Archives For Mortgages

Protect Yourself and Your Investment

Bad things happen. That’s just the way of the world sometimes. But when bad things happen to your home, will you be protected? If you’re a homeowner, you likely already have a homeowner’s insurance policy in place, especially if you’re paying a mortgage. Homeowners insurance covers damage to your home’s structure from certain events such as fire, wind, and water. It also covers theft of personal property from inside the home, and for additional fees you can add protection for more exotic items like art or jewelry collections. If you’re robbed or your home suffers damage from a fire or a windstorm, your homeowner’s insurance policy provider will help make you whole again.

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But what happens when your refrigerator breaks unexpectedly or your heat pump goes on the fritz? Will a homeowner’s policy help you then? Unfortunately, repair to household appliances and systems aren’t covered by most policies, and those costs can easily run into the thousands. If you do face those major repairs, and you’re uncovered, your savings could take a big hit. This is where a Home Warranty comes in handy.

Home Warranties Explained

A Home Warranty is a service contract separate from your homeowners insurance that covers your home’s major appliances and systems. Providers often have a standard list of covered items, and some, like American Home Shield, allow you to personalize your policy by picking your own set of covered appliances and systems. When one of your appliances or systems breaks, your warranty provider will send a qualified repair contractor to fix your problem in exchange for a low, one-time repair fee.

A Home Warranty offers several benefits above and beyond a typical homeowner’s insurance policy:

  • Added Peace-of-Mind: You can never predict when you’ll face unexpected repair bills. A home warranty will protect your budget and your savings from the unexpected costs associated with repairing or replacing expensive household items.
  • Protection for New Buyers: If you’re in the market for a new home, or have recently purchased one, the reliability of its appliances and home systems can be a mystery that’s not always revealed through traditional home inspections. A home warranty offers new buyers a guarantee that unexpected costs from these new-to-you items won’t catch you unprepared.
  • Seller Benefits: When you’re selling your home, you want to differentiate yourself from the competition in every way possible. Telling potential buyers that your home has a current home warranty in place will show your home has been well maintained and instill greater confidence in their buying decision.
  • Greater Flexibility – Unlike a homeowner’s policy, home warranties can be canceled at any time, so you can choose the level of protection that best fits your needs.

For most Americans, a house is the single largest investment they’ll ever make and the source of the majority of their personal wealth. To best protect that investment, it makes sense to have an array of coverage that will keep every corner of your home in its best possible condition. Adding a home warranty to your insurance portfolio is a great way to maximize that protection.

Are you shopping mortgages and struggling to understand what products best fit your needs? To help clear up your confusion, we’ve listed the most common mortgage types along with their advantages and disadvantages. We’ve also provided information on who should consider each type of loan.

ITA18FXIBLOnce you’ve narrowed down the type of financing you’re after, contact a mortgage pro. They will walk you through the entire process and get you the best available deal.

Fixed Rate Conventional

  • Description: A fixed rate loan offers a stable interest rate amortized over the life of loan, which are most often set in 15, 20, or 30 years terms.
  • Advantages: Your monthly payment stays the same over the entire life of your loan.
  • Disadvantages: If interest rates drop after you’ve locked in your loan rate, you may be stuck with a higher monthly payment.
  • Consider If: You plan on staying in your home long-term and desire the security of a predictable monthly payment.

Adjustable Rate (ARM) or Variable Rate

  • Description: A variable rate mortgage or ARM usually offers a low introductory interest rate over a 3, 5, or 7 year term. After the initial-rate period ends, the interest rate fluctuates based on market trends.
  • Advantages: Introductory rates are often lower than rates for conventional mortgages, offering short-term savings. 
  • Disadvantages: If interest rates rise after your initial-rate period your monthly payments could go up.
  • Consider If: You’re confident you’ll be out of your home before the end of the initial-rate period or you plan to refinance.

Interest Only

  • Description: A borrower pays only the mortgage interest, in monthly payments, over a fixed term.
  • Advantages: Without paying principle, monthly payments are often less than fixed rate or adjustable rate loans.
  • Disadvantages: With Interest Only loans, the balance is often due in a lump sum after the initial period ends. This could mean significantly higher monthly payments or facing a large lump sum payment.
  • Consider If: You plan to live in the home for only a short amount of time or have confidence you can handle the larger payment down the road.

FHA Loans

  • Description: Allows buyers who may not qualify for a conventional mortgage to obtain financing with a lower down payment.
  • Advantages: First-time homebuyers or individuals who may not qualify for traditional funding have better access to home financing.
  • Disadvantages: Not everyone will qualify for FHA funding and even if you do, there may be restrictions on how much you can borrow or what types of property you can buy.
  • Consider If: You’re a first-time homebuyer or have low income and/or challenged credit.

