Tag Archives: mortgage

8 Ways to Save Money for a Down Payment on Your Dream Home

8 Ways to Save for a Down Payment on Your Dream HomeImagine never having to pay rent again. Instead of paying a landlord every month, your monthly housing budget could go toward owning your dream home. Unless you’ve got rich relatives or a trust fund though, coming up with a down payment of 3 percent to 20 percent can seem a bit overwhelming. It doesn’t have to be. Here are 8 ways you can start saving for a down payment today!

  1. Reduce your current housing expenses. Your monthly rent is your most costly expense each month. Cut that bill by getting a roommate, moving to a smaller or less expensive place, or moving in with a relative for the short-term, and save the difference in a dedicated account for your down payment.
  2. Get a part-time job or a freelance gig. Increase your income by getting a part-time job or doing freelance work on the side. You could get a traditional part-time job in fast food or retail, but think beyond that to earn some extra cash. Are you good with technology, pets, words or art? Become a consultant, dog walker, blog writer or Etsy artist.
  3. Cut daily living expenses. Do you get a $7 latte each morning? Are you paying for a gym membership you rarely use? Do you spend a lot on take-out? Those costs add up. If you cut non-essential expenses, you could yield a few hundred bucks each month.
  4. Shop for your new insurance. Car insurance can be pricey, particularly if you are young. If you work with an insurance agent, ask if there are discounts available, or if they can get you a better price. For example, you can usually get a discount by getting your car insurance and renter’s insurance from the same carrier. You can also shop online for different types of insurance at an online site like Esurance.com. Caution: Be sure you are comparing coverages, not just price.
  5. Set up automatic savings deductions. To help you discipline yourself, set up an automatic deduction into your savings account with each paycheck. This is an easy way to save your money before you get a chance to spend it.
  6. Get rid of unwanted stuff. Whether you’ve got college textbooks you don’t need or slightly outdated electronics you’ve already replaced, there is a market for your unwanted stuff. There are lots of online marketplaces – Facebook, OfferUp, Craigslist, etc. – where you can sell your items online. Just be careful and always transact business in a safe, public place.
  7. Save your tax refund and bonus checks. If you get a refund at tax time, bonus checks at work or a birthday check from your parents, put that money in the bank!
  8. Pay down debt. High interest rates on credit cards or paying interest on multiple student loans can eat into your budget. Pay down your credit cards with the highest interest rates first, and consider consolidating your student loans to reduce the total interest paid.

With good planning, budgeting and discipline, you’ll be ready to start home shopping before you know it.

 

3 Reasons to Buy a Home This Fall

3 Reasons to Buy a Home This FallBuying a home can be a difficult decision, particularly in a hot real estate market, but research shows that buying a home is a great investment — and is more financially advantageous than renting. Here are three reasons to consider buying a home this fall:

  1. Prices will keep going up. According to CoreLogic’s latest Home Price Index, homes have appreciated by 6.7 percent in the last 12 months. They are expected to increase another 5 percent over the next year, so the home you are looking at buying today will be 5 percent more this time next year.
  2. Mortgage rates will also go up. Mortgage and banking experts project that interest rates for 30-year mortgages will go up, which means your monthly mortgage payment will also go up. Buy now and lock in an interest around 4 percent.
  3. You’re paying someone’s mortgage; it might as well be yours. Even if you are renting, you are paying your landlord’s mortgage. Why not take that same amount of money to buy your own home.

If you aren’t sure if this is the right time for YOU to buy, let us know. We’d be happy to meet with you to discuss your circumstances.

The Current Cost of Renting vs. Buying

Deciding to buy a home instead of renting is a tough call, especially in a hot real estate market like this one where housing is scarce. This infographic shows that the tide has shifted a bit, and it will actually cost you less to purchase a home than it is to rent a home, apartment, condo or townhouse. Buying right now costs significantly less than renting.

 

Here are some other statistics from Trulia’s Rent vs. Buy Report:

  • Interest rates remain low, and though home prices are appreciating, they haven’t outpaced rental appreciation.
  • Shifts in the ‘rent vs. buy’ decision are largely driven by changes in mortgage rates.
  • Nationally, rates would have to reach 9.1% (the current average is 4%) for renting to be cheaper than buying.

For more on renting versus buying, please read these two previous blog posts:

If you’re thinking of buying instead of renting this summer, give us a call. We can help you analyze your situation, so you can make the right choice.

