USDA Single Family Guaranteed Loan Program

What is This Program?

This program has been created to help approved lenders in providing low and moderate income households the possibility to own adequate, modest, safe, and clean houses as their primary residence in eligible rural areas. This program provides a 90% loan note guarantee to approved lenders in order to reduce the risk of extending 100% loans to eligible rural home buyers. Sometimes called a “Rural Housing Loan” or a “Section 502” loan, there are a number of exurban and suburban neighborhoods nationwide in which USDA can be used. You may be surprised to know that a large number of Colorado counties have properties that fit the USDA’s requirements, including areas near Aurora, Denver, Boulder, Colorado Springs and Greeley. Has coming up with a down payment been a problem in the past and kept you from purchasing a house fret no more?

 

Who may be Eligible for this Program. rural housing photo

  • Meet Income-Eligibility. Find out at http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do.
  • Find out if your dream home is in an eligible area http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do.
  • Agree to personally be occupying the residence as your primary residence.
  • Be a U.S. Citizen, U.S. non-citizen national or Qualified Alien
  • Have a legal capacity to incur the loan obligation
  • Have not been suspended or debarred from participation in federal programs
  • Demonstrate the willingness to meet credit obligations in a timely manner.
  • Purchase a property that meets all program criteria

Benefits at a Glance:

  • No down payments
  • Competitive
  • 100% Financing
  • Eligibility requirements cater to low to average income borrowers

More Key Information:

  • No down payments, once qualified you have the option to pay nothing out of pocket for a down payment.
  • Flexible credit guidelines.  You are still required to submit your credit report, but the USDA is far more lenient in what is considered to be acceptable.
  • No maximum purchase price.  NO, there is no limit on the purchase price as long as the lender determines you are able to make the payments.
  • 100% Financing.  In case “no down payment” hasn’t given it away, the U.S. government will finance 100% percent of your home once you are deemed eligible.
  • Many property types included.  If your home is new, previously owned, modular, planned unit development, a condo, or a manufactured… it is eligible.



Tis the Season

As the dust of Halloween quickly begins to fade, and the remnants of candy wrappers litter the hallways a new season begins to emerge.  That’s right the holiday season has officially begun.  While ears aren’t ringing with the sounds of cheery music yet, holiday lights have crept up, and Thanksgiving recipe prep has arrived.  Reflecting on the year as been fun, and as we move forward thinking about the company we wish to be our hearts and dreams have been stirred. Colorado Mortgage group LLC is committed to the communities we serve.  As this is the season of giving, we have decided to serve this year through an annual donation to a local non-profit organization. This year November 2015 we are donating 1% of our profits to Urban Peak.

Founded in 1988, Urban Peak is a Denver non-profit organization that focuses on youth ages 15 through 24 experiencing homelessness or at imminent risk of becoming homeless. Their goal is to help these youth overcome real life challenges and become self-sufficient adults. They believe that best way to accomplish that in Denver, Colorado is by providing five essential services a little or no cost to the youth.  Those services are, an overnight shelter, a daytime drop in center, street outreach, education and employment programming, and supportive housing. If you are interested in getting involved there are numerous ways you can help support youth who are experiencing homelessness in our community. Urban Peak is a non-profit 501(c)(3) organization that relies on the support of generous individuals and companies to help youth find a life off of the streets and become self-sufficient adults. Go to http://www.urbanpeak.org/ for more information.

We hope you enjoy the beginning of your holiday season, and get to spend it with the people you love.

 

From us at;

 

Colorado Mortgage Group

Colorado photo

 

 




New Mortgage Guidelines Starting October 3, 2015

 New Mortgage Rules Aim To Simplify Information But May Slow Down The Process

As of October 3rd, the TILA-RESPA Integrated Disclosure Rule (TRID) will require lenders to provide potential borrowers with more detailed rate and fee information. This process will also give borrowers more time to review documents before closing.

When you think about buying a house, many questions may come to mind. Having the necessary information to make informed educated decisions is an important step in the mortgage loan process. Starting on October 3rd, 2015, new guidelines and regulations will aim to provide more details.  Mortgage rates and fee quote documents are a few of those details. What does this new regulation mean looking forward, and for those looking to get started in the journey of purchasing a home?

