Here’s What To Do If Your Mortgage Won’t Let You Make Extra Payments

Freedom from debt is a common and powerful financial goal. Owning your home free and clear with no other debts gives you a strong financial base for whatever plans you may have in life.

In most situations, you will save money if you make extra payments on an existing mortgage. Doing so will directly reduce the balance on your mortgage, which means that for the rest of the life of your mortgage, the amount of interest you’re charged each month is lower. That means each subsequent mortgage payment will have more going to the principal amount than it would have before, and the end result is that your mortgage is paid off months or even years earlier than it would have been otherwise, even with just a single extra mortgage payment early in the mortgage.

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One potential hazard in that path to financial freedom is the fact that, in some cases, a lender won’t allow you to easily make extra payments on your mortgage. They’ll use various mechanisms to keep you from actually reducing your mortgage balance, such as penalties, suspense accounts and partial payment accounts, that result in little progress toward paying off your mortgage even if you’re trying to pay it down quickly.

What are these things, and how can a homeowner seeking financial freedom get around them?

In this article

What is a prepayment penalty?

A prepayment penalty is an extra fee charged by some home lenders in the event that you pay off too much of your mortgage early. The exact terms of the prepayment penalty are spelled out within a clause in your mortgage agreement.

 Typically, it only applies if you pay off the entire mortgage balance at once, but some clauses apply if you pay off a specified portion of your mortgage at once.

[ Next: Should You Pay Your Mortgage Off Early? ]

Why do lenders charge a prepayment penalty?

Lenders make money when you pay off your mortgage in steady monthly payments, as each payment includes interest that goes in their pockets. If you pay off the mortgage early, the lender loses that income. A prepayment penalty is thus a form of insurance for the lender against you paying off your mortgage too quickly.

This doesn’t just affect people who want to pay off their mortgage quickly, but it also affects those who choose to refinance through a different company. In that situation, the new company will pay off your previous mortgage in full and get hit with that prepayment penalty, which would then be added to the balance of your refinanced mortgage, making it less of a good deal.

What is a suspense account?

A suspense account is an account set up by a lender to hold a borrower’s funds in a suspended state until the lender decides how to allocate them. In the case of a mortgage, if your mortgage specifies the use of a suspense account, any extra payments you make would be deposited into that account.

Thanks to the Dodd-Frank Act of 2010, there are some limitations to the use of suspense accounts. They can only contain an amount less than a full mortgage payment. So, if you make an extra payment on your mortgage that’s less than a full monthly payment, it would go into that suspense account until you made enough extra payments to add up to a full monthly payment, which would then be applied to your mortgage.

To find out if any extra payments on your mortgage would be applied to a suspense account, you can check your mortgage documentation.

What is a partial payment account?

A partial payment account refers to a specific use of an expense account. In this case, it is used in the situation where you make a partial payment on your mortgage rather than a full one. Let’s say, for example, that you decide to pay your mortgage bill by making a half payment every two weeks. Your first partial payment would go into the suspense account, then when your second partial payment arrives — making a whole payment — it would then be applied to the mortgage. Again, check with your mortgage documentation to find out if your lender utilizes a partial payment account.

[ See: When Is the Right Time to Get a Mortgage? ]

What’s the problem? The problem is that the lender is holding your money in limbo while it waits for the rest of your mortgage payment to arrive. During that time, you don’t have it available to you in an emergency and you’re not earning any return on it, but it’s not been applied to your mortgage either.

The best way to avoid this is to simply only make full extra mortgage payments. Pay exactly what you owe each month, then when you can afford to make a full extra mortgage payment, do so.

How to avoid a prepayment penalty on your mortgage

With some mortgages, a prepayment penalty can kick in if you pay too much of your mortgage in advance. This can be a big issue if you want to pay your mortgage off early or refinance. Here are some things you can do to avoid a mortgage prepayment penalty.

Talk to your lender

The first place to start is to talk to your lender, ideally before you ever sign on the dotted line for your mortgage. Ask that your mortgage not include any sort of prepayment penalty clause. If the lender is not willing to do that, shop around for a different mortgage.

If you already have a mortgage, it can’t hurt to ask, especially if you are interested in refinancing with the same lender. Mention the possibility of refinancing into a new mortgage without a prepayment penalty.

Refinance your mortgage

Even with a prepayment penalty, refinancing with a different lender may still be the best option if it lowers your overall interest rate. However, you should make sure that your new mortgage does not include a prepayment penalty. Spending the time to shop around for a great refinancing rate can save you a lot of cash, especially if you have equity built up and your credit has improved since your initial mortgage.

