Access "Trapped Equity" without Refinancing

American homeowners have a record amount of equity in their home.  Many of these homeowners would like to cash out part of that equity but don't want to trade an historically low interest rate for one that is as high as it's been in 20 years.

Instead of refinancing their home, an option is to get a fixed-rate second-lien.  This is different than a HELOC, home equity line of credit, which gives you continual access to your equity at a variable rate.  A HELOC has a draw period where you only must pay the interest.

A second mortgage is a loan against the equity where the homeowner will receive a lump sum and will make payments to repay the loan and interest over a specified period.  Generally speaking, lenders want the combination of the existing first-lien and the new second-lien not to exceed 75-80% of the home's current value.

To calculate how much would be available in a second-lien, subtract the existing unpaid balance on the first-lien from 75-80% of the home's current value.  The remaining amount would be available in the form of a second-lien mortgage.

The borrower, which is the homeowner, would have to qualify for the new second mortgage with sufficient income, acceptable debt-to-income ratios, good credit, and other underwriting requirements.

The advantage of this option is that the homeowner retains the lower interest rate first mortgage which may represent a larger percentage of the value of the property.  The second mortgage will have a higher interest rate but will only be on a smaller percentage of the value of the property.  The blended rate of the two mortgages will be less than the cost of refinancing the home at current interest rates.

Your lender can run an analysis to determine the blended rate on your first and second mortgages so you can see the benefit of keeping your low rate first mortgage in place and accessing your equity through a fixed-rate second mortgage.  Sources for home equity loans could be traditional banks, community banks, credit unions, mortgage brokers, and mortgage companies.

A fixed-rate second mortgage is a solution for homeowners who would like to cash out part of their equity but feel trapped because they don't want to trade an historically low interest rate for a much higher one.

Navigating Closing Costs During Your Home Sale

Buying or selling a house is an exciting and sometimes confusing experience that includes expenses called "closing costs" that can often catch us by surprise. Closing costs are simply the fees and expenses incurred by buyers and sellers during a real estate transaction's closing or settlement process. 

Typical closing costs can vary depending on what is customary in an area, the mortgage type, property value, and other factors.  The largest expenses can be the real estate commission and the title policy.  Total closing costs for a buyer can characteristically range from 2% - 5%  of the sales price and 4% - 7% for a seller.

The most common buyer's closing costs include loan origination fee, title insurance, attorney fees, appraisal, homeowner's insurance, underwriting, miscellaneous fees associated with a new mortgage, and prepaid interest to the end of the month.

Interest is paid in arrears on mortgages after the borrower has used the money.  The payment due on the first of the month pays the interest for the previous month and is calculated for a full month.  The prepaid interest covers the time from the closing date to the end of that month.  The borrower's first payment will usually not be the first of the month following the closing date but the next one.

Separate from the closing costs, lenders usually itemize the additional fees collected at closing used to pre-pay portions of the property taxes and insurance to establish the escrow account.  Insurance is always purchased annually in advance which would be due at closing.

The seller will owe the taxes from January 1^st to the closing date, and it will generally show as a credit to the buyer if they haven't been paid to the taxing authority for the year yet.  Lenders generally like to have two months of funds for the annual insurance and taxes so they can be paid or renewed before it is due.

Some expenses are paid outside of closing like the inspection fees that would be due to the provider at the time they are made.

While both buyers and sellers are responsible for paying certain closing costs, it is possible for a buyer to negotiate for a seller to pay part or all their closing costs.  VA loans restrict the buyer from paying certain fees and they become the responsibility of the seller.  Such fees include attorney fees, agent fees, escrow fees to establish the account, rate lock fees, appraisal fees or inspections ordered by the lender.

The actual expenses will be determined by the lender and special provisions in the sales contract. Your agent can supply you with an estimate of closing costs you typically will be responsible for at the beginning of the transaction and again at the time the sales contract is written.  Buyers will receive an estimate from their lender at the time of application.

Tap into your home equity five ways

Your home is not just a place to live; it's a valuable asset that can serve as a financial resource when you need it most. One of the significant advantages of homeownership is the opportunity to build equity over time, which can be accessed in various ways to fund life's important milestones or unexpected expenses.

Whether you're looking to undertake a home improvement project, consolidate debt, cover education expenses, or simply ensure financial flexibility for the future, your home equity can be a powerful tool to achieve your goals. By understanding the options available and the implications of each, you can leverage your home's value to enhance your financial well-being and seize opportunities that come your way.

Home Equity Loans are a fixed amount loan using the equity in the home as collateral. The borrower receives a lump sum and pays it back in regular monthly installments over a fixed term, typically at a fixed interest rate.

