Donna Geihe - KELLER WILLIAMS REALTY | 617-549-2670 |

Posted by Donna Geihe on 3/6/2018

Buying a home is one of the biggest financial milestones you’ll reach in your life. If you’re a first-time homebuyer, it can be scary to take the plunge and make a down payment on your first home.

Down payments are one element that makes up the factors which determine your monthly mortgage payments, and in turn, how much you’ll be paying toward your home in total. So, it’s important to understand just how much to save for a down payment.

In this article, we’ll talk about down payments, why they matter, and your options for saving up for a down payment.

Why down payments matter

A down payment is simply the amount of money a buyer pays at the time of closing on the house. Down payments help assure lenders that you will make your monthly mortgage payments because you have invested a substantial amount of money into the house and therefore risk losing your down payment if you fail to pay the mortgage and your house is foreclosed on.

If you’re eager to buy your first home, you may want to make the smallest down payment possible so you can move in sooner. However, a smaller down payment typically means a larger monthly mortgage payment. That’s because your mortgage payment depends on several factors.

When a lender determines how much they will lend you towards your home and how much your monthly mortgage payments will be, their formula takes into account your down payment, your credit score, and the value of the property. The higher your credit score and the higher your down payment is, the less your monthly payments will be.

Mortgage types and down payments

Many first time home buyers cannot afford large down payments on their first home (20% or more). As a result, there are loan types insured by the Federal Housing Administration that are offered for as low as 3.5% of the mortgage amount.

If you aren’t approved for an FHA loan but plan on making a down payment of less than 20%, you can still buy a home with private mortgage insurance (PMI). With PMI you pay a monthly premium for your insurance in addition to your monthly mortgage payments.

How long and how much to save

So, how much should you save? The short answer is as much as possible. However, if you need to move soon because of life circumstances, it isn’t always an option to hold off on moving for long periods of time.

If you’re currently renting each month at high prices, it might make more sense to put that money towards your first home, an asset which will likely increase in value, rather than spend it on rent which you get no return on.  

One of the best ways to save for a down payment is to set up a new cash savings account that will automatically deposit a portion of your paycheck each week. Having an off-limits account is a great way to save without the temptation of spending it on luxuries if the money would normally be sitting in your checking account.

Another option is to start investing. If you’re in no rush to buy a home and have the financial resources, investing pays off much more than a savings account does when it comes to increasing assets.

Regardless of how you choose to save, the most important takeaway is that you take action now to start saving and you don’t deviate from your savings plan for any reason.

Categories: Uncategorized  

Posted by Donna Geihe on 8/8/2017

Mortgage blind spots could be dangerous, especially if you are living on a tight budget. Blind spots are generally tied to unexpected fees and emotions that cause you to overlook what would otherwise be obvious. A common mortgage blind spot has to do with the loan origination process.

Loan processing fees are just the start

Included in loan origination costs are underwriting and processing fees. These fees pay for work that lenders perform to evaluate the financial help of loan requesters. During the evaluation, lenders might also evaluate the condition and financial value of a house.

Loan origination costs aren't the only hidden mortgage fees that could increase the amount of money that you pay to own your home. Total costs of loan origination fees could top one percent of the total price on a house. That's more than $1,500 on a house priced at $150,000.

Then, there is mortgage insurance, homeowners insurance and homeowner's association fees. Other than mortgage insurance costs, these expenses may be more commonly known about. What you may not expect to pay when applying for a mortgage are:

  • Mortgage application fees (Depending on the lender, you might be able to negotiate your way out of paying mortgage application fees. This is a time when it might be worth it to let your real estate agent lobby for you, working to gain you a win.)
  • Title fees (Similar to how you receive a title on a car, truck, motorcycle or boat that you purchase, you should receive a title to your house after you pay the mortgage off. Title fees are not free. But, this doesn't mean that you have to pay high title fees. You or your real estate agent can shop around for good title fee prices.)
  • Courier fees (These fees are associated with closing costs. Although relatively small, courier fees could be easily overlooked when buying a house.)
  • Mortgage prepayment fees (To protect their financial investment, some lenders ask homeowners to pay several months of their mortgage in advance. Sign a mortgage that has mortgage prepayment fees stipulated in the writing and you could be hit with late prepayment penalties.)
  • Discount points (These fees can be negotiated. Handle these negotiations the right way and you could end up paying lower closing costs.)
  • Late fees (As they do with bank account fees, mortgage late fees can add up, reaching into thousands of dollars.)
  • Unexpected home inspections (Depending on the lender, you could be hit with fees associated with unexpected home inspections that your mortgage lender makes.)

Financial institutions are in business to earn money, to turn a profit. Unscrupulous financial institutions aren't the only organizations that charge homeowners hidden mortgage fees. Well known and highly respected lenders also tack hidden mortgage fees onto loans.

The only time when you might become aware of hidden mortgage fees is when you are late making a payment. You also might become aware of hidden mortgage fees if you fall behind in your mortgage payments and your loan goes into default.

