Author Archive: RainbowMortgageInc

Taking Money Out of 401K- Smart?

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Someone once asked: As a first-time buyer, is it a good idea to take money out of my 401K to avoid mortgage insurance?
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It’s not a sin to pull money from your 401K, but whether you decide to put down more cash to avoid mortgage insurance is entirely up to you. Here’s some information to help you decide.

When lenders consider risk on a loan, the loan-to-value ratio is one of the factors they evaluate. A loan for more than 80% of the property’s value presents a greater risk in their view. To manage that risk, they require mortgage insurance which is usually paid monthly and added to the payment.

Depending on the total cost of your 401K loan vs. the cost of borrowing more money, and potentially paying mortgage insurance.

You should keep in mind that mortgage insurance on a Conventional can be temporary. Once you can prove to the lender that your loan is 80% of the property’s market value, they’ll allow you to drop it. Check with a licensed real estate professional to see what they think of the future market conditions.

One other thing to consider is that even though most 401K loans have a 15-year term, nothing is stopping you from paying it off faster. Nothing that is, except human nature. 🙂 The fees for the loan may be the deciding factor for you.

Bottom line, this is something to take up with your licensed lender and real estate professional. Be sure you have written details about the 401K loan with you when discussing it with them.

Hope this helps…good luck!

First Time Homebuyer?

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14 First Time Homebuyer Mistakes to Avoid!

#1. Failing to Budget for a Home Loan

Home ownership is a cheaper alternative to renting in the long run. But in the beginning, it can be much pricier. This is especially true if you intend to get a loan to purchase your dream house.

If you do acquire a loan, remember that you will be making monthly mortgage payments for a number of years.

Therefore, it is important to budget for a home loan, beforehand. You need to determine whether your income can accommodate an extra expense or not.

If you are unable to afford making monthly payments on your home loan, it would be a mistake to try to own a house at this time.

#2. Ignoring Your Credit Score

If you thought that finishing school meant being done with competitive scoring, think again!

Apparently, your creditworthiness can be summarized in just 3 digits. Those three numerals will draw the line between owning a house and renting one.

Even if you have an impeccable sense of financial responsibility right now, your credit past can haunt you.

You could have a hard time getting a home loan if your past record shows problems with payments, or if there’s an error in your credit report.

If you go ahead and apply for a mortgage loan without checking your credit score, you could end up paying a lot more than you expected.

It’s best to perform a credit check beforehand.  This way, you will be allowed to get loans without being obligated to pay hefty amounts in interest.

#3. Disregarding Housing Marketing Trends

Just like other financial markets, the housing market fluctuates from time to time. Sometimes it favors the buyers, and sometimes it favors the sellers.

There are a number of factors that affect housing marketing trends. This includes the ratio between supply and demand, interest rates and the overall condition of the economy.

It’s also imperative that you consider how the housing market changes in your ideal location, as home prices vary from one location to another.

If you disregard housing marketing trends when hunting for a house for sale, you might end up signing for a deal that favors the seller.

#4. Lack of a Preapproved Home Loan

Some people are anxious to shop for a house and want to do it quickly, before they are financially able to afford it.

If you have already started talking to sellers before having a hard talk with home loan lenders, you are making a mistake. In fact, not many sellers will want to work with you if you promise them a certain amount and then can’t fulfill that promise.

To avoid any disappointments, it’s wise to have your home loan pre-approved first, then go ahead and look for a house to buy.

#5. Overlooking the Home Resale Value

Another huge mistake you can make when buying a house is not considering the fact that you may need to resell the house you intend to buy.

There are lots of unexpected changes that can occur, such as job transfers, financial problems, or falling in love with another bigger or prettier house.

When this happens, you might find the need to sell your house, obviously at a profit. You should never overlook the resale value of the home you intend to purchase.

What you need to do is to ask yourself several questions such as: Will it be easy to sell this house? Will buyers be interested in buying it? Will this house fetch me a good amount if I decide to buy another one? Is it situated in a preferred neighborhood?

#6. Trusting an Unprepared Agent, not getting a Good One

Involving an agent is highly recommended in the home buying process.

There are pros and cons to dealing with real estate agents. A real estate agent can take a huge burden off your shoulders when it comes to looking for the right house.

An unprepared agent can cost you money and set the deal back.

Also, if you talk to the seller’s agent, he will be representing the seller and he may not be truthful about the negative aspects of the house.

