4 Financial Benefits of Home Ownership

4 Financial Benefits of Home OwnershipHome ownership may be one of the most familiar goals of adulthood, but there’s more than one reason why so many people flock towards this type of investment and leave the rental market behind. If you’re trying to decide if you should make the big plunge towards buying, here are some benefits of saving up for a down payment and finding the right place to settle in.

It’s More Economical

Many people eschew home ownership simply because it can be hard to wrangle together the funds for a down payment. However, while a monthly rental is money you’ll never see again, the money you put down on a mortgage is being invested back into your home, making for a solid investment you can capitalize on later.

Instant Tax Deductions

The interest that you pay on your mortgage payment can be one of the most tumultuous aspects of purchasing a home, but you may not know that you actually have the ability to deduct many associated costs on your taxes. From origination fees to property taxes, there are plenty of costs that go along with your home that can be claimed for a refund when tax time comes!

Paying A Lower Price

The real estate market fluctuates every day, but one thing is for the certain: the median price of a home is on the rise. While low inflation rates may not be ideal if you’re selling, they can mean a better deal if you’re delving into the market for the first time. Just remember, it’s important to buy a home you can afford as anything that goes beyond your budget is not a solid investment.

A Built-In Savings Account

It may be important to have liquid assets outside of the equity you have in your home, but many people struggle to pay off their home and save money at the same time. While saving outside of your monthly mortgage payment is still important, putting money down on a home is an act of investing, and it’s one you’ll likely make a solid profit on when you decide to sell.

There can be many financial benefits to renting in the short term, but purchasing a home is a more solid financial decision when it comes right down to it. If you’re considering a home and would like to know more about your options, you may want to contact one of our mortgage professionals for more information.

Graduating From College? 3 Things You Need to Know About Mortgages and Student Loans

Graduating From College? 3 Things You Need to Know About Mortgages and Student LoansAre you thinking about buying a new home using a mortgage loan? If you’ve just graduated from college, you’re probably wondering how your student loans will impact a mortgage and what your options are. In today’s post we’ll share three things that you need to know about mortgages if you’re still working on paying off your student loan debt.

#1: Yes, Your Student Loan Will Affect Your Application

You might as well embrace the fact that your outstanding student loan is going to cause some questions to be asked during the mortgage application process. Mortgage lenders have a responsibility to understand the risk involved in lending a significant amount of money to you. And because of this, any mortgage provider is likely to dig into your financial background to ensure that you are responsible and can afford to make the mortgage payments.

Don’t take it personally. In fact, it’s best to be up front about your existing student loan or other debts and your plan for managing them.

#2: It’s All About Your “DTI” Ratio

Your debt-to-income ratio is going to be a significant factor in the success of your mortgage application. This figure helps to determine how much money you need to send out to balance your debts each month versus how much you’re bringing in from working. If this ratio is too high, it’s a signal that you may not be able to juggle all of the payments you’re responsible for making. Also, keep in mind that over time, your job and income situation will change and this can affect your DTI ratio as well.

#3: Missed Payments Can Cause Serious Problems

Finally, you’ll want to ensure that you don’t miss any student loan payments. Even one missed payment – for any reason – can cause significant damage to your credit rating or FICO score. Successfully managing a higher-than-normal debt load means being strict with your budget and responsible with your payments. If possible, try to have your student loan payments taken out from your bank account automatically. That way you won’t forget or miss the payment deadline.

While it may be a challenge to manage multiple types of debt, it’s not impossible. Juggling student loans with a mortgage can be done and offers the benefit of building your net worth while paying off your past loans. For more information about getting a mortgage when you have student loans, contact your trusted mortgage team today. We’ll be happy to share our insight and make recommendations that fit your situation.

How Do I Know If It’s a Good Idea to Refinance My Mortgage?

You Ask, We Answer: How Do I Know If It's a Good Idea to Refinance My Mortgage?Are you interested in paying less per month on your mortgage? Or perhaps you would prefer if your mortgage was paid off a couple of months – or years – faster? If you are a homeowner with a mortgage, one option that is open to you is refinancing. In today’s post, we will explore the topic of mortgage refinancing and how to know if it is a good idea.

How Does Refinancing Work?

In short, refinancing is a process in which pay off your existing mortgage and borrow a new mortgage under a different set of terms. In most cases, homeowners will use the funds from the new mortgage to pay off the old one. Depending on the terms of your new mortgage, there may or may not be cash left over which you can use to invest, pay down debts, make renovations or for other purposes.

Refinancing To A Lower Interest Rate

Mortgage interest rates tend to fluctuate over time and because of this, refinancing to a mortgage with a lower rate is quite popular. If you initially borrowed your mortgage when interest rates were at 5%, you may be able to lock-in a new mortgage at a lower rate. Note that it can be tough to try to “time” the mortgage market, so check in with your mortgage professional to find out if the time is right.

