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Do-It-Yourself Energy Audit

An Energy Audit could cost you $500. Some utility companies will do them for free. But you can easily do your own energy audit—so you can get a general idea of what needs to be fixed/updated—and THEN, hire an expert to help you.

Here’s a checklist of the problem areas that may need energy-efficient upgrades:

Air Leaks:

On a windy or cool day, check to see if air can flow thru these places:

• Loose (ill fitting) baseboards; window frames; electrical outlets/switches;
• Doors; attic hatch; fireplace; wall-mounted air conditioning units; foundation seals; door mail slots; corners on exterior of home; chimney where siding and roof meet.
• An easy way to find “air leaks” inside the home is to close all doors, windows and use an incense stick. The moving air will cause the smoke to waver.

 

Insulation:

At the time your home was built, the insulation probably met builder specs, but the level of insulation may no longer be adequate. R-25 is the recommended minimum. Things to check are: Weather stripping around the attic hatch; depth of insulation in your attic; insulation around electrical boxes, insulation wraps around plumbing pipes; insulation in basement ceiling.

Checking insulation in the walls can be tricky. Turn off the electricity, remove a couple of switch plates and check for insulation or foam depth. If you suspect inadequate insulation in the walls, you might want to spring for a Thermographic Inspection.

Heating/Cooling Equipment:

Have your furnace and air conditioning units checked at least once a year. If you have a forced-air furnace, replace filters and clean.

If your furnace is more than 15 years old, you may want to consider replacing it—and take advantage of the tax credit incentives available thru the State and Federal government.

Lighting:

Consider compact fluorescent bulbs for your overhead light fixtures and lamps. They are expensive, but last longer. However, you could also consider replacing a 100-watt bulb with a 75-watter—which will save money as well. Fun fact: Lights account for about 10% of your electrical bill.

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Can You Afford A Home?

To find out what house you can afford discuss with your GSF Mortgage professional and we can help you pre-qualify for a loan. This will let you know how much you can afford and boost your bargaining power with home sellers.

Lenders like GSF Mortgage base how much you can afford on a variety of factors:

Monthly Payments.?Many lenders require your total mortgage payment, including principal, interest, property taxes and property insurance to be no more than 28%-33% of your gross monthly income depending on your down payment.

Debts.?Lenders generally require your monthly ownership costs (mortgage interest, principal, property taxes and insurance) plus other monthly debt payments (car loan, student loan, credit card payments), to be no more than 36%-38% of your gross monthly income.

Credit Record.?Your credit rating will be reviewed and a credit score will be based on these numbers. A credit score is a number that helps lenders and others predict how likely you are to make your credit payments on time.

Employment record.?Lenders will look more favorably on someone who has had the same job or occupation for the past several years than someone who has changed fields frequently.

If you are self-employed or work on a commission, some lenders will require more financial documentation, including personal and business tax returns, balance sheet, and profit-and-loss statements. 

If you would like to determine how much home you can afford, give me a call at GSF Mortgage today!

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Some factors that help determine your credit score…

Your monthly principal and interest charges are determined by the rate and the amount of the loan. The rate and loan amount, in turn, are affected by several factors. On of the most important factor is your credit score.
Mortgage lenders closely scrutinize your financial history to determine whether to approve your loan application. Your primary concern should be:

• Your credit report, which details your payment history on all loans, bankruptcy filings and other financial information.
• Your credit score, which uses your credit report to arrive at a numerical representation of your overall creditworthiness.

Credit scores (sometimes called FICO scores, after Fair Isaac Corp., the firm that created the most commonly used form) range from the 300s to about 900, with most homebuyers falling in 600s and 700s.

The higher your credit score, the less risky you appear to a lender. A good credit score will help you qualify for a mortgage loan and obtain better terms.

Factors used to determine your credit score
Past delinquency:	Those who have failed to make payments in the past tend to do so in the future. The more recent a delinquency, the more it counts against you; a 30-day delinquency within the past 12 months hinders your chances of getting favorable mortgage terms.
Length of credit:	The longer you’ve had credit, the better.
Credit use:	If you’re maxed out or close to your credit limits, you’re viewed as risky.
Mix of credit:	Someone with a combination of revolving and installment debt is considered less risky than one with only a secured credit card.

 

Cleaning up your credit report
Why check your credit report before your lender does? Because an estimated four out of five credit reports contain some kind of misinformation — errors you’ll want to clear up before approaching any lender.
Obtain copies of your credit report from all of the big three credit reporting agencies: Equifax, Experian and TransUnion. Each probably will differ from the others in small ways.

