Category: Blog

Should You Close Credit Cards Before Applying for a Mortgage?

Should You Close Credit Cards Before Applying for a Mortgage?

Obtaining an optimal and affordable mortgage rate depends on many factors, particularly your credit score. However, there has been a misconception that closing a credit cards could help improve scores, when it can do the opposite in some cases. Here are several ways to increase your credit score, become a responsible borrower, and improve your standing as a mortgage applicant.

Steps to Improve Your Credit

  1. Paying off or reducing revolving card balances. Lowering your credit utilization, or the ratio between credit used and credit available, is a substantial way to boost your credit score by several points. The lower your utilization percentage, the higher your credit.
  1. Paying for recent charges before the next statement date. By paying for recent charges in advance to your credit card statement, you show increased reliability to creditors and can maintain a low utilization percentage. Considering billing cycles are monthly, when you pay a portion of your statement several times a month, you accelerate the rate at which you’re building credit with the lowest possible utilization.
  1. Activating any rarely used cards. Keeping a credit card open for a longer period of time establishes a longer credit history, showing lenders you are a responsible borrower for various different obligations. Even if you’re charging small amounts, having an open card with a $0 balance can lower your utilization and improve your credit score.

Things That Impair Your Credit

  1. Closing credit cards.  Though it may not be immediate, if you close a credit card with a $0 balance you risk increasing your credit utilization and lowering your credit score by taking that card’s balance and credit limit out of the utilization equation.
  1. Buying a new car or paying off a car loan early. The number one thing that potential mortgage customers do wrong is buying a car right before applying for a mortgage loan. This not only affects the credit score, but it also adversely impacts the customer’s debt ratios. While paying loans such as cars reduces your debt, it does not affect your credit score enough to be a priority as far as paying off statements. Instead, it creates a less diverse credit mix, especially for a person with limited credit history, and makes it more difficult to qualify for a mortgage.
  1. Applying for or accepting a credit offer. A hard inquiry is the initial step in which lenders check your credit report, which creates a small negative impact on your credit for up to two years. Doing this right before applying for a mortgage raises suspicion amongst creditors, and the more hard inquiries made within a short period of time could label you as a high-risk borrower, increasing your mortgage rate.

Score a Secure Mortgage with Butler Mortgage

For a safe and reliable mortgage process, trust the individuals at Butler Mortgage. We’ve worked with first-time and seasoned buyers in Florida for more than 25 years and are proud to expand our services to Georgia. Call 407-931-3800 or fill out our free online consultation form to get started today.

Mortgage Closing Scams: How to Protect Yourself and Your Closing Funds

Mortgage Closing Scams: How to Protect Yourself and Your Closing Funds

Closing on your house is the final step toward homeownership. However, this exciting time can quickly become stressful if scammers con you into a phishing scheme. Here are some ways to identify a closing scam and protect your assets from scammers.

Types of Closing Scams

Scammers recognize how large the real estate market is. If they manage to get hold of your contact information, scammers posing as your realtor or mortgage lender will send you fake emails with false instructions on how to pay your closing costs. Instead of paying the correct party, you could accidentally forward hundreds or thousands of dollars to the wrong account.

Protecting Your Closing Funds

There are several tips to avoiding phishing schemes. During the closing process, you should:

  • Solidify identities and protocol: Before you close, identify two trusted individuals who can confirm the process for transferring money. Write down their contact information so you have it on hand.
  • Confirm instructions: Before you transfer money, verify the instructions you receive over the phone or email with your trusted individuals. That way, you’ll be able to confirm they’re the ones who sent the instructions.
  • Don’t exchange sensitive information over email: Avoid using contact information, such as phone numbers or links. If a scammer is able to read your emails, they can replicate the information and con you into trusting them. It’s also never a good idea to send financial information over email; it’s not secure and could compromise your finances.
  • Know what your closing costs are: You will receive a Closing Disclosure that should match your initial Loan Estimate. Make sure that your closing agent provides you with a balanced disclosure before transferring any money. If the information looks incorrect, verify it with your team. 

Secure Your Mortgage with Butler Mortgage

For a safe and reliable mortgage process, trust the individuals at Butler Mortgage. We’ve worked with first-time and seasoned buyers in Florida for more than 25 years and are proud to expand our services to Georgia. Call 407-931-3800 or fill out our free online consultation form to get started today.

