What Do Underwriters Actually Do Anyway?

By: Scott Shenton, Mortgage Banker

For anyone who’s been through the mortgage process, particularly in the current regulation-heavy environment, they may feel that underwriter’s only purpose is to be difficult. Although it may feel that way sometimes, underwriters actually are the superheroes of the mortgage industry. 

To appreciate why underwriters are so indispensable, it’s important to first understand a few of the underlying processes in the mortgage industry. No matter which institution you choose to do your mortgage, it’s a near certainty that that loan will one day be sold to a different institution. This buying and selling of mortgages is collectively referred to as the “secondary market”. It’s this buying and selling of mortgages, that enables institutions to continue to have funds to lend and without this market, the entire system would come to a screeching halt. For a mortgage to be considered viable on the secondary market, it must be structured and delivered in a way that proves that it is indeed a good investment (adequately low risk) and is consistent with industry standards.

  

This brings us back to the heroes of this story, the underwriters. Loans are delivered to underwriters complete with a large collection of supporting documents intended to prove a borrower’s income, ability to repay the loan, credit worthiness and the circumstances in which they are purchasing the property. An underwriter’s job is to then look at the big picture and ask the difficult questions.  Is the borrower’s income consistent and stable? Are the borrowers using the property as a primary residence, 2^nd home, or investment? Are all debts being taken in to consideration when determining a borrower’s ability to repay the loan? Does the loan make sense, and will it be purchased by an investor?

Underwriters are expected to pose questions that may impact the loan’s marketability and request additional documentation to answer these questions. When an underwriter has done their job well, the loan will easily be sold and will continue on, issue free. It’s this step that keeps the secondary market, and ultimately the mortgage industry plugging along.

So take it easy when answering an underwriter’s request for additional information and thank them. They keep homebuying possible. Want additional information about the homebuying process? Request a copy of our homebuyer’s guide or apply online.

Pros And Cons Of Adjustable Rate Mortgages

When you are in the market for a new home, you may be faced with numerous options for financing your home. One of the choices you will have to make is whether to apply for a fixed or adjustable rate mortgage.

In some cases, an adjustable rate mortgage may be your best option, but keep in mind, they are not the answer for everyone. Adjustable rate mortgages can be risky for some borrowers and it's important to understand both the pros and cons.

When To Consider An Adjustable Rate Mortgage

Perhaps one of the best things about ARMs is they typically have a lower starting interest rate than fixed rate mortgages. For some borrowers, this means it is easier for them to qualify for a loan. 

ARMs Are Beneficial For Borrowers Who:

• Anticipate an income increase - for borrowers who are anticipating their income to increase over the next year or two, an ARM may be the right option.
• Will be reducing their debt - those borrowers who have automobile loans or student loans that will be paid off in the next few years may benefit from an ARM which would allow them to qualify for a larger mortgage today anticipating their ability to convert to a fixed-rate mortgage.
• Are purchasing a starter home - when you anticipate living in a home for five years or less, an adjustable rate mortgage may help you save money for a bigger home.

Adjustable Rate Mortgage May Contain Hazards

There are a number of different types of adjustable rate mortgages and they are each tied to specific interest rate indexes. While an ARM may offer borrowers some flexibility in terms of income and debt ratios, the downsides cannot be ignored. Some of the cons of using an ARM to finance your mortgage include:

• Increasing rates - borrowers should carefully review their loan documents to see how frequently their interest rates may increase. Some loans adjust annually while other may not increase for three to five years after the mortgage is signed. For borrowers, this means they can anticipate an increase in their monthly payments.
• Prepayment clauses - oftentimes, lenders include a prepayment penalty with ARM loans which can be devastating for borrowers. Before agreeing to an ARM, make sure you read the documents very carefully to determine how long you need to hold the loan
• Home Values - one of the biggest challenges borrowers face with an ARM is what happens if the property value decreases: Refinancing a home into a fixed-rate mortgage may be impossible if this occurs.

Borrowers who are searching for the right mortgage should discuss all options with their loan officer. There are specific instances when an ARM may be the best option and there are other times, such as if you plan to stay in your home for more than five years, where a fixed-rate mortgage may be your best option.

Should I Shorten My Mortgage Term, Important Factors To Consider

When you first bought your home a few years ago, perhaps you started off with a 30 year mortgage. Now, you are considering refinancing and changing it to a 20 year or even a 15 year mortgage.

Shortening your mortgage term and refinancing can be a smart financial move, but before you make this decision there are a number of factors that you should consider.

