Category: Archive

Mortgage Misconceptions: Busted

Looking for a mortgage for your dream home? Make sure you have the facts and then walk down to the bank with confidence. 

Misconceptions disallow us to make rational decisions, which end up hurting us immediately and down the road. And when it comes to something as important as your mortgage, being able to filter out fact from fiction could save you thousands of dollars. Getting a mortgage may not be the easiest thing in the world, which is why discerning myths from reality will only help you throughout the entire process. Here are a few mortgage misconceptions you may have which you should clear up right now.

Your Best Credit Score Is Used for Approval

You may think that lenders will use your highest credit score, but that couldn’t be further from the truth. Lenders take the middle of three credit scores. If you are applying jointly, they will take the lower of both the middle scores.

The Rate You’re Quoted Is Final

Rates are tied to the daily trading of mortgage bonds, so most rates change on a daily basis. There are instances where the refinancers can like a rate when it’s quoted, but you must give your lender enough information and documentation to determine if you qualify for the quotes rate.

Mortgage Insurance Is Required if Your Down Payment Is Less Than Twenty Percent

Mortgage insurance is usually required if your down payment is less than twenty percent. The most common way to do this is with a combination mortgage. The first mortgage caps at eighty percent and the second mortgage takes care of the remaining twenty percent–often called a piggyback.

Mortgages may seem like stressful contracts to obtain, but with the right preparation, they don’t have to be! Contact Dean Rathbun when it comes time to finding the perfect plan of action to buy your home. We are happy to help you.

 

How to Shorten Your Mortgage by Year

Just because you have a 30-year loan doesn’t mean you have to be well into your 60s or 70s paying it off. These tips can help you cross the finish line early. 

No one wants to spend longer than they have to paying off their mortgage. The fastest way to pay off a mortgage faster is to get a shorter-term loan, like getting a 15-year instead of a 30-year. But that means higher monthly payments that not everyone will be able to afford. So how do you fix your budget with a loan you can afford and still pay it off early? Here are a few common approaches to this problem.

Biweekly Payments

A biweekly plan is the easiest way to shorten your mortgage without ruining your finances. This plan shaves about four to five year off your mortgage as you make half your payment every other week.

This means you’re making 26 payments, which is the equivalent of 13 monthly mortgage payments per year instead of just 12. The normal budget can absorb this blow because you are still paying your mortgage, only cutting in half every two weeks.

Increase Monthly Payment

If you can afford to pay more than a biweekly payment, you can opt to do so by increasing your monthly payment amount. Paying an extra $200, $300, or even $400 a month can shave off up to ten years on your mortgage!

If you can still afford more, you may want to consider a fifteen-year loan as they shave off about $100 a month off your monthly payment.

Mortgages may seem like stressful contracts to obtain, but with the right preparation, they don’t have to be! Contact Dean Rathbun when it comes time to finding the perfect plan of action to buy your home. We are happy to help you.

Rules for Self-Employed Mortgage Borrowers

For the 14 million or so self-employed borrowers that live in the U.S., it’s going to get easier to become approved for a mortgage. 

Being self-employed and getting approved for a mortgage is everything but easy. Recently, Fannie Mae issued new loan guidelines related to self-employment income that makes it easier for the self-employed to get approved for mortgages. Some of the highlights include a decrease from two years of federal income tax returns to one and also borrowers with self-employment second jobs no longer have to show proof of income if they are qualified based on the income from their salary-based job. Learn how you may be affected by these new and improved self-employed mortgage borrowers rules.

Self-Employed? Get Approved for a Mortgage

When you are buying a brand new home or doing a refinance loan, you need to follow a specific set of steps to get approved.

  1. You apply for the loan, which you can do in-person or by telephone. You’ll need to disclose your annual income, savings, debts, and your employment history and a record of your past residences.
  2. Once completed, your application is handed over to a bank employee titled an “underwriter.” Your underwriter will review the information provided, make requests for any clarifications, and ask for documentation to prove the information you’ve provided.

It’s important to know that the process varies from applicant to applicant and loan to loan. The documentation required by an underwriter is to ensure you meet the minimum qualifications set by the bank.

Lenders have recently reduced the amount of paperwork for many self-employed persons, and those with “second jobs,” the paperwork requirement is waived altogether.

Mortgages may seem like stressful contracts to obtain, but with the right preparation, they don’t have to be! Contact Dean Rathbun when it comes time to finding the perfect plan of action to buy your home. We are happy to help you.

Should You Lock Your Mortgage Rate

To lock or not to lock: that is the question…you should be asking if you own a home. 

Banks often encourage home buyers to lock in their mortgage rates to guard against any rising borrowing costs. But seeing as how bankers were responsible for the collapse of the real estate market in 2008, it’s easy to understand why one would be wary of what they tell you to do with your mortgage. Locking your mortgage rate to protect against any increases may sound appetizing, but is it the right move for you? Here are the reasons should you lock your mortgage rate?

