Blog – CTeBockhorst's Blog

The Top Tips for Saving Money On Energy Bills

August 10, 2021 by Coleen TeBockhorst

The Top Tips for Saving Money On Energy Bills There are many homeowners who are looking for ways to reduce their monthly expenses. One way to do that is to target energy bills and expenditures. Homeowners might be able to make a few changes and upgrades to their homes, which could reduce utility bills and improve energy efficiency. What are a few ways to do exactly that?

Consider Making The Switch To LED Lights

One of the first changes homeowners might want to make is to switch to LED lights. LED lights are newer lights that can last many times longer than traditional lightbulbs. It is not unusual for homeowners to save $75 per year on energy costs by switching older incandescent lightbulbs to LED bulbs. Talk to a local contractor or professional about some of the top LED bulbs available today.

Seal Leaks Around Doors And Windows Throughout The Home

Heating and cooling expenses are some of the biggest energy expenditures that people have. By sealing a few leaks throughout the home, it is possible to save up to 20 percent on heating and cooling costs. There are small leaks that could be present around the doors and windows. By sealing these leaks using caulk, homeowners can trap heat and air conditioning in the home, removing stress from the HVAC unit. Homeowners should also consider sealing leaks around lighting and chimneys.

Invest In A Smart Thermostat

It is also possible for homeowners to save money by investing in a smart thermostat. Homeowners should consider using this thermostat to reduce the amount of work performed by the HVAC unit when people are at work or asleep. That way, the heating and cooling system doesn’t work as hard when people aren’t home (or are asleep).

Perform Routine Maintenance On Time

Finally, homeowners need to make sure they perform routine maintenance on their HVAC systems on time to reduce energy expenses. For example, the filters might get clogged, forcing the HVAC system to work harder to heat and cool parts of the home. By investing in maintenance, the HVAC system will operate at peak efficiency, which will reduce energy bills. This will also extend the life of the HVAC system efficiency, which might allow homeowners to put off replacing it.

What’s Ahead For Mortgage Rates This Week – August 9, 2021

August 9, 2021 by Coleen TeBockhorst

What's Ahead For Mortgage Rates This Week - August 9, 2021 Last week’s economic reporting included readings on construction spending, consumer sentiment, labor sector reports on public and private sector jobs, and national unemployment. Weekly readings for mortgage rates and jobless claims were also released.

Residential Sector Drove June Construction Spending

Construction spending rose by 0.10 percent in June according to the Commerce Department. Analysts expected spending to increase by 0.50 percent, but builders spent less on public sector and non-residential projects. Spending for all construction spending rose at a year-over-year pace of $1.55 trillion. Residential construction rose by 1.10 percent in June, but public-sector spending fell by -1.20 percent and nonresidential construction spending fell by 0.70 percent. Year-over-year residential construction spending rose by 28.80 percent in June; nonresidential construction spending was 6.60 percent lower year-over-year.

Demand for homes continued to exceed the supply of available homes. Builders took advantage of lower lumber prices to ramp up construction, but shortages of affordable entry-level homes continued to challenge first-time and moderate-income home buyers. Although the covid pandemic continued to increase demand for homes, some buyers left the market due to high home prices and few options for available homes. Cash buyers and bidding wars in popular metro areas continued to drive up home prices.

Mortgage Rates, Jobless Claims Fall

Freddie Mac reported lower average mortgage rates last week as rates for 30-year fixed-rate mortgages fell by three basis points to 2.77 percent. The average rate for 15-year fixed-rate mortgages was unchanged at 2.10 percent; Rates for 5/1 adjustable rate mortgages averaged 2.40 percent and were five basis points lower. Discount points averaged 0.60 percent for fixed-rate mortgages and 0.40 percent for 5/1 adjustable rate mortgages.

New jobless claims fell to 385,000 initial claims filed from the previous week’s reading of 399,000 new claims filed. Ongoing jobless claims were also lower with 2.93 million continuing claims filed as compared to 3.30 million ongoing claims filed in the previous week.

