3 Tips To Help Home Affordability When Rates Rise

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So far the Fed has increased its benchmark rate three times since the financial crisis as they track economic improvement and attempt to maximize employment and stabilize inflation. If the economy continues to improve, and economic data remains positive, another increase could come as soon as May or June. While consumers with credit card debt may see an immediate increase in interest rates as a result of the Fed’s rate increases, the effect on longer term mortgage loans will be less direct, but still impactful. As RPM’s Julian Hebron explains in an article on Zillow “Even though mortgage bonds represent longer-term rates, these Fed hikes still fuel selling of mortgage bonds, pushing mortgage rates higher.”

couple saving for a home

So what does this mean to prospective home buyers trying to navigate the volatility of rates?

Adjust Your Budget
If rising rates make your payment higher, it could impact the price point of the homes you are comfortably able to afford. Most lenders allow you to spend up to 43 percent of your income on housing and non-housing expenses each month. If increased rates push your expenses over this threshold (also known as your debt-to-income or DTI), you may have to reduce your targeted purchase price in order to qualify for a loan. If downsizing your homeownership dreams and reducing your price point don’t appeal to you, another option is to trim other expenses not related to housing in an attempt to lower your DTI. Start by taking a hard look at credit card debt and focus on paying down a good chunk of that to reduce monthly payments.

Pay Points
Another way to limit risk from the unknown when rate increases are expected is to “buy down your rate” or “pay points.” Put simply, this means you pay an extra fee on top of standard loan fees to secure a lower rate over the life of your loan. To determine if this option is right for you it is important to consider the cash you have on hand to pay points, and the time you will spend in the home. From there your lender will help you evaluate where rates are likely headed and calculate possible savings to decide if buying down a rate makes sense in your particular situation.

Lock a Rate
Another way to protect yourself from rate increases that could occur while you complete the loan process is to lock in a rate. When you lock a rate the lender guarantees that you can obtain a loan at a set rate and price within a specified amount of time. A rate lock is typically good for 30, 45, or 60 days. Costs associated with the rate lock will depend upon the duration.

Know Your Options
There is more to home affordability than just rates. Contact an experienced loan advisor who understands the market and can look at your entire financial profile, evaluate it against your financial goals, and devise a plan to keep homeownership within reach!

By Amy Malloy

10 Tips for a More Eco-Friendly Home

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Living room with green accent pieces

Henry David Thoreau once said, “What is the use of a house if you haven’t got a tolerable planet to put it on?” It is easy in the everyday hustle of life, to choose convenience over taking the time to make more eco-friendly choices. In honor of Earth Day, we are sharing 10 easy and inexpensive tips for a more eco-friendly lifestyle in your home.

Choose Eco-Friendly Light Bulbs

Swap out your light bulbs for Energy Star-rated CFL bulbs. Not only do they use 75% less energy and last 10 times longer than standard bulbs, but this upgrade could knock up to $30 off your electric bill for each bulb over the course of its lifetime.

Start Composting

Consider starting a compost heap! Not only will this save money on fertilizer for your garden, but it will also help maintain soil health and keep food scraps from rotting in a dump, which helps reduce greenhouse gas in the atmosphere.

Stop Microwaving Plastic

Plastic dishware that is labeled “microwave-safe” can still leach into foods when microwaved and some contain hormone-disrupting compounds. The “microwave-safe” label simply means that the dishware can withstand a higher heat without losing its shape. So before you pop anything into the microwave, make sure that you are reaching for glass or microwave-safe ceramic dishes instead of anything plastic.

Avoid Heating an Empty House

When you are out of town during the colder months, turn down your thermostat to cut back on unnecessary heating. Most programmable thermostats have a setting for when the house is empty. Just remember if you live in a state that experiences a lot of snow or freezing temperatures in the winter months, you may need to leave your heater on a minimal setting to ensure that your pipes don’t freeze.

