Tag Archive for: closing costs

December 28, 2021
mortgage blog, title insurance, preferred rate

Homeownership is one of the biggest financial commitments that most people will ever make. You’ve probably heard of title insurance, but is it really necessary? If you are applying for a mortgage, your mortgage lender will most likely require title insurance. But even if it’s not required, title insurance offers clear benefits for new homeowners. 

Related: How to fast track your mortgage and get pre-approved for your best mortgage rate

Do I really need title insurance?

When you’re ready to buy a home, you’ll want to protect your investment in every way that you can. And if you have a mortgage, your mortgage lender will most likely require different types of insurance since your home is collateral for your loan. 

This is where title insurance comes in. Title companies verify the legal history of your home and make sure your new home has a clear title free from liens, outstanding debts, and public ownership claims.

During the transfer of ownership, you don’t want to be surprised by legal problems that show up, such as back taxes, ownership disputes, forged titles, or outstanding debt. 

Title insurance is specifically designed to protect both you and your mortgage lender from any disputes over the ownership of your new home. If a dispute does come up, the title company works on your behalf to clear the claims and verify home ownership. If there are fees during the process, the title company would be responsible for paying those fees.

Without title insurance, you’d need to face the battle on your own and pay any fees that could be required.  

What kind of policy is best for me and my home?

There are two primary types of title insurance policies: one policy for the mortgage lender and one policy for the homeowner.

When you apply for a mortgage to purchase your home, the mortgage lender will very likely require title insurance. This protects them from financial complications associated with any title disputes or other ownership complications. If you pay cash for a home or do not have a mortgage, then you will not be obligated to purchase a policy specifically for the mortgage lender. 

The title insurance policy for the homeowner protects you and anyone listed on the title or deed to the home. This policy is usually not mandatory but will protect you from legal and financial disputes. This is even true if the seller presents the warranty deed, confirming the title is clear. Despite this presumed protection, anything can happen.

Related: How to FAST TRACK your mortgage pre-approval

What are my coverage options for title insurance?

After purchasing your home, title insurance can offer protection against common disputes if any issues come up. These are common situations that a new policy covers:

  • Deeds that have been altered or forged 
  • Fraudulent claims 
  • Outstanding tax liens or other debts  
  • Encroachments or property line disputes 
  • Family members who may lay claim to claim the home 

Related: Does every mortgage need an escrow account?

How do I buy title insurance?

Your local mortgage advisor or real estate agent will most likely suggest a title insurance company. Since your local mortgage advisor works with thousands of home loans every year, it’s a wise move to follow their direction. That said, the choice is ultimately yours. Before you sign, you can always talk with your mortgage advisor about recommendations and research title companies.

Before offering you a policy, a title company will perform a title search, which is a process that searches for outstanding debts, loans, or ownership complications. This ensures that the seller has clear ownership of the title and has a right to sell the property. 

Once the title company has completed its research, it will offer a quote based on its findings. However, the title company may decline to offer a policy if the property is considered high risk. 

In the rare instance that title insurance is declined, your mortgage advisor can help you through the process and discuss your options. Your real estate agent is another partner that will be very helpful.

Is title insurance included in closing costs?

Typically, title companies charge 0.5% to 1% of the home’s final sale price, and it’s due at closing. However, this number can vary from state to state. Other risk factors could also influence the cost of the policy, such as the home’s age and the property’s legal history.

Total closing costs run anywhere from 2-5% of the home loan amount and typically include title insurance, appraisal fees, property taxes, loan origination fees, and other items.

If you’d rather not pay your closing costs out of pocket, schedule a time to talk with a local mortgage advisor about possible options

Related: How to roll your closing costs into your mortgage

Taking Action

When you’re ready to buy a home and apply for a mortgage, title insurance will keep you and your home protected. Getting pre-approved for a mortgage is the best first step you can take when you’re shopping for your next home. Connect with a local mortgage advisor to discuss your loan options and save money on your mortgage. We’d love to help.

November 2, 2021
blog young businessman, mortgage blog, mortgage points, preferred rate

Buying mortgage points can lower your mortgage rate. When you buy a home or refinance, you might have the option to buy mortgage points. Buying mortgage points will generally reduce your interest rate by 0.25% (depending on the lender) for each point you purchase. But buying mortgage points isn’t always the best move.

If your top priority as a homebuyer is to lower your interest rate, then buying mortgage points or “discount points” will help you hit your goal. However, paying mortgage points isn’t the best decision for every homebuyer. What’s more, it won’t always help you save money on your mortgage.

The truth is, after discussing the final terms of a mortgage, along with closing costs and down payment options, many clients change their minds about buying mortgage points. Several factors impact a mortgage application, including your credit score, income, employment history, and debt-to-income ratio. Connecting with a local mortgage advisor can help you get the best mortgage based on your homeownership goals.

So then, how does it work when you decide to buy mortgage points?

Related: Mortgage Escrow Accounts–Everything You Need to Know

TOP 5 QUESTIONS ABOUT BUYING MORTGAGE POINTS

1. How does it work if I decide to buy mortgage points?

There are two kinds of mortgage points: rebate points and discount points. When homebuyers refer to paying mortgage points, they’re talking about “discount points.” Whether you “pay discount points” or “buy mortgage points,” both phrases mean the same thing.

Discount points allow the homebuyer to pre-pay interest when the loan closes in exchange for a lower interest rate. By pre-paying mortgage interest, you’ll receive a discount on your loan in the form of a lowered interest rate.

