Down Payment Download: How Much Do You Really Need?

By jeff.moore@nafinc.com November 2, 2017

There is a well-rooted perception that to buy a home, especially your first one, you should keep saving and renting until you can make a 20 percent down payment. Reality is far different and knowing your options may get you through the door to homeownership that much sooner.

Doing More with Less

Black Knight Financial Services reports that 1.5 million borrowers became homeowners in the 12 months ended June 2017 with down payments of less than 10 percent. Most of these loans were conventional, fixed-rate offerings made through the Fannie Mae, Freddie Mac, and FHA loan programs. Because these agencies are now able to accommodate this type of loan, close to 40 percent of all new mortgages are being made with low down payments.

Mortgage ProgramsMinimum Down Payment
Conventional Loans 3–5 percent
Conventional Jumbo 10 percent
FHA Loans 3.5 percent
VA Loans 0 percent
USDA Loans 0 percent

Down payment requirements may differ for condo purchases or new construction.

Weighing the Trade-Off

While it’s possible to get into a home sooner with less money up front, mortgages made with low down payments do come with the added expense of mortgage insurance premiums until that 20 percent equity level is achieved. They also typically result in the borrower paying more interest over the life of the loan, which could make the ultimate cost of the home higher.

However, proceeding with a low down payment might still save you money over the long run. You will no longer be paying rent and may realize tax savings after deductions for your higher interest expense and property taxes. Potential gains in the home’s value can also make the earlier purchase and expenses worthwhile over time. So, it is important to consider how these varying factors may affect your near-term budget as well as the potential for a long-term gain in your net worth. In many cases, your Loan Officer or financial advisor can help you weigh the alternatives.

Next Steps

Going through the preapproval process with a Loan Officer is an effective way to gauge how much home you can buy—and afford—given different down payment scenarios. It will also help you engage the attention of a Real Estate Agent. Having a preapproval letter will ensure they view you as a serious buyer instead of an aspirational browser still building your savings.

When it comes to down payments, in today’s market it isn’t as much about the amount you put down as it is how much you can comfortably afford to owe. Once you know that, homeownership is in reach.

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Refinance Mortgage 101

By charity.bohuslavizki@nafinc.com November 2, 2017

Why Refinance?

 

Why Refinance?

 

Have your neighbors been talking about refinancing, because of today's low rates and now it's got you thinking? Do you want to pay off your mortgage before your retirement years? Or do you need some extra cash to pay for your child's tuition? There are many reasons why a homeowner might want to refinance, or pay off an existing mortgage with the proceeds from a new mortgage, so it's in your best interest to understand the different types of refinance opportunities available.

Rate and Term Refinancing

Most often a homeowner will refinance to change the way they are currently paying off their mortgage, also called a rate and term refinance. In this case the homeowner doesn't want to change their loan amount, but rather lower their payment, build equity in their home faster, or switch from an Adjustable Rate Mortgage (ARM) to a Fixed Rate Mortgage.

1. Lower Your Payment

If you're a homeowner looking to lower your monthly mortgage payment, there are a few different ways you can go about achieving this.

One method would be to refinance to get a loan with a lower interest rate. You may be able to find a loan with a lower interest rate because of market conditions or a lender may offer you a better deal if your credit score or other financials have improved. For example, if you lower the interest rate on a $200,000, 30 year fixed rate mortgage from 7% to 5%, your monthly payment goes from $1330.60 to $1073.64.

Another method to lower your monthly payment would be to refinance to get a loan with a longer term, ie, the length of time for which you make mortgage payments. For example, if you refinance from a 15 year fixed rate mortgage to a 30 year fixed rate mortgage, your interest rate may increase, as longer-term mortgages generally have higher interest rates, but the result will be an overall decrease in your monthly payments. For example, if you increase the term from 15 years to 30 years on a $200,000 mortgage, and your interest rate goes from 5% to 7%, you still end up with a lower monthly payment, decreasing from $1581.59 to $1330.60. However keep in mind that you end up paying more interest on the life of the loan when you increase the loan term.

