Simple savings

Have you given any thought towards putting additional money toward your monthly mortgage payment?  Sometimes spending a little more money actually will save you a lot of money in the long run. 

“That doesn’t make sense,” you say.  Let me show you.

To set up my example let me give you some upfront information.  Let’s say you just bought your home and financed $100,000 for the next 30 years at a rate of  5%.  If you have access to a mortgage calculator, you would agree with me that equals a monthly principle and interest payment of $536.82.

Here is what your amortization table would tell you that you received at closing:  if you make your payment on time for the next 30 years, you would repay a total figure of $193,255.78.  Which means, it will cost you $93,255.78 in interest to borrow the $100,000 for 30 years.  It got you the house of your dreams, but I will agree, that is a lot of money.

Here is how you can beat the amortization table. . . . 

By adding an extra $100 to your monthly payment (re: the example above instead of $536.82 you send $636.82) and identifying that you want it applied to the principal, it changes the total repayable to $162,675.53.  That is a difference of $30,580.25.  Not a bad savings for applying an extra $100 towards your monthly mortgage payment.  This same example would also allow you to own your home in just under 22 years.

Or

Instead of electing the 30-year mortgage note, consider a 15-year note.  By substituting a 15-year term in the example above, the monthly payment would be $790.79, and the total repayable on the mortgage note would be $142,342.85.  Again significantly less interest over the life of the loan compared to the 30-year option.

Mortgage rate trends

If you have seen the news on TV or read a newspaper in the past 2 weeks you have noticed that mortgage rates are trending upwards.  Many national and global events affect how mortgages are offered and, with all the activity lately, rates are up.

Nevertheless, mortgage rates still are at historic lows so don’t be disillusioned by headlines when there are great opportunities at your fingertips to find a home that is right for you, and obtain financing at a great rate.

For those of you who are First Time Home Buyers, Maine State Housing’s (MSHA) note rate is still at 4.375% for those that qualify (please call for details).  They also still have funds available for the Gift of Green, which is a grant offered by MSHA of up to $2500 to be used towards closing costs, AND doesn’t need to be repaid.

My goal is to make sure you understand the mortgage process from application to close, and that you get the product that best suits your needs.  Knowing that there is no way to predict the future of rates, go with what you know today and find your dream house.

Below is a table from www.freddiemac.com to show you the recent history of the 30-year fixed rate. 

	2009	2008	2007	2006	2005
	Rate	Rate	Rate	Rate	Rate
January	5.05	5.76	6.22	6.15	5.71
February	5.13	5.92	6.29	6.25	5.63
March	5	5.97	6.16	6.32	5.93
April	4.81	5.92	6.18	6.51	5.86
May	4.86	6.04	6.26	6.6	5.72
June	5.42	6.32	6.66	6.68	5.58
July	5.22	6.43	6.7	6.76	5.7
August	5.19	6.48	6.57	6.52	5.82
September	5.06	6.04	6.38	6.4	5.77
October	4.95	6.2	6.38	6.36	6.07
November	4.88	6.09	6.21	6.24	6.33
December	4.93	5.29	6.1	6.14	6.27
Annual Average	5.04	6.03	6.34	6.41	5.87

Home inspections, surveys & tests

When you are purchasing a home, there are a variety of tests and assessments that you can conduct on the property to protect yourself from “surprises” later on.  The most common of which is a home inspection.  Most buyers choose to get a home inspection before purchasing a house or condominium, and in some cases, financing is contingent on the inspector’s report.  Home inspections include different items depending on the property or the state in which you are purchasing your home, but it will generally involve a review of the home’s structural elements, roof and attic, plumbing, systems and components, electrical, appliances, garage (if applicable), and some exterior elements such as the exterior paint, driveway, fences, and drainage.

I have many borrowers ask me about home inspections and why they are necessary, especially if the person is purchasing a condominium or a newly constructed home. Even in these cases, it is important to make sure that you have all the information you can before purchasing your home.  Your real estate agent can help you find an inspector who is best suited for the property you are considering, but your best bet will always be to find an inspector who has certification by the National Association of Certified Home Inspectors (NACHI).

In addition to inspections, there are other tests that you may want to have completed.  A survey is an important one.  A survey uses measurements and town records to map exactly where your yard or land begins and ends.  Especially in the rural parts of the state, there can be confusion about where a property line begins and ends, so it is often a good idea to have this done, and again, some financing programs will require it.

Your real estate agent will be able to help you decide what other types of tests you need for your home.  Examples include radon (which is advisable if the home is built in an area where there is lot of ledge), water (advisable if you have a well), lead (in an older home), septic system, mold, or asbestos (again, in an older home). 

Again, your real estate agent will be able to help you decide whether you need certain tests completed and/or whether you should make the purchase of the home contingent on the results, but below are a few links that my help you.

Home Buyers’ and Sellers’ Guide to Radon

Maine Drinking Water Program 

Well Types

Your Septic System

Get Rid of Mold 

Lead hazard prevention

Recovering from a major credit event

The current economic climate has put turmoil in the lives of many citizens.  If you have had to choose between paying a bill or buying food, you are not alone.  Based on current data, it appears positive affects from Economic Stabilization are starting show.  If you have been affected by the poor economy and are now looking to buy a home, below are some general ideas of how long to wait after a major event impacted your credit.  Please note, it is not a guarantee if you wait the appropriate time that you will be granted funds to buy a home, they are just general rules that most Government Lenders - Underwriting Guidelines adhere to.

Bankruptcy – Most lenders require a minimum of 2 -4 years after the discharge of the bankruptcy along with re-established credit.  “Re-established credit” refers to to a minimum of 3 accounts reporting to the credit bureau reflecting no late payments, and the trade lines are provided a minimum of 12 months worth of payments.  All three Credit Bureaus will need to reflect a good credit score (680 or higher would be desired). 

Foreclosure Sale – Most lenders will require a minimum of 3 – 4 years from the transfer of title of the foreclosed property.  Written evidence will need to be provided to validate the foreclosure was beyond the borrower’s control.  Re-established credit with 3 or more trade lines with a minimum of 12 months worth of history, along with a good credit score (680 or higher would be desired).

Late Payments – Most lenders require that there be no more than 2 payments that are 30 days late within the most recent 12 months.  The borrower would have to explain and validate the late payment(s) were beyond their control.  There can be no more than 1 payment that is 60 days late within the most recent 24 months.  A good credit score would need to be reflected by all three Credit Bureaus (680 or higher would be desired).

The regulations and guidelines for mortgage lending tend to change quite often to adapt to National Economic Data, so please give me a call when the time is right to review your current situation.