The SCOOP! Blog by ChangeMyRate.com®

Well, that was fast. 2019, that is. Especially so during the holidays. It seems that the days leading up to Thanksgiving and then January 2 are a blur. The mortgage industry is no different as new guidelines will be in place for the new year. Some of these guidelines are a big deal and some not so much. But changes are coming.

The first big change is the conforming loan limit. Conforming loans are those that conform to guidelines set by Fannie Mae and Freddie Mac. Around two-thirds of all residential mortgage loans issued in the United States are conforming. Lenders approve loans using these standards and after doing so sell those loans to third parties, primarily Fannie and Freddie but other mortgage company buy loans as well. One of the primary conforming guidelines is how big the loan can be. In 2019, the conforming loan limit for most parts of the country was $484,350. But for 2020, the conforming loan limit will be $510,400. In areas where property values are much higher compared to the rest of the country, conforming limits can be as high as $756,600. Conforming loans will carry some of the most competitive mortgage rates compared to “non-agency” loans.

VA loans, those whose guidelines follow those set forth by the Department of Veteran’s Affairs, will also see some changes. Perhaps the biggest change is how big a VA loan can be. Historically, the VA loan marched in step with the conforming loan limits established by Fannie and Freddie. For 2020, that would mean VA loans would have a loan limit of $510,400. For 2020, that changes. VA loans will no longer have a limit and it will be up to the individual lender to set a loan limit for its borrowers. Lenders must still approve a VA loan application in the same way they’re approved today by verifying income, employment, eligibility and other guidelines. 

Another change to VA loans is the Funding Fee. For 2020, the funding fee will be 2.3% of the sales price of the home, this is up from 2.15% in 2019. The funding fee is an insurance policy that compensates the lender in the case of default. This is rare however as VA loans are some of the highest performing in the industry. Other fees can change depending upon the number of times a VA loan was used and whether or not there was a down payment involved in the transaction. What does not change is the occupancy. VA loans can only be used to finance a primary residence.

FHA loans will also see some changes. For most parts of the country, the new FHA loan limit will be $331,760. FHA limits are set as a percentage of median home values for the area. This percentage is set at 115% of the median value. These areas, known as “metropolitan statistical areas,” are identified by the Census Bureau. Because home values will vary from one area to another, the FHA limits will also change. A quick phone call to your loan officer can tell you what the FHA limit is in the area you want to buy.

USDA loans will see some changes in 2020. USDA loans are used to finance rural properties. Because these areas are identified by population which is turn is reported by the Census Bureau, USDA loan limits will change as the new Census is performed. These new limits will be announced after the Census is taken.

Note, these are changes issued by their respective agency. Individual lenders may also have their own changes, referred to as “overlays” in addition to the ones noted above. In general, however, lending guidelines and regulations have somewhat stabilized over the years and obtaining a loan approval is much easier than say 10 years ago. There are changes coming, and they’re good ones.

Source: To view the original article click here

Posted by Jackie A. Graves, President on January 20th, 2020 9:47 AM

Buying your first home can seem like an insurmountable goal, especially if your expenses are already high. Pricey rent, not to mention car payments, insurance, utilities, groceries, and all the other realities of life, can make it hard to save.

Many renters assume they’ll never be able to buy a house for this reason. They spend so much money month to month, there is little or nothing to put away. And the idea of coming up with tens of thousands of dollars for a down payment seems impossible. 

But here’s the reality: The current national median home price is $257,000, and 3.5% of that—the minimum amount needed for an FHA loan—is just under $9,000. Does that seem more doable? 

The truth is that there are probably a bunch of cuts you can make to your current budget to come up with that kind of cash. Here are 20 ideas for 2020.

Set a frugal but realistic budget

Do you know how much you spend every month on bills, necessities, and incidentals? Many people don’t. Having a debit card makes it easy to spend, spend, spend, and, often, a lot of what is being purchased is unnecessary, frivolous, and counterintuitive to your goals if you’re looking to buy a home. 

Setting a budget is key. But it has to be a realistic budget so you can stick to it. We love mint.com, a free website from the makers of Quickbooks, that can help you set up a budget and track your spending.

Cut the cord

“The average cable or satellite user spends a little over $100 a month on their TV bill, which means canceling their service could save them over $1200 annually. But many pay TV defectors will likely be looking for an alternative way to watch their favorite programs,” said Mental Floss. “Assuming you're one of the 83 percent of consumers who pays for both TV and internet, switching to a web-based service shouldn't be too expensive. An Amazon Prime plan costs $99 a year, a basic Netflix subscription costs $132, and Hulu costs $96. Even if you spring for all three choices, you'll still only be paying $327 annually, saving you about $875 if you're a former cable subscriber.”

Work out at home

Go for a run, jump rope, do some planks, or take a fitness class on YouTube. There are tons of options for home-based fitness that will allow you to take a break from the gym, and the payments. That $60 a month translates to $720 a year. 

Pause your retirement savings

“If you’re already saving for retirement, this might feel really weird,” said Dave Ramsey. “After all, Dave normally recommends you start investing 15% of your household income for retirement right after getting your emergency fund in place. But if you’re planning on buying a house in the near future, hold off on your retirement savings and redirect those funds toward your down payment. It’s temporary, so don’t worry. Once you’re sipping coffee in your new breakfast nook, you can get right back to that 15% toward your retirement goal. Think of it like this: If you’re currently investing $500 a month into 401(k)s and IRAs, and instead, you put that toward your down payment savings, you could save around $12,000 in two years. That’s a big boost to your savings timeline!” 

