Home Mortgage Tips Archives — Page 103 of 152

08

Mar

Home Mortgage Tips

The Pros and Cons of A Fixed Rate Second Mortgage vs. Opening a Home Equity Line of Credit

The Pros and Cons of Refinancing Your Mortgage vs. Opening a Home Equity Line of Credit When it comes to a mortgage and the financial stability of your home, there’s no such thing as too much you can know in the case of keeping your biggest investment safe. If you’re looking at paying off debt and are considering using the equity in your home, here are a few things you’ll need to know about refinancing your mortgage and home equity lines of credit.

Fixed Second Mortgage vs. HELOC

Refinancing your mortgage to access equity (without changing the existing first mortgage)comes in two basic flavors: a fixed rate mortgage or a Home Equity Line of Credit (HELOC). A fixed rate second mortgage is also known as a home equity loan. While you’re expected to pay the amount loaned back in monthly payments for a pre-determined number of years, you’ll receive this money at a fixed rate of interest. On the other hand, a home equity line of credit (HELOC) is similar to a credit card where the amount you can borrow is determined by your credit history and income, and funds are withdrawn using this line of credit, can be paid down, and then drawn back on again.

All About The Interest Rates

When you refinance using a fixed rate second mortgage, the interest rate will be fixed so you won’t have to worry about any volatile increases down the road. Since this qualifies as a second mortgage, the interest rate on it will be higher than your typical first mortgage but lower than a HELOC. When it comes to HELOC’s, the amount of interest you’ll be paying will be linked to the prime rate and will fluctuate with the market, and this means you may end up paying a higher amount of interest than you bargained on.

How The Interest Is Calculated

While refinancing your mortgage can seem like a great opportunity since you’ll be able to deal with a fixed interest rate, it’s worth noting that the way you’ll be charged is different. A mortgage refinancing will charge you interest on the total amount of your loan while a HELOC will only require you to pay interest on the money you’ve withdrawn from it, so you’ll want to consider which option works best for you.

When it comes to getting a second mortgage or opening a HELOC, there are pros and cons to both that should be considered before delving into either. As these can risk the security of your most important investment, you’ll want to carefully weigh what will work best for you. If you’re curious about other homes in your area or are thinking of downsizing, you may want to contact one of our local mortgage professionals for more information.

03

Mar

By support

Home Mortgage Tips

The FHA Mortgage Minimum Credit Score Has Been Reduced. Here’s What You Need to Know…

The FHA Mortgage Minimum Credit Score Has Been Reduced. Here's What You Need to Know Credit is of considerable concern when it comes to buying a home, but if you’re on the market for a new place in the next few months there may be some timely news that applies to you. If you haven’t heard about the changes to the Federal Housing Administration’s (FHA) credit score minimum, here’s some information on the recent reduction and how it may impact your home purchase.

Information On The FHA

Started in 1934, the FHA is the organization responsible for insuring the loans that are available to homebuyers in the United States. These loans are not provided directly by the FHA, rather the FHA serves as the insurer for the loans that are leant by financial institutions of the United States. While there are a number of guidelines that must be met by borrowers in order to ensure the FHA will back their loan, a lowered mortgage minimum credit score means that those with a less-impressive credit profile may have a better opportunity for home ownership.

The Minimum Credit Score Reduction

The strength or weakness of your credit history has a significant impact on whether or not you will qualify for a mortgage or even pre-approval, so for those whose credit has suffered the recent drop in the minimum will be good news. Previously, the FHA required a score of 640 so that a borrower could be approved for a mortgage, but the reduction by 60 points to a credit score of 580 means greater possibility for those who might fit into a lower credit category.

A Lower Mortgage Minimum And The Market

With the opportunity for home ownership that will be opened up to potential buyers, there is a strong possibility that the market will experience a noticeable shift. Many millennials are poised to enter the real estate market this year, and with more people considering a house as a result of a reduction, there could be an increased demand in housing purchases. While the prices in rural areas have been dropping off, the housing in metropolitan areas may experience a sizeable upsurge.

With the reduction of the mortgage minimum credit score by the FHA, there are likely to be some shifts in the real estate market in the coming year that will affect demand and price. If you’re on the market for a new home and are interested in a purchase that will align with your finances, you may want to contact your local mortgage professional for more information.

02

Mar

By support

Home Mortgage Tips

4 Facts You Need to Know Before Setting Up a Mortgage Escrow Account

4 Facts You Need to Know Before Setting Up a Mortgage Escrow Account Buying a home involves a variety of nuances and strange-sounding terms, and one of the least understood aspects of the home buying process is the escrow account. Essentially, an escrow account is a third party bank account your lender can require you to pay into in order to cover certain costs related to your home. Your lender uses an escrow account to ensure that property taxes and home insurance fees get paid on time.

But how exactly do escrow accounts work? Here’s what you need to know.

Escrow Accounts Are Mandatory With Certain Mortgages

Not all home buyers are required to have an escrow account. In cases where the buyer pays 20 percent of the purchase price down, lenders will typically waive the escrow, as the buyer has proven liquid assets that can be used to pay property-related fees. But depending on your type of mortgage, you might be required to have an escrow account.

If you bought your home with an FHA loan, you must have an escrow account. Similarly, if your down payment is less than 20 percent, you’ll most likely be required to have an escrow account.

You Can Choose To Pay A Lump Sum Or A Monthly Fee

As your lender uses your escrow account to pay property fees, you’ll need to ensure the account has the available funds to cover taxes and insurance. Typically, your lender will provide you with a set of payment options to keep the account topped up. You may be able to choose whether to pay your escrow fees in an annual lump sum or in 12 equal payments throughout the year, however paying monthly is the most common scenario.

Escrow Payments Can Change Over Time

When your escrow payments begin, you’ll be given a payment schedule with a set payment amount. But just because you start paying $150 per month into the account, that doesn’t mean your monthly payment will stay at $150 per month. If your insurance rates or taxes increase, you’ll need to make larger escrow payments to cover the difference in cost.

Cancelling An Escrow Account May Not Be Easy

An escrow account is a fairly permanent mortgage fixture – once it’s established, there are very few ways to get rid of it. Some escrow agreements do allow you to request a cancellation, but they’ll require you to have a set amount of equity in your home, or pay a cancellation fee, or both. Refinancing will close an escrow account, but you’ll need a 20 percent down payment equity position when doing the refinance to avoid opening a second account.

Setting up an escrow account is a great way to automate your bills and ensure your mortgage is paid on time. Call your local mortgage specialist to learn more.