The SCOOP! Blog by ChangeMyRate.com® 'Stress-Free Mortgages'

Before you push yourself to pay off your home loan ahead of schedule, consider the downside of going this route.

 When you get a mortgage, you agree to repay your loan over a certain period of time. That could be 15, 20, or 30 years -- or a different term that your mortgage lender agrees to. But you may, at some point, decide that you want to pay off your home loan early. Doing so could save you a lot of money on interest. Despite that benefit, here are a few reasons you may not want to pay off your home ahead of schedule.

 1. You'll have less liquidity

 Liquidity refers to how quickly you can access your money when you need to. Savings accounts are very liquid -- you can take a withdrawal from one when you want and get your money right away. Stocks are also fairly liquid -- you can sell a stock with relative ease for cash -- though they're not quite as liquid as savings accounts.

Homes, on the other hand, are very illiquid. You can't easily and quickly sell a home for cash. It could take months to find a buyer and wait for that deal to close. So, when you pay off your mortgage early, you tie up more money in your home, leaving yourself with less liquidity, or less access to money you might need in an emergency or for another reason.

2. You'll lose a valuable tax break

Homeowners who itemize on their taxes get to deduct the interest they pay on their mortgages. And depending on your tax situation, that could be a lucrative write-off. You'll lose that deduction, however, once your mortgage is paid off, which could leave you with a higher tax burden.

3. You'll miss out on the opportunity to invest 

Paying off a mortgage early can make a lot of sense when you're stuck with a high interest rate on your home loan. But if you manage to lock in an affordable mortgage rate, then paying off your loan early could mean losing out on the chance to score higher returns via investing. 

Imagine you take out a mortgage with a 3.5% interest rate. If you invest in stocks over many years, you might easily score an annual return of 7%, which is actually several percentage points below the stock market's average. So in that case, putting your extra money into your home isn't the savviest move. 

On the other hand, if your mortgage has an 8% interest rate, then that's a different story. But if you've managed to snag a low rate, then you may want to stick to your regular payment schedule and invest whatever extra cash you have. 

Many people strive to pay off their mortgages early. Along with saving money on interest, paying off your loan ahead of schedule offers the benefit of not having debt to think about. Some people really don't like the idea of debt, even though home loans are considered a healthy type to have. But before you push yourself to pay off your mortgage early, think about these disadvantages. You may decide to stick to your regular payment schedule after all. 

A historic opportunity to potentially save thousands on your mortgage

 Chances are that interest rates won't stay put at multi-decade lows for much longer. That's why taking action today is crucial, whether you're wanting to refinance and cut your mortgage payment or you're ready to pull the trigger on a new home purchase.

 Our expert recommends this company to find a low rate - and in fact he used them himself to refi (twice!). 

Source: Click here

 

Posted by Jackie A. Graves on September 26th, 2021 1:48 PM

It is our consensus that normal middle class residential owners, upper middle-class homeowners and working families, none of whom are generating a huge income at the moment, should most likely not be supplying the California state government with extra property tax revenue right now.

 This is especially true during a financial crisis such as the Covid predicament we find ourselves in during 2021… where revenue is tight all over the country, especially in California, with only a few exceptions here and there – where in general unemployment, as well as under-employment, is extremely high.

 Regular middle class and upper middle-class homeowners need to be saving money, and spending less, not spending more. Certainly not spending more on housing or standard goods and services, or on income tax or property taxes. We’re not talking about luxury goods or high-end services. That is specific to folks with disposable income and is an entirely different matter altogether. 

As a matter of fact, property taxes are the one big-ticket item just mentioned that is easily lowered, or paused, or even deferred.   And if this never occurs, then property owners are going to have to be more cognizant of related details and new tax laws, as well as new ways to avoid property tax reassessment – and tax specialists or real estate experts that are available in California to help with these matters.

Middle Class Property Tax Savings

When times are hard, as they are now, the state should help residents with key information on property tax breaks, helping property owners take full advantage of established property tax breaks, like the new Proposition 19 parent-to-child transfer and parent-to-child exclusion from reassessment of property taxes.

And this means not spending more on taxes when times are hard. Certainly, property owners should all be better informed about inheriting property taxes, and Prop 19 parent-to-child exclusion; about property tax breaks, and being able to transfer parent’s property taxes, with the right to keep parents property taxes on every property tax transfer.

Owning a Home is Part of the American Dream

Purchasing or inheriting a home is part of the classic American dream and leaving part of that dream to heirs or beneficiaries is something most of us would be proud of.  However, fluid, ever-changing and complicated property tax laws have to be kept up with, either by ourselves, or through specialists that make a living helping property owners with issues like property taxes.  

Getting expert property tax advice and estate planning advice can help save that dream and help sustain good family financial practices for generations to come, where your home and other big-ticket investments are concerned. 

Genuine Property Tax Relief

The property tax breaks middle class and upper middle class Californians are holding on to are the only safety-net solutions middle class residents have in this state, so the Legislature should be focusing on preserving and strengthening those tax breaks, and on educating and informing Californians about establishing a low tax base for trust beneficiaries; about Prop 19 parent-to-child exclusion and Proposition 19 – parent to child property tax transfer on an inherited home; plus Proposition 13 property tax transfers, as well as the Proposition 19 impact on CA homeowners, and avoiding property reassessment wherever possible – not on obsessively driving more tax revenue, under cloaked measures called “property tax relief” that are merely tax deferments.

