4 Tips for Paying Off Your Mortgage

4 Tips For Paying Off Your Mortgage

Many people have a goal of paying off their mortgage early, which is great, but not always feasible or the best decision for everyone. For instance, homeowners with low mortgage rates may decide putting their extra money toward a retirement plan is a more financially savvy move than paying down their mortgage quickly.

There are a number of valid factors that can come into play when deciding if it’s the best decision to pay off a mortgage early, however, there are many who make it a personal goal to get their mortgage paid off as soon as possible. If you fall into that category, these tips are for you!

1. Shorten your mortgage term

Refinancing your mortgage with a 15-year mortgage term can help you pay off your loan faster under certain conditions. It’s important to look at the whole picture when making this type of decision. How long do you have left on your current loan, will your new interest rate be higher or lower than your current interest rate, and do you have the funds to cover all of the closing costs associated with a refinance? Once you answer those questions you can decide your next move.

2. Put extra funds toward your mortgage

Let’s say you receive a bonus or a nice tax refund that allows you to pay a large sum towards your loan. Those additional payments on the principal can help cut the total interest on the loan.
With irregular additional payments, however, it will be difficult to predict your mortgage payoff date.

3. Make an extra payment every year

A great way to make one extra payment a year is to save 1/12 the amount of your monthly payment each month and after the 12th month make the extra payment.
This doesn’t tie up the extra money in case an emergency occurs and you need the saved funds.

4. Pay more each month

Instead of waiting until the end of the year to make an extra payment, you can pay more toward principal each month.
Consulting your financial advisor and loan provider is key when making these type of financial decisions and deciding to pay more aggressively.

To new grads

To New Grads: Now Is The Time To Start Thinking About Buying A New Home

I know what you’re thinking, you just received your diploma and may not even have your first job lined up prior to graduation yet, so isn’t thinking about buying a home a bit premature?

My answer to that question is a big resounding NO.

Now is the best time to start investing into your future; the sooner the better. I don’t mean today is the best time to go out and purchase your first home, but what I am saying is that you should be thinking about the cost of a home and mortgage and begin prepping financially.

Buying a new home takes money so it’s best to be proactive.

Before we talk about saving for a house, we must first mention the dreaded topic many new graduates have pushed towards the back of their mind. Debt. 66% of new graduates from public institutions are graduating with some amount of student loan debt. That’s reality. Carrying student loan debt doesn’t automatically disqualify you from homeownership, but you will need to create a loan payment schedule in order to reduce your debt to income ratio.

Next on your financial prep checklist is building your credit history. Responsible use of credit will be important when applying for a mortgage loan. If you’ve had credit before and made some errors or have never had credit, now is the time to start cleaning up and building. Pay off credit debts and use a card or small auto loan to make regular payments that show you know how to handle money and make wise decisions.

Eventually in your near or far future you may want to put down roots and purchase your first home, and the steps you take now while you’re young will set you up for the best possible scenario in your mortgage and home options.

Building Your Emergency Fund

Unfortunately, humans don’t have the capacity (as of yet) to predict the future, so until that time comes, we must prepare for the unexpected.

Making sure to put aside money for an emergency fund is one of the wisest financial decisions one could make. Natural disasters, car accidents, medical emergencies and job losses are just a few scenarios that can set your funds back by a considerable amount.

Related: Are your expensive habits costings your hundreds?

Don’t let surprise circumstances leave you in financial ruin. Check out our tips below on how to grow your emergency fund.

1. Set a Goal

Without a goal in mind, you decrease the likelihood of actually building a fund. The general rule of thumb is to set aside 6 months’ worth of living expenses. Depending on your income and bill obligations, this may take a while to build up, but  even starting with a small amount will help you get on the right track of hitting your target goal.

2. Get a separate account

Separating your funds helps you stay focused as well as diminishes confusion between what’s emergency savings and what’s not. It helps to set up an account separate from your regular checking to reduce temptations of dipping into the fund for non-emergency spending.

3. Set up a recurring transfer

Treating your savings like another bill is one of the best ways to make sure you’re stashing away money every month. When you set up your monthly budget, plan how much you want to take out for your savings and set up an automatic transfer into your savings account on the same day every month like any other bill payment. You may even decide to setup a direct deposit from your paycheck so that you never see the money that’s being taken out.