Categories: Uncategorized  

Posted by Donna Geihe on 12/8/2015

Getting a mortgage these days can be tough and it is even tougher for small-business owners. Potential self-employed borrowers usually have variability in their income streams. Today, banks are requiring more financial documentation from all buyers, and self-employed borrowers tend to face more scrutiny. Small-business owners may have a smaller income because they are typically knowledgeable about tax deductions and credits. This often reduces the amount of taxable income they have. Reducing the amount of taxable income on your tax returns means to the lender there is less income to qualify for a loan. There are ways self-employed borrowers can increase their chances of getting a home loan, however. Here are a few tips: What is the lenders history? Find out if the lender has a history of working with self-employed borrowers. Self-employed borrowers should focus more on finding a lender that will understand their situation rather than shop the loan rate. There are individual loan officers who will be able to think out of the box or come up with solutions. The lender you choose is key. Consider portfolio lenders. Portfolio lenders have more flexibility in originating loans because they don't have to sell the loan to Freddie Mac or Fannie Mae. Portfolio lenders hold their own loans. That makes a big difference in their ability to loan. Another option may to consider credit unions. Many credit unions also keep a good portion of loans on their books. Boost your income. Show you make as much money as possible on your tax return. You might need to amend your tax returns. Some lenders will look at a loan application again if they have sent in amended returns to the government. Sometimes by rethinking deductions and credits on income taxes, a borrower can increase his qualifying income. Of course, with this strategy, the borrower would also face a new tax bill.

Posted by Donna Geihe on 7/7/2015

When it comes to mortgages there is a lot to know and a lot of choices. One loan that was popular before the housing crisis was the interest-only loan. An interest-only loan is an adjustable-rate loan with an initial fixed period when only interest is due. They are typically available in 5-, 7- or 10-year terms. Economists blame interest-only loans for the foreclosure crisis citing they were issued too freely. Today, interest-only loans are more difficult to obtain. Borrowers were using interest-only loans to qualify for a more expensive home and when the interest-only term ended the payment went up leaving many homeowners unable to afford the mortgage payment. Interest-only loans are now being used by wealthy borrowers as a financial tool to help them manage irregular cash flow, reap a tax benefit, or free up cash for investment elsewhere. Lenders that offer interest-only loans have strict qualifying standards. They generally require 30 percent equity in a property, and a minimum FICO score of 720. Lenders also look at the ability to pay back the loan is based on the fully amortized payment, not the interest-only payment.    

Posted by Donna Geihe on 1/13/2015

The first step in home buying is getting a mortgage. Many home owners also find themselves in a maze when they start the refinance process. Navigating the mortgage process can be confusing. There is so much to know between rates, types of mortgages and payment schedules. Avoiding making a mistake in the mortgage process can save you a lot of money and headaches. Here is a list of the biggest mortgage mistakes that potential borrowers make. 1. No or Low Down Payment Buying a home with no or a low down payment is not a good idea. A large down payment increases the amount of equity the borrower has in the home. It also reduces the bank’s liability on the home. Research has shown that borrowers that place down a large down payment are much more likely to make their mortgage payments. If they do not they will also lose money. Borrowers who put little to nothing down on their homes find themselves upside down on their mortgage and end up just walking away. They owe more money than the home is worth. The more a borrower owes, the more likely they are to walk away and be subject to credit damaging foreclosure. 2. Adjustable Rate Mortgages or ARMs Adjustable rate mortgages or ARMs sound too good to be true and they can be. The loan starts off with a low interest rate for the first two to five years. This allows the borrower to buy a larger house than they can normally qualify for. After two to five years the low adjustable rate expires and the interest rate resets to a higher market rate. Now the borrowers can no longer make the higher payment not can they refinance to a lower rate because they often do not have the equity in the home to qualify for a refinance. Many borrowers end up with high mortgage payments that are two to three times their original payments. 3. No Documentation Loans No documentation loans or sometimes called “liar loans” were very popular prior to the subprime meltdown. These loans requires little to no documentation. They do not require verification of the borrower's income, assets and/or expenses. Unfortunately borrowers have a tendency to inflate their income so that they can buy a larger house. The problems start once the mortgage payment is due. Because the borrower does not have the income they are unable to make mortgage payments and often end up face bankruptcy and foreclosure. 4. Reverse Mortgages You have seen the commercials and even infomercials devoted to advocating reverse mortgages. A reverse mortgage is a loan available to borrowers age 62 and up. It uses the equity from the borrower’s home. The available equity is paid out in a steady stream of payments or in a lump sum like an annuity. Reverse mortgage have can be dangerous and have many drawbacks. There are many fees associated with reverse mortgages. These includes origination fees, mortgage insurance, title insurance, appraisal fees, attorney fees and many other miscellaneous fees that can quickly eat at the home’s equity. Another drawback; the borrower loses full ownership of their home and the bank now owns the home Avoiding the pitfalls of the mortgage maze will hopefully help you keep in good financial health as a home can be your best investment. .