7 Steps to Maximize Mortgage Refinancing Savings When the time is right to refinance your mortgage, you’ll probably want to make it as painless as possible. It’s a natural inclination to simply contact your current mortgage holder and take them up on one of the many offers they may have made to you through emails and direct-mail promotions. However, to realize maximum savings and make the whole process worthwhile, here are seven important items to put on the to-do list. 1. Know what you owe Before you trigger a refi, review the balance and terms of your current mortgage. This will help you determine how much you’re likely to save when you take into account prevailing refinance rates, the payoff with your current lender and the fees and closing costs you’ll encounter. You can also get a good idea of your best possible savings scenario, as well as the minimum acceptable loan terms you’ll want to negotiate. Compare mortgage rates now 2. Check your credit score If your creditworthiness has improved significantly since you took out your existing mortgage, you could be in for a pleasant surprise. A higher credit score can earn you a lower mortgage rate. Review your credit history for accuracy by getting a free report from AnnualCreditReport.com, the official website set up under the federal law that guarantees free reports for consumers. Then consider purchasing your current credit score from one of the three main credit bureaus. There are many variations of the popular FICO score; be sure to ask for the one most commonly used by mortgage lenders. Many banks and credit card companies offer free credit scores to their customers. These can be helpful, but you may not be getting the score most relevant to a mortgage application. Research conducted by the Consumer Financial Protection Bureau found that different scoring models can change the credit-quality category for nearly one-quarter of consumers. (For example, from “good” to “average.”) 3. Put a freeze on new debt If everything checks out OK with your credit history, lock in your qualifications by resisting the urge to make additional credit card purchases or open new credit accounts. If anything, hoard available cash and pay down any debt that you can. Protecting your credit score can be instrumental in maximizing your mortgage refinance savings. 4. Shop at least 3 lenders Research shows that borrowers obtain the biggest savings by shopping at least three lenders. In a recent study, the CFPB found that 47% of consumers consider only one lender when seeking a mortgage, potentially missing out on thousands of dollars of savings by overlooking a home loan lender with a lower interest rate. 5. Refi away mortgage insurance If you put less than 20% down on your original mortgage, you’re probably paying for mortgage insurance. That’s a fee that protects the lender in the event of borrower default. By now, your home’s appreciation may have given you enough equity that further mortgage insurance premiums are unnecessary — but some lenders don’t have to automatically terminate mortgage insurance until the balance on your loan falls to 78% of the original purchase price of your home, or until the midpoint of your mortgage payoff, whichever comes first. Refinancing away — or at least lowering — your mortgage insurance premiums can provide significant savings, particularly if your original home loan was backed by the Federal Housing Administration, or FHA. 6. Forget cash-out and extended-term refis It’s a common temptation to take a cash-out refinance, which converts your equity to cash that you can spend. Maybe it’s even for worthy causes, like funding a college education or paying off high-interest credit cards. The thing is, you’re raiding your home’s value — and that can be a slippery slope, especially if home values start heading south again. And you might decide you want to move in a few years, only to discover that your home equity has been eliminated by that previous spending. Another possible pitfall: extending the payoff term of your home loan. Sure, it can lead to a lower monthly mortgage payment, but it will greatly increase the interest you’ll pay over the long(er) term. Real savings come from paying off debt, not adding to or extending it. 7. Evaluate your mortgage strategy Maybe your current home loan is an adjustable-rate mortgage, and you think interest rates are sure to rise. Or, you have a higher-rate fixed-term loan and believe that a lower-rate ARM is the way to go. Depending on your circumstances, including short-term and long-term housing needs, it may be time to rethink your mortgage strategy. By taking a close look at various scenarios, you may find that a different type of mortgage better suits your needs and saves you a money. All set? Prepare for the paperwork With a firm savings strategy in mind, it’s time to start the application process. If it’s been a few years since you’ve tackled a home loan, prepare yourself for the paperwork. The days of “low doc” or “no doc” mortgages are over. You’ll likely face more disclaimers and fine print than you’ve seen in a while. And you may encounter your share of LOEs — letters of explanation — requesting that you explain anything from your employment history to random bank deposits. In the end, it’s likely to be well worth all the effort, as your savings grow with each refinanced mortgage payment.   This article originally appeared on NerdWallet.    