Make your lattes at home

This has been a hotly contested topic, with many financial experts insisting that millennials are throwing their money away on expensive coffee drinks and millennials countering that they should be able to spend their money any way they want. Shawn M. Carter wrote about this topic for CNBC and admitted that he had spent $2,300 at Starbucks in one year! 

Ditch the dry cleaning

Save hundreds of dollars per month with a few dry cleaning tricks. “There is a difference between ‘dry clean’ and ‘dry clean only,” said Capitol Hill Style. “As The Laundress explains, many items labeled ‘dry clean’ can actually be machine washed on gentle or hand-washed. So when looking at clothes, check the tag: Is it dry clean or dry clean only? To lengthen the time between cleanings, you need a steamer. A steamer smooths out wrinkles and refreshes clothes. And since hot steam kills bacteria, it can prevent clothes from smelling. This $20 steamer from Secura is well-reviewed.”

Go generic

Simply switching from name brands to generics at the grocery stereo can save you $160 per month, per Dave Ramsey. 

Cook at home 

According to meal planning service Wellio, “You can save around $16 per meal by cooking at home,” said MyDomaine. “That means if you cook just one meal at home a week that you would normally buy from a restaurant, you could save $832 a year.” Extrapolate those savings out over multiple nights and you could have your down payment in no time!

Make your lunch

Imagine all the money you could save if you were also bringing your lunch to work! Even if you just weave in a day or two a week, you could save $150 a month or more.

Use those coupons

We all get mailers that have coupons for local restaurants, but how many of us actually use them? If you are going to go out for a meal, use that buy one entree, get one free offer. 

Do competitive research on credit cards

You could be throwing away money on credit card rates that are higher than they should be. LendingTree has a great breakdown of the best options, hitting on interest rates, rewards programs, and other important details. 

Use your points

Savings those credit card points for a vacation? Check to see if your points are redeemable for cash. If not, they may be able to be turned into gift cards, which you could use for daily spending, which would free up that money for your savings. 

Mow your own lawn

That $30 per week may just put you over the top, or at least help pay for your closing costs. 

Clean your own house, too

Serious savings sometimes calls for sacrifice. Will $200–300 per month make a difference to your savings? We’re betting the answer is, “Yes.”

Adjust the temperature

You can save money by lowering the temp by a few degrees in the winter and raising it in the summer. According to the U.S. Department of Energy, the savings can add up to 10% per year “by simply turning your thermostat back 7°-10°F for 8 hours a day from its normal setting. The percentage of savings from setback is greater for buildings in milder climates than for those in more severe climates. You can easily save energy in the winter by setting the thermostat to 68°F while you're awake and setting it lower while you're asleep or away from home. In the summer, you can follow the same strategy with central air conditioning by keeping your house warmer than normal when you are away, and setting the thermostat to 78°F (26°C) only when you are at home and need cooling.”

Share groceries

Buying in bulk can save you money, but those savings may evaporate if you end up letting all the food you bought spoil. Shop your Costco list with a friend and split up the apples and avocados, and the toilet paper and paper towels, too. You can save hundreds of dollars per year.

Say goodbye to plastic

There’s a worldwide effort to ditch single-use plastic bottles, and doing so could help save the planet while saving you money. Get yourself a $25 Brita filter and stop buying bottled water. You’re looking at a savings of more than $100 per person, per year, in the household.

Stop carrying a balance on your credit cards

If you carry a balance on at least one card every month, you’re unnecessarily paying interest. Wouldn’t you rather be earning interest instead?

Get the right bank

There are plenty of banks that don’t charge monthly fees or ATM fees. That can save you $25 or more per month, and it all adds up. Ally continues to get high marks for its online bank account. “This account pays a modest interest rate and offers free Allpoint ATM uses and up to $10 in monthly reimbursements for other bank ATM fees,” said The Balance. “There are no monthly fees, plus no fees for ACH transfers to or from other banks, no fees for cashier’s checks and no fees for incoming wires. This account also offers free checks, which come in handy for your landlord or anyone else who still wants to get paid like it’s the 1990s.”

Carpool

Another way to lower your footprint and save some money is by driving to work with a colleague. Rideshare estimates that, “For a person with a longer than average commute (e.g., more than 12 miles) and carpooling 250 days a year, the potential savings in a two-person carpool could exceed $1,500!” For even more savings, trade off cars to lower the wear and tear on your automobile. 

Source: To view the original article click here

Posted by Jackie A. Graves, President on January 19th, 2020 10:50 AM

Becoming a homeowner is more than having a set of keys and your name on the deed. You may have a rush of emotions the day you take possession and recognize you now have your place in the world—literally. And that’s just the beginning. Here are a few more things you can expect.

You learn what pride of ownership means

You may take pride in your car and your clothes and other minor possessions, but nothing compares to the feeling of being a homeowner. Buying your first place is an accomplishment, and you get to come home to that accomplishment every day. 

You’ll have more peace of mind

Once you have moved into your new home, unpacked, and taken a breath, you’ll have that moment—that moment where you realize, “This is mine.” Thankfully, that moment is repeated regularly. You’ll have it when you look at your countertops and realize you can redo them any way you want. And when you decide to get a dog and don’t have to ask permission. And when you want to paint your walls—any color you choose.

