3 Ways to Prepare for Mortgage Approval

You have been wanting to move into your own home for quite some time, but are not sure where to begin. In order to work towards mortgage approval, here are three things you need to do to really invest in the future you want. Remember, if you are not able to move into your dream home right away, you can always move later. The point is to get started!

Know What You Can Afford

Do you have a household budget? If not, please sit down with pen and paper or spreadsheet and create one. You will amazed how much disposable income you actually have at the end of the month. Look at everything, including your Starbucks habit. Work hard to account for every penny. It seems like a daunting task, but it really isn’t. It’s the first step in your mortgage approval process. Here is a short list to get you started:

  • Begin with your paycheck. What is your monthly take home pay? If you have a partner, you need to include their information, too.
  • Deduct all fixed, monthly payment amounts, such as: rent, car payments, student loans, charge cards, utilities, child support, and anything else you may have.
  • Deduct all non-fixed monthly expenses. This part is more difficult. How much do you spend on gas, clothes, and dining out (even if you charge it), coffee, etc. The list may be long, but this is also something you have control of and can curtail if necessary. This is your disposable income. If it is higher than you thought, congratulations! Although, you may still want to tweak it, and you will see why in a minute. If it is lower than you thought, or perhaps you had no idea what it might be, you really need to take some drastic changes. These are not tweaks, these changes may include pleasure points you will have to limit yourself to. Did you ever think about how much you give Starbucks in a week? The cost of a White Chocolate Mocha is $4.75 without taxes. If you have one each day on your way to work, you are spending $23.75 weekly, $95.00 monthly. Let it be a weekly treat to yourself and you are still saving $76.00 a month. A 48 ounce serving container of Folgers, bought at Walmart averages $9.98, and that’s without a coupon, see the difference? Put your money back into your pocket.

Review Your Credit Report

Have you actually looked at your credit report? Do you know your credit score? This is taken very seriously by mortgage providers and significantly affects your chances for mortgage approval. Why, you ask? Because this determines how much money lenders feel comfortable lending you, and how high your interest rates will be. The lower the number the higher the rate, and of course the opposite is true: higher score, lower interest rate. Know your numbers, and if they are low, take steps to improve them. One sure way to improve them is to pay down or off your credit card debt. If you have any judgments, find out what they are for, and how you can get them removed; these bring down your score, fast. It may take a while to get this resolved, but in the meantime, you are taking other positive steps in procuring your home.

Save For a Down Payment

Now we go back to budget. You must make a down payment or in many instances, at least be able to pay closing costs. The positive steps you take in amending your budget will help you get to house shopping sooner than you realize. Earmark that money for a single purpose. Sometimes it is easier if you open a separate designated bank account, and immediately transfer it each pay period. Do not touch it; watch it grow. Were you able to find $100.00 a month? That’s $1200.00 a year. Good job! You are now much closer to buying your home.

Pacific Mortgage Group is here to help you get moved in to your home ASAP! Licensed in six states so far, and working with over 100 lenders, we are more than happy to assist in getting financing for your home loan. Contact us to see if you qualify for $0 closing costs. Let’s make you a homeowner.


Get Yourself a Cash-Out Debt Consolidation Loan for the Holidays

As you plan for the year ahead, have you thought about refinancing your home to get out from under high-interest credit card and personal debt?

If that seems to be throwing good money after bad, and risking your hard-earned equity, consider the benefits of a cash-out refinance to consolidate your debt.

The Real Estate Boom Benefits Your Home Value

The real estate market has recovered from the recession, and housing prices have been steadily rising for several years. Even if your home value dipped during the worst of it, chances are good that it’s not only bounced back, but that you’ve seen an increase of 5-10 percent each year. In simple math, if your home was worth $250,000 in 2008, it may well be worth over $330,000 today. And assuming your mortgage balance was $225,000 back then, by now it should have amortized down to $220,000, to be conservative. In this example, your equity has ballooned from $30,000 to around $110,000. So if your cards and other loans add to up $40,000, you’ve still got a solid equity cushion in the house, and there’s no need to fear you’re at risk with a cash-out debt consolidation loan.

