tag:blogger.com,1999:blog-59369498117168324382024-03-13T04:49:03.856-07:00South Bend Home LoanLori Hiscockhttp://www.blogger.com/profile/03619139661832096700noreply@blogger.comBlogger85125tag:blogger.com,1999:blog-5936949811716832438.post-36416344261285683122018-08-09T10:52:00.000-07:002018-08-09T10:52:01.527-07:00Saving Money With a Higher Interest Rate<b>"So wait...you're telling me you want me to pay a HIGHER interest rate for my mortgage?"</b><br />
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By the incredulous sound to his voice, I could tell that Mat thought I was crazy. His Realtor had referred him to me for a second opinion on his mortgage even though he was already preapproved with another lender, and he was clearly wondering what his Realtor had been thinking.<br />
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<a href="https://1.bp.blogspot.com/-v99taCOrn10/W2xs1fNtEbI/AAAAAAAA9Do/e1-gTXnlDKYAsB_IO5gg1EsweKFkgdp7wCLcBGAs/s1600/saving%2Bmoney%2Bpic.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="358" data-original-width="636" height="180" src="https://1.bp.blogspot.com/-v99taCOrn10/W2xs1fNtEbI/AAAAAAAA9Do/e1-gTXnlDKYAsB_IO5gg1EsweKFkgdp7wCLcBGAs/s320/saving%2Bmoney%2Bpic.jpg" width="320" /></a>"Yes, Mat, I want you to consider paying a higher interest rate. If you do, your monthly mortgage payment will be lower and your tax refunds will be bigger. Are you open to hearing how we can get creative to save you some serious money?" I replied.<br />
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"OK...I'll listen. I already don't get it, but I'll listen. Lay it on me..."<br />
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<h3>
All PMI Rates Are NOT The Same</h3>
Mat's suspicion made sense. The interest rate is what makes a mortgage payment higher or lower, right? well, yes, it is one piece that makes a payment higher or lower, but <b>it's not the only piece</b>. To understand this, you need to know exactly what makes up a mortgage payment.<br />
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<b>Typically, a mortgage payment includes the principal and interest on the mortgage loan, the property taxes on the house, the insurance on the house and something called private mortgage insurance (PMI). </b>PMI is something a home buyer typically pays as part of their payment when they are not putting 20% down on the price.<br />
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<b>What most home buyers don't realize is that all PMI rates are not the same. </b><b>Different loan types require different amounts of coverage. If the required coverage is lower, the cost for PMI each month is lower making the total monthly payment lower. </b><br />
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"Mat, I want you to consider participating in a down payment assistance program offered by Indiana Housing and Community Development Authority, known as IHCDA. You would get a conventional loan, just like you'd wanted, with only 3% down needed. IHCDA would cover that 3% down payment for you."<br />
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"But I have 3% saved up for the down payment. I don't need down payment assistance so why should I pay a higher interest rate for it? Didn't you say this rate was 0.25% higher than what the other bank was quoting me?"<br />
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"I'm glad you have savings available because you'll need some of that for the closing costs and prepaid items when you buy. And yes, Mat, the interest rate with this program is <b>0.25%</b> higher currently but, because this is a state sponsored program, the PMI coverage required for your credit score costs <b>0.37%</b> less annually so paying the higher interest rate but lower PMI will make your total monthly payment lower."<br />
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"Really? That just seems so strange. I get what you're saying though, and I really do want the lowest payment I can get. But didn't you say something about my tax refund being bigger too? What was that part?"<br />
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"Ahh yes....the tax refund part...you're going to love this..."<br />
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<h3>
Getting a (Much) Bigger Tax Refund</h3>
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"Mat, the IHCDA program I'm recommending not only covers your down payment and gives you cheaper mortgage insurance, it lets your participate in a Mortgage Credit Certificate program."<br />
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"A what? I've never heard that phrase. The other lender didn't mention it at all. What is it?"<br />
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<b>"A Mortgage Credit Certificate program, often referred to as a MCC, is a federal program for eligible first time home buyers that allows you to get between 20 and 35 percent of the interest you pay each year back as an income tax credit. </b>I would estimate your credit at around $850 which means your tax refund after the first full year of home ownership should be around $850 more than it would be if you weren't enrolled in the MCC."<br />
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"Wow! Is that for the first year only? Or does it go three or five years or something?"<br />
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"Even better than that Mat. <b>It goes for the entire life of your loan</b>. As long as you live in this house and pay on this mortgage, you will be eligible for this credit."<br />
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"Well that's cool. Why didn't the other lender mention this stuff? He just quoted me a rate and didn't talk about it at all."<br />
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"That's why your Realtor recommended you talk to me too. I'm glad he did and I'm glad you listened to him. So shall we take the next steps to finish your preapproval?"<br />
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Mat said yes, and we got him fully preapproved and ready to roll. Three weeks later he found his house, used the IHCDA program, and closed a month later with less money needed at closing, a lower monthly payment and everything in place for even more savings at tax filing time.<br />
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<b>Does bringing less upfront, having a lower payment and saving money at tax time sound interesting to you? If so, give me a call or drop me a line! Together we'll see if using IHCDA's down payment assistance program and the Mortgage Credit Certificate can help save you money too.</b><br />
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<em style="font-family: Arial, serif; font-size: 14px; line-height: 22px;"><em style="line-height: 22px;"><strong>Lori Hiscock is a Sr. Loan Officer and Branch Manager at <a href="http://www.ruoff.com/" style="color: #fc8901; text-decoration-line: none;" target="_blank" title="Ruoff Home Mortgage"><span style="color: #8c9a01;">Ruoff Home Mortgage</span></a>‘s South Bend office. One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University. You can connect with <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration-line: none;" target="_blank" title="Lori Hiscock's LO page"><span style="color: #8c9a01;">Lori Hiscock</span></a> or <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration-line: none;" target="_blank" title="Lori Hiscock Online Application"><span style="color: #8c9a01;">apply online</span></a> here.</strong></em><span style="font-family: verdana, sans-serif; font-size: xx-small;"> </span><strong style="font-family: verdana, sans-serif; font-size: x-small;"><em>NMLS#404320.</em></strong></em></div>
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<span style="font-family: arial, sans-serif; font-size: 10.5pt;">Ruoff Mortgage Company, Inc. is an Indiana corporation licensed by the Indiana Department of Financial Institutions (DFI) and operates with the following licenses:<br /><br /><b>Indiana-DFI First Lien Mortgage Lending License #10994;<br />IL Residential Mortgage Licensee #MB.6760734;<br />Michigan 1st Mortgage Broker/Lender License #FL0017496.</b></span></div>
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<b><span style="font-family: arial, sans-serif; font-size: 10.5pt;">Ohio Mortgage Broker Act License #MBMB.850220.000<o:p></o:p></span></b></div>
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<b><span style="font-family: arial, sans-serif; font-size: 10.5pt;">The Florida Office of Financial Regulation License #MLD1182</span></b></div>
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<br />Lori Hiscockhttp://www.blogger.com/profile/03619139661832096700noreply@blogger.com0tag:blogger.com,1999:blog-5936949811716832438.post-51394815746937407672018-01-02T11:50:00.000-08:002018-01-02T11:50:19.958-08:00Why I Love/Hate Credit KarmaI love that there is a Credit Karma in the world today. Never before has the general public had such quick and easy access to their credit information. Not only does Credit Karma share credit scores with them, it gives them information on what is driving that credit score and steps they can take to potentially improve it. Yep, I love Credit Karma.<br />
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<a href="https://4.bp.blogspot.com/-RxFmglh54zY/WkviJxFOprI/AAAAAAAA4cY/L6tRT6KZaRsdagbkANu59PbDPl2vSzI0ACLcBGAs/s1600/credit%2Bscore.JPG" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="385" data-original-width="737" height="167" src="https://4.bp.blogspot.com/-RxFmglh54zY/WkviJxFOprI/AAAAAAAA4cY/L6tRT6KZaRsdagbkANu59PbDPl2vSzI0ACLcBGAs/s320/credit%2Bscore.JPG" width="320" /></a>As a mortgage lender, though, I also kind of hate it. While it tells people their credit score, it's not the same credit score I'll be using for their loan application which regularly leads to disappointment for my clients.<br />
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So why isn't it the same score? Good question. Let me explain.<br />
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What Credit Karma Is</h3>
<b>Credit Karma is a custom credit score calculated with the VantageScore scoring model. </b>The VantageScore is a scoring model that was created by the three main credit reporting agencies (Equifax, Experian and TransUnion) back in 2006.<br />
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To clarify, a 'scoring model' is just a term for the way the math is done. These mathematical models are complex algorithms that look at all of the components of a person's reported financial picture (payment history, balances, collections, judgements, etc.) and calculate a number that lenders can use to determine just how high the risk is when they make a loan to a person.<br />
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While use of the VantageScore scoring model has been growing since its creation, it is still not the primary credit scoring system out there. The main scoring model out there today is the FICO score.<br />
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What Credit Karma Is Not</h3>
<b>A Credit Karma score is not the same as a FICO score. </b>FICO has been around since 1989 and is the leader in the credit scoring arena for one primary reason - <b>it is the model the banks have to use</b>. In the mortgage arena at least, lenders are required to use a FICO score in their loan approval if they are selling their loan to Fannie Mae, Freddie Mac or FHA. Seeing most loans are sold to those entities, it's easier for mortgage companies to just use the FICO scoring system across the board.<br />
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Why This Is A Problem</h3>
<b>The problem with this is that the VantageScore and the FICO calculations are different and they give the user different credit score numbers. </b>If a potential homebuyer gets a higher VantageScore from Credit Karma, they may think they're in good shape to buy a home. They then may go out and find the house they love and officially apply for their mortgage only to have the mortgage lender pull their FICO score and learn that they actually don't qualify.<br />
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Still, though...</h3>
Finding out that the information they were relying on was faulty can be heartbreaking for a potential homebuyer. Still, though, Credit Karma can be an excellent tool when used in the right way.<br />
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<b>The key is for a consumer to use Credit Karma to monitor movements, not the actual score. </b>If someone is looking to buy a house, their first step is to talk to a mortgage lender and learn what their FICO score actually is. Then, if it's lower than needed, they should get their Credit Karma score and start taking the steps their lender recommended to improve their FICO.<br />
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As those steps take effect, the consumer should see their Credit Karma score moving up. This is a good indicator of what is happening with their FICO score as well. Even though these scores are calculated differently, they are using the same data and movement in one is a good indicator of movement in the other. Once the Credit Karma score has moved the number of points that the FICO needed to move, the consumer should check back with their mortgage lender and have them check again to see if they're where they need to be.<br />
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<b>Bottom line, though, a Credit Karma score is just an indicator and shouldn't be used when figuring out if you can get a mortgage or not.</b> That question needs to go to your mortgage lender. If you're looking to buy a house in Indiana or Michigan, I'd love for that mortgage lender to be me! Feel free to contact me at lori.hiscock@ruoff.com if I can assist.<br />
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<em style="font-family: Arial, serif; font-size: 14px; line-height: 22px;"><em style="line-height: 22px;"><strong>Lori Hiscock is a Sr. Loan Officer at <a href="http://www.ruoff.com/" style="color: #fc8901; text-decoration-line: none;" target="_blank" title="Ruoff Home Mortgage"><span style="color: #8c9a01;">Ruoff Home Mortgage</span></a>‘s South Bend office. One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University. You can connect with <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration-line: none;" target="_blank" title="Lori Hiscock's LO page"><span style="color: #8c9a01;">Lori Hiscock</span></a> or <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration-line: none;" target="_blank" title="Lori Hiscock Online Application"><span style="color: #8c9a01;">apply online</span></a> here.</strong></em><span style="font-family: "verdana" , sans-serif; font-size: xx-small;"> </span><strong style="font-family: verdana, sans-serif; font-size: x-small;"><em>NMLS#404320.</em></strong></em></div>
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<div style="font-family: verdana, sans-serif; font-size: x-small; line-height: 16.44px; text-align: center;">
<span style="font-family: "arial" , sans-serif; font-size: 10.5pt;">Ruoff Mortgage Company, Inc. is an Indiana corporation licensed by the Indiana Department of Financial Institutions (DFI) and operates with the following licenses:<br /><br /><b>Indiana-DFI First Lien Mortgage Lending License #10994;<br />IL Residential Mortgage Licensee #MB.6760734;<br />Michigan 1st Mortgage Broker/Lender License #FL0017496.</b></span></div>
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<b><span style="font-family: "arial" , sans-serif; font-size: 10.5pt;">Ohio Mortgage Broker Act License #MBMB.850220.000<o:p></o:p></span></b></div>
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<b><span style="font-family: "arial" , sans-serif; font-size: 10.5pt;">The Florida Office of Financial Regulation License #MLD1182</span></b></div>
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<br />Lori Hiscockhttp://www.blogger.com/profile/03619139661832096700noreply@blogger.com0tag:blogger.com,1999:blog-5936949811716832438.post-19203620104438992017-11-30T11:21:00.000-08:002017-11-30T11:21:58.973-08:00Should I Buy A House For My College Student?This year my oldest child Jacob left home to attend a university in a different town. His school requires that he live on campus for the first year but, after year one, he's allowed to live anywhere he chooses.<br />
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Many of my friends with college aged kids have asked if we're going to have him rent a place after this year or if we're going to have him buy a house. I have been a mortgage lender for fifteen years and a real estate investor for twelve so I have a unique understanding of finances and housing. They're curious about whether I feel buying is worth it for such a short term. </div>
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Will MYCollege Student Rent Or Buy?</h3>
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So...knowing what I know about the industry, will I have my college student buy or rent? </div>
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<b>Buy. </b>We definitely plan on having him buy. Because he will only be living in the home for a short period, though, we will be strategic with his buying. Here are the key pieces to make this work.</div>
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Making the Student The Buyer</h3>
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<a href="https://3.bp.blogspot.com/-_d9Ogqmk_1k/WhxYHNPfFsI/AAAAAAAA4R0/ZS2EBD_1jcQWpagimrZ-ZQ_HJl3zD1-DQCEwYBhgL/s1600/buying%2Ba%2Bhouse.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="872" data-original-width="1000" height="278" src="https://3.bp.blogspot.com/-_d9Ogqmk_1k/WhxYHNPfFsI/AAAAAAAA4R0/ZS2EBD_1jcQWpagimrZ-ZQ_HJl3zD1-DQCEwYBhgL/s320/buying%2Ba%2Bhouse.jpg" width="320" /></a>Our family is anti-debt but I've seen enough young people who want to buy a home but can't qualify or get good terms because they didn't build the necessary credit history. To keep that from happening here, Jacob opened a credit card the week after his eighteenth birthday and another about six months later. He barely uses them (gas only, paid off each month) but now, at nineteen, he has a solid credit score which will help him qualify for a mortgage.</div>
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<b>Why does this matter?</b> Two reasons. First, if he can qualify as the primary buyer, the terms of the loan will be better. He can put less down (as low as 3% sometimes) and the interest rate and mortgage insurance cost will be less because he is an owner-occupant.</div>
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If the parent buys a home for the student to live in and the student is not on the loan, the house is viewed as in investment property for the parents. Investment properties require a 20% down payment and have a higher interest rate than an owner-occupant loan has.</div>
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The second reason that it's good to have the student on the loan is because of the way property taxes work. In our state, property taxes are lower for an owner-occupant than they are for an investor. They tend to be about double for investors which increases the housing cost.</div>
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<b>But wait...what about income?</b> Many students have little to no income so they wouldn't qualify for a mortgage, would they? </div>
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That's where the parents come in. There are many loan options today that would allow the student to buy as the primary borrower with the parent(s) as a non-occupying co-borrower. The student has to qualify credit wise (that's why building that credit score was important) but the actual approval is based on the parent's income, not the student's.</div>
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Consider the Sale When You Buy</h3>
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Even with the lower monthly payment that comes with an owner-occupant, it still may not make sense to buy and sell in a short period of time though. When a person gets a mortgage to buy a house, there are costs involved which are referred to as closing costs. Those costs are different in different places but tend to run around $2,000 in my market.</div>
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Those closing costs need covered upfront. When the time comes to sell the house, there will be even more costs that need covered. Jacob will likely have $1,000ish of closing costs at the time of sale and a 6% Realtor commission that needs paid from his profits.</div>
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<b>People get burned when they buy a house for a short period of time and don't take these costs into consideration upfront</b>. It's important to make sure you're buying in an area that appreciates at a rate that lets you cover those costs without losing money.</div>
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In Jacob's case, he should be ok. If he bought a house for $150,000 and it went up in value 3.5% each year (a normal appreciation level in his college town), the house should be worth $166,000 after three years. If it cost 8% of the price to cover his Realtor and closing costs, he would net $153,000 at sale time so he would come out slightly ahead.</div>
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<b>Another option would be to arrange for lender paid costs at the front end to further reduce the fixed costs.</b> Lenders sometimes have the ability to charge a buyer a slightly higher interest rate over the life of the loan and, in exchange, cover the upfront closing costs. Seeing this is going to be a relatively short-term loan, that option likely will make good financial sense.</div>
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Living Rent Free</h3>
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If our student is going to buy a house and potentially make no money when he sells it, though, why would we even bother? <b>The advantage of owning during college is typically not in the profit at sale. The advantage is in the monthly cost for housing. </b></div>
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Here is what we're planning on for Jake. He is looking for a three bedroom house near campus. He will take one bedroom and rent out the two others to other students. If he bought a $150,000 home and put 5% down, his monthly payment would likely be around $1,000 per month with taxes and insurance included. If he charged $500 per room per month, that would cover the full mortgage, essentially letting him live rent free.</div>
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Plus...Loan Amortization!</h3>
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<b>Another important piece to consider is that the mortgage loan is getting paid down each month with that payment.</b> If Jacob used a 30 year loan and borrowed $142,500 upfront (95% of the $150,000 price), his balance would be about $135,000 when he went to sell the house three years later. This extra $7,500 cushion will either cover him if the market didn't appreciate as well as expected or it will be a profit for him at sale time.</div>
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What I Would Tweak</h3>
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So...does it make sense to buy? Yes, in our case it does. If your student hasn't been able to build a credit score, if your market has higher costs at the front or back end, if you don't think you can find good roommates to cover the payment, yada yada then maybe it wouldn't for you. For Jacob though, it makes financial sense.</div>
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<b>There is one thing we're going to tweak though. </b>Jacob will not be having a 30 year mortgage. Instead, he'll be having a 15 year one.</div>
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The Beauty Of The 15 Year Mortgage</h3>
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<b>A 15 year term is a better option for three reasons</b>. First, the interest rate is lower. Right now, the interest rate is about 0.5% lower when you choose the shorter term. Secondly, the mortgage insurance is cheaper. Mortgage insurance is something you typically pay as part of your loan payment if you don't put 20% down. With a shorter term, the cost for it drops.</div>
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Lastly, the loan gets paid down <b>ALOT </b>faster with a 15 year term. While I estimated the balance owed at $135,000 after three years with a 30 year loan, it's only $120,800 with a 15 year loan. <b>That's over $14,000 more that will go in our student's pocket when he sells the house.</b></div>
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But won't a 15 year term make the payment higher? Yes, it will. In this scenario, the mortgage payment will be about $300 more per month. That adds up to less than the increased profit at sales time though ($300 per month x 36 months=$10,800) so it financially just makes sense.</div>
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Again, buying makes financial sense in our situation. It may not in yours. How do you know if you don't check though? If you're considering your options in Indiana or Michigan, I'd be happy to help you crunch the numbers. Just give me a call or drop me a line at lori.hiscock@ruoff.com.</div>
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<a href="http://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s1600/closing.jpg" imageanchor="1" style="clear: left; color: #fc8901; float: left; font-family: arial, serif; font-size: 14px; line-height: 22px; margin-bottom: 1em; margin-right: 1em; text-align: center; text-decoration-line: none;"><img border="0" height="133" src="https://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s200/closing.jpg" style="border: 1px solid rgb(238, 238, 238); padding: 2px;" width="200" /></a><em style="font-family: Arial, serif; font-size: 14px; line-height: 22px;"></em><br />
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<em style="font-family: Arial, serif; font-size: 14px; line-height: 22px;"><em style="line-height: 22px;"><strong>Lori Hiscock is a Sr. Loan Officer at <a href="http://www.ruoff.com/" style="color: #fc8901; text-decoration-line: none;" target="_blank" title="Ruoff Home Mortgage"><span style="color: #8c9a01;">Ruoff Home Mortgage</span></a>‘s South Bend office. One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University. You can connect with <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration-line: none;" target="_blank" title="Lori Hiscock's LO page"><span style="color: #8c9a01;">Lori Hiscock</span></a> or <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration-line: none;" target="_blank" title="Lori Hiscock Online Application"><span style="color: #8c9a01;">apply online</span></a> here.</strong></em><span style="font-family: "verdana" , sans-serif; font-size: xx-small;"> </span><strong style="font-family: verdana, sans-serif; font-size: x-small;"><em>NMLS#404320.</em></strong></em></div>
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<span style="font-family: "arial" , sans-serif; font-size: 10.5pt;">Ruoff Mortgage Company, Inc. is an Indiana corporation licensed by the Indiana Department of Financial Institutions (DFI) and operates with the following licenses:<br /><br /><b>Indiana-DFI First Lien Mortgage Lending License #10994;<br />IL Residential Mortgage Licensee #MB.6760734;<br />Michigan 1st Mortgage Broker/Lender License #FL0017496.</b></span></div>
