• Mortgage
    3 easy ways to help you find a good mortgage rate

    A good mortgage rate really matters as it means less money to be paid every month and saving thousands of dollars in form of interest. Having said that, it is not easy to get a low mortgage rate as there are various factors that affect the mortgage rate, such as the credit score and from whom you take the loan. Read on to find 3 simple ways to get a great mortgage rate for your next loan.

    Maintain an excellent credit score
    Current mortgage rates are priced according to your credit score. Your credit score will determine whether you qualify the loan in the first place. Once you are eligible for the loan, your credit score will further determine how much money the lender is willing to give you, and the interest rate that you will be charged. Your credit score and the current mortgage rates always share an inverse relationship, which means that if you have an excellent score then you will easily get a loan at a lower mortgage rate. On the other hand, a bad credit score will increase your mortgage interest rate.
    Today, if you have a credit score of around 620, then you will be charged a 5.022% interest, according to the current mortgage rate in the market. If you have a score of 760 or higher, then the current mortgage rate is approximately 3.433%.

    Have a stable income source
    Before you go to apply for a mortgage, make sure that you have a steady source of income and a stable job. The lenders often check your last two years’ job history and prefer candidates who have an income graph that is shooting up. If you have been unemployed for a long period, then it might negatively affect your mortgage rate.
    If you are self-employed, then make sure that you have your income for the past two years well documented because the lenders carry out a stricter investigation when it comes to self-employed loan borrowers.

    Comparison shopping
    A common mistake that many home buyers make is that they settle for the first lender they come across. It i best to refrain from such a strategy; instead, narrow down the best lenders after personally getting a quote from each of them. After this, you should sit and do an in-depth comparison shopping.

    Once you have all the above-listed things checked, you can go ahead and choose a lender who gives you the best mortgage rate.

  • Mortgage
    3 significant factors that determine your mortgage rate

    When you are purchasing a house, you are always on the hunt for the lowest mortgage rate. If you are keeping a track of the current mortgage rates, then you might have noticed that the rates never stay the same. So, how do you get the lowest possible mortgage rate? Many people have a misconception that the credit score is the only factor that determines the current mortgage rates in the market. The truth is that there are several other factors that decide the mortgage rate, on the basis of which the lender will give you the loan.
    Read on to find out three such major factors that affect the current mortgage rates in the market:

    Cash reserves
    For those who are unaware of the term, cash reserves represent liquid money saved that is readily available to the individual. Typically, lenders demand that house buyers have a cash reserve that lasts for at least two months. It means that after you seal the deal and buy your new house, you should at least have enough money to pay for the new mortgage payment for at least two months. The mortgage payment includes the principal amount, interest, taxes, and the insurance amount. Cash reserve can include money in your checking account, savings account, and money market funds; however, it does not include a retirement fund because that you can liquidate only after you retire.

    Down payment
    What many people do not know is that the down payment amount you pay at the time of your house purchase majorly affects your mortgage rate. If you want the best mortgage rate, then try to at least pay a 20% of the total price of the house as the down payment. The mortgage rates are based on the risk factors, so if you pay more the risk reduces, and the lender won’t hesitate to give you a lower mortgage rate.

    Employment
    It is observed that if you have had a stable job in the past two years at the time you apply for a mortgage, there is a high chance that your lender will be convinced to give you a lower mortgage rate. Along with a stable job, make sure that every time you change your job, you pick a new one that pays you better than the previous one. In this way, your income graph goes up, showing that you are capable of paying off your loan.

    Just make sure that you have done a thorough research and have all these factors under control before you go ahead with the best mortgage quote.

  • Mortgage
    Points to consider before availing cash out refinance

    A cash-out refinance replaces your current mortgage with a new loan. You can pay off your current debt obligation and use the balance amount to gain additional funds that can be used for home renovations. The balance amount is made available from the home equity.

    It is not usual for people to opt for a cash-out refinance as there are many drawbacks to taking one. It is, however, beneficial if the interest rates have significantly reduced. You must also continue staying in the same house for the foreseeable future to make the most of the cash-out refinance.

    The cash-out option is possible only if you have sufficient home equity to support the refinance in the first place. One of the main benefits of a high-value cash-out refinance is a shorter duration with better repayment options available for the home mortgage.

