A Simple Guide to Interest Rate Changes

Posted by on March 11, 2018 12:12 pm

When evaluating your financial situation and determining the right mortgage for you, there are a variety of factors. Down payment amount. Length of the loan. Origination fees. Interest rates. While the first three are usually pretty straightforward, your interest rate is something that can be difficult to get a handle on and has a long term impact on your loan.


If it’s been a while since your 11th grade economics class, we’ve put together a little crash course on interest rates. Originally developed to ensure stable prices and liquidity for the economy – making sure that the money supply is neither too large or too small – interest rates determine how much you’ll pay each month as well as the total payments over the life of your loan.


Who controls interest rates?


Mortgage rates are determined by the market – similar to stocks and bonds. When you agree to your loan, your lender most likely turns around and sells that loan on a secondary market. The most common buyers of mortgage loans (or mortgage-based securities, as they’re called), are Fannie Mae and Freddie Mac. So, mortgage rates are determined on this secondary market – where mortgages are bought and sold.

When your lender sells your mortgage, that allows them to get their money back quickly and with a profit so that they can continue lending money to clients like you.


Investors in this secondary market collectively determine the interest rates. The more demand for mortgage-based securities, the more investors will pay for them, and the lower the interest rate will be for you, the consumer.


How often do they change?


Like a traditional stock market, interest rates are constantly changing. It can be difficult and time consuming to track all of the dips and spikes that interest rates take during the course of the day. To add a bit of stability, loan officers typically receive a rate sheet every morning that contains pricing for that day. Those rate sheets are usually determined by individual banks.


This means, you may see slight variations between banks and lenders – even if you talk to them on the same day.


The volatility of interest rates highlight the importance of getting a rate lock as soon as you’re serious about moving forward with a lender. A rate lock is essentially a commitment between you and your lender that you both agree to the rate offered. Usually good for 30 days, rate locks allow you to take advantage of a lower interest rate, even if the market spikes soon after your agreement.

What factors control interest rates?


There are several factors that lead to interest rate changes and most are related to the attractiveness of mortgage-based securities on the secondary market. As mentioned, the more demand, the lower the interest rates. Therefore, interest rates tend to fall when U.S. stocks are falling, foreign markets are struggling, and unemployment is rising. These factors all make the fairly conservative mortgage-based securities an attractive investment.


Alternatively, interest rates are prone to rise along with stock prices and in the event that inflation is expected to speed up.


What is considered a good interest rate?


Your particular mortgage type, credit score, and planned down payment will all affect the rate you’ll be able to lock in. Those factors make it difficult to generalize across the industry. A good score for you may be a GREAT score for someone else but higher than expected for yet another borrower.


However, according to the Freddie Mac Primary Mortgage Survey, the average rate for a 30-year mortgage in 2017 was 3.94%. In general, anything above 5% is considered very high while rates below 3% are considered very low.



What to Expect on Closing Day

Posted by on March 4, 2018 12:08 pm

So, you’ve signed a contract, completed the inspections, sent what seems like a million forms and documents to your lender and are finally closing on your new home! This is such an exciting time whether you’ve been house hunting for a month or a year. You have boxes packed, furniture ordered, and are ready to move in.


There’s just one last box to check off your list. Closing Day is the meeting in which the seller is asked to provide a clear title to the property and the buyer provides the funds needed to close the sale.


In order to make the transition as smooth as possible, it’s important to know what to expect and how to prepare for your closing.


Who is there?

While it can vary in different parts of the country, typically the closing meeting is attended by the seller of the home and their real estate agent, a title company representative, an attorney, the buyer, a representative from the lender, and a closing agent. In most cases, you’ve likely been in contact with most of the people in the room at some point during the process.

While it seems like a long list of attendees, the closing agent leads the meeting and is responsible for making sure that all necessary documents are signed and payments are distributed appropriately.


The closing agent is also there to answer any questions that you may have as you go through the process. They are experts in these types of meetings and a valuable resource – especially to first time homebuyers.