Use Your Dishwasher

It is a common misconception that hand washing your dishes conserves more water than running a dishwasher. However, it is actually the opposite. Running a full dishwasher uses half, or less, of the water and energy of washing the same dishes by hand.

Repair Leaky Faucets

This is especially important if you live in a drought-prone area! You can also cut back on unnecessary water use by installing water-saving toilets and shower heads, and only running the clothes and dishwasher with full loads.

Turn Off Your Computer

Your computer may go to sleep when it becomes inactive, but it still is using energy. Be sure to turn your computer and monitor off at the end of each day. While you’re at it, unplug any phone or laptop chargers when they aren’t being used.

Use Cloth Napkins

Cloth napkins are far more durable than paper ones and can save you money over the years. Opting for cloth napkins helps reduce your trash output, which means less energy is used transporting and processing your waste.

Switch to Chemical-Free Cleaning Supplies

Replace your heavy-duty cleaning supplies with plant-based products. Switching to green cleaners reduces air pollution, and minimizes exposure to chemicals that can be harmful to your health.

Plant More Trees

Planting trees in your backyard is not only great for the environment and aesthetically pleasing, but can also save you money if done strategically. Consider planting your trees on the south and west sides of your house, perhaps even shading your air-conditioning unit. This trick can help save money on your electric bill.

Did we miss your go-to green living tip? Please share your tips in the comments below!

By Kendall Taylor

FHA vs Conventional – Choosing Which Loan Is Best for You

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From location, to budgeting, to the right floor plan, there is a lot to consider when searching for the perfect home. In addition to choosing the home features that matter most, you are also faced with decisions about home financing.

To help you determine which loan program is right for you, we’ll show you some of the differences between two of the most common types of loans; government-backed FHA loans and Conventional loans.

The Basics of FHA Loans
FHA loans are insured by the Federal Housing Association and offer competitive interest rates. They are also known for having fairly flexible parameters ideal for first time home buyers such as: easier credit standards, low down payment options, less elapsed time required after financial hardships or derogatory credit events (foreclosures and bankruptcies), and higher debt-to-income ratios (DTI). FHA loans follow guidelines set by Fannie Mae and Freddie Mac with loan limits up to $424,100 for single family homes in all parts of the country. Limits go up to $636,150 for homes in designated high cost counties. If needed, you can even use a non-occupant co-borrower (who is a relative) to help you qualify for the loan. Gifted down payments are also allowed. But, FHA loans can be pricey in terms of mortgage insurance. An FHA loan requires mortgage insurance, regardless of the amount of the down payment. Both an upfront premium, which can be financed into the new loan, and a monthly premium are required. The monthly premium payment extends throughout the life of the loan and is a percentage of the loan amount borrowed on your home.

The Basics of Conventional Loans
Conventional loans follow the same Fannie Mae and Freddie Mac loan limit guidelines as stated above (up to $424,100 in all parts of the country and up to $636,150 in designated high cost counties). Higher limits apply to 2-4 unit properties. Any loans above the Fannie and Freddie limits are considered non-conforming or jumbo loans, which is a topic for another day! Conventional loans have more restrictive requirements than FHA with a lower maximum DTI of 45 percent and a higher credit score requirement (usually 620). But, if you can meet the requirements to qualify, a conventional loan may offer lower monthly payments. With a down payment of 20 percent or more, no mortgage insurance is required. Even if you put down less than 20 percent, the private mortgage insurance (PMI) charged to obtain the loan could potentially be a lot less than the FHA mortgage insurance premium rates.

The chart below compares the features of these loan types in an easy-to-follow format that will help you match your financial profile to the loan option that offers the most benefits.

FVA vs Conventional Loan

For assistance evaluating the home financing options that will work best for you, contact a loan advisor near you.

