A blog from Pacific Mortgage Co

Top Five FAQ's Brokers Get Asked

Top 5 FAQs Brokers Get Asked

In many business situations, “cutting out the middleman” makes things more efficient. In real estate, however, mortgage brokers are extremely effective in their position as intermediaries between borrowers and lenders. Often unfairly stereotyped as pushy sellers who tack on hidden fees, brokers can help their clients find the best loan terms and rates; the following are five of the most frequently asked questions brokers are asked.

How are you paid?

One of the most common concerns buyers have when working with a mortgage broker is how the broker will be paid. Mortgage brokers are typically paid when the transaction is closed; the broker fee is often embedded in the lender loan origination fee. For most brokers, this fee is 2-3% of the total loan.

What are your hours?

Unlike traditional lenders, most mortgage brokers operate outside of typical banker’s hours. This added flexibility allows brokers to help their clients move through each step of the mortgage process quickly and with minimal delays. Likewise, most brokers are readily available by phone, email, or even text any time of day.

What type of loan is best for me?

This is a personal question and varies wildly from borrower to borrower. A good broker will ask questions about income, down payment, future financial plans, and more before making recommendations on loan options. Potential buyers should consider a variety of loan options: fixed versus variable interest rates, 15- versus 30-year mortgages, FHA or VA loans, and more.

How much can I afford?

Brokers can help their clients determine how much house they can afford, the best down payment amount, and what loan terms will best suit their needs. Likewise, a good broker can provide buyers with a breakdown of different interest rates and fees based off of different down payment amounts.

Why should I work with a broker instead of a bank?

Mortgage brokers act as personal shoppers; with access to a wide variety of lenders, they can help their clients find the best terms on a loan. Because brokers work for their clients instead of a single financial institution, they are able to compare loans from different lenders – including Fannie Mae and Freddie Mac. Brokers can also give their clients rates at wholesale costs.

by Author, Dec. 21, 2020

Mortgage Broker Myths Debunked

Mortgage Broker Myths Debunked

When buying a home, mortgage brokers can be an invaluable ally in finding the best financing options. Unfortunately, brokers sometimes get a bad rap as pushy salesmen who are trying to make as much money as possible off their clients.

In reality, the vast majority of mortgage brokers are helpful and knowledgeable real estate professionals. Whether it is explaining the difference between LVR and LMI, helping small business owners secure a home loan, or translating the small print, brokers can help buyers successfully navigate the financing process.

The following are four common myths about mortgage brokers that need to be debunked:

Myth #1: Mortgage brokers are expensive

It’s a common misconception that mortgage brokers are expensive and charge lots of hidden costs and fees.

Most brokers are paid through commission at closing; this is typically based on a percentage of the total loan amount. While some brokers may charge additional fees, these are communicated to buyers upfront.

Some buyers think working directly with a financial institution will “save” them the commission costs. Which leads to the next myth…

Myth #2: Mortgage brokers work for the banks

Mortgage brokers may represent the best loan products from a financial institution, but they do not work directly for any specific bank or lender. This allows them to shop around to multiple different lenders to find their buyers the best terms and rates. When working with a broker, they should:

  • Be upfront and transparent with fees and commissions
  • Offer competitive options from different lenders
  • Have explanations for the loans they recommend

Myth #3: Mortgage brokers only focus on low rates

While finding low interest rates for their clients is part of what a mortgage broker does, there is more to a loan than just the interest rate. Working directly with buyers, brokers will help find the best loan that their buyers are most likely to be approved for.

Brokers can also be invaluable in situations with complex finances, such as a buyer who has previously declared bankruptcy, owns a small business, is buying an investment property, and more. Because these loans are often more complex, working with a broker to find the most favorable terms gives buyers the best chance at their loan application being approved – and reaching closing on time.

Myth #4: Mortgage brokers have worse rates than the banks

Buyers often think that their neighborhood bank will provide them with the best interest rates. However, this is not always the case. Working with a single bank means buyers are only getting loan options from that financial institution; this can lead to buyers missing out on better loan terms from a different lender. Brokers, however, know the ins and outs of the industry, keep up to date with the latest market trends, and understand the application and approval process for multiple lenders.

by Author, Dec. 14, 2020

Loan Options for Investment Properties

Loan options for investment properties

Investing in real estate is one of the best ways to build passive income and protect money against market volatility. While would-be landlords do not need the cash to purchase a home or building outright, securing financing for an investment property is more complicated than financing a primary residence.

There are several options available for those looking to purchase an investment property. The most popular loan types for investment properties are conventional bank loans, hard money loans, and home equity loans; each of these loans has different requirements and pros and cons that potential investors should consider.

Option #1: Conventional Bank Loans

Conventional loans are the most common financing option for primary residences. Unlike FHA, VA, or USDA loans which are backed by the federal government, conventional mortgages must conform to guidelines set by Fannie Mae or Freddie Mac.

Credit score, credit history, and income will determine a person’s ability to be approved for a conventional loan as well as what type of interest rates they qualify for. For conventional loans, borrowers must also show that they can afford their existing mortgage as well as the monthly payment for the investment property – without rental income.

A higher down payment may also be required. Conventional loans require a down payment of 20%; investment properties, however, often require a minimum of 30% as a down payment.

Option #2: Fix-and-Flip Loans

Thanks to the popularity of home improvement shows, many people think they can make fast and easy money flipping a house. For investors looking to buy, renovate, and sell a home as quickly as possible, a fix-and-flip loan may be the best financing option.

Fix-and-flip loans are short-term, hard money loans; this means that the loan is secured by the property itself. These loans are typically only available from hard money lenders, although some real estate crowdfunding platforms offer them as well. These loans may be easier for some buyers to qualify for as the primary focus is on the profitability of the property and not on the credit score or income of the buyer.

The ARV, or after repair value, is used to gauge when the loan can be repaid. This flexibility comes at a price; interest rates for fix-and-flip loans can be as high as 18%, and the timeframe for paying back the loan amount may be short. Many hard money loans have financing terms of a year or less.

Option #3: Tapping Home Equity

Investors who already own their own home can draw on their home equity to purchase an investment property. A home equity line of credit, or HELOC, or a cash out refinance are a third option to afford buying a second home. In many cases, homeowners are able to borrow as much as 80% of the value of the home’s equity towards the purchase of an investment property.

A HELOC allows homeowners to borrow against the equity, similar to a credit card. Monthly payments are interest-only, but rates are usually variable; this means that they can increase as the prime rate changes. Cash-out refinancing comes with a fixed-rate, but extends the life of the mortgage on the primary residence. The longer loan terms can equal tens of thousands of dollars more in interest over the life of the mortgage.

by Author, Dec. 07, 2020

Seven Factors That Determine Your Interest Rate

Seven Factors that can determine your interest rate

Potential home buyers want the lowest interest rate they get. But how are interest rates determined? Even the savviest buyers may not understand how their interest rates are calculated.

Saving even a tenth of a percent in interest equals thousands of dollars in savings over the life of the loan. Because of this, it pays to know how to get the best interest rate possible. The following are 7 factors that help determine the interest rate a buyer qualifies for.

1. Credit Score

Credit score is the primary predictor for interest rate. In general, the higher the credit score the lower the interest rate. This is because lenders view credit score as an overall reflection of financial security – and how likely a borrower is to repay the loan on time.

Credit scores are determined by a borrower’s credit history including employment, loans, credit cards, and payment history. Potential borrowers should check their credit score at least six months before they plan on applying for a mortgage to allow time for any errors to be disputed and corrected.

2. Loan Amount

Homebuyers who are taking out particularly large – or small – loans may be subject to higher interest rates. Potential buyers should calculate the amount they need to borrow as the price of the home plus closing costs minus the down payment. Mortgage insurance may also be included in the loan amount.

3. Home Location

Interest rates may vary slightly by state. In rural areas, for example, local lenders may be able to offer buyers better rates than a nationwide bank. Likewise, borrowers may find that interest rates in hot markets such as New York City or San Francisco are higher than in nearby suburban areas.

4. Down Payment

In general, homeowners putting a larger down payment towards the purchase of a property can qualify for lower interest rates. This is because in the eyes of lenders a large down payment equals a low level of risk as buyers have a bigger stake in the property. Putting more than 20% down may be able to be able to help lower the interest rates by a few percentage points; likewise, a down payment of at least 20% also means that no private mortgage insurance, or PMI, is needed.

5. Loan

The term, or duration, of the loan is the amount of time a borrower has to pay back the amount. In general, shorter term loans, such as 15-year mortgages, have lower interest rates. This can lead to long-term savings; while the monthly payments may be higher, the overall amount of interest paid is significantly lower.

6. Type of Interest Rate

Interest rates can be fixed or adjustable. Fixed rates stay the same for the entire length of the loan. Adjustable rates, however, may go up or down based on the market after the initial fixed period ends.

Loan Type

There are several categories of loans including conventional, FHA, USDA, VA, and more. These different loans have different eligibility requirements – and often come with different interest rates. Shopping between different lenders and different loan types can help buyers find the best loan – and lowest rates – for their new home.

by Author, Dec. 1, 2020

What is a private lender?

What is a private lender?

When it comes to financing a new home, there is money available beyond the bank. Private lenders are a viable financing option that many homebuyers often overlook.

What is a private lender?

Private lenders are entities not tied to a bank or credit union who loan money to individuals or businesses. A private lender can be an individual person, a small group, or a larger company. While private lenders can finance a variety of different loans, they most commonly finance personal loans and real estate loans.

How do loans from private lenders work?

A loan from a private lender works the same as a loan from a larger financial institution; after applying and being approved, the individual receives the funding for their loan. This can allow them to purchase a home, consolidate debt, make home improvements, and more. Just like a bank or credit union, the amount is then paid back in monthly installments with interest over an agreed-upon amount of time.

What are the benefits of private lenders?

Many private lenders have much faster approval times than larger financial institutions. This is due to a streamlined, more informal application process and significantly smaller size. Likewise, private lenders are often more willing to work with people who may struggle to get approved by traditional financial institutions. Those with low credit scores, past foreclosures, or varying income due to a small business may be more likely to receive financing through a private lender.

Are private lenders legal?

It is absolutely legal for organizations other than banks or credit unions to lend money. Like other financial institutions, private lenders must comply with the usury and banking laws of the states in which they operate; this helps regulate the interest rates and fees that they can charge borrowers. Likewise, in some states private lenders may be limited on the amount they can loan without a banking license.

Private lending companies versus individuals

Like banks, private lending companies make a profit off of the interest borrowers pay on their loans. Many private lending companies are online lenders that conduct their business entirely online. Examples of private lending companies include LightStream, Best Egg, LendingPoint, Avant, Prosper, and more.

Individual private lenders are individual people; they may be investors looking to earn a profit, or someone known to the borrower willing to “help out” with the funding. Individual private lenders tend to fall into three circles:

- Primary circle: The primary circle are people the borrowers know directly such as family members, friends, or colleagues.
- Secondary circle: The secondary circle are acquaintances and friends of friends; these are usually people the buyers have a connection with but may not know as well.
- Third party circle: The third party circle are accredited investors that they buyers don’t know. Connections between these individuals and borrowers are often made through “peer-to- peer” lending sites that make these connections online.

by Author, Sep. 30, 2020

Mortgage mistakes first time buyers make

Mortgage mistakes first time buyers make

Buying a first home is an exciting time. However, it can be easy for first-time buyers to get caught up in the whirlwind of the homebuying process – and be left with buyer’s remorse later. The following are four of the most common mortgage mistakes first time buyers make; following this guide can help new buyers avoid them and feel confident with both their new home and financial decisions.

1. Looking at homes before getting preapproved

While there’s nothing wrong with browsing real estate websites for fun, seriously going to open houses or beginning to work with a realtor before being preapproved for financing is putting the cart before the horse. First-time buyers should get preapproved by a lender for a number of reasons. First, preapproval will give buyers a concrete idea of how much they can afford. Second, it shows real estate agents that they are serious about buying and are able to financially afford the homes they are looking at. Third, preapproval is nearly a necessity in areas with seller’s markets where properties go fast and assured financing is important.

2. Putting down too much – or too little

Many first-time buyers believe they cannot afford to purchase a home unless they have 20% as a down payment. However, this 20% is not a requirement for a number of different types of loans. VA loans, available to qualified veterans, require $0 down; FHA loans require down payments of as little as 3.5%. Buyers of other loan types can also pay PMI, or private mortgage insurance, if they cannot afford the full 20% required by their lender.

Likewise, first-time buyers should be cautious not to put down too much for their down payment. Significantly depleting – or entirely emptying – cash funds can leave new buyers unable to afford closing costs, make repairs, or afford other unexpected expenses.

3. Making major changes during escrow

The days and weeks between being approved for a mortgage and closing are critical; buyers should avoid making any major financial changes that could impact their ability to get financing. This can include everything from changing jobs, taking out a new line of credit, missing existing payments, or making major cash purchases or withdrawals. While it may be tempting to start buying new furniture in the weeks leading up to closing, buyers should refrain from taking out any new lines of credit or making major purchases until they have the keys to their new home in their hands.

4. Not shopping around for lenders

Many first-time buyers are so afraid of the financing process that they go with the first lender they apply with. However, buyers should approach the mortgage process the same way they do the homebuying process and shop around before settling on the perfect loan. Different lenders offer different rates, terms, perks, and more. Shopping around with different lenders can ensure first-time homebuyers are maximizing their borrowing potential and getting the most bang for the buck with their new mortgage.

by Author, Sep. 30, 2020

Etiquette for new homeowners

Etiquette for new homeownersr

Congratulations - you’ve purchased your first home! While you may now own the property, there are several rules and etiquettes to follow in order to maintain positive relationships with your new neighbors.

Keep up with curb appeal

Keeping your new home and lawn maintained will prevent it from becoming the neighborhood eyesore – and raising the ire of your new neighbors. This includes keeping the lawn mowed, garden beds weeded, trees and bushes trimmed, and other exterior repairs made. New to lawn care? Don’t be afraid to ask your new neighbors about tips and tricks for lawn maintenance. Most “suburban dads” are more than happy to discuss mower recommendations, fertilizing strategies, or gardening tips. Likewise, avoid mowing late at night or early in the morning when many are still asleep.

Minimize noise pollution

On that note, try to keep noise to a minimum - particularly between 9 pm and 9 am. While neighbors are likely to forgive the occasional loud party or barking dog, being too loud is one way to quickly alienate the rest of the neighbors. Likewise, if a neighbor does come around and reasonably ask you to limit noise or be quieter, politely respond and try to minimize noise.

There is an important exception to this rule: there is very little anyone can do about limiting the noise from home repairs or remodeling. Whether it is roof repairs or bathroom renovations, don’t worry about noise generated during daytime hours by necessary home repairs.

Respect other people’s property

The golden rule can easily apply to new neighbors: treat others as you want to be treated. Respect your neighbors by keeping kids or pets off of their yards, maintaining your side of the property line, trimming any overhanging tree branches, and more. Likewise, as many neighbors frequently borrow tools or other equipment from each other, make sure to always return it in the same condition in which you received it.

Thank those who pitch in to help

There are many projects around the house that cannot be finished by one or two people alone. If you need to enlist the additional help of friends, coworkers, or new neighbors, follow the 3 R’s of Renovations: rewards, reciprocity, and recognition.

The most basic reward for those who are helping is food and drink. Pizza and beer or sandwiches and lemonade can go a long way in helping someone feel appreciated. Likewise, make sure to recognize their efforts – particularly by bragging about them to friends, family, and other mutual acquaintances. Lastly, reciprocate by helping them next time they are in need of an extra set of hands.

by Author, Sep. 30, 2020

Common home loan pitfalls

Common home loan pitfalls

Common home loan pitfalls

Purchasing a home is an exciting – yet stressful – time. Unfortunately, there are a number of mistakes that home buyers can make that can cause delays at closing or termination of the loan altogether. The following are five of the most common home loan pitfalls buyers face when purchasing a new home.

1. Spending too much on a home

While lenders are legally prevented from approving a loan with a monthly payment that is more than 35% of a households income, most financial advisors recommend that buyers spend no more than 28% of their monthly income on their mortgage.

Being approved for a large mortgage doesn’t necessarily mean buyers should borrow every dollar available to them. Many first-time buyers find themselves “house poor,” or in a situation where their mortgage and other household expenses leave them unable to afford much else – or even on the brink of a financial disaster.

2. Ignoring credit scores

Credit scores are one of the most important factors in mortgage application approval. Because of this, those preparing to purchase a new home should regularly check their credit score – and take active steps to improve it. Checking your own credit does not negatively impact a person’s credit score; reviewing their credit report before applying for a mortgage gives buyers the chance to correct any inaccuracies before heading to the bank.

How good a buyer’s credit score is can also impact the interest rates they qualify for. Those with the highest credit scores are considered low-risk buyers and often qualify for the lowest interest rates. Buyers with good or average credit scores may still get approved for a mortgage, but often face much higher interest rates.

3. Not shopping around for lenders and loans

It is exceedingly rare that potential homebuyers look at only one house before buying. Yet, many buyers go with the first lender they meet with for their mortgage.

There are pros and cons for every lender – and every type of home loan. Different lenders can offer different fee structures, different promotions, or different interest rates. Likewise, there are benefits to considering different loan structures beyond the traditional 30-year, fixed-rate mortgage. A good lender can discuss available options with buyers to help them find the right loan.

4. Applying for another loan

While a new Mercedes may look beautiful in the driveway of your new home, the middle of the homebuying process is not the right time to make any other big purchases. Taking out a new loan, making major purchases, or other major changes to credit can all cause financing to be delayed – or dropped altogether. Instead, wait to buy new furniture or apply for a personal loan until after closing.

5. Ignoring the hidden costs of homeownership

The down payment is not the expense at closing. Instead, buyers should be prepared to cover a variety of other costs at closing – as well as once they become homeowners. Depending on the details outlined in their agreement, buyers may be expected to pay for the home inspection, appraisal, title fees, or loan origination fees. Likewise, homeowners insurance, home warranties, and other routine maintenance are ongoing expenses that should be budgeted for.

by Author, Sep. 30, 2020

The difference between a mortgage banker and a mortgage broker

The difference between a mortgage banker and a mortgage broker

Many buyers use the terms mortgage banker and mortgage broker interchangeably. While both have similar job features – and both can help you get a loan – there are differences and nuances between bankers and brokers. Understanding the differences can help save buyers time, frustration, and in some cases, money.

What is a mortgage banker?

Mortgage bankers underwrite, approve, and close loans for their financial institution. They work for a specific financial institution such as a retail bank, investment firm, or agency such as Freddie Mac or Fannie Mae. Mortgage bankers have access to a variety of loans including conventional, jumbo, USDA, FHA, and VA. These bankers focus exclusively on loans and lending instead of other financial services their institution may offer; they are well-versed in lending laws and are committed to helping structure your loan and closing the deal.

What is a mortgage broker?

Mortgage brokers are individuals who are federally licensed and work on behalf of borrowers for a variety of lenders. While brokers do not lend money themselves, they help borrowers obtain loans through retail banks, credit unions, and other financial institutions. Because brokers do not work for one lender they are able to find their clients the best rates, terms, and conditions.

