Adventures in Homeownership

6 Benefits from a Cash-Out Refi

Young Couple Rennovating Property Together

Young Couple Rennovating Property TogetherIf you’re a homeowner with considerable equity in your home, you might want to consider a cash-out refinancing plan to finance home projects or eliminate high interest debt. In a nutshell, this arrangement allows you to initiate a new mortgage with a larger principle than your existing one – then, you obtain cash on the balance between the two amounts. Used responsibly, there are several advantages to a cash-out mortgage, including these top six benefits.

  1. You may be able to obtain a better interest rate. As compared to other types of property-based loans, a cash-out refinancing usually offers lower interest rates. Home equity, home improvement and business startup loans are typically a few fractions of a percentage higher. A lower interest rate means reduced monthly mortgage payments.
  2. You can improve your on-hand cash flow. You can apply funds from cash-out refinancing to balances due on high-interest debts or credit cards accounts. Eliminating these debts puts you in a better cash liquidity position for unexpected costs or emergencies. You’ll still carry the debt through the refinancing, but you’ll only be making one payment per month on a loan carrying a much lower interest rate.
  3. You’ll get the opportunity to improve your credit score. When you pay off or pay down balances on revolving debt or credit cards, you improve your credit rating. Credit cards that you’ve maxed out have a severe negative impact on your score, as are those where you’re only paying against interest instead of the balance.
  4. There are tax advantages of cash-out refinancing. You’ll take advantage of a couple of tax benefits with a cash-out refinancing. First, the interest you pay is tax deductible; the interest you pay on other types of debt or credit cards is not. Second, some of the closing costs you’ll incur through the refinancing process are also not subject to tax liability.
  5. Fees for refinancing can be minimal under certain circumstances. There are costs related to refinancing your mortgage, including application fees, getting your credit rating, document review expenses, and title insurance and search. However, if you have high equity in your home and a great credit rating, these costs may be reduced. In addition, if you stick with the same lender that issued your original mortgage, some of these fees may not be necessary the second time around.
  6. Cash-out refinancing can help you boost your home’s fair market value. Many homeowners use the proceeds from their cash-out refinancing to fund home improvement projects. These renovations almost always cause the fair market value of the property to increase, whether the projects are interior, exterior or add-ons to the existing square footage.

While homeowners must use caution when arranging a cash-out refinancing plan, the advantages can be significant under appropriate circumstances. If you’d like to know more about whether a cash-out refinance is right for you and qualification requirements, consult with a refinancing professional for details.

*Disclaimer: Paramount Equity Mortgage is not a tax advising company. If you have any questions, please reach out to your CPA for tax advice or other tax related questions.

 

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Fall Home Maintenance Tips

Rain Gutter full of leaves

Rain Gutter full of leaves

7 TIPS TO GET YOUR HOME READY FOR FALL

The fall season is a perfect time to get your home ready before the cold winter months arrive. By taking precautionary steps, you can prevent serious home damages and expensive home repairs from occurring. Our team compiled a list of seven important home maintenance tips you should do during the fall to get home ready for winter.

  1. Get your heater/furnace serviced- Autumn is a great time to have a service technician come out and check to ensure your furnace is working properly. In the winter time, service technicians are more likely to be booked up with service calls, which can cause delays.
  2. Get chimney checked for blockages- Fireplaces are used frequently in the cold winter months. It’s a good idea to make sure your chimney is checked for any blockages as it can result in falling debris or a smoky smell in your home when the fire burns.
  3. Remove window A/C units- We suggest removing your A/C window units during the fall because leaves, dirt and other particles can get inside the unit and potentially can potentially damage the unit.
  4. Clean gutters and downspouts- It’s a good idea to get your gutters and downspouts cleaned because the clogging of leaves and other debris can lead to falling gutters which can cause flooding and foundation issues to your property.
  5. Trim trees and bushes- Trimming trees and bushes around your home in the fall can prevent loose branches and limbs from falling onto your property during winter storms.
  6. Get your roof inspected- It’s important to get your roof inspected for any leaks or loose shingles before winter strikes. Roofers will also charge more for services during peak season (winter months).
  7. Seal any cracks around windows and doors- Sealing cracks around your windows and doors before the cold winter comes, can prevent bugs and rodents from coming inside your home. When its cold outside, these pests are looking for warmth and will try to get inside your warm home.

Once you get these preventative maintenance steps completed, you can be assured your home is prepared for the upcoming colder months. Taking these preventative steps can also save you time and lots of money in repair costs. The cold weather is coming, cozy up and relax knowing you fully prepared your home for the colder months.

