Mortgage

Is an ARM Loan Right for You?

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Is an ARM right for youIn today’s competitive housing industry, it’s important to find the loan that’s right for you. With the low-interest-rate environment, many buyers wonder if an ARM loan is the best choice. Here’s everything you should consider before choosing an ARM loan.

Understanding how an ARM Loan Works

An ARM loan offers an introductory rate. The rate remains fixed for the first few years. After the fixed period, the rate adjusts annually based on the index (such as LIBOR) and the chosen margin set by the lender.

Many buyers prefer the ARM because the initial payment is much lower so they can afford a larger loan. With the potential of increasing rates in the near future, many buyers are looking at the ARM for its lower cost. 

A fixed-rate loan, on the other hand, starts at one rate and remains the same. Your payment never changes unless you escrow your taxes and insurance, and those rates change throughout the time you own the home. 

Pros and Cons of the ARM Loan

 Pros:

  • Lower payment for the first few years
  • You may be able to pay more principal each month with the lower payment
  • Rates may decrease in the future

Cons:

  • Rates can increase significantly
  • Your monthly payment will change annually after the fixed period
  • It’s hard to predict your financial situation 5 to 10 years from now

Choosing Between an ARM Loan and Fixed Rate Loan

Because you don’t know where you’ll be 5 to 10 years from now, it’s hard to decide if an ARM loan or fixed-rate loan is right. Here’s what you should consider.

Will you Move Soon?

Think about your plans. Will you move in the next few years? If so, an ARM may make sense, especially if you can get one with a rate that will adjust after you sell the house.

Do you Think you’ll Refinance? 

Some people like refinancing whether to get the lowest rates or to tap into their home’s equity. If you’ve structured your loan so that you put money into the home now but will tap into it later, an ARM may save you money for a few years. If you refinance before the rate adjusts, you eliminate the risk of increasing rates. 

Do you not Like Risks?

No matter what your future plans may be, if you don’t like risks and uncertainty, a fixed-rate loan is a better choice. You’ll get more predictability and know exactly what your payment is each month. You’ll also know when you can afford to pay more principal and pay your loan down faster.

Choose the Right Loan Term for You

Look at your situation and choose the loan term that suits your finances now and in the future. Even if everyone around you is taking an ARM loan doesn’t mean it’s right for you. Know the terms, how much the rate can change, and what you are comfortable affording.

Talk with your loan officer and look at all scenarios, paying close attention to the loan’s total cost over the life of the loan before deciding.

Deciding Whether To Move or Refinance: Which Is The Better Option?

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Deciding Whether To Move or Refinance: Which Is The Better Option?There are a lot of people who are wondering if now is the right time to move or refinance their current home loan. With interest rates still favorable, a lot of homeowners have the potential to save a lot of money if they are able to secure a home loan with a lower interest rate. There are two ways homeowners can secure a home loan with a lower interest rate. The first is to refinance. The second is to move. Which option is better? There are a few key points to keep in mind.

Taking A Closer Look At Refinancing

There are a lot of homeowners who have an abundance of equity currently built up in their homes, making this a great time to refinance. With a refinance, there are multiple options available. Some homeowners might refinance to access the equity in their homes, allowing them to complete a project. Some homeowners might refinance in an effort to pay off their home loan sooner. If homeowners are trying to access more equity, or are trying to shorten the term of the loan, then refinancing might be the smart move.

Looking At The Option Of Moving

The other option is to get a new home loan entirely by moving. This is an attractive option for homeowners who might have a dream house they would like to move to. In particular, any homeowner who currently has a home loan with a high interest rate should consider moving into their dream home now. Because mortgage rates are low right now, this is a chance for homeowners to move into a larger house while keeping their mortgage payments the same or less by obtaining a lower interest rate.

Every Situation Is Different

In the end, every situation is different. Because interest rates right now are so low, now could be the time for homeowners to consider moving or refinancing. Switching to a home loan with a lower interest rate could save tens of thousands of dollars over the life of the loan. Anyone with questions or concerns should reach out to a professional for help.

Do You Have Enough Of A Down Payment Saved Up?

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Do You Have Enough Of A Down Payment Saved Up?If you are planning on purchasing a home in the near future, you need to make sure you have enough money saved up. While there are a lot of expenses that go along with purchasing a home, the biggest expense is the down payment.

The common belief is that people have to put 20 percent down; however, even if you don’t have 20 percent saved up, you might still be able to purchase a home. It will depend on whether you can get a lender to provide a loan that is greater than 80 percent of the purchase price of a home. If you have a strong credit history, you may be able to get one.

