Category Archives: Mortgage Info

Secret Ingredient to Selling

Posted on by

Being open to flexibility can often be the secret ingredient to selling your house.

The idea of downsizing can feel daunting, like trying to fit your entire life into a tiny car. Yet, for those who’ve invested time and money into a large family home, the thought of moving into something smaller can seem overwhelming.

However, downsizing doesn’t erase the memories made in your old home – those family gatherings, the first steps of your children, or the grand holiday celebrations. As life evolves and your nest empties, the idea of downsizing can become more appealing. Many Americans embark on this journey, especially after retirement, seeking a simpler lifestyle, reduced housing costs, and freedom from maintenance tasks like painting and mowing.

According to Emmet Pierce’s article on downsizing for MoneyTalksNews, opting to rent can make selling your home and relocating a more straightforward decision. “Renters have the flexibility to live wherever they choose and experience life in different communities. And once your lease is up – sometimes even before – you’re free to move on.”

But whether you choose to sell and rent or buy something smaller, dealing with clutter becomes inevitable. An organization expert quoted by Pierce explains, “Retirees in large homes often find themselves using only a few rooms, while other areas collect clutter because maintaining such a vast space becomes overwhelming.” Downsizing offers liberation from unused items, providing more breathing space.

Moreover, downsizing can enhance your quality of life and reduce stress, according to aging experts. Letting go of unnecessary furniture, outdated gadgets, and unused exercise equipment can be liberating, giving you more room to relax.

Are you tired of navigating stairs daily, burdened by the constant ups and downs? Downsizing can address mobility issues, offering homes with better accessibility, enabling you to age in place comfortably.

If you miss the convenience of urban living after moving to the suburbs for a larger home, downsizing could be the answer. Transitioning to an apartment or condo in the city center brings you closer to amenities, entertainment, and even potential job opportunities, reducing the need for long commutes.

Source: MoneyTalkNews, TBWS

Is it time to buy an investment property?

Posted on by

Is it advisable, at the age of 25, to consider purchasing a house for rental purposes as an investment, leveraging rental income to pay off the mortgage?

Real estate has historically proven to be a lucrative investment avenue due to its potential for cash flow, particularly through rental income, and appreciation over time. While the aftermath of the 2008 financial crisis saw a decline in home values, most areas have since rebounded, returning to pre-crash levels.

Before delving into rental property investment, it’s crucial to define your expectations thoroughly. This involves evaluating potential cash flow, which may occasionally be negative. Here’s a structured approach to analyzing this:

Start by researching market rental rates in your area, utilizing online resources or the rent survey typically required by lenders for appraisal purposes. Consider adjusting your gross income estimate to account for vacancy and collection losses, as well as potential expenses associated with eviction, albeit rare.

Factor in repairs and maintenance costs, acknowledging that despite the current condition of the property, these expenses are inevitable. Additionally, allocate funds for replacements, such as estimating the remaining lifespan of major components like the roof.

Expect to provide a larger down payment for a rental property compared to an owner-occupied loan. Lenders may also require reserves, typically around 6 months’ worth, although this varies. Maintaining cash reserves is prudent regardless.

Bear in mind that interest rates for investment properties are typically higher than for primary residences. Utilize spreadsheets or online calculators to calculate principal and interest payments, and estimate property taxes and hazard insurance premiums.

Subtract all negative figures—vacancy, repairs and maintenance, replacement reserves, and monthly mortgage payments (including taxes and insurance)—from the property’s gross income to determine cash flow. A positive result is ideal, while a negative one indicates a monthly deficit that needs covering. Assess whether your stable income or liquid assets are sufficient to offset this deficit.

Consider other pertinent factors:

Is your regular income stable and ample to cover potential shortfalls?
Have you set aside emergency funds for both property-related issues and personal contingencies?
Are you prepared to hold onto the property for an extended period, perhaps five years or more?
Will your job situation permit you to remain in the area? If not, budget for a property manager, typically charging around 10% of monthly rent.
Is your current living situation satisfactory? You might weigh whether purchasing your primary residence should precede investing in rental properties, given the lower cash requirements and financing costs.

I trust this guidance proves beneficial. Best of luck!

First-Time Homebuyer Advice

Posted on by

Best advice I would give to first-time homebuyers
________________________________________
I was once asked: We’re in the process of hopefully purchasing our first home, and I’m a little lost on everything that is going on. What’s the best advice you would give to first-time homebuyers?

Undoubtedly, your primary step in the home buying journey should involve securing your financing. While I acknowledge that this advice may appear biased, considering my involvement in the mortgage business, it’s a reality that the majority of today’s home buyers rely on mortgages, making this part of the process more intricate than before.

Despite the potential complexity, obtaining a mortgage today is not as insurmountable as some may portray. Recognizing your credit situation is pivotal. Lenders don’t demand perfection, but it’s crucial to be aware of your standing. Check your credit report on platforms like Free Credit Report.Com or Creditkarma for free and promptly address any errors, past-due accounts, or public records.

