A Qualified Mortgage Consultant Can
Outline Your Options
Renters Have Much to Gain by Pursuing Home Ownership
Buying a home vs.
renting is a big decision that takes careful consideration, as most mortgage
consultants will agree. But the rewards of home ownership are great. For many
years, purchasing real estate has been considered an extremely profitable
investment. It is an achievement that offers a sense of pride, financial
stability and potential tax advantages.
Yes, there are certain
responsibilities associated with owning a home. Landlords will often argue the
benefits of renting, and for obvious reason. If you are renting, you’re helping
them make their mortgage payment.
The numbers are staggering if
you look at it this way. If you are paying $1,000 per month for an apartment,
and you know your rent will increase 5% every year, then over the next five
years you will pay your landlord $66,309. If you are currently renting a house,
you may be paying much more than that each month. Either way, you gain no
equity by shelling out this monthly housing expense and you certainly won’t
benefit when the property value goes up!
However, if you were to
purchase your own home or condominium, you would be on your way toward building
equity. By choosing a fixed-rate loan program, you can have the comfort of
knowing that your monthly mortgage payment will never go up. In fact, you would
have the option of refinancing to a lower interest rate at some point in the
future should interest rates drop lower than the rate you’d currently be locked
in at, and this would cause your monthly mortgage commitment to go down.
And not only would your own
home give you added space, your own back yard and overall privacy—home
ownership would also give you some tax advantages. Depending
on your tax bracket, owning a home is often less expensive than renting after
taxes. Interest payments on a mortgage below $1 million are
tax-deductible, and your mortgage consultant should
help you evaluate the tax advantages of various loan scenarios, and share this
information with your tax consultant to glean feedback on your behalf.
To find the loan program that
is right for you, your mortgage consultant will need to evaluate your monthly
household income, current assets and savings, as well as any monthly
obligations you may have for credit card payments, car payments, child support,
etc. These prequalification factors, along with the report of your credit
score, will determine how much house you can afford and what interest rate you
will pay for financing. It is also important to let your mortgage consultant
know what your future goals are, because this will help narrow down which loan
option is the best fit for your long-term needs.
Many Loan Options Available
Home Improvements Turn Average Homes into Dreams Come
CITY, ST – If you’re thinking
about taking out a home improvement loan, there are several options to
consider. First and foremost, your mortgage consultant needs to know why you
want a home improvement loan. Here are some factors to take into consideration.
How long have you been in the home?
Will the improvements increase the property value?
Are you making improvements to increase energy
Will improvements be made in one fell swoop, or in
What is the current outstanding balance on your
What is the appraised value of the home?
How much will the improvements cost?
What improvements will be tax deductible?
Do you have other revolving debt that you would like
to pay off at the same time?
Are you making improvements because you plan to sell
The New Tract Home Blues
Buyers of newly-built homes are
often tapped out after making the initial down payment and closing costs, including
upgrades to amenities and the inevitable need for new furniture. Shortly
thereafter, they realize they’d like to make additional improvements to really
have the home of their dreams.
If you’re planning on putting
down roots (pardon the pun), landscaping may be in order. The developer may
have been kind enough to make the front yard a perky green, but if the back
yard is a disturbing brown color sparse with weeds, you may be entertaining the
vision of a pool or deck.
The Major Overhaul
If you have built up equity
in your home and are geared up for some major renovation, the Home Equity Line
of Credit (HELOC) is probably your best bet. This adjustable loan allows you to
use your equity as a line of credit, so if you have improvements that are
phased in over time you can simply write a check when you need to pay a bill.
It’s like a having a credit
card with a much lower financing rate. In fact, the HELOC can be used for any
reason at all – even paying off that credit card debt. In most cases, this
action turns that revolving debt payment into a tax deductible payment with a
lower interest rate. The HELOC is generally a 2nd Trust Deed, unless
it is used to pay off and replace the 1st Trust Deed.
A construction loan is an alternative
to the HELOC for borrowers who don’t want to use or don’t have equity, and this
type of financing can be used for
construction on an existing dwelling. The lender will ask a lot more questions
about what the borrower wants to do with the money, and the home owner will
need architectural designs, permits and a licensed general contractor on board.