Home Buying Help: How Down Payment Assistance Programs Work

Home Buying Help: How Down Payment Assistance Programs Work
Happy young couple lying on the floor at new home

Buying a home for the first time is an exciting process, but it can be stressful if you don’t know whether or not you can afford your down payment. Fortunately, there are several down payment assistance programs that you may apply for through public or private support. 

What Is a Down Payment Assistance Program?

Down payment assistance programs are available to first-time homeowners or those who haven’t owned a home in the last three years and don’t own rental or investment properties. Such programs are offered in a variety of ways and are either run by government agencies or nonprofits. 

Common Types of Down Payment Assistance

Some of the most popular types of down payment assistance programs include:

  • Grants – Grants are a beneficial form of payment because they don’t have to be repaid. It’s important to read the fine print on grants because it may create a lien on your property.
  • Loans – Loans can either be:
    • Forgivable – You won’t have to repay the loan as long as you stay in the home for a certain amount of time. Forgivable loans are helpful if you don’t plan on moving for a long time, but you will have to repay them if you move before your forgiveness period is up.
    • Deferred-payment – You won’t have to repay the loan until you move, sell, or refinance.  Deferred-payment loans aren’t forgiven, but they’re usually covered through selling your home.
  • Matched savings programs – These programs are funded when homeowners deposit money into an account with an organization, and the organization agrees to match the homeowner’s deposit. The money accumulated in this account helps finance the down payment. It’s a wise choice if you’re able to put some money down, but need assistance in financing the rest.

How to Qualify for Down Payment Assistance Programs

Most first-time homeowners qualify for down payment assistance if they have a minimum credit score of 620 and do not exceed the area’s income limit. Some programs may require you to take classes on finances, and you may have to live in the home for a certain amount of time.

Finance Your Home with Butler Mortgage

If you’re a first-time homebuyer looking for a perfect mortgage solution, look no further than Butler Mortgage. We’ve helped homebuyers for more than 25 years in Florida and are proud to bring our services to Georgia. Fill out our free consultation form online or call us today at 407-931-3800 to get started.  

How Mortgage Amortization Works

How Mortgage Amortization Works
Loan amortization paper plan lying at worktable ready to be filled close-up

Mortgage amortization is the process of eliminating your mortgage debt with regular, fixed schedule payments that gradually chip away at both the interest and principal balance over time. But how exactly does mortgage amortization work?

The Mortgage Amortization Process

To understand how mortgage amortization works, you must first know the difference between paying interest and paying off your loan’s principal balance. A monthly mortgage payment will cover a percentage of both your interest and principal. The interest rate of a mortgage is the fee lenders charge you to take out a loan. Interest is added on top of the principal balance, or the amount that you initially borrowed. 

At first, your mortgage payments will go mostly toward your interest and less toward your principal. However, as your loan balance decreases over the months and years, the amount that a lender can charge for interest decreases as well, thus causing the portion of your payment going toward principal to increase. Eventually, toward the final years of your loan, your interest will be just a small part of your monthly payment, and you will notice your balance going down rapidly. 

To figure out how much goes to each in a particular month, divide your interest rate by 12 (the number of payments you will make in a year). Then multiply that number by your current balance. For example, if your rate is 6%, divide .06 by 12, which equals .005. If the balance is $200,000, then $200,000 x .005 = $1,000.00. That is the amount of interest you will pay that month.

Why Is Mortgage Amortization Important?

Mortgage amortization is crucial because it helps you figure out several important aspects of your finances. Mortgage amortization allows you to:

  • Factor how much of each payment goes toward interest and principal
  • Know how much interest you’re paying
  • Track your loan balance
  • Calculate your home equity

By analyzing an amortization schedule, you can discover which mortgage payment strategy works best for you. Understanding your mortgage amortization also helps you plan for the future and take the quickest path toward debt-free home ownership.

Finance Your Home with Butler Mortgage

To navigate the mortgage process, partner with the experts at Butler mortgage. We’ve served first-time and seasoned buyers for three decades in Florida and are excited to now bring our loan solution services to Georgia as well. To secure the best rate that fits your budget, call us at 407-931-3800 or fill out our free online consultation form. 

