Blog - Robert Sinohue| Great Loan Advice| Mortgage Broker| Danville California

Home Builder Confidence At 5 Year High

The National Association of Home Builders/Wells Fargo builder sentiment index rose this month to 29, the highest level California Home Mortgage Rates it’s been since May 2007! Another hopeful sign of an improving housing market, the index rose from the reported 24 last month. Home builders report that they’ve seen an increase in sales and a high amount of traffic from prospective buyers.

This good news follows other positive signs that the home market is improving. In March, builders requested the highest number of permits to build new homes in three and a half years. In addition, the number of signed contract for new home purchases increased in March to the highest level in two years.

Qualifying For A Mortgage

California Home Mortgage Rates One of the most anxiety-driven parts of buying a new home is seeing if you qualify for your mortgage. To some, it may seem like a gamble, with no way of predicting if you’ll qualify or not. However, it’s a very specific equation to not only help the lender decide if you’re a reliable risk, but also to make sure that you won’t be overextending yourself in order to afford your new home.

But what is this equation? How do you know if you make enough to afford the new home of your dreams?

Previously, it was a good tip that a borrower could afford three times their gross annual income on a home loan. That would mean, if you made $40,000 per year, you could afford a $120,000 mortgage.

However, it’s wiser to take a much deeper look into what mortgage amount would fit your lifestyle. Take the time to look into your individual budget and figure out how much money you have to spare. Decide what a monthly payment on a new home will be, while figuring in taxes, maintenance, insurance and any other expenses that come along with owning a new home.

Generally, lenders want borrowers to have monthly payments around 28-44% of a borrower’s monthly income, but with a total monthly debt that doesn’t exceed 35% of that income.

To do this, lenders determine your mortgage amount in two ways:

1. Total Monthly Housing Costs Compared To Total Monthly Income
Through this process, a lender will take your total gross amount you receive per month and multiply it by .28 to determine what the total housing costs are going to be for you.

For example, say you make the $40,000 annually we mentioned above and you only want your max payment to be 28% of that. Your lender would take 40,000 and multiply it by 0.28 to get 11,200. Then they would divide this number by 12 months and your max monthly payment should be $933.33.

2. Debt To Income
To figure out your debt, the lender then takes all of your monthly payments, extending beyond 11 months into the future (this includes installment loans, car loans, credit card payments and more) then multiplies that number by .35. The total calculated should not be exceeded by the total monthly debt for you to qualify for a new home loan.

For this, your lender would take your annual earnings of $40,000 and multiple it by 0.35 to get 14,000. Divide 14,000 by 12 months and your monthly debt, including your new mortgage payments, shouldn’t exceed $1,200.

For more help figuring out exactly what you can afford in order to qualify for a new mortgage, check out our Mortgage calculator.

Your Credit Score and How It Affects Your Interest Rate (greatloanadvice.com)

Should You Refinance Again?

California Home Mortgage When rates originally feel just below 5% last year, many borrowers refinanced their mortgages. Then, when rates fell a full percentage lower, the same borrowers who refinanced a year earlier began to refinance again. So how do you know if it’s worth refinancing again?

First, you should consider your financial goals. Then you should decide how long you plan to live in your current house. If refinancing will only save you a small amount and you plan on moving out of your home in a few years, you may realize it’s not worth the hassle of refinancing. However, if you plan on staying in your home for multiple years, that small amount of savings could be a much larger savings by the time you pay off your loan.

For more info on when you should refinance again, check out this article by NYTimes, or contact your home loan expert to discuss your options.

Adjustable Rate vs Fixed Rate: Which One Is Best? (greatloanadvice.com)

Adjustable Rate vs Fixed Rate: Which One Is Best?

Fixed vs. ARM Adjustable rate vs Fixed rate: Which one is best? This is a very common question that many new home buyers ask. In addition to the various loan options you can choose from, most of these options come in various forms based on interest. The most commonly picked are Fixed and ARM.

What exactly does a Fixed and ARM mean and which one is a better option for you? We break it down for you here:
Fixed-Rate Mortgage

A fixed-rate mortgage is just as it sounds – whichever rate you lock in during your mortgage process is the rate you’ll have for the remainder of your loan’s term.

