by SupremeLending | Jul 17, 2024
Download a copy of the refinance checklist here.
If you’re considering refinancing* your mortgage, there are several ways you can prepare beforehand to ensure a smooth, timely transaction. The refinancing process requires careful planning and organization, starting with gathering the necessary documentation. Just like applying for a traditional mortgage, lenders will require several documents to refi your loan. They’ll need to review your existing mortgage, finances, debts, and capacity to repay the loan. Here’s a general breakdown of what you’ll need to prepare along with a refinance checklist.
Understanding Your Goals of Refinancing
To refinance an existing mortgage essentially involves replacing it with a new one. The most important step of refinancing is to understand the outcome of your new home loan. Whether you’re looking to change the loan term, reduce the interest rate, or take out cash from your home equity, using a refinance calculator can help you get an estimate of associated costs and new monthly payment.
Refinance Checklist
When you’re ready to begin the refinancing process, it’s time to collect the documents needed to refinance. These include details to help lenders verify your income, current mortgage, debts, assets, and other documents depending on individual situations. Here’s a refinance checklist of basic documents to help guide you in preparing to refinance.
Income Documents
- Pay stubs, past 30 days
- W-2s, past two years
- Tax returns, past two years, if self-employed
- Profit and loss statement, if self-employed
- Social security, pension, disability, or other income verification, if applicable
Home and Mortgage Documents
- Mortgage statement
- Homeowners insurance declarations page
- Homeowners association (HOA) statements, if applicable
Identification
- Driver’s license or state-issued I.D.
- Social Security card
Debt Statements, If Applicable
- Credit card statements
- Student loan balance
- Car loan balance
- Personal loan balance
- Home equity loan
Asset Documents
- Bank statements (checking and/or savings accounts)
- Investment account statements
- Retirement account statements
- Proof of any large deposits or gift funds, if applicable
- Other asset statements
Other Situational Documents, If Applicable
- Bankruptcy documentation
- Divorce decree
- Child support or alimony payments
- Credit or employment gap explanation letter, if requested
- Proof of any rental income collected from investment properties
Simplify Your Refinancing with Supreme Lending
Navigating the refinancing process may seem overwhelming at first, but with Supreme Lending by your side, our experienced mortgage professionals can help guide you every step of the way. From ensuring you gather all necessary documents on the refinance checklist to providing timely updates on your loan status, we’re committed to providing a seamless mortgage experience.
Ready to take the next step in refinancing? Contact your local Supreme Lending branch to get started.
*By refinancing an existing loan, total finance charges may be higher over the life of the loan.
by SupremeLending | Jul 11, 2024
Are you interested in investment property loans, but not sure where to begin? Investing in real estate may offer exciting and rewarding opportunities, including rental income. In fact, HousingWire reported that investment returns for single-family rental homes are expected to rise in 2024 due to rent increasing quicker than home prices.
As you can imagine, financing an investment property differs from securing a traditional mortgage for a primary residence. Here’s an overview of investment home financing, unique aspects of investment property loans versus traditional mortgages, and other considerations. Additionally, discover highlights from Supreme Lending’s investment mortgage options.
What Is Investment Property Financing?
Investment property loans are specialized mortgages designed to finance the purchase, renovation, or refinancing* of properties intended for investment purposes. There are several mortgage options to finance investment homes, such as DSCR loans and Conventional options. Common investment properties may offer short-term rentals, fix and flip, or longer-term ventures.
*By refinancing an existing loan, total finance charges may be higher over the life of the loan.
Types of Investment Properties
Eligible properties for investment financing can vary depending on the lender and the mortgage program. However, common property types include single-family residences, townhomes, 2-4 unit properties, and condos.
What’s the Difference Between Investment Property Loans and Primary Home Loans?
Investment properties may require a higher down payment due to potentially higher lending risk versus a primary home. Unlike a primary residence, an investment property is not occupied by the borrower. Additionally, lenders often require a higher credit score for investment loans than other mortgages such as FHA loans, which are designed for primary residences.
