Mortgage planning concepts for financial planning

Imagine Financial Services – Professional Circle, episode 1

(Marianne) Martín, thank you for joining me today. Please, tell me a bit more about you and your firm.

(Martin) My Niche is I offer homes and Loans under one roof. I use my 20 years of experience to help current and future homeowners with Real Estate and Mortgage planning to build financial security. We create a homeownership and mortgage plan that fits their unique situation and goals.

I am the President of USA Homes and Loans Inc that has a lending and mortgage division. I am a licensed Realtor with a team of experienced real estate professionals and a federally licensed Sr Loan Officer. The mortgage division is run by my Operations Manager Renee Vesik who is a 27 year veteran in the industry. She is the Loan Officer when I am the Realtor.  

(Marianne) Great, I love how you frame that and it sounds like you have crafted a very special organization. Please share the differences between various traditional home loans, a cash-out refi, a home equity loan, and a HELOC out there.

(Martin) There are 3 categories of home loans that are recommended depending on various factors including credit history, down payment, reserves, and income.

  1. Government loans include FHA and VA loans. These loans are with 3.5% down payment and 0 down payment for VA loans. These are government-backed and subsidized for lower interest rates. They also are more forgiving with credit standards.
  2. Conventional loans are most often for borrowers with more down payment/equity, higher credit scores, and lower debt ratio with higher income and less debt. However, first-time buyers can buy a home with as little as a 3% down payment.
  3. Second mortgage/Home Equity Lines of Credit (HELOCs) are loans used to tap into equity so a variety of purposes. I recently helped a buyer who took out a $200k HELOC to build a guest house. After building the guest house they refinanced and combined the 1st and HELOC into one loan. They rented out the main house and moved into the guest house. The rental for the main house pays the entire mortgage, taxes, and insurance. This was part of their retirement plan.

(Marianne) I have what I think may be a unique question for you, tell me, what is the impact or considerations of financing a new home loan with a partner when you’re not married, like maybe siblings, partners, or an unmarried couple?

(Martin) Today’s high housing prices are forcing more buyers to partner up to increase purchasing power. A single buyer can’t find anything at $350k for example. But, two buyers of $350k can afford $700k and find something nice. My main recommendation is to get agreements in writing and to have an exit plan where one buys out the other or they sell.

(Marianne) When considering a refi, is there a rule of thumb for the interest rate breakpoint, for example, should there be an interest rate improvement of .5%, .75%, 1%?

(Martin) It depends on the loan amount, loan type, and goals. There are some cases where the rate difference may not be as important as lowering the length of time of the loan. There are a lot of people refinancing to a loan term that matches their retirement horizon. With today’s high loan amounts, even .5% can be a large saving. It is also important to calculate the recapture period for the closing costs. 

(Marianne) Please share any tips for preparing to secure a new home loan, a refi, or equity loan; such as documents required, credit score minimums, and how the fee structure works?

(Martin) I love helping buyers prepare for homeownership. Homeownership is closer than many renters think. There are programs available to help with down payment assistance and credit score requirements are very flexible. I do a lot of free credit building and coaching to help buyers prepare. We are also seeing a lot of parents gifting their children or grandchildren the down payment to get them into the real estate market. Call in an early inheritance that will help them build wealth earlier in life.

(Marianne) Martín, thank you so much for joining me on the Imagine Financial Services Professional Circle

Thank you for watching!