Managing Finances Before Applying For A Mortgage

February 26, 2019 by

Managing Finances Before Applying For A MortgageAre you planning on using a mortgage to help cover the cost of a new home? If so, you will want to prepare your finances and figure out how you will manage all those wallet-draining monthly expenses. Let’s take a look at how to run a quick financial health check to ensure you are ready to apply for a mortgage.

Update (Or Start) Your Monthly Budget

First, it is essential to get the basics out of the way. If you haven’t already, it’s time to start a monthly budget to keep track of your income and expenses. Once you have a mortgage, it will be important to prioritize your monthly payments so that you don’t end up falling behind.

Starting a budget is easy and can be done with mobile apps, software, a spreadsheet or a pen and paper. List all sources of income so that you know exactly how much cash you are working with. Then, list out every one of your expenses. It can be tough to remember them all, so consider using debit and credit card statements from the past few months as a reminder.

Get A Copy Of Your Credit Report

Next, you will want to get a copy of your credit report so you can see what potential mortgage lenders will see when assessing your financial history. This is a free service that you can request once per year, so be sure to take advantage. Note that you will want to use government-approved websites for requesting your credit report. Be wary of scams.

Do You Have A Down Payment?

A down payment is not required for every home purchase, but having one saved up can make the buying process easier. The amount you will want to have saved up will depend on the cost of your home, whether you plan on carrying private mortgage insurance and a variety of other factors. If possible, try to save up an amount close to (or more than) twenty percent of the home’s purchase price.

Ready? Chat With A Professional

Now that you have your financial health in check, it is time to meet with a trusted mortgage professional to discuss your financing options. 

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Is a Hard Money Loan the Right Strategy for You?

January 30, 2019 by

Is a Hard Money Loan the Right Strategy for YouWhen used as a part of an effective real estate investment strategy, hard money loans are an excellent tool to quickly increase holdings without risking existing properties. However, these loans aren’t for everyone.

What investors get the most value from hard money loans?

Investors With Less-Than-Stellar Credit

Investors with credit challenges can qualify more easily for hard money loans. That’s because these loans aren’t based on the borrower. While you will have to prove a measure of creditworthiness, hard money lenders are more interested in the property you plan to buy. If you default on your payments, the lending bank simply takes possession of your property. For that reason, high-value properties in good condition fetch the best terms with hard money lenders. 

If you’re turned down for more conventional funding sources, you may still be able to move forward with a hard money loan for the right property.

Cash-Strapped Veteran Investors

When the market is hot, it’s not unusual for an investor to sink the majority of their liquid assets into new properties. However, this can leave them left out in the cold when new properties come up for sale.

Experienced flippers who are temporarily out of cash can use hard money loans to fund the purchase of additional properties. This allows them to continue expanding their holdings without compromising money earmarked for other projects. The short loan term is no problem for these investors since they know a property sale is always imminent.

Quick Investments: When You Can’t Wait

Sudden auctions can be a blessing to real estate investors. Sometimes, however, these deals pop up at the least opportune time. If you have your eye on a property that promises to go fast, a hard money loan can get you the cash you need in less time than conventional sources. That means you can take advantage of rock-bottom cash auctions quickly.

Since hard money loans don’t have the most favorable repayment terms, many investors choose to convert them into more conventional loan structures after the initial purchase. This strategy allows investors to participate in quick sales without sacrificing too much profit to interest payments.

Hard money loans are a unique source of funding for real estate investors. Use them wisely to realize the benefits and increase your investment income.

Your trusted home mortgage professional can help guide you through all of your financing options. Be sure to set an appointment when you are thinking of investing in a new property.

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3 Tips To Save For A Down Payment

January 10, 2019 by

3 Tips To Save For A Down PaymentSaving up for a down payment can feel overwhelming. Most people have never saved up the kind of money it takes for a down payment. It can be done, though. The goal is to put 20% down on a house. This is what it takes if you don’t want to have to pay private mortgage insurance every month.

However, you don’t have to absolutely put 20% down. Some mortgage programs, such as VA and FHA loans, let borrowers put down as little as zero down or about 3.5% down. There are extra requirements with any kind of mortgage you get, so be sure to discuss those with your lender.