[ Read: The 10 Best Cities for Refinancing a Mortgage ]

Only make full extra payments

If you’re not looking to pay off the full balance all at once, you can still improve your financial situation a little by only making full extra payments on your mortgage. This avoids having any partial payments placed in a suspense account, even for a while. If you don’t have enough to make a full extra payment, keep saving.

Invest your extra payments instead

If your mortgage is locked in at a very low interest rate but has a prepayment penalty, you may want to consider just investing your extra payments instead. This might be a good opportunity to bump up your workplace retirement plan contributions or start saving for a child’s college education with a 529 college savings plan.

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We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

Source: thesimpledollar.com

Nearly 4 Million Homeowners Now in Mortgage Forbearance Plans, Servicers May Get $500 Payments

Posted on May 5th, 2020

The mortgage forbearance rate worsened yet again compared to last week, though as expected the increase has slowed as the pool of borrowers grows larger.

As of April 26th, some 3.8 million homeowners were in forbearance plans, per the Mortgage Bankers Association’s (MBA’s) most recent Forbearance and Call Volume Survey.

The forbearance rate increased from 6.99% to 7.54%, a mere eight percent rise from a week earlier, but still more bad news for loan servicers.

And I should note that we’re about to begin a new month, so those on the fence last month could request forbearance this week, creating a new surge.

Forbearance Rate Tops 10% for FHA/VA Loans

  • Ginnie-backed loans have a forbearance rate of 10.45%
  • Fannie/Freddie loans have forbearance rate of 5.85%
  • Private-label securities and portfolio loans have rate of 8.30%
  • Depository banks have rate of 8.41%, independent mortgage bank (IMB) servicers have rate of 7.13%

In terms of loan type, government-backed home loans continue to fare worst, with Ginnie Mae mortgages (FHA loans and VA loans) seeing forbearance rates climb to 10.45% from 9.73%.

Meanwhile, the Fannie Mae and Freddie Mac forbearance rate rose from 5.46% to 5.85%.

Other mortgages, such as private-label securities and portfolio loans, which can include jumbo loans, increased from 7.52% to 8.30%.

With regard to institution type, depository banks saw their forbearance rate go up from 7.87% to 8.41%, and independent mortgage bank (IMB) servicers saw their rate move from 6.52% to 7.13%.

It’ll be interesting to see what happens in the second week of May once the next wave of borrowers request forbearance.

It seems we’ve kind of plateaued for the month of April, but a new month means new layoffs, business closures, losses of income, etc.

And regardless, the numbers are already way above what was originally forecast, perhaps because the forbearance offered via the CARES Act is very attractive to homeowners.

MBA Senior Vice President and Chief Economist Mike Fratantoni noted that the millions of additional Americans filing for unemployment throughout the week will likely make matters worse, “particularly as new mortgage payments come due in May.”

$500 for Each Mortgage in Forbearance?

  • More relief for mortgage servicers may be on the way
  • Via a $500 credit paid by Fannie/Freddie for each loan in forbearance
  • Unclear if the same would be extended to Ginnie Mae servicers
  • Or if it’s enough to offset the massive losses some servicers are experiencing

That brings us to how loan servicers will fare in all of this, especially nonbanks that might not have as much access to capital.

We know that Fannie Mae and Freddie Mac have agreed to buy mortgage loans in forbearance, and only require servicers to advance the first four months of missed payments.

But those enormous costs could still put enough strain on some servicers to wipe them out.

To further ease the situation, it has been reported that Fannie Mae and Freddie Mac will pay servicers $500 per loan in forbearance to ease the pain.

This is according to Jack Navarro, president of Shellpoint Mortgage Servicing, who spoke about the developing situation during a Tuesday morning conference call, per Inside Mortgage Finance.

The so-called “$500 deferment fee is scheduled to take effect on July 1,” assuming it’s approved by the Federal Housing Finance Agency (FHFA).

That fee would obviously offset some of the cost associated with the forbearance advances, at least partially.

But if the forbearance rate keeps climbing higher in May, it still might prove to be too little too late.

Navarro also spoke to what happens after forbearance, saying the plan is “to allow borrowers to very quickly go from the forbearance process to a current loan with payments deferred to the end of the mortgage.”

That backs up the Fannie/Freddie partial claim I spoke about last week, which would make it relatively painless for borrowers who regain their job/income to continue making mortgage payments and put this all behind them.

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for nearly 15 years.

Source: thetruthaboutmortgage.com

What Is an Investment Property Mortgage?

If you’re looking for another source of income or want to start a side hustle as a home flipper, you may be considering the purchase of an investment property. Getting a mortgage loan for an investment property can be trickier than getting one for your primary residence, and obtaining a mortgage for investment property will require you to have a stronger financial picture than your typical mortgage loan would, too.

