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Posts from the ‘Personal Finances’ Category

More Money, More Problems: When a Big Down Payment Could Spell Trouble

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Hey, there’s nothing wrong with making a sizable down payment—if you’ve got the money to support it. Financial experts advocate putting at least 10% or 20% down, and we’ve got to agree: The more you can pay at the start, the easier managing your mortgage will be.

But there’s a caveat: Sometimes putting down a ton of cash can actually wind up compromising your quality of life or future savings goals. In some cases it can actually hinder your ability to close on that dream home you spent so long saving up for.

Here are five reasons you might want to dial down your payment.

You’ll flush your emergency fund

“Under no circumstances should buying a house be an emergency,” says Jeff Jones with Longview Financial Advisors in Huntsville, AL.

Raiding your emergency fund for the sake of a giant down payment isn’t smart—and it means you’re more likely to find yourself in a terrible position if you lose your job or wind up otherwise financially incapacitated.

Jones recommends building a three- to six-month emergency fund—the longer the better, especially if you have kids—and “not touching it unless it’s truly an emergency.”

And remember: Building this emergency fund comes firstbefore buying the house or even building your 401(k).

If your home-buying aspirations mean you’re skipping the safety net, you need to take a step back and save first. Don’t plunk down a huge down payment if it means leaving yourself vulnerable.

You won’t be able to cover closing costs

Don’t let the massive specter of your down payment make you blind to all of the other expenses that come with closing on a home, which can run about 3% to 6% of the purchase price.

If you’ve put all your money toward one massive down payment, you’re sure to be surprised by the myriad expenses—fees, taxes, the cost of an independent home inspector—all of which need to be paid once your sale is final.

 And, of course, the ultimate closing cost: moving itself.

It might not be much—maybe just the cost of pizza and beer for your buddies—but if you’re moving cross-country or even cross-city, costs can easily inch into the thousands, Jones says.

You might not be able to afford the mortgage

Ever heard the term “house poor”? It refers to buyers who have more house than they can afford, and are in over their head with mortgage and tax payments. Scary stuff.

Trust us—you don’t want to be one of those people.

While this is common among buyers who can offer only the smallest possible down payments, it’s also a potential problem for people who put down more than they can afford. If 20% down strains you, chances are good that the costs associated with owning that home are going to strain you, too.

Your home might be empty

Let’s face it, an empty home is hardly a home at all—and if you’ve spent all your money on the excessively massive down payment, your home might be empty for a while. What’s the purpose of buying a new home if you can’t afford the sofa sectional to put in it?

Especially if you’re moving from a smaller apartment into a home, there’s nothing sadder than an endless succession of empty rooms. It’s not that you need lavish accommodations—really, this is just another symptom of buying more than you can afford—but wouldn’t it be nice to at least put a bed in the guest room?

Retirement, vacations, college—all might be out of reach

So you’ve poured all your money into a down payment, and you’re squeaking by just to pay the mortgage. The potential result: no money left over for the other things that matter in life.

read more via http://www.realtor.com/advice/finance/when-a-big-down-payment-could-spell-trouble/?identityID=10250946&MID=2015_0807_WeeklyNL&RID=361386642&cid=eml-2015-0807-WeeklyNL-blog_2_big_down_payment-blogs_buy

Should You Refinance Even If You Plan to Sell Your Home?

Are you interested in refinancing your mortgage, but hesitant to do so because you’re thinking of selling your home at some point? Believe it or not, refinancing could still make sense. Here are several reasons why you might want to consider refinancing anyway.

Your financial circumstances could change

Let’s say you plan to sell your house in five to seven years. No matter how well you plan for the future financially, things happen. Job loss, illness, death—life inevitably gets in the way of your financial plans. Focus on the here and now, as long as you can financially justify refinancing your mortgage. The longer the horizon of selling the home, the more chances life has of getting in the way. If refinancing can save you money in the meantime, it may just make sense.

Because financial circumstances can change over time, for better or worse, it can be a good idea to calculate how affordable your house really is for you.

You could take advantage of lower interest rates

At publishing time, 30-year mortgage rates have edged their way up and are hovering just over 4%. The new outlook for mortgage rates points to continual increases, bringing the cost of debt up. Picture this, if you don’t sell the property or if there is a market correction—and you do not refinance for whatever reason—is your current loan rate and payment something that you can afford to carry for the long haul? If you could save money or better your financial position, it is probably worth investigating. Rates are even better on jumbo mortgage loans, as more investors are pouring into this particular market niche. So if you have a big mortgage on your home you may want to consider refinancing.

