Once you’ve made the decision to purchase a home, the first step is applying for a mortgage loan, AKA-home loan. To do this, you’ll need to approach a trusted mortgage lender, but make sure to shop around to make sure you get the best rates.
Each mortgage lender will need information in order to give you an offer for a home loan. They may have some of this information already but they may need to collect more. But you will also need to give your lender a pack of documents. Your real estate agent may be able to grab some of the harder-to-find items, such as property taxes.
• Name of current employer, phone, and street address
• Length of time at current employer
• Salary including overtime, bonuses, or commissions
• Two years of W-2s
• Profit and loss statement if self-employed
• Pensions, Social Security
• Public assistance
• Child support
• Bank accounts (savings, checking, brokerage accounts)
• Real property
• Investments (stocks, bonds, retirement accounts)
• Proceeds from the sale of your current home
• Gifted funds from relatives (e.g. a down payment gift for an FHA loan)
• Current mortgage
• Child support
• Car loans
• Credit cards
• Real property
• Street address
• Expected sales price
• Type of home (single-family residence, condo, etc.)
• Size of property
• Real estate taxes (annual)
• Homeowner’s association dues (HOA)
• Estimated closing date
This last item—your credit history—is one of the most important elements in getting your mortgage approved. Because of this, it’s a good idea to check your credit report beforehand to see where you stand. You’re entitled by law to one free credit report from each of the three main reporting bureaus each year.4Be prepared to explain any missteps in your financial background. It’s good to have dates, amounts, and causes for any of these parts of your history.
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Refinancing a loan can be an opportune way to lock in a better interest rate and save money in the long term. If you’re familiar with student loan refinancing, mortgage refinancing works in much the same way. The only real difference is that mortgage refinancing is used for real estate loans, like those you take out to purchase a home.
When you refinance your mortgage, you replace your old mortgage with a new one so you can access new benefits like a lower interest rate. You can usually obtain a mortgage “refi” from a bank, credit union or online lender.
Most financial experts agree that you should only refinance your mortgage if you have an opportunity to access better conditions on the loan, save money or build up equity in your home faster. You may also wish to refinance if you have an opportunity to pay off your loan faster to reduce overall costs.
Nonetheless, choosing to refinance or not is wholly dependent on your circumstances. It may seem like a good idea to refinance a mortgage, but it may not be the best idea for you specifically. Your financial profile, including your credit score, plays a significant role in the conditions of your loan.
Certain factors outside your control also affect this decision. For example, the overall economy, as well as interest rates set by the federal government, will have an impact on your mortgage refinance. You also need to consider all the fees associated with refinancing, like closing fees, appraisal fees and origination fees.
If you’re considering a mortgage refi, here are some reasons to move forward.
Interest rates have fallen significantly
Your interest rate is one factor that is mostly outside of your control. If you took out a fixed-rate mortgage when interest rates were particularly high, you may feel like you missed an opportunity when they fall significantly years later. It may seem like a good idea to take advantage of these lower interest rates by refinancing your mortgage.
In fact, this is generally considered one of the best reasons to refinance your mortgage. If you can obtain a lower interest rate on your loan, you may be able to reduce your monthly payments. More importantly, you can build equity in your home faster because you’ll be paying more toward your principal loan balance and less in interest.
If you have an opportunity to lower your interest rates by more than half, refinancing is usually a good option. However, it may still be a good idea to refinance your loan if you can obtain an interest rate that is just 1% or 2% lower.
Your credit score has greatly improved
Your credit score is the one thing you can control when it comes to interest rates. If you have a good credit score, lenders will view you as less of a risk and will offer you a better interest rate when taking out a loan.
If you obtained a mortgage when your credit score was low, you may have been stuck with a higher interest rate. If your credit score has dramatically improved since then, you could consider refinancing your loan to access a lower interest rate.
Mortgage lenders also look at other financial indicators when considering borrowers. If you’ve reduced your debt, put away more in savings or gained a higher level of income, you may also qualify for better rates.
To switch to a fixed-rate mortgage and remain in your home
Adjustable-rate mortgages (ARMs) tend to be riskier than fixed-rate mortgages because the rate rises and falls with economic factors. Although they start with a low interest rate, that rate won’t last forever.
