Home Buying University – Purchase
Buy vs Rent – 5 Things to Know
You may be going back and forth questioning whether you should buy a home or not. Can I afford this home? Does this home meet my family needs? Is this a good investment? These may be some of the questions you may be asking yourself. Stop riding the fence and commit to purchasing your home today! NOW is the time to buy. The Sacramento Housing Market and Folsom Real Estate is on fire. Jump on the opportunity today to get the best deal.
Here are my top 6 reasons:
- Interest rates are still at record lows – Even though they may creep up at any moment, it’s nonetheless a fact that interest rates on home loans are at historic lows. Doug Duncan, Fannie Mae’s chief economist, notes that the current market is highly favorable for home buyers, “Interest rates are at historic lows. It’s hard to imagine rates going any lower than they are now. House prices have come down considerably, and if your credit is good, there’s lots of money available.”
- Rents have skyrocketed. Over the past year, rents in the Sacramento Housing Market have increased a huge 5%, where if you owned, Zillow says you would have received an 11% increase in value Sacramento. Instead of handing money to your landlord, why not use that money in investing in your own home!
- Home prices are stabilizing – The Sacramento market is considered HOT because of low inventory. You can buy your home today at $300,000 or buy the same home next year at, maybe, $310,000. I don’t know about you, but I would want to buy now.
- Low to No Down payment programs – Today, you don’t have to save for years for that chunk of change, thanks to a variety of programs to help home buyers, such as the zero down the VA Home Loan offers. You may be able to put a lot less down than you think. There are different options you can consider.
- Mortgage insurance is a deal, too – If you put less than 20% down, you are required to have mortgage insurance. However, with a FHA Home Loan the fees are way down from 1.35% to 0.85% of the mortgage balance. PMI is down too!
- Major tax breaks – Tax laws favor homeowners, so you’re not just buying a place to live—you’re getting a tax break! You may be able to deduct the interest you pay on your mortgage from your taxable income. New homeowners with recent home loans tend to get the greatest tax benefit. Homeowners often find that owning a home costs substantially less than renting a home.
There are many other good reasons of course are building equity, predictability in monthly payments, freedom to do what you want, stability for your family and on and on… The Housing Market Forecast is looking awesome for the next year or more, so get off that fence!
Improve Your Credit Score Sanely
There are a lot of rumors circulating when it comes to credit scores and how to improve them. If you want to make your score better, perhaps because you plan to take out a sizable loan in the future, I have 10 strategies that can help. Here’s 4 from my list.
1. Erase the dings / Dispute a credit report error: Contest any entries that are incorrect or a result of identity confusion. According to The Balance if your credit report contains errors, you have the right to have them removed by writing to the credit bureau or the creditor who listed the account on your credit report. Errors can hurt your credit score more than you think. For example, an inaccurately reported late payment could bring your credit score down 60 to 110 points depending on the other information in your credit report.
2. Request a credit line increase: Increasing your credit line will improve your credit utilization ratio, which is the percentage of your credit limit you’ve used, and help your credit score. Try and keep your utilization under 30% Utilization is the amount of your available credit card. To decrease utilization, increase your available credit without spending more.
3. Pay in full / Pay off debt: Missing a payment is one of the biggest hits you can make to your credit score. You should pay all your bills on time and in full each month. If you cannot make the full payment, at least make the minimum payment. Also, by lowering your total balance owed, you lower the total amount of interest you pay, and improve your credit score at the same time.
4. Charge less: If you want to give your score a boost, use your credit cards less and lower your statement balances. New credit card purchases will raise your credit utilization – the ratio between your credit card balances and your credit limit. The higher your balances are, the more your credit score is affected. So, pay cash for purchases instead of putting them on your credit card. Even better, if you can avoid the purchase completely, you can use that money to reduce your credit card balance. Lowering your balances helps improve your credit score.
Your credit score is one of the most important factors in just about anything you do especially if you need to take out a home loan. Use these tips to improve your credit score because there will be times you may need it and sometimes it will pop up expectantly.
If you need any other advice or help with your credit. Our friends at Blue Water Credit are the best and we love referring clients to them.
How Do You Look On Paper When You Apply for a Loan?
The dreaded FICO score. It’s that number that’s associated with every credit report. We all know about it—most people have one—but what does the credit score really mean?
We met up with Jeff Sipes, Owner of Blue Water Credit in Roseville, CA to dispel some myths about your credit score and expose the truths.
One aspect you may not know is that 30% of your Credit Score has to do with your credit card balance. That’s relation to the credit limit. You want to try to have no more than 10% charged on your credit card about 30 to 45 days before you apply for your loan.
“I pay my bills on time, so my credit score is going to be high.” But, only 35% of your score is your payment history. This includes late payments, collections, and even bankruptcies and tax liens. Each type of account will stay on your credit report a specified period and each type of derogatory will hurt your score differently. 30% of your score is credit card balances. So, paying down those balances will maximize your credit score.
“If you pay off your collections, it’s going to disappear.” But, paying off a collection can lower your score. Before you pay off all your collections, talk to an expert!
