15 Confusing Mortgage Terms Explained

1. Adjustable-Rate Mortgage
2. Amortization
3. Annual Percentage Rate
4. Attainable Housing
5. Buydown
6. Closing Costs
7. Default
8. Discount Points
9. Due Diligence
10. Easement
11. Eminent Domain
12. Escrow
13. First-Time Homebuyer Programs
14. Lien
15. Loan Estimate

Understanding the terms you’ll see on your home loan documents is key to getting more out of your mortgage.

The post Top 15 Confusing Mortgage Terms, Explained appeared first on Cardinal Financial.

So, Who Sets Mortgage Rates? Read On to Learn:

• What the Federal Reserve is and how it affects interest rates
• A description of the 10-year Treasury yield and its impact on rates
• The reason why mortgage interest rates are higher than the 10-year Treasury yield
• How your personal finances can impact your interest rate

What’s the Federal Reserve and How Does it Affect Rates?

You might have heard that the “Fed” sets mortgage interest rates but that’s not exactly true. The Federal Reserve’s policies impact rates, but do not have a direct effect on them. Here’s why:

• The Federal Reserve is the central banking system of the U.S. It works to maintain financial stability for the country and to minimize inflation rates.
• If the Federal Reserve wants to improve the economy, it can create policies to do so. One way they do this is by making it less expensive for financial institutions to borrow money. That means, borrowing money probably becomes less expensive for everyone.
• Of course, the Fed can do the opposite by making funds more expensive if they want to slow the economy down. The Federal Reserve doesn’t directly create mortgage rate changes. But, the interest rates they set for what banks charge each other has a strong influence. You’ll find out why this is important in just a minute.

What Role Does the 10-Year Treasury Yield Play?

Let’s start with why the 10-year Treasury yield exists. The Federal Reserve sells 10-year Treasury bonds (and bonds with other durations too) for $1,000 each, which can be purchased by investors. These investors are usually banks or other financial institutions. Basically, investors loan money to the government by purchasing a bond. In return, bondholders are guaranteed an interest payment every six months. After a decade of interest payments from the government, the investor is repaid the initial $1,000 invested; the principal.

Treasury bonds are viewed as one of the “safest” investments since the government has never failed to repay the promised amount. Even better, financial institutions and investors can sell Treasury bonds to others in a secondary market (and to fund the money they lend to others). This is where the “yield” of the 10-year Treasury bond comes in. But before we get into the details of Treasury bonds and their yields, here’s what you really need to know – in a nutshell:

30 year Mortgage interest rates tend to track the 10-year Treasury yield. When the yield goes up, so do mortgage rates. The opposite is true when the yield goes down.

Good with the basics? Go ahead and skip the rest of this section. We recommend picking back up in the “Personal Finances” section below. Are you a number-nerd or just a very curious human? Read on here…

The Secondary Market

The secondary market refers to the selling of pre-owned Treasury bonds by investors and financial institutions. The amount existing bonds are sold for determines the 10-year Treasury yield.

Low Yield Market

• When demand is high and Treasury prices rise, yields fall. That’s because someone buying a bond on the secondary market will have to pay more than the $1,000 face value, thanks to all the purchase competition.
• Of course, when you buy something at a premium price, you make less money by owning the bond (because you paid more for it). In other words, the financial yield on that bond is lower.
• Low yields on Treasuries mean lower rates on mortgages.
• Sure, investors make less money on lower-yield bonds. But, selling these bonds is easier, since lots of people want to buy them (ie: high demand).
• That means lending money overall is less risky. And interest rates always come down to risk. Less risk equals a lower rate.

High Yield Market

• When demand for Treasury bonds is low, investors can buy them at a discount.
• This situation is the opposite of the low yield market described above; when you buy a bond for less than face value, you’ll make more money by owning it (because you spent less when you bought it). In other words, the financial yield on that bond is higher.
• In the high yield market, selling bonds (and other loans) becomes more difficult. That’s all because of the low demand in this scenario.
• And that means the higher the Treasury yield, the higher the mortgage interest rate.

EXAMPLES:

Low Yield – You buy a handful of 10-year Treasury bonds from an existing bond owner for $1,100 each, instead of $1,000. You pay more for the bonds because many other investors are interested in them too. It’s the supply and demand relationship you probably learned about in Econ 101. High demand for Treasury bonds usually happens when investors think the economy might not be doing so well. This means that an investment with almost no risk – like a Treasury bond – becomes more attractive. Because of the higher price you paid for the bonds, you’ll make less money back when the government reimburses you for the face value of the bonds.

