Jan 14, 2015 | Home Mortgage Tips
Some people try to apply for as small of a mortgage payment as they can reasonably afford to, and there is some prudence associated with this line of thinking. After all, recent economic events have shown that those who get over-extended may wind up in a dire financial situation.
However, there are also benefits associated with a higher mortgage and buying a slightly larger home if you can comfortably afford to do so.
For example, the rate of growth on equity will typically be more significant, and there are tax deductions and tax advantages that may be greater. If you are preparing to take on a larger mortgage payment that is reasonably manageable for you, you may do so with greater confidence when you follow a few tips.
Reduce Your Debts Beforehand
The best way to ensure that your larger mortgage payment is still affordable for your budget is to reduce your debts. When you think about the difference between carrying $800 per month in credit card payments or the equivalent in a higher mortgage payment, you will see that the benefit lies in the mortgage payment. The credit card payments typically will be mostly interest that has no benefit to you.
The mortgage payment is building equity through principal reduction on an asset, and the interest has tax benefits to you. However, you want that extra $800 per month in payments to be affordable. If possible, pay off or greatly reduce your credit card debt before you take on a new mortgage. In addition, close most existing credit card accounts so that you do not accumulate additional debt while you are responsible for the higher mortgage payment.
Increase Your Personal Savings
Then, increase your personal savings if necessary. The best budget with a higher mortgage payment is one that still allows you to save money regularly. If you are unable to save with your higher mortgage payment, there is a good chance that you may be taking on a little too much debt for what you can afford.
Ideally, you will have at least three to six months worth of your expenses on hand in cash and available to access in a worst-case financial situation. You will be able to sleep easier at night with your higher mortgage payment when you have the extra cash available to support yourself in the event of job loss, serious illness or other related events.
Your higher mortgage payment may help you to live in a nicer, larger home, to enjoy better tax deductions and to build equity at a faster rate. However, you want your mortgage payment to be affordable. By following these tips, you can confidently take on the larger payment.
Dec 31, 2014 | Home Mortgage Tips
So – you’ve completed an initial mortgage pre-qualification and now you’re ready to take the next step and meet with your lender or mortgage advisor for the pre-approval interview. Are you ready?
At this stage of the application process your lender will dig into your financial background to ensure that you’re fully capable of making your mortgage payments and that you don’t present too high a risk. Let’s take a quick look at a few questions you should know the answers to before you go in for a mortgage pre-approval.
Do You Have a Specific Home in Mind?
If you’ve already picked out the perfect new home, be sure to bring along some of the details when you meet with your lender. At minimum you’ll want to know the price range that you’re expecting to buy in so that your mortgage advisor can try to find a mortgage that allows you to purchase the home and still meet your other financial goals.
What is Your Current Income from All Sources?
Your income (and that of your spouse, if you have one) will be a major factor in the size of your mortgage, your payment terms and the interest rate that you qualify for. If you have a significant income and it’s clear that you will have little trouble making the mortgage payments you’ll likely qualify for a shortened amortization period that includes a lower interest rate. Conversely, if you can only afford to make a bare minimum monthly payment you’ll be facing a longer mortgage term.
Do You Have Any “Black Marks” on Your Credit?
If you have any negative spots in your credit history you’ll want to ensure that you’re able to answer for them, because your lender will certainly ask about them. Be honest and confident, and remember that the lender wants your business as much as you want to receive a pre-approval for mortgage financing.
What Are Your Plans in the Next Five to Ten Years?
Finally don’t forget that interest rates will continue to fluctuate and that may have an impact on your mortgage in the near future. Be sure to share any major financial plans that you have with your mortgage advisor as they can keep you appraised of any refinancing opportunities that come about.
Buying a home is an exciting time – one that will be far less stressful if you are fully prepared for the many steps along the way.
Dec 11, 2014 | Home Mortgage Tips
Whether you’re about to close on a lovely new house for your growing family or a stylish beachfront condo so you can retire close to the ocean, one thing is certain: you’re going to face a variety of closing costs. Insurance, taxes, financing fees, title fees, attorney fees and other costs will need to be paid, and if you’re a savvy buyer you’ll do everything you can to save on them.
In today’s post we’ll share three quick tips that can help you reduce your closing costs when you buy your next home.
Tip #1: Include Closing Costs in Your Negotiations with the Seller
As closing costs are a part of the real estate transaction they’re an excellent item to include in your negotiations with the seller.
For example, if you consider that closing costs might be 3 or 4 percent of the home’s value you can try to bring the seller’s asking price down to get those costs included. Or, you may be able to entice the seller with the prospect of a quick sale if they are willing to pay your closing costs in order to get you to sign on the dotted line.
Tip #2: Compare All of Your Mortgage Options
If you’re using mortgage financing to cover some of the up-front purchase cost of your home you’ll have other closing costs to pay including lender fees, mortgage insurance and more. Be sure to compare all of your options with your trusted mortgage advisor to ensure that you’re getting the best possible deal and paying the least amount in fees and interest.
You may also be able to save a bit on your closing costs by choosing a “no points” mortgage. In this type of mortgage you’ll end up saving on closing costs but you’ll be left paying a higher interest rate. Spend a bit of time doing the math to determine the best course of action.
Tip #3: Ask About Every Fee You’re Required to Pay
Finally don’t forget that you’re the customer and that you have the right to know about each one of your closing costs and why you’re expected to pay them. Being informed about all of the various items in your transaction will help ensure that you’re not paying something you could have avoided.
