Navy Fellas Realty Group

Real Estate, Residential sales and purchase

Does My Current Debt Affect Getting A New Mortgage?

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Does My Current Debt Affect Getting A New MortgageWhen you apply for a new mortgage, the lender will evaluate your creditworthiness to determine whether to approve your application and what terms and interest rate to offer you. Your existing debt can affect your creditworthiness in several ways:

Debt-to-income ratio (DTI): Your DTI ratio is the percentage of your monthly income that goes towards paying off debt. Lenders typically want to see a DTI ratio of 43% or less, meaning your debt payments don’t exceed 43% of your gross monthly income. If your existing debt is high, your DTI ratio will be high, and lenders may view you as a riskier borrower. This can make it more difficult to qualify for a new mortgage or result in a higher interest rate.

Credit score: Your credit score is a numerical representation of your creditworthiness, based on your credit history. If you have existing debt and have been making late payments or defaulting on payments, your credit score may have taken a hit. This can make it more difficult to qualify for a new mortgage or result in a higher interest rate.

Payment history: Your payment history is a record of how consistently you have made payments on your existing debt. If you have a history of late payments or defaulting on payments, this can signal to lenders that you may be a riskier borrower, which can make it more difficult to qualify for a new mortgage or result in a higher interest rate.

Available funds for down payment: If you have existing debt, you may not have as much money available for a down payment on a new mortgage. This can make it more difficult to qualify for a new mortgage or result in a higher interest rate.

Overall debt load: Lenders will also consider your overall debt load when evaluating your creditworthiness. If your existing debt is high relative to your income and assets, this can make it more difficult to qualify for a new mortgage or result in a higher interest rate.

In summary, your existing debt can affect your ability to qualify for a new mortgage by increasing your DTI ratio, lowering your credit score, affecting your payment history, limiting your funds for a down payment, and increasing your overall debt load.

It’s important to manage your debt carefully and maintain a good credit score if you’re planning to apply for a new mortgage. By evaluating the following and staying on track, you can ensure that you’re ready for the financial responsibilities of a mortgage and can make an informed decision about homeownership.

Selling Your Home? Here’s 3 Reasons Why You Won’t Want to Handle the Sale Yourself

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Selling Your Home? Here's 3 Reasons Why You Won't Want to Handle the Sale YourselfAre you thinking about selling your home? If so, you may be weighing the pros and cons of working with a professional real estate agent. Let’s take a quick look at three great reasons why you won’t want to handle the sale yourself.

You Won’t Save As Much As You Think

Let’s start with the most common and obvious reason that homeowners try to handle their home sale: the cost. It’s true that selling your home using the services of a real estate professional isn’t going to be free. Depending on the value of your home, their commission might range from two to four or five percent of the final sale price. However, the entire reason you’re paying commission is that you’re contracting with a professional to do a job. Your real estate agent is there to both share their experience and handle all of the tasks and responsibilities with your sale. Without them, you’ll be responsible for everything from creating an online listing for your property to figuring out how to host an open house.

So while you may believe you are saving money by not paying commission, you’re going to be burning a lot of your time. If you’re already busy in your career or as a parent, that may end up costing you more in the long run.

A Professional And Objective Eye Is A Huge Plus

Objectivity is another great reason to work with a real estate professional when selling your home. If you had to answer right now, would you say your home is better than your neighbor’s? Better than all the houses on your street, even? The majority of home sellers do believe their home is “above average,” which is of course statistically impossible.

When someone has been the one painting, renovating and putting love into her home for so long, it is no surprise that she becomes attached to it. A real estate agent’s objective eye can offer a nice dose of reality and help to keep the sale moving.

Many Buyers Will Automatically Avoid Owner Sales

Are you a professional salesperson? If not, do you have experience dealing with the public? Selling your home is a significant financial transaction in which you’re going to have to meet with buyers. Moreover, from their perspective, it’s likely that your home is not the only one they’re viewing. Many homebuyers will prefer to work with a seller agent as they know the process will be smooth and professional rather than trying to negotiate directly with an owner.

These are just a few of the reasons you won’t want to go it alone when you sell your home. For more information about local home sales, contact your local real estate professional today.

What Does Contingent Mean on a House Sale

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What Does Contingent Mean on a House SaleIn the context of a house sale, “contingent” typically means that the sale of the house is dependent on certain conditions being met. These conditions could include things like the buyer securing financing, the completion of a home inspection, or the sale of the buyer’s current home.

