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Being A Homeowner Has Its Benefits During Periods Of Economic Decline.

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A homeowner is often referred to as having more financial stability. You can become a homeowner by paying down your mortgage and acquiring an asset that can grow in value over time.

Renting a house can mean that your landlord may charge you more for each renewal. If you have a fixed rate mortgage attached, you will be guaranteed the same monthly payments for the entire term of the loan.

There has been much talk about a possible recession by 2023. Federal Reserve’s aggressive interest rates could cause a significant pullback in consumer spending and a period of economic recession. The idea of a recession is a frightening thought. Here are some ways that being a homeowner can work in your favor.

The worst thing about the possibility of losing your job in a recession is perhaps the fact that it could be scary. Unemployment benefits are often available to workers who have been laid off due to no fault of their own. However, these benefits are limited to a certain amount and you might find your weekly unemployment check is not enough to replace your lost paycheck.

You could tap your savings to help you get through a time of unemployment. Your savings may run out at some point. Your home might be able to help you.

You may be able to borrow against your home equity if you own it. To be clear, both of these scenarios involve borrowing money on which you will accrue interest. However, the interest that you pay for a home equity loan or loan may be lower than what you would pay on another loan product. It’s also likely to be lower than the interest you would pay on a credit-card.

You should also consider whether you are eligible for a loan. Unemployed people may find it difficult to borrow money. A lender might be willing to lend you money if you have a lot of equity in your home. This is because the amount you are borrowing is guaranteed by a valuable asset.

You may be able to get a loan for home equity or HELOC, even if you have poor credit. This is because the loan will be secured by your house, which gives lenders greater confidence.

It can be difficult to own a home. Owning a home means you have to take care of it. If there is a recession and you have to borrow money, being a homeowner can work in your favor. As we wait to see how the year unfolds, that alone could give you more security.

The mortgage rates are at their highest levels in many years and they will continue to rise. To get the best rate and minimize fees, it is important to compare rates with different lenders. A small change in your rate can make a huge difference in your monthly payments.

Original Blog: https://www.fool.com/the-ascent/mortgages/articles/own-a-home-heres-how-it-could-help-you-get-through-a-recession/

USDA Loans Aren’t Just For Farmers

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You wouldn’t be alone in thinking USDA loans were only for rural farmers.

The program is accessible through the United States Department of Agricultural. The Rural Development (RD), which was initially called the Farmer’s Home Administration, administers the program.

Russell Hood, an originator of the Meriden-based company Planet Home Lending, stated that about half of those looking for a mortgage through Planet Home Lending don’t know anything about USDA loans.

It is worth taking the time to find out if you are eligible. You might be surprised at who qualifies. USDA loans can offer many advantages over other programs if you’re eligible.

Most people are aware that USDA mortgages are intended for rural residents. Many people think they won’t be eligible because they don’t consider themselves rural residents.

The definition of “rural” can change between different government programs. For USDA loans, however, “rural” can be a surprisingly low standard. It refers to any town, village or city with fewer then 20,000 inhabitants that isn’t located in a Metropolitan Statistical Area. An MSA is defined by the Census Bureau as a group of counties that surround a city with more than 50,000 inhabitants.

There is also some flexibility for fast-growing areas to remain eligible for “rural” status for a period beyond these points.

This means that 97% of America’s land mass is considered “rural” to qualify for a USDA loan. According to a report, 34% of Americans live in an area eligible. Even suburbs outside of major cities like the western part of Olympia, Washington’s capital, and parts Long Island, New York, are eligible.

USDA loans can also be very useful in helping people who otherwise wouldn’t be able to purchase a home. To be eligible for a USDA loan you must be not eligible for a conventional PMI free mortgage. You’d need to pay a minimum of 20% down payment in order to achieve this, which many people don’t find realistic.

One of the greatest benefits of USDA loans is the fact that you don’t have to make any down payments.

If you are eligible, one final reason to consider USDA loans is that they don’t have as much impact on your finances than other government-sponsored mortgage programs. It’s often a better option if the income and property meet the USDA standards.

The upfront funding fee for most government-backed mortgages is usually 1%. This is lower than the 1.4% to 3.6% charge for VA loans, and 1.75% for FHA loan. FHA loans have an additional fee of 0.45% to 1.5%.

USDA loans are often offered at lower rates. This is partly due to the way RD works together with lenders to provide USDA Guaranteed loans. This is a bad term as it does not guarantee you will get a loan. The USDA “guarantees” up to 90% loan amount. In other words, if you default on your loan, the USDA will reimburse your lender up to 90%.