The Property Line: Why You Should Stop Waiting to Sell Your Home Real estate agents have an urgent message for homeowners: Now is the time to sell. “A lot of people are missing the best market now by waiting,” says agent Kris Lindahl. Home sellers wield formidable negotiating mojo because demand outweighs supply. Buyers outnumber sellers, as relatively few owners are putting their homes on the market. The supply of homes for sale settled at an unprecedented 1.9 months in January, much lower than the six-month supply that marks equilibrium between sellers and buyers. Sellers call the shots, and the proof is in the pricing. The median home price rose to $303,900 in January 2021, a 14.1% increase compared with 12 months before, according to the National Association of Realtors. Does that make it sound like sellers have it easy? Most don’t, because they’re looking to buy, too. Here are some factors sustaining this seller’s market, and the decisions that owners will face when listing their homes for sale. Housing market gone haywire It’s tempting to blame the coronavirus for the supply shortage — to say that homeowners want to bar strangers from their homes until the pandemic wanes. But the meager supply of existing homes has an additional cause. Most people sell their home to upgrade, downsize or move to a better location. But with few dwellings on the market, would-be sellers “can’t find another house to move to,” says Lindahl, CEO and founder of Kris Lindahl Real Estate in the Minneapolis suburb of Blaine, Minnesota. It’s a self-reinforcing market failure: Would-be sellers worry that they won’t find their next house, so they stay put, exacerbating a shortage that deters other owners from putting their homes on the market. Rapidly rising prices worsen the problem. Would-be sellers think, “I’m going to end up paying more than I would expect on a comparable home,” even when downsizing, says Marc J. Jenkins, a real estate agent with Prime Property Partners, based near Atlanta. So they keep their homes off the market. Buy first or sell first? Sellers have two escapes from the not-enough-homes-to-buy trap: Buy first, then put up their home for sale. Accept an offer from a buyer who’s willing to wait while they find a place to buy. “I would say buy first, because this way they can take their time,” says Sonia Figueroa, an agent with EXP Realty in Chicago. “They’re not feeling rushed, and they’re not just going to jump into any house, just because they need to hurry up and move out.” She recognizes that her advice presumes that the seller can secure preapproval for a mortgage to buy the next home while paying the mortgage on the current one. Many people don’t earn enough to qualify for two mortgages at once, even briefly. “In that instance, then, unfortunately, it’s going to be a situation where we just start looking as soon as they put the property on the market,” Figueroa says. Lindahl endorses option 2, in which the buyer agrees that the sale is subject to the seller finding suitable housing. Buyers shun this contingency in a normal market, but today’s market has moved away from normal. Sellers dictate terms. Sellers can even negotiate a rent-back agreement, in which the buyer closes on the property, then lets the seller stay in the home for a few days or weeks at a daily rental rate, Lindahl says. Multiple offers are routine The scant supply of homes benefits sellers in ways besides high prices: Homes sell fast, and sellers need not fix them up. In a balanced housing market, Jenkins asks sellers how much notice they need before they skedaddle for a showing (a visit by prospective buyers). Nowadays, he dispenses with showings and instead holds open houses. “At this point, I’m telling my sellers, ‘Pick a Saturday,’” he says. “‘Give me four or six hours, and I’ll sell your house.’” He says 30 people showed up for a four-hour open house recently. Jenkins tells sellers in the Atlanta metro area to expect “a flurry of offers” within days, and to sort through them and choose the best one “in a week, tops.” A similar dynamic prevails in Chicago, provided the home sellers have kept the place in good shape, Figueroa says. “If they price the property reasonably, then most likely they’ll have multiple offer situations,” she says. A house needs to be in good, not great, condition, Figueroa says. Her clients ask what it would take to get top dollar without, say, renovating the kitchen. She replies that they simply need to declutter, clean the carpets and maybe repaint the walls. Jenkins says that even when sellers do nothing to fix up the house, the winning bidders feel relief instead of buyer’s remorse. “There’s a heavy emotion of the fear of missing out right now,” he says. Buyers prefer versatility In the era of COVID-19, buyers prefer certain amenities. Lindahl says that this year, homes replaced gyms, restaurants and offices. The classroom inhabits a nook or a cranny. Families feel sardine-canned. Consequently, the cacophonous open floor plan has lost appeal because occupants need doors to provide quiet and privacy. “Open floor plans aren’t the most popular right now because the more sectioned-off a home is, the more they can do in their home,” Lindahl says. On the other hand, buyers in 2021 will settle for the imperfect. “You might have people that say, ‘I need extra space for an office, but I’ll take a large bedroom and I’ll put my desk in there,’” Jenkins says (cue the sad trombone).     The article The Property Line: Why You Should Stop Waiting to Sell Your Home originally appeared on NerdWallet.    