“Every time your credit is pulled, it hurts your score.” If you pull your credit from a website, there’s no impact and if multiple lenders pull credit it only effects the score one time (as long as you’re within the shopping period.) FICO states for a mortgage inquiry, there’s 30 days to rate shop and it effects the score one time and the impact is 1 to 5 points. It is important to note that when searching for a home you are allowed unlimited inquiries over a 15-30 day period since it is assumed you are rate shopping. Inquiries made by yourself or for unsolicited offers do not count against your score, but are shown on your report.
Credit Scores can be a bit confusing and overwhelming, but if you want more information on credit don’t hesitate to call! We are more than happy to help!
5 FHA Home Loan Facts You May Not Know…
FHA loans are popular with mortgage borrowers because of lower down payment requirements and less stringent lending standards. An FHA loan is a mortgage insured by the Federal Housing Administration, a government agency within the U.S. Department of Housing and Urban Development. Borrowers with FHA loans pay for mortgage insurance, which protects the lender from loss if the borrower defaults on the loan. This insurance gives lenders the ability to offer lower interest rates and more flexibility in qualifying. So, here’s 5 important facts you should know about FHA home loans:
- Minimum credit scores for FHA loans with a down payment as low as 3.5 percent need to be 580 or higher. Those with credit scores between 500 and 579 must make down payments of at least 10 percent.
- FHA borrowers can use their own savings to make the down payment as well as other allowed sources of cash including a gift from a family member or a grant from a state or local government down-payment assistance program.
- The FHA home loan allows home sellers, builders and lenders to pay the borrower’s closing costs. This includes the appraisal, credit report, title expenses, as well as other pre-paid items.
- Two mortgage insurance premiums are required on FHA home loans: The upfront premium is 1.75 percent of the loan amount paid either in closing or it can be financed as part of the loan amount. The second premium is the annual premium paid monthly in your loan amount and varies based on the length of the loan, the amount borrowed and the initial loan-to-value ratio, or LTV.
- The FHA home loan has a special loan product for borrowers who need extra cash to make repairs to their homes, called a 203(k). The loan amount is based not on the current appraised value of the home but on the projected value after the repairs are completed.
Today, about 1 in every 2 loans are FHA home loans and are still gaining in popularity with the millennials jumping into the market. This is a great option for those that have the desire to purchase but haven’t saved enough for that larger down payment and can afford their mortgage every month.
If you are searching for a home in the Sacramento Housing Market, we’d love to help and answer any questions you might have.
Down Payment Assistance Grant that Never Has to be Paid Back
As cited in the 2015 Profile of Home Buyers and Sellers, The National Association of Realtors reported that the “most difficult step in the home buying process was saving for a down payment.” But there is help with a few Down Payment Assistant (DPA) programs. This week I want to talk about one of those little-known programs. The National Homebuyers Fund (NHF) offers the Sapphire Program which is a grant. A DPA grant decreases the homebuyer costs, avoids burdening the homebuyer with additional debt and eliminates property liens associated with secondary financing options. This also creates a long-term positive domino effect because the housing market is infused with borrowers holding more equity for a future move-up purchase if they desire, in turn freeing up another potential entry-level property. Here are a few highlights:
- This is a down payment and/or closing cost assistance grant, up to 5% of the loan amount.
- A DPA grant never has to be repaid.
- It offers affordable interest rates and a variety of grant levels.
- It can be used with FHA Home Loan, VA Home Loan, USDA and Conventional mortgage loan options.
- It is NOT limited to first-time homebuyers.
Iron Point Mortgage is a home loan lender in beautiful Folsom, CA servicing the tri county area of Sacramento, Placer and El Dorado. We offer several loan products including FHA Loan, VA Loan, USDA, Conventional Loan, and Jumbo Loan. If you or your client would like more information, you can email or call me and I’d be glad to help.
5 Steps to Hiring the Most Awesome Realtor
Selling a home can be tricky and complex. The most important decision a homeowner makes when selling is who they will hire to sell their home. A great Realtor can make the difference between a home selling or not. Hiring an agent should be similar to hiring any employee. So here are my 5 steps to hiring the right agent to sell your home:
- Step 1. Invite them to do a listing presentation – Ask questions. Are they full or part time? How do they determine a home’s value? How do they prefer to communicate with their sellers? How do they plan to market your home?
- Step 2. Request to Contact Past Clients – Yes, check their references. Make those calls. Plus, look on line for testimonials on Yelp and Zillow.
- Step 3. Check the Realtor’s Sales History – Again, ask questions. How many homes have you sold in my neighborhood? How many homes on average do you sell a year? What percentage of your business is repeat and referral business? Ask for the list to sales price ratio as well as average DOM or days on market.
- Step 4. What is Their Marketing Strategy – Check out their website and social media sites. Do they have a good online presence? Do they use print media? Do they do open houses? Watch out for the “post and pray” agent that puts the “for sale” sign in the yard and prays it sells.
- Step 5. Trust Your Gut – And finally, how well do you click with the agent? Do they seem trustworthy? If they give you advice on how to cover up potential problems, then question their integrity. Just trust your gut.
Hiring the right Realtor is critical. Not doing so can be a huge mistake, and a costly one at that! If I can help with a preapproval for your next home or give you referrals to awesome agents I know and trust, then give me a call.
