Mortgage Tips

The What, Why, and How to Refinance Your Home Loan

A few months ago, we had a blog Should I Be Refinancing My Home Mortgage? Today, the answer is clear: yes. The current market is prime for refinancing on home mortgage loans. The mortgage refinancing market hinges on further economic data in the global market. However, a major market mover comes biologically.

In the midst of growing coronavirus (COVID-19) fears all over the globe, it has investors retreating to safer investments. As average mortgage rates continue to unwind (parallel to the 10-year treasury yield) to recent history record lows, it shapes up to be an opportunity for those with a current mortgage through refinancing. So far, according to the Mortgage Bankers Association, refinancing applications are up 165% on the year.

What Is Refinancing?

Refinancing is a refresh that gives you a new mortgage with lower monthly payments, a lower interest rate, a shorter term, or even a different lender. The rates that you locked in on your mortgage — whether last year or ten years ago — are not the same that they are today.

In looking at Freddie Mac’s monthly 30-year-fixed-rate mortgage data over the years, there is a widespread in annual averages just in the past two decades ranging from 7.44% in 1999 to 3.66% in 2012. If you locked in at a market rate in 1999 or other high times, you could be paying more per month than you need to be with the current available rates. Cutting the interest rate of your mortgage is a common reason for refinancing.

Why Should I Refinance?

Individuals refinance for two key reasons: to reduce monthly payments or to reduce the term of the loan. By refinancing a home loan, you use current market rates to your advantage for increased monthly cash flows. A reduced monthly payment or loan term allows for individuals to focus their hard-earned money elsewhere and also bolster their credit score. By slashing your monthly payments on your current home, you can better position yourself for purchases down the road with a reduced payment. Other homeowners also refinance in an effort to consolidate their debt or to utilize their current home equity for other large purchases.

Terms of every mortgage vary and it’s important to closely analyze if it is beneficial to refinance your current mortgage and if it’s for the right reasons. The refinance process doesn’t happen overnight and should be thoroughly evaluated prior to locking in.

How Do I Refinance?

Refinancing is not for everyone. There are still lending standards in place that make refinancing only suitable in certain situations.

Here at Chris Doering Mortgage, our team of mortgage loan experts can help you determine if a refinancing of your current home mortgage is right for you. We’ll walk through your current mortgage with you as well as your longterm goals. Once we learn more about your motivations, we can provide the right curated deal just for you. Get in touch with our outstanding team of mortgage experts to find out how you can cut costs with refinancing.

Be a Better Home Buyer

Buying a home is a great step for you and your family but also a large financial commitment. When purchasing a home, how do you know you’re getting the best deal? How do you know that agent isn’t taking advantage of you and your money? How do you know that this house is a good investment?

All of these thoughts and fears are normal, but the best thing to know is that you’re not alone in this. You have a team of individuals involved in the buying process. Often, deals will include a closing agent, a real estate attorney, a real estate agent, and us, a mortgage loan officer. While it’s a team effort with everyone to make the deal happen, there are key things that you as a home buyer can keep in mind to give you an edge in the deal process as well.

Be Open to Negotiation

You won’t find out if you don’t ask. This rule in life also applies to negotiating on your home price. If you accept the first price that the real estate agent listing the house offers, you probably are taking the high end. Keep in mind that they are motivated to get the house sold, maybe even desperate to get it off the market. Make sure they aren’t too desperate, as that could be a red flag for the house as a whole. However, the housing market has so many homes available at any given moment, you could find another one.

Follow Your Budget

While negotiation is recommended, it’s far more important to stick to the house that fits your budget at every step of the process. The price tag on the home paints a good picture, but not quite the full extent of costs. As you close on a home, there will be additional closing costs that must be factored. When moving in, there will be plenty of costs associated such as hiring movers, new furniture, appliances, and updating cosmetic aspects. Plus, even after moving in, there could be unexpected costs that arise such as a broken washing machine or oven. 

Know Your Programs & Resources

There are plenty of programs and resources available to assist home buyers. Some of the most popular mortgage options include:

There are plenty of other loan types, like jumbo loans, USDA loans, and more to help you land in your dream home. Chris Doering Mortgage can help you locate the right loan from these many options.

