Mortgage Planning For The New Year

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Free stock photo of eye, macro, human, seeA new year is nearly here. That means it’s time to take a closer look at your mortgage loan.

You might not give much thought to your home loan, other than to pay it on time each month. But remember that your mortgage bill is probably the largest payment that you are responsible for each month. It makes sense to review your loan details to make sure that it is still the best fit for you and your family—and your budget.

Here are our recommendations for possible changes to make to your mortgage loan in 2017:

Time to refinance? Your mortgage interest rate might already be low, but that doesn’t mean that you can’t save potentially hundreds of dollars every month with a refinance. As a general rule, if you can shave a full point off your interest rate, you’ll save enough money each month to make the cost of a refinance worth it.

Call us today to ask whether you might qualify for a lower interest rate. We’d be happy to study your loan to determine whether a refinance might make financial sense for you.

Shorten your loan term? You don’t have to refinance merely to earn a lower interest rate. You can also refinance to reduce the term of your loan. If you are now paying off a 30-year fixed-rate loan, for instance, it might make sense to refinance to a 15-year or 10-year fixed-rate loan.

Yes, shortening your term will usually result in a higher monthly payment. But you’ll also potentially save tens of thousands of dollars in interest during the life of your loan. If you’re ready to reduce the amount of interest you’re paying each month, refinancing to a shorter-term loan could be a smart move. Again, contact us if you’re ready for a shorter-term loan. We can help you determine if this is a wise financial step.

Pay a bit more? Another way to reduce the amount of interest you’ll pay over the life of your mortgage is to pay a bit more each month than is required. Even paying $100 more toward your loan’s principal balance each month can dramatically reduce the amount of interest you’ll pay. Just make sure to indicate that the extra money you are sending in is earmarked to pay down your principal balance. There should be an option for this on your payment stub or your online payment plan.

Categories: Mortgage, new year, refi, Uncategorized

Want To Save Big Dollars? Pay Your Mortgage Bi-Weekly

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river2We get it. No one really enjoys making a mortgage payment each month. But here’s a secret: You can shorten the length of your mortgage loan without refinancing your loan to a shorter term.

You simply have to make bi-weekly payments.

Here’s how this works: Normally, you’ll make 12 mortgage payments a year, one each month. If you owe $1,000 on your mortgage each month, you’ll make 12 mortgage payments for a total of $12,000 a year. But if you split your payment into bi-weekly payments, you’ll pay $500 every two weeks.

This pays off in a big way: Because there are 52 weeks in a year, you’ll make 26 bi-weekly payments. That is equal to making 13 monthly payments in a year. That’s right, with the bi-weekly mortgage payment, you’d make one extra mortgage payment each year than you would when paying 12 standard monthly payments.

Bi-weekly payments reduce the payoff time of your mortgage loan. The number of months you chop off your mortgage varies depending on the size, interest rate and length of your loan. If you are paying off a 30-year, fixed-rate mortgage loan of $180,000 with an interest rate of 4%, you’ll pay off your loan in 25 years and 11 months, eliminating four years and one month of payments. That means you’ll also save more than $20,000 in interest during the life of your loan.

Those are some compelling reasons to consider a bi-weekly payment plan. Call us today if you are interested. We’ll walk you through the process and help you make the right decision for your financial situation.

Categories: Mortgage, Mortgage 101, Mortgage choice, Mortgage ideas, Mortgage options, Mortgage points, mortgage rates, Mortgages, MPP mortgage, Uncategorized, Wilmington NC Neighborhoods

Want to Save the Big Bucks? Pay Your Mortgage Bi-Weekly

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lv2We get it. No one really enjoys making a mortgage payment each month. But here’s a secret: You can shorten the length of your mortgage loan without refinancing your loan to a shorter term.

You simply have to make bi-weekly payments.

Here’s how this works: Normally, you’ll make 12 mortgage payments a year, one each month. If you owe $1,000 on your mortgage each month, you’ll make 12 mortgage payments for a total of $12,000 a year. But if you split your payment into bi-weekly payments, you’ll pay $500 every two weeks.

This pays off in a big way: Because there are 52 weeks in a year, you’ll make 26 bi-weekly payments. That is equal to making 13 monthly payments in a year. That’s right, with the bi-weekly mortgage payment, you’d make one extra mortgage payment each year than you would when paying 12 standard monthly payments.

Bi-weekly payments reduce the payoff time of your mortgage loan. The number of months you chop off your mortgage varies depending on the size, interest rate and length of your loan. If you are paying off a 30-year, fixed-rate mortgage loan of $180,000 with an interest rate of 4%, you’ll pay off your loan in 25 years and 11 months, eliminating four years and one month of payments. That means you’ll also save more than $20,000 in interest during the life of your loan.

Those are some compelling reasons to consider a bi-weekly payment plan. Call us today if you are interested. We’ll walk you through the process and help you make the right decision for your financial situation.

