Josh's Mortgage Report

With the number of online tools available to find homes these days many people may wonder “why can’t I navigate the home buying process myself?” The truth is you could do the work yourself, but you could also end up making mistakes that may cost you a whole lot of money. Purchasing a home is one of the largest financial decisions you can make so it is important to work with professionals to avoid any rookie mistakes.

First off a real estate agent will save you an enormous amount of time with your home search as they have a wealth of knowledge about the home buying process. Your real estate agent can help you find a home by pointing you in new areas you wouldn’t have otherwise considered because of their experiences and will be able to give you more information about local areas.

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Traditionally homebuyers were asked to put twenty percent down in order to purchase a home. Nowadays there are many more options for homebuyers that require low down payments, anywhere from 5% down all the way down to $0 down. The drawback of not having a twenty percent down payment is the required mortgage insurance that comes with loans with less than 20% down.

Fannie Mae

Fannie Mae offers a 5% down mortgage that does not require upfront mortgage insurance costs and offers low private mortgage insurance costs. Another Fannie Mae program is HomePath Mortgage which gives homebuyers an opportunity to purchase a Fannie Mae owned property for as little as 5% down with no mortgage insurance.

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If you are planning on purchasing a home this spring you will need a mortgage. Before you begin house hunting it is recommended that you get pre-approved for a loan so that you know how much you can afford. Remember, pre-approved and pre-qualified are not the same.

A pre-qualification is good to get a ballpark figure but if you’re serious about becoming a homeowner you will want a more accurate number in mind to set your budget. The main difference between pre-qualification and pre-approval comes down to credit verification. Your credit score is a big factor when it comes to qualifying for a mortgage loan and with a pre-approval your credit history will be reviewed.

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While a 10 year mortgage loan is not for everyone it does have some great benefits. If you are currently shopping for a home loan or looking to refinance don’t overlook your other financing options besides the traditional 30 year fixed rate mortgage.

One of the greatest benefits of a shorter term mortgage, such as the 10 year fixed, is that the interest rate is much lower than longer term loans such as the 30 year fixed. Mortgage interest rates on shorter term loans can be 1-1.5% lower than 30 year fixed rate loans. This results in thousands of dollars saved in interest over the life of the loan.

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Tax season is in full swing with the April 15th deadline fast approaching. Now is a good time to gather your financial information to make sure you have everything organized when it comes time to pay your taxes within the coming month.  

If you've purchased a home last year or done a mortgage refinance you will receive a Form 1098, which includes the amount of mortgage interest that you paid during the year. In most cases that amount is tax-deductible. You'll need to file an itemized Schedule A, but the savings will be worth it. Also, every dollar used to finance home improvement projects up to $100,000 reduces your taxable income dollar for dollar. 

Your home is one of the largest tax write-offs you will have and will increase your refund (or decrease what you owe). So if you bought a home in 2013, make sure you receive all of the tax deductions and tax credits to which you’re entitled for the year. Here are some tax deductions for home mortgage interest and other home tax deductions: 

·         Property taxes and real estate taxes 

·         Mortgage interest paid

·         Points you paid when you bought the house

·         The interest on up to $100,000 borrowed on a home-equity loan or home-equity line of credit

·         The premiums you paid for private mortgage insurance (for mortgages issued after 2007)

·         Home improvements required for medical care
 

The home inspection is an important part of the home buying process as it will give you a better view on the condition of the home your about to purchase. Ultimately the home inspection is done to protect you from any unexpected problems both inside and outside the home. If issues do come up during the inspection you then have the power to negotiate with the seller to make repairs before closing or deduct the cost of the repairs from the asking price.

Purchasing a home will be one of the largest transactions of your life, with that said you want to make sure you make the right decision. Before you even make an offer on a home you should do your own inspection, making sure there are no obvious deficiencies. Some of the areas you should pay attention to include the foundation, the exterior condition, the roof,  windows and doors, the plumbing, the basement, even the appliances.

If your home inspection does uncover problems there are options for you to fix the damage. Minor issues should not necessarily deter you from buying a home as you can usually work with the seller to resolve them. 

Many homebuyers use gifts from relatives and friends to help fund the down payment for their home purchase. It is very important to make sure the gifts you are receiving are traceable so lenders know where your money is coming from. Part of the mortgage process involves the lender to verify all your financial accounts so a proper paper trail is necessary in order for your loan to be approved.