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How HARP Can Help You

house near the woods

 

house near the woodsHARP, which stands for the Home Affordable Refinance Program, was created to help struggling homeowners refinance their mortgage. This government program is designed to assist homeowners, who owe more money than what their home is worth, to have the opportunity to refinance their mortgage and lower their monthly payment. Interest rates in today’s market are 30% lower than rates in 2008, which can mean significant monthly savings! Find out if you meet the HARP eligibility requirements below:

Eligibility Requirements

-Fannie Mae or Freddie Mac must own or back your mortgage loan

-The value of your home is less than your current mortgage or your LTV ratio is 80% or higher

-Your home is your primary residence, second home or investment property

-Your mortgage was created on or before May 31, 2009

-You are current on your mortgage payments

 (No more than one late payment in the last 12 months, no 30+ day late payments in the last 6 months)

*Note: There is not a minimum credit score required for this program and closing costs can be bundled into your new loan.

Over 3 million Americans have taken advantage of this program. If you were turned down in the past, you may be eligible now. Several changes have been made since HARP was originally introduced. The guidelines and eligibility requirements are much simpler now. To learn more about the HARP program, give one of our mortgage specialists a call at (877) 788-4564 or receive a free quote here >> https://www.paramountequity.com/loan-options

  • “Freddie Mac and Fannie Mar have adopted changes to the Affordable Refinance Program (HARP) and you make be eligible to take advantage of these changes.”
  • “If your mortgage is owned or guaranteed by either Freddie Mac or Fannie Mae, you may be eligible to refinance your mortgage under the enhanced and expanded provisions of HARP.”
  • “You can determine whether your mortgage is owned by either Freddie Mac or Fannie Mar by checking the following websites:
  • www.freddiemac.com/mortgage or http://www.fanniemae.com/loanlookup/.”
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What to Look for During Your Final Walkthrough

Luxury Home Interior

Luxury Home InteriorThe excitement of buying a house and transforming it into a home can sometimes result in the buyer making an irrational decision. Nobody wants to make an investment that they later regret, which is what the purpose of a final walkthrough is. What is a final walk through, you ask? Well, it is essentially the last chance you will have to walk around the premises with your realtor.

Unless you are aware of what to look for, there is a chance you might miss something, such as an underlying problem that could potentially turn into an expensive repair job. With that being said, it is crucial that you use this time wisely to ensure the property condition has not changed in any way since the last time you inspected it.

Here are the main things you must focus on for the final walk through:

  • Check Repairs – Should there be a problem, get an estimate of how long the repairs will take to complete, so that you can move into the house with no worries about the condition. In most cases, the owner of a property will arrange to repair visible and invisible problems prior to the moving in date. This is the time to check if the repairs requested were made. In the event that the repairs are not required until after the moving in date, a home warranty will cover it.
  • Check Appliances – There are several things you should inspect when you attend the final walk through. Failure to do so might result in you spending thousands of dollars for repairs once you finally move in. Flip the light switch on and off when entering every room, test all appliances, and flush the toilet. Heating and air conditioning may encounter a fault if the appliances are not maintained properly, too.
  • Check for Leaks – Did you know that a leak inside a property can cost you a lot of money? In fact, even the smallest of leaks can increase water usage by a lot. If you don’t take the time to listen for hissing noises, check the leak indicator on the water meter, and investigate the average water usage, it will be you who is responsible for funding the repairs, not the seller.
  • Check for General Damage – Make sure there isn’t any damage from when the offer was submitted to time of the final inspection. If the property condition has changed from the first time you walked around it, you have the right to request the property owner to pay for repairs. An insurance policy will come in handy if you notice damages after you have moved in. However, the type of coverage you receive will depend on state laws, so bear this in mind and contact a claim representative if in doubt.

Once you have completed the final walk through and have deemed the condition to be good, a contract will need to be signed. The contract addendum serves as proof that you are satisfied with the property. Furthermore, it confirms the completion of any agreed-upon repairs.

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The Benefits of a Home Warranty

Plumber Fixing Domestic Washing Machine

Plumber Fixing Domestic Washing MachineA home warranty plan is something that every real estate investor ought to be thinking about ahead of buying a property. This type of warranty will protect your finances in the event of something going wrong with the property, whether it is an appliance fault or the wear and tear of a boiler system. Do not get home warranty confused with homeowner’s insurance because an insurance plan does not offer the same kind of coverage.

In fact, if you don’t have warranty in place, you will not be covered for the cost of repairing/replacing home system components. Also known as HSA, home warranty offers a whole host of benefits for both the buyer and the seller.

