Monday, July 30, 2018

Why You Should Get Your Mortgage Approval Before Finding a House

by Kevin Graham, July 26, 2018 in Home Buying/Selling

If you’re in the market to purchase a home, you probably realize that the inventory of available houses is pretty limited and competition is stiff. If you’re looking to buy a previously existing home, it’s definitely a sellers’ market.
The National Association of REALTORS® releases a monthly report on the number of existing home sales across the country. Homes are only in the market for an average of 26 days, according to the latest data released for May. Moreover, there are only 4.1 months’ worth of existing homes on the market if sales continue at the current pace. For context, a market is generally considered in balance if the amount of inventory available is six months.
In the market for new homes, things are slightly better, but there’s still only 5.2 months’ worth of housing inventory available. The seller definitely has the advantage at this point.
Although competition is fierce, there are some things you can do to make your offer stand out when buying a home. One of the best things to do is make sure your financing is lined up. Our Power Buying Process™ makes this easy by allowing you to get a Verified Approval for a mortgage before you even start shopping for a home. It’s even possible to lock your rate and protect your mortgage payment while shopping for a home, but we’ll get into that later.
For now, let’s discuss the advantages of getting your mortgage approval before you go shopping for a home.

Advantages of an Upfront Mortgage Approval

There are several benefits to getting a Verified Approval for your mortgage financing right upfront. Let’s run through them.

Make Your Offer Confidently

If you’re looking to make an offer on a home, you want to be absolutely certain you can afford the monthly payments on the offer you’re about to make. There’s no sense guessing.
When Quicken Loans gives you a Verified Approval, we not only pull your credit to get an idea of your debts but also verify your income and assets through documents like pay stubs, tax returns, W-2s and bank statements. This analysis is completed upfront by our team.
Within 24 hours of receiving all the documentation from you, you’ll be given a Verified Approval letter that will give you and the seller the absolute confidence that you can afford the offer you’re making.
How confident can you be in our Verified Approvals? If your loan doesn’t close through no fault of your own after receiving a Verified Approval, we’ll give you $1,000.§

Have the Strength of a Cash Buyer

Having a Verified Approval doesn’t just give you confidence. Knowing your qualifications have been checked in advance also gives a seller comfort when dealing with you because your offer isn’t likely to fall through if everything has been verified by an underwriting team.
Making sure the deal goes through is one reason that in the past a seller may have chosen to take an offer from someone paying cash. With the backing of a Verified Approval from Quicken Loans, you and the seller will know that you have the financial credentials to back up the offer you’re making. This puts your offer on the same level as someone who comes to the table with cash.

Lock Your Rate While You Shop

A Verified Approval will allow you to know exactly how much you can afford, but there’s another source of anxiety for many home buyers. Should you lock your rate or let it float for a while to see if it goes lower? Even if you have a feeling rates may be going up soon and want to lock, traditional programs require that you find a property before locking your rate.
That’s where a RateShield™ Approval|| enters the picture.
Available on 30-year conventional, FHA and VA loans, a RateShield Approval allows you to lock an interest rate for up to 90 days while shopping for a new home. Once you find a home and sign a purchase agreement, we’ll compare your locked interest rate to current market rates. If rates go down, your rate drops. If rates go up, your rate stays the same. Either way, you win!
This also allows you to protect your monthly payment because you know your rate won’t be any higher after you lock it initially. This helps give you confidence when you’re doing the budget to figure out what you can afford to spend on your new home.

Tuesday, July 24, 2018

Paying Your Taxes and Insurance Through Escrow

by Kevin Graham, September 19, 2017 in Insurance

When you pay your mortgage, do you know everything that’s included in your mortgage payment? Often, it can be more than just the standard monthly principal and interest. When you own a home, you are also required to pay for your annual property taxes and home insurance. Lenders often require you to deposit money into an escrow account to make sure your taxes and insurance will be paid.
We’ll go over what an escrow account is and when you have to have one. Then we’ll touch on the implications for your property taxes and homeowners insurance.

What’s an Escrow Account?

An escrow account – a sort of savings account – is set up to protect the lender from borrowers who miss payments toward their real estate taxes and insurance premiums. If these are not paid, local tax authorities may place a lien on your property. So if the property is being sold and taxes are owed, it may cause problems until the party who is owed is paid.

Do I Have to Put Taxes and Insurance in Escrow?