High Yield – You buy a handful of 10-year Treasury bonds from an existing bond owner for $900 each, instead of $1,000. You get this great discount because there aren’t many other investors interested in buying these bonds. (Those other would-be bond purchasers are probably buying more risky types of investments because the economy is doing pretty well). Because of the low price you paid for the bonds, you’ll make more of a profit when the government pays you back for the face value of the bonds.

All this buying and selling of 10-year Treasury bonds is referred to as the secondary market. The market selling rate gives us the 10-year Treasury yield.

Then Why are Mortgage Interest Rates Higher Than the 10-Year Treasury Yield?

Now that you have an idea of how “risk-free” treasury bonds influence mortgage rates, let’s talk about the mortgage-backed securities market (MBS). Mortgage-backed securities are issued by companies like Cardinal Financial. They contain mortgages Cardinal Financial lends, plus loans from other industry participants.

These bundles of home loans have additional risk when compared to Treasuries. Namely, “prepayment risk”. Here’s why:

• Remember, with 10-year Treasury bonds, one receives a fixed rate of interest for 10 years and then receives the initial principal investment back at the end of the 10 year period.
• Since mortgage-backed securities contain loans made to individuals for their homes, those individuals have the option to pay the loans back at anytime. The loan gets repaid whenever a mortgage borrower refinances, sells their current home, or just becomes able to pay their mortgage in full.
• If a loan gets repaid before the end of the mortgage term, the holder of the mortgage-backed security stops earning interest on the loan. That means less money for the loan holder.
• Early mortgage payments tend to increase and decrease at times an investor would not prefer. For example, when rates are dropping and the price of their mortgage-backed securities investment should be going up, it’s also the time when borrowers are more likely to refinance and return the principal.
• Conversely, when rates are going up and the price of the mortgage-backed securities investment is going down, borrowers are less likely to refinance and return the principal, thereby extending the period with lower mortgage-backed securities prices.
• Remember the “higher risk equals higher rates” thing? It comes into play here too. This “prepayment” risk results in higher rates associated with mortgage-backed securities as compared to Treasuries. That’s why mortgage interest rates are higher than the 10-year Treasury yield.

How Do Your Personal Finances Factor In?

Now that you know how general mortgage interest rates are set, it’s time to talk personal finances. Your income and financial history play big roles in the amount of risk a mortgage lender takes when they give you a loan. Just like with Treasury bonds, higher risk means a higher interest rate and lower risk means a lower interest rate.

So, how do lenders determine risk (and therefore, your rate)? These are a few basic factors:

1. Your credit score – Basically, the higher your credit score, the lower your interest rate is likely to be. Since your credit score tracks your financial history, a higher score tells the lender that your loan is less risky than a lower score.
2. Your monthly income as compared to your monthly debt – The more money you have leftover after paying your monthly bills, the less likely you are to skip a mortgage payment. This means that people with a higher percentage of leftover income (after paying debts) present a lower risk to lenders. And, you guessed it, that means a lower interest rate. The calculation of income compared to debt is known as the debt-to-income ratio.
3. Your down payment percentage – This one’s simple. The more of your house that you pay for up-front, the lower the risk to the mortgage lender – and the lower the rate. That’s because the financial burden on a borrower is higher than if they make a smaller down payment (say, 3%). On the other hand, someone who makes a larger down payment (say, 20%) faces less of a repayment load. So, higher down payments signal a higher likelihood of monthly mortgage payments (and less risk to the lender).
4. The length of your loan – The longer the loan, the higher the interest rate. That’s because, to lenders, more time waiting for repayment means more time for someone to default on their loan. Plus, money is worth less when paid back later because of inflation. So, longer loans are higher-risk.

The takeaways? Keep your eye on the 10-year Treasury yield if you want to track mortgage interest rates and focus on your personal finances for your lowest rate.

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The post Who Sets Mortgage Rates? Everything You Ever Wanted to Know appeared first on Cardinal Financial.

The time is right, and you’re ready to buy a house—the first step: Figuring out the differences between the various loan types available. Luckily, we’re here to help you through your homework.

