Your Secret Stash of Ready Cash Could Be Hiding In Your Home Equity

In the shadow of the housing crash of 2008 homeowners are sitting on a record amount of cash — this untapped cash reserve could keep you from becoming another statistic if the market crashes again...

There is currently a record collective of $5.8 trillion in tappable equity held by homeowners throughout the US.

The average amount in the past year for a homeowner with a mortgage was a gain of $14,700 in tappable equity and currently available to draw amount of $113,900. Consumer confidence in the housing market, which has been quite bullish, is actually dropping now.

Here’s a fact you don't hear every day; U.S. homeowners are getting wealthier by the minute, and yet they are less likely to tap into any of this wealth than at any other time in history. Because home values are rising but the amount of people taking out in home equity is shrinking, we are seeing home equity lines of credit flatlining.

This tappable wealth is figured at the appraised value of a home minus the 20 percent most lenders require borrowers to keep as a safety net. In the first quarter of this year alone this amount grew by 7 percent when compared with the previous quarter. Mortgage software and analytics company Black Knight says “that is the largest single-quarter growth since the company began tracking it in 2005”. Compared with a year ago it's up 16.5 percent compared.

These statistics reveal that homeowners now have $5.8 trillion in tappable equity. This is the highest volume ever recorded and is a full 16 percent above the peak in 2006. As we speak, the average mortgage holder gained $14,700 in useable equity over the past year and has a total of $113,900 available at their disposal. This is the amount over and above 20 percent of the value of the average home.

What about variable interest rate mortgages?

Unlike the 30-year fixed primary mortgage, the rate on a HELOC or variable rate mortgage can change. With the Federal Reserve raising rates steadily the HELOC is riskier because they follow that.

Ben Graboske, executive vice president of Black Knight’s Data & Analytics division says, “Who wants uncertainty when it comes to monthly finances. I think a lot of Americans look at, what are my payments? What is my income coming in and what are my payments going out? They want certainty that they can cover their costs and not worry about it.”

Homeowners whose current mortgage interest rate is below 4.5 percent makes up almost 80 percent of those who can lay claim to this equity and 60 percent of it is held by borrowers whose rate is below 4 percent. According to the Mortgage Bankers Association. the average rate on the 30-year fixed today is around 4.8 percent.

Those homeowners who are tapping equity are doing it more through cash-out refinances than HELOCs. Originations for HELOCs are flat, and the amount of equity being withdrawn on HELOCs that are originated is at a two-year low.

Because homeowners are leery of the housing market in the shadow of the 2008 crash, most of them are doing cash-out refinances, even at a higher interest rate. Overall, however, only 1.17 percent of what’s available was tapped in the first quarter of this year, which is the lowest amount in four years.

Why? It may come down to the simple fact that they may not know just how rich they are. “I think the typical American doesn't have that level of awareness, they're not probably studying the numbers,” added Graboske.

The other fact that is likely true is memories of 2008. The pain of the housing crash that happened 10 years ago is still being felt by many. Previous to 2008 borrowers often used their equity like ATMs which is in part what led to millions of borrowers losing their homes to foreclosure, many of whom are just now able to qualify for a mortgage again.

This led to many of today's homeowners who saw their parents lose their homes or were evicted as teenagers. Another factor is that home prices are also rising very quickly. This has led to some markets overheating, with sales slowing even as prices rise. Because prices, historically, follow sales, this is a red flag to many mortgage holders.

Though consumer confidence in the housing market has been quite bullish it is now actually dropping. The net share of Americans who say home prices will go up in the next year fell 3 percent in June compared with May, according to a monthly housing sentiment survey by Fannie Mae.

Doug Duncan, Fannie Mae’s chief economist, said in a recent release, “Tight supply, and lackluster income growth continue to weigh on housing activity, and consumer expectations for home price growth over the next 12 months have moderated. However, consumers expressed increased optimism about the direction of the economy and their personal financial situations over the next 12 months.”

Here’s How to use your Home Equity To Your Financial Advantage

In times of financial struggle its normal to look toward your home's equity as a quick fix. There are certain financial situations that are well suited to using your homes equity and some that aren’t. Let’s take a look at 3 keys to help you use this source of funding to your best advantage.

Some home equity basics can help you begin to evaluate what's best for you. Though home equity may sound complicated all it means is the difference between what your home is currently worth on today's market and how much money you currently owe on it. Let's take a look a simple example. If a home is worth $200,000 and still carries a $150,000 balance on the mortgage, then the house currently has $50,000 in equity.

Unfortunately with some of the large declines in real estate values in parts of the US, some home equity loans are tougher to get. A homeowner whose credit history is good and has some home equity should be able to use the equity in your home as collateral against a loan that contains two key benefits:

Very low-interest rates. As a general rule, loans like these have interest rates that are normally much lower than things like credit cards or other non-collateral loans.

Big tax breaks from Uncle Sam. When you file your taxes and get money back it lowers the cost of borrowing even more meaning in many cases you can deduct the interest on as much as $100,000 of the debt carried against your home’s equity.

There are basically 2 different ways you can borrow against the equity in your home:

You can receive an instant advance of a single sum of money using a home equity loan. This type of loan will have required payments set up over a fixed period of time at a fixed rate of interest.

A home equity line of credit is like an open-ended loan similar to a credit card which you can borrow money as you need it, up to the lender approved amount. Often the rates are variable and your payments will change because interest rate changes will vary as your balance changes.

It really depends on your personal needs as to which one will be best for you. A lump sum home equity loan will offer you the security of a fixed rate and fixed payment but you have to take all the money at once. A home equity line of credit offers more future flexibility and if not needed the money will be at the ready without having to make payments until such time as you need it.

In either case, you must use this money wisely. Lenders love home equity interest rates because of the fact that you are putting up your family's home as collateral. But the truth is you can really put your well being at risk if you overspend and cannot make the payments. It stands to reason then that your first thoughts should be on WHY you need the money not on how much you can borrow.

It's important to remember that any debt you take on should be used to improve your financial position or to make a necessary purchase of something that will have lasting value - at least lasting as long as the term to pay back the loan. Using a home equity loan for a new wardrobe, a fancy getaway, lavish gifts, or spur of the moment purchases is not a wise use of this money. It doesn't matter how low your after-tax cost of borrowing is.

Let’s take a look at some wise uses of home equity debt:

Consolidation of current high-interest debt. Bundling multiple balances of different loans into one payment using a home equity loan, you can dramatically lower your interest rates across the board as well as making paying your bills much simpler. However, there is a caveat: You MUST have the discipline to make debt consolidation work. You can end up in considerably worse shape if you turn around and run up all your balances again.

Make improvements to your home. Before taking on any major upgrades to your home you need to think about things like how long you expect to stay in this home and reap the benefits of your investment. In all likelihood, this type of investment would make your home more valuable increasing your equity down the road but keep in mind that a failing market could take all of that away overnight.

Education costs:

If college is on the horizon for you or your children then a home equity loan can offer a better alternative than many other sources of funding can. However, take time to look at all the federally sponsored options available today. Be sure to keep in mind you can deduct up to $2,500 in interest from student loans, depending of course on your income. Just be careful to balance that debt against your own needs for financial security or retirement.

The easy way to get a VA loan with bad credit

When it comes to finding options for home loans for folks with bad credit VA loans rarely make the list. Most people don't think about VA loans as being for people with bad credit, however, as you will see in this article, VA loans for those with bad credit are actually easy to qualify for as long as you meet their criteria. The current state of your finances will also play a huge role in whether or not you can get a VA loan. Before we dig into this, however, understand that the VA not only offers multiple programs but they also offer ‘work arounds’ if you don’t quite meet the criteria in certain areas. I’ve never heard of a bank offering any kind help like that.

Let’s get started here.

First things first, you must have no current outstanding collections and no outstanding judgments against you. You must also be able to show a stable income and a median credit score of 620 or higher.

The VA loan program was created in 1944 as a thank you for service personnel returning from World War II. The goal was to make it possible for servicemen who likely would not have had any other chance, to purchase a home and become a homeowner.

Making this loan accessible to borrowers with less than perfect credit is considered the easy part. And it is true that the VA loan program has helped untold thousands of people get into homes and become property owners who would never have had a chance otherwise. For those who qualify, this program is a real godsend.

Cutting out the common hassles of obtaining a home loan such as good credit, down-payment, closing costs, etc.is what this loan is all about.

For multiple reasons, many veterans lack positive credit or the funds for a down-payment. The government decided one of the best ways to assist veterans after their completed service was to help them get home or some land.

VA loans with bad credit

Over the years two major things have changed which includes an increase in the amount veterans may borrow and the ability for active duty to apply to get a VA home loan.

Currently, homes below $484,350 and in some areas $726,525 and depending on what county you plan to buy in, can be purchased with $0 down. Think about that for a minute because it is a HUGE benefit to you if you are trying to purchase a home.

Because of the VA Loan Program lenders have the assurance that the loan will be paid for, veterans have the support needed to obtain a house and some land. This is one of the very few government programs that have had long-term success in accomplishing its goal. Untold thousands of people have been able to become homeowners thanks to the VA loan program.

There are only a few important elements that when obtained can and will ensure approval for your VA loan. As stated a satisfactory payment history is arguably the most important, followed quickly by present and/or future anticipated income. To be a success at this you need an income that is stable over time and bills current plus; you must be able to easily afford the loan payments given your current financial situation. To really impress the powers that be at the VA loan office, you must be able to show enough disposable income to meet the VA standards for cost of living as well as the VA loan mortgage payment.