The final steps of the home purchase process actually begin a day or two before your scheduled closing. The buyer has the opportunity to perform a final walk-through of the home 24 hours before closing. At this point, it’s important to ensure that the home is in the condition listed in the agreement – that there are no final repairs or damages necessary to note.


Prior to closing, it’s also important to print and prepare all documents needed at the meeting. While the closing agent will have copies ready, we always recommend bringing your own copies to ensure that everything is as agreed. This also provides a great opportunity to review your documents before closing.


One of the most important documents to review is the Settlement Statement. You’ll receive this document a few days before closing and it will include the sales commission, loan origination fee, loan discount points, appraisal fees, credit report fee, assumption fee, any prepaid interest, mortgage insurance premium, first year’s homeowner’s insurance premium, and the mortgage insurance escrow account. Whew! Basically, this document outlines all of the financial aspects of the agreement.

Finally, pre-closing, you’ll want to prepare and bring a cashier’s check to deliver payment for closing costs and your down payment.


Closing Day

On the day of your final closing, the meeting typically occurs at an attorney’s office – depending on your area of the company. Alternatively, you may meet at your closing agent’s office, mortgage company, or even at the home.


If you’ve prepared ahead of time, your closing meeting will likely move smoothly but it’s still recommended to block off a few hours of time. Most often, closing takes an hour or two, but you don’t want to rush through the process. Depending on the complexity, some closing meetings can take several hours.


When you get to the closing table, be prepared to review and sign between 50-100 pages of paperwork. The closing agent will walk you through signing the settlement statement, mortgage note, deed of trust, title forms, tax forms, affidavits, and a variety of disclosures.


It’s important to take your time as you’re signing and ask questions when the arise!



Often, once the closing meeting concludes, you’ll receive a key to your new home and be able to begin the moving process! Occasionally, if you’ve agreed to a delayed transition, it could be 30 days or longer before you take possession of your new home.

The deed is mailed to the buyer from the recorder’s office once they’ve made note of the change.


While the process can be intimidating, the more prepared you are, the smoother it will go.


Fixed vs. Adjustable Rate Mortgages: How to Choose?

Posted by on February 3, 2018 8:24 am


The mortgage process can be intimidating! There are different types of loans, different structures, and terms that can can have long term financial implications. In this situation, information is power. Understanding your options and how they affect you is the key to making a smart decision that will set you up for success. One of the first decisions to make is the structure of your loan.

Let’s start with a couple of definitions:

A Fixed Rate Mortgage is an agreement to make payments at a certain interest rate for the entire life of the loan.

An Adjustable Rate Mortgage often offers a lower introductory rate that can be raised by your lender after a set period of time.

Fixed Rate Mortgages

Fixed Rate Mortgages are by far the most common in today’s real estate market. As the name suggests, the rates and payments remain constant and don’t depend on the fluctuations of the broader economy.

The advantages of Fixed Rate Mortgages are centered around that stability. A consistent payment structure allows homeowners to manage their money with more predictability because their payments don’t change. For people who like being able to budget for long term purchases, a Fixed Rate Mortgage may be a great option. They are also a good fit for first-time home buyers who may be overwhelmed by the complexity of other types of mortgages.

While Fixed Rate Mortgages work well for most, there are some disadvantages associated with them. In some cases, they are more expensive in the short term because there is no initial payment and rate break. They are also nearly identical for every borrower, so there’s not a lot of customization options. For many, the biggest disadvantage of a Fixed Rate Mortgage is the inability to take advantage of lower rates without refinancing.


Adjustable Rate Mortgages

A lesser-used option, the Adjustable Rate Mortgage, accounts for just 2% – 9% of all loans today. However, they are worth investigating as they have experienced a recent increase in popularity as fixed mortgage rates rise.

Adjustable Rate Mortgages offer advantages to homebuyers who are looking to extend their purchasing power with a low introductory interest rate. Because lenders can use the lower payment when qualifying borrowers, people can buy larger homes than they otherwise might. ARMs also enable borrowers to capitalize on falling rates without the hassle of refinancing. In the case of decreased interest rates in the market, ARMs automatically adjust to the lower payments. Essentially, they offer great options for borrowers who don’t plan on staying in their house forever to capitalize on lower payments.