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<b><span style="font-family: "arial" , sans-serif; font-size: 10.5pt;">Ohio Mortgage Broker Act License #MBMB.850220.000<o:p></o:p></span></b></div>
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<b><span style="font-family: "arial" , sans-serif; font-size: 10.5pt;">The Florida Office of Financial Regulation License #MLD1182</span></b></div>
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Lori Hiscockhttp://www.blogger.com/profile/03619139661832096700noreply@blogger.com0tag:blogger.com,1999:blog-5936949811716832438.post-13002890708499475292017-03-29T10:16:00.001-07:002017-03-31T13:55:34.355-07:00How To Win In A Bidding WarIt's practically an epidemic in our current housing market. A buyer finds a house they really like - one that's only been on the market for a couple of days many times - and they make an offer only to find out that there are other offers on the table and theirs isn't the winning one. <br />
<br />
It's a rotten situation. It's even worse when it happens multiple times, which has been the case for a lot of potential home buyers in Michiana. <br />
<b><br /></b>
<b>What if I told you there was a mortgage loan option that would make your offer better and help you to win in this tight market? </b>There is, and it's called the Ruoff 3 for 1 Program.<br />
<br />
<h3>
<a href="https://2.bp.blogspot.com/-cRmjEfNn-ZE/WNvm-3aVLEI/AAAAAAAA35I/58WwVvHqZMEtjQWesTbQ07Ds8-YCMuO4gCLcB/s1600/3%2Bfor%2B1.GIF" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="168" src="https://2.bp.blogspot.com/-cRmjEfNn-ZE/WNvm-3aVLEI/AAAAAAAA35I/58WwVvHqZMEtjQWesTbQ07Ds8-YCMuO4gCLcB/s320/3%2Bfor%2B1.GIF" width="320" /></a>What is the Ruoff 3 for 1 Program?</h3>
You're going to love this loan option. The Ruoff 3 for 1 Program is a conventional mortgage that eligible buyers can use and only put <b>1% down</b> on the purchase of their home. That's right. Just 1% of the price is needed for the down payment.<br />
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<a href="https://2.bp.blogspot.com/-cRmjEfNn-ZE/WNvm-3aVLEI/AAAAAAAA35I/58WwVvHqZMEtjQWesTbQ07Ds8-YCMuO4gCLcB/s1600/3%2Bfor%2B1.GIF" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><br /></a>
<br />
<h3>
<br />Tell me more. But first, what do you mean by 'Conventional Mortgage'?</h3>
Before I break down the details of the 3 for 1 and how it will make your offer better, let me clarify what I mean by 'conventional mortgage'. In a nutshell, there are two basic types of mortgage loans, government insured loans and conventional loans. Government insured loans typically offer extra flexibility so they're a good fit for some people but that flexibility comes at a cost of higher fees and/or mortgage insurance being charged for the life of the loan.<br />
<br />
If you don't need the flexibility they offer, it's better to skip the extra costs and just go with the plain-vanilla conventional loan. To learn more about why I prefer conventional for most buyers, click here - <a href="http://southbendhomeloan.blogspot.com/2016/07/why-i-almost-always-recommend.html" target="_blank">Why I (almost) Always Recommend Conventional</a>. <br />
<br />
<h3>
So Who Can Buy With 1% Down?</h3>
Conventional loans typically require 5% down but we've had an increase in 3% down options coming on the market lately. The Ruoff 3 for 1 Program technically is a 3% down option too. In this case, though, 2% of that 3% down payment is paid by Ruoff, leaving only 1% to be paid by the home buyer.<br />
<br />
Let's take a minute to hit the high points on what is needed to qualify:<br />
<br />
<ol>
<li><b>Credit score </b>- A 680 minimum credit score is needed.</li>
<li><b>No first time buyer requirement </b>- You do <b>NOT </b>need to be first time buyers (yes!). However, you can't own another house at the time of the loan closing and you will need to take an online home buyer education class. Don't worry. It's not hard. </li>
<li><b>Purchases only </b>- This is for a purchase only (not a refinance of an existing loan) and that purchase has to be of a single family home. No rental properties, duplexes or manufactured homes are allowed.</li>
<li><b>No minimum personal investment or savings required - </b>While you need 1% down, it can be a gift from a family member if needed. This loan also doesn't require any level of additional savings like some loans do, making it even easier to qualify.</li>
<li><b>Some maximum income limits </b>- Some areas have a maximum income limit meaning that you can't make more than the HUD median Income for that area or you won't qualify. About 1/3 of our market has no income cap while the rest has a current cap of $52,900. To see if a cap applies to the house you like, go here - <a href="http://www.freddiemac.com/homepossible/eligibility.html" target="_blank">Property Lookup</a>. </li>
</ol>
<br />
One key thing to know about the income cap - it only applies to the borrower on the mortgage and not to the household. If there are two people buying a home together and combined they make too much money but alone one of them makes less than the cap, we can look to see if that person qualifies alone so they can use the program. Both people could still be on the deed to the house in this situation.<br />
<br />
<h3>
So How Does This Make My Offer Better?</h3>
I'm happy to explain! First, the fact that this is a conventional loan makes a difference. <b> All things being equal, most sellers feel more comfortable with a conventional buyer. </b> The general impression is that a conventional buyer has a stronger financial picture and will be more likely to close. Also, conventional loans have lighter property requirements which make sellers more comfortable.<br />
<br />
T<b>he best way to use this program, though, relates to seller concessions. </b>It's a common thing for buyers to ask a seller to help cover closing costs on a purchase. Buyers typically ask for this because they are using their savings to cover the down payment and can't cover both.<b> If you only need 1% of the price for your down payment though, you can likely cover your own closing costs instead of asking the seller to cover them. This makes your offer look better when compared to another buyer who is asking for seller help.</b><br />
<br />
<h3>
Interested?</h3>
Of course you're interested! While Ruoff's 3 for 1 Program isn't a fit for everyone, it's a fit for a whoooole lot of people who are ready to buy now and quit playing the 'someone beat us out' game. If you'd like to dig deeper to see if this program could help make your offer the winning offer, drop me a line at <a href="mailto:lori.hiscock@ruoff.com">lori.hiscock@ruoff.com</a> or give me a call at 574-234-5201. <br />
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<div style="background-color: white; color: #333333; font-family: Arial, serif; font-size: 14.3px; text-align: center;">
<i>To learn more about low down payment options or any other aspects of home financing, contact Lori Hiscock at lori.hiscock@ruoff.com. </i></div>
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<a href="http://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s1600/closing.jpg" imageanchor="1" style="clear: left; color: #fc8901; float: left; font-family: arial, serif; font-size: 14px; line-height: 22px; margin-bottom: 1em; margin-right: 1em; text-align: center; text-decoration: none;"><img border="0" height="133" src="https://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s200/closing.jpg" style="border: 1px solid rgb(238, 238, 238); padding: 2px;" width="200" /></a><em style="font-family: Arial, serif; font-size: 14px; line-height: 22px;"></em><br />
<div style="text-align: center;">
<em style="font-family: Arial, serif; font-size: 14px; line-height: 22px;"><em style="line-height: 22px;"><strong>Lori Hiscock is a Sr. Loan Officer at <a href="http://www.ruoff.com/" style="color: #fc8901; text-decoration: none;" target="_blank" title="Ruoff Home Mortgage"><span style="color: #8c9a01;">Ruoff Home Mortgage</span></a>‘s South Bend office. One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University. You can connect with <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock's LO page"><span style="color: #8c9a01;">Lori Hiscock</span></a> or <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock Online Application"><span style="color: #8c9a01;">apply online</span></a> here.</strong></em><span style="font-family: "verdana" , sans-serif; font-size: xx-small;"> </span><strong style="font-family: verdana, sans-serif; font-size: x-small;"><em>NMLS#404320.</em></strong></em></div>
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<span style="font-family: "arial" , sans-serif; font-size: 10.5pt;">Ruoff Mortgage Company, Inc. is an Indiana corporation licensed by the Indiana Department of Financial Institutions (DFI) and operates with the following licenses:<br /><br /><b>Indiana-DFI First Lien Mortgage Lending License #10994;<br />IL Residential Mortgage Licensee #MB.6760734;<br />Michigan 1st Mortgage Broker/Lender License #FL0017496.</b></span></div>
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<b><span style="font-family: "arial" , sans-serif; font-size: 10.5pt;">Ohio Mortgage Broker Act License #MBMB.850220.000<o:p></o:p></span></b></div>
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<b><span style="font-family: "arial" , sans-serif; font-size: 10.5pt;">The Florida Office of Financial Regulation License #MLD1182</span></b></div>
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<br />Lori Hiscockhttp://www.blogger.com/profile/03619139661832096700noreply@blogger.com0tag:blogger.com,1999:blog-5936949811716832438.post-42216664474643027392017-01-03T10:59:00.003-08:002017-01-05T10:36:33.260-08:00Can I Buy A House With My Income Tax Refund?If you're anything like me, you probably start thinking about what you could do with your tax refund months before tax time even hits. Should I pay something off? Take a family trip? Save it for a rainy day? <br />
<br />
<a href="https://3.bp.blogspot.com/-dOTu-aPtqs4/WGvx1EDEOOI/AAAAAAAA3oo/vA-vZjxJcr8ayZaHvmqaoJJHhC7skUTlwCLcB/s1600/tax-refund1.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="180" src="https://3.bp.blogspot.com/-dOTu-aPtqs4/WGvx1EDEOOI/AAAAAAAA3oo/vA-vZjxJcr8ayZaHvmqaoJJHhC7skUTlwCLcB/s320/tax-refund1.jpg" width="320" /></a>There are lots of uses for that tax refund money, most of which you'd forget about soon after it was spent. <br />
<b style="font-style: italic;"><br /></b>
<b style="font-style: italic;">But...hey, what if you could do something with that money that would change your life? Is it possible that you could buy a HOUSE with your tax refund?</b><br />
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Yes, you likely could get into a house of your own with your tax refund. <br />
<br />
Let's talk about how.<br />
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<h3>
3% Down Conventional</h3>
First let me say, there is no 'one size fits all' mortgage type. Some buyers get the most benefit from USDA financing, some from VA, some from FHA and some from conventional. <b>For the majority of my home buyers, though, a conventional mortgage offers the most financial benefits. </b><br />
<br />
<div style="text-align: center;">
<i>(To learn more about why conventional financing rocks,</i></div>
<div style="text-align: center;">
<i>click here - <a href="http://southbendhomeloan.blogspot.com/2016/07/why-i-almost-always-recommend.html" target="_blank">Why I (almost) Always Recommend Conventional</a>.)</i></div>
<br />
In 2016, the requirements for getting a conventional loan lightened with the minimum down payment dropping from 5% of the price to 3% for many buyers, making it an even better option than it was before. Suddenly a buyer could get all the benefits of a conventional loan (no financed fee, removable PMI, easier home buying process) without having to invest too much upfront.<br />
<i><br /></i>
<br />
<div style="text-align: center;">
<i>(To learn about my favorite 3% down conventional option, </i></div>
<div style="text-align: center;">
<i>click here - <a href="http://southbendhomeloan.blogspot.com/2016/08/the-loan-i-would-absolutely-pick-today.html" target="_blank">The Loan I would ABSOLUTELY Pick Today</a>.)</i></div>
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<b>Conventional loans have one unique thing that needs to be considered when trying to buy a house with less money needed upfront, though - the seller concessions cap.</b><br />
<br />
<h4>
Maximum Seller Concessions</h4>
When you're buying a house, you are allowed to ask the seller to help pay for the costs you incur with getting the loan. They can also pay for the items that need covered upfront with a home purchase, like your first year of home insurance and your insurance and tax escrows. Together, these items are typically referred to as 'closing costs and prepaids.'<br />
<br />
<b>The seller can't always pay for all of these for you, though.</b> It depends on the price of the home you are buying and the type of loan you are getting. The amount the seller can give is capped as a percentage of the sales price and the percentage allowed is different for different types of loans. <br />
<br />
<b>For conventional loans, the most the seller can give is 3% of the price. On lower priced homes (houses under $110,000ish), this will likely not cover all of the costs so you, the buyer, will have to pay for the rest.</b><br />
<h4>
Show Me The Numbers Please...</h4>
Are you a numbers nerd like me who loves a good chart? If so, I've got your back! Here's a table showing how much the buyer would need for the down payment and closing costs/prepaids assuming the seller agreed to pay the maximum that is allowed towards the buyer's cost. <b>As you can see, the amount the buyer needs stays the same even if the price is lower simply because the seller can't cover all the closing costs on a lower priced home.</b><br />
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<table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse; text-align: center; width: 655px;">
<colgroup><col style="mso-width-alt: 4790; mso-width-source: userset; width: 98pt;" width="131"></col>
<col style="mso-width-alt: 4790; mso-width-source: userset; width: 98pt;" width="131"></col>
<col style="mso-width-alt: 4790; mso-width-source: userset; width: 98pt;" width="131"></col>
<col span="2" style="mso-width-alt: 4790; mso-width-source: userset; width: 98pt;" width="131"></col>
</colgroup><tbody>
<tr height="61" style="height: 45.75pt;">
<td class="xl67" height="61" style="height: 45.75pt; width: 98pt;" width="131"><u><b>Home
Price</b></u></td>
<td class="xl68" style="width: 98pt;" width="131"><u><b>3% Down Payment</b></u></td>
<td class="xl69" style="width: 98pt;" width="131"><u><b> Typical Closing Costs/Prepaids </b></u></td>
<td class="xl70" style="width: 98pt;" width="131"><u><b>Max Seller Can Contribute (3%)</b></u></td>
<td class="xl71" style="width: 98pt;" width="131"><u><b>Amount Needed By Buyer</b></u></td>
</tr>
<tr height="20" style="height: 15.0pt;">
<td class="xl72" height="20" style="border-top: none; height: 15.0pt;"> 75,000 </td>
<td class="xl73" style="border-top: none;"> 2,250 </td>
<td class="xl73" style="border-top: none;"> 3,300 </td>
<td class="xl74" style="border-top: none;"> 2,250 </td>
<td class="xl75" style="border-top: none;"> 3,300 </td>
</tr>
<tr height="20" style="height: 15.0pt;">
<td class="xl76" height="20" style="height: 15.0pt;"> 100,000 </td>
<td class="xl77">
3,000 </td>
<td class="xl78">
3,300 </td>
<td class="xl79">
3,000 </td>
<td class="xl80">
3,300 </td>
</tr>
<tr height="20" style="height: 15.0pt;">
<td class="xl76" height="20" style="height: 15.0pt;"> 125,000 </td>
<td class="xl77">
3,750 </td>
<td class="xl78">
3,300 </td>
<td class="xl79">
3,300 </td>
<td class="xl80">
3,750 </td>
</tr>
<tr height="21" style="height: 15.75pt;">
<td class="xl81" height="21" style="height: 15.75pt;"> 150,000 </td>
<td class="xl82">
4,500 </td>
<td class="xl83">
3,300 </td>
<td class="xl84">
3,300 </td>
<td class="xl85">
4,500 </td>
</tr>
</tbody></table>
<br />
<h3 style="text-align: left;">
3.5% Down FHA</h3>
<div style="text-align: left;">
If you're wanting to buy a lower priced house but can't spend as much upfront as the conventional loan needs, a FHA mortgage might be the better fit.<br />
<br />
FHA financing only needs 3.5% down, so not much more than the conventional option, and <b>the seller is allowed to give up to 6% of the price towards your closing costs and prepaids. </b>The seller being able to give more can keep the upfront amount needed on the lower priced house to a more affordable range for many buyers:</div>
<table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse; text-align: center; width: 655px;"><colgroup><col style="mso-width-alt: 4790; mso-width-source: userset; width: 98pt;" width="131"></col><col style="mso-width-alt: 4790; mso-width-source: userset; width: 98pt;" width="131"></col><col style="mso-width-alt: 4790; mso-width-source: userset; width: 98pt;" width="131"></col><col span="2" style="mso-width-alt: 4790; mso-width-source: userset; width: 98pt;" width="131"></col></colgroup><tbody>
<tr height="61" style="height: 45.75pt;"><td class="xl67" height="61" style="height: 45.75pt; width: 98pt;" width="131"><b><u>Home
Price</u></b></td>
<td class="xl68" style="width: 98pt;" width="131"><b><u>3.5% Down Payment</u></b></td>
<td class="xl69" style="width: 98pt;" width="131"><b><u> Typical Closing Costs/Prepaids </u></b></td>
<td class="xl70" style="width: 98pt;" width="131"><b><u>Max Seller Can Contribute (6%)</u></b></td>
<td class="xl71" style="width: 98pt;" width="131"><b><u>Amount Needed By Buyer</u></b></td>
</tr>
<tr height="20" style="height: 15.0pt;">
<td class="xl72" height="20" style="border-top: none; height: 15.0pt;"> 75,000 </td>
<td class="xl73" style="border-top: none;"> 2,625 </td>
<td class="xl73" style="border-top: none;"> 3,300 </td>
<td class="xl74" style="border-top: none;"> 3,300 </td>
<td class="xl75" style="border-top: none;"> 2,625 </td>
</tr>
<tr height="20" style="height: 15.0pt;">
<td class="xl76" height="20" style="height: 15.0pt;"> 100,000 </td>
<td class="xl77">
3,500 </td>
<td class="xl78">
3,300 </td>
<td class="xl79">
3,300 </td>
<td class="xl80">
3,500 </td>
</tr>
<tr height="20" style="height: 15.0pt;">
<td class="xl76" height="20" style="height: 15.0pt;"> 125,000 </td>
<td class="xl77">
4,375 </td>
<td class="xl78">
3,300 </td>
<td class="xl79">
3,300 </td>
<td class="xl80">
4,375 </td>
</tr>
<tr height="21" style="height: 15.75pt;">
<td class="xl81" height="21" style="height: 15.75pt;"> 150,000 </td>
<td class="xl82">
5,250 </td>
<td class="xl83">
3,300 </td>
<td class="xl84">
3,300 </td>
<td class="xl85">
5,250 </td>
</tr>
</tbody></table>
<div style="text-align: center;">
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<h3 style="text-align: left;">
IHCDA Next Home</h3>
<div style="text-align: left;">
If your tax refund still isn't going to cover the amount needed, you aren't out of the home buying game yet. At that point, we'd see if you could qualify for down payment assistance from IHCDA.</div>
<div style="text-align: left;">
<br /></div>
<div style="text-align: left;">
IHCDA stands for Indiana Housing and Community Development Authority. It is a department of the Indiana state government that provides eligible home buyers with down payment assistance. <b>Because of the help provided by IHCDA, many buyers can purchase a home needing only $500-$1,000 to cover the upfront earnest money. They often get that earnest money back at closing too, making this a truly zero down home buying option. </b> </div>
<div style="text-align: left;">
<br />
<br /></div>
<div style="text-align: left;">
<div style="text-align: center;">
<i>(To learn about the downsides to this down payment assistance program.</i></div>
<div style="text-align: center;">
<i>click here - <a href="http://southbendhomeloan.blogspot.com/2015/03/the-downside-of-down-payment-assistance.html" target="_blank">The Downside of Down Payment Assistance</a>.) </i></div>
</div>
<div style="text-align: left;">
<br /></div>
<h3 style="text-align: left;">
Bottom Line</h3>
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If none of the options above are a fit for you, there still might be other ways to cover your down payment. Gifts from relatives are often allowable sources as are loans against something you own like a 401(k) or a vehicle. </div>
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Bottom line, there's likely a way to cover your down payment at any time of the year. This time of year with that tax refund money flowing in, though, it might be easier than most.</div>
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<b><i>So...are you wondering if this might be the right time for YOU to buy a house? </i></b>I'd be happy to help you figure that out! Just give me a call or drop me a line at lori.hiscock@ruoff.com. Together, we'll see if 2017 might be your year to own a home of your own.</div>
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<i>To learn more about low down payment options or any other aspects of home financing, contact Lori Hiscock at lori.hiscock@ruoff.com. </i></div>
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<em style="font-family: Arial, serif; font-size: 14px; line-height: 22px;"><em style="line-height: 22px;"><strong>Lori Hiscock is a Sr. Loan Officer at <a href="http://www.ruoff.com/" style="color: #fc8901; text-decoration: none;" target="_blank" title="Ruoff Home Mortgage"><span style="color: #8c9a01;">Ruoff Home Mortgage</span></a>‘s South Bend office. One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University. You can connect with <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock's LO page"><span style="color: #8c9a01;">Lori Hiscock</span></a> or <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock Online Application"><span style="color: #8c9a01;">apply online</span></a> here.</strong></em><span style="font-family: "verdana" , sans-serif; font-size: xx-small;"> </span><strong style="font-family: verdana, sans-serif; font-size: x-small;"><em>NMLS#404320.</em></strong></em></div>
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<span style="font-family: "arial" , sans-serif; font-size: 10.5pt;">Ruoff Mortgage Company, Inc. is an Indiana corporation licensed by the Indiana Department of Financial Institutions (DFI) and operates with the following licenses:<br /><br /><b>Indiana-DFI First Lien Mortgage Lending License #10994;<br />IL Residential Mortgage Licensee #MB.6760734;<br />Michigan 1st Mortgage Broker/Lender License #FL0017496.</b></span></div>
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<b><span style="font-family: "arial" , sans-serif; font-size: 10.5pt;">Ohio Mortgage Broker Act License #MBMB.850220.000<o:p></o:p></span></b></div>
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<b><span style="font-family: "arial" , sans-serif; font-size: 10.5pt;">The Florida Office of Financial Regulation License #MLD1182</span></b><br />
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Lori Hiscockhttp://www.blogger.com/profile/03619139661832096700noreply@blogger.com0tag:blogger.com,1999:blog-5936949811716832438.post-67133868234969674242016-12-12T10:11:00.000-08:002016-12-12T10:11:36.246-08:00The Student Loan Problem (And The Fix)We all know that student loans are a big problem for many Americans. You may not realize, though, that they became a big problem for many home buyers in 2016 as well. <br />
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Why is that, you ask? I'm happy to explain!<br />
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<b>In 2016, the rules for how student loan payments are counted when someone is buying a house got a whole lot tighter. </b>Previously a lender could work off of the payment showing on the credit report. If the buyer was on an income based repayment (IBR) plan and the payment was lower because of that, great! If the student loan was deferred and wasn't going to start repayment for 12 months or more, all the better. <br />
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<b>In those cases, a lender was able to count that lower IBR payment or possibly even that zero deferred payment and, because of that, allow the buyer to qualify for a more expensive home than they would otherwise.</b><br />
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<b>In 2016 though, that changed. </b>Both FHA and Fannie Mae changed their requirements to read that a lender now should count 1% of the student loan's balance in their payments when determining how much they qualify for.<br />
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OUCH! Let me share some math on how much that can hurt a home buyer. Let's say a buyer works full time making $12.50 an hour which is $2,166 per month pre-tax. A lender will target them having monthly bills of no more than 45% of this pre-tax income and that number needs to include the new mortgage payment they are requesting.<br />
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So...$2,166 x 45% gives you $974 of monthly bills allowed. Now, if this buyer has $40,000 in student loans that are deferred but the lender has to count 1% of the balance as a payment, that's a $400 payment that needs to come out of that $974, leaving just $574 for everything else. Let's say they have a $250 car payment and $60 per month in minimum credit card bills, and suddenly you're down to $224 left for the new mortgage payment.<br />
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<b>Even in a lower priced market like mine, $224 isn't going to be enough to get a house for most buyers. So...what's the fix?</b><br />
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There are two possible ways to work around this. First, if there is a payment showing on the credit report and we can show that it is a fully amortizing payment, we can use it even if it's under 1%. <b>It's going to take some extra legwork to prove this though. </b>A lender would need to get a copy of the original note from the borrower containing the interest rate and loan term to confirm that the payment on the credit report will pay it off on time. <br />
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<b>If the payment will not pay it off in the original term, there is one more option. Instead of using Fannie Mae or FHA for the loan approval, the lender can run the loan through Freddie Mac. </b>Freddie and Fannie are the two government sponsored enterprises that basically drive the mortgage industry and Freddie is currently offering a bit more flexibility on this issue. Freddie alone will allow a lender to use the lower IBR payment showing on the credit report when approving a buyer.<br />
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<b>So why doesn't everyone with student loans just use Freddie for their loan approval then? </b>There are two main reasons. One, they may not qualify. Some people need to use FHA financing because of newer or bruised credit or tighter debt/income. If that's the case, they will have to use that 1% or fully-amortizing rule which may rule them out for a home purchase.<br />
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Also, some lenders don't offer Freddie for their buyers. They're strictly a Fannie lender, so their clients will have to abide by the 1% or fully amortizing rule as well.<br />
