How Big Does Your Down Payment Need to Be?

by rbeckner on in Mortgage 101

For most prospective homeowners, the down payment is the biggest roadblock between dreaming about buying and actually collecting the keys.

It’s no secret the down payment on a home is a substantial chunk of change. Coming up with that much cash is no small feat. But remember, Rome wasn’t built in a day. As you consider how big your down payment needs to be, consider these key components.

 

A Standard Down Payment is 20%

To secure a conventional loan without Private Mortgage Insurance (PMI), most lenders will require you to make a 20% down payment. For a $400,000 home that’s $80,000.

Standard down payments come with a lot of benefits, including:

  • A better chance of getting your loan approved as you’re considered a more trustworthy borrower.
  • Lower upfront fees
  • Lower interest rate
  • More equity built up in your home immediately
  • Lower monthly payment
  • No PMI

Of course, a standard down payment comes with one obvious drawback – its size.

 

A Piggyback Mortgage Allows You to Put Down Just 10%

Your down payment acts as a security deposit for your lender. In the event you default on your loan, your lender has a better chance of recouping losses the more equity you have in the home.

A piggyback down payment allows you to put down just 10% of the mortgage. Then, you would take out a second mortgage to cover the remaining 10%.

These halved down payment programs do mean less cash up front. However, they also require you to carry PMI until you’ve built up 20% of the equity in your home. This increases the cost of your monthly payment. Piggyback mortgages are also typically connected to higher interest rates, meaning you’ll pay more over the lifespan of the loan.

 

Mortgage Assistance Programs Feature as Little as 3% Down

The Federal Housing Administration (FHA) is a government agency. It was created to help first-time homebuyers qualify for a mortgage. The FHA does so by guaranteeing a portion of an FHA loan’s balance. This allows borrowers to secure a mortgage while putting as little as 3% down.

For many borrowers, this is the lowest down payment program available. While FHA loans provide the distinct advantage of paying less upfront, they also require monthly insurance premiums and typically higher interest rates. Additionally, there is a borrowing cap on FHA loans. The cap is determined by the area in which you live and could potentially price you out of the market.

 

Zero Down Payment Programs for Veterans

VA loans are available to qualifying active and retired service members. Backed by the Department of Veterans Affairs, these loans come with a wide variety of benefits, including zero down payment option.

 

How Big Should Your Down Payment Be?

There is no one-size-fits-all answer. How much you put down is ultimately determined by your current financial status and lifestyle. The best first step you can make is to know your options.

Contact me today, I look forward to talking with you.

Should You Buy Discount Points?

by rbeckner on in Mortgage 101

We all love to save money, especially when we’re buying something as big as a home. That’s why discount points can be so attractive. For a one-time, upfront fee, discount points lower your monthly payment and reduce the overall cost of your loan.

But, discount points aren’t for everyone. Consider the following questions to decide if they are right for you.

 

What’s the term of your loan?

You purchase discount points by paying a percentage of your loan amount. Typically, one point costs 1%. For a $350,000 home, one point will generally cost $3,500.

The point reduces your interest rate and consequently the cost of your monthly mortgage payment. Though this monthly savings can vary, for a $350,000 loan, one point will typically save you about $20 a month. This means it will take 175 months to begin seeing a positive return on your investment (ROI).

 

How long do you play to stay in your home?

If it takes you 175 months to begin seeing a positive ROI, that’s roughly half the lifespan of your mortgage. Most first-time homebuyers move within five to seven years. Consider carefully how long you reasonably expect to stay in your home before you buy points.

Do you expect to refinance?

Whether you plan to move or not, do you think you might refinance? If you do so before you break even, you’ll lose money. If you buy discount points, it’s best to stick with your original mortgage for several years before making any changes.
Can you afford discount points?

With the down payment and closing costs, buying a home requires a substantial amount of cash. How much surplus cash do you have on hand? It’s a good idea to make sure you have some extra money set aside in a rainy day fund for unexpected expenses. Will the cost of your points allow you to do so?

Need help crunching the numbers? Contact my team today, we’d ready to help.

3 Ways to Make Moving Easy

by rbeckner on in Home Buying Process

You have the keys to your new home. Are you ready to paint the walls, host a housewarming party, and lounge for days? Great! But first, you have to move…

We’re not going to lie. Moving is never a breeze. But, it doesn’t have to be a back-thrown-out, truck-broken-down headache either. With the right approach, you can make this move your easiest one yet!

 

Hire a Professional for the Big Stuff

Saving a bit of coin can seem like a good idea, until you consider the dinged doors, scratched walls, and sore back you’ll have to show for it. Professional movers are professionals for several reasons:

  • They have experience. Moving is their job. They know how to fit items around corners and through door frames.
  • They have the tools to make the job easier. Good moving companies have soft blankets designed for covering sharp corners to ensure your home and your stuff is protected.
  • They have trucks. Sometimes carrying capacity is one of the biggest hurdles. Good moving companies have rigs big enough to move your items on hand for just such an occasion.

