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Mortgage Help Desk

What Is PMI?

What Is PMIPrivate mortgage insurance, or as many lenders call it PMI, is a an insurance policy that a buyer must obtain to be offered a risk based loan. This insurance policy is put into place to protect the lender should the borrower default on the loan.  If a buyer defaults on a home loan, the insurance company will reimburse the lender for associated losses.

Conventional Loans: On Conventional loans, PMI is required unless a buyer puts down at least a 20% down payment. There are some loan programs that will allow you to put down less than 20% without obtaining PMI but typically, the lender will attempt to cover the loan risk by increasing the rates or closing costs in the loan. Sometimes these increases can be a more costly option over the life of the loan. So, do your homework when comparing loan options and ask lots of questions.

FHA Loans: FHA loans generally require the buyer to pay Mortgage Insurance for the entire life of the loan. However, if the buyer is able to put 10% or more down, Mortgage Insurance will be required for only 11 years of the loan. Regardless of down payment amount, mortgage insurance is required for at least 11 years with an FHA loan. This is the major difference in PMI between FHA and Conventional loan.

If you are trying to avoid mortgage insurance, discuss with your loan officer the options of  a USDA loan or a VA loan if you are a veteran. Also, keep in mind while making a decision that Mortgage Insurance is a tax deductible cost. Review all options and work with your loan officer on the best option for you and your family.

By: Jason Justice, First Commonwealth Mortgage

Should you have any additional questions about the lending process in Louisville, KY, we invite you to contact one of our preferred lenders Jason Justice with First Commonwealth Mortgage or contact a member of At Home In Louisville Real Estate Group today.


How Much Do I Need For A Down Payment?

How Much Down Payment For A House Many first time home buyers as well as individuals moving up are curious how much they'll need for a down payment with current market conditions. We recently spoke to one of our preferred lenders, Jason Justice with First Commonwealth Mortgage, and he provided some great information!

How much do you need for a down payment? Well it depends on three things: which loan programs you can get approved for, which loan program suites your financial goals, and which area of Louisville you'd like to buy in. 

Also, please keep in mind that in addition to down payment money for each loan program you will also need money for closing costs. Closing costs can be worked into your purchase offer or even be gifted to you by a family member.  Once you locate the home of your dreams, your banker and Realtor in Louisville Ky will sit down with you and draw up the best game plan for you to purchase and meet your financial goals.  This is another reason why it is so important to get pre-approved prior to making an offer and also to have a great agent to negotiate for you. Below is a list of the four most popular loan programs used to purchase a PRIMARY residence as well as a quick rundown of what you would need for a down payment. 

1) FHA-  3.5% of the purchase price is required for a down payment. The 3.5% down has to come from buyer funds or a buyer's family member as a gift.

2)  VA- No money down required.  You have to be a veteran, spouse of deceased veteran, or active duty military to qualify for a VA loan.

3) USDA (aka Rural Housing)- No money down required.  You have to purchase a home outside of Jefferson County and buy in an approved USDA county.  Typically, most of the counties that surround Jefferson County are approved for USDA.

4) Conventional- As little as 5% down payment is required.  20% down payment might be required if the borrower/buyer has a lower credit score.  When putting personal money down along with gift money on a conventional loan, the buyer must have 5% personal funds verified before any gift funds can be received.  Gift funds can be used on top of the 5% personal funds to increase down payment or contribute to closing costs.  The only exception to this rule with a conventional loan would be if the buyer is getting a 20% gift. If the buyer receives a 20% gift they would not be required to provide 5% of their own funds.    

Again, in order to get qualified for any of the programs above the first step is to get pre-approved and find a great realtor! Your lender and realtor can work hand in hand to locate a home that fits your needs and a financial plan that works to your advantage. Getting preapproved is a simple process and free.  To learn more about home loan preapproval in Louisville and down payment requirements, feel free to contact Jason Justice or At Home In Louisville Real Estate Group.

By: Jason Justice, First Commonwealth Mortgage


How does the lender determine the maximum loan amount I can afford?

Maximum Loan AmountHow does the lender determine the maximum loan amount an individual can afford?

According to Jason Justice with First Commonwealth Mortgage, the lender looks at several things to determine what you can afford.  The three major factors a lender will consider are credit score, gross income, and loan program.

