It’s the No. 1 reason that mortgage applicants nationwide get rejected: They’re carrying too much debt relative to their monthly incomes. It’s especially a deal-killer for millennials early in their careers who have to stretch every month to pay the rent and other bills.

But here’s some good news: The country’s largest source of mortgage money, Fannie Mae, soon plans to ease its debt-to-income (DTI) requirements, potentially opening the door to home-purchase mortgages for large numbers of new buyers. Fannie will be raising its DTI ceiling from the current 45 percent to 50 percent as of July 29.

DTI is essentially a ratio that compares your gross monthly income with your monthly payment on all debt accounts — credit cards, auto loans, student loans, etc., plus the projected payments on the new mortgage you are seeking. If you’ve got $7,000 in household monthly income and $3,000 in monthly debt payments, your DTI is 43 percent. If you’ve got the same income but $4,000 in debt payments, your DTI is 57 percent.

[For every eight applicants who seek a mortgage, one is rejected]

In the mortgage arena, the lower your DTI ratio, the better. The federal “qualified mortgage” rule sets the safe maximum at 43 percent, though Fannie Mae, Freddie Mac and the Federal Housing Administration all have exemptions allowing them to buy or insure loans with higher ratios.

Studies by the Federal Reserve and FICO, the credit-scoring company, have documented that high DTIs doom more mortgage applications — and are viewed more critically by lenders — than any other factor. And for good reason: If you are loaded down with monthly debts, you’re at a higher statistical risk of falling behind on your mortgage payments.

Using data spanning nearly a decade and a half, Fannie’s researchers analyzed borrowers with DTIs in the 45 percent to 50 percent range and found that a significant number of them actually have good credit and are not prone to default.

[First-time home buyers already burdened by debt often need help to qualify for mortgages]

“We feel very comfortable” with the increased DTI ceiling, Steve Holden, Fannie’s vice president of single family analytics, told me in an interview. “What we’re seeing is that a lot of borrowers have other factors” in their credit profiles that reduce the risks associated with slightly higher DTIs. They make significant down payments, for example, or they’ve got reserves of 12 months or more set aside to handle a financial emergency without missing a mortgage payment. As a result, analysts concluded that there’s some room to treat these applicants differently than before.

Lenders are welcoming the change. “It’s a big deal,” says Joe Petrowsky, owner of Right Trac Financial Group in the Hartford, Conn., area. “There are so many clients that end up above the 45 percent debt ratio threshold” who get rejected, he said. Now they’ve got a shot.

That doesn’t mean everybody with a DTI higher than 45 percent is going to get approved under the new policy. As an applicant, you’ll still need to be vetted by Fannie’s automated underwriting system, which examines the totality of your application, including the down payment, your income, credit scores, loan-to-value ratio and a slew of other indexes. The system weighs the good and the not-so-good in your application, and then decides whether you meet the company’s standards.

Fannie’s change may be most important to home buyers whose DTIs now limit them to just one option in the marketplace: an FHA loan. FHA traditionally has been generous when it comes to debt burdens: It allows DTIs well in excess of 50 percent for some borrowers.But FHA has a major drawback, in Petrowsky’s view. It requires most borrowers to keep paying mortgage insurance premiums for the life of the loan — long after any real risk of financial loss to FHA has disappeared. Fannie Mae, on the other hand, uses private mortgage insurance on its low-down-payment loans, the premiums on which are canceled automatically when the principal balance drops to 78 percent of the original property value. Freddie Mac, another major player in the market, also uses private mortgage insurance and sometimes will accept loan applications with DTIs above 45 percent.

The big downside with both Fannie and Freddie: Their credit-score requirements tend to be more restrictive than FHA’s. So if you have a FICO score in the mid-600s and high debt burdens, FHA may still be your main mortgage option, even with Fannie’s new, friendlier approach on DTI.

For a free prequalification quote: https://netequityloanscomu.clixonme.com/

By Kenneth R. Harney, The Washington Post

Despite rising home prices, it’s still cheaper to own a home than to rent, reports CNBC. But the toughest part for those who want to buy is actually finding a home.

“One thing we added this month to our REALTORS® Confidence Index is analyzing data on REALTORS®’ comments,” said Danielle Hale, managing director of housing research at NAR. “The two biggest phrases in the comments this month were ‘low inventory’ and ‘multiple offers.’”Inventory levels in April dropped 9 percent compared to a year ago, and listings spent an average of 29 days on the market before selling—the shortest timeframe since the National Association of REALTORS® began tracking such data in 2011.

The least expensive homes are the toughest to find. Sales of homes below $100,000 dropped 17 percent in April year-over-year. Also, sales of homes under $250,000 dropped more than 6 percent. Yet a new Trulia report shows it’s cheaper to buy than rent in all of the nation’s 100 largest metro markets. So while consumers may have more financial incentive to buy now, they are hard-pressed to find an actual home to buy.

The report shows that buying a home is 33.1 percent cheaper than renting, but there are big differences across metros. For example, it’s more than 50 percent cheaper to buy than rent in Baton Rouge, La., if a consumer is purchasing with a 20 percent down payment and 30-year fixed-rate mortgage. On the other hand, in San Jose, Calif., buying is only 3.5 percent cheaper than renting.

Source: “It’s Cheaper to Buy a Home Than Rent, But Only If You Can Find One,” CNBC (May 24, 2017)

4 Things first-time homebuyers need to know!

Buying a home is likely the biggest purchase you'll ever make, and it's not always an easy one.

Low inventory has pushed home prices up in cities throughout the country, giving sellers an advantage. Homes sell fast, bidding wars break out and offers above the asking price are common.

All of this means that buyers need to be on their game and have their finances in order before entering the market.

Here's what experts said first-time buyers need to know:

1. What you can actually afford
Before buyers start their house hunt, it's important they know how much they can afford to spend.
"Start with a plan," said Chantel Bonneau, a financial adviser at Northwestern Mutual. "Don't let your imagination take over and don't let what you see from friends' houses drive your budget."
Buyers should list out all of their monthly expenses. Don't forget to include items like groceries, transportation, and discretionary spending, like gym memberships and nights out.
Related: Should real estate be part of my retirement plan?

A general rule of thumb is that housing costs shouldn't take up more than 30% of your before-tax income.

But experts said that the percentage can vary, especially if you have other debts, like student loans or car payments.

Spending too much on monthly housing payments can leave homeowners house poor, and unable to afford other expenses -- like saving for retirement.
"A home is not a good excuse to be reckless with the rest of your financial situation," said Bonneau.

In competitive markets, it's common for buyers to get pre-approved for financing to get a leg up. But experts said that just because a bank approves you for a certain amount, it doesn't mean that's what you should spend. Stick to a price limit you're comfortable with.

2. You need a buffer
While it may be tempting to throw everything you've got at your offer to stay competitive, experts recommended having at least some money left over after you close on a home.