As you may expect, Adjustable Rate Mortgages have some disadvantages associated with their volatility. While the initial rate may be low, payments can rise significantly over the life of the loan. This is where some borrowers can get in trouble as rates can skyrocket from year to year. Many ARMs feature lifetime caps and other security measures to limit volatility, but it’s important to understand their terms to truly identify how they affect the value of the loan. Those complexities are the biggest disadvantage of an Adjustable Rate Mortgage – they can be extremely difficult to understand.


Which is right for you?

While both types of loans offer different advantages and disadvantages, the key to determining which is right for you depends on a few factors. First, ask yourself how long you plan on staying in your home. If you’re going to be living in the house only a few years, it may make sense to get a low-rate ARM to allow you to save money on your payments. If you plan to move before the adjustable rate period begins, this would enable you to save money for a bigger house down the road.

To that point, another factor to consider is how frequently the ARM adjusts. This can vary from yearly to monthly and is key to evaluating the financial impact of your loan on your budget.

Ultimately, understanding how much volatility you can manage will determine which loan option is best for you!


5 Things to Know if You Plan to Buy or Refinance in 2018

Posted by on January 20, 2018 8:22 am


Price Growth is Slowing

We’re currently in a period of record home price growth. For nearly 2 years, home prices have climbed consistently and the first part of 2017 tracked some of the largest gains in over 5 years. Prices will continue to rise as we turn the page into 2018 as a result of low interest rates, low unemployment, and continued economic growth. The good news for those looking to purchase in 2018 is that the rate of that growth will begin to slow.


Sales Will Slow Early in 2018

As price growth slows, sales will follow suit – but not for long. The new tax bill has several provisions that directly impact housing – property tax deductions, mortgage interest changes, and general uncertainty regarding the financial impact of the bill will cause a short slow down in sales. As people are evaluating the effects of the new tax plan on their own personal budgets and the value of their homes, it might cause some hesitation to make any decisions in regards to housing. The slowdown likely won’t last long due to pent up demand and following the recent market growth.


Inventory Will Continue to be a Challenge

Continuing the trend from 2017, a decline in housing inventory will characterize 2018. Based on statistics from Zillow, we experienced a 10.5% decline in housing inventory over 12 months ending in November. The struggle for inventory is a result of several factors. Due to the state of the market, older homeowners are declining to sell their homes and choosing to retire in their existing homes instead. With the growth of the short term rental industry, investors are making too much as landlords to sell. There is some hope for home buyers in 2018, however.


Mortgage rates will hover around 4%.

While this is a bit higher than the rates of the previous year, most experts are predicting that mortgage rates will reach between 4% and 4.5% by the end of 2018. The expectation of rising rates combined with increased home prices means that buyers should act fast.


Increased Equity Gives Homeowners Options

As home values increase, current homeowners have options with what to do with their increased equity. Homeowners looking to remodel or make home improvements, consolidate debt or otherwise cash-out on their home equity can do so more easily than the past few years. According to Freddie Mac, $15 billion was cashed out in the 2nd quarter of 2017 and that trend will likely continue to increase along with home prices.



Interest Rate Calculator For Your Mortgage Loan

Posted by on October 31, 2015 2:08 pm

Choosing to purchase or refinance your home is a huge decision filled with boatloads of uncertainty. While the process can be very confusing, one of the best tools you can use to gain a better understanding is an interest rate calculator. Interest rate calculators are ideal for helping you figure out the real interest rate of your mortgage with a fixed monthly payment and fixed term. Simply put, interest rate calculators are designed to take the guesswork out of your mortgage payments and can even be used to help you save money. Continue reading to learn more about using interest rate calculators. .

Interest Rate Calculator for Purchasing a Home

When it comes to purchasing a home, a mortgage interest rate calculator will help you calculate your home loan payments. You can access an amortization table to see how much of each payment goes to the principle and how much goes to interest. This information is vital because the first half of your mortgage payments will be mainly attributed to paying interest. Over time, the portion of the payment that goes to the interest decreases and the amount that goes to the principle increases. In any case, an interest rate calculator will help you be more informed, and a more informed consumer saves money. .

