An Overview Of Mortgage Points

An Overview Of Mortgage PointsMortgage points, also known as discount points or origination points, are fees paid by borrowers at closing to reduce the interest rate on their mortgage loan. Each point typically costs 1% of the total loan amount and can lower the interest rate by anywhere from 0.125% to 0.25%.

There are two types of mortgage points: discount points and origination points. Discount points are used to buy down the interest rate on the loan, while origination points are used to cover the lender’s administrative costs.

Borrowers may choose to pay mortgage points in order to lower their monthly mortgage payments or to reduce the overall amount of interest paid over the life of the loan. However, paying points may not always be the best financial decision, as it depends on factors such as the borrower’s financial situation, the length of time they plan to stay in the home, and the current interest rate environment.

It is important for borrowers to carefully consider the costs and benefits of paying mortgage points, and to compare offers from multiple lenders to ensure they are getting the best deal possible.

When to Use Mortgage Points

Mortgage points can be used by borrowers to lower the interest rate on their mortgage loan and potentially save money on interest over the life of the loan. However, whether or not it makes sense to pay mortgage points depends on a variety of factors, including the borrower’s financial situation, the length of time they plan to stay in the home, and the current interest rate environment.

Here are a few situations where it may make sense to use mortgage points:

  • Long-term homeownership: If a borrower plans to stay in their home for a long period of time, paying mortgage points upfront to lower the interest rate could result in significant long-term savings.
  • High-interest rates: When interest rates are high, paying mortgage points may be a good strategy for reducing the interest rate and lowering monthly mortgage payments.
  • Large loan amounts: Borrowers with large loan amounts may benefit from paying mortgage points to reduce the interest rate and save money over the life of the loan.
  • Strong financial position: Borrowers with strong financial positions, including a high credit score and stable income, may be more likely to qualify for lower interest rates and may benefit from paying mortgage points to lower the rate even further.

The decision to pay mortgage points should be based on a careful analysis of your unique financial situation and goals and should take into account the costs and benefits of paying points compared to other options.

What’s Ahead For Mortgage Rates This Week – May 30, 2023

What's Ahead For Mortgage Rates This Week - May 29, 2023Last week’s economic news included readings on new and pending home sales and inflation. The final monthly reading for May consumer sentiment was released along with weekly readings on mortgage rates and jobless claims.

Shortage of previously-owned homes for sale directs buyers to new homes

Homeowners weren’t in a hurry to sell their homes due to the low mortgage rates they obtained during the pandemic. Current mortgage rates are higher than pandemic-era rates, which influenced homeowners to stay in their homes and keep their lower existing mortgage rates. Home buyers turned to new home developments as an alternative to shopping for a home within the slim supply of available previously-owned homes.

The number of pending home sales was unchanged from March as compared to the expected reading of an 0.80 percent increase in pending sales and the March reading of a -5.20 percent decrease in pending home sales. Rising mortgage rates and concerns over the economy sidelined some sellers and would-be home buyers. Rising inflation continued to impact consumers as prices for goods and services rose by 0.40 percent in April as compared to the March increase of 0.10 percent. Year-over-year inflation rose to 4.40 percent in April as compared to the March year-over-year inflation reading of 4.20 percent. 

Consumer concerns about inflation and recession were supported by the government-sponsored mortgage organization  Fannie Mae, which predicted a recession in the second half of 2023.

Fed forecasts a recession and raises key interest rate range

The minutes of the Federal Reserve’s Federal Open Market Committee meeting revealed that policymakers were divided on the Federal Reserve’s monetary policy decision to raise its key interest-rate range to 5.00 percent and 5.25 percent. Some Fed members indicated that May’s interest rate hike may be the last for the near future as expectations of a recession rose. 

Mortgage rates and jobless claims rise

Freddie Mac reported higher mortgage rates last week as the average rate for 30-year fixed-rate mortgages rose by 18 basis points to 6.57 percent. The average rate for 15-year fixed-rate mortgages rose by 22 basis points to 5.97 percent.

229,000 new jobless claims were filed last week; this reading fell short of the expected reading of 245,000 initial claims filed and exceeded the prior week’s reading of 225,000 claims filed.

What’s Ahead

This week’s scheduled economic reporting includes readings on public and private-sector jobs and the national unemployment rate. Weekly readings on mortgage rates and jobless claims will also be released. 