Low Unemployment Rate Suggests Continued Economic Recovery

Public and private sector jobs showed mixed results in July. ADP reported 330,000 private-sector jobs added in July as compared to 680,000 private-sector jobs added in June. The Labor Department reported 943,000 public and private-sector jobs added in July as compared to its June reading of 938,000 jobs added. The national unemployment rate fell to 5.40 percent in July as compared to June’s reading of 5.90 percent. Analysts expected an unemployment rate of 5.70 percent in July.

What’s Ahead

This week’s scheduled economic readings include reporting on job openings, inflation, and the University of Michigan’s initial consumer sentiment index for August. Weekly readings on mortgage rates and jobless claims will also be published.

Money Matters: Understanding How a Mortgage Loan Can Be a Productive Investment

August 6, 2021 by Coleen TeBockhorst

Money Matters: Understanding How a Mortgage Loan Can Be a Productive Investment Most people tend to think of a mortgage loan as a necessary evil, an expense that has to be managed. But under the right circumstances, your mortgage can become a smart investment – something that makes you money instead of costing you money. With a little bit of ingenuity and a lot of hard work, you can turn your mortgage into a money-making investment that will pay dividends for years to come.

So how do you turn your mortgage loan into a productive investment? Here’s what you need to know.

A Mortgage Can Help You Buy A New Rental Property

One of the simplest ways that a mortgage can become an investment that adds value to your portfolio is by using it to buy an income property. For a first-time investor, the simplest arrangement is to buy a single-family home and rent it out. And if you live in a college town, you’ll find no shortage of students looking for housing – meaning you’ll never have a hard time finding renters.

In order to make this work, you’ll need to first have enough money saved up for a down payment. You’ll also need to have your rental rates high enough to turn a profit, but not so high that you have difficulty finding renters. And finally, if it’s possible, you’ll want to consider turning the home’s basement into a secondary suite, allowing you to max out your rental income.

A Mortgage Can Give You A Home To Flip

The second major way that a mortgage can be a productive investment is by using it to flip a home. House flipping has become very popular in recent years thanks to a number of television programs like Flip This House – and although flipping a home can result in a major windfall, it’s not easy. In order to make a house flip work for you, you’ll need to carefully plan out the flip and ensure that you buy the right property at the right time.

Beginning flippers should usually start with an older bungalow. You’ll need a solid credit score to secure the mortgage, and ideally, you should make your down payment in cash. You’ll also want to ensure the home is in a good neighborhood – this will make it easier to sell the home when you’re done renovating.

A mortgage is often thought of as an expense, but if you plan on buying a rental property or flipping a home, it’s actually a very smart investment. There’s always risk involved, of course, but with the right mortgage and the right home, you’ll have no trouble turning a profit. Call your local mortgage professional for help in getting the right mortgage for your investment property.

The Process Of Buying A New Construction Home

August 5, 2021 by Coleen TeBockhorst

The Process Of Buying A New Construction Home Because the housing market is so competitive right now, many buyers are looking at alternative options. Instead of looking for a resale home, some buyers are considering a new home. What is the process of taking out a loan on a new construction home? There are several factors buyers should consider.

Pricing On A New Construction Home

Many buyers are used to negotiating with sellers to get the best deal possible. On a new construction home, it is still possible to negotiate for a better price. Most homeowners are going to be negotiating for better items in the home than the purchase price. For example, it might be possible for buyers to negotiate for better counters, cabinets, floors, or appliances instead of asking for a discount on the price. It is also possible for buyers to negotiate for better options if they are the first or second people to move into the new community. Homes usually go up in price after the first homes in the community sell.

A New Home Is Often A Better Investment

Buying a new home is often a better investment than purchasing an older home. Newer homes tend to appreciate faster immediately after they are built. Many people like to buy a home that has had only one owner because items in the home are less likely to break. Therefore, homes with only one owner are often in higher demand, which can lead to higher property values on new homes.

