WHAT IS A CASH-OUT REFINANCE LOAN?

By Mandy Jordan

If your home’s equity (value) has been building over time, you may be able to get a cash-out refinance allowing you to turn a portion of that equity into cash — cash you can use however you want. Consolidate debt, home improvements, unexpected medical bills, a child’s college education, or investment properties are all realistic possibilities.

So how does a cash-out refinance work? Let’s say you still owe $200,000 on your home, but its value on the market is worth $300,000 now. That means you’ve generated $100,000 in equity. You can use a cash-out refi and use part of your equity. You would have a new larger mortgage with new rates that may mean you pay more in interest over the lifetime of the loan.

Watch this video to learn more about how a cash-out refinance can work to your advantage:

How is a Cash-Out Refinance Different than a HELOC?

Simply put, a cash-out refinance loan is a new mortgage loan that replaces your original mortgage, while a HELOC (Home Equity Line of Credit) is a separate loan that becomes a second mortgage in addition to your current original mortgage.

Does a Cash-Out Refinance Make Sense for You?

It depends on your situation. Start by weighing the benefit of how you plan to use the money against the impact it will have on your mortgage rate, term and payments. A cash-out refinance can be a smart decision when the money is used to invest in appreciating assets, such as home improvements, education, investments or your overall financial security. On the other hand, it might not be worth it if the numbers don’t add up to a significant financial benefit.

Want to explore your options? Feel free to contact a PrimeLending Home Loan Expert today who can help answer any of your questions or get your process started.

LOVE IT OR LIST IT: SHOULD YOU RENOVATE OR SELL?

By Mandy Jordan  

Have you seen the HGTV show, Love It or List It? In the show, a design and remodel team works with the featured homeowner to renovate their existing home, turning it into a space that is functional for their current needs and meets their design expectations. While renovations are taking place, the homeowners meet with a real estate agent to view other homes that might better fit their needs and desires. In the end, the homeowners are left to decide: Love it? Or list it? Will they stay in their existing, newly renovated home, or sell and move to a new home?

While you may not have the opportunity to appear on a show such as Love It or List It, you may find yourself in a similar situation. Is it worth it to renovate your current home, or is it in your best interest to sell and move into something different? How do you decide?

It’s difficult to find the perfect home, one with just the right amount of storage, the ideal layout and all the room your family needs. Most homeowners have at least one thing they’d change about their home. If that something is within the four walls of the home, a renovation may solve the problem. However, if it’s a matter of location, the size of the yard or the length of your daily commute that has you feeling discontented with your home, selling might be your best bet.

If you’re weighing your options between a home renovation project and selling, here are some questions to ask yourself:

What is real estate market in your area like? If there are for sale signs in every other yard on your block and neighbors seem to be making a mass exodus, you may find it difficult to sell — or at least to get asking price for your home. An oversaturated market tends to drop home prices and make it more difficult to sell quickly. On the other hand, if the market is competitive for buyers, meaning there are more buyers seeking homes in your area than there are homes available, now just may be the perfect time to sell.

What is the biggest issue you have in your home? Is it the clutter and lack of storage space or a serious problem like a cracked foundation or a roof that needs to be replaced? Maybe your family is growing and you no longer have enough bedrooms or bathrooms to allow your family to live comfortably. Some points of discontentment may be easily and affordably resolved with a renovation. Consulting with a designer and/or a home organization expert may help you get to the bottom of the clutter and find creative ways to add more storage to your home. Even a larger problem, such as foundation woes or a leaky roof may be covered by your home warranty or homeowners insurance. Identify the biggest problems in your current home and seek out professionals who can give you an expert opinion on how simple and affordable (or not) the remedy can be.

How long have you been in your home? Most experts recommend staying in a home a minimum of three to five years before selling in order to break even. If you’re hoping to make a profit off the sale of your home, you’ll likely need more equity than you can accrue in just a few years. Three to five years allows time for property values to improve and gives you time to build enough equity to cover some of the expenses of selling, such as closing costs and moving expenses.

Are you really ready for a renovation? Not only can it be time-consuming, but depending on the scope of the project, you may need to find temporary living arrangements while your home is under construction. The realities of renovations aren’t always considered into the decision. In addition, renovations can be costly — often costlier than originally estimated. To ensure you have enough to cover the project, boost your budget by 20% of the estimated cost to make room for unexpected expenses.