Guideline Background:

There are two regulations that are designed to protect borrowers from fee abuses currently:

  • The Truth In Lending Act (known as TILA or Regulation Z) established in 1968. This act protects borrowers from unforeseen closing cost abuses. The way in which it does this is by creating standards for the way mortgage fees and terms are calculated and communicated.
  • The Real Estate Settlement Procedures Act (known as RESPA or Regulation X) created in 1974.  This act aims to protect borrowers from false inflated real estate transaction costs.

As of October 3, 2015, the CFPB (Consumer Financial Protection Bureau) will bring together the two regulations mandated under TILA and RESPA into a simpler form. This is called the  TILA-RESPA Integrated Disclosure Rule, or commonly known as TRID.

With these new disclosures, the process might be slower-especially as lenders get used to the new rules.

Looking to the Future: 

Here is What Happens Prior to October 3rd:

  • Within three days of you applying for a home purchase loan, the lender must send you a Good Faith Estimate and an Initial Truth In Lending disclosure, these will show your quoted rate, sum of fees, terms and costs over the life of the loan.
  • Before closing (even if it’s the day of closing, which it often is), the lender will send you a HUD-1, which is a breakdown of all fees for the transaction, and a final Truth In Lending disclosure this will allow you to see if there have been any differences from the beginning.

Today’s process has been deemed too confusing and complicated by the CFPB.  The first time a borrower sees a HUD-1 which contains a formal breakdown of all the fees is at the closing table.  By that point it may be too late to make changes the borrower may see in their favor. In light of this information under the new TRID rules all new applications after October 3 will receive two disclosures.  One will be at the beginning and one will be at the end.

  • Within three days of you applying for a home purchase loan, the lender must sent you a Loan Estimate Form, which provides a detailed line-item breakdown of fees, cash needed to close, rate, terms and costs over the life of the loan. The lender must also obtain your intent to proceed before they can move forward.
  • At least three days before closing, the lender must send you a Closing Disclosure Form, which looks almost exactly like the Loan Estimate, but also separates which costs are paid by the buyer, seller, and third parties. What this means for the borrow is that you will have more time to make decisions and review the final terms of your agreement.

There will be some growing pains in the near future, as lenders, brokers, and other key players figure out the details of this new regulation. Talk to your lender today and ask what starting the lending process could look like for you.




Tips For Refinancing Your Mortgage

What To Know Before Refinancing

Refinancing, is when a new mortgage replaces the original mortgage on a house.  This is done when it benefits the borrower to lock in a different, and better interest term and rate. In order to do this the first loan is paid off and this allows for a second mortgage to be created.  This could be great news for people with a nearly perfect credit history.  By refinancing it is possible to convert a variable loan to a fixed rate and by doing so lock in lower interest rate.  In many circumstances refinancing can work in favor of the borrower and lower mortgage payments. Having the right knowledge and being aware of the economic climate however is huge.

What is Refinancing

When refinancing you are applying for a new loan.  In this process obtaining a new mortgage will aim to reduce monthly payments, lower you current interest rates, change to a different mortgage company, and or take cash out of your house for one reason or anther. Since the borrower in a refinance is applying for a new loan there are a few things to keep in mind:

  • Your current credit score and payment history.
  • Employment history.
  • Your source of income and income.
  • Your assets such as saving accounts and stocks.

  • The current value of your house, otherwise known as an appraisal.

Benefits of Refinancing

  • Lower mortgage rate.
  • Lower monthly payments.
  • Obtain money for a large purchase such as a car or a home remodel. This is possible by taking what is called equity out of the house. Equity is built up over time as the value of ownership increases in a home or property. This represents the current appraisal value of the house less any remaining mortgage payments.
  • A more stable monthly payment. Commonly people chose to refinance from an adjustable-rate mortgage(ARM) to a fixed-rate mortgage in order to have a more stable and predictable monthly payment.
  • Reset a current loan. If your ARM Loan is about to adjust. For example if you had originally entered into a 7/1 ARM and it’s been six years, refinancing could be an option.
  • Consolidate two mortgages. Some people have two mortgages or a mortgage and a home equity line of credit (HELOC). For simplicity it may make since for the borrower to refinance both mortgages into one.