By Amy Malloy

5 Questions to Ask Your Lender

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Young couple consulting their loan advisor

Buying a home is a huge financial decision. Before you start your search, it’s important to be prepared and consult with a lender about your financing options. You want to feel confident that the mortgage lender you choose to work with is providing exceptional service and answers to all of your questions. When you first start shopping around for a mortgage lender, consider asking these questions:

What type of loan option best suits my financial needs?

Lenders offer a variety of loan options and each loan program’s features, such as interest rate, loan term and monthly payment, may vary. The most common types of mortgages are the Federal Housing Authority (FHA), Veterans Affairs (VA), Conventional, Jumbo and Reverse mortgage loans. Loan terms can be fixed, adjustable or interest only. Consult with your lender to discuss what your financial goals are, and he or she can walk you through the lending options available to you to find the perfect fit, for not only what you qualify for, but what you can reasonably afford.

How much money do I need for a down payment?

It’s a common misconception that buyers need a 20% down payment to secure financing for a home. While putting 20% down will likely get you a better rate and avoid the added cost of private mortgage insurance, it is no longer the norm. Down payments for FHA loans start at just 3.5% and Conventional mortgages at 3%. In addition, there are opportunities for down payment assistance. For more information on low down payment options, click here.

Should I pay points to buy down my interest rate?

Paying points means that you are paying an extra fee on top of typical loan fees, such as appraisal and underwriting fees, to get a lower interest rate. Essentially, you pay more upfront, but receive a lower interest rate which means you pay less over time. A point typically equals 1% of the loan amount. For example, buying a point on a $400,000 mortgage would cost an extra $4,000 at closing. The Consumer Finance Protection Bureau advises that “the longer you plan to live in your home, the more sense it may make to pay points.” When it comes to your particular loan and buy down options, consider these details and consult with your mortgage professional.

How much will I need to pay at closing?

There are various costs and fees associated with buying a home, especially the closing costs. Closing costs include a series of recurring and nonrecurring (one-time) fees. Your lender should provide you with a Loan Estimate. On the second page of your Loan Estimate you can find an estimation of the cash you will need to provide at your closing. Remember this is only an estimation. Lenders are required to provide you with your Closing Disclosure three business days before your scheduled closing which will clearly define all the costs of your loan and confirm the cash you will need to present at closing. For more information on closing costs, click here.

What can I do to avoid any delays in closing?

Each mortgage professional will have their own specific recommendations to avoid delays, but here are some general recommendations:

  • Fully and honestly complete all required documents.
  • Respond quickly to any requests from your lender for additional information.
  • Get pre-approved before you begin your home search.
  • Review your credit report for any errors, be prepared to explain any past credit issues, and work with your lender to request any corrections.
  • Refrain from taking on any new debts or career changes during the process.

Buying a home is an exciting and sometimes overwhelming experience. It’s important to find a lender and mortgage professional who can explain all the aspects of your loan options. Reach out to an experienced loan advisor today to discuss your financial needs.

By Kendall Taylor

6 Things to Know About Homeownership and Your Taxes

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There are many costs and benefits associated with living “the American dream” and it’s important to remember that owning a property can qualify you for some potentially large tax breaks. Whether you already own a home or are considering purchasing a home in 2017, here are six opportunities for tax savings worth looking into as a homeowner:

Mortgage Interest

Homeowners are allowed to deduct the amount of money they paid towards their mortgage interest from federal and state taxes. This can provide a relief for new homeowners since interest payments can be the largest component of a mortgage payment in the first couple of years of owning a home. If you happen to own a second home, you can also deduct the mortgage interest for that, as long as it is not a rental property. You will receive a Mortgage Interest Statement (Form 1098) from your lender, which you will file with your tax return.

Points

A mortgage “point” is a payment that equals typically around 1% of your total loan amount. A borrower can pay points to “buy down” their rate. The first year that you own your home, you are able to claim the points you paid as a deduction for your taxes. Since points of 1% or more are common, the savings can be quite considerable.

