Mortgage Options with Low Down Payments, Part 2

mortgage low down payments

In part one of this two-part blog series, we went over some of the basics on low down payment options for those on the mortgage market. There are several specific programs designed to help buyers obtain mortgages without gutting their savings for a large down payment, including several that are easy to qualify for even with imperfect credit.

At Altius Mortgage and our partners at Mortgage Ogden, we’re happy to offer numerous home loan options, from mortgages for first-time homebuyers to mortgage refinances, reverse mortgages and more. Today’s part two of our series will go over a few additional mortgage programs available for those looking for a low down payment, including a couple you may not have heard of.

USDA Loans

Backed by the US Department of Agriculture, the USDA loan is another example of a loan program that often allows buyers to achieve no down payment in many cases. The credit requirements are a bit stricter than something like an FHA loan: You must have a score of at least 640 in most cases for automatic approval.

Generally, USDA loans are meant for those in rural areas. In other cases, they’ll be given to those who will be helping settle or develop such areas anew. They come with 30-year terms in most cases.

Conventional 97 Loans

As we noted in part one, the conventional loan is the one type where 20% down is generally preferred – and where you’ll likely have to pay private mortgage insurance if you aren’t able to obtain this number. As we discussed as well, paying PMI isn’t necessarily a bad option.

However, there is another program known as the Conventional 97 Loan Program. The “97” in the title refers to 97% of the down payment being covered, requiring only 3% down from the buyer. In addition, the entire down payment in a Conventional 97 loan can come from gifted funds in many cases.

HomeReady Mortgage

Provided by Fannie Mae, the HomeReady mortgage is an option that actually allows buyers to get in the market for rates below the current average. It also assists with mortgage insurance and underwriting areas, and even allows for multiple people living in the same home to become qualified and approved simultaneously. There are several additional benefits of this program if you qualify, which our loan officers will help you determine.

Piggyback Loan

Finally, for buyers with higher credit scores, the piggyback loan program is also offered. This is technically two loans in one, and they are offered with a unique 80/10/10 structure.

What does that mean? At closing, the buyer brings a down payment of 10% of the purchase price. The remaining loan is split into two parts – the larger chunk of 80% is a conventional loan, usually via Fannie Mae or Freddie Mac and at current rates. The other 10%, then, is a second mortgage, usually a home equity loan or home equity line of credit. Essentially, this second mortgage “piggybacks” on the first and helps buyers obtain excellent pricing and a limited down payment.

For more on options for a low mortgage down payment, or to learn about any of our mortgage loan programs or services, speak to the staff at Altius Mortgage today.

Mortgage Options with Low Down Payments, Part 1

mortgage options low down payments

When navigating the mortgage process, one of the most important areas for many homebuyers will be achieving a low down payment. While interest rates and other mortgage factors are generally good for many buyers currently, fewer have large chunks of saving built up, and will be looking for mortgage options that allow for lower down payments as a result.

At Altius Mortgage and our partners at Mortgage Ogden, we’re here to help with a variety of potential home loan programs, including several meant in some part to help buyers obtain mortgages without putting a burdensome amount of money down up front. This two-part blog series will go over some important areas to consider when it comes to low or even no down payment on your mortgage, plus some of the top loan options available for those with this goal in mind.

Don’t Fixate on 20%

Within many circles, there’s a myth that all homebuyers, no matter the mortgage type, must be putting 20% of the home’s total purchase price up as a down payment. This simply isn’t the case.

Rather, that 20% figure is only a benchmark for conventional loans – and even then, it’s not actually a hard requirement. Conventional applicants who do not have 20% of the purchase price to put down will have to take out private mortgage insurance to cover the lender’s risk, but that doesn’t mean they can’t take out a loan. Meanwhile, there are several other special loan programs meant to lower down payments, or even eliminate them altogether (more on these below).

