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Reduce Refinancing Costs

Reduce Refinancing Costs

8/29/2018

There is much more than a lower rate and payment to determine whether to refinance a mortgage.  Lenders try to make refinancing as attractive as possible by rolling the closing costs into the new mortgage so there isn't any out of pocket cash required.

The closing costs associated with a new loan could add several thousand dollars to your mortgage balance.  The following suggestions may help you to reduce the expense to refinance.

·         Tell the lender up-front that you want to have the loan quoted with minimal closing costs.

·         Check with your existing lender to see if the rate and closing costs might be cheaper. 

·         Shop around with other lenders and compare rate and closing costs.

·         If you're refinancing an FHA or VA loan, consider the streamline refinance.

·         Credit unions may have lower closing costs because they are generally loaning deposits and their cost of funds is less.

·         Reducing the loan-to-value so mortgage insurance is not required will reduce expenses and lower the payment.

·         Ask if the lender can use an AVM, automated valuation model, instead of an appraisal.

·         You may not need a new survey if no changes have been made.

·         There may be a discount on the mortgagee's title policy available on a refinance.

·         Points on refinancing, unlike a purchase, are ratably deductible over the life of the loan ($3,000 in points on a 30-year loan would result in a $100 tax deduction each year.)

·         Consider a 15-year loan.  If you can afford the higher payments, you can expect a lower interest rate than a 30-year loan and obviously, it will build equity faster and pay off in half the time.

A lender must provide you a list of the fees involved with making the loan within 3 days of making a loan application in the form of a Loan Estimate and a Closing Disclosure Form.  Every dollar counts, and they belong to you.

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    Consumer Protection from Irresponsible Mortgage Practices

    Consumer Protection from Irresponsible Mortgage Practices

     

    Congress enacted the Dodd-Frank Act in 2010 in response to the mortgage crisis that led to America's Great Recession.  The two parts that apply closely to homebuyers are the Ability-to-Repay (ATR) and Qualified Mortgages (QM).

    A Qualified Mortgage is a category of loans that have certain, more stable features that help make it more likely that borrowers will be able to afford their loan.  These loans do not allow certain risky features like an interest-only period when no money is applied to reduce the principal; negative amortization that would allow the mortgage balance to increase; and, "balloon payments" at the end of the loan that are larger than the normal periodic payments.

    A debt-to-income ratio of less than or equal to 43% has been established to provide a limit on how much of a borrower's income can go toward total debt including the mortgage and all other monthly debt payments.  However, the Consumer Finance Protection Bureau believes these loans should be evaluated on a case-by-case basis and in some cases, can exceed 43%.

    There is a limit for up-front points and fees the lender can charge.

    By showing that the lender made an effort to be certain that the borrower has the ability to repay the loan, the lender in turn, receives certain legal protections.  Underwriting factors considered by the lender include:

    1. current or reasonably expected income or assets 
    2. current employment status
    3. the monthly payment on the covered transaction 
    4. the monthly payment on any simultaneous loan 
    5. the monthly payment for mortgage-related obligations
    6. current debt obligations, alimony, and child support
    7. the monthly debt-to-income ratio or residual income
    8. credit history

    For more information, see the Consumer Financial Protection Bureau fact sheet ... protecting consumers from irresponsible mortgage lending.

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      What to Avoid Before Closing Your New Home

      What to Avoid Before Closing Your New Home

      Published on 8/13/2018 & modified on 8/17/2018

      It's understandable; you're excited; you've found the right home, we have helped you negotiate a contract, you made a loan application and the house passed inspections.  Closing is not that far away, and you are making plans to move and put personal touches on your new home.  It is so easy to get caught up in the dreaming and planning for after the closing!  

      Even if you have an initial approval on your mortgage, little things can derail the process which isn't over until the papers are signed at settlement and funds distributed to the seller.  The lender will usually do verifications on your credit score and your employment status just prior to the closing to determine if there have been any material changes to the borrower's credit or income that might disqualify the borrower.  Lenders do not want to see changes in your financial situation, even small changes that may seem insignificant to you.  

