Equity Magazine

EQUITYH O M E

CONSUMER TIPS FOR REFINANCINGVol. 1 Issue 1 2014

10 THINGS you should know before you Refinance

SECRETS TO

...and much more!

Loanin5.com

FHA LOANS

10 THINGS

PROS AND CONS OF FHA LOANS CONVENTIONAL

MORTGAGE

CONVENTIONAL MORTGAGE

VA LOANSSECRETS TO

VA LOANS

TRICKS TO THE

VA LOANS

MAGICALLY

ONE EXTRA PAYMENT

MAGICALLY Shave Years Off Your Mortgage with

ONE EXTRA PAYMENT

MZINE Magazine Template

what’s INSIDE

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Christensen Financial, Inc.2625 Cumberland Pkwy Suite #275 Atlanta, GA 303391-888-425-5504 -- Branch NMLS: 484740 Fair Housing /Equal Opportunity Lender Alabama License #21433.003: Louisiana: South Carolina BFI License #MLB-484740: Tennessee License #109381-118: Virginia MC-5371: Georgia Residential Mortgage Licensee 21045 Christensen Financial, Inc. and LOANIN5.COM are not acting on behalf of or at the direction of the HUD/FHA, Dept of Veteran Affairs or the Federal Government.

Home Equity is a publication that provides Consumer Refinance tips and secrets for individuals seeking to refinance or use the equity in a piece of real estate. All of the content is provided by experts and licensed professionals in the Real Estate and the Mortgage Industry. This information is provided for INFORMATIONAL PURPOSES ONLY and does not intend to act as legal advise or financial planning. Readers of this publication are encouraged to contact the licensed professionals at LOANIN5.COM to discuss your real estate financing goals.

10 Things to know...

before Refinancing!04 08

Magazine Template MZINE

STEPS IN THE REFINANCE PROCESS 03- 04

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10 THINGS YOU SHOULD KNOW BEFORE YOU REFINANCE 05 - 06

THE MAGICALLY DISAPPEARING MORTGAGE 07 - 08

PROS AND CONS OF FHA LOANS

09 - 10

BENEFITS TO VA LOANS 11 - 12

TRICKS TO CONVENTIONAL LOANS 13 - 14

BENEFITS of theVA LOANVA LOAN

BENEFITS of theSteps to the

Refinance Process 12


pplying for a mortgage has become more complicated in recent years. The homeowner looking to refinance needs to be prepared for the new levels of scrutiny and fact-

checking that has become part of today’s mortgage requirements and guidelines by regulators like the FHA, Fannie Mae (Federal National Mortgage Association), and Freddie Mac (Federal Home Loan Mortgage Corporation).

The following list provides the 4 major steps in the process, along with the information you will need to have available for each step. There may be additional information or documentation required by your lender. #1 Pre-ApprovalThe loan officer at the lending institution requires all of your income and asset information and documentation to determine if you qualify for a mortgage. The information that is needed includes (but is not limited to) the following: • Your credit report • Proof of income: W-2’s and paystubs, Federal Tax return• Current loan documentation such as mortgage note or statement. Once the loan officer reviews your credit and income information and determines it meets the basic criteria they can issue a Pre-Approval/RESPA Package. The Real Estate Settlement Procedures Act (RESPA) package includes all the details of the loan transaction including the Good Faith Estimate, Settlement Statement, authorizations, releases and federal/state notices and disclosures, which you are required to

REFINANCE PROCESS

“Your mortgage approval process will be easier when you know what to expect in

each step.”