Mortgage Closing Costs: How Much You’ll Pay

Mortgage Closing Costs: How Much You’ll Pay
Couple asking for loan

The process of buying a home involves many fees and costs. In fact, one of the final steps toward owning a home is paying your closing costs, which are the fees for finalizing a mortgage. 

Here’s how much you can expect to pay for closing costs.

How Much Are Closing Costs?

While the total amount will be different for each homebuyer, and each loan program, closing costs will typically range anywhere from 2-6% of your loan amount. For example, if your mortgage is a $200,000 loan, you’ll pay anywhere from $4,000 to $12,000 in closing costs. This is in addition to the down payment you’ll make. 

What Is Included in the Closing Costs?

Most closing costs are the responsibility of the buyer, but you can negotiate with your seller to pay some of them as a concession. The most common closing costs sellers are expected to pay include real estate commissions, property taxes, and title insurance. However, homebuyers are generally responsible for paying closing costs such as:

  • Property taxes
  • Appraisal fees
  • Discount points
  • Escrow account funds (taxes, insurance)
  • Government recording fees
  • Loan-origination charges
  • Mortgage insurance
  • Survey fees
  • Credit report fees
  • Title fees

How Do I Pay Closing Costs?

The most typical method of paying closing costs is to pay out-of-pocket on the settlement (or closing) date. This one-time expense will cover all of the closing costs. In some instances, such as when refinancing your loan at a later date, you can include closing costs into the new mortgage loan. 

Calculating Closing Costs

Once you’ve applied for your mortgage, lenders will provide an estimate of closing costs and other fees. They’ll automatically determine the costs for you, so you can review it closely and ask questions. This also gives you the opportunity to negotiate certain fees with your seller and the lender to lower some of the closing costs. Reviewing your loan estimate and working with your lender assures you’re getting the best deal possible.

Important Note About Closing Costs

All mortgage loans have closing costs. Do not fall for misleading “no closing costs” advertising. The costs are there, but they may be hidden, usually in a higher interest rate. What good is saving $10,000 in closing costs if you have to pay an extra $25,000 in interest over the life of the loan? There are times when paying a higher rate to avoid paying some, or all, closing costs is beneficial, but make sure to discuss that situation with an experienced mortgage professional.

Close with Butler Mortgage

Closing on a home can be an exciting time, but it can also be nerve-racking. When financing your home, you’ll want a mortgage lender with expertise and experience to keep the process as uncomplicated as possible. For homebuyers in Florida or Georgia, Butler Mortgage is here to help. 

For more than 25 years, our mortgage professionals have helped homeowners find their perfect loan solution. Start your mortgage process today by calling 407-931-3800, or contact us through our free online consultation form. 

Why to Get a Home Inspection Report When Buying a Home

Why You Should Get a Home Inspection Report When You Buy a Home
Repairmen, building inspectors, exterminators, engineers, insurance adjusters, or other blue collar workers examine a building/home’s exterior wall and foundation. One wears a red hard hat and clear safety glasses and holds a clipboard. The other checks the foundation with tool.

When buying a home, you’ll need to do your homework to ensure the property you’re purchasing is in its best condition. Here’s why you should get a home inspection report before closing on a home. 

What Is a Home Inspection Report?

While a property inspection isn’t mandatory, it is usually recommended after your purchase offer has been accepted. A licensed professional will conduct a thorough walkthrough of the house, looking for issues that could delay your closing date, such as structural issues, leaks, or electrical or wiring problems. The inspector will also be looking for termite damage, roof damage, or any other problems caused by the elements.  

Benefits of a Property Inspection

The biggest benefit of conducting a home inspection report is discovering and addressing any large problems with your prospective home before you buy it. A thorough home inspection report will allow you to determine if the property has any underlying issues that the seller should address. 

After the inspection, you can sit down with the seller to discuss these issues and determine who will pay for repairs prior to your purchase. This allows you to be proactive in fixing up your property and will save you time and money in the long run by correcting issues before they get worse. 

Your seller may be willing to pay for more of the required repairs, or they may even be willing to negotiate for a lower purchase price. 

How Home Inspections Affect Mortgages

Knowing your property issues in advance can also save you time and money throughout the mortgage process. If your property has multiple problems, it can make getting a mortgage more difficult. This could result in a larger down payment, a smaller loan, or even a rejected mortgage. By getting a home inspection report before you apply for your mortgage, you can fix any growing problems and receive the best possible mortgage for the home of your dreams. 

