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Vanneste Blog
  • Indecision is Not a Decision

    There could be some legitimate reasons for not buying a home but indecision is not one of them. Indecision is rooted in not having enough information to move forward to own a home or continue renting.18443593-250.jpg

    If you keep renting, at the end of the year, you have had a place to live and a pile of receipts that helped the landlord pay for his house. Deciding to buy a home will give you a place to live that is yours and all the things that come with that.

    When you consider principal reduction, appreciation and tax savings, your monthly cost of housing could be much less than the rent you’re paying. The principal reduction included in each payment is like a forced savings account that increases as your mortgage balance decreases. Your equity in the property will also grow due to appreciation as the home goes up in value. The equity is part of your net worth and an investment in your family’s future.

    The income tax savings can be an additional financial consideration if the combined interest and property taxes are greater than the allowable standard deduction.

    Trends are showing that both tenants and homeowners are staying in their homes longer. It’s been said that whether you rent or own, you’re paying for the home. Do you really want to buy the home for your landlord? Check out your numbers on a Rent vs. Own and then, call us to help make it happen.


  • Risk Rate Relationship

    Regardless of what a lender quotes on mortgage rates, the actual rate a borrower pays is based on a number of variables. Lenders determine whether to loan money and at what rate based on the risk involved with the transaction.Sorry not available.png

    Factors that increase the risk that the loan will be repaid will proportionately increase the interest rate charged to the borrower. If the risk becomes too high, the loan will not be approved.

    • Loan amounts – conventional mortgages above conforming limits as set by Fannie Mae and Freddie Mac are considered jumbo loans and generally have a higher interest rate.
    • FICO score – the lowest interest rate is reserved for the highest score; the lower the score, the higher the rate the borrower will pay.
    • Occupancy – borrowers occupying a home as their principal residence are considered a better loan risk than second homes and investment properties.
    • Loan purpose – purchase transactions generally have the lowest interest rate with refinancing for better rates and terms being priced slightly higher. An even higher rate might be charged for refinancing and taking cash out of the property.
    • Debt-to-Income Ratio – a borrower’s monthly liabilities divided by their gross monthly income develops a ratio that helps lenders to assess the borrower’s ability to repay the mortgage.
    • Property Type – some types of property are considered higher risk than others which could adversely affect the rate.
    • Loan-to-value – the lower the percentage of the loan to the appraised value of the property will generally lower the interest rate.

    Any combination of these factors could limit a borrower’s ability to secure a mortgage at the rate initially quoted. Pre-approval by a trusted mortgage professional can be the best way to know what rate you can expect to pay. Please call for a recommendation of a trusted mortgage professional.


  • Pre-approval is Good for Everyone

    Buyer’s mortgage pre-approval is good for everyone in the transaction. It saves time, money and removes the uncertainty of knowing whether the buyer will be qualified after negotiating a contract. The direct benefits include:

    • Looking at “Right” homes - price, size, amenities, locationPre-approval is good for everyone.png
    • Find the best loan - rate, term, type
    • Uncover credit issues early - time to cure possible problems
    • Negotiating power - price, terms, & timing
    • Close quicker - verifications have been made

    There is a significant difference in having a trusted mortgage professional take a loan application and run all the necessary verifications compared to going through calculators on a lender’s website. Beside the peace of mind, the cost of being pre-approved is a bargain and generally, limited to the cost of the credit report.

    Even if a person has been pre-approved, a second opinion from a different lender may be a good option. It can verify there is a good deal or you’ll discover that you can improve it. Either way, it works to your advantage. Contact me if you’d like a recommendation of a trusted mortgage officer.


  • Easier to Play the Game

    It’s much easier to play a game when you know the rules so you can avoid mistakes that may keep you from winning. Homeownership isn’t a game but there are some rules that will protect your investment and increase your enjoyment.