Supreme Lending’s Popular Investment Property Loans
- DSCR Loans. Debt Service Coverage Ratio (DSCR) financing is intended specifically for investors looking to purchase income-generating properties. Lenders review the property’s ability to generate adequate income to cover the mortgage payments. This means no personal employment verification or income analysis is required.
- The RISE Program. Supreme Lending’s RISE (Real Estate Investment Strategy and Expansion) loan is a DSCR option that offers flexible financing with competitive rates and terms. A key feature includes no limit to the number of investment properties and eligible Foreign National borrowers are accepted.
- Conventional Investment Property Loans. Investors may opt for Conventional financing for a lower down payment requirement and credit score minimum. This could also be a good option for first-time buyers to get their foot in the door of real estate investing.
- The Investment Edge Program. Supreme Lending’s Investment Edge is a Conventional option that frequently offers more competitive rates if the property meets additional criteria. This includes only purchases with 75% Loan-to-Value (LTV) or lower. Standard Conventional underwriting guidelines apply.
- Bank Statement Loans. A bank statement loan can be a great alternative for self-employed borrowers looking to purchase investment properties. Borrowers can elect to use personal or business bank statements for 12- or 24-months. The more bank statements provided the better the rate.
Investment Property Financing: Conventional vs. DSCR
Here’s a side-by-side comparison of DSCR and Conventional features for investment property loans.
Investment Property Considerations
In addition to the mortgage, when looking to purchase a residential investment property, it’s important to consider other key factors that could impact your investment. Here are some considerations to keep in mind:
- Location, location, location. It’s important to find out if there’s market demand for rental properties or people moving to the area. You may consider if the property is within a sought-after school district, centrally located for accessible transportation, or near desired lifestyle amenities and entertainment.
- Property condition. Review the home appraisal and inspection to determine any issues. Evaluate any potential repairs that may be needed. If you’re planning to renovate, understand and calculate possible rehab costs.
- Property management. Be sure to determine how the investment property will be managed. Whether self-managed or through a third-party property management firm, factor in any associated costs. Additionally, consider any on-going home maintenance you may need to be responsible for to keep your investment home safe and habitable.
Investing in residential real estate is a significant move, and securing the right financing for your home is imperative. Supreme Lending is here to help you navigate the complexities of investment property loans with ease and confidence. Whether you’re a seasoned investor or just starting out, our team of experienced mortgage professionals is ready to assist you every step of the way. Contact your local branch today to get started.
by SupremeLending | Jul 8, 2024
Learn about Supreme Lending’s BEYOND Program, an ITIN Loan Option.
Did you or someone you know just miss out on becoming eligible for a mortgage? Supreme Lending may have the solution with the BEYOND mortgage program, commonly known for being an ITIN loan option. However, it’s so much more than that!
Whether a gig worker, recent college graduate, or multi-generational family, the BEYOND program provides more opportunities for prospective homebuyers who may not yet qualify for an FHA loan. What is the BEYOND mortgage program, who can benefit from it, and how does it work? Read on to discover if this loan option could unlock the door to homeownership.
What Is Supreme Lending’s BEYOND Loan Program?
Essentially, the BEYOND program offers a lower down payment option for homebuyers who may be just beyond eligibility for an FHA loan, including non-permanent resident aliens with an Individual Taxpayer Identification Number (ITIN) or U.S. citizens and individuals who don’t have an established work or tax history.
Through this program, eligible borrowers can buy a primary residence with a purchase sales agreement. Then, they can refinance* down the road into direct ownership if they meet the qualifications in the future. This allows borrowers to get mortgage-ready while holding the equitable title interest.
Who Is the BEYOND Program Designed for?
