Category: Financing

When is the right time to buy your first home?

Posted on by Emily Gregory

Purchasing your first home is an exciting adventure with plenty of benefits. Homeownership can provide valuable tax breaks and offers an opportunity to build equity rather than spending rent money with no potential return. It is also an important personal and long-term financial decision, so it makes sense to prepare ahead of time and be sure you are ready.

Consider Your Income

Stable income is a vital factor in qualifying for a home loan. Even if you are in a non-traditional career, keep track of all your monthly income. This will help you and your lender to determine how much home you can comfortably afford. When planning a new budget, take all of your monthly bills into account as well as any additional maintenance and living expenses you’ll have in your new home.

Think About Your Lifestyle in the Next 5 Years

Are you planning on staying at the same place of work, or seeking a different career that might cause you to move? Are you considering sharing your space with a partner or having children in the near future? Purchasing a home is a major investment that involves certain costs, so if you think you’ll be moving or need a larger home soon, it might make sense to wait until you can buy something you’ll be living in longer. An exception to this is purchasing a home you plan to fix up and add equity to, in which case you could still move without a loss.

Learn About Where You Are Planning to Buy

Knowing which areas or neighborhoods you want to live in can help you narrow your home search. You may already be familiar with where you want to live, which makes the process easier. If you are relocating and planning to purchase somewhere new, it is good practice to tour the area you are planning to move to and learn as much about it as you can ahead of time.

Review Your Credit

Building your credit score up to a healthy level can help you obtain the best possible interest rate on your home. Paying down your debt and utilizing other methods to boost your score before purchasing a home can lead to significant long-term savings. That said, there are programs available for borrowers with a range of credit scores, so if you are unsure about your score a Loan Officer can advise you on your options.

Plan for Your Down Payment

The traditional 20% down payment is no longer the only feasible choice. There are several programs that may allow borrowers to pay little or no money out of pocket at the time of closing. Review how much of your savings you can put towards a down payment, and talk to an experienced loan officer about different loan programs to learn which is the best fit for you.

Feel Free to Ask Questions

Realtors and Loan Officers are all about customer service and building client relationships. They are happy to speak with you and answer your questions. Even if you are unsure whether now is the right time for you to buy, reaching out for advice from experienced professionals can give you peace of mind and a solid plan of action if you decide to wait.

Here at First Home Mortgage, we continue to provide the highest level of customer service while adhering to social distancing guidelines. Our innovative communication technologies allow us to exceed your expectations while keeping everyone as safe as possible. If you are considering purchasing or refinancing a home, please contact one of our Loan Officers today!

Mortgage Calculators

Posted on by Emily Gregory

Here at First Home Mortgage, we strive to deliver excellent customer service from the start. We provide tools and resources to better prepare you for purchasing or refinancing your home. Whether you’re buying a home for the first time, you’ve purchased before, or you are refinancing, you will have questions and concerns. “What will my mortgage payment be?”, “How do I know it’s a good time to refinance?”, “What can I afford?” – these are all very important questions that will be the basis of your journey. With these questions in mind, we have provided 9 different mortgage calculators to help you get started!

Mortgage Calculator #1: Mortgage Payment

Repayment of a mortgage loan requires the borrower to make a monthly payment back to the lender. That monthly payment includes both repayment of the loan principal, plus monthly interest on the outstanding balance.

Mortgage Calculator #2: Proceeds from Sale of a Home

How much profit will you make if you sell your home? This is largely dependent on two things: the amount you still owe on the home and what you will have to pay for selling the home.

Mortgage Calculator #3: Compare Two Mortgage Loans

When purchasing a home, the mortgage you choose and the options you want with it will have a significant impact on how much your home costs you in the long run.

Mortgage Calculator #4: Time to Refinance?

The decision to refinance a home mortgage can involve many factors. You might want to take cash out of your home and apply it elsewhere or obtain a lower rate to lower your monthly payments.

Mortgage Calculator #5: Debt to Income Calculator

Your DTI is the percentage of your gross income used to cover your mortgage and other debt payments. This ratio and your credit score are two key factors used to determine if you qualify for a loan.

