Scottsdale Mortgage Info

If you have a Scottsdale mortgage and didn't make at least a 20% down payment, you probably have private mortgage insurance (PMI.) PMI protects the lender if the borrower is unable to make the mortgage payments. Because PMI premiums are paid monthly in the mortgage payments, they can add up. So, how can you avoid PMI or drop it later?

If you have a Scottsdale mortgage and didn't make at least a 20% down payment, chances are you have private mortgage insurance (PMI)

Avoid Scottsdale Mortgage Insurance

The first way is easier said than done. To avoid PMI make sure you borrow 80% or less of the home's value. In other words, put 20% down when you purchase. Some people – even if they have the money – are hesitant to wipe out their savings or spend the money they were planning to use to make improvements to their new purchase.

Sometimes, your mortgage lender will pay the PMI for you. Lender-paid PMI involves the Scottsdale mortgage lender paying for the insurance in exchange for a slightly higher interest rate. The lender pays the PMI company directly, while the borrower "repays" the premium in higher monthly principal and interest payments. Many homeowners like that because they can deduct all the interest paid, while the PMI premiums are not deductible. One word of caution, however: while you can request the mortgage insurance requirement be dropped in time, the higher interest rate will remain until you sell the home, pay off the mortgage or refinance.

Lenders are required by the Homeowners Protection Act to remove PMI once the mortgage loan balance has dropped to 80% or less of the home's original sales price. That could take a while, but there's a way to remove it more quickly. By watching the marketplace you can get an idea of your home's value. As your home appreciates, the remaining loan amount you owe is a lower percentage of your home's new value. This ratio – called the loan-to-value ratio, or LTV – will over time be at or less than 80%. When that happens, request that your lender drop the PMI requirement.

For documentation, your lender may require an updated appraisal of your home and will require you to pay for it. But remember, only approach your lender when you're confident your home's value qualifies for the 80% or lower LTV. Consult a real estate agent or use the Internet to monitor comparable homes in your neighborhood. An appraisal will probably cost $300-$500, so make sure you qualify to remove the PMI before you contact your Scottsdale mortgage lender. Lastly, some lenders require the borrower to keep the PMI coverage for a minimum of two years. Check with your lender to find out what they require.

Sometimes, simply asking your lender to do away with PMI won't work. An FHA loan, for example, requires PMI for the entire loan term. In that case, you'll need to refinance – either with a non-PMI required FHA loan or a conventional loan. However, be smart. Refinancing just to get rid of the PMI insurance premium probably isn't a good idea since closing costs aren't cheap. It may cost more out of pocket than it's worth. Consider refinancing only if it makes good financial sense.

Get more mortgage tips and information in our Scottsdale Mortgage Info section of articles to your right just below Scottsdale Real Estate Categories. And check us out on Facebook and Twitter as well.

Scottsdale mortgage experts say 2016 may bring greater borrowing opportunities for homebuyers. Although you still have to qualify for the amount you want to borrow, more lenders are reporting a loosening of credit standards. Fannie Mae says loan underwriting is expected to ease in the near future. Let's examine why this may be the case and what the effect may be.

Scottsdale Mortgage Industry to Aid Housing

Scottsdale mortgage experts say 2016 may bring better borrowing opportunities with more lenders report a loosening of credit standards.

Relaxed credit requirements will likely help the housing market. Tight credit standards and a short supply of affordable homes for sale have been cited as reasons for the housing market's slow recovery. In a recent survey of Fannie Mae lenders, 16% said they expect a relaxation of credit standards in 2016. Lenders expecting a tightening of standards dropped to 2%. The survey was conducted by Fannie Mae and represented a cross-section of nearly 200 lending institutions.

While credit may improve, affordability for first-time home buyers will remain a challenge. With the number of starter homes on the market, home price appreciation is still higher than growth in household income. However, the easing of credit standards should provide some assistance to offset affordability.

