Refinance Tips: 6 Things to Do Before Interest Rates Go Up

By Tim Beyers

Sometimes Scrooge arrives before Santa. In December, the Federal Reserve played miser when it bumped the cost of short-term debt by a quarter point. Consumers may not want to wait for the agency to act. Here are six refinance tips you can take advantage of now if you’re looking to cash in at todays historically low mortgage rates to pay off credit card debt, retire student loans, or fund home improvements

  1. Check your credit score. Also known as your FICO score, this number can range from as low as 300 to as high as 850. To check your score for free, use Mint for your personal finances—the score is updated regularly—or a distinct provider such as Credit Karma. Be sure to look at the factors impacting your score. Are there things you could do to improve? If so, make those changes immediately and document what you’ve done.
  2. Pull a credit report and correct any errors. Credit ratings agencies such as TransUnion, Equifax, and Experian compile events and account history in lengthy reports that includes your FICO score. Thankfully, the Fair Credit Reporting Act guarantees consumers access to these reports, free, at least once annually by visiting this site. Look for negative items listed. Are you being unfairly targeted for a late payment that was forgiven or a credit card that isn’t yours? So long as you can provide paperwork that provides proof of your claim, it’s possible to fix these and other errors and improve your credit score.
  3. Look at your whole financial picture. What can you really afford? Do you know? Our mortgage loan calculator can tell you a lot. Or if your situation is more complicated, consult with a tax accountant or a fee-only financial advisor before deciding how best to use home equity when refinancing.
  4. Check the value of your existing home if you have one. Years of increases the average value of home prices has been a boon for current homeowners. If you’re among this privileged list, it may be worth checking the value of your home. Do more than check proprietary sites. While they can give you a sense of what your home might be worth in ideal conditions, you also want to know how the market is performing. For that, try the “sold homes” search engine at Realtor.com. Put in your zip and then use the filters to find homes that are close matches for your own that have sold recently.
  5. Shop around for rates. Mortgage interest rates can vary widely. Shop around online to get a sense of the range of available deals. Then, take those figures to a trusted agent to see what’s realistic and what isn’t given your financial situation. Just searching for “mortgage rates” on Google will bring you to a number of the most popular aggregators of current rate information.
  6. Get help from an expert. Once you’ve checked your credit, assessed your financial situation, and learned more about current rates and the potential value of your home, it’s time to call up an expert and run the numbers. A good mortgage partner should not only be able to tell you what you can afford, but also the kind of deal you should seek and what it will cost you all-in—no surprises. Avoid commission-only loan officers who get paid to rush you into an expensive deal.

At roughly 4 percent for a 30-year mortgage, today’s rates are a bargain by historical standards. But they may not stay that way for long. Do your research, shop around, and if you’re thinking of making a move, involve an expert who can help you get the best deal.

Tim Beyers is a mortgage analyst for American Financing, a national company employing salary-based mortgage consultants dedicated to helping homeowners make smart mortgage decisions that align with their unique financial goals.

You Are Still Renting? Why?

Being a homeowner does not have to be a long-term aspiration. Among the many benefits of purchasing a home there are tax write-offs homeowners can take that are not available to renters. Homeowners are able to take a mortgage payment interest deduction, along with other deductions depending on their individual situation. These deductions often amount to a significant saving in the cost of owning a home.

home loan_interest rates_buy a home_low interest rates Purchasing a home also allows you to benefit from appreciation in home prices. When renting, only your landlord benefits from appreciation in real estate prices, in addition to receiving your large rent check each month. The argument for buying instead of renting only gets stronger with the low interest rates that are currently available. While interest rates have risen slightly over the past few months, they are still near record lows. Rates are predicted to rise throughout 2017, so now is the time to take advantage of these rates before they begin to increase further. Locking into a low 30-year mortgage rate today could save you hundreds of dollars each month for decades to come. There are also many attractive mortgage programs available for first time buyers. A lack of savings does not mean you are stuck renting. A qualified mortgage lender will be able to offer low down payment mortgage options, or find other mortgage programs that are best suited for your situation.

