When is an ARM Better Than a Fixed?

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The world of mortgages has a short menu. Will it be an Adjustable Rate Mortgage (ARM) or a Fixed Rate Mortgage? You’ll often hear people say that a fixed-rate mortgage is always the best move
— that’s not necessarily the truth. Homebuyers sometimes have unique circumstances that allow them to take advantage of the initial lower rate of an ARM.

First, let’s distinguish between the two. The interest rate of a fixed-rate mortgage never changes. An adjustable-rate mortgage, on the other hand, resets its interest rate at pre-specified times. For example, a “7/1 ARM” indicates the interest rate is locked in for the first seven years and adjusts annually after year seven. Because rates have been lower in recent times, homeowners generally opt for a 30-year fixed-rate mortgage to lock in that low rate for the life of the loan.

So when might it make more sense to go with an ARM? Here are a few scenarios:
Changing Cities, Changing Jobs. If you think you’ll be moving within a short time frame but prefer not to rent, an ARM is option that could work very well. For example, a student who’s doing a medical residency may wind up practicing in another state after she graduates. Because she’s uncertain where she’ll land after graduation, an ARM may be the better choice for a few years.
Investment Property. If you’re buying an investment property but only plan to hold onto it for a limited period, why not take the lower rate?
Salary Bump. If your budget is stretched now, but you’re confident your salary will increase in the next 5-7 years, you could start with an ARM and then refinance your mortgage before the rate goes up.
First-time Homebuyers. In cases where financing a 30-year fixed is not a viable option, first-time homebuyers may choose an ARM and either sell or refinance later.
While ARMs usually have caps in place for rate increases, there are usually no caps or limits to how much the first adjustment after the reset point will be. If you wind up staying beyond the first interval of your ARM, you could face a larger rate increase than you can afford. This is why we only recommend ARMs for the short term, even though it’s entirely possible the rate could adjust down.

Ready to buy a new home or refinance the one you own? Please get in touch and I’ll be happy to answer your questions and help guide you through the process. I look forward to speaking with you.

5 Home Improvement Ideas That Increase Value

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Does your home need a few tweaks before putting it on the market? Let’s take a look at the top ways to increase your property value, even if you’re staying in your home for the next several years.

1. Kitchen Remodel. Here’s an opportunity to improve one of the most important rooms in the home from a buyer’s perspective. New cabinets and countertops, energy-efficient appliances, and beautiful floor covering can instantly increase value. But be careful–don’t go too far with your changes. They should be in line aesthetically with the rest of the home and the neighborhood.

2. Bathroom Addition. Only one bathroom in the home is a big negative for buyers. According to HGTV, adding a new bathroom can net you up to 130% of your investment.

3. New Windows. Here’s one of the most underrated home improvement ideas. Energy Star-rated windows save on heating costs (as much as $500 annually) and yield a green energy tax credit of 10%.

4. Closet Space. Storage is often an issue for families and spacious walk-in closets are big selling point for potential buyers. Even small changes like additional shelving and hooks can make the most of limited closet space. Don’t underestimate the need for proper storage, especially for homebuyers with one or more children.

5. Curb Appeal. When we think of increasing property value, we often focus on the dwelling itself and overlook the all-important first impression people have when seeing your home from the outside. Even before walking through the door, you’ll need to present a well-lit, painted (or sided) home with a manicured lawn, trimmed hedges, and a clean, family-friendly backyard. A landscaper is a good start, but consider a landscape designer first if your home needs a new look from the outside.

Home improvements can be costly but necessary for a solid ROI. Need help figuring out how to finance them? I can help. Call me at 617-965-1236.

Ready to buy a new home or refinance the one you own? Please get in touch and I’ll be happy to answer your questions and help guide you through the process. I look forward to speaking with you.

3 Downpayment Myths Debunked

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When it comes to mortgage downpayments, there seems to be some confusion about how much you really need to put down on a new property. Let’s take a look at three common misconceptions.

1. The 20% Rule. If you were to ask the average person on the street about downpayments, the majority of them would say 20% is required. While 20% is a common guideline, it’s not necessarily the reality. In fact, there are a number of low downpayment programs available.

