1) Why to refinance your mortgage?

:A Mortgage refinancing lets you save money and also to tap equity.2) What is mortgage refinance?When your current home loan is replaced with a new one it is called as mortgage refinance.When people want to reduce their interest rate, or cut their monthly payments or tap into their home’s equity they refinance.

Sometime they refinance a home to pay off the loan faster and get rid of the mortgage insurance or if they want to switch over to a fixed-rate loan from an adjustable-rate.3) When is the best time to refinance your mortgage loan?In 2020 about 17% of US homeowners have secured refinance on their primary residence.

To know if it the right time you must first be very clear of how long are you planning to stay in your home, and consider the financial goals and be aware of your credit scores.

All with current refinance interest rates and the above mentioned points play a pivotal role in you decision of whether or not to refinance.4) When does it make sense to refinance?When people notice low mortgage rates which is below their current loan rate they decide to refinance however there are other worthwhile reasons too- It is a good reason auto refinance if you are wanting to pay off the loan faster with a shorter term.

If you have enough equity in your home to refinance without a mortgage insurance then it is worth refinancing If you are wanting to tap your home equity with a cash-out refinance.https://www.refinancecalculator.online/

Millennials make up the fastest-growing segment of buyers today as they are ending their leases, and many of them are buying houses.According to a recent report of the National Association of Realtors, the millennials who are in their late 20s to early 30s are the fastest-growing segment of buyers today.The household income rates of this set of people were two to four times higher than that of other age groups, noted a research study.Not just as buyers, half the number of sellers in the country are millennials impacting the market said a Zillow study.This movement is probably due to growth in their careers, higher income, and paying off student loans and other personal debts.Covid-19 was a perfect time for rebounding with a steep drop in interest rates providing the right opportunities for buying a home.Just by stretching their budgets a bit, they could afford a better home due to low-interest rates.MILLENNIALS ARE CHANGING THE HOME BUYING PROCESS.Compared to the older generation, the millennials have been slower to buy their first homes.According to this Pew Research study, 52% of adults aged 18–34 choose to move back in with their parents due to economic factors and the pandemic.According to this Pew Research study compared to 83% of the Silent Generation who married at their age only 46% of millennials are married, this is one of the reasons for the delay in home buying.According to a 2017 report by the National Association of Realtors, 99% of millennials used technology in the form of the internet and mobile devices for the home buying process, which is nearly double to Baby Boomers using the internet to browse homes.MILLENNIALS AND REAL ESTATE AGENTS.Important information about homes is now available online so the realtors’ value now comes from negotiation skills, valuable relationships, and their ability to facilitate the home buying process in this digital world.CHOOSING THE SUBURBS OVER THE CITY.A recent Zillow study pointed that 47% of millennial homeowners live in the suburbs for bigger, more updated houses by moving out of the city areas.Overall, they are approaching and treating the homebuying process in a modern way, which will an impact on the economy in the future.Reference Source: Forbeshttps://www.compareclosing.com/mortgagenews/millennials-contribution-in-the-mortgage-and-home-buying-market/

What is Mortgage Down Payment?A sum of money that a buyer pays in the early stages of purchasing a home is called a mortgage down payment.It is a portion of the total purchase price like an advance, and the buyer will often take out a loan to finance the balance.How do Down Payments Work?A common example of a down payment is a mortgage down payment that you pay when you buy a house.Before taking out a mortgage from a bank or other financial institution the home buyer pays a percentage of the total price of the home upfront, and the mortgage covers the remainder.It is similar in the case of down payments on car purchases.

A down payment is also referred to as a deposit.In some cases, if the deal fails because of the purchaser backing out the down payment is not refundable.Examples of Down PaymentsHome Purchases:In the United States, the traditional standard of a down payment on a home has been 20%.There are mortgage down payments with 10% or 15% as well, and the Federal Housing Administration FHA loans are ways to buy a home with as little as 3.5% down.Cooperative apartments or co-ops, which are common in some cities is a place in which a larger down payment is often necessary.Many lenders will insist on 25% down, and even though it is not the norm some high-end co-op properties may even require a 50% down payment.Auto Purchases:If you are purchasing a car a down payment of 20% or more can make it easier for a buyer to be approved for a loan and also get a better interest rate and other terms.For buyers who qualify, car dealers may also offer promotional terms of 0% down.

While that means it doesn’t require any down payment, it may also mean the lender will charge a higher interest rate on the loan.The Advantage with a Large Down PaymentIf you can afford to make a large down payment it will decrease the amount of interest you’ll pay over the life of the loan, resulting in lower monthly payments, and, in some cases, make insurance unnecessary.

Here are the details:Interest:If you make a bigger down payment, you’ll have to borrow less and you’ll also pay less interest.For instance, if you borrow a loan of $100,000 with a 5% interest rate, you’ll pay an interest of $5,000 in the first year alone.However, if you put down $20,000 and borrow only $80,000, then your first-year interest will be $4,000 resulting in a saving of $1,000.Over the long term, this difference is even more dramatic.

Let us take the same example of borrowing $100,000 at 5% interest, it would cost you $93,256 in interest over a 30-year period.And if you borrow just $80,000 then your total interest cost will be $74,605 saving you nearly $20,000 in long run.Additionally, a lender may offer you a lower interest rate on your loan since you put more money down because you now represent less of a risk.Monthly Payments:A larger down payment will also reduce your monthly outlay.

By taking the same example as above, a loan of $100,000 would require monthly payments of $537, while an $80,000 loan will result in $429.Mortgage insurance:While buying a home, a larger down payment can help you avoid having to pay for private mortgage insurance (PMI) which compensates your lender in case of non-payment of your loan.Your lender will generally not require PMI if you put down 20% or more.

What is a First Mortgage?A primary or initial loan obtained for a property is termed a first mortgage.

