When you calculate the percentage of your gross monthly income that goes toward paying off debt, you get your debt-to-income (DTI) ratio. Because your DTI ratio helps you qualify for mortgages and other loans, you should only factor in debt payments—such as mortgage, car, or other loan payments—when calculating and not regular expenses, like gas, groceries, or utility payments. You should also aim to have a low DTI ratio to qualify for new loans. Federal guidelines discuss a 36% and lower DTI as being the optimal ratio; however, if you have compensating factors such as a great credit score, it is possible to get approved with a DTI as high as 50% or more, depending on the loan program. Anything too high might disqualify you from future loans. Below are a few strategies that can help lower your DTI ratio.
Possible Ways To Lower Your DTI Ratio
Get ahead on debt payments. No debt means no monthly debt payments, which are part of the DTI ratio calculation. Paying off your debt takes time and discipline, so to optimize your payments, pay off smaller debts first to get the best outcome. If you pay off debts with a high payment relative to their balance, that can be best for you too.
Consider refinancing large loans. This works best with loans that have longtime pay periods, such as student loans. If you reduce your minimum monthly payments to extend the life of your loan, this can reduce your DTI ratio. Remember, this time extension can mean having more interest on your loan, so keep that in mind when considering what’s best for you.
Take advantage of no interest charges with debt transfers. Credit cards often have a grace period with low to no interest rates at the beginning of their activation. If you transfer existing debt to a credit card during this window, you may be able to lower your minimum monthly payment and total amount paid over time. Before this promotional period ends, you can repeat the process to another lower interest credit card.
Bring in more monthly income. The other part of the DTI ratio calculation is your gross monthly income. If you increase your income, you can lower your DTI ratio. Research ways you can earn extra cash to supplement your monthly income. A second job, side hustle, or passion project may be your answer to a lower DTI ratio.
Weigh your options with a 401k loan. If you have a 401k, you can lower your DTI by taking funds out of that account to pay your debt. This allows you to repay the loan over time, often with no (or low) interest; however, you may be taxed on that loan amount. While this is a way to pay off a large amount of debt, it will impact your retirement goals. To stay on track, remember to repay your 401k.
Important: Before implementing any of the above items, make sure to discuss your plans with a seasoned mortgage professional. While these ideas can be helpful, they may also have unintended consequences, such as drastically lowering your credit score. A good mortgage professional will understand how such changes may affect your credit.
Get Help Finding the Right Home Loan for You
If you are looking to buy a home in Central Florida and require a home loan, the professionals at Butler Mortgage can help. For over 25 years, Butler Mortgage have assisted both first-time and seasoned buyers in finding the right mortgage solution for their needs. Call us at 407-931-3800 or fill out our free consultation form online for help.
As a homeowner, you are likely well-acquainted with certain aspects of your mortgage such as the life of the loan, the interest rate, and the payment schedule. You may also be familiar with the concept of equity, which is the difference between what you owe on your home and what it is worth, but perhaps you’re unaware of the second mortgage option.
If you’ve diligently paid down a fair amount of your home loan, and are looking for some extra money to utilize, you may be interested in taking out a second mortgage. While it requires careful budgeting and consideration, a financially savvy homeowner can take advantage of a second mortgage and utilize their equity to consolidate credit card debt, pay for home repairs, or invest in anything else they might need.
Understanding a Second Mortgage
The most basic definition of a second mortgage is that it’s a lien taken out on the portion of your home that you have already paid off. You are basically utilizing the equity in your home as a cash reserve. However, your lender is taking on a majority of the risk in lending a second mortgage, so there will be requirements that need to be met for it to happen:
Equity. In order to utilize a second mortgage, you will need to have paid off a portion of your primary mortgage. You will be drawing from the positive equity of your home, which is grown by yearly appreciation, paying your loan down, and/or adding value to your home by way of upgrades or renovation.
Credit. You will likely need a decent credit score to qualify for a second mortgage, although the actual target score can vary by lender.
Debt-to-income ratio. Note your debt-to-income ratio. Your total monthly debts (mortgages, car loans, credit cards, student loans, etc.) should be less than 50% of your monthly gross income for lenders to entrust you with a second mortgage.
A second mortgage can be quite the boon for those who are on top of their finances but would like a little breathing room for revolving expenses or managing debt. To understand your second mortgage or home financing options, consult with a mortgage professional.