The Math Is Better With A Cash-Out Debt Consolidation Loan

Interest rates on mortgages are still at what are considered historic lows–under 5%. Now go look at your credit card statements, and try not to cry. If you’re paying under 20% in interest, you’re one of the lucky ones–many cards carry interest rates of 24% or higher–whatever the limit is in your state. If you’ve got personal loan debt, that’s well over 10% as well–so if your balance for all your high-interest debt is over $25,000, you’re paying over $5,000 each year in interest payments–and if all you pay is the minimum, you’ll never pay those cards off.

Now, let’s say you’ve consolidated your debts into a cash-out debt consolidation loan, and your new loan-to-value (LTV) on your house is 88%. With reasonably good credit, your new interest rate is around 5%. Suppose your house payment on a $225,000 loan is $1300 monthly. A cash-out refinance loan, with a new balance of $280,000 and a rate of 4.85%, carries a monthly principal and interest payment of $1131, with an estimated $350 for taxes and insurance. That totals $1481 for all your monthly debt, since you’ve eliminated the five hundred or so dollars you’ve been paying in high-interest debt.

Getting Started With The Refinance Process

When you refinance your house, it’s very much like the process you had when you bought your home, only there’s no realtor involved. You’ll complete an application and get pre-qualified–our loan officers will then present you with your loan options, and you’ll work together to figure out which one is best for you. You’ll upload any documentation, and we’ll order an appraisal, title search, and payoff from your current lender. Your loan officer will also get the payoffs on those cards and other loans for you, so all you have to do is take out your scissors and cut up the cards.

Special Loans And Cash Out Refinancing

Most mortgages are conventional loans, but if yours is an FHA or VA mortgage, don’t worry–you can get a cash-out debt consolidation loan under those programs, too.

A VA refinance is pretty straightforward; provide your Certificate of Eligibility and meet the lender guidelines, and you can tap into up to 100% of your equity. You are subject to VA loan limits, however, and they vary by area.

If your current mortgage is FHA and you want to stay with that loan program, you can get a cash out FHA refinance. If your credit score is on the lower side and you don’t qualify for conventional financing, you can borrow up to 85% LTV with an FHA loan. As with VA, FHA loan limits are based on your location.

Start the new year off debt-free, with a cash out debt consolidation refinance.


Avoid These Six Home Improvement Mistakes

One of the best ways to add value to your house is through a home improvement project. However, there are plenty of pitfalls when it comes to remodeling.

Here are six critical mistakes to avoid:

  1. Not talking to your real estate agent ahead of time. Before you decide on any renovations or remodeling projects, it’s imperative that you sit down and discuss your plans with your real estate agent first. Their knowledge of which home improvements projects are beneficial—as well as their knowledge of current remodeling trends—is very important. Also, they’ll be able to provide you with references for trusted contractors.
  2. Focusing only on cosmetic areas and not on structural issues. Too many homeowners spend their remodeling dollars solely on more superficial areas rather than on structural areas. Having a new master bathroom may be your dream, but you should also concentrate on your home’s wiring, plumbing, walls, roof, and foundation. Ignoring these areas could cause major problems—along with major expenses—down the road.
  3. Making improvements that aren’t equal to your home and neighborhood. Overdoing it with your remodeling project can be a problem as well. For example, an upscale kitchen remodel—complete with state-of-the-art appliances and high-end countertops—may not be right for your home and may be a turn-off to potential buyers when it comes time to sell. Your agent can help you decide if your project is appropriate for your home.
  4. Not vetting your contractor. To avoid getting burned by shady workmanship, make sure you interview several contractors and vet them thoroughly. Along with your real estate agent’s referrals, you should also consider referrals from business associations, your local government and personal or professional contacts. Also, make sure your contractor is licensed and insured and can provide you with a written estimate for all work.
  5. Attempting a DIY project—when it’s not a DIY project. Even if you fancy yourself as being pretty handy around the house, you should know your limitations. Tackling a project that’s too much for you can be expensive if a contractor has to come in and fix what you’ve done incorrectly. Saving money by doing a project yourself is certainly nice, but don’t bite off more than you can chew.
  6. Not getting the proper permits and ignoring regulations. Whether you’re doing the work yourself or having a professional do it, make sure you get the proper permits and stick to all regulations and codes. Bypassing the permit process or completing a project that’s not up to code can cause big headaches when you sell your home, not to mention the fact that it could be very dangerous for you, your family and your contractor. ∆

 

© Left Field Media


Mortgage Options for Retirement

Whether you’re retiring five years from now or 25 years from now, your financial situation will be one of the keys to a happy retirement. Your savings, investments and retirement income (if any) will be your main focus, but you’ll also need to look at one other important area: your mortgage.

