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How Much Will It Cost To Refinance Your Mortgage?

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real-estate-basicsThe question of the cost of refinancing your mortgage is simple enough on the surface, but the details and the fees add up and appear before you begin and then over the lifetime of the new loan. You need to look carefully at the costs of a refi before you commit to even formally applying for it.

Paying To Qualify

You will have to pay to initiate a mortgage application fee that could be as much as $500. Your refi is for a new loan contract, and the lender will demand a fee for the privilege of starting a new loan. As with any lending, the bank is interested in the qualities of both you and the property.

Credit reports – You will have to show that you are still in good standing with your creditors. Obtaining copies of your credit reports will cost anything up to $100.

Appraisal report – The property that provides the security for your loan also has to prove that it is creditworthy. The appraisal will also have to confirm that there is sufficient equity to repay the previous loan and cover the new lending, which may cost around $400, and you still do not know for certain that you will get approval for the new mortgage. If there is something wrong with the condition of the property or it just does not have the value that you assumed, it could turn out that you spend $1,000 or more only for the lender to decline your application, ouch.

Cost At Closing

Once everything meets the approval of the lender, there is another round of fees to pay at the time that the loan closes. In fact, this is quite a list if you break it down. You will have an origination fee, document preparation fee, title search and insurance fees, recording fee and a host of lesser fees that add up quickly to around 1.5 percent of your initial loan value or more.

Lifetime Cost

Is it worth additional costs? The answer depends on your objectives: If you want to save money in the long-term, and you have found a new loan package that gives you a lower interest rate the savings of interest payments will cover the extra costs to refinance.

It does not take much of a rate reduction to create savings over the life of a thirty-year loan. Likewise, if you reduce the term from thirty to fifteen years, you will save thousands in interest payments. If you plan to sell long before the end of the new amortization period, it will probably be more expensive to pay the up-front cost of refinancing.

How much can you save? Over the life of a thirty-year mortgage, you can save tens of thousands by shaving just a quarter percent from your current rate. If you experiment with an online repayment calculator, you will find that the amount you can save over the life of a loan is on the order of the original balance of the loan, depending on your choices for interest rate and amortization it may be more, or less. If you compare that to the costs detailed above you can see that the key is that re-fi saves in the long term, but it is expensive in the near-term.

When Would You Leave One Partner Off The Loan Application?

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Spouses Go Solo

They do say that two can live as cheaply as one and a marital partnership usually supports the case for homeownership.  However, occasionally one partner has a mark on their credit history that makes the exception to this rule. In such situations, it might be better to leave them off the loan application entirely.

The details depend on state laws, but sometimes it is more expedient for one partner to apply for finance without including the other on the loan. If you take the twin paths of applying for home financing in one partner’s name, while working to improve the other’s credit, you will make positive steps that pay dividends in the long run. Stretching to action now will deliver prosperity later.

Laws Limit How Lenders Look At You

It might tempt you to wait until you both have high credit scores but real estate keeps on moving and tends to grow to keep pace with inflation. If you can qualify and acquire real estate under challenging circumstances, then you will be riding high when you have finally overcome your obstacles. So while you might have to compromise on the choice of properties now, the equity that you build over time will position you to dictate terms in the future.

Like so many financial activities today, loan applications require a credit check before they gain final approval. Sometimes problems with credit because of events cause honest people to go into debt. You might have been the victim of identity theft or had excessive bills due to medical issues.

The Equal Credit Opportunity Act constrains the questions that lenders can ask about spousal income or ask about marital status, except in certain clearly prescribed circumstances. The lack of dual income will change the equation of your debt-to-equity ratio and that will determine how much you can borrow.

Matters Of Loans And Titles

In some cases, you may be able to use your spouse’s income, but your spouse might have to quit their claim to your shared home. On the downside, your partner’s income might not be included to calculate the amount you qualify to borrow. How does leaving one partner or spouse off a deed impact their claim to sharing the home? As married partners you are still likely to be entitled to an equal share, it depends on your state’s laws about community property.