Even when it means a little less property tax revenue going into their coffers, it shouldn’t matter to the state government.  In the long run, helping to preserve working families’ financial health and helping them to pay less property taxes, thereby building up more savings, will drive greater property tax revenue to the state, as more people will own homes and pay taxes!  This is what the Legislature would see if they saw long term rather than short term. 

All middle-class Californians should be able to depend on secure, authentic property tax relief – like wealthy folks and corporations have in every state in America. Why should only the wealthy enjoy genuine tax cuts and real property tax relief?

To learn more about your property tax relief options when inheriting a home from parents – transferring their low property tax base to your new residence – contact Commercial Loan Corp at (877) 756-4454 to speak with a Trust Fund Loan consultant or Property Tax Savings specialist.  Chances are the end result will be a much lower property tax bill.

Source: Click here

 

Posted by Jackie A. Graves on September 25th, 2021 3:51 PM

Most Americans want to own a home at some point in their life, and they say they’re willing to make sacrifices to achieve it. For some, that means forgoing alcohol or vacations for a year to save. But others say they’re willing to give up having kids in order to have their dream home. About 60% of recent survey respondents say they’d prefer their dream home over 40% who said they’d prefer kids first, according to a new survey from Cinch Home Services, a home warranty firm.

The youngest adults in the housing market—Gen Z—feel the strongest about one day becoming a homeowner. Nearly 84% recently surveyed say that owning a home is a major component of achieving the American dream, the survey says.

More Buyers Are Taking Risks to Get Dream Home

What Couples Fight Over Most When Home Shopping

But homeownership is expensive and may require some sacrifice to save up. Cinch asked more than 1,000 respondents what they would be willing to give up to own a home. The 85% of respondents who are willing to make some sacrifices in order to own a home said alcohol or vacations would be their first choices. But some respondents are willing to give up their pet, seeing family, or their relationship for an entire year to save up to own.

Here’s what topped their list.

 

Overall, Gen Z showed more willingness than other generations to give up pleasures over a year to become a homeowner. Here’s how sacrifices differed by age group.

Source: Click here

Posted by Jackie A. Graves on September 24th, 2021 1:55 PM

Just to dispatch with the technicalities, the Federal Reserve does not set mortgage rates, and the central bank’s decisions don’t drive mortgage rates as directly as they do other products, like savings accounts and CD rates.

But the Fed’s actions do indirectly influence the rates consumers pay on their fixed-rate home loans when they refinance or take out a new mortgage. The Fed at its September meeting indicated it plans to keep rates low at least until 2022, despite a brightening economic picture and a jump in inflation in recent months.

“The Fed is inching closer to tapering, the process of slowly – very slowly – dialing back their bond purchases,” says Greg McBride, CFA, Bankrate chief financial analyst. “The stock market has been a direct beneficiary of the Fed’s stimulative actions and the prospect of reducing that is sure to spark heightened market volatility.”

What the Federal Reserve does

The Federal Reserve sets borrowing costs for shorter-term loans in the U.S. by moving its federal funds rate. The Fed kept this rate set near zero. The rate governs how much banks pay each other in interest to borrow funds from their reserves kept at the Fed on an overnight basis. Mortgages, on the other hand, track the 10-year Treasury rate.

Changes to the federal funds rate might or might not move the rate on the 10-year Treasury, which are bonds issued by the government that mature in a decade. Though a Fed rate cut doesn’t directly push down yields on the 10-year, it can lead to the same outcome. Investors worried about the economy after a rate cut might flock to the 10-year Treasury, considered a safe-haven asset, pushing down yields.

The Fed also influences mortgage rates through monetary policy, such as when it buys or sells debt securities in the marketplace. Early in the pandemic there was severe disruption in the Treasury market, making the cost of borrowing money more expensive than the Fed wanted it to be. In response, the Federal Reserve announced it would buy billions of dollars in Treasuries and mortgage-backed securities, or MBS. The move was to support the flow of credit, which helped push mortgage rates to record lows.

What influences mortgage rates

Fixed-rate mortgages are tied to the 10-year Treasury rate. When that rate goes up, the popular 30-year fixed rate mortgage tends to do the same and vice versa.

Rates for fixed mortgages are influenced by other factors, such as supply and demand. When mortgage lenders have too much business, they raise rates to decrease demand. When business is light, they tend to cut rates to attract more customers.

Price inflation pushes on rates as well. When inflation is low, rates trend lower. When inflation picks up, so do fixed mortgage rates.

The secondary market where investors buy mortgage-backed securities plays a role. Most lenders bundle the mortgages they underwrite and sell them in the secondary marketplace to investors. When investor demand is high, mortgage rates trend a little lower. When investors aren’t buying, rates may rise to attract buyers.

What Fed rate decisions mean for mortgages

The Fed sets the federal funds rate. This is an interest rate applied to money that banks and other depository institutions lend to each other overnight.