There you have it – three excellent tips for reducing your closing costs when you purchase your next home.
Dec 5, 2014 | Home Mortgage Tips
If you’re in the market for a new home and you’ve been researching mortgages, you’ve likely come across the terms “pre-qualification” and “pre-approval”. While these terms are self-explanatory in some circumstances, they are quite different in regards to mortgage financing.
In today’s blog post we’ll explain the difference between a mortgage pre-qualification and a pre-approval.
Pre-qualification: an Initial Look at Your Mortgage Options
The first – and easiest – step on the way to receiving mortgage financing to buy a home is known as pre-qualification. During this process you’ll meet with a mortgage advisor or lender who will assess your financial history including your current income and any debts that you might have. Using these numbers they’ll perform a quick calculation that suggests how much mortgage financing you might qualify for when you’re ready to buy a home.
Your mortgage professional will also answer any questions that you might have about the process, including what interest rates you may qualify for, how much you’ll need to invest in your down payment and more.
Pre-approval: a Conditional Mortgage Commitment
After you’ve been pre-qualified for your mortgage and you’re ready to start looking for a new home you’ll go through the pre-approval process. At this time your mortgage advisor or lender will take a much deeper look into your current financial situation, including pulling a credit report to assess how much risk they will have in lending you money. You’ll also complete a full mortgage application as this will allow your lender to get a conditional approval for a certain amount or range. Finally you’ll be informed about the interest rate and the terms of the mortgage once you find your new home and complete the purchase.
The Final Step: Finding the Perfect Home
Now that you’ve been pre-approved and have received a conditional commitment from your lender, you’re ready to find that perfect new home. On top of having a better idea of your price range and what you can afford, you’ll find that sellers are far more receptive to your offers as having a pre-approval signals that you’re a serious buyer who is ready to make your move.
When you’re ready to buy your new house or condo, your local mortgage professional is ready to help. Contact them to learn more about pre-qualification, pre-approval and your financing options. Enjoy your new home!
Nov 28, 2014 | Home Mortgage Tips
Whether you’re just starting to shop for a new home or you’ve already found the perfect new house and you’re ready to submit an offer, if you’re taking out a mortgage loan to cover some of the home’s purchase price you should be aware of the various closing costs you may encounter.
In today’s blog post we’ll share a quick guide to closing costs and what you can expect to pay when you buy a new home.
What Closing Costs Do Buyers Typically Pay?
As you move forward in the home purchase process you’ll incur a variety of fees that cover document preparation, inspections and other services that are required to fully process your mortgage. Your application and processing fees cover the cost of preparing your loan application and submitting it to your lender. Your credit report fee covers the cost of pulling a credit report which is used to assess your suitability for a mortgage and whether your loan is worth the risk.
You’ll likely pay an appraisal fee as you’ll need a proper appraisal of the home’s value, and you may need to pay a flood certification or survey fee depending on where the home is physically located. Additional fees that you may incur include wire transfer fees, commitment fees, courier fees and private mortgage insurance application fees.
Finally you’ll also encounter a number of closing costs that aren’t directly related to your mortgage, including insurance costs, attorney fees, property taxes, government filing or recording fees and more.
Consider Negotiating with the Seller
It may be worth asking the seller to pay some – or all – of your closing costs, depending on the offer that you’ve submitted and how strong of a negotiating position you’re working from. Trust in your real estate agent’s advice in this regard as you’ll want to avoid spooking the seller by asking them to cover costs that they didn’t anticipate.
As you can see, there are a number of different closing costs that you may encounter when you purchase a new home. An experienced mortgage professional will help you to better understand these costs and can show you areas where you may be able to find some additional savings.
Nov 14, 2014 | Home Mortgage Tips
Are you thinking about using a mortgage to buy a new home? Buying your own piece of local real estate is a major financial investment and one that can require some pretty complex math to fully understand.
In this blog post we’ll discuss mortgage calculators and how to use one of these tools to determine your monthly mortgage payments, interest charges, amortization periods and more.
Determining Your Principal and Down Payment Amounts
To get started with a mortgage calculator you’ll need to know how the price of the home and how much you intend to contribute as a down payment. Generally speaking you’ll want to place a down payment of at least 20 percent in order to avoid having to pay for private mortgage insurance and to give you access to better interest rates.
Choosing Your Interest Rate and Amortization Period
Now that you have an idea of the amount of mortgage financing you’ll need, the next step is to choose your interest rate and amortization period. Different lenders will offer different interest rates for every one of their mortgage products, so again you’ll want to play around with these numbers and run the calculation to see which combination of mortgage financing, interest rate and amortization period gives you a monthly payment that suits your budget.
Using a Mortgage Calculator for Refinancing
If you’re thinking about refinancing your current mortgage you can also use a mortgage calculator to help make the math a bit easier. Simply use your outstanding mortgage balance as the principal amount and then choose an amortization schedule that fits your financial goals. Be sure to keep an eye on your interest payments, as you may find that by refinancing to a longer amortization period your monthly payments go down but your total interest paid is quite a bit higher.
Don’t Forget the Closing Costs
Finally, don’t forget that there are numerous “closing costs” – fees, taxes and more – which you’ll need to factor in to your overall calculation. Closing costs will include everything from home appraisal fees to government filing fees and property taxes, and will vary depending on the home and the city or community you’re buying in.
While online mortgage calculators can handle the tricky math to determine monthly payments and interest costs you may still find that you have questions about your mortgage or some aspect of the process. For more information, contact your local mortgage professional and they’ll be happy to share their advice and expertise.