Tips for cleaning up your credit report

• Look closely for any errors and correct them.
• Note late payments and credit balances; you may have to explain them to a lender.
• Compare account numbers to make sure they’re yours.
• Pay all bills on time.
• Learn more about credit scores and how they’re calculated.

Feel free to contact me at GSF Mortgage in Aurora about your credit score. I would like the opportunity discuss your current score with you and what, if anything, you can do to boost your score.

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How Much Do I Need to Put Down?

The down payment concept is an easy one. The more money you can put down, the less your mortgage payment will be.  Scraping up that initial down payment takes some effort. Though FHA loans require a less substantial down payment than conventional loans, it can still be a huge chunk of money for a young person or couple. Don’t lose hope if you don’t have the standard 20% in your account.

Most mortgage lenders require a cash down payment of anywhere from 5 percent to 20 percent of the sale price. Some lenders have zero-down mortgage programs that are still in existence, but these are rare. If you can put down more than your lender requires, say 25 percent to 30 percent, your lender may be willing to overlook credit blemishes. If you come up short on the down payment, with less than 20 percent of the buying price, before your loan is approved you may have to obtain private mortgage insurance, or PMI, to protect the lender.

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Mortgage Insurance – When Can It Be Cancelled?

Both types of loans have certain rules where mortgage insurance must be eliminated after a certain period of time—and under certain conditions.  

Dropping Conventional Mortgage Insurance Rules: 

Automatically Deleted When:

• Mortgage balance is reduced to 78% LTV
• LTV based upon ORIGINAL VALUE
• Based SOLEY on regular amortization (not prepayment of principal) 
• Mortgage payment must be current 

You Request Mortgage Insurance be Deleted

• Mortgage Balance is Reduced to 78% LTV
• Submit cancellation request in writing
• Good payment history
• Current on mortgage payments
• Appraisal or Certification that property value has not decreased BELOW the original value
• No 2nd liens or subordinated loans on property 

Dropping FHA Mortgage Insurance Premium Rules:
If your loan closed PRIOR to January 1, 2001, you are NOT eligible for termination of MIP (monthly insurance premium) if closed on January 1, 2001 and after, MIP will be automatically terminated under the following conditions.  

More than 15-year term

• Must pay for 5 years AND
• 78% LTV based on original LTV 

15-Year Term or less

• If original loan amount is 90.01% or more, of the original appraisal value, MIP will be terminated at 78%
• 5-year minimum payment waived
• If original loan amount is 90% or less, of the original appraisal value, NO monthly MIP was charged. 

SPECIAL NOTE:  Loan-to-Value for purchases based on the lower of the sales price or appraisal value
Loan-to-Value for refinances based on appraisal value
Loan-to-value figured on base loan amount WITHOUT the Upfront Mortgage Insurance for FHA loans. 

If you would like for me to determine if you can cancel your mortgage insurance, please call me at GSF Aurora today!

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House Hunting 101

You have your credit in check and you know how much you can afford.  GSF Mortgage has preapproved your loan.  You are ready to hit the pavement in search of your dream home.

Before you get started, there are a few items you need to consider, which in turn will make your house hunting experience even more rewarding.  Your first step here is to figure out what city or neighborhood you want to live in. (Remember the old saying about “location, location, location.”)

For overall demographics and data on metropolitan areas, you can visit a city site like CNNMoney.com’s annual Best Places to Live list. For more detailed neighborhood information, check out sites like Yahoo! Real Estate, Trulia.com, Zillow.com or NeighborhoodScout for comprehensive school and demographic information on a number of communities. Look for signs of economic vitality: a mixture of young families and older couples, low unemployment and good incomes.

A list also helps in the home buying process.  Do you (and your spouse, if you’re married) really know what you need and want in your home? You’ll save yourself many hours of shopping and potentially arguing if you make a list ahead of time. Zero in on the features you must have, would like to have, definitely don’t want and would prefer not to have. Your goal is to find the right home for your family without falling in love with one that doesn’t suit your needs. Tip: Start compiling your wish list by thinking about what you like and dislike about your current living space.

Your real estate agent (try Home Buyers Realty Corp in Aurora!) should be able to show you listings and have an email with current listings that can be sent to you for updates. Incidentally, if you have the flexibility, consider doing your house hunt in the off-season — meaning, generally, the colder months of the year. You’ll have less competition and sellers may be more willing to negotiate.

