HELOCs are revolving lines of credit, much like credit cards. You can borrow against your home equity up to a certain limit, upwards of 90% or more of your home’s appraised value, and only pay interest on the amount you use. HELOCs have variable interest rates and can be used for any purpose.

In contrast, HELOANs are lump-sum loans that you receive upfront and pay back over a fixed term with a fixed interest rate. You can borrow against your home equity, and the amount you can borrow depends on your home’s appraised value and creditworthiness. HELOANs are often used for significant expenses like home renovations or medical bills.

When considering whether to take out a HELOC or HELOAN, there are some crucial differences to keep in mind. Repayment terms for a HELOC allow you to pay back what you use and can last for 10-20 years. HELOCs often have an introductory interest-only repayment period, often 10 years (followed by a repayment period of 20 years).  On the other hand, HELOANs are paid back over a fixed term, typically 10-30 years. Interest rates for HELOCs are usually variable, while HELOANs most often have a fixed interest rate.

In terms of flexibility, HELOCs are the better option. You can borrow and repay as needed, up to the maximum credit limit, and can reuse the line of credit over time, typically for the first 10 years. This makes HELOCs ideal for homeowners with ongoing or unpredictable expenses. HELOANs may be better suited for homeowners with a specific, one-time expense in mind.

When it comes to closing costs, HELOCs usually have lower costs, as you only pay for what you borrow. HELOANs may have slightly higher closing costs as you borrow a lump sum upfront. Both options come with some risk, such as the risk of increasing interest rates with HELOCs or larger fixed monthly payments with HELOANs.

Deciding between HELOC vs HELOAN always depends on your unique financial situation and goals. If you need ongoing access to cash or have unpredictable expenses, a HELOC may be the better choice. For a specific, one-time expense, a HELOAN may be more suitable. Understanding the differences between the two can help you make an informed decision.

MasonMac loan officers have the experience to help you navigate the two options and determine which may be right for you.  Give us a call to learn more, or you can always reach out for a quick response by asking a question here.

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We cherish all of our customers, but for certain professions, it makes sense to take an extra step toward giving back, and for that reason, MasonMac created the Affinity-Heroes program.

With the Heroes program, MasonMac branches offer financial incentive to first responders (Firefighters, EMS, Law Enforcement), Teachers, Military, and Healthcare professionals as a way to say ‘thank you’ for also putting in so much effort to make our communities better places to live.

How does the Heroes loan program work?

When buying a home or refinancing, MasonMac will provide .5% of the loan amount (up to $3,500) as a lender credit that can be applied toward closing costs or to discount points to buy down an interest rate.  The credit will always be .5% of the loan amount (so for a $200,000 loan, it would be $1,000, and for a $500,000 loan it would be $2,500) up to the max $3,500 credit.  This can bring significant savings to qualifying borrowers and can help make home ownership more affordable for those buying a home.  For those who already own a home, the Heroes program can help borrowers achieve a reduced interest rate by applying the credit toward discount points, exponentially increasing the long term savings available.

Who Qualifies

Local heroes employed in the following fields qualify for the MasonMac Heroes program:  Firefighters, EMS, Healthcare professionals, Military (active duty, reserve, and veterans), Law Enforcement, and Teachers.  Qualifying applicants must work with a MasonMac branch/LO that participates in the heroes program, and qualifying applicant must be on the loan as a borrower or coborrower.

Are you a hero in your local community?  If so, take advantage of our Heroes loan program to help you achieve the dream of home ownership with substantial savings on your next mortgage loan!  If you have any questions, you can get in touch for a quick answer by clicking here.

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Benefits of Non-QM Mortgages

Non-QM mortgages can provide many benefits to borrowers who don’t qualify for traditional mortgages due to various reasons such as self-employment, foreign nationality, or other unique financial situations. Some of the key benefits of Non-QM mortgages include:

1. Flexibility in Documentation: Unlike conventional mortgages that require very specific documentation of income and employment, Non-QM mortgages offer flexibility in documenting income. This is beneficial for self-employed borrowers who may not have traditional pay stubs or W-2 forms to verify their income. Non-QM mortgages allow self-employed borrowers to provide alternative forms of documentation such as bank statements, business financials, or even CPA letters to verify their income.
2. Expanded Credit Criteria: Non-QM mortgages may have more lenient credit requirements compared to traditional mortgages. This can be beneficial for borrowers with less-than-perfect credit histories or unique credit profiles. Non-QM mortgages may consider factors such as payment history, reserves, and other compensating factors to assess the borrower’s creditworthiness, rather than relying solely on credit scores.
3. Customized Loan Terms: Non-QM mortgages offer flexibility in loan terms, allowing borrowers to customize their loans to suit their unique needs. Borrowers can choose from options such as interest-only payments, adjustable rates, or longer loan terms, which may not be available with traditional mortgages. This flexibility can help borrowers tailor their mortgage to their financial situation and achieve their homeownership goals.