2. Build Equity in Your Home Faster/Pay Off Your Loan Sooner/Save Money on Interest Costs

All of these goals are grouped together because the method to go about achieving one goal - refinancing into a shorter-term mortgage, results in achieving these other goals as well. When you refinance into a shorter-term mortgage, for example from a 30 year fixed rate mortgage to a 15 year fixed rate mortgage, you reduce your total interest costs, because you are putting more of your monthly mortgage payment towards the principal. The resulting effect is that you build equity in your home faster, and pay off your loan sooner.

Although shorter-term mortgages generally have lower interest rates, because you are putting more towards your principal, the monthly mortgage payment tends to be higher.

It's important to note, that you do not necessarily need to refinance to achieve these goals. You could always just pay a little extra on principal each month. Check to make sure there are no pre-payment penalties before you start doing this.

3. Switch from an Adjustable Rate Mortgage to a Fixed Rate Mortgage

Adjustable Rate Mortgages (ARM) offer a very low initial interest rate that lasts for a fixed period of time, for example 5 years. After the fixed period expires, the interest rate will start to "adjust" to market interest rate changes. If you don't like the idea of a changing monthly mortgage payment, you may want to refinance into a fixed rate mortgage. Especially if you think rates will begin to increase in the future, this may be a good option for you.

A fixed rate mortgage offers a monthly payment that will never change. However, if your monthly payment includes escrow amounts for taxes and insurance, your payments may fluctuate due to changes in property taxes, insurance, etc. They also tend to have higher rates than ARMs, because with an ARM comes the age-old adage, high risk, high reward. High reward equals a lower initial interest rate, high risk equals the interest rate fluctuating after the initial fixed rate period is over.

Cash-Out Refinancing

Sometimes a homeowner will want to take out a new mortgage with a larger principal than what they are currently carrying, and receive the difference in a cash payment. This is termed cash-out refinancing. It's basically taking the equity out of your home and turning it into cash.

So why might a homeowner need cash? Obviously there are many reasons, but here are the most common instances:

  • To pay for a major expense such as a child's tuition, a new car, or to make home improvements.
  • To consolidate debt, i.e. pay off your credit card that has a high interest rate and consolidate it with your mortgage that hopefully has a lower, more stable rate.
  • To combine first and second mortgages

It's important to understand that when you take equity out of your home for cash, the loan is secured by your home. You also technically own less of your home than before. Be sure that you can afford the payments from your new loan, as you would not want to take the risk of losing your home should anything happen.

So there you have it, an overview of the different refinance opportunities out there, as well as why a homeowner might refinance. Please feel free to share with others that may be interested in refinancing and make your thoughts/opinions known by commenting below.
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Market Update - Halloween Edition

By Nate.Kuchera@nafinc.com October 27, 2017

Market Update - Halloween Edition


Hello everyone and welcome back to the Mortgage Rundown brought to you by New American Funding.  Today I’m going to review what’s happened in the markets these past 12 months and my predictions for the future.

The end of 2016 saw interest rates move higher by 70bps right after around the election of a new US President.  Republicans retained house and senate majority and looked to advance their agendas on tax reform, health care reform and infrastructure spending.  The 10yr finished 2016 at 2.45% and as you can see on your screen it reached an all-time low in July at 1.36%.

In the 1st quarter of 2017, fears of inflation have plagued the markets with many economists calling for the Federal Reserve to raise rates 4 times this year.  Core PCE has almost reached 1.9% and the unemployment rate is right around 4.7%.   The Fed’s dual mandate of below 5% unemployment and 2% inflation is about to be met.  As you can see on this graphic unemployment has been falling continually since 2009.

The 2nd quarter saw inflation falling at a dangerous pace and suddenly the market doesn’t believe the Fed can raise 4 times in 2017.  The market believes that tax reform and health care reform are still on the table.  The 10yr Treasury moved very little.  It started the quarter at 2.38% and finished the quarter at 2.31%.  The graph on your screen shows the change in inflation over the past five years.

