Navy Fellas Realty Group

Real Estate, Residential sales and purchase

What To Know About Your Debt-To-Income Ratio When Buying A Home

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What To Know About Your Debt-To-Income Ratio When Buying A HomeWhen you apply for a mortgage, your lender will do some quick math to figure out how much of a loan you can afford. Your lender will consider many factors, and one of the most important ones is your debt-to-income ratio. It is usually shortened to DTI, and understanding this formula can help you better understand how big of a house you can afford. 

An Overview Of A DTI

Your DTI represents the amount of money you spend compared to the amount you make. Your lender is going to have very strict DTI requirements when deciding whether you can be approved for a mortgage. The lender wants to make sure you are not taking on a loan that you cannot afford to pay. If you cannot pay back your mortgage, your lender ultimately loses that money. Generally, your lender will want to see a lower DTI as they go through your application.

Front-End DTI

Your front-end DTI includes all expenses related to housing. This includes your homeowners’ association dues, your real estate taxes, your homeowners’ insurance, and your future monthly mortgage payment. In essence, this will be your DTI after your lender gives you a potential loan. 

Back-End DTI

Then, your lender is also going to take a look at your back-end DTI. This the first two other forms of debt that could go into your DTI. A few examples include car loans, student loans, credit card debt, and personal loans. Generally, this is the most important number because it is debt that you already carry when you apply for a mortgage. Your lender can always make adjustments to your home loan to fix your front-end DTI, but your lender does not have any control over your back-end DTI. 

What Is A Strong DTI?

Every lender will take a slightly different approach, but lenders prefer to see a total DTI somewhere around 32 or 34 percent. If you already have this much debt when you apply for a mortgage, you may have a difficult time qualifying for a home loan. On the other hand, if you don’t have a lot of debt, your lender may qualify you for a larger home loan. 

 

Let’s Talk Buyer Qualification: How to Ensure You Sell Your Home to the Right Buyer

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Let's Talk Buyer Qualification: How to Ensure You Sell Your Home to the Right BuyerAre you listing your home for sale? If so, it is time to get ready to meet with buyers and their real estate agents. And while you surely want to sell your home as quickly as possible, you will also want to do your homework to make sure you’re selling to the right person. Let’s explore the process of buyer qualification and why it’s important to do a little digging into potential buyers of your home.

Is Your Buyer Pre-Approved For Mortgage Financing?

First, you’ll want to check with your buyer to see if they are approved for mortgage financing. The last thing you want is to agree to an offer only to have the buyer rescind it because they can’t afford your home. If the buyer is not already approved, suggest that they take that additional step before submitting their offer. Otherwise, you may end up experiencing significant delays in the closing process.

Ensure Your Buyer Has Their Earnest Money Ready

Next, you’ll want to check with your buyer to make sure that they have their earnest money ready. These funds are a deposit, typically one or two percent of the purchase price, which is held in escrow once you accept the buyer’s offer. Earnest money is a way for the buyer to prove to you that they are serious about purchasing your home. Once they have placed the deposit down, you can be confident that the buyer intends to close.

Note that the terms of your agreement should ensure that if the buyer backs out of the deal, you get to keep some or all of their earnest money. This is especially important if you’re fielding multiple offers for your home as you may lose the chance to sell if the buyer backs out.

Be Wary Of Offers That Seem Too Good To Be True

If an offer seems too good to be true, that may just be the case. Be wary of any offers that are significantly more than your asking price, or if the buyer is willing to buy your home without so much as an inspection. Rest assured that any serious buyer is going to do their due diligence to ensure they’re getting a good deal.

Buyer qualification is a bit of a process, but it’s an important step that ensures your home sale goes smoothly. When you’re ready to list your home for sale, contact your local real estate professional. We will be happy to assist you with finding the right buyer.

Should You Buy Mortgage Points?

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Should You Buy Mortgage Points?When you take out a home loan, you might have the option to purchase mortgage points. Essentially, this is money that you pay to the lender upfront in exchange for getting a lower interest rate over the life of the loan. If you got a great deal on the house, you might have some extra cash on hand. Should you use that money to buy down the interest rate? This is a math problem that you need to calculate for yourself.

How To Do The Math

If you want to figure out if the mortgage points are worth it, you need to do some math. For example, you may need to pay an extra $3,000 at closing to qualify for a lower interest rate. You need to figure out how long it will take you to get that $3,000 back in terms of interest savings. So, if you save $30 per month on interest in exchange for that $3,000 upfront, it will take you 100 months to get that $3,000 back. After that, you will come out ahead. That is about eight years. So, if you plan on staying in the home for eight years (or more), then it might be worth it. If you sell the house before that point, or if you decide to refinance your home loan, then you will lose that money.

