Investing in real estate can be profitable. There are two types of investing – buy and flip, and buy and hold. With both types of real estate investments, there are things to consider.

Down Payment: Be ready to put down a larger down payment on the house – at least 15-25%. Expect higher interest rates, and slightly more restrictive guidelines.

Property Management: Are you ready to be a landlord or will you have a property management company handle the busywork? If you are taking on the task of being the landlord, be prepared to be available 24 hours a day. If something stops working in the middle of the night or while you are on vacation, you will be responsible for finding a solution to the problem in a timely manner. If you plan to hire a property management company, they will take care of paperwork, finding tenants, fixing repairs and more, but it will come at an added cost to you.

Expected Rental Income: Will the property make a profit or end up being a money pit? If this house is currently being rented out, ask the owners how much they charge in rent each month. Check out other rentals in the neighborhood and see what the average monthly rental income is. If it isn’t high enough to cover the mortgage and other expenses attached to the property, it may be best to pursue a different property.

Expenses and Costs: Do you have the funds for an extra expense account in case any problems emerge in the house? You never know when a problem will crop up. Whether the AC unit breaks or the refrigerator stops working, make sure you have enough funds to pay for sudden repairs and replacements.

Risks of Renting: If you don’t have tenants for a month, will you be able to pay the mortgage? If the current tenants damage the property, will you be able to afford the repairs? What happens if you go to check on the property and your tenants flew the coop?

Buying an investment property is a big decision, but if you do your research and are prepared for any and all possibilities, it can be a great investment and pull in some extra income each month! Talk to a loan officer near you for more information.

Ruth Schoenherr is a mortgage broker who will help you find home loans in the Clearwater, Palm Harbor, Largo, Safety Harbor, St Petersburg and Tampa Bay area. For more information, go to her web site at www.ClearwaterMortgageBroker.net or call at 727 447-2418.

A VA loan is a mortgage that is made by private lenders, but partially backed by the Department of Veterans Affairs. There are no limits on how much you can borrow, but there are limits on how much the VA will guarantee. … Eligible borrowers may only use VA loans for their primary residence.

VA Loan Pros

Here are some of the major advantages of the VA home loan program:

•No down payment: This is such a significant benefit. Qualified borrowers in most parts of the country can purchase homes worth up to $453,100 without making a down payment. FHA loans typically require a 3.5 percent minimum down payment, and for many conventional loans it’s a 5 percent minimum. On a $175,000 home purchase, that’s a $6,125 down payment for FHA and a $8,750 for conventional.

•No private mortgage insurance (PMI): This is required for conventional borrowers who can’t put down at least 20 percent. FHA borrowers have a couple forms of mortgage insurance, one that’s paid up front at the time of purchase and another that’s paid monthly. PMI typically disappears once you have about 20 percent equity in your home. There is no PMI on a VA loan.

•Higher allowable DTI ratio: Lenders will look at the ratio of your total monthly income to your total monthly expenses. The VA typically wants to see a debt-to-income ratio of 41 percent or less. That benchmark is higher than what you would see on conventional and even FHA loans. And it’s possible for qualified borrowers with a DTI ratio greater than 41 percent to still secure VA financing.

•No prepayment penalty: You can pay off your VA loan early with no fear of getting hit with any prepayment penalties.

•Refinance options: The VA home loan program has a pair of refinance loans that can help qualified buyers lower their monthly payments or get cash back from their equity. The Streamline refinance, also known as the Interest Rate Reduction Refinance Loan (IRRRL), is for homeowners with existing VA loans. The VA Cash-Out Refinance allows VA and non-VA homeowners to refinance and get cash at closing to pay down debt or take care of other needs. Refinancing may result in higher finance charges over the life of the loan.
•Flexibility with bankruptcy and foreclosure: Some borrowers who qualify can be eligible for a VA home loan two years after a bankruptcy or foreclosure. The wait can be much longer for different loan types.

VA Loan Cons

Now here are some of the potential drawbacks of the VA loan:

•It’s not for everyone: The VA loan program is a benefit you must earn, which makes it relatively rare to obtain compared to other loan products. VA home loans are only available to eligible service members who have served their country in the United States military. Spouses of veterans who have died in the line of duty or as a result of a service-related disability may also be eligible.

