Category: Mortgage Information

Before you start your home search, you want to know how much you can afford, right?

There are two ways to do this: with a mortgage pre-qualification and a mortgage pre-approval. As a home buyer, the pre-approval is more valuable to you during your home search.

How Pre-Approval Helps You as a Home Buyer

One of the main differences between mortgage pre-qualification and mortgage pre-approval is how the lender gives you the mortgage amount.

For pre-qualification, you give the mortgage lender your general financial history (including debts and income), and the lender gives you a mortgage estimate. For pre-approval, the lender digs deep into your credit report and gives you the exact loan amount.

If you’re choosing between getting pre-qualified for a home mortgage and getting pre-approved, choose to get pre-approved. Here are the top three reasons why:

3. You Learn Exactly What You Can Afford

There’s no estimates in a pre-approval. The lender has looked into your credit history and you’ve given the required documentation to go through with the pre-approval process.

A mortgage pre-approval is not a commitment to the loan, but it paves the way to transition into applying for a specific property — your dream home in your price range.

2.  You Can Narrow Your Home Search

Searching through online listings can be a tedious process, especially if there are hundreds of homes for sale in the area. How do you narrow down your home search?

When you’re pre-approved, you’ll know exactly what you can afford, and tailor your home search around the mortgage amount. Now you can easily search through the listings with confidence and renewed energy.

1. The Home Seller Takes Your Offer Seriously

Home sellers like to see that you’re pre-approved — it tells them that you’re serious about buying their home.

So when you’re competing with other home buyers to make the best offer on your dream home, being pre-approved will give you the competitive edge over buyers who are not. Then you can focus on moving into your new home!

We’re Your Real Estate Experts

If you want more information about the mortgage pre-approval process or about finding the perfect home that fits your lifestyle, contact us today and we can get started. We’d be happy to answer any questions you have about the mortgage pre-approval process.

The sales of new U.S. single family homes fell only slightly in November in the wake of higher mortgage rates.

Meanwhile, prices on new homes continued to rise, signaling to national housing market experts that the market truly is weathering higher mortgage rates, according to a recent news article.

National Housing Market Showing Resilience, Experts Say

The Commerce Department recently reported that sales fell 2.1 percent to a seasonally adjusted annual rate of 464,000 units.

Here’s what else was revealed about recent market activity:

• November’s numbers marked a fall from October’s revised 474,000 pace, which was the highest level since July 2008.
• For November, economists had expected new home sales to be at a 445,000 unit pace in November.
• Compared with November 2012, sales were up 16.6 percent.
• Although higher mortgage rates have slowed the rate of home resales since August, activity is expected to accelerate next year.
• Experts credit this in part to employment gains.
• What’s more, experts say that a lean housing inventory is also expected to increase activity.
• For instance, in November, the supply of houses on the market decreased by 6.7 percent.
• The median price of a new home rose 10.6 percent from a year ago.
• If the housing market remained at November’s sales pace, it would take 4.3 months to clean the market of available homes, which is the smallest inventory there’s been since June.
• In October, the housing market inventory was at 4.5 months.
• For a reference point, a 6-month supply is normally considered as a healthy balance between supply and demand.
• Although home sales decreased in the Midwest and South, sales showed strong gains in the West and Northeast.

Helping You Buy and Sell Homes

The recent activity is actually encouraging, despite the fact that the sale of new single family homes actually dropped.

That’s because the decrease was actually pretty slight, meaning that the national housing market is adapting to higher mortgage rates better than even some experts anticipated.

Check back here soon for more national real estate news that affects your efforts as home buyers and sellers!

These quick tips will help increase your overall credit score.

First, never cancel a credit card that is more than two years old. Having a “seasoned” account – one that is more than two years old is a big plus for you. Next, consider increasing your maximum allowable credit limit. In other words, if you have a credit card that is close to its maximum balance, call the credit card company and ask them to increase the credit limit. The credit bureaus don’t like to see maxed out credit. Tell them you would like them to do this without pulling your credit. You should also spread out your balances among your cards. trying to keep the ratio between card balances and credit limit to 30% or less.

If you are considering buying a new home or refinancing, see if you need to do some work to get your credit score up to highest possible points. Since lower scores mean higher interest rates, even a few lost points on your credit score could cost you tens of thousands of dollars in additional interest payments.

One of our preferred reputable lenders can help you review your current credit situation.  Don’t hesitate, improve the your credit score and to save hard earned money.

One common question a buyer will always ask us is “should I pay points on my home loan?”  The answer is “it depends on a few factors.”

The reason why you pay points on a loan is to get a lower interest rate. A point on a mortgage is equal to 1% of the loan amount. Therefore, if you are receiving a loan of $200,000 one point would cost $2000.

Paying points may seem like the obvious choice because everyone wants lower monthly mortgage payments, but it is not that simple from a cost analysis standpoint though. The main deciding factor whether to pay points or not is how long you plan on staying in the home.  Getting a lower interest rate from paying points is a trade off between paying money now versus paying money later.