Private Mortgage Insurance Basics

We noted private mortgage insurance, or PMI, as something you’ll have to pay if you’re a conventional mortgage borrower putting up under 20% on your down payment. Some view PMI as a negative to be avoided at all costs, but this really isn’t the case.

In reality, PMI allows you to obtain a lower down payment without ruining your finances. In addition, PMI is not permanent – once you reach about 20% equity owned in the home (or sometimes even less), PMI will be cancelled and you’ll simply be paying your monthly mortgage amount from that point forward. This allows you to proceed without depleting your full savings for a down payment while still obtaining the home of your dreams.

Our next several sections will go over some of the top mortgage programs that may help you lower your down payment significantly.

FHA Loans

FHA loans, so-named because they’re backed by the Federal Housing Administration, allow for down payments as low as 3.5% with credit scores of at least 580. For those below this number but above 500, the same loan is available for 10% down.

VA Loans

VA loans refer to those supplied by the US Department of Veteran’s Affairs, and are offered to military members, veterans and surviving spouses. VA loans often allow borrowers to pay no down payment whatsoever, plus typically don’t require any mortgage insurance either.

For more on the kinds of loans to consider if you want a lower down payment, or to learn about any of our mortgage programs, speak to the staff at Altius Mortgage today.

Preparing for Mortgage and Home Closing Day, Part 2

mortgage home closing day

In part one of this two-part blog series, we went over some of the basics on mortgage closing day for those who have reached this important threshold. The culmination of the closing process, closing day involves the actual transfer of property ownership from one party to the other, plus several other important details.

At Altius Mortgage and our partners at Mortgage Ogden, we’re here to help with closing and a variety of other variables for any of our home loan clients, for whom we provide a wide selection of mortgage programs and the best mortgage rates around. We’ll be happy to assist you with every part of closing, from several areas of the weeks-long process to actual closing day itself. Today’s part two of our series will dig into a few additional factors for preparing for closing day.

What to Bring

There will be a few important documents and items you’ll need to ensure you have on-hand for closing day when you meet with the other primaries in the sale. You should be sure to check with your closing agent and loan officer on the specifics here, but some of the typical items that are required here include:

  • Driver’s license or other proof of ID – in some cases, lenders will require two forms of ID and you will also need to bring a passport or some other alternative.
  • Closing Disclosure: Usually three days before closing day, the buyer’s mortgage lender will provide you with a Closing Disclosure. This contains several valuable pieces of information, including final loan terms and costs, and it should be compared to previous loan estimates to ensure there aren’t major differences.
  • Cashier’s check or wire transfer receipt of the required closing funds.
  • Proof of purchase of homeowners’ insurance, which is often a lender requirement before the home can change possession.

Closing Costs to Remember

Closing costs will vary for each sale, but you can get a strong idea of what yours will be like ahead of time. In many cases, some or all of your closing costs will be built into your future mortgage payments – but this won’t always be the case, and there may be certain costs that cannot be folded into mortgage payments in this way.

Closing costs will generally include things like title fees, homeowners’ insurance, appraisals, property taxes and escrow, title or attorney fees. There may be others here, so be sure to consult with your loan officer in advance and ensure you’re prepared.

What Will Happen At Closing Day

The primary purpose of closing day is to sign several documents, including the Closing Disclosure we already mentioned plus the deed of trust (or mortgage) and a promissory note, which serves as a guarantee that you’ll make your mortgage payments moving forward. Be sure to read all these documents and any others involved carefully before signing them, and feel free to ask questions or have your attorney make clarifications.

For more on the closing process and closing day during a mortgage and homebuying process, or to learn about any of our mortgage services, speak to the staff at Altius Mortgage and our partners at Mortgage Ogden today.

Preparing for Mortgage and Home Closing Day, Part 1

mortgage home closing day

There are several major thresholds you’ll cross during the mortgage and homebuying process, and one of the most anticipated by many buyers is closing day. Referring to the day where the closing process is completed and documents are signed to transfer legal ownership of the property, closing day will also include several other important areas to be aware of.