If you trust this kind of agent blindly, you may have regrets later on. Make sure your agent is prepared and well versed.

#7. Settling on a Verbal Agreement

Double crosses are bound to happen when agreements are made verbally. It would be difficult for you to prove in court that a promise was made or a handshake was made.

Therefore, it’s best that you and the seller get everything down in writing to avoid future miscommunications.

This way, you will have something to present in court should the seller fail to keep their word.

#8. Disregarding Hidden Costs

This is another common mistake that many first-time homebuyers often make.

If you neglect to prepare for hidden fees, you might be in for a big surprise. Closing costs are a good example of hidden fees, which usually include a number of fees that cover final housekeeping matters.

Before signing the homebuyer’s agreement, it would be wise on your part to determine what hidden fees are there.

#9. Ignoring Professional Home Inspection

You will be making a costly mistake if you rely on the seller to inform you about the house problems you should expect.

Before you make any payment towards the purchase of the house, it’s imperative that you first hire a professional home inspector to ascertain that the house is in good condition.

#10. Following your “Love-at-First-Sight” Gut

Not everyone or everything that you fall in love with at first sight ends up being your one true love. A house may appear to be everything you ever dreamed of, but it might not live up to your expectations.

Before following a dream house blindly, be sure to check it out thoroughly. Make sure it has all the right qualities that make it a perfect home for you and your loved ones.

#11. Being Indecisive

As unwise as it is to rush into making a purchase, it is equally dumb to take too long without making up your mind. If you take too long to make a decision, another home buyer will take advantage of your indecisiveness and buy your dream house.

Since market trends change from time to time, you could also find out that the house you took too long to buy has a new (and higher) price tag attached to it.

#12. Relying on Online Services Only

Now that many services are obtainable at the click of the mouse, most people have become too dependent on them. It’s true that loans can be obtained online and houses can be bought online as well. But failure to establish personal touch with lenders or home sellers could present a huge and costly misunderstanding in future.

#13. Forgetting the Costs Associated with Owning a Home

Just like a car, a home requires money to maintain. The pain of parting with your hard-earned cash will not end on the day you finish your last mortgage payment.

You have to brace yourself for other costs for maintaining a safe, secure, and environmentally friendly home. You have to also be ready to meet certain costs such as association fees, insurance, taxes, utilities, maintenance and major/minor repairs.

#14. Entering into Multiple Agreements

While it’s a smart thing to compare different houses before buying, you might end up biting off a lot more than you can chew.

This is especially true if you meet up with sellers and make offers or promises that you don’t intend to honor.

Before entering into any agreement with a seller or an agent, it’s imperative you ensure that you are ready to honor your end of the deal.

If you can avoid the above mentioned mistakes that are commonly made by first-time buyers, you will be more like a pro homebuyer instead of a rookie.

Avoiding these mistakes can help you make the right choices when it comes to finding a home you and your family can take pride in. Keeping in mind the resale value will also help you avoid problems moving on in the future. 

Be a pro!

cash back refinance

Cash out and rate-and-term will save you money

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How can a cash out refinance save me money?

There are 2 categories of refinance

1.“rate-and-term” 

2.“cash out”

Both will save you money

rate-and-term

The First type, rate-and-term, replaces your existing loan with one that has a better rate and/or terms. You might replace an ARM or balloon loan with a fixed-rate loan, for example. Or you may decide to lower your rate AND shorten your term. Some borrowers have been able to refinance from a 30-year loan into a 15 or 20-year loan, reducing the term, without appreciably raising their payments.

A borrower does not receive any significant amount of cash in a rate-and-term refinance; lenders generally consider that any cash proceeds above $2,000 pushes the loan into a cash out category.

There are always certain costs involved in any mortgage transaction; there will always be fees for title, escrow, underwriting and document preparation, for example. Borrowers can add these fees to their new loan to avoid having to pay them in cash. Financing these items is not considered cash out.

When you are deciding whether to do a rate-and-term refinance, you should evaluate it in two primary ways: first, how long will it take to recover the cost of doing the loan? For example, if the closing costs amount to $3,000 and the reduction in rate gives a saving of $1,500 per year in the first year.” For most people, this time frame is more than satisfactory, but you should make your own decision. The second criterion is net savings over some time, say five years, ten years or more. 