You’ll obsess over paint colors

Speaking of paint colors, get ready to spend hour after hour at Home Depot gathering dozens and dozens of paint chips. Even if you just want a fresh coat of white on the walls, it’s easier said than done. “There are hundreds and hundreds of white paints available, and most of them are considered white,” said The Spruce. “This makes choosing a plain white paint color nearly impossible.” 

You learn skills you’d never imagine

Soon you may be able to snake a toilet, tile a backsplash, and refinish your floors. Yes, there are people you can hire for these tasks, and all the others you’ll want and need to do in your home over the years, but it can be so much more satisfying—and cost-effective—when you do it yourself.

If you’re on a strict budget after buying your first home, you’ll likely also have to learn how to care for your lawn. Get those edging skills down!

You start prioritizing differently

Oooh, that skirt is so cute. But if you buy it, you’ll want the shirt and the jacket and the boots, and the jewelry, and, before you know it, you’ve spent half the money it would take to update your fireplace.

You start investing in yourself

When you put money and sweat equity into your home, you’re impacting its value. That’s an investment in your home, but it’s also an investment in you and your future. 

Source: To view the original article click here

Posted by Jackie A. Graves, President on January 18th, 2020 10:36 AM

Four ways to help your opponent walk away feeling they got a good deal.

Is it the Feeling or the Fact?

Which is more important or satisfying - to get a good deal or to simply feel you got a good deal?

Some say that getting a good deal will typically elicit a good deal feeling. I agree. But consider, if one feels they got a good deal, when actually they didn't, aren't they happy too?

Don't underestimate the influence of feelings when negotiating. In this context, I'm not talking about your feelings but those of your opponent. How many opportunities are missed by negotiators who fail to properly influence the feelings of their opponent?

Here's my motto: I want my negotiating opponent, whenever possible, to walk away feeling good about the deal. Some disagree with me on this point. Some have the distorted objective to crush, humble and even humiliate their opponent.

How misguided and even sad. Especially so when it takes so little to foster that good deal feeling in someone else.

During your next negotiation, be more attentive to building up the good deal feeling. You take the good deal but let them have that good deal feeling also.

Following are some hints and techniques to help establish that good deal feeling for your opponent.

1. Don't be too quick to accept a proposal, even a good one. If you quickly accept something, without a significant pause, a flinch or consultation with others, you literally deny your opponent from thinking they got a good deal. Accept quickly and your opponent will think they should have asked for more.

2. Compliment your opponent's negotiating skills. After a series of proposals and counter proposals, you realize you've reached the end of the concessions, interrupt the discussions by saying, "Wow. You're a tough negotiator!" Your opponent will immediately think their current position is a good deal for them whether it is or isn't. Complementing someone's negotiating skills is typically taken as an "I surrender, you got the better of this deal." message.

3. As per usual, employ a sincere and observable FLINCH upon receiving a proposal. That pained look, grimace, sigh or the comment such as, "Are you serious?" seems to tell one's opponent that they've gotten to us. Should we later accept that proposal, or one close to it, the good deal feeling is firmly planted in our opponent.

4. Employ the time out. We tend to stay with a negotiation or bargaining session, without interruption, no matter what. To stop, step away or take a break has the misguided reputation of 'blinking first' or 'being driven off'. In actuality, taking a break and rejoining the negotiations later causes both sides to rethink their current position and the prospects of putting a deal together. When we take the initiative to come back later, our opponent assumes they've won and adopts that good deal feeling. The final terms, however, are still open for discussion.

Good negotiators focus more on fostering the good deal feelings for their opponent while negotiating a good deal for themselves.

Source: To view the original article click here

                                                     

Posted by Jackie A. Graves, President on January 17th, 2020 9:38 AM

You may have thought that once you purchased your home and took out a 30-year mortgage, you’d never have to apply for a mortgage again. After a few years, however, you may decide that it makes sense to refinance your home loan. Here’s what you need to know:

What is mortgage refinancing?

Refinancing a mortgage means you get a new home loan to replace your existing one. If you can refinance into a loan that has a lower interest rate than you’re currently paying, you may be able to save money. The best time to consider doing a refinance is when interest rates fall sharply, and sink well below the level they were at when you closed on your original mortgage. Another good opportunity is when your credit improves to the point where a new loan has a lower interest rate.

As a rule of thumb, it’s worth considering a refinance if you can lower your interest rate by at least half a percentage point, and you’re planning to stay in your home for at least a few years. You can find and shop refinance lenders in your area here.

Why you should consider refinancing

There are a variety of reasons that might make financial sense to refinance your home loan:

  • To reduce your monthly mortgage payment by securing a lower interest rate
  • To get a shorter term, such as a 15-year loan to replace a 30-year mortgage, so you can pay it off faster and pay a lot less in total interest
  • To switch from an adjustable-rate mortgage to a fixed-rate loan — a smart move if you think rates are going to go up in the future
  • To extract cash from your home’s equity in what’s known as a cash-out refinance
  • To eliminate mortgage insurance if you’ve built up 20 percent equity in your home

How to refinance your mortgage

The process of refinancing is similar to getting a mortgage when you purchase your home.


Step 1: Set a clear financial goal.

There should be a good reason why you’re refinancing, whether it’s to reduce your monthly payment, shorten the term of your loan, or pull out equity for home repairs or debt repayment.


“Every situation is unique,” says Ann Thompson, Bank of America’s head of retail sales West. “Everyone has different priorities.”

What to consider: If you’re reducing your interest rate but restarting the clock on a 30-year mortgage, you may end up paying less every month, but more over the life of your loan. That’s because the bulk of your interest charges are in the early years of a mortgage.