Understand The Financing Process

Typically, prospecting homeowners need to put down a building deposit for the project to start. This is usually three percent of the projected sale price of the home; however, it can be higher or lower depending on the price of the home and the builders. In addition, homeowners need to be aware that they will need to secure financing when the building project nears its completion date. The lender might require a certain percentage down in order to finance the home.

Do Not Hesitate To Ask For Help

Buying a new home does have a few differences when compared to buying an existing home. Homeowners should reach out to professionals for help with this process to make sure they get the best deal possible.

What To Know About Home Loans for Renovation Projects

August 4, 2021 by Coleen TeBockhorst

What To Know About Home Loans for Renovation Projects When people are looking for a home, they are often looking for something that is move-in ready. While this might make the process easier, this can also make the home much more expensive. It is still possible to find a dream home even if the house requires a bit of renovation. This is also a great opportunity for homeowners to customize the home to meet their needs. What do potential homeowners need to know about taking out a mortgage to renovate a fixer-upper when compared to a conventional home loan? Take a look at some helpful information below.

When Buying A Fixer-Upper Is The Right Decision

There are several situations where buying a renovation project might seem like the logical decision. Remember that these projects are going to take time and money, so homeowners need to have both of these resources to complete the project. Of course, these projects are going to require a lot of construction skills, so it is important to either have the equipment and expertise or be willing to hire someone to do this. Furthermore, it is critical to look at the value of the property once the project is done. What type of return should homeowners expect after they finish the project? It should meet the needs of the homeowner while also providing a significant return.

Understanding The Financing Options

Homeowners are unlikely to have the cash to pay for all of these out of pocket, so it is important to take a look at a few financing options. An FHA 203k Mortgage is often a great option for those with a credit score of 580 or higher. These loans can cover a diverse array of construction projects.

There are also Fannie Mae HomeStyle Renovation Loans, which allow people to borrow up to 50 percent of the total value of the home for the project. Homeowners can also borrow against projected equity instead of having to wait to take out a traditional cash-out home refinance. This loan requires a credit score of 680 or higher and the renovation must be completed in less than 12 months.

These two loan options could be helpful for those who are looking to complete a home renovation project.

The Down Payment: Four Great Reasons To Make The Largest Down Payment You Can Afford

August 3, 2021 by Coleen TeBockhorst

The Down Payment: Four Great Reasons To Make The Largest Down Payment You Can Afford If you’re looking for a new home, you’ve probably heard lots of advice about down payments. About how it’s okay to just have a five percent down payment – you’ll still get approved. About how you should make the down payment as small as possible to avoid cash flow problems.

In truth, you’re actually better off making the largest down payment you can possibly afford. Even if you have to slice up other areas of your budget, save for a few more years before you buy, or take a second job on the weekends, it’ll be worth it in the end. Here are just four reasons why you should make the largest down payment possible.

You Can Avoid Useless Insurance Premiums

Although you can buy a house with as little as a five percent down payment, it’s in your best interest to make a much larger down payment if you can. Mortgage insurance premiums can be as high as one percent of the loan’s value, which means until you’ve invested 20 percent of the home’s value in equity, you’ll have to pay an extra one percent every year. If you pay at least 20 percent of the purchase price upfront, you’ll be able to avoid having to get private mortgage insurance – so you keep more of your money in your own pocket.

You’ll Pay Much Less Interest

The less you have to borrow, the less you have to pay back – for more reasons than one.

When you take out a mortgage, the interest rate applies to the principal amount that you owe – and over time, the interest can run on top of interest, quickly outpacing the original sum. Having a larger down payment means the interest applies to a smaller sum. And that means it accumulates slower and ends up being a smaller amount over time.

You’ll Have More Ammunition In A Bidding War

Offering up a larger down payment is also a great way to make sure you get your dream house, especially if it’s a popular property with multiple offers. The seller isn’t just going to consider who offers the most money – they’re also going to consider which buyer is most likely to get a mortgage. After all, failing to get a mortgage is one of the most common reasons why real estate deals fail.