      Most lending and real estate professionals recommend:

      • Do not make any new major purchases that could affect your debt-to-income ratio
      • Do not buy things for your new home until after you close
      • Do not apply, co-sign or add any new credit (even ORDERING that new furniture or appliances can cause a change in your credit)
      • Do not close or consolidate credit card accounts without advice from your lender
      • Do not quit your job or change jobs or even accept a promotion 
      • Do not change banks
      • Do not talk to the seller without your agent 

      Don't do anything that would affect your credit or income while you're waiting to sign the final papers at settlement.  That new furniture won't do any good if you can't put it into the house you are trying to purchase.  

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        Mortgage Free

        Mortgage Free

         

        It may be an all too common belief that a person will have a house payment and a car payment for the rest of their lives.  However, with a plan and some determination, you can be mortgage free.

        Planning for retirement is obviously important and many times, an activity plagued by procrastination.  Some homeowners' goal is to have their home paid for by retirement, so they won't have payments.  It makes sense to eliminate a sizable recurring expense before they quit working.

        By making regular principal contributions in addition to the payments, the debt can be eliminated by the target retirement date.

        Assume a homeowner refinanced their $300,000 mortgage at 4% last year for 30 years with the first payment due on May 1, 2017.  With normal amortization, the home will be paid for at the end of the term. 

        Additional principal contributions with each payment will save interest, build equity and of course, accelerate the payoff on the home.  An extra $250.00 a month would pay off the mortgage 7.5 years sooner.  $786.81 extra with each payment would pay off the loan in 15 years.

        Having a home paid for at retirement has the apparent benefit of no house payment.  A debt-free home is also a substantial asset that could be borrowed against or sold if unanticipated events should occur. 

        To make some projections to pay off your own mortgage, use this use the Equity Accelerator calculator.

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          How to Clean Gutters

          How to Clean Gutters

           

          The gutters and downspouts on your home are intended to channel rainwater away from your home and its foundation.  When they're blocked and not functioning properly they can lead to the gutters coming loose, wood rot and mildew, staining of painted surfaces, and even worse, foundation issues or water penetration into the interior of the home.

          Most experts recommend cleaning the gutters at least once a year.  More often might be necessary depending on the proximity of leaves and other debris that could collect.

          If this is a task that you feel comfortable about tackling yourself, there are few things to consider.  If the debris is dry, it will be easier to clean the gutters.  Safety is important, and precautions should be taken such as using a sturdy ladder and possibly, having someone hold it while you're on the ladder.

          Other useful tools will be a five-gallon plastic bucket to hook on the ladder to hold the debris; work gloves to protect your hands from sharp edges of the gutters; a trowel or scoop and a garden hose with a nozzle.

          ·         Start by placing the ladder near a downspout for the section of gutter to be cleaned.

          ·         Remove large debris and put it into the empty bucket. Work away from the downspout toward the other end.

          ·         When you're at the end of the gutter, using the water hose and nozzle, spray out the gutter so it will drain to the downspout.

          ·         If the water doesn't drain easily, the downspout could be blocked.  Accessing the spout from the bottom with either the hose with nozzle or a plumber's snake, try to dislodge the blockage.

          ·         Reattach or tighten any pieces that were removed or loosened while working on the downspout.

          ·         Flush the gutters a final time, working from the opposite end, as before, toward the downspout.

          There are specialized tools at the home improvement stores like Lowes and Home Depot that can make this job easier.  Check out their websites and search for "gutter cleaning".

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            Quick Plumbing Inspection

            Quick Plumbing Inspection

            9/12/2018

            No one wants to waste water or money.  For that reason, take a few minutes every other month to do the following inspections:

            1. Check to see if cutoff valves on sinks and toilets are working properly. 

              Many times, builders will put individual cutoffs on supply lines to sinks and toilets.  It is reasonable to expect them to work but after some time, they can corrode which prevents opening and closing.  It is a good idea to test them occasionally before you need them in an emergency.
               
