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Showing posts from March, 2017
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Self-Employed? 5 Steps to Scoring a Mortgage


Loan programs today require lenders to verify the borrower can demonstrate an ability to repay the new mortgage, taxes, insurance along with current credit obligations by comparing income and debt. Most borrowers today are employees and receive a regular pay check or two each and every month. It’s relatively simple for a lender to verify monthly income when someone gets a paycheck on the 1st and the 15th because the gross monthly income is printed on the pay stub along with year to date earnings and deductions. W2 forms from previous years are also required. Lenders want to see at least two years of being employed and W2 forms fill that requirement. But if you’re self-employed, it’s a little bit trickier. Even if you pay yourself on particular days of the month the lender needs more information from you. Here are 5 steps to score a mortgage when you’re self-employed.
1. Check Your Credit. Okay, not exactly limited to a self-employed borrower…
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Why a Mortgage Pre-Approval Can Be Beneficial

There are multiple advantages when shopping for a home with a pre-approval letter in your pocket. In fact, it’s almost standard practice especially in areas where it’s a seller’s market and the seller has the upper hand during negotiations as homes are selling relatively quickly and for a higher price. Multiple offers in areas where real estate is on the move is common and sellers review offers for list price or even offers above what the seller is asking. That means a buyer needs every advantage when making an offer when home sales are brisk and having a pre-approval letter is one of those advantages. Other than making an all cash offer, the pre-approval just might be the best one. What exactly is a pre-approval and what does it provide?
A pre-approval is a particular status of a loan application. A pre-approval is signified by a letter composed by a loan officer on a lender’s letterhead. A pre-approval means the borrowers have provided t…
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Why a 5/1 ARM Can Be Beneficial

It wasn’t all that long ago there appeared to simply be no end to the number of available mortgage programs in the marketplace. Leading up to 2008 borrowers were met with a sometime dizzying array of choices. It seemed everyone offered a loan of some type. It used to be there were two primary choices- a conventional loan underwritten to Fannie Mae or Freddie Mac standards and government-backed loan programs from FHA and VA. Yet as the housing bubble first began to form, the gates were left wide open.
There were stated income loans, no document loans and no down payment loans. Loans for people with bad credit and loans for people without a job. Interest only loans and payment option loans were popular. If someone could fog up a mirror there was probably a mortgage program for them somewhere. Yet we all know what ultimately happened. Lenders began to foreclose on non-performing loans. Toxic loan programs vanished along with the lenders who made them. All …
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When (And When Not) to Refinance Your Mortgage

Is it time to refinance your mortgage? Yes? No? Not really sure? For home owners who have a mortgage and have read recent reports that rates have moved and it might be time to consider refinancing your existing loan and capture the new, lower rates, considering a refinance has probably become an occupying thought. But is a lower rate a good reason to refinance? And if so, does the rate have to be at a certain level to make it worthwhile? Is there a way to tell whether a refinance works or is it better to just leave the mortgage along and move on? Let’s look at some ways to tell when a refinance might be a good idea and when it might not.
First, don’t refinance based upon the interest rate alone. An interest rate along with your loan amount and term are used to arrive at what you pay each month. Don’t look at your current rate and if  the rate goes lower by say, 1.00% then automatically think it’s time to refinance. Instead, compare the di…
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Beyond Interest Rates, What Should You Look For When Searching For a Mortgage?

Getting your financing lined up when first beginning the home buying process is one of the first things that need to be done. You can speak with a loan officer over the phone who can guide you through the process and even pre-qualify you over the telephone regarding how much you might be able to qualify for. Further, you can submit a loan application to that loan officer along with supporting documentation and receive your pre-approval. A pre-approval means you’ve applied for a home loan and all that’s needed is for you to bring a signed sales contract for a property you wish to buy. One of the things that not only can confuse borrowers but frustrate them is shopping for a mortgage lender by making phone calls and getting various interest rate quotes.
When shopping for interest rates buyers will soon notice that interest rate quotes are very similar from one lender to the next. That’s because lenders all se…
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Does a Mortgage Make Sense in Your 20’s?

If you’re fresh out of college and in your 20’s you’ve got some decisions to make. You may have thought your tough decisions were over once you graduated but there are even bigger ones to consider as you get older. Even if you haven’t graduated with a college degree and working full time you will also face similar hurdles in life and as anyone over 50 will tell you, “You’re just getting started…get used to it.” One question more and more young people are facing is whether or not to buy a home at a young age or whether it’s better to rent. Yet there is no universal answer to this question. Yes, it can make sense to get a mortgage and no, it doesn’t make sense. It depends upon your personal situation. However, there are some questions you can ask to get you closer to your answer.
Do you want to be a home owner? Do you? Owning a home creates more wealth than owning any other single asset over time. As property values increase over time, that value…
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Is the House Price More Important or the Interest Rate?