A primary lien on the property is placed by the lender who funded the mortgage to buy a home.If in case of default in payment this lien gives the lender the first right or claim on the home.How does a First Mortgage Work?Depending on the type of mortgage, you’ll need to pay upfront, a percentage of its cost as a down payment.Then, regular monthly payments comprising of a portion of the principal and interest, homeowners insurance, and property taxes all need to be paid till the life of the loan.The first mortgage takes priority over any junior lien or second mortgage, attached to the property.So in case of default in payment, your first mortgage lender would have the first claim to the proceeds from the foreclosure sale.Then second mortgage lender can claim from the remaining proceeds.

If you have multiple liens then this chain of priority continues.However the pending property taxes will be repaid first before other claims, and if the borrower is filing for bankruptcy, then the court decides on the precedence of claims.How is a First Mortgage Different from a Second Mortgage?Both first and second mortgages have the property itself as collateral.The main difference being the first mortgage is used to buy the property, whereas a second mortgage can be used for many reasons like renovation, college fees, consolidating debts or healthcare costs, a vacation, or various other expenses.Sometimes a second mortgage is used to cover the down payment and closing costs.Second mortgages usually have higher interest rates compared to first mortgages.Home equity loans, and (HELOCs) are the two most common types of second mortgages.Reference Source: Bankratehttps://www.compareclosing.com/mortgagenews/all-about-first-mortgage/

Now is the right time to tap into your home equity to finance a renovation or make a large purchase.

In 2020 the amount of equity that borrowers could take out of their homes was at a record low.On Tuesday, CNBC reported, that the soaring home prices in the country led to the record level of home equity.According to data from Black Knight, a mortgage technology and research firm, at the end of 2020, close to 46 million homeowners held a total of $7.3 trillion in equity.

Which is the largest amount ever recorded.This has led to many homeowners considering the home renovation projects by tapping into their equity.Homeowners looking for a home-equity line of credit, or HELOC, face certain challenges said the last month’s report of The Wall Street Journal.As the HELOC offers better rates than a credit card it is a good option.

the average interest rate on this type of credit is 4.86% and that of a credit card is 16%.But in April 2020 during the early days of the COVID-19 pandemic, some banks in the United States of America suspended the origination of HELOCs, including big players like Wells Fargo, JPMorgan Chase, and Citibank.Many of those suspensions are not lifted yet.

The banks offering HELOCs have stricter standards now, so to qualify you might need a high credit score and low debt-to-income ratio.A cash-out refinance, is another option that lets you draw cash from your home where you can replace your old mortgage with a new refinance.Compared to home equity loans and mortgages a cash-out refinance will offer you lower rates.If the cash-out funds are used to make capital improvements then you might also be able to deduct the interest on the first $750,000 of the new mortgage.When mortgage rates are historically low like the present moment a cash-out refinance is the best option because you’re lowering your interest payment even when you are taking out a bigger mortgage.According to the Federal Housing Finance Agency, a new federal refinancing program is starting which will reduce your monthly payment by $100 -$250.Reference Source: Yahoo Financehttps://www.compareclosing.com/mortgagenews/is-it-a-good-time-to-tap-into-home-equity/

About Homeready Mortgage ProgramWhen thinking of homeownership the most important decision is finding the right mortgage to finance our home.Many Americans are unable to put down the standard 20% down payment so the Federal National Mortgage association came up with options.Keeping in mind the need for homeownership for low-income borrowers, Fannie Mae has introduced a program called — HomeReady Mortgage Program.What is a Homeready Mortgage?Home ready mortgage program helps with low down payments, low financing costs, and low mortgage insurance costs.With home ready mortgage program, the borrowers have flexibility in acquiring funds for down payments.This HomeReady mortgage program sponsored by Fannie Mae has been planned to assist mortgage lenders by helping credit-worthy low-income borrowers.A very low down payment of 3% and a cost that is better than or equal to standard pricing are the key features of a HomeReady mortgage.Freddie Mac has a similar program called HomePossible.Borrower’s QualificationWhen borrowers have a credit score of 620 or greater then they are eligible, and those borrowers who score 680 or more may receive even better pricing.Be it first-timer or repeat homebuyers, and those borrowers seeking to refinance an existing mortgage, all can take the advantage of the HomeReady program.Affordable mortgage insurance coverage is also offered by the HomeReady program.Effective July 20, 2019, borrowers are eligible when their income is 80% or less of the area median income (AMI) for the census tract in which the property is located.That also includes properties in low-income census tracts.Since already confirmed that anybody can take advantage of the HomeReady program, (terms and conditions apply) a borrower may have ownership interests in other residential properties, but at the time of closing only one of those other properties may be financed by HomeReady mortgage.How do the Borrowers Benefit?Along with a low down payment of 3%, compared to standard loan pricing the HomeReady mortgages offer pricing that is better than or equal to them.The program Also lower than standard mortgage insurance coverage are offered in the program with requirements being the loan to value (LTV) ratio should be between 90% and 97%, along with the facility that the borrower can cancel the monthly mortgage insurance payments when the LTV ratio drops below 80%.Additionally, the borrower may tap other sources of funds like gifts, grants, and Community Seconds mortgages and doesn’t require to use a minimum amount of personal funds for the down payment and closing costs.Second mortgages are called Community Seconds, these mortgages are used to fund down payments and closing costs on first mortgages that are delivered to Fannie Mae.How will the Lenders Benefit?While offering a credit risk assessment the loans that are eligible for HomeReady are automatically identified by Fannie Mae’s Desktop Underwriter (DU) system.Along with the advantage of pricing that is better than or equal to Fannie Mae’s standard pricing, risk-based pricing waivers for borrowers with credit scores of 680 or greater and LTV ratios over 80% are received by lenders.One can integrate a HomeReady loan along with standard loans in MBS pools and whole loan commitments.What is the difference between HomeReady and HomePossible?Though there are a few basic differences between the two, HomeReady and HomePossible are both great options working toward lower-income, lower-credit-score borrowers who want to build wealth through homeownership.HomeReady mortgages are backed by Fannie Mae and HomePossible is backed by Freddie Mac.Just the difference being to qualify for a HomePossible loan requires a slightly higher minimum credit score.ConclusionHomeReady can be used on a variety of home types.