The difference between bankers and brokers

The National Association of Mortgage Brokers defines a broker as "an independent real estate financing professional who specializes in the origination of … mortgages." By contrast, a mortgage banker is defined by the Mortgage Bankers Association as "an individual, firm or corporation that originates, sells and or services loans secured by mortgages."

There are a number of key differences between brokers and bankers.

  • Bankers are institutional; brokers shop. A mortgage banker works in the loan department for a financial institution. He advises realtors, buyers, and loan applicants about the loan options within a specific institution. A mortgage broker works with a specific realtor or borrower to find the best loan option for them amongst a variety of lenders and institutions. Brokers can compare loans from various institutions whilst a banker cannot.
  • Bankers work on salary; brokers work on commission. Mortgage bankers are paid a salary by the financial institution they work for; they may be offered incentives, bonuses, or small commissions for loans. As bankers are paid by a single institution, their loyalty is to that one bank or credit union and they can only offer loans from that lender. Brokers, however, have a responsibility to the borrower and to get them the best deal possible. Some brokers work on a flat fee, some charge a percentage of the value of the loan, and some are given a sort of commission; this is done by finding the difference between the rate the broker gets from the lending institution and the rate he provides to the borrower.

by Author, August. 18, 2020

Why get a home equity loan?

Why get a home equity loan?

Homeowners can tap into the equity in their existing home as a way to borrow cash to pay off other high-interest loans, pay for home improvements, have cash on hand for medical or education expenses, or afford other large purchases. However, not all homeowners will qualify for a home equity line of credit, or HELOC.

Homeowners who have built significant equity from making large down payments, paying down their mortgages, or increased market values are more likely to qualify for home equity loans. While the requirements vary by financial institution, most lenders want homeowners with strong credit scores, steady income, few debts, and a history of reliable payments.

What is a home equity loan?

A home equity loan is a second mortgage against a home, the proceeds of which are given to the homeowners in one lump sum. The loan is secured against the value of the home; once received, homeowners begin repaying it immediately in monthly installments at a fixed interest rate like their original mortgage.

Home equity loans are similar to personal loans in that they can be used for almost any purpose and have fixed APRs. However, home equity loans often have significantly lower interest rates as the home is being used as collateral.

Why get a home equity loan?

Homeowners can tap into the equity in their homes in three ways: a home equity loan, a home equity line of credit, or a cash out refinance. These loans are helpful when homeowners need a large sum of money to finance large expenses; popular uses for home equity loans include paying off credit card or other consumer debt, financing major home improvement projects, paying college or school tuition, or using the money for a large purchase such as a vehicle or boat. Homeowners who use their home equity loan for substantial home improvements may be able to deduct the interest on the loan from their taxes.

The top 5 requirements for a home equity loan

  • While specific requirements vary from lender to lender, most homeowners must meet these five basic requirements:
  • Have at least 15 to 20 percent equity in a home. The equity in a home helps lenders determine how much homeowners can borrow.
  • Have a credit score of 650 or higher. Higher credit scores can help homeowners qualify for lower interest rates.
  • Have a debt-to-income ratio lower than 43%. Lenders view borrowers with a low debt-to-income ratio as low risk.
  • Have sufficient, steady income. Lenders will evaluate a borrower’s income to ensure they will be able to continue to afford the monthly payments.
  • Have a reliable payment history. A timely pattern of paying bills with few or no missed payments show lenders that a borrower is low risk.

by Author, August. 18, 2020

Modifying a loan due to financial hardship

Modifying a loan due to financial hardship

One of the most common reasons for missing a mortgage payment is sudden, unexpected financial hardship. A death in the family, serious illness, divorce, or loss of a job can take a serious toll on personal finances – and leave homeowners struggling to keep up with mortgage payments.

For homeowners facing sudden financial hardship, there are options available to avoid foreclosure. Loan modifications are a permanent restructuring of the existing loan; this is done with the goal of making the monthly mortgage payments affordable for the long term. The following guide can help homeowners better understand loan modifications due to financial hardship.

Homeowners have to be qualified

Not every homeowner will qualify for loan modification. Lenders often have their own set of criteria for who qualifies for modification, such as:

  • Documentation showing homeowners can’t afford the current payment due to financial hardship
  • Inability to refinance the loan
  • Increased debt-to-income ratio

If the lender agrees to loan modification, the new loan will start with a trial period to ensure homeowners can afford the new monthly payment.

Homeowners need proof of financial hardship

When homeowners ask their lender to modify a loan due to financial hardship, they need to provide proof. This will mean presenting documents to the lender such as:

  • Federal and state tax returns
  • Bank statements
  • Pay stubs
  • Letter of hardship

A letter of hardship is a letter written by homeowners to their lenders explaining their current situation and why they need a loan modification in order to avoid foreclosure. Likewise, homeowners will also need to submit an application to their lender with the above information.

Watch out for loan modification scams

Homeowners who need to modify their loans should work directly with their lenders and avoid third party loan modification companies. Most loan modification companies act only as middlemen between borrowers and lenders, making the process longer – and more expensive – than if homeowners did things themselves.

Unfortunately, some loan modification companies are designed to take advantage of desperate homeowners experiencing financial hardships. This can range from charging high fees for things such as mailing paperwork to even tricking homeowners into paying a modification company directly.

Many loan modification companies are less than honest, if not an outright scam, charging high fees for actions you can easily do yourself like mail paperwork and reply to messages from your provider. Homeowners who suspect a scam should report the company to the FTC and other sources.

by Author, August. 18, 2020

What Do Housing Market Indicators Forecast For the Future?

What Do Housing Market Indicators Forecast For the Future?

As the coronavirus pandemic swept the nation, housing market predictions ran the gamut from optimistic to grim. With few experts agreeing on what the future of real estate will look like, forecasts continue to change with each passing week. Despite this, housing prices have risen for the 33rd consecutive quarter across the United States.

With stay-at-home orders beginning to lift across the country, parts of the workforce preparing to return, and unprecedented interest rates offered by many lenders, early trends indicate the market may be beginning to return to normal. The following housing market indicators show how the market has begun to find its footing amidst the Covid-19 crisis.

Home sales have declined but prices remain strong

The National Association of Realtors found that in March 2020 the median existing home price across all housing types was $280,600; this an an 8% increase from March 2019 with prices increasing in every region. However, the unsold inventory in March was equal to a 3.4-month supply at current market pace. While this is an increase from the 3.0-month supply in February, it is a decrease from the 3.8-month figure from March 2019.

Dramatic reductions in housing supply

The April 2020 report by [] found that available inventory has continued to decline. This is due to both a lack of newly listed properties as well as some sellers opting to de-list their homes and wait until stay-at-home orders and social distancing measures are further lifted. The national inventory is down 15.3 percent year-over-year, with inventory in large markets down 16 percent. Newly listed properties have experienced the sharpest decline with a 44.1 percent year-over year-year decline and a 45.5 percent decline in large markets.

Mortgage rates may drop below 3 percent

As the Fed drops their own rates to historic lows, lenders have been slow to dramatically lower their rates. However, interest rates have declined steadily since the beginning of the Covid-19 crisis; many experts now predict that mortgage rates may drop below 3 perfect before the end of 2020.

While the current economic climate coupled with low inventory may prevent some new buyers from purchasing homes, current homeowners stand to gain the most through refinancing. Fannie Mae predicts that refinancing will increase 40% in 2020 from 2019 as homeowners capitalize on the lowest interest rates in more than a decade.

Long-term implications for new construction

Early predictions for 2020 showed that new construction would be slow to sell. This has proven true, with the builder confidence index seeing its largest ever recorded drop in March. In addition, the National Association of Homebuilders index fell a record 42 points in April 2020 to just 30. While an index of 50 or higher means builders are optimistic, this low number indicates builders will finish their current projects but are unlikely to begin entirely new construction.

New construction supply will be further constricted for the long term as social distancing guidelines slow down construction. Likewise, many manufacturers of construction supplies such as PVC pipe and shingles were shut down or switched to producing essential products such as plastic sheeting. This may have implications on the supply chain for many construction enterprises.

by Author, June. 17, 2020

The truth about missed mortgage payments and unemployment

The truth about missed mortgage payments and unemployment

The coronavirus pandemic has been an unprecedented time of both medical and financial crisis in the United States. More than 40 millions Americans have filed claims for unemployment assistance in the last three months; likewise, the federal government has provided citizens with more than $2 trillion in economic relief and stimulus aid.

While the total number of unemployed has started to shrink as stay-at-home orders are slowly lifted, an analysis by Payscale predicted that it may take the country 4-5 years to fully recover current job loss. Many American families have found themselves unable to make their monthly mortgage payments during the Covid-19 crisis. While there are relief programs available to homeowners, they are not without stipulations and conditions.


The financial crisis has had a major impact on the mortgage industry. In addition to falling federal rates, lenders are tightening up product offerings in an effort to offer the strongest-possible loans. Both lenders and borrowers are frequently talking about forbearance.

As part of the efforts to provide relief to the public, the federal government passed the CARES Act. As part of the act, lenders can offer forbearance to qualifying customers; this allows borrowers to pause or reduce their payments for a limited period of time. These missed payments are then added on to the back end of the loan.

However, forbearance is not guaranteed to all borrowers. The U.S Department of Housing and Urban Development, in conjunction with Fannie Mae, released specific guidelines outlining those who qualify for forbearance under the CARES Act.

Guidelines for lenders

The Federal Housing Authority issued the following guidelines for mortgage servicers:

  • Delay submitting Due and Payable requests for Home Equity Conversion Mortgages for six months. An additional six-month delay is available with HUD approval.
  • Encourage flexibility under the Fair Credit Reporting Act when reporting negative credit actions.
    • Guidelines for borrowers

      Fannie Mae issued the following guidelines for borrowers:

      • Homeowners negatively impacted by the Covid-19 crisis should directly contact their mortgage servicer for assistance
      • Foreclosures and evictions are suspended for 60 days
      • Homeowners negatively impacted by the Covid-19 crisis may be eligible for a forbearance plan. This can reduce or suspend mortgage payments for up to 12 months, with the amount of the remaining payments to be added on to the end of the loan.
      • Credit bureau reporting of missed or past-due payments of borrowers in forbearance is suspended
      • Homeowners in forbearance will not incur late fees on missed or reduced payments
      • After the forbearance period, servicers will work with borrowers to create a permanent plan to adjust monthly payments to an affordable amount, including loan modification
      Borrowers who have questions about forbearance under the CARES act should contact their mortgage servicer directly for more information.

      by Author, June. 17, 2020

How to increase equity during quarantine

How to increase equity during quarantine

Because of the Covid-19 quarantine, most of us are spending more time in our homes than ever before. In addition to learning how to bake bread or finishing a giant jigsaw puzzle, now is the perfect time to tackle improvement projects around the house that can add equity to your home.

Short-term projects can build long-term equity

While it may be impossible to start a major kitchen remodel, there are still a number of home improvement projects that can add equity to your home. Start by making a plan; prioritize projects that you can complete by yourself at home without outside help. As a rule of thumb, home improvement projects should only “cost” 25 cents to the dollar, with the other 75 cents going directly back to increasing the value of your home.

Plan ahead during quarantine

Take the time to plan out projects in advance to ensure you have access to all necessary supplies. While many home improvement stores remain open during quarantine, travel and shopping may be restricted based on stay-at-home orders in your area. Plan ahead as many stores have reduced hours, require masks, have limited numbers allowed in store, or have put other social distancing measures in place. Consider other options such as curbside pickup or home delivery when shopping for project supplies.

Four fast projects to complete during quarantine

The following are four home improvement projects that can add equity to your home during quarantine.

  1. Paint a room

    Paint is one of the easiest – and most transformative – home improvement projects. If you are planning on selling your home in the near future, opt for neutrals such as greys or creams; bold colors can help create an eye-catching accent wall in a space. A gallon of paint generally covers about 400 square feet. In addition to picking out the perfect color, don’t forget to add the painting supplies to your shopping list: rollers, brushes, painters tape, drop cloths, and rags in case of any spills.

  2. Replace faucets

    Replacing outdated faucets is a quick and easy way to update a kitchen or bathroom. Basic fixtures cost as little as $30, with fancier touchless faucets – which are perfect for avoiding germs – ringing in at over $200. There are video tutorials on how to replace most faucets on YouTube that can provide step-by-step instructions for beginners or those with a basic tool box.

  3. Install under cabinet lighting

    Under cabinet lighting is a high-end finish that can be easily installed in about 30 minutes. LED light strips are ideal as they produce less heat and are more energy efficient. Begin by deciding where you want lights to be placed, how far apart they will be spaced, and how many you need; a power drill may be required for installation.
  4. Clean up the deck

    Refresh the look of your deck or patio with a power washer, which can be rented from most home improvement stores – or borrowed from a handy neighbor. Both cement and wood can benefit from power washing to remove stains; this also helps prepare wood for being stained. Finish the look by adding new chair cushions, an outdoor rug, or potted plants.

by Author, June. 17, 2020

Earnest Money: how much is enough?

Earnest Money: how much is enough?

You found the perfect home and you’re ready to make an offer. To show the buyer you’re serious – particularly in a competitive market – most real estate agents will recommend including earnest money with the offer.

This article will give an overview of what earnest money is, how to protect yourself when offering an earnest money deposit, and how to choose the right amount of earnest money – and use it to your advantage when making an offer.

What is earnest money?

Earnest money, also known as a good-faith deposit, is an amount of money that shows sellers that you are serious about purchasing a home. The amount, which is typically 1-3% of the asking price of the home, helps protect the seller in the event that the sale falls through. Earnest money also helps reassure sellers that a buyer is serious about purchasing the home rather than making multiple offers on various homes.

If the transaction goes smoothly, the earnest money amount is applied to either the down payment or closing costs at closing. However, if the buyer backs out of the contract, the earnest money reverts to the seller; this helps cover the costs of relisting the home again. However, if the contract falls through due to issues with the home inspection or other contingencies outlined in the contract, the buyer gets their earnest money back.

How much earnest money is enough?

There is no set “right” amount of earnest money; the amount a buyer chooses to offer depends on a variety of factors. In a slow or buyer’s market, for example, buyers may be able to get away with offering less earnest money. In a hot market where multiple offer scenarios are common, however, a higher good faith deposit can help your offer stand out.

A real estate agent is often the best resource for how much earnest money is enough. In a situation where you may be competing with others for the same property, a higher earnest money deposit is ideal; if your offer is rejected, your earnest money will be returned to you. In general, most agents advise putting down 1-3% of the asking price of the home as an earnest money deposit. If the home costs $300,000, for example, an earnest money deposit of $3,000 would be entirely appropriate.

Protecting your earnest money deposit

There are a variety of ways to protect your earnest money deposit; this helps ensure you will get the money back in the event the deal falls through.

  1. Use an escrow account

    While uncommon, the real estate market isn’t immune to fraud. Because of this, use a third party, such as a title company or escrow company, to hold your earnest money. Transfer the money to the third party – and make sure to keep a receipt for your records. The funds can then be held in the escrow account until closing.

  2. Pay attention to contingencies

    Most real estate contracts have a variety of contingencies that allow either the buyers or sellers to back out of the deal without penalty. Pay attention to the contingencies written into your contract; this can ensure you don’t lose your good faith deposit in the event the deal falls through.

  3. Keep up with your responsibilities

    Purchase agreements often include a timeline for the closing process; this protects the buyers and sellers from escrow being drawn out indefinitely. Missing deadlines, such as when financing needs to be verified or when the inspection has to be completed, may give the sellers grounds to back out of the contract – and keep your earnest money.

  4. Have it all in writing

    Buying a home is the biggest purchase most of us will ever make. To ensure it goes smoothly – and to protect your investment – make sure everything is in writing. Make changes and updates to the real estate contract as necessary; if closing is pushed back due to a delay in scheduling the home inspection, make sure it is explained in detail to avoid voiding the contract.

by Author, June. 17, 2020

What to know about mortgage forbearance

What to know about mortgage forbearance

Families across the country are experiencing financial hardship during these uncertain times. Loss of wages, reduced hours, or unexpected unemployment has left many unable to afford their mortgage payments. Mortgage forbearance, however, may be able to help.

What is mortgage forbearance?

Mortgage forbearance is when the mortgage lender or servicer allows borrowers to reduce or pause mortgage payments for a short period of time. Forbearance does not eliminate payments; the amount of the reduced or skipped payments are due at a later date and are often added on to the end of the loan period.

Do I qualify?

Not every loan qualifies for mortgage forbearance. The following guide can help homeowners determine whether or not their loan qualifies for forbearance.

If the loan is federally backed: To be eligible for forbearance under the CARES Act, the mortgage must be federally owned or backed by a federal agency including:

  • US Department of Housing and Urban Development (HUD)
  • USDepartment of Agriculture
  • USDA Direct
  • USDA Guaranteed
  • Federal Housing Administration (FHA), including reverse mortgages
  • US Department of Veterans Affairs (VA)
  • Fannie Mae
  • Freddie Mac

If the loan is backed by Fannie Mae or Freddie Mac: Those whose loans are backed by Fannie Mae or Freddie Mac are eligible for additional protections under forbearance, including:

  • Not incurring late fees
  • No delinquencies reported to credit bureaus
  • Suspension of foreclosure and other legal proceedings

If the loan is not federally backed: If the loan is not backed by a federal agency, homeowners should contact their servicer directly. Financial regulators have encouraged lenders to work with borrowers who are currently unable to meet their obligations due to the effects of COVID-19.

How to request forbearance

While forbearance may seem like an easy way to take a break from mortgage payments, homeowners that can afford their monthly payments should continue to pay. Many lenders are overwhelmed by borrowers requesting forbearance; avoid calling financial institutions to allow those who truly need help to receive services first.

When calling the loan servicer, be prepared to provide the loan officer with information including:

  • Why you are unable to make the payment
  • An estimate of how long the problem will last
  • Details about income, assets, and expenses

Likewise, make sure to ask the lender questions such as:

  • What options are available to reduce or temporarily suspend payments?
  • Is forbearance, loan modification, or another option available?
  • Will late fees be waived?

After speaking with the loan servicer, ask for written documentation outlining the details of the agreement. Review the information; some forbearance programs require all the missed payments by a specific time, while others add missed payments to the end of the mortgage term. When income is partially or fully restored, resume making partial or full payments as soon as possible. The fewer missed payments, the less that is owed back to the loan servicer in the future.

by Author, May. 08, 2020

What mortgage debt relief programs are available?

What mortgage debt relief programs are available?

The COVID-19 crisis has impacted almost every facet of life in America. Unfortunately, this has included changes to employment and earnings for many Americans; as businesses across the country have closed, either temporarily or permanently, millions of people are suddenly out of work.

To help ease the financial strain during these uncertain times, many private lenders and private agencies are offering mortgage debt relief programs to buyers. In addition, many cities and states have implemented their own protections for renters and homeowners. In Wisconsin and North Carolina, for example, foreclosures and evictions have been temporarily suspended; in Florida, the deadlines for paying property taxes have been extended.

