Blog Archives Page 10 of 14 | Michigan Mortgage

The COVID-Compliant Way to Refinance or Purchase a New Home

April 30, 2020/0 Comments/in Blog/by mimortgage

With all that is taking place around us, purchasing a home may not be top-of-mind for most people.

But then again, maybe it is. Before this crisis hit, the spring home buying season was just getting started. And the reality is, many families do need to sell and buy homes, even during a pandemic.

Once the crisis passes, there will be even more buyers and sellers. Some mortgage forecasters are predicting a pent-up demand of buyers flooding the market.

If you anticipate house shopping once the all-clear is given and social distancing rules are eased, now is the time to get ready.

Those who are pre-approved will be in a better position to have their offers accepted once the real estate market gets back into full or partial stride.

Another way home owners are taking advantage is by refinancing. Mortgage rates are still historically low. Many consumers are enjoying big savings by refinancing.

Many of you might be thinking, “how can I get a mortgage with social distancing rules in place and me stuck at home?”

The answer is: with the Home Snap mobile app from Michigan Mortgage.

Even in normal times, Home Snap offers convenience for getting a new home loan or refinancing. The app lets you do everything from the convenience of your home. The app lets you get pre-approved, view your progress, securely upload documents, digitally sign documents, and easily message your loan officer.

In these restricted times, Home SNAP is a necessity. Like workers at many companies, Michigan Mortgage loan officers are working from home for the time being. But that doesn’t mean the mortgage services we provide have stopped.

Using Home Snap, you can:

Start the Application Process
Calculate Payments Easily
Securely Scan and Upload Documents From Your Phone
Digitally Sign Documents
Message Your Loan Officer and Realtor Instantly
See Your Progress
Get Updates as You Go

With mortgage rates at record lows, many homeowners are taking advantage by refinancing their existing mortgages. Home Snap is ideal for these homeowners as well.

“We have many customers who are using Home Snap to refinance safely and securely while they are sitting at home, all without having to meet face-to-face. Customers love the convenience and safety, as well as the great rates.”says Mortgage 1 CEO Mark Workens.

In pre-coronavirus times, hundreds of Michigan Mortgage customers took advantage of Home Snap to get a new mortgage or to refinance. You can, too. To get started, visit the Home Snap page on our website.

This blog post originally appeared on mortgageone.com. Michigan Mortgage is a DBA of Mortgage 1.

Five Tips to Improve Your Credit Score

April 2, 2020/2 Comments/in Blog/by Courtney Coon

Your three-digit credit score can make or break your financial future.

Interested in buying a home? Your credit score will determine whether or not you qualify. Looking to buy a new car or recreational vehicle? Your credit score will determine your interest rate. Hoping to take out a personal loan to invest in your child’s future? You need to have good credit to do so.

If your credit score isn’t up to par, we’re here to help! But before we offer you tips to improve your three-digit score, we want to make sure you understand how your score is calculated.

A combination of five factors determines your FICO credit score; some factors impact the score more than others. Take a look at the graph below to better understand.

FICO scores can range from 300 to 850, but for mortgage purposes, your goal should be 680 or above.

Here are five tips to help you reach that 680 benchmark.

Make sure your credit reports are accurate. Lenders analyze reports from three credit bureaus when you apply for a mortgage – Equifax, TransUnion and Experian. If you don’t have a copy of your reports, you can claim a free report from each bureau once every 12 months at annualcreditreport.com. Mistakes are known to happen, and reporting errors can have a negative impact on your score. If you find a credit reporting error, dispute the mistakes with the appropriate credit reporting agency and your score may improve.
Make your payments on time. According to experts, a large portion of your credit score (35 percent, to be exact) is calculated based on payment history. Making your payments on time, every time can greatly impact your score. This includes credit card bills or any loans you may have, such as auto loans or student loans, your rent, utilities, phone bill and so on.
Reduce the amount you owe. Roughly 30 percent of your credit score is calculated based on the amount of debt you owe. Most loan programs have very specific debt-to-income ratios in place that can keep you from purchasing your dream home. For the ultimate credit score boost, credit experts suggest you pay on time, twice per month, and decrease the amount you owe. This will help control the factors that collectively make up 65 percent of your score.
Become an authorized user on someone else’s credit card account. This is easier said than done, but if your spouse or parent has excellent credit and a perfect payment history, it would benefit you (and improve your credit score) if you were added as an authorized user on their credit card account. Why? The account will show up on your credit report as well as the credit utilization rate and all the on-time payments associated with the account, which will naturally increase your score.
Open a secure credit card. Opening a secure credit card, and using it properly, can help to increase your credit score. You’ll be required to deposit money into a checking account to secure the line of credit. Payments will come directly out of this account, so they will always be on time and will never be missed.

