At Athena Mortgage Group, we recognize that every loan is unique and has its own story and challenges. Whether it be first time homebuyer, veteran or jumbo loan, we have the knowledge to choose the best loan product to fit your situation.
BEST FOR:
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Self-employed buyers
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Bank statement or 1099 income qualifying borrowers
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Non-owner occupied investment loans
BEST FOR:
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Veterans and active duty only
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Finance up to 110% including funding fee
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No monthly mortgage insurance.
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Cash out up to 100%
BEST FOR:
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One time close construction loans.
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Construction to permanent financing
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Renovation loans
Home
Loan options
BEST FOR:
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Good Credit Scores
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Minimum Downpayment of 3% for first time Homebuyers.
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Mortgage Insurance required down to 80%
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Typically less expensive over time
BEST FOR:
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62 years or older
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More than 50% equity in the property
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No mortgage payment for the homeowner
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Homeowner pays taxes and insurance separate.
BEST FOR:
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First time Homebuyers
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lower credit scores
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Lower down payment
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Pairs well with downpayment assistance programs.
Conventional Home Loan
Conventional Home Loan
What is a conventional loan?
A conventional loan is any loan that is not insured by the federal government. It can be conforming or non-conforming. Examples of federally insured loans are FHA, VA or USDA. A conventional loan is, typically, best for the homebuyer or homeowner who has a higher credit score. The interest rate is always higher than a federally insured loan, but with 20% equity in the property, a conventional loan does not require any type of mortgage insurance or funding fee added onto the monthly payment and/or loan amount. Conventional loans require as little as 3% down payment for a homebuyer that meets the first-time homebuyer guidelines. For any other buyer who does not meet the criteria for a first-time home buyer, the minimum down payment is 5%. Anything less than 20% down payment will require private mortgage insurance. Conventional loans are more difficult to qualify for as they have stricter requirements with higher FICO score requirements. Most lenders require a minimum credit score of 620 to qualify and even then, the rate is higher to match the risk of the lower credit score buyer, which in turn, means a higher monthly payment.
What is private mortgage insurance?
Any loan that has less than 20% equity requires private mortgage insurance. The monthly amount is calculated based on the loan amount and the loan to value. The private mortgage insurance will drop off once the loan balance reaches 78% of the original purchase price or agreed upon value at loan consummation or can be removed with a refinance and a new value showing 80% or less loan to value.
What is Loan to Value?
Loan to Value is the amount that a borrower owes on a property vs. the value of the property. So, for example, if a home is worth $100,000 and the homeowner owes $80,000, the loan to value is 80%.
FHA Home Loans
FHA Home Loans
What is an FHA Loan?
An FHA loan is a federally insured loan that is part of the U.S. Department of Housing and Urban Development. FHA, Federal Housing Administration, insures mortgages on different types of properties, but is most known for residential mortgage loans. These types of loans are best for first time homebuyers with low credit scores, limited credit and/or limited down payment funds. The interest rate for a government loan is, typically lower than a conventional loan, but quite often the higher monthly mortgage insurance rate makes up for the lower interest rate. The minimum down payment on an FHA loan is 3.5% of the purchase price.
Mortgage Insurance on an FHA Loan:
Mortgage insurance protects the lender and the borrower against any losses in the event of a foreclosure. So, for instance, if the owner of the home is unable to make the payments on the FHA mortgage and ends up having to sell or foreclose on the property, the mortgage insurance would cover the gap between what is owed on the property and what the property is finally sold for.
Mortgage insurance is required on every FHA loan, even if the loan to value is lower than 80%. It stays in the monthly payment for the life of the loan, unless the loan was originated prior to June 3, 2013 and the loan to value is less than 78%. The only way to remove mortgage insurance on an FHA loan is to refinance into a conventional loan or other type of loan that does not require mortgage insurance, such as a Non-QM loan.
The mortgage insurance on an FHA loan is collected up front as well as in a monthly premium, unlike a conventional loan where it is either up front or monthly, but not both. The monthly premiums are collected by the lender and are not refunded to the borrower when the buyer sells the home. It is just like having hazard insurance. The monthly amount is non-refundable but insures the lender and the borrower in the event of foreclosure.
How to Decide If an FHA loan is Right for You:
Here are a few key criteria to choose an FHA loan over a standard conventional loan
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Low credit scores, especially in the case of a higher loan to value. FHA is more lenient with the lower credit scores when it comes to reserves requirements, debt to income ratios and other compensating factors.