If a homeowner is unable to make their monthly mortgage payment due to coronavirus related illness or job loss, assistance may be available. What programs are available vary based on who owns the loan, where the property is located, and if the loan is federally backed.

Who owns your mortgage?

The first step in determining if a loan is eligible for mortgage relief is figuring out who owns the loan. Keep in mind that the owner of the loan may be different than the loan servicer, where the payments are sent to.

A large number of mortgages are owned by the government-sponsored entities Freddie Mac and Fannie Mae. Homeowners can find out if their loans are owned by these groups by entering their name, address, and last four digits of their Social Security number on the lookup page.

If the loan is not owned by Freddie Mac or Fannie Mae, contact the mortgage servicer for more information. Loan servicers are legally obligated to share the name, address, and telephone number of the loan’s owner; the Consumer Financial Protection Bureau has examples of written requests that can be sent to loan servicers for this information.

Federal mortgage debt relief

If Freddie Mac or Fannie Mae own your mortgage, the mortgage servicer can evaluate borrowers for a mortgage forbearance plan for up to 12 months. Mortgage servicers are not required to obtain proof of hardship to approve forbearance. Freddie Mac asks borrowers to contact loan servicers directly for help; Fannie Mae borrowers can contact either their loan servicer or their Disaster Response Network for assistance.

Private mortgage lender relief

Loans that are not federally owned may still qualify for debt relief. First, verify that the loan has not been sold at some point after origination; the loan servicer may not currently own the loan, and it may now qualify for federal relief. Next, many private lenders such as Ally Bank, Flagstar Bank, and Quicken loans are offering forbearance or other mortgage relief programs. Contact the lender directly for more information.

Home insurance relief

Some home insurance providers are offering programs to help cut costs during these uncertain times. Contact the homeowner’s insurance issuer directly for more information about relief programs they are offering.

Property tax relief

Many cities and states have extended property tax deadlines. Contact your county’s tax assessor’s office for more information.

by Author, May. 08, 2020

How to best ensure your buyers can close on the purchase transaction

How to best ensure your buyers can close on the purchase transaction

The sale of a home requires many small details to come together at once. Unfortunately, there are a number of things that can go wrong before the final signatures are made.

The National Association of Realtors found that 32% of closings are delayed. There are, however, a number of ways to ensure buyers can close on their purchase transaction on time.

Problem #1: Mortgage and financing fall through at the last minute

A buyer’s ability to finance a home may fall through before closing. An unexpected job loss, large purchase, or missing documents could all cast into doubt a buyer’s ability to afford a house. About one third of closing delays are due to buyer financing problems.

Solution: Work with pre-approved buyers and keep them up to date of the timeline

There isn’t much that can be done to prevent buyers from purchasing a new BMW the week before closing. However, the best solution is to work with buyers who are pre-approved – rather than simply pre-qualified. Pre-qualification is a simpler process during which a lender checks over a buyer’s overall financial picture; pre-approval is much more in-depth and involves an official mortgage application, credit check, and more.

In addition to working with pre-approved buyers, keep buyers in the loop about the timeline for closing. This can help them avoid buying all new furniture – and increasing their debt load – in the days leading up to closing.

Problem #2: Document errors

Closing day involves signing a mountain of paperwork in a short amount of time; there simply isn’t time to read every document line by line. Unfortunately, even something as minor as a misspelled middle name can throw a major wrench in the closing process.

Solution: Request documents in advance

To avoid document errors such as misspelled names, wrong addresses, or unanticipated fees, request documents before closing day. Any loan documents, the ALTA statement, and the CD can all be read in advance of closing. Worried about making a mistake? Hire a real estate attorney to read the fine print and help prevent delays.

Problem #3: Missing Closing Disclosure form

The Closing Disclosure, or CD, is a large document that outlines the exact terms of the buyer’s loan as well as any closing costs associated with the sale. The CD must be sent to the buyer by the title or closing company no later than three days before closing; if a closing is scheduled for Friday, the CD must to the buyers by Tuesday or closing will have to be rescheduled.

Solution: Both the buyer’s and seller’s agents should be consistently in touch with the title company.

This allows both agents to receive updates on and get a set date for when the CD is guaranteed to go out, ensuring that closing day does not need to be unnecessarily postponed.

In both real estate and sports, it ain’t over till it's over. Staying in communication with buyers and tracking documentation are just a few of the ways to ensure buyers can close on their purchase transaction on time.

by Author, May. 08, 2020

How home appraisal works

How home appraisal works

Whether buying, selling, or refinancing, home appraisal is an integral part of the loan approval process. Understanding how appraisal works – and how a home’s value is determined – can make the process fast and easy.

What is a home appraisal?

An appraisal is an unbiased, professional opinion of a home’s value used in purchase and sale transactions as well as refinancing. In a purchase and sale transaction, the appraisal is used to verify that the contract price is appropriate based on the location, condition, and features of the home. In refinancing transactions, the appraisal is used by the lender to ascertain the value of the home and assure that the homeowner is not borrowing more than their home is worth.

Inspection vs. appraisal

Home inspections and home appraisals are both a part of the buying process but serve a very different purpose.

The home inspection is used to evaluate a home’s condition. During an inspection, the inspector will check the interior and exterior of a home including ceilings, floors, walls, windows, doors, plumbing, electrical systems, appliances, and more. The inspector then provides both the buyers and sellers with an objective report of any damage that is found, as well as repair recommendations. Home inspections clauses are a standard part of most real estate contracts, but are not required by lenders.

An appraisal is the assessment of the value of the home. Appraisers will walk through the interior and exterior of a home to assess its condition. The condition of the home is then compared to other factors such as the local housing market to ascertain a general value of the home. Appraisals are required by the majority of lenders to verify that the value of a home is equal to the amount of the loan.

Cost of an appraisal

According to HomeAdvisor, the national average cost of a home appraisal is $336. Fees vary by location, size of the home, and type of loan. While the lender orders the appraisal, the mortgage borrower typically pays for the cost of the appraisal as part of the loan’s closing costs.

What appraisers look for

Almost all appraisers use the same form, called the Uniform Residential Appraisal Report. This form asks specific questions about housing trends in the area, neighborhood demographics, available utilities, and how the house fits into the surrounding neighborhood. The report also includes specific details and measurements about the home and condition of the property.

Exterior Factors

  • Age
  • Location
  • Neighborhood
  • Quality of construction
  • Integrity of the roof and foundation
  • Gutters and siding
  • Garage or parking
  • Exterior condition

Internal Factors

  • Square footage
  • Layout
  • Number of bedrooms and bathrooms
  • Included utilities
  • Appliances
  • Interior condition
  • Code compliance
  • After the appraisal

    The average appraisal report is returned in about 10 days; while sellers do not automatically receive a copy of the report, it can be requested through the lender. Most appraisal reports are about ten pages long and include photos, details of the property, comparable homes, and other information about how the value of the home was determined.

    by Author, May. 08, 2020

Renovations With The Highest Return On Investment

Renovations With The Highest Return On Investment

Not every home improvement project is a good investment. In fact, some may wind up costing homeowners hundreds – if not thousands – of dollars more than what they’re worth.

Thanks to the popularity of makeover shows on HGTV and websites like Houzz, home improvement has been glamorized. In 2015 along, Americans spent more than $326 billion on home improvements and upgrades. But the question remains – is this project a good investment?

The following guide compares the cost of popular renovations with what homeowners can expect to recoup from the project. This can help homeowners choose renovation projects with the highest return on investment.

  1. New garage door installation

    • Average renovation cost: $3,470
    • Value added: $3,411
    • Return on investment: 98.3%

    While a new garage door is not a glamorous upgrade, it is the home improvement project with the highest return on investment.

  2. Manufactured stone veneer

    • Average renovation cost: $8,221
    • Value added: $7,986
    • Return on investment: 97.1%

    Manufactured stone veneer can quickly update the exterior of a home, helping the property look newer – and more expensive.

  3. New front door

    • Average renovation cost: $1,471
    • Value added: $1,344
    • Return on investment: 91.3%

    Another exterior project with a high ROI, a steel entry door is a solid investment.

  4. Patio, deck, or outdoor living space

    • Average renovation cost: $10,950
    • Value added: $9,065
    • Return on investment: 82.8%

    Outdoor living spaces are one of the most requested features in real estate. A beautiful wood deck or stone patio can help a home stand out from the competition.

  5. Minor kitchen remodel

    • Average renovation cost: $21,198
    • Value added: $17,193
    • Return on investment: 81.1%

    A minor kitchen remodel often involves upgrades such as new flooring, new countertops, and new appliances. This type of remodel has a much higher return on investment than those where the entire kitchen is gutted; a major kitchen remodel has a much higher price tag – and a much lower ROI of just 59%.

  6. Bathroom remodel

    • Average renovation cost: $19,134
    • Value added: $13,422
    • Return on investment: 70.1%

    The old adage in real estate still rings true – kitchens and bathrooms sell houses. A bathroom remodel that includes new tile, fixtures, and upgraded finishes can help add significant value for a home; stick with a neutral, universally-appealing color pallet for an even higher return on investment.

by Author, March. 26, 2020

6 Reasons Your Home Isn't Selling

6 Reasons Your Home Isn't Selling

You think your home is incredible – but why isn’t it selling?

There are a number of possible reasons the “For Sale” sign on your property is gathering dust. Don’t panic – a series of small changes can help bring buyers back to a property. The following are 6 reasons why a home may not be selling – and what to do about it.

  1. The price is too high

    Price is the most common reason a home doesn’t sell. According to a Homelight Top Agents Insights Report, 51% of real estate agents reported that pricing a home incorrectly was the top mistake sellers make.

    What to do?

    Listen to feedback from open houses and showings; if a large number of potential buyers say a property is priced too high, it probably is. Browse comparable properties in the area for an idea of what similar homes are being listed for.

    General wisdom says a home should go no longer than three weeks without a price reduction. Sellers who drop their asking price aren’t alone; a survey by the National Association of Realtors found that 22% of sellers drop the asking price of a home at least once.

  2. The home needs repairs

    Most potential buyers are prepared to make minor repairs, such as changing the paint or installing new flooring. Major repairs, however, can be a major turnoff. A broken HVAC system, damage from a flood, or a mold problem can prevent buyers from seeing the potential of a home.

    What to do?

    Make the repairs. While a big repair is a costly investment, most serious repairs have high return on investment; sellers should be able to recoup some of the costs when the home sells.

  3. The listing photos aren’t professional

    The National Association of Realtors found that 44% of home buyers start their search online - and 89% of buyers found photos helpful in their home search. A few iPhone quality shots aren’t going to cut it; listing photos taken professionally get 61% more page views and can help increase the closing price on a property.

    What to do?

    Hire a professional to re-do the listing photos. A small investment in quality photos can bring big returns at closing.

  4. Staging hasn’t been done right

    Many families find it difficult to stage a home while they’re still living there. However, stage homes typically sell faster – and for more money; a survey found that staged homes sold for 17% more than non-staged homes as well as sold 87% faster.

    What to do?

    Put a fresh coat of paint on the walls and do some serious decluttering. Consider placing a large part of your furnishings, clothes, or décor into storage before a home is listed; the fewer things in a room, the easier it is to stage. Top agents are often able to recommend a stager who can rearrange your current belongings to highlight the best features of a home.

  5. Curb appeal isn’t making a good first impression

    First impressions, particularly in real estate, matter. Curb appeal is so important that many buyers will decide not to see a property after just seeing it from the outside. Overgrown bushes, wilting gardens, or cracked concrete may indicate a home is not well cared for – and that the interior will not be cared for as well.

    What to do?

    In 2016, the National Association of Realtors reported that good lawn care gets a seller an average of 303% ROI. Make a short-term investment in a lawn care service, plant colorful annuals in flower beds, and install new exterior lights; these fast and easy project can help a home look great from the curb.

  6. The house has a strong odor

    Sellers are used to the odors inside their home – and may not even notice that there is a smell. Whether it’s from a strong cooking spice, pets, smoking, mold, or more, odors can be a major turn off to potential buyers.

    What to do?

    Ask a few unbiased or honest friends to walk through your home; this may help identify any unpleasant or off-putting odors that may be driving away potential buyers. Avoid using air fresheners directly before an open house or showing, which can be off-putting or cause an allergic reaction.

by Author, March. 26, 2020

5 Milestones When Applying For A Mortgage

5 Milestones When Applying For A Mortgage

Purchasing a home can seem like a drawn-out, complicated process with never-ending paperwork. When preparing to apply for a mortgage, it’s important to understand the importance of each step of the process. Knowing what to expect can make the process seem less confusing, help buyers stay on top of required paperwork, and be aware of any additional costs and fees that may arise. The following can help guide buyers through the five major milestones when applying for a mortgage.

  1. Pre-Qualification

    You’re ready to buy your first home – congratulations! Pre-qualification is the first step of the homebuying process. Getting pre-qualified is fast and easy, requiring no cost and no commitment to a specific lender. Pre-qualification can be done in person, over the phone, or by filling out an online form. During pre-qualification a lender will estimate the maximum monthly mortgage payment and loan amount buyers can afford; many real estate agents ask for proof of pre-qualification before kicking off a home search.

  2. Application

    After finding a home, an offer is made to the seller. At this point, the buying agent and selling agent negotiate on behalf of the buyer and seller to agree on a price. Once an agreement has been reached, the loan application process begins. During the application process, buyers will need to provide the loan officer at their lender with a variety of documents including documentation of income and assets, pay stub, tax returns, or bank statements. To keep the loan on track for an on-time closing, ensure all documents are submitted in a timely manner.

  3. Processing

    During mortgage processing, the necessary documents have been submitted and will be reviewed for accuracy. The loan processor will then pass the application package on to an underwriter. The loan officer will also order the appraisal and title work during this time.

  4. Underwriting

    When a loan reaches this milestone, an underwriter will review the entire loan application to determine if it meets the guidelines for approval. This includes reviewing a borrower’s credit score, assets, employment, appraisal, and any additional documents that have been provided. Once the conditions for approval have been met, the underwriter will clear the loan for final approval and the loan is ready for closing.

  5. Closing

    Reaching closing means the mortgage process is at an end! A closing date, time, and location are established in escrow; this is when the buyers and sellers will meet to sign the final paperwork and transfer ownership of the property. At least three days before closing, the closing disclosure, or CD, is available; this verifies the terms of the loan and gives borrows the amount they will need to bring to closing. Once at settlement, funds from the mortgage are distributed, the final documents are signed, and ownership of the property is transferred. Congratulations!

    by Author, March. 26, 2020

4 Things To Consider Before Refinancing

4 Things To Consider Before Refinancing

Mortgage rates are reaching record lows; because of this, many homeowners are considering refinancing. However, there are a number of factors homeowners should consider before refinancing.

What is refinancing?

A refinance is a new mortgage that replaces an existing loan. Refinance loans are typically done so homeowners can get better rates or more advantageous terms. Refinanced loans can be customized with the amount borrowed, rates, fees, and loan length. Other reasons for refinancing can include switching from an adjustable rate to a fixed rate mortgage or cancelling private mortgage insurance.

Refinancing also offers homeowners the chance to cash in on the equity they have built in their home. This cash payout can be used to pay off other debt, fund home improvements, or build up an emergency fund.

Things to consider before refinancing

While low mortgage rates may be tempting, there are a number of factors to consider before refinancing.

  1. Your current interest rate

    In general, refinancing is a good idea if it will reduce the mortgage rate and monthly payment of a loan. While some experts say homeowners should only refinance if their rate drops by at least 1%, even a small change in percentage can make a dramatic difference in monthly payments. However, someone with only a small balance remaining on their loan may need to reduce their rate by 2-3% to see a change in their monthly payment.

  2. The cost to refinance

    Closing costs and other fees should be taken into consideration before deciding to refinance. For example, if refinancing lowers a monthly payment by $100 but has a loan origination fee of $5000, it would take 50 months to recoup the cost of refinancing; unless the homeowners planned to remain in their home for more than 4 years, refinancing could cost them more money than it saves. However, if the refinance saved $200 and only cost $3000 in closing fees, the cost would be recouped in 15 months. Likewise, some lenders offer no-cost refinancing options that exchange slightly higher interest rates for no closing costs.

  3. Effects of paying the loan longer

    If a homeowner has paid 6 years on a 30-year mortgage, refinancing with a 30-year loan would extend the number of years they are paying for the loan. For some homeowners, this extended loan term is worth it; the amount of interest paid over the additional years, as well as if any additional payments will be made, should all be taken into account.

  4. The equity in your home

    Most lenders will want to verify the amount of equity in a home before approving a refinance. In general, the more equity homeowners have in their property, the easier it is to refinance. However, even those with little equity – or those who are underwater on their mortgages – may be able to refinance with the current historic-low rates. FHA Streamline refinance, HARP, and VA IRRL programs all allow homeowners to refinance with little equity to no equity.

by Author, March. 26, 2020

What Is The Right Home Loan Option For Me?

What Is The Right Home Loan Option For Me?

No two buyers are alike – and no two mortgages are the same, either. The truth is that there is no right answer to the question “What is the right home loan option for me?” It depends on a number of factors; the following guide can help potential buyers understand the different types of loans – and which loan best fits their needs.

Fixed-rate mortgages

Fixed-rate mortgages, also known as conventional mortgages, are the most common type of loan home buyers take out. With this type of loan, buyers pay the same interest rate on the loan amount through the life of the loan, which is typically 15 or 30 years. These predictable interest rates are ideal for buyers purchasing a primary residence that they plan to stay in for at least five years.

Adjustable-rate mortgages

Adjustable-rate mortgages, or ARMs, are loans that have an interest rate that changes or fluctuates over time. A typical ARM will offer buyers a low interest rate for an introductory period of two-five years; after this, the interest rate becomes adjustable – to a certain limit – and fluctuates based on market conditions. While an ARM is a bit of a gamble, it can significantly benefit homeowners in good market conditions or if they plan on quickly paying off a loan.

FHA loans

FHA, or Federal Housing Administration, loans were designed for low-to-moderate income families who would be otherwise unable to purchase a home. With qualifying credit scores as low as 580, FHA loans are ideal for buyers with steady income who may not quality for conventional mortgages. Buyers can put as little as 3.5% down with FHA loans, but these terms come at a price. Buyers must pay an upfront mortgage insurance premium of 1.75% in addition to their down payment as well as annual mortgage insurance of 0.85% of the borrowed amount. In addition, FHA loans are capped at $417,000 for most areas of the country, while cap in high-cost areas is $625,000; this can limit buying power.

VA loans

VA loans are guaranteed by the US Department of Veterans Affairs and give qualifying veterans the chance to purchase a home with $0 down – and no mortgage insurance. VA loans have fairly stringent requirements; in addition to qualifying military service, buyers must have a credit score of 620 or higher and the home will require an additional special appraisal before closing.

USDA loan

USDA loans are another government-insured mortgage option; offered by the US Department of Agriculture, these loans are only available in areas with populations of 10,000 or less. Geared to encourage low-income families to purchase homes in rural areas, USDA loans can have 0% down payments. However, these loans charge an upfront mortgage insurance fee of 2% of the loan amount as well as an annual monthly mortgage insurance of 0.5%.

by Author, January. 30, 2020

What Causes Home Prices To Fluctuate?