Your credit score won’t improve over night, but with a little hard work and dedication, you’ll be moving into your dream home in no time.

The Pros and Cons of a Cash-Out Refinance

March 22, 2020/0 Comments/in Blog/by Rob Garrison

These are certainly crazy times. The COVID-19 Pandemic has the markets in turmoil. Many states, including Michigan, have issued stay home orders, and people are generally anxious about the future. People are looking for options and smart decisions.

One of the options many people have so that they feel more secure, is to do a cash-out refinance on their home. Let’s take a closer look at some of the benefits and possible downfalls of this.

There are three reasons that I generally advise as sound financial reasons to do a cash-out refinance:

Home Repairs
Pay Off Debt
Conservative Investments with a Financial Advisor

We will Address Each of these reasons in more detail below, but before we can get to the reasons, it is important to determine whether there is enough equity in your home to pull cash out. Equity is the difference between what you owe and what your house is worth. Generally, banks will not allow more than 80 percent of the appraised value to be pulled out in a cash-out refinance. Your lender will most likely need to do an appraisal to determine value; however, you can utilize sites like Zestimate to get a general idea.

Home Repairs

Pulling out equity to do home repairs not only adds value to your life, it oftentimes adds value to your home. If the added value is more than the cost to do the work, you have just made a good investment. So even though you added closing costs and principle to your loan, you could be ahead of the game when you do end up selling.

Paying Off Debt (Debt Consolidation)

Paying off credit card debt and high interest debt is usually met with enthusiasm from the client. This debt is oftentimes weighing heavily on client’s monthly expenditures and is gladly paid off. We will address precautions regarding that below.

Other than paying off credit cards, there are options to pay off other debt. Oftentimes clients balk at adding debt to their mortgage to pay off shorter term installment debt. The argument is that paying off this is unwise because it is added to a longer term on a mortgage. I hear things like “I only owe five years on the car, so I don’t want to add that to a 15-year mortgage.” The problem with this argument is that they are not thinking about what could be done with the money they are freeing up.

Here is the math:

Lets’ say someone has a $20,000 installment loan at 6% interest paying $386/mo. After 5 years they will have paid $23,160. If they were to consolidate that into a 15-year mortgage at 3% they would pay $24,840 in 15 years. But that is $1, 600 more you say? True BUT what if you took that $386 that you freed up and invested conservatively? Making just 5% compounded annually over the 5 years you would make $25,594! If you kept that up for 15 years you would make $99,951!

Investments

Pulling out equity to make investments is a bit trickier. I do not normally advise this unless it is part of a financial plan overseen by a trusted financial advisor. The argument for investing is similar to the one that I made above. The problem is that investing is not for the weak of heart and hopeful gains can sometimes become devastating losses. If someone is going to pull out equity in their homes to invest, they need to have a CONSERVATIVE plan that has a high likelihood of success. Again, you really should have a financial advisor in on this plan.

Side Benefits of Doing a Cash-Out Refinance

Aside from home improvement, paying off debt and investing, a cash-out refinance might afford you the ability to lower your interest rate or remove mortgage insurance. This is especially true in the current market where interest rates have fallen and values of homes have risen.

