[area] home mortgage

The Federal Reserve raised its benchmark interest rate .75% in September and concerns over how this would affect the personal finances of millions of Americans started to arise.

While an increase in rates may help tame inflation, they don’t always help consumers. However, some homeowners may still benefit from mortgage refinancing. In fact, even with the rate jump, select homeowners can still save money with a refinance.

Pay Off Your Loan Early

The 30-year home loan is the most popular due to the fact that it spreads out to more manageable payments. This can take decades to pay off the loan. But what happens if you want to finish your loan sooner to eliminate what’s likely your biggest monthly bill. Then a mortgage refinance loan may be worth pursuing. By shortening the loan term you’ll be able to pay it off and build up equity in the house faster. Just be aware that reducing your loan term may make your monthly payments go up, albeit for a shorter period.

Drop Your PMI

If you originally purchased your home with a down payment of less than 20% of the home’s value the lender probably tacked on PMI, private mortgage insurance, to your monthly payment. If the value of your home has grown since the time of purchase you may be able to refinance your mortgage loan to remove this payment. Just make sure the numbers make sense.

Other Possibilities

Cash-out refinancing allows a homeowner to take out a new loan for a larger amount than what they owe on their current loan. They then use the new loan to pay off the old one and keep the difference between the two as cash that can be used as the home owner sees fit.

Reverse mortgages permit homeowners above the age of 62 who have completely paid off or paid off most of their mortgage to take out a portion of their home’s equity. This would qualify as tax-free income. It does need to be repaid if the homeowner dies or decides to sell the home. Still, it may be worth pursuing if the cash is needed.

Can’t Predict The Future

The current state of mortgage rates and mortgage refinance rates are clearly not as advantageous as they were in 2020 and parts of 2021. But, if inflation doesn’t cool, the current rate environment may be the best homebuyers and homeowners can expect for the foreseeable future. So don’t dismiss the potential benefits of refinancing, even now.

[area] home equity

Over the last year the average homeowner in the United States gained roughly $64,000 in equity due to home price appreciation. Now, whether you’ve just retired or you’re thinking about retirement, you may be considering your options for this whole new stage of your life. Here are a few ways that you can go about converting your home equity into money for retirement.

Cash-Out Refinance

For retirees who don’t want to move, a cash-out refinance may be a viable option. A cash-out refinance is a new loan that replaces your existing mortgage. While other types of refinancing can result in a lower interest rate or change the length of your mortgage, a cash-out refinance leaves you with a new mortgage for an amount that exceeds what you currently owe. You then collect the difference in cash.

While the cash-out refinance will produce a lump sum of tax-free cash, there are risks and drawbacks associated with this type of transaction. In addition to paying closing costs, you also give up the equity you’ve presumably worked to build. And if the value of the home drops, you could end up owing more than the home is worth. Then again, if you’re committed to staying in your home and your retirement income can cover your monthly mortgage payments, a cash-out may be an option for you.

Downsize

The most obvious option is to sell your home, purchase a smaller one and pocket the difference. Some retirees who downsize forgo buying a new home altogether and opt to rent instead. These retirees are less likely to be interested in building equity in their home over the course of several decades and instead view their home as an expense, not an investment.

Convert Your Home Into a Rental

Retirees with the energy and willingness to be a landlord can combine some of the above strategies to create a new income stream. If you own your home outright, you can take out a mortgage on the home and use the cash infusion to cover your retirement expenses, including buying a smaller home or renting an apartment. By converting your primary residence into a cash-flowing rental property, you’ll hang on to the home and use the monthly rent to cover your mortgage payments. pocketing whatever’s left over. Assuming the property remains rented, it will be a valuable asset to leave to your heirs as part of your estate.

[area] real estate
Over the last five years, a surge in home prices has created substantial wealth for the middle class. According to the latest Homeowner Equity Insights from CoreLogic, the average homeowner’s equity has grown by $64,000 just over the last 12 months alone. Since there’s an ongoing imbalance between the number of homes available for sale and the number of buyers looking to make a purchase, home prices are still on the rise.

Down Payment On A New House

When you sell your current house, the equity you built up comes back to you in the sale. In a market where homeowners are gaining so much equity, it may be just what you need to cover a large portion – if not all – of the down payment on your next home.

Cash-out Refinance

One way to get money from your home’s increase in value is to refinance. You’ll refinance your home with a larger mortgage than you previously had to get the difference back in cash. In some instances you’re able to refinance at a lower rate or reduce your monthly payments. It may not be the best option for homeowners right now, however. That’s because interest rates are rapidly rising, and with them, mortgage rates. You’ll also need to consider the extra closing cost fees to refinance.

