PennyMac Loan Services - National Home Mortgage Lender

The Homebuyer’s Guide to Jumbo Loans

2019-12-10T14:00:00-08:00

So you have your eye on a new home, but the loan you need is bigger than the conforming loan limit — what are your options?

A jumbo loan can be a great fit for homebuyers who are in a strong financial position and want to secure a large loan. Learn more about jumbo mortgages and decide whether or not it’s the right type of loan for you.

What is a Jumbo Loan?

A jumbo loan is a non-conforming mortgage that is used to buy a higher-priced home. Potential homebuyers typically need to be in a strong financial situation — that is, with a high credit score, low debt-to-income ratio, and plenty of cash reserves — to secure a jumbo loan.

A jumbo mortgage is considered non-conforming because the loan amount exceeds the limit for a conforming mortgage (i.e. loans that conform to Fannie Mae and Freddie Mac standards). The 2020 limit on conforming loans is $510,400 in most parts of the country, but in high-cost areas this limit can be as high as $765,600. If the loan you are seeking is higher than the limit in your area (and you meet other financial requirements), you may want to pursue a jumbo loan.

A jumbo loan means taking on a larger financial burden. Jumbo mortgages cannot be handled by Fannie Mae or Freddie Mac, the two government-chartered lenders, so the loan will be kept on the lender’s own books or transferred to another entity.

Lenders set their own underwriting guidelines for jumbo loans, so eligibility requirements may vary among lenders. Make sure to get as much information as you can from each lender to understand the lender’s specific requirements and underwriting procedures for jumbo loans.

Jumbo Loans vs. Conforming Loans

Jumbo loans differ from conforming loans in several important ways. Keep in mind that these variations will depend on the specific lender and the jumbo loan program they offer.

The Down Payment

Down payment requirements for jumbo loans are often stricter than with conforming mortgages. Many homebuyers will be required to make the typical 20 percent down payment for a jumbo loan, but this varies among lenders. Some lenders may have a minimum down payment of 15, 20 or even 30 percent for a jumbo loan.

For those who want to make a smaller down payment, some lenders are willing to offer loans with down payments as low as 10 percent, or even five percent. However, these lenders still want to ensure you are in a strong financial position to pay off the loan, so it may come with a trade-off — such as a higher interest rate — to offset the smaller down payment. Talk with your lender for more specifics on negotiating your down payment.

Credit Score

Similar to down payments, credit requirements are higher for jumbo loans than for conforming loans. To secure a jumbo mortgage, most lenders require a strong credit score. Some lenders will approve borrowers in the 680-700 range, while others have a minimum credit score of 720. The lender may also take a closer look at your payment and credit history, including the number of current or former lines of credit in your credit history.

Depending on your situation, the lender may heck for a satisfactory mortgage or rental history from the past few years to verify your ability to make payments and manage your funds.

Income Level

Jumbo loans are often attractive to homebuyers with more complex sources of income.With that in mind, it’s common for jumbo loans to require more paperwork and income documentation than conventional loans. Self-employed buyers, for example, may be required to provide multiple years’ worth of tax returns, rather than just one year, to verify ongoing income.

Lenders may also require a stronger debt-to-income ratio to secure a jumbo mortgage. Many lenders require a debt-to-income ratio in the 38-43% range, meaning your monthly mortgage payment and credit liabilities can’t be more than 43% of your pretax income.

Interest Rates

Historically, interest rates for jumbo mortgages were usually higher than conforming mortgages, but this isn’t necessarily the case anymore, as interest rates for jumbo loans are usually comparable to conforming loans.

Cash Reserves

For a conforming mortgage, lenders want to see that you have a few months’ worth of mortgage payments set aside (i.e. “in reserve”). Given the size of jumbo loans, lenders may ask to see 6-12 months’ worth of mortgage payments in reserve. Requirements may vary among lenders, but many lenders want to see half of these reserves liquid (checking or savings), and the other half can come from a non-liquid source, such as a retirement account.

Eligible Homes

There are more stringent restrictions on property eligibility for jumbo loans as compared to conforming loans. Some lenders will only offer jumbo mortgages for the buyer’s primary residence, but others will allow jumbo mortgages for second homes. Some lenders will not underwrite a jumbo loan for a short sale or a foreclosed home, and some have specific requirements for condominiums vs. houses. When it comes to eligibility requirements, check with your lender for more specific information before you apply.

Is a Jumbo Mortgage Right For You?

Jumbo loans are usually geared toward high-income earners who have good credit and plentiful assets. Due to the size of the loan, as well as the lack of government insurance, lenders assume greater risk with these mortgages.

A jumbo mortgage may be right for you if:

Your finances are strong and healthy.
You wish to buy a higher-priced home.
You’re ready to take on a substantial, long-term financial commitment.

For more information about jumbo loans from PennyMac, call a PennyMac loan officer today.

Conforming vs. Non-conforming Loans: Which Is Best for You?

2019-12-10T13:00:00-08:00

When you’re evaluating home loan categories, it’s easy to get confused by the terms “conventional” and “conforming.” As similar as these two terms may sound, their definitions are different so it’s important to understand the distinctions. We’re here to clear the air.

A conventional loan doesn’t have to be guaranteed or insured by the federal government, but it does adhere to Fannie Mae and Freddie Mac guidelines in most cases. A conforming loan, on the other hand, describes a certain set of characteristics, mainly loan amount, contained within a home loan.

Within the mortgage industry, loans are repackaged and sold on the secondary market to mortgage investors, the biggest of which include the government-sponsored entities (GSEs), Fannie Mae and Freddie Mac. When a pool of loans adheres to the standards of Fannie Mae and Freddie Mac, the loans are considered “conforming.” When they do not, such as with jumbo loans, they are considered “non-conforming.”

Let’s take a closer look at the differences of conforming and non-conforming loans, and how borrowers can assess which home loan will benefit them most.

What Is a Conforming Loan?

In order for a mortgage loan to be conforming, it must meet the specific criteria that allow Fannie Mae and Freddie Mac to purchase the loan. The most significant of these criteria is the loan limit, which refers to the maximum amount of the loan that Fannie Mae or Freddie Mac will purchase. The loan limit can change from year to year.

The Federal Housing Finance Agency (FHFA) has increased the conforming loan limit for a single-family, one-unit property—to $510,400 (as of 2020). Certain areas of the country, such as Alaska and Hawaii, have a higher loan limit due to their higher-priced housing markets. Since Fannie Mae and Freddie Mac are managed by FHFA, they align with FHFA’s loan limits and will only purchase loans within those limits.

What Are the Benefits of a Conforming Loan?

The primary advantage of a conforming loan is that they typically offer a lower interest rate than a non-conforming loan, which means lower monthly mortgage payments and less money spent over the life of the loan.

What Is a Non-Conforming Loan?

Non-conforming loans are loans that cannot be purchased by Fannie Mae or Freddie Mac. These types of loans include jumbo loans. Jumbo loans exceed the conforming loan limits and have different underwriting guidelines. Due to the higher risk of jumbo loans, they generally have less-favorable terms and are more difficult to sell on the secondary market.

What Are the Benefits of a Non-Conforming Loan?

While riskier and less common than conforming loans, non-conforming loans allow individuals to borrow larger amounts than is possible with a conforming loan.

You may have heard the term "jumbo loan" before. These include any loans above the conforming limit. In most U.S. counties, the conforming loan limit is $510,400. However, in areas with a high cost of housing, such as San Francisco, the conforming limits are much higher (in that case, $765,600).

To reduce the risk, many lenders require borrowers to place a down payment of 20 percent (or higher) or require anywhere from six to 12 months of mortgage payments in an asset account as additional security. The risk to the lender is also offset through generally higher interest rates, greater upfront fees, and stricter underwriting requirements.

Choosing the Home Loan Option That’s Best for You

As described above, the loan amount, and your financial situation, along with a variety of other factors, dictate which loan type you qualify for. However, there are times when the borrower has a choice.

In either case, it's very important to follow all the same best practices: comparison-shop lenders to understand different programs, rates, fees, and, of course, to confirm the lenders' quality.

To find out more information about the current loan limits and loan programs, contact a PennyMac Loan Officer today.

Your Guide To The Federal Reserve & Mortgages

2019-10-30T14:00:00-07:00

UPDATE — Federal Reserve cuts rates by another 0.25%^*

In the October 30^th meeting, the Federal Reserve cut interest rates for the third time in 2019 — reducing the benchmark short-term interest rate by 0.25% once again. But what does this mean for you and your monthly mortgage payment? Let’s find out.

^*Source: https://www.cnbc.com/2019/10/30/fed-decision-interest-rates-cut.html

Why is the Federal Reserve lowering interest rates?