4. Determine rules for spending

Depending on circumstances, you may find yourself contemplating what exactly qualifies as an emergency and dipping into your savings for things you justify as such. This is why it’s wise to set up restrictions beforehand. Ask yourself, what types of things constitute an unexpected emergency, and what kinds of things don’t; lay the ground rules and then stick to them!

5. Start somewhere

One of the hardest parts of any goal is getting started. Building a 6-month emergency fund won’t happen overnight; it takes time. Start small and over time as more money frees up increase the amount you save. For instance, if you were making a $45 credit card payment every month and you paid off the balance, add that $45 payment to your monthly savings transfer.

If you have a meager savings that you’d like to grow, or you have no savings whatsoever, there’s no better time than the present to start actively preparing for the unexpected. Your bank account will thank you later.

For tips on easy ways to save money, check out our blog How to Save Money Without Doing Anything!

Why It’s Important To Get Pre-Approved

Beginning the process of looking for a new home can be a daunting task and for many first time home buyers, knowing where to start can be confusing. You may be asking yourself “how do I go about paying for a house?” or “how much home can I afford?” Well, both of those questions can be answered after getting a pre-approval.

What’s a pre-approval?

It can be difficult for the average person to pay for their home with cash. So, how do many people buy a home? Well, the answer is quite simple and many individuals go this route every day; apply for a home mortgage loan.

At AmeriSave Mortgage Corporation, we’ve made this process simple, offering online services that allow you to go through the loan process from the comfort of your living room.

Obtaining a pre- approval is one of the first steps you should take in your home hunting process. A pre- approval can assist in your house hunt because you learn just how much of a loan you qualify for and that makes home shopping easier. Not to mention, sellers will view you as a serious buyer and this could put you in good standing in their eyes when you begin to make bids on a home, especially if there are multiple offers.

Four tips on negotiating a home purchase price

Four Tips On Negotiating A Home Purchase Price

For many inexperienced homebuyers, negotiating a final sale price can seem rather intimidating. Every homebuyer wants to make an offer most in their favor, which is why proper negotiation plays such an important role in the process. Here are four quick tips to help you get started on negotiations.

1. Understand the seller.

Perhaps the most important component of any negotiation, understanding your counterpart helps you estimate how much leverage you have and how low you can make an offer. If a seller is eager to sell the house as quickly as possible, you should stand firm in your negotiations and stress your willingness to buy the home immediately.

2. Research home prices in the area.

Before entering into any negotiation, you want to be sure that you have access to all useful information. In real estate, the average price of surrounding homes provides a reliable starting point for negotiations and helps you pick out houses that are listed well above market value.

3. Keep your options open.

All too often, first time homebuyers fall in love with a property and end up giving away far too much in the negotiation process. Instead of putting all your eggs in one basket, keep several options in mind. Not only will you avoid becoming locked in to one property, but letting the seller know about other properties of interest can give you leverage in a negotiation.

4. Don’t let ego get in the way.

By their very nature, negotiations require a certain level of competition between the two sides. As such, it is important to stay focused on buying a home at a favorable price and not let ego get in the way of common sense. Instead of insisting on a maximum price and risking losing the home, stay focused on the property itself and consider whether or not the price fits into your budget.

Get Your Credit Mortgage Ready

Get Your Credit Mortgage Ready!

If you’re considering buying a new home, then you’re probably aware of the criteria that factors into obtaining a mortgage loan. However, one of the many standards that concern most individuals is the shape of their credit.

Your credit does affect your loan eligibility and rate, that’s why it’s important to take steps in order to improve your report/score before submitting an application.

Check out these 5 steps so that you can have confidence when applying for your next home loan!

  1. Check your credit report

Okay, first things first, check your credit report. You’ve probably heard this advice many time, but there is a reason it is the first step you should take; credit reports may have mistakes. In fact, according to a report by the Federal Trade Commission, 1 in 5 Americans have an error on their credit report. Those aren’t the best odds. Spending time once a year reviewing your report to confirm there are no errors can increase your score and ultimately save you money; better scores typically equal better rates.