HomeReady is a great product for low-income applicants who want to put the minimum down payment for a mortgage.Once you’ve paid off 20% of the home’s value, you have the option of canceling the mortgage insurance.HomeReady can be purchased through local, national, and online lenders and are perfect for first-time and low-income home buyers.https://www.compareclosing.com/blog/about-homeready-mortgage-in-texas/

What are REITs — Real Estate Investment Trusts?When a company owns, operates, or finances income-generating real estate then it is called a real estate investment trust REIT.REITs pool the capital of many investors, making it possible for individual investors to earn dividends from real estate investments, without needing to buy, manage, or finance any properties themselves.How REITs WorkIn 1960 REITs was established by Congress as an amendment to the Cigar Excise Tax Extension.Investors were allowed to buy shares in commercial real estate portfolios by the provision, which was earlier available only to wealthy individuals and through large financial intermediaries.Even if REITs specializes in specific real estate sector, the diversified and specialty REITs hold different types of properties in their portfolios, so it comprises both office and retail properties.Apartment complexes, data centers, healthcare facilities, hotels, infrastructure are the properties included in a REIT portfolio, also fiber cables, cell towers, energy pipelines, office buildings, retail centers, self-storage, timberland, and warehouses can all be a form of properties.Major securities exchanges have public trading of many REITs, and they can be bought and sold like stocks throughout the trading session by investors.These REITs typically trade under big volume and are considered very liquid instruments.What Qualifies as a REIT?The business model of most REITs is quite straightforward.

Space is leased and rents are collected on the properties, then that income is distributed as dividends to shareholders by REIT.Mortgage REITs instead of owning real estate, finance real estate.

Income is earned from the interest on their investments by these REITs.A company must comply with certain provisions in the Internal Revenue Code (IRC) to qualify as a REIT.These requirements being to primarily own income-generating real estate for the long term and distribute income to shareholders.If a company wants to qualify as a REIT then it must meet the following requirements:At least 75% of total assets to be invested in real estate, cash, or U.S. Treasuries.At least 75% of gross income to be obtained from rents, interest on mortgages that finance real property, or real estate sales.Each year a minimum of 90% of taxable income to be paid in the form of shareholder dividends.The company should be an entity that’s taxable as a corporationA board of directors or trustees to manage the companyAfter its first year of existence the company must have at least 100 shareholdersFive or fewer individuals cannot hold more than 50% of its sharesAs in the current scenario, REITs collectively own about $3 trillion in gross assets, publicly traded equity REITs account for $2 trillion.Different types of REITs Equity REITs — That owns and manages income-producing real estate.

Income are generated mainly through rents and not by reselling properties.Mortgage REITs — The real estate owners and operators are lent money by these REITs either directly through mortgages and loans, or indirectly through the acquisition of mortgage-backed securities.

The spread between the interest they earn on mortgage loans and the cost of funding these loans is how their earnings are generated.

Yet they are more stable as they do not face market fluctuations.Private REITs — These REITs neither are registered with the SEC nor do they trade on national securities exchanges.

What Is a SIMPLE IRA?Most small businesses with 100 or fewer employees can use a retirement savings plan that is called a SIMPLE IRA.

“SIMPLE” represents “Savings Incentive Match Plan for Employees,” and “IRA” is for “Individual Retirement Account.”A non-elective contribution of 2% of the employee’s salary, up to 3% of their salary, or a dollar-for-dollar matching contribution of the employee’s contributions can be made by the employer.As of 2021, an employee can contribute a maximum of $13,500 annually.An additional catch-up contribution of $3,000, allowing their annual maximum to $16,500 can be made by retirement savers of age 50 and above.Every year the government will provide a maximum tax credit of $500, under the Setting Every Community Up for Retirement enhancement (SECURE)ACT of 2019, to employers who create a 401(k) or SIMPLE IRA plan with automatic enrollment.Understanding the SIMPLE IRAThe best part of SIMPLE IRAs is minimal paperwork requirements, an initial plan document and annual disclosures to employees are all that is required.the plan is established by the employer through a financial institution which then administers it.For the contributions that they make for employees, the employers get tax deductions, and the startup and maintenance costs are also low.Eligibility for SIMPLE IRATo establish a SIMPLE IRA the eligibility, requirements are:The employer must have 100 or fewer employees.Even those who are self-employed or sole-proprietors can establish a SIMPLE IRA.Employees must have earned at least $5,000 in compensation in any two previous calendar years and be expected to earn at least $5,000 in the current year, so as to participate in the plan.If they wish, the employers can choose less restrictive participation requirements.When an employee receives benefits through a union then the employer may choose to exclude him from participation.How does a SIMPLE IRA work?If the employer wants to allow employees to choose the financial institution where they will hold their SIMPLE IRAs then by using Internal Revenue Service (IRS) Form 5304-SIMPLE, he can establish a plan, or if the employer wants to choose the financial institution where employees will hold their IRAs then he can use Form 5305-SIMPLE.To open their accounts the employees must fill out a SIMPLE IRA adoption agreement.And once the plan is established, each year the employers are required to contribute to it till the plan is ends or closes.However, if they follow IRS rules then employers are allowed to change their contribution decision between the 2% mandatory contribution and the 3% matching contribution.The disadvantages of SIMPLE IRAWith SIMPLE IRAs the business owner cannot save as much for retirement as they would with other small business retirement plans, like the simplified employee pension (SEP) or a 401(k) plan.A 401(k) plan also offers higher catch-up contribution limits.Only after a two-year waiting period from the time the employee first joined a plan, can a SIMPLE IRA be rolled over into a traditional IRA, which is not the case with other plans like a 401(k).Taking money out of SIMPLE IRAWhen you withdraw from your SIMPLE IRA if you are under age 59½ then You have to pay a 10% additional tax on the taxable amount when you withdraw the money unless you are eligible for another exception to this tax.This tax can be increased to 25% in some cases.When do you not pay additional taxes?If you are age 59½ or older when you withdraw the money from your SIMPLE IRA then you don’t have to pay additional taxes.

