loan

15 vs 30

Finding the mortgage that is best for you, best for your family, and best for your unique situation can take a little time (and a little research). So we decided to get down to the basics on the differences between short-term and long-term loan options.

If you have any experience in the world of home-buying and mortgages, you have, most likely, heard the terms 15-year fixed mortgage and 30-year fixed mortgage. These are the two standard types of fixed mortgages available.

Other than the duration of the payment period, are there many other differences? Well, yes! And the biggest one is whether or not you are in a financial situation to take on a shorter term loan.

To break it down- a 15-year mortgage cuts the repayment period in half, making your monthly mortgage payments higher.

 

Things to consider

There are two different frames of thought on this topic. The first is if you can realistically afford the higher mortgage payment each month. Now, if you can afford it and still have some disposable income remaining for other bills and emergency situations, repaying your loan over a shorter period of time may be ideal for you. Now, the other frame of thought is simply the amount of money you can save with a shorter term mortgage.

Over the span of 15 years, versus 30, you will save significantly on interest alone (usually 40 to 50% of the loan balance).

Is it too late to switch?

Regardless of the term you originally settled upon for your mortgage, there is a possibility of changing it, if the time is right. You are able to switch over to a shorter repayment period, but it definitely one that you need to make carefully.

While it is much simpler to switch to a lower repayment period, if things begin to get difficult, you are not simply able to fall back on your original 30-year mortgage. Rather, you will have to completely refinance the loan in order to do so. And refinancing, as we discussed in one of our previous blogs, comes with some additional costs of its own.

Getting down to the brass tax

Realistically, this is something to consider and to keep in mind as you begin your home-buying journey. And, honestly, it is a great idea to talk it over- with your mortgage lender, with your significant other, with your friends- before you are even ready to take the plunge.

Having a comprehensive understanding of mortgages and your options before getting pre-approved for a loan is one of the best pieces of advice we can give you. The more you know, the more you have discussed your options, and the better you understand the entire process will leave you feeling better equipped to move forward with your decision to purchase a home.

We do pride ourselves on providing excellent customer service, as well as making it our goal to ensure your entire mortgage process is as quick and as easy as possible. So if you have questions or need someone to talk loan logistics with- our experienced loan officers are available.

While we may have said it before, we are going to say it again, making a plan that is 100% right for your personal situation is the best first step you can take after beginning to educate yourself on the options available to you.

This is especially true when it comes to solidifying the length of your repayment period. Just because it seems ideal in the future, it may not be realistic for you to take on a 15-year mortgage at this point in your life. That is why it is great to keep in mind- there is always the opportunity and possibility of making adjustments to the loan (through refinancing and other tools) later on in the future.

 

Total Home Lending

 

 

Natasha Mason

15 vs 302020-09-28T15:14:20+00:00

Buying After Bankruptcy

When the economy fell just over a decade ago, many of American’s lost their careers and their homes. And since then they have been struggling to bring themselves back to where they came from.

If you fall among the percentage of American’s who declared bankruptcy during this period in time, you are not alone. But you should definitely not think that it means you can no longer buy a house.

 

Do not let bankruptcy be the end of your home-buying journey.

Generally speaking, foreclosure leads to bankruptcy. Foreclosure means deficiency (or lacking). So, let’s say you owe $150,000 on your home still and in the foreclosure or sheriff sale, it is sold for $50,000. That means, realistically, you still owe $100,000 on the home.

Now, generally speaking, this final amount is unrealistic for an individual or a family to pay. So declaring bankruptcy to clear their name of the foreclosure and the deficiency.

 

While this may seem like the end of the line, it most definitely is not. First and foremost, there is a waiting period between declaring bankruptcy and applying for another mortgage to purchase a new home.

Here are the waiting periods for the four major loans available:

FHA Loans 2 years

*note: this 2 year waiting period is for Chapter 7 FHA Mortgage. You can actually be paying on a Chapter 13 Mortgage and still be approved.

VA Home Loans 2 years

Conventional Mortgages 4 years

USDA Home Loans 3 years

Once you have surpassed this time frame, you can then begin to entertain the idea of applying for a new mortgage. There are always exceptions to every “rule,” and this is the standard across the board. But at times, there are some circumstances where you can qualify for additional loans before this time period is up.

Now, these guidelines are when your foreclosure is tied up in your declaration of bankruptcy. The foreclosure waiting period for a conventional loan is seven years. But, depending on the period of time between the foreclosure and your declaration of bankruptcy (either before or after), you may qualify for a reduction in the waiting period.

