23
Feb
By First Rate Financial Group
Mortgage

Everything Homeowners Need To Know About Down Payments

Everything Homeowners Need To Know About Down PaymentsBuying a house is an exciting time, but homeowners also need to make the best financial decision to meet their needs. One of the biggest decisions potential homeowners will face is how much money to put down.

A down payment is the amount of money that homeowners pay upfront when they purchase a home. Many homeowners believe they need to put down 20 percent; however, this is not always the case. What do homeowners need to know about putting a down payment on a house? 

20 Percent Is Not Always Required

The reason why homeowners often believe they need to put down 20 percent is that lenders will often require a 20 percent down payment to avoid paying PMI. PMI stands for private mortgage insurance. If a homeowner puts down less than 20 percent, the lender takes on significant risk if the homeowner defaults. Therefore, the lender may require the homeowner to purchase PMI to protect the lender against the risk of default.

Homeowners might be able to secure a loan with 10 percent down if they are willing to pay PMI. First-time home buyers might be able to secure a home loan with as little as 3.5 percent down if they go with an FHA loan.

The Relationship Between Down Payments And Interest Rates

Homeowners might want to put down more money to earn a lower interest rate. Securing a lower interest rate could save homeowners tens of thousands of dollars over the life of the loan. If homeowners put down more money, the lender doesn’t take on as big of a risk. Therefore, the lender might be willing to charge a lower interest rate. 

Work With A Professional 

Ultimately, the size of the down payment is one of the biggest decisions potential homeowners have to make. It can take a long time to save up 20 percent for a home, but this is not always required. Homeowners need to know whether they need to pay PMI if they do not put 20 percent down, and they need to understand how the size of the down payment will impact the interest rate on a loan. It is a prudent idea to consult with a professional when deciding how much money to put down for a house.

09
Feb
By First Rate Financial Group
Mortgage

Which Home Equity Loan Is The Best Option?

Which Home Equity Loan Is The Best Option?There are a number of significant advantages that come with homeownership, and one of the biggest advantages is the ability to take out a home equity loan. As homeowners pay off the mortgage, the amount of equity in the house increases. Homeowners can borrow against the equity in their house to fund other projects. For example, homeowners could borrow against home equity to complete a home renovation, pay medical expenses, or pay down student loans. The most common home equity loans include cash-out refinances, a traditional home equity loan, and a home equity line of credit. Which is the best option? 

A Cash-Out Refinance

The first option is called a cash-out refinance. Essentially, homeowners are taking out a loan for an amount that is greater than the current mortgage. Then, homeowners will keep the difference in the two loan values for their personal use. Homeowners essentially refinance the existing mortgage and extract additional equity. There is only one mortgage payment, and any interest on the new loan is tax-deductible. 

A Home Equity Loan

The next option is a traditional home equity loan. Homeowners borrow against the existing equity in the home, and homeowners create a second mortgage. There is a fixed interest rate on the second mortgage, and homeowners receive the money as a lump sum. It is not unusual for the interest rate on the second mortgage to be higher than the first mortgage.  Then, they have to pay off the second mortgage just like the first mortgage. 

A HELOC

Homeowners who are okay receiving the funds over time might be interested in a home equity line of credit, also known as a HELOC. The initial interest rate on a HELOC is often lower than the mortgage, but it can vary with time. Payments are often lower because homeowners only owe money if they actually use the line of credit. Interest is only charged on the outstanding balance.

Choose The Right Option

Homeowners need to understand the differences between these home equity loans to choose the best option for them. Some of them provide lump sums, some create multiple monthly payments, and some have more flexible payment terms. The features of each loan must be compared to the needs of the individual homeowner.

 

08
Feb
By First Rate Financial Group
Mortgage

Analyzing The Closing Disclosure: What Everyone Must Know

Analyzing The Closing Disclosure: What Everyone Must KnowIt is exciting to hear that an offer has been accepted, and many homeowners are ready to move into their new houses as quickly as possible. At the same time, homeowners must take the time to review all documents associated with the purchase. Purchasing a house is a major financial decision, and homeowners need to understand what their obligations are. That is where the closing disclosure is critical. What type of information is included in the closing disclosure, and what do homeowners need to know now?

The Closing Disclosure Includes Fees And Costs

First, homeowners need to take a look at the numbers included in the closing disclosure. Of course, the biggest number will be the purchase price. Homeowners will see the amount of money they put down, and they will see the total balance of the loan. 

Homeowners should also take a look at the monthly mortgage payment. Understand that this monthly payment may not be the same as the amount of money that is drafted out of the bank account every month. Often, banks withdraw money for real estate taxes and home insurance premiums, holding that money in escrow for the homeowner.

Homeowners also need to take a look at the interest rate. They need to understand whether the interest rate is fixed or variable.

Look At The Terms Of The Loan

Homeowners also need to look at the terms of the loan. They should understand how long it will take them to pay off the mortgage. They also need to understand the consequences of missing a monthly mortgage payment. They need to see whether there is an acceleration clause and whether there is a late fee tied to any late payments. Homeowners must also understand when the first mortgage payment is due. 

Talk To A Trained Professional About The Closing Disclosure

There is a lot of information in closing disclosures, it can be intimidating for someone who has not been through this process before. That is why all new homeowners need to work with a professional who can make sure they understand the terms of the mortgage. Homeowners must understand what they are agreeing to before they sign on the dotted line.