Seth Jacobs – Maine Mortgage Banker / Broker

10 Mistakes to Avoid when Shopping for Home Loans

Home-buying in Maine should be one of the most exciting experiences of your life. At the same time, it is important not to let the excitement overcome your better judgement. If you just avoid some common mistakes, you can be as excited about your decision ten years from now as on the day you move in. Here are 10 mistakes to avoid when shopping for a property and a home loan:

1. Failing to budget properly. You may think you have a rough idea of what you can spend, but you won’t know for sure unless you take the time to document your past expenses. If possible, use a year’s worth of expenses so you account for any seasonal items. Once you think you know what you could afford to put toward mortgage payments, try setting that amount aside for a few months. This will be a good dry run, as well as a way of raising money for a down payment.

2. Accepting the real estate agent’s definition of what you can afford. Real estate agents often do a rough estimate of how big a home loan you can afford, based on your household income. While you might qualify for that home loan on paper, that doesn’t mean you’d be comfortable with the payments. Go with an estimate based on what your budget tells you.

3. Keeping up with the Joneses. Some home buyers overreach in buying a home, trying to match what their friends purchased or impress their families. Once you move in though, you’ll find the most enjoyable home is one you can readily afford.

4. Not knowing the market. Houses, properties, and neighborhoods are far from uniform, so it can take a while to get a feel for what values are like in a particular area. Don’t fall in love with a house too quickly–the more you shop around, the better you’ll know which characteristics suit you best, and what prices represent a good value.

5. Expecting your income will keep going up. Since people often buy a home early in their careers, they tend to assume that the mortgage may become easier to afford in the future because their incomes will naturally go up over time. More recently though, with unemployment rising and income growth slowing, this hasn’t been such a sure thing. Be sure you can afford your home loan from the start.

6. Neglecting to save enough up front. Closing on a house is expensive. Besides your down payment, there are a variety of fees and expenses for things such as mortgage processing, insurance, home inspection, and lawyers. Make sure you leave a cushion, rather than getting caught short at a crucial moment.

7. Not bothering to shop around for mortgage lenders. Mortgage rates not only vary from day-to-day, but they can also be very different from one mortgage lender to the next. Shopping around gives you a better chance of finding the best rates, as well as giving you a wider choice for choosing a Maine mortgage lender whose service makes you feel comfortable.

8. Leaving points and fees out of mortgage comparisons. Mortgage lenders may quote mortgage rates in different ways–some with points paid up front, some without. Others may offer low rates but make up for it with higher fees. There are mortgage calculators that can help you make comparisons that include points and fees.

9. Not looking into special programs like VA or FHA mortgages. These are mortgage insurance programs that give lenders confidence in making home loans to borrowers with limited or less-than-perfect credit histories. While FHA mortgages require that you pay a mortgage insurance premium, FHA mortgage rates may well be lower than you could get otherwise unless you are a saint with a large down payment. One of the first things you should discuss with a Maine mortgage lender is whether you qualify for a VA or FHA mortgage.

10. Not understanding the risk of adjustable-rate/flexible-payment mortgages. Adjustable-rate mortgages, as well as those with flexible payment options, give borrowers more latitude to take advantage of certain market conditions. However, they also involve the possibility of monthly payments going up in the future, and sometimes by a significant amount. Unless you have a thorough understanding of the risks involved, you may want to lock in your monthly payment with a fixed-rate mortgage.

Face it–you may only buy a home once or twice in your life, so you’ll probably never get a chance to gain much experience with the process. However, you can learn from the experiences of others by avoiding the above mistakes.

Simple Ways to Save More

On average, families spend $1,900 a year on utility bills. Much of the money is wasted on inefficiencies. Save hundreds of dollars (and make your home more comfortable) by following low-cost & no-cost steps:

1. Install programmable thermostats;

2. Replace conventional lighting with compact fluorescent bulbs;

3. Caulk & weatherstrip doors/windows;

4. Turn off computers & monitors when not in use;

5. Use power strips for electronics (turning strips off when equipment isn’t in use);

6. Lower hot water heater thermostat to 120°F;

7. Take short showers instead of baths;

8. Wash only full loads of dishes & clothes;

9. Replace or clean furnace filters monthly;

10. Purchase ENERGY STAR rated appliances & products.

For more energy-saving ideas, check out, greenmadesimple.com, and energystar.gov.

Know the answers to these questions before you sign on the dotted line.
Now more than ever, Americans are discovering the importance of having a handle on their finances. Budgeting projected monthly expenses and future investments helps consumers determine whether or not home ownership is financially feasible. By addressing the following key questions with one of our mortgage specialists you can gain a better understanding of the mortgage process and ensure you obtain the product that best fits your needs and circumstances.

• What documents must I provide and what might delay the mortgage approval process?