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<b>So what does this mean for home buyers today? It means that, while it is harder to get approved for a mortgage when they have student loan balances, there may be options. </b>If you have been told you don't qualify because of your student loans, ask your lender if they looked into documenting that your loans were fully amortizing. Ask them if they looked into running your approval through Freddie Mac. If they're unable or unwilling to take these extra steps, feel free to contact me for a second opinion (lori.hiscock@ruoff.com). Or, hey, just come to me first! Whether we can do it now or we need to create a plan to get you there in time, student loans don't have to stop you from owning a house of your own.<br />
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<o:p><i style="font-size: 14.3px; line-height: 22.88px;">To learn more about the products covered here or any other aspects of home financing, contact Lori Hiscock at lori.hiscock@ruoff.com. </i></o:p></div>
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<a href="http://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s1600/closing.jpg" imageanchor="1" style="clear: left; color: #fc8901; float: left; font-family: Arial, serif; font-size: 14px; line-height: 22px; margin-bottom: 1em; margin-right: 1em; text-decoration: none;"><img border="0" height="133" src="https://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s200/closing.jpg" style="border: 1px solid rgb(238, 238, 238); padding: 2px;" width="200" /></a><em style="font-family: Arial, serif; font-size: 14px; line-height: 22px;"><strong>Lori Hiscock is a Sr. Loan Officer at <a href="http://www.ruoff.com/" style="color: #fc8901; text-decoration: none;" target="_blank" title="Ruoff Home Mortgage"><span style="color: #8c9a01;">Ruoff Home Mortgage</span></a>‘s South Bend office. One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University. You can connect with <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock's LO page"><span style="color: #8c9a01;">Lori Hiscock</span></a> or <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock Online Application"><span style="color: #8c9a01;">apply online</span></a> here.</strong></em> <strong><em>NMLS#404320.</em></strong></div>
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<span style="font-family: "arial" , sans-serif; font-size: 10.5pt;">Ruoff Mortgage Company, Inc. is an Indiana corporation licensed by the Indiana Department of Financial Institutions (DFI) and operates with the following licenses:<br /><br /><b>Indiana-DFI First Lien Mortgage Lending License #10994;<br />IL Residential Mortgage Licensee #MB.6760734;<br />Michigan 1st Mortgage Broker/Lender License #FL0017496.</b></span></div>
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<b><span style="font-family: "arial" , sans-serif; font-size: 10.5pt;">Ohio Mortgage Broker Act License #MBMB.850220.000<o:p></o:p></span></b></div>
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<b><span style="font-family: "arial" , sans-serif; font-size: 10.5pt;">The Florida Office of Financial Regulation License #MLD1182</span></b></div>
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Lori Hiscockhttp://www.blogger.com/profile/03619139661832096700noreply@blogger.com0tag:blogger.com,1999:blog-5936949811716832438.post-25457877451971356782016-08-30T11:10:00.001-07:002016-08-30T11:10:33.905-07:00The Loan I would ABSOLUTELY Pick Today<div class="separator" style="clear: both; text-align: center;">
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When I'm reviewing mortgage options with prospective home buyers, they often ask me which one I would choose. Typically the answer isn't obvious because the different options have different strengths and weaknesses. The final decision really depends on what matters most to each person and that will vary buyer to buyer.<br />
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<b><span style="color: blue;">There is currently a mortgage loan available that blows most of the other options out of the water, though.</span> </b><br />
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It is Fannie Mae's Home Ready Mortgage. <br />
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Why Home Ready ROCKS</h3>
There are multiple reasons why this program is exceptional. They include:<br />
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<li><b>Conventional loan -</b> Home Ready is a conventional loan with all of the positive features of a conventional loan including no upfront mortgage insurance/funding fees, more flexible property standards, and the ability to eventually get the private mortgage insurance (PMI) dropped from the payment.</li>
<li><b>Only 3% down needed </b>- This program only requires a 3% down payment and that down payment can be gifted from a family member if needed.</li>
<li><b>Not limited to first-time homebuyer </b>- You used to have to be a first-time buyer to use this loan but they changed that in July. <b><span style="color: blue;">This is a BIG win. Huge.</span></b></li>
<li><b>Can own another property </b>- If a person owns a house already and wants to buy another one that they'll live in, they can do that with this loan without having to sell the current house first.</li>
<li><b>Cheaper PMI </b>- The private mortgage insurance rate is cheaper on this loan than on the typical 3% down mortgage. </li>
<li><b>Better interest rates for lower credit scores </b>- this loan program doesn't charge a higher interest rate for 680-740 credit scores like most conventional mortgages do. <b><span style="color: blue;">This lack of a credit score adjustment is a big win that can save a buyer thousands of dollars over the life of their loan.</span></b> </li>
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See what I mean? This mortgage loan has some <b><span style="color: blue;">major benefits </span></b>for a broad range of buyers.<br />
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The One Potential Snag </h3>
<a href="https://2.bp.blogspot.com/-UOUlsEkLBsY/V7309F3RDXI/AAAAAAAA3fA/2BgewujWwBA_ugoyRnTpN-8vzj3M2dKxQCLcB/s1600/income%2Blimits%2Btwo.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="172" src="https://2.bp.blogspot.com/-UOUlsEkLBsY/V7309F3RDXI/AAAAAAAA3fA/2BgewujWwBA_ugoyRnTpN-8vzj3M2dKxQCLcB/s320/income%2Blimits%2Btwo.jpg" width="320" /></a><br />
There's got to be a downside though, right? Well, there is one but it's not nearly as big of a snag as it used to be.<br />
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<a href="https://4.bp.blogspot.com/-gN96Dq9EmaE/V7309E_AbkI/AAAAAAAA3fI/7aeI3IwhzsQsFEexUETRehZ0MBKKXBJ0QCEw/s1600/income%2Blimits%2Bone.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="316" src="https://4.bp.blogspot.com/-gN96Dq9EmaE/V7309E_AbkI/AAAAAAAA3fI/7aeI3IwhzsQsFEexUETRehZ0MBKKXBJ0QCEw/s320/income%2Blimits%2Bone.jpg" width="320" /></a>This program was created to help low to moderate income borrowers and they enforced that by having income limits. <b><span style="color: blue;">In July they rezoned the map for this and a significant chunk of our market now has no income limit at all. </span></b>That means a person could make a bazillion dollars per year and still only put 3% down and get the cheaper PMI if they were buying in one of these newly-expanded areas (although, with a bazillion dollar income, they really should just pay cash).<br />
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Some areas still have an income limit though. It's determined by census tract and the map can be easily accessed here - <a href="https://homeready-eligibility.fanniemae.com/homeready/" target="_blank">Home Ready Map</a>. For those areas with a limit, it's currently $52,900. <br />
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<span style="color: blue;"><b>This is the maximum income for the borrower, not the household.</b></span> This is significant because it gives us a workaround when someone wants to buy in an area with this cap. If there are multiple borrowers, we often can do the loan in just one of their names to stay under the limit while putting them both on the deed to the house.<br />
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It's SO Worth It</h3>
A first time home buyer will also have to take an online home buyer education class but that and the income limit in some areas are really the only negatives. <b><span style="color: blue;">If a person can work around those, it is SO worth it to get the lower down payment, lower PMI costs and lower interest rate.</span></b><br />
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So are you interested? Do you want to learn more? Just email me at lori.hiscock@ruoff.com to see if this program is a fit for you.<br />
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<o:p><i style="font-size: 14.3px; line-height: 22.88px;">To learn more about the products covered here or any other aspects of home financing, contact Lori Hiscock at lori.hiscock@ruoff.com. </i></o:p></div>
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<a href="http://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s1600/closing.jpg" imageanchor="1" style="clear: left; color: #fc8901; float: left; font-family: Arial, serif; font-size: 14px; line-height: 22px; margin-bottom: 1em; margin-right: 1em; text-decoration: none;"><img border="0" height="133" src="https://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s200/closing.jpg" style="border: 1px solid rgb(238, 238, 238); padding: 2px;" width="200" /></a><em style="font-family: Arial, serif; font-size: 14px; line-height: 22px;"><strong>Lori Hiscock is a Sr. Loan Officer at <a href="http://www.ruoff.com/" style="color: #fc8901; text-decoration: none;" target="_blank" title="Ruoff Home Mortgage"><span style="color: #8c9a01;">Ruoff Home Mortgage</span></a>‘s South Bend office. One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University. You can connect with <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock's LO page"><span style="color: #8c9a01;">Lori Hiscock</span></a> or <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock Online Application"><span style="color: #8c9a01;">apply online</span></a> here.</strong></em> <strong><em>NMLS#404320.</em></strong></div>
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<span style="font-family: "arial" , sans-serif; font-size: 10.5pt;">Ruoff Mortgage Company, Inc. is an Indiana corporation licensed by the Indiana Department of Financial Institutions (DFI) and operates with the following licenses:<br /><br /><b>Indiana-DFI First Lien Mortgage Lending License #10994;<br />IL Residential Mortgage Licensee #MB.6760734;<br />Michigan 1st Mortgage Broker/Lender License #FL0017496.</b></span></div>
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<b><span style="font-family: "arial" , sans-serif; font-size: 10.5pt;">Ohio Mortgage Broker Act License #MBMB.850220.000<o:p></o:p></span></b></div>
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<b><span style="font-family: "arial" , sans-serif; font-size: 10.5pt;">The Florida Office of Financial Regulation License #MLD1182</span></b></div>
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<br />Lori Hiscockhttp://www.blogger.com/profile/03619139661832096700noreply@blogger.com0tag:blogger.com,1999:blog-5936949811716832438.post-46820176628507252012016-08-22T05:36:00.000-07:002016-08-22T05:36:07.248-07:00Why Flipping is so Flipping Hard<a href="https://2.bp.blogspot.com/-EGiVYC64S-4/V7X63SrwfLI/AAAAAAAA3eg/msFmabTMOfQsTA1N8lRPEECy_izCE3NfQCEw/s1600/house%2Bflipping%2Bpicture.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="131" src="https://2.bp.blogspot.com/-EGiVYC64S-4/V7X63SrwfLI/AAAAAAAA3eg/msFmabTMOfQsTA1N8lRPEECy_izCE3NfQCEw/s320/house%2Bflipping%2Bpicture.jpg" width="320" /></a>A past client emailed me this weekend asking for my help with a new property she wants to purchase. I love working with previous clients and was initially delighted by her message. As I read on though, that delight faded a bit.<br />
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<b>She was wanting to buy a house to flip it. </b>Now please don't get me wrong. I have nothing against people flipping homes. I've flipped a few myself (with the hugely important help of my contractor husband that is). I truly love when people take a home that is neglected and improve it. The whole community benefits from better houses so I'm a big fan.<br />
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That being said, flipping a house is just <b>so flippin' hard</b> to do. And I'm not talking about the actual work involved, although I think most first time flippers grossly underestimate that. I'm talking about the financing part of a house flip. Let me share why getting a mortgage for a flip home is so challenging for most buyers.<br />
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<h3>
The Undervalued House</h3>
The way to make money on a house flip is to find one that is undervalued, normally because of condition, fix it and resell it for a fair market value. <b>The challenge is that you need to cover the costs of your financing, repairs and your profit in that new 'fair market value' which means the initial price needs to be quite low when compared to the houses around it.</b><br />
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That does happen, but when it happens, it's often because the problems with the current condition are significant. They're things like missing plumbing or visible mold or significant damage (floors torn up, toilets missing, etc.). <b>The issues that exist are often things that make the house uninhabitable and an uninhabitable house is not a financeable house. </b><br />
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<b>What does that mean for a flipper? </b>It means that most of the houses that will make the best flips have to be bought with cash. If you don't have the cash to buy and fix them, you're not going to be able to buy a lot of the more profitable flip houses.<br />
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<h3>
Down Payment and Reserves</h3>
Maybe a person finds a house that could be a profitable flip that is actually in good enough condition to get financed. Yea! The next hurdle then is the down payment and repair costs. When you're purchasing an investment property, you need to invest more upfront than you do on a home you intend to live in. <b>An owner occupant home can often be purchased for as little as 3% down (even 0% down for USDA eligible homes) but an investment property typically takes at least a 20% down payment.</b><br />
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To make it more challenging, a lender will need you to have additional funds in savings AFTER the down payment and loan approval costs are covered (called 'reserves'). You often don't need to have any additional savings with an owner-occupied home purchase but <b>an investment property purchase typically requires you to have savings equal to six months of payments on your existing mortgage(s) and the new mortgage combined. </b>That savings can often be in the form of retirement savings if needed (IRA, 401k), which helps. For many would be flippers though, they're stretching all their savings to just buy and fix the house and the requirement to have additional savings is just too much. <br />
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<h3>
Debt/Income</h3>
So....maybe just maybe you find a house that is financeable and maybe you have the money for the down payment, reserves and repair costs. Do you have the room in your budget for the new loan though? Even if your intent is to sell the house fairly quickly, the lender has to see that you can afford the payment on it on top of your current payments. This means <b>your income has to be enough to cover your current bills (mortgage, car loans, credit cards, student loans, etc.) and the new mortgage payment with enough cushion above these for the lender to be comfortable.</b> Some people have that kind of space in their budget but, if you don't, this could stop your flipping plans in their tracks.<br />
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<h3>
All to say...</h3>
<br />
So does all this mean that only cash buyers can flip houses? No, not really. A person can potentially flip with a mortgage but there are so many 'ifs' to it. You could potentially flip with a mortgage if the house meets minimum property conditions, if you have the 20% down payment, if you have the required reserves, if your debt/income ratio isn't too high (plus a few more minor 'ifs' not covered here). <b>Add on top of all of this that most sellers will prefer a cash offer on their distressed property over a financed one and it's just really, really flippin' hard for people to get into home flipping if they need a mortgage to do it. </b><br />
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My best advice - if this is something you really want to do, find a property that meets minimum property standards and buy it to live in while you're fixing it. If you make it your home and live there, repairing it over time, and selling it down the road, a lender will view it as your primary home and a lot of these tighter requirements go away.<br />
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If that's not an option, try to save the money and become a cash flipper. It may take longer to get to your goal, but it's do-able if you're willing to put effort and time to save upfront.<br />
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<o:p><i style="font-size: 14.3px; line-height: 22.88px;">To learn more about the products covered here or any other aspects of home financing, contact Lori Hiscock at lori.hiscock@ruoff.com. </i></o:p></div>
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<a href="http://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s1600/closing.jpg" imageanchor="1" style="clear: left; color: #fc8901; float: left; font-family: Arial, serif; font-size: 14px; line-height: 22px; margin-bottom: 1em; margin-right: 1em; text-decoration: none;"><img border="0" height="133" src="https://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s200/closing.jpg" style="border: 1px solid rgb(238, 238, 238); padding: 2px;" width="200" /></a><em style="font-family: Arial, serif; font-size: 14px; line-height: 22px;"><strong>Lori Hiscock is a Sr. Loan Officer at <a href="http://www.ruoff.com/" style="color: #fc8901; text-decoration: none;" target="_blank" title="Ruoff Home Mortgage"><span style="color: #8c9a01;">Ruoff Home Mortgage</span></a>‘s South Bend office. One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University. You can connect with <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock's LO page"><span style="color: #8c9a01;">Lori Hiscock</span></a> or <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock Online Application"><span style="color: #8c9a01;">apply online</span></a> here.</strong></em> <strong><em>NMLS#404320.</em></strong></div>
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<span style="font-family: "arial" , sans-serif; font-size: 10.5pt;">Ruoff Mortgage Company, Inc. is an Indiana corporation licensed by the Indiana Department of Financial Institutions (DFI) and operates with the following licenses:<br /><br /><b>Indiana-DFI First Lien Mortgage Lending License #10994;<br />IL Residential Mortgage Licensee #MB.6760734;<br />Michigan 1st Mortgage Broker/Lender License #FL0017496.</b></span></div>
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<b><span style="font-family: "arial" , sans-serif; font-size: 10.5pt;">Ohio Mortgage Broker Act License #MBMB.850220.000<o:p></o:p></span></b></div>
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<b><span style="font-family: "arial" , sans-serif; font-size: 10.5pt;">The Florida Office of Financial Regulation License #MLD1182</span></b></div>
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Lori Hiscockhttp://www.blogger.com/profile/03619139661832096700noreply@blogger.com0tag:blogger.com,1999:blog-5936949811716832438.post-84485420675947460232016-07-13T11:35:00.000-07:002016-08-03T12:06:47.659-07:00Why I (almost) Always Recommend Conventional Sometimes a home buyer will call me and say they were referred to me for a home loan. My first response is typically <b><i>"YEA! That's awesome!" </i></b>I'll then ask if they've gone through the preapproval process before and they'll often say that, yes, they're preapproved with another bank but don't wish to work with them any further (typically because of poor communication). <br />
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I then typically ask if they recall what type of loan they were preapproved for and <b>they'll often say "They told me FHA financing, but I have no idea why....."</b><br />
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<a href="https://4.bp.blogspot.com/-qLRYyJIT8JA/V4aHmAMQ-5I/AAAAAAAA3Z8/shMxXw-MIOwkvH0pD14yF9_nVU6i0XFOwCLcB/s1600/fha-vs-conventional-7adeb1%2B%25281%2529.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="190" src="https://4.bp.blogspot.com/-qLRYyJIT8JA/V4aHmAMQ-5I/AAAAAAAA3Z8/shMxXw-MIOwkvH0pD14yF9_nVU6i0XFOwCLcB/s320/fha-vs-conventional-7adeb1%2B%25281%2529.jpg" width="320" /></a>That answer saddens me because it points out a common weakness in my industry. Lenders have a tendency to tell buyers what loan we think they should use instead of giving them the pros and cons of multiple options and letting them decide.<br />
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Sometimes FHA is the right fit for a buyer. Sometimes, it's the ONLY option for a buyer. <b>There are many times conventional financing is an option too though. </b>When Conventional is an option, it will (almost) always trump FHA in my eyes. Let's review why:<br />
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<ul>
<li><b>Lower fees:</b> FHA currently charges a home buyer an upfront fee equal to 1.75% of the mortgage amount. This fee is rolled into the loan so the buyer doesn't pay it upfront, but if they borrowed $100,000, they're going to owe $101,750 right out of the gate. Conventional loans don't charge a fee like this.</li>
<li><b>Lifetime mortgage insurance: </b> When a home buyer is not putting 20% down on a loan, they typically pay something called mortgage insurance as a part of their monthly payment. With a conventional loan, that piece of the payment will automatically fall off and the monthly payment will become lower once the buyer has built up 22% equity in the house (they can request it be removed at 20% equity). With FHA loans though, that mortgage insurance typically stays for the life of the loan. </li>
<li><b>Lower down payment: </b> People often think they need a bigger down payment for conventional loans. Not necessarily though. There are several 3% down conventional options available these days. FHA requires 3.5% down. </li>
<li><b>Simpler property standards:</b> FHA has a higher bar on property conditions which can make the home purchase more challenging. For example, if the home is a flip, FHA has rules on how long the seller needs to have owned the home (conventional does not). Also, FHA is picky about peeling paint on homes older than 1978 and will require it to be scrapped, sanded and repainted before the loan closes. Conventional financing doesn't require this.</li>
</ul>
<b>Now are there reasons why FHA might be a better fit for a buyer? Absolutely! </b>FHA is more willing to approve someone with a lower credit score and it's more flexible with previous bankruptcies and foreclosures. It also can offer a lower interest rate or cheaper mortgage insurance in some situations which should definitely be considered in a loan selection.<br />
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The problem comes in when a lender thinks 'Well, I know they'll be approved FHA, so we'll just go that route' instead of exploring the FHA vs. Conventional option more deeply and giving the buyer the information to let them decide what fits them best. <b>Yes, it can be more difficult to get a loan approved for a conventional loan sometimes, but if it's best for the buyer, it's worth the extra work.</b><br />
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Given all the advantages of conventional financing, it's almost always my first choice for a buyer who qualifies. Why only 'almost', you say? Because I love love LOVE VA loans even more. To learn more about VA financing, feel free to click here - <a href="http://southbendhomeloan.blogspot.com/2013/01/va-loans-flax-seed-of-mortgage-lending.html" target="_blank">VA Loans - The Flax Seed of Mortgage Lending</a>.<br />
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Bottom line, there is no one right answer for all buyers. Each loan situation is unique. Each home buyer's goals and priorities are different. A lenders role is to review their situation and help them decide which of the available options suit them best. <br />
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To learn more about the loan options that give the best benefit to <b>you </b>based on <b>your </b>scenario and goals, feel free to contact me at lori.hiscock@ruoff.com.<br />
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<o:p><i style="font-size: 14.3px; line-height: 22.88px;">To learn more about the products covered here or any other aspects of home financing, contact Lori Hiscock at lori.hiscock@ruoff.com. </i></o:p></div>
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<a href="http://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s1600/closing.jpg" imageanchor="1" style="clear: left; color: #fc8901; float: left; font-family: Arial, serif; font-size: 14px; line-height: 22px; margin-bottom: 1em; margin-right: 1em; text-decoration: none;"><img border="0" height="133" src="https://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s200/closing.jpg" style="border: 1px solid rgb(238, 238, 238); padding: 2px;" width="200" /></a><em style="font-family: Arial, serif; font-size: 14px; line-height: 22px;"><strong>Lori Hiscock is a Sr. Loan Officer at <a href="http://www.ruoff.com/" style="color: #fc8901; text-decoration: none;" target="_blank" title="Ruoff Home Mortgage"><span style="color: #8c9a01;">Ruoff Home Mortgage</span></a>‘s South Bend office. One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University. You can connect with <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock's LO page"><span style="color: #8c9a01;">Lori Hiscock</span></a> or <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock Online Application"><span style="color: #8c9a01;">apply online</span></a> here.</strong></em> <strong><em>NMLS#404320.</em></strong></div>
<div style="background-color: white; color: #333333; font-family: Verdana, sans-serif; font-size: x-small; line-height: 16.44px; text-align: center;">
<span style="font-family: "arial" , sans-serif; font-size: 10.5pt;">Ruoff Mortgage Company, Inc. is an Indiana corporation licensed by the Indiana Department of Financial Institutions (DFI) and operates with the following licenses:<br /><br /><b>Indiana-DFI First Lien Mortgage Lending License #10994;<br />IL Residential Mortgage Licensee #MB.6760734;<br />Michigan 1st Mortgage Broker/Lender License #FL0017496.</b></span></div>
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<b><span style="font-family: "arial" , sans-serif; font-size: 10.5pt;">Ohio Mortgage Broker Act License #MBMB.850220.000<o:p></o:p></span></b></div>
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<b><span style="font-family: "arial" , sans-serif; font-size: 10.5pt;">The Florida Office of Financial Regulation License #MLD1182</span></b></div>
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<br />Lori Hiscockhttp://www.blogger.com/profile/03619139661832096700noreply@blogger.com0tag:blogger.com,1999:blog-5936949811716832438.post-3763247090720895912016-04-29T09:51:00.004-07:002016-05-02T07:04:14.569-07:00How To Make Your Offer Better<div class="separator" style="clear: both; text-align: center;">