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steps in the A


sign and return to your lender to initiate the loan process. Once recieved by your Mortgage Consultant it will be submitted to Processing. #2 Submission for ProcessingOnce you have completed Pre-Approval process by submitting all of the required documents and disclosures to your lender it is then handled by the mortgage processor who will review the mortgage package and order: • An appraisal of the property• A title examination• Any necessary legal work

The mortgage processor will also make sure the documentation is complete and request anything the loan officer may have missed. This is an extremely important step to make sure no documentation is missing and that all the information is available for underwriting the loan. #3 UnderwritingAfter the Mortgage Processor has collected and reviewed all the necessary documents they will then submit the file to the Underwriter, who will scrutinize the entire loan package and issue an initial approval after reviewing all the documentation – again! The Underwriter will make the approval subject to additional documentation if questions or concerns arise. Once the loan is approved, it is termed “clear to close.” #4 Clear-to-Close Once the Underwriter has approved the loan the process does not end here. The following steps may require even more paperwork:• One week prior to closing:

The lender will conduct a “verbal verification of employment” to verify your employment status has not changed.

• A few days prior to closing: The lender will request a “credit refresher” making sure you do not have any new debt or credit.

• At the time of closing: No documents can be older than 90 days, so updated documentation may be required.

• After closing: When the mortgage lender reviews the loan internally, additional documentation may be required.

Your mortgage approval process will be easier when you know what to expect in each step. Remember to ask questions. Your loan officer has been through this process before and is available to answer any questions you may have.

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ost homeowners consider refinancing at least once during their years of home ownership. The

major reasons for refinancing are to pay off debt, to make home improvements or to lower

the monthly payment, to name a few. Before deciding to refinance, there are some important

things you need to know.

1. Your Home Equity

The first thing you need to know in order to decide if refinancing is a good decision is the equity in your home.

Your home equity is the amount of money you have already paid against the value of your home. You will have

an easier time qualifying for a loan it you have at

least 10% equity.

2. Your Reason for Refinancing

Whatever your reason for refinancing, it should

be one that makes the decision valid. In other

words, you should have something to show for

it. Paying off high-interest loans is an excellent

reason; so is paying for your child’s education;

reducing the number of years from your

mortgage.

3. How Long You Plan to Stay in Your

Home

Unless you are planning to sell in a few years, it

is best to stay away from a variable interest rate

loan. You don’t want to be caught with a payment

higher than you can afford because the interest

rate goes up. If you plan to stay in your home

indefinitely, a fixed rate is best for you.

4. Your Credit Score

Loan approvals are not as easy as they used to

be. To get the lowest interest rates, you need a credit score of 740 or higher. Check your credit score before

starting the refinancing process. You don’t want to be surprised by having to pay a higher interest rate than

anticipated.

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THINGS you should KNOW before you

REFINANCE

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debts when applying for a loan, usually just the debts

listed on your credit report.

8. Refinancing Costs

Home refinancing will cost you from 2% to 4% of the

loan amount. You can reduce this amount by wrapping

it into the loan. Also, check for a “no point refinance.”

You may pay a higher interest rate, however, to cover

the closing costs. Refinancing fees can be paid by

the lender or reduced, so shop for the best loan and

negotiate.

9. Breakeven Point

The point at which the costs of refinancing are

covered by your monthly saving is referred to as your

breakeven point. You should know this amount before

refinancing. After this point, what you

save each month is yours. If your cost

for refinancing is $3,000 and you save

$150 each month, your breakeven point

is at 20 months. Refinancing is not a

good idea if you plan to move before

this amount of time has passed.

10. The Impact on Your Taxes

If you rely on your mortgage interest deduction to

reduce your federal income tax bill, the reduction will

be less if you refinance and begin paying less interest.

Points paid for the refinancing loan can be deducted

over the life of the new loan. It is a good idea to

consult a tax professional to find out how refinancing

will influence your individual taxes.

Mortgage refinancing can be simplified if you prepare

by knowing the impact your decision will make on your

finances before proceeding. Make sure you consult

your Mortgage Consultant and do not hesitate to ask

additional questions before deciding if refinancing if a

good decision for you.

065. Are You Going To Come Out Ahead

Financially?