Step 2: Check your credit score and history.

You’ll need to qualify for a refinance, just as you needed to get approval for your original home loan. The higher your credit score, the better refinance rates lenders will offer you–and the better your chances of underwriters approving your loan.

What to consider: It may make sense to spend a few months boosting your credit score before you start the refinancing process.

Step 3: Determine how much home equity you have.

Your home equity is the value of your home in excess of what you owe the bank on your mortgage. To figure it out, check your mortgage statement to see your current balance. Then check online home search sites or get a real estate agent to run an analysis to find the current estimated value of your home. Your home equity is the difference between the two. For example, if you still owe $250,000 on your home, and it is worth $325,000, your home equity is $75,000.

What to consider: You may be able to refinance a conventional loan with as little as 5 percent equity, but you’ll get better rates and fewer fees if you have more than 20 percent equity. The more equity you have in your home, the less risky the loan is to the bank or lender.

Step 4: Shop multiple lenders.

Getting quotes from multiple lenders can save you thousands of dollars. Once you’ve chosen a lender, discuss when it’s best to lock in your rate and not having to worry about rates climbing before your loan closes.

What to consider: In addition to comparing interest rates, pay attention to the cost of fees and whether they’ll be due upfront or rolled into your new mortgage. Lenders sometimes offer “no-closing cost loans” but charge a higher interest rate or add to the loan balance.

Step 5: Be transparent about your finances.

Gather recent pay stubs, federal tax returns, bank statements, and anything else your lender requests. Your lender will also look at your credit and net worth, so disclose your assets and liabilities upfront.

What to consider: Having your documentation ready before starting the refinancing process can make it go more smoothly.

Step 6: Prepare for the appraisal.

Some lenders may require an appraisal to determine the home’s current market value for a refinance approval.

What to consider: You’ll pay a few hundred dollars for the appraisal. Letting the lender know of any improvements or repairs you’ve made since purchasing your home could lead to a higher appraisal.

Step 7: Come to the closing with cash, if needed.

The closing disclosure, as well as the loan estimate, will list how much money you need to pay out of pocket to close the mortgage.

What to consider: You might be able to finance those costs, which typically amount to a few thousand dollars, but you’ll likely pay more for it through a higher rate or loan amount.

Step 8: Keep tabs on your loan.

Store copies of your closing paperwork in a safe location and set up autopayments to make sure you stay current on your mortgage. Many lenders will also give you a lower rate if you sign up for autopayment.

What to consider: Your lender might resell your loan on the secondary market either immediately after closing or years later. That means you’ll owe mortgage payments to a different company, so keep an eye out for mail notifying you of any such changes.

Benefits of refinancing your mortgage

Free up money each month. A rate-and-term refinance replaces your mortgage with a new loan that has a lower rate, meaning you have to pay less to your lender each month. “There’s a significant opportunity to reduce your monthly cash requirements,” says Glenn Brunker, a mortgage executive with Ally Home. “Depending on the size of your mortgage, it could be $75 or $100 per month, or even several hundred dollars a month.”

Pay your home off more quickly. You may be able to refinance into a loan with a lower interest rate and a shorter term. The savings in interest payments could be substantial, for example, if you’re able to refinance into a 15-year mortgage from a 30-year loan. Still, if you’re putting more cash into paying off your mortgage, you may have less money on-hand for expenses like saving for retirement, college or an emergency fund.

Eliminate private mortgage insurance. If your original down payment was less than 20 percent, you have likely been paying private mortgage insurance, or PMI, an extra fee on every payment. If rising home values and your loan payments have pushed your home equity above 20 percent, you might be able to refinance into a new loan without PMI.

Tap your home’s equity. Homeowners with at least 20 percent equity in their home sometimes turn to cash-out refinancing. That’s when you refinance your home loan into a new mortgage for a larger amount, to meet a specific financial need and receive the difference in cash. This may make sense if you’re considering using the money to invest back into your home through a major remodeling project or to pay off high-interest debt.

Lock in a fixed-rate mortgage. If you’re in an adjustable-rate mortgage that’s about to reset and you believe that interest rates are going to rise, you can refinance into a fixed-rate loan. Your new rate might be higher than what you’re paying now, but you’re guaranteed that it won’t rise in the future.

Risks and costs of refinancing your mortgage

While refinancing can be a smart move, it’s not right for everyone. Refinancing can be a mistake if you aren’t able to lower your interest rate by much or you incur a lot of fees. Here’s what to keep in mind:


Refinancing isn’t free. Your refinanced mortgage comes with costs, such as origination fees, an appraisal, title insurance, taxes and other fees, just like your original mortgage. Even if the refi results in a lower monthly payment, you won’t actually save money until the monthly savings offset the cost of refinancing. You’ll need to do some math (use this calculator) to figure out how many months it will take to reach this break-even point. If there’s a chance you’re going to move before then, refinancing is probably not the best move.

You may have a prepayment penalty. Some lenders charge you extra for paying off your loan amount early. A high prepayment penalty could tip the balance in favor of sticking with your original mortgage.

Your total financing costs can increase. If you refinance to a new 30-year mortgage, you’re likely going to pay significantly more interest and fees over the life of your loan than if you’d kept the original mortgage.

No cash-out refinance vs. cash-out refinance: What’s the difference?