The Federal Reserve System (The Fed) is the United States’ central bank, which regulates financial institutions. The Federal Reserve decreased the benchmark interest rate (the base rate financial institutions use when lending) to encourage borrowing and lending among banks, businesses and consumers.

The Fed’s rate changes have a broad impact on the economy, which eventually leads to a general decrease or increase in interest rates over time, particularly for new credit.

Should I refinance now?

When the federal lending rate decreases, your monthly payment could temporarily decrease if you have a HELOC, ARM, or another variable-rate loan. But when rates start climbing again, your payments could also increase.

If you have a fixed-rate mortgage, your rate stays the same for the life of your loan, whether 15 years or 30.

Whether you have a fixed-rate or variable mortgage in the mix right now, it’s important to understand that 30-year fixed mortgage rates are at historic lows. Consider refinancing if:

Current interest rates are at least 0.5% lower than your current fixed rate.
You have a variable or adjustable-rate mortgage, you’re planning on staying in your house for several years, and you’d like to lock in a lower-interest fixed-rate loan.
You’d like to shorten the life of your loan — for example, moving from a 30-year fixed mortgage into a 15-year fixed rate mortgage.
Your home value has risen, and current, low interest rates could help you draw responsibly on equity with cash-out refinancing.
Your refinanced interest rate is much lower than your interest rate on credit cards or other debt. Cash-out refinancing can be used to pay off multiple debts, as part of a balanced financial plan.

Of course, there are many steps to the refinancing process — it doesn’t happen overnight. You’ll also need good credit to apply for refinancing.

How do falling interest rates impact my monthly mortgage payment?

Lower mortgage interest rates make owning a home less expensive by reducing your monthly payment, composed of principal, interest, taxes and insurance. You’ll also save money over the life of your loan.^*

For example, if you have a 30-year loan with 6% interest for a $100,000 house, you’ll pay around $600 a month in interest. If refinancing lowers your rate to 4%, you would pay $477 in interest monthly — that’s an extra $123 in your pocket every month (or $1,476/year), that could go toward other things you want to spend your hard-earned cash on.^**

Rates also influence how much house you can buy. Decreasing interest rates can make expensive homes more affordable. The inverse is true, too — what you could afford at a 3% interest rate may become impossible at 6%. Recent news reports have pointed to a buyer’s market in many locations.

How high or low can mortgage interest rates go?

30-year fixed mortgage rates went as low as 3.35% in 2012, when the U.S. economy was struggling to recover from The Great Recession. Rates went as high as 18.45% in 1981, when the national average cost of a house was just $82,000.^***

With interest rates at historic lows, it might be time to start thinking about selling, buying, refinancing, or otherwise taking advantage of these low rates. To learn more about your options, get started online now, or get in touch with a PennyMac Loan Officer to learn more.

^*By refinancing your existing loan, your total finance charges may be higher over the life of the loan.
^**Source: https://www.interest.com/calculator/mortgage-calculator/
^***Source: http://www.freddiemac.com/pmms/pmms30.html

7 Ways to Lower Your Mortgage Payments

2019-09-23T12:10:00-07:00

If you’re like most homeowners, your mortgage payment looms on the calendar as the single largest expense each month. Pruning that payment can add cash to your household budget — every month. As Ben Franklin would say, “a penny saved is a penny earned.” Let’s see how you can save the most, and make Ben proud.

The trick to lowering your mortgage payment is to start by reviewing what is actually included in the bill. Many people don’t realize that a mortgage bill is often a combination of several separate expenses. By breaking it down, you can explore any flexibility you might have with each of its component parts. Do this and you’ll discover compelling strategies to trim your expenses and plan for the future. Here are seven of those strategies.

1) Research the Local Market

Refinancing gives you an opportunity for a better deal that might extend the term or bring down the interest rate. While mortgage loans are long-term commitments, refinancing lets you take advantage of market changes to find a loan that better fits your current circumstances. Refinancing pays off the old loan and establishes new terms, including the interest rate.

If the value of your home has increased, you can directly benefit through the Loan-to-Value (LTV) ratio used to determine the terms for the loan. When you first purchased the home, your down payment established the equity you have in the house. With 10% down, your loan covers the other 90% of the home’s purchase price.

As you make loan payments, some of your payment goes toward the principal, or the amount actually borrowed. The rest of your payment goes toward the interest accruing on your loan. As you pay down the principal, you are contributing to the equity you have in your home. And as the home value goes up, that added value also becomes part of your equity — often at a much faster rate.

The credit score you’ve earned by consistently paying your mortgage and other bills on time also enables you to take advantage of even further options. It makes you an appealing customer and financial institutions will compete for your business.

Looking for a deeper understanding of refinancing? We’ve demystified how refinancing works.

2) Get Rid of MI

If you have an FHA loan, or a conventional loan, but didn’t have the cash for a 20% down payment when you bought your home, then your loan payment probably includes Mortgage Insurance (MI).

MI protects the lender in case you’re unable to repay the loan. If your circumstances have changed, however, since securing the original mortgage, it may no longer be required once you refinance.

While MI is always required on loans from the Federal Housing Administration (FHA), once your equity reaches 20% or higher, you could then qualify for a conventional loan to eliminate a lender’s MI requirements. As described earlier, refinancing allows you to revisit the LTV ratio to take advantage of the growth in your equity from two key factors:

The amount of principal paid
Your home's rising market value

An original loan for 90% of the home value would have required MI. But should you decide to refinance, any increased market value since that original purchase will be taken into account. If a home appraisal can show that the property has appreciated substantially, the same loan amount now might be at or below 80% of the market value — thus eliminating the need for MI.

3) Redo Your Tax Assessment

As you dig into the components of your monthly bill, it may also include contributions toward an escrow account that covers property tax payments.

In markets where property values are volatile or declining, it may be worthwhile to ask the county assessor to reassess your property value for tax purposes. Lower values will mean lower tax payments — regardless of whether they’re paid directly or through an escrow account with your lender.

Want to learn more? Check out our article on how refinancing affects real estate taxes.

4) Lower your Homeowners Insurance Payment

Like property tax payments, homeowners insurance premiums can be paid through the escrow account on your mortgage loan as well. It may require a bit of research, but you should periodically review your coverage and provider.

Insurance premiums are affected not only by replacement values but also by factors like deductibles and discounts. In a competitive market, you want to be sure you have the right level of coverage at a competitive rate.

You may find a provider offers discounts if you choose a higher deductible or combine home and auto plans, for example. In certain areas of the country, providers also offer discounts for seismic retrofits and fire mitigation. These kinds of programs not only help protect your home, but they can also save you money.

5) Let the Government Help

As a homeowner, you contribute to your community in ways that local and federal institutions want to support. The federal government has several loan modification programs that, depending on your circumstances, can help you bring down your monthly costs.

Here are a few:

Veterans Administration (VA) loans are available exclusively to U.S. military veterans and their families and are guaranteed by the Veteran’s Administration. If you currently have a VA-backed loan, an Interest Rate Reduction Refinance Loan (IRRRL) may help you lower your monthly payments^*.
Federal Housing Administration (FHA) loans, designed for those with lower credit scores and/or without the means for a large down payment, offer an additional benefit on refinancing. Homeowners with an existing FHA mortgage that closed more than six months prior may be eligible for Streamline Refinancing that doesn’t require extensive documentation or home appraisals.
U.S. Department of Agriculture (USDA) loans also offer favorable programs for borrowers to refinance. The Simplified Assist Program reduces documentation requirements on refinancing for borrowers who have been current on their loans for 12 months. Like FHA Streamline refinancing, new appraisals are not required unless a borrower is receiving a subsidy on the loan.
Hardest Hit Fund (HHF), a program introduced following the subprime mortgage crisis, is still available in states hit hardest by the crisis. The program works with loan servicers to modify the payments of qualified borrowers.

6) Recast Your Loan

Another approach to lowering your monthly expense is to request that your loan servicer recast your loan, which is when you can ask for a recalculation of your mortgage payments after making a large, one-time payment.

Should circumstances allow you to make a large sum of money available — for example, from an inheritance — you can make a lump-sum payment toward your principal balance. For a fee (in most cases), your lender will then reamortize your loan based on the new, lower balance, thus lowering your monthly payments.

7) Start with a Low Payment

At the end of the day, the fastest way to lower your payment is to start with the right loan. Understanding the components that affect the cost of mortgages helps you focus on the factors that you can control:

Making a larger down payment. Starting with a higher down payment improves the LTV ratio which can qualify you for lower interest rates. Further, if your down payment is 20% or higher, it can eliminate the need for MI altogether.
Improving your credit score. Credit scores create a standardized way for lenders to judge how reliable you will be in repaying your loan. Monitoring your credit score and checking your credit report for fraudulent activity, while maintaining a punctual bill-paying routine will help improve your score and could help you qualify for a new loan with lower monthly payments.
Choosing a home loan without MI. An understanding of the loan types that require MI gives you the flexibility to apply for a loan that doesn’t require a form of mortgage insurance.
Choosing an ARM. Adjustable Rate Mortgages (ARM) can lock in a competitively low rate, typically for a year or more, then adjust or float relative to a benchmarked index rate for the balance of the loan. If the initial rate is sufficiently low, and the index rate is stable, this can be an appealing option. As with all major financial commitments, it’s important to understand what you’re getting into.