5 Tips for Getting a Mortgage in 2017

Special Home Financing Programs: FHA, VA and USDA LoansUnless you’ve got a trust fund or buckets of cash lying around, if you want to buy a home this year, you’ll need a mortgage. Here are 5 tips to help you find a mortgage that meets your needs:

  1. Find out how much of a down payment you need to save. Down payments vary from 0 percent to 20 percent down, and everywhere in between. Talk to your mortgage lender – or an experienced Realtor – to find out how much you need to save.
  2. Check your credit score. To determine your credit worthiness, you’ll want to review your credit score with a mortgage lender. If you are going for an FHA loan, the average qualifying credit score in 2016 was about 686. The average credit score for a conventional homebuyer was about 753, according to Bankrate.com.
  3. Get pre-approved. While pre-qualification does not guarantee you will get a mortgage, getting pre-approved does. When you get pre-approved by a mortgage lender, it means that lender has checked your credit, verified your income and assets and agreed to lend you money to buy a home, assuming everything else lines up (value of the home, etc.). Learn more about pre-approval here.
  4. The 4 Cs. When seeking pre-approval, a mortgage lender will look at the 4 Cs – Capacity (your current and future ability to make mortgage payments), Capital or Cash Reserves – how much money, savings and investments you have, Collateral – the home you want to purchase, and Credit – your credit history. Learn more about the 4 Cs here.
  5. Decide what type of mortgage is right for you. Before you apply for a mortgage loan, you’ll want to know the different types available to you. For example, if you are a veteran, you might be able to get a VA loan. If you are a first-time homebuyer, an FHA loan might be right for you. Talk to your Realtor and your mortgage lender to see what type of mortgage best fits your situation.

4 Reasons to Buy Your Dream Home This Winter

4 Reasons to Buy Your Dream Home This WinterAs the temperature in many areas of the country starts to cool down, you might think that the housing market will do the same. This couldn’t be further from the truth!

Here are 4 reasons you should consider buying your dream home this winter instead of waiting for spring!

1. Prices Will Continue to Rise

CoreLogic’s latest Home Price Index reports that home prices have appreciated by 6.3% over the last 12 months. The same report predicts that prices will continue to increase at a rate of 5.2% over the next year.

The bottom in home prices has come and gone. Home values will continue to appreciate for years. Waiting no longer makes sense.

2. Mortgage Interest Rates are Projected to Increase

Your monthly housing cost is as much related to the price you pay for your home as it is to the mortgage interest rate you secure.

Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage are currently at 4.08%. The Mortgage Bankers Association, Fannie Mae, Freddie Mac & the National Association of Realtors are in unison, projecting that rates will increase by this time next year.

An increase in rates will impact YOUR monthly mortgage payment. A year from now, your housing expense will increase if a mortgage is necessary to buy your next home.

3. Either Way You’re Paying a Mortgage

There are some renters who have not yet purchased a home because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize that, unless you are living with your parents rent free, you are paying a mortgage – either yours or your landlord’s.

As an owner, your mortgage payment is a form of ‘forced savings’ that allows you to have equity in your home that you can tap into later in life. As a renter, you guarantee your landlord is the person with that equity.

4. It’s Time to Move on with Your Life

The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise.

But what if they weren’t? Would you wait?

Look at the actual reason you are buying and decide whether it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer or you just want to have control over renovations, maybe now is the time to buy.

If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.

7 Reasons Your Credit Score May Have Dropped

7 Reasons Your Credit Score May Have DroppedA good credit history is needed to buy a home, but what constitutes a “good” credit score varies by lender and loan type. For example, to qualify for an FHA loan with a 3.5% down payment, you need a FICO score of 580 or higher. Conventional loans backed by Freddie Mae or Freddie Mac require a minimum credit score of 620.

With that in mind, it is important to monitor your credit score at least annually. If you have seen your score drop since you last ran your credit report, here are some possible reasons for the change:

  1. Using too much of your available credit. You shouldn’t use more than one-third of your available credit. This can also become a problem if any of your creditors reduce your credit line, throwing the total balance versus total available credit ratio out of balance.
  2. Missing payments
  3. Accounts in collection, tax liens and bankruptcies will all lower your credit score.
  4. Average length of time with open credit lines. The longer, the better.
  5. Limited types of credit – a mix of different credit types is better than just credit card accounts, for example.
  6. Too many credit inquiries for credit cards and loans
  7. Inaccurate information on your credit report

Correcting these problems can take time and a concerted effort on your part to reverse the trend and boost your credit score, but it is possible. Talk to your mortgage lender for advice on what your credit score is, what it needs to be and how to improve it if you are falling short.

 

 

Top 10 Home Buyer FAQs: Part 2

Top Home Buyer FAQs: Part 2This week we are continuing our top 10 list of home buyer’s most frequently asked questions!