Supreme Lending’s BEYOND program may be a good ITIN loan option for foreign national borrowers who do not have work authorization or a Social Security Number (SSN). However, ITIN borrowers are not the only people who may benefit from this unique loan program. Gig workers who may not have an established W2 income or newly self-employed people may qualify. Here’s an overview of borrowers who may be eligible for this program:
- Non-permanent resident aliens with an Individual Taxpayer Identification Number (ITIN); no work authorization or SSN required
- For example, ITIN mortgages typically require a higher down payment of 10-20%, so this program offers a more affordable ITIN loan option
- Deferred Action for Childhood Arrivals (DACA)
- 1099 or gig workers
- Borrowers who are relocating or awaiting citizenship
- Borrowers with a new job
- College graduates; deferred student loans do not need to be included in Debt-to-Income (DTI) ratio
- Multi-generational households
- Borrowers with credit issues preventing mortgage approval
How It Works?
- The first step of the BEYOND program is simply determining if the homebuyer qualifies. They will need to meet the program guidelines and get pre-approved for the purchase price limit based on income qualifications. An important starting point is to determine if the borrower has proof of successfully making rental payments within the last year. Several other criteria will also need to be considered.
- Once approved and the buyer makes an offer to buy a qualified property, they’ll enter into a sales contract. The contact is then assigned to a third-party government entity approved by the U.S. Department of Housing and Urban Development (HUD) to purchase the home as an investment.
- The buyer must pay at least a 3.5% down payment along with additional administrative fees.
- An FHA appraisal and home inspection are required.
- The government entity buys the home using an FHA loan.
- The homebuyer also signs a seller-financing agreement with the third-party entity, which gives them a recorded equity interest in the property. This agreement acts similar to a standard mortgage or deed of trust.
BEYOND Loan FAQs
What Proof of Rental History Is Accepted?
A key requirement is for the borrower to provide proof of successfully paying rent for the past year. This could be through checks, money orders, or reviewing bank statements. Living for free with family members will not qualify.
Are There Credit Requirements?
For ITIN borrowers, no credit score is required. For non-ITIN borrowers, a minimum credit score of 600 is required.
What Form of Identification Is Needed?
The borrower will need to present two forms of unexpired government-issued identification. One must be a picture ID (i.e. driver’s license or passport). ITIN borrowers must provide proof of ITIN documentation. Valid IDs from other countries are accepted.
What Upfront Costs Are Required?
Qualified borrowers will need to pay at least the minimum down payment of 3.5% along with program administration fees and the first monthly payment.
Does the Borrower Own the House?
They will have equitable title interest, which is legal ownership. This means borrowers can benefit from any equity gains. However, the title of the home hasn’t been fully transferred. Additionally, for borrowers who do qualify on their own in the future, the loan may be refinanced* into the borrower’s name and have the title transferred.
Homeownership In Reach
With programs like BEYOND, Supreme Lending is committed to providing affordable, flexible mortgages for all. Contact your local branch to see if you may qualify and take the leap into homeownership.
*By refinancing an existing loan, total finance charges may be higher over the life of the loan.
by SupremeLending | Jun 28, 2024
Understanding How to Use a Refinance Calculator
Refinancing a mortgage can be a strategic tool for many homeowners, but determining whether it’s the right move requires careful consideration and calculation. A refinance calculator can help you understand the potential costs and benefits of refinancing. Here’s an overview of what refinancing is, common reasons homeowners may consider refinancing, and how to use a refinance calculator to get an initial idea of potential related costs.
What Is Refinancing?
Refinancing a mortgage involves replacing an existing home loan with a new one, usually with different terms. The primary goals of refinancing are to change the loan term, reduce the interest rate, or tap into your home’s equity for cash. By refinancing, homeowners can potentially lower their monthly payments, pay off the mortgage sooner, or secure funds to use for other significant expenses. A refinance calculator can help breakdown the costs of refinancing and new estimated monthly payments.
Why Refi Today?
Even in today’s higher interest rate environment, there are still several reasons people may consider refinancing.
- Shorten Loan Term. Refinancing to a shorter loan term, for example going from a 30-year to a 15-year term, can help pay off the mortgage faster and save in interest over the life of the loan.
