What To Ask About How Loan Application Data Is Kept Private

What To Ask About How Loan Application Data Is Kept PrivateAfter hackers breached Equifax and stole vital financial records of 145 million Americans, people have a right to be afraid of disclosing personal information. That’s why it’s imperative that lending institutions to do everything in their power to protect your privacy.

When a prospective home buyer submits a loan application, defining information such as date of birth, home address, social security number, credit cards, bank accounts, and pay stubs are included. Basically, everything a hacker needs to penetrate an individual’s financial world is disclosed on a loan application.

If you are applying for a mortgage, get answers to these and other questions before handing over information. Hackers are too skilled at breaking into computer systems and the financial risk is too high to take any chances.

Does The Lender Take Submissions Via Email?

With the flurry of high profile email hacks making headlines, it may surprise borrowers that some lending institutions continue to take data via email.

Some estimates say that upwards of 70 percent of lending institutions routinely use email during the application process. When an applicant doesn’t have a bank account or credit card number handy, some lenders will take it electronically to complete the process. This is a major misstep.

Despite efforts to protect email, it continues to be a doormat for hackers to breach systems and steal data.

Does The Lender Use Encryption Software?

Although there is no perfect method to protect online data, many companies enlist the help of high-level IT personnel to maximize security. One of the better standards is the use of encryption.

When files are encrypted, the data enjoys two-tier protection. First, the hacker would need to breach the system to lift financial and personal information. Even if the internet criminal manages to steal data, they will be tasked with decoding it.

Breaking encryption software acts as a strong protection and future deterrent. Hackers tend to go after the low-hanging fruit. Ask about encryption protocols when applying for a loan.

Does The Lender Share Information?

The days of lenders sharing and selling personal information without consent are over. Under the Gramm-Leach-Bliley Act, banks must provide applicants with a disclosure form that states information sharing policies.

Don’t be startled that the form lists third parties who will review your information. Banks often reach out to businesses in their network when making a determination about loan approval or rejection. Nothing happens in a vacuum so to speak.

But take the time to review this form carefully. If you do not feel comfortable with some of the outfits on the list, trust your instincts and walk away.

Ask About The Lender’s Data Protection Policy

Data protection has emerged as a significant problem. For every new protection program a hacker will find away to breach it.

Cybersecurity has grown into a major business sector and borrowers would be wise to ask about a lending institution’s policies, protocols and investment into data protection. Compare how each company addresses threats and make an informed decision about who can be entrusted with critical personal and financial information.

Your trusted mortgage professional is an essential part of your home buying experience. Be sure to ask these questions to increase your confidence in this important partnership.

4 Things You Should Know About Conventional Mortgage Rates

4 Things You Should Know About Conventional Mortgage RatesSecuring the best conventional mortgage rate possible can pose a challenge for even veteran property buyers.

Your mortgage rate will be determined by a variety of factors that pertain to your unique financial portfolio as well as economic forces. While no one has full control over all of the things that influence the process, understanding the manageable aspects can improve your negotiation position when securing a conventional mortgage.

Consider these four things that impact how conventional mortgage rates are determined.

1: Credit Is King

A borrower’s credit score has a tremendous impact on the final mortgage rate. The general rule is that the higher the score, the lower the rate. The opposite generally holds true as well.

Lenders usually require a minimum credit score of at least 620. Some will dip as low as 580. If yours falls lower, qualifying for a conventional loan may not be an option. But the good news about credit scores is that this is an element you have control over.

A credit report details your repayment history, previous loans, credit card and financial bandwidth, so to speak. Before mortgage shopping, get a copy of your credit report, clean up any blemishes and amp it up as high as possible.

2: Economic Growth Matters

The average home buyer has zero control over the economic forces that impact mortgage rates. But you do have choice about when to buy.

It’s no secret that the country is in the midst of tremendous GDP growth, historically low unemployment, improved consumer confidence and rising wages. This may seem like a good time to buy. Not necessarily when it comes to conventional mortgage rates.