Each mortgage point typically costs 1% of the total loan amount. For example, buying 1 point on a $500k mortgage would be $5,000 (2 points would cost $10,000). The interest rate on your home loan would then be reduced by 0.25% for each discount point you purchase.

Related: Pros and Cons of a Conventional Mortgage

2. A sample scenario for a fixed-rate 30-year mortgage.

Here’s a sample home loan example for a $450,000, 30-year fixed-rate mortgage.

Loan amount: $450,000
Loan term: 30 year fixed-rate
Interest rate: 4.5%
Monthly payment: $2,280

If you decide to buy 2 mortgage points, it would cost $9,000 (2%), and your rate would be reduced 0.50% (0.25% x 2) to 4.0%. Your new payment would be $2,148.

In this scenario, you’d have a monthly payment that is $132 lower. It will take 69 months to recover the cost of your mortgage points (the original $9,000). After 6 years, you’d break even and begin saving money on your mortgage. Over 30 years, this would amount to a savings of $47,520.

3. Is it always a smart move to buy mortgage points?

In our example above, paying mortgage points at closing can save you a lot of money over the life of the loan. However, if you decide to sell or refinance before you break even, it could end up costing you money.

There are a few additional questions worth considering. How how long do you expect to stay in your new home? Do you have enough cash reserves for unexpected repairs? Are there other investment opportunities that might yield a better return?

Remember, you’ll need cash reserves for home repairs, maintenance, homeowner’s insurance, and other unexpected homeowner costs. If paying mortgage points exhausts your savings, it might be smarter to hold your funds.

Compare: How to Qualify for a Home Loan When You’re Self-Employed

4. Should I make a bigger down payment instead of buying points?

In the example above, if you were to put that $9,000 toward your down payment instead of paying mortgage points, you’d have a smaller loan and a lower monthly payment of $2,234.

Loan amount: $441,000
Loan term: 30 year fixed rate
Interest rate: 4.5%
Monthly payment: 2,234

One important detail: If you can put 20% as a down payment, you’ll have access to better loan terms, lower rates, and you won’t have to pay private mortgage insurance. For this reason, using your extra cash to increase your down payment might be a smart move.

By increasing your down payment, you’ll have a stronger loan-to-value (LTV) ratio, yielding better loan terms.

Understanding the trade-offs and using a mortgage calculator can help you determine what’s best for you financially. Connect with a local mortgage advisor to discuss your best options.

5. If I buy mortgage points, will the amount be tax deductible?

Yes, mortgage points are tax-deductible in most scenarios. When you buy mortgage points, you are technically pre-paying interest on your mortgage. For this reason, any amount you pay to buy mortgage points is treated the same as mortgage interest on your tax forms.

The Tax Cuts and Jobs Act of 2017 has put limits on the amount of mortgage interest that can be claimed as a deduction. For this reason, it’s a good idea to check with your accountant or tax advisor to verify the current limits and tax laws in your state.

Summary

Paying mortgage points at closing is a straight path to securing a lower interest rate on your mortgage. If you plan to stay in your home long-term, buying discount points will save you money on mortgage interest. However, paying down mortgage points along with your down payment, title fees, property taxes, and other closing costs can be tough.

Before you decide to exhaust your savings, discuss your options with a local mortgage advisor. An experienced mortgage advisor can help figure out exactly how much you’ll save each month on your mortgage and how long it would take to break even.

Finally, consider making a large down payment if you have plenty of cash resources to put toward a new home. A bigger down payment could generate more favorable loan terms that could end up saving you more money than deciding to buy mortgage points.

Taking Action

If you’re not sure whether buying mortgage points is the best financial decision, we can help guide you through the process. It’s important to understand the final terms of your loan, closing costs, and down payment options before you decide to buy discount points. Connect with a local mortgage advisor to discuss your goals and set yourself up for financial freedom. We’d love to help.

September 1, 2021
blog backyard table with friends

The FHA Streamline Refinance is still one of the best ways to reduce your monthly mortgage payment without the hassle of a traditional refinance. It’s fast and efficient and requires minimal documentation to refinance your mortgage at a lower rate.

One catch: the FHA streamline refinance is only available for homeowners who currently have an FHA home loan. If you’re not sure whether or not your mortgage is an FHA loan, connect with one of our mortgage advisors. We’re happy to help.

FHA loans are still one of the top 5 home loans selected by first-time homebuyers, so there’s a good chance you’re eligible. For homeowners with an existing FHA home loan, the streamline refinance is the fastest way to lock in a lower rate and reduce your monthly mortgage payment.

Top reasons homeowners apply for the FHA streamline refinance:

  • Lower your mortgage rate to market rates
  • Reduce your monthly mortgage payment
  • No income verification required
  • No credit check required
  • No home appraisal required

Quick note! If you have equity in your home and a good credit score, you might want to refinance your FHA loan to a conventional loan, which we blogged about here. Get rid of mortgage insurance premiums and access more with cash out.

What to expect when you apply for an FHA streamline refinance:

The FHA (Federal Housing Administration) home loan is a government-backed home loan popular for first-time homeowners. If mortgage rates have dropped since you first bought your home, it makes sense to refinance.

But what if you haven’t built much equity in your home yet? What if your credit score has dropped? What if your employment situation has changed or become unpredictable?