Getting A Loan With Less Than 20 Percent Down

First, many lenders realize that many people do not have enough money saved up to put down 20 percent. After all, this could be tens of thousands of dollars.  Although some people might be able to get a loan with only 10 percent down, those with outstanding credit might even qualify for a larger loan. There are certain people, such as veterans, who might have other options outside of conventional loans that might open other doors. If you are looking to get a home loan for less than 20 percent down, you will want to check all of your options.

How To Get A Loan For Less Than 20 Percent Down

Particularly if you are a first-time homebuyer, you might not know how to get a loan for less than 20 percent down. First, you need to have a strong credit score. If the lender is giving you a larger loan, they will want to make sure you can pay it back. Having a strong credit score can prove this to them. You may want to check your credit report ahead of time to correct any inaccuracies.

Second, you need to take a look at your debt to income ratio. If you have a lot of debt, consider paying this down before applying for a home loan.

Finally, trust an experienced lender to guide you through the process. You might be able to get a home loan for less than 20 percent down.

Understanding Appraisals and What to Do If Your Home Doesn’t Appraise for Its Purchase Price

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Understanding Appraisals and What to Do If Your Home Doesn't Appraise for Its Purchase PriceIt can be a bit of a surprise if your home turns out to be valued at less than the purchase price offered, but this is the type of thing that can occur in an appraisal situation. While this can change everything from your contract to the amount of your down payment if your home has been appraised at less than you envisioned, here are some options you may want to consider.

Review The Appraisal Contingency Clause

If an appraisal contingency clause is built into the terms of your contract, this means that the terms of your contract can be re-evaluated and re-negotiated if an appraisal happens to come up short. While this is meant primarily to protect the homebuyer against a lower appraisal, it doesn’t mean that the terms of a new deal can’t be met for the good of both parties.

Get A Second Appraisal

It’s entirely possible that the initial appraisal is accurate, but it doesn’t necessarily hurt to get a second opinion in the event that the first appraisal seems too low. While you can work in conjunction with your lender to get a second appraisal, you may need to pay for it the second time around in order to get your initial purchasing price. Whether it happens to be good news or bad news, it can be worth the peace of mind to know how to proceed.

Consider A Lower Price

It’s less than ideal when your home is appraised for less than the purchase price, but this doesn’t have to be a deal breaker when it comes to selling it. While you may be able to get away with a higher price for your home in a hot real estate market, if things have cooled off, this can be an important time to re-negotiate the deal you’ve got. If a potential buyer likes your home and has already made an offer, they may be happy to decide on new contract terms.

It can be quite disappointing if your home is appraised at a value that is less than the offer you’ve received, but this doesn’t necessarily mean that you’ll have to put your home back on the market. Whether you and the potential buyer decide to re-negotiate or get a second opinion, there are options that can be beneficial for both parties. If you’re currently going through the appraisal process, you may want to contact your local mortgage professional for more information.

In The Current Housing Market, Prospective Buyers Must Remain Patient

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In The Current Housing Market, Prospective Buyers Must Remain PatientThe housing market has been through many ups and downs during the past 12 months. Now, buyers are facing a unique challenge as they try to find the right house in the perfect seller’s market. Right now, real estate is extremely competitive, as low inventory has continued for several months.

As mortgage rates remain low, more people are looking for homes, increasing the competition. Some people are reluctant to sell because they know they will face the same challenges of trying to find a new home themselves. As a result, the housing market has record-low inventory making it difficult for buyers to find the right house in their budget.

Builders Have Not Constructed As Many New Homes

While a reluctance to sell is one reason why the housing market has become competitive, it is not the only one. There has also been a lack of new homes built during the past decade. From 2000 to 2010, builders constructed more than 12.6 million new homes, creating more inventory for those looking to buy. From 2010 to 2020, only 6.5 million new homes were constructed.

This number is significantly lower than the rate of new household formation, which has continued to go up. The result is an extremely competitive market for anyone looking to purchase a house in the current market. While builders are working hard to keep up with demand, it will take some time for them to catch up.

Buyers Must Remain Patient During This Challenge Time

Because the housing market is so competitive, many buyers find themselves facing bidding wars, where multiple buyers make offers on the same home. This drives up the sale price of the house, increasing property values in the surrounding area. This simply makes it more competitive for those still looking to buy.

Therefore, buyers need to remain patient. Low inventory will not remain at a low forever, and builders continue to construct new homes. It takes between four and eight months to build new homes, and more houses will come on the market as families consider moving in the wake of the pandemic. Patience is the key to finding the right home in the current market.

Is Now The Time To Refinance Your Mortgage?

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Why Refinance

To refinance a mortgage means to pay off your existing loan and replace it with a new one.

There are many reasons why homeowners opt to refinance, from obtaining a lower interest rate, to shortening the term of the loan, to switching mortgage loan types, to tapping into home equity.