Prosperity tends to create an uptick in consumers vying for home loans. That demand seems like a good thing. But the Fed often responds to high levels of consumer confidence by raising rates across the board. The theory behind this unfortunate environment stems from the idea lenders have limited resources.

It may seem counterintuitive, but weak economies often enjoy lower rates. For practical buying purposes, the U.S. economy looks like a juggernaut right now. You may want to buy sooner rather than later. Rates could go up again.

3: Price And Down Payment

Another set of facts that you have control over are the down payment amount and price of the home.

Conventional mortgages require a minimum down payment of 20 percent or higher. Like credit scores, the higher the down payment to better positioned you will be to secure the lowest possible rate. The basic concept trails back to the level of risk the lender takes by writing the loan.

For example, borrower defaults often force banks to take losses upwards of 30-60 percent of the loan. That 20 percent shows that you have real skin in the game and are less likely to stop paying the monthly premiums. Big down payments often correlate to lower mortgage rates.

Although 20 percent remains the industry standard, borrowers can secure a loan with less down. If you qualify for a conventional loan with less than 20 percent down, expect a less than desirable rate and the additional cost of private mortgage insurance. It’s kind of a double whammy.

4: Loan Types Differ

There are several variables in the loan-writing process that directly impact rates.

Most loans have terms of 15-30 years and lenders are more apt to offer lower rates on shorter term mortgages. Fixed- or adjustable-rate types are also profoundly different. Adjustable mortgages tend to enjoy lower rates in weak economies. But when the country ramps up, so does your interest rate and monthly premium.

Fixed-rate conventional mortgages are static throughout the life of the loan. The rate may be slightly higher at the closing. However, you won’t be betting against the economy.

Lastly, borrowers have the ability to buy points. This practice allows borrowers to pay more upfront costs and enjoy lower mortgage rates for the life of the loan. It’s one method some people use to overcome less-than-perfect credit scores.

As always, contact your trusted mortgage finance professional to discuss the best plan for your individual circumstances.

Does Private Mortgage Insurance Make Sense For You?

Does Private Mortgage Insurance Make Sense For YouIf you are reading this article, it’s entirely possible that you are considering buying a home. It’s also likely that you are weighing certain financial options between a sizable down payment or taking on the expense of mortgage insurance.

It’s important to understand that private mortgage insurance (PMI) helps mitigate the lender’s risk. It has little benefit to the homeowner, other than help facilitate the mortgage approval process. Home buyers would be well advised to understand the complexities of PMI because not everyone needs or can afford the additional cost.

Do You Need PMI?

PMI reduces the lending institution’s loss in the event a borrower cannot make payments. Homes that fall into foreclosure reportedly cost lenders upward of 60 percent of the remaining loan’s balance. That’s a significant amount of red ink in any ledger.

This reality prompts lenders to require buyers to purchase PMI when they cannot offset any potential loss with a 20 percent down payment or more. But keep in mind, the “20-percent” standard can be a bit misleading.

When a mortgage company considers your application, there are several factors at work beyond the size of your down payment. Banks scrutinize credit scores, repayment and bankruptcy history, as well as the types of mortgage programs that may be suitable. 

Those who are required to purchase PMI should also keep a close watch on the repayment process. Once the mortgage balance dips below 80 percent of the home value, you may be able to end the PMI requirement.

Consider someone buying a home below market value. If you purchase the property at 90-percent of its value and put 10 percent down, the 80-20 threshold may be met in the lender’s eyes more quickly. In some cases the PMI can be eliminated after meeting the 80% loan to value, usually after a period of time in the loan.

The flipside is that a lender can require PMI even after the 80-20 measure if the borrower is considered high risk or has poor credit history. Yes, it’s complicated and you would be wise to sit down with a home loan professional.

What Is PMI And What Does It Cost?

In many respects, PMI functions like many other types of insurance. The purchaser makes payments and the insurance company pays out in the event of a loss, meaning loan default.