Switching to a shorter mortgage will mean that your monthly payments will be higher, but you will be 100% paid off much sooner and you will save thousands of dollars in interest rates. Here are a few of the factors to consider before making this decision:

Has Your Situation Improved?

Perhaps you have moved to a higher paying position, allowing you to earn a higher income and pay off more of your mortgage every month? Or maybe you have received an inheritance, which will help you to make the payments? Perhaps your expenses have gone down and you will have more money left over from your wage?

Whatever the reason, if your financial situation has improved you might want to consider switching to a shorter mortgage. With your spare money, you will be able to make the larger payments and get your house paid off sooner.

Is The Improvement Long Term?

However, it is important to consider whether this improvement will last for the long term. Will your higher wage stay that way for the next several years? Are there any hidden expenses that you are failing to factor in?

You might be set up to repay larger monthly amounts on your mortgage at the moment, but you don’t want to set yourself up for failure in the future if your finances change.

What Are The Refinancing Costs?

Keep in mind that refinancing often comes with costs and fees, so make sure that you subtract these when you are making your calculations. It can sometimes take at least two or three years to recoup the fees, so make sure that you don’t plan on selling your home in the short term.

Can You Get A Better Rate?

One of the advantages of refinancing to a shorter mortgage is that you can sometimes get the opportunity to find a better rate. Perhaps if you have an adjustable rate you will be able to convert it to a fixed rate. Take a look at what is available and ask your financial advisor for help.

These are just a few important factors to consider when it comes to shortening your mortgage term. For more info about your home, contact your trusted mortgage professional.

Dodd-Frank's Latest Gift: The Qualified Mortgage Rule

The Dodd-Frank Wall Street Reform and Consumer Protection Act's latest provision - the Qualified Mortgage rule - is going to effect on January 10, 2014.

While, like many of Dodd-Frank's other features, its ability to protect customers remains to be seen, one of its impacts is already clear. Taking out a home loan just got harder.

The QM rule contains a set of provisions that, if followed, may protect lenders from lawsuits. They will also make it harder for customers to qualify to borrow money to buy a house.

Verifying Incomes

Lenders now have to follow stringent procedures to verify that borrowers can repay their loans. While many home loan lenders are already verifying and documenting borrower incomes, assets and debts, they will have to create additional paperwork to prove that they did their jobs.

DTI Caps

For a loan to be considered a qualifying mortgage, the borrower's debt-to-income ratio can be no more than 43 percent. This means that if a borrower has $4,500 in gross monthly income, his total debt payments including his new mortgage cannot exceed $1,935 per month.

Previously, some lenders had been willing to go up to 45 percent.

Fee And Term Caps

Lenders will be less able to make creative loans, as well. Loans that meet the QM rule can be no longer than 30 years in length. They also cannot have closing costs and fees that exceed a cap of 3 percent of the loan's balance.

Who Gets Impacted?

The good news is that the normal borrower taking out the normal loan might not notice the new QM rule. Borrowers that get squeezed are those that need to take out a loan that doesn't fit the box laid out by the provisions. These include:

• People in high-cost cities that need 40-year or interest-only mortgages to lower their payments.
• Self-employed people and contractors that need to be able to borrow money on "stated" income without detailed verification.
• Borrowers that can afford a loan but have other debts, like student loans.
• Those that need non-traditional loans with high fees.

While the law still allow a lender to make a loan that isn't a qualifying mortgage, given that the loan won't have the same legal protections, its costs remain to be seen. This could end up pricing people with special needs out of the home loan market.

3 Considerations When Making A Down Payment

One of the challenges you will face when deciding how much money to put down on your new home is whether to put down a larger down payment or to take a bit of money from your down payment and use it to pay "discount points" to lower your interest rate.

There are pros and cons to doing both and each borrower's situation will be different so it's important to understand which option is best for your individual need.

Some Factors You Should Consider Include:

• Cost Of Borrowing - generally speaking, to lower your interest rate will mean you pay a premium. Most lenders will charge as much as one percent (one point) on the face amount of your loan to decrease your mortgage interest rate. Before you agree to pay discount points, you need to calculate the amount of money you are going to save monthly and then determine how many months it will take to recover your investment. Remember, discount points are normally tax deductible so it may be important to talk to your tax planner for guidance.

• Larger Down Payment Means More Equity - keep in mind, the larger your down payment, the less money you have to borrow and the more equity you have in your new home. This is important for borrowers in a number of ways including lower monthly payments, potentially better loan terms and possibly not having to purchase mortgage insurance depending on how much equity you will have at the time of closing.