 

Host a Moving Party

What’s one thing that makes an un-enjoyable task more fun? Friends, of course! Host a moving party. Tell your friends when and where you’d like them to be. Bribe them with a healthy dose of post-moving pizza and cocktails. Just make sure you have all your boxes packed before your helpers arrive.

 

Pack Key Kitchen Items Last & Put Them in a Well Labeled Box

Eating takeout gets old and expensive after awhile. Keep your key kitchen utensils out until the last and pack them where they can easily be accessed. It’s not uncommon for some boxes to go untouched for months after you move.

But before you can move into your new home, you have to buy it. If you’re ready to move forward, I look forward to hearing from you.

6 Factors To Consider When Comparing The Cost Of Renting Vs. Buying

by rbeckner on in Mortgage 101

The answer isn’t black and white when you consider, “What costs less, renting or buying?” What’s more affordable is determined by a lot more than comparing a rent payments and mortgage payment.

While buying comes with some additional expenses (more on those later in the post), it also comes with a lot of perks. Yes, you become the master of your own domain and get to make decisions about how your home is maintained.

But beyond that, you can start using your monthly living expenses to build equity. Rather than just spending the money and never seeing those dollars again, you are investing in an asset you can sell or leverage. And that’s huge!

Additionally, the cost of rent does nothing but rise. If you secure a fixed-rate mortgage, the cost of your mortgage payment won’t. This means by buying, you’ll gain a lot more control over your monthly living expenses.

But even with these awesome perks, it’s important to consider the full cost or home ownership to determine if buying is right for you. These expenses include:

Homeowner’s Insurance – Renter’s insurance covers the cost of replacing the stuff within your home. In most cases, this is a pretty nominal fee. Homeowner’s insurance protects you against unplanned damage to your home itself. This damage could be caused by vandalism, storms, theft or fire. Generally speaking, your homeowner’s insurance will cost more than your simple renter’s insurance.

Maintenance – As a renter, when something breaks you call the landlord and they pay to fix or replace it. As a homeowner, all maintenance is your responsibility. You need the skill or the money to fix whatever is broken.

Property Taxes – Your property taxes are determined by the value of your home. They can vary based on they city, county or town in which you live.

Utilities – Utility bills aren’t unique to home ownership. But, the bigger the space, the bigger the utility bills tend to be. If you move into a home that’s substantially larger than the one you were renting, get ready to pay more.

Transportation – It’s easy to overlook the cost of getting around, but it can significantly add up over time. If you buy a home further from work and your daily activities, be ready to pay more for transportation.

Homeowners Association Fees (HOAs) – If you buy a home that’s part of an HOA, you’ll also need to pay those dues. This fee is generally used to pay for the maintenance of common spaces, as well as items like insurance and landscaping.

Want to explore more differences between renting and buying? Give me a call today, I’m here for you.

Top Reasons to Refinance Your Mortgage

by rbeckner on in Mortgage 101

Refinancing a home takes a lot of effort. First you have to qualify for refinancing; you then must fill out financial paperwork. Finally, there are terms to accept under the new loan agreement. But as long as you have a clear goal in mind, refinancing can have real benefits. There are several common reasons why you may decide to refinance your existing mortgage.

1. Reduce your payment rate.

When you first got your mortgage the payments were easier to manage. Things have changed and you wish there was a way to lower those monthly mortgage payments. You’re tired of struggling to pay the mortgage and could use some relief. Refinancing is a good way to free up thousands of dollars per year in primary and interest payments. To get a lower payment rate there’s a good chance you’ll be making payments over a longer period of time. This is a fair trade-off if your mortgage is causing a budget squeeze.

2. Get cash you need for important items.

The equity in your home has a certain dollar value in cold, hard cash. If you have an urgent need for a large amount of money. Perhaps to buy a car, make home improvements, pay for medical care or college fees, refinancing can help you cover these types of expenses.

3. Get a better interest rate.

Mortgage interest rates constantly fluctuate. High interest rates take a chunk out of your household budget, so when rates take a big dip, it’s time to consider refinancing. Shop around to find the lowest rates, and best terms. Rates between three and five percent are excellent, but even lowering rates by a few percentage points puts money back in your pocket.

4. Pay off credit card debt.

In addition to monthly mortgage payments, you have one or more credit card bills to pay. Credit card debt is the worst type of debt, because it drains your budget of money needed for other things, interest rates tend to be high. Debt consolidation through refinancing allows you to pay off all of your credit card debt, while getting a better interest rate deal. Once free and clear, avoid habits that led to huge credit bills.