A Home Equity Line of Credit is similar to a credit card; a HELOC provides a revolving line of credit using the home's equity as collateral. Homeowners can borrow as much or as little as they need up to a specified limit, and interest is only paid on the amount borrowed.

 A Cash-Out Refinance involves refinancing the current mortgage for more than the homeowner owes and pocketing the difference. Essentially, homeowners replace their existing mortgage with a new, larger loan and get the difference in cash to be used any way they want.

A Reverse Mortgage is available to seniors, typically 62 and older and allows homeowners to convert part of their home equity into cash without having to sell their home or pay additional monthly bills. Instead of making monthly payments to a lender, the lender makes payments to the borrower.

Homeowners can choose to sell their current property and purchase a less expensive one, using the profit from the sale (equity) for other purposes. This is a more drastic approach as it involves moving, but it can release a significant amount of equity.

Each of these options has its own advantages and considerations, so homeowners should carefully evaluate which method best fits their needs and consult with financial professionals before making decisions.

New Construction Homes with Your Own Agent

Homebuyers in the market who are frustrated by the low inventory are finding what they want in new construction.  Among the obvious advantages are that it is fresh and new, has never been lived in, and can be personalized to an individual's taste and needs.

New construction homes can be more expensive upfront, but they can save you money in the long run. These homes are built to the latest building codes, which means they are more energy-efficient and require less maintenance. They also come with warranties that can help protect you from unexpected repairs.

New construction homes can be a great option for first-time homebuyers. They offer a blank slate that you can customize to your liking, and they don't have the same wear and tear as older homes.

Working with a REALTOR� can help you navigate the process of buying a new construction home. They can help you find the right builder, negotiate a good price, and make sure that the home is built to your specifications.

One of the most critical steps in designing your dream home is enlisting the expertise of a qualified real estate professional. A REALTOR� brings essential knowledge of the local market, construction processes, checklists, and negotiation skills. They can help you explore financing options, connect you with reputable builders and guide you through the complex steps of purchasing new construction.

Navigate the path to your dream home with these steps guided by your REALTOR�:

1. Select a Real Estate Professional: Find a trusted agent to champion your interests, negotiate with builders and ensure a seamless transaction.
2. Research Builders and Neighborhoods: Discover builders, track records and neighborhoods using the expertise of your real estate professional.
3. Get Pre-approved: Determine your budget and financing options by securing pre-approval from a trusted lender.
4. Navigating Legal and Documentation Processes: Your real estate professional understands local regulations, permits and zoning requirements. They will guide you through the paperwork and review things along the way, allowing you to focus on the creative aspects of your dream home.
5. Construction and Project Management: Your real estate professional will accompany you through the construction process. Your agent will work with the builder's agent to oversee the timeline and progress, to address any concerns that may arise.

An important step is having your agent introduce you to the builder's home for the first time and register you as their client.  Builders have sales teams that will assist you, but they don't represent you; they are employees of the builders.

Another consideration is to have a home inspection, even though it may not seem necessary.  It is comforting to have your inspector verifying that the building is up to code and being done the way it should be.  Some buyers elect to have inspections done at the major steps of the building process, but this does add some additional cost.

The importance of having a REALTOR� by your side is part of your investment in a home.  Your agent will be with you every step of the way and advocate for you in the process.  Your path to home-sweet-home starts with selecting your agent.

How Rapid Rescoring Can Make a Difference

Imagine you're on the verge of securing a mortgage, and a slightly higher credit score could mean a lower interest rate. The good news? There's a quicker way to make that possibility a reality. Mortgage loans are often more time-sensitive than other loans. If you find yourself in a situation where a slightly improved credit score could open doors to better rates, the solution might lie in rapid rescoring.

When it comes to mortgage loans, time is of the essence. Your offer has been accepted, and you have a limited window to qualify for a new loan. But what if there was a way to boost your credit score swiftly and improve your chances of securing a lower interest rate?

Enter rapid rescoring ... a powerful tool that mortgage lenders use to diagnose potential actions that could lead to a credit score increase. It's important to note that these diagnostic reports are estimates, and their accuracy can vary since different lenders employ distinct scoring formulas. However, this innovative approach can provide a viable solution for improving your credit score in a time-sensitive scenario.

Let's say you realize you have sufficient funds in your savings account to significantly pay down your credit card debt. Acting on your mortgage officer's advice, you make the payment, anticipating a positive impact on your credit score. This strategic step is a prime example of how you can proactively influence your credit standing.

Following your payment, your lender can initiate a rapid rescore by obtaining an updated copy of your credit report from one or more of the three nationwide consumer reporting agencies ... Equifax, TransUnion, and Experian. With this fresh data in hand, your lender can reevaluate your credit scores based on the latest information, including your substantial debt payment aimed at elevating your scores.