Just like the factors that go into the PMI requirement, the method of arriving at a cost can also be complex. Down payment amount, home value, credit score and history will all be considered. Home buyers can often lower rates by increasing their initial down payment. In most cases, PMI premiums generally run between 0.3 and 1.5 percent.

There are two standard methods of paying the annual PMI. In most cases, it simply gets rolled into the monthly mortgage installments. In some instances, the sum can be paid upfront. This may open the door a crack to lower annual pricing.

The true value of PMI to a borrower remains its ability to help gain loan approval when you might otherwise be rejected. If you are considering purchasing a home, it’s important to speak with a mortgage professional about your options.

Top Uses Of A HELOC

Top Uses Of A HELOCHomeowners who have equity built up in their homes can tap into that equity using a home equity line of credit, or HELOC. This financial tool can be a great way to accomplish a number of financial goals.

Here are four excellent uses of a HELOC for homeowners to consider.

Consolidating Costly Debts

Credit card debt and other types of consumer loans are costly, unless a debtor is lucky enough to have a no-interest card. Borrowers can consolidate that debt into a HELOC, which is much more affordable because it is a secured debt.

This advantage only works if the borrower stops adding to the debt problem. A HELOC becomes a valuable tool to get rid of debt quickly when used properly.

Create An Emergency Fund

Most people do not intend to end up in credit trouble, but emergencies happen. Emergency home repairs, job loss, or car repairs can quickly add up to unwanted debt.

A HELOC provides homeowners the option to have an emergency fund. Should one of these emergencies pop up, the homeowner can use the HELOC for an affordable source of funds.

Home Repairs That Add Value

Some home repairs add value to the property, but are also expensive. A HELOC can provide a source to fund these repairs. Because they put value back into the property, homeowners may be making wise use of their equity when using the HELOC in this way.

To make this work well, homeowners should choose repairs that do add to the home’s value. Since the cost of the repairs comes from the equity, the home’s owner should recoup the costs later when selling the home.

Funds For Investing

Finally, homeowners can use funds from a HELOC to get started in investment. This is risky, because the loan is paid regardless of how successful the investment is, but it can give a homeowner the chance to start investing for the first time.

Similarly, retirees can sometimes use HELOC funds to supplement retirement income if investments are struggling. This is a temporary solution to give investments a chance to recover, but for those living on a fixed income it is very helpful to have this option.

The HELOC is a valuable tool for homeowners that allows them to tap equity when it is needed. Since they have spent years building up this equity, homeowners should not fear using it when it can help with their financial goals.

Contact your trusted loan professional to find out if a HELOC may be right for you. 

Seller-Paid Closing Costs In A Seller’s Market? Yes, It’s Still Possible

Seller-Paid Closing Costs In A Seller's Market Yes, It's Still PossibleFor first-time home buyers, closing costs are a major hurdle for home ownership. Coming up with a down payment and several thousand dollars for closing costs can be hard without home equity to tap.

To help, buyers often ask sellers to cover all or some of these costs. In markets favoring buyers, this is a common habit, but when the market switches to favoring sellers it becomes harder. Sellers who know they may get multiple offers are less likely to say “yes” to this request.

Yet even when the market favors sellers, buyers can still ask for this help. It all depends on how the offer is presented. Here’s how to potentially make it look appealing, even with other offers on the table.

Buyers Need To Consider The Total Amount

Many sellers build negotiation room into their asking prices. This means they anticipate some offers coming in that are lower than their asking price.

Buyers asking for closing costs can offer the full asking price or more than the asking price to make the offer more appealing.

For example, if the buyer needs $2,000 in closing costs, and offers $2,000 more than the asking price, the seller won’t stand to lose money and will find the offer more appealing. This, in effect, rolls the closing costs into the loan.

On the flip side, if a buyer makes an offer well below the asking price, then also asks for closing costs, the seller is likely to say no.

