Monthly Archives: May 2016
If you stop and think about the price you’re paying to bring in added shoppers in terms of time or money, you can start to make better decisions about how and where to put those resources.
- Advertising. The key to advertising successfully is to generate promising leads in exchange for the money you spend.
- Networking and referrals. Landing referrals from networking or past business associations isn’t just a cheap way to pick up new business.
- Teaming up. Another way to leverage available resources is through what’s known as a “host-beneficiary” arrangement.
- Strategic Alliances. You might take that partnership a step further and form what’s known in the industry as a “strategic alliance.” While a host beneficiary relationship is generally a one-time or short-term commitment, strategic alliances can sometimes last for many years. Source: entrepreneur.com by Brad Sugars
Your Loan in the Valley
While it’s important to do your research during the home-buying process, you can’t believe everything you hear.
We’ll help you spot the popular mortgage myths and reveal the truth behind them.
Myth 1: Once you’re pre-qualified, you’re guaranteed the loan amount.
If you are thinking about purchasing a home, getting pre-qualified is essential to give you a general idea of your budget.
But it’s important to remember that you haven’t been officially approved for that amount yet.
During pre-qualification, your lender looks at your assets and credit report to determine how much you can reasonably expect to be approved for. This doesn’t entail a deep dive into your finances, so the lender isn’t making any commitment at this point — it’s simply a ballpark figure with which to begin your house hunt.
A pre-approval, on the other hand, is much more comprehensive. Your lender will find out everything that they need to know about your financial well-being to approve you for a loan amount.
Note: Once you get pre-approved, it doesn’t mean you can stop worrying about your credit.
Lenders still have the right to check your credit at any time before your mortgage closes, and any additional credit obtained before you close on your home will have to be counted in your debt to income ratio. Depending on the amount of the increased credit, you could nullify your pre-approval.
Myth 2: Thirty-year fixed-rate mortgages are always the best.
When people think of a traditional mortgage, it’s a 30-year fixed-rate mortgage that comes to mind.
While these mortgages are a common and popular option, they aren’t necessarily the best choice for everyone. Today, conventional wisdom maintains that the average homebuyer lives in his or her home for around 7 years. This makes potential fluctuations in adjustable-rate mortgages a less important factor.
Adjustable-rate mortgages (ARMs) have a stigma attached to them because the interest can fluctuate. What people fail to consider is that these types of loans have interest rate caps to limit how high the rate is able to go. If you’re looking to stay in your home for a long time, a fixed-rate mortgage may be a great option. If not, some ARMs may be more suitable.
There is no one-size-fits-all solution. Each lender and mortgage is different, so it’s important to read the fine print and understand all of the terms before deciding which type of loan is right for you.
Myth 3: If you’re looking to save money, it’s better to rent.
People often think that renting is less expensive than owning a home.
The fact is, it’s almost always less expensive to pay a mortgage than to rent a comparable home. When you rent, the landlord, real estate company, or apartment complex is responsible for maintenance.
Of course, this convenience is baked into the price you pay each month for rent. As a homeowner, these expenses are your responsibility, but if you are prepared for them, it will almost always cost less than the premium you will pay to rent.
Another perk of owning a home is that it gives you the opportunity to build equity. When the lease is up on your rented apartment, you are free to leave, but the money you paid throughout your lease term is gone.
Owning a home allows you to build wealth slowly over time instead of throwing your hard-earned money away every month.
Myth 4: You should always pay off your mortgage as quickly as possible.
While it’s natural to assume that you want to pay off your mortgage as quickly as possible, it may not be the best use of your money.
Paying down your mortgage may lower your principal but it’s not the same as instant equity. When you pay your mortgage, the only guarantee is that you’re lowering your overall loan balance.
Rather than paying more into your mortgage each month to pay it off sooner, consider investing that extra money.
The interest you earn on these investments may be higher than the interest you pay on your mortgage. Also, keep in mind that the interest you pay on your mortgage may be deductible at tax time.
Myth 5: You can’t get a good loan unless you have a 20% down payment
The old rule of thumb used to be that you needed to put at least 20% down on a home. If you put down less, your interest rate would be worse and you’d have to pay Private Mortgage Insurance (PMI).
Today, there are many more options out there for mortgages. The Federal Housing Administration (FHA) offers mortgages with as little as 3.5% down.
In addition, “piggyback” mortgages have become more popular in recent years. These loans enable the borrower to take out a second mortgage in order to lower their loan-to-value ratio under 20%. By doing this, the borrower is no longer required to get private mortgage insurance.
Now that you know the truth about these mortgage myths, you may be ready start the home-buying process.
This article originally appeared in Homestead, our home-buying and personal finance magazine. Source: localfirstbank.com
Your Loan in the Valley