•VA Funding Fee: All VA loans come with a mandatory VA Funding Fee charged by the VA. This fee goes directly to the agency and helps keep the VA home loan program running for future generations. It’s a cost you can finance into the loan, and borrowers with service-connected disabilities are exempt from paying the fee. But this isn’t something you’ll pay on a conventional loan or FHA loan. You can learn more about how much the VA Funding Fee is, who pays what and who is eligible for a refund.

•They’re intended for primary residences: This isn’t a loan program you can use to purchase a second home or an investment property.

•Sellers aren’t always on board: Some home sellers aren’t open to receiving offers from VA borrowers. A lot of this undoubtedly has to do with some of the myths and misconceptions surrounding VA loans.

Ruth Schoenherr is a mortgage broker who will help you find home loans in the Clearwater, Palm Harbor, Largo, Safety Harbor, St Petersburg and Tampa Bay area. For more information, go to her web site at www.ClearwaterMortgageBroker.net or call at 727 447-2418.

The assumption is that the advantage of working with a mortgage broker is they can shop mortgages from multiple companies instead of making you stick with one company that they might work for.

A mortgage broker acts as a middleman between you and potential lenders. The broker’s job is to work on your behalf with several banks to find mortgage lenders with competitive interest rates that best fit your needs. Mortgage brokers have a well-developed stable of lenders they work with, which can make your life easier.

Mortgage brokers are licensed and regulated financial professionals. They do a lot of the legwork — from gathering documents from you to pulling your credit history and verifying your income and employment — and use the information to apply for loans for you with several lenders in a short time frame.
Once you settle on a loan and a lender that works best for you, your mortgage broker will collaborate with the bank’s underwriting department, the closing agent (usually the title company) and your real estate agent to keep the transaction running smoothly through closing day.

Mortgage brokers are most often paid by lenders.

Loan officers are employees of a lender and are paid a set salary (plus bonuses) for writing loans for that lender.

Mortgage brokers, who work within a mortgage brokerage firm or independently, deal with many lenders and earn the bulk of their money from lender-paid fees.
A mortgage broker applies for loans with different lenders on your behalf, shops for competitive mortgage rates and negotiates terms.

You can also save time by using a mortgage broker; it can take hours to apply for different loans, then there’s the back-and-forth communication involved in underwriting the loan and ensuring the transaction stays on track. A mortgage broker can save you the hassle of managing that process.

But when choosing any lender — broker, bank, online or otherwise — you’ll want to pay close attention to lender fees. Specifically, ask what fees will appear on page two of your Loan Estimate form in the Loan Costs section under “A: Origination Charges.”

Then, take the Loan Estimate you receive from each lender, place them side by side and compare your interest rate and all of the fees and closing costs.

That head-to-head price comparison among different options is the best way to make the right choice in what is likely to be one of the largest purchases in your life.

Ruth Schoenherr is a mortgage broker who will help you find home loans in the Clearwater, Palm Harbor, Largo, Safety Harbor, St Petersburg and Tampa Bay area. For more information, go to her web site at www.ClearwaterMortgageBroker.net or call at 727 447-2418.

You’ve probably heard that the single greatest reason why people go bankrupt is for medical bills. If you have bad health, lose your job, or a number of other unfortunate things happen, you may find you have a problem with your mortgage. If you are unable to afford your monthly mortgage payments and find yourself falling behind, you may be able to modify your home loan to catch up and avoid foreclosure.

A loan modification is a permanent restructuring of your original loan to provide you with a more affordable payment. Here is what you need to know about modifying your loan due to financial hardship:

You Need To Be Qualified

Not everyone can restructure their loan. Your lender will have to agree to a modification based on a series of criteria such as:
•Showing you can’t make your current payment due to financial hardship
•You can’t refinance the loan
•Your debt-to-income ratio has increased

If your lender decides to modify your loan, you will go through a trial period to show that you can afford the new monthly payments.

It is essential to remember that lenders want you to be able to repay your loans. Contact your mortgage company to discuss your situation and work together towards a solution.

You Need Financial Proof Of Hardship

For your lender to modify your loan due to financial hardship, you will need to provide financial proof. That means getting together:
•Recent federal and state tack returns
•Bank statements
•Pay stubs
•All information regarding your loan
•Letter of hardship

A letter of hardship is a letter you write to your lender to explain your situation. You will also have to submit an application with your information in addition to the above.