Secure Pre-Approval

Before you tour your dream house, you need to show that you have what it takes to purchase said house. This means coming to a mortgage lender, like our team at Chris Doering Mortgage, to work out the details. Our pre-approval process requires a formal credit check, review of financial documents and income, and underwriting the potential loan. With all of this information, you’ll walk away with a good sense of what’s the low, high, and comfortable zone of your house budget.

Coming to an open house prequalified lets the real estate agent know that you’re serious about your shopping and that you are a real option for the house.

We’re Here to Help

It’s important that you feel well-equipped to take on the home buying process, but our team is here to help you every step of the way. Whether you need to be pre-qualified or want to discuss the best loan type for you, get in touch with us to learn more.

Should I Be Refinancing My Home Mortgage?

Whether it was just last year or ten years ago, you agreed to a specific market rate and terms to pay off your home mortgage. Since then, a lot may have changed in your life; your job/position, your car, your cell phone, and more. If these items aren’t stagnant, why should your mortgage be? Refinancing your mortgage loan depends on a variety of factors and has to be done based on current market conditions, but it’s safe to say that right now is a great time to explore refinancing your home loan.

Factors that Affect Your Decision to Refinance

With the Federal Reserve’s two rate cuts this year in July and again in September, interest rates are hard to beat right now. The federal funds rate, which controls costs like mortgages, is now sitting under 2%. According to Freddie Mac, if you got a 30-year fixed-rate mortgage a year ago (November 2018), the average interest rate has dropped by about 1.5% since then. By sticking with such long and pricey terms, the costs will add up significantly over the years and you’ll end up spending more for the same home.

There are other factors beyond interest rates to consider when exploring refinancing on your home loan:

Home’s Value

The equity in your home is important to assess prior to refinancing your loan. In most parts of the United States, the value of homes has risen in recent years. You should be aware of your home’s new value, whether it has risen or dropped. If the value has dropped, do you really want to be re-investing in the property? If you’re refinancing, you want to be absolutely sure that your home is the place you want to live for an extended period of time.

Your Income and Debts

Also commonly known as your debt-to-income ratio, mortgage lenders will want to know that you have a stable job history with a source of good income, a safety net of savings, and minimal debts to cover, like student loans. Before refinancing, make sure that you have great job security with a steady stream of income that allows for optimal payments, no matter the term length.

Your Credit Score

Refinancing means more favorable rates, but in order to get these favorable rates, you have to have an equally favorable credit score to your name. While you may be able to secure a new loan, the interest rates might only be marginally better with a lower credit score.

Refinancing Closing Costs

Before you jump to refinance your loan, it’s important to note that there are numerous additional costs associated along the way during the refinancing process. Often, there are refinancing fees like an application fee, an origination fee, and more associated with the total loan amount. While those may be changed, these additional costs are important to weigh as you explore refinancing options.

We’re Here to Help

With favorable conditions for home buyers right now, you have to assess if refinancing is right for you. Before locking down your refinancing terms, make sure you run a breakeven analysis that accounts for all of these factors mentioned, especially the closing costs, to assure that the new refinancing is to your benefit.

Are you still unsure if a home mortgage refinancing is right for you? Our team of loan originators is here to help you navigate your options and decide what is best for you. Get in touch with our team to find the right refinancing match.

Renting? 4 Reasons Why You Should Buy a Home

We’ve written a lot about the home buying process over the years, but why should you even consider buying a home? Many people today prefer renting or think that owning a home is out of their reach, but that doesn’t have to be the case.

It can be a big commitment when you buy a home, but it comes with so many benefits. We’ve highlighted four reasons why you should buy a home.

1. Tax Benefits

There are many tax benefits that come with home ownership. These breaks help offset some of your costs:

  • The interest and mortgage insurance you pay on your mortgage is tax deductible.
  • If you bought mortgage points, they’re tax deductible in the year that you bought them.
  • Property taxes that are apart of your monthly payment are deductible.
  • The money you make on the sale of your home (up to $250,000 or $500,000 if you’re married and filed jointly) is tax-free if you have owned the home for at least two years and put the money you make towards the purchase of a new house.

