Financial Secrets - Achieve Your Dream on Your Terms

How to Maximize Your Income

btjones32 — Wed, 23 Sep 2009 17:59:50 +0000

Most lenders will require that you disclose your income from the previous two years and use this income to qualify you for a mortgage. They will ask for W-2 forms, tax returns, or bank statements to verify the income. The lender will then apply a formula to the income to determine your ability to repay the loan. A common requirement is that the mortgage payment cannot be greater than 28 percent of the borrower’s gross monthly income, and the mortgage payment plus all other monthly obligations cannot exceed 36 percent of the gross monthly income. FHA allows higher ratios, and there are always exceptions to the guidelines.

One way to expand your purchasing power is to obtain a low, low rate mortgage such as some adjustable rate mortgages. They may begin with an introductory rate 3 percent under the going rates. The disadvantage to these types of loans is that the rates are subject to change as frequently as every six months. Payments are permitted at an artificially low rate but these may result in “reverse amortization;” that is, the mortgage balance may be higher at the end of the year than when you started! This may not always be bad, particularly if you are buying in an area of high appreciation or if you only intend to live in the home for a few years but know what you are getting in to. Not all adjustable rate mortgages are negative amortizing and lenders are required to give you a program description. Get it and review it until you are sure that you understand all of the terms. This type of loan can however add thousands to your purchasing power due to the low initial rate.

If you don’t have the stomach for an adjustable rate mortgage, explore 5/1 or 7/1 type loans. The rate will stay the same for the first five or seven years, and then it changes to a one-year ARM for the remainder of the term. The initial rate is lower than a fixed 30-year mortgage, and by the time the rate is due to change in five years, you may be ready to move or refinance.

Take a look at your monthly installment payments. It can be advantageous to use some of your downpayment money to pay off high interest rate or short term debt to ease your qualifying ratio. Paying off a car loan with a few years to run may erase a high dollar monthly payment for only a few thousand dollars. The result may be a higher mortgage due to less downpayment, but monthly you will be spending less and mortgage payments only increase by only a few dollars per thousand due to longer amortization.

In general, always try to obtain a 30-year amortization loan. Shorter-term loans do save interest over the long run but decrease buying power up front. You can always make extra payments later if you want to shorten the term of the mortgage. Forget about bi-weekly mortgages, they just force you to make extra payments whether you want to or not. It may be smarter to save money in a mutual fund or other vehicle that could offer a better return and easier access to funds when needed than a mortgage. Owning a home with a mortgage could allow you to itemize your taxes for the first time and save money on April 15th.

How To Afford A Mortgage

btjones32 — Fri, 18 Sep 2009 04:27:53 +0000

The main deterrent in buying a home today is not income or credit requirements but rather finding the necessary funds to cover the initial costs and downpayment. Traditionally a 20 percent downpayment is required and in many instances the related closing costs and escrow funds can run another 10 percent. In today’s market of high prices for even modest homes, up front fees of 30 percent present more of a barrier than credit history or mortgage payment ratios. Funds for the purchase of a home can include obtaining a cash gift from a relative or cashing in an insurance policy or retirement account; fortunately, there are other more available methods to lower the initial costs of obtaining a mortgage.

Many real estate agents do not push FHA or VA loans because they believe that the paperwork involved with these loans is too burdensome. While the so-called “government” programs are more detailed than a straight conventional loan, they are by no means overly difficult to process if you deal with an experienced lender. FHA loans require only about 3 percent downpayment and almost any resident of the U.S. is eligible for a loan. Contrary to what many people believe, the FHA insured loan program is not a subsidized loan for low-income individuals. VA loans do not call for a downpayment at all. That’s right; VA loans offer 100 percent financing for many veterans of the U.S. armed forces. The FHA and VA programs offer more lenient loan terms than conventional loans, but there are still certain guidelines on income, credit, and property requirements to meet mortgage amounts that are limited to about $140,000+.

Conventional loans also offer low or no downpayments with PMI (Private Mortgage Insurance). PMI is not life or accident insurance, but rather insures the mortgage itself and covers the lender in the event of a foreclosure on the property. Generally, lenders will require PMI when there is less than a 20 percent downpayment. Many lenders offer conventional loans with as little as 5 percent down and a few offer loans with no downpayment at all. Generally conventional loans with PMI are subject to more restrictive credit and income guidelines than FHA or VA loans. Interest rates among most types of prime loans are roughly equal.

The key to using the minimum in up-front funds is to have the seller pay most or all of your closing costs. Depending on the down payment you make, the seller may be permitted to absorb all of your closing costs. Under the VA program, the seller can also pay the tax and insurance escrow allowing the buyer to get in the home with little or no funds. FHA and most conventional programs allow the seller to pay up to 6 percent of the sales price to the closing costs; conventional loans at 95 percent LTV (Loan-To-Value) allow the seller to pay only 3 percent of the sales price towards closing costs. You may have to make the seller a full price offer to have him absorb the closing costs, but any offer can be presented. If the seller does agree to pay the closing costs, ask your lender if you can obtain a loan without escrowing for taxes and insurance. This will mean that you will have to come up with hefty payments when the property taxes and insurance are due periodically throughout the year, but you will have avoided establishing a fat escrow fund at closing. Beware however, finding money to pay taxes and insurance in a lump sum can be difficult and most lenders won’t allow it unless you have a large (20 percent) downpayment. Also, try to set up your closing to occur towards the end of the month, because you will have less pre-paid interest due at settlement for the month of closing.