Depending upon your financial situation and retirement goals, you’ll have a few options with your mortgage when it comes time for you to retire. Let’s take a closer look at those options: paying off your mortgage, keeping your mortgage (or getting a new one) and refinancing your mortgage.

Pay Off Your Mortgage. For many retirees or soon-to-be retirees, being debt-free during retirement is the most important goal. If you’re one of these people, then paying off your mortgage—either before you retire or within a short time after you retire—may be right for you. By eliminating your monthly mortgage payment, your cash flow will improve and you’ll have one less item of debt to worry about. Paying off your mortgage may take some long-range planning, so talk to your mortgage professional now about your current mortgage and payoff options, if applicable.

Keep Your Mortgage or Get a New Mortgage. Being debt-free may be a nice goal, but if you have to up your current monthly mortgage payment by quite a bit just to pay off your mortgage early, you may be better off keeping your mortgage and investing that “extra” money elsewhere. If you’re looking to relocate for your retirement or downsize into a smaller home, you can also “trade” one mortgage for another. Also, by keeping your mortgage or getting a new one, you’ll have the added benefit of continuing to take the yearly tax deduction on interest.

Refinance Your Mortgage. For many people, this is the best option. With today’s still-low interest rates, refinancing into a fixed-rate mortgage—either with the same term or a shorter term—will keep your payments low and give you much more flexibility in terms of your finances when you retire. If you’re relocating or downsizing for your retirement, however, refinancing may not be the best idea because you may not be able to recoup your costs. Also, if you’re considering refinancing into a short-term loan in order to pay off your mortgage sooner, keep in mind that the higher monthly payments may reduce your ability to build up a nest egg for your retirement.

To get a better understanding of your financial situation when you retire, talk to your financial planner and make sure your mortgage options are part of the conversation. ∆

 

© Left Field Media


Lack of Comparable Sales

“THERE HAVE BEEN VERY FEW HOME SALES IN OUR AREA. HOW CAN WE SET OUR LIST PRICE IF WE DON’T HAVE ANY COMPARABLE SALES TO GO BY? ALSO, TO COMPLICATE THINGS, WE’VE MADE A LOT OF UPGRADES.”

 

This is a situation in which having an experienced real estate agent who knows your area is vital. Not having any recent sales in your neighborhood—and the fact that your home has undergone a lot of upgrades—does provide a few challenges, but a good real estate agent will be able to help you set a fair list price. The problem can be attacked from several different angles. To arrive at an initial list price with very few “comps” to go by, your agent will consider a wide range of factors including your location, current market conditions, your square footage, the year your home was built, distance to services, and your home’s overall condition. In terms of the upgrades you’ve made to your home, although any upgrades will increase its value, you probably won’t get a dollar-for-dollar return on your investment on those particular projects. Your agent will certainly know this and take it into account when determining a good list price. In the end, keep in mind that looking at comparable sales is indeed helpful in setting your list price, but it’s not the end-all be-all. Rather, an agent’s experience and knowledge is much more important and useful. ∆

© Left Field Media

What Can I Afford?

Whether you’re buying a home for the first time or considering a move into a new home, how much you can afford—in terms of a mortgage and general housing expenses—is the biggest calculation you’ll need to make.

To figure out how much you can afford, first you’ll need to calculate how much of your gross monthly income can go towards your mortgage. When doing the math, your goal is to have your monthly mortgage payment not exceed 28 percent of your gross monthly income, although that percentage isn’t necessarily set in stone. However, if your calculations come to quite a bit more than 28 percent, then you may need to scale back on how much you can afford in terms of a monthly mortgage payment.

Next, figure out your total debt and what percentage of your gross monthly income goes to that debt. This calculation will give you a rough estimate of your total household expenses. As a rule, your total debt should be no more than 36 percent of your income. Much like your earlier calculations with your monthly mortgage payment, 36 percent is just a general guideline and you may come in over or under that number by a couple of percentage points.

