Sunrise Homes & Renovations, Inc.

Manage These 3 Items Before Applying For A Mortgage

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Manage These 3 Items Before Applying For A MortgageMortgage lenders weigh the risk of getting their principal and interest paid back by looking at the qualities of the prospective borrrower. And due to the amount of money being requested and lent to purchase homes, those requirements can become daunting.  Working with a trusted and qualified mortgage professional makes this sometimes confusing process a little clearer.

To this end, there are three things that a potential homebuyer can do to prepare for the mortgage approval process.

Manage Debt And Credit Levels

For many homebuyers, managing their credit score is the biggest challenge. Mortgage lenders like buyers with strong credit. While getting strong credit usually isn’t something that can be done overnight, paying bills on time, all of the time can help to build a positive profile.

Using as little credit as possible is also helpful, since high utilization of existing credit lines can harm a borrower’s score. Having less debt can also reduce monthly payments, making it easier to qualify for a larger mortgage.

Manage Income And Qualifying Ratios

Lenders look for two things when it comes to a borrower’s income:

  1. Stable incomes are preferred, so being able to prove the income with a W-2 form or other documentation is usually required. Self-employed people will typically need to prove their income with their tax returns, so taking high write-offs can make it harder to qualify.
  2. A borrower’s income should be significantly higher than his total monthly debt payments. Lenders divide a borrower’s monthly payments — including their proposed mortgage — into the gross monthly income. If the payments exceed a set percentage, the lender will shrink the mortgage until it considers the payment affordable.

Collect Required Paperwork Early

To qualify for a mortgage, borrowers typically need to submit a comprehensive file of supporting documentation. This can include tax returns, pay stubs and bank and investment account statements.

Since lenders frequently want some historical data, it can be a good idea for people considering applying for a mortgage to start collecting documentation before they actually begin the mortgage application process. Once again, working with a qualified finance professional will make this process a lot more comfortable.

Over 5 Trillion Dollars In Home Equity May Lead To More Cash Out Transactions

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Over 5 Trillion Dollars In Home Equity May Lead To More Cash Out TransactionsUS homeowners now have over 5 trillion dollars in home equity which is a very large amount of money! So this year may be the year for a lot of cash out refinances and other home equity mortgage products. Most often, when you are purchasing a home, you are buying at or below the appraised value and you are making a down payment.

The good news is this means you have “instant equity” in your home. And over time you build more equity as you make your monthly mortgage payments as well as any potential home price appreciation.

This build up of equity gets some homeowners thinking about taking cash-out from your home to pay off credit card bills, purchase a car or pay for college expenses. However, it is important understand, there are rules as to what can and can’t be done.

Cash out refinance, equity loan or second mortgage

There are three basic ways to access the equity in your home which are common these include:

  • Cash out refinance – you refinance your current mortgage and you request cash-out for the equity. For example, if your home is worth $200,000 and you have a current mortgage of $100,000 you may be able to access an additional $60,000 to $70,000 in cash depending on your lenders requirements
  • Home equity loan – a home equity loan is typically a line of credit that you take out with your local bank. These loans are typically what are known as “revolving” where you can access the funds over and over again as you make payments. Home equity loan interest payments are not tax deductible after the recent tax reform plan
  • Second mortgage – in order to qualify for a second mortgage on your home, the lender would require you to meet specific credit requirements as well as certain debt-to-income ratios. 

In most cases, lenders will require borrowers to have had their mortgage at least one year before they are allowed the option of any type of cash-out refinance. However, Ginnie Mae (GNMA), the investor for FHA and VA home loans allow cash out transactions after 6 monthly payments and a minimum of 210 days in the home.

While you may already have a substantial amount of equity in your home, lenders are taking an additional risk if you are allowed to “tap into” that equity. Before you make the decision to access the equity, talk to your trusted real estate professional regarding possible restrictions.

How The 2018 Tax Changes Can Affect Your Mortgage

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How The 2018 Tax Changes Can Affect Your MortgageWhen the chatter was at its peak on the 2018 tax law changes being proposed, one of the big areas of concern for homeowners was the elimination of the mortgage interest deduction. Right behind that issue was a similar treatment with regards to property tax deductions.

As the rumors swirled and Congress moved, many feared both deductions had finally met their day and were going to be entirely eliminated, resulting in a major financial hit that many homeowners and particularly those in high real estate cost states would have felt painfully. As it turned out, there’s no reason to panic or suddenly dump titled real estate just because it has been bought with a mortgage. 