Stable income is normally considered 24 months of steady solid income. If there are potential future income opportunities, the underwriter will have to evaluate that and offer his/her expert opinion. They like to see a FICO Credit Score of a least 620 even though there are officially no actual rules about this.

Here’s an article from the Veterans Loan Center to help you: https://www.vamortgagecenter.com/va-loans-bad-credit.html

But don't worry; the VA has loans for people with no credit or even scores below 620. If you fall in the no credit area, then your potential qualification is determined based on past rent payment history, car insurance, and other monthly expenses.

Even one or two late payments in the last year or any unpaid or untimely debts can easily get you denied, however. But this is an area that the VA offers a ‘work around’. Let me explain.

Just because you have late payments, though, this may not result in an automatic denial. There is an exemption for this rule under special circumstances. You would still be eligible even with open collection accounts just as long as you have committed to a payment plan and put it in place. It might be a good idea to meet with a Consumer Credit Counseling program or possibly file Chapter 13 bankruptcy as those can show as a positive step for a VA loan.

For a normal bankruptcy called a Chapter 7, at least two years must have passed since the bankruptcy was discharged or forgiven for the VA to consider you as having satisfactory credit.

As far as the VA is concerned, as long as you are making your payments, a Chapter 13 does not have to be discharged for you to qualify.

Another special circumstance would be if you were forced to file bankruptcy because of medical circumstance or any number of other issues out of your control. These types of situations will not be held against you.

Another special circumstance involves if you were forced to file bankruptcy because of a failed business venture and at present you have employment, you will still be considered for a VA loan. You must also have no derogatory credit information since the bankruptcy or prior to the self-employment to qualify for this special exemption.

Your VA loan approval will be delayed in most cases by too many inquiries on your credit report but in most cases, that alone won’t disqualify you completely. In case you were not aware, non-mortgage inquiries can cause a huge drop in your credit rating. Truth is multiple non-mortgage credit inquiries can look like new credit lines and couple with a low credit score this can look like it will affect your ability to repay the debt.

Let's take a look at a few important questions and answers about VA loans

What are the VA loan eligibility requirements?

Most members of the regular military, veterans, reservists and National Guard are eligible to apply for a VA loan. Spouses of military members who died while on active duty or as a result of a service-connected disability also can apply.

Active-duty military personnel generally qualify after about six months of service. Reservists and members of the National Guard must wait six years to apply, but if they are called to active duty before that, they gain eligibility after 181 days of service.

You may qualify if you:

●      Served 90 consecutive days of active service during wartime

●      Served 181 days of active service during peacetime

●      Have been an active member of the National Guard or Reserves for 6 years or more

●      Are married to a service member who died in the line of duty or as a result of a service-related disability

Do VA loans require PMI?

Unlike other low down-payment mortgage options, a VA loan doesn’t require PMI.  Federal Housing Administration (FHA) loans and conventional loans with less than 20 percent down require PMI, which can end up costing the borrower thousands over the life of the loan.

The benefit translates into significant monthly savings for VA borrowers. For instance, a borrower who makes a 3.5 percent down payment on a $200,000 purchase with an FHA-insured mortgage would pay $139.19 a month for mortgage insurance alone.

What are VA loan funding fees?

Although the costs of getting a VA loan are generally lower than other types of low-down-payment mortgages, they still carry a one-time funding fee that varies, depending on the amount of the down payment and military category. This fee helps offset taxpayers’ costs since there’s no PMI or down payment required.

Any old or current savings or checking account overdraft fees need to be paid up and cleaned up as this will look bad and the VA frowns on any unpaid debts.

Here are your top 5 keys to getting a VA loan

These loans are easier to obtain than conventional mortgages because they are backed by the VA and are ideal for many veterans who may not qualify for other loans. Take a look at these five key elements to help you succeed in getting a VA backed loan.

1. The loans are NOT Issued by Veterans Affairs

No matter what the situation you are still dealing with standard banks and lenders. What the VA does is guarantee they will pay a large portion of the loan should you default on it. What this does is offers the bank or lender some security that the loan will be repaid should you default for any reason.

A mortgage lender who specializes in obtaining VA loans is going to be where you need to start. You will need to show the lender your Certificate of Eligibility (COE). This document confirms that you are eligible for a VA-backed loan so the lender can proceed.

It's very simple to apply for a COE through your eBenefits account. You can also apply by mail by completing Form 26-1880 and sending it to the Atlanta Regional Loan Center if you would rather do it by mail and avoid the internet. If your lender has access to WebL GY system you may be able to apply for a COE that way as well.

 2. Bottom Credit Score Not Required

Using a VA backed loan over conventional loans has 2 major benefits. To the lender you are a much lower risk because the VA has backed your loan so, if your house costs less than $484,350 there is no down payment required. This can save you thousands of dollars right off the bat.

The second great advantage is that there are no minimum credit score requirements for borrowers to qualify for a VA loan. An applicant with a score below 620 in most cases would not qualify for a home mortgage loan. A VA-backed loan may be the only option someone in that position has.

So where is the catch in this deal?

So you must be asking, where's the catch? Here it is; there is a downside and it's called the VA’s Funding Fee. This fee, which is typically between 2% and 3.5% of the loan, rather than being due upfront, it’s normally just added to the loan. To help keep the VA home loan program going, the VA’s Funding Fee goes back into the program.

3. Refinancing With a VA Loan

VA-backed home loans can be used to refinance a current loan into a new VA home loan. There are two main types of refinancing options the VA supports. You’ll have to decide which is best for you.

If you currently have a VA loan and want to lower your monthly payment or reduce the length of your loan then you can apply for an Interest Rate Reduction Refinance Loan (IRRRL). This is also called a VA Streamline Refinance loan. Refinancing requires no appraisal or credit underwriting package and it can often be completed with no out-of-pocket expenses.

The Cash-Out Refinance Loan is the other type of VA refinance loan, and it can be used to obtain cash for home improvements, paying off debt, or other financial needs. You simply refinance up to 100% of the home’s value as mortgage debt, with the equity available as cash.

You can turn a conventional mortgage loan, USDA loan, or FHA loan into a VA home loan using the Cash-Out refinance loan option.

 4. How and when you served may play a Part in your Qualifying

If you don’t qualify due to poor credit or the lack of a down payment, a VA loan is great. But they are not available to everyone but are a special benefit solely for eligible service members, veterans, and their families.

There are also specific eligibility requirements, particularly regarding their terms of service. Whether you served during wartime or peacetime, and whether you are a Selected Reserve or National Guard member.

During wartime need to have served at least 90 days of active duty without a dishonorable discharge, or less than 90 days with a discharge for a service-connected disability. During peacetime, it’s at least 181 days of continuous active duty and no dishonorable discharge, unless discharged for a service-connected disability. 

5. You May Qualify for Other Bad Credit Home Loans

The VA-backed loans are definitely a great choice for folks who qualify but don’t forget you may have other options when looking for a mortgage loan with bad credit — your chances of success increase if you have a decent-sized down payment. An FHA loan is possible if you have a credit score of 580 or above. Also if you have a score above 620 you may even be able to get a conventional mortgage.

VA backed loans are a real Godsend to many veterans who otherwise would not qualify for a mortgage loan. And the truth is because these loans are solid in the eyes of the bank; VA loans can be quite flexible as we have shown in many of the cases above.

FACTS ABOUT VA LOANS

The loan doesn’t come from the Department of Veterans Affairs. The VA only guarantees the loan; it does not issue the loan. What this means is that the VA provides assurance to the lender that a portion of that loan will be covered should the borrower default on the mortgage. In other words, the lender is covered up to the amount of the guarantee. This makes a VA loan a NO LOSE loan for the bank.

Only certain properties are eligible. Co-ops aren’t eligible for VA loan benefits. On its own, vacant land isn’t eligible for a VA loan, either. However, it may be eligible if it’s used simultaneously with a construction loan. And other properties, like modular or manufactured homes, are subject to the lender’s approval.

They must be used on primary residences. You can’t use your VA loan benefits to buy a vacation home or an investment property. There are residency requirements set by the VA that make these properties ineligible.

There are no pre-payment penalties. You can make extra payments over the life of your loan and pay off your loan sooner without getting penalized. These extra payments, made at any time you want, can save thousands of dollars in interest over the life of your loan.

They have a funding fee. This fee is the cost associated with obtaining a VA loan and helps to ensure that the loan continues to require no down payment and no monthly mortgage insurance. Which leads to…

There’s no monthly mortgage insurance. With other loan programs, if you don’t have at least 20 percent down on a new mortgage, you’re required to pay a monthly or upfront mortgage insurance fee. This requirement is eliminated by the VA’s Funding Fee.

You can reuse the VA loan benefit.  As long as you pay off your existing loan, you’re allowed to use your VA loan benefit as often as you’d like.  If you’re moving you may even have enough entitlement to get another VA loan without selling your current one. 

The real keys are simply to keep payments current, be sure and show the VA that if you have defaulted on payments that there were special circumstances (if there were) and ask for the exemption offered under these special circumstances. If you don’t show them and ask for it, it could mean you being denied when you could have been approved.

The best advice I ever got about VA loans when I started was to take your time and have patience with the process. A VA loan will likely take a little time but in the end, it can be well worth it to get a VA backed loan that you may not have had a chance at with the VA’s help.