"If buying a house takes your checking account down to $1,000, it's probably too expensive," said Bonneau.
Experts advised having at least three to six months in savings the day you become homeowners. One reason is that you'll need emergency savings now more than ever.

"You don't want a flat tire or a deductible on a medical plan to throw you into financial turmoil," said Bonneau. "When you are a homeowner, you have a lot more things that can go wrong."

If a home purchase leaves you with no liquidity, it might be worth considering waiting to increase your savings or lowering your price point, advised Neil Krishnaswamy, a certified financial planner with Exencial Wealth Advisors.

3. The true cost of owning a home
The down payment tends to be the biggest financial hurdle to owning a home, but there are many other costs that pop up along the way: appraisal, origination, credit report and notary fees can all add up.

And the costs don't stop just when the keys are handed over. There's the move, new furniture and costs like lawn care and utility payments that former renters might not be used to paying.

"I don't know if anyone truly understands the total cost of owning a home," said Krishnaswamy. "Things just continually come up that you want to do, either buy something to fill a room or fix or improve something. Most people underestimate the cost."

4. Renovations are not as seen on TV
Buying a fixer-up might allow you to snag a bigger home or afford one in a more desirable area, but experts warned there are huge risks.
"Know that it is always more expensive than what you are imagining ... or what you see on TV," said Bonneau.
If a home needs renovations, factor that into the total cost of buying, recommended Krishnaswamy.
A private loan is an option to finance the project, but can be difficult to secure, especially after just taking out a mortgage.

If your home appraises for more than you purchased it for, you could have the option of tapping your equity to help pay for renovations.

There are some mortgage options that include renovation expenses. For instance, 203k FHA loan allows homebuyers to finance the sale and rehabilitation on a single mortgage.
Another option is asking a friend or family member for a loan.

"If you are trying to secure the best low-rate loan, look at those closest to you, but be mindful of your relationship status if you can't pay back the loan," said Krishnaswamy.
Send us your money questions for a chance to be featured in Broke no more! Ask us here.

CNNMoney (New York)First published May 11, 2017: 10:38 AM ET

Top 10 Millennial Mortgage Mistakes

In this day and age of technology, where everything seems simply a click away, one thing remains true, getting a mortgage is far from a simple process. In some ways, it’s easier due to advances in technology, but much holds true about the role of a mortgage in modern life. It’s complicated. For one, it’s the largest debt most people ever take on and most often is done without thorough research. The following list condenses down some of the top mistakes and missteps our younger generation tends to make when buying their first home and getting a mortgage.

1. Not understanding the home buying process and approaching it unrealistically.

2. Having false expectations of affordability and the true cost of homeownership.

3. Not understanding the use of credit, debt and leverage.

4. Not seeing mortgage planning as building a nest egg of long term equity.

5. Underestimating future living expenses after the home purchase.

6. Thinking that buying foreclosed property is the ticket to riches.

7. Failing to explore the many options available before making a decision.

8. Over-focusing on buying a house rather than how this asset fits into a goal plan.

9. Not using the services of trusted advisors such as attorneys and accountants.

10. Not planning the journey far enough in advance to do the proper research required.

There is much information available online today on all these topics but today’s home buyers more than ever need education, guidance, experience, and expertise to go along with all the technology. We find that our smarter buyers tend to take the time in advance to educate themselves on the process, their expectations, the marketplace and the players in it.

For more information on these topics, please visit our blog at http://www.netequityloans.com/MyBlog

College Grads Could Get Home Buying Help

Several states are offering homeownership assistance programs to recent college grads that may help them receive thousands of dollars toward the purchase of a home. In New York, Gov. Andrew Cuomo recently announced the "Graduate to Homeownership" program, which provides assistance to first-time buyers who have graduated in the past two years from an accredited college or university with an associate's, bachelor's, master's, or doctorate degree. Program participants may be eligible for up to $15,000 in down-payment assistance or a reduced-rate mortgage—but they have to agree to live in one of eight upstate New York communities in order to be eligible.

"Upstate colleges and universities have world-class programs that produce highly skilled graduates, who then leave for opportunities elsewhere," Cuomo said in a statement. "This program will incentivize recent graduates to put down roots."

Nearly half of states offer some form of housing assistance to student-loan borrowers, according to an analysis by Credible.com. Ohio offers Grants for Grads, which, like the New York program, offers down-payment assistance or lower-rate mortgages to people who have graduated from college in the past four years. Rhode Island's Ocean State Grad Grant program offers up to $7,000 in down-payment assistance to college graduates who earned a degree in the past three years.

Many of these state programs, however, require college grads to live in certain cities within the state, similar to New York's program. "It can certainly help people who are dealing with high student debt burdens," says David Reiss, research director for the Center for Urban Business Entrepreneurship at Brooklyn Law School. "But programs like this have to deal with a fundamental issue: Do these communities have enough jobs for recent college graduates? Time will tell."

Source: “College Grads Can Get Home Grants – But There’s a Catch,” realtor.com® (May 5, 2017)

Programs expand mortgage eligibility for those burdened by student debt

Last week, Fannie Mae unveiled three new programs to help aid current homeowners and future homebuyers who are blocked from eligibility and financing by the burden of student debt.

Fannie Mae first announced an expansion of its cash-out refinance program with SoFi. The GSE also announced the implementation of two other programs to help widen eligibility for borrowers. One helps potential borrowers whose debt is paid by others. The third solution allows lenders to accept student loan payment information on credit reports, making it easier for student debt holders to qualify for a loan.
So, how do these new programs help current homeowners and future homebuyers who are bogged down by student debt when financing a home? Here’s an outline of what each new solution does and how it can help.

Student loan cash-out refinance

This option offers homeowners the flexibility to pay off high interest rate student debt while potentially refinancing to a lower mortgage interest rate.

Johnathan Lawless, Fannie Mae’s director of consumer outreach, said this option is ideal for parents who may have home equity to cash in on because it could be used to pay for their child’s education debt. But Lawless did warn that refinancing may negate any benefits the borrower receives in the original loan contract, such as the ability to enter into forbearance or an income-based repayment plan.
Debt paid by others
Fannie Mae has widened borrower eligibility by excluding from the borrower’s debt-to-income ratio any non-mortgage debt, such as credit cards, auto loans, and student loans, that are paid by someone else.
Student debt payment calculation
Fannie Mae has changed how student debt is calculated when applying for a mortgage, making it more likely for borrowers with student debt to qualify for a loan by enabling lenders to accept student loan payment information on credit reports.
Lawless explained that if you’re on an income-based repayment plan, the lower payments will now count toward your debt-to-income ratio to help determine mortgage eligibility.
“The day we announced this, I received a call from a lender who had a borrower on one of these plans and their monthly payment was $100, but because of the policy on how to put the debt into the ratio, they were actually using $600,” Lawless said. “We announced the change and they went back into the application and updated it to $100 and it went from not being approved to being approved.”