Mortgage Calculator #6: Rent vs Buy

Deciding whether to rent or buy relies on many factors. Take into consideration the difference in monthly rent vs. mortgage payment, home value, rent increases, interest rate, and taxes to name a few.

Mortgage Calculator #7: Home Affordability

Your ability to obtain a loan for a new home purchase is based on several aspects. Lenders typically focus on three key ratios: Loan-to-Value ratio, Housing Ratio, and Debt-to-Income ratio.

Mortgage Calculator #8: Adjustable Rate Mortgage Analyzer

ARMs typically offer home buyers the advantage of having a lower mortgage payment during the initial period of the mortgage. Once the initial period expires, the rate will reset at current interest rate levels.

Mortgage Calculator #9: Compare a Bi-Weekly Mortgage to a Monthly Mortgage

One popular strategy for accelerating the payoff of a loan is to make ‘Bi-Weekly’ payments. Under a Bi-Weekly mortgage plan, you will make payments to your lender every two weeks instead of monthly.

While we consider these mortgage loan calculators to be very helpful and educational, everyone’s personal situation varies, and reaching out to one of our Loan Officers will give you a more accurate sense of what you would be facing! Find a Loan Officer in your area today!

DTI Ratio: What it Means for Your Mortgage, and 5 Ways to Improve it!

Posted on by Emily Gregory

What Does DTI Ratio Mean for your Mortgage?

The debt to income ratio is a calculation of the percentage of your monthly debt payments, compared with your gross (pretax) monthly income. Monthly debt payments include mortgage payments, car payments, and any other minimum loan or card payments. Living expenses like gas, groceries, and utilities are not included.

The debt to income ratio is an important factor in qualifying for mortgages and other loans. The ideal DTI ratio for a mortgage is 36% or below. If your DTI ratio is too high, you may not qualify for the home loan you want. The lower the ratio – the better!

5 Ways to Lower Your DTI Ratio

  1. Pay off Debts Ahead of Time. Paying off debt means you’re no longer paying a monthly bill on it. Paying off smaller debts first, or debts with a high payment compared to their balance is recommended to get the best results.

 

  1. Refinance larger loans over a longer period of time. This would apply to large loans such as student loans. You can extend the length of the loan to reduce your minimum monthly payments, which will also reduce your DTI ratio. Just keep in mind that repaying a loan over a longer period can result in more interest paid over the life of the loan.

 

  1. Transfer credit card debt to a lower-interest card. There is often credit card offers available with an introductory period of lower or no interest. You can transfer the existing debt to a low or no-interest card in order to reduce your minimum monthly payment and the total amount paid overtime! At the end of the promotional period, you can always transfer again to a lower interest card!

 

  1. Look for ways to increase your monthly income. With the world of Etsy and YouTube channels, there are plenty of ways to earn extra income in addition to your monthly income. If you have a specific hobby or craft to share, it can gain you extra funds every month.

 

  1. Consider a 401k loan. You can take funds out of your 401k to pay off debt, and then repay the loan over time at zero interest. You will however need to pay taxes on the 401k loan amount. This can save a substantial amount on a high-interest loan. Just be sure to repay the 401k loan to yourself as soon as possible to keep your retirement savings on track!

Reducing your DTI improves your overall budget, can help your credit score and puts you in the right position to purchase a home you can comfortably afford. If you have any questions about your DTI in regard to purchasing or refinancing a home, please contact one of our experienced loan officers today!

Down Payment Tips for Gen Z

Posted on by Emily Gregory

Are you a Gen Zer unsure about your financial responsibility when it comes to buying a home? Are you worried about if you have enough saved for your down payment? Buying a home doesn’t have to be an overwhelming process or a financial drain. How should you prepare?

1. Down Payments

Down payments seem to be the biggest obstacle first-time homebuyers think they will face when buying a home. According to Freddie Mac, 60 percent of adults ages 18 to early 20s don’t know and overestimate how much they will need to put down on a home. However, according to NAR (National Association of Realtors), the actual down payment median for first-time homebuyers was 7% in 2019.