Below, we’ll dive into two of the most popular home loan options, FHA vs. Conventional, explain their key features, and break out a couple scenarios so you can learn which might work best for you.
FHA Loan

What is an FHA Loan?

An FHA loan is a mortgage that’s insured by the Federal Housing Administration. FHA loans are available to borrowers of all kinds, from first-time home buyers to homeowners looking to refinance. FHA loans are often popular with first-time home buyers because they allow low down payments. For instance, you can put down as little as 3.5% for a fixed-rate FHA loan if your FICO score is high enough. It’s important to remember that the lower your credit score is, the higher your interest rate will be.

A few other things to consider about FHA loans:

• An FHA loan can be used to purchase a primary residence.
• You can put down as little as 3.5% for a fixed-rate loan. Even if you don’t meet the credit score to qualify for the 3.5% down payment, you may still qualify with a 10% down payment.
• It can be easier to qualify. Lower credit scores and down payments are accepted and this loan type is more forgiving when it comes to bankruptcies and other financial issues.
• You must pay a mortgage insurance premium, regardless of the size of your down payment.
• You can refinance an FHA loan to lower your rate or change your term or even to take cash out.

It can be easier to qualify for an FHA loan. Lower credit scores and down payments are accepted and this loan type is more forgiving when it comes to bankruptcies and other financial issues.

Conventional Loan

What is a Conventional loan?

Conventional loans are the most popular option for borrowers looking to purchase or refinance a home. Borrowers may choose between fixed- and adjustable-rate mortgages with terms from 10 to 30 years. Conventional mortgages are not insured or guaranteed by any government agency. They are granted by private mortgage lenders, such as banks, credit unions, and other financial institutions. Credit standards are a little more strict than with FHA loans. Depending on specific loan characteristics, you could put down as little as 3% for a credit score as low as 620.

A few other things to consider about Conventional loans:

• You can use a Conventional mortgage to purchase a primary residence as well a second home or investment property.
• Depending on specific loan characteristics, you could put down as little as 3%.
• You have the option of choosing between an adjustable or a fixed-rate mortgage.
• You can refinance a Conventional loan to lower your rate or change your term or even to take cash out.

Conventional mortgages are granted by private mortgage lenders, such as banks, credit unions, and other financial institutions.

What are the pros and cons of FHA loans and Conventional loans?

All mortgages have characteristics that may be advantageous and disadvantageous depending on your specific scenario. It’s best to speak with a mortgage loan originator about which option best suits you. Here are the most common pros and cons of FHA and Conventional loans.

Pros and cons of FHA loans

FHA loans are generally popular among first-time homebuyers who don’t have a large down payment saved up, or have experienced bumps in their credit history. Here are some important factors to consider.

Pros:

Qualification

FHA loans can be easier to qualify for. FHA loans have less restrictive requirements on debt-to-income ratio and are more forgiving of past bankruptcies or foreclosures.

Low down payment

To qualify for the low down payment of 3.5%, you must meet a minimum FICO score specified by your lender. This score can vary from lender to lender, but it is generally lower than the score requirements of other loans, including conventional. If you do not have the minimum score, you may still be eligible for an FHA loan, but your down payment may increase to 10%.

Cons:

Mortgage insurance premiums

Mortgage insurance is required on all FHA loans, regardless of down payment size. An FHA loan requires that you pay two types of mortgage insurance premiums — an upfront MIP (equal to 1.75% of the total value of your loan) and an annual MIP (charged monthly). Mortgage insurance protects the lender if the borrower defaults. If you have put at least 10% down at closing, you’ll be able to cancel MIP after 11 years of payment. If you have less than 10% down, you’ll pay MIP for the entire term length.

Property type

You can only use an FHA loan to buy a home you plan to live in as a primary residence. To finance a vacation or investment property, you’ll need to opt for a Conventional mortgage or another type of loan.

Pros and cons of Conventional loans

While it may be tougher to qualify for a Conventional loan, it may be the best option for borrowers who have stronger credit scores or more money for a down payment. Check out these pros and cons to see if it’s right for you.

Pros:

3% down payment possible

Depending on certain loan characteristics, you could pay as little as 3% down on a Conventional loan. That’s even slightly lower than with an FHA loan.

More property type options

You can use a Conventional mortgage to purchase a primary residence, a second home, or even an investment property. FHA loans are only for primary residences.

