Monthly Archives: March 2014

//March
26 03, 2014

Mortgage 101: What’s In Your Mortgage Payment?

March 26th, 2014|Blog, Home Finances, Mortgage 101|

piti-tax-insurance-escrow1

A mortgage payment is made up of four main components: Principle, Interest, Taxes, and Insurance (PITI).

 

Principle: The original amount of the loan.

Interest: This is the cost charged for borrowing money. The amount of interest for the month is calculated based on the outstanding principal balance. As the term of the mortgage proceeds, the ratio between the principal and interest amounts shifts in each payment. As the principal balance is paid off, the interest payment goes down.

Taxes: Your property taxes are assessed by the county you live in. Property taxes are typically collected as part of your mortgage payment and put the into an escrow account until the bills are due.

Insurance: Payment for homeowner’s insurance to cover damage to your home or property. Like your taxes, homeowners insurance is often paid for as part of the mortgage payment and put into an escrow account. You pay 1/12th of the annual premium each month and your lender then pays your insurance company once each year.

 

There are several factors that determine how much your monthly mortgage payment will be. These factors include how much of a down payment you pay and the mortgage program you choose.

 

If you purchase a home for $250,000 with a 20% down payment, this is what your monthly payments will look like….

Summary
Home Price                             $250,000
20% Down Payment             $50,000
Mortgage Term                      30-year fixed
Interest Rate                            4.5%
Property Taxes                       1.2%/year
Homeowners Insurance:     $800/year

Payment Breakdown
Principle & Interest = $1,013
Property Taxes = $250
Homeowners Insurance […]

20 03, 2014

5 Common Questions About The New Qualified Mortgage Rules

March 20th, 2014|Blog, General, Tips & Advice|

Are you familiar with a Qualified Mortgage (QM) and the new rules surrounding QMs? If you are planning on buying or refinancing a home in 2014, it’s important to understand how the new mortgage rules may impact you. Here are five frequently asked questions about the new Qualified Mortgage rules:
  1. Who Created Them and Why?
    The new mortgage rules were established by the Consumer Financial Protection Bureau (CFPB) and went into effect on January 10th. These guidelines and regulations were designed to provide greater safeguards and information to borrowers, and to prevent buyers from getting into loans they can’t afford.
  1. What Is A Qualified Mortgage? 
    Under new federal mortgage regulations, lenders are required to verify that borrowers have the ability to repay their loan. The ability-to-repay rule says, before issuing a loan, a lender must assess and document a potential home buyer’s income and assets, employment status, credit score and other outstanding debt levels . A Qualified Mortgage is presumed to have met the ability-to-repay requirements, along with a number of other affordability criteria.
  1. What Do The Qualified Mortgage Rules Mean For Borrowers?
    Lenders will have to take a closer look at your debt obligations before you can secure a loan. Therefore, borrowers may need to provide more documentation to prove they have the ability to repay the loan they are requesting. This can mean increased time to process and evaluate certain mortgage applications.
  1. How Much Income Will I Need To Qualify? 
    Under the new mortgage rules, potential homebuyers will need to have a debt-to-income ratio of less than 43% to qualify for a Qualified Mortgage. That means that when you add up mortgage payments,  taxes insurance and other debt like credit cards or car loans, that debt total has to be less than 43% of your annual income.The goal is to make sure borrowers can afford their […]

12 03, 2014

Mortgage 101: Fixed Rate Mortgage Vs. Adjustable Rate Mortgage…Which one is better for you?

March 12th, 2014|Blog, Buying a home, Loan Products, Mortgage 101|

When deciding on the right home mortgage, it helps to understand the difference between the two major mortgage types: fixed rate and adjustable rate. Each has its benefits, but one may be better than the other for your situation.


Fixed Rate Mortgage

With a fixed rate mortgage, the interest rate remains the same for the life of the loan. The interest rate is set when you take out the loan and will not change, regardless of how interest rates change in the marketplace.

Pros:

  • Locks in your best interest rate for the term of the loan
  • Your monthly payment remains the same even if your principal and interest rates change
  • Initial loan payments are applied toward your interest—and less to principal—although that reverses over time.

Cons:

  • Principal and interest payments are usually higher than most adjustable rate mortgages, at least in the initial years
  • To take advantage of an interest rate decrease, you would have to refinance

A good choice for:

  • Those more comfortable with predictable principle and interest payments that do not increase if interest rates rise
  • Those planning to stay in their home for 10 or more years


Adjustable Rate Mortgage (ARM)

The interest rate on an adjustable rate mortgage can go up or down. Initially, many ARMs will start at a lower interest rate than fixed rate mortgages. However, after this introductory period ends, your interest rate unlocks and adjusts periodically based on an outside index. Meaning your monthly payment may increase.

Pros:

  • Offers lower rates at the beginning of the loan, so you’ll have lower payments to start
  • If rates drop, payments may become lower without refinancing
  • While various types of ARMs are available, they adjust either annually or semi-annually; most of these loans come with caps that prevent your monthly payment from increasing significantly.

Cons:

  • If rates increase, your monthly payments […]
5 03, 2014

4 Reasons to Buy a Home Now

March 5th, 2014|Blog, Buying a home, General, Latest News|

buy-a-home If you’ve been on the fence about buying a new home, now is the perfect time to take the plunge and find that dream home you’ve always wanted. Here are a few reasons why you should consider purchasing a home sooner rather than later:


1. Interests rates are rising
Experts predict that mortgages rates will steadily rise in 2014, and continue to rise well into 2015. An increase in interest rates could also mean an increased monthly payment on your mortgage, so it may make sense to buy this year before rates get even higher.


2. Home prices are on an upward swing
Home prices are expected to rise slowly in 2014, and if the economy continues to rebound, prices will rise more steeply after 2014. So this year may be the perfect time to purchase a home. Buyers also have to consider how rising home prices may affect their ability to purchase a home if they wait.  Higher House Prices = a need for a larger Down Payment and Higher Monthly Mortgage Payments


3. New mortgage qualifying rules protect borrowers
New mortgage rules went into effect in the U.S. on January 10, 2014. These rules were created to help ensure that when borrowers are financed for a mortgage, they will be able to pay back the loan. Even though some people argue that it’s harder to get a loan, the new rules make it the most secure time to get a mortgage.


4. Fewer buyers means less competition
Sellers want to sell quickly, but many people are delaying buying until later in the year. This is ideal because there won’t be as many buyers vying for the same house. Sellers may be more willing to negotiate in order to keep your interest and improve their chances of making […]

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