You are not required to pay additional taxes if:Your withdrawal is less than:If your unreimbursed medical expenses have exceeded 10% of your adjusted gross income, which is 7.5% if your spouse is age 65 or older,While you are unemployed and have to pay for your medical insurance,Your qualified higher education expenses, orThe amount to buy, build or rebuild your first homeYour withdrawal is in the form of an annuityYour withdrawal is a qualified reservist distributionYou are a disabled personThe SIMPLE IRA owner has expired and you are the beneficiaryAn IRS levy is the cause of withdrawalConclusionSIMPLE IRA, meaning Savings Incentive Match Plan for Employees, is a tax-deferred retirement savings plan.It is easy to set up SIMPLE IRAs and is a good option for small businesses.They have their set of challenges, so businesses that can afford to set up other plans might consider it.Beginning from December 2015, transfers from SEP IRAs, traditional IRAs, and employer-sponsored plans such as a 401(k) are allowed into SIMPLE IRA accounts.https://www.compareclosing.com/blog/what-is-a-simple-ira/

Should I Refinance or NotBuying a home is one of the biggest and most important financial decisions you will make in your life and it involves a mortgage which is a wonderful tool to help you reach your future home goals.Since many people go through the question should I refinance?

Let us understand if it is the right choice.Here’s a guide with the pros and cons, the requirements, eligibility, etc to help you decide for yourself.Why should I refinance my mortgage?By refinancing you can change the terms of your mortgage and secure a lower monthly payment, you can also switch your loan terms, consolidate debt, or even take some cash from your home’s equity to put toward your pending bills or get a renovation done.Let’s dive deeper into the question ‘should I refinance?’ and find the reasons you may want to refinance.1.

When you want to change your loan termThere are various reasons why you as a homeowner might want to change your loan term.

You may be switching to a longer or shorter term.Longer mortgage termIf you having trouble making your monthly mortgage payments, or are not satisfied with your current payment amount then a refinance can allow you to lower your monthly payments by lengthening the term of your mortgage.For instance, you can make a lower payment each month just by lengthening your existing 15-year mortgage to a 30-year refinance loan term.You may get a higher interest rate when you lengthen your mortgage term, because inflation is taken into account by the lender, and the possibility of you paying more in interest over a period of time because of a longer mortgage term.If your current payment schedule is not working with your household income then with a refinance you can free up more cash to invest or, build an emergency fund or spend it on other necessities.Shorter mortgage termSimilarly, you can also refinance your mortgage from a longer-term to a shorter term.You will enjoy lower interest rates and own your home sooner when you switch from a longer-term mortgage to a shorter term.Sometimes switching to a shorter-term means that your monthly payments have increased, so be to have enough stable income to cover your new payments before you sign on for a shorter term.2.

You need cash to pay off debtsYou might have equity in your home because you’ve made payments on your mortgage.Equity can be gained by either paying off your loan principal or when the value of your home rises.Just by making your regularly scheduled monthly payments, you would have built a bit of equity in your investment when your loan is more than 5 years old.Cash-out refinance for debtBy replacing your current loan with a higher-value loan and by taking out a portion of the equity you have, a cash-out refinance helps you to tap into the equity of your home.For instance, if you have a mortgage of $200,000 and equity worth $50,000 it means that you still owe $150,000 on the loan.You can accept a new loan for $170,000, and in a few days after closing your lender would give you the cash difference of $20,000.Because you need money to pay off other debts you might seek a cash-out refinance.If your debts are spread over multiple accounts, then a cash-out refinance can be used to consolidate the debts to a lower interest rate, pay off each account, and transition to one monthly payment.With consolidation, you can keep a better record of what you owe and avoid instances of missed payments, late fees, and overdraft charges.3.

When you want to improve your home or renovate itFor repair or for replacing some fixtures, you might need to invest in your home.It is better to use the equity in your home rather than taking out a personal loan or putting charges on a credit card because they would work out to be more expensive and cash-out refinances would have comparatively lower interest rates.Cash-out refinance for renovationsThe average 30-year mortgage rate is currently is less than 3.5% while the average credit card rate is more than 12%.So by choosing a variable rate credit card or a store credit card, you’ll be paying more in interest.But if you have enough equity in your home for a cash-out refinance, you can complete your renovations or repairs without huge interest charges.Remember even though it is a refinance it is still a loan so do thoughtful spending.So before you close on your refinance get estimates from contractors or repair professionals.So that you don’t take out too much or too little money and have another bill sitting after the job is finished.4.

