About

Apache is functioning normally


What do you spend most of your money on? For most people, their two biggest expenses are their home and car(s). If you remember the post comparing expenses in 1913 to 2012, you might recall the three things that Mr. Average spent most of his “raise” on were:

  • Housing (36 percent of the raise)
  • Income taxes (28 percent), and
  • Transportation (24 percent)

A majority of the increase in transportation has, arguably, to do with that wonderful instrument of freedom — the automobile.

The choices we make

Our spectrum of choice in cars is, of course, wider than a mile. Egotistas spend big on the latest model of the coolest car. Hollywood celebrities once flaunted their beblinged Cadillac Escalades at the annual Oscar ceremony. That was before the 2002 recession. When that hit, it suddenly wasn’t cool any more to be seen piloting a behemoth slurping down rivers of Mother Earth’s precious resources. That’s when the curtain went up on the eco-friendly Toyota Prius, which Cameron Diaz and other stars rode to the 2003 big event in their sipply little Priuses. Overnight, saving the planet with the Prius became California Cool.

That was then.

The top 1 percent, as we saw a few weeks ago, figured out a way to ensure that a full 95 percent of the wealth increase from this economic recovery gets channeled into their pockets. With that, concern for saving the planet went the way of Uggs for boys, and now the wheels of choice for gliding down Rodeo Drive has become a Range Rover, starting at $85,000 (new, of course).

While an egotista’s main concern is how to bling up a new Range Rover, the other end of the spectrum is occupied by frugalistas sporting boring robust-o-cars destined for at least ten more faithful years of service. Those road warriors are inevitably at least 20 years old, scored on Craigslist for $500 from people with more money than savings concern.

Most of us find ourselves somewhere in the middle of the bulge of the ever-present bell curve, seeking to save while driving something a tad less extreme. That includes the mythical Mr. Average, the darling of all statisticians and bloggers.

So what does Mr. Average spend to keep his or her car on the road? The three biggest car expenses are depreciation, fuel, and car insurance. How does Mr. Average try to save on these items? Buy a cheaper car, is the usual answer.

Not for insurance. You would think you would save on auto insurance with an economical Toyota Corolla, which would be cheaper to insure than, say, a Chevy Tahoe, which is approximately twice the cost. You would be wrong. In an actual comparative pricing study I did for another blog post, I discovered that insuring the more expensive Tahoe is actually cheaper in total dollars than insuring the economical Corolla (new, as well as used).

Comparing gas mileage and depreciation is relatively easy. Getting a handle on car insurance costs for Mr. Average, however, is not.

You see, car insurance is greatly affected by “other” factors than by your choice of vehicle. According to Insurance.com, there are four basic factors insurance companies use to set your rates, and the actual vehicle is only third on that list.

The biggest factor setting your auto insurance rate is you — or, to be more specific, how insurance companies see you. You are bound to hate some and love some of these distinctions, but they’re driven by hard data, collected and analyzed by geeks at their computers.

Who you are

Age: If you’re under 25, your car insurance rates will be higher. Over 25, it depends. It drops until you become seriously interested in Depends, at which time your car insurance rates will start to climb again.

Along with age, insurance companies look at how many years you’ve been driving. Statistics prove that people who have driven longer file fewer claims. For that reason, it usually pays to keep your driver’s license current, even if you live somewhere like New York City or Chicago, where you many times don’t even need to own a car or drive. (Of course, you may need to have a driver’s license in America to write checks or buy stuff with plastic. Foreigners sometimes have a hard time figuring out how being able to pass a driving test qualifies you to write checks, but that’s a different story.)

Gender: Women pay less because:

  • They drive less
  • They get in fewer accidents
  • They get fewer speeding tickets
  • They get fewer DUI convictions
  • They buy safer cars

Please note: that’s not a personal judgment. Insurance companies agree that that’s what the numbers say.

Zip Code: Where you live affects your rates, because the frequency of “risk events” varies greatly from neighborhood to neighborhood. These risk events include vandalism, theft of cars and/or contents, and fraudulent claims. Again, these are not Mark Cuban types of assessments; they’re conclusions drawn from statistical data. For this reason, it’s not uncommon for two identical people living just a few miles apart to have a difference of as much as 50 percent in their auto insurance rates.

So, if you’re considering moving, it might be a good idea to find out what the difference will be in your car insurance. You can get quotes from esurance, Progressive, or other online insurance providers — or you can fill out a single form at Insurance.com and get free online quotes from a bunch of insurance companies any time you want to compare rates. (It’s pretty slick, but I digress.)

In general, it’s cheaper to insure cars in rural areas, because they have less crime, less traffic, and fewer accidents.

Credit History: You might not think paying your credit card bill late would increase your car insurance, but you would be mistaken. According to an insurance broker friend of mine, statistics show that people with bad credit file claims something like 40 percent more frequently than those with good credit. If you want to look into this, here’s an article about how and why your credit history affects your car insurance premiums.

Occupation: Again, statistics rule when it comes to insurance. Occupations like scientist, pilot, or actor/artist show lower claims and, therefore, have lower car insurance rates, generally speaking. Why? I want to say nobody really knows, but I’m sure somebody does. The most common explanation I’ve heard is that those occupations require attention to detail and being meticulous. In other words, those people are careful. That’s in contrast to occupations with high auto insurance rates, such as lawyers, business executives, judges and doctors. Apparently, the reason for that is the stress level that comes with jobs like those. (They say the rate for doctors isn’t much lower than for teens.) Real estate brokers also pay more because they have to drive more.

Marital Status: Did you know married people get into fewer accidents than their unmarried counterparts? Insurance companies do, and that’s why they offer married people lower rates. In addition, insuring two cars with the same company usually will get you an additional multi-policy discount, much like the next criterion.

Homeownership: Insurance companies generally charge less for homeowners because they’re regarded as more stable. By itself, that’s not a significant factor, but the discount you get from combining your home and car insurance is.

The rest

The other basic factors determining your auto insurance rates are:

  • Your driving record (accidents, tickets, etc.) and claims history
  • The coverage you’re looking for (pretty obvious)
  • Your vehicle

The impact of your vehicle selection is not obvious, so it’s not simply that a more expensive car will carry a higher insurance premium. In fact, as pointed out above, a Tahoe costs less to insure than a Corolla.