2. 20 Percent Down Myth

Because millennials still hold on to the “20 percent down” myth, it’s no surprise Gen Z are following suit. 60% of Gen Zers want to hold off on buying until they have enough down payment and can manage a mortgage payment, but first-time home buying comes with perks, including low down payment options.

3. Homebuying can be within reach despite challenges

With financial education at home, a strong economy, and a job market, home buying is an attainable goal for Gen Zers. Being optimistic about their financial futures, many prefer to own verse rent and want to purchase a home by the age of 30.

A 2019 Freddie Mac study showed low down payment options shrink the time it takes “mortgage ready” young millennials to achieve homeownership. With this information, we can assume it applies to Gen Z adults. Bottom line, low down payment options can give a much more motivating time frame of 3 to 5 years instead of 15 to 20 years to get into your first home.

Are you ready to take that next step into homeownership? Let one of our loan officers walk you through the process, contact us today!

Source: https://sf.freddiemac.com/articles/insights/four-reasons-lenders-should-begin-educating-gen-z-about-down-payments-now?utm_source=eloqua&utm_medium=email&utm_campaign=2020-02-13_LN_NEWSLTTR_

Build Your Budget in 2020

Posted on by Emily Gregory

Creating and utilizing a budget is an integral part of everyone’s financial stability and growth. The term “budget” can sometimes get a bad wrap, but it’s not about harsh restrictions. Building a budget just means knowing how much money you have, where it’s at, and where it’s going. If you don’t currently use a budget, here are some tips from experts on how to get started!

Step 1: Write down a full list of your finances.

  • This includes assets you currently have in checking, savings, and other accounts (including retirement, college funds, etc.)
  • All current debt. (Including car and mortgage loans, student loans, credit card balances, etc.)
  • Your current monthly income from all sources.
  • Your current monthly expenses, both fixed and variable. Fixed expenses are bills that are the same amount each month. Variable expenses are bills that can vary, such as utilities, and your living expenses outside of bills, such as gas and groceries.

This will give you a good overall grasp of your current financial situation so that you can build a budgeting plan that works best for you.

Step 2: Track your spending

Many experts recommend tracking all your spending for at least one month before developing your budget. This will provide an accurate look at how much you spend on variable expenses each month, so you can create a budget that accommodates your lifestyle.

Step 3: Pick a budgeting style that works for you!

There are several popular budgeting styles out there, and even the pros admit to some trial and error. It’s perfectly okay to try out a few different plans before you settle on one you love! Some popular plans are:

50/30/20 Plan: This plan involves spending 50% of your net income on needs, 30% on wants, and 20% on debt reduction and/or savings. Your “needs” category is anything you can’t live without, such as a place to live, a car to drive, affordable food, and clothing. Everything else you want to spend money on falls into the “wants” category, such as cable, dining out, and shopping. Many have found this to be a highly effective plan for them! For more about the 50/30/20 plan, check out: https://www.thebalance.com/the-50-30-20-rule-of-thumb-453922

Cash Envelope Plan: With this plan, you divide your spending after bills and savings/debt reduction into categories. Examples of these categories would be groceries, gas, fun, shopping, and beauty. You then would determine a set maximum amount you can spend for each category and put that amount of cash into labeled envelopes for each category. You can use the cash from the appropriate envelope for all of your spendings throughout the month. The concept behind using cash envelopes is to encourage you to carefully track all of your spending in different categories, and also promote mindfulness about your purchases. The thought of physically handing over cash has a bigger impact mentally than just swiping a card. For more details on setting up a Cash Envelope Plan, check out https://www.thebudgetmom.com/the-ultimate-guide-to-the-cash-envelope-system/

Reverse Budgeting Plan: This simplifies budgeting as much as possible. You set a firm (preferable aggressive) amount for monthly savings and/or debt reduction. Many people have this amount automatically paid and/or transferred to help enforce the monthly goal. After that, and paying the rest of your necessary bills, money will be free to be spent as you choose. This plan is considered ideal for those who want the best results with the least amount of time and thought spent on budgeting. For more information on Reverse Budgeting, check out:  https://www.forbes.com/sites/peterlazaroff/2016/02/29/creating-a-budget-that-works/#63af655b7bcc

Step 4: Review your plan and make adjustments as necessary!