Property Taxes

Homeowners are able to take a tax deduction for their local property taxes. Depending on where a homeowner lives, this can be a substantial deduction.

Energy Credits

If you spent money to improve the energy efficiency of your home, you may qualify for a tax credit. Unlike a deduction, which only saves you the tax amount you paid based on your income bracket, a tax credit is a dollar-for-dollar savings. Upgrading items such as insulation, windows, doors and roofs may qualify you for this credit. For more information regarding energy credits and tax filing, click here.

Mortgage Insurance

Borrowers who are unable to put down 20% for a down payment are required to purchase private mortgage insurance (PMI) to protect the lender in case the loan defaults. PMI holders are able to deduct their PMI payments from their annual taxes.

Casualty Losses

If you suffered property damage and weren’t reimbursed by an insurance company for repairs, you may be eligible for a tax deduction. The cost of your casualty loss must exceed 10% of your adjusted gross income in order to be eligible. So although you won’t be able to write off any small-time repairs, you can claim any major damage that your home might have suffered during any storms or fires.

Consult with a tax professional to ensure that you don’t miss out on any tax savings related to homeownership. If you are thinking about buying a home or refinancing the one you currently own, contact a loan advisor near you to evaluate your options.

By Kendall Taylor

5 Spring Cleaning Tips

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Spring is right around the corner! But, before you can relax in your backyard and enjoy your blooming garden, there are probably some seasonal chores to conquer. To make this year’s preparation for spring a breeze, focus on these five spring cleaning must-do’s:

The Fridge

Woman looking into fridge.It doesn’t take much for a fridge to go from pristine and organized to a disaster zone. Give your fridge some TLC this spring. First, remove all the contents from the inside of your fridge. Combine salt and soda water to give the inside of your refrigerator a much-needed cleaning. The carbonation of the soda water combined with the hard texture of the salt makes for a great cleaner. Now that you have a clean and bare fridge, you have the perfect opportunity to thoughtfully organize its contents to fit your family’s needs. If you have children that like to ransack the fridge, consider dedicating an area of the fridge to kid-friendly pre-portioned snacks.

The Faucets

Lime buildup around faucets and drains are not uncommon, Kitchen faucetbut can be a huge pain to clean. Since you are already in the spring cleaning spirit, now is the time to tackle this project! An easy trick to get rid of lime buildup is to lay paper towels around the fixture or drain. Then, soak the paper towels with vinegar and let it sit for an hour or so. The deposits will soften and you should be able to easily remove the buildup with the tough side of a sponge.

The Screens

Screen doorIf you leave your screens in year-round, now is the time to give them a once-over! If not, all that dried-on dirt from winter storms may blow into your home the first time you open your windows or sliding glass door this spring. Luckily, there is an easy way to accomplish this task! Leave the screens on the window and run your vacuum with its dusting-brush attachment over the side that faces into your home. To ensure that you remove all the dirt, run the brush side to side from the top to the bottom of the screen.

The Windows

You can’t admire spring’s beauty if you can’t see Woman looking out window.outside your window! To clean your windows, first brush off any excess dust or dirt lining the window frame or sill. Then, spray cleaner onto the inside of the glass until it’s heavily misted, but not dripping down. Next, with a lint-free cloth, wipe the glass horizontally until the window is dry. Repeat these steps on the outside of the window. Pro tip: Choose a cloudy day to clean your windows. Direct sunlight can make the cleaner dry too quickly, which can leave behind streaks.

The Walls

Cleaning suppliesTake time to really examine your walls. Are they covered with fingerprints and smudges? Eliminate these wall marks by taking a soft cloth dipped in cleaning solution and wipe off the marks using a circular motion. Avoid any ammonia-based cleaning supplies. A drop of gentle hand soap diluted with water can do the job! Also, be sure to wipe down light switches, doorways and other high traffic areas.

Did we miss your go-to spring cleaning chore? Share your cleaning tip in the comments below!