If you obtained an ARM and wish to switch to a fixed-rate mortgage, you could consider refinancing, especially if you intend to stay in your home for the duration of the loan term. In doing so, you could prevent paying out large sums of money in interest. You could also feel more secure financially knowing that your rate won’t increase.
On the other hand, yo
u may wish to refinance to switch from a fixed-interest mortgage to an ARM. If you don’t intend to stay in your home for much longer, you could take advantage of low interest rates until you’re ready to sell. This may also be an option if interest rates are falling and the fixed interest rate on your first mortgage is particularly high.
Nonetheless, you must keep ris
k in mind when making this decision. No one can predict what interest rates will be in the future.
To eliminate private mortgage insurance
You may have been required to take out private mortgage insurance (PMI) if you put less than 20% of the value of your home down when obtaining a conventional mortgage. PMI protects the lender in case you default on your loan, but it adds monthly costs on your end.
There are multiple ways to eliminate PMI. For example, you could request your lender to lift PMI once you’ve built up enough equity in your home. If you’re planning to refinance your mortgage, you can also eliminate PMI if your new mortgage is 80% or less of the current value of your home and you pay the remaining cost. With this strategy, you’re essentially purchasing your home again with a new loan, but this time with 20% or more as a down payment.
To pay off your loan faster
If your income increases or you receive
a windfall of cash, you may wish to refinance to a shorter loan term so you can pay it off faster. This will likely increase your monthly payments, but you’ll pay substantially less in interest and build equity in your home much faster.
Reasons to Stick with Your Current Mortgage
As with taking out any other type of loan, there are some not-so-great reasons for refinancing your mortgage as well. In the past, homeowners have gotten themselves into serious trouble by refinancing their mortgages or using their home as collateral to obtain financing that wasn’t necessary.
Refinancing should only be used as a tool for saving on costs or lowering interest rates if possible. Here are some reasons not to refinance your mortgage.
To reduce monthly payments with a longer term
It isn’t usually advisable to refinance your mortgage to obtain a longer term for one very good reason: you’ll end up paying out much more in interest. A longer term means your loan will accrue interest for as long as it’s active. That means you’ll be paying a great deal more toward interest and not to the principal on your loan.
For example, if you took out a 15-y
ear loan on your first mortgage, refinancing to a 30-year mortgage will add additional years of interest payments. Similarly, if you’re refinancing a 30-year loan with another 30-year loan and you’ve already made 5 years worth of payments, you’d be paying an additional 5 years in interest.
You should also consider the fees you may have to pay for choosing this option. Closing costs tend to range from 2% to 5% or more of the original loan principal. According to a 2017 survey by Bankrate, the average closing costs for a $200,000 home totaled $2,084 in lender and third-party fees.
Still, sometimes obtaining a longer loan term is your only option. If you’re facing hardship and you’re worried about defaulting on your loan and losing your home, you could refinance to extend your loan and lower your monthly payments.
To switch to a fixed rate when you aren’t planning on staying in your home
ARMs have a notorious reputation, and that reputation isn’t unwarranted. They may come with a low starting interest rate, but the rates on ARMs rise after this period and then adjust based on economic conditions.
For someone who intends to live in their home for the duration of their mortgage term, an ARM may mean paying much more in interest in the long term if interest rates go up — although it may mean paying less, depending on the circumstances.
If you only intend to stay in your home for a short period of time, sticking with your initial ARM may be a good idea. The low starting rate can help you build equity faster, so you’ll be able to keep more of the money when you sell your home.
To access a lot of cash quickly
It’s possible to use a mortgage refi to access a large amount of cash quickly. For example, if you take out a larger loan than the cost of your home, some institutions will give you the difference as a lump sum, which you can use for almost anything you’d like.
Some homeowners justify this action because they plan to use that cash for an important purchase, such as putting a child through college, but this is a particularly risky choice to make. Cash is easy to spend. Even the most disciplined budgeters are guilty of spending money on things they don’t need when they see a lot of figures in their checking account.
College students often run into a very similar problem with their student loans. They take out as much money as they qualify for, pay for their education, and then use the remaining funds for other purchases. In the end, they are stuck with more debt than was necessary.
The key issue with this strategy is that you end up paying interest on all the extra cash you didn’t need to borrow to refinance your mortgage. Even if you invest the extra money, you may still operate at a loss if your investments aren’t as fruitful as the interest on your loan.