The fed funds rate affects short-term loans, such as credit card debt and adjustable-rate mortgages, which, unlike conventional fixed-rate mortgages, have a floating interest rate that goes up and down with the market on a monthly basis. Long-term rates for fixed-rate mortgages are generally not affected by changes in the federal funds rate.

If the central bank wanted to reduce rates again to stimulate the economy, it would have to push rates into negative territory, a move that Powell, the Fed chairman Powell has said is not being contemplated.

What to consider if you’re shopping for a mortgage

When you’re shopping for a mortgage, compare interest rates and APR, which is the total cost of the mortgage. Some lenders might advertise low interest rates but offset them with high fees, which are reflected in the APR.

To begin your search compare offers online, read lender reviews and go directly to lenders’ websites.

If you have a relationship with a lender, bank or credit union, find out what interest rate or customer discount you might qualify for. Often, lenders will work with customers to give them a better deal than they might otherwise get at another place.

Mortgage rates are near historic lows, so while you should pay attention to the Fed and the economy, your best move if you need a property loan is to get a rate that suits your budget and goals rather than wait for still lower rates.

Source: Click here

Posted by Jackie A. Graves on September 23rd, 2021 11:53 PM

This start-to-finish overview walks you through every step of getting a home loan.

Buying a home is a huge financial commitment that’s both exhilarating and stressful, especially for first-time buyers. But if you’ve done your homework and know what to expect, you’ll be ready to close your deal with confidence.

The process can vary from one scenario to the next, but you can expect to go through certain basic steps when you apply for a mortgage. Depending on your unique situation, these steps may happen concurrently, or take longer than expected. (We’re giving you some time estimates, but keep in mind that, for a variety of reasons, delays aren’t uncommon.)

In the end, if all goes to plan, you’ll soon pocket the keys to your new home.

Pre-qualification/pre-approval

Time: Generally, 2 to 5 days, but sometimes longer

Once you’ve saved up a down payment and think it’s the right time for you to buy, you may be tempted to contact a real estate agent and hit the open houses. That’s not always the best strategy, though — you could fall in love with a home only to find out later that you can’t afford it. For that reason, it’s a good idea to get pre-qualified or pre-approved before you start shopping for homes.

Pre-qualification

For a pre-qualification, a lender will ask you about any previous homeownership, and about your income, assets, and debt, to get an overall sense of whether you would qualify for a loan.

This conversation could happen over the phone or in person. There are a few red flags that would let them know you’re not ready to buy. If, for example, you had a recent foreclosure, you’ll need to wait several years before you can apply for a new mortgage.

If there are no obvious red flags, the lender may pre-qualify you up to a certain amount. The process is fast and convenient, and you should have an answer in a day or two.

Pre-approval

Pre-approvals can often take longer, and many banks and lenders divide the process into two stages. Initially, you may be asked to provide the following documentation:

  • 3 months of bank statements. Be sure to include all pages, even those “intentionally left blank.”
  • Proof of your income for two years. This means W-2s, or 1099s for self-employed borrowers.
  • Federal tax returns for the past two years

Couple using mobile devices to get preapproved for mortgage

Getting a pre-approval before you start shopping for a home can help when you’re ready to make an offer.

A loan processor will use an automated underwriting system to independently verify your income, assets, and debt. Those findings are forwarded to an underwriter, who compares them to the information you’ve provided. (The underwriter’s job is to determine the risk involved with giving you a loan, which requires evaluating lots of documentation, most of which you’ll provide later in the process.)

If your initial information checks out, the lender will generally provide a pre-approval letter indicating you may qualify for a loan of up to a certain amount. This process often takes two or three days if the information you’ve supplied is complete and accurate. If the lender has to ask for additional or more current information, the process will usually take longer.

But remember, a pre-approval is not a guarantee you’ll get a loan. You’ll still have to apply for a loan and go through the underwriting process.

Is it necessary?

Getting pre-approved has advantages. It shows your agent and sellers that you’re serious about buying, and that one lender already feels you’re financially capable. 

Home shopping and purchase offer

Time: Varies widely, depending on your real estate market

Finding the right home for you could happen in a matter of days, or it may take months. Whatever your situation, when you’ve found a home, you want to buy, you’ll work with your real estate agent to structure a purchase offer.

Your offer includes what you’d like to pay, inspections that need to take place (like a home inspection and termite inspection), contingencies (like a financing contingency that gives you time to get a loan), and how much you’ll put down in earnest money.

Typically, you pay earnest money to an escrow company when you submit an offer. It’s often 1-2% of the sales price, and if you pull out for a reason not allowed under the purchase contract, you may lose that money. (Don’t confuse earnest money with your down payment, which is the amount of money lenders require you to put toward the home purchase. The down payment is typically 3-20% of the purchase price depending on the loan, and is due at the closing, along with your closing costs.)  

In a slow real estate market, you might only have to pay $500 – $1,000 in earnest money. In other markets, where sellers may have several offers to choose from, you might want to increase your deposit to 2% or 3% of the offer amount. Your earnest money will generally be kept in an escrow account to be applied to the purchase price at closing.