At Altius Mortgage and our partners at Mortgage Ogden, we’re here to help any of our clients with the mortgage process, including first-time homebuyers entering the market for the first time. We’ve assisted numerous buyers with not only closing day, but the entire closing process and its connection to your overall mortgage application and approval. This two-part blog will go over everything you need to know about closing day, from typical timing and attendance basics to some of the primary areas to prepare for.

General Closing Timing

Generally speaking, the closing process itself will take between four and six weeks in its entirety. And in nearly all cases, closing day will represent the final day of this process, the one where final documents are signed and ownership changes hands.

The closing period will usually be kicked off by you signing a purchase and sale agreement with the seller of the home. Over the next several weeks, a number of other tasks will be completed, from mortgage underwriting and approval to home inspection and appraisal contingencies. The precise timing here will depend on several factors, which your loan officer will inform you of closer to the closing itself.

In-Person or Virtual?

In normal times, most closing days will be carried out in person, with the buyer, seller, closing agent, attorneys and perhaps title company or real estate representatives on-hand. This will almost always be done at the home being sold.

Recently, however, the spread of COVID-19 has made such in-person gatherings tougher in many situations. As such, some are choosing virtual closing, which can be easily done using modern technology and allows for simple, secure signing and returning of documents.

Final Walk-Through

Whether on closing day or done in the 24 hours prior (such as if you’re doing a virtual closing), a vital piece of this process to remember is the final walk-through the buyer will generally be allowed. You’re looking for a number of things during this walk-through, from basic cleanliness and fixtures in working order to manuals and warranties, information on basic maintenance, location of shut-off valves and numerous other areas. This is your final chance to ensure everything is the way you expect it to be in the property you’re purchasing, so don’t let it go to waste.

For more on preparing for and properly executing closing day, or to learn about any of our mortgage loan services or rates, speak to the staff at Altius Mortgage today.

Avoiding First-Time Homebuyer Mortgage Pitfalls, Part 2

first-time homebuyer mortgage pitfalls

In part one of this two-part blog series, we went over some of the common mistakes some first-time homebuyers make and how you can avoid these. There are several important parts to the mortgage application and homebuying process, and a trusted loan officer will go a long way toward assisting you with elements you aren’t familiar with.

At Altius Mortgage and our partners with Mortgage Ogden, we’re proud to offer a wide variety of home loan options for first-time homebuyers, whether you’re an individual, couple or family looking to purchase their initial home. In today’s part two of our series, we’ll go over a few other pitfalls to steer clear of during this process, including several our loan officers will assist you with and answer any questions on.

Escrow Misunderstandings

During many mortgages and home sale situations, escrow will be used – and may be very new to first-time buyers. Escrow refers to earnest or “good faith” money that the buyer puts down to the seller in exchange for the seller taking the property off the market for negotiation purposes. This money is held by a third party. If the sale goes through, these funds will be used for property taxes moving forward.

It’s important to know why escrow is being used and who is holding the money. If you’re unsure of any of the details here, speak to your loan officer before consenting or sending any money into escrow.

Closing Errors

There are a few errors to avoid when it comes to closing your home purchase and beginning your monthly mortgage payments:

  • Underestimating closing costs: Closing costs feature areas like lawyer fees, title changes and related costs that are often paid during or directly after the home purchase. You will need to have funds remaining to pay for these costs, so don’t exhaust your savings.
  • Not using discount points: You can gain savings on your interest rate by using mortgage discount points, or optional fees you pay ahead of time.
  • Monthly expense miscalculation: It’s also vital to know what your monthly housing payment will be moving forward – including not only the mortgage itself, but also areas like property taxes, utilities and HOA fees (if applicable).

No Home Inspection

Finally, no buyer should ever complete a home purchase without a third-party inspection from a professional home inspector. This individual will inspect both the interior and exterior, helping locate any hidden issues or concerns that should be remedied by the seller in advance of the sale. Many inspections save buyers thousands of dollars, and they’re relatively affordable, so they should never be skipped.