Homeowners with adjustable rate mortgages (ARMs) may decide to refinance into a fixed rate loan, even though their rate may initially be higher, they might feel more secure knowing that their rate will never change. This is more of a defensive strategy to guard against the possibility of a higher rate in the future, but it may not “save money.”

cash out

The other type of refinance, a “cash out,” the borrower receives cash of more than $2,000 at closing. This is accomplished by getting a new loan that is larger than the balance of the old one plus closing costs. Borrowers can use that money for anything. Homeowners have used cash out refinances to pay off consumer debt, like car loans, student loans, and credit cards. Using home equity to pay off credit cards can drop the payment dramatically! But paying down installment loans can create a false economy. A $30,000 car loan with an interest rate of 6% will have a payment of $500. Paying off that loan with the proceeds of a home refinance will effectively drop the payment to $150. It does NOT make sense to finance a car for 30 years. 

Contact Us. We can help you get pre-approved for a mortgage and determine how much house you can buy this next time around.  Rainbow Mortgage, Inc. is a broker so we have access to many different lenders and their loan programs which translates into more options for you!

 

How Can a Mortgage Professional Help With Divorce?

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It goes without saying, but I’ll say it anyway…divorces are complicated! There are many questions that an experienced mortgage professional can help answer before you finalize your divorce.

 

For example:

Can one of us afford the family home or do we need to sell it?

Will I have enough income to qualify for a mortgage after the divorce?

Is my credit score good enough to qualify?

Will I have enough assets to refinance or purchase a new home?

Do I have the right job and/or job history for mortgage qualification?

What’s my home worth?

Will the family home appraise high enough to pull out equity to cover the cash I owe my spouse, or do I need to pull funds from another source?

What’s the consequence if my Ex-spouse keeps the home but can’t refinance it into their name after the divorce?

What’s the best loan for me post- divorce?

Attorneys are not mortgage experts and there are many nuances in the mortgage world that can totally derail the perfect divorce settlement. Rainbow Mortgage Inc. takes a very proactive role in assisting our attorney friends and their clients in making sure their post decree housing goals are met.  We help you to (1) make realistic decisions about what is possible, (2) understand your loan options, and (3) structure a mortgage loan focusing on your post-divorce goals.  We are happy to help you by participating in client-attorney meetings to discuss potential initial options, provide revised options (if necessary) prior to the final signing of the decree, provide an estimate of what your home is worth using our AVM tool (which is the same tool used by lenders to evaluate whether a value on an appraisal is reasonable) and at no cost to you or your attorney, review the decree prior to it being sent to the judge.

Here are a few examples of items in a divorce decree that have caused client issues in the past:

(1) The length of time that a person is to receive support payments does not meet lender guidelines to qualify for a mortgage loan.   Different loans have different guidelines however, standard guidelines require that a borrower prove that they will receive the income for a minimum of three years following the funding of the mortgage loan.  The dates listed in the decree must be carefully monitored and possibly adjusted if the divorce process goes on for an extended period before it’s finalized.

(2) Child care expenses are being shared and the decree lists a payment that is to be made monthly to a specified bank account- underwriters will sometimes consider this child support which can throw off a person’s monthly budget causing them to no longer qualify for a loan.

Divorces are complicated but the mortgage doesn’t have to be with the right professionals in your corner. We can offer you the help you need and why wouldn’t you take it?  Contact us for a FREE consultation and decree review.  We only get paid when you are happy with our service and your loan closes.  It’s a Win-Win for you!

Commonly Overlooked Spring Cleaning Hiding Places

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Spring Cleaning

Do you wish cleaning were as simple as Snow White wielding a broom and whistling while she works?

It seems no matter how thorough a housekeeper you are, there are a number of spots that tend to get bypassed during your spring-cleaning tirade, only to grow in grime if ignored. What? You’re one of those people who supposedly leaves no stone unturned as you move through your spring cleaning tasks like a whirling dervish? Realtor.com suggested these areas of your home we can bet you’ll forget to clean this spring as well as what to do about it.

Tile floors and/or countertops have grout that can harbor germs and mold, and a mere swipe of a nubby-sided sponge or a thorough mop job may not cut it. The grout will eventually start to stain, meaning an even bigger cleaning job down the road. Cleaning experts advise wiping the grout with vinegar, then scrubbing it with baking soda and a brush. Yes. On your hands and knees, if need be. Also effective are borax or olive oil-based Castile soap. For in-your-face moldy grout, spray on 3% hydrogen peroxide diluted by half in water and let it steep for 45 minutes, then rinse.