Pitfalls to a Cash-Out Refinance

Possible higher rate. As compared to a rate and term refinance (not pulling out extra equity), the interest rates on a cash out can be higher depending on your equity position.
Enabling bad habits. Using them money to pay for vacations or buy non-essential luxury items is not a good idea for obvious reasons. Paying off credit cards can be a great idea as mentioned above, but if you then run up the cards again in a few months you have defeated the purpose. Be smart and don’t succumb to the allure of credit card debt.
Foreclosure risk. Remember that a mortgage is a secured debt. If you don’t pay you can lose your home. Paying off unsecured debt with secured debt can be a risk if you simply cannot afford your debt. Occasionally, I have clients that come to my trying to solve all of their previous bad decisions with a cash-out refinance. Sometimes I can help but oftentimes, doing this is just prolonging the inevitable: they simply have too much debt and not enough equity to save the day.

Bottom Line

Using a cash-out refinance can make sense when interest rates are good and you have a sound use for the money. Do not use it as a rescue maneuver that could cause you to lose your home or to buy something you don’t need. In these trying times, it is imperative that you have good advice. We can guide you and help you make the best decision for your unique situation.

Analyzing Your Current Financial Situation

March 12, 2020/0 Comments/in Blog/by Rob Garrison

Long before you make an offer on your dream home, it is important to honestly look at your current financial situation.

Variables such as your credit score, employment history and how much you have saved for a down payment can greatly influence the type of loan that you qualify for. Equally as important, the type of loan you qualify for can impact how viable and attractive your offer is to a potential seller.

It is important for you to analyze your spending habits. If you do not have a budget, you should start one now. This will help you understand you spending habits so that the lifestyle that is important to you will be maintainable as a homeowner.

One of the most important considerations is how comfortable with your monthly payment. For a great app to calculate a payment, click here.

As a rule of thumb, total housing costs should be no more than 25 percent of your net pay. So, if your net monthly household income is $3500 per month, a safe mortgage payment would be $875. No two households have the same expenses, so it is important to honestly look at what your expenditures are when you do a budget.

Note that lenders do not use net income when they calculate your debt to income. They use gross pay. The formula they use oftentimes (but not always) allows you to borrow more than you may be comfortable with or should spend. I call this giving you enough rope to hang yourself. No one wants to be house poor and feel strapped paying for a mortgage they really can’t afford. That is why knowing your budget, comfort level is so important.

It is also important that you are aware of the expenses prior to closing.

Earnest Money or Good Faith Deposit
Home Inspection
Appraisal Fee
Closing Costs and Pre-Paids

These costs vary and some of them can be paid on your behalf by the seller. Additionally, it is a good idea (and sometimes required by financing) that you have a few months mortgage payments in reserves, any moving costs, furniture, appliances, etc. You can typically estimate how much you will need for these costs by getting pre-approved for a loan by a lender that you trust and is highly recommended to you.

Your credit rating is a primary factor in qualifying for a mortgage.

The type of loan, down payment required and the interest rate you qualify for are all dependent on your credit score. Sometimes you will need funds to pay down credit or pay off derogatory credit.

It is important to consider all of these variables well in advance of looking for a home to purchase. Make sure you have enlisted a trusted advisor who can guide you through this process so that when the time comes, you will be in tip-top shape to purchase your dream home.

Tax Tips for Michigan Residents

February 27, 2020/0 Comments/in Blog/by Rob Garrison

It’s that time of year again! No, I am not talking about March Madness or the finale of “The Bachelor” … It’s tax time! For some (like self-employed people) that have not been paying quarterly taxes, it is a time to pay the piper. But for the vast majority of us, it is the time of year where we can actually get a tax refund.

So, what is the best use of those funds? Like most questions, the answers vary depending on the individual situation. If you are swimming in debt it may be time to pay some of that debt off. If you have not funded your 401(k) for the year, perhaps that money is best used to invest in a tax deferred plan.

If, however, you are not taking advantage of all the benefits, of home ownership, it may be the perfect time to purchase a home. The average tax refund these days is about $2,800. Many loans only require that you put between 1 percent and 3 percent down. This means you may have enough money to close a loan with only the refund.

Did you know that the average monthly rent payment in our area is more than the average monthly mortgage payment? For example, the average monthly rent in Muskegon (February 2020) is $880. The medium home price is $128,000. After just 3 percent down, the payment with taxes and insurance would be about $830.

