How Big Does Your Down Payment Need to Be?

For most prospective homeowners, the down payment is the biggest roadblock between dreaming about buying and actually collecting the keys.

It’s no secret the down payment on a home is a substantial chunk of change. Coming up with that much cash is no small feat. But remember, Rome wasn’t built in a day. As you consider how big your down payment needs to be, consider these key components.


A Standard Down Payment is 20%

To secure a conventional loan without Private Mortgage Insurance (PMI), most lenders will require you to make a 20% down payment. For a $400,000 home that’s $80,000.

Standard down payments come with a lot of benefits, including:

  • A better chance of getting your loan approved as you’re considered a more trustworthy borrower.
  • Lower upfront fees
  • Lower interest rate
  • More equity built up in your home immediately
  • Lower monthly payment
  • No PMI

Of course, a standard down payment comes with one obvious drawback – its size.


A Piggyback Mortgage Allows You to Put Down Just 10%

Your down payment acts as a security deposit for your lender. In the event you default on your loan, your lender has a better chance of recouping losses the more equity you have in the home.

A piggyback down payment allows you to put down just 10% of the mortgage. Then, you would take out a second mortgage to cover the remaining 10%.

These halved down payment programs do mean less cash up front. However, they also require you to carry PMI until you’ve built up 20% of the equity in your home. This increases the cost of your monthly payment. Piggyback mortgages are also typically connected to higher interest rates, meaning you’ll pay more over the lifespan of the loan.


Mortgage Assistance Programs Feature as Little as 3% Down

The Federal Housing Administration (FHA) is a government agency. It was created to help first-time homebuyers qualify for a mortgage. The FHA does so by guaranteeing a portion of an FHA loan’s balance. This allows borrowers to secure a mortgage while putting as little as 3% down.

For many borrowers, this is the lowest down payment program available. While FHA loans provide the distinct advantage of paying less upfront, they also require monthly insurance premiums and typically higher interest rates. Additionally, there is a borrowing cap on FHA loans. The cap is determined by the area in which you live and could potentially price you out of the market.


Zero Down Payment Programs for Veterans

VA loans are available to qualifying active and retired service members. Backed by the Department of Veterans Affairs, these loans come with a wide variety of benefits, including zero down payment option.


How Big Should Your Down Payment Be?

There is no one-size-fits-all answer. How much you put down is ultimately determined by your current financial status and lifestyle. The best first step you can make is to know your options.

Contact me today, I look forward to talking with you.

Should You Buy Discount Points?

We all love to save money, especially when we’re buying something as big as a home. That’s why discount points can be so attractive. For a one-time, upfront fee, discount points lower your monthly payment and reduce the overall cost of your loan.

But, discount points aren’t for everyone. Consider the following questions to decide if they are right for you.


What’s the term of your loan?

You purchase discount points by paying a percentage of your loan amount. Typically, one point costs 1%. For a $350,000 home, one point will generally cost $3,500.

The point reduces your interest rate and consequently the cost of your monthly mortgage payment. Though this monthly savings can vary, for a $350,000 loan, one point will typically save you about $20 a month. This means it will take 175 months to begin seeing a positive return on your investment (ROI).


How long do you play to stay in your home?

If it takes you 175 months to begin seeing a positive ROI, that’s roughly half the lifespan of your mortgage. Most first-time homebuyers move within five to seven years. Consider carefully how long you reasonably expect to stay in your home before you buy points.

Do you expect to refinance?

Whether you plan to move or not, do you think you might refinance? If you do so before you break even, you’ll lose money. If you buy discount points, it’s best to stick with your original mortgage for several years before making any changes.
Can you afford discount points?

With the down payment and closing costs, buying a home requires a substantial amount of cash. How much surplus cash do you have on hand? It’s a good idea to make sure you have some extra money set aside in a rainy day fund for unexpected expenses. Will the cost of your points allow you to do so?

Need help crunching the numbers? Contact my team today, we’d ready to help.

6 Factors To Consider When Comparing The Cost Of Renting Vs. Buying

The answer isn’t black and white when you consider, “What costs less, renting or buying?” What’s more affordable is determined by a lot more than comparing a rent payments and mortgage payment.

While buying comes with some additional expenses (more on those later in the post), it also comes with a lot of perks. Yes, you become the master of your own domain and get to make decisions about how your home is maintained.

But beyond that, you can start using your monthly living expenses to build equity. Rather than just spending the money and never seeing those dollars again, you are investing in an asset you can sell or leverage. And that’s huge!

Additionally, the cost of rent does nothing but rise. If you secure a fixed-rate mortgage, the cost of your mortgage payment won’t. This means by buying, you’ll gain a lot more control over your monthly living expenses.