You’re facing a higher rate on your ARM or HELOC

With the increased likelihood of interest rates going up in fall 2015, the subsequent recasting of adjustable-rate mortgages and home equity lines of credit will affect millions of homeowners. Most adjustable mortgage loans were tied to the London Interbank Offered Rate, which closely trails the Fed Funds Rate, the rate at which the Federal Reserve uses to control the U.S. economy. If the Federal Reserve hikes interest rates, LIBOR will soon follow suit, and any homeowners within their adjustment period will experience a higher payment or a future higher payment when their adjustable-rate loans reset.

A HELOC works in a similar fashion to an ARM with a fixed period for the interest rate, followed by a rate reset. For a HELOC, payments are interest-only for the first 10 years of the 30-year term. After 10 years, the loan resets, and for the remaining 20 years the loan payment is principal and interest, so at the end of 30 years, the loan is paid off in full. The payment shock will happen after the first 10 years.

If you have a first mortgage on your home with a HELOC, it very well might make sense even if you plan to sell the home down the road, to roll the first mortgage and HELOC into one, saving money and continuing to make a manageable mortgage payment until you sell.

read more via http://www.realtor.com/advice/finance/should-you-refinance-even-if-you-plan-to-sell-your-home/?identityID=10250946&MID=2015_0807_WeeklyNL&RID=361386642&cid=eml-2015-0807-WeeklyNL-blog_3_refi_if_selling-blogs_own

Mortgage Shopping and Credit Scores

The notion that a flurry of credit inquiries from mortgage lenders will lower a borrower’s score is a common misconception, experts say. The truth is that five inquiries are likely to have no more impact than one, provided they are made within a compressed period of time.

When it comes to mortgages, as well as automobile financing and student loans, “in both the FICO and VantageScore credit-scoring systems, there is logic in place that protects consumers’ credit scores from any negative impact caused by multiple inquiries as a result of rate shopping,” said John Ulzheimer, a credit expert with Credit Sesame, a website that helps consumers manage credit.

With FICO (the scoring model required by Fannie Mae and Freddie Mac), credit inquiries for mortgage loans that are less than 30 days old are ignored and have no impact, Mr. Ulzheimer said. Inquiries older than 30 days are looked at, but multiple inquiries from mortgage lenders made within 45 days of one another are treated as one inquiry. With VantageScore, the window is 14 days.

Both scoring systems assume that if someone has multiple mortgage-related inquiries in a short period, they are likely shopping for the best deal on a single mortgage, Mr. Ulzheimer said.

If one of the multiple mortgage inquiries occurs outside the allowed window — say, on day 46 — it would be counted as a second inquiry. “But it probably wouldn’t hurt you even then,” said Daniel Sater, the owner of Credit Scoring Advisor in Melville, N.Y. “One or two isn’t a significant risk factor in determining your ability to pay your debts in the future.”

continue to full article http://www.nytimes.com/2015/02/01/realestate/mortgage-shopping-and-credit-scores.html?_r=0

3 Key Tax Deductions Renewed for Homeowners

Thought this would be helpful at this time of year…

If you are anticipating a rough year when it comes to filing taxes, don’t turn those forms into new year’s confetti just yet. Several key provisions for homeowners have been retroactively renewed for 2014—and they might provide you with some much-needed tax relief.

If you did any of these three things in 2014, you still have reason to celebrate (OK, maybe not really celebrate, but celebrate as much as anyone can while doing taxes).

Short sale

In the third quarter of 2014, 8.1 million homes in the United States were seriously underwater, according to the real estate research firm RealtyTrac. If you were a homeowner who decided to short-sell your home last year, it’s not all bad news: Congress once again extended the Mortgage Forgiveness Debt Relief Act.

read more two more via http://www.realtor.com/advice/three-key-2014-tax-deductions-still/?MID=2015_02_MonthlyNewsletter_2010-13_sl1_ro&RID=10250946&cid=eml-2015-02-MonthlyNewsletter-sub2_renewed-blogs_buy

Interest rates are driven by various factors. Here is what you may not know…

There are a few other factors such as property type and occupancy status. But this is a good start to understanding how interest rates are determined.

If you’re like most people, you want to get the lowest interest rate that you can find on your mortgage loan. But how is your interest rate determined? That can be difficult to figure out for even the savviest of mortgage shoppers.

Your lender knows how your interest rate gets determined, and we think you should, too. That’s why we’ve created a new interactive tool that lets you explore the factors that affect your interest rate and see what rates you can expect.

