Tag Archives: mortgages

The Three Most Popular Types of Mortgages


The Three Most Popular Types of Mortgages

Fixed-Rate Mortgage
This is the most common type of loan, and for good reason. With a fixed-rate loan, the interest rate remains the same throughout the loan’s duration, which is typically 15 or 30 years.
Who should use this loan?
Those who are interested in consistent housing payments or don’t plan to move anytime soon.

Adjustable-Rate Mortgage
Also known as a variable-rate mortgage, this is a loan with an interest rate that changes based on the prime rate and index rate. While you may start with lower monthly payments, you must be prepared to pay more at any given time.
Who should use this loan?
Those who have poor credit or plan to sell their home before their fixed-rate period is up.

FHA Loan
In an effort to make buying a home more attainable for Americans, the Federal Housing Administration offers FHA loans which allows buyers to put a minimum down payment for as little as 3.5 percent.
Who should use this loan?
Those who don’t have enough savings for a down payment. However, with a FHA loan comes private mortgage insurance (PMI), which hovers around 1 percent of the cost of your loan.

There are two other types of loans that home buyers should consider and that is the USDA Home Mortgage and the VA Mortgage.   USDA loans are not available in all areas, but if it is, it can be a great alternative, especially first-time home buyers.  The VA loan is a fantastic mortgage option for those who qualify.  Not only is a great interest rate, but the credit criteria is very workable.
At the end of the day, talking to a mortgage professional will help you decide which type of loan is best suited for you.

Application documents checklist
To be able to predict your financial future, lenders need to take a hard look at your past and present financial situations. With this checklist, the task of gathering the necessary paperwork won’t seem as burdensome.
• Bank statements
• W2s from current and past employers
• Pay check stubs
• List of all debts
• List of all assets
• Credit report
• Residential address for the past two years
• Landlord names and addresses for the past two years
• Proof of timely rental payments
• Divorce decree (if applicable)
• Gift letter (if using gift funds)
• Bankruptcy paperwork (if applicable)
If you are thinking of buying or selling, talk to a real estate professional – talk to a REALTOR® who can give you the information you need to make an informed decision.
As always, if I can help with any of your real estate needs, please feel free to text or call me at 301-712-8808 or email me at RolandLow1@gmail.com.
Roland

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What Every REALTOR® Wants You to Know About the Government Shutdown


What Every REALTOR® Wants You to Know About the Government Shutdown

 Several years ago, I broke the little toe on my left foot.  Not a serious injury, I’m sure you’ll agree, but a break never the less.  As a REALTOR® and not a doctor, the state of Maryland recognizes me as an “expert” in the field of real estate, but not in the field of medicine.  Never the less, I believe I can say with confidence that my medical advice is to avoid breaking a toe (or anything for that matter).

As my doctor was wrapping my broken little toe to the toe next to it, he said, half chuckling, “You are about to find out how your body is all interconnected.”  As I tried to stand, walk, or even balance myself I realized how the toes – even the little toe – was used to maintain balance.  The partial government shutdown is no different.  The government agencies are all interconnected.

When the partial government shutdown was first announced, FHA announced that they would stop processing mortgage loans insured by the FHA.  A few days later, the FHA reversed their decision and announced that they would process loan applications, although they would only process loan applications for single family homes, and not for condos.

That may sound like good news, but in reality, when a person applies for a mortgage, their income is verified by checking their income from their tax records.  During the partial government shutdown, the IRS workers are not working, making the verification of the tax records difficult, if not impossible.

The FHA announced that if the government shutdown is “brief”, the FHA does not expect the housing market to be “…significantly affected.”  Then the FHA stated that most employees of the Department of Housing and Urban Development are furloughed and not working and that applications for loans will be delayed.  The definition of “brief” as used by the FHA was not provided.

If you are thinking of buying or selling, talk to a real estate professional – talk to a REALTOR® who can give you the information you need to make an informed decision.

As always, if I can help with any of your real estate needs, please feel free to text or call me at 301-712-8808 or email me at RolandLow1@gmail.com.

Roland

 

PMI Insurance Deductions – Now You See It, Now You Don’t, Now You See It!


PMI Insurance Deductions – Now You See It, Now You Don’t, Now You See It!

 PMI insurance is one of the most hated aspects of the real estate industry – at least in my honest opinion.  Basically, if you do not put at least 20% down on the purchase of your home, you will be required to pay PMI insurance.  The payment will be factored into your monthly payments.  What makes the PMI payments almost tolerable is that the PMI insurance that you pay is – was – and is again, tax deductible.

Let me throw in a comment about the world of real estate.  Yes, we hear a lot of complaining about the PMI insurance, or the origination fee if you are doing a VA mortgage.  But the truth of the matter is that the mortgage / real estate industry in the United States is the envy of the world.  In many countries homebuyers  would love to be able to buy a home with only 20% down.

