Navy Fellas Realty Group

Real Estate, Residential sales and purchase

How to Run a Quick Financial Health Check Before You Apply for a Mortgage

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How to Run a Quick Financial Health Check Before You Apply for a MortgageAre you planning on using a mortgage to help cover the cost of a new home? If so, you will want to prepare your finances and figure out how you will manage all those wallet-draining monthly expenses. Let’s take a look at how to run a quick financial health check to ensure you are ready to apply for a mortgage.

Update (Or Start) Your Monthly Budget

First, it is essential to get the basics out of the way. If you haven’t already, it’s time to start a monthly budget to keep track of your income and expenses. Once you have a mortgage, it will be important to prioritize your monthly payments so that you don’t end up falling behind.

Starting a budget is easy and can be done with mobile apps, software, a spreadsheet or a pen and paper. List all sources of income so that you know exactly how much cash you are working with. Then, list out every one of your expenses. It can be tough to remember them all, so consider using debit and credit card statements from the past few months as a reminder.

Get A Copy Of Your Credit Report

Next, you will want to get a copy of your credit report so you can see what potential mortgage lenders will see when assessing your financial history. This is a free service that you can request once per year, so be sure to take advantage. Note that you will want to use government-approved websites for requesting your credit report. Be wary of scams.

Do You Have A Down Payment?

A down payment is not required for every home purchase, but having one saved up can make the buying process easier. The amount you will want to have saved up will depend on the cost of your home, whether you plan on carrying private mortgage insurance and a variety of other factors. If possible, try to save up an amount close to (or more than) twenty percent of the home’s purchase price.

Ready? Chat With A Professional

Now that you have run a quick financial health check, it is time to meet with a mortgage professional to discuss your options. 

Owning vs Renting: Why High Rents Are Worse Than a Mortgage over the Long Term

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Owning vs Renting: Why High Rents Are Worse Than a Mortgage over the Long TermIf you’re at the stage in life where home ownership is nearly within your reach, you’re probably wondering whether you should start looking for a home or whether you should just keep renting. Renting is easier, people say, and it gives you more mobility. But over the long term, all that rent money can really add up – and it eventually reaches a point where buying a home is a better deal.

So why is paying a high rent a worse option than buying a house and getting a mortgage? Here’s what you need to know.

Renting Doesn’t Generate Equity

One of the single biggest sources of wealth in the United States is home equity – as you pay down your mortgage, you invest more and more of your money into your property, and it appreciates in value. When you eventually sell that home, you make a profit. The monthly payment is something you’d have to make anyway, whether you rent or own – but when you rent, your monthly rent money lines someone else’s pockets, while when you own, paying down your mortgage actually creates wealth for you.

Renting Doesn’t Give You Access To Homeowner Tax Credits And Deductions

There are all sorts of tax benefits available to homeowners that renters simply can’t access. As a homeowner, you can deduct your mortgage interest from your taxes owing, reducing your taxable income – but there’s no such deduction for renters. You can also deduct property taxes and some closing costs when you buy a home – there are no corresponding tax benefits for renters.

There are also several tax credits available to homeowners that aren’t available to renters. Things like renovations or simply buying a home for the first time can give you tax benefits that renters can’t access.

If You Can Muster Up A Down Payment, Owning Is Cheaper In The Long Run

One of the biggest hurdles keeping young people out of the real estate market is the down payment. It’s not easy, but if you can save up enough money for a down payment, you’re actually better off buying a home than continuing to rent.

According to Trulia, the median home price in metro Houston in Texas is just under $163,000, while the median monthly rent for an apartment is $1,550. That means renting would cost $18,600 per year, while buying a home (assuming a 20% down payment and 30-year term) would cost $9,384 per year in mortgage payments. In other words, owning is about half as expensive as renting in the long run.

Renting may be a good short-term solution, but over the long haul, owning is almost always better. Call a local mortgage professional to learn more.

Understanding ‘PITI’ and What Goes in to Your Monthly Payments

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Understanding 'PITI' and What Goes in to Your Monthly PaymentsAsk any friend or family member that owns a home and they will share that it takes a bit of management to keep all the expenses under control. Let’s explore the concept of PITI and why it is vital to have a clear picture of how much your home is costing you each month.

Just What Is PITI, Anyway?

PITI is an acronym that stands for “principal, interest, taxes and insurance,” which are the four main components that make up your housing costs.