The requirements vary by state and by case. A hidden benefit is that in the future, if you cannot make the payments, your positions could be reversed, and your partner’s credit is unaffected while yours is suffering for the hit you’ve taken now; you would be no worse off than you are now.

Credit Not Joined As One In Marriage

Just because you have married and agreed to share everything, it does not mean that the credit agencies will go along with that; they do not issue joint credit scores or reports. In the near-term it might just be the best choice to leave one of you off the loan application and start building equity in your home now so that you can move up to the bigger home and lifestyle when time are better, and credit scores have healed.

Prequalifying When You Still Have Outstanding Student Loans

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Mortgage Qualification BasicsIt is a fact of modern life that if you have attended college in the last decade, you are likely to carry a debt from the effort. You might have ambitious plans about how you want to live your life and find that this debt is the greatest obstacle in your path. Specifically, how do you clear the way to buy a home if you still have a balance on your student loans? Will it take half your adult life and selling your soul?

Student Loans Give You A Path To A Better Life

Fortunately, it is not as bad as all that. In fact, you may be closer to qualifying than you think. Student debt is not an insurmountable challenge, but you may have to work hard to achieve the goal of home ownership while you are still paying for your education.

The United States carries a collective student loan balance of more than $1.2 trillion, and students who graduated from college in 2014 had an average of $33,000 in outstanding loans. This level of indebtedness is a trade-off that gives graduates access to better-paying jobs in the long-term, at the expense of lifestyle and relative affluence in the short-term. The sacrifice eventually pays off even if it might seem like it never will right now.

Turning A Plan Into Action

Student loans do influence your ability to qualify for financing, but this debt counts most explicitly on your debt-to-income (DTI) ratio, which is one of the numbers that loan officers will scrutinize when they are deciding if they want to lend to you. The fact that lenders are looking at DTI rather than your total levels of debt matters because it is easier for you to reduce your monthly debt servicing costs than it is to reduce your total amount of debt.

Do not take on any more debt; hold off on buying a new car or spending on credit cards. Real estate holds and grows in value, unlike cars, possessions, and experiences, which will still be there when you are a more affluent homeowner. Contact you student loan servicer and apply to reduce your monthly repayments. Look for ways to earn extra income whether it is through a pay raise, a weekend job or by finding a better paying career.

Make Your Goal A Reality With Work Now And Experiences Later

It might require you to adjust your expectations and demand that you work hard to achieve this worthy goal, but it is possible to buy a home while you still have student loans. The best way to discover how close you are to buying your home is to start taking steps to get prequalified. You will not need a credit check as a part of the process, but it will give you a fair understanding of how close you are to your goal.

If the worst outcome would be to find out just how far you have to go in paying off your debts, it at least gives you more information on which to base the plan you execute to pursue your goal. However, in all likelihood, you will discover that your student loans are less of a burden than you had expected and that the path to buying your first home is almost within your reach.

Scooping Out The Middle With Home Equity Loans

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HELOC BasicsWhat Is A Home Equity Line Of Credit?

Do you have enough equity in your home to cash out and use it to increase your overall wealth? If you do, be forewarned that this is both an opportunity and a temptation that you could potentially misuse to your financial detriment.

A home equity line of credit or HELOC is a line of credit secured by your real estate. Rather than advancing the full sum of the loan, like a conventional or FHS loan, the lender sets a term and a limit, and you only take out the cash you want to use, up to that limit and within a period typically limited to between 5 and 25 years. HELOCs are home loans that require you to qualify in the same manner as other loans secured by your real estate, and defaulting on your payments could ultimately result in a foreclosure.

The most prudent uses of HELOCs are those big-ticket life-changing items like education and home improvement. This loan format suits these purposes well because of the flexibility; you only borrow as much against your equity as your expenditures mount. Since you are taking away from the stake that you hold in your home, you should only invest it either in bettering yourself or raising the market value of your property.