This is an interesting question. It’s almost akin to the classic “Which came first, the chicken or the egg?”  Well, maybe not quite as common as the chicken vs. egg query but it is indeed important. When someone first begins searching for a home to buy certainly price is important but then again so are current market rates. Both have an impact but is one more important than the other?
First, let’s consider the price of the house. A list price on a home will be similar to homes that have recently sold in the area and crafted by a real estate agent who has performed some research and arrived at a price suitable to the owner. But really it’s less the price of the home but more about how much down payment the buyer has. If someone is qualified to borrow $200,000 but they’re looking at homes listed at $1 million then there needs to be a down payment of at least $800,000. For a better example, if there is a home listed at $400,000 and …
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3 Reasons Why Manufactured Homes Are Becoming More Popular

Manufactured housing has really come of age over the years. Linked to older mobile homes with wheels attached and a hitch on the front, manufactured homes today look like anything but a mobile home. In fact, manufactured housing has come so far it’s hard to tell the difference between a manufactured home and a traditional “stick built” property. If you’ve wondered about the prospects for a manufactured home but haven’t yet made the decision, here are three advantages of manufactured homes.
Affordability.  Manufactured homes are simply less expensive compared to a single-family property. How much less expensive? On average, manufactured homes can cost anywhere from 35 to 50 percent less per square foot compared to a traditional home. When combined with regular financing the monthly payments are much lower compared with a similarly sized structure. If a standard 2,000 square foot home is listed at $300,000 then a manufactured hom…
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Tips for Buying a House Within Your Income Range

Tired of renting? Did someone at work just buy a home and they can’t wait to close? Did you recently get bitten by the “home buying bug?” It happens at some point to all of us. Even if you’re not ready to buy your own home at least you’ve thought about it. But if you’re getting past the “thinking about it” stage to getting pretty serious about it, you first need to get an idea on what you can afford. At least what you can afford in a lender’s eyes. Lenders are required to make sure you can afford a new mortgage and they do so by comparing your monthly income with monthly debt and come up with a debt ratio, or simply “ratio.” In general, lenders like to see total credit obligations be no greater than 43 percent of your gross monthly income. This is a formula lenders use. Is it the same formula for you, however? Here are some basic tips to buy a house within your range.
First, get comfortable. This is probably the most important tip. When…
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3 Reasons Why Millennials Should Be Investing Homes

Millennials have officially taken over as the driving economic force today. As more and more baby boomers face retirement and are no longer in the work force it’s the millennial who will wield the purchasing power. This age group ranging from 18 to 34 or so which also means their buying power is beginning to mature. A new car, new clothes and even eating out and weekend entertainment is being paid for out of the millennial’s pocket. But what about real estate? Should millennials add real estate to their financial profile? Is it time to buy a home now and if so, why?
One of the things millennials witnessed at an early age was the financial mess that occurred in the last decade leading up to about 2008. Mortgage lenders in their quest for making more home loans would create a new loan program that previously ineligible borrowers could qualify for. Lower down payments, reduced credit scores and subprime loans hit the market. At a very t…
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Is 2017 the Year to Invest in a Rental Property?

Real estate is one of the asset classes rarely mentioned during a planning session with your stock broker or financial planner. Usually during these reviews it’s based upon an allocation of funds, your age and when you expect to retire. If you’re in your 30’s you’ll probably be pointed more toward stocks and less toward bonds. Stocks are more volatile but provide greater returns over time compared to bonds. Bonds are not volatile, the return is guaranteed but the yields are paltry compared to a stock or mutual fund. As you head closer to retirement age your financial planner will suggest moving more funds out of stocks and into more conservative investments such as bonds. But what you won’t hear is real estate. Typically, anyway. But you should consider rental property.
Rental property is a real asset that is secured. The asset will grow in value over time while each month providing a positive monthly cash flow. When considering a renta…
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Can You Take Equity Out With a VA Loan?

Refinancing a VA loan is much like refinancing any other mortgage. However, VA loans do have a refinance option that conventional loans do not have. This option is referred to as a VA “streamline” and is a VA-to-VA refinance that requires very little documentation. No income or employment check, no appraisal required and no need for verification of assets. As long as the borrower is refinancing an existing VA mortgage into a new one and is either lowering the interest rate or switching from a variable rate loan to a fixed, the streamline program is available. And, just like a conventional refinance, borrowers with an existing VA loan can pull out some cash during the refinance process given sufficient equity.
VA guidelines allow borrowers to pull out equity in the form of cash during the course of a refinance like any other loan but now the loan is not eligible for the streamline option. VA streamline loans do not allow for any cash out during t…
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Financing Basics for First Time Buyers

