%. However, if you close the joint account, your utilization is now 50%, contributing to a lower credit score.

Being removed as an authorized user on your spouse’s credit card(s)

An authorized user on a credit card gives the user the ability to access the credit without the obligation to make payments. However, as an authorized user, you receive the benefits (such as a decrease in credit utilization) to your credit score when the account holder makes consistent, on-time payments. Being removed as an authorized user from an account, you are likely to see an increase in credit utilization and a negative impact on your credit.

Creditors don’t honor divorce decrees

Unfortunately, creditors do not honor divorce decrees despite going to court and receiving a judge’s order to divide your credit debt. If your name is on the account, you are still liable for the debt. If your ex-spouse decides to skip out on accounts that they were ordered to pay in the divorce, creditors can still come after you for payment, and the lack of payments can impact your credit report.

What happens to a mortgage after a divorce?

During a divorce, it is common for one party to maintain residence in the home they purchased together. In most cases, the divorce decree states which spouse maintains the home and is responsible for the mortgage payments. However, similar to credit card debt, the mortgage lender does not honor divorce decrees, and both parties are responsible for the mortgage. In this case, if your ex-spouse is awarded the home but does not make payments, the lender can come after you to collect a payment, and the lack of payments will reflect on your credit report.

How to protect your credit during a divorce?

When a divorce decree doesn’t hold weight for credit or mortgage debt, you must take the necessary steps to help maintain your credit. Some of these steps may not be possible, depending on your relationship with your ex-spouse. However, if working together is not possible, there are some things you can do on your own.

• Work together: If possible, work together with your ex-spouse to gradually pay off and close existing accounts. For example, you can begin by freezing any new spending and agree to make equal monthly payments until the debt is paid in full.
• Contact lenders: This is an important step for a variety of reasons. If you cannot work with your spouse to pay off and close joint accounts, talk to the lender about converting the debt to an individual account. If you believe all your debts are personal, it is still good to contact all your lenders to ensure your ex-spouse is not listed as an authorized user.
• Make all your payments on time: Make sure you pay all your debts on time. For the joint debts your spouse is responsible for, it is good to call and make sure payments are still being made. If they are not, you can step in and avoid any damage to your credit before it takes place.
• Consider home refinance: When both parties are on mortgage debt, consider getting a mortgage refinance or home sale if you are not the party retaining the home. This will protect your credit from defaulted home mortgage payments.
• Check your credit report often: Because you are not aware of your ex-spouse’s activity when paying debt obligations, you must regularly monitor your credit report to help ensure their non-payment is not affecting your credit score.

Saving Your Home and Credit Score after a Divorce

A good credit score is essential for purchasing your dream home. While divorce can take its toll emotionally, following these tips will help ensure that it doesn’t damage your credit score and your chances of owning your dream home.

At Hero Home Programs, our goal is to help everyone achieve the dream of homeownership, and helping maintain a good credit score is only the beginning. Schedule a call with us today to learn how we can help you find and qualify for the perfect home.

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Delayed Financing: What It Is and How It Works

When making an offer on a new home, cash speaks volumes. In fact, if you are facing a bidding war on a new home, offering cash will make your offer more appealing than similar offers dependent on financing. The only downside is purchasing a home with cash leaves you cash poor. This is where a delayed financing mortgage can make all the difference. What is delayed financing, and how can it benefit you?

What is delayed financing?

Delayed financing is a method of purchasing a home where you get a mortgage after a cash purchase goes through. In this case, you purchase the home with cash and then immediately obtain a cash-out refinance mortgage. Using delayed financing gives you the leverage of being a cash buyer while still enjoying the mortgage's benefits.

How does delayed financing work?

Using delayed financing begins with acquiring the funds to make a cash offer. This can mean dipping into savings or selling assets, such as stocks or other properties. Once you have the available cash and make an offer, you apply for delayed financing on the property. This application process is similar to a traditional home loan, and you will need to provide your financial information, proof of income, and a credit check. Choosing to use delayed financing is similar to refinancing, except you do not have to be on the home's title for a minimum 6-month period.