Less impact from private mortgage insurance

With Conventional loans, you are required to pay mortgage insurance if you’re putting down less than 20%. However, if you save up enough for a 20% down payment, mortgage insurance will be waived. Even if you need to pay private mortgage insurance for the beginning of the loan, that can eventually be dropped after you reach 22% of your home’s equity.

Cons:

Tougher qualification standards

There are more stringent requirements when it comes to getting approved for a Conventional loan than that of an FHA loan. You will need at least a 620 credit score to qualify for a Conventional loan.

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Which loan fits your needs?

Take the financial situations of two people, Hugo and Laila.

Hugo is trying his best to become a homeowner. However, after maxing out his credit cards and suffering a bankruptcy, his credit score is lower than he’d like it to be. He has a home in mind, but he’s only been able to save up about 4% for a down payment. An FHA loan may be right for Hugo. Since we’ve learned that FHA loans offer more flexible credit qualifying guidelines than other loan types, a lender may be able to offer Hugo a competitive interest rate.

Hugo may have a strong enough credit score to qualify for financing on an FHA loan, depending on the minimum qualifications required by his lender (the minimum required FICO score can vary from lender to lender, but it is generally lower than the score requirements of other loans, including Conventional).

Depending on his credit score, Hugo may be able to qualify for the low down payment of just 3.5% on his home’s purchase price. If his credit score is too low for that qualification, Hugo may still be eligible for an FHA loan, but his down payment may increase to 10%.

Now consider Laila: She’s spent the past few years building up strong credit, and has been able to save up a 15% down payment for a home in her price range.

Like roughly two-thirds of most homeowners, she’ll likely be eligible for a Conventional loan. While she may need to pay a little private mortgage insurance, it won’t be long at all before she can wipe that requirement away and focus on building equity in her new home.

What’s next?

Now you’re up to speed on the differences between FHA and Conventional loans. If you’re interested in exploring which option is best for you, the next step is to speak with a licensed mortgage loan originator. Contact us today to get started!

Did this breakdown help you learn the differences between FHA and Conventional loans? Do you have any more questions? Let us know on social media!

The post What Is the Difference Between FHA and Conventional Home Loans? appeared first on Cardinal Financial.

Etymology: The origin of a word and the historical development of its meaning.

You might be surprised to learn that the concept of mortgages — home loans — is fairly intertwined with American history, dating all the way back to the 1700s. You may be even more surprised to learn that mortgages date back even further than that. In fact, the earliest use of “mortgage” as a term to describe a long-lasting deal dates back to 14th century France, according to our friends at the Online Etymology Dictionary.

But what’s it mean? Sure, the concept of mortgages is old, but why don’t we just call them “home loans”? What does “mortgage” even mean?

The Dead Pledge: Mortgage Etymology

Like most words, “mortgage” can be picked apart to uncover its true, or original, meaning. Its French origins can actually be traced back to Latin and early German language. In Latin, “mortus” (or “mortuus”) means “dead.” “Gage” stems from the early German vocabulary which translates in old French to “pledge.” When brought together, the word effectively translates to “dead pledge” — called so because, according to the Online Etymology Dictionary, “the deal dies when the debt is paid or when payment fails.”

These days, mortgages work similarly. Once a mortgage is paid off, the house belongs to the buyer. Alternatively, should the buyer forego payments…well, that’s another way the deal could “die”, so to speak. Except these days we call that defaulting on a loan, which ultimately leads to foreclosure.

Comparing These Days To Those Days

So we know the origin of the word “mortgage” is old, but when did mortgages themselves become a thing?

The history’s a little hazy, but the concept of a mortgage — that is one person owing another person money for property — dates back more than a thousand years. English documents from the 1100s detail lender protections in property deals.

Fast forward a bit to the turn of the 20th century, where mortgages had evolved a bit. More similar in nature to today’s loans, but still quite different. For example, back then, down payments of 50% were common. Now, 50% of the average cost of a home back then — let’s say $10,000 — is only $5,000. Doesn’t seem like much these days (especially in the larger scope of things), but consider inflation: A $10,000 house back then would cost more than $350,000 nowadays. Suddenly a down payment of $175,000 seems like a bigger deal, huh?

The remaining would be paid through interest-only payments over a short period of time, usually five years, with the last payment being a principal-only balloon payment. Hardly seems fair, right?