Each has its considerations.

Lower Your Mortgage Rate
Among the best reasons to refinance is to get access to lower mortgage rates. There is no “rule of thumb” that says how far rates should drop for a refinance to be sensible. Compare your closing costs to your monthly savings, and determine whether the math makes sense for your situation.

Shorten Your Loan Term
Refinancing your 30-year fixed rate mortgage to a 20-year fixed rate or a 15-year fixed rate is a sensible way to reduce your long-term mortgage costs, and to own your home sooner. As a bonus, with mortgage rates currently near all-time lows, an increase to your monthly payment from a shorter loan term may be negligible.

Convert ARM To Fixed Rate Mortgage
Homeowners with adjustable-rate mortgages may want the comfort of a fixed-rate payment. Mortgage rates for fixed-rate mortgages are often higher than for comparable ARMs so be prepared to pay more to your lender each month.

Access Equity For Projects, Debts, Or Other Reasons
Called a “cash out” refinance, homeowners can sometimes use home equity to retire debts, pay for renovations, or use for other purposes including education costs and retirement. Lenders place restrictions on loans of this type.

A refinanced home loan can help you reach specific financial goals or just put extra cash in your pocket each month — just make sure that there’s a clear benefit to you. Paying large closing costs for small monthly savings or negligible long-term benefit should be avoided.

Many lenders offer low or no closing costs options for refinancing. Be sure to ask about it.

Pantone Colors: Should You Repaint Before You Sell?

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Pantone Colors: Should You Repaint Before You Sell?Pantone is a universal language of color that you can use to select beautiful colors to paint the home. Interestingly, each year, Pantone selects a color of the year that embodies what’s happening in society. 

In 2021, the Pantone color of the year was awarded to two colors, Illuminating 13-0647 and Ultimate Gray 17-5104. These two colors highlight how two different elements can come together and support each other. This is the thought behind selecting them based on what has occurred over the last year. 

The bold yellow and deeper gray capture feelings of promise, friendliness, and thoughtfulness, which may be a great reason to add those colors to a home. Should homeowners repaint their home in these colors, though, before they sell?

When Psychology Matters, Remember Pantone’s Color of the Year

Pantone’s color of the year is normally the start, or continuation, of a yearly color trend. That can make it an excellent color to incorporate into your home, especially if you are selecting the color based on its meaning. 

However, most people don’t use Pantone colors to completely repaint before selling their homes. Instead, they use the Pantone color of the year to add pops of color or a touch of the modern color palette before putting the home on the market. 

How Can You Incorporate the Pantone Color of the Year?

For example, if a home is already based on a neutral color scheme in grays or blues, adding a pop of the color Illuminating draws the eye. Using yellow as an accent color is a great way to draw attention to impressive parts of the home.

For brighter spaces, toning down the room with a cooler, relaxed gray is a good way to make the space welcoming to those who love color as well as to those who have a more traditional approach to home decorating.

Repainting an entire home in the Pantone color of the year is an option if homeowners need to repaint anyway, but if they don’t, then it could be an expensive option. To reach the most buyers, the better bet is to choose a neutral palette that potential buyers can envision in their own preferred color scheme. 

How Does A Change In Mortgage Rates Impact A Family’s Housing Budget?

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How Does A Change In Mortgage Rates Impact A Family's Housing Budget?

The housing market is extremely competitive right now because mortgage rates are still near record lows. While mortgage rates are rising this year, the rates are still attractive to many individuals and families who are looking to buy a home. At the same time, when mortgage rates change, families need to re-evaluate their budgets. A change in mortgage rates will impact the monthly mortgage payment, so families need to know what they can afford.

Furthermore, because the market is so competitive, sale prices are going up as well. As mortgage rates and home prices rise, families need to determine what their monthly budget is. Even a small increase in the mortgage rate can make a big difference.  

Families Must Do The Math To Figure Out Their Monthly Mortgage Payments

Families need to figure out what monthly mortgage payment they can afford before they make an offer on a home. The factors impacting the monthly mortgage payment are the loan amount, the interest rate, and the repayment period. Many homeowners take out a 30-year mortgage; however, borrowers might be able to adjust the term to meet their specific needs. A few important points to remember include:

  • If the number of years over which the loan is paid back goes down, the monthly payment will likely increase
  • If the interest rate on the loan goes up, the monthly payment will increase
  • If the loan amount goes up, the monthly payment will increase

Families can adjust all of these factors to find the right monthly payment for their budgets.

