What Is Mortgage Refinancing?

Mortgage refinancing can help homeowners save money by reducing their interest rate and improving the terms of their mortgage. If interest rates have dropped since you first took out your mortgage, refinancing may lead to significant savings.

However, refinancing may not pay off in every situation. Learn what mortgage refinancing is, how it works and when it might save you money.

How does a mortgage refinance work?

Mortgage refinancing allows you to replace your existing mortgage with a new one, ideally with a lower interest rate and more favorable terms. When you refinance, you'll receive money up front to pay off your old mortgage. Then, you'll begin paying the balance of the new loan.

If you're considering a refinance, you have a few options:

• A traditional refinance covers only the amount you still owe your lender, known as the principal.
• A cash-out refinance, on the other hand, replaces your old mortgage with a larger one that allows you access the difference between the two loans in cash, which can be used to fund major expenses, such as a college education, or renovations that might increase the overall value of your home.

Common reasons for mortgage refinancing

You might refinance your mortgage for a number of reasons:

• Lower your interest rate. If market conditions or other circumstances have changed over the life of your loan, you may qualify for a new mortgage with a lower interest rate. For example, interest rates may drop if the economy has improved since you first took out your mortgage. Alternatively, an increase in your credit scores may boost your creditworthiness in the eyes of your lenders, which may help you qualify for a better interest rate. Your credit scores are among the factors that lenders consider when setting the interest rate and other terms of your mortgage.

• Change the mortgage length. Refinancing may allow you to shorten the length of your loan. This means you'll pay off the mortgage faster, leading to fewer interest payments over time. Depending on your new loan's interest rate, however, a shorter term may mean you owe higher mortgage payments each month.

• Change the mortgage type. If you have an adjustable-rate mortgage (ARM), your interest rate may change in response to market conditions. Fluctuations in your interest rate can get expensive, especially if you took out your loan when rates were low. To help stabilize or lower your interest rate, you might refinance to a fixed-rate loan.

• Access cash. A cash-out refinance allows you to borrow against your home equity with a new loan that's worth more than what you owe on your current mortgage. You'll then receive a lump sum in cash you can use to pay for major purchases. Cash-out refinance loans typically have lower interest rates than personal loans or credit cards.

How to know when to refinance your mortgage

Should you refinance or not? Unfortunately, there's no definitive answer to this question. Whether a refinance is right for you depends on your unique circumstances.

If you're considering a mortgage refinance, evaluate whether your financial situation has meaningfully changed since taking out your original loan. Have your credit scores improved? Have you increased your income significantly? If either applies to you, you may now qualify for a better offer from your lender.

Next, determine if market interest rates have dipped in the intervening years. Consider refinancing only if your lender offers a new interest rate that is at least 2% lower than your current rate. You'll also need to consider the current length of your mortgage. If you only have five years of payments left, it's likely best to stick with your current loan. If your mortgage is new, be aware that most lenders have a waiting period of zero to 210 days before you'll be able to refinance. Attempting to refinance before this period is up could result in a significant penalty fee.

Finally, don't forget to factor in closing costs — a collection of fees and other expenses you'll pay on closing day. These generally total between 2% and 6% of the loan amount, adding a high cost to your refinanced loan. Before you sign on the dotted line, make sure that your closing costs don't exceed any potential savings. Source

DRE ID # 01769353

NMLS ID # 394275

What Do Interest Rates Really Mean?

What is interest and an interest rate?

To put it simply, interest is the price you pay to borrow money — whether that's a student loan, a mortgage or a credit card. When you borrow money, you generally must pay back the original amount you borrowed, plus a certain percentage of the loan amount as interest. There are some exceptions: if you pay your credit card balance in full every month, or you have a promotional 0 percent interest rate, for instance, you will not pay interest.

If potential lenders and creditors see a past record of responsible credit behavior and consider you a low-risk borrower, you may receive lower interest rates.

The total amount you pay back in interest can vary, depending on the length of your loan and whether interest rates are fixed or subject to change (known as variable interest rates). A fixed interest rate does not change; a variable interest rate is tied to a benchmark interest rate called an index. When the index changes, the interest rate may change as well.