Rethinking Real Estate

Seems backwards to say, but the Great Depression may have actually been a good thing for this country — or, at the very least, a necessary wake up call. The Great Depression led to the creation of the Federal Housing Administration (FHA), which aimed to reduce risk, protect lenders, and promote fairer lending practices to borrowers regardless of background.

To do so, FHA-insured loans came with a handful of…well, let’s call them prerequisites. These “prerequisites” included stringent quality standards, lower down payment requirements, extended loan terms (15 to 30 years, compared to three to five in years prior), and amortization — which means basically means you work on paying down more of your loan’s interest first, while paying off principal debt later.

Where older mortgages saw buyers paying interest only over a period of time, followed by a balloon payment to repay the principal, amortization saw buyers paying interest and principal simultaneously over time.

Modern Mortgage

Modern mortgages are somehow easier and more difficult to obtain. Thanks to the Great Recession (remember 2008?), the market needed regulation. Lenders needed to qualify prospective buyers before handing out mortgages, so the process is certainly more involved than it used to be. For good reason, though — most lenders just want to make sure buyers can afford what they’re borrowing.

At the same time, the digital age has seen an influx of speedy online lenders boasting streamlined experiences. Mortgages are more accessible than ever, but regulations have made them subject to stringent requirements. Like most things in life, it’s give and take.

Those Who Don’t Learn From History…

You’ve heard the old adage. Luckily, thanks to modern mortgage requirements, you aren’t doomed to repeat the mistakes of mortgages past. You know where mortgages come from, you know how they’ve changed over time, and you’re already here.

Maybe you’re ready to buy a house, or maybe you’re just weighing your options. Either way, our team is ready to help you make home happen wherever you’re at in the process.

Mortgages are more accessible than ever, but regulations have made them subject to stringent requirements. Like most things in life, it’s give and take.

The post A Brief History of Mortgage Etymology appeared first on Cardinal Financial.

When you decide to buy a new car, you’re likely researching a lot of things. First and most obvious, the car you want. Second, the dealership you’re buying from. In this step, you’re probably looking at several different dealerships, and for good reason: No two dealerships are alike, and they all seem to offer varying benefits.

For example: One offers free oil changes for life, another offers free inspections for two years, and the third offers a limited powertrain warranty. The dealership you decide to buy from should offer a distinct intersection between availability, price, and benefits.

Don’t worry, we’re not here to guide you through the car buying process—but when you’re looking for a mortgage professional, you should shop around as much as you do when looking for a new car to try and find a similar intersection.

What To Look For in a Mortgage Lender

Not only are there different types of lenders, there are a host of different mortgage products available, and not every lender has the same access to the same loans. And, because many lenders operate on different platforms, the technology they use might influence your buying timeline, the lender’s decision, and even your rate.

In this great big financial ocean, it’s easy to get lost at sea, floating from option to option. We’re here to help you find your direction—your Cardinal Financial direction, if you know what we mean. Read on to find out what to look for in a mortgage lender.

What’s Your Type?

One of the first things to look at is the type of mortgage professional you’re working with. And trust us, there are plenty of options out there. Here’s a brief look at a few of the most common options—mortgage brokers and direct lenders.

Pro-Tip: Direct lenders and mortgage brokers are not the same thing. Lenders are businesses that offer home loans. Brokers are businesses that serve as aggregators, providing various quotes from multiple lenders. At the end of the day, it’s a matter of personal preference.

Direct Lenders
Unlike brokers, direct lenders use their money to originate loans. That often means you’ll benefit from better rates and lower upfront costs, as well as a one-to-one relationship with the lender across every touchpoint of the process. However, it’s important to consider that working with a direct lender means you’re limited to their own products. Because loan applications appear as hard pulls on your credit report, shopping around with multiple direct lenders—or going to a second after the first wasn’t able to approve you for one of their loan options—could affect your credit score and subsequent approval odds.

Mortgage Brokers
Matchmaker, matchmaker…find me a loan? While mortgage brokers do not originate loans themselves, or put up any of their own money in the process, they act as an intermediary of sorts—connecting borrowers with potential lenders to provide a handful of options from other lenders. Because of this, brokers are often paid via broker fees (paid by you, the buyer) and through partnerships with certain lenders who might “pay to play” for higher visibility over other lenders.

