Tag Archives: monthly payments

Money Monday: Money tips for homeowners

With homeownership, there are both benefits and costs involved (not just the down payment).

As the homeowner, your financial responsibilities extend beyond the down payment and monthly mortgage payments; there will be maintenance items to maintain and pay for, yearly tax bills, and the unexpected repairs to resolve. CNN Money does have a few money tips to help those would-be and already-are homeowners; read their article here.

Photo from Pictures of Money

Photo from Pictures of Money

1. Create a new budget

Instead of rent, you now have house expenditures. Besides the change in the monthly payment, there will likely be an increase in utility bills (it costs more to cool and heat and power a larger living space!), the potential watering and maintenance of a yard and garden, and other things such as a trash bill and your tax bills.

Estimate your monthly expenses initially, but then keep track of the actual monthly money going out for awhile, and then base your budget on that.

2. Plan on repairs

Even with a turn-key property, most likely you will have repairs to make pretty soon down the road. “Most homeowners spend 1% to 4% of their homes’ value each year on repairs and maintenance.” (CNN Money. “4 money tips for new homeowners”). And if you have an expensive repair coming up, like replacing the roof, try to save a little more each month in preparation.

3. Expect your property taxes to go up

Property taxes start out based on the assessed value of your home at the time of purchase. But,

Property taxes have a tendency to rise, even when home values drop. Back in 2000, localities across the U.S. collected an estimated $247 billion in property taxes, but by 2010, that number almost doubled to $476 billion despite the decline in home prices from the infamous housing bubble implosion. (CNN Money. “4 money tips for new homeowners”)

4. Expect big payments

Homeowner’s insurance and property taxes are some hefty bills, that you should plan for accordingly.

Read up on all of CNN Money’s tips here: “4 money tips for new homeowners”

Money Monday: Half of all renters can’t afford the rent

 

Nearly half of renters in the U.S. are struggling to afford their monthly payments.

IMG_5374.JPG“Experts generally recommend keeping your housing costs around 30% of your monthly income. But the number of “cost-burdened” tenants — those who spend more than 30% of their income on rent — rose to 21.3 million people last year, according to Harvard’s Joint Center for Housing Studies.

“Of those, more than 26% are “severely cost burdened” and spend more than half of their income to cover rent.

“Here’s the problem: rents are increasing much faster than wages. Inflation-adjusted rents increased 7% from 2001-2014 while household incomes dropped 9%, the report showed. At the same time, rising demand for rental units has pushed the national vacancy rate to a 30-year low, driving prices even higher…”

This article is from CNN Money. Read more at CNN Money here.

 

What’s in a mortgage payment?

What’s in a mortgage payment? This infographic breaks down a mortgage payment into P.I.T.I. – principal, interest, taxes, insurance. When you’re buying a house, keep informed about how much that home will cost you, based on how much you put down and whether or not you will need to pay mortgage insurance.

mortgage paymentsThis mortgage payment-related infographic is from mlsmaps.com.

BofA Tests an Option to Foreclosure

Bank of America Corp.is launching a pilot program that will allow homeowners at risk of foreclosure to hand over deeds to their houses and sign leases that will let them rent the houses back from the bank at a market rate.

While the initial scope of the “Mortgage to Lease” program is small—the bank began sending letters Thursday offering leases to 1,000 homeowners in Arizona, Nevada and New York—it represents a big change in the way banks deal with borrowers who can’t afford their mortgages.

Until now, banks have focused the bulk of their borrower outreach on modifying mortgages, usually by reducing the monthly payments. When that doesn’t work, most foreclosure alternatives require homeowners to leave their house, typically through a short sale, in which the bank approves the sale for less than the amount owed. Banks often insert clauses forbidding the new owner from renting the property back to the former owner.

The new approach is unlikely to be expanded unless banks conclude that avoiding eviction reduces costs associated with taking back, maintaining and reselling properties. If a significant number of borrowers are willing and able to rent the homes, Bank of America could ultimately sell the properties to investors that agree to keep them as rentals.

Already, in a growing number of housing markets, investors are buying foreclosures and converting them into rentals, often filling them with families that have gone through foreclosure.

Executives last year began to ask themselves “isn’t there a way to sort of combine that whole process and

keep the borrower in the property? It’s just better for the market,” said Ron Sturzenegger, the Bank of America executive who last summer was put in charge of the unit that handles troubled mortgages.

