Dec 3, 2019 | Mortgage
Those who are looking at buying a home need to think about whether or not they are truly ready for this responsibility. When someone takes out a mortgage, this is frequently the largest loan someone will ever apply for in their life. Furthermore, owning a home also means homeowners insurance, real estate taxes, home maintenance, and home repairs.
There are a few signs that signal someone is not ready to buy a home. Identifying and rectifying these situations ahead of time will ensure that someone is the right position to take on the responsibility of homeownership.
Too Much Debt
One of the biggest signs that someone is not ready is own a home is too much personal debt. A mortgage is another (albeit different) form of debt. It someone already has a large amount of debt, they might not be able to handle an additional loan.
Some forms of debt that people might have include student loans, credit card debt, and car loans. Cutting down this debt before applying for a mortgage will make someone more competitive when applying for a mortgage.
Not Enough Savings
In addition to reducing debt, it is important to build up savings as well. First, people need to have enough money for the down payment. It is highly unlikely that a lender is going to hand out a loan to someone who is not able (or willing) to put up any of their own capital.
In addition, savings are important for potential home maintenance or home repair costs. Owning a house is a major financial investment. People should be able to put up some of their own money when buying a home.
Location Is Not Determined
People move from place to place. It is a reality of school, employment, relationships, and more. At the same time, it is hard for someone to buy a house they don’t know where they want to live.
While this might seem obvious, this factor is frequently overlooked. Think about where “home” is going to be before deciding to buy a home. Consider the overall cost of living in that location, the potential commute, and the potential HOA.
Buying A Home
It is important for everyone to think about whether or not they are truly ready to buy a home before applying for a mortgage. This is a significant responsibility that should not be taken lightly.
Talk with a home mortgage professional to discuss the options that will get you on the path to homeownership. Although it may take time and planning, buying a home is absolutely possible for everyone. When you are ready, your trusted real estate professional can help you find your new home.
Nov 19, 2019 | Mortgage
Most people can’t pay for a home outright, so they finance it with a mortgage loan. 30-year mortgages are more conventional, but they also come with a significant interest price tag.
People who have a stable career and the income to afford larger payments, or who are nearing retirement, may want to take out a 15-year mortgage. Here are some reasons to consider one.
Save Money Over The Life Of The Loan
The total interest paid on a 30-year loan can be nearly as much as the principal. While it can be difficult to see the bigger picture when facing a mortgage payment that will be a good bit higher, consider this: Paying off a loan in 15 years versus 30 years will save tens of thousands of dollars in interest, and in some cases, as much as $100,000.
Interest rates on 15-year mortgages are also typically lower than other longer-term home loans, which provides additional mortgage interest savings.
Build Equity Faster
Equity refers to how much of your home you’ve already paid for plus what it appreciates in additional value over time. If your home is worth $250,000 and you owe $190,000 on your loan, you have $60,000 in equity.
Since more money is going toward the loan principal rather than interest on a 15-year loan, you build equity faster, which is beneficial for numerous reasons. It lowers your loan-to-value ratio and may improve your chances of getting a home equity loan, which can be used for large expenses.
Become Mortgage-Free Sooner
Instead of having a housing payment later in life, that money is freed up for retirement or other expenses.
If retirement is on the horizon for you in the next 10-20 years, ditching your mortgage payment sooner rather than later is wise. Once you are on a limited income, you will want as few expenses as possible. Plus, having the option of a home equity loan for emergencies is attractive.
If you are in the market for a new home or interested in listing your current property, be sure to contact your trusted real estate professional.
Nov 15, 2019 | Mortgage
When you are buying a new home, it is an exciting process. You have spent months searching and have found the home you want to purchase. You are ready to move into the home of your dreams.
Unfortunately, you have found out that your request for a mortgage has been denied. This can be a deflating experience. Fortunately, there are ways to avoid this by understanding the most common reasons why a buyer is denied for a loan.
The Loan Requirements Have Changed
One of the most common reasons why you might be denied a mortgage is that the terms of the loan have changed. For example, the lender might have raised the minimum credit score requirement. This might sound unfortunate; however, it does happen from time to time.
Loan requirements might change from the pre-approval stage. If this happens, think about searching for a loan from a different lender.
You Added Debt
The debt to income ratio is going to matter when applying for a loan. If you are pre-approved for a loan and your amount of debt changes, the lender is going to look at this closely. Common forms of debt include student loans and credit cards.
Even small changes in your debt amount can impact your ability to qualify for a loan. Try to avoid buying a new car or maxing out a credit card during the mortgage application process. This will help you keep the loan you’ve worked so hard to earn.
You Changed Jobs
Finally, employment status also matters to the lender. When you take out a loan, the lender needs to know that this will be repaid. This depends on you having a steady stream of income from your job.
If you decide to change jobs between the time of pre-approval and the time of purchase, your employment history and income stream do not mean as much. While changing employment will not totally disqualify you, make sure to discuss this possibility with your lender. Changing jobs within the same field is likely fine; however, moving to a new career entirely can be a red flag.
Mortgage Denials are Frustrating
It is frustrating to have your request for a loan denied. Fortunately, understanding these common reasons can help you avoid this deflating experience. Think about all of these possible scenarios when you apply for a home loan.
If you are in the market for a new home or interested in listing your current property, be sure to contact your trusted real estate professional.
Nov 14, 2019 | Mortgage
When you are buying a home, you may run into a number of hurdles to complete the purchase. One of the items that you may be asked to purchase is called private mortgage insurance, often shortened to PMI. This is a unique insurance policy that your lender, such as the credit union or bank, may ask you to buy in order to protect themselves. In this insurance policy, the bank protects themselves against losing money if you end up defaulting on your loan.