That doesn’t mean it’s impossible, though. Knowing your options when it comes to lending types, credit and financial criteria, and funding guidelines can help you navigate the process and ensure that you’re doing as much as you can to set yourself up for success.

In this article

What is an investment property mortgage?

An investment property mortgage is a loan that is used to purchase a property for either rental income or to flip and sell for a profit. Underwriting guidelines are more strict on investment property loans when compared to purchasing a home to live in or a vacation or secondary home.

Not all lenders offer investment property loans, as the risk of default is higher compared to lending money for a primary residence you plan to call home. That’s because you’re likely to continue paying your home mortgage payments in times of financial crisis. However, if rental income isn’t coming in for some reason, and you have to choose between paying your personal mortgage and your investment mortgage, you’re likely to pay to keep the roof over your head than pay on an investment property. This is also why mortgage interest rates are higher for investment properties vs. primary or secondary homes.

To get approved for a mortgage on an investment property, you must:

  • Have a good or better credit score
  • A down payment of 10% to 25%
  • Cash reserves available
  • Stable employment

What is an investment property?

An investment property is a unit that is purchased to provide a stream of income or to flip and sell for profit. This could be a single-family home or a multi-unit building with four or fewer units. Apartment and condo buildings with five or more units are considered commercial real estate and fall under separate guidelines.

Examples of an investment property can include:

  • Single-family home
  • Duplex
  • Triplex
  • Townhome
  • Condo

While many investors seek to gain a stream of income from renting their units out to tenants, others prefer to purchase a home to update or improve and then resell to make a profit. Either way, investment properties can be a lucrative source of income if you’re smart about your investment and are able to nail down an investment property loan for your purchase.

That doesn’t mean there aren’t risks, though. As with anything, there are pros and cons to owning rental properties as well as tax benefits that make purchasing investment properties an attractive way to make money. But with mortgages at historically low interest rates, buyers with the funds, credit and the desire to invest could consider an investment property a viable source of income.

Difference between investment property loan vs. regular mortgage

While you’ll choose from the same loan types — conventional, fixed, adjustable rate, government-backed — for both regular mortgages and investment property loans, the interest rates and lending requirements vary vastly from one to the other. From a lender’s standpoint, a mortgage loan for an investment property is riskier than for someone’s home, which is reflected in higher interest rates. The average interest rate can be as much as 0.75% more for investment property loans when compared to conventional mortgage loans.

On top of higher interest rates, lenders also have stricter guidelines to follow for investment property mortgages. For example, the real estate lending standards set by the FDIC limit the loan-to-value of an investment property at 85%, whereas the LTV of an owner-occupied residence can be as high as 100% depending on the loan type and lender.

While buyers who purchase a home with a regular mortgage can get away with a much lower down payment — in some cases as low as 3.5% with an FHA loan or 0% with a USDA loan — investment property lenders want more down on the property. Depending on the property, the lender and your credit, expect to pay between 10% and 30% down on the property.

Lenders also expect borrowers to prove they have at least six months worth of cash reserves available to pay for the mortgage, whether or not they have tenants lined up yet.

Requirements for an investment property mortgage

While lender requirements vary, some general requirements you can expect when applying for an investment property mortgage include:

  • Low debt-to-income ratio. Freddie Mac’s investment property guidelines for DTI for is 45%. The lower your DTI, the better chance you have of getting a low interest rate on your loan and more lenders vying for your business.
  • Significant amount of borrower funds. You’ll need a significant amount of cash that you can prove came from your savings or investments to get an investment property mortgage. Your down payment and closing costs may not include the use of gifted funds, so plan accordingly when sourcing cash if you don’t have the money saved and ready for use.
  • Higher than average credit profile. You’ll need a relatively high credit score to qualify for an investment property loan. Most lenders will require a minimum credit score of 620 to qualify for an investment property mortgage, though some like Guaranteed Rate will go as low as 580 and others will require a much higher score to qualify. But even if you can find a lender who will work with a lower score, you may want a higher score before applying. Higher credit scores command better interest rates and lower down payments.
  • Financial documents. As with a regular mortgage, you must provide pay stubs or other ways to show employment income, as well as your prior year’s tax returns and any other information or documentation that the lender requests.

Where to get an investment property mortgage

Though it’s riskier to lend money to investors, this likely won’t limit the lender options you have to choose from. While not all lenders offer investment property loans, there are a number of mortgage lender types to consider, including:

  • Conventional banks
  • Online lenders
  • Credit unions
  • Peer-to-peer lenders

Online lenders and credit unions may offer better interest rates or have more lenient guidelines than conventional banks, so these lenders are worth checking out. Credit unions are member-owned nonprofit financial institutions that require you to join as a member, but the application process is generally simple and can greatly benefit you in the form of lower rates, flexible lending parameters and other perks.

