Blog - Leagan Realty

How Do Mortgage Points Cut Your Interest Costs?

February 1, 2024 by Lisa Eagan

Those who are involved in the real estate industry likely know that mortgage rates are at an all-time low. At the same time, nobody wants to pay more for a house than they have to. Some of the most important factors that dictate how much someone is going to pay for a house include points and interest rates.

While interest rates are incredibly low, there is a way to make them lower. This comes in the form of points. This is additional money that is paid upfront to get a better deal over the life of the loan. Even though this sounds great in theory this might not be the best option for everyone. There are a few important points to keep in mind.

What Are Points?

Often, the lender is going to offer someone the option of paying points when the mortgage is created. This should be viewed as paying interest on the loan in advance. In exchange for paying interest upfront, the lender should offer to lock in a lower interest rate over the life of the loan. The more points someone purchases, the better the rate.

For example, paying one point of interest may reduce the interest rate on the loan by 0.25 percent. This is standard. Take, for example, a $200,000 home. One point on this loan would cost someone about $2,000. In exchange, the interest rate on the loan is going to drop by 0.25 percent. This might be worth it in the long run.

Discount Points

Other people might have heard about something called discount points. This is another term for mortgage points. The two terms can be used interchangeably. Typically, people can purchase as many discount points as they want, up to the limit of the lender.

An Overview Of Origination Points

Another type of point that people might have heard about is origination points or origination fees usually expressed by a percentage of the loan amount. These are points that are charged to the borrower to cover the processing, or originating fees for the mortgage loan. These fees are included in the total closing costs disclosed when you apply for your home loan.

Origination points are almost always negotiable. The number of origination points that a lender is going to charge can vary from place to place. Therefore, always be sure to ask about origination points. There might be a way to get these points waived, saving the borrower a significant amount of money.

As always, your trusted mortgage financing professional is the best source of information for your personal mortgage situation.

Understanding the Jumbo Mortgage and Why Refinancing is Different

January 31, 2024 by Lisa Eagan

The contemporary trend towards expansive dimensions is palpable in various aspects of modern life. Oversized soft drinks, large fast-food meals, and expansive smartphones have become ubiquitous. However, one unlikely sector experiencing a similar trend is the realm of mortgages.

Delving into the specifics, what exactly constitutes a jumbo mortgage? How does it differ from its conventional counterpart, and what implications does it hold for potential refinancing? Here’s a comprehensive overview.

Jumbo Mortgages

As the name suggests, the primary distinguishing factor of jumbo mortgages lies in the loan limit. Fannie Mae and Freddie Mac administer mortgage limits nationwide, contingent upon the cost of living in individual states. In scenarios involving high-value real estate, such as luxury properties and commercial holdings, standard mortgages may prove insufficient, thus necessitating the flexibility afforded by jumbo mortgages.

Jumbo mortgages are particularly prevalent in regions characterized by elevated living costs, where real estate values routinely exceed the standard loan limits applicable to high-cost areas.

Qualifying for a Jumbo Mortgage

Given the higher financial stakes, eligibility requirements for jumbo mortgages are markedly more stringent than those for traditional mortgages. Notably, jumbo mortgages do not fall under private insurance coverage, resulting in a substantially larger down payment compared to standard mortgages. Prospective applicants must convincingly demonstrate to lenders their financial capacity to meet the obligations associated with a jumbo mortgage.

Additionally, a higher credit score is imperative for those seeking a jumbo mortgage. While a credit score of 660 or higher suffices for conventional mortgages, a minimum score of 700 is typically required for consideration by most lenders when applying for a jumbo mortgage.

Jumbo mortgage lenders may mandate that borrowers set aside a minimum of six months’ worth of payments in a dedicated bank account at the time of closing, a requirement that typically stands at two months for standard mortgages. Applicants must also prove to their lenders that their debt-to-income ratio is below 45 percent to qualify for a jumbo mortgage.

Refinancing Complexities

Refinancing a jumbo mortgage introduces heightened complexities compared to standard mortgages. Considerable home equity is a prerequisite for refinancing, and individuals looking to include Home Equity Line of Credit (HELOC) debt in the refinancing plan must adhere to stringent conditions, including the absence of any deductions against home equity in the preceding 12 months.