Principal – this is the amount that you are paying against the total amount that you borrowed when you purchased the home. For example, if you used a mortgage to cover $200,000 of the home’s purchase price, the remaining balance of that $200,000 is the principal. A part of your monthly mortgage payment goes to paying down the principal.

Interest – this is the extra cost that the lender charges for the service of lending you the principal amount. For most mortgages, you will see this expressed as an “interest rate” which is a small percent charged on the loan. A portion of your monthly mortgage payment goes to paying down the interest owed.

Taxes – tax costs are not included in your monthly mortgage payment, but will be added by your lender as part of your yearly expenses when calculating your debt-to-income ratio (see below). Property taxes and other assessments will need to be paid each year.

Insurance – this is the cost of insuring your mortgage and your home. Like taxes, your mortgage lender will typically include some insurance costs in your DTI ratio calculation.

How Lenders Use PITI

Many mortgage lenders use some form of PITI calculation when determining your debt-to-income ratio. This ratio helps the lender understand your ability to manage your monthly mortgage payments without being at risk of missing one. The lower the ratio, the more likely you can afford all your monthly expenses.

Don’t Forget Your Other Monthly Expenses

Finally, don’t forget that along with PITI you will have a variety of other monthly expenses that need to be budgeted for. Leave some space for utilities, repairs and other renovations that need to be made throughout the year.

Once you have the full picture of what is coming in and going out each month, managing your expenses is easy. When you are ready to discuss or apply for a mortgage, get in touch with us. Our friendly team of mortgage professionals is happy to help.

Taking Out a Mortgage for the First Time? Learn Why a Condo Might Be a Great First Home

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Taking Out a Mortgage for the First Time? Learn Why a Condo Might Be a Great First HomeAre you starting to tire of paying your monthly rent to someone and never building any equity? Renting forever can be a significant pain, especially as you’re contributing to someone else’s financial well-being. The good news is that there are affordable real estate options out there for those investing in their first home. Below we will share a few excellent reasons why an apartment or condo might be the best choice for a first-time home buyer.

A Manageable Monthly Payment

In most markets across the country, condos and apartments are available at a significantly lower cost than a full-sized house. Buying a less-expensive home means that your monthly mortgage payments will, in turn, be lower. If you are single or a young professional trying to start a family, that extra money can be a massive boost to your monthly budget.

Note that while your monthly mortgage payment may be lower, you are still responsible for other maintenance and upkeep fees. The most common is known as a homeowners’ association fee, to which all condo owners in the same development contribute. These funds are used to upkeep the building or property as well as things like landscaping, a pool or gym, and other amenities.

A Smaller Down Payment

In the same vein, buying a less-expensive home also means that you can put a smaller down payment on it when you close the sale. In many cases you are required to place a certain percentage – typically 20 percent – down to avoid having to purchase private mortgage insurance. Having to commit less in your down payment leaves more money in the bank for other purposes.

An Excellent Future Investment Property

Don’t forget that when you are ready to upgrade and move into a larger house, you can keep a condo as a rental or investment property. Once your mortgage is paid off, you are only responsible for the monthly maintenance fees and taxes. So if you can rent the condo out to a tenant, you will have an excellent source of cash flow that can help to pay for your new home or fund other activities.

The above are just a few of the many reasons why a condo can be a great starter home for first-time buyers. To learn more about your mortgage options, contact us today. We are happy to help.

How Interest-Only Mortgages Work and Why They’re A Good Solution for Some Buyers

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Mortgage 101: How Interest-Only Mortgages Work and Why They're A Good Solution for Some BuyersWhether you’re a first-time homebuyer or an experienced real estate investor, if you are planning to borrow funds to buy a home you will want to choose the right mortgage product. In today’s blog post we’ll explore how interest-only mortgages work and why they’re the perfect choice for some homebuyers.

How Interest-Only Mortgages Differ From Conventional Ones

As the name suggests, interest-only mortgages are loans where you are only required to pay off the interest portion of the loan each month for some specific term. The length of these loans can be up to ten years, although five or seven is the most common. Once this period is over, you will have some options. Some choose to refinance their mortgage into a new term; others will make a lump-sum payment to pay off the balance. The most important item of note is that during the interest-only period, no principal is paid off unless you pay a bit extra.

