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Is a Mortgage Refinance Right for You?Posted by
Are you looking to reduce your monthly mortgage payments, get a lower interest rate, convert your home equity into cash, or switch to a fixed-rate loan? Consider refinancing your home loan.
But before you jump into the refinance process, remember that everyone’s financial circumstances are different. Loan balances, interest rates, remaining months on the loan term – they all vary depending on each situation. However, there is one thing that is, and always will be, the same for everyone: math. And it’s only after you and your First Class Mortgage Consultant “do the math” that you should decide whether or not to refinance.
How does refinancing work?
Refinancing is the process of replacing an existing mortgage with a new loan. Typically, people refinance their mortgage to reduce their monthly payments, lower their interest rate, or change their loan program from an adjustable rate mortgage to a fixed-rate mortgage. Additionally, some people need access to cash to fund home renovation projects or paying off various debts and will leverage the equity in their house to obtain a cash-out refinance.
Goals for refinancing:
- Lowering your monthly payment: With a lower monthly payment, you are free to put the savings toward other debts and other expenditures or apply those savings towards your monthly mortgage payment and pay off your loan sooner.
- Remove private mortgage insurance (PMI). Some homeowners who have enough property appreciation or principal paid off will not be required to pay mortgage insurance which will reduce your total monthly payment.
- Reducing the length (term) of your loan. For homeowners who took out a mortgage in the early stages of their career, a 30-year mortgage may have made the most financial sense. But for those who want to pay off their mortgage sooner, reducing the loan term can be an attractive option.
- Switching from an adjustable-rate mortgage to a fixed-rate loan. When you have an adjustable-rate mortgage, your payment can adjust up or down as interest rates change. Switching to a fixed-rate loan with reliable and stable monthly payments can give homeowners the security of knowing that their payment will never change.
- Using the equity in your home to take out cash. With rising home values, you may have enough equity to take out a cash-out refinance. This money can be used to finance home improvements, pay off debts or to fund large purchases.
Regardless of your goal, the actual process of refinancing works much in the same way as when you applied for your first mortgage: you’ll need to collect financial documents and submit a mortgage refinancing application before you can be approved.
Is Now the Right Time to Refinance?
Ultimately, it’s critical to crunch the numbers to see if refinancing makes sense for you. Our website has a refinance mortgage calculator designed to help you calculate what your new payment would be.
Even if you’ve been unable to refinance in the past, loan programs and rates are always changing. These changes, along with rising home values in many markets, may enable you to reduce your rate or lower your monthly payments.
But you don’t have to go at it alone! Our mortgage consultants are always ready to answer your questions and guide you along the path to a successful refinancing.
How to buy a second homePosted by
Lake season is here! If you are considering purchasing a vacation property, now is a great time. No matter what type of vacation property – lakeshore, rural or urban — you’ll follow the same basic steps when it comes to financing a second home. Here are some things to consider as you purchase a second property.
Setting a budget:
When financing a second home purchase, it’s essential to get in touch with a mortgage consultant BEFORE you begin your property search.
Together with your mortgage consultant, we will help you determine a budget that takes into account, maximum mortgage payment, annual homeowner’s insurance policy, and taxes.
While these additional expenses are not factored into your mortgage scenario, other costs to keep in mind are travel costs – to and from the property, regular maintenance & repairs, utilities, furnishings, and household items.
Financing a second home:
While some people can afford to pay cash for a vacation home, financing makes more sense for a majority of future second homeowners. Here are two options to consider:
Financing a second home is different than purchasing a primary residence. FHA home loans are not an option since they can only be used to buy a primary residence. That leaves a conventional loan, which you have to qualify for on top of any mortgage debt on your primary home.
Typically, you will need to make a down payment of at least 10 percent, meet credit standards and debt-to-income requirements, and provide documents for income and asset verification.
Home values are on the rise across the country. Because of this, many homeowners have built substantial equity in their primary residence in just the past few years. Cash-out refinancing can be an excellent way to liquidate your home equity and then use it to purchase a vacation home.
Rental vs. Vacation Home
For some, owning a vacation home may sound like an unattainable dream. But, with the rise of services like Airbnb, it is now easier than ever to receive occasional rental income.
If you do plan to rent the property out, know that financing is different for rental homes and vacation properties. Qualifying is more straightforward when purchasing a property as a second home.
Finding your dream
The market for lake homes is heating up, and new properties are being added to the market daily. If you are not already working with an agent, we would be happy to recommend some REALTORS that specialize in lakes country. They will take the time to help you find your perfect home away from home.
Once you have found a property, your First Class Mortgage consultant will help you determine the best way for you to purchase it.
Your Mortgage, What to Expect: UnderwritingPosted by
We are now at the halfway point of the mortgage process. Underwriting.
What is mortgage underwriting?
During the mortgage underwriting stage, your application moves from the desk of the loan processor to the mortgage underwriter. The mortgage underwriter will ensure your financial profile matches your lender’s guidelines and loan criteria and he or she will ultimately make the final decision: to approve or deny your loan request.
How Underwriters Assess Risk, the “Three C’s” of underwriting:
- Capacity: Do you have the means and resources to pay off your debts? Underwriters assess your available resources by reviewing your employment history, your income, your debts and your asset statements. (Note: If you are self-employed, you may be asked to provide much more documentation of your income and work status.)
They will also review your savings, checking, 401(k), and IRA accounts to ensure you can still pay your mortgage if you lose your job or become ill. Underwriters will pay particular attention to your debt-to-income ratio; they want to make sure you have enough money to fulfill your current financial obligations, as well as take on a new mortgage.
- Credit: Do you have solid repayment and credit history? Your credit is one of the most critical factors in the loan approval process. The underwriter will review your credit score to see how you have handled past bills (like auto loans, student loans, and home equity lines of credit) and predict your ability to make the proposed mortgage payments on time and in full.
- Collateral: What is the value and type of property? The mortgage underwriter must make sure the loan amount meets the loan-to-value requirements of the product. Otherwise, in the case of a default, a lender may not be able to recover the unpaid balance of the loan. An underwriter will typically order a home appraisal which will assess the home’s current worth.
Also, the underwriter will likely review the type of property you are looking to buy, because different kinds of properties carry different risks. For example, many lenders consider an investment property a riskier investment; this is because, historically, a borrower is more likely to walk away from an investment property than their primary residence in a difficult financial situation.
Ready to get started? Give us a call or fill out an online application: APPLY ONLINE HERE.
Things to do BEFORE you buy a home.Posted by
Whether it is your first home or you’re already a homeowner, there are some critical thing you should do before a move to a new place. Here are 13 things that will help make your next move easier.
- Know your credit score. Your score
- Get pre-approved by a local mortgage broker before shopping
- Know every expense beyond the mortgage – insurance, repairs, association fees, property tax, etc.
- Work with a skilled real estate agent that knows your area.
- Understand the actual value of any property you are buying
- Verify all the information in the listing
- Use a reputable home inspector
- Make sure all renovations are up to code
- Understand any Home Owners Association that you will be part of
- Look for water-related problems
- Have a professional look for the presence of asbestos, mold, and radon.
- Make sure the electrical system is up to par
- Know the potential growth of your investment
Your Mortgage, What To Expect: Document ReviewPosted by
Getting ready to buy a home?
This short video will help you understand the first step of the mortgage process for home buyers: the initial document review. Find out what to expect and learn what the mortgage lender or broker will look at and analyze during the review process.
Ready to get started? Give us a call or fill out an online application: APPLY ONLINE HERE.