- Change Loan Type. Switching from an adjustable-rate mortgage (ARM) to a fixed-rate can provide more stability with consistent monthly payments. Borrowers may also refinance to change from a government-insured FHA loan to a Conventional mortgage or other eligible loan type.
- Cash-out Refinancing. This option allows borrowers to use the equity they’ve built in their home and receive the difference in cash to use for other expenses, such as home renovation projects, tuition, or additional large expenses.
- Lower Interest Rates. Securing a lower interest rate can reduce monthly payments and potentially save thousands of dollars in the long term.
- Life Changes. Major life events such as divorce or death may require refinancing to remove a co-signer from a loan. It’s important for married homebuyers to understand spousal states and ownership rights.
Using a Refinance Calculator**
A refinance calculator is a useful tool to help you understand and estimate potential costs associated with refinancing your current mortgage. Here are general steps to use a refinance calculator effectively.
1. Go to Supreme Lending’s online refinance calculator at www.SupremeLending.com > Learn > Calculators > Mortgage Refinance Calculator.
2. Input Current Loan Details, including the original loan balance, appraised value, interest rate, and loan terms.
3. Enter New Loan Information, including the proposed new mortgage terms, interest rate, and closing costs.
4. Calculate Monthly Payments. With the provided mortgage information, the calculator will provide an estimate of your new mortgage costs and monthly payment.
5. Compare Costs and Savings. The refinance calculator can help you review potential savings and total interest paid for the life of the loan. Consider the break-even point, which is the time it takes for your savings to cover the refinancing costs.
6. Evaluate Additional Factors. Consider any pre-payment penalties or other fees that may be applied to the current loan and the impact of extending or shortening the loan term. Additionally, if you used a down payment assistance program for your initial mortgage, be sure to refer back to the agreed upon terms. In some cases, the assistance may need to be paid back if refinancing before a specified period of time.
Calculate Refinancing Costs
When using a refinance calculator, it’s important to review associated costs to get an accurate picture of whether refinancing may be beneficial. Common refinancing costs include:
- Application Fee. This fee is charged to process the loan application.
- Origination Fee. The lender may charge a fee to process and originate the loan.
- Appraisal Fee. This is the cost of having a home appraised to determine its market value.
- Title Insurance and Search Fees. These are costs associated with verifying the home’s ownership and ensuring there are no outstanding claims on the property.
- Closing Costs. Other fees and charges may be included that can typically amount to 2-5% of the loan amount.
Determine Monthly Payments
The refinance calculator can also help you determine new estimated monthly payments. By comparing your current payment and the new projected calculation, you can see the impact on your loan and plan your budget accordingly. If the new payment is significantly lower, refinancing may be a great option. If the new payment is higher due to a shorter loan term or other factors, you may need to decide if the long-term benefits outweigh the upfront refinancing costs.
Refinancing a mortgage may offer benefits, but it’s essential to understand the costs and new loan terms involved. A refinance calculator may help you make an informed decision with a comparison of your current mortgage and proposed new loan. Take a step further and get pre-qualified with Supreme Lending today. Let us help you make the most of homeownership and explore your mortgage and refinancing options.
*By refinancing an existing loan, total finance charges may be higher over the life of the loan.
**Results received from this calculator are designed for comparative purposes only, and accuracy is not guaranteed. Supreme Lending is not responsible for any errors, omissions, or misrepresentations.
by SupremeLending | Jun 26, 2024
Understanding Down Payment Assistance Programs
When it comes to buying a home, one of the most common misunderstandings is that you need at least a 20% down payment. This misconception can discourage potential buyers, especially first-time homebuyers, from pursuing their dream of homeownership. Good news – there are several low and no down payment options, including down payment assistance programs, designed to help people become homeowners without hefty upfront costs. Discover what down payment assistance is, how it works, benefits, and other lower down payment mortgage options.
What Are Down Payment Assistance Programs?