Chances are that if you’re concerned with getting rich slowly, you will have a good (or at least improving) credit record, and you’ll be on the positive side of many of the variables listed above. But now you know exactly how those factors can lead to savings on your auto insurance, the third largest expense of car ownership.

How have you gone about lowering your car insurance premiums?

Source: getrichslowly.org

Apache is functioning normally

Potential homebuyers who are not employed full-time or whose income is considered irregular may not have the proof of employment typically associated with a mortgage. However, these consumers do not have to abandon their dreams of becoming homeowners altogether. 

Instead, they could qualify for a no-documentation mortgage, also known as a no-doc mortgage, no-income verification mortgage, or no income, no job or assets’ (NINJA) mortgage. 

As the name suggests, there is less paperwork involved to get approved for a no-doc mortgage. The lenders will go through non-traditional channels to verify a borrower’s income. 

In this article, you’ll learn about what no-doc mortgages are and their requirements, who can qualify, and whether or not this may be the best option for you. 

What Is a No-Doc Mortgage and How Does It Work?

No-doc mortgages don’t require the normal sort of documentation of most loans such as bank statements or recent pay stubs. This type of mortgage loan is generally intended for people who don’t have tax forms from an employer or who want their information to remain confidential. 

Depending on the situation, you will still need to provide some evidence of income. 

Since no-doc loans are risky for lenders, your interest rate will be much higher than usual and you may have to look around at multiple companies before someone will take a gamble on you. You’re unlikely to find no-doc loans at the big banks.

To have a realistic chance of being approved, you will need to have an excellent credit score. 

If your credit score isn’t 740 or higher, you will need to make every possible effort to increase it before applying for this type of loan.

What Is a No Ratio Loan?

No ratio loan is another variety of no-doc loans. It’s primarily for people who don’t want to disclose their income or have complicated and fluctuating sources of income. 

While most borrowers must have a debt-to-income ratio below 43% to qualify for a loan, a no ratio loan means that lenders won’t take your DTI into account.

To qualify for a no ratio loan, you will also need a solid credit score, and it’s ideal to have significant assets as well. With this type of loan carrying considerable risks for lenders, you can expect to pay a higher interest rate than one where you prove your income. 

Are No-Doc Mortgages Still Available?  

While it is deemed a niche product in the housing industry that has historically been associated with sub-prime lenders, no-doc mortgages still exist and continue to evolve today.

Since the housing crisis of 2007/2008, in which mainstream lenders had exposure to sub-prime mortgages, lending standards on no-doc mortgages have tightened to provide better consumer protections. 

Before, these loans were the go-to, self-employed mortgage based on a trust system between lenders and borrowers on income. These days, it is not that simple. 

This primarily affects the NINJA mortgage: lenders were not required to verify a borrower’s income, assets, or job status. These loans have mostly gone away since the Great Financial Crisis. 

Who Can Get a No-Doc Mortgage Loan? 

A no-doc mortgage loan is designed for people outside the realm of the traditional financial system. No-doc mortgages are meant for high-net-worth individuals whose employment income is not cut and dry. 

For example, an entrepreneur with equity in a startup with enough operating history could be an ideal candidate for a no-documentation mortgage. Under these conditions, even a high-middle-class borrower might not meet the standard.

Circumstances under which you might be able to qualify for a no-documentation mortgage include:

  • If your paychecks are sporadic, but you have managed to accumulate savings or liquid assets that can easily be converted to cash.
  • Self-employed people or those who work in the gig economy or restaurant business.

Another candidate for no-doc mortgages is someone who receives steady deposits that their bank statements can verify. In this case, they could qualify for a self-employed mortgage loan, a term used interchangeably with a no-doc mortgage. 

Real estate investors make up another potential borrower category for a no-documentation mortgage. For buyers who are flush with cash and whose steady rental income will pay the mortgage, no-doc mortgage loans could be the ideal solution. 

Advantages of a No-Doc Mortgage Loan 

The key benefit of a no-doc mortgage loan is that it plays the same function as traditional loans. At the end of the day, it helps the consumer to own a home. In addition, borrowers can avoid excessive paperwork generally required for an application, and they could even have the closing process accelerated compared to a fully documented loan.

When you are ready to take advantage of these benefits, find a Total Mortgage loan expert near you to find out if you qualify for a no-doc mortgage. 

Requirements for a No-Doc Mortgage Loan 

You may be wondering what it takes to qualify for a no-doc mortgage. The truth is that what no-doc mortgage loans lack in the paperwork, they make up for in other requirements. 

For example, to be eligible for a self-employed mortgage, a borrower is expected to maintain a higher credit score than required for a fully-documented mortgage. In addition, they will need to put down a higher down payment as a percentage of the purchase price. 

  • Minimum down payment: Homebuyers can expect to pay a down payment of anywhere between 20 to 30% or more of the purchase price. 
  • Minimal credit score: No doc mortgage loans have a stringent credit score requirement of at least 700, which according to Experian, falls into the “good” category of credit score rankings. 

Explore Total Mortgage’s Loan Options 

No-doc mortgages are geared toward people who don’t have a steady income or full-time employment but want to become homeowners. Since the risk to the lender is greater with no-doc mortgages, qualifying for one is quite difficult but not impossible. 

If your credit history and financial situation tick all the boxes listed in this article, homeownership may be within reach for you with a no-doc mortgage. If not, you might want to explore your options with a traditional mortgage. 
We are here to walk you through the process from beginning to end.

Take the first step by applying for a mortgage today, or find a Total Mortgage branch near you and discuss your options in person with one of our loan advisors.

Source: totalmortgage.com

Apache is functioning normally

The United States is an amazing place to invest in real estate or buy real estate as an owner-occupant. The US has some of the best financing options, most choices, most secure real estate, and yes even some of the most affordable real estate in the world. While the US is a great place to be a landlord, not every state has the same laws or advantages. Some states are making it harder to be a landlord to the point where investors are looking to other states to invest in. This article goes over what the best states and worst states are for landlords based on a number of factors I put together and weighted based on how important they are. I have been a landlord, flipper, and real estate broker for many years and I see my local state of Colorado slowly becoming less landlord friendly. You can see Colorado’s ranking as well as every other state below.