By Kendall Taylor

A Simple Guide to the Home Buying Process

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Buying a home for the first time can seem like a daunting process. But it doesn’t have to be difficult. With a little preparation, and the guidance of a real estate agent and mortgage professional, you’ll be well on your way to making the house of your dreams…your home! This easy-to-follow infographic will show you what to expect along the path to home ownership:

Infographic

Contact a loan advisor near you to get started!

Lucky Charms In Real Estate

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Whether it’s a family home, a vacation getaway, or an investment property, owning real estate is an important investment in your future. With so much riding on these transactions, real estate often feels like a high stakes game of chance. Given that there’s no exact formula for success and the process can be highly emotional, real estate lends itself to a bit of superstition. Let’s take a look at some of the practices that are believed to bring good luck in real estate!
lucky horseshoe
Horseshoe Over the Door
The horseshoe has a long history of being a protective symbol. It has become customary to hang a horseshoe over the door to protect against evil and bring good luck. The way that you hang the horseshoe is a matter of preference. Some believe it should be pointing upward so your luck does not escape. Others argue that hanging the horseshoe upside down will ensure that good luck pours down into the home.

St. Joseph
St. Joseph is a Catholic saint long believed to help with home-related matters. Through the years he has become known as the patron saint of real estate. There are even St. Joseph “home sale kits” available for purchase. The idea is that if you bury a statue of St. Joseph in your yard and say a series of special prayer, the right buyer will come along to purchase your home. Once the home is sold, the next step is to dig up the statue and place it in your new home for continued good fortune.

Feng Shui
The art of feng shui (pronounced fung shway) is an ancient Chinese practice of balancing the physical environment to promote harmony and balance, which is believed to bring positive outcomes. One prominent “rule” in feng shui is to clear out clutter to allow a natural flow of energy, which is a perfect complement to some of the more mainstream strategies for staging a home! Additionally, it is believed that a home should have a healthy combination of the five feng shui elements – wood, fire, earth, metal, and water. Each element represents a different kind of energy and the type of outcome it cultivates. For example, the water element is all about wealth and abundance, while wood represents natural growth and vibrant health.

Smudging
A traditional Native American practice known as smudging uses the smoke from burning sacred herbs (such as sage) to purify a space. Smudging is believed to clear away negative energy, and bring luck and positive energy. The traditional practice is to place the herbs in a bowl and open a door or window before you begin. Light the sticks or bundle and gently blow out the flame allowing it to smolder, like incense. To dispose of leftover ashes, practitioners recommend that you take them outside and leave them “on the earth.”

Lucky Numbers
Based on the perceived bad luck associated with the number 13, some avoid purchasing a home with the number 13 in the address and some high-rises skip 13 when numbering the floors. But, lucky numbers also extend into pricing strategies. The number 8 is often considered lucky, based on cultural beliefs. The Chinese word for 8 sounds similar to the word for “wealth” or “prosperity,” making it a favorable number. In Jewish tradition, the number 18 symbolizes “chi,” which is the Hebrew word for “life.” There is some debate over using the number 9 in pricing. While it is generally believed to indicate a bargain, the strategy seems to work less effectively in higher priced markets.

Do you have any superstitions that have impacted your home buying or selling decisions?

By Amy Malloy

Things to Know When Purchasing a Condo

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Condos

Buying a condo can be great choice for many first time buyers or investors. However, since the condo project is looked at as a whole, condos are considered to have many variables that can affect the property’s value. Government agencies like the FHA, Fannie Mae and Freddie Mac require that the property meets their established criteria for loan approval.

Condos are labeled as warrantable if they meet the criteria for financing eligibility, while a property deemed non-warrantable may be eligible for fewer financing options. So before you start your condo purchase journey, it is wise to do some research on the condo project you are looking at in particular, as financing may still be available, but could cause some delays or workarounds if deemed non-warrantable.