5 Steps for Buyers to Succeed in a Seller’s Market
With low interest rates, rising rent prices and a stronger sense of job security, more folks are jumping into the housing market to buy their first home. With the current low inventory levels, the market today is considered a “Seller’s Market”. In a Seller’s Market, it is likely that buyers will encounter competition and bidding wars. Often, full price offers are the norm and even offers over asking. So, what should home buyers do in a seller’s market when you’ve fallen in love with the house and can’t see yourself in any other home? Here are a few steps to increase your chances of getting the home you love and setting yourself up for success in the beginning:
- Step 1. Before you do anything, get a pre-approval letter. The pre-approval shows the seller that you have been vetted financially while giving you an idea of how much you can afford.
- Step 2. Don’t put in a low-ball offer. Be prepared to pay fair market value. Low-balling a seller may alienate them right off the bat. Plus, you waste everyone’s time going back and forth. And you risk another offer being accepted while you fuss.
- Step 3. Be flexible with timing. You can improve your chances of landing the home you want if you can show that you are willing to move as quickly — or as slowly — as the seller needs.
- Step 4. Tug at the heart strings. Are you and the person selling your home both veterans? When sellers are facing multiple offers, getting a personal letter from buyers that shows why they love the house might help to set the offer apart.
- Step 5. Get a pre-inspection. Anything you can do to speed up the buying process and make it easier for the seller might improve your chances.
Remember, if you love it, there’s good chance others are going to love it for the same reasons. It can be a stressful time so make sure you have all your tools in your tool box ready to go. Making sure you have the most awesome Real Estate Agent on your side is another big factor. You may want to check out my blog on How to Hire the Most Awesome Realtor Ever! So, give me a call and let’s get the pre-approval for your home loan out of the way first.
5 Common Mistakes Cause Problems in Mortgage Process
For first time homebuyers, the hardest part of the decision is to charter the waters of getting the mortgage. Even for those seasoned buyers, the mortgage approval process can feel daunting. So in order to assist you ahead of time, I thought I would give you the 5 most common mistakes that can cause delays and hiccups in your mortgage process:
- Excluding details of your financial profile. If you don’t provide absolutely every detail about your financial profile, it can throw off the entire loan process. Even the little things you don’t think will matter, tell your lender.
- Not providing every single piece of documentation. You will receive a “needs list” as soon as your application is completed. Make sure you go down the list and provide EVERYTHING on the list as quickly as possible, and complete. If you have a document that says Page 1 of 5, make sure all 5 pages are provided, even if one page is blank.
Remember, your lender will run your credit, which can reveal employers, addresses, debts and other credit inquiries that you may not have disclosed. If new information comes to light, you’ll be required to explain and document all of it.
- Confusing approval with pre-approval. Getting a mortgage “pre-approved” means you’ve talked to a lender, have provided some documents, and been told your profile looks good — but make no mistake, this isn’t a loan approval. Misinterpreting approval status kills deals and can take years off your life. So remember this and live long in your new home: get your loan approved by an underwriter before you write any offer to buy a home.
- Not sharing home offer details with the lender. The purchase contract, which is the offer you write on a home, includes critical transaction timing milestones like how many days you have to secure loan approval and how many days you have to close. Your real estate agent will take the lead here, but make sure your lender and agent are in sync, because the lender must provide these critical milestone dates that your agent writes into the contract.
- Being unrealistic or uninformed about rates. When a seller accepts your offer, you’re in contract to buy your home and ready to lock a rate for your mortgage. You can’t lock before you’re in contract because a rate lock runs with a borrower and a property. To avoid rate surprises, ask your lender to quote rate locks based on your closing timeline.
Remember, how smooth the loan process goes depends a lot on the borrower. So be informed, responsive, and keep calm. Thank you for joining me. Give me a call if you are thinking about selling, buying or need to refinance and let’s get the pre-approval out of the way first.
House Hunting During the Holidays
Shorter days, less light and demanding holiday schedules lead many home buyers to avoid buying a home during the holiday season. However, these same conditions can make holiday home buying a great idea.
If you’re getting ready to purchase a home, the secret is that now can be the ideal times to buy. Many buyers are exiting the market until spring, but that can be a big mistake. Some of the best deals can be found over the Holidays. Here are 4 reasons why:
- Less competition: With the holiday season being an extremely busy time most people are not concerned with shopping for a home. This lowers the chances of multiple offers. You may want to act now because Folsom Real Estate inventory is low but with less competition, your chances become a lot higher. With fewer loan applications over the holidays, lenders may able to process your loan application more quickly than during peak periods.
- On the other side of the transaction, sellers are usually highly motivated with an immediate need to sell their properties. This can mean less hassles in negotiating; greater willingness to compromise; and more consideration for your offer.
- It can be the softest Time of the Year for prices: Faster closings are historically more available in November and December, because of fewer overall transactions in the industry. Because lenders want to close their books at the end of the year, they may be inspired to close a transaction more quickly for people buying homes at this time.
- Enjoy your summer: Finally, do you really want to spend your summer overwhelmed with the demands of buying a house? If you’re moved in during the winter, you’re freed up to enjoy summer activities If you put in some planning and effort to buy a home during the winter months, then you can relax and enjoy yourself more than those caught up in the spring and summer house-buying frenzy.
As we enter the slower home shopping season many active markets are becoming more affordable than they have been historically. If you want to take advantage of low interest rates, the time to act is now.
How to Avoid the Neighborhood Drama
What is the most important thing you look for when picking a neighborhood to live in?