Are you looking for a ZERO COST refinance on your home? Think again, here’s why.

Let me be candid right off the bat about “no-cost refinancing." Before I lead you any further down the dream-like path of no-cost refinancing we need to get one thing straight; It does not exist. What they call no-cost financing is in truth “normal full cost” refinancing that is in reality “no-money-out-of-your-pocket-refinancing.”

In this article, I’m going to debunk the myth of the ZERO COST refinance, explain to you what is really being offered and show you the different options available under this umbrella so you can make an informed decision about which option is best suited to you.

The myth of the ZERO COST refi is really nothing more than a marketing ploy designed to get prospects excited enough to pick up the phone and call a lender. Whether you find this marketing tool unethical or not, it does work and has been used quite effectively for a while now.

The truth of the matter is, there are ALWAYS hard costs involved when refinancing a home and they do not simply go away under a ZERO COST refi. What this should be called is the NO CASH OUT OF YOUR POCKET refi because that’s a much better way of describing what is going on here. Let me explain…

Whenever you refinance, there are always charges that are simply part of the process. Everything from the appraisal, pulling credit reports, lender and bank fees, the search for the title, title insurance as well as good old Uncle Sam, and at some point, the person doing the refi expects to get paid.

You’ll also need to set up an escrow account that is new for your taxes and insurance and put in two months’ worth of payments to start. Yes, you get the money back at the end but until then (many years from now most likely) you have to produce the money upfront.

As I stated earlier, there really is no such refinance that I have ever heard of that doesn’t accrue these charges. These costs do not just disappear on a no-cost refinance (wouldn’t it be nice if they did)...they are simply hidden.

Don’t worry; I can hear you asking the inevitable question I've heard many times before; “So if refinancing has all these fees, how can lenders offer so-called “no-cost-refinancing?”

Well, as explained they really don’t.  What they actually offer is “no-cash-out-of-your-pocket-refinancing,” and there are two kinds of those.

Here is an in-depth article about how to judge if a no out of pocket cost refinance loan is for you:

https://www.bankrate.com/finance/mortgages/is-no-closing-cost-mortgage-for-you.aspx

The most used form of “no-cost” refinancing is where they add all of the costs to the loan amount. That's right, costs for closing, taxes, and escrows for insurance are added to your current mortgage owed a balance and then they increase the size of the mortgage to cover these costs. This may not seem like what you intended when you started looking for refinancing but over time, this has still proven to be an option that gets the desired results for most clients.

Now let's say you have a $250,000 30-year mortgage and a 5.50% interest rate by paying $1,420/month and you want to lower your monthly payment. If you get into a new 30-year mortgage for $255,000 which pays off the current mortgage as well as paying the closing costs of $5,000, plugged into an interest rate of 4.25%, your new monthly payment is $1,255.  That is a monthly savings of $165.

If the $165/month savings was your goal then it works perfectly using the new loan to cover the $5,000 worth of costs. At the end of the day, that monthly savings may be exactly what your family needs in a tough financial climate. 

The second way this is done is by the lender offering the home a slightly higher interest rate than that bank is. With this one, you’ll have to pay your tax and insurance escrows separately. So if the rates for 30-year mortgages are 4.25%, and a lender offers 30-year mortgages at 4.75%, the lender earns more.  This incremental revenue is then offered as ‘lender credit’ and can be used to pay closing costs. So with the same $250,000 mortgage, this option would result in a $1,304/month payment, $116 monthly savings and no increase in the existing principal balance. The 4.75% interest rate results in a “lender credit” of $5,000 which is used to pay closing costs. You’ll pay in the form of a higher interest rate and more interest paid over time.

Every refinancing circumstance is different; so you really need to study both options with your lender to find the option best suited for your specific individual circumstances. You need to take the time to find a real professional, one that has the expertise and experience to guide you in the right direction make sure you accomplish your goals with the refi whatever those goals may be.

I'm sure you can see that without the guidance of a trained professional you could easily end up putting yourself in a worse financial situation - depending on what your overall goals may be - so it really is imperative that you take the time needed to find the ‘perfect fit’ for you.

It is very important that from day one you are specific about why you want to refinance in the first place and what is the overall goal? It's easy to say ‘low interest rates’ EVERYONE wants low-interest rates, but that's just the sparkling gem that catches the eye of prospects and gets them thinking about refinancing.

Things like making your monthly payment lower, shortening time on your mortgage loan or using equity to pay off other debt or another purchase are all ‘doable’ goals. Doable with the proper terms and the guidance of professional.

The key, of course, is to be realistic about whether or not refinancing your mortgage can actually achieve that goal. If your goal is to save on your monthly payment, how can you realistically save? With those fees added to your loan, the monthly savings may not be enough to make it worth doing. If there is not enough equity to take much ‘cash-out’ and that’s your goal, save the time and trouble.

As I'm sure you can tell, it really comes down to the numbers and your professional refinance broker can easily show you if it works or not.

The bottom line with refinancing is simple - it either makes sense or it doesn’t.

The real question is not who pays these refinancing costs but how the costs are paid.

From the beginning to ending a refi usually takes about 45-60 days. This includes the application process, appraisal, the approval and to close a mortgage refinance. These days the standard rate lock-in is 60 days. The vast majority of refi loans have no problem closing and funding inside that 60 day period. There are situations though, and yours could be one, should your loan become delayed and looks like it will surpass the interest rate lock-in period, then it will need to be extended. And it can be but of course, there is a fee involved. Normally its.25% of the full loan amount that gets added to your closing costs for a 15-day extension. 

If we are talking about a $250,000 loan, that would add an additional $625 closing cost that was likely not accounted for at the start. And take one guess who pays that? Yep, you do. I have heard about many cases of loans that locked for 45 days but because of subordination agreements or appraisal value reconsiderations, the extension fees piled up causing the benefits to refinancing to be completely lost.

That's why it’s so imperative that you take the time to find a real pro with the experience to navigate this type of situation should it be a possibility in your case. Any issues that would cause a delay of your approval should be addressed by the lender right from the start. The reality is income verification, asset and credit documentation requirements are rigorous and things like a second mortgage or a Home Equity Line of Credit, or unrealistic value expectations could add untold days to the refinancing process.

Finding the best agent for buyers and sellers

No matter what your current homeownership status, your perfect, ‘once in a lifetime’ dream home could be right around the corner and you’d never know it unless you have the right agent.

Even if you are trying to dump a home that has no equity, needs repairs and you are pretty sure it's at least a little haunted...there IS a perfect real estate agent for YOU and YOUR SITUATION...you just need to know how to look and where to look. That is what you are going to learn in this article, so get buckled in and let's get started.

In this article, I’m going to share with you a little-known process that will ensure you have the exact right agent for whatever your needs are. It is vitally crucial that you have an agent with the right experience, resources, and expertise to help guide you through the process you are undertaking whether it be buying your dream home or selling your current house.

Many people take the finding of an agent for granted believing that any old agent can help them. That would be like if you have a foot problem and you walk into a doctors office who specializes in colon issues. Well, he’s a doctor right? He’ll do just fine for your foot problem huh?

The same thing goes with a real estate agent. First and foremost you need one who is actually active in the market. There are many ‘weekend warriors’ who got their license on a whim and have never really done much. That's absolutely not who you want.

The process of finding your dream home involves many elements like neighborhood research, locating a good match to your budget and lifestyle, initial contact and talks to work out the best deal on price and possible repairs. Buying a home is likely going to be one of the biggest purchases of your lifetime, so you must be committed to the process. For most people, doing all this alone is not a viable option, that's why you need to find a good agent.

This entire process will be MUCH easier when you have the guidance, connections, and advice of a great real estate agent that has the unique talents, skill set, and experience that fits your project perfectly. A great agent that is well matched to you have the inside knowledge to help you manage a great price, even in a hot market and save you thousands of dollars - whether you are the buyer or the seller. It really doesn't matter which side of the fence you are on, whether you are a buyer or seller, the following keys can help you find that perfect agent for you.

  1. Initial interview for a potential new agent and follow up.

  2. Take note of their communication style

  3. Discuss their negotiation strategy

  4. Review the agent's certifications and experience

  5. Obtain and contact everyone in the agent's network

  6. Discuss the agent's workload

  7. Search public records of the agent

Initial interview for a potential new agent and follow up.

What kind of experience does your agent have with clients like yourself? Have they sold in the neighborhood you’re looking at before, if so how much? If you are headed to a new state, your agent with your direct (and only) link to insights and info about the area you’re looking at - how much experience does he have here?

One simple question you ask all the agents references will sum up all you need to know. “Would you work with this agent on your next sale or purchase?” Austin, TX agent John May “if the answer is yes, you’re probably good to go but if there is ANY hesitation you should ask why and continue to dig into the agent's background

Get their style of communication

Chasing your agent around to get critical updates and info isn't going to work. Another question to ask references is if they had a hard time getting their agent on the phone or getting updates.

 Find out how they plan to negotiate on your behalf

Giving you suggestions for offers, competitive market guidelines, and closing table backup plans are all some of what a good agent should provide you. Negotiations are a huge part of the process and having an agent who is confident and experienced in this process can make or break a deal. 

You should feel like your agent is confident enough to turn down a deal that is not what you are looking for, especially when they know they can get you better. Understanding your needs and bringing a deal together without getting in the way is very important. There is a time to walk away and sometimes total silence is a great tactic to use.