It’s possible to avoid escrow and pay your own taxes and insurance under certain circumstances. This will make your monthly mortgage payment lower, but you’ll have to make separate payments for property taxes and homeowners insurance.
If you’re buying a home, an escrow account may not be required with a high enough credit score and a down payment of 5% if you have a conventional loan and a 10% down payment if it’s a VA loan. In New Mexico, a 20% down payment is required no matter the loan type.
If you’re looking to have your escrow account removed after you’ve been making payments for a while, Quicken Loans has a few requirements.
  • You need a minimum equity amount of 10% for removal from a VA loan. Conventional loan escrow removal requires 20% equity.
  • You need a FICO credit score of 680 or higher on a conventional loan and 720 or greater on VA.
  • If your mortgage is backed by Freddie Mac or the VA, the loan must be at least a year old. Fannie Mae loans must be two years old.
  • You must be current on your mortgage. This means you must have no 30-day late payments in the last year. Fannie Mae requires no 60-day late payments in the last two years.
  • You have to have a positive escrow balance.
FHA and USDA loans always require an escrow account.
You don’t always have to have one, but there are certain advantages to having an escrow account.

Why Should I Have an Escrow Account?

Paying taxes and insurance through escrow can be a great convenience. Mortgages can be complicated enough, and this is one less thing homeowners have to worry about. With an escrow account, your property tax and homeowners insurance payments are split into more manageable monthly chunks paid throughout the year.
Some people find it easier than having to write a large check in the summer and a larger check in the winter for their property taxes, as well as other checks to cover insurance premiums.

Are Escrow Payments Tax Deductible?

Your property taxes are generally tax deductible on your state and federal taxes. If you have any doubts regarding deductibility, please consult a tax professional.
Assuming your property taxes are deductible, they’re still deductible if you’re paying them into an escrow account. You’ll get a 1098 from your lender or servicer at the beginning of each new year, which will help you report the previous year’s deductible tax payments to the IRS as well as state authorities.

Why Do I Receive a Property Tax Bill if I Have an Escrow Account?

If you’re paying your property taxes through your mortgage servicer, you may wonder why you still get a bill (or statement) from your local taxing authority. In most cases, this is just for your awareness. Your servicer generally gets a copy of the bill and will pay it.
There are a few tax offices in Pennsylvania that don’t automatically send your tax bill to Quicken Loans. If this is the case for you, you’ll be notified to send us your tax bill.
Occasionally, you may receive a one-time or short-term supplemental property tax bill. We don’t collect for these. You’ll have to make an individual payment to your taxing authority.

Switching Homeowners Insurance Policies on Escrow

If you switch homeowners insurance policies before your policy expires, you may receive a refund from your former carrier that’s prorated for the portion of the insurance that went unused for the year. While it may be tempting to spend this refund check, if your policy is paid through escrow, don’t.
Quicken Loans pays for your homeowners insurance policy up front and spreads the payments out for you over the course of the year. If you switch insurance providers and don’t send the refund check to us, we’ll end up paying both policies, which will result in a shortage in your escrow account. When that happens, you’ll have to make up the difference the next year. You can avoid this by sending us the fully endorsed refund check. We have a previous blog post on switching homeowners policies.

Things to Keep in Mind

Be aware that even if you have a long-term fixed-rate loan, your mortgage payment can vary. The principal and interest portion of your payment is fixed, but tax assessments may change and insurance premiums may fluctuate. This makes your entire payment vary.
To be able to cover possible shortages in payments, lenders require an extra two months’ worth of payments be kept in the account as a reserve cushion. Tax assessments and premium adjustments can happen any time during a 12-month period, and lenders will have to cover those shortages either using your escrow account or their own money. If they use their own money, they will recover the shortage by requiring an increase in the amount you deposit monthly into escrow.
Also, when building a new home, understand that your escrow payments may spike once construction has been completed because when lenders calculate escrow, the amount is based on the last disbursement. The last disbursement may only reflect the taxes on the land (if there were no previous house on that land). When construction is complete, the land is now worth more because of the existence of the home; therefore, escrow will be higher.
Lastly, keep an eye on your escrow account since it’s always possible for mistakes to occur. It may be a case where the loan is transferring possession from one lender to another and, in the interim, wires are crossed and the tax bill gets paid by both lenders or by neither. As long as you have made your payments, the onus is on the lender to straighten things out. But the best way to tackle this is to keep a close eye on how your money is being managed.
If you’re unsure whether you should escrow, talk to an experienced mortgage banker who can answer all your questions.