Private investors, known as peer-to-peer lenders, are also an option, though interest rates tend to be even higher with shorter repayment terms. These types of lenders also often charge more fees, including pre-payment penalties, to borrowers.

Another option is to do a cash-out refinance on your primary residence to pay for the investment property. Depending on the amount of equity you have available, you can pay for some or all of the cost without having to find an investment property lender. This isn’t always ideal though, since you’re essentially wiping out the equity in your home for a more risky investment.

Ultimately, the best way to find the right investment property mortgage is to shop around and see what different lenders offer. Each borrower has different needs and goals, so you may have to shop around to find a lender that’s a good fit for you. It’s smart to do that no matter what, though — as you should shop lenders in order to save money on rates and fees, too.

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We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

Source: thesimpledollar.com

Fannie Mae and Freddie Mac Agree to Buy Mortgages in Forbearance

Posted on April 22nd, 2020

While the CARES Act has allowed millions of homeowners nationwide to put their mortgage payments on hold, doing so has left lots of questions for mortgage lenders.

One being how they’d continue to pay investors while the loans they service were in forbearance. The FHFA clarified that piece yesterday by agreeing to only hold servicers to the first four missed payments.

But how do they originate new loans if borrowers turn around and stop paying right away? Will lenders be punished, even if they had no idea these homeowners would immediately request forbearance?

Fannie and Freddie Will Temporarily Buy/Securitize Loans in Forbearance

  • Lenders can now sell or securitize their new mortgages even if in forbearance
  • This is a temporary policy aimed at keeping the mortgage market liquid
  • Loans must still meet the general requirements of Fannie Mae and Freddie Mac
  • Eligible loans will be priced to mitigate the heightened risk of loss to the GSEs

To alleviate some of that concern, both Fannie Mae and Freddie Mac (the GSEs) have announced a temporary policy to purchase mortgages actively in forbearance plans, counter to their long-held position.

Typically, mortgage loans that are either delinquent or in forbearance are ineligible for delivery under Fannie/Freddie requirements.

However, things are far from typical at the moment thanks to the coronavirus (COVID-19).

In short, some borrowers have sought mortgage forbearance just after closing on their loan, before the lender could actually deliver it to the GSEs.

This put lenders in a bad spot if they wound up stuck with the loan, and unable to unload it, thereby putting their liquidity at risk.

Today’s action removes “that restriction for a limited period of time and only for mortgages meeting certain eligibility criteria.”

For eligible loans that can be purchased by the pair, they will “be priced to mitigate the heightened risk of loss” to the GSEs.

Which Loans Are Eligible?

  • Home purchase loans and rate and term refinances only
  • No cash out refinances may be delivered while in forbearance
  • Reason for forbearance must be directly/indirectly related to COVID-19
  • Loans must not be more than 30 days delinquent with note date on/after February 1st, 2020

It should be noted that not all mortgages are eligible for this new, temporary benefit.

First off, this relief is only limited to home purchase loans and rate and term refinances. No cash out refinances are permitted.

Additionally, the note date must be on or after February 1st, 2020 for May 1st delivery to the GSEs.

The loan must also not be more than 30 days delinquent at the time of sale or securitization to Fannie/Freddie.

Perhaps most important, the forbearance must be related to COVID-19, either directly or indirectly.

It shouldn’t be for some other reason, though at the moment this appears to be the one and only reason anyone is requesting forbearance.

For the record, Fannie and Freddie are also tacking on hefty loan-level pricing adjustments (LLPAs) as follows:

– 500 basis points (5.000%) for loans where any borrower is a first-time homebuyer
– 700 basis points (7.000%) for all other loans

Expect this cost to be passed onto consumers, either via a higher mortgage rate or increased discount points due at closing.

Since cash out refinances aren’t eligible, those may be even more expensive for the time being relative to purchase loans and rate and term refis.

Fannie has also warned loan servicers to “not in any way discourage borrowers from contacting them or encourage borrowers to delay notifying them either before or after the note date if they are experiencing a COVID-19 related financial hardship.”

In other words, don’t tell them to hold off on the forbearance request so they can sell off their loans first without issue.

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for nearly 15 years.

Source: thetruthaboutmortgage.com

Buyer’s vs. Seller’s Market: What Do They Mean?

When you’re buying a house, it’s important to know what type of market you’re in: a buyers market or a sellers market. Each type of housing market offers its own set of unique opportunities and drawbacks depending on what side of the equation you’re on.