Let’s look into into the perks associated with this type of coverage:

  1. Protection Against Costly and Unexpected Repairs - Although you will have the chance to inspect the property for any damages or underlying problems during the open house, this does not mean that a problem will not surface in the near future. Wear and tear from using appliances, such as the lights, heating, and air conditioning, is inevitable. Rather than digging deep to fund unexpected repairs, you can rely on home warranty to cover the costs. Most major systems and appliances are covered on the standard plan.
  2. Full Replacement - There may come a time when the technician is unable to resolve the problem and make the appropriate repairs. In the event that this does happen, a full replacement will be provided with the costs covered by the home warranty plan. What’s more, the contractors are guaranteed to be completely professional and licensed to perform the job, so you can feel confident that the end result will be satisfactory.
  3. Small Service Fee – When you have no option but to contact a technician to visit your home and perform a repair or service on your home appliances, the fee will not leave you strapped for cash. Considering you will be paying a monthly fee for warranty coverage, the service fee will be considerably less than it would be if you weren’t investing in coverage.
  4. Annual Renewal - Once your yearly coverage is up, the home warranty plan can be renewed. It is completely up to you whether or not you go ahead and renew the plan, but since you have the opportunity to call for service as many times as you wish, chances are you’ll want to renew the plan before it actually expires.

There are some things you should know before purchasing a home warranty, such as the fact that policy prices vary from $200-$600 annually and when/if you make a claim; you will be required to pay a deductible. Take it upon yourself to find the best possible home warranty plan available by browsing your options first. Generally, service agreements will last for a year or more, but this totally depends on the provider of HSA. For the best protection, consider gaining coverage from a warranty plan and a homeowner’s insurance plan.

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Add A Personal Touch When Submitting Your Offer

Business women hands working writing notebook on wooden desk, lighing effect

Business women hands working writing notebook on wooden desk, lighing effectJust because you have your eye on a property and have been shown around the premises by a professional real estate agent, it does not mean that you will be the only person interested in submitting an offer. In fact, there could be multiple people making an offer at the same time, which is why it is imperative that your offer really stands out!

It is rare for a buyer to offer the seller the asking price, with most buyers putting their haggling skills to the test in order to land their dream home for a desirable price. So, how can you peak the seller’s curiosity and improve your chances of receiving a positive response?

Capture the seller’s attention with a personal letter. A traditional tactic that has not lost its touch, personal letters can make you stand out among a sea of bidders.

How to Write the Perfect Personal Letter

Including a personal letter with your offer is known to help get an offer accepted. Below, we discuss the three main points to include in your letter:

  • Personal Information - Opening up to the seller will strike a chord with them. It will help them to get to know you, without even meeting you. Furthermore, it will allow them to make a choice based on who they would (ideally) like to transfer home ownership to. Including personal information in your offer letter that is related to your profession, your pets (if any), and your family size will make your offer stand out. Plus, the inclusion of personal information will prove to the seller that you are a serious and honest buyer.
  • Express Emotion - Connecting with the seller on an emotional level can be a challenge, but if you accomplish it, the chances of your offer being accepted are far greater. Perhaps you have decided to buy a new home so that you can use the leftover expenses to fund a relative’s surgery or a child’s college education? Maybe you want to relocate as a way of feeling safer in the neighborhood? Whatever your reason(s) for wanting to buy a particular property, don’t be afraid to express emotion in your letter.
  • Show Appreciation - It is nice to be nice! Even if the seller already has someone else in mind, this doesn’t mean that they don’t deserve some gratitude. After all, they invited you into their home and took the time to read your letter, right? Be polite and you never know – the seller could change their mind and accept your offer over someone else’s.

When you realize the difference a personal offer letter could make to your chances of being accepted for a property purchase, you won’t want to approach a seller without writing a letter ever again! A well-written letter that demonstrates your suitability for the house can be read over and over by the seller, thus enabling them to make an informed decision. After all, it is their pride and joy they are selling, so they won’t be willing to hand the keys over to just anybody.

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How to Understand the Impact of your Debt-to-Income Ratio and How It Affects the Loan Process

Businessman's hands with calculator and cost at the office and F

Businessman's hands with calculator and cost at the office and FGearing up for a loan application can stir up a mixture of emotions, from euphoria to anxiety about the entire process. All that is required for a plain sailing experience is knowledge on the subject and in particular, on the topic of debt-to-income (DTI) ratios. Many loan applicants will be unaware of the fact that this is considered by a lender before the applicant is accepted for a loan.

What is considered a good debt-to-income ratio?

Dividing your total gross income with your recurring monthly debt is the easiest way to understand what your DTI income ratio is. Once you are aware of this, you can take a step forward and arrange a meeting with a lender. By doing so, you can discuss your loan options and talk about whether your DTI is good or could do with some improvement.

The Negative Impact on Financing

Put it this way: if a lender looks at a borrower who has a DTI of 50% or above, you are instantly in the red. In many cases, they will not give you a second look since you will be deemed “dangerous” in their strict book of lending. This can make it a struggle to obtain financing. On a brighter note, there are multiple lending options out there now that consider applicants with a poor credit history and DTI.

Tips for Being Approved for a Loan

Fear not if you fall into the red category when it comes to calculating DTI because it does not mean that your chances of loan approval have gone completely out the window. In fact, the following tips could actually teach you how to handle your finances overall:

– Pay off any debts you have accrued.