I’m Kevin Fritz, with Iron Point Mortgage, your Sacramento Mortgage Broker. Whether you are looking to buy, you want to be in a neighborhood that fits your lifestyle. Those that are just starting out in a career might prefer a neighborhood in a major metropolitan area, close to work, walkable to local hot spots and access to the transit systems.
Those that are starting or have a young family might desire a neighborhood with quality schools, access to public parks, and low crime. Others might be looking for that forever home in a gated community with views and large lots with entertaining in mind. Whatever stage of life you are in, you have a vision of where you want to live. Once you have figured out your vision, let’s talk about how to research neighborhoods so you can feel confident in your purchase.
Property values are largely determined by location. The more desirable the neighborhood, the higher home values tend to be. The things that make a neighborhood desirable are pride of ownership, low crime, great schools, shopping and restaurants, walkability, access to parks, parking, and for most, family friendly. Always keep resale in mind when evaluating a home to purchase for example, you don’t have kids but your next buyers might so school quality is important.
Trulia offers neighborhood statistics such as school ratings, crime statistics, proximity of shopping, restaurants, and parks. You can also research the local schools using sites like GreatSchools.org and by talking with local parents. They’ll tell you candidly about the schools! To get information on a few things you’ll have to do some legwork. Look around, is the community cutting back on the public services they offer? Does the city appear to be thriving? What is the curb appeal of the homes on the street and throughout the neighborhood? Are the streets clean? Are the parks maintained? Check the library as well. Have they had to cut their hours?
Signs that things might be on the decline are homes for sale on every block, lack of pride of ownership, lots of rentals empty and commercial buildings for lease. So, examine the clues around you but don’t forget to listen as well. Can you hear noise from the highway or airport? Is there a club or bar nearby that might get annoying at 2 a.m.? These are all important things to consider. Visit the neighborhood at different times of the day and different days of the week. Take 5 minutes to just sit in your car with the windows down to listen and observe. You may find out things you wouldn’t otherwise!
Once you think you’ve narrowed down your search to a neighborhood or two, talk to your potential neighbors. Remember, you can always make home improvements to your house, but changing your neighborhood is a little tougher to do. Be a sleuth before the purchase and you’ll be much more likely to make the right long term decision for you and your family. If you need any assistance on your research or to get pre-qualified for your loan before you purchase, feel free to give me a call. Again, I’m Kevin Fritz, with Iron Point Mortgage your Folsom Mortgage Banker serving the greater Sacramento, Placer and El Dorado Counties. Have a great day.
What Happens if an Appraisal Comes Too Low?
So, you’re in contract, you’ve had several excellent offers, maybe even some above value, you’ve comped out our house well and expect no problems with value. Everything is going great; the buyer is fully approved and wham! Your appraisal comes in below value. Is the deal dead? What do you do…appraisal rebuttal?
It’s important to know that at times you’re going to get an overly conservative or even bad appraisal. Any number of reasons could contribute: the appraiser had a bad day, they missed comps, they don’t understand the nuances of the area, or any other variety of reasons. As a result, you decide you want to fight it and you’re going to do an Appraisal Rebuttal. The first thing you should know is that the appraiser must in essence say that they are wrong and that they missed better comps. Since they’re rated by the Appraisal Management Companies and banks, it could hurt their ability to get additional appraisal assignments in the future, and there is no manager to hold them accountable, realize that you are swimming upstream and these are rarely won.
The second thing to know is that this process will add a minimum of a week to the escrow process: figure 2 days for you to pull the comps together, 2-4 business days for the appraiser to respond, and 2-3 additional business days in underwriting. This can be an important influence in helping you decide if you want to go through the rebuttal process or not.
Rebuttals are most often initiated by Listing Agent, and are limited to comps that the appraiser missed. At times, the buyer may want to rebut because their loan is based on the appraised value, if the seller won’t negotiate on price, they will have to come up with the difference out of pocket.
The lender will provide the appraisal rebuttal form: Pending sales rarely help, so don’t base an argument on them. Don’t use sales that closed after the appraiser’s site visit. While you can add a list of upgrades or improvements, make sure that they are not just cosmetic and that they create real value for the property. Lastly, don’t try to make the appraiser look bad, it won’t help. Being cooperative and helpful with the rebuttal will build goodwill and may help both of you in the end.
Remember, the best way to fight an appraisal is to not have to at all. Show up for the initial site visit for the appraisal so you are part of the process.
If you have any questions, please contact us. We’d be happy to help.
What is Table Funding in the Mortgage Loan Process?
When buying a home in some states, a practice which is known as Table Funding, is common. This is where the buyers and sellers, along with their agents, sit down at the table together and sign the loan and other related documents with their Escrow Officer, Notary or Attorney. Once complete, the buyer is handed the keys right there on the spot and they are the new owners. It’s slick, and it’s called Table Funding.
In this practice, at the time of the settlement, the mortgage broker transfers the loan to a lender that simultaneously advances funds for the loan. Immediately after the loan is consummated the mortgage broker delivers the loan package to the lender, including the promissory note, mortgage, evidence of insurance, and assignments of all rights the mortgage broker held.
While it is a great process, in California, table-funding is not allowed. In this state, a signing is conducted, usually independently with sellers and buyers with their Escrow Officer. Once all documents are executed, they are submitted back to the bank for Funding Review. And once conditions are met, the lender funds the loan. It is now “Funded”. Once everything is filed with the county clerks’ office it is now considered “on record.”