VA Loans

  • Description: These loans are offered through the US Department of Veteran’s Affairs to eligible Veterans, active duty personal, or surviving spouses.
  • Advantages: VA Loans offer competitive rates, often with low or no down payments.
  • Disadvantages: As with FHA loans, the size of your loan may be limited.
  • Consider If: You’re a veteran, active duty personal, or surviving spouse.

Jumbo Loans

  • Description: Jumbo loans are for amounts exceeding $417,000 (or $625,000 in Alaska and Hawaii), which is the maximum Fannie Mae and Freddie Mac are willing to purchase.
  • Advantages: Jumbo Loans make it possible to purchase large homes and help finance home purchases in states with high home costs.
  • Disadvantages: Jumbo loans often require 20% down payments and interest rates can be .25-.50 higher than comparable conventional loans.
  • Consider If: You want to purchase a large home or live in a high-cost area.

Reverse Mortgage

  • Description: Reverse Mortgages are for seniors aged 62 and older with substantial equity in their property. With this loan, the lender pays the borrower a fixed monthly payment for as long as they live in their home.
  • Advantages: Allows seniors to convert their home equity into cash, which is often used for living expenses. The loans and interest don’t have to be paid back as long as the borrower lives in the home.
  • Disadvantages: Often an area of fraud by unethical lenders who prey on the elderly. If you’re considering a Reverse Mortgage, make sure your lender is reputable and the loan is federally insured.
  • Consider If: You’re retired and need extra monthly income.

There are many ways that consumers can save energy and spend less––adding insulation, buying a programmable thermostat, replacing single-pane windows, and installing a solar water heater, to name a few; however, many homeowners are considering energy efficient mortgages as an alternate way to go green at home.

Energy-efficient mortgages are a great way to maximize efficiency and finance the cost of improvements that will help you save energy. Fannie Mae, the Federal Housing Administration, and the Veterans Administration loan program all offer energy-efficient mortgages. Though you may make a higher monthly payment, lenders will not move forward with the project unless they believe your home will net cost savings.

In addition to the financial benefits, energy improvements will also help boost your home’s value. According to the Shelton Group, 81% of consumers say energy efficiency “somewhat-to-very-much” affects their home buying decision.

This post can be found in its original form on US News.

Photo: Inhabitat

mortgage-rates16New federal regulations requiring lenders to verify an applicant’s ability to repay may make it more difficult for borrowers who are self-employed to obtain a mortgage. The rules, created by the Consumer Financial Protection Bureau, set standards for mortgages that are considered low-risk for both parties.

Effective this month, lenders are now required to verify a borrower’s income and confirm a debt-to-income ratio of 43% or less. Borrowers who are self-employed or own their own business will find their incomes being analyzed in greater detail.

According to Peter Grabel, a loan originator at Luxury Mortgage, in Stamford, Connecticut, borrowers who have been self-employed for less than two years will find it nearly impossible to obtain financing without sufficient business tax returns.

“[Lenders] must establish the stability and continuity of the income source,” he said. “The problem for self-employed people is that they want to minimize their tax liability, but some of the ways they do so impact their ability to borrow.”

This article can be found in its original form at The New York Times.

8 Mortgage Tips for 2014

Househappy —  January 17, 2014 — 2 Comments

mortgage-ratesEarly 2014 might be a good time for buyers and homeowners to grab a low mortgage rate. If you keep your finances in order and act quickly, you will still have time to grab a great mortgage deal.

These 8 mortgage tips from MSN Real Estate can help you with your decisions in 2014:

1. Document your finances. With the new mortgage rules going into effect this month, lenders will be extra diligent when underwriting loans. Make sure to keep records of your finances, including bank statements, tax returns, W-2s and other assets you own. Lastly, be ready to explain any unusual deposits to your accounts to help close your loan faster.

2. Lock a rate as soon as you can. Rates will likely increase during the year with the Federal Reserve reducing the pace of the economic stimulus program. If you are planning to get a mortgage, lock in a rate as soon as you are able to.

3. Refinance now – if you still can. Those who are still paying more than 5 percent interest on their home loans might still have an opportunity to refinance at a lower rate. It doesn’t hurt to try. Talk to a loan officer and have them look over the numbers.

4. Buyers, use your bargaining power. Lenders lost a big portion of their refinance business when mortgage rates increased. This year, they will give more attention to homebuyers thus creating more competition. Buyers should take advantage of bargaining power and should shop around for the best deal and look beyond the interest rate on the loan.

5. Learn your rights as a borrower. Mortgage borrowers will get more new rights as consumers when the new mortgage rules go into effect this year. Make sure to be aware of your rights so you don’t run into any problems.

6. Take good care of your credit. If you are planning to get a mortgage, make sure to monitor your credit history and score until your loan closes. For the best rates, keep your credit score around 720 or above.

7. Don’t overspend. Lenders won’t want to give you a loan if you have little money left over at the end of each month. Try to keep your debt obligations below 43 percent of your income.

