If you are applying for a mortgage, it is usually in your best interest (and suggested) to not make any changes in your job or career path. Mortgage lenders look for stability. As one of the prerequisites or requirements you could call it, they require a two year job history. However, there is a possibility to still obtain a mortgage without having this requirement. It would take some work, but it is possible. 

If you fall in this category and do not have a two year job history, you should consider an offer letter mortgage. Your past income, education, and potential for future income is looked at in order to measure income. If someone recently graduated from law school, you could consider an offer letter mortgage. Your potential for future income is great. This type of program does not bypass your credit score, down payment, etc. But it affects your eligibility, interest rate, and loan amount. 

Not only are recent graduates applicable for this situation, but someone who is staying in the same profession but just switching companies would be applicable. Also, if you are staying in the same company but perhaps moving out of state, you would also be applicable. This is true even if your job in your new location has not begun. Lenders just want to make sure you will have a reliable income so you can make your mortgage payments.

If you plan to go this route, it is important to make sure your job offer letter includes many details. It should include your start date and your salary. It should also be signed by both you and your employer. The more specific the letter is, the happier the loan officer will be.

There are quite a few loan types that allow this type of letter. Do not lose your hope if you are in between jobs and you want to apply for a mortgage!

Last week we chatted about the speculation of a recession occurring. There are a handful of reasons that people are coming up with this conclusion. We want to make it clear that we are not, in any way, predicting that this will happen. We have simply gathered information from others and put together the reasons why this is being said. This type of information includes the fact that both unemployment and inflation is high. This means less money is going into the economy. Also, the Federal Reserve policies are more strict than usual. Overall, there are less houses being built for a multitude of reasons. But when this occurs, the economy is typically impacted. With all of this being said, the conclusion for some is a possible recession. 

If a recession happens, the housing market will be affected in a few different ways. To start, mortgage rates will likely decrease as inflation decreases. Typically these two rates tend to go in the same direction as one another.

However, when it comes to the price of homes, the price of homes will either stay the same or increase. In the last six recession that have happened, this is what happened. (Again, we do not have a crystal ball and are not saying that this is what is going to happen. We are only letting you know what has happened in the past.) 2022 is very different from previous recessions. To start, supply and demand is different. The demand for homes is high and the supply is low. Lenders are also more strict in 2022 as well. With this being said, what would happen to the housing market is not certain since things are different than in the past.

It is hard to tell what would happen to the prices of homes for sale. It is possible that the price would decrease as sellers would realize what is appropriate to sell the home. But again, that is not certain.

Something to keep in mind as it relates to the housing market and a recession is that it is important to realize that real estate investments need to always be looked at in the long term. So if you have that type of mindset, it is possible that a recession would not even have any effect over you as it relates to the housing market.

With it being in the middle of the year, there has been some speculation of a recession happening. With people worrying about the possibility of a recession, people are also concerned what it would mean for both homeowners and those purchasing a home. No one can predict the future, that is certain. We have no crystal ball for this type of thing. However, there are a handful of signs that indicate if a recession is likely to occur or not.

To start, if the unemployment rate is high, it is a sign of a potential recession. If people are struggling with finding a job, the money they have is being used on necessities. This means that there is not “extra” money being spent eating out or buying clothes, etc. So overall, unemployment means less money going into the economy.

Another potential sign of a recession is when inflation starts to happen. This means that money, overall, holds less value. Right now, inflation is at a forty year high. It is predicted that this will hold until at least the fall. It does not mean after the fall, things will go back to “normal,” though. It does mean that consumers are less likely to spend money since the cost of things are so much higher than normal. This is especially true for the unemployed. Again, this means less money going into the economy.

The Federal Reserve has a huge influence on whether a recession will or will not occur. The central bank is doing its best to fight against inflation. Let’s hope that they are able to influence things positively. There are some big meetings that are due to occur. The outcome of these meetings will influence a possible recession in general, but also mortgage rates as well.

Compared to a year ago, home building has taken a huge backseat. There are a lot of reasons for this. To start, the cost of materials has skyrocketed, along with issues in the supply chain. There has also been a labor shortage as well. With all of these things combined, builders are simply just not building as many houses. In the past, this usually indicates economic troubles.

Next week, we will talk about how a potential recession would affect the housing market.

Investment properties are an option for people who have some extra cash flow or saved up money where they would like to earn a return on investment. Even though the cost of homes have indeed increased, you may still have the opportunity to earn a great deal of money. There are a lot of things that you need to take into consideration. Some of the things you need to think about are what timeline do you have to work with? How much money do you have to spend? With how much money you have to spend, would you have to borrow anything from anyone? How much money are you hoping to make from the investment? You can never ask too many questions, especially when it comes to making an important decision like this!