Use Cases and Examples of Non-QM scenarios

Non-QM mortgages are used by a wide range of borrowers who may not qualify for traditional mortgages due to their financial situation. Some common examples of borrowers who can benefit from Non-QM mortgages include:

1. Self-Employed Borrowers: Self-employed borrowers often face challenges in obtaining traditional mortgages due to the nature of their income. They may have irregular income streams or may write off a significant portion of their income on their tax returns, which can affect their ability to qualify for a conventional mortgage. Non-QM mortgages can provide self-employed borrowers with flexible income documentation options, making it easier for them to qualify for a mortgage.
2. Foreign National Borrowers: Foreign national borrowers, who do not have U.S. citizenship or permanent residency, may face hurdles in obtaining a traditional mortgage. Non-QM mortgages can offer financing options for foreign national borrowers, allowing them to purchase a home in the U.S. without the need for a Social Security number or credit history.
3. Investors:  Investors who have large property portfolios or are in need of financing based on potential rental income can benefit from a DSCR (Debt Service Coverage Ratio) loan, which uses current or potential rental income on a property to qualify, rather than traditional income and employment documentation.
4. Borrowers with Unique Financial Situations: Non-QM mortgages can also benefit borrowers with unique financial situations such as those with significant assets but limited income, retirees with unconventional income sources, or borrowers with previous credit events such as bankruptcies or foreclosures. Non-QM mortgages provide these borrowers with alternative financing options that may not be available with traditional mortgages.

Cons of Non-QM Mortgages

While Non-QM mortgages offer many benefits, they also come with some potential downsides that borrowers should be aware of. Some of the negative aspects of Non-QM mortgages include:

1. Higher Interest Rates and Fees: Non-QM mortgages may have higher interest rates and fees due to the perceived increase in risk to these non-traditional products.
2. Complex underwriting:  Since Non-QM loans offer more flexibility in guidelines and documentation, the underwriting process can also be more tedious        with borrowers being asked to provide more documents and explanations throughout the loan process.  For this reason, it’s a good idea if using Non-QM financing to give a few extra days for the underwriting process.  MasonMac underwriters Non-QM products in-house with MasonMac underwriters, so the process is more streamlined than working with wholesale/mortgage broker options.
3. Non-QM mortgage funds come from a smaller pool of investors with a smaller pool of overall funds than conventional loans which have oversight from FHFA.  For this reason, the Non-QM mortgage market can be more volatile and subject to frequent changes to product availability.  This is a pro and a con, because this also leads to a more nimble market, with new products frequently coming to market.

Non-QM mortgage loans aren’t a solution for everyone, but there is no doubt they have a place in today’s market for borrowers who cannot qualify for traditional mortgage products.  Understanding Non-QM loans and working with a lender that specializes in them not only presents more loan options but can make the process of getting financing easy even for those who don’t qualify for conventional or government-backed mortgage loans.

Curious about Non-QM loans, or have any questions about specific products?  Feel free to ask an expert by clicking here for a quick response!

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This is huge news to help address the affordability challenges that are prevalent in much of California.  For those looking to buy their first home that haven’t been able to save enough for a down payment, Dream for All can help assist with covering down payment requirements and closing costs.

As with most CalHFA loan programs, there are restrictions and unique qualifying considerations to meet the Dream for All program:

• Buyers must be first time home buyers, defined by CalHFA as those buyers who have not owned a primary residence within the most recent 3 year period
• Buyers must meet county area median income requirements (income limits vary by county)
• The Dream for All program is a 2nd mortgage that ‘piggybacks’ on to a conventional first mortgage loan, which must be a CalHFA first mortgage
• Funds are limited and program is set to end when allotted funds are exhausted
• California home buyers only, property must be a primary residence

With MasonMac’s Dream for All offering, a 2nd mortgage is set up that covers down payment and closing cost requirements, and the borrower does not have to make payments on this second mortgage.  Since it is a shared appreciation program, the loan is due to be repaid when the home buyer sellers their home, refinances, or pays their first mortgage in full.  When the loan is repaid, the original amount borrowed is repaid, and depending on the borrower’s income in relation to their area median income, a percentage of the earned home appreciation is also paid back to CalHFA.

