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Waiting For 3% Mortgage Rate Might Just Be A Mistake

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The Federal Reserve took steps last year to reduce inflation. The mortgage rates rose rapidly after the 2021 record lows and reached a peak of just over 7% in October. Some buyers felt a decrease in their purchasing power and decided to halt their plans.

The rate of inflation is beginning to fall today. As a result, mortgage rates are now lower than last year’s peak. Although mortgage activity has declined significantly over the past year, inflationary forces are decreasing and should result in lower mortgage rates for 2023.

This is great news for buyers who are looking to get back in the housing market. A drop in mortgage rates can help boost your buying power and lower your monthly mortgage payment. The lower mortgage rates experts predicted this fiscal year may be what you need in order to rekindle your passion for homebuying.

This opens up opportunities for you but don’t expect rates dropping to records lows, as we saw in 2021.

It is important to have an accurate vision of what you can expect for the next year. Expert real estate advisors are critical. A slight drop in mortgage rates can have a significant impact on your budget. You can purchase a home today if you are ready. Today’s market offers the chance to get a lower mortgage rate, find your dream house, and face less competition.

Although the recent decrease in mortgage rates is good news, it is not a wise decision to wait for 3% if you are ready to purchase now.

Let’s talk about how rates today can impact your goals and discuss your options in this area. Contact Preferred Properties of Texas today to speak to one of our knowledgeable agents.

Original Blog: https://www.keepingcurrentmatters.com/2023/01/17/think-twice-before-waiting-for-3-mortgage-rates/

Hybrid Loan

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I will be the first person to admit that the mortgage and real estate industries have their own word salad. Different words and terms can mean different things depending on their context. This is true for the mortgage industry as well. The term hybrid is still very much in use, but it can cause confusion for some as it relates specifically to getting a mortgage.

I will be the first person to admit that the mortgage and real estate industries have their own word salad. Different words and terms can mean different things depending on their context. This is true for the mortgage industry as well. The term hybrid is still very much in use, but it can cause confusion for some as it relates specifically to getting a mortgage.

What is a hybrid? A hybrid is an amalgamation of several characteristics into one entity. Hybrids are found in automobiles. Food and agriculture also have hybrids. Any industry can boast a hybrid. Hybrids are also common in the mortgage industry.

As we have said in the column, home loan terms can be divided into two categories: adjustable and fixed. Fixed loans have an interest rate that is fixed and does not change over the term of the loan. A variable loan allows the monthly payment to be adjusted based on previously agreed terms. A variable rate mortgage or ARM is one where the monthly payment can be adjusted based on previously established terms.

An ARM must adhere to certain rules. Paying attention to the basic index within which the ARM is tied is important. Then there’s also the margin. The margin determines the amount of adjustment time that the new rate is allowed to change. There are also rate caps that limit the rate’s ability to change when adjustments are due. Hybrids weren’t mentioned, however. If hybrids are a “thing”, where does that leave the mortgage business?

An ARM is a hybrid that has its base in a hybrid. Why the hybrid label? When rates were relatively high, hybrids were a popular option. The hybrid rate starts at slightly less than similar ARMs.

A hybrid loan has an initial period during which the loan is locked for a set period. The rate for a 5/1 hybrid is five-year fixed, and the one indicates when adjustment can be made after that initial period of five years. The rate could change after five years, but only once every year. These loans often use caps to limit how much the rate may change after each adjustment, which is usually five years.

Why would someone choose a hybrid? The initial rate will be lower than current market fixed rates. Many people may be aware that they will likely move before the five-year term ends. Personally, I prefer stability and security from a fixed. However, hybrids can be useful in certain niche situations.

 

Original Blog: https://realtytimes.com/archives/item/1046345-here-s-one-for-ya-hybrid-loan?rtmpage=

Starter Home… What Does That Mean?

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It is common to hear the term “starter home” quite often. But, as a buyer, you might wonder what that actually means.

You need to understand the basics of buying a home, as well as whether you should invest in your forever home.

You can choose to buy a starter home as a single-family or multi-family home, or even a condo. The average buyer will be able to afford a starter home, but they are likely to outgrow it. The cost of a starter home will be lower relative to the local market.

These homes can be small or large, and may also be older. These homes can also be brand new, but they are still designed to satisfy the needs of entry-level buyers.

While there aren’t all the features that you might want, you can see how a starter home would suit your needs in the short-term.

It is possible that you will stay in your starter house for life. On the other hand you might decide to move on to a better home or a more expensive one.

A forever home can be larger than a regular home, but it may also have more outside space or be updated. Some of the most desirable features in a forever home are those that make it attractive and competitive. For example, it might have a large, private yard or be located in a great school area.

However, the definition of a forever home can be subjective. Some people may find that the home is where they can imagine raising a family. Others might prefer a fixer-upper in a great location that is in need of some TLC, but is still a permanent home.

While a forever home does not have to be extravagant, it is more spacious than a starter house.

There are pros and cons to both a starter or forever home if you are at the point of deciding whether it is worth your time.