Construction loans are
short-term loans that usually require interest-only payments until completion
of construction, but the balance is due when construction is done. Most often,
that is managed up front by setting up construction-to-perm financing. In this
scenario, the loan is automatically rolled over into permanent financing at a fixed
rate when construction is complete, and a rate-lock agreement can be purchased
to carry the borrower through that period of construction.
Another option – depending on
the value of your home and local loan amount limitations – is the FHA 203(k)
Program. This financing is designed for the purchase or refinance and
rehabilitation of properties that meet FHA guidelines. This is worth looking
into if you need to bring a property up to compliance standards, finance
eligible energy efficient improvements, or turn a single-family owner occupied
dwelling into a duplex to accommodate Mom or Dad!
Just a Facelift, Please!
If you want to sell your home
and you simply want to improve the curb appeal, it makes sense to go with a
HELOC. Make sure you are aware of the current market value of homes in your
area to make sure you’re not going over the limit on the fair market value of
your home. You’ll want to get a return on your investment!
If you’ve had your home on the
market too long and have not been able to sell, you might want to make some
changes to give it a fresh new look and bring back the passion you once had for
your home. Your mortgage consultant will help you weigh out your options for
financing based on your outstanding mortgage balance, income and credit score.
Regardless of your reason for
home improvement, make sure you share your goals with your mortgage consultant.
He or she can walk you through the various loan options and confer with your
tax advisor to make sure you’re getting the best deal possible.
Ready to Trade-In Your Home?
Perhaps You Should Remodel Instead!
Each year, millions of Americans move into
the home of their dreams. As time goes by, families expand, kids grow older,
and suddenly that home isn't quite so perfect anymore. Or perhaps you still
love your home, but you really want a gourmet kitchen and a larger master
bedroom. Should you start looking for a new house? Or would it be better to
stay where you are and remodel instead?
Both options involve a significant investment of time
and money, so it's important to take your time and make an informed decision.
You'll also want to be sure to consider both the financial and the emotional sides of the equation. Let's begin by examining
the financial factors involved.
Moving: A good local real estate agent should be able to
assist you with estimates on these numbers.
How much will it cost to purchase a home that will
meet your needs?
How much could you sell your existing home for? Don't
forget to subtract the agent's commission from this total.
What will it cost
to move? According to real estate consultant and best-selling author of Remodel or Move, Dan Fritschen, a
typical move costs 10% of the value of your home.
How much will
your property taxes increase as a result of the move?
What projects do you want to have done and how much
will they cost? An architect or general contractor will be able to assist you
with these figures.
How much will the improvements add to the value of
your home, also known as the "payback"? A local real estate agent can
assist with this as well.
If the decision about whether to renovate or move were
purely a financial one, then it would be quite easy to look at the numbers and
come to the right conclusion. However, there are also emotional factors that
come into play, and they have a value as well. Let's consider some examples.
Reasons you may want to move:
If you relocate to a new neighborhood, your children
could attend superior schools.
You would like to reduce your commute or have better
access to local amenities, such as restaurants and shopping.
You're not particularly fond of your current
Your yard is too small, and you cannot expand it.
Reasons you may want to stay and remodel:
You're happy with your location. It's convenient, you
love your neighbors, and the schools are either excellent or are not a factor.
You love the layout of your home.
All you need is a little more space, and your home
will be perfect.
Of course only you know
what is truly important for your happiness, so try to use these questions as a
starting point. Create a list of the pros and cons of each scenario and leave it
someplace accessible, so that you and your spouse can add to it as you think of
additional factors. You may also want to consider attending open houses and
visiting new housing developments to see what is available and how your home
Once you've completed your
list and your financial assessment, it's time to draw some conclusions. Are the
numbers and the emotional factors pointing you in a clear direction? If you're
still feeling unsure and would like some additional assistance, you may want to
read Dan Fritschen's book, Remodel or
Move, or visit his website at www.remodelormove.com.