Betsy Mayotte, director of consumer outreach and compliance for American Student Assistance, an organization aimed at helping students and universities overcome student debt, said the changes are exciting and reasonable.
“This could be a great option for Parent PLUS and Grad PLUS loans,” she said.
Mayotte stressed that borrowers should become more educated about their options when exploring how to pay for student debt.
“People get so caught up in interest rates,” Mayotte explained. “They get tunnel vision and may not see what they’re giving up. Federal loans have discharge options if something terrible happens, such as disability and death.”
Mayotte encouraged borrowers to look into any program with their eyes wide open and to think about the long-term implications, cautioning that “if you used home equity to pay off $60,000 in student loans, that could be a $600 payment a month and if you can’t afford that, you could lose your house.”

Source: housingwire.com

Know before you owe- Pa Mortgages

The CFPB’s mortgage initiative is designed to help consumers understand their loan options, shop for the mortgage that’s best for them, and avoid costly surprises at the closing table. Get Free information from the Consumer Financial Protection Bureau.

Learn more

4 Tips on Building a Solid Credit History to qualify for a Pa Mortgage

Establishing a good credit history has never been as important as it is today.It’s not just that you’ll need good credit to get decent rates when you’re ready to buy a home or a car. Your credit history can also determine whether you get a good job, a decent apartment, reasonable rates on insurance or how you qualify for a Pa mortgage. See how you stack up.

Building your credit

If you’re just starting out, you have a once-in-a-lifetime opportunity to build a credit history the right way. It’s a classic Catch-22: You’ve got to have credit to get credit. So where do you start? If you are rebuilding your credit, all of the same issues apply.

1) Piggyback on someone else’s good credit.
2) Apply for a secured credit card.
3) Get an installment loan using a co-signer.
4) Use revolving accounts lightly but regularly.
5) Pay your bills on time EVERY month.

Learn more great credit building tips

https://www.thebalance.com/ways-to-build-good-credit-960109

For other credit and mortgage topics, visit http://www.netequityloans.com/MyBlog

Should we wait and save 20% Down to Buy a Home in Pa

Down payments are commonly cited as one of the most misunderstood parts of the home-buying process, as potential homebuyers hold off shopping until they can put 20% down on a home.

HousingWire has covered the misconceptions in-depth, such as this article on 5 common down payment misconceptions.

But if reading about down payment myths isn’t enough, mortgage insurer MGIC created a calculator for home shoppers to see if they should buy now or wait.

MGIC designed the calculator to help mathematically show that waiting to save for a 20% down payment will likely cost prospective homebuyers.

“As mortgage professionals, we must help counter this misinformed idea. Let consumers know – especially those looking to buy their first home – that waiting to save up 20% is not the only option, and they may be better off buying a home today with a smaller down payment rather than waiting,” MGIC stated in a blog on the new calculator.

This example from MGIC helps break down the math:

Let’s assume someone is saving for a 20% down payment on a $200,000 home. She has saved $10,000 of the $40,000 she needs for a 20% down payment and can add $500 to savings each month – $6,000 a year.
Our calculator will help her see she could buy a home with as little as 3% down, and the cost if she were to purchase today with 5% down (the amount she has available today).
It also shows that if home prices appreciate at 3% annually (the user can adjust that value), her future 20% down payment will need to be $48,552 and take her more than 6 years to save.
During that time, she will have paid more than $80,000 in rent while her home equity position would be more than $72,000 had she bought 6 years ago.

The blog did caution that it is not trying to encourage prospective borrowers to buy homes before they are ready.

However, even these low down payment mortgages have misconceptions around them. For added research, check out these 6 myths about Freddie Mac's 3% down mortgage.

Source: MGIC

Want to learn how to buy a home with 1% downpayment?

Click here

Fed Hikes Mortgage Interest Rates 3/15/2017

The Fed voted to raise its benchmark short-term interest rate by a quarter percentage point. This move will most likely push up rates on mortgages, credit card rates and other types of consumer loans in the short term.

Consumers with credit card debt, adjustable-rate mortgages and home equity lines of credit are the most likely to be affected by a rate hike, says Greg McBride, chief analyst at Bankrate.com. He says it’s the cumulative effect that’s important, especially since the Fed already raised rates in December 2015 and December 2016.

“These interest rate hikes could add up to hundreds of dollars per month in extra fees for credit card, adjustable-rate mortgage and HELOC borrowers,” McBride says.

The Fed’s likely decision to lift the federal funds rate, which is what banks charge each other for overnight loans, will have several effects on consumers. Here's how it may impact mortgage rates, auto loans, credit cards and bank savings rates:

Mortgages

The Fed’s key short-term rate affects mortgages and other long-term rates only indirectly.

Thirty-year fixed mortgage rates hit a 2017 high last week as the average jumped to 4.21% in anticipation of the Fed’s move Wednesday and another similar hike. That is up from a year ago when the average 30-year mortgage rate was 3.68%, according to Freddie Mac.

“For consumers currently shopping for a mortgage to purchase a property or refinance an existing loan,” says NerdWallet mortgage analyst Tim Manni, a Fed rate hike "shouldn’t feel like a real shock to the system since the rate move has already been 'baked' into the market.”

A third hike later this year could boost the rate by as much as another quarter-point or so, increasing the monthly mortgage payment on a $200,000 home by up to $30

Check Today's Rates Now!

2016 Bucks County Single Family Housing Report

Middletown residents Mike and Jill Kohler, owners of Net Equity Financial Mortgage of Langhorne, recently were recognized as the top real estate sales producers in 2016 for The Chapman Agency.

http://www.buckscountycouriertimes.com/business/people-in-the-news/bucks-and-montgomery-county-business-achievers-jan/article_f079773c-d9ed-11e6-b1ef-9fa5694246b1.html

Trump Inauguration Day 2017

Forbes says Fed unlikely to carry through
on raising interest rates in 2017

The overall consensus of the upcoming 2017 Federal Reserve Board meetings is that interest rates will be rising in the near future. It's not all that surprising as interest rates have been at record lows for the last 6 to 7 years. What remains to be seen is what affect the Trump presidency will have on raising interest rates in the next couple of years. The largest market in the homebuying sector is Millenials and rising interest rates certainly don't help the cause, however perhaps a bigger challenge for this extremely large market of potential First Time Home Buyers is the downpayments required to get a mortgage.

Some Factors in 2017 affected by rising interest rates

The Fed's 3 projected quarter point increases in 2017 will likely stall home values since higher interest rates will most certainly affect borrowing power, and limit affordability for potential home buyers. On the flip side, the new adminstration seems to be all for lowering PMI mortgage insurance premiums on low down payment FHA Loans, which have risen dramatically in the last several years, which should definitely help things. Another factor that comes into play is that more banks and lenders are accepting gifts as downpayments which is a bit of a newer concept. Also the ability for buyers to structure a purchase using sellers assist which essentially lets the buyer finance their closing costs

In the last couple of years, banks and lenders have gotten a bit less restrictive in their policies and underwritings procedures. After all, they do need to make loans to consumers to make money. We are not predicting a repeat of the mid 2000's when anyone could get a loan. But this responsible loosening should help borrowers in the big picture, even if interest rates do rise, which eventually they will. Our goal moving forward is to educate consumers so they completely understand the process. All in all, with a new presidency comes changes in monetary policy and only time will tell how it will all shake out for the economy, housing, jobs, borrowers, and mortgages.