Specific lenders may impose additional requisites for refinancing jumbo mortgages. For example, homeowners with less than a year of ownership may be directed toward a Freddie Mac or Fannie Mae loan. Regardless of the fair market value at the time of mortgage filing, properties owned for less than a year are typically assessed at their original purchase price.

While jumbo mortgages provide an avenue for acquiring luxury residences or commercial properties, securing one demands meticulous adherence to a stringent set of prerequisites. Prospective applicants are advised to seek guidance from professional advisors to navigate the intricate qualification process successfully.

For those contemplating a jumbo mortgage, engaging with a seasoned mortgage professional is crucial to gaining insights into refinancing alternatives and understanding the qualification criteria. Reach out to your trusted mortgage professional to explore refinancing options and ascertain your eligibility for a jumbo mortgage.

The Truth About Solar Panels, Savings, and Debunking Myths

January 30, 2024 by Lisa Eagan

In recent years, solar panels have emerged as a sustainable and environmentally friendly solution to power generation. As the world continues to grapple with the effects of climate change, the adoption of solar energy has gained momentum. Beyond its positive impact on the environment, many individuals and businesses are also drawn to the potential savings associated with solar panel installations. However, amidst the growing popularity of solar energy, several myths and misconceptions persist.

The Economic Benefits of Solar Panels

Long-Term Cost Savings: One of the primary attractions of solar panels is the promise of long-term cost savings on electricity bills. While the initial investment in solar panels can be significant, they often pay for themselves over time. Solar panels harness energy from the sun, providing a sustainable and free source of electricity once installed. As utility costs continue to rise, the savings accrued from solar energy become increasingly substantial.

Government Incentives: Many governments around the world offer financial incentives to encourage the adoption of solar energy. These incentives may include tax credits, rebates, and other subsidies that significantly reduce the upfront costs of installing solar panels. These financial benefits, combined with long-term savings, make solar panels a more attractive investment for individuals and businesses alike.

Energy Independence: Solar panels contribute to energy independence by allowing individuals and businesses to generate their own electricity. This independence not only insulates users from fluctuations in energy prices but also contributes to a more resilient and sustainable energy infrastructure.

Debunking Common Myths

Solar Panels Are Too Expensive: One prevalent myth is that solar panels are prohibitively expensive. While the initial cost of installation can be a significant investment, it is essential to consider the long-term savings and government incentives available. As technology advances, the cost of solar panels continues to decrease, making them more accessible to a broader range of consumers.

Solar Panels Are Inefficient in Cloudy or Cold Climates: Another misconception is that solar panels only work optimally in sunny and warm climates. While direct sunlight enhances efficiency, solar panels can still generate electricity on cloudy days. Additionally, solar panel efficiency improves in colder temperatures. Modern solar technologies are designed to capture and convert sunlight into electricity even in less-than-ideal conditions.

Maintenance Costs Are Prohibitive: Some believe that solar panels come with high maintenance costs, deterring potential users. However, solar panels generally require minimal maintenance. Regular cleaning and occasional inspections are usually sufficient to keep them functioning effectively. Many manufacturers offer warranties that cover maintenance costs for an extended period.

Solar panels not only contribute to a cleaner environment but also offer tangible economic benefits. The potential for long-term cost savings, combined with government incentives, makes solar energy an increasingly attractive option. As technology advances and awareness grows, debunking myths surrounding solar panels becomes crucial in fostering a wider adoption of this sustainable and economically viable energy source. Embracing solar energy not only makes financial sense but also contributes to a brighter and more sustainable future for generations to come.

What’s Ahead For Mortgage Rates This Week – January 29th, 2024

January 29, 2024 by Lisa Eagan

It was an uneventful week for the data reports, as the majority of the interest waits for the Federal Reserve’s rate decision heading into the following week. One of the most notable reports is for New Home Sales, which had managed to greatly exceed the projections for the end of the year moving into January. It is an early sign that there is a surge in response to the week-to-week rate cuts we have been observing over the last two weeks.

The second largest data reports come from the PCE Index and preliminary projections for the Q1 GDP statistics. It is expected that the Federal Reserve’s decision to hold the current rate will hold true, but there is some optimism that a small rate cut may be a possibility.

Pending Home Sales

U.S. pending home sales shot up in December as falling mortgage rates brought buyers back into the market.