Mistakes That Homeowners Make With Home Equity Lines Of Credit

Trading in your equity to use for retail purchases or transient experiences is not an efficient financial strategy for the long-term. Case in point, when property values dipped significantly in 2007-2008, overuse of this type of financing for personal spending caused many homeowners to discover that their secured debts were greater than their home values.

In extraordinary circumstances your HELOC could be reduced by a nervous lender before the end of the term and before you can utilize it, which is what happened precisely as the real estate market crumbled in 2008; the banks revoked previously secured lines of credit in response to falling levels of homeowner equity. This drastic pullback was a result of the economic conditions of that era and a drastic measure.

Making Judgment Calls About Opportunities

There are alternatives to HELOCs that might better suit many homeowner circumstances. If you have a large proportion of equity, say fifty percent of the value of your home or more it might prove to be less expensive and simpler to refinance or take a conventional second home loan and take out the equity as a lump sum. However, there is no point in paying interest on cash that you do not intend to put to use immediately. Scooping out the equity that you have accrued in your home with a HELOC is best used as to trade for higher value elsewhere.

As a borrower, you might consider that once your line of credit is exhausted you may then decide to refinance. As the last decade has shown, your home value can go down as well as up. As a sensible homeowner, you should always allow for changes in fortune. However using a HELOC in the short-term to advance your education, career prospects and enhancing your property value are likely to be wise choices in the long-term as well.

Match Your Home Finance Approach To Your Stage Of Life

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real-estate-basicsAs A Borrower, Either Millennial, Gen-Xer or Baby-Boomer Be

There are three distinct stages in a homeowner’s life. Let’s call them Millennial, Gen-X, and Baby-boomer, and while these terms imply distinct generations you can think of them as a series of financial stages that lead one to another, ascending the ladder of wealth.

Arguably, homeownership proceeds in stages because it is all about building and managing wealth; wealth itself is about having the lifestyle you have earned from the accumulated rewards of hard work. In the United States of America, owning your home is still one of the most significant factors associated with financial independence and membership in the middle class.

Financing for The Millennial Generation

If you are at the leading edge of the millennial generation, you are likely to be finished with school and starting to build a career. Now that you have gotten the travel bug out of your system paid down the majority of your student loans, and your career is on track, you might start to look around and get a home of your own.

As a person with just starting out, you might wonder if you are better off renting or buying. Once you decide that ownership is the right choice, you will have to start taking your credit history seriously and make an effort to get qualified for your first home loan.

Fortunately, first-time homeowners are reasonably well served by programs intended to get you into your first home. If you don’t have the savings to make a deposit of twenty percent or more, an FHA loan will facilitate making a small down payment, but that will add costs to your borrowing, this is an institution that has helped generations of Americans buy their first homes. If you are a veteran of the United States military, you might qualify for a Veterans Administration loan with even more generous terms.

Mid-life Gen-X Financing Options

You have bought that first home; you have paid down the loan balance and maybe the house of condominium is looking a little too small now, you have a career that is expanding and a two-income home. If you made it through the last decade with your assets intact you are in a good position to move up, you might decide to move up to a luxury home in an exclusive neighborhood.

With a low level of debt relative to the equity you hold in your assets, you can qualify for a jumbo loan unrestricted by the limits imposed on conforming loans, loans that fall within the limits set by Federal regulators on mortgages to conform to FHA and other government-backed lending programs.

Once your big move is behind you, maybe it is time to start expanding your assets. Do you dream of buying a vacation home or a rental property as an investment? Buying a second home or a rental unit could be a convenient and enjoyable way to increase your wealth.

Baby-Boomer Asset Consolidation Financing

You are in the stage of life when you want to consolidate your assets and downsize and focus in preparation for retirement. You may be wondering about how to get more out of your investment properties, reinvesting your gains or just converting to cash. These are questions that you need to work with your financial advisors and your family. Borrowing against your assets may not be the best choice if you have built up a large nest egg. However, holding a moderate level of debt could be financially efficient if you can take advantage of the tax deductions relating to interest.