Rapid rescoring is designed to be swift, typically taking three to five business days to complete. The exact duration may vary depending on your individual circumstances, but the benefits can be significant.

Before requesting your lender to initiate a rapid rescore, it's prudent to evaluate your entire financial situation. Ensure there are no unforeseen negative developments on the horizon, such as new delinquent payments or other potential issues that could affect your credit.

If you find yourself in a credit score range where a few extra points could unlock better terms for your mortgage, rapid rescoring could be an excellent option to explore.

In the intricate world of mortgage loans, rapid rescoring emerges as a valuable strategy for potential homebuyers aiming to secure favorable terms. By understanding the potential of rapid rescoring and acting strategically, you can potentially save time and even money in the long run. When considering this option, remember to assess your entire financial landscape and consult with a trusted mortgage professional to make an informed decision that aligns with your goals.

Why It's a Smart Move to Buy a Home in the Current Market

If you're in a financially stable position, now might be the perfect time to embark on your homeownership journey. Buying a home today offers several advantages, including the opportunity to build equity and stabilize your housing costs in the face of rising expenses. Explore the reasons why purchasing a home now can be a wise decision in the current market.

By purchasing a home today, you can start building equity, which is an investment in your future. Additionally, opting for a fixed-rate mortgage allows you to stabilize your monthly housing costs for the long term, even as other expenses continue to rise. This stability provides peace of mind in an ever-changing financial landscape.

While housing costs experienced significant increases in 2021 due to a combination of factors, such as inflation, high demand, and low supply, the market has since moderated. If you decide to buy now, you can expect relatively stable house prices and potentially face less competition from other buyers due to the current mortgage rate environment.

Despite prevailing interest rates, which fell to 7% last week, recent research from Freddie Mac suggests that homebuyers can save $600 to $1,200 annually by applying for mortgages from multiple lenders. It's important to remember that you can always refinance your loan in the future if rates decrease further.

Renters, on the other hand, have experienced rising rental costs in recent years. The 2023 Multifamily Outlook indicates that rent prices increased between 6% and 8% in 2022, with a projected growth of 3.9% in 2023. By choosing to buy a home, you can escape the uncertainty and potential annual rent increases, gaining stability and control over your housing expenses.

Homeowners with fixed-rate loans enjoy the benefit of consistent monthly housing costs over the life of their loan. While other expenses may fluctuate, you can take comfort in the fact that your mortgage payments will remain relatively unchanged in the long run. This stability gives you confidence in managing your finances effectively, regardless of external economic factors.

Despite the potential for rising rents and home prices, buying a home today offers distinct advantages for those who are financially prepared. With the opportunity to build equity, stabilize your housing costs, and enjoy long-term cost predictability, homeownership can be a smart investment in your future. By taking the leap into homeownership now, you can secure a place to call your own and navigate the evolving financial landscape with confidence.

Download our Buyers Guide and let's connect to provide you with specific information relevant to your individual situation.

Moving Scams: How to Spot Them

Moving can be stressful enough without having to worry about being scammed by a moving company. Unfortunately, there are unscrupulous movers out there who prey on people who are in the midst of moving.

To protect yourself from being scammed, it's important to be aware of the red flags. Here are a few things to watch out for:

The mover or broker doesn't perform an on-site inspection of your household items and gives an estimate over the telephone or online. A legitimate moving company will always come to your home to inspect your belongings and give you an accurate estimate.

The mover or broker doesn't provide a written estimate or says they will determine the cost after loading. A written estimate is essential to protect yourself from hidden charges.

The moving company demands cash or a large deposit before the move. Legitimate moving companies will accept credit cards or checks.

The mover asks you to sign blank documents. Never sign blank documents. This could give the mover the opportunity to add hidden charges after the move.

The mover or broker doesn't provide you with a copy of the Your Rights and Responsibilities When You Move booklet and a copy of FMCSA's Ready to Move brochure. These booklets contain important information about your rights and responsibilities as a mover.

The company's website has no local address and no information about their registration or insurance. A legitimate moving company will have a physical address and be registered with the Federal Motor Carrier Safety Administration (FMCSA).

The mover claims all goods are covered by their insurance. This is not always true. Make sure you understand the terms of the mover's insurance before you sign any contracts.

On moving day, a rental truck arrives rather than a company-owned or marked fleet truck. This is a red flag that the mover may not be legitimate.

The mover claims that you have more belongings than estimated. This could be an attempt to charge you more money.

If you see any of these red flags, it's best to walk away from the moving company and find a more reputable one. You can check the FMCSA's website to see if the company is registered and insured. You can also read reviews of the company online.

For more information, go to the Federal Motor Carrier Safety Administration website.   Download our Moving Guide.