Refinancing For Lower Monthly Payments

Another great use of refinancing is to reduce the monthly payment required on the mortgage. If you have ten years remaining on a 20-year mortgage, refinancing to extend the payments out to 15 years will lower the monthly payment.

Refinancing To Eliminate Other Debts

Finally, many homeowners will refinance their mortgage to use some of the home’s equity to pay off other debts. For example, a family might have $25,000 in debts that are being charged a higher interest rate than their mortgage. If they have built up enough equity, they can refinance and draw out $25,000 from the home’s value. This shifts the debt from the higher interest areas into the mortgage, where it can be paid off over time.

As you can see, there are many reasons why you might want to refinance your mortgage. To learn more about the refinancing process, or to discuss your options, contact us today. Our professional team of mortgage advisors is ready to help you choose the path that best suits your financial needs.

A Step-by-Step Guide to Refinancing a Traditional Mortgage to a FHA Mortgage

A Step-by-Step Guide to Refinancing a Traditional Mortgage to a FHA MortgageRefinancing a mortgage can provide a homeowner with many benefits, and many are interested in refinancing their traditional mortgage into an FHA mortgage to take advantage of low interest rates. Depending on the specific circumstances, this step may lower the monthly payment, reduce interest charges, adjust the loan term so that it is more beneficial for achieving financial goals and more. Those who are interested in refinancing in an FHA mortgage may consider these steps.

Understand the Rules and Requirements

There are specific rules in place regarding refinancing under the FHA program. For example, the loan amount may be up to 96.5 percent of the value of the home, but the homeowner cannot take cash out of the refinance transaction. If cash is taken out, the loan-to-value limit under the FHA program is usually 86 percent of the property value. 

Review Goals and Current Mortgage Details

The next step for homeowners to take is to review their own financial goals and to define their reasons for refinancing. In addition, it is important for homeowners to contact their current mortgage company to learn more about their current interest rate, if there is a prepayment penalty and the current loan balance. Estimating the property value is also important. Homeowners may have a reasonable idea about property value, or they can contact a real estate agent for a valuation. When all of this information is taken into account, the homeowner will have a better idea about what to expect from refinancing.

Each homeowner will be in a unique situation regarding current loan details, property value and goals that they want to achieve through refinancing. It can be confusing to decide if refinancing is the right move to make, and it can be even more complicated to determine which loan program is a best-fit for the goals of the homeowner. Those who are interested in refinancing from a traditional mortgage into the FHA loan program may contact a mortgage broker soon to discuss the options and to determine if this is a best fit option for them as a first step in the loan process.

5 Ways That a Mortgage Can Be a Huge Benefit to Your Financial Future

5 Ways That a Mortgage Can Be a Huge Benefit to Your Financial FutureFor many people, investing in a house is one of the most important purchases they will make in their lifetime. However, alongside having the comfort of your own home, there are many financial benefits associated with buying in. If you’re currently perusing the market for opportunities, here are some reasons to consider investing a little sooner.

Get Away From Inflation

If you have an adjustable-rate mortgage, your interest rates will certainly fluctuate from time to time, but owning a home actually allows you to guard against the reality of inflation, which can be a significant burden as a renter. While the price of housing and apartment rentals can rise considerably with inflation, your monthly mortgage cost will be relatively fixed.

Hold On To More Of Your Money

Renting may be an easier financial obligation than home ownership, but the money you invest into a home each month contributes to your equity, and this is a benefit for your financial future. While rent money will be gone when the month is over, equity provides a consistent means of building wealth.

Buy At A Lower Price

The cost of home ownership may vary around the country, and while it’s certainly climbing in many urban centers, home prices are lower overall. This means that, instead of having to scrounge for a down payment, you’ll be able to invest a little less and maintain a better bank balance.

Cue The Tax Breaks

Many people hold off on home ownership because of the costs of property tax and maintenance, but there are financial boons outside of the money you invest. When tax time comes, you can receive tax deductions for costs like mortgage interest, property taxes and even private mortgage insurance that make buying in a little easier to bear.

Own A Rental Property

Whether you are a first-time buyer or you’ve delved into the market before, having a home in an up-and-coming neighborhood can also be an option, as this will enable you to rent it out and reap the financial rewards. While this may be a more feasible option later on in life, it can be a means of substantial additional income.

Many people hold off on owning a home because of all the associated costs, but it can be of benefit to buy into the market earlier to reap the financial rewards. If you are currently considering home ownership, contact one of our mortgage professionals for more information.