Getting Ahead Of Your Mortgage with Split Payments

One of the most cost effective tools for paying your mortgage down is to make split payments. If you use a mortgage interest rate calculator, you will see the savings from paying split mortgage payments. Instead of making one monthly mortgage payment, pay half of the mortgage every two weeks. This practice will result in an extra mortgage payment every year without ever missing the additional cash flow. Best of all, you will notice the obvious positive cash flow when you pay the mortgage off early. Check out this effect with an mortgage interest rate calculator.

Getting Ahead with Extra Payments

In addition to split payments, you can also get ahead on your mortgage with additional payments. Making additional payments is an excellent way to minimize the long-term costs of a mortgage. When you use the mortgage calculator to determine the amount you will pay over the entire life of the loan if you pay the mortgage as scheduled, you may end up paying up to three times the original cost of the property. In any case, an $100 additional payment leads to over $100 in savings on the mortgage, which is the multiplier effect. Simply use the mortgage calculator to realize how much you can save by making additional payments.

Interest Rate Calculators for Mortgage Refinancing

If you are on the fence about whether you should refinance or take out a home equity loan, this calculator can be a valuable tool that will save you thousands of dollars. For instance, many people choose to refinance their home when the interest rates drop so they can take advantage of the lower interest rate, which typically means lower payments. However, just because the interest rate drops doesn’t mean the collective mortgage refinance will be a more financially sound decision because you must consider the effect of the closing costs. An interest rate calculator would provide you with a clear and more precise financial snapshot of how much you would potentially save as a result of that lower interest rate. Then you could make an educated decision of whether the savings from the interest rate would justify paying closing costs.


Manufactured Home Loans and Mortgage Programs Explained

Posted by on October 28, 2015 2:08 pm

Manufactured home loans are one way to grow your wealth through finally become a home owner. You can purchase or refinance a manufactured home, its land or both in a similar way to how you would do so with a traditional home. It is important to remember that despite the similarities, both the types of homes themselves and the manufactured home loans used to finance them are different from traditional homes.

Home Ownership is Required

One of the major differences between manufactured home loans and those for most types of houses is that a manufactured home may not be used as a rental property under regulations. This rule prevents the loans from being abused by unscrupulous landlords who would finance massive numbers of manufactured homes and defer maintenance until they became squalid. Your owner occupancy is required due to the increased risk that the lender takes on, as manufactured homes tend not to wear as well as traditionally built homes do.

Title I

The Federal Housing Administration has a requirement known as Title I, which declares that lenders approved by the FHA make loans from company funds to borrowers who are eligible for these loans. Lending criteria are reasonably standard across lenders, with the ability to repay the loan and general financial past being major contributing factors to whether the lender will issue the loan in question. By definition, Title I loans are neither grants nor government loans, but are private in nature.

Lending Guarantees

Title I ensures that the loan issued will be a fixed rate loan of up to 20 years. The fixed rate requirement is necessary to ensure fairness on the lender’s part and protect less financially savvy borrowers. For manufactured homes with multiple sections, the maximum term of the loan becomes 25 years, while for the lot that the home sits upon the maximum loan term is 15 years. The guarantees on the lender’s side are matched by the guarantee on the borrower’s side.

The federal government encourages home ownership, even among borrowers who may be less capable of supporting a long-term mortgage. Because of this, under Title I the FHA ensures many manufactured home loans against the possibility of a borrower default. If the borrower becomes unable to make their monthly payments at some point, the lender will be made whole on the amount borrowed. This facilitates a lower interest rate that many borrowers find considerably easier to afford than they would most other types of loans, including traditional mortgages. This is also beneficial for borrowers with blemishes on their credit record, as they can borrow at a level that they may not be able to otherwise.

Requirements for Manufactured Home Loans

A manufactured home loan carries a hot of requirements. Structurally, the home must be at least 400 square feet in size. This eliminates many of the smaller and higher risk homes. As well, the manufactured home must be permanently affixed to a foundation that is approved of by the Department of Housing and Urban Development. The manufactured home must be titled as real estate under the local government instead of as personal property.