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Low down payment, combined with a lower credit score, can be expensive for a conventional loan. However, FHA will still consider a 3.5% down payment option, at a rate lower than conventional, even with the lower credit scores.
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No Additional reserves are required with an FHA loan. However, check with your lender as many lenders will add a reserve requirement as a guideline overlay.
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Great for use with Down payment Assistance. Depending on the area you are looking to buy in and income limits, FHA is a good option to pair with many down payment assistance programs. Be sure to ask your loan officer at Athena Mortgage Group about down payment options in your area.
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3 months of alimony/child support receipt – FHA only requires 3 months of receipt of alimony to qualify for a mortgage with a continuance of 36 months. Whereas, conventional guidelines require 6 months of receipt of alimony and/or child support to be able to use it for income qualifying. Be sure to check with your loan officer on the specifics of when this might be a strategy in divorce mortgage planning. Depending on the total number of months the alimony is to be received, this may be the only option to be able to qualify to purchase or refinance in a divorce.
Whatever your reason for purchasing or refinancing your home with an FHA loan, be sure to consult with a licensed loan officer to compare all types of loan options to find the best loan to fit your needs.
Whatever your reason for purchasing or refinancing your home with an FHA loan, be sure to consult with a licensed loan officer to compare all types of loan options to find the best loan to fit your needs.
Non-QM Home loans
What is a Non-QM Loan?
A Non-qualified mortgage or Non-QM loan is any loan that is not a conventional or government loan (FHA, VA, USDA) and are not regulated by the Consumer Financial Protection Bureau (CFPB). These are loans that have been designed to help borrowers that can’t meet the requirements of qualified mortgages.
Not everyone fits into the qualified mortgage box of guidelines. These types of loans help borrowers to qualify to purchase a home that might not otherwise be able to. A good example is the self-employed borrower that looks like they don’t make very much money because they have so many write offs.
Different Types of Non-QM Loans
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40 year fixed – This allows the borrower to extend the term of the loan to 40 years. This often comes with a higher interest rate that will often offset the extra 10-year term. A low loan to value and high credit score might make this loan a good option for some buyers.
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Interest Only – An interest only loan allows interest only for the first 10 years of the loan and then becomes fixed for the rest of the term of the loan. This can help lower the monthly payments for the borrower, but it does not pay down any of the principal and can result in negative equity in a downward housing market. The borrower must qualify at a fully amortized payment as well.
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Bank Statement Loan – A bank statement loan is only for self-employer borrowers that are 1099 or otherwise. It cannot be used for a w2 borrower. The lender will evaluate deposits for 12 or 24 month period and use the deposits only and reduce the total by a certain percentage based on the industry and the lender. For instance, a General Contractor may have deposits in excess of $500,000 in a 12 month period, but then the underwriter will reduce it by 25-45% to calculate the average monthly income. This varies by lender.
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DSCR – Debt Service Coverage Loan – This loan is for investor or rental properties that collect rent. It is the borrower’s ability to repay the loan based on the amount of rent that will be received on the property. It is not an income verified loan. It is based solely on the property’s ability to pay the loan.
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Asset Loans – This type of loan is based on assets only. No income is necessary if the assets are enough to carry the loan payment for a certain period of time. For conventional loans, it is the term of the loan (30 years = 360 months). For a Non-QM lender, the time period is less, most commonly as little as 60 months. For example, if a borrower has $1,000,000 in assets, and chooses to do a conventional asset loan, the total monthly payment cannot exceed $2,777/mo. For a Non-QM loan, it would be divided by 60 months and the payment cannot exceed $16,666/mo. The loan comes with a higher interest rate. But it is another option for high-net-worth borrowers to buy a home.
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Commercial Loans – These types of loans are for any type of commercial, or non-owner occupied multi-unit property. These types of loans are a bit more time consuming and have unique loan terms.
There are many other programs out there for non-traditional borrowers. It is important to understand that these types of loans are considered a higher risk for the lender and therefore will come with a higher interest rate.
If you have a unique financial situation, please call to see if we can figure out a solution that might fit your particular scenario.
Non-QM
Home Loans
VA Home Loans
VA HOME LOANS
What is a VA loan?
A VA loan is offered to active and retired military veterans that is backed by the Veterans Administration and covers the lender in case of default. A VA loan can be used to buy, build or improve your current home. Since it is considered a government loan and backed by the VA, the rate is typically much lower than a conventional home loan that you might get from a bank.