But even with these awesome perks, it’s important to consider the full cost or home ownership to determine if buying is right for you. These expenses include:

Homeowner’s Insurance – Renter’s insurance covers the cost of replacing the stuff within your home. In most cases, this is a pretty nominal fee. Homeowner’s insurance protects you against unplanned damage to your home itself. This damage could be caused by vandalism, storms, theft or fire. Generally speaking, your homeowner’s insurance will cost more than your simple renter’s insurance.

Maintenance – As a renter, when something breaks you call the landlord and they pay to fix or replace it. As a homeowner, all maintenance is your responsibility. You need the skill or the money to fix whatever is broken.

Property Taxes – Your property taxes are determined by the value of your home. They can vary based on they city, county or town in which you live.

Utilities – Utility bills aren’t unique to home ownership. But, the bigger the space, the bigger the utility bills tend to be. If you move into a home that’s substantially larger than the one you were renting, get ready to pay more.

Transportation – It’s easy to overlook the cost of getting around, but it can significantly add up over time. If you buy a home further from work and your daily activities, be ready to pay more for transportation.

Homeowners Association Fees (HOAs) – If you buy a home that’s part of an HOA, you’ll also need to pay those dues. This fee is generally used to pay for the maintenance of common spaces, as well as items like insurance and landscaping.

Want to explore more differences between renting and buying? Give me a call today, I’m here for you.

Top Reasons to Refinance Your Mortgage

Refinancing a home takes a lot of effort. First you have to qualify for refinancing; you then must fill out financial paperwork. Finally, there are terms to accept under the new loan agreement. But as long as you have a clear goal in mind, refinancing can have real benefits. There are several common reasons why you may decide to refinance your existing mortgage.

1. Reduce your payment rate.

When you first got your mortgage the payments were easier to manage. Things have changed and you wish there was a way to lower those monthly mortgage payments. You’re tired of struggling to pay the mortgage and could use some relief. Refinancing is a good way to free up thousands of dollars per year in primary and interest payments. To get a lower payment rate there’s a good chance you’ll be making payments over a longer period of time. This is a fair trade-off if your mortgage is causing a budget squeeze.

2. Get cash you need for important items.

The equity in your home has a certain dollar value in cold, hard cash. If you have an urgent need for a large amount of money. Perhaps to buy a car, make home improvements, pay for medical care or college fees, refinancing can help you cover these types of expenses.

3. Get a better interest rate.

Mortgage interest rates constantly fluctuate. High interest rates take a chunk out of your household budget, so when rates take a big dip, it’s time to consider refinancing. Shop around to find the lowest rates, and best terms. Rates between three and five percent are excellent, but even lowering rates by a few percentage points puts money back in your pocket.

4. Pay off credit card debt.

In addition to monthly mortgage payments, you have one or more credit card bills to pay. Credit card debt is the worst type of debt, because it drains your budget of money needed for other things, interest rates tend to be high. Debt consolidation through refinancing allows you to pay off all of your credit card debt, while getting a better interest rate deal. Once free and clear, avoid habits that led to huge credit bills.

5. Switch to a fixed interest rate.

You currently have an adjustable-rate mortgage, but you want to take advantage of low fixed rate mortgage offers while they last. Grab a great refinancing deal that locks you into a long-term lower payment rate.

Ready to see if refinancing is right for you? Let’s connect, give me a call today.

How to Qualify for a Loan When You Work Part-Time

If you think the freelance community here in America is small, think again. A new study released by the Freelances Union and Elance-oDesk found that 34 percent of the American workforce is doing freelance work.

This kind of self-employed or part-time status can make it difficult to qualify for a mortgage. But it doesn’t make it impossible. With the right preparation, you can qualify for a mortgage without working the standard 9-to-5.

Clearly Show Your Earning History

At a minimum, you’ll need to show two years of income high enough to afford the mortgage you are seeking. Additionally, it’s best to be able to show you have increased your earnings year after year. This means, your earnings report for 2015 should be higher than your earnings report for 2014.

Bring the Bacon

As is the case with any other borrower, the more you put down, the better. Ideally, you’ll want to put down a full 20 percent. This will make you more trustworthy.

Have a Solid Credit Score

Your credit score is one of the key elements to proving how trustworthy you are as a borrower. A direct reflection of your credit history, it gives lenders insight into how successful you have been at taking on and paying off debt.

Show Your Savings

Because your earnings can fluctuate, a rainy day fund is ideal. In the event you have a slow month, these liquid assets can help ensure you can smake your monthly payment.

Highlight Your Track Record

Do you consistently make your rent payments on time and in full? Awesome! This can help you show lenders you’re able to establish a monthly budget and keep to it. You can do so by showing your lender rent stubs and a letter from your landlord.