[BANKRENT]

Bank of America became the nation’s largest mortgage originator after its 2008 purchase of Countrywide Financial Corp., but over the past year it has retreated from the mortgage market. The initial pilot is limited to loans that Bank of America holds on its books. Homeowners can’t apply for the program—only those who receive letters from the bank can participate.

Borrowers would agree to a what is known as a “deed-in-lieu” of foreclosure, where they essentially sign over ownership of the property to the lender. This is less costly to the bank and also does less damage to a borrower’s credit than a foreclosure.

Borrowers selected for the program must be at least two months past due on their mortgage and face considerable risk of foreclosure.

In exchange…

Read the rest of this article by the Wall Street Journal here: “Alternative to Foreclosure Tested“.

Low Rates, High Obstacles to Refinancing Mortgage

As interest rates have slid over the past couple of years, Gabriel Bousbib of Englewood, N.J., refinanced his 15-year mortgage not once, but twice-cutting his interest rate in two steps from about 4.6 percent to 3.375 percent.

He’s one of a number of homeowners who refinanced just a year or two ago, but decided it was worth considering again as mortgage rates hit record lows-now averaging around 4 percent for a 30-year loan.

refinancing your home“When you’re quoting rates in the high 3s, people are saying, ‘It’s worth it to me,'” says Steve Hoogerhyde, executive vice president at Clifton Savings Bank.

“My monthly savings are going down a few hundred dollars; it adds up over 15 years,” said Bousbib, a financial services executive. “And if rates keep going down, I would refinance again.”

Refinance applications have more than doubled over the past year, though they’re not as high as in previous refinancing booms because it’s harder to qualify in the current atmosphere of tighter credit standards, according to the Mortgage Bankers Association. With the volume of home purchases still low, refinancing accounts for about 80 percent of recent activity.

Although the old guideline used to be that you should consider refinancing only when rates drop at least 2 percentage points, the new wisdom is that it can be worthwhile even with smaller drops.

“For most people, if you can shave three-quarters of a percentage point off your interest rate, it’s worth looking at,” says Greg McBride, an analyst with Bankrate.com, a personal finance website.

For homeowners who plan to stick with the same loan term and want to lower their monthly payments, the math is straightforward. Find out how much it will cost to refinance, figure out how much you’ll save each month and then how long it will take to break even. If you can save enough to offset the refinancing costs within a year or two-or even longer if you expect to stay in the house for a number of years-it’s worth considering.

Though low-interest rates are eye-poppingly low, the refinancing climate has changed from the easy-money days of five years ago. Generally, to get the best rates, homeowners need a 740 FICO credit score, well above the median score of 711. They also usually need at least 10 to 20 percent equity in the property. A recent expansion in the federal Home Affordable Refinance Program should allow refinancing this year by more so-called underwater borrowers – those who owe more than their homes are worth.

Lenders are also demanding much more documentation – including pay stubs, tax returns and bank statements – than they did five years ago, at the insistence of government regulators as well as Fannie Mae and Freddie Mac, which buy mortgages from lenders.

“You have to have a taste for doing paperwork,” says Keith Gumbinger of HSH Associates, a Pompton Plains, N.J., company that tracks mortgage data. “You’re going to be asked for lots of documents. No one loves the process to begin with, and in today’s environment, it’s even less palatable.”

These stricter requirements are simply a return to the kind of underwriting standards that prevailed before lending standards slackened a few years back, leading to the housing bust and foreclosure crisis, McBride says.

“We’re in this mess because money was too easy to get,” he says.

Refinancing costs roughly $3,000, according to several mortgage companies. That covers costs like an appraisal, title insurance, application fees, attorney’s fees and recording the mortgage. Some lenders also offer low- or no-cost options, which they can do by either adding the closing costs to the mortgage amount or charging a slightly higher interest rate.

Bousbib, for example, took a no-cost refinance with Equity Now, a New York-based lender that also lends in New Jersey. “It didn’t cost me a penny,” he says. Equity Now says it charges a slightly higher interest rate on no-cost loans.

Lowering the monthly payment is not the only reason people are refinancing. Many are shifting from a 30-year loan to shorter terms, said Matthew Gratalo of Real Estate Mortgage Network in River Edge, N.J. He has worked with clients in their 40s who hate the thought of carrying a mortgage into retirement.

“They’re looking ahead and saying, ‘I don’t want to pay a mortgage forever; can I get this done in 15 years? Can I be done with this and have it paid off?’ ” Gratalo says.