Trust the Professionals at Butler Mortgage
Whether you are in the market for a primary conventional mortgage for a new home purchase or a refinance of your existing mortgage, Butler Mortgage has you covered every step of the way. For over 25 years, we have worked with homeowners in Central Florida to secure home mortgages. Our experienced mortgage professionals have the knowledge and tools to help match you with the best loan solution for you. Let us help you with your mortgage needs by calling 407-931-3800 or by filling out our free consultation form online.
Not to be confused with a deed, which is a legally binding document used to transfer property from one owner to the next, a title is documentation that explicitly states that you own the property. In the homebuying process, title companies verify that the real estate title gets properly passed to the homebuyer to guarantee title insurance. If someone makes a claim to a property, title insurance will protect the lender and potentially the owner as well as maintain your escrow accounts at closing. While the title company insurance process is thorough, here is what you need to know about the role that title companies play in the homebuying process.
What Happens Before Title Companies Issue Title Insurance?
Before insurance is granted, title companies perform title searches. The goal of the search is to review potential obstacles and ensure a seamless transfer of ownership. These obstacles can include:
Outstanding Mortgages: Homeowners usually have a mortgage tied to the property, exceptions being that the home is owned without any debt. For a title to be smoothly transferred, outstanding mortgages will need to be paid off at closing.
Liens: Other payments on your property, such as a loan for solar panels, must be paid off or removed before closing. Liens can also include unpaid taxes. For example, if you didn’t pay a contractor for work on your home, then unfulfilled payments exist. Liens for unpaid taxes must be solved before a sale.
Homeowners Association Payments: Take a look at your HOA contract. Any liens or additional dues need to be taken care of before moving forward with a title.
Restrictions: If certain rules are in place, like age limits to live in a community, transfer of property ownership will be more difficult.
Leases: A title search will find if a property is rented out to others.
After title companies do their search, they will survey the property to ensure no infringements or damages exist for a smoother transition. From there, two documents are prepared:
Abstract of Title – a legal document that summarizes the ownership and property history.
Opinion – a document written by the title company that states a valid title to the property exists.
What Is Title Insurance?
After proper preparations, title insurance steps are next. Two types of title insurance exist:
Lender’s title policy: Protects the mortgage lender with the title if the house is lost in a property dispute. If a lender opts for mortgage payments, this is required when buying a home. It does not protect any existing home equity.
Owner’s title policy: Protects the overall property investment. This is an optional form of insurance that protects home equity. It’s recommended for homes with a long history of owners since it can help if a past owner reclaims your home.
How Do I Find a Title Insurance Company?
Mortgage companies work with area title companies and can help recommend a good one to you. Fortunately, most of the title companies in the Central Florida area are excellent. If you are a homebuyer looking to close on the home of your dreams, Butler Mortgage can help. With 25 years of experience, we understand how extensive the homebuying and title insurance process can be and want to help you be successful every step of the way. Call us at 407-931-3800 or fill out our free consultation form online.
Purchasing a rental property can be a great investment; however, there is a lot that must be done to properly prepare a space for renters. As a rental property owner, you should apply the following tips to get your home ready for renters.
Invest in a Professional Cleaning
Before you welcome potential tenants to even view your rental home, be sure to give the premises a deep cleaning comprised of more than just your usual routine. A thorough, top-to-bottom cleaning should include:
Cleaning and steaming the carpets to remove stains
Changing the air filter and cleaning air ducts to remove dust and allergens
Scrubbing tile floors, bathtubs, showers, toilets, sinks, baseboards, and molding until they shine
Pressure washing exterior walls, windows, sidewalks, and driveway to remove dirt and grime
If you don’t have the equipment to complete such tasks, you may want to consider hiring a professional cleaning company to ensure each job is properly done.
Perform an Inspection
Be sure to give your property a comprehensive inspection to ensure that everything looks its best and functions properly. While a professional inspection should be conducted before renters move in, you will want to personally check each of the following items and areas of your home to ensure they are in good shape and don’t require repair, replacement, or renovation:
Interior and exterior walls
Toilets, baths, showers
Various utilities (electrical, HVAC, plumbing, hot water heater)
If you notice that any of these areas have cracks, mold, water damage, or are compromised in any way, be sure to make the proper repairs before renting out your property.
Review Your Rental Property Mortgage
Remember to review your mortgage before advertising your rental property. Depending on your mortgage type, you may need to notify your mortgage company of your plans before renting out your property. If you need help understanding your mortgage, the experts at Butler Mortgage are here to help.
