What to do Once Mortgage Rates Go Up

by Risacovi - December 30, 2021

What to do Once Mortgage Rates Go Up

Recently, the average 30-year fixed mortgage rate from Freddie Mac inched up to 3.1%, and experts project rates will continue rising through 2022:

“The 30-year fixed-rate mortgage was 2.9% in the third quarter of 2021. We forecast mortgage rates to increase slightly through the remainder of the year and reach 3.0%, rising to 3.5% for full year 2022.”

Photo by Carlos Muza on Unsplash

If you’re thinking of buying a home, here are a few things to keep in mind so you can succeed even as mortgage rates rise.

Taking Time Off Can Be Costly

Mortgage rates play a significant role in your home search. As rates go up, your monthly mortgage payment increases. If you’re buying a home, directly affecting how much you can afford. And even the smallest increase has a large impact on your monthly payment (see chart below):With mortgage rates on the rise, you’ve likely seen your purchasing power impacted already. Instead of waiting and hoping rates will fall, today’s rates should motivate you to purchase now before rates increase more.

Smart Buyers Can Succeed by Planning Ahead

You can use your newfound motivation to energize your search and plan your next steps accordingly. So you’re prepared to act no matter what happens with mortgage rates. One way to do that: take rising rates into consideration as part of your budget.

Danielle Hale, Chief Economist at realtor.com, puts it best, saying:

“Smart buyers should consider calculating a monthly payment not only at today’s rates, but also at rates that are a bit higher so that they won’t be derailed by a sudden upward move. . . .”

You should also be ready to act when you find the home that meets your needs. That means getting pre-approved with a lender so there won’t be any delays when the time arrives.

The best way to prepare is to work with a trusted real estate advisor now. An agent can connect you with a lender, help you adjust your search based on your budget, and be ready to act quickly when it’s time to make an offer.

In conclusion, What to do Once Mortgage Rates Go Up.

Serious buyers should approach rising rates as a motivating factor to buy sooner, not a reason to wait. Waiting will cost you more in the long run. Contact Us today so you can better understand your budget and be prepared to buy your home even before rates climb higher.

Why be Stuck Renting? Buying a home is much easier

by Risacovi - December 20, 2021

Why be Stuck Renting? It Just Became Much Easier To Buy a Home

Photo by todd kent on Unsplash

Since the pandemic began, Americans have reevaluated the meaning of the word home. That’s led some renters to realize the many benefits of homeownership, including the feelings of security and stability and the financial benefits that come with rising home equity. At the same time, many current homeowners have decided their house no longer meets their needs, so they moved into homes with more space inside and out, including a home office for remote work.

However, not every purchaser has been able to fulfill their desire for a new home. Here are two obstacles some homebuyers are facing:

The ability to save for a down payment
The ability to qualify for a mortgage at the current lending standards

This past week, both of those challenges have been mitigated to some degree for many purchasers. The FHFA (which handles mortgages by Freddie Mac, Fannie Mae, and the Federal Housing Administration) is raising its loan limit for prospective purchasers in 2022. The term used to describe the maximum loan amount they will entertain is the Conforming Loan Limit.

What Is the Difference Between a Conforming Loan and a Non-Conforming Loan?

Investopedia explains the difference in a recent post:

“Conforming loans are the only loans that meet the requirements to be acquired by Fannie Mae and Freddie Mac. Jumbo loans, which exceed the conforming limit, are the most common type of nonconforming loan.”

What Difference Does It Make to Me as a Home Buyer?

A Forbes article earlier this year explains the benefits of a conforming loan and why they exist:

“Since lenders can’t sell non-conforming loans to Fannie Mae or Freddie Mac to free up their cash, they’re a bit riskier for the lender. This is especially true for jumbo loans, which aren’t backed by any government guarantees. If you default on a jumbo loan, it’s a huge blow to the lender.

Thus, lenders generally charge higher interest rates to compensate, and they can have even more requirements. For example, lenders who give out jumbo loans often require that you make a down payment of at least 20% and show that you have at least six months’ worth of cash in reserve, if not more.”