What Causes Home Prices To Fluctuate

Homes have no “true” market value. This is best evidenced by average home prices around the country. While the median home price in Los Angeles is $689,500, the median home price in Kansas City is a measly $101,200 by comparison. Are houses really that different, or is something else controlling home prices?

Real estate relies on a number of factors to determine the price of a home. Because of this, home prices can fluctuate from year to year – if not from month to month. Understanding the conditions that cause home prices to increase or decrease can help buyers get their dream home at their dream price while helping sellers maximize profits when moving. The following are four reasons that cause home prices to fluctuate.

  1. Supply and demand

    Just like goods and services, housing prices are also affected by supply and demand. Too many homes for sale with too few buyers leads to a buyer’s market in which prices drop and homes sit on the market longer. In areas where supply is low and demand is high, such as in the Bay Area, a seller’s market occurs; prices skyrocket and bidding wars and multiple-offer scenarios become common.

  2. The economy

    The health of the economy can cause enormous fluctuations in the real estate market. In a thriving economy with low unemployment home prices tend to increase; buyers feel secure in the future – and in their future income – and are more likely to invest in a home. By comparison, prices tend to drop during downturns in the economy. As unemployment rates rise, buyers feel less financially confident and fewer people are able to afford mortgages.

  3. Interest rates

    Interest rates – and therefore the affordability of mortgages – are directly tied to the economy. The Federal Reserve has the ability to raise or lower interest rates; this can trickle down to the mortgage rates that lenders set for their customers. The lower the mortgage rates the more affordable buying a home becomes. Likewise, higher interest rates can increase a buyer's monthly payment and make homeownership unaffordable.

  4. Location

    The over $500,000 difference in median home prices between Los Angeles and Kansas City is a prime example of how location can affect prices. Pricing discrepancies can happen on the local level as well. An up-and-coming neighborhood can see an enormous price jump as stores, attractions, and restaurants move into the area. Likewise, prices can vary significantly in as little as a few blocks based on school boundaries, crime rates, proximity to highways, and more.

by Author, January. 30, 2020

Simple rules for negotiation when buying a house

Simple rules for negotiation when buying a house

You found your dream home and are ready to put in an offer – congratulations! Unfortunately, this signifies that the “fun” part of the home buying process is over and that it is time for the nitty-gritty of negotiations to begin.

Settling on a fair price when putting in an offer, as well as negotiations with the seller, can be difficult for even seasoned homebuyers. This is especially true in competitive real estate markets where a listing may receive multiple offers within the first few days – if not hours. Following these three simple rules, however, can help make the negotiation process easier whether you’re preparing to buy your first home or your fifth.

  1. Find out how motivated the seller is

    People do not put their homes on the market just to see what kind of offers they get; if a house is listed, the current owners want to sell. Despite this, different sellers have different motivations and timelines; this can affect how willing they are to accept an offer or how receptive they will be to changes to the contract during negotiations. A seller who is moving out of state within the month for a new job, for example, may be highly motivated to sell and willing to make more concessions to the buyer. Likewise, a family with less pressure to move may hold out for a better offer.

  2. Keep an eye on your budget

    If the sellers send back a counter offer with a much higher price tag or multiple offers are placed on a house, it can be tempting to do whatever it takes to get your dream home. However, it is important to keep an eye on the budget during all stages of negotiation. Remember that:

    • You cannot exceed the amount your lender has pre-approved you for
    • You cannot overextend your own budget or cash reserves

    For example, your lender pre-approved you for a $180,000 loan and you have $20,000 saved in cash for a down payment. You offered $175,000 for the home, but the sellers have countered with $185,000. Accepting this counter offer would reduce the amount you have for a down payment, pushing you below the 20% threshold at which PMI is required.

    Likewise, keep in mind that there will be other cash expenses during escrow and closing. This can include homeowners insurance, title costs, agents fees, and paying for inspections. Make sure you have enough cash saved to cover these expenses at closing.

  3. Be willing to walk away

    You paid the earnest money. The sellers accepted your initial offer. But now you are stuck squabbling over the details. Examples of problems that can stall negotiations include the sellers wanting the buyers to cover closing costs, the buyers wanting the sellers to pay for new flooring, or unexpected damage being discovered during the home inspection.

    No matter the reason, don’t be afraid to walk away from a contract. While a tough decision, it is an important one to make. If the sellers won’t budge, your agent warns you against parts of the deal, or something simply doesn’t feel right, trust your gut. It can be disappointing to lose out of a home, particularly after a difficult home search, but feel confident knowing that there are more homes out there – including the right one for you and your family.

by Author, January. 30, 2020

5 Things To Consider Before Purchasing an Investment Property

5 Things To Consider Before Purchasing an Investment Property
Purchasing an investment property is one of the most frequently recommended ways to begin growing personal wealth. Becoming a landlord should not be taken lightly; when done right, it can create passive income, generate equity gains, and allow owners certain tax breaks. Done wrong and it can cost buyers their savings, financial portfolios, or even their primary residence. Successfully purchasing an investment property relies on research market trends, the type of property, and the financial goals of the buyer. Whether it is a commercial property, a second home, or a vacation rental, consider the following five things before purchasing an investment property.
  1. Location, location, location

    The primary rule of real estate applies to investment properties, too. A beautiful vacation home in an undesirable area is unlikely to find footing in a rental market. Purchasing a fixer upper in a competitive area is likely to recoup renovation costs; a home that needs lots of improvements in a slow market is less likely to be a good investment. Before purchasing an investment property, focus on the location first and the property itself second – particularly if renovations are planned.

  2. The 1% rule

    Follow the 1% rule when calculating the expected return on investment. By this rule, the goal should be to receive at least 1% of the purchase price plus renovations and repairs each month. For example, if an investor purchases a home for $200,000 and invests $25,000 in repairs, their total investment is $225,000. By the 1% rule, the ideal rent or return each month should be at least $2,250. It is worth noting that this rule applies to moderately-priced homes; million dollar homes or commercial properties are less likely to follow the 1% rule.
  3. Have a budget for fixed and variable expenses

    Investment properties are not a one-and-done expense. Just like a primary residence, an investment property will incur both fixed and variable expenses. Variable expenses are difficult to predict; from broken radiators to leaky roofs, it is important to have enough money in reserve to cover any unexpected costs.

    Fixed expenses to budget for include:

    • Property taxes
    • Homeowner’s insurance
    • Property management fees
    • HOA fees
    • General upkeep costs
  4. Property management

    Think about the property management style you want to employ at your property. Some investors choose to be hands-on landlords, engaged in the day-to-day management of the property. This involves collecting rent or rental fees, overseeing maintenance, and personally responding to issues that arise. Another option is to hire a professional property management service. While it is an additional expense each month, these services take care of everything from cleaning and maintenance to booking and leasing. Property management services are particularly popular for vacation rentals or for when a property is in a different city – or state – than the investor.

  5. Know the risks

    No matter how much research or planning is done, buying an investment property is still a risk. Markets change, rental interest may decrease, repairs may be more than anticipated, taxes could go up, and more. No investment is a guarantee, but following these considerations help negate the risk and find the perfect property.

by Author, January. 30, 2020

When is it a good time to refinance your mortgage?

When is it a good time to refinance your mortgage?

If mortgage rates are low, is it a good time to refinance? Not necessarily.

Deciding to refinance depends on a variety of factors including – but not limited to – interest rate. Common reasons to refinance include:

  • - Significantly lower interest rate
  • - Use savings to contribute more to retirement or other savings
  • - Cash out equity for another major purchase, such as a vehicle or child’s education
  • - Cash out equity for home renovations that would be otherwise unaffordable

The following three questions can help homeowners decide whether or not it is a good idea to refinance.

  1. What are the potential savings from refinancing?

    Refinancing can save homeowners money in two ways: by reducing their monthly mortgage payment, or by saving on interest over the life of the loan.

    In an ideal world, refinancing saves homeowners money in both ways. However, this is not always the case. For example, a family that has 25 years left on a 30-year mortgage refinances at a lower rate, the monthly payment may be lower but they may pay more interest in the long run; this is because the length of the loan is now a total of 35 years. If the same family has 25 years left and refinances into a 15-year mortgage, their monthly payment may go up slightly but they would save tens of thousands in interest over the life of the loan.

  2. How long do you plan on staying in your home?

    After refinancing, it can take homeowners several months – or years – to begin seeing savings. If you plan on staying for several more years, refinancing is a good option; if you plan on moving sooner rather than later, refinancing may not be the best idea. A loan officer or mortgage broker can help homeowners determine when they can break even after refinancing
  3. Does your home qualify to refinance?

    Not every homeowner is qualified to refinance. Being able to refinance a home depends on a variety of factors, including:

    - Income

    - Equity in the home

    - Credit

    Just like when applying for an initial mortgage, lenders want to ensure homeowners can continue to afford the monthly payments after refinancing. Significant changes to credit or income, being underwater on the current mortgage, or a lack of equity can all prevent homeowners from qualifying for refinancing.

Refinancing is not the right option for every homeowner. While lower interest rates may be alluring, it may not be the right choice for your family and situation. Taking the time to evaluate total costs, calculate monthly payments, and think about your long-term plans can help homeowners decide if refinancing is the right choice.

by Author, December. 010, 2019

What to know about buying a home at a high interest rate

What to know about buying a home at a high interest rate

One of the most common recommendations when preparing to purchase a home is to look for the lowest available interest rate. But what are buyers supposed to do when rates are high? Is it worth waiting until interest rates or lower, or is it still a good idea to purchase at a higher rate?

When the recession hit the real estate industry in 2008, the Federal Reserve set interest rates at an unbelievably low 0.25% to help inspire consumer confidence. Since then, interest rates have been slowly increasing; the Federal Reserve raised rates to 0.5% in 2015, 1.5% in 2017, and rates are expected to reach 3% by the end of 2020.

While interest rates may be rising, there is no need to panic. The following guide can help buyers navigate the homebuying process when interest rates are high.

What happens when interest rates begin to rise?

As interest rates begin to rise, there is often an immediate uptick in real estate; many potential buyers who were on the fence about homeownership buy quickly out of fear of increasing rates. This can lead to low inventory levels and highly competitive market conditions as rates continue to rise.

It can be tempting to jump into buying a home to avoid “overpaying” with a high interest rate. However, it is important for buyers to take their time and not rush into the wrong home. Purchasing the wrong property can wind up costing buyers thousands in the long run; waiting longer for the right home – even at a higher interest rate – is often the better investment.

The relationship between home prices and interest rates

A change of as little as 1% can make an enormous difference in how much home buyers can afford. A buyer who is able to afford a $1,432 monthly payment could purchase a $300,000 home with an interest rate of 4%. However, to afford the same monthly payment with a 5% interest rate, their buying power would be reduced to less than $267,000.

Rising interest rates can cause initial increases in home prices; this can make affording a home difficult for some buyers. Over time, however, home prices will begin to decrease as interest rates remain high. The same homes will sell for less after the initial rush of buyers has come and gone, making more people able to afford homes and widen the pools of both buyers and inventory.

When buyers purchase at high interest rates, there are a variety of options to avoid overpaying in the long run. Budgeting for an additional payment towards the loan principal, switching to a biweekly payment schedule, or even refinancing can help defray the additional costs of a high interest rate.

Things to know before applying for a mortgage

Things to know before applying for a mortgage

The majority of home buyers will need a mortgage when buying a home. Applying for a mortgage, unfortunately, is much more work than simply showing up at the bank with a checkbook in hand. Getting approved for a mortgage takes knowledge, planning, and organization. The following are three things potential buyers should know before applying for a mortgage.

  1. What is considered a good credit score?

    The elusive credit score is often misunderstood, yet is a major determining factor in being approved for a mortgage. This three-digit number helps lenders assess whether or not borrowers are high- or low- risk. The higher the credit score, the better chance a borrower has of being approved – and at a better interest rate.

    What is a good credit score? While a perfect score is 850, few borrowers have scores this high. An “excellent” credit score is 760 or higher; a credit score this high means a borrower is likely to qualify for the best terms and interest rates. A “good” credit score is between 700 and 759, while a “fair” score is between 650 and 699.

    Consumers are eligible to check their own credit reports. This can ensure there are no problems such as late payments or overdue bills that need to be addressed. It’s recommended to first check your credit at least six months before applying for a mortgage; this gives borrowers the chance to fix or amend any issues their credit reports may have.

  2. What amount should be put down?

    What is the right amount to put down on a house? Unfortunately, there is no simple answer; the right down payment amount varies from buyer to buyer and depends on a variety of factors.

    In a recent study by NerdWallet, 44% of respondents said they believe that a down payment of at least 20% (or more) is required to buy a home. While common, this amount is not set in stone. The reason a 20% down payment is considered the “gold standard” is because this is the amount that no longer requires PMI, or private mortgage insurance. Another advantage is putting this amount down is that it can help reduce monthly payments or even receive a better interest rate.

    Can’t afford 20% down? There are many lenders that still allow borrowers to make smaller down payments. FHA loans, for example, only require 3.5% down; loans by the Department of Veterans Affairs give military personnel the opportunity to purchase a home with $0 down and no PMI. USDA loans also have lower down payment requirements than traditional mortgages.

  3. What is a DTI ratio?

    DTI, or debt-to-income, is the ratio of debts to income. For example, a couple who makes $6,000 per month and pays $500 towards outstanding loans has a DTI of 8.3%. After factoring in a mortgage payment of $1,000 per month, the couple’s DTI would increase to 25%.

    Lenders use DTI as evidence as to whether or not a borrower will be able to afford a monthly mortgage payment. Most lenders look for potential borrowers to have a DTI no more than 36%, while some will accept up to 43%. High DTI? Try to lower it before applying for a mortgage by paying down existing debt as much as possible.

by Author, December. 010, 2019

How a financial planner can help you qualify for a mortgage

How a financial planner can help you qualify for a mortgage

Purchasing a home is first and foremost a major investment – and can make or break your financial future. Many buyers unintentionally jeopardize their savings, children’s education, or even their own retirement by following the incorrect financial advice of others. Working with a financial planner helps buyers in two ways: it gets their finances in order before applying for a mortgage and prevents them from making financial unsound decisions.

Fine tune your budget before applying for a mortgage

A common mistake many first time buyers make is not fully investigating their own finances before applying for a mortgage. Unfortunately, this can result in high interest rates, the necessity of private mortgage insurance, or the loan application being altogether rejected.

Working with a financial planner before you start the house hunting process can ensure your finances are in order. The following five tips can ensure buyers are able to qualify for a mortgage when the time comes.

  1. Make a list of monthly expenses: know what you’re making and where your money is going each month
  2. Find ways to cut back: look for areas in the budget that can be scaled back, even if only temporarily
  3. Pay off as much debt as possible: the more money you owe, the more a lender views you as high risk
  4. Save for a down payment: try to get as close to 20% as possible to avoid paying PMI
  5. Buy realistically: most financial planners agree buyers can afford a home about 2.5 times their annual salary

Things to discuss with a financial advisor

Mortgage officers are often only concerned with how much home you can afford; financial advisors can help buyers decide how much home they should buy. Financial advisors look at more than just your income and debts, helping buyers leverage their short- and long-term financial goals alongside their home purchase. This includes discussing topics such as:

- Will this monthly payment allow me to save at least 12% of my pretax income?

- Can I afford a 10-20% down payment?

- How will my finances change if I opt for a 15 year vs 30 year mortgage?

- What do I do if the value of my home changes? Could I still afford this home with a change in career or family situation?

- Will I still have an emergency fund to cover three to six months expenses after closing and moving costs are covered?

- Should I put down as much as possible or put down the minimum amount?

While there are no hard and fast answers for many of these financial questions, having these discussions with a certified financial planner can help buyers make sound financial – and real estate – decisions!

by Author, December. 010, 2019

Which loan is right for me?

Which loan is right for me?

One of the most common questions potential buyers ask their lenders is “what kind of loan is best?” Because no two homes and no two buyers are alike, there is no hard and fast answer. Instead, the answer is often “it depends.” The type of home being purchased, credit history, location, employment history, and the amount of the loan can all impact what will be the best mortgage option for a buyer. The following guide can help buyers decide which loan is right for their needs.

Conventional loans

Conventional loans are the most common type of mortgage and are the go-to loan for most home buyers. With good rates, flexible terms, and a variety of down payment options, conventional loans are offered by nearly every bank, credit union, and mortgage company in the country.

- Down payment as low as 3% with PMI - Available for primary residence, second home, or investment property - PMI is cancelable once 20% home equity is reached - Loan amounts up to $480,000 – or more in high cost countries

FHA loans

FHA loans are the favorite loan of first-time buyers, with about 40% of young buyers choosing this type of mortgage. The more flexible terms make homeownership a possibility for those with lower credit scores or less money for down payments.

- Minimum down payment of 3.5% with PMI - Credit scores as low as 580 when minimum down payment is met - Gift money from family or friends can account for 100% of the down payment or closing costs - More lenient income requirements

VA loans

Only available to those with a history of eligible military service, VA loans are backed by the US Department of Veterans affairs. With lower rates than most standard mortgages – and no down payment requirement – they are an extremely popular loan choice for those who have served in the military.

- Low interest rates - Both 15- and 30- year loans available - No down payment requirement - No PMI required for down payments under 20%

USDA mortgage

USDA mortgages may also be called Rural Development (RD) loans or the Single Family Housing Guaranteed program. These loans are for buyers who plan to live in rural areas and can offer zero down payment loans for moderate-income buyers in these areas.

- Applicants must meet minimum income - Lenient credit score requirements - Low mortgage insurance fees - Home must be within USDA-eligible areas (which covers around 97% of the country)

Jumbo loans

In expensive areas, loan amounts regularly exceed the standards Fannie Mae and Freddie Mac allow. In these cases, a non-conforming loan – also know as a jumbo loan – may be offered by the bank.

- Comparable rates to conforming loans - Fixed and adjustable rates available - Loan amounts in the millions can be offered

by Author, October. 05, 2019

Tips to increase the equity in your home

Tips to increase the equity in your home

One of the most commonly cited reasons to buy a home versus renting is to build equity. Equity is the difference between the market value of a home and the amount left of the mortgage. While equity naturally increases with each payment a homeowner makes, there are a number of benefits to increasing the equity in a home. The following are five ways to increase the equity in your home.

  1. Make a large down payment

    If you are preparing to purchase a home, making a large down payment is the fastest – and easiest – way to build instant equity. In addition to building equity, making a large down payment can help reduce monthly mortgage costs or eliminate the need for costly mortgage insurance.

  2. Prioritize paying off the mortgage

    Homeowners build equity every month simply by making their mortgage payments. Paying off the home faster, even if it’s by paying just a little extra each month, can build equity over time. Common tactics for paying off the mortgage even faster include putting any money from tax returns or other financial windfalls directly towards the mortgage, making an extra payment one to two times per year, refinancing to a loan with shorter terms, or increasing the monthly payment amount by a few hundred dollars.