The 3rd quarter brought more bad news on inflation with Core PCE and CPI below 2%.   There were two FOMC meetings in Q3 but the Fed made no changes to the benchmark rate during either session. Over the quarter there was rate volatility as the 10yr fell to 2.04% before climbing all the way to 2.33% by September 30th.   

The fourth quarter has begun with a more hawkish tone as there is now an 80% chance the Fed raises rates in December.  Keep a close eye out for more inflation data from October.

Looking into the future, my prediction is that tax overhaul and health care overhaul will continue to stall.  Inflation without an overhauled tax code will remain relatively low.  The Fed’s unwinding of the balance sheet will take precedence over interest rate increases and last but not least the 10yr will remain below 3%.

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Market Update - Halloween Edition

By tina.nikkhah@nafinc.com October 27, 2017

Market Update - Halloween Edition


Hello everyone and welcome back to the Mortgage Rundown brought to you by New American Funding.  Today I’m going to review what’s happened in the markets these past 12 months and my predictions for the future.

The end of 2016 saw interest rates move higher by 70bps right after around the election of a new US President.  Republicans retained house and senate majority and looked to advance their agendas on tax reform, health care reform and infrastructure spending.  The 10yr finished 2016 at 2.45% and as you can see on your screen it reached an all-time low in July at 1.36%.

In the 1st quarter of 2017, fears of inflation have plagued the markets with many economists calling for the Federal Reserve to raise rates 4 times this year.  Core PCE has almost reached 1.9% and the unemployment rate is right around 4.7%.   The Fed’s dual mandate of below 5% unemployment and 2% inflation is about to be met.  As you can see on this graphic unemployment has been falling continually since 2009.

The 2nd quarter saw inflation falling at a dangerous pace and suddenly the market doesn’t believe the Fed can raise 4 times in 2017.  The market believes that tax reform and health care reform are still on the table.  The 10yr Treasury moved very little.  It started the quarter at 2.38% and finished the quarter at 2.31%.  The graph on your screen shows the change in inflation over the past five years.

The 3rd quarter brought more bad news on inflation with Core PCE and CPI below 2%.   There were two FOMC meetings in Q3 but the Fed made no changes to the benchmark rate during either session. Over the quarter there was rate volatility as the 10yr fell to 2.04% before climbing all the way to 2.33% by September 30th.   

The fourth quarter has begun with a more hawkish tone as there is now an 80% chance the Fed raises rates in December.  Keep a close eye out for more inflation data from October.

Looking into the future, my prediction is that tax overhaul and health care overhaul will continue to stall.  Inflation without an overhauled tax code will remain relatively low.  The Fed’s unwinding of the balance sheet will take precedence over interest rate increases and last but not least the 10yr will remain below 3%.

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Market Update - Halloween Edition

By Henry.Durkee@nafinc.com October 27, 2017

Hello everyone and welcome back to the Mortgage Rundown brought to you by New American Funding.  Today I’m going to review what’s happened in the markets these past 12 months and my predictions for the future.

The end of 2016 saw interest rates move higher by 70bps right after around the election of a new US President.  Republicans retained house and senate majority and looked to advance their agendas on tax reform, health care reform and infrastructure spending.  The 10yr finished 2016 at 2.45% and as you can see on your screen it reached an all-time low in July at 1.36%.

In the 1st quarter of 2017, fears of inflation have plagued the markets with many economists calling for the Federal Reserve to raise rates 4 times this year.  Core PCE has almost reached 1.9% and the unemployment rate is right around 4.7%.   The Fed’s dual mandate of below 5% unemployment and 2% inflation is about to be met.  As you can see on this graphic unemployment has been falling continually since 2009.

The 2nd quarter saw inflation falling at a dangerous pace and suddenly the market doesn’t believe the Fed can raise 4 times in 2017.  The market believes that tax reform and health care reform are still on the table.  The 10yr Treasury moved very little.  It started the quarter at 2.38% and finished the quarter at 2.31%.  The graph on your screen shows the change in inflation over the past five years.

