21 Feb 2018
By Kevin Gahagan

Questions and Answers Regarding Escrow Accounts

Mortgage

Questions and Answers Regarding Escrow AccountsWhether you are purchasing a new home or you are considering applying to refinance your home, chances are the lender will require an escrow account. These accounts are often a source of confusion for homeowners. In reality, these accounts benefit the homeowner and help protect the lender.

What is an escrow account?

Escrow accounts are sometimes called “impound” accounts. These accounts are set up to help manage payments of property taxes and homeowner’s insurance. Depending on the individual requirements of the lender, you may be asked to pay as much as one-quarter of these upfront and they will be put into the account for the purposes of making payments.

Who controls escrow accounts?

Lenders have complete control over escrow accounts. However, homeowners are entitled to receive an annual statement advising them of their escrow balance. If there is an increase or decrease in insurance payments through the year, a homeowner may request the lender evaluate the escrow account and change the amount that is paid.

Is interest paid on escrow accounts?

There is no mandate to pay interest on escrow accounts. When you refinance your home, the funds for your taxes and insurance are calculated into your overall payment. The portion that is to be used to pay taxes and insurance is placed in escrow. Federal laws do not require lenders to pay interest on these accounts.

What happens if I sell my home or refinance?

When you sell or refinance your home, your escrow account will be credited at closing. The amount may be used to lower your out-of-pocket costs or may be turned over to you as a direct payment.

What happens if there is not enough/too much money in escrow?

If your lender has underestimated your escrow payments, they may request you send an additional payment to make up the difference. In the event you are paying too much into escrow, your lender has the discretion to release the overage amount directly to you. In most cases, shortfalls or overages of $50 or less are typically not a major concern.

If your lender requires you to have an escrow account for the taxes and insurance portion of your mortgage payment, it can be very helpful. Escrow accounts help ensure you do not have to come up with a large payment once a year for insurance or quarterly for taxes.

In some cases, if a lender does not require an escrow account, as a borrower, you may request they escrow your taxes and insurance for convenience.

20 Feb 2018
By Kevin Gahagan

What’s Ahead For Mortgage Rates This Week – February 20th, 2018

Financial Reports

What’s Ahead For Mortgage Rates This Week – February 20th, 2018Last week’s weeks economic releases included readings on the NAHB Housing Market Index, housing starts and building permits issued and consumer sentiment. Weekly readings on mortgage rates and new jobless claims were also released.

NAHB: Builder Confidence in Housing Market Holds Steady in February

The National Association of Home builders reported an index reading of 72 for its Housing Market Index in February. January’s reading was also 72; readings over 50 indicates that more builders than fewer are confident about housing market conditions.

Three readings comprising the overall NAHB HMI reading include builder confidence in current market conditions, which was one point lower in February at 78. Builder confidence in housing market conditions in the next six months rose two points to an index reading of 80.

This was the highest reading for future housing market conditions since before the recession. Builder confidence in buyer traffic in new housing developments was unchanged at 54.

Builders surveyed cited strong labor markets and short supplies of pre-owned homes as fueling confidence in current market conditions, but identified ongoing labor and lot shortages and rising materials costs as concerns for builders.

Housing Starts, Building Permits Issue Rise in January

High builder confidence was reflected in readings for housing starts and building permits issued in January. Housing starts rose to their highest level in more than 10 years. The annual pace of housing starts reached 1.326 million starts.

January’s reading exceeded expectations of 1.324 million starts and December’s reading of 1.209 million housing starts. January’s starts reflect strong builder confidence readings and may also signal future relief for short supplies of available homes and high demand for homes in many metro areas.

High demand for homes has caused rapid appreciation in home values and sidelined first-time and moderate-income buyers in areas with high home values. According to the Commerce Department, building permits issued rose to 1.396 million from December’s1.380 million starts annually.

The University of Michigan reported the second highest reading for consumer sentiment in 14 years. February’s reading of 99.9 was higher than expectations for a reading of 95.3 and January’s reading of 95.7Analysts said that recent tax cuts likely stabilized consumer outlook in spite of volatile financial markets.

Mortgage Rates, New Jobless Claims Rise

Freddie Mac reported higher mortgage rates for all three types of mortgages it tracks in its Primary Mortgage Market Survey. Rates for a 30-year fixed rate mortgage rose an average of six basis points to 4.38 percent.

The average rate for a 15-year fixed rate mortgage was seven basis points higher at an average of 3.84 percent. Rates for a 5/1 adjustable rate mortgage averaged 3.63 percent, which was six basis points higher than the prior week.

New jobless claims were higher last week with 230,000 new claims filed, which matched expectations and exceeded 223,000 new jobless claims filed the prior week.

What‘s Ahead

This week’s economic releases include readings on existing home sales along with weekly readings on mortgage rates and new jobless claims. Financial markets were closed on Monday for President’s Day.

16 Feb 2018
By Kevin Gahagan

Recently Inherited a Home That You Don’t Need? Here’s How to Get It Sold Without Too Much Stress

Home Seller Tips, Mortgage

Recently Inherited a Home That You Don't Need? Here's How to Get It Sold Without Too Much StressHas a loved one or family member recently passed on and left you with their home? Inheriting a house can be a delightful gift, but it can also present a significant number of challenges that you must navigate.

Let’s explore how to deal with an inherited house and, should you decide to, how to sell it without incurring too much stress.