So, on average, the monthly expenditure owning a home is less than renting. But even if the payment was higher on the mortgage payment it would most likely still be beneficial to own? Why? Two main reasons: appreciation and amortization.

Appreciation: Appreciation is the rate at which the value of something increases in value. The average appreciation in our area is about 3.8 percent for real estate. For the last five years has been 6.3 percent! On $128,000, the forecasted appreciation gain in the next nine years (using only 3.4 percent) is $45,466! Compare that to rent where the is obviously $0.

Amortization: The second reason is amortization gain. Remember, while the amount you owe on a mortgage goes down over time and the payment stays the same, on a rental the amount you pay for rent will likely continue to go up. In 9 years, you’ll pay over $22,000 down on the home. When you rent, you’re just paying down your landlord’s mortgage.

So even assuming the cost of a Real Estate sale’s commission sale of 6 percent, in nine years you are $55,000 richer when you buy a home vs. renting.

Given this, as well as the emotional and text benefits of home ownership, tax time may be a great time to buy. Call me if you would like to talk further about your specific options.

Guiding You Home in a Snap

January 29, 2020/0 Comments/in Blog/by Courtney Coon

We launched a new mobile app – called Home Snap – and are very excited to introduce it to all of you!

Home Snap at a glance:

Apply from your mobile device. Everything can be done in the palm of your hand. Apply with ease and securely scan and upload the necessary documents.
Calculate monthly payments. Home Snap’s calculate feature allows you to customize the fields according to your interest rates and mortgage amount to determine whether or not you can afford the home you’re interested in purchasing.
Track your progress. Home Snap notifies you when you reach new milestones in your home buying journey.
Communicate with your Loan Officer and Realtor. Contact information, as well as links related to their business, is available at all times. Text, call or email with the touch of your finger – in the evening and on weekends!

All of your mortgage needs can be done in the palm of your hand. Home Snap allows you to apply with ease and securely scan and upload the necessary documents to purchase a new home or refinance your current mortgage.

Home Snap’s built-in calculator allows you to run payments on the go. Want to determine if you can afford the home you’re viewing? Customize the calculator to include both your anticipated interest rate and mortgage amount to determine if you can afford the home you’re viewing. The calculator also takes into account the various loan programs we offer.

The app tracks your progress and notifies you when you reach new milestones in your home-buying journey.

Last but not least, Home Snap allows you to easily connect with your Loan Officer and Real Estate Agent. Contact information, as well as links associated with their business, is available at all times. Text, call or email with the touch of your finger – in the evening and on weekends.

It’s time to start your home-buying journey in the palm of your hand!

For more information, or to download Home Snap, click here.

Realtors: Win with Home Snap

January 29, 2020/0 Comments/in Blog/by Courtney Coon

We want to help you WIN with Home Snap. Partner with one of our experienced Loan Officers and co-brand the mobile app to your liking. You can include your headshot, business logo and links to your web pages and social networks.

Home Snap at a glance:

Co-Branded Mobile App. Your information – headshot, company logo, contact information and links to your website and social networks – is available front and center for borrowers to see and explore.
Cutting edge. This app will allow you to appear cutting-edge with state-of-the-art technology that very few have. You’ll stay top-of-mind while your clients search for homes and work through their home buying journey.
Send Push Notifications. Home Snap’s web platform allows you to send an unlimited number of push notifications to groups or individuals.
Calculate payments. Home Snap’s interactive calculator allows you to calculate payments on the go in the palm of your hand.
Convenience is key. Your buyers can apply for a mortgage, securely scan and upload documents and follow along from the palm of their hand.

This app will allow you to appear cutting-edge with state-of-the-art technology. You’ll stay top-of-mind while your clients search for homes and work through their home buying journey.

You will also have access to an online platform (available at https://myloan.michmortgage.com/login) that allows you to manage and communicate with your customer database.

Home Snap, via the web platform, allows you to send Push Notifications to groups and individuals with important information and updates. Communicate quickly and efficiently and in a format that today’s buyers are comfortable with.