Does Landlord-friendly mean tenant unfriendly?

Before I get into the rankings there is a lot of landlord hate in the world these days. Just because a state is landlord friendly does not mean it is bad for tenants. In fact, many of the states that are the most friendly to landlords, are the cheapest for tenants to live in. The problem with states that make it harder on landlords is that those restrictions make it more expensive to be a landlord. If it is harder and more expensive to be a landlord, landlords have to raise rents to make it worthwhile to do business in those areas or they may choose to sell. If there are fewer rental properties, that also means rents will rise higher thanks to supply and demand.

Landlords and tenants can work together and coexist without having to fight each other. One of the biggest misconceptions out there is that landlords are buying all the houses and making it impossible for first-time buyers to purchase. The facts, show landlords selling many more rental properties than they are buying and the owner occupancy rate is going up. This is decreasing the number of rentals and pushing rent prices up as well as purchase prices. If you want more affordable rent, you want more landlords!

What are the most landlord-friendly states?

I made this list based on a number of factors including:

  • Crime
  • Population change
  • Median house value
  • Time to evict
  • Property taxes
  • Insurance rates
  • Unemployment
  • Vacancy rates
  • Rent control

I used the most recent sources I could because the world has been changing fast in the last few years, and I weighted the categories differently based on the importance of each factor. I will be changing and updating this list to make it as accurate as possible. If you have suggestions please leave them below. I would love to hear about new laws being passed as I may not hear about them as soon as locals to those areas.

The lower the score the better for this ranking!

Rank State Score
1 Alabama 63
2 Wyoming 75
3 Kentucky 78
4 Florida 78
5 Iowa 81
6 Idaho 85
7 Montana 87
8 West Virginia 88
9 New Hampshire 90
10 Arkansas 92
11 Arizona 92
12 Oklahoma 92
13 South Carolina 92
14 Nebraska 95
15 Wisconsin 96
16 Delaware 96
17 Indiana 97
18 Maine 97
19 Tennessee 99
20 Utah 99
21 Georgia 102
22 North Carolina 102
23 North Dakota 102
24 Vermont 104
25 Mississippi 104
26 Ohio 106
27 South Dakota 106
28 Nevada 106
29 Louisiana 107
30 Kansas 110
31 New Mexico 110
32 Missouri 111
33 Virginia 112
34 Pennsylvania 114
35 Colorado 116
36 Connecticut 119
37 Michigan 120
38 Rhode Island 122
39 Alaska 124
40 Massachusetts 125
41 Hawaii 129
42 Minnesota 133
43 Texas 134
44 Washington 140
45 New Jersey 144
46 Maryland 147
47 Illinois 149
48 Oregon 157
49 New York 164
50 California 169
51 District of Columbia 182

How did I come up with a Landlord friendly list?

I have put a lot of thought into this list as there are many others online that I do not agree 100% with. Many lists include income taxes or other factors which do not impact investors unless they live in that state. This list is meant to show how friendly states are based solely on rental properties in that state, not the advantages of living there.

I have weighted the list based on the importance of these categories. The price of real estate is the number one weighted category where as insurance is important but not nearly as important. I thought about adding a category for appreciation but it is so hard to know what areas will appreciate and I think appreciation should be thought of as a bonus for rentals, not the end goal. Many of the categories like population gains will contribute to appreciation as well.

I will not post the entire data set here, but I will create a YouTube video going over all of the data soon on the InvestFourMore YouTube channel. Be sure to subscribe there so you are notified when that video is live! I will also post the sources for all my data below.

If you want to learn more about investing in rentals check out this article: How to Get Started Investing in Rentals.

Sources:

Build a Rental Property Empire

Categories Rental Properties

Source: investfourmore.com

Apache is functioning normally

Buying a home is one of life’s most rewarding milestones. However, as a prospective homebuyer, you may have noticed how much the real estate landscape has changed over the past few years.

Let’s take a look at how a temporary mortgage buydown concession could reduce your interest rate and make your initial monthly payments more affordable.

What Is a Temporary Buydown on a Mortgage?

A temporary buydown is a mortgage financing strategy that allows a homebuyer to lower their interest rate and payment for a predetermined amount of time through the payment of mortgage points at closing (whether by the lender, homebuyer or seller).

What’s a mortgage point? A mortgage point, also known as a mortgage discount point, equals 1% of your total loan amount. For example, a mortgage point on a $200,000 loan would be $2,000. When you purchase points in a mortgage buydown, you’re essentially prepaying interest upfront at closing in exchange for a lower rate, i.e., “buying it down.” Typically, a lender may offer a .25% rate reduction in exchange for one point.

How long could the rate and payment reduction last? Up to three years.

How much could the rate be reduced? A maximum of 3%. The rate is lower in the introductory period and increases over time — a maximum increase of 1% per year — to the original quoted rate.

What happens to those mortgage point payments? The money will typically go into an escrow account. Those funds temporarily subsidize your interest rate for the agreed-upon time period.

According to Scott Bridges, senior managing director of Pennymac’s consumer direct lending division, the benefit of a buydown is simple. “In short, the buydown allows a buyer to combat higher market rates,” he explains. “The first year of the loan, your rate and payment will be based on a rate that is 1% lower than the market rate. So if current rates are 6%, your first year of payments would be based on a 5% rate. That reduced rate for year one can save the average consumer several thousand dollars in payments (depending on loan amount).”

While interest rate discounts, loan terms, and conditions vary by lender, a buydown can be a good option for temporarily lowering your monthly mortgage payments at the start of your loan.

What Are the Benefits of Buying Down an Interest Rate?