 

Foreclosure then bankruptcy

When your house is foreclosed upon before you declare bankruptcy, things are much more simple. The waiting period begins at the date of the bankruptcy discharge date. For example, if your home was foreclosed in January 2005, filed for bankruptcy in October 2005, and the bankruptcy was discharged in December 2005- the waiting period begins in December 2005. Based on the standards for the conventional mortgage waiting period, you would be eligible for another mortgage in December 2009.

Bankruptcy then foreclosure

Sometimes the roles are reversed. Whether intentional or not, there are times where the bankruptcy discharge date is prior to the actual foreclosure date. When that happens, as long as your foreclosure is tied to your bankruptcy, your waiting period will still fall within the conventional waiting periods listed above.

This is slightly more complicated, but definitely still understandable in layman’s terms. It varies from loan to loan what the waiting period or leniency will be.

For more information on the exact waiting periods for your unique situation, please consult a mortgage consultant. Since each situation is different, it is important to understand exactly where you stand.

 

 

Total Home Lending

 

 

Natasha Mason

Buying After Bankruptcy2020-09-28T15:14:20+00:00

The Reverse Mortgage

If you are considering a reverse mortgage, there are a few key things to consider before taking the plunge. Like any financial undertaking, it is important to ponder these decisions.

First, we should start with what a reverse mortgage actually is. Essentially, it is a type of home loan that allows you to turn the equity you have on your home into cash. So, all of the equity you have built over the years from paying on your mortgage can become accessible funds for you to use. Typically referred to as a Home Equity Conversion Mortgage (HECM), these loans do not need to be paid back until you move out of the house. And generally speaking, with a reverse mortgage, you do not have to make a monthly mortgage payment.

And for a bit of history- the first FHA-insured reverse mortgage was issued back in the late 1980’s. Generally speaking, these types of loans allow older, long-term home owners to access part of their home equity without ultimately having to move.

Now, who actually benefits from a reverse mortgage? People who do not plan to move, people who can afford the cost of maintaining their home, and people who want to access the equity on their home (whether it is to supplement their income or simply to have for one of those “rainy days”).

The longer that you have been living in your home and the older you are, typically your mortgage balance is much smaller and you have built up more equity in your home. So, life expectancy does play a factor in your reverse mortgage and how much money you will receive.

 

Here’s an example: Bill and Sue are both 80 years old. They do not have any plans to move and are looking for a way to supplement their monthly income. After meeting with a loan officer, they get their house appraised at $300,000. With only $35,000 left to pay on their mortgage, the available reverse loan amount available to them is about $195,000. After settlement costs, their remaining mortgage balance, and other taxes & fees, there is still a sizable amount of money left to supplement their monthly income. Even to take a small vacation.

While a reverse mortgage sounds like a great idea, they are most beneficial when you have been living in the same home for quite some time (and have been regularly paying on your home mortgage) and if you are planning on staying in the same home.

Wondering if you are in a good situation for a reverse mortgage or simply want to discuss all of your options, speak with one of our loan officers. We are happy to talk through your unique situation and find out what options are best for you.

 

 

Total Home Lending

 

Natasha Mason

The Reverse Mortgage2020-09-28T15:14:20+00:00

First Step: getting pre-approved for a loan

If you are actively searching for a home, there is one thing that absolutely must be on the top of your “to do” list.

Pre-approval.

It is a (conditional) written commitment from your mortgage lender that states the loan amount you are approved for. Pre-approval should not be confused with a pre-qualification on a loan, however. Pre-qualification is a preliminary step that does not require as much financial information and, because of that, is not a sure thing. In order to get pre-approved for a loan, you will need to provide all of the information necessary for your lender to conduct an extensive review of your financial background.

Getting approved for a loan is something that, of course, needs to happen regardless. So taking the time to get pre-approved with your lender will make your home buying process significantly easier.

First, once you have been pre-approved for a certain amount it allows you to start shopping within your budget. If you are approved for a $100,000 loan and are able to contribute a $40,000 down payment, you know exactly what price range you should be looking in. Without the pre-approval, you may spend a significant amount of time and energy looking at homes that you will never be able to buy.

Besides making the entire home shopping experience easier, there are many sellers who will only consider buyers who have been pre-approved. And the sellers who do not require a pre-approval letter? Well, there are many who will take your offer more seriously because you have been pre-approved. While that is not a guarantee, having it will definitely put you ahead of the game.

Key

As if that was not quite enough, having a pre-approval letter can even save you some money. Sellers may be more willing to lower the asking price, cover closing costs or even make other allowances.

Now, how do you get started? Start talking with your mortgage lender. The sooner you have been pre-approved, the sooner you can start a home buying experience with ease (and potential savings)!