Understanding the Basic Interest Rates Difference Between Fixed and Variable

Understanding the Basic Interest Rates Difference Between Fixed and VariableHome loans are available in an assortment of lending packages, but the big difference that consumers need to pay attention to at a minimum is how the interest charge is calculated. Interest is the margin that represents the profit and risk offset for a lender financing a consumer’s home purchase.

With loans lasting over 30 to 40 years now, the amount of money that can be made can be two or three times the purchase value of the home involved. So it’s calculation method is important for the borrower.

A Fixed Rate

A fixed rated is one where the home loan interest rate does not change. So, if a person takes out a 30-year home loan with an interest rate of 5 percent, that interest rate charge per year will not change at any time during the 30 years of repayment. It provides stability for financial planning, especially for buyers who just want to pay the same payment monthly and not fuss about anything else.

A Variable Rate

A variable interest rate is one in which the interest on a home loan can change over time. The most frequent set up involves an introductory rate period where the interest rate on a 30 year loan is attractively low for the first one, three or five years. Then, if the loan is still in place, the interest rate may adjust up or down and starts to track an index, usually based on a stock or bond market. Then a “margin” is added to the index to determine the current mortgage interest rate.

The risk is whether that newly adjusted interest rate is higher than what was available previously as a fixed interest rate. The variable rate may work very well for those who only want to hold a home for a short period and then sell it for a profit. It can become a problem, however, if the loan is held longer than the change period when the variability kicks in with a market index.

Pros And Cons

The major advantage of a fixed loan is that is very straightforward, simple and can be refinanced years later if the market starts to offer much lower rates. That protects a consumer from fluctuating costs, especially when running a household on a set budget. However, the same formula is often more expensive in the first few years, especially if the home will only be owned for a few years.

The big advantage of the variable interest rate loan is realized by investors or those who only plan to stay in their home or home loan for a short period of time. Investors who think the real estate market will go up can make big profits with far less carrying costs in interest since variable rate loans often have a low introductory period. However, if they guess wrong or are forced to keep the loan longer than planned, the buyer could get stuck with a more expensive, fluctuating monthly loan payment.

Which one works best often depends on the buyer and his specific interests in a home purchase. Talk to your trusted mortgage professional today about interest rates to help you determine which option is best for you. 

Running A Quick Financial Health Check Before You Apply For A Mortgage

Running A Quick Financial Health Check Before You Apply For A Mortgage Getting a mortgage is a significant financial decision, and it is crucial to ensure that you are financially prepared before applying for one. Conducting a quick financial health check before applying for a mortgage can help you determine your financial standing and your ability to afford a mortgage payment.

Here are some reasons why you should consider conducting a quick financial health check before applying for a mortgage:

  1. Check your credit score: Your credit score is an important factor that lenders consider when deciding whether to approve your mortgage application. Check your credit score to see where you stand and take steps to improve it if necessary.
  2. Review your debt-to-income ratio: Lenders will also look at your debt-to-income ratio, which is the amount of debt you have compared to your income. If your debt-to-income ratio is too high, you may not be able to qualify for a mortgage. Try to pay down debt and increase your income to improve your debt-to-income ratio.
  3. Calculate your down payment: Most lenders require a down payment of at least 20% of the purchase price of the home. Calculate how much you’ll need for a down payment and make sure you have enough savings.
  4. Determine your monthly housing costs: Take a look at your monthly income and expenses to determine how much you can afford to spend on your mortgage payment, including property taxes and insurance. Make sure you’re comfortable with the monthly cost before applying for a mortgage.
  5. Get pre-approved for a mortgage: Once you’ve completed these steps, it’s a good idea to get pre-approved for a mortgage. This will give you an idea of how much you can borrow and the interest rate you’ll receive.

Conducting a quick financial health check before applying for a mortgage is a smart move. It can help you identify any financial issues, improve your mortgage eligibility, and ensure that you are prepared to take on the financial responsibilities of homeownership.

By following these steps, you’ll be able to quickly assess your financial health to increase your chances of being approved for the loan and determine whether you’re ready to apply for a mortgage.

Mortgage Approval With An Unconventional Job – How Does It Work?

Mortgage Approval With An Unconventional Job It is unlikely that an unconventional job will hurt your mortgage approval, as long as you can demonstrate a consistent and stable income stream that meets the lender’s requirements. Lenders are primarily concerned with your ability to repay the mortgage, and they will evaluate your income and employment history to determine whether you are a suitable candidate for a loan.

It’s also worth noting that the type of property you are seeking to purchase, as well as your credit history, debt-to-income ratio, and other financial factors, will all play a role in the lender’s decision. So while an unconventional job may not be a deal-breaker, it’s important to make sure your overall financial profile is strong before applying for a mortgage.