Application and disclosures 

Time: Generally, about 1 week, if you’ve supplied all required documentation

The loan application

Now it’s time to submit a mortgage loan application. You can use any lender for this step; you aren’t obligated to use the lender that pre-approved you.

You’ll need to supply six key pieces of information:

  • your name
  • your income
  • your Social Security number
  • the property address
  • the sales price
  • the amount you’d like to borrow

At this point, you can also talk to a loan officer to discuss how much you plan to put down, and the types of mortgages that may fit your situation. These could be fixed or adjustable-rate mortgages, conventional or government issued (VA, FHA, or USDA).

A bright cheerful home for sale

Once you’ve found the perfect home for you and submitted your loan application, you’ll receive a Loan Estimate within three days.

Your loan estimate

Within three days after your loan application is complete — meaning you’ve supplied all your current income and asset information — the lender will provide a Loan Estimate that outlines the terms of your loan, including estimated closing costs, the interest rate, and monthly payments (which include principal, interest, taxes, and hazard/homeowner’s insurance, sometimes abbreviated as PITI).

It’s important to know that the Loan Estimate doesn’t mean your loan is approved. But it does let you know the loan terms the lender expects to offer you if the loan is approved, and you accept.

If the terms look good to you and you want to move forward with this lender, you must notify them (usually within 10 days of receiving the Loan Estimate) of your intent to proceed.

During this stage, you’ll probably also have the result of home inspections and may be negotiating with the seller to make some repairs.

Disclosures

During this time, you can expect a series of disclosures to be sent for your review and signature. Typically, you’ll use e-signature (e-sign) technology on your smartphone, tablet, or computer to view, download, sign, upload, and return these documents.

While it isn’t required, e-signing documents condenses what used to take days into just minutes. But to use the technology, you’ll need to sign a consent form saying you agree to the process. Some lenders include this consent step as part of their online application.

Follow-up tasks and documents

Time: Varies, and can happen concurrently with other steps

Document requests

Throughout the loan process, the lender will probably request additional or more current documents. For example, it’s not uncommon for lenders to ask for updated bank statements and income information.

This can be frustrating when you’re anxious to know whether your loan is approved, but try to be patient — and remember, it’s to your advantage to reply promptly. You’ll want to respond to these requests right away, ideally within 48 hours, to keep the process moving.

Home buyer using laptop to send lender his mortgage application

Be sure to send complete and current documents when your lender asks for additional information.

Loan processing

Time: Varies, based on your closing date

You’ve been sending your lender a lot of paperwork, and you may be wondering where it’s all going and what’s happening with your loan.

Senior couple reviewing their mortgage information on a laptop

Loan processing can take much longer than most borrowers would like, but it pays to be patient.

Most likely, your file is in the hands of a mortgage loan processor. It’s their job to ensure all documents are present and accurate, clarify any discrepancies, and ask for additional information needed.

Because time is elapsing, you may need to send new pay stubs or bank statements, so the lender will consider them “current” on your closing date.

When your loan file is complete, it’s sent by the processor to an underwriter who will verify your identification and credit history, and make an assessment of your financial situation, which includes verifying your income, cash reserves, equity investments, financial assets and more.

Loan decision

Time: About 2 weeks, if all the information you’ve supplied is still current

The underwriter may assess your mortgage application manually or run it through an automated system for approval. Many lenders adhere to underwriting guidelines from the government-sponsored enterprises (GSEs) — Fannie Mae and Freddie Mac — which purchase mortgages in the secondary mortgage market. In most cases, GSE guidelines require a maximum loan-to-value ratio of 97%, a credit score of 680 or higher, and a debt-to-income (DTI) ratio of 36% or lower.

Family receiving news about their loan application

Stay in touch with your lender during the loan decision phase and notify them if anything related to your income or credit changes.

The underwriter will generally make one of three decisions about your loan:

  • Approve
  • Conditionally approve
  • Deny

If your loan is approved

When all underwriting requirements are met and your loan is approved, you’ll often receive a commitment letter, indicating your loan program, loan amount, loan term, and interest rate. At that point, certain inspections and other activities need to happen, including a final pull of your credit report, an appraisal, and a title search.

Final credit check

When the lender pulls your credit, it’s important that your credit score and revolving debt payments haven’t changed much. In other words, don’t make any large purchases that could raise your DTI or lower your credit score once you’ve applied for a mortgage.

Appraisal

The lender will order an appraisal to determine if the amount you’ve offered to pay for the property is appropriate based on the home’s condition and comparable homes (or “comps”) in the neighborhood.

If the home appraises at the sales price, everybody’s happy.

If it comes in too low, the seller may need to lower the price to the appraised value to keep the deal moving forward, or the lender may be able to dispute the appraisal. Talk to your loan officer and real estate agent about the best approach for your specific situation.

Title

The lender will also order a title search to make sure the property can be legally transferred. A title company will check for any claims, liens, easement rights, zoning ordinances, pending legal action, unpaid taxes and restrictive covenants.

If the property is clear of these prohibited encumbrances, the title company issues an insurance policy that guarantees the accuracy of its research. Often, two policies are issued, one to protect the lender and one to protect the buyer. Owner’s title insurance is generally optional and not required. 

