VA loan

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Let’s talk mortgage basics: “What is the loan-to-value ratio?”

If you’re currently shopping for a home or already going through the mortgage loan process, chances are you’ve heard the phrase loan-to-value ratio get thrown around on more than one occasion.

You may have also encountered the acronym “LTV” while perusing mortgage advertisements or playing around on mortgage rate comparison websites.

Regardless of what’s going on in the housing market, you should know all about this very important term when applying for a home loan.

Why? Because it can greatly affect mortgage rate pricing, refinance options, and overall loan eligibility.

How to Calculate the Loan-to-Value Ratio (LTV)

loan to value ratio

  • It’s actually one of the easiest calculations you can make
  • Simply divide the loan amount by the appraised value or purchase price
  • And you’ll wind up with a percentage known as your LTV
  • The tricky part might be agreeing on a sales price and getting the home to appraise at value

Simply put, the loan-to-value ratio, or “LTV ratio” as it’s more commonly known in the industry, is the mortgage loan amount divided by the lower of the purchase price or appraised value of the property.

If we’re talking existing mortgages (in the case of refinance loans), it’s the outstanding loan balance divided by the appraised value.

When calculating it, you will wind up with a percentage. That number is your LTV. And the lower the better here folks!

It’s actually very easy to calculate (no algebra required) and takes just one step. You don’t even need a mortgage calculator. In fact, you might be able to run the numbers in your head. Honest!

Let’s calculate a typical LTV ratio:

Property value: $500,000
Loan amount: $350,000
Loan-to-value ratio (LTV): 70%

In the above example, we would divide $350,000 by $500,000 to come up with a loan-to-value ratio of 70%.

Using a basic household calculator, not a so-called “LTV calculator,” simply enter in 350,000, then hit the divide symbol, then enter 500,000. You should see “0.7,” which translates to 70% LTV. That’s it, all done!

This means our hypothetical borrower has a loan for 70 percent of the purchase price or appraised value, with the remaining 30 percent the home equity portion, or actual ownership in the property.

LTV ratios are extremely important when it comes to mortgage rate pricing because they represent how much skin you have in the game, which is a key risk factor used by lenders.

A Lower LTV Ratio Means More Ownership, Better Mortgage Rate

low LTV low rate

  • The lower your loan-to-value ratio the more home equity or down payment you have
  • Which is another way of saying ownership or skin in the game
  • A low LTV equates to a lower mortgage rate because you’re viewed as less risky
  • It means the bank is risking less since you are more invested in the underlying property

Essentially, the lower the loan-to-value ratio, the better, as it means you have more ownership (home equity) in the property.

Someone with more ownership is less likely to fall behind on payments or foreclose, seeing that they have a greater equity stake, aka financial interest to keep paying the mortgage each month.

They’ve also got more options if they do struggle with payments, as they could just sell the property without taking a loss (or the bank losing money).

Not only that, but banks and mortgage lenders also set up pricing adjustment tiers based solely on the LTV ratio.

Those with lower LTV ratios will enjoy the lowest interest rates available, while those with high LTVs will be subject to higher mortgage rates and/or closing costs.

For example, if you’re being “hit” by the lender for having a less-than-stellar credit score, that adjustment will grow larger as the loan-to-value ratio increases (higher LTV ratio = greater risk).

So if your mortgage rate is bumped a quarter percent higher for a loan-to-value ratio of 80%, that same pricing hit may be increased to a half percentage point if the LTV ratio is a higher 90%.

This can certainly raise your interest rate in a hurry, so you’ll want to look at all possible scenarios with regard to down payment and loan amount to keep your LTV ratio as low as possible.

More importantly, just maintain an excellent credit score and you’ll have plenty of loan options, regardless of your chosen down payment or available home equity.

80% LTV Is a Very Important Threshold!

80% LTV

  • Keep your mortgage at/below 80% LTV if you want to save money
  • You won’t have to pay private mortgage insurance (PMI)
  • And it should result in a lower mortgage interest rate with fewer pricing adjustments
  • You’ll also enjoy greater lender choice as most banks will lend up to 80% LTV

Most borrowers (who have the means) elect to put 20% down when buying a home, as it allows them to avoid mortgage insurance and the much higher pricing adjustments often associated with LTVs above 80%.

Fewer adjustments mean you can secure a lower interest rate on your mortgage. And if you can avoid PMI at the same time, it’s a win-win for your monthly housing payment!

You may also find it easier to get approved, as virtually all banks and mortgage lenders will accept LTVs of 80% or less.

But you don’t necessarily need to put 20% down to enjoy the benefits of a low-LTV mortgage.

Also Get to Know the Combined Loan-to-Value Ratio (CLTV)

Looking at the above example again, if you were to raise the first mortgage amount to $400,000 and add a second mortgage of $50,000, the combined loan-to-value ratio, or CLTV as its known, would be 90%.

Banks and mortgage lenders have both LTV and CLTV limits, meaning they won’t allow homeowners to borrow more than say 80, 90, or 100 percent of the property value.

These limits came down after the Great Recession but are creeping back up again…

Let’s do the math here; again, no mortgage calculator required!

Simple math: $400,000 + $50,000 = $450,000 / $500,000 = 90% CLTV

You would have a first mortgage at 80% LTV, and a second mortgage for an additional 10% LTV, making the CLTV 90%. Simply add up both numbers.

Sometimes borrowers elect to break up home loans into a first and second mortgage, known as combo mortgages.

This keeps the loan-to-value ratio below key levels, thereby reducing the interest rate and/or helping the homeowner avoid private mortgage insurance.

Tip: The undrawn portion of a home equity line of credit (HELOC) typically isn’t included in the CLTV calculation.

Max LTV by Home Loan Type

max LTV

  • FHA loans go as high as 96.5% LTV (3.5% down payment)
  • Conforming loans (Fannie/Freddie) go as high as 97% LTV (3% down)
  • USDA and VA loans go to a full 100% LTV (zero down)
  • Jumbos, cash-out refis, and investment properties are much more restrictive
  • And there is no maximum LTV in many cases for streamline refinances

There are certain LTV limits based on home loan type, with conventional loans (non-government) typically being more restrictive than government loans.

And mortgage refinance programs often less accommodating than home purchase loans.