Review the agent's certifications and experience

In addition to a real estate license, there are other certifications agents can get like a certified residential specialist (CRS) has specific training for residential real estate transactions as well as an accredited buyer’s representative (ABR) who have completed training to represent buyers.

What's the agent's network look like

Having a broad network of potential buyers and sellers, as well as great relationships with other agents is the hallmark of an experienced and successful agent. Having a team of trustworthy contractors, handymen, designers, and architects available to help you with renovations, small fixes, or designs is simply mandatory for an agent you need.

Agent workload

You need to find out how long an agent has been in the field as well as whether they are a full-time agent or whether this is just a part-time endeavor for them. This project is likely one of the biggest commitment YOU will make in your lifetime and you need a full-time, dedicated, and extremely experienced professional.

Public records of the agent

If your agent has been disciplined and why that's information you really need to know. It could be indicative of the quality of service they truly provide and maybe a reason to avoid any further research on them.

The bottom line is as buyers and sellers you need to be able to trust your real estate agent. You’ve probably found your match if you end up with a personal connection with an agent.

There are really no transactions that won't have some bumps and struggles. The agent needs to remember that the client is part of the team and may have a much-needed outsider’s perspective. 

You have to look at this as at least a 4 to 6-month commitment, so making sure your agent matches up with your needs in all of these areas is of vital importance. And once you find a really great fit, you’ll be able to call on them in the future knowing they will have your best interests at heart.

How agents get paid

You need to understand that the buyer’s agents split the commission with the seller's agent with no additional costs to the buyer. The commission is paid by the seller. Now you can likely see why the listing agent has a big incentive to make a quick sale in lieu of putting your needs first - because they get the full commission.

If things don't work out it can really cost you. You need to read the terms of separation that are disclosed in the buyer’s agent agreement. Make sure you understand what your signing and make sure there is a way out if you and your agent just don’t seem to click. This must be done BEFORE signing anything.

Here is the uncomfortable ‘truth’ about this industry

You simply cannot afford to be stuck with someone you aren’t comfortable with given the importance of this decision. One option: Try out a short-term initial agreement — perhaps 30 days or so — renewable for another 60 days upon mutual consent.

With the number of jobs in real estate expected to continuously grow by 6% through 2026, according to the U.S. Bureau of Labor Statistics, the competition for agents is and will remain strong. This simple fact makes your search for the right agent even harder BUT ALSO even more important. Don't get me wrong, it will be a challenge for any homebuyer or seller to find the right real estate agent to work with. But using the tools I've given you here, I just made the process at least 80% easier than without them.

Taking a future look at this marketplace it's not hard to imagine that with so many agents vying for clients, it might be easy to get overwhelmed with offers and opportunities as a buyer or seller. Just keep coming back to starting place which is matching the right agent to the right client. Matching your wants and needs with an agent who can provide you the personality, drive, and effort you are looking for can make the difference in whether you have a good experience or become another ‘home seller nightmare story’.

The insider secrets to finding the best real estate agent for you

When you get into the Real Estate Market rather buying or selling a house, to be successful you will require the services of real estate agent. However, very few know the real secrets to choosing a realtor that is well suited to the project you are working on.

The secrets of how to choose a good realtor are 90% common sense and 10% application. However, if this is your first rodeo, you are likely at a complete loss as to what your needs are or will in the near future. That’s why you need a tried and true method for contacting, identifying and verifying the true facts about any realtor to make sure you are getting someone who is well suited to your current project.

How to pick a realtor…

In this field, you will find what they call Realtors, as well as real estate agents. Some are part-time some are full-time agents. You may discover family friends who are in real estate, you could even find out your next door neighbor is an agent. So how do you find out which one is right for you?

Missouri residents Kevin and Carrie Smith contacted a convenient real estate connection after finding their perfect home. “We had a family friend who is a part-time real estate agent,” Kevin stated. “She showed us the house and we submitted an offer. That's when the trouble started.”

Mr. Smith came to find out that the agent for the seller was “ready to go to war for her clients.” A seasoned negotiator she was a real shark. The Smiths part-time agent was intimidated instantly. After only one call with ‘the shark’ about price, “our agent was scared to negotiate.”

A tough lesson learned. He says he’ll look for a top-shelf professional agent, one who’s not afraid of anything and whose focus is on getting a great deal for their clients not just closing the deal as fast as possible.

Home sellers need the right agent. There is no longer such a thing as a real estate broker who simply places a sign in the yard, enters it into the Multiple Listing Service and sits around waiting for it to sell.

A good seller's agent is always searching for a proactive, technology-based system. Your photos must be professional and that means magazine quality, as well as the description which has to be detailed and really sizzle.

Another great article to help in this search is: https://www.bankrate.com/finance/real-estate/7-tips-for-picking-a-real-estate-agent-1.aspx

It’s advised that you find an agent who has some social-media marketing muscle. The bottom line is in today's market its a Facebook World and if your agent is not well versed in navigating Facebook for prospects, you are behind the 8 ball already.

The right realtor for homebuyers

When looking for an agent to sell your home, the number 1 attribute is a buyer’s agent with a solid track record of closing deals.

If stats reveal that the average agent sold only four homes last year, you are purchasing a home you represent 25% of that agent’s yearly income. From that perspective do you think they have your best interest at heart, or are they ready to do about anything to close this deal?

A run of the mill buyer’s agent will search the MLS for homes, but when you got a really great agent, he will hunt down homes that aren’t even on the market yet. They’ll start by contacting homeowners in the prospected neighborhood or produce a direct mail campaign in your desired area with specifics on you and your family.

How to define the difference between Realtors and real estate agents

This can get a little complex but just because someone is a real estate agent, it doesn’t mean they are a Realtor. The National Association of Realtors owns the registered trademark for the term Realtor. NAR members pledge to follow a strict set of guidelines set by the code of ethics of the association. State and Federal laws assure that similar ethical standards are enforced whether you deal with a Realtor or a real estate agent.

Agent interviews - you gotta do your due diligence

The standard rule of thumb recommended by the professionals is for buyers and sellers to interview no less than three agents. Truth is most people are one and done. Here are a few special tips:

•Always ask an agent for a list of recent references.

•Ask the agent you’re considering what plan they have in place to help you find the perfect home (for buyers) or market your home (for sellers)

•VERY IMPORTANT: Note how an agent responds to your inquiry. If a prospective agent answers your initial request promptly giving a thorough and complete response, that is likely the type service you’ll receive throughout your dealings with them.

•Ask for a list of their recent sales, not just a number of sales or overall volume.

Working with an agent needs to be an ebb and flow process. For tips on how to do this effectively see: https://www.thebalance.com/rules-for-working-with-agents-1798904

The Agent Interview: The 10 must ask questions when searching for a real estate agent

Today there are over 2 million real estate agents in the U.S. alone. If you are a brand new home seller or buyer, you have certain needs that must be properly met by the agent you choose. If you choose the wrong one, it could literally be a mistake that costs you THOUSANDS OF DOLLARS.

So far we have discussed important ways to discern the proper agent. These top 10 must ask questions will be the key to making sure you get the agent you need.

You can ask friends and family for referrals for a start. If you find a name that keeps coming up, that would be a good place to begin. Once you narrowed it down to 3 to 5 names, call the agents and set up a time to interview the agent using these 10 questions.

#1 How long have you been selling real estate?

Experience matters, sometimes a lot. It may be true that it doesn’t equal success but real estate is a commission-based business and any agent surviving over time cannot be providing shoddy service. An experienced agent is much less likely to be rattled by any oddball situations that may occur.

#2 Are you equipped to handle my unique situation?

Think about what defines who you are to an agent: a long-term investor, a first-time homebuyer, house flipper, or just selling an estate? There are many unique scenarios that you may find yourself and you need an agent with experience in the area that defines you. If you interview a know it all who says, “Don’t worry, I’ve dealt with this before.” Ask the agent what unique issues could arise and how she would handle them.

#3 What area do you cover?

There are agents who are neighborhood experts and others who will travel halfway across the country to find you the perfect home. In most instances, someone in the middle is your best bet. Agents can get a better understanding of a larger territory now than ever before because of the internet, but it's impossible to cover an entire state while maintaining an intimate knowledge of local markets. When you have a “neighborhood expert," they can try to fit you into a shoe that doesn’t fit. Find and an agent that works both in and around your ideal area.

#4 Are you part of a team?

Obviously, there are many benefits to working with a real estate team, but you must clarify your relationship with the other team member right at the start. Within a team, some members have a more intimate knowledge of specific situations than another. You must define - upfront - however, if the team plans for you to work with one agent the duration of the transaction, or if all of them will be available should the need arise. Truth is you need to work with numerous agents, but you also do not need to be passed around at every step along the way.

#5 Can I have the contact information for three references?

Past clients will always be your best gauge as to the level of customer service provided by the agent. Take what they say with a grain of salt because the people given to you are going to be the best of the best, however, ask very specific, open-end questions based on your priorities

#6 What is your ratio of buyers to sellers?

Many agents tend to work with primarily buyers or sellers. Most teams have designated buyer agents and listing agents. This can lead to a limited perspective on the part of your agent. If your agent has only worked with buyers, how can they have any real world idea what is happening from the seller's perspective? Truth is you be looking to sell your current house and buy another, so the transactions will be much more seamless if one agent is able to oversee the entire process.

#7 What is your average number of clients?