    Most people want a home of their own to raise their family, share with their friends and to feel safe and secure. In most cases, it is also their largest asset. These suggestions can help protect your investment and make homeownership more enjoyable.12519621-250.jpg

    • Don’t overpay for your home
    • Maintain your home to protect its value
    • Minimize your assessed value to lower property taxes
    • Make extra contributions to save interest and build equity
    • Validate the insured value of improvements and contents
    • Be aware of current surrounding property values
    • Make mortgage interest payments deductible
    • Invest in capital improvements that increase market value
    • Don’t over-improve the neighborhood comparables
    • Keep records of capital improvement & other maintenance

    We’d like to be your personal source of real estate information and we’re committed to helping from purchase to sale and all the years in between. If you need assistance with any of the items mentioned in this article or need a recommendation for a service provider, it would be our pleasure to help.


  • Protecting Your Credit

    One of the “big” three credit bureaus recently announced that a massive hack has exposed the personal information of up to 143 million people. To add perspective to that statement, that is about two-thirds of American credit card holders or close to half the population of the United States.  Part of protecting your credit is being vigilant and making it difficult for thieves to steal your identity. 17405556-250.jpg

    If you suspect you are a victim of identity theft, an initial step is to place a fraud alert on your account. Contact one credit reporting company (Equifax, Experian or TransUnion), tell them you are an identity theft victim and ask the company to put a fraud alert on your credit file. Confirm that the company will contact the other two companies.

    The initial fraud alert will make it harder for an identity thief to open accounts in your name. The alert lasts for 90-days and it can be renewed.

    A more severe precaution called a credit freeze restricts access to your credit report. A credit freeze makes it more difficult for thieves to use your identity to apply for loans or credit cards in your name.

    By contacting each of the three credit reporting agencies separately, you can request a temporary freeze. This would prevent them from providing credit information without both your explicit permission and a PIN that temporarily lifts the freeze.

    Unlike the fraud alerts, the agencies may charge you a fee for instituting the freeze in addition to another fee to lift the freeze each time.

    A credit freeze will not affect your credit score. If you are in the process of buying a home, contact your loan officer and discuss the decision you are considering. If you will be making a mortgage application in the near future, you can temporarily lift the freeze for the lender you are using.

    A trusted mortgage professional is a key team member in purchasing a home. Making an appointment with them is one of the first steps along with determining your real estate professional. Contact us to get a recommendation of a trusted mortgage professional.

    To request a credit freeze, you can do it online or by phone:

    Equifax – 800-349-9960 | Experian – 888-397-3742 | Trans Union – 888-909-8872

    For more information, see Credit Freeze FAQs at the Federal Trade Commission.

    It is important to personally monitor your credit reports through annual credit report.com to discover any unusual activity.


  • Investing on Your Side of the Fence

    The grass tends to look greener on the other side of the fence. Maybe that’s why some people invest in things they don’t understand. It has been said that the grass is just as hard to mow on the other side of the fence so stay with what your most familiar.3283858-250.jpg

    Single-family homes used for rental property give a person a chance to invest in something they understand: a home. They also have distinct advantages over other types of investments.

    An investor can borrow up to 80% of the value at fixed interest rates 30 years. The financing creates leverage so that the investor can benefit from the increase in value of the home not just the down payment.

    It is reasonable to expect that the home will appreciate while providing tax advantages and practical control that are not available with many other investments. Low housing inventory in many markets has caused rents to increase and low new home growth will make it difficult to keep up with demand.

    Consider a $150,000 home purchased for cash that would rent for $1,500 per month. With $18,000 income and allowing for property taxes, insurance and maintenance, it is still reasonable to expect $10,000 net income. There would be an 8% return on investment without considering tax savings or future appreciation compared with 5-year CDs paying less than 2.35% and a 10-year Treasury yield at 2.13%.

    An added bonus is the amortization that occurs on the loan as the principal is reduced with each payment. It becomes a forced savings account that increases the equity and isn’t taxable until the property is sold.

    The reasonable control has a lot of appeal to many investors who find the volatility of the stock market unacceptable and don’t want the risk associated with alternative investments. Please contact me if you’d like to know more about available opportunities.