Armed with information, you can have confident conversations with lenders and ask questions to make sure you get a good deal. Here are seven key factors that affect your interest rate that you should know:

1. Credit score

Your credit score is a number that lenders use to help predict how reliable you’ll be in paying off your loan. Your credit score is calculated from your credit report, which shows all your loans and credit cards and your payment history on each one. In general, if you have a higher credit score, you’ll be able to get a lower interest rate. You can use our tool to explore how your credit score impacts the rates available.

Before you start mortgage shopping, get your credit report. Check for errors, and make sure to get them fixed. Examine your debts, and see if there are any you can pay down to improve your score. Learn more about how to raise your score.

Credit scoring is complicated—in fact, you have many credit scores, not just one. You can learn more about how mortgage lenders evaluate your credit history and use credit scores.

It’s a good idea to try to get a sense of your credit score range before you start mortgage shopping. Once you have an idea of your credit score range, put it into our tool to get more accurate rates.

2. Home location

Many lenders have slightly different pricing depending on what state you live in, so to get the most accurate rates using our tool, you’ll need to put in your state. If you live in a rural area, you can use our tool to get a sense of rates for your situation, but you’ll want to shop around with local lenders as well. Making a loan in a rural area can be more complicated, so large lenders may not serve that area.

3. Home price and loan amount

Your home price minus your down payment is the amount you’ll have to borrow for your mortgage loan. Typically, you’ll pay a higher interest rate on that loan if you’re taking out a particularly small or particularly large loan.

If you’ve already started shopping for homes, you may have an idea of the price range of the home you hope to buy. If you’re just getting started, real estate websites can help you get a sense of typical prices in the neighborhoods you’re interested in.

4. Down payment

In general, a higher down payment means a lower interest rate, because lenders see a lower level of risk when you have more stake in the property. So if you can put 20 percent or more down, do it—you’ll usually get a lower interest rate.

If you can’t afford 20 percent down, experiment to see how lower amounts affect your rate.

5. Loan term

The term of your loan is how long you have to repay the loan. In general, shorter term loans have lower interest rates and lower overall costs, but higher monthly payments. Learn more about your loan term, and then try out different choices with our tool to see how your term affects your rate and interest costs.

6. Interest rate type

Interest rates come in two basic types: fixed and adjustable. Fixed interest rates don’t change over time. Adjustable rates have an initial fixed period, after which they go up or down based on the market.

In general, you can get a lower initial interest rate with an adjustable-rate loan, but that rate might increase significantly later on. Learn more about interest rate types, and then use the tool to see how this choice affects interest rates.

7. Loan type

There are several broad categories of loans, known as conventional, FHA, and VA loans. Rates can be significantly different depending on what loan type you choose. You can learn more about the different loan types in our Owning a Home loan options guide.

Now you know

That’s it—know these seven factors and you’ll be well on your way to getting a great interest rate for your situation. And just remember:
•You don’t need to have all seven of these factors decided before experimenting in our tool.
•As you consider your budget and learn more about your options, come back often. The more you know, the more accurate the rates will be.
•As you start talking to lenders, compare their offers to the rates in the tool to see if you are getting a good deal.

Now go forth and find a great mortgage rate!

See more via http://www.consumerfinance.gov/blog/7-factors-that-determine-your-mortgage-interest-rate/?utm_source=newsletter&utm_medium=facebook&utm_campaign=01202015_oahlaunch

HARP refinance-helping homeowners who are current on their mortgage payments, but who are “underwater” on their mortgage

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Last night I left my client’s home after a refinance closing with an awesome feeling. They are saving just shy of $500/month! Yes, you read that correctly. It’s what the HARP loan is all about.

• They lowered their rate from the 6% range to the 4% range
• Their loan to value was higher than 100% (the underwater part-they owe more than the value of their home in today’s market
• They did not need an appraisal
• I was able to cover their closing costs

This is one of the reasons I do what I do for my career, and feeling great about it!

Do call me if you wish to talk over your mortgage situation to see if you can get HARPed 630.362.6405.

Calling All Home Buyers! The 3% Down Payment Makes a Comeback

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New programs available for first-time and lower-income homebuyers.

Socking away enough for a down payment isn’t easy. In fact, recent research found that, with Americans’ current savings rate, it would take the average buyer as long as 12 years to build up a 20% down payment on a median-priced home. Fannie Mae announced an option for qualified first-time homebuyers that will allow for a down payment as low as 3%.

As a result, many first-time, younger and lower-income homebuyers have been largely left out of the housing market in the years since the recession.

Now, Fannie Mae and Freddie Mac are hoping to change that. The mortgage giants announced on Monday that they would begin backing mortgages with down payments as low as 3%. Fannie’s program will start this month; Freddie’s will begin March 2015.