5. Switch to a fixed interest rate.

You currently have an adjustable-rate mortgage, but you want to take advantage of low fixed rate mortgage offers while they last. Grab a great refinancing deal that locks you into a long-term lower payment rate.

Ready to see if refinancing is right for you? Let’s connect, give me a call today.

How to Qualify for a Loan When You Work Part-Time

by rbeckner on in Mortgage 101

If you think the freelance community here in America is small, think again. A new study released by the Freelances Union and Elance-oDesk found that 34 percent of the American workforce is doing freelance work.

This kind of self-employed or part-time status can make it difficult to qualify for a mortgage. But it doesn’t make it impossible. With the right preparation, you can qualify for a mortgage without working the standard 9-to-5.

Clearly Show Your Earning History

At a minimum, you’ll need to show two years of income high enough to afford the mortgage you are seeking. Additionally, it’s best to be able to show you have increased your earnings year after year. This means, your earnings report for 2015 should be higher than your earnings report for 2014.

Bring the Bacon

As is the case with any other borrower, the more you put down, the better. Ideally, you’ll want to put down a full 20 percent. This will make you more trustworthy.

Have a Solid Credit Score

Your credit score is one of the key elements to proving how trustworthy you are as a borrower. A direct reflection of your credit history, it gives lenders insight into how successful you have been at taking on and paying off debt.

Show Your Savings

Because your earnings can fluctuate, a rainy day fund is ideal. In the event you have a slow month, these liquid assets can help ensure you can smake your monthly payment.

Highlight Your Track Record

Do you consistently make your rent payments on time and in full? Awesome! This can help you show lenders you’re able to establish a monthly budget and keep to it. You can do so by showing your lender rent stubs and a letter from your landlord.

Consider a Co-Signer

Co-signing isn’t without its hiccups – namely finding someone who is willing to attach their credit to your own. However, a co-signer can help you qualify for a mortgage which you might not be able to receive otherwise.

Ready to get pre-approved? Contact me today.

Should I Rent or Buy a Home?

by rbeckner on in Home Ownership, Mortgage 101

The question of whether to buy a home or to rent has become controversial in recent years. Many people have rejected the notion of home ownership in favor of a lifestyle with fewer long-term commitments. Even so, there are some important reasons why it can be a good idea to buy a home of your own, rather than paying rent to a landlord.

 

  1. You can have it your way

With ownership, unlike renting, you don’t need the approval of a landlord in order to make design changes, or keep pets. You can live in a place that conforms to your lifestyle, and you can expand it as your needs change. Owning your own home offers considerable additional personal freedom and privacy compared to renting.

 

  1. What you buy, you keep

When you buy a house, you’re getting more than just a place to live; it’s a place to call home, perhaps even for future generations to call home. It’s a long-term commitment with long-term benefits. As you pay down a mortgage, you build equity that functions much like a savings account, stored in the form of a physical asset. It’s solid, it’s real, and once it’s fully paid for, it’s yours to live in and enjoy for the rest of your life. Renters pass up this opportunity to build something bigger than themselves.

 

  1. Long-term stability

Land is a scarce commodity, and it’s an especially hard one to create more of. Because of that, its value generally increases over time. The housing markets have their ups and downs, but the numbers have historically gone up over the long term. This is a good thing for homeowners who have a fixed-rate mortgage. The value of your property increases, but your mortgage remains stable and predictable, a cost you can count on. It’s less peaceful for renters, who often see rates rise along with property values, and their landlord’s expenses.

 

  1. Financial power

Owning a home offers several financial benefits that renters don’t enjoy so easily. When you always make mortgage payments on time, you can build up a powerful credit history. You’ll be able to enjoy access to bigger and better loans on cars, appliances, and financial investments. Substantial mortgage interest and property tax deductions are available to homeowners, but not to renters. You can also consider the possibility of becoming a landlord yourself, and renting out rooms or the entire house for profit. As the owner, you’re ultimately responsible for maintenance either way, so why not let someone else pay you for it? This is one of the roads to true wealth: by acquiring an asset that generates passive income, you can begin to make yourself financially free.

Questions? I’d love to talk to you about how you can get pre-approved for a home that builds your wealth.

Is a Kitchen Remodel Worth the Investment?

by rbeckner on in Home Maintenance

Thinking about a home upgrade? Want to make sure it’s worth the investment? Kitchen remodels typically offer the best return on investment (ROI) of any home improvement project.

Not only is the kitchen where most families spend the majority of their time – so they’ll enjoy the update the most – it’s one of the key items potential buyers consider.

Not all kitchen remodels are created equal. Highly specialized updates might be something you enjoy, yet be a turnoff to potential buyers. The same is true of extremely expensive finishes and appliances. This doesn’t mean you should never make a decision that’s about your personal enjoyment. However, you’ll want to make those decisions with your eyes wide open.