At the moment, you can get an FHA loan as high as 96.5% LTV, which is just 3.5% down payment.

You can get a conventional loan as high as 97% LTV, which at just 3% down is higher than it used to be.

In recent history, the maximum was 95% LTV, but now Fannie Mae and Freddie Mac are competing directly with the FHA.

[See FHA vs. conventional for more on that.]

You can get either a VA loan or USDA loan at 100% LTV (which represents no money down).

These are the most flexible loan programs LTV-wise, but they are also only available to veterans or those living in rural areas, respectively. So not everyone will qualify for these types of mortgage loans.

There are also proprietary home buying programs from various private mortgage lenders that allow for 100% LTV financing if you take the time to shop around.

If it’s a jumbo home loan, a cash-out refinance, or an investment property, the loan-to-value will be a lot more limited, potentially capped at just 70-80% LTV, depending on all the attributes.

And finally, those underwater or upside down borrowers you hear about; they owe more on their mortgage than the property is currently worth.

This can happen due to negative amortization and/or home price depreciation.

A quick underwater loan-to-value ratio example:

Property value: $400,000
Loan amount: $500,000
Loan-to-value ratio (LTV): 125%

As you can see, the underwater borrower has a LTV ratio greater than 100% (this equates to negative equity), which is a major issue from a risk standpoint.

For the record, you get 1.25 by dividing 500 by 400.

The problem with homeowners in these situations is that they have little incentive to stick around, even with a modified mortgage payment, as they’re so far in the red that there’s little hope of recouping home value losses.

However, the popular Home Affordable Refinance Program (HARP) allowed millions of underwater homeowners to refinance to lower rates with no LTV limit. And many of these folks are probably now back in the black.

Today, this type of program still exists, but is a permanent option known as a high-LTV refinance, or HIRO for short.

So there are options to refinance and get a lower interest rate, as long as your loan is owned by Fannie Mae or Freddie Mac, no matter the mortgage balance relative to the property value.

Same goes for FHA loans and VA mortgages thanks to the FHA streamline refinance and the VA IRRRL option.

Despite being far behind new homeowners entering the market in terms of building home equity, many of these formerly-underwater borrowers now have lots of equity thanks to rising home prices and several years of paying down their mortgages.

That’s why you have to consider the long-game in real estate and never give up, even when times get tough. This also illustrates why home buying shouldn’t be a quick or hasty decision.

A Lower Loan-to-Value Can Save You Money!

  • A lower LTV generally results in a better interest rate
  • Which means cheaper monthly mortgage payments
  • It puts more of your hard-earned dollars toward the principal balance each month
  • Potentially saving you thousands of dollars over the life of the loan!

As noted, a lower LTV will likely result in big savings thanks to a lower interest rate.

Additionally, you may be able to avoid costly private mortgage insurance, enjoy expanded loan program eligibility, and have an easier time getting approved for a mortgage.

If your LTV is higher than you’d like it to be, there are some creative options to lower it.

Borrowers Can Reduce Their LTV in a Variety of Ways

  • Come in with a larger down payment if it’s a home purchase loan
  • Ask for gift funds to increase your down payment
  • Or break your mortgage up into two separate loans (combo loan)
  • Make extra payments or a lump sum payment for a refinance to get the LTV down before you apply
  • Or simply wait for natural amortization and home price appreciation to lower your LTV over time

If we’re talking about a home purchase, simply bring in more down payment money and the LTV will be lower. Easier said than done, sure, but possible for some.

Perhaps someone will gift you the money or act as a co-borrower?

Alternatively, you can look into breaking up your financing into two loans, with both a first and second mortgage.

If it’s a mortgage refinance, simply pay down the mortgage balance a bit more before you apply, whether on schedule or by making extra mortgage payments.

This can be especially helpful if you’re super close to a certain LTV threshold, or just above the conforming loan limit.

Speaking of, pay close attention to your LTV – if it’s just above 80% or some other meaningful tier, think about adjusting your loan amount down (your loan officer should advise you here!).

Lastly, there’s another way existing homeowners can get their LTV down and it requires no effort whatsoever.

You don’t have to do anything except sit back and watch your property value increase over time, thereby lowering your LTV in the process. Of course, the opposite can happen too if home values drop!

But as noted, real estate should be treated with a long time horizon, so be sure you have the ability to ride the ups and downs and make moves when it’s most favorable to you.

Read more: 10 ways to build home equity.

Source: thetruthaboutmortgage.com

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ISAs can have a HUGE impact on your ability to convert real estate leads at a high level, but how do you know who to hire? How do you know which systems to put in place in order to ensure their success? Find out on today’s Real Estate Rockstars with Oak & Ocean’s lead inside sales agent, Travis Halverson. Travis covers scripts, systems, and lead sources. Tune in and learn exactly how to hire and train an ISA so the you can turn more contacts into clients.

Listen to today’s show and learn:

  • What an ISA is [3:17]
  • How to track an ISA’s success [4:18]
  • How to make an ISA’s follow-up more effective [5:50]
  • One of the best problems for an ISA to have and how to solve it [7:27]
  • The most successful real estate agents [9:30]
  • A way to make meaningful touches with Follow Up Boss [10:40]
  • An easy system for following up with the best leads first [12:50]
  • Simple scripts for non-committal buyers [15:38]
  • A potential problem to avoid when your buyer wants to use a VA loan [19:21]
  • When ISAs should follow up after passing off a lead [20:14]
  • The follow-up Oak & Ocean ISAs do for past clients [22:39]
  • How to start prepping to hire your first ISA [28:22]
  • The right person to hire for an ISA position [29:26]
  • Where to find potential hires for an ISA position [30:55]
  • Different ways to compensate ISAs and what Travis prefers [32:30]
  • Travis’ favorite CRM, lead source, and texting service [35:54]
  • The oldest lead Travis ever converted [38:14]
  • Using templates to save time with touches [39:40]
  • How much time and money you can save with the right system [41:19]
  • Why you need a system now [42:49]
  • What all new ISAs need to remember [44:21]

Travis Halverson

Travis is the Lead Inside Sales Associate at Oak & Ocean and manages a team of 6 client care specialists. He takes pride in making sure that all of our clients are met with that 6-Star Ritz Carlton service from the first “hello” all the way to the first meeting with one or our amazing agents. He has gained vast knowledge of lead generation tactics from his network and contacts in other real estate markets across the country. Travis has made it his mission to ensure that all of his team members abide by Oak & Ocean’s core values of Results.Resilience.Respect. In his free time he likes to spend time with his girlfriend and go to the movies.