To consolidate other debt
If you have high-interest debt like credit card debt, it may seem like a good idea to refinance your mortgage to consolidate it. With a larger loan than the cost of your home, you could use the extra money to pay off that debt. Technically, this would allow you to pay off the debt at a lower interest rate.
There are several problems with this strategy. For one, you’re transferring your previous debts onto your home. If you can’t meet your new loan payments, you could lose your home because of it.
It’s also quite easy to charge up your credit cards again once they have been paid down. You can’t predict if you’ll need your credit card in an emergency in the future, and it’s always tempting to use credit cards to make big purchases. If you rack up the same amount of credit card debt again, you’ll be left with just as much credit card debt and even more debt on top of it because of your new mortgage.
The Final Word
Mortgage refinancing isn’t a good option for every homeowner, but in certain situations it can help you build equity in your home faster and avoid paying out large sums of money in interest. Before refinancing, calculate how much you could end up paying in interest and fees. You may also wish to speak to a financial adviser as well to make sure the decision is right for you.
Creating a budget can help you make the most of your money.
Budgeting is one of the key foundational concepts of personal finance, but knowing how to create one is still a mystery for many people. Budgeting is often viewed as the equivalent of financial deprivation. If made properly, however, a budget can help you achieve financial freedom. If you’re a budgeting beginner, learning how to create a monthly spending plan is the first step in getting your finances under control.
Determine how much money you’re making each month. You can’t successfully create a budget if you don’t know how much you’ve got coming in. You should create a list of all the income you receive each month from all sources, including pay from your job, money you make from a side gig or hobby, child or spousal support, interest income, etc. If your income varies throughout the year, it may be easier to use your average monthly income as a starting point.
Make a list of all your basic monthly expenses, including rent or mortgage payments, car payment, utilities, groceries, gas, pet care, insurance, etc. Now, compare your total basic expenses with your total monthly income. If your income is higher than your expenses, you’re already off to a good start. If your basic expenses exceed your income, go over each one carefully to determine how you can reduce your costs.
Write down everything you spend on a daily basis. Not knowing where your money is actually going can be a major budget buster, and tracking your spending helps you to identify areas where you can cut costs. If you’re just getting started with budgeting, it’s recommended that you track your spending for at least a month or two to establish your spending patterns.
Add up any and all debts, including mortgage loans, car loans, credit cards, student loans and medical bills. Next, add up the minimum payments for your debts and how much you’re actually paying each month. If you’re only making minimum payments on your debts, you should go over each of your basic expenses to see if you can cut spending. Once you find extra money in your budget, you can use it to repay your debts more quickly.
Set aside some portion of your income each pay period specifically for savings. Building up an emergency fund of cash can protect you in the event of an unexpected expense or a temporary loss of income. Ideally, you should have anywhere from six to eight months of expenses saved. If your newly created budget is still a little tight, start off with $10 or $20 per week and increase your savings as you eliminate your debts.
Wherever you live, you only have a certain amount of space and most people want the room to be spacious. A home’s size is predetermined by the architect who built it, while an apartment is designed specifically to fit a certain amount of units in a building.
While you may not be able to bust out a wall to make more room in your living space, you can still make it fit your needs. Don’t throw out your furniture pieces just yet. With a few easy tricks, you’ll soon feel like you’re living in the spacious home you desire; lighting, paint, mirrors and spacious area rugs help increase the magnitude of a space.
Try these six tips for fooling the eye and making a room look more spacious. Even someone on the tightest budget can maximize the space in their home — or, at least, the appearance of it — and make it feel brand new.
1. Clean From Top to Bottom
The best thing you can do to create more space in your home is clean it from top to bottom. Take a day to empty every closet and shelf you’ve turned a blind eye to, and dig through the contents. Toss anything you don’t want to keep in a pile. Then, separate it later into one collection of items you can donate and one pile of things to throw out.
Once you clear your home of any unwanted or unnecessary things, you’ll automatically gain more space to work with. Then you can move on to the fun stuff, like redecorating and playing with the way you set up each room. Lighting, paint, mirrors
2. Work With Mirrors
The first tip any interior designer will give you to open up a room is to hang mirrors. While you don’t need to cover the walls with mirrors from top to bottom, you’ll need more than a couple of mirrors hanging here and there to do the job.