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In my thirteen years of mortgage lending, I've never seen the market balanced. The number of buyers and sellers is always lopsided with someone having an advantage.<br />
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Any active home buyer will tell you that the seller is currently on the winning side of that equation. <b>There are more buyers out their than good homes so the attractive properties are selling fast, often with multiple offers.</b><br />
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This can really stink for buyers. They find a house they like only to find out other buyers want it too. So what can they do? <b>Can they somehow make their offer look better than the other guy's offer?</b><br />
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<b>Absolutely!</b> There are certain small differences that can have a big impact on the seller's decision to pick one offer over the other. Let me share three important ones here:<br />
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<h3>
Go Conventional</h3>
Conventional mortgages and FHA mortgages are the two most common loan types used today. Many buyers use FHA financing because it offers more flexibility with the loan approval. Credit scores can be lower, the down payment can sometimes be lower, bills can be higher compared to income, etc. <br />
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<b>FHA is a logical choice for many buyers, but it can make some sellers nervous. </b>FHA financing requires a higher property standard which could mean that some repairs are required for a FHA buyer that wouldn't be required for a conventional buyer. <br />
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<b>Because of it's flexibility, FHA financing also sometimes has the reputation of being used by 'less solid' buyers.</b> That is not the case at all - a FHA buyer is just as able to close on a mortgage loan as a conventional buyer - but perception matters and some sellers view FHA offers as weaker than conventional offers.<br />
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<b>So what can you do to make your offer look better in a multiple offer scenario?</b> Talk to you lender and see if you can go conventional. While FHA may have made the most sense for you when you did your initial loan application, you may also have a conventional option. There are now several 3% down conventional loan options available and the requirements for credit score, savings and debt/income ratio continue to soften, so a conventional option might be available to you if needed.<br />
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(If you'd like to learn more about the 3% down conventional options, go here - <a href="http://southbendhomeloan.blogspot.com/2016/01/the-best-mortgage-loan-youve-never.html" target="_blank">The Best Mortgage Loan You've Never Heard Of</a>)<br />
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<h3>
Remove Seller Concessions</h3>
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It's common for buyers to ask sellers to contribute to the buyer's loan costs. <b>When you are up against multiple offers, though, asking for seller assistance can put you out of the running. </b>Even if the net amount to the seller is the same (or sometimes even better) the impression given with seller concessions is that you don't have enough money to buy the house without help. That can make a seller nervous so they may go with a different buyer.<br />
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But what if you really <b>don't </b>have enough money to buy the house without help? I<b>n a competitive offer situation, you may want to look for help from another source.</b> Do you have a family member that might gift you the money needed for closing costs? Do you have a 401k that you could take a loan against? A vehicle you own outright that you could borrow against? <br />
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Or does your lender have an option to charge you a higher interest rate and waive some of the loan costs? That's not always an option but it often is. In a competitive situation, you'll want to explore all options to help your offer be strong.<br />
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<b>(LENDER SIDE NOTE - </b>if you choose to try any of these options, talk to your lender before making the offer. Adding gift funds in or a new loan can change your approval status. Be safe. Talk to the lender first.)<br />
<h3>
Use a Trusted Local Lender</h3>
I can see how me telling you to use a local lender may seem self-serving. I <b>am </b>a local lender, after all, so of course I'd say to go local, right? The truth of it is, though, <b>going local really can make a difference.</b> Even if the seller doesn't have a preference, odds are good that their Realtor does. The seller's Realtor has worked with the Internet banks before and they have worked with many of the mortgage lenders in town and they have opinions of who is good and who is not. The seller will likely take their Realtors advice into consideration when deciding who to go with.<br />
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Now, don't get me wrong. All Internet lenders are not bad. All local lenders are not good. People are people and there are strong and weak ones on both sides. <b>There are local lenders though that have a strong reputation in the market for getting things to closing on time and with little drama. </b>If your offer comes with a preapproval letter from one of those lenders, that can go a long way in helping your offer stand out from the rest.<br />
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And is Ruoff Home Mortgage one of those well-respected, low-drama, get it done lenders? You bet we are. But don't just trust me, ask around. <b>Check with your Realtor. Read the online reviews (<a href="https://www.zillow.com/lender-profile/LoriHiscock/" target="_blank">Zillow Review for Lori Hiscock</a>). Talk to us and judge for yourself.</b><br />
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So...there you go. If you want your offer to be stronger than the other guys, these options could help. <b>If you'd like to explore them deeper and get that 'well respected local lender' advantage, email me at lori.hiscock@ruoff.com. </b>Good luck with your home shopping! <br />
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<o:p><i style="font-size: 14.3px; line-height: 22.88px;">To learn more about the products covered here or any other aspects of home financing, contact Lori Hiscock at lori.hiscock@ruoff.com. </i></o:p></div>
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<a href="http://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s1600/closing.jpg" imageanchor="1" style="clear: left; color: #fc8901; float: left; font-family: Arial, serif; font-size: 14px; line-height: 22px; margin-bottom: 1em; margin-right: 1em; text-decoration: none;"><img border="0" height="133" src="https://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s200/closing.jpg" style="border: 1px solid rgb(238, 238, 238); padding: 2px;" width="200" /></a><em style="font-family: Arial, serif; font-size: 14px; line-height: 22px;"><strong>Lori Hiscock is a Sr. Loan Officer at <a href="http://www.ruoff.com/" style="color: #fc8901; text-decoration: none;" target="_blank" title="Ruoff Home Mortgage"><span style="color: #8c9a01;">Ruoff Home Mortgage</span></a>‘s South Bend office. One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University. You can connect with <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock's LO page"><span style="color: #8c9a01;">Lori Hiscock</span></a> or <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock Online Application"><span style="color: #8c9a01;">apply online</span></a> here.</strong></em> <strong><em>NMLS#404320.</em></strong></div>
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<span style="font-family: "arial" , sans-serif; font-size: 10.5pt;">Ruoff Mortgage Company, Inc. is an Indiana corporation licensed by the Indiana Department of Financial Institutions (DFI) and operates with the following licenses:<br /><br /><b>Indiana-DFI First Lien Mortgage Lending License #10994;<br />IL Residential Mortgage Licensee #MB.6760734;<br />Michigan 1st Mortgage Broker/Lender License #FL0017496.</b></span></div>
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<b><span style="font-family: "arial" , sans-serif; font-size: 10.5pt;">Ohio Mortgage Broker Act License #MBMB.850220.000<o:p></o:p></span></b></div>
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<b><span style="font-family: "arial" , sans-serif; font-size: 10.5pt;">The Florida Office of Financial Regulation License #MLD1182</span></b></div>
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<br />Lori Hiscockhttp://www.blogger.com/profile/03619139661832096700noreply@blogger.com0tag:blogger.com,1999:blog-5936949811716832438.post-72845154981496627542016-01-15T08:32:00.001-08:002016-01-15T08:33:07.152-08:00The Best Mortgage Loan You've Never Heard OfBack in the early 2000's it seemed like the mortgage industry was coming out with new loan types all the time. No Income Loans. No Asset Loans. No Income AND No Asset Loans. If You Have A Pulse You Can Buy A House Loans (OK, maybe not that one). It was nuts. <br />
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Somewhere around 2007, though, things changed. We found ourselves in a recession and those crazy flexible loan types were given much of the blame. The mortgage industry clamped down, taking away a lot of the fluff and leaving us with the tried-and-true mortgage products of yore (5% Down Conventional, FHA, USDA and VA). <br />
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<b>In the past year or two, though, we've begun to see a thawing. </b>Underwriting requirements have loosened a bit. PMI companies have lowered their rates and requirements. <b>The best thing in my opinion, however, has been the addition of some new lower down payment options for conventional buyers.</b><br />
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Let's go over what's out there today...<br />
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<h3>
Fannie 97<div class="separator" style="clear: both; text-align: center;">
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</h3>
<a href="http://3.bp.blogspot.com/-O7RD8luG1MQ/Vpe_1rR6AFI/AAAAAAAA3MI/da3BvwXE7bY/s1600/fannie.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="76" src="http://3.bp.blogspot.com/-O7RD8luG1MQ/Vpe_1rR6AFI/AAAAAAAA3MI/da3BvwXE7bY/s320/fannie.jpg" width="320" /></a> The first to show back up on the scene in early 2015 was Fannie Mae's Fannie 97. <b>The Fannie 97 is a conventional loan that only requires a 3% down payment. </b><br />
<br />
The advantage of a conventional loan over a FHA loan is that the private mortgage insurance (PMI) eventually stops being charged in the payment. The upfront fees are lower with conventional financing too (no 1.75% financed mortgage insurance like with FHA). The property requirements also aren't as strict as with FHA, which is VERY appreciated here in Indiana where exterior peeling paint is pretty common due to our extreme seasons.<br />
<br />
<b>Fannie 97 does require the buyer to be a first time buyer</b>. A first time buyer is viewed as someone who hasn't owned a home in over 3 years. Other than that, though, there are minimal extra requirements. Thankfully, there is no maximum income cap that you must be under to qualify unlike the other programs discussed below. <br />
<br />
<b>The downside of Fannie 97 is twofold. </b>First, the PMI companies charge more for their monthly coverage because the down payment is lower. This makes the monthly payment higher for the buyer. <br />
<br />
<b>The second disadvantage of the Fannie 97 is that, like with most conventional loans, the interest rate goes up as your credit score goes down. </b> FHA loans don't see as much of a rate increase with 'less than perfect' scores, but conventional loans often see a rate increase at every 20 point increment when the score slides below 740.<br />
<br />
<h3>
Home Possible Advantage</h3>
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<a href="http://3.bp.blogspot.com/-YTzogKQXlkg/Vpe_1qoK7wI/AAAAAAAA3MM/tlhV8WLv5yc/s1600/freddie.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="186" src="http://3.bp.blogspot.com/-YTzogKQXlkg/Vpe_1qoK7wI/AAAAAAAA3MM/tlhV8WLv5yc/s320/freddie.jpg" width="320" /></a></div>
Not to be left out of the game, Freddie Mac jumped in later in 2015 with their Home Possible Advantage loan. <b>Home Possible is also a 3% down loan and it's not only for first time home buyers. </b> There is a maximum income limit for the buyer, though (100% of the area median income). In St. Joseph County, Indiana, that median income is currently $57,300.<br />
<br />
<b>One nice thing is that Freddie only counts the income of the borrower, not of everybody in the household. </b>Many special programs are based on 'household income' regardless of who is on the loan. Not with Home Possible though. If there is a two person household and together they make above that $57,300 but one or the other makes under $57,300 and can qualify for the loan on that income only, they could likely use this program.<br />
<br />
<b>Another REALLY nice thing about Home Possible is that the PMI rates are much cheaper than with the Fannie 97. </b> As of right now, the savings with the cheaper Home Possible PMI is equal to about 0.5% in interest rate (NICE!). <br />
<br />
<h3>
Hellooooooo HomeReady</h3>
Not to be outdone by Freddie Mac, Fannie Mae recently threw a second hat in the ring. This winter we've seen the addition of Fannie's Home Ready Mortgage.<br />
<br />
Like the two above, this is a 3% down program. You do not need to be a first time buyer. You do (maybe) need to earn below a 'maximum allowed' income limit. <br />
<br />
<b>Why 'maybe'? Well, with HomeReady, the income limit is by census track - not by county.</b> Many census tracks in our county have no income limit under this program at all. Some have that $57,300 and some have $45,840 (current limits - subject to change). Again, though, they only count the borrower's income, not the whole household income.<br />
<br />
HomeReady brings a middle ground on the PMI rates. It's not as cheap as Home Possible but it's cheaper than Fannie 97. <b>What potentially makes HomeReady REALLY attractive though is that it doesn't do that whole 'higher interest rate for lower credit scores' thing that the other two 3% down programs do. With HomeReady, the interest rates are the same when your score is 680 or higher (NICE!).</b><br />
<br />
<h3>
SHOW ME IN PICTURES PLEASE!</h3>
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Whew! After all those words and pros and cons, I bet your mind is just BEGGING for a picture :). <b>While it's still kind of number-nerdy, this graph does what words can't do easily - it compares the effective cost on all three options as of today. </b>By 'Effective Cost' I'm meaning the interest rate plus the annual PMI charge. This is then broken down by credit score to see which is better at each point.<br />
<br />
Well, here's one. <br />
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<a href="http://3.bp.blogspot.com/-YXbYkp6yM1c/VpkeYE-Wc_I/AAAAAAAA3M0/tX3SjFFLv6k/s1600/last%2Bgraph.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="227" src="http://3.bp.blogspot.com/-YXbYkp6yM1c/VpkeYE-Wc_I/AAAAAAAA3M0/tX3SjFFLv6k/s400/last%2Bgraph.JPG" width="400" /></a></div>
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<br />
<br />
So...which is better? As of today's interest rates and PMI pricing, the HomeReady option is beating the other two options if the credit score is 680-720. At that point, Freddie's Home Possible gets a slight advantage. <br />
<br />
For the borrower who wouldn't qualify for HomeReady (maybe buying in one of the lower max income areas and they make too much), Freddie's Home Possible is a decent option even at the lower credit scores. If the buyer's income is just too high for either of those but they are a first time buyer, there is always Freddie 97 available.<br />
<br />
So does this have you more confused than when you started? It very well might with all the facts and figures. Don't worry though - that's why I'm here! The important thing to know is there ARE 3% down conventional options out there. Just give me a call or drop me an e-mail (574-234-5201/lori.hiscock@ruoff.com) and I will gladly help you figure out which one is the best fit for you.<br />
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<div class="MsoNormal" style="background-color: white; color: #333333; font-family: Arial, serif; font-size: 14.3px; line-height: 22.88px;">
<o:p><i style="font-size: 14.3px; line-height: 22.88px;">To learn more about the products covered here or any other aspects of home financing, contact Lori Hiscock at lori.hiscock@ruoff.com. </i></o:p></div>
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<a href="http://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s1600/closing.jpg" imageanchor="1" style="clear: left; color: #fc8901; float: left; font-family: Arial, serif; font-size: 14px; line-height: 22px; margin-bottom: 1em; margin-right: 1em; text-decoration: none;"><img border="0" height="133" src="http://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s200/closing.jpg" style="border: 1px solid rgb(238, 238, 238); padding: 2px;" width="200" /></a><em style="font-family: Arial, serif; font-size: 14px; line-height: 22px;"><strong>Lori Hiscock is a Sr. Loan Officer at <a href="http://www.ruoff.com/" style="color: #fc8901; text-decoration: none;" target="_blank" title="Ruoff Home Mortgage"><span style="color: #8c9a01;">Ruoff Home Mortgage</span></a>‘s South Bend office. One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University. You can connect with <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock's LO page"><span style="color: #8c9a01;">Lori Hiscock</span></a> or <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock Online Application"><span style="color: #8c9a01;">apply online</span></a> here.</strong></em> <strong><em>NMLS#404320.</em></strong></div>
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<span style="font-family: Arial, sans-serif; font-size: 10.5pt;">Ruoff Mortgage Company, Inc. is an Indiana corporation licensed by the Indiana Department of Financial Institutions (DFI) and operates with the following licenses:<br /><br /><b>Indiana-DFI First Lien Mortgage Lending License #10994;<br />IL Residential Mortgage Licensee #MB.6760734;<br />Michigan 1st Mortgage Broker/Lender License #FL0017496.</b></span></div>
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<br />Lori Hiscockhttp://www.blogger.com/profile/03619139661832096700noreply@blogger.com0tag:blogger.com,1999:blog-5936949811716832438.post-41776299385727524722016-01-08T10:43:00.001-08:002016-01-08T10:59:48.240-08:00What Would The Mortgage Lender Do?<a href="http://1.bp.blogspot.com/-a9LSbjm_g8E/Vo_9wd2GpAI/AAAAAAAA3Lc/4ZWIRYB2-4E/s1600/my%2Bface%2Bfor%2Bblog%2Bpost%2B2.jpg" imageanchor="1" style="clear: right; display: inline !important; float: right; margin-bottom: 1em; margin-left: 1em; text-align: center;"><img border="0" height="228" src="http://1.bp.blogspot.com/-a9LSbjm_g8E/Vo_9wd2GpAI/AAAAAAAA3Lc/4ZWIRYB2-4E/s320/my%2Bface%2Bfor%2Bblog%2Bpost%2B2.jpg" width="320" /></a>It happens all the time. I'm sitting with a prospective home buyer, going through mortgage options together, and they ask me "What would <b><i>you </i></b>do if you were me?"<br />
<br />
<b>I love that question. </b> It shows that they trust my knowledge and experience and they consider my advice valuable. So...I answer them! <br />
<br />
That answer's not always the same either. There isn't one 'right loan' solution. Things like the size of their savings, the stability of their income and the likelihood of them staying in the house long-term are just a few of the factors that could make that answer different. <br />
<br />
There are two things that I personally would <b>ALWAYS </b>do when buying a house, though. Let me take a minute to share them.<br />
<br />
<h3>
Have Emergency Savings</h3>
Many people who are looking to buy a house are living paycheck to paycheck. They don't see that as something to worry about because, hey, it's worked for them so far, right? Many times their mortgage payment will even be lower than their rent so...why not?<br />
<br />
<b>Here's why not. </b> When you own the house, you are responsible for the house. Things break, it is part of life, and as the homeowner you have to pay for fixing those things. <br />
<br />
Purchasing a home warranty can protect against some of this risk but there are always things that are not covered. I can't tell you how many times I've had a client call me after their home closing to say "Oh no, the water heater/furnace/sump pump/refrigerator broke! I don't have the kind of money needed to fix it. What can I do?" <br />
<br />
<b>My answer always breaks their heart. </b> "The seller isn't going to cover this and neither is the home inspector. It's your house now. You need to find a way."<br />
<br />
<b>So...what would I do? </b> I would always, ALWAYS, have at least $1,000 in a savings account earmarked just for potential home repairs prior to ever becoming a home owner. $2,000 would be better...or maybe $2,500. At a minimum though, I'd have $1,000. <br />
<br />
<h3>
Leave Room For Change</h3>
When you're buying a house, it's so easy to look short term. This house is just right for us right now! We can totally afford the monthly payment! It's perfect!<br />
<br />
It probably is perfect...now. But will it be perfect 3, 5, 7 years from now? <b>While you can sell a house down the road if it is no longer 'perfect' then, there are costs involved in selling a house. </b>Realtor commission, title company fees and property transfer costs will all have to be covered. Home buyers frequently find that, once they <b>want </b>to become the home sellers, they can't. There is not enough equity in their house to cover the costs so they can't sell.<br />
<br />
Knowing that, I always look at a house not only in terms of "Does it fit my life now?" but also "Will it fit my life 5 years from now?" If the answer is "Maybe not", then maybe this is not the right house for me.<br />
<br />
<b>That same long term approach needs to be taken on the monthly payment.</b> People often want to buy right up to the maximum they can qualify for. Why not? Who wouldn't want the best house they can get?<br />
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<b>Here's why not - life changes</b>. You may need to buy a new car, a new furnace, or pay unexpected medical bills. Your work scenario may change because of things beyond your control, or maybe it will change because you WANT it to. You may choose to change careers or cut your hours or open a business of your own. <b> If you're tied to the maximum mortgage payment you could qualify for though, you're trapped. You can't handle the things you don't want and you don't have the freedom to pursue the ones you do.</b><br />
<br />
<b>So...what would I do?</b> I would leave some wiggle room between my budget and that payment. Actually, I'd leave ALOT of wiggle room. If life brings me something bad or (hopefully) something really really good, I want to be able to take it.<br />
<br />
There are more things I'd do, and maybe sometime I'll write a 'Chapter 2' to share those. <b>For now, though, I'd ask all prospective home buyers to trust the advice of this wise old mortgage lender who has bought alot of houses personally and financed a WHOLE lot more for others. Save some money and leave some wiggle room to prepare yourself for the good and the bad. </b><br />
<b><br /></b>
<b>And...when you're ready to take that step into home buying, call me :). </b><br />
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<o:p><i style="font-size: 14.3px; line-height: 22.88px;">To learn more about the products covered here or any other aspects of home financing, contact Lori Hiscock at lori.hiscock@ruoff.com. </i></o:p></div>
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<a href="http://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s1600/closing.jpg" imageanchor="1" style="clear: left; color: #fc8901; float: left; font-family: Arial, serif; font-size: 14px; line-height: 22px; margin-bottom: 1em; margin-right: 1em; text-decoration: none;"><img border="0" height="133" src="http://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s200/closing.jpg" style="border: 1px solid rgb(238, 238, 238); padding: 2px;" width="200" /></a><em style="font-family: Arial, serif; font-size: 14px; line-height: 22px;"><strong>Lori Hiscock is a Sr. Loan Officer at <a href="http://www.ruoff.com/" style="color: #fc8901; text-decoration: none;" target="_blank" title="Ruoff Home Mortgage"><span style="color: #8c9a01;">Ruoff Home Mortgage</span></a>‘s South Bend office. One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University. You can connect with <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock's LO page"><span style="color: #8c9a01;">Lori Hiscock</span></a> or <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock Online Application"><span style="color: #8c9a01;">apply online</span></a> here.</strong></em> <strong><em>NMLS#404320.</em></strong></div>
<div style="background-color: white; color: #333333; font-family: Verdana, sans-serif; font-size: x-small; line-height: 16.44px; text-align: center;">
<span style="font-family: Arial, sans-serif; font-size: 10.5pt;">Ruoff Mortgage Company, Inc. is an Indiana corporation licensed by the Indiana Department of Financial Institutions (DFI) and operates with the following licenses:<br /><br /><b>Indiana-DFI First Lien Mortgage Lending License #10994;<br />IL Residential Mortgage Licensee #MB.6760734;<br />Michigan 1st Mortgage Broker/Lender License #FL0017496.</b></span></div>
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<b><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; font-family: Arial, sans-serif; font-size: 10.5pt;">Ohio Mortgage Broker Act License #MBMB.850220.000<o:p></o:p></span></b></div>
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<b><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; font-family: Arial, sans-serif; font-size: 10.5pt;">The Florida Office of Financial Regulation License #MLD1182</span></b></div>
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<br />Lori Hiscockhttp://www.blogger.com/profile/03619139661832096700noreply@blogger.com0tag:blogger.com,1999:blog-5936949811716832438.post-90938826892779402682015-09-22T06:38:00.000-07:002015-09-24T06:21:13.989-07:00How Paying More Interest Could Save A Home Buyer Money<div class="MsoNormal">
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<b>Andrew and Amanda thought
they knew what I was going to say when they walked in the door. </b>They were looking to buy their first home,
had good jobs, great credit and the ability to put 20% down. They had already talked to a couple of other
lenders before me so they were fully prepared for my recommendation.<br />
<o:p></o:p></div>
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“So we should put 20% down, right? And probably do a 15 year loan to pay it off
faster?” they asked nonchalantly.<o:p></o:p></div>
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<b><i>“No….no, that’s not what I would recommend for you. I’d only put 10% down in your case and
consider the 30 year term.”<o:p></o:p></i></b></div>
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Needless to say, Andrew and Amanda were surprised. Anyone who has worked with me before would
likely be shocked as well. Why? Because
it’s well known that I’m very anti-debt.