5 Smartest Uses of Tax Refunds
Tax season can be stressful but also bring opportunity if planned smartly. If you are expecting to pay, make sure you have enough saved each month to pay your taxes on time and get it out of the way! If you are getting a refund, how are you going to spend or save that money? Having a plan can prevent us from wasting the opportunity to apply those funds to the right area to improve our credit score, invest in our future by buying a home, or saving for it for that ultimate emergency
Your refund won’t be enough to redo your kitchen or bathroom, but it can certainly pay for any costs or fees for a refinance. Allowing your home to pay for its upkeep or updating through refinancing is smart. Investing the equity back into your house usually increases its value, makes it easier to sell in the future, and you can improve your quality of life in the home.
You can use the extra cash for smaller updates like adding a backsplash, painting a room, replacing your bathroom sink, updating your faucets, installing a programmable thermostat or sprucing up your yard. Look at your curb appeal and see what improvements can be made.
Increase your credit score! Use your refund to pay off a balance with an 18% interest rate is like earning 18% on your investments — an incredibly valuable use of the money. The higher the credit score, the lower the rate you qualify for on the largest purchase you make, your home mortgage. If you have any questions about credit scores, our friends at Blue Water Credit in Roseville, CA would love to help.
You can also beef up your home insurance. Use some of your refund money to protect your home. For about $50, you can add $10,000 to $20,000 in sewage backup coverage — which usually isn’t part of a standard home owner’s policy. You can pay to trim your trees to help protect against some of the most common types of storm damage and put together a disaster kit. If you got the bare minimum initially when you got your mortgage, look at your policy to make sure you have the coverage you are comfortable with.
With the low mortgage rates, especially in the Sacramento Housing Market and low or no down payment options available, such as USDA Home Loan, VA Home Loan and FHA Home Loans, that tax refund could be invested in a new home. The FHA Home Loan has options as low as 3.5% down. The USDA Loan for rural areas may have a no down payment option, and, of course, the VA Home Loan can be a 100% financing option as well.
Planning ahead so that you don’t spend the money impulsively or unwisely could to help get that first home, or perhaps that dream home.
If you’re looking for some options for purchasing a home, we are Iron Point Mortgage, a home loan lender located in Folsom, CA servicing the tri county area of Sacramento, Placer and El Dorado. We offer several loan products including FHA Loan, VA Loan, USDA, Conventional, and Jumbo.
How to Have Cash Reserves When Buying Rentals
Often I find that new real estate investors have a lack of understanding when it comes to cash reserves. So many people think that real estate investing can be boiled down to a quick series of numbers, like how much will this be or how much will that be or how much should I set aside for this expense and that expense? All of those are VERY VALID QUESTIONS!!
However, the one questions too few investors ask of themselves is how much do I want to keep in reserve to make me feel comfortable… regardless of how my property operates? There are so many variables that play into each person’s finances that simply saying here is how much you should put in reserves is a great injustice to an investor. There is no formula! There is no calculation that says if you keep ‘X’ in cash reserves you will be ok. If it did exist, it would say if you are buying an investment property for $100,000, just for the sake of using a round number, and you keep $100,000 in cash reserves…well, you should be ok!
If you get your hands on a rate sheet, or talk to a bank or mortgage broker, they’ll usually tell you how many months of reserves you’ll need to verify assets and qualify for a mortgage. Asset requirements will be defined in terms of PITI (Principal Interest Taxes and Insurance), meaning you’ll need enough money to pay for “X” number of months of mortgage payments including principal, interest, taxes and insurance. And mortgage insurance, where applicable.
Reserve requirements will vary from bank to bank, and from mortgage program to mortgage program, but you can get a good idea of what you may need to provide for different property types.
- Owner-occupied residences typically require two months PITI in reserves, but may ask for up to six months.
- For second homes, reserves can range between three to four months, but again, can be higher.
- On non-owner occupied properties, otherwise known as investment properties, reserves are usually six months PITI or more.
Allowable types of assets: Earnest Money Deposit, Checking/Savings/CD/Money Market Accounts, VOD, Business accounts, Stocks, Bonds, IRA/401k and other retirement accounts and Gift Funds/Gift of Equity.
If you have any questions, please don’t hesitate to call! We are a home loan lender in beautiful Folsom, CA servicing the tri county area of Sacramento, Placer and El Dorado. We offer several loan products including FHA Loan, VA Loan, USDA, Conventional, and Jumbo.
The Dirty Secrets of No Fee Loans They Don’t Want You to Know
“Need extra money in your pocket each month, well give me a call, I can refinance your loan without tax returns or bank statements, with NO LENDER fees, yes, you heard me, no lender fees, and all of this in ten minutes! Just ask for me, Leon Sharky Luciano!!!”
Does that sound too good to be true? If it does, then it probably is! I am Kevin Fritz with Iron Point mortgage provided mortgage home loans and in California located in the beautiful Folsom, CA.