Points to Consider Before Refinancing

There are loan fees to be aware of before refinancing. To counteract or avoid entirely these fees, it is best to shop around or wait for low fee or no-cost refinance. Contact the Colorado Mortgage Group for current mortgage rates and helpful tips and one-on-one counseling to move forward with a refinance.




FHA Loans: Fixed Rate

What is a FHA Loan?

FHA loans have helped the United States become some of the most housed people in the world, recording over 73 million Americans as home owners. Today, FHA loans are popular. With lower down payment requirements and less stringent lending standards this loan is attractive especially with first-time home owners.  In Layman’s Terms an FHA loan is a mortgage backed by the Federal Housing Administration, a government agency located in the U.S Department of Housing and Urban Development (HUD).  Mortgage insurance is required for all borrowers, which protects the lender if the loan is defaulted. In the 1930’s there was a string of foreclosures and defaults. One response was the FHA program.  This in turn provided mortgage lenders with insurance that was necessary to help keep the housing market stable by creating loans that were affordable and accessible. With FHA home loans being implemented more than seventy years ago they have been a major contributor to home ownership rates in the United States.

The Advantages of a FHA Loan

Generally, an FHA Loan is one of the easiest mortgage loan types to apply and qualify for.  A few of the variables that make this possible include, requiring a low down payment and less-than-perfect credit.  A down payment of 3.5% is required for FHA loans.  For example, if you need a loan of 200,000 then the down payment would be $7,000.  A traditional down payment of 20 percent is not feasible for many prospective home owners. Another Advantage is that FHA loans can be assumable under certain conditions. This means if you want to sell your house, the buyer can “assume” the loan you have.  This is good news for people who have had a bankruptcy, low or bad credit, or been foreclosed in the past, because you still may be able to qualify for a FHA loan. Minimum credit scores for FHA loans depends on the type of loan.  For a down payment of 3.5% the borrower usually needs a credit score of 580 or higher.  Qualifying for a FHA loan with lower credit is possible, however the down payment must be at least 10 percent.  For the most part people with credit scores lower than 500 are ineligible for FHA loans.  There are certain circumstances that the FHA may consider credit scores under 500.

Another benefit of an FHA loan is that it allows lenders, builders, and sellers to pay some some of the borrower’s closing costs.  These closing cost could include an appraisal, credit report, underwriting fee, survey fee, etc.  If the lender is paying the closing costs this will come in the form of a higher interest rate. When they interest rate is higher, the lender offers the borrower a credit that can cover some or all of their closing costs.

If you need some extra cash to make repairs to the home you are buying, the FHA also has a special loan for this. This loan is called a 203K and and the advantage of this loan type is that the loan amount is based on the projected value of the house after repairs and not on the current appraisal of the property. This type of loan allows the borrower to finance up to $35,000 that could go toward painting, replacing cabinets and or fixtures.

What is a Fixed Rate Loan?

A fixed rate mortgage is simply what is sounds like.  It’s a mortgage where the duration of the loan has a fixed interest rate.  The length of the mortgage might be available in a various amount of time.  A measurement of time is considered a term.  For a fixed-rate mortgage the loan is paid-in-full when the term is complete.  The monthly payment for a fixed-rate loan is inversely proportional to the term allotted.  For example the more years in the term, the lower the monthly payments will be.  The reason for this is: with a smaller loan term the borrower repays the lender over a smaller period of time. 30 years and 15 years are the most common loan types .  A 20 year and 10 year loan are available as well.

The good news about a shorter-term loan are lower mortgage rates in comparison with longer-term loans then means less interest paid to the lender over time.

The benefits of a shorter-term loan are lower mortgage rates as compared to longer-term loans; and less mortgage interest paid to the lender over time. What many people enjoy about a fixed rate mortgage is the consistency and stability that comes along with it.  From day 1 your home loan is finalized, the principal and interest portion of your payment won’t change. For many people this certainty brings a peace of mind.