Over time, as your needs and finances change, one or more of these strategies can bring your monthly payment down, and even reduce the lifetime cost of your loan. By breaking down your mortgage bill, you can understand which of these strategies applies best to your circumstances.

As you evaluate your options, one of the most important choices you make will be selecting the right lender. PennyMac is focused on finding the right loan for each unique borrower. Unlike a bank, PennyMac is a direct mortgage lender, who can offer multiple options to help you refinance at a rate you can sustain in the long run. To see how we can help, connect with a a PennyMac Loan Officer today or apply online.

^*By refinancing the consumer's existing loan, the consumer's total finance charges may be higher over the life of the loan.

The Best Smart Home Devices of 2019

2019-09-22T16:00:00-07:00

Although flying cars haven’t arrived just yet, the smart home technology available in 2019 is very impressive. Beyond playing music by voice command and hands-free Googling, the devices and apps now available to homeowners can help with your everyday needs like cooking, cleaning, managing your utility use, and even improving your home’s security.

Home tech options now allow for automating tasks and the convenient remote control of certain devices. From pumping your perfect playlist to stopping an emergency before it starts, here are our best smart home device picks for 2019.

What Can Smart Home Devices Do?

Most of us are familiar with the functions of smart speakers and task-specific devices like robotic vacuums, but what other smart home devices are available and how can they increase your quality of life? Generally, smart home tools and technology can allow for the following:

Control: Smart thermostats can manage the temperature in your home and smart lighting hubs or bridges connect your smart light bulbs, giving you the ability to turn lights on and off at set times or based on commands from wherever you might be located.

Monitoring: Security systems and smoke, water, and other detectors can keep your family safe from intruders or disasters. These systems will also give you peace of mind knowing that your home is safe from crime or other damage even when you aren’t physically there.

Automation: This third category of smart home devices will run regular activities on the date and time that you schedule. Starting your dinner before you even leave work or mowing your lawn every Saturday at noon are examples of tasks that you can automate with smart home >technology.

Voice Assistant

Voice assistants are one of the most common and identifiable smart home features. On their own, they are convenient, but they do have limited functionality and features. Where voice assistants become really useful is when they are integrated as a part of a smart home ecosystem, composed of a network of compatible, interactive smart home devices. Many voice assistant devices are compatible across different ecosystems, but you will still need to consider compatibility when buying a new device. Most products will clearly list which ecosystem(s) they work with, so just take the time to check carefully before you buy.

Not sure where to start with creating your smart home? Here’s insight on three of the most popular ecosystems from major technology companies. Each has different features, so evaluate your options carefully.

Google Assistant: The major advantage that Google Assistant has is the ability to answer questions and complete commands that other systems can’t, thanks to Google’s dominance of search engine technology. Because of this, it can offer a higher percentage of correct answers to your questions and has a better understanding of how people naturally speak, giving you fewer literal responses to your commands. Google Assistant can easily integrate into an ecosystem containing products from many top brands, as well as popular apps including Spotify and Uber.

Amazon Alexa: If you are looking to control nearly all elements of your life from a single device, the Amazon Alexa is probably the right choice for you. Alexa has the ability to integrate and speak to most other smart devices and apps — the most third-party integrations of any smart ecosystem. From TVs to thermostats, most smart home products work with Alexa. While shopping for the other products that will make up your Alexa-based ecosystem, just look for the ‘Works with Amazon Alexa’ indication.

Apple’s Siri and Homekit: By setting up your HomePod and Homekit accessories in the Home app on your apple devices (iPhone, Apple Watch, iPad, or computer), it’s possible to create a robust smart home ecosystem managed by Siri. You can even set up a home hub to control them remotely.

Automation is just one path to streamlining your home — another is protecting your home using high tech security tools.

Smart Upgrades for Your Home

Whether you already have a robust smart home set up or are new to the ideas of smart home control and automation, there are great upgrades constantly being released in almost every category of technology. Here are our top picks in numerous useful and fun categories.

The Best Hubs and Smart Speakers

Amazon Echo Dot (3rd generation): For only $50, this small speaker offers great sound for playing music as well as making calls via voice commands.

Google Home: At $100, ($50 for the Google Home Mini), this smart speaker can answer numerous questions, keep you entertained, and help you stay on top of your schedule, reminders, calls, and even daily news.

Apple HomePod: Apple devotees can use Siri to control this $300 speaker. With Access to both Apple Music and your own personal digital music library, the HomePod uses 360-degree design, powerful drivers, and automatic calibration to offer amazing sound quality.

The Best Lighting Upgrades

Lifx mini wifi smart bulb: For less than $20 each, these LED bulbs can easily be controlled by your smart home ecosystem, offering potential increases in security and convenience (and decreases in utility bills.)

Nanoleaf rhythm smarter kit: For an upgrade that is more fun than functional, consider using these $300 modular light panels to create dynamic and interesting home design. The Rhythm Module syncs light patterns to your music in real-time, and the panels can also be controlled using the Nanoleaf App, your voice, or the physical controller.

Philips SpaceWise wireless technology DT: Looking for serious energy savings? Philips’ new luminaire level lighting control system promises to eliminate energy waste and simplifies the commissioning process with an Android App. You don’t have to be a controls expert to use it and your office could be looking at up to 75 percent in energy savings.

The Best Gadgets for Safety and Security

Nest Hello: Video doorbells have become a popular smart home feature due to the convenience and security they offer. For $230, the Nest Hello video doorbell has night vision, a 160 degree field of view with clear, sharp video, and can even play pre-recorded messages for anyone who comes to your door.

Wyze Cam V2: For just $25, this small and inexpensive camera offers sharp 1080p video that can be generated by both motion and sound triggered recordings. It also offers night vision, time-lapse recording, and motion tracking.

SimpliSafe: For home security beyond a camera, the SimpliSafe 3.0 kit starts at $229 for the base station, a keypad, a motion sensor, and an open/close sensors. It can then be customized with a selection of eight different sensors to detect smoke or even the sound of glass breaking. There are no contracts required, but If you’d like any extra support, SimpliSafe does offer an optional $15-a-month professional monitoring package that can be cancelled at any time.

Nest Protect: For a little over $100, the Nest Protect can detect smoke, carbon monoxide, and both slow and fast burning fires. This sensor can even tell you which room the fire is located in and can be linked to the other devices in your smart home ecosystem.

Concerns about devices compromising privacy at home? Read on to make sure you’re being smart about your smart devices.

The Best Smart Plug

Belkin WeMo Insight Smart Plug: From its easy set up to its compact size, the $50 Belkin WeMo Insight Smart Plug uses your home Wi-Fi to turn devices on and off remotely and gives you insight into your home energy usage. It also pairs with Amazon Alexa or Google Home for voice control.

ConnectSense Smart Outlet 2: Pairs with Amazon Alexa, Apple HomeKit or Google Assistant, with no hub required. The feature-rich outlet (which has two sockets) also comes with a bonus 2.4 amp USB charging port for juicing up smartphones and tablets.

iHome iSP6X SmartPlug: This $30 device lets you use Amazon Alexa, Google Assistant, or the Apple HomeKit to control whatever item or appliance you have plugged into it. You can even control it remotely via an app.

The Best Smart Thermostats

Ecobee SmartThermostat: This $250 smart thermostat lets you control one of your largest monthly expense creators: your home heating and air conditioning systems. Using an app, or with your voice via Alexa, Google Assistant, and Siri, you can keep your home comfortable and your bills lower. One additional exciting feature of the Ecobee is a remote temperature sensor that can read the temperature of whatever room it's located in and adjust accordingly.

Nest Learning Thermostat: At a similar price to the Ecobee, the Nest smart thermostat has a large, clear display and sensors that can track where you are in your home. It integrates easily with Google Assistant and Alexa.

The Best Smart Robot Vacuum

iRobot Roomba 960: Relatively quiet with solid navigation capabilities and additionally displays a map of cleaned areas. Can be controlled via a smartphone app or voice control using either Google Assistant or Amazon Alexa and comes in just under $500.

Neato Botvac D4: Dying to control your robot vacuum with your Apple Watch? Look no further than the Neato Botvac D4, which ⁠— in addition to its smartwatch functionality and relatively low price tag ($399) ⁠— also comes equipped with laser navigation and smart charging.