When interest rates are high, it's more expensive to borrow money; when interest rates are low, it's less expensive to borrow money. Before you agree to a loan or sign up for a new credit card, it's important to make sure you completely understand how the interest rate will affect the total amount you owe.

How is my interest rate determined?

Lenders and creditors have their own criteria to decide what interest rates to offer you. These may include credit scores, credit reports, factors such as your income and the length of the loan. Economic trends, such as the benchmark interest rates mentioned above, also can influence your interest rate, particularly on home mortgages.

Interest rates are generally unavoidable when borrowing money, but it's worth it to comparison shop and understand the real costs of the loans or credit before you accept.

What is considered a high interest rate and what is considered a low interest rate?

What is considered a high or low interest rate depends on the specific type of loan. For example, credit cards often carry high interest rates, commonly in the double digits, making them comparatively expensive forms of debt. Mortgages typically feature lower interest rates, with rates significantly below historical averages often perceived as low. Auto loans and personal loans fall somewhere in between, with rates influenced by factors such as creditworthiness and the length of the loan term.

What is an APR?

An Annual Percentage Rate (APR) is another rate that you may come across when borrowing money. An APR is your interest rate for an entire year, rather than just a monthly fee or rate, on your credit cards or loans, plus any costs or fees associated with the loan. It's the total cost of having the credit card or loan, stated as a percentage. The APR is intended to make it easier to compare lenders and loan options. Credit card companies are required to disclose the APR before issuing the card and also on monthly statements.

It's important to do your research and be aware of how interest rates affect the total cost of the loan and using credit. Source

DRE ID # 01769353

NMLS ID # 394275

Home Warranty vs Home Insurance—What’s the Difference?

Like most homeowners, you have a lot of money invested in your home. But, you also understand that things happen, and protecting your investment and its contents against unforeseeable situations is important. But if you’re shopping for home insurance vs. home warranty policies, the lines between the two might be starting to blur. What are these coverages and how do they differ? Let’s find out.

What Is a Home Warranty?

A home warranty is an agreement between a homeowner and a third-party warranty company that provides coverage for certain items within the home. This policy protects the homeowner’s investment in the event that if a covered item should break or fail, the warranty company will cover most of the repair bill. All the homeowner is responsible for (in most cases) is the service fee, which typically ranges from $50 to $150, and is agreed upon in the contract.

What Does a Home Warranty Cover?

Home warranties cover major appliances and systems that fail due to everyday use. There are typically three types of home warranties available. They include appliance policies, system policies and combination policies. Appliance policies cover items like refrigerators, built-in microwaves, stoves, ovens, dishwashers, washers and dryers and other typical appliances found in a home. Should one of these items fail, the homeowner can file a claim with the warranty company to have a technician respond and repair the appliance. If they’re unable to repair the item, the warranty company may even replace it.

System policies cover items such as electrical systems, plumbing systems and HVAC systems. In some cases, these policies may cover roofing systems, fire alarm systems, central vacuum systems and septic systems as well. If there are issues with these major systems, the homeowner can file a claim and the warranty company will send the proper contractor to repair the problem.

Combination policies act as both appliance and system policies.

If a covered item should fail or break due to typical wear and tear, the warranty company will most likely cover it. Understand that this does sometimes require the homeowner to keep maintenance records to prove that the items aren’t failing due to neglect.

What Doesn’t a Home Warranty Cover?

There are plenty of items or circumstances which a home warranty company will not cover. First, home warranties do not cover structural issues, interior or exterior finishes, furniture or other belongings. Also, should an item covered under warranty break due to neglect, misuse, abuse or an accident, the warranty company will not cover the repair.

It’s important to note that many home warranty companies set limits as to how much a single repair can cost. For example, if the homeowner’s extremely high-end refrigerator fails and requires a repair item that costs $1,200, but the home warranty company set a limit of $1,000 for refrigerator repairs, the homeowner will have to pay the additional cost.

What Is Home Insurance?

Home insurance is an agreement between a homeowner and a third-party insurer that protects the homeowner’s investment against accidents, building failures and natural disasters. These policies even provide some degree of general liability insurance against injuries incurred by other people while on the property.

Any home paid for with a mortgage will be required to carry home insurance by the lien holder (the bank).

What Does Home Insurance Cover?

