Are You In A Good Position To Refinance?

This may be a question you’re asking yourself. Refinancing has been very popular among American homeowners over the last several years as we continue to experience all-time low interest rates. A refinance allows a homeowner to remain their home with a lower interest rate and therefore, likely a much lower monthly mortgage payment. Refinancing also has allowed many homeowners the opportunity to get out of a specific loan type such as an adjustable rate mortgage (ARM) into a more stable fixed rate loan.

If you’re interested in refinancing, you may be wondering if you’re a good candidate. Here are a few tips to read through and compare to your particular situation to help you make a good decision on your next steps.

refinance2-edit1)      Are you planning on staying in your home for the long term? This is a good place to start. Evaluate your current plans and where you’ll be in the years to come. If you plan on staying in your current home for many more years, refinancing your mortgage to a lower rate is probably a good idea. Because refinancing your loan typically costs between 2-3 percent of the total loan amount, you’ll need to remain in your home long enough to get that money back in monthly savings.

2)      Do you have your closing costs saved? As we shared, refinancing your mortgage will cost you between 2-3 percent of the loan. It won’t save you money in the long run to roll those closing costs into your total loan amount to its best to have this money in savings before you start shopping around for your loan. If you don’t have a good savings ready for a refinancing, maybe doing this now isn’t the best decision for you.

3)      How long have you been in your home? If you’ve already been paying your current mortgage for many years, refinancing may not be a good cost savings for you in the long run.  The best way to understand your options is to meet with a lender to see if refinancing to a new loan, even one with a shorter term, is a good way for you to save money. If over the long haul it’s not a good enough cost savings for you, consider keeping your existing loan but pay more each month to pay it off faster.

4)      Are you partnered with a good lender?  If you like your existing lender, meet with them to understand your refinancing options. If you had a bad experience the first time around, make sure you shop around for a new lender. There are many to choose from and interviewing at least three will give you an idea of their experience and their ability to help you get a loan that meets your short and long term needs.

5)      Are you in a tough spot with your existing mortgage? This may make it tough to refinance but may also give you’re the impetus you need to get your existing loan refinanced. This is why partnering with a great lender is critical. You’ll need to be completely honest with them about your situation and be sure to talk through all of your options in order to get you into a loan you can afford.

If you’re ready to talk to a lender to better understand your refinancing options, CLICK HERE.

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Does A Pre-Approval Mean I Can Afford The Home I Want?

Lenders approve borrowers based on their income, monthly debt load, and estimated homeowner expenses. The result of this calculation will provide you with a number that tells you how much you can borrow, but it doesn’t necessarily tell you what you can afford. What you also need to take into consideration are monthly taxes, insurance, and interest charges on top of having adequate emergency savings.

The rule of thumb for a lender is a borrower will pay approximately 36 percent of their gross monthly income towards their overall debt – including their home; and that 28 percent of this will go directly towards their house payment.

With that general calculation, that’s 1/3 of your monthly income. Can you comfortably afford to pay 1/3 of your income towards debt each month? That something you’ll need to be honest with yourself about and be confident in sharing your concerns with your lender so they can work with you to find something you can afford.

Housing-Affordability To do a little research on your own, here are some helpful tips:

1)       Crunch the numbers – In order to truly know what you can afford each month for your house payment, you need to be honest with yourself about what money comes in and what money goes out. Then after you determine your budget, make sure you also have a good savings account and an emergency savings account that you can easily access in case you need it. This honest look at your monthly budget and savings will be a good opportunity for you to really understand what you can afford each month for a house payment.

2)       Give your new house payment a test run – While you’re renting or in your existing home, increase you house payment to what you expect to be in your new home by paying your rent or mortgage, and taking the extra that you’d be paying towards a new mortgage and put it into savings. Make sure after you do this, you don’t touch it. Do this for at least three – six months to see if you can afford the higher payment and that it doesn’t cut your budget too close.

3)       Tweak the numbers – What if you give your new mortgage payment a test drive and you can’t afford the extra money per month it would cost you? This means it’s time for you to tweak your original calculation to a mortgage payment that is better suited to what you can afford.