Roborock S50 Smart Robot Vacuum Cleaner: This home cleaning helper offers a lot of features for $500: strong suction, intelligent room-mapping for efficient cleaning, a slim profile that can easily fit under furniture, and 2.5 hours of work off of each charge.

The Best Smart Devices for Your Kitchen

Anova Culinary Precision Cooker Wi-Fi: This tool uses the sous vide method to cook food to an exact temperature, ensuring maximum tenderness and moisture retention. For $160, it can be used to cook meat, fish, vegetables, soups, and even desserts.

AmazonBasics Microwave: For only $60, you can easily control your microwave with your voice. It also includes 10 power levels, a kitchen timer, a child lock, and a turntable.

Drop Scale: If you want to modify a recipe but are not sure that you are doing the math correctly, the Drop Scale can help. This $35 tool can scale any recipe by ingredient, and also offers simple ingredient substitutions, and hundreds of new step-by-step interactive recipes.

Best Robot Lawnmower

Husqvarna Automower 315X: This high-end $1,999.95 robotic lawnmower can be easily controlled via a user-friendly app that allows you to start and stop the mower, monitor its progress, create mowing schedules, and track where it has been in your yard. Most importantly, it cuts well, and does it quietly.

Landroid M 20V: Looking for a deal? This automated lawn mower costs about half, at $999.99 has great cutting performance while still managing to be quiet. Its mobile app is user-friendly and it also comes with Wi-Fi and GPS radios. And should it rain? The mower has a sensor that tells it to return back to charger station.

Robomow RS622: If you don’t mind the price tag ($2,199) or the upfront setup work required, the Robomow RS622 is extremely quiet with high performance cutting technology. It can also be controlled from iOS or Android device and no bag is needed for discarded cuttings.

Find out the best time to buy these and other common household items.

Make Your Ideal Smart Home a Reality Today

Whether you want to automate every aspect of your daily life, or keep a remote vacation home safe and secure, today’s smart home technology makes it easy to seamlessly connect to your home, with multiple options. You may want to upgrade your current home by adding new smart features for your convenience, or start fresh with a new home you know would accommodate your smart home dreams more efficiently.

Decided on purchasing a new space to turn into the perfect smart home? Get pre-approved online before you start shopping, or contact a PennyMac Loan Officer today to get a free analysis of your options.

How to Create a Pet-Friendly Home

2019-09-22T12:01:00-07:00

As you started shopping for your new home, did you make sure that you considered the needs of all of your family members — including those with paws and claws? More than half of U.S. households include pets, so making the home you are buying (or selling) welcoming to animal companions can definitely pay off. From quick fixes to bigger projects, read on for expert veterinary and home design advice on how to make your home pet-friendly.

Hunting for a Pet Friendly Home

House hunting is one of the few things in life that seems to be equal parts exciting and utterly overwhelming. With so many factors to consider, it can be pretty easy to forget about those little things that will truly help to make your new house a pet-friendly home.

When you find yourself shopping for a new home, remember that this is your opportunity to start fresh with a new space that works harmoniously for all aspects of your life, which includes, of course, your beloved pets! If you don’t think there is a way to make your home more pet-friendly, think again. There are actually a lot of things you can do to make your home a more rewarding and comforting environment for all family members, especially the furry ones.

As vice president of marketing for Oxyfresh, Melissa Gulbranson is passionate about educating pet parents with the latest and most trustworthy research, tips, education and solutions. Having been a leader in the pet industry for 20 years, she enjoys sharing her insights in the pet dental and grooming industry, heavily focusing on non-toxic ingredients for pets. Gulbranson advises house-hunting pet owners to consider both the features of an individual home, as well as the neighborhood where it’s located.

House hunting is one of the few things in life that seems to be equal parts exciting and utterly overwhelming. With so many factors to consider, it can be pretty easy to forget about those little things that will truly help to make your new house a pet-friendly home.

First things first: A yard. You'll want to make sure that your new place has plenty of safe outdoor space for your favorite [four-legged] friend to enjoy. While landscaping can always be changed out or modified, it’s a lot of work. So, keep in mind that certain types of plants and ground coverings can be harmful to your pet.

You'll also want to consider the neighborhood itself. Are there sidewalks, is the home positioned next to busy roads or airports, are there loud dogs in the community? Many pets suffer from acute anxiety, and extraneous environmental stress factors can severely alter your best friend’s mood or behavior.

Finally, consider your pet's age and ability. If you're looking at a multi-story home, or a house that has features such as a pool, or an old patio, you might want to think twice. Then again, maybe your pup can't wait to finally take a dip in the new pool! Did someone say ‘cannonball?’

Dr. Judy Morgan currently operates two veterinary hospitals based in southern New Jersey that offer an integrative approach combining holistic medicine with traditional Western techniques. Dr. Morgan is a best-selling author of four books, hundreds of online and print magazine articles, and host of the Naturally Healthy Pets radio show. Here are her tips (a personal wishlist) for choosing the ultimate pet-friendly home.

Pet owners like tile and hardwood floors for easy cleanup, however, if there are senior pets with mobility issues, these floors can be more problematic. For bathing, having a home with a walk-in shower makes pet washing much easier for large dogs. For smaller dogs, a utility sink big enough to fit them is also helpful. Having an area that can be blocked off easily to confine pets if they are not allowed free roam of the house may also be desirable.

I personally like [easy-to-clean] painted walls, minimal stairs, and a separate area where I can feed my pets that is not in the kitchen. We finished part of our basement to make a pet feeding room, but unfortunately, we have to carry our senior dogs up and down the stairs.

Goals for our next house [include] a pet room on the main level with [easy-to-clean] floors and no stairs, plus their own washer, dryer, and walk-in bathing area. [We also want to have] a refrigerator and freezer in there for their food (they eat raw or home-prepared cooked foods).

Keeping Your Companions Safe at Home

Another important issue to consider as you shop for and set up your new home is your pets’ safety. Choosing a home with the right layout, as well as adding security features after you move in, will ensure that you and your furry friends are protected.

Johanna Reel, a registered veterinary technician (RVT) at NHV Natural Pet, has spent over 10 years working at different types of veterinary clinics and hospitals. She has both simple and high tech suggestions for homeowners to make sure that their pets stay safe — even when the owners have to step away.

We all know about ‘child proofing’ homes, but pets can get into as much, if not more trouble than children if left to their own devices. ‘Pet proofing’ a home is very important, especially for young kittens and puppies. Hazards can be all around the home.

Be sure to tuck away loose wires; keep anything that could be chewed out of reach. Get down to their level and have a look around. “What could you get into that would cause problems or danger?” Many products used for child-proofing can also be used for pet-proofing.

If you need to spend most days away from your pet, consider using wifi cameras to monitor them. Many of these cameras allow you to speak to your pet; you can monitor what they do with their day and see if they’re getting into any trouble. There are also cameras marketed specifically for pets that will allow you to dispense treats throughout the day.

Paul Foresman is vice president at Design Basics. For over 30 years, Foresman has focused primarily on helping builders succeed and has written dozens of articles on home design and marketing, spoken at numerous home builder conferences, and has appeared on radio and TV. Here are a few of his favorite home design ideas that can help keep your pets out of trouble.

For one homeowner with multiple dogs, Foresman created a mudroom that doubled as a pet center. An open hallway led into the home from the pet center, but the homeowner designed a lower cabinet door that swung out, partially closing off that hallway, and further installed a sliding gate on the back of that cabinet door to fully corral their four dogs in the pet area. The dogs were then restricted to the main floor of their three-level home by wood bi-fold gates at the stairs.

You don’t want ‘planning where the dog beds and/or kennel(s) will go’ to be an afterthought. [My client] repeated the retractable gate idea in the doors of a 4-foot wide x 4-foot high x 18-inch deep kennel built into the hallway just off the pet center, where his two dachshunds sleep.

Russell Hartstein is a renowned behaviorist and sought-after dog trainer. With over 30 years of experience in animal behavior, nutrition, and pet care expertise, he has received numerous media spots, and offers his dog training services within the Los Angeles area. When designing your new home and yard, keep these pet-protecting ideas from Hartstein in mind.

[It’s a good idea to add] dog or cat doors so that pets can come and go as they wish. Split doors also may be very helpful as they act as built-in visual blockers that still allow cats to jump over, but many dogs can’t get over them.

[Make sure to] pick non-toxic chemicals and flame retardants in home materials and furniture to avoid offending your sensitive pets’ olfactory glands. Choose tactile flooring so that pets can have traction and not slip and injure themselves.

He also has tips for a pet-friendly landscaped yard.

Add many shade elements and strategically placed trees to block the wind and sun for pets to lounge outdoors. Dog runs and ‘catios’ are very helpful and keep predators from harming your pets and your pets safe and able to enjoy the outdoors without risking their lives.