Prepare to be inundated with personal, income, employer, asset and liability questions. Get a head start and avoid any potential delay in your mortgage approval by checking your own credit file and gathering the required documents a couple of months prior to shopping for your mortgage.
The following are just a few of the necessary documents you will need to supply in order to complete your mortgage application:
• Earnings: W-2 forms, recent pay stubs and tax returns for the past two years.
• Employment: Copy of a recent paycheck stub that displays your full name, Social Security number, your year-to-date earnings and the name and address of your employer.
• Additional income: Documents to show you have other sources of income, which may include a second job, overtime, commissions and bonuses, interest and dividend income, Social Security payments, alimony, child support, VA and retirement benefits.
• Debts: A full list of your outstanding debt and creditors, such as credit cards, car loans, student loans, child support, etc., along with the minimum monthly payment and balances.
• Assets: Records of investments including real estate and auto titles, stock/bond certificates and mutual funds.
Get a full checklist of application requirements by contacting your Maine Mortgage Specialist.

• What are the qualifying guidelines for my loan?

Once you have completed the mortgage application, you will be presented you with the products that best fit your financial situation. The loan programs offered will require that you meet several income, employment and credit guidelines.

• How will my down payment affect the cost of the loan?

The more money you can afford to put down the better. A large down payment will either reduce your mortgage payments and/or enable you to purchase a bigger, more expensive home. Generally, lenders require a down payment anywhere between 2 percent and 20 percent of the home sale price.

• What is the annual percentage rate of the loan?

Use the annual percentage rate, or APR, as a general guideline when comparing your loan options. The APR is designed to represent the true cost of the loan, preventing lenders from concealing fees and upfront costs from the borrower. Though the APR is a good comparison tool, it does not always include all costs that you will pay. Ask your  mortgage professional to clarify what is and is not calculated into your loan”s APR so that you can determine which program best fits your financial needs.

• Is there a prepayment penalty on the loan?

Prepayment penalties ensure that your lender is compensated for a certain amount of money when you, the borrower, decide to pay off your loan earlier than what was originally agreed. Not all loans enforce prepayment penalties, but those that do, have penalties that range anywhere from one to three percent of the loan amount.

By asking the right questions, you can gain a better understanding of the mortgage process and be confident that you are getting the product that best fits your financial situation.

Senior adults: use a Reverse Mortgage to BUY A NEW HOME with NO PAYMENTS!

The reverse mortgage enables seniors 62 and older to finance the purchase of a home with no repayment for as long as they live in their home.  For example:

A senior homeowner with a $175,000 home is finding it increasingly difficult to move around their home (staircase, etc.), maintain their large home or no longer feels safe in their neighborhood.  They decide to sell their home and buy a new smaller home closer to family and in a safer neighborhood. The new home is priced at $300,000 and they are able to receive $150,000 from the reverse mortgage. With $150,000 from the sale of their old home and the $150,000 from the reverse mortgage they buy their new home, and they have no payments.

In this example, the senior homeowner was not only able to conserve their personal funds and not tap investments or savings to buy their new home, they were able to put money into savings.

Credit and income are not used to qualify for the reverse mortgage and the interest rate is very low (under 5%). Seniors have no out-of-pocket cost with the reverse mortgage: all closing costs are financed.

In addition to selling an old home and buying a new home, senior adults have been using the reverse mortgage to:

• Buy a second home or vacation cottage
• Be a first time home buyer (requires a large cash reserve, i.e., recent inheritance, divorce settlement, accumulated pension or investment funds).
• Provide Gift to adult children or grandchildren for their down payment to purchase a home.
• Buy a rental property for a high positive cash flow.

Call Toll Free at 888-775-4200 ext 271 Today! for a Maine Reverse Mortgage.

Seven Myths About Reverse Mortgages

Myth #1- The lender will own your home.

You continue to retain ownership of your home.  The lender does not take control of the title!

Myth #2- Your heirs must pay the loan back.

A Reverse Mortgage is a non-recourse loan.  The lender can only derive repayment of the loan from the proceeds of the sale of the property with you or your heirs retaining all of the equity.  Your heirs owe nothing even if the property loses value!

Myth #3- You need income, good credit, or good health to qualify.

A Federally Insured/Federally regulated Reverse Mortgage has no income, credit or health requirements.  Even a current bankruptcy or pending foreclosure is allowed!

Myth #4- You have to make monthly payments.

Although you always have the right to make interest or principal payments monthly there is in fact is no repayment requirement.  Furthermore, 91% of seniors who use a Reverse Mortgage do not make any payments at all!

Myth #5- Your home must be debt free to qualify for a Reverse Mortgage.

You may have a mortgage or other debt on your home.  In fact, a lot of seniors extinguish their current property debt and payments with a Reverse Mortgage and still have significant equity remaining for additional cash purposes!