• Qualifying For A Loan - borrowers who are facing challenges qualifying for a loan should weigh which option (discount points or larger down payment) is likely to help them qualify. In some instances, using a combination of down payment and lower rates will make the difference. Your mortgage professional can help you determine which is most beneficial to you.

There is no answer that is right for every borrower. All of the factors that impact your mortgage loan and your overall financial situation must be considered when you are preparing for your home mortgage loan.

Talking with your mortgage professional and where appropriate your tax professional will help you make the decision that is right for your specific situation.

Pitfalls And Warning Signs Of Making A Down Payment

When you already have a home, you may be interested in determining if a refinance is a good option. You will not have to worry about restrictions on down payments or some of the problems that can occur with a down payment.

However, if you are considering purchasing a home in or the surrounding communities, understanding down payment restrictions is important.

Gifting Of A Down Payment

There are some programs that will allow you to use a gift for your home down payment. However, before you assume this, make sure you talk to your loan officer. Generally speaking, the lender will require the person making the gift to provide a letter stating the money was a gift and does not require repayment.

Windfalls Of A Down Payment

When people hit the lottery or come into money through an inheritance, one of the first things they may consider is buying a new home. However, it is important to keep in mind that lenders will typically want to know exactly how you came up with your down payment.

Borrowers still need to show a "trail" of how they came into money. If your down payment amount has not been "seasoned" the lender may not accept your loan.

What Is A Seasoned Down Payment?

Generally speaking, your loan officer will want a "paper trail" to document your down payment. Most lenders require down payment funds to be at a minimum six months old.

For example, let's assume a borrower did win the lottery: If they deposit the funds into their checking account and leave it there for six months or more, the funds would be considered seasoned.

Lender restrictions on down payment funds are fairly common. If you are uncertain if your funds meet the lender's criteria, talk to your loan officer. In most cases, a lender will require at least one-half your down payment fall into the category of seasoned funds.

Some borrowers may use their retirement account or other savings to make their home down payment.

Don't wait until the last minute to discuss your down payment with your loan officer because you may wind up disappointed. Keep in mind, every lender has different requirements and these rules may not apply to your lender.

5 Great Questions To Ask At An Open House

An open house gives you a great opportunity to look more closely at real estate you might be interested in buying. It also affords you the chance to chat with the owner or real estate agent so you can bring up any issues or hesitations you have with the home.

Knowing what to ask can be difficult, so below are examples of questions to ask at the next open house you attend.

Why Has The Seller Decided To Sell Now?

If you ask why the seller is moving, you could learn valuable information to help determine your offer or possibly whether or not you want to buy the home.

Knowing whether the owners are about to go into foreclosure, have experienced trouble in the neighborhood, or if they've retired and completely paid off the home can help you understand how urgently they need to sell their property.

Has The Seller Had Any Other Offers?

Don't forget that you are not only negotiating with the seller for a price, you are also competing with other potential buyers. It really helps to know what you are up against.

It is important to understand that you might not get a 100% straight answer to this question as most sellers know that competition or perceived competition can cause a potential buyer to move forward more quickly and at a higher price.

If you're comfortable in this discussion, you might want to try and see if you can find out the details of any other offers.

Does The Property Have Special Ownership Costs?

Ask the agent or owner about the other costs associated with owning the property, such as Home Owners Association fees within a condo complex or a gated community. It's important to know about these extra expenses in advance so you can make an informed offer.

You may also want to ask about any pending litigation concerning the property. Litigation is not always a deal killer, but it's better to know the details before you sign closing documents.

What Furniture And Appliances Are Being Sold With The House?

Most of the time, a seller will include their major appliances such as the refrigerator, stove and dishwasher with the home, but this isn't always the case. If you don't already have these items, it's important to know whether they are included in the purchase price.

Is There Anything Else That You Want To Leave With The Home?

This is an important question to ask. Especially if there are specific things in the home that you have a strong interest in. Perhaps there is custom art work or a pool table that fits perfectly in the game room.

The seller may be eager to part with those items and include them in the sale of the home or sell them at a large discount. The open house is a great opportunity to learn more about a home before making the decision to buy it, so be sure you ask the right questions.

4 Tips To Save For That Down Payment

In order to save up a huge amount of cash for the down payment on your first mortgage, you need a solid savings plan!

When you take out a mortgage on your new home as a first time homebuyer, the more you can pay as a down payment the better. The down payment on a mortgage reduces the principle of the loan and means that you will be paying tens of thousands less in interest payments over the life of the loan.