Here is a link to the article from Forbes.

What will December's rate hike mean for First Time Home Buyers?

For the first time this year, and only the second time in the last 10 years, the Federal Reserve raised interest rates on Wednesday, a widely expected move following strengthening economic reports and signals from Fed officials.After its two-day policy meeting, the Federal Open Market Committee unanimously voted to raise the range of the federal funds rate to 0.50% and 0.75%, citing progress in economic activity and labor market growth.

What will this rate hike mean for First Time Home Buyers?

Our take on this is that it probably won't mean a whole lot in the short term. Sure, higher rates don't help more people qualify for mortgages, but they do tend to stall inflation including housing prices which have taken a significant turn upward in the last few years. Also many likely First Time Home Buyers don't qualify far more often due to the required downpayment than income issues. Borrowers insured through FHA loan programs are still faced with coming up with a 3.5% downpayment. (That's $7000 on a $200,000 house purchase) plus the required closing costs which can range from $6000 and up for title insurance, home inspections, transfer tax, etc.
More than likely it will have a "shake the trees" effect and bring buyers into the market. Consumers are so conditioned to interest rates being at low levels (since they've been there since 2009) that it's not been much of a concern. With a new presidency and monetary policy coming in 2017, plus a strengthing economy, our bet is that rates will be going up at least a couple more times in 2017. If you are a First Time Home Buyer and need more information on home buying or would like a rate quote, please follow the links below.

http://www.netequityloans.com/1stTimeHomeBuyerLoans

Pa Company Net Equity Financial offers $500
Future Entrepreneur Scholarship

Applicant Eligibility

Applicant must be a U.S. Citizen or Permanent Legal Resident of the United States.

Current freshmen, sophomores, juniors, seniors and graduate students
Applicant must have a cumulative college grade point average of at least 3.0 on a 4-point scale, and be enrolled full-time at an accredited four-year college or university during the 2017 Fall semester.
Must be working towards a degree in one of the following: Business/Marketing/Entrepreneurship

Application Submission and Deadline

Application materials must be received by June 15th, 2017 in order to be considered.
The following materials should be submitted:

A typed essay (no more than two pages double-spaced) addressing one of the following topics:

Describe in detail a small business in your community that you would like to own?
Describe a business idea you have that you think would be a great business to build?
Describe the traits you think that an entrepreneur must have to be successful and why?
Email to: LoanDept@NetEquityLoans.com Please include all contact information including complete address, phone, email and current school. (Transcripts from your accredited university not needed to apply but may be requested for the winner)

Purpose of Scholarship

To provide financial assistance to a student with an interest in Business/Marketing/Entrepreneurship

Description of Funds

The recipient will receive a one-time $500 scholarship to be applied to qualified expenses including tuition, fees, books, and on-campus room and board for the 2017 Fall Semester. Funds are provided by Net Equity Financial. Payments are issued by Net Equity Financial and made directly payable to the student’s approved college or university and mailed after June 30, 2017 directly to the accredited college or university last designated by the student.

Winner Selection and Announcements

The winner is selected after Net Equity Financial reviews all entries by June 15th,2017. Applicants are judged on creativity, thoughtfulness, and insight. The winner will be announced by June 30th, 2017.

College/University Approval

The institution must be accredited and listed on the official website of the U.S. Dept of Education. Applicants attending military academies are ineligible for this scholarship. All school transfers are subject to accreditation approval.

Responsibilities of Recipients

The recipient must be actively enrolled as a full-time freshman, sophomore, junior, senior, or graduate student in spring 2017 —barring illness, emergency, or military service. It is the recipient’s responsibility to verify receipt of funds with their designated institution and notify Net Equity Financial should the award check not arrive on or about 30 days from the issue date. Net Equity Financial reserves the right to alter or discontinue this program at any time without notice.

Top ways college students can build their credit history

So you’ve finally made it to college. Your parents have been harping on you forever about the importance of getting good grades so you can graduate and get a great job making a lot of money in a field you love….. so right now you have no worries. I mean, you have the worries of writing that research paper by Thursday and of course doing well at school. But no “real life” worries. Or at least that’s what your parents say.

But one day in the near future, there will be no more assignments, pop quizzes or research papers due and you will finally graduate. You will likely celebrate your achievement of graduating from college (which is a huge one), frame your diploma on the wall, and head off to that place everyone’s been telling you for years that you know so very little about. The REAL WORLD.

Hopefully while in college you were smart and/or lucky enough to do an internship with a company in your field of study that might offer your first career prospect. I.e Job. Otherwise, you will begin searching for a job like millions of other graduates do every year. Eventually, or hopefully sooner, you will land that job and begin to put that expensive education to work for you.

After finding employment, maybe your goal is to begin paying off your student loan debt, saving money to buy a new car, or perhaps you’re thinking of buying a house or condo of your own in the future. Or you’ll move out of your parents’ house and rent an apartment for a while. No matter what path your life takes from this point, your credit is going to become a huge piece of that puzzle.

Understanding your credit profile and how it will affect you in the future

Why is this so important? Well, for starters, you may have heard that things are EXPENSIVE. And if we wait to save up the money for everything we’d like to buy in life and pay cash. Well, we are likely going to be waiting a long time for things, or have very few things. “So ok, I’ll just take out a loan” you say. And that’s where the basic need for credit comes into play. In short, to buy the things we can’t afford to pay cash for. We borrow.

“So when I go to get a loan, what do banks and lenders look for?”

Credit, Capacity, Collateral

The top things that lenders will look for when you borrow money are the three C’s. That is, your Credit, your Capacity, and your Collateral. You may have heard and maybe even gained some understanding of these terms in your finance or economics class. Those are the primary factors a bank or lender will look at to determine your ability to borrow so here’s how they may apply to you in the “Real World” we were talking about earlier.

Credit: There are 3 major companies out there that keep track of your credit by your social security number. You do remember that number right? They are Experian, Equifax, and Trans Union. Each one of these companies keeps a report on any credit account you open. Not your school lunch account, but your Macy’s cards, or your gas card, or your student Visa or Discover card, and of course, your school loans. Each account has a detailed history that lenders can see your credit limit, how much you borrowed, how much you owe, and how well you paid on the account among other things. If you make your payments every month on time, you’ll be rewarded with a high credit score. This will likely generate offers from other banks and credit cards who will want to loan you money because you’ve demonstrated you can pay on time. In the case of credit cards, this is known as unsecured debt. If you buy a watch on your credit card at the mall, and decide to stop paying, they are probably not going to come looking for you to return the watch. However they will make negative reports on your credit. And the next time you go to open a credit card or apply for a loan, that poor payment history will reflect on your report, and you will likely have some trouble getting the credit you seek. Conversely if you pay your bill every month on time, your payment history will reflect positively.