First you will need to obtain a gift letter that can be provided by your lender that includes the amount of the gift, the property address, the relationship of the gifter to the giftee, and a note that states the gift is not a loan and will not be repaid. After all parties sign the letter, a check should be written out with the exact dollar amount stated in the letter. Note that a photocopy of the check will be required by the lender.

When depositing the check, remember to make the deposit into the account from which your money at closing will be taken from. Also, only deposit the gift funds and do not make any other transaction, don’t forget your receipt which will be required by the lender.

The last thing you should be aware of is that not all types of mortgage loans have the same guidelines for down payment gifts. Some require the down payment to be at least five percent of the borrowers own funds and others do not have any limits. Speak with your mortgage lender before starting the gifting process to prevent any setbacks.  

While you may have missed out on historically low mortgage rates back in late 2012 and earlier lastyear, that doesn’t mean that 2014 will not be a good time for real estate. The truth is, the market is already picking up even though the winter months are generally slow. Will 2014 be your year to purchase a new home?

One thing to remember when deciding if you are ready to buy a home is to not be too heavily influenced by data. You may see news reports and articles online regarding mortgage rates and home prices but this information shouldn’t be the only reason you decide to buy. While a house is an investment it is first your home so buy when you are ready, not when someone tells you to.

Home buying is a huge step in life which comes with a great deal of responsibility. The best time to buy will always be when your finances allow you to afford a home that meets your needs. Take your time when making this decision and if you need help or advice don’t hesitate to contact me. 

The home buying process can be a scary thing for a newbie especially since it’s probably the largest purchase you will ever make. Below are some simplified steps to help guide you along the way to homeownership.

Pre-Approval…House Hunt…Make an Offer

Before you start looking for a house it is important to first get pre-approved for a mortgage loan. After all you don’t want to fall in love with a house you cannot afford. Once you get your pre-approval letter from your mortgage loan officer you can start your house hunt. When you find the perfect house it will be time to make an offer.

 

Processing…Appraisal…Inspection

If your offer is accepted your loan will move into processing where your financial information that you provide will be verified. At this time the appraisal will take place which will determine if the seller’s contract price is accurate. Also at this time a property inspector will be checking the home’s major components for flaws that you should know about.

Underwriting and Closing

Once all the details of your loan are squared away your loan will move into underwriting where your loan files will be reviewed for approval. Once your loan is approved you will be on your way to closing which is where you will sign all the paperwork finalizing the purchase of your new home.

 

The process of purchasing a new home can be simple if you work with the right lender and real estate agent. As your preferred lender I am dedicated to make this process run smoothly for you and am here to help you through each step. 

While going through the mortgage process there are many questions that you will have for your lender. Below are some of the more overlooked parts of the process that are equally important:

Annual Percentage Rate (APR): While the interest rate is used to calculate the monthly payments it does not reflect the overall cost of borrowing which is why the APR is important to discuss. The annual percentage rate is a better representation of what the loan is costing you because the APR factors in other costs associated with the loan beyond the interest rate. Some of these costs may include origination fees, mortgage insurance, closing costs, and more.

Escrow Taxes and Insurance: Ask your lender if an escrow account is required. Some borrowers use escrow accounts to ensure that insurance premiums and taxes will be paid on time. Money is deposited into the escrow account at closing and portions of your monthly mortgage payment are also deposited into the account. When the taxes and insurance payments are due, the lender pays them from your escrow account. There are several factors that may determine whether you need to escrow, for example, if the down payment is under 20% or there is minimal cash flow.

Prepayment Penalty: While not common anymore in the industry you may want to double check if your mortgage has a prepayment penalty. This is an agreement you must sign that binds you to pay a penalty if you prepay the mortgage before a specific time period. Many loans don’t allow prepayment penalties but it doesn’t hurt to double check with your lender.

What Not to Do Before Closing: While your loan is working its way through the mortgage approval process there are certain aspects of your financial status that you should be aware of. Lenders will be double checking your employment status and credit score among other things to ensure your financial stability and your ability to repay the loan. During this process hold off on making any large purchases, moving money around in your bank accounts, or making large deposits. These things could all put a red flag on your file which will hold up the process and could possibly hurt your chances at getting a loan.

Servicing: Often times homebuyers, especially first time buyers, may not realize that their loan will be sold and serviced to someone else. This means you may not be sending your mortgage payment to the lender that originated your loan. This is a common practice in the industry and you will always be notified of these changes.