Ways to Refinance Home Equity LoanThere are various reasons that people are thinking about refinancing a home equity loan.Either they want to reduce their monthly payments by getting a lower interest rate or extending their loan term.Or they might want to shorten their loan term, so they can pay less total interest in the long run and become debt-free soon.Cash-out of the home’s equity can be taken for a large purpose like remodeling.Let us look at various options and the steps to be taken when you planning to refinance home equity loan.Cash-out Refinance is the 1st possibilityWhile refinancing a home equity loan a cash-out refinance is an option when you also want to refinance your first mortgage.At the time of closing of the new loan, part of the proceeds go toward paying off your first mortgage, and the cash-out part will pay off your old home equity loan.If your home has had enough equity value, you might be able to save some additional cash.The cash-out options are used by many people for making large purchases like cars or remodeling services because the interest rates of a home equity loan will be lower than a personal loan or auto loan.If the loan proceeds are used for repairing or upgrading the home, then in most cases the interest can be tax-deductible.Why This Choice Might Be the Right OneA few of the reasons you might want to refinance a home equity loan are:If you have a variable-rate loan then before interest rates go up you want to turn into a fixed-rate one.you have an existing fixed-rate loan with a higher interest rate compared to what you can get today.Now with your circumstances improved you would like to have a less expensive conventional loan with no private mortgage insurance (PMI) compared to your existing Federal Housing Administration (FHA) loan that was the only option you could qualify for at that time.Saving money or exiting an unsustainable loan into one you can better manage should often be your main consideration of refinancing a home equity loan.Eligibility for a cash-out refinanceyou must have owned the home for a minimum of six months.You should have enough home equity to pay off the principal balance on your first mortgage, that you owe on your home equity loan,You must be able to cover closing costs, and still have not less than a 20% remaining equity stake in your home.The mortgages that are originated by lenders are often sold off to Fannie Mae or Freddie Mac.If a house has an LTV ratio higher than 80% then Fannie Mae will not buy cash-out refinance loans on a single-unit principal residence.If you have a high-balance loan then your LTV ratio cannot be higher than 60%.The maximum LTV ratio allowed is 70% if you have listed your home for sale in the past six months.A credit score of at least 640–680 (varies on lender requirement) depending on your LTV ratio is required.Closing CostsA closing cost connected with a first mortgage is usually higher than those with a home equity loan.If the objective to refinance is saving money, then you need to identify your break-even period to see how many months will you need the new loan for before you cover your closing costs.The shorter the break-even period, the beneficial it is.You can also roll your closing costs into your monthly payment but if the goal is to save money then you will be paying interest on them until your loan is paid off.Smart Refinance is another option for a balance of less than $150,000 with no closing cost.Refinance into a New Home Equity Loan — is the 2nd possibilityIf your first mortgage is good enough, or if you don’t need to take out extra cash as a loan, then you can look into refinancing with a new home equity loan.Why This Choice Might Be the Right OneIf you want to get a new loan for the same amount as what you owe in your current loan to save on interest rate or for a shorter term, then opt for a new loan for a somewhat larger amount so that you can cover new expenses.Or get a new loan with a longer term so that your monthly payments are more affordable, but be aware that you’ll eventually pay more interest, this way.So if you’re having trouble making the payments this is a better option than defaulting on your existing loan.EligibilityA minimum LTV requirement is to be met to qualify, but compared to a cash-out refinance the requirements for home equity loans are lower.Though the requirements vary from lender to lender, if you belong to a credit union and have excellent credit and lending conditions that are favorable then you can borrow up to 90% or even 100% of your home’s value.For a home equity loan, you need a credit score of a minimum of 620 otherwise the interest rate will be quite high.Borrowers with scores of 740 or higher get the best rates.

On a home equity loan, unless you close the loan early, the lenders often pay most or all closing costs but if you close your loan in 24–36 months then depending on your location and loan size you’ll have to compensate the lender several hundred to a few thousand dollars for the closing costs.Difference between a Home Equity Loan vs. a Cash-out RefinanceBoth the home equity loans and cash-out refi’s have higher interest rates compared to refinancing the first mortgage.A home equity loan usually has a lower interest rate than a cash-out refinance.All the usual mortgage qualification requirements, like having sufficient income and lower debts to make the monthly payments, a stable employment history, proper documentation, and a good credit score are needed to qualify.ConclusionWhile refinancing a home equity loan a cash-out refinance is an option when you also want to refinance your first mortgage.But if you are comfortable and benefitted from your first mortgage, then you should just pay attention to the current task of refinancing a home equity loan.If you want to get the best refinance terms then having a good credit score and a low loan-to-value (LTV) ratio is important.

Shop around to find the best deal.https://www.compareclosing.com/blog/how-to-refinance-home-equity-loan/

How Does Refinancing Hurt your Credit?According to credit bureaus, the financial companies that produce the well-known credit scores, your FICO credit score gets affected in different ways by mortgage refinancing.But compared to changes caused by the way you handle your mortgage payments for the duration of the note these impacts would be small and short-lived.Too much Mortgage Refinancing is not GoodIf you are refinancing or applying for new credit related to your mortgage then does refinancing hurt your credit score?

It is not advisable to pull your credit score too many times over a short period, and from too many different potential creditors.In fact, if you don’t honor a credit contract or if you are having too many inquiries on your credit report then FICO might penalize you.And every time when you refinance, your credit score is pulled, if you have too many credit score requests in a relatively short period of time it will have a negative impact on your credit score.There are multiple credit inquiries in a short period of time when you are rate shopping for a refinance on your current mortgage.The way multiple inquiries are treated on your credit scores for certain kinds of debt, like the mortgages or student loans changed in 2009 because of the change in the FICO and other credit scoring systems.FICO recommends submitting all of your applications within a 30- to 45-day period when you are shopping around.In its newest scoring model, all of the inquiries during that period are treated as just one “credit pull,” by FICO minimizing the impact on your credit score, even if when you are not accepting a new loan.However, some lenders still prefer to use older FICO scoring models, hence the limit of inquiries is restricted at times to a 14-day period.Older Debt is BetterWhen you refinance an existing loan, the older mortgage accounts are paid off.

So there is a possibility of you missing out on some credit benefits when you replace a long-standing payment history on one debt.Compared to the new or irregular debts, the older, established, and consistent debts are considered more valuable.

If you are making payments for the same asset with newer debts without that steady payment history then refinancing does hurt your credit.Cash-out Refinances Don’t HelpYour credit score will have an adverse impact because of cash-out refinanceThe first impact is when you replace your old debt with a new loan.

The second is that the assumption that a larger loan balance could increase your credit utilization ratio, which makes up 30% of your FICO credit score.Generally speaking, when your credit file is larger and the impact on your overall debt levels is smaller, then a mortgage refinance will have less impact.When you know your credit score perfectly, then you can give the scores to lenders while lender shopping, so each lender does not have to run your credit.After identifying the lender you would like to work with, let them run your credit and complete your refinance.When you have one lender running your credit and refinance your home it should not adversely affect your credit score.ConclusionWhen you refinance too often or apply too frequently for credit-related to your mortgage, then it takes a toll on your credit score.

Always limit your inquiries to a two-week window when you are rate shopping.Compared to a newer debt, an older debt that has a steady payment history is better for you.

About Physician Mortgage LoansLike the VA loans that are specifically for Veterans, there are loan programs specifically for doctors.