As the prospect of rising interest rates looms in 2016, many lenders expect more competition. This may persuade them to ease some of the lending safeguards added after the last housing crash. Fannie Mae, Freddie Mac and the FHA have all worked to clarify lender liabilities for bad loans. They have been pushing hard for lenders to ease their credit practices to help the housing market recover.

In addition, Fannie Mae recently announced a new credit scoring program. Dubbed "trended data," the scoring model shows a broader review of the credit history of borrowers. That should improve the credit scores of some home purchasers. According to a recent study by TransUnion, trended data would increase the percentage of borrowers in the "super prime risk" tier from 12% to 21%. Those borrowers would get better access to new mortgage loans at the best rates.

Despite the potential relaxation in credit standards, a recent survey by the National Association of Realtors revealed roughly 66% of consumers perceive mortgages as "somewhat difficult" or "very difficult" to obtain in today's market.

Find more articles about the Scottsdale mortgage market in our Scottsdale Mortgage Info to your right just below Scottsdale Real Estate Categories.

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As predicted by some in the Scottsdale mortgage industry, sales of existing homes fell sharply in November. Insiders say the new consumer disclosure rule was to blame. The rule resulted in delays in many mortgage loan closings.

As predicted by some in the Scottsdale mortgage industry, existing home sales fell in November.

Scottsdale Mortgage Fears Realized

The sale of existing homes dropped 10.5% during November from the previous month, according to the National Association of Realtors. With a seasonally adjusted annual rate of slightly more than 4.75 million homes sold, it was the slowest month for existing home sales in more than eighteen months. The decline follows a 3.4% decrease in October, as well.

The chief economist for the National Association of Realtors, Lawrence Yun, said the decline in demand was due, in part, to the Consumer Financial Protection Bureau's recent new disclosure rules. The requirements, known as "Know Before You Owe" or TRID (Truth in Lending Act and Real Estate Settlement Procedures Act integrated disclosures,) went into effect in October. Confirming the fears of many in the Scottsdale mortgage industry, the disclosure forms have increased the time needed to close a loan. The delays pushed closings that should have taken place in November into December, sometimes January.

Lower home inventory and higher asking prices were also responsible for the drop in home demand. The combined impact meant that existing home sales dropped nearly 4% in November compared to November of 2014. That decline was the first year-to-year decrease since September of 2014.

As written in a previous article on this topic, mortgage lenders feared the new changes would create technological hurdles requiring additional software programs and thousands of man-hours.

The disclosure form given to the consumer after the loan application begins — known as the Loan Estimate — covers the rules as to what can and cannot be done by the lender. It includes cost estimates approved by the borrower in writing before the application process can continue. The Closing Disclosure must be given to the borrower within three business days of closing. It shows all the costs paid by the consumer. If the borrower wants to make any changes during the three-day window, the three days start over. As expected, this has caused delays and the "domino effect" creates additional delays in loan closings.

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The Scottsdale home buying market may feel the effects of the Federal Reserve’s recent decision to raise interest rates… or not. The Fed increased the rate on federal funds for banks by .25%, the first such increase in over seven years. What does that mean for people contemplating purchasing a home?

How will Scottsdale home buying be affected, if at all, by the Fed raising interest rates?

Scottsdale Home Buying: What's Next?

As part of an overall strategy to allow the market to recover from the 2008 housing crash, the Federal Reserve purposely kept interest rates low.

For months new home buyers have anticipated a rate increase. That’s given many an incentive to buy or refinance existing mortgages before rates went up. However, a slight interest rate increase isn’t likely to deter buyers from continuing to shop for homes. If anything, it may continue to make them aware that interest rates could be on the rise and now is the time to buy.

The increase in the Federal Reserve rate won’t affect you all that much. There’s little correlation between the Fed’s interest rate and mortgage interest rates. Economists argue that rates on new mortgages have fluctuated throughout the entire year without any change in the Federal Reserve’s policy until recently. They cite, for example, a movement of 70 basis points (.70%) in the 30-year fixed rate mortgage loan category during 2015.