The bottom line is this: do you, and will you, have enough time to give me top-flight service? You do not need an agent who is always busy with another client and unable to give you their undivided attention. If you choose an agent with a high volume of clients, you need to ask about what might happen should you need extra time/attention on your deal. Are their other team members that can help out? Is the licensed assistant available to offer advice?

#8 What type of communication should I expect from you?

By this point in the interview, you should already notice if you and the agent understand each other well. This is where you both set expectations for how often you should be updated, who needs to be in the loop and the best way to communicate long term. You, as the client should pick what makes you the most comfortable.

#9 Do you have a recommended vendors list?

Any experienced agent has trusted relationships with industry professionals that they use on a regular basis. Starting with mortgage lenders and title companies to independent contractors and inspectors, your agent needs to be able to refer you to multiple sources so you figure the one best suited to you. These are recommendations for you. You have the right to choose who you work with via the Real Estate Settlement Procedures Act.

#10 What questions do you have for me?

Believe it or not, this is the most important question you will ask. The questions one asks defines their true state of mind. This is where the great agents shine. An excellent indicator of client-centered service, for which there is no substitute is if they take the time to get to know you and your priorities, wants and needs from this transaction.

Armed with these tips and the Top 10 must ask questions you are assured to find the best agent for your needs.

Mortgage Note: Is it Time to Refinance Your Home?

Mortgage Note: Is it Time to Refinance Your Home?

Mortgage note: Is it time for you to refinance your home? Find out here whether or not you should be considering a mortgage refinance.

A typical home loan term is 30 years and interest rates can fluctuate with the market. A borrower may feel tremendous stress underneath a mortgage note.

Many people make payments on their home loans each month without asking whether a change needs to be made. We have no idea what turns our lives will take. The plan you have for you and your family may change each year.

This is why there are options if you want to change the conditions of a mortgage loan. Knowing what option is right for you is the first step. Refinancing your current loan could help change your financial future.

If you're unsure whether it's time to refinance your home, you need to speak to a mortgage lender. You also need to educate yourself on what options are available.

Reasons to Consider Refinancing a Mortgage Note

The two types of refinancing options are rate/term and cash-out refinances. A rate and term refinance lowers the monthly rate and changes the length of the loan term. In a cash-out refinance, the new loan is for a larger amount than the existing loan and the borrower receives the difference in cash.

The type of refinance option you choose depends on your situation. Making the decision between the two should be pretty clear. Asking yourself why you would choose to refinance is the first step.

Let's look at some of the primary reasons you should refinance your mortgage note.

Lower Interest Rate

One of the primary reasons people decide to refinance a mortgage note is to get a lower interest rate. A lower interest rate could significantly lower your monthly bill. 2017 has seen lower interest rates, so now may be a good time to consider refinancing.

As you become more financially stable and pay off debt, you increase your credit score. A better credit score will increase your chances of obtaining a loan with lower interest.

In the past, a borrower needed to reduce their loan by one percent in order to save money. Today home loan amounts are much higher than they used to be. As a result, even a small mortgage rate reduction will mean lower monthly payments.

Take advantage of tools like an online mortgage calculator to determine if you can get a lower rate. If you decide to move forward, you'll need to speak to an experienced mortgage lender.

Change the Term on Your Deed

Many mortgage notes are for 30 years. That may seem like a frightening amount of time to be under a loan. Refinancing a home loan can enable you to shorten the term of the loan. This will allow you to better plan for your future. 

If you have been financially successful and are now able to take on larger monthly payments, you should consider refinancing. Shortening the term by making monthly payments will allow you to pay it off faster. Imagine paying off a 30 year loan in 15 years.

Many people who are planning for retirement or have children entering college may want to free themselves of their home mortgage debt. Refinancing the mortgage note in order to shorten the term is a great option.

On the other hand, if you need lower monthly payments you could refinance to increase the loan term. However, this could be a risky move. Extending the term will put you further away from owning the home.

Switch from an ARM to an FRM

Refinancing can provide an opportunity to convert an adjustable rate mortgage (ARM) to a fixed rate mortgage (FRM). This could allow you to secure a good interest rate for the duration of the loan term. Doing this will lock you into a lower monthly payment.

If your adjustable rate loan is going to readjust to a higher rate, you may try locking into a lower interest rate by refinancing. Your credit score will be a determining factor. If your credit score is high and you want to decrease your monthly payments, a fixed rate mortgage may be the perfect option for you.

Cash-Out Refinance

In a cash-out refinance, equity that has built up on your home is taken and added to the loan principal. The new mortgage loan is higher than the original and you receive the difference in cash. This option will allow you to use the money from the refinance for debt consolidation or other expenses.

This approach is not for everyone. Keep in mind that a cash-out refinance often comes with higher interest rates. It may also result in a longer loan term.

This type of refinance can also be used during a divorce. If one spouse wants to keep the home, a cash-out will allow the couple to split the home equity. The person remaining in the home will then be on the new mortgage note.

Eliminate FHA Insurance

If you have an FHA loan, you likely pay a Mortgage Insurance Premium (MIP) each month. If you put less than 10% down on an FHA loan after June of 2013, mortgage insurance must be in place for the entirety of the loan. But you may not want to pay for insurance each month for many years. 

Refinancing can be a way out of these insurance premiums. In these cases, once 20% equity is achieved on the home, you can refinance to a new loan. The new loan should not require a Mortgage Insurance Premium and you will now be free of the monthly insurance payments on the new mortgage note.

Find an Experienced Kansas City Mortgage Lender

You need to consider your reason for refinancing before making any moves.

If you've decided that refinancing is a smart decision, you need to speak to a knowledgeable mortgage lender in your area. The Kansas City Mortgage Guy will look at your situation and provide the best options for you.

I provide personal care when dealing with your finances and value long-term relationships with my clients. Contact me to discuss your options.

5 First-Time Homebuyer Mistakes (And How to Avoid Them)

If you're a first-time homebuyer, then don't miss out on these common home buying mistakes. Click here to learn more about how you can avoid them.

Do you dream about owning your first home?

Your first home marks a major milestone in your life. The last thing you want is to regret it. Before you sign on the dotted line, make sure you've got all of the right boxes checked.

Keep in mind these common first-time homebuyer mistakes. Learn how to avoid them to make sure your first home purchase is the one of your dreams!

1. Skipping the Pre-Approval for a Mortgage

When getting ready to take out a mortgage, you'll have to submit financial information to your lender for pre-approval.

During the pre-approval process, your lender will take a close look at your finances and employment status. He'll also check your credit to make sure you have enough to take out a mortgage.

You must get pre-approved for your mortgage. It enables the lender to determine what you qualify for, and it will give you an idea of how much you have to pay.

If you skip this process, you forgo valuable knowledge that can help you plan your budget and anticipate monthly payments.

2. Compromising Personal Credit Before the Loan is Finalized

Once the loan is almost final, you might not think to worry about your credit. You'd be wrong.

Take care of all your credit issues before your mortgage is finalized. A drop in your credit score can lead your lender to reject your loan or drastically change the terms.

Check your credit before you begin the home buying process and adjust accordingly. Start a conversation with potential lenders about the credit score they look for in a traditional mortgage.

Maintain good credit habits like paying bills on time, carrying little to no balance on your credit cards, and taking care of any other lingering issues.

Your credit is the baseline for your entire mortgage approval. Make sure it's on par before you start searching.

3. Working With the First Real Estate Agent You Find

It's easy to let emotions dominate you during the buying process. You're taking a big step. Unfortunately, emotions often get in the way.

Many first-time homebuyers will go with the first real estate agent they find, without pausing to make sure they're the right fit.

When it comes to real estate agents, first-time homebuyers should find a knowledgeable agent with an extensive background in the field. This agent should be honest, realistic, and prepared to work with your needs and interests.

The best way to find this real estate agent is to do your homework. Ask the potential agent about his/her qualifications and certifications. Don't be afraid to meet with several agents to decide on a good fit.

Choose an agent who knows the current market and its trends and can show you areas of opportunity you may have otherwise missed.

4. Making Assumptions About Mortgages and Their Terms

The world of mortgages is as intimidating as it is unclear. Often, a first-time homebuyer will make assumptions about home loans and get discouraged. But most of what they assume isn't true. Let's clear up a few of those mortgage myths, shall we?

Most people assume they don't qualify for a mortgage, period. This is a hasty assumption to make. Many people can take out mortgages with good to fair credit.  Pre-approval will show you what mortgage you qualify for.

Many homebuyers also assume that they'll have to come up with a hefty down payment. This may not actually be the case. Every loan situation is different, which is why you need to get pre-approved to understand the terms.

Ask as many questions as possible when buying a home for the first time. Make sure you are clear on everything.

5. Choosing a Lender Who Sounds Good

This goes right up there with choosing a real estate agent right off the bat.

Your lender will play a crucial role in your first home buying experience, which is why you want to choose one that won't steer you wrong. 

But what does an excellent fit look like?

You'll want a lender well-versed in mortgages and their terms and can work with your income and home aspirations. Search for lenders who have genuine relationships with their clients and a good understanding of market and interest trends.

Above all, first-time homebuyers should choose a mortgage lender who works with honesty and integrity. Do your research to find the lender who will work with your financial situation and home buying goals.

Avoid These Common Homebuyer Mistakes

It's easy to fall into traps when buying a home for the first time. However, you can avoid these first-time homebuyer blunders.

The most common pitfall is to not get pre-approved for a loan, which will jeopardize the entire home buying process the start. Get pre-approved first and the keys of your new home will be that much closer.