When you refinance in order to reset your interest rate or term, or to switch, say, from an ARM to a fixed-rate mortgage, that’s called a no cash-out refinancing, or a rate-and-term refinancing. Rate-and-term refinancing pays off one loan with the proceeds from the new loan, using the same property as collateral. This type of loan allows you to take advantage of lower interest rates or shorten the term of your mortgage to build equity more quickly.

By contrast, cash-out refinancing leaves you with more cash than you need to pay off your existing mortgage, closing costs, points and any mortgage liens. You can use the cash for any purpose. To be eligible for cash-out refinancing, you typically need to have at least 20 percent equity in your home.

Example of a no cash-out refi (or a rate-and-term refi):

Jessica gets a $100,000 mortgage with an interest rate of 5.5 percent. Three years later, interest rates have fallen and Jessica can refinance with an interest rate of 4 percent. After 36 on-time payments, she still owes about $95,700.

In this situation, Jessica can save more than $100 per month by refinancing and starting over with a 30-year loan. Or she can save $85 per month, while keeping the loan’s original payoff date, paying it off in 27 years, and also reducing the total cost of the loan by about $8,000. Better still in terms of saving on interest would be to refi into a 15-year loan. The monthly payments will be higher but the interest savings is massive.

Example of cash-out refinancing:

In this case, Christopher and Andre owe $120,000 on a mortgage on a home that’s worth $200,000. That means that they have 40 percent, or $80,000, in equity. With a cash-out refinance, they could refinance for more than the $120,000 they owe. For example, they could refinance for $150,000. With that, they could pay off the $120,000 on the current loan and have $30,000 cash to pay for home improvement and other expenses. That would leave them with $50,000, or 25 percent equity.

Next steps: How to get the best refinance rate

Once you’ve determined why you want to refinance and the type of loan you want, you’re ready to shop lenders and compare refinance rates. Get quotes from at least three lenders, including a mortgage broker, a bank and an online lender. Be sure to compare both their rates as well as fees and other charges that could add to the overall cost of the loan.

Source: To view the original article click here


Posted by Jackie A. Graves, President on January 16th, 2020 8:55 AM

After years of preparing for this moment in your life you are finally ready. No, not marriage, but buying your first home. It’s taken you a long time to get here and there was a lot of sacrifice along the way but it paid off in the end because you have enough money saved for the down payment and your credit score is fantastic. Even though you think you are prepare you may be wondering, “where do I start?” In the next few paragraphs we will discuss your starting point, ending point and everything in between.

What Monthly Payment Can I Afford?

This is the first and probably the most important you should ask yourself before you take another step. Sure you may love the house on the upper east side of town but can you afford the monthly payment every month? The house down the street from your parents is to die for but you will you die trying to make the mortgage? Let’s start by figuring out how much you can afford and that will let your real estate agent know what area town to start searching in. Get your finances together and make a budget that includes your income and expenses. Your mortgage payment should be around twenty five to twenty eight percent of your monthly income. This is a safe percentage that will help you not overextend yourself and your budget. Now that we know how much we can afford let’s move on to the next step.

Find a Real Estate Agent

Having the right real estate agent can make all the difference in the world when you purchase a home. Picking one that is experienced and knows what they are doing will help eliminate confusion between the two of you. You need to be able to communicate to your real estate agent what you are looking for in your new home and what you are and aren’t willing to compromise on. For example, if you want a home that is energy efficient and that has solar panels and you’re not willing to budge on it, then you need to make sure your agent is aware. This will give them a good starting to point to begin their search. Often real estate agents have close working relationships with brokers so they will be able to tap into a market of homes that you wouldn’t be able to do on your own. Some of the key things that you need to ask your realtor about every property that you are considering are:

1. Has the home ever flooded?
2. Is the home located in a flood plain?
3. Does the home have mold?
4. What are the yearly taxes on the home?

Often home buyers, especially first time home buyers, forget to ask these important questions and they don’t find out the answers until its too late and they have already bought the home. The reason you need to know the monthly taxes on the home is because this will directly affect your monthly mortgage amount. After you have finally picked out the home you like make sure and get a home inspection. A home inspection will tell you if there is anything majorly wrong with the home like foundation problems or a faulty roof.

Which Loan Is Right For Me?

Only you will be able to truly decide which loan best fits your needs and accommodates your financial situation, but here a few helpful tips. Try and do a fixed rate mortgage because with a fixed rate mortgage your payment will never fluctuate like it could with and adjustable rate mortgage. Put as much money down as you can afford because it will help keep your monthly payments low and manageable. The length of your loan can be anywhere between ten and thirty years but it’s always a good idea to make the term of the loan between fifteen and twenty years.

Source: To view the original article click here

Posted by Jackie A. Graves, President on January 15th, 2020 10:15 AM

Refinancing your mortgage can potentially get you a lower interest rate, lower your monthly payments and possibly even shorten the term of your loan. But what are the reasons not to refinance your home and when is refinancing a bad idea? It’s important to know when and when not to refinance your mortgage as well as how to find the best refinance lender for your situation to figure out if refinancing is the right financial move for you.

Refinancing your home

Refinancing your home means taking out a new mortgage to replace your existing one. You may want to do this for a few different reasons. When interest rates go down, you may be able to get a new loan with a better interest rate, which will in turn lower your monthly mortgage payments.

You can also take advantage of low interest rates by refinancing with a loan that has a shorter term. This will help you pay off your mortgage faster while keeping your monthly payments affordable.

Another common reason to refinance is to get equity out of your home. The money you pull out can be used to pay off high-interest debt, make home repairs and upgrades or pay for other big expenses.

Should you refinance?

