Calculating Your Home Equity

Home equity is the portion of your home that you’ve paid off — your stake in the property, as opposed to the lender’s. For many homeowners, this is their most valuable asset. And the best part is that it often increases without you having to do anything more than making your regular monthly mortgage payment.

So what is it exactly? 

Equity is the portion of the home that you truly own and does not need to be repaid to any lender. In other words, it is the appraised value of your home minus any outstanding mortgage and loan balances. In most cases, home equity builds over time as you pay down mortgage balances or add value to your home.

How is it calculated?

Current Appraised Value – Mortgage Loan Balance = Home Equity

Subtract the amount you owe on your home loan/s from its appraised value to get how much equity you have in your home.

Example:

Appraised Value is $500,000 – $230,000 Loan Balance = $270,000 in equity

How do you use your home’s equity to make renovations?

A loan (second mortgage) allows you to borrow a certain amount for your renovation. The equity in your home is used as collateral, giving you free access to spend the money on your home project.

A HELOC is typically a variable-rate line of credit based on your equity, that allows you to borrow and repay repeatedly.

You may also have the ability to refinance, which allows you to turn your equity into cash –  referred to as “cash-out” refinancing.  This gives you access to the equity without selling your home.

Talk to a Loan Officer to learn more about your options.

FHA Revises Condominium Requirements

After a long-awaited update, the FHA is finally issuing a change to condominium guidelines. It was announced Wednesday that spot approvals are back, and steps are being taken in order to loosen eligibility requirements. With these revised guidelines, FHA is expecting the update to qualify an additional 20,000-60,000 condo units per year.

Changes that will come with the new guidelines include extending the re-certification deadline for approved condo projects from two years to three and loosening restrictions on owner occupancy rules allowing projects to just be 50% owner-occupied. Department of Housing and Urban Development Secretary, Ben Carson, is hopeful the updated guidelines will open doors and allow more opportunity for home ownership. “FHA is publishing a new rule in the Federal Register that we believe will offer significantly more options for individuals and families to buy a home, specifically the kind of home more and more people are looking for in order to achieve home ownership, and of course that is a condominium.” Carson stated. Out of the 150,000 condo projects across the country, just 6.5% have approved financing through FHA.

The National Associations of Realtors has been advocating for change in FHA requirements for over a decade and stated they are thrilled with the change and the opportunities that will now be available to prospect homebuyers. NAR President John Smaby stated, “This ruling, which culminates years of collaboration between HUD and NAR, will help reverse recent declines in condo sales and ensure the FHA is fulfilling its primary mission to the American people.”

The updated guidelines will take effect on October 15, 2019.

Potential Federal Rate Cut

From what you pay on the balance on your credit card to inflation, rates can have an influence on our everyday lives. When the economy dips, rates tend to dip as well. This encourages people to spend more which gives the economy a boost. Jerome Powell, chair of the Federal Reserve, makes the big decisions when it comes to the federal fund rate and due to recent trade war news and the overall global economy, he’s hinting that rates could be decreasing soon.

But how will this affect your wallet? If you have credit card debt or plan to buy a home in the near future, the rate cut can be a benefit. Most credit cards that have variable rates are linked to the prime rate so a federal funds cut would lead to lower interest rates. The lower the interest rate on your credit card, the easier it will be to pay that balance down so be sure to take advantage.

Though the federal fund rate isn’t linked to mortgage rates, it can have an impact on them. Whether your mortgage is a fixed-rate or an adjustable rate will determine the impact a rate cut would have on your savings. An adjustable rate will generally decrease when the fed rate decreases but a rate cut would have no impact on a fixed-rate mortgage. Lower rates are beneficial for potential home buyers and with a federal rate cut it would be a good time to purchase. Even if you’re not in the market for a new home it would be a great time to consider refinancing to take advantage of a lower interest rate! Please reach out to a Loan Officer near you to discuss all of your options!

Scotsman Guide Names First Home Mortgage Top Mortgage Lender 2018

Bothell, WashingtonScotsman Guide congratulates First Home Mortgage for ranking on Scotsman Guide’s seventh annual Top Mortgage Lenders rankings. First Home was ranked #37 for Top Overall Volume.

This is the seventh year that Scotsman Guide has compiled rankings for Top Mortgage Lenders, and the seventh year First Home has made the Top Lenders list. These rankings complement Scotsman Guide’s 10th annual Top Originators rankings. Top Mortgage Lenders will appear in print in June’s Residential Edition. All rankings are online at scotsmanguide.com/rankings and in Scotsman Guide’s digital edition at sg-resdigital.com.

Scotsman Guide’s Top Mortgage Lenders is the industry’s most comprehensive verified rankings of the nation’s top-producing mortgage companies. To ensure that we publish the most-accurate data possible, all submitted data undergoes an extensive verification and auditing process prior to the publication of the Top Mortgage Lenders rankings.

