Category: Mortgage

Interest Rates Are the Lowest They’ve Ever Been!

mortgage rates
You’ve probably heard the words “lowest rates” often in the last few years, but as of yesterday, interest rates fell to the lowest they’ve ever been!

Since the United Kingdom voted to leave the EU, interest rates in the U.S. have been dropping, and as of August 1st, they’ve fallen lower than ever before. This is a once in a lifetime event!
So what does this mean for potential homebuyers and home owners who want to refinance?

It means that you might want to strike while the iron is hot and take action while rates are low! A fraction of a percentage point may seem small, but it could add up to huge savings over the life of your loan.

And a lower interest rate can mean more money to spend on family trips, remodeling your home, or even a bigger home.

If there’s one thing that the Brexit vote has taught us, it’s that you can’t predict the world events that will affect interest rates in the U.S. Rates can go up at any time.

So if you’re ready to take advantage and buy a home or refinance, give me a call or shoot me an email!

Source: Bloomberg, August 1, 2016

3 Pros and 3 Cons of Refinancing

mortgage
When it comes to making major decisions there are generally some pros and cons to consider. Today I’m addressing 3 reasons why refinancing your home loan would be a good idea and 3 reasons why it might not be right for you.

Despite interest rates continuing to be low, the Mortgage Bankers Association recently conducted a survey of all mortgage applications and found that only about 53.8% of total applications were for refinancing.

The Pros

For those still debating whether or not they should refinance, here are 3 reasons why it might be the right move for you:

1. You would like to reduce your term.

If you’ve been making payments on a 30-year loan, it might be worth looking into options for shortening the term to a 15-year loan. In many cases, 15-year interest rates are more favorable since you are committing to pay the loan off sooner. A 15-year loan is typically the best way to pay off your loan quickly and you pay less in interest over the life of the loan.

2. You would like to lower your rate.

One of the most common reasons to refinance a home loan is if you originally financed at a much higher rate than what is now available today. This doesn’t mean you should monitor interest rates and refinance at every available opportunity because repeatedly paying closing costs may not be beneficial to you.

However, if you haven’t refinanced in a while, discussing the current rates with Skyline Northwest will only take a few minutes of your time, and may save you thousands over the course of your loan and possibly free up substantial dollars in your monthly budgeting.

3. You would like to switch from an adjustable rate mortgage to a fixed rate.

Although much less popular now, adjustable rate mortgage loans were once a popular option when interest rates were pushing double digits. Many homeowners were attracted to the initially low rates, which were tied to the prime interest rate. But as the prime rate went up, so did the monthly home loan payments.

In today’s historically low interest rate environment, locking into a fixed rate from an adjustable rate could provide you with payment certainty.

The Cons

While refinancing can be a help for many, it is not always a good financial move. Here are 3 reasons why not to refinance:

1. You’ve had your mortgage for a long time.

The amortization chart below created by the Federal Reserve Board shows that the amount of your payment that is credited to the principal of your loan increases each year, while the amount credited to the interest decreases each year. If you’ve had your mortgage for a long time, you are at the stage when more of your payment applies to principal and helps build your equity. If you were to refinance late in your mortgage period, you will restart the process all over and most of your monthly payment will again be credited to paying interest and not to building equity.

Amortization of a $200,000 loan for 30 years at 5.9%

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2. You may incur a prepayment penalty.

A prepayment penalty is a fee that a lender may charge if you pay off your mortgage loan early, including refinancing. Be sure to carefully consider the costs of any prepayment penalty against the savings you expect to gain from refinancing. Paying a prepayment penalty will increase the time it will take to break even, when you account for the costs of the refinance and the monthly savings you expect to gain. If you are refinancing with the same lender, you may want to ask if any prepayment penalty can be waived.

3. You are going to move in the next few years.

The monthly savings you would gain from lower monthly payments after a refinance may not exceed the actual costs of refinancing. Use this break-even calculation to help determine whether it is worthwhile to refinance now based on the date of any anticipated change of residence.