With all of the benefits associated with home ownership, you owe it to yourself to find out whether or not you are qualified to begin the home buying process. Taking the simple step of speaking to a qualified mortgage lender during this unique time of low mortgage rates, may be the smartest financial situation you can make thus allowing your family to make your monthly home payment towards your own asset instead of increasing your landlord’s wealth.

The Fed Just Increased Rates. Here’s What is Means to You.

Conceptual image - percent growth

Conceptual image – percent growth

The Federal Reserve met last week, raising the benchmark interest rate for the second time following the 2008 financial crisis.  Their decision to raise the target range for the federal funds rate from 1/2 to 3/4 percent did not come as a surprise for the country’s financial experts, with markets predicting a 100% probability of the increase prior to the meeting.

Overall, experts say that the Fed’s rate increase reflects its confidence in the economy. Additional rate increases are also predicted throughout 2017.

But what does this mean for you?

If you are planning on buying a house or refinancing your mortgage, do not let yourself make the mistake of putting the process off until next year. The predicted increases in the benchmark rate throughout the next year mean that mortgage rates will likely continue to rise. This month’s average mortgage rate of 4.3 percent remains near historic lows compared to rates of over 18 percent seen in the 1980s.

Your opportunity to take advantage of these low rates may not exist next year as rates increase. Taking the simple step of speaking to a qualified mortgage lender may save you hundreds of dollars each month as you lock yourself into a mortgage rate much lower than future home buyers will be able to secure.

Rate Volatility: Is This the Last Chance to Refinance?

Thinking about refinancing you mortgage? This may be your last chance to refinance while rates are still in the 3s. Mortgage rates have been volatile over the past month, representing a divergence from the consistent decline in rates over the past few years. Economists are predicting that mortgage rates will move into the 4s in the near future.

 Despite these recent increases, mortgage rates remain historically low. According to Freddie Mac’s weekly Primary Mortgage Market Survey, mortgage rates averaged 8.25% over the past 45 years. So while rates may be increasing, there is no limit to where they could go in the future.

Even if you think you’re not qualified to refinance, allow yourself to find out. Refinancing and locking in a rate while mortgage rates are still low could save your family hundreds of dollars each month though out the course of your mortgage payments. A qualified mortgage lender will be able to inform you about a variety of programs. You might be surprised by much money refinancing while rates are still low will save you and your family for years to come; don’t let yourself regret not finding out.

5 Mortgage Tips for Millenial Homebuyers

millenial

Getting a mortgage is often a daunting task for first time homebuyers. With a multitude of different types of mortgages and lenders to choose from, it can be difficult to know which options best fit your needs. Fortunately, there is an abundance of information available to help homebuyers, including millennials, find the optimal mortgage. Here are five mortgage tips for millennial homebuyers:

1. Find a Lender You Can Trust

It’s always important to find a trustworthy mortgage broker, but it is even more essential if you are new to the home buying process. A good lender will inform you of the different mortgage options available and move the process along as smoothly as possible. Look for a lender who pays their agents a salary rather than by commission so you know they will be working in your best interest.

2. Understand Different Down Payment Options

Not all mortgages require twenty percent down payments. If you do have the money at your disposal to come up a twenty percent down payment, there are various mortgages less than twenty percent down. In the case of VA mortgages, for instance, no down payment is required. Make sure to find a lender who can offers these various programs if you think you may want to pursue this option.

3. Improve Your Credit Score

Your credit score is an important factor in determining your eligibility to be approved for a mortgage. If you are in the earlier stages of planning, make sure to improve your credit score to the best of your ability. Paying outstanding debts and taking care of any disputes are two good ways to go about raising your credit score.

4. Manage Your Student Loan Payments

Many millennials have a significant amount of college debt. If you are part of this large group, you may believe that your student loans will prevent you from ever getting a mortgage and buying your first home. For many, though, this is simply not the case. Lenders use a debt-to-income ratio calculation to determine your eligibility for a loan, and managing your payments and optimizing your debt can improve your DTI ratio and allow you to qualify for a mortgage.