There are several reasons you may want to buy down your mortgage rate. Here are a few potential budget-friendly benefits:

  • Lowers initial monthly mortgage payments. If you have a temporary buydown, those points you pay for upfront can make your initial mortgage payments more manageable, which can be especially helpful if you’re at the beginning of your career and expect your income to rise in the future. Those early savings will also add up to less interest paid over the life of your loan.
  • May boost your buying power. A reduced interest rate and the subsequent lower monthly mortgage payment may help you qualify for a higher mortgage, enabling you to purchase a more expensive home.
  • Can be arranged for both purchases and limited cash-out refinances. Whether you’re buying a new home or doing a limited cash-out refinance and replacing your current mortgage with a new, slightly larger mortgage, you may qualify for a temporary interest rate buydown.
  • Potential tax write-off. While a seller, builder, or lender may cover the buydown to facilitate a sale, the points may be deductible as home mortgage interest if you’re the buyer and pay for the buydown.1
  • Reduces rates for fixed-rate and adjustable-rate mortgages (ARM). You can purchase points to lower your interest rate on a fixed-rate mortgage and during an ARM’s introductory fixed-rate period. Depending on the buydown structure, rates may be reduced up to 3% for a maximum of three years.
  • More money in your pocket. A lower mortgage payment at the start of your loan could free up cash to pay bills or make home improvements.
  • Allows you to watch the market. A buydown gives you an opportunity to watch the market while saving on your monthly payments. “As rates move up and down during and after that first year, you can refinance into a lower rate with the knowledge you had a full year of reduced mortgage payments,” Bridges notes.

How Much Does It Cost to Buy Down the Interest Rate?

Generally speaking, the approximate cost for a temporary mortgage buydown equals how much you’ll ultimately save in interest. But several factors will be taken into account:

  • How much money you’re borrowing
  • How many points you’re buying; each point costs 1% of the mortgage amount
  • Type of buydown structure

Who funds a temporary mortgage buydown? In most cases, the buyer will pay the mortgage points, but in some instances, the buydown could be fully or partially funded by the seller, lender, or third party, such as a realtor or builder.

How long will the reduced interest rate be in effect? The lower rate and payment will be in effect for up to three years, depending on the rate buydown structure. Below are a few different types of mortgage buydowns.

Rate Buydown Structures

There are several types of rate buydown structures. If your lender offers you a buydown — most, but not all, lenders do — you will have the opportunity to negotiate pricing and determine which structure suits your financial needs. The following are the most common types of temporary mortgage buydown structures.

3-2-1 Buydown

A 3-2-1 buydown is a home financing arrangement that will reduce a homebuyer’s interest rate for the initial three years. The lowest interest rate is in the first year, increasing to the permanent quoted rate after the third year.

3-2-1 Buydown Basics

  • Reduces rate by three percentage points in the first year of the mortgage
  • Reduces rate by two percentage points in the second year
  • Reduces rate by one percentage point in the third year
  • Borrower pays full interest rate after the completion of the third year and is fixed for the remainder of the loan

3-2-1 Buydown Example

This chart shows how a 3-2-1 rate buydown could potentially work if you were to qualify for a 30-year, $200,000 mortgage at a rate of 7%:

Mortgage Year Interest Rate Monthly Payment (Principal and Interest) Monthly Savings Annual Savings
1 4% $954.83 $375.77 $4,509.24
2 5% $1,073.64 $256.96 $3,083.52
3 6% $1,199.10 $131.50 $1,578
4 – 30 7% $1,330.60 $0 $0

In this scenario, the total buydown cost would be approximately $9,171, the amount equal to the first three years of interest savings. The chart amounts don’t include insurance or taxes, and you will want to assume no points contribution from the seller, builder, lender, or a third party.

2-1 Buydown

A 2-1 buydown is a type of home financing arrangement that reduces the interest rate on a mortgage for the first two years, after which the rate rises to the permanent quoted rate.

2-1 Buydown Basics

  • Reduces rate by two percentage points in the first year of the mortgage
  • Reduces rate by one percentage point in the second year
  • Borrower pays full interest rate after the completion of the third year for the remainder of the loan

2-1 Buydown Example

This chart shows how a 2-1 rate buydown could potentially work if you were to qualify for a 30-year, $200,000 mortgage at a rate of 7%:

Mortgage Year Interest Rate Monthly Payment (Principal and Interest) Monthly Savings Annual Savings
1 5% $1,073.64 $256.96 $3,083.52
2 6% $1,199.10 $131.50 $1,578
3 – 30 7% $1,330.60 $0 $0

In this scenario, the total cost of the buydown would be approximately $4,661.52, the amount equal to the first two years of interest savings. The chart amounts don’t include insurance or taxes, and assume no points contribution from the seller, builder, lender, or a third party.

1-0 Buydown

A 1-0 buydown is a type of home financing arrangement that reduces the mortgage interest rate by 1% in the first year, increasing to the permanent quoted rate after that initial year.

1-0 Buydown Basics

  • Reduces rate by one percentage point in the first year of the mortgage
  • Borrower pays full interest rate after the completion of the first year for the remainder of the loan

1-0 Buydown Example

This chart shows how a 1-0 rate buydown could potentially work if you were to qualify for a 30-year $200,000 mortgage at a rate of 7%:

Mortgage Year Interest Rate Monthly Payment (Principal and Interest) Monthly Savings Annual Savings
1 6% $1,199.10 $131.50 $1,578.00
2 – 30 7% $1,330.60 $0 $0

In this scenario, the total cost of the buydown would be approximately $1,578, the amount equal to the first year of interest savings. The chart amounts don’t include insurance or taxes and assume no points contribution from the seller, builder, lender, or a third party.

Who Can Buy Down a Mortgage?

In most cases, the buyer will buy down the mortgage, but there are times when the seller, builder, or lender will offer to purchase points and pay for the buyer’s mortgage buydown. Let’s take a look at each scenario.

Buyer-Funded Buydown

When a buyer negotiates a buydown with a lender, they pay a certain amount of points upfront at closing in exchange for a reduced interest rate. Depending on the buydown structure, the rate could be temporarily lowered for up to three years or the entire loan term. Most mortgage buydowns are buyer-lender arrangements.