The only way you will know if you are going to

benefit financially from the refinancing, you need to

work with the numbers. Some things to consider:

· Paying Points

You can pay points (percentage points of the value

of the loan) or choose not to. You may think that

a zero point mortgage is a great deal, but you may

end up with a higher interest rate. Points are paid

at closing or wrapped into the principal of your new

loan.

· Interest Rate

You should try to get a minimum difference of two

percentage points to make refinancing

worth it.

· Private Mortgage Insurance

(PMI)

Private mortgage insurance is

required if you have less than 20%

equity in your home when you

refinance. You may be paying PMI

with your current loan, in which case this will not

make a big difference. But if you have owned your

home for a while, you may start paying PMI for the

first time when you refinance. Make sure you add

the PMI into the amount of your payment to make

sure refinancing is of benefit. Not all loan programs

have PMI, ask your Mortgage Consultant.

6. Debt-to-Income Ratio (DTI)

This is calculated by taking your gross income and

dividing your monthly credit obligations against it.

Example- You make $1,000 a month and your credit

card and car loan payments total $360 per month.

Your DTI is 36%. The lower your debt-to-income

ratio is the less risk you appear to a bank. Utility

bills, insurance, cell phone are not counted as


If you make ONE ADDITIONAL mortgage payment each year you can shave off years and thousands of dollars from your mortgage.

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bracadabra!!! Mortgage Be Gone! If it were only that simple to make your mortgage disappear… Or is it?

One well known, yet rarely used, mathematical “magic trick” used to pay off your mortgage faster is the ADDITIONAL PAYMENT. It’s simple math: If you make ONE (1) ADDITIONAL mortgage payment each year you will reduce the number of months (term) on your mort-gage. The following example gives you a numerical perspective:

If you have a $200,000 mortgage with a 6.5% interest rate fixed for 30 years, your monthly payment is approximately $1264 per month. Technically speaking this is called your NOTE RATE. What most borrowers don’t take into consideration is the Finance Charge (Interest) – the total dollar amount the credit will cost you. Typically this amount is significant and on a $200,000 loan this amount is over $255,000. Loan Amount: $200,000Interest Rate: 6.5%Term: 30 YearsMonthly Payment: $1264Total Interest: $255,088.98Total Amount This Loan Will Cost You: $455,088.98

But when the ‘magical mortgage disappearing act’ comes into play the above scenario is changed drastically. By simply making one additional payment of $1264 over a twelve (12) month period this is what happens to your mortgage:

Loan Amount: $200,000Interest Rate: 6.5%Term: 30 YearsMonthly Payment: $1264One (1) Additional Annual Payment: $1264Total Interest: $199,098.92Total Amount This Loan Will Cost You: $399,098.92Monthly Term Reduction: 6 Years (or you now have a 24 Year Mortgage NOT 30 Years!)

You have saved yourself over $55,000 and reduced your term by 6 years. I highly rec-ommend any mortgage holder that is considering a refinance to reduce their Rate and Term, meaning they aren’t taking out any cash – they only want to lower their loan term or monthly payment – find an Additional Payment Calculator online and rely on it heavily before making the decision to Rate and Term refinance.

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THE PRO’S & CON’S OF FHA LOANS


n 1934, the Federal Housing Administration (FHA) made mortgages affordable for families previously denied home ownership because of

short-term loans and high interest rates. Loan terms were extended to 30 years and interest rates were typically below those offered by conventional loans. Additionally, the FHA established the first set of appraisal and construction standards for inspecting property before approval of loans, which have affected all areas of the housing industry.

In this article, we will discuss the pros and cons of FHA financing.

PROS

· Low Down PaymentThe required down payment is 3.5%. · Less Stringent RequirementsIncome and credit requirements are not as stringent as those required for conventional loans with low or no down payment.

· Flexibility on Down Payment OriginThe entire down payment can be borrowed from a friend, relative, employer, or other source, or even received as a gift.

· Flexibility on Payment of Closing CostsThe seller or a third party is allowed to help pay the closing costs.

· Lower Loan RatesLoan rates are usually less than conventional, market-rate, or fixed-interest loans.