Other Factors To Consider

There are other factors to consider as well. For example, if you decide to buy discount points, it might be tax deductible, but this is something that you need to talk about with an accountant. Furthermore, if you are not getting the lowest interest rate because of a low credit score, you might want to buy discount points as well. Finally, if you want to reduce your monthly payment, mortgage points might be a smart way to get a lower payment.

Do not forget that you need to think about other options for that cash. There is a chance that you might need that cash for another bill, such as tuition or a car repair, so think carefully before buying discount points. 

The Quick and Easy Guide to Finding the Best Real Estate Agent to Sell Your Home

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The Quick and Easy Guide to Finding the Best Real Estate Agent to Sell Your HomeIs it time to move on from your house, townhouse or condo? If a sale is in your near future, you will want to start looking for a professional selling agent or broker to help manage the process. Let’s take a look at our quick and easy guide to finding the best real estate agent to handle your home sale.

Check Your Social Network

The easiest place to start is your social network, as almost everyone knows a great real estate agent. Get a post up on Facebook sharing that you are about to sell your home and you’re looking for the very best agent to help you sell it. Maybe an old high school acquaintance or college friend is now in the real estate business and can help.

Ask Your Friends And Family For Referrals

If you aren’t close with a trustworthy real estate agent, the next best people to ask are your local friends and family. It is unlikely that you’re going to get a bad referral from your best friend, brother or aunt. Send out a few text messages and make a few calls to let the family know that you’re hunting for a great real estate agent. Soon enough, you’ll have some recommendations.

Check Their Designations And Specialties

You might not know this, but real estate agents have specialties and designations available to certify in. Aside from becoming a REALTOR®, your agent may be a Certified Residential Specialist, an Accredited Buyer’s Representative, a Seniors Real Estate Specialist and more.

Be Sure To Read Reviews And Talk To Past Clients

When you’ve made a short list of your final choices for a selling agent, it’s time to check on their recent work. Ask the agent for a list of houses or other properties that they’ve sold recently. If possible, you’ll also want to socialize with some of their past clients to see what the agent is like. You’ll be working closely together for at least a couple of weeks, so it’s important that you choose a real estate professional that you’re comfortable with.

Selling your home is not a painful process, but it’s one where you’ll want to have the best agent working to protect your interests. If you’re thinking about making a move, contact your local real estate professional.

What’s Ahead For Mortgage Rates This Week – September 19, 2022

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What's Ahead For Mortgage Rates This Week - September 19, 2022Last week’s economic reporting included readings on inflation, retail sales, and consumer sentiment. Weekly readings on mortgage rates and jobless claims were also released.

Consumer Inflation Rate Falls as Gas Prices Decrease

Lower gas prices was welcomed news to consumers last week, but analysts said that high inflation would continue to impact consumer goods including groceries. The core inflation rate, which excludes volatile food and fuel prices, rose by 0.60 percent, which was twice the expected month-to-month pace of  0.30 percent. Rapidly rising inflation could cause the Federal Open Market Committee of the Federal Reserve to raise its target interest rate range again in a further attempt to slow runaway inflation.

While lower gas prices provided good news for consumers, rising costs for food, clothing, and household goods added to financial pressures for many families. The Fed indicated that it would increase its target interest rate range as needed to ease rapidly rising prices.

The consumer price index rose by 8.30 percent year-over-year, which exceeded the expected reading of 8.00 percent, but fell short of July’s year-over-year reading of 8.50 percent growth. The year-over-year reading for core consumer prices showed 6.30 percent growth which exceeded expectations of 6.00 percent growth and July’s reading of 5.90 percent growth.

In related news, retail sales rose by 0.30 percent in August and exceeded expectations of 0.10 percent month-to-month growth but fell short of July’s reading of 0.40 percent growth in retail sales. August’s retail sales excluding autos were -0.30 percent lower than in July. Analysts expected 0.10 percent growth in sales based on a flat reading of 0.00 percent growth n July. Consumers assumed a wait-and-see position about spending and chose to hold on to their cash.

Mortgage Rates, Jobless Claims

Freddie Mac reported higher average mortgage rates as the average fixed rate for 30-year mortgages exceeded six percent for the first time since 2008. Rates for 30-year fixed-rate mortgages averaged 13 basis points higher than in the previous week at 6.02 percent; rates for 15-year fixed-rate mortgages averaged 5.21 percent and five basis points higher. Rates for 5/1 adjustable rate mortgages averaged 29 basis points higher at 4.93 percent. Discount points averaged 0.80 percent for 30-year fixed-rate mortgages and0.90 percent for 15-year fixed-rate mortgages. Discount points for 5/1 adjustable rate mortgages averaged 0.20 percent.