5 Things to Consider When Buying an Investment Property

Buying real estate can be a great investment; whether you want to purchase a primary residence, flip a property and sell it, or rent it out to make a profit. If you have chosen the latter option, here are a few things to take into consideration.

Down Payment: Be ready to put down a larger down payment on the house – at least 15-25%. Expect higher interest rates, and slightly more restrictive guidelines.

Property Management: Are you ready to be a landlord or will you have a property management company handle the busywork? If you are taking on the task of being the landlord, be prepared to be available 24 hours a day. If something stops working in the middle of the night or while you are on vacation, you will be responsible for finding a solution to the problem in a timely manner. If you plan to hire a property management company, they will take care of paperwork, finding tenants, fixing repairs and more, but it will come at an added cost to you.

Expected Rental Income: Will the property make a profit or end up being a money pit? If this house is currently being rented out, ask the owners how much they charge in rent each month. Check out other rentals in the neighborhood and see what the average monthly rental income is. If it isn’t high enough to cover the mortgage and other expenses attached to the property, it may be best to pursue a different property.

Expenses and Costs: Do you have the funds for an extra expense account in case any problems emerge in the house? You never know when a problem will crop up. Whether the AC unit breaks or the refrigerator stops working, make sure you have enough funds to pay for sudden repairs and replacements.

Risks of Renting: If you don’t have tenants for a month, will you be able to pay the mortgage? If the current tenants damage the property, will you be able to afford the repairs? What happens if you go to check on the property and your tenants flew the coop?

Buying an investment property is a big decision, but if you do your research and are prepared for any and all possibilities, it can be a great investment and pull in some extra income each month! Talk to a loan officer near you for more information.

Smart Technology for Your Home

Smart home technology has really taken off over the last few years. Every gadget and device you could need is on the market right now. From voice-activated assistants to robo-vacuums, companies are creating products to make our lives a little bit easier. So what smart home options will be beneficial to you? Well, it depends.

If you want something simple or need a quick way to make grocery lists or check the weather without having to pick up your phone, a voice-activated home assistant may be right for you. Devices like Google Assistant and Amazon’s Alexa are top choice for home owners. Smart assistants are great gadgets to have for quick voice commands.

Smart lighting is a great feature to have if you aren’t home a lot, but don’t want outsiders to think your house is empty. Smart lighting allows you to control the lights in your house from your smart phone. Whether you are miles away from your home, or simply forgot to turn the light off in the bathroom but don’t feel like getting back up (don’t worry, we’re not judging you!), this feature is super convenient and easy to use.

Video monitoring systems are also great features to have in your home. The benefits are pretty obvious, cameras will allow you to feel safe and secure while you are in your home or out for the day. Alerts will typically pop up on your smart phone letting you know activity is present at your door. Some systems also allow you to video chat if someone comes to your door, adding a bit more security.

If you want a more hands-off approach or if you don’t feel comfortable buying and working these gadgets yourself, specifically video monitoring systems, there is some good news! There are many options to have a professional automation system installed for you. Added benefits of this include not dealing with the hassle of installing and keeping tabs on your devices and gadgets. The company that installed the devices will handle everything for you, monitor your security cameras and let you know if any issues arise.

Having smart technology in your house is very beneficial as a home owner and will be an added feature if you plan on selling your house. With so many options at different price points, it is easy to add a few key gadgets to your home and build from there. Whether you are looking for a simple device, complete smart home system or a fully automated household, the options are endless.

What’s the Best Home Loan Option for Me?

As a homebuyer, your mortgage is specific to your situation and lifestyle. There are many different factors to consider when thinking about which home loan option is best for you. While one buyer may be comfortable paying a 20% down payment, another buyer may need down payment assistance. How long you plan on living in your home can also play a role in which type of home loan to choose. We will give a brief overview below of some options, but it is best to reach out to one of our loan officers for the full breakdown.

One loan option to consider is a fixed-rate mortgage. A fixed-rate mortgage has an interest rate that stays the same for the entire life of your loan. This offers a predictable monthly payment for a term of 10-30 years. This type of loan is best suited for a buyer than intends to stay in their home for a long period time. Highlights of a fixed-rate mortgage are

  • Interest rate security
  • Monthly payment stability

Another option to consider is an adjustable-rate mortgage (ARM). An ARM is a mortgage in which the interest rate is adjusted periodically based on an index. An ARM is a good option for buyers who are planning to move into a different house within the next few years. Depending on the type of ARM, the interest rate and monthly payment will fluctuate every adjustment period. An adjustment period is the period between each rate change, such as 5/1 – meaning the first rate reset takes place after five years and continues to reset each year for the life of the loan. Highlights of an adjustable-rate mortgage are:

  • Low starting interest rate
  • Lower monthly payments during the initial term

Buyers who need assistance with up-front fees may consider Down Payment Assistance (DPA) Loans. State Housing Finance Agencies offer state specific programs to residents who need help purchasing a home. These programs can be in the form of a loan or grant, and assist with closing costs, down payment, and even student debt relief. Highlights of DPA loans are:

  • Lower amount of money required up-front
  • State specific programs to assist most buyers

First Home Mortgage offers a variety of loans that can meet your needs. While reading about different loan types online is a great way to get started, to know exactly what option is best for you, it is wise to talk to a mortgage professional. Get in touch with a First Home Loan Officer near you to fully outline your situation and goals and tailor a plan.