Beware Of Loan Modification Scams

If you need to modify your loan, it is recommended to go directly to your lender and avoid loan modification companies. Loan modification companies act as middlemen between you and your lender and it is often cheaper and faster to handle the process yourself.

In addition, many loan modification companies are less than honest, if not an outright scam, charging high fees for actions you can easily do yourself, like mail paperwork and reply to messages from your provider.

Ruth Schoenherr is a mortgage broker who will help you find home loans in the Clearwater, Palm Harbor, Largo, Safety Harbor, St Petersburg and Tampa Bay area. For more information, go to her web site at www.ClearwaterMortgageBroker.net or call at 727 447-2418.

The Fed recently cut interest rates, presumably to stimulate the economy. You may be wondering how that will affect you.  When the Fed “cuts rates,” this refers to a decision by the FOMC to reduce the federal fund’s target rate. The target rate is a guideline for the actual rate that banks charge each other on overnight reserve loans. Rates on interbank loans are negotiated by the individual banks and usually, stay close to the target rate. The target rate may also be referred to as the “federal funds rate” or the “nominal rate.”

The federal funds rate is important because many other rates, domestic and international, are linked directly to it or move closely with it.

Why Does It Change?

The federal funds rate is a monetary policy tool used to achieve the Fed’s goals of price stability (low inflation) and sustainable economic growth. Changing the federal funds rate influences the money supply, beginning with banks and eventually trickling down to consumers.

The Fed lowers interest rates in order to stimulate economic growth. Lower financing costs can encourage borrowing and investing. However, when rates are too low, they can spur excessive growth and perhaps inflation. Inflation eats away at purchasing power and could undermine the sustainability of the desired economic expansion.

On the other hand, when there is too much growth the Fed raises interest rates. Rate increases are used to slow inflation and return growth to more sustainable levels. Rates cannot get too high,

Financing

The Fed’s target rate is the basis for bank-to-bank lending. The rate banks charge their most creditworthy corporate customers is known as the prime lending rate. Often referred to as “the prime,” this rate is linked directly to the Federal Reserve’s target rate. Prime is pegged at 300 basis points (3%) above the target rate.

Consumers can expect to pay prime plus a premium depending on factors such as their assets, liabilities, income, and creditworthiness.

A rate cut could help consumers save money by reducing interest payments on certain types of financing that are linked to prime or other rates, which tend to move in tandem with the Fed’s target rate.

Mortgages

A rate cut can prove beneficial with home financing, but the impact depends on what type of mortgage the consumer has, whether fixed or adjustable and which rate the mortgage is linked to.

For fixed-rate mortgages, a rate cut will have no impact on the amount of the monthly payment. Low rates can be good for potential homeowners, but fixed-rate mortgages do not move directly with the Fed’s rate changes. A Fed rate cut changes the short-term lending rate, but most fixed-rate mortgages are based on long-term rates, which do not fluctuate as much as short-term rates.

Generally speaking, when the Fed issues a rate cut, adjustable-rate mortgage (ARM) payments will decrease. The amount by which a mortgage payment changes will depend on the rate the mortgage uses when it resets. Many ARMs are linked to short-term Treasury yields, which tend to move with the Fed or the London Interbank Offered Rate (LIBOR), which does not always move with the Fed. Many home-equity loans and home-equity lines of credit (HELOCs) are also linked to prime or LIBOR.

Ruth Schoenherr is a mortgage broker who will help you find home loans in the Clearwater, Palm Harbor, Largo, Safety Harbor, St Petersburg and Tampa Bay area. For more information, go to her web site at www.ClearwaterMortgageBroker.net or call at 727 447-2418.

A year ago, I think that we thought that interest rates were going up. We have had artificially low interest rates for almost a decade, and the consensus was that we can’t keep doing this forever. However, Jerome Powell, chair of the Federal Reserve, makes the big decisions when it comes to the federal funds rate and due to recent trade war news and the overall global economy, he’s hinting that rates could be decreasing soon.