2. It Has to be ONLY my money. Gift funds are a great option. A gift may be provided by a spouse, child, or anyone related to the borrower. It must specify the dollar amount and an official gift letter is required stating that the funds were a gift and no repayment is expected.

3. First-time Homebuyers Only. While the industry has always encouraged first-time homebuyers, it’s a myth to think current and previous homeowners will be forced to submit 20% and not a penny less. I have worked with numerous clients over the years who have preferred a smaller downpayment so they can keep some money for repairs and additions to their new home.

Don’t be fooled by these misconceptions that have seeped into the general consciousness. There are more options for low downpayments than you may have imagined. If you or someone you know would like to explore the possibility of a low downpayment option, I can help. Call me at 617-965-1236.

Ready to buy a new home or refinance the one you own? Please get in touch and I’ll be happy to answer your questions and help guide you through the process. I look forward to speaking with you.

The One Question That Saves Thousands of Dollars

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I’ve been working with homeowners for many years and I discovered long ago that eager buyers set themselves up to fail by taking the wrong approach in their excitement of making what is often the largest purchase of their lives.

Whether I’m advising couples, divorced women, single men or anyone else across all demographics, the majority of these home buyers start house-hunting with the amount of money in mind that has been determined with their pre-approval. It’s a mistake and can lead to serious financial issues.

The question I start with is a simple one: What do you need to live happily and comfortably over the next several years? That change of mindset–focusing on their needs rather than what the bank tells them they can afford–makes a huge difference.

Let’s face it: in many ways, we are a nation of impulse buyers. Why buy a Toyota when you can buy a Lexus, right? I’ll tell you why. Because you can’t afford it. You only think you can.

First-time homebuyers often find themselves in serious debt when they learn of unexpected costs to maintain their homes in addition to their monthly mortgage payment, property taxes, utility bills and more. Then suddenly one winter they have ice dams and roof repairs and mold remediation. The typical homebuyer thinks of a dream home, not a nightmare scenario that stretches their budget to the limit and beyond.

When buyers work with me they have a professional who helps them make practical decisions that will serve them well over the life of the mortgage. Consider me the reality check you never asked for, but really need. You can’t put a price on good advice, but you can always afford it. I’m happy to help.

Ready to buy a new home or refinance the one you own? Please get in touch and I’ll be happy to answer your questions and help guide you through the process. I look forward to speaking with you.

Appraisal vs Assessment: What’s the Difference?

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The difference between an assessment and an appraisal is significant. The two words are not interchangeable, contrary to popular thought. A look at each of these terms will show two very different looks at your home’s value.

An appraisal determines the market value of a specific home at a specific time. The appraiser determines this value based on recently sold homes within the past 90 days. They are of equal (or similar) comparison and are located within approximately one mile from your home. Adjustments are made for differences that might include location and square footage as well as the number of bathrooms.

An assessment, on the other hand is notably different. It is determined by the town or municipality to set property taxes. The amount of taxes you’ll pay is based on the assessment. But here’s the thing: the number is based on stats from previous fiscal years.

For example, a home sold in 2016 has a tax assessment based on sales from 2013 or 2014.

In a nutshell, an appraisal is based on very recent sale prices and are used to determine value. Assessments are based on the past and are specifically used for taxes.

I hope this helps clear up any confusion. If you need further clarification, please contact me at 617-965-1236.

Ready to buy a new home or refinance the one you own? Please get in touch and I’ll be happy to answer your questions and help guide you through the process. I look forward to speaking with you.

Second Home vs. Investment Property

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If you ever hear someone say they are interested in buying a second home as an investment property, stop them right there. A second home and an investment property are not the same thing. There are several distinctions that set them apart. Let’s take a look.

A second home is just what it sounds like: another location for you to reside at various times of the year. So let’s say you own a home in Needham but you’re interested in buying a winter home in Miami. That falls into the “second home” classification.

An investment property, on the other hand, is intended to generate a return on investment, either through rental income or resale (or both). Examples of investment properties include two-family houses and renovation/flipping projects.

To avoid charges of fraud, your second home should be a considerable distance from your primary residence. The rule of thumb is approximately 50 miles (Wellesley to the Cape, for example, is about 80 or 90 miles.) A two-family second home is unlikely to be approved because it is, by design, intended to be a revenue generating property.

