![The Cost of Waiting: Interest Rates Edition [INFOGRAPHIC] | MyKCM](https://files.mykcm.com/2019/07/19100001/20190719-MEM-1046x784.jpg)
With the recent lower interest rates, many homeowners are wondering if they should refinance.
To decide if refinancing is the best option for your family, start by asking yourself these questions:
There are many reasons to refinance, but here are three of the most common ones:
Once you know why you might want to refinance, ask yourself the next question:
There are fees and closing costs involved in refinancing, and Lenders Network explains:
“If you were to refinance that loan into a new loan, total closing costs will run between 2%-4% of the loan amount.”
They also explain that there are options for no-cost refinance loans, but be on the lookout:
“A no-cost refinance loan is when the lender pays the closing costs for the borrower. However, you should be aware that the lender makes up this money from other aspects of the mortgage. Usually pay charging a slightly higher interest rate so they can make the money back.”
If you’re comfortable with the costs of refinancing, then ask yourself one more question:
To answer this one, we’ll use an example. Let’s assume you have a $200,000 home loan. A 4% refinance cost will be $10,000. If you want to lower your interest rate from 6% to 4%, then refinancing is going to save you $244 per month. To break even ($10,000/$244), you need to continue owning your home for over 40 months.
Now that you know how the math shakes out, think about how much longer you’d like to own your current home. If you plan to stay for more than 3 years, then maybe it is advantageous for you to refinance.
If, however, your current home does not fulfill your present needs, you might want to consider using your potential refinance costs for a down payment on a new move-up home. You will still get a lower interest rate than the one you have on your current house, and with the equity you’ve already built, you can finally purchase the home of your dreams.
There are many opportunities for growth in the current real estate market. To find out what’s right for your family, let’s get together to help you understand your options and guide you toward the best decision.
In many markets across the country, the number of buyers searching for their dream homes outnumbers the number of homes for sale. This has led to a competitive marketplace where buyers often need to stand out. One way to show that you are serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage before starting your search.
Even if you are not in an incredibly competitive market, understanding your budget will give you the confidence of knowing whether or not your dream home is within your reach.
Freddie Mac lays out the advantages of pre-approval in the ‘My Home’ section of their website:
“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”
One of the many advantages of working with a local real estate professional is that many have relationships with lenders who will be able to help you through this process. Once you have selected a lender, you will need to fill out their loan application and provide them with important information regarding “your credit, debt, work history, down payment and residential history.”
Freddie Mac describes the ‘4 Cs’ that help determine the amount you will be qualified to borrow:
Getting pre-approved is one of many steps that will show home sellers that you are serious about buying, and it often helps speed up the process once your offer has been accepted.
Many potential homebuyers overestimate the down payment and credit scores necessary to qualify for a mortgage. If you are ready and willing to buy, you may be pleasantly surprised at your ability to do so today.
![The Cost of Renting vs. Buying This Spring [INFOGRAPHIC] | MyKCM](https://files.mykcm.com/2019/05/29064811/20190503-ENG-STM-1046x1354.jpg)
If you are in the market to buy a home this year, you may be confused about how much money you need to come up with for your down payment. Many people you talk to will tell you that you need to save 20% or you won’t be able to secure a mortgage.
The truth is that there are many programs available that let you put down as little as 3%. Those who have served our country could qualify for a Veterans Affairs Home Loan (VA) without needing a down payment.
These programs have cut the savings time that many families would need to compile a large down payment from five or more years down to a year or two. This allows them to start building family wealth sooner.
So then, why do so many people believe that they need a 20% down payment to buy a home? There has to be a reason! Today, we want to talk about four reasons why putting 20% down is a good plan, if you can afford it.
Putting down a 20% down payment vs. a 3-5% down payment shows your lender/bank that you are more financially stable, thus a good credit risk. The more confident your bank is in your credit score and your ability to pay your loan, the lower the rate they will be willing to give you.
The bigger your down payment, the lower your loan amount will be for your mortgage. If you are able to pay 20% of the cost of your new home at the start of the transaction, you will only pay interest on the remaining 80%. If you put down a 5% down payment, the extra 15% on your loan will accrue interest and end up costing you more in the long run!
In a market where many buyers are competing for the same home, sellers like to see offers come in with 20% or larger down payments. The seller gains the same confidence that the bank did above. You are seen as a stronger buyer whose financing is more likely to be approved. Therefore, the deal will be more likely to go through!
Simply put, PMI is “an insurance policy that protects the lender if you are unable to pay your mortgage. It’s a monthly fee, rolled into your mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%.”
As we mentioned earlier, when you put down less than 20% to buy a home, your lender/bank will see your loan as having more risk. PMI helps them recover their investment in you if you are unable to pay your loan. This insurance is not required if you are able to put down 20% or more.
Many times, home sellers looking to move up to a larger or more expensive home are able to take the equity they earn from the sale of their house to put down 20% on their next home.
If you are looking to buy your first home, you will have to weigh the benefits of saving a 20% down payment vs. the time and cost of continuing to rent while you save that amount.
If your plan for your future includes buying a home and you’re already saving for your down payment, let’s get together to help you decide what down payment size best fits with your long-term plan!
Congratulations! You’ve found a home to buy and have applied for a mortgage! You are undoubtedly excited about the opportunity to decorate your new home! But before you make any big purchases, move any money around, or make any big-time life changes, consult your loan officer. They will be able to tell you how your decision will impact your home loan.
Below is a list of 7 Things You Shouldn’t Do After Applying for a Mortgage! Some may seem obvious, but some may not!
1. Don’t change jobs or the way you are paid at your job! Your loan officer must be able to track the source and amount of your annual income. If possible, you’ll want to avoid changing from salary to commission or becoming self-employed during this time as well.
2. Don’t deposit cash into your bank accounts. Lenders need to source your money and cash is not really traceable. Before you deposit any amount of cash into your accounts, discuss the proper way to document your transactions with your loan officer.
3. Don’t make any large purchases like a new car or new furniture for your new home. New debt comes with it, including new monthly obligations. New obligations create new qualifications. People with new debt have higher debt to income ratios… higher ratios make for riskier loans… and sometimes qualified borrowers no longer qualify.
4. Don’t co-sign other loans for anyone. When you co-sign, you are obligated. As we mentioned, with that obligation comes higher ratios as well. Even if you swear you will not be the one making the payments, your lender will have to count the payment against you.
5. Don’t change bank accounts. Remember, lenders need to source and track assets. That task is significantly easier when there is consistency among your accounts. Before you even transfer money between accounts, talk to your loan officer.
6. Don’t apply for new credit. It doesn’t matter whether it’s a new credit card or a new car. When you have your credit report run by organizations in multiple financial channels (mortgage, credit card, auto, etc.), your FICO score will be affected. Lower credit scores can determine your interest rate and maybe even your eligibility for approval.
7. Don’t close any credit accounts. Many clients have erroneously believed that having less available credit makes them less risky and more likely to be approved. Wrong. A major component of your score is your length and depth of credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both those determinants of your score.
Any blip in income, assets, or credit should be reviewed and executed in a way that ensures your home loan can still be approved. The best advice is to fully disclose and discuss your plans with your loan officer before you do anything financial in nature. They are there to guide you through the process.