Whichever kind of mortgage you decide to try for, here are some tips for saving for a down payment.

Get A Head Start

The sooner you start saving for a down payment, the easier it will be. Even if you currently can’t see having any extra money for savings, tuck as much as you can into a savings account. Every single dollar will help later on. 

Invest Safely To Earn Interest On Your Down Payment

If your home purchase goal is two or more years away, consider investing your savings so it earns interest. Since you’re counting on that money to use for a life goal, invest in things with low or no risk. Also, invest in things that allow you to cash out with no penalties when you think you’ll be ready to buy.

Ideas include a bank CD, money market, tax lien certificate, or municipal bonds. You won’t earn massive amounts of interest with any of these vehicles, but in return you’ll have flexibility and security.

Request An Inheritance Advance

If you know that your parents have you in their will, you can request to get part of your inheritance early. Your parents may be able to give you up to a certain amount for your mortgage down payment with no penalty.

Be sure to check with your potential lender. Some mortgage programs have caps on how much of the down payment can be sourced from a third party.

Once you decide what kind of home you might like, and which mortgage programs you might qualify for, you can decide how much you’ll need to save for a down payment. Use these three tips to save up. Before long, you’ll be ready to start shopping for the home of your dreams.

An essential partner is your trusted home mortgage professional. You can count on them to guide you every step of the way through your home loan process.

 

 

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Home Buying Power Remains In Motion Depsite Rising Mortgage Rates

November 30, 2018 by

Home Buying Power Remains In Motion Depsite Rising Mortgage RatesThe real estate market does not occupy a space outside the laws of physics. As Sir Isaac Newton so aptly theorized, “For every action, there is an equal and opposite reaction.” When applying the English physicist’s Third Law to today’s rising mortgage rates, anticipating the reaction can be valuable information if you are planning to buy or sell a home or commercial property.

At first blush, residential home buyers and commercial property investors might expect the “opposite” reaction to impact buying power negatively. The initial data might lead many to believe that premise.

How Home Buyers Reacted To Rate Hikes

According to Realtor.com, the average cost to American mortgage holders increased by 15.8 percent from Sept. 2017 to Sept. 2018. In dollars, that totaled about $223, reportedly from $1,413 to $1,636 when considered against the median home at $294,900. That so-called reaction seems to indicate a loss of buying power for everyday homeowners.

Naturally, these increases were higher in top real estate markets with New York at $545 increase and Seattle at $533 where the median home costs $529,900 and $550,045 respectively. The top 20 housing markets incurred a total 68 percent of the increases year-over-year. Compounding the reaction to rising rates, many pundits are claiming the Fed’s rate hikes are creating stock market volatility.

All of these numbers seem to indicate a gloomy opposite reaction to mortgage rate increases. Or do they?

Real Estate Market Remains In Motion

Much of that thinking stems from looking at increased costs as if they somehow prohibit home buyers from making purchases. But the very fact that Americans are purchasing homes and paying somewhat higher monthly mortgage premiums indicates people enjoy the required buying power. Yes, rates have increased since the Great Recession, but that was always the plan.  

Keep in mind that Newton has a few other applicable laws of physics as well. For example, “A body in motion remains in motion.” The Fed’s decision to finally raise rates was held back by a sluggish recovery. Today’s robust economy has prompted the long overdue interest rate hikes, but they are still quite low.

If, for example, mortgage rate increases resulted in a stagnant housing or commercial real estate market, that might be considered an adverse reaction. However, single-family homes and investment properties are in high demand.

That should indicate that the booming economy has improved buying power ahead of mortgage rate increases. Simply put, Americans seem to be ahead in the real estate game.

For everyday families interested in starter homes, homeowners eyeing a more substantial property or commercial investors looking to get into the market, a smart equal and opposite reaction to rate increases may be to get in quickly and enjoy today’s low rates before the next planned increase.

Be sure to consult with your trusted mortgage professional for your best financing options.