When should you use delayed financing?

So, you might wonder why you would consider delayed financing instead of a traditional mortgage or waiting and choosing a refinance option later down the road. While delayed financing is definitely not for everyone, let’s look at some of the pros and cons associated with delayed financing.

Pros

• Buying a home in a hot real estate market. If you are in a hot real estate market, winning a bidding war on a home can be difficult. Offering a cash bid often puts you at the top of the list as the seller knows the deal will go through.
• A traditional mortgage may not be available. Buying foreclosures, short sales, or fixer-uppers means they may not qualify for traditional financing. Purchasing the home with cash allows you to make necessary changes to the property to qualify for a new mortgage.
• Purchasing investment properties. Purchasing a home with cash allows you to prepare the home for potential renters. Once you are ready to rent and take in rental income, you can apply for the delayed financing to move on to your next investment property.
• Allows you to invest cash. While purchasing a home with cash gives you leverage in the buying process, acquiring delayed financing allows you to get that cash back to return to investments.
• Offers tax deduction. Having a mortgage on your home allows you to deduct mortgage interest from your taxes.
• It can help you build credit and establish a favorable credit history.

Cons

• You must have the entire purchase price in cash. This can be difficult if you do not have assets available.
• Only available on conventional loans. Delayed financing is only available for conventional loans backed by Fannie Mae or Freddie Mac, so FHA, VA, or USDA loans are not available. In addition, there are many additional requirements in order to qualify for delayed financing.
• The risk that financing won’t be approved. If problems arise with the property after purchase, you may not qualify for delayed financing.
• Interest rates could increase. Interest rates may rise depending on how much time passes between purchasing and financing.

Delayed financing guidelines

When it comes to delayed financing, you will receive the best mortgage rates with conforming loans that are eligible for resale to Fannie Mae or Freddie Mac. However, certain requirements must be met to qualify for these delayed financing mortgages.

Eligibility and requirements

• Property must be lien-free
• You must be able to provide proof of a cash purchase
• You must show documentation of where the initial cash came from. If you received money from a third party as a gift, you must provide a gift letter and any money obtained through the delayed financing can not be paid back for the “gift.”
• The mortgage amount can not exceed the purchase price plus closing costs, prepaid fees, and points. If you want to take advantage of any renovations made and the increased value, you will need to wait to qualify for a standard refinance loan.
• The property must be purchased in an arm’s length transaction, meaning you can have no prior relationship with the seller.

Exceptions

These eligibility requirements are for conforming loans eligible for resale to Fannie Mae or Freddie Mac. If you apply for a non-conforming or jumbo loan, these requirements do not apply.

Using delayed financing to purchase your dream home.

If you have cash available to purchase your home, taking advantage of delayed financing can help you look better in the eyes of the seller and increase your chances of securing a bid while still allowing you to remain cash-liquid. Hero Home Programs' goal is to help you achieve your dream of homeownership. Whether you have questions about delayed financing or other home loan questions, our team is here to help. Contact us online today.

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How to Get Bank Transaction History for Your Mortgage Loan Officer?

The home mortgage application process is filled with the paperwork that the mortgage loan officer requires to process your loan. The necessary information can include pay stubs, tax records, and bank information, including bank statements and bank transactions.

But why do loan officers need bank statements? What is the difference between a bank statement and a transaction history?

Bank transaction vs. bank statement

Bank statements and bank transaction histories are both supporting documents often asked for when applying for a home mortgage. What are they, and what are their differences?