If you are an active duty or military veteran, there are three reasons to consider doing a VA loan vs. a conventional home loan.
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You can borrow up to 100% of the established value of the home. However, there are county loan limits as set by the FHFA. FHFA.gov/DataTools/downloads/pages/conforming-loan-limit.aspx
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You do not have a monthly mortgage insurance premium if you borrow more than 80% of the loan to value.
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Interest rates are lower than a conventional loan.
How to Apply for a VA loan?
The first step in applying for a VA loan is to acquire your certificate of Eligibility. You can acquire that through your VA ebenefits portal. https://www.ebenefits.va.gov/ebenefits/about/feature?feature=cert-of-eligibility-home-loan. Most lenders can acquire this for you as well. There are a few things that might disqualify you for eligibility. So, be sure to check your COE to make sure it show full entitlement before you apply for a VA loan:
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You currently own another home with your full entitlement used to purchase that home. You can restore the entitlement by selling the home or refinancing the current mortgage into a conventional loan.
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You had a dishonorable discharge. You can apply for a discharge upgrade. https://www.va.gov/discharge-upgrade-instructions
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Early leave of service. You must have served at least 21 months of a 2 year term.
Once you have acquired your Certificate of Eligibility, call your VA lender. Make sure they are a Certified Veteran Loan Specialist, because they have been specifically trained in serving military personnel. Tiffany Hughes is a dedicated CVLS and is proud to serve those who have given their lives to this country.
What is a Funding Fee and Why Is It Necessary?
The funding fee is added to the base loan amount of a VA loan and it insures the lender in case of default. It works very similar to mortgage insurance in a conventional loan. But, instead of a monthly premium that is paid if the Loan to Value is more than 80%, it is paid up front at inception of the loan and it is required on all VA loans, except for those borrowers that have a service connected disability or are eligible to receive VA disability, but choose to receive retirement or active duty pay instead, or can provide evidence of receiving the Purple Heart.
The amount of the funding fee depends on several factors.
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The loan amount - It is calculated as a percentage of the loan amount.
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The amount of down payment.
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If it is a first time or subsequent use.
Be sure to check with your lender to find out how much the funding fee will be on your loan.
What Types of Loans Can I Get With a VA Loan?
There are several types of loans that VA home loan benefits can be used for:
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To purchase a new home.
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Cash out Refinance can be used for any purpose.
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Construction Loan – Not all lender do these types of loans.
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Interest Rate Reduction Loan (IRRLS) is used to reduce the current rate on a VA loan.
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Manufactured homes – Not all lenders do these types of loans.
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Native American Direct Loans
Be sure to check with your mortgage loan officer to make sure they can do the type of loan you are looking for.
What Fees Are you Allowed to Pay at Closing?
There are certain fees that the Veteran is allowed to pay at closing. Outside this list, the lender or the seller must cover the additional fees.
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VA funding fee
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Loan origination fee
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Loan discount points or funds for temporary “buydowns”
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Credit report and payment of any credit balances or judgments
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VA appraisal fee
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Hazard insurance and real estate taxes
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State and local taxes
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Title insurance
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Recording fee
The seller cannot pay more than 4% of the closing costs as well. So, make sure you check with your lender to find out how much the closing costs will be. This is a common mistake by inexperienced or non-CVLS loan officers.
Construction Home Loans
Construction Home loans
What is a Construction Loan?
A construction loan is a short term loan that is used to fund the construction or renovation of a home. It is typically a short-term loan with a limit of 12 months to 18 months. It can cover the purchase of the land, the construction plans, the permits, labor and materials, and sometimes it can even include landscape and out-building costs as well. However, a construction loan can be a little more complicated and time consuming to acquire because the lender will require the following documentation before they begin to underwrite the loan.
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Purchase contract or proof of ownership of the land.
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Construction plans and specs.
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Construction costs.
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A construction timeline.
Most of these items can be provided by your contractor that you choose to build the home. Make sure they are reputable and have a history of building homes. Many lenders require them to go through an approval process if they have not been approved prior to your loan.
It is possible to purchase land as part of the loan that is used for construction of the home as well. Each lender has their own down payment requirements, so make sure you check with your lender before moving forward with the purchase of your land.
