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Showing posts from May, 2017

Must Be This Tall to Ride

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Surely, you remember being a child at an amusement park when after having stood in line with your friends and family, waiting to get on a terrific ride, you discovered the sign that read, “you must be this tall to ride.”Not only was it disappointing, it was slightly embarrassing. You never want to go through that again.A remarkably similar situation occurs when people are buying a home. After finding the right home and negotiating the contract, they find out that they don’t measure up financially.  It’s not something that anyone wants to go through if they have a choice.Regardless of what you think you know, if you’re buying a home with a loan, you need to physically visit with a trusted mortgage professional before you get serious. You’ll find out your credit score which will directly affect the mortgage rate you’ll pay. You might discover blemishes on your credit that possibly can be corrected. You’ll even get a pre-approval letter that you can submit with an offer which could …

Would-be Buyers with Student Debt

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59% of non-owners are not comfortable taking on a mortgage with their student debt according to the Aspiring Home Buyers 2017 survey. It is estimated that the college graduates have an average of $37,172 in student debt.Fannie Mae, who has loan programs with as little as three to five percent down payments, has announced changes to how student loan debt is treated that could make the difference in qualifying for a mortgage.For the 5 million borrowers who participate in the reduced payment plans, actual payments are considered for calculating debt-to-income ratio rather than maximum payment amount.Non-mortgage debts paid by another party for at least 12 months won’t be included in calculating debt-to-income ratio.  For example, payments being made on a student loan by the parents would not be counted against the DTI ratio for the student.These changes can make it possible for would-be buyers with student debt to get a home now instead of waiting for years. Being pre-approved by a tr…

Good Info - Good Decisions

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While low inventory is certainly challenging buyers, not having a clear understanding of mortgage financing is also causing issues. By having good information, they are able to make better decisions as well as compete favorably.Most buyers don’t realize how the mortgage rate is determined for a borrower. While annual income is important, a good credit score, low debt-to-income ratio, loan-to-value ratio and ability to repay the loan are vital concerns. A variety of myths seem to permeate the market such as rates are set and released once a day; FHA loans are for first-time buyers only; pre-qualification commits the lender; lender fees are not negotiable and adjustable rate mortgages always go up.Misunderstanding of actual mortgage practices may be a contributing factor to why more buyers are not taking advantage of what are still historically low mortgage rates.While getting solid information about mortgages and being pre-approved from a lender are very important, it is only one st…

Reasons to Refinance

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Regardless of the reason to refinance a home, the basic question to ask is: “Do you plan to live in the home long enough to recapture the cost of refinancing?” There are always expenses involved in refinancing which can be paid in cash or rolled into the new mortgage.From a strictly financial standpoint, the break-even point is achieved when the cost of refinancing has been recaptured by the monthly savings. It would take approximately 23 months to recapture $4,000 of refinance costs with a lower payment of $175 a month.Lower the rateShorten the term so that the loan will build equity faster and be paid off sooner.Lower your payment to reduce your monthly cost of housing.Convert an ARM to a FRM to stabilize your payment due to concern of rising interest rates.Cash out equity to be able to use the money for another purpose.Combine a first and second mortgage.Consolidate personal debt so the interest is tax deductible.Payoff higher cost debt such as credit cards, student debt, etc.Rem…

Indecision May Cost More

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“More has been lost due to indecision than was ever lost to making the wrong decision.” Interest rates have as much effect on housing costs as price and when they are both trending upward, it can be very expensive to wait. There can be some legitimate reasons for postponing a purchase such as needing to save the down payment, improve your credit or waiting to find out about a possible transfer. The problem is that prices and interest rates could, and very likely will, go up in the future.If the price of $250,000 home went up 5% and the interest rate went from 4.5% to 5.25%, the payments would increase by $176.42. The additional cost over a seven-year period would be close to $15,000.The questions that indecisive buyers need to ask themselves is “how am I going to feel knowing that if I had not waited, I could have been living in the home for less money?” and “What would I have spent the money on if I didn’t have to make the larger payment?”Use the Cost of Waiting to Buy calculato…