Perhaps the most convenient feature, Home Snap calculates payments while you’re on the go. The calculator operates based on loan programs and is customizable to each client you work with and home you’re showing. You’ll know first hand if the home your client is interested in is out of their price range.

Home Snap is all about convenience. Your buyers can apply for a mortgage from their mobile phone, securely scan and upload the necessary documents and follow along as their mortgage moves through the process. Communication is made easy.

For more information, or to co-brand with a Michigan Mortgage loan officer, give us a call!

Cash-Out Refi vs. HELOC: Which Should You Choose?

December 5, 2019/0 Comments/in Blog/by Rob Garrison

Many homeowners, at some point in their lives, need extra cash. The reasons people need a quick cash infusion could be one of many:

Major home improvement
New vehicle
Wedding
College
Vacation
Unforeseen emergency

And who hasn’t heard the story of a now-successful billionaire entrepreneur who put it all on the line to fund a startup by either remortgaging his house or taking out a home equity loan?

The reasons people need money are as plentiful as there are leaves on the trees.

Home Equity at All-Time High

With mortgage rates low and home equity rising, it makes sense that people would tap the value of their single biggest investment – their house – for extra funds when the time comes.

According to MSNBC, in October, 2018, untapped home equity — the difference between a property’s value and the amount owed on it — stood at an all-time high of $14.4 trillion.

In June of this year, total refinance volume was up 79.5% from the same week a year ago, which is the highest level since January 2018.

The same can’t be said for home equity lines of credit (HELOC), however. Demand for HELOCs collapsed to 15-year low earlier this year.

Why the difference? And what should you choose if you find yourself in need of extra money?

Refi vs. HELOC

To appreciate the reason for these trends, it’s important to understand the difference between a refinanced mortgage and a HELOC. Here are summaries of the two taken from the website Investopedia.

Refinance: “A refinance occurs when an individual revises the interest rate, payment schedule, and terms of a mortgage. Debtors will often choose to refinance a loan agreement when the interest rate environment has substantially changed, causing potential savings on debt payments from a new agreement.”
HELOC: “Home equity loans and HELOCs both use the equity in your home—that is, the difference between your home’s value and your mortgage balance—as collateral Because the loans are secured against the value of your home, home equity loans offer extremely competitive interest rates—usually close to those of first mortgages. Compared to unsecured borrowing sources, like credit cards, you’ll be paying far less in financing fees for the same loan amount.”

So when it comes to tapping the rising equity in your home, which should you choose?

Cash-Out Refi

In the world of refinance, there are many different types. But in the current climate of low rates and rising equity, one refinance option stands out among the crowd when it comes to getting cold, hard cash for the value of your home: cash-out refinance.

“Cash-outs” are common when the underlying asset – aka, the value of a house — increases in value. With a cash-out refi, you withdraw equity of your house or condo in exchange for a higher loan amount. A cash-out refi lets you gain access to the value in your house via a loan rather than by selling it. This option gives you access to cash immediately while still maintaining ownership of your house.

Here’s a scenario:

Your home is worth $300,000
You owe $200,000
Thus, you have have $100,000 in equity

With cash-out refinancing, you could receive a portion of this equity in cash. If you wanted to take out $40,000 in cash, this amount would be added to the principal of your new home loan. In this example, the principal on your new mortgage after the cash-out refinance would be $240,000.

What’s Right for You?

Of course, everyone’s situation is different. And you should consult with your financial advisor before making any big move. But, in general, a cash-out refinance makes sense in a number of situations:

When you have the opportunity to use the equity in your home to consolidate other debt and reduce your total interest payments each month
When you are unable to get other financing for a large purchase or investment
When the cost of other financing is more expensive than the rate you can get on a cash-out refinancing

Another advantage of cash-out refis is that you are free to use the cash in just about any way you want.

If you are considering a cash-out refinance or have questions about refinancing options, give us a call!

This blog post was written by experts at Mortgage 1 and originally appeared on www.mortgageone.com. Michigan Mortgage is a DBA of Mortgage 1.

What is debt-to-income ratio?