Second, Don't blindly pick real estate agents or lenders without researching them first and be clear on their terms.

Lastly, do your homework on mortgages and their terms. Maintain your credit throughout the mortgage process. Avoid these mistakes and you take your first step toward your dream home.

I know it sounds like a lot, but don't worry. You don't have to go it alone. 

As the Kansas City Mortgage Guy, I believe in giving every homebuyer the best possible lending experience. I pride myself on nurturing long-term relationships with my clients and get genuine satisfaction in assisting first-time buyers.

I can't wait to help you transition into a new and exciting life. Contact me today to get started

5 Stress Free Tips to Pay Off Your Housing Loan

Imagine the day you pay off your housing loan. Won't that be a happy occasion?

Want to get there quicker? 

Check out these 5 tips that will help you sprint toward the finish line -- and without a lot of stress. 

1.  Increase Your Payment

I know what you're thinking you're thinking: "Increase payments? I'm already struggling to make the ones I have now!" Consider this: any payment above what's required by the terms of the loan goes directly to the principal.

Your regular payments have two parts. One part goes to pay interest and another part goes to the principal or the amount you owe.

At the beginning of a loan term, payments go almost entirely to interest. This is a result of amortization, which is one of the terms you should know when you have a housing loan.

When you look at the amortization of your loan, you'll see that with each payment you pay a little less interest and a little more principal. In other words, it takes a while to make a dent in your loan.

But if you add a little extra to each payment, you'll see the principal come down faster. That's because extra payments go directly to principal.

It doesn't take a lot to make a difference. Let's say you have a $200,000 loan at 5% annual interest for a 30-year term. The overall interest costs would be just over $186,000.

But if you increase your monthly payments by even a small amount and interest costs drop. Using the example above, if you increased your regular payments by one-twelfth (so that by the end of the year you've paid the equivalent of 13 payments instead of 12), you will pay the housing loan off nearly 4 years ahead of schedule and save about $32,000.

Most people find increasing their payment by even $40 a month won't break their budget. 

2. Pay Bi-Weekly Housing Loan Payments

Another stress-free way to reduce the principal faster: pay more frequently.

Most housing loan payments are calculated monthly by default. Arrange for bi-weekly payments instead. This plan works well for people who are paid by their employer every two weeks.

Bi-weekly payments reduce your overall interest cost and duration of the home loan in two ways. First, the more frequent the payments, the less time interest can accrue on the outstanding balance. 

Second, bi-weekly payments allow you to make 26 payments in a year as opposed to 12. It's a painless way to chip away at the principal.

3. Make Lump Sum Payments 4 Times a Year

Get into the habit of making regular lump sum payments. This simple act can save you thousands of dollars in interest and close your housing loan sooner.

Provided the terms of your loan agreement allow for lump sum payments without penalty, plan for a modest payment throughout the year.

Again, it doesn't have to be a large amount to make a difference. One idea is to put $100 toward your mortgage with the change of seasons. That routine can help free you from your housing loan years ahead of schedule.

4. Use Half of Windfalls

Make a promise to yourself as soon as you take out a housing loan. If you get a bonus at work, receive an inheritance, or have the good fortune of winning the Powerball, you will put half of it toward your mortgage.

How to handle windfalls often involves philosophy and practicality.  

Many financial planners recommend using half because it allows you to enjoy half of the money now and benefit from the other half later. Once again, it links back to using lump sum payments to reduce the principal. In turn, those payments shorten the duration of the loan and reduce interest. 

5. Refinance

A different way to pay off your housing loan ahead of schedule is to refinance. But this option is only true under certain conditions.  

If you can get a new loan at a lower interest rate than your current loan, refinancing would reduce your interest cost. And if you don't change the payment amount, refinancing can shorten the duration of the loan. 

This scenario often applies to people whose bad credit or poor financial standing prompted a lender to impose a high-interest rate for the initial loan. A track record of making payments without incident for a few years often makes it easy to refinance at a lower rate.

Another way to pay your loan off faster through refinancing is to shorten the amortization period. This can work even if the interest rate is a little higher than what you're currently paying.

By getting a 15- or 20-year amortization instead of 25 or 30 years, monthly payments are higher but the pay down rate is faster. If you can afford higher monthly or bi-monthly payments, a shorter amortization period might be right for you.

Finally, don't increase the amount of the loan. When you refinance, look at the amount of principal outstanding on your current loan. That's the number you should shoot for. 

If your goal is to be free of a home loan, resist the temptation to get "money in your pocket" by increasing your overall obligation.

But take note: if your current loan is due, you could face penalties for refinancing. Always know the terms and conditions of your loan before seeking to refinance.

Every Dollar Helps

The most important thing to remember when trying to pay off any loan: every dollar helps. Don't get stressed out thinking you have to make huge payments to get ahead. Small and steady is often a more sustainable approach.

You only have to find a few dollars a week and put them toward the principal of your loan. Just think, for the cost of one lunch from a restaurant each week, you could save tens of thousands of dollars in interest and be free of your housing loan sooner than your lender would like!

If you're in the Kansas City metro area and are interested in refinancing your home loan, we can help! Get in touch with us today and we'll help you get your home loan paid in full.

10 First Mortgage Tips for New Home Buyers

Buying a home and taking out your first mortgage can be an overwhelming process. It's a big leap, but it doesn't have to be into the unknown. 

In fact, there are many things you can do before, during, and after the process to make life easier. Some people end up with mortgages that they're unhappy with, or can't afford later on. 

Don't be like those people. Check out these ten mortgage tips and use them to help you navigate the home buying process. 

1. Check Your Credit Score

Before you start the home buying process, you absolutely need to check your credit score. It's not enough to be pretty sure you have good credit. Errors can pop up at any time.

Check for any mistakes and do what you can to improve your score before you begin the process. Then use that score to estimate what your payments will likely be. Even a small change in your interest percentage can mean huge savings–or losses.

2. Take It Easy On Your Credit

What I mean is, now is not the time to be making big purchases on credit. That can impact your debt-to-income ratio negatively.

The same goes for opening new lines of credit. Now is the time to hit pause on anything that could hurt your credit score. You want to go all-in on making sure your first mortgage has an affordable interest rate.  

3. Figure Out What You Can Afford

This is the time to be brutally honest with yourself. Don't try to make the numbers work by assuming a rosy future. Just take a hard look at your current finances and what you're on track to achieve. 

It's also wise not to overextend yourself. You probably don't max out your credit card each month, even though you potentially could. It can also be a bad idea to max out your budget just because you've qualified for a mortgage. 

If it is your first mortgage, then there's a good chance this isn't your dream house. There will be time to upgrade down the road. Now is the time to focus on putting yourself on the sound financial footing to do that. 

4. Get All Your Documents Together

You don't want to go marching into the lender's office, only to go marching right back out again five minutes later to gather documents. 

It can be a pain, but you should have a number of documents on you when you head to the lender. Pay stubs, tax returns, bank statements, W-2s, and even a marriage license may all be necessary. 

5. Think About Your Options

The 30-year, fixed-rate mortgage is what most people think about when they talk about mortgages. But there are plenty of other options available. 

Can you afford larger monthly payments? Then a mortgage with a shorter time-span and lower interest may be a smarter choice. It will depend on your individual situation, but keep in mind that the faster you pay it off, the less you'll spend. 

If you don't think you'll be in this house very long, then it might be worth it to look into adjustable-rate mortgages

6. Save for a Down Payment

Speaking of paying it off quickly, do you know how large a down payment you can afford? The standard is 20% down but we have several programs that allow for significantly less.  Sometimes as low as 3% or even zero in some cases. 

Again, the caveat here is that you'll probably end up paying more, possibly including mortgage insurance

Another tip–make sure the funds for the down payment are in your account 60-90 days ahead of time. This is called "seasoning" the funds, and it's often required for loan programs. 

7. Look for Assistance for Your First Mortgage

Here's one that many people forget about. Both the federal government and many states offer assistance to first-time home buyers. For your first mortgage, you may be entitled to tax credits, interest-free loans up to a certain amount, and other perks. 

It's up to you to take advantage of these programs, and you may be able to combine them for substantial savings. 

8. Get Pre-Approved

Getting pre-approved before shopping for a home isn't strictly necessary. However, it is a major plus when you start shopping. 

Getting pre-approved is basically the same as being approved for a mortgage, but it doesn't specify a certain house. It just shows that you've been approved for a certain type of mortgage. 

This is great for shopping because it shows sellers that you're serious about buying their home. They can be confident that financial issues won't gum up the sale of the house once the process has begun. 

9. Compare Rates

Many first-time home buyers accept the first mortgage they're offered. But contrary to what you might believe, it's won't hurt your credit score to get multiple mortgage applications. As long as they're all within the same short time period, that is. 

It all comes back to that interest rate. Even the numbers way after the decimal point can have a major effect on how much you pay down the road. 

10. Remember Closing And After-Closing Costs

There are a number of things to think about here. Closing costs–the cost of closing your mortgage–can run from 2-5%. Depending on the cost of the home, that can be significant. 

But you'll also need homeowners insurance and home inspections. And don't forget that you'll likely need to buy furniture and all the other things that make your first house a home. 

When piled on top of each other, these expenses can break a budget quickly. Add them all into your planning, and then budget a little extra just in case. 

