5 Not So Well-Known Loans

by rbeckner on December 10, 2015 in Mortgage 101

Did you know that there are different kinds of loans? As a Loan Officer, I constantly educate home buyers on the wide verity of loans available. There is no one size fits all approach when it comes to home loans. There a countless types of loans and structures available to you, so you can get a loan that fits your situation. Loans from from different lenders, have different rules, payment options, and time frames.

To help you brush-up on your borrowing know-how, we’ve compiled five types of loans you might not know about.

Cash Advances (aka Costly Borrowing)

A cash advance loan is a loan typically extended by your credit card provider. These loans are often smaller in size, such as a few hundred dollars. They generally have high interest payments and fees, meaning they can be extremely expensive.

Equity Loans (aka Borrowing From Yourself)

With an equity loan, you leverage your personal equity. This could include your home’s equity, your retirement fund, and even your life insurance. Essentially, you’re liquefying these assets with a clearly defined repayment plan.

Reverse Mortgages (aka Leveraging Your House)

A reverse mortgage is similar to an equity loan, in that you are leveraging the equity in your house. The difference is, with a reverse mortgage there is no repayment plan. As you recoup the equity in your home in liquid assets, the lender takes ownership of your home. Traditionally, reverse mortgages are used by retirees.

Personal Loans (aka the Friends & Family Loan)

Personal loans can be extended to you by friends, family or an institution. With the advent of crowdfunding, you can even get a personal loan from complete strangers. The size and term length of the loan can vary widely. As with most loans, the higher your credit score, the lower your interest rate will likely be. Before you take on a personal loan, make sure to read the fine print. You and the party from which you are borrowing should create a legal document outlining the terms. These terms should include (but are not limited to): the total sum you’re borrowing, your interest rate, your payment schedule, and the specific terms for how the lender can recoup their losses in the event you default.

Debt Consolidation Loans (aka Repaying Old Debts with a New Loan)

Debt consolidation is exactly what it sounds like. It allows you to pay off your debt with a new loan. For those who find themselves in serious financial trouble, debt consolidation can offer a way out. It can allow you to lower your interest rate and simplify your monthly payment plan. However, debt consolidation will also seriously harm your credit report for some time. It isn’t a decision to make lightly.

Have additional questions about loan types or simply ready to explore traditional mortgages? Give me a call today.

6 Hidden Home Buying Expenses

by rbeckner on November 24, 2015 in Home Buying Process

Buying your first home is exciting. As you begin imagining your new life, it’s easy to dream of a new couch here and a new TV there. It’s logical to picture a professionally landscaped yard and the color scheme of your new home office.

But remember all these “new” things cost money. Before you wipe out your savings account to outfit your new abode, make sure you can cover all the potential expenses associated with buying.

Third party fees paid at closing are typically non-negotiable. Sometimes the seller will pay some or all of these costs, but sometimes not. These third party fees can include:

Document Taxes
Transfer Taxes
Prorated Property Taxes

You’ll also need to pay for a home appraisal. Additionally, it’s often a good idea to invest in a professional home inspection before closing.

Once you’ve closed, you might get hit with a special property tax assessment. This is different from the property taxes and hazard insurance your mortgage company has already collected. This tax generally occurs when your taxing authority needs money to put in a new streetlight or revamp a park in your neighborhood.

If your condo or neighborhood is governed by a homeowners association (HOA), you might be charged special HOA assessments. This typically covers items such as repairs and improvements to the common areas. It’s a fee that’s due above and beyond your monthly or yearly HOA dues. The good news is, HOA members typically vote on projects and review bids before any work is started.

In addition to special taxes and assessments, you might need to acquire flood and disaster insurance. This is particularly true if you live in a flood plain.

Furthermore, your home might need some unforeseen work. For example, you could suddenly need to repair the dishwasher or patch a leaky sink.

Have additional questions? Give me a call today.

3 Steps to Be Prepared Financially for the End of the Year

by rbeckner on October 15, 2015 in Home Ownership

By doing a little work now, you won’t suddenly find yourself scrambling to get your affairs in order come tax time.

Summer is behind us. It’s officially fall. While it’s hard to believe, the end of the year is just around the corner. Pretty soon you’re going to be patting yourself on the back for leaving up last year’s Christmas lights.

While you’re gearing up for the holidays, now is the perfect time to take a look at your taxes and do a few other financial chores. Do a little work now and you won’t suddenly find yourself scrambling to get your affairs in order come tax time. Sound good? We think so too.

Step 1 – Get a Handle on Your Tax Deductions

To make sure you aren’t giving Uncle Sam any more money than absolutely necessary, it’s important to know exactly what tax deductions you can take. For example, if purchase a new home, you can deduct the interest on your mortgage. Have kids who went to a summer day camp or after school care? Make sure to keep those receipts. Under the Child and Dependent Care Credit, you can deduct up to $3,000 for one child ($6,000 for two or more) if the activity allowed you or your spouse to work. (Unfortunately, overnight camps are not eligible.)