But how will this affect your wallet? If you have credit card debt or plan to buy a home in the near future, the rate cut can be a benefit. Most credit cards that have variable rates are linked to the prime rate so a federal funds cut would lead to a lower interest rates. The lower the interest rate on your credit card, the easier it will be to pay that balance down so be sure to take advantage.

Though the federal fund rate isn’t linked to mortgage rates, it can have an impact on them. Whether your mortgage is a fixed-rate or an adjustable rate will determine the impact a rate cut would have on your savings. An adjustable rate will generally decrease when the fed rate decreases but a rate cut would have no impact on a fixed-rate mortgage. Lower rates are beneficial for potential home buyers and with a federal rate cut it would be a good time to purchase. Even if you’re not in the market for a new home it would be a great time to consider refinancing to take advantage of a lower interest rate! Please reach out to a Loan Officer near you to discuss all of your options!

Ruth Schoenherr is a mortgage broker who will help you find home loans in the Clearwater, Palm Harbor, Largo, Safety Harbor, St Petersburg and Tampa Bay area. For more information, go to her web site at www.ClearwaterMortgageBroker.net or call at 727 447-2418.

The name of this blog is Refinance Clearwater. In honor of our name, we want to tell you that now is the time to refinance. According to CNBC 6-12-2019

It is pretty common knowledge that a good credit score is important in getting a mortgage. But what is the minimum score that will be required? Your credit score is going to be a big factor. In fact, it can make or break your loan approval and carries the most weight when it comes to determining your mortgage rate.

Why are credit scores so important to mortgage lenders, you ask?

Well, they use credit score(s) to measure your payment default risk, coupled with things like down payment, income, assets, and property type. While credit scores aren’t perfect, and were even partially blamed for the most recent mortgage crisis, they do tell lenders a lot about you. Simply put, the higher your score, the lower your interest rate, and the more loan options you’ll have. So be sure to get it right!

Are mortgage credit scores different?

Mortgage lenders use FICO scores just like other finance companies. But pull one version from each of the three major credit bureaus. To create what is known as a tri-merge credit report. The mid-score is used for qualifying and mortgage rate purposes

First and foremost, you might be wondering which credit score mortgage lenders use, seeing that there’s no sense focusing on something they won’t actually look at to determine your creditworthiness.

I’ll save you the suspense. The short answer is FICO scores, which are the industry standard and relied upon by just about everyone.

I think something like 9 out of 10 lenders use FICO, and it’s pretty much 100% in the mortgage world.

As for the version of FICO, I don’t know if any mortgage lenders use the newer FICO 8 or FICO 9 scores, which are the latest iterations available, because they tend to upgrade slowly to avoid any unwelcome risk.

This also explains why FICO is pretty much the only game in town – it’s hard to change the status quo because there are a lot of moving parts (and investors) in the mortgage space, so one seemingly small alteration could have major ramifications.

FHFA director Mel Watt, whose agency oversees Fannie Mae and Freddie Mac, recently noted that any credit score model change would not go into effect before 2019.

And he didn’t sound optimistic that there would be a change, despite the introduction of a bill called “The Credit Score Competition Act of 2017” that wants other credit scoring models to be considered.

While it might sound unfair to only allow one company to score mortgage applicants, it does mean that consumers should focus on their FICO scores since they seem to be the only ones used by lenders, at least for the moment.

That being said, those other scores you receive for free often aren’t the same as the ones the lenders pull, though they’re typically not far off.

So they can be beneficial to give you an estimate of where you stand. Just don’t be surprised if they’re a bit different.

And notice I wrote scores, not score.  There are three FICO scores you need to be concerned with, including one from Equifax, one from Experian, and one from TransUnion, which are the three main credit bureaus, as seen in the table above.

Don’t expect a mortgage lender to only use Experian, or only use TransUnion, like some credit card issuers might do. This is a big loan so they’ll want to assess risk across as many platforms as possible.

The models in that table above tend to be the most commonly used, though there are mortgage industry-specific versions of FICO scores as well that may come into play.

The credit scores range from a low of 300 to a high of 850. The higher you score the better, though you don’t need a perfect score to get approved for a mortgage, or to obtain an excellent rate.

Ruth Schoenherr is a mortgage broker who will help you find home loans in the Clearwater, Palm Harbor, Largo, Safety Harbor, St Petersburg and Tampa Bay area. For more information, go to her web site at www.ClearwaterMortgageBroker.net or call at 727 447-2418.