Advantages: Predictability. Your rates and payments will remain constant throughout your entire loan, making your budgeting easier.

Disadvantages: If rates fall, to take advantage of them, you would have to refinance.

ARM

ARM stands for Adjustable Rate Mortgage, which is a home loan that carries a rate that adjusts after a fixed period of time (typically 5 to 7 years). After this fixed period of time, the rate will change based on the current market and rate.

Advantages: Flexibility. You’re able to take advantage of falling rates without refinancing. You may even be able to buy a larger home, since most lenders tend to use a lower payment to qualify ARM borrowers. It also offers you a cheap way to buy a home if you don’t plan on living in one place for very long.

Disadvantages: ARMs can be difficult to understand and you’re at the mercy of the current housing market. Your rates and payments can rise significantly over the life of the loan.

Which One Is Right For You?

You should consider a wide range of personal factors when deciding between a fixed-rate mortgage and an ARM. Individual finances and interest rates both are prone to rising and falling over the course of time.

An ARM is a great choice if your primary requirement is to have low payments in the near term, or if you don’t plan on living in the property long enough for your rate to rise. An ARM may also be a good idea if current interest rates are high, but expected to fall. If rates are low and beginning to climb, locking in a low rate with a fixed-rate mortgage would be the best way to go.

To discuss all your options, contact your home purchase expert.

Why the Internet Can’t Replace a Real Estate Agent

California Home Mortgage No one can deny that the internet hasn’t changed the housing market. With websites like Tulia, Zillow, HomeFinder and many others, it’s much easier for potential home buyers to search and find their dream homes. However, many wonder – can it replace a real estate agent?

The answer is no.

During a study by HomeFinder.com, it was discovered that 47% of respondents were in the market for a home, but had not yet sought help from an agent. That number shows that, while the internet is a simple and accessible tool for homebuyers, it still is not enough to replace the skills and expertise of a good real estate agent.

A real estate agent understands not only the market, but the neighborhood that your potential home is in. Their negotiation skills and experience with multiple transactions are reasons enough to want them on your side – whether it’s your first or tenth home purchase.

If you’re one of the home buyers who haven’t yet sought the help of a real estate agent, check out our exclusive database of agents across the country that are ready to help you.

If you already have an agent, but need to be pre-approved for a home mortgage, please contact me today at (925) 364-5210.

How Much Should Home Remodeling Cost?

How Much Should Home Remodeling Cost Many homeowners decide to remodel their homes in hopes of enticing more buyers and possibly getting a higher price for their home. However, how much should you spend on your home remodeling for it to be worthwhile?

While the cost may vary depending on your finances and home, it’s more about what type of remodeling will get you the most bang for your buck? If you put $1000 into your living room, while choosing to ignore your small bathroom, you’re not going to see a huge number change of interested buyers.

The best rooms to remodel to see an increase in interested buyers is the bathroom and kitchen. New cooking spaces and cabinets are a huge trigger for potential buyers, and could potentially lead to more people bidding on your home.

Also, try making use of any space you have that’s not being used. Is there a linen closet near your bathroom that you could live without? Consider expanding your bathroom into that space for a cheap way to increase your home’s space, without having to build onto your home.

What other home remodeling tips do you know or follow? What’s the most you’ve ever spent on remodeling your home?

Your Credit Score and How It Affects Your Interest Rate

Credit Score and Interest Rates Mortgage rates determine your monthly payment for your home loan and the total amount that you’ll be repaying. However, mortgage rates can be a fickle factor to estimate when figuring out your mortgage costs.

While the news may boast about low rates, you might not be able to obtain that exact rate. There are many factors that go into determining your mortgage interest rate such as your loan option, property type and down payment amount.

But the number one thing that affects your interest rate is your credit score.

What’s My Credit Score?

Your credit score is a three-digit number generated from information in your credit report. It is designed to predict risk and the likelihood that you’ll pay your credit obligations back on time. It’s for this reason that lenders look to your credit score to make a more informed decision about you regarding your loan qualification. By acquiring your score through major credit bureaus (TransUnion, Experian and Equifax), lenders will look at your bill payment history, along with the number of outstanding debts you have, in comparison to your income to decide if you qualify for a home loan with them.