Rate locks allow home buyers to guarantee a particular mortgage rate if they close on the home sale within a set period, no matter the influence outside factors may have on the market. This way, home buyers can avoid larger monthly payments on their loan.

Since interest rates had been at historic lows, many people did not opt for locking their rates, but now with interest rates finally rising, it became a very popular action within the last year.

But the drawbacks can be significant. Locking your mortgage rate is a double-edged sword.

Why? To start, locking your rate comes at a price–literally. They offer free rate locks for as long as 45 to 60 days, the amount of time it takes to process a mortgage. Additionally, locked mortgage rates are typically higher than the market rate by and eighth to a quarter percent.

Locking your mortgage ultimately depends on what you can afford. If you want help with the process of securing your mortgage, or advice on whether you actually should lock your house mortgage,  contact  Dean Rathbun when it comes time to finding the perfect plan of action to buy your home. We are happy to help you.

Questions You Should Ask Your Mortgage Lender

Are you ready to buy a home? Not so fast, cowboy. 

Do you think you’re ready to purchase a home? While the “perfect plan” is a myth, it definitely helps to have some guidelines to assist you along the way. Buying a home is likely the most expensive investment you will ever make in your life, and it is one that will be with you for decades, so being fully prepared is the best way to go about it. Here are some questions you should ask your mortgage lender before you apply for a mortgage.

  1. What is the interest rate on this mortgage?
    Ask to take a look at the lender’s loan estimate which breaks down the contract. It should include the annual percentage rate (APR) which includes: rates, points, fees, and other charges you’ll have to pay for the mortgage.
  2. How much are the closing costs? 
    Borrowers pay fees for the services that the lender and other parties provided to you. It is required for lenders to give you an estimate within three days of receiving a loan estimate.
  3. Will there be any origination/discount points for which I have to pay?
    Lenders have the option of charging origination points, discount points, or both. 1 point is equal to 1 percent of the total loan amount. DISCOUNT POINTS reduce the interest rate, and ORIGINATION POINTS are fees by the lender for originating the loan.
  4. Prepayment penalty
    Some lenders charge a penalty if you prepay your mortgage. If you want to pay off your mortgage faster and get rid of that incredible burden, you should know of any penalties that may come.

If you want help with acquiring the mortgage that’s right for you, contact  Dean Rathbun when it comes time to finding the perfect plan of action to buy your home. We are happy to help you.

Real Estate Market Trends for Fall 2016

What should you expect from the real estate market in the fall of 2016? 

Seasons change, and the real estate market is not immune to this shift. The fall of 2016 is here, but what can you expect to happen to the housing market during this change in seasons? Will the prices be affected by the presidential election? Will an up and coming generation finally make its mark in the real estate market? And for what should potential buyers be on the lookout. Here is what you should know about the real estate market trends for the fall of 2016.

In the fall, mortgage rates will rise. Mortgages have been low for the past decade and with a strengthening economy, prices are looking to be back on the rise.

Rent rates will climb gradually. Rent rates have increased since 2015, and it will remain steady through the fall of 2016 and into the future. This steadiness is because American households simply do not have the credit, savings, and stable income that’s required by modern-day lenders.

Millennials will take the wheel. The fall is known for the slowing down of home sales, but in 2016, Millennials will finally start making a difference in the real estate market as more of them buy their very first home. Recovering Gen Xers and Baby Boomers will also make an impact in the home buying field as well.

The fall is a time for change, and the real estate market will be changing along with it. Being prepared for this shift is the only way you’ll be able to take advantage of the opportunities that may be coming and acquire the house that’s right for you. Contact  Dean Rathbun when it comes time to finding the perfect plan of action to buy your home. We are happy to help you.

Renter’s Tip: How to Save for a Down Payment (Water Edition)

When looking to move out and finally purchase a home, you’re going to need a down payment, but, when already paying for rent, how can you save that much?

Whether you are responsible for the water bill, or your landlord covers the water but you are wise and want to conserve water, there are plenty of ways you can save on your utilities and decrease your carbon footprint. Maybe, some of your utility hacks are surprisingly creative and incredibly efficient. Water is a finite resource, so it’s important to save water wherever and whenever you can, even if you’re not paying for it yourself. Here are some ways which can save water and help you save up for a down payment.

Ways to Conserve Water

  1. Limit Your Water Usage

Long showers, running the water running while brushing your teeth, refilling the tub again and again: these are bad habits that are not only costing you money, but, are also a  huge waste of water. Water timers alert the user when they’ve had their fair share of water.

  1. Wash Wisely

If you are the proud owner of a dishwasher, make sure that you turn it on when loaded to capacity (not a glass before) and shut the water off when you are washing your pans and pots.

