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VA Home Loans: Helping Heroes Find a Home

VA Home Loans: Helping Heroes Find a Home

VA Home Loans: Important Housing Benefits for Veterans | MyKCM

Today, on Veterans Day, we honor those who have served our country and thank them for their continued dedication to our nation. In the United States, there are many valuable benefits available to Veterans, including VA home loans. For over 75 years, VA home loans have provided millions of Veterans and their families the opportunity to purchase their own homes.

As we consider the full impact of VA home loans, it’s important to both understand these great options for Veterans and to share them with those we know who may be able to benefit most. For a variety of different reasons, many Veterans don’t use their VA home loan options, so being knowledgeable about what’s available and how they work may be a game-changer for many.

Facts about 2019 VA Home Loans (most current data):

  • 624,546 home loans were guaranteed by the Veterans Administration.
  • 306,879 VA home loans were made without a down payment.
  • 2,055 grants totaling $118 million were provided to help seriously disabled Veterans purchase, modify, or construct a home to meet their needs.

VA Home Loans Often Offer:

  • No down payment options as long as the sales price isn’t higher than the home’s appraised value.
  • Better terms and interest rates than loans from other lenders.
  • Fewer closing costs, which may be paid by the seller.

Bottom Line

The best thing you can do today to celebrate Veterans Day is to share this information with those who can potentially benefit from these loan options. Let’s connect today to discuss your questions about VA home loan benefits. Thank you for your service.

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Two Important Impacts of Home Equity

Two Important Impacts of Home Equity | MyKCM

Equity continues to rise, helping American homeowners secure a much more stable financial future. According to the most recent data from CoreLogic, the average homeowner gained $9,800 in equity over the past year. In addition, experts project 2020 home prices to continue rising. With prices going up, equity gains will also keep accelerating. Black Knight just reported:

“The annual percent change in the overall median existing single-family-home price has skyrocketed in the past several months, with recent numbers at three to five times higher than rates seen in the past several years.”

Jeff Tucker, Senior Economist at Zillow, just qualified recent price increases as “jaw-dropping” and “within a hair’s breadth of double-digit year-over-year appreciation.”

Knowing equity will help enable many homeowners to better survive the economic distress caused by the ongoing pandemic, it’s important to break down two key homeowner benefits of increasing equity.

1. Equity Increases a Homeowner’s Options to Buy a New Home

Aside from the financial damage of the last seven months, there has also been a tremendous emotional toll on many people. Shelter-in-place mandates, quarantine requirements, and virtual schooling have all made us re-evaluate the must-have requirements a home should deliver. Having equity in your current house gives you a better opportunity to move-up or build your perfect home from scratch.

Mark Fleming, Chief Economist at First American, recently explained:

“As homeowners gain equity in their homes, they are more likely to consider using that equity to purchase a larger or more attractive home – the wealth effect of rising equity.”

If you need to make a move, the equity in your current home can help make that possible – right now.

2. Equity Enables Homeowners to Help Future Generations

An increase in home equity grows overall wealth, which can transfer to future generations. The Federal Reserve, in an addendum to their recent Survey of Consumer Finances, explains:

“There are numerous ways families can transmit wealth and resources across generations. Families can directly transfer their wealth to the next generation in the form of a bequest. They can also provide the next generation with inter vivos transfers (gifts), for example, providing down payment support to enable a home purchase or a substantial wedding gift.”

The Federal Reserve also explains another way wealth (including the additional net worth generated by an increase in home equity) can benefit future generations:

“In addition to direct transfers or gifts, families can make investments in their children that indirectly increase their wealth. For example, families can invest in their children’s educational success by paying for college or private schools, which can in turn increase their children’s ability to accumulate wealth.”

Bottom Line

Equity can help a homeowner grow their confidence in a more stable financial future. It provides near-term move-up options and creates a positive impact for future generations. In many cases, the largest single investment a person has is their home. As that investment appreciates in value, financial options increase too.

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When Should You Refinance Your Mortgage?

when to refinance mortgage

When mortgage rates begin falling, more and more homeowners decide to refinance their loans. Depending on a person’s individual situation, however, it isn’t always the best move. Here’s what you should know about refinancing, along with tips for deciding whether it’s right for you.

Why Do People Refinance their Loans?

There are several different ways to refinance a mortgage, and finding the right loan will depend on your financial goals. You might want to switch from your adjustable-rate mortgage to a standard fixed-rate loan with a steady monthly payment. On the other hand, you may want to shorten the term of your mortgage loan from a 30-year plan to a 15-year agreement to avoid interest charges. A refi can also allow you to escape the high costs of private mortgage insurance once you accrue 20% equity in your home.

The majority of homeowners seek straight rate-and-term refinancing that lowers their interest rates while providing a comfortable repayment term. Some are looking for lower monthly payments to free up cash for college tuition, auto loans or other expenses. Others want cash-out refinancing, in which they borrow more than they owe and use the cash to pay for home renovations, eliminate credit card debt or fund some other major expense.

When is a Good Time to Refinance?

Most people start thinking about refinancing their mortgage loans when they learn that mortgage rates are on the decline. While lower mortgage rates are definitely a key factor in determining whether you should refinance, there are other good reasons including:

  • You want to pay off your home loan quicker with a shorter term.when should I refinance my mortgage
  • You’ve accumulated enough equity in your property to refinance into a loan that doesn’t have mortgage insurance.
  • You are looking to tap some of your equity with a cash-out refinance.

