Refinancing a mortgage means you are paying off your current loan with a new loan.
Whether looking for a lower monthly payment, or to tap into your home equity to help pay for renovations or consolidate debt, homeowners refinance their home loans for a number of reasons.
While refinancing your mortgage isn’t a miniscule task, working with an independent mortgage broker like us can help you follow the process to ensure you complete your refinance properly and efficiently.
Before you jump into refinancing your mortgage, let’s take a look at the five main steps you should follow to ensure you get the loan that best suits your current financial situation.
What are you hoping to accomplish with your refinance?
Do you want to change your mortgage from a 30-year-fixed-rate to a 15-year-fixed rate?
Are you looking to reduce your monthly payments? Or, perhaps you’re hoping to remove FHA mortgage insurance.
Whatever the reason, it’s important to have your goals set before you begin the mortgage refinance process.
If you want to find the best mortgage rate, work with an independent mortgage broker like us. We will shop hundreds of loan options to find the best possible rate available for your financial situation.
Simply give us a call at 407-834-3377 and we can start the process right away.
Paperwork, paperwork, paperwork! Coordinate closely with us to ensure you have all the proper documents available and filled out to officially submit your loan application.
Locking in your interest rate is a must. It ensures your interest rate can’t be changed for a certain period of time.
For example, if your interest rate is locked at 4.5% and the next day rates jump up to 4.75%, your rate won’t change as long as your initial rate was locked. You’ll again work closely with us to close the loan before that locked rate expires.
Closing on the loan will feel similar to when you closed on your home, except this time, you’ll be walking away with only a new loan instead of a new house.
The good news is, this is the final step in the process. Once you close on the loan and pay the closing costs, you’ll be all set.
Remember: we are home loan experts who can help guide you through the refinance process.
If you’re unsure if refinancing is right for you, connecting with us will give you needed clarity and help you determine next steps.
Call us today so you can begin the process: 407-834-3377.
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Deductible Homeowners Expenses
One of the advantages of owning your own home is that the home mortgage interest and real estate taxes paid can be deducted from your federal income tax*. To do so, you'll need to comply with current tax laws and complete the appropriate federal tax forms and itemized deduction schedules.
Home Mortgage Interest
For your home mortgage interest to be deductible, it must be for a first or second mortgage, a home improvement loan, or a home equity loan. Additionally:
The amount you can deduct can be limited if your mortgage balance is more than $1 million ($500,000 if married filing separately) or the mortgage was taken out for reasons other than to buy, build, or improve your home.
Points (a.k.a. loan origination fees, maximum loan charges, loan discount, or discount points) are generally treated as pre-paid interest and, as such, the full amount cannot be deducted in the year paid. Rather, the deduction must be taken over the term of the loan.
Real Estate Taxes
State or local real estate taxes can be deducted from your income if they are paid in the tax year. To qualify, the tax must be levied on the property's assessed value, the taxing authority must charge a uniform rate for properties in its jurisdiction, and the tax must not be for your special privilege, but for the benefit of the general welfare.
Restrictions on Itemized Deductions
The amount of itemized deductions you can take are restricted by your adjustable gross income. In 2003, the limits were $139,500 for single persons, persons filing as head of household or qualified widow(er), or married persons filing jointly; and $69,750 for married persons filing a separate return.
Many of the expenses related to owning your own home cannot be deducted from your income tax. These non-deductible items can include:
Check with the IRS
*The information contained in this article is for informational purposes only and may not reflect current tax year rules and regulations. You'll need to consult with your tax attorney, CPA, or the IRS for current tax year rules, restrictions and regulations.
Give us a call today and we can discuss your home loan needs! 407-834-3377.
Before you begin to shop for a new home, you should set up a time to meet with us so we can figure out how much you can afford. This will put you in a better position as a buyer. That’s when it is important to understand the distinction between being pre-qualified for a loan and pre-approved for a loan. The difference between the two terms will be crucial when you decide to make an offer on a house.
To get pre-qualified for a loan, we will collect information about your debt, income, and assets. We’ll look at your credit profile and assess goals for a down payment and get an idea of different loan programs that would work for you. We will issue you a pre-qualification letter indicating the amount you are pre-qualified to borrow.