When you apply for the FHA streamline refinance, you can take advantage of low mortgage rates and lower your mortgage payment without having to provide much documentation. The loans are government-insured, and lenders figure if you’re able to make your current mortgage payment on time, then you’ll be able to make a lower mortgage payment even easier.

Main Benefits to the FHA Streamline Refinance

The top benefit is the ability to lower your interest rate without the extra paperwork of a traditional refinance.

If your mortgage rate is higher than 4.5%, connect with a local mortgage advisor. The FHA streamline is the easiest and fastest refinance loan available.

  • No home appraisal is required. Even if your home value has dropped, you can still qualify to lower your mortgage payment.
  • MIP (mortgage insurance premium) could decrease.
  • There is no credit check. If your credit score has dropped since your last mortgage, it won’t negatively affect your refinance rates or loan terms.
  • Refinance rates are typically lower than industry averages.
  • There is no income verification required. If you’ve recently lost your job or been laid off, you could still qualify for a lower mortgage payment.

How do I qualify for the FHA streamline refinance?

The FHA Streamline offers rate and term home loans common to most refinance programs. You can refinance to a 30-year fixed rate, a 15-year fixed rate, or an adjustable-rate mortgage. Beware that if you restart the clock to a 30-year fixed-rate mortgage, you may end up paying higher MIP over the life of the loan. To apply for a streamline refinance, you must meet the following eligibility requirements and provide noted documentation.

Eligibility requirements:

  1. The current mortgage must be an FHA home loan.
  2. Past 3 months of mortgage payments must be on-time payments.
  3. Must provide a current mortgage statement with at least 6 months’ payment history. (Equal to a 210 day minimum waiting period since the date of your last refinance or purchase.)
  4. The FHA Streamline Refinance needs to benefit the homeowner financially by reducing your interest rate (including insurance) by at least 0.50%.
  5. Need to provide employer information (lender might verify employment, but not income).
  6. Must present current utility bill to verify your primary residence.
  7. Must provide recent bank statements (60 days) to verify available funds for closing costs

* If you don’t meet these requirements, be assured that there are several refinance options available! Talk with a qualified mortgage advisor to discuss your financial goals. We can help you discover the best path to refinance your mortgage and save you money in the long term.

Can I get cash out with an FHA streamline refinance?

No. The FHA streamline is limited in scope and works similar to a rate and term refinance. You’ll be able to refinance to a lower mortgage rate and set a new term for the duration of your loan.

If you’re interested in refinancing with cash out, talk with a local mortgage advisor. There are several refinance options that can save you money and help you access the equity in your home, which we blogged about here.

Will I need to pay MIP (mortgage insurance premium) with an FHA streamline?

In most cases, yes. Your MIP can be canceled for some homeowners, especially if you put more than 10% down when you bought your home. If you want to cancel your MIP, talk with a mortgage advisor. We can help explain the best options that will help you save money on your mortgage.

Are there closing costs for an FHA streamline refinance?

Yes. For a standard FHA streamline, homeowners are expected to pay closing costs when they refinance. The bulk of the closing costs typically aren’t allowed to be rolled into the new loan and usually amount to 2-5% of the loan amount. That said, talk with your lender about options to reduce your closing costs or negotiate fees, which we blogged about here.

Next Steps

The FHA streamline is a smart move if you want to refinance to lower your mortgage payment. But with mortgage rates so low, you might want to consider all your refinance options to find the best fit. Take action and connect with a local mortgage advisor to discuss your financial goals. We’d love to help.

August 26, 2021
blog townhouse 2

Want an affordable mortgage? One strategy is to aim for a property with a low purchase price. Even better, find a low-priced property in a desired location where home values are on the rise. Enter townhouses, condos, and fixer-uppers. Buying a townhouse can be a great first step to becoming a homeowner, with a few payoffs along the way.

Townhouses and condos both offer lower maintenance and community living. On the other hand, a fixer-upper offers a solid opportunity to buy an under-priced house in a great location. But does the idea of a fixer-upper sound like a mountain of stress? Sometimes DIY is better on Netflix.

Townhouses are growing in popularity for a handful of reasons–prime locations, minimal maintenance, lifestyle amenities, and a sense of community in a home that still offers privacy. So if you’re looking to become a homeowner in 2021, buying a townhouse is worth considering. 

RELATED: Are you a first-time homebuyer? Check out these special advantages for first-time homebuyers in 2021

Condo vs. Townhouse vs. Single-Family Detached Home

What’s the difference? And which is best? In broad strokes, all three are individually owned properties and are considered single-family dwellings. As a new homeowner, it comes down to lifestyle and what’s important to you in a home. Do you want a low-maintenance property that’s close to downtown and has shared amenities? Would you rather spend your weekends on a fixer-upper with lots of privacy?

CONDOMINIUM

Condos offer lifestyle amenities similar to apartment living. Homeowners are responsible for the interior and that’s it. The exterior, landscaping, facilities and community spaces are maintained by the HOA (Homeowners Association). Be prepared to share a few walls and the noise that comes with it. The upside: condos are low-maintenance and offer shared access to amenities like fitness gyms, pools, and parks.

TOWNHOUSE

Townhouses might just be the perfect balance between condos and single-family detached homes. When you buy a townhouse, you own the dwelling plus the land (usually a small space in the front and back). As the homeowner, you’re responsible for the interior, exterior, and land maintenance within your property line.

A townhouse offers more square footage in a multi-story dwelling. You’ll have a private entrance and 1-2 shared walls (on either side of your property.)