Step 2 – Manage Your Debt

Carrying a hefty credit card balance can be costly. You know that large pile of junk mail you haven’t had time to deal with? It could be your money saving goldmine. Sort through the stack for any credit card offers. If you have a decent credit score, you could secure deal for transferring your debt, such as 18 months with 0 percent interest. But, be sure to pay attention to the fees. If they are exorbitant, this will cut into your savings or eliminate it all together.

Step 3 – Block Out Black Friday

Block out Black Friday on your calendar. Remember, Black Friday is the day on which traditionally stores offer all sorts of bargains. It’s the perfect time to pick up Christmas gifts for loved ones and items you need. This year Black Friday is November 27. It’s by far one of the best times to score Christmas gifts and keep your holiday spending to a minimum. If you have a lot of techies in your life, you’ll also want to consider Cyber Monday.

Curious what other tax deductions you qualify for as a homeowner? Contact me today!

Resources:

Tax tips and debt advice to round out the year by Brian J. O’Connor

What is a GFE?

by rbeckner on September 28, 2015 in Home Buying Process, Mortgage 101

A GFE is a Good Faith Estimate. It is a form that estimates what charges and loan terms you can expect if you are approved for that specific loan.

Lenders are required by law to give you a GFE within three businesses days of receiving your loan application. (The GFE must be mailed or hand delivered by the end of the third business day.)

Some of the fees outlined on a GFE are covered by the buyer and some are covered by the seller.

As the name would suggest, the numbers are an estimate. They can fluctuate up to 10 percent in either direction. Because of this potential increase, it’s important you hold on to your GFE. This will allow you to compare the estimated fees against the actual fees.

What Fees Should You Expect on a GFE?

Application Fee: Your application fee is the processing charge you pay when you submit your loan. In some cases this fee is rolled into other fees.

Appraisal Fee: To ensure the home you are purchasing is worth the value of the loan, an independent third party is hired to appraise the home’s value. It is important to note this is not the same as a home inspection.

Credit Report Fee: Some, but not all, lenders will charge you to check your credit history from one or all of the three major national credit bureaus: Equifax, Experian and TransUnion.

Discount and Origination Points: In some cases, discount points can be purchased to lower the interest rate on your loan.

Escrow Account: While your escrow account isn’t a fee, it is an account which holds potential payments such as earnest money, homeowner’s insurance, private mortgage insurance, and property taxes.

Attorney Fees: Legal documents must be prepared and reviewed by a lawyer for your loan to close. In some cases the seller will pay for the attorney’s time. In other cases the buyer will be responsible for covering this fee.

Survey Fee: In order to officially define the property’s boundaries, the property must be surveyed.

How Accurate Are GFE’s typically?

Third-party fees have a tendency to fluctuate because the lender isn’t in control of these. However, the lender’s fees are typically more accurate because they have a better grasp of their own overhead.

Have additional questions about GFEs? Contact me today and I’d be happy to help you out.

5 Affordable Home Improvements that Pack a Punch

by rbeckner on August 19, 2015 in Home Maintenance

Looking to put your home on the market and want to get the best price possible? Or, simply want to give your new abode a little extra something-something? These five home improvement options pack a punch without breaking the bank.

The Kitchen

When you’re considering which room is the best investment, look no further than the kitchen. Of course, you won’t want to do anything too specialized if you’re planning to put your home on the market. (Sorry country music fans. A tiled mural of Tim McGraw just isn’t going to do it for most folks.) But, new kitchen appliances can certainly be a good place to start. So can new kitchen countertops, and a refresh on those old cabinets.

Carpet Swap

Few things make your house feel more dated than old, worn-out carpet. Breathe new life into your home with a welcoming carpet that’s free of grime.

Paint

Painting is like giving your home a face-lift. A few cans combined with a little elbow grease and you have yourself a brand new look. If you’re unsure about color palates, just keep it neutral. This is especially important if you are putting your home on the market. It will allow your home to appeal to a wider variety of prospective buyers.

The Outdoor Living Space

While it’d be nice to have a Fairy Godmother who can waive a few extra square feet of space into your home, none of us live in a Disney movie. Extend your home by creating an outdoor living space you and your family will enjoy. Make it a multi-season spot with the addition of a fire pit or outdoor heater.

Hang a Mirror (or Two)

Another way to make your home feel larger is with mirrors. They visually expand your space. For maximum appeal, be sure to find a unique frame that compliment your existing décor.

US Homebuilders Confidence Surges. What’s This Mean for You?

by rbeckner on July 22, 2015 in Home Buying Process, Mortgage 101

Homebuilders estimate the next six months will bring the highest level of sales they’ve experienced in the last 10 years.