A starter home is typically less expensive so that you can save more money for your down payment. This will allow you to start building equity faster. You’ll spend more time renting than you do investing in equity if you wait until you can afford a forever house. Once you are ready to purchase your forever home, the equity that you have will be able to use it as a financing source.

A starter home has the downside that it will likely be outgrown as you move on to a new phase of your life. A starter home may not be sufficient for your needs if you get married or have children.

You can either rent or sell your starter home if you decide to move. You will need to find a new home, apply for a mortgage and pay the closing costs.

There are many benefits to moving from the starter home to your forever home. You can feel secure knowing that you will be able to live in your home for the long-term without worrying about moving or selling.

It is possible to take your time and adjust slowly.

A forever home is more expensive. This means that you will need to save more money and delay building equity.

It is important to only spend what you can afford when buying a house. It is a good rule of thumb to not spend more than 28% on housing costs. Not only should you not pay 36% for debt, but also other loans and credit card debt.

It can be a wise move to buy a home that will last forever. If you sell your home too quickly after purchasing it, you might have to pay capital gains tax if its value increases. If you file your taxes separately, you can get a $250,000 exclusion and $500,000 if you are married filing jointly to capital gains on real property. If you have owned the property for less than 2 years, this exclusion is removed.

Before you purchase a home, consider the long-term potential value. It is important to find properties that are well-respected and have a high potential for resale, regardless of their price. You have to realize that sometimes what seems forever now may not be forever.

Original Blog: https://realtytimes.com/archives/item/1043899-what-should-you-know-about-buying-a-starter-home?rtmpage=

Cash Out Refinance or Home Equity Loan

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You may be able to get cash if you have substantial home equity.

A cash-out refinance or a home equity loan let you borrow against the equity in your home, with your home as collateral. A cash out refinance replaces your current mortgage with a new one. A home equity loans are additional loans that you take out over your mortgage. Consider the pros and cons of each option before deciding which home equity product is best for you.

Both a home equity loan or a cash-out refinance mortgage can be used to fund similar projects, such as home improvements and paying off high-interest debt. Both loans use your property as collateral. If you default on one of them, it could be foreclosed.

Although cash-out mortgage refinances serve the same purpose as home equity loans, there are important differences. Cash-out refinance refers to taking out a loan in order to pay off your remaining mortgage balance. This will effectively replace your mortgage with a new loan. A home equity loan, which is a second mortgage, comes with its own terms and interest rate.

A cash out refinance repays the principal balance of your first mortgage loan and provides a new loan to pay for it. The amount of the newly refinanced loan is the balance due on your first mortgage and the amount that you are “cashing out” with the equity.

The interest rate for cash-out refinancing might be higher than the current one. The loan term can generally last up to 30 year.

Certain lenders and federal programs might have lower requirements for cash-out refinancing . In the event of default, the refinancing lender will assume the first mortgage in a cash-out refi. Lenders might offer lower rates than what you would get with a home equity loan because they have easier access to your house as collateral.

Home equity loans are often used to finance large-ticket items, home improvements or consolidate high-interest debt.

This is a second mortgage against your house that has its own terms and interest rates. It’s separate from your original mortgage. Refinance using a home equity loan means you borrow against your home’s equity, which is the difference between your home’s market value and your mortgage debt. You can borrow up to 85 per cent of the equity in your home. Your income, credit history, and other financial factors will also affect your loan amount.

Home equity loan rates might be higher than other options for refinancing. However, the differences can vary from one bank to another and over time. The repayment term for home equity loans can be up to 30 year.

Lenders may not charge origination fees. This results in closing costs that are lower or even zero. In contrast to some cash-out refinance loans, home equity loans don’t require mortgage insurance.

This scenario is where refinancing with cash-out refinance loans can be cheaper, despite the higher loan amount and closing costs. Because the cash-out refinance rate is much lower than that of a home equity loan, this is why.

Home equity loans have a higher interest rate than cash-out refinancing. While home equity loans are generally cheaper than home equity loans due to lower closing costs, their interest rates can be more costly over time.

A home equity loan is a good option if you have excellent credit and can find a loan with low interest rates or waive closing costs. The cash-out refinance offers a significant advantage, with lower interest rates.

It’s ultimately a personal decision. This will depend on how much equity you have in the home and your credit rating. To determine which option you are most likely to be approved for, it is equally important to review the qualifications for each option.

If you have strong credit and want to draw out large amounts of equity, a home equity loan may be an option. If you are looking to lower your mortgage payments and withdraw funds from your equity, a cash out refinance might be a better option.

Cash-out refinances and home equity loans are two strategic options to access the equity in your home. To determine which approach is best for you, consider your financial situation and goals. To determine which option you are most likely to be approved for, it is equally important to review the qualifications for each option.

If you have good credit and want to draw out large amounts of equity, a home equity loan may be a viable option. A cash out refinance might be a better option if your goal is to lower your mortgage payment and withdraw funds from your equity with one loan product.

Compare offers from different lenders, regardless of the path you choose. You can also request an itemized list of the lending fees from your chosen lender to estimate how much the loan will cost.