    Before putting extra money towards the mortgage, however, ensure it’s going towards the principal – not the interest. In addition to building equity and helping pay off the mortgage faster, making extra payments can help homeowners save thousands in interest.

  3. Make improvements inside

    Whether it is installing a new light fixture in the kitchen or entirely gutting and rebuilding a bathroom, home improvement projects help increase equity. Look for projects that have a high return on investment; this ensures that homeowners can maximize the equity they are getting without blowing the budget. Projects around the home with a high return on investment include minor kitchen remodels, new flooring, or updating bathroom fixtures.

  4. Add curb appeal to exteriors

    Curb appeal is important; it’s the first impression people get of a home. Because of this, increasing curb appeal can help increase a home’s value – and add equity. Common exterior projects that can build equity quickly include building a deck, installing new vinyl siding or stone veneer, updating landscaping, or adding shutters.

  5. Follow market trends

    Patience is a virtue – and is especially important when waiting for the equity in a home to increase. The value of most homes naturally increases over time; the equity in a home will likely increase over time as the home appreciates in value. Unfortunately, the opposite can be true – if the market trends downward, you may lose equity as well.

by Author, October. 05, 2019

Reasons to buy a home now

Reasons to buy a home now

While home prices may be steadily increasing, buying a house is still surprisingly affordable. Affordability in an area is determined by looking at home prices, wages, and mortgage interest rates. According to the Affordability Index by the National Association of Realtors, “All four regions saw an increase in affordability from a year ago. The South had the biggest gain in affordability of 6.9%, followed by the West with a gain of 6.0%. The Midwest had an increase of 5.8%, followed by the Northeast with the smallest gain of 1.8%.”

For many, homeownership is an important milestone of adulthood. However, it can be difficult to determine when is the best time to take the plunge and purchase a home. While it can be beneficial to some to wait and accrue additional savings, current market trends make it the perfect time to purchase a home. The following are five reasons to buy a home now.

1. Increase your investment

Home prices tend to increase slowly over time; this allows many homeowners to increase their investment, eventually selling their homes for more than the purchase price. Home prices in the United States tend to increase 3-6 percent per year, making homeownership a safe, secure way to increase wealth.

2. Save money

In most areas of the country, monthly mortgage payments are significantly lower than comparable rent amounts. Owning instead of renting can lead you to paying less each month. Likewise, there are many tax breaks that are available to homeowners; real estate taxes are often deductible, creating an even greater savings for homeowners.

3. Take advantage of low interest rates

Current economic trends have led to extremely low interest rates. With many predicting a downturn in the economy in several years, now is the perfect time to capitalize on low interest rates and purchase a home.

4. The home is yours

Owning a home has plenty of economic benefits – as well as many personal ones. Feel free to paint a room, replace flooring, or even punch a hole in the wall if you want. Likewise, homeowners can decide to get a pet – or more than one – without special approval, fees, or security deposits that a landlord may require.

5. Experience the peace of mind of financial security

Homeownership can equal long-term financial security. Instead of dealing with crazy landlords or unfair rent increases, you have a guaranteed, fixed payment every month. Likewise, the longer you own a home, the more equity it will build; home equity can help you refinance for better rates or take out a home equity loan to make other major purchases or improvements.

by Author, October. 05, 2019

How much do you know about down payments?

How much do you know about down payments?

Most homebuyers still mistakenly believe that every home purchase with a loan requires a 20% down payment. However, modern financing options are more diverse than ever before – and many require little to no down payment. The following guide can help potential buyers better understand down payments, how they work, and how to choose the right amount.

What is a down payment?

A down payment is the money that buyers pay at the origination of a loan – whether that is for a home, vehicle, or other large asset. Money for a down payment often comes from personal savings, while smaller loans may allow you to put the down payment amount on a credit card.

Down payments are sometimes – but not always – a part of a loan. The amount that is made in a down payment will affect the amount the loan is for, as well as what the monthly payments will be. A larger down payment equates to a smaller loan, which in turn leads to a lower monthly payment; a smaller down payment, however, can leave money in the bank to pay for immediate projects and improvements.

How much should I put down?

Some believe that a bigger down payment is always better; others prefer to make the down payment as small as possible. There are pros and cons to both methods, and buyers should evaluate their savings, future earnings, or plans for a home before making a decision on down payment amount.

Benefits of going small

Benefits of a small down payment include:

- Buy sooner. Saving 20 percent can take years – particularly in expensive markets. A small down payment can help buyers purchase a new home sooner. - Leave money in the bank. Many buyers eliminate the majority of their savings to make a down payment. A small down payment leaves plenty of money for emergency reserve funds. - Money for improvements. Instead of making a large down payment, money can instead be used to make immediate improvements or changes to a property. - Other opportunities. Money can be used for investments, retirements, or business opportunities instead of being tied up in a house.

Go big or go home

Benefits of a big down payment include:

- Lower rates. When buyers are prepared to put a large amount down, lenders may be willing to lower their interest rates. - No PMI. With a down payment of more than 20%, buyers are able to avoid mortgage insurance and other upfront payments. - Lower monthly payment. The bigger a down payment, the smaller the size of the loan – and the smaller the monthly payments. - Future borrowing power. A large down payment can improve a buyers debt-to-income ratio, making it easier to qualify for additional loans in the future. - Potential equity. A large down payment is in investment in the home; when buyers put down a large sum, they are immediately increasing the equity value of a home.

Lender Requirements

Down payment requirements vary from lender to lender – and from loan to loan. While conventional and FHA loans can have down payments as low as 3%, PMI is required. VA loans, however, are available to qualifying military members with no down payment. Check with individual lenders for more information about down payment requirements.

by Author, October. 05, 2019

What causes home prices to fluctuate

What causes home prices to fluctuate

The value of a home can fluctuate from year to year – and even from month to month. The median sales prices of homes in the United States are between $188,900 and $279,900, but there can be significant differences depending on the time of year, neighborhood, or the state of the economy. Whether you’re a buyer looking to get the most bang for your buck or a seller wanting to get the most money for your current home, understanding changing home prices can help you decide when to make a move in the real estate market. While there are a number of reasons home prices can change, the following are four common reasons home prices fluctuate.

1. The economy

Whether it is strong or weak, the economy has a significant impact on home prices. When the economy is strong, families feel more financially secure, are more willing to take out a larger mortgage, and home prices tend to increase. In an unstable economy, people can lose their jobs or fear getting laid off; this leads to fewer home purchases and, by extension, lower home prices.

2. Supply and demand

Real estate is subject to the economic laws of supply and demand; when there are more buyers than sellers, home prices go up. When there are more sellers than buyers, home prices go down. Spring tends to be the most popular season to buy a home. Because of this, sellers can expect higher home prices, ensuing bidding wars, and even paying over asking price. In colder months, demand goes down; with fewer people shopping for homes, sellers may list for a lower price tag.

3. Location, location, location

Real estate is all about location, location, location; what neighborhood, school district, city, or even state a home is located in can have a major impact on its price. In San Francisco, for example, the median sale price was $1.6 million in 2018; in Kansas City, the average home sells for $236,000. If you aren’t willing to move across the country to a less expensive area, homes in up and coming or traditionally less popular neighborhoods tend to have lower pricing.

4. Interest rates

Changing interest rates can impact housing prices. When interest rates are low, home prices tend to be higher; this is because lower rates encourage more families to buy homes, increasing competition and therefore prices as well. Interest rates tend to go up when the economy is down as banks are less willing to take risks on mortgages. Because higher interest rates make higher monthly payments, potential buyers can afford less; this leads to home prices decreasing.

by Author, August. 27, 2019

The best smart technology for your home

The best smart technology for your home

Innovations in smart technology have made being a homeowner easier than ever. We can now lock and unlock doors, adjust the thermostat, change the lighting, or even turn on music from our smart phones and devices. The following are a number of the best smart technology devices for your home.

Amazon Echo

The Amazon Echo remains the most popular smart speaker on the market. This Bluetooth speaker provides 360-degree audio – as well as listening to voice commands with Amazon’s voice assistant Alexa. The Echo can be connected to the smaller Echo Dot as well as a variety of smart devices. Once connected, it can set alarms, recall a grocery list, make calls, and more.

Philips Hue Starter Kit

The Philips Hue ecosystem can work seamlessly with smart speakers including Alexa, IFTTT, and even Siri. This allows you to control the lights, brightness, and even color of the bulbs by either voice or app. In addition to letting you create flexible lighting throughout your home, the Philips Hue can be programmed to set colors or brightness levels with alarms and music.

SmartCharge LED Lightbulbs

Never be left in the dark when the power goes out with SmartCharge LED lightbulbs. These energy efficient bulbs have a battery backup that provide a minimum of 3.5 hours of additional light during a power outage. Easy to install, SmartCharge bulbs can be turned on and off with the regular wall switch – even when the power is out.

Honeywell SkyBell Tri

While there are a number of Wi-Fi enabled doorbells on the market, the Honeywell Skybell Trim regularly tops ranking lists. The built-in 1080p camera includes full-color night vision, motion sensor alerts, and free cloud recording with no monthly fees. Easy to install and weather resistant, it can be used with the free SkyBell app.

Ecobee Smart Thermostat

There are a number of features that make the Ecobee the best smart thermostat on the market. The Ecobee is Alexa-enabled; this allows it to be voice controlled, used as a speaker, and even used to control other smart devices. The Ecobee also has multiple sensors that can be placed throughout the home to help reduce hot and cold spots.

TP-Link HS100 Smart Plug

The TP-Link HS100 is a feature-rich smart plug that can help manage energy usage throughout your home. The HS100 can be programmed into both Alexa and Google home groups and routines, making it possible to turn the plugs on and off by voice command. The extremely useful Away Mode allows you to schedule days or times when the plug is powered on or off, while the Kasa app allows you to monitor your daily, weekly, or monthly energy use.

by Author, August. 27, 2019

5 things to know about buying an investment property

5 things to know about buying an investment property

Investing in real estate is one of the most common ways to build wealth and long-term financial independence. While there are plenty of people who have gotten rich flipping or renting houses, the reality is far riskier. The following are five things that every person should know about buying an investment property.

1. Think with your head – not your heart

House hunting for a primary residence is driven by emotions: how a home feels, what design features we prefer, or imagining our families living there. When choosing an investment property, however, it’s important to take emotion out of the equation. This is not a place you’ll be living with your family for many years; it is an investment that will either be rented or renovated and sold. Make smart, logical decisions about price, neighborhood, and even design finishes to maximize your return on investment.

2. Avoid a flip to prevent a flop

HGTV shows like Fixer Upper have many potential investors convinced they can quickly and easily flip a house for a major profit. Unfortunately, many flips turn into flops, with investors losing thousands of dollars due to unforeseen renovation costs. Instead, look for a home that needs very minor repairs or updates that can be completed quickly.

3. Secure your financing

The rules for mortgages and investment properties are significantly different than those for primary residences. In addition to qualifying for different terms and conditions, many lenders require mortgages for investment properties to have higher down payments. To ensure you are getting the best loan possible, consider working with a mortgage broker to help find the right loan for your investment.

4. Calculate your expenses and earnings

Considering every detail beforehand can help potential investors avoid pitfalls – or getting in over their heads. Calculate earnings as well as expenses beforehand. Check local listings for comparable properties to find out how much you can expect to bring in for rent. Expect about 50% of the income generated to cover expenses – not including the loan. Fixed expenses include property taxes, HOA fees, and insurance; variable expenses are unplanned issues such as plumbing problems or replacing appliances.

5. Select a low-cost first property

Even if you have one million dollars to invest, consider starting with a low-cost property. Most experts agree that your first investment should cost no more than $150,000; starting with a low-to-mid range property can help investors stay in their “safe zone”; even if you don’t meet your expected profits, there’s lower risk of losing everything.

by Author, August. 27, 2019

5 facts about working with a mortgage broker

5 facts about working with a mortgage broker

Finding your dream home might seem like the most stressful part of the home buying process, but for many buyers finding the right lender can be worse. From filling out multiple applications, fielding calls and emails from various lending officers, and trying to get years of financial paperwork in order, the mortgage process can take all the fun out of finding your new home.

Utilizing the services of a mortgage lender is one of the best ways to simplify the mortgage process. Whether you’re a first time home buyer, have complex lending needs, or simply don’t have the time to hunt for the perfect lender, a mortgage broker can be a valuable ally in the home buying process. The following are five facts about working with a mortgage broker.

1. A mortgage broker is a middleman between buyers and lenders

Mortgage brokers act as middlemen between lenders and buyers; they help their clients navigate the mortgage process. Because they work with multiple financial institutions, they can help buyers find the best rates, terms, and conditions for their mortgage. Because their dedicated job is finding loans for their clients, brokers know how to find the best mortgages and competitive rates. They are particularly helpful for those with complicated credit histories, people who are self -employed or work seasonally, or those purchasing a second home or investment property.

2. Mortgage brokers are paid on commission

. One of the most commonly asked questions about mortgage brokers is how they get paid. Most mortgage brokers charge a commission of 1% of the loan, which is due at closing. Other brokers may negotiate “no-fee” mortgages where the fees are rolled into the loan.

3. A mortgage broker is like a loan concierge

Paying a 1% fee for something you can do yourself might seem like a tough pill to swallow. A mortgage broker, however, is like a loan concierge who is designed to make the entire process as fast and easy as possible. They handle everything from shopping around for different lenders, negotiating interest rates, preparing paperwork, collaborating with the underwriting department of the lender, and keeping in contact with the closing and title companies. This keeps the transaction running smoothly – and quickly – to closing.

4. Besides the fee, there are few drawbacks

Besides the fee, there are few drawbacks to utilizing the services of a mortgage broker. As real estate professionals, they are often privy to loans and rates that regular buyers working with traditional lenders are not. In addition to saving you money, brokers can help save you time and make the whole experience less stressful.

5. Referrals are the best way to find a good broker

Ready to find a mortgage broker? Ask friends, family, coworkers, and even your real estate agent who they have had a good – or bad – experience with. Ask questions about their experience, the level of service you an expect, and their preferred communication style; this ensures you aren’t fielding multiple phone calls a day when you’d prefer to be reached over email. Likewise, don’t be afraid to interview multiple brokers before making a decision!

by Author, August. 27, 2019

Unexpected Benefits Of A VA Loan

Unexpected Benefits Of A VA Loan

For those who have served in the Armed Forces, home loans guaranteed by the Department of Veteran Affairs often have the most favorable terms and conditions. Low down payments, competitive interest rates, and cheaper terms often make them a better option than conventional mortgages. However, a small minority of service members and veterans take advantage of the VA loan program; according to National Mortgage News, less than 12% of service members use VA loans.

Is a VA loan right for you? The following are four of the unexpected advantages of a VA loan.

Low interest rates and fewer fees

VA loans are designed to make homeownership affordable for service members and veterans. First, no down payment is required for purchase up to $417,000; even without a down payment, no mortgage insurance is required. Next, restrictions are placed on the kind and amount of closing costs that are allowed, making closing more affordable. Finally, VA loans have competitive interest rates – even for those with high debt or low credit scores. For most lenders, for example, VA loans qualify for the same interest rates as conventional borrowers with a 760 credit score and 20% down payment.

While the rates and fees are often better than a conventional loan, VA loans do have a funding fee. This can range from 1.5% to 3.3% of the total amount of the loan. However, the funding fee is added on to the loan; this means borrowers do not have to pay the funding fee upfront. Likewise, those with a service-related disability can have the funding fee waived.

Avoid overpaying with a VA-certified appraiser

The VA requires that all properties are inspected by a VA-certified appraiser before purchase. This helps service members avoid overpaying and helps ensure the house does not have any unexpected problems. The VA's Minimum Property Requirements include a list of safety, structural, and health requirements a property must meet; while the inspection requirements might seem stringent, they are designed to protect service members and their families from bad deals or shoddy workmanship.

Available help to avoid defaulting on the loan

Why are default rates on VA loans so low? Because unlike conventional loans, borrowers with VA loans have access to a number of programs for assistance and advice in the event they cannot make payments on their mortgage. Whether it is a sudden illness, lost job, or other unexpected financial problem, VA Regional Loan Centers offer financial counseling to service members designed to keep their homes out of foreclosure. This often takes the form of revised repayment plans; in extreme cases, the VA may opt for a deed in lieu of foreclosure, transferring the ownership of the property to the government and releasing the service member from financial liability.

Qualify for more than one loan

VA eligibility is not a one-time deal; service members can take out VA loans multiple times – and may even be able to have VA loans on two homes simultaneously. Because service members routinely relocate, they are able to take advantage of VA loans multiple times. Second loans may be taken out simultaneously depending on how much “entitlement,” or the amount the government will guarantee, is left on the benefit.

For service members, VA loans can make homeownership achievable. With favorable rates and terms and programs to help stay out of foreclosure, these loans are an excellent option for members of the Armed Forces.

by Author, May. 23, 2019

How To Decide When It’s Time To Buy A Home

How To Decide When It’s Time To Buy A Home

Buying a home is a major financial decision. Nearly two thirds of Americans have invested in real estate; according to the U.S. Census Bureau, 63.7% of Americans own their home. For many, however, it can be difficult to decide when it’s the right time to buy their first home.

If you have a steady income, good credit history, and plan on staying in the same area, it can be tempting to invest in real estate by purchasing a home. However, some of us are simply better off renting. The following guide can help you determine whether or not you are ready to purchase a new home.

Your finances are in order

Purchasing a home is, primarily, a financial transaction. Because of this, it is imperative that your financial affairs are in order before taking the first steps towards homeownership. There are several basic financial benchmarks that should be met before purchasing a home; you should have a steady income, a good credit score, a low debt-to-income ratio, and enough saved for both a down payment and closing costs.

You are ready to settle down

Whether you want a yard for a dog, more space for a growing family, or simply the ability to paint the walls whatever color you want, buying a home affords you many freedoms that renting does not. Home ownership, however, seriously impacts ease of mobility; moving again within the first several years after purchase can cause homeowners to lose money. Before buying, be prepared to stay in the same home for at least three to five years in order to recoup the costs associated with closing and moving.

You can save money by buying

In many areas, purchasing a home may actually help lower your monthly payments and bills. If the amount you pay in rent each month is similar to what a mortgage payment for a similar property would be, buying instead of renting can help you save money – and build equity. The biggest difference is in upfront costs; while renting often requires fees for security deposits or background checks, closing on a home comes with thousands in closing costs.

You can fix a leak

One of the most important – yet often overlooked – aspects of homeownership is the necessary skills to maintain and repair the house. If a faucet breaks at 2 am or the hot water heater suddenly stops working, there is no longer a superintendent to call; instead, you as the homeowner are responsible for identifying – and repairing – any maintenance issues that may arise. Likewise, regular upgrades to paint, flooring, appliances, and landscaping should be made to keep the home looking its best.

The bottom line

Buying a home is a major financial decision – that ultimately comes down to personal choice. While there is no “right” time to buy a home, having a strong financial history, or saving enough for both the down payment and unexpected repairs can help make purchasing your new home an enjoyable – and profitable – experience.

by Author, May. 23, 2019

FHA vs Conventional Loans

FHA vs Conventional Loans

Applying for a mortgage is more complicated than simply filling out a pile of paperwork. For many borrowers, there are choices to be made when it comes to the type of loan they would like to receive.