What Happened Recently?

The FHFA has significantly increased its Conforming Loan Limits for 2022. Sandra L. Thompson, FHFA Acting Director, explains in the press release that:

“Compared to previous years, the 2022 Conforming Loan Limits represent a significant increase due to the historic house price appreciation over the last year. While 95 percent of U.S. counties will be subject to the new baseline limit of $647,200, approximately 100 counties will have conforming loan limits approaching $1 million.”

This means that more homes now qualify for a conforming loan with lower down payment requirements and easier lending standards – the two challenges holding many buyers back over the last year.

The Federal Housing Administration (FHA) also increased its Conforming Loan Limits for 2022. That could also mean an easier path to homeownership for many prospective buyers. As the Forbes article explains:

“FHA loans can be very beneficial if you don’t have as much savings, or if your credit score could use some work.”

For these reasons, why get stuck renting

Buying your first or your next home may have just gotten much easier (less stringent qualifying standards) and less expensive (possibly lower mortgage rate). Let’s connect to discuss how these changes may impact you.

Resources:

To get more information on the new FHFA Conforming Loan Limits, click here.
To get more information on the new FHA Conforming Loan Limits, click here.

After Applying for a Mortgage, Thing to Avoid Doing

by Risacovi - December 10, 2021

After applying for a mortgage, watch for these common mistakes.

Photo by Visual Stories || Micheile on Unsplash

Once you’ve found your dream home and applied for a mortgage, there are some key things to keep in mind before you close. It’s exciting to start thinking about moving in and decorating your new place, but before you make any large purchases, move your money around, or make any major life changes, be sure to consult your lender – someone who’s qualified to explain how your financial decisions may impact your home loan.

Here’s a list of things you shouldn’t do after applying for a mortgage. They’re all important to know – or simply just good reminders – for the process.

1. Don’t Deposit Cash into Your Bank Accounts Before Speaking with Your Bank or Lender.

Lenders need to source your money, and cash isn’t easily traceable. Before you deposit any amount of cash into your accounts, discuss the proper way to document your transactions with your loan officer.

2. Don’t Make Any Large Purchases Like a New Car or Furniture for Your Home.

New debt comes with new monthly obligations. New obligations create new qualifications. People with new debt have higher debt-to-income ratios. Since higher ratios make for riskier loans, qualified borrowers may end up no longer qualifying for their mortgage.

3. After Applying for a Mortgage, Don’t Co-Sign Other Loans for Anyone.

When you co-sign, you’re obligated. With that obligation comes higher debt-to-income ratios as well. Even if you promise you won’t be the one making the payments, your lender will have to count the payments against you.

4. Don’t Change Bank Accounts.

Remember, lenders need to source and track your assets. That task is much easier when there’s consistency among your accounts. Before you transfer any money, speak with your loan officer.

5. Don’t Apply for New Credit.

It doesn’t matter whether it’s a new credit card or a new car. When you have your credit report run by organizations in multiple financial channels (mortgage, credit card, auto, etc.), your FICO® score will be impacted. Lower credit scores can determine your interest rate and possibly even your eligibility for approval.

6. Don’t Close Any Credit Accounts.

Many buyers believe having less available credit makes them less risky and more likely to be approved. This isn’t true. A major component of your score is your length and depth of credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both of those determinants of your score.

Finally, after applying for a mortgage

Any blip in income, assets, or credit should be reviewed and executed in a way that ensures your home loan can still be approved. If your job or employment status has changed recently, share that with your lender as well. The best plan is to fully disclose and discuss your intentions with your loan officer before you do anything financial in nature.

FHA Loans – What are the Advantages & Requirements To Obtain It

by Risacovi - December 1, 2021

FHA Loans are a great option for first time home buyers who don’t have the 20% down payment needed. These loans require less of a down payment, which makes it easier to qualify for, and they also come with lower mortgage insurance rates. There are some requirements that you need in order to apply for an FHA Loan though.

To qualify for an FHA Loan, you need to be a first time home buyer or purchasing your primary residence. You must also have steady income even if your credit is less than perfect. The home you’re purchasing must meet certain requirements as well, such as being in good condition and meeting FHA’s property standards.

