MORTGAGE PLANNING

There is a big difference as summarized below and the value is unparalleled because working with a referral based mortgage planner costs the same as working with anyone else.

The mortgage planner’s purpose is to work with you for as long as you have a home and a need for a mortgage. Calling Quicken Loans is not the same. They are a transactional based, profit motivated company that will originate and close a loan for you, they are friendly and offer good service but beyond that they will do nothing more except service your loan.

Focused on helping you to succeed. What’s important is helping you achieve your goals. Working together you will feel secure in knowing you always have a true mortgage professional in your corner and staying in touch with you to make sure you stay on track to accomplish your goals is part of the job.

Having someone you know and TRUST. You could think of your Mortgage Planner as your trusted guide who is helping you to climb to the top of your mountain. You are the one taking each new step on the climb but your MP will advise you with an integrated plan encompassing all your family and financial goals.

Working directly with the other trusted advisors on your team. A Mortgage Planner understands that your family and the home they live in is the financial centerpiece and the single most important asset you own. The equity in your home is a powerful tool and if understood properly can be used to work together with the other things that are important to you and you are working towards. This means by working directly with your financial advisor, realtor, CPA, and other team members, we all work together with your family to meet your goals and dreams.  

Here for you, not the other way around. The job is to listen to you about what you want to accomplish and help you to take action. Planners generally do not have supervisors and production managers that monitor how many loans they are originating. They do not set profit and sales orientated goals. My satisfaction comes when I help someone get their first home, free up hundreds in extra cash flow, set up a wealth creation account putting idle equity dollars to work for you and your family, helping you to become debt free and growing your balance sheet so you can one day have enough money to pay off your home if you choose to do so. 

Not going anywhere, tomorrow or 15 years from now. Your mortgage planner will answer the phone and reply to your emails, communicate with you exactly what’s happening with your loan during the process and when there is turbulence during the transaction, work with you to solve problems and get the loan closed. A mortgage planner will stay in touch with you after the new loan closes and when there is opportunity to improve on what you’re already doing they show you any new options.

Please don’t hesitate to call/text us at 925-216-9735 or contact us with any questions.

The four-step mortgage plan and scenarios.

This is the simple plan I show all my clients to pay off your mortgage and become debt free. If you follow the steps you can have success.  I use it for planning my own finances and you may find it as a useful road map for financial stability. This is something you have to want to do and only you can decide to do it. No one else will do it for you. If you want it you can have it!

Here are the steps…

1. SET ASIDE A RAINY DAY FUND

Understanding and changing your financial habits is a process and can’t be done overnight. It’s something to work at little by little, one step at a time. My best advice is to stop using credit cards to purchase things.  Sometimes you have to use the cards but you must pay off the balances when you do. If you have some money set aside you can avoid using the credit cards when things come up.

2. PAY OFF YOUR DEBT

If you have debt, you need to find a way to pay it off.  Once you have stopped using credit cards and gotten into the habit of using cash to make your purchases, it’s very important to set a goal to pay off all your debt.  If you have someone who can help you then that’s ok; there are other ways too. I will list below some ideas.

• Stop using credit cards- don’t accumulate more debt
• Consolidate your debt with one loan and use the new monthly payment savings to pay down remaining debt balance. Don’t just spend the new money.
• Try to buy a used car with cash as opposed to buying a new car with a loan
• Borrower from a parent or relative, you may be able to borrower against future inheritance.
• Secure a gift or early advance from parent or relative from inheritance.
• Rob a bank- just kidding- HAHA
• Transfer balance to one 0 interest credit card
• Sell something; if you have anything of value you can live with out- sell it and use the cash to pay off your credit cards.

3. SAVE ENOUGH MONEY TO COVER 1 YEAR OF SALARY

Once you have your debt paid off use the money you save to put dollars in a liquid emergency account.

Some ideas for you to consider:

• Using cash to buy things is a mindset and a habit; learning to save money is no different. Creating and sticking with a budget Is extremely important.
• Go thru all your bills a couple of times a year and look for what you can reduce or get rid of.
• If you have more than one car and you do not need it, sell it!
• Write on paper how much you should be spending for food gas ect ect. The important thing is to pay attention to what you are spending money on and modify your habits. Freeing up money to save is the name of the game.
• Put your money in a account that you have to go out of your way to get to but accessible in case of emergency.

4. SET A GOAL TO HAVE ENOUGH MONEY IN RETIREMENT AND SAVINGS TO PAY OFF YOUR MORTGAGE ON YOUR BALANCE SHEET

This will give you choice, safety, and liquidity. If it makes sense, by getting a larger mortgage and harvesting equity dollars you will not have your equity trapped. This is important if you have a loss of income.