Due to the shared appreciation, the program may not be financially beneficial to everyone, however it’s a tremendous option for those with low to moderate income living in high cost areas since it eliminates the burden of saving a large amount of money for down payment or closing costs.

Want to know if MasonMac’s CalHFA Dream for All program is right for you?  Give us a call and we’ll be happy to answer any questions you may have about this or any of our other down payment assistance options.

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Here is the chart showing the loan limit updates for the year 2023:

FHFA announced increases to conventional loan limits for 2023

What does this mean for borrowers?

Borrowers can benefit from the increases in loan limits mostly due to the fact that conventional lending guidelines are more forgiving than jumbo loan guidelines.  Any loan above the conventional loan limit falls into jumbo loan territory, and may be more difficult to qualify for.  For example, many jumbo loan products require at least 10% down payment and good to great credit scores.  Conventional loans require 3-5% down payment, and are far more forgiving in terms of FICO score.

These increases also mean that more cash is available to home owners who want to use conventional cash out refinance mortgages, and investors who want to purchase more expensive investment properties using conventional guidelines.

With home prices rising drastically year over year since 2020, these loan limits should help more borrowers access competitive financing terms , and help those in higher priced markets buy a home without an immense down payment.

1st Time Over $1 Million

2023 marks the first year FHFA will allow Fannie Mae & Freddie Mac backed conventional mortgage loans exceeding $1 million dollars in high cost markets for single family homes.  This will help buyers obtain loans to help buy homes in expensive metro areas or areas where median home values have exceeded the million dollar mark, without the need for an intimidating down payment.  To fully understand the benefit, take a competitive jumbo loan product and compare the down payment requirement on a $1.1M home.  With a competitive jumbo product requiring a 20% down payment, that’s a $220,000 investment (before closing costs!) to get into a home.  With a conventional loan product requiring just 5% down, the initial investment shrinks to $55,000, helping to make it easier to achieve the dream of home ownership in higher cost communities.

For more information, or to see what the loan limits are in your community, reach out to your MasonMac loan officer today!

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A mortgage rate lock allows customers in need of mortgage financing to “lock” in their interest rate.  This is an important feature of mortgages because the markets that influence mortgage rates (Mortgage backed securities, or MBS) trade each day and in certain markets can be very volatile.  Rates can change daily, and sometimes even multiple times in a single day, so having the option for a mortgage rate lock can protect against some of that volatility.

How It Works

With most mortgages a mortgage rate lock happens during the process and a rate is locked to cover the period of time from when the loan process starts through closing and funding.  A borrower will select a lock period and their rate is set at the locked rate for the duration of the lock period.  The most common mortgage rate lock time frames are 30 or 45 days, but in extremely busy markets it can be more typical to see 60 day locks.  In improving markets when rates are going lower, sometimes a lender will wait until just before closing and do a 15 day (or less) rate lock.  Typically, the shorter the rate lock period, the better the rate/pricing will be.

In other situations where a customer wants to lock in a rate to avoid market volatility (ie a market where rates are expected to go up), a mortgage rate lock can be obtained for a longer period of time.  In some cases, this requires an up front fee, usually used more as a deposit that gets refunded at closing, as is the case with MasonMac’s “Lock & Shop” program .  This type of lock can protect home buyers during a new build, rebuild, or a situation where they’re looking for the right home and want to ensure their monthly payment ends up being what is expected.  These longer term mortgage rate lock programs offer that option.

What If the Markets Get Better (or Worse)

By the very nature of a mortgage rate lock, if markets get worse (rates rise), a borrower is protected by their mortgage rate lock.  The rate on their loan cannot increase if it’s locked, even if market rates rise.  But what if rates get better after a borrower locks in?  There are some protections in place.  Usually, if the market sees just slight improvements, a locked loan will retain it’s locked rate.  But if the market improves substantially, borrowers can be offered the opportunity to “float down” their rate to the current market levels.  Sometimes there is a cost for this, but a borrower who has already locked their rate can take advantage of an improving market.  This makes a mortgage rate lock a good idea because in a bad market (rates rising) a borrower is protected, and if the market gets really good really fast, a borrower can usually still take advantage.  Every lender has a different policy on “float downs” so it’s important to ask your loan officer to explain further.