All three stages have variations and creative possibilities and if you have a plan you can make each of the first two stages flow on to the third. Real estate finance still offers the American public the opportunity of ownership and advancement; it can bring a more comfortable and exciting lifestyle for those who are motivated to take advantage of it.

Is Co-Signing A Mortgage A Good Idea? The Pros And Cons

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Home Purchase BasicsThere are at least as many ways to finance a home purchase as there are circumstances in which to buy your home. Help from a friend or family member is one way to get that first home when it would otherwise be just out of reach. Co-signing the loan for a beloved family member is a way to help them to become homeowners if you are comfortable with the responsibilities that go with it.

Co-signers help when the borrower is young and does not yet have credit or has a short credit history. Alternatively, the borrower might be living on a modest income that would not otherwise enable them to secure financing unassisted.

The Warm And Fuzzy Part: Co-Signer Pros

If you are financially well established, with all of the assets and good credit that you could desire, you may be looking around to help the younger and less affluent members of your family. You will have the emotionally rewarding feeling of sponsoring your family. The changes in the economy over the past several decades have made it more difficult for young people to get established. Student debt and economic turmoil have made starting out in life more difficult, and it is rewarding for senior family members to help out.

And Now For The Scary Part: Co-Signer Cons

Co-signing a loan for a relative or friend is not without risks. As long as your name is on the title you are going to be sharing the risk, which has the real possibility of generating disagreements and hostility between the borrower and you; it is the sort of thing that can destroy family relationships.  As a co-signer, you will be listed on the property title, and this will give you responsibilities but not many rights.

In legal terms, the cost can be very high for you as the co-signer if the borrower defaults. The lender will come after you first, it will damage your credit, you will most likely not have any rights to take possession of the property and, depending on your state laws, any deficiency judgments that result from a foreclosure sale will be against you as well as the borrower. The lesson here is that, if you are sure, get sound legal advice on the laws of your state before make your decision and sign anything.

Make It A Temporary Solution

If you are confident that your fledgling borrower is going to make the payments and build their credit and income, it is in your long-term interest if you can encourage them to refinance as soon as possible. If their credit and paychecks improve, their equity has increased sufficiently, or local real estate values rise, they will have some strong incentives to refinance based on their independent financial standing.

Your borrower should appreciate the significance of this help for the generous act that it is and co-signers need to get comprehensive legal advice before agreeing to anything. Co-signing for a home loan is something that needs to be weighed very carefully but, if no other less extreme options are available, it can be one way for a family to pass on financial opportunities to the next generation.

I’ve Found The Right Location But I Want To Build From Scratch – What Now?

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Home Building BasicsDreaming The Dream

Ironically the key to building your own home from scratch is having the right professional support to put the whole process together and to ensure that the process goes smoothly from start to finish.

The thought of building your own home is extremely appealing to homeowners. If you could live in a unique house that was designed to your exact personal requirements, why would you not? Who would not want that? It is a real aspirational dream to start from scratch and come up with a house unlike any other.

Building your own home is an epic challenge because of the costs and complexities involved. But after it is completed, a successfully self-built home that stands out with charm and character is likely to become a landmark and icon of the community in future decades. This is also because the owner made their mark on society prior to construction.

Listing The Build Your Own Home Resources

As always, real estate and home ownership is about location. So the first element of the project will always be the finding of a suitable plot of land. If you already have that then you have made a significant first step to committing to a long and elaborate journey.

Your land will need to have the right permissions to construct the type of building that you want. This process could be straightforward or frustratingly difficult depending on how inline your plans are with the surrounding properties and the community in which it is situated.

Bring In Professionals

You will start when you hire an architect or select a published building design that suits your needs. An architect can do much to help you organize the plan and will come up with a unique design for your site and your lifestyle. Many construction companies have off-the-shelf plans ready to go. The advantage here is that they will do the work and already have the bugs worked out. So, it could be a smoother ride through the process.