Just last month, U.S. Today reported homebuilders estimate the next six months will bring the highest level of sales they’ve experienced in the last 10 years.

Nationwide, the brutal winter caused nearly all construction sites to shut down and buyers to stay home. However, the sell-tides changed as Mother Nature brought a warm summer. Demand for new homes has skyrocketed, resulting in robust confidence among builders.

Additionally, the previous slowdown in production has lead to a limited supply of available homes for sale. This is effectively driving up prices. “Over the last 12 months, the median sale price for new homes has risen by 8.3 percent to $297,300,” reported Alex Veiga in his article, ‘Homebuilders’ confidence in sales surges in June’.

A drop in unemployment is also attributed to the new home buying surge. “Employers have added more than 3 million jobs as the unemployment rate has steadily dropped to 5.4 percent,” reported Veiga.

While new homes only represent a fraction of the housing market, their scarcity reflects the lack of current homes available for sale. In addition, their production has a huge impact on the economy. If you’re looking to buy new, shopping sooner rather than later might be your best option.

Read Veiga’s full article here.

Considerations

There are some big differences when your looking at buying a new home or a current home that need to be taken into account. In most cases, buying new comes with a bigger price tag. Additionally, if you’re looking for any special touches – such as certain appliances, custom cabinetry or a special floor plan – be ready to pay more.

However, the larger upfront cost can often mean savings down the line. With a new home, it typically takes you longer to incur the hefty maintenance costs associated with older homes. For those who aren’t very handy, this might prove to be a very attractive option.

Your HELOC Loan’s Reaching Amortization. What Now?

by rbeckner on June 4, 2015 in Home Buying Process

When the initial stage of your Home Equity Line of Credit (HELOC) comes to an end, you could be facing a large increase in your monthly payment. Luckily, you have options.

An HELOC has two stages. The initial draw period typically lasts 10 years, though it can stretch for as long as 20 years. During this time, you make a relatively small monthly payment that covers only the interest.

During the second stage, known as the amortization phase, your minimum monthly payment includes both the principal and the interest. This causes a considerable spike in the monthly check you need to cut.

Luckily, you can delay the payment increase by refinancing your HELOC loan with one of these three options:

Refinance Your HELOC

By refinancing your HELOC, you’ll start over with a new HELOC. With this option, you’ll still have to pay off the balance someday. But for the time being, you’ll continue to enjoy the interest-only draw period.

Why would your choose to refinance? Because nearly all HELOCs are variable rate, meaning they fluctuate based on current interest rates. It’s impossible to know what rates will be in a year. If they drop considerably, the overall cost of your loan will also decrease.

Pay Off Your HELOC with a Fixed-Rate Home-Equity Loan

By taking out a home-equity loan with a fixed rate, you’ll be able to pay off your HELOC and enjoy a consistent monthly payment through the lifespan of your loan.

Refinance Your HELOC and First Mortgage into a New Primary Mortgage

Refinancing both your HELOC and first mortgage into a new primary mortgage loan would allow you to take advantage of today’s low fixed-interest rate.

The drawback you’ll face is higher closing costs. In comparison, most HELOCs have significantly lower closing costs than primary mortgages.

Regardless of which option you take to refinance your HELOC, it’s worth noting that qualification standards have become stricter since 2008. In order to protect both borrowers and lenders, a more in-depth analysis is performed of your trustworthiness as a borrower.

Interested in learning more about your options? Contact Rob today to learn more.

Is a Second Home Right for You?

by rbeckner on May 27, 2015 in Home Buying Process

Being a dual-homeowner might sound like a title reserved for the wildly rich. It’s not. Sure, there are those folks who simply want an exotic getaway all their own. But, there are plenty of homeowners who buy a second home for other reasons. Sometimes homeowners have trouble selling their first home and need to move anyways. Some homeowners might be interested in buying a second home so they can fix it up and sell it for a big profit. Others might want to use it as a rental property.

A second home can be a great thing if you’re purchasing it for the right reasons and are prepared financially. However, it can also put you in a world of financial hurt if you’re not. When you’re considering taking on a second mortgage, consider these two major factors.

You need enough money.

While you don’t need to be part of the 1% to own a second home, you do need to have solid financial footing to qualify for a second mortgage. If you’re just “getting by,” a bank isn’t going to consider you a good risk.

You can’t have too much debt.

A second mortgage is more debt. When you apply for your second loan, your lender is going to take into account the debt-to-income ratio as they did with your first. In most cases lenders want your debt – this includes mortgage payments, credit card bills, car loans, and student loans – to not exceed 42 percent of your income.

The mortgage payment on your second loan will most likely be higher than it would be if you just had one home. Why? For the simple fact that you typically won’t receive as low an interest rate on your second mortgage because you are considered a riskier borrower.

Curious if you’re ready to take on a second home? Contact Rob today!