1) Credit score: Your credit score will determine the maximum debt ratio the lender will approve.  Debt ratio is the percentage of a consumer's monthly gross income that goes toward paying debts.  Therefore, a high or low credit score can increase or decrease the available loan amount.  

2) Total gross income for all applicants on the loan:  Gross base income is used to determine your household income.  If you have two years history of receiving commission, bonuses, or overtime, then that income can also be included and will help to qualify you for a higher loan amount.  Once the gross income is determined, the lender calculates a max ratio that will allow you to pay your new house payment as well as your current debts.

3) The particular loan program you are applying for: The type of the loan program you are applying for may define how much a lender can offer you.  Loan program guidelines play a large role in determining your loan amount.

If you have other questions about home loans in Louisville, KY- Jason Justice, with First Commonwealth Mortgage would be glad to discuss them with you.  To learn more about Louisville Real Estate and homes loans in Louisville, Ky please explore our website or contact a member of At Home In Louisville Real Estate Group today. 


How Do I Get Preapproved for a Home Loan In Louisville KY?

Preapproval Home Financing In Louisville KYA lot of home buyers experience anxiety and have common misconceptions about the mortgage preapproval process. Sitting down with a mortgage banker might even seem torturous.  Many buyers worry about finding time for the appointment or believe getting preapproved will cost money.  Getting preapproved for a home loan is actually a fairly simple process and totally free.  Preapproval can now be done online, via phone, and email which saves consumers time.  No need to take a half day off of work or take a long lunch! If you like, First Commonwealth Mortgage (one of our recommended lenders) can send you an Adobe PDF application over e-mail.  Preapproval in Louisville KYThey will ask you to return a short list of items including your last two paystubs and W2’s.  Once you send back the application and requested documents, pre-approval can be completed within 24-48 hours. The lender will then give you a call back to review your preapproval via phone or in person.  Pre-approval can be quick, painless, and convenient!  To learn more about financing a home in Louisville or Louisville Real Estate feel free to contact At Home In Louisville Real Estate Group.





Can I purchase a home after selling mine through a short sale?

Buying a Home After a Short Sale

Have you sold your home through a short sale?  Do you wonder if and when you will be able to purchase a home again?  According to one of our recommended lenders at First Commonwealth Mortgage, a three year waiting period may be required before your next purchase, however; this is only required when mortgage payments become delinquent.  Paying your mortgage on time throughout the short sale process may allow you to purchase without the three year waiting period.  If mortgage payments are made on time, the loan will not be put into a foreclosure status when the bank reports it to credit companies.  This means individuals might be able purchase a new home with an FHA loan even after a short sale.  If you would like to learn more about purchasing a Louisville home or financing in Louisville, Ky please contact At Home In Louisville Real Estate Group.




Mortgage Rates Fall to Record Lows

This just in from the Washington Post:

Interest rates on 30-year fixed-rate mortgages averaged 4.57 percent this week, Freddie Mac reported this morning. That's down just a hundredth of a percentage point from last week's average rate, but it marks the third consecutive week of record-setting lows for the most popular type of home loan. Freddie Mac has been tracking this rate for 39 years.

The 5/1 hybrid loans that are fixed for five years and then convert to an annual rate-adjustment schedule also hit a new low, 3.75 percent. Freddie started tracking that series in 2005.

Mortgages fixed for 15 years rose to 4.07 percent from last week's 4.04 percent. One-year adjustable-rate mortgages pegged to the Treasury index averaged 3.75 percent this week, down from last week's 3.8 percent.

The amount of up-front interest, called points, has remained steady for many weeks, averaging 0.7 point for each type of mortgage. One point equals 1 percent of the loan amount, and a loan with higher points typically carries a lower interest rate.

If you are thinking about buying (or even refinancing), this certainly merits consideration. Who knows how long they will stay this low?


Federal Tax Credit Filing Deadline Extended

Good news! According to the Federal Housing Tax Credit website:

For home purchases where a binding sales contract was signed by April 30, 2010, otherwise qualified buyers now have until September 30, 2010 to complete the purchase. Congress has extended the closing date to provide buyers who had binding sales contracts in place by April 30, 2010, additional time to complete their purchases.

Chances are that if you had secured a contract on a new home by April 30 and are hoping to qualify for the tax credit, you already know this, but if not, we just made your day!