Home insurance covers much more than a home warranty. There are four types of coverages, including dwelling, other structures, personal property and liability.

Dwelling coverage helps to pay for repairs or losses due to covered events. These events may include fires, storm damage, fallen trees or other unforeseeable events.

Other structure coverage offers the same type of coverage as dwelling coverage with the exception that it’s specifically designed for detached garages, sheds and even guest houses built separately from the home. Personal property coverage helps homeowners recover financial losses to the items within the home or other structures damaged by covered events. So, if there was a plumbing leak that ruined a couch, the insurance company may cover the damage.

Liability insurance protects the homeowner against financial losses due to someone getting hurt on the insured property. Or, if they accidentally damage another person’s property, liability coverage can protect them against financial losses. If an incident occurs, the homeowner can file a claim with the insurance company. At that point, the insurance company will send an adjuster to the property to assess the damage and assign a value.

What Doesn’t Home Insurance Cover?

Every policy is different, but there are some general items that most insurance policies do not cover. They include:

• Damage from earthquakes
• Flood damage
• Maintenance issues

Like a home warranty, home insurance won’t cover the entire bill. Rather than a service fee, homeowners using their home insurance policy will have to pay a deductible for each instance. For example, if the homeowner’s insurance deductible is $1,000 and a covered event occurs with a total value of $3,000, the homeowner will receive $2,000 for the damage ($3,000 less the $1,000 deductible).

For more information and description of differences please click here...

DRE ID # 01769353

NMLS ID # 394275

6 Tips To Save For A House

Buying a home is one of life’s biggest milestones for countless Americans, and the largest purchase many will ever make.

For most mortgages, you’ll have to put at least some money down, and that’s not the only thing you should save for: There are also closing costs, property taxes, and ongoing repairs and maintenance. That’s a lot to take on, and it makes sense to take a few years to save up before you can buy a home. That may seem like a long time, but don’t worry — there are a few ways to speed it up. And while it’s tricky to amass thousands of dollars for a down payment when you’re already stretched to the max with expenses like rent, utilities, student and/or auto loans, transportation and possibly childcare, it is possible.

If you’re hoping to be a homeowner in the future, here are our best tips for how to save for a house;

1. Determine how much you need

You need a 20% down payment to buy a house, right? Not necessarily — many banks now offer conventional mortgage loans with down payments as low as 3%. There are also government-backed mortgages like FHA loans, which allow down payments starting at 3.5%, and VA loans and USDA loans, which may require no down payment at all. Depending on the loan, you may have to pay for mortgage insurance, but you may decide this is a worthwhile trade-off if it gets you into a home sooner. Meet with a mortgage loan officer to determine what types of loans you could qualify for, how much house you can afford and how much of a down payment you’d need. That will inform how much you need to save, and who knows — it may be a lot less than you think!

2. Get your debt under control

Carrying a lot of debt makes it more difficult to save for a house, since a chunk of your income goes toward repayments. That debt load can also make it more difficult to qualify for a mortgage. If you have debt, do whatever you can to reduce it. If you have student loans with high interest rates, consider refinancing them to lower your payments. If you have high-interest credit card debt, pay off as much as you can and consider transferring your balance to a low-interest card.

3. Put retirement savings on temporary hold

Caveat: This might not be advisable if you’re close to retirement. But if you’re young and actively contribute a percentage of your income to a retirement plan, like a 401(k) or IRA, consider temporarily diverting that money to down payment savings. This should only be short term, but it can make a big difference in how quickly you can save for a house, especially if you currently put a sizeable chunk of every paycheck into a retirement account.

4. Use technology to make saving less painful

Cutting back and setting aside money is obviously important if you want to save up for a house, but taking a portion out of each paycheck can feel like it’s cramping your style. If that’s the case, try an app like Digit, which uses technology to automatically save a daily amount small enough that you won’t notice it or hurt your budget. There’s also Acorns, which rounds up your purchases to the nearest dollar and puts the difference in an investment account. Your spare change can add up quickly over time, and you can also make one-off deposits whenever you’re able to.

5. Ask for gift money

When your family asks what you want for your birthday, Christmas or Hanukkah, anniversary or any other special occasion, tell them you’d love to forgo tangible items and instead receive gift money that you can put toward a house down payment. While not everyone may oblige, some of your relatives may enjoy knowing they’re helping you attain your dream of homeownership.