Consider a Co-Signer

Co-signing isn’t without its hiccups – namely finding someone who is willing to attach their credit to your own. However, a co-signer can help you qualify for a mortgage which you might not be able to receive otherwise.

Ready to get pre-approved? Contact me today.

Should I Rent or Buy a Home?

The question of whether to buy a home or to rent has become controversial in recent years. Many people have rejected the notion of home ownership in favor of a lifestyle with fewer long-term commitments. Even so, there are some important reasons why it can be a good idea to buy a home of your own, rather than paying rent to a landlord.


  1. You can have it your way

With ownership, unlike renting, you don’t need the approval of a landlord in order to make design changes, or keep pets. You can live in a place that conforms to your lifestyle, and you can expand it as your needs change. Owning your own home offers considerable additional personal freedom and privacy compared to renting.


  1. What you buy, you keep

When you buy a house, you’re getting more than just a place to live; it’s a place to call home, perhaps even for future generations to call home. It’s a long-term commitment with long-term benefits. As you pay down a mortgage, you build equity that functions much like a savings account, stored in the form of a physical asset. It’s solid, it’s real, and once it’s fully paid for, it’s yours to live in and enjoy for the rest of your life. Renters pass up this opportunity to build something bigger than themselves.


  1. Long-term stability

Land is a scarce commodity, and it’s an especially hard one to create more of. Because of that, its value generally increases over time. The housing markets have their ups and downs, but the numbers have historically gone up over the long term. This is a good thing for homeowners who have a fixed-rate mortgage. The value of your property increases, but your mortgage remains stable and predictable, a cost you can count on. It’s less peaceful for renters, who often see rates rise along with property values, and their landlord’s expenses.


  1. Financial power

Owning a home offers several financial benefits that renters don’t enjoy so easily. When you always make mortgage payments on time, you can build up a powerful credit history. You’ll be able to enjoy access to bigger and better loans on cars, appliances, and financial investments. Substantial mortgage interest and property tax deductions are available to homeowners, but not to renters. You can also consider the possibility of becoming a landlord yourself, and renting out rooms or the entire house for profit. As the owner, you’re ultimately responsible for maintenance either way, so why not let someone else pay you for it? This is one of the roads to true wealth: by acquiring an asset that generates passive income, you can begin to make yourself financially free.

Questions? I’d love to talk to you about how you can get pre-approved for a home that builds your wealth.

Home Buying Tips for Veterans

We are incredibly humbled by the men and women who have served and are serving our country. Here at Fairway Kirkland, your sacrifice is not without notice.

This is why we take great pride in helping those eligible for a VA loan secure the dream of home ownership. It’s just one small way we can give back. Our loan officers are well versed in VA loans and are available to answer any questions you may have. To help you get started, we’ve outlined the five essential steps you need to take:


Shore Up Your Finances

Check your credit report and, if needed, correct any mistakes. You can still qualify for a VA loan with a low credit score. However the higher your score, the more money for which you can qualify and the more favorable your interest rate.


Get Pre-Approved

In Seattle’s competitive housing market, deals happen quickly. If you are not pre-approved, you will miss out. Before you go house hunting, work with a loan officer to get pre-approved.


Understand Your Loan Options

Just because you can qualify for a VA loan, doesn’t always mean it is your best option. Be sure to speak with your loan officer about your long-term goals and current financial status to determine the right loan product for you.


Work with a Military-Friendly Real Estate Agent

While a VA loan is similar to a traditional mortgage, it still has some nuances. It is best to work with a military-friendly real estate agent who understands how VA loans work. This will help ensure you close quickly and efficiently.


Work with a Loan Officer Who Processes Loans Quickly

Another side effect of Seattle’s hot market is that deals move fast. If your loan takes too long to close, you could lose out on your new home. This is why it is important to work with a loan officer who pays close attention to detail and closes loans quickly.

Ready to get pre-approved? Need help finding a military-friendly real estate agent? I’m here to help. Give me a call today.

Should You Buy a Vacation Home?

Summer is going to officially be here before we know it. Heck, with the amazing weather we’ve been having, you might have even convinced yourself it’s already here.

As you dive headfirst into summer vacations and weekend getaways, you could find yourself toying with the idea of a more permanent destination. A vacation home. A place out of town that’s all yours.

However, the real questions are: Should you buy a vacation home? Is now the right time?

To help you decide, we’ve outlined three key questions to consider:

Can your budget handle it?

While not all vacation homes are as expensive as a primary residence, purchasing one will always mean introducing an additional drain on your monthly budget. It’s not simply a question of whether of not you can make the mortgage payments. You’ll also need to budget for routine maintenance, utility bills, taxes, and the unexpected major repairs.

How will you finance the purchase?

While you may have used a VA or FHA loan to purchase your primary residence, these loan assistance programs are not an option when it comes to buying a vacation home. If you have the financial means for an all-cash purchase, the entire process will be much simpler.