Your Central Florida Mortgage Professionals
When you need assistance with your mortgage, contact Butler Mortgage. We have been serving both first-time and seasoned home buyers in the Central Florida area for over 25 years and have the experience and expertise necessary to answer your questions regarding your loan contract. For more information on our excellent services or to sign up for a free consultation, fill out our online form or call us today at 407-931-3800.
Buying or selling a home is a major milestone to meet and be proud of, but the process can feel overwhelming if you’re unsure how to navigate through the legal components, such as signing a real estate purchase agreement. Also known as a real estate sales or purchase contract and a home or house purchase agreement, the real estate purchase agreement is a contract that is signed when home property is transferred from one person to another.
What Makes a Real Estate Purchase Agreement?
Every buying or selling contract is different. However, since the purpose of a real estate purchase agreement is to outline the details of a home transaction, the following are typically outlined:
Information about the buyer and seller
Details on the property, including fixtures or appliances in the sale
Specifics on pricing, closing cost responsibility, and borrower financing
What To Know Before Signing a Real Estate Purchase Agreement
While the above outlines are relatively clear, other components of the agreement may seem more complicated, especially for first-time buyers or sellers. Before you sign the contract, know the following:
Contingencies: The following conditions must be met before a sale is made.
Financing contingencies: Tells the seller how the buyer will obtain financing and protects the buyer if they can’t secure a mortgage
Inspection contingency: Calls for a professional inspector to assess the home and lets the buyer leave without penalty if they aren’t satisfied with assessment
Appraisal contingency: Explains that the home needs to appraise at or higher than the sales price
Home sale contingency: Included when this new home purchase will only be possible when the buyer sells their current home
Earnest money deposit: Also known as a good faith or escrow deposit, earnest money deposits let sellers know that buyers are serious about purchasing a home. Since it’s typically held in escrow and credited toward the down payment or closing costs, the deposit can also protect the seller if the buyer backs out.
Closing costs: These are fees that are paid at the end of the buying process, which can include agent commission, appraisal and inspection fees, taxes, lenders fees and insurance.
Lastly, the buyer will propose an offer price within the contract, which can be negotiated between the buyer and seller. Once both parties agree and sign off on the contents of the contract, they will be considered “under contract.”
Butler Mortgage Will Support You in the Process
If you need help understanding real estate purchase agreements, our experts are here to support you. At Butler Mortgage, our mortgage professionals can match you with affordable home financing loans at desirable rates so you can complete the Central Florida home buying process. Let us help you find the right loan solution for you by calling 407-931-3800 or by filling out our free consultation form online.
Anyone placing their house on the market will want to ensure their home is in the best condition possible. However, those who need to sell a house quickly may have unresolved home repairs that they either don’t have the time or money to address. They may worry that such issues will scare off potential buyers and jeopardize their opportunity to sell. Fortunately, for homeowners concerned about trying to sell a home that needs repairs, there are a few options.
Sell Your Home That Needs Repairs as-Is
Selling a house as-is allows you to be upfront and honest with potential buyers about the condition of your house. When you sell a house as-is, you don’t spend any money on any of the needed repairs, but you will likely have to accept a lower asking price. On the upside, houses being sold as-is are often very attractive to investors and flippers.
Focus on Completing Minor Repairs
If you don’t have a lot of time but you are willing to do some repairs, consider focusing on a few minor, cosmetic fixes. These repairs are typically low-cost and don’t take a lot of time. Completing them will ultimately improve the general curb appeal of your house and can help you maintain a higher asking price.
Going for the Big-Ticket Repairs and Upgrades
Most potential buyers are okay with having to do a few small fixes themselves. However, they are likely more concerned about and less willing to inherit expensive, big-ticket repairs and upgrades. If you have the time to take care of some larger repairs and are willing to spend the money, consider investing in the following recommended areas:
Foundational damage repair
New hot water heater
If you are making these repairs in order to sell your home, consider contacting a local bank for a second mortgage or home equity line of credit (HELOC) to help you pay for the repairs. If you are not thinking about selling your home and are having difficulty financing any of these desired repairs or home upgrades, consider contacting the professionals at Butler Mortgage for help.
Your Trusted Home Lending Experts
The professionals at Butler Mortgage can help match you with affordable loans at desirable rates that can finance your home improvements. For the past 25 years, Butler Mortgage has been serving the Central Florida community by working with both first-time and experienced home buyers in helping them own homes in the area. If you are looking for help finding the right loan solution for you, fill out our online form for a free consultation or call us today at 407-931-3800.