It is important to understand that a pre-qualification letter is just an estimate of what you are eligible to borrow, not a commitment to lend. Getting pre-approved for a loan gives you competitive advantage when the time comes to bid on a home because you have been approved for a loan for a specified amount.
To get pre-approved, you will complete a mortgage application and provide us with various information verifying your employment, assets and financial status, such as W-2 forms, bank records and credit card statements. We’ll review your mortgage options and submit your application to the lender that best meets your needs. Once the application process is complete, you will receive a pre-approval letter indicating the amount your lender is willing to lend you for your home.
A pre-approval letter is not binding on the lender; it is subject to an appraisal of the home you wish to purchase and certain other conditions. If your financial situation changes (e.g. you lose your job), interest rates rise, or a specified expiration date passes, your lender must review your situation and recalculate your mortgage amount accordingly.
Here are some great tools to help make your lending experience easier:
Rent vs. Buy Calculator
15 vs. 30 Year Mortgage Calculator
Biweekly Payment Calculator
Reverse Mortgage Calculator
Give us a call today, and let's discuss your specific home loan needs. 407-834-3377
Buying a home? Here are some valuable tips to remember:
Paying consistent additional payments on your loan principal can yield huge returns.
Borrowers can pay against principal by employing various techniques. For many people, perhaps the easiest way to keep track is to make one additional mortgage payment every year. But some people won't be able to pull off such a large additional payment, so dividing an extra payment into 12 extra monthly payments works, too.
Another very popular option is to pay half of your payment every two weeks. The result is you make one extra monthly payment each year. These options differ a little in reducing the total interest paid and reducing payback length, but they will all significantly reduce the duration of your mortgage and lower your total interest paid.
Some people just can't make extra payments. But you should remember that most mortgages allow additional payments at any time.
You can benefit from this rule to pay down your mortgage principal any time you come into extra money.
For example: five years after buying your home, you get a larger than expected tax refund, a large inheritance, or a non-taxable cash gift; investing a few thousand dollars into your mortgage principal will significantly shorten the repayment duration of your loan and save enormously on interest over the duration of the loan.
For most loans, even this relatively modest amount, paid early in the mortgage, could offer huge savings in interest and duration of the loan.
Quick Guide to Buying Your Dream Home
It’s a common scenario for many first-time homebuyers: You can envision the home of your dreams — the style, the features, even the color — but none of the houses you’re visiting check all the boxes.
Don’t despair; instead, follow these easy instructions that will help you narrow down your search and find that perfect needle in your house-hunting haystack.
1. Craft a Budget
Unless you’re dreaming of sprawling mansions and vast estates, reality doesn’t have to throw cold water on your home dreams. But you will need a budget: Take a look at your income and savings and see if you have enough money to make the mortgage payment on the kind of home you’re after. (Looking online is the easiest way to get an idea of current prices and an independent mortgage broker like us can help you determine how much home you can afford through a pre-approval.)
Then, share your budget with your real estate agent and independent mortgage broker. Remember to budget for extra expenses that come during move-in (like furniture and renovations/painting) and others that will be recurring over years in the home (maintenance costs, for example).
2. Get Pre-Approved
Before you start house hunting, it’s crucial to get pre-approved with an independent mortgage broker to understand your buying power and a monthly mortgage payment you can afford. Your pre-approval is determined by several key factors such as:
• Credit history
• Credit score
• Employment history
• Debt-to-income ratio
• Assets and liabilities
Your independent mortgage broker will perform a hard credit check to determine a loan amount you are pre-approved for. In most cases, a seller will want to see your pre-approval letter to show that you’re serious and competitive with other potential buyers.
3. Decide on Your “Must-Haves”
Don’t just answer, “light beige.” Instead, think about exactly how many bedrooms you need. Do you want a dining room, or are you perfectly content eating in the kitchen? Will you need a finished basement, or are basements just for storage as far as you’re concerned? Do you require a two-car garage, or are you a “driveway parker” by nature? By simply sitting down and listing your preferences, you’ve taken huge strides to create a clear vision of the house you want. This will help your real estate agent tailor a search that meets your needs.
4. Search for Your Ideal Neighborhood
Don’t put that pen (or keyboard) away just yet — it’s time to make a similar checklist for your desired neighborhood features. Are streetlights and sidewalks a must? Are dirt roads a no-no? Sharing these preferences with your real estate agent can help them focus on areas you’re most likely to fall in love with. Google Maps or similar sites are also a helpful tool to give you an aerial overview of your desired area. Most of all, hit the road! Long evening or weekend drives are a great way to wander and discover hidden neighborhoods in the cities you’re most interested in.