So, what updates do offer the best ROI?

 

Re-Paint the Walls and Cabinets

Paint is far and away the most cost effective way to give your home an update. This true for any room in the house. By refinishing the walls and/or cabinets, you can breathe new life into your kitchen without dropping a pretty penny. You’ll save even more if you do the painting yourself. In comparison to laying tile or re-wiring lights, painting is a pretty simple do-it-yourself (DIY) project.

 

Add a Backsplash

Redoing all your counters can cut into your remodeling budget substantially. Adding a tile backsplash can refresh the look of your existing countertops by providing a focal point. You’ll want to stick to a backsplash that plays on the colors found within your existing counter. This can be done either by pulling accent colors from the tile or using complimentary colors.

 

Update Your Lighting

Older kitchens aren’t typically equipped with as much lighting as their modern day sisters. By updating your lighting you can take your kitchen from dark and dreary to light and airy. Consider swapping out old light fixtures for newer pendant lights. You might also install under-cabinet lighting. This can give your kitchen a more elegant, high-end look.

Ready to make an update? A home equity loan or a home equity line of credit can supply the necessary cash to complete the job. Contact me today to explore your options.

The Pros of Buying a Duplex

by rbeckner on in Home Buying Process

Traditionally, when most folks imagine buying their first home they think of three options – a single-family house, a townhome or a condo.

 

Did you know there’s a fourth? A duplex is a home divided into two sets of living quarters with separate entrances. While it might not be what first comes to mind, owning a duplex offers some significant advantages.

 

4 Pros of Owning a Duplex

 

Mortgage Advantages

When you’re purchasing a home – whether it’s a single-family home, townhome, condo or duplex – lenders will classify it as either owner-occupied or non-owner occupied.

 

Owner-occupied homes are considered less risky. This is because the likelihood an owner will walk away from their mortgage when they physically live in the home is reduced. As such, you’ll typically secure a lower interest rate for an owner-occupied unit.

 

The great news is, lenders consider a duplex one property. If you plan to live in one half and rent the other, a lender will still consider the property as owner-occupied.

 

Tax Breaks

In general, buying a home gives you some significant tax write-offs, such as deducting your mortgage interest. In the case of a duplex, if you’re only living in one half you can only write-off the interest on that one side. However, if you rent the other side there are other tax write-offs of which you can take advantage. This could include any repairs or updates you make to the space. If you share expenses like the Internet, cable or garbage, you can also write half those off.

 

Rental Income

By renting the other side, you can help cover the cost of your mortgage. As property values rise, your rental rate will typically rise too. Once you’ve paid off your mortgage, those monthly rent checks will become a supplemental income.

 

Vacation Rental

Not quite sure you want to become a full-bore landlord? Sites like Airbnb and VRBO allow you to easily turn the second half of your duplex into a vacation rental.

Ready to explore your options? The first step is to get pre-approved, contact me today and let’s get started.

Why Should You Buy in 2016?

by rbeckner on in Home Ownership

Though 2016 is nearly over, home-buying opportunities are as attractive as ever. Mortgage rates have dropped drastically, and continue to hover at record lows. There are plenty of options still available that can help you finally get into your dream home, and there’s time left in the year for you to benefit! Here are a few reasons why 2016 may still be the time for you to buy.

 

Lower Home Prices

Real estate prices have dropped, allowing for an increase of supply for homes. This results in lower prices for those ready to buy and get moved in. Many homes are still available at low cost to the buyer.

 

More Availability

More and more sellers are willing to put their homes on the market, allowing the floodgates to open for new homes. Starter and middle-range homes are abundant, boosting inventory to make buying easier. Bidding wars may go away, and prices could fall even more.

 

Interest Rates

The Federal Reserve has been planning on raising the interest rate, which means low rates may not stick around beyond this year.

 

Rent is Going Up

Rental prices are expected to rise, which means that buying a home can be cheaper than shelling out extra money for rent. If buying a home sounds like a scary commitment, I promise you that the amount of money you’ll put into rent in the long run is much more significant.

 

Pre-Approval

When you’re looking for a home, it’s a good idea to get pre-approved for a home. This way, you know what you can afford, and start pricing the market.  Since homes are cheaper now than in recent years, you can get more bang for your buck.

 

Timing

Trying to time the housing market is like trying to predict the future without knowing all of the factors. Since the housing market is cyclical, you shouldn’t wait for that perfect time. The market can go up or down, it’s impossible to know where the market will go. But if the market has rates at a level that you can afford, there’s no better timing than the present.

The housing market has seen some tough times within the last decade, but has rallied and come back in a big way. Before mortgage and interest rates jump higher in the months and years ahead, make 2016 the year you win big with your dream home at low cost!

Ready to get preapproved and explore your options? Let’s talk, I’m here for you.

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