Instead, hang mirrors strategically as decor and make each room feel bigger. Use them to create a visual window rather than constructing an actual windowpane. Play around with different sizes to determine what works for you. Consider the space, color and design of each mirror you choose.
3. Combine Lighting and Paint
When you need to work with an especially small space, lighting and paint color play a vital role. Natural light fills a living area and brightens every corner, making it appear larger. The right color paint will emphasize this trick of the eye. So, where can you start?
The first step to approaching paint is to match it with your floors to get the shade that works best in each room. Light floors and light paint will visually open up a space more than if you matched dark paint with light floors. Ask for paint samples at your local hardware store to try out swatches and figure out what you like before committing to painting the whole room.
4. Hang Curtains Higher
When you picture an expensive home with extra spacious rooms, you might imagine tall windows with extra tall curtains. While your home’s curtains probably fit the size of your windows, think about switching them out for longer shades to achieve this look. Hang the curtains four to five inches above the top of each window to maximize its size and play a visual trick with the room.
5. Invest in Tall Furniture
People with large homes often have taller furniture made specifically for each room. Even if you can’t do the same, you can still invest in tall furniture that fits the height of any area of your home. Find tall furniture that looks like it belongs in your space, such as a bookshelf painted your favorite color.
Bookshelves are one of the best pieces of furniture you can find to create a bigger room. Look around thrift stores in your area for bookshelves on sale, or consider building one yourself using your room’s exact measurements. Line one wall with floor-to-ceiling bookshelves and leave some space on each shelf unfilled to create the appearance of a larger room with more space.
6. Buy Large Rugs
Homeowners commonly use rugs to create a focal point in a room. The right rug blends seamlessly into any design scheme — and if you’re trying to create more visual space, you’ll want to go big or go home. Larger rugs cover more of the floor and create the illusion of a larger more spacious room. On the other hand, having multiple small rugs in one room shrinks each section and minimizes the entire space.
Large rugs are worth saving up for. As soon as you unroll your new addition, you’ll immediately see a change in how you perceive the room.
Stick to Tiny Changes
When you think about making a room bigger, you might immediately picture expensive renovation and weeks of contractors moving in and out of your home. Instead, you can avoid the headache of a large project and create the same effect with tiny changes.
Buy a lighter paint color and redo your home to expand every room. Build tall furniture or roll out an oversized rug while you’ve got free time on the weekend. Little efforts make a huge difference in changing your home from feeling like a cramped space to one with room to breathe.
Flipping Properties is a SCARY endeavor to embark upon! Jaime Fallon showcases flipping and listing in the video below to maximize your profits as a seller or flipping investor. Here are other factors to consider when embarking on a house flip
EVALUATE NEIGHBORHOOD Do values appreciate over time? ◦Is there a HOA? Limits what you can do without approval
EVALUATE SCHOOL DISTRICT Is the neighborhood part of an “A” rated school district?
EVALUATE NEIGHBORHOOD COMPS Analyze Days on Market and the homes specifics. Is it a luxury or executive neighborhood that makes it unique? Is the home in a unique job are such as an oil and gas or tech neighborhood?
WHEN EVALUATING A HOUSE TO RENOVATE Does the property have equity? What is the payoff on property? Does the seller have cash to update property? How long will renovations take?
What Is After Repair Value (ARV) in Real Estate? The 70% rule is a basic quick calculation to determine what the maximum price you should offer on a property should be. This calculation is made by multiplying the after repaired value (“ARV”) by 70% and then subtracting any repairs needed. This gives you a 30% margin to cover your profit, holding costs & closing costs. Calculating After Repair Value (ARV): The ARV formula isn’t complex. It basically boils down to the Property’s Current Value + Value of Renovations = ARV.
Example: Maximum Purchase Target = ARV x 70% minus Estimated Repair Costs. Maximum Purchase Target = $200,000 x 70% – $30,000 repair costs. Maximum Purchase Target = $110,000
*Get the materials estimates right and buy at discounts. Work not only with the big box home stores but also with liquidators and rehab stores.
*Know your contractors and their capabilities. Supervise to the extent necessary to be sure you’re getting quality work that will be done on time and inside the budget.
*Budget based on your buyer. Keep the materials in the “acceptable” range if you’re going to be selling in the commercial market. Upgrade to finishers that buyers want if you’re selling in the consumer retail market.