In a buyers market, the market is more favorable toward buyers due to an abundance of inventory, a low demand for housing or other factors that cause home sales to be slower than normal. This type of market works in the buyer’s favor because they can ask for extra concessions, lowball the offer or generally push the purchase to be more favorable to them. A sellers market, on the other hand, means that you’ll be competing with other buyers for the homes on the market. In this case, the seller calls the shots due to high demand for homes.

Though much of the country would be considered a sellers market right now due to extremely low interest rates on mortgage loans, that could always change in the near future. The pendulum swings constantly, and it’s not always clear where it will stop. So, if you’re considering a new home purchase in the near future, here’s what you need to know about a buyers or sellers market to make the most of the market you happen to be in.

In this article

What is a buyer’s market?

A buyers market is when there are more houses for sale than there are buyers. People aren’t buying at a fast enough rate to keep the market from flooding with inventory — which drives the market to be more friendly to the buyers that do exist.

[Read: Mortgage Rates Hit Another 50-Year Low. Should You Buy?]

In a buyers market, sellers must often lower the asking price on their homes to be competitive. If they don’t, they run the risk of their house sitting on the market for too long, which can cause financial issues or issues with getting a loan for the house they’re moving to. Therefore, not only do homebuyers get to enjoy deflated prices in a buyer’s market, but they also stand a good chance of having their lowball offers being considered.

What is a seller’s market?

A sellers market is the opposite of a buyer’s market, and occurs when there are more buyers than there are sellers. When this happens, sellers obviously have the upper hand. Any reasonably priced house is likely to get multiple offers or even instigate a bidding war in highly desirable neighborhoods or cities.

In this type of market, most homes don’t last long before being snatched up by buyers — especially if mortgage loan interest rates are as low as they are right now. Many homes are sold as is and could even get an offer that’s well above asking price. If you have a home to sell, putting it on the market during a seller’s market will likely get you more than you paid for it and help propel you to your next home.

[Read: How to Negotiate Mortgage Closing Costs]

How to determine if it’s a buyers market or a sellers market

If you want to determine whether you’re in a buyers or sellers market, there are a few tricks you can use to figure it out. These include:

  • Analyze the inventory. Use a listing website and look at the county, neighborhood or area you plan to purchase in. Pay particular attention to information like time on the market and the final sales price. If you see a large number of homes are being sold as soon as they hit the market, you are most likely in a sellers market. If sold homes are few and far between, you’re in a buyers market. It’s possible to get even more precise. You can divide the number of homes on the market by the number of homes sold the last 30 days. If the quotient is over seven, you’re in a buyer’s market. Five sold homes or below equals a sellers market.
  • Determine the amount of time homes are sitting. Homes sell quickly in a sellers market if they are priced right and are in good condition — or in some cases, they may sell even if they need a ton of work and aren’t priced as low as you’d expect. The opposite is true of a buyers market.
  • Determine market trends. Are home prices rising or falling? A downward trend suggests a buyers market while an upwards trend indicates a sellers market. The good news is that you don’t have to do the research yourself. You can easily find market reports online or ask a licensed real estate agent to pull some comps for you.
  • Figure out whether the homes are selling for asking price. If a lot of the offers in the area you’re looking at are selling for more than their asking price, that is obviously good news for sellers and bad news for buyers. If the comps indicate that the homes are selling for well below the list price, then you know you’re in a buyers market. You can also look at current listings to determine whether you’re in a buyers or sellers market. Do you notice a lot of listed homes with price cuts? This suggests that homes in this area have sat on the market for longer than expected and that buyers are in control.

Tips for a buyer’s market

A buyer’s market offers unique perks for would-be homeowners. However, if you’re a seller, you’ll have to both lower your expectations and clear a few hurdles along the way.

[Read: 5 Tips for Navigating the Mortgage Underwriting Process During Covid-19]

Tips for sellers:

  • Don’t ask for too much. If your home is priced in the right range, you could still get a buyer in a reasonable amount of time. However, don’t price your home too low to try and unload it, since buyers will still push the envelope in this type of market, no matter what you list your home at.
  • Tackle needed repairs that won’t break the bank. With so many options to choose from, buyers won’t have a reason to take on a fixer-upper unless you’re selling it at a huge discount. Any decent agent will be able to tell you what your house needs to get attention — so listen to them and make repairs or upgrades when possible.
  • Be prepared for lowball offers. Don’t take lowball offers personally and be prepared for them. Figure out what you’re willing to negotiate on before you list your home. If you aren’t willing to negotiate, your home may sit there for a while.