Yes, both issues were impacted by the 2018 tax law changes, but neither the mortgage interest deduction nor the property tax deduction were eliminated entirely. Instead, they were modified.

The changes include:

  • Mortgage interest deduction – the new laws cap the eligible debt to $750,000. While old loans originated prior to the law change date are still eligible up to $1 million, new mortgages created after the enactment date are caught in the lower universe. However, being realistic, most homebuyers are not in the bracket that afford a $750,000 plus priced home except maybe in a few communities such as New York City or the San Francisco/Bay Area in California. So the change basically means business as usual for 9 out of 10 homeowners in the U.S.
  • Real estate property taxes – total state and local taxes eligible for deduction are now capped at $10,000. This is where some homeowners could feel a pinch as a typical home in higher cost states easily generates property tax levels of $5,000 to $7,000 for a $300,000 home. So those units assessed a higher value by tax auditors will likely feel this new limitation take effect.
  • The standard deduction increase – remember, the above items are only useful to the extent that a tax filer itemizes his deductions. With a standard deduction now at $12,000 for an individual and $24,000 for a married couple, filing jointly, the option to itemize could go away entirely if the standard deduction provides a higher level of tax savings overall. And then that makes the above two deductions entirely moot and useless. Of course, it’s not entirely a plus since the personal exemption is also eliminated, thus reducing the benefit of the higher standard deduction by as much as $4,150 per person. In essence, the change is a wash, but could be enough to bar use of itemization, which would hurt greatly.

So the changes did not wipe out any benefit entirely (except the personal exemption). Instead, the real impact depends on which change applies to a specific taxfiler’s situation.

This is why two homeowners in the same town with the same house and market value could end up having very different tax results with the 2018 changes. Because there is so much variance.

As always, work with a trusted tax professional in order to understand how these changes will affect your personal tax situation.

Questions and Answers Regarding The Veterans Loan Program

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Questions and Answers Regarding The Veterans Home Loan ProgramOwning a home is important to military veterans just like the majority of other consumers.  The Veteran’s Administration has provided an exceptional benefit for those who have served (or are currently serving) in any of the armed forces. And this VA Loan Program is helping thousands of service members achieve the goal of home ownership.

There are a number of questions that come up regarding the fees and qualifications of the VA Loan Program.  

What Are The Specific VA Fees?

Many veterans and active military personnel like the fact that VA loans don’t require private mortgage insurance (PMI). PMI has served as a thorn in the side countless home buyers who couldn’t manage a 20 percent down payment. The good news is that VA loans don’t requre mortgage insurance, even with no down payment at all.

To compensate for the absence of mortgage insurance, the government charges most borrowers a VA Funding Fee. Depending on individual circumstances and the type of funding you need (first-time home purchase versus refinance, for example), this fee can range from.5 percent to 3.3 percent of your mortgage amount.

Fortunately, applicants on disability and surviving spouses may be exempt from this requirement. 

Are There Any Administrative Concerns Regarding VA Home Loans?

VA loans are generally as easy to attain as any other government or conventional mortgage loan products, but they do have some unique qualifications to consider. These issues just need to be known and addressed appropriately throughout the transaction to ensure it goes smoothly.

For instance, if you and your spouse both serve in the military and you want to buy a home together, each of your VA entitlements must go through separate processing and approval procedures.

A VA loan also calls for a specific type of home appraisal called a Minimum Property Requirements (MPR) inspection. This should not be confused with the traditional home inspection. The MPR is the required appraisal by an independent VA appraiser. These appraisers typically dig into the home’s tiniest details, which can also be helpful by uncovering potential issues with the home.

Any home improvement or construction work currently under way may delay the approval process. You can minimize these issues by making sure that both your lender and your REALTOR have extensive experience in working with VA loans.

How Can A VA Loan Save Me Money?

Properly finessed, a VA loan for the right amount, and at the right interest rate, can edge out conventional loans. For instance, that VA Funding Fee, unwelcome as it might seem, could cost substantially less than the down payment you might otherwise put down on a conventional loan — without the need to pay mortgage insurance premiums for the first several years of your home ownership.

While the monthly mortgage payments might not look dramatically different on paper, even a savings of $100 a month can make an enormous difference to your financial health over the life of your mortgage loan.

