You might have heard in the news that it has become more expensive for some borrowers to obtain a mortgage. At County Bank, we believe in educating our borrowers and being fully transparent about what factors into closing costs and interest rates and we wanted to break down some of the information you may have heard.

As a result of the housing crisis in 2008, Government Sponsored Enterprises, Fannie Mae and Freddie Mac, imposed loan-level pricing adjustments, known as LLPs, which are fees charged to mortgage borrowers who obtain conventional mortgage loans. LLPA’s are calculated based on various factors, including credit score, loan to value, and type of collateral (i.e., single-family home, multi-family home, condo). LLPAs can be paid by the borrower in the form of fees added to the closing costs, or fees can also be factored into the interest rate and paid over the course of the loan.

Country Bank offers various products that do not have these LLPA fees. We would be happy to review all of our mortgage products to ensure that the one you select is best suited for your lending needs. Don’t hesitate to contact our Loan Officers with any questions; we’d welcome the opportunity to make a difference in your homebuying experience.

Click Here to learn more about our Mortgage Options.

Click Here to learn more about our Loan Officers.

Congratulations on getting to that point in life where the dream of homeownership looks more like reality. Purchasing a home is truly a difference-maker. It’s both a significant financial investment, and emotional one too. Since the mortgage process can be a bit complicated, it’s important you know what’s going on every step of the way. Here are some tips to ensure the buying of your home feels as good as finding it.

Tip 1: Find Out How Much You Can Afford

Before you even begin your search, find out what you can afford by getting prequalified with a loan officer. They should verify your income, do a credit check, and even look at bank statements to get a more accurate assessment of the loan amount you’d qualify for, taking into consideration your assets and down payment. That due diligence pays off big time, ensuring a smoother process through the underwriting team who will complete the loan preapproval.

Debt-to-income ratio

Your loan officer will come up with a projected loan amount by calculating your debt-to-income (DTI) ratio, factoring in your gross monthly income (before taxes and other deductions), and subtracting the minimum payments to your credit as reported in your credit report. The DTI is usually capped at about 42% to 45% of your income. From that number, you’ll fit in your new mortgage payment, which will include principle, interest, property taxes, homeowners’ insurance, and private mortgage insurance, if needed.

Keep in mind, there are many daily living expenses not factored into the equation, such as utilities, auto insurance, groceries, cell phone bills, gym membership, clothing, and home maintenance.

“A lot of times if you educate the borrower on that, and show them how it works, they can play around with their own debt-to-income and make sure that there’s affordability there,” said Justin Calheno, Assistant Vice President of Retail Lending for Country Bank. “You have to make a decision as a consumer and make sure that those numbers are affordable.”

Calheno has extensive experience walking customers through the mortgage process—and getting them to closing quickly. Another piece of advice he offers: If you’re shopping for a mortgage, don’t worry about inquiries to your credit report. Pulling your credit will not hurt your score. He thinks that’s probably one of the biggest myths borrowers have.

 

Tip 2: How to Prepare for the Home Loan Application Process

Once you’re prequalified, you’ll get a letter that’s good for 90 days. Now it’s time to get a real estate agent and shop for your home. Once you find a home and get an accepted offer signed by all parties involved, your loan officer will start the mortgage application. Be sure to hand over all the forms they ask of you—and quickly. Once all the documents are in and appraisal completed, your loan moves to underwriting for final approval, and then to the attorney for closing.

The more organized you are, the faster you’ll move to closing. It’s easier than ever, thanks to the convenience of online applications and electronic signatures. At Country Bank, application approvals are taking about 13 days.

“There is a direct correlation between an approval in two weeks with a borrower who provides the checklist in a day,” Calheno said. “If your file is complete and ready and can be underwritten in an hour, underwriting will grab it and issue your approval. Because it’s a full file, you’re organized, and you have provided everything in a timely manner. They want to get loans through the pipeline. If you can provide all your information in a timely manner, we will get you closed and it’s going to be a much easier process.”

 

Tip 3: A Quick Guide to Understanding the Various Types of Mortgage Loans

The home you choose says a lot about you. Same with your mortgage. While most mortgages are basic conventional loans, requiring about 5% down, there are other options available based on your specific needs and goals.

If you’re building a home, you’ll likely find your financing fit with a construction-to-permanent loan, which offers many cost-savings. For instance, Country Bank lets customers lock in their rate at the start of the application process and have only one closing. The bank offers up to 90% financing with PMI approval, as well as the option for borrowers to self-contract their own construction at 70% of the total acquisition price. And if you just want to buy some land and hang onto it for a while before building, there’s a land loan.