Myth #6- Only “cash poor” senior citizens can benefit.

Not all seniors have a great need for cash or additional monthly income.  A Reverse Mortgage is also an excellent financial or estate planning tool.  One can even buy a new primary residence or second home with no mortgage or purchase long-term care insurance or life insurance.

Myth #7- A Reverse Mortgage is too expensive.

A Reverse Mortgage does cost more than a conventional loan.  However, the interest rate is relatively low and there is little out-of pocket cost.  Using a Reverse is much less expensive than the alternative of selling your home because there are no moving costs or real estate sales commissions to be paid.  Also, you eliminate the emotional pain of relocating and any new expenses such as rent, condo/association fees or any other payments related to a new property or residence!

Reverse Mortgage – Maine Baby Boomers

Baby boomers will be reaching retirement in the next few years and many of them are starting to prepare for their golden years by getting in shape, eating a healthier diet, planning trips and starting hobbies. Although these are all great things to consider, their main focus should be on how they plan to finance their retirement.

Unlike their more prudent parents, studies show that aging Boomers are paying off their debts and mortgages, as well as funding their active lifestyles, by acquiring reverse mortgages, while staying in their primary residence.

According to a recent report by the United States Department of Housing and Urban Development, there has been a 77 percent increase in government backed reversed mortgages, bringing the total to more than 76,000 nationwide. Throughout the next 10 years the majority of those born during the Baby Boom generation, which is 1946 through 1964, will be eligible for a reverse mortgage, meaning the popularity of reverse mortgages will continue to grow.

If you or someone you know is planning for retirement and is looking for a supplementary income then a reverse mortgage could be the right option for you.

There are many reasons to use a reverse mortgage.

• Pay off an existing mortgage
• Pay off other debt such as credit cards, medical bills, property taxes
• Home repair and/or renovations
• Home health care and/or assisted living
• Medication
• Buy a new car
• Buy a vacation home
• Take a trip
• Fund your grandchild’s education
• Donate to a cause

The reverse mortgage has earned its name because the payment stream is “reversed”, meaning that instead of making monthly payments to a lender, as with a regular first mortgage or home equity loan, a lender makes payments to the borrower.

Though there are no income or medical requirements to qualify, borrowers must be at least 62 years old and own their home. The money the borrower obtains from a reverse mortgage can be used for anything from daily living expenses and home repairs, to that long awaited trip to Tahiti.

The amount accessible to a homeowner through a reverse mortgage relies on three factors; the value of the home, the interest rate and the age of the borrower. A homeowner with a more valuable property will receive a larger loan, often times up to half of the home’s current value. The loan’s interest rate also directly affects the amount that can be borrowed, meaning the higher the loan’s interest rate, the less the homeowner can borrow. And, older borrowers are expected to remain outstanding and accrue interest for a shorter period of time, resulting in less interest per dollar and a larger loan.

If you would like further information about  Maine reverse mortgage qualifications or to find out which program best suits you then contact me direct at 888-775-4200.

Invest in Maine Real Estate

With the real estate market  in a slump the past few years, investors have been rolling with the punches and discovering new ways to make a profit off of their properties in Maine.
Consumers’ skepticism of homeownership has left many properties vacant and on the market for a number of months. An increasing number of people throughout Maine are renting their home, condominium or apartment and investment property owners and buyers are quickly learning that the best way to make a profit is to rent out their property.

Before investing in a new property, or renting out your existing property, take into account the following tips and investment suggestions:

Looking to Purchase an Investment Property?

Know Your Ownership Time Line

Have a good idea of how long you plan to own a property before you buy it. The longer you plan to own the property, the more you’ll probably need to invest in maintenance, repairs and improvements, but, long term home ownership will most likely appreciate over time. Contact your Maine Mortgage Specialist to determine the best financing and ownership time line for you.

Do Your Research

Before purchasing a new investment property, do your research. It is important to purchase an investment property in a growing area. Cities with a rising employment and population rate are usually the best bets.

Get Your Finances in Line

The better your credit, and the less consumer debt you have, the better your chances are for getting a decent loan. Lenders often require that investment property candidates provide a large down payment and have a stable and strong financial past.

Already Own an Investment Property?

Appeal to Renters

A shabby appearance won’t attract buyers or renters and will only force you to decrease tenant rental fees. Do all of the necessary aesthetic and practical maintenance. Make sure your property is freshly painted, double check that plumbing, wiring and appliances function properly, and that outdoor areas and stairways are safe and look attractive.

Managing the Property

Trying to manage the renters yourself is often times more trouble than it’s worth. If it is difficult to screen renters, upkeep the property and quickly respond to renters’ concerns, you may want to consider paying a professional property-management service to handle your rental.

Know the Rules

Landlord-tenant laws vary from state to state. Be sure you know the owner and landlord’s legal obligations before you put your property up for rent.