Once you close on the construction of the loan, it is important to know that you will not receive the entire loan funds all up front. Most banks have a construction loan draw schedule based on what has been completed on the property. Make sure that you review this with the home builder prior to closing on the loan, so that you do not have any misunderstandings, or you may have to come up with funds out of pocket to cover the completed portion of the project. This is why an agreed upon timeline is so important. This sets expectations for the builder and the lender right up front.
Prior to a draw, the lender may require an inspection of the completed work before the funds can be disbursed. Make sure everything listed on the timeline has been completed prior to asking the bank for a draw or you could be on the hook for additional inspection fees.
The interest that accrues throughout the construction process is handled differently by every lender. Some will require it to be paid monthly, others may tack it on to the end of the loan. Make sure you clarify how it will be handled before signing on the dotted line. Depending on how the lender handles the payments throughout construction, can affect ability to qualify as well. If you have another mortgage, currently, you may be expected to qualify for both payments.
Different Types of Construction Mortgage Loans
There are 3 main types of construction loans.
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One-time Close Construction Loan – This type of construction loan has only one closing with only one set of closing costs and is locked once the loan is approved. It is done at the beginning of the construction period and then converts to a permanent loan once construction is completed on the property.
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Construction Only Loan – This is most common with banks. It charges interest only payments throughout the construction on the home and can get added to the balance of the loan in the end or paid throughout the time of construction. Once construction is completed it then must be converted to a permanent loan through the same bank or another lender or mortgage broker. You will have a second set of closing costs for the permanent loan, so I highly recommend you shop around to find the best lender when you are about 60 days out from completion of the project.
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Renovation Loan – This type of loan is great for buying a fixer upper type property. The construction costs get added onto the price of the home and the lender gives the loan based on purchase price plus construction costs or the final anticipated value of the home, whichever is less. These loans will allow for as little as 3% down for a first time homebuyer or 3.5% for an FHA 203k renovation loan. They can be used for a property that you already own as well.
A homeowner cannot be their own contractor unless they have extensive experience renovating and or building homes or they have a contractor’s license. If a homeowner is licensed in a specific field of renovation, such as electrical, roofing, etc., then the lender may allow for the homeowner to do that portion of the construction with prior approval.
If you are considering buying land and building a home or setting a pre-fabricated home such as a kit or a modular, be sure to check with your lender first on additional requirements.
Tiffany Hughes, CDLP, CVLS has a lot of experience in these types of loans. If this is something you are interested in, give her a call. She can walk you through the process step by step and help you choose the right construction loan for your needs.
Reverse Mortgage Loans
Reverse Mortgage loans
What is a HECM reverse mortgage and how does it work?
A HECM reverse mortgage is designed for homeowners 62 and over to utilize the equity in their home for tax-free cash with no monthly mortgage payments.
It can be used to enhance retirement security by:
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Create additional monthly income
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Increase cash reserves
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Delay drawing on social security or pension
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Buffer the spending of retirement assets
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Allow more monthly expendable income for medical expenses and prescription costs.
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Does not affect social security or Medicare benefits.
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Be an equitable solution in a silver divorce
When keeping a senior in their home is the only option, a HECM reverse mortgage can help make this happen. It opens the possibility of aging in place. Studies have shown that keeping a senior in their home has health and emotional benefits over institutional care. Not all insurance covers in home medical care. A HECM reverse mortgage can eliminate a mortgage payment every month, thus freeing up the finances for in-home medical care.
Why Do I Need Mortgage Insurance?
A HECM is insured by FHA and requires up front mortgage insurance premium and monthly mortgage insurance premiums. The upfront amount can be .5% - 2.5% of the lending limit on the property. The monthly premium amount is 1.25% of the loan balance. Mortgage insurance covers any shortfall in equity, if any, at the time of sale. It is there to protect the lender and the heirs to the property.
How Does the Mortgage Interest Get Paid?
The monthly interest and the mortgage insurance on the property is paid to the lender/servicer by adding the amount to the loan balance each month. Instead of decreasing the loan balance, like a traditional home mortgage, a Reverse Mortgage loan balance increases with each monthly insurance and mortgage insurance payment that is paid to the servicer of the loan.
What Else Am I Responsible for On My Property?
The homeowner is responsible for paying the property taxes, homeowner’s Insurance, and the HOA fees on the property outside the mortgage. Taxes are paid twice a year and most insurance companies will allow monthly payments. HOA dues vary by Association.
