What to Do If Your Mortgage Application Is Denied

While the home buying process has gotten more streamlined and easier in recent years, there are still many moving parts and potential points of frustration. As a first-time buyer, it’s possible you might be denied a loan—even if you get pre-approved. 

When this happens, it can be easy to get discouraged. However, there are many reasons a mortgage application can be denied, so do not give up hope. Instead, review your reasons for denial to help better your odds for approval.

Why a Mortgage Application Might Be Denied

Issues involving your credit score can certainly be a big part of why a mortgage application is denied, but that alone isn’t a make-or-break point of contention. Mortgage underwriters also consider: 

  • Short or insufficient credit history – The length of your credit history and how you manage it is a big indicator to lenders of how reliably you can pay back the loan. 
  • Debt-to-Income ratios – Lenders want to see that you have enough income to cover the mortgage payments, but they also want to make sure that your total monthly debts do not exceed more than roughly half of your monthly income. Exceptions apply depending on the loan program.
  • Changes in employment – Lenders prefer to see stability in your employment history, and a mortgage application could very well be denied if there are frequent, sudden, or recent job changes. Most of the time, this can be overcome with a simple explanation from the borrower.
  • Unexplained large deposits –This might seem strange, but lenders are wary of bank statements showing large deposits that cannot be explained. The concern is that the money a borrower has in their account is not actual savings, but money borrowed from another source, which is not typically allowed for a mortgage transaction. 

What to Do When Your Mortgage Application Is Denied 

The silver lining to these reasons for application denial is that they can be spot-fixed with some diligence and time. If you’re coming up short on any of your mortgage qualifications, you can start a plan that includes: 

  • Talking to your lender to find out exactly what the issue is
  • Building more credit with a consistent account or adding yourself to a trusted family member’s credit card as an authorized user
  • Diligently paying down your debt and always paying bills on time
  • Making sure that any large deposits appearing in your past couple of months’ bank statements can be easily explained and documented

Professional Mortgage Application Services

If you’re worried that your mortgage application may be denied, don’t fret. The professionals at Butler Mortgage can help you take a closer look at your financials and advise on next steps. Once you’re approved, our team can help you navigate the mortgage process and secure desirable rates that fit your budgetary needs.

Let Butler Mortgage help you find the right loan solution for you. Call us today at 407-931-3800 or fill out our free consultation form online.

Cash-Out Refinance Vs. Home Equity Line of Credit

Buying a home is an exciting new stage in life. Having your own place to shape into your perfect living space is a truly rewarding experience; however, that process can take time and additional funds. 

To pay for home improvements and remodeling costs, homeowners often draw on the equity they build up as they pay off their home loan. Common options include a cash-out refinance or a home equity line of credit (HELOC). Figuring out which is best for you is the key to getting the most out of your home’s value. 

The Difference Between a Cash-Out Refinance and HELOC

As mentioned, both cash-out refinances and HELOCs utilize your home’s positive equity, but how they access that equity differs. Here’s a closer look at both options: 

  1. Cash-Out Refinance – If you have sufficient equity, you can opt to refinance your loan, which pays off your current mortgage and establishes new terms. Such terms may include a lower rate and term of your loan, such as a 15 or 20 year loan to replace your existing 30 year loan. In addition to equity, you will need a satisfactory credit score and debt-to-income ratio to qualify.
  2. Home Equity Line of Credit (HELOC) – A HELOC allows you to borrow against the equity built in your home without upsetting your current mortgage. HELOCs are a great option when you already have a great, low rate and don’t want to incur a lot of closing costs. Functioning as a second mortgage, this is a flexible option since you can use the HELOC like a credit card and you only pay interest charges on the amounts you use. 

Get Professional Mortgage Assistance at Butler Mortgage

If you’re in need of emergency home repairs, improvements, or simply want to explore a remodel, these options could offer you financial assistance. If you’re still unsure which option might work best for you and your unique situation, know that the mortgage professionals at Butler Mortgage can help. 

For over 25 years, Butler Mortgage has worked with both first-time and seasoned Central Florida home buyers to navigate the refinance process and secure desirable rates that fit their budgetary needs. If you need mortgage assistance, our team can help you find the right loan solution for you. 