For example, if a buyer makes an offer on a house and the offer is accepted by the seller, the sale may be contingent on the buyer obtaining financing within a specified period of time. If the buyer is unable to obtain financing, the sale may fall through.

Another common contingency is a home inspection. If the inspection reveals significant issues with the property, the buyer may have the option to renegotiate the terms of the sale or back out of the deal altogether.

Contingencies are designed to protect both the buyer and seller in a real estate transaction. They give the buyer an opportunity to ensure that the house is in good condition and that they can obtain financing, while also giving the seller some assurance that the sale will go through if the conditions are met.

Types of Home Contingencies

There are several types of contingencies that can be included in a home sale contract. Here are some of the most common.

Financing contingency: This contingency specifies that the sale of the home is contingent on the buyer obtaining financing. If the buyer is unable to secure financing within a specified timeframe, the contract may be voided.

Appraisal contingency: This contingency specifies that the sale of the home is contingent on the home appraising for at least the purchase price. If the appraisal comes in lower than the purchase price, the buyer may have the option to renegotiate the price or back out of the deal.

Inspection contingency: This contingency specifies that the sale of the home is contingent on a satisfactory home inspection. If the inspection reveals significant issues with the property, the buyer may have the option to renegotiate the terms of the sale or back out of the deal.

Sale contingency: This contingency specifies that the sale of the home is contingent on the buyer selling their current home within a specified timeframe. If the buyer is unable to sell their current home, the contract may be voided.

Title contingency: This contingency specifies that the sale of the home is contingent on the seller having clear title to the property. If there are issues with the title, the contract may be voided or the seller may need to take steps to clear the title before the sale can proceed.

It’s important to note that contingencies can vary depending on the specifics of the contract and the state or region where the sale is taking place. It’s always a good idea to consult with a real estate professional or attorney to ensure that your contract includes the appropriate contingencies for your situation.

Ready to Buy Your First Home? Don’t Forget to Check Your Credit Score – Here’s Why

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Ready to Buy Your First Home? Don't Forget to Check Your Credit Score – Here's WhyWhether you’re just out of college, recently married or simply haven’t jumped into the market yet, buying your first home is an exciting prospect. It can also be an expensive one, which is why most people will take out a mortgage to help finance the cost.

If you are planning on engaging with a mortgage lender, you’ll need to have your finances in order. In today’s post, we’ll share a few key reasons why you’ll want to check your credit score well in advance of buying your first home.

Your Credit Score Is A Signal For Lenders

As you know, mortgage lenders have a responsibility to lend to those individuals and families who are at a low risk of default. So when a mortgage lender starts to dig into your financial background, they are looking at your credit history and credit score to help them assess that risk.

Note that having a low score doesn’t necessarily mean you have bad credit. If you’re still in your 20s and have only had a credit card, your score might be low even though you are fully capable of managing a mortgage.

Your Score Impacts Your Mortgage Interest Rate

As mentioned above, your credit score helps to signify your risk. If your credit score is in a lower range, perhaps a 640 or 660, you’re presenting a greater risk than someone with a score of 760 or 800. Because of this, the interest rate that you pay on your mortgage will in part be determined by your credit score. Those individuals who present a higher risk pay a higher rate to compensate. And vice versa, if your credit is spotless you can expect to pay a lower interest rate.

You’ll Need Time To Challenge Any Issues

Finally, you’ll need to give yourself some lead time to challenge any irregularities with your credit report. The credit reporting agencies aren’t perfect and they do make mistakes. There may be some old, retired credit card or other debt sitting on your report which is holding the score down. Even worse, there may be some incorrect delinquency or other error which ends up as a big red flag for potential mortgage lenders.

As you can see, it’s worth spending the time to check your credit score. You get to check it for free once per year, so take advantage of the opportunity. And when you’re ready to discuss buying your first home, contact your trusted mortgage professional. We’ll share how to navigate the credit score and mortgage process so you can land the home of your dreams.

What’s Ahead For Mortgage Rates This Week – September 11, 2023

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What's Ahead For Mortgage Rates This Week - September 11, 2023Last week’s scheduled economic reporting was limited due to the U.S. Labor Day holiday on Monday. The Federal Reserve released its Beige Book report and weekly readings on mortgage rates and jobless claims were also published.