  1. Pay down your debt

You’ve probably heard of this little thing called debt-to-income ratio, and if you haven’t, get acquainted with this term. Basically, your debt-to-income ratio is the total of your monthly debt payments divided by your monthly gross income. The higher your ratio, the bigger risk you are to a mortgage lender because you’re less likely to be able to pay your monthly mortgage bill. Paying down debt and paying off collections will also be good for you in the long run because it’s less monthly payments you have to make on top of your mortgage.

  1. Don’t over utilize your credit

No matter how high the limit is on your credit cards, utilizing a high percentage can have a negative impact on your credit. A good rule of thumb is to keep your utilization under 30%, so if you had a credit card with $1500 limit, you wouldn’t want to spend more than $450 at any given time. Also, if you can afford to pay off your credit cards in whole every month, that can help boost your score.

  1. Diversify your credit lines

This may seem counterintuitive, but with responsible managing, having several forms of credit lines can improve your credit. A good mix of credit cards and loans that you make regular, on-time payments with low utilization shows lenders that you are responsible with your debt.

  1. Get some credit

For many, the world of credit cards and personal loans seems daunting and scary, so they opt out of dealing with any form of credit at all. However, building a credit history is important if you plan on purchasing a home with a mortgage. The older your credit history the better, so start building soon. Secured cards and small loans are good starting places. If you’re still unsure, ask a financial professional for help.

 

If you already follow these steps, then you’re on the right track and may be ready to venture into home ownership. Check out our rate calculators and get your no obligation quote today!

homes are selling fast this spring

Homes Are Selling Fast This Spring Season

With demand so high and supply low, it’s no wonder houses are selling faster than agents can set up showings with their clients. This spring we are definitely in a sellers’ market; home prices have gradually increased and show no signs of stopping and yet buyers are still swooping in and purchasing homes.

According to new data collected by Redfin, sales have jumped by 9% compared to this time last year. This competitive market is creating a lightning fast environment for home sales with houses selling at an average pace of 8 days faster than the previous year.

Fast home sales and low supply means that agents and buyers have to be prepared and on their A-game in order to compete in the fast paced market. First time homebuyers will face some of the toughest challenges when searching for affordable homes since builders are having trouble keeping up with demand for starter homes.

A seller’s market is great for business for many real estate agents as buyers attempt to stay competitive and find insider help, and leverage market connections. Buyers know, or will soon realize, that this is not the market to go at it alone, and using an agent will give them a competitive edge when attempting to sway sellers in their favor.

Reduce Your Debt to Income Ratio

Reduce Your Debt-To-Income Ratio

In the wake of the home finance crisis that began in about 2008, obtaining a mortgage is now more difficult than it was before, but knowing the obstacles will help prepare you for buying a home.  Today’s lenders want to avoid the mistakes that bankrupted yesterday’s lenders.  Additionally, Government Sponsored Entities (GSEs) Fannie Mae and Freddie Mac have set much tighter guidelines that lenders must follow.  There are numerous factors considered when determining eligibility for a mortgage, but the three big ones are credit history, income and debt.

The debt-to-income ratio (DTI) is a valuable number that underwriters look at heavily when determining your borrowing ability.  To put it simply, DTI is the amount of debt you have compared to your overall income.  A low DTI shows lenders that you have a favorable balance between debt and income.

There are two main kinds of DTI and they’re expressed as a pair (front-end/back-end).  The front-end ratio indicates the percentage of income that goes towards housing costs (principal and interest, mortgage insurance, property taxes and homeowners’ association dues).  The back-end ratio is the percentage of income that goes towards paying recurring debts, including the housing costs covered in the front-end, plus credit card payments, car payments, student loans, child support, alimony, etc.  AmeriSave, one of the nation’s largest online lenders generally requires a DTI of 45% or lower for conventional conforming loans.

If you haven’t guessed it yet, one of the keys to unlocking the door of homeownership is reducing your debt-to-income ratio.  There are many things you can do to actively reduce your DTI so you can apply for a mortgage.

Increase your income – This might mean working some overtime, asking for a salary increase or taking on a part-time job.  Be advised though, as we mentioned earlier, income verification standards have increased greatly in the new age of lending so be mindful that cash or otherwise non-reported earnings will likely not count toward your “income”; although it could be used to reduce debt to the same effect.