Most financial experts recommend that you should save up at least 20% of the value of the home as a down payment. Depending on the value of the home that you want to buy, this can be a serious chunk of money.

The conventional saving tricks of skipping your morning latte and eating dinner at home just aren't going to cut it when saving up this much money! You will need some strategies for saving big.

Here are some tips to help you get closer to that down payment:

Make A Separate Savings Account

No matter how much you have already saved for your down payment, create a new savings account to put the money in. When the money is in your personal account it is so much more tempting to spend it on day to day expenses. Also, a savings account will give you a better rate of interest so that you can help you money grow.

Pay Off Your Credit Cards First

If you have credit card debt, you will be paying interest charges to the credit card company every month. These charges can really add up, especially if you are only paying the minimum on your loans. If you can pay down this debt you will have extra money every month to put into your savings instead.

Get A Part-Time Job

If you want to accelerate yourself towards having your down payment saved up, you could consider taking on a part-time job in addition to your full-time job on a few evenings and weekends.

It doesn't have to be something that you do forever, but even sticking with it for six months to a year will give you thousands in extra income that you can put straight towards your down payment.

Make A Backwards Budget

Do you find that after you have paid all of your bills and your living expenses, there is nothing left over to save? Rather than calculating all of the money that you use on your monthly expenses and then saving whatever is left afterwards, why not make your budget the other way around?

Start off with how much you want to be able to save per month then subtract that amount from your net income. The number you have left is what you have to live off.

You will find that you naturally change your habits to make this amount of money work for you and if it if not enough you can increase your income by getting a side gig. These are just a few ways that you can save up for a down payment on your first home in order to save money over the years on your mortgage.

3 Tips To Sidestep These Common FHA Loan Hang-ups

FHA loans are becoming increasingly popular these days as potential homeowners are not able to qualify for mortgages from traditional lenders. The FHA insures these high-risk loans, in turn allowing borrowers with low down payments and less than perfect credit to purchase homes and bolster the housing market.

However, getting through the loan process with the FHA is more difficult than with a traditional lender, and you may need to cope with some of these common loan hang-ups.

Property Condition

You can't buy just any property with a FHA loan. The appraiser must deem it to be livable, without any conditions that could jeopardize health or safety. If the home has chipping paint, a leaky roof, or a wobbly banister, the financing could fall through.

Sometimes you can get the seller to make the needed repairs to pass inspection, but in other cases, you may have to go an alternate route. The FHA 203K streamline loan allows you to borrow up to $35,000 over the purchase price of the home for repairs and updates. It's important to check with your local mortgage lender to determine any specific local FHA 203k loan details.

Low Appraisal

In addition to inspecting the property, appraisers also estimate its market value. These estimates are based on the property's features and a comparison to similar properties that have sold recently. If the appraisal is low, the FHA loan funding could fall through because the FHA will not let you borrow more than the home's appraised value.

Rather than trying to scrape together a bigger down payment, just take the information to the seller to renegotiate the purchase price. The seller will likely recognize that other buyers would be in the same boat, leading the seller to agree to a lower purchase price.

High Debt-to-Income Ratio

Your FHA loan may encounter a snag in the underwriting process if your total debt payments, including your new mortgage, would be a high percentage of your income. If you are in this situation, ask your lender to try running you through the automated underwriting program called TOTAL.

The process is quick, and often you can make up for a high debt-to-income ratio with other compensating factors, like a larger down payment or a cash reserve of several months of mortgage payments. For more information on common FHA loan hang-ups feel free to contact your trusted mortgage professional today.

Are 50 Year Mortgages A Good Financing Option?

When most people are taking out a mortgage on a property, they select either a 15 or 30 year mortgage loan. However, there is a new mortgage option that has been available to home owners since 2006 and that is the 50 year mortgage loan.

Although a half-century might seem like a very long loan term, there can be some advantages to taking out a five-decade mortgage. Here are some of the pros and cons to taking out a mortgage that you repay over 50 years.

Advantages

The main benefit that you will experience with a 50 year mortgage is the ability to take out a larger loan and buy a more expensive house that you might not have otherwise been able to afford. This means that you can enjoy a better standard of living with lower monthly payments.

A 50 year mortgage might also make home ownership easier to qualify for as a first time homebuyer. On a monthly basis, it means that you will have more room in your budget for paying for other expenses.

Disadvantages

Of course, the major disadvantage to a 50 year mortgage is that you will end up paying much more interest over the loan period. Also, you will build equity in the home very slowly and you will not gain back much equity if you sell the home a few years on.