As always, I’m here for help. I love answering questions specific to your situation and will guide you to the best decision for your family after we weigh the pros and cons together. Call me anytime at 503-654-7369.

Source: Housing Wire and Federal Reserve Board

Refinance for USDA Mortgage Loan Cheaper, Faster

A recent announcement from the United States Department of Agriculture (USDA) will soon make refinancing a USDA mortgage much faster and less expensive.

USDA Rural Housing Service Administrator Tony Hernandez made the announcement saying, “Helping homeowners refinance their homes to reduce their monthly payments and take advantage of low interest rates will bring increased capital to rural residents and the communities where they live and work.”

The changes go into effect June 2, 2016, and apply to mortgages issued through USDA and those where USDA has issued a loan-note guarantee. Homeowners current on their mortgages for the past 12 months will no longer be required to get an appraisal, provide a credit report or undergo a debt-to-income calculation when refinancing for a 30-year term.
usda loans The Pacific Northwest
These changes will save time and money.

The USDA began testing these changes in a 2012 pilot program. Since then, nearly 9,500 homeowners have refinanced their mortgages. Some saved as much as $600 a month, with an overall average of $150 savings per month.

Only qualified borrowers will benefit and rigorous underwriting standards will still apply to help ensure these loans are consistent with other industry standards. The Department of Housing and Urban Development and Department of Veterans Affairs have similar programs for the homeowners they serve.

Interested homeowners with USDA loan guarantees should give me a call about refinance procedures. Homeowners with USDA Direct loans should contact a USDA housing specialist. A list of State offices is available at: http://www.rd.usda.gov/contact-us/state-offices.

Source: USDA.gov
Current as of June 2016

How the Brexit Can Save You Money on Your Home Loan

mortgage
Brexit may be bigger than we anticipated!

Great Britain surprised the world by voting to leave the European Union, but the effects of the decision can be felt around the world and in all sorts of different industries.

For home buyers or refinancers in the United States, the Brexit is actually good news because it could actually lead to even lower interest rates!

Interest rates has actually dropped since the Brexit and are approaching historic lows, and that can only mean one thing for home buyers and home owners – an opportunity to save money.

Lower interest rates mean smaller mortgage payments. Even a small change in interest, like a quarter of a percentage point, can add up to thousands of dollars over the term of a mortgage.

Global economic uncertainty means that interest rates are staying low or could even go down, at least for the time being.

So if you’ve been wondering if now is a good time to buy or refinance, you might want to take advantage of these incredible rates while they’re low.

Ready to take a leap? Give me a call or shoot me an email!

Source: U.S. News, June 24, 2016

HELOC vs HECM – What’s the Difference?

We get it. Deciphering mortgage terminology is like solving a Rubik’s Cube sometimes! You just want to throw your hands up in the air and say, “I give up! Somebody else figure this out for me!”

That’s what I am here for – to answer your most complex and confusing questions about the mortgage industry.
mortgage The Pacific Northwest
Today’s topic of confusion: The difference between a home equity line of credit (HELOC) and a type of reverse mortgage, a home equity conversion mortgage (HECM). Though at first they seem to be very similar types of loans, they are in fact, quite different.

How Are They Similar?

With both a HELOC and a HECM, you use the equity in your home for other financial purposes. As a reminder, “equity” is the difference between what you still owe on your home and how much it is worth. For example, if your home is worth $500,000 but you only owe $100,000 more on it, you have $400,000 of equity in your home. That’s your money! You’ve invested it; it’s up to you what to do with it.

The main differences come in with who is eligible, how the equity is used, and how it is paid back.

What Is A HELOC?

A home equity line of credit, or HELOC, is a form of credit in which your home’s equity serves as collateral. Because a home is often an individual’s most valuable asset, many use HELOCs only for major items, such as education, home improvements, or medical bills, and not day-to-day expenses.

HELOCs are available to any homeowner, regardless of age, with enough equity in their home.

To start, you will be approved for a specific amount of credit. The credit limit on a HELOC is generally set by taking a percentage (not the total) of the home’s appraised value and subtracting from that the balance owed on the existing mortgage.