Wrapping Up

Buying a home and getting a mortgage can be quite overwhelming if you're not prepared for it. It can also be a difficult experience if you aren't working with the right lender. 

But now you know some of the steps you'll need to take to make that mortgage work for you. All that's missing is a lender who understands your needs.

Here's the last tip–let the KC Mortgage Guy get you the mortgage you need for your new home. Contact me today and let's get you started on the path to the perfect mortgage.

First-Time Homebuyers: Mortgage Terms You Need to Know

When I was a kid, I remember building forts in my living room and thinking about how cool it would be when I got to buy my own real home.

 

I mean, how hard could it be?

 

 

Obviously, I've learned there are a few more steps to take in order to buy or refinance a home. It takes more than just gathering blankets and pillows from around the house.

Although there are a few mortgage terms that seem to really get confusing for first-time homebuyers, here's a quick guide to help grasp mortgage lingo:

Mortgage Terms 101 for First Time Homebuyers

Pre-Qualification vs. Pre-Approval

Both of these terms have that fantastic prefix pre-, noting that they will be done before something else, but these two terms are notorious for getting mixed up.

Pre-Qualification

Getting pre-qualified is like taking a brief survey based on some basic financial information, as well as potential down-payment/initial investment information. 

Lenders can provide a type of tentative green, yellow, or red light to determine your eligibility for a specific loan. 

Pre-qualification gives a strong idea as to how much of a loan can be afforded and how expensive of a house can be purchased.

Pre-Approval

Here's what really needs to be secured before beginning any home search.

A pre-approval happens when your lender gives the a-okay or the not-gonna-happen for a potential loan based on a completed application, verification of income, assets, employment check, credit history, and other necessary information.

However, once pre-approved, the real home searching fun can begin!

Getting a pre-approval can make the home buying process go much smoother.

Debt to Income (DTI) Ratio

What fun would it be to find and buy a home without adding a few mathematical equations?! 

A debt-to-income ratio is one of those basic equations used by your lender to determine whether enough money is made in order to afford the potential loan.

A simple recommendation for personal finance applies to first-time homebuyers trying to secure a home loan:

Earn more money than you spend.

When tracking a new home, I try to always remind my homebuyers that the amount of money they make must validate the amount of money they are asking to borrow.

I always recommend that anyone interested in purchasing a new home needs to have a strong idea of their DTI ratio.

Consider these financial obligations when calculating a personal DTI ratio:

  • Car payments
  • Credit card payments
  • Student/personal loans
  • Child support/alimony
  • Any other monthly financial obligations

The goal is to have as low of a DTI number as possible. That way, there will be more money available to pay a monthly mortgage.

Fixed vs Arm vs Balloon

Just looking at these three mortgage loan terms together appear ridiculous. There doesn't seem to be any connection between how they could possibly be related.

However, these three terms are the bread and butter of the mortgage industry.

Knowing the differences between the three is a much-needed ingredient to deciding which mortgage is best for each homebuyers' needs.

Here's a quick overview of each:

Fixed Rate Mortgage

  • The most popular
  • Offered between 10-40 year mortgage options, where the interest rate remains the same for the life of the loan
  • Payments are predictable

Adjustable Rate Mortgage

  • The rate of interest only remains fixed for a specific period of time (usually 1, 3, or 5 years)
  • Interest rate is lower in the beginning; adjusts at set intervals after initial period is over 
  • Interest rate adjusts to reflect market conditions (can rise or lower)
  • Payments are not always predictable

Balloon Mortgage

  • Cheaper for the first few years
  • After initial period of time, the rest of the loan is due in one lump sum, known as the balloon
  • Potentially good for buyers who are:
    • looking to move after a few years (before needing to make the balloon or lump sum payment)
    • commission-based or earners of large bonuses that can put the money towards the final balloon payment

Good Faith Estimate

Plain and simple - an estimate of the potential closing costs that a new homebuyer will pay.

Amortization

This big, fancy word is just a term to schedule how the loan will get repaid. 

This payment schedule includes how much money will go towards the principal and how much will go towards the interest.

Speaking of, here's the difference between these two terms:

Principal

The amount of money actually borrowed for the mortgage.

Interest

That percentage that the bank gets. Interest is usually the bulk of the monthly payment until it has been reached - it's the money that the bank or lender earns from the home purchase.

Escrow

A type of sub-account that is set up during closing. The escrow will include money to pay homeowner's insurance and yearly taxes, which will be wrapped into the annual mortgage payment and divided among twelve monthly payments. 

If taxes or homeowner's insurance rise, this can affect the annual and monthly payment each year.

Don't get overwhelmed!

Sure, these mortgage terms seem to be a bit confusing and at times intimidating. But, they don't have to be!

Doing a bit of homework before purchasing a new home is one of the best ways that new homebuyers can prepare for their exciting investment.

A quick checklist to remember before beginning the search for the perfect home:

  • Try to pay off as much debt as possible so a debt-to-income ratio is not massive.
  • Don't get excited about a home that cannot be afforded; don't spend more money than is earned. 
  • Get pre-approved to make the purchasing process smoother and quicker.
  • Get a good idea of a personal DTI ratio.
  • Use one of these mortgage calculators to get an idea of which type of mortgage works best for personal purchasing needs.

And my number one recommendation for anyone looking to buy a new home: Don't be afraid to ask for help! 

Making the perfect move to the perfect home doesn't have to be overwhelming or confusing!

Looking to move to the Kansas City metro area? Looking to refinance?

Let's work together to buy that dream home!

The 6 Things That Affect Your Home Loan Eligibility (Hint: You Can Fix Some of Them!)

There are few things that are more exciting than buying your first home. 

When you buy a home, you get to have the pride of ownership. You can paint the walls whatever color you want, and or update hardware and appliances without having to consult a landlord.

Best of all, unlike rent, mortgage payments actually contribute to building personal equity. In fact, many finance experts consider home ownership the key to building wealth.

That said, while purchasing a home can be a great experience, it can also be a daunting process. 

Buying a house is a huge investment. In fact, for many people, it will be the most expensive purchase they ever make in their life. 

For this reason, most buyers cannot afford to buy a home in cash. Instead, they must apply for financing. 

It can be very disheartening for would-be homeowners to get excited about a potential property, only to find that their mortgage application has been denied. The good news, however, is that there are often steps you can take to improve your home loan eligibility. 

Let's take a look at how mortgage lenders determine your eligibility for a loan.

What is home loan eligibility?

Before we look at the factors that impact your home loan eligibility, let's take a moment to define what this term means. 

Lending institutions make their profits off of the interest that borrowers pay when paying back their loans.

Whenever someone applies for a loan, the institution must decide how much money to lend that person. They also decide what interest rate to charge. They make these decisions based on how likely they believe the borrower is to make their payments on time. 

Essentially, factors that lending institutions believe make you more or less likely to make your mortgage payments will impact your eligibility for a home loan.

So what are these factors? While there are several, let's take a look at six primary ones. 

Age

One of the ways lending institutions determine a potential borrower's trustworthiness is by their age. Age can factor into a lender's decision in a few ways.

First, let's consider if a borrower is 50 years old, and looking to take out a 20-year mortgage. By the end of that loan term, the borrower would be 70 years old. 

Before approving a loan, the lender would want to know when the borrower plans to retire. Additionally, they would want to see how the borrower plans to pay back the loan during retirement. 

By contrast, folks who are further from retirement are considered to have more working years ahead of them. 

At the same time, young borrowers present other risks to lenders. Lenders may question whether a young person is sufficiently responsible for making consistent loan payments.

In order to make this determination, the lender will typically weigh age against other factors. 

Income and Profession

Monthly income is one of the best indicators of whether a borrower will be able to make loan payments. If a borrower does not have money coming in consistently, they may struggle to pay a mortgage.

In addition to your current income, lenders also look at your profession and job history. Borrowers who are in traditional professions are considered less risky because their jobs are in high demand and provide a consistent salary. 

Additionally, lenders prefer borrowers who have been in the same job or industry for two or more years. These borrowers are viewed as more stable, and more likely to continue making their current salary.

So, even if a borrower currently makes a great salary by running a start-up company, lenders might view them as a risk. For one, the borrower's income could vary significantly month to month. Or, the business could fail, and the borrower could be out of work while looking for another job. 

Credit score

Another factor affects home loan eligibility is the borrower's FICO Credit Score. Your credit score gives lenders an idea of your history of making loan payments on time. 

If you are applying for conventional financing, a better credit score will get you a better interest rate on your loan. 

If you are applying for a government-backed FHA loan, you'll likely need to meet a minimum credit score requirement. Once you meet that minimum, however, you typically won't qualify for a lower interest rate by having a great credit score.

Existing Debt

Even if you make your loan payments on time, however, your total amount of existing debt could negatively impact your home loan eligibility. 

Your total amount of income compared to your monthly debt obligations is called your debt-to-income ratio. Typically, it is recommended that your debt-to-income ratio should not be higher that 45%.

Or, put differently, you should not spend more than 45% of your monthly income on debt payments.

If your mortgage payment would put you over this threshold, lenders may be hesitant to approve the loan. 

Marital status

You've heard the expression "two heads are better than one." 

Well, when it comes to home loan eligibility, two incomes are better than one. If you and your spouse both have solid incomes, lenders will view that positively.

Even if one of you loses your job, you will have the other spouse's income to fall back on.

That said, applying for a mortgage with a spouse can be a blessing or a curse. If your spouse has poor credit, for example, that could negatively impact you. 