Reduce spending – Review your bank and credit card statements to see where you are spending most of your money.  Cut back on unnecessary expenses and research other providers of insurance, phone, cable and other utilities to see if there are lower-cost alternatives.  Plow those savings into reducing your debt.

5 Ways to Cut Costs and Save

Reduce debt – A high DTI is not necessarily bad if you’re actively reducing debt.  For example, if your income is $2000 per month and you’re putting $1000 towards debts, your DTI is temporarily 50%, but will be reduced to 0% when you’re finished.  If you have any cash saved, you might want to consider paying off some debt.  While credit cards have high interest rates, the minimum payments are typically lower than, say an auto loan. Consider this scenario:

You have credit card debt of $5000 with a minimum payment of $120 and an auto loan with $5000 remaining and a payment of $600.  The $600 per month towards the auto loan reduces your borrowing power by $100,000, so you may want to consider using the savings to eliminate the auto loan and continue paying monthly towards the credit card.

If you plan on paying off any debts in full, ask the creditor the date they report to the credit bureaus, then apply for the mortgage after your account has been updated, revealing less debt.  You can also track changes to your credit report with free services like Credit Karma.

Spring has sprung

What To Expect When Purchasing A Home During The Busiest Time In Real Estate

With the blossoming of new flowers, for sale signs are also blooming across the country; spring homebuying season is up and running. Despite rate increases, it’s still a sellers’ market for Americans in most of the U.S. Yes, 2016 was a great year for mortgage rates, seeing rates hit record lows; however, with rates lingering in the 4% range, historically speaking, we’re a far cry from saying rates are bad. In fact, comparing rates over the course of the past 50 years, a rate below 5% is really great, even by today’s standards.

Spring time real estate sales are projected to boom this year, but low inventory will definitely present a major increase in demand. So, what does this mean for buyers? Well, the simple answer is homes are selling faster than ever. In fact, homes are selling at an average of 8 days faster than the previous year. With that being said, while conditions are great for purchasing a home, finding one to buy may present problems. You will have competition, even more so with the projected increase of millennials entering first time homeownership this year.

Don’t let the lack of supply discourage you though. Our economy is on the rise and has been for some time; that fact, coupled with job growth and still low rates creates a landscape for optimal selling and buying potential. However, it does make it more important than ever to do your research and ready yourself with a great mortgage lender. You can visit amerisave.com and apply for a pre-approval so that you have a gauge of how much home you can afford. The market is competitive

Tax Tips For Last Minute Filers

Tax Tips For Last Minute Filers

When it comes to filing taxes, procrastination plagues a large number of Americans every year. In fact, based on data collected by the Internal Revenue Service, up to 25% of tax filers wait until the last two weeks before they even begin preparing their tax documents.

Of course, procrastination isn’t the only reason individuals delay the tax filing process. For those that owe money, waiting to file can help them earn interest on their money before they pay back the government. Whatever your reasons may be for postponing your taxes, we are down to the wire and the deadline is upon us, so we put together a list of tips that may help you get your returns filed and all squared away! Check out our list below!

1. Write a list

Yes, this may seem arbitrary, but trust us; when a deadline is approaching many find themselves feeling stressed and anxious which usually leads to worrying about what they need to do instead of actually doing it.

A list of documents needed and tasks you need to complete will keep you organized and on track to get everything done on time!

2. Don’t make hasty sacrifices due to time

Itemized deductions could help you save more than the standard deduction. Take time and compare your total deduction amount and make a decision based on what fits your situation.

3. File online

There are awesome tax filing services that streamline the process and make filing easier than ever, and for many Americans, depending on their income levels, it’s free! For those with more complicated financial situations, this may not be the best path, but many individuals have had great success with e-filing services.

4. File an Extension

When it comes down to it and you realize you aren’t able to file by the deadline date (April 17th), the next step is to file an extension. Head over to irs.gov to find the IRS free file application and apply for the 6 month extension. Filing after the deadline without an extension could put you at risk of receiving a late filing penalty.

5. Start tracking your docs

If you haven’t before, a proven way to eliminate tax stress is by keeping track of your records throughout the year. Start now so that you can have a happy, stress free filing year for your 2018 returns!