Under most circumstances, in order to finance or refinance your manufactured home, you must also own the land under the home. However, in a manufactured home community you may get past this regulation through having the required foundation. In this way, you may lease the land while still owning the home and finance it as you normally would.

Financing your manufactured home is a good way to home ownership. Follow the requirements, and you can secure a favorable interest rate.


Down Payment Assistance Programs in California

Posted by on October 25, 2015 2:08 pm

When you search for a new home, there are many considerations to take in. From both a financial and emotional perspective, this is a large change in your life. Whether you have been a home owner before or have always rented previously, it can be challenging to produce the necessary down payment to acquire a traditional mortgage. Since a down payment is very useful, down payment assistance may be what you need.

Home as an Investment

Naturally, your home is a place to live first. However, in some cases it can be helpful to look at your home as an investment. When you think of your home as an investment, the amount of your own money you put into its purchase should be as low as possible. Consider that getting a great deal is one of the reasons why great investors can pocket large returns. By putting in less of your own money, you can receive a nicer home and keep more of your money for other purposes.

Maximizing Your Value

The value you receive from your home comes down to enjoyment and monetary reward. By being able to afford a nicer home, you can raise your family in a nicer area and potentially reap financial benefits down the road from greater appreciation. This appreciation can grow your wealth over time, and can even allow you to upgrade where you live later.

Qualifying for Assistance

Qualifying for down payment assistance works differently depending on what kind of loan you get, as well as what agency you choose to work with. In some cases, your qualification may be automatic based on your status as a veteran. In other cases, you may have to have a certain income or track record.


HomePath is a service offered by Fannie Mae, and is very popular as a down payment assistance vehicle. One advantage that HomePath offers is that your new home does not need an appraisal prior to acquiring the loan, and neither do you need to pay private mortgage insurance. In this instance, your down payment is only three percent of the loan amount instead of the traditional twenty percent. For a $150,000 home, this allows you to put $4,500 down versus putting down $30,000. Depending on your saving rate, this can allow you to be a home owner years earlier than you otherwise could.

FHA Loans

The Federal Housing Administration provides down payment assistance through a separate program called HUD, or the Department of Housing and Urban Development. Since the federal government ensures these loans, they are at a lower than average interest rate and sometimes the down payment is minimal, which is a good way to get into a nice home if your credit is less than ideal.


The American Dream Down Payment Assistance Initiative or ADDI allows you to purchase a new home if you are financially disadvantaged. If you have not owned a house for at least three years and qualify as low income, you can use ADDI to qualify for down payment assistance and for a low interest mortgage for your single family home. This can allow you to begin climbing the property ladder from where you are.

VA Loan Guaranty

Veterans, their widowed spouses and active duty military personnel can receive a Veterans Affairs loan that the federal government guarantees. This is a low interest loan that can also include assistance with your down payment if you qualify. In some cases, the amount of the loan can cover the entire cost of your home, making closing costs most of your required money out of pocket.


How Does a Mortgage Payment Calculator Work?

Posted by on October 20, 2015 2:08 pm

How Does a Mortgage Payment Calculator Work?

If you are planning to buy a home, you will need to take out a mortgage. You will be very excited about submitting your application to the lender and getting it approved. However, before you do this, have you taken a few minutes to calculate whether you can afford a mortgage? Well, if you haven’t, it is time to put on your thinking cap and start using a mortgage payment calculator.

Why are Mortgage Payment Calculators a Necessity?

Most people end up taking a mortgage without realizing the long-term implications of this debt. A health emergency or job loss can prove to be a disaster for you and your newly acquired home. A mortgage payment calculator lets you check out a range of scenarios, though the most common use of the calculator is determining monthly payments. Nonetheless, with an online payment calculator designed for mortgages, you can even find out the details of an unknown variable of your long-term loan, that is if you know the other three variables.

Of course, it is important to understand a mortgage payment calculator just gives you an approximate amount, but it definitely puts things in a clearer perspective and allows you to weigh the impact of the mortgage. This also is the tool to use if you intend to refinance your mortgage for a lower interest rate or shorter duration.