The idea here is to find ways to grow enough of a liquid account on your balance sheet so should you choose to do so for whatever reason; you have funds to do so. This gives you choice, safety and liquidity.

Below are some ideas to help you achieve your goals. These concepts aren’t for everyone and I understand that but it’s good to be aware that there are options. An experienced consultant can help you with a plan that will show you how to begin working toward and meet your goals.

• Get a mortgage large enough to take out equity dollars up to 80% or higher if you can. Use those dollars in a conservative well managed account to gain a rate of return that is more than the effective rate of your mortgage. There are several reasons to do this.
• Putting the idle equity dollars in your home to work to accelerate the payoff of your mortgage
• May increase the mortgage interest rate reduction on your federal income tax
• In case of emergency loss of income you will already have the equity of your home in a liquid account; if you lose the house to the bank you will not have lost your initial investment and have emergency funds available to you until you can restore your monthly income.

If you follow just the first 2 steps of this plan you will be much better off.  It starts with understanding that to have success you must address your financial habits. To do this you need to study and pay attention to what your habits are objectively. You do not need to be critical of yourself; just taking the first step to make a change is huge. How you think is everything and success begins with your mindset.

You may already be someone who is very careful with your spending habits and may be able to skip to step 3 and begin to work on step 4.

Part of this plan is to address what happens when unexpected expense events or income reduction events occur because they do. Being prepared is and a step ahead in your finances will help to keep you out of trouble.

Please don’t hesitate to call/text us at 925-216-9735 or contact us with any questions.

The top 15 questions about refinancing your home.

1. WHY SHOULD I REFINANCE MY MORTGAGE?

When interest rates drop it’s usually a good time to refinance your mortgage. You want the new rate to be lower than the rate you already have. There is no hard fast rule to how much lower the new rate needs to be but generally as long as your new payment is lower by 100.00 to 200.00 it is enough of a benefit to justify the cost.

You may also wish to take cash out to consolidate a second mortgage or consumer debt, do home improvements or use for other reasons. You can dramatically increase your monthly cash flow by paying off debt and lowering your interest rate.

2. WHAT WILL MY NEW PAYMENT BE?

Your new payment will be determined by the new interest rate and the length of time you choose to pay the loan back. Common terms are for 30, 15 and 10 year fixed rate loans. Your payment should be low enough to realize a monthly savings that will justify at least a 24 month break even period.

3. DO I HAVE TO START ALL OVER AGAIN WITH A NEW LOAN? WHY DO THAT?

With most loans, a larger percentage of interest is collected in the first 10 years of the term of the loan. If you have not had your loan for very long and rates go down, it may be a good time to secure a lower fixed rate. Rates may never go lower, you don’t know.

If you have had your loan for 7 years or longer then there should be a particular goal that the home owner is trying to accomplish. This is perhaps where a highly qualified mortgage planner / consultant such as myself can help you.

4. WHAT ARE MY LOAN OPTIONS?

Knowing your immediate and long term goals is important. Anyone worth their salt should ask you about your goals and what is most important to you going forward. Mortgage planning encompasses taking in account your career goals, financial goals, goals for your family, helping your parents in retirement and securing your own retirement.

The best consultants are the best listeners. Helping you to achieve your goals is what’s most important.

5. HOW MUCH DOES REFINANCING COST AND WHAT ARE THE FEES?

This depends. Generally the fee to refinance 250k to 453k is around $2,400-$3,100.00. That does not include pre-paids or reoccurring closing costs. Mortgage interest is collected in advance and hazard insurance will need to be renewed for one year if your policy is coming due within the next 3 months.

If your taxes and insurance are included in your payment then you will need to fund an escrow account. To set this up you will be paying for your next property tax installment in advance into a separate account, usually about 6 months or 1 installment. Homeowners insurance will also be collected. Sometimes you will skip a mortgage payment, this is because prepaid mortgage interest is being collected in advance of your new loan closing.

The appraisal is usually paid for at the time of appraisal being ordered and the cost is $450-$500. Sometimes it can be more.

6. WHAT DO I HAVE TO PAY FOR OUT OF MY OWN POCKET?

Fees are often included in the new loan so you do not have to pay “out of pocket” (except the appraisal, which is usually paid for on a credit card).

Sometimes it is not possible to get all the fees included in the new loan and you will have to come in with some funds. Usually this is the case when the loan-to-value and the current loan balance are very close to being the same. Example: $100,000 house has a $80k loan balance and the new loan can’t exceed $80k to avoid mortgage insurance. In this case there is no room to cover the closing costs; the house would have to appraise for more than $100k.