“A mortgage refinance makes sense when it will save the homeowner money. It may also be the best option when the owner must raise funds and all other options are either exhausted or more expensive,” says Michael Drake, president of PMG Home Loans.

If refinancing while interest rates are low will help you meet your financial goals then you should consider it. Refinancing at the right time will lower your monthly mortgage payments, allowing you to put more money toward retirement and savings. Taking out a new loan could also shave years off your mortgage and ensure that you enter retirement with less debt.

Cashing out some of the equity in your home may also be a good financial decision depending on your circumstances. If you have high-interest credit card debt, for example, taking out a bigger loan to pay it off will save you money on interest and get you out of the debt cycle.

“A home is considered an appreciating asset and the funds should be used for equally wise investments,” Drake said.

Reasons not to refinance your mortgage

Taking out a new home loan can definitely help you meet your financial goals. However, there are a few good reasons why you may not want to refinance your mortgage.

If you plan on selling your home soon, refinancing could actually cost you money. It typically takes a few years to recover the money spent on closing costs, so don’t refinance unless you’re sure you want to stay in your home for at least a few more years.

Another reason not to refinance is poor credit. You won’t be able to qualify for a loan with a good interest rate if you have below-average credit, so you should work on raising it before you try to refinance.

If you can’t afford to pay the closing costs associated with refinancing, then you may also want to hold off. While some lenders do offer refinancing options with no closing costs, they come with higher interest rates that will eat into your savings. It’s usually worth it to wait and save up the cash you need to pay for closing costs out of pocket.

Another reason to delay refinancing is if you don’t have enough equity in your home. Homeowners who have less than 20% equity usually have trouble qualifying for conventional loans because they’re seen as higher-risk. Some government programs allow you to refinance with low equity, but it’s usually better to wait.

You should also steer away from refinancing if you’re already deep into your mortgage. If you’re 10 years into paying off a 30 year loan, for example, getting a new 30 year mortgage may not make financial sense. By doing so, you’ll be adding another ten years of payments to your mortgage, which could outweigh any savings you get from refinancing.

When should you consider refinancing?

If you plan on staying in your home and interest rates have dropped, you may want to consider refinancing. As a general rule, refinancing will save you money if you can get an interest rate that’s 1% to 2% below your current rate.

When you take out a new home loan, you’ll have to pay closing costs, which typically equal 3% to 6% of the total loan amount. However, if interest rates are low enough, the savings you’ll get over the life of the loan will far outweigh the costs. Before you take out the loan, though, make sure that you crunch the numbers or use a refinance calculator to ensure that the savings will be worth it.

Sometimes refinancing is worthwhile even if interest rates haven’t dropped much. If you have an adjustable-rate mortgage and you’re worried about interest rates rising, you may want to switch to a fixed-rate mortgage to lock in a predictable interest rate. Just make sure that you shop around to get the best mortgage rate possible.

Choosing the best refinance option

Having all of the necessary information is a key component of selecting the best refinance option. “Whenever a buyer or homeowner is considering a mortgage loan or refinance, they should ask the lenders for a Good Faith Estimate (GFE). This document will show a borrower the interest rate and all associated closing costs,” Drake said. “This is the best way to do a comprehensive comparison of the options before them.”

“If a borrower focuses on interest rates or closing costs exclusively, they may not be able to determine which lender is truly giving them the best deal,” Drake said.

You should also take the reputation of each lender into account and consider any perks that they offer, such as round-the-clock customer service or rewards points.

Bank of America may be a good lender to consider because it provides competitive rates and top-notch customer service. The bank has a Home Loan Navigator portal that allows you to upload documents, download important paperwork, e-sign documents and track the progress of your loan. You’ll also get help navigating the refinancing process from one of the bank’s experienced loan officers.

Right now, Bank of America is offering low refinance rates well under 4%. You can apply online, in person or over the phone, and you may even get same day preapproval. However, you won’t know which company will offer you the best deal until you get a few quotes.

The bottom line

Refinancing your home can be a good fiscal decision, but you need to do it at the right time and for the right reasons. If you plan on moving in the near future or you have below-average credit, you should probably hold off. Otherwise, take your time to find the right lender and understand the terms of your new loan. No cost refinancing options may sound attractive but they often come with higher interest rates that eat into your savings. Make sure you do the math and read the fine print to ensure it will save you money in the long run.

Source: To view the original article click here

Posted by Jackie A. Graves, President on January 14th, 2020 8:39 AM

Financing a home can be an expensive journey that many prospective homebuyers believe is out of reach. However, obtaining an FHA loan can help make homeownership within reach for many individuals. Some buyers may not know how to get an FHA loan or how to qualify for an FHA loan. Let’s dive into the ins and outs of these loans, plus the awesome advantages of an FHA loan and some disadvantages.

What is an FHA loan?

An FHA loan is a mortgage loan that is funded through an FHA-approved lender, while insured by the Federal Housing Authority. This loan is ideal for those who have a low-to-moderate income, especially first-time homebuyers, as well as those who do not have sufficient funds for a down payment.

With this loan, buyers can put as little as 3.5% down on their home as long as they meet certain qualifications, such as having a credit score of at least 580. In addition to having a low down payment, the funds for the down payment can either come from the borrower’s savings, gift funds or a down payment grant. This provides more flexible options for buyers on how they will obtain the funds for the down payment.