A downpayment on a second home carries less risk and therefore may be the home purchase you can make with the least amount of money down. Your downpayment on an investment property, however, will be higher because the risk is higher. The two-family investment is viewed as a risk by the banks because you’ll be counting on the rent coming in. There’s no guarantee of tenant reliability or year-round occupancy.

I hope this helps clear up any confusion. If you need further clarification, please contact me at 617-965-1236.

Ready to buy a new home or refinance the one you own? Please get in touch and I’ll be happy to answer your questions and help guide you through the process. I look forward to speaking with you.

Being Grateful for Those Who Are Thankful

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Sometimes the most important job I have is to talk someone out of buying a home. It sounds counterintuitive, but I can tell you after many years of working in this profession that some of the best mortgage advice I could ever give is to hold off on it.

Buying a home is a deeply emotional investment. Once someone decides it’s the right thing to do, it can be difficult to talk them out of it. But I believe it’s my ethical responsibility to help people succeed, even when it goes against my clients’ requests.

I know some serious, go-getter mortgage professionals who close more loans every year than I ever will. But their style is different from mine. You ask for a mortgage and they find a way grant it, no questions asked. I can’t work that way with so much at stake for people making such a big investment.

I think about a recently divorced woman with two young children. She wanted a fresh start in a new home. After reviewing her financials and understanding her situation I gave her the news she didn’t want to hear. It simply made more financial sense for her to rent for at least a year. In that time she could increase her credit score along with a salary bump from an impending promotion.

It was a difficult conversation. As you can imagine, she was disappointed. I knew, however, that it was the right thing to do. And 18 months later, after I helped her with her mortgage, she called to thank me for not moving forward with her original request. The timing, she realized, just wasn’t right.

These are the stories that make me grateful for what I do. I see it all the time from the professionals I work with regularly. When you put people ahead of profit you’ll always have thankful clients — and that’s what makes me grateful.

Ready to buy a new home or refinance the one you own? Please get in touch and I’ll be happy to answer your questions and help guide you through the process. I look forward to speaking with you.

FHFA Increasing Loan Limits in 2017

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There’s some good news for those homebuyers looking for a larger loan amount in 2017. The Federal Housing Finance Agency recently announced that loan limits for are rising. The limit on conforming loans moves up from $417,000 to $424,100. This is the first increase in the baseline loan limit since 2006. That’s good news for those of us in the industry, but it’s better news for homebuyers.

A conforming loan — not to be confused with a conventional loan — is a mortgage loan that follows Fannie Mae guidelines. On its surface a $7000 increase may not seem like much when considering a $400,000 mortgage, but that extra bit of cash can come in very handy for those seeking the best financial advantage as possible when purchasing a new home.

Loans that exceed this new limit are considered high balance loans. This translates to higher pricing with the least flexibility. Staying under the cap will get a mortgage with the most underwriting and highest flexibility. Nonconforming or jumbo loans carry a higher interest rate than conforming loans, increasing monthly payments and negatively impacting affordability.

The new loan limit will allow more buyers to borrow more money without having to put more money down. Homeowners can refinance bigger loan sizes while staying within the conforming loan limits.

This increase comes at a time when mortgage rates have increased slightly to just over 4.0%. That’s still an excellent rate, compared to 6% in 2008 and 8% in 2000.

This bodes well for the real estate industry as a whole, with the Federal Housing Finance Agency showing greater confidence in the recovery of home prices across the country. 2017 will be another great year for homebuyers.

Ready to buy a new home or refinance the one you own? Please get in touch and I’ll be happy to answer your questions and help guide you through the process. I look forward to speaking with you.