Home Equity Loan

A home equity loan gives you access to some of your house’s appreciated value. It’s a loan that you take out against the value of your home and pay off over a set period, generally 10 to 30 years. These loans do include closing costs and can also include fees. In addition, you’re required to take out a lump sum, say $100,000, and pay off the entire amount plus interest. Usually, the interest rate is fixed, however, which can help you when budgeting long-term. According to Bankrate, home equity loan rates generally range from 3.5% to 12%, depending on the borrower.

Home Equity Line Of Credit

A home equity line of credit, or HELOC, is a type of home equity loan that allows you to draw funds as you need them and repay the money at a variable interest rate. Because of this, HELOCs are generally best for people who need funds for ongoing home improvement projects or who need more time to pay down existing debt. HELOCs typically have lower interest rates than home equity loans and personal loans; to get the best rates, you’ll have to have a high credit score, a low debt-to-income ratio and a lot of tappable equity in your home.

[area] mortgage

There is a lot of competition in the real estate market today, so you do not want to do anything that could jeopardize your chances of getting your dream home. The home loan approval process is not as simple as most people believe, and it can take some time to process all the information required. Here are a few things you may not realize you need to avoid after applying for your home loan.

Avoid Making Large Cash Deposits

In order to source your money, lenders need to know where your money is coming from, and cash isn’t easy to trace. Before transferring any cash into your account, discuss documenting your transactions with your loan officer.

Avoid Making Big Purchases

As borrowers add new bills, their debt-to-income ratio will increase, and in the eyes of the lender, this makes their loans riskier, and in some cases, qualified borrowers will no longer qualify. Since higher ratios make loans riskier, qualified borrowers may no longer qualify.

Avoid Applying For New Credit

Regardless of whether you are looking for a new car or a new credit card, your FICO score will be affected by organizations like auto dealers, mortgage companies, and credit card companies every time they pull your credit report. This lowers your credit score and that can affect your mortgage interest rate and even your eligibility for credit.

Don’t Change Your Bank Account

When you transfer money between accounts, consult with your loan officer and ensure that they are notified before you do so. Lenders have to track and source your assets; this can be simplified if your bank accounts are consistent.

Avoid Closing Credit Accounts

It is a common misconception among borrowers that having fewer resources available to them would reduce their risks, and that closing some accounts would improve their chances of being approved. Credit history as well as overall usage, measured as a percentage of available credit, are important aspects of your score, and closing accounts hurts them both.

A Brief Summary

If you are planning on making any major purchases, moving your money around, or making any major changes in your life, it’s recommended you consult your lender first. Your lender is qualified to explain how your financial decisions may affect your home loan.If you need assistance in navigating the mortgage process, consult your loan officer. You can increase your chance of approval by being clear and honest with your loan officer.

[area] mortgage
Once you’ve applied for a mortgage, there are some key things to keep in mind before you close the transaction. It’s exciting to start thinking about moving in and decorating your new place, but before you make any large purchases, or move your money around, be sure to consult your lender. Here’s a list of things you shouldn’t do after applying for a mortgage. They’re all important to know – or simply just good reminders – for the process.

Depositing Cash

Lenders need to source your money, and cash isn’t easily traceable. Before you deposit any amount of cash into your accounts, discuss the proper way to document your transactions with your loan officer.

Large Purchases

New debt comes with new monthly obligations. People with new debt have higher debt-to-income ratios. Since higher ratios make for riskier loans, qualified borrowers may end up no longer qualifying for their mortgage.

Co-Signing Other Loans

When you co-sign, you’re obligated. With that obligation comes higher debt-to-income ratios as well. Even if you promise you won’t be the one making the payments, your lender may have to count the payments against you.

Applying for New Credit

It doesn’t matter whether it’s a new credit card or a new car loan. When you have your credit report run by organizations in multiple financial channels (mortgage, credit card, auto, etc.), your FICO® score can be impacted. Lower credit scores can determine your interest rate and possibly even your eligibility for approval.

Closing Credit Accounts

Many buyers believe having less available credit makes them less risky and more likely to be approved. This isn’t true. A major component of your score is your length and depth of credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both of those determinants of your score.

[area] mortgage

There’s no way around it, mortgage rates have been on the rise in 2022. With the uncertainty of where rates may go, you should do everything in your power to increase your chance at getting the best rate available to you. Your mortgage rate will depend on things such as your personal credit profile, income, current debt load, and down payment amount.

Improve your credit score

Your lender will check your credit score and report with the three major credit bureaus before they can secure the best rate for you. If your score is below 740, it’s worth the effort to boost your credit score. First, look for any errors on your report and dispute them with the bureau reporting it. Next, make steps to pay down all debts and maintain low credit card balances. Don’t close any accounts though, this will reduce the available credit you have. You should aim to use no more than 30% of the limit on any credit card while continuing to make payments on time.