In general, it’s a good idea to refinance if it will help you build equity, allow you to save money or pay off your mortgage faster. It’s best to consider refinancing if you will be able to lower your interest rate by about one-half to three-quarters of one percentage point since this can significantly lower your monthly payment.

Things to Consider

To gain noticeable benefits from refi, you need to make sure your total monthly savings will offset the overall cost of refinancing. It may not be a good idea to refinance your existing loan if you plan to move in the next 24 months since you won’t have a lot of time to recoup the cost.

While interest rates are a primary consideration when it comes to refinancing; it’s important to remember that they aren’t the only key factor. To qualify for the right refinance loan, you will need to have good credit. Mortgage interest rates are influenced by various market factors, including the current yields on long-term Treasury bonds, and the lowest rates and best terms will always go to borrowers with the best credit scores.

Is it Worth the Costs?

Anytime you refinance a home loan, you will typically spend an average of between 2% and 5% of the entire loan amount in closing costs. With this in mind, it’s very important to figure out how long it will take for your monthly savings to recoup those high costs. In mortgage refinance, this is often referred to as the “break-even point.” For example, it would take 40 months to break even on $4,000 in closing costs if your monthly mortgage payment were to drop by $100. If you decide to move during those 40 months, you will ultimately lose money in a refinance.

When deciding whether to refinance, don’t just think about current mortgage rates; think about whether your current home will continue to fit your lifestyle in the future. If you’re thinking of starting a family or headed toward an empty nest, there’s a chance you won’t stay in your home long enough to break even after refinancing.

Even if your new loan will lower your rate considerably, you should consider whether it’s worth taking on the added interest. If you’re already more than ten years into your loan, refinancing to a new 20- to 30-year loan will tack on interest costs since interest payments are front-loaded. The longer you pay on a mortgage, the more you pay toward the principal instead of interest.

Before going ahead with refinancing, ask your lender to run the numbers on a loan term that’s equal to the number of years you have remaining on your existing mortgage. You might end up lowering your payment, reducing your mortgage rate and saving on interest by deciding not to extend your loan term.

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Are Interest Rates Going Down?

are interest rates going down

Mortgage rates play a huge role in determining the cost of a home loan. Recently, rates have been trending downward, creating great opportunities for affordable home loans. Here’s what you should know about current mortgage rates, along with some insight into what drives interest rates higher and lower over time.

How Low Are Current Rates?

A year ago, the benchmark rate of a 30-year fixed-rate mortgage loan was about 4.05%. Since that time, it has been trending downward in a big way. As we head into the third and fourth quarters of the year, rates are hovering at or below 3.5%. This makes now a great time to buy as long as you understand how interest rates affect the overall cost of your mortgage loan.

Why Do Interest Rates Matter?

When you buy a home, the listing price, down payment and closing costs are only a small part of the cost equation. One of the smallest (but most significant) numbers home buyers need to understand is the mortgage interest rate. The interest rate significantly affects monthly mortgage payments and determines the total amount you pay for your home.

In essence, the interest rate on your loan determines how much you are paying every year to your lender for just having the mortgage loan. Basically, lower interest rates mean a lower overall cost for your real estate investment.

For instance, consider a $300,000, 30-year fixed-rate loan with an interest rate of 4.5%. Over the term of the loan, you can expect to pay an extra $247,220 in interest on top of the initial $300,000). You can also expect monthly mortgage payments of about $1,520.

interest rates going downNow, if you were able to get a loan at 3.5 percent, you’d only pay $184,968 in interest, and your monthly mortgage payments would be about $1,347. Although it may not seem significant at first glance, that 1% difference in interest could cost (or save) you around $170 a month and more than $60,000 over the life of your mortgage loan.

In addition to saving you money on a loan, lower interest rates allow you to look at homes that might normally be outside your price range. This is why it’s so important to pay close attention to fluctuating interest rates and strike when an ideal opportunity arises.

How Are Mortgage Rates Determined?

Contrary to common belief, mortgage rates are not actually based on the 10-year Treasury note; they are based on the bond market, meaning mortgage-backed securities or mortgage bonds. Mortgage-backed securities are essentially mortgage loans that are packaged into bundles or groups of securities and then sold in the bond market. The price of these bundled debt securities is driven by global and national news events, which also impacts individual mortgage rates.

While that may sound complicated, it simply means that there are a lot of factors that influence the benchmark rate of 30-year fixed-rate mortgage loans. That said, just because national mortgage rates are low doesn’t mean you can expect to acquire a loan at an affordable rate. There are a lot of other things that work to determine the rate on each borrower’s loan. Individual lenders adjust mortgage rates based on how risky they judge a loan to be. The riskier the mortgage loan, the higher the overall interest rate.

When judging risk, lenders will consider how likely you are to fall behind on payments, and how much money they stand to lose if the loan goes bad. The major factors are loan-to-value ratio and credit score. Lenders may also charge higher interest rates for adjustable-rate mortgages, cash-out refinances and loans on condominiums, manufactured homes, investment properties and second homes because they are viewed as riskier.

Working with an Expert

When it comes to getting the best deal on a home, it’s important to take advantage of low interest rates. It’s also important to have an expert in your corner to help you make important decisions and navigate the complex home buying process.

With 60-plus years of combined real estate experience, The Wheaton Team specializes in residential real estate throughout Colorado Springs and all of El Paso County. Our considerate team of seasoned professionals can guide you through each step of the buying and financing process, so you can find the home you’ve always dreamed of. To learn more, contact us today!

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