Capacity: The 2^nd C. This is a tricky one. A bank or lender will look at your income and make a determination (through a series of ratio’s and calculations) of whether they feel you have the capacity to pay for the item you are borrowing to buy. Let’s say in the case of getting a car loan. Example: You want to buy a $7000 used car to save money. You find a nice car you like on Auto Trader and you have $1000 saved to put towards the car and need to borrow the remaining $6000. You have a part time job making $150 a week and a couple of credit card bills you are paying on from things you bought while you were at college. The total of your credit card payments is $50 a month. This car loan might be $275 a month, plus your $50 a month on your cards, so you’d need at least $325 a month just to make the payments. Lenders also know that this car will need to be insured. That might cost you another $120 per month, and your car will also need gas. Let’s say a $30 tankful per week because you want to drive it right. That’s $120 a month. We haven’t gotten into repairs yet but I’ll save that for another article. So the lender adds this all up and determines. This applicant make $600 a month, but by the time they pay their credit card bills, pay the loan on the car, insure it, and put gas in it. They are going to spend $565 per month buying, insuring, and fueling this car, plus their credit card bills. That leaves about $35 bucks a month left in their wallet. Or $8 a week. What happens when the car needs a $500 repair. You do know that cars sometimes need repairs right? In any case, there’s a good chance that you may get denied for this loan (even if your prior history is good) Why? Because the lender has determined that you don’t have the CAPACITY to pay for it and afford other normal things in life with your 8 bucks a week that’s left after paying for it.

Collateral: The 3^rd C. Collateral in a basic sense is something of value pledged for the payment of a loan. So for instance, when you go to buy a house one day, it’s primarily the value of the home you’re buying that you are pledging to the bank to guarantee that you will make the payments. Of course a lender will want to see your good credit history, and that you’ve made your car payments on time, because buying a home is a much bigger step. But they are going to be very concerned that the value of the home (the collateral) is worth more than what you are borrowing to buy it. That value of the home insures the bank that if for some reason you cannot make the payments on the loan, they can take that collateral back to satisfy what you owe them, which in this case is the house. I think it goes without saying that you want to try to avoid this situation as it can have disastrous consequences on your ability to borrow in the future.So there you have it, that’s the basics of Credit, Capacity and Collateral.

Things you can do right now to build a good credit history

Open up a small charge account or two and make the minimum payments every month, even if it’s $10. Demonstrating you can borrow money and repay it on a schedule is a great first step. Paying off your balance in full doesn’t do much to build your payment history or FICO score. Unless you charge something one month, pay off the full balance, then do it again next month. Let’s say your gas card. You charge $60 worth of gas on your credit card, then pay off. Then the following month charge $60 more gas, and pay that off, etc. This will definitely help build your credit (and save you some interest as well) but that’s another topic.

Your initial credit card limit may be rather small, maybe $300 to 500 dollars. Or in some cases, you may need to get a secured credit card, which basically means you put up the cash as collateral (remember that) and you basically borrow your own money back but you build your credit by doing it. Some of these credit cards may have an annual fee. By paying on time every month, you will build your credit history and qualify for higher limit credit cards (some with much lower interest rates) like Visa and Mastercard. Continue demonstrating a solid payment history on these cards and in time, apply for better cards with less fees, lower interest rates and higher credit limits. A successful payment history will help you qualify for the loan on that new car you may be hoping to buy after graduation. Make sure you monitor your credit periodically and make sure that the accounts that are on your credit report are yours and are reporting accurately. You can request a free copy of your credit reports once per year from Experian, Equifax, and Trans union. You can also dispute items that appear incorrectly.

For many students, one day this credit experience may lead to buying that home you may dream about to raise a family in. When you sit down with your lender one day in the future to discuss your possible mortgage loan, he or she will be making determinations on, yep you guessed it, your credit, your capacity and your collateral so pay your bills on time, use your credit responsibly and you will find this process much easier. Years ago home buyers would need to put down 20% of the purchase price as collateral to get a home loan. Today, there are a number of low down payment programs backed and insured by the government called FHA Loans which will allow you to qualify for a mortgage with as little as 3.5% down. More options are becoming available to make the dream of home ownership a reality for your upcoming generation but developing a solid credit history will go a long way toward reaching that dream. Best of luck to you and hope this information helps in your journey.

For more topics on credit, visit our blog at

http://www.netequityloans.com/MyBlog

Author: Mike Kohler

Source: Net Equity Financial

In a tough economy borrowers worry about foreclosure and bankruptcy, and the effects such issues can have on the ability to borrow. One big topic these days regarding FHA loans involves the required waiting period for new FHA home loans after filing bankruptcy or foreclosure.

A good example of a frequently asked question in this area: "When does the waiting period began per FHA Guidelines? If you included a conventional loan in a Chapter 7 bankruptcy, does the waiting period began at the discharge date? Or does the waiting period began at the trustee sale?"

After Chapter 7 bankruptcy, (not to be confused with Chapter 13 bankruptcy rules) the borrower must wait out the FHA's minimum "seasoning" period. At the time of this writng, that period is two years plus any additional amount required by the lender. Some banks will require that a borrower wait a total of three years before applying for a new home loan.

Other lenders may be willing to work with qualified borrowers after the FHA two-year minimum for Chapter 7, but it is important to note that the required waiting period begins from the time the bankruptcy is discharged--NOT the time the bankruptcy is filed.

Here is some additional information on waiting periods and other requirements for both Chapter 13 and Chapter 7 bankruptcy:

CHAPTER 13 BANKRUPTCY WAITING PERIODS

FHA rules allow a lender to consider approving an FHA loan application from a borrower who is still paying on a Chapter 13 Bankruptcy-but only if those payments have been made and verified for a period of at least one year.

The borrower isn't automatically able to apply for a new FHA loan if they meet this requirement--the court trustee's written approval is a condition of the policy. Additionally, the borrower must write a detailed explanation of the bankruptcy and submit it with the loan application. The borrower must have good credit, a satisfactory employment history and other financial qualifications.

CHAPTER 7 BANKRUPTCY WAITING PERIODS

As mentioned above, all borrowers must wait least two years after the discharge date of a Chapter 7 Bankruptcy. The discharge date should not be confused with the date bankruptcy was filed.

As with Chapter 13 bankruptcy, FHA regulations demand a full explanation to be submitted with the FHA home loan application. To get a new FHA insured mortgage loan after Chapter 7, the borrower must qualify financially, establish a history of good credit in the wake of the filing of the Chapter 7, and meet other FHA requirements.

