Blog – Page 171 of 790 – Fred Gruber - First Rate Financial Group

14

Apr

Mortgage

Common Fees During Refinancing

Common Fees During Refinancing As interest rates fluctuate, you might think about refinancing your mortgage. This is the cost of taking out a new home loan to replace the one you currently have. If you get a significantly lower interest rate, you could save tens of thousands of dollars over the life of the mortgage. On the other hand, you need to think about potential expenses you might incur during the refinancing process. Because you are taking out another home loan, you may need to pay closing costs a second time. What are some of the most common expenses you might have to pay?

The Mortgage Application Fee

One of the most common expenses is the mortgage application fee. Essentially, this is a fee that the lender will charge for opening up a new application on your behalf. The fee can vary significantly depending on the lender you use, but it is usually a few hundred dollars.

A Home Appraisal

When you took out your first mortgage, the lender probably required you to get your home appraised. The lender wants to make sure they are not financing a home that is not worth as much as its price tag. You still need to get your home appraised again if you decide to refinance your mortgage. The lender wants to make sure they understand how much the house is worth before they give you a loan for it. A typical home appraisal is also a few hundred dollars.

Title Search And Title Insurance

The lender might also require a title search and title insurance. This is important for making sure you protect yourself in the event someone else still holds the title to your house. A title search is usually a few hundred dollars, and title insurance could be $1,000 or more.

Loan Origination Fee

Most lenders charge a loan origination fee that is approximately one percent of the value of the loan. Again, this can vary from lender to lender as well.

Understand These Fees

There are lots of potential fees that a lender might tack on. Fortunately, you do not necessarily need to pay for all of them. Always ask the lender whether they might be willing to waive some of these fees to make the cost less expensive.

13

Apr

By First Rate Financial Group

Mortgage

Taxes And A Cash-Out Refinance: What To Know

Taxes And A Cash-Out Refinance: What To Know If you decide to go through the refinancing process, there are several options available. One of the most popular options is a cash-out refinance. Essentially, you capitalize on the difference between current interest rates and the interest rate on your home loan to keep your payments the same while also drawing equity out of your home in the form of cash. You can use this money to fund your retirement, complete home repairs, or do a renovation project. Even though you can do just about anything you want with this cash, what do you need to know about a cash-out refinance and taxes?

You Do Not Have To Pay Taxes On Your Cash-Out Refinance

You don’t have to pay taxes on the cash stemming from a cash-out refinance. The IRS generally looks at this money as a loan that you will be expected to pay back. Therefore, you don’t have to report it on your taxes. On the other hand, there are other implications you need to know.

The Interest On Your Mortgage Is Tax-Deductible

One of the biggest tax deductions you might claim is the interest on your mortgage. If you want to claim your mortgage interest as a tax deduction, you will need to itemize your deductions on Schedule A. Furthermore, there is a limit to the amount of mortgage interest you can claim on your tax forms. If you have questions about how to handle your mortgage interest on your taxes, you should talk to a tax professional or an attorney who can help you.

Consider Setting Up A Home Office

You might even want to use the money from your cash-out refinance to build a home office. If you are self-employed and working from home, you might be able to deduct the expenses related to your home office. Again, you need to be familiar with the requirements related to your home office if you want to claim this deduction. A tax professional can help you.

Be Aware Of The Implications Of Refinancing And Taxes

These are a few of the most important points you should keep in mind regarding taxes and the refinancing process. Reach out to a tax professional with any questions.

12

Apr

By First Rate Financial Group

Mortgage

Understanding Your Debt To Income Ratio: What It Means

Understanding Your Debt To Income Ratio: What It Means If you are looking for a home, you might need to finance it using a lender, such as a bank or a credit union. There are a number of factors that will influence whether your mortgage application is approved. Then, these same factors will play a role in the terms the lender might offer you. One of the most important factors is called the debt to income ratio, or DTI. It is important to understand how this will impact your mortgage application.

What Is A Debt To Income Ratio?

Your DTI is important to the lender because this allows the lender to figure out the likelihood of you paying your mortgage on time. The less debt you have, the more financial stability you have to pay a potential mortgage.

To calculate your debt to income ratio, you need to calculate all the bills you have for the upcoming month. For example, if you have rent and a car payment, you add these numbers together. Then, you divide this number by your gross monthly income. If your rent is $900 and your car payment is $200, your total debt is $1100. Then, if you earn $3300, divide $1100 by $3300. This is about 33 percent.

Student Loan Debt Is A Driving Factor

With many members of the younger generation getting ready to purchase a house, it is important to understand the impact of student loan payments. Because a lot of potential home borrowers have student loans to pay back, their debt-to-income ratios will be significantly higher. This could make it harder for younger borrowers to get qualified for a mortgage, particularly one with favorable terms.

How To Improve Your Mortgage Application

Before you apply for a home loan, you should try to improve your debt to income ratio by paying down your existing bills. For example, if you have credit card debt, this will be included in your debt to income ratio. Try to pay this off before you apply for a mortgage. You should try to pay down your student loans as much as possible before applying for a mortgage as well. The less debt you carry, the more likely your mortgage application will be approved.