Even though I help people get loans for a living, my goal is for my
buyers to owe as little as possible for as short of a period as possible. <o:p></o:p></div>
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<b>So why would I
encourage these buyers to borrow more and stretch it out over a longer time?<o:p></o:p></b></div>
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<b><br /></b></div>
<h4>
<b><u>Considering The
Whole Picture</u></b></h4>
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Truly, there was a method to my madness. When making my recommendation, I was just looking
at a bigger financial picture than the previous lenders had considered. <o:p></o:p></div>
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Most mortgage lenders tend to look at the new mortgage as an
isolated loan when making their recommendations. It’s not though. This new loan is going to be a part of the
buyer’s total financial picture. As
such, the full financial picture should be looked at when deciding on which
mortgage options are the most beneficial.<o:p></o:p></div>
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<b>Yes, Andrew and Amanda
had the savings to put the 20% down.
They also had extensive student loans, though, most of which were at
6%-7% interest rates.</b> Andrew and Amanda
had larger incomes which was great in that it allowed them to save money
quickly but bad in that it excluded them from getting any income tax benefits
on the interest paid on those student loans.<o:p></o:p></div>
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The interest rate on their new mortgage would be 2-3% lower
than the student loan interest and it likely would be deductible when
determining their taxable income. <b>Seeing it would be a cheaper source of
money on multiple fronts, financially it made sense to pay more on the student
loans and less on the mortgage.<o:p></o:p></b></div>
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<b><br /></b></div>
<h4>
<b><u>But….what about PMI?</u></b></h4>
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When I explained my recommendation, Andrew and Amanda
immediately grasped the logic of using their extra savings to pay down the
student loans instead. The risk of
Private Mortgage Insurance (PMI) concerned them though.<o:p></o:p></div>
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“Don’t we have to put 20% down?” they asked. “Won’t we have to pay PMI if we don’t?”<o:p></o:p></div>
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“Not in your case.
For you, I would recommend a no PMI conventional loan.”<o:p></o:p></div>
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<h4>
<b><u>Ways To Slay The
PMI Beast</u></b></h4>
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No PMI? Is there <b>really</b> a no PMI conventional loan with
less than 20% down? Well, technically...no. If you don’t have a 20% down
payment, someone is going to have to pay for insurance to protect the lender if
the buyer defaults. Normally that
insurance is paid for in monthly installments by adding a premium to the buyer’s
mortgage payment. <o:p></o:p></div>
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<b>That is not the ONLY
way it can be paid though.</b> If the
buyer chooses, they can pay a lump sum upfront and have no PMI for the life of
the loan. If that lump sum needed is
under 3% of the price, they can also ask for the seller to pay for it in seller
concessions.<o:p></o:p></div>
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These weren’t the options I proposed for Andrew and Amanda
though. Instead, I recommended lender
paid PMI.<o:p></o:p></div>
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<h4>
<b><u>Getting Smart with
LPMI</u></b></h4>
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Lender Paid Mortgage Insurance (LPMI) can sometimes be the
best option for PMI avoidance<b>. In Andrew and Amanda’s case, I could increase
their mortgage interest rate by 0.125% and, with the excess lender income from
that, pay the lump sum PMI in full for them.</b>
This was a win on both fronts in that it removed a higher monthly PMI
cost (not tax deductible) and replaced it with a lower increase in interest
cost (wonderfully tax deductible). <o:p></o:p></div>
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<br /></div>
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<b>And how did this work
out for them in dollars and cents? Very
nicely, actually. </b> The monthly PMI
option would have added $108.23 to their monthly mortgage payment. The 0.125% higher interest rate? It only added $25.59 to the payment. <o:p></o:p></div>
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<br /></div>
<h4>
<b><u>Knowing the
Downside</u></b></h4>
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<b>While this was a good
option for Andrew and Amanda, this structure isn’t one I would propose for
everyone because there is a downside.
The buyers going this route have to actually follow the plan we’ve made.</b> That means the extra that was going to go
toward the down payment needs to actually go to the student loans, NOT to new
furniture for the home or other optional items.
And the extra money they’ll have each month by taking a 30 year term
instead of a 15 year term also needs to go to the those student loans. If it doesn’t, they’ve taken on additional
debt for nothing.<o:p></o:p></div>
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<br /></div>
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I could see that Andrew and Amanda were capable of working
this plan though. As a matter of fact,
they were thrilled by it.</div>
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<br /></div>
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Paying off
their student loans had been a BHAG (big hairy audacious goal) for them since
graduation, and they were excited to start working on it in an intentional, mapped-out
way.</div>
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<br /></div>
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<o:p></o:p></div>
<h4>
<b><u>So The Moral Of
The Story Is…</u></b></h4>
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Is there a moral to this story? But of course! In short, mortgages are not a ‘one size fits
all’ thing. There are multiple ways to
structure a loan and a mortgage lender should be exploring all of them in light
of their buyer’s big-picture finances, not just through the lens of the
mortgage alone. <o:p></o:p></div>
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If you’re considering a home purchase and want a detailed
review to see what mortgage options will best benefit you, drop me an email at <a href="mailto:lori.hiscock@ruoff.com">lori.hiscock@ruoff.com</a>. I wish you all the best in your home shopping
adventure!<o:p></o:p></div>
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<o:p><i style="background-color: white; color: #333333; font-family: Arial, serif; font-size: 14.3px; line-height: 22.88px;">To learn more about the products covered here or any other aspects of home financing, contact Lori Hiscock at lori.hiscock@ruoff.com. </i></o:p></div>
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<a href="http://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s1600/closing.jpg" imageanchor="1" style="clear: left; color: #fc8901; float: left; font-family: Arial, serif; font-size: 14px; line-height: 22px; margin-bottom: 1em; margin-right: 1em; text-decoration: none;"><img border="0" height="133" src="http://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s200/closing.jpg" style="border: 1px solid rgb(238, 238, 238); padding: 2px;" width="200" /></a><em style="font-family: Arial, serif; font-size: 14px; line-height: 22px;"><strong>Lori Hiscock is a Sr. Loan Officer at <a href="http://www.ruoff.com/" style="color: #fc8901; text-decoration: none;" target="_blank" title="Ruoff Home Mortgage"><span style="color: #8c9a01;">Ruoff Home Mortgage</span></a>‘s South Bend office. One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University. You can connect with <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock's LO page"><span style="color: #8c9a01;">Lori Hiscock</span></a> or <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock Online Application"><span style="color: #8c9a01;">apply online</span></a> here.</strong></em> <strong><em>NMLS#404320.</em></strong></div>
<div style="background-color: white; color: #333333; font-family: Verdana, sans-serif; font-size: x-small; line-height: 16.44px; text-align: center;">
<span style="font-family: Arial, sans-serif; font-size: 10.5pt;">Ruoff Mortgage Company, Inc. is an Indiana corporation licensed by the Indiana Department of Financial Institutions (DFI) and operates with the following licenses:<br /><br /><b>Indiana-DFI First Lien Mortgage Lending License #10994;<br />IL Residential Mortgage Licensee #MB.6760734;<br />Michigan 1st Mortgage Broker/Lender License #FL0017496.</b></span></div>
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<b><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; font-family: Arial, sans-serif; font-size: 10.5pt;">Ohio Mortgage Broker Act License #MBMB.850220.000<o:p></o:p></span></b></div>
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<b><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; font-family: Arial, sans-serif; font-size: 10.5pt;">The Florida Office of Financial Regulation License #MLD1182</span></b></div>
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Lori Hiscockhttp://www.blogger.com/profile/03619139661832096700noreply@blogger.com0tag:blogger.com,1999:blog-5936949811716832438.post-15420143169787691432015-06-22T13:49:00.004-07:002015-06-23T08:20:51.639-07:00More Home Buyers Now Qualify For Indiana Down Payment Assistance<div class="separator" style="clear: both; text-align: center;">
<a href="http://3.bp.blogspot.com/-6lgNpWaEQ9Q/VYhxlulMKMI/AAAAAAAA3Ac/TAgVCQVCNAg/s1600/Breaking-News.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="147" src="http://3.bp.blogspot.com/-6lgNpWaEQ9Q/VYhxlulMKMI/AAAAAAAA3Ac/TAgVCQVCNAg/s320/Breaking-News.jpg" width="320" /></a></div>
Great news! Indiana Housing and Community Development Authority (IHCDA) announced an increase in the income cap for home buyers wanting to participate in the mortgage credit certificate program, the My Home reduced down payment program and the Next Home down payment assistance program.<br />
<br />
<b>What this means is that more Indiana home buyers can now take advantage of these programs. </b>Let me take a minute to summarize what these programs offer:<br />
<br />
<h4>
Mortgage Credit Certificate (MCC)</h4>
The MCC is a federal income tax credit that is available for first time buyers. The eligible buyer who enrolls in the MCC program will receive an income tax credit when filing their tax returns that is equal to a percentage of the interest paid on their mortgage that year. Annual credits given range between 20-35% of the interest paid and they are ongoing for as long as the buyer lives in the home, pays income taxes and pays mortgage interest. Amounts received vary based on loan size but typically run between $800-$1,000 in year one, declining slowly thereafter. <br />
<h4>
My Home </h4>
My Home is a conventional loan product for first time buyers that offers a 3% down payment, a competitive interest rate and a lower cost for private mortgage insurance (PMI). The interest rate is not driven by the credit score which is different than the norm for conventional mortgages, so a person qualifying with a 680 credit score will get the same attractive interest rate as the person qualifying with a 780 score. That and the lower PMI cost are what make this loan option appealing to certain buyers.<br />
<h4>
Next Home</h4>
Next Home is the most well known IHCDA product because it addresses the down payment need of many buyers. Next Home has both a FHA and conventional option and, in both cases, the entire down payment is covered by IHCDA. This program is <b><i>NOT </i></b>for first time buyers only. As long as the buyer sells their existing home before closing on the new home, they could qualify. <br />
<br />
The interest rate and fees are higher for this program. Seller concessions are typically used to cover the higher fees but conventional loans are limited to a 3% cap from the seller so the conventional buyer typically needs to invest some money themselves (the FHA buyer typically does not). It is still less than with a typical loan product, though, and the conventional loan gets that same reduced PMI as the My Home product, so it can help many buyers get into a home sooner with little to nothing out of pocket and a comfortable payment.<br />
<h4>
Higher Income Limit Amounts</h4>
With today's announcement, IHCDA is allowing more buyers to now qualify for these programs by raising the maximum household income limits. In St. Joseph County, Indiana, a buyer using the MCC program or the Next Home FHA program can now qualify with an income of up to <b><span style="color: red;">$61,700 </span></b>for a 1-2 person household. For a 3+ person household, the income limit is increased to <b><span style="color: red;">$70,955</span></b>.<br />
<br />
For conventional loans not used jointly with the MCC, the limits are now even higher. <span style="color: red;"><b>Next Home Conventional and My Home are allowing household income limits up to $86,380.</b></span><br />
<h4>
Share the Word</h4>
Many home buyers in Indiana are not aware of these programs and they should be. Not all buyers will choose to participate because of the higher interest rate and higher fees, but all buyers should be aware of the option so that they can compare the costs/benefits and decide for themselves. <br />
<b><br /></b>
<b>At a minimum, all first time buyers should consider the MCC. </b>The $500 enrollment fee is regained in under a year typically which makes it a great option for the buyer who has the upfront money available.<br />
<br />
But, again, many home buyers have never even heard that these programs are out there. <b>Please - help them learn by sharing this post. </b>They'll thank you for it. :) <br />
<br />
<br />
<i style="background-color: white; color: #333333; font-family: Arial, serif; font-size: 14.3000001907349px; line-height: 22.8800010681152px;">To learn more about the IHCDA products covered here or any other aspects of home financing, contact Lori Hiscock at lori.hiscock@ruoff.com. </i><br />
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<a href="http://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s1600/closing.jpg" imageanchor="1" style="clear: left; color: #fc8901; float: left; font-family: Arial, serif; font-size: 14px; line-height: 22px; margin-bottom: 1em; margin-right: 1em; text-decoration: none;"><img border="0" height="133" src="http://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s200/closing.jpg" style="border: 1px solid rgb(238, 238, 238); padding: 2px;" width="200" /></a><em style="font-family: Arial, serif; font-size: 14px; line-height: 22px;"><strong>Lori Hiscock is a Sr. Loan Officer at <a href="http://www.ruoff.com/" style="color: #fc8901; text-decoration: none;" target="_blank" title="Ruoff Home Mortgage"><span style="color: #8c9a01;">Ruoff Home Mortgage</span></a>‘s South Bend office. One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University. You can connect with <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock's LO page"><span style="color: #8c9a01;">Lori Hiscock</span></a> or <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock Online Application"><span style="color: #8c9a01;">apply online</span></a> here.</strong></em> <strong><em>NMLS#404320.</em></strong></div>
<div style="background-color: white; color: #333333; font-family: Verdana, sans-serif; font-size: x-small; line-height: 16.44px; text-align: center;">
<span style="font-family: Arial, sans-serif; font-size: 10.5pt;">Ruoff Mortgage Company, Inc. is an Indiana corporation licensed by the Indiana Department of Financial Institutions (DFI) and operates with the following licenses:<br /><br /><b>Indiana-DFI First Lien Mortgage Lending License #10994;<br />IL Residential Mortgage Licensee #MB.6760734;<br />Michigan 1st Mortgage Broker/Lender License #FL0017496.</b></span></div>
<div style="background-color: white; color: #333333; font-family: Arial, serif; font-size: 14.3000001907349px; line-height: 22.8800010681152px;">
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<b><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; font-family: Arial, sans-serif; font-size: 10.5pt;">Ohio Mortgage Broker Act License #MBMB.850220.000<o:p></o:p></span></b></div>
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<br />Lori Hiscockhttp://www.blogger.com/profile/03619139661832096700noreply@blogger.com0tag:blogger.com,1999:blog-5936949811716832438.post-22399609274164279552015-03-16T08:57:00.000-07:002017-06-29T12:23:24.627-07:00The Downside of Down Payment Assistance<div class="separator" style="clear: both; text-align: center;">
<a href="http://1.bp.blogspot.com/-6obTxroA9wg/VQb9NKUOXWI/AAAAAAAA2yU/oFD-RAzQCPE/s1600/DP%2BMoney.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="320" src="https://1.bp.blogspot.com/-6obTxroA9wg/VQb9NKUOXWI/AAAAAAAA2yU/oFD-RAzQCPE/s1600/DP%2BMoney.jpg" width="217" /></a></div>
Potential home buyers often ask me if there is any down payment assistance available through the government. It's a good question to ask. Why not take advantage of free money if it's there, right?<br />
<br />
The good news is -<b><span style="color: red;"> t</span></b><span style="color: red;"><b>here IS down payment money available</b></span>. The Indiana Housing and Community Development Authority offers the Next Home down payment assistance program to people buying a primary home in Indiana. This program is great for many reasons, including:<br />
<br />
<ol>
<li><b>Full down payment given </b>- It covers all of the money needed for the buyer's down payment.</li>
<li><b>Conventional or FHA - </b>it can be used with both conventional and FHA financing. </li>
<li><b>Not for first time buyers only - </b>The program is not just for first time buyers. Even if the buyer owns a home at the time of application, as long as it will be sold prior to purchasing the new one, they could qualify.</li>
<li><b>Flexible credit score requirement - </b>to get the down payment help, the buyer's credit score does need to be higher than the minimum FHA requirement, but it's reasonable. Currently, we require a 660 for Next Home down payment assistance.</li>
<li><b>No delay in buying </b>- using the program doesn't slow down the home buying process. We still close in the typical 30-45 days. </li>
<li><b>No higher property qualifications</b> - there is no higher property standard set for the house being purchased and no additional inspections needed.</li>
<li><b>Higher income limits - </b>There is a maximum household income limit for this program so, if you make too much money, you don't qualify. The limit is generous though. For a 1-2 person household, the current limit is St. Joseph county is $67,000. If there are 3 or more people in the household, it's $77,050 (link to all limits for the state here - <a href="http://www.in.gov/ihcda/files/2014_Income_Limits_spreadsheet_July_21.1.pdf" target="_blank">County Income Limits</a>).</li>
</ol>
<br />
<b>So, this all sounds good, right? Why wouldn't someone who qualifies take advantage of this?</b><br />
<br />
This IS good, really, but <b><span style="color: red;">there are downsides to using this program. </span></b>The main three are:<br />
<br />
<h4>
Upfront Money Still Needed</h4>
Even if you are using the Next Home down payment assistance, you still need money upfront when buying a home. You need your earnest money when your offer is accepted (typically $500-$1,000). Within a week after the offer is accepted, you'll need to enroll in the Next Home program (currently $100) and - if you're a first time home buyer - you'll need to take an online home buyer education class (currently $75). The home inspector will also typically want to be paid upfront, if you have one, but you can normally negotiate for this to be paid at closing, potentially from the seller's assistance.<br />
<h4>
Higher Interest Rate</h4>
The interest rate for the Next Home mortgage is typically higher than the interest rate you would get if you paid the down payment yourself. The difference varies with rate fluctuations in the market, but on average the Next Home rate is 0.25%-0.50% higher than the normal market interest rate.<br />
<h3>
But the Big One Is....</h3>
These are all minor inconvenience with using this program. No one wants to gather more paperwork, pay a couple hundred to IHCDA or have a higher interest rate, but to get the free money, it's probably worth it.<br />
<br />
<b><span style="color: red;">There is one piece to this program that may make it NOT worth it, though,</span> </b>if you have another option and that is the higher closing costs. <br />
<br />
Let's back up a bit - when you are buying a house, you need money for the down payment, money for closing costs (title work fees, lender fees, appraisal costs, etc.) and money for prepaid items (first year of home insurance, prepaid interest, escrow build-up). <b>The Next Home program pays for your down payment but it does NOT pay for the closing costs or prepaid items.</b><br />
<br />
So who does? If you have the money and are willing, you do. If you don't have the money, you ask the seller to pay them on your behalf. This is allowed as long as the total amount you are asking for doesn't exceed 6% of the price for FHA loans or 3% of the price for conventional loans.<br />
<br />
<b>Here's the problem - </b>the closing costs are higher for Next Home loans. How much higher depends on the price of the home but, in general, <b><span style="color: red;">if you are asking the seller to pay for those for you, you are going to have to ask the seller to pay for 5-6% of the price worth of fees on your behalf.</span></b><br />
<br />
This can create problems in multiple ways:<br />
<br />
<ol>
<li><b>Seller offended - </b>It's fairly common for a buyer to ask for 3-4% from the seller from costs, but when you ask for 6%, the seller may get offended. They may not be open to your offer because they think you are asking for too much.</li>
<li><b>Higher price needed - </b>If the seller's are OK with paying the 6%, they're probably going to expect you to pay a higher price on the home to help offset the higher amount they're giving.</li>
<li><b>Challenge in re-negotiating -</b> <span style="color: red;"><b>If you are paying a higher price for the home because of higher seller concessions, their is an increased risk that the appraisal will come in low. </b></span>This is important to know going in because, by the time the appraisal is back, you've spent money on appraisals/inspections/enrollment fees that you can't get back. If the appraisal comes back low, the seller may be unwilling to drop the price without also reducing how much of your costs they are covering. <b><span style="color: red;">This is also a risk with repair negotiations.</span></b> If he is giving 6% towards your costs, the seller may be unwilling to give more to fix things that come up on your inspection.</li>
</ol>
<br />
<h3>
Bottom Line</h3>
It's currently a seller's market in northern Indiana. There are multiple offers happening on good homes so buyers need to go in with the strongest offer they can. <b>If you are a buyer and you need the down payment help given by Next Home, by all means use it.<span style="color: red;"> </span> </b>It is a good program and will get you into a home now versus having you wait until you save up the down payment.<br />