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· Less Restrictive Underwriting GuidelinesSome of the underwriting guidelines for FHA loans are less restrictive than those of conventional fixed-rate loans, making it easier for the average buyer to qualify.

· Lender InsuranceAn FHA loan insures the lender against loss for the duration of the loan.

CONS

· Restrictions on Ability to AssumeIf your loan originated after December 1, 1986, you must qualify prior to assuming a new mortgage. If your loan originated before December 1, 1986, you must request a release of liability to avoid secondary liability ifs the loan defaults, when selling the property by loan assumption.

· Additional ChargesMIP (Mortgage Insurance Premium) required at closing and can be financed into the loan.

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VA LOANVA LOANVA LOANof the almighty...

died in service, is missing in action (MIA) or is/was a prisoner of war (POW), and who has not remarried.· Discharged for a service-related disability· A Public Health Service officer, military cadet, Naval academy midshipmen, officers of National Oceanic & Atmospheric Administration, merchant seaman with WWII service.Eligible PropertiesVA Loans are only allowed for one-to-four unit properties, including condominiums and manufactured homes.Financial Benefits· No Down Payment Is RequiredThis is probably the most important advantage, as it makes it easier for people who do not have cash available to purchase a home.· Substantial Loan Amount Is AvailableThe VA establishes the current guaranteed maximum amount of the loan allowed – currently in excess of

eterans who qualify for a home loan can receive a loan guaranteed by the Department of Veterans’ Affairs. A Veterans Administration (VA) Loan is a

loan guarantee program, these loans have several advantages not available with conventional loans. Knowing what these advantages are can help you (if you are a veteran) determine if a VA loan is beneficial for your home buying needs.Eligible BorrowersTo be eligible for a VA Loan, a borrower must be any one of the following:· Honorably discharged from the Armed Forces, which includes the Air Force, Army, Coast Guard, Marine Corps and Navy.· A service member on Active Duty· Members of the Reserves and National Guard with at least six years of service· A surviving spouse of an eligible veteran who

V

BENEFITS


$400,000. Your loan can be up to 100% of the reasonable value of the property.· No PMI- Private Mortgage InsuranceEven if you do not make a down payment, a VA loan does not require mortgage insurance, which represents a substantial savings over other loans options that can increase your loan amount and/or added to your monthly payment, increasing your housing costs.· Lower Closing CostsA VA home loan is designed for lower total cost. If a veteran is receiving service-connected disability compensation, they are exempt from funding fees. If a funding fee is necessary, it may range from 2.15% to 3.3% and may be paid out-of-pocket or included in the loan. Additionally, the VA limits what the lender is able to charge for the appraisal, credit check, and the loan origination fee.· No Prepayment PenaltyA prepayment penalty is charged on some loans for early payoff, but not on a VA loan. · Escrowed Property Taxes and Homeowner’s InsuranceProperty taxes and homeowner’s insurance will be escrowed and spread out as part of your monthly payment.Faster Processing· Faster Loan ProcessingSome lenders have VA approval for automatic processing. This means they can finalize a loan without waiting for the VA to review the application or the appraisal after the buyer submits the application and requests a property appraisal.· Faster RefinancingHaving a VA loan makes refinancing easier because you do not have to go through the process of providing income and asset proof, or credit verification.Financing AssistanceThe VA provides counseling for veterans who run into financial problems after buying a home with a VA loan in order to help them avoid foreclosure.Other Advantages· Approval with Less Than Perfect CreditSince the government protects the bank making your VA loan if the loan isn’t repaid, the loan is

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easier to get if you have less than perfect credit.· Lender ProtectionThe VA is not the loan provider, but guarantees repayment of the loan. This protects the lender from loss in case the veteran is unable to fulfill his obligation. This makes VA loans attractive to lenders, so veterans can get better loan terms.· Loan FlexibilityA VA home loan can be used to buy land, build a house, or improve an existing home. It can also be used to refinance a current home loan.