  1. Smart Toilet

While it may not connect to the internet, these “smart” toilets have two options when flushing. One uses much less water per flush which conserves water.

  1. Watch the Lawn

While a green lawn is something to behold, you don’t have to water your lawn every day. If you live in a rainy climate, you shouldn’t even be watering, as nature is taking care of that for you. Watering your lawn for about an hour every other day is all most lawns require.

Conserving water contributes to your savings. These savings may take a while, but you’ll have your down payment before you know it! Contact  Dean Rathbun when it comes time to finding the perfect plan of action to buy a home. We are happy to help you.

Why Isn’t My House Selling? 3 Possible Reasons as to Why

Has your home been stalled in the housing market? There may be some reasons you’re overlooking.

It’s currently a seller’s market in many cities across the U.S. If your home is in one of those cities, and is not getting offers, something is wrong. There are more buyers than there are houses for sale, so simple statistics means that your home should be getting at least a few offers. Knowing the problem is a good first step in finding the solution and giving your house high visibility for some great offers.

  1. Your Confidence is Playing Tricks on You

While being confident is certainly a quality you want to have, there is such a thing as too much confidence. This overconfidence may be hindering your chances of selling your home. Don’t get lazy in this seller’s market, and prepare as you would in a regular market (equal buyers to sellers ratio).

  1. Your Photos Are Bad

Finding homes online is what many buyers are doing nowadays. The first view they see must be a well-framed HD picture; otherwise, they’ll skip right over it and settle on a house that took the time to procure high definition photographs. Hiring a professional photographer to take pictures may not seem necessary, but, it pays off if you want additional offers.

  1. The House Has an Odor About It

If your house has a pet or a smoker, your house will likely smell pretty bad. Washing the rugs, carpet, and investing in some professional-grade odor removers would be a wise investment. No one wants to move into a house that smells bad.

If your house isn’t selling in this market, there may be an issue which you can quickly fix and (literally) bring home those offers. Contact  Dean Rathbun when it comes time to devising the perfect plan of action to sell your home. We are happy to help you.

What to Know About Mortgage Points

You often hear mortgage companies and real estate agents discuss “Mortgage Points,” but what are they?

You may hear your mortgage lender utter the words “mortgage points” a few times while going over your loan. You merely nod pretending to know what they are in an effort not to appear dumb. This is a bad strategy when considering something as important as your mortgage–a contract that will be with you for 30-odd years. So, when trying to find out how much your mortgage will cost, what do these points mean and can you use them to your advantage?

What is a “point”?

A point is a fee that is equal to 1 percent of the loan amount. A 30-year, $150,000 mortgage might have a rate of 7 percent but come with a charge of 1 point (or $1,500). A lender may also charge 1, 2, or even more points. These points come split into two branches: discount and origination points.

Discount Points. These points translate to prepaid interest on the loan. The more points you pay, the lower your interest rate will be, and vice versa. You can pay anywhere from 0 to 4 points, depending on how much you want to lower your rates.

Origination Points. These are points charged by the lender to cover the costs of making the loan. Like a service fee when you buy event tickets: you don’t understand why, and there’s not much you can do about it. Luckily, these are tax deductible if you use them for mortgage purposes and not for any other closing costs.

These knowledge points you just earned will help you when it comes to the mortgage points you will inevitably come across. Contact  Dean Rathbun when it comes time to finding the perfect plan of action to buy your home. We are happy to help you.

Which Mortgage Is Right for You?

Mortgages come in many shapes and sizes, meaning that there is one that right for you.

A mortgage is something that is going to be with you for a significant portion of your life–30 years, on average. With the many mortgages that exist in the world, it’s important that you choose the one that will work best for you, instead of having one that will put you into a financial catastrophe! Here are the three kinds of home loans that you should be aware of before you go mortgage shopping.

Types of Loans

  1. Conventional Loans

Conventional mortgages are ideal for the hopeful homeowner with good or excellent credit. They’re relatively standard and follow conservative guidelines for credit scores, minimum down payments, and your debt-to-income ratio (the percentage of monthly income that is spent paying all debts).

  1. VA Loans

VA Loans are for active-duty military and veterans that qualify for Veterans Affairs mortgages. Spouses of a military member who sacrificed their life for our freedom on active duty or as a result of a service-connected disability may also qualify. No down payment is required with this kind of mortgage. The VA does not lend money but guarantees loans made by private lenders.

  1. FHA Loans

Federal Housing Administration mortgages were created for people whose house payment will be a big chunk of their “take home” pay, hopeful homeowners with low credit scores, and homebuyers with little down payments to offer. FHA loans allow the borrowers to spend up to 56 to 57 percent of their monthly income on monthly debt obligations.

It’s important to know about mortgage types, as it will be with you, potentially, for the next thirty years! Contact  Dean Rathbun when it comes time to determining the perfect plan of action to buy your home. We are happy to help you.