What First-Time Home Buyers Should Know About Fixer-Uppers A perfect home can be hard to find these days, especially if you’re a first-time home buyer on a budget. That could be why nearly 60% of home shoppers age 18-34, many of whom may be buying for the first time, say they’re open to a house that needs renovations, according to a 2019 survey from Realtor.com. Fixer-uppers — existing homes in need of updates or repairs — usually sell for less per square foot than homes that are in good shape, says Dan Bawden, president and CEO of Legal Eagle Contractors in Houston, Texas. But before you start bargain hunting, you may want to practice your deep cleansing breaths. Simple projects can become complicated once the demolition starts, and if costs end up higher than estimated, finishing your to-do list can take longer than you think. Use these pointers to help decide if buying a fixer-upper is right for you. 1. Buying a fixer-upper can be a shortcut to homeownership High prices, limited inventory, weak credit scores and saving a down payment: These challenges often stand between new buyers and their first home. Buying a fixer-upper is one way you may be able to overcome them. Because they need improvements, fixer-uppers are typically priced at a discount and may get passed over by buyers who can pay for move-in-ready homes. Also, homes that need work are still eligible for loans with relaxed requirements, like 3% minimum down payments or the ability to qualify with a credit score in the 500s. 2. It matters which mortgage you choose Renovation loans let you finance a house and improvements at the same time. With a renovation loan, you can pay off improvements over a longer period of time and at a lower interest rate than other types of financing. Options include: FHA 203(k): Offered through the Federal Housing Administration, FHA 203(k) loans allow lower income and credit scores than conventional mortgages. They can be used for most improvement projects. VA renovation loan: The Department of Veterans Affairs recently updated its VA loan guidelines to include the purchase and renovation of a home. A VA-approved contractor is required, eligible projects are somewhat limited and your lender may charge a construction fee. HomeStyle: Guaranteed by Fannie Mae, HomeStyle mortgages require higher credit scores than FHA 203(k) loans. But almost any improvements are eligible, including “luxuries” like a pool or landscaping. CHOICERenovation loan: Guaranteed by Freddie Mac, this mortgage allows improvements that help homes withstand natural disasters, among other upgrades. And borrowers can make repairs themselves to earn a down payment credit. A renovation loan may help cover your mortgage payments if you have to live elsewhere while improvements are in progress and may include extra funds in case projects exceed the estimated cost. 3. Match the house to your skills and budget “There’s less-than-perfect shape and then there’s total disrepair,” says Carolyn Morganbesser, senior manager of mortgage originations at Affinity Federal Credit Union in New Jersey. Hire a professional contractor to estimate the cost of all the work that’s needed before you make an offer. The house that’s right for you depends on your skills, schedule and the way you plan to finance the improvements. If you get a traditional mortgage, you’ll have to pay for upgrades with cash, a credit card or a personal loan. These boot-strapped financing options might put a low ceiling on your budget and limit you to one project at a time, so a home that needs simpler repairs may be right for you. A renovation loan can expand your budget and allow you to tackle larger projects simultaneously, which may make it more reasonable to buy a house that needs a lot of work. And whether you DIY or hire a pro, don’t be surprised if there are roadblocks along the way. “It always takes longer than you thought it was going to take because that’s the nature of remodeling,” Bawden says. If your fixer-upper is a foreclosure, brace for delays during the mortgage offer process as well, Morganbesser adds. You’ll be negotiating with the bank that owns the property, and they may reject your offer more than once, she says. That makes for a slow start to a project that could take months. 4. Your lender will be watching Renovation loans often require extra consultations, inspections and appraisals designed to protect your lender’s investment. A standard FHA 203(k) loan, for example, requires you to hire a HUD consultant who’ll approve your plans, manage contractor payments and inspect the property after each phase of work is complete. Using the CHOICERenovation loan’s sweat equity provision means you’ll go through two appraisals — before and after improvements. The appraiser will confirm that workmanship and materials match what’s promised in the contract, and that the newly renovated home lives up to its estimated value. Don’t be frustrated by these additional hurdles; they help to ensure the work is on-time, on-budget and up to snuff. 5. You’ll create a home that’s uniquely yours There’s no doubt that buying a fixer-upper is more work than a move-in ready house, but the reward most likely will match the effort. When the dust clears and the paint dries, your first home will be full of personal touches rather than the remnants of someone else’s life. A house that’s just how you want it without the premium price tag of new construction? Now that’s a first-time home buyer’s dream. The article What First-Time Home Buyers Should Know About Fixer-Uppers originally appeared on NerdWallet.