How does your home compare to others in the neighborhood? Do you live in the biggest home on the block or is your home relatively comparable to your neighbors’ houses? Your real estate agent can run a comp for you to show how your home compares to others in the neighborhood. Should you choose to renovate, and there’s a chance you will still sell in the future, it’s important not to over-improve your home. Making renovations that outpace other homes in the area means you’ll be less likely to recoup those costs when you do sell. Upgrades to the kitchen, bathrooms and landscape, as well as new carpet or flooring and paint are generally wise investments to make in your home.

Have you outgrown your space? If you’re feeling cramped in your space and splitting one bedroom into two, or knocking down or extending the walls of your common areas just isn’t an option, then selling and buying a larger home is probably your best bet. Meeting with a contractor can help you determine if expanding your existing home is an option and a wise investment.

No matter how much you enjoy shows like Love It or List It, remember that this isn’t TV, it’s real life. Take time to weigh all your options before making your decision to love it or list it.

Whether you decide on a home renovation or are ready to start the hunt for a new home, PrimeLending has home loan options to fit your needs. Check out our guide to financing a home renovationto learn about the loan options available for remodeling and renovations. Contact us today to speak with a PrimeLending home loan expert in your area.

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11 Questions to Ask Your Mortgage Lender

By Mandy Jordan

Questions To Ask To Ensure You Know Your Options

Purchasing a home may be the biggest investment you make in your lifetime. In 2016, more than six million homes were sold in the U.S. (that’s more than 1,600 homes every day!). Residential real estate transactions are just part of day-to-day business for mortgage lenders, but for you, the homebuyer, this may be a new experience.

It’s important to begin the home buying process with as much knowledge and information as possible. As you’re researching lenders, trying to find the best fit for you, here are some important questions you should ask:

What types of mortgages do you offer? When shopping mortgage lenders, you’ll find that different lenders offer different types of home loans. These can vary in amount, interest rate, term length and payment type. There are conventional loans (not insured by a federal agency) and government-insured loans. Some of the most common home loans include:

• Federal Housing Authority (FHA) — Government-insured by the Federal Housing Authority, this loan is best for clients with limited credit or income. Advantages include a low down payment and easier credit and income requirements.

• Veterans Affairs (VA) — Government-insured by the Department of Veterans Affairs, this loan is for eligible past or present services members and their spouses. Advantages include a low down payment, low interest rate and covered costs.

• US Department of Agriculture (USDA) — Government-insured by the US Department of Agriculture, this loan is for clients with a limited income in USDA designated rural areas. Advantages include 100 percent financing, eliminating the need for a down payment and assistance for limited income clients.

• 30-year Fixed-Rate Mortgage (FRM) — A conventional loan offered to long-term homeowners looking for stability. Advantages include a long-term interest rate and monthly payment stability.

• 15-year Fixed Rate Mortgage — A conventional loan for clients looking for stability and speedy payoff. Advantages include interest rate and payment stability, faster equity/payoff and less overall interest.

• Adjustable-Rate Mortgage (ARM) — A conventional loan idea for short-term homeowners and clients with future income growth potential. Advantages include a low initial interest rate.

• Jumbo Loans — A conventional loan for clients seeking higher value. Jumbo loans exceed the “conforming loan limit” set by the federal government, allowing the buyer to reduce the down payment for a more expensive home.

What type of mortgage is the best fit for me? Once you’ve submitted your mortgage application, your lender can make a recommendation on the best type of loan for you, based on your employment, income, assets, credit, debt, expenses, down payment and any additional financial information.

What is the estimated full cost of my mortgage? When shopping mortgage lenders, request a Good Faith Estimate (GFE), which provides a line-by-line estimate of all costs associated with your mortgage. This tool can help you compare the rates and costs associated with each lender.

What are the qualifying guidelines for this type of loan? While certain types of loans have certain guidelines (such as a VA loan is only for eligible veterans), your lender may have their own list of restrictions and will be able to tell you which loans you qualify for based on those guidelines.

Who will be the title and escrow agency? You may have the option to shop title companies to find one that could save you money on fees. You may also be able to do the same for an escrow agency and/or attorney.

What paperwork do I need? Be prepared to provide your lender with necessary documents, including proof of income (you’ll need two years of W-2s and paystubs) and assets (two most recent statements), personal identification and credit history. If you are self-employed, you’ll also need to have tax returns available. Be prepared for your home loan expert to request additional information throughout the approval process.