Let’s look at an example using the a $200,000 loan.  We will assume that the interest rate on a loan with no points will equal 6% and a loan with 2 points will equal 5.5%.

• Monthly Payment without Points $1,199.10
• Monthly Payment with Points $1,135.58
• Monthly Savings from Points $63.52
• Cost of Points $4,000.00
• Savings Rate of Return 2.000% (keeping the money in a bank account)
• Monthly Income from Investment $6.67
• Net Monthly Savings $56.85

By dividing the amount the buyer paid for the points ($4000) by the monthly savings ($56.85) we see that it would take the borrower five years and ten months before they would be at the break even point.

If a borrower is going to be in the home for more than five years and 10 months it would make sense for them to pay points. If they are going to be in the home for a shorter period of time the no points option would make more sense.  When refinancing, you can also opt to pay points.

Another important consideration is that points are fully deductible in the tax year of your closing. This however, only applies to purchases and not when you refinance a property. In the case of a refinance, the IRS requires you to spread out the loan deduction over the course of the loan. Using the $4000 for points in the above example you would be able to deduct 1/30 of $4000 over 30 years.  If you happen to pay off the loan early you can deduct the remaining balance in that tax year.

In any situation regarding taxes, I always recommend you speak with a tax professional.

It is understandable to have questions when coping with a new and challenging situation, especially when a home is at stake. The reality is that millions of homeowners across the country are finding out that they have more questions than answers. We hope that the following information will help you better understand the circumstances. If you have further questions not addressed below, or would like additional information resources, feel free to contact us.

Do I qualify for a short sale?

The qualifications for a short sale include any or all of the following:

1. Financial Hardship – There is a situation causing you to have trouble affording your mortgage.
2. Monthly Income Shortfall – In other words: “You have more month than money.” A lender will want to see that you cannot afford, or soon will not be able to afford your mortgage.
3. Insolvency – The lender will want to see that you do not have significant liquid assets that would allow you to pay down your mortgage.

What is a mortgage modification?

A mortgage modification is a process through which your mortgage lender changes any or all of the following:

• Your interest rate
• Your principal balance (through a reduction)
• Your loan terms (example: from an adjustable to a fixed rate)

This process can allow borrowers to stay in their property when they can no longer afford their current mortgage payments.

Why would a lender modify my mortgage?

Lenders have realized that in some cases it is better for them to work with current borrowers to lower payments or possibly improve terms in order to keep homeowners in their properties. The average foreclosure can cost a lender from 35-50% of the value of a property, so keeping borrowers in their homes is a good option for everyone.

What do I need to qualify for a mortgage modification?

According to the Making Home Affordable Web site, you will need the following information for your lender to consider a modification:

• Information about your first mortgage, such as your monthly mortgage statement
• Information about any second mortgage or home equity line of credit on the house
• Account balances and minimum monthly payments due on all of your credit cards
• Account balances and monthly payments on all your other debts such as student loans and car loans
• Your most recent income tax return
• Information about your savings and other assets
• Information about the monthly gross (before tax) income of your household, including recent pay stubs if you receive them or documentation of income you receive from other sources

If applicable, it may also be helpful to have a letter describing any circumstances that caused your income to reduce or expenses to increase (job loss, divorce, illness, etc.)

How do I qualify for a mortgage modification?

The first call you make should be to your lender, have the information above ready to discuss with them and call your customer service line to ask them what options you have available. If the person you speak with does not understand what you are asking, you can ask to be referred to one of the following departments (different lenders have different names for these departments):

• Loss Mitigation
• Mortgage Modification
• H.O.P.E.

Prior to contacting your mortgage lender you can quickly complete an eligibility test at MakingHomeAffordable.gov. This test will let you know if you are eligible for a modification through the government-sponsored Home Affordability and Stability Program (HASP). For a list of mortgage lenders and servicers, visit HopeNow.com.

What if I don’t qualify for a mortgage modification, can’t afford my home, and owe more than it’s worth?

You are not alone and foreclosure is not the only option. If your mortgage lender or servicer will not work with you to reduce your payment, you may want to consider a short sale. Agents like me, with the Certified Distressed Property Expert® Designation, have undergone extensive training in how to process and negotiate short sales. A short sale allows you to sell your home for less than what you owe and avoid foreclosure. Speak to your market expert to see if you may qualify.

What is a Home Affordable Refinance?

If Fannie Mae or Freddie Mac owns your mortgage, you may be eligible for a Home Affordable Refinance. This will allow you to refinance your home and often lower your payments.

What are the qualifications for a Home Affordable Refinance?

According to the resources released by the government, following are a list of qualifications:

• You are the owner occupant of a one- to four-unit home
• The loan on your property is owned or securitized by Fannie Mae or Freddie Mac
• At the time you apply, you are current on your mortgage payments (you haven’t been more than 30 days late on your mortgage payment in the last 12 months, or if you have had the loan for less than 12 months, you have never missed a payment)
• You believe that the amount you owe on your first mortgage is about the same or slightly less than the current value of your house
• You have income sufficient to support the new mortgage payments, and the refinance improves the long-term affordability or stability of your loan