Categories: Mortgage, Pay off mortgage, Uncategorized

No PITI Party | Understanding Your Mortgage Payment

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cloudcbbakerYour mortgage payment is probably the biggest financial responsibility you face each month. But do you know all the parts of your monthly mortgage payment?

PITI is the key abbreviation: That stands for Principal, Interest, Taxes and Insurance. Those four components make up most homeowners’ monthly mortgage bills.

Principal: This is the part of your payment that each month goes toward paying off the amount of money you owe on your mortgage. When you first start making mortgage payments, a fairly small percentage of your monthly payment goes toward your loan’s principal balance. As the years go on, though, a greater slice of your payment will go toward reducing your loan’s balance.

Interest: Early in the life of your loan, a hefty chunk of your monthly payment will go toward interest. The interest you pay on your loan depends on the size of your loan, the loan’s term and the interest rate attached to it. You’ll pay more in monthly interest on a 30-year fixed-rate loan of $200,000 with an interest rate of 6% than you would for a 15-year fixed-rate loan in the same amount with an interest rate of 4.5%.

Taxes: You’ll have to pay property taxes when you buy a home. Most lenders ask that you set up an escrow arrangement with them, meaning that you’ll pay a bit extra with each payment to help cover property taxes. When your taxes are due, your lender dips into this escrow fund to pay your tax bill on your behalf. If your yearly property taxes are, say, $6,000, expect your lender to add about $500 each month to your mortgage bill.

Insurance: Mortgage lenders won’t loan you money if you don’t first pay for homeowners insurance. Again, in an escrow arrangement—which many lenders require—you’ll pay extra each month to cover homeowners insurance. If your yearly insurance policy is $1,200, your lender will add about $100 to your monthly mortgage payment and then pay this bill for you when it comes due.

Categories: Mortgage, PITI

GOT APPLIPHOBIA? Mortgage 101

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banjoYou know the old story: Mortgage interest rates are at near-record lows. But mortgage lenders are passing out fewer home loans. Strict loan qualification rules are a reaction to sky-high foreclosures that hit the lenders during the housing bust.

What’s wrong with that story? It’s not entirely true. Yes, mortgage rates are at low levels. But, no, mortgage lenders aren’t nearly as tight-fisted with home-loan dollars as some say. In fact, it’s far easier today to qualify for a mortgage loan than you might think.

Here’s some friendly advice: If you haven’t applied for a mortgage loan because you think your credit or income levels aren’t good enough, give us a call. There are mortgage programs available for borrowers of all kinds today. You may be surprised just how attractive a borrower you truly are in this market.

Here’s what you’ll really need to qualify for a mortgage loan. If you didn’t know how reachable these numbers are, don’t feel bad. You’re far from alone.

Credit score: You might have paid a few credit-card bills late. Maybe you forgot to send in your auto-loan payment one month. That’s not good, and it will drop your credit score. But know this: You don’t need perfect credit to qualify for a mortgage loan.

If your FICO credit score is 740 or higher, you’ll qualify for the lowest interest rates and the widest variety of loan programs. But even if your score is lower, you can still qualify for a mortgage loan. You’ll just have to pay a higher interest rate. Even if your score is under 600, you can still qualify for a mortgage loan insured by the FHA.

Down payment:
Fannie Mae and Freddie Mac are now willing to back mortgage loans with down payments as low as 3% of a home’s final purchase price. Consider that $180,000 house again. A down payment of 3% on that home comes out to a more affordable $5,400.

Income: Many would-be borrowers think that they don’t make enough money for a mortgage loan. But mortgage lenders only care that your total monthly bills—including your new mortgage payment—equal 43% or less of your gross monthly income. This means that you don’t have to be a millionaire to afford a home today.

Self-employment: Others worry that because they are self-employed they won’t be able to convince lenders to loan them mortgage money. This isn’t exactly true. Lenders need to see proof that your income is consistent each year. Providing this proof might be more challenging if you are self-employed, but it is doable. Just send your lender copies of your most recent tax returns showing your annual income over the last three to five years. Your lender will look to make sure that your income has been stable, and hasn’t risen or fallen sharply during this time. Your lender might also ask for more information about your business—such as profit/loss statements. The quicker you can provide this information the faster the mortgage process will go.

We look forward to working with you!

Categories: Mortgage, Uncategorized

HEAVENLY Why You Don’t Need An Angelic Credit Score To Get A Loan Today

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You can get a Wilmington NC mortgage loan today even if your past financial habits have been more devilish than angelic.Here’s a look at the steps you can take this year to boost your odds to qualify for a home loan, even if your three-digit credit score isn’t as sky-high as you’d like.