Related Links and Resources:

Thank You Rockstars!
It might go without saying, but I’m going to say it anyway: We really value listeners like you. We’re constantly working to improve the show, so why not leave us a review? If you love the content and can’t stand the thought of missing the nuggets our Rockstar guests share every week, please subscribe; it’ll get you instant access to our latest episodes and is the best way to support your favorite real estate podcast. Have questions? Suggestions? Want to say hi? Shoot me a message via Twitter, Instagram, Facebook, or Email.
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Typically, you pay a premium if you select a 30-year fixed mortgage versus an adjustable-rate mortgage.

The reason is simple – the interest rate is locked in and will not change during the entire loan term, which is a full 30 years, or 360 months.

Conversely, if you choose to go with an adjustable-rate mortgage, such as a 5/1 ARM or a 7/1 ARM, you only receive the benefit of a fixed rate for the first five or seven years, respectively.

It is then subject to change annually during the remaining 23 or 25 years of the loan term.

As such, you should be entitled to a discount on your mortgage rate during that initial fixed period to make up for the risk of the interest rate resetting higher once the fixed period ends.

This spread can change over time depending on what’s going on in the economy and secondary market, along with lender/investor appetite for certain products.

Today’s Menu: 30-Year Fixed or Bust

  • Mortgage rates are usually highest on the 30-year fixed
  • Because borrowers receive a fixed interest rate for a full three decades
  • Discounts are typically given on riskier products like ARMs or shorter-term loans like the 15-year fixed
  • But right now lenders aren’t passing along the usual discounts

At the moment, anything that isn’t a 30-year fixed mortgage is basically out of favor.

This is probably even more true with nonbank lenders and those who sell off their mortgages, as opposed to keeping them in their own bank portfolio.

This explains why you’re no longer seeing the usual discounts offered for loan products like ARMs, and in some cases, even shorter-term fixed-rate mortgages, including the 15-year fixed.

Once again, I traveled across the internet to see what mortgage lenders were advertising for their popular loan programs, and this trend is pretty clear.

Lender ARM or 15-Year Fixed Rate 30-Year Fixed Rate
Bank of America 3.375% (10/1 ARM) 3.375%
BB&T 3.375% (15-year fixed) 3.375%
Chase 3.49% (7/1 ARM) 3.125%
Citi 4.75% (7/1 ARM) 3.875%
Citizens Bank 3.375% (7/1 ARM) 3.375%
Navy Federal 2.375% (5/5 ARM) 2.875%
Quicken Loans 3.125% (10/1 ARM) 3.375%
USAA *3.50% (VA 5/1 ARM) 3.50%
Wells Fargo 3.625% (5/1 ARM) 3.375%

Bank of America is advertising a 30-year fixed for 3.375% with 0.786% discount points, and a 10/1 ARM for the same rate with 0.971% discount points. In this example, it’s actually more expensive to take the riskier loan product.

BB&T is charging the same 3.375% for a 30-year or 15-year fixed refinance rate, yet the APR is slightly higher on the 15-year.

Chase will give you a 30-year fixed for 3.125%, or a 5/1 ARM for the same price. If you want a 7/1 ARM, the rate jumps up to 3.49%. More risk for more money…that’s a sign of a messed-up mortgage market.

Citi is showing super wild mortgage rates, with the 30-year fixed 3.875% with 0.125% points, and the 7/1 ARM pricing at 4.75% with a full point charged. You’d be crazy to go with the ARM.

Over at Citizens Bank, they’re advertising a 30-year fixed for 3.375% with .50% discount points. Meanwhile, their 7/1 ARM features the same exact rate with .125% discount points.

So slightly cheaper in terms of closing costs, but the same exact rate. It wouldn’t make much sense for most folks to go with the ARM unless they absolutely knew they’d be selling before those seven years were up.

And right now, there’s not a whole lot of certainty in terms of what’s next for anyone.

Some mortgage lenders aren’t advertising or possibly even offering ARMs at the moment, including Better Mortgage and Guaranteed Rate.

Navy Federal seems relatively normal, with their 30-year fixed 2.875% with 1.25 points, and their 5/5 ARM pricing at 2.375% with 0.25% points.

That’s a discount of a half a percent, which is more of what you’d expect to see based on the risk profiles of both loan programs. This might be because they keep the loans they originate.

At Quicken Loans, you can get a slight discount on a 10-year ARM vs. a 30-year fixed, 3.125% instead of 3.375%.

Then there’s USAA, which is advertising a 30-year fixed VA loan for 3.50% with negative mortgage points of 0.375%, and a 5/1 ARM with “APR typically around 3.500%.” You have to call to get the scoop, but it doesn’t sound much cheaper.

Lastly, Wells Fargo is offering a 5/1 ARM for 3.625%, and a 30-year fixed for a cheaper 3.375%.

So again, you’d be better off taking the 30-year fixed, not only because the interest rate is lower, but it’s also fixed for the full mortgage term.

It’s All About the Plain Vanilla Home Loan Right Now

  • Mortgage lenders are very skittish at the moment like all other businesses
  • As such they’re sticking to their safest products like the 30-year fixed while also tightening underwriting standards
  • This is partially because it’s easier to sell these types of loans on the secondary market to investors
  • Expect it to be more difficult to find a home loan with exotic features for the foreseeable future

In summary, mortgage lenders are grappling with a lot of uncertainty, just like everyone else thanks to the coronavirus (COVID-19).

And when that happens, they flock to the safety and security of the 30-year fixed, similar to how investors flee the stock market and head toward government bonds, which are guaranteed to be paid back.

Speaking of being paid back, the Fed’s QE4 program targets agency mortgage-backed securities, such as those backed by Fannie Mae and Freddie Mac.

At the moment, banks and lenders are eschewing anything that isn’t super vanilla, aka basic and low-risk.

Those who are offering ARMs, jumbo loans and other traditionally riskier products are charging a premium in many cases since they don’t have the benefit of the Fed as a buyer.

