08
Dec
By First Rate Financial Group
Home Mortgage Tips

A Step-by-Step Guide to Refinancing a Traditional Mortgage to a FHA Mortgage

A Step-by-Step Guide to Refinancing a Traditional Mortgage to a FHA MortgageRefinancing a mortgage can provide a homeowner with many benefits, and many are interested in refinancing their traditional mortgage into an FHA mortgage to take advantage of low interest rates. Depending on the specific circumstances, this step may lower the monthly payment, reduce interest charges, adjust the loan term so that it is more beneficial for achieving financial goals and more. Those who are interested in refinancing in an FHA mortgage may consider these steps.

Understand the Rules and Requirements

There are specific rules in place regarding refinancing under the FHA program. For example, the loan amount may be up to 96.5 percent of the value of the home, but the homeowner cannot take cash out of the refinance transaction. If cash is taken out, the loan-to-value limit under the FHA program is usually 86 percent of the property value. 

Review Goals and Current Mortgage Details

The next step for homeowners to take is to review their own financial goals and to define their reasons for refinancing. In addition, it is important for homeowners to contact their current mortgage company to learn more about their current interest rate, if there is a prepayment penalty and the current loan balance. Estimating the property value is also important. Homeowners may have a reasonable idea about property value, or they can contact a real estate agent for a valuation. When all of this information is taken into account, the homeowner will have a better idea about what to expect from refinancing.

Each homeowner will be in a unique situation regarding current loan details, property value and goals that they want to achieve through refinancing. It can be confusing to decide if refinancing is the right move to make, and it can be even more complicated to determine which loan program is a best-fit for the goals of the homeowner. Those who are interested in refinancing from a traditional mortgage into the FHA loan program may contact a mortgage broker soon to discuss the options and to determine if this is a best fit option for them as a first step in the loan process.

06
Dec
By First Rate Financial Group
Home Mortgage Tips

5 Ways That a Mortgage Can Be a Huge Benefit to Your Financial Future

5 Ways That a Mortgage Can Be a Huge Benefit to Your Financial FutureFor many people, investing in a house is one of the most important purchases they will make in their lifetime. However, alongside having the comfort of your own home, there are many financial benefits associated with buying in. If you’re currently perusing the market for opportunities, here are some reasons to consider investing a little sooner.

Get Away From Inflation

If you have an adjustable-rate mortgage, your interest rates will certainly fluctuate from time to time, but owning a home actually allows you to guard against the reality of inflation, which can be a significant burden as a renter. While the price of housing and apartment rentals can rise considerably with inflation, your monthly mortgage cost will be relatively fixed.

Hold On To More Of Your Money

Renting may be an easier financial obligation than home ownership, but the money you invest into a home each month contributes to your equity, and this is a benefit for your financial future. While rent money will be gone when the month is over, equity provides a consistent means of building wealth.

Buy At A Lower Price

The cost of home ownership may vary around the country, and while it’s certainly climbing in many urban centers, home prices are lower overall. This means that, instead of having to scrounge for a down payment, you’ll be able to invest a little less and maintain a better bank balance.

Cue The Tax Breaks

Many people hold off on home ownership because of the costs of property tax and maintenance, but there are financial boons outside of the money you invest. When tax time comes, you can receive tax deductions for costs like mortgage interest, property taxes and even private mortgage insurance that make buying in a little easier to bear.

Own A Rental Property

Whether you are a first-time buyer or you’ve delved into the market before, having a home in an up-and-coming neighborhood can also be an option, as this will enable you to rent it out and reap the financial rewards. While this may be a more feasible option later on in life, it can be a means of substantial additional income.

Many people hold off on owning a home because of all the associated costs, but it can be of benefit to buy into the market earlier to reap the financial rewards. If you are currently considering home ownership, contact one of our mortgage professionals for more information.

02
Dec
By First Rate Financial Group
Home Mortgage Tips

Understanding ‘PITI’ and What Goes in to Your Monthly Payments

Understanding 'PITI' and What Goes in to Your Monthly PaymentsAsk any friend or family member that owns a home and they will share that it takes a bit of management to keep all the expenses under control. Let’s explore the concept of PITI and why it is vital to have a clear picture of how much your home is costing you each month.

Just What Is PITI, Anyway?

PITI is an acronym that stands for “principal, interest, taxes and insurance,” which are the four main components that make up your housing costs.

Principal – this is the amount that you are paying against the total amount that you borrowed when you purchased the home. For example, if you used a mortgage to cover $200,000 of the home’s purchase price, the remaining balance of that $200,000 is the principal. A part of your monthly mortgage payment goes to paying down the principal.

Interest – this is the extra cost that the lender charges for the service of lending you the principal amount. For most mortgages, you will see this expressed as an “interest rate” which is a small percent charged on the loan. A portion of your monthly mortgage payment goes to paying down the interest owed.

Taxes – tax costs are not included in your monthly mortgage payment, but will be added by your lender as part of your yearly expenses when calculating your debt-to-income ratio (see below). Property taxes and other assessments will need to be paid each year.

Insurance – this is the cost of insuring your mortgage and your home. Like taxes, your mortgage lender will typically include some insurance costs in your DTI ratio calculation.

How Lenders Use PITI

Many mortgage lenders use some form of PITI calculation when determining your debt-to-income ratio. This ratio helps the lender understand your ability to manage your monthly mortgage payments without being at risk of missing one. The lower the ratio, the more likely you can afford all your monthly expenses.

Don’t Forget Your Other Monthly Expenses

Finally, don’t forget that along with PITI you will have a variety of other monthly expenses that need to be budgeted for. Leave some space for utilities, repairs and other renovations that need to be made throughout the year.

Once you have the full picture of what is coming in and going out each month, managing your expenses is easy. When you are ready to discuss or apply for a mortgage, get in touch with us. Our friendly team of mortgage professionals is happy to help.