Final approval

When these activities and all other required actions or inspections are complete, the underwriter gives final approval. This means you’re “clear to close.” (Congratulations!)

Portrait of young couple in front of home

Learning you’re “clear to close” is cause for celebration.

Once the closing has been cleared, a closing agent will review instructions and requirements from all parties involved and the legal and loan documents. They will assemble charges, prepare the closing statements, and schedule the close.

If your loan is approved with conditions

This means the underwriter has a question (or a few) that must be cleared up before they can approve your loan. You might need to explain where money in your bank account came from if it wasn’t from your regular paycheck, or maybe pull a document that’s aged during the review time, like a bank statement that shows your current balance.

Once you’ve addressed all the conditions, the underwriter will either give final approval or deny your loan.

If your loan is denied

There are many reasons a loan application could be denied. For example, if your employment status or credit situation changed after you applied, that could be the cause. Talk to your lender to find out the specific reasons your loan was denied.

Closing

Time: Generally, about 2 hours

An escrow or settlement agent will oversee the close. Under the TILA RESPA Integrated Disclosure rule (TRID), also known as the Know Before You Owe mortgage disclosure rule, the lender must provide a Closing Disclosure at least three business days before you’re scheduled to close the loan. Use this time to compare your final terms and closing costs to those from the lender’s Loan Estimate and ask any questions you have.

Signing the documents

The seller and buyer can sign documents at different times, or together. In any case, the seller signs the deed and closing affidavit. The buyer signs the new note and mortgage, and any other disclosures. The old loan is paid off, and the seller, real estate agents, attorneys and other parties involved are paid.

A couple closing on their home loan

Closing may take place with the buyer and seller both present, or they may sign documents separately.

Final steps

After the signing, the transaction documents are recorded in the county where the property is located. Title insurance policies are prepared and sent to you and to your lender.

As part of the close, you will be given instructions on how to pay your mortgage, including the monthly amount you’ll owe and where to send it.

The lender collecting your mortgage payments, called your loan servicer, will usually set up an escrow account on your behalf so property taxes and other payments (such as HOA fees) are paid automatically.

And now you’re officially a homeowner!

Source: Click here

Posted by Jackie A. Graves on September 22nd, 2021 1:44 PM

If you need money to pay bills or make home improvements, and think the answer is in refinancing, a second mortgage, or a home equity loan, consider your options carefully. If you can't make the payments, you could lose your home as well as the equity you've built up.

Talk to an attorney, financial advisor, or someone else you trust before you make any decisions about borrowing money using your home as collateral.

Early Warning Signs

Don’t let anyone talk you into using your home as collateral to borrow money you may not be able to pay back. High interest rates and credit costs can make it very expensive to borrow money, even if you use your home as collateral. Not all loans or lenders (known as “creditors”) are created equal. Some unscrupulous creditors target older or low income homeowners and people with credit problems. These creditors may offer loans based on the equity in your home, not on your ability to repay the loan.

Avoid any creditor who:

  • tells you to lie on the loan application. For example, stay away from a lender who tells you to say that your income is higher than it is.
  • pressures you into applying for a loan or for more money than you need.
  • pressures you into accepting monthly payments you can't comfortably make.
  • doesn’t give you required loan disclosures or tells you not to read them.
  • misrepresents the kind of credit you're getting, like calling a one-time loan a line of credit.
  • promises one set of terms when you apply, and gives you another set of terms to sign — with no legitimate explanation for the change.
  • tells you to sign blank forms — and says they'll fill in the blanks later.
  • says you can't have copies of documents you signed.

Protecting Your Home and Equity

Here are some steps you can take to protect your home and the equity you've built up in it when you are looking for a loan.

Shop Around.

Costs can vary greatly. Contact several creditors, including banks, savings and loans, credit unions, and mortgage companies. Ask each creditor about the best loan you would qualify for. Compare:

  • The annual percentage rate (APR). The APR is the single most important thing to compare when you shop for a loan. It takes into account not only the interest rate(s), but also points (each point is a fee equal to one percent of the loan amount), mortgage broker fees, and certain other credit charges you have to pay the creditor, expressed as a yearly rate. Generally, the lower the APR, the lower the cost of your loan. Ask if the APR is fixed or adjustable — that is, will it change? If so, how often and how much?
  • Points and fees. Ask about points and other fees that you'll be charged. These charges may not be refundable if you refinance or pay off the loan early. And if you refinance, you may pay more points. Points usually are paid in cash at closing, but may be financed. If you finance the points, you'll have to pay additional interest, which increases the total cost of your loan.
  • The term of the loan. How many years will you make payments on the loan? If you're getting a home equity loan that consolidates credit card debt and other shorter term loans, you may have to make payments on those other debts for a longer time.
  • The monthly payment. What's the amount? Will it stay the same or change? Ask if your monthly payment will include escrows for taxes and insurance. If not, you will have to pay for those items separately.
  • Balloon payments. This is a large payment usually due at the end of the loan term, often after a series of lower monthly payments. When the balloon payment is due, you must come up with the money. If you can't, you may need another loan, which means new closing costs, points, and fees.
  • Prepayment penalties. These are extra fees that may be due if you pay off the loan early by refinancing or selling your home. These fees may force you to keep a high rate loan by making it too expensive to get out of the loan. If your loan includes a prepayment penalty, find out what you would have to pay. Ask the creditor if you can get a loan without a prepayment penalty, and what that loan would cost. Then decide what's right for you.
  • Whether the interest rate for the loan will increase if you default. An increased interest rate provision says that if you miss a payment or pay late, you may have to pay a higher interest rate for the rest of the loan term. Try to negotiate this provision out of your loan agreement.
  • Whether the loan includes charges for any type of voluntary credit insurance, like credit life, disability, or unemployment insurance. Will the insurance premiums be financed as part of the loan? If so, you'll pay additional interest and points, further increasing the total cost of the loan. How much lower would your monthly loan payment be without the credit insurance? Will the insurance cover the length of your loan and the full loan amount? Before you decide to buy voluntary credit insurance from a creditor, think about whether you really need the insurance and comparison shop with other insurance providers for their rates.