The catch? Borrowers would have to meet strict standards to be eligible, such as a credit score of at least 620. The program would also only be available for first-time homebuyers, those who haven’t owned a home in a few years, and people with lower incomes. Further, borrowers would be required to undergo home-buyer counseling and purchase private mortgage insurance before signing on the dotted line. And those eligible for the program would likely have to meet other measures to offset the increased risk, like boasting a low debt-to-income ratio.

“This will be particularly helpful to those who are strapped by wealth rather than credit challenges,” Jim Parrott, a senior fellow at the Urban Institute, told The Wall Street Journal. – See more at: http://www.trulia.com/blog/calling-home-buyers-3-payment-makes-comeback/?ecampaign=cnews&eurl=www.trulia.com%2Fblog%2Fcalling-home-buyers-3-payment-makes-comeback%2F#sthash.yY8d4i4n.dpuf

Make 2015 the Year You Get Off Your Butt and Buy a House

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Treat your home-seeking experience seriously and make finding your new home a reality.New Year’s resolutions are in full effect. An overwhelming number of us have committed to hit the gym, sweat it out, and shed the extra pounds we managed to pack on over the holidays. Eating, drinking, and then more eating — it’s time to get serious!

Getting in shape is the standard New Year’s resolution, but by February, the new gym membership is languishing and we’re back to eating pasta for dinner. Forget all that sweaty talk, let’s set a goal that we can really work toward: committing to finding and buying a home in 2015. So what can you do to ensure this is the year you score your dream home?

Tell people

“Making yourself accountable to your friends and family is one of the best ways to reach your goals,” says Molly Cain, an experienced life coach and Forbes contributor.

It makes total sense, doesn’t it? Sharing your plans with your friends and family gives you a group of instant cheerleaders and makes you more beholden to the goal. So take the plunge, hop on the interwebs, and start updating your social media profiles.

You can even give yourself a public deadline for extra accountability — let everyone on Facebook, Instagram, and Twitter know that this is the year you will be hosting Friendsgiving in your new home.

Seek referrals

Working with solid real estate professionals is a critical component to a smooth homebuying process. Begin asking your network of contacts for a referral for a real estate agent — but only if they had a positive experience. Take the time to interview and learn about the agent’s experience and geographic specialty, as well as discuss his or her communication styles and habits.

Elizabeth Weintraub, a broker-associate with Lyon Real Estate in Sacramento, CA, suggests taking it one step further and asking the agent to provide references from previous clients. “Everyone has references; ask for them.”

Get your credit in check

We all know how vital our credit history is when purchasing a home. If your credit is pristine, congratulations! If not, then do yourself a favor and start the cleanup process now. Start by reading these nine steps to boost your credit and heed these words: “If you think you can get your credit spruced up and ready to go in a matter of days, think again.”

Credit agencies are unwieldy bureaucracies and take time to navigate, so planning far in advance is the key.

Apply for a mortgage

Once you have identified the mortgage professional you will be working with, begin the loan application process immediately. Not sure how to choose whom to work with to finance your home purchase? No problem. Follow these tips to select the best loan officer or mortgage broker.

Having an approved loan application and a prequalification letter in hand before searching for a home gives you a serious advantage when making offers. Jump this financial hurdle early in the process and you’re well on your way to achieving your goal in 2015.
See more at: http://www.trulia.com/blog/make-2015-year-get-butt-buy-house/?ecampaign=cnews&eurl=www.trulia.com%2Fblog%2Fmake-2015-year-get-butt-buy-house%2F#sthash.zleonLYS.dpuf

It’s official: Obama to direct FHA to cut mortgage insurance premiums

Finally, a positive change for those needing an FHA loan…

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The Obama Administration is directing, via executive action, the Federal Housing Administration to reduce annual mortgage insurance premiums by 50 basis points, from 1.35% to 0.85%.

“…(T)oday, the President announced a major new step that his Administration is taking to make mortgages more affordable and accessible for creditworthy families,” according to a statement from the White House.

The White House statement says that the typical first-time homebuyer, this reduction will translate into a $900 reduction in their annual mortgage payment.

read full article via http://www.housingwire.com/articles/32533-its-official-obama-to-direct-fha-to-cut-mortgage-insurance-premiums

Mortgage Interest Rates are Dropping…

Mortgage Interest Rates are Dropping like a ROCK!
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Do not hesitate to call me if you wish to consider refinancing scenarios or
perhaps you know someone looking to purchase a home.

(630) 362-6405