When you secure a mortgage, it typically means committing to a long-term payment plan that can last several decades. However, it’s possible to shorten this timeline by making additional payments towards your loan. Prepaying your mortgage means more than just getting ahead on payments; it fundamentally changes how quickly you can free yourself from this debt. This blog post delves into what it means to prepay your mortgage, the potential savings, and how to navigate the associated benefits and drawbacks.
Understanding Mortgage Prepayment
Prepayment of a mortgage involves paying extra amounts towards the loan principal beyond the regular monthly payments. By directing extra funds to the principal rather than the interest, you accelerate the loan’s payoff timeline and reduce the total interest paid over the life of the loan.
Calculating the Impact of Extra Payments
Using a mortgage amortization schedule calculator can illustrate the effect of extra payments. By selecting the option to make additional payments, borrowers can see how even modest increases in monthly payments can lead to substantial savings. For example, adding just $25 to the monthly payment can shorten the loan term and reduce interest costs by nearly $20,000. These tools help borrowers make informed decisions about how best to manage their mortgage payments.
Considerations Before Making Extra Payments
While the financial benefits of prepaying a mortgage can be significant, there are considerations to weigh. Making extra payments means less cash available for other financial goals or emergencies. There’s also the potential of a prepayment penalty, a fee some lenders charge for early loan payoff. Additionally, tying up funds in home equity means reduced liquidity. Before deciding to prepay your mortgage, it’s crucial to evaluate your overall financial situation, including other debts, retirement savings, and your emergency fund status.
Prepaying your mortgage can be a financially advantageous strategy for many homeowners, but it’s not suitable for everyone. By carefully considering your financial health and long-term goals, you can make a decision that best supports your overall financial well-being. If you want a professional consultation to see what best fits your needs use our easy scheduler on our website and we can do a call, zoom or meeting.

This past week, national mortgage rates have shown a mixed behavior with most rates climbing. The average rates for popular loan types such as the 30-year fixed, 15-year fixed, and jumbo loans saw an uptick, while the rates for 5/1 adjustable-rate mortgages (ARM) declined. Such fluctuations are not just numbers; they directly influence potential homebuyers’ decisions and the overall housing market’s dynamics.

As we navigate through the year, the expectation is that mortgage rates might gradually decrease, although the journey could be uneven. The trajectory of fixed mortgage rates often aligns with movements in the 10-year Treasury yield, which is sensitive to changes in investor sentiment, economic conditions, and crucial decisions made by the Federal Reserve. Recently, the Fed decided to maintain the current interest rates, focusing on controlling inflation which has been above their target of 2% for the last couple of years.

The Federal Reserve’s strategies significantly affect a range of financial products, including both adjustable-rate mortgages and broader mortgage pricing. Traditionally, mortgage rates tend to decrease when the Fed cuts the federal funds rate. However, with the Fed’s latest decision to hold rates steady, the mortgage market remains in a state of cautious anticipation, watching for any signs of rate adjustments later this year as part of the central bank’s ongoing efforts to steer inflation towards its set target.

For homebuyers and homeowners, the fluctuating mortgage rates present a challenging landscape. It’s difficult to time the market perfectly to find the lowest possible rate. That being said, the decision to purchase a home often depends more on personal circumstances and needs than on market conditions. For some, securing a mortgage now—even at a higher rate—might be preferable to waiting and risking further rate increases or price escalations in the property market. This strategy also allows buyers to start building equity sooner, potentially refinancing later if rates become more favorable. As always, every persons situation is unique so schedule a consultation with us on our website and we can see what strategy fits your needs!