Generally, the creditor or mortgage broker will give you a written Good Faith Estimate that lists charges and fees you must pay at closing, and the creditor will give you a Truth in Lending Disclosure that lists the monthly payment, the APR, and other loan terms. If you don't get these d, ask for them. That makes it easier to compare terms from different creditors.

Once You’ve Chosen a Creditor

Negotiate. It never hurts to ask if the creditor will lower the APR, take out a charge you don't want to pay, or remove a loan term that you don't like.

Ask the creditor for a blank copy of the form(s) you will sign at closing. While they don't have to give them to you, most honest creditors will. Take the forms home and review them with someone you trust. Ask the creditor about items you don't understand.

Ask the creditor to give you copies of the actual documents that you'll be asked to sign. The creditor may not have to give you all of the actual filled in documents before closing, but it doesn't hurt to ask.

Be sure you can afford the loan. Do the math. Figure out whether your monthly income is enough to cover each monthly payment, in addition to your other monthly bills and expenses. If it isn't, you could lose your home and your equity — through foreclosure or a forced sale.

If you’re refinancing the original mortgage on the property, ask about escrow services. Does the loan's monthly payment include an escrow amount for property taxes and homeowner's insurance? If not, be sure to budget for those amounts, too.

At Closing

Before you sign anything, ask for an explanation of any dollar amount, term or condition that you don't understand.

Ask if any of the loan terms you were promised before closing have changed. Don't sign a loan agreement if the terms differ from what you understood them to be. For example, a creditor should not promise a specific APR and then — without good reason — increase it at closing. If the terms are different, negotiate for what you were promised. If you can't get it, be prepared to walk away and take your business elsewhere.

Before leaving the creditor, make sure you get a copy of the documents you signed. They contain important information about your rights and obligations.

Don't initial or sign anything saying you're buying voluntary credit insurance unless you really want to buy it.

After Closing

Most home equity borrowers have at least three business days after closing to cancel the deal. This is known as your right of "rescission." In some situations (ask your attorney), you may have up to three years to cancel. To cancel the loan, you have to tell the creditor in writing. Send your letter by certified mail and ask for a return receipt. That will allow you to document what the creditor received and when. Keep copies of your correspondence and any enclosures. After you cancel, the creditor has 20 days to return the money or property you paid to anyone as part of the credit transaction and release any security interest in your home. Then, you have to offer to return the creditor's money or property, which may mean getting a new loan from another creditor.

High-Rate, High-Fee Loans

You may have additional rights under the Home Ownership and Equity Protection Act (HOEPA) if your loan is a home equity loan, second mortgage, or refinance secured by your principal residence and if:

  • the loan's APR is more than 8 percentage points higher than the rate on a Treasury note of comparable maturity on a first mortgage, or the loan's APR is more than 10 percentage points higher than the rate on a Treasury note of comparable maturity on a second mortgage.
  • the total fees and points at or before closing exceed $625 or 8 percent of the total loan amount, whichever is larger. (The $625 figure is for 2013; the amount is adjusted annually.) Credit insurance premiums written in connection with the loan count as fees in this situation.

Higher-Priced Loans

You may have additional rights if your loan is used to buy a home (but not for the initial construction of your home, or for a temporary loan of 12 months or less), a home equity loan, a second mortgage, or a refinance secured by your principal residence and if:

  • the loan’s APR is 1.5 or more percentage points higher than the average prime offer rate for a comparable transaction on the date the interest rate is set for a first mortgage, or
  • the loan’s APR is 3.5 or more percentage points higher than the average prime offer rate for a comparable transaction on the date the interest rate is set for a second mortgage.

Complaints

If you think your creditor has violated the law, you may wish to contact the creditor or loan servicer to register your concerns. At the same time, you may want to contact an attorney, your state Attorney General's office or banking regulatory agency, or the Federal Trade Commission.

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Posted by Jackie A. Graves on September 21st, 2021 4:43 PM

The economy is weird right now. The pandemic has upended daily life for almost everyone, the Federal Reserve is trying to stave off even more dire conditions by lending money for next to nothing, and the unemployment situation remains precarious.

Even so, real estate has remained an unusual bright spot, because homeowners and would-be buyers were generally less affected, monetarily speaking, by the pandemic than renters.