4)       Try it again – After you tweak your numbers, give your new mortgage payment a test drive again before you commit to making it permanent. Follow what was outlined in number 2 above before you move forward with a new home and a new mortgage payment.

If you’re ready to talk to us to better understand your mortgage options and what you can afford, CLICK HERE or give us a call at (855) 693-7283.

Popular Real Estate Terms You Need To Know

You’re considering buying or selling a home in the near future and are wondering how you can get prepared. Maybe you’ve even done some research online or started interviewing real estate agents and lenders. Soon you will realize that the world of lending, home buying and selling comes loaded with lots and lots of buzzwords. There’s just no way to avoid it. So to get yourself fully versed in all things real estate, you’ll want to get quite familiar with this list of top buzzwords:

understanding-real-estate-lingo-1)      Adjustable rate mortgage (ARM) and Fixed rate mortgage – when applying for a loan, you’ll learn more about adjustable rate mortgages (ARM) and fixed rate mortgages. An ARM is a loan that has a set interest rate for a predetermined amount of time, and then adjusts on a regular schedule. A fixed rate loan is one where the interest rate remains fixed for the entirety of the loan.

2)      Escrow – if a third party holds property, cash, and the property title until all conditions of the property agreement have been satisfied, this is call escrow. The third party is likely a lawyer and will then hand over the assets to the respective parties, as outlined in the agreement.

3)      Fannie Mae/Freddie Mac – Fannie Mae and Freddie Mac are two government sponsored enterprises that buy mortgages from lenders in order to promote stability and home affordability in the market. Fannie Mae is short for The Federal National Mortgage Association and Freddie Mac is short for the Federal Home Loan Mortgage Corporation.

4)      Good Faith Estimate (GFE) – a Good Faith Estimate is an approximation of the total cost of a home and is a document given to a homebuyer prior to the closing.

5)      Flipping – flipping is the process of buying a home, investing in upgrading it, and then selling it again. This is popular among real estate investors and in particular with residential real estate.

6)      Lien – if a legal claim to receive payment for debt is placed against a house, it’s called a lien.

7)      Closing – the last thing you’ll do with a real estate loan is close. The closing is when you sign all final documentation related to your loan.  You will pay for your closing costs and hand over your down payment in the form of a certified check.

8)      Down Payment – your down payment is the amount of money you are bringing to the closing table to pay upfront for your new home.  This needs to be in the form of a certified check or wire.

9)      Points – mortgage points are upfront charges the lender may add to a mortgage. One point equals one percent of the total loan amount and a homebuyer may choose to pay points to lower their interest rate.

10)   Amortization schedule – amortization means to reduce debt. When obtaining a loan, an amortization schedule is created to show how debt is paid over the life of a loan based on how much interest and principal is paid.

11)   Prequalification – when a borrower is prescreened by a lender for a loan, this is considered a prequalification.  This is only informational and not an obligation from the lender.

12)   Pre-approval – different from a prequalification, a pre-approval from a lender locks in an interest rate for a specific loan amount and requires a borrower’s credit report and score.

13)   Prime Rate – prime rate is an interest rate that commercial banks offer to their best customers. 

14)   Underwater – when a borrower owes more on their home than its current value, it’s considered underwater.

15)   Underwriting – underwriting is the process a lender goes through to determine whether or not to extend credit to a borrower. A lender will look at the borrower’s credit score, credit history, income and other debt obligations as well as property value.

If you’re ready to talk to a trusted lender to better understand your loan options, Click Here.

Housing Trends to Expect This Spring

Home buying season is nearly upon us so what can you expect as a prospective buyer or seller this year? A lot! Since you still have a few months to get prepared, be sure to take this time to do your research. Understanding the market, your lending options and working with the right real estate agent and lender are steps that will set you up for great success. In regards to what’s on tap for this year, here are some trends the experts are already talking about:

Tulip House1) Sellers market will continue – Sellers aren’t seeing as much equity in their homes, and therefore, they aren’t as apt to put their homes on the market. With this dynamic, buyers are in demand creating a sellers market. This is giving sellers an opportunity to raise prices, thus giving them the equity they want and ultimately more homes will end up for sale. As prices rise, and more houses end up on the market, a flip may occur as homes sit longer and buyers demand relents. If this unfolds, only time will tell but the beginning of this year will continue as a sellers market.