The PMI fee was made palatable by having the fee deductible on your Federal taxes – until last year.  At the end of 2017, Congress passed a budget bill that eliminated the Federal deductions for PMI insurance for 2017.  Because it was the end of the year, tax professionals were scrambling to amend documents to change the deductions.  Then, in the first of February, Congress passed a bill that retroactively reinstated the deductions for PMI insurance for 2017.  That’s a good thing, unless of course, you finished your 2017 taxes about the time the new bill passed into law.

Don’t fret – you can file an amendment to your taxes and  enjoy the benefit of deducting PMI insurance once again.

Of course, if you have any questions of your tax liability, talk to a tax professional who can give you the information you need.  Don’t listen to a thing I say about taxes – only real estate!

If you are thinking of buying or selling real estate, talk to a real estate professional – talk to a REALTOR® – who can give you the information you need to make an informed decision.

As always, if I can help with any of your real estate needs, please feel free to text or call me at 301-712-8808 or email me at RolandLow1@gmail.com.

Roland

 

Finding the Right Mortgage Officer


Finding the Right Mortgage Officer

Anyone who has bought a house will tell you that finding the right REALTOR® and the right mortgage person is absolutely critical.  If you talk to a REALTOR®, they will tell you that you should select your real estate agent first; if you talk to a mortgage person they will say you should select your mortgage person first.  In reality it doesn’t matter which one you select first as long as you select people who are going to do a good job for you.

There is one factor that is critically important when selecting a mortgage person that I think warrants discussion.  If you are like millions of people in this country who may have less than stellar credit, or do not have a gazillion dollars to put down, it is important to have a mortgage person who can guide you in making those decisions.

All too often I have clients who talk to a mortgage person only to be told that they do not qualify for a mortgage without telling them what they need to do to correct the matter.  The good news is that there are some mortgage officers who have the computer programs and the desire to provide this information to clients.

I have had clients who thought they needed to have no debt in order to buy a house and have used all their money to pay off credit card debt but then did not have the money for closing costs or down payments.

Before you make that decision I would encourage you to talk to a mortgage person or a REALTOR® who can get you in touch with a mortgage officer who can advise you on what to pay down and what not to pay down.  It really does matter.

If you are thinking of buying or selling, talk to a real estate professional – talk to a REALTOR® – who can give you the information you need to make an informed decision.

As always, if I can help with any of your real estate needs, please feel free to text or call me at 301-712-8808 or email me at RolandLow1@gmail.com.

Roland

 

 

What Every REALTOR® Wants You to Know About Credit Scores


What Every REALTOR® Wants You to Know About Credit Scores

 Unless you are paying cash for a house, you will need to have a loan or mortgage, to buy the house.  Having a good credit rating will make that task a lot easier.

magnifying-glass-on-levels-of-credit-scores_573x300

First, let me start by saying that I am not a mortgage broker, however, many of the questions I get from real estate clients involve mortgages.  If you are working with a REALTOR® they should be able to refer you to a mortgage person who can answer any questions and to get the ball rolling for an approval.

Nevertheless, there are many things we can talk about to help buyers, especially first time home buyers with questions they may have.  It is important to understand that the news indicates that you must have 20% down to buy a house – not true.  FHA requires as little as 3.5% and the USDA has programs in specific areas that will require 0% down!  There are far too many programs to discuss here.  That is where a mortgage officer can help, but there is some basic information that can help a home buyer understand the approval process.

Recently I talked to a potential client who was aggressively paying down his credit card debt, which is not a bad thing.  However, the client was under the impression that he had to have all his credit cards paid off before he could apply for a mortgage – again, not true.  It is important to pay down debt to a level that helps your credit score, but it is also important to have cash on hand when buying a house.  That is where a mortgage person can help.

Here is some basic information to help you understand how your FICA score is computed.  Probably the most important factor is your payment history.  Your payment history is the best predictor of future behavior and therefore one of the most important factors in a credit score.  Your payment history accounts for 35% of your credit score.

Another important factor is the amount you owe, and it’s not just how much you owe, but how much you owe compared to the amount of credit you have available.  If a person is maxed out on their available line of credit they are more likely to be over extended and miss future payments.  This accounts for 30% of your credit score.

These two factors account for 65% of your credit score.  New credit and length of credit also count for your credit scores.  Talking to a mortgage officer can help you to determine where you stand and what you need to do to improve your score to enable you to buy a house.

If you are thinking of buying or selling talk to a real estate professional – talk to a REALTOR® – who can give you the information you need to make an informed decision.

As always, if I can help with any of your real estate needs, please feel free to text or call me at 301-712-8808 or email me at RolandLow1@gmail.com.

Roland

Things Every REALTOR® Wants You To Know – Pre-Qualified vs. Pre-Approved


Things Every REALTOR® Wants You To Know – Pre-Qualified vs. Pre-Approved

The age-old question of which came first, the chicken or the egg, can certainly apply to home buying. If you talk to a REALTOR® they will most likely tell you the first person you should contact is a REALTOR®. If you talk to a mortgage broker they will undoubtedly tell you the first person you should talk to is a mortgage broker.