We’re not trying to go existentialist on you, but just because you can’t see dirt doesn’t mean it doesn’t exist. Picture yourself as a tiny drone buzzing close to the ceiling, photographing anything above your sightline, and you’ll be able to picture where a primo dust collection is taking place. We’re talking door and trim tops, upper kitchen cabinets not attached to the ceiling, stately bookcases as well (as the tops of each book), and on and on. And just think about how anything that started out as dust in your kitchen is now mixed with sticky kitchen grease. It’s the stuff about which obsessive types have nightmares.  How to head off those nightmares? Use a damp cloth to wipe door frames and bookshelves. For greasy gunk, try rubbing dish detergent on, leaving it for a moment, then wiping it off. If that doesn’t cut it, level up to Goo Gone Kitchen Degreaser. And don’t forget light fixtures and ceiling fans that trap bugs and attract dust bunnies.

“Look down” is not just a musical phrase out of a song in Les Mis. Try casting your eyes down into your garbage disposal using a small flashlight to aid your view. But first, prepare your stomach for it. Beside general disgust, you’ll take note of the serious grease buildup that has the potential to seriously back up your sink drains. Attack this by running hot water, turning on the disposal, pouring a tablespoon of dish soap down there, and letting the water run for 15 to 30 seconds. Then turn off the disposal and let the water run until this orifice is bubble-less. Use an angled brush (if you can find one) to scrub the underside of the drain flaps with hot water and dish soap.

Okay, toilets are just naturally disgusting merely by the nature of and reason for their existence, and your toilet brush and holder can make their own horror movies. We know thousands of fastidious people simply give up on the idea of cleaning these things in favor of buying new ones and, of course, that is an option as long as you budget for it. But you can also prevent some germ build-up on your existing implements by spraying down the brush with disinfectant after each use. Use your toilet seat to clamp it down and let it dry awhile, dripping over the bowl. Oh, and spraying warm water mixed with a few capfuls of bleach is also a good remedy. Just be very careful with the bleach.

Drapery is a passive collector of dust, pet hair, odors, and other air gunk. Start with vacuuming them, then determine if they are washable. You can rent a steamer for the really heavy stuff, but the very idea of cleaning a house full of drapery may have you running to a professional.

Oh, and don’t forget the electronics — phones, keyboards, computers, entertainment electronics, etc. All fall into the category of things your grimy fingers touch every day and some heat up, making them dust magnets. Keyboards collect food crumbs (you know how this happens, so don’t pretend you don’t). After carefully flopping your keyboard over to dislodge the crumbs, use a toothpick or Q-tip to dislodge anything stuck in the crevices and swipe the rest with a cotton ball soaked (but not dripping from) in a tiny bit of rubbing alcohol.

Did you know that research shows that cell phones are dirtier than toilet seats? For your phone, grab a dewy-soft microfiber cleaning cloth and spray it with a 50/50 combination of distilled water and vinegar or distilled water and isopropyl alcohol. Wipe down your phone thoroughly without getting it too wet.

Chimneys are serious business and chimney fires are more common than most would think. Don’t want to get up on your own roof risking life and limb to sweep your own chimney? Then call a handy professional for the task, because doing it wrong can have serious consequences. Experts recommend once a year for this at a minimum for optimum fireplace safety.

Have you decided that no amount of spring cleaning is going to make you happy with the house you are currently in?  Maybe now is the time to sell!  Spring is an excellent time to get a home on the market, however, before you do that, Contact Us. We can help you get pre-approved for a mortgage and determine how much house you can buy this next time around.  Rainbow Mortgage, Inc. is a broker so we have access to many different lenders and their loan programs which translates into more options for you!

Source: TBWS

Rainbow Mortgage Inc March Madness

This is Mortgage Madness!

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It’s March Madness on and off the court! Rainbow Mortgage Inc. is currently offering so many different unique home loan programs that it’s pure mortgage madness!

1% Down

The buzzer is ticking down and it’ll soon be game over for our 1% down home loan program! This program is perfect for first time home buyers or those who are strapped for cash but have great credit. You, the home buyer puts 1% down, the lender gives you an additional 2%, which gives you 3% equity in your home!

FREE Appraisals

What’s better than seeing your team make it through to the Final Four- getting a FREE appraisal on your home! If you’re looking to purchase a home in either Hennepin or Ramsey County, it qualifies for a free appraisal! No matter what your income is, or if this is your first or 5th home, you’ll save over $500! (other counties may also be eligible, call for details).