2) Mortgage rates are expected to rise – Albeit not that high, they are expected to tick a little higher. Over the past year, rates have trended in an upward climb and the beginning of this year will be no different. This climb will be slow and will also be welcomed by periods of pause so this year will continue to be a great year to buy a home.

3) Buyer confidence rises – with rates, although rising slightly, as low as they are, with more homes coming on the market, and more buyers getting qualified for loans, buyer confidence will continue to rise. The economy is getting better attributing to this confidence as well as employment rates continue to improve. All together, this year should be a healthy year for home buyers and sellers.

If this year is your year to purchase or sell a home, have confidence that the market will be in good favor. If you’re ready to partner with a lender you can trust and is ready to help you get qualified for a loan that meets your needs, complete our short application here.

Were Mortgage Rates Really Near 20% Before?

With today’s low interest rate environment, many have a hard time believing that rates for home loans were once near 20%. For the experienced homeowner, you may remember the early 1980’s when mortgage rates were this high and shake your head thinking, for today’s new borrowers, they have no idea how lucky they are!

interest rate percentBack in the early ’80s, the Federal Reserve had other issues on its hand, namely serious inflation. Different than today, in the ’80s the Federal Reserve was doing all it could to tame inflation by driving interest rates higher, consequently causing mortgage rates to reach a high of 18.45% in 1981.

With high interest rates, you can guess, the mortgage industry took a hit. Borrowers who could otherwise afford the American dream of homeownership were forced to rent because of how expensive interest rate charges were. Because of this, it took years for housing sales to rebound. Until homeownership became more affordable to the general public, homes couldn’t sell.

In 1981, the average American home cost $82,500. With an interest rate of 18.45%, after putting 20% down, a borrower’s monthly payment would be a little over $1,000. By today’s standards, $1,000 monthly mortgage payment can put a homeowner into a home worth $300,000 with a rate between 4-5%.

In today’s market, most borrowers have no context for historical interest rate data and may believe that although they didn’t jump on last year’s low 3% rates, today’s 4-5% is an amazing deal compared to data from just a few decades ago.

If you are on the fence considering purchasing a new house or refinancing your existing loan, be sure to contact a trusted lender with great experience. To get started today, apply now.

How To Get Pre-Approved

The most important thing for a new homebuyer to do first in the lending process is to get preapproved before starting looking for a home. This very important step can help save someone from looking at homes outside of their budget and the heart break they may feel when their dream home is too far out of reach.

 

preapprovedFirst things first, there is a distinct difference between being preapproved and prequalified. A prequalification only gives a homebuyer a rough idea of what they will qualify for. Therefore, when they go to get preapproved, they may find out that they qualify for much less or more than what they originally thought.

 

With a preapproval, three important factors are taken into consideration, which make it a more valid assessment of what you will be eligible for when borrowing; a borrower’s credit, your equity and your home equity or down payment.

 

With a prequalification, a lender will pull your credit but will simply ask what you make for a living and if you have any equity or a down payment. Based on your answers, you will receive a prequalification letter to next start home shopping.

 

The preapproval asks for clear documentation so nothing is left up to question or guess. A borrower will be asked to provide the last 30 days of pay stubs, two years of federal tax returns, the last two months of bank statements including where any down payment money is currently residing, two years of W2s. With each of these documents, and your credit score, you will get preapproved for a loan.

 

To be preapproved, be sure that you have a good paper trail of all of your important financial information. This will show the lender exactly where your closing costs and down payment are coming from, it’ll also show your financial and work history, which is really important to a lender.

 

Last but not least, be sure to be completely upfront and honest throughout the entire preapproval process. Now is not the time to be hiding anything. A lender can work with you and depending on your situation, will have very sound advice to fix anything that may be lacking in your financial record. Partner with your lender from start to finish in order to get the best loan for you.

 

If you’re ready to start your preapproval process today, and take advantage of our “Help You Buy Program”, simply click here and complete our short application.