Two of the most common types of loans issued are FHA and conventional loans. The following guide can help home buyers compare these two loans and decide which loan is right for them.

Conventional loans

Conventional mortgage loans are often the better choice for buyers with strong credit histories who are planning on putting at least 20% down towards their new home. Good candidates for conventional loans:

  • Have a credit score of at least 640
  • Plan on making a down payment of at least 5%-20%
  • Have high DTI ratio
  • Purchasing a higher-priced home

However, there are disadvantages to conventional loans.

  • PMI required if down payment is less than 20%
  • Reserve funds often required
  • Minimum 620 credit score
  • Higher interest rates
  • More difficult to qualify for

FHA loans

The Federal Housing Administration, or FHA, was created in 1934 to help more Americans become homeowners. To accomplish this goal, FHA loans have lower qualification requirements than most traditional loans.

Advantages of an FHA loan include:

  • Down payment requirement of 3.5% for those with a credit score of 580 or higher
  • 10% down payment required for those with a credit score of 500 or higher
  • Lower interest rates than conventional loans
  • Gift funds can be used for down payment or closing costs
  • Reserve funds not required

Disadvantages of FHA loans include:

  • Lower maximum loan limit
  • MIP required for the life of the loan if less than 10% is put down
  • Condos must be FHA approved

When FHA loans are better

FHA loans are easier to qualify for, particularly for those with past credit problems. FHA loans are also ideal for those with good credit scores who do not have a lot to put down on a home. With just 3.5% down required for those with credit scores above 580, FHA loans are often the best choice for first-time home buyers. When conventional loans are better For buyers who have great credit scores and significant savings for a down payment, conventional loans are often better. While FHA loans have fewer upfront costs, borrowers may end up paying more over the life of the loan because of FHA-issued insurance. Putting more than 20% down on a conventional loan helps borrowers avoid mortgage insurance altogether; if insurance is required due to a down payment of less than 20%, the PMI is automatically cancelled once the LTV reaches 78%. Conventional loans also offer more options such as 10, 15, 20, 25, and even 40-year fixed rate mortgage options.

The bottom line

Both FHA and conventional mortgages have advantages and disadvantages. Speaking with a mortgage professional, such as a local mortgage broker, can help buyers determine which loan is right for them.

by Author, May. 23, 2019

Buying A Home With A Low Credit Score

Buying A Home With A Low Credit Score

Defaulting on a previous loan, carrying significant debt, or missing a series of payments can all have a negative impact on a person’s credit score. While buying a home with a medium to low credit score is still less than ideal, there are more avenues than ever for those with a low credit score to become homeowners. The following tips can help guide potential buyers with low credit scores through the loan application and approval process.

  1. Check your credit score

    There are a number of websites that allow consumers to check their credit scores for free. Checking your own credit score does not count as an outside credit check and will therefore not effect your score. There are three major bureaus that evaluate credit scores; lenders often use the median, or middle score, to determine a borrowers credit worthiness.

  2. Fix errors on your credit report

    Credit reporting is not perfect. Many borrowers are surprised to check their credit and find there are several errors on their credit report. Consumers can dispute everything on their credit reports, from old addresses to late payments. Having errors fixed usually can help improve a person’s overall credit score; improving a score by even 10 or 20 points can make a big difference to a low credit score.

  3. Maximize your FICO scores

    In addition to disputing errors, there are several other ways to maximize your FICO score. First, pay down the balance on any credit cards to improve your credit utilization ratio. For example, if you owe $600 on a credit card with a $1000 limit your credit utilization ratio would be 60%, which is considered high. Paying down the balance improves this ratio and can improve your credit score. Likewise, try to have any collection accounts removed; while paying a collection amount itself does not improve your credit score, many creditors offer “pay to delete” programs.

  4. Look for low credit score lenders

    Some lenders specialize in finding loans for low credit score applicants. FHA loans, for example, allow borrowers with credit scores as low as 500 to purchase a home with as little as 10% down. For those with credit scores above 580, FHA loans only require 3.5% down. Because lenders are able to set their own terms and requirements, borrowers may need to contact multiple lenders before finding one that can work with their credit score.

  5. Show financial stability in other ways

    If you have a bad credit score, there are other ways to show a lender you’ll be able to make the monthly mortgage payment. Being able to make a large down payment can reassure lenders – and help reduce the costs associated with PMI, or private mortgage insurance. Likewise, having no late payments in the last 12 months shows lenders you are re-establishing your credit history – even if your score doesn’t yet reflect that. Finally, having a low debt-to-income, or DTI, ratio can reassure lenders you can afford your new mortgage. Most lenders look for a DTI that is 43% or less; this lowers the risk that the borrower will not be able to afford payments and default on the loan.

    Buying a home with a low credit score may be more difficult, but it is not impossible. Taking the time to review your credit score, fix errors, and rebuild credit history can all help improve the odds of being approved for a loan.

by Author, May. 23, 2019

Your Mortgage Broker is your best friend

Your Mortgage Broker is your best friend

While finding the perfect property might seem like the most difficult part of the house hunting process, many potential buyers are taken aback by how difficult securing financing can be. From shopping rates and terms between multiple lenders to hunting down the correct documentation, the loan application process can feel like a second job during an already stressful time.

Enter a mortgage broker. A mortgage broker is a real estate professional whose entire job is to help you find the best deal while guiding you step-by-step through the loan process. While hiring a mortgage broker is an added expense, they are truly a buyer’s best friend during the financing process.

The pros of using a mortgage broker

A mortgage broker acts as a liaison between potential buyers and lenders during the loan application and approval process. Homeowners hire a broker who works on their behalf to shop mortgage rates and terms among different banks and lending institutions.

One of the major benefits of working with a broker are connected with savings – helping to save buyer’s time, money, and frustration during the loan application process. Most brokers work with a network of five to ten lenders; they can analyze the rates and terms from a variety of trusted lenders to help find buyers the best fit for their financial needs. While a buyer would need to fill out five different applications to find out five different rates, a broker can find out the rates and terms on their behalf, leaving buyers to fill out a single application for the lender they choose.

As lending professionals, brokers are also knowledgeable about a variety of specialized mortgage programs such as low or no downpayment loans or home renovation incentives. They examine a buyers credit report, employment history, assets, and debts to help ascertain what kinds of loans they qualify for.

Once they find their clients the perfect loan, mortgage brokers are on hand to guide them through every step of the application and approval process during escrow. Brokers speak “legalese” and work with lenders everyday; this level of expertise can be comforting, particularly to first-time buyers.

Are there cons to using a mortgage broker?

As in any industry, there can be unscrupulous mortgage brokers; some take illegal incentives from lenders, while others may not be able to help you strike the best deals. Luckily for homeowners, however, the last housing downturn drove most of the dishonest brokers out of the industry. Asking questions before hiring a broker can ensure you work with an honest, trustworthy professional who has your best interests at heart – and will help you get to closing day with minimal stress.

by Author, May. 02, 2019

What to know about financing for foreign national buyers

What to know about financing for foreign national buyers

It is a common misconception that you have to be a United States citizen in order to receive a mortgage. However, there are specific requirements that foreign nationals must meet before buying a home.

Documentation and qualification requirements

Documentation required for foreign national buyers will vary based on their residency and work status.

  • Permanent resident alien: Permanent resident aliens will need their green cards and social security numbers; the loan application process for permanent resident aliens is very similar to that of regular US citizens.
  • Non-permanent resident alien: Non-permanent resident aliens can finance a home by producing their social security number as well as their work permit (Employment Authorization Document) or employer-sponsored visa. Non-permanent residents will need to provide documentation proving they have been living and working in the country for at least three years.
  • Immigrants granted asylum: Immigrants who are not residents but have been granted asylum or refugee status can apply for financing like a lawful resident alien.
  • Non-US citizens without lawful residency: Non-US citizens without lawful residency are not eligible for Freddie Mac, FHA, or Fannie Mae loans.

Financing for permanent residents

Both permanent and non-permanent resident aliens can obtain financing for a home. Many permanent residents can qualify for Freddie Mac, FHA, or Fannie Mae loans, sometimes with as little as 3% down. If the work permit of a non-permanent resident alien is set to expire within a year, lenders will evaluate their ability to get financing based on the likelihood they will remain employed in the country; those who have renewed their visas at least once are often better able to satisfy the requirements for financing such as FHA loans.

Foreign national loans for non-citizens

Foreign nationals looking to buy an investment property or vacation home in the United States still have financing options. Many private lenders offer foreign national loans; however, this type of financing often comes with high interest rates – and even higher down payments. Foreign nationals can expect to put between 30 and 50% down on a home in the US when not a permanent resident. Utilizing a mortgage broker is often the best option for finding the best terms and rates for a foreign national loan.

What about credit scores?

Many foreign national buyers face a lack of credit data when applying for financing for a new home. “Thin files”, or non-traditional credit reports, are one way to show a loan applicant’s financial health. A 12-month history of school payments, utility payments, or savings deposits are all examples of financial transactions that can act as trade lines.

by Author, May. 02, 2019

How to work with your Mortgage Broker

How to work with your Mortgage Broker

A mortgage broker can be your best friend during the lending process. These real estate professionals are familiar with a variety of lenders, speak the “legalese” that helps make understanding contracts and paperwork easier, and want to help their clients get to closing with minimal stress and frustration. The following guide can help potential buyers as they make the decision to work with a mortgage broker.

What is a mortgage broker?

A broker is a certified financial and real estate professional who works as an intermediary between buyers and lenders. While individual buyers are only able to access loans directly from credit unions, banks, and other lenders, brokers are able to help their clients apply for wholesale loans.

One of the primary jobs of the broker is to do the mortgage shopping for their clients. During this process the broker will collect financial information including credit reports, employment history, and debts and assets from their clients; they use this information to help them find a lender with the most favorable terms and conditions. Doing this often saves buyers considerable time and money as they are not filling out applications with multiple lenders.

How are mortgage brokers paid?

Mortgage brokers work independently from financial institutions and are not paid by a specific bank or credit union. Most mortgage brokers charge origination or brokers fees that are paid when buyers close on their home; these fees are rolled into the total loan and are not paid separately. Because brokers can help their clients save by accessing wholesale rates, in many cases using a broker still saves buyers money in the long run.

What are the advantages of working with a mortgage broker?

There are a number of advantages to working with a mortgage broker versus a lending officer at a single institution.

  • Brokers have knowledge of a variety of available loans, lenders, and options
  • Brokers comparison shop for their clients, saving them time
  • Brokers can access wholesale mortgage rates

Because mortgage brokers work with a variety of lending institutions, they are often able to help their clients find the best rates and terms for their new home. This is particularly true of buyers with low credit scores or other credit problems; mortgage brokers can direct their clients to lenders who are more likely to work with those with past credit problems.

How can I find a mortgage broker?

One of the best ways to find a mortgage broker is by asking a real estate agent. Like brokers, real estate agents work in the industry every day; they often have a wide network of brokers whom they have worked with in the past and trust. The following are a few examples of questions to ask before hiring a broker.

  • What experience do you have as a mortgage broker?
  • Can you provide references?
  • What is your process for working with clients?
  • How will you be paid?
  • Do you require payment upfront or take your fees at closing?

Working with a mortgage broker is an easy way to simplify the lending process while ensuring you are getting the best rates, terms, and conditions on your new mortgage.

by Author, May. 02, 2019

How financial planners can help you manage debt

How financial planners can help you manage debt

For those with significant debt, it can be difficult to imagine a debt-free future. However, working with a financial planner is often the best way to manage debt; financial planners can also help with other services including investment and portfolio management, estate planning, and tax preparation.

Budget planning

Budget planning is one of the primary ways a financial planner can help manage debt and prepare for a healthy financial future. Clients should bring bank statements, bills and utilities, loan statements, pay stubs, and tax returns to create a full picture of their finances. Financial planners will then review cash flow, expenses, and debts to create a budget plan that allows for paying off debt, monthly expenses, savings, and flex spending.

Restructuring Debts

There are different types of debt; some loans, such as mortgages, have low interest rates and are considered benign, while toxic credit card debt or predatory loans have high interest rates and fees. Financial advisors can analyze a client’s debt and create a payback strategy that prioritizes delinquent accounts.

A financial advisor may also be able to restructure debt. During restructuring, existing debts can be combined or new loans can be taken out to pay off loans with high interest rates. For example, homeowners may be able to channel the equity in their home into a second mortgage; the second mortgage can then be used to pay off multiple credit cards or other loans at once. In addition to helping to lower monthly payments and reduce any fees incurred from high-balance accounts, restructuring debt can help improve client’s credit scores – and even lead to lower insurance premiums.

Setting long-term goals

In addition to creating a plan to pay off debt at quickly as possible, financial planners can help their clients set long-term financial goals. Creating college savings accounts for children, saving for retirement, or diversifying investment portfolios are common long-term goals for many families. Planners can help their clients create a roadmap forward including achievable goals – and red flags to look out for along the way.

Finding the right financial planner

While some commission-based advisors sell insurance policies or investment packages, most financial advisors are paid an hourly rate. Look for a Certified Financial Planner (CFP) or a Chartered Financial Consultant (ChFC), both of whom are certified to give advice on both finances and insurance. Likewise, planners who are a member of the National Association of Personal Financial Advisors (NAPFA) are fee-only advisors who do not work on commission. This ensures you have an advisor who has their client’s best interest at heart, particularly when debt restructuring is involved.

by Author, May. 02, 2019

What does the pre-approval process for a mortgage look like?

What does the pre-approval process for a mortgage look like?

A mortgage pre-approval is what separates home browsers from home buyers. It signals that you’re serious about buying a home and ready to take the next steps in the process.

If you watch house hunting shows on TV, it seems simple to walk into a bank or mortgage broker and receive a pre-approval letter. Like a lot of things, though, the process in real life is a little more complicated than how it looks on TV.

Here’s what you need to know about the mortgage pre-approval process:

Choosing a lender or lenders

The first step in the pre-approval process is to select a lender to issue the pre-approval letter. Shop around for lenders offering the best rates, or work with a mortgage broker to choose one.

Just like getting a second opinion from a doctor, having more than one pre-approval is sometimes beneficial. You might find that one lender qualifies you for a higher amount than another, or that one is easier to work with.

Again, a mortgage broker can help with this part of the process by selecting the lender for you and working as an intermediary in the pre-approval process.

Submitting the application

The goal of the pre-approval is to provide an accurate estimate of your financial picture and how much you can realistically spend on a home. To do that, lenders need to know how much you make, what your expenses are, and how much debt you already have.

Be prepared to provide the following as part of the pre-approval process:

  • Pay stubs
  • W-2
  • Bank account statements
  • Federal tax returns from the past two years
  • Statements from 401K, IRA, and other investment accounts if applicable
  • A gift letter, if you’re using funds from a relative to help cover the down payment

The lender will also run your credit report. We recommend pulling a report for yourself a few months before pre-approval so you can correct any errors you find or figure out how to boost your credit score if needed.

Obtaining the letter

Once the pre-approval screening is complete, you’ll receive a letter stating how much that lender would be willing to give you to buy a home. Think of it as the maximum you should spend on a home and try to stay under the listed amount if possible.

Most mortgage pre-approvals expire within 60 or 90 days, so you might need to go through the process again if you do not apply for a mortgage within that time frame.

by Author, March. 20, 2019

Taxes and Home Buying: What You Need to Know

Taxes and Home Buying: What You Need to Know

Tax deductions and other benefits should never be the sole reason for buying a home. However, the perks of doing so are pretty nice — especially if you know what to do and when to do it.

Here are a few ways you can make the most of your home purchase when it comes to taxes:

Mortgage Interest Deduction

This is the most commonly-known tax benefit associated with buying a home. As of 2019, homebuyers can deduct the interest on up to $750,000 of mortgage debt if they are married and file jointly. Those who file individually can write off up to $375,000.

Before the most recent tax reform bill, the caps were $1 million for joint filers and $500,000 for individuals. You may still qualify for these brackets if you purchased your home before 2017. Check with your accountant to see if you do.

An added bonus? You can also deduct up to $10,000 in state and local property taxes on your federal return.

All About IRAs

First-time homebuyers can withdraw up to $10,000 from a traditional IRA or 401K retirement account to use toward a down payment without penalty. If you’re buying a home with your spouse, they can also withdraw up to $10,000.

Both IRAs are a little trickier. You can withdraw money from them at any time, but it will only be tax-free if the account is at least five years old.

Either way, remember that your retirement accounts are not unlimited piggy banks. They should only be used as a last resort for down payments, and you should build the funds back up as quickly as possible once you buy the house.

Moving and Home Improvements

Federal deductions and IRA withdrawals are available to all U.S. home buyers. Beyond that, some states offer specific programs or incentives to make buying a home there even more attractive from a tax perspective.

Check with your realtor or mortgage broker to find out whether your state offers tax credits for first-time home buyers, moving expenses, or home improvements. And, when it comes time to do taxes, make sure to complete all details related to your new home so that you don’t miss out on any tax-related opportunities.

by Author, March. 20, 2019

How to effectively work with your mortgage broker

How to effectively work with your mortgage broker

A good mortgage broker can mean the difference between getting a great deal on your dream home and paying too much on a house you don’t love. Like any relationship, it requires an understanding of each party’s goals and objectives to be successful.

At Pacific Mortgage, we have decades of experience working with all types of clients. Based on that experience, we put together a few ideas for how any can work more effectively with a mortgage broker:

Be honest — and expect honesty in return

Trust is at the heart of any successful relationship. Mortgage brokers can only help you get the best home loan if they know what your financial circumstances are and what you’re looking for in a home.

Some of this information will be revealed through your financial documents, but it’s better to be upfront rather than give a false impression only to have the truth come out later. We’re working for you, and we want to do everything we can to help you land the home of your dreams.

As a client, you should always expect a high level of professionalism from your mortgage broker. They should always be honest about their fees, their professional qualifications, and the lenders they work with. If possible, ask to speak with a previous client or another reference before signing with a broker.

Keep in touch

Homes come and go quickly, especially in today’s market. You need to be ready to move on a house if the opportunity arises. This requires good communication with your realtor and mortgage broker.

A good broker should hold up their end of the bargain when it comes to communication, but you need to do the same. Let your broker know the best way to reach you, then respond as quickly as possible to any messages or calls you receive.

A delay in response could mean a delay in purchasing your home or moving along in the closing process. Buying a home is a fixed-term process. The questions and requests won’t last forever, and a little inconvenience is usually worth it in the end.

by Author, March. 20, 2019

How to Help Your Buyer Complete a Closing

How to Help Your Buyer Complete a Closing

As a realtor, there’s nothing more frustrating than helping a buyer find a home, only to have the process fall apart at closing. Time is money in the real estate business, and there’s nothing worse than losing both with a failed closing.

No matter where you work or what type of real estate you sell, there are a few things you can do to help your buyer close on their purchase transaction:

Keep Them Organized

From an organization perspective, buying a home is one of the most complicated things that a person ever has to do. A successful closing requires income and asset verification, a completed inspection, proof of insurance, and a lot of other documents along the way.