Townhouses offer more privacy than condos, front and backyard spaces, a private driveway and garage, and community amenities. The HOA is responsible for maintaining shared amenities such as pools, tennis courts, clubhouses and the like.

SINGLE-FAMILY DETACHED HOME

Detached means no shared walls! Single story, multi-story, or a sprawling compound, your home is privately owned right up to the property line defined by the title. As the homeowner, you own both your dwelling and the land. 

You’re free to use your land however you’d like (limited by city ordinances). Build a workshop, raise chickens, install a built-in kitchen, or plant an orchard. What’s more, with a detached home you’re free to tear it down and build your dream home. You own everything within your property lines. Ask your real estate agent about any restrictions set by the city.

One Caveat on HOA fees: Many single-family detached homes are built as part of a planned community that includes a Homeowners Association. You’ll enjoy shared amenities such as pools and tennis courts, but you’ll also have to pay HOA fees. In addition, any home renovations or landscaping updates will need to meet HOA regulations. 

Find Your Neighborhood 

Location is still the biggest determiner of home prices, and buying a townhouse is no exception. Look for a townhome property that fits your lifestyle and your wallet. Consider a few things: Do you want to buy a bigger home after a few years and keep a townhouse as a rental? Are you downsizing now and the townhome is your new forever home? Take note of resale values, school districts, lifestyle and community events in the area.

Find a qualified mortgage expert in your local area

Q&A on Buying a Townhouse (what our clients are asking)

Is buying a townhouse less expensive than a single-family home?

Not always. Townhouses are often viewed as a low-cost alternative for first-time homebuyers. But townhouses can often be in a similar price range as single-family homes, especially in desired locations with rising home values. You’re paying a premium for the area, not necessarily the square footage of your home.

For example, let’s say you are looking to buy a property for under $700k in a premium location with well-rated schools, high safety ratings, and rising home values. You find a townhouse and a single-family home, and both list for $680k. Both properties are in the same school district with similar neighborhoods and access to restaurants, public transportation, parks and the like.

The difference here will most likely be the condition of the home. The $680k detached single-family home might be on the lower end of the housing market for the area. As a result, it will probably be much older and need a fair amount of work and renovation.

By contrast, the $680k townhouse will likely be newer and in better condition, updated with modern appliances and amenities.

As with any new home purchase, don’t forget about closing costs, which we blogged about here.

Do you have to pay HOA fees when you buy a townhouse?

Yes. Homeowners Association (HOA) dues are standard when you buy a townhouse. The fees are paid quarterly or monthly to cover ongoing upgrades and maintenance for all shared amenities. 

Worth noting, not all HOA fees are created equal. When you’re ready to buy a townhouse, take time to compare amenities and costs with other townhouse developments in the area. Are the grounds and facilities well maintained? Do they have the amenities that are important to you, like tennis courts or expansive poolside areas?

You get to decide if the fees are reasonable and whether or not the community spaces offer what you want.

Is it easier to qualify for a mortgage when you buy a townhouse?

The easiest way to qualify for a mortgage is to work with an experienced mortgage advisor to get pre-approved. Buying a townhouse isn’t much different when it comes to home loan options, but there are a few factors to consider. 

Buying a townhouse will require a few more steps required by mortgage lenders to get approved. Often, the home appraisal will include an inspection of the entire grounds to ensure the community spaces are well-maintained and up to code.

A mortgage advisor can keep things moving forward stress-free. Find out how to get pre-approved quickly, which we blogged about here.

Get Pre-Approved For the Best Financing

Getting pre-approved is the best way to secure an affordable mortgage at a low mortgage rate. You’ll know exactly how much you can afford and shop with confidence.

Note that financing a townhouse is different than getting a mortgage for a condo or single-family detached home. Mortgage lenders have specific regulations when it comes to buying a townhouse. Be prepared to provide additional documentation to meet mortgage requirements. 

Getting pre-approved for a mortgage will help ensure you’ve got everything in place before you make an offer.

Talk to a local mortgage advisor about your financial goals. Buying a townhouse in 2021 can put you on the fast track to financial freedom. Getting preapproved for a mortgage is the best next step!

The Final Remix

Buying a townhouse can be a perfect choice when you want a low-maintenance home with modern appliances, good square footage, and a small footprint. Enjoy the benefits of community spaces, shared amenities, and privacy without the maintenance required for a detached single-family home. When you’re ready to get pre-approved for an affordable mortgage, buying a townhouse is the perfect next step.

Take Action

Mortgage pre-approval is a smart move when you’re buying a townhouse. An experienced mortgage advisor can help you get pre-approved and get your financing secured, so you can shop with confidence. Connect with a mortgage advisor to discuss your options and get an affordable mortgage that saves you money. We’d love to help.

June 15, 2022
mortgage blog, refinance, fixed-rate mortgage

With the pandemic still impacting loans and interest rates, now is an ideal time to consider refinancing from an adjustable-rate mortgage to a fixed-rate mortgage. Mortgage rates have been inching upwards since earlier this year. Slowly at first, but the jumps are increasingly hard to ignore. If you have an adjustable-rate mortgage (ARM), now is a good time to refinance to a fixed-rate mortgage.

Historically, mortgage rates rise with inflation. Investors watch the trends with caution, and often mortgage rates rise based solely on the anticipation of inflation. Add the fact that the Fed is also raising the federal funds rate, and it’s hard to ignore the potential long-term rise of mortgage rates.