Your lender will then review your ability to repay the loan (principal and interest) by looking at your income, debts, and other financial obligations as well as your credit history. Many plans set a fixed period during which you can borrow money, such as 10 years. Some plans may call for payment in full of any outstanding balance at the end of the period. Others may allow repayment over a fixed period (the “repayment period”), for example, 10 years. Once approved for a HELOC, you will most likely be able to borrow up to your credit limit whenever you want. Typically, you will use special checks to draw on your line. Under some plans, borrowers can use a credit card or other means to draw on the line. There may be other limitations on the plan, such as keeping a minimum balance in the account.

What Is A HECM?

A home equity conversion mortgage, or HECM, is a federally approved type of reverse mortgage that allows older homeowners to borrow against the equity in their homes.

It is called a “reverse” mortgage because, instead of making payments to the lender, you receive money from the lender. The money you receive, and the interest charged on the loan, increase the balance of your loan each month. Over time, the loan amount grows. Since equity is the value of your home minus any loans, you have less and less equity in your home as your loan balance increases.

This plan can gives some older Americans financial security after retirement. It assists them with making home improvements, offsets unexpected medical expenses, and supplements Social Security or other income.

Not everyone is eligible. To qualify for a reverse mortgage you must be at least 62 years old, be the primary resident and paid off some, or all, of your traditional mortgage.

There is generally an origination fee and other closing costs, as well as servicing fees over the life of the mortgage. You may also be charged mortgage insurance premiums (for federally insured HECMs).

Once you sell your home, move out, or pass away, the loan must be paid back in full. In most cases, the home is sold to get the money to repay the loan. Once the loan balance is paid, you or your heirs can receive any proceeds above the balance of the loan.

I hope this helps clear up some confusion about these two different ways to use the equity in your home. If you have more questions, feel free to call anytime – 503-654-7369!

Source: Consumer Financial Protection Bureau

We’ll get you moving FAST AND EASY!

mortgage
One of the main reasons I chose to work for Skyline Home Loans is because they make closing loans quickly such a priority. We have an incredibly hard-working and dedicated family here. In fact, Mortgage Executive Magazine just ranked us number 35 of the Top 100 Mortgage Companies in America for 2015. Our loan volume grew to more than $3.2 billion last year, a 48% increase over 2014.
top mortgage
That much loan volume doesn’t happen if loans are just sitting around waiting to be processed. Our entire operations and support team works hard every day to process loans accurately and quickly.

The type of loan you’re applying for and the complexity of your financial situation will ultimately determine the time it takes to close.

The good news is that some things are in your control… like, having all your documents in order, sharing as much information with me as possible during the process so we can address concerns before they become problems, and putting your patience and trust in me along the way.

For the rest of it – the moving parts that are out of your control like getting the home appraised, purchasing insurance and running a title check – I’m here to help guide and get it moving. And I will keep you updated along the way.

We’re always working on getting loans done better and I can’t wait to show you how! Call me to set up an appointment so we can talk soon. I can be reached at 503-654-7369!

May is National Military Appreciation Month so I want to take this special opportunity to thank all of you who are serving now or who have served our Nation in the past!

It is hard to find a way to truly show my appreciation for your selfless service. That’s why today I’m posting this blog about the Veterans Administration (VA) home loan and how it can help military families get the best mortgage they can at an affordable rate with little or even no down payment.va home loans

I know it’s not much in comparison to your sacrifices. But I hope you’ll find the following info to be of help to you or someone you love.

This month – and always! – our family here at Skyline Home Loans salutes our Nation’s military. Thank you for your service to us all!

What is a VA home loan?

Essentially, the VA home loan is a guarantee for part of your loan. With this guarantee, the VA agrees to cover a certain percentage of the loan should you be unable to pay it back.

The VA is not a bank, so the loan itself is instead issued from an approved lending institution and serviced through that entity. Approved lenders accept the VA’s guarantee as comparable to a down payment, and offer mortgage rates and amounts accordingly.

Who is eligible for a loan?