It’s a lot to keep track of, especially for families and busy professionals. As a realtor, you go through this process every day and can help keep your clients on track.

Little things like offering to make copies or creating a Dropbox folder to store mortgage-related documents on the cloud are not technically part of your job, but they go a long way toward ensuring that you’ll receive your paycheck at the end of a successful sale.

Raise Red Flags

As a realtor, you’ve probably seen it all when it comes to home closings. It’s your job to help your buyers see red flags when they arise and figure out how to address them.

For example, if you see something questionable on the home inspection report, make sure you let the buyer know so you can begin working with the seller on a solution. They might not know what to look for, especially if it’s their first time buying a home. You can provide guidance on which issues are worth pursuing and which are not.

The earlier you catch problems, the more likely it is that they’ll be addressed before closing. Being proactive also increases the likelihood that buyers will refer you to others in their network who are looking for a realtor.

by Author, March. 20, 2019

A Pivot

A Pivot

It is an amazing turn of events that we have experienced in the last four months. There was near universal expectation for the US Federal Reserve (FED) to hike rates three or more times in 2019. Instead, the FED’s tone changed dramatically last December and most analysts now anticipate zero or one rate hike this year (one bank, RBC, anticipates three though). Due to this, mortgage rates have come down as much as half of a percent. For home owners who had just recently purchased a home, this is a great opportunity to lower the mortgage payments or switch to a fixed rate. And for home buyers, it’s an opportunity to move into a price range that seemed to be just out of reach a few months ago.

Mortgage Lenders have come out with a number of interesting new programs which allows for ‘alternative’ ways to document income. The law still requires lenders to document the borrower’s ability to repay the mortgage. That has not changed. For many self-employed individuals though it has been hard the square the challenge of minimizing tax liabilities with buying the home or investment property they know they can afford. These new programs are more flexible in the type of documentation needed to document income. Using business and/or personal bank statements in one alternative way but not the only. Good to excellent credit is needed and rates are higher, but not massively so. The number of programs available has increase significantly which has held the rate premium in relative check.

While I’m cautiously optimistic about the near and midterm, I cannot but wonder when our massive US budget deficit is going to bite and push interest rates higher, even if the FED lower their rates again. Higher risk will demand higher rates for buyers of US treasuries pushing the cost of government debt higher, which will create all sorts of other challenges.

And by the way…

The relationship between the FED and mortgage rates is a bit confusing. The FED does not set interest rates for home mortgages, rather they set the interest rate for banks to borrow money from it. The FEDs policy decisions on rates however has a big but indirect impact on the US Treasury Bond rates and Mortgage Backed Securities (MBS) market rates. It is the US Treasury rate market (the rates the US Government pays to borrow money) and through it the MBS market that the FED’s impacts on mortgage rates is felt. So, the relationship between the FED and mortgage rates is indirect. Sometimes, the FED raises rates and the actual mortgage rates go down in the short term. The best gage to anticipate mortgage rates is the 10 year US Treasury rate. They rarely diverge.


by Author, March. 20, 2019

What to know about bank statement programs

What to know about bank statement programs

While being self-employed or owning your own business is a dream for many, it can create hurdles when attempting to buy a house. However, obtaining a loan is not impossible for self-employed buyers. Bank statement programs can be one of the most effective ways for potential buyers without regular income to obtain a mortgage.

Who can qualify

Self-employed professionals with an irregular income stream or significant write offs each year may benefit from bank statement programs. Entrepreneurs, freelancers, seasonal workers, small business owners, artists, promoters, or consultants are just some of the careers that could benefit from applying for a mortgage through a bank statement program.

Required documentation

Applying for a traditional loan can lead to mountains of paperwork, particularly for those who are self-employed. Bank statement programs are much simpler and only require 12-24 months of bank statements and deposits. Because tax statements and returns are not required, hard-to-document income or significant write offs are not an issue.

How it works

Bank statement programs are simple; the lender will review deposits from 12-24 months to create an average monthly income. For example:

  • January: $5,300
  • February: $8,400
  • March: $3,500
  • April: $4,200
  • May: $9,500
  • June: $5,250

The six-month average income for this example is around $6,000. The lender figures their loan pre-approval amount based on this monthly average.

Finding a bank statement program

While the basic requirements for bank statement programs are the same, the exact requirements vary from lender to lender. Just like traditional mortgage rates can vary from lender to lender; contacting multiple banks or lenders can help you find a program that offers the best terms, rates, and down payment amounts for your small business.

Owning your own business doesn’t have to preclude you from owning your own home. Bank statement programs can offer those without stable monthly income the ability to purchase their own home – while focusing on their business instead of on the paperwork.

by Author, Feb. 01, 2019

What to know about “Alt-A” Loan Programs

What to know about “Alt-A” Loan Programs

For most people, buying a home is the largest investment they will ever make. Applying for a mortgage is the most time-consuming – and sometimes most difficult – part of the home buying process. Credit score, employment history, debt, and loan-to-value ratio can all affect what kinds of rates and loans are offered.

Types of mortgages

The three most common types of mortgages are prime, subprime, and Alt-A mortgages. Prime mortgages are offered to borrowers with good credit scores and minor debt; they are considered low risk and typically receive the lowest interest rates. Subprime mortgages are for borrowers with low credit scores who are considered high risk; the higher interest rates help banks compensate for the added risk when issuing these loans. Alt-A loans are somewhere in between prime and subprime both in terms of risks and interest rates.

Basics of Alt-A loans

Alt-A loans are known for being low-to-no documentation loans. Instead of providing extensive documentation, borrowers simply need to state their income, assets, and expenses. This can benefit those without consistent monthly income such as small business owners.

Another feature of Alt-A loans is that they have low down payment requirements and a corresponding higher loan-to-value ratio. While most prime mortgages have LTV ratios of 80%, the LTV of an Alt-A loan can be as high as 100%.

The debt-to-income ratio for Alt-A loans is usually higher than the standard. While most loans require a DTI of 36%, Alt-A loans can exceed 43%.

Who benefits from Alt-A loans?

Alt-A loans are good options for borrowers with good financial and credit history but lower income. Entrepreneurs, freelancers, and other seasonal workers may benefit from Alt-A loan terms due to their inability to document a consistent income; this type of loan can also benefit small business owners whose net income may be lowered by extensive tax deductions.

The bottom line

Alt-A loans are an excellent mortgage choice for those with good credit, but without a steady, documentable income. While they can be high-risk loans for lenders, Alt-A mortgages can help small business owners, entrepreneurs, and other self-employed workers buy their dream homes.

by Author, Feb. 01, 2019

Tax Tips for Homeowners

Tax Tips for Homeowners

Owning a home is a major investment. However, there are a number of tax programs, deductions, and incentives available for homeowners that can help make the cost of owning a home more affordable. Many homeowners miss deductions each year because they were not aware of all of the available savings opportunities; the following tips can help homeowners save money this tax season.

1. Stay organized

Most deductions for homeowners require detailed records or receipts for tax-related expenses. Saving receipts and statements throughout the year can help make things easier when tax time rolls around. To avoid having filing cabinets overflowing with paper, consider scanning and digitally saving documents.

Thinking about throwing away old documents? Plan on holding onto tax-related documents for several years; should you be audited by the IRS, they will typically ask to see three years of documentation to back up deductions.

2. Start itemizing

A major way homeowners miss out during tax season is by taking the standard deduction instead of itemizing. For tax year 2018, $24,000 is the standard deduction for married couples, $12,000 for individuals, $18,000 for head of household. If your itemized deductions are more than this amount, you could save even more on your taxes. Eligible deductions can include mortgage interest, property taxes, contributions to charity or religious organizations, and medical expenses not covered by insurance.

3. Track when you work from home

If you own a home-based business, you may be able to deduct some of the expenses associated with working from home. Office equipment, utilities, and even Internet costs may be deducted for a qualifying home office.

Employees may also qualify for this deduction if they meet specific criteria. The primary requirement is that working from home is for the employer’s convenience; taking advantage of a work-from-home program a few days per week is unlikely to qualify.

4. Make energy efficient updates

Adding green upgrades to your home can be rewarding at tax time. Energy efficient updates such as installing solar energy systems can qualify for a tax credit for 30% of the cost of installation. The tax credit won’t be around forever; the reimbursement amount for residential upgrades will decrease to 26% in 2020, then to 22% in 2021 before the program ends in 2022.

Have additional questions?

Have additional questions about what deductions you may quality for? Don’t hesitate to ask a real estate or tax professional for help. They will be able to guide homeowners when it comes to understanding the at-times complicated process of filing an itemized deduction.

by Author, Feb. 01, 2019

How to Get Ready to Refinance Your Home

How to Get Ready to Refinance Your Home

Refinancing can help homeowners reduce the amount of interest they pay, lower monthly mortgage payments, or take advantage of the equity in their home. However, refinancing may not be the best decision for every homeowner. The following guide can help you get ready to refinance your home.

Reasons to refinance

There are three major reasons to refinance: to take cash out, to lower payments, or to shorten the terms of the mortgage.

- Take cash out

Refinancing is a great way to take advantage of the equity you’ve built in your home. A cash out refinance allows homeowners to refinance for a higher amount than what is currently owed on the loan; the difference can be pocketed tax-free. The results from refinancing can be used to pay off other high interest loans, finance a home improvement, and more. Because mortgage rates are typically lower than other loans – and mortgage interest is tax deductible – this can be a good way to take advantage of the equity in your home.

- Lower payments

There are two ways it is possible to lower monthly payments by refinancing. The first is by refinancing with a lower interest rate. Interest rates are variable and tend to follow overall economic trends. If you purchased your home with a high interest rate, refinancing with a much lower rate can lower how much interest you’ll pay over the life of the loan – as well as lowering the monthly payments.

Refinancing can also be used to get rid of private mortgage insurance, or PMI. PMI is required for most traditional loans when the down payment was less than 20%. Refinancing once this amount has been paid towards the mortgage can eliminate the need for PMI and significantly reduce monthly payments.

- Shorten terms

Shortening the terms of a loan may increase each month’s mortgage payment – but significantly reduce how much interest is paid over the life of the loan. Because more each month is paid towards the principal of the loan versus interest, it also helps build equity in the home faster.

Homeowners with a $200,000 30-year loan at 3.5% interest would pay approximately $123,000 over the life of the loan. Cutting the terms of the loan in half to 15 years decreases the amount of interest paid to about $57,000.

Things to consider before refinancing

Refinancing is not a smart option for every homeowner. Consider these four things before refinancing your home.

  1. Credit score. Make sure your credit score is as good – or better – than it was when you applied for your mortgage. If your credit score has gone down you may not be able to refinance at a better rate.
  2. Current monthly payment. Refinancing can, in some cases, increase your monthly payment. Likewise, refinancing may not reduce your monthly payment by enough to be considered worthwhile.
  3. Home value. Lenders will not issue a mortgage for more than your home is worth. If home prices in your area are going down or the appraised value of your home is less than before, refinancing may be difficult.
  4. Debt to income ratio. Debt to income ratio, or DTI, shows lenders how much of your income goes towards paying off loans and other debt. Lending institutions are unlikely to refinance a mortgage if your DTI is higher than 50%.

by Author, Feb. 01, 2019

Why banks don’t have the money, but mortgage brokers do

Why banks don’t have the money, but mortgage brokers do

While most home buyers assume they have to work directly with a bank to secure a mortgage, there are others ways to help them find the most competitive rates. Mortgage brokers represent more than 10% of all home loan originations; an increasing number of buyers choose to work with brokers in order to help them find the best rates and terms for their mortgage.

How banks work

Banks use their own money to fund mortgages; your loan becomes a part of the lender’s portfolio of investments and can be sold to other investors. Loans that originate from a bank are known as direct loans because they work directly with consumers.

Loan officers, processors, underwriters, and funders all work for the same company. Most loan officers receive commissions for originating loans, and they are only authorized to offer you rates and loans from their specific lending institution. Rates and terms are often inflexible or not negotiable, limiting available options.

How mortgage brokers work

Mortgage brokers are licensed financial professionals; they are often referred to as wholesale lenders because they offer loans through institutions that do not deal directly with consumers.

Brokers are often smaller than banks; they can provide customers with one-on-one attention and a more personalized experience. Brokers guide buyers through every step of the process, dealing with some of the daunting details and paperwork that can arise during the loan process.

Because brokers work with a variety of lenders and institutions, they are often the best option for buyers with more complicated applications. Those who may have trouble qualifying for a traditional mortgage, want to avoid PMI, have bad credit, or are looking for VA, FHA, or jumbo loans may have better luck working with a broker versus a single institution.

Most commonly asked questions about mortgage brokers

The role of mortgage brokers in the real estate process is often misunderstood. The following are three of the most commonly asked questions about mortgage brokers.

  1. Are there drawbacks?

    Unscrupulous mortgage brokers might try to direct you towards a lender that offers them a larger commission. However, the vast majority of mortgage brokers are trusted professionals who genuinely want to help homeowners find the best rates and terms for their loan.

  2. How do I choose the right broker?

    Potential buyers should shop around for a mortgage broker the same way they would shop around for a lender. Ask friends and family for referrals – as well as your real estate agent. Realtors have the most experience working with both brokers and lenders and can direct you to one or most brokers whom they have enjoyed working with in the past.

by Author, Jan. 11, 2019

What to know about the federal mortgage rates

What to know about the federal mortgage rates

In December, the federal reserve raised interest rates for the fourth time in 2018. Rates rose a quarter of a percent to a range of 2.25 percent to 2.5 percent.

While this raise is not likely to impact those with fixed-rate mortgages or long-term rates, it does impact those with adjustable rate mortgages (ARM’s) or home equity lines of credit (HELOC’s). Likewise, the Fed’s decision to raise rates can have an impact on a range of consumer credit interest rates.

Changing rates can impact homeowners, home buyers, and other consumers in a variety of ways. The following are three things you should know about changing federal mortgage rates:

  1. ARM and HELOC rates are likely to rise

    If you have an ARM or a HELOC, plan to see an increase in your monthly payments. Because these types of loans are subject to varying rates, they can be impacted – for better or worse – by rising or falling federal rates. Those with hybrid ARM loans set to adjust within the next year should consider refinancing now to avoid increases to their rates or payments.

  2. Lower rates don’t always mean a better market

    Many buyers associate low interest rates with a better market. However, the opposite is often true. At the height of the housing bubble, interest rates peaked between 5.5 and 7 percent; both homeownership and sales fell along with interest rates for the next several years. Instead, most potential buyers list a lack of savings for a down payment rather than interest rates as their primary obstacle to buying a home.

  3. There’s no guarantee where rates will go

    While experts predict that rates will continue to rise in 2019, there is no guarantee where rates will be by the end of the year. Global economic growth, geopolitical unease, presidential trade policies, and the U.S. economic expansion cycle can all impact – negatively or positively – mortgage rates. Homeowners looking to refinance at the lowest rate possible should consider locking in a rate sooner rather than later.

by Author, Jan. 11, 2019

What to know about FHA loans

What to know about FHA loans

Federal Housing Administration, or FHA, loans are an increasingly popular choice; they allow buyers to purchase a new home even when they may not have the cash up front to do so normally. FHA loans are backed by the government, protecting lenders against defaults. Available with both fixed and adjustable rates, FHA loans are becoming more commonplace. The following are six things that real estate professionals need to know about FHA loans.

  1. Loan amounts are based on net, not gross, income

    Many first time buyers calculate how much they will be able to afford based on their gross income, or how much they make before taxes, insurance, Medicaid, and more. Instead, help buyers calculate a loan amount of their net monthly income; the monthly payment should not exceed 31% of their monthly take home income.

  2. FHA loans require mortgage insurance

    Potential buyers should be aware that FHA loans require monthly mortgage insurance. This may significantly increase their monthly payment – and change how much they are able to afford. Most FHA require that this insurance is paid for the entire life of the loan, unlike conventional loans in which PMI is only required until 20% equity has been reached.

  3. Not much cash is needed to close

    Closing costs can be a major hurdle for those trying to buy their first home. Borrowers taking out an FHA loan can roll closing costs into the loan; likewise, gift funds can be used to help cover closing costs.

  4. Max loan amounts vary

    The max loan amounts for FHA loans vary by location. Buyers should verify with a lender about the max amount allowed in their specific area. In Hawaii, for example, the maximum amount allowed is $721,050; in Phoenix, Arizona, it is significantly less at $271,050.

  5. The lender is still in control

    While FHA loans are guaranteed by the government, the lender is still very much in control. Banks have their own FHA underwriting guidelines, lender overlays, and mortgage rates. Just like with a traditional mortgage, buyers should shop around to find the best rates and lender.

  6. Sellers may be leery of FHA loans

    Many sellers falsely view FHA loans an as risky; in a multiple offer scenario or in a competitive market, sellers may go with other loan types to avoid credit issues or closing delays. Help potential buyers make their offers stronger by offering to take the home as is or offering the full asking price.

by Author, Jan. 11, 2019

How to get your buyers ready to buy when they can’t today

How to get your buyers ready to buy when they can’t today

Buying a home is the biggest purchase most people will make in their lifetimes. Unfortunately, many first time buyers often begin scheduling showings or visiting open houses before they are ready to buy. There are a number of ways agents can guide buyers – even if they aren’t ready to buy today.

Common reasons clients aren’t ready to buy

  1. Finances aren’t in order

    Not being financially ready is the primary reason buyers aren’t able to immediately purchase a home. Whether it is not having a preapproval letter from a lender, not having enough for the down payment, or being unable to cover closing costs, make sure to frankly discuss the financial aspects of homeownership as early as possible. Help first time buyers get their finances in order by encouraging them to check their credit scores, build their credit in other ways, and save aggressively towards a down payment.

  2. Starting their search too early

    Many first-time buyers are ready to start scheduling showings months before they are ready to put in an offer. Even if they are still saving towards a down payment or are not relocating to the area for six months or more, they may view starting the search early as a way to avoid “missing out” on their dream home. Rather than skipping showings altogether, take time to discuss their wants and needs for their first home; take them to two or three homes that are indicative of what they can get in their preferred neighborhood or at their price point, but save the serious searching for when they are ready to buy.

  3. Buyers can’t agree

    Working with first-time buyers can sometimes leave you feeling more like a couple’s counselor than a realtor. He wants to be centrally located downtown, she wants to be in the suburbs. She wants a sprawling ranch, he wants a classic colonial. He wants low maintenance, she wants a large yard. When these types of disagreements occur, discuss the pros and cons of their conflicting styles; oftentimes the best advice is to encourage them to take more time to discuss their specific wants and needs before continuing their home search.

by Author, Jan. 11, 2019

Factors that can affect your credit score

Factors that can affect your credit score

From buying a home to applying for student loans, your credit score can impact whether you can move forward on your financial journey. If you are trying to repair a bad score or maintain a good one, it’s important to know what factors go into compiling the score.

More than 27 million credit scores are calculated each day, based primarily on the following factors:

Payment history

This is by far the most important factor in calculating a credit score and accounts for about 35 percent of the overall score. The best indicator of how you’ll handle a new loan or credit card is your behavior with past accounts.