Seller-Funded Buydown

A seller-funded buydown is when a highly motivated seller purchases points and buys down the homebuyer’s interest rate. This seller concession can help “seal a deal” by incentivizing and speeding up a home sale. Subsidizing a mortgage buydown can:

  • Give a seller a competitive advantage without having to lower the listing price
  • Help increase the borrower’s purchasing power
  • Make it easier for buyers to qualify for financing
  • Expedite the home sale process

A possible win-win for both the seller and the buyer. The seller could make a faster sale while holding on to more profits than they would if they lowered the asking price. The buyer saves money with a lower interest rate.

Builder-Funded Buydown

Homebuilders can offer mortgage buydowns to attract prospective homebuyers. As interest rates climb and the new-home market slows, builder buydowns are becoming an increasingly popular selling strategy. A recent survey found that 75% of nationally surveyed home builders confirmed they are buying down buyers’ mortgage rates to make payments more affordable.2 Builder buydowns can:

  • Lure buyers in a competitive and high mortgage market
  • Make new homes more affordable to a broader range of buyers
  • Be offered as part of a package, such as an upgrade or closing cost contribution

A builder buydown arrangement may require the buyer to go through the builder’s mortgage company for the mortgage.

Lender-Funded Buydown

Lenders may offer to subsidize a buydown by contributing all or some of the funds for the mortgage points. This concession option could help increase your negotiating and purchasing power as a borrower.

A temporary lower interest rate is certainly enticing, but mortgage buydowns aren’t for everyone. Buying mortgage points in exchange for a rate reduction may not be in your best interest if you are…

  1. Having trouble meeting loan qualification criteria: You must qualify for the standard loan terms without the benefit of the buydown. This also includes:
    • Having a minimum 660 FICO score
    • Meeting the applicable Fannie Mae requirements
    • Submitting mandatory documentation
  2. Purchasing an investment property or manufactured home: A mortgage buydown can be arranged for a principal, owner-occupied home, or a second home. It’s not available for investment properties or manufactured homes.
  3. Planning on selling soon: There are substantial upfront costs involved with buying a new home, including the down payment and closing costs. Add mortgage points to the mix and it will take time to “break even,” meaning the time it will take for your savings to outweigh those costs to lower your interest rate. If you sell in the near future, you may not have been in the home long enough to recoup those point costs.
  4. Doing a regular cash-out refinance: Mortgage buydowns are allowed on purchases and limited cash-out refinances only. Limited cash-out refinances follow Fannie Mae guidelines restricting the cash-back amount to $2,000 or 2% of the new loan principal balance, whichever is less.3
  5. Short on cash: If you have limited cash, the high upfront costs may deplete your savings, leaving you short on funds you may need to cover other future expenses. Instead of buying points, you may want to allocate those funds to paying down high-interest debt or building an emergency fund.
  6. Making a small down payment: If you’re purchasing a home and contributing less than 20% to the down payment, or if you’re refinancing and have less than 20% equity, you’ll likely have to pay for private mortgage insurance (PMI) on your conventional loan.4 The premium will be added to your regular monthly payment. Rather than pay for points, consider using that money to make a larger down payment.

When can a mortgage buydown make sense? This home loan strategy is worth exploring if…

  1. You have enough liquid cash: If your savings is enough to cover the down payment, closing costs, and mortgage points — and you have a cash reserve left over — a temporary mortgage buydown can be a great option for reducing your interest rate for up to three years.
  2. You expect your income to rise: Starting your career? Re-entering the workforce? If you anticipate that your income will rise within the next few years, a temporary mortgage buydown can help you ease into homeownership with a lower initial interest rate and payment.
  3. The seller, builder, or lender is paying for the points: If you’re a homebuyer and the seller, builder, or lender offers to purchase the mortgage points for you, a temporary buydown can be an easy way to save money without any point-related, out-of-pocket expenses.

“Lots of people avoid buying a home when rates are higher,” says Bridges, “but this program allows you to at least achieve some reduced payments and real savings for a year.”

Higher rates can also significantly slow down home buying demand. That means, Bridges adds, “You will likely pay less for the house than you would in a low rate market when multiple buyers tend to bid over asking.” With a buydown, you set yourself up to win on multiple fronts. “You get a deal on the house you want, save money on the purchase price of the home in this higher rate market, save money on the monthly payment in year one, and refinance when rates drop.”

The Permanent Mortgage Rate Buydown Option

Want to lower your interest rate and monthly mortgage payment for your entire loan term? In addition to a temporary buydown, you may be eligible to negotiate a permanent buydown with your lender.

  • Protects against rate hikes. The lower rate will never increase during the loan term as long as you have a fixed-rate mortgage.
  • How much does it cost? The rate typically costs between six and eight points. Costs are added to the closing fees.

Ready to learn more about how Pennymac can help you find the right home loan? Begin your online application now, and if you still have questions, contact a Pennymac Loan Expert. We’ll help you evaluate your mortgage buydown options and decide the best course of action for your unique situation.

1 https://www.irs.gov/taxtopics/tc504

2 https://www.realestateconsulting.com/the-light-rate-buydowns-help-buyers-purchase-new-homes/

3 https://selling-guide.fanniemae.com/Glossary/1044658971/What-is-the-definition-of-a-limited-cash-out-refinance.htm

4 https://www.consumerfinance.gov/ask-cfpb/what-is-private-mortgage-insurance-en-122/

Source: pennymac.com

Apache is functioning normally

One of the very few good moments of 2020 (besides the release of  “Tiger King”, of course) was when federal student loans were put in an interest-free moratorium after the CARES Act was approved. The original plan was for payments to restart in September of that same year, but that didn’t happen. Instead, we got … [Read more…]

Apache is functioning normally

“I haven’t seen a dry spell like this in the time I’ve been in business,” Bob Yopko, president of First Equity Residential Mortgage, said of this year’s spring homebuying season. 

The purchase market is locked up with a lack of inventory thanks to elevated rates and homeowners already having secured low mortgage rates during the pandemic years. This, in turn, has made business brutal, Yopko explained.

The still-high mortgage rates that have been killing Yopko’s business averaged 6.39% as of May 4, a decline from last week’s 6.43%, according to Freddie Mac’s primary mortgage market survey (PMMS). Rates averaged 5.27% during the same period a year ago.