Collection agencies often settle for amounts less than what is reported. However, exercise caution when settling collections older than two years, as it might impact your credit score. Establishing a relationship with a reliable loan officer early on is crucial. Seek someone responsive, trustworthy, and capable of offering clear guidance.

Initiate the preapproval process with your chosen loan officer by submitting essential documents such as pay stubs, W2s, and bank statements. The Automated Underwriting System (AUS) will swiftly provide initial findings. Aim for “Approve/Eligible” or “Accept” results and inquire about a “TBD Approval” for added strength in your offer to sellers.

I hope you find this information helpful. Best of luck on your home-buying journey!

PMI or Larger Down Payment?

Posted on by

Determining whether it’s cheaper to pay for private mortgage insurance (PMI) or to put up a larger down payment on a house depends on your specific financial situation and goals. Here are some steps to help you make an informed decision:

Calculate the cost of PMI: If your down payment is less than 20% of the home’s purchase price, your lender may require you to pay PMI. PMI costs can vary based on the loan amount, credit score, and other factors. Your lender can provide specific details on the PMI costs associated with your loan.

Assess the cost savings with a larger down payment: Compare the total cost of PMI over the time you expect to pay it (until the loan-to-value ratio reaches 78%) with the potential savings of making a larger down payment. A larger down payment means a smaller loan amount, which can result in lower monthly mortgage payments and less interest paid over the life of the loan.

Consider alternative uses for your cash: If you have the money for a larger down payment, weigh the opportunity cost of using that money for a down payment versus other financial goals. For example, paying off high-interest credit card debt or investing the money might yield higher returns compared to the savings from a larger down payment.

Factor in future home value appreciation: If you expect the value of the home to appreciate significantly in the coming years, it may impact when PMI gets automatically canceled (at 78% loan-to-value ratio). If the home appreciates rapidly, you may reach that threshold sooner, reducing the overall cost of PMI.

Evaluate your overall financial situation: Consider your long-term financial goals, current income, job stability, and other financial commitments when deciding between a larger down payment and paying PMI.

Consult with a financial advisor or mortgage professional: Seeking advice from a financial advisor or mortgage expert can help you better understand the trade-offs and make a decision that aligns with your financial objectives.

Ultimately, the decision depends on your unique circumstances and financial priorities. Whether you choose a larger down payment or opt for PMI, buying a home should fit comfortably within your budget and contribute to your overall financial well-being.

5 tips to refinance

The Resolution you Should Keep. Refinance.

Posted on by

5 reasons to refinance

“Should I refinance my mortgage?”

This is one of the most common questions we help our clients answer. 

When you refinance your existing mortgage, you are essentially paying off the existing mortgage debt and replacing it with a new loan. Many of the same costs are involved in refinancing a loan as are in first−time financing.

There is an old adage in the mortgage business that states that if you can improve your interest rate by at least two percentage points, then it is a good time to refinance. While that may work as a general rule of thumb, the truth is that there are many reasons to refinance. Here are the top five we see.

1. Lower Interest Rate 

Securing a lower interest rate is one of the top reasons for refinancing. A lower rate can make a large different in your monthly payments, and save you money on the financing fees! 

 

2. Build Equity Faster 

If you’re in a position to make a higher monthly payment due to a salary increase or other good fortune, you may want to refinance from a 30-year loan to a short (15 or 20 year) term loan. Adjusting the term enables you to build equity faster and save a large amount of money on the interest paid over time! 

 

3. Change your Loan Program 

Some homeowners who start in an ARM (Adjustable Rate Mortgage) discover they’d rather switch to a more stable Fixed Rate mortgage. While an ARM may have been the more attractive loan program when you first purchased, we can compare different Fixed Rate programs to find which would save you more money. 

 

4. Credit Score Improvement 

If you’ve increased your credit score since you first applied, you may be in position to refinance with a lower rate with your higher score! We’ll evaluate your current loan, then compare the rates with your new score to find you the best program that’ll lower your monthly payments! 

 

5. Getting Cash Out 

With a Cash Out Refi you’re able to tap into the equity that you’ve built in your home. You may want to put money towards home improvements, send a child to school, or pay off other debt with the equity you’ve accrued through your mortgage.  

 

Before you decide to refinance, think back to when you purchased your home.

  • Did you pay points to get a lower rate?
  • Has it been long enough that you’ve made your money back?
  • Is there a pre-payment penalty on your loan?
  • What is the purpose of this refinance? 

Refinances EMPOWER you to change

the terms of your original mortgage!

All of these factors are important to consider when you’re weighing if you should refinance your home. Give us a call at 952-405-2090 to set up your FREE initial consultation. We can help you determine if now is the right time for you to refinance. 

Are you ready to resolve your refi questions?

Refinance: refinance

 verb

re·​fi·​nance | \ ˌrē-fə-ˈnan(t)s  , (ˌ)rē-ˈfī-ˌnan(t)s, ˌrē-(ˌ)fī-ˈnan(t)s \

refinanced; refinancing; refinances

Definition of refinance

: to renew or reorganize the financing of something : to provide for (an outstanding indebtedness) by making or obtaining another loan or a larger loan on fresh terms refinance a mortgage

Vacation Homes in High Demand!