Missed payments and late payments can drive your score down quickly. The best way to improve or maintain a good score is to make consistent, on-time payments on all existing loans and credit cards.

Credit utilization

After payment history, credit utilization, or how much of your available credit you are using, is the next most important factor in determining a credit score. It accounts for about 30 percent of your credit score. In short, just because you have a high credit limit does not mean you should max out a credit card — even if you pay the bill in full each month.

Credit bureaus like to see an overall utilization rate of less than 10 percent, and no more than 30 percent. Of course, things happen that might constitute a higher utilization from time to time, but this should be the exception and not the rule.

Credit history

Credit history includes the age of your oldest and newest credit accounts, the average age of your accounts, and whether you’ve used the accounts recently. You can’t change time, but you can control this credit score factor by applying for and opening new credit accounts only as you need them.

It might seem tempting to open a new credit card to take advantage of a promotion or discount, but is the benefit really worth the ding to your credit score? Credit history accounts for about 15 percent of your overall credit score.

Credit inquiries and credit mix

Somewhat vaguer than the other factors, this one accounts for about 10 percent of your credit score. Credit reporting bureaus are looking for evidence that you can be responsible with all types of credit, including loans, mortgages, and credit cards.

Your credit score can also go down every time a bank or credit card company checks your credit before issuing a new account. This is unavoidable if you want to open a new account, but try to keep the inquiries to a minimum, especially on credit cards.

by Author, Sept. 26, 2018

Tips to Prepare for Refinancing your Home

Tips to Prepare for Refinancing your Home

Whether you want to lower your mortgage payment or access some cash for home renovations, refinancing your home is a great way to access your home’s equity.

Self-employed borrower naturally have the goal of reporting as little net income as possible which can conflict with a 2nd goal: qualifying for a real estate purchase or refinance! We can help you to make the right decision to achieve both by working with borrowers and CPAs to achieve both goals. It’s not only the bottom line number that matter, it’s the details inside the tax return that can decide the achievement of your financial goals. There are a few steps you need to take to make sure that you’re ready to refinance. The more prepared you are up front, the smoother the process will go. Here are a few helpful tips:

Review Your Credit Report

Any home refinance is going to involve a lender running your credit report. Before any bank looks at the report, you should check it to make sure there are no surprises. You can obtain a free copy of your credit report once a year from each of the three major credit bureaus (Experian, Equifax, and TransUnion).

Once you have the reports, work on correcting any errors you see and make sure that the report presents a stable financial picture. Lenders like to see a low debt-to-income ratio and plenty of available credit. You may decide that you need to hold off on refinancing for a few months while you pay down or consolidate other debt.

Estimate Your Home’s Value

Your home will be formally assessed as part of the refinancing process, but doing your own research ahead of time will help you know where things stand and how much you stand to save by refinancing.

Sites like Zillow are great resources for checking out home values and recent sales in your area. Mortgage lenders typically like to see that you owe less than 80 percent of your home’s value. If your research shows that you owe more than that, you might want to focus on paying down your mortgage balance or waiting until home values increase before refinancing.

Collect Financial Documents

Once your credit report is in order and you’ve determined what your home is worth, the last step in preparing for a refinance is gathering all of the paperwork necessary to make it happen. If you bought your home a while ago, you might have forgotten about all of the documents needed to complete the sale.

You’ll need pay stubs for proof of income, bank and investment statements, and tax returns from the past two years. If you receive income child support, alimony, or other sources, be prepared to provide those documents as well.

by Author, Sept. 26, 2018

How financial planners can help their clients to qualify for a mortgage

How financial planners can help their clients to qualify for a mortgage

Buying a home is the largest purchase that most of us will ever make, and it’s not one that should be taken lightly. Working with a financial planner can help make this daunting task seem doable by giving you a roadmap to work from.

One of the biggest ways financial planners help their clients is in the mortgage qualification process. Here are some of the ways they can do that:

Understand Debt to Income Ratio

A financial planner can help you make sense of how much you can realistically afford each month based on your existing debt and other monthly expenses. It’s helpful to have this conversation and know where things stand before you start looking at homes. Otherwise, you might fall in love with a house that you can’t realistically afford and end up on the path to default or foreclosure.

Down Payment Saving Strategies

As home values continue to rise, putting 20 percent — or even 10 percent — down on a home seems like a daunting task. But, putting in a little extra cash up front can help you avoid paying private mortgage insurance as part of your loan.

A financial planner will assess your income and expenses and help you determine how much you can realistically save each month. Once you know that, you can determine how long it will take to amass a down payment and when you will be ready to begin the mortgage qualification process.

Credit Score TLC

Like applying for any loan or line of credit, qualifying for a mortgage requires a check on your credit report. A poor credit score or sketchy credit history could mean the difference between qualifying and not qualifying or between a low interest rate and a high one — so it’s in your interest to put your best financial foot forward.

A financial planner will review your credit reports from all three reporting bureaus and help you address any errors or problems that you uncover. It can be an arduous process, but one that’s well worth it in the end.

by Author, Nov. 07, 2018

How to get ready to buy a home

How to get ready to buy a home

Buying a home represents a major investment; for many potential buyers, it will be the most significant of their life. Because of this, it is important to go into the homebuying process prepared, organized, and intentional. The following steps can help potential buyers prepare to look for a house, apply for a mortgage, and successfully close on their new home.

  1. Financially prepare for the mortgage process

    Without question, the most important part of the home buying process is applying for and securing a mortgage. To increase the chance to get the best rates on the market, begin financially preparing for the mortgage process up to a year in advance. Stop applying for new lines of credit at least one year before applying for a new mortgage – and keep the moratorium on new financing in place until after closing. Likewise, regularly check your credit score for inconsistencies and accuracy. While scores above 700 can ensure financing, a credit score of 750 or higher ensures the best rates. “Below 660 or 680, you’re either going to have to pay sizable fees or a higher down payment,” said Barry Zigas, director of housing policy for the Consumer Federation of America.

  2. Determine what you can afford

    For most potential buyers, monthly mortgage payments and other expenses should add up to less than 30% of their gross monthly income. Exceeding this can cause buyers to become “house poor”; this occurs when the majority of monthly income is spend on mortgage payments, insurance, utilities, and other expenses, leaving little to no room for other monthly expenses or building savings.

  3. Save for down payment and closing

    A down payment of between 3 and 20 percent is recommended for most buyers. Having enough money in savings to start with a large down payment can help reduce monthly mortgage costs or make a costlier home more affordable. If you are unable to put a large enough amount down on a home, the lender may require PMI, or private mortgage insurance, on the loan.

    Cash will also be required for closing. Average closing costs are between 2 and 5 percent of the cost of the home; purchasing a $150,000 home can cost between $3,000 and $7,500 at closing. A recent national survey found that the average buyer pays $3,700 at closing. Responsibility for closing costs can also be negotiated as a part of the real estate contract.

  4. by Author, Nov. 07, 2018

What to know about your FICO scores

What to know about your FICO scores

Anyone who has applied for a credit card, auto loan, mortgage, or other type of financing has heard the term FICO score. Despite this, few fully understand what this credit score means or how it is determined. The following guide can help consumers better understand the country’s most widely recognized credit-scoring model.

The history of FICO

FICO stands for Fair Isaac Corporation, a predictive analytics company that was founded in 1956. The group began creating credit risk scores in 1981; these three-digit scores represent “the likelihood that you will pay all of your (debt) obligations on time for the foreseeable future,” said Barry Paperno, former consumer affairs manager for FICO.

How are FICO scores created?

FICO credit scores can range from 300 to 850, with some industry-specific scores going to 900. The scores are based on credit reports, or the statements generated by consumer credit reporting bureaus based on your credit activity and current debt.

FICO scores are broken down into five categories. Each category has a percentage value that indicates how much it affects the overall score.

  • Payment history (35%): Your history of paying bills on time, late payments, or bankruptcies
  • Amounts owed (30%): How much debt you carry, including credit card debt and installment loans such as student loans or mortgages.
  • Credit history length (15%): The age of your accounts and how often they are used
  • New credit (10%): How many recent inquiries have been made of your
  • Credit mix (10%): The different accounts you have, such as banking, credit cards, or mortgages

Why are FICO scores important?

  • Credit scores are used to assess how likely a person will be to repay their debt; for this reason, financial institutions heavily rely on credit scores when offering loans. Borrowers with high FICO scores can often secure better interest rates and other terms of the loan. FICO scores are also sometimes used by insurance providers, landlords, and other companies as a way to ascertain a person’s financial dependability.
  • “If your scores are high, then you’re likely to get approved with competitive rates and terms,” said credit expert John Ulzheimer. “If your scores are low, then you could be denied or approved with less-advantageous terms.”

Why are there different FICO scores?

  • While there are several dozen forms of FICO scores, they can generally be categorized into two groups: base FICO scores and industry-specific FICO scores. Base FICO scores are the most widely used. Industry-specific FICO scores are used for certain credit products, such as auto loans or credit cards.
  • “Despite widespread use of the term ‘FICO score’ as a single score, FICO is actually the brand, with dozens of scores falling underneath that brand,” Ulzheimer said. This creates multiple editions of each scoring model; while lenders can choose which scoring model to use – leading to slight variations in FICO scores – the base criteria remains the same."

by Author, Nov. 07, 2018

Why it’s smart to buy when rates are high

Why it’s smart to buy when rates are high

Don’t let rising interest rates keep you from purchasing the home of your dreams. High rates might change the type of home you buy, but they should not be enough to make or break a decision to buy in the first place.

Here are a few things to keep in mind as you are considering whether or not to buy a home as interest rates rise:

Rates are still historically low

If you purchased a home today, the interest rate would be around 4.6 percent, which is still well below where rates were before 2008. Markets change over time, but your interest rate will remain constant.

You can always refinance to get a lower rate, but you’ll never have one higher than the one you lock in at closing. With a strong economy, rates are likely to continue rising, so waiting to buy a home will cost you even more down the road — both in interest rates and higher home values.

You have more room in your budget than you think

As you already know, the higher the interest rate, the more you’ll pay for your home each month. But the difference might not be quite as big as you’d expect.

For example, $200,000 mortgage with a 30-year fixed rate at 4 percent interest has a monthly payment of $954.83. At a 4.5 percent interest rate, the payment goes to $1,013.37; at 5 percent it becomes $1,073.64.

A financial planner can help you identify changes to your budget to absorb the higher monthly cost while making sure that you don’t overextend yourself in the process.

Fear of missing out

That’s right, FOMO. You might have experienced it in other areas of your life, and it definitely applies to buying a home. When the home of your dreams is on the market, you need to act, regardless of where interest rates might be.

You can’t do anything to change the rates, so don’t let them stop you from landing the home you want. Instead, we can help you find a mortgage lender who can help you get the best rate possible and put you on the right financial track.

by Author, Nov. 07, 2018

Do this to avoid drama with the loan process

Do this to avoid drama with the loan process

Surprises are best saved for birthday parties – not the home buying process. A major hiccup in the loan process is the worst case scenario that keeps both buyers and sellers awake at night. To avoid problems in escrow coming between you and your dream home – or your money – do this to avoid home loan drama.

Do: Keep finances steady

Lenders want to see consistency in your bank statements and credit reports; billed pays on time and direct deposits from paychecks on a regular schedule shows lenders you have the financial means and responsibility to cover the mortgage. Spending beyond your means, carrying too much debt, or even receiving large, unexplained deposits can affect things before closing.

Don’t: Open new lines of credit

While most people know not to buy a car while in escrow, many buyers still attempt to finance new appliances, open new credit cards, or secure other lines of credit before closing. Banks often run a second credit check before closing; avoid major purchases during escrow to keep closing on time.

Do: Make a full disclosure on the application

Underwriters are notorious sticklers; they want to ensure every i is dotted and t is crossed before approving the loan and sending the mortgage into escrow. To avoid a delay in closing, make sure you disclose judgements, liens, debts, accounts, and other information up front

Don’t: Assume closing costs are the same every day

Closing costs can vary widely depending on when in the month closing occurs; changing the closing date may seem easy, but it can leave you saddled with additional prepaid mortgage interest. For short sales or foreclosures, make sure to save a little additional extra cash for closing costs as closing is frequently delayed.

Do: Update mortgage rates

If you received pre-approval weeks – or months – before you found your new home, make sure to ask the lender for updated mortgage rates once you have a firm closing date. Mortgage rates can change significantly in a short time; getting updated information can help you better estimate monthly payments as well as how much you’ll need at closing. Worried about locking in the right rate? Ask your lender about mortgage rate lock.

Don’t: Read the contract at closing for the first time

One of the most tedious, yet important, parts of the closing process is reading and signing the closing documents. When your future home and moving plans in the balance, however, few homeowners take the time to closely scrutinize the documents. Avoid mistakes in the closing documents by asking to read and review them in advance. This can benefit both buyers and sellers as it ensures there are no costly or time consuming errors in the contracts.

by Author, Dec. 12, 2018

Self-employed home buyers: What to know

Self-employed home buyers: What to know

Self-employment is on the rise; the U.S. Bureau of Labor Statistics estimates that more than 15 million Americans are currently self-employed. Whether your office is a desk in the spare bedroom, a shared work space, or even the front seat of your pickup, self-employment offers the chance to be your own boss, create your own schedule, and build a business from the ground up.

For all its benefits, self-employment can also have serious downsides – particularly when it comes to buying a home. While it is true that self-employed people have to work harder to get a mortgage, it is not impossible. The following guide can help self-employed buyers prepare for the loan application process.

Good documentation makes the difference

The beginning of the loan process is the same whether you work for a company or own your own business; expect to start by getting a rate quote, filling out an application, and providing documentation of debts and assets.

While self-employed buyers may not have a W2 to show proof of income, debt-to-income and credit requirements remain the same. Plan to show 1040 tax returns and schedules; this can be tricky as many self-employed business owners write off significantly more business expenses than regular employees, affecting net income.

Prepare to pay more

Many lenders consider self-employed applicants to be high risk; because of this, expect to pay for a slightly higher interest rate. While it may seem like a loss at first, consider it to your benefit; a solid history of on-time payments can help you refinance in the future at a lower rate.

Five ways to improve the odds of being approved

There are several ways that self-employed applicants can improve their chances of being approved for a mortgage.

  1. Pay yourself a W2 wage rather than taking an owner’s draw from the business.
  2. Keep separate business and personal accounts.
  3. Maintain good records. Programs like QuickBooks can help owners classify and track income and expenses as well as generate profit and loss statements.
  4. Make a larger down payment by tapping into a 401(K) or IRA account.
  5. Partner with another small business. Local banks and lenders are more likely to be flexible for other small business owners.

Remember that it isn’t impossible

While being approved for a mortgage is more difficult for self-employed business owners, it isn’t impossible! Even starting at a disadvantage, receiving a mortgage on your dream home is possible through proper documentation, willingness to pay for a higher interest rate, and dedication to building a good relationship with the lender.

by Author, Dec. 12, 2018

What to know about VA loans

What to know about VA loans

Veterans Affairs, or VA, loans are one of the most popular perks of military service. With little-to-no down payment required and competitive interest rates, VA loans have helped more than 22 million service members become homeowners.

While these loans are an excellent option for many current and former service members, they do come with certain stipulations and requirements that set them apart from traditional loans. The following are a few things about VA loans that both borrowers and realtors should know.

1. VA loans can be used more than once

VA loans can be used over and over again – as long as the previous entitlement is paid off. Those who have a VA loan on their current home – or have lost one to foreclosure – are often still able to obtain a new loan.

2. VA loans are only for certain types of homes

Planning on buying a working farm, vacation condo, or fixer upper? A VA loan might not be for you. VA loans are available for primary residences in “move-in-ready” condition. Businesses, vacation properties, or houses with serious structural damage may not qualify. Benefits can be used, however, to purchase multi-unit properties such as duplexes or apartment buildings provided you will live in one of the available units.

3. VA loans aren’t issued by the VA

The Department of Veterans Affairs doesn’t issue the loans themselves, but the government does guarantee them. The agency typically guarantees up to a quarter of the total loan amount; this gives lenders the confidence to offer great rates and terms to service members.

4. VA loans don’t require mortgage insurance

One of the most appealing aspects of VA loans is they do not require PMI, or private mortgage insurance. While most traditional mortgages require PMI if the down payment is less than 20% of the total cost of the home, VA loans have no such requirement; this means that service members can put less down on a home and save their cash for improvements, upgrades, moving expenses, or closing costs.

5. VA loans have additional fees

While they do not require PMI, all VA loans incur a VA funding fee. This fee helps keep the program going by working to lower costs and is required on both purchase and refinance loans. Funding fees can be rolled into the monthly mortgage payment, and those with service-related disabilities may be able to have their fees waived.

6. VA loans don’t have extra payment penalties

VA loans allow borrowers to make additional payments at any time without incurring additional fees. In addition to helping service members pay off their mortgages faster, it can help save thousands in interest fees over the life of the loan; paying as little as $100 extra a month towards the principal can make a significant difference over the life of a 30-year mortgage.

by Author, Dec. 12, 2018

Why realtors prefer to work with mortgage brokers over banks

Why realtors prefer to work with mortgage brokers over banks

For most buyers, a new home is the single most expensive purchase they will ever make. Navigating the process can be time-consuming, frustrating, and at times confusing. While it is possible to sort through various loans and rates on your own, mortgage brokers can help you secure the best lender for your new home loan.

The decision to use a mortgage broker can be polarizing; while banks and other lending institutions often advise against them, most realtors prefer to work with mortgage brokers. If you’re preparing to apply for a mortgage, here’s what you need to know about working with a mortgage broker – before you head to the big bank or credit union.

What do mortgage brokers do?

A mortgage broker is a regulated, licensed finance professional who acts as the liaison or bridge between the mortgage lender and the borrower. Because they do not work for a single lender, they can help you find the best loan with the best interest rates and terms across a variety of lending institutions.

The mortgage broker’s expertise is knowing what kinds of issues, like closing on time, will come up on loans that might make it not work at one lender, but may make it work at another.”

Why realtors recommend mortgage brokers

While most potential buyers will only go through the mortgage process a handful of times, real estate agents work with both lenders and borrowers every day. Because of this, they are uniquely positioned to understand the ins and outs of the mortgage process – including the best professionals to work with.

Many realtors have close relationships with one or more mortgage broker. When they recommend a mortgage broker to potential buyers, it is not to receive kickbacks or other perks; agents recommend brokers that they trust, have worked with in the past, communicate well with, and above all else, know that they can help borrowers close on time.

Brokers are mortgage experts; they can help you take the guesswork out of finding the right loan, saving you time and money by helping identify the best rates. Mortgage brokers can also make the entire process less stressful. Because they serve as the liaison between the lender and your realtor, buyers can expect fewer phone calls or emails demanding documents.

Mortgage brokers can save potential buyers’ time – as well as significantly reduce stress during the home buying process. While their services aren’t free, the right broker can make the entire loan application and escrow process easier – and help you close on your dream home on time.

by Author, Dec. 12, 2018

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