5. Get Pre-Approved

Getting pre-approved for a mortgage is a great first step as you begin to get serious about purchasing a home. This will help you to determine an appropriate price range for your housing search. You don’t want to fall in love with a house only to get denied for the necessary mortgage amount because it is too expensive!

5 Ways to Increase the Value of Your Home

Home Equity

Increasing the value of your home can be beneficial regardless of whether or not you are planning on selling your home in the near future. Besides the obvious advantages if you are planning on selling, increasing your home’s value may allow you to complete a cash-out refinance on your mortgage, enabling you to take advantage of the equity you’ve built and the current low mortgage rates. Here are 5 ways to increase the value of your home:

 

  1. Update Kitchen Appliances

 

Old appliances can make an otherwise desirable house appear outdated. Investing in new appliances that complement the design of the room will provide a great return on their cost and give your kitchen a significantly more modern and cohesive look.

 

  1. Take Care of Deferred Maintenance

 

Having a home with a little deferred maintenance like a leaking faucet or chipping paint can seem like insignificant factors in determining your home’s value, but these minor things can make your home less undesirable and decrease your home’s worth more than you’d think. Hiring a handyman to take care of the little things can go a long way.

 

  1. Make Sure Your Home is Light and Bright

 

Not having enough light in a room can make it seem smaller and more cramped than it really is. Adding nice chandeliers or light fixtures can also improve the overall appearance of a room. Purchasing a few lights for dark rooms and making sure that all of your current lights are in working are a few cheap and simple fixes that will undoubtedly pay off.

 

  1. Clear Away Cluttered

 

Clutter can make a home seem cramped and is often off-putting to potential homebuyers. Removing clutter and making sure that each room in your house is well organized are simple and completely free ways to increase your home’s value.

 

  1. Improve Curb Appeal

 

First impressions are important. Potential buyers could be immediately driven away from an otherwise perfect home by poor curb appeal. Landscaping is a great first step; cleaning up the lawn and planting some flowers and a few trees can completely change your home’s appearance.

5 Tips to Raise Your FICO Score Now

Good vs Bad Credit Sign

Raising your FICO score is an important step in obtaining a mortgage. Mortgage lenders use FICO scores to measure your risk of defaulting, so your score can have a tremendous impact on your ability to secure a mortgage. Your FICO score includes components like payment history, debt burden and credit card use. As a result it is vital to learn how your financial decisions can affect and improve your FICO score. Here are 5 ways to improve your FICO score now:

1. Check Your Credit Report

If you want to raise your FICO score, it is important to first check your credit report so that you’re aware of your present standing. Once you know the starting point of your credit score, you will be able to evaluate how much you will need to improve your score in order to get a mortgage. This should give you a better idea of the steps you will need to take to get your FICO score to where it needs to be.

2. Dispute Errors on Your Credit Report

When reviewing your credit report you may find that the data used to calculate your score contains errors. Use the information on the report to contact the appropriate credit bureaus with information to back up the inaccuracy. Resolving an inaccurate report of a late or missed payment is one of the most straightforward ways to quickly raise your FICO score.

3. Become an Authorized User

If your current credit score makes it difficult for you to obtain your own credit, becoming an authorized user on another person’s account can allow you to build credit and improve your FICO score. The authorized user will be able to make purchases on the account, and the entire account’s history will be factored into the authorized user’s report.

4. Set Up Payment Reminders

Setting up payment reminders only takes a few minutes, but can have a significant impact on your ability to make payments on time. This is a great step to take because making your payments on time is one of the most important factors in determining your FICO score. You don’t want forgetfulness to sabotage your FICO score when you have the funds to make your payment on time.

5. Improve Your Debt Utilization Ratio

Debt utilization is a another component of your FICO score which measures how much money you owe to creditors compared to how much credit is available to you. For example, if you have a $2,000 balance on your credit cards but have a $10,000 credit limit your debt utilization ratio would be 20%. The best way to improve this ratio is to pay off some of your debts, starting with the card that is closest to being maxed out. To improve your FICO score, you will generally want to keep your debt utilization ratio under 30%.