Pending home sales rose 8.3% in December from the previous month, according to the monthly index released Friday by the National Association of REALTORS®.

GDP (Prelim)

The U.S. grew at a robust 3.3% annual pace in the fourth quarter, showcasing the economy’s remarkable vigor despite high interest rates and still-elevated inflation. The Forecast of Growth was projected to be 2.0%.

Although growth slowed from the third-quarter’s surprising 4.9% clip, the back-to-back readings were the strongest since 2014, if the sharp recovery after the pandemic is set aside.

PCE Index

The rate of U.S. inflation — based on the Federal Reserve’s preferred PCE gauge — rose a mild 0.2% in December and pointed to smaller price increases in 2024.

Inflation picked up a bit at year end after declining in November, but there’s little evidence of emerging trouble. The increase in prices in the 12 months ended in December was unchanged at 2.6%.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates are seeing an increase by 0.20%, with the current rate at 5.96%
• 30-Yr FRM rates are seeing an increase by 0.09%, with the current rate at 6.69%

MND Rate Index

• 30-Yr FHA rates are seeing a 0.05% increase for this week. Current rates at 6.20%
• 30-Yr VA rates are seeing a 0.08% increase for this week. Current rates at 6.25%

Jobless Claims

Initial Claims were reported to be 214,000 compared to the expected claims of 200,000. The prior week landed at 189,000.

What’s Ahead

All sights are set for the Federal Reserve’s rate decision coming next week. There are other notable reports alongside the rate decision including Non-farm Payroll statistics, Consumer Reports (Univ. Michigan), PMI numbers, and Shiller Price Home Index statistics, first reports of the year.

Mortgage Rate Locks When and How to Secure a Favorable Rate

January 26, 2024 by Lisa Eagan

Rate locks play a crucial role in the mortgage application process, helping borrowers secure a favorable interest rate for their home loans. Here’s an explanation of the importance of rate locks and when and how to secure the best rate:

Interest Rate Protection: Mortgage rates are subject to market fluctuations and can change daily or even multiple times a day. Rate locks protect borrowers from potential rate increases during the loan processing period.

Budgeting and Planning: Knowing the exact interest rate allows borrowers to budget more effectively and plan their finances with certainty. It prevents unexpected increases in monthly payments, helping borrowers manage their expenses.

Peace of Mind: Homebuyers can experience peace of mind when they know their interest rate is secured. This allows them to focus on other aspects of the home-buying process without worrying about market volatility affecting their mortgage terms.

Financial Stability: Rate locks provide financial stability, especially for those on a tight budget. Unpredictable rate changes can significantly impact the affordability of a mortgage, and a rate lock mitigates this risk.

When to Secure a Rate Lock:

Timing Matters: Rate locks are typically available for a specific period, such as 30, 45, or 60 days. It’s crucial to lock in a rate at the right time, considering the expected duration of the loan approval process.

Market Conditions: Monitor market conditions to identify favorable times for rate locks. If interest rates are low or expected to rise, it might be advantageous to secure a rate lock sooner rather than later.

Loan Approval Status: It’s generally recommended to wait until your mortgage application is complete and the loan is in the underwriting process before locking the rate. This ensures that the lock period aligns with the expected timeline for loan approval.

How to Secure the Best Rate Lock:

Shop Around: Obtain quotes from multiple lenders to compare interest rates and terms. This provides a basis for negotiating and helps you identify the best possible rate.

Understand Lock Terms:

Be aware of the lock period and any associated fees or conditions. Longer lock periods may come with higher fees, so it’s essential to strike a balance that suits your needs.

Consider Float-Down Options: Some lenders offer float-down options, allowing borrowers to secure a lower rate if market conditions improve before closing. Understand the terms and conditions of this option.

Consult with a Mortgage Professional: Work closely with your mortgage broker or loan officer. They can provide guidance on the optimal time to lock in your rate based on market trends and your specific financial situation.

In the end, rate locks provide stability and predictability in a volatile market, enabling homebuyers to secure favorable mortgage terms. Timing, market awareness, and careful consideration of lock terms are essential to ensuring you get the best rate for your mortgage.