Because the loan is funded through an FHA-approved lender, the FHA doesn’t issue this loan directly. The mortgage is funded through a typical lender, like a bank or credit union, but is insured by the FHA. This can protect the lender in case a borrower defaults on a loan. Because the FHA protects the lender’s margins in this way, the result is a lower credit score minimum and a lower down payment than a standard mortgage loan.

How to qualify for an FHA loan

Qualifying for an FHA loan is a bit different than a standard mortgage. To restate, borrowers only need to put 3.5% of the purchase price down as long as they have at least a 580 credit score. A credit score of 580 qualifies the borrower for the program. That doesn’t mean that anyone with a credit score lower than that will not qualify, however. In fact, borrowers with a credit score below 580 can still potentially qualify; they just need 10% down. It is important to note that these requirements are FHA requirements, but lender requirements may differ. The actual bank or credit union funding the loan may have different qualification standards and buyers should confirm the lender requirements as well.

Buyers need to meet the debt-to-income ratio requirements set by the lender in order to be approved. If a borrower has too much debt, the lender reserves the right to decline their application. In addition to having sufficient funds for the loan, borrowers also need to be aware of the FHA mortgage limits to prevent looking at homes outside of the maximum loan amount. All buyers should speak with their desired lender for additional information because it will vary from lender to lender; they can even talk to their lender about a pre-approval.

Types of FHA loans

The FHA offers a multitude of loans, so borrowers can choose from different options to find the one that best fits their needs.

  • Fixed-rate FHA mortgage: This mortgage is the most similar to a standard mortgage. The interest rate the borrower receives when the loan is funded is the interest rate that they will have over the life of the loan.
  • Adjustable-rate mortgage (ARM): Typically with an ARM, the interest rate is fixed for a certain number of years, and then switches to a variable rate after that period. For example, a 5/1 ARM has a fixed rate for the first five years, with a variable rate every year after.
  • FHA 203(k) loan: The 203(k) loan is exclusively for buying and renovating a fixer-upper. Borrowers can combine their home purchase with the funds needed to renovate their new abode.
  • Condominium loan: This loan allows home buyers to purchase a condominium with an FHA-approved lender. The condo must be in an FHA-approved project and the property must meet other restrictions in order to qualify.

Even though FHA loans have a lower down payment than conventional loans, they do require a lot of fees to be paid before funding. A borrower should expect to pay about 3% to 5% of the purchase price for closing costs, plus any origination, title, and private mortgage insurance (PMI) fees.

Advantages of an FHA Loan

There are a few benefits of FHA loans that make them extremely appealing to borrowers. First off, the low down payment requirement is a popular reason, especially among first-time home buyers. With such a low requirement, just 3.5%, it can make the initial home purchase more affordable, especially because buyers can have the funds for their down payment funded from savings, gifts or down payment assistance grants. Additionally, because the loan is backed by the FHA, there are lower credit requirements needed. This is beneficial for those who have a nontraditional credit history or a low credit score.

Disadvantages of an FHA Loan

With the advantages of an FHA loan come disadvantages that may be deal-breakers for some people in the market for a new home. For starters, FHA loans have a couple of different insurance requirements. Borrowers must pay an up-front mortgage insurance fee of about 1.75% of the purchase price. Luckily, borrowers may have the option to add this into their loan balance if that better suits their financial needs, but they will be paying more over time. Additionally, there is a monthly mortgage insurance premium (MIP) that, unlike private mortgage insurance (PMI), cannot be canceled once the homeowner builds up more than 20% of the equity in their home. The MIP must be paid throughout the life of the loan.

There are also restrictions on homes that can be purchased with an FHA loan. It is extremely important that the buyer determines if the area of homes they are looking at meets all of the qualifications. This will help reduce the risk of falling in love with a home that they cannot get through the program.

The Final Word

FHA loans can be a great opportunity to make homeownership within reach for some borrowers. Those in the market for a new home should examine their financial situation and check with a local bank or credit union to see if they meet the requirements to qualify for this program. At the end of the day, qualifying for an FHA loan and becoming a homeowner may be easier than you originally thought.

 

Source: To view the original article click here

Posted by Jackie A. Graves, President on January 13th, 2020 9:38 AM

Homeowners often refinance their mortgages when interest rates fall to reduce their mortgage payments and lighten the monthly bill load. But there's a twist on this called cash-out mortgage refinancing where the homeowner refinances the property for an amount larger than their mortgage's remaining balance in order to get some cold hard cash that can be used for other things.

"It's a way to access the equity in your home to do whatever you please," says Tony Garcia, a Los Angeles-based market manager for Wells Fargo Home Mortgage. "A very high percentage of customers are pulling that cash out and using it for various reasons." Indeed, the percentage of "cash-out" borrowers, who had increased their loan balance by at least 5 percent, made up 82 percent of all refinance loans in fourth quarter 2018, according to Freddie Mac. This was the highest percentage since 2006, the heyday of the housing bubble.

So, how does this work? You probably know that home equity is the value a homeowner actually has in a property (the current market value minus any liens). So, if your home is worth $500,000, but you only owe $100,000 on the loan that means you have $400,000 in equity. A homeowner in this situation who pursues a cash-out mortgage refinance can opt to pull some of that equity to take care of other financial business, like consolidating debts, paying off student loans, sending kids to college, funding a wedding, renovating a kitchen or whatever else strikes their fancy.

Although cash-out refinance is a slam-dunk scenario for many, it doesn't come without some caveats. We talked to Michelle McLellan, senior vice president and product management executive of home loans at Bank of America to get her take on the pros and cons of cash-out mortgage refinance.