Fewer new jobless claims were filed last week with 213,000 first-time claims filed as compared to the previous week’s reading of 218,000 initial jobless claims filed. Analysts expected 225,000 new jobless claims to be filed. The University of Michigan’s Consumer sentiment rose to an index reading of 59.5 in September as compared to the expected reading of 60.0 and August’s reading of 58.2. Consumer sentiment readings over 50 indicate that most consumers feel positive about current economic conditions.

What’s Ahead

This week’s scheduled economic reports include readings on the U.S. housing market, sales of previously-owned homes, data on housing starts, and building permits. issued Weekly readings on mortgage rates and jobless claims will also be released.

Using Your Equity To Buy Another House: What To Consider

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Using Your Equity To Buy Another House: What To ConsiderBuying a home is a dream that many people want to make come true. At the same time, many people dream of buying a second home. Perhaps you are looking for a rental property. Maybe you are looking for a vacation home. Regardless, you might be wondering how you can come up with the necessary cash to finance this dream. You might even be thinking about tapping into the equity in your current home to make that happen. It could be your down payment for your second house, but what do you need to know?

How To Get A Home Equity Loan

If you want to take out a home equity loan for a second house, there are a few steps to follow. First, you need to figure out how much money you need. You need to take out enough money for the down payment and closing costs. Furthermore, you can only withdraw 85 percent of the equity in your home. If you don’t have enough equity in the home, you might not be allowed to take out a home equity loan. 

Remember that you will also need to go through the traditional oan application process. Your outstanding debt will be reviewed, and your credit report will be checked. You will also need to verify your income or assets to qualify for a second mortgage. The process is similar to your first loan.

Why Take Out A Home Equity Loan?

There are a few reasons why this might be a smart move for financing a second home. You can probably get a lower interest rate, and you don’t have any restrictions on how you can use the money. With a larger lump sum, you might also be a more competitive buyer in a hot market.

Before you take out a home equity loan, you should work with a professional who can help you find the best loan option to meet your needs. That way, you can compare the benefits and drawbacks of each option before making a decision on what is best for your purchase.

Thinking About a New Home? 3 Reasons Why a Mortgage Will Be the Best Money You Ever Borrow

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Thinking About a New Home? 3 Reasons Why a Mortgage Will Be the Best Money You Ever BorrowIn these days of low interest rates, it can be a great idea to get into the real estate market and invest in a home. However, if you don’t have the funds saved up to buy a home outright, it may seem like more of a burden than it’s worth. The good news is that you might qualify for a mortgage loan, which tends to come with more favorable terms than a traditional bank loan. Here are three reasons why a mortgage might just be the best money you ever borrow.

Taking Advantage Of Low Interest

Interest rates have been relatively low for a number of years, which can be a definite financial boon when it comes to your monthly mortgage payment. Unfortunately, though, the predictions forecast that rates are on the rise and that means home ownership may be a more difficult dream in the coming years. If you’re interested in getting a home at a lower price with a better interest rate, it may be worth getting a short-term loan for the long-term gain.

Begin To Invest

It will certainly improve your financial outlook if you have a financial plan and a monthly budget you stick to, but few things will help your money grow like investing. Fortunately, real estate is still one of the best investments you can make in terms of helping your money grow and ensuring your future fiscal success. While stocks and mutual funds can be a bit topsy-turvy if you’re not knowledgeable about investing, real estate can be a more reliable asset that’s easier to understand.

Giving Up On Rent

When investing in a home, there are few things more rewarding than not having to pay rent anymore. Instead of effectively tossing away money each month that you’ll never see again, you will be able to see your equity grow in the home and property you purchase. Plus, this equity can be used as leverage for investment in another home. It also means that no matter the downturn in the market, you’ll have a solid investment in something.

You may not like the idea of borrowing money for your mortgage, but it can be a good fiscal choice with interest rates on the rise and the opportunity to say goodbye to rent forever. If you’re currently considering borrowing and are planning on buying a home in the near future, contact your trusted mortgage professional for more information.

How Your Home Equity Can Help You Reach Your Retirement Goals

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How Your Home Equity Can Help You Reach Your Retirement GoalsIf you plan on retiring soon, you are probably looking at a few options that can get you over the hump. You are probably excited to start a new phase of life. With a record number of people closing in on their retirement age, many are starting to assess their resources to make sure they have enough money to last them for the rest of their lives. If you already own a home, you might be able to tap into your home equity to help you fuel your retirement.