    As a homeowner, you can take advantage of lower mortgage payments, reduced interest rate, and a shorter tenure of repayment with a cash-out refinance option. You can also remove additional borrowers of the current debt obligation and free up sufficient cash against the home equity.

    For taking a cash-out refinance, the applicant must meet certain requirements. Factors like your loan-to-value ratio (LTV), credit score, and property appraisal will play a key role in getting refinance options.

    The LTV ratio is the outstanding mortgage debt calculated as a percentage of the property’s current market value. An 80% LTV is considered favorable to apply for a cash-out refinance. A high credit score will allow you to negotiate favorable interest terms for the new debt obligation. The most important factor that will influence and dictate the terms and conditions of the refinance will be the property appraisal.

    It is advisable to get minor repairs and maintenance done to prepare the property for an inspection. The appraisal will determine the value of the house that will directly affect your current home equity. The equity will determine if a cash-out refinance is possible.

    A cash-out refinance is beneficial in the long run. It is advisable to pay for home renovations or even save up for purchasing a second property with the lump sum amount.

  • Mortgage
    Pros and cons of cash out refinance

    Refinance is a mortgage taken to replace the existing home loan. A cash-out refinance gives you the option to replace your current debt obligation with a high value on the existing mortgage. The difference in amount is available for withdrawal in cash.

    A cash-out refinance is generally taken to pay for home improvements or can be used for debt consolidation using the equity built up on the house. It is a better option in comparison to taking a traditional refinance. A cash-out refinance also has a slightly higher interest rate. The option allows you to take out a maximum of 90% of the home equity for expenses and debt consolidation.

    Pros and cons
    A cash-out refinance, or any refinance for that matter, helps lower the interest rate on your debt obligation. While you might be able to save on the interest component, paying for the closing costs after the tenure of the loan is still an inevitable expense.

    When it comes to borrowing, a cash-out refinance is a better option for debt consolidation as you will pay a lower rate of interest. However, you may find it difficult to get used to the new terms and conditions of the loan for revised repayment.

    You can use the difference in the amount to pay off your credit card bills. A cash-out refinance will also improve your credit score as a full payout tends to reduce the credit utilization ratio that directly affects the rating. In case you are unable to meet the new repayment terms and conditions, you run the risk of foreclosure of the property put up against the mortgage.

    Taking a cash-out refinance significantly reduces your taxable income as the mortgage interest is exempt from taxation. You can expect a better tax refund in the process. However, you will have to pay for private mortgage insurance if the borrowing exceeds 80% of the total home equity. The tax implications will affect your taxable income and your refund.

    A cash-out refinance may seem like an easy way of paying off your mortgage and your credit card bills. The refinance allows you to free up your credit limit significantly. However, taking out refinances over and over to pay off your debts is not advisable as you may end up racking huge amounts of credit card debt.

  • Mortgage
    Important factors that affect your mortgage interest rate

    When one is on a lookout for a mortgage loan, their priority is finding the lowest rate of interest. And why wouldn’t it be, an interest is one of the biggest cost a debtor has to incur. Although it is quite tough to anticipate the exact rate of interest you can receive, you can always positively enhance your chances to find the best one.
    If you are wondering how you can find the best mortgage rate, then you should be well aware of the following factors that massively affect your loan application.

    Credit
    In simple terms, a credit score determines your capability to repay the money to the lender. So, a decent credit score elevates your chances of getting a great mortgage rate. Always make sure that you regularly repay your debts, as this will positively influence the creditor’s first impression about you. Also remember that a good credit score will help you gain more options. So, this means that you don’t have to be stuck with unfavorable alternatives and you can always choose what’s best for you.

    Down payment
    Several lenders will offer you loans without the criteria of incurring a down payment. But this means that you will have the bear the burden of high interest rates. To get low interest rates, if you manage to make a down payment then your lender will understand that the level of risk involved with you is lower and will trust you more. Thus, offering you with a low mortgage rate.

    Duration and amount of the loan
    If you have a long term loan, then it easily translates into a fact that it is going to involve a high amount of money. So, you can expect if not high, a significantly taxing rate of interest. For instance, a rate of interest of a car will be much lower than a rate of interest for a house.

    Chosen rate of interest
    There are two main types of rate of interest, i.e. adjustable and fixed. Like the names suggests, a fixed rate of interest won’t fluctuate during the loan term. On the other hand, an adjustable rate of interest will be dictated by current market trends, that means it could go low or high based on the alterations occurring in the economy.