The 3rd quarter brought more bad news on inflation with Core PCE and CPI below 2%.   There were two FOMC meetings in Q3 but the Fed made no changes to the benchmark rate during either session. Over the quarter there was rate volatility as the 10yr fell to 2.04% before climbing all the way to 2.33% by September 30th.   

The fourth quarter has begun with a more hawkish tone as there is now an 80% chance the Fed raises rates in December.  Keep a close eye out for more inflation data from October.

Looking into the future, my prediction is that tax overhaul and health care overhaul will continue to stall.  Inflation without an overhauled tax code will remain relatively low.  The Fed’s unwinding of the balance sheet will take precedence over interest rate increases and last but not least the 10yr will remain below 3%.

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Market Update - Halloween Edition

By Alfredo.Arteaga@nafinc.com October 27, 2017

Hello everyone and welcome back to the Mortgage Rundown brought to you by New American Funding.  Today I’m going to review what’s happened in the markets these past 12 months and my predictions for the future.

The end of 2016 saw interest rates move higher by 70bps right after around the election of a new US President.  Republicans retained house and senate majority and looked to advance their agendas on tax reform, health care reform and infrastructure spending.  The 10yr finished 2016 at 2.45% and as you can see on your screen it reached an all-time low in July at 1.36%.

In the 1st quarter of 2017, fears of inflation have plagued the markets with many economists calling for the Federal Reserve to raise rates 4 times this year.  Core PCE has almost reached 1.9% and the unemployment rate is right around 4.7%.   The Fed’s dual mandate of below 5% unemployment and 2% inflation is about to be met.  As you can see on this graphic unemployment has been falling continually since 2009.

The 2nd quarter saw inflation falling at a dangerous pace and suddenly the market doesn’t believe the Fed can raise 4 times in 2017.  The market believes that tax reform and health care reform are still on the table.  The 10yr Treasury moved very little.  It started the quarter at 2.38% and finished the quarter at 2.31%.  The graph on your screen shows the change in inflation over the past five years.

The 3rd quarter brought more bad news on inflation with Core PCE and CPI below 2%.   There were two FOMC meetings in Q3 but the Fed made no changes to the benchmark rate during either session. Over the quarter there was rate volatility as the 10yr fell to 2.04% before climbing all the way to 2.33% by September 30th.   

The fourth quarter has begun with a more hawkish tone as there is now an 80% chance the Fed raises rates in December.  Keep a close eye out for more inflation data from October.

Looking into the future, my prediction is that tax overhaul and health care overhaul will continue to stall.  Inflation without an overhauled tax code will remain relatively low.  The Fed’s unwinding of the balance sheet will take precedence over interest rate increases and last but not least the 10yr will remain below 3%.

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Market Update - Halloween Edition

By brian.keranen@nafinc.com October 27, 2017

Hello everyone and welcome back to the Mortgage Rundown brought to you by New American Funding.  Today I’m going to review what’s happened in the markets these past 12 months and my predictions for the future.

The end of 2016 saw interest rates move higher by 70bps right after around the election of a new US President.  Republicans retained house and senate majority and looked to advance their agendas on tax reform, health care reform and infrastructure spending.  The 10yr finished 2016 at 2.45% and as you can see on your screen it reached an all-time low in July at 1.36%.

In the 1st quarter of 2017, fears of inflation have plagued the markets with many economists calling for the Federal Reserve to raise rates 4 times this year.  Core PCE has almost reached 1.9% and the unemployment rate is right around 4.7%.   The Fed’s dual mandate of below 5% unemployment and 2% inflation is about to be met.  As you can see on this graphic unemployment has been falling continually since 2009.

The 2nd quarter saw inflation falling at a dangerous pace and suddenly the market doesn’t believe the Fed can raise 4 times in 2017.  The market believes that tax reform and health care reform are still on the table.  The 10yr Treasury moved very little.  It started the quarter at 2.38% and finished the quarter at 2.31%.  The graph on your screen shows the change in inflation over the past five years.