Tips for buyers:

  • Be aggressive: Don’t be afraid to make an offer that’s well below the asking price — especially if the home has been on the market for a while. All the buyer can do is turn you down — and if you’re in a buyers market, it’s less likely that would happen.
  • Negotiate with the seller. You have nothing to lose by negotiating. There are tons of other options on the market if this offer falls through. So, unless you’re at risk of losing the house of your dreams, you can go back and forth with the seller without worrying that you’ll kill the deal over bad feelings.
  • Ask for repairs and closing costs. The worst thing that might happen is the seller will say no. At the very least, you can expect a reasonable counter offer to come of it — and best case, you’ll end up with some contributions from the seller to make your home purchase cheaper.

Tips for a seller’s market

A seller’s market is a great time to cash in if you’re a seller. If you’re a buyer, be prepared to compete with tons of other buyers and maybe offer more than you originally intended.

Tips for sellers:

  • Don’t worry about cosmetic repairs. As long as your home is in decent condition, it’s very likely to get multiple offers. You don’t need to dump a bunch of money into painting the bathroom a neutral color or upgrading the siding. Buyers will still likely be interested in your home.
  • Test the waters on the price. Believe it or not, you can scare buyers away with an overly ambitious listing price, but that doesn’t mean you shouldn’t test the waters a little bit. Try listing your home for over what you think it’s worth. Even with a high listing price, you may get a bidding war from buyers — especially if you’re in a highly desirable area and also in a sellers market.

Tips for buyers:

  • Check listing sites every day. It’s not uncommon for homes to get offers on the first day of listing in a sellers market. Be prepared to live on sites like Realtor and Zillow — and employ the help of a real estate professional who can send you the new listings as soon as they hit the market.
  • Work with a top notch agent. In a sellers market, you’ll need an aggressive agent who is able and willing to drop to show you a house. If you don’t have an agent like this, you’re going to miss out.
  • Get preapproved. You need to be able to make an offer at any time to be competitive with other buyers. Speak with a lender before you speak with an agent to get preapproved — this will strengthen your offer and make you stand out against others.
  • Know your maximum price. Bidding wars are common in a sellers market. Your emotions can put you in financial ruin if you aren’t careful, so you need to know when to back out. Set a maximum price cap and stick to it. Also keep in mind that you can refinance later on if you need to.
  • Don’t ask for too much. You’re competing with a lot of buyers in this type of market. Asking for too much in closing costs and repairs will likely result in the seller not considering your offer.

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We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

Source: thesimpledollar.com

3 Simple Mortgage Tricks Can Save You Over $5000/year

July 8, 2019 Posted By: growth-rapidly Tag: Buying a house

If you’re ready to refinance your mortgage loan, and speed up the process of being debt free, then you’ve come to the right place. The following mortgage tricks can save you several thousands of dollars.

As a homeowner, it’s probably been a while since you last checked and compared home loan rates to see if if your current loan rate is still a good deal. If you haven’t done so in a while, then you’re making a big mistake. Indeed, this mistake could be costing you a lot of money in interest every year, given that there are relatively low home loan rates out there.

3 Simple Mortgage Tricks Can Save You Over $5000/year:

These 3 simple mortgage tricks can help you get rid of your debt sooner, save on interest, and allow you to live in a house that is actually and really your own without worrying about monthly mortgage payment ever again. Who wouldn’t want that!?


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1. Compare mortgage rates.

Even if you think your home loan was a pretty good deal, you still need to compare home loans to see what rates are available.

LendingTree mortgage loans comparison can help you find the best mortgage loan rates for your needs and situation. With LendingTree, you can compare several mortgage lenders for home loan rates and fees side by side at one place and at the same time. It’s easy, fast, and free.

Head over to LendingTree now to compare low rate home loans.

2. Establish your credit score.

Before you can get the best home loan, you will need to establish and maintain a good credit score. In fact, a good credit score is one of the most important factors to determine whether you will get a good rate.

The first step then is to get a copy of your credit report for free online. Check for any mistakes and address them immediately. And if you find any red flags, contact the three credit bureaus (Equifax, Transunion, Experian). If your credit score is below 730, take steps to raise it.

One of the ways to raise your credit score is to pay your bill on time. In fact, payment history accounts for 35% of your total credit score. Another way to improve your credit score is keep your credit card utilization rate below 30 percent of your total balance. For more information, check out: How To Raise Your Credit Score To 850.

3. Refinance your mortgage.

After comparing home loans, you need to refinance it with a lender. Refinancing your loan simply means that you take a new loan to replace the one you currently have, in the hope that you get a lower interest rate, so you can same money on interest. Or that you get a shorter term on your mortgage.

Refinancing can save you over $5000 a year in interest and fees.

Want to compare home loans? Check out the latest mortgage rates through LendingTree. It’s completely FREE.

Not only that, it will allow you to pay your mortgage sooner. Let’s take an example. Let’s say you have a 30 year, $400,000 mortgage with an interest rate of 4.04%. If you were to refinance the loan with a rate of 3.34%, you’d be able to pay off the loan 4 years earlier.