Bank statement

A bank statement is a document provided by your bank, typically every month, either online or received in the mail. It reports banking activity for a standard timeframe, often by the month. A bank statement will contain the following information:

• Your bank’s logo
• Your full name and address
• Your account number
• The opening balance for the statement period
• The closing balance for the statement period
• A list of the transactions during the statement period

Bank transaction

Like a bank statement, a transaction history shows a list of your banking transactions, including deposits and withdrawals. However, unlike a bank statement, you can choose the time period. If you want to see your last two weeks of transactions during the period, you can enter dates in your online banking portal and generate a transaction history report. It will show the following:

• Your bank’s logo
• Your account number
• A list of all transactions in the given time
• A running balance

Why do you need a transaction history?

Given that both bank statements and transaction histories provide your banking history, why would a loan officer need both? In some cases, they don’t. The request for both often has to do with when you apply for your loan.

Let’s say you are applying for a mortgage on the 15th of July. Your bank statements run from the first to the last of the month. In this case, your loan officer would request the last two months of bank statements. So, you would provide statements for both May and June. But what about the last 15 days in July? The statements you provide do not show current bank activity. This is when a loan officer would request a bank transaction history covering July 1-15th. This allows them to get a clear history of your banking transactions and your current account status.

What do lenders check on bank transaction history and bank statements?

Lenders require your bank statements and your transaction history to verify that you can afford the down payment, closing costs, and monthly payments associated with a new mortgage. They are looking to verify where your income comes from, what your monthly expenses currently are, and that your current balance is enough to cover those obligations and the necessary down payment and closing costs for your new mortgage.

Common factors lenders look for include:

• Regular income from verifiable sources
• Consistent monthly payments
• Regular expenses
• Cash reserves in your accounts
• Bounced checks or overdrafts
• Direct debits to individuals
• Large deposits without a documented source

When going over your bank statements and history, certain things are likely to send up red flags and require additional documentation for the underwriters. These can include:

• Bounced checks and overdraft fees show the inability to balance the account and make necessary payment obligations.
• Large deposits that are not from verified sources such as a family member’s gift. In many cases, the family may offer financial assistance to help you purchase a home, but the underwriters will require a letter stating that these funds are a gift and do not require payback.
• Monthly payments or direct debits to an individual can show that you may have an undisclosed personal loan you are paying back. You may need to provide written evidence of what these payments are for.

How to provide transaction history to your mortgage loan officer?

When you are asked to provide transaction history, the lender will request certain dates. You can simply log into your online banking program and choose the date range for the report to get the data. Once the system generates the report, you can print it and deliver it to your lender. In some cases, you can email a scanned or pdf copy of the report directly to your lender. If you do not have access to online banking, many bank branches can generate and print a transaction history for you.

Bank transaction history plays a major role in home financing.

Bank transaction history and bank statements are normal requirements for lenders. We understand how these document requirements and gathering all the correct documents can become overwhelming. Our goal is to help new homebuyers through the lending process, helping to find the best loan programs and offers available. Contact Hero Home Programs today.

How to Get Bank Transaction History for Your Mortgage Loan Officer? was originally published on https://www.herohomeprograms.com/

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Should You Avoid Buying a House with a Sump Pump?

When looking for a new home, your focus tends to be on the number of bedrooms and bathrooms, whether it is in the right school district or how close it is to your place of employment. Unless they are from a flood-prone area, most homebuyers think about things like a sump pump, but the truth is it can make a big difference when choosing a new home.

When do you need a sump pump, and what should you know before buying a house with a sump pump?

What is a sump pump?

A sump pump is a device installed in the basement or lowest level of a home. It is usually placed in an area prone to flooding or rapid snowmelt. The sump pump pumps water out of the home through a system of pipes into another area, such as a storm drain. The idea is that the sump pump keeps your home dry and helps avoid potential water damage on the property.

Are sump pumps bad?

In areas prone to flooding, heavy rains, and rapid snowmelt, sump pumps can actually save your home from potential water damage. If you are looking for homes in a flood-prone or high precipitation area, you will find homes with sump pumps. While the addition of these in a home can be very beneficial, there are some things to consider when looking at a home with a sump pump.