The 3rd quarter brought more bad news on inflation with Core PCE and CPI below 2%.   There were two FOMC meetings in Q3 but the Fed made no changes to the benchmark rate during either session. Over the quarter there was rate volatility as the 10yr fell to 2.04% before climbing all the way to 2.33% by September 30th.   

The fourth quarter has begun with a more hawkish tone as there is now an 80% chance the Fed raises rates in December.  Keep a close eye out for more inflation data from October.

Looking into the future, my prediction is that tax overhaul and health care overhaul will continue to stall.  Inflation without an overhauled tax code will remain relatively low.  The Fed’s unwinding of the balance sheet will take precedence over interest rate increases and last but not least the 10yr will remain below 3%.



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Market Update - Halloween Edition

By Beny.Rabuchin@nafinc.com October 27, 2017

Hello everyone and welcome back to the Mortgage Rundown brought to you by New American Funding.  Today I’m going to review what’s happened in the markets these past 12 months and my predictions for the future.

The end of 2016 saw interest rates move higher by 70bps right after around the election of a new US President.  Republicans retained house and senate majority and looked to advance their agendas on tax reform, health care reform and infrastructure spending.  The 10yr finished 2016 at 2.45% and as you can see on your screen it reached an all-time low in July at 1.36%.

In the 1st quarter of 2017, fears of inflation have plagued the markets with many economists calling for the Federal Reserve to raise rates 4 times this year.  Core PCE has almost reached 1.9% and the unemployment rate is right around 4.7%.   The Fed’s dual mandate of below 5% unemployment and 2% inflation is about to be met.  As you can see on this graphic unemployment has been falling continually since 2009.

The 2nd quarter saw inflation falling at a dangerous pace and suddenly the market doesn’t believe the Fed can raise 4 times in 2017.  The market believes that tax reform and health care reform are still on the table.  The 10yr Treasury moved very little.  It started the quarter at 2.38% and finished the quarter at 2.31%.  The graph on your screen shows the change in inflation over the past five years.

The 3rd quarter brought more bad news on inflation with Core PCE and CPI below 2%.   There were two FOMC meetings in Q3 but the Fed made no changes to the benchmark rate during either session. Over the quarter there was rate volatility as the 10yr fell to 2.04% before climbing all the way to 2.33% by September 30th.   

The fourth quarter has begun with a more hawkish tone as there is now an 80% chance the Fed raises rates in December.  Keep a close eye out for more inflation data from October.

Looking into the future, my prediction is that tax overhaul and health care overhaul will continue to stall.  Inflation without an overhauled tax code will remain relatively low.  The Fed’s unwinding of the balance sheet will take precedence over interest rate increases and last but not least the 10yr will remain below 3%.

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5 Home Maintenance Must-Dos for Fall

By Tammie.VanDeusen@nafinc.com October 23, 2017

In many parts of the country, fall is the perfect season. It’s not too hot or too cold, the air is clear and crisp, and the turning leaves create a backdrop for daily life. It’s also the best time to get your house ready for the coming change of seasons. With just a few preventative measures, you can ensure your home will be ready to take on the rougher weather that is sure to follow. Plus, once you’re finished, you can relax and really get outside and enjoy the season.

A Homeowner’s Fall To-Do List

1. Inspect the Exterior

Really look at your home’s outer shell and be on the lookout for things like peeling paint, missing shingles, eroded caulking, clogged downspouts, and loose gutters. By catching and addressing any of these conditions early, you can prevent moisture from penetrating the exterior of your home and potentially damaging your interior walls.

 2. Make a Clean Sweep

It is important to have your fireplace and chimney inspected and cleaned annually if you use them regularly during colder months. This will prevent soot from building up. Even if you do not use them or use gas logs, test your fireplace flue to make sure it forms a tight seal when it’s closed. The loss of heat can be expensive and make a room uncomfortable.