Others are just removing them from their product menu, perhaps until the dust settles.

It’s reminiscent of the mortgage crisis that took place in the early 2000s, when lenders only originated boring old fixed-rate mortgages and ditched all the aggressive option ARMs, interest-only loans, and so on.

To make matters worse for some borrowers, they’re also upping minimum credit score requirements and getting tougher with their underwriting, whether it’s a lower max DTI ratio or a lower max loan-to-value ratio (LTV).

The name of the game is less risk, so if you’ve got a questionable loan scenario, it might be difficult to get funding right now.

Hopefully this is a short-term phenomenon, but no one knows for sure how long it will last.

Read more: What mortgage has the best interest rate?

Source: thetruthaboutmortgage.com

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Here’s a good sign mortgage rates might be moving even lower than they already are.

Pontiac, Michigan-based United Wholesale Mortgage (UWM), which refers to itself as the #1 wholesale lender in the nation, has launched an exclusive new program that offers mortgage rates as low as 1.99% on the 30-year fixed.

That’s basically the lowest rate in history on the popular loan program, and a direct jab at local competitor Quicken Loans, whose CEO recently said 30-year fixed mortgage rates wouldn’t fall below 3%.

UWM CEO Mat Ishbia announced the new loan program, known as “Conquest,” in a Facebook Live post this morning. Let’s learn more about it.

Conquest: What’s in a Name?

  • Exclusive program designed to help mortgage brokers win new business
  • Offers “significantly better pricing” than UWM’s other offerings
  • Mortgage rates range from 1.999% to 2.875% on the 30-year fixed
  • Rates may be even lower (or higher) based on mortgage market conditions

First off, UWM is a wholesale-only lender, meaning they don’t work directly with the public. Instead, they work with mortgage brokers, who are consumer-facing liaisons.

So if you want a loan with UWM, you’d need to hook up with a broker who is approved to work with UWM.

Anyway, the new Conquest program was basically launched to grab more market share as UWM goes head-to-head with Quicken Loans for nation’s largest lender.

While Quicken is #1 thanks to a recent stellar first quarter, UWM hasn’t been far behind lately.

And Ishbia didn’t mince words this morning, saying, “Conquest is about domination.”

In other words, he launched the program in an attempt to become #1 by taking back borrowers from competing lenders.

He said if you lost a loan two months ago, or even two weeks ago, the goal is to go get it back via Conquest.

Apparently, February, March, and April were their best months of all time, so they’re already in a great spot to fight for the overall lead.

And Ishbia sees the purchase market coming on strong in June, meaning a product that differentiates could separate them from the crowd and keep home buyers coming back.

Who Is Eligible for a 1.99% Mortgage Rate via Conquest?

  • Conventional home loans only (Fannie Mae/Freddie Mac)
  • No government loans (FHA/VA/USDA)
  • Home purchase loans and rate and term refinances
  • No cash out refinances
  • Primary and second homes only (no investment properties)
  • Must obtain financing via a mortgage broker who works with UWM
  • Borrower must not have recently closed a refinance through UWM (in the past 18 months)
  • Max rate lock period of 22 days

The program went live on May 13th, and per Ishbia, rates have only gotten better compared to what was on the rate sheet since then.

However, there is a range of rates depending on loan characteristics, so mortgage broker partners may see interest rate options of 1.99%, 2.25%, 2.50%, 2.75%, and so on, with the lowest available to their best borrowers.

Remember, rates will always vary based on personal loan attributes, market movements, and so on.

He expects competitors to follow suit and offer similar rates, or even lower rates. But Conquest isn’t just about good pricing, it’s also supposed to deliver an excellent customer experience.

As such, it’s well-suited for brokers who can close loans fast, as the max rate lock period is just 22 days. And lock extensions on the program will be “very expensive.”

Ishbia said the best brokers they work with are closing loans in around nine days, so the 22-day rate lock period is apparently plenty long.

In terms of who’s eligible, it’s only available on home purchase loans and rate and term refinances. No cash out is permitted due to the recent turmoil in the mortgage market.

Additionally, it’s only for Fannie and Freddie conventional loans, no government loans like FHA, USDA, or VA.

Those with a VA loan can check out the VA Conquest loan program instead.

It is available on both primary residences and second homes, but not investment properties.

And as a borrower, you must not have closed a rate and term refinance in the past 18 months.

Ishbia said he expects Conquest to account for roughly 50% of their business volume.

Separately, he announced that the company removed overlays on conventional loans, though a 50% max DTI still applies to government loans.

In summary, this is great news for borrowers, whether they use UWM or not, because it means mortgage rates are likely heading even lower than they are today.

That’s due to the Fed continuing to buy mortgage-backed securities, namely 2% coupons, which is increasing their value and driving down rates.

It appears UWM is just trying to get a head start on the competition by marketing this new low-rate environment as a unique product.

Update: They now offer a 15-year fixed Conquest rate as low as 1.875%!

Source: thetruthaboutmortgage.com

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Today we’ll take a hard look at San Diego, CA-based mortgage broker “Grander Home Loans,” which has some of the best customer reviews I’ve come across.

On all the major ratings websites, they have perfect 5-star reviews, which is a huge testament to their goal of putting the customer first.

At the same time, they say they offer the best combination of mortgage rate, monthly payment, and overall savings.

So it appears you can get the best of both worlds, responsiveness and a competitively-priced mortgage, without sacrificing a thing.

What’s more, they can shop your home loan on your behalf with their many wholesale lender partners so you don’t have to. Read on to learn more.

Grander Home Loans Fast Facts

  • Mortgage broker that offers home purchase loans and refinances
  • Founded in 2014, headquartered in San Diego, CA
  • Currently licensed in nine states nationwide
  • One of only seven LendingTree Certified Lenders nationwide

Grander Home Loans, Inc. is a mortgage brokerage that offers home purchase loans and mortgage refinances.

This means they connect home buyers and existing homeowners with their wholesale lender partners.

The company has been around since 2014 and is headquartered in San Diego, California in the Mission Valley area.

Their claim to fame, other than having perfect customer reviews, is the fact that they’re one of just seven LendingTree Certified Lenders.

Such lenders have proven that they consistently provide customer satisfaction that is absolutely top notch.

