Interest rates are low and now is a great time to purchase or refinance, but once you are in that great new loan, what are some ways to get it paid off quick and save even more? Of course I am sure you have heard about the benefits of paying bi-weekly instead of monthly. This can be done by setting up a payment plan with your mortgage lender where they pull out half of your monthly mortgage payment every other week. Given that there are 26 bi-weekly pay periods in a year this has you making one extra payment on your mortgage every year without having to put the effort into actually saving up the money to do so. On a $200,000 loan that one payment can shorten the term of your loan by roughly 5 years and save you over $34,000 in interest over the life of the loan.
If one whole extra payment a year seems too much for a tight budget to handle you can do something as simple as rounding up your mortgage payment just a touch more. Rounding up an extra $10 a month will reduce the life of your loan by 4 months and on a $200,000 mortgage save you roughly $2,469 in interest. To really see an impact you can increase your mortgage payment by $50 a month for $12,666 in interest saved and shorten your term by 2 years, again based on a $200,000 mortgage.
If you are just purchasing your first home, these are good habits to get into to get the most out of your new asset. If you currently own, make sure you’ve checked out your financing options to see if you qualify for a lower rate or shorter term and then put these into play to get it paid off even faster.
Short sales can be a great option for first time home buyers who possess a little patience. Truth is there is nothing short about doing a short sale. The whole process from offer to close can take up to 6 months, although as short sales have become more prevalent banks have gotten quicker at turning them around. 40% of short sales purchased August of last year were done so by first time homebuyers.
A short sale is where the home is still owned by the seller, not by the bank, however the house is usually underwater for what the borrower owes. So both the bank and the seller agree to sell for less than the amount owed. The trick (and the time consuming part) is that the final sales price has to be approved by both the seller and the seller’s lender. These homes are usually a great value for first time homebuyers because most times they are getting them at a reduced rate from what they would normally sell for, thus being able to get more house for the money. The mistake most home buyers make is putting in offers that are too low. Remember these homes are already being sold for a discounted rate and the bank is only going to be willing to lose so much money. It is important to work with a realtor who is experienced in short sales and who knows the local market well and will be able to tell you if you are making a realistic offer. And just make sure that you have a back up plan if you are on a deadline to have to leave your current living situation because again, these transactions can take a little longer. But if you have the time, the great deal you’ll get in the end will be well worth the wait.
The housing market is on the rebound. Economists are saying that the housing market is clearly superior this year to the past four years and the National Association of Realtors expects the national median of existing home prices to rise 5.7% in 2013. The lack of inventory on the market has many prospective buyers finding themselves in frustrating bidding wars. Some tips to help you know if you truly are getting a good deal – for starters do your homework on the neighborhood. Find out how many homes are on the market in the neighborhood, what kind of condition they are in, and how long they’ve been on the market. Also look to see what homes in the area have sold for in the past 90 days and then compare the cost and condition of the one you want to buy. Remember how the neighbor treats their house can impact the value of yours, so make sure the view across the street and next door isn’t looking onto a rundown property. And if you find yourself in a bidding war, 2 key factors that can help you come out the winner include putting down a larger earnest money deposit to show you are really serious and committed to the home and find a lender that can get the loan closed fast. Your realtor will often times be able to suggest a lender that they work with and while you are free to use whoever you want, remember your agent does this on a regular basis and will know what their own lender is capable of.
Think what you do in your current rental today won’t impact you in the future? Think again. Having a positive rental history is an important part of getting a mortgage. Mortgage lenders will check the place you are currently renting to make sure that you pay on time and not 30 days late, and sometimes even if you have recently moved out of a rental they will still go back and verify that you paid on time. Any collections on past rents due from skipping out on leases that shows up on your credit report will need to be taken care of as well. The news reported this week that it is now cheaper to own then it is to rent and that rents have increased as much as 15% in parts of the country. New home sales were up 7.6% in May, the highest they have been in two years. That being said why continue to throw your money away paying someone else’s mortgage. If your plan is to become a home owner know this, that it is important to treat the place you are currently renting like it was your own. Because what you do in someone else’s house today can impact whether or not you get to own your own home in the future.