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Mortgage Challenges For Self-Employed Home Buyers

November 28, 2018 by

Mortgage Challenges For Self-Employed Home BuyersIt’s no secret that mortgage lending institutions look favorably on steady paychecks and positive debt-to-income ratios. That can leave many self-employed prospective home buyers feeling anxious about getting approved for a mortgage. But just like the 9-to-5ers who get regular paychecks, self-employed people earning a good living can get approved with a little due diligence.

The primary concern of mortgage lenders is not necessarily where your revenue comes from, it’s confidence that you can meet the monthly obligations. A lender probably wouldn’t see a significant difference between someone who was paid every two weeks and another paid monthly. Why should a self-employed earner be any different? While there are differences, that doesn’t necessarily have to be a bad thing.

Self-Employed Mortgage Applicants Face ‘Different’ Scrutiny

When reviewing a self-employed person’s mortgage application, the lender can expand their consideration to items related to your business. Factors such as stability, longevity, location, and viability are issues that can come into play.

This type of review mirrors that of steady paycheck earners in terms of length of employment, history of layoffs and other potential revenue setbacks. There really isn’t a higher standard for self-employed mortgage applicants. You enjoy a different professional life, and the process reflects those differences. That being said, there are a number of things you can do to put your best foot forward toward mortgage approval.

Strengthen Your Self-Employed Mortgage Application

First and foremost, every mortgage applicant must be able to demonstrate an ability to meet the monthly payments on paper. There is no way around the debt-to-income ratio. And although many self-employed people exercise some lifestyle flexibility in terms of tax deductions, your numbers have to prove you can take on a mortgage. That being said, there are important items you may want to consider when applying for a home loan.

  • Revenue Stability: Volatile swings in revenue are not generally persuasive. Lenders tend to like steady and positive growth reflected in your business and personal earnings.
  • Tax Returns Matter: This can be particularly problematic for people who find creatively legal ways to make revenue tax exempt. Home offices and company cars can lower your taxable income, but they also reduce your ability to pay the mortgage, at least on paper. Plan ahead by strategically filing strong earned-revenue tax returns.
  • Consistency Matters: There are a few ways to demonstrate consistency. It can be level monthly earnings or multiple years of tax returns in the same business. Your income may only be considered if it fluctuates in a way that frightens lenders.
  • Good Credit: Some cash-oriented people tend to discount the value of credit scores. The adage that “cash is king” may apply to the down payment, but a poor credit history can hurt your chances with lenders. Think “credit is king” when applying for a home loan.

Being self-employed does not mean you are at a strategic disadvantage when applying for a mortgage. But keep in mind that the home loan review can be slightly different. As always, your best next step would be to consult with your trusted home mortgage professional to go over your personal situation.

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Real Estate Crowdfunding Investment Is Trending

October 30, 2018 by

Real Estate Crowdfunding Investment Is TrendingAlthough the real estate market is currently booming, the last housing bubble burst remains relatively fresh in investors’ minds and that has many taking a long look at crowdfunding.

One of the lessons that came out of the burst and ensuing Great Recession was that investors were blind to where their money went. If you watched the Academy Award-winning film “The Big Short,” then you at least understand Hollywood’s hyperbolic explanation of the subprime mortgage crisis. You may be asking: what does this have to do with real estate crowdfunding real investing? Well, everything.

Among the key reasons that the financial collapse occurred was the fact that investors had no clue what was in the AAA collateralized debt obligations (CDOs). Most people didn’t know what was in them and others simply did not care. At the end of the day, Americans lost massive amounts of wealth because they were not hands-on about investing.

That’s a primary reason why real estate crowdfunding platforms are trending. Crowdfunded real estate investments tend to be more of an open book. Consider the transparency differences between crowdfunding and a real estate investment trust (REIT).

Transparency: Crowdfunding Or REIT

Let’s assume that you are not particularly keen on buying an investment property and becoming a landlord. Although renting yourself has its benefits, it can also be labor intensive at times. That being said, wealth-building alternatives such as REITs and crowdfunding present opportunities that require less effort.