Tips to Use a Mortgage Calculator

To realize such a mortgage payment calculator’s true potential, you should know how to use it effectively.

Each calculator uses a fixed algorithm to calculate the result based on the inputs you provide. Typically, a mortgage payment calculator will ask you to enter the following in the space provided:

  • Price of the home
  • Loan amount you have qualified for
  • Interest rate
  • Term of the loan amount
  • Start date of the loan
  • Property tax
  • PMI (private mortgage insurance)

Once you fill in the details and click “Enter” or “Calculate”, the calculator will run the algorithm in the background and within few seconds gives you a detailed report of your liabilities. Each calculator is different and programmed to offer you different results. Typically, you will get the following information:

  • Monthly payment
  • Total payments for 360 months (30 years)
  • Total interest
  • Total tax
  • Total PMI
  • Monthly PMI
  • Date when you pay off the PMI

Some mortgage payment calculators may also show you a comparison between bimonthly and monthly payments to show your liabilities and the mortgage pay off date along with the interest payment. This allows you to see the amount you can afford and save, depending on which repayment option you choose.

The Bottom Line

A mortgage payment calculator lets you figure out whether you can afford the monthly payments. Remember, even if you think you can handle a large mortgage, never let your total debt exceed 50 percent of your income. Your home should improve your quality of life and not turn into an unbearable burden. So, use the calculator and turn into a prudent borrower and homeowner.


Home Refinancing Vs. Home Equity Loan

Posted by on October 12, 2015 2:08 pm

As the largest purchase most people will make in their lifetimes, a home is generally thought of as a sound investment because of the ability to build equity. Equity is the difference between what you owe and how much the property is worth. There are two ways to build equity:

  • Make payments on the home to decrease the loan value
  • The property value increases

The equity in your home can be used for a wide array of uses, such as helping to pay for a kid’s college, adding a room onto the house, paying medical bills, or just for an additional source of funds. In most cases, the equity in your home is one of the cheapest sources of funds you have. As a result, several people use home equity lending products and home refinances to cash in on this equity. Continue reading to learn more home equity lending products and home refinancing options.

Home Equity Lending Products

Home Equity Loan

A home equity loan is essentially a loan based exclusively on the equity in your home. Similar to a second mortgage on your home, these loans have fixed interest and principal payments every month. Home equity loans are disbursed as a lump sum based on a percentage of the equity you have in your home.

Home Equity Line of Credit

A home equity line of credit (HELOC) works similar to a credit card and allows you to withdraw money based on a percentage of the equity in your home. This lending product allows you to use funds, pay it back, and use the funds again during a specified period. While home equity loans have fixed interest rates, HELOCs have variable interests rates.

Home Refinancing

While home equity loans are designed to give a loan on the equity in your home, a home refinance allows you to refinance the entire mortgage. In most cases, refinancing your home is the better option if you need to borrow large amounts of money. At the same time, refinance rates are typically lower than home equity rates for larger amounts. When you refinance your home, you can also choose a longer payment period, such as 25 or 30 years. These longer terms may allow you to keep the payments lower and well within your budget.

Considerations for Refinancing Your Home

Anytime you refinance your home, you will pay appraisal fees and closing costs. In most cases, these closing costs can range anywhere from 3% to 6% of the total loan value. When you are considering whether to refinance your home or take out an equity loan, it’s vital to consider:

  • The amount you need to borrow;
  • The refinancing interest rate; and
  • The amount of time you plan on staying in the home.

Home Refinancing Vs Home Equity Lending Products

If you have built up a significant amount of equity in your home, home refinancing may be the best way to go. Other reasons people choose to refinance is to switch from an adjustable rate mortgage (ARM) to a fixed rate loan or to simply take advantage of lower interest rates. On the other hand, home equity loans are best for those who are looking for a smaller loan for specific purposes. At the same time, if your initial mortgage has incredibly low interest rates, choosing a home equity lending product will allow you to still access the equity in your home without losing those favorable terms. If you choose to refinance, you will lose those favorable interest rates on your initial loan.