“Some people aren’t ready to build yet, but that piece of land’s out there and they want to grab it before it gets off the market,” said Jason Mourao, Retail Loan Officer with Country Bank. “They’re able to do that with the land loan. Then, when they go to build and get the construction loan, that land loan will roll into the construction loan itself.”

There are specific loans for borrowers wanting to invest in property, people who have moderate incomes and need down payment assistance, first-time homebuyers, and those who simply want affordable housing in Massachusetts. Whatever your need, you’ll likely find the financing to support you, especially if you partner with a loan officer who takes the time to understand you and go through all your options with you.

 

Tip 4: How to improve your credit score?

Your credit score is a number that reflects your creditworthiness. Borrowers with strong credit scores (higher the better) are usually offered the lowest interest rates, while those with low scores are offered the most expensive rates. Improving your number means more money in your pocket, literally.

A good rule of thumb: Maintain open lines of credit, make your payments on time, and don’t max out on your debt.

“I always recommend people to get a small credit card or to rotate them every single month, use them for small things like grocery bills or gas or anything like that and just pay it off at the end of the month,” Mourao said. And don’t max out all your cards. “I’ve had borrowers that have never missed a payment, but they’re maxed out on their debt, maxed out on their credit cards. I’ve seen those credit scores lower than a borrower who has missed payments but is not maxed out.”

You can get a free credit report once per year from each of the three major credit bureaus. This is a great way to monitor your credit, spot inaccuracies, detect identity theft early, and qualify for competitive financing terms on your home loan.

 

Tip 5: How much of a down payment is needed to buy a home?

Your down payment will be determined by the type of loan you choose. First-time homebuyers, for instance, may qualify for just 3% down, land loans 20% down, construction loans 10% down. If you’re purchasing a home in eligible rural areas, you can obtain 100% financing, which means $0 down payment.

It’s important you find a loan officer who wants to learn about your needs, asks questions, finds the right answers for you, and, ultimately, wants you to prosper—not just at the closing, but throughout the life of your mortgage.

 

Country Bank is an Equal Housing Lender.

Moving into your own place can be exciting and frightening at the same time. Here are a few questions worth considering when choosing your own home.

1. How much money do you have saved up?

Start with an evaluation of your financial health. Figure out how much money you have for a down payment or deposit on a rental. Down payments are typically 5 to 20 percent of the price of the home. Security deposits on rentals are usually about one month of rent and more if you have a pet. But be sure to keep enough in savings for an emergency fund. It’s a good idea to have three to six months of living expenses to cover unexpected costs.

2. How much debt do you have?

Consider all of your current and expected financial obligations like your car payment and insurance, credit card debt and student loans. Make sure you will be able to make all the payments in addition to the cost of your new home. Aim to keep total rent or mortgage payments plus utilities to less than 25 to 30 percent of your gross monthly income. Recent regulatory changes limit debt to income (DTI) ratio on most loans to 43 percent.

3. What is your credit score?

A high credit score indicates strong creditworthiness. Both renters and homebuyers can expect to have their credit history examined. A low credit score can keep you from qualifying for the rental you want or a low interest rate on your mortgage loan. If your credit score is low, you may want to delay moving into a new home and take steps to raise your score. For tips on improving your credit score, visit aba.com/consumers.

4. Have you factored in all the costs?

Create a hypothetical budget for your new home.Find the average cost of utilities in your area, factor in gas, electricity, water and cable. Find out if you will have to pay for parking or trash pickup. Consider the cost of yard maintenance and other basic maintenance costs like replacing the air filter every three months. If you are planning to buy a home, factor in real estate taxes, mortgage insurance and possibly a home owner association fee. Renters should consider the cost of rental insurance.

5. How long will you stay?

Generally, the longer you plan to live someplace, the more it makes sense to buy. Over time, you can build equity in your home. On the other hand, renters have greater flexibility to move and fewer maintenance costs. Carefully consider your current life and work situation and think about how long you want to stay in your new home.

Have questions? Feel free to leave comments or call me anytime at 800-322-8233.

– Justin Calheno – Retail Lending Business Development Officer

7 Tips for Improving Your Credit Score

An important step to finding a home, whether you’re renting or buying, is ensuring that you have a good credit history. Here are a few handy suggestions on how to improve your credit score.