30-year mortgages have almost always been what you imagine when getting a mortgage as it offered a sweet spot for borrowers seeking an optimal balance between affordable monthly payments and overall cost-effectiveness. Now, the lesser-known 40-year mortgage offers an intriguing alternative for those looking to stretch their payments even further. Though not as widespread as their 30-year counterparts, 40-year mortgages present a unique solution, especially for borrowers facing financial challenges.
What Sets the 40-Year Mortgage Apart?
The crux of a 40-year mortgage is in its extended repayment period – a full decade longer than the standard 30-year term. This longer timeframe translates into lower monthly payments, providing immediate financial relief. However, it’s important to weigh this short-term gain against the long-term implications: a higher interest rate and more total interest paid over the life of the loan. Moreover, 40-year mortgages often fall under the category of non-qualified mortgages (non-QM loans), meaning they’re not as readily available through conventional lenders and are usually employed in scenarios of loan modification for payment relief.
Navigating the Availability of 40-Year Mortgages
So, where does one find these elusive 40-year mortgages? Typically, they emerge as a lifeline for borrowers struggling to keep up with current loan payments. Mortgage servicers may extend the loan term to 40 years as part of a modification program, potentially also reducing interest rates and loan balances. Programs like the Flex Modification offer such options for conventional loans, and similar paths exist for FHA loans. A handful of lenders might offer 40-year mortgages outside of modification scenarios, often structured as adjustable-rate mortgages (ARMs) with initial interest-only payments, targeting borrowers expecting future income growth but currently constrained by debt or other financial limits.
Weighing the Pros and Cons
Before diving into a 40-year mortgage, it’s crucial to consider both sides of the coin. On the upside, these mortgages can significantly reduce monthly payments, offering a more permanent solution than temporary measures like forbearance. Yet, their limited availability, potentially higher interest rates, and the increased total interest cost over time are significant drawbacks. Furthermore, the Consumer Financial Protection Bureau (CFPB) categorizes these as “unqualified” mortgages, so you’ll find that many established banks and lenders steer clear of offering them.
While a 40-year mortgage can be a useful tool for specific financial situations, particularly for those needing a long-term solution to make home payments more manageable, it’s vital to thoroughly understand the long-term financial implications, so fill out our loan analyzer on our website or schedule a meeting and we can find the program that best fits your needs!

The Fed’s pattern of rate hikes through early 2022 to mid-2023 culminated in a pause, announced at their latest meeting on March 20, 2024. Despite this pause, we’ve seen mortgage rates fluctuate. A notable instance was the decrease in rates in late December, despite the Fed’s decision to maintain its key rate during its December 13 meeting.
Lawrence Yun, the chief economist at the National Association of Realtors, explains that the bond market, including mortgage-backed securities, often adjusts longer-term interest rates in anticipation of future Fed policies. While the Fed plans to cut rates later this year, the exact timing remains uncertain. While the rates have remained unchanged, there’s an expectation of three rate cuts in 2024.
How the Federal Reserve Influences Borrowing Costs
The Fed sets borrowing costs for short-term loans via the federal funds rate, which affects how much banks charge each other for overnight loans. This rate, increased in 2022 and 2023 to control inflation, impacts borrowing costs across the economy, including credit card rates and home equity loans. However, fixed-rate mortgages, the most popular home loan type, are more closely aligned with the 10-year Treasury yield rather than the federal funds rate.
The Fed’s role in buying and selling debt securities also indirectly affects mortgage rates by influencing the credit flow.
What Affects Mortgage Rates?
The primary influencer of fixed-rate mortgages is the 10-year Treasury yield. A notable gap typically exists between this yield and the fixed mortgage rate. In 2023, the gap widened, leading to more expensive mortgages.
Mortgage rates are also subject to:
• Inflation: Higher inflation often leads to increased fixed mortgage rates.
• Supply and Demand: Lenders adjust rates based on their current business volume.
• The secondary mortgage market: The demand from investors for mortgage-backed securities can lower mortgage rates. Conversely, lack of investor interest might cause rates to rise.
The Fed’s Impact on Adjustable Rate Mortgages (ARMs)
While less common than fixed-rate mortgages, ARMs are significantly influenced by the Fed’s decisions. ARMs often tie to the Secured Overnight Financing Rate (SOFR), which the Fed’s actions can affect. Changes in the fed funds rate lead to adjustments in SOFR, consequently impacting ARM rates.
If you are looking to make a move this spring make sure to schedule a consultation with us on our website and we can review your needs and what best fits your needs.