If a tree from your yard falls on your neighbors house, who is responsible for the damage? That is actually covered on the neighbor’s home owners insurance as many people found out after damaging storms rolled through the Baltimore and DC area on Friday night. The horrible sight of trees that had fallen through roofs and damaged homes was prevalent in many neighborhoods. Having proper coverage is key for situations like this, and unfortunately many home owners aren’t aware of how their coverage works or what they have until a catastrophe happens. And while paying less per year to have a higher deductible may sound like a good plan, when something unexpected like this happens, how easy is it to actually come up with that money, or have it taken out of what you are getting back to pay for the repairs. In most cases the smartest move is to go with the lowest deductible possible and pay a little more month to month. You should also shop your policy every year to make sure you are getting the best deal and the lowest rates.
Another option many people don’t know about when something happens to their home is the option of using a public adjuster. A public adjuster works as a liaison between the home owner and the insurance company to get the home owner the most money possible for repairs. Public adjusters can be beneficial because they know what is covered and what isn’t and what the insurance company looks for and will negotiate with them, rather than just accept the first offer. Nine times out of ten the public adjuster will get a higher settlement for the home owner.
Home owners insurance protects your biggest and most valuable asset. When shopping for insurance, price is important, but the right coverage and good service is even more valuable.
Across the country, the number of mortgage applications is the highest it has been in the past 3 years. Home sales are 10% higher than they were this time last year and the median existing-home price is up 10.1% from this time a year ago. Economists predict even stronger gains in 2013.
So what does that mean for those who have been waiting out the market to get the best deal? Your time is about to be up. As the housing market begins to rebound an increase in rates is expected as well. This is sending buyers into a frenzy trying to get in now while rates and prices are still low. Many buyers are finding frustration in the bidding wars going on over many properties. Buyers need to be ready to be more aggressive in their offers. A few tips for beating out the competition:
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Get pre-approved, not prequalified. Pre-qualified means the lender reviewed your credit and your income information and thinks you will be a low risk loan. Pre-qualified means your documents have actually been reviewed by an underwriter and that you are credit approved making you a safe bet to a seller that the financing will go through.
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Have your agent find out the sellers motivation for selling and then work to meet their need. In some cases the seller has to be out of the house quickly, work with your lender to find out a reasonable timeframe to close the loan and see if you can offer a quicker turnaround time for the seller.
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Limit your conditions and need for seller help. Don’t sell yourself short of course, but the fewer things you ask the seller to do for you, the better
chance you have.
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Keep cash on hand. Bid on properties that are less than the amount that you are pre-approved for so that you can offer over the asking price if need be to win out in a bidding war.
Lastly remember, new propertiesare always coming on the market so don’t get discouraged. Buying a home requires taking a leap of faith that when the right house comes along all the pieces will fall into place.
The month of June is Homeownership Month in Maryland and to add incentive for prospective homeowners the Maryland Mortgage Program has
lowered the interest rate on 30-year fixed rate loans to 2.875% (APR 3.675%) in targeted areas and 3.25% (APR 4.082%) in non-targeted areas. $30 million dollars has been earmarked by the Mayor towards this incentive and these low rates will last for the next 3 months or until the entire 30 million is gone.
Targeted areas consist of the following counties:
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Baltimore City
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Caroline
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Dorchester
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Garrett
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Kent
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Somerset
And portions of the following:
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Anne Arundel
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Baltimore County
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Frederick
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Harford
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Prince George’s
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Washington
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Wicomico
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Worcester
There are additional incentives for those looking to buy foreclosures and short sales with the same reduced rates being offered via the
Save-A-Home Loan Program through the end of June. The hope is that the low rates plus the down payment assistance offered by the Maryland Mortgage Program will bring 10,000 new home owners to Baltimore City by the end of the summer.