If you meet certain requirements, such as having steady income and good credit. Federal Housing Administration loans may be an option for you.

Advantages of FHA Loans

With less of a down payment needed and lower mortgage insurance rates, these loans make it easier to get into the market.

Designed for people with lower credit scores than other mortgages. These loans are ideal for first time buyers, or people that are still paying back education loans.

Keep in mind though, there still are some requirements that come with owning one of these loans.

To be eligible for an FHA loan, borrowers must meet the following lending guidelines:

Have a credit score of 500-579 with 10% down payment or a score of 580 or higher for a 3.5% down payment.
Have a verifiable employment records for the last 2 years.
The borrower must live in this house

Additionally, the home must meet certain standards as well which include being in good condition.

Disadvantages

They require mortgage insurance which is an additional cost to carry.
The property you buy cannot be an investment property, in other words, you must live in it.

If you’re interested in seeing if an FHA Loan is right for you, or want to know more about how they work, contact their website.

Personal Loans Explained For People Looking for Funds

by Risacovi - October 30, 2021

Personal loans are a type of loan that can be used for personal purposes and goals, such as paying medical bills or consolidating debt. They sometimes come with lower interest rates than other types of loans because they don’t have to be repaid until the borrower has finished school or is no longer employed by the lender. Personal loans also usually do not require collateral because the lender trusts that it will be repaid.

This means that a borrower can often get a personal loan quickly and, because they are granted on an individual basis, they can usually ask for more money than with other types of loans.

Photo by Austin Distel on Unsplash

What are the Advantages of Personal Loans

Although personal loans offer several advantages, they are an option of last resort. Usually they have higher interest rates than traditional business loans. Personal loans are used for almost any reason. Not all lenders however, are willing to extend credit for every purpose. Personal loans also have higher interest rates and fees than traditional business loans.

A personal loan is a debt that you take out in your name only through a specific lending institution.

These loans are unsecured. However, borrowers with high credit scores will often find lower interest rates. Borrowers with bad or fair credit scores usually must pay more.

Personal loans have fixed rates, which means the interest rate will stay consistent throughout the life of the loan.

The personal loans most widely available to small-business owners tend to have high APRs — around 36% or higher. This can be a real burden for businesses that have just started up and don’t have established revenue streams.

The good news is that there are some lenders, like OnDeck and Kabbage, that offer unsecured business loans to small businesses with lower interest rates than those offered by traditional banks.

Can Small Business Owners Use Personal Loans?

Small-business owners must always do their research before applying for a personal loan so they can compare interest rates and lender terms.

A personal loan might be a smart choice for small-business owners who need extra capital to fund equipment or inventory purchases, but don’t want to risk losing any of their business’s existing assets.

Personal loans are also good options for new business owners who have built up their credit scores to help ensure they receive the best possible rate.

If you are an entrepreneur with bad or fair credit, consider applying for a small-business loan through Kabbage or OnDeck. While these lenders have higher interest rates than personal loans; they will be lower than those offered by traditional banks to new small-business owners with less established credit scores.

A personal loan is a type of financing that allows an individual to access funds (usually via their credit score) for general purposes.

Some of them like home improvement, wedding expenses, etc.

When you apply for a personal loan, a lender uses your credit history to determine whether they will give you the cash and what rate they’ll charge you. Rates charged depend on your credit scores.

Term Lengths for Personal Funding

The term length of a personal loan can vary drastically. For this type of financing usually ranges from 1 with the longest term being 20 years.

When taking out a long-term loan, you may need to get an asset, like real estate, to secure the loan.

A personal loan allows people to borrow money from a bank, credit union or online lender. Business owners can use personal loans for capital expenditures, business operation expenses and equipment purchases.

Financing sources are banks, financial institutions and peer-to-peer lenders.

Business owners can borrow from a personal loan to cover business expenses such as salaries, supplies and rent.

Common uses are inventory and equipment purchases.

Personal loans have lower credit score requirements than traditional business loans, according to the U.S. Small Business Administration (SBA).