Refinancing: The process of replacing an existing loan with a new one. When homeowners refinance, they repeat the mortgage process they completed when they first purchased their home, but instead of buying a new home, they get a new loan. If you’re a homeowner considering refinancing, below are key tips to consider.
When refinancing, your new loan can come with financial incentives, including lowered interest rates, lower payments, and home equity access. If you’re looking into refinancing your home, first decide which options best help your circumstance. Consider the following questions:
What will the repayment period look like? Would a longer or slower mortgage term work best for me?
Will taking on lowered interest rates reduce overall interest costs?
Which refinancing options are best for me to build home equity?
What are my cash-out refinancing options? Will they help me pay for other life expenses?
Do I want to remove someone else’s name from the loan through refinancing?
Do I have real estate taxes or homeowners insurance I want to pay off? Will refinancing help with those payments?
What Will the Refinancing Process Look Like?
After you’ve analyzed your refinancing options, you’ll find that the next steps in the process are similar to when you first bought your home, minus the real estate agent and down payment costs. In fact, because there’s less paperwork and people involved, the refinancing process may seem even easier than your home buying process.
First, you’ll fill out an application that requires the same information you provided when buying your home, which may include income, employment, and credit score verification. From there, your refinance closing may take from 2-4 weeks. Along the way, you may need to fill out additional information, depending on the needs of your lender. You should also expect to pay some closing costs at closing, unless you decide to have such costs rolled into your new loan amount.
What Help Is Available?
Even if you are familiar with financing a home, how long your refinance takes depends on the experience and efficiency of your lender. For over 25 years, the professionals at Butler Mortgage have been helping Central Florida homeowners through the homebuying and home refinancing process by matching them with affordable loans at desirable rates. Let us help you take the first steps towards refinancing your home by calling 407-931-3800 or by filling out our free consultation form online.
Navigating the homebuying world can be tricky, even if it isn’t your first time dealing with a mortgage. There may be lots of acronyms and jargon that get thrown around during the process, but what do any of them mean? To avoid confusion and help you buy a home like a seasoned pro, here is a handy guide explaining some important homebuying lingo that you should know.
Homebuying Acronyms to Know
APR: Annual Percentage Rate. This is the interest rate you pay on a loan annually.
ARM: Adjustable Rate Mortgage. An ARM is a type of mortgage with an interest rate that can either be increased or decreased, depending on certain factors. An ARM often starts with low interest rates, then is adjusted based on the standard financial index set from either the Federal Reserve or the London Interbank Offered Rate.
CD: Closing Disclosure. This is a form provided to you by your lender at least three days before closing. It outlines the final terms and cost of your mortgage. This form is extremely important and must be thoroughly examined to make sure you’re aware of every condition before closing.
DTI Ratio: Debt-to-Income Ratio. Lenders look at this to see the percentage of your monthly gross income paid toward your monthly debt payments.
FICO and BEACON SCORES: FICO scores were first developed by the Fair Isaac Corporation for Experian, one of the three main credit bureaus, while Beacon was developed specifically for Equifax. The third credit bureau, TransUnion, also has their own scoring model. These scores are used to determine a homebuyer’s credit risk. Typically, a mortgage company looks at all three scores and uses the middle one.
FHA: Federal Housing Administration. The FHA is a government agency that offers assistance by insuring loans so lenders can get better deals. They also set standards for construction and underwriting.
LE: Loan Estimate. This is a document provided to you at the beginning of the loan process. It shows a breakdown of your estimated costs including interest rate, loan amount, and closing fees.
LOX: Letter of Explanation. While not always necessary, a LOX can be used by you to explain anything in your financial or employment documents that may be concerning. This often includes unusual activity in credit reports or bank statements.
LTV Ratio: Loan-to-Value Ratio. The LTV ratio compares the loan amount to the market value of the asset. Lenders look at this to determine the risk factor for taking on a loan.
PITI: Principal, Interest, Taxes, and Insurance. All four of these factors come together to equal your monthly mortgage payment.
PMI / MIP: Private Mortgage Insurance (or Mortgage Insurance Premium for FHA loans). This is a type of insurance used to protect the lender if mortgage payments aren’t made. PMI is typically required if your down payment is less than 20% of the purchase price, while MIP is required for all FHA loans.
