Interest rates fluctuate frequently, often depending on the news. If you are considering refinancing your home, your loan officer may suggest locking in the interest rate on your loan.
There are some valid reasons why this is a good idea including:
Saving Money For The Long-term
Over the life of a loan, an increase of as little as one-quarter of a percent can cost thousands of extra dollars. Spending a small amount of money now to lock in a rate can save money over the life of the loan.
Your loan officer will explain the difference in rate increases initially, over a year and over the life of the loan.
You May Not Qualify At Higher Rates
Whether you are considering refinancing your property or you are buying a new home, you may discover your rate just qualified for your loan to meet the required debt-to-income ratios. An interest rate increase may mean you will not qualify for the loan.
Closing Times May Impact Their Decision
If a loan is scheduled to close within 30 days, it may be a good idea to consider locking in the interest rate your loan officer is offering. The lock will help protect against potential increases in rates during that period of time. This will help you plan your final closing costs and ensure your monthly payments will not be higher that estimated.
Don’t Forget: Upcoming News Impacting Rates
There are often issues that will have a serious impact on interest rates. For example, the current Quantitative Easing program by the Fed is keeping rates low. Should the Fed reveal they intend to modify or taper their program; chances are fairly good that rates will take a slight hike.
Loan officers can help you unwind the news and make sure your refinance is not negatively impacted by interest rate increases.
Not every refinance customer will want or need to lock in their interest rates. However, once a loan has been approved, you should consider talking with your loan officer about the potential of locking in. The small fee that may be required could save you thousands of dollars over the life of your loan.
Have you ever considered paying off the mortgage on your home in two biweekly payments rather than one monthly payment? It might seem like this wouldn’t make a difference, but the truth is that biweekly payments really do add up more quickly.
Since there are 52 weeks in a year you will end up making 26 payments in total – which is equal to 13 months rather than 12. This means that your mortgage will be paid off more quickly and you will save money on interest payments in the long run.
This arrangement might be the best for you when it comes to paying off your mortgage quickly and saving money, but it’s important to consider the possible disadvantages before you make the decision.
Cons Of A Biweekly Mortgage Payment
Often lenders do not offer biweekly services free of charge. You will be required to pay a registration fee as well as paying biweekly charges.
If your budget doesn’t allow the room to pay more toward your mortgage every year, this could be a foolish move. Don’t neglect the importance of having an emergency savings fund or paying your bills.
If you have your mortgage payment set up via direct debit from your bank account, taking out a payment every two weeks could catch you out if the funds are not there, especially if you are only paid once per month. This would result in charges for insufficient funds from both your lender and your bank.
Pros Of A Biweekly Mortgage Payment
Some people find that paying their mortgage biweekly fits better into their budget because it’s easier to plan for a smaller payment amount – especially if they are paid every two weeks.
By shaving years off the length of your mortgage, you are reducing the amount of money you will pay over the long run.
You will also be speeding up the time it takes to build equity in your home.
You will be compelled to make an extra mortgage payment per year, enforcing good habits on yourself that will eventually pay off.
These are just a few factors to consider before deciding whether you should make biweekly payments on your mortgage. If you don’t want to commit to biweekly payments on your home mortgage, you can always save up your money and make a lump sum payment at the end of the year.
For more tips and advice, feel free to reach out to your trusted mortgage professional today.
When preparing for a closing on your refinance or home purchase, one of the documents you will be provided with a few days before closing is a HUD-1 Form. This form provides you with valuable information about your loan.
While at first, this three page document may seem intimidating, if you understand what you see in each section, it is not as confusing as you might think. Let’s break down the various parts of the HUD-1 and talk about what they mean.
On the first page of your HUD1, you will see your loan information at the top. This includes the type of mortgage, property location, loan amount and the date of closing. This information is very basic but also is very important to review for accuracy.
Buyer And Seller Costs
If you are refinancing your home, you will only see information in the buyer section of the HUD-1. This section will define any charges associated directly with the home including taxes, insurance and any amounts that are due from you or payable to you at closing.
You will also see a total of all settlement costs which you can find broken down by category on page two of the HUD-1.
Page 2 Is Important
On the second page of your HUD-1 form, you will see a complete breakdown of all costs associated with your loan. This includes appraisal fees, broker or lender fees, and if your loan is a purchase loan, you will also see information regarding fees paid to a real estate broker if applicable.
Additional information found on this page includes escrow payments the lender may require be paid prior to closing. In most cases, escrow will include a portion of taxes and insurance payments that will be due through the quarter following closing on the mortgage.
Final And Important Highlights Of Page 3
Finally, you will need to review the signature page of your HUD-1 form. This page also contains critical information regarding your loan. Your interest rate, information on whether or not your loan will increase and the total amount you will pay over the life of your loan.
Additionally, you will see a comparison of the fees that you are actually paying compared to what your lender estimated at the type of application.
Borrowers need to review their HUD-1 form thoroughly prior to signing any loan documents. Typically, this form will be provided to a borrower a day or two prior to closing to allow for review and to get any questions answered prior to closing.