High Balance Loans

When it’s tournament time, these teams go big or go home, with our high balance home loans you’re able to go big and go home! Rainbow Mortgage Inc. is offering low-rate conventional loans for homes up to $850,000 with a loan amount as high as of $679, 650. This is big news since these conventional loans allow for lower rates, easier guidelines, and fewer documents than a jumbo loan.

Pre-Qualified

With the fast-moving housing market, it may feel like you’re watching the Selection Show while waiting to hear back if your offer has been accepted. Before the intensity builds, get a letter of pre-qualification. This not only proves to the sellers that you’re a serious contender for the big dance, it gives you an idea of what you can afford. Our pre-qualification process is simple, give us a call today to get it started!

Are you ready for mortgage madness?

Working with Rainbow Mortgage Inc. is always a slam dunk! We’ve been in business for over 19 years and have created systems to produce faster closing loans that require less paperwork. Now is the perfect opportunity to take advantage of our March Mortgage Madness. Call us today, and our team of mortgage experts will start planning your full court press.

Mortgage Myths

Mortgage Myths: Busted!

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When you mention you are about to buy a house, there’s a chance that your friends and family will give you their advice on how to get a mortgage or tips they’ve heard before. While some of the advice may be helpful, you should most likely proceed with caution since rules, regulations, and programs change all the time in the mortgage loan world. Here are the top 5 mortgage myths that we hear from our clients.

1) You need excellent credit to qualify.

Typically, a credit score of 670 is “good” and higher scores will generally help keep your interest rates lower- saving you money! Each specific loan program has a different credit requirement; some FHA loans can be done with a 600 or even a 500 credit score. While your credit score is a key factor, lenders look at other items while reviewing your mortgage loan application too. Ask us what programs your score qualifies for, or how to improve it if you’re not satisfied with your current credit score.

2) If you get pre-qualified, you definitely get a loan.

It’s advised that you get a letter of prequalification before you start looking for a home, and you may think this means you’re guaranteed a loan, but that’s not the case. The mortgage pre-qualification process determines the amount of home you’ll be eligible to purchase, based off of your income, credit score and a few other factors. Your pre-qualification letter is not a binding agreement or a specific offer to lend, as you’ll have to provide further documentation once you’re ready to move forward with the loan process and have found a house!

3) You need a significant down payment to purchase a home.

It’s been programmed in our minds that a 20% down payment is needed to purchase a home. It is not a requirement, but is an ideal amount. There are many loan programs out there that work with significantly lower down payments for those who may be strapped for cash, some programs even accept 1% or 3.5% down. The government also offers a few programs that require no down payment. Both the USDA and VA Loans offer mortgage loans without down payments! Keep in mind that if you do not put 20% down, you may be required to pay mortgage insurance. Adding that additional insurance will be important to factor into your monthly mortgage payment.

4) A 30-year loan is the best option.

A loan with a 30 year term may be the best option if you are looking to keep your payments lower, however, lower interest rates are usually offered with lower term mortgages. A 15-year mortgage may be the best option because of the amount of interest you’ll save over the life of the loan, however, your payment will most likely be higher than the 30 year option because of the shorter term of the loan (must be paid off in 15 years versus 30). Another low payment, low interest rate option would be an ARM or an Adjustable Rate Mortgage, where the interest rate periodically changes to reflect the market conditions. The rate may go up, causing your payment to go up, or it may go down, causing your payment to decrease. Consider each of these options when deciding which loan option is best for you! As a local mortgage broker, we’re able to shop around and find the different loan options so you don’t have to.

5) Student debt will prevent you from buying a home.

While it may be true that student loan debt may hinder your ability to purchase a home, new guideline changes have made it a bit easier. The debt-to-income ratio was increased to 50% since many of the first-time mortgage applicants looking to buy a home currently have student loan debt. Before this increase, borrowers had to fit all of their monthly debt obligations (including the presumed mortgage) within 45% of their pre-tax income. Even though the ratio has been increased, consider if it is right for your budget to have approximately 50% of your budget going towards debt.

These mortgage myths just break the surface on all of the free-floating mortgage advice. Have further questions on your situation, give us a call!

 

Rainbow Mortgage Inc.

3300 Edinborough Way #550

Edina, MN 55435

 NMLS# 345827 || 952-405-2090|| www.rainbowmortgageinc.com|| dave@rainbowmortgageinc.com