Pinal County Down Payment Assistance, Bond Program

Did you know that if you are a first-time home buyer in Pinal County, Arizona, you may be able to obtain down payment assistance for as much as $20,000?

Sounds too good to be true? Well, it is indeed very true. However, not every Pinal County home buyer is eligible. And you need to understand the true definition of "first-time home buyer" as it applies to this program.

Firstly, first-time home buyer as it pertains to this DPA (down payment assistance) program means that you must not have owned a home within the past 3 years. How the heck would anyone be able to confirm that? Simple. The lender will require that you provide your last 3 years of federal income tax returns.

You must also satisfy additional eligibility requirements including falling within specified family household income limits, as well as not exceeding specified purchase price limits.

And did you also know that an interest rate reduction bond program is available to Pinal County, first-time home buyers? The eligibility requirements for this program are the same as for the down payment assistance program.

There are also a few other resources out there including Pinal County Down Payment Assistance and Pinal Bond Program.

What is PMI (Private Mortgage Insurance)?

PMI (or Private Mortgage Insurance)

is usually required when you purchase a home with less than a 20% down payment. Designed to protect lenders against the costs of foreclosure, PMI is most often provided by private mortgage insurance companies, such as MGIC (Mortgage Guaranty Insurance Corporation), GE Mortgage Insurance, et al.

PMI is an additional expense typically collected with your monthly your mortgage payment. The cost (monthly premium) of PMI varies depending upon the size of the down payment or, from the lenders perspective, by the Loan-to-Value (LTV). The cost of this monthly premium is higher for lower down payments.

Can PMI ever be cancelled? Yes, here are a few common ways:

Once you feel that the mortgage balance as a percentage of your current home value is at least 80% (Loan-to-Value or LTV), you may contact your lender or mortgage servicer. In most cases, an appraisal will be required to determine the value of your property, the cost of which you can expect to pay. Although there is no law requiring lenders to remove PMI even if an appraisal supports a value of your home sufficient to bring the LTV down to 80% or less, many lenders may do so, after taking additional information into consideration, such as your mortgage repayment history. If you've been late on your mortgage, that may have a serious impact on the decision to remove PMI.

Another thing you may do is try to refinance into a new loan without PMI as long as the appraised value on the new loan supports at least an 80% Loan-to-Value.

Is PMI tax deductible? As of January 1, 2007, Congress passed a bill making Private Mortgage Insurance a tax deductible item for new borrowers whose adjusted gross annual income (personal) is at or below $100,000. The benefit for millions of new homeowners is a potential savings of hundreds of dollars in reduced tax liability (thereby reducing the cost of financing) or an opportunity to afford a slightly more expensive home. Consumers can now breathe a little easier in their dislike of this much maligned mortgage related expense.

Five Components of Credit Scoring

In order of importance:

Payment History. Perhaps the most important factor. Repayment of debts on time and in full is a big plus. Late payments, judgements, charge-offs, etc. as you can imagine can significantly reduce one's score. Delinquencies within the most recent 2 year period affect score more than those that are much older.

Outstanding Credit Balances. Almost as important as payment history. The higher the balance as a percentage of the available limit, the lower the score. Better to keep outstanding credit (particularly revolving debt, such as credit cards) balances below 30% of available.

Length of Credit History. As it pertains to when credit for a particular debt was established. Generally, the older the debt (i.e. a car loan, mortgage, etc.), the better. Thus, a borrower who has a lengthy history of satisfactory debt repayment, is a lower risk and therefore have a higher score than one who recently opens credit accounts for the first time.

Type of Credit Used. A variety of different types of debt (installment and revolving - mortgage, car loan and credit cards) is better than a concentration of a particular type of debt obligation (revolving only - credit cards).

Credit Inquiries. The number of times a credit report is "pulled" for a consumer within the preceding 6 month period can reduce the credit score. More than 10 inquires in a 6 month period should have no further impact on a borrower's credit score. Each inquiry, can reduce a consumer's credit score anywhere from 2 to 50 points.

When it comes time to buying a home, mortgage applicants would be well advised not to go out on a shopping spree for furniture or any other big ticket items. Borrowers should always exercise extreme caution in continuing to manage their credit practices throughout the loan process.

How Does Credit Affect My Mortgage Rate?

Good Credit Equals Lower Mortgage Loan Rates.

Over the years, I am often asked whether or not credit impacts the interest rate one can obtain from a mortgage lender. I always give a resounding yes. In fact, good credit not only means that you "should" get lower rates on most types (mortgage, car, personal) of loans, but it also opens the barn doors to all types of credit possibilities.

Why exactly is this the case? Back in the day (we're talking the 1960s) the Fair Isaac Corporation developed a scoring system which lenders could rely upon to determine the probability of timely repayment of loans. Before this, lenders had not much more than a man's (or woman's) word, upon which to rely.

A few decades later, how things have changed. Credit scoring is a lender's first line of defense. Although loan decisions are not made soley on a consumer's credit score (in theory), it can definitely put a damper on a consumer's ability to borrow money, as well as the cost of borrowing money. FICO scores can range from 350 to 850, the higher the score, the better.
I have recent studies indicating that only 1 out of 1300 people in the U.S. have a credit score above 800, whereas 1 out of 8 prospective home buyers have a credit score between 500 to 600.

Take a look at the chart below which illustrates how credit score can affect the interest rate.

For more information, contact a qualified lender.

Annual Percentage Rate (APR): What does it mean?

Calculated by using a standard formula, the APR shows

the cost of a loan expressed as a yearly interest rate and includes the interest, points, mortgage insurance, and other fees associated with the loan. Because the APR takes into consideration all of these costs spread over the term of the mortgage, it is supposed to reflect for the consumer, the "true" cost of borrowing money. It also prevents lenders from hiding fees and any upfront costs from consumers.

All mortgage lenders and brokers are required by federal law to disclose the APR to consumers who apply for a mortgage in a diclosure called the Federal Truth-in-Lending. The APR was conceived as a way for consumers to compare the cost of borrowing among different lenders. However, the way in which the APR is calculated is not neccessarily the same from lender to lender, making this a less-than-perfect method of cost comparison shopping. Additionally, the APR does not take into account loan pre-payments, including early pay-offs.

APRs for Adjustable Rate Mortgages (ARMs) or for Balloon mortgages are less credible as there is no way to know exactly what the interest rate will be during the term of the loan. Thus, certain assumptions about the rate changes are made for the purpose of calculating APRs on ARMs and Balloons.

Therefore, consumers should consider other factors when deciding with which lender they should apply. Those may include the integrity and knowledgeability of the loan officer representing the lender or how long they plan on holding the loan.