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If you are looking to buy a home or refinance in Phoenix, or throughout the state of Arizona, give us a call at (623) 432-1309 to schedule your consultation.

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The First Things You Should Know About Reverse Mortgages

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Reverse Mortgages In Phoenix Arizona

Retirement is a new phase in a person’s life and one that many look forward to. While it means a lot of free time to pursue passions that may have been put on the backburner, it also brings different sorts of expenses. Seniors who have to pay off debt, make major home repairs, or take a vacation can use a reverse mortgage to help them reach their financial goals. This kind of mortgage allows a debtor to convert home equity to cash.

A loan like this is an excellent choice for some, but not for everyone. Before signing on the dotted line, you should consider a few things. Here are some things you should note.

Costs Can Add Up

This type of mortgage, like any loan, grows when you add interest and charges to the principal. The longer it takes for you to pay the loan back, the heftier the total becomes. The principal can increase by tens of thousands of dollars, and without a basic understanding of how reverse mortgaging works, it has the potential to backfire.

Furthermore, you have to clear additional fees like insurance premiums and loan origination fees upon the loan closing. Other expenses include interest and servicing fees throughout the life of the loan. You can choose to add these to your loan, but that increases the principal, making it more difficult for you to keep up with the payments.

You Have to Pass a Screening

Individuals with considerable equity are the ones who get approved for this loan. The bank looks at your financials to ensure that you can pay property taxes, homeowner association dues, insurance, and upkeep. It is not to own the house on paper.

Furthermore, creditors also check reports on payment history and household debt. Once you do get approved, note that banks do not put taxes and insurance on escrow.

In the U.S., borrowers may only avail of reverse mortgages called HECM or Home Equity Conversion Mortgages. These are available only through FHA-approved lenders and have several requirements.

For one, the debtor must be at least 62 years old. They must also use their primary residence for the loan, which has to be a single-family home. Alternatively, it can be a property with two to four units, provided that the borrower occupies at least one.

Furthermore, it should meet FHA property standards and flood requirements. In case the property is a condominium, it should be in a building approved by the Department of Housing and Urban Development.

Are Reverse Mortgages Risky?

A fixed interest rate gives you a lump sum payment. Adjustable rates deliver money in several ways. You can choose to have tenure payments, which are monthly installments delivered for as long as you live on the property. You can also receive your payments over a term or a specific period. Finally, you can request for a line of credit, and take money out at your discretion.

According to the National Council on Aging or NCOA, it is best to have HUD-approved counselors inform you of your choices and their advantages and disadvantages. Not weighing your options can lead to serious financial repercussions such as foreclosure, interest rates stacking, or your home running out of equity.

Desert Springs Mortgage and Reverse Mortgages

Reverse mortgages are an excellent option for some seniors looking for an infusion of cash for their budget. The NCOA says that many people use this to pay off living expenses or debts, or as a second income. However, it is not a surefire way of eliminating financial troubles. For that, you need expert advice from people who understand your needs.

Desert Springs is a Phoenix mortgage company that can walk you through the entire application process and connect you with your ideal lender. We are a locally owned and family-operated business, and we assist our clients through the duration of their loan. Schedule a free consultation with us today by calling (623) 432-1309 for more details.

Mortgage Advantage for Veterans: 3 Benefits of VA Loans

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Mortgage Advantage for Veterans: 3 Benefits of VA Loans

In securing a mortgage, you can use several loan standards in finding the perfect payment platform. Among the different loans available, VA loans are one of the most cost-friendly loans in the market. They involve lenient underwriting, impressive secondary benefits, and, above all, low payment rates.

Securing a Mortgage with VA Loans

VA loans were an initiative of the US Department of Veterans Affairs to help active-duty personnel, veterans, and other related groups secure housing at affordable costs. VA loan’s impressive zero-down mortgage option is just one of the many outstanding benefits that it offers.

In this article, we share three benefits of VA loans.