  • Deductible Dilemma

    The purpose of insurance is to shift the risk of loss to a company in exchange for a premium. Most policies have a deductible which reduces the amount of the claim that is paid by having the insured share in the first part of the loss.38973594-250.jpg

    In the process of managing insurance premiums, policy holders often consider higher deductibles to lower the premium. Lower deductibles mean less money out of pocket if a loss occurs but also results in higher premiums. Higher deductibles result in lower premiums but require that the insured bear a larger part of the loss.

    A small fire in a $300,000 home that resulted in $2,500 of damage might not be covered if the policy holder has a 1% deductible. If the homeowner can afford to handle the cost of repairs in exchange for cheaper premiums, it might be worth it. On the other hand, if that loss would be difficult for the homeowner, a change in the deductible could be considered.

    Homes in high-risk flood areas with mortgages from federally regulated or insured lenders require additional flood insurance. However, each homeowner needs to assess the risk of being able to financially sustain a flood loss on their home when flood insurance is not required. The recent events in south Texas and Louisiana are evidence that the unexpected can happen.

    It is important to review your deductible and discuss risks with your property insurance agent so that you’re familiar with the amount and make any changes that would be appropriate before a claim is made.  The FEMA website has information and frequently asked questions about flood insurance.


  • Your Home's Equity Could Be the Answer

    A home equity line of credit, HELOC, is a mortgage loan made to homeowners to be used on an as-needed basis. A lender, such as a bank, will approve a borrower for a specified amount based on the equity in their home and all the necessary paperwork is signed to authorize the loan.43355754-250.jpg

    The line of credit amount is available to the borrower and no interest is due until some or all the money is used. When the money is paid back, the line of credit is again available in full to the borrower.

    The specifics of the repayment will depend on the HELOC lender. It may require interest only or it may require amortized payments of principal and interest.

    The proceeds from a HELOC can be used to make improvements on the home or anything else such as medical expenses, college tuition or unexpected expenses or other liquidity issues.

    Unlike personal credit card interest, the interest on a HELOC may be tax deductible. Your tax advisor will be able to let you know about your situation.

    Rates and fees can vary widely on HELOC loans. Borrowers should shop around, compare and get recommendations before deciding on a lender.


  • Which Value Do You Want?

    What your home is worth depends on why you ask the question. It could be one value based on a purchase or sale and an entirely different value for insurance purposes.Values-250.png

    Fair market value is the price a buyer and seller can agree upon assuming both are knowledgeable, willing and unpressured by extraordinary events. This value is generally indicated by a comparable market analysis done by real estate professionals.

    Insured value is determined for insurance coverage. Homeowner policies typically have replacement clauses in them and the cost of demolition, new construction and the added complexities of matching existing construction could exceed the cost of new construction.

    Investment value is based on the income it can generate during its useful life. This value is dependent on what kind of yield an investor requires to capitalize the value over time. The formula for this is to divide net operating income by the capitalization rate required by the investor.

    The assessed value of a home is used to determine the property taxes the owner must pay. This value is determined by the responsible state government agency.

    Homeowners are generally more familiar with their home’s market value. Since it can be lower than the replacement cost, owners should review the insured value with their property insurance agent periodically.

    There can be a surprising difference in each of these separate values. It is important to know the purpose that it is going to be used for the value.


  • Shorter Term - More Savings

    Whether you’re refinancing your current home or buying a new one, something worth considering is a 15-year loan rather than a 30-year term. The payments will be a little higher but you’ll get a lower interest rate and you’ll build equity much faster.30348233-250.jpg

    Let’s look at an example of a $300,000 mortgage with the choice of a 30-year term with a 3.92% rate compared to a 15-year term with a 3.2% rate. The payments would be $682.28 higher on the shorter term but the equity would be considerably higher even after you adjust for the higher payments.

    Another benefit is that the shorter-term loan creates a forced savings situation where the savings on longer term loan might end up being spent rather than being saved and invested.  A conscious decision to pay more in payments could pay big dividends in the future.

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  • Home Energy Aware

    After the mortgage payment, the largest homeowner expense is for utilities and the major component is energy.  Contributing factors include air leaks, insulation, heating and cooling equipment, water heaters and lighting.Where does my money go.png

    Computers, monitors, TVs, cable and satellite boxes, DVRs and power adapters are spinning your electric meter even when they’re not being used. Even though they only represent a small percentage of a home’s total energy consumption, about 3/4 of the electricity is used when the products are turned off.