In the realm of home financing, interest-only mortgages present a unique blend of short-term affordability and long-term considerations. If you’re contemplating this type of mortgage, understanding its mechanics, benefits, and potential pitfalls is crucial.
What is an Interest-Only Mortgage?
Interest-only mortgages allow borrowers to pay only the interest component of their loan for a predetermined period, usually 7 to 10 years. During this time, you won’t pay down the principal balance. After this phase, the loan reverts to a standard amortizing mortgage, where both principal and interest are paid, typically at a variable rate.
A Brief Historical Context
These mortgage types gained traction in the early 2000s, offering immediate low payment relief. However, they played a significant role in the 2007 housing crisis and subsequent recession, leading to stricter regulations and a reevaluation of their role in the mortgage industry.
The Mechanics of Interest-Only Mortgages
During the interest-only phase, your payments may be considerably lower than traditional loans. However, this doesn’t include the principal, meaning no equity build-up during this period. After the initial phase, you must repay the principal, resulting in significantly higher payments, especially as these are now amortized over a shorter period.
Case Study: Interest-Only vs. Traditional Mortgage
Consider a $330,000 loan. With an interest-only mortgage at 5.1%, your initial monthly payment would be around $1,403. Post the interest-only phase, assuming a stable rate, this jumps to $2,033. In contrast, a 30-year traditional mortgage at 5.54% would cost $1,882 monthly, a more consistent figure over time.
Qualifying for an Interest-Only Mortgage
Post-housing crisis, these loans are less accessible and come with stringent qualifying criteria, such as high credit scores, low debt-to-income ratios, substantial down payments, proof of future earnings, and ample assets.
Is an Interest-Only Mortgage Right for You?
These mortgages suit certain financial strategies and situations, like expecting a future income increase, needing lower initial payments, or planning a property sale before the interest-only period ends. However, they come with risks, such as payment shock post the initial period, market rate vulnerabilities, and the potential for negative equity.
Pros and Cons at a Glance
Pros:
• Lower initial payments.
• Potential for larger or better-located homes initially.
• Delaying larger payments or avoiding them if relocating.
Cons:
• No equity build-up initially.
• Risk of unaffordable future payments or large balloon payments.
• Dependence on market rates.
Alternatives and the Refinancing Option
Consider alternatives like adjustable-rate mortgages with introductory low rates or government-backed loans offering affordable payments without the interest-only risk. Refinancing into an interest-only mortgage is possible but comes with similar qualification hurdles and additional costs like appraisals and closing fees.
Conclusion: Think Long-Term
Interest-only mortgages offer flexibility but demand a strategic long-term view and a thorough understanding of their implications. Remember, the right mortgage choice is one that aligns with your overall financial goals and lifestyle needs. Your mortgage journey is unique, and we’re here to guide you through every step. Schedule a consultation on our website and we can help find the best mortgage options for your situation.

When you’re in the market to buy or sell a home, understanding all the costs involved is crucial. One of these costs, often overlooked, is the real estate transfer tax. This blog post aims to shed light on what real estate transfer taxes are, how they differ from other taxes, their costs, who typically pays for them, and where the funds go.

A real estate transfer tax, sometimes referred to as a deed transfer tax or documentary stamp tax, is a one-time fee imposed during the transfer of property ownership. This tax is usually based on the property’s sale price and can vary significantly depending on the location.

How Does It Differ From Other Taxes?
It’s important to distinguish real estate transfer taxes from other types of taxes like property taxes, estate taxes, and gift taxes. Property taxes are an ongoing expense paid annually, mainly used for public services like schools and roads. Estate taxes apply when transferring assets (which might include real estate) of a deceased person to their heirs. Gift taxes are due when property is gifted and its value exceeds a certain threshold. Unlike these, real estate transfer taxes are a one-time cost incurred during the property sale process.

Cost of Transfer Taxes
The rate of real estate transfer tax varies by state. For instance, a $500,000 property sale might attract just $50 in transfer taxes in Colorado but can be as high as $3,500 in Florida. This cost is part of the closing costs and is not deductible against income tax. However, it can increase the tax basis of the property for the buyer, which might be beneficial in reducing future capital gains taxes.

Who Pays the Transfer Taxes?
The responsibility for paying transfer taxes can differ based on the state and even the specific terms of the real estate contract. While in many places the seller pays these taxes, in others, it’s the buyer’s responsibility, or the cost is split between both parties. This can often be a point of negotiation during the sale process.

Where Do Transfer Tax Funds Go?
The funds collected from real estate transfer taxes are used by local governments for various purposes, such as infrastructure maintenance or paying public employee salaries. In some states, these taxes contribute to the state budget.

States Without Real Estate Transfer Tax
Interestingly, several states do not impose any real estate transfer tax. These include Alaska, Idaho, Indiana, Kansas, Louisiana, Mississippi, Missouri, Montana, New Mexico, North Dakota, Oregon (in most counties), Texas, Utah, and Wyoming.