So, if you’d like to pay off your loan sooner, check out some current rates now.

Related Articles

3 Signs You’re Not Ready To Refinance Your 30-year Mortgage

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Related Resources

Not All Mortgage Lenders Are Created Equally

When it comes to getting a mortgage, rates and fees vary. LendingTree allows you to view and compare multiple mortgage rates from multiple mortgage lenders all in one place and at the same time, so you can choose the best rates for your needs. LendingTree makes getting a loan faster, simpler, and better. >> (opens in a new tab)”>Get started today >>>

Source: growthrapidly.com

Mortgages in Forbearance Fell in January 2021

The COVID-19 pandemic has shaken up all areas of the U.S. economy in a number of ways, and the mortgage industry has been no exception. Since the start of the pandemic, the number of mortgages in forbearance have increased significantly — due, in major part, to the high unemployment numbers as well as the federal relief programs meant to help protect homeowners who are struggling financially.

 While the forbearance and delinquency numbers in January 2021 look more optimistic than they did at other points in the past, experts still predict it will be a while before the rates return to pre-pandemic numbers. Here’s what you should know about this issue.

In this article

Current state of forbearance as of January 2021

According to data from the Mortgage Bankers Association, about 5.46% of all mortgages — or roughly 2.7 million homeowners — were in forbearance during the second week of January, down slightly from 5.53% the week prior.

Forbearance numbers have ebbed and flowed over the past 10 months, in major part because of the economic changes caused by the pandemic. The latest decrease in forbearances came after a three-week increase caused by the economic slowdown in December.

There are still tons of people still struggling to make their mortgage payments, however, and two important federal relief programs are set to end soon — which could cause big issues for homeowners who are struggling to pay their mortgages.

The foreclosure moratoriums for Fannie Mae are set to end January 31, while the foreclosure protections for Freddie Mac loans are set to end on Febuary 28. Further compounding the issue is the fact that the deadline to request forbearance on a government-backed loan is currently February 28.

If your mortgage is backed by Fannie Mae, Freddie Mac or another government agency and you’re still facing financial hardship due to COVID-19, be sure to request mortgage relief before the deadline. You can request up to 180 days of forbearance if you need it.

2020 forbearance trends and the COVID-19 pandemic

When the pandemic hit and unemployment numbers increased, many homeowners struggled to make their mortgage payments. In response, the federal government provided mortgage relief as part of the CARES Act, a $2.2 trillion stimulus bill to provide relief during the COVID-19 pandemic.

Included in the bill was a provision to protect homeowners with mortgages that are backed by a government agency or government-sponsored enterprises (GSE) such as Fannie Mae or Freddie Mac. Under the CARES Act, borrowers who fit the criteria couldn’t have their home foreclosed on. Those experiencing a financial hardship could also request forbearance in 180-day increments for a total period of 12 months.

During the first couple of months of the pandemic, the number of homeowners with forbearances grew rapidly. At the start of the pandemic in early March, only 0.25% of loans were in forbearance. By the first week of April, that number had risen to 3.74%.

The percentage of mortgage loans in forbearance peaked at 8.6% in June, representing about 4.2 million mortgages. While the numbers ebbed and flowed throughout the rest of 2020, the rate of mortgages in forbearance generally declined.

As unemployment and forbearance rates remained high throughout the year, government agencies extended deadlines on forbearance requests and extended foreclosure moratoriums. As of Jan. 2021, borrowers have until Feb. 28 to request forbearance on their government-backed loan, and their mortgage cannot be foreclosed on until the same date. For Fannie Mae and Freddie Mac loans, there is no deadline to request forbearance, but the foreclosure moratorium ends Jan. 31, 2021.

Despite the relief provided by the federal government, mortgage delinquencies still remain high. Part of the problem is that the federal protections only apply to those with a government or GSE-backed mortgage. As a result, many homeowners aren’t eligible, and some may not realize there are programs available to help.

[ Read: Best Refinance Rates ]

Before COVID-19, the number of mortgages that were delinquent was fairly steady at about 3.6%. By mid-2020, that number had risen to more than 8%. Mortgage experts expect that delinquency rates won’t return to pre-pandemic levels until early 2022.

How the housing market was affected by COVID and government forbearance programs

Despite the increase in unemployment and mortgage delinquencies throughout 2020, the past year has still been booming for the housing market.

First, the Federal Reserve slashed interest rates in 2020 to help keep the economy moving during the pandemic. As a result, mortgage rates have reached all-time lows over the past year, significantly increasing the demand for homes and refinances.

The public health crisis also caused many families to flee urban areas in favor of suburban neighborhoods or smaller towns. This pattern has caused housing demand and prices to spike in those areas due to an influx of new residents.