8. Consider alternative mortgage options such as ARMs. Depending on your plans, and how long you think you will keep your house, there are many different mortgage options. Rates on adjustable-rate mortgages can be as much as one percentage point lower than on fixed-rate loans. Although if you don’t know how long you plan to keep your home, a fixed-rate loan may be the better choice.

This article can be found in its original form on MSN Real Estate.

Photo: Total Mortgage

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Home for sale via Househappy

Homeowners have been enjoying the price growth that happened in 2013. New construction home sales are also up and previously underwater properties are returning to positive equity. Economists expect home prices to rise another 4 percent to 5 percent in 2014.

With all that in mind, here are 10 tips for homebuyers and sellers from MSN Real Estate:

1. Sellers: Jump-start the process. If you want to sell your house this year, it is best to start planning as soon as possible. Since the process always takes longer than expected, start cleaning and de-cluttering now, and get your home inspected in case there are any repairs you need to fix.

2. Buyers: Be credit-ready. Since there is a lot of competition out there, it is best to get ready ahead of time. Get your credit report and make sure there are no errors. Then start with the pre-approval process on a loan so you can be ready to go when you start looking at houses.

3. Sellers: Search for an agent, and then follow the agent’s advice.  Make sure to hire the right real estate broker to help you sell your house. You’ll most likely want one that is web savvy and uses mobile technology, since most homes are viewed online. Once you find the right agent, accept their advice on pricing, marketing, and negotiation.

4. Buyers: Adjust your negotiating expectations. This year is not the time for lowball offers as they will likely eliminate you from consideration. Try to respond to counteroffers quickly to keep other buyers away and prevent a bidding war. Also, have a few other homes in mind just in case it becomes competitive.

5. Sellers: It’s your market, so make the most of it. Don’t jump at the first seemingly generous offer––especially if you have received more than one. Lastly, never let the buyer’s agent know what you’re willing to do if you planning on giving something extra. Make them ask.

6. Buyers: Find life after foreclosure. If you have had a foreclosure in recently, don’t fret. The Federal Housing Administration requires just a three-year waiting period and there are many nonconforming lenders out there (often called “shadow bankers”) to help you out.

7. Sellers: Hesitate to renovate. There is no need to completely remodel your kitchen if you plan on selling soon. According to remodeling surveys, the average renovation project only returns about two-thirds on investment. In most cases it would be cheaper to drop your price or issue credits to buyers. Smaller jobs such as installing new doors, painting or fixing up the exterior are more practical and will likely have a greater return.

8. Buyers: Ask and you won’t receive. Don’t be afraid to ask questions to the selling party in writing before signing a contract. Ask anything, from questions about the neighborhood, to sex offenders nearby, to commercial zoning, to on-premise felonies, noise pollution and more. If the selling party refuses to answer any of them, that might be a red flag.

9. Sellers: Tailor your local game. Remember that real estate is local and that all markets are different, therefore prices tend to vary. Find out local area trends and statistics as well as recent comparable sales.

10. Sellers and buyers: Heed changing trends. Make sure to pay attention to trends and react to them accordingly.

This article can be found in its original form on MSN Real Estate.

For Sale: 3425 NE Stanton St, Portland, OR 97212

Since the housing bubble burst in 2007, it seems that nearly every week there has been a new report or set of data on the current state of the real estate market. After years of hearing buzz phrases like “rising mortgage rates” and “foreclosure crisis,” its no wonder that the idea of buying can feel daunting to most people.

But, despite the seemingly endless amount of (often conflicting) information, the last quarter of 2013 just might be the perfect time to buy a home. According to U.S. News & World Report, here are 7 reasons you should consider taking the plunge this year:

1. Mortgage rates are still dropping. Yes, rates are up 1.15% from the historic low of 3.35% in 2012, but this is still an attractive rate for prospective home buyers.

2. It’s cheaper to buy than rent. Studies have shown that monthly costs for homeowners are significantly cheaper than for renters in the 100 largest metropolitan areas.

3. Home prices are relatively low. Housing price trends vary significantly by location, but the average trends across the country look promising. The S&P/Case-Shiller composite index of 20 metropolitan areas increased only 1% this past season, so 2013 could still be a great time to buy.

4. It may be easier to get a mortgage. Less stringent requirements and qualifying criteria may make it easier for prospective buyers to qualify for a mortgage––especially if you have good credit and some savings available.

5. Less competition from home flippers. Because housing prices in some markets are increasing, house flipping has become less attractive. This means less competition from investors.

6. Avoid the cost of rising rent. Renting can be a more affordable option for the short term, but renters continue to face rising rental costs year after year.

7. Invest in your future. Buying a home allows you to stabilize your housing expenses, start building equity, and invest in your future. Even if you end up selling your home in 5 or 10 years, you could profit from the sale and invest that money elsewhere.

This post can be found in its original form on U.S. News & Word Report.