Securing a mortgage in the current housing market can be challenging. With rising mortgage rates, soaring home values, and a pace of home price appreciation that far exceeds wage growth, getting a mortgage approval is far from guaranteed. This blog post aims to clarify the mortgage approval process, highlight typical obstacles, and provide advice for prospective homeowners.
The Mortgage Underwriting Process
Mortgage underwriting is where lenders assess your financial situation. This process involves a detailed examination of your financial documents – bank statements, tax documents, W-2s, pay stubs, and any additional information requested by the lender. The objective is to determine whether you qualify for a loan.
The traditional, more subjective methods of assessing creditworthiness have been replaced by automated underwriting software systems like Desktop Underwriter for Fannie Mae loans or Loan Product Advisor for Freddie Mac loans. These systems use algorithms to approve, reject, or request more information from applicants.
Top Reasons for Mortgage Application Denial
1. Credit Issues
Your credit score is a crucial factor in the mortgage process. While higher scores (above 740) often get the best rates, you can still qualify for certain mortgages with lower scores. It’s essential to check your credit score, correct any errors, and maintain your score during the mortgage application process.
2. Income Shortfalls
Lenders look at your debt-to-income (DTI) ratio to determine if you can handle an additional loan. A DTI ratio above 43% is typically undesirable, with 36% being more favorable. If you have substantial debts, such as student or car loans, it’s advisable to reduce these before applying for a mortgage. Self-employed individuals might face extra challenges due to irregular income or the way tax write-offs impact reported income.
3. High Loan-to-Value (LTV) Ratio
A high LTV ratio, which compares the loan amount to the property’s value, can be a red flag for lenders. A larger down payment, resulting in a lower LTV ratio, can improve your loan approval chances.
4. Financing Challenges for Certain Properties
Some properties, like condos or manufactured homes, can be more difficult to finance. Structural issues or other property-related concerns can also hinder loan approval.
5. Recent Financial Instability
Financial stability is important to lenders. Recent changes in your job, a history of sporadic employment, or unusual banking activity can impact your loan approval.
What to Do If Your Application is Denied
If your mortgage application is denied, use our qualifier wizard on our website and schedule a consultation. Whether it’s addressing credit issues, lowering your DTI or LTV ratios, choosing the right type of property, or ensuring financial stability we can do a deep dive and see what best fits your needs!

For many homeowners who opt for a conventional mortgage with less than a 20 percent down payment, Private Mortgage Insurance (PMI) becomes a necessary part of their monthly expenses. PMI is an additional charge on your mortgage payment, primarily designed to protect the lender in case of default. However, there are several ways to eliminate this extra cost, which can save you a significant amount over the life of your mortgage.

When Does PMI Go Away?

The Homeowners Protection Act of 1998 set forth guidelines for the automatic termination of PMI. According to the Act, PMI must be removed by the lender once the borrower attains a 78 percent loan-to-value (LTV) ratio. This means that when you have paid down your mortgage to 78 percent of the original purchase price of your home, PMI should be lifted automatically.

For instance, if you bought a home for $300,000, PMI would be removed when your mortgage principal falls to $234,000. It’s important to note that PMI costs decrease as you pay down your loan, and are completely removed when you reach the required LTV ratio.

How to Get Rid of PMI

While PMI can add hundreds to your monthly mortgage payment, there are several strategies to get rid of it:

1. Wait for Automatic or Final Termination
Under the Homeowners Protection Act, PMI is automatically terminated once your LTV ratio hits 78 percent. Alternatively, PMI must be cancelled at the midpoint of your loan’s amortization schedule, regardless of LTV ratio. This applies if you’ve been making regular payments and are in good standing with your lender.

2. Request PMI Cancellation at 80 Percent Mortgage Balance
You can request to cancel PMI when your mortgage balance reaches 80 percent of your home’s original value. This requires a proactive approach, including a written request to your lender and ensuring you meet other lender-specific requirements.

3. Pay Down Your Mortgage Early
Making larger or additional mortgage payments can expedite reaching 20 percent equity, allowing you to request PMI cancellation sooner.

4. Refinance Your Mortgage
Refinancing might be an option if you’re close to the 20 percent equity mark, especially if you can secure a loan that doesn’t require PMI.

5. Reappraise Your Home
In a thriving real estate market, your home’s value might increase enough to push your equity over the 20 percent mark, qualifying you for PMI cancellation.

6. Home Improvements
Significant improvements to your home might increase its value, potentially raising your equity to the required level for PMI cancellation.

Caution: Don’t Drain Your Assets

While eliminating PMI can be financially beneficial, it’s crucial not to deplete your savings or investment accounts in the process. Maintaining a balance of liquid assets for emergencies is a wise financial strategy.

Know Your Rights Under Federal Law

The Homeowners Protection Act ensures your right to eliminate PMI under specific conditions. Familiarize yourself with these provisions and keep track of your mortgage payments and home value. If you believe your lender is not complying with PMI removal regulations, you can file a complaint with the Consumer Financial Protection Bureau.