Also, often 50 year mortgages will come with higher interest rates than their 30 year counterparts. You can usually expect to pay an extra 0.25% or more than you would if you took out a 30 year mortgage, which can really add up over time.

It might be advantageous to take a 50 year mortgage with low payments in the beginning, with the aim to refinance and reduce your term in the future when you are earning more money and can make higher mortgage payments.

A 50 year mortgage can sometimes be advantageous, but ask yourself if you really want to wait until you are in your 70s or 80s before owning your home! If a 50 year mortgage is the only way you can afford your mortgage payments, you might be considering a home that is beyond your price range.

To find out more about the right mortgage term for you on your property, call your trusted mortgage professional today. 

Beware Of Zombie Titles

With the economic downturn, anyone dealing in real estate quickly became familiar with previously little-known terms such as foreclosure and short sale. Now that the housing market is picking back up and people are moving on, a new term is coming to light — zombie titles.

The Zombie Title

This is when a home has been vacated because the owners defaulted on their loan and their bank started the foreclosure process. However, for some reason or another the bank never completed the foreclosure and sold the home.

So, when the city starts fining someone for the overgrown grass and dilapidated structure, the homeowner who thought they were finished with the property gets the bill.

A Home That Keeps Haunting

Homeowners think they don't own the property any longer and therefore try to move on by rebuilding their credit score and finding a new place to live. It can be a rude awakening to find out that not only do they still own a home they could have been living in, but also its long vacancy has caused it to fall into disrepair.

It's Spooking The Neighborhood

These vacant homes can decrease the value of a neighborhood. If the bank or the un-suspecting homeowner are neither one taking care of the property, then it can become overgrown and an eyesore on the block. It becomes a problem with no solution because the owner won't want to invest any money in fixing up the property when the bank could come back with the foreclosure at any time.

Nail Shut The Foreclosure Coffin

Homeowners who have foreclosed on a home should double check that their bank actually followed through to closing on a sale. They could contact their lender or check public property records just to make sure. Otherwise, they could be haunted by their housing nightmare all over again.

Don't let the zombie title of a past property haunt your future! Check with your bank to make sure you're free and clear of your foreclosure. If you'd like more information on zombie titles or have other questions, please contant your trusted mortgage professional.

Tips On Passing Your Home Inspection With Flying Colors

Home inspections are a tense time for everyone. Sellers are fervently hoping that nothing major is wrong with their home that could hold up the transaction.

Buyers are eager to hear that their new house is in prime condition. Whatever the wishes, one thing is for sure; any news from an inspector is usually bad news.

Home inspectors have a tough job. They have to be trained to spot hundreds of potential issues with a home and be knowledgeable of local codes, community restrictions and residential permit parameters.

Stay one step ahead of your home inspector by reading the list of common home inspection issues below. Then hopefully your inspection won't reveal any unwelcome surprises.

Electrical Wiring

This is a common bubble-busting issue, especially in older homes. Wiring might have been up to code when the home was built, but it now violates code and is a fire hazard.

Look for ungrounded outlets, shoddy wiring or a mass of confusing connections in the electrical panel. Replacing an entire electrical system can be expensive, but it's worth it not to risk a fire.

Plumbing

Look for signs of water damage in the ceilings. This could be a sign that something above, like a bathtub or sink is leaking into the floor or walls. Look around toilets and inside kitchen cabinets for traces of wet flooring or wood.

While external leaks are easy enough to fix, interior pipes might require you to rip up flooring.

Foundation And Framing

Examine the foundation and framing of your home for any structural issues. You'll want to keep an eye out for cracking in the foundation due to water runoff or settling. Also, look for signs of wood rot or termite damage.

These issues affect the framing of your home and could cause scary structural problems if left unattended.

Roofing

While it's probably too difficult for you to inspect the roof yourself, just stand back in the yard and see if you can notice any bare spots. Also, check for water damage around the roofline from rain leaking in. Don't get too discouraged about roof issues. It might not call for a complete replacement, but just a repair on one section.

These common home inspection issues affect both sellers and buyers. As a buyer, you'll want to keep a eye out for these problems so that you know what you'd be getting for your hard-earned money.

As a seller, it's good to stay one step ahead of the home inspector so that whatever price is agreed upon goes through.

When Is It A Good Idea To Use A Home Equity Loan?

A home equity loan is a type of loan that allows you to use the equity of your home as collateral. It is an option that home owners have available to them and that some people use to pay for major expenses such as home renovations, college education or medical bills.