As daunting as it may seem now, your dream house isn’t that far out of reach when you work with an independent mortgage broker (like our team here at Contemporary Mortgage Services, Inc.) and your real estate agent. Use these tips on how to get your dream home (plus a little planning and perseverance) and your wish could come true faster than you expect!
Ready to get started? Give us a call! 407-834-3377.
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When is the Right Time to Refinance Your Mortgage?
Here are some things to think about if you're considering a refinance.
While mortgage refinances are popular and financially savvy decisions for some homeowners, it doesn’t necessarily mean it’s the right thing for you.
Every person and every home is different, so be sure you understand how to refinance and speak with our team here at Contemporary Mortgage Services, Inc. before starting the process.
Let’s take a look at some of the best and worst times to refinance so you can make an educated decision on whether or not it’s right for you.
When Should You Refinance?
Thinking about refinancing your home loan? Here are a few examples of when you should refinance:
1. When Interest Rates are Low
This is the most obvious reason. When the mortgage interest rates are at least 0.5% - 0.75% lower than your current home loan, it’s time to start looking at a refinance. A lower interest rate can translate into significant monthly savings.
In addition, this could be a good chance to switch from a variable-rate to a fixed-rate or even drop from a 30-year mortgage to a 15-year mortgage. In this case, your monthly rates may be higher, but you’ll be saving more money on interest over time.
2. When You Need to Consolidate Debt or Remodel Your Home
Are you looking to remodel your home? Or, maybe you just find yourself in need of some extra cash. Take a look at where your equity stands on your home. If you have equity built up, a cash-out refinance may be the best option for you to help pay for home updates or even consolidate debt.
3. When You Have Enough Equity to Remove PMI
Lenders will require you to pay Private Mortgage Insurance (PMI) if you put less than 20% down on your loan. If you have enough equity built up, you can do a cash-out refinance and use those funds to put down 20% of your new loan, therefore allowing the PMI to be removed and dropping your monthly payment.
When Should You NOT Refinance?
Here are a few reasons why you shouldn't refinance your home loan:
1. If You Plan on Moving or Selling Your Home in the Next Two Years
If you’re not sold on your current location and have been thinking about moving, you should probably stay away from refinancing your mortgage to avoid the closing cost fees. Refinance fees can add up to be roughly 2-5% of the principal balance of your loan. If you move within the first two to three years after refinancing, you’ll likely end up losing more money instead of saving it.
To confirm when you’ll reach that breakeven point, you can find the number by dividing your closing costs by your monthly savings.
2. If You Have a Poor Credit Score
If your credit score isn’t exactly where you’d like it to be, you might want to hold off on refinancing. Your credit score has the power to impact your interest rate and could end up hurting you in the long run with a higher monthly payment or longer loan terms. If you have questions about your credit and how to know if you have a suitable score for a refinance, consider talking to us so we can help you figure out what home loans are available for your specific financial situation.
3. If You Can’t Afford the Closing Costs
When you refinance your mortgage, you’ll need to pay up front closing costs that can’t be rolled into the loan.
If you don’t have the financial flexibility to pay these fees right away, now might not be the best time for you to refinance. Closing costs can vary, so we can also work with you to see what your options look like.
If you’re ready to refinance your current home loan, it’s crucial to work with an independent mortgage broker like us to understand your options.
We will work with you every step of the way — from application to closing — to ensure the process goes smoothly!
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Are you considering buying your first home?
Many of us have been told: "If you're renting, you're throwing your money away." But, how do you know when you're really ready to purchase a home?
The truth is, purchasing your first home is different for everyone.
There's not a one-size-fits-all approach.
While there is a lot to take into consideration when purchasing a home, it's more doable than people might realize with the right mindset and partners to help, like our team here at Contemporary Mortgage, and your real estate agent.
Another thing to remember is that the price of rent can spike, year over year. Many people today are currently experiencing that.
However, mortgages tend to be more stable over the course of the term of the mortgage (usually 30 years.)
Have you considered what your current lifestyle entails, and have you taken a look at what your long-term goals are?