Although this guarantee does not directly benefit you, it can make things more affordable for you. Lenders are almost guaranteed to recoup some costs in one way or another. This means they can pass lower rates on to you. That could result in significantly lower monthly payment with USDA loans.

USDA Direct loans are cheaper than conventional mortgages. The fixed rates for low-income and very low-income buyers were set at 3.25% as of October 2022. This is compared to 6.65% for a conventional loan. The average USDA loan cost $178,400 in 2021. This is $380 less than what you would pay if you borrowed conventionally.

 

Original Blog: https://finance.yahoo.com/news/zero-down-usda-mortgages-arent-100000653.html?guccounter=1&guce_referrer=aHR0cHM6Ly93cmVuZXdzLmNvbS8&guce_referrer_sig=AQAAAEMfd_s6cf9cnjRg0x12RmnucbOROcR906XA3ztVq5J9aer0l4bSUkxUFB1PFtF6tNXBmMtHZDwWjWCjGfjlYJZKBRyn1jXmUAqGA9qW95XW9lRqq1wR2LFGKnvTYJ2r3MZWVV0zD9OAkyxJbok30FkWB5tB8zeonGDjhM1ifUgf

 

How Lenders View and Treat Financial Gifts

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You might consider asking your parents for some help in buying your first home. Lucky you! The biggest hurdle for most homebuyers is securing the funds to pay the down payment and cover closing costs. However, a little financial help can go a long ways in obtaining a financial boost. It is important to understand how lenders treat financial gifts before you apply for a loan. What’s important?

Lenders will need to verify that the financial gift is legitimate. The lender will match what appears on your paycheck slips with deposits verification from your bank statements if you submit your bank statements. Deposits should appear on the dates you receive your pay, i.e. if you are paid on the 15th and 1st. If you receive a financial gift, however, the money will appear in your account. Lenders will need to know the source of this irregular deposit.

Lenders want you to be sure that the money in your bank accounts is not from a loan. You will have to repay the loan in either monthly installments or one lump sum. This can impact your ability to repay your mortgage, and at the minimum, increase your debt-to-income ratios.

Family members, qualified non-profits, and life partners are all eligible sources for gift funds. No matter what source you may be, you will need to submit a letter from the donor acknowledging that the funds were a financial gift. You are not expected or required to repay them. You may decide to repay the donor in full or in part if you so choose.

You will need to explain where the funds came from when you receive the gift. Lenders have the right of verifying that the donor is able to pay the gift. They can also expect to be paid back. The donor’s source of gift funds will be noted in the gift letter. Simple ‘from our bank’ will suffice.

If you are hoping to get financial assistance from qualified sources, it is important to know that it is not as easy as saying “it came from my bank account.” The funds will be used for financing the purchase of your new house. You’ll need proof that the funds are yours and not to be repaid.

 

Original blog: https://realtytimes.com/archives/item/1045762-understanding-financial-gifts?rtmpage=

The Most Volatile Mortgage Rates in More Than Three Decades are Causing Struggle with Homebuyers

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A typical house hunter who began looking in July and closed on their home in September saw their potential mortgage rates fluctuate by approximately half a percentage point every four week, according to a new report of Redfin ( Redfin.com), a technology-powered realty brokerage. This is the most volatile period in three months since 1987 when mortgage rates surged after soaring to an all-time high of almost 19% earlier in the decade. The Fed was working to curb severe inflation.

This could be a good deal for a house hunter who is looking to purchase a home worth $500,000:

  • They expected their monthly payment of $3,051 when they began looking in July. This amounts to $1.098million over 30 years, with a 20% downpayment and the 5.7% mortgage interest rate. 435,777 of that total payment is interest.
  • They expected to pay $2,874 per month when they bought their dream home in August. This amounts to $1.035million over 30 years, with a 20% downpayment and a 4.99% mortgage rate. Interest is the largest component of that $372,143 total payment.
  • Their final monthly payment was $3,202 after they had locked in a mortgage rate in September. This amounts to $1.153million over 30 years, with a 20% downpayment and the current 6.29% mortgage interest rate. 490,382 of that total payment is interest.
  • The buyer’s expected total payment fell by $64,000 (5.8%), but then rose by $118,000 (11.4%) between July and August.

Taylor Marr, Redfin’s Deputy Chief Economist, stated that the challenges facing homebuyers today go beyond the declining affordability due to high mortgage rates and high home prices. It is extremely difficult to plan ahead due to the whiplash in mortgage rates that occurs between when homebuyers decide on their budget and when they make an offering.