These types of loans became popular in 1996 because they provided a way for consumers to circumvent their tax charges for that year, which eliminated the deductions on the interest for most consumer purchases.

It is a good idea to leverage your shelter for cash? What is a legitimate reason for taking out a home equity loan? It can be tempting to use the equity you have in your property to pay for expensive luxuries, but there are only a few things that you should be spending a home equity loan on.

Home Renovation Projects

Home renovations are a popular reason why people take out a home equity loan. This idea actually makes sense, because making improvements to the home can greatly improve its value.

The renovation could pay for itself and more, when it comes to increasing the value of the property.Of course, the value of the home is also dependent on other factors beside the renovation, so there are no guarantees.

Debt Consolidation

Another reason why people take out home equity loans is so that they can combine all of their bills and debts into one, such as the credit card debt, retail credit debt and more. This can be advantageous, because the interest rate on a home equity loan is a lot cheaper.

Having a single monthly bill rather than having to keep track of several debts can also make things a lot simpler and improve your monthly cash flow.

Investing In Your Kids

Many parents have chosen to use their home equity loans to fund their child's university or college education. With the extremely high costs of post-secondary education these days, this option can make a lot of sense.

However, if you are just about to consider retirement when your kids are going to college, you might want to look for scholarships or student loans instead so that you don't reduce the nest egg you planned to retire on.

These are just a few things for homeowners to consider when it comes to home equity loans. To learn more about owning a home, you can contact me your trusted mortgage professional.

How Does An Interest-Only Mortgage Work?

When you have been researching your different options for a mortgage on your home, you might have heard of an "Interest-Only Mortgage". What exactly does this type of mortgage mean and how does it work?
Usually when you take out a loan, you must pay back the capital debt (the amount you borrowed) and the interest on that debt. An interest-only mortgage offers a cheaper option for purchasing a property, because you will only be making payments on the interest and not the capital.
Compared to a repayment style mortgage where you are paying down the principle of the loan, an interest-only mortgage will have much lower monthly payments.
However, when you reach the end of the mortgage term with an interest-only mortgage, you will not have paid off any of the original principle of the loan. This means that you will still not be any closer to owning the home than when you started, whereas with a repayment mortgage you would be in full possession of the property.
You will reach the end of the loan term, still owing the lender $250,000 or whatever the value of the house was. Also, if you do not pay off that lump sum at that point, the lender will charge you interest on the entire loan for the full time.
From the description of how it works, it seems like there would never be a good situation for taking out an interest-only mortgage. However, if you are stretched financially and you are desperate to get onto the property ladder it might be a viable option. Some people take on an interest-only mortgage so that they can buy their first home, then when their income goes up they switch to a repayment mortgage.
These types of mortgages are often used by buy-to-rent investors, who are able to claim their tax back against the mortgage interest. If this is your goal, you might find this strategy advantageous.
To find out more about mortgages and determine the best option for your needs when buying a home, contact your trusted mortgage professional.

4 Quick Tips On Becoming A Young Real Estate Investor

Investing in property at a young age seems like a bit of a daunting prospect sometimes. Most young people don't have a lot of disposable income, often have poor credit and perhaps even student loans.
When you are in your early 20s, you are not likely thinking about investing in property and are probably focusing on other things. However, investing in property at a young age can bring you a lot of advantages.
It requires a different approach and style and you might be the only one of your peers who is doing so, but you will definitely reap the benefits later on in life. When you invest long-term, you will start building your financial independence.
Some might believe that it is impossible for a young person to start investing so early in life, but investing in your 20s is completely possible.
You are not "too busy", in fact you will find that you have even less spare time as your responsibilities grow when you get older. You will need a little bit of money to get started, but often you can purchase your first property with as little as 3.5% down.
If you want to get started early, here are some tips that will help you along the way:

1. Get into very good saving habits from a young age by putting aside your money from first jobs. When you want to take out a mortgage, you will typically need to be able to show savings of 3% of your purchase price.
2. Maintain a clean credit history and pay all of your bills on time in order to build a great credit rating, so that you can obtain a mortgage with a good rate.
3. Make the most of technology and social media to learn more about investing in property and to find the best opportunities. You have a wealth of information on investing, all at your fingertips.
4. Find an older mentor – someone with successful experience who can give you tips on how to choose the right investment.

Another main advantage to investing when you are young is that if anything goes wrong, you will have more time to make mistakes and still recover without affecting your retirement. You have nothing to lose and everything to gain, so why not get started?

Rounding Up Your Mortgage Payment, Will It Really Help?