Budgeting is a continual and rewarding process, and since it’s your own lifestyle and finances you impacting, all the freedom to choose is entirely in your hands.

If your goal in boosting your savings and reducing your debt is purchasing or refinancing a home, our loan officers can offer additional insight on mortgage qualifications and mortgage program offerings. Contact us today! https://firsthome.com/find-a-loan-officer/

New Year, New Goals! Tips for Improving your Credit Score in 2020.

Posted on by Emily Gregory

If you’re considering purchasing or refinancing a home, it’s a good idea to look at your credit score first. Your credit score will directly impact your interest rate and the loan programs that you qualify for. When it comes to a home loan, improving your score can save you money and give you a larger variety of options. The higher your score, the more you can save. Here are some tips to boost those numbers in 2020!

  1. Avoid Late Payments. Paying bills on time is the single most important factor in your credit score. If you have a late payment on your report that you believe is in error – you can contact the credit bureaus to dispute it and have your score corrected.
  2. Decrease Your Overall Credit Utilization. Credit bureaus calculate your overall credit limit versus how much credit you’re currently using, and it’s best to have a ratio below 30%. One quick way to decrease your utilization is to call your credit card issuers and request a higher limit on your existing cards. This higher limit will lower your ratio without adding any hard inquiries to your report. Paying down your existing balances will also reduce your ratio.
  3. Limit New Accounts. Hard Inquiries show up on your report whenever you apply for new credit. Too many hard inquiries can lower your score, but their impact does fade over time. Be cautious of opening too many new accounts at once and try to avoid hard inquiries 6-12 months before applying for a mortgage loan. Opening new accounts can also reduce your average length of credit, which can further impact your score.
  4. Don’t Close Inactive Accounts. Surprisingly, closing old credit accounts will directly affect your credit score. This is because closing old accounts can shorten your length of credit and raise your credit utilization. If you do have credit cards you no longer use, you are better off holding on to them or renegotiating for a better interest rate to start using them again. If you feel you still want to close some accounts, wait it out until after the home buying process, as it may deduct points each time you close an account.
  5. Dispute Errors. Review your credit report regularly and dispute any errors that might be bringing down your score. Simply send a letter directly to the credit bureau with your explanation of what the errors were. The credit bureau will review your case and respond back in around 30 days. If it is found to be an error, it should be removed directly from your credit report. According to the Federal Trade Commission, as of 2012, 5% of consumers had errors on their credit reports which could have resulted in less favorable terms for loans.

Let’s wrap up with a few fun credit score facts:

  • Credit scores range from 300 – to 850

  • Any score over 810 is considered “perfect” because raising your score beyond that point doesn’t offer any real increase in benefits from creditors.

  • The average 2019 FICO credit score was 706, and the average 2019 Vantage score was 682!

Interested in learning more about First Home Mortgage? Feel free to reach out to one of our loan officers today!

Tips for Preparing for Tax Season

Posted on by Emily Gregory

2019 has come to an end which means tax season is right around the corner. Soon it will be time to prepare your 2019 tax returns and it pays to be ready! Getting prepared early can not only save you time and stress but potentially money.  It’s especially important if you have experienced major changes throughout the year such as getting married or buying a home. The IRS encourages early preparation and has recently shared a few tips that can give you a head start.

Always making sure you’re paid up on your taxes is important. The IRS expects that you will have paid most of your tax bill by the time you file your return. If your taxes are being withheld from your pay, chances are that’s enough to cover your total bill and even leaves you with extra for a refund. But keep in mind life events can happen which affect your tax withholding.  You will want to make sure your withholding will also take care of any other income you receive from other sources such as a business or investments.