However, if like most of us, you don’t have a few hundred thousand dollars just waiting to be used, you’ll need to look into other avenues. You might consider:

A Home Equity Loan – A home equity loan allows you to leverage the equity in your primary residence to secure a second mortgage for your vacation home.

A Conventional Loan – You’re probably already familiar with conventional loans. They can be a great option for purchasing a vacation home. However you’ll need to be prepared to make a substantial down payment – in most cases 20 percent of the purchase price.

Will you really use it?

Assuming you can afford to buy a vacation home, you’ll ultimately need to decide if you will really use it. If you are the kind of vacationer who constantly wants to go some place new, becoming financially invested in one destination might not be for you. However, if you love going to some particular place and rent a house there every chance you get, then a vacation home could be right up your alley.

Ready to explore your options? Give me a call today.

4 Questions Homebuyers Need to Answer

Buying a home can be overwhelming and confusing. To help simplify the process, make sure you can answer these questions:

How Much Do You Prequalify For?
It’s all too common to see first-time homebuyers house hunting without getting preapproved. This can cause some serious issues. First, if you’re looking at houses outside of your price range, it can easily lead to dissatisfaction. Second, it wastes your time. Most sellers won’t even look at bids from prospective buyers who aren’t preapproved.

What is Your Credit Score?
Your credit score is one of the crucial factors a lender will use to determine if you are eligible for a mortgage loan. Your credit score also affects the interest rate you can secure. If you don’t know your credit score, you’ll want to find it out ASAP. Make sure to take a close look at your credit report to identify any mistakes or discrepancies that might be affecting it. By addressing these, you may raise your credit score and improve your interest rate.

How Much Will Your Closing Costs Be?
It’s not uncommon for closing costs to stun borrowers. At three to five percent of the total home price, closing costs can be a substantial chunk of change. If you’re not prepared, finding the necessary cash can be difficult.

The key is to discuss closings costs with your loan officer from the very beginning. The final dollar amount of your closing costs can fluctuate by no more than 10 percent. However, knowing the estimated cost up-front can allow you to prepare for it or discuss alternatives, such as including your closing costs in your monthly payment.

Who is Responsible for Paying Your Closing Costs?
As the buyer, you don’t automatically have to pay closing costs. Sometimes the seller will agree to assume some or all of the closing costs in order to close the deal. Be sure to communicate with the buyer from the very beginning about who will assume responsibility.

Ready to learn more? Give me a call today.

5 Not So Well-Known Loans

Did you know that there are different kinds of loans? As a Loan Officer, I constantly educate home buyers on the wide verity of loans available. There is no one size fits all approach when it comes to home loans. There a countless types of loans and structures available to you, so you can get a loan that fits your situation. Loans from from different lenders, have different rules, payment options, and time frames.

To help you brush-up on your borrowing know-how, we’ve compiled five types of loans you might not know about.

Cash Advances (aka Costly Borrowing)

A cash advance loan is a loan typically extended by your credit card provider. These loans are often smaller in size, such as a few hundred dollars. They generally have high interest payments and fees, meaning they can be extremely expensive.

Equity Loans (aka Borrowing From Yourself)

With an equity loan, you leverage your personal equity. This could include your home’s equity, your retirement fund, and even your life insurance. Essentially, you’re liquefying these assets with a clearly defined repayment plan.

Reverse Mortgages (aka Leveraging Your House)

A reverse mortgage is similar to an equity loan, in that you are leveraging the equity in your house. The difference is, with a reverse mortgage there is no repayment plan. As you recoup the equity in your home in liquid assets, the lender takes ownership of your home. Traditionally, reverse mortgages are used by retirees.

Personal Loans (aka the Friends & Family Loan)

Personal loans can be extended to you by friends, family or an institution. With the advent of crowdfunding, you can even get a personal loan from complete strangers. The size and term length of the loan can vary widely. As with most loans, the higher your credit score, the lower your interest rate will likely be. Before you take on a personal loan, make sure to read the fine print. You and the party from which you are borrowing should create a legal document outlining the terms. These terms should include (but are not limited to): the total sum you’re borrowing, your interest rate, your payment schedule, and the specific terms for how the lender can recoup their losses in the event you default.

Debt Consolidation Loans (aka Repaying Old Debts with a New Loan)

Debt consolidation is exactly what it sounds like. It allows you to pay off your debt with a new loan. For those who find themselves in serious financial trouble, debt consolidation can offer a way out. It can allow you to lower your interest rate and simplify your monthly payment plan. However, debt consolidation will also seriously harm your credit report for some time. It isn’t a decision to make lightly.

Have additional questions about loan types or simply ready to explore traditional mortgages? Give me a call today.