Still renting and tired of it? Your noisy neighbors can’t seem to be quiet for any normal length of time? Your parents are telling you it’s time to stop being a renter and throwing your money away each month? Maybe your best friend just bought a condo and you’re thinking, “Well, if she can then I can too!” Buying a first home is an exciting experience and simply shopping for a home on the internet and comparing home prices and places to live takes on a whole new meaning. But the mortgage part, well, that’s not really something to jump up and down for, is it? We agree. Getting a mortgage isn’t won’t really get your heart pumping with excitement but for many it can also be a bit scary. For first time buyers, here are some financing basics you can use.
Affordability is based upon current and future debt along with your gross monthly income. Lenders compare monthly credit obligations along with your future mortgage payment, including amounts for prop…
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What Is a Cash Out Refinance?

What is a cast out refinance? There are two types of a refinance loan and both perform the same primary function: replacing an existing mortgage with a new one.  A refinance can be a cash out refinance or a rate-and-term refinance. A rate and term refinance is a mortgage that replaces an existing mortgage and changes the rate, the loan term or the type of mortgage.
For example, a couple has a 30 year fixed rate mortgage with a rate of 4.75% and they want to refinance to a 4.00% rate. The newly refinanced loan changes the interest rate and reduces the monthly payment due to the new lower rate on the loan. The new mortgage pays off the old mortgage and typically includes the closing costs into the new loan.
When refinancing a loan term that same couple could refinance from a 30 year loan into a shorter term loan such as a 10, 15, 20 or 25 year term. Shortening the loan term reduces the overall amount of interest paid to the lender although higher monthly p…
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Rates Are Up, What Should I Do?
Are you looking at the historic low rates in your rear view mirror? You’re not alone. The lowest rates we’ve seen occurred nearly four-and-a-half years ago back in November 2012 while rates are indeed higher now they’ve held in a relatively tight range. Yes, they’re up, but now way, way up. However, if you’ve been waiting for rates to come back down so you can finally refinance your existing mortgage you might very well be out of luck on that one. Fed Chair Yellen and the FOMC raised the Federal Funds rate back in December of 2016 matching the 0.25% rate bump in December the previous year. Not only that, but Fed Chair Yellen recently commented we could expect three more rate increases in 2017. Now that rates are up and appear to be heading higher, what should you do?
That really depends upon your motivation. Most people refinance because rates are lower than the one they currently have. If for example you have a 30 year rate at 4.75% and want to refinan…
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What Are the Benefits of Cashing Out?

Are you looking at financial portfolio and noticing the amount of equity in your home? Thinking of pulling out some of that equity in the form of cash? As the value of a property someone owns so too does the amount of equity the person owns. The equity is the difference between the current market value of the property less the liens and closing costs associated with a new loan. There are three ways to pull out equity in your property, a HELOC, an equity loan and a cash out refinance.
A HELOC is revolving line of credit based partly on the value of the home.  A HELOC transfers equity into cash and can be used over and over again. A HELOC will have slightly higher rates than other cash out programs but is reusable very similar to credit line on a credit card. An equity loan is a lump sum amount issued to the owners and can be taken with either fixed or variable rates. A cash out refinance is a loan that replaces an existing loan while simultaneously…
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How Do I Become Eligible to Pull Equity Out of My Property?

Just last year home values erased the equity deficit and surpassed the highest median home value set in 2006. Here in San Diego County we’re certainly no different and that means a return to the home equity loan marketplace. Homeowner equity is simply the difference between the current market value of the property and the outstanding loan balance, less associated closing costs. The difference is the equity that belongs to the owner. How do you become eligible to pull equity out of your property?
The most common way is to simply sell the home. During a sale, the old loan is paid off and closing costs, including real estate commissions are deducted from the sales price and the net proceeds are delivered to the homeowner. However, for someone who just wants to tap into the equity of an existing home without the somewhat drastic measure as an outright sale, there are other, more agreeable options.
A cash out refinance is an optio…
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How to Recover From a Low Credit Score

Did you get a surprise when you looked at your credit report? Did your lender inform you your credit score was just a bit low for the loan you’re seeking? In general consumers are fairly aware of their credit standing but may not know where their credit scores actually stand. Credit scores are calculated using an algorithm first developed by the FICO Company and are three digit numbers ranging from 300 to 850. Those with scores above 740 are considered to have “excellent” credit while those with scores below 580 are typically labeled “fair” or “poor.”
When applying for a mortgage a lender requests a credit report designed for the mortgage industry and at the same time request a credit score. While most mortgage programs don’t specify a minimum credit score lenders do. And even one or two points off can mean the difference between a loan approval and a delay. For example, if a minimum credit score requirement for a loan program is 620 and the rep…