These special loan programs for doctors that can help them buy a home are called Physician mortgage loans.What is a Physician Mortgage Loans?A mortgage specifically for medical professionals that usually doesn’t require any down payment is physician mortgage loans or doctor mortgage loans.With other loan types, if the borrower is making a down payment of less than 20% then the lenders want them to pay private mortgage insurance (PMI).With a Physician loan, it is possible to skip paying for both a down payment and PMI if you are a doctor.New medical professionals just entering the field can take the advantage of physician loans.Doctors usually have a large debt-to-income ratio (DTI) after medical school and often have a drawback when applying for a regular mortgage in the earlier stage of their career because they are not able to provide proof of employment and income as they have just graduated or started their residency.All these issues are taken into account by the physician loans and special allowances are made for the unique situation of a physician’s career.A lender may not allow borrowers to take on a mortgage when they already have a large amount of debt and are just going to start out their careers, but with a doctors’ career, it is a different situation.How the Physician Loans Works?In many ways, a physician mortgage loan is different from a conventional mortgage loan.The physicians will be able to buy a home earlier than they would with a conventional mortgage this is the biggest advantage of having a doctor loan.For the new medical professionals, physician loans with their 0% to 10% down payment, no need for PMI, and flexibility with employment and DTI make it an easier and more affordable option.The only disadvantage being, these types of loans usually don’t offer a fixed interest rate.Private Mortgage Insurance (PMI).If a borrower stops making payments on a loan a PMI protects the lender.

Usually, when buying a home, if a down payment of less than 20% is made then the lender will require you to pay PMI.Since it is dependent on the insurance rates, it varies, typically a PMI costs 0.5% — 1% of the loan amount each year.Depending on the size of the loan that could be any extra monthly payment of hundreds of dollars.With physician loans the new doctors are given the opportunity to pay off their medical school debt, so even if the borrowers have not made any down payment they don’t require to pay for PMI.Debt to Income Ratio (DTI).A DTI is the percentage measure of the money you spend on debt versus the money you have coming in.For most conventional loans, your DTI should be 50% or lower.

Lenders want to work with people who have little debt and can more easily manage their monthly payments so they check the borrower’s DTI.When a borrower has a high DTI, they are considered risky to the lender.Because of the thousands of dollars in debt, a new doctor would have accrued from medical school so, it is impossible for them to achieve a DTI of 50% or lower, this is taken into account by the physician mortgage loan and the DTI restrictions are more relaxed.Though credit card debts, car loans, and other expenses are still examined, a recent medical school graduate is expected by lenders to have debt, so a high DTI is usually not an obstruction.Borrower QualificationsAll doctors with the following degrees can avail of the physician loan programs.M.D.D.O.Medical professionals like dentists, orthodontists, and veterinarians with the following degrees are offered loan programs by a few lenders:D.D.S.D.M.D.D.P.M.D.V.M.To qualify the borrowers for a mortgage, the lenders require more than a degree.The proof of employment and income needs to be provided by the borrower.Since new doctors may be working in an internship, residency, or fellowship so the physician loans are flexible with these qualifications.if the borrower does not have pay stubs or W-2s reflecting their current position for a physician loan, then lenders will usually accept a contract of employment to verify a doctor’s income.Property QualificationsIf you are buying or refinancing a primary residence then only physician loans can be used.Meaning, the home you are buying or refinancing, you need to live in it for the majority of the year.You cannot use a physician loan to finance a second home or investment property.Neither are the borrowers allowed to finance a condo with a physician loan.Are Physician Mortgage Loans a Good Idea?Compared to conventional mortgages the physician mortgage loans are useful to new doctors looking to buy a home.Let’s understand the pros and cons to guide you if a doctor loan is the right choice for you.Why you Might want a Doctor Mortgage LoanIf you’re a new doctor and can’t afford or qualify for a mortgage, you may still be able to buy a house with a physician mortgage loan because, you don’t have to pay for PMI or a down payment, and you have flexibility with the DTI requirements.Neither do you require the typical proof of employment and income needed for most conventional mortgages, just an employment contract will be sufficient.The Disadvantages of the Physician Mortgage LoansThe opportunity to buy a house when one otherwise would not qualify may be a great advantage but physician loans come with their drawbacks.The first being a doctor loan doesn’t offer a fixed-rate mortgage, it would invariably be an adjustable-rate mortgage (ARM).After the initial (teaser) period, the interest rate will fluctuate and often increase.

ARMs always carry more risk than fixed-rate mortgages.Along with the changing interest rates of ARM, doctor loans also sometimes have slightly higher interest rates.Over time the interest rates add up, and in the long run, the physician loans end up being more expensive than a conventional mortgage, despite it being appealing initially.There is also the risk of an underwater mortgage since the borrower start with 0% equity because they haven’t put a down payment on the house.If the property value decreases or if the borrower can’t afford to make payments while they still owe the original loan balance, they could end up with a home loan that has a higher principal than the home is worth.ConclusionA physician loan can be a great choice for new doctors who are looking to buy a home, but as with all the other mortgage loans, one should always explore all their options to make sure that they are getting the best deal.https://www.compareclosing.com/blog/physician-mortgage-loans-for-doctors/

What is a Hard Money Loan?A type of loan that is secured by real property is termed a hard money loan.