To schedule a free consultation, fill out our form online or call us at 407-931-3800.

What Coronavirus Means for Mortgage Rates and Your Home Loan

The COVID-19 pandemic impacted everyone in many ways. On the economic side of things, real estate and home buying has seen some changes—some of which are quite positive for home buyers and homeowners. To protect our economy and mitigate some of the financial damage caused by the pandemic, the Federal Reserve took many actions that led to lower interest rates on mortgages and home equity loans. 

COVID’s Impact on Your Mortgage Rate or Home Loan

In the second quarter of 2020, the Federal Reserve began slashing the federal funds rate, which is the rate banks can charge other banks. They also stabilized markets by purchasing government securities. Finally, they ensured liquidity would not be an issue by supporting the Paycheck Protection Program and the Main Street Lending Program. All of these things led to lower mortgage rates as the markets were reassured by these swift actions. 

What Low Mortgage Rates Mean for You

Low rates can mean a few different things for you depending on where you are in the home owning process: 

In the market

While mortgage rates are low, there is currently a shortage of inventory throughout the country, which means that we are in a seller’s market. Therefore, if you’re in the homebuying stage, you may find that the selection of homes on the market is slim. Many potential sellers had chosen to back out of the market, in part due to the virus and not wanting to open homes up for viewing.

Current homeowner

If you, like many homeowners, are seeking to refinance in the wake of these lower interest rates, then do not wait. Rates may increase as a more satisfactory employment rate is achieved and the Fed tries to battle rampant inflation. To streamline the refinance process, reach out to a mortgage professional who will know exactly what program will benefit you best. 

Find Your Mortgage Rate or Home Loan Solution at Butler Mortgage

For over 25 years, Butler Mortgage has worked with both first-time and seasoned buyers wanting to own a home in Central Florida. Our mortgage professionals can help you navigate the mortgage process and secure desirable rates that fit your budgetary needs.

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.

How to Refinance Investment Properties

Investment properties are a great way to diversify your income sources by adding passive income. Refinancing such a property can afford a homeowner a number of benefits. However, requirements for refinancing an investment property mortgage can be more stringent due to increased risk.

If you are interested in refinancing an investment property, here are some things you should know before starting the process. 

Why Refinance Investment Properties?

There are a few reasons why you might want to refinance your investment property: 

A little more room in the budget 

A refinance replaces your current mortgage with a lower rate, which, in turn, will lower your payment, thus providing you with better cash flow. 

Pay off an adjustable rate or a balloon note with a fixed rate 

This will give you peace of mind that your payment will remain consistent and you won’t need to scramble to pay off the entire loan early.

Buy additional investment properties 

You can use the equity in your investment property by obtaining a “cash out” mortgage to reinvest in other properties, strengthening your portfolio as a property investor. 

What to Do Before Refinancing an Investment Property

Here is a short checklist of what you should review and consider before moving forward with an investment property refinance:

Check your investment property’s current value

as there might be a loan-to-value requirement. Keep in mind, you may need a certain amount of equity to even be considered for a refinance.

Prepare all relevant documentation

such as tax returns, bank statements, and any other items you will need to qualify for a loan. 

Make sure an investment property refinance is a viable move. 

Interest rates on investment properties are higher by default, so it is important to work with a knowledgeable mortgage professional to determine whether such a move is advantageous.

Explore Investment Property Refinancing With Butler Mortgage

Whether you have one investment property or many, a mortgage professional can help you navigate the refinance process and secure desirable rates that fit your budgetary needs. For over 25 years, Butler Mortgage has worked with both first-time and seasoned buyers wanting to own or refinance a home in Central Florida. Let us help you find the right investment property loan solution for you by calling 407-931-3800 or by filling out our free consultation form online.

What Is FHA Streamline Refinance?

What Is FHA Streamline Refinance?

Refinancing can be a very attractive option for homeowners looking to lower their interest rate and monthly mortgage payment while also tapping into some home equity to pay for renovations, upgrades, and other expenses. However, traditional refinances typically require a few stipulations, such as having a good deal of positive equity in the home. If you have an existing FHA loan but lack equity, then the FHA Streamline Refinance Program may be the refinance solution for you. 