Once you’re comfortable with those figures, take into consideration general expenses directly relating to your new home. Not only should you look at one-time expenses such as moving and renovations, but—more importantly—also look at general homeowner expenses that you may incur each month such as maintenance, homeowners’ association fees and unexpected home repairs. For this, it’s a good idea to budget in 30-40 percent more than your monthly mortgage payment.

Finally, after you’re done with your own budgeting, you’ll need to get a pre-approval from your lender. With a pre-approval, a lender determines how much they are willing to lend to you by assessing your income, assets, employment and credit history. Once you have a pre-approval, you’ll know what your price range is for buying a home. Keep in mind that the purchase price of your new home doesn’t need to be the same as what your lender is willing to lend—it’s okay to buy a home that’s less than what you’re approved for.

The key to not overextending yourself is to make sure to leave plenty of space in your budget for unforeseen costs and expenses. If you’re going to err, make sure you err on the side of affordability. ∆

 

© Left Field Media


Current & Future Interest Rates Trends October 18′

Now that the traditional spring/summer buying and selling season is over, let’s take a look at how interest rates have been trending—and what may be in store in the coming months.

Generally, the interest rates on a 30-year fixed-rate mortgage and on a 15-year fixed-rate mortgage have been stable throughout the spring and summer real estate season. In the chart below from Freddie Mac’s Primary Mortgage Market Survey, the interest rates have fluctuated only 0.12 percentage points on the 30-year fixed-rate and only 0.14 percentage points on the 15-year fixed-rate from April through August.

This stability in the rates is something we’ve seen the last two years during the same April-August timeframe, with a variance of 0.17 percentage points in the 30-year fixed and 0.14 percentage points in the 15-year fixed in 2017 and 0.17 in the 30-year fixed and 0.12 in the 15-year fixed in 2016.

 

Month 30-Year Fixed 15-Year Fixed
April 4.47% 3.93%
May 4.59% 4.07%
June 4.57% 4.04%
July 4.53% 4.01%
August 4.55% 4.02%

 

The weekly figures for the last six weeks also show fairly steady rates. Since August 16, the 30-year fixed has varied only 0.14 percentage points and the 15-year fixed has varied only 0.14 percentage points.

 

Weekly 30-Year Fixed 15-Year Fixed
August 16 4.53% 4.01%
August 23 4.51% 3.98%
August 30 4.52% 3.97%
September 6 4.54% 3.99%
September 13 4.60% 4.06%
September 20 4.65% 4.11%

 

 

The steady interest rates are a result of a variety of factors that have been applying pressure—both upwards and downwards—on the rates. The balanced economy, strong corporate earnings and worries over rising inflation have applied upward pressure while slowing home sales, concerns about the global economy, and other international “drama”—such as the recent currency problem in Turkey—have applied downward pressure on the rates.

Going forward, two opposing factors that may influence interest rates in the near future are the Federal Reserve’s pronouncement that we’ll see one or two more hikes to the key short-term interest rate this year and the possible economic ramifications of the current tension surrounding tariffs and trade.

As always, to get the best information on interest rate trends, talk to your mortgage professional. ∆

 

© Left Field Media


3 Reasons Why You Should Refinance This Summer

Whoever coined the phrase, “Make hay while the sun shines” was onto something­­­­—summer is the absolute best time to tackle those projects (or vacations) you’ve been putting off.

And while there are many valid reasons for delaying said projects, a lack of funds shouldn’t be one. Especially when we’ve come up with 3 sure-fire reasons to act now.

 

Eliminate PMI

 PMI, or Private Mortgage Insurance, is a form of insurance lenders implement to reduce the risk of loss on low down payment mortgages. By removing PMI, you can save hundreds, if not thousands of dollars each year.

However, you must have at least 20% equity in your home to do away with PMI. You can ask your lender to remove the PMI when you’ve paid down the mortgage balance to 80% of the homes original appraised value.

If you aren’t quite at 80%, it might be a good idea to refinance. Not only can you remove the PMI, but you might be able to lower your monthly mortgage payments and still pull out some equity for a project or a much-needed vacation. Score!

 

Fund Your Remodel

First things first: You must make sure the refinance plus the remodel doesn’t cause your mortgage payment to increase or extend your payments past your existing pay-off schedule. Then and only then should you take to your kitchen cabinets with a jackhammer in hand.