Pros of Cash-out Mortgage Refinancing

No Need to Move: Got bills, but don't want to change addresses? "Cash-out refinancing allows you to access a large chunk of money without selling your home," McLellan says. Everyone who hates packing and unpacking can just start high-fiving each other right now.

May Be Cheaper Than Other Financing Options: The cash-out scenario is ideal for many since home interest rates are at near-record lows, so it's cheaper to meet these short-term cash needs via a cash-out refi than it is to rack up credit card bills or take out a separate higher-interest loan.

Let's say your home is worth $400,000 and you owe $200,000; that leaves $200,000 as sweet, sweet equity. "With cash-out refinancing, you could receive a portion of this equity in cash. If you take out $50,000 in cash, this amount would be added to the principal of your new mortgage, which would be $250,000 after the cash-out refinance," she says. "While the cash you take out will cost you more in interest over the life of your new loan, it won't necessarily cost you more than other financing options."

Only One Loan: Although the cash-out refinancing may sound similar to a traditional home equity loan, where you borrow against the equity in your home, the biggest difference is that with the latter, you essentially take out a second mortgage, so you now have two loans. Conversely, the cash-out refinancing option is just one loan. And interest rates are generally lower with this option than with a home equity loan.

But using a cash-out refinance has some drawbacks too.

Cons of Cash-out Mortgage Refinance

Additional Closing Costs: Closing costs can be a pretty tough pill to swallow, as they're usually 2 to 5 percent of the home's purchase price. Cash-out refinances incur closing costs similar to those found with the original mortgage (loan application fee, home appraisal fee, etc.), McLellan says, unlike taking out a home equity line of credit (HELOC), which has its own unique set of pros and cons. Fees vary by lender, so just as you would with your original loan, you'd want to shop around for a mortgage lender.

Limit to Amount You Can Borrow: You can't cash out your entire equity. Most banks and the Federal Housing Administration (FHA) won't lend you more than 80 percent of your home's current value. This is called the loan-to-value ratio. So, if your home is worth $400,000, and you have $200,000 in equity, your loan-to-value ratio is 50 percent. The most you could borrow would be $120,000 (80 percent of $400,000 minus the outstanding loan balance of $200,000.)

To be fair, the limits imposed on cash-out refinances are largely for the homeowner's own good. "Cash-out refinancing normally has tighter credit parameters, and most lenders place a cap on the percentage of loan-to-value that you can borrow," McLellan says. "This ensures you still have some equity in your home."

Higher Interest Rates: The interest rate for a cash-out refinance may be higher than for a straight mortgage refinance. This is because the lender may perceive more risk with this kind of refinance — for instance, the borrower may be more likely to walk away from the loan if he's already cashed out the equity in his home. Of course, a lot depends on the credit rating of the borrower, how much equity is being taken out and market factors.

Mortgage Repayment Period Extends: "It's common to refinance into another mortgage of the same term, typically another 30-year mortgage," McLellan says. "That means you'd be restarting another 30-year mortgage after you've already owned your home for a number of years. As a result, you'll probably pay more in interest over the life of the loan." So, if you were near the end of paying off your mortgage, you'd probably not want to start all over again.

Source: To view the original article click here

Posted by Jackie A. Graves, President on January 12th, 2020 10:50 AM

You’ve decided it’s time to buy a home. You’re making headway with your homebuying checklist. You’ve researched down payment options and mortgage rates. You have a clear understanding of what you want and what you can afford. It’s time to start browsing open listings. Where do you start? All the real estate apps you downloaded last night.

Join the club. According to the National Association of Realtor’s report pdf on real estate in the digital age, 81% of older millennials, 80% of younger millennials, 78% of Generation X and 68% of younger baby boomers found their homes on a mobile device in 2019.

And there’s no surprise why. Apps have introduced a new level of convenience to the homebuying process, allowing you to search for homes by location and filter listings by your needs and wants. Evaluating a home and booking a viewing can take a matter of seconds.

But as with all digital developments, mobile house hunting brings a new set of opportunities and challenges. Consider the tips below as your embark on your cyber search.

1.      Find an app for that. Apps can help make parts of the homebuying process, including looking through listings, creating your monthly budget, calculating your mortgage, getting a preapproval and even finding home décor and paint colors, simpler and faster.

2.      Stay up to date. Databases are constantly updating to add new homes, reflect price adjustments and remove sold homes. That’s why most mobile real estate apps allow you to set alerts for changes to individual property listings and specific locations. Activate those notifications for listings you’re interested in so you’re the first to know if the price drops.

3.      Expand your search. While filters can be helpful in narrowing your search, they can also limit your results and keep you from finding the right home. Try expanding your search area to include counties that surround your dream location and setting the filters to broad ranges. This way while you’re looking for your two-bedroom, two-bath condo with a view, you don’t skip over the nearby three-bedroom renovated bungalow listed at a killer price.

4.      Contact your real estate agent when you find homes you’re interested in. Mobile app databases can often be outdated. If you find a home you’re interested in, have your agent review the listing on your behalf and schedule a viewing.

5.      Go see the home. Just as the jacket always seems to look better on the mannequin, listing photos can help to conceal flaws while making houses look newer and rooms look larger than they are. If you think you’ve found the one, work with your agent to schedule a tour so you can get a better sense of the state of the home and assess the neighborhood.

For more tips to help you on your homebuying journey, visit MyHome® by Freddie Mac.

Source: To view the original article click here

Posted by Jackie A. Graves, President on January 11th, 2020 10:56 AM

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