Posted on by

Vacation homes increasingly in demand because of remote work trends. It’s not something you’d expect during a pandemic and recession, but numbers don’t lie…

It’s not something you’d expect during a pandemic and recession, but numbers don’t lie. According to a PRNewswire report, sales of vacation homes are soaring. According to Redfin’s report, October saw demand for second homes skyrocket 100% from a year earlier—the fourth triple-digit increase in the last five months. That outpaces the demand for primary homes.

Home sales are on the rise across the board due to record-low mortgage rates but also because of a wave of relocations during the pandemic. Demand for second homes rises to the top among more affluent Americans who work remotely, no longer need to send their kids to school in person, and are limited by travel restrictions, according to Redfin’s lead economist Taylor Marr.

“With mortgage rates at all-time lows and offices shut down across the country, the dream of having a second home outside of the city is becoming a reality for many wealthy Americans,” Marr said. “Unfortunately, at the same time, millions of less-fortunate families are behind on their mortgage or rent payments due to financial hardship brought on by the coronavirus pandemic.”

Some of these second homes may eventually turn into primary homes, as it’s not uncommon for a buyer to close a deal on a second home before putting their current house on the market. It seems resort towns across the U.S. have attracted more homebuyers. Hotspots include Lake Tahoe, Cape Cod, Palm Springs, the Jersey Shore, and Bend, OR.

Marr adds,” Even when offices reopen, folks will be able to spend more time than ever before in their second homes because many employers will continue to offer flexible remote-work policies. With workers still commuting in one or two days a week, resort towns that are near major cities will likely continue to heat up.”

Source:PRNewswire, Redfin, TBWS

Keeping your credit score STRONG!

Posted on by

Cards that offer miles, cashback, or some other perk aren’t offered to just anyone, but if your credit is good…

When they say “it ain’t over ’til it’s over” they must not have been talking about credit scores. Keeping your score high is just as important after you buy a home as it was before you closed escrow, so don’t go on autopilot or revert back to old habits.

According to RealtyTimes’ Jaymi Naciri, while you may have met the goal of homeownership, keeping your scores up can benefit you in several ways. For one, you can get more credit cards, including those cards offered by stores with 0 percent financing for things like furniture, appliances and outdoor fixtures with no interest for several months. But watch out. Once your happy no-interest period expires, your rate can skyrocket if you don’t pay the entire balance. Still, if you just want to buy a little time until a few more paychecks or commission checks roll in, it’s not a bad way to go, using their money instead of your own for a short time.

Cards that offer miles, cash back, or some other perk aren’t offered to just anyone, but if your credit is good, they may be knocking down your door. “If you keep your credit score high enough to snag one, you’ll love being able to rack up miles to use for travel or apply a cash back bonus to everyday expenses to keep costs down,” says Naciri.

And here is something you may have forgotten: many employers run your credit as part of the hiring process. Let your credit drop, and it could keep you from getting a new job.

On top of all this, you never know what’s going to happen to interest rates. Good credit means that when rates drop you can jump in a heartbeat if you want to refinance, sell or buy another home.

VA Loan Right for You?

Posted on by

Why should you use VA loan:
________________________________________
The VA loan is hands down the best mortgage loan there is. Here are some reasons why.

First, VA guarantees the loan for 100% of the appraised value of the property (technically, the loan is for the Notice Of Value amount, which in most cases is the same thing). This guarantee means that the lender is willing to make the loan. The loan amount for 100% financing goes as high as the maximum amount in each county.

Veteran buyers can get a loan for more than the county maximum; they just have to pay 25% of the amount above the county maximum. In pricey California, for example, a veteran could buy a home for $800,000 with a $40,963 down—roughly 5%. Which brings me to the next reason to get a VA loan:

There is no mortgage insurance. A buyer with a 700 credit score will pay about $400 per month for mortgage insurance if he puts 3% down on a conventional loan.

The rates are slightly lower in some cases. Also, underwriting standards are easier. Where conventional loans use dent-to-income ratios to qualify, VA loans use “residual income.” This looks at how much money they actually have available each month after meeting normal expenses from their take-home pay. Conventional loans are typically capped at a 45% debt ratio (or thereabouts). VA loans can many times be approved above 50% depending on the overall strength of the borrower.

When rates drop, refinancing is easy. VA loans offer a “streamline” refinance option, called an Interest Rate Reduction Refinance Loan (IRRRL). This allows the veteran borrower to reduce his or her rate with no appraisal, and very little underwriting of income. The primary criterion for approval is that the borrower has an acceptable payment history and that they are improving their position.

If a veteran wants to refinance and get cash out of his or her equity, there is no pricing adjustment for that process. A conventional loan will typically be about .25% higher in rate to get cash out.

For anyone who is a qualifying veteran, NOT getting a VA loan would be a costly mistake.

Hope this helps!

Taking Money Out of 401K- Smart?

Posted on by

Someone once asked: As a first-time buyer, is it a good idea to take money out of my 401K to avoid mortgage insurance?
________________________________________

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?

Posted on by

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!