Although the housing market has remained strong, it’s not immune from outside economic forces, including inflation. Inflation essentially is an increase in the prices consumers pay for goods and services.

A small amount of ongoing inflation is considered normal, but the rate of inflation has been rising recently, affecting everything from how much you pay at the pump to the listing prices of homes.

“By keeping interest rates this low for this long, what they’ve done is they’ve created an everything bubble. It’s not just the housing market,” Desmond Lachman, a senior fellow at the American Enterprise Institute, previously told Bankrate.

Compounding the inflationary pressure on housing, the limited number of homes available for sale is pushing prices up rapidly. That low inventory is due partly to pandemic-related construction delays and partly because many homeowners who would otherwise have moved chose to postpone putting their properties on the market during lockdowns.

Taken together, these conditions are favorable for sellers, who are often receiving many offers above asking price, but the market can be extremely frustrating for buyers, who can struggle to make the winning bid.

What to consider if you want to sell your home 

If you’re looking to sell your home right now, you shouldn’t have too much trouble. The real issue could be what happens on the other side of the transaction. When you go to purchase your next place to live, you’ll be joining the scrum of eager buyers competing for a limited number of available properties. 

Pros

  • The pandemic has shifted priorities for a lot of homebuyers, and many newly-minted remote workers sought out more space.
  • Although more people wanted to move, the number of listings did not keep up, which forced prices up — a great thing for sellers.
  • Buyers have had to offer more and more money to compete, and many even waived conditions like inspection and appraisal contingencies in their contracts.
  • Many housing experts think we’re near the top of the market in terms of prices, so it’s a great time to sell overall.

Cons

  • Selling is easy, but finding another home is hard, especially for people looking to downsize, because they may find themselves in an even more competitive market segment.
  • Home prices are up by more than 17 percent since last year, according to the National Association of Realtors, which means the proceeds from your sale won’t go as far when you move to make your next purchase.
  • Low inventory, high prices and high rents may make it hard to find your next home.

What to consider if you want to buy a home

Even in this crazy market, you can still snag a great home if you play your cards right and make sure the numbers work for you. It’s especially important to get preapproved for a mortgage before setting out to look for homes, and make as big a down payment as possible, to show sellers you’re serious and your financials are sound.

Pros

  • Mortgage rates have never been lower. You may have to pay more for your house than you’d like to, but your borrowing costs will be lower, so you may be able to afford that bigger loan without stretching too much
  • Although home prices are high, most experts say this current housing cycle should not be a repeat of 2008, when the bursting bubble triggered the Great Recession. If you buy now, you may see some short-term losses if you try to sell the property again too soon, but there shouldn’t be a huge wave of foreclosures like there was a little over a decade ago.

Cons

  • The intense seller’s market means buyers need to be prepared for bidding wars and to lose out on multiple properties before finally sealing a deal.
  • You may need to reevaluate your budget or must-have list: Most homes sell over-asking these days, so your dollars may not go as far as you hoped.
  • You could see your property value decline after you close once the market cools off, but experts say a trend toward foreclosure is not on the horizon, and if you’re buying your forever home, the value should eventually recover.

Should you wait for inflation to decrease and inventory to increase?

There’s no perfect time to buy a house, so it really comes down to what you’re comfortable with. If the numbers work for you now, and you can secure a mortgage that has monthly payments you can afford going forward, then it’s a fine time to buy if you can make the best offer.

Otherwise, it could be worth it to wait until market conditions favor buyers a little more or see if you can adjust the geographical area or physical parameters of your housing search.

No matter what you decide to do, it’s important to get your finances in order so you’re in as strong a position as possible when you do decide to enter the homebuying fray. If you wait, you can use the time to keep contributing to your savings. Your down payment fund may go farther in a cooler housing market, after all.

Source: Click here

Posted by Jackie A. Graves on September 17th, 2021 4:08 PM

Home buyers can make mistakes that could put their mortgage in jeopardy leading up to closing or make them miss out altogether in homeownership.

“Most buyers are so preoccupied with simply saving up for a down payment and getting their foot in the door that they forget about the little details that can trip [them] up,” Michele Harrington, COO of First Team Real Estate, told The Mortgage Reports.

Real estate pros and financial experts point to several of the most common mistakes buyers make, such as financing a car or another expensive item before closing. They may buy new furniture and appliances for their new home on credit. “All of these activities are a big no-no, as lenders will do a final credit inquiry check before closing,” Jim Roberts, president of True North Mortgage, told The Mortgage Reports. “If new debts were added, it could jeopardize the loan approval.”

Also, borrowers may be tempted to max out their credit cards as they try to afford homeownership by saving money. Lenders consider how much you owe relative to your credit limit. For example, if a borrower owes $2,000 on a limit of $2,500, the card is considered nearly maxed out, which will significantly reduce a credit score, Roberts said.

Another big mistake that home buyers often make failing to shop around for their mortgage. “Although many lenders’ rates are very close in price to others, some lenders charge rates that are above average,” Kahri Washington, broker and owner of 1st United Realty & Mortgage, told The Mortgage Reports. “Getting a bad loan with a higher interest rate can be very expensive in the long run, so be sure to shop around and get quotes in writing from several different mortgage lenders.”