October 24, 2019/0 Comments/in Blog/by Rob Garrison

Your debt-to-income (DTI) ratio is the percentage of your income that goes toward paying your monthly debts. DTI can often be overlooked as many people assume that a good credit score and a high income are the only two factors needed to be taken into consideration when seeking to purchase a home.

However, for many lenders, that’s not enough to be considered a good mortgage candidate. As a borrower, your DTI is utilized in various situations to determine your level of risk. For instance, if your DTI is too high, opportunities to make a big purchase, such as a mortgage, may be limited.

How to Calculate Your DTI Ratio

DTI Ratio = (Monthly expenses ÷ Pre-Tax Income) x 100
Start by adding up your monthly bills such as:

Rent or house payment
Alimony or child support
Student loans
Auto payments
Other

Next, divide your total sum by your gross monthly income (income before taxes). Multiply by 100. Your result is your DTI ratio.

The goal is to keep your DTI ratio as low as possible. The lower the ratio, the less risky you are to lenders. An adequate DTI ratio is below 36 percent. Typically, having a DTI ratio of 43 percent is the maximum ratio you can have in order to be qualified for a mortgage.

Front-End DTI vs. Back-End DTI

There are two variations of DTI: Front-End and Back-End.

A front-end DTI calculates how much of a person’s gross income is going towards housing costs.
Front-End DTI = (Housing Expenses ÷ Gross Monthly Income) x 100

A back-end DTI calculates the percentage of gross income going toward other types of debt (credit cards, car loans, etc.).
Back-End DTI = (Total monthly debt expense ÷ Gross Monthly Income) x 100

The main difference between Front-End and Back-End DTI ratios is that the front-end ratio only considers the mortgage payment and other housing expenses whereas the back-end ratio considers all other types of debt. Lenders will utilize this ratio in conjunction with the front-end ratio to approve mortgages.

Why is Knowing Your DTI Ratio Important?

Your DTI ratio is utilized by lenders as a measuring tool. Your DTI ratio helps lenders determine your ability to manage your finances, specifically, your monthly payments to repay the money you borrowed. Keep in mind that lenders do not know what you will do with your money in the future, so they refer to historical data to verify your income and debt totals. Moreover, your DTI ratio illustrates that you have a sufficient balance between your income and debt, thus, are more likely to be able to manage your mortgage payments.

If you are considering buying a home or have questions about your DTI ratio, give us a call!

This blog post was written by experts at Mortgage 1 and originally appeared on www.mortgageone.com. Michigan Mortgage is a DBA of Mortgage 1.

Appraisals vs. Home Inspections

October 17, 2019/3 Comments/in Blog/by Courtney Coon

As Michigan Mortgage Loan Officer Dave Lehner would say, “Don’t buy a money pit!”

What exactly does that mean?

Appraisals are required as past of the home-buying process. Home inspections are not, but they may be one of the most beneficial things you can do for your financial future. A home inspection will ensure that you don’t buy a money pit.

Here’s the difference between the two.

Appraisals

Required.
An appraiser provides a professional opinion of the home’s value. They do not analyze the “systems” of the home.
The goal is to make sure buyers are not overpaying for a home.
A home is appraised based on size, the number of bedrooms and bathrooms, functionality and recent sales of similar properties in the area.
The cost is typically between $400 and $575.

Home Inspections

Optional.
A home inspector will examine the physical structure as well as the “systems” of the house ranging from the foundation to the roof.
The home’s HVAC system, plumbing and electrical components, roof, attic, insulation, walls and ceilings, windows and doors, floors, foundation and basement will be assessed.
The home inspector is a licensed professional.
Buyers can use the inspection results to renegotiate the purchase price and request that the sellers make home improvements.
The cost is typically between $300 and $500.

As lenders, we’re responsible for ordering appraisals before proceeding to the closing table. We have no control over which appraiser is assigned to which home. The homebuyer is typically responsible for paying the appraisal fee.

Because the home inspection is not required, inspectors are hired by the homebuyer. We work with a pool of reliable experts and are happy to recommend one that will best meet your needs. The home inspector is working on the buyer’s behalf, so the cost is paid for by the buyer.

If you have questions about appraisals or home inspections, don’t hesitate to reach out. We’re here to help in any way we can!