Josh's Mortgage Report

If you have been through the process of buying a home or even a car you know the importance of your credit score and how it can impact your purchases. You probably know the most common things that can affect your credit, but there are some other things that may surprise you that you should be aware of.

For instance, it is widely known that things like late payments or high credit balances will hurt your credit score but did you know that closing a credit account could affect your credit as well? If you close an account you will lose all of the positive credit history that you have built with that account. The length of credit history accounts for 15% of your credit score so build your credit wisely.

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If you are interested in saving a significant amount of money each month you should consider refinancing your mortgage through the Home Affordable Refinance Program (HARP). Over three million homeowners have already taken advantage of this government program that gives homeowners the opportunity to refinance even with little or no home equity.

Even though HARP has been around since 2009 there are still nearly 700,000 people who may be eligible for HARP savings. In the Chicago area alone there are over 42,000 loans out there that could reap the benefits of this refinance program.

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It’s important to understand that there is not an exact time frame until your holding the keys to your new home. The home buying process is different for everyone but generally once you have a sales contract, you can expect to close anywhere from 30-45 days.

The first step in the home buying process is to analyze your finances to determine your budget. You will work with your mortgage lender on getting pre-approved for a mortgage which will let you know the loan amount you qualify for based on your credit and income. This is the first step towards financing your home and you can get preapproved within 24 hours.

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When you are in the process of obtaining a mortgage loan you will not only need to provide a lender with a down payment on the home, but also a variety of other fees called closing costs. Closing costs are generally paid by the homebuyer at the time of closing, but sometimes can be rolled into the loan amount, and other times a portion of the closing costs can be paid by the seller.

Closing costs vary depending on certain factors such as the loan amount, the type of loan, length of the loan, etc. You can expect to pay anywhere from 2-5% of the purchase price of the home in closing costs, which covers the expenses of both the lender as well as third party services such as inspections and appraisals. When you apply for a loan your lender will provide you with a Good Faith Estimate (GFE) which will outline all the costs that you will be charged.

Some of the items you may see on your GFE include:

Myth 1: The Interest Rate Determines the True Cost of the Mortgage
The annual percentage rate (APR) is what is used to determine the true cost of the mortgage. The APR includes the interest rates, points, mortgage insurance, and all other fees. This figure will give you a better idea of the total cost over the life of the loan.

Myth 2: Mortgage Rates Change Only Once Per Day
Mortgage rates change frequently often several times per day based on market activity. Work with your loan officer closely to determine the best strategy for locking in a good rate.

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Housing and the economy is gaining momentum after a dismal winter. Sales of existing homes are at their fastest pace in six months and sales of new homes are at a six year high. U.S. consumer confidence is also at a six year high with more households feeling optimistic about the labor market.

Home prices continued to rise in April although at a slower pace, 10.8% annual growth vs 12.4% in March. While slower price appreciation isn’t the best news for current homeowners, it is helping to boost purchasing power for many homebuyers.

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If you have been through the mortgage process lately you already know that you are required to provide a great deal of paperwork to your lender. This is required by law by all mortgage lenders which is used to determine your ability to repay the mortgage loan. Three major areas of your finances that lenders will be reviewing include credit, capacity, and collateral.

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Points, or discount points, in the mortgage industry are an upfront fee that you pay to lower your mortgage interest rate. One point equals one percent of the loan amount, so one point of a 200,000 loan would be $2,000.

For each point you pay, your rate will lower by 0.25%. A quarter point may not sound like much but it could save you hundreds of dollars in interest annually. Determining if you should pay down your interest rate with discount points will be based on your personal finances and whether you can afford to make an upfront payment, as well as how long you plan to stay in the home.

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When considering a refinance you want to make sure it’s the right move by comparing interest rates, weighing the cost, and analyzing your finances to determine what you can afford.

What is Your Current Rate?
If you are looking to refinance to save money on interest, compare your current rate to today’s rate. Utilize the mortgage calculator on my website to determine your interest savings.

How Long Do You Plan on Staying?
It is important to know how long you plan to stay in your home if you are considering a refinance because refinances come at a cost. You want to make sure you will break even before you sell the home.

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Whether you have always dreamed of buying a fixer upper or it’s the only way you can afford the size home in the neighborhood you want, there are many things to take into consideration before the price tag makes the decision for you. Analyze the situation carefully as fixer-uppers can often end up being a money pit if not thoroughly planned.

Assess the Home
First off you want to arrange a home inspection which will help you identify any problems in the home that are not visible to the average person. Unless you’re a contractor yourself or have a large budget, you typically are going to want to purchase a fixer upper that primarily only needs cosmetic work as major projects such as foundation issues, plumbing, or electrical will require hiring professionals.

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