Reduce your debts

If earning extra income isn’t possible, cutting expenses may be the way to lowering your debt-to-income ratio, also known as your DTI. Decrease entertainment related purchases, forgo the vacation this year and eat out less. Lenders use your DTI as a representation of your personal financial fitness and ultimately, as a way to judge how much of a risk you are to lend to. Ideally, your DTI should be around 36% or less making you a better candidate for a lower mortgage rate. For example, if you make $8,000 a month and you’ll only be spending $2,800 (35% of your income) on your mortgage payment and other debt payments.

Save for a bigger down payment

Most loans require a minimum down payment amount, with USDA and VA loans being the exceptions. Putting down more than the minimum shows the lender that you’re willing to invest more in the property, making you less risky and therefore eligible for a more attractive interest rate. If you put down less than 20% on the loan, you’ll most likely be required to have private mortgage insurance (PMI). Having to pay PMI premiums will affect you the same as a higher rate will be increasing your monthly payment and total borrowing costs.

Look into a shorter term loan

When you select a 15 year fixed rate mortgage instead of a 30 year fixed rate mortgage, the interest rate will typically be lower. Although this may mean a slightly higher monthly payment, you’ll have the benefits of paying interest on the loan and also paying off the home in half the time, potentially saving you thousands over the life of your loan.

Current market conditions, your credit history and other details about your financial life will be how lenders personalize your interest rate. Since you can’t control the markets, it’s up to you to build your creditworthiness and obtain the best interest rate available to you.

[area] real estate
It’s an adventure when you’re ready to go house hunting. It’s even more exciting when you are ready to search for your first home. Whether you’re moving out of your parent’s house, or you have been renting and are ready to finally own your own place, you’re taking a big step in life. Here are some helpful tips which will make buying your first home a positive experience.

Budget Wisely

Far too many people make the mistake of buying a home that is beyond their means. This only adds stress to their lives and can even lead to moving out if the mortgage is too much to handle. Sit down and work out your budget. Look at all of your monthly expenses and remember that you’ll want to continue to set aside savings for a rainy day. Once you see how much is left for a mortgage payment, give yourself some wiggle room.

Location, Location, Location

If you’re going to take the plunge as a first-time homebuyer, be strategic about your search. What area calls to you? A great price or a beautiful home will not be enough if you’re unhappy with the location. Consider the school district if you have children and think about access to your favorite stores. Figure out if you want neighbors nearby or if you would prefer your own space. Perhaps most importantly, decide if you’re comfortable with the quality of the surrounding area you’re moving to. This will help you to trim down your list of potential homes.

Establish Financing

This may be the most important tip in obtaining your first home…make sure you have your financing in order before you go home shopping. Seek out a licensed mortgage professional in your area and begin the pre-qualification process. Getting pre-approved before you start looking at homes is extremely important in the event you decide to write an offer on one. In the competitive housing market we’re currently in, offers from pre-qualified buyers go to the front of the line.

[area] home mortgage
It’s important to get pre-approved at the beginning of the homebuying process, but what does that really mean, and why is it so important? Especially in today’s market, with rising home prices and high buyer competition, it’s crucial to have a clear understanding of your budget so you stand out to sellers as a serious homebuyer.

Being intentional and competitive are musts when buying a home right now. Pre-approval from a lender is the only way to know your true price range and how much money you can borrow for your loan. Just as important, being able to present a pre-approval letter shows sellers you’re a qualified buyer, something that can really help you land your dream home in an ultra-competitive market.

With limited housing inventory, there are many more buyers active in the market than there are sellers, and that’s creating some serious competition. According to the National Association of Realtors (NAR), homes are receiving an average of 5.1 offers for sellers to consider. As a result, bidding wars are more and more common. Pre-approval gives you an advantage if you get into a multiple-offer scenario, and these days, it’s likely you will. When a seller knows you’re qualified to buy the home, you’re in a better position to potentially win the bidding war.

By having a pre-approval letter from your lender, you’re telling the seller that you’re a serious buyer, and you’ve been pre-approved for a mortgage by your lender for a specific dollar amount. In a true bidding war, your offer will likely get dropped if you don’t already have one.

Every step you can take to gain an advantage as a buyer is crucial when today’s market is constantly changing. Interest rates are low, prices are going up, and lending institutions are regularly updating their standards. You’re going to need guidance to navigate these waters, so it’s important to have a team of professionals such as a loan officer and a trusted real estate agent making sure you take the right steps and can show your qualifications as a buyer when you find a home to purchase.