So, why do interest rates vary from one lender to the next? Well, most the funds come from government-backed are sponsored programs like FHA Home Loan, or USDA Loan. Every lender has their own tolerance for risk in the profit that they’d need to make from originating that loan. The overlays are additional qualifying criteria that each bank provides includes what loan they can do as well as the price that they need offer. A tougher product line is going to be much more labor to get a loan done and therefore needs more headcount which means higher pricing. The great news is that they can do the loan! The not so great news is that it’s going to cost you more.
Another major influencer is that each bank offers different levels service. To quote a Dell represented when I was buying a computer, I asked him which service plan to go with he said, “Would you like cheap or would you like someone who speaks English?”
Typically, if you go to a big bank you’re going to work with one of many that are doing the loan. You might work with a person in the bank to start with the loan processor could be in Kansas the underwriter could be in their Arizona and the funder could be in Georgia and you would never even know. Who’s accountable and what is the downside if they mess up? It’s nothing to them but lots to you.
Another way to go is the internet where often you are working with the telemarketer and the loan gets done possibly out of the country. This is the same challenges as the first option but on steroids.
Working with a knowledgeable service oriented professional typically requires a higher level of income being as compensation. But the amount of hassles that you are going to avoid when you are working with a good person are monumental. No matter how good of a barrower you might be, many little nuances can arise when getting a loan. If you don’t want to risk your largest investment to an unqualified person, it can save you a lot of money by working with a local professional.
Again, I’m Kevin Fritz with Iron Point Mortgage, we are your local mortgage broker here in Folsom California. Give me a call to set up your free long consultation to see if we can help you with your home loan purchase or refinance.
5 VA Home Loans Facts You Need to Know
The VA loan is a great loan! Today, I want to share five facts that you might not already know about.
- You still need to qualify just because you meet the eligibility requirements for your DD-214 doesn’t automatically mean qualify for the loan. You still need to meet the credit, income, and asset requirement.
- You don’t have to pay PMI on a VA loan. This was one of the awesome things about it. Mortgage insurance is not required on a VA loan because it guaranteed by the federal government. This saves you money with a lower down payment as well as lower ongoing monthly payments, which increase your buying power.
- You can get a VA loan while serving overseas. Military members serving overseas can grant a power of attorney (POA) to a spouse or someone else to sign loan documentation for them while they’re overseas. So, there’s a sixty-day occupancy rule but only a spouse can satisfy that but they can satisfy it. Otherwise, an extension up to 12 months is granted to you, the borrower, to move into the property.
- VA Loans take as long to close as a conventional loan. It’s a common myth the closing of VA Loan can drag on and be difficult. However, that’s not true. The average length of time it’s taken to close a conventional loan is 38.9 days compared to a VA loan at 39.6 days. So, very little difference.
- Not all lenders offer VA Loans. It’s important to find a lender that’s going to finance your VA Loan. Here at Iron Point Mortgage are a VA loan lender with extensive experience helping veteran members of the military obtain their VA Loans. The VA home loan is an awesome loan with no down payment requirements. So, if you or your client is eligible, check it out!
Why You Have to Explain all Your Cash in the Bank
Sourcing funds, what does that mean? Depending on the loan that you’re inquiring, you’re going need money for your down payment, closing costs, and other transaction related items. In addition, if you paid up any debt including credit card or car loans within the last two months of the transaction, you’re going to need to show where the money has come from, to pay them off.
Lenders have become increasingly concerned about determining the source of the fund identified in the transaction, primarily because the federal government is keeping tight controls and auditing every file. Where this all started with efforts to curb money laundering from drug dealers and has expanded to terrorism and a lot different things. Federal regulations allow the government to confiscate any property acquired via the use of funds that are procured through illegal drug sales. Thus, all money must be verified as having been obtained legally where the property owner and the lender are at risk.
Well, the funds cannot be borrowed money, it must be determined that the buyer does not have any undeclared debt. Perhaps via third-party family member, personal loan, or credit card.
The most frequent method of requiring funds is current savings, gift funds, money from a relative, selling items of value, selling, or borrowing in real estate, borrowing against retirement or 401K accounts in repayment of funds previously loaned. Let’s explore each of the options individually.
Gift Funds – perhaps most likely source additional money and the following steps must be taken to do it.
- Statement a donor ability. That’s just the bank statement with the last 30 days and in the last 30 days any deposits need to be explained.
- Gift Letter. Identifying the source of the money clearly stating that the funds need to be repaid in determining the relationship with the buyer. It must be a close relative that would be giving the gift.
- Easiest way to track is for the fund to be wired directly to escrow and a check can be given to the borrower who deposits it into their account. Make sure to keep a copy of the check, a receipt of the deposit in your account, a copy of the statement showing that the money is now in your account, so that wiring is a lot easier.
Selling an Asset Value – you can sell a vehicle, jewelry, antique, etc., the sale of an asset requires the appraisal having been done prior to the sale picture, a bill sale the case for the sale the vehicle a DMV transfer will be required, a copy of the check received and proof of deposit into your account. It’s important we have all the appropriate documentation. It’s advised that you discuss any proposed sale of an asset with your lender prior to sale.
Another great way is borrowing against your equity. As I mentioned, you can do a personal loan or credit card cash advance just not acceptable but a major exception is where you borrow from your own equities such as real estate, a car, 401k. You’re going to need to show supporting documentation for the loan. Note, reporting a statement showing the amount owed monthly so we can get a payment. In the case of a 401k loan, a lender’s going to need the term to withdrawal and proof of funds have been deposited into your account. The great thing about borrowing from your 401K is that we won’t even have to get against your debt to income ratio.