How to Evaluate Property Taxes and What You Need to Know Before You Buy

January 25, 2024 by Lisa Eagan

Retirement is a significant milestone in one’s life, symbolizing the culmination of years of hard work and dedication. As individuals approach this stage, meticulous planning becomes imperative to ensure a comfortable and financially secure future. Among the plethora of retirement planning options, real estate emerges as a challenging player, offering unique advantages that can enhance the overall strategy. Let’s discuss the pivotal role that real estate plays in retirement planning and why it deserves a prominent place in your financial portfolio.

Building Equity for the Future:

One of the fundamental advantages of investing in real estate is the potential for equity growth over time. Unlike other assets that may fluctuate in value, real estate often appreciates in the long run. By acquiring property early in your career and allowing it to accumulate value, you’re essentially building a robust foundation of equity that can serve as a valuable financial resource during retirement.

Steady Income Stream through Rental Properties:

Real estate’s ability to generate a steady income stream is a crucial factor in retirement planning. Owning rental properties allows retirees to enjoy a regular source of passive income, supplementing other retirement income streams such as pensions or social security. Well-managed rental properties can provide a reliable and predictable cash flow, ensuring financial stability throughout retirement.

Diversification for Risk Mitigation:

Diversification is a key principle in any successful investment strategy, and real estate offers an excellent avenue for achieving it. By diversifying your retirement portfolio to include real estate assets, you can spread risk and reduce vulnerability to market fluctuations. Real estate’s performance often exhibits low correlation with traditional financial markets, providing a hedge against economic downturns and uncertainties.

Hedging Against Inflation:

Inflation erodes the purchasing power of money over time, posing a significant threat to retirees. Real estate, however, has historically proven to be an effective hedge against inflation. Property values and rental income tend to rise with inflation, ensuring that the real value of your real estate assets remains relatively stable over the long term.

Downsizing and Lifestyle Adjustments:

Real estate plays a dynamic role in retirement planning by offering options for downsizing or making lifestyle adjustments. Retirees can leverage the equity built in their properties by selling and downsizing to a smaller, more manageable home. This not only releases funds for retirement expenses but also reduces maintenance costs and property taxes.

As individuals navigate the intricate landscape of retirement planning, embracing the role of real estate can significantly enhance their financial well-being. From building equity and generating passive income to providing a buffer against inflation, real estate stands as a versatile and resilient asset class. Including real estate in your retirement portfolio offers not only financial benefits but also the peace of mind that comes with a diversified and well-rounded approach to securing your future.

How Do Mortgage Lenders Decide How Much You Can Borrow?

January 24, 2024 by Lisa Eagan

When you visit your lender to get a mortgage for your home, they will tell you the maximum amount that you are allowed to borrow. But how do they reach this total and what factors do they take into consideration?

How do they determine that one borrower can take on a bigger mortgage than the next? This decision is made by mortgage companies by considering a wide range of factors, including your credit information, your salary, and much more.

Here Are Some Of The Common Ways That Lenders Determine How Much You Can Borrow:

1. Percentage Of Gross Monthly Income

Many lenders follow the rule that your monthly mortgage payment should never exceed 28% of your gross monthly income.

This will ensure that you are not stretched too far with your mortgage payments and you will be more likely to be able to pay them off. Remember, your gross monthly income is the total amount of money that you have been paid, before deductions from social security, taxes, savings plans, child support, etc.

2. Debt To Income Ratio

Another formula that mortgage lenders use is the “Debt to Income” ratio, which refers to the percentage of your gross monthly income that is taken up by debts. This takes into account any other debts, such as credit cards and loans. Many lenders say that the total of your debts shouldn’t exceed 36% of your gross monthly income.

The lender will look at all of the different types of debt you have and how well you have paid your bills over the years. By using one of these two formulas, your mortgage lender calculates the size of a mortgage that you can afford.

Of course, many other factors need to be considered, such as the term length of the loan, the size of your down payment, and the interest rate.

Remember that when factoring in your income, you usually have to have a stable job for at least two years in a row to be able to count your income. If you want to increase your chances, you could consider paying down your debts or buying with a co-borrower, which will improve your debt-to-income ratio.

For more info about mortgages and your home, contact your mortgage professional.