A 2018 study by Freddie Mac found that potential borrowers could save an average of $1,500 over the life of a 30-year fixed-rate loan by getting just one additional rate quote when shopping for a mortgage. More quotes can offer more savings; for example, 80% of borrowers who received one additional rate quote while shopping for a mortgage saved between $966 to $2,086 over the life of their loan. Eighty percent of the borrowers who obtained five quotes saved between $2,089 and $3,904, according to Freddie Mac’s report.

Source: Click here

Posted by Jackie A. Graves on September 16th, 2021 4:34 PM

For the ninth consecutive week, mortgage rates stayed below 2.9%. But even with historically low mortgage rates, home buying may be following a more typical seasonal pattern of cooling off, Nadia Evangelou, senior economist and director of forecasting for the National Association of REALTORS®, writes on the association’s Economists’ Outlook blog.

“Buyers and sellers typically do not want to move their family in the middle of the school year, and they usually wait until its end so they have more free time for moving,” she wrote. Sales typically drop by 15% between August and September, she said. “Even with historically low rates, it’s normal to see the market cooling off in the following months,” she added. NAR has forecast existing-home sales to drop by 10% in the last quarter of this year.

“While the economy continues to grow, it has lost momentum over the last two months due to the current wave of new COVID cases that has led to weaker employment, lower spending and declining consumer confidence,” said Sam Khater, Freddie Mac’s chief economist. “Consequently, mortgage rates dropped early this summer and have stayed steady despite increases in inflation caused by supply and demand imbalances. The net result for housing is that these low and stable rates allow consumers more time to find the homes they are looking to purchase.”

Freddie Mac reports the following national averages with mortgage rates for the week ending Sept. 9:

  • 30-year fixed-rate mortgages: averaged 2.88%, with an average 0.7 point, climbing slightly from last week’s 2.87% average. Last year at this time, 30-year rates averaged 2.86%.
  • 15-year fixed-rate mortgages: averaged 2.19%, with an average 0.6 point, rising slightly from last week’s 2.18% average. A year ago, 15-year rates averaged 2.37%.
  • 5-year hybrid adjustable-rate mortgages: averaged 2.42%, with an average 0.3 point, dropping slightly from last week’s 2.43% average. A year ago, 5-year ARMs averaged 3.11%.

Freddie Mac reports average commitment rates along with average points to better reflect the total upfront cost of obtaining the mortgage.

Source: Click here

Posted by Jackie A. Graves on September 15th, 2021 11:51 AM

Americans’ home equity reached another record high in the second quarter, according to a new report by mortgage data firm Black Knight. That metric, along with still-low mortgage rates, sets the stage for a continued boom in mortgage refinancing.

Black Knight says “tappable home equity” — the equity homeowners could borrow against while maintaining a loan-to-value ratio of less than 80 percent — jumped to a record $9.15 trillion at the end of June.

“U.S. homeowners with mortgages gained another $1 trillion in tappable equity in the second quarter alone,” says Ben Graboske, Black Knight’s president of data and analytics. “This is by far the strongest growth we’ve ever seen and equates to some $173,000 in equity available to the average mortgage holder, a $20,000 increase in just three months.”

The surge in home equity goes hand in hand with soaring home values. Prices are rising in nearly every part of the country, as shortages of homes for sale lead to bidding wars by desperate buyers. Meanwhile, the average rate on a 30-year fixed-rate mortgage fell to 3.03 percent last week, just 10 basis points above the record low, according to Bankrate’s national survey of lenders.

Cash-out refinances come back strong

In boom times, record levels of home equity open the possibility of using a refinance to extract cash from your home to fund renovations or pay down higher-cost debt. As the housing market has powered through the coronavirus recession, lenders have proven willing to sign off on cash-out refinances.

Black Knight says cash-out refis are soaring. The 1.1 million cash-out refinance loans originated in the second quarter made up fastest quarterly pace in nearly 15 years.

What you can do if your mortgage rate is too high

Does it make sense to refi? Here’s how you can tell:

  • Take a look at your situation: Do you have significant equity in your home? Is your rate above 3.5 percent? Do you plan to be in your home for a few more years? If you can answer yes to all of these questions, a refi may make sense.
  • Crunch the numbers: Borrowers often forget about the hefty closing costs that accompany a refi. Your savings from the lower rate need to be significant enough to recover those upfront costs. Say you have a $200,000 loan at 3.75 percent. In that case, your monthly payment is $926. If you’re able to borrow $200,000 at 3.25 percent, your monthly payment would fall by $56, to $870 a month. If the refi means paying $4,000 in closing costs, you’d need nearly six years to make back your closing costs before the refi would provide a financial benefit. Bankrate’s refinance calculator can help you decide.
  • Shop around: Rates and closing costs can vary widely by lender. Make sure to compare offers from multiple lenders.
  • Keep in mind that market conditions are changing: Mortgage rates are difficult to predict, but many experts expect rates to rise only slightly in the near future.

Source: Click here

Posted by Jackie A. Graves on September 12th, 2021 7:54 PM

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