The homeowner is also responsible for the upkeep of the property. The property cannot be left in disrepair. It is the homeowner's responsibility to make sure the property remains “habitable”, meaning, there are no deferred repairs or maintenance that could affect the health and safety of the homeowner.
What Happens If I Go Into Long Term Care or Pass Away?
There are several events that can trigger loan maturity.
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Selling the home
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Vacated for more than 12 months – ie: long term care
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Last Surviving borrower passes away
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Failing to uphold agreed upon responsibilities:
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Failure to pay HOI, taxes or HOA dues
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Continue to maintain the property
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Failure to owner occupy the property
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If any of these events happen, the property must be sold by the borrower or the heirs within 12 months. At which time, the homeowner or the heirs to the property must notify the bank of their intentions with the property. The bank does not take ownership of the property, unless NO action is taken to uphold the agreed upon responsibilities of the borrower.
Eligibility Requirements
The minimum requirements to qualify for a reverse mortgage are the following:
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Must be at least 62 years old
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You must own your home
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The home must be your primary residence
If you meet all the above requirements, then the amount you would qualify for is calculated and based on the following factors:
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Your Age
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Your home value – We will order an appraisal on the property as part of the loan approval process.
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The interest rate at the time of submission
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Your current mortgage loan balance. Your current mortgage must be paid off at closing.
All of these factors are calculated through an algorithm, and it is then determined how much you will receive.
The proceeds of the loan, can be used in the following manner:
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As a full lump sum received at closing.
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In a line of credit
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As a monthly payment
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Or a combination of any of the above
Myths & Realities of Reverse Mortgages
Myth #1 - The lender owns the home.
FALSE. Like all mortgage loans, a reverse mortgage is secured by a lien. You will not lose your home as long as you continue to meet the loan obligations. For a reverse mortgage the obligations are the following:
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You must live in the home as your primary residence
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You must maintain the property according to Federal Housing Administration requirements.
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Continue to pay the property taxes on the property
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Maintain sufficient Homeowner’s insurance on the property.
Myth #2 - The bank takes my home once I pass away or can no longer live in the home.
FALSE. The borrower owns the home until death, or they can no longer live in the home. Then the ownership of the home is passed along to the heirs. The beneficiaries of the home have 12 months to refinance or sell the home once ownership has been transferred.
Myth #3 - If the home is upside down in equity at the time of death, the heirs will then be responsible for the short payoff of the loan balance.
FALSE. A HECM reverse mortgage is insured by FHA. If the home becomes upside down in equity at the time of death, the FHA mortgage insurance will pay off the balance and the heirs will not be held responsible for the short payoff of the mortgage balance.
Myth #4 - The borrower is restricted on how to use the loan proceeds.
FALSE. The Proceeds from a Reverse Mortgage can be used for just about anything the borrower chooses. However, if there is deferred maintenance required to meet the FHA requirements, the proceeds will either be set aside in an escrow account and work must be completed in a timely manner. Other examples include:
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Home remodel
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Supplement retirement income to prolong using other retirement assets
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Pay off high interest credit cards
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Purchase a 2nd home
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Take a vacation
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Help adult children
However, prudence must be used when choosing how to spend the additional funds
Myth #5 - When you take additional proceeds, you must pay taxes on them.
FALSE. Like any other loan, reverse mortgage proceeds are paid out tax free as they are not considered income. Although, I highly recommend you contact your financial advisor and tax preparer for any other effect this may have on your taxes.
Myth #6 - The home must be free and clear of any existing mortgages.
FALSE. Many borrowers use the reverse mortgage to pay off an existing mortgage to eliminate a mortgage payment altogether. You are still responsible for pay the taxes and homeowner’s insurance on the property when they come due. It is recommended that you have a savings account set up to put that money away every month. Just as if it were your mortgage escrow account.
Myth #7
Only people with financial hardships need a reverse mortgage.
FALSE. This is a false statement as more and more financially savvy and affluent seniors are using it as another retirement tool in their estate planning. They are working closely with their financial advisors and estate attorneys to enhance their overall quality of life in retirement. As mentioned above, instead of tapping into retirement funds to support a certain lifestyle into retirement, many seniors are using reverse mortgages instead. Again, talk to your financial advisor about what is the best option for your situation.
WHAT PEOPLE SAY
Tiffany is very knowledgeable and helpful. We are able to close our refinance in just 2 weeks. She made everything easy and was always there to answer our questions. Thanks Tiffany!
— LISA SYVERSON