Keep in mind that the higher your credit score, the easier it is to obtain a mortgage and a lower interest rate:

Excellent Credit Score: 800 and higher
Very Good Credit Score: 700 – 799
Good Credit Score: 680 – 699
Ok or Fair Credit Score: 620 – 679
Poor Credit Score: 580 – 619
Bad Credit Score: 500 – 579
Very Bad Credit Score: 499 and lower

A bad score means you’re a risk to the lender. For example, delinquency (whether you make regular credit payments on time) accounts for more than a third of your credit score, so if it shows you have issues paying regular credit payments on time, it’ll be hard for the lender to trust you to pay them on time.

If you have a high credit score, you’ll directly benefit by receiving a lower interest rate, ultimately meaning lower monthly payments and less cost overall. Someone with a score between 760 and 850 could be offered an interest rate as much as 25% lower than those with a score between 620 and 640!

If you’re at the beginning of your home purchase process, check your credit score and try to improve it if it’s low, before continuing on with your home purchase. If you’re already in a position where you can’t improve your score, you may be able to be more appealing to your lender by putting down a higher down payment.

Pending Homes Sales Rise – More Signs of Recovery

Pending Homes Sales Rise – More Signs of Recovery March’s pending home sales rose 4.1% to 101.4 from the 97.4 it was in February. This marks the highest index we’ve seen since April of last year, which was 111.3, signaling that the market is recovering. This time last year, the Pending Home Sales Index was 12.8% less than it is now, predicting good results for Q2.

According to many economic experts, 2012 is predicted to be the year for housing recovery. With the current housing market turning the corner, the increase in home sales is bringing inventory down, creating balanced conditions around the country. If conditions continue to move in this direction, we can be sure to see a rise in home prices as the year continues.

For more information on March’s numbers, check out this article on Realtor.org.

Pending Home Sales Index Remains Strong Into Spring (greatloanadvice.com)
Pending Home Sales Rise To 22-Month High (greatloanadvice.com)
Homebuilder Confidence Slips 3 Points In April (greatloanadvice.com)

Home Prices Lowest Since 2002

In a new article by CNNMoney, it’s been reported that home prices have hit post-bubble lows and are currently the lowest we’ve seen them since 2002!

20 cities recorded a decline of 3.5% from a year ago, including Atlanta, Charlotte, Chicago, Las Vegas and New York City. California Home Mortgage However, while these cities are marking low prices, a few cities that were hardest hit by the housing crisis are beginning to see an uptick in home prices, including Phoenix and Miami.

With prices this low, there’s no question that anybody who has been on the fence about buying a new home shouldn’t jump on the housing market now. In addition to these low home prices, interest rates are still extremely low and in some areas, it’s actually cheaper to own a home than rent!

Contact one of our home purchase experts today to see what your options are or start your application on our new online application and save $150 doing so!

What do you think of these home prices? How long do you think these prices will stay this low?

Get To Know Your 30 Year Fixed Mortgage

One of the most popular mortgage options available to home buyers is the 30 year fixed mortgage. But what does a 30 year fixed mortgage actually mean? And more importantly, should you get one? Guaranteed Rate has the information you need!

A fixed mortgage is a mortgage whose interest rate stays the same throughout the entire duration of the loan, which in this case, is 30 years. That means, whatever interest rate you lock at the beginning of your 30 year fixed mortgage, will remain your interest rate for the entire life of the mortgage, unless you decide to refinance.

A 30 year fixed mortgage is great if you desire:
• Low Monthly Payments
• Rate Security
• Predictable Payments

Should You Get a 30 Year Fixed Mortgage?
If you plan on staying in your home for more than 5-7 years and want to have a mortgage payment that spreads out over many years – then yes.

However, if you’re expecting to move before that time, or you don’t want to be stuck with your rate for the entire term of your mortgage, then you may want to consider a different mortgage type.

Contact your California Home Mortgage Expert to go over your home goals and all your mortgage options.