Any veteran, active service member, and surviving spouses (in some situations) may apply. Applicants must have a good credit score and cannot have defaulted on any past VA guarantees.

You must have served in the military for a specific length of time in order to be eligible for a VA home loan. Service requirements for full-time military members vary from 90 to 181 days, depending on when you served.

National Guard and Reserve members may also apply, but minimum service requirements may be longer if you have never been called to active duty.

What limits apply to the loan?

The limits of the guarantee stand at 25% of the loan, but the limits on the overall size of the loan for which the VA can do a 25% guarantee vary according to location. As of 2014, according to the US Department of Veterans Affairs, the basic entitlement is a $36,000 guarantee per service member or up to 25% of a loan below the limits. Loan limits start at $417,000 and may vary according to the County the property is located in. All loan limits are subject to change.

What information will you need to apply?

As with any home loan, you will need basic information about your income, assets, and credit history, as well as proof of your military service history.

Required documents include:

  • Valid identification documents (driver’s license, passport, etc.)
  • Proof of service, such as a DD Form 214 for veterans or current statement of service for active members
  • Pay stubs for at least the most recent two months
  • W2 forms and/or tax return forms
  • Proof of assets, including recent investment statements

Different lenders may require slightly different information, but these are generally the only documents needed to obtain approval from the VA.

How do you apply for a VA home loan?

The first step in applying for a VA home loan is to obtain a Certificate of Eligibility (COE). While lenders may have access to automatic VA approval when you submit your mortgage application, it’s always a good idea to apply for the COE ahead of time.

Automatic approval only works if all required information is already available, so your loan could be delayed if you put off obtaining the COE.

You can apply for your COE online through the VA eBenefits Portal, or by sending a completed Form 26-1880 to the VA Loan Eligibility Center. The address for mailed applications is printed in the upper right corner of the required form.

The COE serves as a VA pre-qualification, guaranteeing that you will receive the stated coverage for your loan. With COE in hand, you now have to apply with an approved lender for the full amount of the mortgage.

Keep in mind though, that even with a COE, it’s ultimately dependent on the financial institution to approve or deny your loan. They may accept the VA guarantee for the entire down payment, or may require additional collateral or out-of-pocket down payment. The lending institution also determines exactly how much they’re willing to lend based on your income and credit history.

The purpose of the VA home loan is to ensure that you and your family are able to obtain adequate housing by reducing or eliminating the burden of a down payment. And if the loan remains in good standing and is completely paid back, then you may qualify for additional VA guarantees in the future.

All limits and guidelines are reviewed regularly by the Veteran’s Administration to ensure that they continue to meet current needs. Any questions regarding specific situations can be directed to the Regional Benefit Office serving your state.

For more information about VA home loans check out my free eBook. Download it today!

4 Areas Mortgage Lenders Consider Before Lending You Money

If you’re a first-time homebuyer, the idea of borrowing money for a home can feel overwhelming. Where to even start?!?!

Today I’d like to help you understand four of the key areas that Lenders take into consideration when reviewing your loan application. It’s my goal to help you prepare for exactly what to expect as far as what questions you might be asked, and what documents you’ll want to have on hand for the more common types of home loans.

1. Affordability

To determine how much house you can reasonably afford, the lender will calculate your monthly gross income and multiplying that number by .28. This figure is generally representative of the most that a lender will approve you to spend on a mortgage payment each month.

If the payments on a house that you’re considering exceed this number, you’ll need to come up with additional funds to apply towards the down payment, or search for a home in a lower price range.
mortgage lenders

2. Monthly Expenses

While this calculation may seem simple, lenders are extremely strict in their interpretation of how much money you spend every month. For this figure, you can’t simply state that you won’t spend money on clothes just to meet a specific spending ratio guideline.

Instead, lenders use pre-set numbers to calculate this amount. To their credit, lenders understand that every person, couple, and family has personal needs that must be met and so the goal of this calculation is to ensure that your monthly income exceeds these financial needs even when a new mortgage payment is introduced into your budget.

When you’re applying for a home loan, you will be asked for a detailed itemization of your current monthly bills and documentation of your current income. It’s in your best interest to supply all the information regarding your personal finances so qualifying for a loan is based on your current financial situation.