Both contain a calculator that will assist you with the difficult task of
quantifying the ramifications of your decision. In addition, you can learn tips
to assist you with the next step, after you've determined what it will be.
If you choose to remodel,
then you'll need to have a clear idea of what you want to accomplish before
finalizing any details with the contractor or architect. One of the most
expensive things you can do is change the project midstream.
If you decide to move, then
there are low-cost improvements you can make to your existing home that will
help it to sell more quickly. The kitchen and the bathrooms provide the biggest
return on investment in this area.
Whether you decide to
remodel or buy a new home, it's important to ensure that you have proper
financing in place prior to moving forward. If you decide to purchase a home, a
mortgage originator will help you to determine how much you can afford, as well
as which loan package works best with your overall financial plan. In the case
of remodeling, you should meet with a mortgage professional before any
construction takes place. Otherwise you may severely limit the type of
financing options available to you.
Remodel or Move?: Make the Right Decision, by Dan Fritschen
is an uncomfortable subject for a variety of reasons. The most obvious is the
potential havoc it can wreak on your finances. Running a close second is the
negative stigma which is often attached to the process. This negativity is
important to mention because strong emotions can sometimes lead to unsound
financial decisions with devastating results.
a viable option for someone who is “upside down” in terms of cash flow. In
other words, when a person has more money going out each month than coming in,
bankruptcy should be considered if no reversal of this negative cash flow is
within sight. The longer someone waits to explore the various options available,
the more serious his or her situation may become.
One of the worst
things people can do in this situation is to borrow more money to try and pay
off their debts. On paper, this is clearly an unwise financial decision. In the
real world, however, it is very common for individuals to pursue this strategy to
buy time and hold off on filing for bankruptcy. On the surface, this is
certainly a noble notion; however, it can often compound the problem and serves
only to delay the inevitable.
For many homeowners
during this upside-down cash flow, speaking to a qualified mortgage
professional is a much better option. An experienced loan officer can
objectively look at your finances and help you determine if restructuring your
mortgage would not only help, but possibly even alleviate any need for
If bankruptcy is
the only option, seek out a reputable bankruptcy attorney and credit counselor.
A qualified mortgage specialist can provide references for you as well, as he
or she works with these professionals on a regular basis. Reliable references
are essential in this case because experienced professionals greatly increase
the odds of a successful bankruptcy experience. It’s that simple.
When filing for
bankruptcy, be completely honest and accurate regarding every aspect of your
financial situation. This includes any changes to your income which may occur
throughout the process. Bankruptcy is a federal procedure, adjudicated by real
judges, and scrutinized by representatives who coordinate with the Department
of Justice, the FBI, and the IRS.
Here are some additional steps you can take
to make the bankruptcy process as painless as possible:
Tips for Rebuilding Credit:
While it does take time, there is life (and credit) after bankruptcy. Some
mortgage lenders will even lend to you within a year or so after a bankruptcy.
If you’re in serious financial trouble, the trick is to get the help and advice
you need from professionals you trust.
ST – When a marriage ends in divorce, the lives of those involved are changed forever.
During this time of upheaval, one thing that shouldn’t have to change is the
credit status you’ve worked so hard to achieve.
for many, the experience is the exact opposite. Unfulfilled promises to pay bills,
the maxing out of credit cards, and a total breakdown in communication
frequently lead to the annihilation of at least one spouse’s credit. Depending
upon how finances are structured, it can sometimes have a negative impact on
good news is it doesn’t have to be this way. By taking a proactive approach and
creating a specific plan to maintain one’s credit status, anyone can ensure
that “starting over” doesn’t have to mean rebuilding credit.
first step for anyone going through a divorce is to obtain copies of your credit
report from the 3 major agencies: Equifax, Experian®, and TransUnion®. It’s
impossible to formulate a plan without having a complete understanding of the
situation. (Once a year, you may obtain a free credit report by visiting www.AnnualCreditReport.com.)
you’ve gathered the facts, you can begin to address what’s most important.