Buyers Should Consider Other Components Of Their Offer

Sometimes the problem the buyer faces is a lack of cash to cover the closing costs, particularly when using a no- or low-down payment loan option. To make the offer more appealing, buyers should look at the rest of the offer’s terms.

For example, a buyer may ask for closing costs but overlook other contingencies, such as non-urgent repairs. This makes the offer appealing, because the seller’s costs even out.

Buyers Can Offer To Close Quickly

Another way to make seller-paid closing costs something a seller will accept is moving the closing date up. Most sellers want to sell quickly, so the faster the buyer can close, the better the offer may look.

For buyers in a seller’s market who need closing cost help, the key is to make all other aspects of the offer appealing. By doing so, these buyers may just get the closing cost help they need to move forward with their home purchase.

One of the best things to do before entering into negotiation is to have your mortgage funding pre-approved. Contact your trusted home loan professional to get started today.

RISING RATES, MORTGAGE AFFORDABILITY, & REAL ESTATE PRICES

HouseRising interest rates have been a hot topic in the news lately! Following the housing market crash just a decade ago, the U.S. Federal Reserve has worked to keep interest rates low, providing easy access to credit to encourage housing market activity. More recently as the economic climate has continued to improve, changes in the Fed’s policy include raising interest rates. For prospective homebuyers, rising rates may put some pressure on finding a home sooner. Below is some perspective on what rising rates mean for mortgage affordability, along with how they affect the real estate market and housing inventory in areas around Buncombe County.


AUTHORED BY: Cameron Lewis, Branch Manager for Acopia Home Loans in Asheville NC. NMLS 112509

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Interest rates have risen over the last year and are continuing to rise much in part due to the continued forecast of economic growth and the Federal Reserve’s current stance on monetary policy.  Yet rates are still very low from a historical perspective (see FRED Economic Data/St. Louis Fed Graph). It appears that an average 30-year fixed rate over the last 40-plus years is somewhere in the 8% range (65-70% higher than current levels).

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Nonetheless, let’s look back over the last year to see how the increase in rates has affected home affordability.  See the below chart from Keeping Current Matters.  These figures are obviously not exact and don’t include down payment, taxes, insurance or mortgage insurance. But the point is this: rates have risen about .75% from last June to now and it significantly impacts one’s ability to purchase.  Look at the impact this 20% increase in interest rate and 5% increase in purchase price has on one’s housing payments for a $250,000 loan over 30 years – just over $64,000!  Keep in mind that many of our markets in the WNC region have appreciated at a higher pace than 5% over the last year so the cost of waiting could have been greater. 

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For the family in this example to keep their principal & interest payment at or under $2,000 a month, they would have to lower their loan amount from $250,000 in 2017 to $229,000 in 2018.  That is roughly an 8.5% decrease in purchase power.  If interest rates and home prices continue to climb it could significantly reduce one’s buying power even further. What will this comparison look like from ’18 to ’19? Will rates be in the 5.50% range? There’s no way to know for sure, yet it’s generally accepted by economists that rates will continue to rise.


AUTHORED BY: Collin O’Berry, Managing Broker of the Altamont Property Group with Keller Williams Realty in Asheville NC. NC License 274582.

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While it’s expected that rate increases will continue, their effect on home values isn’t necessarily a direct correlation. Some would expect prices to decline as rates rise.

In Buncombe County, the real estate market has been experiencing fewer home sales over the past 12 months, down approximately 5 % thus far in 2018 in comparison to 2017. General inventory levels are the most likely culprit for this sales pace. At the same time prices have continued to rise, with prices in Buncombe County up over 10% from this time in 2017. These numbers suggest more of the same – price appreciation and similar levels of inventory for the foreseeable future. Also, the Asheville market draws a wide range of buyers across age groups and income levels, including primary owner occupants, retirees, investors and second home owners. This diversity in market activity is another factor contributing to price appreciation.