It’s No Treat to Be Tricked Into a Mortgage

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You may have noticed that once you apply for a mortgage, you are almost instantly flooded with emails, calls and letters of pre-approval from competing mortgage companies, even though you’ve never contacted them.
Don’t be fooled into thinking your mortgage company is selling or sharing your information. What’s happening is a function of the Fair Credit Reporting Act (FCRA). This law permits consumer credit reporting companies like Experian, Equifax and Transunion to add your name to lists of companies that provide mortgages, credit or insurance. This process is triggered automatically upon the initial credit check for your mortgage.
The onslaught of calls and mail can be prevented, especially when you’re already working with a mortgage professional you trust. The companies soliciting you may very well be legitimate enterprises, but it’s always a risk when you are unsure about their business practices, service and attention.
To opt out by phone, call 1-888-5-OPTOUT (1-888-567-8688) or visit OptOutPrescreen.com.
When you opt out online or by phone, your name will be removed from lists for five years. If you would like to permanently opt out, you’ll need to fill out a form downloaded from the OptOut site and mail it in.
Note: Your credit score will not be affected by these companies and they do not have permission to run additional credit checks. All they can do is send you firm offers of pre-screening or pre-approval.
For more information, download this pdf from the Federal Reserve.

October’s Home Improver

Do I Need a Backup Generator?

No matter where you live in the United States, there is always the possibility of a weather-related incident that could leave you without power for days or even weeks.
Hurricanes, tornadoes, earthquakes and blizzards are all capable of leaving you without electricity. A backup generator can keep you safe and comfortable until power is restored. It also keeps your refrigerator cool so you don’t have to throw out all your food that would otherwise spoil.
There are two common types of generators: the standby and the portable. The standby generator is also called a “whole house” generator. It is installed permanently outside your home and it runs on either propane or natural gas. The minute you lose power, the generator kicks in and power is restored almost immediately. This type of generator is recommended for homes that are prone to hurricanes and flooding.
The portable generator is usually powered by gasoline or diesel fuel, though natural gas and propane portables may also be available. These are ideal for rare power outages lasting only a short time. Although they are significantly smaller and cheaper than standby generators, they should be used with caution. Because of the carbon monoxide discharge, there is a major risk of poisoning if the generator is run indoors or in crawlspaces, garages or any enclosed fixture. Be sure to run it outdoors only.

Getting Divorced? Here’s Your Mortgage Timeline

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Divorce is rarely a sudden action. Removing oneself from what was once a life-long commitment often takes time and consideration. It also requires planning and strategy which generally takes place with an attorney who specializes in divorce and family law.

Next, it’s important to contact a mortgage professional. There are many questions to ask along with information to gather and understand.

You’ll need to know the answers to questions like these:

  • Can I stay in my home? Will my spouse move out?
  • Should I buy a new home?
  • Does my downpayment come from my assets?
  • Should we sell the house and split the money?
  • How much debt have I accrued?
  • What’s my debt-to-income ratio?
  • What’s my credit score?

After answering these questions, you’ll need to get your name off your current mortgage. This is especially important before securing a mortgage for your new home, even if you’re divorcing and planning to sell. If your name is still on the mortgage in your current home, you may be denied approval for a new one.

In addition, the closing date on your current home must occur before the date of the purchase of your new home. Be careful. You’ll risk getting approved if these timelines are not followed.

Making it through the emotionally difficult process of divorce is hard enough without having the right people in your corner. Please contact me after you’ve met with your attorney — or recommend me to women who are planning a separation or divorce.

Ready to buy a new home or refinance the one you own? Please get in touch and I’ll be happy to help guide you through the process. I look forward to speaking with you.

August’s Home Improver

Which Kitchen Trash Can?

In the good old days when you needed a kitchen trash can you’d go to the supermarket or local hardware store and grab a plastic can and cover and a box of tall kitchen garbage bags. Done! These days, that same simple need is now a quest for the perfect receptacle for your kitchen.

Looks, location and functionality all need to be considered. Plastic or metal? Inside or outside the cabinet? Mechanized cover or old school step-to-open lid? So many choices!

Once you make up your mind, there’s a bigger issue. We know, you thought you were done, but there’s more. Here’s the deal: It’s less about the look than the lid. Covering your trash not only stops odors from spreading, but it also prevents insects from landing on bacteria and then happily spreading it throughout the rest of your house. Yes, people, this is a thing! Your neighbor the germaphobe isn’t as crazy as you thought, now is she?

Those hidden trash cans that hang off the inside of a cabinet door rarely have covers. Your can might be out of sight, but left uncovered it’s quietly inviting flies, ants and mice to feast on whatever you’ve discarded.

So take our advice when it comes to choosing the right kitchen trash can. Pick the style you like most, but remember that an uncovered can is a bacteria-spreading deal-breaker.