Unfortunately, if you are asked to purchase PMI, this will increase your monthly mortgage payment. Therefore, most people try to avoid it. Fortunately, there are a few ways to do this.
Increase the Size of Your Down Payment
Typically, the lender will ask you to purchase PMI if your loan to value ratio is off. In most cases, the lender will ask you to buy PMI if you put down less than 20 percent. It is important to remember that this is still handled on an individual case-by-case basis and each lender handles this differently.
Invest in a Piggyback Mortgage
Another option to avoid PMI is to invest in something called a piggyback mortgage. In this case, you are splitting your mortgage into two policies. For example, if you put down 10 percent, you would need to take out a mortgage for the other 90 percent.
When you take out a piggyback mortgage, you split this 90 percent loan into one mortgage for 80 percent and the other for 10 percent. The drawback of this policy is that the second loan might have a higher interest rate than the first. This can help you avoid having to take out PMI.
Try Building the PMI Into the Loan
Finally, the last option is to roll them into the cost of the loan. In this case, the lender avoids asking you to purchase PMI and instead charges you a little bit more money for the loan. You won’t have a section on your bill for “private mortgage insurance” but you will have a slightly higher monthly payment anyways. Remember that you can refinance to a lower rate later, saving some money; however, it might be harder to eliminate PMI.
Avoiding Mortgage Insurance
These are a few ways that you can avoid purchasing PMI. This will help you keep your monthly payments low. As always, speak with your trusted mortgage professional for personal advice on your specific situation.
If you are in the market for a new home or interested in listing your current property, be sure to contact your trusted real estate professional.
Nov 8, 2019 | Mortgage
Carrying debt is a common problem that people have. Some of the most common types of debt include student loans, credit cards, and motor vehicles. When you are interested in buying a new home, you often think about whether or not your debt is going to hurt your chances of qualifying for a new mortgage.
Fortunately, you may still get a new home with that debt. There are several factors that may determine whether or not you qualify.
Your Debt to Income Ratio
The debt to income ratio is a major factor that the mortgage lender is going to consider when deciding whether or not you will qualify for a new mortgage. In general, the magic number is 43 percent. If your debt exceeds 43 percent of your total income, the lender will have a hard time giving you that new mortgage.
For example, if you make $5,000 per month, you will want to have less than $2,150 in monthly debt payments. To make yourself a more attractive candidate for a mortgage, try paying off some of your existing debt.
Taking A Look At The Credit Score
The lender is also going to consider your credit score. The higher your credit score is, the more likely the lender will reward you with a loan. In order to keep your credit score high, make sure you manage your debt well.
Making your debt payments on time will keep your credit score high. Missing debt payments will lower your score. Manage your existing debt well and you will have a better chance of qualifying for a mortgage.
Making Sure You Can Handle A Mortgage
Finally, the lender is also going to take a look at whether you can take on the responsibilities of owning a home. The monthly mortgage payment isn’t the only expense you will be taking on. Some of the other issues you will have to handle include property taxes, maintenance costs, and homeowners’ insurance.
The bank or credit union will want to ensure you can handle these costs. To make these expenses easier to bear, it might be a good idea to pay off some of that existing debt.
Investing In A New Mortgage
Looking for a new home is exciting. You can purchase a house with existing debt as long as it is minimized and managed well. Think about these factors before investing in a mortgage.
If you are in the market for a new home or interested in listing your current property, be sure to consult with your trusted real estate professional.
Nov 1, 2019 | Mortgage
There are many options when it comes to taking out a loan on a new home. One of the options that people might have heard about is called owner financing. In general, the property owner takes the place of a traditional lender.
Instead of someone taking out of a loan from a bank or a credit union, they take out a loan from the owner of the property. Similar to a traditional loan, the buyer will make payments to the seller over a period of time with a certain interest rate.
The Structure Of Owner Financing
If someone elects to go with owner financing, there are several terms that will specify the repayment structure. The most common structure is called a note and mortgage.
This is a secure form of financing. It is also the closest in structure to a traditional mortgage from a bank. The seller will put together a note that specifies the size of the loan and how it will be repaid. The mortgage will secure the seller with the property in case the borrower cannot repay the loan.
The buyer is still placed on the title of the home. Then, the mortgage is recorded with public records, just as in a traditional loan. There are other types of seller financing; however, this is the most common structure.
The Structure Of Repayment
You may have questions regarding this type of financing when compared to a traditional mortgage. Just as in a traditional mortgage, the repayment terms can vary. You will still have the opportunity to negotiate the terms of the loan.
Typically, interest rates are close to that of a loan from a bank or credit union. There are still options to set up a fixed-rate or adjustable-rate mortgage as well.
The Benefits Of Seller Financing
There are several benefits for both the buyer and the seller. First, seller financing may allow the seller to avoid paying capital gains taxes on the property. This can also help the seller offload a property that otherwise might not sell.
The buyer will also be able to purchase a home without having to borrow from a bank. Often, there is less paperwork and fewer fees. Finally, a buyer that might not qualify for a traditional bank loan might be able to buy a home through seller financing.
Understanding Owner Financing
It is important for everyone to think carefully before signing up for this type of financing. This is a unique option that you should understand when looking for a home. Consult with your home mortgage professional to get the best answer for your particular situation.
If you are interested in buying a new home or listing your current property, be sure to contact your trusted real estate professional.