Hard money loans are regarded as loans of “last resort” or short-term bridge loans.Primarily used in real estate transactions, the hard money loans are not transactions with the banks but with lenders who are individuals or companies.How to get a Hard Money LoansThere are terms based on the value of the property that is being used as collateral for the hard money loan and not dependent on the creditworthiness of the borrower.As traditional lenders, like the banks, do not make hard money loans, the private individuals or companies are hard money lenders who are ready to take potential risks in this type of venture.Property flippers who plan to renovate and resell the real estate that is used as collateral for the financing can be sought for hard money loans.The collateralized property is sold by them in a year’s time so the money can get rotated.Depending on the borrower’s intends to pay off the loan, the higher cost of a hard money loan is offset.These hard money loans are for a period of one to three years.Hard Money Loan RequirementsThe cost of a hard money loan to the borrower is always more than what could be available through banks or government lending programs, because of the higher risk that the lender is taking by offering the financing.But for some borrowers who are in a hurry for funds, the increased expense is a tradeoff for faster access to funds, also a less stringent approval process, and potential flexibility in the payment plan.Hard money loans are used in turnaround situations, short-term financing, and when borrowers have substantial equity in their property but bad credit history.A hard money loan can be used as a way to push off foreclosure because it gets issued quickly.The Benefits and Costs of a Hard Money LoanHard money loans have their own set of pros and cons related to the process of approval, the loan to value (LTV) ratios, and interest rates.The Advantages of Hard Money LoansThe approval process of a hard money loan is, much quicker than that of a mortgage or other traditional loans that are moved through a bank.The lenders of hard money loan whom private investors can make decisions faster because they are focused on collateral instead of the applicant’s financial position.Lenders spend less time spent on combing through a loan application, verifying income, and reviewing financial documents is not there so the lender doesn’t require a lot of time for approval.The process will be far smoother if the borrower has an existing relationship with the lender.Because of a greater value and opportunity for reselling the property themselves in case of default the hard loan investors aren’t too concerned with receiving repayment.The Disadvantages of Hard Money LoansBecause the property itself is used as the only protection against default, hard money loans usually have lower LTV ratios compared to traditional loans.The interest rates of hard money loans are usually higher.

Compared to subprime loans the rates are higher for hard money loans.In 2020, the average interest rate for a hard money loan was 11.25%.

Last year the rates varied between 7.5% to 15% in the whole of the country.Because of regulatory oversight and compliance rules, there is a possibility of hard loan lenders not provide financing for an owner-occupied residence.ConclusionPrimarily used for real estate transactions hard money loans are money from an individual or company and not from a bank.A hard money loan is taken out for a short time, When a borrower wants to raise money quickly it attracts higher costs and lowers the LTV ratio.The hard money loans rely on collateral instead of your financial position, the funding is done quickly.A lender and the borrower can often negotiate the terms of hard money loans.

If a borrower defaults the lender still is in a profitable position.https://www.compareclosing.com/blog/what-is-a-hard-money-loan/

What Is ERISA (Employee Retirement Income Security Act)?In 1974 to protect the retirement assets of workers in the U.S. the Employee Retirement Income Security Act (ERISA) got formed.The ERISA implemented rules to be followed by qualified plans to ensure that plan fiduciaries do not misuse plan assets.Some non-retirement accounts, such as employee health plans was also covered by ERISA.Under ERISA, the participants must be provided regularly with complete details about plan features and funding, and that too free of charge.The ERISA provisions are overseen and enforced by The Employee Benefits Security Administration (EBSA), which is a unit of the Department of Labor (DOL).Understanding ERISA(Employee Retirement Income Security Act)The employer-sponsored retirement plans, of defined benefit and defined contribution, are covered by ERISA.Some of the common plans are 401(k) plans, pensions, deferred compensation plans, plan, and profit-sharing plans.Some of the non-retirement employer plans falling under ERISA are health maintenance organization (HMO)plans, flexible spending accounts (FSA’s), disability insurance, and life insurance.ERISA requires reporting of plan fiduciaries.

A fiduciary is defined as anyone who exercises discretionary authority or control over a plan’s management or assets, which also includes anyone who provides investment advice to the plan.If the fiduciaries do not follow the principles of conduct they will be held responsible for restoring losses to the plan.ERISA also addresses fiduciary provisions and prohibits the exploitation of assets through these provisions.Minimum standards for participation, vesting, benefit accrual, and funding are set by ERISA.The law defines before becoming eligible to participate in a plan, or reap benefits, and have a non-forfeitable right to those benefits a person may be required to work for a stipulated period of time.Also, a detailed funding rule is established that requires retirement plan sponsors to provide adequate funding for the plan.ERISA keeps participants informed of their rights, and it also grants them the right to sue for benefits and breaches of fiduciary duty.If a defined-benefit pension plan is terminated then to take care that the participants do not lose their retirement contributions, ERISA guarantees payment of certain benefits through a federally hired institution known as the Pension Benefit Guaranty Corporation (PBGC).History of ERISA (Employee Retirement Income Security Act)ERISA was authorized to take care of irregularities in the administration of a few large pension plans.Because these issues focused on a lack of protections for workers.For example: in 1963, when Studebaker-Packard closed its Indiana factory because the pension plan was underfunded more than 4,000 workers lost some or all of their pension plan benefits.In the 1960s, the Teamsters’ Central States Pension Fund, which was involved in controversial loans to Las Vegas casinos, resulting in the issue of fiduciary malfeasance related to retirement accounts that came into the public eye.ERISA-qualified retirement accounts are protected from creditors, bankruptcy proceedings, and civil lawsuits.The retirement savings are not at risk if the employer of an organization declares bankruptcy.

And the creditors to whom you owe money cannot make a claim for the funds held in your retirement account.Special ConsiderationsBecause of its complicated rules, ERISA discourages few small-business owners from setting up retirement accounts for their employees.Instead of ERISA, a more simple plan is SIMPLE IRA which doesn’t have confusing regulations, it can be used by small businesses with 100 or fewer employees as a retirement savings plan.SIMPLE stands for “Savings Incentive Match Plans for Employees.”SIMPLE IRAs are easier to set up, even though they are covered by ERISA, they don’t have the reporting and administrative burden that qualified retirement plans like the 401(k)s have.In SIMPLE IRA, the employer chooses and files the plan using IRS forms 5304-SIMPLE or 5305-SIMPLE.ERISA rules stating which employees are eligible and how a company handles employee contributions should be followed by the employers, and they are required to clearly spell out details of the plan’s features within a summary plan description.ConclusionTo prevent retirement plan fiduciaries from misusing plan assets rules and regulations are implemented by ERISA.The minimum standards for participation, vesting, benefit accrual, and funding of retirement plans are also set by ERISA.In case there is a breach of fiduciary duty, then ERISA grants retirement plan participants the right to sue for benefits.All retirement plans are not subject to the terms of ERISA.The IRAs or plans set up and maintained by government entities and churches are not covered by ERISA.ERISA does not govern the plan if a company sets up a plan outside of the U.S. for its nonresident alien employees.https://www.compareclosing.com/blog/what-is-erisa-employee-retirement-income-security-act/