The condition of the property

Another factor that can affect home loan eligibility is the condition of the home itself. 

If you apply for a loan on an older home with a lot of problems, it will be harder to get approved by a bank. That's because the bank sees the home as having a higher risk of becoming uninhabitable.

If you are no longer able to live in your home, but still owe money on it, that could put you in a difficult financial situation. 

If you need help determining your home loan eligibility, contact us. Our mortgage lenders can work with you to find a financing option that will work for your situation. 

The Complete Guide to Your First Home Mortgage

Ready to take your hard earned money and hit the real estate market to find your dream home?

First, you're going to want to make sure you can afford that dream house. Enter: your first home mortgage.

A mortgage, by its nature, puts you in debt. It's also likely to be the largest debt load you'll carry.

This doesn't need to be intimidating but it does help build appreciation in what an undertaking having a mortgage is.

To qualify for a first home mortgage there are some steps you can take to ensure a smooth and relatively pain-free experience.

Know Your Credit Score

Before a lender approves you for a mortgage, it is important to know what your credit worthiness is. This is known as your credit score.

Credit scores typically range from 300-850 with 620-650 being the ideal number range to qualify. If you find yourself below this range, you'll want to address this first.

It's worth bearing in mind that the higher your credit score the better your rate will likely be.

Some ways to help better your credit score involve not carrying a balance on your credit cards or loans or having a large car loan. The sooner you can pay off your debts the more creditworthy you will get.

By addressing this first, you can save yourself the heartbreak of failing to obtain a mortgage while setting yourself up for future success.

Establish Your Capacity for Debt

Your capacity for debt is essentially how much you can realistically afford to pay toward your mortgage.

People often want the largest first home mortgage they qualify for. This can lead to some terrible financial situations. You do not want to over-leverage yourself by taking out a loan that exceeds your ability to pay it back. This is how people go bankrupt.

Be honest with yourself about your financial situation and ensure you're staying within your comfort zone.

A ballpark figure to help you understand where you sit financially is to have 41% or less of your income going toward debt. This tells lenders that you are in a solid position to pay off your debt.

Determine the Value of Your Assets

Obviously, the more money you have to go toward the purchase of your house, the larger the mortgage can be.

It's important to audit your assets to have a solid understanding of what your spending capacity is. 

You'll also want to be mindful that you aren't looking at just the amount of your downpayment, but the associated costs as well. Closing costs, legal fees, and any prepaid insurance or escrow fees will need to be covered.

The better you understand your spending position, the more confidence you install in the mortgage lender. Be sure to show them that you have considered all costs and that you're able to cover them.

The more assured the mortgage lender is, the more favorable your mortgage will be.

Have an Understanding of the Market

You don't want to approach a mortgage lender without an idea of what you want to borrow. When applying for a first home mortgage you want to be very clear about what your needs are.

Determine what you want and what you need from your house. Set a list of priorities, what the must-haves are and what the ideals are. Gather a list of potential neighborhoods that are appealing and understand what the houses there are selling for.

The more information you have the better prepared you are. This creates the context for the value of your assets and your ability to carry debt.

Having a fine grasp of your first home mortgage needs allows you to position yourself where you are and where you need to be. This allows you to bring the mortgage lender the numbers that they need to establish your qualifications.

It's also an opportunity to understand what your price point really is. You may realize that you actually have a greater purchasing power than you originally thought.

The important thing is that you don't know until you do your homework!

Get Organized

When you're establishing all the above points make sure to gather and organize all relevant paperwork. The more prepared you are for the mortgage lender, the smoother things will go.

Have a full list of your current debts so that you are aware of what you owe. Have proof of your assets together so that there are no questions as to your value. Demonstrate how you can carry the debt load you're asking for without risk.

Keeping these items organized allows you to keep a clear view of your position. If you need to refer to any of this information, you'll have it easily accessible.

Get Quotes 

Circling back to the idea that a first home mortgage is likely to be the largest debt you'll carry, you want to make sure that you are getting a favorable quote.

The difference of a percentage point on hundreds of thousands of dollars makes a massive difference when compounded over decades.

Understand the terms of your mortgage, too. Know whether you can lock in the rate and what the terms are if you need to break the contract early. Having a mortgage is a huge responsibility. The more you know about the terms of your agreement the more power you have over it.

Closing Thoughts on Getting Your First Home Mortgage

Buying a first home is an incredibly exciting experience. It can be an emotional roller-coaster full of unpredictability and uncertainty. You'll be competing with other buyers for limited properties. You'll find homes you love and homes you can live with.

With so much of the buying process out of your hands be sure to be in absolute control of the aspects you can influence.

The biggest variable you can manage is your first home mortgage. By using the above steps as a road map, you can put yourself in control of your buying power.

If you have any questions or need some advice please reach out and let us know.

7 Things You Need To Know About A Home Improvement Loan Before You Get One

Owning a home comes with all sorts of benefits, but also with many expenses.

Home improvement is popular among homeowners both because of improved quality or design, but also because it can add value to your home.

In fact, 53% of U.S. adults have made some sort of home improvement in the past year.

But with many projects costing thousands of dollars, this can be difficult to finance.

Taking out a home improvement loan is the solution for many homeowners looking to start a new project. 

Here are 7 things you need to know if you are thinking about taking out a loan for home improvement. 

1) You Have Options

When we are talking about loans, there is never just one type: there are a variety of options for you to choose from.

The first option actually isn't a loan at all: just save up money.

While this might be possible for smaller improvements, 56% of people who do home improvements spend more than $1000.

Saving up a large quantity of money might not be feasible for you or your family. 

Another option would be using a personal loan or credit card.

Lastly, you could borrow with a home equity loan, a HELOC, or a mortgage refinance.

2) How to Decide Between Loans

The route you choose should depend on what type of home improvement you are looking to do, your financial situation, and your credit.

COST

Let's look at cost of the project you are looking to do. 

For small projects, it would be best to just save and pay for it yourself.

For improvements that are $15,000 or less, like buying new appliances, for example, a credit card with low interest would likely be the best route.

As it gets a little more expensive, a personal loan would be appropriate.

If the project is $50,000 or more, you're better off going for a home equity loan, a HELOC, or refinancing.

FINANCES AND CREDIT

As I said before, your credit and financials can have an affect on whatever loan you take out.

With personal loans, the interest rate will be determined by your credit score and sometimes even your profession and your income.

It's important to look around and find which lender would have the lowest interest rate for you. 

Home equity loans are usually cheaper than personal loans and have fixed interest, while a HELOC has an adjustable-rate interest.

Oftentimes a HELOC begins with a lower rate, and can thus be cheaper, but a home equity loan has the benefit of being given in a lump sum.

It's up to your needs and priorities which you choose. 

If your renovation is large and costly, a mortgage refinance would be the way to go. This can be more expensive than the other options, so consider your financial situation carefully.

3) Know the Risks of a Home Improvement Loan

Obviously, all loans have a certain element of risk compared to just saving and spending your own money.

If you are using a credit card, be sure to get one with low or 0% interest otherwise you will end up paying extra in interest. You also need to be careful not to miss payments, as this can result in extra fees.

You also need to be wary of fees the credit card may charge you, as well as understanding that some low-interest rates eventually expire.

If you have a card that gives you a low interest for a certain amount of time, usually for around 1 year, then you should make sure to pay off the charge sooner rather than later.

As I mentioned earlier, the interest rate on a home improvement loan can depend on a variety of factors. If you have or come to have a bad credit score, you could suffer from a high-interest rate.

Finally, be wary of closing costs. Closing costs for certain loans can be quite high.

So what's the takeaway here? Do your research and understand your personal situation before committing to any of these loans. There are many apps and online calculators that can help you. 

4) You Can Combine your Options

Taking out a home improvement loan is a big decision, so it is important to borrow only what you really need.

If you have a couple thousand dollars saved, you can use that money alongside a loan instead of borrowing the entire amount. This can reduce your interest and save you money. 

5) Home Improvements Can Add Value to Your Home

If you're taking out a home improvement loan, chances are you know that it will do just that: improve your home.

But the improvements themselves can add value to a home.

So what does this mean? Let's say you spend $100,000 on your home and put $30,000 into renovations. If you then sell your home for $200,000, that means you made a $70,000 profit. 

Spending money and taking out a home improvement loan can help you make money in the long run.

6) Know What you are Looking to Add or Remodel

In order to make a profit on resale, the home improvement you make should add substantial value to your home. 

Some examples of popular renovations that add value include:

  • Landscaping
  • Maintenance (gutters, furnace, septic system, etc.)
  • Solar panels 
  • Efficient lighting, heating, and cooling
  • Kitchen or bath remodel

If you're considering a home improvement loan, these renovations could be your best bet at making your money back (and hopefully, making a profit).

7) Tax Deductions

While the home improvements themselves are not tax-deductible, there are other things related to home improvement that are deductible.

Usually, the interest on home loans and HELOCs are eligible for deduction. The specifics of the tax deduction will depend on the loan itself, your tax bracket, and other related factors. 

I talked earlier about specific types of home improvements that can add value to your home. Certain types of renovations can also lead to tax deductions.

If you have a home office for a business or rent out parts of your home, then renovations to those areas are eligible for a deduction.

Bottom Line

Home improvements can be fun and exciting for homeowners, but they are a big decision with a lot to think about.

A lot of this information can be confusing, so please reach out to us if you have any questions or need any help deciding what is right for you.