“This week, mortgage rates inched down slightly amid recent volatility in the banking sector and commentary from the Federal Reserve on its policy outlook,” Sam Khater, Freddie Mac’s chief economist, said in a statement.

Mortgage rates tend to align with the 10-year U.S. Treasury yield, which traded at 3.38% on Wednesday compared to 3.43% about a month ago.

“Mortgage rates spreads are bad now, meaning mortgage rates should be a lot lower today versus the 10-year yield,” Logan Mohtashami, lead analyst at HousingWire, said. 

With financial credit getting tighter and the Fed no longer buying mortgage-backed securities (MBS), it has been hard for the spread to get better in this environment, Mohtashami explained.

“Mortgage rates should be 5.55%, not 6.5%,” he said.

Slower housing market

With mortgage rates remaining elevated, many sellers feel locked in by their current low mortgage rate. As a result, swaths of homeowners are planning to wait until rates come down before selling, leading to fewer newly listed homes compared to a year ago. 

“The housing market is moving slower this spring. In a typical year, we would expect to see the number of homes for sale begin to increase more significantly from this point forward,” Jiayi Xu, an economist at Realtor.com, said.

Buyers who are still interested in buying in the busiest season for the residential housing market are acclimating to the current rate environment, Khater noted, but the lack of inventory remains a primary obstacle to affordability. 

Due to limited options available on the market, buyers are increasingly turning to newly constructed homes, Xu added.

Another source of frustration for buyers are the new Federal Housing Finance Agency (FHFA) loan-level price adjustments (LLPAs) that went into effect May 1. The FHFA’s “revamped” LLPA matrix differentiates pricing by loan purpose, with grids for purchase loans, limited cash-out refinance loans, cash-out refinance loans and additional LLPAs by loan attribute. 

One goal for the changes was to make homeownership accessible for first-time homebuyers and those with low and moderate incomes. But the new changes have faced pushback from the industry, with opponents claiming that the LLPA adjustments are penalizing middle-class American families by raising fees on good-credit borrowers while lowering fees for higher-risk borrowers.

“According to this new policy, well-qualified borrowers with scores ranging from 680 to above 780 may need to pay slightly more than before to offset the reduction in fees charged to buyers with low credit scores,” Xu said. 

In the weeks ahead, the Mortgage Bankers Association (MBA) expects the ongoing uncertainty in the financial markets to keep mortgage rates volatile, but expects rates to ultimately fall below 6%-levels.

“We still anticipate they will fall, ending the year closer to 5.5%,” MBA President and CEO Bob Broeksmit said.

Source: housingwire.com

Apache is functioning normally

The Federal Reserve announced another 25 basis point rate hike last week, bringing the federal funds rate to its highest level since 2007. But according to DoubleLine Capital Founder Jeffrey Gundlach, this should mark the end of the U.S. central bank’s hawkish stance.

“The Fed will not raise rates again,” he said in a tweet.

This is not the first time for Gundlach to predict that the Fed will pivot.

“I predict the Federal Reserve will be cutting rates substantially soon,” he said in a tweet in March. “I am wrong about 30% of the time so factor that into any decision-making.”

Nevertheless, a success rate of 70% is still pretty astounding in the investing realm. Over the years, Gundlach’s uncanny ability to predict trends and make profitable decisions in the bond market has earned him the moniker of Bond King.

If the billionaire investor is right this time, it could be good news for investors in these sectors.

Don’t miss:

Technology

Tech stocks have been the go-to choice for growth investors. But because of their growth potential, these companies actually got punished as interest rates went up.

To give you an idea, the S&P 500 has fallen about 13% since the beginning of 2022. The tech-centric Nasdaq Composite, on the other hand, plunged by a more painful 22% during the same period.

There are several possible explanations behind the phenomena.

Increasing interest rates can lead to higher discount rates used in valuation models, causing multiples to shrink — that’s bad for all stocks. But high-growth tech stocks usually have a larger portion of their value tied to future earnings and cash flows. As the discount rate used to value these future earnings and cash flows go up, these companies’ valuations can get hit particularly hard.

At the same time, tech companies in their growth phase often rely on borrowed money for research, development and expansion. High borrowing costs as a result of rate hikes can impact the profitability and growth prospects of these companies.

Tech moguls have been calling for rate cuts. Back in November 2022, Tesla Inc. CEO Elon Musk said the Fed “needs to cut interest rates immediately” or risk “massively amplifying the probability of a severe recession.” Ark Invest’s Cathie Wood — whose funds invest heavily in the tech sector — recently said that rising interest rates have hit her company’s strategy “like an earthquake.”

If the Fed pivots as Gundlach predicts, the sector would finally breathe a sigh of relief, and tech stocks could make a comeback.

Investors can access the sector through exchange-traded funds such as the Technology Select Sector SPDR Fund (NYSEARCA: XLK) and the iShares U.S. Technology ETF (NYSEARCA: IYW). You can also purchase shares of individual technology companies if you are willing to do thorough research and due diligence.

Real Estate

Real estate is another sector that’s sensitive to interest rates, and it’s easy to see why.

When the Fed raised interest rates aggressively to tame inflation, mortgage rates also shot up. And people found it more difficult to afford a property because of increased costs of borrowing. This dampened the demand for real estate.

Publicly traded real estate investment trusts (REITs) have long been a popular option for investors looking to tap into real estate. And their performance has been impacted by this rate hike cycle as well.

In 2022 — when the Fed announced seven rate hikes — the MSCI U.S. REIT Index tumbled 24.5%.

Rising interest rates increase REITs’ borrowing costs, reducing their profitability. At the same time, the increased competition from bonds and other interest-sensitive securities can make REITs less attractive to income investors.

If this rate hike cycle comes to an end, the real estate sector could see better days ahead.

Like most publicly-traded assets, REITs can be volatile. If you want to collect passive income from real estate but don’t want exposure to the stock market’s volatility, there are crowdfunding platforms that allow retail investors to invest directly in real estate with as little as $100 through the private market.

Read next: 

Don’t miss real-time alerts on your stocks – join Benzinga Pro for free! Try the tool that will help you invest smarter, faster, and better.