– Reduce your DTI by paying in affordable amounts.

– If you are able, settle high-interest debts.

– Stop spending so much and start saving more.

– Write a monthly budget and stick to it.

– Cut off direct debits or subscriptions that you no longer require.

Improving the Debt-to-Income Ratio

Sit down and really get stuck into your finances. It will be worth it when you get one step closer to being accepted for a loan, despite having a low DTI at the beginning. Pay attention to the higher debts on your list, if possible. Paying off larger amounts faster will ensure that your credit rating boost at a quicker rate. This will also lift that credit rating arrow from the red spot to the amber or, if you really commit, close to the green.

There are plenty of ways in which you can improve your DTI, prior to applying for a loan. This will boost your chances of acceptance and will have a positive effect on your credit score as a whole. Take it upon yourself to perform a recalculation of your DTI every month, as this will paint a clearer picture of how your financial situation is changing, for the better!

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What Closing Costs does the Buyer and Seller Pay?

Couple meeting financial advisor

Couple meeting financial advisorThe real estate market provides huge profit potential for sellers, as long as the seller takes the right approach. According to the 2016 National Association of REALTORS Profile of Home Buyers and Sellers, 51% of homebuyers will use the Internet to find their ideal home, whereas 34% will use the services of a real estate agent. The remaining percentage of buyers will make an investment move after seeing a yard sign, hearing about the real estate listing from a family/neighbor/relative, or will know the seller directly.

No matter how you intend on attracting a buyer (if you are a seller) or searching for the ideal home (if you are a buyer), it is important that you are aware of the fees involved once a selling price has been determined. Unless you understand what the typical closing cost includes, there is a chance you may be left surprised with unexpected costs.

Familiarize yourself with the process of closing a real estate transaction to eliminate surprise once the home ownership is shifted from the seller to the buyer.

Typical Buyer’s Closing Costs

  • The Down Payment - This is the initial payment a buyer will make to reserve the home. A larger down payment means reduced loan interest, so aim to put down as much as possible.
  • Loan Fees – A lender will assess your credit score and charge a fee to process the loan application.
  • Prepaid Interest - When daily interest builds on your loan, this must be paid at the time of closing. Once again, the amount depends on your credit report and financial situation.
  • Inspection Fees – A property inspector will charge this fee to assess the condition of the property. This service is valuable since it aids the buyer in making a final decision.
  • Appraisal - The fee charged by a qualified appraiser to determine a property’s market value.
  • Mortgage Insurance – Should a mortgage loan default, mortgage insurance will cover it.
  • Hazard Insurance – Damage caused by Mother Nature, vandalism, theft, or unintentional circumstances can be repaired, with costs covered by this insurance policy.
  • Title Insurance – A kind of indemnity insurance that shields a buyer and lender if the seller is unable to transfer home ownership.
  • Documentary Stamps - Documents that transfer real estate interest must be stamped, so that the excise tax can be imposed properly.

Typical Seller’s Closing Costs

  • Broker’s Commission – Every realtor will charge a different percentage of commission on the final property sale value. This will be deducted at the time of purchase.
  • Transfer Taxes – Consider this a transaction fee for transferring home ownership from you to the buyer.
  • Documentary Stamps on the Deed - This is a tax on documents detailing the transfer, sale, acceptance, or loan agreement for a property.
  • Title insurance – Indemnity insurance is equally as important for the seller to pay, as it is for the buyer.
  • Property Taxes – Property expenses must be divided fairly to ensure the buyer is only paying from the moment he/she claims home ownership. This is guaranteed when property taxes (a proration) are paid.

Calculating the closing costs prior to making a property purchase or agreeing to a sale will ensure you are satisfied with the outcome. Use the Internet to your advantage at this time, by estimating the costs with an online calculator. A few influential factors include the condition of the house, its size, and the features (interior and exterior).

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Paramount Equity Mortgage®, LLC is licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act, License #4170047; Arizona Mortgage Banker License #0922160, NMLS# 30336; regulated by the Colorado Division of Real Estate NMLS# 30336; Connecticut - Connecticut Mortgage Lender License # ML-30336; D.C. - Mortgage Lender License #MLB30336; Florida Mortgage Lender Servicer License # MLD 898; Kansas - Kansas licensed mortgage company License # MC.0025206; Maryland - Mortgage Lender License # 21172; Nevada Mortgage Banker License #3919; Licensed by the N.J department of Banking and Insurance NMLS#30336; Oregon Mortgage Lender License #ML-3256; Texas – Paramount Equity Mortgage®, LLC NMLS #30336; Utah DRE Mortgage Entity License #6967176; Washington Consumer Loan Company License #CL-30336; and Wisconsin – Wisconsin Mortgage Banker License #30336BA; NMLS ID #30336.