    Location
    Lenders based in different locations will set a different standard rate of interest depending on factors like demand for loans and popularity of the vicinity.

  • Mortgage
    How does economic activity affect the mortgage rates

    You might wonder what goes behind the forever’ fluctuating mortgage rates. The answer would be inflation rates of the country and the financial policies set by the treasuries and the Federal Reserve. How? These factors along with few other fiscal factors, directly decide how much investors are willing to pay in order to invest in the mortgage backed securities, popularly known as MBS.

    Here are a few crucial factors that come into play while determining the mortgage rates.

    Inflation
    The most easiest way to explain inflation would be increase in prices over time that significantly diminishes the purchasing power at the macro level of the economy. Literally inflation erodes the profit, which in turn makes the mortgage lenders to react by increasing mortgage lending rates. Why would they do it? To preserve the purchasing power of their returns.

    Growth in the economy
    When there is a growth in the consumer’s income, his/her purchasing power increases. Naturally this means that the consumer will incorporate his/her financial reserves in profitable investments. It is quite evident that when the money available at one’s disposal goes up, the economic stability gets strengthened. When the economy is stabilized, it drives consumers to become homeowners, thereby scouting for best mortgage lenders. This increased demand for mortgages generates upward scale on rates in reaction to the limited supply of loanable funds.

    Fiscal policies
    The nation’s central banking authority is one of the key influencers of the economy. Although, the Federal Reserve does not directly decide the rate of interest in the open market, it does influence the rates indirectly. They achieve this by adjusting the supply of money in the economy. For instance, by increasing the money supply, interest rate decreases and when the money supply in the economy is brought down, the interest rate increases. Hence, it is apparent that a home buyer should time their purchase.

    Don’t miss the trends
    Yet another great way to anticipate which way mortgage rates are headed is to look at the 10-year bond yield. Such information is readily available on financal websites or even in daily newspapers. Stock tickers also aid in understanding the trend. If the yield is going higher, mortgage rates increases and if it goes down, so will the mortgage rates.

    To summarize, mortgage rates are also determined by several other economical, fiscal and governmental factors. Therefore, one should be vigilant enough to ace the research, so that they could make the right choices.

  • Mortgage
    Breaking down the reverse mortgage calculation

    Home Equity Conversion Mortgage (HECM) program is the most popular of the reverse mortgage program due to the fact that this program is attested and backed by the federal government. The reverse mortgage rates under the HECM model are less expensive compared to other programs in the market. This is because of the government participation as well as the strict eligibility criteria that qualifies an individual for the program. While there is no set structure that can turn up the average mortgage, the calculation of the eligible amount depends on the four important factors such as the borrower’s age, the net value of the property, the current market interest rates, and the pre-approved loan amount sanctioned for the county. The main factor that determines the eligible amount is mainly the mortgage limit that has been approved by the Federal Housing Administration (FHA) for the respective counties, as a result of which the rates may vary greatly between some areas.

    The eligibility amount for a reverse mortgage loan is the comparison between the appraised value of the property and the FHA mortgage limit. The lesser of the two amount is factored as the eligible amount and the current 10-year LIBOR swap rate as well as the lender’s margin is added to calculate the expected rate. Adding in the age of the youngest eligible spouse will result in the Principal Limit Factor (PLF). To calculate the total upfront loan cost, the loan origination fee along with the extra costs associated with closing should be included with the initial mortgage insurance premium amount. It is essential to consider how much the individual would be able to afford for the upfront cost associated with the finance because some people may source this cost outside the loan. While others may be fully dependent on the loan or may require only a certain percentage of the loan dedicated towards this cost. The last calculation would be to factor in the life-expectancy requirements that have currently been deemed essential to calculate the financial assessment of the borrower. The final step after the separate determinations would be to calculate the HECM credit, that is available for the mortgage loan by adding the PLF, the costs and the set asides.

    Accordingly, a borrower would be able to determine the net amount that would be available to them in the form of either tenure or term payments. Based on the individualistic needs, one can chalk up a payment method that would suit their financial situation. In order to understand the intricacies involved, one can always get the aid of a reverse mortgage counselor for better clarity and planning of the loan.