Federal Reserve Releases Beige Book Report

The Beige Book report is a summary of information supplied to Federal Reserve policymakers by their business and professional contacts. Highlights of September’s Beige Book report included:

  • Accelerated leisure spending by consumers boosted economic growth during July and August.
  • Non-essential retail sales slowed, but the economy was boosted by a final stage of post-COVID-19 pent-up demand.
  • Prices for consumer goods fell faster than in many other sectors.
  • Auto sales rose due to better inventories available to consumers but increased sales were not connected with rising consumer demand for vehicles.
  • Rising business costs reduced profit margins.

The Beige Book report is published eight times a year before scheduled meetings of the Federal Reserve’s Federal Open Market Committee.

Mortgage Rates, Jobless Claims Fall

Freddie Mac reported lower mortgage rates last week; rates for 30-year fixed-rate mortgages averaged 7.12 percent and were six basis points lower than in the previous week. Rates for 15-year fixed-rate mortgages were three basis points lower and averaged 6.52 percent.

Initial jobless claims were lower with 216,000 first-time claims filed as compared to the prior week’s reading of 229,000 initial jobless claims filed. Analysts expected a reading of 230,000 new jobless claims filed.

What’s Ahead

This week’s scheduled economic reports include readings on inflation, U.S. retail sales, and the preliminary monthly report on consumer sentiment. Weekly readings on mortgage rates and initial jobless claims will also be released.

3 Ways To Avoid Mortgage Insurance

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3 Ways to Avoid Mortgage InsuranceWhen you are buying a home, you may run into a number of hurdles to complete the purchase. One of the items that you may be asked to purchase is called private mortgage insurance, often shortened to PMI. This is a unique insurance policy that your lender, such as the credit union or bank, may ask you to buy in order to protect themselves. In this insurance policy, the bank protects themselves against losing money if you end up defaulting on your loan.

Unfortunately, if you are asked to purchase PMI, this will increase your monthly mortgage payment. Therefore, most people try to avoid it. Fortunately, there are a few ways to do this.

Increase the Size of Your Down Payment

Typically, the lender will ask you to purchase PMI if your loan to value ratio is off. In most cases, the lender will ask you to buy PMI if you put down less than 20 percent. It is important to remember that this is still handled on an individual case-by-case basis and each lender handles this differently. 

Invest in a Piggyback Mortgage

Another option to avoid PMI is to invest in something called a piggyback mortgage. In this case, you are splitting your mortgage into two policies. For example, if you put down 10 percent, you would need to take out a mortgage for the other 90 percent.

When you take out a piggyback mortgage, you split this 90 percent loan into one mortgage for 80 percent and the other for 10 percent. The drawback of this policy is that the second loan might have a higher interest rate than the first. This can help you avoid having to take out PMI.

Try Building the PMI Into the Loan

Finally, the last option is to roll them into the cost of the loan. In this case, the lender avoids asking you to purchase PMI and instead charges you a little bit more money for the loan. You won’t have a section on your bill for “private mortgage insurance” but you will have a slightly higher monthly payment anyways. Remember that you can refinance to a lower rate later, saving some money; however, it might be harder to eliminate PMI.

Avoiding Mortgage Insurance

These are a few ways that you can avoid purchasing PMI. This will help you keep your monthly payments low. As always, speak with your trusted mortgage professional for personal advice on your specific situation.

The Five Most Common Overlooked Expenses When Selling a House

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The Five Most Common Overlooked Expenses When Selling a HouseMost homeowners are so enthusiastic about putting their home on the market and getting the price they’re hoping for that the expenses involved in selling a home are forgotten. However, it’s often said that one has to spend money to make money, and selling a home is no exception! If you’re wondering what kinds of overlooked expenses will cut into your home sale, here are some costs to consider.

Minor Renovations

There are always a few things to fix-up when it comes time to sell your home, but by establishing what will best increase your home’s value, you can make it a good investment. Instead of going it blind, create a renovation budget so any cost you incur will pay for itself.

Staging Your Home

It’s possible you may be able to get away with minimal costs when it comes to home staging, but adding a few small details can improve the overall impression of your home. Instead of spending an abundance on dressing up your home, put your time into cleaning and de-cluttering for ample effect.

Closing Costs

It goes without saying that closing costs can add up to a lot of money at the end of the day, but many people forget they’re part of the transaction. Closing costs can include anything from transfer tax to title insurance to escrow fees so it may be worth talking to your agent to see if they can give you a deal.