Paying off the mortgage on your home as quickly as possible will ensure that you pay less interest and save money in the long term. But how can you accelerate those payments so that you own your home sooner?

One simple and easy way that you can pay off your mortgage faster is to round up your mortgage payment to the nearest $100 interval. So, for example, if your mortgage payment is $756 per month, you can pay $800 instead.

Not only will this help you to pay off your mortgage sooner, but round numbers are also much easier to handle for simple calculations. You will be able to look at your bank account and easily subtract your mortgage payment in your head to get an idea of where your money stands.

Will This Really Make a Difference? 

By rounding up your mortgage payment, you won’t notice the difference in your day to day expenses but you will really notice the difference when it comes to the overall lifespan of your mortgage.

In your monthly budget, you will have already mentally allocated your mortgage payment as $800, so having that $44 less per month won’t make much difference and you can easily adjust. It is an amount that is small enough that you won’t “miss” it.

However, paying $44 extra per month will add up to $528 per year. That’s almost like making an extra payment every year. This extra money will go straight into the principal of the loan, which will make your interest payments go down every year faster and faster.

Over the years, this will compound and will mean that you actually end up reducing your mortgage term by a few years. The savings that you can enjoy over the total life of the loan can be in the thousands!

There are many other ways that you can pay down your mortgage faster, such as contributing a lump sum payment or switching to bi-weekly payments. However, it is interesting to know that just rounding up your payment can make such a significant difference!

For more information about the mortgage on your home, contact me. 

What's Ahead For Mortgage Rates This Week - August 26, 2013

Last week brought mixed economic news, but Leading Indicators released Thursday suggest that the U.S. economy is growing at a moderate rate.

Mortgage rates for fixed rate loans were higher, but the average rate for a 5/1 adjustable rate mortgage was unchanged from the prior week. Weekly jobless claims were also higher.

The National Association of REALTORS released its Existing Home Sales report for July and reported existing home sales came in at 5.39 million on an annualized basis.

This reading surpassed expectations of 5.21 existing homes sold as well as June's reading of 5.06 million existing homes sold on an annualized basis.

FOMC Minutes Released, Mortgage Rates Rise

The minutes for the July 31 FOMC meeting were released, and emphasized the likely "tapering" of the Fed's quantitative easing program possibly as early as September, though no dates have been set. Many of the FOMC members support reducing the $85 billion in monthly securities purchases made by the Fed; fewer members supported tapering the asset purchases sooner than planned.

Previous announcements by the Fed regarding its plan to reduce QE have created erratic responses in financial markets, but the release of the meeting minutes seemed to cause a sharp rise in mortgage rates.

Freddie Mac reported that the average rate for a 30-year fixed rate mortgage moved from the prior week's average rate of 4.40 percent to 4.58 percent; average discount points moved up from 0.70 to 0.80 percent. Average rates for a 15 year fixed-rate mortgage also rose from 3.44 percent to 3.60 percent with average discount points moving from 0.60 to 0.70 percent.

Average rates for a 5/1 adjustable rate mortgage were unchanged from the previous week at 3.21 percent with average discount points paid at 0.50 percent.

FHFA reported that home prices for homes with mortgages owned by Fannie Mae and Freddie Mac rose by 7.70 percent year-over-year in June, home prices rose slightly from May's year-over-year- rate of 7.60 percent.

Leading Economic Indicators (LEI) for July rose by 0.60 to a reading of 96.0; this exceeded expectations for an increase of 0.50 percent. The LEI measures the health of the economy by measuring 10 top economic sectors; eight of 10 factors measured increased; these were led by the spread on interest rates, availability of credit, stock prices and permits issued for building new homes.

New home sales for July were lower than expected at 394,000; Wall Street expected new home sales to come in at 485,000 on a seasonally-adjusted annual basis against the revised number of 455,000 new home sales reported for June. 497,000 homes were initially reported sold in June. Hew home sales gained by 6.80 percent year-over-year in July.

What's Coming Up

Scheduled economic news for this week includes the Case-Shiller Home Price Index, and Consumer Confidence on Tuesday, Pending Home Sales will be out Wednesday. Thursday brings Weekly Jobless Claims, and Friday brings consumer spending and the University of Michigan's consumer sentiment report.

 

Tips For Helping Your Kids Adjust To A New School

August means it's time to get your children ready for school once more. Picking out backpacks, going clothes shopping and finding all the right school supplies can be hectic enough.

However, when you've moved and your children have to start all over in a new district, there's even more to worry about!