What Causes Home Prices to Fluctuate?

The median sales price of a house in the United States is currently between $188,900- $279,500. There is such a large price range because many different factors can play into a home’s sales price. If you are looking to buy or sell soon, keep the following factors in mind when determining costs.

The price of a home can vary depending on the location. A more populous area, like a downtown neighborhood or a highly sought after suburb, can boost the sales price because there is a high demand of borrowers wanting to live there. A less popular area, or even an up-and-coming neighborhood, may show lower home prices, even if the homes are similar in size to those in more expensive areas.

The season may also have an impact on home prices. Once the spring buying season starts heating up, there will be a larger demand for homes to purchase. Prices may also increase because there is a higher chance the home will be bought. With a hot buying market, bidding wars may ensue, which can also increase the price of a home. In colder seasons home prices may decrease since less people are shopping for a new home. Since the demand is low, sellers may consider a lower price tag, giving way to a better deal for borrowers.

A strong or weak economy can also impact home prices. When a strong economy is present, individuals and families may have a more secure financial mindset. With this in mind, buyers are more likely to feel comfortable obtaining a larger mortgage, which could lead to higher home prices. In an unstable economy, prices tend to be lower.

If you aren’t sure whether now is a good time to buy a new home, get in touch with one of our loan officers to learn more about the current market. We are happy to help and answer any questions you may have.

Sprucing Up the House for Spring

Open those windows and turn off the heaters, warmer weather is on the way! Winter has faded, and the trees are starting to bloom, spring is finally upon us. Warm weather fans rejoice!

As spring season is setting in, it’s a good idea to make a home maintenance checklist of items to prep your home for the new season. Spring cleaning isn’t just for the inside of your home. Check out the tips below that will help prepare the inside and outside of your home.

Inspect the Roof

Winter weather can cause havoc on your home’s roof, whether it’s damaged from ice or snow. With “April Showers” on the way, it is important to inspect your roof for missing or damaged shingles which can lead to leaks. A leaky roof can cause havoc on your wallet if you ignore it.

Test Smoke and Carbon Monoxide Detectors

While we hope you will never have to rely on these items, make sure your smoke and carbon monoxide detectors are in working condition and have fresh batteries.

Check Water Drainage and Gutters

Clogged gutters can lead to leaks, which in turn will lead to water damage. Save your future self some money by clearing out your gutters and getting rid of any dirt and debris that piled up over the year.

Clean Up the Lawn

Properly maintaining and servicing your lawn mower and other lawn accessories will ensure they last longer. Also, remove any sticks and debris from the yard before mowing. Add new mulch to the garden for a fresh new look.

Service the HVAC Unit

Although you should do this more than once a year, servicing your HVAC unit is a spring must-do. Cleaning any dirty filters and making sure the unit works properly can save money on your AC bill each month, especially when the summer heat sets in.

Window and Door Treatment

Clean and inspect windows, doors and screens. Fix any cracks in windows or doors and patch up any holes in your screens. On cooler nights, you can open the windows in your home and turn off the AC to help reduce your electric bill.

Fix the Cracks

Inspect your driveway and sidewalks for any cracks that occurred during the winter months. Repairing these issues early on will be easier and more budget friendly for you rather than waiting until it becomes a major problem.

FED Says No More Hikes

Recently, the Federal Reserve decided to hold interest rates steady and indicated that no more hikes will be coming this year. This is very encouraging to homebuyers looking to purchase a new home or to refinance their current mortgage.

Mortgage rates have been hovering around their lowest levels in more than a year, which in turn has seen an increase in the number of mortgage applications recently. Lower mortgage rates could potentially mean lower monthly payments for homebuyers, and less total interest spent over the life of the loan.

If you previously purchased a home with a high interest rate, it may be a good idea to speak with your loan officer to see if refinancing would be beneficial to you. You could save monthly and even possibly pay off your mortgage sooner. With the current low mortgage rates, the Refinancing Index was at its highest rate since January 2016.

Since mortgage rates have been so favorable the past few months, it is forecasted to be a strong spring buying season. With the current low rates and the abundance of products and programs First Home offers, it is possible to get a great deal on a home this year! Please reach out to a loan officer near you to discuss all your options.

Connect With Us