<br />
<b><span style="color: red;">If you have the ability to cover the down payment yourself, though, consider doing so. </span></b>You'll have lower upfront costs, a lower interest rate, will likely pay less for the home and could have a better chance of your offer being accepted because you are asking for lower contributions from the seller. <br />
<br />
Bottom line, 'free money' isn't always free, and you don't want to miss out on the home you love because you're trying to get some. Weigh the pros and cons, talk to you mortgage lender and Realtor and then decide if using Next Home for your purchase is the right step for you.<br />
<br style="background-color: white; color: #333333; font-family: Arial, serif; font-size: 14.3000001907349px; line-height: 22.8800010681152px;" />
<br />
<i>To learn more about Next Home down payment assistance or any other aspects of home financing, contact Lori Hiscock at lori.hiscock@ruoff.com. </i><br />
<br />
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<a href="http://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s1600/closing.jpg" imageanchor="1" style="clear: left; color: #fc8901; float: left; font-family: Arial, serif; font-size: 14px; line-height: 22px; margin-bottom: 1em; margin-right: 1em; text-decoration: none;"><img border="0" height="133" src="https://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s200/closing.jpg" style="border: 1px solid rgb(238, 238, 238); padding: 2px;" width="200" /></a><em style="font-family: Arial, serif; font-size: 14px; line-height: 22px;"><strong>Lori Hiscock is a Sr. Loan Officer at <a href="http://www.ruoff.com/" style="color: #fc8901; text-decoration: none;" target="_blank" title="Ruoff Home Mortgage"><span style="color: #8c9a01;">Ruoff Home Mortgage</span></a>‘s South Bend office. One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University. You can connect with <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock's LO page"><span style="color: #8c9a01;">Lori Hiscock</span></a> or <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock Online Application"><span style="color: #8c9a01;">apply online</span></a> here.</strong></em> <strong><em>NMLS#404320.</em></strong></div>
<div style="background-color: white; color: #333333; font-family: Verdana, sans-serif; font-size: x-small; line-height: 16.44px; text-align: center;">
<span style="font-family: "arial" , sans-serif; font-size: 10.5pt;">Ruoff Mortgage Company, Inc. is an Indiana corporation licensed by the Indiana Department of Financial Institutions (DFI) and operates with the following licenses:<br /><br /><b>Indiana-DFI First Lien Mortgage Lending License #10994;<br />IL Residential Mortgage Licensee #MB.6760734;<br />Michigan 1st Mortgage Broker/Lender License #FL0017496.</b></span></div>
<div style="background-color: white; color: #333333; font-family: Arial, serif; font-size: 14.3000001907349px; line-height: 22.8800010681152px;">
<div align="center" class="MsoNormal" style="line-height: 12.35pt; margin-bottom: 0in; text-align: center;">
<b><span style="font-family: "arial" , sans-serif; font-size: 10.5pt;">Ohio Mortgage Broker Act License #MBMB.850220.000<o:p></o:p></span></b></div>
<br />
<div align="center" class="MsoNormal" style="line-height: 12.35pt; margin-bottom: 0in; text-align: center;">
<b><span style="font-family: "arial" , sans-serif; font-size: 10.5pt;">The Florida Office of Financial Regulation License #MLD1182</span></b></div>
</div>
<br />Lori Hiscockhttp://www.blogger.com/profile/03619139661832096700noreply@blogger.com0tag:blogger.com,1999:blog-5936949811716832438.post-23840619072951547192015-01-27T14:05:00.002-08:002015-01-28T08:55:40.001-08:00Should I Refinance?<div class="separator" style="clear: both; text-align: center;">
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<a href="http://4.bp.blogspot.com/-Eavw6iws4GI/VMgJZNW3n4I/AAAAAAAA2sA/dh_FWfG5EqA/s1600/refinancing_jumbo.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://4.bp.blogspot.com/-Eavw6iws4GI/VMgJZNW3n4I/AAAAAAAA2sA/dh_FWfG5EqA/s1600/refinancing_jumbo.jpg" height="208" width="320" /></a><i>"Hey Lori, I saw online that interest rates are currently lower than my interest rate. Maybe I should refinance."</i><br />
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I get this call from past clients all the time, and my answer typically surprises them. <b> "It might make financial sense for you to refinance, but - truthfully - it might not."</b><br />
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<i><b>"What??</b> But the rate is lower! Why wouldn't it make financial sense?"</i><br />
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It's a good question, and one I'm happy to answer for them - and for you!<br />
<h3>
The Benefits of Refinancing</h3>
There definitely can be benefits to refinancing. The main four are:<br />
<br />
<ol>
<li><b>Lower Interest Rate </b>- This needs little explanation. If you could pay a lower interest rate on your loan than you are paying now, that's a good thing.</li>
<li><b>Lower Monthly Payment </b>- Typically refinancing also gives you a lower monthly payment which is nice. </li>
<li><b>Shorter Term - </b>Sometimes people refinance to get a shorter term as well, changing from a 30 year loan to a 15 year one, for example. In cases like that, the monthly payment might actually go up even though the rate goes down just because they're paying it off faster. They are typically saving a TON of money on interest with that shorter term, though, so it's still a good thing. </li>
<li><b>Removing/Reducing Private Mortgage Insurance (PMI) -</b> this is one that people often don't even think of. If their home value has gone up since they bought it and they are currently paying PMI as a part of their payment, refinancing could remove or reduce the cost of that PMI.</li>
</ol>
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<b>So....WHY did I say it might not make financial sense to refinance? </b> There truly are situations where refinancing to a lower rate will cost you more money. Let's look at those now.<br />
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<h3>
Paying More with a Lower Interest Rate</h3>
The thing that people often don't realize about refinancing is that a lower interest rate doesn't automatically equate to less interest paid. Why is that? <b>Because refinancing typically resets the loan term.</b><br />
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Let me give an example. Let's say your mortgage balance is $70,450 and your interest rate currently is 4.75%. You've been paying on the loan for 5 years now and you have an opportunity to refinance to 4.00%. The closing costs will be $2,000 and will be rolled into the new loan.<br />
<i><br /></i>
<i>If you continue to pay your loan as-is without refinancing, you will pay $50,056 in interest between now and the time it's paid off in 25 years. If you refinance into a new 4.0% loan though, adding in your closing costs, you will actually pay $52,069 in interest by the time the loan is paid off. </i><br />
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<b>Why are you paying MORE interest with a lower interest rate?</b> Because by refinancing, you are stretching your loan back out to 30 years. Adding in those 5 additional years will cost you more in interest, even with the lower rate.<br />
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<b>Now, could you take the new, lower rate and pay it back over 25 years? Absolutely! </b>And your payment would still drop $19.25/month if you did this. The truth of it is though, few people actually do that. They probably intend to but, when the bill comes showing that new, lower payment, they just pay that minimum amount due. By doing that they end up paying more for their mortgage than if they had left their loan unchanged.<br />
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<h3>
Adding Permenant Mortgage Insurance</h3>
Paying more in interest isn't the only reason to potentially pass on refinancing, though. <b> If you currently have a FHA mortgage and are considering refinancing into another FHA mortgage, you may be strapping yourself to unexpected mortgage insurance for the life of your loan. </b><br />
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HUH??<br />
<b><br /></b>
Let me explain.<b> </b> <b>If a homeowner currently has a FHA mortgage and that mortgage was taken out before June 3, 2013, the mortgage insurance portion of their monthly mortgage payment will eventually go away.</b> When they have enough equity, their lender will remove that cost from their monthly payment, never to return.<br />
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On June 3, 2013 though, FHA changed that. The majority of FHA loans taken out after that date will have mortgage insurance for the life of the loan, <b>meaning ALL 30 YEARS. </b><br />
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How does this impact your refinancing decision? If you are going from a FHA mortgage to a FHA mortgage, if you intend to stay in your home for awhile and if you currently have a FHA mortgage that will drop that mortgage insurance charge in time,<b> refinancing into a new loan that will have mortgage insurance charged all 30 years doesn't make sense</b>, even if the interest rate is lower.<br />
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<h3>
The Bottom Line</h3>
<b>So what does this mean to you? Should you refinance if the rates are lower or shouldn't you?</b><br />
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It truly depends on your unique situation. Some people should and some people really shouldn't.<br />
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<b>Here's what you should do. </b>If you are curious about refinancing, contact a lender and ask them if it makes sense for you. If they automatically say "Yes!", hang up and call someone else. They're not thinking about what's best for you. They're thinking about getting another loan.<br />
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If they say "It depends", though, talk to them some more. <b>Or, even better - just call me! </b>I'm happy to do the math with you to see if refinancing makes sense or not. If it does, I'll gladly help you save some money. And if it doesn't, I'll tell you that too.<br />
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<br />Lori Hiscockhttp://www.blogger.com/profile/03619139661832096700noreply@blogger.com0tag:blogger.com,1999:blog-5936949811716832438.post-66336572029625775862015-01-09T17:55:00.001-08:002015-01-10T06:02:15.193-08:00Big Reduction in FHA Mortgage Insurance Rate<div class="separator" style="clear: both; text-align: center;">
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<strong>For the past seven years, I have stood back and watched FHA's mortgage insurance rates go up and up and up</strong>. FHA has always charge a monthly mortgage insurance premium (their version of Private Mortgage Insurance aka PMI), and rightly they should. That premium helps cover their cost of losses in foreclosures, so charging it is only right.<br />
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<strong>The amount they charge has gotten a bit painful for my buyers through the years though</strong>, and that has bothered me. It was only 0.5% per year before 2008, but then it went to 0.55% before leaping to 0.9% in 2010.<br />
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That wasn't the end of it though. <strong>2011 saw another huge increase to 1.15%, followed by a hop to 1.25% in 2012 before landing at it's current straining rate of 1.35% per year in 2013.</strong><br />
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This high rate worked for FHA when they were the only game in town and - after the credit crisis - they were for many buyers. <strong>Fannie Mae just recently re-activated their 3% down conventional option, though </strong>(YEA FANNIE MAE!), and Freddie Mac's 3% down option will be back on the market later this year. With these lower down payment options and more flexibility being offered by the PMI companies, <strong>FHA is starting to feel the heat.</strong><br />
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<strong>Thankfully, they've done something about it. Today they announced a HUGE reduction in the monthly mortgage insurance rates, dropping it from the current 1.35% to a much more bearable 0.85% per year. </strong>For the person borrowing $125,000, this will equate to roughly a $50/month savings on their mortgage payment. <br />
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This reduction will take effect for all FHA case numbers assigned on or after <strong>January 26th</strong>. To make themselves even more beloved by the general mortgage populace, <strong>FHA will allow existing case numbers to be cancelled and reissued with this lower rate if the case number was issued within 30 days of today's announcement (January 9th). </strong><br />
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Some of you might recall a blog I wrote a few years ago where I broke up with FHA (<a href="http://southbendhomeloan.blogspot.com/2013/06/fha-im-dumping-you.html" target="_blank">FHA, I'm Dumping You).</a> <strong>Well, maybe it's time to reconsider</strong>. FHA has come a'courtin' again, and I like the smell of their flowers. Keep it up FHA. Their might be hope for you yet.<br />
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(To learn more straight from HUD, click here for <a href="http://portal.hud.gov/hudportal/documents/huddoc?id=15-01ml.pdf" target="_blank">Mortgagee Letter 2015-01</a>).<br />
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Lori Hiscockhttp://www.blogger.com/profile/03619139661832096700noreply@blogger.com0tag:blogger.com,1999:blog-5936949811716832438.post-85204878651467788582014-12-31T08:48:00.002-08:002014-12-31T08:57:51.434-08:00Sales Contribution or Sales Concession?<div class="separator" style="clear: both; text-align: center;">
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<strong>I have to admit it, I occasionally speak in mortgagese.</strong> I'll be meeting with a home buyer and speaking perfectly normal English when suddenly I hear myself using words like <em>'escrow account</em>', '<em>conditional commitment letter</em>' and '<em>seller contributions</em>'. <br />
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These terms make complete sense to me but to the new home buyer? I might as well be speaking a different language. They have no idea what I'm talking about. <br />
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<strong>To help you understand this lingo too, let me provide a little education on one of the most common terms used - seller contributions.</strong><br />
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<h3>
What is a Seller Contribution?</h3>
Seller contributions is a generic term we use in the mortgage and real estate industry to reference things given to the buyer from the seller. Technically, though, contributions from a seller can consist of two different components - sales contributions and sales concessions. <br />
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<h3>
OK...Then what are Sales Contributions and Sales Concessions?</h3>
Let me break these out:<br />
<ul>
<li><strong>Sales Contributions</strong> - these are any closing costs or prepaid items that are normally paid by the buyer when getting a mortgage that will instead be paid by the seller. These can include things like loan approval costs, the appraisal, title work, home insurance, etc. </li>
<li><strong>Sales Concessions</strong> - these are physical items or money given to the buyer by the seller, often as an inducement to purchase the home. Sales concessions would be things like furniture, vehicles, weekend getaways, rebates or, most commonly, carpeting or repair allowances.</li>
</ul>
<h3>
Are both Sales Contributions and Sales Concessions Allowed?</h3>
Yes, they are both technically allowed, but they have to be treated differently.<br />
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<strong>Sales contributions are allowed up to a maximum percentage of the home price.</strong> If the buyer is getting a conventional mortgage, a seller can give up to 3% of the sales price of the home toward the buyers closing costs, prepaid items and inspections. If the buyer is getting a FHA mortgage, a seller can give up to 6% of the home's price. <strong>If the seller chooses to do this, it does not alter the terms or process for the buyer's mortgage approval. As long as the contribution doesn't exceed that 3% or 6% maximum limit, all is good.</strong><br />
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<strong>Sales concessions are treated differently though.</strong> When they exist, the lender has to manually reduce the price or appraised value (whichever is lower) by the value of that concession prior to calculating how much they will lend to the buyer. <strong>Because of this, the buyer typically has to bring more money to the closing then they would have otherwise to cover that difference</strong>. <br />
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<h3>
Does This Impact How I Write My Offer?</h3>
Yes, it does. Knowing that these things are treated differently, you'll want your Realtor to write up your purchase agreement to work within these rules.<strong> </strong><br />
<strong></strong><br />
<strong>Let's say that the seller was offering a $2,000 carpet allowance.</strong> If the purchase agreement said "$2,000 carpet allowance from seller", that would be viewed as a Concession and that $2,000 would need to be deducted from the price before the lender set your loan amount, which would work against you. <br />
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<strong>BUT - if instead your Realtor asked for $2,000 in seller contributions toward your closing costs and prepaid items, that would be fine. </strong>It wouldn't change your mortgage terms at all. You could then use the $2,000 you had saved up for your closing costs and instead use it for new carpet.<br />
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<strong>What if you want the seller to pay for your closing costs, though, and you also want the carpet allowance?</strong> Then you're in a tough spot. In situations like that, you'll typically want the seller to contribute towards your closing costs and then actually install the carpeting upfront instead of giving you money to do it later. Or, you can have the seller drop the price by the $2,000 and figure out a way to replace that carpet yourself down the road.<br />
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There are multiple ways to address things like this, and you don't need to know them all. <strong> You DO need to be working with a knowledgeable mortgage lender and Realtor, though,</strong> to guide and educate you on your options. <br />
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<strong>I'd be honored to be that mortgage lender!</strong> To apply for your fast, free mortgage preapproval, click here -<a href="http://www.ruoff.com/lorihiscock.html" target="_blank">Apply Online.</a><br />
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<a href="http://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s1600/closing.jpg" imageanchor="1" style="clear: left; color: #fc8901; float: left; font-family: Arial, serif; font-size: 14px; line-height: 22px; margin-bottom: 1em; margin-right: 1em; text-decoration: none;"><img border="0" src="http://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s200/closing.jpg" height="133" style="border: 1px solid rgb(238, 238, 238); padding: 2px;" width="200" /></a><em style="font-family: Arial, serif; font-size: 14px; line-height: 22px;"><strong>Lori Hiscock is a Sr. Loan Officer at <a href="http://www.ruoff.com/" style="color: #fc8901; text-decoration: none;" target="_blank" title="Ruoff Home Mortgage"><span style="color: #8c9a01;">Ruoff Home Mortgage</span></a>‘s South Bend office. One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University. You can connect with <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock's LO page"><span style="color: #8c9a01;">Lori Hiscock</span></a> or <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock Online Application"><span style="color: #8c9a01;">apply online</span></a> here.</strong></em> <strong><em>NMLS#404320.</em></strong></div>
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<span style="font-family: Arial, sans-serif; font-size: 10.5pt;">Ruoff Mortgage Company, Inc. is an Indiana corporation licensed by the Indiana Department of Financial Institutions (DFI) and operates with the following licenses:<br /><br /><b>Indiana-DFI First Lien Mortgage Lending License #10994;<br />IL Residential Mortgage Licensee #MB.6760734;<br />Michigan 1st Mortgage Broker/Lender License #FL0017496.</b></span></div>
<br />Lori Hiscockhttp://www.blogger.com/profile/03619139661832096700noreply@blogger.com0tag:blogger.com,1999:blog-5936949811716832438.post-39500009866565335532014-10-30T09:50:00.000-07:002014-10-31T06:02:53.787-07:00Declined the Day Before Closing"I told her to call you first but she didn't. She just went to her bank and now they're declining her and we're supposed to close TODAY! Can you meet with her?"<br />
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<b>Realtor calls like that always make my stomach hurt.</b> I want to help but, if the other bank declined their client, odds are good that they had a valid reason. Admittedly, it's normally a reason that they should have spotted early on and not the day before closing but still - it's typically valid.<br />
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<a href="http://4.bp.blogspot.com/--rCrHv6lZjY/VFJsI58m4_I/AAAAAAAA2cM/rQatD-7oua4/s1600/decline.bmp" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://4.bp.blogspot.com/--rCrHv6lZjY/VFJsI58m4_I/AAAAAAAA2cM/rQatD-7oua4/s1600/decline.bmp" /></a><b>I'm always willing to try though and, at a minimum, help educate the home buyer on what went wrong and how to potentially fix it for the future, </b>so I said yes and invited them to come to my office later that day.<br />
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<b>"They said the PMI company wouldn't do it</b>" she shared when we met. "They said their bank would approve me, but the private mortgage insurance company declined me because of my previous foreclosure."<br />
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I reviewed her credit report and saw that, yes, she did have a foreclosure in November of 2007 which was less than 7 years ago. She needed a conventional mortgage because of the condition of the house and 7 years is the magical number typically for conventional loans.<br />
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However, the mortgage in question was actually included in her bankruptcy from January of 2006, which was over 7 years ago. This past July, Fannie Mae came out with a new ruling saying that - in situations like that - the borrower is held to the bankruptcy's waiting period and not the foreclosure's waiting period. She had met the bankruptcy's waiting period so I felt the other lender might be able to educate the PMI company on this and still get her closed quickly.<br />
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<b>"No. Absolutely not. I don't want anything to do with that bank. Can you just make it happen fast with Ruoff please?"</b><br />
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Of course I could. We started her loan immediately. I had it to my underwriting area within hours and we were cleared to close within 2 weeks. <br />