3. Long Term Debt-to-Income Ratio

This ratio takes into account any monthly payments that extend beyond 11 months. Payments for things like car loans, credit card payments, student loans, and other mortgages are included in this calculation.

Other debts that fall into this category include: judgments, tax liens, alimony, and child support. To ensure that you can afford the home that you intend to buy, it’s always best to disclose everything so that you can make the most informed decision possible.

4. Credit Check

Most potential homeowners have secured some credit in one way or another before deciding to apply for a home loan. Lenders look very carefully at your past payment record to see if you made timely payments on these obligations.

They look at everything from how many late and missed payments you’ve had, to the number of “maxed out” credit card balances you carry, and the overall amount of debt you have in total.

A lender will also be extremely interested in any loans that have defaulted and gone into collections. Be prepared to explain these issues in writing, no matter how minor, or your loan could be declined. A poor credit report could result in you paying a higher interest rate which could mean you end up paying tens of thousands of extra dollars over the lifetime of the loan.

The Bottom Line

Taking on a home loan is usually the single most expensive financial commitment anyone makes in their lifetime. Still, many borrowers go into the process unprepared and uninformed.

In the case of home loans, ignorance is not bliss so your best bet is to accurately assess your financial situation, gather the necessary required paperwork, and prepare for the questions that may be asked of you based on your individual circumstances.

My job is to help you do just that. I’d love to talk to you more about buying your first home and I will walk you through all the steps along the way. Give me a call at 503-654-7369 soon!

Source: Salted Stone

The information contained in this article has been prepared by an independent third party and is distributed for educational purposes only. The information is considered reliable but not guaranteed to be accurate. The opinions expressed in this article do not represent the opinions of Skyline Home Loans.

Explaining Mortgage Points and Tax Deductions*

mortgage pointsTax deductions are a hot topic these days. It seems we’re all looking for ways to owe Uncle Sam less and keep more in our pockets. Did you know that mortgage points can be deductible in many situations?

This topic can get a little confusing so let’s start with the basics.

What are mortgage points?

Points are a part of the closing costs for obtaining a mortgage. Paid to the mortgage lender, each point is 1% of the loan value. In the example of a $200,000 home with a $170,000 mortgage, one point of the mortgage would be $1,700.

There are two different types of points. The first is origination points, also known as the origination fee or broker fee. Lenders charge points as a way to make a profit. They are basically used to recover some of the costs of loan origination. Depending on the lending institution, they can be negotiated in part or in full.

The second is known as the discount points. Borrowers pay for discount points in order to obtain a lower mortgage rate. This process is known as a “buy down”. Purchasing one point generally will result in a quarter of a percent (0.25%) reduction in a fixed interest rate and a 0.35% decrease on an adjustable rate loan. Like origination points, these too are negotiable.

How are points deductible?

The IRS allows for the deduction of any extra charges paid by the homebuyer as a part of the closings costs for obtaining a mortgage. Origination points are not deductible because they are part of the mortgage fees and not an extra. Discount points are extra though. They are tax deductible*.

After the homebuyer obtains a mortgage, at the end of the year they will receive a Form 1098 Mortgage Interest Statement. The points paid to purchase the home will appear on the form in Box 2. Discount points can be deducted under “Schedule A” of a 1040 tax form if the homebuyer itemizes the deductions.

What are the eligibility requirements to deduct points?

  1. The loan is secured for your primary residence.
  2. Your primary residence is located in an area in which buying points is practiced.
  3. The price paid for the points was consistent with the prices in the area.
  4. The homebuyer must use the cash method of accounting, in which income is reported the year it is received and then deducted in that year when it’s time to pay.
  5. The points were only used on closing costs, such as appraisal fees, inspection fees, title fees, attorney fees, or property taxes, and no initial fees.
  6. The homebuyer is the one who purchased the points. Points that were outright purchased by the seller, or purchased with money borrowed from the lender or mortgage broker are not deductible.
  7. The loan is being used to buy or build a primary residence.
  8. The points were calculated to be a percentage of the principal amount of the mortgage (i.e. 1%).
  9. The amount appears on the settlement statement (a form known as the HUD-1 Settlement Statement) or Closing Disclosure.