This article ‘The Fed Will Not Raise Rates Again’: Bond King Jeffrey Gundlach Says Rate Hikes Are Done — Is It Time For These 2 Sectors To Shine? originally appeared on Benzinga.com

.

© 2023 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

Source: finance.yahoo.com

Apache is functioning normally

What Is a Probate Loan and How Do You Get One?

Close thin

Facebook

Twitter

Google plus

Linked in

Reddit

Email

arrow-right-sm

arrow-right

Tap on the profile icon to edit
your financial details.

If you’re expecting an inheritance, you may be wondering how long it will take to receive it. You might consider a probate loan if you need funds sooner rather than later. A probate loan, also referred to as an estate loan, allows you to borrow money against a future inheritance. Probate loans can allow you to access money that may be coming to you following the death of a loved one sooner, but there are some potential disadvantages to keep in mind.

You can also talk to a financial advisor about how to handle an inheritance.

Probate Loans Basics

A probate loan is a loan against an inheritance that’s due to you. You’re borrowing money today against assets that you expect to inherit tomorrow. Like other loans, probate loans must be repaid to the lender with interest, and you’ll typically make payments while the estate is still in probate.

Why do probate loans exist? Simply because probate — the legal process by which someone’s estate is settled after death — can take months to complete. In some cases, probate can take years if the deceased person’s heirs bring challenges against the will or otherwise dispute the distribution of assets.

Probate loans allow heirs to benefit from an anticipated inheritance without the lengthy wait. That may be appealing to heirs who need money to pay for medical bills, unexpected expenses or day-to-day living costs.

How Does a Probate Loan Work?

A probate loan is similar in structure to other loans, in that you borrow a lump sum and repay the money in installments. The lender can charge interest on the loan, along with fees. In most cases, the lender will expect the loan to be repaid in full once the borrower receives their inheritance.

The difference between probate loans and other types of loans lies in what’s needed for approval. While a probate loan lender might check an applicant’s credit score or income, the primary concern is the inheritance itself.

Lenders need to be able to verify that the applicant will receive an inheritance and the amount. Once that’s established, the lender can shape the loan terms, including the loan amount, interest rate and repayment schedule.

Loan amounts are usually a percentage of the inheritance. For example, you might be able to borrow up to 75% of what you expect to inherit. The interest rate on a probate loan can vary by lender but it may be typical of what you’d get with a traditional personal loan.

Probate Loan Advantages

The main benefit or advantage of getting a probate loan is that it allows you to tap into any inherited funds you expect to receive early. You don’t have to spend months or even years waiting for probate to conclude to start putting your inheritance to work.

Probate loans can be used to cover virtually any expense you choose, which could make them a good option if you need to pay for things like:

  • Home repairs or improvements
  • Higher education expenses
  • Medical bills
  • Emergency expenses

You might prefer a probate loan to other loan options, such as a home equity loan or personal loan. While home equity loans can put a lot of cash in your hands, depending on how much equity you have, they require you to use your home as collateral. Personal loans also allow for flexibility, but you might not be able to borrow as much as you could with a probate loan.

Probate Loan Disadvantages

Probate loans can offer convenience, but they can also be problematic for certain borrowers. For instance, having to make monthly payments toward the loan while you’re waiting for probate to wrap up could place an additional strain on your budget.

A probate loan can be an expensive way to borrow if the lender charges a higher interest rate or tacks on steep fees. A general lack of regulation around these loan products means that borrowers must tread carefully and do thorough research in order to find a reputable lender.

Taking out a loan against your inheritance can also be less than ideal if the estate you’ll inherit from is in dispute. For instance, say your parents pass away, leaving everything to you and your two siblings. Your parents had a will that specified you should get 60% of their assets, since you acted as their caretaker in their final years, while your siblings should get 20% each.

Your siblings decide to contest the terms of the will because they believe that your share of the inheritance is unfair. In that case, attempting to take out a probate loan could stoke the fire if the will contest created conflict between the three of you. You can ask a financial advisor about whether they think a probate loan is a good idea.

Probate Loan vs. Probate Advance

When discussing probate loans, you might also hear the term “probate advance” or “probate cash advance”. While they might sound the same, they’re actually two very different ways to borrow against an inheritance.

With a probate loan, you get a lump sum of money from your inheritance. You then make payments back to the lender in installments with interest, with the remaining amount due paid in full once the inheritance is paid out to you. Any leftover inheritance proceeds remaining after the loan is paid are yours to keep.

A probate advance is an agreement in which the lender purchases part of your inheritance. For instance, say you stand to inherit $100,000 from your parents after probate fees and other expenses are paid. You might enter into an advance agreement that allows the lender to purchase 40% of the inheritance.

You get $30,000 now and when probate ends, the advance company collects the $40,000 it purchased, plus the original advance amount and its fee. Any remaining inheritance funds are paid to you. If your inheritance turns out to be less than expected, you wouldn’t have to pay anything back to the advance company.

How to Get a Probate Loan

If you’re interested in getting a probate loan, you can start by searching for lenders that offer them. You typically won’t find probate loans at a bank or credit union. These loans are usually offered by companies that specialize in inheritance financing.

As you’re shopping around for a lender, it’s important to consider:

  • Loan amounts and how much you might be able to borrow
  • Repayment terms
  • Loan interest rates and fees
  • The lender’s overall reputation

Once you find the right lender, you’ll need to provide them with some information about you and the inheritance. The lender will verify the inheritance amount in order to determine if they can help you. If so, you’ll need to fill out an application for the probate loan.

Assuming that you’re approved, you should have a chance to review the loan terms and details. If you agree to the loan terms, the lender will provide you with funding, which you can start using right away. In the meantime, you’ll need to make payments to the lender as specified by the loan agreement.

The Bottom Line

Probate loans can be an attractive way to borrow against an inheritance, but it’s important to consider the pros and cons. You may appreciate being able to get money today if you need it, but there may be trade-offs you’re making in the long term. If you’re considering a probate loan, it’s a good idea to compare lenders to see what kind of loan terms you might qualify for. It’s also wise to be clear on whether you’re getting a probate loan or a probate advance, as they don’t work the same way.