Pet-Friendly Home Upgrade Ideas

Even if you are not planning a move, there are many ways that you can make your existing home more comfortable and enjoyable for both you and your pets. From temporary solutions to built-in updates, you can increase both the fun and function in your home with these expert ideas.

Cynthia Chomos is the founder of Catio Spaces, where she combines her expertise as a feng shui consultant and general contractor to create custom ‘catios’ (visually appealing outdoor enclosures) to enhance the lives of cats and their humans. Chomos echoes some of Foresman’s advice.

Pet-friendly, tactile flooring choices include bamboo, engineered hardwood, cork, vinyl, tile or stone. Add attractive, slip-free rugs for warmth and doormats to help keep muddy paws from tracking dirt into your home.

Also consider your furniture and fabric choices, Chomos says.

If your comfort-seeking pet likes the sofa or chair, a slipcover or throw can protect fabrics and be removed for cleaning or when guests visit. Durable fabrics include leather, synthetic microfibers and various outdoor textiles. Patterns and darker colors will hide pet stains.

For pets that chew and scratch, metal-legged tables and furniture are a good choice. A cat scratcher, essential for removing nail sheaths and daily stretching, can be placed in a family room out of direct viewing.

[Don’t forget] a serene pet feeding area. Avoid placing water and food bowls in traffic flow areas of the kitchen as this can affect your pet’s digestion (and become a tripping hazard for two-legged family members)! Choose a calm location and consider a raised feeder, which can provide easy access while promoting better posture. Water-resistant placemats and oversized, decorative canisters can add a creative touch.

Once you have your indoor design complete, it’s time to consider how your pets will safely enjoy your outdoor spaces. Here is both a quick tip and a larger project idea from Chomos, who offers a variety of online DIY catio plans and tips.

[Pick] pet-safe plants. Many indoor and outdoor plants are toxic to pets. For a complete list, visit the ASPCA’S website. Also, avoid lawn and garden pesticides and chemicals that can harm pets and wildlife.

Cats love sunshine and territorial views so a family room with east, and west facing windows offers a ‘purrfect’ spot to catnap and enjoy birdwatching. Cats naturally want to be outdoors to enjoy fresh air and the stimulation of nature, but unlike dogs who can be contained in a fenced backyard, cats can easily scale a fence and encounter a variety of outdoor hazards as well as hunt and injure birds.

To keep a cat safe and stimulated, catios, outdoor ‘cat patios,’ are a popular trend and can be designed for a window, deck, patio or yard. A catio provides an exciting outdoor experience while also protecting your cat, as well as birds and other wildlife. From a simple window box to a large and luxurious haven (with space for human seating), catios can complement your home and garden.

Pets bring you lots of joy, but they also collect lots of toys, bedding, food, grooming tools, and other accessories. Paul Foresman reminds homeowners that they will also need to consider these items when planning the layout of their space.

Don’t overlook storage. Just where are you going to keep dog food, hairbrushes, harnesses, and other pet supplies? Adjoining [the] shower [in one of our most popular home design layouts], there are pull-out storage bins (similar to pull-out wastebasket drawers) for dog food, storage above for treats, leashes, toys, and other supplies, and the food and water bowls in a toe-kick drawer at the bottom. [My other client’s] pet center is similar, though he opted to utilize a tilt-out cabinet that can hold 40-pound bags of dog food.

Don’t have room for a pet center? Consider a flip-up bench in your rear foyer. Handy for sitting down to remove shoes, the storage inside can be used for your pet products, extra food bowls, and dog coats.

Ultimately, there’s no one right answer. Your options for pet-friendly features are as myriad as the pets themselves. It’s up to you to customize or seek out that home with pet features that are just ‘purrfect.’

Creating a Home That is the Cat’s Meow

When you are making a list of your wants and needs for your new home (or updates to your current home), don’t forget to consider the four-legged members of your household. Pet-friendly design can be easy, affordable, and is a great way to improve everyone’s happiness. If you are ready to start shopping for a new home that makes your tail wag, get started online today or contact a PennyMac Loan Officer.

The views, information, or opinions expressed in this blog do not necessarily represent those of PennyMac Loan Services, LLC and its employees. The inclusion of links to third party sites is not intended to assign importance to those sites or to the information contained therein, nor is it intended to endorse, recommend, or favor any views expressed, or commercial products or services offered on these third party sites, or the vendors sponsoring the sites.

Subordinate Mortgages: Everything You Need to Know

2019-08-30T11:00:00-07:00

Your home is typically one of your largest investments, and there are numerous ways that you can leverage this valuable asset in order to meet your goals. Subordinate mortgages, which can come in the form of a second mortgage, equity loan, or home equity line of credit (HELOC), can allow you to fund all types of projects.

Before you enter into one of these complex transactions, it’s important to have all the information you need. Here is an overview of subordinate mortgages that will help you understand the liabilities, rewards, and rules around this financial process.

What is a Subordinate Mortgage?

Subordinate mortgages are loans that have a lower priority status than any other recorded liens (or debts) against a property. When you get the loan you need to purchase your home, this loan is typically recorded as the first repayment priority on your deed after closing. This means that if you default on your loan, it will be the first debt repaid with any proceeds from the sale of your home.

Behind this primary loan, you may have secondary, or subordinate, mortgages. Examples of these can include separate mortgages used to help buy your home, HELOCs, or equity loans taken out after you purchased your home. Since these loans are subordinate to your first mortgage, if you default on your loans, they would be paid off by any proceeds left over after the first mortgage is paid off from the sale of your house.

What is a Subordination Clause in a Mortgage?

The part of your mortgage agreement that documents this process is the subordination clause. In this portion of your agreement, the mortgage company for your first loan states that your debt on their loan takes precedence over any other debts or liens you may have on your property, now or in the future.

What is a Lien?

A mortgage is not the only type of debt that can be recorded against your home. Another common type is a lien. A lien states that someone else has the right to repossess your home if you fail to make payments on a debt that you owe. Examples of liens include costs owed to contractors for large remodeling projects, unpaid child support, and Federal or State tax debt.

There’s more than one way to leverage your home’s value. Check out our roundup of ways to financially benefit from your home.

How Does a Mortgage Become Subordinate?

If all of this seems quite straightforward and sensible to you so far, you may be wondering how or why your first mortgage could ever become subordinate to another debt. Still, there are situations in which your first mortgage may be placed in a subordinate position, whether by your request (and your lender’s agreement) or by law.

Any mortgages that are recorded after your first purchase loan are usually subordinate loans. However, lenders may occasionally agree to “change position,” and make their loans subordinate to other debts. These situations require you, the borrower, to ask your lender to subordinate to another loan, however, doing so is not usually in the lender’s best interest.

There are also situations where your first purchase loan can become subordinate by law or regulation, without your lender’s agreement. Here are two examples:

If you have a Federal tax lien for unpaid income taxes, this debt automatically becomes a primary lien ahead of your first mortgage. Your Federal tax debt will be repaid first if you sell your home or go into foreclosure.
A mechanic’s lien is used by an unpaid contractor, subcontractor, laborer, or material supplier to place a legal claim on your property for monies owed. In some states, your first mortgage debt can be relegated to a subordinate position to their unpaid bills. Keep in mind, the laws around mechanic’s liens vary widely from state to state.

How’s your financial health? Need a little preventative care? We’ve got you covered! Check out Your Financial Check-Up: 7 Things to Evaluate.

How Will Subordination Affect my Financing?

Having subordinate liens on your home might not have much of a noticeable impact on your daily life, but these debts can have a big impact on your ability to qualify for mortgage financing. Depending on your lender and the details of the lien(s), you may or may not be able to qualify to buy a new home or get another mortgage in the future.

Many lenders will only offer you mortgages if their loan will be in the primary position. If you have unpaid subordinate liens, you would have to ask those lien holders if they would be willing to be subordinate to your prospective new mortgage — something they may or may not be willing to do.

In addition, your lender will need to review these subordinate liens to make sure the payments remain constant, are something you can afford, and don’t include negative amortization, or other potential financial pitfalls that could make you more likely to default on your loan.

Subordination and Second Mortgages

If you loaned money to a friend, how would you feel if they told you that you were their last priority when it came to repayment? Would you still freely make the loan, or would you take extra steps to protect yourself?

Lenders view things in a similar way. If they are giving you a loan (like a second mortgage) that is subordinate to other debts, they consider the loan to be riskier. This is because they are taking a chance: They might not get paid back if your assets are gone by the time their loan is due to be paid on the priority list.

The result of this is that you will most likely be charged higher rates on subordinate mortgages than you would be on a primary mortgage. This higher rate is a way for lenders to protect their investment.

Subordinate Mortgages and Refinancing

During the time that you own your home, you may refinance your mortgage. The refinancing process is usually quite simple, but one thing that can add extra steps is the existence of subordinate mortgages, such as a HELOC.