At the moment, they’re licensed in nine states, including Alaska, California, Colorado, Florida, Hawaii, Idaho, Montana, Oregon, and Washington.

It’s unclear if they plan to expand, or simply focus on the states they already do business in.

Aside from their San Diego headquarters, they have an office in Lanai City, Hawaii, which is located on the island of Lanai.

How to Apply with Grander Home Loans

Because they’re a mortgage broker, the loan application process may vary depending on which wholesale partner you wind up with.

But they’ll likely start by providing you with a mortgage rate quote and ask you to electronically complete a loan application and eSign disclosures.

They have a secure upload form on their website that allows you to submit supporting documentation, such as tax returns, bank statements, and so on.

Once submitted, you’ll be able to use this same portal to satisfy any prior-to-doc conditions that are required to close your loan.

They say they provide “regular loan updates and progress reports” throughout the loan process to keep you informed and in the know.

And because customer satisfaction is their number one goal, you should be partnered with a very responsive lending team.

To that end, Grander says it promptly responds to emails and returns phone calls, a common gripe in the mortgage space.

This is especially useful for first-time home buyers and those who have never refinanced, where a little hand-holding goes a long way.

Available Loan Programs at Grander Home Loans

  • Home purchase loans
  • Refinance loans: rate and term, cash out, streamline
  • Conforming loans backed by Fannie Mae and Freddie Mac
  • High balance loans (those that exceed conforming limit)
  • Jumbo home loans up to $5 million loan amounts
  • FHA loans
  • VA loans
  • Fixed-rate mortgages: loan terms between 8 and 30 years
  • Adjustable-rate mortgages: 5/1, 7/1, and 10/1 ARM

When it comes to product choice, Grander Home Loans has lots of loan programs to choose from, including the ability to choose a loan term from 8 to 30 years.

This could allow you to avoid resetting the clock when refinancing, a great way to stay on track if paying your mortgage in full is a priority.

They also offer core first-time home buyer programs, such as Fannie Mae and Freddie Mac’s 97% LTV offerings, along with the FHA’s 3.5% down product.

Those with not-so-great credit can take advantage of an FHA loan with credit score minimums of just 550.

If you’re active duty or a veteran, you can take advantage of a VA loan that requires no money down.

Those purchasing a home or refinancing a mortgage in a more expensive region of the country shouldn’t have any issues thanks to their high balance and jumbo loans, with loan amounts as high as $5 million.

For those sitting on a ton of home equity, they allow cash out up to $1 million.

They lend on all common property types, including single-family homes, vacation homes, condos/townhomes, and 2-4 unit investment properties.

The only major loan program they seem to be missing is USDA loans, which are reserved for home buyers and homeowners in rural areas.

Grander Home Loans Rates

The only area where I wish I knew more is their pricing and fees. They say right on their homepage that they “offer the best combination of rate, payment, term, and overall savings.”

But they don’t post daily mortgage rates on their website, or a list of lender fees that must be paid.

Despite this, my assumption is that they are very competitively priced because mortgage brokers often are, and they have stellar customer reviews.

I doubt they’d have incredible reviews if their pricing was high, or even just so-so.

They also have the advantage of shopping your loan with multiple wholesale lenders at once, instead of simply looking within.

Still, take the time to haggle and negotiate with them and gather mortgage rate quotes from other banks, lenders, and brokers.

Remember, you should compare mortgage brokers too, even if they can shop for you with their partners.

Also be sure to take into account any lender fees, such as a loan origination fee, or required mortgage points for a given rate.

The mortgage APR should give you the complete picture, which you can then compare with other companies during your home loan search.

Grander Home Loans Reviews

Over at LendingTree, where they are just one of seven Certified Lenders, they have a perfect 5-star rating out of a possible 5 from about 300 customer reviews.

Additionally, 100% of former customers recommend them to others, which is a great sign if you want a solid mortgage experience.

With regard to the Certified Lender status, one of the requisites is “providing exemplary service to LendingTree consumers,” while having at least half their staff certified with the company.

Grander Home Loans also achieved “President’s Club” status back in 2020, which is “presented to an elite group of loan officers” based on a commitment to customer excellence and LendingTree best practices.

They’ve also got a perfect 5.0-rating from about 250 Google reviews, which is quite impressive given the volume.

Beyond that, they also have a perfect 5-star ratings on Customer Lobby, Yelp, and Zillow.

On aggregate, they seem to have achieved perfection from a customer satisfaction standpoint.

To sum things up, Grander Home Loans is one of the highest-rated mortgage companies I’ve come across, so if you value customer service, they could be a great choice.

They also operate as a mortgage broker, which means they should offer a hands-on approach and a wide array of loan programs and mortgage rates to choose from.

This could serve both existing homeowners looking to refinance and prospective home buyers, the latter of which may need more guidance than a big bank can offer.

Grander Home Loans Pros and Cons

The Good Stuff

  • Say they offer competitive pricing
  • Can shop your loan with multiple lenders because they’re a broker
  • Lots of loan programs to choose from
  • Perfect 5-star customer reviews across all ratings websites
  • BBB accredited business since 2015
  • LendingTree certified lender (one of just nine nationwide)
  • Licensed to do business in the state of Hawaii

The Maybe Not

  • Only licensed in nine states at the moment
  • Do not offer USDA loans

Source: thetruthaboutmortgage.com

Apache is functioning normally

Now it’s time to take a look at the top mortgage lenders in Florida based on 2021 volume.

The Sunshine State is the biggest mortgage market outside of California, with about a 7% share of the national market.

In 2021, roughly $350 billion in home loans were originated there during what was a banner year for mortgage lenders.

Let’s take a look at which lenders dominated the state, broken down by different categories.

As I always say, biggest doesn’t necessarily mean best, but it’s good to know who the players are.

Top Mortgage Lenders in Florida (Overall)

Ranking Company Name 2021 Loan Volume
1. Rocket Mortgage $22.4 billion
2. UWM $18.6 billion
3. Wells Fargo $16.7 billion
4. Pennymac $10.6 billion
5. Chase $10.1 billion
6. Freedom Mortgage $8.7 billion
7. Caliber Home Loans $8.5 billion
8. loanDepot $7.4 billion
9. Newrez $6.9 billion
10. Truist $6.5 billion

Unsurprisingly, Rocket Mortgage was the top mortgage lender in the state of Florida last year, per HMDA data visualized by Richey May.