6. Get a side gig

With the gig economy continuing to expand, there are ways to make a quick buck to help boost your down payment savings. Consider spending a few hours a week driving for a ride share service, shopping or delivering meals for an online delivery service, walking dogs, pet sitting, charging self-service scooters … you get the idea. Thanks to technology, there is an ever-increasing number of freelance opportunities like these that require very few qualifications and make it easy to earn extra cash you can put away for a home. Source

DRE ID # 01769353

NMLS ID # 394275

Applying For A Mortgage: 7 Documents You May Need

If you’re applying for a mortgage, it’s a good idea to start prepping your financial documents. Lenders will request paperwork for your mortgage application that proves things like how much money you make and your debts. The exact forms you need for a home loan depend on your situation. For example, someone who is self-employed will likely have to provide different forms than someone who is employed by a company. A lender can get a good sense of your likelihood of being approved by checking out your recent pay stubs, bank statements, W-2 forms and tax returns. Depending on your financial situation, here are seven mortgage documents you might need when applying for a home loan.

1. Tax returns

Mortgage lenders want to get the full story of your financial situation. You’ll probably need to sign a Form 4506-T, which allows the lender to request a copy of your tax returns from the IRS.

Lenders generally want to see one to two years’ worth of tax returns. This is to make sure your annual income is consistent with your reported earnings through pay stubs and there aren’t huge fluctuations from year to year.

2. Pay stubs, W-2s or other proof of income

Lenders may ask to see your pay stubs from the past month or so. Your tax returns help give them a clear idea of your overall financial health, while pay stubs help them gauge your current earnings.

Lenders generally ask for documentation of other income streams, such as spousal support or child support payments, Social Security benefits, investment or rental income, and income from a business or side gig.

You may need to show your lender proof of income through 1099 forms, direct deposits or other means.

3. Bank statements and other assets

When assessing your risk profile, lenders may want to look at your bank statements and other assets. This can include your investment assets as well as your insurance, such as life insurance.

Lenders typically request these documents to make sure you have several months’ worth of reserve mortgage payments in your account in case of an emergency. They also check to see that your down payment has been in your account for at least a few months and did not just show up overnight.

4. Credit reports

In order to assess you as a borrower, lenders often pull your credit reports — with your verbal or written permission.

The type of mortgage loan you may qualify for partly depends on your credit history and credit scores.

Here’s what you should know about credit requirements for different loan types.

• Conventional loans— Conventional mortgage loans are not part of a government mortgage program. You’ll likely need a FICO® score of at least 620 to be approved for a conventional loan. And your score might need to be at least in the mid-700s to qualify for a competitive interest rate.

• FHA loans— These government-backed loans require credit scores of at least 500 to be approved, and your credit scores affects the size of the down payment you have to make. If your score is between 500 and 579, you’ll need a 10% down payment. With a score of 580 or higher, you may be able to put down as little as 3.5%. But keep in mind that lenders can impose stricter standards on top of the basic rules for FHA loans, so the standards can be higher in some cases.

• VA loans— VA loans don’t require a certain credit score to qualify, so lenders can decide on minimum scores for themselves. Lenders may be more likely to overlook low credit scores if you’re applying for a VA loan than if you’re applying for a conventional loan.

• USDA loans— The USDA doesn’t set a minimum credit score, but lenders may have their own minimum requirements.

• Jumbo loans— Credit score requirements for jumbo loans are usually stricter than for other conventional loans because of their large amounts. You may need a score in the low- to mid-700s or above to qualify.

5. Gift letters

Your friends and family might help you buy a house by giving you money. If that’s the case, you’ll need to provide a written confirmation the money is indeed a gift and not a loan by writing a gift letter. The documentation should list their relationship to you as well as the amount of the gift.

The documentation should include the following information:

• The name, address and phone number of the person giving the gift
• How you’re related to the person giving the gift
• The amount of the gift
• The date you received the money
• A statement that the person giving you money doesn’t expect repayment or anything else in exchange
• Your signature and the signature of the person giving the gift, with the date

6. Photo ID

You’ll likely need to provide a photo ID, such as a driver’s license. This is simply to prove you are who you’re claiming to be.