 3. Take It Inside

Scheduling a furnace tune-up ensures that your home will heat itself efficiently and safely, while replacing filters regularly keeps the system running optimally. Installing a programmable thermostat and reversing the direction of your ceiling fans also improve efficiency and heat distribution. Fall is also a time to check the batteries in your smoke and carbon monoxide detectors and run tests to make sure they are functioning properly.

 4. Treat Your Garage Like Your Closet

With the change of season, you will want to bring the equipment and outdoor decorations you plan to use in the coming months to the front and store the planters, tools, and furniture you won’t need until spring in the less accessible areas. Since you won’t be using it in the near future, it’s a good time to send your mower out to have its blade sharpened. It’s also important to make sure each of your cars is equipped with ice scrappers and an up-to-date emergency kit. Additionally, make sure your shovels and any other snow- and ice-removal tools are ready for duty.

 5. Shift Your Yardwork Focus

Think green even as your grass is about to go dormant. Fertilizing now strengthens roots to encourage growth in the spring. Raking also promotes a healthy lawn, and the leaves you collect make good mulch for your garden by helping insulate plant roots against the cold. Once watering is no longer likely, bring in your hoses and turn off the water supply to your spigots. This prevents any potential issues that might arise from water becoming trapped in the pipes and freezing.

We’ve all heard the saying, “An ounce of prevention is worth a pound of cure.” When it comes to your home, fall is the season of prevention. Taking the time to ensure your home is in good shape now can lead to worry-free months ahead.

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5 Home Maintenance Must-Dos for Fall

By Shawn.Gauuan@Nafinc.com October 13, 2017

fall leaves rain gutter

In many parts of the country, fall is the perfect season. It’s not too hot or too cold, the air is clear and crisp, and the turning leaves create a backdrop for daily life. It’s also the best time to get your house ready for the coming change of seasons. With just a few preventative measures, you can ensure your home will be ready to take on the rougher weather that is sure to follow. Plus, once you’re finished, you can relax and really get outside and enjoy the season.

A Homeowner’s Fall To-Do List

1. Inspect the Exterior

Really look at your home’s outer shell and be on the lookout for things like peeling paint, missing shingles, eroded caulking, clogged downspouts, and loose gutters. By catching and addressing any of these conditions early, you can prevent moisture from penetrating the exterior of your home and potentially damaging your interior walls.

2. Make a Clean Sweep

It is important to have your fireplace and chimney inspected and cleaned annually if you use them regularly during colder months. This will prevent soot from building up. Even if you do not use them or use gas logs, test your fireplace flue to make sure it forms a tight seal when it’s closed. The loss of heat can be expensive and make a room uncomfortable.

3. Take It Inside

Scheduling a furnace tune-up ensures that your home will heat itself efficiently and safely, while replacing filters regularly keeps the system running optimally. Installing a programmable thermostat and reversing the direction of your ceiling fans also improve efficiency and heat distribution. Fall is also a time to check the batteries in your smoke and carbon monoxide detectors and run tests to make sure they are functioning properly.

4. Treat Your Garage Like Your Closet

With the change of season, you will want to bring the equipment and outdoor decorations you plan to use in the coming months to the front and store the planters, tools, and furniture you won’t need until spring in the less accessible areas. Since you won’t be using it in the near future, it’s a good time to send your mower out to have its blade sharpened. It’s also important to make sure each of your cars is equipped with ice scrappers and an up-to-date emergency kit. Additionally, make sure your shovels and any other snow- and ice-removal tools are ready for duty.

5. Shift Your Yardwork Focus

Think green even as your grass is about to go dormant. Fertilizing now strengthens roots to encourage growth in the spring. Raking also promotes a healthy lawn, and the leaves you collect make good mulch for your garden by helping insulate plant roots against the cold. Once watering is no longer likely, bring in your hoses and turn off the water supply to your spigots. This prevents any potential issues that might arise from water becoming trapped in the pipes and freezing.

We’ve all heard the saying, “An ounce of prevention is worth a pound of cure.” When it comes to your home, fall is the season of prevention. Taking the time to ensure your home is in good shape now can lead to worry-free months ahead.

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