How to lock your rate

Your MasonMac loan officer can review lock options with you to see which type of mortgage rate lock best fits your situation.  If you’re interested in new builds and think rates may go up (or the numbers for you to qualify are tight and rising rates could disqualify you from a loan completely), our lock & shop option may be best.  If you’ve identified a home and are under contract, a shorter term lock would offer you better pricing and protection to your rate through closing.  Our experienced team of loan officers can help you select the option that’s right for you, and talk to you about the best mortgage rate lock options available.  Once you decide to lock, it’s an easy process for your loan officer to make it official, and you’ll receive documentation that reiterates the terms of your mortgage rate lock.

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Enter, MasonMac’s Lock & Shop loan program.  With our Lock & Shop product, home buyers can lock in their interest rate for an extended period of time prior to identifying a property.  This is a great benefit to buyers because they can take the time to find the right home without the pressure of a rising rate environment weighing on the decision making process.

So buyers are protected from volatile rate increased while shopping for a home, but what if rates improve while they look for a home?  Wouldn’t the locked rate then be a bad thing?  MasonMac has you covered!  Our Lock & Shop product features a 1 time float down option, so if the market improves, our customers are able to take advantage by choosing to exercise the float down option within 30 days of their settlement to take advantage of the improved market.

With the float down function, MasonMac customers get the benefit of both protection from rising rates and the ability to take advantage of an improving market, offering some peace of mind to what can be an otherwise stressful home buying process.

When considering buying a home, we think you’ll love the options we present – with long term locks, this Lock & Shop program, and our Buyer’s Advantage process, we put our customers in the best place for a stress-free house hunting and home buying process.  Add to that our highly experienced team of loan officers ready to assist with in depth product knowledge and armed with the technology to streamline the loan process, and home buyers are in the best of hands when working with the team at MasonMac!  

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The Budget and the Plan

In order to get a renovation loan, you need to have a pretty good idea of the scope of your home project.  The cost and timeline are 2 things to be aware of, and when applying, it helps if contractors are already lined up with budgets and the cost breakdown for materials and labor (for most renovation loans, you’ll need contractors familiar with the draw schedules of renovation loans) as well.  Once you know the scope of your project, how much the work will cost, and who will complete it, you’ll be able to move forward with an application for the proper type of renovation loan.

Conventional or FHA?

Both conventional and FHA loan programs offer renovation loan options as part of their product suite.  Conventional has limited offerings, and FHA renovation loan offerings vary based on the scope of the project.  Generally speaking, minor projects with no major changes to an existing structure can be covered under an FHA 203k (streamline) loan, and FHA offers financing as well for energy efficient home upgrades through the EEM program.  For more complex, expensive, or structural projects, the full 203k is offered by FHA, and conventional offers the FannieMae Homestyle Renovation options.

These projects generally function in a similar fashion to each other, with a property value being considered after the completion of the noted renovations.  An appraiser will determine what the property of a home will be after renovations are done, and the financing is then based on that as completed valuation.  This allows a lender to finance most (and many times, all) of the costs of renovations without exceeding the value of a home.

While renovation loans aren’t necessarily difficult to process, it makes sense to work with a loan officer that’s familiar with the products being offered because there are certain forms, documents a contractor needs to complete, and some steps along the way that differ from more traditional financing.  Another consideration in recent years has been difficulties with supply chains and availability of workers – renovation loans require work to be completed within a certain period of time (usually within 6 months of closing) so it’s important to have professionals in place that can and will deliver on their promises and budgets.

Factoring in the above information, renovation loans can be a great way to turn a home with “great bones” into a dream home, or take a property that may be priced well but is “dated”, and update it to match the latest trends, creature comforts, and money saving efficiency upgrades.  From square footage additions to bath and kitchen remodels, depending on the type of renovation loan, there’s a lot that can be done (and financed!) with these product offerings.

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If you need to access cash from your home equity and have no interest in selling, in most cases you’re left with limited options to tap into the equity you’ve likely grown over the past few years of high appreciation.  It often boils down to a HELOC VS Refinance.  There are some definite benefits and drawbacks to both options so it’s important to know the ins and outs so you can make a smart financial decision that offers the most benefits short and long term.  Let’s start with the HELOC!