For more on avoiding first-time homebuyer mistakes, or to learn about any of our mortgage services, speak to the staff at Altius Mortgage today.

Avoiding First-Time Homebuyer Mortgage Pitfalls, Part 1

avoiding first-time homebuyer pitfalls

As a first-time homebuyer, there will be several elements of the mortgage and home search process that may be unfamiliar to you. It pays to have an ideal loan officer on your side who has experience with the process and can guide you through it, helping you check the right boxes while avoiding pitfalls.

At Altius Mortgage and our partners at Mortgage Ogden, we’re proud to offer a wide range of home loan options to first-time homebuyers, plus numerous areas of expertise to assist you with parts of the process you’re unsure of – including avoiding some of the common mistakes sometimes made by first-timers on the market. This two-part blog will go over some of the most frequent such errors we’ve seen throughout the years, plus advise you on the proper approach in several of these important areas.

Home Before Mortgage

While we know it’s tempting to be scouring the market for homes in your area the moment you decide it’s time to buy, you must resist this urge until you’ve begun the mortgage pre-approval or pre-qualification process, at the very minimum. This is because the home market is constantly changing and evolving – homes might fly off the market before you’ve completed your mortgage in many cases, or could change in price.

More importantly, starting the mortgage process allows you to understand your own purchasing power through the kinds of home loan programs and rates you qualify for. Without this knowledge, you might be spending significant time investigating homes that will be outside your budgetary range, which is simply a waste of your time.

Credit Score and Other Prep Issues

A mortgage application is an area that often requires some advanced prep in terms of your finances, and one key area here is your credit score. You should be checking your score well in advance, plus auditing it for any possible mistakes if you think they might be present and artificially lowering your score.

In addition, be sure you have other financial documents like tax returns, pay stubs or other account statements available and up to speed.

Lacking Down Payment

Another vital prep element is saving up funds for a down payment, which will vary depending on the program you qualify for. Standard down payments are 20% of the purchase price, but there are many first-timer programs, such as FHA loans, that allow for lower amounts – but may also come with mortgage insurance requirements. Wherever possible, try to build up as much money as you can for a down payment to avoid larger interest and insurance payments through the life of your loan.

Missing Incentives

There are several incentives possibly available that you should not miss out on:

  • First-home incentives: Various organizations, government entities and even regions offer programs to incentivize first-time buyers, from discount housing to ideal loan terms or improved financial services.
  • FHA loans: Backed by the Federal Housing Administration and complete with much lower rates and down payments.
  • VA loans: For veterans, spouses and active military members.
  • USDA incentives: For rural buyers, farmers and similar individuals.

For more on avoiding mistakes as a first-time homebuyer, or to learn about any of our mortgage loan services, speak to the staff at Altius Mortgage today.

Avoiding VA Loan Application Denial Causes, Part 2

VA loan application denial

In part one of this two-part blog series, we went over some basics on behaviors or application errors that might lead to a higher chance of denial for a VA loan. Backed by the Department of Veteran’s Affairs, VA loans offer no down payment and several other benefits, but do require meeting some basic thresholds and avoiding various issues to qualify.

At Altius Mortgage and our partners with Mortgage Ogden, we’re happy to offer a wide range of loans to first-time homebuyers and many others, including VA loans to qualified service members, veterans and spouses. In today’s part two of our series, we’ll go over a specific set of circumstances to be aware of here: The possibility for a denial based on automated underwriting, plus what you can to do get around this issue if it shows up for your application.

Underwriting Formats

In today’s modern age, there are many mortgage lenders who utilize automated underwriting as part of their loan application and approval processes. Automated underwriting refers to an online portal lenders use to upload loan applications and all their relevant information, with algorithms meant to evaluate the application data and come up with an approval or denial based on it.