Monday, July 2, 2018

How to Control Household Spending with Your Spouse

by Andy Hill, June 13, 2018 in Money Matters

When we mix marriage and money, it can either be a recipe for disaster or financial success. It’s really up to us. With a proactive attitude, perseverance and some open communication, a financially harmonious relationship can be ours if we want it.
For a lot of us (me included), it’s not always marital roses and sunshine when money is involved. In the age of  “1-click ordering,” our desires can often outpace our income. These unplanned online purchases or any other impulse buy can cause momentary joy, but can pull us away from our long-term financial goals and cause fights about money.
Here are seven actionable tips that will help you and your spouse align your spending appropriately and start to work together as a team.

Become Clear on Your Own Financial Goals

Our actions and words can hold a lot more power when they are backed up by a goal. Decreasing household spending is a tactic that will quite often help you meet a multitude of goals, but defining a specific personal finance mission is most important.
For example, let’s say you have $12,000 of student debt and you want it out of your life. Now you have a goal that backs up your desire to control your household spending.
Be sure to get SMART with your goals as well:
  • Specific
  • Measureable
  • Actionable
  • Realistic
  • Time-Based
Here’s a SMART declaration: “I want to pay off my student loan balance of $12,000 in 24 months.”
After you assess if your goal is realistic, you’re ready to start taking action. 

Ask Your Spouse to Share Their Goals with You

This can be an excellent opportunity to connect with your spouse. When a person shares their financial dreams, they are opening up their heart to you. They are showing you what is most important to them.
Sit down with your spouse, turn off your cell phone and ask them to share their goals. Truly listen.
Perhaps you’ll discover that your goals may align. You may even learn something you never knew. These are the conversations that allow your financial relationship to really grow.

See Where Your Goals Intersect

Let’s say your spouse wants to pursue a small business opportunity, but always just considered it a pipe dream. This is your chance to get your significant other fired up about both goals. When both of you are working toward a common goal, your chance for success rises exponentially.
In this scenario, decreasing your household spending can eliminate those dreaded student loans and provide capital for a small business venture.
Ask yourself and your spouse why you want to pursue these goals. Some potential answers could be:
  • Reducing your stress
  • Feeling proud of building a business
  • Using the extra money to have more fun
Your individual answers will help you both drive toward your goal together.

Budget Together

If you’re not aware of how much you’re spending each month, then you’ll never know how to improve your finances. Start your journey of financial improvement by getting a gauge of your current expenses.
Utilize a budgeting system for couples, such as Honeyfi, which allows both you and your spouse to feel empowered. A system like this will automatically sync your bank and credit card accounts so you can see your spending. This way you can make improvements and move closer to your collective financial goals.
If you’re not into finance apps, not a problem. Grab a copy of your last bank or credit card statement and start to analyze the expenses. Look for trends, patterns and start to add up your typical monthly expenses.
Once you’re budgeting with your spouse, your financial future starts to become clearer.

Practice Saying “No”

It’s never fun to miss out on fun experiences or buying the trendiest gear, but if we want to improve our financial future we need to learn to start saying “no.”
It’s not all doom and gloom though. When we say “no” to one thing, we’re saying “yes” to another. For example, you may have to say “no” to impulse shopping a couple years, but you’re saying “yes” to saving money for your future small business.
Will you feel happier owning your business or having the freedom to shop as you please? Only you can answer that.

When Times Get Tough, Focus on the “Why” 

As you’re working on controlling your spending to hit your financial goals, there will be plenty of setbacks, obstacles and marital disagreements along the way. Do your best to focus on why you started down this path to begin with.
If you want to eliminate the student debt in your life so your days are less stressful and more joyful, remind yourself of that when you feel like giving up.
“When I’m student debt-free, I will feel less stressed and happier knowing that I don’t owe Sallie Mae another dime!”
Or in your spouse’s case:
“I will feel proud and confident when I’m managing my own business. That’s why I’m sticking to this!”

Celebrate Your Wins

Some financial goals can take quite a bit of time. That’s why it’s important to celebrate along the way. No accomplishment is too small.
  • You’ve met three months in a row for your budget reviews? Congrats! Time to party!
  • The student debt is down to $5,000? You’re a rock star!
  • You’ve saved up $2,500 for your future small business savings account? Cheers!
Take time to do the activity you two love the most. Congratulate each other for your teamwork, partnership and love.
And when the big day comes when you’ve accomplished your monster goal, go crazy! Take a picture together, shoot a video, celebrate with family and shout it from the rooftops. The two of you are creating the lives you’ve always dreamed of and you’re doing it together.