Archive for Mortgage

Should You Remodel Your House?

Do you need more closet space, need another bathroom for your growing family, or simply want to increase your home’s value? Here are some factors to help you decide.

If you’re contemplating remodeling because you want to sell your home, focus on cosmetic changes instead of functional ones – they’re more likely to draw buyers. For example, people who replace garage doors get 98.3% of their value back in sales dollars, while replacing wood windows returns only 69.5%. To make your property more attractive for sale without spending too much money, skip remodeling. Instead, fix anything that is broken, remove personal touches, declutter, deep clean, paint in neutral colors, refinish floors, and replace aging hardware and fixtures. A remodel may force you to set a much higher asking price than the other homes in your neighborhood, and you’ll have a much harder time selling your home. To determine a reasonable asking price, check recent listings in your neighborhood to see current prices.

If you want to enjoy your living space more, first ask yourself what you want to change. If you want to replace your tub with a walk-in shower or finish out the attic space above your garage to create an additional living area or game room, remodeling may be for you. If you want to add a mother-in-law suite or replace your galley kitchen with a chef’s kitchen, then research all the pros and cons of such a big remodel. Moving might be a better option.

Make sure your house can handle the changes you want. Then compare those costs to the cost of selling your home and buying another. If remodeling is better for you financially, then staying put is the answer.

The following steps will help make your remodeling project run smoothly:

  • Start with design ideas, the more specific the better.
  • Decide whether to combine functional home changes with your remodel.
  • Research materials and contractors to come up with a reasonable budget.
  • Determine how you will pay for the project.
  • Check with the city planning or parish planning department to see which permits you’ll need.
  • Decide how you will tolerate the disruption to your daily life.
  • Ask yourself whether you can remodel while keeping your home’s design consistent with the neighborhood aesthetics?

CSE has a number of mortgage options to fit your needs. Call today!
CSE Mortgage Lenders
Esther Abrahams, 337.562.3181 — eabrahams@csefcu.org
Amy Hannon, 337.562.3330 — ahannon@csefcu.org

CSE Construction Loan Officer
Jeff Johnson, 337.562.3230 — jjohnson@csefcu.org

Written by  Tracy Curtis, July 26, 2018 / Modified for CSE by Liz Trahan,  August 20, 2018

Mortgage Pre-qualification

Q: Every ad for mortgage companies I read talks about prequalification or preapproval. Is that something I need to do before I start house shopping?

A: There are two phases to securing a mortgage.

Imagine the lending market as sort of trying to set up a friend on a date. You tell your friend about the partner you have in mind for them, and based on what you tell them, they decide if that person is worth a date. They’re considering the possibility of the date, assuming everything you say is true. If you tell your friend about the potential date’s persistent body odor problem, they might choose to say no. If you tell your friend about their beau-to-be’s interesting job, sense of humor or winning smile, they’d probably set up a date to see for themselves.

That’s part 1. Of course, your friend doesn’t go immediately from your description to wedding bells. First, they have to actually date and get to know each other. Your friend has to see if the qualities you described are actually true and make sure there’s nothing hiding beneath the surface that would rule them out.

That’s part 2. While it does make for some confusion, lenders may refer to either part 1 or part 2 as preapproval, and the other as pre-qualification. Rather than focusing on the labels, focus on the steps involved and what the steps mean. We’ll keep calling them “part 1” and “part 2.”

What do I need for part 1? In part 1 of the process, you describe your financial situation to a potential lender. Usually, this information includes salary, savings, and current debts. The lender may or may not pull your credit score at this point. Based upon that information, the lender will make a determination about the kind of loan you might qualify for, assuming everything you’ve said is true.

You don’t need to prove anything at this point. It can be done over the phone, over the internet or in person, and no documentation is required.

During part 1, you might want to compare possible mortgage rates. There’s a lot less paperwork involved, so it’s much easier to ask a lender to run through a variety of scenarios. You can look for a loan situation that combines the monthly payment, interest rate, term and down payment where you have the most comfort.

Part 1 can be completed early in the house shopping process. In fact, it makes sense to do this before you view the first house. That way, you won’t fall in love with a house you can’t possibly afford or convince yourself to settle for a house that doesn’t really meet your needs. This also gives you the chance to straighten out any potential kinks in your financial situation before starting part 2. Don’t worry about multiple checks on your credit if necessary. Credit bureaus lump mortgage inquiries within 30 days together as one inquiry, so they won’t adversely affect your credit score.