If you’re a first-time buyer, pay special attention to condominiums and cooperatives, or co-ops. Condos generally sell for 15 percent to 20 percent less than the cost of comparable detached homes in the same neighborhood, so you get much more space for your money.

When you actually start touring homes, bring a notebook and a digital camera to help you remember details. Your real estate agent should supply you with a description of each house and the lot it sits on, the property tax assessment, the asking price, and sometimes a diagram of the rooms. Your camera and notebook are there to record other details, ranging from the cost of heating to the view out the rear window.

Granted, buying a home is a major life-altering event. But it’s not worth making yourself stressed about it. Save time at the end of your house-hunting expedition to unwind, calm your thoughts and emotions and keep the whole experience in perspective. 

Feel free to contact me with any house hunting questions or concerns you may have. I am here to help not only on your mortgage loan, but also in this entire process.

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Government Home Buying Programs

If you need extra help getting into a home, call GSF Mortgage to discuss if you might qualify for any of these special mortgages. The US Government is there to help you purchase the home of your dreams. These programs offer refer to “low-income home buying program” and usually covers a broad range of topics, which is why it confuses a lot of home buyers.

What exactly does the government have to offer?

Usually, this assistance takes place in the form of insurance. A third-party organization (such as those listed below) will insure a loan made by a mortgage lender. This makes the mortgage lender more inclined to offer the loan, despite the home buyer’s low-income situation.

With that basic definition out of the way, let’s look at some different types of low-income home buying programs, services and resources:

Fannie Mae & Freddie Mac

Fannie Mae and Freddie Mac are private corporations founded and sponsored by the U.S. government. Both organizations help low- to middle-income families purchase homes, and in very similar ways. Though you normally won’t deal directly with these organizations, they do have a role in making mortgage loans affordable for low-income home buyers.

Fannie Mae stands for the Federal National Mortgage Association (FNMA). This organization was created by Congress in 1938. In their own words, Fannie Mae “provides financial products and services that make it possible for low-, moderate-, and middle-income families to buy homes of their own.”

Freddie Mac is the Federal Home Loan Mortgage Corporation. This organization was chartered by Congress in 1970. Freddie Mac supports the secondary mortgage market by purchasing residential mortgage loans and reselling them to investors on Wall Street. This increases the availability and affordability of home loans for low- and middle-income Americans.

Federal Housing Authority

The Federal Housing Authority (FHA) also supports low-income home buying in the U.S. The FHA was created as part of The National Housing Act of 1934. The organization supports the home financing system by insuring mortgages. In other words, they help low-income home buyers qualify for mortgage loans they might not otherwise qualify for, by insuring those loans.

Rural Housing Authority

The Rural Housing Authority (RHA) is another government organization that can assist low-income home buyers in certain situations. The RHA is part of the United States Department of Agriculture (USDA). Unlike the organizations mentioned previously, the RHA actually makes direct loans to home buyers, among other things. They also guarantee regular commercial loans for home buyers in rural areas.

Veteran’s Administration Home Loans

The Veteran’s Administration (VA) helps low-income home buyers (and all home buyers, for that matter) by guaranteeing loans made by mortgage lenders. The VA does not actually make direct loans. The VA home loan program is reserved for military veterans and their spouses. Applicants to the program must obtain a Certificate of Eligibility that they will in turn present to their mortgage lender.

Feel free to contact me about how the government can help you get into the home of your dreams.

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What Are Points?

As you have been learning about the mortgage process and rates, I am sure you have come across mortgage points.  Though the term might seem abstract, the concept is actually quite simple. Mortgage points describe certain charges to be paid in order to obtain a mortgage on a home. Each mortgage point is a fee based on one percent of the total amount of the loan.

Borrowers should bear in mind that there are two different kinds of mortgage points – discount points and origination points.

Discount points refer to an amount of money paid to a lender to obtain a loan at a specific interest rate. These points are like pre-paid interest on a loan that a borrower takes out for a new home, with each point equaling to 1% of the total principal amount of the loan. For example, if a loan is for $100,000, one point is worth $1,000. Each point one purchases will therefore lower his or her interest rate by some amount. Most borrowers will be able to decide how many points they wish to purchase. However, they are usually limited to purchasing around four points. The number of points a borrower chooses to purchase will depend on how much he or she wishes to lower his or her interest rate. Discount points are paid at closing, and, although buyers may not pay points on FHA or VA guaranteed loans, sellers can. On most mortgages, either the buyer or seller can pay the points; alternatively, the two parties can split the payment between themselves. An important feature of mortgage points is that they are tax deductible as a home mortgage interest if the deductions are itemized on Form 1040, Schedule A.