The government relief programs have also kept the housing supply low, despite the high demand. Thanks to the foreclosure moratorium and forbearance program, many homeowners have been able to stay in their homes when they otherwise may have had to sell. As a result, the housing market supply hasn’t increased like it generally does during an economic crisis.

What to expect for the rest of 2021

There’s no way to know exactly what is to come for the remainder of 2021. The past 12 months have been a tumultuous time for the economy as a whole, including the housing market.

The first thing worth noting is that many of the federal protections for homeowners are set to end soon. The foreclosure moratorium will end Jan. 31 for mortgages backed by Fannie Mae and Freddie Mac and Feb. 28 for mortgages backed by a government agency. Additionally, the deadline for homeowners to request forbearance from a government agency is Feb. 28.

Despite the protections currently in place, the delinquency rate for federally-backed loans has remained significantly higher than the rate for mortgages overall. Once the current relief programs end, it’s possible that many of the loans currently in forbearance will become delinquent, ultimately causing them to go into foreclosure.

[ Read: Best Investment Property Mortgage Rates ]

We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

Source: thesimpledollar.com

Top 6 Home Buying Risks To Avoid

June 22, 2019 Posted By: growth-rapidly Tag: Buying a house

Buying a home, especially as a first time home buyer, while can be an exciting time, can be a scary, stressful and expensive process. That’s why it’s important to be aware of the risks involved. By having an idea of what you may encounter when buying a home, you can take steps to avoid them. If you think you’re ready to buy a house, here are some home buying risks to avoid.

If you are interested in comparing the best mortgage rates through LendingTree click here. It’s completely free.

Check out: 5 Signs You’re Not Ready to Buy a House

If the process of buying a home seems complicated to you, it may make sense to speak with a professional. The SmartAdvisor free matching tool can connect you with up to three financial advisors in your neighborhood.

1. Obtaining the wrong mortgage.

The worst thing you can do when buying a house is to obtain the wrong home loan. A bad mortgage loan can be one with a high interest rate, which means that your monthly payments are higher. You also have to pay more in interest over the term of the loan.

The people who find themselves in this kind of situation are those who fail to shop for multiple mortgage lenders before deciding on one.

Not all mortgage loans are created equal. Mortgage rates and fees may differ from lender to lender. So to avoid this risk, you should plan to compare several mortgage rates. While the mortgage process can be overwhelming at times, you can navigate the process by comparing home loans side by side through LendingTree.


LendingTree: A Better Way to Find A Mortgage

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2. You don’t have any job security.

Another of the several home buying risks to avoid is to make sure you have a stable job with a steady paycheck so you can make your payments on time.

Unless you were able to purchase your home with all cash, you will need to make monthly mortgage payments to satisfy your loan requirements.

In addition, you will need to consider additional expenses, like money to replace the roof or to renovate the kitchen and bathroom. Therefore you will need a steady paycheck or stream of income.

So before you jump into homeownership, make sure you have a stable job.

Related: Apply for a Mortgage Loan Today

3. You forget about other costs.

First time home buyers may think that buying a house only involves finding and getting a mortgage loan, coming up with a down payment, making an offer on a house that they like, and preparing for closing.

However, they may not realize that there are other costs that come with buying a house.

In addition to the down payment and mortgage payments, they need to come up with closing costs, inspection costs, moving costs, maintenance costs, taxes, etc… And if you don’t consider and budget for these costs, you may be in hot water.

4. Buying a home full with problems.

You may have found a house you’ve always dreamed about. But it’s never good idea to purchase a home without conducting a building inspection.

A house inspection is crucial, because it can let you know of a lot of problems that you as a first time home buyer would have never thought existed.

It can reveal problems with the structure of the house, the roof, plumbing, electricity, etc.

Click here to compare mortgage rates through LendingTree. It’s completely FREE.

If you ignore house inspection and move in anyway, these issues can end up cost you a lot of money and can also be detrimental to your safety and well-being.

In conclusion, buying a home can be a fun and exciting experience. It can also come with unique challenges. By being aware of these home buying risks, you can take steps to avoid them.

More articles on buying a house:

The Biggest Mistakes Millennials Make When Buying a House

How Much House Can I Afford

5 Signs You’re Better Off Renting

10 First Time Home Buyer Mistakes to Avoid

Not All Mortgage Lenders Are Created Equally

When it comes to getting a mortgage, rates and fees vary. LendingTree allows you to view and compare multiple mortgage rates from multiple mortgage lenders all in one place and at the same time, so you can choose the best rates for your needs. LendingTree makes getting a loan faster, simpler, and better. Get started today >>>

Source: growthrapidly.com