Finding the Loan that is Right For You

For many people a fixed rate term loan would be an ideal option.  Finding the right loan for your specific situation will depend on many different variables. What are your long-term financial goals, how about your short term goals? Can you predict foreseeable changes in your job, family, etc. Check today’s rates and compare loan pricing and get started on owning your home today.

 

 

 

 

 

 

 

 

 

 




How To Avoid Common Mortgage Approval Mistakes

The mortgage process can be an in depth process as well as time consuming. Ask your mortgage lender to help you during this season of your life.  Below are a few common mistake to avoid that will simply obtaining a mortgage approval. Stay clear of the following:

1. Avoiding or Leaving Out Information on Your Financial Profile

Colorado Mortgage Group will begin by reviewing your personal information.  This information will include employment, income, residence history, debts, and assets. The important take away is to answer every question and be truthful.  If every question about your financial profile isn’t answered, it has the potential to derail the loan process. It is better to know everything up-front so we can handle it before it becomes an issue.

2. Documentation, make sure you have everything

Your lender will next ask you for detailed documentation which may include:documentation photo

  • 30 days of pay stubs
  • Two years of tax returns and W-2s
  • Year-to-date business financial statements if you’re self-employed
  • Two months of statements for all asset accounts
  • Explanations and paper trails of all deposits (and often withdrawals)
  • A home insurance quote with adequate coverage
  • Full financials on any other homes or businesses you own

If any document is missing, providing it will be necessary to move forward. Colorado mortgage group will also run your credit, which can reveal employers, addresses, debts and other credit inquire. If new information comes to light, you’ll be required to explain and document all of it.

3. Pre-approval is not loan approval

You should consider your loan approved by an underwriter before you write any offer to buy a home. Lets talk about the difference between being “pre-approved” and obtaining loan approval.  Getting a mortgage “pre-approved” means you’ve talked to a lender, and provided the necessary documents listed above, and your personal profile looks good. This does not however mean you have loan approval.  The next step would be to get “underwriting approved”. This would mean obtaining a formal loan commitment in writing.  When this step has been accomplished your loan approval is official. Your Colorado Mortgage Loan officer will be the one to submit your file to an underwriter.

4. Not knowing what is realistic or being uninformed about rates

Avoid surprises when is comes to rates and get your lender to quote a rate based on your closing timeline.  Remember rates change daily.  Rates are based on how long they’re locked, for example a shorter lock at 15 or 30 days will have a lower rate that a longer lock such as 60 days.  As the borrower you are under rate market movement until you’ve entered into contract.  You are in contract when a seller accepts your offer.  It is key to know that before entering a contract you cannot lock a rate, this is because a rate is linked with the borrower and the property. Colorado Mortgage Group Publishes our rates online. These are the same rates you will receive when you call us for a quote.

 




FHA Secure Refinancing

On August 31st, 2007 the U.S. Department of Housing and Urban Development started to offer the new “FHASecure”.  This program helps homeowners refinance subprime loans and other adjustable-rate mortgages that are due to reset.

This FHA program has stepped in and helped people with adjustable rate mortgages and find themselves in financial trouble for one reason or another.  FHASecure refinancing plans allows for people who have previously purchased a home and have missed up to three mortgage payments in the last twelve months under specific circumstances to avoid foreclosure.  It is important to know that you don’t need an existing FHA home loan to qualify for an FHASecure refinance loan, rather the program is designed to target people without FHA loans to get lower payments, prevent default and foreclosure, and protect their investment.colorado photo

  • Homeowners with current or delinquent non-FHA adjustable rate mortgages are eligible.
  • You are not automatically disqualified based on delinquency on your current loan.
  • You must have a dependable income and be able to make your mortgage payment.
  • If you are in default, you must show delinquency or default is the result of increased interest rates and the resulting higher mortgage payments.
  • If you are current on your mortgage payments, any type of conventional loan is eligible for FHASecure refinancing.

