Too late to buy?

Many people in their 50s or 60s who do not own a home may think buying a home won’t benefit them, but it can.  This is the story of one such person.  Mary (not her real name) was single, age 59, and renting in 2012. Her income was  about $3,000/month.

In March 2013, she bought a two-bedroom condominium for $100,000 with a 3.5% down FHA loan.  Her monthly payment including consumer debt totaled $1,193.31.  While living there, she maintained the property and made some low-cost improvements.

In August 2015, 2.5 years later, Mary sold the condominium for $168,000. This enabled her to pay off her consumer debts and buy a three-bedroom condominium for $180,000 with 20% down.  With no remaining consumer debts, her monthly payments were $1,122.79.

Let’s say current appreciation continues. By March 2018, five years after she bought the first property, she should have enough equity to obtain a Reverse Mortgage and eliminate her mortgage payment.  She will then be in a home with expenses for taxes, insurance, HOA, and maintenance of about $550/month.  She will have two extra bedrooms that she can rent out using or to provide additional income.

The net effect? Based on current numbers, Mary may be able to stop working and live on her Social Security income when she reaches full retirement age.  If she had not purchased a home, it is unlikely that her Social Security alone would have been adequate to pay market rent.  Additionally, rooms on or may rent for more than what her condo will cost with a Reverse Mortgage.

I cannot predict future appreciation, but wouldn’t you agree that owning a home without a mortgage payment is a good option for low cost housing?
Orion Mortgage, Inc. offers Reverse Mortgages and HECMs to eliminate the mortgage payment for homeowners over 62.  Call Don Opeka at 303-469-1254 with questions.  Colorado MLO license 100007878

Why You Should Review Your Mortgage Twice Yearly

We recommend that everyone do a mortgage loan review at least once or twice per year just as you go to the dentist for a checkup, visit a doctor and review insurance and legal documents.  This review should involve more than just “What’s the rate?”  It is too easy to think that a borrower got a great rate on the last mortgage and since rates are not significantly lower, that nothing has changed.  

Check out these seven scenarios that show the potential financial health benefits of  a refinance:

Rule Changes

FHA mortgage insurance is still required for the life of the loan, but rates have come down. Reduced mortgage insurance rates typically only apply to new loans, including refinances, and not retroactively to old loans.

Home Value

As the value of a home increases, it creates opportunities:

  • to drop the mortgage insurance
  • to lower the mortgage insurance rate
  • to consolidate or lower the rate on other debts
  • to shorten the loan term without increasing the payment.

Credit Changes

We are finding borrowers with loans that are 5-15 years old who could easily qualify for better financing now. That’s because old credit issues such as late payments, loan modification, bankruptcy, or foreclosure  have been resolved. Without a periodic review of their situation,  they continue to pay higher rates than necessary, unfortunately.

Student Loans

Adults sometimes return to school for training in a new occupation.   While they are in school, their student loans are in deferment. All too often, though, they are not well-informed about the rates that will be attached to the payments once they finish school.  In some cases, they struggle to manage repayment terms when the deferment ends. Consolidating these loans into the mortgage may be attractive depending on the rates and terms of each loan. It’s worth exploring.

Consumer Debt

Car loans, credit cards, or other consumer debts may have very high rates. In some cases, borrowers can save enough on consumer debt interest to justify a refinance even if the mortgage rate is not reduced. This must be done with caution, though, because high-rate consumer debt can result from either a temporary non-recurring expense such as medical treatments, or excess spending. Underwriting guidelines now discourage refinance to cover overspending.

Remodeling or Major Repairs

Roof repair, new windows, basement finishing, an addition, or other major home improvement projects may be paid for with a cash-out refinance or a second mortgage. A quick comparison of loan rates and terms will show which is best.

Combination of Events

Sometimes the reason for a refinance is not just one of the above, but a combination. For instance, say you recently remodeled your basement and then had to replace your car. You have worked hard to improve your credit score over the 15 years since you took out your first mortgage. During your mortgage review, you learn that the mortgage rate has not significantly decreased, but because of your improved credit you can decrease your total loan repayment cost by consolidating your new debts.

A mortgage review can be as quick as checking current home value, rates and fees for a refinance and the terms of the current loan. We can do an estimate of the rate and fees to refinance the mortgage without a credit report or any charge to the borrower. A more complete analysis including all debts may require a credit report. We still would not charge for the analysis, but the borrower would need to pay a nominal fee for the credit report.  In either case, we could analyze the borrower’s position, generally within 24 hours. Our report would show whether a refinance would benefit  the borrower, who could then decide to proceed with an application or not.

Your financial health is important to us. When you are ready to schedule your mortgage’s annual checkup, let us know if we can assist you.

Discouraged from Applying for a Loan?

 Have you been told you could not qualify?

We sometimes have customers who’ve been told they could not afford to buy the home they wanted.  In one case, the person wanted to buy a home with 20% down and other lenders told them they “could not qualify”.  We restructured the transaction using some of the down payment money to pay off consumer debt.  With the consumer debt gone, and a larger mortgage, their total payments were lower.  They were able to buy the home they wanted with the resources they had.

house key

Help us learn about your unique situation

One of our clients wanted to purchase a home from a relative of his.  We were able to take advantage of some unique rules and structure the loan so that there was no earnest money required, no cash to close, and home ownership became a reality for him because it was a related party transaction.

Overcoming previous credit difficulties

We had a client with some significant health problems that affected his ability to work.  It had a negative impact on his finances.  He had a bankruptcy and multiple foreclosures on his credit record and he was unable to attain a loan.  FHA rules require three years must pass before applying for a new home loan after a foreclosure.  We were able to sit down together and put a financial plan in place so he was able to purchase a home after that three year time period.

Please contact me at 303-469-1254 so we can work through overcoming any obstacles that may be standing in your way to home ownership.

Cosigning on Loans

Cosigning on a loan can have a negative impact on your credit

Sometimes lenders suggest that a cosigner would be helpful for a borrower to get a loan.  We generally do not recommend cosigning the loan because what cosigning the loan really means is that the cosigner is agreeing to make all the payments on the loan should the primary borrower default.  We have seen multiple cases of cosigners having their credit damaged when the primary borrower fails to pay on time , or at all, and the cosigner receives no notice of the payments due.  The cosigner often learns of the late payments when they go to apply for a loan themselves.  The primary borrower defaulting or making late payments can greatly raise the cost of a mortgage that the cosigner may want to obtain.

mom and student

Cosigning can raise the cost of your next loan

In one case, the late payments on a $1,971 student loan cosigned by a father raised the cost of the mortgage loan by $7,668.  In another case, the non-payment on student loans by a daughter raised the cost of a loan her mother wanted.  The cost of the credit damage to the cosigner is often greater than the amount borrowed on the student loan.

It wasn’t a cosign situation, but one father bought a house and rented it to his son.  When the son didn’t make the rent payments, the father found himself in foreclosure on the home he bought to help his son.

A better option

If it’s possible, it would be better to loan or gift enough money to your loved one so they don’t need a cosigner.  All in all, it would be better not to enter a contract that requires a cosigner because the lender knows the probability of default is high.  If the probability of default was not high, the lender would not be requesting a cosigner.

I would still very much like to learn of your unique financial situation and assist you with setting up a plan to achieve your goal of a home purchase, refinance or obtaining a reverse mortgage.  Please feel free to contact me at 303-469-1254 so we can discuss your options.