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When you first bought your house, you may have been asked by a lender whether you wanted to escrow your taxes and insurance or not. Usually to the new homebuyer, you usually don't know what that means. If you have been escrowing for a number of years, you undoubtedly know by now that your mortgage payment has gone up. Reason being, once per year, your mortgage servicer is required by federal law to update your account and make sure that they are not over collecting monies from you. Is there is a significant overage, they must return the overage to you. This doesn't usually happen. What normally happens is that taxes go up, homeowners insurance usually goes up. You just forward the bills to your servicer, they pay them, and every once in a while your payment goes up 20 or 30 dollars. You pay it and life goes on and one day you realize that your taxes have gone up 800 dollars and your homeowners 360 bucks. That is the typical experience of escrowing.

On the other hand, for those who don't, or do not wish to escrow, a different situation often plays out. Once you bought your house, you paid the original tax bill and bought a homeowners policy with a check. Hopefully you set out with some type of plan to budget 1/12 of those bills in a special account so that when next years bills come do, you can just withdrawal the money, pay the bill and all is well. What sometimes happens is the "out of sight, out of mind" theory, followed by the "didn't I just pay that". Yes, you did...last year. Unless you have iron discipline, it can be challenging to try and save the money each year. Even if you are successful for a while, things come up. It's there to dip into for car tires, home maintenance, etc all with the good intention of replacing it as soon as you can because taxes arent do for a while yet.

My final word on this one, from my own experiences as both a homeowner who has done both and as a lender is, "When in doubt, go the escrow route."

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Before applying for a Pa mortgage loan, Do Not make Major Purchases of any kind or take on any unnecessary debt if you can avoid it. Reason being that bills for appliances, jewelry, ,furniture, vacations, cars orany of these expenses that may show up on a credit report can affect your DTI. (debt ratio) A 0% interest free loan for a year on some appliances from Home Depot still may need to have a monthly figure attached to it on your credit bureau, often 5% of total balance. That seemingly insignificant amount could be the difference on what rate your lender is able to approve you at, or worse yet, whether you get approved for the mortgage loan at all. Better safe then sorry. Get the loan then buy the appliances (or whatever else) later. You'll be glad you did.

Keep your funds where they're at. That includes checking, savings, money markets, CD's, retirement funds, 401k savings, mutual funds or stocks. Remember that a loan officer may need a paper trail of each account and transaction you make and it can be very messy. All loans require proper documentation especially these days. Lenders, banks and credit unions triple check every loan file for quality control, accuracy and fraudulent activity so leave your cash parked where it's at until you get solid advice from your lending professional. And by the way, consider not changing banks either.

Getting a commercial loan isn't easy, but you can start the process off by reading thru these top tips.

1) Have a business plan, with forecasts, projections, financial records and statements.
2) Put your own money down. You'll need a substantial deposit, at least 25%, sometime 30-35% depending on the type of commercial building it is.
3) Apply as soon as you can. It can take 3 months to go thru the process.
4) Deal with a commercial mortgage broker. They have many lenders they deal with. They will find the best lender for your scenario.
5) Never order your own appraisal. The lender will order it directly thru their own channels.

Freddie Mac Multifamily Small Balance Loan Program

Freddie Mac multifamily financing (loans above $5 million)

Fannie Mae’s Small Apartment Loan program

Freddie Mac Hybrid Small Balance Apartment Loan program ($1MM-$5MM).

Freddie Mac Small Balance Apartment Loan Program Features

· Non-recourse

· No yield maintenance - step down prepay

· Converts to ARM at end of fixed term

· Highly competitive interest rates

· Up to 80% LTV

· 30 year amortization

· Full term interest only available

· No replacement reserves

· No underwriting floor rate maximizes proceeds

· Tax returns not required

· Assumable

· Cash out refinances

Fannie Mae Multifamily Loans

With industry low interest rates, customized terms and certainty of execution, the Fannie Mae DUS Multifamily Loan platform is one of the single largest sources of capital to the multifamily housing market. Hedge interest rate risk with fixed rate terms up to 30 years, maximize cash flow with low rates and interest only payment options, and maximize leverage with up to 80% LTV.

Features:

· Non-recourse / Assumable

· Up to 30 year fixed interest rates

· Up to 80% LTV purchase and refinance

HUD FHA Multifamily and Apartment Building Loans

HUD FHA apartment loans are a great financing option for borrowers looking for maximum leverage and longer fixed rates and terms.

· Up to 35 and 40 year fixed rate terms

· Leverage up to 83% (90% for construction)

· Non-recourse / assumable

· No population or geographic restrictions

· Market rate or affordable

· Construction or permanent financing

Stated Income Loans

The stated income apartment loan program does not require personal or business tax returns. Personal financial statements and three years of property operating statements are required to verify ability to service the debt.

· Tax returns not required

· No personal or global debt DSCR

· Property operating statements required

· Credit and financial capacity requirements

Bridge Apartment Loans

Short term or bridge apartment loans are available for the renovation or repositioning of multifamily properties. Program can also be used for stabilized properties requiring a quick close or waiting for a permanent close.

· $5 million minimum

· Strong experienced sponsorship req.

· Up to 80% loan-to-cost

· Floating rate over LIBOR

Apartment loan refinance and purchase availability -- including LTV, DSCR, and loan size -- may vary depending on property location, economic conditions, exposure, and other variables that may negatively influence risk. Loan programs and program guidelines (including, without limit, fees, rates and features) are subject to change. Information provided is not an offer to make a loan and should be used for informational purposes only.

Freddie Mac Multifamily Small Balance Loan Program

Freddie Mac multifamily financing (loans above $5 million)

Fannie Mae’s Small Apartment Loan program

Freddie Mac Hybrid Small Balance Apartment Loan program ($1MM-$5MM).

Freddie Mac Small Balance Apartment Loan Program Features

· Non-recourse

· No yield maintenance - step down prepay

· Converts to ARM at end of fixed term

· Highly competitive interest rates

· Up to 80% LTV

· 30 year amortization

· Full term interest only available

· No replacement reserves

· No underwriting floor rate maximizes proceeds

· Tax returns not required

· Assumable

· Cash out refinances

Fannie Mae Multifamily Loans

With industry low interest rates, customized terms and certainty of execution, the Fannie Mae DUS Multifamily Loan platform is one of the single largest sources of capital to the multifamily housing market. Hedge interest rate risk with fixed rate terms up to 30 years, maximize cash flow with low rates and interest only payment options, and maximize leverage with up to 80% LTV.

Features:

· Non-recourse / Assumable

· Up to 30 year fixed interest rates

· Up to 80% LTV purchase and refinance

HUD FHA Multifamily and Apartment Building Loans

HUD FHA apartment loans are a great financing option for borrowers looking for maximum leverage and longer fixed rates and terms.

· Up to 35 and 40 year fixed rate terms

· Leverage up to 83% (90% for construction)

· Non-recourse / assumable

· No population or geographic restrictions

· Market rate or affordable

· Construction or permanent financing

Stated Income Loans

The stated income apartment loan program does not require personal or business tax returns. Personal financial statements and three years of property operating statements are required to verify ability to service the debt.