7. Renting history

For buyers who don’t already own a home, some lenders will request proof that you can pay on time. They may ask for a year’s worth of canceled rent checks (check that your landlord has cashed).

They might also ask your landlord to provide documentation showing that you paid your rent on time. Your renting history is especially important if you don’t have an extensive credit history. Source

Contact us here: 916-847-3090 or visit our website: https://workhomeloans.com/

DRE ID # 01769353

NMLS ID # 394275

The 5 Most Common Questions From New Homeowners

If you're a new homeowner, you likely have questions about budgeting for your new expenses, adding value to your home and handling post-purchase surprises and challenges. Here, the answers!

Q: How do I come up with a post-homeownership financial strategy? 

A: Create a list of your monthly bills and due dates, and pay them on time each month. Budget the money you have leftover for maintenance, savings and other expenses. 

Q: How does saving for college, retirement, etc. factor into homeownership considerations? 

A: Saving money while paying off a mortgage can be tough, but coming up with a financial strategy can make it possible. 

Q: What can I do to maintain good credit after I buy a house? 

A: After taking on a large debt like a home loan, you may see your credit score decrease initially. However, making your mortgage payment on time every month will get your credit back on track. 

Q: What should I avoid doing so I don’t destroy my credit? 

A: Be sure to pay your bills on time every month. Also, keep your credit account balances low and only open new credit accounts when you need them. 

Q: What should I know about taxes and homeownership? 

A: Homeownership comes with many tax perks. You can deduct mortgage interest, property taxes and points on your tax return. Source

Top 10 Red Flags for Homebuyers

Sellers don't always tell the truth about their homes to potential homebuyers. Look out for these red flags during your home tours and open houses. Sellers don't always disclose the whole truth to potential homebuyers, especially if they're eager to sell (or "motivated" in real estate lingo). But you can't afford to get a professional inspection of every house you tour. So before you spring for the pro, narrow down your choices by doing your own pre-inspection to spot potential problems.

1.) Mass Exodus From the Neighborhood

Don't let a home's curb appeal keep you from glancing down the street. Are there several other homes for sale? Are nearby businesses boarded up or vandalized? Get the scoop from the neighbors. If everyone else wants to leave the street, maybe you should, too. Just do it before you're stuck with a bad investment.

• How to choose a neighborhood

2.) Mediocre Maintenance

Three layers of roofing and gutters with plants growing in them are signs the owners aren't big on maintaining their home. What else did they neglect?

• Signs of poor home maintenance

3.) Foundation Failures

Check out the yard grading. If the yard slopes toward the house, it could cause water to run down the foundation walls or into the basement, which will be costly to repair. Scour the foundation for damage. Bulges or cracks bigger than one-third inch can mean the house has serious structural issues.

• Get your home inspected

4.) Bad Smells (Inside or Outside)

Take a big whiff of the air inside and outside the house. Do you smell anything funky? If you can't smell anything but the huge baskets of potpourri all over the house, this could be a red flag.

• Smells to be aware of when house hunting

5.) Faulty or Old Wiring

While you're probably not an electrician, make sure all the switches and outlets in the house function properly. Flickering lights, circuits that don't work and warm or hot outlets or faceplates are all symptoms of wiring problems.

• Look out for old home wiring

6.) Fresh Paint on One Wall

New paint can really spruce up drab walls, but it can also hide bigger problems, like water damage, mildew or mold. If the room smells strange or if you see stains or saggy walls or ceilings, have an inspector look for mold and leaks.

• Finding a good home inspector

7.) Locked Doors and Blockades

Ask about any rooms that are "off limits" during your home tour, and arrange to see them later if you're interested in the house. 

• Be sure to tour the entire house

8.) Foggy or Nonfunctioning Windows

Check for water in between double-paned windows and make sure all the windows are functional.

• What to look for in windows

9.) Structural Walls or Floors Have Been Removed

Sure you love the open floor plan, but was the house always open or did the homeowners renovate? If they removed a load-bearing wall without adjusting the framing, it can shift weight to other parts of the house. Hire a structural engineer if you think any renovations are questionable.