Get the Right Mortgage with Butler Mortgage

To navigate the mortgage process and get the best possible rate, finance with Butler Mortgage. We’ve worked with first-time and experienced buyers in Florida for more than 25 years, and we’re proud to expand our professional services into Georgia. 

Find your loan solution today by calling 407-931-3800 or filling out our free consultation form online.

How to Take Cash Out of Your Home

How to Take Cash Out of Your Home

Equity occurs when your home’s value is greater than the amount left on your mortgage. When you access your equity, you take cash out of your home that you’ve worked hard to build so this should only be done for important reasons. This money can be used for a variety of purposes, such as helping you invest in your home’s future, through home improvement projects. 

Here are a few ways to take cash out of your home.

Cash-Out Refinance

Refinancing your home is an easy way to take cash out. When you refinance, the new mortgage will be greater than your current mortgage balance, but you’ll get to keep the difference, after paying closing costs. The best time to employ this method is when you can also reduce your interest rate. In some cases, you may increase your balance, but the monthly payment actually goes down due to a lower rate. When rates are higher than your current rate, this option is not as advisable.

Home Equity Loan

If you don’t want to mess with your current mortgage, you can take out a home equity loan or a home equity line of credit (HELOC). Each of these is a second mortgage taken out on your home that allows you to access equity. Once a home equity loan closes, you’ll receive the payout. When a HELOC closes, you can access it whenever you want, making this a great option for someone who isn’t quite sure when the money will be needed. Home equity loans can be a fixed or adjustable rate loan and usually has a shorter term than a traditional mortgage. It allows you to access exactly what you want without refinancing, and it has substantially lower closing costs. 

Reverse Mortgage

If your mortgage is paid off or has a low balance, a reverse mortgage might be right for you. You access your home equity by receiving a lump sum or electing to receive a set amount every month. It is exactly as the name implies… reverse. The lender pays you! You won’t have to ever make a monthly payment. The mortgage balance will increase over time, and it’ll be paid off when the property is sold or refinanced. For seniors, it can be a smart way to take out cash while continuing to own, and stay in your home.

Finance Your Home with Butler Mortgage

Butler Mortgage is here to help get you in a home so you can start building equity. For more than 25 years, we’ve been helping home buyers in Florida, and now Georgia, find the right loan solution and secure rates that fit their needs. Get started today by calling 407-931-3800 or filling out our free consultation form online.

How to Get Rid of PMI

How to Get Rid of PMI

If you secured your mortgage through a conventional loan, there is a chance you added private mortgage insurance, also known as PMI. PMI may protect your loan, but it can also cost you hundreds of dollars each month. Here is some information about PMI and ways you can save money by dropping it from your mortgage.

What Is PMI?

Private mortgage insurance protects your lender in case you default on your loan or go through foreclosure. PMI is usually required if you have a conventional loan and make a down payment of less than 20%, or if you refinance and your equity is less than 20% of your home’s value. The only benefit that you get from PMI is the ability to make a smaller down payment. 

How Much Does PMI Cost?

PMI depends on a variety of factors, just like your mortgage. The smaller your down payment is, the higher your PMI will be to cover your risk factor. A low credit score can also raise PMI since those with lower scores are more likely to default. However, fixed-rate loans will have lower PMI because they’re more predictable. Regardless of how high or low it is, your PMI can still be a few hundred dollars a month.

Ways to Get Rid of PMI

If you’re purchasing your home or refinancing, there’s a clear path to get rid of PMI. The first step is to build equity. You can’t cancel your PMI until your home equity reaches 20%. You can, however, raise your home equity by making loan payments. The second step is time. Most lenders require that you make 24 payments before being eligible to remove PMI, although some lenders allow removal after only 12 on-time payments. Once you’ve reached that 20% threshold and you have reached the required time threshold, contact your lender to get rid of PMI. 

For those refinancing their home, 20% home equity must still be reached to get rid of PMI. But after applying for your refinance and clearing all your paperwork, your new loan won’t include PMI.

Contact Your Florida and Georgia Mortgage Experts

Whether you’re a first-time or experienced buyer or looking to own a home or refinance, secure your home loan through Butler Mortgage. We’ve worked with potential homeowners throughout the states of Florida and Georgia for more than 25 years. We are ready to help find the best loan solution for you. Call us today at 407-931-3800 to schedule an appointment or fill out our free consultation form online. 

