02
Feb
By First Rate Financial Group
Home Mortgage Tips

Refinancing Your Mortgage: Understanding the Various Types of Refinancing

Refinancing Your Mortgage: Understanding the Various Types of RefinancingWhether you’ve been thinking about ways that you can draw on your home equity to fund a renovation project or you want to take advantage of low interest rates before they rise again, refinancing your mortgage is an excellent option.

In today’s blog post we’ll introduce mortgage refinancing and discuss a few of the ways that you can use this tool to help accomplish your financial goals.

Cash-In and Cash-Out Refinancing

Many homeowners refinance their mortgage in order to take some of the home equity out for other purposes. In a “cash-out” refinancing, you take out a new mortgage loan which is greater in value than your current loan. After paying off the existing mortgage you’ll receive a check for the difference which can then be reinvested in home upgrades or put to use elsewhere in your financial portfolio. You may also be able to get a better interest rate in this type of refinancing, saving additional money over the long term.

Do you owe more on your mortgage than your home is currently worth but still want to take advantage of lower interest rates? If so, “cash-in” refinancing is an option that can help you to avoid the mortgage insurance costs that you may be facing when you refinance. As the name implies, cash-in refinancing will provide you with a loan that is for less than the amount that you currently owe, so you’ll need to add “cash-in” to make up the difference.

Home Affordable Refinance Program or “HARP” Refinancing

If you find that you’re unable to refinance your mortgage as the value of your home has declined, the federal government’s Home Affordable Refinance or “HARP” Program may be an option. If you have been making your mortgage payments on time, have a mortgage guaranteed by Fannie Mae or Freddie Mac and your current “Loan to Value” ratio is greater than 80% it’s likely that you’ll qualify for HARP refinancing.

The above are just a few of the ways that you can refinance a mortgage to better suit your needs and financial goals. Contact your local mortgage professional today to learn more about refinancing and to discuss how you can tap in to the home equity that you’ve built up over time.

01
Feb
By First Rate Financial Group
Home Mortgage Tips

5 Uncommon Mortgage Terms You Need to Know

5 Uncommon Mortgage Terms You Need to KnowWhen it comes to finding a new home, there are lots of complex ratios, terms, and contracts that you’ll encounter – and at times, it’ll feel like you’re trying to navigate a minefield. Here are five mortgage terms you may not encounter regularly that you’ll need to know when buying a home.

Escrow: Money Held In Trust To Pay Taxes

An escrow account is a bank account that your lender maintains on your behalf. When you close your mortgage, you’ll need to deposit a certain percent of your annual property taxes into the escrow account, which your lender will hold in trust and use to pay your property taxes.

PITI: How Your Lender Calculates Your Monthly Payments

Your lender uses a specific formula used to calculate exactly how much money you need to pay your lender each month. Each month, your mortgage payment will include portions that go toward your principal loan amount (P), your interest payment (I), your property taxes (T), and your homeowner’s insurance (I). If you have private mortgage insurance, it’ll be included with this PITI payment.

Rate Buydown: Lowering Your Interest Rate With A Larger Down Payment

A rate buydown, also known as a discount point, is a chunk of your mortgage interest that you pre-pay in order to get a lower monthly interest rate over the life of the loan. Each point you buy reduces your interest rate by a small amount.

Loan Estimate: What Your Lender Must, By Law, Give You

A loan estimate is a form that your lender is required to give you when you apply for a mortgage, as per the Truth in Lending Act. Your loan estimate will include your estimated costs of carrying the loan – including monthly payments, interest rates, and processing fees. Loan estimates allow you to compare terms and rates across different lenders.

Loan-To-Value: Determining How Much House You Can Afford

Your LTV (loan-to-value) ratio is a ratio that is used to calculate the amount of equity you have in your home and to assess your risk as a borrower. Typically expressed as a percentage, your LTV is determined by dividing the total amount of your mortgage loan by the property’s fair market value. Borrowers generally prefer to see lower LTV ratios.

Mortgages contain a variety of legal terms that can be challenging for the uninitiated to understand. But with a qualified mortgage advisor on your side, you’ll have no difficulty navigating mortgage contracts and finding the right mortgage for you. Contact your local mortgage professional to learn more.

27
Jan
By First Rate Financial Group
Home Mortgage Tips

Struggling to Get Approved Because of Your Income? 5 Reasons to Consider a FHA Loan

Struggling to Get Approved Because of Your Income? 5 Reasons to Consider a FHA LoanBuying a home isn’t cheap. But if you’re determined to become a homeowner, the FHA home loan program can help. This loan program, ideal for first-time buyers with low incomes, can help you to build your credit and make home ownership a reality.

So why should you consider an FHA loan? Here are just a few ways you’ll benefit from these government-backed mortgages.

You Can Get Approved With Just 3.5% Down

Traditional mortgage lenders typically require you to pay 20% down on your mortgage, or 5% if you have good credit and agree to pay mortgage insurance premiums. But for a lot of younger people with lots of debt and low incomes, even a 5% down payment is an unrealistic burden. With an FHA loan, you can be approved for a mortgage with a down payment as low as 3.5% – which means a $200,000 home can be yours for as little as $7,000 down.

You Can Get A Loan Even With A High Debt-To-Income Ratio

Standard mortgages are difficult to get if you have a high debt-to-income ratio. Typically, lenders will want to see that your mortgage costs will consume no more than 28% of your income, and your total payments toward debts from all sources will be no more than 36% of your income. But with an FHA loan, the maximum DTI is 57%, although it’s lower in some cases.

You Can Qualify With A Low Credit Score

If you have a credit score under 700, you’ll pay higher interest rates on typical mortgages – and if it’s below 660, you may not get approved at all. But with an FHA mortgage, you can get approved for a 3.5% down payment with a credit score as low as 580 – or lower, if you agree to a 10% down payment.

FHA Closing Cost Regulations Are Better For Low-Income Buyers

FHA loans have different closing cost regulations than traditional mortgages. With an FHA loan, you can bundle closing costs into the mortgage or even use gift funds for 100% of the closing costs. That means home ownership is more accessible for people with lower incomes.

An FHA Loan Can Help You Find A Good Home

With most mortgages, you’re free to buy any home you wish as long as you stay within a set price range. But with an FHA loan, any home you buy must be habitable, sanitary, and safe – otherwise the FHA won’t approve your loan. That means using an FHA loan will ensure you get a good home.

Buying a home with an FHA loan is a great way to become a homeowner if a traditional mortgage isn’t an option for you. Call your local mortgage professional to learn more.