Manual underwriting, on the other hand, is the traditional method of underwriting. An actual underwriter reviews the documents and application, then determine eligibility. For many VA loans, FHA loans and other programs, the preference among many lenders is automated underwriting, with manual underwriting serving as a secondary method.

Automated Underwriting Denials

In some cases, however, the automated underwriting system may deny a VA loan application for reasons that aren’t fully correct. Maybe there was an incorrect input from the lender into the portal, for instance, or perhaps there’s an error on your credit report that the automated system is viewing as correct.

If you are denied by an automated underwriting system for a VA loan and you believe one of these issues was at hand, do not give up.

Request Manual Underwriting

Rather, request manual underwriting done by an actual home loan underwriter. There are many cases where such an individual will approve a given application once they’ve been informed of an issue like an input error or a credit report inaccuracy – but automated underwriters are incapable of this due to their computerized nature. There are ways you can supply additional documentation that allows the underwriter to grasp a larger picture of your finances, understanding why an issue that appeared like a blocker to approval initially might not actually be as large a concern.

For more on underwriting formats and VA loan approval, or to learn about any of our mortgage loan  services, speak to the staff at Altius Mortgage today.

Avoiding VA Loan Application Denial Causes, Part 1

avoiding VA loan denial

For many military service members, veterans and certain military spouses, the US Department of Veterans Affairs guarantees mortgages under the VA loan program. This program, which involves zero down payment and several other benefits, is enormously helpful to many of those who have served our country – but it does come with qualification thresholds and the need for an application, and there are some cases where applications may be denied.

At Altius Mortgage and our partners at Mortgage Ogden, we’re proud to provide VA loans and excellent VA loan rates to a variety of clients, including first-time homebuyers this program is often ideal for. We’ll walk you through the basic requirements for qualifying for VA loan, plus areas that might prevent you from qualifying. While some of these are based around credit score and other firm requirements, there may be certain errors or other controllable variables that also play a role here. This two-part blog will begin by looking at certain errors you may have some control over, while part two will dig into issues with automated underwriting and how this area may impact your application.

Application Errors

The single leading cause of VA loan application rejection, and also the area you have most control over, is errors on the application itself. VA loan applications are just like any other mortgage application: They require precision and exact details in every area, and even minor mistakes can cause issues.

Underwriters who view these applications, whether manual or automated, are perfectionists. You must be clear about things like sources of income and family size, plus be detailed in all debt disclosure and related areas that will impact how a lender views your financial situation. Be sure you’re clear and precise on every single area of the application.

Employment Changes

Once you’ve begun the loan application and approval process, you should do your best to avoid major employment changes if possible. Underwriters may view this suspiciously or be concerned about the reliability of your new income.

If such a change is unavoidable, speak to your loan officer in advance. There may be new documentation to verify or other steps you can take to make this a more presentable situation to the underwriter that does not ruin your chances at approval.

Credit Changes

Another big area to try and keep consistent in the lead-up to a VA loan application is your credit. Avoid taking out new debt or undergoing major credit checks during the application process, as these may alter your credit and raise suspicion from underwriters. Keep your debt-to-income ratio good as well, avoiding major credit purchases during the application process.

For more on avoiding risks of a VA loan application being denied, or to learn about any of our mortgage loan services, speak to the staff at Altius Mortgage today.

Meaning and Uses of Escrow in Homebuying Situations, Part 2

meaning uses escrow homebuying

In part one of this two-part blog series, we went over some basic details on escrow, or good-faith deposits made during many homebuying situations. Used to protect both the buyer and the seller from scams and other monetary risks as negotiations heat up, escrow also has purposes within mortgage and various home fee payments once a home has already been purchased.

At Altius Mortgage and our partners with Mortgage Ogden, we’re happy to spend time explaining various terms or factors of any of our mortgages or homebuying programs, whether you’re a first-time homebuyer or an experienced real estate flipper. In today’s part two, we’ll go over how escrow is managed and some factors to consider when determining whether you actually need to go with an escrow account during your home purchase.