    Unplugging devices can actually make a difference in the size of your electric bill. Plugging several of these offenders into a power strip with a single on/off switch may make the task easier. Most computers have options to put them into sleep mode or even turn when not in use.

    The Department of Energy has an Energy Saver Guide and do-it-yourself suggestions.


  • Home Safe Home

    Home is a place you should feel safe and secure. Sometimes, we take it for granted and unfortunately, we do need to remain vigilant about things we do that could compromise our safety. Here are a few tips to consider:Home Safe Home.png

    • Everyone loves an inviting home including burglars. Make sure it looks occupied and is difficult to break in.
      • Always lock outside doors and windows even if you’re only gone for a brief time.
      • Lock gates and fences.
      • Leave lights on when you leave; consider timers to automatically control the lights.
      • Keep your garage door closed even when you’re home; don’t tempt thieves with what you have in your garage.
      • Suspend your mail and newspaper delivery when you’re out of town or get a neighbor to pick it up for you.
    • Posting that you’re out of town or away from home on social networks is like advertising your home is unprotected.
    • Equally dangerous could be allowing certain social network sites to track your location.
    • Don’t leave keys under doormats, in flowerpots or the plastic rocks; thieves know about those hiding places and even more than you can think.
    • Trim the shrubs from around your home; don’t give criminals a place to hide.
    • Use exterior motion detectors and yard lighting.
    • Have an alarm system and use it when you leave home and go to bed.
    • Put 3 ½” deck screws in door plates and door hinges.
    • Have good deadbolts on all exterior doors.
    • Exterior doors should be solid core.

  • Other People's Money for College

    Consider the goal of funding a child’s college education in the future. If “other people’s money” in the form of a scholarship is not a possibility, there still may be another way to use some “other people’s money.”26458431-250.jpg

    A $25,000 investment into a mutual fund paying 5% would earn $1,250 in the first year. Alternatively, the $25,000 as a 20% down payment to purchase a $125,000 rental home appreciating 3% a year would have gone up by $3,750 or three times that of the mutual fund in the first year.

    The mutual fund’s growth depends on the value of the money invested. Rental real estate benefits because a 20% down payment controls a much larger asset because you’re using “other people’s money.” Leverage allows the investor to profit not only from the amount of cash invested but from the value of the investment.

    With a 20% down payment and current interest rates, a typical rental would have a positive cash flow. In ten years, the equity could be $75,000. On the other hand, the $25,000 initial investment in a mutual fund earning 5% annually would only grow to about $40,000 in the same 10 years. It would require an additional $2,700 each year to reach the same $75,000 value.

    Leverage is just one of the many benefits that make rental real estate the IDEAL investment. Whether you are saving for higher education, retirement or wealth accumulation, consider rental real estate. Using single-family homes as investments are attractive because homeowners have a better understanding than many other investments and self-management is a possibility.


  • Assumptions are an Alternative

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    In the late 80’s, both FHA and VA began requiring buyers to qualify to assume their mortgages. The main reason there haven’t been many assumptions in the past 25 years is that interest rates have been steadily going down and if a person has to qualify, they might as well do it on a new loan and get a lower interest rate.

    Based on projections by Fannie Mae, Freddie Mac, the MBA and NAR, rates for the second half of 2017 and 2018 are expected to be higher. When interest rates on new mortgages are higher than the rates of assumable FHA and VA mortgages in the recent past, it becomes more advantageous to assume the existing mortgages.

    FHA and VA loans originated with lower than current interest rates have great advantages for buyers and sellers.