“Certainly shortening the term makes a lot of sense because you can cut years of mortgage payments,” says Carl Nielsen of Mortgage Master Inc.’s Wayne office.

Nielsen, for example, recently talked to a customer with a $375,000, 30-year mortgage at 4.5 percent. The customer is considering a 20-year mortgage at 3.75 percent. His monthly payments would go from $1,900 to about $2,223, but by shortening the life of the loan, he’ll save more than $150,000 in interest payments.

“That’s kind of a no-brainer,” says Nielsen.

Sources: Greg McBride, Bankrate.com ©2012 The Record (Hackensack, N.J.), Distributed by RISMedia and MCT Information Services.

Payment calculator

If you’ve been shopping around for a home to buy, it can be difficult to know what price range to stay in.  Unfortunately, you cannot look just at the sales price as the total amount you will be paying over the years; you must also calculate in the loan and interest rate on the mortgage to figure out the monthly and yearly amount you will be paying.  Want a quick way to figure that all out?  You can use this easy calculator below; just click on the picture to be directed to it.

payment calculator

Top six reasons mortgage applications are rejected

Half of refinance applications are abandoned or rejected, as are 30 percent of purchase mortgage applications, according to the Mortgage Bankers Association. All told, the Federal Financial Institutions Examination Council (FFIEC) says that well over 2 million mortgage applications were rejected last year.

Want to avoid falling into that number? It’s tough — especially in light of the fact that mortgage lenders have become increasingly restrictive in terms of their lending guidelines since the housing market crash.

Here, as a cautionary tale and primer on what to expect, are the top six reasons mortgage lenders reject applications.FFIEC

1. Income issues. Most failed applications falling into this category have income too low for the mortgage amount they are seeking; often, a spouse’s credit issues can create this problem, too, as the income the spouse plans to actually chip in toward the mortgage cannot be considered by a lender.

But increasingly, the recent vagaries of the job market are also causing this issue, as people who have changed their line of work or have changed from salaried employee to freelancer over the last couple of years can also have their home loan applications rejected based on income.

2. Muddled money matters. If the mortgage for which you’re applying plus your monthly payments on credit card, car and student loan debts will comprise more than 45 percent of your total income, you could have problems qualifying for a home loan. You might also run into problems if you rely too heavily on bonuses, overtime, cash wages or rental income — all of these can be difficult or impossible to get a mortgage bank to consider, and if they do, they might not take all of it into account.

3. Credit issues. Today, the mortgage-qualifying FICO score cutoff falls somewhere between 620 and 660, depending on which lender and which loan type you seek. More than one-third of Americans, by some numbers, have credit scores too low to qualify for a home loan. Even if your credit score is high enough to qualify, if you have any late mortgage payments, a short sale, a foreclosure or a bankruptcy in the last two years, loan qualifying could be difficult to impossible.

4. Property didn’t appraise. Since the whole industry had its hand smacked for allowing home values to skyrocket in a very short time, appraisal guidelines have tightened up — some would say, even more than overall mortgage guidelines. So, it is increasingly common to have the property appraise for a price lower than the sale price negotiated between the buyer and seller.

This is especially common in the refinance realm, as well over a quarter of U.S. homes are now upside-down, meaning the mortgage balance owed is greater than the value of the home.

5. Condition problems. With all the distressed properties on the market, and with most non-distressed sellers barely breaking even, more home-sale transactions than ever are falling apart due to condition problems with the property. Many lenders will not extend financing on homes where the appraiser points out problems like cracked or broken windows, missing kitchen appliances, electrical problems, or wood rot.

And in the world of condos and other units that belong to a homeowners association, if more than 25 percent of units are rented (rather than owner-occupied) or more than 15 percent are delinquent on their HOA dues, new applications for refinance or purchase mortgages on units in the development are likely to be rejected.

6. Technical difficulties with application. The days when lenders just took your word for it are long, long gone. Applications with incomplete or unverifiable information are doomed.

If any of these mortgage loan application glitches arise in your homebuying or refinancing process, it’s critical that you connect with your mortgage professional, be it your banker or mortgage broker, to determine what course of action to take.

In some cases, it might be as simple as buying a stove you find at Craigslist and installing it before escrow closes; but with income issues your mortgage pro will need to help you determine whether it makes sense to pay some bills down, get a co-signer, or even wait six months so your income documentation will qualify.

Tara-Nicholle Nelson is an author and the Consumer Ambassador and Educator for real estate listings search site Trulia.com.