How an Irregular Job Influences Your Mortgage Approval

An irregular job, such as freelance work or self-employment, can make the mortgage approval process more complicated, but it doesn’t necessarily mean you will be denied a mortgage. The primary concern for lenders is whether you have a stable income that will allow you to make your mortgage payments on time.

If you have an irregular job, you will need to provide more documentation to prove your income, such as tax returns, bank statements, and client contracts.

Lenders will look at your income over the past few years to determine if you have a consistent and reliable income stream. They may also consider the nature of your work and whether it is likely to continue in the future.

In some cases, lenders may require a higher down payment or charge a higher interest rate to offset the perceived risk of an irregular job. You may also need to have a higher credit score or lower debt-to-income ratio to qualify for a mortgage.

Ultimately, the impact of an irregular job on your mortgage approval will depend on a variety of factors, including your financial history, the type of property you are purchasing, and the lender’s specific requirements. Some lenders may have stricter requirements for certain types of jobs or income sources. In these cases, you may need to provide additional documentation or demonstrate a longer track record of consistent income to qualify for a mortgage.

Non-QM Option

Non-QM (non-qualified mortgage) loans are a type of mortgage loan that does not meet the qualified mortgage guidelines established by the Consumer Financial Protection Bureau (CFPB) in 2014. Qualified mortgages are designed to ensure that borrowers have the ability to repay their loans, based on certain criteria such as debt-to-income ratio, employment status, and credit history. Non-QM loans are typically used by borrowers who do not meet the requirements for a qualified mortgage.

Non-QM loans may have different requirements than traditional mortgage loans, such as higher interest rates, larger down payments, and shorter repayment terms. They may also be used for non-traditional properties or for borrowers who are self-employed, have irregular income streams, or have a poor credit history.

Because they are considered riskier than qualified mortgages, non-QM loans are generally only offered by a limited number of lenders and may be subject to higher fees and interest rates. It is important for borrowers to carefully consider their financial situation and the terms of the loan before applying for a non-QM loan.

It’s important to work with a knowledgeable mortgage professional who can guide you through the process and help you find the right loan for your situation.

What’s Ahead For Mortgage Rates This Week – May 22, 2023

What's Ahead For Mortgage Rates This Week - May 22, 2023Last week’s economic reporting included readings on U.S. housing markets, sales of previously-owned homes, housing starts, and building permits issued. Weekly readings on mortgage rates and jobless claims were also released.

NAHB: U.S. Home Builder Confidence Rises in May

The National Association of Home Builders reported a five-point gain in home builder confidence in current housing market conditions in May. The index reading for May rose to 50 in May as compared to April’s reading of 45. Analysts expected a reading of 45 for May. Readings above 50 indicate a majority of home builders are positive about current housing market conditions. Component readings of the home builder index also rose as the gauge for current market conditions rose by five points to 50; the reading for market conditions over the next six months rose by seven points and the index reading for buyer traffic increased by two points.

Builders surveyed indicated that homeowners aren’t motivated to sell as many of them bought or refinanced their homes during the pandemic when mortgage rates were very low. Aspiring homeowners are turning to new homes for more options as demand for homes continues to outpace the number of previously-owned homes available.

 Higher demand for homes caused developers to reduce incentives to homebuyers. Homebuilders offering price reductions on new homes fell from 30 percent in April to 27 percent in May.  NAHB said home price reductions averaged six percent of original home prices.

Mortgage Rates, Jobless Claims

Freddie Mac reported higher average mortgage rates last week. Rates for 30-year fixed-rate mortgages averaged 6.39 percent and were four basis points higher than for the previous week. Rates for 15-year fixed-rate mortgages averaged 5.75 percent, which was unchanged from the prior week.

242,000 initial jobless claims were filed last week as compared to 255,000 expected claims and 264,000 first-time jobless claims filed in the prior week.

What’s Ahead

This week’s scheduled economic reporting includes readings on new and pending home sales, minutes from the recent Federal Open Market Committee meeting, and the final consumer sentiment reading for May. Weekly readings on mortgage rates and jobless claims will also be released.


Important Things You Should Know About Land Surveys

Important Things You Should Know About Land SurveysA land survey is an essential tool that is used to determine the exact boundaries of a piece of land or property. It is often required when buying, selling, or dividing land, and is also important for resolving property line disputes.