6.  Why should I buy a home instead of rent one?

A home is a long-term investment that gives you secure long-term housing and financial security. When you pay rent, that money goes to pay your landlord’s mortgage and related expenses. When you make a mortgage payment on your own home, however, you are putting money toward your financial future. You can deduct the cost of mortgage loan interest, as well as property taxes, from your federal income taxes and, in some states, from your state taxes. You’ll also have something that’s yours and that reflects you and your personal style. Also, right now, interest rates are at record lows, and they will increase over time. The sooner you buy, the more you’ll save.

7.  How much can I afford to spend?

According to Bankrate.com, a good guideline is spending about 25 percent of your net income on house payments. You can go as high as 32 percent, but anything over 35 percent is dangerous, because a higher income-to-housing ratio puts your home at risk if your finances change, such as a job loss or increased living expenses. Work with your mortgage lender to analyze your current income and expenses and to identify a comfortable mortgage level for your situation. Then you can start shopping for your dream home within your price range. If you don’t have a mortgage lender yet, talk to your Realtor® who can refer you to trusted resources.

8.  Can I buy a home while I’m selling my current one?

Yes, you can, but that depends on a variety of factors. For example, if you buy another home before you’ve sold your current one, you may overextend yourself financially. To avoid this pitfall, you can make your purchase offer contingent upon the sale of your current home. There is also the possibility that you could sell your current home before you lock in a new one. Talk to your Realtor to discuss your options and get some recommendations given your individual situation and current real estate market conditions.

9.  Besides a mortgage, what other costs should I consider when buying a home?

In addition to your monthly mortgage, you may have to pay private mortgage insurance (PMI) if you are putting less than 20 percent down on the home. You will have property taxes and any applicable city and state taxes. You’ll also have homeowner’s insurance. Some or all of these may be rolled into your mortgage payment, but you’ll want to find that out before closing. Also, you may have higher utility payments in your new home and homeowner association or condo dues may apply. Ask your Realtor for more information about monthly and annual costs.

10.  How much should I offer for the home I want?

Your Realtor is your best guide for choosing the right offer price. Factors to consider will include the asking price of similar homes in the same area, the condition of the home, how long the home has been on the market, how much of a mortgage will be required, how much you really want the home and if other offers are expected for the same property.

Here’s a link to Part 1, ICYMI. Have additional questions? Type them in the comments below or reach out to an experienced Realtor you know and trust to answer your questions.

Thanks for reading!

 

Top 10 Home Buyer FAQs: Part 1

Top 10 Home Buyer FAQs: Part 1 from Kent Realtor Marti Reeder of John L. Scott

 

Prospective home buyers have a lot of questions about buying their first – or next – home. Here are some of the most frequently asked questions I hear from home buyers.

1.  How do I get started? What’s the first step?

Choose a Realtor®, not just a real estate agent, to help you from the very first steps through the closing of your home. An experienced Realtor® can tell you what’s first, next and last, and there will be many steps. Start by asking friends and family for referrals. Then interview a few Realtors to see which best meets your needs and that you feel really understands what you want in a home. Is she easy to talk to, responsive and available? Is she a solo agent or does she have a team? How many homes has she sold in the last year? How long has she been a Realtor? All good questions.

2.  How long does it take to buy a home?

It depends, but usually 30 to 60 days from the time a home buyer signs a contract to purchase a home, according to Homes.com. This does not include time to shop for a home, make an offer, get the offer accepted or to apply for mortgage pre-approval.

3.  What type of credit score do I need to qualify for a home loan?

Again, the answer depends on what type of loan you are applying for. For an FHA mortgage loan, FHA.com says a FICO score of 580 or higher will allow you to make a down payment of 3.5%. A credit score lower than 580 will require a 10% down payment. For a conventional loan, Credit Sesame says home buyers need a minimum score of 620. We recommend you ask your mortgage broker, mortgage lender or your Realtor for the latest requirements, which can change. Bottom line: the higher the score, the better your chances for mortgage approval and the lower your interest rate.

4.  How much of a down payment do I need?

A down payment on a home is a percentage of the home’s purchase price that you pay up front. Ideally, you should plan on a down payment of 20%, but depending on a variety of factors, you may qualify for a loan with as little as 3% down. For a conventional loan, if you are putting less than 20% down, your lender may require private mortgage insurance (PMI) which will increase your mortgage payments. The more you put down, the less your monthly mortgage will be. Also, remember that your down payment is not the only amount of up-front cash you’ll need to buy a home. There will be other expenses including closing costs to budget for.

5.  Are there other mortgage loan programs besides a conventional mortgage?

Yes! There are special home financing programs available including specialty, government-based financing programs like FHA, VA and USDA loans. Learn more about them here.

Next week, we’ll cover the next 5 top frequently asked questions by home buyers. Have your own questions? Type them in the comments below or reach out to an experienced Realtor you know and trust to answer your questions.

Thanks for reading!