Down payment assistance (DPA) refers to programs designed to provide financial aid to help cover part or all of the down payment and, in some cases, closing costs associated with purchasing a home. These programs can significantly reduce the upfront costs of buying a home and help more people across the country buy a home.
How Does Down Payment Assistance Work?
Down payment assistance programs are often provided by state and local governments, non-profit organizations, or other entities dedicated to promoting homeownership in local communities. DPA can come in various forms, such as grants, forgivable second loans, deferred payment loans, and tax credits. Down payment assistance programs can have specific guidelines, often targeted for first-time homebuyers and lower income areas.
- Grants. These are funds that do not need to be repaid. Essentially, they are a gift to help cover a home’s down payment.
- Forgivable Loans. When a loan is forgivable, a borrower doesn’t need to repay it after a certain time period and agreed upon criteria is met. For example, living in the primary home for a set number of years.
- Deferred Payment. This refers to loans that do not need to be repaid until the home is sold, the borrower refinances, or the mortgage is paid off.
- Tax Credits. Some down payment assistance programs offer mortgage credit certificates (MCCs) that provide a direct tax credit based on the interest paid on the loan.
Common Eligibility Requirements
While loans and down payment assistance vary by lenders and program guidelines, here’s an overview of some general eligibility criteria that may be considered.
- Income Limits. Many mortgage DPA programs have maximum income limits based on family size and location. Some lenders may consider how a borrower compares to the Area Median Income (AMI).
- Credit Score. Like most mortgages, credit score is a major factor. A minimum credit score is typically required, such as 620 for FHA and VA.
- First-time Homebuyers. Several down payment assistance programs are designed specifically for first-time homebuyers or people who haven’t owned a home within the past three years. Homebuyer education may also be included with the program as well.
- Primary Residence. In general, down payment assistance is used toward owner-occupied primary residences.
- Location. Properties may also need to be in a specific geographic area or within a targeted zone for revitalization to qualify.
- Profession. Some down payment assistance programs may also target specific occupations, such as first responders, educators, or healthcare providers. These options help give back to those who serve our communities.
Benefits of Down Payment Assistance
- Affordability. Evidently, down payment assistance can greatly reduce the amount of upfront costs when buying a home. When getting pre-qualified for a DPA program, you’ll be able to determine the right programs and potential savings.
- Increased Accessibility. Many people who might not have qualified for a traditional mortgage due to lack of savings, may qualify using down payment assistance. This helps open more doors to homeownership in your community.
- Flexibility. Down payment assistance typically can be combined with various loan types, including FHA, VA, and USDA. These typically already have lower down payment requirements to begin with. Work with an experienced, knowledgeable loan officer to discuss your options and understand what you may qualify for.
Types of Assistance
Local and State Bond Programs
Many local, regional, and state governments offer down payment assistance programs. Supreme Lending is proud to partner with these types of organizations to provide a wide range of DPA options across the country. Examples include statewide programs through the Texas State Affordable Housing Corporation (TSAHC) or California Housing Financing Agency (CalHFA), and more localized options, such as the Orange County Housing Finance Authority’s First-Time Homebuyer program.
Specialized Options
Fannie Mae and Freddie Mac also have down payment assistance options, such as HomeReady® and Home Possible® that offer down payment requirements as low as 3% for Conventional loans.
Supreme Lending’s Down Payment Assistance
Through Supreme Lending’s Supreme Dream 100% financing, no-money-down program, qualified borrowers get a 30-year fixed FHA loan, followed by a fully forgivable second loan to be used toward down payment, closing costs, and pre-paids. A unique feature of this program is that no income limits are required and it can be combined with a 2-1 temporary rate buydown.
Other Low Down Payment Mortgages to Consider
- FHA loans can require down payments as low as 3.5%.
- VA loans offer qualified military Veterans 100% financing, meaning zero down payment required.
- USDA loans, guaranteed by the U.S. Department of Agriculture, offer a zero down payment requirement for properties in eligible rural areas.