When you refinance, your new lender will want their mortgage to hold primary status, and for the HELOC to remain subordinate. In order for this to happen, the HELOC lender will need to agree and the HELOC will need to be re-subordinated. This process allows the refinancing mortgage to have first claim on the property, even though it is a more recent loan than the HELOC.

Don’t be Scared of Subordination

“Mortgage Subordination” may sound intimidating, but it’s actually a straightforward process that allows lenders to give homeowners greater flexibility when it comes to leveraging the equity in their home. If you want to explore your mortgage options, take the first step and contact a PennyMac Loan Officer or apply online today.

How to Improve Your Credit Score During the Home Buying Process

2019-08-28T13:00:00-07:00

Your credit score is a simple number that tells a complicated story. A huge part of your financial history — from long-term debt to a few scattered missed payments here and there — can be summarized by this number. This little figure can have a big impact on your life, as it is one of the major factors that your lender uses to determine what loan terms you can qualify for.

You should always be working to improve your credit score, but it’s particularly critical as you start considering homeownership. A better credit score can be a huge factor in determining what types of loans you may qualify for, how low of an interest rate you can get, and even how low your down payment can be.

If you are looking to buy a home in the future, or are already house hunting, increasing your credit score will help you get the loan you need in order to close on the house you want.

What Minimum Credit Score Do You Need for a Home Loan?

A higher credit score is always better, but a less than perfect score typically won’t prevent you from getting a mortgage. The minimum credit score you must have to get a loan will depend on the type of home loan you are looking for. Here are the minimum scores lenders may require to be eligible for the four common types of mortgages:

FHA Loan: 580+ credit score (500-579 score can be eligible)
VA Loan: 620+ credit score (some lenders may go down to 580)
USDA Loan: 640+ credit score
Conventional Loan: 620+ credit score

However, when it comes to eligibility requirements, check with your lender for more specific information before you apply.

If your credit isn’t quite at these minimums, don’t worry — there are a number of ways you can raise your score and take the next steps towards homeownership.

How to Improve Your Credit Score to Get a Home Loan

There are many different elements that go into creating your credit score. Things like your credit account limits, the amount of secured and unsecured debt you carry, how long you have had each account and your payment history are all recorded as entries on your credit report and these factors contribute to the final number. Since your credit report contains numerous types of information, there are several approaches that you can take toward improving your overall report and score.

1) Pull Your Credit Reports and Fix Any Errors

Your score is determined by the entries on your credit report, so it’s essential to make sure that you know what is on your report, and that the entries are correct. Incorrect, negative entries can drag your score down by no fault of your own. It’s important to check your credit report for accuracy, at least annually. Common credit report errors include:

Debts or accounts that don’t belong to you being listed on your report
Accounts that do belong to you not being listed on your report (accounts in good standing help your credit, and you should make sure they are included)
Accounts being listed more than once
Old debts that should have been removed but are still listed

If there are errors on your credit report, one of the best ways to improve your credit score is to work with the companies that report errors to get them corrected. You will typically need to contact the credit bureaus with a description of the issue and the evidence you have to support your request. It’s important to start this process as soon as you notice the error, as it can take a month or more to get a response. Your loan officer may be able to help you build a strategy to determine which errors to work on first.

Want to take advantage of your right to a free credit report? Learn how to get a no-strings-attached free credit report and get the information you need!

2) Pay Down Credit Card Balances

Paying down balances may help you in two ways. First, doing so can lower your monthly payments, which can make your debt-to-income (DTI) ratio look more attractive. Your DTI ratio is calculated by dividing your total monthly debt payments by your monthly gross income. DTI is expressed as a percentage, and a lower number is more attractive to lenders: with fewer competing bills, you should be able to repay your loan easily.

Second, it lowers your credit utilization rate, which can make your credit score go up. Credit utilization measures how much of your available credit you are using. For example, if you have a credit card with a $5,000 limit and are carrying a balance of $2,500, you are utilizing 50% of the credit available to you. If you are utilizing nearly all of the credit available to you, there is a good chance that you are struggling financially and may also struggle to repay a loan. This is why lenders prefer borrowers with a lower credit utilization rate.

3) Bring Past-Due Accounts Current

If you have accounts that are late but have not yet gone into collections, making them current can stop them from doing more damage to your credit report. As they transition back into on-time status, your score may stop incurring new damage from those late bills. Address this as soon as you are able.

4) Use Your Credit Cards Less Frequently

Another way to show lower credit utilization is to simply use your credit cards less, unless, of course, you consistently pay off the charges prior to the end of the monthly billing cycle. You can simulate lower usage of available credit by paying them down in the middle of the month. That way your statement shows lower balances.

5) Pay on Time

As always, pay your credit card obligations and any other bills on time. Do not miss any payments during your loan application. Even if you were previously pre-approved for a mortgage, one missed payment could bring your application process to a sudden halt or abrupt end.

A solid history of paying bills on time is a very important part of your credit score, and one of the patterns that lenders look for during the loan application and underwriting process. If you are having financial difficulties now, how will you manage the additional obligations of a mortgage payment, insurance, property taxes and more?

6) Do NOT Close Any Current Credit Cards

This may seem counterintuitive, particularly when compared to the previous advice of using your credit cards less frequently. It’s complicated, but when you close an account, you are reducing your amount of available credit. As a result, you may be raising your debt-to-available-credit ratio. For example, if the total of all your credit card limits is $10,000, and the total of the balances equals $2,000, your ratio will be 20 percent. But, if you decided to close a line of credit with a limit of $6,000, your ratio will be raised up to 50 percent.

It’s also best to avoid closing any current credit account because having open accounts in good standing over a long time helps your credit history and your credit score. Closing long-term, current accounts reduces the amount of positive information on your credit report, and can actually lower your score.

7) Increase Your Credit Limits

Another way to make your credit utilization score look better is to call your credit card lenders and ask for a higher credit limit. If you owe $1,000 on a $2,000 limit, you’re using 50% of your limit; if you can get an increase to $3,500, your utilization drops to 28.6%.

However, be careful doing this as your credit card lender may perform a “hard inquiry” that shows up on your credit report. Each time that you apply for more credit, whether it is a card limit or a loan, the lender will check your credit as a part of their evaluation process. This records a “hard inquiry” or “hard pull” on your credit report.

Ask your lender if this will be the case with your request, and consider it carefully before you proceed. Too many hard inquiries in a short amount of time can lower your score, and it can also make you look unreliable to lenders: Are you struggling to pay your bills and searching for help anywhere you can find it?

Need a financial check-up? Check out these 7 things to evaluate, and get the scoop on your financial fitness!

What to Do if You Have No Credit

Improving your credit score is always beneficial, but where do you start if you truly have no credit? Will you be able to get a home loan if you have little to no credit history? If you have no loan repayment history, lenders may consider you too big of an unknown risk. If you have no credit history, or what may be called a nontraditional credit history — no credit card debt or any other loans — it is still possible to get a home loan, although you may have to investigate a few different options.

Even if you never had a credit card, most people have a history of paying at least some bills, such as rent and utilities, or a car payment. Having a strong payment history with these types of bills can be used to show that you are a reliable borrower, and may even be reported to the bureaus as a part of your credit score.

How to Start Building Credit

Although the options above can provide a viable path to homeownership for many people, you will have more loan products to choose from if you work towards building your credit. Here are three low-risk ways that you can start building a strong credit history.

Apply for a secured credit card: Secured credit cards are different in that they require a deposit. Like regular credit cards, (and unlike debit or prepaid cards) they can help you build credit by reporting your activity to the major credit bureaus.
Apply for a credit-builder loan: Typically issued by credit unions, these small loans generally have short (6-24 month) terms. Making these payments on time allows the credit union to make positive reports to the credit bureaus on your activity.
Apply for department store credit cards: Obtaining a department store credit card may be another way to start building your credit, as some will approve applicants with scores considered far less than ideal, or those with no credit at all. Bonus: you may also receive additional discounts and benefits through holding such an account.

What to Do Once You’re Pre-Approved

You may have done a lot of work improving and building your credit to get pre-approved for your home loan, but your work is not over yet. Your lender approved your specific financial situation, including your credit score, income, debt, amount of credit, and bill paying history. Any changes to these factors can impact the viability of your loan, so keeping them all stable throughout the home buying process is very important. Following the tips below will help during the home buying process:

Don’t change jobs: If you must make a change to your employment, tell your lender right away. A promotion or lateral move within the same industry may not be a problem, but it’s impossible to know for sure. It’s best to put your job search on hold during the home buying process.
Don’t take on new debt: Although you may have the desire to go on a shopping spree to furnish your new house as soon as possible, try to avoid large purchases during the process. Taking on any new debt can seriously impact your debt-to-income ratio, which can alter the terms you qualify for on your loan.
Don’t apply for new credit cards: This can impact your credit score via hard inquiries, and changes your overall financial picture.
Continue to pay your bills on-time: Missing payments can hurt your credit score, and cause your lender to reconsider making your loan.