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<b>So how did I work around the problem? Did I convince the PMI company that they should honor Fannie Mae's new ruling?</b><br />
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Nope. I didn't have to. I just used another PMI company.<br />
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Let me explain. There is not just one provider of private mortgage insurance out there. There are many of them with four primary providers. While they all provide similar coverages at similar prices, they are not all the same. One often gives lower rates when there are two borrowers on a loan. One works great with down payment assistance programs. And one? It just trusts the lender to make the approval decision.<br />
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<b>That's the PMI company I went with. </b>They don't have their own rules (often called 'overlays') that they apply to the approval. This particular PMI company (Radian) says "If you have an approve/eligible response from Fannie Mae, we're in. No further questions asked."<br />
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I sent them the approve/eligible response with the PMI order and, as promised, there were no further questions asked and the coverage was given (at a very attractive price, I might add).<br />
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<b>And why didn't her original lender just do that? </b>Sadly, not all lenders will shop the PMI. Many have one PMI provider they use and that's it. <b>If that one provider can't accommodate the unique nuances of the borrower, they will decline the borrower.</b><br />
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Thankfully, Ruoff doesn't work that way. We not only work hard to make sure we're offering buyers a wide range of mortgage options, we make sure to have multiple PMI options as well. <b>Why? Because it's the right thing to do. </b><br />
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I'm starting to think that should be our tagline at Ruoff Home Mortgage :). <b>Doing it right, because it's the right thing to do.</b><br />
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<a href="http://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s1600/closing.jpg" imageanchor="1" style="clear: left; color: #fc8901; float: left; font-family: Arial, serif; font-size: 14px; line-height: 22px; margin-bottom: 1em; margin-right: 1em; text-decoration: none;"><img border="0" src="http://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s200/closing.jpg" height="133" style="border: 1px solid rgb(238, 238, 238); padding: 2px;" width="200" /></a><em style="font-family: Arial, serif; font-size: 14px; line-height: 22px;"><strong>Lori Hiscock is a Sr. Loan Officer at <a href="http://www.ruoff.com/" style="color: #fc8901; text-decoration: none;" target="_blank" title="Ruoff Home Mortgage"><span style="color: #8c9a01;">Ruoff Home Mortgage</span></a>‘s South Bend office. One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University. You can connect with <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock's LO page"><span style="color: #8c9a01;">Lori Hiscock</span></a> or <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock Online Application"><span style="color: #8c9a01;">apply online</span></a> here.</strong></em> <strong><em>NMLS#404320.</em></strong></div>
<div style="background-color: white; color: #333333; font-family: Verdana, sans-serif; font-size: x-small; line-height: 16.44px; text-align: center;">
<span style="font-family: Arial, sans-serif; font-size: 10.5pt;">Ruoff Mortgage Company, Inc. is an Indiana corporation licensed by the Indiana Department of Financial Institutions (DFI) and operates with the following licenses:<br /><br /><b>Indiana-DFI First Lien Mortgage Lending License #10994;<br />IL Residential Mortgage Licensee #MB.6760734;<br />Michigan 1st Mortgage Broker/Lender License #FL0017496.</b></span></div>
Lori Hiscockhttp://www.blogger.com/profile/03619139661832096700noreply@blogger.com0tag:blogger.com,1999:blog-5936949811716832438.post-33633814695800786762014-10-23T07:42:00.001-07:002014-10-25T04:43:09.387-07:00Salvation from the Rapid RescoreA Realtor I regularly work with called me last Thursday. "Well, I doubt you can help this girl, but I thought it was worth a try having her talk to you," he said.<br />
<br />
<b>Hmmm....well that didn't sound promising.</b><br />
<br />
<a href="http://1.bp.blogspot.com/-q2OIvaBD7qU/VEkQpz5wqoI/AAAAAAAA2bw/3-swxjC3pXM/s1600/person%2Bclimbing%2Bcredit%2Bscores.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://1.bp.blogspot.com/-q2OIvaBD7qU/VEkQpz5wqoI/AAAAAAAA2bw/3-swxjC3pXM/s1600/person%2Bclimbing%2Bcredit%2Bscores.jpg" height="320" width="226" /></a>I'm always happy to help people get moving down the right path though, so I got her name and number and gave her a call.<br />
<br />
<b>"OK. Here's the problem" </b>she shared as soon as we got on the line. "I was pre-approved with my bank and everything was great. I made an offer on a PERFECT house and they accepted it but then I called my bank and they re-pulled my credit and said my score had dropped from 660 to 628 so now they can't give me a mortgage. Can you??"<br />
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<h3>
Going below 640</h3>
Good question. This is the point in a conversation with a potential home buyer where my super awesome detective skills come into play. I<b> often can provide a mortgage to someone with a 600-640 credit score, but they have to meet some 'ifs' so I have to ask some detailed questions. </b><br />
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Currently, a buyer can purchase a home in this credit score range if the down payment is their own money and not a gift, if they have a clean rental history, if they have a couple of months' worth of savings and if they have a clean credit report in the last 12 months (plus a few other smaller things). <b>I dug into this girl's story and...shoot...she didn't meet all the 'ifs' so we couldn't go below the 640 score for her.</b><br />
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<h3>
Identifying the Culprit</h3>
That's not where I give up though. I pulled a copy of her credit report myself to see why her score had dropped. The other bank had told her it was because of a collection she had, but that collection was over a year old. It wouldn't have made a change in her score in the last 60 days.<br />
<br />
Thankfully, I spotted the culprit right away. <b>"Hey, what's the story on your Capital One credit card balance?</b> This report is showing you have a balance of $506 but your limit is only $500. Is your balance really that high?" "Oh. No!" She replied. "It was but I paid it off entirely last week. I don't owe anything on that."<br />
<br />
Eureka! We had found the answer. Having a higher balance on your credit cards can make your credit score lower. Being OVER the limit though - that's a real score killer. <b>Her score had dropped over 30 points just because she was $6 over her limit.</b><br />
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"Does that mean I have to wait a whole month for the credit report to cycle before my score shows the new balance?" she wailed. "We can't do that! The home will be gone by then!"<br />
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<b>I completely felt her anxiety. Luckily, I had a plan.</b><br />
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<h3>
Getting the Score Up FAST</h3>
"Typically, that is the route that a lender will take" I told her. "Given this situation though, and the time sensitivity of getting you pre-approved again, let's go with route B. I'll order a rapid rescore."<br />
<br />
<b>A rapid rescore is a tool that lenders have for situations just like this. Rather than waiting for a credit report to cycle and let a score go up on its own, the lender can provide the credit reporting agency with proof of the item that has changed since the last report and ask for it to be rescored right away.</b> In this case, I just needed a printout from Capital One's website showing that she had made the payment and her balance was now at $0. <br />
<br />
She got the paperwork to me Thursday night and I ordered the rapid rescore on Friday morning. It typically takes about a week for these to come back but, thankfully, it only took three business days in her case. The new credit report came back this morning. And her score? A shiny, workable 661.<br />
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<h3>
When a Rapid Rescore Can Work for You</h3>
For this buyer, the rapid rescore was the solution. She's getting me the rest of her paperwork today and we're going to get her in her new home in the next 30 days (yea!).<br />
<br />
<b>The rapid rescore isn't the right route for everyone though. For starters, it's expensive. </b>If there is time to let the score go up on its own, we're going to go that route. A rapid rescore should only be used when there isn't time due to the specific situation we're dealing with. <br />
<br />
<b>A rapid rescore can also only help with certain types of credit problems</b>. If there is an error on the credit report that is hurting you, it's a fit for that. Common errors are things like a derogatory debt listed under your name that isn't really yours or something showing as an active collection or charge-off that has actually been paid off. <br />
<br />
A rapid rescore can also work when the lower score is being caused by higher balances that have now been paid down, as in this situation.<br />
<br />
<b>To know what credit steps you should take for YOUR home purchase, you need a seasoned, knowledgeable lender to review your credit report and help you work out a plan</b>. If you are considering a home purchase in Indiana or Michigan, I'd be happy to assist with that. I can be reached at lori.hiscock@ruoff.com. Hopefully your story can have a happy ending too!<br />
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<a href="http://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s1600/closing.jpg" imageanchor="1" style="clear: left; color: #fc8901; float: left; font-family: Arial, serif; font-size: 14px; line-height: 22px; margin-bottom: 1em; margin-right: 1em; text-decoration: none;"><img border="0" src="http://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s200/closing.jpg" height="133" style="border: 1px solid rgb(238, 238, 238); padding: 2px;" width="200" /></a><em style="font-family: Arial, serif; font-size: 14px; line-height: 22px;"><strong>Lori Hiscock is a Sr. Loan Officer at <a href="http://www.ruoff.com/" style="color: #fc8901; text-decoration: none;" target="_blank" title="Ruoff Home Mortgage"><span style="color: #8c9a01;">Ruoff Home Mortgage</span></a>‘s South Bend office. One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University. You can connect with <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock's LO page"><span style="color: #8c9a01;">Lori Hiscock</span></a> or <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock Online Application"><span style="color: #8c9a01;">apply online</span></a> here.</strong></em> <strong><em>NMLS#404320.</em></strong></div>
<div style="background-color: white; color: #333333; font-family: Verdana, sans-serif; font-size: x-small; line-height: 16.44px; text-align: center;">
<span style="font-family: Arial, sans-serif; font-size: 10.5pt;">Ruoff Mortgage Company, Inc. is an Indiana corporation licensed by the Indiana Department of Financial Institutions (DFI) and operates with the following licenses:<br /><br /><b>Indiana-DFI First Lien Mortgage Lending License #10994;<br />IL Residential Mortgage Licensee #MB.6760734;<br />Michigan 1st Mortgage Broker/Lender License #FL0017496.</b></span></div>
Lori Hiscockhttp://www.blogger.com/profile/03619139661832096700noreply@blogger.com0tag:blogger.com,1999:blog-5936949811716832438.post-27160510804588688672014-10-15T07:23:00.000-07:002014-10-15T07:23:30.595-07:00Mastering the Mortgage Letter of ExplanationIn my 12+ years as a mortgage lender, I've found that there are some steps to the mortgage approval process that make a home buyer anxious and some steps that just make them annoyed. <br />
<a href="http://4.bp.blogspot.com/-VX9C6f_iQNU/VD6C0EXamYI/AAAAAAAA2To/jryjFiIzk_E/s1600/example%2Bpage%2Bfor%2Bwebsite%2Bblurred%2Bfinal.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://4.bp.blogspot.com/-VX9C6f_iQNU/VD6C0EXamYI/AAAAAAAA2To/jryjFiIzk_E/s1600/example%2Bpage%2Bfor%2Bwebsite%2Bblurred%2Bfinal.jpg" height="200" width="155" /></a><br />
Price Negotiations? Inspections? Appraisals? <strong>Anxious, definitely anxious</strong>. Lender disclosures? Documenting of deposits? Letters of explanation? <strong>Annoyed. DEFINITELY annoyed.</strong><br />
<strong></strong><br />
One of my top focuses as a mortgage lender is to reduce the anxiousness as much as possible for my buyers and, as best I can, not annoy. How do I do that? By only asking for things that I truly need and by making it easy for my home buyers to give those items to me.<br />
<br />
<a href="http://1.bp.blogspot.com/-GExn0oxlg4w/VD6DE_SYHDI/AAAAAAAA2T4/60eNUqToVD0/s1600/cover%2Bof%2Bbook%2B3d.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="http://1.bp.blogspot.com/-GExn0oxlg4w/VD6DE_SYHDI/AAAAAAAA2T4/60eNUqToVD0/s1600/cover%2Bof%2Bbook%2B3d.jpg" height="320" width="200" /></a>To help with that, I've recently written a little e-book. Yes, these blogs were just not enough writing for me! My new e-book, <strong>'Letters Lenders Love' </strong>walks home buyers through the process of quickly writing a letter of explanation on any topic needed as part of their mortgage approval. It also provides 30+ examples of ready-to-go letters that just need tweaked for a buyer's specific situation and then submitted. <br />
<br />
If you need a letter of explanation and would like a copy of the book, contact me or go to <a href="http://mortgageletterofexplanation.com/" target="_blank">Letters Lenders Love</a>. It should help take some of the 'annoying' out of home buying and get you back to the fun of this exciting step in your life!Lori Hiscockhttp://www.blogger.com/profile/03619139661832096700noreply@blogger.com0tag:blogger.com,1999:blog-5936949811716832438.post-64289805443887022014-09-29T09:45:00.002-07:002014-09-29T09:45:50.103-07:00My Take On My Home
<a href="http://4.bp.blogspot.com/-dNJmhf5yabs/VCmLdCo8LHI/AAAAAAAA2H4/Ojv1RBwNadY/s1600/money%2Bcake.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://4.bp.blogspot.com/-dNJmhf5yabs/VCmLdCo8LHI/AAAAAAAA2H4/Ojv1RBwNadY/s1600/money%2Bcake.jpg" /></a><span style="font-family: Verdana, sans-serif;">IHCDA (Indiana Housing and Community Development Authority) introduced
a new mortgage option called ‘My Home’ last June.<span style="mso-spacerun: yes;"> </span>While I am typically a big fan of IHCDA’s
products, I must admit that I’ve been lukewarm on this one.<span style="mso-spacerun: yes;"> </span><b style="mso-bidi-font-weight: normal;">Frankly,
I wasn’t seeing the benefit.<o:p></o:p></b></span><br />
<span style="font-family: Verdana, sans-serif;">
</span><br />
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<span style="font-family: Verdana, sans-serif;">Today I decided to put some math behind my first impression
to see if this program really is beneficial to the homebuyer, and I thought I’d
share what I found with you.<span style="mso-spacerun: yes;"> </span>So...here
you go!</span></div>
<h2 class="MsoNormal" style="margin: 0in 0in 10pt;">
<span style="font-family: Verdana, sans-serif;">The Advantages of<em> My Home</em></span></h2>
<div class="MsoNormal" style="margin: 0in 0in 10pt;">
<span style="font-family: Verdana, sans-serif;"><b style="mso-bidi-font-weight: normal;">My Home is a
conventional loan option offered to both first and repeat home buyers that lets
them buy with a reduced down payment (3%) at an attractive, at-market interest
rate.</b><span style="mso-spacerun: yes;"> </span>Typically, if a conventional mortgage
has a down payment lower than 5%, the interest rate is higher in order to make
up for the additional risk, so this at-market interest rate is a strong
advantage<b style="mso-bidi-font-weight: normal;">.<span style="mso-spacerun: yes;"> </span>Also, the My Home buyer gets a reduced private
mortgage insurance (PMI) rate</b> making the monthly PMI cost less than it
would be with other 3% down options.<span style="mso-spacerun: yes;"> </span></span></div>
<div class="MsoNormal" style="margin: 0in 0in 10pt;">
<span style="font-family: Verdana, sans-serif;"><span style="mso-spacerun: yes;"></span></span><span style="font-family: Verdana, sans-serif;"><b style="mso-bidi-font-weight: normal;"><span style="font-family: "Calibri","sans-serif"; line-height: 115%; mso-ansi-language: EN-US; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><span style="font-family: Verdana, sans-serif;">The
3% down payment can come as a gift from a family member</span></span></b><span style="font-family: "Calibri","sans-serif"; line-height: 115%; mso-ansi-language: EN-US; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><span style="font-family: Verdana, sans-serif;">, which is also rare for conventional loans.<span style="mso-spacerun: yes;"> </span>With the ability to get a conventional
mortgage at a good interest</span> <span style="font-family: Verdana, sans-serif;">rate with 3% down, reasonable PMI and an option to use
gift funds for the purchase, many buyers would be attracted to the My Home
program.</span></span></span></div>
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<span style="font-family: Verdana, sans-serif;">The Disadvantages of <em>My Home</em></span></h2>
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<span style="font-family: Verdana, sans-serif;"><b style="mso-bidi-font-weight: normal;">The biggest drawback to
this program are the fees.</b><span style="mso-spacerun: yes;"> </span>Like IHCDA’s
Next Home product, the My Home loan typically has 2 points charged as a closing
cost.<span style="mso-spacerun: yes;"> </span>A point is a cost equal to 1% of
the loan amount.<span style="mso-spacerun: yes;"> </span>The seller can
contribute towards these points but a conventional mortgage will only allow a
seller to give a total<span style="mso-spacerun: yes;"> </span>of 3% of the
sales price towards the buyer’s costs so the seller’s contributions typically
will not cover the 2 points, plus the additional closing costs/prepaid items
related to the purchase.<span style="mso-spacerun: yes;"> </span><b style="mso-bidi-font-weight: normal;">This means the buyers will need to cover
some of those costs themselves, along with their 3% down payment.<o:p></o:p></b></span></div>
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<span style="font-family: Verdana, sans-serif;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Calibri","sans-serif"; line-height: 115%; mso-ansi-language: EN-US; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><span style="font-family: Verdana, sans-serif;">Additionally,
the PMI is still slightly higher than it would be on a 5% down mortgage</span></span></b><span style="font-family: "Calibri","sans-serif"; line-height: 115%; mso-ansi-language: EN-US; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><span style="font-family: Verdana, sans-serif;">.<span style="mso-spacerun: yes;"> </span>Yes, it
is lower than many other 3% down loans out there, but putting 5% down puts a
buyer into a lower PMI bracket.<span style="mso-spacerun: yes;"> </span>Because
of </span><span style="font-family: Verdana, sans-serif;">this, the cost of PMI for a regular 5% down mortgage is typically lower than
the reduced 3% down PMI.</span></span></span></div>
<h2 class="MsoNormal" style="margin: 0in 0in 10pt;">
<span style="font-family: "Calibri","sans-serif"; line-height: 115%; mso-ansi-language: EN-US; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><span style="font-family: Verdana, sans-serif;">So Which Option Is Best</span>?</span></h2>
<span style="font-family: Verdana, sans-serif; font-size: x-small;"></span><span style="font-family: "Calibri","sans-serif"; line-height: 115%; mso-ansi-language: EN-US; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><div class="MsoNormal" style="margin: 0in 0in 10pt;">
<span style="font-family: Verdana, sans-serif;">Seeing that a buyer
needs 3% down for My Home and then has to pay 2 points on top of that, my
initial feeling was that they might as well just do a regular 5% down mortgage
and get the lower PMI that goes with it.<span style="mso-spacerun: yes;">
</span>They’re paying 5% either way, right?<span style="mso-spacerun: yes;">
</span>And the PMI is cheaper?<span style="mso-spacerun: yes;"> </span>So going
with a regular 5% down loan is best, isn’t it?</span></div>
<div class="MsoNormal" style="margin: 0in 0in 10pt;">
<span style="font-family: Verdana, sans-serif;">For some buyers, it definitely is.<span style="mso-spacerun: yes;"> </span>For some buyers, though, it isn’t.<span style="mso-spacerun: yes;"> </span>Why is that, you ask?<span style="mso-spacerun: yes;"> </span>It’s because
of the credit score impact.</span></div>
<div class="MsoNormal" style="margin: 0in 0in 10pt;">
<span style="font-family: Verdana, sans-serif;"><strong>Let me explain</strong>.<span style="mso-spacerun: yes;"> </span>The My
Home program has just one interest rate for all buyers.<span style="mso-spacerun: yes;"> </span>Today it is 4.5% for the 30-year fixed loan (this
is the current rate and subject to change at any time).<span style="mso-spacerun: yes;"> </span>A regular conventional loan’s interest rates will
move slightly based on your credit score, though.<span style="mso-spacerun: yes;"> </span>If you were buying a $125,000 home right now
with 5% down and had a 720 or higher credit score, your interest rate would also
be 4.5%.<span style="mso-spacerun: yes;"> </span>If your credit score was 680-719 though, it would slide up to
4.625%.</span><span style="mso-spacerun: yes;"> </span><o:p></o:p></div>
<div class="MsoNormal" style="margin: 0in 0in 10pt;">
<span style="font-family: Verdana, sans-serif;"><strong>The PMI is also impacted by your credit score.<span style="mso-spacerun: yes;"> </span>If you were buying a home with a 760 credit
score right now with 3% down, the PMI would cost 0.57% per year.<span style="mso-spacerun: yes;"> </span>If</strong></span><span style="font-family: Verdana, sans-serif;"><strong> you were buying with 5% down, it would
cost you 0.54% per year,</strong> which supports my original idea that 5% down is
cheaper because the PMI costs less.</span></div>
<div class="MsoNormal" style="margin: 0in 0in 10pt;">
<span style="font-family: Verdana, sans-serif;"><span style="font-family: "Calibri","sans-serif"; line-height: 115%; mso-ansi-language: EN-US; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">
<span style="font-family: Verdana, sans-serif;"><strong>If your credit score was only 680 though, the benefit goes the opposite way.</strong> </span></span></span><span style="font-family: "Calibri","sans-serif"; line-height: 115%; mso-ansi-language: EN-US; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><span style="font-family: Verdana, sans-serif;"><span style="font-family: Verdana, sans-serif;"><span style="mso-spacerun: yes;"> </span>A 5% down
option would have PMI at 0.89% per year while the 3% down option would actually
be </span>less at 0.80% per year</span><span style="font-family: Verdana, sans-serif;">.</span></span><span style="font-family: Verdana, sans-serif;"></span></div>