I say that because they are also #1 nationally and have been for a while now.

They are also the top lender in most states throughout the nation, other than a few like Minnesota and Nebraska.

Anyway, Rocket (formerly known as Quicken Loans) managed to fund $22.4 billion in Florida last year, which is about a six percent market share.

Per usual, they beat out their local rival United Wholesale Mortgage (UWM), which originated $18.6 billion.

Coming in third was Wells Fargo with $16.7 billion, impressive given their ongoing mortgage scandals.

Big correspondent lender Pennymac, which was created by Countrywide executives, came in fourth with $10.6 billion.

Completing the top five was Chase with $10.1 billion in funded home loans during the year.

Others in the top-10 list included Freedom Mortgage, Caliber Home Loans, loanDepot, Newrez, and BB&T Bank, now known as Truist thanks to their merger with SunTrust.

Unlike the top mortgage lenders in California, only three of the top 10 were depository banks, with the rest nonbank lenders.

That’s an interesting takeaway as lenders will face a much tougher year in 2022 thanks to higher mortgage rates.

Top Mortgage Lenders in Florida (for Home Purchases)

Ranking Company Name 2021 Loan Volume
1. UWM $10.3 billion
2. Wells Fargo $9.6 billion
3. Chase $5.5 billion
4. Caliber Home Loans $5.3 billion
5. Rocket Mortgage $5.2 billion
6. Pennymac $5.0 billion
7. CrossCountry Mortgage $4.5 billion
8. U.S. Bank $3.8 billion
9. Newrez $3.4 billion
10. Amerihome Mortgage $3.3 billion

Now let’s fine-tune the list to only look at home purchase loans, those reserved for home buyers as opposed to existing homeowners.

Topping this list was UWM, whose $10.3 in home loan volume beat out Wells Fargo’s $9.6 billion.

As seen above, that pair held the second and third spots in the overall list, with Rocket falling out of the top four on this list.

Chase gained a couple spots in the home purchase list, rising to third with $5.5 billion, well below the two heavy hitters.

Similar volume was seen by Caliber Home Loans with $5.3 billion, and Rocket Mortgage with $5.2 billion.

The rest of the best included Pennymac, CrossCountry Mortgage, U.S. Bank, Newrez, and Amerihome Mortgage.

This list will be increasingly important as the mortgage market shifts toward purchase lending.

For context, the refinance share of mortgage applications hit 29.6% last week, per the Mortgage Bankers Association. So lenders will want to focus on purchase business moving forward.

Top Mortgage Lenders in Florida (for Home Refinances)

Ranking Company Name 2021 Loan Volume
1. Rocket Mortgage $16.8 billion
2. UWM $8.3 billion
3. Freedom Mortgage $7.1 billion
4. Wells Fargo $6.5 billion
5. Pennymac $5.6 billion
6. loanDepot $4.6 billion
7. Nationstar (Mr. Cooper) $3.7 billion
8. Newrez $3.5 billion
9. Chase $3.5 billion
10. Caliber Home Loans $3.2 billion

While Rocket lost out to UWM in the home purchase lending list, they reclaimed the top position when it came to mortgage refinances.

The Detroit-based lender originated $16.8 billion in refinance loans in Florida last year, more than double UWM’s $8.3 billion.

In third was Freedom Mortgage with $7.1 billion, which was the top VA loan lender in the country.

Wells Fargo also managed to grab the fourth spot here with $6.5 billion, while Pennymac snagged fifth with $5.6 billion.

Others in the top-10 included loanDepot, Nationstar Mortgage (now Mr. Cooper), Newrez, Chase, and Caliber Home Loans.

Chase and Caliber were pretty low on the refi list, illustrating their focus on home purchase lending.

Top Mortgage Lenders in Jacksonville

Ranking Company Name 2021 Loan Volume
1. Rocket Mortgage $1.9 billion
2. Wells Fargo $1.9 billion
3. UWM $1.4 billion
4. Pennymac $992 million
5. U.S. Bank $953 million
6. Freedom Mortgage $921 million
7. VyStar Credit Union $715 million
8. loanDepot $631 million
9. Truist $559 million
10. Bank of England $544 million

Top Mortgage Lenders in Miami

Ranking Company Name 2021 Loan Volume
1. Wells Fargo $2.7 billion
2. UWM $2.5 billion
3. Chase $1.9 billion
4. Rocket Mortgage $1.8 billion
5. Caliber Home Loans $1.5 billion
6. Paramount Residential $1.2 billion
7. Bank of America $1.1 billion
8. Newrez $872 million
9. loanDepot $831 million
10. Citibank $778 million

Top Mortgage Lenders in Tampa

Ranking Company Name 2021 Loan Volume
1. Rocket Mortgage $3.4 billion
2. UWM $3.0 billion
3. Wells Fargo $1.9 billion
4. Caliber Home Loans $1.8 billion
5. Pennymac $1.7 billion
6. Freedom Mortgage $1.6 billion
7. Chase $1.2 billion
8. Truist $1.1 billion
9. Newrez $1.1 billion
10. loanDepot $1.0 billion

Should You Use One of the Largest Mortgage Lenders in Florida or Go Local?

Now aside from all the lenders mentioned, there were dozens more that originated several billion in home loans last year in the state of Florida.

That made them big names, despite not making the top-10 rankings. Examples include FBC Mortgage, The Mortgage Firm, and many others.

So if you want to get your mortgage from a big name, you could still do so without using one of the companies listed above.

At the same time, you might be perfectly happy going with a Florida-based credit union or a local mortgage broker.

At the end of the day, everyone has different preferences that will dictate where they get their home loan.

None of these options are necessarily better than others, they’re just different, as long as the company is financially sound and competent.

The only disservice you could do is not take the time to speak to several different lenders before deciding on one.

Comparison shopping is an absolute must when obtaining a mortgage, so be sure to put in the time whichever company you choose.

(photo: Marcin Wichary)

Source: thetruthaboutmortgage.com

Apache is functioning normally

This story is from Karl Boericke. He is the author of The Frugal Berry, money-saving tips of all kinds for home, office, and small business.