There are few important things to know:
- Investors may not receive gift funds. It is just not permitted.
- Always have a very clear and distinct paper trail for all money transferring.
- Never go to cash it’s going to break the chain and it’s not source able. Whatever you do don’t let the chain brake by taking cash out or by doing cash deposit.
- Lenders generally look back two months if the money’s been in the account for the past two months like it’s always been there.
- If money cannot be sourced, it’s typically backed out of the transaction and it acted like it’s not even there.
When it comes to sourcing, the best practice is the contact your mortgage professional and make sure you’re doing it right. Please call us! We will be happy to advise you. Again, I’m Kevin Fritz with Iron Point Mortgage and we’re always here to help!
Home Buying University – Refinance
Tax Relief for Folks Underwater on a Short Sale or Foreclosure
I have some great news hot off the press… The Federal Senate Bill (351), Extension of the Mortgage Forgiveness Debt Relief Act of 2007 passed at the end of 2015! This bill provides exclusions for the cancellation of debt income with specific rules and criteria for qualified taxpayers who lost their residence in a foreclosure or sold the residence in a short sale.
What this means is that if somebody sold their home for less than it what they owed on their existing mortgage, the difference could be taxed as income to the borrower, even though it was a loss. Sadly, this bill expired, but, because the senate signed this into law in late December it applies retroactively to cover 2015 and covers transactions in 2016.
The Sacramento Housing Market and surrounding areas were hit hard with inflated home prices when the recession hit. This bill has been an important part of our recovery here in the Folsom Real Estate market as well. SB 351 has allowed homeowners that were underwater with their mortgage to recover without being hit with taxable gains.
Deed Transfers Due to Death Now Revocable
Steve Beede, Sacramento attorney, specializes in real estate. He joined us to talk about a new regulation in transferring deeds to real property due to death. Beede informs us about the transfer of property process in California called, The Revocable Transfer on Death Deed.
For many people the home is the single asset they have. It may not have so enough value that they want to spend the money on a trust, but they want to help in the areas that can avoid the problems of probate. For the first time, this will enable people to transfer the property to their relatives or whoever they want. But, if they change their mind after they’ve done it, they can revoke it. A lot of questions are still up in the air and need to be worked out. Because this is a new method in California, there’s going to be a five-year look back when the legislature decides if this is what we want to do. But for now, this provides an opportunity that has not existed.
If you want more information or any advice, please feel free to contact Steve Beede at SJBD@bpelaw.com.
How Do You Know If You Should Move or Improve?
Selling and buying a home costs money. So do you move or improve? Weigh your decision carefully. If you are considering a remodel to upgrade your living space, then make a list of the improvements you want. Then get some estimates from a local contractor. Total up the cost of selling your home (usually 7 percent to 10 percent of your sales price) and buying a home that better suits your needs, and compare the two. Ask yourself:
- Do you have the space to expand? If not, and you need space, the issue may be moot. But consider other ways to maximize the space you have. Attics are a popular space to look at for additional space. If you are considering a garage conversion, be sure to investigate what that can do to your home value before tackling that option. Garages are usually prime property for storage and are a must have for most buyers.
- What is your house’s condition? Do your own inspection to see if you have any major problems lurking, such as an aging heating system that needs replacement or potentially serious wood damage. Using your home equity in this area will give you the greatest return on investment if you decide you need to sell and buy your forever home to get that additional space.
- How much can you do before you start over-improving for the neighborhood? Your improvements should match the size and sensibility of the area in which you live. Too many improvements do not always translate into higher resale value. Plus, being the most expensive house on the block may work against you in the long run.
- Will remodeling do the trick? Be realistic about how much remodeling can do. If you want to live in a spacious home on a large lot right now, no contractor will be able to turn your tiny urban bungalow into the home of your dreams.
- Will it pay off in the long run? Kitchen and bathroom remodeling projects consistently return the most in resale value whereas converting an existing bedroom into a walk in closet could hurt your home’s value and resell.
How you answer these questions should bring clarity to your decision. You may even need to make some improvements in order to get top dollar if you decide to sell to get more space. I can help with either, your mortgage preapproval or a refinance to use the equity in your home for those improvements. So don’t hesitate to call for your home loan.
How Can I Use Equity From My Home
While gathering the data for our latest Real Estate Market Update for the Sacramento Tri-Valley area. We found some fantastic news about our local real estate trends. In the Sacramento Market, Home Values are UP. With this positive news came a realization that homeowners have begun experiencing something familiar but not seen for quite a while, Equity. One great benefit of home ownership, Equity is the difference between your home’s value and the amount owed. As values increase and homeowners pay down their mortgages, real estate equity positions continue to rise. This ownership stake ultimately results in long-term personal wealth, which drives the economy.
So, you’ve got equity. Now what can you do?
- Home Improvements: When the market was down, many homeowners held off from fixing up their homes due to uncertainty of whether it would be worth it or not. With home prices increasing, many homeowners are opting to improving their homes rather than moving. Whether renovating the kitchen, completing deferred maintenance or adding a much needed room, a cash out refinance can provide the money needed to complete the work. The great news is that while this improvement creates a much nicer lifestyle, if done strategically it may significantly increase the value of your home as well.