The truth is, many homeowners can save a lot of money in interest and lower their mortgage payment by refinancing to a 15-year fixed-rate mortgage or a 30-year fixed-rate mortgage.

If you’re concerned about your mortgage payment and want the financial stability of a fixed-rate mortgage, we can help. Connect with a local mortgage advisor to discuss your goals.

Related: Find out how much you can save right now with this mortgage refinance calculator

How the Federal Funds Rate Affects Mortgage Rates

When the Fed decides to increase the federal funds rate, it directly impacts mortgage rates. For those homeowners who currently have an ARM or a HELOC, this means your rates could jump without much warning. The result could be a higher mortgage payment, higher equity loan payments, or more of your payment will go toward interest every month instead of principal.

Adjustable-Rate Mortgages

Adjustable-rate home loans have variable interest rates. This means that the rate will fluctuate, rising or falling based on the fed funds rate. If the fed funds rate goes up, your rate will go up, and your mortgage payment will go up. There are different caps for each loan, limiting how much your mortgage payment can increase. Talk with a local mortgage advisor to determine if refinancing your home loan can save you money and protect your mortgage payment.

HELOC (Home Equity Line of Credit) and Home Equity Loans

Most home equity loans and HELOCs are directly tied to the prime rate (which is typically 2-3 percentage points above the federal funds rate). Therefore, if the federal funds rate goes up, this causes the prime rate to increase, and interest rates for HELOCs and home equity loans will rise in tandem.

Similarly, HELOCs have a flexible rate that is impacted directly by the federal funds rate. This means your HELOC rate can rise at any point, and with a higher rate, you’ll have a higher payment.

As an aside, most home equity loans are fixed-rate loans, which means your payment won’t change. However, since home equity loans typically have a higher interest rate than a fixed-rate mortgage, it could be wise to refinance.

If you’re concerned about your mortgage payment, we can help.

 

How to Compare Offers and Get the Best Fixed-Rate Home Loan

Working with a qualified mortgage advisor can help you compare loan offers and get your best mortgage. What’s more, a mortgage advisor can explain refinancing options that you might not know about and get you a better home loan that can save you money.

We’ll guide you through these five steps toward a better mortgage:

  1.  Discuss your situation and share your homeownership goals.
  2.  We’ll analyze the market and lock in your best mortgage rate.
  3.  Review your new refinancing options together.
  4.  Gather the final documentation for underwriting.
  5.  Verify the value of your home with a home appraisal.

Final Step — Close on your new home loan with a low fixed-rate payment!

Related: Get started now with a qualified mortgage advisor in your local area

Are there closing costs to refinance to a fixed-rate mortgage?

Refinancing to a fixed-rate mortgage will incur closing costs, just like most home loans, which we blogged about here. That said, you can save thousands of dollars over the life of your loan by securing a fixed-rate loan that isn’t subject to the volatility of market rates.

Typically, it takes 5-7 years to recoup non-recurring closing costs after a mortgage refinance. In general, it’s a good move to refinance to a fixed-rate mortgage if adjustable rates are rising and you want the security of a fixed payment for the life of the loan.

Be sure to connect with your local mortgage advisor about your best loan options and lock in a preferred rate.

RELATED: Learn the Truth About No-Closing Cost Loans

Summary

If you have a mortgage with an adjustable rate, a home equity loan, or a home equity line of credit, now is the time to refinance your home loan and secure a fixed-rate mortgage.

Refinancing to a fixed-rate mortgage secures a fixed monthly payment for the life of your loan, no matter how the market shifts. You’ll have a steady mortgage with a predictable monthly payment you can afford, regardless of inflation or future volatility in the market.

Next Steps

If you’re wondering how to afford your ARM mortgage with rising rates, refinancing now can help establish financial stability. When you’re ready to refinance to a fixed-rate mortgage, a local mortgage advisor can help you get approved, lock in the lowest mortgage rate, and secure the right home loan. Connect with a mortgage advisor to discuss your options and make a plan that can help you save money on your mortgage. We’d love to help.

December 21, 2021
mortgage blog, refinance, no appraisal, preferred rate

With the pandemic still impacting loans and interest rates, now is an ideal time to consider refinancing to a 15-year fixed-rate mortgage. Low interest rates are holding, and homeowners can save a substantial amount of interest by refinancing to a 15-year mortgage.

According to economists at the National Association of Realtors, the national average interest rate on a mortgage in 2021 was 3%. However, mortgage rates are slowly climbing above 3.5%, and are predicted to rise throughout 2022.

Now is the time to take advantage of lower interest rates and lock in a low rate with a fixed-rate mortgage. That said, it’s not always an easy decision. So, how should a homeowner decide whether or not to refinance to a 15-year fixed-rate mortgage?

Let’s dig in.

30-year vs. 15-year Fixed-Rate Mortgages: Know the Difference

Refinancing a 30-year mortgage or an adjustable-rate mortgage (ARM) to a 15-year fixed-rate home loan means you will pay less interest over the life of the loan. Depending on your current mortgage balance, this could result in thousands of dollars saved over the life of your loan, not to mention you’ll pay off your house sooner.

What’s more, homeowners who refinance to a 15-year fixed-rate home loan are typically offered a lower interest rate and better loan options. Overall, the savings could be substantial.

