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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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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!

What to Know About Buying Non-Warrantable Condos

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Buying Non Warrantable Condos In Phoenix

There are many things you have to know before purchasing any piece of real estate. You must see if it is in good physical condition, if there are any liens on the title, and if the building is professionally managed, among other things. You will also need to know if your financing options qualify you for the purchase price.

If you are applying for federal home loans backed by Fannie Mae or Freddie Mac, some condo options may not be available to you, as they fall in the category of non-warrantable condos. Non-warrantable condos are units that do not meet the criteria to be eligible to be insured by government-sponsored entities. A property is considered non-warrantable if:

  • The condominium development is incomplete
  • Renters occupy more than 50% of the units
  • The building has more than 35% of commercial space
  • A corporation or individual owns more than 10% of the building
  • Issues are affecting the homeowner’s association (HOA) of the condominium, such as:
    • More than 25% are delinquent on association dues
    • There are pending legal issues against the HOA
    • Non-residents are in control of the HOA

If a property turns out to be non-warrantable, you can still find financing for it, although it will be much more challenging. Government-sponsored entities shy away from these types of loans because they are perceived to be higher risk. Likewise, major banks and large lenders will prefer to focus on other, less risky mortgages.

If you have your eyes set on a property, you might be surprised to find out that it does not qualify for federal housing loans.  When you apply for a mortgage, the lending institution will also conduct an assessment to determine the property’s eligibility. You can check online and see for yourself if a condo is warrantable through the Federal Housing Administration’s website. If they don’t appear on their list, then there is a big chance that they fall into the non-warrantable category.

Nevertheless, if you decide to press on, there are still financial institutions that will offer to finance. Yet, you will have to put up more equity–usually, at least 20%–and interest rates will be less favorable. You can also work with a local mortgage broker who can help you find special financing arrangements.

When Warranty Status Changes

A non-warrantable condo’s status can change if, after some time, its circumstances change, and the new state meets certain conditions. If the development reaches completion, it can become warrantable, provided it meets all other requirements. If the ownership and occupancy levels of the building shift with the guidance of the homeowner’s association, then warranty status can improve as well. Additionally, if the HOA can resolve outstanding issues like delinquent members and legal cases, then the condos in the building can become eligible for conventional loans.

Some condos are permanently non-warrantable by their nature, such as developments that have significant areas dedicated to commercial use.

Should you decide to pursue a mortgage for a non-warrantable condominium, you must know that you are immediately at a position of disadvantage with higher-than-average mortgage rates, bigger equity requirements, and a smaller pool of lender options. You may also encounter major challenges finding refinancing options down the line if you need it.

Non-Warrantable Condos with Desert Springs Mortgage

While some non-warrantable properties seem attractive by their design and location, if you are not adept at investing in real estate and have little experience in mortgage borrowing, you will be better off with home loans with warrantable condos. Some people take a gamble with properties in development because pre-selling prices are much lower, or buildings that will undergo a significant renovation work which drastically increases the property value. Still, you should consider your options carefully and consult your mortgage broker if the loan terms are reasonable enough for the risk involved.

Do you need a mortgage broker in Phoenix? We are a full-service brokerage firm that can help you get the specialized financing you need. Call us today at (623) 432-1309 and get a free mortgage rate quote to get you started!