It’s important to note that pre-qualification is not a guarantee of a loan. To continue our example from above, your friend agreeing to a first date does not mean you get to start planning a wedding! Completing part 1 is a way to get an idea of how much you can afford to spend during your house hunting, as well as a way to show potential sellers that you’re serious. Completing part 1 illustrates to a buyer that you are already part of the way through the lending process, and it’s less likely that your financing will fall through.

What do I need for part 2? Part 2 is where the paperwork starts to fly. At this point, a lender is deciding whether or not to issue you a loan. Successfully completing part 2 means a lender is ready and willing to provide you with a loan up to a specified amount.

To navigate this step, you’ll need to prove everything you claimed in part 1. This means you need to provide tax forms to substantiate your income and account statements to verify your savings. You’ll also need to sign a variety of forms giving your lender or their agents the power to talk to employers, landlords and the IRS about your financial security. Generally, lenders will want tax returns for the past two years, including supporting documents like W-2 forms. If you’ve switched jobs a few times in that span, you may need to go further back to demonstrate consistent employment. If you’re an independent contractor or own a small business, documentation requirements are significantly steeper. You’ll need to provide enough financial disclosure to show lenders that you can make the payments.

Completion of part 2 is a conditional approval for a loan. If the house you’re buying passes appraisal, you will get financing on the terms you’ve agreed upon with your lender. The paperwork is a bit more cumbersome, so you don’t want to do this multiple times. Only complete this step with a lender you’re going to borrow from.

Part 2 is best to complete before you make an offer, especially in competitive markets. A letter of prequalification or preapproval that shows your financing is in place does a lot to reassure sellers that your offer will survive until closing. If you’re on the fence about what house you’ll put an offer on, this process can still be completed with the property identified as “to be determined.”

Don’t worry if this process seems confusing. You’ll be working with a qualified mortgage professional who deals with it every day and can answer all your questions. One of the benefits of working with an institution you trust for your mortgage is that it clears your mind to focus on the important stuff, like where to put the sofa!

 

Stop Worrying and Love Your Mortgage

Stop Worrying and Love Your Mortgage

Every corner of the personal finance world seems to hammer home the same point: Debt is the wealth killer. Debt is the single greatest threat to your retirement planning, college savings, and financial independence.

 

EXCEPT, as it turns out, there is one kind of debt that defies all of these rules: mortgages.

The money you owe on real property can, in fact, be a boon to your financial independence in a lot of ways. Let’s talk about a few reasons why mortgages are different from other kinds of debt:

Having a mortgage can improve your credit score. Mortgages are seen as “good debt” by creditors. Because it’s secured by the value of your house, lenders see your ability to maintain mortgage payments as a sign of responsible credit use and as a sign of financial stability. Since 2009, credit scoring agencies have added points for consumers who are able to manage different kinds of debt. Having a mortgage that is comfortably within your budget and one that you pay on time each month makes you look like a better, more responsible user of credit.

It is possibly the lowest type of interest rate loan you’ll ever get. Mortgage loans are among the safest types of loans that lending institutions can issue. If there’s a problem during the life of the loan, the real property is a guarantee that the loaned money can be recovered. As a result, mortgage rates generally track the “prime” rate – the interest rate the Federal Reserve charges institutions to borrow money from them.

It gets preferential tax treatment. The interest you pay on your mortgage is generally tax-deductible, which puts it in a class of debt by itself. The government wants to encourage homeownership, and is, therefore, willing to offer you a tax break for the financing costs of your mortgage. This tax treatment makes mortgages potentially even less expensive. Consult a tax advisor regarding deductibility of interest.

It’s proof against volatility. If you’ve got a fixed-rate mortgage, you can make plans around the amount you pay each month. If inflation accelerates, your payment (principal and interest) stays the same. If interest rates skyrocket, you’re protected from that, too. If interest rates drop, you can usually refinance to save money. Whatever happens, your mortgage is locked in to protect you from uncertain economic times.

It’s a safe emergency fund. While you want to keep some money in a savings account to protect you from minor emergencies, you can use the equity in your home to protect you from major events. If you can get more than a 4% return on your investment, you’ll make money by keeping a home equity line of credit as an emergency fund and pursuing returns with your savings.

If you’re interested in purchasing a new home or refinancing an existing one, CSE Federal Credit Union can help. Call today to speak to one of our representatives and see if you qualify for a home loan with a great low rate. Our knowledgeable service personnel can answer any questions you might have about how to get the most financial power out of your dream home. Call CSE at 337.477.2000 or visit csefcu.org and get details about our home loan options!

This article has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax or financial advice.

Sources: http://online.wsj.com/articles/nine-reasons-to-love-your-mortgage-1406420252?mod=Your_Money_newsreel_2 http://blog.readyforzero.com/how-does-a-mortgage-affect-your-credit-score/

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