Process: The process of land surveying typically involves a licensed surveyor visiting the property to take precise measurements and create a detailed map or plan of the land. This may include identifying any physical features of the property, such as trees, buildings, or natural landmarks, as well as any easements or encroachments.

Types: There are several different types of land surveys, each with its own specific purpose. For example, a boundary survey is used to establish property lines, while a topographic survey is used to map the physical features of the land. Other types of surveys include ALTA/NSPS surveys, subdivision surveys, and construction surveys. It is important to select the appropriate type of survey based on the specific needs of your project or property.

Land Surveys Can Be Used For Insurance Purposes

Land surveys can be used for insurance purposes. A land survey can provide valuable information about the physical characteristics of a property, such as the location of buildings, trees, and other features. This information can be used by insurance companies to assess the risk of insuring the property and to determine appropriate coverage and premiums.

For example, if a property is located in a flood zone, a land survey can identify the exact location and elevation of the property, as well as any nearby bodies of water or drainage patterns. This information can be used by insurance companies to assess the risk of flooding and to determine appropriate flood insurance coverage.

Similarly, if a property is located in an area prone to wildfires, a land survey can identify the location of any vegetation, structures, or other features that may increase the risk of fire damage. This information can be used by insurance companies to assess the risk of fire and to determine appropriate coverage and premiums.

Does a fence help a land survey?

Yes, a fence can help a land survey by providing a physical marker of the property boundary. A land surveyor can use the fence to determine the location of the property line and ensure that the fence is placed within the boundaries of the property. This can be particularly useful in situations where the property line is not clearly defined or where there may be disputes over the location of the boundary.

It is important to note that a fence alone is not sufficient to establish the legal boundary of a property. In order to accurately determine the property line, a land surveyor will need to conduct a thorough survey that considers all available evidence, including property records, physical markers, and other relevant factors. Additionally, it is possible for a fence to be installed in the wrong location, either intentionally or accidentally, which can result in boundary disputes and other legal issues. Therefore, while a fence can be a useful tool in a land survey, it should not be relied on exclusively to determine the property boundary.

Overall, a land survey can provide valuable information for many purposes and can help property owners make informed decisions about insurance coverage and risk management.

What is a Bridge Loan and How Does it Work?

What is a Bridge Loan and How Does it Work?A bridge loan, also known as interim financing, is a short-term loan used to provide temporary financing until a borrower secures long-term financing or sells an asset. Bridge loans are commonly used in real estate transactions, such as when a buyer needs to close on a new home before selling their current home.

Bridge loans are typically secured by the borrower’s current property, which serves as collateral. The amount of the loan is determined by the equity in the borrower’s property and the value of the property they are purchasing. The loan is intended to bridge the gap between the purchase of a new property and the sale of the existing property.

Bridge loans often have higher interest rates and fees than traditional loans, due to their short-term nature and the increased risk associated with them. They may also require a lower loan-to-value ratio, which means that the borrower may need to put down a larger down payment to secure the loan.

Once the borrower secures long-term financing or sells their existing property, they can use the proceeds to pay off the bridge loan. In some cases, the borrower may choose to refinance the bridge loan into a traditional mortgage if they are unable to sell their existing property within the loan term.

Requirements for A Bridge Loan

The specific requirements for a bridge loan can vary depending on the lender and the purpose of the loan, but there are a few general requirements that borrowers should be aware of:

Collateral: A bridge loan is typically secured by collateral, which is often the property being purchased or the borrower’s current property. The lender will require a valuation of the collateral to determine the loan amount.

Creditworthiness: Although bridge loans are often easier to qualify for than traditional loans, lenders will still look at the borrower’s credit history and credit score to determine their ability to repay the loan.

Exit strategy: Lenders will want to see a clear plan for how the borrower intends to repay the loan. This could include selling the existing property, securing long-term financing, or other means.

Loan-to-value ratio: Bridge loans typically require a lower loan-to-value ratio than traditional loans, which means the borrower may need to provide a larger down payment to secure the loan.

Fees and interest rates: Bridge loans often come with higher fees and interest rates than traditional loans due to the increased risk and short-term nature of the loan. Borrowers should be aware of these costs when considering a bridge loan.

It’s important for borrowers to carefully consider their financial situation and their ability to repay the loan before taking out a bridge loan. Consulting with a financial advisor or a reputable lender can also help borrowers determine if a bridge loan is the right option for them.