You will also need to have a plan for completing the project. This is not a design for your home but a roadmap to get through the process of doing all of the work to make it happen. This is critical because there is a sequence of events from clearing the land to connecting the utilities.

On a related note, you will need to decide if you are going to employ a builder to manage and supervise the project or if you are going to act as show-runner and manage the build yourself. Even if you do choose to self-build you will likely need to consult with a builder to make sure the details come out right.

The combinations and permutations of how you go about building your own home are almost limitless. Some of the things you need to be aware of are the steps in the project plan and follow how progress is going in relation to the plan. One of the most important issues you should be concerned with is costing. Even small cost overruns can add up over the life of a project. An alternative would be to work with a builder that provides a turnkey solution.

In Summary

Building your own home can be a fantastic adventure or a difficult long, drawn-out process. It is not for everybody. Most home seekers will be satisfied with the new homes offered by developers or the many choices of the existing home sales market.

If you decide to go the route of building your own home make certain that you do your research and find qualified professionals to support your objectives. If you get it right you will have a unique and remarkable home that is unlike any other in your neighborhood.

Buying The Worst Shack In A High Value Neighborhood

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Real Estate Investment BasicsIs It Work Putting In A Bid And Doing The Work?

Choosing to invest in a fixer upper in a nice neighborhood may seem like a case of following your heart but it is in fact a math problem. You are going to want to spend less than the full market price and then put in some cash, construction loans or really, really hard work. Of course you will get the biggest discounts by using the best available combination of all of these.

Although construction and rehab prices will vary the real deciding factor is the variation in the price of land, which varies dramatically across the country. The more crowded areas and those that have the best weather may be pricier than the rest. Also the amount of money that is poured into an industry in a region can make a difference. This is evident in the so-called sunshine tax of Southern California, the tech driven super-high prices of San Francisco and the expensive urban centrality of Cities like New York or Miami.

Rehabilitation Heroics

The thing about buying the most run-down home in a neighborhood and improving it is that, even if the fact remains unspoken, you immediately become a community hero. There is serious automatic goodwill for you when you take on the local eyesore. Homeowners in a community are painfully aware of the run down foreclosures and derelict houses that are dragging down the character and value of their own homes.

In fact, if no other option emerges, some owners will form syndicates to rehabilitate blighted properties, if it will make a critical difference in the future prospects of their own homes. Abandoned houses attract wildlife and sinister uses by elements such as drug users and such. You will be doing the existing homeowners of your new community a huge favor to put in the work and the equity. It’s an investment that they are dreading to make themselves.

Doing The Fixer Upper Math

How do you price it? First, determine a conservative estimate of the likely full market value. At this point professional investors and house flippers will knock off around twenty percent as a profit margin that they want to make. For you as a private buyer, this discount is likely going to make getting in with hard work worthwhile.

Second, determine the cost of getting the property to full market value. This should be estimated on the high side to allow for hidden defects and unforeseen problems. You will be looking at a list of problems, and the materials and labor to put them right. Don’t forget the cost of professional fees and any cost of short-term borrowing. Then, subtract that from the full value. This will give you the price range in which to bid. If it turns out to be something that you can afford, work with your realtor to negotiate a deal.

Hard Work Might Just Pay Off

At the end of the day it’s about making your own personal dream affordable. That might mean getting you ensconced in the perfect neighborhood at a discount. If that is what works for you to create a happy home there is no reason to argue. The essential point is to be happy and cut some corners so that you can do it within your budget.

Why Don’t Realtors Do Appraisals Anymore?

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Home Appraisal BasicsThe Competitive Market Analysis

Why is it that the expression “appraisal” isn’t slung around by realtors the way that it used to be thirty years ago? Well, it turns out there’s a pretty solid reason. Appraisal has come to mean an official statement of price opinion. The alternative is the competitive market analysis given by your realtor or broker.