The Pros and Cons of FHA Streamline Refinance Requirements

The FHA Streamline Refinance Program offers homeowners a refinance option with more relaxed eligibility requirements. Because of your proven credit worthiness, the program can assist you whether or not you have positive home equity built up. However, there are pros and cons to consider with any refinance program, and the FHA Streamline Refinance is no different: 

Pros of FHA Streamline Refinance

  • Potential insurance refund. You may be able to get a partial refund of your previous upfront mortgage insurance premium; however, this can vary on a few factors. 
  • Appraisal may not be required. This can also vary, but because the FHA streamline program allows you to qualify regardless of equity, they will not likely require an appraisal.
  • Reduced documentation. The program’s relaxed requirements may include less employment and income verification. The FHA will already be aware of your payment history, so additional or redundant paperwork will not be necessary.

Cons of FHA Streamline Refinance

  • Mortgage insurance payments for the life of the loan. This is the only significant potential drawback of the FHA Streamline Refinance Program. Depending on when you obtained your original FHA loan, you can potentially be stuck paying mortgage insurance payments—albeit reduced and easier to make because of your lower interest rates—for the remainder of the life of your loan.  Prior to June 3, 2013, the mortgage insurance portion of your FHA payment was removed once your loan balance reached 78% of the value of your home. Loans after that contained mortgage insurance that stayed with the loan until it was paid off. So if your original loan was obtained after June 3, 2013, nothing will have changed for you by doing an FHA Streamline Refinance now.

Is the FHA Streamline Refinance Right for You?

No matter your choice or what you’re eligible for, the professionals at Butler Mortgage can help match you with the right refinance to suit your specific needs. Our mortgage experts can help assess your current home loan situation and assist you in getting the most optimal refinance for your situation. 

Consult With the Professionals at Butler Mortgage

For over 25 years, Butler Mortgage has worked with home buyers and homeowners looking to finance or refinance a Central Florida home. 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.

Freddie Mac’s Enhanced Relief Refinance

Freddie Mac’s Enhanced Relief Refinance

With mortgage interest rates currently at a near all-time low, refinancing looks to be an attractive option for many homeowners. However, a lot of refinancing routes require built up equity. If you have yet to accrue some equity on your home, there may still be a way to refinance courtesy of Freddie Mac’s Enhanced Relief Refinance (FMERR) option. 

What Is Freddie Mac’s Enhanced Relief Refinance?

Typically, those with a high loan-to-value (LTV) ratio and no positive equity find it difficult and unfeasible to refinance. However, up until 2018, such homeowners could refinance under the Home Affordable Refinance Program (HARP). Intended as a replacement for HARP, the FMERR program is seeking to help homeowners refinance with little or no equity—even if they are underwater on their mortgage or owe more than their house is worth. However, certain qualifications must first be met.

Freddie Mac’s Enhanced Relief Refinance Qualifications

To qualify for this option, your loan will have to be owned by either Fannie Mae or Freddie Mac and you will need to be current on your payments. You must also meet timing rules and pass debt-to-income ratio and credit tests and there must also be a verifiable benefit such as: 

How to Know if Freddie Mac’s Enhanced Relief Refinance Is Right for You?

If you think the FMERR might be a route you would like to explore, the experienced team at Butler Mortgage can help you assess your current loan situation to see if this is the optimal choice for you as a homeowner. If it is not, our professionals can also help you navigate an alternate refinance process and secure desirable rates that fit your budgetary needs. 

Benefit from a Refinance With Butler Mortgage

For over 25 years, Butler Mortgage has worked with both first-time and seasoned buyers wanting to own or refinance a home in Central Florida. 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.

Understanding the Different Property Types: Primary, Secondary, and Investment

Understanding the Different Property Types: Primary, Secondary, and Investment

No matter the type of home you wish to purchase, you can obtain a mortgage loan. However, which type of property you purchase will determine your overall investment as the property type typically affects the mortgage interest rate that you will receive as well as the down payment you will be required to make. Therefore, it is important to understand the differences between primary properties, secondary properties, and investment properties when you’re considering making a property purchase. 

