Friday, January 27, 2017

What You Need To Know About Gift Funds

The "Donor" of the gift must be a family member, fiancé or domestic partner. They must prove they have the ability to provide you with the gift by providing a copy of their bank statement, a copy of the canceled gift check and/or a signed letter from their bank saying the funds are available. The "Gift Letter" is a form we will provide. The donor will need to complete it with basic information and a signed statement that the funds are a gift with no expectation of repayment. The "Transfer" must be documented carefully. Make a copy of the gift check and deposit slip or of confirmation of the wire transfer. Deposit the gift in the account you're already using for verification of funds to close. DO NOT combine this deposit with any other incidental deposits. Provide either an online update or the next account statement to show that the deposit cleared into the account. Some programs allow for the entire down payment to be in the form of a gift. Others may require that you have at least 5% of the purchase price from your own funds. As these rules can vary or change at any time, never hesitate to consult with us for the specifics as they relate to your transaction. While the documentation requirements may seem excessive at times, please remember that the underwriters are simply following the rules to assure that your down payment is not borrowed and that any allowable gift funds are coming from acceptable sources. And remember, if you have any questions about the mortgage process, just ask! Call 281-907-6401 or visit www.txpremiermortgage.com TODAY!

Wednesday, January 18, 2017

Calculating The Net Benefit Of A Refinance Transaction

Calculating the net benefit of refinancing can be a challenging task if you do not understand what to calculate. We are going to focus on the net benefits of refinancing from the standpoint of lowering your interest rate. Although there are several reasons to refinance, lowering your mortgage rate to save on interest payments over the term of the loan is the most popular. Calculating the actual savings can be a tricky chore unless you know the difference between cash flow savings and interest savings. If your refinance objective is to only save on the interest by lowering your rate, then the interest savings should be done with the calculations below. Calculating Interest Savings: (Loan Amount x Interest Rate) / Months in year = Interest paid per month ($200,000 x 6% or .06) / 12 = $1,000.00 *Remember to do the calculation in the parentheses first* We now know that you are paying $1,000.00 per month in interest. You should take the new interest rate you are getting with your refinance and calculate what your new interest payment will be. ($200,000 x 5% or .05) / 12 = $833.34 Now we need to find out the difference between the two interest rates. Current Interest Payment – Proposed Interest Payment = Interest Savings $1,000.00 – $833.34 = $166.66 Now you have figured out that by dropping your interest rate 1% on $200,000 you will be saving $166.66 per month or about $2,000 per year. Awesome! Anyone would want to save $2,000 per year, where do I sign… right? Not so fast, you’ll want to calculate the break-even point to find out how you will benefit after your closing costs. Net Benefit Formula (Break-Even): (Closing Costs – Escrows) / Interest Savings = Month of Break-Even ($6,000 – $1,000) / $166.66 = 30 Months In other words, it will take 30 months for you to recoup the cost of your refinance. If you plan to keep your mortgage for at least 30 months then you might want to consider this deal. Okay, now we can calculate your net benefit for refinancing with one more calculation. (Monthly Savings * Months you plan to keep mortgage) – (Closing Costs –Escrows) = Net Savings ($166.66 * 120 months) – ($6,000 – $1,000) = $14,999.20 If you kept the mortgage for 120 months (10 years) you would save $15,000. Okay, now you can find out where to sign. Calculating the net benefits of a refinance is crucial in determining if it is strategic for you to refinance. Keep in mind that each mortgage is slightly different and you may need to adjust calculations accordingly. …… Frequently Asked Questions: Q: I heard that I should only refinance if I drop 1% on my mortgage is that true? Some people say ½% , 1% to never. Every mortgage is different. For Example: A no cost loan can have a 1 month break-even point with only a .25% drop in interest rate. Now that you know how to calculate your net benefit, you are able to figure out what may be beneficial for your situation. Q: Why can’t I just compare my current payment to the proposed payment and figure out my net benefit? You could just compare just the two payments if you wanted to find out your cash flow savings, but the current and proposed loans may have two different amortizations. Let’s assume you currently have a 15 year mortgage and you’re comparing it to a 30 year mortgage. If both loans have the same interest rate and loan amount but the amortization is different, your interest savings per month would be $0. However, you are going to show a cash flow savings with the 30 year mortgage because of the longer amortization.

Monday, January 9, 2017

Where Does My Earnest Money Go?

Where Does My Earnest Money Go? If I give my real estate agent a $5000 Earnest Money Deposit check… Where does that money go? A basic and very obvious question that most First-Time home Buyers ask once their purchase contract gets accepted. According to Wikipedia: Earnest Money – an earnest payment (sometimes called earnest money or simply earnest, or alternatively a good-faith deposit) is a deposit towards the purchase of real estate or publicly tendered government contract made by a buyer or registered contractor to demonstrate that he/she is serious (earnest) about wanting to complete the purchase. When a buyer makes an offer to buy residential real estate, he/she generally signs a contract and pays a sum acceptable to the seller by way of earnest money. The amount varies enormously, depending upon local custom and the state of the local market at the time of contract negotiations. An Earnest Money Deposit (EMD) is simply held by a third-party escrow company according to the terms of the executed purchase contract. For example, there may be a contingency period for appraisal, loan approval, property inspection or approval of HOA documents. In most cases, the Earnest Money held by the escrow company is credited towards the home buyer’s down payment and/or closing costs. *It’s important to keep in mind that the EMD may actually be cashed at the time escrow is opened, so make sure your funds are from the proper sources. The Process: Earnest Money is submitted to an escrow company with the accepted purchase contract At the close of escrow, the EMD is credited towards the down payment and / or closing costs If there are no closing costs or down payment, the EMD is refunded back to the buyer Who Doesn’t Get Your Earnest Money: Selling Real Estate Agent – A conflict of interest Sellers – Too risky Buying Agent – They shouldn’t have your money in their account