• Explore back out contingencies

10.) Bugs!

No one wants a house with a pest problem, be it roaches, mice or, worst of all, termites. Be on the lookout for unwelcome creatures as you tour the house. Even if no foes pop out while you're there, consider a separate termite inspection if you're thinking of purchasing the property. Source

Contact us here: 916-847-3090

DRE ID # 01769353

NMLS ID # 394275

Financial Responsibilities New Homeowners Need To Know

Buying your first home is incredibly exciting. You have a space to call your own, can begin building equity, and even enjoy some tax advantages. With these new benefits, you also have new responsibilities as a homeowner. If you recently became a new homeowner—or if you’re putting together your budget to become a homeowner—it’s the perfect time to dig deeper into the responsibilities that come with homeownership. The better you understand these responsibilities, the smoother your transition to homeownership will be.

Financial responsibilities.

Purchasing a home is one of the biggest financial decisions a person ever makes. Homeownership often provides people with financial stability and allows them to reach a higher net worth than renting. Homeowners in the US have an average net worth that is almost 40 times higher than that of renters, a huge wealth discrepancy.

To reap the financial benefits of home ownership, you have to uphold your financial responsibilities. These responsibilities include making your mortgage payment, keeping up with home maintenance, and paying your property taxes.

Your mortgage payment.

The first thing that comes to mind when you’re house hunting is probably, “What will my mortgage payment be?” Before you close on the home, make sure the loan payment will fit in your budget. If you’re late with your mortgage payment, your lender will often charge you a late fee.

Late fees.

These late fees generally range from 3% to 6% of your mortgage payment for the month, which can add up quickly. A late payment on a $2,000 monthly mortgage, for example, would cost you between $60 and $120 each time. A missed payment may also hurt your credit score.

Missed mortgage payments can also have more extreme repercussions. If you miss three or more mortgage payments, your lender will likely begin the foreclosure process. So it’s important that you can not only afford your payments but also pay on time.

The advantage of automatic payments.

Consider setting up automatic mortgage payments to avoid the consequences of late payments. You’ll protect your credit score, save on late fees, and enjoy reduced stress when you “set it and forget it.” As long as you’re depositing sufficient funds in your source account before the payment date, you won’t have to worry about scheduling a payment.

Home maintenance, renovations, and appraisals.

Beyond the cost of purchasing your home, you must plan for home maintenance and renovations. Unexpected emergencies and natural disasters will eventually affect most homes, as will age and time. While insurance will play a role here in certain circumstances, you as the homeowner are responsible for any necessary repairs and maintenance.

Preparing for maintenance and renovations.

Don’t skip a home inspection before buying. In a competitive market, it can be tempting to offer to waive inspection contingencies. But a thorough inspection will warn you of potential problems that might arise in the near future. In some cases, you might be able to negotiate with the seller to take care of urgent issues before you close.

Set aside a rainy day fund. A general rule of thumb is to set aside 1-4% of your home’s value every year to prepare for home repairs and maintenance. If your home is more than 10 years old, or if you live in a particularly rainy or humid environment, you are more likely to need repairs soon, so you may want to bump up the amount you save. The more you can save ahead of time, the less likely you’ll need to use credit when something breaks.

Invest in a Home Warranty policy. Regular maintenance can help prevent small problems from becoming larger, more expensive repairs. If you purchase a Home Warranty policy, you can save money on the costs of individual appointments for covered services.

You also have to consider the tax appraisal of your home, particularly if you are planning renovations. Any improvements you make to your home can increase the tax appraised value, leading to a higher tax burden—but they can also increase your equity in the home, giving you additional financial options.

Insurance and taxes.

Homeowner’s insurance offers financial protection if your home (or personal property within) is damaged in an event like a fire or hurricane. Most mortgage lenders will require you to have some homeowner’s insurance, so be sure to factor that into your budget.

You will also owe property taxes on your home. The amount you pay in property taxes depends on where you live, anywhere from less than 0.75% to over 1.5% of your home’s appraised value. Your property taxes are generally included in your mortgage payment, but be sure to check.