Having a basic understanding of the HUD-1 form can help make your closing much less stressful. For further questions on this topic feel free to reach out to your trusted mortgage professional.
Last week brought several indicators of a strengthening economy. New home sales, private and federal employment and mortgage rates rose.
The Department of Commerce released construction spending numbers for October with mixed results. Although public projects fueled an 0.80 percent increase in month-to-month construction spending, residential construction fell by 0.60 percent.
Analysts had expected an increase of 0.50 percent and also noted that the negative effect of the government shutdown was a “blip.” October’s reading for construction spending was the highest since 2004.
CoreLogic released data that home prices rose by 0.20 percent, which represents a year-over-year growth rate of 12.50 percent for home prices. Pending home sales were suggested that November sales are expected to hold steady as compared to October, and projected year-over-year sales for November at 12.20 percent.
Slower growth in home prices was attributed to higher mortgage rates and a fear of a housing bubble in the West, where demand for homes far exceeds the number of available homes.
Not wanting to buy at the top of the current housing market, some potential buyers may be waiting for the talk of another housing bubble to subside before buying. Robert Shiller, co-author of the Case-Shiller Housing Market Index, noted that home buyers may not be “psychologically ready” for another housing bubble.
New home sales for October were higher than expectations of 419,000 homes sold on a seasonally-adjusted annual basis. October’s reading of 444,000 new home sales was 21.60 percent higher than September’s reading of 354,000 new homes sold. The national median home price fell by 4.50 percent to $245,800 in October; this was the lowest month-to-month reading since November 2012.
The number of available homes fell to a 4.90 month supply in October. This may cause buyers to put their home searches on hold as they wait out the winter months and hope for supplies of available homes to increase.
U.S. Employment Improving, Mortgage Rates Rise
ADP a private-sector provider of payroll services reported 215,000 new jobs added in November as compared to October’s reading of 184,000 jobs added. Weekly jobless claims supported the ADP reading as new jobless claims fell to 298,000 against expectations of 325,000 new claims and a prior reading of 321,000 new claims.
The Bureau of Labor Statistics brought more good news with its Non-Farm Payrolls report and Unemployment Rate for November. Non-Farm payrolls added 203,000 jobs in November against expectations of 180,000 jobs added and October’s reading of 200,000 jobs added.
The National Unemployment rate dipped to 7.00 percent in November against expectations of a 7.20 percent reading and October’s reading of 7.30 percent. The Federal Reserve has set a benchmark unemployment rate of 6.50 percent as an indicator of economic recovery.
Last week’s strong economic news boosted mortgage rates; Freddie Mac reported that the average rate for a 30-year fixed rate mortgage rose by 17 basis points to 4.46 percent with discount points lower at 0.50 percent.
The average rate for a 15-year fixed rate mortgage also gained 17 basis points at 3.47 percent with discount points at 0.40 percent. The average rate for a 5/1 adjustable rate mortgage rose by 5 basis points to 2.99 percent with discount points at 0.4 percent.
What’s Coming Up
This week’s scheduled economic news includes Retail Sales, Weekly Jobless Claims and Freddie Mac’s report of average mortgage rates.
When it’s cold outside, there’s nothing quite as cozy as curling up on the sofa with a good book in front of a roaring fire. A fireplace evokes the idea of a warm and pleasant atmosphere.
However, if it isn’t properly maintained, your living room could be filled with a cloud of soot, or worse, fire. A fireplace not only creates a snug setting, but most are actually functional and can help heat your home.
Harness their heat and generate the ambiance of a softly lit living space by following the tips below to ensure yours is properly maintained and working efficiently before the first cold spell hits.
Clean It Regularly
Have your chimney cleaned out twice a year. The recommended number varies depending on how often you use your hearth. However, you should have it cleaned every fall to ensure it’s properly vented so that smoke has a way to escape.
Also, you’ll want to make sure that no animals have made their home there over the summer.
Close The Damper
Make sure you close the damper when you’re not using the fireplace. You don’t want to make your furnace work overtime because warm air is sneaking up and out the chimney.
Install A Chimney Cap
If your home doesn’t have a chimney cap, then have one installed. These help to prevent snow, leaves, animals and other debris from falling down the chimney. Caps also help keep downdrafts from gusting into your living area.
Burn Firewood Only
A fireplace isn’t the spot to burn your broken chair or ex-girlfriends photos. Painted wood, plastic and other treated wood surfaces can release chemicals into the air of your home. Worse, they can coat the interior walls of your fireplace, so you continue breathe them in for the next couple of fires.
Mount Smoke Alarms
If you don’t already have them, mount smoke alarms near your hearth and in every bedroom. Consider installing combined carbon monoxide and smoke detectors if you have a home with a gas-burning fireplace.
Don’t use your fireplace without taking the right precautions. Get it cleaned, and if it’s your first use, then be sure to get it inspected beforehand. Make the hearth in your home the heart of your home by following the tips above to ensure it’s up to snuff this fall.