Are you thinking about purchasing your first home this year?
Let's take a look at some signs you might be ready to explore homeownership.
Signs You're Ready to Purchase a Home
Here are a few signs that you're ready to purchase your new home:
1. You Feel Financially Stable
Is your job stable? How does your savings account look? Homeownership comes with additional costs you may not be used to. Be sure to have funds set aside for things such as repairs, renovations, trash pick-up, water, maintenance service, and homeowner's insurance so you're prepared for life as a homeowner.
Also, take a look at your FICO score. Is it 640 or higher? Having a good score is essential when purchasing a home and can help you get better interest rates on your loan to save you money. Many lenders will also go as low as a credit score of 620 for a conventional loan, and a 580 for an FHA loan. An FHA loan is a Federal Housing Administration loan. It's a home mortgage that is insured by the government and issued by a bank or other lender that is approved by the agency. FHA loans require a lower minimum down payment than many conventional loans, and applicants may have lower credit scores than are usually required.
Check out some of our free online tools for when you are in the process of buying a home for the first time. CLICK HERE for the complete list!
With each payment you make, and with the current demand for homes, your equity will grow. It is important to note that you can also do things to reduce your mortgage cost, such as refinance or recast.
2. You Want More Freedom on Home Renovations
Does your landlord have strict restrictions around home renovations? Oftentimes, renting means you won't be able to make any major changes to the home or apartment. That can be a pain when you really need to customize something to suit your lifestyle and needs.
One of the best perks about having your own home is having the ability to do whatever you want to it and make it your own. Want to paint? Do you want to try your hand at remodeling? The world is your oyster when you're a homeowner! While you're responsible for all the costs, you are building long-term equity so you can reap the benefits in the future.
3. You're Looking For More Space
Tired of hearing your neighbors stomping around or talking loudly through the wall? Are your closets bursting at the seams because you don't have enough storage space? Maybe you're thinking about starting, growing your family, or even getting a pet. No matter what the reason may be, purchasing a home can give you the space, privacy, and quiet you're craving. Sounds amazing, right?
4. You're Looking for Additional Ways to Receive Tax Deductions
Who doesn't love a good tax break?
For many, mortgage interest deductions are some of the biggest tax breaks you can get. The IRS has also provided several other tax breaks for buying a home, including pay points, real estate taxes, mortgage insurance premiums, and some home improvements.
Signs You're Not Ready to Purchase a Home
Here are some signs that renting might be the better option for you right now:
1. You Don't Plan on Settling in a Specific Location
Still trying to figure out your career path? Or maybe you're interested in living in a big city, but unsure if it's right for you long-term.
2. You're Building Your Credit
Your credit score is extremely important when purchasing a home. If it isn't exactly where you'd like it to be, don't panic. Take some time to build it up. Do your homework, meet with financial advisors, and stick to your budget. For perspective, most lenders require at least a 640 FICO score to qualify for a loan.
3. You Don't Want to be Responsible for Maintenance Repairs
If something breaks while you're renting, your landlord or maintenance office is just a phone call away. Typically, they handle fixing the problem themselves and are held accountable for the expenses as well. If home repairs aren't your thing, or you don't have the money to cover a major unexpected repair, it might be a good idea to continue renting until maintenance projects are more realistic.
4. You're Looking for Stable Monthly Costs
When you rent, expenses are typically reliable. For example, you can probably estimate how much your electric and energy bill will cost without much variance from month to month. However, when you purchase a home, you may come across unexpected costs that increase your monthly budget.
5. You're Still Figuring Out Your Plan
There's absolutely nothing wrong with not knowing what your long-term plan is yet. It just may mean purchasing a home isn't the right move for you at this time. Everyone is on their own timeline, so you must make a decision that's best for you.
If you're still unsure whether or not you're ready to purchase a home, or you're looking for a second opinion, reach out to us today and we will talk you through your options. Determine your goals, budget, and timeline so you can get one step closer to purchasing your dream home.
Ready for a simple, painless home-buying experience? Give us a call! 407-834-3377
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Are you in the process of buying a home in Florida, and wondering how your credit score will affect your buying power? This article is for you!
Since we live in an automated world, it's not surprising that your ability to repay your mortgage boils down to a single number. Credit reporting agencies use your history of paying loans in order to create this score.
All three major credit agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a score.