The Different Types of Properties

Primary Properties 

Also known as a primary residence, this is the main home that you live in. From houseboats to mansions, anything can be your primary property as long as you live in it for most of the year. These properties usually qualify for lower mortgage rates, but there are strict requirements your property needs to meet in order for it to be considered a primary property. To qualify as your primary residence, your property must be a convenient distance from your work, listed on documentation like your voter registration or tax returns, and be occupied by you for a majority of the year.

Secondary Properties 

A secondary property, also referred to as a vacation home, is one that you live in for only part of the year. Typically, a secondary property may come with a slightly higher interest rate and possibly a larger down payment (10% is typical) than a primary property. You may also need a good credit score in order to purchase a secondary residence.

Investment Properties 

Typically a rental house or a condo, an investment property is a property that is intended to generate income. They usually require a larger down payment (20-25%) and come with a higher mortgage rate than the other types of properties. Investment properties typically require you to have excellent credit to finance and can be a bit trickier than other mortgage types, so it is recommended that you consult with a mortgage professional before investing.

Get the Right Mortgage for Your Property Type

If you need help finding the right loan solution for your primary, second home, or investment property, contact the professionals at Butler Mortgage. Having worked with both first-time and seasoned buyers in the Central Florida area for over 25 years, we can help you find a loan that perfectly suits your needs. For more information on our services, fill out our online form or call us at 407-931-3800 to set up your free consultation today.

Is a No Closing Cost Refinance Right for You?

Is a No Closing Cost Refinance Right for You?

It is not uncommon for homebuyers to experience sticker shock at the many fees and expenses associated with buying a home. Many customers expect to make a down payment in order to obtain a mortgage, but they often forget there are closing costs as well. Similarly, when refinancing a mortgage, there are also closing costs that need to be paid — either as a single lump sum at closing or by building the costs into your new loan balance. However, there is another option that some lenders advertise called a No Closing Cost mortgage loan. It is extremely important to remember the old adage, “There is no such thing as a free lunch” when considering such an option.

Does a “No Closing Cost” Refinance Exist? 

The short answer is yes. However, before considering a no-closing-cost refinance or any type of mortgage loan, it is important to understand what closing costs are. To put it simply, closing costs are the individual expenses that come with the purchasing or refinancing of a home. Closing costs may include:

Homeowner fees

Included property taxes, homeowners’ insurance, and the homeowners’ association dues

Lender fees

Costs associated with originating a loan and processing your application

Mortgage points

Fees you can pay to your lender to reduce your monthly mortgage payment and interest rate. Also known as discount points.

Third-party fees

Charges from the appraiser, title company, or credit services 

You may be wondering why there could be any downside to avoiding all of these fees with a No Closing Cost refinance. Well, remember the no free lunch adage. If a lender is going to magically waive all of your costs, they are going to have to recoup it in some other way. The way they do this is by charging you a higher interest rate. The difference in the rate may not seem too bad, but typically that translates to a higher payment that can cause you to spend tens of thousands of dollars over the life of the loan. It is important to consider whether it is beneficial to save $7-8K up front only to wind up paying $20K over time.  

Is There Another Way I Can Refinance Without Bringing Cash to Closing?

If cash is tight and you are hoping to benefit from a refinance with a lower rate and payment, you can usually include closing costs in the new balance. It will depend upon the equity position you have in your home, but in many cases you can include the costs. Even though the balance will be a bit higher, obtaining a lower rate will lower your payment. In fact, many customers lower the term of their loan so as to not go back to a 30 year loan and still wind up saving quite a bit in their monthly payment.  

To determine what loan option is best for you, consult with a mortgage professional. They can run different scenarios so you can decide which path works best for you. 

Rely on the Experts at Butler Mortgage

With over 25 years of experience in the mortgage industry, the professionals at Butler Mortgage are well-equipped to help first-time and seasoned Central Florida homebuyers find the right loan solution to match their needs. If you need help navigating the homebuying or refinance process, contact our mortgage experts today by calling 407-931-3800 or fill out our free consultation form online.

What Is DTI Ratio?

What Is DTI Ratio?
Debt-to-income ratio DTI blue marker underlined.

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

  1. 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. 
  2. 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.
  3. 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. 
  4. 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. 
  5. 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. 

What Is a Second Mortgage and How Does It Work?

What Is a Second Mortgage and How Does It Work?
Second Mortgage sign and key from home.

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.