7. HOW DOES A MORTGAGE BROKER GET PAID AND WHAT ARE LENDER CREDITS?

The new lender pays the mortgage consultant a preset compensation fee. This is what is known as an origination fee. Generally – you do not pay this, the new lender does. In addition, there may be lender credits to you depending on the rate you choose. These credits are applied towards your closing costs and cannot be kept by the originator.

8. WHAT IS A “NO COST” LOAN?

When rates go down, sometimes the new market rate can be much lower than your current rate. If you have a 5% interest rate, and the new rate with closing costs added to the new loan balance is 4%, it may make sense to opt for a rate that is slightly higher. This will help you to keep your current loan balance the same without increasing your current loan balance with a new loan. Here’s an example…

Current Loan

• Loan Amount $350k
• Rate 5%
• Payment $1,878 ($350k was the original balance and $325k is the current balance)

New Loan

• Loan Amount 325k
• Rate 4%
• Payment Option 1 – $1,670.00  (cost is $2,800.00, non-reoccurring hard fees)
• Payment Option 2 – $1,696.00 (cost of loan is covered by choosing the higher rate). In this scenario you will come in with your taxes and insurance to keep your new loan balance at $325k.

This is a very general example. The spread between the “no cost rate” and “par” rate can be different from lender to lender and depending on what the market rate is.

9. WHAT ARE POINTS AND WHY WOULD I EVER PAY FOR THEM?

You have the option to “buy a rate down”. Usually the cost is so expensive that it rarely makes sense, especially when market rates have been as low as they have been.

Sometimes you will have to pay all or part of a discount point when the scenario is such that to qualify for a new loan, the rate on the rate sheet is not “par” after lender compensation. In that scenario you may want to consider a borrower paid option where the mortgage consultant is paid by you and not the bank. This can work out in your favor.

10. DO I NEED AN APPRAISAL?

Not always. Sometimes desk top underwriter and loan prospector will return findings with an appraisal waiver. In such a case an appraisal is not required. I have found that this depends on the loan-to-value (the lower the better) and the age of the home. You also need to be sure the correct postal address is entered into DU or LP.

11. WHAT IS A LENDERS ESTIMATE OF FEES?

This is known as a LE or lenders estimate of fees. You will see several of these during the course of your transaction. The LE’s purpose is to disclose the fees of the loan and cannot change. Often these will be “over disclosed”, in other words, the fees being disclosed are more than they will actually be at closing. The reason for this is that loan originators do not want to have to pay for your fees out of their own pocket which is what happens if anything gets missed.

When you get lender estimates and other disclosures, it is important for you to know that you must acknowledge them and sign them as soon as you get them. Your loan consultant should give you guidance regarding this.

12. WHY ARE THERE 2 INTEREST RATES ON MY LENDERS ESTIMATE?

There will always be 2 interest rates on your Lender Estimates, Truth in Lending and Closing Disclosures. This is the way California state discloses to you that you are financing fees to close a new home loan.

The purpose here is to make you aware that there are fees associated with your new home loan and that you are financing them into the new balance of your loan. There is a “note rate” and “APR rate”. The APR is almost always higher than the note rate but is not the actual rate you are paying for the money you are borrowing. The note rate is what is most important.

13. WHAT IS THE PROCESS OF REFINANCING AND HOW LONG WILL IT TAKE?

• Application – Right away. In person or by phone with your loan consultant, you will need to send your mortgage consultant requested documents and sign a loan application with disclosures. This can be many pages but usually done electronically so it shouldn’t be too much trouble.
• Lender Estimate – 1st week, you will need to sign this ASAP as soon as you get them from the lender usually by email.
• Underwriting – Occurs during the 2nd week, this takes 48 to 78 hours
• Appraisal – By the end of 2nd or 3rd week during the transaction.
• Conditions – Week 3, after file is looked at by underwriter there almost always will be some additional documentation needed to validate what is on the application.
• Closing Disclosure – Should go out sometime during the 3rd week of processing your loan.
• Docs Ordered – Week 4
• Sign to Close – During week 4
• Fund and Record – All done. You should get a check (if cash coming back to you) within days of closing

14. CAN I ADD SOMEONE ELSE ON TO MY LOAN?

Yes. If you are not taking cash out you need to be sure that at least one of the borrowers of the new loan is on the title of the home. You can add someone just before you apply for a home loan. If you want to take money out one of the original borrowers must have been on the title of the property for at least 6 months.

15. WILL MY CREDIT SCORE DROP IF I HAVE MY CREDIT CHECKED?

You have 30 days to have as many mortgage related inquires as you would like. After 30 days at the beginning of the next reporting cycle your score will absorb a 4-7 point drop in fico score.

Please don’t hesitate to call/text us at 925-216-9735 or contact us with any questions.