HELOCs

HELOCs are Home Equity Lines of Credit.  They act similarly to a credit card, in that you have a limit (based on the amount of equity in your home), and can access the line of credit to draw funds in either a lump sum, or as needed, during a “draw period”.  Most HELOCs are structured as 30 year loans, with an initial 10 year “draw period” where you can access the cash from your home, followed by a 20 year repayment period in which no more cash can be taken out and the withdrawn funds must be repaid.  During the draw period, most HELOCs offer interest-only payment options.

The plus side of this payment option is that it allows for lower monthly payments so you can borrow the money you need for things like debt consolidation, home renovations, or anything else, without making too large of an impact to your monthly budget.  Another perk of HELOC products is they often have lower closing costs than a full refinance, but many times they will be accompanied by a small annual fee (again, similar to many credit cards).

The HELOC is not without it’s downside.  Since HELOCs tend to be based on the prime rate, the interest rate is often variable based on what the Fed does to the Fed funds rate.  Unlike first mortgage rates, HELOC rates vary, sometimes frequently, so payment amounts aren’t fixed and can be unpredictable year over year.  Another downside that’s not often considered is that if you want to refinance your first mortgage in the future and you have a HELOC, most times your new refinance rate will be higher as there’s a penalty for having a 1st and 2nd lien, but also a penalty for “cash out” if you’re consolidating a HELOC that wasn’t used to purchase your home.

So while HELOCs may be a more affordable option up front, they could prove more costly long term in the event rates rise, and they’ll make future refinances (to take advantage of lowering rates) more expensive

Refinance

A refinance is a restructuring of an existing mortgage lien, in which a new loan replaces the existing loan.  With a cash out refinance (often referred to as an “equity loan”), borrowers may restructure their existing debt and borrower additional funds from the equity in their home as well.  A refinance can also be used to simply reduce an existing interest rate or change the term of a loan (for example, from a 30 year to a 15 year loan term).  When no additional cash is borrowed, or only a very small amount, it’s called a “rate/term refinance”, or “no cash out refinance”.

The perks of a refinance to take cash out will depend on the situation, but fixed rates are available so a borrower knows what their payment will be today, 6 months from now, and for years to come.  This offers more long term planning without having to worry about rates or the overall mortgage market in terms of the effect on monthly payment and finances.  A refinance may also offer the possibility for more cash out, and is available on various property types and ownership situations (for example, HELOCs aren’t widely available in investment properties, but investment property owners frequently borrow against their equity with refinances).  In a falling rate environment, refinancing can sometimes offer customers cash without impacting their monthly expenses!  For example, on a $400,000 mortgage at 5.5%, the monthly payment is close to the same as a $500,000 mortgage at 3.5%, so in a falling rate environment, a refinance can offer cash without negatively impacting your budget!.

The downside of a refinance is that if you currently have a very low interest rate, increasing it by much to access cash may be a tough pill to swallow.  It can make sense when paying off higher rate consumer debt, but whether it’s worth it depends on overall savings.  Refinance closing costs tend to be higher than HELOC closing costs, too, sometimes by a few thousand dollars.

When it comes to the HELOC VS Refinance debate, everyone’s situation is different and since both products offer different short and long term benefits and pitfalls, it’s really important to talk with an expert about the available options.  Our MasonMac loan officers are here and ready to help you decide – when it comes to HELOC vs Refinance, what’s right for you?

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These changes represent an increase in area median home prices, and county changes are based on local rates of appreciation.  These changes should allow home buyers more flexibility and more favorable loan terms in areas where home prices have seen increases over the past year.  One major perk of using conventional financing is the ability to finance up to 95% of a home purchase, having only a 5% down payment requirement.  For some borrowers and situations, conventional loans require only a 3% down payment, making it possible to achieve the goal of home ownership without bringing in a larger down payment that many jumbo loan products require.

Another perk of conventional financing is competitive rates and mortgage insurance terms for those with excellent credit.  For those with good (but not exceptional) credit, conventional financing is another great option, since most jumbo financing options either require excellent credit (leaving those without excellent credit with minimal options), or coming with higher rates.

2022 loan limits are in effect for loans delivered to Fannie Mae & Freddie Mac in calendar year 2022, but loan applications can begin being processed under the new loan limits effective immediately.  Your MasonMac loan officer can further explain how the increase in loan limits may be able to assist you in getting better loan terms or qualifying for more home.

For an interactive map that shows loan limits for your specific county, you can click here .  If you have questions on how these loan limits can help you, or any other mortgage related questions, you can ask an expert here.

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