If you take out a mortgage with a down payment of less than 20%, your lender may require you to buy private mortgage insurance (PMI). PMI protects the lender in the event you stop making your loan payments. On average, you should expect to pay 0.22% to 2.25% of your total mortgage amount in annual PMI fees. The good news here is that you can generally count on the PMI requirement to be removed once you pay down the principal balance of the loan below 80% of the home’s value.

Avoid surprises with an escrow account.

Homeowner’s insurance costs and property tax bills can sneak up on you. Ask your lender about setting up an escrow account.

• The expected costs for property taxes and your homeowner’s insurance policy renewals will be divided up into monthly installments and added to your regular mortgage payments.
• This extra amount you pay each month will be deposited into an escrow account from which your lender will pay the property taxes and insurance bills when they come due.
• In some cases, your escrow account might even earn interest.

With an escrow account, you’ll avoid the surprise of a single large bill and have peace of mind from knowing these important expenses will be taken care of.

Dues, monthly expenses, and fees.

Other costs associated with owning a home include mover fees, closing costs during the home-buying process, utility fees, trash removal fees, and, potentially, homeowner’s association (HOA) fees. Thinking through each of these upcoming costs will help you build your budget before making an offer on a home.

Take your time checking out movers and get multiple quotes. Reviews on sites such as Yelp can be useful, but also ask your friends and acquaintances about personal experiences.

Calculate the closing costs. Common mortgage closing costs range between 2-5% of the total loan amount and include:

• Loan origination fees
• Appraisal fees
• Title search fees
• Title insurance
• Real estate agent fees
• Local recording fees and taxes
• Credit report charges
• Inspection fees
• Notary fees

Compare utility bills. In many cases, if you’re working with a realtor, they will be able to obtain copies of recent utility bills from the seller (ideally for a full year) to give you a sense of what you might expect to pay in your new home. Some utility companies may also be able to provide data on average bills within that zip code.

Understand any HOA expenses and benefits. If you’re joining an HOA as part of your purchase, be sure to carefully review their fee schedule and regulations, both to plan for the recurring membership fee and to avoid paying unnecessary penalties. You’ll also want to understand what sort of major expenses might be shared by everyone in the HOA, such as roof repairs.

Any time you make a late payment—for your mortgage, homeowner’s insurance, or other home expenses—expect to pay a late fee. As with your mortgage, setting up automatic payments for any recurring expenses will help you avoid that stress and expense. Source

Contact us here: 916-847-3090 or visit our website: https://workhomeloans.com/

DRE ID # 01769353

NMLS ID # 394275

How Does A Mortgage Work?

Mortgages come in lots of shapes and sizes. But most home buyers use the same general loan type: a 30-year, fixed-rate mortgage (FRM).

Let’s break down what that means:

You have 30 years to pay back what you borrow. Your loan amount will be broken down into 360 monthly payments (12 monthly mortgage payments per year x 30 years)

Your loan has a fixed interest rate. This means the total interest cost is predetermined, so you know from the outset exactly how much interest you’ll pay over the life of the loan, and your lender can never increase your rate. Your monthly payments are always the same. With a fixed-rate loan, the monthly payments never change. For instance, if you pay $1,000 per month in year 1 of your mortgage, you’ll pay $1,000 per month in year 30

In addition, most home loans are “fully amortized.” Amortization just means your payments are scheduled so that at the end of the loan term, your house will be fully paid off.

There are other common mortgage options, too, like 15-year mortgages and adjustable-rate mortgages. But most home buyers prefer the longer-term 30-year fixed-rate loan for its predictability and affordable payments.

If you’re shopping for mortgages as a first-time home buyer, this is the first loan type you should look at. Source

DRE ID # 01769353

NMLS ID # 394275

Pros and Cons of Refinancing Your Home

The main benefits of refinancing your home are saving money on interest and having the opportunity to change loan terms. Drawbacks include the closing costs you’ll pay and the potential for limited savings if you take out a larger loan or choose a longer term.

Refinancing your home loan can have big benefits, such as saving you money on interest costs or giving you the option to cash out some of your home equity. Refinancing can be particularly beneficial if you have strong enough credit to qualify for good terms on the new loan and your long-term savings will easily offset the upfront fees. But refinancing isn't always worth it. You could get a longer repayment term or a larger loan and end up paying more over time or going into more debt. In the end, certain circumstances make refinancing a solid choice, while others might mean it's time to pause and reevaluate.