Higher rates don’t mean mortgage lending will tighten up. Because the Fed's rate hike was so small, it’s not likely to prevent homebuyers from being able to purchase. There are mortgage products available for most every financial situation — from low down payment requirements to still-attractive fixed rate 30-year conventional loans.

Higher rates may motivate you to act. Some economists expect interest rates to rise in 2016 by as much as 1%. While the increases will probably be small, they may serve as the “nudge” that some Scottsdale home buyers need to get off the fence and get serious about buying.

Higher interest rates may keep home values in line with wage increases. Home values increased dramatically in some markets during 2015. This appreciation rose higher and faster than wage increases, making it harder for many Americans to afford to buy. The rise in interest rates typically slows the rate of home appreciation. This will allow wages the opportunity to “catch up” with real estate appreciation, making homes more affordable.

If you have an adjustable-rate mortgage, you probably shouldn’t worry. You probably don’t have an ARM. Experts say 85-90% of mortgage originations in the past two years were for 30-year fixed rate loans. Homeowners that may have had an ARM likely refinanced during 2015 expecting a possible rate increase. If you have an ARM don’t worry. Most ARMs have a locked interest rate between 5-7 years. The rate will remain unaffected during that period. Even if you’ve passed that timeframe, chances are the rate increases in 2016 will be small. If you’re still worried about the future, a fixed-rate refinancing is always an option.

Continue to shop around for the best deal. Just as the Scottsdale home buying process involves looking for the home that best suits their needs, you should do the same when loan shopping. Find the loan program that fits you and your financial situation. Shop around. Ask questions. Compare rates and lenders.

Get more information on Scottsdale home buying by checking out our other articles in the Scottsdale Home Buying Tips section just beneath Scottsdale Real Estate Categories to your right.

Scottsdale mortgage loan experts say over 6 million people nationwide will buy homes next year. Statistics expect roughly 2 million will be first-time homebuyers. Both first-time buyers and others always wrestle with whether or not to pay “discount points” on their mortgage.

The Scottsdale Mortgage Loan: Points?

Discount points on a Scottsdale mortgage loan are designed to save interest over a long term loan payback.

Just what the heck are discount points, anyway? Mortgage discount points are a one-time, upfront closing cost designed to discount the existing mortgage interest rate. One point is equal to 1% of your loan amount. Your interest rate is normally reduced by .25% for each discount point.

Since paying discount points lowers your interest rate, the process is often called “buying down” your rate. As an example, on a mortgage amount of $400,000 at 4% interest, you could elect to pay one discount point or $4,000 and lower your interest rate to 3.75%. For a borrower planning to be in that home for as long as a 30-year term, the interest savings over the life of the loan can be substantial.

Should you pay discount points? The answer is a resounding "that depends." Paying discount points can be expensive. Plus, it will mean you have to come up with more money at the loan closing. Still, it may make sense — especially if you can negotiate with the seller for him to pay part or all of the closing costs.

Paying points to lower your mortgage interest rate could be a good investment over time. However, if you plan to sell your home in a few years or refinance your mortgage you probably won’t recoup the amount you paid in discount points.

Because discount points are used to "buy down" your interest rate, they are usually tax-deductible.

Mortgage experts recommend you consider paying discount points as a luxury, not a necessity. If paying one or more points puts you in a bind by requiring you to pay additional money at the closing, it’s probably best not to do it.

Okay, what’s next? Consult your real estate agent about concessions the seller may make as part of your offer to purchase a home. You never know what you may get until you ask. Discuss discount points with your Scottsdale mortgage loan professional to find out your best course of action.

Get more up to date news and tips on Scottsdale mortgage loans by checking out our other articles under the Scottsdale Mortgage Info section just below Scottsdale Real Estate Categories to your right.