Many times a 5 percent cushion is built into the sales price of a home to allow negotiation of a sales offer. Just remember that in a hot real estate market, the seller may not be anxious to accept a low offer and may reject the agreement on a home that you really want due to small differences. If you play the game, you must be prepared to lose and go on to the next property.

You should try to get pre-approved by a lender prior to shopping for a home. A pre-approval is a strong marketing tool when making an offer that may contain many a number of seller concessions. Telling a seller that you are already approved for a loan makes the acceptance of a low offer or one where he may be paying the closing costs much more palatable.

6 Things To Make You STOP PAYING RENT….

btjones32 — Wed, 09 Sep 2009 19:35:49 +0000

6 Things To Make You STOP PAYING RENT……or what you need to know to get you started toward buying your 1st home!

People fear what they don’t understand. A good example is the purchase of a home. The average consumer knows very little regarding the home buying process. Between finding the right house, making sure it won’t fall apart the day after it is purchased, and finding the best financing, it is no wonder that so many people are afraid to purchase homes.

Buying a home is one of the most important financial decisions an individual will make. For a first-time homebuyer, the decision to purchase a home can be daunting. It will represent a major step forward as the individual/family will be assuming potentially its largest responsibility. As with any major decision, it is important that everyone, especially first-time homebuyers, take full advantage of the information and training that is available to more clearly understand the home buying process.

To prepare, you should do research and be fully informed before beginning the search for a dream home. Here are six steps to get started:

1. Before you start your house search, think carefully about what it will be like to be a homeowner. For most people, homeownership is an integral part of the American dream. That is not even to mention that the advantages (tax benefits, pride of homeownership, financial investment) far outweigh any drawbacks.

2. Your credit history is one of the first things a lender will look at in making a decision on your loan. Contact one of the three major credit-reporting agencies to obtain a credit report. Review it carefully to be sure all the information is correct. If you find discrepancies, you should work with the credit agencies to resolve them.

3. Saving for a down payment can be one of the biggest barriers to homeownership. Mortgage lenders recognize this dilemma and many now offer low down payment loans. Three and five percent down payments are commonly available, and there are some loans that require no down payment.

4. Before you begin working with a Realtor, first go to your local lender and ask them to pre-approve (not prequalify) you for a mortgage. Most lenders will provide this service free of charge. Pre-approval will let you know exactly how much you can spend on a home purchase BEFORE you start your search. A preapproval in hand also makes you a more attractive buyer when you are ready to make an offer on a home. Home sellers are more likely to accept an offer from a buyer who can demonstrate the ability to secure financing.

5. Many cities and counties offer down payment assistance programs for borrowers meeting certain eligibility requirements. Investigate these by calling your local housing department. You may also want to check with your mortgage lender and possibly local nonprofit housing organizations as well, to see if there are assistance programs in your area. Down payment assistance programs may take the form of “silent seconds,” which are loans you take in addition to your mortgage to help make the down payment. Many times, silent second loans will have below market interest rates, and in some cases might not require payments until you sell your home. As an alternative, some local housing departments offer low interest rate loans for the entire mortgage, sometimes a full point below market interest rates.

6. Many mortgage lenders, nonprofits, and even Realtors offer homebuyer education classes to prepare you for homeownership. Classes normally run about four hours and cover the basics of home buying. Some of the topics covered are how to apply for a loan, work with a Realtor, make an offer on a home, the escrow process, and the responsibilities of homeownership.

Brandon Jones
JFREI Mortgage
http://www.jfrei.com

Renting Cost…

btjones32 — Tue, 01 Sep 2009 04:30:22 +0000

Credit is King….

btjones32 — Mon, 31 Aug 2009 16:44:26 +0000

Good credit is critical when it comes to
obtaining the best interest rates and terms
on a mortgage. Here are some credit do’s
and don’ts when looking for a mortgage.

Do Stay Current On Existing Accounts. One 30-day notice can cost you.

Do Call Your Loan Officer Below. Call before making any address or credit changes that may
affect your score.

Do Continue To Use Your Credit As Normal. If it appears you are changing your pattern, it will
raise a red flag and your score could go down.

Don’t Apply For New Credit. Every time you have your credit pulled by a potential creditor or lender,
you can lose points from your credit score. This includes co-signing for a loan.

Don’t Close Credit Card Accounts. If you close a credit card account, it may appear that your debt
ratio has gone up. Closing a card will affect other factors in the score, including credit history.

Don’t Max Out Or Over Charge Credit Card Accounts. Try to keep your credit card balances
30% below their limit during the loan process. If you pay down balances, do it across the board.

Don’t Consolidate Your Debt. When you consolidate all of your debt onto one or two credit cards, it will
appear that you are “maxed out ” on that card and you will be penalized.

Contact us today – we can assist you:

JFREI Motgage

http://www.jfrei.com