Understanding ‘PITI’ and What Goes in to Your Monthly Payments

Understanding 'PITI' and What Goes in to Your Monthly PaymentsAsk any friend or family member that owns a home and they will share that it takes a bit of management to keep all the expenses under control. Let’s explore the concept of PITI and why it is vital to have a clear picture of how much your home is costing you each month.

Just What Is PITI, Anyway?

PITI is an acronym that stands for “principal, interest, taxes and insurance,” which are the four main components that make up your housing costs.

Principal – this is the amount that you are paying against the total amount that you borrowed when you purchased the home. For example, if you used a mortgage to cover $200,000 of the home’s purchase price, the remaining balance of that $200,000 is the principal. A part of your monthly mortgage payment goes to paying down the principal.

Interest – this is the extra cost that the lender charges for the service of lending you the principal amount. For most mortgages, you will see this expressed as an “interest rate” which is a small percent charged on the loan. A portion of your monthly mortgage payment goes to paying down the interest owed.

Taxes – tax costs are not included in your monthly mortgage payment, but will be added by your lender as part of your yearly expenses when calculating your debt-to-income ratio (see below). Property taxes and other assessments will need to be paid each year.

Insurance – this is the cost of insuring your mortgage and your home. Like taxes, your mortgage lender will typically include some insurance costs in your DTI ratio calculation.

How Lenders Use PITI

Many mortgage lenders use some form of PITI calculation when determining your debt-to-income ratio. This ratio helps the lender understand your ability to manage your monthly mortgage payments without being at risk of missing one. The lower the ratio, the more likely you can afford all your monthly expenses.

Don’t Forget Your Other Monthly Expenses

Finally, don’t forget that along with PITI you will have a variety of other monthly expenses that need to be budgeted for. Leave some space for utilities, repairs and other renovations that need to be made throughout the year.

Once you have the full picture of what is coming in and going out each month, managing your expenses is easy. When you are ready to discuss or apply for a mortgage, get in touch with us. Our friendly team of mortgage professionals is happy to help.

3 Ways That a Reverse Mortgage Can Transform Your Retirement

3 Ways That a Reverse Mortgage Can Transform Your RetirementAre you a retired individual looking for ways to increase your financial security? If so, you may have heard of a home equity conversion mortgage, more commonly known as a reverse mortgage. Used correctly, this is one of the most effective financial products for retirees who own their home.

Let’s explore three ways that a reverse mortgage can help to transform a dull retirement into one filled with excitement.

It’s All About Flexibility

The primary benefit that one receives with a reverse mortgage is financial flexibility. It is an excellent way to tap into the equity that has built up in your home over time without having to sell the house and move out. Moreover, unlike a traditional home loan, the payment terms are far more flexible. In many cases, payments are not required until you are ready to leave the home permanently.

An Extra Source Of Income

Is your lifestyle starting to suffer because you do not have a regular salary coming in for you and your partner? Regardless of how much you have saved in 401-k and other retirement accounts, losing that regular monthly income can be depressing.

The good news: a reverse mortgage can help to change that. The funds you receive can be used however you want. You can invest in renovations for your home, take a nice vacation, invest in the stock market or simply leave it in your bank account. It is a helpful ‘bridge’ income source that will ensure that you have no trouble taking care of life’s many expenses.

A Contingency Fund, Just ‘In Case’

Finally, a reverse mortgage can be an excellent contingency fund. If you take this out as a line of credit, the money will be available if and when it is needed. Many retired individuals lack a financial ‘safety net’ and end up suffering due to unexpected health issues or other costs. With a reverse mortgage, you can sleep soundly knowing that emergency cash is there if needed.

As you can see, taking advantage of a reverse mortgage can be the catalyst that helps take your retirement to the next level. To learn more about these unique financial products, contact us today. We are happy to share how a reverse mortgage can benefit you and your family.

Mortgage 101: How Interest-Only Mortgages Work and Why They’re A Good Solution for Some Buyers

Mortgage 101: How Interest-Only Mortgages Work and Why They're A Good Solution for Some BuyersWhether you’re a first-time homebuyer or an experienced real estate investor, if you are planning to borrow funds to buy a home you will want to choose the right mortgage product. In today’s blog post we’ll explore how interest-only mortgages work and why they’re the perfect choice for some homebuyers.

How Interest-Only Mortgages Differ From Conventional Ones

As the name suggests, interest-only mortgages are loans where you are only required to pay off the interest portion of the loan each month for some specific term. The length of these loans can be up to ten years, although five or seven is the most common. Once this period is over, you will have some options. Some choose to refinance their mortgage into a new term; others will make a lump-sum payment to pay off the balance. The most important item of note is that during the interest-only period, no principal is paid off unless you pay a bit extra.