For example, you have $10,000 in mind for your remodel and currently have a 30-year, $200,000 mortgage at a 6% interest five years ago. As it stands, your monthly payment is ~$1,200, (excluding insurance and taxes) with a remaining balance of $186,109.

Here’s where the magic happens­­­­—you would take a mortgage out for $196,109 with an interest rate of 2.5% for 25 years, making your new monthly loan payment $982. And voila, you not only pay your home off as scheduled but also save money while doing so.

 

Say Goodbye to Debt

Debt is completely normal and something that many homeowners accumulate over time but becomes a serious problem if your monthly budget is affected. But fear not, having equity in your home can put you on the right track to becoming financially comfortable again.

Similar to the example above, you can pull out $10,000 to pay off debt while simultaneously lowering your mortgage payment and still pay it off on time. Have significantly more debt? No problem! You can withdraw more money and break even on your mortgage.

No matter the situation, your home equity can do the work for you. Your home is an investment and now is the time to cash in on the rewards of home ownership.

Contact us today to see if a refinance makes sense for you. We can work with you on countless scenarios and find the best solution that works for your situation.


Are Mortgage Rates Influenced by the Presidential Election?

Thinking of buying a home?

If you’re thinking of buying a home, it’s prudent to know if current events have any impact on the direction of mortgage rates. After all, the direction of mortgage rates means you can buy more house for the same money if they go down, or less if they go up.

Does the outcome of the presidential election have any influence on mortgage rates? Up? Down? Remaining the same?

Mortgage Rates Are Determined by the Federal Reserve

Mortgage rates are determined by the Federal Reserve, which meets about eight times a year and looks at economic data. If the economy looks strong, they may decide to raise rates. If it looks weak, rates are sometimes lowered to stimulate the economy.

The governance of the Federal Reserve, which determines the direction of interest rates, was designed in part to remove it from partisan politics. Although the president of the United States nominates the chair of the Federal Open Market Committee (FOMC), they serve for four-year terms and cannot be replaced. In other words, the inauguration of a new president does not coincide with the ability to name a new Fed chair, although that will happen down the road, when the term is up.

The governors of the Fed serve 14-year terms, and also cannot be removed. That means, for example, that the overall governance of the Fed cannot be removed because an incoming president doesn’t like their monetary policies.

Federal Reserve

It’s the Economy, Not the President

The ultimate determinant of interest rate direction and thus mortgage rate direction is the economy, not who sits as president.

Rates currently are at historically low levels, making this a good time to buy a house.

A recent survey of economists showed a consensus that the economic picture would be strong in November 2016, with low unemployment and good consumer confidence.

However, the consensus on the direction of interest rates has changed several times this year, with an unexpectedly weak job report and the British vote to leave the European Union affecting plans to hike.

The best bet is to stay tuned to the economic news.

 


Saving money: Tips and Tricks that are almost too Easy

Saving money is hard, actually the only hard part is allowing time for your money-saving tips to take effect. Many money-saving tips and tricks are so simple and easy, you should not have a problem implementing them into your daily life. The problems arise when those tips are not followed regularly. The biggest, and best money-saving tip anyone can give is this, choose one or two money-saving methods that you are going to use, and make habits out of them. In other words, keep it up and keep it regular. Now here are those, ‘almost too easy’ saving money tips and tricks:

Use Cash When you Shop

Instead of pulling out your debit cards and credit cards when you go shopping for groceries, clothing, or anything else, use cash instead. Set aside a certain amount of money for everything you have to buy for the month/week. Why? Because it is harder to spend money when you have to physically count it out and hand it to someone. Swiping a piece of plastic is much easier, and makes it harder to save money. Use cash and save your money in the long run.

Donate to Savings Every Week

This is a very simple tip, but it can be hard to turn it into a habit. Simply donate a small amount (the same amount) to your savings account each week. Choose a day, at the beginning or the end of the week, and make it a part of your weekly routine to transfer $5, $10, $15, or more into your savings account. Make sure you donate the same amount each week, unless you donate more – never donate less.

Use a Piggy Bank

This may seem childish, but saving your pennies can add up over time. Even if you only save $10, you can put that amount in your savings that week, and then you have an extra $10 for fun. This is also an easy tip because you can simply empty your pockets every day into your at-home bank. It may not be a get-rich-quick solution, but it can help you to save money.

If you would like to learn more about ways you can save money, please contact us today.