Renovate your home with mortgage financing

It’s been a record year for home renovations. With countless Americans staying home for work or school and cancelling planned expenses like vacations, many people have gained the motivation and the means to repair, upgrade or expand their living spaces. But what if you don’t have the funds for a big renovation project sitting in your bank account? The right mortgage solution may hold the key to financing your renovation.

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How low are record-low mortgage rates? Really low!

In July, the average interest rate for a 30-year fixed-rate mortgage dropped below 3% for the first time ever. But how big of a deal is a 3% mortgage rate, and how does it affect the average homebuyer or homeowner? To appreciate just how incredible these low rates are for mortgage borrowers, we need to look back through the decades.

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The right mortgage for each season of life

Getting a mortgage is more than a one-time event. It’s an important ongoing part of your lifelong financial strategy, and it should change and evolve as you and your household’s needs, goals and circumstances change and evolve. Whether you want the smallest mortgage payment available, to be debt free as soon as possible, to minimize the cost of your loan or to have the most cash available to save, spend or invest elsewhere, each may require a different mortgage solution. Here are some guidelines to consider at each stage of life when deciding what direction to take with your mortgage.

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What are Mortgage Closing Scams and How to Protect Yourself

Getting a mortgage is one of the biggest investments most people will make in their lives. Our company takes pride in protecting our borrowers’ finances and personal information during the mortgage process, but we can’t do this without their help. Part of our job as a lender is educating our clients on how to protect themselves from the risks of mortgage closing scams.

What are mortgage closing scams?

Mortgage closing scams are a form of phishing that targets people who are obtaining mortgages. The scam attempts to trick borrowers into sending their closing funds (down payment and closing costs) to the wrong recipient by sending false instructions that appear to come from a trusted source. An estimated total of $1 billion in mortgage closing scams occur every year, costing some victims tens of thousands of dollars or more.

Here’s how a mortgage closing scam can happen:

  1. The borrower receives an email, text message or other communication from their settlement agent, lender or another professional working on their transaction.
  2. The message includes instructions for the borrower to send their closing funds electronically. Everything looks good, so they follow the instructions and send their money.
  3. The borrower eventually learns that their closing funds were never received. They show everyone the instructions they followed, but no one recognizes them. These were fake instructions sent by a scammer!
  4. The borrower calls their bank as fast as they can to try to reverse the transfer, but it’s too late. Their money is gone for good, and now their closing is in jeopardy.

How can you protect yourself from mortgage closing scams?

Here are the instructions we provide to our borrowers to help them keep their closing funds safe:

  1. NEVER trust any wire instructions from anyone until you verify the instructions. No matter how authentic an email, text message, phone call, letter, website or other message seems, it can easily be a fraudulent imitation.
  2. DO NOT call, click or use any phone numbers, hyperlinks, email addresses or email attachments you receive in an unverified message. These items may be false or dangerous. If you receive a phone call you do not trust, politely hang up and call a number you do trust.
  3. ALWAYS verify your wire instructions by calling your settlement agent at a trusted phone number. This should be a number you have on file or receive from a trusted source. When you call, be sure to verify any account numbers or names included in the instructions.
  4. ONLY obtain wire instructions from your settlement agent. As a lender, we do not send wire instructions, and if you receive them from anyone but your settlement agent, it may be a sign of an attempted scam.
  5. STOP, think and take your time. Be on your guard if anyone tries to push you to send money immediately or surprises you with last minute changes. Only send your funds after you have confidently followed these steps without rushing.
  6. ONLY send your funds by wire transfer using validated wire instructions from your settlement agent. Never send funds by ACH (automatic clearing house) bank transfer, PayPal, Venmo, Zelle or any other payment transfer method.
  7. IMMEDIATELY notify your bank or wire transfer company and request a wire recall if you believe your wire was sent to the wrong recipient. Do this only by calling phone numbers you trust. Your chances of reversing a fraudulent transfer decrease the longer you wait.

To learn more about how to stay safe from mortgage closing scams, click here to visit the Consumer Financial Protection Bureau’s page on the topic.

What you need to know about forbearance

If you are experiencing financial difficulty due to the coronavirus and you cannot make your payments,  you need to reach out to your loan’s servicer (the company you make your payment to) immediately.