Of course, you won’t start receiving your W-2s or 1099s until January at the earliest, but there are a few things you can do while you wait. Gathering important records and documents ahead of time will allow for a quicker return. Making sure your address is up to date with your employer and investment providers will ensure you receive these forms in a timely manner. Creating a checklist is also very helpful and can be used every year. Look at your old tax records to compile of list of what materials you were sent. Use that list to create a checklist so you know what to expect throughout the tax season. If you have recently purchased a home, there are some additional documents you may need to gather such as the settlement statement, property tax statement, and if you’re a first-time homebuyer, your Mortgage Credit Certificate.

When you’re all set to file, consider doing so electronically! Every year the IRS is encouraging taxpayers to file electronically for many reasons. Not only is filing electronically quicker and more secure, but it also’s easier and highly accurate. Anyone with a bank account is eligible for direct deposit. Meaning your refund will be automatically sent to your bank account, so you won’t have to wait to receive the check in the mail.

Now that the holiday season is over, preparing for tax season should be at the forefront of your mind. Taking steps to ready yourself will prove to be beneficial in the future.

Source: https://www.msn.com/en-us/money/taxes/4-ways-to-get-ready-for-tax-season/ar-BBWsZss?ocid=spartanntp

Calculating Your Home Equity

Posted on by Emily Gregory

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.

Which Renovations Have the Highest Impact on Your Home’s Value?

Posted on by Emily Gregory

Remodeling your home is a wonderful way to make it your own when you first move in, or to update the space as your needs and styles change over time. Since home renovations can be pricey, balancing your budget and wish list can be tricky. Fortunately, there are lots of projects that can make you love your home even more, while also boosting its value. Increasing your home’s overall value increases your equity! This means that not only will you see a return on your investment when you sell your home, but you’ll also have a lower loan to value ratio while you live in it, which can impact your options when refinancing, and even potentially eliminate the need for a mortgage insurance.

The “2019 Cost Vs Value Report” (www.remodeling.hw.net), revealed which home renovations will give you the highest percentage of return on investment, and what they cost on average. According to the study, the top five renovations that provide the biggest bang for your buck are:

1. Garage door replacement

• Average out-of-pocket: $3,611
• Average return on investment: $3,520
• Percentage of cost recouped: 97.5%

2. Manufactured stone veneer

• Average out-of-pocket: $8,907
• Average return on investment: $8,449
• Percentage of cost recouped: 94.9%

3. Minor Kitchen Remodel

• Average out-of-pocket: $22.507
• Average return on investment: $18,123
• Percentage of cost recouped: 80.5%

4. Deck addition (wood)

• Average out-of-pocket: $13,333
• Average return on investment: $10,083
• Percentage of cost recouped: 75.6%

5. Siding Replacement

• Average out-of-pocket: $16,036
• Average return on investment: $12,119
• Percentage of cost recouped: $75.6%

Renovating your home can be a wonderful way to boost your enjoyment and your equity! Find more information from this study, including how project costs and values were calculated, at www.remodeling.hw.net/cost-vs-value/2019/.

Thinking about purchasing a fixer-upper, or refinancing to free up funds for your home renovation? Contact one of our Loan Officers today!

New Loan Limits!

Posted on by Emily Gregory

Loan limits for Fannie Mae and Freddie Mac increase to $510,400 in 2020, an increase from $484,350 in 2019!

There has been an update provided by The Federal Housing Finance Agency. The agency has announced the Fannie Mae and Freddie Mac conforming loan limits for mortgages for 2020.

Each year, the baseline conforming loan limit is adjusted accordingly with the change in the average U.S. home price. House prices during the third quarters of 2018 and 2019 have increased by 5.38 percent on average, therefore, The Federal Housing Finance Agency is increasing 2020’s maximum limit by the same percentage.

It will be higher than the $510,400 baseline limit in certain areas where median home values were higher.

There are different calculations for Alaska, Hawaii, Guam, and the U.S. Virgin Islands. The baseline limit in these areas will be $765,600.

Click here for a map of 2020 loan limits by area!

If you are interested in learning more, contact one of our loan officers for information today!

 

 

Connect With Us

  How Can We Help?