POC: Paid Outside of Closing. POC’s are any payments that are typically paid before closing, such as the appraisal fee.
Get to Know the Experts at Butler Mortgage
With over 25 years of experience, Butler Mortgage has worked alongside many Central Floridians — from first-time purchasers to seasoned homebuyers — to achieve the dream of owning a home. And we’d be happy to assist you in securing financing for your dream home. To find out more about our services, call us today at 407-931-3800 or fill out our free consultation form online.
When purchasing a home, the homebuyer can expect the transaction to be finalized at the time of settlement, or once both parties have executed all documents and the lender issues a funding authorization. However, for certain transactions, most notably refinances, the loan is not officially funded until the borrower’s right of rescission has passed. The right of rescission allows a homeowner to cancel a refinance of their primary residence, a home equity loan, or a home equity line of credit AFTER the loan has closed — but they only have a short window to do so. In fact, the homeowner has until midnight of the third business day after closing to cancel.
How the Right of Rescission Is Determined
The rescission period begins the day you receive your notice to rescind (or right to cancel), which is one of the documents you will sign at closing. The customer then has three business days to re-evaluate what they just signed and must notify the settlement agent if they choose to cancel the transaction. Most, but not all, lenders consider Saturday to be a business day. Sundays and the following 10 federal holidays are not considered business days.
New Year’s Day
Martin Luther King Jr. Day
Many customers who refinance their homes do so to take out cash equity to pay for home repairs, college expenses, a wedding, or to consolidate debt. If you expect to get the money immediately upon closing, it is important you understand this federally mandated delay in the funding process.
Contact the Experts at Butler Mortgage
Whether you need help understanding the rescission process or just need information about refinancing or buying a home, the team at Butler Mortgage is happy to help. At Butler Mortgage, we’ve worked with Central Florida homeowners for over 25 years — and we can help you get the loan that works best for your financial situation. If you’re interested in a free consultation, call us at 407-931-3800 or complete our free consultation form on our website.
Once you find your dream home, there are quite a few financial details you’ll need to take care of. Today, we’re going to help you get one step closer to financing by demystifying the appraisal contingency.
What Is an Appraisal Contingency?
An appraisal is a process that determines the fair market value of a home, and a contingency is a condition that has to be met before something can proceed forward. Therefore, an appraisal contingency is a condition that is set into place so that if the home you are interested in doesn’t appraise for the amount you intend to pay, the offer does not proceed forward and you can walk away with your deposit.
What Does an Appraisal Contingency Do?
The most important function of an appraisal contingency is that it protects you financially. First and foremost, it allows you to receive back a deposit if new information determined by the appraisal process makes it so that you no longer want to participate in the sale. If you don’t have a contingency in this situation, you lose your deposit money.
A buyer and seller can negotiate just about any type of contingency when executing a contract, but these are the three most common types:
Appraisal Contingency – As explained above, an appraisal contingency includes the process of getting the home appraised. If the appraisal value comes back lower than originally assumed, this gives you leverage to try and negotiate the price down.
Financial Contingency – This type of contingency protects you as a prospective homeowner in case funding is not able to be attained for your mortgage. With the protection of a financial contingency, you don’t have to worry about being locked into the sale until you get an approval letter from your mortgage company.
Inspection Contingency – An inspection contingency is all about home inspections. It protects homeowners from being locked into a sale unless the prospective home passes any and all inspections, which may include foundation, roof, HVAC, mold, and pest.
Real estate agents usually recommend that you include a combination of contingencies when you become serious about purchasing a prospective home.
What Are the Benefits of an Appraisal Contingency?
So, what are the advantages contingencies provide for a prospective homeowner? Other than protecting you from being locked into a purchase, the most important benefit is that contingencies prevent you from overpaying for a home. Contingencies of all kinds can bring to your attention potential cost discrepancies, and these can be used as leverage when you want to negotiate for a lower price.
Your Appraisal Experts
Working through the financial part of purchasing a home can be stressful. Fortunately, the mortgage professionals at Butler Mortgage can help you complete the home buying process by matching you with a loan that finances your dream home at an affordable rate. With over 25 years of experience, our mortgage experts have worked with both new and experienced buyers looking to own a home in Central Florida. Whether you are searching for homes in and around Orlando, or anywhere in the state of Florida, let us help you find a loan solution that’s just right for you. To schedule your free consultation, call us today at 407-931-3800 or fill out the free consultation form online.