Pay Off Your Mortgage Early – Mortgage Amortization Secrets

Posted by on October 8, 2015 2:08 pm

Owning your own home is perhaps the ultimate dream, but having a mortgage hanging over your head like the Sword of Damocles for 30 long years can be daunting. If you take a mortgage in your 30s, you won’t pay it off until you are in your 60s, if you go by the mortgage amortization schedule. The good news is you don’t have to wait for 30 years to clear your mortgage. There are numerous ways to hasten the repayment clock.

Here are some ways to accelerate your mortgage amortization schedule, so that you can pay off your mortgage early.

1. Refinance Your Mortgage for a 15- or 20-Year Loan

Mortgage refinance is one of the best available options to pay off your home loan. While a 30-year loan period is the norm, today, many loan institutions offer shorter loan terms. Yes, your monthly payment will increase, but it will help amortize your home loan quicker because a bigger portion of your monthly payment will go towards repayment of the principal rather than the interest. So, you will reduce the principal and interest simultaneously. Also, remember when you refinance, you usually end up with a lower interest rate.

2. Make Higher Monthly Payments on Your Mortgage

While refinancing your mortgage is the quickest way to accelerate your mortgage amortization schedule, you may not want to do this because of the closing costs and other factors, such as the possibility of losing your job. Furthermore, if you have just a few years remaining in your mortgage term, it doesn’t make financial sense to refinance the loan. In such a case, you can make sizeable extra payments to close the loan quickly. It will still take a few years, but this will be shorter than your actual loan term.

3. Refinance with a Lower Interest Rate

If you want to retain the loan term, you can do it. But if you want to pay off your mortgage quicker, it is best to refinance your 30-year mortgage with a lower interest rate. This option is perfect for people who can’t afford higher monthly payments that come with reduced loan term. However, to avail a lower interest rate on your existing mortgage, you should have a low debt to income ratio and strong credit standing. If you qualify, speak to your lending institution to get your interest rate reduced. Alternatively, you can check with other lending institutions to see they can offer a more competitive interest rate than your existing lender. Remember, while refinancing with a lower interest rate will reduce your monthly payments and you will save money on interest payments over the term of the loan, it will not help you repay your mortgage quicker.

4. Make Fortnightly Payments

Your mortgage amortization schedule lists monthly payments. However, you can accelerate the schedule by making payments every 15 days instead of once a month. If your monthly mortgage payment is $1000, you break it into two payments of $500 each every two weeks. When you use this method of repayment, you will be making 26 fortnightly payments annually. This means you will be making an extra month’s payment on your mortgage without feeling the pinch. This extra payment will help to reduce the loan term over a period of time.

Use these tips to pay off your mortgage early and make your mortgage amortization plan more attractive. They help you save money and get out of debt quicker, making it a worthwhile endeavor.


Is Applying for VA Loans Difficult?

Posted by on October 4, 2015 2:08 pm

Applying for VA loans can be the difference between having to rent a home for far longer and being able to own much earlier. If you have been in the military or are currently active, using the Department of Veterans Affairs to aide you in acquiring a loan can be very useful in achieving home ownership. However, there is a process to go through for VA loans.

What a VA Loan Offers

As active duty military or a veteran, you qualify for several things through the VA. You are able to finance a home in an area where there is a shortage of credit, such as in a more rural area, for up to 103.3 percent of the home’s value or its sale price, based on the lower of the two figures. You will not need private mortgage insurance for this. You may qualify for a 20 percent second mortgage. You also have access to up to $6,000 to improve the overall energy efficiency of the home you purchase. The benefits are great, if you are willing to go through the process.

Get Your Fundamentals in Order

You need to have a real estate agent to help with the purchase process. Then you need to begin shopping around for a lender that offers VA loans. Since each lender has their own rules for pre-qualification, interest rate, closing points and discount points, seek out as many potential lenders as you can to get the best possible deal. In some cases, one lender may offer you a larger potential loan than another lender does because of differing requirements between them.

The general rule is that to be eligible, you must be active duty for at least 90 consecutive days, or have a total of 6 years as a reservist, or have 24 months of active duty as a retiree or before being honorably discharged, or have been discharged due to reduction-in-force or due to a service-connected disability. Even if you have used VA loans before, you may be able to restore this entitlement through transfer or through paying off your loan in full. Once you have satisfied your requirements, you can receive your COE or Certificate of Eligibility to verify to the lender that you meet the necessary requirements.