The Pros And Cons Of Interest-Only Mortgages

Interest-only mortgages are a popular choice because of their many upsides. Your monthly payments are almost certainly going to be far lower during the interest-only period. This is because you’re not responsible for paying down the principal of the loan. A lower monthly payment frees up money that you can use for other purposes, such as investing. Also, your entire monthly payment during the interest-only period should be tax deductible, which may contribute to a refund each year.

Note that there are some potential downsides to interest-only mortgages as well. For example, if your mortgage interest rate is adjustable, you can end up paying more in interest than if you had locked in. You also need to stay disciplined financially. Once the interest-only period ends, your monthly payment may increase significantly to cover both interest and principal.

Who Should Consider An Interest-Only Mortgage?

Interest-only mortgages are a good fit for those individuals or families where you are confident that your income is going to grow significantly in five or ten years. Alternatively, if your income is somewhat sporadic and you want the option of paying lower payments in some months and more substantial payments in others. The key point is that these mortgages offer flexibility that other mortgage products do not.

As you can see, interest-only mortgages are an excellent choice in certain circumstances. To learn more about how an interest-only mortgage might be right for you, contact our professional mortgage team today. We are happy to share our experience to find mortgage financing that perfectly suits your needs.

3 Reasons to Hit the Accelerator on Your Mortgage Payments – If You Can Afford It

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3 Reasons to Hit the Accelerator on Your Mortgage Payments If You Can Afford ItDoes the thought of repaying your mortgage for the next twenty-plus years leave you feeling a little down? Whether you’ve had your mortgage for weeks or years, accelerating your payments is an excellent option that can help get your mortgage fully paid off in a shorter time frame. Let’s explore three great reasons to accelerate your payments so that your mortgage debt is paid down faster.

You’ll Be Debt-Free That Much Faster

It may seem obvious, but it’s worth stating that you’ll be debt-free that much quicker if you accelerate your repayment schedule. Every extra payment you make against your mortgage debt builds the amount of equity you own in your home. So not only are you becoming more debt-free with each payment, but you’re also building your net worth. And while it’s true that you might only shave a year or two off of your 25-year mortgage period, being debt-free faster is still worth the effort.

You’ll Pay Less Interest

With most mortgages, any extra payments that you make will go straight towards your ‘principal’ balance. Getting the principal paid down faster means that you’ll end up paying less in interest than if you hadn’t. If you consider that every year you shave off of a 20-year amortization period is a full year of interest that you won’t have to pay, it adds up. Note that if you have an existing mortgage agreement, you’ll need to check the terms to determine the rules around extra principal payments.

You’ll Have More Financial Freedom

Finally, the faster you get your mortgage paid off, the more financial freedom you’ll have. The equity and credit you’ve built over time will also provide you with some options. You can invest in buying an investment property, or in taking out a line of credit to renovate and upgrade your current home. If the numbers make sense, you can also borrow against your home equity to invest in the financial markets. This will diversify your investment portfolio and expand your net worth.

As you can see, it’s well worth the financial investment to accelerate your mortgage repayment. If you can afford it and it won’t significantly lower your quality of life. If you have questions about a mortgage new or existing, contact our team of mortgage professionals. We’re happy to help.

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.

A Quick and Easy Guide to Hiring the Best Contractor for Your Pre-sale Home Renovations

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A Quick and Easy Guide to Hiring the Best Contractor for Your Pre-sale Home RenosIf you’re planning to complete some renovations on your home before putting it on the market, you may be unsure of the best way to go about finding the right contractor for the job. While there are probably many contractors available who can do your renovations right, here’s how you can get to the bottom of who will work the best for you.

Make A Few Phone Calls

Once you’ve done some research and determined a short list of prospective contractors, you’ll want to call each contractor to determine that they can complete your project in good time and are the right candidate for the work required. If they’re not available or are cagey about your question, this can be an easy way to whittle down the list.

Arrange A Meeting In Person

While a phone interview should provide you with some good insights right off the bat, you’ll also want to meet your potential contractors face to face before making any final decisions. If you get along well with the contractor and they are able to answer the questions you ask with confidence, it’s a good sign that they may be the right pick for your project.

Check In On The References

Once you’ve decided between a few candidates, make sure you contact their former clients to determine how happy they were with the work and the contractor. Since you may have a date in mind for when you want to put your home on the market, it will be important to know if the job was completed in good time, as well as if any final issues were left hanging in the air unfinished.