Ownership

Less than 10% of the condominium must be owned by a single person or entity. If one person, or entity, owns more than 10% of a development, the complex is seen as unstable since one person has too much potential impact on the development’s value.

Owner Occupancy

It may be an issue if less than half of the tenants are not owners. This can happen when over half the units are rental or tenant occupied. Lenders typically like to see 50% or more of the complex owner-occupied, with minimal rental units.

Delinquent Payments

The lender will look to see if a complex has more than 15% of its owners in arrears at the time of inquiry. Delinquencies can include regular Home Owners Association (HOA) fees, fines for violations and nonpayment for work orders.

Lawsuits

Most lenders are concerned with structural litigation, but any type of outstanding lawsuits against the complex’s HOA can be seen as unstable since it may affect the HOA’s overall characteristics of the property itself.

Cap Reserve                                                                  

HOAs must include a timeline in their annual budget showing that 10% of their annual income is deposited into a Capital Reserve fund. This fund is used for larger projects, such as foundation repairs, roof repair and road maintenance.

Commercial Space

Does commercial space account for 25% or less of the total building’s square footage? Complexes with commercial space exceeding 25% of total square footage are deemed non-warrantable since the businesses housed in the commercial space can affect the property’s value.

These are just a few requirements that lenders take into consideration when approving a condo purchase loan. In your research if you find the project may pose a financing dilemma, don’t be discouraged. There are still many financing solutions for non-warrantable condos. Talk to one of RPM’s experienced loan advisors today to discuss the lending options that best suit your financial needs and property.

By Kendall Taylor

Affordable Updates to Make You Fall in Love with Your Home Again

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Does it feel like everyone is smitten with their home, while you’re lacking any sense of emotional connection to your surroundings? Take heart! Breathing new life into your home doesn’t require a huge renovation budget. Try these simple updates to bring back the spark and make you fall in love with your home all over again!

Enhance the Entryway

Your front entryway is the first area guests see of your home. Impress visitors by investing in a new front door or giving the current door a fresh coat of paint. A new front door can drastically change the look of your home and enhance curb appeal! If you are wary of changing your front door, you can repaint the exterior trim, update your house number tiles or install new outdoor lighting for an updated, more stylish look.

The Walls

Update your kitchen walls by adding a fun kitchen-backsplashbacksplash. If you do not have the budget for a tile backsplash, try something simple like tin ceiling tiles, wallpaper, stainless steel, chalkboard or magnetic paint. If you are thinking about updating the space above a desk area, consider adding a cork backsplash. Cork walls are not only inexpensive, but can also serve as a real-life Pinterest board.

Lighten It Up

light-fixturesNew kitchen lighting or an updated fixture over the dining room table can make a huge impact on your living space. Replace any outdated fixtures with modern light fixtures that make a statement. Or, consider adding a dimmer switch. A little mood lighting can go a long way in terms of ambiance! For an easy DIY fixture update, repaint an old chandelier or ceiling fan to give it a fresh look.

Landscape the Yard

Landscaping is too often overlooked. Fresh landscaped-yardlandscape isn’t only aesthetically pleasing, it can reduce water bills and maintenance if properly planned! Start out with a trip to the local greenhouse and figure out what plants thrive best in your area, or more importantly, what plants are easiest to care for. If you live in a drought prone area, look for plants that do not require lots of watering.

Clean and Fresh

living-room-interiorAs much as new updates will help, one of the easiest ways to revamp your home’s interior is a little TLC. Consider hiring a cleaning service to give your walls and floors a scrub down. Or tackle each room a day at a time. Start with the most-used rooms, like the kitchen or family room. Take time to wipe down every surface and clean the windows. Organize drawers, cabinets, countertops and any areas in your home that tend to get cluttered. Purge and/or store things that are not frequently used. A good thorough cleaning and a fresh coat of paint can give your home that sparkle that it was missing and make it feel like new!

By Kendall Taylor