It is all about getting the right opinion of the price the market will support for a sale. Appraisal refers to an official opinion from a certified professional but it is still an opinion of price. It can be submitted on an application for home finance because the finance industry will trust it based on the fact that a licensed appraiser created it.

An experienced and worthy professional realtor will have a very good idea of prices. Even so, the opinion that they give is not usable for applications but they should have an accurate enough opinion to put a property on the market and have it sell. Or, as a buyer’s agent, calculate the right price to bid for a property without over-bidding.

Appraisal Means Authority

The distinction and split between appraisal and market analysis came about because of the savings and loan crisis of the 1980s. Since then there has been a clear difference in the usage of the terms.

So what is it that a realtor can do for you without calling in a certified appraiser? Quite a lot actually and it is one of the fundamental reasons that the profession is so valuable in all real estate transactions.

Your realtor should have enough experience to judge the market conditions in your community, whether you are selling out of it or buying into it. They should be able to give you accurate advice to complete the transaction at the highest and best value for a given property.

The Multiple Listing Service (MLS) to which they subscribe is the inside track on what is being sold in your area, for how much and when. There are websites that give you information about sales and listings such as Zillow and but the most comprehensive information is always within an MLS.

Websites do a great job of tracking public record information but your agent’s MLS will have access to the inner details about what is happening in the slice of the market that it covers. A realtor must understand the market beyond the obvious and that is the advantage that experience gives.

Different Stage Means Different Need

Word play and legalistic definitions aside your realtor has the knowledge and the support to give you the information to help you buy or sell your home. When it comes to official documents, yes you do need to have an opinion of value from a licensed appraiser. Otherwise, the wisdom of your experienced real estate professional should get you to the right value for your side of the real estate transaction.

Move In Together And Merge Your Finances, But What About Refinancing?

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real-estate-basicsIt is an exciting time when you move in with a partner, one that should be the epitome of happiness. However, organizing cohabitation is more complicated in practice, especially if either one of you already owns the home and makes payments on a home loan. The question of whether you should refinance is a part of the bigger question about how you will share ownership and financial responsibilities in general.

The Hazards Of Taking Turns

Taking turns in paying for life’s necessities in cohabitation leads to two parts of one problem: One or both partners soon start to keep a tally of who has paid for what. The solution for this is creating one shared bank account from which all costs of living and shared expenses come with both partners making a predetermined monthly contribution based on a budget that you work out and review together. Like your bank account, you will find that sharing the home you occupy is a tricky proposition, dependent on your circumstances and your state’s real estate laws on shared ownership.

Cohabiting As Homeowners

When you commit to co-ownership, you need to have a clear understanding of each other’s financial position going into the relationship. Do you know your partner’s current credit situation? Deciding whether you should refinance your home with your partner comes as part of the process of deciding how you should share everything. It is something to settle before you start making final choices.

So, what do you do when one partner owns the home already? If the other can afford to match assets and equity and borrowing ability, then the simplest solution might be to refinance as equal partners, both bringing cash and financial clout to the shared home.

If there is an imbalance in assets, then it becomes more complicated and yet in the eyes of the law, both partners might be entitled to an equal share of the property. The solution could be a cohabitation agreement, very much like a wedding prenuptial agreement, a contract that declares the assets brought to the partnership by each side and which return to each partner, should the relationship end.

Getting On With Your Lives Together

Real estate is a concept that is defined very clearly in the laws of the land, and each state has its particular histories legal precedents and legislation. The more closely you study the subject, the more complicated it becomes and it has become a specialization in the law that captures entire careers and specialized law firms.

As unromantic as it might seem, getting legal advice before you commit to moving in together is a prudent course of action. However, homeownership is a part of life, and domestic partnerships are a reflection of legal ones. If you can get past the legal formalities and settle in, as many couples do, you can have the domestic bliss you are seeking with all the comforts of owning your home.

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