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<span style="font-family: "Calibri","sans-serif"; line-height: 115%; mso-ansi-language: EN-US; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><span style="font-family: Verdana, sans-serif;">So What Does This Tell Us</span>?</span></h2>
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<span style="font-family: Verdana, sans-serif; font-size: small;">Based on this math, My Home very well might be a good option
for some conventional buyers.<span style="mso-spacerun: yes;"> </span>Buyers who want to use gift funds for their
down payment and closing costs, or buyers who have a credit score under 720,
should consider this.</span><span style="mso-spacerun: yes;"><span style="font-family: Verdana, sans-serif; font-size: small;"> </span> </span></div>
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<span style="font-family: Verdana, sans-serif; font-size: small;">But how do <b style="mso-bidi-font-weight: normal;">YOU </b>know
if it’s right for <b style="mso-bidi-font-weight: normal;">YOU</b>?<span style="mso-spacerun: yes;"> </span>Simple.<span style="mso-spacerun: yes;">
</span><b style="mso-bidi-font-weight: normal;">You talk to me.</b><span style="mso-spacerun: yes;"> </span>Together, we look at your specific situation
and the exact numbers for you.<span style="mso-spacerun: yes;"> </span>Based on that,
you make the decision for which type of mortgage suits you best.</span></div>
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<span style="font-family: Verdana, sans-serif;"><span style="font-size: small;">If you are considering a home purchase in Indiana or
Michigan and have questions about the IHCDA My Home program or any other
mortgage program, just give me a call!<span style="mso-spacerun: yes;">
</span>I’d be happy to help you take your next step towards your new home.<o:p></o:p></span></span></div>
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<br /><a href="http://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s1600/closing.jpg" imageanchor="1" style="background-color: white; clear: left; color: #fc8901; float: left; font-family: Arial, serif; font-size: 14px; line-height: 22px; margin-bottom: 1em; margin-right: 1em; text-decoration: none;"><img border="0" height="133" src="http://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s200/closing.jpg" style="border: 1px solid rgb(238, 238, 238); padding: 2px;" width="200" /></a><em style="background-color: white; color: #333333; font-family: Arial, serif; font-size: 14px; line-height: 22px;"><strong>Lori Hiscock is a Sr. Loan Officer at <a href="http://www.ruoff.com/" style="color: #fc8901; text-decoration: none;" target="_blank" title="Ruoff Home Mortgage"><span style="color: #8c9a01;">Ruoff Home Mortgage</span></a>‘s South Bend office. One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University. You can connect with <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock's LO page"><span style="color: #8c9a01;">Lori Hiscock</span></a> or <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock Online Application"><span style="color: #8c9a01;">apply online</span></a> here.</strong></em> <strong><em>NMLS#404320.</em></strong><br /><br /></div>
<div style="text-align: center;">
<span style="color: #333333; font-family: "Arial","sans-serif"; font-size: 10.5pt;">Ruoff Mortgage Company, Inc. is an Indiana corporation licensed by the Indiana Department of Financial Institutions (DFI) and operates with the following licenses:<br /><br /><b>Indiana-DFI First Lien Mortgage Lending License #10994; <br /> IL Residential Mortgage Licensee #MB.6760734; <br /> Michigan 1st Mortgage Broker/Lender License #FL0017496.</b></span></div>
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Lori Hiscockhttp://www.blogger.com/profile/03619139661832096700noreply@blogger.com0tag:blogger.com,1999:blog-5936949811716832438.post-16076402049141033962014-09-10T12:30:00.002-07:002014-09-16T12:48:55.590-07:00More Home for Less Payment<a href="http://2.bp.blogspot.com/-8jzGz2ecqGM/VBCk9O8Me-I/AAAAAAAA1sc/q_g9EQGcUnE/s1600/scales%2Band%2Bhouse.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://2.bp.blogspot.com/-8jzGz2ecqGM/VBCk9O8Me-I/AAAAAAAA1sc/q_g9EQGcUnE/s1600/scales%2Band%2Bhouse.jpg" height="185" width="320" /></a>Mortgage preapproval letters can be a bit deceiving. Your typical mortgage preapproval letter says that a buyer is preapproved up to a set price for their home purchase. <span style="color: red;"><strong>Truth be told though, buyers are not approved for a set PRICE of a home. Buyers are preapproved for a set PAYMENT</strong>.</span><br />
<h3>
Isn't the price based off of the payment though?</h3>
Yes, the maximum price is based off of the maximum payment. A lender will decide that a buyer can afford to pay a certain amount each month for a mortgage payment and then back into a home price based off of this figure.<br />
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The problem with this system is that the lender is making certain assumptions when they back into this price. They are assuming a certain interest rate, a certain cost for home insurance, a certain cost for property taxes and a certain cost for mortgage insurance. If these figures are higher or lower than what the lender assumed, the price of a home that the buyer qualifies for will also be higher or lower.<br />
<h3>
What else impacts this price/payment calculation?</h3>
One of the bigger things that impacts this price payment calculation is the loan type. This often isn't discussed much though. Lenders frequently decide on a type of loan that seems to fit a buyer and then shows them the numbers related to that one type of loan only. <span style="color: red;"><strong>That can cap them at a lower priced home than they would have qualified for though, if a different loan type was used.</strong></span> <br />
<h3>
Hmmm.....Give me an example please....</h3>
Gladly! Amy and Russ met with me this spring about buying their first home. They had stable employment, little debt and solid credit, but no down payment. They could get a gift from their parents for that piece though.<br />
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They qualified for a payment up to $1,150 per month. Many lenders would have said "FHA Mortgage!" and gone with that. FHA will allow the down payment to be gifted so it sounds like the right fit. <br />
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<span style="color: red;"><strong>FHA has its drawbacks though</strong>.</span> There is a FHA financed upfront fee of 1.75% of the loan amount and the monthly mortgage insurance is higher, making the amount they qualified for lower. <br />
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The biggest drawback for Amy and Russ was that this $1,150 payment wouldn't let them buy the home they wanted. They had fallen in love with a house and they wanted it and only it. <span style="color: red;"><strong>The FHA payment for their dream home was going to be $1,183, so above their $1,150 max.</strong></span><br />
<h3>
Saving the Day With Creative Financing</h3>
Amy, Russ and I met to go over <strong><span style="color: red;">all</span></strong> of their options and determined that IHCDA's Next Home conventional mortgage was a better fit. It only needed 3% down and that piece would be provided by IHCDA. The seller could cover some of the closing costs but they would still need some money to cover the balance. Their parent's gift could cover that though.<br />
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<span style="color: red;"><strong>Because the conventional loan had lower monthly mortgage insurance, their payment with this option was only $1,134</strong>.</span> Not only was it almost $50 less per month, but their parents didn't have to gift them as much money with the Next Home option. They only needed $3,495 from them versus $5,530 for the FHA option.<br />
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So...$49 less per month and $2,035 less upfront? Plus the ability to buy the home they truly wanted rather than have to find a cheaper one to stay under their payment cap?<br />
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<span style="color: red;"><strong>Yep, that's how the story ended. Amy and Russ got more home for a lower payment with less money needed upfront thrown in for good measure.</strong></span> <br />
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If you'd like to have this kind of analysis done for your home purchase to make sure you are getting the best terms possible on your Indiana or Michigan mortgage, drop me a line or give me a call today! (<a href="mailto:lori.hiscock@ruoff.com">lori.hiscock@ruoff.com</a> email, (574) 234-5201 office).<br />
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<a href="http://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s1600/closing.jpg" imageanchor="1" style="background-color: white; clear: left; color: #fc8901; float: left; font-family: Arial, serif; font-size: 14px; line-height: 22px; margin-bottom: 1em; margin-right: 1em; text-decoration: none;"><img border="0" src="http://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s200/closing.jpg" height="133" style="border: 1px solid rgb(238, 238, 238); padding: 2px;" width="200" /></a><em style="background-color: white; color: #333333; font-family: Arial, serif; font-size: 14px; line-height: 22px;"><strong>Lori Hiscock is a Sr. Loan Officer at <a href="http://www.ruoff.com/" style="color: #fc8901; text-decoration: none;" target="_blank" title="Ruoff Home Mortgage"><span style="color: #8c9a01;">Ruoff Home Mortgage</span></a>‘s South Bend office. One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University. You can connect with <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock's LO page"><span style="color: #8c9a01;">Lori Hiscock</span></a> or <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock Online Application"><span style="color: #8c9a01;">apply online</span></a> here.</strong></em> <strong><em>NMLS#404320.</em></strong><br />
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<div style="text-align: center;">
<span style="color: #333333; font-family: "Arial","sans-serif"; font-size: 10.5pt;">Ruoff Mortgage Company, Inc. is an Indiana corporation licensed by the Indiana Department of Financial Institutions (DFI) and operates with the following licenses:<br /><br /><b>Indiana-DFI First Lien Mortgage Lending License #10994; <br /> IL Residential Mortgage Licensee #MB.6760734; <br /> Michigan 1st Mortgage Broker/Lender License #FL0017496.</b></span></div>
Lori Hiscockhttp://www.blogger.com/profile/03619139661832096700noreply@blogger.com0tag:blogger.com,1999:blog-5936949811716832438.post-34574990941066627162014-08-29T08:07:00.002-07:002014-09-02T06:14:52.291-07:00How Your Credit Clean-Up Could Derail Your Mortgage ApprovalWhen I ask a potential homebuyer if they know their credit score and they do, I do a little happy dance inside. This tells me that they're proactive buyers who have probably already taken any steps needed to improve their credit, allowing them to get better terms on their mortgage.<br />
<span style="font-size: small;"></span><br />
<a href="http://2.bp.blogspot.com/-UIxSAI-CvBc/VACVeTrygyI/AAAAAAAA1rs/UWRDm376LSg/s1600/loan%2Bdenied.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://2.bp.blogspot.com/-UIxSAI-CvBc/VACVeTrygyI/AAAAAAAA1rs/UWRDm376LSg/s1600/loan%2Bdenied.jpg" height="257" width="320" /></a><strong>There is also a little red flag that goes up in my head when I hear this, though.</strong> If a buyer has taken steps to review and improve their credit score, there's a chance they've filed a dispute on things on their credit report.<br />
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<span style="color: red;"><strong>"So what?" </strong></span>you ask. <strong><span style="color: red;">"Isn't it a consumer's right to file a dispute?"</span></strong> Absolutely. If something is wrong on your credit report you should dispute it and get it fixed. While that's happening though, your lender will not be able to approve you for a mortgage.<br />
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<strong><span style="color: red; font-size: large;">WHAAAAAT???</span></strong></div>
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Yep. It's true. A mortgage lender cannot approve your mortgage with an open dispute showing on your credit report. <strong>Any disputes have to be removed or resolved.</strong><br />
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<strong><span style="color: red;">Here's why</span></strong> - when a consumer files a dispute, they are telling the credit reporting agency that the item in question is wrong. The credit reporting agency takes steps to confirm that. To be fair to the consumer while that process is happening, they remove the disputed item from the calculation of the credit score.<br />
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The removal of that item likely will inflate the credit score (you wouldn't be disputing it if it was good stuff, right?) , which means you likely have a higher score while that dispute is in place than you would if it wasn't. <br />
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When a loan underwriter sees a dispute on a credit report, this raises a red flag that tells them that your credit score is not a true credit score. It's a temporary one until the item(s) in question are resolved. Because of that, they have to stop the mortgage approval, get your dispute removed or resolved, and have your score recalculated.<br />
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This would not be a huge problem if a lender looked for disputes right upfront and discussed it with the buyer before a home was found. The problem is, most loan originators don't think about this risk and don't review the credit report for it. This often isn't recognized as a problem until a buyer is a couple of weeks into the process of a home purchase.<br />
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<strong>If the disputed item is newer or more significant in nature, the impact of adding it back into the credit score can be enough to cause a loan to be declined, sometimes days before closing.</strong><br />
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<strong><span style="color: red;">So....what do you do now that you know this? </span></strong> First, if you have any open disputes, contact the credit reporting agency to get them resolved and removed. Second, when your lender pulls your credit report, ask them if there are any disputes showing on it. Third, if the lender seems confused by the question or tells you that some are there but that they don't matter, find a more informed lender.<br />
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For homebuyers in Indiana and Michigan, I'd be happy to be that 'more informed lender'. Just give me a call or drop me an email if I can be of service!<br />
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<a href="http://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s1600/closing.jpg" imageanchor="1" style="background-color: white; clear: left; color: #fc8901; float: left; font-family: Arial, serif; font-size: 14px; line-height: 22px; margin-bottom: 1em; margin-right: 1em; text-decoration: none;"><img border="0" src="http://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s200/closing.jpg" height="133" style="border: 1px solid rgb(238, 238, 238); padding: 2px;" width="200" /></a><em style="background-color: white; color: #333333; font-family: Arial, serif; font-size: 14px; line-height: 22px;"><strong>Lori Hiscock is a Sr. Loan Officer at <a href="http://www.ruoff.com/" style="color: #fc8901; text-decoration: none;" target="_blank" title="Ruoff Home Mortgage"><span style="color: #8c9a01;">Ruoff Home Mortgage</span></a>‘s South Bend office. One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University. You can connect with <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock's LO page"><span style="color: #8c9a01;">Lori Hiscock</span></a> or <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock Online Application"><span style="color: #8c9a01;">apply online</span></a> here.</strong></em> <strong><em>NMLS#404320.</em></strong><br />
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<div style="text-align: center;">
<span style="color: #333333; font-family: "Arial","sans-serif"; font-size: 10.5pt;">Ruoff Mortgage Company, Inc. is an Indiana corporation licensed by the Indiana Department of Financial Institutions (DFI) and operates with the following licenses:<br /><br /><b>Indiana-DFI First Lien Mortgage Lending License #10994; <br /> IL Residential Mortgage Licensee #MB.6760734; <br /> Michigan 1st Mortgage Broker/Lender License #FL0017496.</b></span></div>
Lori Hiscockhttp://www.blogger.com/profile/03619139661832096700noreply@blogger.com0tag:blogger.com,1999:blog-5936949811716832438.post-81492159056412676332014-08-19T10:18:00.003-07:002014-08-20T07:01:28.071-07:00Is the FHA HAWK Program Worth It?<a href="http://1.bp.blogspot.com/--USTwEY7Shk/U_OFgOZb7wI/AAAAAAAA1rU/8F_GVqiQius/s1600/hawk.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://1.bp.blogspot.com/--USTwEY7Shk/U_OFgOZb7wI/AAAAAAAA1rU/8F_GVqiQius/s1600/hawk.jpg" /></a>Last May, FHA announced that they would be rolling out a new program this fall that would let first time homebuyers save money on the upfront and monthly mortgage insurance. <br />
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The program is known as <strong>HAWK</strong> which stands for <strong>'Homeowners Armed with Knowledge'</strong>. In a nutshell, first time homebuyers who take an upfront and post-closing home buyer education class will get a reduction in the cost of both the upfront mortgage insurance and the monthly mortgage insurance charge.<br />
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Sounds like a good deal, right? <br />
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<strong>Maybe. Maybe not.</strong> Let's compare the pros and cons.<br />
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<h2>
Pros</h2>
<ul>
<li><strong>Lower upfront mortgage insurance</strong> - right now, a homebuyer is charged 1.75% of their loan amount as an upfront mortgage insurance cost when getting a FHA mortgage. This cost is added to their loan balance, making them owe more for the home. With the HAWK program, the qualifying borrower would only pay 1.25%, so a 0.5% savings. </li>
<li><strong>Lower monthly mortgage insurance</strong> - right now, the typical FHA homebuyer pays 1.35% annually toward mortgage insurance. This is paid in monthly installments (initial base loan amount x 1.35% / 12) and stays at that level for the life of the loan. With this program, the rate would be reduced to 1.25% initially. If the buyer completes a post-closing homebuyer education course and pays the loan on time during the first 18 months, they get a further reduction to 1.10% at the two year mark. </li>
<li><strong>More educated home buyers -</strong> this is the real reason for this program. HUD is hoping it will help homebuyers be more educated about the home buying and home owning process. Many home buyers go into home ownership unprepared. Additional education could help with that. </li>
</ul>
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Cons</h2>
<ul>
<li><strong>Time</strong> <strong>Investment </strong>- the home buyer who participates in this program is going to invest a lot of time in it. They need to do six hours of homebuyer education before finding a home, one hour after they find a home but before they close on it and one hour after they close, so a total of 8 hours of home buyer education, a portion of which has to be done one-on-one with a HUD approved counselor. </li>
<li><strong>Money Investment</strong> - the HUD approved counselor doesn't work for free, so someone will have to pay him. At this point, it looks like the buyer will pay the counselor upfront and the lender who makes the FHA loan will reimburse them at the closing of the purchase. What if the buyer doesn't buy a home after-all though? Then they will have to pay that cost. Exact costs are not determined yet seeing the program has not yet rolled out, but HUD has listed an estimated cost of $100/hour for one-on-one counseling (less if taken in a group setting). </li>
</ul>
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<h2>
Bottom Line</h2>
So, is it worth it for the buyer to invest the money and time upfront? <strong>If they have the time and are definitely going to buy a home with FHA financing, then definitely. </strong> On a $100,000 loan, they will save $500 on the upfront fee, about $8 per month for the first 24 months and about $20 per month after that.<br />
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<strong>HOWEVER - if a buyer is proactive enough to do 6 hours of homebuyer education before making an offer on a home, could they be proactive enough to take the steps needed to make themselves eligible for conventional financing?</strong> A conventional mortgage has no upfront financed mortgage insurance and, dependent on the credit score, the monthly mortgage insurance is typically significantly cheaper than even this program's discounted 1.1% rate. Also, conventional borrowers eventually can remove the monthly mortgage insurance from their loan while most FHA borrowers have it for the life of the loan.<br />
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All to say....it can be a good program for the proactive buyer who absolutely has to go FHA. <strong> If the buyer has the time and ability to become eligible for conventional financing, though, this route will typically beat FHA's HAWK program, hands down.</strong> <br />
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<a href="http://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s1600/closing.jpg" imageanchor="1" style="background-color: white; clear: left; color: #fc8901; float: left; font-family: Arial, serif; font-size: 14px; line-height: 22px; margin-bottom: 1em; margin-right: 1em; text-decoration: none;"><img border="0" src="http://3.bp.blogspot.com/--e0c2kFQ8mY/UkxfiUrX8AI/AAAAAAAA1AA/cEMwfdXyeW0/s200/closing.jpg" height="133" style="border: 1px solid rgb(238, 238, 238); padding: 2px;" width="200" /></a><em style="background-color: white; color: #333333; font-family: Arial, serif; font-size: 14px; line-height: 22px;"><strong>Lori Hiscock is a Sr. Loan Officer at <a href="http://www.ruoff.com/" style="color: #fc8901; text-decoration: none;" target="_blank" title="Ruoff Home Mortgage"><span style="color: #8c9a01;">Ruoff Home Mortgage</span></a>‘s South Bend office. One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University. You can connect with <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock's LO page"><span style="color: #8c9a01;">Lori Hiscock</span></a> or <a href="http://www.ruoff.com/lorihiscock.html" style="color: #fc8901; text-decoration: none;" target="_blank" title="Lori Hiscock Online Application"><span style="color: #8c9a01;">apply online</span></a> here.</strong></em> <strong><em>NMLS#404320.</em></strong><br />
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<span style="color: #333333; font-family: "Arial","sans-serif"; font-size: 10.5pt;">Ruoff Mortgage Company, Inc. is an Indiana corporation licensed by the Indiana Department of Financial Institutions (DFI) and operates with the following licenses:<br /><br /><b>Indiana-DFI First Lien Mortgage Lending License #10994; <br /> IL Residential Mortgage Licensee #MB.6760734; <br /> Michigan 1st Mortgage Broker/Lender License #FL0017496.</b></span></div>
Lori Hiscockhttp://www.blogger.com/profile/03619139661832096700noreply@blogger.com0