The Crucial Role of Real Estate in Retirement Planning

January 23, 2024 by Lisa Eagan

Building Equity for the Future:

Steady Income Stream through Rental Properties:

Diversification for Risk Mitigation:

Hedging Against Inflation:

Downsizing and Lifestyle Adjustments:

What’s Ahead For Mortgage Rates This Week – January 22nd, 2024

January 22, 2024 by Lisa Eagan

The following week of CPI and PPI reports are typically lighter, with this week showing the same trend. There are a number of interesting interim reports that are worth noting however, including the Federal Reserve’s Beige Book which indicates the labor market has been cooling across most of the country. Following up is the Consumer Sentiment Reports, which is an excellent indicator for how the average consumer feels about their buying power, reflecting on the current economic conditions. Slower inflation, cheaper gas and a healthy economy have boosted optimism. Lastly, retail sales reports showing activity in December.

Consumer Sentiment Report

The numbers: Consumer sentiment jumped in January to the highest level since the summer of 2021, reflecting fresh optimism about the economy as inflation slows and incomes rise.
The preliminary reading of the sentiment survey shot up to 78.8 from 69.7 in December, the University of Michigan said Friday. Two straight strong increases pushed the index to its highest level since July 2021.

Retail Sales

The numbers: Sales at retailers jumped 0.6% in December to cap off a fairly robust holiday-shopping season and underscore the resilience of a still-growing U.S. economy.
Economists polled by The Wall Street Journal had forecast a 0.4% increase.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates saw a decrease by -0.11% with the current rate at 5.76%
• 30-Yr FRM rates saw a decrease by -0.06% with the current rate at 6.60%

MND Rate Index

• 30-Yr FHA rates seeing a 0.15% increase for this week. Current rates at 6.15%
• 30-Yr VA rates seeing a 0.16% increase for this week. Current rates at 6.17%

Jobless Claims

Initial Claims declined to 187,000 compared to the expected claims of 208,000. The prior week’s count was 203,000.

What’s Ahead

Next week boasts a number of larger employment rates which come at a quarterly pace. There is also the very large Fed Rate Decision for the first quarter which strongly determines how most lending partners and markets as a whole will view things going forward. There is a lot of optimism for rate cuts this year.

The Ultimate Home Inspection Checklist for Informed Decisions

January 19, 2024 by Lisa Eagan

Embarking on the journey to homeownership is an exciting venture, but it comes with its share of responsibilities. One crucial step in the process is a comprehensive home inspection. To ensure your dream home doesn’t turn into a nightmare, we’ve compiled the ultimate home inspection checklist. Armed with this guide, you’ll be equipped to make informed decisions, identify potential issues, and negotiate confidently before sealing the deal.

Exterior Inspection:

Roof condition and age
Gutters and downspouts
Siding and paint
Windows and doors
Foundation and grading

Structural Elements:

Foundation integrity
Walls, ceilings, and floors
Attic and crawl spaces
Load-bearing walls

Plumbing System:

Water pressure
Visible leaks
Condition of pipes (visible and accessible)
Functionality of faucets, sinks, toilets, and showers

Electrical System:

Panel condition and capacity
Presence of GFCI outlets
Functionality of switches and outlets
Wiring and visible connections

Heating, Ventilation, and Air Conditioning (HVAC):

Furnace and air conditioning units
Ductwork condition
Filter replacement history
Thermostat functionality

Interior Features:

Appliance condition and age
Flooring condition
Walls and ceilings (look for signs of water damage)
Functionality of doors and windows

Insulation and Energy Efficiency:

Presence and condition of insulation
Energy-efficient features (double-pane windows, etc.)
Overall energy efficiency of the home

Pest and Mold Inspection:

Signs of termites or other pests
Presence of mold or mildew
Condition of wood structures and beams

Environmental Factors:

Radon testing (if applicable in your region)
Asbestos inspection (for older homes)
Lead-based paint assessment (for homes built before 1978)

Miscellaneous Checks:

Garage condition
Functionality of garage doors and openers
Drainage around the property
Overall safety features (smoke detectors, handrails, etc.)

Navigating the home inspection process armed with this comprehensive checklist empowers you to assess your potential home thoroughly. Remember, a well-informed buyer is a confident buyer. Use the insights gained from the inspection to negotiate repairs or adjustments to the sale price. By investing time in a thorough home inspection, you’re not just buying a house; you’re investing in a home where you can build a future.