Fair Isaac and Co. originally developed this score. Experian uses this model and calls its score FICO. Equifax's model, based on FICO, is called BEACON, while TransUnion, which also uses a slightly modified FICO, calls its score EMPIRICA.
While the formulas vary from one agency to another, the differences aren't huge; they all use the following factors to build a score:
• Credit History - How many years have you had credit?
• History of Payments - Do you have a history of late payments?
• Balances on your Credit Cards - How many credit card accounts do you hold, and how much do you owe on them?
• Inquiries on Your Credit - How many times have lenders pulled your credit report for the purpose of giving you a loan?
These factors are weighted differently depending on which formula the agency uses. The result is a single number: your FICO score.
Credit scores range from 300 to 800. Higher is better. Most home buyers have a score above 620.
Your score greatly affects your monthly payment
Did you know? FICO scores are used for more than just determining whether or not you qualify for a mortgage. Lenders give lower interest rates to individuals with higher scores!
Raising your credit score
What can you do to raise your FICO score? Unfortunately, not much. Some companies promise quick fixes, but they can't do anything different than what you can do — for free. (Of course you must have incorrect items removed from your credit report.)
Getting your credit score
In order to improve your credit score, you've got to obtain the reports that are used to build it, and of course, you need the score itself. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. It's inexpensive, fast, and easy to get your credit score, as well as credit reports from all three reporting agencies. Also available are information and online tools that can help you understand how to improve your FICO score.
You can get a free credit report once a year from all three agencies at AnnualCreditReport.com. These reports do not include a free credit score, but it's very inexpensive to get one at the same time.
Now that you have all the facts, you'll be a more informed consumer and you'll be better positioned to get the most favorable mortgage.
Want to know more about your credit score? Give us a call: 407-834-3377.
Are you thinking about refinancing your home loan? This information will definitely help you!
When you refinance a mortgage, you pay off your existing home loan and replace it with a new one—often with a lower monthly payment or better loan terms.
You’ll work with an independent mortgage broker (like us) every step of the way and provide them documents like your bank statements and tax returns to start the process.
How do you know if refinancing is right for you? Let’s take a look at some of the top reasons why people refinance their home loan.
1. Lower Interest Rates and Monthly Payments
This is one of the most common and obvious reasons homeowners decide to refinance. When rates drop, borrowers have the opportunity to get a loan at a lower monthly payment. Who doesn’t want that? To ensure you’re getting the lowest rate available, it’s a good idea to work with an independent mortgage broker who can compare prices across all lenders to find you the best deal for your financial situation. We can help you! Call us at 407-834-3377.
2. Improved Credit Score
An improved credit score is a great motivation for looking into a potential refinance. If your score improved since you took out your mortgage loan, you may be eligible for a lower interest rate and new loan terms.
3. Obtain Some Extra Cash
A popular type of refinancing is a cash-out refi. In some instances, you may be able to find a reduced interest rate and still take cash out of your home to use as you wish. Many use this to pay off other debt or to help cover the costs for home improvements.
4. Change the Loan Term
Changing the term of a loan is another common reason why someone may refinance. It’s not unusual for a short-term loan to have a lower interest rate. While this may result in a higher monthly payment, you’ll likely be saving money over the life of the loan.
5. Switch to a Fixed Rate
Adjustable-rate mortgages (ARMs) may start with a low interest rate, but often increase significantly throughout the duration of your loan. Switching to a fixed-rate means the interest rate cannot change, making it a smart move if you plan to be in your home for a long time.
6. Remove Someone from the Loan
Whether you’re getting a divorce or just going separate ways from a roommate, another common reason to refinance is to remove someone from the title or loan.
7. Eliminate Mortgage Insurance
Private Mortgage Insurance (PMI) is required on loans with less than 20 percent down at closing. However, once the homeowner has acquired at least 20 percent home equity with a conventional loan, it’s no longer required. If you’ve built up enough equity and are looking to cut the cost of insurance, refinancing could be a great option.
8. Consolidate Debt
For homeowners with a lot of high-interest credit card debt, a refinance can help them consolidate their debt and save on interest payments. If you have enough home equity, this type of refinance may be possible.
Ready to refinance your home loan? Talk through your options with us! You can give us a call at 407-834-3377 and we will guide you through the process and ensure the refinance meets your financial needs.
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