Summer fun can make the sunny months fly by. It's easy to forget that with the beginning of school comes excitement and anxiety for your little ones — especially if they're starting out somewhere new.

So help them get adjusted with the back-to-a-new-school strategies below.

Explain Why You'll Be Moving

Whether you're moving states or just school districts, it's best to give your children as much notice as possible and explain to them the reason for the change. They'll need time to get used to the idea and say goodbye to friends.

Be Positive

As the first day draws near, be positive about what they'll experience. School will be a place where they'll learn new things and make great friends.

Become Involved

Think about joining the PTA, so you can learn about what's happening in the school, meet teachers and be able to discuss policies and issues with your children.

Stick To A Routine

A new school is going to hold a lot of unknowns for your little ones. So it's best to keep a consistent routine at home. This will help children know what to expect and feel they at least have some control in their own space.

Tap Into Their Feelings

Your children might be excited or sad about the new change and they'll need someone to release all of this positive or negative energy upon. Just listen and be sure not to minimize their feelings. They'll need an understanding ear throughout this adjustment.

Encourage Participation

While it's always important for your children to focus on their schoolwork, they would also benefit by joining some sort of club, group or team. The sooner they make friends, the more settled they'll feel.

Moving to a new Washington, DC school can be tough on your children, which in turn makes it tough on you.

If you can set aside the time to prepare for the first weeks, talk positively about their upcoming experiences and take the time to really listen to your children, then adjusting to the new environment can be a smooth transition for all.

For more helpful tips on adjusting to a new home and neighborhood, please feel free to contact your trusted mortgage professional today.

How To Choose The Right Neighborhood When Buying A Home

The old real estate cliche' about "location, location, location" is true, as the area of the city where your home is located will have an impact on its future value as well as your lifestyle.

So what factors should you consider when you are choosing which neighborhoods to house hunt within?

Proximity to Your Daily Needs

If you work downtown, living out in the suburbs means that you will be adding time for a commute onto your day.

While this might be worth the cheaper prices for properties out of the town center, it is something to consider when making your decision.

You will also need to consider whether the house is near shopping centers, schools, doctors, dentists and other services that you will need regularly.

Planned Developments

When you are choosing a neighborhood to buy in, do some research into what developments are planned in the future for that part of town.

For example, you might be able to get a cheap price on a home that is out of the way, but a new proposed highway leading straight into the town center that will be built in the next five years could increase property values considerably.

Overall Atmosphere

Take a walk around the neighborhood where you are considering buying and get a sense of the overall atmosphere. Are there a lot of families living there? Are there green places to relax? Are people friendly and saying hello to you?

You want to live in a place where you feel welcome and comfortable.

Property Values

Different neighborhoods will have a range of house prices and you will want to look for something with the right balance of value.

Some areas of town will be very expensive but very nice; other areas will have cheap house prices but might not be as pleasant to live in. Take the time to find the neighborhood that is in the middle, where you will find the right house, and neighborhood, at a good price.

These are just a few of the factors to consider so that you can choose the right neighborhood to buy in.

For more information about buying a Rockville home, feel free to contact your trusted mortgage professional today. 

A Few Red Flags To Look For When Buying Real Estate

If you're looking to purchase real estate, keep in mind that the homes you are considering might be in need of repairs or improvements.

In a recent study done by a major home inspection company, at least 40 percent of previously owned homes on the market have at least one serious issue or defect.

When buying real estate, you should have a professional inspection performed on the property to look for any issues that might not be visible to the untrained eye.

It's better to identify this damage before you buy so that you are not stuck with budget-busting renovations.

Below are a few major red flags you should look for when buying a home.

Foundation Damage

Look at the slope of the yard. If the land slopes towards the house, this could be causing water to run down into the foundation, which will result in moisture damage. Take a look at the foundation for any bulges or cracks that could indicate serious issues.

Faulty Wiring

Your home inspector should be sure to check the electrical wiring — especially if it is an older house. If there are any flickering lights, circuits that don't work, or warm outlets, these are telltale signs of wiring issues that might be expensive to fix.

Ceiling Stains

This is usually a sign that something in the house is leaking. Ceiling stains are common underneath bathrooms when a toilet, shower or bathtub has a leak. A leaky roof could be an even more expensive repair.

When you are negotiating to buy a house and damage is discovered, you can either change your mind about the sale or renegotiate for a lower price that factors in the cost of repairs. Either way, it is always worth having the home professionally inspected to identify red flags and avoid any surprises.

Please call me, your trusted mortgage professional for more information about buying your next Washington, DC home.