If you are still able to make your mortgage payments, it is recommended that you do so.

Do not participate in a forbearance plan without asking these specific questions:

  • When will the missed payments become due?
    • Believe it or not, some servicers are waiving payments, but then asking for a ‘balloon payment’ at the end of the forbearance term. In other words, you may skip 3, 6 or 12 months of payments but then have it all due, with interest, at the end of that term.
  • Will I still acquire interest during this period?
    • Make sure that your agreement is clear on if, or how much, interest will be charged during the forbearance period. Most, if not all, of these programs are similar to when you get a furniture credit card. You don’t have to pay any interest until the term comes due.
  • Will this impact my credit?
    • If you simply stop making payments without contacting your servicer, and having an agreed upon forbearance plan in writing, you definitely WILL affect your credit negatively.
  • When will I know, for sure, that I can stop making payments and for how long?
    • Get EVERYTHING in writing. If a customer service rep tells you something on the phone, that is NOT a forbearance plan.

You can find more details in the video below.

Why get preapproved for a mortgage?

The spring real estate market has arrived! If you’re considering buying or refinancing a home, getting preapproved for your mortgage is an important first step.

Here are the benefits of getting preapproved:

  • Shows you how much home financing you can receive and how much home you can buy
  • Provides you with a good estimate of what your monthly mortgage payment will be
  • Helps catch issues, save time and reduce stress later in the home financing process
  • Is required by most real estate agents and home sellers before you make an offer to buy a home

Getting preapproved is free, and it can be done easily online or over the phone. If you’re thinking of buying or refinancing a home and would like to get preapproved, get in touch!Programs included on this document are subject to approval based on individual program guidelines and borrower’s credit and underwriting approval. Contact your Draper and Kramer Mortgage Corp. professional for full program details.

What do falling mortgage rates mean for you?

At the start of February, mortgage interest rates dropped to their lowest since 2016.1 Most people know this is good news, but not everyone understands exactly how it may affect them. Here’s a short explanation of the two big ways you may be able to benefit from falling mortgage rates.

Benefit 1: you may qualify for lower payments on a new mortgage

Whether you’re buying a new home or refinancing a current one, the lower your interest rate, the lower your monthly mortgage payment (all other factors equal).

For example, on a mortgage for $200,000, an interest rate of 4.5% (4.643% APR2) would equal a monthly principal and interest payment of $1,013, while a lower interest rate of 3.5% (3.635% APR2) would equal a lower payment of $898.

That’s a savings of $115 a month – or $41,400 over 30 years! The bigger the loan amount and the bigger the difference in rates, the bigger the potential savings.

Benefit 2: you may be able to afford a bigger loan and more home

The lower the interest rate on a new mortgage, the larger the loan you can afford (all other factors equal, once again). For example, a $200,000 mortgage with a rate of 4.5% (4.643% APR2) would have a monthly principal and interest payment that is about the same as a $225,000 mortgage with a rate of 3.5% (3.620% APR2).

Therefore, falling mortgage rates may allow you to buy a bigger home without increasing your monthly payment. The more rates drop, the bigger this benefit may be.

What this means for homebuying

If you’re planning to buy a new home, you picked a very fortunate time to do so. To ensure you can take advantage of today’s low rates, you need to lock in a rate with your lender in case rates increase later. At Draper and Kramer Mortgage Corp., we can lock your rate up to 90 days before your closing if you’re shopping for a home and up to 360 days before closing if you’ve already picked a specific property.

What this means for home refinancing

If you’re planning to stay in your home, it may be worthwhile to refinance your current mortgage. This may allow you to lower your interest rate and monthly payment and take advantage of other benefits such as removing mortgage insurance, getting out of an adjustable-rate loan or taking cash out for college, renovations or other expenses. However, you should weigh these benefits against the closing costs that come with refinancing your loan.

Your next steps

If you’re interested in learning what rate, loan amount and monthly payment you qualify for, get in touch to schedule a free mortgage consultation.

When refinancing an existing loan, total finance charges may be higher over the life of the new loan.

1 Based on the 30-year fixed-rate mortgage average as of February 6, 2020. Source: https://fred.stlouisfed.org/graph/?g=NUh

2 Annual Percentage Rate