· Tax returns not required

· No personal or global debt DSCR

· Property operating statements required

· Credit and financial capacity requirements

Bridge Apartment Loans

Short term or bridge apartment loans are available for the renovation or repositioning of multifamily properties. Program can also be used for stabilized properties requiring a quick close or waiting for a permanent close.

· $5 million minimum

· Strong experienced sponsorship req.

· Up to 80% loan-to-cost

· Floating rate over LIBOR

Apartment loan refinance and purchase availability -- including LTV, DSCR, and loan size -- may vary depending on property location, economic conditions, exposure, and other variables that may negatively influence risk. Loan programs and program guidelines (including, without limit, fees, rates and features) are subject to change. Information provided is not an offer to make a loan and should be used for informational purposes only.

Freddie Mac Multifamily Small Balance Loan Program

Freddie Mac multifamily financing (loans above $5 million)

Fannie Mae’s Small Apartment Loan program

Freddie Mac Hybrid Small Balance Apartment Loan program ($1MM-$5MM).

Freddie Mac Small Balance Apartment Loan Program Features

· Non-recourse

· No yield maintenance - step down prepay

· Converts to ARM at end of fixed term

· Highly competitive interest rates

· Up to 80% LTV

· 30 year amortization

· Full term interest only available

· No replacement reserves

· No underwriting floor rate maximizes proceeds

· Tax returns not required

· Assumable

· Cash out refinances

Fannie Mae Multifamily Loans

With industry low interest rates, customized terms and certainty of execution, the Fannie Mae DUS Multifamily Loan platform is one of the single largest sources of capital to the multifamily housing market. Hedge interest rate risk with fixed rate terms up to 30 years, maximize cash flow with low rates and interest only payment options, and maximize leverage with up to 80% LTV.

Features:

· Non-recourse / Assumable

· Up to 30 year fixed interest rates

· Up to 80% LTV purchase and refinance

HUD FHA Multifamily and Apartment Building Loans

HUD FHA apartment loans are a great financing option for borrowers looking for maximum leverage and longer fixed rates and terms.

· Up to 35 and 40 year fixed rate terms

· Leverage up to 83% (90% for construction)

· Non-recourse / assumable

· No population or geographic restrictions

· Market rate or affordable

· Construction or permanent financing

Stated Income Loans

The stated income apartment loan program does not require personal or business tax returns. Personal financial statements and three years of property operating statements are required to verify ability to service the debt.

· Tax returns not required

· No personal or global debt DSCR

· Property operating statements required

· Credit and financial capacity requirements

Bridge Apartment Loans

Short term or bridge apartment loans are available for the renovation or repositioning of multifamily properties. Program can also be used for stabilized properties requiring a quick close or waiting for a permanent close.

· $5 million minimum

· Strong experienced sponsorship req.

· Up to 80% loan-to-cost

· Floating rate over LIBOR

Apartment loan refinance and purchase availability -- including LTV, DSCR, and loan size -- may vary depending on property location, economic conditions, exposure, and other variables that may negatively influence risk. Loan programs and program guidelines (including, without limit, fees, rates and features) are subject to change. Information provided is not an offer to make a loan and should be used for informational purposes only.

Before applying for a Pa mortgage loan, Do Not make Major Purchases of any kind or take on any unnecessary debt if you can avoid it. Reason being that bills for appliances, jewelry, ,furniture, vacations, cars orany of these expenses that may show up on a credit report can affect your DTI. (debt ratio) A 0% interest free loan for a year on some appliances from Home Depot still may need to have a monthly figure attached to it on your credit bureau, often 5% of total balance. That seemingly insignificant amount could be the difference on what rate your lender is able to approve you at, or worse yet, whether you get approved for the mortgage loan at all. Better safe then sorry. Get the loan then buy the appliances (or whatever else) later. You'll be glad you did.

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Top tips for first time buyers

Tips for First Time Home Buyers

Hire a buyer’s agent to save you time and money

If you are considering buying a home, hire a buyer’s agent. An agent will save you time in finding a home that meets your needs. They can send you listings to view the details and photos before actually setting foot out the door. Also, agents often know of new listings that aren’t on the market yet. Besides, the seller is the one that will end up paying the commission, so take advantage of having some representation on your side, it doesn’t cost you anything.

Set up the financing for your new home purchase

Think about getting the loan before buying a home. It is smarter to go house shopping with a preapproval letter in your hand. When that day comes along that you want to make an offer, it will make your offer a lot stronger when the seller doesn’t have to worry so much as to you having to get financing. Get preapproved now!

Negotiate a successful deal that benefits both parties

Make sure your buyer’s agent gives you a list of comparable sales in the area. This will help you determine how much to bid on the home. The last 3 months sales are a good gauge for you to determine what to bid. Remember there are always more details to the offer than just the price. Examples are: how soon you want to move, having a pre-approval, seller’s assist, the items you want them to leave in the house. There are many details so be sure so sit back and think of the things that are important to you.

Make home inspections part of the plan

You may want to make your offer contingent on the home inspection. If you find out the home has foundation issues, you may decide against buying it. Having a home inspection will let you know exactly what you are getting into. Some people hate to spend another $300-$500 on the inspection, but it does give you the opportunity to address with the seller the problems of the home. Also, it lets you negotiate the items you would like them to address.

Remember buying a home is a step by step journey, there is no easy way there. There are many hurdles to go over to end up living in your dream home, but if you take them one step at a time, you’ll be well on your way to home ownership in no time.

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When people look at their mortgage statement they think that is their payoff balance. This however is not the case. Your mortgage payment is paid in arrears. For example, your July payment is paying June’s interest. Remember when you bought or refinanced your home and the loan originator stated “you’re going to skip one month’s payment” or “you won’t have another payment due until the following month after closing”? Well this is where that payment essentially catches up with you. (Technically, it’s not “that” payment, you’re just always paying the previous month’s interest).

The escrow company will order the payoff from your mortgage company. The interest is prorated to the day of funding/closing. There may be additional fees included in your payoff that the lender will charge, such as:

pay off transmission fees
unpaid late fees
prepayment penalties (you may want to consider delaying a refinance if possible until the prepay period is over if you have a prepayment penalty)

Often times, the escrow company will request the payoff with a few additional days factored in to act as a cushion. The escrow company may (should) order an updated payoff closer to the signing date in order to provide the most accurate figures possible. The lender being refinanced will refund any difference in your favor. In addition, if you have an escrow reserve account for taxes and insurance, you will receive a refund from the lender in approximately 6-8 weeks after closing.

At your signing appointment, ask to receive a copy of your payoff statement. Check to see how recently it was requested. If it was ordered at the beginning of the transaction and you have since made a mortgage payment, you can ask the closer to order an updated statement prior to closing (with a refinance, there is a three day right of rescission that takes place, so there should be enough time for this to take place with most lenders).

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FHA loans are the new most popular mortgage loan. During the housing boom, subprime mortgages were all the rage. But as the housing market fell apart, lending standards tightened and the benefits of FHA mortgages are more prevalent. FHA is a good alternative to for first time buyers to be able to qualify and become a homeowner even though they don't have a large amount of cash to put down.