Origination points are used to pay for the costs of obtaining the loan in the first place. They are much less popular than discount points, as they do not provide borrowers with any valuable benefits and are not tax deductible. Borrowers are therefore better off trying to get a loan that does not require them to acquire these kinds of points.

The decision to get mortgage points depends on a few key considerations. The length of time one plans to live in the house and the amount of the down payment one will be putting down are two such factors. A mortgagor who plans to live in the house for many years would benefit from obtaining discount points because they will lower the interest rates for the long term.

I would love to show you what your rate could be if discount points were offered. Please feel free to call or email me at GSF Mortgage Aurora regarding points.

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What Happens at Closing?

The closing of a home consists of all the final steps, necessary documents and signing of papers to sealing the deal on a home purchase.  Included in the closing are the following documents:  The offer to purchase The deposit – This is also called earnest money, this is a demonstration of good faith and commitment by the buyer to the seller. Contingencies – These are certain requirements specified in a contract that need to be met before the buyer is required to close. Typical among them: the buyer’s securing of financing and an acceptable house inspection. Home inspection – In a home inspection, a professional conducts a thorough examination of a property to assess its structural and mechanical condition.   The contract – This follows the acceptance of an offer by the seller, and it is a legal and binding obligation, on the part of the buyer, to purchase the property if any contingencies are met. It outlines the details of the transaction, including: a description of the property, the selling price, the date of closing, the possession date and any applicable contingencies. Settlement sheet – Also called a “closing statement” or a “settlement statement,” this is a document that the Department of Housing and Urban Development requires to account for all financial aspects surrounding the sale and purchase of a home. It provides an enumerated list of the funds that were paid at closing. Items on the statement include real estate commissions and initial escrow amounts (money or securities deposited with a neutral third party — the escrow agent — to be delivered upon fulfillment of certain conditions). The Real Estate Settlement Procedures Act requires that a copy of the settlement sheet be distributed to both parties at least one day prior to settlement. Closing documentation – Before you can close on a house, some paperwork must be completed. This includes a title search to make sure the title is clear, title insurance to protect the buyer and the lender from an oversight regarding a claim on some aspect of the property and an application for homeowner’s insurance. Closing costs – The total amount of closing costs varies, but may include: a loan origination fee, an appraisal fee, the cost of a credit report, a lender’s inspection fee, the cost of title insurance, a mortgage broker fee, taxes and a fee for document preparation. Final arrangements – Before the deal is closed and you take possession, you must make some practical arrangements regarding utility service and first mortgage payment. Settlement – Settlement describes the payment of the balance of the purchase price the buyer owes on the property, and the transfer of the title. It takes place on the possession date specified in the agreement.  If you have more specific questions about the mortgage process, do not hesitate to contact us at GSF Mortgage, Aurora, IL.

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How Do You Avoid House Hunting Headaches?

House hunting and applying for a mortgage is a big financial step in your life.  How do you make this process go smoothly and be less stressful?  Below are some tips on making this a positive move. Find a REALTOR® who you can relate to. Home buying is not only a big financial commitment, but also an emotional one. It’s critical that the agent you choose is both skilled and a good fit with your personality. Remember, there’s no “right” time to buy, any more than there is a right time to sell. If you find a home now, don’t try to second-guess the interest rates or the housing market by waiting. Changes don’t usually occur fast enough to make that much difference in price and a good home won’t stay on the market long. Don’t ask for too many opinions. It’s natural to want reassurance for such a big decision, but too many ideas will make it much harder to make a decision. Accept that no house is ever perfect. Focus in on the things that are most important to you and let the minor ones go. Don’t try to be a killer negotiator. Negotiation is definitely a part of the real estate process, but trying to “win” by getting an extra-low price may lose you the home you love. Remember your home doesn’t exist in a vacuum. Don’t get so caught up in the physical aspects of the house itself – room size, kitchen – that you forget such issues as amenities, noise level, etc., which have a big impact on what it’s like to live in your new home. Don’t wait until you’ve found a home and made an offer to get approved for a mortgage, investigate insurance availability, and consider a schedule for moving. Presenting an offer contingent on a lot of unresolved issues will make your bid much less attractive to sellers. Factor in maintenance and repair costs in your post-home buying budget. Even if you buy a new home, there will be some costs. Don’t leave yourself short and let your home deteriorate. Accept that a little buyer’s remorse is inevitable and will probably pass. Buying a home, especially for the first time, is a big commitment, but it also yields big benefits.

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