VA home loans are a very good financing option for those who qualify. Since the Department of Veterans Affairs guarantees all loans, they aren’t risky for a bank. Therefore, banks are open to providing loans for veterans wishing to purchase a home. Talk to your Mortgage Consultant if you believe you qualify for a VA loan; they can help you start the VA loan application process.


CONVENTIONAL LOAN


OF THE

T he term “conventional mortgage” refers to any mortgage loan not insured or guaranteed by the federal government. Generally speaking, a conventional loan is for homebuyers with a steady income, good credit, and funds available for a down payment. Although they appear straightforward, these useful tricks can help if a conventional loan is your choice for your home loan.

PREPARATIONDocument Your Finances.Make sure you have good, ongoing records of your finances, including your assets, bank statements and investment account statements, and tax returns with W-2s. In addition, you need to be able to explain anything out of the ordinary such as a gift from a relative or an employment bonus.


14 Educate Yourself You have begun this important initial step in the loan process by reading this article. Try to know as much up-front as possible about what a conventional loan entails, including the process. Refer to the article titled “Steps in the Mortgage Process” on page 3. Additionally, learn the meaning of any mortgage terms with which you are not familiar. Ask questions of your real estate professional and your lending insti-tution if you have areas you don’t under-stand. FINANCINGConsider a Higher Down PaymentIf you are able to do so, putting down more money can reduce the cost of your points. Lock In the Interest Rate It is possible interest rates will climb, so if you are planning to obtain a mortgage, lock in the rate as soon as you can to en-sure your rate doesnt change. Pay Attention to Tax DeductionsMake all comparisons on an after-tax basis. Mortgage interest is deductible; appraisal, application fees, and title insur-ance are not. Points on an original mort-gage can be deducted in full when you take the loan out, but points on a refinanc-ing are prorated over the life of the loan. If you are refinancing, you can deduct the unused balance of the first refinancing’s points when you do the second refinanc-ing. YOUR LOANEven when you know you will have a conventional mortgage loan, there are still some loan decisions you will need to make. Consider the following: An ArmIf you are planning to keep your house for less than ten years, consider taking ad-vantage of a lower interest rate with a 7 to 10 year ARM. These mortgages can have interest rates as much as 1% below a fixed-rate mortgage. However, a fixed-rate

loan is a better choice if you are not sure how long you plan to stay in this home. Remember; if interest rates fall, you can al-ways refinance. Rate ModificationAsk your current lender for a rate modifica-tion. There is a one-time fee, but if rates have fallen, your lender may be willing to lower the rate on your current mortgage loan to avoid you refinancing with someone else and losing your business. OTHER TIPS Do Not Close On a Friday or HolidayIf you’re closing for a refinancing is right be-fore a weekend or holiday, the funds will be in transit for more than one or two days and you may need to pay interest on the same money to both the old and the new lender.

Avoiding PMIIf your down payment is less than 20% of the value of the home, you will be required to pur-chase private mortgage insurance (PMI). With a conventional mortgage, once your reach 20% equity in your home, you do not have to pay PMI. Keep this in mind when making financial decisions regarding your convention-al mortgage loan.

Consult your Mortgage Consultant if you have any questions or concerns about using a con-ventional mortgage for your home financing. Remember; preparation as well as knowledge about financing and the nature of your loan are important for a comfortable, convenient home buying experience.


FAST! EASY! CONFIDENTIAL! 1-888-425-5504

HASSLE-FREE MORTGAGE QUOTES IN MINUTES

Christensen Financial, Inc. 2625 Cumberland Pkwy Suite #275 Atlanta, GA 30339 1-888-425-5504 Branch NMLS: 484740 Fair Housing /Equal Opportunity Lender

Alabama License #21433.003: Louisiana: South Carolina BFI License #MLB-484740:

Tennessee License #109381-118: Virginia MC-5371: Georgia Residential Mortgage Licensee 21045

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