If you can show that you’re able to make a larger down payment, you’ll have a better shot at getting a mortgage – and that means sellers will prioritize you over other buyers.

You’ll Get A Great Start On Building Equity

Your home equity is equal to the difference between your home’s fair market value and the amount of debt invested into the home. If you don’t have enough equity in your home and home prices in your neighborhood fall, you may find yourself in a situation where you owe more money on your home than it’s worth – a phenomenon known as negative equity. By making the largest possible down payment you can, you’ll have a great head start on building your home’s equity – which may help you profit if you decide to sell in the future.

Buying a house isn’t easy, but making the largest down payment you can afford will give you a great financial head start on home ownership. Want to learn more about how to afford the home of your dreams? Contact your local mortgage professional today for practical advice to help you maximize your down payment.

What’s Ahead For Mortgage Rates This Week – August 2, 2021

August 2, 2021 by Coleen TeBockhorst

What's Ahead For Mortgage Rates This Week - August 2, 2021 Last week’s economic reporting included readings on home prices, new and pending home sales, and the post-meeting statement of the Fed’s Federal Open Market Committee. Weekly readings on mortgage rates and jobless claims were also released.

S&P Case-Shiller Home Price Indices: Home Price Growth Breaks Records for Second Consecutive Month

National home prices grew by 16.60 percent year-over-year in May according to S&P Case-Shiller’s National Home Price Index. April’s reading reported year-over-year home price growth of 14.80 percent. Home price growth broke records for the second month in a row in May. S&P Case-Shiller’s 20-City Home Price Index reported top home price growth in Phoenix, Arizona, Seattle, Washington, and San Diego, California again held the top three positions for US home price growth.

Home price growth exceeded expectations in the months since the covid pandemic arose as homeowners and homebuyers sought to relocate to less populated areas. Demand for homes continued to exceed inventories of homes for sale; this trend has driven home prices beyond the reach of many first-time and moderate-income buyers. While affordability issues won’t be solved overnight, some slowing in home prices growth suggested that the national housing boom was easing as demand for homes slowed. Affordability became an obstacle for homebuyers who could not compete with rapidly escalating home prices, high demand for homes, and buyers prepared to make cash offers.

New and Pending Home Sales Fall

Rapidly rising home prices and few choices among available homes caused new home sales and pending home sales to fall in June. Homebuyers were frustrated with low inventories of homes and high home prices. Pending home sales fell by 1.90 percent in June; analysts expected an increase of 0.50 percent for pending home sales. Pending home sales in May rose by 8.30 percent.

June sales of new homes fell to a year-over-year pace of 676,000 sales as compared to May’s reading of 724,000 sales of new homes. Analysts expected a year-over-year sales pace of 795,000 new homes sold. This was the lowest pace for sales of new homes since the onset of the pandemic.

Mortgage Rates, Jobless Claims Mixed

Freddie Mac reported mixed changes in average mortgage rates last week. Rates for 30-year fixed-rate mortgages rose by two basis points to 2.80 percent, but the average rate for 15-year fixed-rate mortgages fell by two basis points to 2.10 percent. The average rate for 5/1 adjustable rate mortgages fell by four basis points to 2.45 percent. Discount points averaged 0.70 percent for fixed-rate mortgages and 0.30 percent for 5/1 adjustable rate mortgages.

New jobless claims fell to 400,000 first-time claims filed as compared to the previous week’s reading of 424,000 claims filed. Continuing jobless claims rose to 3.27 million ongoing claims filed last week as compared to 3.26 million ongoing jobless claims filed in the previous week.

The Federal Open Market Committee of the Federal Reserve announced that it did not raise the Federal Reserve’s key target interest rate range of 0.00 to 0.25 percent.

The University of Michigan’s Consumer Sentiment Index for July was released with an index reading of 81.2; a reading of 80.5 was expected based on June’s index reading of 80.8.