What You Need To Know About Your Home Appraisal And Your Mortgage

What You Need To Know About Your Home Appraisal And Your MortgageWhen buying a home, there are certain steps a buyer should go through before the home sale is official. First the buyer makes the offer, then the offer is accepted.

Next the buyer schedules the inspection and home appraisal. Finally, everyone is ready for closing.

It’s easy to overlook the impact of some of these steps, but when it comes to a mortgage, the home appraisal is actually quite important. Banks want to see that they are lending money for an investment that is worthwhile, so that appraisal is a crucial step to getting financing. Here is what buyers need to know about how the appraisal could affect their mortgages.

Understanding The Home Appraisal Process

The home appraisal gives a home valuation expert the chance to evaluate the home a buyer’s considering to determine its market value. Home appraisers are highly trained, state-licensed professionals that know how to evaluate homes and assign value to them.

The appraiser will use various approaches to determine the final appraised value. The appraisal typically happens after an offer on the home was approved but before the lender loans the money.

The Appraisal And Mortgage Approval

The appraisal is one factor that a mortgage lender considers when deciding whether or not to approve a final loan request. Even if a borrower had preapproval, a low appraisal could cause the mortgage to fall through.

Why is this? A lender only wants to lend enough to cover what the home’s actual value, and if the appraisal comes in lower than what the borrower is asking for, the lender can deny the loan.

If the lender does not deny the loan completely, they may refuse to lend more than the home’s value. In order to buy the home at the agreed price, the buyer may need to come up with the difference in cash at closing.

What Can Buyers Do If The Appraisal Is Low?

If an appraisal comes in low on the home someone wishes to buy, the buyer shouldn’t panic. It is possible to get a new appraisal at a higher value.

First, consider the condition of the home. Did the seller let some things fall into disrepair? If the seller fixes those items, a new appraisal may be higher.

Does the home look rundown or cluttered? This shouldn’t affect the appraisal, but it can sometimes cause the appraiser to trend lower. Sometimes, simply asking for a second opinion might get a slightly different appraised value.  That said, if the appraisal is low, make sure to evaluate the purchase price. Is it in line with current market conditions and the overall condition of the home?

If the answer to that question is no, then the offer may be too much for the home. The appraisal, in this case, gives the buyer the opportunity to reevaluate the purchase decision.

When it comes to mortgage approval, the appraisal is one of the critical steps in the process. If a buyer has shopped wisely, the home should pass with flying colors, and soon the home sale process will be over.  As always, your trusted mortgage professional is the best resource for appraisal information in your local market.

Buying A Home With Cash Versus Low Interest Rate Mortgages

Buying A Home With Cash Versus Low Interest Rate MortgagesWhen deciding whether to buy a home with cash or to obtain a low-interest rate mortgage, there are several factors to consider. A cash offer can be very competitive in a real estate market, as it can give the buyer a significant advantage over buyers who need to obtain financing through a mortgage.

Here are additional advantages and disadvantages of both.

Advantages of buying a home with cash:

  • You own the property outright, which means no mortgage payments are necessary.
  • You may be able to negotiate a lower purchase price if you’re able to pay in cash.
  • You avoid interest charges and fees associated with a mortgage.

Disadvantages of buying a home with cash:

  • You may tie up a significant amount of your liquid assets in the property.
  • If you need cash for emergencies or investments, it may be difficult to access it if it’s all tied up in your home.
  • You may miss out on the opportunity to leverage your credit to earn a higher rate of return on your investments.

Advantages of obtaining a low-interest rate mortgage:

  • You can preserve your liquid assets for other investments or emergencies.
  • You may be able to earn a higher rate of return on your investments than the interest rate on your mortgage.
  • You can take advantage of tax benefits associated with mortgage interest deductions.

Disadvantages of obtaining a low-interest rate mortgage:

  • You will have to make regular mortgage payments, which may be a strain on your budget.
  • You may end up paying more with the interest charges over the life of the loan than if you had bought the home with cash.
  • You may be required to put down a larger down payment or pay mortgage insurance premiums.

The decision to buy a home with cash or obtain a low-interest rate mortgage depends on your personal financial situation and goals. If you have the cash available and want to own your home outright, buying with cash may be the right choice for you. However, if you prefer to preserve your liquid assets and have the ability to earn a higher rate of return on your investments, a low-interest rate mortgage may be the better option. It’s important to note, however, that a cash offer may not always be the most competitive offer in every situation. In some cases, a seller may be more interested in accepting a higher offer that is contingent on financing, rather than a lower cash offer. It depends on the specific circumstances of the sale and the preferences of the seller.