What Is MIBOR, The Mumbai Interbank Offered Rate?MIBOR stands for Mumbai Interbank Offered Rate (MIBOR) it is one iteration of India’s interbank rate.A bank charges this rate of interest on a short-term loan to another bank.As the development of financial markets continues in India, it felt it needed a reference rate for its debt market, leading to the development and introduction of the MIBOR.The central bank of India uses MIBOR in conjunction with the Mumbai interbank bid and forward rates (MIBID and MIFOR) to set short-term monetary policy.Understanding the Mumbai Interbank Offered RateOn the interbank market, the banks borrow and lend money to one another for maintaining appropriate, legal liquidity levels, and to reach up to the reserve requirements placed on them by regulators.Only the largest and most creditworthy financial institutions can avail these interbank rates.Every day the National Stock Exchange of India (NSEIL) calculates MIBOR as a weighted average of lending rates of a group of major banks throughout India, on funds lent to first-class borrowers.In the Indian interbank market, this is the interest rate at which banks can borrow funds from other banks.The London InterBank Overnight Rate (LIBOR) is the inspiration behind the modeling of the Mumbai Interbank Offer Rate (MIBOR).Currently, the rate is used for forwarding contracts and floating-rate debentures.

Over time and with regular usage, MIBOR may become more prominent.The History of MIBORMIBOR was launched as an overnight rate by the Committee Development of the Debt Market on June 15, 1998.

On November 10, 1998, the NSEIL launched the 14-day MIBOR, and on December 1, 1998, the one-month and three-month MIBORs were launched.Since the launch, in India for the majority of money market deals made, MIBOR rates have been used as benchmark rates.The Difference between MIBOR and MIBIDMIBID, the Mumbai Interbank Bid Rate (MIBID) is the interest rate that one participating bank pays to another bank to attract the deposit of funds in the Indian interbank market.The MIBID rates the weighted average of all interest the participating banks offer on deposits on a particular day.MIBOR is the acronym for Mumbai Interbank Offering Rate, the yardstick of the Indian money market.In the interbank market, it is the rate at which banks borrow unsecured funds from one another.The MIBOR is higher than MIBID rates because — after taking loans the banks will try to pay less interest and while offering loans they will try to get more interest.The MIBID and MIBOR together add up to a bid-offer spread for Indian overnight lending rates.MIBOR is the interest rate that the lender would like to charge while lending or giving loans while MIBID is the interest rate that the borrower is willing to pay.The offer and bid are both part of loan obtaining activities.

MIBOR is the interest rate that a bank is willing to charge from a borrower in the Mumbai interbank money market which is spread across India.MIBOR — lender offer at this rate.

The lender wants a higher rate and withMIBID Borrower bid at this rate.

The borrower wants the loans at a lower rate.As Everybody would like the money to generate interest they would like to generate interest due to which banks want to lend the money.Depending on the bank’s credit rating the borrowing rates vary.

What are Mortgage credit certificates?A mortgage lender gives a document to the borrower which converts a portion of the mortgage interest paid by the borrower into a non-refundable tax credit this document is known as a mortgage credit certificate or MCC.A mortgage credit certificate (MCC) program can be used by low- or moderate-income homebuyers to help them purchase a home.Either loan brokers or the lenders themselves can issue, mortgage credit certificates but they are not a loan product.The working of mortgage credit certificatesWhen first-time homebuyers qualify for a home loan a mortgage credit certificate helps them by reducing their tax liabilities below what they would otherwise have to pay.Sometimes the term “mortgage credit certificate” is used to refer to the tax credit that an eligible borrower receives.For a portion of the mortgage interest, they pay each year the borrowers can receive a dollar-for-dollar tax credit.Every year the borrowers can get a maximum tax credit of $2,000.A formula is used to calculate the exact amount of the tax credit a borrower will receive by taking into account the mortgage amount, the mortgage interest rate, and the mortgage credit certificate percentage.Depending on the amount of the original mortgage loan the credit rate percentage is calculated.The process of mortgage credit certificateAfter the purchase, the contract has been signed, but before the time of closing, borrowers apply for mortgage credit certificates with the originating lender.A non-refundable fee is charged for the service of the mortgage certificate program by the party administering it.There is a validity of up to 120 days for the state or local approval and it can be transferred to another property in case the current loan does not close.Homebuyers must qualify for income and purchase price criteria to take advantage of the mortgage credit certificate program.A portion of the monthly mortgage payment can be balanced and saved by reducing the buyer’s federal tax liability, with the help of a mortgage credit certificate and tax breaks.Borrowers now with this reduced tax liability can qualify for a loan during the initial approval process.Once they obtain a mortgage credit certificate, and as long as the borrower remains in the home and occupies it as his principal residence he can take advantage of the tax credit every year.In most cases, the mortgage credit certificate can be reissued if the borrower refinances the loan.How to qualify for a mortgage credit certificate?A borrower must contact an eligible Participating Lender, to see if they are eligible for an MCC.Advantages and disadvantages of mortgage credit certificateLike every program MCC too have there pros and cons.The advantages of MCC are: All the states offer a mortgage credit certificate program.Every state offers a tax credit for first-time homebuyers or people who are purchasing a home in an economically distressed area through access to the federal program.

there is a cap at a maximum of $2,000 for their savings and this credit is available to the homeowner for every year.So a homeowner can save $10,000 on their taxes after spending five years in the home.

If he stays there for 10 years, then the saving is $20,000.

One can still qualify for this program even if they are divorced or are renting out another home.

Till the borrowers, the financial situation can stabilize there may also be opportunities for grants, low-interest loans, or defer payments for a specific period.No need for a perfect credit score to qualify.Most states will let a borrower qualify for a mortgage credit certificate with a credit score of less than 700.

And if a borrower makes more than $86,000 for a family of four, then they may not qualify for a mortgage credit certificate.The property must qualify to specific health and safety stipulations as a mortgage credit certificate is usually treated as a first-time home buyer arrangement program.