Should You Rent or Buy a Home?

Moving into a new home is a major life decision that requires much thought and research. When deciding whether to rent or buy a home, you should consider where you want to be in the next 5-10 years. If you just need temporary housing, perhaps renting is your best option. However, owning a home is an investment that can reward you in the long run. 

Here are some pros and cons of renting and buying a home.

The Benefits of Renting a Home

The biggest benefit of renting is your lower overall commitment to the property, both personally and financially. Since you are a tenant and not the owner, the responsibility of handling maintenance issues that often burden homeowners will fall on your landlord or property management company, unless specified otherwise in your rental agreement. 

There also aren’t any expensive closing costs to deal with. You simply agree to pay a set price for rent each month as well as an upfront deposit to cover any damages — usually in the form of first and last month’s rent. Renting also gives you the freedom to move around and “test-drive” a location or style of home before deciding to buy. 

The Drawbacks of Renting a Home

Regardless of the freedom that renting offers, there are several downsides to renting a home. The biggest drawback to renting is instability. While your rent shouldn’t change throughout the year, there’s a strong chance it will increase when it’s time to renew your lease. Such uncertainty and upheaval can be stressful as rental rates and cost-of-living go up. Furthermore, many view renting a home as throwing money away. As a tenant, you’ll live in the home but will be unable to build equity. Therefore, your monthly rent is passive income for the property owner. 

Before committing to a rental agreement, make sure you know what maintenance services are included, what you are allowed to do to the property, and what you’ll need to pay for out-of-pocket. Renters are often not able to make any home renovations; you get to live in the property as is. And if you paint or redecorate, you’ll likely have to change it back before you move out. 

While renting can be a good temporary solution, buying a home can help you settle down and create a permanent living space. 

The Benefits of Buying a Home

Buying a home does require a higher overall cost and more responsibilities than rentals; however, it is an investment in your future — and quite possibly the best investment you can make. You can receive tax deductions for the interest and property tax portions of your mortgage payments, and as you pay your mortgage and complete home improvement projects, your home’s equity and value will increase. You’ll also have unlimited freedom to decorate your house’s interior to make it feel more like home. 

With monthly rental costs increasing, it makes more sense to invest your money in a home. By working with a mortgage professional to find an affordable rate, you can possibly become a homeowner for around the same amount that you would be paying for rent each month.

Find Out Your Home Buying Options at Butler Mortgage

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

4 Practical Reasons to Use Home Equity

four ways to use home equity

Home equity is technically the amount of your mortgage that you’ve paid off. Your home’s worth is weighed against what you still owe, so as your home’s value increases and your mortgage sum decreases over time, your home equity will grow. 

If your financial situation needs assistance, your home equity can be tapped into to provide a low-cost and convenient way to pay for major life milestones. 

Ways to Use Home Equity

With few limitations, home equity loans are an easy and safe way to receive a large cash sum to help pay for various expenses. 

Here are a few common reasons why homeowners tap into their home equity.

  1. College Loans – Using your home equity may be a better option than taking out traditional student loans. In some cases, mortgage interest rates are lower than student loan rates. Student loans may also have a shorter term, making it harder to pay back. A home equity loan is a great way to receive a low-cost loan with plenty of time to repay.
  1. Debt Consolidation – While it isn’t always advisable to turn short term debt into long term debt, there are times when simplifying credit card bills, student loans, car loans, and other debt into one payment makes sense. Credit cards can carry extremely high interest rates, making repayment of large balances rather difficult. Consolidation creates breathing room for the borrower, but is only successful if the borrower changes their spending habits to avoid getting into serious debt all over again. 
  1. Emergencies – Nothing adds a financial strain more than a medical or family emergency. Sudden unemployment or injury can cost you a significant amount of money in a short amount of time. Home equity loans are a good short-term solution to temporary financial distress.
  1. Home Improvements – One of the most common reasons to use home equity, home improvements are a wise way to invest your equity as it can feed back into your home’s equity by increasing your property value. 

There are a myriad of other reasons to obtain a home equity loan, such as buying a car, paying for a daughter’s wedding, or financing another home. However, it would be advisable to discuss your reasons for using your home’s equity with a qualified mortgage loan professional before starting that process.

Secure a Home and Build Equity with Butler Mortgage

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