Estate Planning Tips

  • Inheriting money can raise questions about how to make the most of those assets. It can be helpful to talk to a financial advisor about the best ways to use an inheritance, which might include paying off debt, funding an early retirement or covering college expenses for your children. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Have you started planning your own estate yet? If not, there’s no time like the present. The most basic element of any estate plan is a last will and testament. If you don’t have a will, you can create one using an online will-making software program. You may want to talk to an estate planning attorney if you have a more complex financial situation or if you think you might need to create a trust along with a will.

Photo credit: ©iStock.com/stocknshares, ©iStock.com/kazuma seki, ©iStock.com/Kameleon007

Rebecca Lake, CEPF®
Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She’s worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, CreditCards.com and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.

Related Posts

Read next article

Categories

Source: smartasset.com

Apache is functioning normally

First-time homebuyer programs in North Carolina

The North Carolina Housing Finance Agency (NCHFA) offers options to help first-time homebuyers find low-interest mortgages and no-interest down payment assistance loans.

NC Home Advantage Mortgage

With an NC Home Advantage Mortgage, offered through the NCHFA, borrowers can get a fixed-rate mortgage coupled with down payment assistance up to $15,000. To qualify:

  • Your annual income must be $126,000 or less.
  • Your credit score must be 640 or higher.
  • You must be a legal resident of the U.S. and buying a home in North Carolina.
  • You must occupy the home as your primary residence within 60 days of closing.
  • You are applying for a qualifying mortgage through a participating lender.

The NC Home Advantage Mortgage is available for single-family homes, condos, duplexes and townhouses, as well as new manufactured homes if your credit score is 660 or higher.

NC 1st Home Advantage Down Payment

For NC Home Advantage Mortgage borrowers, the NCHFA also offers the 1st Home Advantage Down Payment program, which is specifically for first-time homebuyers (defined as those who haven’t owned a home in the past three years) and military veterans.

Through this program, borrowers can get up to $15,000 to assist with the down payment in the form of a deferred, zero-percent second mortgage. The second mortgage is forgiven in 20 percent increments between years 11 and 15 of the loan term, and completely forgiven at the end of year 15.

NC Home Advantage Tax Credit

The NC Home Advantage Tax Credit allows first-time homebuyers and military veterans to claim a federal tax credit for the interest on their mortgage through a Mortgage Credit Certificate (MCC). The credit is equal to 30 percent of the interest paid yearly for an existing home, or 50 percent of the interest paid yearly for a new-construction home. Borrowers can claim credits up to $2,000 per year through the program.

To claim this credit, borrowers must apply for the MCC through the NCHFA before buying their home.

Source: thesimpledollar.com

Apache is functioning normally

Like in March, the energy index posted a significant decrease, and was down 5.1% compared to a year prior.

“CPI data show that inflation is down significantly from the 9.1% level reported last summer, but inflation is still running far above the Fed’s target rate of 2%,” Lisa Sturtevant, Bright MLS’ chief economist, said in a statement. “The lackluster inflation report comes as the Fed has raised interest rates 10 times in an attempt to slow the economy and cool price growth. There has been a lot of speculation about why we aren’t seeing inflation come down faster. Maybe the conventional models explaining the relationship between interest rates and inflation simply don’t work in this unusual, post-pandemic economy. Maybe holding firm on a 2% target—a threshold that has a pretty arbitrary origin story—doesn’t make sense in today’s economy.”

Despite the annual dip, the CPI rose on a month-over-month basis, posting a 0.4% monthly increase in April, compared to a 0.1% monthly increase in March. Major contributors to this increase included used cards and trucks (4.4%), motor vehicle insurance (1.4%), and energy (+0.6%, thanks to a +3.0% jump in the gasoline index).

Shelter was again a major contributor to this increase, rising 0.4% month over month, thanks to a 0.6% increase in the rent index and a 0.5% jump in the owners equivalent rent index. This increase, however, is slightly better than the 0.6% monthly increase recorded in March. The data also suggests that the economy is close to peak rent inflation—lower monthly rent prices have been recorded for two consecutive months, and the price growth for new leases is still decelerating.

Indexes that declined month over month in April included airline fare (-2.6%) and new vehicles (-0.2%). The food index remained unchanged on a monthly basis. 

Despite inflation remaining at levels higher than the Fed would like, economists believe the Fed should at least pause its rate hikes. 

“Pausing would also allow housing costs a chance to catch up. Housing plays an outsized role in the CPI, accounting for between 30 and 40% of the inflation measure each month. But shelter costs—including both rents and owner’s equivalent rents—can track several months behind other prices. We know home price growth and rent growth have been decelerating, and prices and rents have even been falling in some markets,” Sturtevant said. “Looking back at historic data, the shelter component of the CPI definitely tracks behind trends in the overall inflation metric. For example, in the inflation run-up in the late 1970s, the rate inflation peaked in March of 1980. However, the CPI’s shelter component did not begin to fall until July of that year.”

Lawrence Yun, the National Association of Realtors’ chief economist, took a stronger stance during the “Residential Economic Issues and Trends Forum” at NAR’s ongoing Legislative Meeting. 

According to Yun, the Fed’s rate hikes have hurt regional banks and the housing market. 

“Inflation will not reignite – inflation will come down closer to 3% by the year’s end,” Yun stated. “Inflation has calmed down while rents are still accelerating. Rent growth will decrease because apartment construction – entry units coming on the market – is already in the pipeline. We are already moving in the right direction towards consumer price inflation.”

Yun also noted that he is forecasting mortgage rates to fall closer to 6.0% in 2023 before dropping below 6.0% in 2024. He also anticipates new and existing home sales to bottom out in 2023 before rising again in 2024. 

In reflection of the current spring housing market, Sturtevant shares a similar view. 

“The spring housing market has been slower as higher interest rates have eroded buyers’ purchasing power and both buyers and sellers are watching an economy that is growing more uncertain,” she said. “The Fed’s rate hikes may, indeed, be having the intended impact but we might just need to pause, take a breath and let the effects move through the economy.”

Source: housingwire.com