5 Tips for Finding the Best Mortgage Lender

Best Mortgage Lender

Finding a trustworthy and competent mortgage lender is an important and often overlooked step of the home buying or refinancing process. Signing off on a mortgage is one of the most significant financial decisions you can make, so you need to make sure you’ve found a mortgage lender who will assist you through the process. Here are five tips for finding the best mortgage lender:

1. Talk to Your Real Estate Agent

Real estate agents are often a terrific resource for getting suggestions regarding a number of home buying issues. They will know which mortgage lenders are trustworthy and who does the best job of completing the process in a timely fashion better than almost anyone.

2. Narrow Your Search to Salary-Based Mortgage Agents

A commission-based mortgage lender will primarily be motivated by closing your mortgage, whether or not the terms of the mortgage are in your best interest. With salary-based mortgage agents, you won’t have to worry that your mortgage lender is locking you into a huge financial commitment in order to make their own mortgage payment for the month. With so much money on the line, it is tremendously important to make sure that your mortgage lender will be looking out for you instead of their own bank account.

3. Find A Lender Who Offers a Wide Variety of Mortgage Programs

It is important to find a mortgage lender who offers a wide variety of mortgage programs. If your lender only offers a limited range of programs, they may lock you into a suboptimal mortgage when there would be better options available for your situation elsewhere. Check to see if your lender offers programs like FHA loans or VA mortgages before moving forward with their services.

4. Find an Experienced Lender

Be sure to find an experienced lender who knows how to get the job done. You will want to make sure that your lender has a lot of experience with your specific type of loan. This is a great way of increasing the odds that the process of getting a mortgage will be a smooth one.

5. Ask Questions

Before choosing your mortgage lender, ask any potential lender questions. See how they go about the process of closing a loan and find out what additional fees you will have to pay. Asking questions is also a great way to gain insight into the lender’s level of professionalism and communication skills.

Interest Rates Rising

The Federal Reserve decided once again against raising interest rates last week, keeping the federal funds rate between one-quarter and one-half percent. The Fed’s decision to hold rates throughout this year is at odds with the indication they made in December of 2015 that they would raise rates a quarter of a point four times throughout 2016. With two meeting left before the end of the year, most experts are confident that the Fed will decide to raise rate prior to the conclusion of 2016. Many believe that this will be done during the December meeting rather than the November meeting. This is because the November meeting will occur just before the presidential election, and the Fed would not want to make a decision that could affect the election’s outcome.

But what does this mean for you? The availability of “cheap money” for loans, which many Americans have been able to take advantage of in financing major purchases, will most likely become more “expensive” before the end of the year. A seemingly small increase in the interest rate can have a significant effect on your monthly loan payments. This means that if you are thinking about refinancing your mortgage or purchasing a new home, now is the time to do so. As financial experts have noted, historically low mortgage rates currently available will not stay this low forever. Locking in a low rate for a 30-year mortgage before rates increase could save you a substantial amount of money over the long term.

Refinancing: What are your options?

Home Equity

Refinancing your home mortgage loan can be very beneficial for a lot of homeowners. Reasons why you might want to refinance is to either lower your mortgage rates, or, the equity on your home has increased and you need cash:  college, repairs, vacations, debt consolidation, etc. Another reason could be to shorten your loan term, from a 30-year fixed rate mortgage to a 15-year fixed rate mortgage. The refinancing process is generally pretty simple, but knowing your options can get tricky. Before you apply, you should know that refinance options are generally grouped into three categories: rate-and-term, limited cash-out, and cash-out refinances.

Rate-and-term refinance usually changes your mortgage rate, your loan term, or both. The refinance fees are normally paid with cash or it can be paid using the low-closing cost refinance.

Limited cash-out works very similar to the rate-and-term refinance, except the closing cost is added to your loan balance.

Cash-out refinance converts a portion of your equity into cash, that cash is then used to pay on the closing cost.

Knowing your options is crucial in making the best decision for you and your future. If you’re unsure where to begin with your refinancing.  Do your research with regard to mortgage lenders and make sure you look carefully through all fees and calculations.