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