REITs tend to be the more hands-off than crowdfunding. That’s because REITs are generally traded funds. Dating back to 1971, the FTSE Nareit REIT index reportedly yielded a return of 9.72 percent. Some REIT investments do quite well in specific sectors such as self-storage and office space among others.

But REITs can be widely diversified, and some have non-real estate assets embedded in them. An REIT with hundreds of moving parts can be onerous to track. That makes them feel a lot like the CDOs. This is not to imply that REITs are a scam like those CDOs. It’s just that crowdfunding investments are more clear.

When investors opt for crowdfunded real estate investments, it falls on their shoulders to select specific properties for their portfolio. Unlike an REIT in which you just buy in and someone else manages the entire fund, crowdfund investors pick real estate options one at a time. In many ways, it is like becoming a landlord, just with someone else doing the legwork. At the end of the day, there’s less need for transparency because you picked all the assets yourself.

Why Consider Real Estate Crowdfunding?

Besides not having to do the heavy lifting, real estate crowdfunding generally avoids much of the volatility of the market-driven REITs and stocks. Everyday people are not investing the market per se, just the select properties you feel confident about. Also, the IRS reportedly allows investors to deduct depreciation.

But what makes real estate crowdfunding increasingly popular is that it allows people to invest directly into tangible properties without having to take on landlord responsibilities. Simply put, you know what you are buying.   

Checking your credit and becoming pre-approved are important first steps for most home purchases. It is important to discuss other factors, including seasoning of funds, when considering options like crowdfunding. These are all steps your trusted home mortgage professional can help you navigate. 

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What To Know About Specialty Mortgages

October 16, 2018 by

What To Know About Specialty MortgagesRecent medical school graduates, saddled by high student loan debt, sometimes have a hard time qualifying for a first mortgage. Now, however, a growing number of lenders will consider future earnings potential of high earners in the medical profession as a way to offset high debt ratios. But specialty mortgages for young physicians aren’t the only unique loans available today.

Nationwide, there are a number of unique programs designed to help first-time buyers qualify for a mortgage loan. While some target specific professions, others are open to a wider range of applicants. They are definitely worth exploring if you’re interested in buying a home, but are not able to qualify for a standard home loan.

Here are some of the better known, widely-available options:

Good Neighbor Next Door

A HUD-sponsored program, this not-so-well-known option is available to firefighters and law enforcement officers, emergency medical technicians and teachers. The loans provide a discount of up to 50 percent of the asking price in select zones in the country known as revitalization areas. One stipulation is that the borrower must agree to live in the home for at least three years.

VA Loans — Zero Down

For anyone who has served in the military, and certain authorized civilian employees of the government, the zero down VA loan is one of the best specialty mortgages available.

Home Path

Fannie Mae and Freddy Mac programs offered to low and moderate-income families also provide guidance and home-ownership information that can be invaluable for first-time borrowers. The education programs are specifically designed to address the common misconceptions about buying as well as providing education about property maintenance and financial responsibility.

Energy-Efficient Mortgage (EEM)

This specialty mortgage allows homebuyers to add green features to a home without making a larger down payment or paying a higher interest rate. The cost of energy-efficient improvements is simply rolled into the primary FHA or VA mortgage. It can be a cost-effective, simple way to add desirable improvements as well as value to a home.

FHA Rehabilitation Program

If a fixer-upper seems like the way to go for your specific situation, the FHA 203(k) program offers a loan option that might be a good fit. Basically, this mortgage is based on the value of the home after improvements are completed, and carries a down payment requirement as low as three percent. The funds needed for rehabilitation are included in the primary loan.

Native American Direct Loan

Essentially a VA loan for Native American veterans, this mortgage program is for homes on federal trust lands; it is a zero down 30-year fixed-rate mortgage with a low interest rate.

State And Municipal Programs

Many states and cities have grants or specialty programs available. It is always worth checking with local jurisdictions to what is offered that you might qualify for.

Interest Only Or Extended Term

Two other types of mortgage that are available to serve special needs borrowers are interest only loans and mortgages with terms up to 40 years.

If you think these might be of interest, be sure to ask for specifics from your trusted mortgage broker or lender.