The VA Loan is a home-mortgage option available to United States Veterans, Service Members and not remarried spouses. VA Loans are issued by qualified lenders and guaranteed by the U.S. Department of Veterans Affairs (VA).

You have served 90 consecutive days of active service during wartime,

OR
You have served 181 days of active service during peacetime,

OR
You have more than 6 years of service in the National Guard or Reserves,

OR
You are the spouse of a service member who has died in the line of duty or as a result of a service-related disability.

Homebuyers interested in the VA Loan aren’t required to reach any kind of income threshold to use their home loan benefits; however, borrowers are expected to have stable, reliable income that will cover monthly expenses – including their new mortgage payment.

Additionally, the VA requires that borrowers maintain a certain amount of income left over each month after all major expenses are paid. The excess is meant to cover typical family needs, such as food, transportation and so forth and is referred to as residual income. Residual income is a large reason why the VA Loan maintains one of the lowest foreclosure rates of all major lending options.

By enforcing residual income requirements, the VA increases the chances of its borrowers earning sufficient income to meet all financial obligations, and also ensures borrowers have a cushion in the event of an emergency.
The VA loan process typically takes 30 to 45 days once you’re under contract on a home, although every buyer’s situation is different. Applying for a VA loan doesn’t obligate you in any way to a particular lender or to moving forward with the home buying process.

Here’s a look at the four basic steps to applying for a VA Home Loan:
1.Familiarize yourself with the broad VA Loan eligibility requirements above
2.Contact a VA-approved lender like Veterans United Home Loans and start your VA Loan application
3.Obtain your Certificate of Eligibility through your lender or on your own
4.Finalize your loan application and provide all necessary paperwork to your lender, including W-2s, tax returns and recent bank statements

Ruth Schoenherr is a mortgage broker who will help you find home loans in the Clearwater, Palm Harbor, Largo, Safety Harbor, St Petersburg and Tampa Bay area. For more information, go to her web site at www.ClearwaterMortgageBroker.net or call at 727 447-2418.

If you go on those real estate websites, they very often state what your monthly payment might be. But you need to be careful with this, because the amount that they quote on the website may include principal and interest and may not include the other parts of the payment, like taxes and insurance. When you  get ready to buy a home, the first thing that you should do is get with your mortgage broker and get pre-qualified for a mortgage. After you do this, your mortgage broker can give you a more accurate amount of what your monthly payment might be for a given purchase price with a given down payment.

Let’s look at each portion of the overall loan payment to get a better understanding of what you’re paying each month.

The principal portion of your payment is essentially the amount of debt you are borrowing, which eventually transitions into your ownership in the home as it is paid back, also known as home equity.

The interest portion of your payment is the cost of borrowing that money for the loan, or the expense the bank or mortgage lender charges for taking on the risk.

The tax portion of the payment is paid to the local government based on the assessed property value and tax rate for the area.

Finally, the insurance portion of the payment covers homeowners/hazard insurance, which protects the borrower (and lender) from a number of dangers and provides liability coverage.

* You may also see the acronym “PITIA,” which stands for principal, interest, taxes, insurance, and association dues.  This may apply if there is an HOA that charges due for your property each month.

Does the Mortgage Payment Include Insurance?
Your monthly mortgage payment may include insurance
Including both homeowners insurance and PMI (if applicable)
Assuming your loan is escrowed/impounded (which many are)
Impounds are required on loans with LTVs above 80%
And also on FHA loans, VA loans, and USDA loans

For those with a mortgage impound account (typically required for a high LTV loan over 80%), taxes and insurance are paid monthly as part of the overall mortgage payment.

So you’ll pay the full PITI payment each month, as discussed above.

Instead of paying the mortgage and taxes/insurance separately, you’ll make an installment payment each month that covers all of those items.

Then when taxes/insurance are due, they’ll be paid from those proceeds, which are held in an escrow account.

Ruth Schoenherr is a mortgage broker who will help you find home loans in the Clearwater, Palm Harbor, Largo, Safety Harbor, St Petersburg and Tampa Bay area. For more information, go to her web site at www.ClearwaterMortgageBroker.net or call at 727 447-2418.