In 1990, I was honorably discharged from the Navy and quickly found a job in an electronics manufacturing company as a technician in their test department. While renting an apartment at the time, I wondered how I would ever be able to afford to buy a house with my meager salary. I had heard that buying a duplex was an inexpensive way to live and build equity in a home.

After looking at a few mobile homes and quickly realizing the long-term downside to such an “investment,” it became clear that buying a duplex was my best realistic ticket to home ownership. I lucked out in finding a great real estate agent who gave me some sage advice. Even though I could buy a duplex with a VA loan with almost NO cash up-front, she advised me to use an FHA first-time buyer mortgage. This would cost me some money at purchase, but it would give me the possibility of using my VA loan in the future for my “next duplex.” This thought stimulated my imagination, and seemed like an impossibility at the moment, but I followed her advice and kept this long-term idea in storage for another time.

Before I bought my first duplex, I was spending $525 per month to rent a studio apartment that consisted of a kitchen, bathroom with stand-up shower, and an all-purpose room that held my bed, dresser, couch, and a small TV placed on top of my file cabinet. After buying, I was now living in luxury. I had two bedrooms, a living room, a spacious kitchen with laundry hookup, and a full bathroom. I was now renting out a one-bedroom apartment below me for $425 per month, and my mortgage payment was $653 per month, which included real estate taxes, mortgage interest and insurance. This meant that my effective cost of housing per month went from $525 while renting to $228 for more space and home ownership.

Twenty-five months later, I bought my second duplex. This time I used my VA loan, and had very few out-of-pocket costs at closing. I moved into this new duplex to satisfy the loan requirements, and lived there for five years before getting married and buying a single home.

At this point my duplexes were paying for themselves, generating some additional income, and building equity that didn’t suffer even in the most recent housing tumble. Anyone who has watched the movie “Pacific Heights” knows the possible downside to being a landlord. Luckily I did not watch this movie until I was a year into my second duplex.

I had a huge learning curve as a landlord, but never had to evict anyone through the legal system. Twice the tenant and I came to a “mutual understanding,” and they were out by the end of the month.

Maintenance came easy for me, but even if I had to pay contractors to take care of any issues, I still would have been saving money like crazy. The dollar figures have changed over the past 20 years or so and mortgage requirements are changing, but the investment opportunities are just the same, or even better in the current housing market.

If you are renting an apartment, living paycheck to paycheck, I highly recommend that you consider buying a duplex. It doesn’t cost anything to look, and if nothing else you will be more educated on your possible options for the future.

Source: getrichslowly.org

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It’s good to be a homeowner these days. After all, home prices are rising at an incredible pace, and have been for nearly a decade now since bottoming out.

On top of that, many of today’s homeowners hold fixed-rate mortgages with ultra-low mortgage rates, making it very affordable to own rather than rent.

Unfortunately, the same can’t be said of those looking over the fence, or sitting on the fence, wondering if they too should make the move to homeowner.

One of the biggest hurdles to homeownership that continues to worsen is the pesky down payment.

And as property values increase, so too does the minimum amount required to get a mortgage, assuming a down payment is needed, which it often is unless you’re taking out a USDA loan or VA loan.

This has made it more and more difficult for renters to become homeowners, despite mortgage rates being at/near all-time lows.

It also highlights the fact that low mortgage rates, while certainly great, aren’t a be-all, end-all solution to affordable housing.

Home Price Gains Outpace Mortgage Rate Discounts

  • Median monthly mortgage payment on an existing single-family home increased to $1,059 in Q3
  • That number was up from $1,019 in the second quarter and $1,032 in Q3 2019
  • Mortgage payments accounted for 15.6% of income in Q3 based on median income of $81,477
  • That was up from 14.8% in the second quarter unchanged from a year ago

In the National Association of Realtors (NAR) latest statistical release, they noted that the median existing single-family home price surged 12.0% on a year-over-year basis to $313,500.

These home price gains were seen all throughout the country, with double-digit year-over-year increases in the West (13.7%), Northeast (13.3%), South (11.4%), and the Midwest (11.1%).

Meanwhile, home prices are growing four times as fast as median family incomes, which have only ticked up about 2.9%.

Still, with mortgage rates so low at the moment, the monthly mortgage payment on an existing single-family home has only increased to $1,059 from $1,019 a quarter earlier and $1,032 a year ago.

For most prospective home buyers and existing homeowners, this is probably incidental, and not a deal-breaker in terms of qualifying for a mortgage.

But NAR chief Lawrence Yun still remarked that “housing prices are increasing much too fast.”

Interestingly, the low mortgage rates are a double-edged sword because they’re continuing to lure buyers to market, thereby increasing demand and raising home prices in the process.

So while you might get a lower mortgage rate, you’ll pay more for the house, assuming you don’t already own it.

In fact, 65% of metro areas , or 117 areas out of 181, experienced double-digit price gains from one year ago.

Biggest Year-Over-Year Home Price Gainers

1. Bridgeport, Conn. (27.3%)
2. Crestview, Fla. (27.1%)
3. Pittsfield, Mass. (26.9%)
4. Kingston, N.Y. (21.5%)
5. Atlantic City, N.J. (21.5%)
6. Boise, Idaho (20.6%)
7. Wilmington, N.C. (20.6%)
8. Barnstable, Mass. (19.4%)
9. Memphis, Tenn. (19.1%)
10. Youngstown, Ohio (19.1%)

These are the hottest metros nationwide when measuring home price growth from the third quarter of 2019 to the third quarter of this year.

Shockingly, home values were up nearly 30% in Bridgeport, Connecticut, which certainly doesn’t sound like healthy home price appreciation.

Yun noted that home prices have “jumped” in cities that contain larger properties with more open space, a symptom of the ongoing COVID-19 pandemic.

More frightening is the continued lack of housing inventory – at the end of the third quarter there were just 1.47 million existing homes available for sale, which was down a whopping 19.2% from a year earlier.

That represented just 2.7 months at the current sales pace, as of September 2020, which tells you why it’s overwhelmingly a seller’s market still.

Sure, you can probably get your hands on a super low mortgage rate, but good luck finding a house if you don’t already own one!

Read more: Would You Rather Have a Low Mortgage Rate or Pay a Lower Price for a Home?