  1. No down payment and mortgage insurance. Although most home loan programs require a down payment to buy a home, VA loans are an exception to this rule. Instead of paying a portion of the amount from 5% to 20% of the property’s total value, a VA loan can finance you up to 100% of the real estate’s price. It allows you to purchase a home without having to put any down payment at all. Lenders usually offer mortgage insurance to home buyers who cannot give more than 20% of a property’s total value. It is known as private mortgage insurance (PMI) for conventional loans and mortgage insurance premium (MIP) for FHA loans. These insurance policies protect the lender if a buyer defaults on the loan payments. VA loans, on the other hand, don’t require this bond, which makes it an affordable loan both upfront and over time.
  2. Versatile options with different lenders. Although the Department of Veterans Affairs backs it, it’s not funded by the VA. What this means is that the department doesn’t set mortgage loans’ restrictions.  Instead, VA loans are provided as an option by different lenders from banks, savings and loan institutions, credit unions, and mortgage lenders, each with their loan rates and fees. It allows you to have a wide selection of options in comparing loan offers from different lenders to find a VA loan that works best within your budget. Some VA loans offer fixed or adjustable rates, which can be used for different properties, ranging from condos, duplexes, and other kinds of real estate. Besides buying new real estate, you can also use a VA loan to refinance your existing mortgage for different purposes, such as home improvement projects.
  3. Easier process for application and transfer. Like all mortgage applications, VA loans require specific documents together with a viable credit history to ensure credibility in paying monthly payments. However, unlike other programs, VA loan guidelines can be more flexible due to the Department of Veterans Affair’s accommodation for its applicants. Its primary function is to allow eligible candidates to buy or refinance their properties effortlessly. You can also transfer your VA loan to a home buyer who is VA-eligible. The transfer-ability of assumable loans is beneficial when you’re ready to reap your investments’ fruits. If your home loan at today’s rate is expected to rise in the future, this assumption value of your VA further increases your property’s costs.

VA Loans with Desert Springs Mortgage

When it comes to buying real estate, you should always be informed of the different available loan plans. If you’re qualified for a VA loan, you should invest in securing the best payment plan possible that works with your current financial situation. The best way to get great mortgage deals is by making informed decisions backed by research on the various mortgage application processes and versatile loan plan options.

Before you commit to a mortgage deal, you should ensure that you’ve gone through all the possible options that are available to you. If you need a mortgage broker in Phoenix to help you in securing the best VA loans, get in touch with us today at (623) 432-1309, and we’ll make sure to guide you through managing your real estate’s financing!

Why You Should Think Twice About Forbearance for Your Home

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The mortgage market is aware of how much the coronavirus pandemic has affected households all over the country. Families have experienced drastic changes in their lifestyle, living situation, and even economic status, so it is easy to see how homeowners might view mortgage refinance or even forbearance as a viable option when managing their resources.

Skipping your mortgage payment for 180 to 360 days is understandable, and even necessary if your financial needs are especially urgent. Forbearance, though, makes less sense if you are not in that situation. Here are some things to consider if you are thinking about skipping your payments.

Phoenix Mortgage Broker

Forbearances Mean Uncertainty For Companies

According to the CARES Act, there is no need to verify whether applicants for forbearance of FHA or VA loans truly require the extension that they are requesting. If you claim to have a financial need, your provider cannot ask you to submit documents to prove it.

As a result, more people are claiming forbearance, which leads to higher non-payment in the industry. The risk to this is that the coronavirus pandemic is here to stay indefinitely. Uncertainty is costly, and financial institutions would rather cover those costs proactively.

For example, it is costlier to enter forbearance prematurely—housing agencies are now charging seven percent of the loan balance to lenders if debtors apply for forbearance soon after closing. These penalties add up rapidly and can cause a lender to go under.

To remedy this, some investors who purchase mortgages charge it on the consumer. They offer higher rates, more fees, or refuse to offer loan programs that they deem overly risky. The higher the number of risk factors, the higher the payments.

They Also Have More of An Impact Than The Law Implies

In addition, the industry defines ‘risk factor’ conservatively. For example, agencies do not guarantee loans if they see early forbearance, even if the lenders handling these pay the seven percent penalty. Moreover, you might not be able to get a refinance or apply for a new mortgage if your credit report has an instance of forbearance.

Mitch Stam, President of Desert Springs Mortgage shared, “This is inconsistent with the law—it states that there should be no adverse effect on a person’s credit report due to a forbearance. Though companies would not count payments after forbearance as late, the application itself is still a red flag for the agencies especially as the CARES Act is still active.”

While it is true that forbearance does not impact a person’s FICO, you can experience other financial constraints because of it. For example, some creditors lower their revolving credit limits for people whose credit reports indicate that they have a forbearance. Lower available credit limits increase the debt-to-credit ratio, which then affects the FICO score.

Desert Springs Mortgage Company in Phoenix

Although the forbearance itself will not pull down your FICO score, it has other adverse effects. Lenders who see your application on your report might cause changes in your mortgage situation that would lower your score, hurting your chances of getting a mortgage refinance or a new loan. To be sure, you should consult with an expert who can lay down all your realistic options clearly.

Desert Springs Mortgage is a full-service mortgage company in Phoenix. Keeping your home or refinancing it is easier when you know your options, and Desert Springs Mortgage team of expert brokers will help you find the best ones for your family. Call them today at (623) 432-1309 for more information!