The Federal Reserve has been increasing interest rates to reduce sky-high inflation, which is why mortgage rates are fluctuating. Last week, the Fed increased interest rates by three quarters of an percentage point to a range between 3% and 3.25%. This was its third major hike in a row. They also predicted that they would reach 4.4% by year’s end. Freddie Mac’s weekly data shows mortgage rates at 6.29%, the highest since 2008. However, a separate daily gauge shows them at 7.08%.

As the Fed tries to reduce inflation, volatility in mortgage rates is likely to continue for the near future. However, mortgage rates should fall within the next 12-18 months if inflation eases, according to Justin Dimler, Redfin’s mortgage company Bay Equity.

Dimler, who is a regional sales manager at Bay Equity Seattle, said that “the good news for those people who can afford to purchase a home” and could refinance to a lower interest rate within a year or so. I advise house hunters who were approved for a loan a few months ago to have their mortgage advisor requalify them. The change in mortgage rates could mean that they are no longer eligible to borrow the same amount.

Refinancing is a possibility for homeowners in the near future, but buyers should be aware of the potential costs.

 

Original Blog:  https://realtytimes.com/real-industry-news-articles/item/1045729-homebuyers-are-grappling-with-the-most-volatile-mortgage-rates-in-over-three-decades?rtmpage=

Buyers Feel Pinch of Rising Interest Rates

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Although homeownership is the largest investment and source of wealth for most households in the United States, there are many factors that make it more difficult to achieve homeownership, particularly for first-time buyers. Rising mortgage interest rates are the latest factor. The average rate for a 30-year fixed mortgage rose 2 percentage points from 3.22 percent in the first half to 5.7 percent in the second half of 2022.

Potential buyers face many consequences from rising interest rates. They reduce buyers’ purchasing power. The mortgage payment increases with rising mortgage rates, which in turn leads to a decrease in buyers’ purchasing power. This means that it is more difficult for them to get a mortgage loan. The mortgage rate rises means that the income required to be eligible for a mortgage loan for the same home is higher. This effectively pushes out more buyers from the housing market. With a 3 percent rate of interest, 34.8 percent Texas renters could afford the first-quartile price for a home in 2Q2022. With a 6. percent interest rate, this percentage drops to 24.7 per cent.

A higher interest rate equals a higher mortgage payment. This increases the buyer’s debt to income (DTI). This makes buyers more risky to lenders and could reduce the chances of getting a mortgage loan. A higher DTI ratio can make it more difficult to repay mortgages, especially for those who have lost their job.

Higher interest rates mean higher mortgage payments. This reduces the return on homeownership and prolongs the time it takes to break even.

 

To read more click on original article: https://www.recenter.tamu.edu/articles/tierra-grande/Home-Stretch-2362

Can You Purchase a Home with a Home Equity Loan?

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A home equity loan can be used to purchase a house. However, it is not always the best decision. With caveats, home equity can be used to purchase a second or investment property.

A home equity loan allows you to access the equity in your home by taking out a second mortgage. Home equity is the difference between your home’s value and what you owe.

There are two things you should know if you want to use your equity from your home to purchase another property. Is this a purchase of a second house or an investment?

A home equity loan is a great option if you are looking to purchase an investment property.

You can contribute more to your down payment. You can put more towards your down payment with a home equity loan. You will be more competitive in the current market and your monthly payments and interest rates will be lower.

A second property can be more difficult to finance due to the higher down payment requirements. A home equity loan is a better option and can be more affordable.

Home equity loans are secured by collateral which is your home. You will enjoy lower interest rates as a result.

Your home equity could be an asset in wealth building if you are looking to buy an investment property. You should consider the fact that a second house will not bring you income as an investment. This means you will be borrowing money to buy your second home.

There are downsides to using equity to purchase investment properties. You are effectively trading an asset for debt. You are taking the portion of your home you own and then putting it in a loan.

Housing market shifts can make you vulnerable, especially if you have two properties. If something happens in the housing markets, you’re at double your risk. If your property’s value falls, for example, you could owe more on both your home equity loan or your mortgage.

You could lose both your properties if you default on your loan.

It is possible to end up with three mortgages and only two homes. You will need to combine the home equity loan with the loan for your second house.

A downside to consider is that the interest on your home equity loan won’t be tax-deductible due to 2018 tax code changes.

This is the big takeaway: Yes, you can use your home equity to purchase a second home. Sometimes it’s a good option. However, it comes with risks. It’s not always the best decision. You need to carefully consider your particular situation.

 

Original Post: https://realtytimes.com/archives/item/1043687-can-you-use-home-equity-to-buy-another-property?rtmpage=

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