1. Request a copy of your credit score report – and make sure it is correct. Your credit report illustrates your credit performance, and it needs to be accurate so that you can apply for other loans – such as a mortgage. Everyone is entitled to receive a free copy of his or her credit report annually from each of the three credit reporting agencies, but you must go through the Federal Trade Commission’s website at www.annualcreditreport.com, or call 1-877-322-8228. Note that you may have to pay for the numerical credit score itself.

2. Set up automatic bill pay. Payment history makes up 32 percent of your VantageScore credit score and 35 percent of your FICO credit score. The longer you pay your bills on time, the better your score. Avoid missed payments by setting as many of your bills to automatic pay as possible.

3. Build credit through renting. VantageScore’s scoring model, created by the three major credit bureaus, will now weigh rent and utility payment records. This will allow it to score as many as 35 million people who previously couldn’t get a credit score.

4. Keep balances low on credit cards and ‘revolving credit.’ Racking up big balances can hurt your scores, regardless of whether you pay your bills in full each month. You often can increase your scores by limiting your charges to 30 percent or less of a card’s limit.

5. Apply for and open new credit accounts only as needed. Keep this in mind the next time a retailer offers you 10 percent off if you open an account. However, if you need a new line of credit, don’t jump at the first appealing offer; compare rates and fees offered through mail solicitation, on the Internet or at your local bank.

6. Don’t close old, paid off accounts. According to FICO, closing accounts can never help your score and can in fact damage it.

7. Talk to credit counselors if you’re in trouble. Using legitimate, non-profit credit counseling can help you manage your debt and won’t hurt your credit score. For more information on debt management, contact the National Foundation for Consumer Credit (www.nfcc.org).

 

Before you can make the transition from renting your home to owning your home, you will need to have a down payment, typically 3 to 20 percent of the home’s sales price or value. Here are a few tips to help save for it:

  1. Develop a budget & timeline. Start By determining how much you’ll need for a down payment. Create a budget and calculate how much you can realistically save each month that will help you gauge when you’ll be ready to transition from renter to homeowner.
  2. Establish a separate savings account. Set up a separate savings account exclusively for your down payment and make your monthly contributions automatic. By keeping this money separate, you’ll be less likely to into it when you’re tight on cash.
  3. Shop around to reduce major monthly expenses. It’s a good idea to check rates for your car insurance, renter’s insurance, health insurance, cable, internet, or cell phone plan. There may be deals or promotions available that allow you to save hundreds of dollars by adjusting your contracts.
  4. Monitor your spending. With online banking, keeping an eye on your spending is easier than ever. Track where most of your discretionary income is going. Identify areas where you could cut back (e.g. nice meals out, vacations, etc.) and instead put that money into savings.
  5. Look into state and local home-buying programs. Many states, counties and local governments operate programs for first-time homebuyers. Some programs offer housing discounts, while others provide down payment loans or grants.
  6. Celebrate savings milestones. Saving enough for a down payment can be daunting. To avoid getting discouraged, break it up into smaller goals and reward yourself when you reach each one. If you need to save $15,000 total, consider treating yourself to a nice meal for every $5,000 saved. This will help you stay motivated throughout the process.

Many older Americans want to remain in their homes as they grow older. Here are few tips for those considering “aging in place”:

Take a hard look at your finances. Arrange a meeting with a trusted family member or friend and a banker. It’s critical to understand your financial resources, how long they’ll last and what housing options are the most cost-effective for you. Be sure to consider all costs associated with aging in place, including:

Consider a reverse mortgage. Though not for everyone, a reverse mortgage loan can provide monthly cash payments based on your home’s equity.

Assess your home and determine what modifications are necessary. While staying in your home is preferable for many, there are often design changes that must be made to ensure it’s also safe and comfortable.

Make security a priority. Older Americans are often targets for scams and other criminal behavior. Be cautious about who you allow in your home and disclose sensitive information to.

Look into community resources. If mobility is limited, look into services offered in your area. Many communities have established non-profit programs that offer transportation and food delivery to assist older Americans at a reasonable cost.

Be prepared for possible emergencies.

Reevaluate every six months to make sure all needs are being met. As you age, your needs inevitably change. Take time twice a year, or as needed, to sit down with your trusted family or friend and make sure your current living situation is still the right one.

Now that you’re settling in to your new home, there are some important things you need to consider:

1. Create a budget.

The key to a good budget is including as much information as you can, so that you can adequately prepare and plan. It’s important to keep accurate records of your spending so you can spot places to save money and know how much you can reasonably spend. The American Bankers Association’s budgeting worksheet will help you document and categorize your expenses.