How long will it take to process my application? Once you supply required documents, the next steps will include an inspection, appraisal and final approval from the underwriter. In most cases, the process from application to close can take anywhere from a few weeks to a few months.

When will I close? Early in the process, your lender will give you an estimated closing date, but this date is not set in stone. Any number of factors could cause the closing date to fluctuate. Once your loan has been approved, you will be given the “clear to close,” and a final closing date, time and location will be set.

How much cash will I need at closing? At closing, you will need funds for your closing costs and down payment. Closing costs generally range from two to five percent of the purchase price of the home and include fees for pulling your credit report, document prep fees and fees for the inspection, appraisal and necessary surveys. Closing costs also include the brokerage commission, which is the amount paid to your real estate agent. These costs may be negotiated with either the buyer or seller agreeing to cover some or all of the closing costs.

What can I do to avoid delays? At the start of the process, your lender will provide you with recommendations to ensure the purchase process is speedy and smooth. These general recommendations include fully completing all required documents, being available to answer questions, being prepared to answer any questions and provide additional documentation, reviewing your credit report for errors and maintaining the same job during the process.

Will my loan get sold? It isn’t uncommon for mortgage loans, especially smaller loans to be sold to a new servicing company within the first few months after closing. If this happens, your lender will notify you in writing, so you will know where to send your next mortgage payment. The sale of your mortgage will not impact the overall cost of your loan.

Are you shopping for home lenders, or ready to take submit your mortgage application? Contact me. I'm happy to answer your questions and help get the process started.

8 VA Home Loan Benefits You May Not Know About

A Guide To VA Home Loans In 2018

By Greg Kummer

Posted March 30, 2018

Whether you’re a military Veteran or in active duty, a Veterans Administration (VA) home loan can help you land a home you love and save you a ton of money in the process. But did you know that only about 6% of U.S military Veterans and active service members are actually taking advantage of this powerful, government-backed home loan? If you’re currently serving (or have served) in the military, it’s a great time to make the most of this money-saving resource and achieve your dreams of homeownership.

Here are some incredible benefits of a VA home loan that you may not have realized you have access to.

1. VA loans require zero down payment

While a majority of home loan programs require a down payment, the VA home loan is a notable exception. Provided you are eligible for this special loan, you have the opportunity to finance up to 100 percent of a home’s purchase price instead of paying up front.

2. VA loans are guaranteed by the government

Because the VA loan is backed by the government, they guarantee repayment to the lender in the event you cannot make monthly payments. As a result, lenders are encouraged to offer VA loans and help those who are or have served in our country’s military.

3. VA loans do not have set rates

VA home loans are not funded by the VA, and VA home loan rates are not set by the VA. U.S. banks and mortgage lenders set each of their own VA loan rates, so you can still do some cost comparison between lenders and find the right loan for you and your financial situation.

4. VA loans do not require you to pay for PMI

In general, mortgage lenders will require you to pay for mortgage insurance when you make a down payment of less than 20%. This is known as Private Mortgage Insurance (PMI) and serves to protect the lender in case a buyer can’t pay for their loan. VA loans, however, do not require you to pay for mortgage insurance, making the home buying process much more affordable for you.

5. The VA places a limit on lender closing costs

For many loans, closing costs may vary from lender to lender, but with a VA loan, lenders have a limit on what they can charge. This makes a VA home loan even more affordable, and you can use the money you saved on other things like moving costs or furnishing your new home.

6. There are a variety of VA loans available

If you are eligible for a VA loan, you can buy a house, condo or other various properties. A VA loan can also be used to refinance your current mortgage, or even allow you to make much-needed repairs to your home. Overall, VA loans offer you a wide range options, so make sure to contact a Loan Officer to help you decide which loan option is right for you.

7. Qualifying for a VA loan is easier than you think

When you apply for any mortgage, a lender generally looks for legal documentation, a positive credit history, and a way to ensure you can make your monthly payments. The U.S. Department of Veterans Affairs, however, makes guidelines for VA home loans more flexible to accommodate and reward those who are serving or have served in the military.

8. VA loan eligibility can be transferred to a surviving spouse

To help provide more security for your family, VA loan eligibility can be transferred to your surviving spouse. As long as the requirements are met, your spouse will be eligible for the same VA loan benefits that you are and can help them purchase a home with zero down payment, and save them on other home buying costs.

Wondering if you’re eligible for VA financing?

You are eligible for a VA home loan if you are an active servicemember, a Veteran or (as mentioned above) if you are the surviving spouse of a fallen Servicemember. Your eligibility does not expire and if you are a Veteran who has used their VA benefits before, you can continue using them indefinitely.