 

Original Blog: https://www.bankrate.com/home-equity/refinance-vs-home-equity-loans/ 

DEBT-TO-INCOME RATIO- HOW TO CALCULATE YOURS

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The home-buying process is complex, especially for first-time buyers. The debt to-income ratio is one of the criteria mortgage lenders use when assessing your mortgage application. Your debt-to income ratio is a comparison between how much debt you have (your debt) and how much income you make (your earnings). This number is calculated using your gross income, which is the income before taxes.

Lenders will be more impressed by a lower ratio of debt to income if you have a healthy mix of debt and income. A higher ratio of debt to income means that you have too much debt. This could lead to lenders deeming you a risky borrower. Although the DTI is not the only factor that determines how much you can borrow it is important to understand this before you start the home loan process.

A debt-to income ratio of 20% means that 20% is going towards debt payments. This includes cumulative debt payments. Think credit card payments and car payments.

A The Mortgage reports breakdown shows that a good ratio of debt to income is at least 43%. According to LendingTree, many lenders might want to see a DTI closer to 35%. Depending on which loan you are applying for, a ratio closer to 45% may be acceptable. However, a ratio of 50% or more can cause concern.

Simply put, too much debt relative the income of your household will make it more difficult to get a loan. Many common forms of debt, such as student loans and credit cards, can make it difficult to qualify for home loans.

Lenders want to ensure that borrowers aren’t taking on too much debt. Lenders may decline mortgage applications if you have a high DTI.

It is easy to calculate your DTI. Simply add up your monthly total debt payments and divide that by your gross monthly income.

Let’s suppose you have $1,000 monthly student loan payments, a car payment, and a credit card payment. Your gross monthly income is $5,000. Divide 1,000 (your total debt) by 5,000 (your income), and you get 0.2. This is 20%. In this example, your DTI would be 20%.

You can lower your DTI before you apply for a mortgage if you are concerned that it may stop you from getting the home loan you want. This usually means increasing your income or paying down debt.

A debt consolidation personal loans will help consolidate credit card debt from multiple cards. You can also use this loan to organize all your payments into one monthly payment with a lower interest rate. You can pay off the balance quicker by reducing interest. You might also consider a balance-transfer credit card to transfer your balance to a new card offering a 0% intro rate. You can get a longer period of time without being charged interest and pay off your principal faster.

You should consider all costs associated with buying a home when applying for a mortgage. This includes private mortgage Insurance (PMI) (if your down payment is less than 20%), property taxes, mortgage interest, inspections, appraisals and closing costs.

It’s expensive, no doubt. You can make it more affordable by finding a lender that helps you save.  This will help you save money on the initial process.

Lenders want to ensure that you don’t take on too much debt. To calculate how much of your income goes towards debt payments, they use a ratio called the debt-to-income ratio.

The DTI is not the only thing a lender will consider. Don’t be discouraged if your DTI exceeds what most lenders prefer. It is best to calculate your DTI sooner than you think. This will give you enough time to reduce your debt and increase your income, so that you can lower your DTI.

 

Original Blog: https://www.cnbc.com/select/how-to-calculate-debt-to-income-ratio-for-mortgage/

Mortgage In 2023

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Home shoppers are being tested this year due to record-high home prices, rising inflation, and high mortgage rates. Many homebuyers looking for an affordable mortgage have been left in more uncertainty going into 2023.

First-time homebuyers are particularly affected by skyrocketing mortgage rates and home prices. This has resulted in a decrease in their buying power and down payment.

If you want to secure the best mortgage, even though the housing market is slowly improving, you should be keeping an eye on the market and any economic moves by the government.

The Federal Reserve aggressively increased its benchmark federal funds rates in an effort to reduce rising inflation. This was done throughout 2022. Although rate hikes by the Fed do not directly affect mortgage rates, they have an impact on the bond market which in turn has an impact on mortgage rates.

The Federal Reserve will not stop raising the fed funds rate aggressively until it believes runaway inflation is under control. This will drive mortgage rates higher.

Economic consensus seems to be that the economy will see strong signs that inflation is slowing down in the first half of next year. All indicators point to more upward pressure on mortgage rates in the future than a decrease in 2023.

Many shoppers have stopped buying in the market because of record mortgage rates and the uncertainty surrounding the housing market.

Will 2023 be a better time to get a mortgage?

Many housing experts believe that we will see a greater decrease in home prices month-over-month next year.

Now, we expect home prices to decline year-over-year in 2023. The national median single-family home value is expected to drop 5.5% over the course of the year.

However, the supply shortfall and strong underlying demand will eventually limit home price appreciation.

The home depreciation rate will not be the same in all markets. There will be regional variations. Markets that were once popular with buyers will see extreme swings to their disadvantage compared to those in less-populated areas.

Remember that home appreciation has risen in an abnormally high rate over the past few years. Comparing to the second quarter 2020, the average home sale price rose 45% to $542,000.

Some experts predict that the best case scenario for a 30-year fixed mortgage rate will be around 5.5% by 2023. Other experts expect rates to remain in the 6.5% to 7.5% range throughout the year. Freddie Mac recently forecasted 6.4%.

 

Original Blog: https://www.forbes.com/advisor/mortgages/how-to-get-best-mortgage-in-2023/?&utm_source=ra&utm_medium=referral

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