 

 

 

 

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U.S. Wage Increases Could Help Home Buyers

October 12, 2018 by

U.S. Wage Increases Could Help Home BuyersThe struggle to achieve the American homeownership dream often feels like it happens in a vacuum. Everyday people work hard, save money and polish up their credit to get a low mortgage rate.

But there are powerful forces at work that are far beyond each person’s control. And until recently, the gap between American wage growth and rising home prices was widening. According to data coming out of the U.S. Department of Labor, unemployment recently hit a 49-year low and wages are enjoying the greatest uptick in nearly a decade. That is good news for prospective home buyers.

American Wages On The Rise

The 2018 economic news has seemed like one long greatest hits album. Historic-low unemployment for African-Americans and Hispanic-Americans has spurred confidence among these groups and the national unemployment has been steadily under 4-percent. The stock markets are booming, and the GDP growth has been impressive.

But there has been some frustration over stubborn wages that haven’t kept pace with other metrics. A report following stagnant salaries in February pointed to no slow down between rising home prices and wallowing pay rates. The growth rate was reportedly a modest 0.1 percent gain in February and that put Americans behind the curve in terms of buying homes.

But numbers coming out of the second quarter jobs report point to a 10-year high wage increase. The Bureau of Labor and Statistics reported wages are rising as employers compete to fill positions and the 12-month increase stands at 2.9 percent through August.

These are key numbers that may put a smile on potential home buyers’ faces.

  • Wages rose 0.5 percent in the second quarter of 2018.
  • Through August, wages rose 2.9 percent over the previous 12-month period.
  • Private industry compensation increased by 2.9 percent.
  • Government compensation increased by 2.3 percent, down from 2.6 in 2017.
  • Sales jobs gained by 3.5 percent.
  • Transportation jobs increased by 3.4 percent.

Experts are also claiming that setbacks from hurricanes likely blocked wage growth from topping the 2.9 high in 2009.

Where The Housing Market Stands

There’s little doubt that the surging economy put a higher number of Americans in position to purchase homes. However, inventory has remained well behind demand and that created a seller’s market with rising listing prices. But home prices are coming within reach for more people in 2018 and possibly 2019 market.

Since bottoming out in 2102, today’s home prices reportedly stand at about 6 percent higher than they were at their 2006 peak. That is not necessarily an indication that another housing bubble exists. Rather, the uptick in home prices is a natural reaction to an inventory shortage and economic growth.

The optimistic news for prospective home buyers is that wage growth appears to be gaining on home costs. As the gap closes, it’s likely that more and more people will be financially able to secure the American Dream of owning a home.

If you are in the market for a new home, contact your trusted home mortgage professional to start the pre-approval process.

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Best Things To Do Now To Get Your Finances Mortgage Ready

October 4, 2018 by

Best Things To Do Now To Get Your Finances Mortgage ReadyYou probably already know that qualifying for a mortgage can be the biggest hurdle — aside from actually finding that dream property — along the path to home ownership.

Rather than agonizing about it, however, there are some positive actions you can take in advance to help you realize your dream.

Take A Close Look At Your Budget

If you don’t currently operate with a comprehensive household budget, get started now to analyze your income and monitor your spending habits. There’s no better way to prepare for home ownership than by being realistic about how you spend your money. If you don’t have a regular savings program, or if you’re constantly short on cash prior to the next payday, take steps to remedy the problem. Plan for the future by getting the present in check.

Gather Employment And Earnings Records

Mortgage lenders want to see stability and commitment. Finding and organize your employment records to show a consistent earnings pattern and, hopefully, a record of growth, both in terms of income and responsibility. Simplify the task of gathering required documents by collecting all records in a binder or notebook that can easily be copies when it’s time to submit them to a lender. It’s a confidence-building step as well.

Organize Your Banking Records

Lenders will not only want to see employment records, but they will require copies of all bank and investment accounts as well. Again, by being organized and getting a handle on your dollar inflow and outflow, you’ll gain insights into your individual spending habits and make the job easier for a mortgage specialist.