How Escrow is Managed

As we noted in part one, escrow accounts are managed by a third party independent of both the buyer and seller. As we also went over, however, there are multiple types or uses of escrow accounts, and which you’re using may dictate who is managing the account. A couple possible management sources include:

  • Escrow agents or companies: During primary escrow usage, when a buyer places funds in the escrow account as an earnest money deposit to the seller, the account will usually be managed by an escrow company or agent. This company may be the same as the title company in some cases, or may be different. In most such cases, this company is also responsible for the deed and other sale documents. Generally, the fee for this company or agent will be split 50-50 by the buyer and seller.
  • Mortgage company: When you’ve purchased the home in question and have begun making mortgage payments, plus various insurance and tax payments, an escrow account will sometimes be used for these payments and managed by your mortgage company. This will usually be your lender, though not always. The company in question makes such payments directly from your escrow account.

Escrow Doesn’t Cover Everything

Now, it should be noted that escrow accounts don’t necessarily cover all fees or homeownership expenses. Utility bills, for example, are not included in escrow account contributions, and neither are homeowners’ association fees if applicable. Supplemental taxes will also not involve escrow.

Do You Need Escrow?

It’s important to note that escrow is not a firm requirement for a home purchase, in either form it’s used for. There are certain cases where escrow is required, or where you’ll need certain qualifications to opt out of one. There also may be situations where you can use an escrow account for certain expenses, then pay others on your own to save money. Your lender and loan officer will be happy to explain the important factors and whether you might benefit from an escrow account.

For more on escrow and good-faith deposits in a mortgage or homebuying situation, or to learn about any of our mortgage loans or services, speak to the staff at Altius Mortgage today.

Meaning and Uses of Escrow in Homebuying Situations, Part 1

uses escrow homebuying situations

There are several terms that may be new to you if you’re purchasing your first home, and a great example here is escrow. Used for a couple different reasons within a mortgage and homebuying situation, escrow is in place to protect multiple parties – buyers, sellers and even lenders – during such processes.

At Altius Mortgage and our partners with Mortgage Ogden, we’re happy to explain escrow and any other important terminology for any of our mortgage loan options, from ideal first-time homebuyer programs to mortgage refinancing and numerous other areas. In this two-part blog series, we’ll go over everything you need to know about escrow within a homebuying situation, including how it protects both parties and how it’s used.

Understanding Escrow

Simply, escrow refers to any situation within a transaction where a third party holds funds, valuables or other items of value as part of the transaction. Escrow may be used for several different high-value transaction types, but perhaps the most common is within a home purchase.

During escrow in a homebuying situation, money or property will be held by a neutral third party to protect it from potential scammers. The money in question can only be accessed for pre-arranged purposes agreed upon by both the buyer and seller of the home.

Escrow and “Earnest Money”

Escrow use within a homebuying situation ties in directly with a theme known as “earnest money.” Also called a good-faith deposit, earnest money refers to a buyer’s investment in the purchase in question, which should match the seller’s – but they come in different forms.

When a buyer and seller reach a certain point in their negotiations, you see, the seller will generally make their own good-faith move by pulling the house off the public market to negotiate solely with this buyer. This is an investment – putting the house back on the market costs money. In return, the buyer will put down between 1% and 3% of the home’s listed price in escrow. If and when the sale goes through, this money is simply applied to the purchase amount. If the deal falls through, the seller retains the earnest money to cover the cost of re-listing the home.

Types of Escrow

There are actually two types of escrow used during home purchases:

  • To protect the buyer’s good-faith deposit and bring the money to the right party based on sale conditions, as detailed above.
  • To hold a homeowner’s funds in a separate account for taxes and insurance payments, which will be handled by your lender in most cases.

For more on escrow and good-faith deposits during a home purchase, or to learn about any of our mortgage loans or services, speak to the staff at Altius Mortgage today.