What’s Ahead

This week’s scheduled economic reporting includes readings on construction spending and labor sector readings on jobs growth and national unemployment. Weekly reporting on mortgage rates and jobless claims will also be released.

Will Missing Mortgage Payments Impact My FICO Score? Yes – and Here’s How

July 30, 2021 by Coleen TeBockhorst

Will Missing Mortgage Payments Impact My FICO Score Yes and Heres How If you’re like most homeowners, you probably believe that one missed mortgage payment won’t have a noticeable impact on your FICO score. People get behind now and then, and besides, you’ve been faithfully making payments on time for years. How bad could it be?

In truth, even one missed mortgage payment could seriously damage your FICO score. Lenders can report missed monthly payments whenever they choose – they don’t need to wait until a certain date to do it. That means even if your mortgage payment is a few days late, your lender may report it as unpaid.

So what exactly happens to a FICO score when you miss a mortgage payment? Here’s what you need to know.

Payment History: The Single Largest Factor In Determining Your Credit Score

FICO scores are calculated based on several different criteria, the largest of them being your payment history. A full 35% of your credit score is determined by how often you pay your bills on time and in full. And although FICO says that one or two late payments aren’t going to decimate your credit score, they will shave off some points that could have made the difference between a low-risk and high-risk interest rate.

Consumers With Higher Scores Have More To Lose

A 2011 FICO study analyzed the impact of late mortgage payments on consumer credit scores. The study grouped consumers into three groups based on their starting FICO score, with Consumer A having a score of 680, Consumer B a score of 720, and Consumer C a score of 780. The findings?

Even if you have a credit score of 780, being just 30 days late on a mortgage payment can result in a 100-point drop. And it can take up to three years to earn that credit back. In contrast, a consumer with a score of 680 who is 30 days late will see only a 70 point drop and can recover their original score within 9 months.

The takeaway? Contrary to popular belief, people with high credit scores stand to lose more from a missed payment than people with low credit scores.

There Are Varying Degrees Of “Late”

One common misconception is that if you miss a mortgage payment, it doesn’t matter if it’s 30, 60, or 90 days overdue. The mainstream thinking is that late is late is late. But that’s not how FICO sees it.

Although borrowers with credit scores under 700 won’t see much of a decline after 30 days late, borrowers with a higher credit score will. If you have a credit score of 720 and you’re 30 days late on your mortgage, your score will fall to about 640. If you’re 90 days late, that score will fall again this time, to about 620.

That means if you miss a mortgage payment, you need to get in touch with your lender as soon as possible in order make repayment arrangements and hope they haven’t yet reported the overdue payment. It’s your best shot at protecting your FICO score.

Credit scores can be vulnerable to all sorts of factors, which is why if you’re looking into mortgages, you’ll want to consult an expert. A qualified mortgage professional can help you find a mortgage you can afford, so your credit will stay intact. Contact your local mortgage expert to learn more.

S&P Case-Schiller Indices Report Record Rise in Home Prices

July 29, 2021 by Coleen TeBockhorst

S&P Case-Schiller Indices Report Record Rise in Home Prices Home prices continued to rise at record rates in May according to S&P Case-Shiller Home Price Indices. National home prices rose by 16.60 percent year-over-year in May as compared to 14.80 percent year-over-year price growth in April. The 10-City Home Price Index reported home prices rose 16.40 percent year-over-year and 1.90 percent month-to-month.

20-City Home Price Index Reports 17 Percent Home Price Growth Year-Over-Year

S&P Case-Shiller’s 20-City Home Price Index reported month-to-month home price growth of two percent in May as year-over-year home price gains rose from April’s reading of 15 percent to 17 percent year-over-year home price growth.

All cities participating in the 20-City Home Price Index reported home price gains in May. Three cities held their positions with top rates of home price growth. Phoenix Arizona held first place with year-over-year home price growth of 25.90 percent; San Diego, California reported 24.70 percent home price growth. Seattle Washington held third place with 23.40 percent year-over-year home price growth in May.