VA loans can indeed provide some important benefits and buying power for our nation’s past and present military service professionals. Take the time to examine all your options so you can obtain the mortgage loan package that best serves your specific needs and goals.

Ultimately, however, you should probably sit down with your trusted real estate professional who can advise you on your wisest course of action.

Selling Your Home FHA? Learn These Tips To Ensure A Smooth Closing

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What Are The Requirements To Sell A Home Using FHABefore an owner can market a property to buyers that want to use a FHA loan, he will want to familiarize himself with the FHA’s standards. FHA won’t insure loans on just any property. While their standards aren’t as stringent as they used to be, a home needs to be in relatively good condition to qualify for FHA financing.

Location and Lot

To qualify for FHA financing, the property has to be located on a road or easement that lets the owner freely enter and exit. The access also has to be paved with a surface that will work all year — a long dirt driveway that washes out in spring won’t qualify.

The FHA also wants the lot to be safe and free of pollution, radiation and other hazards. For that matter, it also needs to provide adequate drainage to keep water away from the house.

Property Exterior

The FHA’s requirements for making a loan start with the home’s roof. To pass muster, the house must have a watertight roof with some future life left. In addition, if the roof has three or more layers of old shingles, they must all be torn off as part of the replacement process.

The property’s exterior has to be free of chipped or damaged paint if the home has any risk of having lead paint. Its foundation should also be free of signs of exterior (and interior) damage. It also needs full exterior walls.

Property Interior

The property’s interior also needs to be inspected. FHA standards require that the home’s major systems be in good working order. Bedrooms should have egress routes for fire safety and the attic and basement should be free of signs of water or mold damage.

The bottom line is that the FHA wants to make loans on homes that borrowers can occupy. This doesn’t mean that a home has to be in perfect condition to be sold to an FHA mortgage-using borrower. It just needs to be a place that they can live.

Contact your trusted real estate professional to discuss these issues as well as any other questions regarding the sale of your home.

 

What Important Items Can Upset My Mortgage Pre-Approval Status?

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What is a mortgage pre-approvalWhen you are purchasing a home, your lender may recommend you obtain a mortgage pre-approval before you find the home of your dreams. There are some benefits to being pre-approved before you find a home, but oftentimes, people confuse pre-qualifications with pre-approvals.

So the question many buyers have is what exactly is a mortgage pre-approval? In a nutshell, it’s when the lender provides you (the buyer) with a letter stating that your mortgage will be granted up to a specific dollar amount.

What Do I Need For Pre-Approval?

In order to obtain a pre-approval for your home purchase, you will have to provide your lender all of the same information you would need to show for qualifying for a mortgage. This means providing tax returns, bank statements and other documents that prove your net worth, how much you have saved for your down payment and your current obligations.

What Conditions Are Attached to a Pre-Approval?

Generally speaking, a pre-approval does have some caveats attached to it. Typically, you can expect to see some of the following clauses in a pre-approval letter:

  • Interest rate changes – a pre-approval is done based on current interest rates. When rates increase, your borrowing power may decrease
  • Property passes valuation and inspection – your lender will require the property you ultimately purchase to come in with a proper appraisal and meet all inspection requirements
  • Credit check requirements – regardless of whether it’s been a week or six months since you were pre-approved, your lender will require a new credit report. Changes in your credit report could negate the pre-approval
  • Changes in jobs/assets – after a pre-approval is received, a change in your employment status or any substantial assets may result in the pre-approval becoming worthless

What Items Can Change My Mortgage Pre-Approval Status?

One of the major issues that affect some borrowers as they are preparing to purchase their new home is financing large ticket items before the home purchase loan is completely funded.  Even if you are buying new furniture or other items for the home, it’s best to wait until after your home loan is entirely complete before purchasing any of these new items.

Work changes can also drasitically affect your pre-approval status.  Make sure your loan professional is well aware of any changes well in advance of them happening in order to plan effectively.  There are ways to work with job changes but it is a delicate matter during the mortgage underwriting process.

Getting pre-approved for a home mortgage may allow you more negotiation power with sellers and may help streamline the entire loan process. It is however important to keep in mind there are still things that may have a negative impact on actually getting the loan.

It is important to make sure you keep in contact with your trusted real estate professional, especially if interest rates increase or your employment status changes after you are pre-approved.