Home Loans – Page 2 – Community Broker News and Views

When Soaring College Costs Hit Home

“Poverty is hereditary – it comes from your children.”

Comedian Phyllis Diller may have been joking when she said that, but anyone who is raising a child today knows that there’s nothing inexpensive about having kids. In fact, according to a report from the U.S. Department of Agriculture, “it will cost an estimated $241,080 for a middle-income couple to raise a child born last year for 18 years.”

If that doesn’t shock you, consider an even more eye-opening fact: that figure doesn’t include one of the most expensive costs for parents – financing a college education. According to The College Board, an “in-state public college for the 2013–2014 academic year averaged $22,826 while a private college averaged $44,750.” In the last 30 years, college costs have quadrupled.

A shared burden

The burden of financing college education isn’t just falling on parents; today’s students are amassing significant debt. As the infographic below shows, the average student graduates with nearly $25,000 in debt, giving them an uphill climb on the road to financial success. The burden of this debt may be why they delay getting married and purchasing homes.

So how can parents help their children finance the costs of college and fill the gap where Financial Aid and other student loans leave off? One popular solution is actually close to home — home equity credit. With home equity, parents can borrow off the equity in their homes to pay for college costs, and take advantage of some very significant benefits, including:

Lower rates than those available with private student loans.
Potential tax savings.
The ability to borrow and repay funds with a home equity line.
Interest-only options to keep payments low.
The flexibility to use funds to cover any educational expense — from books to computers to room and board and tuition.

Here to Help.

At DNB First, we have competitive home equity options, including a special rate on a home equity line. Stop by or call us today to learn more. Of course, as with any financial decision, it’s important to carefully weigh your options. After all, college is one of the biggest investments you will make as a parent, so you’d better do your homework.

10 Mind-blowing Facts About The Cost of College Tuition Created by: TakeLessons

Avoiding Jeopardy with Reverse Mortgages

It’s Final Jeopardy. Contestants eagerly await as Alex Trebek, the man with all the answers, smugly reads the final clue of the game.

“A type of mortgage where the bank pays you.”

Within a millisecond, the Jeopardy champion pounds the buzzer and proudly declares “Reverse Mortgage.”

After the dreaded “fail” buzzer goes off, Alex disdainfully declares, “No sorry, that is incorrect. The correct answer is “What is a Reverse Mortgage?”

In reality, this question – What is a reverse mortgage? – has been posed more and more frequently today as mature adults and baby boomers struggle with rising expenses and their adult children worry about how they can help their parents manage them.

So what exactly is a reverse mortgage?

By definition, a reverse mortgage is a type of home loan that lets borrowers age 62 or older receive cash payments based on the equity in their homes. So instead of a borrower making payments to a mortgage lender, the lender makes payments to them, hence the term reverse mortgage.

A growing trend for those growing older.

Reverse mortgages offer some unique benefits, not the least of which is that they generally allow aging homeowners to remain in their homes (borrowers usually do not have to pay back loans until they are no longer living in their homes). Reverse mortgages can also provide a steady stream of income to help seniors manage rising expenses – a benefit that’s become increasingly attractive as cost of living and healthcare expenses have risen.

But despite their popularity, reverse mortgages come with many drawbacks, including risk of foreclosure and higher costs than those associated with traditional loans. Because of the risk involved, potential borrowers must complete a counseling program from a government-approved agency to help them evaluate the pros and cons of obtaining a reverse mortgage. And, they must be careful to avoid overzealous lenders who might try to sway them toward reverse mortgages when a traditional option, such as a home equity loan, or no loan at all, may be a wiser decision.

A model reverse mortgage success.

If used properly, a reverse mortgage can be a very wise investment decision as demonstrated by a retired family friend. The friend had inherited an older home in an affluent community. Though he owned the home outright, the home needed major renovations, including upgrades to the electrical and heating systems. Without the savings to finance these expenses, my friend was faced with three choices: to sell the home and rent, tap into his retirement savings to pay for the repairs, or obtain a reverse mortgage. He chose the latter and received a lump sum distribution that he used to finance repairs and renovation in the home. It proved to be a wise decision as the renovations helped improve the home’s value, and of course, allowed my friend to remain in the home and avoid renting or depleting his retirement nest egg.

Not always the best move.

Reverse mortgages are not for everyone. Because of their high cost, and the risk involved with putting one’s home at risk, borrowers and their children must be careful to use reverse mortgages wisely and not for frivolous purposes. Such decisions can put a homeowner in a more tenuous situation than they were in before they sought the reverse mortgage – in real jeopardy.

Early Mortgage Payoff?

DNB First shared a link to an article today about “why you should make an extra mortgage payment” and it made me wonder, how many people have been able to pay off their mortgage early? Continue reading “Early Mortgage Payoff?”

Thinking of a refinance – what’s holding you back?

Since 2012, many consumers across the United States took advantage of low rates and refinanced their high rate mortgages, lowering monthly payments and freeing up cash for other purposes. If you happen to be one of the approximately 20 million households who have never refinanced, and are paying 6% or more on your mortgage, you may want to take advantage of the current environment and refinance now, but hurry – time’s a wastin!

Continue reading “Thinking of a refinance – what’s holding you back?”

New Year changes to mortgage rules under Dodd Frank

In early January 2014, a change will be made to allowable debt to income for qualified mortgages under Dodd-Frank.

“Home loan seekers need to know that the allowable debt-to-income (DTI) ratio for a qualified mortgage under Dodd-Frank come January will be 43 percent,”

Grace Keister of First Team Real Estate in Irvine, CA.

This change represents a two percentage point reduction from the current traditional, conforming loan requirements which allow up to 45% debt to income (DTI) ratio. This change is part of the “ability to repay” rule established by the introduction of the Qualified Mortgage (QM) category under Dodd-Frank.

There are ways to lower debt to income ratio when applying for a mortgage or refinance. Debt consolidation is one path to lowering monthly payments, improving DTI ratio. Paying off low balance installment loans like auto or student loans may help as well. It’s important not to negatively impact cash reserves while in the qualification process – consult your mortgage advisor!

While the impact will be felt by all, there is an added burden on first time home buyers who typically stretch every dollar to buy their first home. Professional consultation by an experienced Home Mortgage consultant is vital in determining the most effective way to proceed through the mortgage process. Select a professional that understands your unique situation and knows your real estate community well.

Vince Liuzzi – Executive Leader