Apart from being all around helpful to most homebuyers during the initial purchase and taxes associated with buying a home, there are other perks of mortgage points. One of the biggest is that the deduction can be spread out over the life of the mortgage. This is especially helpful if you – for one reason or another – do not itemize your deductions. Another major perk is that points can be used for home refinancing.

That’s a lot to take in. Hope you found it helpful. Call me soon at 503-654-7369 and we can talk more about mortgage points in the home loan process.

Source: Salted Stone

*Skyline Financial Corp. and its loan officers are not tax advisors. Always consult a tax professional for details.

Own A Home, Get A Tax Break

Real estate and home ownership is a huge part of our country’s economy. That’s why Uncle Sam has incentives to encourage Americans to purchase homes. He wants owning a home to be a help for you, not a burden.
get a tax break
Here are some tax incentives for home owners that you might not know about:

First-time Homebuyer Credit

As defined by the IRS, a first-time homebuyer is “any taxpayer who has not owned another principal residence at any time during the three years prior to the date of purchasing the home.” The original version of this federal tax credit terminated in 2010 for civilian homebuyers and in 2011 for homebuyers who were members of the military. However, there are other forms of the first-time homebuyer tax credit that still exist, such as the Mortgage Credit Certificate, otherwise known as the MCC.

Mortgage Credit Certificate (MCC)

The MCC allows homeowners to claim a tax credit on some of their mortgage interest paid. This amount is then used to reduce the amount of federal taxes the homeowner would pay to the IRS. The standard rate for the MCC is 20% of the mortgage interest paid annually.

Mortgage Interest Deduction

The interest paid on a mortgage can be added as an itemized deduction on a standard Form 1040, Schedule A. Assuming the itemized deduction is greater than the standard deduction, this can lead to substantial savings for homeowners, particularly in the earlier years of homeownership when the mortgage balance (and the mortgage interest along with it) is at its highest.

Mortgage Points Deduction

The IRS allows for the deduction of any extra charges paid by the homebuyer as a part of the closings costs for obtaining a mortgage. Origination points are not deductible because they are not extraneous charges; they are a part of the mortgage fees. By contrast, discount points are extra, and are tax deductible.

After the homebuyer obtains a mortgage, at the end of the year they will receive a Form 1098 Mortgage Interest Statement. The points paid to purchase the home will appear on the form in Box 2. The discount points can be deducted under “Schedule A” of a 1040 tax form. As with the Mortgage Interest Deduction, points can only be deducted if the homebuyer itemizes the deductions.

Energy Credits and Exemptions

The Home Energy Credit allows homeowners to recoup up to 30% of the costs of (with a cap of around $1,500) for installing energy efficient windows, doors, furnaces, air conditioners, heat pumps, hot water heaters, and more.

Mortgage Interest Credit Deduction

This is one of the lesser discussed tax deductions simply because it does not save homeowners as much money as some of the other deductions. But mortgage interest credit is an allowable deduction that should not be overlooked.

The simple description of the Mortgage Interest Credit is that it’s a credit designed to prorate your mortgage for the first month if it applies in that scenario. It allows new homeowners to get credited for interest whenever a mortgage closes and funds within the first five days of a given month.

IRA Penalty Exemption

For any individual who is buying, building, or rebuilding their first home, you have the opportunity to distribute $10,000 from your IRA if the money will be used towards expenses related to the home, including closing costs.

Others

And finally, there are home improvement, home business deductions, as well as medical home improvement deductions available to homeowners who meet eligibility requirements.

As you prepare for this tax season or are considering buying a home, remember that there are many tax benefits that come with being a homeowner. While it might take a bit of research to uncover all of them, a good tax accountant can help you take advantage of all the deductions you may qualify for.

Source: IRS.gov

Skyline Financial Corp. and its loan officers are not tax advisors. Always consult a tax professional for details.