First Step: getting pre-approved for a loan2020-09-28T15:14:21+00:00

FHA Lowers Insurance Premium: what that means for your loan

We shared the news a bit earlier this week—The Federal Housing Administration (FHA) is set to cut their insurance premium.

The FHA is an organization that does not actually provide loans, but provides insurance that protects lenders. This is to ensure lenders (ie- a mortgage company) has some measure of protection if a borrower runs into any complications. That could be anything from missing loan payments to defaulting on their loan.

There are a fair amount of requirements that Congress has established for the FHA. One of those is that the FHA has enough reserves to cover losses over a projected 30 years.

Now, over the past four years, the FHA has seen consistent and consecutive growth. Because of this, they have made the decision to share that growth with American families—in the form of savings.

The primary objective is to allow for greater credit access across the country. Lower insurance premiums allows for individuals (and families) significant savings.

All of this information was released this past Monday. And, on Monday, it was stated that borrowers who close on an FHA loan after January 27th of this year will pay 25 basis points less.

piggy-bank-houses

So what does this mean for you?

If you have been house hunting or even seeking out your various loan options, the home of your dreams may be closer than you think. With lower FHA insurance premiums, borrowers (like yourself) will be spending less each month, meaning you can afford a monthly payment you may not have been able to before.

To see what, exactly, this may look like for you, we recommend you talk to one of our loan officers directly. They can discuss your unique loan options, as well as the savings you may have in store with this lower FHA insurance premium.

lending6

 

By Natasha Mason

FHA Lowers Insurance Premium: what that means for your loan2020-09-28T15:14:21+00:00

Refinancing: is it right for you?

Refinancing. That’s a term you regularly hear thrown around in the mortgage industry.

It is, in fact, exactly what it sounds like- replacing your current mortgage with a new one. While there are a variety of reasons that lead people to refinance, these are some of the most common:

The first is to lower your interest rate. If you took your mortgage during a time where interest rates were slightly higher, choosing to refinance could, ultimately, save you thousands of dollars. This type of refinance is typically referred to as rate-and-term refinancing. You refinance the remaining balance on your mortgage for a lower interest rate and a term (or number of years it will take to repay) you can afford.

The second reason to refinance is to convert an adjustable rate loan to a fixed rate loan. Just like it sounds, an adjustable rate loan has an interest rate that fluctuates based on market conditions. So, when interest rates are low, converting your loan to a fixed rate loan secures that low interest rate for the remaining duration of your mortgage.

The third is a way to “free up” cash. Typically referred to as cash-out refinancing, this entails taking out a new loan for a greater amount than your previous balance. You can then take the difference in cash or even use it to pay off other forms of debt.

Other reasons to refinance are to eliminate FHA loan insurance or even to settle a divorce.

The potential benefits seem pretty obvious. Lower interest rates means less money paid over the life of the loan. It even means you could lower your monthly mortgage payments. Having additional cash on hand. All of these benefits are compelling.

houses-on-scrabble-pieces

To refinance or not to refinance

Refinancing, however, is not for everyone. There are a variety of other factors that contribute to the entire refinancing process. The length of your loan, the amount of money you owe, even the amount of time you plan on staying in that particular home.

Both the length of your loan and the amount of money you owe can directly affect the additional costs to refinance. These “hidden costs” are important to factor into your decision to refinance (or to keep your current loan). Cost of a house appraisal, loan origination fee, plus a variety of other costs for filing documents, purchasing title insurance and even fees for your new mortgage application.

 

Time to break out your calculator

Before you take the plunge, take a minute to crunch the numbers. Is refinancing something you can afford, at this time? And, will you ultimately save money over the duration of your loan?

The goal is to not only “break even,” but to do so in a time frame that is affordable and beneficial to you. Essentially, how long it will take for the refinance to pay for itself. For example, you have $2,000 in costs to refinance, but you are saving $100 in your monthly payments. In that situation, you will “break even” after 20 months of payments.

 

What now?

Are you considering refinancing? Take a look at your current mortgage and financial situation. You can even discuss the benefits of refinancing with one of our loan officers. In doing so, you can determine whether or not refinancing is the smartest move for you (at least for now).

lending6

 

By Natasha Mason

Refinancing: is it right for you?2020-09-28T15:14:21+00:00

So, You’re A 1st Time Home Buyer

Top Tips for First Time Home Buyers

You’re on the hunt for your first home. It is an exciting milestone in your life. Not to mention one of the largest financial decisions you may ever make. Don’t fall into the “rookie” home-buyer category. Our advice? The more you know about the process, the easier (and less daunting) it is going to be.

We are here to help. These are some of our “top tips” for you to remember when buying a home.