2. Appreciation

Homes generally appreciate in value over time, meaning that the longer you own your home the more valuable it becomes. While there are ups and downs in the housing market, owning a home is generally a smart investment.

When buying a home make sure you consider the area, the condition of the home, and how much land it has. Homes in good condition and in good areas hold their value and generally become more valuable over time.

3. Equity

Home equity is the difference between what you owe on your home and what the house is worth on the market. You can gain equity on your home in two ways:

  • The longer you own your home (and pay down your mortgage) the more equity you have (assuming the value of your home doesn’t dramatically decrease over time).
  • The more your home appreciates in value the more equity you have.

Equity takes time to build, but it is worth it. Investing in your home can have major returns down the road, and leaves you with something of greater value than when you started.

4. Savings

Depending on the market you live in, buying a home can lead to major savings when compared to renting. When you factor in the equity you’re generating, the tax breaks that come with home ownership, and the increase in the value of your property, a home is going to save you money in the long run and leave you with something of value that you won’t get if you rent.

The longer you’re planning on staying in an area, the smarter it is to buy a home. This calculator can help you calculate how long you’d have to live in your home before you start saving money compared to renting an apartment.

Let us Know How We Can Help

The home buying process can be both intimidating and overwhelming. Sometimes it can be hard to know where to start. But if you want the freedom, stability, and predictability of living in your own home – we can help you get started. Reach out today.

What You Need to Know About Condo Loans

Condominiums can be a great low cost, low maintenance solution when you are choosing where to live. Unfortunately, receiving financing for a condo can be more challenging than receiving a conventional loan on a traditional home.

What You Need to Qualify

Loan qualifications for a condo loan are often more stringent and there are a few things to consider when applying for a condo loan:

  • You may need a larger down payment to get the best mortgage rate for your condo.
  • The homeowners association for the condo complex may have additional financial qualifications before you can buy a unit in their complex.
  • Lenders look at not only your financial standing, but also the financial standing of the developers. Different loan programs have different requirements for the condo developers.
  • The condominium complex must hold a certain amount of HOA fees in reserve to satisfy most lenders.

Often condo loans are harder to secure because not all the requirements apply to you, the home buyer. If the developers are financially irresponsible or noncompliant, many lenders won’t give out a loan. When looking at condos make sure that you can trust the developers of the complex you are looking to move into.

Warrantable vs. Non-warrantable Condos

Condo loans are either classified as “warrantable” or “non-warrantable”. Non-warrantable condos are considered risky and can be challenging to finance. Often you’ll need to procure a loan from a specialty lender. Condotels, timeshares, and complexes that require buyers to join an ownership club (like a golf club), are most often considered non-warrantable.

Warrantable condo loans are determined to be more stable by Fannie Mae or Freddie Mac, government-sponsored agencies that determine guidelines for buying homes. Here are some typical requirements for a condo to be considered warrantable:

  • No single person or entity owns more than 10% of the development, including the developer.
  • Over half of the units must be occupied by owners.
  • There is less than 25% commercial space set aside in the development.
  • The homeowners association has never been litigated against.

Warrantable condos are much easier to obtain loans for because they are considered stable by lenders. Make sure you take extra time to find warrantable condos when looking for a new home.

Don’t Forget About the Homeowners Association

One thing home buyers often forget about when they look to buy a condo is the added cost of the homeowners’ association fees. These fees are often monthly and should be included when considering what you can afford.

Homeowners association (HOA) fees often provide certain services that offset some of the cost and provide convenience to the homeowner, such as:

  • Lawn Care. This means that you don’t have to mow the lawn or trim the bushes.
  • Pest Control. Many HOAs schedule inspection and treatment from a pest control company to avoid pest infestations.
  • Exterior Maintenance. Roof and siding repairs that may come up are often covered, potentially saving you money on what would be a costly repair.

Combined with a higher down payment, condos can require a lot of upfront work for the home buyer. Make sure that you can afford both the HOA fees and your mortgage before you apply for a mortgage loan for a condo.

We Are Here to Help

You don’t have to figure out how to obtain a condo mortgage loan alone. At Chris Doering Mortgage, we have years of experience in all types of loans and we can help you. Call us or come by the office and we will help you through the entire process.