In a competitive market with low inventory, a pre-approval letter is a game-changing piece of the homebuying process. Not only does being pre-approved bring clarity to your homebuying budget, but it shows sellers how serious you are about purchasing a home.

[area] real estate
How big of a down payment do you need for a house? That’s going to depend entirely on the type of mortgage you choose. For some, it could be literally nothing — not a dime. Most will need at least 3% or 3.5% of the purchase price. The down payment amount you’ll need depends on what type of mortgage loan you choose. Here are the minimum down payments for different home loans:

VA loans ($0 down)

To get a zero-down VA loan (backed by the Department of Veterans Affairs), you need a Certificate of Eligibility. And the VA has strict rules about those. Veterans, active-duty service members, members of the National Guard, and reservists typically qualify — along with some surviving spouses. You’ll need an “acceptable” credit history as well. Some mortgage lenders are happy with a credit score of 580, but many want 620-660 or higher.

USDA loans ($0 down)

USDA mortgages are backed by the U.S. Department of Agriculture as part of its rural development program. Like the VA loan program, USDA allows a 0% down payment (though you still need to pay closing costs out of pocket). You’ll have to buy in an eligible rural area to qualify. However, your occupation doesn’t have to be connected to agriculture in any way.

Conforming loans (3% down)

Fannie Mae and Freddie Mac (the agencies that set rules for conforming mortgages) require a down payment of only 3% of the purchase price. If you can qualify, conforming loans may be better than those from the FHA. That’s because they let you stop paying mortgage insurance once your equity (the amount by which your home’s market value exceeds your mortgage balance) reaches 20%. FHA makes you keep paying mortgage insurance premiums until you sell, refinance, or finish paying down your loan.

FHA loans (3.5% down)

The smallest down payment you can make on an FHA loan is 3.5%. That’s a bit higher than for conforming loans. And, as we mentioned, FHA loans have you paying mortgage insurance premiums until you sell, refinance to a different type of mortgage, or simply pay off the loan, usually after 30 years. Often, an FHA loan can be a shortcut to homeownership. And if you’ll move or refinance within the next few years, those mortgage insurance payments aren’t as big of a deal.

Conventional loans (5-20% down)

Most conventional loans fall into the ‘conforming loan’ category regulated by Fannie Mae and Freddie Mac. The least you can put down with these is 3 percent. The next step up for a conventional loan is 5% down on a single-family primary residence. But with 5% down, you’ll be paying mortgage insurance until your equity rises to 20 percent. And you may find other types of mortgages more attractive if you’re in that situation. If cash isn’t an issue, you can go ahead and put 20% down right away. This will earn you the lowest mortgage rate and help reduce your monthly mortgage payments as well as your total interest cost.

[area] home equity

If you’re a homeowner in 2021, there’s a very good chance that you have a fair amount of equity due to recent market appreciation. So if you’re wanting to take advantage of historically low borrowing rates and pay off debt or do some home improving, there are a few ways to go about it.

There are three main ways to tap into home equity and we’ve boiled down what you need to know about some of the most common home financing options—cash-out refinance, home equity loan, and home equity line of credit.

Cash-out refinance

A cash-out refinance replaces your existing mortgage with a new loan that’s larger than what you currently owe—and puts the difference in your pocket. With a cash-out refinance, you’re able to receive some of your home’s equity as a lump sum of cash during the process. You can use this money for whatever you want—upgrades to your house, even a vacation. Another positive? If interest rates are lower than when you first got your loan, you’ll get to lock in lower interest rates than you’re paying now.

Home equity loan

Unlike a cash-out refi, which replaces your original loan, a home equity loan is a second additional mortgage that lets you tap into your home’s equity. You’ll get a lump sum to spend as you see fit, then you’ll repay the loan in monthly installments, just as you do with your first mortgage. The home equity loan is secured by your house, which means that if you stop making payments, your lender could foreclose on the home. A home equity loan lets you keep your existing mortgage, so you don’t have to start over from year one. Your interest rate is typically fixed, not adjustable, so you know exactly what your monthly payment will be over the life of the loan. And, another plus is your interest may be tax-deductible.

Home equity line of credit

A home equity line of credit, aka HELOC, is similar to a home equity loan—it’s a second mortgage that lets you pull out your home equity as cash. With a HELOC, however, instead of a lump sum amount, it works more like a credit card. You can borrow as much as you need whenever you need it (up to a limit), and you make payments only on what you actually use, not the total credit available. Since it’s a second mortgage, your HELOC will be treated totally separately from your existing mortgage, just like a home equity loan. Most HELOCs typically require the borrower to pay interest only during what’s known as the draw period, with principal payments kicking in later during the repayment period.