There Are Ways To Reduce The Interest Rate On A Loan

Finally, there are steps that families can take to reduce the interest rate on their loans. For example, families might be able to put more money down to qualify for a better interest rate. This could reduce the monthly payment, keeping the loan amount within the family’s budget. Or, families might be able to pay down other types of debt such as credit card debt or car loans. If families have a lower debt to income ratio, they might qualify for a better interest rate. This could help families afford a larger house without having to spend more money.

Reevaluate

Top 8 Things New Homeowners Need

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Top 8 Things New Homeowners NeedMoving into your first home is an exciting experience, but it can also be overwhelming. To manage the move properly, you need a wide variety of tools you may never have considered before. You may not realize you should have purchased a certain item until you need it. 

To prepare for the move into your new home, make sure you have all of the items listed below. 

Storage For Documents

As a homeowner, you will need to keep and organize a variety of documents, including receipts, warranties and even your mortgage papers. Consider buying a fireproof box or cabinet to store these items.

Fire Extinguisher

Every homeowner should have at least one fire extinguisher on hand. Make sure your fire extinguisher is stored in a location that can be accessed easily in the event of a fire. 

Extension Cords

Extension cords can be useful in a variety of situations, from plugging in appliances that are too far from an outlet to decorating your home for the holidays. Be sure to buy multiple cords in different lengths so you can use them for different purposes. 

Smoke Alarms

If your home is not already equipped with working smoke alarms, you need to purchase and install them as soon as possible. Be sure that you check your alarms every four months and change the batteries as needed. 

Cleaning Supplies

Another important purchase for every new homeowner is cleaning supplies. While some of these supplies may be used on a daily basis, others may be used less frequently. Nonetheless, it is a smart to have all of these items on hand. Examples of cleaning supplies you may need include window cleaner, toilet brushes, brooms, mops, sponges and paper towels. If you have carpet in your new home, you may need to buy a vacuum cleaner as well

A Basic Tool Kit

Every new homeowner will need some basic tools. Purchasing these tools in advance will make both small and large tasks easier. Be sure your toolkit includes a utility knife, flashlight, measuring tape, screwdrivers, wrenches and hammers. Having some different kinds of tape on hand is also a wise idea. 

Exterior Door Locks

When moving into a new home, it is always a good idea to change the locks. Although the previous owner is asked to turn over all the keys to the home, it is impossible to know whether other keys exist. Buying your own door locks will protect against break-ins and give you peace of mind. 

Lawn Equipment

If you will be responsible for maintaining your own lawn and landscaping, you will need to invest in the proper lawn maintenance equipment. Examples of items you may need include snow shovels, sprinklers, rakes, shears, shovels and water hoses. You may also need a lawnmower. 

You may still need to make additional purchases after you have everything on this list. However, this list covers many of the basic things you will need to begin life successfully in your new home. 

 

How to Become a Homeowner: First Time Home Buyer Guide

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How to Become a Homeowner: First Time Home Buyer GuideBecoming a homeowner for the first time is exciting. However, for many potential buyers, the process can also be confusing. Below is an overview of the steps you need to complete in order to buy your first home. 

Work Out The Finances

The first step in buying a home is deciding on a price range. This price range will be determined by your income, as well as your own comfort level with home prices and monthly payments. Consider all of these factors to determine the maximum amount you are willing to spend on your new home. 

In most cases, you will be required to pay the downpayment and closing costs upfront, even if you are financing the rest of the home’s purchase price. In general, most lenders will expect a downpayment equal to 20 percent of the home’s purchase price. Otherwise, you may be required to pay mortgage insurance. Before buying a home, set enough money aside to cover these expenses. 

For most homeowners, the next step in the home buying process involves looking into different mortgage options. Unless you have enough money to purchase your home for cash, you will need a mortgage. Be sure to compare quotes from different lenders before making a choice to be sure you are getting the best deal. Once you have chosen a lender and a specific type of mortgage, ask for a preapproval letter that you can attach to any offers you make so that you will be a more reliable and attractive buyer. 

Hire An Agent 

When searching for the perfect first home, hiring a real estate agent to represent you throughout the process is highly recommended. Your real estate agent will act as a buyer’s agent, which means they will have your best interests at heart. When you don’t have a buyer’s agent, you will be dealing only with the seller’s real estate agent instead. Because this individual has been hired to represent the seller, they will always put the seller’s needs above yours. 

Find The Right Home

Once you have a qualified agent to represent you and a preapproval letter from your lender, it is time to start looking for your new home! Your real estate agent will help you comb through listings and choose the properties you want to see. Next, you will walk through each home until you find the one that is right for you. After you have chosen a home, your real estate agent will help you prepare and submit an offer to the seller. 

The process of buying your first home may seem overwhelming at first. However, by following these steps, you can simplify the process and become a homeowner with ease.