Home Price Growth Expected to Slow as Buyers Drop Out of Market

Craig Lazarra, managing director and global head of index investment strategy at S&P down Jones Indices said he found himself “running out of superlatives to describe the record increases in home prices.” Analysts credited homebuyer relocation from urban areas to less populated suburban and rural areas for driving up prices. The pandemic initially drove this trend and continues to do so today. Other factors pushing home prices higher included high demand for homes exceeding homes available. As millennials reach their prime-home buying years, demand for homes will increase. Low mortgage rates also encouraged would-be home buyers into the housing market.

High demand for homes drives home prices up, but slower sales suggest that buyers are reaching a tipping point with affordability. Fewer buyers will raise the inventory of available homes and cause home prices to fall. First-time and moderate-income buyers continue to face affordability constraints in many areas, but home prices likely won’t fall significantly in the near term.

In related news, the Federal Housing Finance Agency reported similar readings for single-family homes owned or financed by Fannie Mae and Freddie Mac. Home prices rose 1.70 percent from April to May and 18.00 percent year-over-year in May. Readings from FHFA include seasonally-adjusted purchase-only data; refinance transactions were not included.

FHA Cash-Out Refinance – Are You Eligible?

July 28, 2021 by Coleen TeBockhorst

FHA Cash-Out Refinance – are you Eligible? If you have equity in your home, you may wonder how you can access it. You don’t want to sell your home, but you know you’ve earned a profit from it.

We have many options to secure your home’s equity, one of which is the FHA cash-out refinance. Unlike the FHA streamline refinance, you don’t have to be a current FHA borrower. As long as you meet the requirements below, you can use an FHA loan to cash into your home’s equity.

Qualifying for the FHA Cash-Out Refinance

Like an FHA purchase loan, the FHA cash-out refinance has simple requirements:

Minimum 600 credit score
Maximum 43% debt-to-income ratio
Proof you’ll occupy the property as your primary residence
Stable income and employment for 2 years
Over 20% home equity
Make at least 12 months of timely payments on your current loan

How Much Can You Borrow?

The FHA cash-out refinance allows you to tap into your home’s equity, but you must leave 20% untouched.

Here’s an example:

Your home is worth $300,000 and your current mortgage is $150,000. With a new FHA cash-out refinance, you can borrow up to $240,000, but first, you must deduct the amount of your outstanding mortgage.

This leaves you with $90,000 in equity.

$300,000 x.8 = $240,000
$240,000 – $150,000 = $90,000

If you can afford the payment without going over the 43% debt-to-income ratio requirement, you could take out $90,000 from your home’s equity, leaving $60,000 untouched.

How to Use an FHA Cash-Out Refinance

The nice thing about the FHA cash-out refinance is you don’t have to justify how you’re using the funds. You earned the equity and it’s your right to withdraw it, but here are a few common uses:

Home renovations, repairs, or additions
Debt consolidation
Pay for college or prepay for a college education
Consolidate a first and second mortgage
Save as an emergency fund

How to get an FHA Cash-Out Refinance

Securing an FHA cash-out refinance is simple using these steps:

Complete an application and get pre-approved by a lender, compare your options and see if you qualify for any other cash-out loan including a conventional cash-out refinance
Decide which loan you want, including if you want a fixed-rate or ARM
Provide the documentation required including paystubs, W-2s, tax returns, asset statements, and proof of employment
Arrange an appraisal time with the appraiser (you’ll need a new appraisal)
Work with the loan officer to clear your conditions
Close on the loan and receive your cash

Bottom Line

If you’re thinking about tapping into your home’s equity, an FHA cash-out refinance can be a great option, especially if you have less-than-perfect credit. FHA loans have flexible guidelines and allow borrowers to get the money they need to complete their life goals.

You’ve worked hard to earn your home’s equity. If you need it for other purposes, let us help you access it. We’ll discuss your options, go over the costs, and make sure it’s the right option for you!

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