For single-family homes, multi-family, and manufactured home can all qualify for FHASecure refinancing.  Something that a borrower should know would be that refinancing does not indicate flexible requirements for credit.  Borrowers should, have a stable income from a dependable source, show a trustworthy payment history on other debts, have a debt-to-income ratio below 41%, and have an acceptable credit score.

 




What Is a FHA Adjustable Rate Mortgage?

Features of How it Works

The Key to this program is that the lender is able to assist low to moderate-income families get into a home by keeping costs such as a down payment lower.  Under an FHA loan individuals who have previously been denied or did not meet conventional loan requirements may be able to qualify. Adjustable Rate Mortgages help when interest rates are high by keeping the initial interest rate on a mortgage low this in turn allows borrowers to qualify for the financing they may need. With an adjustable rate mortgage your interest rate and monthly principal and interest payments will remain the same for an initial period of 5, 7, or 10 years, after that is will adjust annually.

Most of the ARM loans issued today are “hybrid” loans that start off with a fixed interest rate for an allotted amount of time. An example of this would be a FHA 5-year adjustable mortgage.  In this loan the mortgage would be fixed or stable for the first five years, then after that it will start to be adjusted each year. The Section 251 Adjustable Rate Mortgage program states the maximum fluctuation of your interest rate in any year cannot exceed 1 percentage point. The most common types of loans are 3-year, 5-year, and 7-year. The number of years corresponds with the length of the fixed-rate term.  A few things to know is that loans are available in a variety of longer terms and an interest rate cap is set that will limit how high your interest rate can go.

 

The table below describes the annual interest rate adjustment and interest rate cap over the life of the five types of Adjustable Rate Mortgage (ARM) loans.

When the ARM is initially at a fixed interest rate for… Then the annual interest rate adjustment, after the initial fixed interest rate period, is… And the interest rate cap over the life of the loan is …
· 1 year

· 3 years, or

· 5 years

one percentage point Five percentage points.
· 5 years

· 7 years, or

· 10 years

two percentage points Six percentage points.

Benefits

An FHA ARM is at its simplistic definition an adjustable home loan that has been insured by the federal government and there are several benefits to consider with shopping for loans.  The number one benefit of using an FHA adjustable-rate mortgage is that most likely you can get a lower interest rate and lower payment, when compared to a fixed-rate loan.  While the following is true it is important to consider that the lower rate is only during the initial stage. This is the primary reason people choose an adjustable mortgage, to save money by locking in a lower interest rate. The interest rate cap limits the maximum amount your P&I payment may increase at each interest rate adjustment and over the life of the loan.  Also they may provide flexibility if you expect future income and growth or it you plan to move or refinance within a few years.

Considerations

Monthly principal and interest payments may increase when the interest rate adjusts. Your monthly principal and interest payments may change every year after the initial fixed period it over. The adjustable loan option is only beneficial if you are able to secure a lower rate during the first term of the loan.  What is also worth noting is you choose not to refinance or sell the property of interest before the fixed-rate term expires, you may also step into the uncertainty of acquiring an adjustable interest rate.  Monthly payments could possibly start to grow yearly until the loan is payed off.  An adjustable-fixed rate could be a great opportunity for certain situations, FHA mortgages are also available in fixed terms that could benefit the borrower.

 

 

 

 




FHA Reverse Mortgage (HECM)

What Is A Reverse Mortgage?

A reverse mortgage is a special type of home loan that lets you convert a portion of the equity or wealth in your home into cash. The wealth that you acquired over the years of making mortgage payments can be paid to you.  However, unlike a traditional home equity loan or second mortgage, Home Equity Conversion Mortgage (HECM) borrowers do not have to repay the HECM loan until the borrowers no longer use the home as a primary residence or are unable to meet the responsibilities of the mortgage. How a reverse mortgage works is, the borrower receives money from the lender. The money you receive, and the interest charged on the loan, increases the balance of your loan each month. Over time the loan amount will grow. Equity is defined as the value of your house minus the amount of loan, therefore as time goes on you will have less and less equity in your house as your loan balance increases.  Reverse mortgage loans are often used to pay for home renovations, medical and daily living expenses. Homeowners who have an existing mortgage often use the reverse mortgage loan to pay off their existing mortgage and eliminate monthly mortgage payments.

