Children Leaving the Nest? 3 Pieces of Sage Advice You Can Share About How to Manage a Mortgage

Children Leaving the Nest? 3 Pieces of Sage Advice You Can Share About How to Manage a MortgageWhen your children are about to step out into the world on their own, you want to help them on their way. This especially holds true when it comes to buying a house. As your sons or daughters prepare to take the plunge into home ownership, make sure they follow three crucial tips that will help them during the mortgage process.

Don’t Bite Off More Than You Can Chew

One of the biggest mistakes that homeowners make is choosing a home that is beyond their price range. Your children need to remember that they are going to be paying for their home for a long time. A crushing house payment could be difficult to manage.

In order to find a reasonable mortgage, you need to look at the numbers. The bank, or mortgage lender, will generally look at a client’s income, debt, and the current mortgage rate to determine an acceptable amount when purchasing a home. Your children can look at their own budget, lay out all of their costs, and determine how much spending room is left for a house payment.

Choose A Shorter Term For A Mortgage

When the time comes to sign the dotted line, the mortgage lender will offer various payment terms for your child’s home loan. Twenty-five to thirty years is the typical term for most mortgages, but the sooner the mortgage is paid, the better. Advise your children to choose the shortest possible term while still living within their means.

Make Extra Payments When Possible

Your children can pay their mortgage off sooner by making extra payments. While this may seem like a challenge, it can be accomplished with careful budgeting.

Making one extra payment a year will shorten the length of the loan and put more equity into the home. Whether your children plan on staying put or want to buy another home down the line, they’ll appreciate it when they have paid off a considerable chunk of their mortgage.

Getting a mortgage is a rite of passage and a milestone that thousands of Americans encounter every year. Make sure that your children get the best mortgage available by following these tips. For more helpful information, or to make sure your children are getting a good deal, contact a trusted mortgage professional today.

Applying for a Mortgage? Three Questions Your Lender Will Ask You – and How to Prepare Your Answers

Applying for a Mortgage? Three Questions Your Lender Will Ask You - and How to Prepare Your AnswersBefore approving a mortgage, your lender is going to have to do his due diligence to ensure that you can afford a loan large enough to pay for a house. That means your lender will be asking you several questions about whether or not you can afford a mortgage.

Here’s how you can prepare to answer these questions in a way that will increase your likelihood of approval.

How Stable Is Your Income?

Your lender is going to want to know that your income is going to be stable over the life of the loan. This means that you should be able to document steady employment, that investment income is going to be stable or that the alimony that you receive from your former spouse will continue to come in for the foreseeable future. To document your income, you can provide bank statements, pay stubs or tax returns from the previous three years.

How Much Do You Have In The Bank?

A lender is going to be interested in how much you have in reserve in case you lost your job or suffer an unexpected medical expense that could make it harder to pay your mortgage. For a conventional mortgage, you may be required to have three to six months’ worth of expenses in the bank or in other assets that you could liquidate. To show how much you have in the bank, you can provide bank statements or balance statements from any other account where you may get money from if need be.

Where Is The Money For The Down Payment And Closing Costs Coming From?

While some lenders don’t mind if the money is gifted from a qualified source such as a family member, friend or employer, other lenders will require that the money for a down payment or other costs comes straight from your own bank account. To prove where the funds are coming from, you will need to show when the money was deposited into your bank account if using your own funds (or a gift letter if the funds are being gifted).

A mortgage lender needs to be sure that you are able to repay any loan that you are approved for. That means you’ll want to present your lender with solid, documented proof that you have a steady income and ample cash reserves to pay the mortgage and associated fees. For more information about what lenders look for in mortgage applicants, contact a qualified mortgage professional today.

Separation Anxiety: How to Deal with a Joint Mortgage Loan in the Event of a Divorce

Separation Anxiety: How to Deal with a Joint Mortgage Loan in the Event of a DivorceDuring the course of a marriage, it is common for the couple to acquire property together. This is what is referred to as joint or community property.

When a couple divorces, it is up to the parties involved to determine what happens to this joint property or let a judge use applicable law to determine how property is to be split.

What Happens To The House?

A couple of options are available when deciding what to do with a house where both partners are listed on the mortgage. First, the couple may decide to simply sell the home and split the proceeds from the sale.

Another option would be for one person to give the other person the house as part of the divorce settlement.

Technically, the house is sold or transferred and whoever gets the home is now the sole person listed on the mortgage.

Beware Of The Tax Implications

Typically, the person who gets the house should be the person who is in the lower tax bracket. This is because capital gains taxes may be lower or non-existent for those who are in the 10 or 15 percent tax bracket.

If the house is sold and the proceeds are split, capital gains taxes are exempted on the first $250,000 of profit made on the sale. For a married couple, the exemption is $500,000. Therefore, it may be worthwhile to sell the house before the marriage is over.

What If Children Are Involved?

In the event that the divorcing couple has a child, the best interest of the child must be considered. Typically, a judge will award a principal residence to the parent who will raise the child after the divorce is finalized.

To help the custodial parent afford any payments on the house, the other parent may be asked to help make payments as part of a child support or alimony agreement. This may be beneficial to the noncustodial parent as payments that are considered alimony are tax deductible.

When a couple divorces, they have a lot to think about. As this may be an emotional time, figuring out what to do with a home where both parties are on the mortgage can be difficult. However, those who are divorcing amicably or who want what is best for their children can come to an agreement without a lot of stress or drama.