A Small Number with a Big Impact

Your credit score is the single summary of countless diverse actions. Each time that you pay a bill on time or resist the urge to go into unnecessary consumer debt, you are making one of many small choices that add up to a big difference in your score. In turn, a high credit score can help make some of life’s biggest financial decisions, such as buying a home, much easier. If you are ready to start exploring your mortgage options, contact a PennyMac Loan Officer or get an online quote today.

Guide to Condo Mortgages: What You Need to Know

2019-08-27T16:00:00-07:00

Buying your own home has many benefits: you can gain equity, have access to potential tax savings, and on top of it all, gain a sense of security and freedom that comes from homeownership. Owning a single-family home also comes with responsibilities that you would occasionally need to set time aside for, such as landscaping and home repair projects. However, if you are looking for the benefits of homeownership in a lower-maintenance package, then buying a condo might be the right choice for you.

Choosing a condo instead of a single-family home can also allow you to own in popular neighborhoods at a lower price. Plus, many condos offer access to desirable community features such as a pool, jacuzzi or gym. If you are sold on the lifestyle and amenities that condo living can offer, it’s time to learn how to get the loan you need to make your dream a reality.

Why Condo Mortgages Are Different

Whether you are shopping for your first mortgage or have owned homes in the past, you may be surprised to learn that condo mortgages are different. It’s important to first find out if the condo is eligible for mortgage financing, as there are many different factors that influence financing eligibility outside the buyer’s control.

You and your real estate agent will need to research whether or not the particular properties you are interested in are eligible for a loan. If a property is eligible, there will most likely be a few more steps to take in order to get approved.

Overall, there are multiple options available to you as a buyer. Make sure you partner with a lender who can clearly explain the choices available and how each one will impact your budget on both a monthly and on a long-term basis.

Down Payments on Condos

As mentioned before, the down payment that you make on your condo purchase can have a big impact on your loan rate. You will need to put at least 25% down on a condo to get the lowest rates possible on a Fannie Mae loan, but remember the more you put down, the more your rate can decrease. FHA loans allow down payments of as little as 3.5% on condos, but rates may be higher than if you put down more money. The options available to you will depend on both your credit and the complex you are interested in.

Saving for a down payment? We’ve collected these tips from expert resources and industry insiders to help homebuyers get on track with saving.

Non-Warrantable Condo

When you start searching for a condo, you might see a property you like that is non-warrantable. This means the condo project doesn’t meet the requirements for Fannie Mae, Freddie Mac, FHA, or VA financing. Each agency has their own set of condo requirements for a project to be eligible, or “warrantable”. A condo could meet one Agency’s requirements and not another’s, so you need to double check to see what type of loan you can use to purchase the condo.

Can You Get a Loan for a Condo?

Condominium communities have to deal with many interdependent factors that don’t impact single-family homes, including occupancy, construction status and the financial health of the condo project. Many of these factors will influence whether you can get a mortgage for a particular condo. Although relatively rare, here are some of the reasons that a condominium could be ineligible for financing:

The complex contains segmented ownership, a manufactured home, or timeshare units.
The condo complex contains more than 35% commercial or mixed-use space.
The complex functions as both a condo and a hotel or offers hotel amenities, including the HOA offering short-term rentals for condos in the complex.
The property is a cooperative (or co-op).
The condo complex is owned by the developer, with condos being leased by the HOA.
The condo project requires all homeowners to pay fees to use a country club or golf course.
The percentage of condos sold and closed amounts to less than 90% of the total condos in the complex.

Once you have determined that the complex you are interested in is eligible for financing, and you have saved enough for the down payment, you may think that you are ready to start packing for your move. Your lender will need to verify a few additional items before you reach the finish line. Here are some general rules that will apply to almost any condo loan application:

HOA delinquency minimums: In a condo complex, it’s essential that the homeowners pay their HOA dues in a timely manner. This allows the HOA to maintain common areas and amenities, and generally keep the complex in good physical and fiscal shape. Most lenders require that at least 85% of HOA dues be paid on time.
No pending legislation: Lawsuits are costly and can take years to resolve — make sure that the complex you are interested in is not involved in any.
No restrictive covenants: Most lenders require that the condo title can be transferred in fee simple. In other words, there cannot be any claims or restrictions against the property and the holder of the title must have absolute ownership.
Proper insurance coverage: The condo complex you are interested in must have appropriate insurance, including hazard, liability, and flood insurance.

Urban, suburban, or rural? When looking for a new house or condo, it’s important to know what’s best for you and your family.

HOA Considerations

Being able to have at-home, maintenance-free access to amenities like a pool, gym, tennis courts and other conveniences are a big part of what makes condo living appealing. Access to these shared amenities does come with some costs — the most obvious being your monthly condo or HOA fees.

HOAs are typically responsible for the maintenance and repairs for the building exteriors, the grounds and any shared facilities or amenities. Such projects are funded by the dues paid by condo owners each month. HOA dues are not fixed or guaranteed, and can be increased (or occasionally decreased) if the HOA’s needs or reserves change.

HOA dues can vary widely, depending on the amenities offered, what the fees include (such as, in some cases, water or cable), and the costs of maintaining the property. And while you may at first think of HOA fees as an extra cost in addition to your monthly mortgage payment, they actually can end up saving you money when you consider what they give back in return.From small costs like landscaping or a gym membership to major potential bills like a roof replacement, your HOA will provide a lot of benefits that single-family homeowners don’t have access to.

You may also find you’ll enjoy some other extra benefits gained by living in a community environment. Besides a gym or pool and jacuzzi, some developments may also offer recreation rooms that you can have parties in, or theatre rooms. Some communities are even developed to cater to certain groups, such as young professionals, families, or older adults and may offer organized group activities and other community social events. So be prepared to possibly meet some new friends should you decide this type of community living is for you!

Besides the social benefits, you’ll also want to consider the safety perks of living in such a community. Often condo developments offer extensive security, such as gated entry, doorkeepers and other professional security personnel, video monitoring and alarm systems. Also, don’t forget there’s usually safety in numbers, and having a neighbor just a few steps away can not only be convenient, but sometimes safer, especially for those who live alone.

Want to learn more about HOAs? Check out PennyMac’s Guide to Homeowners Associations and get the information you need.

Types of Condo Financing

If your condo community of choice has met all of the previous requirements, it’s time to start considering the type of condo loans that you are eligible for and interested in. Many of the same types of loans available to single-family home buyers (such as conventional, FHA, and VA mortgages) are also available to condo buyers.

Conventional Loans

A conventional loan is a standard mortgage that is insured by Fannie Mae or Freddie Mac. If you are applying for a conventional loan for a condo, your lender will need to review both your application, and the condo complex, and HOA operations very carefully. Here are some of the things your lender will look for:

HOA delinquency minimums: Most lenders require that at least 85% of HOA dues be paid on time.
HOA reserves: Is the HOA saving at least 10% of its budget for future or emergency expenses?
Occupancy details: Most lenders will want the units in the complex to be at least 90% occupied. In addition, they may require a certain amount of the other units in the complex to be primary or vacation homes, not rentals.

FHA Rules for a Condo Loan

Condos are often a popular choice for first time homebuyers due to their lower prices, and FHA loans are an equally popular funding source for first time buyers due to their low down payment options. Insured by the Federal Housing Administration, FHA loans allow borrowers to finance homes with down payments as low as 3.5%. Your rate will still vary based on your unique situation, and don’t forget to account for the FHA mortgage insurance fee of approximately 1.75% of the loan amount. In order to buy a condo with an FHA loan, you will need to make sure that your purchase meets the following requirements:

FHA-Approved Condo List: The condo must be listed on the FHA-approved condominium list.
Primary Residence: The condo you are buying must be your primary residence, not an investment or vacation home.
Percentage of FHA Loans: FHA will only allow up to 50% of the units to be financed with FHA.
Percentage of Owner-Occupied Units: At least 50% of the units in the complex have to be owner-occupied, regardless of how they are financed.

VA Loans for Condos

Loans backed by the United States Department of Veterans Affairs (VA) are known as VA loans, and are only offered to veterans, active service members, and their spouses. While VA loan funding is provided by private lenders, the VA guarantees (or “backs”) a portion of the loan, protecting the lender’s investment and allowing them to offer lower down payments and interest rates to buyers.

VA loans can be used to purchase condos, as long as the condo complex is approved by the VA. You can check the VA’s condo database to see if the condo you want to purchase is in an approved complex.

If you’re interested in a condo complex that is not in the approved database, it is possible to ask the VA to approve a new complex, but keep in mind that this process may take time to complete.