Create a spreadsheet, and list all of the accounts that are currently open. For
each entry, fill in columns with the following information: creditor name,
contact number, the account number, type of account (e.g. credit card, car
loan, etc.), account status (e.g. current, past due), account balance, minimum
monthly payment amount, and who is vested in the account
that you have this information at your fingertips, it’s time to make a plan.
are two types of credit accounts, and each is handled differently during a
divorce. The first type is a secured account, meaning it’s attached to
an asset. The most common secured
accounts are car loans and home mortgages. The second type is an unsecured
account. These accounts are typically credit cards and charge cards, and
they have no assets attached.
it comes to a secured account, your best option is to sell the asset. This way
the loan is paid off and your name is no longer attached. The next best option
is to refinance the loan. In other words, one spouse buys out the other. This
only works, however, if the purchasing spouse can qualify for a loan by
themselves and can assume payments on their own. Your last option is to keep
your name on the loan. This is the riskiest option because if you’re not the
one making the payment, your credit is truly vulnerable. If you decide to keep
your name on the loan, make sure your name is also kept on the title. The worst-case
scenario is being stuck paying for something that you do not legally own.
the case of a mortgage, enlisting the aid of a qualified mortgage professional
is extremely important. This individual will review your existing home loan
along with the equity you’ve built up and help you to determine the best course
it comes to unsecured accounts, you will need to act quickly. It’s important to
know which spouse (if not both) is vested. If you are merely a signer on the
account, have your name removed immediately. If you are the vested party and
your spouse is a signer, have their name removed. Any joint accounts (both
parties vested) that do not carry a balance should be closed immediately.
there are jointly vested accounts which carry a balance, your best option is to
have them frozen. This will ensure that no future charges can be made to the
accounts. When an account is frozen, however, it is frozen for both parties. If
you do not have any credit cards in your name, it is recommended you obtain one
before freezing all your jointly vested accounts. By having a card in your own
name, you now have the option of transferring any joint balances into your
account, guaranteeing they’ll get paid.
payment on a debt which carries your name is paramount when it comes to
preserving credit. Keep in mind that one 30-day late payment can drop your
credit score as much as 75 points. It is also important to know that a divorce
decree does not override any agreement you have with a creditor. So, regardless
of which spouse is ordered to pay by the judge, not doing so will affect the
credit score of both parties. The message here is to not only eliminate all
joint accounts, but to do it quickly.
is difficult for everyone involved. By taking these steps, you can ensure that
your credit remains intact.
7 Essential First-Time Homebuyer Facts – Mortgage Infographic: Recently the National Association of Realtors released their annual Profile of Home Buyers and Sellers. We found some of the first-time homebuyer facts quite interesting and wanted to share these mortgage insights from the report with you. For example, did you know the primary reason given by first-time homebuyers for purchasing a home is simply the desire to own a home of their own? Yes, the American Dream of Homeownership is alive and well! Take a closer look at our mortgage infographic below to see all of these essential first-time homebuyer facts, so that you may better serve your mortgage customers!
Eric Fox June 7, 2018
Open commentary on everything impacting the U.S. housing economy. The opinions expressed here represent the author's alone.
After our first 10 weekly HousingWire columns looked at predicted real estate appreciation in Metropolitan Statistical Areas in the Northeast, Northwest, Southeast, Southwest and Midwest, we now check in with the West and the nation's most populous state.
In the March 2018 VeroFORECAST from Veros Real Estate Solutions, which forecasts changing property values through March 2019 in 342 of the more than 360 MSAs in the United States, California's San Diego-Carlsbad-San Marcos MSA was ranked 20th with a projected rate of 8.3% appreciation over the next 12 months.
Coincidentally, that is the same percentage of California's population that lives in America's most southwestern MSA. According to a U.S. Census Bureau estimate, 39,536,653 people lived in the Golden State in 2017 and more than 3.3 million of them call the San Diego-Carlsbad-San Marcos MSA home. That makes it California's fourth largest and the nation's 17th largest.
CoreLogic: Home equity gains top $1 trillion in first quarter
Homeowner equity topped $1 trillion in the first quarter of 2018, according to the Q1 2018 home equity analysis from CoreLogic, a property information, analytics and data-enabled solutions provider.