I hear weekly where buyers voice concern about real estate prices and desire to wait until property values stagnate. While these are valid concerns, it’s important to pay attention to inventory levels as indicators of where prices are trending in different segments of the market. In Buncombe County, inventory levels are very low in the more affordable segments of the market (300k and less) and buyer demand has continued to be strong. The cost and scarcity of quality building land means builders need to build more expensive homes to make the investment feasible, meaning less affordable new construction homes are under construction. Inventory in middle segments of the market (300-650k) is more balanced with the most desirable listings selling quickly. There can be some great opportunities for both buyers and sellers here. For the luxury segments of the market, many opportunities can be found for savvy buyers, ranging from in-town historic homes and condos, to mountain properties and homesteads. Inventory levels in the Asheville city limits tend to be lower across the board. Click here for the May 2018 market absorption report for Buncombe County.

All in all, many factors point to decreased long-term affordability with rising rates and rising prices if buyers choose to wait. This is especially true for buyers seeking affordable homes. For investors these market conditions have more of an influence on purchase decisions and timing. Also of importance is the market is ripe with opportunity for trade up or downsizing buyers to sell their homes for maximum value, and save or re-invest their realized equity.


Your questions, comments, and feedback are most welcome! Also please be sure to connect with Collin or Cameron if you are seeking expert real estate or mortgage lending advice.

Cameron Lewis can be reached at clewis@acopiahomeloans.com, 828-231-4909, or at http://www.acopiahomeloans.com/cameron-lewis.

Collin O’Berry can be reached at collin.oberry@gmail.com, 828-772-1667, or www.altamontpropertygroup.com.

Understanding the Factors That Impact Your Credit Score

Understanding the Factors That Impact Your Credit ScoreMost consumers believe if they pay their bills on time, they need not worry about their credit score. Oftentimes, it is a rude awakening when they apply for a mortgage loan, car loan, or any revolving credit to learn they are not going to get the lowest rates available due to their credit score. This is because paying bills on time only accounts for 35 percent of your credit score. The remaining 65 percent is spread out among other factors that impact your credit score.

Credit Usage and Impact on Score

Nearly one-third, 30 percent, of your credit score is based on how much of your available credit you are using. For example, if you have combined credit available of $100,000 and you use $90,000, you will suffer a decline in your credit score. Those consumers who have similar credit lines and are using $9,000 will get a slight bump in their score.

New Credit vs. Old Credit

We seldom think about how long we have held a line of credit open. However, some consumers “exchange” credit lines for other credit lines due to special offers made by credit card companies. This is not necessarily a good idea since 15 percent of your credit score is determined by the age of your credit accounts. The longer you have had an account, the better in most cases. The calculation will take all open credit accounts, take the amount of time they have been open and get an “average age”. If you have six accounts which have been open less than a year and six that have been open five years, the newer accounts will count against you in this case.

Mixing up Credit Lines

A consumer who has only a mortgage and a single credit score will take a modest hit on their credit score versus a consumer who has multiple credit cards, a mortgage, and an auto loan. The types of credit you have will account for 10 percent of your credit score and the more varied your open credit lines, the better. While it is inadvisable to open new credit lines simply to show a variety of types, having installment loans, retail credit cards, and traditional credit cards is a good idea.

New Lines of Credit Opened

One danger many consumers are unaware of is suddenly opening new lines of credit. For example, a new homeowner may open a new account with a home improvement store, a general retail store, and a new credit card to help them furnish and repair their new home. This could be a red flag since the credit lines are new, and there is no established history on the mortgage, or the new credit lines. Since this factor accounts for 10 percent of your credit score, you could suffer a temporary decline in your credit score.

Consumers should be aware of the factors which impact their credit score, and also be aware of the factors that do not impact their scores. Understanding your credit score may be the most important tool you have when buying a home, or refinancing your current mortgage.

Please contact your trusted mortgage professional to discuss how your credit score may be impacting your ability to finance your next home purchase.