Conclusion

Paying off your PMI can be a financially savvy move, saving you thousands over the life of your mortgage. By understanding the rules and keeping a vigilant eye on your mortgage balance and home value, you can take steps to remove this extra charge as soon as you’re eligible. Remember, the responsibility to initiate PMI cancellation often lies with you, the homeowner, so stay informed and proactive in managing your mortgage costs.

Homeowners often overlook the financial potential of their home equity, a valuable asset that can be used to purchase a second home. This equity, calculated as your home’s value minus any outstanding mortgage, can be accessed through two primary methods: a home equity loan or a Home Equity Line of Credit (HELOC). A home equity loan offers a lump sum with a fixed interest rate, ideal for significant one-time expenses. In contrast, a HELOC provides a flexible, revolving line of credit with variable interest rates, akin to a credit card.

Using home equity to buy another home offers several advantages. It enables you to access substantial funds without depleting personal savings and allows you to retain ownership of your current home. Additionally, it can position you as a more competitive buyer, with the ability to make larger down payments or even full cash purchases. However, it also carries risks, such as the potential loss of your primary home if you cannot repay the loan, the burden of additional debt, and the possibility of negative equity in a declining market.

There are tax implications to consider when using home equity for real estate investment. Typically, the interest on home equity loans is tax-deductible when used for improvements on the property securing the loan. However, this deduction may not apply if the loan is used to purchase a separate property, like a vacation home.

For those considering using home equity for an investment property, it’s crucial to weigh the potential for high returns against the risks of financial strain. Investment properties can offer significant income opportunities, but they also pose the risk of underperformance, which can lead to financial challenges if the property doesn’t generate expected income.

Besides home equity loans and HELOCs, other financing options include obtaining a new mortgage on the second property, taking a loan from retirement savings, opting for a personal loan, considering a cash-out refinance, or exploring reverse mortgages (for homeowners over 62). Each option has its unique features and implications so please schedule a consultation on our website and we can review your individual options.

In 2024, new homeowners are seeing mortgage interest rates have more than doubled since 2021, making the dream of home ownership with the traditional down payment of 20% seem like a bridge that is very far.
However, there are many options and programs that don’t require 20% down. Some loan programs now allow for a much lower down payment, requiring as little as 3 percent in cash. This development significantly eases the burden for homebuyers, especially first-timers.
Understanding 3 Percent Down Mortgage Options
These low down payment mortgages are often part of special programs, typically targeting first-time homebuyers or those who haven’t owned a home in the recent past. Here’s a closer look at these options:
1. Conventional 97
• Backed By: Fannie Mae
• Key Features: Only 3% down required; down payment can be a gift, grant, or other assistance.
• Qualifications:
• Must be a first-time homebuyer or not have owned a home in the past three years.
• Homebuyer education course required for all first-time buyers.
• Minimum credit score of 620.
• The home must be a primary residence.
• Conforms to loan limits (e.g., $766,550 for a one-unit property in most areas).
• Additional Info: Requires private mortgage insurance (PMI) until 20% equity is reached.
2. Fannie Mae’s HomeReady Program
• For: A wider range of properties, including multi-family units.
• Qualifications:
• Open to those who haven’t owned a primary residence in the past three years.
• Credit score minimum of 620.
• Income cannot exceed 80% of the area’s median income.
• At least one unit must be the owner’s primary residence.
• Unique Feature: Counts rental income towards income requirements; down payment can be entirely from gifts or assistance.
3. Freddie Mac’s HomePossible Program
• Distinctive Feature: Allows non-occupying co-borrowers to contribute to the down payment.
• Qualifications:
• Homeownership education for first-time buyers.
• Credit score of 660 or above.
• Income limits apply.
• Must live in the home as a primary residence.
• Additional Info: PMI required until 20% equity is achieved.
4. HomeOne by Freddie Mac
• Target Audience: First-time homebuyers and those looking for cash-out refinances.
• Qualifications:
• At least one applicant must be a first-time homebuyer.
• Usable credit score required.
• Property must be a single-unit primary residence.
• No Restrictions: No income or geographical limitations.
Other Low-Down Payment Options
• FHA Loans: Minimum 3.5% down. Available to a broader audience, including those with lower credit scores.
• USDA and VA Loans: No down payment required, specific to rural area borrowers (USDA) and military personnel (VA).
The path to homeownership in 2024, despite the daunting landscape of high interest rates and challenging savings goals, is made smoother with these innovative low down payment mortgage options. Whether you’re a first-time homebuyer or someone looking to re-enter the housing market, these programs offer a ray of hope and an opportunity to achieve the dream of owning a home. Fill out our easy pre-qualifier on our website and we can see what program best fits your needs!