You can borrow 96.5% of the value of the home. You only need to come up with a 3.50% downpayment. Minimum credit scores are typically lower, as well as you won’t be disqualified if you have a bankruptcy or foreclosure. With FHA loans, you can also refinance with them. You need to be current on your payments, but you may not need to get your home appraised. And typically there is a lot less paperwork involved. FHA currently allows sellers to contribute up to 6% towards the buyers closing costs. Lastly, FHA loans come with fixed rates. Many reasons homeowners got into trouble was their mortgages were adjustable rates and their monthly payments became very unstable.

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Credit Tips

One of the most important factors today in getting a Pennsylvania mortgage is knowing your credit score and history. Your credit is going to determine a lot of things, whether you can get a mortgage, how much you'll have to put down and what your interest rate will be.

If you've had a blemish or two on your credit report (and who hasn't these days) here are a few tips toward improving your scores.

Keep your bill payment history on time for 24 months.
Open several new accounts and use them by making the minimum payment for a number of months.
Open a secured credit card (Orchard Bank has a good one)
Don't keep running your credit report. Wait 6 months
Talk to a qualified professional about your situation
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401k for home purchase
Many people consider this option since they don't have money set aside in their savings account. By withdrawing money from your 401k you will have to pay early withdraw fees as well as taxes on the money you take out. On the other hand, it may be worth it if you found the right house.

As a first time homebuyer you can often avoid the penalties, but you will have to pay taxes on the money. However, you can usually take the money out of your 401k without a penalty if you basically take out a loan on the money,( if your employer permits loans.)

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Also, unless you are putting at least 20% down on the home purchase, you will more than likely have pmi insurance. Since there isn’t going to be a huge difference in the monthly payment on the insurance itself, it may be in your better interest to consider not borrowing from the 401k unless you have enough to put the entire 20% down to avoid the insurance all together.

If you have an accountant I would suggest you sit down with them and see what this impact would have on each situation in relation to your taxes. It is unique to every individual.

Fixed versus adjustable rates

With a fixed-rate loan, your payment stays the same for the entire duration of the mortgage. The amount of the payment that goes to principal (the loan amount) increases, but your interest payment will decrease accordingly. Your property taxes increase, or rarely, decrease, and your insurance rates might vary as well. But generally monthly payments for a fixed-rate loan will increase very little.

Your first few years of payments on a fixed-rate loan are applied mostly to pay interest. The amount applied to principal increases up slowly each month.

You might choose a fixed-rate loan in order to lock in a low interest rate. People select fixed-rate loans when interest rates are low and they want to lock in at this lower rate. For homeowners who have an ARM now, refinancing into a fixed-rate loan can provide greater monthly payment stability. If you have an Adjustable Rate Mortgage (ARM) now, we can help you lock in a fixed-rate at the best rate currently available. Call Net Equity Financial Mortgage at (215)741-3131 to discuss how we can help.

Adjustable Rate Mortgages — ARMs, come in a great number of varieties. ARMs are normally adjusted every six months, based on various indexes.

Most ARM programs have a "cap" that protects you from sudden monthly payment increases. Some ARMs can't increase more than 2% per year, regardless of the underlying interest rate. Sometimes an ARM features a "payment cap" which ensures your payment can't go above a fixed amount over the course of a given year. Additionally, the great majority of ARM programs have a "lifetime cap" — this means that your rate will never go over the cap amount.

ARMs most often feature the lowest, most attractive rates toward the start. They guarantee that interest rate for an initial period that varies greatly. You've likely heard of 5/1 or 3/1 ARMs. For these loans, the initial rate is fixed for three or five years. It then adjusts every year. These loans are fixed for a certain number of years (3 or 5), then adjust after the initial period. Loans like this are best for people who expect to move within three or five years. These types of ARMs most benefit borrowers who plan to move before the initial lock expires.

Most borrowers who choose ARMs choose them because they want to get lower introductory rates and do not plan to stay in the home longer than the initial low-rate period. ARMs can be risky when housing prices go down because homeowners can get stuck with increasing rates when they can't sell or refinance at the lower property value.

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This is one of the most common questions we hear from potential home buyers and borrowers. The simple answer is a minimum of 3.5 to 5% in cash of the amount of the property you're planning on purchasing. This assumes decent credit (above 620 mid score) 2 years continuous employment, documented income (current paystubs, w-2's) with the total payment (including property/school taxes and insurance) or PITI no more than about 31% of gross monthly income for monthly housing expense. Bear in mind this is a minimum set of criteria. We fund loans through many different wholesale banks and each of those lenders has their own set of underwriting guidelines (and some can be downright picky) If you are planning on applying for a purchase mortgage anytime soon, you may want to speak with a qualified mortgage professional to review your credit, financials, accounts and ratio's to prepare in advance before entering the market and falling in love with your dream home.

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Getting a mortgage loan, whether FHA, refinancing, or conventional can take a little doing, but here are a few tips to prepare for the process.

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1) Gather all your financial information in one place. Current W-2's (or 1099's), at least last years tax returns, preferably the last 2 years, current mortgage statements, 1 month of current pay stubs for all borrowers,

2) Have an idea of what your credit score is. A lender will pull a trimerge report from 3 major credit bureau's and have some questions about these issues. The lender may also guide you in the right direction if your credit is less than perfect on what steps to take to improve it.

3) Be honest and provide accurate information on your application. Credit reports, bank accounts, and jobs are all verified. It's a lot easier to deal with an issue upfront than find out later in the loan process after you've paid for an appraisal and things are moving along.

4) Respond promptly to any requests for additional information so that you get your approval sooner.

If you are a veteran, you can refinance up to 100% (and in some cases more) than your home's value. If you are carrying a lot of credit card debt that you are only making minimum payments on, a VA cash out refinance to 100% could save you up to $400 per month just by combining your balances into a VA cash out refinance loan at a low interest rate. For more info, please call 215-741-3131.

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Forbes says Fed unlikely to carry throughon raising interest rates in 2017

Some Factors in 2017 affected by rising interest rates

What will December's rate hike mean for First Time Home Buyers?

What will this rate hike mean for First Time Home Buyers?

Pa Company Net Equity Financial offers $500 Future Entrepreneur Scholarship

Application Submission and Deadline

Purpose of Scholarship

Description of Funds

Winner Selection and Announcements

College/University Approval

Responsibilities of Recipients

Top ways college students can build their credit history

Understanding your credit profile and how it will affect you in the future

Credit, Capacity, Collateral

Things you can do right now to build a good credit history

Tips for First Time Home Buyers

Hire a buyer’s agent to save you time and money

Negotiate a successful deal that benefits both parties

Make home inspections part of the plan

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Forbes says Fed unlikely to carry through
on raising interest rates in 2017

Pa Company Net Equity Financial offers $500
Future Entrepreneur Scholarship