Find Your Home and Sign Your Agreement

With your real estate professional’s help, find the home you want and put together your letter of intent. Once the seller accepts it and the terms you develop during the negotiation, present your contract. It needs to have a VA Option Clause, which will establish that the Department of Veterans Affairs can de facto cancel the contract by deciding that the property’s value is inconsistent with the loan due to being improperly valued or too expensive. With this Clause, you can cancel the contract without forfeiting earnest money and without other penalties.

Apply for Your Loan and Allow Time for Processing

A VA loan is like any other kind of loan in that you need check stubs, bank statements and other documents. Apply with your chosen lender, and then begin the waiting process while the VA and your lender simultaneously appraise the property and determine whether you are financially sound enough based on their standards to receive the loan.

At this point, all that remains once you receive your acceptance is to close on the property. The lender will choose a representative of theirs such as an attorney or title company, and you will close as is the norm. The process can take several months, but the reward will be through living in your new home.


Things To Know Before Applying For Jumbo Loans

Posted by on October 1, 2015 2:08 pm

Things To Know Before Applying For Jumbo Loans

Jumbo loans are extremely large loans, typically exceeding $417,000. They are very common in states such as California and New York where pricey real estate is the norm. They tend to be for larger single-family homes, although people also use them to buy condominiums. Many lenders designate them only for primary homes, but other lenders allow them for investment properties, second homes or vacation homes. If you’re thinking about applying for a jumbo loan, there are a few things to know first.

Reasons to Take Out a Jumbo Loan

  • Many people who live in areas such as Irvine, California, have no choice but to go jumbo. Otherwise, they’d probably have to use up all of their savings to purchase a home.
  • You can avoid multiple loans in favor of one large loan. One monthly payment, one lender, far fewer headaches.
  • You’re comfortable with the risk that goes along with adjustable-rate loans; fixed rates don’t happen often with jumbo mortgages. You can also refinance a jumbo loan to get lower interest rates.
  • They’re good for tax deductions; you can deduct the interest on loans up to $1 million.
  • In some cases, it’s possible to qualify for a $1 million-plus jumbo mortgage with as little as 10 percent down, especially if your debt-to-income ratio is low. The tradeoff is a higher interest rate.
  • Some lenders offer reamortization, meaning that as you pay down your loan, your monthly payments get recalculated. It’s an incentive to use bonus income toward your loan.

Reasons not to take out a jumbo loan

  • Payments are hefty due to high interest rates and the added risk. Jumbo loans don’t carry private mortgage insurance, which otherwise gives lenders security. Ideally, your monthly debts would not exceed 38 percent of your pretax income, although some lenders push the debt-to-income ratio to as high as 43 percent. If your debt is higher than that, some lenders will still work with you.
  • Qualifying for jumbo loans is harder than for traditional loans. You must document a good credit score, usually no lower than 700, sufficient income, liquidity and plenty of assets. Often, you need to put down at least 20 percent of the purchase price for your down payment, or if you’re refinancing, to have at least 20 percent equity in the home.
  • The risk involved is significant. If the value of your property falls, you stand to take a hit in equity. Refinancing becomes harder, and if you sell your property, you might do so at a loss.

Documenting Income and Assets

You’ll need to prove ability to repay the loans. If you’re self-employed, lenders typically ask to see the past two years’ worth of tax returns and your two most recent bank statements. However, lenders do offer some flexibility. For instance, say you’ve worked in a certain field for 20 years and a year ago, you opened a business in that field. Instead of requiring two years of self-employment tax statements, a lender might be okay with only one year of returns as long as you show stability and growth for the business. In most cases, you’ll have to show sufficient liquidity equaling at least six months to a year’s worth of monthly payments.

If you hold down a traditional job, a lender wants to see your pay stubs from at least the past 30 days and your W2s for the past two years.

As you see, jumbo loans require careful consideration. Before you apply, make sure your income and debts are in the right place and that you understand the risks.