 

 

 

What’s the Difference Between Being Pre-qualified and Pre-approved for a Mortgage?

What’s the Difference Between Being Pre-qualified and Pre-approved for a Mortgage?There are all kinds of terms thrown around when it comes to buying a home. Two of these terms are “pre-qualified” and “pre-approved.” While these terms are similar, they are, in fact, very different. Let’s talk about the differences.

Pre-qualification

Being pre-qualified for a mortgage does not guarantee that you will get a mortgage. A lender will talk to you while you’re still a prospective buyer and ask you questions about your credit, assets and income. During this meeting, you will not be required to show proof of income, and a credit check will not be run. There’s no harm in being pre-qualified, but focusing on pre-approval should be your priority.

Pre-approval

Pre-approval from a lender means your credit check has been approved, and that your income and assets have been verified by the lender. The mortgage lender has made a decision to lend you money to buy a home.

There is a time frame to use your pre-approval for the purchase of a home, generally 120 days, according to Realtor.com. For pre-approval, you will need at least two years of tax documents, several weeks of paystubs, your two most recent tax returns, and any other proof of your income. A credit score of 740 or higher will help you get the lowest interest rates and a minimum credit score of 620 to be approved for an FHA loan.

In short, pre-qualification means a lender will have an overview of your financial history, without pulling a credit report or verifying your income. Pre-qualification will not help much when it comes to buying a home, but it will help you learn where you stand and if there are areas you need to work on. Pre-approval, on the other hand, is vital to getting a mortgage.

For more information, please contact your mortgage lender or an experienced Realtor®. Good luck!

 

Financial Literacy: Shopping for a Mortgage

This is our second blog post to celebrate National Financial Literacy Month and to help put (or keep) you on the road to financial success.

Shopping for a new home is such an exciting process – touring other homes, imagining yourself and your family living in them, having choices of different styles and vintages, etc. Shopping for a mortgage, however, isn’t as much fun, but it is important that you know what’s out there and what your rights are.

The Federal Trade Commission (FTC) offers these tips:

  1. Financial Literacy: Shopping for a MortgageCompare lenders and brokers. You can get a mortgage through a broker who represents multiple lenders or you can get a mortgage directly through a financial institution like a commercial bank, mortgage company or credit union. According to the FTC, some lenders are both lenders and brokers, and you want to know which you are dealing with because brokers usually get paid a fee for their services in addition to a loan origination fee and other fees. Compare several lenders and brokers and the various loan options and fees before choosing who you want to work with. Referrals from friends, family and your Realtor® are a good place to start.
  2. Get all relevant costs from your broker or lender, including
    • Current mortgage interest rates. Ask if the rates quoted are the lowest rates of the week.
    • Fixed or adjustable rates. If the rates are adjustable, ask about the terms of the loan, including the index the rate is tied to, how often the rate can be adjusted, and if there is a cap on how high it can go.
    • The loan’s annual percentage rate (APR). The APR factors in the interest rate, points, broker fees and other charges, expressed as a yearly rate.
    • Ask the lender or broker to quote current points as a dollar figure. Usually, the more points you pay, the lower your interest rate.
    • Ask the lender what fees you’ll have to pay including loan origination fees, underwriting, broker fees and closing costs.
    • Down payment and private mortgage insurance. Ask what percentage of a down payment is required and if you’ll be required to pay private mortgage insurance for down payments less than 20%.
  3. Negotiate the best deal. Mortgage lenders and brokers often have latitude in rates and fees, so you want to negotiate the best deal possible for your home loan. Ask each to provide you with a written quote, and once you’ve selected the best home loan for your situation, ask if you can lock in that deal, assuming you are in that stage of the home buying process. An experienced Realtor® can explain these steps to you if you have questions or need support.
  4. Fair Lending is required. The Equality Credit Opportunity Act prohibits lenders from discriminating against credit applications in any aspect of a credit transaction on the basis of race, color, religion, national origin, sex, marital status, age, whether or all or part of the applicant’s income comes from a public assistance program, or whether the applicant has in good faith exercised a right under the Consumer Credit Protection Act. In addition, the Fair Housing Act prohibits discrimination in residential real estate transactions on the basis of race, color, religion, sex, handicap, familial status or national origin. A consumer cannot be refused a loan based on these characteristics, charged more for a loan, or offered less favorable terms based on such characteristics.
  5. Shop, Compare and Negotiate, even if you have credit problems. Even if you have minor credit problems or have extenuating circumstances, you are in a position to negotiate loan terms, including interest rate and fees. Explain your situation and any credit history problems up front. It is also a good idea to get a copy of your credit report before shopping for a home. You can get a free copy annually at AnnualCreditReport.com.

You can find more information about shopping for a mortgage, including a glossary of terms, on the FTC website.