These are the pros and cons that you'll want to weigh before refinancing your mortgage;

Pros of Refinancing Your Home

There are many reasons why a mortgage refinance could be on your mind, especially when interest rates are increasing and you'd like to lock in a low fixed rate before they rise further. While rates are going up this year, you may still be able to save money if your current rate is high. But the advantages of refinancing go beyond the potential savings. Consider these pros:

Potentially Lower Interest Rate and Monthly Payment

One of the most common reasons to refinance is to get a lower interest rate. That may happen if your credit has improved since you first applied for a mortgage or if lenders are currently offering low rates due to market conditions. Refinancing can lead to big savings, especially if you also shorten your repayment timeline. You could also decide to refinance in order to opt for a lower monthly payment by choosing a longer repayment term.

If your credit is on the lower side—typically below 620 on an 850-point scale—refinancing isn't out of the question. The Federal Housing Administration (FHA), Veterans Administration (VA) and U.S. Department of Agriculture (USDA) all have programs that cater to borrowers in your situation.

Ability to Get Rid of Private Mortgage Insurance

When you get a conventional home loan and put down less than 20% of the home's value, you'll likely have to carry private mortgage insurance (PMI) to protect the lender from the risk you'll miss payments. PMI can add hundreds of dollars to your monthly mortgage costs.

But if your home's value has gone up, and you've perhaps also paid down part of your loan balance, you may now hold at least the 20% equity you need to avoid PMI. That means you can refinance to a new loan, using the new value of your home to make the equity calculation, and get rid of PMI. That will save you 0.2% to 2%, or more, of the loan balance per year.

Option to Change Loan Features

You can save money by refinancing to a shorter loan term or get a lower monthly payment by refinancing to a longer loan term. You could also switch from an adjustable-rate mortgage to a fixed rate, which is particularly attractive in a market in which rates are expected to increase.

You Can Add or Remove a Co-Borrower or Cosigner

If you first applied for a mortgage with a cosigner or co-borrower, such as a former spouse, you can refinance to a new loan and remove that individual. Or, if you'd like to add a new co-borrower―perhaps a new spouse with a very strong credit and income profile, who can help you qualify for the very best rates and terms—you can add them to the new loan.

Option to Cash Out Part of Your Equity

A cash-out refinance lets you take out a new, larger loan and take the difference between your prior and new loans in cash. That can be helpful if you're looking to pay off high-interest debt, like credit card debt, or fund a child's college education. You'll need to have equity in your home in order to qualify, and a cash-out refinance is a good idea only when you'll receive a lower rate than before as a result of the refinance.

Cons of Refinancing Your Home

A mortgage refinance isn't a no-brainer. There are still some downsides, starting with the amount it could cost. Here are the cons to be aware of:

Closing Costs

Refinancing your mortgage will come with closing costs of 2% to 6% of the new loan amount. These fees include appraisal fees, origination fees, attorney fees and more. You might be able to negotiate down some fees, and costs will likely differ depending on the lender you choose.

It's smart to compare offers from multiple refinance lenders, including the one you have your current mortgage with, to find the best terms.

Potential Negative Impact on Your Credit Score

When you apply for a refinance, the lender will conduct a hard credit inquiry in order to view your credit report, and to decide whether to work with you. A hard inquiry will stay on your credit report for two years, and could lead to a drop in your credit score that lasts a few months. Your prior mortgage will also appear as a closed account on your credit report when you refinance, which may also initially cause a drop in your score.

You won't be able to avoid this account closure or the hard inquiry when you refinance, and your credit score will probably improve as you make on-time payments toward the new loan. But keep in mind the potential effect on your credit score if you're planning to apply for another type of credit in the near future.

Potential for a Longer Loan Term or More Debt

When you refinance to a longer loan repayment period or you choose a cash-out refinance, it's important to balance the short-term benefits with the longer-term impact. Due to interest costs, you may pay more over the life of your mortgage loan if you refinance to a longer-term loan—even if your monthly payments are smaller. And if you take out a larger loan as part of a cash-out refinance, your debt-to-income ratio will rise, potentially making repayment more difficult or making it harder to borrow more in the future. Source