Real Estate Commission

It’s easy to forget, but using a real estate agent to sell your home will require you to pay a portion of your home’s sale to them. While you may be able to negotiate this percentage with your agent, it’s worth realizing that an agent will help you garner a higher price and will do a lot of the leg work for you.

The Moving Van

It might be too soon to think about, but if you have a lot of stuff and don’t want to take on the task yourself, you’ll need to hire a moving company to help you relocate. Instead of leaving this to the last minute, contact a few popular movers to get pricing, and don’t wait until the last minute to schedule your move. If you’re desperate, you’re likely to pay more.

Selling a home can be a financial boon, but there are many expenses that can come along with it. If you’re currently preparing to put your home on the market, contact your local real estate professional for more information.

Vacation Home or First Mortgage Payoff?

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Vacation Home or First Mortgage Payoff?Imagine having some extra cash on hand, enough to make a significant financial decision that could potentially shape your future. You’ve worked hard to build equity in your home, and now you find yourself at a crossroads. Should you invest in a vacation home or use the money to pay off your first mortgage?

Vacation Home-Pros

A Place to Escape: Owning a vacation home provides you with a tranquil getaway, a place to unwind and recharge. It offers the potential for making lasting memories with family and friends.

Rental Income: If you decide not to use the vacation home year-round, you can rent it out during the times you’re not there. This rental income can help offset the property’s expenses and mortgage.

Potential Appreciation: Depending on the location and market conditions, vacation homes can appreciate in value over time, potentially leading to a profitable investment in the long run.

Vacation Home-Cons

Added Expenses: Owning a second property means added expenses beyond the initial purchase price, such as property taxes, insurance, maintenance, and potential association fees.

Time Commitment: Managing a vacation rental or maintaining a vacation home requires time and effort, especially if you don’t live nearby.

Market Volatility: The real estate market can be unpredictable, and the value of your vacation home may fluctuate, potentially resulting in a financial loss if you decide to sell.

First Mortgage Payoff- Pros

Financial Security: Paying off your first mortgage eliminates a significant debt, providing you with increased financial security and peace of mind.

Interest Savings: By paying off your mortgage early, you save money on interest payments over the life of the loan, which could amount to substantial savings.

Improved Credit: Paying off a mortgage can positively impact your credit score, as it demonstrates responsible financial management.

First Mortgage Payoff- Cons

Opportunity Cost: Using your funds to pay off the mortgage means potentially missing out on the potential returns from other investments or opportunities.

Liquidity: Once you pay off your mortgage, the money becomes tied up in your home equity, making it less accessible for other needs or emergencies.

Potential Tax Implications: Depending on your location and individual circumstances, there may be tax implications associated with paying off your mortgage early.

Considerations and Decision-Making Process

Making the right choice between a vacation home and paying off your first mortgage requires careful consideration of your financial goals, risk tolerance, and lifestyle preferences.

Choosing between investing in a vacation home or paying off your first mortgage is not a decision to be taken lightly. Both options have their merits, and the best choice for you depends on your individual circumstances and priorities. Take the time to carefully weigh the pros and cons of each option, and if needed, consult with a financial advisor who can provide personalized guidance based on your unique situation. Remember that whichever path you choose, responsible financial planning and thoughtful consideration will lead you to a more secure and rewarding future.

Vacation Home or First Mortgage Payoff?

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Vacation Home or First Mortgage Payoff?Imagine having some extra cash on hand, enough to make a significant financial decision that could potentially shape your future. You’ve worked hard to build equity in your home, and now you find yourself at a crossroads. Should you invest in a vacation home or use the money to pay off your first mortgage?

Vacation Home-Pros

A Place to Escape: Owning a vacation home provides you with a tranquil getaway, a place to unwind and recharge. It offers the potential for making lasting memories with family and friends.

Rental Income: If you decide not to use the vacation home year-round, you can rent it out during the times you’re not there. This rental income can help offset the property’s expenses and mortgage.

Potential Appreciation: Depending on the location and market conditions, vacation homes can appreciate in value over time, potentially leading to a profitable investment in the long run.

Vacation Home-Cons

Added Expenses: Owning a second property means added expenses beyond the initial purchase price, such as property taxes, insurance, maintenance, and potential association fees.

Time Commitment: Managing a vacation rental or maintaining a vacation home requires time and effort, especially if you don’t live nearby.

Market Volatility: The real estate market can be unpredictable, and the value of your vacation home may fluctuate, potentially resulting in a financial loss if you decide to sell.