- Investing: With the Real Estate market continuing to improve, rents are going up as well. Many homeowners are eager to purchase rental property for all the benefits that it provides. In order to get the money for the down payment, taking cash out of your home can be an effective way to get the down payment together. Others are deciding to keep their existing homes, turning them into rentals and purchasing their long-term dream home. Equity can make this all possible, while providing a tax benefit and increasing cash-flow.
- Debt Planning: If you have high interest debt such as student loans, car payments, tax liens, or credit cards, rolling them into the home loan can be a great advantage. While the monthly mortgage payment might go up a bit, it can be far off-set by eliminating unsecured debt. It is not uncommon to decrease your payments by $500 to $1,000 per month while getting a better tax write-off.
- College Education: Many parents are in a quandary about how they are going to pay for high-priced college tuition and expenses. If you’ve been thinking about taking on a student loan, or a second mortgage, consider refinancing your primary mortgage instead. The rates are typically much better, you can take a Schedule A deduction on your taxes, and the payment is not typically as high. Payments can be spread over a longer period of time, which reduces the stress. This is a great time of life with the kids, you might as well enjoy it while you can.
We hope you’ve found these ideas of value. We’ve included some useful resources below in order to answer more of your questions. Please call or email us if we can help you evaluate your current situation.
Has My Value Increased?
So far this year, the housing market has been hot. You’ve probably seen a whirl wind of activity in your neighborhood and have wondered about the value of your home… Well, home prices are on the rise, so let’s look at the 4 signs your home may have increased in value…
- Business Is Booming in Your Neighborhood – that is the sound of money! New businesses investing in your neighborhood bring new residents as well!
- Neighborhoods Near You Have Gotten Spendy! – if you are wondering how in the heck the Jones’ got that much money for their house three doors down, take a look! You can gauge which direction values are headed by comparing a home’s recent sale price with its pricing history.
- Neighborhood Homes Are Selling in a Week – remember, low inventory also drives home values up, so if homes are selling quickly, that may indicate your value has also increased.
- A Real Estate Agent Says So – talk to a real estate professional and get their opinion on your home value. They are experienced and its free.
Now if your home value has increased, what can you do with that? First, you may lower your monthly mortgage payments by refinancing and possibly getting rid of your mortgage insurance. Second, you may have enough equity to move up in to that forever home you have dreamed about. Or what about using the equity in your home to remodel that dream kitchen or master bath!
Remove Mortgage Insurance in 5 Steps
Recently, a lot of our clients have been asking how to remove Private Mortgage Insurance so they can lower their monthly payments. This is simply the insurance policy protecting the lender against default when a borrower puts less than 20% down on their home purchase or has an FHA Loan.
If you feel your home has over 20% equity due to an increase in value or you’ve paid the mortgage down, you may be eligible to remove PMI. Here’s how you do it if you have a conventional Fannie Mae or Freddie Mac Loan:
- Contact your loan servicer. Their number can be found on your statement
- They should have a form that you’ll fill out and send back
- Order an appraisal, which should cost about $350-$500
- Each lender has different rules, but generally as long as there is over 20% equity, the MI should be eliminated
- They’ll charge a fee to remove PMI, but it will be minimal compared to the monthly payments you’ve paid If you have an FHA Loan, it’s a different story
7 Things to Consider Before Using FSBO
Can selling your own home save you money in the long run? Maybe…maybe not! I have 7 things you should consider before even trying to sell your own home.
Selling your own home can be a real hassle and there are many missteps you can take that can cost you dearly. They can prevent your home from selling for top dollar and in a timely manner, so here are 4 of the 7:
- Exposure – How will you get the word out? You don’t want to be limited to the local area. Many buyers are relocating from different areas. It is important to tap into a network that reaches far beyond the city or town where you’re located. It’s important to know what buyers want to see and package your home appropriately with color photos, feature sheets and other materials for both brokers and potential buyers. Not getting enough exposure may result in your property sitting on the market for a long time and the price being reduced.
- Market Information – Do you know how to value your home properly? There is a lot of information and facts that go into pricing a home. If you don’t correctly gauge the market’s direction and speed, you may lose out.
- Negotiating Ability – How are you at negotiating skills? This may be the most oft-overlooked part of the do-it-yourself process, and one that should not be considered lightly. Remember you’re competing against other professionals who are negotiators and know the sale process well. They may suggest all kinds of terms and conditions that sound reasonable but really aren’t in your best interest.
- Legal Issues – Do you have the proper forms and disclosures? Perhaps the most dangerous aspect of the home selling process involves contracts and closings. If you don’t perform these correctly, you may leave yourself open to a lawsuit.
- Value Added Services – Large real estate firms offer value-added services, such as assisting potential buyers to get pre-qualified with financing. This reduces time delays, unnecessary traffic in your home and offers qualified buyers up front.
- The Eccentricity Factor – Are you reducing the number of potential buyers because you haven’t listed with an agent? Some house shoppers will be apprehensive about engaging a “for sale by owner” simply because it’s not the norm.
- Your Time – It takes a lot of time to not only prepare and stage your home for sell but if you are selling it yourself, then you also have flyers, postings, signs, and on and one to get together. That takes a lot of time and effort. In the end, what you save in a commission may be less than what you spend if you put a value on your time and energy to get the job done.