In Conclusion

One of the main advantages of a personal loan is that it usually has a lower credit score requirement than other types of credit, such as an unsecured loan made by your bank. A disadvantage is that they result in higher interest rates than other types of business finance.

Business Loans – See How Much You Qualify For

by Risacovi - September 29, 2021

Business Loans – See How Much You Qualify For

Photo by Mateus Campos Felipe on Unsplash

If you’re an established business and are focused on growth, you may be searching for business loans to help you accomplish your goals. But before you apply for a loan, you’ll need to determine the best amount to ask for.

If you borrow too little, you may not accomplish your goals, and if you borrow too much it could be a financial burden.

So how do you establish the “correct” amount when seeking out business loans?

Consider your options

The answer is simple and yet complicated. There is no right, “blanket” amount for a business loan that will work for every business owner. Meaning there’s no perfect equation that tells you how much to borrow; it’s all up to your unique business needs.

To determine the right amount, it’s helpful to consider a host of factors, including:

The business type
Your real needs
What are your plans for the funding
Know your cash flow needs and expenses

Ideally you should have your own finance department, they will assist you with these decisions. But chances are you are your own finance department.

So how do you make that kind of decision without years of experience crunching numbers and assessing risk?

Borrowing Too Much

You may be tempted to borrow a large amount of cash; overshooting your expansion budget (or whatever business project you’re looking to fund with a loan). That way, even if expenses end up being higher than projected, you still have enough cash to cover it.

But keep in mind that with a higher loan, the associated fees may be higher, too. If you borrow more than you can afford to repay, you may find yourself in an endless cycle of debt.

When you take out a loan responsibly, and for the right amount, a loan is an incredible business asset that offers you opportunity, growth, and success. It shouldn’t be a financial burden.

Borrowing Too Little

At the same time, if you’re too risk-averse, you may end up borrowing less money than you need. With this scenario, you could find yourself short on cash while upgrading equipment or planning a location move, and unable to carry out your plan as you intended. And, consequently, you could be left repaying a loan that didn’t benefit you to the fullest extent.

As you can see, neither borrowing high nor borrowing low is a safe strategy; you need to borrow the right amount for your needs, no more or less.

If There are No “Right Amount Business Loans,” Then How Do You Decide?

If you don’t know how much capital you need, then you may want to consider enlisting the help of finance professionals to determine a game plan.

And, what better finance professional than your very own bank? You likely already have a relationship with them (or intend to begin one), and they know the intimate details of loan finances.

Most banks help small business owners access the right lending solution for them every day. Often business owners contact them knowing that they need a loan, and what they want to accomplish with the funds, but not having a clear idea of how much loan capital they need to accomplish those goals.

Let Your Banker Help You

They are there to help strengthen and grow your business. Speak with one of their loan advisors and share the details of your business plan, whether you’re looking to revamp your cash flow situation or expand your business.

They will help you figure out how much you need to accomplish your goal, and how much you can repay realistically without stressing your finances or stretching the limits of what your business model can accomplish.

Factoring is a Very Useful Business Tool – Use It!

by Risacovi - September 14, 2021

Factoring is a Useful Cash Flow Solution

Photo by airfocus on Unsplash

If you are an established business and you want to grow, then you should search for a loan. But before doing that, think about how much money you need. If it is too little, then your goal will not be accomplished. And if it is too much, then it can be a financial burden. So figure out what the right amount of money is by borrowing less or more than that amount if possible.

How does it work?

Invoice factoring is a way that you can get most of the money for your invoices immediately. It is a type of invoice finance. A company will buy your invoices and then collect payment from your customers.

It means selling part or all of your accounts receivable. You sell this to a company who pays you up front for the invoices. They Basically, you sell your invoices to a company. You give the goods or service to people in the normal way. The company then pays you up to 80-90% of what you are owed for that invoice after they check that it is right. Your customers then pay the company directly and the company chases the payment if necessary.

When should your company use it?

Your company should use invoice factoring when you routinely have a lot of invoices that are overdue. You can then take the money that they owe to you and use it for other things. For example, if your company sells to people on 30-day payment terms, but some people pay early while others may go over 30 days, invoice factoring will help you get the money owed to your company faster.