    1. Interest rate won't change for the qualified buyer
    2. Lower interest rate means lower payments
    3. Lower closing costs than originating a new mortgage
    4. Easier to qualify for an assumption than a new loan
    5. Lower interest rate loans amortize faster than higher ones
    6. Equity grows faster because loan is further along the amortization schedule
    7. Assumable mortgage could make the home more marketable
    An Assumption Comparison can help determine the savings and financial benefits of an assumable mortgage with a lower rate.
  • Family & Friends Mortgage

    Anytime a lender and borrower can agree on rates and terms, it can be a good match but IRS has specific rules that govern the transaction especially when the parties are family or friends.26614035-250.jpg

    The loan must be done in a business-like manner with a written note specifying the loan amount, interest rate, term and collateral. IRS requires that the mortgage be a recorded lien to allow the interest deduction.

    Sometimes, a friends and family situation might have a less than normal interest rate on the mortgage. However, the rate charged in the note is regulated by the minimum applicable federal rate which is published monthly by IRS based on current Treasury securities. For July 2017, the rate is 2.57% for terms over nine years.

    The seller must report the interest paid to them along with the name, address and Social Security number on schedule B when the buyer uses the property as their principal residence.  A mortgage between family and friends can be good for both parties. It may allow the borrower a slightly lower rate without the expenses of a traditional lender while giving the note holder a higher rate than they can earn in available investments.

    Your tax professional can guide the transaction whether you’re a buyer or a seller and your real estate professional can help arrange to have the documents drawn and filed.


  • Down Payment Problem - Are You Sure?

    There is increasing difficulty for first-time home buyers to save for their down payment as indicated in the graph.  Several factors that contribute to this trend include rising rents, rising home prices, student loan debt and flat wages.down payment graph.png

    Some would-be buyers feel they cannot buy a home today but a large part of those decisions may be based on inaccurate assumptions.

    Nine out of ten non-owners believe they need ten percent or more for a down payment. The typical down payment for first-time buyers is six percent. VA has 100% loan programs as well as USDA for certain qualifying areas and buyers. FHA is known for 3.5% down payments. And FNMA and Freddie Mac have down payments as low as 3% and 5%.

    There are gift provisions available for buyers who have an “angel” who would like to help them with their down payment.

    There are ways to borrow against a person’s qualified retirement program for a down payment. It isn’t necessarily limited to the buyer but could include a relative. Interestingly, a son or daughter can borrow against their retirement to benefit their parents.

    In some respects, having good credit and sufficient income is more important than the down payment. Don’t rely on “common knowledge.” Get expert advice and counsel to see if there is a way to advance your dream of owning a home.


  • Don't Have a CLUE?

    If you haven’t heard of a CLUE report, it has nothing to do with the table game searching for a murderer. It is a report showing the insurance claims on your home and car for the past five to seven years.10340976-250.jpg

    This database is used by insurance companies to evaluate risks and determine rates. C.L.U.E. stands for Comprehensive Loss Underwriting Exchange. Rates can be increased not only due to legitimate claims but data entry errors also. Sometimes, simply asking a question without filing a claim can be logged as a claim.

    For that reason, similar to verifying the accuracy of your credit report, it is important to check out the CLUE report on your home and car. The reports are free and there is a process for correcting mistakes.

    An interesting and sometimes costly surprise occurs during the home buying process. The claim experience of the prior seller could impact the price of the premium of the new buyer. For that reason, you can ask for a copy of the CLUE report on the home you’re interested in buying prior to writing a contract.


  • Emergency Kit for the Car

    Mickey Mantle said “If I knew I was going to live this long, I’d have taken better care of myself.”

    Similarly, if people planning their summer travel knew they were going to have an emergency, they would have the right things available. Only 5% of drivers carry all recommended emergency supplies in their cars.9111296-250.jpg

    The Federal Emergency Management Agency (FEMA) recommends that all Americans have some basic supplies on hand in order to survive for at least three days if an emergency occurs. Some of these things would be more important if you lived or traveled in remote areas.

    • Reflective hazard triangle or road flares
    • Spare tire
    • Jumper cables
    • First-aid kit
    • Flashlight and extra batteries
    • Cell phone and charger
    • Crucial medications
    • Emergency radio with batteries
    • Bottled water for each person and pet in your car
    • Non-perishable, high-calorie food
    • Distress signal flag
    • Matches or lighter

    During cold weather, additional items are recommended:

    • Windshield scraper and brush
    • Blankets and extra warm clothing
    • Road salt or cat litter to help with tire traction
    • Tarp for working outside in weather

    It is recommended that emergency supplies should be checked at least twice a year to see that all of the items are in working order and in good condition. It is important that items are replaced if any of them are used during the year.