2. Protect your property.

Whether you’re a homeowner or a renter, you need insurance to protect your belongings. Check with your local insurance agent, you might be able to get a discount if you have things like dead bolt locks, an alarm system, or smoke detectors, or if you already have a policy with that company, like car insurance. Also, find out if you’re in a flood zone. If you’re concerned about flooding, you will need to purchase a separate flood insurance policy. Learn more at floodsmart.gov.

3. Protect your safety.

Make sure all of the locks on your doors and windows work properly. If it makes you more comfortable, look into having an alarm system installed. Also, check your fire and carbon monoxide alarms once a month to be sure they’re working. If you have a dryer, clean the lint from the entire system, from the dryer to the exterior vent cap. Lint is extremely flammable and poses a fire risk.

4. Take your tax deductions.

Be sure you know all the tax deductions associated with your move and new home. If you use a portion of your home for business purposes or moved for a new job, you may be able to take deductions. Homeowners can deduct mortgage interest, property taxes and loans for home improvements. Call your tax advisor!

5. Make your house – or apartment – your home.

Decorating your space will make it more comfortable and personal. If you’re a tenant, check with your landlord before making major changes like painting the walls or changing the appliances. Renters should take photos of the rental space before moving in to document the existing condition and insist on a final walk-through with the landlord. If you own your home, be smart about where you invest your money on improvements to ensure you’re building equity in your home. For example, updates in the kitchen and bathroom usually provide the best return on investment.

6. Save up for a rainy day.

Although life may be sunny now, it’s a good idea to create a rainy day fund. The fund should have at least three to six months of living expenses in case you or someone in your household loses a job or becomes ill and unable to work.

Have questions? Feel free to leave comments or call me anytime at 800-322-8233.

– Justin Calheno – Retail Lending Business Development Officer

Whether you’re preparing to rent or buy, here are few housing terms you should be familiar with:

Before Buying:

APR: Short for annual percentage rate, APR is how much your loan will cost over the course of a year. This figure is almost always higher than the interest rate; because it takes into account the interest charged as well as fees or additional costs associated with the loan. Since all lenders use the same formula, it can be a more effective way of comparing mortgages rather than just the interest rate.

Closing costs/settlement fees: The costs, in addition to the price of the property, that buyers and sellers are charged to complete a real estate transaction. Costs include loan origination fees, discount points, appraisal fees, title searches, title insurance, surveys, taxes, deed-recording fees and credit report charges.

Escrow: An account held by a neutral third party (called an escrow agent) who works for both the lender and the borrower. Escrow accounts are usually required by lenders to cover property taxes and mortgage insurance. After an initial deposit, borrowers pay into the escrow monthly – usually as part of the mortgage payment.

Good Faith Estimate (GFE): An accurate estimate of fees associated with a loan provided to the customer by a mortgage lender or broker. A GFE is required by law under the Real Estate Settlement Procedures Act (RESPA). The estimate must be provided within 3 business days of applying for a loan.

Mortgage broker: An individual or company who connects borrowers and lenders for the purpose of facilitating a mortgage loan. Unlike a mortgage lender, a broker does not make the loan or service the mortgage. A mortgage broker may represent various lenders or may offer loans from one single source.

Points: Borrowers can pay a lender points to reduce the interest rate on the loan, resulting in a lower monthly payment. The cost of one point is equal to 1 percent of the loan amount. Depending on the borrower, each point lowers your interest rate by one-eighth to one one-quarter of a percent.

Before Renting:

Lease: A legal document detailing the terms under which the lessee (the renter) agrees to rent property from the lessor (the property owner). A lease guarantees use of an asset and guarantees regular payments from the lessee for a specified number of months or years.

Notice to vacate: Notification from the landlord to the tenant ordering the tenant to vacate the property. In most cases, the notification is given because the tenant either broke one of the terms of the lease or is not following through with payment of rent. The tenant is typically given 30 days to vacate the premises. Similarly, a notice to intend to vacate may be required under the lease for the tenant to notify the landlord before vacating the property.

Rental application: Filled out by a prospective tenant, which typically authorizes the landlord to conduct a credit check to determine the suitably of the individual. Often, there can be a non-refundable fee associated with the rental application.

Security deposit: Funds, in addition to rent, that a landlord requires a tenant to pay to be kept separately in a fund for use should the tenant cause damage to the premises or otherwise violate terms of the lease.