Boost your income, cut your debts: The most important guideline associated with the new Qualified Mortgage (QM) rule might be the one relating to your monthly income and debts. According to the QM rules, a mortgage can only be considered a qualified one if borrowers’ total monthly debts—including their estimated new mortgage payment—equal no more than 43% of their gross monthly income.

So if you want to convince lenders that you’re a good risk, work to improve your debt-to-income ratio. You can do this by either boosting your monthly income or eliminating some of your monthly debts. The lower this ratio is, the more attractive you’ll look to mortgage lenders, even if your credit score isn’t perfect.

Consider An FHA Loan: A mortgage loan insured by the Federal Housing Administration (FHA) does come with some extra costs. But it also comes with some big benefits for credit-challenged consumers. You can qualify for an FHA loan even if your FICO credit score is as low as 500. Of course, a higher score is better. If your score is at least 580, you can take out an FHA loan with a required down payment of just 3.5% of your home’s final purchase price. If your credit score is under 580 but at least 500, you can still qualify for an FHA loan, but you’ll need a down payment of at least 10% of your home’s purchase price.

Your credit score makes a big difference in how much down payment is required. Consider a home that costs $150,000. A down payment of 10% will cost you $15,000. One of just 3.5%, though, will cost you a much more affordable $5,250.

Be Willing To Pay More In Interest: Mortgage lenders generally reserve their lowest interest rates for those borrowers whose FICO credit scores are 740 or higher. If your score is lower, though, this doesn’t mean you won’t qualify for a mortgage loan, but you will have to pay a higher interest rate. If your score is 740, for example, you might qualify for an interest rate of 4.25% on a 30-year fixed-rate mortgage loan of $200,000. But if your FICO score is just 640, you might have to take an interest rate of 5.5%—or higher—on the same loan. A higher interest rate will mean a higher monthly mortgage payment.

If your interest rate on that 30-year fixed-rate loan of $200,000 is 4.25%, you’ll pay about $983 each month in interest and principal. (This doesn’t include any money you’ll pay each month for property taxes and homeowners insurance.) If your interest rate on the same loan stood at 5.5%, your monthly payment—minus insurance and taxes—would be about $1,135.

Boost That Score: If your score is too low, of course, you will struggle to qualify for a home loan. But you can take steps to boost that score. Pay all your bills on time. Reduce your credit-card debt. If you gradually build a solid credit history, your score will rise. Just be patient. Boosting a credit score isn’t complicated, but it does take time. Expect to spend at least nine months to move your weak credit score high enough so that you’ll look like an angel to mortgage lenders.

Categories: Mortage options, Mortgage, Mortgage 101, Mortgage ideas, Mortgage options, Mortgage points, Mortgages, Uncategorized, wilmington nc real estate, Wilmington NC real estate stats 2014

LOWER RATE: Seven Smart Ways To Reduce Your Mortgage Rate

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Predicting interest rates in today’s economy is at least as hard as winning in Las Vegas. But even if rates are on the rise, there are a number of options you can exercise to get the lowest rate possible on your home loan. Consider the following strategies.

1. Consider An Adjustable Rate Mortgage (ARM)

{short description of image}Even though the rate on your loan may fluctuate, an ARM will allow you to enjoy a lower monthly payment at the outset. Traditional ARMs adjust every year, but ARMs now exist to suit just about everyone with 3- and 5-year adjustment periods, even a single adjustment at the 7-year mark.

2. Float Down

Financial products introduced recently will lower your rate if market rates fall, but won’t raise it if rates creep up again.

3. Quick Close

If you can settle on your loan quickly (say, 30 days or less), some lenders will agree to shave percentage points off your rate.

4. Lock In

If you fear rates are going to rise, lock in early before they do. Some lenders allow a float-down option, but with an up-front fee.

5. Pay Points

If you’re willing to pay some interest up front (known as points), you can get a fixed-rate mortgage with a lower interest rate.

6. Stay Awhile

If you agree to keep the same loan for five years or longer, some lenders will cut their interest rate. If you do move or refinance before the agreed-upon deadline, you may have to pay a penalty of about 1% of your loan.

7. Use Good Credit To Negotiate

Do you have A-1 credit? If so, you’re a hot commodity for lenders. They may even be willing to reduce closing costs to get your business. If interest rates are firm, ask for a reduction in fees for document preparation, processing, courier services, copying, underwriting, appraisal or application. Other reductions might include: fewer or no points, lender’s attorney’s fee, commission rate (for mortgage brokers) and the credit check fee. On an adjustable rate mortgage, ask for a lower starting rate.With so many options available, you may need a professional to help you choose the best program for your situation. Call us today to see what’s available in your area.

 

Categories: Lower your Mortgage, Mortgage, Mortgage 101


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Copyright © 2017 Wilmington NC Real Estate Guide. All rights reserved. Disclaimer: All content on this blog is my own opinion and should not be treated as fact or relied upon when purchasing or selling real estate.