Online Lending
Thanks to advances in lending technology, many lenders are turning to wholly digital solutions that allow the process to be completed mostly—or entirely—online. Depending on who you work with, you may miss out on the traditional person-to-person interaction, but you’ll benefit from streamlined communication and faster origination. Most online lenders fall into the direct lender category, and brokers may provide quotes from those same lenders. Cardinal Financial offers a hybrid model, providing online capabilities while matching you with a loan professional for a personalized lending experience.

Strengthen Your Search With These Five Tips

Whether you decide to stick with that traditional bank mortgage or a modern online mortgage, knowing the type of lender will only get you so far. When it comes to making a decision, there are a handful of other things you should consider as well. Shopping around for a mortgage professional? Keep these five tips on hand:

1. Technology
   What kind of technology, if any, do they use? These days, many loans can be completed 100% online. Of course, if you choose to roll with an online lender, your experience will only be as good as their tech. That’s why we love Octane, our proprietary home loan platform built with borrowers in mind and offering a more efficient process for faster closings.
2. Service
   You will, inevitably, speak to someone when applying for a loan. You don’t want an interaction with a call center talking head who’s reading from a script. You should look for a lender who’s empathetic to your circumstances and willing to explain any and everything along the way. This is your home loan, after all—you’re paying for it and you deserve top-shelf service.
3. Credit
   Low scores don’t have to keep you from buying a home, but different loan options require different credit scores. Before you apply for a loan, know your credit score. Trust us, the lender will ask about it. The more you know, the more they can help. You might even qualify for a program or grant that could put a home loan within reach. This tip also goes back to service: You want empathy, not a lender who’s going to turn you away or make you feel bad about your circumstances.
4. Finances
   Two things (almost) every home loan will require: A down payment and closing costs. These aren’t small chunks of change, and often seem daunting to borrowers. Before you apply for a loan, it’s important to know how much you’ll be able to put down for your home purchase. To that end, it’s critical to know what kind of closing costs you’re looking at.
5. Rates
   This is one of the most important reasons to shop around and obtain pre-qualifications (not pre-approvals, those are different) from various lenders. Depending on your home’s location, your debt-to-income ratio (i.e. your monthly debt payments divided by your gross monthly income) and a handful of other factors, different lenders may offer different rates and terms for your home loan. While a 1% difference between rates may not seem like a lot right now, it could equate to thousands of dollars saved—or wasted—over the life of your loan.

Finding a Home Loan Expert You Love

You may have a mortgage professional in mind, or you might be starting your search from scratch. But now that you know what to look for in a mortgage lender, you should feel more prepared to begin your journey.

Still looking for the right lender? Not to toot our own horn, but we’re pretty confident in our ability to check all the right boxes. Connect with the experts at Cardinal Financial to get your pressing questions answered and find out what kind of loan options you might qualify for.

In this great big financial ocean, it’s easy to get lost at sea, floating from option to option. We’re here to help you find your direction—your Cardinal Financial direction, if you know what we mean.

The post Wondering What to Look For in a Mortgage Lender? We’ve Got the Answers. appeared first on Cardinal Financial.

Don’t look now, but low down payment mortgage loans are back—but not in the same way you remember them. Often pegged as the cause for the crash of the housing market in 2008, low down payment mortgages have made a controversial return to the mortgage industry through several well-respected lenders. This has caused many economists to publicly voice their opinions on either side. If you’re lost, or simply not sure why you should care, we get it. Here’s our thoughts on the matter to help you sift through all the information.

low down payment mortgages: a history

So what exactly are low down payment mortgages? When we say low, we mean REALLY low. Many lenders have been offering Conventional loans with as little as 3% down payments. Some won’t even ask for a down payment at all! That sounds like a good thing, right? Maybe. But in the years leading up to the housing market crash of 2008, a lot of these low or zero down payment loans were going to borrowers with spotty financial histories, as well as undocumented income and debt, and many of them defaulted. Lenders were more focused on closing loans than making sure the loans were good quality. Was this the only cause for the crash? No, but a crash was bound to happen. And when it did, new regulations were introduced to prevent this type of debacle from ever happening again.

a decade later . . .

With low down payment loans gaining popularity in the market, many people are understandably skeptical about what this could mean. The main issue is that the former version of low to no down payment loans required very little to no documentation of financial history. The latest version of these loans is vastly different as applicants must demonstrate an ability to repay what’s owed, must have excellent credit histories and scores, and must provide every bit of documentation for income and assets.