Final Thoughts

If you have served (or are serving) in the military, not only do you deserve respect for your hard work and dedication to our country, you deserve to find a place you can call your home. The home buying journey can be complex, but PrimeLending is here to make financing your next home a simple and hassle-free process. We’ll help you close quickly and confidently, and make sure you get the most from your VA loan benefits. For more information, reach out to a PrimeLending mortgage expert in your area today.

All loans subject to credit approval. Rates and fees subject to change. Mortgage financing provided by PrimeLending, a PlainsCapital Company an Equal Housing Lender. ©2018 PrimeLending, a PlainsCapital Company (NMLS: 13649).

What’s Up With Your Down Payment?

Is 20% Outdated Advice? Here’s What You Need To Know

According to Zillow, the median home sales price is $238,700 — which means a traditional down payment of 20% would be nearly $50,000. But if that size down payment is overwhelming, don’t feel discouraged. More and more mortgage programs allow borrowers to qualify with less than 20% to put down.

In fact, that well-known percentage is really just a myth.

Depending on the type of home loan, your credit history and personal financial situation, you may be eligible to put as little as 3% down, or even less for VA and USDA mortgages that require zero down1. According to the National Association of Realtors, the average down payment for first-time home buyers in 2016 was 6%, and just 14% for repeat buyers.

In addition to a lower upfront cash investment, here are other benefits of putting less than 20 percent down.

Preserve your investments and retirement. It may be tempting to dip into your 401k for a down payment, but that’s not generally recommended advice. In some cases, while mortgage rates remain low, it may make more sense to put less down on your home and preserve your retirement funds or put the difference in a high-yield investment. Check with your financial advisor or tax accountant to understand the fill impact2.

Keep cash on hand. A smaller down payment means you’ll have access to more cash in case of a change in your financial situation, such as a job loss or unexpected medical expenses. That extra cash can also come in handy should your new home need any repairs or improvements.

Buy now, save more. Buying now, even with a lower down payment could end up saving you, too. Home prices continue to rise at a rate of about five percent per year. Waiting to buy until you have 20 percent saved up could mean you end up paying more for your home in the long run.

Make progress toward other financial goals. Putting less down on your home purchase frees up more cash to chip away at student loans, credit card debt and other long-term financial goals.

Of course, there are still some advantages to making a higher down payment. If you can come up with a down payment of 10%, you’ll have more options, even with a lower credit score. For example, you may qualify for an FHA loan with a FICO score as low as 520 if you can swing a 10% down payment1. A higher down payment also typically means better interest rates and you’ll have more equity in the home.

So what is the advantage to putting down 20%? One obvious benefit is avoiding PMI (private mortgage insurance). A down payment of less than 20 percent will require you to purchase PMI, which can cost anywhere from .5 to 1% of your total loan amount, potentially hundreds of dollars to your monthly payments. The good news is that once you’ve built up 20% equity, you’ll be eligible to drop the PMI. For some buyers, the higher monthly payment is easier to swallow than making a higher down payment. Your home loan expert at PrimeLending can help you run the numbers and decide which scenario makes sense for you.

So how do you know what the right down payment is for you? There are a few factors to consider.

1. How soon are you planning to purchase a home? If you need to move sooner rather than later and simply don’t have time to save, talk to your mortgage lender about your options for a low down payment loan, such as an FHA or USDA loan.

2. Consider how much you have saved and how much you can really afford to put down. Use a mortgage calculator to compare monthly payments with varying down payments and loan terms to find the number that works best for you.

3. Contact a PrimeLending mortgage expert to help you assess all your options. They can help you prequalified3 and find out what loan programs – and down payment scenarios –you qualify for. Our loan expert will review your income, credit and other factors to determine your eligibility for different mortgage programs.

1ADDITIONAL RESTRICTIONS MAY APPLY.  CONTACT YOUR PRIMELENDING LOAN OFFICER FOR MORE DETAILS.

2PRIMELENDING IS NOT AUTHORIZED TO GIVE TAX ADVICE. PLEASE CONSULT YOUR TAX ADVISER FOR TAX ADVICE FOR YOUR SPECIFIC SITUATION.

3A PREQUALIFICATION IS NOT AN APPROVAL OF CREDIT, AND DOES NOT SIGNIFY THAT UNDERWRITING REQUIREMENTS HAVE BEEN MET.