USDA Loans

USDA loans are backed by the U.S. Department of Agriculture. Geared toward buyers of rural (and some suburban) properties, these loans can be made for a condo purchase if both the complex and buyer can meet the USDA loan requirements. USDA loan eligible condos must be:

A “decent, safe, and sanitary” home.
Certified as structurally sound by a state-licensed home inspector.
Meet all lender requirements for a USDA loan.
Be on the approved-condo lists of the FHA, VA, or warrantable by Fannie Mae, or Freddie Mac.

In addition to the condo complex requirements, USDA loan eligible buyers must be unable to secure a home loan from traditional sources, and have an adjusted income at or below the low-income limit for their area.

Mortgages for Townhomes

Townhomes (or townhouses) can be purchased as a single-family residence or a condominium. They have HOAs, common amenities, and sometimes shared walls (they can be attached, detached, or semi-detached).

A townhome refers to the type of construction, rather than the type of ownership and can be viewed differently by mortgage lenders. Depending on the buyer’s credit score and other factors, it may have a lower interest rate and an easier underwriting process if being processed as a single-family dwelling.

Is the Convenience of Condo Ownership Right for You?

Whether you want amazing amenities, affordable homeownership, or just a life free from lawn mowing, there are many reasons to consider buying a condo. Getting a mortgage may seem complex at first, but partnering with an experienced lender will make the process quick and easy. If you are ready to start shopping for your dream condo, take the first step: get pre-approved online or contact a PennyMac Loan Officer today.

2019 Urban Chic Home Design Trends

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It’s a common perception that in order to enjoy the convenience of urban living, you must resign to living in a bland, boring and inconveniently small space. Thankfully, this is no longer true. Trends are changing and designers are innovating to make it possible for you to enjoy the amenities of your favorite city while simultaneously maintaining a spacious, well-designed home. Here are the top lifestyle-enhancing urban chic design trends, as chosen by expert architects, developers and builders.

Single Family Home Design and Condo Living: Enjoy the Best of Both Worlds

We saw an opportunity to provide floor plans that evoke the feeling of a single-family residence, but one where residents can also enjoy the views and lifestyle of a luxury building in the city center.

The old narrative goes something like this: young people start their adult lives in crowded, crummy city spaces, and eventually move to suburban single-family homes in search of privacy, and additional space to start a family or even to entertain. Today, you can continue to enjoy the many advantages of city living, while simultaneously enjoying the special features that you could formerly only find in the suburbs.

David Goldman is co-CEO of Belgravia Group, a company specializing in real estate development, sales and marketing, interior design, accounting, customer service, and real estate legal services. Lately, he says, he has seen his condo designs, such as those for the Renelle on the River or Three Sixty West developments, taking their inspiration from single-family-style homes. No longer cramped, some modern urban condos can measure up to 3,500 square feet, offering owners the best of both worlds: A maintenance-free urban lifestyle, combined with privacy and tons of space.

When designing floor plans for [the two Chicago condominium buildings], our research showed it was important to offer homes with defined spaces that incorporate both gracious open areas for entertaining and casual living, as well as rooms that offer privacy and seclusion. We saw an opportunity to provide floor plans that evoke the feeling of a single-family residence, but one where residents can also enjoy the views and lifestyle of a luxury building in the city center.

Lee Golub, Principal and Executive VP of Golub and Company, the development firm behind Fifteen Fifty on the Park, agrees with this trend.

These condominiums offer highly functional space for family living with the traditional advantages of an upscale urban home. … [This] appeals to a wide range of buyers, including those looking for a city residence that feels like a single-family home.

The Principal of Chicago-based Lexington Homes, Jeff Benach is a second-generation homebuilder with more than 36 years of experience in the real estate industry. Having built more than 40,000 homes in the Chicago area, he now works on numerous townhomes, row homes, and single-family home communities in locations throughout the city of Chicago and its surrounding suburbs. He has also noticed that many of today’s homebuyers want townhomes with single-family-style features, and they have integrated those ideas into their designs.

But on a particular project, Benach took a different approach:

Townhome footprints are typically long and narrow, but we shifted the layout to be wide instead of deep. This gives the homes a more expansive feel, much like a single-family home in the open-concept kitchen and great room. Plus, the homes have full basements with 9-foot ceilings that add an additional level of living space to the home when finished.

Elissa Morgante is Co-Principal of Morgante Wilson Architects, an Evanston, Illinois-based architecture and interior design firm that specializes in luxury residences, including vacation homes, in Chicago and the Midwest. Morgante has seen kitchens become a large focus in home design, with homeowners in all areas wanting features like spacious banquettes, oversized islands and extensive bar seating — all making the kitchen a more inviting gathering area.

While the functionality of a kitchen is of course very important, many of our clients are also putting an equal priority on elements that turn it into a comfortable living space, knowing that the kitchen is where their family and guests will naturally end up spending time together.

Besides devoting more square footage to the kitchen to accommodate more seating or island space, we’re also using more furniture-like pieces, a variety of colors and materials, and open shelving instead of long runs of cabinetry — all of which contribute to a visually engaging design and create that ‘unfitted’ look that’s so popular today.

Functionality is one thing. But how about nailing that urban design? When considering your ideal city home, it’s also important to keep your eye on aesthetic trends with lasting power.

Condo Design Trends Anyone Can Master

The increased emphasis on high-quality design extends beyond just the layout of new urban homes — it also means taking a look at the materials with which they are finished. The era of flimsy industrial carpet and drab metal doors is over. Today, homeowners don’t want to settle for cheap, cookie-cutter styles and surfaces when buying a condo. Here are a few of our favorite experts’ condo design trends for 2019 — from the upscale to the affordable.

Ann Thompson is the Senior Vice President of Architecture and Design at Related Midwest, a popular Chicago-area developer of luxury condominium and rental homes, affordable housing communities, and mixed-use properties. She says she feels that today’s urban homebuyers have a greater interest in good design and craftsmanship, when it comes to both the units and common areas of properties where they are considering buying.

Our team considered every design element at [our recent project], including the treatment of the ceilings in many of our amenity spaces. Multilevel surfaces, bold shapes and textures draw the eye upward, and the ceilings’ finishes complement so many of the rooms’ details–from custom-designed lighting and decorative metalwork to patterned wall coverings, natural flooring materials and luxuriously upholstered furnishings.

[On the exterior of the building], people are quick to notice the warmth of the stone façade and the beauty of the intricate metalwork. Quality craftsmanship, custom design, and a rich material palette help create a legacy residence that stands the test of time.

Julie Whitley is the Director of Architecture Design for Red Seal Homes, a builder with projects in both the Chicagoland area and Nashville. She reminds developers, designers, and buyers to consider the ceiling of their projects, an often forgotten feature that can have a big impact on design.

Buyers sometimes overlook the design value of the so-called ‘fifth wall,’ so we help identify ways to highlight a room by increasing a ceiling’s depth, dimension, and texture. A decorative interest on a ceiling can bring unique detail to the space that makes the room more interesting for little cost, such as using architectural trim to connect rooms.

Whitley added that the simple use of crown molding or ceiling trim can cost just $1,000 and still achieve a dramatic change in a home.

But creating a homey and inviting condo space is not only just about following interior trends. Sometimes you have to bring the outside in as a means of achieving that perfect custom fit.

Taking Inspiration From Your Own Neighborhood

A big reason that a buyer might choose a local condo or townhouse over moving away to a distant single-family home is a love for the city or neighborhood where they currently live. Many homebuyers are looking for a sense of place that sometimes they feel the suburbs don’t provide, and integrating a neighborhood’s unique heritage into the design of your project (or even just your decor) can offer amazing results.

Lindsey Senn is Senior Vice President for Fifield Cos., a developer of urban office towers and luxury high-rise rental apartments, such as Logan Apartments. Senn has noticed that many new urban projects feature exterior and interior details inspired by the neighborhood and other local buildings that have been a part of a neighborhood’s character and history.

For [a mixed-use property in Chicago], we considered vernacular architecture through a brick façade and dark window frames, and we’ve imagined interiors that celebrate the neighborhood’s diversity and its identity as a haven for creatives.

For example, we’ve commissioned textiles from a neighborhood-based artist whose wall coverings reflect cultural narratives from around the globe, and we’re incorporating a historical mural wall into the co-working space.

We’ve looked out, we’ve looked in, but ultimately it’s up to your own personal style and tastes to create the ultimate urban home project.

Downtown and Your Dream Design: Together at Last

City living has countless benefits, from diverse dining and activities, to the potential for developing equally diverse neighborhood relationships. Today, many homebuyers are looking to take advantage of those urban perks, while still enjoying the great quality of life that a well-designed home can provide. Thankfully, developers have taken notice, and it’s easier than ever to find what you want, where you want it. If you are ready to buy your first condo, or just get back into the downtown action with a new townhome, contact a PennyMac Loan Officer or get pre-approved online today.