When you have a lot of invoices and your cash flow is not good, invoice factoring can help you get the money. Let’s say that your company sells on 30-day payment terms. Some people pay on time while some might not. You can get the cash from those who do not pay in time by using invoice factoring.

You could use that money to:

Bridge short-term expenses
Repay a loan
Take advantage of seasonal business opportunities
Or for any reason for which cash flow might otherwise be a constraint

Take Advantage

Invoice factoring is a good way to get more cash for your business. You can pay the bulk of your invoices sooner rather than waiting for the money to come in. This helps with business planning and forecasting because you have an idea of how much money will be coming in at what time. Invoice factoring also allows you to take advantage of opportunities that might otherwise be unaffordable.

It is cheaper and easier to get than a bank loan. It is good for short-term needs because it helps with debt management and does not take much work. Invoice factoring also helps with the hassle of dealing with a lot of money that could be difficult to manage or store.

Invoice factoring services will reduce your business overheads. There are fees, but they might be less than the cost of hiring a credit control staff. Invoice factoring could also make people in your accounts department happier because it can be stressful to chase payments.

In conclusion, Invoice factoring will help your business stay healthy – as long as you use this wisely.

Contact Us for details

How Much Money Can You Borrow?

by Risacovi - September 8, 2021

How Much Money Can You Borrow? – Here is a simple Guide

Photo by Quinton Coetzee on Unsplash

If you’re an established business and are focused on growth, you may be searching for a business loan to help you accomplish your goals. But before you apply for a loan, you’ll need to determine the best amount to ask for.

If you borrow too little, you may not accomplish your goals, and if you borrow too much it could be a financial burden.

So how do you establish the “correct” amount when seeking out loans for businesses?

Consider the Variables

The answer is simple and yet complicated. There is no right, “blanket” amount for a business loan that will work for every business owner. Meaning there’s no perfect equation that tells you how much to borrow; it’s all up to your unique business needs.

To determine the right amount, it’s helpful to consider a host of factors, including:

What type of business it is
Your business requirements
How are you going to use the money
What expenses you will incurr

So how do you make that kind of decision without years of experience crunching numbers and assessing risk?

Borrowing More than You Need

You may be tempted to borrow a large amount of cash; overshooting your expansion budget (or whatever business project you’re looking to fund with a loan). That way, even if expenses end up being higher than projected, you still have enough cash to cover it.

But keep in mind that with a higher loan, the associated fees may be higher, too. If you borrow more than you can afford to repay, you may find yourself in an endless cycle of debt.

When you take out a loan responsibly, and for the right amount, a loan is an incredible business asset that offers you opportunity, growth, and success. It shouldn’t be a financial burden.

Borrowing Less than You Need

At the same time, if you’re too risk-averse, you may end up borrowing less money than you need. With this scenario, you could find yourself short on cash while upgrading equipment or planning a location move, and unable to carry out your plan as you intended. And, consequently, you could be left repaying a loan that didn’t benefit you to the fullest extent.

As you can see, neither borrowing high nor borrowing low is a safe strategy; you need to borrow the right amount for your needs, no more or less.

How to Borrow the Right Amount

If you don’t know how much capital you need, then you may want to consider enlisting the help of finance professionals to determine a game plan.

And, what better finance professional than your very own lending partner? You likely already have a relationship with them (or intend to begin one), and they know the intimate details of loan finances.

Finding the Right Lending Partner for Your Needs

Successful small business owners must find the right lending solution for their needs by doing their homework. Often business owners contact lenders because they need a loan fast.

They know what they want to accomplish with the money, but most of the time they don’t have a clear idea of how much loan capital they really need to accomplish their objectives.

Hence, speak with as many lenders as you can and share the details of your business needs.

Only then you will have a clear idea of how much you can repay realistically without stressing your finances or stretching the limits of what your business model can accomplish.

If you’re interested in discussing your financing options, eMail Us today!

The information shared here is intended to be used for informational purposes only.