The Pros And Cons Of Interest-Only Mortgages

Interest-only mortgages are a popular choice because of their many upsides. Your monthly payments are almost certainly going to be far lower during the interest-only period. This is because you’re not responsible for paying down the principal of the loan. A lower monthly payment frees up money that you can use for other purposes, such as investing. Also, your entire monthly payment during the interest-only period should be tax deductible, which may contribute to a refund each year.

Note that there are some potential downsides to interest-only mortgages as well. For example, if your mortgage interest rate is adjustable, you can end up paying more in interest than if you had locked in. You also need to stay disciplined financially. Once the interest-only period ends, your monthly payment may increase significantly to cover both interest and principal.

Who Should Consider An Interest-Only Mortgage?

Interest-only mortgages are a good fit for those individuals or families where you are confident that your income is going to grow significantly in five or ten years. Alternatively, if your income is somewhat sporadic and you want the option of paying lower payments in some months and more substantial payments in others. The key point is that these mortgages offer flexibility that other mortgage products do not.

As you can see, interest-only mortgages are an excellent choice in certain circumstances. To learn more about how an interest-only mortgage might be right for you, contact our professional mortgage team today. We are happy to share our experience to find mortgage financing that perfectly suits your needs.

Considering a New Home Next Year? Start Now and Get a Jump on Improving Your Credit Score

Considering a New Home Next Year? Start Now and Get a Jump on Improving Your Credit ScoreWith the new year right around the corner, that leaves you with precious little time to get your finances in order. Let’s explore a few tips that will help you get a jump on improving your credit score before the end of the year.

Grab A Fresh Copy

The first step is to order a fresh copy of your credit report from one of the major agencies. The Fair Credit Reporting Act allows you to access a free copy of your credit report once every 12 months. So, if you have not ordered a copy recently, it is time to do so. You can access this free service through AnnualCreditReport.com, which is a website recommended by the Federal Trade Commission.

Clean Up Anything Outstanding

Now that you have a copy of your credit report, it’s time to go through it, line-by-line. You should recognize every current and outstanding account in the report. Any balances owing should be in order and reflect how much you owe. It’s critical that you flag any mistakes or old debts that you have already paid in full. If you come across anything that shouldn’t be on your credit report, call the reporting agency to let them know. If necessary, they will assist you with challenging the issue.

Pay Down Those High-Interest Debts

The final tip is to prioritize your outstanding debts so that you can pay them off more efficiently. The essential debt payments are your mandatory minimums, which you need to pay to avoid being sent to a collection agency. From there, try to pay off your debts with the highest interest rates first. Getting these paid off faster means that over time, you’re spending less on interest payments. Moreover, you can use that extra cash to pay your debts down further.

The above are just a few of the action steps that you can take today to start improving your credit score. When you’re ready to discuss a mortgage for your new home, give our team a call. We will be happy to advise you on the mortgage offer that suits your needs, budget, and credit.

Taking Out a Mortgage for the First Time? Learn Why a Condo Might Be a Great First Home

Taking Out a Mortgage for the First Time? Learn Why a Condo Might Be a Great First HomeAre you starting to tire of paying your monthly rent to someone and never building any equity? Renting forever can be a significant pain, especially as you’re contributing to someone else’s financial well-being. The good news is that there are affordable real estate options out there for those investing in their first home. Below we will share a few excellent reasons why an apartment or condo might be the best choice for a first-time home buyer.

A Manageable Monthly Payment

In most markets across the country, condos and apartments are available at a significantly lower cost than a full-sized house. Buying a less-expensive home means that your monthly mortgage payments will, in turn, be lower. If you are single or a young professional trying to start a family, that extra money can be a massive boost to your monthly budget.

Note that while your monthly mortgage payment may be lower, you are still responsible for other maintenance and upkeep fees. The most common is known as a homeowners’ association fee, to which all condo owners in the same development contribute. These funds are used to upkeep the building or property as well as things like landscaping, a pool or gym, and other amenities.

A Smaller Down Payment

In the same vein, buying a less-expensive home also means that you can put a smaller down payment on it when you close the sale. In many cases you are required to place a certain percentage – typically 20 percent – down to avoid having to purchase private mortgage insurance. Having to commit less in your down payment leaves more money in the bank for other purposes.

An Excellent Future Investment Property

Don’t forget that when you are ready to upgrade and move into a larger house, you can keep a condo as a rental or investment property. Once your mortgage is paid off, you are only responsible for the monthly maintenance fees and taxes. So if you can rent the condo out to a tenant, you will have an excellent source of cash flow that can help to pay for your new home or fund other activities.

The above are just a few of the many reasons why a condo can be a great starter home for first-time buyers. To learn more about your mortgage options, contact us today. Our team is happy to help.