If you are still not confident if this is the right route for you, we have a simple way for you to look at it. To start, with the amount of money you have to invest, can you purchase a home with just that amount of money? Or would more funding be needed in addition to what you have? If more money is needed, will what you are expected to make be worth the investment? An important factor to look at is if the home does not sell immediately, will you have any financial issues because of it? If you would, an investment property may not be the best avenue for you. With the unpredictable market of today, it is not guaranteed how quickly a home would sell.

Something else you should keep in mind, that the majority of people may not be aware of, is the fact that the interest rate of second homes is usually higher. With taking this into consideration, would you still make a significant amount of money for the investment to be worth it?

If after asking yourself these types of questions and you think an investment property is a good idea, we would recommend you speak to a professional. We would be happy to talk to you about your mortgage options on an investment property!

There are always new options out on the market! Which is very exciting for new and current homeowners. A home equity investment (or known as an equity sharing agreement) basically allows you to sell equity that you have on your home. Your earnings are an upfront cash payment. Keep in mind that this is not a loan. You are making an agreement with an investment company to obtain cash for what you have earned from home equity. This is very different than someone who may refinance their home or take out a second mortgage.

One of the main appeals is that you are not getting into any further debt. Like if you did a cash-out refinance, you would technically be getting into further debt. (Even if you were able to afford it, this is still what you are doing.) Another appealing point of view is that you have no extra monthly payments. The amount you owe to the investor depends on how much your property value increases or decreases. Typically, you have ten years to repay, unless you sell or refinance your home earlier than ten years.

If the value of your home increases, keep in mind that you will be responsible to pay that much more back.

Understanding how home equity investments work can be cumbersome and confusing. Because of that, we would highly recommend you speak with a professional to make sure you are understanding how the investment works. A professional will be able to help ensure that you are eligible for this type of investment.

Also, like any other decisions you make, we would recommend you get offers from multiple investment companies instead of just one. There may be one company that offers something that the other one does not. It is also important to verify that there would be no type of penalties with your mortgage lender for obtaining this type of agreement.

As we have mentioned before and you are likely incredibly aware, houses to purchase that are not astronomically are not easy to find! In all actuality, we know that finding a home to purchase, period, is hard to find. In an effort to help, we have some ideas for you as to how you can decrease your down payment and closing costs. These ways may not work for everyone but we still want to share them with you, just in case!

A no-brainer to save money is having a no-down-payment mortgage! Both a VA loan and USDA loan offer this type of loan. You do have to qualify for them and there are quite a few hoops to jump, as you likely know, but if you qualify, it would save you from having to make a down payment!

If you do not qualify for a no-down-payment mortgage, there are some low-down-payment mortgage options available. This would mean your down payment is 3% or 3.5%, which would save you a decent amount of money. There are quite a few ways you have to qualify and while it may not be easy, it is still something we recommend you look into. This type of option is through an FHA loan.

There are some programs out there that actually help with covering your down payment. Each state has their own rules and availability but take a look to see if you meet the requirements. If you need help locating this type of program, ask a professional for help finding one. Also, some people receive gifts from loved ones that may cover both the down payment and closing costs. It is important to know that the gift must actually be a gift and not have to be paid back in any way. A formal letter must be written up that states it is a gift.

Believe it or not, some sellers or lenders will actually cover closing costs. It is likely that it will not be down-right offered to you, but if you ask and see if it is possible, it is worth a try. If the lender pays for the closing cost, it is likely that the amount will be added to your mortgage and your interest rate may be higher. But if you simply cannot afford closing costs, it is an option.

As you can see, there are many options available to get help if you need it! You may have to do some investigating, but help is available.

Did you know that purchasing a newly constructed home is a bit different than purchasing an existing home?  There are some things to think about and take into consideration when you purchase a home that has recently been or in the process of being constructed.

For the most part, the actual purchasing process is the same. But the nice part with a new construction home is that you may have some say in certain aspects of the design of the home, including what type of floor is put in, etc. We would recommend that you start the process by getting a real estate agent. The real estate agent can help you to negotiate with the builder, if need-be. And the cool thing is that the builder usually pays for the commission of the real estate agent – not you! Just like buying any other home, getting pre-approved for a loan helps the process happen a bit quicker. 

Next up is the fun stuff! You need to make sure you find the right builder for your home. Each builder has a different style and even builds in different areas. There are even some spec homes that are somewhat custom, so some decisions are left to you with what you want. Keep in mind that the type of home will affect how quickly the house is built, along with financing options.