- Click here for an overview of common down payment requirements broken down by mortgage type.
At Supreme Lending, we’re always looking for innovative ways to help make homeownership more affordable. Whether it’s through local bond programs, low down payment loans, or our own Supreme Dream down payment assistance.
Contact us today to explore your mortgage options and down payment assistance programs.
by SupremeLending | Jun 20, 2024
Ease into a Mortgage with a Temporary Interest Rate Buydown
In today’s mortgage market, finding ways to make homeownership more affordable is key. One effective option is a temporary rate buydown mortgage. What is a rate buydown and how can it benefit borrowers? Let’s explore how a mortgage buydown works, types of buydowns, and unique advantages of these programs – especially in higher interest rate environments. Plus, learn how Supreme Lending offers a variety of buydown options to fit unique mortgage needs, including the possibility of combining down payment assistance with a temporary rate buydown, offering more affordability for first-home homebuyers.
How Does a Temporary Rate Buydown Mortgage Work?
A temporary rate buydown mortgage allows borrowers to reduce their monthly mortgage payment with a lower interest rate for a specific period of time, generally the first one to three years of the loan term. This means lower monthly payments during the agreed upon years of the mortgage. The cost difference is covered by an upfront lump sum, typically paid by the seller, builder, or lender at closing. A portion of the funds is released from an escrow account each month to cover the interest difference.
As the name suggests, these buydowns are temporary. After the buydown period ends, the mortgage interest rate resets to the original, higher rate for the remainder of the loan term.
Types of Rate Buydowns
Temporary rate buydowns can be applied to a variety of mortgage types including Conventional, FHA, and VA loans. Additionally, there are different buydown options depending on the program and duration of the initial rate buydown.
1-Year Buydown (1-0 Buydown)
- In the first year, the interest rate is reduced by 1%.
- From the second year onward, the interest rate reverts to the original note rate.
- This option may be ideal for buyers expecting their income to increase in the near future.
2-Year Buydown (2-1 Buydown)
- In the first year, the interest rate is reduced by 2%.
- In the second year, the rate is reduced by 1%.
- From the third year onward, the interest rate reverts to the original note rate.
- This provides a more extended period of lower monthly payments, allowing more time to adjust to the higher rate.
3-Year Buydown (3-2-1 Buydown)
- In the first year the interest rate is reduced by 3%.
- In the second year, the rate is reduced by 2%.
- In the third year, the rate is reduced by 1%.
- From the fourth year onward, the rate reverts to the original note rate.
- This offers the longest period of reduced payments for affordable financing.
Benefits of Buydowns in a Higher Rate Market
Lower Initial Payments
The primary benefit of a temporary rate buydown mortgage is lower monthly payments during the early years of the loan. This can be especially beneficial in a higher-rate market, making homeownership more accessible.
Financial Flexibility
Lower initial payments can provide the flexibility needed to handle other expenses associated with purchasing a home, such as relocating costs, furnishing the new home, or making home renovations or repairs.
Gradual Adjustment
A buydown allows borrowers to ease into the full mortgage payment gradually, giving them time to adjust their budget and plan accordingly.
Possibility to Refinance* If Rates Drop
Temporary rate buydown mortgages are a great option to provide lower initial monthly payments during the specified buydown period. After that, if interest rates drop below the original note rate, the borrower may have the option to refinance to a lower rate. This may save costs in interest over the life of the loan.
*By refinancing an existing loan, total finance charges may be higher over the life of the loan.
Supreme Lending’s Buydown Options
Supreme Lending is proud to offer several buydown options to suit individual mortgage needs. Our experienced mortgage professionals can help you explore 1-year, 2-year, and 3-year buydown programs to see if this option is right for you. We may also be able to apply a temporary rate buydown with our Supreme Dream Down Payment Assistance program, making homeownership even more accessible. This combination may significantly reduce upfront costs and monthly payments in the early years of the mortgage.
To learn more about temporary rate buydown mortgages and other home financing options, contact Supreme Lending today.