Qualifying For a Reverse Mortgage:

  • You must be at least 62 years old.
  • The home must be your primary residence.
  • You must have significant equity remaining in your home after paying off any existing mortgages with the new Reverse Mortgage.

Distribution of Funds:

There are a combination of ways in which a reverse mortgage could be received:

  • Term: a monthly payment for a specific length of time.
  • Tenure: monthly payments for the life of the loan
  • Lump sum: a sum of cash at the time of closing
  • Line of Credit: just as with a credit card you can draw money as needed up to set eligible amount

Is A Reverse Mortgage For Me?

Still have questions, discuss your desired future financial plans with family, friends, or trustworthy people in your life. A reverse mortgage may be a sound financial decision, however there may also be a better option out there for you. If you have more questions please feel free to contact us.




FHA Loans For Condominiums

There is a specific FHA Loan Program that is geared toward those who are wanting to buy in a unit in a condominium building.  Condominium ownership involves that separate owners of each unit together share stewardship over the development of the common areas and facilities.  Under FHA Section 234(c) insurance for this type of housing is laid out.

FHA Condominium Loans are created to provide incentive for lenders to lend out affordable mortgage credit.  The Section 234(c) program insures a loan for 30 years to purchase a unit in a condominium building.  There are requirements that the FHA takes into consideration, the building must contain at least four dwelling units and can be comprised of detached and semi-detached units, row houses, walk-ups, or an elevator structure.  By serving as an umbrella under which lenders have the confidence to extend loans to those who may not meet conventional loan requirements, FHA loan insurance allows individuals to qualify who may have been previously denied for a home loan by conventional underwriting guidelines.condo photo

 

 

Although there are many FHA Condo Approval Guidelines, these are the basics that will determine eligibility.  These requirements are taken directly from the FHA guidelines.

THE BASIC ELIGIBILITY REQUIREMENTS for 2015

  • Right of First Refusal in Declarations can not violate Discriminatory Conduct under the Fair Housing Act Regulation 24 CFR part 100
  • Commercial Space – No more than 50% of property can be used as commercial space.
  • All units and facilities & phases inside the project must be 100% complete
  • Delinquent Dues:  No more than 15% of units can be in arrears more than 60 days.
  • At least 50% of total units must be sold prior to endorsement
  • Any investor/entity (single or multiple owner entities) may own up to 50 percent of the total units IF at least 50 percent of the total units in the complex are owner occupied as principal residences.  (The previous limit was 10%)
  • No more than 50% of the units can be Rentals / Investor owned.
  • No more than 50% concentration of FHA Loans
  • Sufficient Budget required – at least 10% of budgeted income must go toward a reserve account.
  • Insurance Coverage:
    • Master or Blanket – Must be 100% of replacement cost of condominium, not including foundation or land.
    • General Liability – insuring all common elements,  and public ways
    • Fidelity Bond (aka Employee Dishonesty or Crime Insurance) – for communities with 20+ units.  Covers the Board of Directors and Employees that handle association funds.  Must be 3 months aggregate assessments on all units + Reserves.  Note: This type of insurance is different than D&O insurance.
    • Flood insurance – Only Required if located within 100 year flood plane.

Advantages of the FHA Condo Approval Process

There are some advantages of getting a FHA-backed loan.  One of those advantages is that the government does a lot of work on your behalf.  All prospective homeowners have a legal duty to  preform an inspection of the house and an evaluation of any paperwork linked to the home before going through the purchase.  There is a lot of paper work involved in the condo purchase process, such as HOA documents.  It is important to understand that FHA scrutinizes some of the heavier reading, such as the budget.   FHA won’t approve a complex if some of the shadier or more distasteful condominium practices are occurring.  Another advantage to purchasing an FHA-approved condo is that the hoops the association must jump through aren’t a one-shot deal. They must be re-certified every two years to remain FHA-approved.  Lastly, An FHA-approved condo is easier to sell. If your complex if approved, your prospective buyers increases.