            2.  Fill each sink with a few inches of water to see if they drain in what you feel is a normal time.

              A slow-draining sink can be an indication of a clog that builds up around the insides of the pipe.  Common causes are food, grease, hair and soap scum.  Plunging can take care of some slow-running sinks.  After partially filling the sink with water, seal the plunger over the drain and pump it up and down a few times.
               
            3.   Inspect each toilet to see if they are leaking water from the tank into the bowl.

              Toilets that continue to run after being flushed can use a large amount of water in a month's time.  Generally, the problem comes from a flapper that doesn't seat properly.  Sometimes, the chain is keeping it from closing properly or the flapper itself may need to be replaced.

              Another issue could be that the flush valve needs to be replaced.  These can be purchased at Lowe's or Home Depot for about $20.00 and are relatively easy to change out.  There are lots of instructional videos on the internet and it can save money if you give it a try.

            If you need a recommendation for a good plumber to take care of something you discover, please feel free to call me at (941) 518-4432.

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              Consumer Protection from Irresponsible Mortgage Practices

              Consumer Protection from Irresponsible Mortgage Practices

               

              Congress enacted the Dodd-Frank Act in 2010 in response to the mortgage crisis that led to America's Great Recession.  The two parts that apply closely to homebuyers are the Ability-to-Repay (ATR) and Qualified Mortgages (QM).

              A Qualified Mortgage is a category of loans that have certain, more stable features that help make it more likely that borrowers will be able to afford their loan.  These loans do not allow certain risky features like an interest-only period when no money is applied to reduce the principal; negative amortization that would allow the mortgage balance to increase; and, "balloon payments" at the end of the loan that are larger than the normal periodic payments.

              A debt-to-income ratio of less than or equal to 43% has been established to provide a limit on how much of a borrower's income can go toward total debt including the mortgage and all other monthly debt payments.  However, the Consumer Finance Protection Bureau believes these loans should be evaluated on a case-by-case basis and in some cases, can exceed 43%.

              There is a limit for up-front points and fees the lender can charge.

              By showing that the lender made an effort to be certain that the borrower has the ability to repay the loan, the lender in turn, receives certain legal protections.  Underwriting factors considered by the lender include:

              1. current or reasonably expected income or assets 
              2. current employment status
              3. the monthly payment on the covered transaction 
              4. the monthly payment on any simultaneous loan 
              5. the monthly payment for mortgage-related obligations
              6. current debt obligations, alimony, and child support
              7. the monthly debt-to-income ratio or residual income
              8. credit history

              For more information, see the Consumer Financial Protection Bureau fact sheet ... protecting consumers from irresponsible mortgage lending.

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                Rising Rates Affect the Cost Too

                Rising Rates Affect the Cost Too

                 

                Mortgage rates have risen 0.5% in 2018 on 30-year and 15-year fixed rate mortgages and experts expect them to continue to increase. Buyers paying attention to the market understand the relationship that inventory has on pricing; when the supply is low, the price usually goes up. Rising interest rates can affect the cost of homes also.

                When interest rates go up, fewer people can afford homes. Lower numbers of buyers can affect the demand, which could cause prices of homes to come down. The question is how much do the interest rates have to go up to affect demand?

                As the rates gradually go up, the affect may not be noticeable at all except for the fact that the payments for the buyer have increased.

                A 1/2% change in interest is approximately equal to a 5% change in price. A $300,000 mortgage at 4.5% for a 30-year term will have a $1,520.06 principal and interest payment. If the mortgage rate goes up 0.5%, it would affect the payment the same as if the price had gone up 5%. The difference in payments for the full term of the loan would be $32,547.

                There are some things beyond buyers' control, but indecision isn't one of them. If they haven't found the "right" home yet, it is understandable. However, when that home does present itself, the buyer needs to be ready to make a decision. If they are preapproved and have done their due diligence in the market, they should be able to contract before significant changes occur in the mortgage rates.

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