Are Emotions Involved?

The death of a family member or other loved one can be a trying time emotionally. Depending on how the deceased left the property, you may also have to deal with cleaning out personal belongings and reviving old memories. A battle over a will or the proceeds of an estate can compound the situation, making things worse.

If you are emotionally involved, it is best to work with a real estate agent who can do much of the heavy lifting. That way you can focus on supporting your family and keeping your stress levels down.

Understand Your Legal Obligations

Although real estate inheritance is common, there are still some legal issues that must be considered. As such, you will need to understand what your legal obligations are regarding the will or estate process. Are you the executor of the will, or is someone else? Is the property included in a trust, or is it free-standing and gifted directly to you? Has the probate period passed, or can a family member or relative still challenge the will? If you haven’t already, it is best to speak with a real estate professional or experienced lawyer to get their advice.

Consider The Tax Implications

As with any financial windfall, there are going to be tax implications that need to be considered when selling an inherited home. For example, it’s unlikely that you will qualify for the home sales tax exclusion unless you have been living in that house as your primary residence. Once you sell the home, you will also need to report the proceeds of the sale to the IRS. There are also a variety of different taxes that need to be factored in, including estate taxes, inheritance taxes and more.

Consult An Experienced Real Estate Agent

Selling a home that you have inherited in a will or as part of an estate can be an emotionally draining process. Before you make any moves, it is best to speak with a real estate professional. Contact our office at your convenience and we will be happy to meet with you and share our guidance.

16 Feb 2018
By Kevin Gahagan

Why Should One Consider Refinancing Their Mortgage Now?

Mortgage

Why Should One Consider Refinancing Their Mortgage Now?Refinancing a mortgage is a golden opportunity to lock in today’s low interest rate for the next 15 or 30 years. While interest rates now are still low, there’s a good chance they may be heading up in the coming months.

The Fed may not maintain the current bond purchasing level forever, and any changes that the Fed makes will likely affect mortgage interest rate levels.

As interest rates remain near low for 30 and 15 year mortgages, homeowners can benefit greatly from a refinance. Several types of people in particular should consider refinancing.

Carrying a high rate

Anyone with an interest rate well above today’s level should think about a refinance. Unless the homeowner is planning to sell within the next few years, a refinance will almost always save money in the long run if the rate can be lowered by at least a percent.

Switching from FHA to conventional

Given that FHA mortgages now carry mortgage insurance premiums for the life of the loan, it makes a lot of sense for borrowers to switch away from them when they can. Refinancing may be possible once the homeowner has built up enough equity to qualify for a mortgage from a traditional lender, without the burden of mortgage insurance.

ARM coming up on adjustment

The low rate of an adjustable rate mortgage may not stay low beyond the first few years of the mortgage. After this point, the rate adjusts each year based on market trends. Rather than paying the adjusted rate, which is almost always higher, homeowners can refinance into a new fixed rate mortgage to lock in one of today’s low fixed rates for the duration of the mortgage.

Cash out to consolidate debt

Homeowners carrying high-interest debt, like credit cards and personal loans, can often benefit from consolidating it into their mortgage. As long as they maintain at least 20 percent equity in their home, they can get a cash-out refinance for an amount higher than their current mortgage balance. They can then use the difference to pay off high-interest debt.

15 Feb 2018
By Kevin Gahagan

4 Home Improvement Shortcuts That Can Lead to Disaster — and How to Avoid Them

Around The Home

4 Home Improvement Shortcuts That Can Lead to Disaster -- and How to Avoid ThemAre you starting to get the renovation itch? With spring on the way, you might be tempted to launch those home improvement projects that you contemplated over the winter. However, as with any project, you will want to get things right. Let’s take a look at four renovation shortcuts that can lead to disaster and the steps you can take to avoid them.

Shortcut #1: Not Understanding Your Home’s Structure

Before you undertake any renovation involving your home’s structure, you must be confident that you know exactly what is where. For example, do you know what is inside of your walls? You might be surprised to learn what is hiding behind those pieces of painted drywall. Electrical wiring, plumbing, structural supports, insulation and possibly even soundproofing material can all be damaged by misplaced nails or cuts. You might also discover damage caused by pests, mold or water which needs to be repaired.

Shortcut #2: Not Measuring Everything (At Least) Twice

You have likely heard this tired cliché: “measure twice, cut once.” However, what you may not realize is that was intended for professionals. If you are new to renovating, you will want to measure at least twice, if not three times or more. A small measuring mistake of one-half-inch can mean the difference between your new cabinets fitting and not fitting. Or your tiles lining up with one another or not.

Shortcut #3: Not Using Quality Tools And Materials

Another shortcut that homeowners try to take when starting do-it-yourself home projects is using cheaper materials or whatever tools they have handy. Keep in mind that you are investing in your home and that you are saving money by not paying for the labor. Use those savings on top-quality materials that will withstand the test of time.

Shortcut #4: Not Calling A Professional After You Mess Up

Finally, one shortcut that must be avoided at all costs is not calling a professional if you have made a significant mistake. If you end up drilling into the wrong wire, or you damage something else beyond your repair skills, don’t try to patch it up. Swallow your pride and make the call. You will be able to sleep soundly knowing that whatever was damaged isn’t at risk of failing later.

Renovating your home is the best way to increase its value, but even the smallest mistake can blow up into a major problem in the future. To learn more about your home’s value, contact us today.