Make Copies Of Your Tax Returns

Tax returns confirm and validate all the other financial information that you will be required to supply. Typically, returns for the past two or three years will be required. If you own a small business or have income in addition to that from paid employment, make copies of those records as well.

Put A Halt To Spending

Perhaps the best way to demonstrate your serious intent to purchase — and pay for — a new home is by curtailing your spending on impulse purchases and expensive entertainment. This is not the time to buy a new car, book an exotic vacation, purchase major electronics or even home furnishings, or commit to time payments of any sort. Frugality should become your mantra in the months leading up to loan qualification.

Monitor Your Credit Cards

If your credit rating is within acceptable limits, do what you can to make all payments on time, pay down balances, minimize new purchases and demonstrate your continuing ability to “live within your means.” Do not apply for new credit cards, no matter how tempting the offers, because increased account activity can adversely affect your FICO score. In addition, if you have a blip on your credit report, do what you can to repair it prior to making a mortgage loan application, or be prepared to explain the circumstances, in detail and in writing.

Applying for a loan need not be scary; understanding the financial reality, however, is a great benefit.

Contact your trusted home mortgage professional who will be able to assist you in organizing your documents and aligning you with your best financing options.

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Is A Reverse Mortgage Right For You?

September 19, 2018 by

Is A Reverse Mortgage Right For YouImagine the bank depositing monthly premiums into your account instead of you writing a mortgage check. That’s basically how a reverse mortgage works.  

Traditional mortgages involve people paying down the interest and principal on a home loan. The goal is generally to pay off the property and cruise through retirement without that monthly installment eating at your budget. With your home paid off, those previously allotted finances can be used to relax and enjoy your retirement to the fullest. That’s the best-case scenario anyway.

But financial life has changed significantly over the past half-century. The formula for economic security has been chipped away by rising health care costs, tax increases, and other complications. Working hard and paying off your family home may no longer equal financial flexibility later in life. The valued elders in everyday American communities may require enhanced resources and the reverse mortgage has been a viable option for many.

How A Reverse Mortgage Works

The product was created to allow homeowners who are 62 and older to convert their home equity into cash payments. Rather than you paying the bank, the roles are reversed and the lender basically buys out your equity by paying you in monthly installments.  

Homeowners are required to stay up to date on things such as local property taxes, association fees and insurance. The lender receives reimbursement for the equity purchase when the home sells at the conclusion of the agreement. What was once money going out each much makes a full swing to cash coming into the home. That can be a remarkable financial boon.

Types Of Reverse Mortgages

The reverse mortgage products on the market can be broken down into three basic types. The overwhelming majority are federally-insured home equity conversion mortgages.

Industry insiders often refer to these products as HECMs and they are supported by the U.S. Department of Housing and Urban Development. They reportedly comprise upwards of 90 percent of reverse mortgages. Other types include private loans and those with a single purpose. For example, a qualified homeowner may secure a reverse mortgage to make a necessary home improvement. State agencies and nonprofits often back these to help low-income families through adversity.

Benefits Of A Reverse Mortgage

When people discover that their pension, 401(k) and savings won’t necessarily carry them through a comfortable retirement, selling the family home and downsizing emerges as one of the solutions. But reverse mortgages can offer an alternative by providing the following benefits.

  • Steady Home Life: Reverse mortgages allow homeowners to stay in their home and receive payments on the equity rather than sell, move and squirrel away the profit. The key benefit is remaining in the family home that is rich with memories.
  • Relieve Burden: The increased costs of taxes, insurance, utilities and other living expenses may eat away at the financial relief gained by paying off a home. Reverse mortgages infuse elders’ budgets and help overcome financial shortfalls.
  • Eliminate Mortgage: For those who still have a monthly mortgage payment, a reverse mortgage can pay off the outstanding balance. The product allows homeowners to subtract money owed and still receive monthly installments. That can be a substantial financial swing.

Reverse mortgages can be an excellent tool to improve your quality of life during retirement. However, it’s important to have a realistic long-term financial plan in place.

If you are considering a reverse mortgage, speak with an experienced mortgage professional about options that best meet your needs.

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