    The American Red Cross is among many sources where emergency preparedness kits and supplies can be purchased.


  • What Can You Expect?

    Businesses must treat customers fairly if they expect to do business with them again or get recommendations to their friends. Customers of stores like Nordstrom’s understand that a salesperson is an employee and represents the company.13959026-250.jpg

    The line becomes less clear in some industries, especially ones that involve real estate. Agency is a legal relationship authorizing a person to act for or in the place of another. It involves responsibilities that exceed treating a person fairly.

    The duties a buyer or seller can expect to receive from a real estate salesperson or broker include but are not limited to honesty, accountability, full disclosure, representation and reasonable skill and care. Buyers and sellers might additionally expect obedience, loyalty and confidentiality.  State laws can differ on specific duties.

    Mortgage and title officers are limited in their duties to the buyer to honesty and accountability and specific requirements under the federal Real Estate Settlement and Procedures Act.

    A special relationship with a real estate agent makes it advantageous to have them coordinate efforts with the other professionals in the home buying process. Since most buyers’ and sellers’ transactions are infrequent, the agent can bring valuable experience to the transaction.

    Every buyer and seller should discuss the level of service they expect from the real estate professional they work with. Another good question is what happens if the purchase and sale are within the same company.


  • Hands-Only CPR

    Hands-only CPR can save lives.  The American Heart Association states that "Almost 90% of people who suffer out-of-hospital cardiac arrests die.  CPR, especially if performed in the first few minutes of cardiac arrest, can double or triple a person's chance of survival."  Most people who survive a cardiac emergency are helped by a bystander.   

    1. Check for responsiveness – shake the person and shout “Are you OK?”11700251-250.jpg
    2. Call 9-1-1 – either tell someone to call or make the call yourself
    3. Compress - Push hard and fast in the center of the chest at a rate of 100 per minute.

    The victim should be flat on their back preferably on the floor. Place the heel of one hand on the center of the victim’s chest and place the heel on top of the other hand lacing your fingers together. Lock your elbows and compress the chest forcefully; make sure you lift enough to let the chest recoil.

    Chest compressions should be continued until the person shows obvious life-like breathing, the scene becomes unsafe, an AED (automatic external defibrillator) becomes available, or a trained responder takes over the emergency treatment.

    Alternating mouth-to-mouth breaths is not necessary using this method. Compressions are adequate except in drowning or drug overdose situations where 30 chest compressions are followed by two mouth-to-mouth breaths.

    Watch this two-minute video and consider taking instructions from the Red Cross or other qualified provider. Every household should have at least one person trained in life-saving skills.


  • Must Be This Tall to Ride

    Surely, you remember being a child at an amusement park when after having stood in line with your friends and family, waiting to get on a terrific ride, you discovered the sign that read, “you must be this tall to ride.”This Tall3.png

    Not only was it disappointing, it was slightly embarrassing. You never want to go through that again.

    A remarkably similar situation occurs when people are buying a home. After finding the right home and negotiating the contract, they find out that they don’t measure up financially.  It’s not something that anyone wants to go through if they have a choice.

    Regardless of what you think you know, if you’re buying a home with a loan, you need to physically visit with a trusted mortgage professional before you get serious.

    • You’ll find out your credit score which will directly affect the mortgage rate you’ll pay.
    • You might discover blemishes on your credit that possibly can be corrected.
    • You’ll even get a pre-approval letter that you can submit with an offer which could dramatically affect your negotiations in the current competitive market.

    Some rides don't turn out to be as good as you thought they were going to be.  A person certainly doesn’t want that disappointment with a lender. Contact me for a recommendation of trusted mortgage professional.