Related: Find out how much you can save right now with this mortgage refinance calculator

However, refinancing to a 15-year mortgage isn’t always the best choice for every homeowner. There are things to consider before changing your mortgage payment, such as setting a monthly budget, paying off debt, growing your savings, and pursuing investment opportunities.

A 30-year fixed-rate mortgage can provide a lower mortgage payment with the stability of a fixed payment every month. You’ll pay more interest over the life of the loan, but your monthly payment will be lower.

Whether you decide on a 30-year fixed-rate mortgage or a 15-year fixed-rate mortgage, both home loans provide the stability of fixed monthly payments for the life of the loan.

No surprises, no rate increase, and no change in your mortgage payment.

Consider your monthly budget and long-term financial goals.

Refinancing from a 30-year mortgage to a 15-year mortgage is ideal for homeowners with steady cash flow, substantial savings, and a low debt-to-income ratio.

For homeowners with 17 or more years left in their mortgage payments or for homeowners with an interest rate of 4% or higher, a refinance could help allocate the bulk of your mortgage payment toward the principal balance on your home loan. This means a faster pay off and less interest over the life of your home loan.

Homeowners who have extra room in their budget for a higher mortgage payment and a low debt-to-income ratio are strong candidates. However, homeowners who live on a strict monthly income with little in savings may want to consider other refinancing options to help lower mortgage payments.

Related: Get started now with a qualified mortgage advisor in your local area

Find out how much you can afford.

Mortgage lenders will often offer a lower interest rate for a 15-year mortgage, saving you thousands in the long run. Refinancing to a 15-year home loan can also give you advantages through the home equity you’ve built.

If you’ve paid down your mortgage and built equity since you first purchased your home, your monthly mortgage payments could decrease after refinancing. For example, if your loan-to-value (LTV) ratio is below 80% you’ll have access to better loan options and lower interest rates.

However, if you find that the minimum monthly payment for a 15-year mortgage puts strain on your monthly budget, consider staying with a 30-year mortgage and refinancing with a rate and term refinance which can lower your monthly payment.

Another option is to make bi-monthly payments every two weeks (e.g., 2 additional mortgage payments each year). This approach will slowly reduce the term of your 30-year mortgage while giving homeowners the flexibility to revert to smaller payment schedules when needed. Keep in mind your interest rate may stay at a slightly higher percentage than if you were to refinance. 

Click here to download your free credit report

Are there closing costs to refinance a 15-year mortgage?

Refinancing to a 15-year fixed-rate mortgage will incur closing costs, just like most home loans, which we blogged about here. That said, you can save tens of thousands of dollars over the life of your loan by reducing your mortgage term to 15 years. 

Typically, it takes 5-7 years to recoup non-recurring closing costs after a mortgage refinance. In general, it’s a good move to refinance to a 15-year fixed mortgage if you’re mortgage rate will drop by at least 1% for your new home loan.

Be sure to connect with your local mortgage advisor about your best loan options and lock in a preferred rate.

RELATED: Learn the Truth About No-Closing Cost Loans

What documentation will I need to refinance to a 15-year fixed-rate mortgage?

Applying for a 15-year mortgage is similar to most home loan applications. Mortgage lenders typically require the following documentation to apply for a 15-year fixed-rate mortgage:

  • Identification such as a passport or driver’s license
  • Employment verification
  • Proof of income (e.g., pay stubs, W-2 statements, bonuses, alimony)
  • Recent bank statements
  • Investment account statements
  • Current credit report

If you’re self-employed, ask your mortgage advisor about additional information that might be required.

RELATED: How to refinance a mortgage when you’re self-employed

5 Questions to ask yourself before you refinance to a 15-year mortgage:

  1. Do you have enough money saved for emergencies, home repairs and other financial commitments?
  2. Would you rather pay down your current mortgage by making bi-monthly payments?
  3. Do you have other outstanding debt with a higher interest rate that should be paid off first?
  4. Do you plan on remaining in your current home for at least 7 years to recuperate the closing costs of a new home loan?
  5. Would you be able to increase your mortgage payment and still meet your financial goals?

Summary

To secure the best home loan and the lowest interest rate, homeowners with a steady income and a strong credit history will have the best loan options. Rates are beginning to shift upwards, and now is the perfect time to lock in a low rate and pay off your mortgage in less than 15 years. 

Your mortgage payment might be higher with a reduced term of 15 years, but not always. Take time to review your overall finances, cash flow, investments, and income. Make sure to set a new budget to make room for a new mortgage payment along with home maintenance, repairs, and emergencies.

Next Steps

When you’re ready to apply for a 15-year fixed-rate mortgage, an experienced mortgage advisor can help you get approved, lock in the lowest mortgage rate, and secure the right home loan. Connect with a mortgage advisor to discuss your options and make a plan that can help you save money on your mortgage. We’d love to help.

July 31, 2021
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In response to the FHFA’s recent announcement to eliminate the 0.5% adverse market refinance fee, mortgage lenders are driving mortgage rates lower in a race to compete for business. In the past two weeks, mortgage rates have dropped substantially, falling below 3% for qualified borrowers.  The official change takes effect on August 1, 2021. 

If you’re ready to refinance your mortgage, this is good news. Take action now to refinance your mortgage and access the lowest mortgage rates in years.

These quick steps can help you get started.