That being said, there’s still an avenue for people to get into some trouble. Like we said earlier, part of what caused the failure of the housing market a decade ago was irresponsibility at the hands of the lenders. Lenders didn’t own the mortgage loans they were making for more than a couple of months, so they didn’t have much incentive to make sure their borrowers could pay. Unfortunately, not much has been done to address this issue within the industry. And lenders still have little to lose in the way of ownership when it comes to these low down payment mortgages.

count on cardinal financial

Even with the new wrinkles, low down payment mortgages can still be risky. That’s why we’re careful in our pre-approval process and our loan originators are skilled in what to look for in borrowers who have the ability to repay. If you’re looking for low down payment options, we offer VA loans with 0% down payments, Conventional loans with 3%, and FHA loans with 3.5% down, along with down payment assistance (DPA) programs in certain states!

What do you think about low down payment mortgages coming back? Is it good or bad for the housing industry? Let us know your thoughts on social media!

The post Low Down Payment Mortgages Are Making a Comeback appeared first on Cardinal Financial.

In the mortgage business, things never stay the same for too long. It’s a cyclical industry and that’s why we’re always keeping tabs on what’s happening and letting you know what may be coming next. Last year was interesting to say the least. If we could sum it up in one word: growth. Interest rates, home prices, and the rate of homeownership all increased. This month, it’s the start of a new year, and we’re making three bold housing predictions for 2018 (you might be surprised at number two).

Home prices will rise

It’s the current “inventory crisis” that’s got everyone talking. Since the number of homes for sale is low, competition is high, and sellers are taking advantage of their chance to post higher asking prices. And, if interest rates continue to increase (as they steadily did in 2017) we’re looking at a tough market for home buyers in 2018, especially for first-timers. Some sources may predict home price growth will slow down, but we’re predicting a slight uptick. Needless to say, one of our bold housing predictions for 2018 is that housing will become less affordable for would-be home buyers.

If interest rates continue to increase (as they steadily did in 2017) we’re looking at a tough market for home buyers in 2018, especially for first-timers.

For those of you who made a New Year’s resolution to buy a home this year, if this prediction comes true, it might make the jump from renting to owning more difficult. Beyond that, you’re competing against experienced buyers who have at least one successful home sale under their belts and are well-versed in the art of negotiation. But even experienced buyers might avoid the market in 2018…

Homeowners will remodel, not sell

Due to rising home prices—coupled with low housing inventory and the possibility of interest rates rising even more—we’re predicting a lot of current homeowners who are due for an upgrade will stay put instead. Let’s say you bought your home seven years ago and you’re getting serious about buying a new home this year. Maybe you’re upsizing, downsizing, or you’re looking to move out of the city and into the suburbs. Whatever your motivation, we like to call homeowners like you “rebound buyers” because you’re re-entering the market.

Another one of our 2018 housing predictions is that, rather than jumping into today’s tough landscape and competing with other buyers over high home prices, these homeowners will stay in place and opt for renovations. But that doesn’t mean they don’t need a mortgage! These homeowners might take out a HELOC or cash-out refinance to help fund the cost of making their current digs feel more like new.

We’re predicting a lot of current homeowners who are due for an upgrade will stay put instead.

More assistance programs will launch

Last year was big in the way of homeownership assistance. In 2017, we saw more mortgage lenders adopt new down payment assistance (DPA) programs, lower their minimum credit score requirements, and lower their down payment minimums. Last June, Fannie Mae raised their debt-to-income ceiling from 45% to 50%, making homeownership possible for many more Americans who have debt. Where a high DTI keeps people from qualifying for a mortgage, this ceiling increase helps many more become eligible.

Fannie Mae and Freddie Mac also raised their conforming loan limits from $424,100 to $453,100 for single-family residential loans closed after January 1, 2018—which means home buyers looking to purchase a high-priced home may not have to take out Jumbo loan financing. This will allow more home buyers who either don’t qualify for a Jumbo loan or simply don’t want to deal with the hassle of a strict Jumbo loan process to get that dream home. We’re predicting this loan limit increase will be huge for home buyers in 2018 seeing as we’re also predicting home prices will continue to rise.

These are just a few of the changes to the mortgage industry that are making homeownership more affordable for many Americans. And one of our bold housing predictions for 2018 is that advancements like these will only continue!

Do you have any bold housing predictions for 2018? Tell us on any one of our social media channels or tag #Cardinal2018Predictions!

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