Your Home Has Probably Gone Up In Value

Your house is an investment and now is your opportunity to capitalize on that investment. There is a great chance that the value of your home has significantly increased since you first bought it. Furthermore, if you have been in your house for a long time, your mortgage may have been completely paid off. This means that just about all of your home’s value could be yours to keep. Your house could be worth hundreds of thousands of dollars, which you can put towards your retirement.

How To Use Your Home Equity For Your Retirement

Of course, you still need a place to live, but there are ways for you to tap into your home equity for your retirement. If you have children who have already moved out, you might be ready to downsize. As a result, you could sell your house and use the cash from the sale of your house to purchase a smaller home. Then, you can use the money left over to fund your retirement. It might not be enough to cover your retirement completely, but it could be enough to get you over the hump if you are wondering when you can retire.

Consider The Implications Of Selling Your Home

When you sell your home, there is a chance that you may have to pay taxes on the capital gains stemming from the value of your home. On the other hand, you might be able to shield some of those gains if you use the money to buy another house quickly. You should reach out to a professional who can help you understand the tax implications of selling your home.

 

What’s Ahead For Mortgage Rates This Week – September 12, 2022

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What's Ahead For Mortgage Rates This Week - September 12, 2022Last week’s economic reporting was minimal due to the Labor Day Holiday. Fed Chair Jerome Powell Weekly readings on mortgage rates and jobless claims were also released.

Fed Chair: Rates Expected to Remain Higher

Chair Powell said that interest rates will remain high for a longer than expected time as “history cautions against prematurely loosening [monetary] policy.” The Federal Reserve has a legislative mandate to maintain its target interest rate range at or near 2 percent, During a discussion at the Cato Institute, Chair Powell said that the longer inflation remains above the target rate range the more likely the public will view high inflation as normal.

Chair Powell addressed concerns about political influence on Fed policy. “ I can assure you that we never take into consideration external political considerations.” While President Biden supports the Fed’s policies,  Massachusetts Senator Elizabeth Warren expressed concern that too many rate hikes could raise unemployment. Chairman Powell would not indicate how much the Fed may raise rates at its next monetary policy meeting on September 21 but analysts said the rate hike would likely be 0.75 percent or 0.50 percent at the least.

Mortgage Rates Rise, Jobless Claims Mixed

Freddie Mac reported higher mortgage rates last week as the average rate for 30-year fixed-rate mortgages rose by 23 basis points to 5.89 percent. Rates for 15-year fixed-rate mortgages averaged 5.16 percent and were 18 basis points higher than in the previous week. Rates for 5/1 adjustable rate mortgages averaged 4.64 percent and were 13 basis points higher on average. Discount points averaged 0.70 percent for 30-year fixed-rate mortgages and 0.80 percent for 15-year fixed-rate mortgages. Discount points for 5/1 adjustable rate mortgages averaged 0.40 percent.

New jobless claims fell to 222,000 initial claims filed last week as compared to the previous week’s reading of 228,000 new jobless claims filed.  1.45 million continuing jobless claims were filed last week as compared to the previous week’s 1.44 million ongoing claims filed.

What’s Ahead

This week’s scheduled economic reporting includes readings on month-to-month and annual inflation, retail sales, and consumer sentiment. Weekly readings on mortgage rates and jobless claims will also be released.

Consider A Home Renovation Loan To Navigate A Challenging Housing Market

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Consider A Home Renovation Loan To Navigate A Challenging Housing MarketToday, there are many people who are having a difficult time purchasing a house. Even though interest rates have gone up, sales are still happening quickly. Therefore, it can be difficult for people to qualify for a mortgage, purchase a house, and get to the closing table before the property is sold. One potential way to get around the hot housing market is to consider a home renovation mortgage. How can a home renovation mortgage help you? 

A Renovation Loan Can Help People Buy A Less Desirable Home

If you want to close on a home, you might be interested in a house that is not as desirable as some of the others. That way, you don’t have to worry about a bidding war. A renovation loan can help you purchase a less desirable home. If you are interested in buying a home that requires some repairs, but you do not have a lot of cash available for repairs, a renovation mortgage is a special loan that gives you the money you need to repair the house.

How Does A Renovation Loan Work?

Typically, the amount of money you can borrow for a renovation loan will depend on the value of the home after the renovations are completed. Therefore, the appraisal process is a bit different. This is the only type of mortgage that will give a homeowner credit for the future value of the property. Therefore, you can borrow more than you would be able to with a traditional mortgage. You can use the extra cash to perform repairs, which can increase the value of the home.

How Many Renovation Loans Are There?

Just as there are different types of conventional loans, there are different types of renovation loans as well. Each has a different set of requirements, but all of them require you to use the extra money to repair the home. Furthermore, all the work you do on the house has to add to the value of the property. If you have questions about how you can use the money that comes with a renovation loan, you should reach out to a professional who can help you.