How to Fast Track Your Mortgage Application and Refinance Your Mortgage

Low interests rates are only one part of a mortgage refinance. The truth is, shopping for the lowest rate won’t always help you save money when you refinance your mortgage. Several factors directly impact your refinance rate, including your credit score, loan-to-value ratio, and the loan product. Specific lenders might advertise super-low refinance rates, but it may end up costing you more based on your approved mortgage rate and closing costs.

Step 1: Connect with a local mortgage advisor

Talk to a mortgage advisor right away if you’re considering refinancing your home mortgage. An experienced mortgage advisor can start the process quickly and help you lock in the lowest rate possible. What’s more, they’ll uncover hidden opportunities and customize a mortgage refinance to meet your long-term financial goals.

No matter your credit score or employment status, there are refinancing options available for most homeowners.

* If you’re facing foreclosure or nearing the end of forbearance, connect with a mortgage advisor today to discuss your options.

Find a qualified mortgage expert in your local area

Step 2: Estimate how much you can save

Use a free mortgage calculator to find out how much you can save when you refinance your mortgage. Decide which factors are most important to you, then connect with a mortgage advisor to discuss your mortgage goals. For example, maybe you want to refinance to a 15-year mortgage or change from an adjustable-rate mortgage to a fixed-rate mortgage.

Use this mortgage refinance calculator to see how much you can save

Step 3: Download your free credit report

You can download a free copy of your credit report once every 12 months. It’s a good idea to look for any errors in advance. Your credit score has a direct impact on the terms of your loan and your mortgage rate. By reviewing a free copy of your credit report early, you can fix errors ahead of time.

Click here to download your free credit report

Step 4: Gather required documentation for a refinance

Start gathering paperwork you’ll need to verify income and assets, employment information, bank statements, and tax returns. Ask your mortgage advisor for a quick list to help keep things on track. An experienced mortgage advisor will provide a checklist to follow and will make sure the process runs smoothly.

If you’re self-employed, your mortgage advisor can talk with you about additional information that might be required.

Questions about refinancing? We hear you.

What are my options for refinancing a mortgage?

If your current mortgage is more than 6 months old, here are the most common options worth considering:

  • Cash-out Refinance
  • Streamline Refinance
  • Rate and Term Refinance
  • Renovations & Remodels
  • Consolidate a Second Mortgage

Consider investment opportunities or other ways to extend your home equity. For example, refinance your mortgage with cash-out and invest in a second property. Or apply for a renovation loan to increase the value of your primary residence.

Can I refinance my mortgage without getting a home appraisal?

A home appraisal is necessary in many cases, but not always. Depending on your refinancing terms, the mortgage lender may require an appraisal to verify your home’s current market value.

However, you might have the option to bypass a home appraisal. Talk to a mortgage advisor to see if you qualify for a no-appraisal refinance. 

If you have an FHA loan or a VA loan, talk with a local mortgage advisor about the FHA streamline or the VA IRRRL (Interest Rate Reduction Refinance Loan). These are just a few refinance options that don’t require an appraisal.

RELATED: Talk with a local mortgage expert to find out if you qualify for a no-appraisal refinance

Are there closing costs to refinance a mortgage?

Yes. Most borrowers want to refinance a mortgage to save money and lower their monthly mortgage payments. However, if you refinance at a lower mortgage rate but face high closing costs, it might not save you money in the long run. We recently blogged about that here.

Review this sample Loan Estimate to find out which fees are negotiable. 

Closing costs typically include:

  • Origination Fee
  • Appraisal Fee
  • Credit Report Fee
  • Prepaid Homeowner’s Insurance
  • Prepaid Interest
  • Property Taxes
  • Mortgage Insurance

When you refinance a mortgage, many homeowners have the option to pay the closing costs upfront, roll them into the loan, or get a lender credit in exchange for a higher rate. Review the numbers to decide whether or not refinancing your mortgage is truly saving you money. 

RELATED: Learn the Truth About No-Closing Cost Loans

What documentation will I need to refinance my mortgage?

Refinancing a mortgage is similar to starting an application for a home loan, with a few exceptions. Mortgage lenders require varying documentation depending on the type of mortgage refinance.

Common documentation to pull together:

  • Identification such as a passport or driver’s license
  • Employment verification
  • Proof of income (e.g., pay stubs, W-2 statements, bonuses, alimony)
  • Tax returns for the past two years 
  • Recent bank statements
  • Investment account statements

If you’re self-employed, ask your mortgage advisor about additional information that might be required.

RELATED: How to refinance a mortgage when you’re self-employed

Summary

Refinance rates have dropped again and are below 3% for qualified borrowers. That said, refinancing your mortgage might not always be the best financial decision, especially if the fees and closing costs start adding up. Start your application early and review your loan estimate so you can compare potential savings. You can refinance your mortgage for a lower interest rate and a better mortgage payment by discussing your options with a qualified mortgage advisor. 

Next Steps

When you’re ready to refinance a mortgage, an experienced mortgage advisor can help you get the lowest rate and the best terms available. Connect with a mortgage advisor to discuss your options and make a plan that can help you save money on your mortgage. We’d love to help.

December 7, 2021
mortgage blog, refinance, cash out, preferred rate


If you want to pay off debt and start 2022 with a clean slate, refinancing your mortgage with a cash-out refinance can give you financial freedom for the new year.

Homeowners with equity have a lot of choices when it comes to refinancing a mortgage. Applying for a cash-out mortgage is one option, but there a several loan options worth considering if you want to pay off debt.

These quick steps can help you get started.