Again, more fun instore! After you pick your builder you get to have a design consultation. This consultation will go over what you can customize, design-wise, and what you are unable to. If you want to customize everything, make sure you are on the same page with the builder and design consultant. 

After the fun is out of the way, you have to get back to serious stuff…you need to sign a contract with the builder and also finalize your mortgage. There are different loans available for new construction homes. This is where working with a professional comes to play and is very important. They can help you with all aspects of the process!

There are many people who are attracted to buying a home that needs a lot of work…a fixer-upper as they call it! Some of the reason for this, we suspect, is from all of the great do-it-yourself reality shows out there. They make it look so easy and completely do-able for people to accomplish on their own. While we do not want to discourage you from doing this if it is something you want to do, we want to give you a few things to think about before making your final decision. We understand that some of the reasons people want to do it, as well, is because the price on this kind of home is less than a home in good standing order. And in the crazy housing market of today, it is the only option for some.

If the home you are looking at has some type of structural damage, we want you to really think about the decision! If the home has structural damage, depending on how extensive it is, you may have to rebuild your entire home! This may wind up costing you a lot more money than if you were to have purchased a home without any type of damage like this. This also ties into a home that may have foundational issues. If the foundation of a home is bad, it is likely that you will have to continue to spend a great deal of money on it on a continual basis. As with the purchase of any home, we highly recommend you get an inspection and make sure it is from a reputable business! The inspection may save you from buying a money pit.

If a home has old plumbing or electrical work, we would suggest you really think about purchasing the home. If you do not get these areas fixed right away, it is possible that more serious issues can arise before you update the electrical work and plumbing. Check with a professional before deeming if the electrical work or plumbing should stop you from purchasing the home.

If a home has small issues that are easy to fix, it should not stop you from buying the home. But again, we would highly recommend that you hire a professional to deem if the issue is truly a small issue or if it is a danger to you if you move in or will prove to be a money pit.

There has been a great deal of chatter about if the value of homes is going to plummet. For a significant amount of time now, the value of homes have been significantly higher than other years. It has also been difficult for people to even find a home to purchase since the market is so hot right now. With that being said, all good things must come to an end at some point. (And that is if you see it as “good” – if you are a buyer, you may not see this as being something that is good!)

In the beginning of 2020, the price of a house rose 41%. That continued to the beginning of this year. That increase is something else! Along with that increase, the interest rate decreased greatly as well. This created some great scenarios for some people. It has been this way for two and a half years – which is a decent amount of time. The majority of people do not see the housing market stopping.

Two and a half years of people buying homes as much as they can since the interest rate decreased caused supply and demand to play a big role in the housing market as well. Since the amount of houses available to purchase has been low, the prices of the homes have stayed high. We are not at a point where the interest rate is not as low as it was, which may cause the demand for homes to decrease.

With this being said, it is likely that the housing market will decrease. However, that does not mean there will be a significant housing market crash like we experienced in 2008. As of right now, this appears to be the general consensus for most professionals who are knowledgeable enough to make an educated guess in this situation. 

We are not done with the refinance talk yet! As more people are trying to make the right decision for themselves and their family as far as if they should refinance or not, we are happy to help answer any questions people may have. Some of you have asked us if you should refinance or if you should pay a bit extra toward your mortgage. For most people, it makes the most sense to refinance since their interest rate will be significantly lower. (If it is not, there is no reason to refinance.) But for some people, it saves more money in the long run by just paying extra toward your mortgage monthly. Your current loan and interest rate play a large part of making the right decision. Your family’s needs also play a role in the decisions as well, along with any financial goals you may have.

If you can lower both your interest rate and your monthly payment, it would be beneficial for you to refinance. When you refinance, do not forget that you still have to pay closing costs and other fees. Do not forget to factor this amount of money into the decision. If you are wanting to use some of your home equity, a cash-out refinance is a great option for you. The money you take out can be used for a variety of things – renovating your home, paying off credit card bills, etc. If you think you are going to stay in your home for a significant amount of time, it would be beneficial to refinance as you will truly be able to reap the rewards of saving money.

Now when looking into making extra payments instead, there are a few things to keep in mind. To start off, by paying extra, you will be lowering your loan and paying off your loan faster. This is a good idea if the potential savings of refinancing is not enough for you to benefit from refinancing. If you think you may sell your home in the near distant future, making extra payments on your mortgage is the way to go. You will likely save money from not having to pay a closing cost and other fees if you were to refinance – and then you turn around shortly after and sell your home.

We would recommend you really figure out your goals with your house for the foreseeable future, along with planning out how much money you would potentially save. This will help you to figure out which decision is best.