 

The (sometimes) forgotten credit score

The credit score. Your mortgage company, of course, will pull that score, but it is still a good number know before starting the home-buying process. If there are any mistakes or issues with your score, it is easier to remedy those before you have found that perfect home. Additionally, knowing your score in advance will allow you the opportunity to repair any minor blemishes. One more good thing to know- your mortgage banker (and us!) can sometimes provide tips on how to deal with those flaws.

 

Pre-approval letters are an absolute must

So, what is a pre-approval letter? It’s a letter from your mortgage lender stating what loan amount the borrower (you) is qualified for. So, yes, stating how large of a loan you are able to take out.

Now, why they are important? First and foremost, it allows you to look for homes that are in your price-range. It will save you a lot of time (and potentially a lot of stress) knowing what you can afford and searching accordingly. Then, when you do find a home you want to put an offer on, having that pre-approval letter puts you ahead of the game. While not a guarantee, sellers may take your offer more seriously since you have already been pre-approved for a loan. Not to mention, they may be more willing to lower the asking price, cover closing costs or make other allowances.

 

Down payments made easy

Whether you are a first time home-buyer or are looking to buy again, you have probably been thinking about that “down payment.” The larger down payment you make, the smaller mortgage you have. And, subsequently, the less you have to pay back over the course of the loan.

Is there such thing as “too big” of a down payment? Actually, yes! A 20% down payment is typically viewed as “ideal” by lenders. When you put 20% down, you don’t have to pay private mortgage insurance (PMI) which provides insurance to your lender, in the chance you default on your mortgage. Additionally, it can qualify you for a lower interest rate than someone who makes a smaller down payment.

Realistically, however, 20% is a significant sum of money, especially depending on the house you are looking at. A lower down payment does allow you to become a homeowner faster because you won’t have to save up as much money before buying.

Whether you have the 20% readily available or not, there is one important fact to remember- making a down payment is never a bad investment. Putting money into your home is lower risk than, let’s say, investing it in the stock market. It is a good idea for any homebuyer because it ultimately reduces your risk and allows for immediate home equity. If you have questions or wonder what size down payment is best for you, we recommend discussing your particular situation with your lender. They can provide insight into your unique situation.

edited-piggy-bank

Life happens- be prepared!

You’ve found the house. You’ve been approved for a loan. You’re good to go, right? One thing we always recommend is reserving cash for emergencies. Because, life happens! The last thing you want is to move into your new home and find yourself in dire need of money (and fast!). So, plan accordingly when making your down payment and considering your loan options. It’s better to be prepared!

 

Consider the resale

It’s your first home, you’re excited! You may not be planning to sell in the foreseeable future, but it is important to think about selling your home. If (or when) the time to sell your home comes, will it be easy or difficult to do so? Thinking about the preferences of the “average” homebuyer and keeping those preferences in mind while finding your own home will make reselling the home that much easier.

One huge factor is the school district. Maybe you don’t have children in your home right now, so you’re not thinking about schools. But finding a home in a desirable school district, or even one with a school of choice nearby, could be an added benefit for the resale of your home.

 

Full disclosure and home inspections

While most states do require sellers to disclose any potential problems with the home or the property, they may not always be aware of existing structural issues. Although most purchase agreements are dependent upon a home inspection, you should 100% demand one. Spending the money to hire a licensed professional to inspect your potential new home is the only way to guarantee there are no major structural issues with the home.

What will a comprehensive inspection include? Heating and cooling systems, plumbing and electrical systems, structural integrity of walls, floors, ceilings, foundation and roof. The condition of gutters, insulation, ventilation, major appliances, garage… Finding an issue with any of these things can be extremely costly, so discovering them before signing any paperwork is a huge money saver.

You should also be present for the inspection. Ask questions as you go through the house. Sure, houses need repairs, but there may be a chance the problems with the house will be so expensive it is no longer a home you are interested in. It may seem like a lot of money now to pay for a home inspection, but you could ultimately be saving yourself thousands in the future if the house does have major issues.

 

The hidden costs

Buying a home can feel like a whirlwind. But while you are thinking about a down payment, an affordable monthly mortgage payment and even realator costs, there are a few “hidden” costs that many first time home buyers forget about. Homeowners insurance, property taxes, appraisal fees, moving costs, escrow costs, tax service fee, credit report fee… Just to name a few.

Ask questions. Make sure you are aware of any and all fees, taxes and additional costs you may need to pay before the “buying” process is complete. And, finally, be prepared for just about anything. When it comes to owning your own home, there’s nothing wrong with being a little “over-prepared.”

lending6

 

By Natasha Mason

So, You’re A 1st Time Home Buyer2020-09-28T15:14:21+00:00
Go to Top