Advantages

Having a home with a sump pump can provide many different benefits for your property and your health. Common advantages include:

• Prevents flooding: there is nothing worse than waking up to a basement full of water. Having a sump pump means that as water comes in, it goes out, reducing the risk of indoor flooding and damage to your home’s foundation.
• Saves money: Water damage to your home’s foundation can be expensive. So can replacing items in your home that are damaged when the water rises.
• Keeping your basement dry ensures that your foundation and your belongings are safe.
• Mold prevention: When water enters your basement, the additional moisture can contribute to mold growth, making you and your family sick.
• Lower your insurance costs: Your insurance company knows how much it costs to repair flood damage, and if you live in an area prone to flooding, the presence of a functional sump pump can help keep your insurance premiums down.
• Keeps you and your belongings safe: With many basements being finished and used as fully functional parts of the home, it is likely going to be filled with your belongings and may even have bedrooms. A sump pump works automatically when it senses water, so you don’t have to worry about waking up to your bed floating and all your belongings soaked.

Disadvantages

Although there are benefits to having a sump pump, there are some things to consider as a new buyer. These include:

• Was the sump pump installed after damage? Oftentimes, homeowners will install a sump pump after a flooding event. So, damage may have already occurred.
• Sump pumps require regular maintenance. Like most home devices, a sump pump will require regular maintenance to help ensure it operates correctly when you need it to.
• Regular replacement is necessary. The average sump pump lasts about ten years, so you will need to budget for regular replacement.

Four things you should know before buying a house with a sump pump

When looking at a home with an existing sump pump, you don’t want to go in blind. You should ask the seller some questions and some extra considerations the home inspector should follow to ensure that the sump pump is effective, not hiding previous damage, and does not require immediate replacement.

Here are five things you should consider when looking at a home with an existing sump pump.

Is there water or structural damage?

In many cases, sump pumps are installed after a major flooding event. When looking at a potential new home, you want to make sure that you look for any signs of water damage in the home.

• Does the basement smell musty?
• Do you see signs of mold or mildew?
• Do the walls have flaking or peeling paint?
• Does the floor seem uneven?

While some of these signs you may notice right away, others require a trained eye. Make sure your home inspector looks for signs of potential water damage that may need addressing. Also, ask the sellers if there is a history of water damage. If requested, they are required to disclose this information.

Does the pump work properly?

Just because you can visibly see a sump pump doesn’t mean it is working correctly. Make sure that you inspect the sump pump to ensure that it is working properly and that there are no leaks. In addition, ask when the current sump pump was installed. Keep in mind these have an average life of only ten years. So, if it’s more than that, you may want to request a replacement before you sign a buyer’s agreement.

Are the sump pump lines buried deep enough?

If the home you are looking for is in an area prone to freezing temperatures, it is essential to make sure the lines from the sump pump are buried deep enough to avoid freezing. If these lines freeze, they can develop cracks and not work efficiently at removing water when it floods.

Is there a backup system?

Unfortunately, heavy rains and flooding are often accompanied by power outages. When the power goes out, so does the sump pump. If there is not a battery-operated backup system, there is a chance that flood damage may have occurred. If not, it may be a good idea to consider adding a backup system if you purchase the home.

Maintaining your sump pump

If you purchase a home with a sump pump, you will need to perform regular maintenance to ensure your pump works when you need it. This maintenance includes keeping the sump pump clean and clear of debris, checking the valve and filter regularly, and testing the system at least once a year.

Understanding a sump pump is essential before purchasing your dream home.

Depending on the area your new home is located, adding a sump pump can be very beneficial. However, before you agree to the sale, you need to understand all the things discussed above.

At Hero Home Programs, we work with borrowers to help them find a quality home and the best possible lending options to help them achieve homeownership. If you are interested in learning more about how we can help, contact us online today.

The following article Should You Avoid Buying a House with a Sump Pump? is courtesy of https://herohomeprograms.com/

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