How to Fast Track Your Refinance and Pay Off Debt

If you’re ready to refinance your mortgage to pay off debt, take action now and access today’s mortgage rates while they are still low.

Low interests rates are only one part of a mortgage refinance. To be honest, several factors directly impact your refinance rate, including your credit score, loan-to-value ratio, and the type of loan you choose.

Step 1: Decide how much debt you want to pay off

Use a free mortgage calculator to find out how much you can save when you refinance your mortgage. Decide which factors are most important to you, then connect with a mortgage advisor to discuss your mortgage goals. For example, maybe you want to take out as much cash as possible, or maybe you want to refinance for a lower mortgage payment. It might be time to refinance from an adjustable-rate mortgage to a fixed-rate mortgage.

Or you could apply for a rate and term refinance to get a lower mortgage payment. A lower mortgage payment can free up monthly income toward debt repayment. Alternatively, applying for a home equity loan or a HELOC is another option.

Use this mortgage refinance calculator to see how much you can save

Step 2: Connect with a local mortgage advisor

Talk to a mortgage advisor right away if you want to refinance your mortgage with cash-out to pay off debt. An experienced mortgage advisor can start the process quickly and help you lock in the lowest rate possible. What’s more, they’ll uncover hidden opportunities and customize a mortgage refinance to meet your immediate and long-term financial goals.

No matter your credit score or employment status, there are refinancing options available for most homeowners.

Ask about a HELOC or Home Equity Loan, both of which allow you to access the equity in your home and use the funds however you’d like. A standard cash-out refinance is a more direct way to access cash, restructure your home loan with a fixed-rate and enjoy a lower mortgage payment.

Find a qualified mortgage expert in your local area

Step 3: Gather required documentation for a cash-out refinance

Start gathering paperwork you’ll need to verify income and assets, employment information, bank statements, and tax returns. Ask your mortgage advisor for a quick list to help keep things on track. An experienced mortgage advisor will provide a checklist to follow and will make sure the process runs smoothly.

If you’re self-employed, your mortgage advisor can talk with you about additional information that might be required.

Step 4: Download your free credit report

If you want to pay off debt, chances are your credit might not be the best right now. Don’t let late payments or high credit balances keep you stuck.

You can download a free copy of your credit report once every 12 months. It’s a good idea to look for any errors in advance and know what you’re facing. Your credit score has a direct impact on the terms of your loan and your mortgage rate. By reviewing a free copy of your credit report early, you can fix errors ahead of time and partner with your mortgage advisor to get the right mortgage.

Click here to download your free credit report

Questions about refinancing? We hear you.

What are my options for refinancing a mortgage to pay off debt?

If your current mortgage is more than 6 months old, here are the most common options worth considering if you want to pay off debt:

Applying for a cash-out mortgage refinance is the fastest way to access cash from the equity in your home.

That said, if you apply for a rate and term refinance, you could substantially lower your mortgage payment, and put those savings directly toward paying off debt. Also, if you decide to consolidate a 1st and 2nd mortgage, you can apply your monthly savings directly to pay off debt.

Applying for a Home Equity Loan or a HELOC is another option that gives you direct access to cash at a low interest rate. With a home equity loan or a HELOC, there are no restrictions on how you use the funds, so you can pay off debt, start a home renovation, or start a new investment.

Can I refinance my mortgage without getting a home appraisal?

With a cash-out refinance to pay off debt, a home appraisal is almost always necessary. Depending on your refinancing terms, the mortgage lender will most likely initiate an appraisal to verify your home’s current market value.

The mortgage lender will want to evaluate risk and verify that your home value meets the 80% loan-to-value ratio. In some cases, you might have the option to bypass a home appraisal. Talk to a mortgage advisor to see if you qualify for a no-appraisal refinance. 

RELATED: Talk with a local mortgage expert to find out if you qualify for a no-appraisal refinance

Are there closing costs to refinance a mortgage to pay off debt?

Yes. Even when you apply for a mortgage refinance to pay off debt, there will be closing costs. However, there are options to roll your closing costs into your new loan, which we recently blogged about here.

Closing costs on a cash-out refinance to pay off debt typically include:

  • Origination Fee
  • Appraisal Fee
  • Credit Report Fee
  • Mortgage Insurance (if applicable)

When you refinance a mortgage to pay off debt, most homeowners have the option to pay the closing costs upfront, roll them into the loan, or get a lender credit in exchange for a higher rate. Review the numbers to decide whether or not refinancing to pay off debt is actually saving you money. 

RELATED: Learn the Truth About No-Closing Cost Loans

What documentation will I need to refinance my mortgage to pay off debt?

Refinancing a mortgage to pay off debt is similar to starting an application for a home loan, with a few exceptions. Mortgage lenders require varying documentation depending on the type of home loan you decide on.

Common documentation to pull together:

  • Identification such as a passport or driver’s license
  • Employment verification
  • Proof of income (e.g., pay stubs, W-2 statements, bonuses, alimony)
  • Tax returns for the past two years 
  • Recent bank statements
  • Investment account statements

If you’re self-employed, ask your mortgage advisor about additional information that might be required.

RELATED: How to refinance a mortgage when you’re self-employed

Next Steps

When you’re ready to refinance your mortgage to pay off debt, an experienced mortgage advisor can help you access cash, lock in the lowest mortgage rate, and secure your best home loan. Connect with a mortgage advisor to discuss your options and make a plan that can help you save money on your mortgage. We’d love to help.