Mortgage Fraud: Buyer Beware

Did you know that Florida is one of the worst states for mortgage fraud? In fact, the mortgage fraud levels in Florida are three times higher than the national average!

What is Mortgage Fraud?

The FBI says this about mortgage fraud: “It is crime characterized by some type of material misstatement, misrepresentation, or omission in relation to a mortgage loan which is then relied upon by a lender.” Any lie meant to deceive the bank into providing a mortgage loan is considered mortgage fraud.

Victims of this crime can be devastated financially. Those who are already down on their luck financially are most commonly targeted for mortgage fraud. Knowing the common schemes perpetrated by these criminals can save you money and give you peace of mind.

Lenders and buyers alike can commit mortgage fraud. Beware, and know that mortgage fraud is considered a very serious crime. If you are caught committing fraud, you can be charged with a felony.

Two Types of Mortgage Fraud

Generally, there are two motivations for mortgage fraud, for profit or for housing:

  1. For profit – This type of fraud is generally committed by lenders and industry insiders. They take advantage of their knowledge of the mortgage industry and manipulate it for monetary gain. The FBI prioritizes this type of fraud.
  2. For housing – Typically committed by the borrower in an effort to acquire a loan so that they can buy a house.

Common Mortgage Schemes

Knowing the types of schemes out there can protect you from falling prey to predators, or making a mistake yourself.

Borrower Fraud

  • Inaccurate income statements – If you are self-employed and fail to accurately report your income in order to receive a loan, you are committing mortgage fraud. The lender takes into account your income when giving you a loan. By inflating your income to receive a larger loan, you are defrauding the lender and increasing the chances that you default.
  • “Under the table” down-payments – Sometimes a seller, desperate to sell their home, gives the home-buyer money for the down-payment that the buyer can’t afford on their own. The larger down-payment can sway the lender to provide a loan to the buyer who cannot truly afford the home.
  • Giving the down-payment as a gift – Legally you are allowed to take money given to you as a gift and using it toward a down-payment for a home. However, if you pay back that “gift” under the table once the home is purchased, you are committing fraud.
  • Not really occupying the home – If you own a home, but do not live in it, chances are the bank will charge you a higher interest rate on the loan. Claiming you live in a home to receive a lower interest rate, when you live somewhere else, is committing fraud.

Committing borrower fraud to buy a home is not worth the pain you could be causing yourself. Even if the authorities do not catch you, you are setting yourself up for potential financial disaster.

Buying a home you cannot truly afford puts you at significant financial risk. Rather than rush to get a mortgage, take your time, save, and enjoy the benefits of getting a mortgage you can truly afford.

Lender Fraud

Lender fraud can make victims of either homeowners or lenders. There are many variations of these schemes, so it is important to be wary. Take caution if someone offers you something that seems too good to be true – it probably is.

  • Foreclosure “rescue” – If you are at risk of foreclosure and someone offers you a way out, beware! The defrauder will offer to save your home by taking the deed to the home and transferring it to an investor. They then have the homeowner pay them rent while they “re-establish their credit.” Unfortunately, the money you pay this investor is not going toward the mortgage and the house usually forecloses within a year.
  • Loan modification – This scheme is very similar to foreclosure rescue. If you are at risk of foreclosure, someone will come to you offering to negotiate a more favorable mortgage loan on your behalf. They charge you large fees upfront, and then do not act, or negotiate bad terms, allowing the bank to foreclose on your home.
  • Air loans – This type of fraud defrauds the lender more than a homeowner. Someone creates a fake borrower who requests a mortgage loan with no collateral. They fabricate employers, credit agencies, appraisers, and more to convince the lender that this is a real person. The lender gives a loan to this fake borrower and the defrauder takes the money.

Work with a Mortgage Company You Can Trust

When it comes to getting a home, it can be the most significant and rewarding purchase in your life. Working with someone you trust provides peace of mind. Our mortgage professionals are experienced and know how to guide you through the home buying process. Don’t allow yourself to fall victim of predators looking to defraud you. Work with a mortgage company you can trust!