Consider The Estimated Costs

Last but not least, you’ll want to have each contractor break down the project and provide a projected cost for labor and materials. You should be able to get a good sense of exactly what it’s going to cost and which bid is the most realistic. While it may be tempting to go for the lowest bid since you’ll probably be moving soon, you’ll want to strongly consider which contractor and which price will turn out the best in the end.

It can seem complicated to hire a contractor for your home renovations, but by conducting simple interviews and checking references you should be able to determine who the best person for the job is. If you’re curious about renovations and how they can impact the sales price of your home, you may want to contact your local real estate professional for more insights.

Making Sure You Are Ready To Take On A Mortgage

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Making Sure You Are Ready To Take On A MortgageThere is so much to know when it comes to homeownership that even wading into all of the information can seem overwhelming, but if there’s one thing you need when the time comes to purchasing a home, it’s to be prepared. Here are a few ways that you can ensure you’re ready for what a mortgage entails so that buying your dream home will be a positive experience you won’t regret.

Consider All Of Your Options

Instead of accepting the mortgage that your bank is offering you, it’s very important to do some research and determine what some of the best options out there are for you. While it’s entirely possible that the option pushed forward by your bank will work out, in the days of so much information online it’s silly to go into your biggest purchase blindfolded. Take some time out and read about the products available so that, when the time comes, you can make an educated decision.

Know Your Credit History

Lenders will most definitely be digging through your finances and credit history for anything that might make them leery of your financial state, but you’ll want to be aware of your own standing so that you can be prepared for what this might entail. By getting your credit report and score before going through the process of acquiring a mortgage, you can fix any errors that might be on your credit report so that you’ll be prepared for the result when the time comes for pre-approval.

Plan For The Future Possibilities

If the mortgage amount you are planning on paying seems feasible on a month-to-month basis, it’s certainly a good place to start, but if you not on a fixed rate mortgage, you will need to consider the ever-fluctuating state of interest rates, and you need to prepare for this reality at the same time. It’s important to base the amount you’ll be spending each month off of the income and expenditures that you’ve worked out in a budget, but you’ll want to add in some wiggle room so that a jump in the rates won’t sink your dream of home ownership.

There are many things to be aware of when starting the process of purchasing a home, but delving into your credit history and doing the necessary background research can make for a smoother experience. If you’re looking for advice on purchasing a home, contact your local mortgage professional for more information.

3 Reasons to Avoid Giving Wrong Information on Your Mortgage Application

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3 Reasons to Avoid Giving Wrong Information on Your Mortgage ApplicationA mortgage application is typically several pages in length, and it requires you to provide a considerable amount of information about your personal, professional and financial life. Some mortgage applicants may not have access to all of the information when completing the application, and others may simply skim over the form and provide incomplete answers. These are only a few of the reasons why information on the mortgage application may not be accurate, but there are several key reasons why applicants should avoid giving inaccurate information.

Loan Approval is Based on It

The initial loan application will usualy serve as a basis for the pre-qualification of the mortgage request. The applicant may make a decision to move forward with an offer to purchase a home based on this pre-qualification, but the pre-qualification is based on the accuracy of the information that is initially provided to the lender in the loan application. If the information is incorrect then an applicant may not be able to qualify for the loan and the deal could fall through. 

Information Will Be Verified

The majority of the information that is provided by the applicant in the loan application will be verified at various points throughout the loan process. For example, a credit report may be pulled very early on in the loan process, and it may be used to document the accuracy of the debts and monthly payments that the applicant wrote on the loan application. Tax returns, pay stubs and other related documentation may also be required. Essentially, the lender will eventually have access the accurate data, so there is little benefit to provide inaccurate information up-front on the loan application.

It Is Against the Law

A final reason why it is not advisable to provide inaccurate information on the application is because this is illegal. There is a disclaimer on the standard mortgage application that goes into detail about the law regarding providing false information on a loan application. There are also disclosures that are signed before and during closing that relate to this.

Completing a loan application is among the first steps mortgage applicants take when applying for a loan, and it is easy to overlook the importance of providing accurate and detailed information at this stage in the process. It is best to take time complete the loan application as thoroughly and accurately as possible since it is a legal requirement and because of many other negative consequences. Those who have questions about how a loan application works or who would like to begin the loan application process can reach out to their trusted mortgage professional for assistance.