Scott Storace - Branch Manager, 100 Pacifica Drive Ste. 140, Irvine CA 92618 NMLS #226339 949.973.0141

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Home Financing Tips for 2015

Anyone have a crystal ball?  If so, ask it what rates will look like in 2015!  Once I have that information, I can add it to the top of my “Home Financing Tips for 2015” list and set up for early retirement!  Until then, I offer you this:  Home Financing Tips at the expense of 2014.  Sounds a bit funny but, it’s true.  Since tips are generally derived from the catastrophes that precede them, my list of home financing tips was assembled with those “hairy” transactions in mind.

The only "tip" I want are home financing rates in 2015!

The only “tip” I want are home financing rates in 2015!

Sure, I may be a bit sick and I may be a bit twisted but, I actually like “hairy” transactions.  They aren’t easy and they aren’t painless but they are very satisfying to close.  For the client, however, they are a nightmare.  Last year’s “hairy” transactions came to me in two forms:  Late in the game with very little time to close and from those who had not received a proper review of their mortgage profile prior to the home financing process.  In both scenarios, an improperly structured transaction was the cause of all buyer chaos.

So again, I offer here my professional advice and warning!

TIP 1:  Plan ahead and have a lender review your mortgage profile before you begin shopping.  Shopping for a home is exciting.  Especially once you’ve found one you want!  When that happens, there’s not much that can curb your urge to go, go, go!   But, please remember this:  Without a comprehensive review of your mortgage profile, you’re not likely to have a properly structured request for funds.  And, without a properly structured request for funds, your transaction could end up dead in the water.

Take for example a buyer with variable income or a complex tax structure.  These two items need more than just a quick glance.  Future and historical income are primary factors and must be calculated correctly.  If this is not done correctly and upfront, you and your lender may wind up in a tangled storm with an underwriter that’s not likely to end in your favor.  Working with a trusted lender who is capable and willing to do this work upfront is crucial.

What about your assets?  Assuming that you have enough for a down payment, closing costs and reserves  is dangerous.  Sourcing sufficient assets can be tricky when a buyer decides to use a 401k loan, business and/or foreign funds.  Cash on hand, though seemingly harmless, is another potential pitfall.  Why?  As of now, the $20,000 in your gun safe is not a verifiable source of funds.  If that changes, I will certainly let you know!  Have your lender check your assets!

Finally, will you qualify for a loan?  Mortgage guidelines vary with your current structure and strategy. For instance, if you have four financed properties and you’re looking to finance a fifth, there will be more questions and documentation required to determine eligibility.

The subtle differences I’ve mentioned thus far are sure to trigger a complete shift in programs and guidelines.  Though it’s absolutely normal for this to happen, save yourself the drama and get this information before you fall in love with a home.  It’s also wise to take the product of a comprehensive mortgage review like this to your financial advisor to ensure that it fits in well with your portfolio.  Allowing yourself the space and the time to make shrewd financial decisions now will give you freedom and peace of mind in the future.

TIP 2:  Review your equity positions and real estate strategies.  Questions to ask yourself:

  1. Am I paying an inflated interest rate that is eating unnecessarily into my cash flow? More specifically, am I paying more interest than I should? A rate reduction, if available, could help you save more cash each month. You can stash the savings or re-invest it into the property reducing the overall cost of the home in the long run.
  2. Do I want to access my equity? Life can get pretty exciting overnight! For some, accessing equity may mean starting the business they’ve always dreamed of or paying off other large, high-interest bills.  Let me check on this for you.
  3. Have I reviewed my terms? Do I have an adjustable rate nearing term? If so, do I know how it will adjust and if it will recast?  This can sneak up on a lot of folks. Take advantage of working with a trusted lender willing to spend the time to help you “remember” how these loans function. They may have fit your goals 5 years ago but, do they still?

TIP 3:  Real estate is going green in 2015!  And, since energy costs are expected to rise by nearly 40% over the five years, it might be time to learn more about the cash incentives that are available today.  Energy efficient mortgages are also available and can help you upgrade just about any home.  If it sounds too futuristic, talk to an energy efficient mortgage lender like me to learn more about how you can save big in the future.

TIP 4:  Your lender can’t predict rates… not yet, at least!  It’s a wise buyer who watches the market but, don’t beat yourself up about pulling the trigger at the “perfect” moment.  Economic data and rates are out of our control.  However, you can control preparedness.  Prepare yourself using the aforementioned tips and work with a skilled lender so that you are ready to pull the trigger when the time is right.

When you’re ready, contact me regarding your home financing options.  You’ll need someone who’s thorough, likes the challenge associated your specific needs and is undaunted by the “hairiness” that comes with EVERYONE’s situation!

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