  • Would-be Buyers with Student Debt

    59% of non-owners are not comfortable taking on a mortgage with their student debt according to the Aspiring Home Buyers 2017 survey. It is estimated that the college graduates have an average of $37,172 in student debt.16522219-250.jpg

    Fannie Mae, who has loan programs with as little as three to five percent down payments, has announced changes to how student loan debt is treated that could make the difference in qualifying for a mortgage.

    For the 5 million borrowers who participate in the reduced payment plans, actual payments are considered for calculating debt-to-income ratio rather than maximum payment amount.

    Non-mortgage debts paid by another party for at least 12 months won’t be included in calculating debt-to-income ratio.  For example, payments being made on a student loan by the parents would not be counted against the DTI ratio for the student.

    These changes can make it possible for would-be buyers with student debt to get a home now instead of waiting for years. Being pre-approved by a trusted mortgage professional is the best way to confirm that these changes apply to your situation. Call today for a recommendation of a trusted mortgage professional.


  • Good Info - Good Decisions

    While low inventory is certainly challenging buyers, not having a clear understanding of mortgage financing is also causing issues. By having good information, they are able to make better decisions as well as compete favorably.Mortgage Rate History0517.png

    Most buyers don’t realize how the mortgage rate is determined for a borrower. While annual income is important, a good credit score, low debt-to-income ratio, loan-to-value ratio and ability to repay the loan are vital concerns.

    A variety of myths seem to permeate the market such as rates are set and released once a day; FHA loans are for first-time buyers only; pre-qualification commits the lender; lender fees are not negotiable and adjustable rate mortgages always go up.

    Misunderstanding of actual mortgage practices may be a contributing factor to why more buyers are not taking advantage of what are still historically low mortgage rates.

    While getting solid information about mortgages and being pre-approved from a lender are very important, it is only one step in the home buying process. Success in buying a home in today’s market should begin with a real estate professional who will coordinate all the different parts of the transaction including mortgage, title, insurance, inspections.


  • Reasons to Refinance

    Regardless of the reason to refinance a home, the basic question to ask is: “Do you plan to live in the home long enough to recapture the cost of refinancing?” There are always expenses involved in refinancing which can be paid in cash or rolled into the new mortgage.

    From a strictly financial standpoint, the break-even point is achieved when the cost of refinancing has been recaptured by the monthly savings. It would take approximately 23 months to recapture $4,000 of refinance costs with a lower payment of $175 a month.22683914-250.jpg

    1. Lower the rate
    2. Shorten the term so that the loan will build equity faster and be paid off sooner.
    3. Lower your payment to reduce your monthly cost of housing.
    4. Convert an ARM to a FRM to stabilize your payment due to concern of rising interest rates.
    5. Cash out equity to be able to use the money for another purpose.
    6. Combine a first and second mortgage.
    7. Consolidate personal debt so the interest is tax deductible.
    8. Payoff higher cost debt such as credit cards, student debt, etc.
    9. Remove a person from a loan as in the case of a divorce.

    Points paid to purchase a principal residence are tax deductible completely in the year paid. However, the points must be spread over the life of the mortgage on a refinance. For that reason, consider getting a “par” value loan with no points. It may have a slightly higher rate but the interest will be fully deductible and it will lower the cost of refinancing.

    Determine the break-even point on your situation by using the Refinance Analysis . Call for a recommendation of a trusted mortgage professional.


  • Indecision May Cost More

    “More has been lost due to indecision than was ever lost to making the wrong decision.” Interest rates have as much effect on housing costs as price and when they are both trending upward, it can be very expensive to wait. 25787590cropped.jpg

    There can be some legitimate reasons for postponing a purchase such as needing to save the down payment, improve your credit or waiting to find out about a possible transfer. The problem is that prices and interest rates could, and very likely will, go up in the future.

    If the price of $250,000 home went up 5% and the interest rate went from 4.5% to 5.25%, the payments would increase by $176.42. The additional cost over a seven-year period would be close to $15,000.

    The questions that indecisive buyers need to ask themselves is “how am I going to feel knowing that if I had not waited, I could have been living in the home for less money?” and “What would I have spent the money on if I didn’t have to make the larger payment?”

    Use the Cost of Waiting to Buy calculator to find out how much indecision may be costing you.