First Mortgage Payoff- Pros

Financial Security: Paying off your first mortgage eliminates a significant debt, providing you with increased financial security and peace of mind.

Interest Savings: By paying off your mortgage early, you save money on interest payments over the life of the loan, which could amount to substantial savings.

Improved Credit: Paying off a mortgage can positively impact your credit score, as it demonstrates responsible financial management.

First Mortgage Payoff- Cons

Opportunity Cost: Using your funds to pay off the mortgage means potentially missing out on the potential returns from other investments or opportunities.

Liquidity: Once you pay off your mortgage, the money becomes tied up in your home equity, making it less accessible for other needs or emergencies.

Potential Tax Implications: Depending on your location and individual circumstances, there may be tax implications associated with paying off your mortgage early.

Considerations and Decision-Making Process

Making the right choice between a vacation home and paying off your first mortgage requires careful consideration of your financial goals, risk tolerance, and lifestyle preferences.

Choosing between investing in a vacation home or paying off your first mortgage is not a decision to be taken lightly. Both options have their merits, and the best choice for you depends on your individual circumstances and priorities. Take the time to carefully weigh the pros and cons of each option, and if needed, consult with a financial advisor who can provide personalized guidance based on your unique situation. Remember that whichever path you choose, responsible financial planning and thoughtful consideration will lead you to a more secure and rewarding future.

What’s Ahead For Mortgage Rates This Week – September 5, 2023

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What's Ahead For Mortgage Rates This Week - September 5, 2023

Last week’s economic reporting included readings on inflation, consumer sentiment, and weekly readings on mortgage rates and jobless claims. 

 

Inflation Rates Are Similar in August

Month-to-month, the inflation rate holds relatively steady at 3.18 percent. This is slightly up when compared to 2.97 percent last month; however, it is significantly lower than the rate of 8.52 percent last year. When compared to the long-term average, inflation is trending in the right direction, as the long-term average is 3.2 percent.

Inflation rose at a pace of 0.20 percent in July and met analysts’ expectations. There was no change in the pace of month-to-month inflation from June’s reading of 0.20 percent growth. The Consumer Price Index also reported that year-over-year inflation reached 9.10 percent, which was the highest reading since reaching a 40-year high in mid-2022.

 

While we still wait for core inflation, experts predict it to come in at around 3.38 percent. Core inflation, also known as the CPI, excludes food and fuel prices, which are historically volatile. If core inflation comes in at 3.38 percent, this would be significantly lower than the July reading of 4.7 percent.

 

Right now, it is unclear whether the Federal Reserve will raise interest rates, as they are still waiting for other metrics, including the core inflation above.

 

Mortgage Rates Rise, Job Market Cools

The 30-year fixed, the preferred metric for mortgage rates, remains at around 7.53 percent. These are the highest mortgage rates of the last 20 years. Rates continue to rise when compared to July’s mortgage rates, which were just under 7 percent. This continues to put pressure on those interested in purchasing homes. The 15-year fixed mortgage rate is about 6.81 percent. This is slightly higher than the 15-year fixed for August, which was 6.55 percent on average.

 

When comparing these mortgage rates to last week, the 30-year fixed has gone up. It was 7.23 percent, on average, last week, and has jumped to 7.53 percent this week. The average rate for a 15-year fixed is 6.81 percent this week, which is slightly higher than last week, where the average 15-year fixed was 6.55 percent.

 

It appears that the increase in interest rates is finally having an impact on the job market. Unemployment rose to 3.8 percent, and the economy added 187,000 jobs in August. While these are still historically solid numbers, it is clear that the job market is cooling, when compared to July.


University of Michigan Consumer Sentiment Survey 

The University of Michigan released its monthly consumer sentiment report, and consumer sentiment has dropped slightly when compared to last month. The index reading was 72.0 in July, but it dropped to 69.5 in August. The overall sentiment regarding the economy also dropped from 76.6 in July to 75.7 in August. 

 

These numbers reflect that consumers are still a bit wary of economic conditions. While inflation continues to come down, many consumers are likely still nervous about the increase in interest rates and the cooling job market. While sentiment remains positive, there is some cooling in the economy.

 

What’s Ahead

During the next week, mortgage rates will get an update, and the Federal Reserve will receive some new metrics regarding the economy. These numbers will be very important for the Fed, as it decides whether it will raise interest rates again in September in an attempt to cool inflation further.