Source: thetruthaboutmortgage.com

Apache is functioning normally

Today we’re going to talk about a “temporary buydown,” the latest effort by the mortgage industry to provide much-needed payment relief to borrowers.

In recent months, mortgage rates effectively doubled, straining affordability and cooling the hot housing market.

These higher rates have also had a big impact on the mortgage industry, which is typically reliant on low rates to fuel its important mortgage refinance business.

Mortgage lenders understand the impact these higher rates have had on borrowers and prospective home buyers, so there’s a good chance you’ll see more of these offers pop up soon.

Let’s discuss how these buydown mortgages work, if they can save you money, and the general pros and cons.

What Is a Temporary Buydown Mortgage?

buydown mortgage

In short, a temporary buydown is a home loan that features a reduced interest rate for a temporary period of time, whether it’s one, two, or three years.

The interest rate may be 2% lower in year one, 1% lower in year two, and then the standard note rate thereafter.

An upfront cost covers these lower monthly payments, with the required funds set aside in a buydown account.

Each month during the temporary buydown period, the borrower makes a reduced monthly payment, with the additional amount released from the buydown account to cover the difference.

This makes monthly payments more affordable during the beginning of the loan term.

Typically, borrowers opt for these buydowns because they expect their income to increase in the near future. Or the buydown is offered by a home builder or home seller to sweeten the deal.

To that end, these buydowns are often paid by a home seller or builder, or perhaps a mortgage lender.

It may also be possible to apply seller concessions toward a temporary mortgage buydown.

Recently, United Wholesale Mortgage (UWM) and CrossCountry Mortgage have introduced temporary buydown programs to offset high mortgage rates.

Types of Temporary Buydown Mortgages

$400,000 loan amount with 2-1 buydown Interest Rate Monthly Payment Monthly Savings Annual Savings
Year 1 3.5% $1,796.18 $474.98 $5,699.76
Year 2 4.5% $2,026.74 $244.42 $2,933.04
Year 3-30 5.5% $2,271.16 $0 $0

2-1 Buydown

There are several buydown loan options out there, with the “2-1 buydown” perhaps the most common.

As the name suggests, it lowers your interest rate by a full 2% the first year, and 1% the second year.

For example, if you qualified for a rate of 5.5% on a 30-year fixed, your interest rate in year one would be 3.5%.

In year two, your interest rate would rise to 4.5%. And in year three (and beyond) you’d pay the full note rate of 5.5%.

As seen above, a homeowner would have a payment of $2,271.16 per month on a 5.5% mortgage with a $400,000 loan amount.

During year one, they’d save $474.98 per month and $5,699.76 annually.

During year two, they’d save $244.42 per month and $2,933.04 annually.

That’s about $8,600 total, which would need to be earmarked to cover the buydown cost over those two years.

3-2-1 Buydown

There is also a “3-2-1 buydown,” which is perhaps less common given the enormous expense involved.

This type of buydown lowers the interest rate by 3% the first year, 2% the second year, and 1% the third year.

After that, your mortgage rate returns to the note rate for the remainder of the loan term.

So if the note rate were 5.5%, you’d be looking at 2.5%, 3.5%, and 4.5% in years 1-3.

1-0 Buydown

Going the opposite way, you might come across a “1-0 buydown,” which is simply a 1% reduction the first year.

So if the note rate were 5.5%, you’d get a year at 4.5% before the mortgage reverted back to 5.5% for the remainder of the loan term.

In mid-September 2022, Rocket Mortgage launched its so-called “Inflation Buster,” a 1-0 buydown that provides customers with a reduced interest rate during the first 12 months.

For example, instead of a rate of 5.75%, they might get a rate of 4.75% for the first year, with Rocket covering the difference in monthly payment automatically.

temporary buydowns

As you can see, the 2/1 buydown loan is most popular, followed by 1/0, and 3/2/1, per data from Black Knight and Optimal Blue.

Temporary Buydown Rules

Note that temporary buydown periods typically can’t exceed three years. So the options above will likely be the only terms available.

Additionally, the annual increase in mortgage rate is generally capped at 1%, probably to avoid payment shock.

As noted, borrowers still need to qualify at the full note rate in most instances, unless a borrower is expected to see a large increase in future income (for certain loan types).

Buydowns are also only permitted on certain property types, such as primary residences and second homes, with investment properties often prohibited.

But can be used in conjunction with an FHA loan, VA loan, or conforming mortgage backed by Fannie Mae or Freddie Mac.

It may be possible to use a temporary buydown on an adjustable-rate mortgage with the VA or Fannie/Freddie, but not the FHA.

The buydown funds are also not refundable unless the mortgage has been paid off ahead of time, in the case of a refinance or home sale.

If this were to happen, the proceeds would typically go toward paying off the mortgage or be returned to the borrower/lender. Be sure to ask about this!

Mortgage Buydown Pros and Cons

While receiving a reduced mortgage rate the first couple years sounds nice, the upfront cost generally equals the savings.

In other words, you’re not really saving any money, you’re simply allocating funds in a different manner.

Basically, paying upfront instead of monthly, though if someone else is footing the bill, it can be considered a money-saving move.

Also note that mortgage lenders typically still require you to qualify at the actual note rate. So if the post-buydown rate is 5.5%, you need to qualify at that rate, even if you get a 3.5% rate in year one.

In the past, some underwriters may have allowed a lower qualifying rate, but that became a big no-no after the housing crisis in the early 2000s (VA loans might be the exception).

So what’s the point then? Well, as noted, if a third party is covering the cost of the buydown, why not take it?

Or if you have extra funds from a home builder or seller that can’t be used otherwise, or you don’t want to use them toward say the down payment or other closing costs.

But perhaps a better alternative is paying mortgage discount points, which result in a lower interest rate for the entire loan term. This is known as buying down your rate, on a permanent basis.

For example, you might pay one point upfront for an interest rate that is .375% lower for the entire 30-year loan term.

Another option is to go with an adjustable-rate mortgage that offers a fixed-rate period the first five or seven years (5/1 ARM or 7/1 ARM). You actually save money via a lower interest rate.

And in the case of discount points, save money once the breakeven period has passed.

Read more: Temporary vs. Permanent Mortgage Buydowns: Which to Choose and Why

Source: thetruthaboutmortgage.com