Pre-Approval-vs-Pre-Qualification

Breaking with tradition of REALTORS® I will tell you it really does not make to much difference who you contact first – as long as both the real estate agent and the mortgage broker are in lock step. That being said, I will say that I believe that it is more critical to talk with a REALTOR® first. The reason is that the REALTOR® will be with you during the entire process. Because of that it is important that you are comfortable with your REALTOR®. The mortgage broker will handle a much smaller portion of the process.

Nevertheless, applying for a mortgage is a critical step and should be done early on in the process. First of all, buyers must determine the amount of mortgage they will be approved for in order to determine what price range of homes they should look at.

As a REALTOR®, one of the first questions I will ask a potential buyer is whether or not they have talked to a mortgage broker and whether or not they have been “pre-approved.” If not, most REALTORS® can refer you to a mortgage broker that they are confident will work hard to be able to approve a loan for a potential buyer. Not only that, the relationship between the REALTOR® and mortgage officer is critical during the process should there be a glitch along the way. It is always important that if there is a glitch – and there often is – that the REALTOR® or mortgage officer can pick of the phone and talk to each other, as opposed to emails from Internet based mortgage companies.

There is a lot of confusion between a pre-qualified and pre-approved. It is very important that buyers understand the difference and get pre-approved for a mortgage. Here is why.

Any real estate agent can pre-qualify a potential buyer for buying a home. This process is a very simple process and only crunches a few numbers. Basically, the buyers state how much income they have and how much debt they have. If the total debt and mortgage payments, including taxes and insurance is less that 36% of their gross income and their mortgage payment is less than 28% of their gross monthly income, then they will LIKELY qualify for a mortgage.

I say ‘likely’ because in the pre-qualify process it does not take into account if the potential buyers are current with payments; it does not verify the income, nor does it review their overall credit worthiness. Personally, I have not done a pre-qualify for years. It is more effective for potential buyers to obtain a “pre-approval” letter from a qualified mortgage broker. Even then it is a first step in obtaining a mortgage.

There is another major reason why I require buyers to get pre-approved prior to showing properties, at least not too many.

Often times potential buyers will decide that they can afford a $500,000 home only to later find out that they will only be approved for a $350,000 mortgage. If I have shown them homes priced at $500,000 every home that I now show them priced at $350,000 will fall short of what they have looked at before. This makes home buying very difficult.

In addition, if I am representing the sellers, I want to see a “pre-approval letter” from a qualified mortgage broker along with the offer to determine how serious the offer really is.

If you are thinking a buying or selling, talk to a real estate professional – talk to a REALTOR® – who can give you the information you need to make an informed decision.

As always, if I can help with any of your real estate needs, please feel free to text or call me at 301-712-8808 or email me at RolandLow1@gmail.com.

Roland

Home Buying – and Selling – for 2016


Home Buying – and Selling – for 2016

The groundwork is in place for a major jump in home buying for 2016 – especially this spring. Experts range the prospect from moderate to “robust.” It doesn’t appear that it will be the frenzied sales we saw just before the market went bust, but it appears that it will be healthy growth.

Real Estate Market Trend is Strong
Real Estate Market Trend is Strong

If you are even remotely thinking of buying – or selling for that matter – anytime in 2016, I would suggest that you take some time now to meet with a REALTOR who can help with a game plan to put you on the right path in obtaining your new home. If you are thinking of selling, a review by an objective REALTOR may help to point out areas that need to be improved to maximize your sale amount.

If you are thinking of buying in 2016 – especially if you are a first time home buyer, I suggest that you meet with an agent as soon as possible. I generally advise that first time homebuyer’s meet with a REALTOR about a year before they plan on closing on their house.

A year may seem like a long time, but there are times when you will discover that there are items on your credit bureau that may need to be corrected, or that you will need more money in your bank account than you thought. The earlier you find these issues and work to correct them, the better.

There are one of two issues that mortgage brokers and real estate agents will tell you are important. They will either say to “Pay down your debt” or “Save every penny you can.” These obviously can be conflicting goals and may lead to frustration on the part of the first time home buyer’s.

My suggestion is this: You have to have a balance between the two. Yes, reducing your debt may help to get a better interest rate, but if you put all your money on your debt and have not saved enough you will not be able to purchase that home.

For most home buyer’s, especially first time home buyer’s, its the down payment that gets in the way. Mortgage brokers will tell you that you should have 20% down payment in order to buy a house. The good news is that the 20% down payment will most likely prevent you from having to pay PMI insurance, but it is not necessary in order to buy a house. Many transactions are made with 3.5% to 5.0% down.

Here’s the good news: Say you buy a house for $250,000. For simplicity, we are not going to figure in any downpayment. If your home increased in value 3% every year, at the end of seven years you would have approximately $57,467 to put towards a down payment of your next home. That does not include any reduction in the principle you made with your payments.

If your home increased in value 4% a year; after seven years you would have approximately $78,982 to put towards a down payment of your next home.

Home ownership is one of the best ways to increase your net worth.

If you are thinking of buying – or selling – talk to a real estate professional; talk to a REALTOR who can give you the information you need to make an informed decision.

As always, if I can help with any of your real estate needs, please feel free to text or call me at 301-712-8808 or email me at RolandLow1@gmail.com.

Roland